AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
- -----------------------------------------------------------------------------
WASHINGTON, D.C. 20549
-------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
INDYMAC ABS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------
DELAWARE APPLIED FOR
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
155 NORTH LAKE AVENUE
PASADENA, CALIFORNIA 91101
(800) 669-2300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------
MICHAEL W. PERRY
INDYMAC, INC.
155 NORTH LAKE AVENUE
PASADENA, CALIFORNIA 91101
(800) 669-2300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
-------------------
WITH A COPY TO:
EDWARD J. FINE, ESQ.
BROWN & WOOD LLP
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048-0557
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time on or after the effective date of the registration statement, as
determined by market conditions.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. ( )
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. (x)
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
registration statement for the same offering. ( )
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
of the same offering. ( )
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. ( )
-------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE OFFERING PRICE(1) FEE
PER UNIT(1)
<S> <C> <C> <C> <C>
Asset Backed Certificates and Asset
Backed Notes .. $1,000,000(2) 100% $1,000,000 $295.00
</TABLE>
(1) Estimated for the purpose of calculating the registration fee.
(2) Not specified as to each class of Asset Backed Securities to be
registered pursuant to General Instruction II.D of Form S-3.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED ____________ __, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED __________, 1998)
$___________
(Approximate)
INDYMAC ABS, INC.
DEPOSITOR
(INDYMAC, INC.)
SELLER AND MASTER SERVICER
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 19__-__
DISTRIBUTIONS PAYABLE ON THE ____THE DAY OF EACH MONTH, COMMENCING IN _____
19__
____________________
The Mortgage Pass-Through Certificates, Series 199__-__ (collectively,
the "Certificates") will represent the entire beneficial interest in a Trust
Fund consisting primarily of a pool (the "Mortgage Pool") of (fixed-rate)
Mortgage Loans secured by first liens on one- to four-family residential
properties. Only the Classes identified in the table below (collectively,
the "Offered Certificates") are offered hereby.
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE
DEPOSITOR, THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR
RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR THE MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL ENTITY, THE DEPOSITOR, THE SELLER,
THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES OR ANY OTHER
PERSON. DISTRIBUTIONS ON THE CERTIFICATES WILL BE PAYABLE SOLELY FROM THE
ASSETS TRANSFERRED TO THE TRUST FUND FOR THE BENEFIT OF CERTIFICATEHOLDERS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Initial Class Certificate
Balance (1) Pass-Through Rate
- -----------------------------------------------------------------------------
Class A - $ %
Class $ %
Class PO $ (2)
Class X (3) (4)
Class A-R $ %
Class B - $ %
Class $ %
Class $ %
(1) Subject to the permitted variance described herein.
(2) The Class PO Certificates will be Principal Only Certificates and will
not bear interest.
(3) The Class X Certificates will be Notional Amount Certificates, will
have no principal balance and will bear interest on their Notional
Amount (initially expected to be approximately $____________).
(4) The Pass-Through Rate for the Class X Certificates for any
Distribution Date will be equal to the excess of (a) the weighted
average of the Net Mortgage Rates of the Non-Discount Mortgage Loans
over (b) % per annum. The Pass-Through Rate for the Class X
Certificates for the first Distribution Date is expected to be
approximately % per annum.
The Senior Certificates, other than the Class PO and Class X
Certificates (the "Underwritten Senior Certificates"), will be purchased
by _______ and the Class ____ Certificates (together with the Underwritten
Senior Certificates, the "Underwritten Certificates") offered hereby will
be purchased by ______ (each, an "Underwriter") from the Depositor and
will be offered by the Underwriters from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time
of sale. Proceeds to the Depositor from the sale of the Underwritten
Certificates are expected to be approximately $_______ , plus accrued
interest, before deducting issuance expenses payable by the Depositor.
The Class , Class PO and Class X Certificates will be issued to the
Depositor on or about _________, 19__ as partial consideration for the
sale of the Mortgage Loans to the Trust Fund.
The Underwritten Certificates are offered by the respective
Underwriters, subject to prior sale, when, as and if delivered to and
accepted by the Underwriters and subject to their right to reject orders
in whole or in part. It is expected that delivery of the Underwritten
Senior Certificates, other than the Class A-R Certificates, will be made
in book-entry form only through the facilities of The Depository Trust
Company, that the Class A-R Certificates will be delivered at the offices
of _________________ in New York, New York and that the Class
Certificates will be delivered at the offices of_______________ in New
York, New York, in each case on or about _________, 19__.
(Underwriters)
The Mortgage Loans will be sold to the Depositor by (IndyMac, Inc.
("IndyMac")).
An election will be made to treat the Trust Fund as a "real estate
mortgage investment conduit" (the "REMIC") for federal income tax
purposes. As described more fully herein and in the Prospectus, the
Offered Certificates, other than the Class A-R Certificates, will
constitute "regular interests" in the REMIC. The Class A-R Certificates
will constitute the sole class of "residual interest" in the REMIC.
Prospective investors are cautioned that a Class A-R Certificateholder's
REMIC taxable income and the tax liability thereon will exceed cash
distributions in certain periods, in which event such holder must have
sufficient alternative sources of funds to pay such tax liability. See
"Certain Federal Income Tax Consequences" herein and in the Prospectus.
The Class A-R Certificates will be subject to certain transfer
restrictions. See "Description of the Certificates -- Restrictions on
Transfer of the Class A-R Certificates" herein.
THE YIELD TO INVESTORS ON EACH CLASS OF OFFERED CERTIFICATES WILL BE
SENSITIVE IN VARYING DEGREES TO, AMONG OTHER THINGS, THE RATE AND TIMING
OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS) OF THE MORTGAGE LOANS, WHICH
MAY VARY SIGNIFICANTLY OVER TIME. THE YIELD TO MATURITY OF A CLASS OF
OFFERED CERTIFICATES PURCHASED AT A DISCOUNT OR PREMIUM WILL BE MORE
SENSITIVE TO THE RATE AND TIMING OF PAYMENTS THEREON. HOLDERS OF THE
OFFERED CERTIFICATES SHOULD CONSIDER, IN THE CASE OF ANY SUCH CERTIFICATES
PURCHASED AT A DISCOUNT, AND PARTICULARLY THE PRINCIPAL ONLY CERTIFICATES,
THE RISK THAT A SLOWER THAN ANTICIPATED RATE OF PRINCIPAL PAYMENTS ON THE
MORTGAGE LOANS COULD RESULT IN AN ACTUAL YIELD THAT IS LOWER THAN THE
ANTICIPATED YIELD AND, IN THE CASE OF ANY OFFERED CERTIFICATES PURCHASED
AT A PREMIUM AND PARTICULARLY THE INTEREST ONLY CERTIFICATES, THE RISK
THAT A FASTER THAN ANTICIPATED RATE OF PRINCIPAL PAYMENTS ON THE MORTGAGE
LOANS COULD RESULT IN AN ACTUAL YIELD THAT IS LOWER THAN THE ANTICIPATED
YIELD. HOLDERS OF THE INTEREST ONLY CERTIFICATES SHOULD CAREFULLY CONSIDER
THE RISK THAT A RAPID RATE OF PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS
COULD RESULT IN THE FAILURE OF SUCH HOLDERS TO RECOVER THEIR INITIAL
INVESTMENTS. THE YIELD TO INVESTORS IN THE OFFERED CERTIFICATES, AND
PARTICULARLY THE CLASS ____ CERTIFICATES, ALSO WILL BE ADVERSELY AFFECTED
BY NET INTEREST SHORTFALLS AND BY REALIZED LOSSES. NO REPRESENTATION IS
MADE AS TO THE ANTICIPATED RATE OF PREPAYMENTS ON THE MORTGAGE LOANS, THE
AMOUNT AND TIMING OF NET INTEREST SHORTFALLS OR REALIZED LOSSES, OR AS TO
THE RESULTING YIELD TO MATURITY OF ANY CLASS OF CERTIFICATES.
Each Underwriter intends to make a secondary market in the Classes of
Underwritten Certificates being purchased by it, but no Underwriter has an
obligation to do so. There is currently no secondary market for the
Offered Certificates and there can be no assurance that such a market will
develop or, if it does develop, that it will continue or that it will
provide Certificateholders with a sufficient level of liquidity of
investment.
____________________
This Prospectus Supplement does not contain complete information about
the offering of the Offered Certificates. Additional information is
contained in the Prospectus of the Depositor dated ____________, 1998 (the
"Prospectus") and purchasers are urged to read both this Prospectus
Supplement and the Prospectus in full. Sales of the Offered Certificates
may not be consummated unless the purchaser has received both this
Prospectus Supplement and the Prospectus.
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL
DEALERS EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
SUMMARY OF TERMS
This Summary of Terms is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and
in the accompanying Prospectus. Certain capitalized terms used in this
Summary of Terms are defined elsewhere in this Prospectus Supplement or in
the Prospectus.
Title of Certificates . . . . . . . . Mortgage Pass-Through Certificates,
Series 199__-__ (the "Certificates").
Offered Certificates . . . . . . . . Class A-____, Class ____, Class PO,
Class X, Class A-R, Class B-___ and
Class ____ Certificates. Only the
Offered Certificates are offered
hereby. The aggregate initial Class
Certificate Balances of the
Certificates will be subject to a
permitted variance in the aggregate
of plus or minus __%. Variances in
the Class Certificate Balances may
result in variances in the Notional
Amount of the Class of Notional
Amount Certificates.
The Notional Amount of the Class X
Certificates for any Distribution Date
will be equal to the aggregate of the
Stated Principal Balances of the Non-
Discount Mortgage Loans with respect to
such Distribution Date. The initial
Notional Amount of the Class X
Certificates will be equal to the
aggregate of the Stated Principal
Balances of the Non-Discount Mortgage
Loans as of the Cut-off Date.
Certificates other than the
Offered Certificates . . . . . . . In addition to the Offered
Certificates, the following Classes
of Certificates will be issued in
the indicated approximate initial
Class Certificate Balances and will
bear interest at the indicated
Pass-Through Rates, but are not
offered hereby:
<TABLE>
<CAPTION>
Initial Class
Certificate Pass-Through
Balance Rate
<S> <C> <C>
Class (1) . . . . . . . . . . . $ %
Class (1) . . . . . . . . . . . $ %
Class (1) . . . . . . . . . . . $ %
_______________
(1) The Class ____, Class____ and Class ____ Certificates will
provide limited credit support to the Senior Certificates and the
other Subordinated Certificates, as described herein.
</TABLE>
Any information contained herein with
respect to the Class ___, Class ____
and Class ____ Certificates is provided
only to permit a better understanding
of the Offered Certificates.
Designations
Regular Certificates . . . . . . . All Classes of Certificates other
than the Class A-R Certificates.
Residual Certificates . . . . . . . Class A-R Certificates.
Senior Certificates . . . . . . . . Class A- , Class_____, Class PO,
Class X and Class A-R Certificates.
Subordinated Certificates . . . . . Class B- , Class_____, and Class ____
Certificates.
Principal Only Certificates . . . . Class PO Certificates.
Interest Only Certificates . . . . Class X Certificates.
Notional Amount Certificates . . . Class X Certificates.
Fixed Rate Certificates . . . . . . All Classes of Certificates other than
the Class PO and Class X Certificates.
Variable Rate Certificates . . . . Class X Certificates.
Physical Certificates . . . . . . . Class PO, Class X and Class A-R
Certificates and the Subordinated
Certificates.
Book-Entry Certificates . . . . . . All Classes of Certificates other
than the Physical Certificates.
Trust Fund . . . . . . . . . . . . . The Certificates will represent the
entire beneficial ownership interest in
the Trust Fund, which will consist
primarily of the Mortgage Pool.
Pooling and Servicing
Agreement . . . . . . . . . . . . . The Certificates will be issued
pursuant to a Pooling and Servicing
Agreement dated as of _____________,
19___ (the "Agreement"), among the
Depositor, the Seller, the Master
Servicer and the Trustee.
Depositor . . . . . . . . . . . . . IndyMac ABS, Inc. (the "Depositor"),
a Delaware corporation and a limited
purpose finance subsidiary of IndyMac,
Inc. See "The Depositor" in the
Prospectus.
Seller and Master Servicer . . . . . (IndyMac, Inc. ("IndyMac")) or the
"Seller" and, in its capacity as
master servicer of the Mortgage
Loans, the "Master Servicer"). See
"Servicing of Mortgage Loans -- The
Master Servicer" herein. The Mortgage
Loans were originated or acquired in
the normal course of its business by
the Seller and will be acquired by the
Depositor in a privately negotiated
transaction. The Master Servicer will
be responsible for the servicing of the
Mortgage Loans and will receive the
Master Servicing Fee from interest
collected on the Mortgage Loans. See
"Servicing of Mortgage Loans-Servicing
Compensation and Payment of Expenses"
herein.
Trustee . . . . . . . . . . . . . . . __________________, a _________________
organized under the laws of ___________
(the "Trustee").
Cut-off Date . . . . . . . . . . . . _________, 19__.
Closing Date . . . . . . . . . . . . On or about ____________, 19__.
Determination Date . . . . . . . . . The _____ day of each month or, if such
day is not a business day, the
preceding business day; provided that
the Determination Date in each month
will be at least two business days
prior to the related Distribution Date.
Mortgage Loans . . . . . . . . . . . The Mortgage Pool will consist
primarily of 30-year conventional
(fixed-rate) mortgage loans secured
by first liens on one- to four-family
residential properties. Distributions
of principal and interest on the
Certificates will be based solely on
payments received on the Mortgage
Loans, as described herein. See "The
Mortgage Pool" herein.
Distribution Date . . . . . . . . . . The ____ day of each month or, if
such day is not a business day, on
the first business day thereafter,
commencing in ______________ 19 (each,
a "Distribution Date"). Distributions
on each Distribution Date will be made
to Certificateholders of record as of
the related Record Date, except that
the final distribution on the
Certificates will be made only upon
presentment and surrender of the
Certificates at the Corporate Trust
Office of the Trustee.
Record Date . . . . . . . . . . . . . The Record Date for each Distribution
Date will be the last business day of
the month preceding the month of such
Distribution Date.
Priority of Distributions . . . . . . Distributions will be made on each
Distribution Date from Available Funds
in the following order of priority:
(i) to interest on each interest
bearing Class of Senior Certificates;
(ii) to principal on the Classes of
Senior Certificates then entitled to
receive distributions of principal, in
the order and subject to the priorities
set forth herein under "Description
of the Certificates -- Principal,"
in each case in an aggregate amount
up to the maximum amount of principal
to be distributed on such Classes on
such Distribution Date; (iii) to any
Class PO Deferred Amounts with respect
to the Class PO Certificates, but only
from amounts that would otherwise be
distributable on such Distribution Date
as principal of the Subordinated
Certificates; and (iv) to interest on
and then principal of each Class of
Subordinated Certificates, in the order
of their numerical Class designations,
beginning with the Class ____
Certificates, in each case subject to
the limitations set forth herein under
"Description of the Certificates --
Principal."
Under certain circumstances described
herein, distributions from Available
Funds for a Distribution Date that would
otherwise be made on the Subordinated
Certificates may be distributed instead
on the Senior Certificates. See
"Description of the Certificates --
Allocation of Losses" herein.
Distributions of Interest . . . . . . To the extent funds are available
therefor, each interest bearing Class
of Certificates will be entitled to
receive interest in the amount of the
Interest Distribution Amount for such
Class. The Class PO Certificates are
Principal Only Certificates and will
not bear interest. See "Description of
the Certificates -- Interest" herein.
A. Interest Distribution Amount . . For each interest bearing Class
of Certificates, the amount of
interest accrued during the
related Interest Accrual Period
at the applicable Pass-Through
Rate on the related Class
Certificate Balance or Notional
Amount, as the case may be.
B. Pass-Through Rate . . . . . . . The Pass-Through Rate for each
interest bearing Class of Offered
Certificates for each Distribution
Date will be as set forth or
described on the cover page hereof.
The Pass-Through Rate for the Class X
Certificates for any Distribution Date
will be equal to the excess of (a) the
weighted average of the Net Mortgage
Rates of the Non-Discount Mortgage
Loans over (b) ______% per annum. The
Pass-Through Rate for the Class X
Certificates for the first Distribution
Date is expected to be approximately
___% per annum.
With respect to each Distribution Date,
the "Interest Accrual Period" for each
interest bearing Class of Certificates
will be the calendar month preceding
the month of such Distribution Date.
Distributions of Principal . . . . . On each Distribution Date, to the
extent funds are available therefor,
principal distributions in reduction
of the Class Certificate Balances of
each Class of Certificates (other than
the Notional Amount Certificates) will
be made in the order and subject to the
priorities set forth herein under
"Description of the Certificates --
Principal" in an aggregate amount equal
to such Class' allocable portion of the
Senior Principal Distribution Amount,
the Class PO Principal Distribution
Amount or the Subordinated Principal
Distribution Amount, as applicable. The
Notional Amount Certificates do not
have principal balances and are not
entitled to any distributions in
respect of principal of the Mortgage
Loans. See "Description of the
Certificates -- Principal" herein.
Credit Enhancement -- General . . . . Credit enhancement for the Senior
Certificates will be provided by the
Subordinated Certificates and credit
enhancement for each Class of
Subordinated Certificates will be
provided by the Class or Classes of
Subordinated Certificates with higher
numerical Class designations, as
described below. The aggregate of the
initial Class Certificate Balances of
the Class ____, Class _____ and Class
____ Certificates, which are the only
Certificates supporting the Class
Certificates, is expected to be
approximately $_______.
Subordination . . . . . . . . . . . . The rights of holders of the
Subordinated Certificates to receive
distributions with respect to the
Mortgage Loans in the Trust Fund
will be subordinated to such rights
of holders of the Senior
Certificates, and the rights of the
holders of each Class of
Subordinated Certificates (other
than the Class _______ Certificates)
to receive such distributions will
be further subordinated to such
rights of the Class or Classes of
Subordinated Certificates with lower
numerical Class designations, in each
case only to the extent described
herein.
The subordination of the Subordinated
Certificates to the Senior
Certificates, and the further
subordination within the Subordinated
Certificates, is intended to increase
the likelihood of timely receipt by the
holders of Certificates with higher
relative payment priority of the
maximum amount to which they are
entitled on any Distribution Date and
to provide such holders protection
against losses on the Mortgage Loans to
the extent described herein. The
Subordinated Certificates also provide
protection, to a lesser extent, against
Special Hazard Losses, Bankruptcy
Losses and Fraud Losses. However, in
certain circumstances the amount of
available subordination (including the
limited subordination provided for
certain types of losses) may be
exhausted and shortfalls in
distributions on the Certificates could
result. Holders of the Senior
Certificates will bear their
proportionate share of any losses
realized on the Mortgage Loans in
excess of the available subordination
amount. See "Description of the
Certificates--Priority of Distributions
Among Certificates," "-- Allocation of
Losses," and "Credit Enhancement --
Subordination of Certain Classes"
herein.
Advances . . . . . . . . . . . . . . The Master Servicer is obligated to
make cash advances ("Advances") with
respect to delinquent payments of
(principal of and interest) on any
Mortgage Loan to the extent described
herein. (The Master Servicer will not
make any Advances with respect to
delinquent principal payments on the
Mortgage Loans.) The Trustee will be
obligated to make any such Advance
if the Master Servicer fails in its
obligation to do so, to the extent
provided in the Agreement. See
"Servicing of Mortgage Loans--Advances"
herein.
Prepayment Considerations and
Risks; Reinvestment Risk . . . . . The rate of principal payments on
the Offered Certificates, the aggregate
amount of distributions on the Offered
Certificates and the yield to maturity
of the Offered Certificates will be
related to the rate and timing of
payments of principal on the Mortgage
Loans.
Since the rate of payment of principal
on the Mortgage Loans will depend on
future events and a variety of factors,
no assurance can be given as to such
rate or the rate of principal
prepayments. The extent to which the
yield to maturity of a Class of Offered
Certificates may vary from the
anticipated yield may depend upon the
degree to which it is purchased at a
discount or premium, and the degree to
which the timing of payments thereon is
sensitive to prepayments, liquidations
and purchases of the Mortgage Loans.
Further, an investor should consider
the risk that, in the case of the
Principal Only Certificates and any
other Offered Certificate purchased at
a discount, a slower than anticipated
rate of principal payments (including
prepayments) on the Mortgage Loans
could result in an actual yield to such
investor that is lower than the
anticipated yield and, in the case of
the Interest Only Certificates and any
other Offered Certificate purchased at
a premium, a faster than anticipated
rate of principal payments could result
in an actual yield to such investor
that is lower than the anticipated
yield. Investors in the Interest Only
Certificates should carefully consider
the risk that a rapid rate of principal
payments on the Mortgage Loans could
result in the failure of such investors
to recover their initial investments.
Because the Mortgage Loans may be
prepaid at any time, it is not possible
to predict the rate at which
distributions of principal of the
Offered Certificates will be received.
Since prevailing interest rates are
subject to fluctuation, there can be no
assurance that investors in the Offered
Certificates will be able to reinvest
the distributions thereon at yields
equaling or exceeding the yields on
such Offered Certificates. It is
possible that yields on any such
reinvestments will be lower, and may be
significantly lower, than the yields on
the Offered Certificates. See "Yield,
Prepayment and Maturity Considerations"
herein.
Optional Termination . . . . . . . . On any Distribution Date on which
the Pool Principal Balance is less
than 10% of the Cut-off Date Pool
Principal Balance, the Master Servicer
will have the option to purchase, in
whole, the Mortgage Loans and the REO
Property, if any, remaining in the
Trust Fund. See "Description of the
Certificates -- Optional Termination"
herein.
Federal Income Tax Consequences . . . An election will be made to treat
the Trust Fund as a "real estate
mortgage investment conduit" ("REMIC")
for federal income tax purposes. The
Regular Certificates will constitute
"regular interests" in the REMIC and
the Residual Certificates will
constitute the sole class of "residual
interest" in the REMIC. The Class A-__,
Class PO and Class X Certificates will,
and depending on their respective issue
prices certain other Classes of Offered
Certificates may, be issued with
original issue discount ("OID") for
federal income tax purposes. See
"Certain Federal Income Tax
Consequences" herein and in the
Prospectus.
The holders of the Class A-R
Certificates will be subject to special
federal income tax rules that may
significantly reduce the after-tax
yield of such Certificates. Further,
significant restrictions apply to the
transfer of the Class A-R Certificates.
See "Description of the Certificates
-- Restrictions on Transfer of the
Class A-R Certificates" herein.
ERISA Considerations . . . . . . . . The acquisition of an Offered
Certificate by a pension or other
employee benefit plan (a "Plan")
subject to the Employee Retirement
Income Security Act of 1974, as
amended ("ERISA"), could, in some
instances, result in a prohibited
transaction or other violation of
the fiduciary responsibility provisions
of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as
amended (the "Code").
Subject to the considerations and
conditions described under "ERISA
Considerations" herein, it is expected
that the Senior Certificates (other
than the Class PO, Class X and Class
A-R Certificates) may be purchased by a
Plan.
Any Plan fiduciary considering whether
to purchase any Offered Certificates on
behalf of a Plan should consult with
its counsel regarding the applicability
of the provisions of ERISA and the
Code. See "ERISA Considerations"
herein.
Legal Investment . . . . . . . . . . The Senior Certificates and the Class
______ Certificates will constitute
"mortgage related securities" for
purposes of the Secondary Mortgage
Market Enhancement Act of 1984
("SMMEA") so long as they are rated in
one of the two highest rating
categories by at least one nationally
recognized statistical rating
organization and, as such, are legal
investments for certain entities to the
extent provided for in SMMEA.
It is anticipated that the Class ____
and Class ____ Certificates will not be
rated in one of the two highest rating
categories by a nationally recognized
statistical rating organization and,
therefore, will not constitute
"mortgage related securities" for
purposes of SMMEA.
Institutions whose investment
activities are subject to review by
federal or state regulatory authorities
should consult with their counsel or
the applicable authorities to determine
whether an investment in the Offered
Certificates complies with applicable
guidelines, policy statements or
restrictions. See "Legal Investment" in
the Prospectus.
Ratings . . . . . . . . . . . . . . . It is a condition to the issuance of
the Senior Certificates that they be
rated ____ by ("_______") and ______ by
("_______" and, together with ____, the
"Rating Agencies"). See "Ratings"
herein. It is a condition to the
issuance of the Class _____, Class
_____ and Class _____ Certificates that
they be rated at least _____, _____ and
______, respectively, by ______. The
ratings of the Offered Certificates of
any Class should be evaluated
independently from similar ratings on
other types of securities. A rating is
not a recommendation to buy, sell or
hold securities and may be subject to
revision or withdrawal at any time by
either of the Rating Agencies. See
"Ratings" herein.
RISK FACTORS
Investors should consider the following risks in connection with the
purchase of the Offered Certificates.
Consequences of Owning Book-Entry Certificates. Issuance of the
Offered Certificates in book-entry form may reduce the liquidity of the
Offered Certificates in the secondary trading market since investors may
be unwilling to purchase Offered Certificates for which they cannot obtain
physical certificates. See ("Description of the Certificates --
Book-Entry Certificates" herein and) "Risk Factors -- Book-Entry
Registration" in the Prospectus.
Since transactions in the Offered Certificates can be effected only
through DTC, CEDEL, Euroclear, participating organizations, indirect
participants and certain banks, the ability of a Certificate Owner to
pledge an Offered Certificate to persons or entities that do not
participate in the DTC, CEDEL or Euroclear system may be limited due to
lack of a physical certificate representing the Offered Certificates. See
("Description of the Certificates -- Book-Entry Certificates" herein and)
"Risk Factors -- Book-Entry Registration" in the Prospectus.
Certificate Owners may experience some delay in their receipt of
distributions of interest and principal on the Offered Certificates since
such distributions will be forwarded by the Trustee to DTC and DTC will
credit such distributions to the accounts of its Participants (as defined
herein) which will thereafter credit them to the accounts of Certificate
Owners either directly or indirectly through indirect participants.
Certificate Owners will not be recognized as Certificateholders of the
Offered Certificates as such term is used in the Pooling and Servicing
Agreement, and Certificate Owners will be permitted to exercise the rights
of Offered Certificateholders only indirectly through DTC and its
Participants. See "Description of the Certificates -- Book-Entry
Certificates" herein and "Risk Factors -- Book-Entry Registration" in the
Prospectus.
Cash Flow Considerations and Risks. Even assuming that the Mortgaged
Properties provide adequate security for the Mortgage Loans, substantial
delays could be encountered in connection with the liquidation of Mortgage
Loans that are delinquent and resulting shortfalls in distributions to the
Certificateholders could occur. Further, liquidation expenses (such as
legal fees, real estate taxes, and maintenance and preservation expenses)
will reduce the security for such Mortgage Loans and thereby reduce the
proceeds payable to the Certificateholders. In the event any of the
Mortgaged Properties fail to provide adequate security for the related
Mortgage Loans, the Offered Certificates (particularly the most
subordinate Classes) could experience a loss.
Subordination -- Limited Protection Afforded to Offered Certificates.
The rights of the Class B-1 Certificates to receive distributions will be
subordinate to the rights of the Class A Certificates to receive such
distributions. The subordination of the Subordinated Certificates
relative to the Class A Certificates (and of the more lower-ranking
Classes of the Subordinated Certificates to the higher-ranking Classes) is
intended to enhance the likelihood of regular receipt by each Class A
Certificate of the full amount of the monthly distributions allocable to
them, and to afford protection against losses.
Subordination-Allocation of Losses to Subordinated Certificates. If
Realized Losses are incurred with respect to the Mortgage Loans to the
extent that the aggregate Certificate Principal Balances of the Offered
Certificates exceed the Stated Principal Balances of the Mortgage Loans,
the Certificate Principal Balances of the Subordinated Certificates will
be reduced in reverse order of seniority by the amount of the excess.
Consequently, the yields to maturity on the Subordinates will be
sensitive, in varying degrees, to defaults on the Mortgage Loans (and the
timing thereof). Investors should fully consider the risks associated
with an investment in the Subordinates Certificates, including the
possibility that such investors may not fully recover their initial
investment as a result of Realized Losses.
Prepayment Considerations and Risks. The Mortgage Pool's prepayment
experience may be affected by a wide variety of factors, including general
economic conditions, interest rates, the availability of alternative
financing and homeowner mobility. In addition, substantially all of the
Mortgage Loans contain due-on-sale provisions and the Master Servicer
intends to enforce such provisions unless (i) such enforcement is not
permitted by applicable law or (ii) the Master Servicer, in a manner
consistent with reasonable commercial practice, permits the purchaser of
the related Mortgaged Property to assume the Mortgage Loan.) To the
extent permitted by applicable law, such assumption will not release the
original borrower from its obligation under any such Mortgage Loan. See
"Yield, Prepayment and Maturity Considerations" herein and "Certain Legal
Aspects of the Loans -- Due-on-Sale Clauses" in the Prospectus for a
description of certain provisions of the Mortgage Loans that may affect
the prepayment experience thereof. The yield to maturity and weighted
average life of the Offered Certificates will be affected primarily by the
rate and timing of principal payments (including prepayments) of, and
losses on, the Mortgage Loans.
(The yield to investors on the Adjustable Rate Certificates will also
be sensitive to the level of One-Month LIBOR, the level of the Mortgage
Index and the additional limitations on the Pass-Through Rate as described
herein. In addition, the yield to maturity of the Offered Certificates
purchased at a discount or premium will be more sensitive to the rate and
timing of payments thereon. Certificateholders should consider, in the
case of the Offered Certificates purchased at a discount, the risk that a
lower than anticipated rate of principal payments could result in an
actual yield that is lower than the anticipated yield and, in the case of
the Offered Certificates purchased at a premium, the risk that a faster
than anticipated rate of principal payments could result in an actual
yield that is lower than the anticipated yield. Because certain of the
Mortgage Loans contain prepayment penalties, the rate of principal
payments may be less than the rate of principal any payments for mortgage
loans which do not contain prepayment penalties. No representation is
made as to the anticipated rate of prepayments on the Mortgage Loans, the
amount and timing of losses thereon, the level of One-Month LIBOR or the
Mortgage Index or the resulting yield to maturity of any Offered
Certificates. Any reinvestment risks resulting from a faster or slower
incidence of payments on the Mortgage Loans will be borne entirely by the
Offered Certificateholders as described herein. See "Yield, Prepayment
and Maturity Considerations" herein and "Yield and Prepayment
Considerations" in the Prospectus.)
Certificate Rating. The rating of each Class of the Offered
Certificates will depend primarily on an assessment by the Rating Agencies
of the Mortgage Loans as well as the structure of the transaction. The
rating by the Rating Agencies of any Class of Offered Certificates is not
a recommendation to purchase, hold or sell any Offered Certificates,
inasmuch as such rating does not comment as to the market price or
suitability for a particular investor. There is no assurance that the
ratings will remain in place for any given period of time or that the
ratings will not be lowered or withdrawn by the Rating Agencies. In
general, the ratings address credit risk and do not address the likelihood
of prepayments. The ratings of each Class of the Offered Certificates do
not address the possibility of the imposition of United States withholding
tax with respect to non-U.S. persons.
Bankruptcy and Insolvency Risks. The sale of the Mortgage Loans from
the Seller to the Depositor will be treated as a sale of the Mortgage
Loans. However, in the event of an insolvency of the Seller, the trustee
in bankruptcy of the Seller may attempt to recharacterize the sale of the
Mortgage Loans as a borrowing by the Seller, secured by a pledge of the
applicable Mortgage Loans. If the trustee in bankruptcy decided to
challenge such transfer, delays in payments of the Offered Certificates
and reductions in the amounts thereof could occur. The Depositor will
warrant in the Pooling and Servicing Agreement that the transfer of the
Mortgage Loans by it to the Trust Fund is either a valid transfer and
assignment of such Mortgage Loans to the Trust Fund or the grant to the
Trust Fund of a security interest in such Mortgage Loans.
In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee
or the Class A Certificateholders from appointing a successor Master
Servicer.
Subprime Nature of Mortgage Loans. The Mortgage Loans in the Mortgage
Pool were made to borrowers with prior credit difficulties and do not
satisfy the underwriting guidelines for mortgage loans eligible for sale
to the Federal National Mortgage Association ("FNMA") or the Federal Home
Loan Mortgage Corporation ("FHLMC"). It is expected that the rates of
delinquency, bankruptcy and foreclosure for the Mortgage Loans will be
higher, and may be substantially higher, than that of mortgage loans
underwritten in accordance with FNMA and FHLMC standards. See "The
Mortgage Pool--Underwriting Standards."
IndyMac began purchasing subprime mortgage loans in April 1995. As a
result, the Seller has only limited delinquency, foreclosure and loss
experience with respect to the subprime mortgage loans that it has
purchased. Although the Depositor believes that the Seller's underwriting
standards and the Master Servicer's servicing practices are consistent
with industry standards, there can be no assurance that the foreclosure
and loss experience on the Mortgage Loans will be consistent with industry
norms.
Geographic Concentration. As of the Statistic Calculation Date,
approximately (--) (by Cut-off Date Principal Balance of the Mortgage
Loans) of the Mortgaged Properties were located in the State of
California. An overall decline in the California residential real estate
market could adversely affect the values of the Mortgaged Properties
securing such Mortgage Loans such that the Principal Balances of the
related Mortgage Loans could equal or exceed the value of such Mortgaged
Properties. As the residential real estate market is influenced by many
factors, including the general condition of the economy and interest
rates, no assurances may be given that the California residential real
estate market will not weaken. If the California residential real estate
market should experience an overall decline in property values after the
dates of origination of such Mortgage Loans, the rates of losses on such
Mortgage Loans would be expected to increase, and could increase
substantially.
Delinquent Mortgage Loans. The Trust Fund may include Mortgage Loans
which are 59 or fewer days delinquent as of the Cut-off Date. It is
expected that not more than 1% of the Mortgage Loans (by Cut-off Date
Principal Balance) will be between 30 days and 59 days delinquent. None
of the Mortgage Loans is more than 59 days delinquent as of the Cut-off
Date. If there are not sufficient funds from amounts collected on the
Mortgage Loans, the aggregate amount of principal returned to any Class of
Offered Certificateholders may be less than the Certificate Principal
Balance thereof on the day the such Class of Offered Certificates were
issued.
For a discussion of additional risks pertaining to the Offered
Certificates, see "Risk Factors" in the Prospectus.
THE MORTGAGE POOL
GENERAL
The Depositor will purchase the Mortgage Loans from (IndyMac) pursuant
to the Pooling and Servicing Agreement dated as of the Cut-off Date among
(IndyMac), as Seller and Master Servicer, the Depositor and the Trustee
(the "Agreement") and will cause the Mortgage Loans to be assigned to the
Trustee for the benefit of the holders of the Certificates (the
"Certificateholders").
Under the Agreement, the Seller will make certain representations,
warranties and covenants to the Depositor relating to, among other things,
the due execution and enforceability of the Agreement and certain
characteristics of the Mortgage Loans and, subject to the limitations
described below under " -- Assignment of the Mortgage Loans," will be
obligated to repurchase or substitute a similar mortgage loan for any
Mortgage Loan as to which there exists deficient documentation or an
uncured breach of any such representation, warranty or covenant, if such
breach of such representation, warranty or covenant materially and
adversely affects the Certificateholders' interest in such Mortgage Loan;
provided, however, that the Seller will not be obligated to make any such
repurchase or substitution (or cure such breach) if such breach
constitutes fraud in the origination of the affected Mortgage Loan and the
Seller did not have knowledge of such fraud. The Seller will represent and
warrant to the Depositor in the Agreement that the Mortgage Loans were
selected from among the outstanding one-to four-family mortgage loans in
the Seller's portfolio as to which the representations and warranties set
forth in the Agreement can be made and that such selection was not made in
a manner that would adversely affect the interests of the
Certificateholders. See "Loan Program -- Representations by Sellers;
Repurchases" in the Prospectus. Under the Agreement, the Depositor will
assign all its right, title and interest in and to such representations,
warranties and covenants (including the Seller's repurchase obligation) to
the Trustee for the benefit of Certificateholders. The Depositor will make
no representations or warranties with respect to the Mortgage Loans and
will have no obligation to repurchase or substitute Mortgage Loans with
deficient documentation or which are otherwise defective. (IndyMac) is
selling the Mortgage Loans without recourse and will have no obligation
with respect to the Certificates in its capacity as Seller other than the
repurchase obligation described above. The obligations of (IndyMac), as
Master Servicer, with respect to the Certificates are limited to the
Master Servicer's contractual servicing obligations under the Agreement.
Certain information with respect to the Mortgage Loans expected to be
included in the Mortgage Pool is set forth below. Prior to the Closing
Date, Mortgage Loans may be removed from the Mortgage Pool and other
Mortgage Loans may be substituted therefor. The Depositor believes that
the information set forth herein with respect to the Mortgage Pool as
presently constituted is representative of the characteristics of the
Mortgage Pool as it will be constituted at the Closing Date, although
certain characteristics of the Mortgage Loans in the Mortgage Pool may
vary. Unless otherwise indicated, information presented herein expressed
as a percentage (other than rates of interest) are approximate percentages
based on the Stated Principal Balances of the Mortgage Loans as of the
Cut-off Date.
As of the Cut-off Date, the aggregate of the Stated Principal Balances
of the Mortgage Loans is expected to be approximately $_______ (the
"Cut-off Date Pool Principal Balance"). The Mortgage Loans provide for the
amortization of the amount financed over a series of substantially equal
monthly payments. All the Mortgage Loans provide for payments due as of
the first day of each month (the "Due Date"). At origination,
substantially all of the Mortgage Loans had stated terms to maturity of 30
years. The Mortgage Loans to be included in the Mortgage Pool were
purchased by (IndyMac) and were originated substantially in accordance
with (IndyMac's) underwriting criteria for conventional non-conforming
mortgage loans described herein. Sub-prime mortgage loans are generally
first mortgage loans.
Each Mortgage Loan was originated after ____________.
The latest stated maturity date of any Mortgage Loan is _________. The
earliest stated maturity date of any Mortgage Loan is ___________.
As of the Cut-off Date, no Mortgage Loan was delinquent more than 30
days.
(No) Mortgage Loan will be subject to a buydown agreement. (No)
Mortgage Loan provides for deferred interest or negative amortization.
(No Mortgage Loan had a Loan-to-Value Ratio at origination of more
than 95%. Each Mortgage Loan with a Loan-to-Value Ratio at origination of
greater than 80% is covered by a primary mortgage guaranty insurance
policy issued by a mortgage insurance company acceptable to FNMA or FHLMC,
which policy provides coverage in an amount equal to the excess of the
original principal balance of the related Mortgage Loan over 75% of the
value of the related Mortgaged Property, plus accrued interest thereon and
related foreclosure expenses.
The Loan-to-Value Ratio of a Mortgage Loan is equal to (i) the
principal balance of such Mortgage Loan at the date of origination,
divided by (ii) the Collateral Value of the related Mortgaged Property.
The Collateral Value of a Mortgaged Property is the lesser of (x) the
appraised value based on an appraisal made for (IndyMac) by an independent
fee appraiser at the time of the origination of the related Mortgage Loan,
and (y) the sales price of such Mortgaged Property at such time of
origination. With respect to a Mortgage Loan the proceeds of which were
used to refinance an existing mortgage loan, the Collateral Value is the
appraised value of the Mortgaged Property based upon the appraisal
obtained at the time of refinancing. No assurance can be given that the
values of the Mortgaged Properties have remained or will remain at their
levels as of the dates of origination of the related Mortgage Loans. If
the residential real estate market should experience an overall decline in
property values such that the outstanding balances of the Mortgage Loans
become equal to or greater than the value of the Mortgaged Properties,
actual losses on the Mortgage Loans could be higher than losses now
generally experienced in the mortgage lending industry.
The following information sets forth in tabular format certain
information, as of the Cut-off Date, as to the Mortgage Loans. Other than
with respect to rates of interest, percentages (approximate) are stated by
Stated Principal Balance of the Mortgage Loans as of the Cut-off Date and
have been rounded in order to total 100%.
<TABLE>
<CAPTION>
Mortgage Rates(1) Current Mortgage Loan Principal Balances(1)
- --------------------------------------------------------- -----------------------------------------------------------------
Aggregate Aggregate
Number of Principal Percent of Number of Principal Percent of
Mortgage Balance Mortgage Current Mortgage Loan Mortgage Balance Mortgage
Mortgage Rates (%) Loans Outstanding Pool Amounts Loans Outstanding Pool
- --------------------------------------------------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.250 . . . . . . . $ % . . . . . . . . . . . . . $ %
6.750 . . . . . . . . . . . . . . . . . . . .
6.875 . . . . . . . . . . . . . . . . . . . .
7.000 . . . . . . . . . . . . . . . . . . . .
7.125 . . . . . . . . . . . . . . . . . . . .
7.250 . . . . . . . . . . . . . . . . . . . .
7.375 . . . . . . . . . . . . . . . . . . . .
7.500 . . . . . . . . . . . . . . . . . . . .
7.625 . . . . . . . . . . . . . . . . . . . .
7.750 . . . . . . . $450,001-$ 500,000 . . .
7.875 . . . . . . . $500,001-$ 550,000 . . .
8.000 . . . . . . . $550,001-$ 600,000 . . .
8.125 . . . . . . . $600,001-$ 650,000 . . .
8.250 . . . . . . . $650,001-$ 700,000 . . .
8.375 . . . . . . . $700,001-$ 750,000 . . .
8.500 . . . . . . . $750,001-$1,000,000 . . .
8.625 . . . . . . . Total . . . . . . . . . . 100%
8.750 . . . . . . .
8.875 . . . . . . . (1) As of the Cut-off Date, the average current Mortgage Loan
9.000 . . . . . . . principal balance is expected to be approximately $______
9.125 . . . . . . .
9.250 . . . . . . .
9.375 . . . . . . .
9.500 . . . . . . .
9.875 . . . . . . .
10.00 . . . . . . . $ 100%
(1) The Lender PMI Mortgage Loans are shown at the Aggregate
Mortgage Rates net of the interest premium Number of Principal Percent of
charged by the related lenders. As of the Mortgage Balance Mortgage
Cut-off Date, the weighted average Mortgage Type of Program Loans Outstanding Pool
Rate of the Mortgage Loans (as so adjusted) is --------------------------------------------------------------
expected to be aproximately %. without such Full . . . . . . . $ %
adjustment, the weighted Alternative . . . .
Reduced . . . . . .
Original Loan-to-Value Ratios(1) Types of Mortgaged Properties
- ----------------------------------------------------------- --------------------------------------------------------------
Aggregate Aggregate
Number of Principal Percent of Number of Principal Percent of
Original Loan-to- Mortgage Balance Mortgage Mortgage Balance Mortgage
Value Ration (%) Loans Outstanding Pool Property Type Loans Outstanding Pool
- ----------------------------------------------------------- ---------------------------------------------------------------
50.00 and below . Single Family . . . . . $ %
50.01 to 55.00 . . Condominium . . . . . .
55.01 to 60.00 . . Two- to Four-Family . .
60.01 to 65.00 . . Planned Unit
65.01 to 70.00 . . Development . . . . . .
70.01 to 75.00 . . Totals $ 100%
75.01 to 80.00 . .
80.01 to 85.00 . . Occupancy Types(1)
85.01 to 90.00 . . -----------------------------------------------------------------
90.01 to 95.00 . . Aggregate
Totals . . . . . . $ 100% Number of Principal Percent of
- --------------- Mortgage Balance Mortgage
(1) The weighted average original Loan-to-Value Ratio of Occupancy Type Loans Outstanding Pool
Mortgage Loans is expected to be approximately ____% ------------------------------------------------------------------
Primary Residence . . $ %
Investor Property . .
Second Residence . .
Totals . . . . . . . $ 100%
---------------
(1) Based upon representations of the related mortgagors at the
time of origination.
</TABLE>
<TABLE>
<CAPTION>
State Distribution Properties(1) Remaining terms to Maturity(1)
- ---------------------------------------------------------- -----------------------------------------------------------------
Aggregate Aggregate
Number of Principal Percent of Number of Principal Percent of
Mortgage Balance Mortgage Remaining Term to Mortgage Balance Mortgage
State Loans Outstanding Pool Maturity (Months) Loans Outstanding Pool
<S> <C> <C> <C> <C>
360 . . . . . . . . .
Arizona . . . . $ % 359 . . . . . . . . . $ %
California . . 358 . . . . . . . . .
Colorado . . . 357 . . . . . . . . .
Florida . . . . 356 . . . . . . . . .
Georgia . . . . 355 . . . . . . . . .
Hawaii . . . . 354 . . . . . . . . .
Illinois . . . 353 . . . . . . . . .
Maryland . . . 352 . . . . . . . . .
Massachusetts . 351 . . . . . . . . .
New Jersey . . 349 . . . . . . . . .
New York . . . 348 . . . . . . . . .
Pennsylvania . 347 . . . . . . . . .
Texas . . . . . 345 . . . . . . . . .
Utah . . . . . 344 . . . . . . . . .
Washington . . 343 . . . . . . . . .
Other (less than 342 . . . . . . . . .
2%) . . . . . . 341 . . . . . . . . .
Totals . . . . $ 100% 338 . . . . . . . . .
335 . . . . . . . . .
(1) Other includes other states with under (2)% 334 . . . . . . . . .
concentration individually. No more than 333 . . . . . . . . .
approximately % of the Mortgage Loans will 332 . . . . . . . . .
be secured by Mortgaged properties located 328 . . . . . . . . .
in any one postal zip code area. 326 . . . . . . . . .
325 . . . . . . . . .
321 . . . . . . . . .
Purpose of Mortgage Loans 320 . . . . . . . . .
- ---------------------------------------------------------- 319 . . . . . . . . .
Aggregate 318 . . . . . . . . .
Number of Principal Percent of 314 . . . . . . . . .
Mortgage balance Mortgage 297 . . . . . . . . .
Loan Purpose Loans Outstanding Pool 293 . . . . . . . . .
- ---------------------------------------------------------- 259 . . . . . . . . .
Purchase . . . . . . . $ % 240 . . . . . . . . .
Refinance (rate/term). 238 . . . . . . . . .
Refinance (cash out) . 237 . . . . . . . . .
Totals . . . . . . . . $ 100% Total . . . . . . . . $ 100%
(1) As the Cut-Off Date, the weighted average remaining term
to maturity of the Mortgage Loans is expected to be
approximately months.
</TABLE>
ASSIGNMENT OF THE MORTGAGE LOANS
Pursuant to the Agreement, the Depositor on the Closing Date will
sell, transfer, assign, set over and otherwise convey without recourse to
the Trustee in trust for the benefit of the Certificateholders all right,
title and interest of the Depositor in and to each Mortgage Loan and all
right, title and interest in and to all other assets included in the Trust
Fund, including all principal and interest (received) (due) on or with
respect to the Mortgage Loans after the Cut-off Date (, exclusive of
principal and interest due on or prior to the Cut-off Date).
In connection with such transfer and assignment, the Depositor will
deliver or cause to be delivered to the Trustee, or a custodian for the
Trustee, among other things, the original promissory note (the "Mortgage
Note") (and any modification or amendment thereto) endorsed in blank
without recourse, the original instrument creating a first lien on the
related Mortgaged Property (the "Mortgage") with evidence of recording
indicated thereon, an assignment in recordable form of the Mortgage to the
Trustee (which may be a blanket assignment if permitted in the applicable
jurisdiction), the title policy with respect to the related Mortgaged
Property and, if applicable, all recorded intervening assignments of the
Mortgage and any riders or modifications to such Mortgage Note and
Mortgage (except for any such documents not returned from the public
recording office, which will be delivered to the Trustee as soon as the
same is available to the Depositor) (collectively, the "Mortgage File").
Assignments of the Mortgage Loans to the Trustee (or its nominee) will be
recorded in the appropriate public office for real property records(,
except in states such as California where in (the opinion of counsel 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 Seller).
The Trustee will review each Mortgage File within 90 days of the
Closing Date (or promptly after the Trustee's receipt of any document
permitted to be delivered after the Closing Date) and if any documents in
a Mortgage File are found to be missing or defective in a material respect
and the Seller does not cure such defect within 90 days of notice thereof
from the Trustee (or within such longer period not to exceed ___ days
after the Closing Date as provided in the Agreement in the case of missing
documents not returned from the public recording office), the Seller will
be obligated to repurchase the related Mortgage Loan from the Trust Fund.
Rather than repurchase the Mortgage Loan as provided above, the Seller may
remove such Mortgage Loan (a "Deleted Mortgage Loan") from the Trust Fund
and substitute in its place another mortgage loan (a "Replacement Mortgage
Loan"); however, such substitution is permitted only within two years of
the Closing Date and may not be made unless an opinion of counsel is
provided to the Trustee to the effect that such substitution will not
disqualify the REMIC or result in a prohibited transaction tax under the
Code. Any Replacement Mortgage Loan generally will, on the date of
substitution, among other characteristics set forth in the Agreement, (i)
have a principal balance, after deduction of all Scheduled Payments due in
the month of substitution, not in excess of, and not more than 10% less
than, the Stated Principal Balance of the Deleted Mortgage Loan (the
amount of any shortfall to be deposited by the Seller in the Certificate
Account and held for distribution to the Certificateholders on the related
Distribution Date (a "Substitution Adjustment Amount")), (ii) have a
Mortgage Rate not lower than, and not more than 1% per annum higher than,
that of the Deleted Mortgage Loan, (iii) have a Loan-to-Value Ratio not
higher than that of the Deleted Mortgage Loan, (iv) have a remaining term
to maturity not greater than (and not more than one year less than) that
of the Deleted Mortgage Loan, and (v) comply with all of the
representations and warranties set forth in the Agreement as of the date
of substitution. This cure, repurchase or substitution obligation
constitutes the sole remedy available to Certificateholders or the Trustee
for omission of, or a material defect in, a Mortgage Loan document.
UNDERWRITING STANDARDS
IndyMac began operating a mortgage conduit program in 1993 and began
in April 1995 to purchase mortgage loans made to borrowers with prior
credit difficulties (so-called "subprime mortgage loans"). All of the
subprime mortgage loans purchased by IndyMac are "conventional non-
conforming mortgage loans" (i.e., loans which are not insured by the FHA
or partially guaranteed by the VA and which do not qualify for sale to
FNMA or FHLMC) secured by first liens on one- to four-family residential
properties.
IndyMac purchases all of its subprime mortgage loans from unaffiliated
sellers either under flow or bulk purchase arrangements, the terms of
which may vary from seller to seller. Such sellers are required to be HUD
approved mortgagees.
IndyMac's underwriting standards are primarily intended to evaluate
the value and adequacy of the mortgaged property as collateral for the
proposed mortgage loan, as well as the type and intended use of the
mortgaged property. Its underwriting standards are less stringent than
the standards generally acceptable to FNMA and FHLMC with regard to the
borrower's credit standing and repayment ability. Borrowers who qualify
under the IndyMac underwriting standards generally have payment histories
and debt-to-income ratios that would not satisfy FNMC and FHLMC
underwriting guidelines and may have a record of major derogatory credit
items, such as outstanding judgments or prior bankruptcies, or lower
credit scores. As a result, the rates of delinquency, bankruptcy and
foreclosure for such mortgage loans could be higher, and may be
substantially higher, than that of mortgage loans underwritten in
accordance with FNMA and FHLMC standards.
Each of the subprime mortgage loans purchased by IndyMac is assigned
to one of six credit levels based on the prospective mortgagor's mortgage
payment history within the preceding twelve months, retail and installment
debt credit history, judgements, charge-offs and accounts assigned for
collection. IndyMac also accepts loans underwritten under one of four
documentation programs: Full/Alternate Documentation, Reduced
Documentation, No Ratio Documentation and No Income/No Asset. For each
credit level and documentation program, IndyMac has a maximum permitted
loan amount, a maximum Loan-to-Value Ratio and, in some cases, a
limitation on the loan purpose. The maximum debt to income ratio for all
loans, other than those with primary mortgage insurance, is 55%. Such
limitation, however, may be waived on a case by case basis.
Under the Full/Alternate Documentation Program, the prospective
borrower's employment, income and assets are verified through written or
telephonic communications. Mortgage loans in all six credit levels may be
submitted under this program. Under each of the Reduced Documentation
Program and the No Ratio Program, more emphasis is placed on the value and
adequacy of the mortgaged property as collateral and other assets of the
borrower than on credit underwriting. Under the No Income/No Asset
Program, credit underwriting documentation concerning income, employment
verification and asset verification is waived and income ratios are not
calculated. Under each of these programs, certain credit underwriting
documentation concerning income or income verification and/or employment
verification is waived.
Only mortgage loans for primary residences in credit Levels 0 and I+
may be submitted under the No Income/No Asset Program, and the maximum
Loan-to-Value Ratios under this program is less than those under the Full
Documentation, Alternative Documentation, Reduced Documentation and No
Ratio Programs.
Set forth below are the maximum loan amounts and Loan-to-Value Ratios
for purchase money mortgage loans and refinance mortgage loans for each
credit level and documentation program:
<TABLE>
<CAPTION>
PRIMARY RESIDENCE-PURCHASE MONEY AND RATE/TERM REFINANCES
CREDIT MAXIMUM NO INCOME/
LEVEL LOAN AMOUNT FULL/ALT. DOC. REDUCED DOC. NO RATIO NO ASSET
---------- ------------- ---------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
0
I+
I
II
III
IV
</TABLE>
<TABLE>
<CAPTION>
PRIMARY RESIDENCE-CASH OUT REFINANCES
CREDIT MAXIMUM NO INCOME/
LEVEL LOAN AMOUNT FULL/ALT. DOC. REDUCED DOC. NO RATIO NO ASSET
-------- ------------- ---------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
0
I+
I
II
III
IV
</TABLE>
<TABLE>
<CAPTION>
SECOND HOME AND INVESTOR PROPERTIES-PURCHASE MONEY AND RATE/TERM REFINANCES
CREDIT MAXIMUM
LEVEL* LOAN AMOUNT FULL/ALT. DOC. REDUCED DOC. NO RATIO
-------- ------------- ---------------- -------------- ----------
<S> <C> <C> <C> <C>
0
I+
I
II
III
- --------------
* No Credit Level IV allowed for this product.
</TABLE>
<TABLE>
<CAPTION>
SECOND HOME AND INVESTOR PROPERTIES-CASH-OUT REFINANCES
CREDIT MAXIMUM
LEVEL* LOAN AMOUNT FULL/ALT. DOC. REDUCED DOC. NO RATIO
-------- ------------- ---------------- -------------- ----------
<S> <C> <C> <C> <C>
0
I+
I
II
</TABLE>
- ----------------
* No Credit Level III or IV allowed for this product.
Such limits may be waived, however, on a case by case basis if it is
determined, based on compensating factors, that an underwriting exception
is warranted. Compensating factors may include stable employment, time in
the same residence, cash reserves and savings.
SERVICING OF MORTGAGE LOANS
GENERAL
The Master Servicer will service the Mortgage Loans in accordance with
the terms set forth in the Pooling and Servicing Agreement. The Master
Servicer may perform any of its obligations under the Pooling and
Servicing Agreement through one or more subservicers. Notwithstanding any
such subservicing arrangement, the Master Servicer will remain liable for
its servicing duties and obligations under the Pooling and Servicing
Agreement as if the Master Servicer alone were servicing the Mortgage
Loans.
The information set forth in the following section through and
including the section captioned "Delinquency Status as of _____________,
199_" has been provided by (IndyMac). No representation is made by the
Depositor or any of its affiliates as to the accuracy or completeness of
any such information.
THE MASTER SERVICER
(IndyMac, Inc. ("IndyMac"), a Delaware corporation, will act as the
Master Servicer of the Mortgage Loans pursuant to the Pooling and
Servicing Agreement.
As of __________, 199_, IndyMac provided servicing for approximately
$__________ million in conventional mortgages.
The principal executive offices of IndyMac are located at 155 North
Lake Avenue, Pasadena, California 91101.)
SERVICING AND COLLECTION PROCEDURES
IndyMac has entered into contracts (each a "Servicer Contract") with
each Servicer to perform, as independent contractors, servicing functions
for IndyMac subject to its supervision. Such servicing functions include
collection and remittance of principal and interest payments,
administration of mortgage escrow accounts, collection of certain
insurance claims and, if necessary, foreclosure. IndyMac may permit the
Servicers to contract with subservicers to perform some or all of
Servicer's servicing duties, but such Servicer will not thereby be
released from its obligations under the Servicer Contract. IndyMac also
may enter into servicing contracts directly with an affiliate of a
Servicer or permit a Servicer to transfer its servicing rights and
obligations to a third party. In such instances, the affiliate or third
party, as the case may be, will perform servicing functions comparable to
those normally performed by the Servicer as described above, and the
Servicer will not be obligated to perform such servicing functions. When
used herein with respect to servicing obligations, the term Servicer
includes any such affiliate or third party. IndyMac may perform certain
supervisory functions with respect to servicing by the Servicers directly
or through an agent or independent contractor and will be responsible for
administering and servicing the Mortgage Loans pursuant to the Agreement.
On or before the Closing Date, IndyMac will establish one or more accounts
(the "Collection Account") into which each Servicer will remit collections
on the mortgage loans serviced by it (net of its related servicing
compensation). For purposes of the Agreement, IndyMac, as Master
Servicer, will be deemed to have received any amounts with respect to the
Mortgage Loans that are received by a Servicer regardless of whether such
amounts are remitted by the Servicer to IndyMac. IndyMac has reserved the
right to remove the Servicer servicing any Mortgage Loan at any time and
will exercise that right if IndyMac considers such removal to be in the
best interest of the Certificateholders. In the event that IndyMac
removes a Servicer, IndyMac will continue to be responsible for servicing
the related Mortgage Loans.
FORECLOSURE AND DELINQUENCY EXPERIENCE
The following table summarizes the delinquency experience of subprime
loans master serviced by IndyMac. A mortgage loan is characterized as
delinquent if the borrower has not paid the minimum payment due by the due
date. The table below excludes mortgage loans where the mortgage loan is
in foreclosure or the borrower has filed for bankruptcy. Since IndyMac
began master servicing subprime mortgage loans in April 1995, the
delinquency percentages may be affected by the size and relative lack of
seasoning of the servicing portfolio because many of such loans were not
outstanding long enough to give rise to some or all of the periods of
delinquency indicated in the chart below. Accordingly, the information
should not be considered as a basis for assessing the likelihood, amount,
or severity of delinquency or losses on the Mortgage Loans, and no
assurances can be given that the foreclosure experience presented in the
second paragraph below the table will be indicative of such experience on
the Mortgage Loans.
<TABLE>
<CAPTION>
------------------------------------------
AT DECEMBER 31,
------------------------------------------
______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
Delinquent Mortgage Loans and Pending Foreclosures at Period end(1):
30-59 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . % % % % %
60-89 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90 days or more (excluding pending foreclosures) . . . . . . . . . . . . . . . ______ ______ ______ ______ ______
Total of delinquencies % % % % %
====== ====== ====== ====== ======
Foreclosures pending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . % % % % %
====== ====== ====== ====== ======
Total delinquencies and foreclosures pending . . . . . . . . . . . . . . . . . . . % % % % %
- ----------------------------------------------------------------------------------- ====== ====== ====== ====== ======
(1) As a percentage of the total number of loans master serviced.
</TABLE>
Delinquencies are reported on a contractual basis. As of
_____________, 199_, __________ mortgage loans with an aggregate principal
balance of $______________ were in foreclosure and, there were ___________
loans in bankruptcy with a combined loan balance of $______________.
(Over the last several years, there has been a general deterioration
of the real estate market and weakening economy in many regions of the
country, including __________. The general deterioration of the real
estate market has been reflected in increases in delinquencies of loans
secured by real estate, slower absorption rates of real estate into the
market and lower sales prices for real estate. The general weakening of
the economy has been reflected in decreases in the financial strength of
borrowers and decreases in the value of collateral serving as security for
loans. If the real estate market and economy continue to decline, IndyMac
may experience an increase in delinquencies on the loans it services and
higher net losses on liquidated loans.)
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
(The Master Servicer will be paid a monthly fee from interest
collected with respect to each Mortgage Loan (as well as from any
liquidation proceeds from a Liquidated Mortgage Loan that are applied to
accrued and unpaid interest) equal to one-twelfth of the Stated Principal
Balance thereof multiplied by the Servicing Fee Rate (such product, the
"Servicing Fee"). The Servicing Fee Rate for each Mortgage Loan will equal
________% per annum. The amount of the monthly Servicing Fee is subject to
adjustment with respect to prepaid Mortgage Loans, as described herein
under "--Adjustment to Master Servicing Fee in Connection with Certain
Prepaid Mortgage Loans." The Master Servicer is also entitled to receive,
as additional servicing compensation, amounts in respect of interest paid
on Principal Prepayments (as defined below) received from the 2nd day
through the 15th day of a month ("Prepayment Interest Excess"), all late
payment fees, assumption fees, prepayment penalties and other similar
charges and all reinvestment income earned on amounts on deposit in the
Certificate Account and Distribution Account. The Master Servicer is
obligated to pay certain ongoing expenses associated with the Mortgage
Loans and incurred by the Trustee in connection with its responsibilities
under the Pooling and Servicing Agreement.)
ADJUSTMENT TO MASTER SERVICING FEE IN CONNECTION WITH CERTAIN PREPAID
MORTGAGE LOANS
(When a borrower prepays a Mortgage Loan between Due Dates, the
borrower is required to pay interest on the amount prepaid only to the
date of prepayment and not thereafter. Except with respect to the month of
the Cut-off Date, principal prepayments by borrowers received by the
Master Servicer from the first day through the fifteenth day of a calendar
month will be distributed to Certificateholders on the Distribution Date
in the same month in which such prepayments are received and, accordingly,
no shortfall in the amount of interest to be distributed to
Certificateholders with respect to the prepaid Mortgage Loans results.
Conversely, principal prepayments by borrowers received by the Master
Servicer from the sixteenth day (or, in the case of the first Distribution
Date, from the Cut-off Date) through the last day of a calendar month will
be distributed to Certificateholders on the Distribution Date in the month
following the month of receipt and, accordingly, a shortfall in the amount
of interest to be distributed to Certificateholders with respect to such
prepaid Mortgage Loans would result. Pursuant to the Agreement, the Master
Servicing Fee for any month will be reduced, but not by more than (_____)
of such Master Servicing Fee, by an amount sufficient to pass through to
Certificateholders the full amount of interest to which they would be
entitled in respect of each such prepaid Mortgage Loan on the related
Distribution Date. If shortfalls in interest as a result of prepayments in
any Prepayment Period exceed an amount equal to one-half of the Master
Servicing Fee otherwise payable on the related Distribution Date, the
amount of interest available to be distributed to Certificateholders will
be reduced by the amount of such excess. See "Description of the
Certificates -- Interest" herein.)
ADVANCES
Subject to the following limitations, the Master Servicer will be
required to advance prior to each Distribution Date, from its own funds or
funds in the Certificate Account that do not constitute Available Funds
for such Distribution Date, an amount equal to the aggregate of payments
of (principal and interest) on the Mortgage Loans (net of the Master
Servicing Fee with respect to the related Mortgage Loans) which were due
on the related Due Date and which were delinquent on the related
Determination Date, together with an amount equivalent to interest on each
Mortgage Loan as to which the related Mortgaged Property has been acquired
by the Trust Fund through foreclosure or deed-in-lieu of foreclosure ("REO
Property") (any such advance, an "Advance").
Advances are intended to maintain a regular flow of scheduled
(interest and principal payments) on the Certificates rather than to
guarantee or insure against losses. The Master Servicer is obligated to
make Advances with respect to delinquent (payments of principal of or
interest) on each Mortgage Loan to the extent that such Advances are, in
its reasonable judgment, recoverable from future payments and collections
or insurance payments or proceeds of liquidation of the related Mortgage
Loan. If the Master Servicer determines on any Determination Date to make
an Advance, such Advance will be included with the distribution to
Certificateholders on the related Distribution Date. Any failure by the
Master Servicer to make an Advance as required under the Agreement with
respect to the Certificates will constitute an Event of Default
thereunder, in which case the Trustee or the successor master servicer
will be obligated to make any such Advance, in accordance with the terms
of the Agreement.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Agreement. Set forth
below are summaries of the specific terms and provisions pursuant to which
the Certificates will be issued. The following summaries do not purport to
be complete and are subject to, and are qualified in their entirety by
reference to, the provisions of the Agreement. When particular provisions
or terms used in the Agreement are referred to, the actual provisions
(including definitions of terms) are incorporated by reference.
The Mortgage Pass-Through Certificates, Series 199_ - __ will consist
of the Class A- , Class ___ , Class PO, Class X and Class A-R Certificates
(collectively, the "Senior Certificates") and the Class B- , Class ___ and
Class ____ Certificates (collectively, the "Subordinated Certificates").
The Senior Certificates and Subordinated Certificates are collectively
referred to herein as the "Certificates." Only the Classes of Certificates
listed on the cover page hereof (collectively, the "Offered Certificates")
are offered hereby. The Classes of Offered Certificates will have the
respective initial Class Certificate Balances or initial Notional Amounts
(subject to the permitted variance) and Pass-Through Rates set forth or
described on the cover hereof.
The Class Certificate Balance of any Class of Certificates as of any
Distribution Date is the initial Class Certificate Balance thereof (A)
reduced by the sum of (i) all amounts previously distributed to holders of
Certificates of such Class as payments of principal, (ii) the amount of
Realized Losses (including Excess Losses) allocated to such Class and
(iii) in the case of any Class of Subordinated Certificates, any amounts
allocated to such Class in reduction of its Class Certificate Balance in
respect of payments of Class PO Deferred Amounts, as described below under
" -- Allocation of Losses". In addition, the Class Certificate Balance of
the Class of Subordinated Certificates then outstanding with the highest
numerical Class designation will be reduced if and to the extent that the
aggregate of the Class Certificate Balances of all Classes of
Certificates, following all distributions and the allocation of Realized
Losses on a Distribution Date, exceeds the Pool Principal Balance as of
the Due Date occurring in the month of such Distribution Date. The
Notional Amount Certificates do not have principal balances and are not
entitled to any distributions in respect of principal of the Mortgage
Loans.
The Notional Amount of the Class X Certificates for any Distribution
Date will be equal to the aggregate of the Stated Principal Balances of
the Non-Discount Mortgage Loans with respect to such Distribution Date.
The initial Notional Amount of the Class X Certificates will be equal to
the aggregate of the Stated Principal Balance of the Non-Discount Mortgage
Loans as of the Cut-off Date.
The Senior Certificates will have an initial aggregate principal
balance of approximately $_____ and will evidence in the aggregate an
initial beneficial ownership interest of approximately ____% in the Trust
Fund. The Class B- , Class B- , Class B- , Class B- , Class B- and Class
B- Certificates will each evidence in the aggregate an initial beneficial
ownership interest of approximately ___%,___%,___%, ___%,___%, and ___%,
respectively, in the Trust Fund.
The Book-Entry Certificates will be issuable in book-entry form only.
The Physical Certificates will be issued in fully registered certificated
form. The Physical Certificates (other than Class A-R Certificates)
offered hereby will be issued in minimum dollar denominations of $25,000
and integral multiples of $1,000 in excess thereof. A single Certificate
of each such Class may be issued in an amount different than described
above. The Class A-R Certificates will be issued as a single Certificate
in a denomination of $1,000.
BOOK-ENTRY CERTIFICATES
Each Class of Book-Entry Certificates will be issued in one or more
certificates which equal the aggregate initial Class Certificate Balance
of each such Class of Certificates and which will be held by a nominee of
The Depository Trust Company (together with any successor depository
selected by the Depositor, the "Depository"). Beneficial interests in the
Book-Entry Certificates will be held indirectly by investors through the
book-entry facilities of the Depository, as described herein. Investors
may hold such beneficial interests in the Book-Entry Certificates in
minimum denominations representing an original principal amount of $25,000
and integral multiples of $1,000 in excess thereof. One investor of each
Class of Book-Entry Certificates may hold a beneficial interest therein
that is not an integral multiple of $1,000. The Depositor has been
informed by the Depository that its nominee will be CEDE & Co. ("CEDE").
Accordingly, CEDE is expected to be the holder of record of the Book-Entry
Certificates. Except as described in the Prospectus under "Description of
the Certificates -- Book-Entry Certificates," no person acquiring a
Book-Entry Certificate (each, a "beneficial owner") will be entitled to
receive a physical certificate representing such Certificate (a
"Definitive Certificate").
Unless and until Definitive Certificates are issued, it is anticipated
that the only "Certificateholder" of the Book-Entry Certificates will be
CEDE, as nominee of the Depository. Beneficial owners of the Book-Entry
Certificates will not be Certificateholders, as that term is used in the
Agreement. Beneficial owners are only permitted to exercise the rights of
Certificateholders indirectly through Financial Intermediaries and the
Depository. Monthly and annual reports on the Trust Fund provided to CEDE,
as nominee of the Depository, may be made available to beneficial owners
upon request, in accordance with the rules, regulations and procedures
creating and affecting the Depository, and to the Financial Intermediaries
to whose Depository accounts the Book-Entry Certificates of such
beneficial owners are credited.
For a description of the procedures generally applicable to the
Book-Entry Certificates, see "Description of the Securities -- Book-Entry
Registration of Securities" in the Prospectus.
PAYMENTS ON MORTGAGE LOANS; ACCOUNTS
On or prior to the Closing Date, the Master Servicer will establish an
account (the "Certificate Account"), which will be maintained in trust for
the benefit of the Certificateholders. Funds credited to the Certificate
Account may be invested for the benefit and at the risk of the Master
Servicer in Permitted Investments, as defined in the Agreement, that are
scheduled to mature on or prior to the business day preceding the next
Distribution Date. On or prior to the business day immediately preceding
each Distribution Date, the Master Servicer will withdraw from the
Certificate Account the amount of Available Funds and will deposit such
Available Funds in an account established and maintained with the Trustee
on behalf of the Certificateholders (the "Distribution Account").
DISTRIBUTIONS
Distributions on the Certificates will be made by the Trustee on the
__th day of each month, or if such day is not a business day, on the first
business day thereafter, commencing in ____ 199_ (each, a "Distribution
Date"), to the persons in whose names such Certificates are registered at
the close of business on the last business day of the month preceding the
month of such Distribution Date (the "Record Date").
Distributions on each Distribution Date will be made by check mailed
to the address of the person entitled thereto as it appears on the
applicable certificate register or, in the case of a Certificateholder who
holds 100% of a Class of Certificates or who holds Certificates with an
aggregate initial Certificate Balance of $1,000,000 or more or who holds
an Interest Only Certificate and who has so notified the Trustee in
writing in accordance with the Agreement, by wire transfer in immediately
available funds to the account of such Certificateholder at a bank or
other depository institution having appropriate wire transfer facilities;
provided, however, that the final distribution in retirement of the
Certificates will be made only upon presentment and surrender of such
Certificates at the Corporate Trust Office of the Trustee.
PRIORITY OF DISTRIBUTIONS AMONG CERTIFICATES
As more fully described herein, distributions will be made on each
Distribution Date from Available Funds in the following order of priority:
(i) to interest on each interest bearing Class of Senior Certificates;
(ii) to principal on the Classes of Senior Certificates then entitled to
receive distributions of principal, in the order and subject to the
priorities set forth herein under " -- Principal," in each case in an
aggregate amount up to the maximum amount of principal to be distributed
on such Classes on such Distribution Date; (iii) to any Class PO Deferred
Amounts with respect to the Class PO Certificates, but only from amounts
that would otherwise be distributed on such Distribution Date as principal
of the Subordinated Certificates; and (iv) to interest on and then
principal of each Class of Subordinated Certificates, in the order of
their numerical Class designations, beginning with the Class ____
Certificates, in each case subject to the limitations set forth herein
under "Description of the Certificates -- Principal."
"Available Funds" with respect to any Distribution Date will be equal
to the sum of (i) all scheduled installments of interest (net of the
related Expense Fees) and principal due on the Due Date in the month in
which such Distribution Date occurs and received prior to the related
Determination Date, together with any Advances in respect (thereof (in
respect of interest)); (ii) all proceeds of any primary mortgage guaranty
insurance policies and any other insurance policies with respect to the
Mortgage Loans, to the extent such proceeds are not applied to the
restoration of the related Mortgaged Property or released to the Mortgagor
in accordance with the Master Servicer's normal servicing procedures
(collectively, "Insurance Proceeds") and all other cash amounts received
and retained in connection with the liquidation of defaulted Mortgage
Loans, by foreclosure or otherwise ("Liquidation Proceeds") during the
calendar month preceding the month of such Distribution Date (in each
case, net of unreimbursed expenses incurred in connection with a
liquidation or foreclosure and unreimbursed Advances, if any); (iii) all
partial or full prepayments received during the month preceding the month
of such Distribution Date; and (iv) amounts received with respect to such
Distribution Date as the Substitution Adjustment Amount or purchase price
in respect of a Deleted Mortgage Loan or a Mortgage Loan repurchased by
the Seller as of such Distribution Date, reduced by amounts in
reimbursement for Advances previously made and other amounts as to which
the Master Servicer is entitled to be reimbursed from the Certificate
Account pursuant to the Agreement.
INTEREST
The Classes of Offered Certificates will have the respective
Pass-Through Rates set forth or described on the cover hereof.
The Pass-Through Rate for the Class X Certificates for any
Distribution Date will be equal to the excess of (a) the average of the
Net Mortgage Rates of the Non-Discount Mortgage Loans, weighted on the
basis of the Stated Principal Balances thereof, over (b)___% per annum.
The Pass-Through Rate for the Class X Certificates for the first
Distribution Date is expected to be approximately ___% per annum. The Net
Mortgage Rate for each Mortgage Loan is the Mortgage Rate thereof less the
Expense Fee Rate for such Mortgage Loan.
On each Distribution Date, to the extent of funds available therefor,
each interest bearing Class of Certificates will be entitled to receive an
amount allocable to interest (as to each such Class, the "Interest
Distribution Amount") with respect to the related Interest Accrual Period.
The Interest Distribution Amount for any interest bearing Class will be
equal to the sum of (i) interest at the applicable Pass-Through Rate on
the related Class Certificate Balance or Notional Amount, as the case may
be, and (ii) the sum of the amounts, if any, by which the amount described
in clause (i) above on each prior Distribution Date exceeded the amount
actually distributed as interest on such prior Distribution Dates and not
subsequently distributed ("Unpaid Interest Amounts"). The Class PO
Certificates are Principal Only Certificates and will not bear interest.
With respect to each Distribution Date, the "Interest Accrual Period"
for each interest bearing Class of Certificates will be the calendar month
preceding the month of such Distribution Date.
The interest entitlement described above for each Class of
Certificates for any Distribution Date will be reduced by the amount of
"Net Interest Shortfalls" for such Distribution Date. With respect to any
Distribution Date, the "Net Interest Shortfall" is equal to (i) the amount
of interest that would otherwise have been received with respect to any
Mortgage Loan that was the subject of (x) a Relief Act Reduction or (y) a
Special Hazard Loss, Fraud Loss, Debt Service Reduction or Deficient
Valuation, after the exhaustion of the respective amounts of coverage
provided by the Subordinated Certificates for such types of losses and
(ii) any Net Prepayment Interest Shortfalls with respect to such
Distribution Date. A "Relief Act Reduction" is a reduction in the amount
of monthly interest payment on a Mortgage Loan pursuant to the Soldiers'
and Sailors' Civil Relief Act of 1940. See "Certain Legal Aspects of the
Loans -- Soldiers' and Sailors' Civil Relief Act" in the Prospectus. With
respect to any Distribution Date, a "Net Prepayment Interest Shortfall" is
the amount by which the aggregate of Prepayment Interest Shortfalls during
the calendar month preceding the month of such Distribution Date exceeds
the aggregate amount payable on such Distribution Date by the Master
Servicer as described under "Servicing of Mortgage Loans -- Adjustment to
Master Servicing Fee in Connection with Certain Prepaid Mortgage Loans." A
"Prepayment Interest Shortfall" is the amount by which interest paid by a
borrower in connection with a prepayment of principal on a Mortgage Loan
is less than one month's interest at the related Mortgage Rate on the
Stated Principal Balance of such Mortgage Loan. Each Class' pro rata share
of such Net Interest Shortfalls will be based on the amount of interest
such Class otherwise would have been entitled to receive on such
Distribution Date.
Accrued interest to be distributed on any Distribution Date will be
calculated, in the case of each interest bearing Class of Certificates, on
the basis of the related Class Certificate Balance or Notional Amount, as
applicable, immediately prior to such Distribution Date. Interest will be
calculated and payable on the basis of a 360-day year divided into twelve
30-day months.
In the event that, on a particular Distribution Date, Available Funds
in the Certificate Account applied in the order described above under " --
Priority of Distributions Among Certificates" are not sufficient to make a
full distribution of the interest entitlement on the Certificates,
interest will be distributed on each Class of Certificates of equal
priority based on the amount of interest each such Class would otherwise
have been entitled to receive in the absence of such shortfall. Any Unpaid
Interest Amount will be carried forward and added to the amount holders of
each such Class of Certificates will be entitled to receive on the next
Distribution Date. Such a shortfall could occur, for example, if losses
realized on the Mortgage Loans were exceptionally high or were
concentrated in a particular month. Any Unpaid Interest Amount so carried
forward will not bear interest.
PRINCIPAL
General. All payments and other amounts received in respect of
principal of the Mortgage Loans will be allocated between (i) the Senior
Certificates (other than the Notional Amount Certificates and the Class PO
Certificates) and the Subordinated Certificates and (ii) the Class PO
Certificates, in each case based on the applicable Non-PO Percentage and
the applicable PO Percentage, respectively, of such amounts.
The Non-PO Percentage with respect to any Mortgage Loan with a Net
Mortgage Rate ("NMR") less than ___% (each such Mortgage Loan, a "Discount
Mortgage Loan") will be equal to NMR/___%. The Non-PO Percentage with
respect to any Mortgage Loan with a Net Mortgage Rate equal to or greater
than ___% (each such Mortgage Loan, a "Non-Discount Mortgage Loan") will
be 100%. The PO Percentage with respect to any Discount Mortgage Loan will
be equal to (___% - NMR)/___%. The PO Percentage with respect to any
Non-Discount Mortgage Loan will be 0%.
Non-PO Formula Principal Amount. On each Distribution Date, the
Non-PO Formula Principal Amount will be distributed as principal of the
Senior Certificates (other than the Notional Amount Certificates and the
Class PO Certificates) and the Subordinated Certificates, to the extent of
the amount available from Available Funds for the distribution of
principal on such respective Classes, as described below.
The Non-PO Formula Principal Amount for any Distribution Date will
equal the sum of the applicable Non-PO Percentage of (a) all monthly
payments of principal due on each Mortgage Loan on the related Due Date,
(b) the principal portion of the purchase price of each Mortgage Loan that
was repurchased by the Seller or another person pursuant to the Agreement
as of such Distribution Date, (c) the Substitution Adjustment Amount in
connection with any Deleted Mortgage Loan received with respect to such
Distribution Date, (d) any Insurance Proceeds or Liquidation Proceeds
allocable to recoveries of principal of Mortgage Loans that are not yet
Liquidated Mortgage Loans received during the calendar month preceding the
month of such Distribution Date, (e) with respect to each Mortgage Loan
that became a Liquidated Mortgage Loan during the calendar month preceding
the month of such Distribution Date, the amount of the Liquidation
Proceeds allocable to principal received with respect to such Mortgage
Loan and (f) all partial and full principal prepayments by borrowers
received during the related Prepayment Period.
Senior Principal Distribution Amount. On each Distribution Date prior
to the Senior Credit Support Depletion Date, the Non-PO Formula Principal
Amount, up to the amount of the Senior Principal Distribution Amount for
such Distribution Date, will be distributed as principal of the following
Classes of Senior Certificates in the following order of priority:
(i) to the Class A-R Certificates until the Class Certificate
Balance thereof has been reduced to zero;
(ii) concurrently, to the Class ____ and Class _____
Certificates, pro rata based on their respective Class Certificate
Balances, until the Class Certificate Balances thereof have been
reduced to zero;
(iii) sequentially, to the Class ___ and Class ____
Certificates, in that order, until the respective Class Certificate
Balances thereof have been reduced to zero;
(iv) sequentially, to the Class ____ and Class ____ Certificates,
in that order, until the respective Class Certificate Balances thereof
have been reduced to zero; and
(v) to the Class ____ Certificates until the Class Certificate
Balance thereof has been reduced to zero.
Notwithstanding the foregoing, on each Distribution Date on and after
the Senior Credit Support Depletion Date, the Non-PO Formula Principal
Amount will be distributed, concurrently as principal of the Classes of
Senior Certificates (other than the Notional Amount Certificates and the
Class PO Certificates), pro rata, in accordance with their respective
Class Certificate Balances immediately prior to such Distribution Date.
The Senior Credit Support Depletion Date is the date on which the
Class Certificate Balance of each Class of Subordinated Certificates has
been reduced to zero.
The Senior Principal Distribution Amount for any Distribution Date
will equal the sum of (i) the Senior Percentage of the applicable Non-PO
Percentage of all amounts described in clauses (a) through (d) of the
definition of "Non-PO Formula Principal Amount" for such Distribution
Date, (ii) with respect to each Mortgage Loan that became a Liquidated
Mortgage Loan during the calendar month preceding the month of such
Distribution Date, the lesser of (x) the Senior Percentage of the
applicable Non-PO Percentage of the Stated Principal Balance of such
Mortgage Loan and (y) either (A) the Senior Prepayment Percentage or (B)
if an Excess Loss was sustained with respect to such Liquidated Mortgage
Loan during such preceding calendar month, the Senior Percentage of the
applicable Non-PO Percentage of the amount of the Liquidation Proceeds
allocable to principal received with respect to such Mortgage Loan, and
(iii) the Senior Prepayment Percentage of the applicable Non-PO Percentage
of amounts described in clause (f) of the definition of "Non-PO Formula
Principal Amount" for such Distribution Date; provided, however, that if a
Bankruptcy Loss that is an Excess Loss is sustained with respect to a
Mortgage Loan that is not a Liquidated Mortgage Loan, the Senior Principal
Distribution Amount will be reduced on the related Distribution Date by
the Senior Percentage of the applicable Non-PO Percentage of the principal
portion of such Bankruptcy Loss.
"Stated Principal Balance" means as to any Mortgage Loan and Due Date,
the unpaid principal balance of such Mortgage Loan as of such Due Date, as
specified in the amortization schedule at the time relating thereto
(before any adjustment to such amortization schedule by reason of any
moratorium or similar waiver or grace period), after giving effect to any
previous partial prepayments and Liquidation Proceeds received and to the
payment of principal due on such Due Date and irrespective of any
delinquency in payment by the related Mortgagor. The Pool Principal
Balance with respect to any Distribution Date equals the aggregate of the
Stated Principal Balances of the Mortgage Loans outstanding on the Due
Date in the month preceding the month of such Distribution Date.
The Senior Percentage for any Distribution Date is the percentage
equivalent of a fraction the numerator of which is the aggregate of the
Class Certificate Balances of each Class of Senior Certificates (other
than the Class PO Certificates) immediately prior to such date and the
denominator of which is the aggregate of the Class Certificate Balances of
all Classes of Certificates, other than the Class PO Certificates,
immediately prior to such date.
The Senior Prepayment Percentage for any Distribution Date occurring
during the ____ years beginning on the first Distribution Date will equal
100%. Thereafter, the Senior Prepayment Percentage will, except as
described below, be subject to gradual reduction as described in the
following paragraph. This disproportionate allocation of certain
unscheduled payments in respect of principal will have the effect of
accelerating the amortization of the Senior Certificates which receive
these unscheduled payments of principal (other than the Class PO
Certificates) while, in the absence of Realized Losses, increasing the
interest in the Pool Principal Balance evidenced by the Subordinated
Certificates. Increasing the respective interest of the Subordinated
Certificates relative to that of the Senior Certificates is intended to
preserve the availability of the subordination provided by the
Subordinated Certificates.
The Senior Prepayment Percentage for any Distribution Date occurring
on or after the _____ anniversary of the first Distribution Date will be
as follows: for any Distribution Date in the _____ year thereafter, the
Senior Percentage plus __% of the Subordinated Percentage for such
Distribution Date; for any Distribution Date in the ______ year
thereafter, the Senior Percentage plus __% of the Subordinated Percentage
for such Distribution Date; for any Distribution Date in the _____ year
thereafter, the Senior Percentage plus __% of the Subordinated Percentage
for such Distribution Date; for any Distribution Date in the ______ year
thereafter, the Senior Percentage plus __% of the Subordinated Percentage
for such Distribution Date; and for any Distribution Date thereafter, the
Senior Percentage for such Distribution Date (unless on any of the
foregoing Distribution Dates the Senior Percentage exceeds the initial
Senior Percentage, in which case the Senior Prepayment Percentage for such
Distribution Date will once again equal 100%). Notwithstanding the
foregoing, no decrease in the Senior Prepayment Percentage will occur if
(i) the outstanding principal balance of all Mortgage Loans delinquent __
days or more (averaged over the preceding _________ period), as a
percentage of the aggregate principal balance of the Subordinated
Certificates (averaged over the preceding _________ period), is equal to
or greater than __%, or (ii) cumulative Realized Losses with respect to
the Mortgage Loans exceed (a) with respect to the Distribution Date on the
_____ anniversary of the first Distribution Date, __% of the aggregate of
the principal balances of the Subordinated Certificates as of the Cut-off
Date (the "Original Subordinated Principal Balance"), (b) with respect to
the Distribution Date on the _____ anniversary of the first Distribution
Date, __% of the Original Subordinated Principal Balance, (c) with respect
to the Distribution Date on the _______ anniversary of the first
Distribution Date, __% of the Original Subordinated Principal Balance, (d)
with respect to the Distribution Date on the ______ anniversary of the
first Distribution Date, __% of the Original Subordinated Principal
Balance, and (e) with respect to the Distribution Date on the _____
anniversary of the first Distribution Date, __% of the Original
Subordinated Principal Balance. The Subordinated Prepayment Percentage as
of any Distribution Date will be calculated as the difference between 100%
and the Senior Prepayment Percentage for such date.
If on any Distribution Date the allocation to the Class of Senior
Certificates then entitled to distributions of principal of full and
partial principal prepayments and other amounts in the percentage required
above would reduce the outstanding Class Certificate Balance of such Class
below zero, the distribution to such Class of Certificates of the Senior
Prepayment Percentage of such amounts for such Distribution Date will be
limited to the percentage necessary to reduce the related Class
Certificate Balance to zero.
Subordinated Principal Distribution Amount. On each Distribution
Date, to the extent of Available Funds therefor, the Non-PO Formula
Principal Amount, up to the amount of the Subordinated Principal
Distribution Amount for such Distribution Date, will be distributed as
principal of the Subordinated Certificates. Except as provided in the next
paragraph, each Class of Subordinated Certificates will be entitled to
receive its pro rata share of the Subordinated Principal Distribution
Amount (based on its respective Class Certificate Balance), in each case
to the extent of the amount available from Available Funds for
distribution of principal. Distributions of principal of the Subordinated
Certificates will be made sequentially to the Classes of Subordinated
Certificates in the order of their numerical Class designations, beginning
with the Class ___ Certificates, until the respective Class Certificate
Balances thereof are reduced to zero. The Subordinated Percentage for any
Distribution Date will be calculated as the difference between 100% and
the Senior Percentage.
With respect to each Class of Subordinated Certificates, if on any
Distribution Date the sum of the related Class Subordination Percentages
of such Class and all Classes of Subordinated Certificates which have
higher numerical Class designations than such Class (the "Applicable
Credit Support Percentage") is less than the Applicable Credit Support
Percentage for such Class on the date of issuance of the Certificates (the
"Original Applicable Credit Support Percentage"), no distribution of
partial principal prepayments and principal prepayments in full will be
made to any such Classes (the "Restricted Classes") and the amount of
partial principal prepayments and principal prepayments in full otherwise
distributable to the Restricted Classes will be allocated among the
remaining Classes of Subordinated Certificates, pro rata, based upon their
respective Class Certificate Balances, and distributed in the sequential
order described above.
The Class Subordination Percentage with respect to any Distribution
Date and each Class of Subordinated Certificates, will equal the fraction
(expressed as a percentage) the numerator of which is the Class
Certificate Balance of such Class of Subordinated Certificates immediately
prior to such Distribution Date and the denominator of which is the
aggregate of the Class Certificate Balances of all Classes of Certificates
immediately prior to such Distribution Date.
The approximate Original Applicable Credit Support Percentages for the
Subordinated Certificates on the date of issuance of the Certificates are
expected to be as follows:
Class . . . . . . . . . . . . %
Class . . . . . . . . . . . . %
Class . . . . . . . . . . . . %
Class . . . . . . . . . . . . %
Class . . . . . . . . . . . . %
Class . . . . . . . . . . . . %
The Subordinated Principal Distribution Amount for any Distribution
Date will equal (A) the sum of (i) the Subordinated Percentage of the
applicable Non-PO Percentage of all amounts described in clauses (a)
through (d) of the definition of "Non-PO Formula Principal Amount" for
such Distribution Date, (ii) with respect to each Mortgage Loan that
became a Liquidated Mortgage Loan during the calendar month preceding the
month of such Distribution Date, the applicable Non-PO Percentage of the
Liquidation Proceeds allocable to principal received with respect to such
Mortgage Loan, after application of such amounts pursuant to clause (ii)
of the definition of Senior Principal Distribution Amount, up to the
Subordinated Percentage of the applicable Non-PO Percentage of the Stated
Principal Balance of such Mortgage Loan and (iii) the Subordinated
Prepayment Percentage of the applicable Non-PO Percentage of the amounts
described in clause (f) of the definition of "Non-PO Formula Principal
Amount" for such Distribution Date reduced by (B) the amount of any
payments in respect of Class PO Deferred Amounts on the related
Distribution Date.
Residual Certificates. The Class A-R Certificates will remain
outstanding for so long as the Trust Fund shall exist, whether or not they
are receiving current distributions of principal or interest. In addition
to distributions of interest and principal as described above, on each
Distribution Date, the holders of the Class A-R Certificates will be
entitled to receive any Available Funds remaining after payment of
interest and principal on the Senior Certificates and Class PO Deferred
Amounts on the Class PO Certificates and interest and principal on the
Subordinated Certificates, as described above. It is not anticipated that
there will be any significant amounts remaining for any such distribution.
Class PO Principal Distribution Amount. On each Distribution Date,
distributions of principal of the Class PO Certificates will be made in an
amount (the "Class PO Principal Distribution Amount") equal to the lesser
of (x) the PO Formula Principal Amount for such Distribution Date and (y)
the product of (i) Available Funds remaining after distribution of
interest on the Senior Certificates and (ii) a fraction, the numerator of
which is the PO Formula Principal Amount and the denominator of which is
the sum of the PO Formula Principal Amount and the Senior Principal
Distribution Amount.
If the Class PO Principal Distribution Amount on a Distribution Date
is calculated as provided in clause (y) above, principal distributions to
holders of the Senior Certificates (other than the Class PO Certificates)
will be in an amount equal to the product of (i) Available Funds remaining
after distribution of interest on the Senior Certificates and (ii) a
fraction, the numerator of which is the Senior Principal Distribution
Amount and the denominator of which is the sum of the Senior Principal
Distribution Amount and the PO Formula Principal Amount.
The PO Formula Principal Amount for any Distribution Date will equal
the sum of the applicable PO Percentage of (a) all monthly payments of
principal due on each Mortgage Loan on the related Due Date, (b) the
principal portion of the purchase price of each Mortgage Loan that was
repurchased by the Seller or another person pursuant to the Agreement as
of such Distribution Date, (c) the Substitution Adjustment Amount in
connection with any Deleted Mortgage Loan received with respect to such
Distribution Date, (d) any Insurance Proceeds or Liquidation Proceeds
allocable to recoveries of principal of Mortgage Loans that are not yet
Liquidated Mortgage Loans received during the calendar month preceding the
month of such Distribution Date, (e) with respect to each Mortgage Loan
that became a Liquidated Mortgage Loan during the calendar month preceding
the month of such Distribution Date, the amount of Liquidation Proceeds
allocable to principal received with respect to such Mortgage Loan and (f)
all partial and full principal prepayments by borrowers received during
the related Prepayment Period; provided, however, that if a Bankruptcy
Loss that is an Excess Loss is sustained with respect to a Discount
Mortgage Loan that is not a Liquidated Mortgage Loan, the PO Formula
Principal Amount will be reduced on the related Distribution Date by the
applicable PO Percentage of the principal portion of such Bankruptcy Loss.
ALLOCATION OF LOSSES
On each Distribution Date, the applicable PO Percentage of any
Realized Loss, including any Excess Loss, on a Discount Mortgage Loan will
be allocated to the Class PO Certificates until the Class Certificate
Balance thereof is reduced to zero. The amount of any such Realized Loss,
other than an Excess Loss, allocated on or prior to the Senior Credit
Support Depletion Date will be treated as a Class PO Deferred Amount. To
the extent funds are available on such Distribution Date or on any future
Distribution Date from amounts that would otherwise be allocable to the
Subordinated Principal Distribution Amount, Class PO Deferred Amounts will
be paid on the Class PO Certificates prior to distributions of principal
on the Subordinated Certificates. Any distribution of Available Funds in
respect of unpaid Class PO Deferred Amounts will not further reduce the
Class Certificate Balance of the Class PO Certificates. The Class PO
Deferred Amounts will not bear interest. The Class Certificate Balance of
the Class of Subordinated Certificates then outstanding with the highest
numerical Class designation will be reduced by the amount of any payments
in respect of Class PO Deferred Amounts. After the Senior Credit Support
Depletion Date, no new Class PO Deferred Amounts will be created.
On each Distribution Date, the applicable Non-PO Percentage of any
Realized Loss, other than any Excess Loss, will be allocated first to the
Subordinated Certificates, in the reverse order of their numerical Class
designations (beginning with the Class of Subordinated Certificates then
outstanding with the highest numerical Class designation), in each case
until the Class Certificate Balance of the respective Class of
Certificates has been reduced to zero, and then to the Senior Certificates
(other than the Notional Amount Certificates and the Class PO
Certificates) pro rata, based upon their respective Class Certificate
Balances.
On each Distribution Date, the applicable Non-PO Percentage of Excess
Losses will be allocated pro rata among the Classes of Senior Certificates
(other than the Notional Amount Certificates and the Class PO
Certificates) and the Subordinated Certificates based upon their
respective Class Certificate Balances.
Because principal distributions are paid to certain Classes of
Certificates (other than the Class PO Certificates) before other Classes
of Certificates, holders of such Certificates that are entitled to receive
principal later bear a greater risk of being allocated Realized Losses on
the Mortgage Loans than holders of Classes that are entitled to receive
principal earlier.
Realized Losses allocated to a Class of Certificates comprised of
multiple payment Components will be allocated pro rata among the
Components of such Class of Certificates based on their respective
Component Balances.
In general, a "Realized Loss" means, with respect to a Liquidated
Mortgage Loan, the amount by which the remaining unpaid principal balance
of the Mortgage Loan exceeds the amount of Liquidation Proceeds applied to
the principal balance of the related Mortgage Loan. "Excess Losses" are
(i) Special Hazard Losses in excess of the Special Hazard Loss Coverage
Amount, (ii) Bankruptcy Losses in excess of the Bankruptcy Loss Coverage
Amount and (iii) Fraud Losses in excess of the Fraud Loss Coverage Amount.
"Bankruptcy Losses" are losses that are incurred as a result of Debt
Service Reductions and Deficient Valuations. "Special Hazard Losses" are
Realized Losses in respect of Special Hazard Mortgage Loans. "Fraud
Losses" are losses sustained on a Liquidated Mortgage Loan by reason of a
default arising from fraud, dishonesty or misrepresentation. See "Credit
Enhancement -- Subordination of Certain Classes" herein.
A "Liquidated Mortgage Loan" is a defaulted Mortgage Loan as to which
the Master Servicer has determined that all recoverable liquidation and
insurance proceeds have been received. A "Special Hazard Mortgage Loan" is
a Liquidated Mortgage Loan as to which the ability to recover the full
amount due thereunder was substantially impaired by a hazard not insured
against under a standard hazard insurance policy of the type described in
the Prospectus under "Credit Enhancement -- Special Hazard Insurance
Policies." See "Credit Enhancement -- Subordination of Certain Classes"
herein.
STRUCTURING ASSUMPTIONS
Unless otherwise specified, the information in the tables in this
Prospectus Supplement has been prepared on the basis of the following
assumed characteristics of the Mortgage Loans and the following additional
assumptions (collectively, the "Structuring Assumptions"): (i) the
Mortgage Pool consists of Mortgage Loans with the following
characteristics:
<TABLE>
<CAPTION>
Original Term Remaining Term
Net to Maturity to Maturity
Principal Balance Mortgage Rate Mortgage Rate (in months) (in months) Loan Age
----------------- ------------- ------------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C>
$ % %
$ % %
</TABLE>
(ii) the Mortgage Loans prepay at the specified constant percentages of
SPA, (iii) no defaults in the payment by Mortgagors of principal of and
interest on the Mortgage Loans are experienced, (iv) scheduled payments on
the Mortgage Loans are received on the first day of each month commencing
in the calendar month following the Closing Date and are computed prior to
giving effect to prepayments received on the last day of the prior month,
(v) prepayments are allocated as described herein without giving effect to
loss and delinquency tests, (vi) there are no Net Interest Shortfalls and
prepayments represent prepayments in full of individual Mortgage Loans and
are received on the last day of each month, commencing in the calendar
month of the Closing Date, (vii) the scheduled monthly payment for each
Mortgage Loan has been calculated such that each Mortgage Loan will
amortize in amounts sufficient to repay the current balance of such
Mortgage Loan by its respective remaining term to maturity, (viii) the
initial Class Certificate Balance or Notional Amount, as applicable, of
each Class of Certificates is as set forth on the cover page hereof and
under "Summary of Terms -- Certificates other than the Offered
Certificates", (ix) interest accrues on each interest bearing Class of
Certificates at the applicable interest rate set forth or described on the
cover hereof and as described herein, (x) distributions in respect of the
Certificates are received in cash on the ____ day of each month commencing
in the calendar month following the Closing Date, (xi) the closing date of
the sale of the Offered Certificates is the date set forth under "Summary
of Terms -- Closing Date," (xii) the Seller is not required to repurchase
or substitute for any Mortgage Loan, (xiii) the Master Servicer does not
exercise the option to repurchase the Mortgage Loans described herein
under " -- Optional Purchase of Defaulted Loans" and " -- Optional
Termination" and (xiv) no Class of Certificates becomes a Restricted
Class. While it is assumed that each of the Mortgage Loans prepays at the
specified constant percentages of SPA, this is not likely to be the case.
Moreover, discrepancies may exist between the characteristics of the
actual Mortgage Loans which will be delivered to the Trustee and
characteristics of the Mortgage Loans used in preparing the tables herein.
Prepayments of mortgage loans commonly are measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement
is the Standard Prepayment Assumption ("SPA"), which represents an assumed
rate of prepayment each month of the then outstanding principal balance of
a pool of new mortgage loans. SPA does not purport to be either a
historical description of the prepayment experience of any pool of
mortgage loans or a prediction of the anticipated rate of prepayment of
any pool of mortgage loans, including the Mortgage Loans. 100% SPA assumes
prepayment rates of 0.2% per annum of the then unpaid principal balance of
such pool of mortgage loans in the first month of the life of such
mortgage loans and an additional 0.2% per annum in each month thereafter
(for example, 0.4% per annum in the second month) until the 30th month.
Beginning in the 30th month and in each month thereafter during the life
of such mortgage loans, 100% SPA assumes a constant prepayment rate of 6%
per annum. Multiples may be calculated from this prepayment rate sequence.
For example,___% SPA assumes prepayment rates will be___% per annum in
month one,___% per annum in month two, and increasing by ___% in each
succeeding month until reaching a rate of ___% per annum in month 30 and
remaining constant at %___ per annum thereafter. 0% SPA assumes no
prepayments. There is no assurance that prepayments will occur at any SPA
rate or at any other constant rate.
OPTIONAL PURCHASE OF DEFAULTED LOANS
The Master Servicer may, at its option, purchase from the Trust Fund
any Mortgage Loan which is delinquent in payment by 91 days or more. Any
such purchase shall be at a price equal to 100% of the Stated Principal
Balance of such Mortgage Loan plus accrued interest thereon at the
applicable Mortgage Rate from the date through which interest was last
paid by the related mortgagor or advanced (and not reimbursed) to the
first day of the month in which such amount is to be distributed.
OPTIONAL TERMINATION
The Master Servicer will have the right to repurchase all remaining
Mortgage Loans and REO Properties in the Mortgage Pool and thereby effect
early retirement of the Certificates, subject to the Pool Principal
Balance of such Mortgage Loans and REO Properties at the time of
repurchase being less than or equal to 10% of the Cut-off Date Pool
Principal Balance. In the event the Master Servicer exercises such option,
the purchase price distributed with respect to each Certificate will be
100% of its then outstanding principal balance plus any Class PO Deferred
Amounts in the case of the Class PO Certificates and, in the case of an
interest bearing Certificate, any unpaid accrued interest thereon at the
applicable Pass-Through Rate (in each case subject to reduction as
provided in the Agreement if the purchase price is based in part on the
appraised value of any REO Properties and such appraised value is less
than the Stated Principal Balance of the related Mortgage Loans).
Distributions on the Certificates in respect of any such optional
termination will first be paid to the Senior Certificates and then to the
Subordinated Certificates. The proceeds from any such distribution may not
be sufficient to distribute the full amount to which each Class of
Certificates is entitled if the purchase price is based in part on the
appraised value of any REO Property and such appraised value is less than
the Stated Principal Balance of the related Mortgage Loan.
THE TRUSTEE
______________________ will be the Trustee under the Agreement. The
Depositor and the Master Servicer may maintain other banking relationships
in the ordinary course of business with ___________________. Offered
Certificates may be surrendered at the Corporate Trust Office of the
Trustee located at _______________________________, Attention:
_____________________ or at such other addresses as the Trustee may
designate from time to time.
RESTRICTIONS ON TRANSFER OF THE CLASS A-R CERTIFICATES
The Class A-R Certificates will be subject to the restrictions on
transfer described in the Prospectus under "Certain Federal Income Tax
Consequences -- REMIC Certificates -- Tax-Related Restrictions on
Transfers of Residual Certificates -- Disqualified Organizations," " --
Noneconomic Residual Interests" and " -- Foreign Investors." The Agreement
provides that the Class A-R Certificates (in addition to certain other
Classes of Certificates) may not be acquired by an ERISA Plan. See "ERISA
Considerations" herein. Each Class A-R Certificate will contain a legend
describing the foregoing restrictions.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
GENERAL
The effective yield to the holders of the interest bearing
Certificates will be lower than the yield otherwise produced by the
applicable rate at which interest is passed through to such holders and
the purchase price of such Certificates because monthly distributions will
not be payable to such holders until the ____ day (or, if such day is not
a business day, the following business day) of the month following the
month in which interest accrues on the Mortgage Loans (without any
additional distribution of interest or earnings thereon in respect of such
delay).
Delinquencies (in respect of interest) on the Mortgage Loans which are
not advanced by or on behalf of the Master Servicer (because amounts, if
advanced, would be nonrecoverable) will adversely affect the yield on the
Certificates. Because of the priority of distributions, shortfalls
resulting from delinquencies (in respect of interest) not so advanced will
be borne first by the Subordinated Certificates, in the reverse order of
their numerical Class designations, and then by the Senior Certificates.
If, as a result of such shortfalls, the aggregate of the Class Certificate
Balances of all Classes of Certificates exceeds the Pool Principal
Balance, the Class Certificate Balance of the Class of Subordinated
Certificates then outstanding with the highest numerical Class designation
will be reduced by the amount of such excess.
Net Interest Shortfalls will adversely affect the yields on the
Offered Certificates. In addition, although all losses initially will be
borne by the Subordinated Certificates, in the reverse order of their
numerical Class designations (either directly or through distributions in
respect of Class PO Deferred Amounts on the Class PO Certificates), Excess
Losses will be borne by all Classes of Certificates (other than the
Notional Amount Certificates) on a pro rata basis. Moreover, since the
Subordinated Principal Distribution Amount for each Distribution Date will
be reduced by the amount of any distributions on such Distribution Date in
respect of Class PO Deferred Amounts, the amount distributable as
principal on each such Distribution Date to each Class of Subordinated
Certificates then entitled to a distribution of principal will be less
than it otherwise would be in the absence of such Class PO Deferred
Amounts. As a result, the yields on the Offered Certificates will depend
on the rate and timing of Realized Losses, including Excess Losses. Excess
Losses could occur at a time when one or more Classes of Subordinated
Certificates are still outstanding and otherwise available to absorb other
types of Realized Losses.
PREPAYMENT CONSIDERATIONS AND RISKS
The rate of principal payments on the Offered Certificates, the
aggregate amount of distributions on the Offered Certificates and the
yield to maturity of the Offered Certificates will be related to the rate
and timing of payments of principal on the Mortgage Loans. The rate of
principal payments on the Mortgage Loans will in turn be affected by the
amortization schedules of the Mortgage Loans and by the rate of principal
prepayments (including for this purpose prepayments resulting from
refinancing, liquidations of the Mortgage Loans due to defaults,
casualties, condemnations and repurchases by the Seller). The Mortgage
Loans may be prepaid by the Mortgagors at any time without a prepayment
penalty. The Mortgage Loans are subject to the "due-on-sale" provisions
included therein. See "The Mortgage Pool" herein.
Prepayments, liquidations and purchases of the Mortgage Loans
(including any optional purchase by the Master Servicer of a defaulted
Mortgage Loan and any optional repurchase of the remaining Mortgage Loans
in connection with the termination of the Trust Fund, in each case as
described herein) will result in distributions on the Offered Certificates
of principal amounts which would otherwise be distributed over the
remaining terms of the Mortgage Loans. Since the rate of payment of
principal of the Mortgage Loans will depend on future events and a variety
of factors, no assurance can be given as to such rate or the rate of
principal prepayments. The extent to which the yield to maturity of a
Class of Offered Certificates may vary from the anticipated yield will
depend upon the degree to which such Offered Certificate is purchased at a
discount or premium, and the degree to which the timing of payments
thereon is sensitive to prepayments, liquidations and purchases of the
Mortgage Loans. Further, an investor should consider the risk that, in the
case of the Principal Only Certificates and any other Offered Certificate
purchased at a discount, a slower than anticipated rate of principal
payments (including prepayments) on the Mortgage Loans could result in an
actual yield to such investor that is lower than the anticipated yield
and, in the case of the Interest Only Certificates and any other Offered
Certificate purchased at a premium, a faster than anticipated rate of
principal payments could result in an actual yield to such investor that
is lower than the anticipated yield. Investors in the Interest Only
Certificates should carefully consider the risk that a rapid rate of
principal payments on the Mortgage Loans could result in the failure of
such investors to recover their initial investments.
The rate of principal payments (including prepayments) on pools of
mortgage loans may vary significantly over time and may be influenced by a
variety of economic, geographic, social and other factors, including
changes in mortgagors' housing needs, job transfers, unemployment,
mortgagors' net equity in the mortgaged properties and servicing
decisions. In general, if prevailing interest rates were to fall
significantly below the Mortgage Rates on the Mortgage Loans, the Mortgage
Loans could be subject to higher prepayment rates than if prevailing
interest rates were to remain at or above the Mortgage Rates on the
Mortgage Loans. Conversely, if prevailing interest rates were to rise
significantly, the rate of prepayments on the Mortgage Loans would
generally be expected to decrease. No assurances can be given as to the
rate of prepayments on the Mortgage Loans in stable or changing interest
rate environments.
As described herein under "Description of the Certificates --
Principal," the Senior Prepayment Percentage of the applicable Non-PO
Percentage of all principal prepayments will be initially distributed to
the Classes of Senior Certificates (other than the Class PO Certificates)
then entitled to receive principal prepayment distributions. This may
result in all (or a disproportionate percentage) of such principal
prepayments being distributed to holders of such Classes of Senior
Certificates and none (or less than their pro rata share) of such
principal prepayments being distributed to holders of the Subordinated
Certificates during the periods of time described in the definition of
"Senior Prepayment Percentage."
The timing of changes in the rate of prepayments on the Mortgage Loans
may significantly affect an investor's actual yield to maturity, even if
the average rate of principal payments is consistent with an investor's
expectation. In general, the earlier a prepayment of principal on the
Mortgage Loans, the greater the effect on an investor's yield to maturity.
The effect on an investor's yield as a result of principal payments
occurring at a rate higher (or lower) than the rate anticipated by the
investor during the period immediately following the issuance of the
Offered Certificates may not be offset by a subsequent like decrease (or
increase) in the rate of principal payments.
The tables below indicate the sensitivity of the pre-tax corporate
bond equivalent yields to maturity of certain Classes of Certificates to
various constant percentages of SPA. The yields set forth in the tables
were calculated by determining the monthly discount rates that, when
applied to the assumed streams of cash flows to be paid on the applicable
Classes of Certificates, would cause the discounted present value of such
assumed streams of cash flows to equal the assumed aggregate purchase
prices of such Classes and converting such monthly rates to corporate bond
equivalent rates. Such calculations do not take into account variations
that may occur in the interest rates at which investors may be able to
reinvest funds received by them as distributions on such Certificates and
consequently do not purport to reflect the return on any investment in any
such Class of Certificate when such reinvestment rates are considered.
SENSITIVITY OF THE INTEREST ONLY CERTIFICATES
As indicated in the table below, the yield to investors in the Class X
Certificates will be sensitive to the rate of principal payments
(including prepayments) of the Non-Discount Mortgage Loans (particularly
those with high Net Mortgage Rates), which generally can be prepaid at any
time. On the basis of the assumptions described below, the yield to
maturity on the Class X Certificates would be approximately 0% if
prepayments were to occur at a constant rate of approximately % SPA. If
the actual prepayment rate of the Non-Discount Mortgage Loans were to
exceed the foregoing level for as little as one month while equaling such
level for the remaining months, the investors in the Class X Certificates
would not fully recoup their initial investments.
As described above under "Description of the Certificates -- General,"
the Pass-Through Rate of the Class X Certificates in effect from time to
time is calculated by reference to the Net Mortgage Rates of the
Non-Discount Mortgage Loans. The Non-Discount Mortgage Loans will have
higher Net Mortgage Rates (and higher Mortgage Rates) than the other
Mortgage Loans. In general, mortgage loans with higher mortgage rates tend
to prepay at higher rates than mortgage loans with relatively lower
mortgage rates in response to a given change in market interest rates. As
a result, the Non-Discount Mortgage Loans may prepay at higher rates,
thereby reducing the Pass-Through Rate and Notional Amount of the Class X
Certificates.
The information set forth in the following table has been prepared on
the basis of the Structuring Assumptions and on the assumption that the
purchase price of the Class X Certificates (expressed as a percentage of
initial Notional Amount) is as follows:
Class Price*
----- -----
Class X................ %
- ---------
* The price does not include accrued interest. Accrued interest has been
added to such price in calculating the yields set forth in the table
below.
SENSITIVITY OF THE INTEREST ONLY CERTIFICATES TO PREPAYMENTS
(PRE-TAX YIELDS TO MATURITY)
<TABLE>
<CAPTION>
SPA Prepayment/Assumption
Class 0% % % % % %
- ------------ -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Class X % % % % % %
</TABLE>
It is unlikely that the Non-Discount Mortgage Loans will have the
precise characteristics described herein or that the Non-Discount Mortgage
Loans will all prepay at the same rate until maturity or that all of the
Non-Discount Mortgage Loans will prepay at the same rate or time. As a
result of these factors, the pre-tax yields on the Class X Certificates
are likely to differ from those shown in the table above, even if all of
the Mortgage Loans prepay at the indicated percentages of SPA. No
representation is made as to the actual rate of principal payments on the
Mortgage Loans for any period or over the lives of the Class X
Certificates or as to the yield on the Class X Certificates. Investors
must make their own decisions as to the appropriate prepayment assumptions
to be used in deciding whether to purchase the Class X Certificates.
SENSITIVITY OF THE PRINCIPAL ONLY CERTIFICATES
The Class PO Certificates will be "principal only" certificates and
will not bear interest. As indicated in the table below, a lower than
anticipated rate of principal payments (including prepayments) on the
Discount Mortgage Loans will have a negative effect on the yield to
investors in the Principal Only Certificates.
As described above under "Description of the Certificates --
Principal," the Class PO Principal Distribution Amount is calculated by
reference to the principal payments (including prepayments) on the
Discount Mortgage Loans. The Discount Mortgage Loans will have lower Net
Mortgage Rates (and lower Mortgage Rates) than the other Mortgage Loans.
In general, mortgage loans with higher mortgage rates tend to prepay at
higher rates than mortgage loans with relatively lower mortgage rates in
response to a given change in market interest rates. As a result, the
Discount Mortgage Loans may prepay at lower rates, thereby reducing the
rate of payment of principal and the resulting yield of the Class PO
Certificates.
The information set forth in the following table has been prepared on
the basis of the Structuring Assumptions and on the assumption that the
aggregate purchase price of the Principal Only Certificates (expressed as
a percentage of initial Class Certificate Balance) is as follows:
Class Price
-------- -----
Class PO............. %
SENSITIVITY OF THE PRINCIPAL ONLY CERTIFICATES TO PREPAYMENTS
(PRE-TAX YIELDS TO MATURITY)
<TABLE>
<CAPTION>
SPA Prepayment/Assumption
Class 0% % % % % %
- ------------ -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Class PO % % % % % %
Class PO... % % % % % %
</TABLE>
It is unlikely that the Discount Mortgage Loans will have the precise
characteristics described herein or that the Discount Mortgage Loans will
all prepay at the same rate until maturity or that all of such Discount
Mortgage Loans will prepay at the same rate or time. As a result of these
factors, the pre-tax yield on the Principal Only Certificates is likely to
differ from those shown in the table above, even if all of the Mortgage
Loans prepay at the indicated percentages of SPA. No representation is
made as to the actual rate of principal payments on the Mortgage Loans for
any period or over the life of the Principal Only Certificates or as to
the yield on the Principal Only Certificates. Investors must make their
own decisions as to the appropriate prepayment assumptions to be used in
deciding whether to purchase the Principal Only Certificates.
ADDITIONAL INFORMATION
The Depositor intends to file certain additional yield tables and
other computational materials with respect to one or more Classes of
Underwritten Certificates with the Commission in a report on Form 8-K to
be dated_____, 19__. Such tables and materials were prepared by each
Underwriter at the request of certain prospective investors, based on
assumptions provided by, and satisfying the special requirements of, such
prospective investors. Such tables and assumptions may be based on
assumptions that differ from the Structuring Assumptions. Accordingly,
such tables and other materials may not be relevant to or appropriate for
investors other than those specifically requesting them.
WEIGHTED AVERAGE LIVES OF THE OFFERED CERTIFICATES
The weighted average life of an Offered Certificate is determined by
(a) multiplying the amount of the net reduction, if any, of the Class
Certificate Balance of such Certificate on each Distribution Date by the
number of years from the date of issuance to such Distribution Date, (b)
summing the results and (c) dividing the sum by the aggregate amount of
the net reductions in Class Certificate Balance of such Certificate
referred to in clause (a).
For a discussion of the factors which may influence the rate of
payments (including prepayments) of the Mortgage Loans, see " --
Prepayment Considerations and Risks" herein and "Yield and Prepayment
Considerations" in the Prospectus.
In general, the weighted average lives of the Offered Certificates
will be shortened if the level of prepayments of principal of the Mortgage
Loans increases. However, the weighted average lives of the Offered
Certificates will depend upon a variety of other factors, including the
timing of changes in such rate of principal payments and the priority
sequence of distributions of principal of the Classes of Certificates and
the distribution of principal of the Planned Principal Classes and the
Targeted Principal Classes in accordance with the Principal Balance
Schedules herein. In particular, if the amount available for distribution
as principal of the Senior Certificates (other than the Class PO
Certificates) on any Distribution Date exceeds the amount required to
reduce the principal balances of the Planned Principal Classes and the
Targeted Principal Classes then entitled to receive a distribution of
principal to their respective scheduled balances as set forth in the
Principal Balance Schedules, such excess principal will be distributed on
the remaining Classes of Senior Certificates (other than the Class PO
Certificates) on such Distribution Date. Conversely, if the amount
available for distribution of principal of the Senior Certificates (other
than the Class PO Certificates) on any Distribution Date is less than the
amount so required to reduce the Planned Principal Classes and the
Targeted Principal Classes then entitled to receive a distribution of
principal to their respective scheduled balances, no principal will be
distributed on such other Classes of Senior Certificates on such
Distribution Date. Accordingly, the rate of principal payments on the
Mortgage Loans is expected to have a greater effect on the weighted
average life of the Support Classes and under certain prepayment
scenarios, the weighted average lives of the Targeted Principal Classes,
than on the weighted average lives of the Planned Principal Classes.
The interaction of the foregoing factors may have different effects on
various Classes of Offered Certificates and the effects on any Class may
vary at different times during the life of such Class. Accordingly, no
assurance can be given as to the weighted average life of any Class of
Offered Certificates. Further, to the extent the prices of the Offered
Certificates represent discounts or premiums to their respective original
Class Certificate Balances, variability in the weighted average lives of
such Classes of Offered Certificates will result in variability in the
related yields to maturity. For an example of how the weighted average
lives of the Classes of Offered Certificates may be affected at various
constant percentages of SPA, see the Decrement Tables below.
DECREMENT TABLES
The following tables indicate the percentages of the initial Class
Certificate Balances of the Classes of Offered Certificates (other than
the Notional Amount Certificates) that would be outstanding after each of
the dates shown at various constant percentages of SPA and the
corresponding weighted average lives of such Classes. The tables have been
prepared on the basis of the Structuring Assumptions. It is not likely
that (i) the Mortgage Loans will have the precise characteristics
described herein or (ii) all of the Mortgage Loans will prepay at a
constant percentage of SPA. Moreover, the diverse remaining terms to
maturity of the Mortgage Loans could produce slower or faster principal
distributions than indicated in the tables, which have been prepared using
the specified constant percentages of SPA, even if the remaining term to
maturity of the Mortgage Loans is consistent with the remaining terms to
maturity of the Mortgage Loans specified in the Structuring Assumptions.
PERCENT OF INITIAL CLASS CERTIFICATE
BALANCES OUTSTANDING/*/
<TABLE>
<CAPTION>
Class A-
--------------
Distribution Date 0% % % % % % %
- -------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C. <C>
Initial................ % % % % % %
19.................
19.................
19.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
------- ------- ------- ------- ------- -------
Weighted Average
Life (in years)/**/..........
</TABLE>
<TABLE>
<CAPTION>
Class A-
--------------
Distribution Date 0% % % % % % %
- -------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C. <C>
Initial................ % % % % % %
19.................
19.................
19.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
20.................
------- ------- ------- ------- ------- -------
Weighted Average
Life (in years)/**/..........
</TABLE>
___________
* Rounded to the nearest whole percentage.
** Determined as specified under "Weighted Average Lives of the Offered
Certificates" herein.
LAST SCHEDULED DISTRIBUTION DATE
The Last Scheduled Distribution Date for each Class of Offered
Certificates is the Distribution Date in _____, 20__, which is the
Distribution Date in the ____ month following the latest scheduled
maturity date for any of the Mortgage Loans. Since the rate of
distributions in reduction of the Class Certificate Balance or Notional
Amount of each Class of Offered Certificates will depend on the rate of
payment (including prepayments) of the Mortgage Loans, the Class
Certificate Balance or Notional Amount of any such Class could be reduced
to zero significantly earlier or later than the Last Scheduled
Distribution Date. The rate of payments on the Mortgage Loans will depend
on their particular characteristics, as well as on prevailing interest
rates from time to time and other economic factors, and no assurance can
be given as to the actual payment experience of the Mortgage Loans. See
"Yield, Prepayment and Maturity Considerations -Prepayment Considerations
and Risks" and " -- Weighted Average Lives of the Offered Certificates"
herein and "Yield and Prepayment Considerations" in the Prospectus.
THE SUBORDINATED CERTIFICATES
The weighted average life of, and the yield to maturity on, the
Subordinated Certificates, in increasing order of their numerical Class
designation, will be progressively more sensitive to the rate and timing
of mortgagor defaults and the severity of ensuing losses on the Mortgage
Loans. If the actual rate and severity of losses on the Mortgage Loans is
higher than those assumed by a holder of a Subordinated Certificate, the
actual yield to maturity of such Certificate may be lower than the yield
expected by such holder based on such assumption. The timing of losses on
Mortgage Loans will also affect an investor's actual yield to maturity,
even if the rate of defaults and severity of losses over the life of the
Mortgage Pool are consistent with an investor's expectations. In general,
the earlier a loss occurs, the greater the effect on an investor's yield
to maturity. Realized Losses on the Mortgage Loans will reduce the Class
Certificate Balances of the applicable Class of Subordinated Certificates
to the extent of any losses allocated thereto (as described under
"Description of the Certificates -- Allocation of Losses" herein), without
the receipt of cash attributable to such reduction. In addition,
shortfalls in cash available for distributions on the Subordinated
Certificates will result in a reduction in the Class Certificate Balance
of the Class of Subordinated Certificates then outstanding with the
highest numerical Class designation if and to the extent that the
aggregate of the Class Certificate Balances of all Classes of
Certificates, following all distributions and the allocation of Realized
Losses on a Distribution Date, exceeds the Pool Principal Balance as of
the Due Date occurring in the month of such Distribution Date. As a result
of such reductions, less interest will accrue on such Class of
Subordinated Certificates than otherwise would be the case. The yield to
maturity of the Subordinated Certificates will also be affected by the
disproportionate allocation of principal prepayments to the Senior
Certificates, Net Interest Shortfalls, other cash shortfalls in Available
Funds and distribution of funds to Class PO Certificateholders otherwise
available for distribution on the Subordinated Certificates to the extent
of reimbursement for Class PO Deferred Amounts. See "Description of the
Certificates -- Allocation of Losses" herein.
If on any Distribution Date, the Applicable Credit Support Percentage
for any Class of Subordinated Certificates is less than its Original
Applicable Credit Support Percentage, all partial principal prepayments
and principal prepayments in full available for distribution on the
Subordinated Certificates will be allocated solely to such Class and all
other Classes of Subordinated Certificates with lower numerical Class
designations, thereby accelerating the amortization thereof relative to
that of the Restricted Classes and reducing the weighted average lives of
such Classes of Subordinated Certificates receiving such distributions.
Accelerating the amortization of the Classes of Subordinated Certificates
with lower numerical Class designations relative to the other Classes of
Subordinated Certificates is intended to preserve the availability of the
subordination provided by such other Classes.
CREDIT ENHANCEMENT
SUBORDINATION OF CERTAIN CLASSES
The rights of the holders of the Subordinated Certificates to receive
distributions with respect to the Mortgage Loans will be subordinated to
such rights of the holders of the Senior Certificates and the rights of
the holders of each Class of Subordinated Certificates (other than the
Class B-1 Certificates) to receive such distributions will be further
subordinated to such rights of the Class or Classes of Subordinated
Certificates with lower numerical Class designations, in each case only to
the extent described herein. The subordination of the Subordinated
Certificates to the Senior Certificates and the subordination of the
Classes of Subordinated Certificates with higher numerical Class
designations to those with lower numerical Class designations is intended
to increase the likelihood of receipt, respectively, by the Senior
Certificateholders and the holders of Subordinated Certificates with lower
numerical Class designations of the maximum amount to which they are
entitled on any Distribution Date and to provide such holders protection
against Realized Losses, other than Excess Losses. In addition, the
Subordinated Certificates will provide limited protection against Special
Hazard Losses, Bankruptcy Losses and Fraud Losses up to the Special Hazard
Loss Coverage Amount, Bankruptcy Loss Coverage Amount and Fraud Loss
Coverage Amount, respectively, as described below. The applicable Non-PO
Percentage of Realized Losses, other than Excess Losses, will be allocated
to the Class of Subordinated Certificates then outstanding with the
highest numerical Class designation. In addition, the Class Certificate
Balance of such Class of Subordinated Certificates will be reduced by the
amount of distributions on the Class PO Certificates in reimbursement for
Class PO Deferred Amounts.
The Subordinated Certificates will provide limited protection to the
Classes of Certificates of higher relative priority against (i) Special
Hazard Losses in an initial amount expected to be up to approximately
$____ (the "Special Hazard Loss Coverage Amount"), (ii) Bankruptcy Losses
in an initial amount expected to be up to approximately $____ (the
"Bankruptcy Loss Coverage Amount") and (iii) Fraud Losses in an initial
amount expected to be up to approximately $_____ (the "Fraud Loss Coverage
Amount").
The Special Hazard Loss Coverage Amount will be reduced, from time to
time, to be an amount equal on any Distribution Date to the lesser of (a)
the greatest of (i) __% of the aggregate of the principal balances of the
Mortgage Loans, (ii) _____ the principal balance of the largest Mortgage
Loan and (iii) the aggregate principal balances of the Mortgage Loans
secured by Mortgaged Properties located in the single California postal
zip code area having the highest aggregate principal balance of any such
zip code area and (b) the Special Hazard Loss Coverage Amount as of the
Closing Date less the amount, if any, of losses attributable to Special
Hazard Mortgage Loans incurred since the Closing Date. (All principal
balances for the purpose of this definition will be calculated as of the
first day of the month preceding such Distribution Date after giving
effect to scheduled installments of principal and interest on the Mortgage
Loans then due, whether or not paid.)
The Fraud Loss Coverage Amount will be reduced, from time to time, by
the amount of Fraud Losses allocated to the Certificates. In addition, on
each anniversary of the Cut-off Date, the Fraud Loss Coverage Amount will
be reduced as follows: (a) on the _____, ______, _____ and ______
anniversaries of the Cut-off Date, to an amount equal to the lesser of (i)
__% of the then current Pool Principal Balance and (ii) the excess of the
Fraud Loss Coverage Amount as of the preceding anniversary of the Cut-off
Date over the cumulative amount of Fraud Losses allocated to the
Certificates since such preceding anniversary and (b) on the _____
anniversary of the Cut-off Date, to zero.
The Bankruptcy Loss Coverage Amount will be reduced, from time to
time, by the amount of Bankruptcy Losses allocated to the Certificates.
The amount of coverage provided by the Subordinated Certificates for
Special Hazard Losses, Bankruptcy Losses and Fraud Losses may be cancelled
or reduced from time to time for each of the risks covered, provided that
the then current ratings of the Certificates assigned by the Rating
Agencies are not adversely affected thereby without regard to the guaranty
provided by the Policy. In addition, a reserve fund or other form of
credit enhancement may be substituted for the protection provided by the
Subordinated Certificates for Special Hazard Losses, Bankruptcy Losses and
Fraud Losses.
As used herein, a "Deficient Valuation" is a bankruptcy proceeding
whereby the bankruptcy court may establish the value of the Mortgaged
Property at an amount less than the then outstanding principal balance of
the Mortgage Loan secured by such Mortgaged Property or may reduce the
outstanding principal balance of a Mortgage Loan. In the case of a
reduction in the value of the related Mortgaged Property, the amount of
the secured debt could be reduced to such value, and the holder of such
Mortgage Loan thus would become an unsecured creditor to the extent the
outstanding principal balance of such Mortgage Loan exceeds the value so
assigned to the Mortgaged Property by the bankruptcy court. In addition,
certain other modifications of the terms of a Mortgage Loan can result
from a bankruptcy proceeding, including the reduction (a "Debt Service
Reduction") of the amount of the monthly payment on the related Mortgage
Loan. Notwithstanding the foregoing, no such occurrence shall be
considered a Debt Service Reduction or Deficient Valuation so long as the
Master Servicer is pursuing any other remedies that may be available with
respect to the related Mortgage Loan and (i) such Mortgage Loan is not in
default with respect to payment due thereunder or (ii) scheduled monthly
(payments of principal and interest) are being advanced by the Master
Servicer without giving effect to any Debt Service Reduction or Deficient
Valuation.
USE OF PROCEEDS
The Depositor will apply the net proceeds of the sale of the
Certificates against the purchase price of the Mortgage Loans.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, an election will be made to treat the
Trust Fund as a REMIC. The Regular Certificates will constitute the
regular interests in the REMIC. The Residual Certificates will constitute
the sole class of "residual interest" in the REMIC.
The Regular Certificates generally will be treated as debt instruments
issued by the REMIC for federal income tax purposes. Income on the Regular
Certificates must be reported under an accrual method of accounting.
The Principal Only Certificates will be treated for federal income tax
purposes as having been issued with an amount of Original Issue Discount
("OID") equal to the difference between their principal balance and their
issue price. Although the tax treatment is not entirely certain, Notional
Amount Certificates will be treated as having been issued with OID for
federal income tax purposes equal to the excess of all expected payments
of interest on such Certificates over their issue price. Although unclear,
a holder of a Notional Amount Certificate may be entitled to deduct a loss
to the extent that its remaining basis exceeds the maximum amount of
future payments to which such Certificateholder would be entitled if there
were no further prepayments of the Mortgage Loans. The remaining Classes
of Regular Certificates, depending on their respective issue prices (as
described in the Prospectus under "Certain Federal Income Tax
Consequences"), may be treated as having been issued with OID for federal
income tax purposes. For purposes of determining the amount and rate of
accrual of OID and market discount, the Trust Fund intends to assume that
there will be prepayments on the Mortgage Loans at a rate equal to___% SPA
(the "Prepayment Assumption"). No representation is made as to whether the
Mortgage Loans will prepay at the foregoing rate or any other rate. See
"Yield, Prepayment and Maturity Considerations" herein and "Certain
Federal Income Tax Consequences" in the Prospectus. Computing accruals of
OID in the manner described in the Prospectus may (depending on the actual
rate of prepayments during the accrual period) result in the accrual of
negative amounts of OID on the Certificates issued with OID in an accrual
period. Holders will be entitled to offset negative accruals of OID only
against future OID accrual on such Certificates.
If the holders of any Regular Certificates are treated as holding such
Certificates at a premium, such holders should consult their tax advisors
regarding the election to amortize bond premium and the method to be
employed.
As is described more fully under "Certain Federal Income Tax
Consequences" in the Prospectus, the Offered Certificates will represent
qualifying assets under Sections 593(d), 856(c)(5)(A) and 7701(a)(19)(C)
of the Code, and net interest income attributable to the Offered
Certificates will be "interest on obligations secured by mortgages on real
property" within the meaning of Section 856(c)(3)(B) of the Code, to the
extent the assets of the Trust Fund are assets described in such sections.
The Regular Certificates will represent qualifying assets under Section
860G(a)(3) if acquired by a REMIC within the prescribed time periods of
the Code.
The holders of the Residual Certificates must include the taxable
income of the REMIC in their federal taxable income. The resulting tax
liability of the holders may exceed cash distributions to such holders
during certain periods. All or a portion of the taxable income from a
Residual Certificate recognized by a holder may be treated as "excess
inclusion" income, which with limited exceptions, is subject to U.S
federal income tax.
Prospective purchasers of a Residual Certificate should consider
carefully the tax consequences of an investment in Residual Certificates
discussed in the Prospectus and should consult their own tax advisors with
respect to those consequences. See "Certain Federal Income Tax
Consequences -- REMIC Certificates -b. Residual Certificates" in the
Prospectus. Specifically, prospective holders of Residual Certificates
should consult their tax advisors regarding whether, at the time of
acquisition, a Residual Certificate will be treated as a "noneconomic"
residual interest, a "non-significant value" residual interest and a "tax
avoidance potential" residual interest. See "Certain Federal Income Tax
Consequences -- Tax-Related Restrictions on Transfer of Residual
Certificates -- Noneconomic Residual Certificates -- Residual Certificates
- -- Mark to Market Rules -- Residual Certificates -- Excess Inclusions and
- -- Tax-Related Restrictions on Transfers of Residual Certificates --
Foreign Investors" in the Prospectus. Additionally, for information
regarding Prohibited Transactions and Treatment of Realized Losses, see
"Certain Federal Income Tax Consequences -- Prohibited Transactions and
Other Taxes" and " -- REMIC Certificates -- a. Regular Certificates
- -Treatment of Realized Losses" in the Prospectus.
ERISA CONSIDERATIONS
Any Plan fiduciary which proposes to cause a Plan (as defined below)
to acquire any of the Offered Certificates should consult with its counsel
with respect to the potential consequences under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and/or the Code, of the
Plan's acquisition and ownership of such Certificates. See "ERISA
Considerations" in the Prospectus. Section 406 of ERISA prohibits "parties
in interest" with respect to an employee benefit plan subject to ERISA
and/or the excise tax provisions set forth under Section 4975 of the Code
(a "Plan") from engaging in certain transactions involving such Plan and
its assets unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Code imposes certain excise taxes on
prohibited transactions involving Plans and other arrangements (including,
but not limited to, individual retirement accounts) described under that
Section; ERISA authorizes the imposition of civil penalties for prohibited
transactions involving Plans not subject to the requirements of Section
4975 of the Code.
Certain employee benefit plans, including governmental plans and
certain church plans, are not subject to ERISA's requirements.
Accordingly, assets of such plans may be invested in the Offered
Certificates without regard to the ERISA considerations described herein
and in the Prospectus, subject to the provisions of other applicable
federal and state law. Any such plan that is qualified and exempt from
taxation under Sections 401(a) and 501(a) of the Code may nonetheless be
subject to the prohibited transaction rules set forth in Section 503 of
the Code.
Except as noted above, investments by Plans are subject to ERISA's
general fiduciary requirements, including the requirement of investment
prudence and diversification and the requirement that a Plan's investments
be made in accordance with the documents governing the Plan. A fiduciary
that decides to invest the assets of a Plan in the Offered Certificates
should consider, among other factors, the extreme sensitivity of the
investment to the rate of principal payments (including prepayments) on
the Mortgage Loans.
The U.S. Department of Labor has granted an individual administrative
exemption to ____(Prohibited Transaction Exemption ____, Exemption
Application No. D-___ , Fed. Reg.____ (__)(___)(the "Exemption") from
certain of the prohibited transaction rules of ERISA and the related
excise tax provisions of Section 4975 of the Code with respect to the
initial purchase, the holding and the subsequent resale by Plans of
certificates in pass-through trusts that consist of certain receivables,
loans and other obligations that meet the conditions and requirements of
the Exemption. The Exemption applies to mortgage loans such as the
Mortgage Loans in the Trust Fund.
For a general description of the Exemption and the conditions that
must be satisfied for the Exemption to apply, see "ERISA Considerations"
in the Prospectus.
It is expected that the Exemption will apply to the acquisition and
holding by Plans of the Senior Certificates (other than the Class , Class
PO, Class X and Class A-R Certificates) and that all conditions of the
Exemption other than those within the control of the investors will be
met. In addition, as of the date hereof, there is no single Mortgagor that
is the obligor on five percent (5%) of the Mortgage Loans included in the
Trust Fund by aggregate unamortized principal balance of the assets of the
Trust Fund. Because the Class , Class PO and Class X Certificates are not
being purchased by either Underwriter, such Classes of Certificates do not
currently meet the requirements of the Exemption or any comparable
individual administrative exemption granted to either Underwriter.
Consequently, the sale or exchange of the Class , Class PO and Class X
Certificates may be made only under the conditions set forth for the Class
B- , Class B- and Class B- Certificates below.
Because the characteristics of the Class B- , Class B- , Class B- and
Class A-R Certificates may not meet the requirements of PTCE 83-1, the
Exemption or any other issued exemption under ERISA, the purchase and
holding of the Class B- , Class B- , Class B- and Class A-R Certificates
by a Plan or by individual retirement accounts or other plans subject to
Section 4975 of the Code may result in prohibited transactions or the
imposition of excise taxes or civil penalties. Consequently, transfers of
the Class B- , Class B- , Class B- and Class A-R Certificates will not be
registered by the Trustee unless the Trustee receives: (i) a
representation from the transferee of such Certificate, acceptable to and
in form and substance satisfactory to the Trustee, to the effect that such
transferee is not an employee benefit plan subject to Section 406 of ERISA
or a plan or arrangement subject to Section 4975 of the Code, nor a person
acting on behalf of any such plan or arrangement nor using the assets of
any such plan or arrangement to effect such transfer; (ii) if the
purchaser is an insurance company, a representation that the purchaser is
an insurance company which is purchasing such Certificates with funds
contained in an "insurance company general account" (as such term is
defined in Section V(e) of Prohibited Transaction Class Exemption 95-60
("PTCE 95-60")) and that the purchase and holding of such Certificates are
covered under PTCE 95-60; or (iii) an opinion of counsel satisfactory to
the Trustee that the purchase or holding of such Certificate by a Plan,
any person acting on behalf of a Plan or using such Plan's assets, will
not result in the assets of the Trust Fund being deemed to be "plan
assets" and subject to the prohibited transaction requirements of ERISA
and the Code and will not subject the Trustee to any obligation in
addition to those undertaken in the Agreement. Such representation as
described above shall be deemed to have been made to the Trustee by the
transferee's acceptance of a Class B- , Class B- or Class B- Certificate.
In the event that such representation is violated, or any attempt to
transfer to a plan or person acting on behalf of a Plan or using such
Plan's assets is attempted without such opinion of counsel, such attempted
transfer or acquisition shall be void and of no effect.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of PTCE
83-1 described in the Prospectus and the Exemption, and the potential
consequences in their specific circumstances, prior to making an
investment in any of the Offered Certificates. Moreover, each Plan
fiduciary should determine whether under the general fiduciary standards
of investment prudence and diversification, an investment in any of the
Offered Certificates is appropriate for the Plan, taking into account the
overall investment policy of the Plan and the composition of the Plan's
investment portfolio.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement between the Depositor and the Underwriters, the Depositor has
agreed to sell to the Underwriters, and each Underwriter has agreed to
purchase from the Depositor the respective Classes of Underwritten
Certificates indicated on the cover page hereof to be purchased by it.
Distribution of the Underwritten Certificates will be made by the
respective Underwriters in each case from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time
of sale. In connection with the sale of the Underwritten Certificates, the
Underwriters may be deemed to have received compensation from the
Depositor in the form of underwriting discounts.
Each Underwriter intends to make a secondary market in the Classes of
Underwritten Certificates being purchased by it, but no Underwriter has
any obligation to do so. There can be no assurance that a secondary market
for the Offered Certificates will develop or, if it does develop, that it
will continue or that it will provide Certificateholders with a sufficient
level of liquidity of investment.
The Depositor has agreed to indemnify the Underwriters against, or
make contributions to the Underwriters with respect to, certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Class X and Class PO Certificates may be offered by the Depositor
from time to time directly or through underwriters or agents (either of
which may include IndyMac Securities Corporation, an affiliate of the
Depositor and the Master Servicer) in one or more negotiated transactions,
or otherwise, at varying prices to be determined at the time of sale, in
one or more separate transactions at prices to be negotiated at the time
of each sale. Proceeds to the Depositor from any sale of the Class X or
Class PO Certificates will equal the purchase price paid by the purchaser
thereof, net of any expenses payable by the Depositor and any compensation
payable to any such underwriter or agent. Any underwriters or agents that
participate in the distribution of the Class X or Class PO Certificates
may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933 and any profit on the sale of such Certificates by them and
any discounts, commissions, concessions or other compensation received by
any such underwriter or agent may be deemed to be underwriting discounts
and commissions under such Act.
LEGAL MATTERS
The validity of the Certificates, including certain federal income tax
consequences with respect thereto, will be passed upon for the Depositor
by Brown & Wood LLP, New York, New York. _________________, ________,
________, will pass upon certain legal matters on behalf of the
Underwriters.
RATINGS
It is a condition to the issuance of the Senior Certificates that they
be rated ___ by ____ ("____") and, ____ by ____ ("____" and, together with
______, the "Rating Agencies"). It is a condition to the issuance of the
Class B- , Class B- and Class B- Certificates that they be rated at least
______, _____ and ____, respectively, by _____.
The ratings assigned by ____ to mortgage pass-through certificates
address the likelihood of the receipt of all distributions on the mortgage
loans by the related certificateholders under the agreements pursuant to
which such certificates are issued. ____'s ratings take into consideration
the credit quality of the related mortgage pool, including any credit
support providers, structural and legal aspects associated with such
certificates, and the extent to which the payment stream on the mortgage
pool is adequate to make the payments required by such certificates. ____
ratings on such certificates do not, however, constitute a statement
regarding frequency of payments of the mortgage loans.
The ratings assigned by _____ to mortgage pass-through certificates
address the likelihood of the receipt of all distributions on the mortgage
loans by the related certificateholders under the agreements pursuant to
which such certificates are issued. _____'s ratings take into
consideration the credit quality of the related mortgage pool, including
any credit support providers, structural and legal aspects associated with
such certificates, and the extent to which the payment stream on such
mortgage pool is adequate to make payments required by such certificates.
____'s ratings on such certificates do not, however, constitute a
statement regarding frequency of prepayments on the related mortgage
loans.
The ratings of the Rating Agencies do not address the possibility
that, as a result of principal prepayments, Certificateholders may receive
a lower than anticipated yield.
The security ratings assigned to the Offered Certificates should be
evaluated independently from similar ratings on other types of securities.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the Rating
Agencies.
The Depositor has not requested a rating of the Offered Certificates
by any rating agency other than the Rating Agencies; there can be no
assurance, however, as to whether any other rating agency will rate the
Offered Certificates or, if it does, what rating would be assigned by such
other rating agency. The rating assigned by such other rating agency to
the Offered Certificates could be lower than the respective ratings
assigned by the Rating Agencies.
<TABLE>
<CAPTION>
============================================================== =============================================================
<S> <C>
No person has been authorized to give any information or
to make any representations other than those contained in this
Prospectus Supplement or the Prospectus and, if given or made,
such information or representations must not be relied upon.
This Prospectus Supplement and the Prospectus do not
constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby, nor an offer of
Offered Certificates in any state or jurisdiction in which, or
to any person to whom, such offer would be unlawful. The
delivery of this Prospectus Supplement or the Prospectus at
any time does not imply that the information contained herein
or therein is correct as of any time subsequent to its date;
however, if any material change occurs while this Prospectus
Supplement or Prospectus is required by law to be delivered,
this Prospectus Supplement or the Prospectus will be amended
or supplemented accordingly.
$(_____________)
--------------- (Approximate)
TABLE OF CONTENTS INDYMAC ABS, INC.
Depositor
PAGE
PROSPECTUS SUPPLEMENT (INDYMAC, INC.)
Seller and Master Servicer
Summary of Terms . . . . . . . . . . . . . . . . . . . S-3
The Mortgage Pool . . . . . . . . . . . . . . . . . . . S-9 MORTGAGE PASS-THROUGH
Servicing of Mortgage Loans . . . . . . . . . . . . . S-10 CERTIFICATES,
Description of Certificates . . . . . . . . . . . . . . S-18 SERIES 199_ - _
Yield, Prepayment and Maturity Considerations . . . . . S-28
Credit Enhancement . . . . . . . . . . . . . . . . . . S-35 -------------------------
Use of Proceeds . . . . . . . . . . . . . . . . . . . . S-36 PROSPECTUS SUPPLEMENT
Certain Federal Income Tax Consequences . . . . . . . . S-36 (_________, 199_)
ERISA Considerations . . . . . . . . . . . . . . . . . S-37 -------------------------
Method of Distribution . . . . . . . . . . . . . . . . S-39
Legal Matters . . . . . . . . . . . . . . . . . . . . . S-39
Ratings . . . . . . . . . . . . . . . . . . . . . . . . S-39
PROSPECTUS
PROSPECTUS
Prospectus Supplement or Current Report on Form 8-K . . . 2
Incorporation of Certain Document by Reference . . . . . 2
Available Information . . . . . . . . . . . . . . . . . . 2
Reports to Securityholders . . . . . . . . . . . . . . . 3
Summary of Terms . . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . 11
The Trust Fund . . . . . . . . . . . . . . . . . . . . . 16
Use of Proceeds . . . . . . . . . . . . . . . . . . . . 20
The Depositor . . . . . . . . . . . . . . . . . . . . . 20
Loan Program . . . . . . . . . . . . . . . . . . . . . . 21
Description of the Securities . . . . . . . . . . . . . 23
Credit Enhancement . . . . . . . . . . . . . . . . . . . 39
Yield and Prepayment Considerations . . . . . . . . . . . 43
The Agreements . . . . . . . . . . . . . . . . . . . . . 45
Certain Legal Aspects of the Loans . . . . . . . . . . . 61
Certain Federal Income Tax Consequences . . . . . . . . . 75
State Tax Considerations . . . . . . . . . . . . . . . . 94
ERISA Considerations . . . . . . . . . . . . . . . . . . 94
Legal Investment . . . . . . . . . . . . . . . . . . . . 99
Method of Distribution . . . . . . . . . . . . . . . . . 99
Legal Matters . . . . . . . . . . . . . . . . . . . . . . 100
Financial Information . . . . . . . . . . . . . . . . . . 100
Rating . . . . . . . . . . . . . . . . . . . . . . . . . 100
============================================================== =============================================================
</TABLE>
SUBJECT TO COMPLETION, DATED APRIL __, 1998
PROSPECTUS SUPPLEMENT
(To Prospectus dated ______________, 199__)
$___________________
(APPROXIMATE)
HOME EQUITY LOAN ASSET BACKED CERTIFICATES, SERIES 199_-_
INDYMAC ABS, INC.
DEPOSITOR
(INDYMAC, INC.)
SELLER AND MASTER SERVICER
Each Home Equity Loan Asset Backed Certificate, Series 199_-_
(collectively, the "Certificates") will represent an undivided interest in
the Home Equity Loan Trust 199_-_ (the "Trust") to be formed pursuant to a
Pooling and Servicing Agreement among (IndyMac, Inc. ("IndyMac")), as Seller
and Master Servicer, IndyMac ABS, Inc., as Depositor, and ( ), as Trustee.
The property of the Trust will include a pool of (adjustable rate) home
equity revolving credit line loans made or to be made in the future (the
"Mortgage Loans") under certain home equity revolving credit line loan
agreements. The Mortgage Loans are secured primarily by first and second
deeds of trust or mortgages on one- to four-family residential properties.
The aggregate undivided interest in the Trust represented by the
Certificates will, as of ____________, 199_ (the "Cut-off Date"), represent
approximately __% of the outstanding principal balances of the Mortgage
Loans. The remaining undivided interest in the Trust not represented by the
Certificates (the "Transferor Interest") will initially be equal to
$_________________, which as of the Cut-off Date is _% of the outstanding
principal balances of the Mortgage Loans. Only the Certificates are offered
hereby.
Distributions of principal and interest on the Certificates will be made
on the __________th day of each month or, if such date is not a Business Day,
then on the succeeding Business Day (each, a "Distribution Date"), commencing
___________, 199_. On each Distribution Date, holders of the Certificates
will be entitled to receive, from and to the limited extent of funds
available in the Collection Account (as defined herein), distributions with
respect to interest and principal calculated as set forth herein. The
Certificates are not guaranteed by the Depositor, (IndyMac) or any affiliate
thereof. (However, the Certificates will be unconditionally and irrevocably
guaranteed as to the payment of the Guaranteed Distributions (as defined
herein) on each Distribution Date pursuant to the terms of a financial
guaranty insurance policy (the "Policy") to be issued by
(INSURER)
---------------
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE S-17 HEREIN AND ON PAGE 16 IN THE ACCOMPANYING
PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR, (INDYMAC), THE TRUSTEE OR ANY
AFFILIATE THEREOF, EXCEPT TO THE EXTENT PROVIDED HEREIN. NEITHER THE
CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY
ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
===============================================================================
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to the
Public (1) Discount(2) Depositor (3)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Per Certificate . . . . . . . . . . . . . % % %
- ----------------------------------------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . $ $ $
========================================================================================
</TABLE>
(1) Plus accrued interest, if any, from _______________, 199_.
(2) The Depositor has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933.
(3) Before deducting expenses, estimated to be $_______________.
---------------
The Certificates are offered subject to prior sale and subject to the
Underwriter's right to reject orders in whole or in part. It is expected
that delivery of the Certificates will be made in book-entry form only
through the facilities of The Depository Trust Company, CEDEL S.A. and the
Euroclear System on or about ______________, 199_ (the "Closing Date"). The
Certificates will be offered in Europe and the United States of America.
---------------
(UNDERWRITER)
________________, 199__.
There is currently no market for the Certificates offered hereby and
there can be no assurance that such a market will develop or if it does
develop that it will continue. See "Risk Factors" herein and in the
Prospectus.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Certificates offered hereby constitute part of a separate series of
Home Equity Loan Asset Backed Certificates being offered by IndyMac ABS, Inc.
from time to time pursuant to its Prospectus dated _______________, 199__.
This Prospectus Supplement does not contain complete information about the
offering of the Certificates. Additional information is contained in the
Prospectus and investors are urged to read both this Prospectus Supplement
and the Prospectus in full. Sales of the Certificates may not be consummated
unless the purchaser has received both this Prospectus Supplement and the
Prospectus.
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL
DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS
ACTING AS UNDERWRITERS TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------
SUMMARY
The following summary of certain pertinent information is qualified in
its entirety by reference to the detailed information appearing elsewhere in
this Prospectus Supplement and the accompanying Prospectus. Certain
capitalized terms used in the Summary are defined elsewhere in the Prospectus
Supplement or in the Prospectus. Reference is made to the Index of Defined
Terms herein and the Index of Defined Terms in the Prospectus for the
definitions of certain capitalized terms.
Trust............................. Home Equity Loan Trust 199_-_ (the
"Trust") will be formed pursuant to a
pooling and servicing agreement (the
"Agreement") to be dated as of
______________, 199_ (the "Cut-off Date")
among (IndyMac, Inc. ("IndyMac")), as
seller and servicer (together with any
successor in such capacity, the "Seller"
and the "Master Servicer", respectively),
IndyMac ABS, Inc., as depositor (the
"Depositor"), and ( ), as trustee (the
"Trustee"). The property of the Trust
will include: a pool of (adjustable rate)
home equity revolving credit line loans
made or to be made in the future (the
"Mortgage Loans"), under certain home
equity revolving credit line loan
agreements (the "Credit Line Agreements")
and secured by either first or second
mortgages on residential properties that
are primarily one- to four-family
properties (the "Mortgaged Properties");
the collections in respect of the
Mortgage Loans received after the Cut-off
Date (exclusive of payments in respect of
accrued interest due on or prior to the
Cut-off Date or due in the month of
_____________); property that secured a
Mortgage Loan which has been acquired by
foreclosure or deed in lieu of
foreclosure; an irrevocable and
unconditional limited financial guaranty
insurance policy (the "Policy"); an
assignment of the Depositor's rights under
the Purchase Agreement (as defined
herein); rights under certain hazard
insurance policies covering the Mortgaged
Properties; and certain other property, as
described more fully herein.
The Trust property will include the
unpaid principal balance of each Mortgage
Loan as of the Cut-off Date (the "Cut-
off Date Principal Balance") plus any
additions thereto as a result of new
advances made pursuant to the applicable
Credit Line Agreement (the "Additional
Balances") during the life of the Trust.
With respect to any date, the "Pool
Balance" will be equal to the aggregate
of the Principal Balances of all Mortgage
Loans as of such date. The aggregate Cut-
off Date Principal Balance of the Mortgage
Loans is $____________________ (the "Cut-
off Date Pool Balance"). The "Principal
Balance" of a Mortgage Loan (other than a
Liquidated Mortgage Loan) on any day is
equal to its Cut-off Date Principal
Balance, plus (i) any Additional Balances
in respect of such Mortgage Loan, minus
(ii) all collections credited against
the Principal Balance of such Mortgage
Loan in accordance with the related Credit
Line Agreement prior to such day. The
Principal Balance of a Liquidated Mortgage
Loan (as defined herein) after final
recovery of related Liquidation Proceeds
(as defined herein) shall be zero.
Securities Offered................ Each of the Home Equity Loan Asset
Backed Certificates, Series 199_-_ offered
hereby (the "Certificates") represents an
undivided interest in the Trust. Each
Certificate represents the right to
receive payments of interest at the
variable rate described below (the
"Certificate Rate"), payable monthly, and
payments of principal at such time and to
the extent provided below. The aggregate
undivided interest in the Trust repre-
sented by the Certificates as of the
Closing Date will equal $_________________
(the "Original Invested Amount"), which
represents __% of the Cut-off Date Pool
Balance. The "Original Certificate Princi-
pal Balance" will equal $____________.
Following the Closing Date, the "Invested
Amount" with respect to any date will be
an amount equal to the Original Invested
Amount minus (i) the amount of Investor
Principal Collections (as defined herein)
previously distributed to Certificate-
holders, and minus (ii) an amount equal
to the product of the Investor Floating
Allocation Percentage and the Liquidation
Loss Amounts (each as defined herein). The
Transferor (as described below) will own
the remaining undivided interest (the
"Transferor Interest") in the Mortgage
Loans, which is equal to the Pool Balance
minus the Invested Amount and will
initially equal approximately __% of the
Cut-off Date Pool Balance. The Transferor
(the "Transferor") as of any date is the
owner of the Transferor Interest which
initially will be (IndyMac).
The Certificates will be issued pursuant
to the Agreement. The principal amount
of the outstanding Certificates (the
"Certificate Principal Balance") on any
date is equal to the Original Certificate
Principal Balance minus the aggregate
of amounts actually distributed as
principal to the Certificateholders. See
"Description of the Certificates" herein.
Removal of Certain
Mortgage Loans;
Additional Balances.............. Subject to certain conditions, on any
Distribution Date the Transferor may, but
shall not be obligated to, remove from the
Trust certain Mortgage Loans without
notice to the Certificateholders. The
Transferor is permitted to designate the
Mortgage Loans to be removed. Mortgage
Loans so designated will only be removed
upon satisfaction of certain conditions
specified in the Agreement, including:
(i) the Transferor Interest as of the
Transfer Date (as defined herein) (after
giving effect to such removal) exceeds the
Minimum Transferor Interest (as defined
below); (ii) the Transferor shall have
delivered to the Trustee a "Mortgage Loan
Schedule" containing a list of all
Mortgage Loans remaining in the Trust
after such removal; (iii) the Transferor
shall represent and warrant that no
selection procedures which are adverse to
the interests of the Certificateholders or
the Certificate Insurer were used by the
Transferor in selecting such Mortgage
Loans; (iv) in connection with the first
such retransfer of Mortgage Loans, the
Rating Agencies (as defined herein) shall
have been notified of the proposed
transfer and prior to the Transfer Date
shall not have notified the Transferor in
writing that such transfer would result
in a reduction or withdrawal of the
ratings assigned to the Certificates
without regard to the Policy; and (v)
the Transferor shall have delivered to the
Trustee and the Certificate Insurer an
officer's certificate confirming the
conditions set forth in clauses (i)
through (iii) above. See "Description
of the Certificates--Optional Transfers of
Mortgage Loans to the Transferor" herein.
The "Minimum Transferor Interest" as of
any date is an amount equal to the lesser
of (a) __% of the Pool Balance on such
date and (b) the Transferor Interest as of
the Closing Date.
During the term of the Trust, all
Additional Balances will be transferred
to and become property of the Trust. The
Pool Balance at any time will generally
fluctuate from day to day because the
amount of Additional Balances and the
amount of principal payments with respect
to the Mortgage Loans will usually differ
from day to day. Because the Transferor
Interest is equal to the Pool Balance
minus the Invested Amount, the amount of
the Transferor Interest will fluctuate
from day to day as draws are made with
respect to the Mortgage Loans and as
Principal Collections are received.
The Mortgage Loans............... The Mortgage Loans are secured by first
and second mortgages on Mortgaged
Properties located in ___ states. On
the Closing Date, (IndyMac) will sell
the Mortgage Loans to the Depositor,
pursuant to a purchase agreement (the
"Purchase Agreement").
The percentage of the Cut-off Date
Principal Balance of the Mortgage Loans
secured primarily by Mortgaged Properties
located in the states of __________,
________, __________, _______, ______ and
________ is approximately ____%, ____%,
____%, ____%, ____% and ____%, respec-
tively. The "Combined Loan-to-Value Ratio"
of each Mortgage Loan is the ratio of (A)
the sum of (i) the maximum amount the
borrower was permitted to draw down under
the related Credit Line Agreement (the
"Credit Limit") and (ii) the amounts of
any related senior mortgage loans
(computed as of the date of origination of
each such Mortgage Loans) to (B) the
lesser of (i) the appraised value of the
Mortgaged Property or (ii) in the case
of a Mortgaged Property purchased within
one year of the origination of the
related Mortgage Loan, the purchase price
of such Mortgaged Property. As of the
Cut-off Date the Combined Loan-to-Value
Ratios ranged from ____% to ______% and,
as of the Cut-off Date, the weighted
average Combined Loan-to-Value Ratio of
the Mortgage Loans was approximately
____%.
(Interest on each Mortgage Loan is payable
monthly and computed on the related daily
outstanding Principal Balance for each day
in the billing cycle at a variable rate
per annum (the "Loan Rate") equal at any
time (subject to maximum rates, as
described herein under "Description of the
Mortgage Loans--Mortgage Loan Terms," and
further subject to applicable usury
limitations) to the sum of (i) the highest
prime rate published in the "Money Rates"
section of The Wall Street Journal and
(ii) a Margin within the range of ____% to
____%). As of the Cut-off Date, the
weighted average Margin was approximately
____%. Loan Rates are adjusted monthly on
the first business day of the calendar
month preceding the Due Date. As to each
Mortgage Loan, the "Due Date" is the
fifteenth day of each month. The Cut-off
Date Principal Balances ranged from zero
to $__________ and averaged approximately
$__________. Credit Limits under the
Mortgage Loans as of the Cut-off Date
ranged from $__________ to $__________
and averaged approximately $__________.
Each Mortgage Loan was originated in
the period from _______________, 199_
to ________________, 199_. As of the Cut-
off Date, the maximum Credit Limit
Utilization Rate (as defined herein) was
100% and the weighted average Credit Limit
Utilization Rate was approximately ____%.
As of the Cut-off Date, approximately
____% by Cut-off Date Principal Balance of
the Mortgage Loans represented first liens
on the related Mortgaged Properties,
while approximately ____% of the Mortgage
Loans represented second liens. As of the
Cut-off Date, the Mortgage Loans had
remaining terms to scheduled maturity
ranging from ___ months to ___ months and
had a weighted average of approximately
___ months. See "Description of the
Mortgage Loans" herein.
Denominations.................... The Certificates will be offered for
purchase in denominations of $1,000 and
multiples of $1 in excess thereof. The
interest in the Trust evidenced by a
Certificate (the "Percentage Interest")
will be equal to the percentage derived by
dividing the denomination of such Certif-
icate by the Original Certificate Princ-
ipal Balance.
Registration of
Certificates..................... The Certificates will initially be issued
in book-entry form. Persons acquiring
beneficial ownership interests in the
Certificates ("Certificate Owners") may
elect to hold their Certificate interests
through The Depository Trust Company
("DTC"), in the United States, or Centrale
de Livraison de Valeurs Mobilieres S.A.
("CEDEL") or the Euroclear System
("Euroclear"), in Europe. Transfers within
DTC, CEDEL or Euroclear, as the case may
be, will be in accordance with the usual
rules and operating procedures of the
relevant system. So long as the
Certificates are Book-Entry Certificates
(as defined herein), such Certificates
will be evidenced by one or more
Certificates registered in the name of
Cede & Co. ("Cede"), as the nominee of DTC
or one of the relevant depositaries
(collectively, the "European Deposit-
aries"). Cross-market transfers between
persons holding directly or indirectly
through DTC, on the one hand, and
counterparties holding directly or indir-
ectly through CEDEL or Euroclear, on the
other, will be effected in DTC through
Citibank N.A. ("Citibank") or The Chase
Manhattan Bank ("Chase"), the relevant
depositaries of CEDEL or Euroclear,
respectively, and each a participating
member of DTC. The Certificates will
initially be registered in the name of
Cede. The interests of the Certificate-
holders will be represented by book
entries on the records of DTC and partici-
pating members thereof. No Certificate
Owner will be entitled to receive a
definitive certificate representing such
person's interest, except in the event
that Definitive Certificates (as defined
herein) are issued under the limited
circumstances described herein. All
references in this Prospectus Supplement
to any Certificates reflect the rights of
Certificate Owners only as such rights may
be exercised through DTC and its partici-
pating organizations for so long as such
Certificates are held by DTC. See "Risk
Factors -- Book - Entry Certificates",
"Description of the Certificates--Book-
Entry Certificates" herein and "Annex I"
hereto.
Depositor........................ IndyMac ABS, Inc., a Delaware corporation
and a limited purpose finance subsidiary
of IndyMac, Inc., a Delaware corporation.
The principal executive offices of the
Depositor are located at 155 North Lake
Avenue, Pasadena, California 91101
(Telephone: (818) ___-____). See "The
Depositor" in the Prospectus.
Master Servicer of
the Mortgage Loans.................(IndyMac, Inc., a Delaware corporation
headquartered in Pasadena, California. The
principal executive offices of the Master
Servicer are located at 155 North Lake
Avenue, Pasadena, California 91101
(Telephone: (818) 304-8400).) See
"Servicing of the Mortgage Loans--The
Master Servicer" herein.
Collections....................... All collections on the Mortgage Loans will
generally be allocated in accordance with
the Credit Line Agreements between amounts
collected in respect of interest and
amounts collected in respect of principal.
As to any Distribution Date, "Interest
Collections" will be equal to the amounts
collected during the related Collection
Period, including the portion of Net
Liquidation Proceeds (as defined below)
allocated to interest pursuant to the
terms of the Credit Line Agreements less
Servicing Fees for the related Collection
Period.
As to any Distribution Date, "Principal
Collections" will be equal to the sum of
(i) the amounts collected during the
related Collection Period, including the
portion of Net Liquidation Proceeds
allocated to principal pursuant to the
terms of the Credit Line Agreements and
(ii) any Transfer Deposit Amounts (as
defined herein).
"Net Liquidation Proceeds" with respect to
a Mortgage Loan are the proceeds
(excluding amounts drawn on the Policy)
received in connection with the
liquidation of any Mortgage Loan,
whether through trustee's sale, fore-
closure sale or otherwise, reduced by
related expenses, but not including the
portion, if any, of such amount that
exceeds the Principal Balance of the
Mortgage Loan plus any accrued and unpaid
interest thereon to the end of the
Collection Period during which such
Mortgage Loan became a Liquidated Mortgage
Loan.
With respect to any Distribution Date,
the portion of Interest Collections
allocable to the Certificates ("Investor
Interest Collections") will equal the
product of (a) Interest Collections
for such Distribution Date and (b) the
Investor Floating Allocation Percentage.
With respect to any Distribution Date,
the "Investor Floating Allocation
Percentage" is the percentage equivalent
of a fraction determined by dividing the
Invested Amount at the close of business
on the preceding Distribution Date (or at
the Closing Date in the case of the first
Distribution Date) by the Pool Balance at
the beginning of the related Collection
Period. The remaining amount of Interest
Collections will be allocated to the
Transferor Interest as more fully
described herein.
On each Distribution Date, the Investor
Interest Collections will be applied in
the following order of priority: (i) as
payment to the Trustee for its fee for
services rendered pursuant to the
Agreement; (ii) as payment for the premium
for the Policy; (iii) as payment for the
accrued interest due and any overdue
accrued interest (with interest thereon)
on the Certificate Principal Balance of
the Certificates; (iv) to pay any Investor
Loss Amount (as defined herein) for such
Distribution Date; (v) as payment for any
Investor Loss Amount for a previous
Distribution Date that was not previously
(a) funded by Investor Interest Collec-
tions allocable to the Certificateholders,
(b) absorbed by the Overcollateralization
Amount, (c) funded by amounts on deposit
in the Spread Account or (d) funded by
draws on the Policy; (vi) to reimburse
prior draws made from the Policy (with
interest thereon); (vii) to pay principal
on the Certificates until the Invested
Amount exceeds the Certificate Principal
Balance by the Required Overcollateral-
ization Amount, each as defined herein
(such amount, if any, paid pursuant to
this clause (vii) being referred to herein
as the "Accelerated Principal Distribution
Amount"); (viii) any other amounts
required to be deposited in an account
for the benefit of the Certificate Insurer
and Certificateholders pursuant to the
Agreement or amounts owed to the
Certificate Insurer pursuant to the
Insurance Agreement; (ix) certain amounts
that may be required to be paid to the
Master Servicer pursuant to the Agreement;
and (x) to the Transferor to the extent
permitted as described herein.
Investor Interest Collections available
after the payment of interest on the
Certificates may be insufficient to
cover any Investor Loss Amount. If such
insufficiency results in the Certificate
Principal Balance exceeding the Invested
Amount, a draw in an amount equal to such
difference will be made on the Policy in
accordance with the terms of the Policy.
The "Overcollateralization Amount" on any
date of determination is the amount, if
any, by which the Invested Amount exceeds
the Certificate Principal Balance on
such day. Payments to Certificateholders
pursuant to clause (iii) above will be
interest payments on the Certificates.
Payments to Certificateholders pursuant
to clauses (iv), (v) and (vii) will be
principal payments on the Certificates and
will therefore reduce the Certificate
Principal Balance, however, payments
pursuant to clause (vii) will not reduce
the Invested Amount. The Accelerated
Principal Distribution Amount is not
guaranteed by the Policy.
"Liquidation Loss Amount" means with
respect to any Liquidated Mortgage Loan,
the unrecovered Principal Balance thereof
at the end of the related Collection
Period in which such Mortgage Loan became
a Liquidated Mortgage Loan, after giving
effect to the Net Liquidation Proceeds in
connection therewith. The "Investor Loss
Amount" shall be the product of the
Investor Floating Allocation Percentage
and the Liquidation Loss Amount for such
Distribution Date. See "Description of
the Certificates -- Distributions on the
Certificates" herein.
Principal Collections will be allocated
between the Certificateholders and the
Transferor ("Investor Principal Collec-
tions" and "Transferor Principal Collec-
tions", respectively) in accordance with
their percentage interests in the Mort-
gage Loans of __% and __%, respectively,
as of the Cut-off Date (the "Fixed Allo-
cation Percentage"), but a lesser amount
of Principal Collections may be distrib-
uted to Certificateholders during the
Managed Amortization Period, as described
below. The "Investor Fixed Allocation
Percentage" shall be __%.
The Master Servicer will deposit Interest
Collections and Principal Collections in
respect of the Mortgage Loans in an
account established for such purpose
under the Agreement (the "Collection
Account"). See "Description of the Cer-
tificates--Payments on Mortgage Loans;
Deposits to Collection Account and
Distribution Account" herein.
Collection Period................. As to any Distribution Date other than
the first Distribution Date, the
"Collection Period" is the calendar
month preceding the month of such
Distribution Date. As to the first Dis-
tribution Date, the "Collection Period"
is the period beginning after the Cut-off
Date and ending on the last day of
_____________, 199_.
Interest.......................... Interest on the Certificates will be dis-
tributed monthly on the fifteenth day of
each month or, if such day is not a
Business Day, then the next succeeding
Business Day (each, a "Distribution
Date"), commencing on _____________, 199_,
at the Certificate Rate for the related
Interest Period (as defined below). The
"Certificate Rate" for an Interest Period
will generally equal the sum of ((a)
the London Interbank offered rate for
one-month Eurodollar deposits ("LIBOR")
appearing on the Telerate Screen Page
3750, as of the second LIBOR Business Day
(as defined herein) prior to the first day
of such Interest Period (or as of two
LIBOR Business Days prior to the Closing
Date, in the case of the first Interest
Period) and (b) ____%.) Notwithstanding
the foregoing, in no event will the
amount of interest required to be distrib-
uted in respect of the Certificates on any
Distribution Date exceed a rate equal to
the weighted average of the Loan Rates
(net of the Servicing Fee Rate, the fee
payable to the Trustee and the rate at
which the premium payable to the Certifi-
cate Insurer is calculated) weighted on
the basis of the daily balance of each
Mortgage Loan during the related billing
cycle prior to the Collection Period
relating to such Distribution Date.
Interest on the Certificates in respect
of any Distribution Date will accrue from
the preceding Distribution Date (or in the
case of the first Distribution Date, from
the date of the initial issuance of the
Certificates (the "Closing Date") through
the day preceding such Distribution Date
(each such period, an "Interest Period")
on the basis of the actual number of days
in the Interest Period and a 360-day year.
Interest payments on the Certificates will
be funded from Investor Interest
Collections, any funds on deposit in the
Spread Account and from draws on the
Policy. See "Description of the Cer-
tificates" herein.
Principal Payments from
Principal Collections............ For the period beginning on the first
Distribution Date and, unless a Rapid
Amortization Event (as defined herein)
shall have earlier occurred, ending
on the Distribution Date in _____________,
200_ (the "Managed Amortization Period"),
the amount of Principal Collections
payable to Certificateholders as of each
Distribution Date during the Managed Amor-
tization Period will equal, to the extent
funds are available therefor, the
Scheduled Principal Collections Distribu-
tion Amount for such Distribution Date. On
any Distribution Date during the Managed
Amortization Period, the "Scheduled
Principal Collections Distribution Amount"
shall equal the lesser of (i) the Maximum
Principal Payment (as defined herein) and
(ii) the Alternative Principal Payment (as
defined herein). With respect to any
Distribution Date, the "Maximum Principal
Payment" will equal the product of the
Investor Fixed Allocation Percentage and
Principal Collections for such Distribu-
tion Date. With respect to any Distri-
bution Date, the "Alternative Principal
Payment" will equal the greater of (x)
____% of the Certificate Principal
Balance immediately prior to such Distri-
bution Date and (y) the amount, but not
less than zero, of Principal Collections
for such Distribution Date less the aggre-
gate of Additional Balances created during
the related Collection Period.
Beginning with the first Distribution Date
following the end of the Managed Amortiza-
tion Period, the amount of Principal
Collections payable to Certificateholders
on each Distribution Date will be equal
to the Maximum Principal Payment. See
"Description of the Certificates--Distri-
butions on the Certificates" herein.
In addition, to the extent funds are
available therefor (including funds avail-
able under the Policy), on the Distribu-
tion Date in _____________ 20__, Certif-
icateholders will be entitled to receive
as payment of principal an amount equal
to the outstanding Certificate Principal
Balance.
Distributions of Principal Collections
based upon the Investor Fixed Allocation
Percentage may result in distributions
of principal to Certificateholders in
amounts that are greater relative to the
declining Pool Balance than would be the
case if the Investor Floating Allocation
Percentage were used to determine the per-
centage of Principal Collections distri-
buted in respect of the Invested Amount.
The aggregate distributions of principal
to Certificateholders will not exceed
the Original Certificate Principal
Balance.
The Certificate Insurer........... (Insurer) (the "Certificate Insurer") is
a __________ insurance company engaged
exclusively in the business of writing
financial guaranty insurance, principally
in respect of securities offered in domes-
tic and foreign markets. The Certificate
Insurer's claims-paying ability is rated
____ by __________________________________
and _ _ _ _ _ by ________________________.
See "The Certificate Insurer" in this
Prospectus Supplement.
Policy............................ On or before the Closing Date, the Policy
will be issued by the Certificate Insurer
pursuant to the provisions of the Insur-
ance and Indemnity Agreement (the "Insur-
ance Agreement") to be dated as of
_____________, 199_, among the Seller, the
Depositor, the Master Servicer and the
Certificate Insurer.
The Policy will irrevocably and uncon-
ditionally guarantee payment on each Dis-
tribution Date to the Trustee for the ben-
efit of the Certificateholders the full
and complete payment of (i) the Guaranteed
Principal Distribution Amount (as defined
herein) with respect to the Certificates
for such Distribution Date and (ii)
accrued and unpaid interest due on the
Certificates (together, the "Guaranteed
Distributions"), with such Guaranteed
Distributions having been calculated in
accordance with the original terms of the
Certificates or the Agreement except
for amendments or modifications to which
the Certificate Insurer has given its
prior written consent. The effect of the
Policy is to guarantee the timely payment
of interest on, and the ultimate payment
of the principal amount of, all of the
Certificates.
The "Guaranteed Principal Distribution
Amount" for any Distribution Date shall be
the amount by which the Certificate Princ-
ipal Balance (after giving effect to all
other amounts distributable and allocable
to principal on the Certificates on such
Distribution Date) exceeds the Invested
Amount for such Distribution Date. In
addition, the Policy will guarantee the
payment of the outstanding Certificate
Principal Balance on the Distribution
Date in ____________, 20__ (after giving
effect to all other amounts distributable
and allocable to principal on such
Distribution Date).
In accordance with the Agreement, the
Trustee will be required to establish and
maintain an account (the "Spread Account")
for the benefit of the Certificate Insurer
and the Certificateholders. The Trustee
shall deposit the amounts into the Spread
Account as required by the Agreement.
In the absence of payments under the
Policy, Certificateholders will directly
bear the credit and other risks associated
with their undivided interest in the
Trust. See "Description of the Certifi-
cates--The Policy" herein.
Overcollateralization
Amount............................ The distribution of Accelerated Principal
Distribution Amounts, if any, to Certif-
icateholders may result in the Invested
Amount being greater than the Certificate
Principal Balance, thereby creating the
Overcollateralization Amount. The Over-
collateralization Amount, if any, will be
available to absorb any Investor Loss
Amount not covered by Investor Interest
Collections. Payments of Accelerated
Principal Distribution Amounts are not
covered by the Policy. Any Investor
Loss Amounts not covered by such over-
collateralization, amounts on deposit in
the Spread Account or Investor Interest
Collections will be covered by draws on
the Policy to the extent provided therein.
Record Date....................... The last day preceding a Distribution
Date or, if the Certificates are no longer
Book-Entry Certificates, the last day of
the month preceding a Distribution Date.
Servicing......................... The Master Servicer will be responsible
for servicing, managing and making col-
lections on the Mortgage Loans. The Master
Servicer will deposit all collections in
respect of the Mortgage Loans into the
Collection Account as described herein.
On the third Business Day prior to each
Distribution Date (the "Determination
Date"), the Master Servicer will calcu-
late, and instruct the Trustee regarding
the amounts to be paid, as described
herein, to the Certificateholders on such
Distribution Date. See "Description of
the Certificates--Distributions on the
Certificates" herein. With respect to each
Collection Period, the Master Servicer
will receive from collections in respect
of interest on the Mortgage Loans, on
behalf of itself, a portion of such
collections as a monthly servicing fee
(the "Servicing Fee") in the amount of
approximately ____% per annum (the
"Servicing Fee Rate") on the aggregate
Principal Balances of the Mortgage Loans
as of the first day of each such
Collection Period. See "Description of the
Certificates--Servicing Compensation and
Payment of Expenses" herein. In certain
limited circumstances, the Master Servicer
may resign or be removed, in which event
either the Trustee or a third-party
servicer will be appointed as a successor
Master Servicer. See "Description of the
Certificates--Certain Matters Regarding
the Master Servicer and the Transferor"
herein.
Final Payment of Principal;
Termination..................... The Trust will terminate on the Distribu-
tion Date following the later of (A) pay-
ment in full of all amounts owing to the
Certificate Insurer and (B) the earliest
of (i) the Distribution Date on which the
Certificate Principal Balance has been
reduced to zero, (ii) the final payment or
other liquidation of the last Mortgage
Loan in the Trust, (iii) the optional
retransfer to the Transferor of
the Certificates, as described below and
(iv) the Distribution Date in ___________,
20__. The Certificates will be subject
to optional retransfer to the Transferor
on any Distribution Date after the
Certificate Principal Balance is reduced
to an amount less than or equal to
$________________ (__% of the Original
Certificate Principal Balance) and all
amounts due and owing to the Certificate
Insurer and unreimbursed draws on the
Policy, together with interest thereon,
as provided under the Insurance Agreement,
have been paid. The retransfer price
will be equal to the sum of the outstand-
ing Certificate Principal Balance and
accrued and unpaid interest thereon at the
Certificate Rate through the day preceding
the final Distribution Date. See
"Description Of The Certificates--Term-
ination; Retirement of the Certificates"
herein and "The Agreements--Termination";
Optional Termination in the Prospectus.
In addition, the Trust may be liquidated
as a result of certain events of
bankruptcy, insolvency or receivership
relating to the Transferor. See "Descrip-
tion of the Certificates--Rapid Amorti-
zation Events" herein.
Trustee........................... ( ), a ____________________________
(the "Trustee") will act as Trustee on
behalf of the Certificateholders.
Mandatory Retransfer of
Certain Mortgage Loans........... The Seller will make certain representa-
tions and warranties in the Agreement with
respect to the Mortgage Loans. Subject to
the limitations described below under
"Descriptions of the Certificates--Assign-
ment of the Mortgage Loans", if the
Seller breaches certain of its represent-
ations and warranties with respect to
any Mortgage Loan and such breach
materially and adversely affects the
interests of the Certificateholders or the
Certificate Insurer and is not cured
within the specified period, the Mortgage
Loan will be removed from the Trust upon
the expiration of a specified period from
the date on which the Seller becomes aware
or receives notice of such breach and will
be reassigned to the Seller. See "Descrip-
tion of the Certificates--Assignment of
Mortgage Loans" herein.
Federal Income
Tax Consequences. . . . . . . . . . Subject to the qualifications set forth in
"Certain Federal Income Tax Consequences"
herein, special tax counsel to the
Depositor is of the opinion that, under
existing law, a Certificate will be
treated as a debt instrument for Federal
income tax purposes as of the Closing
Date. Under the Agreement, the Transferor,
the Depositor and the Certificateholders
will agree to treat the Certificates as
indebtedness for Federal income tax
purposes. See "Certain Federal Income Tax
Consequences" herein and in the Prospectus
for additional information concerning the
application of Federal income tax laws.
ERISA Considerations. . . . . . . . The acquisition of a Certificate by a
pension or other employee benefit plan (a
"Plan") subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), could, in some instances,
result in a "prohibited transaction" or
other violation of the fiduciary
responsibility provisions of ERISA and
Code Section 4975. Certain exemptions from
the prohibited transaction rules could be
applicable to the acquisition of the
Certificates. Any Plan fiduciary
considering whether to purchase any
Certificate on behalf of a Plan should
consult with its counsel regarding the
applicability of the provisions of ERISA
and the Code. See "ERISA Considerations"
herein and in the Prospectus.
Legal Investment
Considerations. . . . . . . . . . . The Certificates will not constitute
"mortgage related securities" for purposes
of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"), because
not all of the Mortgages securing the
Mortgage Loans are first mortgages.
Accordingly, many institutions with legal
authority to invest in comparably rated
securities based solely on first mortgages
may not be legally authorized to invest in
the Certificates. See "Legal Investment
Considerations" herein and "Legal
Investment" in the Prospectus.
Certificate Rating. . . . . . . . . It is a condition to the issuance of the
Certificates that they be rated "___" by
_____ and "___" by _________ (each a
"Rating Agency"). In general, ratings
address credit risk and do not address the
likelihood of prepayments. See "Ratings"
herein and "Risk Factors--Rating of the
Securities" in the Prospectus.
RISK FACTORS
Book-Entry Certificates. Issuance of the Certificates in book-entry
-----------------------
form may reduce the liquidity of such Certificates in the secondary trading
market since investors may be unwilling to purchase Certificates for
which they cannot obtain physical certificates. See "Description of the
Certificates--Book-Entry Certificates" herein and "Risk Factors-Book-Entry
Registration" in the Prospectus.
Since transactions in the Certificates can be effected only through DTC,
CEDEL, Euroclear, participating organizations, indirect participants and
certain banks, the ability of a Certificate Owner to pledge a Certificate to
persons or entities that do not participate in the DTC, CEDEL or Euroclear
system or otherwise to take actions in respect of such Certificates, may be
limited due to lack of a physical certificate representing the Certificates.
See "Description of the Certificates--Book-Entry Certificates" herein and
"Risk Factors-Book-Entry Registration" in the Prospectus.
Certificate Owners may experience some delay in their receipt of
distributions of interest and principal on the Certificates since such
distributions will be forwarded by the Trustee to DTC and DTC will credit
such distributions to the accounts of its Participants (as defined herein)
which will thereafter credit them to the accounts of Certificate Owners
either directly or indirectly through indirect participants. See
"Description of the Certificates--Book-Entry Certificates" herein and "Risk
Factors-Book-Entry Registration" in the Prospectus.
Cash Flow Considerations. Minimum monthly payments on the Mortgage
------------------------
Loans will at least equal and may exceed accrued interest. Even assuming
that the Mortgaged Properties provide adequate security for the Mortgage
Loans, substantial delays could be encountered in connection with the
liquidation of Mortgage Loans that are delinquent and resulting shortfalls in
distributions to Certificateholders could occur if the Certificate Insurer
were unable to perform on its obligations under the Policy. Further,
liquidation expenses (such as legal fees, real estate taxes, and maintenance
and preservation expenses) will reduce the proceeds payable to
Certificateholders and thereby reduce the security for the Mortgage Loans.
In the event any of the Mortgaged Properties fails to provide adequate
security for the related Mortgage Loans, Certificateholders could experience
a loss if the Certificate Insurer were unable to perform its obligations
under the Policy.
Prepayment Considerations. Substantially all of the Mortgage Loans may
-------------------------
be prepaid in whole or in part at any time without penalty. Home equity
loans, such as the Mortgage Loans, have been originated in significant volume
only during the past few years and neither the Depositor nor the Master
Servicer is aware of any publicly available studies or statistics on the rate
of prepayment of such loans. Generally, home equity loans are not viewed by
borrowers as permanent financing. Accordingly, the Mortgage Loans may
experience a higher rate of prepayment than traditional loans. The Trust's
prepayment experience may be affected by a wide variety of factors, including
general economic conditions, interest rates, the availability of alternative
financing and homeowner mobility. In addition, substantially all of the
Mortgage Loans contain due-on-sale provisions and the Master Servicer intends
to enforce such provisions unless (i) such enforcement is not permitted by
applicable law or (ii) the Master Servicer, in a manner consistent with
reasonable commercial practice, permits the purchaser of the related
Mortgaged Property to assume the Mortgage Loan. To the extent permitted by
applicable law, such assumption will not release the original borrower from
its obligation under any such Mortgage Loan. See "Description of the
Certificates" herein and "Certain Legal Aspects of Loans--Due-on-Sale
Clauses" in the Prospectus for a description of certain provisions of the
Credit Line Agreements that may affect the prepayment experience on the
Mortgage Loans.
Certificate Rating. The rating of the Certificates will depend
------------------
primarily on an assessment by the Rating Agencies of the Mortgage Loans and
upon the claims-paying ability of the Certificate Insurer. Any reduction in
a rating assigned to the claims-paying ability of the Certificate Insurer
below the rating initially given to the Certificates may result in a
reduction in the rating of the Certificates. The rating by the Rating
Agencies of the Certificates is not a recommendation to purchase, hold or
sell the Certificates, inasmuch as such rating does not comment as to the
market price or suitability for a particular investor. There is no assurance
that the ratings will remain in place for any given period of time or that
the ratings will not be lowered or withdrawn by the Rating Agencies. In
general, the ratings address credit risk and do not address the likelihood of
prepayments. The ratings of the Certificates do not address the possibility
of the imposition of United States withholding tax with respect to non-U.S.
persons.
Legal Considerations. The Mortgage Loans are secured by mortgages
--------------------
(which generally are second mortgages). With respect to Mortgage Loans that
are secured by first mortgages, the Master Servicer has the power under
certain circumstances to consent to a new mortgage lien on the Mortgaged
Property having priority over such Mortgage Loan. Mortgage Loans secured by
second mortgages are entitled to proceeds that remain from the sale of the
related Mortgaged Property after any related senior mortgage loan and prior
statutory liens have been satisfied. In the event that such proceeds are
insufficient to satisfy such loans and prior liens in the aggregate and the
Certificate Insurer is unable to perform its obligations under the Policy,
the Certificateholders will bear (i) the risk of delay in distributions while
a deficiency judgment against the borrower is obtained and (ii) the risk of
loss if the deficiency judgment cannot be obtained or is not realized upon.
See "Certain Legal Aspects of Loans" in the Prospectus.
The sale of the Mortgage Loans from (IndyMac) to the Depositor pursuant
to the Purchase Agreement will be treated as a sale of the Mortgage Loans.
However, in the event of an insolvency of (IndyMac), the receiver of
(IndyMac) may attempt to recharacterize the sale of the Mortgage Loans as a
borrowing by (IndyMac), secured by a pledge of the applicable Mortgage Loans.
If the receiver decided to challenge such transfer, (i) if the Mortgage Loans
have not been delivered to the Trustee, the interest of the Trust in the
Mortgage Loans will be that of an unperfected security interest and (ii) even
if the Mortgage Loans have been delivered to the Trustee, delays in payments
of the Certificates and reductions in the amounts thereof could occur. The
Depositor will warrant in the Agreement that the transfer of the Mortgage
Loans by it to the Trust is either a valid transfer and assignment of such
Mortgage Loans to the Trust or the grant to the Trust of a security interest
in such Mortgage Loans.
If a conservator, receiver or trustee were appointed for the Transferor,
or if certain other events relating to the bankruptcy or insolvency of the
Transferor were to occur, Additional Balances would not be sold to the Trust.
In such an event, the Rapid Amortization Period would commence and the
Trustee would attempt to sell the Mortgage Loans (unless Certificateholders
holding Certificates evidencing undivided interests aggregating at least 51%
of the Certificate Principal Balance instruct otherwise), thereby causing
early payment of the Certificate Principal Balance. The net proceeds of such
sale will first be paid to the Certificate Insurer to the extent of
unreimbursed draws under the Policy and other amounts owing to the
Certificate Insurer pursuant to the Insurance Agreement. The Investor Fixed
Allocation Percentage of remaining amounts will be distributed to the
Certificateholders and the Policy will cover any amount by which such
remaining net proceeds are insufficient to pay the Certificate Principal
Balance in full.
In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee or
the Certificateholders from appointing a successor Master Servicer.
(Geographic Concentration. As of the Cut-off Date, approximately _____%
------------------------
(by Cut-off Date Principal Balance) of the Mortgaged Properties are located
in the State of __________. An overall decline in the __________ residential
real estate market could adversely affect the values of the Mortgaged
Properties securing such Mortgage Loans such that the Principal Balances of
the related Mortgage Loans, together with any primary financing on such
Mortgaged Properties, could equal or exceed the value of such Mortgaged
Properties. As the residential real estate market is influenced by many
factors, including the general condition of the economy and interest rates,
no assurances may be given that the __________ residential real estate market
will not weaken. If the __________ residential real estate market should
experience an overall decline in property values after the dates of
origination of the Mortgage Loans, the rates of losses on the Mortgage Loans
would be expected to increase, and could increase substantially.)
Master Servicer's Ability to Change the Terms of the Mortgage Loans.
-------------------------------------------------------------------
The Master Servicer may agree to changes in the terms of a Credit Line
Agreement, provided that such changes (i) do not adversely affect the
interest of the Certificateholders or the Certificate Insurer, and (ii) are
consistent with prudent business practice. There can be no assurance that
changes in applicable law or the marketplace for home equity loans or prudent
business practice will not result in changes in the terms of the Mortgage
Loans. In addition, the Agreement permits the Master Servicer, within
certain limitations described therein, to increase the Credit Limit of the
related Mortgage Loan or reduce the Margin for such Mortgage Loan.
Delinquent Mortgage Loans. The Trust will include Mortgage Loans which
-------------------------
are __ or fewer days delinquent as of the Cut-off Date. The Cut-off Date
Principal Balance of Mortgage Loans which are between __ days and __ days
delinquent as of the Cut-off Date was $_________________. If there are not
sufficient funds from the Investor Interest Collections to cover the Investor
Loss Amounts for any Distribution Date, the Overcollateralization Amount and
the amount on deposit in the Spread Account have been reduced to zero, and
the Certificate Insurer fails to perform its obligations under the Policy,
the aggregate amount of principal returned to the Certificateholders may be
less than the Certificate Principal Balance on the day the Certificates are
issued.
For a discussion of additional risks pertaining to the Certificates, see
"Risk Factors" in the Prospectus.
THE CERTIFICATE INSURER
The following information set forth in this section has been provided by
the Certificate Insurer. Accordingly, neither the Depositor nor the Master
Servicer makes any representation as to the accuracy and completeness of such
information.
(Description of Certificate Insurer)
THE MASTER SERVICER
General
(The Master Servicer will service the Mortgage Loans in accordance with
the terms set forth in the Agreement. The Master Servicer may perform any of
its obligations under the Agreement through one or more subservicers.
Notwithstanding any such subservicing arrangement, the Master Servicer will
remain liable for its servicing duties and obligations under the Agreement as
if the Master Servicer alone were servicing the Mortgage Loans. As of the
Closing Date, the Master Servicer will service the Mortgage Loans without
subservicing arrangements.)
The Master Servicer
(IndyMac, Inc. ("IndyMac"), a Delaware corporation), will act as Master
Servicer for the Mortgage Loans pursuant to the Master Servicing
Agreement. The principal executive offices of (IndyMac) are located at
(155 North Lake Avenue, Pasadena, California 91101).
At ______________, 199_, IndyMac provided servicing for approximately
$______ billion aggregate principal amount of first-lien mortgage loans,
substantially all of which are being serviced for unaffiliated persons. At
_____________, 199_, IndyMac provided servicing for approximately $______
million aggregate principal amount of first and second lien mortgage loans
originated under home equity lines of credit.
DESCRIPTION OF THE MORTGAGE LOANS
General
The Mortgage Loans were originated pursuant to loan agreements and
disclosure statements (the "Credit Line Agreements") and are secured by
mortgages or deeds of trust, which are either first or second mortgages or
deeds of trust, on Mortgaged Properties located in ____ states. The
Mortgaged Properties securing the Mortgage Loans consist primarily of
residential properties that are one- to four-family properties. See
"--Mortgage Loan Terms" below.
The Cut-off Date Pool Balance is $______________, which is equal to the
aggregate Principal Balances of the Mortgage Loans as of the Cut-off Date.
As of the Cut-off Date, the Mortgage Loans were not more than 89 days
delinquent. The average Cut-off Date Principal Balance was approximately
$__________ , the minimum Cut-off Date Principal Balance was zero, the
maximum Cut-off Date Principal Balance was $_____ , the minimum Loan Rate and
the maximum Loan Rate as of the Cut-off Date were _____% and _____% per
annum, respectively, and the weighted average Loan Rate as of the Cut-off
Date was approximately _____% per annum. As of the Cut-off Date, the
weighted average Credit Limit Utilization Rate was approximately _____%, the
minimum Credit Limit Utilization Rate was zero and the maximum Credit Limit
Utilization Rate was 100%. The "Credit Limit Utilization Rate" is determined
by dividing the Cut-off Date Principal Balance of a Mortgage Loan by the
Credit Limit of the related Credit Line Agreement. The remaining term to
scheduled maturity for the Mortgage Loans as of the Cut-off Date ranged from
_____ months to _____ months and the weighted average remaining term to
scheduled maturity was approximately _____ months. As of the Cut-off Date,
the Combined Loan-to-Value Ratio of the Mortgage Loans ranged from _____% to
_____% and the weighted average Combined Loan-to-Value Ratio was
approximately _____%. The Combined Loan-to-Value Ratio for a Mortgage Loan is
the ratio (expressed as a percentage) of (A) the sum of (i) the Credit Limit
of the Mortgage Loan and (ii) any outstanding principal balances of mortgage
loans senior to such Mortgage Loan (calculated at the date of origination of
the Mortgage Loan) to (B) the lesser of (i) the appraised value of the
related Mortgaged Property as set forth in the loan files at such date of
origination or (ii) in the case of a Mortgaged Property purchased within one
year of the origination of the related Mortgage Loan, the purchase price of
such Mortgaged Property. Credit Limits under the Mortgage Loans as of the
Cut-off Date ranged from $_____ to $_____ and averaged approximately $_____ .
The weighted average second mortgage ratio (which is the Credit Limit for the
related Mortgage Loan, provided such Mortgage Loan was in the second lien
position, divided by the sum of such Credit Limit and the outstanding
principal balance of any mortgage loan senior to the related Mortgage Loan)
was approximately _____%. As of the Cut-off Date, approximately _____% by
Cut-off Date Principal Balance of the Mortgage Loans represented first liens
on the related Mortgaged Properties, while approximately _____% of the
Mortgage Loans represented second liens. As of the Cut-off Date,
approximately _____% of the Mortgage Loans are secured by Mortgaged
Properties which are single-family residences and _____% were owner-occupied.
As of the Cut-off Date, approximately _____%, _____%, _____%, _____%, _____%
and _____% by Cut-off Date Principal Balance are located in __________,
________, __________, _______, ______ and ________), respectively.
Mortgage Loan Terms
(The Mortgage Loans bear interest at a variable rate which changes
monthly on the first business day of the related month with changes in the
applicable Index Rate. The Mortgage Loans are subject to a maximum per annum
interest rate (the
"Maximum Rate") ranging from (_____% to _____%) per annum and subject to
applicable usury limitations. As of the Cut-off Date, the weighted average
Maximum Rate was approximately _____%. See "Certain Legal Aspects of the
Loans--Applicability of Usury Laws" in the Prospectus. The daily periodic
rate on the Mortgage Loans (the "Loan Rate") is the sum of the Index Rate
plus the spread (the "Margin") which generally ranges between _____% and
_____% and had a weighted average, as of the Cut-off Date, of approximately
_____%, divided by 365 days. The "Index Rate" is based on the highest "prime
rate" published in the 'Money Rates' table of The Wall Street Journal as of
the first business day of each calendar month.)
(IndyMac) offers an introductory loan rate on home equity lines of
credit which are originated with Combined Loan-to-Value Ratios of __% and
__%. The introductory rate applies to any payments made during the first
three months after origination. After such three month period, the Loan Rate
will adjust to the Index plus the applicable Margin. As of the Cut-off Date,
approximately _____% of the Mortgage Loans by Cut-off Date Principal Balance
were subject to an introductory rate of ____% per annum.
In general, the home equity loans may be drawn upon for a period (the
"Draw Period") of either five years (which may be extendible for an
additional five years, upon (IndyMac's) approval) or three years. Home
equity loans with an initial Draw Period of five years, which constitute
approximately _____% of the Mortgage Loans by Cut-off Date Principal Balance,
are subject to a fifteen year repayment period (the "Repayment Period")
following the end of the Draw Period during which the outstanding principal
balance of the loan will be repaid in monthly installments equal to 1/180 of
the outstanding principal balance as of the end of the Draw Period. Mortgage
Loans with a Draw Period of three years, which constitute approximately
_____% of the Mortgage Loans by Cut-off Date Principal Balance, are subject
to a ten year Repayment Period following the end of the Draw Period during
which the outstanding principal balance of the loan will be paid in monthly
installments equal to 1/120 of the outstanding principal balance as of the
end of the Draw Period.
The minimum payment due during the Draw Period will be equal to the
finance charges accrued on the outstanding principal balance of the home
equity loan during the related billing period. The minimum payment due
during the repayment period will be equal to the sum of the finance charges
accrued on the outstanding principal balance of the Mortgage Loan during the
related billing period and the principal payment described above.
Set forth below is a description of certain characteristics of the
Mortgage Loans as of the Cut-off Date:
PRINCIPAL BALANCES
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-of Date Principal
Range of Principal Balances Loans Principal Balance Balance
<S> <C> <C> <C>
$_______ to $_______ . . . . . . . . . . . . . . . . $ %
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ and over . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . $100
</TABLE>
GEOGRAPHIC DISTRIBUTION(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-of Date Principal
State Loans Principal Balance Balance
<S> <C> <C> <C>
$ %
Total . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
- ----------
(1) Geographic location is determined by the address of the Mortgaged
Property securing the related Mortgage Loan.
COMBINED LOAN-TO-VALUE RATIOS(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Combined Mortgage Cut-off Date by Cut-of Date Principal
Loan-to-Value Ratios Loans Principal Balance Balance
<S> <C> <C> <C>
$_______ to $_______ . . . . . . . . . . . . . . . . $ %
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ and over . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
- ----------
(1) The ratio (expressed as a percentage) of (A) the sum of (i) the Credit
Limit of the Mortgage Loans and (ii) any outstanding principal balances
of mortgage loans senior to the Mortgage Loans (calculated at the date
of origination of the Mortgage Loans) to (B) the lesser of (i) the
appraised value of the related Mortgaged Property as set forth in loan
files at such date of origination or (ii) in the case of a Mortgaged
Property purchased within one year of the origination of the related
Mortgage Loan, the purchase price of such Mortgaged Property.
PROPERTY TYPE
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-of Date Principal
Property Type Loans Principal Balance Balance
<S> <C> <C> <C>
Single Family . . . . . . . . . . . . . . . . . . . $ %
Two- to Four-Family . . . . . . . . . . . . . . . .
Condominium . . . . . . . . . . . . . . . . . . . .
PUD . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
LIEN PRIORITY
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-of Date Principal
Lien Priority Loans Principal Balance Balance
<S> <C> <C> <C>
First Lien . . . . . . . . . . . . . . . . . . . . . $ %
Second Lien . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
LOAN RATES(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-of Date Principal
Range of Loan Rates Loans Principal Balance Balance
<S> <C> <C> <C>
$_______ to $_______ . . . . . . . . . . . . . . . . $ %
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
- ----------
(1) Approximately % of the Mortgage Loans by Cut-Off Date Principal Balance
are subject to an introductory rate of _____% per annum.
MARGIN
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-of Date Principal
Range of Margins Loans Principal Balance Balance
<S> <C> <C> <C>
$_______ to $_______ . . . . . . . . . . . . . . . . $ %
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ and over . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
CREDIT LIMIT UTILIZATION RATES
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Credit Limit Mortgage Cut-off Date by Cut-of Date Principal
Utilization Rates Loans Principal Balance Balance
<S> <C> <C> <C>
$_______ to $_______ . . . . . . . . . . . . . . . . $ %
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ and over . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
CREDIT LIMITS
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-of Date Principal
Range of Credit Limits Loans Principal Balance Balance
<S> <C> <C> <C>
$_______ to $_______ . . . . . . . . . . . . . . . . $ %
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ to $_______ . . . . . . . . . . . . . . . .
$_______ and over . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
MAXIMUM RATES
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-of Date Principal
Maximum Rates Loans Principal Balance Balance
<S> <C> <C> <C>
_______% . . . . . . . . . . . . . . . . . . . . . . $ %
_______% . . . . . . . . . . . . . . . . . . . . . .
_______% . . . . . . . . . . . . . . . . . . . . . .
_______% . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
MONTHS REMAINING TO SCHEDULED MATURITY(1)
<TABLE>
<CAPTION>
Number of Percent of Pool
Range of Months Mortgage Cut-off Date by Cut-of Date Principal
Remaining to Scheduled Maturity Loans Principal Balance Balance
<S> <C> <C> <C>
_______ to _______ . . . . . . . . . . . . . . . . . $ %
_______ to _______ . . . . . . . . . . . . . . . . .
_______ to _______ . . . . . . . . . . . . . . . . .
_______ to _______ . . . . . . . . . . . . . . . . .
_______ to _______ . . . . . . . . . . . . . . . . .
_______ to _______ . . . . . . . . . . . . . . . . .
_______ to _______ . . . . . . . . . . . . . . . . .
_______ to _______ . . . . . . . . . . . . . . . . .
_______ to _______ . . . . . . . . . . . . . . . . .
_______ to _______ . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
- ----------
(1) Assumes that the Draw Period for Mortgage Loans with five year Draw
Periods will be extended for an additional five years.
ORIGINATION YEAR
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-of Date Principal
Origination Year Loans Principal Balance Balance
<S> <C> <C> <C>
_______ . . . . . . . . . . . . . . . . . . . . . . $ %
_______ . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
DELINQUENCY STATUS
<TABLE>
<CAPTION>
Number of Percent of Pool
Mortgage Cut-off Date by Cut-of Date Principal
Number of Days Delinquent Loans Principal Balance Balance
<S> <C> <C> <C>
0 to 29 . . . . . . . . . . . . . . . . . . . . . . $ %
30 to 59 . . . . . . . . . . . . . . . . . . . . . .
60 to 89 . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . 100.00%
</TABLE>
MATURITY AND PREPAYMENT CONSIDERATIONS
The Agreement, except as otherwise described herein, provides that the
Certificateholders will be entitled to receive on each Distribution Date
distributions of principal, in the amounts described herein, until the
Certificate Principal Balance is
reduced to zero. During the Managed Amortization Period, Certificateholders
will receive amounts from Principal Collections based upon their Fixed
Allocation Percentage subject to reduction as described below. During the
Rapid Amortization Period, Certificateholders will receive amounts from
Principal Collections based solely upon their Fixed Allocation Percentage.
Because prior distributions of Principal Collections to Certificateholders
serve to reduce the Investor Floating Allocation Percentage but do not change
their Fixed Allocation Percentage, allocations of Principal Collections based
on the Fixed Allocation Percentage may result in distributions of principal
to the Certificateholders in amounts that are, in most cases, greater
relative to the declining balance of the Mortgage Loans than would be the
case if the Investor Floating Allocation Percentage were used to determine
the percentage of Principal Collections distributed to Certificateholders.
This is especially true during the Rapid Amortization Period when the
Certificateholders are entitled to receive Investor Principal Collections and
not a lesser amount. In addition, Investor Interest Collections may be
distributed as principal to Certificateholders in connection with the
Accelerated Principal Distribution Amount, if any. Moreover, to the extent
of losses allocable to the Certificateholders, Certificateholders may also
receive as payment of principal the amount of such losses either from
Investor Interest Collections or, in some instances, draws under the Policy.
The level of losses may therefore affect the rate of payment of principal on
the Certificates.
To the extent obligors make more draws than principal payments, the
Transferor Interest may grow. Because during the Rapid Amortization Period
the Certificateholders share of Principal Collections is based upon its Fixed
Allocation Percentage (without reduction), an increase in the Transferor
Interest due to additional draws may also result in Certificateholders
receiving principal at a greater rate. The Agreement permits the Transferor,
at its option, but subject to the satisfaction of certain conditions
specified in the Agreement, including the conditions described below, to
remove certain Mortgage Loans from the Trust at any time during the life of
the Trust, so long as the Transferor Interest (after giving effect to such
removal) is not less than the Minimum Transferor Interest. Such removals may
affect the rate at which principal is distributed to Certificateholders by
reducing the overall Pool Balance and thus the amount of Principal
Collections. See "Description of the Certificates--Optional Retransfers of
Mortgage Loans to the Transferor" herein.
All of the Mortgage Loans may be prepaid in full or in part at any time.
(However, Mortgage Loans secured by Mortgaged Properties in __________ are
subject to an account termination fee equal to the lesser of $___ and six
months interest on the amount prepaid, to the extent the prepaid amount
exceeds __% of the unpaid principal balance, if the account is terminated on
or before its _____ year anniversary. In addition, Mortgage Loans secured by
Mortgaged Properties in other jurisdictions may be subject to account
termination fees to the extent permitted by law. In general, such account
termination fees do not exceed $___ and do not apply to accounts terminated
subsequent to a date designated in the related Mortgage Note which, depending
on the jurisdiction, ranges between ___ months and ___ years following
origination.) The prepayment experience with respect to the Mortgage Loans
will affect the weighted average life of the Certificates.
The rate of prepayment on the Mortgage Loans cannot be predicted.
Neither the Depositor nor the Master Servicer is aware of any publicly
available studies or statistics on the rate of prepayment of such Mortgage
Loans. Generally, home equity revolving credit lines are not viewed by
borrowers as permanent financing. Accordingly, the Mortgage Loans may
experience a higher rate of prepayment than traditional first mortgage loans.
On the other hand, because the Mortgage Loans amortize as described herein,
rates of principal payment on the Mortgage Loans will generally be slower
than those of traditional fully-amortizing first mortgages in the absence of
prepayments on such Mortgage Loans. The prepayment experience of the Trust
with respect to the Mortgage Loans may be affected by a wide variety of
factors, including general economic conditions, prevailing interest rate
levels, the availability of alternative financing, homeowner mobility, the
frequency and amount of any future draws on the Credit Line Agreements and
changes affecting the deductibility for Federal income tax purposes of
interest payments on home equity credit lines. Substantially all of the
Mortgage Loans contain "due-on-sale" provisions, and, with respect to the
Mortgage Loans, the Master Servicer intends to enforce such provisions,
unless such enforcement is not permitted by applicable law. The enforcement
of a "due-on-sale" provision will have the same effect as a prepayment of the
related Mortgage Loan. See "Certain Legal Aspects of The Loans--Due-on-Sale
Clauses" in the Prospectus.
The yield to an investor who purchases the Certificates in the secondary
market at a price other than par will vary from the anticipated yield if the
rate of prepayment on the Mortgage Loans is actually different than the rate
anticipated by such investor at the time such Certificates were purchased.
Collections on the Mortgage Loans may vary because, among other things,
borrowers may make payments during any month as low as the minimum monthly
payment for such month or as high as the entire outstanding principal balance
plus accrued interest and the fees and charges thereon. It is possible that
borrowers may fail to make scheduled payments. Collections on the Mortgage
Loans may vary due to seasonal purchasing and payment habits of borrowers.
No assurance can be given as to the level of prepayments that will be
experienced by the Trust and it can be expected that a portion of borrowers
will not prepay their Mortgage Loans to any significant degree. See "Yield
and Prepayment Considerations" in the Prospectus.
POOL FACTOR AND TRADING INFORMATION
The "Pool Factor" is a seven-digit decimal which the Master Servicer
will compute monthly expressing the Certificate Principal Balance of the
Certificates as of each Distribution Date (after giving effect to any
distribution of principal on such Distribution Date) as a proportion of the
Original Certificate Principal Balance. On the Closing Date, the Pool Factor
will be 1.0000000. See "Description of the Certificates--Distributions on
the Certificates" herein. Thereafter, the Pool Factor will decline to reflect
reductions in the related Certificate Principal Balance resulting from
distributions of principal to the Certificates and the Invested Amount of any
unreimbursed Liquidation Loss Amounts.
Pursuant to the Agreement, monthly reports concerning the Invested
Amount, the Pool Factor and various other items of information will be made
available to the Certificateholders. In addition, within 60 days after the
end of each calendar year, beginning with the 199_ calendar year, information
for tax reporting purposes will be made available to each person who has been
a Certificateholder of record at any time during the preceding calendar year.
See "Description of the Certificates--Book-Entry Certificates" and "--Reports
to Certificateholders" herein.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. The form of
the Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus Supplement and the Prospectus is a part. The following
summaries describe certain provisions of the Agreement. The summaries do not
purport to be complete and are subject to, and are qualified in their
entirety by reference to, all of the provisions of the Agreement. Wherever
particular sections or defined terms of the Agreement are referred to, such
sections or defined terms are hereby incorporated herein by reference.
General
The Certificates will be issued in denominations of $1,000 and multiples
of $1 in excess thereof and will evidence specified undivided interests in
the Trust. The property of the Trust will consist of, to the extent provided
in the Agreement: (i) each of the Mortgage Loans that from time to time is
subject to the Agreement; (ii) collections on the Mortgage Loans received
after the Cut-off Date (exclusive of payments in respect of accrued interest
due on or prior to the Cut-off Date or due in the month of _____ ); (iii)
Mortgaged Properties relating to the Mortgage Loans that are acquired by
foreclosure or deed in lieu of foreclosure; (iv) the Collection Account and
the Distribution Account (excluding net earnings thereon); (v) the Policy;
(vi) the Spread Account (for the benefit of the Certificate Insurer and the
Certificateholders); and (vii) an assignment of the Depositor's rights under
the Purchase Agreement. Definitive Certificates (as defined below), if
issued, will be transferable and exchangeable at the corporate trust office
of the Trustee, which will initially act as Certificate Registrar. See
"--Book-Entry Certificates" below. No service charge will be made for any
registration of exchange or transfer of Certificates, but the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge.
The aggregate undivided interest in the Trust represented by the
Certificates as of the Closing Date will equal $ _____ (the "Original
Invested Amount"), which represents __% of the Cut-off Date Pool Balance.
The "Original Certificate Principal Balance" will equal $ _____ . Following
the Closing Date, the "Invested Amount" with respect to any Distribution Date
will be an amount equal to the Original Invested Amount minus (i) the amount
of Investor Principal Collections previously distributed to
Certificateholders, and minus (ii) an amount equal to the product of the
Investor Floating Allocation Percentage and the Liquidation Loss Amounts
(each as defined herein). The principal amount of the outstanding
Certificates (the "Certificate Principal Balance") on any Distribution Date
is equal to the Original Certificate Principal Balance minus the aggregate of
amounts actually distributed as principal to the Certificateholders. See
"--Distributions on the Certificates" below. Each Certificate represents the
right to receive payments of interest at the Certificate Rate and payments of
principal as described below.
The Transferor will own the remaining undivided interest in the Mortgage
Loans (the "Transferor Interest"), which is equal to the Pool Balance less
the Invested Amount. The Transferor Interest will initially equal $, which
represents _% of the Cut-off Date Pool Balance. The Transferor as of any
date is the owner of the Transferor Interest which initially will be the
Seller. In general, the Pool Balance will vary each day as principal is paid
on the Mortgage Loans, liquidation losses are incurred, Additional Balances
are drawn down by borrowers and Mortgage Loans are transferred to the Trust.
The Transferor has the right to sell or pledge the Transferor Interest
at any time, provided (i) the Rating Agencies (as defined herein) have
notified the Transferor and the Trustee in writing that such action will not
result in the reduction or withdrawal of the ratings assigned to the
Certificates, and (ii) certain other conditions specified in the Agreement
are satisfied.
Book-Entry Certificates
The Certificates will initially be issued in book-entry form. Persons
acquiring beneficial ownership interests in the Certificates ("Certificate
Owners") may elect to hold their Certificate interests through The Depository
Trust Company ("DTC"), in the United States, or Centrale de Livraison de
Valeurs Mobilieres S.A. ("CEDEL") or the Euroclear System ("Euroclear"), in
Europe. Transfers within DTC, CEDEL or Euroclear, as the case may be, will be
in accordance with the usual rules and operating procedures of the relevant
system. So long as the Certificates are Book-Entry Certificates (as defined
herein), such Certificates will be evidenced by one or more Certificates
registered in the name of Cede & Co. ("Cede"), as the nominee of DTC or one
of the relevant depositaries (collectively, the "European Depositaries").
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and counterparties holding directly or indirectly
through CEDEL or Euroclear, on the other, will be effected in DTC through
Citibank N.A. ("Citibank") or The Chase Manhattan Bank ("Chase"), the
relevant depositaries of CEDEL or Euroclear, respectively, and each a
participating member of DTC. The Certificates will initially be registered
in the name of Cede. The interests of the Certificateholders will be
represented by book entries on the records of DTC and participating members
thereof. No Certificate Owner will be entitled to receive a definitive
certificate representing such person's interest, except in the event that
Definitive Certificates (as defined herein) are issued under the limited
circumstances described herein. All references in this Prospectus Supplement
to any Certificates reflect the rights of Certificate Owners only as such
rights may be exercised through DTC and its participating organizations for
so long as such Certificates are held by DTC. See "Risk Factors--Book-Entry
Certificates", "Description of the Certificates--Book-Entry Certificates"
herein and "Annex I" hereto.
Assignment of Mortgage Loans
At the time of issuance of the Certificates, the Depositor will transfer
to the Trust all of its right, title and interest in and to each Mortgage
Loan (including any Additional Balances arising in the future), related
Credit Line Agreements, mortgages and other related documents (collectively,
the "Related Documents"), including all collections received on or with
respect to each such Mortgage Loan after the Cut-off Date (exclusive of
payments in respect of accrued interest due on or prior to the Cut-off Date
or due in the month of _____ ). The Trustee, concurrently with such
transfer, will deliver the Certificates to the Depositor and the Transferor
Certificate (as defined in the Agreement) to the Transferor. Each Mortgage
Loan transferred to the Trust will be identified on a schedule (the "Mortgage
Loan Schedule") delivered to the Trustee pursuant to the Agreement. Such
schedule will include information as to the Cut-off Date Principal Balance of
each Mortgage Loan, as well as information with respect to the Loan Rate.
Within 90 days of an Assignment Event, the Trustee will review the
Mortgage Loans and the Related Documents and if any Mortgage Loan or Related
Document is found to be defective in any material respect and such defect is
not cured within 90 days following notification thereof to the Seller and the
Depositor by the Trustee, the Seller will be obligated to accept the transfer
of such Mortgage Loan from the Trust. Upon such transfer, the Principal
Balance of such Mortgage Loan will be deducted from the Pool Balance, thus
reducing the amount of the Transferor Interest. If the deduction would cause
the Transferor Interest to become less than the Minimum Transferor Interest
at such time (a "Transfer Deficiency"), the Seller will be obligated to
either substitute an Eligible Substitute Mortgage Loan or make a deposit into
the Collection Account in the amount (the "Transfer Deposit Amount") equal to
the amount by which the Transferor Interest would be reduced to less than the
Minimum Transferor Interest at such time. Any such deduction, substitution
or deposit, will be considered a payment in full of such Mortgage Loan. Any
Transfer Deposit Amount will be treated as a Principal Collection.
Notwithstanding the foregoing, however, prior to all required deposits to the
Collection Account being made no such transfer shall be considered to have
occurred unless such deposit is actually made. The obligation of the Seller
to accept a transfer of a Defective Mortgage Loan is the sole remedy
regarding any defects in the Mortgage Loans and Related Documents available
to the Trustee or the Certificateholders.
An "Eligible Substitute Mortgage Loan" is a mortgage loan substituted by
the Depositor for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Principal Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Principal Balance), not __% more or less than the Transfer
Deficiency relating to such Defective Mortgage Loan; (ii) have a Loan Rate
not less than the Loan Rate of the Defective Mortgage Loan and not more than
_% in excess of the Loan Rate of such Defective Mortgage Loan; (iii) have a
Loan Rate based on the same Index with adjustments to such Loan Rate made on
the same Interest Rate Adjustment Date as that of the Defective Mortgage
Loan; (iv) have a Margin that is not less than the Margin of the Defective
Mortgage Loan and not more than ___ basis points higher than the Margin for
the Defective Mortgage Loan; (v) have a mortgage of the same or higher level
of priority as the mortgage relating to the Defective Mortgage Loan; (vi)
have a remaining term to maturity not more than ___ months earlier and not
more than __ months later than the remaining term to maturity of the
Defective Mortgage Loan; (vii) comply with each representation and warranty
as to the Mortgage Loans set forth in the Agreement (deemed to be made as of
the date of substitution); (viii) in general, have an original Combined
Loan-to-Value Ratio not greater than that of the Defective Mortgage Loan; and
(ix) satisfy certain other conditions specified in the Agreement. To the
extent the Principal Balance of an Eligible Substitute Mortgage Loan is less
than the Principal Balance of the related Defective Mortgage Loan and to the
extent that the Transferor Interest would be reduced below the Minimum
Transferor Interest, the Seller will be required to make a deposit to the
Collection Account equal to such difference.
The Seller will make certain representations and warranties as to the
accuracy in all material respects of certain information furnished to the
Trustee with respect to each Mortgage Loan (e.g., Cut-off Date Principal
Balance and the Loan Rate). In addition, the Seller will represent and
warrant on the Closing Date that at the time of transfer to the Depositor,
the Seller has transferred or assigned all of its rights, title and interest
in each Mortgage Loan and the Related Documents, free of any lien (subject to
certain exceptions). Upon discovery of a breach of any such representation
and warranty which materially and adversely affects the interests of the
Certificateholders or the Certificate Insurer in the related Mortgage Loan
and Related Documents, the Seller will have a period of 90 days after
discovery or notice of the breach to effect a cure. If the breach cannot be
cured within the 90-day period, the Seller will be obligated to repurchase or
substitute a similar mortgage loan for such Mortgage Loan; provided, however,
that the Seller will not be obligated to make any such repurchase or
substitution (or cure such breach) if such breach constitutes fraud in the
origination of the affected Mortgage Loan and the Seller did not have
knowledge of such fraud. The same procedure and limitations that are set
forth in the second preceding paragraph for the transfer of Defective
Mortgage Loans will apply to the transfer of a Mortgage Loan that is required
to be transferred because of such breach of a representation or warranty in
the Agreement that materially and adversely affects the interests of the
Certificateholders.
Mortgage Loans required to be transferred to the Seller as described in
the preceding paragraphs are referred to as "Defective Mortgage Loans."
Pursuant to the Agreement, the Master Servicer will service and
administer the Mortgage Loans as more fully set forth above.
Amendments to Credit Line Agreements
Subject to applicable law, the Master Servicer may change the terms of
the Credit Line Agreements at any time provided that such changes (i) do not
adversely affect the interest of the Certificateholders or the Certificate
Insurer, and (ii) are consistent with prudent business practice. In
addition, the Agreement permits the Master Servicer, within certain
limitations described therein, to increase the Credit Limit of the related
Mortgage Loan or reduce the Margin for such Mortgage Loan.
Optional Transfers of Mortgage Loans to the Transferor
Subject to the conditions specified in the Agreement, on any
Distribution Date the Transferor may, but shall not be obligated to, remove
on such Distribution Date (the "Transfer Date") from the Trust, certain
Mortgage Loans without notice to the Certificateholders. The Transferor is
permitted to designate the Mortgage Loans to be removed. Mortgage Loans so
designated will only be removed upon satisfaction of certain conditions
specified in the Agreement, including: (i) the Transferor Interest as of such
Transfer Date (after giving effect to such removal) exceeds the Minimum
Transferor Interest; (ii) the Transferor shall have delivered to the Trustee
a "Mortgage Loan Schedule" containing a list of all Mortgage Loans remaining
in the Trust after such removal; (iii) the Transferor shall represent and
warrant that no selection procedures which the Transferor reasonably believes
are adverse to the interests of the Certificateholders or the Certificate
Insurer were used by the Transferor in selecting such Mortgage Loans; (iv) in
connection with the first such retransfer of Mortgage Loans, the Rating
Agencies shall have been notified of the proposed transfer and prior to the
Transfer Date shall not have notified the Transferor in writing that such
transfer would result in a reduction or withdrawal of the ratings assigned to
the Certificates without regard to the Policy; and (v) the Transferor shall
have delivered to the Trustee and the Certificate Insurer an officer's
certificate confirming the conditions set forth in clauses (i) through (iii)
above.
As of any date of determination, the "Minimum Transferor Interest" is an
amount equal to the lesser of (a) _% of the Pool Balance on such date and (b)
the Transferor Interest as of the Closing Date.
Payments on Mortgage Loans; Deposits to Collection Account
The Trustee shall establish and maintain on behalf of the Master
Servicer an account (the "Collection Account") for the benefit of the
Certificateholders and the Transferor, as their interests may appear. The
Collection Account will be an Eligible Account (as defined herein). Subject
to the investment provision described in the following paragraphs, within two
days of receipt by the Master Servicer of amounts in respect of the Mortgage
Loans (excluding amounts representing administrative charges, annual fees,
taxes, assessments, credit insurance charges, insurance proceeds to be
applied to the restoration or repair of a Mortgaged Property or similar
items), the Master Servicer will deposit such amounts in the Collection
Account. Amounts so deposited may be invested in Eligible Investments (as
described in the Agreement) maturing no later than one Business Day prior to
the date on which the amount on deposit therein is required to be deposited
in the Collection Account or on such Distribution Date if approved by the
Rating Agencies and the Certificate Insurer. Not later than the third
Business Day prior to each Distribution Date (the "Determination Date"), the
Master Servicer will notify the Trustee of the amount of such deposit to be
included in funds available for the related Distribution Date.
An "Eligible Account" is (i) an account that is maintained with a
depository institution whose debt obligations at the time of any deposit
therein have the highest short-term debt rating by the Rating Agencies, (ii)
one or more accounts with a depository institution having a minimum long-term
unsecured debt rating of "____" by _______ and "____" by ___, which accounts
are fully insured by either the Savings Association Insurance Fund ("SAIF")
or the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation established by such fund, (iii) a segregated trust account
maintained with the Trustee or an Affiliate of the Trustee in its fiduciary
capacity or (iv) otherwise acceptable to each Rating Agency and the
Certificate Insurer as evidenced by a letter from each Rating Agency and the
Certificate Insurer to the Trustee, without reduction or withdrawal of their
then current ratings of the Certificates.
Eligible Investments are specified in the Agreement and are limited to
investments which meet the criteria of the Rating Agencies from time to time
as being consistent with their then current ratings of the Certificates.
Allocations and Collections
All collections on the Mortgage Loans will generally be allocated in
accordance with the Credit Line Agreements between amounts collected in
respect of interest and amounts collected in respect of principal. As to any
Distribution Date, "Interest Collections" will be equal to the amounts
collected during the related Collection Period, including such portion of Net
Liquidation Proceeds allocated to interest pursuant to the terms of the
Credit Line Agreements less Servicing Fees for the related Collection Period.
As to any Distribution Date, "Principal Collections" will be equal to
the sum of (i) the amounts collected during the related Collection Period,
including such portion of Net Liquidation Proceeds allocated to principal
pursuant to the terms of the Credit Line Agreements and (ii) any Transfer
Deposit Amounts. "Net Liquidation Proceeds" with respect to a Mortgage Loan
are equal to the Liquidation Proceeds, reduced by related expenses, but not
including the portion, if any, of such amount that exceeds the Principal
Balance of the Mortgage Loan plus accrued and unpaid interest thereon to the
end of the Collection Period during which such Mortgage Loan became a
Liquidated Mortgage Loan. "Liquidation Proceeds" are the proceeds (excluding
any amounts drawn on the Policy) received in connection with the liquidation
of any Mortgage Loan, whether through trustee's sale, foreclosure sale or
otherwise.
With respect to any Distribution Date, the portion of Interest
Collections allocable to the Certificates ("Investor Interest Collections")
will equal the product of (a) Interest Collections for such Distribution Date
and (b) the Investor Floating Allocation Percentage. With respect to any
Distribution Date, the "Investor Floating Allocation Percentage" is the
percentage equivalent of a fraction determined by dividing the Invested
Amount at the close of business on the preceding Distribution Date (or the
Closing Date in the case of the first Distribution Date) by the Pool Balance
at the beginning of the related Collection Period. The remaining amount of
Interest Collections will be allocated to the Transferor Interest.
Principal Collections will be allocated between the Certificateholders
and the Transferor ("Investor Principal Collections" and "Transferor
Principal Collections", respectively) as described herein.
The Trustee will deposit any amounts drawn under the Policy into the
Collection Account.
With respect to any date, the "Pool Balance" will be equal to the
aggregate of the Principal Balances of all Mortgage Loans as of such date.
The Principal Balance of a Mortgage Loan (other than a Liquidated Mortgage
Loan) on any day is equal to the Cut-off Date Principal Balance thereof, plus
(i) any Additional Balances in respect of such Mortgage Loan minus (ii) all
collections credited against the Principal Balance of such Mortgage Loan in
accordance with the related Credit Line Agreement prior to such day. The
Principal Balance of a Liquidated Mortgage Loan after final recovery of
related Liquidation Proceeds shall be zero.
Distributions on the Certificates
Beginning with the first Distribution Date (which will occur on
__________, 199_), distributions on the Certificates will be made by the
Trustee or the Paying Agent on each Distribution Date to the persons in whose
names such Certificates are registered at the close of business on the day
prior to each Distribution Date or, if the Certificates are no longer
Book-Entry Certificates, at the close of business on the last day of the
month preceding such Distribution Date (the "Record Date"). The term
"Distribution Date" means the fifteenth day of each month or, if such day is
not a Business Day, then the next succeeding Business Day. Distributions
will be made by check or money order mailed (or upon the request of a
Certificateholder owning Certificates having denominations aggregating at
least $_________, by wire transfer or otherwise) to the address of the person
entitled thereto (which, in the case of Book-Entry Certificates, will be DTC
or its nominee) as it appears on the Certificate Register in amounts
calculated as described herein on the Determination Date. However, the final
distribution in respect of the Certificates will be made only upon
presentation and surrender thereof at the office or the agency of the Trustee
specified in the notice to Certificateholders of such final distribution.
For purposes of the Agreement, a "Business Day" is any day other
than (i) a Saturday or Sunday or (ii) a day on which banking institutions in
New York State are required or authorized by law to be closed.
Application of Interest Collections. On each Distribution Date, the
Trustee or the Paying Agent will apply the Investor Interest Collections in
the following manner and order of priority:
(i) as payment to the Trustee for its fee for services rendered
pursuant to the Agreement;
(ii) as payment for the premium for the Policy;
(iii) as payment for the accrued interest due and any overdue
accrued interest (with interest thereon to the extent permitted by law)
on the Certificate Principal Balance of the Certificates;
(iv) to pay Certificateholders the Investor Loss Amount for such
Distribution Date;
(v) as payment for any Investor Loss Amount for a previous
Distribution Date that was not previously (a) funded by Investor
Interest Collections, (b) absorbed by the Overcollateralization Amount,
(c) funded by amounts on deposit in the Spread Account or (d) funded by
draws on the Policy;
(vi) to reimburse prior draws made from the Policy (with interest
thereon);
(vii) to pay principal on the Certificates until the Invested
Amount exceeds the Certificate Principal Balance by the Required
Overcollateralization Amount (such amount so paid, the "Accelerated
Principal Distribution Amount");
(viii) any other amounts required to be deposited in an account for
the benefit of the Certificate Insurer and the Certificateholders or
owed to the Certificate Insurer pursuant to the Insurance Agreement;
(ix) certain amounts that may be required to be paid to the Master
Servicer pursuant to the Agreement; and
(x) to the Transferor to the extent permitted as described herein.
Payments to Certificateholders pursuant to clause (iii) will be interest
payments on the Certificates. Payments to Certificateholders pursuant to
clauses (iv), (v) and (vii) will be principal payments on the Certificates
and will therefore reduce the Certificate Principal Balance, however,
payments pursuant to clause (vii) will not reduce the Invested Amount. The
Accelerated Principal Distribution Amount is not guaranteed by the Policy.
To the extent that Investor Interest Collections are applied to pay the
interest on the Certificates, Investor Interest Collections may be
insufficient to cover Investor Loss Amounts. If such insufficiency results
in the Certificate Principal Balance exceeding the Invested Amount, a draw
will be made on the Policy in accordance with the terms of the Policy.
The "Required Overcollateralization Amount" shall be an amount set forth
in the Agreement. "Liquidation Loss Amount" means with respect to any
Liquidated Mortgage Loan, the unrecovered Principal Balance thereof during
the Collection Period in which such Mortgage Loan became a Liquidated
Mortgage Loan, after giving effect to the Net Liquidation Proceeds in
connection therewith. The "Investor Loss Amount" shall be the product of the
Investor Floating Allocation Percentage and the Liquidation Loss Amount for
such Distribution Date.
A "Liquidated Mortgage Loan" means, as to any Distribution Date, any
Mortgage Loan in respect of which the Master Servicer has determined, based
on the servicing procedures specified in the Agreement, as of the end of the
preceding Collection Period that all Liquidation Proceeds which it expects to
recover with respect to the disposition of the related Mortgaged Property
have been recovered. The Investor Loss Amount will be allocated to the
Certificateholders.
As to any Distribution Date other than the first Distribution Date, the
"Collection Period" is the calendar month preceding each Distribution Date.
As to the first Distribution Date, the "Collection Period" is the period
beginning after the Cut-off Date and ending on the last day of
_______________ 199_.
Interest will be distributed on each Distribution Date at the
Certificate Rate for the related Interest Period (as defined below). The
"Certificate Rate" for a Distribution Date will generally equal the sum of
((a) LIBOR, determined as specified herein, as of the second LIBOR Business
Day prior to the immediately preceding Distribution Date (or as of two LIBOR
Business Days prior to the Closing Date, in the case of the first
Distribution Date) plus (b) ____% per annum.) Notwithstanding the foregoing,
in no event will the amount of interest required to be distributed in respect
of the Certificates on any Distribution Date exceed a rate equal to the
weighted average of the Loan Rates (net of the Servicing Fee Rate, the fee
payable to the Trustee
and the rate at which the premium payable to the Certificate Insurer is
calculated) weighted on the basis of the daily balance of each Mortgage Loan
during the related billing cycle prior to the Collection Period relating to
such Distribution Date.
Interest on the Certificates in respect of any Distribution Date will
accrue on the Certificate Principal Balance from the preceding Distribution
Date (or in the case of the first Distribution Date, from the date of the
initial issuance of the Certificates (the "Closing Date")) through the day
preceding such Distribution Date (each such period, an "Interest Period") on
the basis of the actual number of days in the Interest Period and a 360-day
year. Interest payments on the Certificates will be funded from Investor
Interest Collections and, if necessary, from draws on the Policy.
(Calculation of the LIBOR Rate. On each Distribution Date, LIBOR shall
be established by the Trustee and as to any Interest Period, LIBOR will equal
the rate for United States dollar deposits for one month which appears on the
Telerate Screen Page 3750 as of 11:00 A.M., London time, on the second LIBOR
Business Day prior to the first day of such Interest Period. "Telerate
Screen Page 3750" means the display designated as page 3750 on the Telerate
Service (or such other page as may replace page 3750 on that service for the
purpose of displaying London interbank offered rates of major banks). If
such rate does not appear on such page (or such other page as may replace
that page on that service, or if such service is no longer offered, such
other service for displaying LIBOR or comparable rates as may be selected by
the Depositor after consultation with the Trustee), the rate will be the
Reference Bank Rate. The "Reference Bank Rate" will be determined on the
basis of the rates at which deposits in U.S. Dollars are offered by the
reference banks (which shall be three major banks that are engaged in
transactions in the London interbank market, selected by the Depositor after
consultation with the Trustee) as of 11:00 A.M., London time, on the day that
is two LIBOR Business Days prior to the immediately preceding Distribution
Date to prime banks in the London interbank market for a period of one month
in amounts approximately equal to the principal amount of the Certificates
then outstanding. The Trustee will request the principal London office of
each of the reference banks to provide a quotation of its rate. If at least
two such quotations are provided, the rate will be the arithmetic mean of the
quotations. If on such date fewer than two quotations are provided as
requested, the rate will be the arithmetic mean of the rates quoted by one or
more major banks in New York City, selected by the Depositor after
consultation with the Trustee, as of 11:00 A.M., New York City time, on such
date for loans in U.S. Dollars to leading European banks for a period of one
month in amounts approximately equal to the principal amount of the
Certificates then outstanding. If no such quotations can be obtained, the
rate will be LIBOR for the prior Distribution Date. "LIBOR Business Day"
means any day other than (i) a Saturday or a Sunday or (ii) a day on which
banking institutions in the State of New York or in the city of London,
England are required or authorized by law to be closed.)
Transferor Collections. Collections allocable to the Transferor
Interest that are not distributed to Certificateholders will be distributed
to the Transferor only to the extent that such distribution will not reduce
the amount of the Transferor Interest as of the related Distribution Date
below the Minimum Transferor Interest. Amounts not distributed to the
Transferor because of such limitations will be retained in the Collection
Account until the Transferor Interest exceeds the Minimum Transferor
Interest, at which time such excess shall be released to the Transferor. If
any such amounts are still retained in the Collection Account upon the
commencement of the Rapid Amortization Period, such amounts will be paid to
the Certificateholders as a reduction of the Certificate Principal Balance.
Overcollateralization. The distribution of the aggregate Accelerated
Principal Distribution Amount, if any, to Certificateholders may result in
the Invested Amount being greater than the Certificate Principal Balance,
thereby creating overcollateralization. The Overcollateralization Amount, if
any, will be available to absorb any Investor Loss Amount that is not covered
by Investor Interest Collections.
Distributions of Principal Collections. For the period beginning on the
first Distribution Date and, unless a Rapid Amortization Event shall have
earlier occurred, ending on the Distribution Date in ______________ 20__ (the
"Managed Amortization Period"), the amount of Principal Collections payable
to Certificateholders as of each Distribution Date during the Managed
Amortization Period will equal, to the extent funds are available therefor,
the Scheduled Principal Collections Distribution Amount for such Distribution
Date. On any Distribution Date during the Managed Amortization Period, the
"Scheduled Principal Collections Distribution Amount" shall equal the lesser
of (i) the Maximum Principal Payment (as defined herein) and (ii) the
Alternative Principal Payment (as defined herein). With respect to any
Distribution Date, the "Maximum Principal Payment" will equal the product of
the Investor Fixed Allocation Percentage and Principal Collections for such
Distribution Date. With respect to any Distribution Date, the "Alternative
Principal Payment" will equal the greater of (x) 0___% of the Certificate
Principal Balance immediately prior to such Distribution Date and (y) the
amount, but not less than zero, of Principal Collections for such
Distribution Date less the aggregate of Additional Balances created during
the related Collection Period.
Beginning with the first Distribution Date following the end of the
Managed Amortization Period, the amount of Principal Collections payable to
Certificateholders on each Distribution Date will be equal to the Maximum
Principal Payment.
The amount of Principal Collections to be distributed to
Certificateholders on the first Distribution Date will reflect Principal
Collections and Additional Balances during the first Collection Period which
is the period beginning after the Cut-off Date through the last day of
__________ 199_.
Distributions of Principal Collections based upon the Investor Fixed
Allocation Percentage may result in distributions of principal to
Certificateholders in amounts that are greater relative to the declining Pool
Balance than would be the case if the Investor Floating Allocation Percentage
were used to determine the percentage of Principal Collections distributed in
respect of the Invested Amount. Principal Collections not allocated to the
Certificateholders will be allocated to the Transferor Interest. The
aggregate distributions of principal to the Certificateholders will not
exceed the Original Certificate Principal Balance.
In addition, to the extent of funds available therefor (including funds
available under the Policy), on the Distribution Date in ____________ 20__,
Certificateholders will be entitled to receive as a payment of principal an
amount equal to the outstanding Certificate Principal Balance.
The Paying Agent. The Paying Agent shall initially be the Trustee,
together with any successor thereto in such capacity (the "Paying Agent").
The Paying Agent shall have the revocable power to withdraw funds from the
Collection Account for the purpose of making distributions to the
Certificateholders.
Rapid Amortization Events
As described above, the Managed Amortization Period will continue
through the Distribution Date in 20 , unless a Rapid Amortization Event
occurs prior to such date in which case the Rapid Amortization Period will
commence prior to such date. "Rapid Amortization Event" refers to any of the
following events:
(a) failure on the part of the Seller (i) to make a payment or
deposit required under the Agreement within three Business Days after
the date such payment or deposit is required to be made or (ii) to
observe or perform in any material respect any other covenants or
agreements of the Seller set forth in the Agreement, which failure
continues unremedied for a period of 60 days after written notice;
(b) any representation or warranty made by the Seller in the
Agreement proves to have been incorrect in any material respect when
made and continues to be incorrect in any material respect for a period
of 60 days after written notice and as a result of which the interests
of the Certificateholders are materially and adversely affected;
provided, however, that a Rapid Amortization Event shall not be deemed
to occur if the Seller has purchased or made a substitution for the
related Mortgage Loan or Mortgage Loans if applicable during such period
(or within an additional 60 days with the consent of the Trustee) in
accordance with the provisions of the Agreement;
(c) the occurrence of certain events of bankruptcy, insolvency or
receivership relating to the Transferor; or
(d) the Trust becomes subject to regulation by the Securities and
Exchange Commission as an investment company within the meaning of the
Investment Company Act of 1940, as amended.
In the case of any event described in clause (a) or (b), a Rapid
Amortization Event will be deemed to have occurred only if, after the
applicable grace period, if any, described in such clauses, either the
Trustee or Certificateholders holding Certificates evidencing more than 51%
of the Percentage Interests or the Certificate Insurer (so long as there is
no default by the Certificate Insurer in the performance of its obligations
under the Policy), by written notice to the Depositor and the Master Servicer
(and to the Trustee, if given by the Certificateholders) declare that a Rapid
Amortization Event has occurred as of the date of such notice. In the case
of any event described in clause (c) or (d), a Rapid Amortization Event will
be deemed to have occurred without any notice or other action on the part of
the Trustee or the Certificateholders immediately upon the occurrence of such
event.
In addition to the consequences of a Rapid Amortization Event discussed
above, if the Transferor voluntarily files a bankruptcy petition or goes into
liquidation or any person is appointed a receiver or bankruptcy trustee of
the Transferor, on the day of any such filing or appointment no further
Additional Balances will be transferred to the Trust, the Transferor will
immediately cease to transfer Additional Balances to the Trust and the
Transferor will promptly give notice to the Trustee of any such filing or
appointment. Within 15 days, the Trustee will publish a notice of the
liquidation or the filing or appointment stating that the Trustee intends to
sell, dispose of or otherwise liquidate the Mortgage Loans in a commercially
reasonable manner and to the best of its ability. Unless otherwise
instructed within a specified period by Certificateholders representing
undivided interests aggregating more than 51% of the aggregate principal
amount of the Certificates, the Trustee will sell, dispose of or otherwise
liquidate the Mortgage Loans in a commercially reasonable manner and on
commercially reasonable terms. Any proceeds will be treated as collections
allocable to the Certificateholders and the Investor Fixed Allocation
Percentage of such remaining proceeds and will be distributed to the
Certificateholders on the date such proceeds are received
(the "Dissolution Distribution Date"). If the portion of such proceeds
allocable to the Certificateholders are not sufficient to pay in full the
remaining amount due on the Certificates, the Policy will cover such
shortfall.
Notwithstanding the foregoing, if a conservator, receiver or
trustee-in-bankruptcy is appointed for the Transferor and no Rapid
Amortization Event exists other than such conservatorship, receivership or
insolvency of the Transferor, the conservator, receiver or
trustee-in-bankruptcy may have the power to prevent the commencement of the
Rapid Amortization Period or the sale of Mortgage Loans described above.
The Policy
(On or before the Closing Date, the Policy will be issued by the
Certificate Insurer pursuant to the provisions of the Agreement and the
Insurance and Indemnity Agreement (the "Insurance Agreement") to be dated as
of ____________, 199_, among the Seller, the Depositor, the Master Servicer
and the Certificate Insurer.
The Policy will irrevocably and unconditionally guarantee payment on
each Distribution Date to the Trustee for the benefit of the
Certificateholders the full and complete payment of (i) the Guaranteed
Principal Distribution Amount (as defined herein) with respect to the
Certificates for such Distribution Date and (ii) accrued and unpaid interest
due on the Certificates (together, the "Guaranteed Distributions"), with such
Guaranteed Distributions having been calculated in accordance with the
original terms of the Certificates or the Agreement except for amendments or
modifications to which the Certificate Insurer has given its prior written
consent. The effect of the Policy is to guarantee the timely payment of
interest on, and the ultimate payment of the principal amount of, all of the
Certificates.
The "Guaranteed Principal Distribution Amount" shall be the amount, if
any, by which the Certificate Principal Balance (after giving effect to all
other amounts distributable and allocable to principal on the Certificates)
exceeds the Invested Amount as of such Distribution Date (after giving effect
to all other amounts distributable and allocable to principal on the
Certificates for such Distribution Date). In addition, the Policy will
guarantee the payment of the outstanding Certificate Principal Balance on the
Distribution Date in ______________ 20__ (after giving effect to all other
amounts distributable and allocable to principal on such Distribution Date).
In accordance with the Agreement, the Trustee will be required to
establish and maintain an account (the "Spread Account") for the benefit of
the Certificate Insurer and the Certificateholders. The Trustee shall
deposit the amounts into the Spread Account as required by the Agreement.
Payment of claims on the Policy will be made by the Certificate Insurer
following Receipt by the Certificate Insurer of the appropriate notice for
payment on the later to occur of (i) 12:00 noon, New York City time, on the
second Business Day following Receipt of such notice for payment and (ii)
12:00 noon, New York City time, on the relevant Distribution Date.
If payment of any amount guaranteed by the Certificate Insurer pursuant
to the Policy is avoided as a preference payment under applicable bankruptcy,
insolvency, receivership or similar law, the Certificate Insurer will pay
such amount out of the funds of the Certificate Insurer on the later of (a)
the date when due to be paid pursuant to the Order referred to below or (b)
the first to occur of (i) the fourth Business Day following Receipt by the
Certificate Insurer from the Trustee of (A) a certified copy of the order
(the "Order") of the court or other governmental body which exercised
jurisdiction to the effect that the Certificateholder is required to return
the amount of any Guaranteed Distributions distributed with respect to the
Certificates during the term of the related Policy because such distributions
were avoidable preference payments under applicable bankruptcy law, (B) a
certificate of the Certificateholder that the Order has been entered and is
not subject to any stay and (C) an assignment duly executed and delivered by
the Certificateholder, in such form as is reasonably required by the
Certificate Insurer and provided to the Certificateholder by the Certificate
Insurer, irrevocably assigning to the Certificate Insurer all rights and
claims of the Certificateholder relating to or arising under the Certificates
against the debtor which made such preference payment or otherwise with
respect to such preference payment, or (ii) the date of Receipt by the
Certificate Insurer from the Trustee of the items referred to in clauses (A),
(B) and (C) above if, at least four Business Days prior to such date of
Receipt, the Certificate Insurer shall have Received written notice from the
Trustee that such items were to be delivered on such date and such date was
specified in such notice. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
and not to the Trustee or any Certificateholder directly (unless a
Certificateholder has previously paid such amount to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
in which case such payment shall be disbursed to the Trustee for distribution
to such Certificateholder upon proof of such payment reasonably satisfactory
to the Certificate Insurer).
The terms "Receipt" and "Received", with respect to the Policy, mean
actual delivery to the Certificate Insurer and to its fiscal agent appointed
by the Certificate Insurer at its option, if any, prior to 12:00 noon, New
York City time, on a Business Day; delivery either on a day that is not a
Business Day or after 12:00 noon, New York City time, shall be deemed to be
Receipt on the next succeeding Business Day. If any notice or certificate
given under the Policy by the Trustee is not in
proper form or is not properly completed, executed or delivered it shall be
deemed not to have been Received, and the Certificate Insurer or the fiscal
agent shall promptly so advise the Trustee and the Trustee may submit an
amended notice.
Under the Policy, "Business Day" means any day other than (i) a Saturday
or Sunday or (ii) a day on which banking institutions in The City of New
York, New York are authorized or obligated by law or executive order to be
closed.
The Certificate Insurer's obligations under the Policy in respect of
Guaranteed Distributions shall be discharged to the extent funds are
transferred to the Trustee as provided in the Policy, whether or not such
funds are properly applied by the Trustee.
The Certificate Insurer shall be subrogated to the rights of each
Certificateholder to receive payments of principal and interest, as
applicable, with respect to distributions on the Certificates to the extent
of any payment by the Certificate Insurer under the Policy. To the extent
the Certificate Insurer makes Guaranteed Distributions, either directly or
indirectly (as by paying through the Trustee), to the Certificateholders, the
Certificate Insurer will be subrogated to the rights of the
Certificateholders, as applicable, with respect to such Guaranteed
Distributions, shall be deemed to the extent of the payments so made to be a
registered Certificateholder for purposes of payment and shall receive all
future Guaranteed Distributions until all such Guaranteed Distributions by
the Certificate Insurer have been fully reimbursed, provided that the
Certificateholders have received the full amount of the Guaranteed
Distributions.
The terms of the Policy cannot be modified, altered or affected by any
other agreement or instrument, or by the merger, consolidation or dissolution
of the Seller. The Policy by its terms may not be cancelled or revoked. The
Policy is governed by the laws of the State of ________.
The Policy is not covered by the Property/Casualty Insurance Security
fund specified in Article 76 of the New York Insurance Law. The Policy is
not covered by the Florida Insurance Guaranty Association created under Part
II of Chapter 631 of the Florida Insurance Code. In the event the
Certificate Insurer were to become insolvent, any claims arising under the
Policy are excluded from coverage by the California Insurance Guaranty
Association, established pursuant to Article 14.2 of Chapter 1 of part 2 of
Division 1 of the California Insurance Code.
Pursuant to the terms of the Agreement, unless a Certificate Insurer
default exists, the Certificate Insurer shall be deemed to be the Holder of
the Certificates for certain purposes (other than with respect to payment on
the Certificates), will be entitled to exercise all rights of the
Certificateholders thereunder, without the consent of such Holders and the
Holders of the Certificates may exercise such rights only with the prior
written consent of the Certificate Insurer. In addition, the Certificate
Insurer will have certain additional rights as third party beneficiary to the
Agreement.
In the absence of payments under the Policy, Certificateholders will
bear directly the credit and other risks associated with their undivided
interest in the Trust.)
Reports to Certificateholders
Concurrently with each distribution to the Certificateholders, the
Master Servicer will forward to the Trustee for mailing to such
Certificateholder a statement setting forth among other items:
(i) the Investor Floating Allocation Percentage for the preceding
Collection Period;
(ii) the amount being distributed to Certificateholders;
(iii) the amount of interest included in such distribution and the
related Certificate Rate;
(iv) the amount, if any, of overdue accrued interest included in
such distribution (and the amount of interest thereon);
(v) the amount, if any, of the remaining overdue accrued interest
after giving effect to such distribution;
(vi) the amount, if any, of principal included in such
distribution;
(vii) the amount, if any, of the reimbursement of previous
Liquidation Loss Amounts included in such distribution;
(viii) the amount, if any, of the aggregate unreimbursed
Liquidation Loss Amounts after giving effect to such distribution;
(ix) the Servicing Fee for such Distribution Date;
(x) the Invested Amount and the Certificate Principal Balance, each
after giving effect to such distribution;
(xi) the Pool Balance as of the end of the preceding Collection
Period;
(xii) the number and aggregate Principal Balances of the Mortgage
Loans as to which the minimum monthly payment is delinquent for 30-59
days, 60-89 days and 90 or more days, respectively, as of the end of the
preceding Collection Period;
(xiii) the book value of any real estate which is acquired by the
Trust through foreclosure or grant of deed in lieu of foreclosure; and
(xiv) the amount of any draws on the Policy.
In the case of information furnished pursuant to clauses (iii), (iv),
(v), (vi), (vii) and (viii) above, the amounts shall be expressed as a dollar
amount per Certificate with a $1,000 denomination.
Within 60 days after the end of each calendar year commencing in 1998,
the Master Servicer will be required to forward to the Trustee a statement
containing the information set forth in clauses (iii) and (vi) above
aggregated for such calendar year.
Collection and Other Servicing Procedures on Mortgage Loans
The Master Servicer will make reasonable efforts to collect all payments
called for under the Mortgage Loans and will, consistent with the Agreement,
follow such collection procedures as it follows from time to time with
respect to the home equity loans in its servicing portfolio comparable to the
Mortgage Loans. Consistent with the above, the Master Servicer may in its
discretion waive any late payment charge or any assumption or other fee or
charge that may be collected in the ordinary course of servicing the Mortgage
Loans.
With respect to the Mortgage Loans, the Master Servicer may arrange with
a borrower a schedule for the payment of interest due and unpaid for a
period, provided that any such arrangement is consistent with the Master
Servicer's policies with respect to the home equity mortgage loans it owns or
services. In accordance with the terms of the Agreement, the Master Servicer
may consent under certain circumstances to the placing of a subsequent senior
lien in respect of a Mortgage Loan.
Hazard Insurance
The Agreement provides that the Master Servicer maintain certain hazard
insurance on the Mortgaged Properties relating to the Mortgage Loans. While
the terms of the related Credit Line Agreements generally require borrowers
to maintain certain hazard insurance, the Master Servicer will not monitor
the maintenance of such insurance.
The Agreement requires the Master Servicer to maintain for any Mortgaged
Property relating to a Mortgage Loan acquired upon foreclosure of a Mortgage
Loan, or by deed in lieu of such foreclosure, hazard insurance with extended
coverage in an amount equal to the lesser of (a) the maximum insurable value
of such Mortgaged Property or (b) the outstanding balance of such Mortgage
Loan plus the outstanding balance on any mortgage loan senior to such
Mortgage Loan at the time of foreclosure or deed in lieu of foreclosure, plus
accrued interest and the Master Servicer's good faith estimate of the related
liquidation expenses to be incurred in connection therewith. The Agreement
provides that the Master Servicer may satisfy its obligation to cause hazard
policies to be maintained by maintaining a blanket policy insuring against
losses on such Mortgaged Properties. If such blanket policy contains a
deductible clause, the Master Servicer will be obligated to deposit in the
Collection Account the sums which would have been deposited therein but for
such clause. The Master Servicer will initially satisfy these requirements
by maintaining a blanket policy. As set forth above, all amounts collected
by the Master Servicer (net of any reimbursements to the Master Servicer)
under any hazard policy (except for amounts to be applied to the restoration
or repair of the Mortgaged Property) will ultimately be deposited in the
Collection Account.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements on the property
by fire, lightning, explosion, smoke, windstorm and hail, and the like,
strike and civil commotion, subject to the conditions and exclusions
specified in each policy. Although the policies relating to the Mortgage
Loans will be underwritten by different insurers and therefore will not
contain identical terms and conditions, the basic terms thereof are dictated
by state laws and most of such policies typically do not cover any physical
damage resulting from the following: war, revolution, governmental actions,
floods and other water-related causes, earth movement (including earthquakes,
landslides and mudflows), nuclear reactions, wet or dry rot, vermin, rodents,
insects or domestic animals, theft and, in certain cases vandalism. The
foregoing list is merely indicative of certain kinds of uninsured risks and
is not intended to be all-inclusive or an exact description of the insurance
policies relating to the Mortgaged Properties.
Realization Upon Defaulted Mortgage Loans
The Master Servicer will foreclose upon or otherwise comparably convert
to ownership Mortgaged Properties securing such of the Mortgage Loans as come
into default when, in accordance with applicable servicing procedures under
the Agreement, no satisfactory arrangements can be made for the collection of
delinquent payments. In connection with such foreclosure or other
conversion, the Master Servicer will follow such practices as it deems
necessary or advisable and as are in keeping with its general subordinate
mortgage servicing activities, provided the Master Servicer will not be
required to expend its own funds in connection with foreclosure or other
conversion, correction of default on a related senior mortgage loan or
restoration of any property unless, in its sole judgment, such foreclosure,
correction or restoration will increase Net Liquidation Proceeds. The Master
Servicer will be reimbursed out of Liquidation Proceeds for advances of its
own funds as liquidation expenses before any Net Liquidation Proceeds are
distributed to Certificateholders or the Transferor.
Optional Purchase of Defaulted Loan
The Master Servicer may, at its option, purchase from the Trust any
Mortgage Loan which is delinquent in payment by 91 days or more. Any such
purchase shall be at a price equal to 100% of the Principal Balance of such
Mortgage Loan plus accrued interest thereon at the applicable Loan Rate from
the date through which interest was last paid by the related mortgagor to the
first day of the month in which such amount is to be distributed to
Certificateholders.
Servicing Compensation and Payment of Expenses
With respect to each Collection Period, the Master Servicer will receive
from interest collections in respect of the Mortgage Loans a portion of such
interest collections as a monthly Servicing Fee in the amount equal to
approximately 0.50% per annum ("Servicing Fee Rate") on the aggregate
Principal Balances of the Mortgage Loans as of the first day of the related
Collection Period (or at the Cut-off Date for the first Collection Period).
All assumption fees, late payment charges and other fees and charges, to the
extent collected from borrowers, will be retained by the Master Servicer as
additional servicing compensation.
The Master Servicer will pay certain ongoing expenses associated with
the Trust and incurred by it in connection with its responsibilities under
the Agreement. In addition, the Master Servicer will be entitled to
reimbursement for certain expenses incurred by it in connection with
defaulted Mortgage Loans and in connection with the restoration of Mortgaged
Properties, such right of reimbursement being prior to the rights of
Certificateholders to receive any related Net Liquidation Proceeds.
Evidence as to Compliance
The Agreement provides for delivery on or before ___________ in each
year, beginning in ___________, 199_, to the Trustee of an annual statement
signed by an officer of the Master Servicer to the effect that the Master
Servicer has fulfilled its material obligations under the Agreement
throughout the preceding fiscal year, except as specified in such statement.
On or before _____________ of each year, beginning ___________, 199_,
the Master Servicer will furnish a report prepared by a firm of nationally
recognized independent public accountants (who may also render other services
to the Master Servicer or the Transferor) to the Trustee, the Certificate
Insurer and the Rating Agencies to the effect that such firm has examined
certain documents and the records relating to servicing of the Mortgage Loans
under the Agreement and that, on the basis of such examination, such firm
believes that such servicing was conducted in compliance with the Agreement
except for (a) such exceptions as such firm believes to be immaterial and (b)
such other exceptions as shall be set forth in such report.
Certain Matters Regarding the Master Servicer and the Transferor
The Agreement provides that the Master Servicer may not resign from its
obligations and duties thereunder, except in connection with a permitted
transfer of servicing, unless (i) such duties and obligations are no longer
permissible under applicable law or are in material conflict by reason of
applicable law with any other activities of a type and nature presently
carried on by it or its affiliate or (ii) upon the satisfaction of the
following conditions: (a) the Master Servicer has proposed a successor
servicer to the Trustee in writing and such proposed successor servicer is
reasonably acceptable to the Trustee; (b) the Rating Agencies have confirmed
to the Trustee that the appointment of such proposed successor servicer as
the Master Servicer will not result in the reduction or withdrawal of the
then current rating of the Certificates; and (c) such proposed successor
servicer is reasonably acceptable to the Certificate Insurer. No such
resignation will become effective until the Trustee or a successor servicer
has assumed the Master Servicer's obligations and duties under the Agreement.
The Master Servicer may perform any of its duties and obligations under
the Agreement through one or more subservicers or delegates, which may be
affiliates of the Master Servicer. Notwithstanding any such arrangement, the
Master Servicer will remain liable and obligated to the Trustee and the
Certificateholders for the Master Servicer's duties and obligations
under the Agreement, without any diminution of such duties and obligations
and as if the Master Servicer itself were performing such duties and
obligations.
The Agreement provides that the Master Servicer will indemnify the Trust
and the Trustee from and against any loss, liability, expense, damage or
injury suffered or sustained as a result of the Master Servicer's actions or
omissions in connection with the servicing and administration of the Mortgage
Loans which are not in accordance with the provisions of the Agreement.
Under the Agreement, the Transferor will indemnify an injured party for the
entire amount of any losses, claims, damages or liabilities arising out of or
based on the Agreement (other than losses resulting from defaults under the
Mortgage Loans). In the event of an Event of Servicing Termination (as
defined below) resulting in the assumption of servicing obligations by a
successor Master Servicer, the successor Master Servicer will indemnify the
Transferor for any losses, claims, damages and liabilities of the Transferor
as described in this paragraph arising from the successor Master Servicer's
actions or omissions. The Agreement provides that neither the Depositor, the
Transferor nor the Master Servicer nor their directors, officers, employees
or agents will be under any other liability to the Trust, the Trustee, the
Certificateholders or any other person for any action taken or for refraining
from taking any action pursuant to the Agreement. However, neither the
Depositor, the Transferor nor the Master Servicer will be protected against
any liability which would otherwise be imposed by reason of willful
misconduct, bad faith or gross negligence of the Depositor, the Transferor or
the Master Servicer in the performance of its duties under the Agreement or
by reason of reckless disregard of its obligations thereunder. In addition,
the Agreement provides that the Master Servicer will not be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its servicing responsibilities under the Agreement and which in
its opinion may expose it to any expense or liability. The Master Servicer
may, in its sole discretion, undertake any such legal action which it may
deem necessary or desirable with respect to the Agreement and the rights and
duties of the parties thereto and the interest of the Certificateholders
thereunder.
Any corporation into which the Master Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Master Servicer shall be a party, or any
corporation succeeding to the business of the Master Servicer shall be the
successor of the Master Servicer hereunder, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything in the Agreement to the contrary notwithstanding.
Events of Servicing Termination
"Events of Servicing Termination" will consist of: (i) any failure by
the Master Servicer to deposit in the Collection Account any deposit required
to be made under the Agreement, which failure continues unremedied for five
business days after the giving of written notice of such failure to the
Master Servicer by the Trustee, or to the Master Servicer and the Trustee by
the Certificate Insurer or Certificateholders evidencing an aggregate,
undivided interest in the Trust of at least 25% of the Certificate Principal
Balance; (ii) any failure by the Master Servicer duly to observe or perform
in any material respect any other of its covenants or agreements in the
Agreement which, in each case, materially and adversely affects the interests
of the Certificateholders or the Certificate Insurer and continues unremedied
for 60 days after the giving of written notice of such failure to the Master
Servicer by the Trustee, or to the Master Servicer and the Trustee by the
Certificate Insurer or Certificateholders evidencing an aggregate, undivided
interest in the Trust of at least 25% of the Certificate Principal Balance;
or (iii) certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings relating to the Master Servicer
and certain actions by the Master Servicer indicating insolvency,
reorganization or inability to pay its obligations. Under certain other
circumstances, the Certificate Insurer with the consent of holders of
Investor Certificates evidencing an aggregate, undivided interest in the
Trust of at least 66 2/3% of the Certificate Principal Balance may deliver
written notice to the Master Servicer terminating all the rights and
obligations of the Master Servicer under the Agreement.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (i) above for a period of ten Business Days or
referred to under clause (ii) above for a period of 60 Business Days, shall
not constitute an Event of Servicing Termination if such delay or failure
could not be prevented by the exercise of reasonable diligence by the Master
Servicer and such delay or failure was caused by an act of God or other
similar occurrence. Upon the occurrence of any such event the Master Servicer
shall not be relieved from using its best efforts to perform its obligations
in a timely manner in accordance with the terms of the Agreement and the
Master Servicer shall provide the Trustee, the Depositor, the Transferor, the
Certificate Insurer and the Certificateholders prompt notice of such failure
or delay by it, together with a description of its efforts to so perform its
obligations.
Rights Upon an Event of Servicing Termination
So long as an Event of Servicing Termination remains unremedied, either
the Trustee, or Certificateholders evidencing an aggregate, undivided
interest in the Trust of at least 66 2/3% of the Certificate Principal
Balance or the Certificate Insurer, may terminate all of the rights and
obligations of the Master Servicer under the Agreement and in and to the
Mortgage Loans, whereupon the Trustee will succeed to all the
responsibilities, duties and liabilities of the Master Servicer under the
Agreement and will be entitled to similar compensation arrangements. In the
event that the Trustee would be obligated to succeed the Master Servicer but
is unwilling or unable so to act, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a housing and home finance
institution or other mortgage loan or home equity loan servicer with all
licenses
and permits required to perform its obligations under the Agreement and
having a net worth of at least $__________ and acceptable to the Certificate
Insurer to act as successor to the Master Servicer under the Agreement.
Pending such appointment, the Trustee will be obligated to act in such
capacity unless prohibited by law. Such successor will be entitled to
receive the same compensation that the Master Servicer would otherwise have
received (or such lesser compensation as the Trustee and such successor may
agree). A receiver or conservator for the Master Servicer may be empowered
to prevent the termination and replacement of the Master Servicer where the
only Event of Servicing Termination that has occurred is an Insolvency Event.
Amendment
The Agreement may be amended from time to time by the Master Servicer,
the Depositor and the Trustee and with the consent of the Certificate
Insurer, but without the consent of any of the Certificateholders, (i) to
cure any ambiguity or mistake, (ii) to correct any defective provision
therein or to supplement any provision therein which may be inconsistent with
any other provision therein, (iii) to add to the duties of the Depositor, the
Seller or the Master Servicer, (iv) to add any other provisions with respect
to matters or questions arising under the Agreement or (v) to modify, alter,
amend, add to or rescind any of the terms or provisions contained in the
Agreement; provided that any action pursuant to clauses (iv) or (v) above
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shall not, as evidenced by an opinion of counsel (which opinion of counsel
shall not be an expense of the Trustee or the Trust Fund), adversely affect
in any material respect the interests of any Certificateholder or the
Certificate Insurer; provided, however, that no such opinion of counsel shall
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be required if the Person requesting the amendment obtains a letter from each
Rating Agency stating that the amendment would not result in the downgrading
or withdrawal of the respective ratings then assigned to the Certificates; it
being understood and agreed that any such letter in and of itself will not
represent a determination as to the materiality of any such amendment and
will represent a determination only as to the credit issues affecting any
such rating.
The Agreement may also be amended from time to time by the Depositor,
the Master Servicer and the Trustee with the consent of the Certificate
Insurer and with the consent of the Holders of a Majority in Interest of each
Class of Certificates affected thereby for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of the Agreement or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment shall (i) reduce in
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any manner the amount of, or delay the timing of, payments required to be
distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of
the Holders of any Class of Certificates in a manner other than as described
in (i), without the consent of the Holders of Certificates of such Class
evidencing, as to such Class, Percentage Interests aggregating 66 2/3%, or
(iii) reduce the aforesaid percentages of Certificates the Holders of which
are required to consent to any such amendment, without the consent of the
Holders of all such Certificates then outstanding.
Termination; Retirement of the Certificates
The Trust will terminate on the Distribution Date following the later of
(A) payment in full of all amounts owing to the Certificate Insurer and (B)
the earliest of (i) the Distribution Date on which the Certificate Principal
Balance has been reduced to zero, (ii) the final payment or other liquidation
of the last Mortgage Loan in the Trust, (iii) the optional transfer to the
Transferor of the Certificates, as described below and (iv) the Distribution
Date in ____________ 20__.
The Certificates will be subject to optional transfer to the Transferor
on any Distribution Date after the Certificate Principal Balance is reduced
to an amount less than or equal to __% of the Original Certificate Principal
Balance and all amounts due and owing to the Certificate Insurer and
unreimbursed draws on the Policy, together with interest thereon, as provided
under the Insurance Agreement, have been paid. The transfer price will be
equal to the sum of the outstanding Certificate Principal Balance and accrued
and unpaid interest thereon at the Certificate Rate through the day preceding
the final Distribution Date. In no event, however, will the Trust created by
the Agreement continue for more than 21 years after the death of certain
individuals named in the Agreement. Written notice of termination of the
Agreement will be given to each Certificateholder, and the final distribution
will be made only upon surrender and cancellation of the Certificates at an
office or agency appointed by the Trustee which will be specified in the
notice of termination.
In addition, the Trust may be liquidated as a result of certain events
of bankruptcy, insolvency or receivership relating to the Transferor. See
"--Rapid Amortization Events" herein.
The Trustee
( ), a ______________________ with its principal place of business in
________, has been named Trustee pursuant to the Agreement.
The commercial bank or trust company serving as Trustee may own
Certificates and have normal banking relationships with the Depositor, the
Master Servicer, the Seller and the Certificate Insurer and/or their
affiliates.
The Trustee may resign at any time, in which event the Depositor will be
obligated to appoint a successor Trustee, as approved by the Certificate
Insurer. The Depositor may also remove the Trustee if the Trustee ceases to
be eligible to continue as such under the Agreement or if the Trustee becomes
insolvent. Upon becoming aware of such circumstances, the Depositor will be
obligated to appoint a successor Trustee, as approved by the Certificate
Insurer. Any resignation or removal of the Trustee and appointment of a
successor Trustee will not become effective until acceptance of the
appointment by the successor Trustee.
No holder of a Certificate will have any right under the Agreement to
institute any proceeding with respect to the Agreement unless such holder
previously has given to the Trustee written notice of default and unless
Certificateholders evidencing an aggregate, undivided interest in the Trust
of at least 51% of the Certificate Principal Balance have made written
requests upon the Trustee to institute such proceeding in its own name as
Trustee thereunder and have offered to the Trustee reasonable indemnity and
the Trustee for 60 days has neglected or refused to institute any such
proceeding. The Trustee will be under no obligation to exercise any of the
trusts or powers vested in it by the Agreement or to make any investigation
of matters arising thereunder or to institute, conduct or defend any
litigation thereunder or in relation thereto at the request, order or
direction of any of the Certificateholders, unless such Certificateholders
have offered to the Trustee reasonable security or indemnity against the
cost, expenses and liabilities which may be incurred therein or thereby.
Certain Activities
The Trust will not: (i) borrow money; (ii) make loans; (iii) invest in
securities for the purpose of exercising control; (iv) underwrite securities;
(v) except as provided in the Agreement, engage in the purchase and sale (or
turnover) of investments; (vi) offer securities in exchange for property
(except Certificates for the Mortgage Loans); or (vii) repurchase or
otherwise reacquire its securities. See "--Evidence as to Compliance" above
for information regarding reports as to the compliance by the Master Servicer
with the terms of the Agreement.
DESCRIPTION OF THE PURCHASE AGREEMENT
The Mortgage Loans to be transferred to the Trust by the Depositor will
be purchased by the Depositor from (IndyMac) pursuant to the Purchase
Agreement to be entered into between the Depositor, as purchaser of the
Mortgage Loans, and (IndyMac), as Seller of the Mortgage Loans. Under the
Purchase Agreement, the Seller will agree to transfer the Mortgage Loans and
related Additional Balances to the Depositor. Pursuant to the Agreement, the
Mortgage Loans will be immediately transferred by the Depositor to the Trust,
and the Depositor will assign its rights in, to and under the Purchase
Agreement to the Trust. The following summary describes certain terms of the
form of the Purchase Agreement and is qualified in its entirety by reference
to the Purchase Agreement.
Transfers of Mortgage Loans
Pursuant to the Purchase Agreement, the Seller will transfer and assign
to the Depositor, all of its right, title and interest in and to the Mortgage
Loans and all of the Additional Balances thereafter created. The purchase
price of the Mortgage Loans is a specified percentage of the face amount
thereof as of the time of transfer and is payable by the Depositor in cash.
The purchase price of each Additional Balance comprising the Principal
Balance of a Mortgage Loan is the amount of the related new advance.
Representations and Warranties
The Seller will represent and warrant to the Depositor that, among other
things, as of the Closing Date, it is duly organized and in good standing and
that it has the authority to consummate the transactions contemplated by the
Purchase Agreement. The Seller will also represent and warrant to the
Depositor that, among other things, immediately prior to the sale of the
Mortgage Loans to the Depositor, the Seller was the sole owner and holder of
the Mortgage Loans free and clear of any and all liens and security
interests. The Seller will make similar representations and warranties in
the Agreement. The Seller will also represent and warrant to the Depositor
that, among other things, as of the Closing Date, (a) the Purchase Agreement
constitutes a legal, valid and binding obligation of the Seller and (b) the
Purchase Agreement constitutes a valid sale to the Depositor of all right,
title and interest of the Seller in and to the Mortgage Loans and the
proceeds thereof.
Assignment to Trust
The Seller expressly acknowledges and consents to the Depositor's
transfer of its rights relating to the Mortgage Loans under the Agreement to
the Trust. The Seller also agrees to perform its obligations under the
Purchase Agreement for the benefit of the Trust.
Termination
The Purchase Agreement will terminate upon the termination of the Trust.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will
be applied by the Depositor towards the purchase of the Mortgage Loans.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
The following discussion, which summarizes certain U.S. federal income
tax aspects of the purchase, ownership and disposition of the Certificates,
is based on the provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), the Treasury Regulations thereunder, and published rulings and
court decisions in effect as of the date hereof, all of which are subject to
change, possibly retroactively. This discussion does not address every
aspect of the U.S. federal income tax laws which may be relevant to
Certificate Owners in light of their personal investment circumstances or to
certain types of Certificate Owners subject to special treatment under the
U.S. federal income tax laws (for example, banks and life insurance
companies). Accordingly, investors should consult their tax advisors
regarding U.S. federal, state, local, foreign and any other tax consequences
to them of investing in the Certificates.
Characterization of the Certificates as Indebtedness
Based on the application of existing law to the facts as set forth in
the Agreement and other relevant documents and assuming compliance with the
terms of the Agreement as in effect on the date of issuance of the
Certificates, Brown & Wood LLP, special tax counsel to the Depositor ("Tax
Counsel"), is of the opinion that the Certificates will be treated as debt
instruments for Federal income tax purposes as of such date. Accordingly,
upon issuance, the Certificates will be treated as "Debt Securities" as
described in the Prospectus. See "Certain Federal Income Tax Consequences"
in the Prospectus.
The Transferor and the Certificateholders express in the Agreement their
intent that, for applicable tax purposes, the Certificates will be
indebtedness secured by the Mortgage Loans. The Transferor, the Depositor
and the Certificateholders, by accepting the Certificates, and each
Certificate Owner by its acquisition of a beneficial interest in a
Certificate, have agreed to treat the Certificates as indebtedness for U.S.
federal income tax purposes. However, because different criteria are used to
determine the non-tax accounting characterization of the transaction, the
Transferor intends to treat this transaction as a sale of an interest in the
Asset Balances of the Mortgage Loans for financial accounting and certain
regulatory purposes.
In general, whether for U.S. federal income tax purposes a transaction
constitutes a sale of property or a loan, the repayment of which is secured
by property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction rather than its form or the manner in
which it is labeled. While the Internal Revenue Service (the "IRS") and the
courts have set forth several factors to be taken into account in determining
whether the substance of a transaction is a sale of property or a secured
loan, the primary factor in making this determination is whether the
transferee has assumed the risk of loss or other economic burdens relating to
the property and has obtained the benefits of ownership thereof. Tax Counsel
has analyzed and relied on several factors in reaching its opinion that the
weight of the benefits and burdens of ownership of the Mortgage Loans has
been retained by the Transferor and has not been transferred to the
Certificate Owners.
In some instances, courts have held that a taxpayer is bound by the
particular form it has chosen for a transaction, even if the substance of the
transaction does not accord with its form. Tax Counsel has advised that the
rationale of those cases will not apply to this transaction, because the form
of the transaction as reflected in the operative provisions of the documents
either accords with the characterization of the Certificates as debt or
otherwise makes the rationale of those cases inapplicable to this situation.
Taxation of Interest Income of Certificate Owners
Assuming that the Certificate Owners are holders of debt obligations for
U.S. federal income tax purposes, the Certificates generally will be taxable
as Debt Securities. See "Certain Federal Income Tax Consequences" in the
Prospectus.
While it is not anticipated that the Certificates will be issued at a
greater than de minimis discount, under Treasury regulations (the "OID
Regulations") it is possible that the Certificates could nevertheless be
deemed to have been issued with original issue discount ("OID") if the
interest were not treated as "unconditionally payable" under the OID
Regulations. If such regulations were to apply, all of the taxable income to
be recognized with respect to the Certificates would be includible in income
of Certificate Owners as OID, but would not be includible again when the
interest is actually received. See "Certain
Federal Income Tax Consequences--Taxation of Debt Securities; Interest and
Acquisition Discount" in the Prospectus for a discussion of the application
of the OID rules if the Certificates are in fact issued at a greater than de
minimis discount or are treated as having been issued with OID under the OID
Regulations. For purposes of calculating OID, it is likely that the
Certificates will be treated as Pay-Through Securities.
Possible Classification of the Certificates as a Partnership or Association
Taxable as a Corporation
The opinion of Tax Counsel is not binding on the courts or the IRS. It
is possible that the IRS could assert that, for purposes of the Code, the
transaction contemplated by this Prospectus with respect to the Certificates
constitutes a sale of the Mortgage Loans (or an interest therein) to the
Certificate Owners and that the proper classification of the legal
relationship between the Transferor and the Certificate Owners resulting from
this transaction is that of a partnership, a publicly traded partnership
treated as a corporation, or an association taxable as a corporation. Since
Tax Counsel has advised that the Certificates will be treated as indebtedness
in the hands of the Certificateholders for U.S. federal income tax purposes,
the Transferor will not attempt to comply with U.S. federal income tax
reporting requirements applicable to partnerships or corporations as such
requirements would apply if the Certificates were treated as indebtedness.
If it were determined that this transaction created an entity classified
as a corporation (including a publicly traded partnership taxable as a
corporation), the Trust would be subject to U.S. federal income tax at
corporate income tax rates on the income it derives from the Mortgage Loans,
which would reduce the amounts available for distribution to the Certificate
Owners. Cash distributions to the Certificate Owners generally would be
treated as dividends for tax purposes to the extent of such corporation's
earnings and profits.
If the transaction were treated as creating a partnership between the
Certificate Owners and the Transferor, the partnership itself would not be
subject to U.S. federal income tax (unless it were to be characterized as a
publicly traded partnership taxable as a corporation); rather, the Transferor
and each Certificate Owner would be taxed individually on their respective
distributive shares of the partnership's income, gain, loss, deductions and
credits. The amount and timing of items of income and deductions of the
Certificate Owner could differ if the Certificates were held to constitute
partnership interests rather than indebtedness.
Possible Classification as a Taxable Mortgage Pool
In relevant part, Section 7701(i) of the Code provides that any entity
(or a portion of an entity) that is a "taxable mortgage pool" will be
classified as a taxable corporation and will not be permitted to file a
consolidated U.S. federal income tax return with another corporation.
Subject to a grandfather provision for existing entities, any entity (or a
portion of any entity) will be a taxable mortgage pool if (i) substantially
all of its assets consist of debt instruments, more than 50% of which are
real estate mortgages, (ii) the entity is the obligor under debt obligations
with two or more maturities, and (iii) under the terms of the entity's debt
obligations (or an underlying arrangement), payments on such debt obligations
bear a relationship to the debt instruments held by the entity.
Assuming that all of the provisions of the Agreement, as in effect on
the date of issuance, are complied with, Tax Counsel is of the opinion that
the arrangement created by the Agreement will not be a taxable mortgage pool
under Section 7701(i) of the Code because only one class of indebtedness
secured by the Mortgage Loans is being issued.
The opinion of Tax Counsel is not binding on the IRS or the courts. If
the IRS were to contend successfully (or future regulations were to provide)
that the arrangement created by the Agreement is a taxable mortgage pool,
such arrangement would be subject to U.S. federal corporate income tax on its
taxable income generated by ownership of the Mortgage Loans. Such a tax
might reduce amounts available for distributions to Certificate Owners. The
amount of such a tax would depend upon whether distributions to Certificate
Owners would be deductible as interest expense in computing the taxable
income of such an arrangement as a taxable mortgage pool.
Foreign Investors
In general, subject to certain exceptions, interest (including OID) paid
on a Certificate to a nonresident alien individual, foreign corporation or
other non-United States person is not subject to U.S. federal income tax,
provided that such interest is not effectively connected with a trade or
business of the recipient in the United States and the Certificate Owner
provides the required foreign person information certification. See "Certain
Federal Income Tax Consequences--Tax Treatment of Foreign Investors" in the
Prospectus.
If the interests of the Certificate Owners were deemed to be partnership
interests, the partnership would be required, on a quarterly basis, to pay
withholding tax equal to the product, for each foreign partner, of such
foreign partner's distributive share of "effectively connected" income of the
partnership multiplied by the highest rate of tax applicable to that foreign
partner. In addition, such foreign partner would be subject to branch
profits tax. Each non-foreign partner would be required to certify
to the partnership that it is not a foreign person. The tax withheld from
each foreign partner would be credited against such foreign partner's U.S.
income tax liability.
If the Trust were taxable as a corporation, distributions to foreign
persons, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30%, unless such rate were reduced by an
applicable tax treaty.
Backup Withholding
Certain Certificate Owners may be subject to backup withholding at the
rate of 31% with respect to interest paid on the Certificates if the
Certificate Owners, upon issuance, fail to supply the Trustee or his broker
with his taxpayer identification number, furnish an incorrect taxpayer
identification number, fail to report interest, dividends, or other
"reportable payments" (as defined in the Code) properly, or, under certain
circumstances, fail to provide the Trustee or his broker with a certified
statement, under penalty of perjury, that he is not subject to backup
withholding.
The Trustee will be required to report annually to the IRS, and to each
Certificateholder of record, the amount of interest paid (and OID accrued, if
any) on the Certificates (and the amount of interest withheld for U.S.
federal income taxes, if any) for each calendar year, except as to exempt
holders (generally, holders that are corporations, certain tax-exempt
organizations or nonresident aliens who provide certification as to their
status as nonresidents). As long as the only "Certificateholder" of record
is Cede, as nominee for DTC, Certificate Owners and the IRS will receive tax
and other information including the amount of interest paid on the
Certificates owned from Participants and Indirect Participants rather than
from the Trustee. (The Trustee, however, will respond to requests for
necessary information to enable Participants, Indirect Participants and
certain other persons to complete their reports.) Each non-exempt Certificate
Owner will be required to provide, under penalty of perjury, a certificate on
IRS Form W-9 containing his or her name, address, correct Federal taxpayer
identification number and a statement that he or she is not subject to backup
withholding. Should a nonexempt Certificate Owner fail to provide the
required certification, the Participants or Indirect Participants (or the
Paying Agent) will be required to withhold 31% of the interest (and
principal) otherwise payable to the holder, and remit the withheld amount to
the IRS as a credit against the holder's Federal income tax liability.
STATE TAXES
The Depositor makes no representations regarding the tax consequences of
purchase, ownership or disposition of the Certificates under the tax laws of
any state. Investors considering an investment in the Certificates should
consult their own tax advisors regarding such tax consequences.
All investors should consult their own tax advisors regarding the
Federal, state, local or foreign income tax consequences of the purchase,
ownership and disposition of the Certificates.
ERISA CONSIDERATIONS
Any Plan fiduciary which proposes to cause a Plan to acquire any of the
Certificates should consult with its counsel with respect to the potential
consequences under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the Code, of the Plans acquisition and ownership of
such Certificates. See "ERISA Considerations" in the Prospectus.
The U.S. Department of Labor has granted to _________________
("Underwriter") Prohibited Transaction Exemption _____ (the "Exemption")
which exempts from the application of the prohibited transaction rules
transactions relating to (1) the acquisition, sale and holding by Plans of
certain certificates representing an undivided interest in certain
asset-backed pass-through trusts, with respect to which Underwriter or any of
its affiliates is the sole underwriter or the manager or co-manager of the
underwriting syndicate; and (2) the servicing, operation and management of
such asset-backed pass-through trusts, provided that the general conditions
and certain other conditions set forth in the Exemption are satisfied. The
Exemption will apply to the acquisition, holding and resale of the
Certificates by a Plan provided that certain conditions are met.
For a general description of the Exemption and the conditions that must
be satisfied for the Exemption to apply, see "ERISA Considerations" in the
Prospectus.
The Underwriter believes that the Exemption will apply to the
acquisition and holding of the Certificates by Plans and that all conditions
of the Exemption other than those within the control of the investors will be
met.
Any Plan fiduciary considering whether to purchase any Certificates on
behalf of a Plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of
ERISA and the Code to such investment. Among other things, before purchasing
any Certificates, a fiduciary of a Plan subject to the fiduciary
responsibility
provisions of ERISA or an employee benefit plan subject to the prohibited
transaction provisions of the Code should make its own determination as to
the availability of the exemptive relief provided in the Exemption, and also
consider the availability of any other prohibited transaction exemptions.
LEGAL INVESTMENT CONSIDERATIONS
Although, as a condition to their issuance, the Certificates will be
rated in the highest rating category of the Rating Agencies, the Certificates
will not constitute "mortgage related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA"), because not all
of the Mortgages securing the Mortgage Loans are first mortgages.
Accordingly, many institutions with legal authority to invest in comparably
rated securities based on first mortgage loans may not be legally authorized
to invest in the Certificates, which because they evidence interests in a
pool that includes junior mortgage loans are not "mortgage related
securities" under SMMEA. See "Legal Investment" in the Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement, dated ___________, 199_ (the "Underwriting Agreement"), among the
Depositor and (Underwriter) (the "Underwriter"), the Depositor has agreed to
sell to the Underwriter, and the Underwriter has agreed to purchase from the
Depositor all the Certificates.
In the Underwriting Agreement, the Underwriter has agreed, subject to
the terms and conditions set forth therein, to purchase all the Certificates
offered hereby if any of the Certificates are purchased.
The Depositor has been advised by the Underwriter that it proposes
initially to offer the Certificates to the public in Europe and the United
States at the offering price set forth herein and to certain dealers at such
price less a discount not in excess of ____% of the Certificate
denominations. The Underwriter may allow and such dealers may reallow a
discount not in excess of _____% of the Certificate denominations to certain
other dealers. After the initial public offering, the public offering price,
such concessions and such discounts may be changed.
The Underwriting Agreement provides that the Depositor will indemnify
the Underwriter against certain civil liabilities, including liabilities
under the Act.
LEGAL MATTERS
Certain legal matters with respect to the Certificates will be passed
upon for the Depositor by Brown & Wood LLP, New York, New York and for the
Underwriter by _______________________, New York, New York.
EXPERTS
The consolidated balance sheets of (Insurer) and Subsidiaries as of
___________, 199_ and 199_ and the related consolidated statements of income,
changes in shareholder's equity, and cash flows for each of the three years
in the period ended ___________, 199_, incorporated by reference in this
Prospectus Supplement, have been incorporated herein in reliance on the
report of ________________________, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
RATINGS
It is a condition to issuance that the Certificates be rated "___" by
_____ and "___" by _________.
A securities rating addresses the likelihood of the receipt by
Certificateholders of distributions on the Mortgage Loans. The rating takes
into consideration the characteristics of the Mortgage Loans and the
structural, legal and tax aspects associated with the Certificates. The
ratings on the Certificates do not, however, constitute statements regarding
the likelihood or frequency of prepayments on the Mortgage Loans or the
possibility that Certificateholders might realize a lower than anticipated
yield.
The ratings assigned to the Certificates will depend primarily upon the
creditworthiness of the Certificate Insurer. Any reduction in a rating
assigned to the claims-paying ability of the Certificate Insurer below the
ratings initially assigned to the Certificates may result in a reduction of
one or more of the ratings assigned to the Certificates.
A securities rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each securities rating should be evaluated
independently of similar ratings on different securities.
The Depositor has not requested a rating of the Certificates by any
rating agency other than the Rating Agencies; there can be no assurance,
however, as to whether any other rating agency will rate the Certificates or,
if it does, what rating would be assigned by such other rating agency. The
rating assigned by such other rating agency to the Certificates could be
lower than the respective ratings assigned by the Rating Agencies.
INDEX OF DEFINED TERMS
Page
----
1934 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
Accelerated Principal Distribution Amount . . . . . . . . . . . . . S-8, S-40
Additional Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
ALTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-21
Alternative Documentation Program . . . . . . . . . . . . . . . . . . . S-20
Alternative Principal Payment . . . . . . . . . . . . . . . . . . S-11, S-41
Assignment Event . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36
BIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-38
Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . . . . S-32
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . S-39, S-44
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
CEDEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
CEDEL Participants . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
Certificate Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
Certificate Owners . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-33
Certificate Principal Balance . . . . . . . . . . . . . . . . . . . S-4, S-32
Certificate Rate . . . . . . . . . . . . . . . . . . . . . . S-4, S-10, S-40
Certificateholder . . . . . . . . . . . . . . . . . . . . . . . . S-33, S-54
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-4
CGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-17
CGIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-17
Citibank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-10, S-40
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-51
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . S-9, S-38
Collection Period . . . . . . . . . . . . . . . . . . . . . . . . S-10, S-40
Combined Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . . S-5
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-35
(IndyMac) . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3, S-20
Credit Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Credit Limit Utilization Rate . . . . . . . . . . . . . . . . . . . . . S-23
Credit Line Agreements . . . . . . . . . . . . . . . . . . . . . . S-3, S-22
Cut-off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Cut-off Date Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . S-3
Cut-off Date Principal Balance . . . . . . . . . . . . . . . . . . . . . S-3
Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-51
debt-to-income ratio . . . . . . . . . . . . . . . . . . . . . . . . . S-21
Defective Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . S-37
Definitive Certificate . . . . . . . . . . . . . . . . . . . . . . . . S-33
Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Determination Date . . . . . . . . . . . . . . . . . . . . . . . S-13, S-38
Dissolution Distribution Date . . . . . . . . . . . . . . . . . . . . . S-43
Distribution Date . . . . . . . . . . . . . . . . . . . . . . S-1, S-10, S-39
Draw Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-23
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-33, S-60
Due Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
Eligible Substitute Mortgage Loan . . . . . . . . . . . . . . . . . . . S-36
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14, S-54
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . . . . . S-34
Euroclear Participants . . . . . . . . . . . . . . . . . . . . . . . . S-34
European Depositaries . . . . . . . . . . . . . . . . . . . . . . . S-7, S-33
Events of Servicing Termination . . . . . . . . . . . . . . . . . . . . S-48
Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-54
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-19
Financial Intermediary . . . . . . . . . . . . . . . . . . . . . . . . S-33
Fixed Allocation Percentage . . . . . . . . . . . . . . . . . . . . . . . S-9
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-21
Fund American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
Guaranteed Distributions . . . . . . . . . . . . . . . . . . . . S-12, S-43
Guaranteed Principal Distribution Amount . . . . . . . . . . . . S-12, S-43
Index Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-23
Insurance Agreement . . . . . . . . . . . . . . . . . . . . . . . S-11, S-43
Interest Collections . . . . . . . . . . . . . . . . . . . . . . . S-7, S-38
Interest Period . . . . . . . . . . . . . . . . . . . . . . . . . S-10, S-40
Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . . S-4, S-32
Investor Fixed Allocation Percentage . . . . . . . . . . . . . . . . . . S-9
Investor Floating Allocation Percentage . . . . . . . . . . . . . . S-8, S-39
Investor Interest Collections . . . . . . . . . . . . . . . . . . . S-8, S-39
Investor Loss Amount . . . . . . . . . . . . . . . . . . . . . . . S-9, S-40
Investor Principal Collections . . . . . . . . . . . . . . . . . . S-9, S-39
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-52
LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
LIBOR Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . S-40
Liquidated Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . S-40
Liquidation Loss Amount . . . . . . . . . . . . . . . . . . . . . . S-9, S-40
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . S-38
Loan Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6, S-23
Managed Amortization Period . . . . . . . . . . . . . . . . . . . S-10, S-41
Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-23
Maximum Principal Payment . . . . . . . . . . . . . . . . . . . . S-11, S-41
Maximum Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-23
Minimum Transferor Interest . . . . . . . . . . . . . . . . . . . . S-5, S-38
Money Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Mortgage Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36
Mortgage Loan Schedule . . . . . . . . . . . . . . . . . . . S-4, S-36, S-38
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Mortgaged Properties . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Net Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . S-8, S-38
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-52
OID Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-52
Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-43
Original Certificate Principal Balance . . . . . . . . . . . . . . S-4, S-32
Original Invested Amount . . . . . . . . . . . . . . . . . . . . . S-4, S-32
Overcollateralization Amount . . . . . . . . . . . . . . . . . . . . . . S-9
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-42
Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . S-6
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-14
Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Pool Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3, S-39
Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-32
Principal Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Principal Collections . . . . . . . . . . . . . . . . . . . . . . . S-8, S-38
Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . S-5
Rapid Amortization Event . . . . . . . . . . . . . . . . . . . . . . . S-42
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-15
Receipt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44
Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-44
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-39
Reduced Documentation Program . . . . . . . . . . . . . . . . . . . . . S-20
Reference Bank Rate . . . . . . . . . . . . . . . . . . . . . . . . . . S-41
Related Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . S-36
Relevant Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . S-33
Repayment Period . . . . . . . . . . . . . . . . . . . . . . . . . . . S-23
Required Overcollateralization Amount . . . . . . . . . . . . . . . . . S-40
Restricted Group . . . . . . . . . . . . . . . . . . . . . . . . . . . S-55
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-33
SAIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-38
Scheduled Principal Collections Distribution Amount . . . . . . . S-11, S-41
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Master Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-13
Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . . . . S-13, S-47
SMMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-15, S-55
Spread Account . . . . . . . . . . . . . . . . . . . . . . . . . S-12, S-43
Tax Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-51
Telerate Screen Page 3750 . . . . . . . . . . . . . . . . . . . . . . . S-41
Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . S-35
Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-37
Transfer Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . . S-36
Transfer Deposit Amount . . . . . . . . . . . . . . . . . . . . . . . . S-36
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
Transferor Interest . . . . . . . . . . . . . . . . . . . . . S-1, S-4, S-33
Transferor Principal Collections . . . . . . . . . . . . . . . . . S-9, S-39
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1, S-3
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3, S-14
U S WEST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-16
Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . S-54, S-55
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . S-55
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Home
Equity Loan Asset Backed Certificates, Series 199_-_ (the "Global
Securities") will be available only in book-entry form. Investors in the
Global Securities may hold such Global Securities through any of The
Depository Trust Company ("DTC"), CEDEL or Euroclear. The Global Securities
will be tradeable as home market instruments in both the European and U.S.
domestic markets. Initial settlement and all secondary trades will settle in
same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations and prior Home Equity Loan
Asset Backed Certificates issues.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Certificates will be effected on a
delivery-against-payment basis through the respective Depositaries of CEDEL
and Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities
clearing organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, CEDEL and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts
as DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to prior Home Equity Loan Asset
Backed Certificates issues. Investor securities custody accounts will be
credited with their holdings against payment in same-day funds on the
settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to prior Home
Equity Loan Asset Backed Certificates issues in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant
to the account of a CEDEL Participant or a Euroclear Participant, the
purchaser will send instructions to CEDEL or Euroclear through a CEDEL
Participant or Euroclear Participant at least one business day prior to
settlement. CEDEL or Euroclear will instruct the respective Depositary, as
the case may be, to receive the Global Securities against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date, on the basis
of the actual number of days in such accrual period and a year assumed to
consist of 360 days. For transactions settling on the 31st of the month,
payment will include interest accrued to and excluding the first day of the
following month. Payment will then be made by the respective Depositary of
the DTC Participant's account against delivery of the Global Securities.
After settlement has been completed, the Global Securities will be credited to
the respective clearing system and by the clearing system, in accordance with
its usual procedures, to the CEDEL Participant's or Euroclear Participant's
account. The securities credit will appear the next day (European time) and
the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the CEDEL or Euroclear cash debt
will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to
preposition funds for settlement, either from cash on hand or existing lines
of credit, as they would for any settlement occurring within CEDEL or
Euroclear. Under this approach, they may take on credit exposure to CEDEL or
Euroclear until the Global Securities are credited to their accounts one day
later.
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, CEDEL Participants or Euroclear Participants can elect not to
preposition funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear
Participants purchasing Global Securities would incur overdraft charges for
one day, assuming they cleared the overdraft when the Global Securities were
credited to their accounts. However, interest on the Global Securities would
accrue from the value date. Therefore, in many cases the investment income
on the Global Securities earned during that one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result
will depend on each CEDEL Participant's or Euroclear Participant's particular
cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective European Depositary for the benefit of CEDEL Participants
or Euroclear Participants. The sale proceeds will be available to the DTC
seller on the settlement date. Thus, to the DTC Participants a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between CEDEL or Euroclear Seller and DTC Purchaser. Due to
time zone differences in their favor, CEDEL Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through the respective Depositary, to a DTC Participant. The seller will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. In
these cases CEDEL or Euroclear will instruct the respective Depositary, as
appropriate, to deliver the Global Securities to the DTC Participant's
account against payment. Payment will include interest accrued on the Global
Securities from and including the last coupon payment to and excluding the
settlement date on the basis of the actual number of days in such accrual
period and a year assumed to consist of 360 days. For transactions settling
on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. The payment will then be
reflected in the account of the CEDEL Participant or Euroclear Participant
the following day, and receipt of the cash proceeds in the CEDEL
Participant's or Euroclear Participant's account would be back-valued to the
value date (which would be the preceding day, when settlement occurred in New
York). Should the CEDEL Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the
back-valuation will extinguish any overdraft incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the CEDEL Participant's or
Euroclear Participant's account would instead be valued as of the actual
settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC Participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least
one day prior to the value date for the sale to the CEDEL Participant or
Euroclear Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through CEDEL
or Euroclear (or through DTC if the holder has an address outside the U.S.)
will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless (i) each clearing system, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business in the chain of intermediaries
between such beneficial owner and the U.S. entity required to withhold tax
complies with applicable certification requirements and (ii) such beneficial
owner takes one of the following steps to obtain an exemption or reduced tax
rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status).
If the information shown on Form W-8 changes, a new Form W-8 must be filed
within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business
in the United States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are Certificate Owners residing
in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty
provides only for a reduced rate, withholding tax will be imposed at that
rate unless the filer alternatively files Form W-8. Form 1001 may be filed
by the Certificate Owners or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payer's
Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his
agent, files by submitting the appropriate form to the person through whom it
holds (the clearing agency, in the case of persons holding directly on the
books of the clearing agency). Form W-8 and Form 1001 are effective for
three calendar years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any political subdivision thereof or (iii) an estate or
trust the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all
aspects of U.S. Federal income tax withholding that may be relevant to
foreign holders of the Global Securities. Investors are advised to consult
their own tax advisors for specific tax advice concerning their holding and
disposing of the Global Securities.
<TABLE>
<CAPTION>
<S> <C>
No dealer, salesman or other person has been authorized
to give any information or to make any representation not
contained in this Prospectus Supplement or the Prospectus and,
if given or made, such information or representation must not
be relied upon as having been authorized by the Company or
(Underwriter). This Prospectus Supplement and the Prospectus
do not constitute an offer of any securities other than those
to which they relate or an offer to sell, or a solicitation of
an offer to buy, to any person in any jurisdiction where such
an offer or solicitation would be unlawful. Neither the
delivery of this Prospectus Supplement and the Prospectus nor
any sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is
correct as of any time subsequent to their respective dates. $(_____________)
--------------- (Approximate)
TABLE OF CONTENTS
Home Equity Loan
PAGE Asset Backed Certificates
PROSPECTUS SUPPLEMENT Series 199_-_
Incorporation of Certain Documents by Reference . . . . . S-2 INDYMAC ABS, INC.
Summary . . . . . . . . . . . . . . . . . . . . . . . . . S-3 DEPOSITOR
Risk Factors . . . . . . . . . . . . . . . . . . . . . . S-12
The Certificate Insurer . . . . . . . . . . . . . . . . . S-14 (INDYMAC INC.)
The Master Servicer . . . . . . . . . . . . . . . . . . . S-16 Seller and Master Servicer
The Home Equity Loan Program . . . . . . . . . . . . . . S-17
Description of the Mortgage Loans . . . . . . . . . . . . S-19
Maturity and Prepayment Considerations . . . . . . . . . S-26 -------------------------
Pool Factor and Trading Information . . . . . . . . . . . S-27 PROSPECTUS SUPPLEMENT
Description of the Certificates . . . . . . . . . . . . . S-28 (_________, 199_)
Description of the Purchase Agreement . . . . . . . . . . S-45 -------------------------
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . S-46
Certain Federal Income Tax Consequences . . . . . . . . . S-46 (UNDERWRITER)
State Taxes . . . . . . . . . . . . . . . . . . . . . . . S-49
ERISA Considerations . . . . . . . . . . . . . . . . . . S-49
Legal Investment Considerations . . . . . . . . . . . . . S-50
Underwriting . . . . . . . . . . . . . . . . . . . . . . S-50
Legal Matters . . . . . . . . . . . . . . . . . . . . . . S-51
Experts . . . . . . . . . . . . . . . . . . . . . . . . . S-51
Ratings . . . . . . . . . . . . . . . . . . . . . . . . . S-51
Index of Defined Terms . . . . . . . . . . . . . . . . . S-52
Annex I . . . . . . . . . . . . . . . . . . . . . . . . . S-56
PROSPECTUS
Prospectus Supplement . . . . . . . . . . . . . . . . . . . 2
Available Information . . . . . . . . . . . . . . . . . . . 2
Reports to Holders . . . . . . . . . . . . . . . . . . . . 2
Summary of Terms . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . 11
Description of the Securities . . . . . . . . . . . . . . . 14
The Trust Funds . . . . . . . . . . . . . . . . . . . . . . 17
Enhancement . . . . . . . . . . . . . . . . . . . . . . . . 22
Servicing of Loans. . . . . . . . . . . . . . . . . . . . . 24
The Agreements. . . . . . . . . . . . . . . . . . . . . . . 30
Certain Legal Aspects of Loans. . . . . . . . . . . . . . . 38
The Depositor . . . . . . . . . . . . . . . . . . . . . . . 46
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 46
Certain Federal Income Tax Consequences . . . . . . . . . . 47
State Tax Considerations. . . . . . . . . . . . . . . . . . 64
ERISA Considerations. . . . . . . . . . . . . . . . . . . . 65
Legal Investment. . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
SUBJECT TO COMPLETION, DATED APRIL __, 1998
PROSPECTUS SUPPLEMENT
(To Prospectus dated ___________, 1998)
$___________
INDYMAC ABS, INC.
DEPOSITOR
(INDYMAC, INC.)
SELLER AND MASTER SERVICER
HOME EQUITY LOAN TRUST 199__
$___________ HOME EQUITY LOAN ASSET BACKED NOTES, SERIES 199__-__
$________ HOME EQUITY LOAN ASSET BACKED CERTIFICATES, SERIES 199__-__
The Home Equity Loan Trust 199__ (the "Trust") will be formed pursuant
to a trust agreement to be dated as of ______, 199__ (the "Trust Agreement")
and entered into by IndyMac ABS, Inc. (the "Depositor"), ________________ and
_____________, as owner trustee (the "Owner Trustee"). The Trust will issue
$___________ aggregate principal amount of Home Equity Loan Asset Backed
Notes (the "Notes"). The Notes will be issued pursuant to an indenture to be
dated as of __________ __, 199__ (the "Indenture"), between the Trust and
____________, as indenture trustee (the "Indenture Trustee"). The Trust will
also issue $____________ aggregate principal amount of Home Equity Loan Asset
Backed Certificates, Series 199_-_ (the "Certificates" and, together with the
Notes, the "Securities").
The property of the Trust will include a pool of (adjustable rate) home
equity revolving credit line loans made or to be made in the future (the
"Mortgage Loans") under certain home equity revolving credit line loan
agreements. The Mortgage Loans are secured primarily by first and second
deeds of trust or mortgages on one- to four-family residential properties.
(In addition, the Securities will have the benefit of an irrevocable and
unconditional limited financial guaranty insurance policy (the "Policy")
issued by ______________ (the "Certificate Insurer") covering (describe).)
Distributions of principal and interest on the Notes will be made on the
_________ day of each month or, if such date is not a Business Day, then on
the succeeding Business Day (each a "Distribution Date"), commencing on
________, 199_ to the extent described herein. Interest will accrue on the
Notes at a rate (the "Note Rate") equal to ___% per annum from the Closing
Date to the first Distribution Date and at (a floating rate equal to (LIBOR)
(as defined herein) plus ___% per annum) (___% per annum) thereafter.
The Certificates will represent fractional undivided interests in the
Trust. Distribution of principal and interest on the Certificates will be
made on each Distribution Date to the extent described herein. Interest will
accrue on the Certificates at a rate (the "Pass-Through Rate") equal to ___%
per annum from the Closing Date to the first Distribution Date and at (a
floating rate equal to (LIBOR) plus ___% per annum) (___% per annum)
thereafter.
Payments of interest and principal on the Notes will have equal priority
with payments of principal and interest (and will be made pro rata) on the
Certificates.
There is currently no market for the Securities offered hereby and there
can be no assurance that such a market will develop or if it does develop
that it will continue. See "Risk Factors" herein.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET
FORTH UNDER "RISK FACTORS" ON PAGE S-10 HEREIN AND
ON PAGE 16 IN THE ACCOMPANYING PROSPECTUS.
--------------------
THE SECURITIES REPRESENT INTERESTS IN OR OBLIGATIONS OF THE TRUST ONLY
AND DO NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR,
OWNER TRUSTEE, INDENTURE TRUSTEE OR ANY AFFILIATE THEREOF,
EXCEPT TO THE EXTENT PROVIDED HEREIN. THE SECURITIES
ARE NOT INSURED OR GUARANTEED BY ANY
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Securities offered hereby will be purchased by (______) (the
"Underwriter") from the Depositor and will, in each case, be offered by the
Underwriter from time to time to the public in negotiated transactions or
otherwise at varying prices to be determined at the time of sale. The
aggregate proceeds to the Depositor from the sale of the Notes are expected
to be $__________ and from the sale of the Certificates are expected to be
$__________ before deducting expenses payable by the Depositor of $_______.
The Securities are offered subject to prior sale and subject to the
Underwriters' right to reject orders in whole or in part. It is expected
that the Notes will be delivered in book-entry form through the facilities of
The Depository Trust Company, (Cedel, S.A. and the Euroclear System) on or
about _______, 199_. The Securities will be offered in (Europe and) the
United States of America.
--------------------
Until ninety days after the date of this Prospectus Supplement, all
dealers effecting transactions in the Securities, whether or not
participating in this distribution, may be required to deliver a Prospectus
Supplement and Prospectus to investors. This is in addition to the
obligation of dealers acting as Underwriters to deliver a Prospectus
Supplement and Prospectus with respect to their unsold allotments or
subscriptions.
--------------------
Each Series of Securities offered hereby constitute part of a separate
Series of Asset Backed Securities being offered by the Underwriter from time
to time pursuant to the Prospectus dated ____________, 199_. This Prospectus
Supplement does not contain complete information about the offering of the
Securities. Additional information is contained in the Prospectus and
investors are urged to read both this Prospectus Supplement and the
Prospectus in full. Sales of the Securities may not be consummated unless
the purchaser has received both this Prospectus Supplement and the
Prospectus.
--------------------
(UNDERWRITER)
_______________, 199__
SUMMARY OF TERMS
The following summary of certain pertinent information is qualified in
its entirety by reference to the detailed information appearing elsewhere in
this Prospectus Supplement and in the accompanying Prospectus. Certain
capitalized terms used herein are defined elsewhere in the Prospectus
Supplement or in the Prospectus.
Title of Securities . . . . . . . Home Equity Loan Asset Backed
Notes, Series 199__-__(the
"Notes") and Home Equity Loan
Asset Backed Certificates, Series
199__-__ (the "Certificates" and,
together with the Notes, the
"Securities").
Securities Offered . . . . . . . All of the Securities, including
the Class ___, Class __ and Class
__ Notes and the Class __, Class
__ and Class __ Certificates.
Each Security represents the right
to receive payments of interest at
the variable rate described below,
payable monthly, and payments of
principal at such time and to the
extent provided below.
Trust . . . . . . . . . . . . . . Home Equity Loan Trust 199_-_ (the
"Trust" or the "Issuer"), a
Delaware business trust
established pursuant to the Trust
Agreement (as defined herein),
dated as of ___, 199_ (the
"Cut-off Date"). The property of
the Trust will include: a pool of
(adjustable rate) home equity
revolving credit line loans made
or to be made in the future (the
"Mortgage Loans"), under certain
home equity revolving credit line
loan agreements (the "Credit Line
Agreements") and secured by either
first or second mortgages on
residential properties that are
primarily one- to four-family
properties (the "Mortgaged
Properties"); the collections in
respect of the Mortgage Loans
(received) after the Cut-off Date
(exclusive of payments in respect
of accrued interest (due) on or
prior to the Cut-off Date or due
in the month of _____________);
property that secured a Mortgage
Loan which has been acquired by
foreclosure or deed in lieu of
foreclosure; (an irrevocable and
unconditional limited financial
guaranty insurance policy (the
"Policy")); an assignment of the
Depositor's rights under the
Purchase Agreement (as defined
herein); rights under certain
hazard insurance policies covering
the Mortgaged Properties; and
certain other property, as
described more fully herein.
The Trust will include the unpaid
principal balance of each Mortgage
Loan as of the Cut-off Date (the
"Cut-off Date Principal Balance")
plus any additions thereto as a
result of new advances made
pursuant to the applicable Credit
Line Agreement (the "Additional
Balances") during the life of the
Trust. With respect to any date,
the "Pool Balance" will be equal
to the aggregate of the Principal
Balances of all Mortgage Loans as
of such date. The "Principal
Balance" of a Loan (other than a
Liquidated Loan) on any day is
equal to its Cut-off Date
Principal Balance, plus (i) any
Additional Balances in respect of
such Mortgage Loan, minus (ii) all
collections credited against the
Principal Balance of such Mortgage
Loan in accordance with the
related Credit Line Agreement
prior to such day. The Principal
Balance of a Liquidated Loan after
the final recovery of related
Liquidation Proceeds shall be
zero.
Indenture . . . . . . . . . . . . The Notes will be issued pursuant
to an indenture dated as of
_________, 199_ (the "Indenture")
between the Trust and the
Indenture Trustee. The Indenture
Trustee will allocate
distributions of principal and
interest to holders of the Notes
(the "Noteholders") in accordance
with the Indenture.
Trust Agreement . . . . . . . . . Pursuant to a trust agreement
dated as of ________ 1, 199_ (the
"Trust Agreement"), among the
Depositor, ________ and the Owner
Trustee, the Trust will issue the
Certificates in an initial
aggregate amount of $__________.
The Certificates will represent
fractional undivided interests in
the Trust.
Depositor . . . . . . . . . . . . IndyMac ABS, Inc. a Delaware
corporation and a limited purpose
finance subsidiary of IndyMac,
Inc., a Delaware corporation.
Master Servicer . . . . . . . . . (IndyMac, Inc. ("IndyMac") and, in
its capacity as Master Servicer of
the Mortgage Loans, the "Master
Servicer".
Indenture Trustee . . . . . . . . _______________ (the "Indenture
Trustee").
Owner Trustee . . . . . . . . . . _______________ (the "Owner
Trustee").
Cut-off Date . . . . . . . . . . __________ 1, 199__.
Closing Date . . . . . . . . . . On or about __________ __, 199__.
Determination Date . . . . . . . The ___ business day, but no later
than the ___ calendar day, of each
month (the "Determination Date").
The Mortgage Loans . . . . . . . The Mortgage Loans are secured by
first and second mortgages on
Mortgaged Properties. The
Mortgage Loans were acquired in
the normal course of its business
by (IndyMac) (in such capacity,
the "Seller"). On the Closing
Date, (IndyMac) will sell the
Mortgage Loans to the Depositor,
pursuant to a purchase agreement
(the "Purchase Agreement"). The
aggregate Principal Balance of the
Mortgage loans as of the Cut-off
Date is $___________ (the "Cut-off
Date Pool Principal Balance").
The percentage of the Cut-off Date
Principal Balance of the Mortgage
Loans secured primarily by
Mortgaged Properties located in
the states of (__________,
_________, _________, _______,
______ and ________) is
approximately ____%, ____%, ____%,
____%, ____% and ____%,
respectively. The "Combined
Loan-to-Value Ratio" of each
Mortgage Loan is the ratio of (A)
the sum of (i) the maximum amount
the borrower was permitted to draw
down under the related Credit Line
Agreement (the "Credit Limit") and
(ii) the amounts of any related
senior mortgage loans (computed as
of the date of origination of each
such Mortgage Loans) to (B) the
lesser of (i) the appraised value
of the Mortgaged Property or (ii)
in the case of a Mortgaged
Property purchased within one year
of the origination of the related
Mortgage Loan, the purchase price
of such Mortgaged Property. As of
the Cut- off Date the Combined
Loan-to-Value Ratios ranged from
____% to ______% and, as of the
Cut-off Date, the weighted average
Combined Loan-to-Value Ratio of
the Mortgage Loans was
approximately ____%.
Interest on each Mortgage Loan is
payable monthly and computed on
the related daily outstanding
Principal Balance for each day in
the billing cycle at a variable
rate per annum (the "Loan Rate")
equal at any time (subject to
maximum rates, as described herein
under "The Home Equity Lending
Program--Mortgage Loan Terms," and
further subject to applicable
usury limitations) to the sum of
((i) the highest prime rate
published in the "Money Rates"
section of The Wall Street
Journal) and (ii) a Margin within
the range of ___% to ____%. As of
the Cut-off Date, the weighted
average Margin was approximately
___%. Loan Rates are adjusted
monthly on the first business day
of the calendar month preceding
the Due Date. As to each Mortgage
Loan, the "Due Date" is the ___
day of each month. The Cut-off
Date Principal Balances ranged
from zero to $____ and averaged
approximately $___. Credit Limits
under the Mortgage Loans as of the
Cut-off Date ranged from $___ to
$___ and averaged approximately
$___ . Each Mortgage Loan was
originated in the period from
__________ __, 19__ to __________
__, 19__. As of the Cut-off Date,
the maximum Credit Limit
Utilization Rate (as defined
herein) was 100% and the weighted
average Credit Limit Utilization
Rate was approximately ____%. As
of the Cut-off Date, approximately
____% by Cut-off Date Principal
Balance of the Mortgage Loans
represented first liens on the
related Mortgaged Properties,
while approximately ____% of the
Mortgage Loans represented second
liens. As of the Cut-off Date,
the Mortgage Loans had remaining
terms to scheduled maturity
ranging from ___ months to ____
months and had a weighted average
of approximately ___ months. See
"The Home Equity Lending Program"
and "Description of the Mortgage
Loans" herein.
Distribution Date . . . . . . . . The ____ day of each month or, if
such day is not a Business Day,
the next succeeding Business Day,
commencing with _______, 199_. A
"Business Day" is any day other
than a Saturday or Sunday or
another day on which banking
institutions in New York, New York
(and ____________) are authorized
or obligated by law, regulations
or executive order to be closed.
Final Scheduled
Distribution Dates . . . . . . With respect to the Certificates,
___________________. To the
extent not previously paid, the
Security Principal Balance of the
Notes will be due on the
Distribution Date in _______,
199_. Failure to pay the full
principal balance of Notes on or
before the applicable final
scheduled payment dates
constitutes an Event of Default
under the Indenture.
Record Date . . . . . . . . . . . The last day preceding a
Distribution Date or, if the
Securities are no longer
Book-Entry Securities, the last
day of the month preceding a
Distribution Date.
Collections . . . . . . . . . . . All collections on the Mortgage
Loans will be allocated by the
Master Servicer in accordance with
the Loan Agreements between
amounts collected in respect of
interest ("Interest Collections")
and amounts collected in respect
of principal ("Principal
Collections" and collectively with
Interest Collections, the
"Collections"). The Master
Servicer will generally deposit
Collections distributable to the
Holders in an account established
for such purpose under the
Servicing Agreement (the
"Collection Account"). See
"Description of the Master
Servicing Agreement--Allocations
and Collections" herein and "The
Agreements--Payments on Loans;
Deposits to Security Account" and
"--Collection Procedures" in the
Prospectus.
Description of the Securities . .
A. Distributions . . . . . On each Distribution Date,
collections on the Mortgage Loans
will be applied in the following
order of priority:
(i) to the Master Servicer, the
Servicing Fee;
(ii) as payment for the accrued
interest due and any overdue
accrued interest (with
interest thereon) on the
respective Security Principal
Balances of the Notes and the
Certificates;
(iii) as principal on the
Securities, the excess
of Principal Collections
over Additional Balances
created during the
preceding Collection
Period, such amount to
be allocated between the
Notes and Certificates,
pro rata, based on their
respective Security
Principal Balances;
(iv) as principal on the
Securities, as payment for
any Liquidation Loss Amounts
on the Mortgage Loans;
(v) as payment for the premium on
the Policy;
(vi) to reimburse prior draws made
on the Policy; and
(vii) any remaining amounts to
the Seller.
As to any Distribution Date, the
"Collection Period" is the
calendar month preceding the month
of such Distribution Date.
"Liquidation Loss Amount" means
with respect to any Liquidated
Mortgage Loan, the unrecovered
Principal Balance thereof at the
end of the related Collection
Period in which such Mortgage Loan
became a Liquidated Mortgage Loan
after giving effect to the Net
Liquidation Proceeds in connection
therewith.
B. Note Rate . . . . . . . Interest will accrue on the unpaid
Security Principal Balance of the
Notes at the per annum rate (the
"Note Rate") equal to ___% per
annum from the Closing Date to the
first Distribution Date and
thereafter interest will accrue on
the Notes from and including the
preceding Distribution Date to but
excluding such current
Distribution Date (each, an
"Interest Accrual Period") at (a
floating rate equal to LIBOR (as
defined herein) plus ___%) (___%).
(Interest will be calculated on
the basis of the actual number of
days in each Interest Accrual
Period divided by 360.) A failure
to pay interest on any Notes on
any Distribution Date that
continues for five days
constitutes an Event of Default
under the Indenture.
C. Pass-Through Rate . . . Interest will accrue on the unpaid
Principal Balance of the
Certificates at the per annum rate
(the "Pass-Through Rate") equal to
___% per annum from the Closing
Date to the first Distribution
Date and thereafter interest will
accrue on the Certificates for
each Interest Accrual Period at (a
floating rate equal to LIBOR (as
defined herein) plus ___%) (___%).
(Interest will be calculated on
the basis of the actual number of
days in each Interest Accrual
Period divided by 360.) A failure
to pay interest on any
Certificates on any Distribution
Date that continues for five days
constitutes an Event of Default
under the Trust Agreement.
D. Form and
Registration . . . . . . . The Securities will initially be
delivered in book-entry form
("Book-Entry Securities").
Holders of such Securities may
elect to hold their interests
through The Depository Trust
Company ("DTC"), (in the United
States, or Centrale de Livraison
de Valeurs Mobilieres S.A.
("Cedel") or the Euroclear System
("Euroclear"), in Europe).
Transfers within DTC (, Cedel or
Euroclear, as the case may be,)
will be in accordance with the
usual rules and operating
procedures of the relevant system.
So long as the Securities are
Book-Entry Securities, such
Securities will be evidenced by
one or more securities registered
in the name of Cede & Co.
("Cede"), as the nominee of DTC
(or one of the relevant
depositaries (collectively, the
"European Depositaries")).
Cross-market transfers between
persons holding directly or
indirectly through DTC(, on the
one hand, and counterparties
holding directly or indirectly
through Cedel or Euroclear, on the
other,) will be effected in DTC
through Citibank N.A. ("Citibank")
or The Chase Manhattan Bank
("Chase") the relevant
depositaries of Cedel and
Euroclear, respectively, and each
a participating member of DTC.
The Securities will initially be
registered in the name of Cede.
The interests of such Holders will
be represented by book entries on
the records of DTC and
participating members thereof. No
Holder of a Security will be
entitled to receive a definitive
note representing such person's
interest, except in the event that
Securities in fully registered,
certificated form ("Definitive
Securities") are issued under the
limited circumstances described in
"Description of the Securities--
Book-Entry Registration of
Securities" in the Prospectus.
All references in this Prospectus
Supplement to Securities reflect
the rights of Holders of such
Notes only as such rights may be
exercised through DTC and its
participating organizations for so
long as such Securities are held
by DTC. See "Risk Factors--
Book-Entry Securities" herein.
E. Denominations . . . . . The Securities will be issued in
minimum denominations of
$(________) and integral multiples
thereof.
(Final Payment of Principal;
Termination . . . . . . . . . . The Trust will terminate on the
Distribution Date following the
earlier of (i) _________________
and (ii) the final payment or
other liquidation of the last
Mortgage Loan in the Trust. The
Mortgage Loans will be subject to
optional repurchase by the Master
Servicer on any Distribution Date
after the Principal Balance is
reduced to an amount less than or
equal to $_____ (____% of the
initial Principal Balance). The
repurchase price will be equal to
the sum of the outstanding
Principal Balance and accrued and
unpaid interest thereon at the
weighted average of the Loan Rates
through the day preceding the
final Distribution Date. See
"Description of the Securities--
Optional Termination" herein and
"The Agreements--Termination;
Optional Termination" in the
Prospectus.
(Letter of Credit)
(Surety Bond)
Issuer . . . . . . . . . . _________________ (the "(Letter of
Credit) (Surety Bond) Issuer").
See "The (Letter of Credit)
(Surety Bond) Issuer" herein.
(Letter of Credit)
(Surety Bond) . . . . . . . On the Closing Date, the (Letter
of Credit) (Surety Bond) Issuer
will issue a (letter of credit)
(surety bond) (the "(Letter of
Credit) (Surety Bond)") in favor
of the Owner Trustee on behalf of
the Trust. In the event that, on
any Distribution Date, available
amounts on deposit in the
Collection Account with respect to
the preceding Collection Period
are insufficient to provide for
the payment of the amount required
to be distributed to the Holders
and the Master Servicer on such
Distribution Date, the Trustee
will draw on the (Letter of
Credit) (Surety Bond), to the
extent of the (Letter of Credit)
(Surety Bond) Amount for such
Distribution Date, in an amount
equal to such deficiency. See
"Description of the Securities--
Distributions" herein and "Credit
Enhancement" in the Prospectus.
((Letter of Credit)
(Surety Bond)
Amount . . . . . . . . . . The amount available under the
(Letter of Credit) (Surety Bond)
(the "(Letter of Credit) (Surety
Bond) Amount") for the initial
Distribution Date will be $______.
For each Distribution Date
thereafter, the (Letter of Credit)
(Surety Bond) Amount will equal
the lesser of (i)___ % of the Pool
Balance as of the first day of the
preceding Collection Period (after
giving effect to any amounts
distributed with respect to
principal of the Mortgage Loans on
the Distribution Date occurring in
such preceding Collection Period)
and (ii) the (Letter of Credit)
(Surety Bond) Amount as of the
first day of the preceding
Collection Period, minus any
amounts drawn under the (Letter of
Credit) (Surety Bond) during such
preceding Collection Period, plus
any amounts paid to the (Letter of
Credit) (Surety Bond) Issuer on
the Distribution Date occurring in
such preceding Collection Period
up to the amount of any previous
draws on the (Letter of Credit)
(Surety Bond).)
Certain Federal Income Tax
Consequences . . . . . . . . . In the opinion of Tax Counsel (as
defined herein), for federal
income tax purposes, the
Securities will be characterized
as indebtedness, and the Trust
will not be characterized as an
association (or publicly traded
partnership) taxable as a
corporation. Each holder of a
Security, by the acceptance of a
Security, will agree to treat the
Security as indebtedness for
federal, state and local income
and franchise tax purposes. See
"Certain Federal Income Tax
Consequences" and "State Tax
Consequences" herein and "Certain
Federal Income Tax Consequences"
and "State Tax Considerations" in
the Prospectus concerning the
application of federal, state and
local tax laws.
ERISA Considerations . . . . . . Generally, plans that are subject
to the requirements of ERISA and
the Code are permitted to purchase
instruments like the Notes that
are debt under applicable state
law and have no "substantial
equity features" without reference
to the prohibited transaction
requirements of ERISA and the
Code. In the opinion of ERISA
Counsel (as defined herein), the
Notes will be classified as
indebtedness without substantial
equity features for ERISA
purposes. However, if the Notes
are deemed to be equity interests
and no statutory, regulatory or
administrative exemption applies,
the Trust will hold plan assets by
reason of a Plan's investment in
the Notes. Accordingly, any Plan
fiduciary considering whether to
purchase the Notes on behalf of a
Plan should consult with its
counsel regarding the
applicability of the provisions of
ERISA and the Code and the
availability of any exemptions.
Under current law the purchase and
holding of the Certificates by or
on behalf of any employee benefit
plan (a "Plan") subject to the
fiduciary responsibility
provisions of the Employee
Retirement Income Security Act of
1974, as amended ("ERISA"), may
result in a "prohibited
transaction" within the meaning of
ERISA and the Code or other
violation of the fiduciary
responsibility provisions of ERISA
and Section 4975 of the Code.
(Consequently, Certificates may
not be transferred to a proposed
transferee that is a Plan subject
to ERISA or that is described in
Section 4975(e)(1) of the Code, or
a person acting on behalf of any
such Plan or using the assets of
such plan unless the Owner Trustee
and the Depositor receive the
opinion of counsel reasonably
satisfactory to the Owner Trustee
and the Depositor to the effect
that the purchase and holding of
such Certificate will not result
in the assets of the Trust being
deemed to be "plan assets" for
ERISA purposes and will not be a
prohibited transaction under ERISA
or Section 4975 of the Code.) See
"ERISA Considerations" herein and
in the Prospectus.
Legal Investment . . . . . . . . The Securities will not constitute
"mortgage related securities" for
purposes of the Secondary Mortgage
Market Enhancement Act of 1984
("SMMEA"), because some of the
Mortgages securing the Mortgage
Loans are not first mortgages.
Accordingly, many institutions
with legal authority to invest in
comparably rated securities based
solely on first mortgages may not
be legally authorized to invest in
the Certificates. See "Legal
Investment Considerations" herein
and "Legal Investment" in the
Prospectus.
Rating . . . . . . . . . . . . . It is a condition to the issuance
of the Securities that they be
rated _________ by at least ____
nationally recognized statistical
rating organizations (each a
"Rating Agency"). In general,
ratings address credit risk and do
not address the likelihood of
prepayments. A security rating is
not a recommendation to buy, sell
or hold securities.
RISK FACTORS
Book-Entry Securities. Issuance of the Securities in book-entry form
may reduce the liquidity of such Securities in the secondary trading market
since investors may be unwilling to purchase Securities for which they cannot
obtain physical securities. See "Description of the Securities--Book-Entry
Securities" herein and "Risk Factors--Book-Entry Registration" in the
Prospectus.
Since transactions in the Securities can be effected only through DTC,
CEDEL, Euroclear, participating organizations, indirect participants and
certain banks, the ability of a Security Owner to pledge a Security to
persons or entities that do not participate in the DTC, CEDEL or Euroclear
system or otherwise to take actions in respect of such Securities, may be
limited due to lack of a physical security representing the Securities. See
"Description of the Securities--Book-Entry Securities" herein and "Risk
Factors--Book-Entry Registration" in the Prospectus.
Security Owners may experience some delay in their receipt of
distributions of interest and principal on the Securities since such
distributions will be forwarded by the Trustee to DTC and DTC will credit
such distributions to the accounts of its Participants (as defined herein)
which will thereafter credit them to the accounts of Security Owners either
directly or indirectly through indirect participants. See "Description of
the Securities--Book-Entry Securities" herein and "Risk Factors--Book-Entry
Registration" in the Prospectus.
CASH FLOW CONSIDERATIONS
Minimum monthly payments will at least equal and may exceed accrued
interest. Even assuming that the Mortgaged Properties provide adequate
security for the Mortgage Loans, substantial delay could be encountered in
connection with the liquidation of Mortgage Loans that are delinquent and
corresponding delays in the receipt of related proceeds by Holders could
occur if the (Letter of Credit) (Surety Bond) provider were unable to perform
on its obligations under the (Letter of Credit) (Surety Bond). Further,
liquidation expenses (such as legal fees, real estate taxes, and maintenance
and preservation expenses) will reduce the proceeds payable to Holders and
thereby reduce the security for the Mortgage Loans. In the event any of the
Mortgaged Properties fail to provide adequate security for the related
Mortgage Loans, Holders could experience a loss if the (Letter of Credit)
(Surety Bond) provider were unable to perform its obligations under the
(Letter of Credit) (Surety Bond).)
PREPAYMENT CONSIDERATIONS
Substantially all of the Mortgage Loans may be prepaid in whole or in
part at any time without penalty. Home equity loans, such as the Mortgage
Loans, have been originated in significant volume only during the past few
years and neither the Depositor nor the Master Servicer is aware of any
publicly available studies or statistics on the rate of prepayment of such
loans. Generally, home equity loans are not viewed by borrowers as permanent
financing. Accordingly, the Mortgage Loans may experience a higher rate of
prepayment than traditional loans. The Trust's prepayment experience may be
affected by a wide variety of factors, including general economic conditions,
interest rates, the availability of alternative financing and homeowner
mobility. In addition, substantially all of the Mortgage Loans contain
due-on-sale provisions and the Master Servicer intends to enforce such
provisions unless (i) such enforcement is not permitted by applicable law or
(ii) the Master Servicer, in a manner consistent with reasonable commercial
practice, permits the purchaser of the related Mortgaged Property to assume
the Mortgage Loan. To the extent permitted by applicable law, such
assumption will not release the original borrower from its obligation under
any such Mortgage Loan. See "Certain Legal Aspects of the Loans--Due-on-Sale
Clauses" in the Prospectus for a description of certain provisions of the
Credit Line Agreements that may affect the prepayment experience on the
Mortgage Loans.
Certificate Rating. The rating of the Securities will depend primarily
on an assessment by the Rating Agencies of the Loans and upon the
claims-paying ability (Letter of Credit) (Surety Bond) provider. Any
reduction in a rating assigned to the claims-paying ability of the (Letter of
Credit)(Surety Bond) provider below the rating initially given to the
Securities may result in a reduction in the rating of the Securities. The
rating by the Rating Agencies of the Securities is not a recommendation to
purchase, hold or sell the Securities, inasmuch as such rating does not
comment as to the market price or suitability for a particular investor.
There is no assurance that the ratings will remain in place for any given
period of time or that the ratings will not be lowered or withdrawn by the
Rating Agencies. In general, the ratings address credit risk and do not
address the likelihood of prepayments. The ratings of the Securities do not
address the possibility of the imposition of United States withholding tax
with respect to non-U.S. persons.
LEGAL CONSIDERATIONS
The Mortgage Loans are secured by deeds of trust or mortgages (which
generally are second mortgages). With respect to Mortgage Loans that are
secured by first mortgages, the Master Servicer has the power under certain
circumstances to consent to a new mortgage lien on the Mortgaged Property
having priority over such Mortgage Loan. Mortgage Loans secured by second
mortgages are entitled to proceeds that remain from the sale of the related
Mortgage Property after any related senior mortgage loan and prior statutory
liens have been satisfied. In the event that such proceeds are insufficient
to satisfy such loans and prior liens in the aggregate (and the (Letter of
Credit) (Surety Bond) provider is unable to perform its obligations under the
(Letter of Credit) (Surety Bond) or if the coverage under the (Letter of
Credit) (Surety Bond) is exhausted) the Trust and, accordingly, the Holders,
bear (i) the risk of delay in distributions while a deficiency judgment
against the borrower is obtained and (ii) the risk of loss if the deficiency
judgment cannot be obtained or is not realized upon. See "Certain Legal
Aspects of the Mortgage Loans" in the Properties.
The sale of the Mortgage Loans from the Seller to the Depositor pursuant
to the Purchase Agreement will be treated as a sale of the Mortgage Loans.
The Seller will warrant that such transfer is either a sale of its interest
in the Mortgage Loans or a grant of a first priority perfected security
interest therein. In the event of an insolvency of the Seller, the receiver
of the Seller may attempt to recharacterize the sale of the Mortgage Loans as
a borrowing by the Seller secured by a pledge of the Mortgage Loans. If the
receiver decided to challenge such transfer, delays in payments of the
Securities and possible reductions in the amount thereof could occur. The
Depositor will warrant in the Trust Agreement that the transfer of its
interest in the Mortgage Loans to the Trust is a valid transfer and
assignment of such interest.
If a conservator, receiver or trustee were appointed for the Seller, or
if certain other events relating to the bankruptcy or insolvency of the
Seller were to occur, Additional Balances would not be transferred by the
Seller to the Trust. In such an event, an Event of Default under the Pooling
and Servicing Agreement and Indenture would occur and the Owner Trustee would
attempt to sell the Mortgage Loans (unless Holders holding Securities
evidencing undivided interests aggregating at least 51% of each of the
Security Principal Balance of the Notes and the Certificates instruct
otherwise), thereby causing early payment of the Security Principal Balance
of the Notes and the Certificates.
In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the applicable
Trustee or the Holders from appointing a successor Master Servicer.
(Geographic Concentration. As of the Cut-off Date, approximately _____%
(by Cut-off Date Principal Balance) of the Mortgaged Properties are located
in the State of __________. An overall decline in the __________ residential
real estate market could adversely affect the values of the Mortgaged
Properties securing such Mortgage Loans such that the Principal Balances of
the related Mortgage Loans, together with any primary financing on such
Mortgaged Properties, could equal or exceed the value of such Mortgaged
Properties. As the residential real estate market is influenced by many
factors, including the general condition of the economy and interest rates,
no assurances may be given that the __________ residential real estate market
will not weaken. If the __________ residential real estate market should
experience an overall decline in property values after the dates of
origination of the Mortgage Loans, the rates of losses on the Mortgage Loans
would be expected to increase, and could increase substantially.)
MASTER SERVICER'S ABILITY TO CHANGE THE TERMS OF THE MORTGAGE LOANS
The Master Servicer may agree to changes in the terms of a Credit Line
Agreement, provided that such changes (i) do not adversely affect the
interest of the Holders or the (Letter of Credit) (Surety Bond) provider, and
(ii) are consistent with prudent business practice. There can be no
assurance that changes in applicable law or the marketplace for home equity
loans or prudent business practice will not result in changes in the terms of
the Mortgage Loans. In addition, the Master Servicing Agreement permits the
Master Servicer, within certain limitations described therein, to increase
the Credit Limit of the related Mortgage Loan or reduce the Margin for such
Mortgage Loan.
DELINQUENT MORTGAGE LOANS
The Trust will include Mortgage Loans which are __ or fewer days
delinquent. The Cut-off Date Principal Balance of such delinquent Mortgage
Loans was $______________.)
For a discussion of additional risks pertaining to the Securities, see
"Risk Factors" in the Prospectus.
THE TRUST
GENERAL
The Issuer, Home Equity Loan Trust 199_, is a business trust formed
under the laws of the State of Delaware pursuant to the Trust Agreement for
the transactions described in this Prospectus Supplement. The Trust
Agreement constitutes the "governing instrument" under the laws of the State
of Delaware relating to business trusts. After its formation, the Issuer
will not engage in any activity other than (i) acquiring, holding and
managing the Mortgage Loans and the other assets of the Trust and proceeds
therefrom, (ii) issuing the Notes and the Certificates, (iii) making payments
on the Notes and the Certificates and (iv) engaging in other activities that
are necessary, suitable or convenient to accomplish the foregoing or are
incidental thereto or connected therewith.
The property of the Trust will consist of: (i) each of the Mortgage
Loans that are _________; (ii) collections on the Mortgage Loans (received)
after the Cut-off Date; (iii) Mortgaged Properties relating to the Mortgage
Loans that are acquired by foreclosure or deed in lieu of foreclosure; (iv)
the Collection Account and the Distribution Account (excluding net earnings
thereon); (v) the (Letter of Credit) (Surety Bond); and (vi) an assignment of
the Depositor's rights under the Purchase Agreement, including all rights of
the Depositor to purchase Additional Balances.
The Trust's principal offices are in __________, Delaware, in care of
________________________, as Owner Trustee, at (__________).
THE (LETTER OF CREDIT)(SURETY BOND) ISSUER
The following information with respect to _________ ("_______") has been
furnished by __________. Accordingly, none of the Issuer, the Depositor or
the Master Servicer makes any representation as to the accuracy and
completeness of such information.
(Description of Letter of Credit/Surety Issuer)
THE MASTER SERVICER
GENERAL
The Master Servicer will service the Mortgage Loans in accordance with
the terms set forth in the Master Servicing Agreement. The Master Servicer
may perform any of its obligations under the Master Servicing Agreement
through one or more subservicers. Notwithstanding any such subservicing
arrangement, the Master Servicer will remain liable for its servicing duties
and obligations under the Master Servicing Agreement as if the Master
Servicer alone were servicing the Mortgage Loans. As of the Closing Date,
the Master Servicer will service the Mortgage Loans without subservicing
arrangements.
THE MASTER SERVICER
(IndyMac, Inc. ("IndyMac"), a Delaware corporation), will act as Master
Servicer for the Mortgage Loans pursuant to the Master Servicing
Agreement. The principal executive offices of (IndyMac) are located at
(155 North Lake Avenue, Pasadena, California 91101).
At ______________, 199_, IndyMac provided servicing for approximately
$______ billion aggregate principal amount of first-lien mortgage loans,
substantially all of which are being serviced for unaffiliated persons. At
_____________, 199_, IndyMac provided servicing for approximately $______
million aggregate principal amount of first and second lien mortgage loans
originated under home equity lines of credit.
THE HOME EQUITY LOAN PROGRAM
UNDERWRITING PROCEDURES RELATING TO HOME EQUITY LOANS
The following is a description of the underwriting procedures
customarily employed by the Seller with respect to home equity loans. The
underwriting process is intended to assess the applicant's credit standing
and repayment ability, and the value and adequacy of the real property
security as collateral for the proposed loan. Exceptions to the Seller's
underwriting guidelines will be made when compensating factors are present.
Such factors include the borrower's employment stability, credit history,
disposable income, equity in the related property and the nature of the
underlying first mortgage loan.
(Description of Specific Underwriting Procedures to Follow)
SERVICING OF THE MORTGAGE LOANS
The Master Servicer has established standard policies for the servicing
and collection of the home equity loans. Servicing includes, but is not
limited to, (i) the collection and aggregation of payments relating to the
Mortgage Loans; (ii) the supervision of delinquent Mortgage Loans, loss
mitigation efforts, foreclosure proceedings and, if applicable, the
disposition of Mortgaged Properties; and (iii) the preparation of tax related
information in connection with the Mortgage Loans.
(Description of Specific Servicing Standards to Follow)
FORECLOSURE AND DELINQUENCY EXPERIENCE
The following table summarizes the delinquency and foreclosure
experience, respectively, on the dates indicated, of home equity loans
serviced by the Master Servicer. Since (_______) only began servicing home
equity loans in _______ 199_, the delinquency and foreclosure percentages may
be affected by the size and relative lack of seasoning of the servicing
portfolio because many of such loans were not outstanding long enough to give
rise to some or all of the periods of delinquency indicated in the chart
below. Accordingly, the information should not be considered as a basis for
assessing the likelihood, amount or severity of delinquency or losses on the
Mortgage Loans and no assurances can be given that the foreclosure and
delinquency experience presented in the table below will be indicative of
such experience on the Mortgage Loans:
Delinquency Status as of _____________, 199__*
Dollars Percent Units Percent
Current . . . . . . . . $__________ ____% _____ ____%
30-59 days . . . . . . $__________ ____% _____ ____%
60-89 days . . . . . . $__________ ____% _____ ____%
90+ days . . . . . . . $__________ ____% _____ ____%
Total $__________ 100.00% _____ 100.00%
_____________
* Delinquencies are reported on a contractual basis.
As of _____________, 199_, ______ loans with an aggregate balance of
$___________ are in bankruptcy and ________ loans with an aggregate balance
of $___________ are in foreclosure. Of the loans in foreclosure, there will
be a ____________ 199_ charge off of $________. In addition to this charge
off, there is an anticipated charge off of approximately $_____________ which
may also be realized in _________.)
DESCRIPTION OF THE MORTGAGE LOANS
GENERAL
The Mortgage Loans were originated pursuant to loan agreements and
disclosure statements (the "Credit Line Agreements") and are secured by
mortgages or deeds of trust, which are either first or second mortgages or
deeds of trust, on Mortgaged Properties located in (__) states. The
Mortgaged Properties securing the Mortgage Loans consist primarily of
residential properties that are one- to four-family properties. See "--
Mortgage Loan Terms" below.
The Cut-off Date Pool Balance is $______________, which is equal to the
aggregate Principal Balances of the Mortgage Loans as of the Cut-off Date.
As of the Cut-off Date, the Mortgage Loans were not more than 89 days
delinquent. The average Cut-off Date Principal Balance was approximately
$____ , the minimum Cut-off Date Principal Balance was zero, the maximum
Cut-off Date Principal Balance was $______, the minimum Loan Rate and the
maximum Loan Rate as of the Cut-off Date were ____% and ____% per annum,
respectively, and the weighted average Loan Rate as of the Cut-off Date was
approximately ___% per annum. As of the Cut-off Date, the weighted average
Credit Limit Utilization Rate was approximately ____%, the minimum Credit
Limit Utilization Rate was zero and the maximum Credit Limit Utilization Rate
was 100%. The "Credit Limit Utilization Rate" is determined by dividing the
Cut-off Date Principal Balance of a Mortgage Loan by the Credit Limit of the
related Credit Line Agreement. The remaining term to scheduled maturity for
the Mortgage Loans as of the Cut-off Date ranged from ____ months to ____
months and the weighted average remaining term to scheduled maturity was
approximately _____ months. As of the Cut-off Date, the Combined Loan-to-
Value Ratio of the Mortgage Loans ranged from ____% to ______% and the
weighted average Combined Loan-to-Value Ratio was __%. The Combined Loan-to-
Value Ratio for a Mortgage Loan is the ratio (expressed as a percentage) of
(A) the sum of (i) the Credit Limit of the Mortgage Loan and (ii) any
outstanding principal balances of mortgage loans senior to such Mortgage
Loan (calculated at the date of origination of the Mortgage Loan) to
(B) the lesser of (i) the appraised value of the related Mortgaged Property
as set forth in the loan files at such date of origination or (ii) in the
case of a Mortgaged Property purchased within one year of the origination of
the related Mortgage Loan, the purchase price of such Mortgaged Property.
Credit Limits under the Mortgage Loans as of the Cut-off Date ranged from
$______ to $____ and averaged approximately $_____ . The weighted average
second mortgage ratio (which is the Credit Limit for the related Mortgage
Loan, provided such Mortgage Loan was in the second lien position, divided by
the sum of such Credit Limit and the outstanding principal balance of any
mortgage loan senior to the related Mortgage Loan) was approximately _____%.
As of the Cut-off Date, approximately _____% by Cut-off Date Principal
Balance of the Mortgage Loans represented first liens on the related
Mortgaged Properties, while approximately ____% of the Mortgage Loans
represented second liens. As of the Cut-off Date, approximately ______% of
the Mortgage Loans are secured by Mortgaged Properties which are
single-family residences and ___% were owner-occupied. As of the Cut-off
Date, approximately ____%, ____%,____%,______%,______% and ______% by Cut-off
Date Principal Balance are located in (__________, ________, __________,
_______, ______ and ________), respectively.
MORTGAGE LOAN TERMS
(The Mortgage Loans bear interest at a variable rate which changes
monthly on the first business day of the related month with changes in the
applicable Index Rate. The Mortgage Loans are subject to a maximum per annum
interest rate (the "Maximum Rate") ranging from _____% to _____% per annum
and subject to applicable usury limitations. As of the Cut-off Date, the
weighted average Maximum Rate was approximately ______%. See "Certain Legal
Aspects of the Loans--Applicability of Usury Laws" in the Prospectus. The
daily periodic rate on the Mortgage Loans (the "Loan Rate") is the sum of the
Index Rate plus the spread (the "Margin") which generally ranges between
____% and ____% and had a weighted average, as of the Cut-off Date, of
approximately %, divided by 365 days. The "Index Rate" is based on the
highest "prime rate" published in the 'Money Rates' table of The Wall Street
Journal as of the first business day of each calendar month.)
_________ offers an introductory loan rate on home equity lines of
credit which are originated with Combined Loan-to-Value Ratios of __% and
__%. The introductory rate applies to any payments made during the first
three months after origination. After such three month period, the Loan Rate
will adjust to the Index plus the applicable Margin. As of the Cut-off Date,
approximately ____% of the Mortgage Loans by Cut-off Date Principal Balance
were subject to an introductory rate of ____% per annum.
In general, the home equity loans may be drawn upon for a period (the
"Draw Period") of either five years (which may be extendible for an
additional ____ years, upon _________'s approval) or three years. Home
equity loans with an initial Draw Period of five years, which constitute
approximately ____% of the Mortgage Loans by Cut-off Date Principal Balance,
are subject to a fifteen year repayment period (the "Repayment Period")
following the end of the Draw Period during which the outstanding principal
balance of the loan will be repaid in monthly installments equal to (1/180)
of the outstanding principal balance as of the end of the Draw Period.
Mortgage Loans with a Draw Period of three years, which constitute
approximately ____% of the Mortgage Loans by Cut-off Date Principal Balance,
are subject to a ten year Repayment Period following the end of the Draw
Period during which the outstanding principal balance of the loan will be
paid in monthly installments equal to (1/120) of the outstanding principal
balance as of the end of the Draw Period.
The minimum payment due during the Draw Period will be equal to the
finance charges accrued on the outstanding principal balance of the home
equity loan during the related billing period. The minimum payment due
during the repayment period will be equal to the sum of the finance charges
accrued on the outstanding principal balance of the Mortgage Loan during the
related billing period and the principal payment described above.
Set forth below is a description of certain characteristics of the
Mortgage Loans as of the Cut-off Date:
PRINCIPAL BALANCES
Number of Cut-off Date Percent of Pool by
Mortgage Principal Cut-off Date
Range of Principal Balances Loans Balance Principal Balance
- ----------------------------- --------- ------------ -----------------
$ _______ to $ _______ . . . $ %
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . .
$ _______ to $ _______ . . . ---------- ----------- --------------
Total . . . . . . . . . . $ 100.00%
========== ========== ==============
GEOGRAPHIC DISTRIBUTION(1)
Number of Cut-off Date Percent of Pool by
Mortgage Principal Cut-off Date
State Loans Balance Principal Balance
- -------------------- ---------- ------------ ------------------
$ %
---------- ------------ -----------------
Total . . . . . . . . $ 100.00%
========== ============ =================
______________
(1) Geographic location is determined by the address of the Mortgaged
Property securing the related Mortgage Loan.
<TABLE>
<CAPTION>
COMBINED LOAN-TO-VALUE RATIOS(1)
Number of Cut-off Date Percent of Pool by
Range of Combined Mortgage Principal Cut-off Date
Loan-to-Value Ratios Loans Balance Principal Balance
- ---------------------------------------- ---------- ------------ ------------------
<S> <C> <C> <C>
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
-------------------------------------------------------
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . . ---------- ------------- -------------------
Total . . . . . . . . . . . . . $ 100.00%
========== ============= ===================
______________
(1) The ratio (expressed as a percentage) of (A) the sum of (i) the Credit
Limit of the Mortgage Loans and (ii) any outstanding principal balances
of mortgage loans senior to the Mortgage Loans (calculated at the date
of origination of the Mortgage Loans) to (B) the lesser of (i) the
appraised value of the related Mortgaged Property as set forth in loan
files at such date of origination or (ii) in the case of a Mortgaged
Property purchased within one year of the origination of the related
Mortgage Loan, the purchase price of such Mortgaged Property.
</TABLE>
<TABLE>
<CAPTION>
PROPERTY TYPE
Number of Cut-off Date Percent of Pool by
Mortgage Principal Cut-off Date
Property Type Loans Balance Principal Balance
- ---------------------------------------- ---------- ------------ ------------------
<S> <C> <C> <C>
Single Family . . . . . . . . . . . . $ %
Two- to Four-Family . . . . . . . . .
Condominium . . . . . . . . . . . . .
---------- ------------ -----------------
PUD . . . . . . . . . . . . . . . . .
---------- ------------ -----------------
Total . . . . . . . . . . . . . $ 100.00%
========== ============ =================
</TABLE>
<TABLE>
<CAPTION>
LIEN PRIORITY
Number of Cut-off Date Percent of Pool by
Mortgage Principal Cut-off Date
Lien Priority Loans Balance Principal Balance
- ---------------------------------------- ---------- ------------ ------------------
<S> <C> <C> <C>
First Lien . . . . . . . . . . . . . $ %
Second Lien . . . . . . . . . . . . .
---------- ------------ -----------------
Total . . . . . . . . . . . . . $ 100.00%
========== ============ =================
</TABLE>
<TABLE>
<CAPTION>
LOAN RATES(1)
Range of Number of Cut-off Date Percent of Pool by
Loan Rates Mortgage Principal Cut-off Date
Loan-to-Value Ratios Loans Balance Principal Balance
- ---------------------------------------- ---------- ------------- ------------------
<S> <C> <C> <C>
_______% to ________% . . . . . . . . $ %
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
---------- ------------ -----------------
Total . . . . . . . . . . . . . $ 100.00%
______________
(1) Approximately % of the Mortgage Loans by Cut-Of Date Principal Balance
are subject to an introductory rate of ____% per annum.
</TABLE>
<TABLE>
<CAPTION>
MARGIN
Number of Cut-off Date Percent of Pool by
Range of Mortgage Principal Cut-off Date
Margins Loans Balance Principal Balance
- ---------------------------------------- --------- ------------ ------------------
<S> <C> <C> <C>
_______% to ________% . . . . . . . . $ %
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
---------- ------------ -----------------
Total . . . . . . . . . . . . . $ 100.00%
========== ============ =================
</TABLE>
<TABLE>
<CAPTION>
CREDIT LIMIT UTILIZATION RATES
Number of Cut-off Date Percent of Pool by
Range of Credit Limit Mortgage Principal Cut-off Date
Utilization Rates Loans Balance Principal Balance
- -------------------------------------- --------- ------------ ------------------
<S> <C> <C> <C>
_______% to ________% . . . . . . . . $ %
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
---------- ------------ ----------------
Total . . . . . . . . . . . . . $ 100.00%
========== ============ ================
</TABLE>
<TABLE>
<CAPTION>
CREDIT LIMITS
Number of Cut-off Date Percent of Pool by
Mortgage Principal Cut-off Date
Range of Credit Limits Loans Balance Principal Balance
- ---------------------------------------- ---------- ------------ ------------------
<S> <C> <C> <C>
_______% to ________% . . . . . . . . $ %
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
_______% to ________% . . . . . . . .
---------- ------------ ----------------
Total . . . . . . . . . . . . . $ 100.00%
========== ============ ================
</TABLE>
<TABLE>
<CAPTION>
MAXIMUM RATES
Number of Cut-off Date Percent of Pool by
Mortgage Principal Cut-off Date
Maximum Rates Loans Balance Principal Balance
- ---------------------------------------- --------- ------------ ------------------
<S> <C> <C> <C>
________% . . . . . . . . . . . . . . $ %
________% . . . . . . . . . . . . . .
________% . . . . . . . . . . . . . .
________% . . . . . . . . . . . . . .
________% . . . . . . . . . . . . . .
---------- ------------ ----------------
Total . . . . . . . . . . . . . $ 100.00%
</TABLE>
<TABLE>
<CAPTION>
MONTHS REMAINING TO SCHEDULES MATURITY(1)
Number of Cut-off Date Percent of Pool by
Range of Months Mortgage Principal Cut-off Date
Remaining to Scheduled Maturity Loans Balance Principal Balance
- ---------------------------------------- --------- ------------ ------------------
<S> <C> <C> <C>
_______ to ________ . . . . . . . . . $ %
_______ to ________ . . . . . . . . .
_______ to ________ . . . . . . . . .
_______ to ________ . . . . . . . . .
_______ to ________ . . . . . . . . .
_______ to ________ . . . . . . . . .
_______ to ________ . . . . . . . . .
_______ to ________ . . . . . . . . .
_______ to ________ . . . . . . . . .
_______ to ________ . . . . . . . . .
---------- ------------ ----------------
Total . . . . . . . . . . . . . $ 100.00%
========== ============ ================
______________
(1) Assumes that the Draw Period for Mortgage Loans with five year Draw
Periods will be extended for an additional five years.
</TABLE>
<TABLE>
<CAPTION>
ORIGINATION YEAR
Number of Cut-off Date Percent of Pool by
Mortgage Principal Cut-off Date
Origination Year Loans Balance Principal Balance
- ---------------------------------------- --------- ------------ ------------------
<S> <C> <C> <C>
_______ . . . . . . . . . . . . . . . $ %
_______ . . . . . . . . . . . . . . .
---------- ------------ ----------------
Total . . . . . . . . . . . . . $ 100.00%
========== ============ ================
</TABLE>
<TABLE>
<CAPTION>
DELINQUENCY STATUS
Number of Cut-off Date Percent of Pool by
Mortgage Principal Cut-off Date
Number of Days Delinquent Loans Balance Principal Balance
- ---------------------------------------- --------- ------------ ------------------
<S> <C> <C> <C>
0 to 29 . . . . . . . . . . . . . . . $ %
30 to 59 . . . . . . . . . . . . . .
60 to 89 . . . . . . . . . . . . . .
---------- ------------ ----------------
Total . . . . . . . . . . . . . $ 100.00%
========== ============ ================
</TABLE>
ASSIGNMENT OF MORTGAGE LOANS
At the time of issuance of the Securities, the Depositor will transfer
to the Trust all of its right, title and interest in and to each Mortgage
Loan (including its right to purchase any Additional Balances arising in the
future), related Credit Line Agreements, mortgages and other related
documents (collectively, the "Related Documents"), including all collections
received on or with respect to each such Mortgage Loan after the Cut-off Date
(exclusive of payments in respect of accrued interest due on or prior to the
Cut-off Date or due in the month of ______). The Owner Trustee, concurrently
with such transfer, will deliver the Securities. Each Mortgage Loan
transferred to the Owner Trust will be identified on a schedule delivered to
the Owner Trustee pursuant to the Purchase Agreement. Such schedule will
include information as to the Cut-off Date Principal Balance of each Mortgage
Loan, as well as information with respect to the Loan Rate.
Within 90 days of an Assignment Event the Owner Trustee will review the
Mortgage Loans and the Related Documents and if any Mortgage Loan or Related
Document is found to be defective in any material respect and such defect is
not cured within 90 days following notification thereof to the Seller and the
Depositor by the Owner Trustee, the Seller will be obligated to repurchase
the Mortgage Loan and to deposit the Repurchase Price into the Collection
Account. Upon such retransfer, the Principal Balance of such Mortgage Loan
will be deducted from the Pool Balance. In lieu of any such repurchase, the
Seller may substitute an Eligible Substitute Mortgage Loan. Any such
repurchase or substitution will be considered a payment in full of such
Mortgage Loan. The obligation of the Seller to accept a transfer of a
Defective Mortgage Loan is the sole remedy regarding any defects in the
Mortgage Loans and Related Documents available to the Owner Trustee or the
Holders.
With respect to any Mortgage Loan, the "Repurchase Price" is equal to
the Principal Balance of such Mortgage Loan at the time of any transfer
described above plus accrued and unpaid interest thereon to the date of
repurchase.
An "Eligible Substitute Mortgage Loan" is a mortgage loan substituted by
the Depositor for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Principal Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Principal Balance), not __% more or less than the Transfer
Deficiency relating to such Defective Mortgage Loan; (ii) have a Loan Rate
not less than the Loan Rate of the Defective Mortgage Loan and not more than
1% in excess of the Loan Rate of such Defective Mortgage Loan; (iii) have a
Loan Rate based on the same Index with adjustments to such Loan Rate made on
the same Interest Rate Adjustment Date as that of the Defective Mortgage
Loan; (iv) have a Margin that is not less than the Margin of the Defective
Mortgage Loan and not more than ___ basis points higher than the Margin for
the Defective Mortgage Loan; (v) have a mortgage of the same or higher level
of priority as the mortgage relating to the Defective Mortgage Loan; (vi)
have a remaining term to maturity not more than ___ months earlier and not
more than __ months later than the remaining term to maturity of the
Defective Mortgage Loan; (vii) comply with each representation and warranty
as to the Mortgage Loans set forth in the Purchase Agreement (deemed to be
made as of the date of substitution); (viii) in general, have an original
Combined Loan-to-Value Ratio not greater than that of the Defective Mortgage
Loans; and (ix) satisfy certain other conditions specified in the Purchase
Agreement. To the extent the Principal Balance of an Eligible Substitute
Mortgage Loan is less than the Principal Balance of the related Defective
Mortgage Loan, the Seller will be required to make a deposit to the
Collection Account equal to such difference.
The Seller will make certain representations and warranties as to the
accuracy in all material respects of certain information furnished to the
Owner Trustee with respect to each Mortgage Loan (e.g., Cut-off Date
Principal Balance and the Loan Rate). In addition, the Seller will represent
and warrant on the Closing Date that at the time of transfer to the
Depositor, the Seller has transferred or assigned all of its right, title and
interest in each Mortgage Loan and the Related Documents, free of any lien
(subject to certain exceptions). Upon discovery of a breach of any such
representation and warranty which materially and adversely affects the
interests of the Trustee (or Letter of Credit)(Surety Bond) provider in the
related Mortgage Loan and Related Documents, the Seller will have a period of
90 days after discovery or notice of the breach to effect a cure. If the
breach cannot be cured within the 90-day period, the Seller will be
obligated to repurchase or substitute the Defective Mortgage Loan from the
Trust; provided, however, that the Seller will not be obligated to make any
such repurchase or substitution (or cure such breach) if such breach
constitutes fraud in the origination of the affected Mortgage Loan and the
Seller did not have knowledge of such fraud. The same procedure and
limitations that are set forth above for the repurchase or substitution of
Defective Mortgage Loans will apply to the transfer of a Mortgage Loan that
is required to be repurchased or substituted because of a breach of a
representation or warranty in the Purchase Agreement that materially and
adversely affects the interests of the Trustee in the such Mortgage Loan.
Mortgage Loans required to be transferred to the Seller as described in
the preceding paragraphs are referred to as "Defective Mortgage Loans."
MATURITY AND PREPAYMENT CONSIDERATIONS
(All of the Mortgage Loans may be prepaid in full or in part at any
time.) However, Mortgage Loans secured by Mortgaged Properties in __________
are subject to an account termination fee equal to the lesser of $___ and six
months interest on the amount prepaid, to the extent the prepaid amount
exceeds __% of the unpaid principal balance, if the account is terminated on
or before its _____ year anniversary. In addition, Mortgage Loans secured by
Mortgaged Properties in other jurisdictions may be subject to account
termination fees to the extent permitted by law. In general, such account
termination fees do not exceed $___ and do not apply to accounts terminated
subsequent to a date designated in the related Mortgage Note which, depending
on the jurisdiction, ranges between (___ months and ____ years) following
origination.) The prepayment experience with respect to the Mortgage Loans
will affect the weighted average life of the Securities.
The rate of prepayment on the Mortgage Loans cannot be predicted.
Neither the Depositor nor the Master Servicer is aware of any publicly
available studies or statistics on the rate of prepayment of such Mortgage
Loans. Generally, home equity revolving credit lines are not viewed by
borrowers as permanent financing. Accordingly, the Mortgage Loans may
experience a higher rate of prepayment than traditional first mortgage loans.
On the other hand, because the Mortgage Loans amortize as described herein,
rates of principal payment on the Mortgage Loans will generally be slower
than those of traditional fully-amortizing first mortgages in the absence of
prepayments on such Mortgage Loans. The prepayment experience of the Trust
with respect to the Mortgage Loans may be affected by a wide variety of
factors, including general economic conditions, prevailing interest rate
levels, the availability of alternative financing, homeowner mobility, the
frequency and amount of any future draws on the Credit Line Agreements and
changes affecting the deductibility for Federal income tax purposes of
interest payments on home equity credit lines. Substantially all of the
Mortgage Loans contain "due-on-sale" provisions, and, with respect to the
Mortgage Loans, the Master Servicer intends to enforce such provisions,
unless such enforcement is not permitted by applicable law. The enforcement
of a "due-on-sale" provision will have the same effect as a prepayment of the
related Mortgage Loan. See "Certain Legal Aspects of the Loans--Due-on-Sale
Clauses" in the Prospectus.
The yield to an investor who purchases the Securities in the secondary
market at a price other than par will vary from the anticipated yield if the
rate of prepayment on the Mortgage Loans is actually different than the rate
anticipated by such investor at the time such Securities were purchased.
Collections on the Mortgage Loans may vary because, among other things,
borrowers may make payments during any month as low as the minimum monthly
payment for such month or as high as the entire outstanding principal balance
plus accrued interest and the fees and charges thereon. It is possible that
borrowers may fail to make scheduled payments. Collections on the Mortgage
Loans may vary due to seasonal purchasing and payment habits of borrowers.
No assurance can be given as to the level of prepayments that will be
experienced by the Trust and it can be expected that a portion of borrowers
will not prepay their Mortgage Loans to any significant degree. See "Yield
and Prepayment Considerations" in the Prospectus.
DESCRIPTION OF THE MASTER SERVICING AGREEMENT
The Master Servicer shall establish and maintain on behalf of the Owner
Trustee an account (the "Collection Account") for the benefit of the Holders.
The Collection Account will be an Eligible Account (as defined herein).
Subject to the investment provision described in the following paragraphs,
upon receipt by the Master Servicer of amounts in respect of the Mortgage
Loans (excluding amounts representing administrative charges, annual fees,
taxes, assessments, credit insurance charges, insurance proceeds to be
applied to the restoration or repair of a Mortgaged Property or similar
items), the Master Servicer will deposit such amounts in the Collection
Account. Amounts so deposited may be invested in Eligible Investments (as
described in the Servicing Agreement) maturing no later than one Business Day
prior to the date on which the amount on deposit therein is required to be
deposited in the Distribution Account or on such Distribution Date if
approved by the Rating Agencies. Not later than the _____ Business Day prior
to each Distribution Date (the "Determination Date"), the Master Servicer
will notify the Owner Trustee and the Indenture Trustee of the amount of such
deposit to be included in funds available for the related Distribution Date.
The Owner Trustee and the Indenture Trustee will establish one or more
accounts (the "Security Account") into which will be deposited amounts
withdrawn from the Collection Account for distribution to Holders on a
Distribution Date. The Security Account will be an Eligible Account.
Amounts on deposit therein will be invested in Eligible Investments maturing
on or before the Business Day prior to the related Distribution Date.
An "Eligible Account" is (i) an account that is maintained with a
depository institution whose debt obligations at the time of any deposit
therein have the highest short-term debt rating by the Rating Agencies, (ii)
one or more accounts with a depository institution having a minimum long-term
unsecured debt rating of "____" by _____ and "____" by _____, which accounts
are fully insured by either the Savings Association Insurance Fund ("SAIF")
or the Bank Insurance Fund ("BIF") of the Federal Deposit Insurance
Corporation established by such fund, (iii) a segregated trust account
maintained with the Owner Trustee or an Affiliate of the Owner Trustee in its
fiduciary capacity or (iv) otherwise acceptable to each Rating Agency as
evidenced by a letter from each Rating Agency to the Owner Trustee, without
reduction or withdrawal of their then current ratings of the Securities.
Eligible Investments are specified in the Servicing Agreement and are
limited to investments which meet the criteria of the Rating Agencies from
time to time as being consistent with their then current ratings of the
Securities.
ALLOCATIONS AND COLLECTIONS
All collections on the Mortgage Loans will generally be allocated in
accordance with the Credit Line Agreements between amounts collected in
respect of interest and amounts collected in respect of principal. As to any
Distribution Date, "Interest Collections" will be equal to the aggregate of
the amounts collected during the related Collection Period, including Net
Liquidation Proceeds (as defined below), allocated to interest pursuant to
the terms of the Credit Line Agreements.
As to any Distribution Date, "Principal Collections" will be equal to
the sum of (i) the amounts collected during the related Collection Period,
including Net Liquidation Proceeds, and allocated to principal pursuant to
the terms of the Credit Line Agreements and (ii) any Substitution Adjustment
Amounts. "Net Liquidation Proceeds" with respect to a Mortgage Loan are
equal to the aggregate of all amounts received upon liquidation of such
Mortgage Loan, including, without limitation, insurance proceeds, reduced by
related expenses, but not including the portion, if any, of such amount that
exceeds the Principal Balance of the Mortgage Loan at the end of the
Collection Period immediately preceding the Collection Period in which such
Mortgage Loan became a Liquidated Mortgage Loan plus accrued and unpaid
interest thereon through the date of liquidation.
With respect to any date, the "Pool Balance" will be equal to the
aggregate of the Principal Balances of all Mortgage Loans as of such date.
The Principal Balance of a Mortgage Loan (other than a Liquidated Mortgage
Loan) on any day is equal to the Cut-off Date Principal Balance thereof, plus
(i) any Additional Balances in respect of such Mortgage Loan minus (ii) all
collections credited against the Principal Balance of such Mortgage Loan in
accordance with the related Credit Line Agreement prior to such day. The
Principal Balance of a Liquidated Mortgage Loan after final recovery of
related Liquidation Proceeds shall be zero.
HAZARD INSURANCE
The Master Servicing Agreement provides that the Master Servicer
maintain certain hazard insurance on the Mortgaged Properties relating to the
Mortgage Loans. While the terms of the related Credit Line Agreements
generally require borrowers to maintain certain hazard insurance, the Master
Servicer will not monitor the maintenance of such insurance.
The Master Servicing Agreement requires the Master Servicer to maintain
for any Mortgaged Property relating to a Mortgage Loan acquired upon
foreclosure of a Mortgage Loan, or by deed in lieu of such foreclosure,
hazard insurance with extended coverage in an amount equal to the lesser of
(a) the maximum insurable value of such Mortgaged Property or (b) the
outstanding balance of such Mortgage Loan plus the outstanding balance on any
mortgage loan senior to such Mortgage Loan at the time of foreclosure or deed
in lieu of foreclosure, plus accrued interest and the Master Servicer's good
faith estimate of the related liquidation expenses to be incurred in
connection therewith. The Master Servicing Agreement provides that the
Master Servicer may satisfy its obligation to cause hazard policies to be
maintained by maintaining a blanket policy insuring against losses on such
Mortgaged Properties. If such blanket policy contains a deductible clause,
the Master Servicer will be obligated to deposit in the Collection Account
the sums which would have been deposited therein but for such clause. The
Master Servicer will initially satisfy these requirements by maintaining a
blanket policy. As set forth above, all amounts collected by the Master
Servicer (net of any reimbursements to the Master Servicer) under any hazard
policy (except for amounts to be applied to the restoration or repair of the
Mortgaged Property) will ultimately be deposited in the Collection Account.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements on the property
by fire, lightning, explosion, smoke, windstorm and hail, and the like,
strike and civil commotion, subject to the conditions and exclusions
specified in each policy. Although the policies relating to the Mortgage
Loans will be underwritten by different insurers and therefore will not
contain identical terms and conditions, the basic terms thereof are dictated
by state laws and most of such policies typically do not cover any physical
damage resulting from the following: war, revolution, governmental actions,
floods and other water-related causes, earth movement (including earthquakes,
landslides and mudflows), nuclear reactions, wet or dry rot, vermin, rodents,
insects or domestic animals, theft and, in certain cases vandalism. The
foregoing list is merely indicative of certain kinds of uninsured risks and
is not intended to be all-inclusive or an exact description of the insurance
policies relating to the Mortgaged Properties.
REALIZATION UPON DEFAULTED MORTGAGE LOANS
The Master Servicer will foreclose upon or otherwise comparably convert
to ownership Mortgaged Properties securing such of the Mortgage Loans as come
into default when in accordance with applicable servicing procedures under
the Master Servicing Agreement, no satisfactory arrangements can be made for
the collection of delinquent payments. In connection with such foreclosure
or other conversion, the Master Servicer will follow such practices as it
deems necessary or advisable and as are in keeping with its general
subordinate mortgage servicing activities, provided the Master Servicer will
not be required to expend its own funds in connection with foreclosure
or other conversion, correction of default on a related senior mortgage loan
or restoration of any property unless, in its sole judgment, such
foreclosure, correction or restoration will increase net Liquidation
Proceeds. The Master Servicer will be reimbursed out of Liquidation Proceeds
for advances of its own funds as liquidation expenses before any Net
Liquidation Proceeds are distributed to Holders or the (Transferor)(Seller).
"Net Liquidation Proceeds" with respect to a Mortgage Loan is the amount
received upon liquidation of such Mortgage Loan reduced by related expenses,
which may include the amount advanced in respect of a senior mortgage, up to
the unpaid Principal Balance of the Mortgage Loan plus accrued and unpaid
interest thereon.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
With respect to each Collection Period, other than the first Collection
Period, the Master Servicer will retain from interest collections in respect
of the Mortgage Loan a portion of such interest collections as a monthly
Servicing Fee in the amount equal to ___% per annum ("Servicing Fee Rate") on
the aggregate Principal Balances of the Mortgage Loans as of the first day of
each such Collection Period. All assumption fees, late payment charges and
other fees and charges, to the extent collected from borrowers, will be
retained by the Master Servicer as additional servicing compensation.
The Master Servicer will pay certain ongoing expenses associated with
the Trust and incurred by it in connection with its responsibilities under
the Servicing Agreement, including, without limitation, payment of the fees
and disbursements of the Trustee, any custodian appointed by the Trustee, the
Registrar and any paying agent. In addition, the Master Servicer will be
entitled to reimbursement for certain expenses incurred by it in connection
with defaulted Mortgage Loans and in connection with the restoration of
Mortgaged Properties, such right of reimbursement being prior to the rights
of Holders to receive any related Net Liquidation Proceeds.
DESCRIPTION OF THE SECURITIES
GENERAL
The Notes will be issued pursuant to the Indenture dated as of
___________, 199_, between the Trust and _______________, as Indenture
Trustee. The Certificates will be issued pursuant to the Trust Agreement
dated as of ______________, 199_, among the Depositor, __________, and
______________, as Owner Trustee. The following summaries describe certain
provisions of the Securities, Indenture and Trust Agreement. The summaries
do not purport to be complete and are subject to, and qualified in their
entirety by reference to, the provisions of the applicable agreement. As
used herein, "Agreement" shall mean either the Trust Agreement or the
Indenture, as the context requires.
The Securities will be issued in fully registered, certificated form
only. The Securities will be freely transferrable and exchangeable at the
corporate trust office of the Owner Trustee, with respect to the Certificates
or the Indenture Trustee with respect to the Notes.
BOOK-ENTRY SECURITIES
The Senior Certificates will be book-entry Certificates (the "Book-Entry
Certificates"). Persons acquiring beneficial ownership interests in the
Senior Certificates ("Certificate Owners") will hold their Certificates
through the Depository Trust Company ("DTC") in the United States(, or CEDEL
or Euroclear (in Europe)) if they are participants of such systems, or
indirectly through organizations which are participants in such systems. The
Book-Entry Certificates will be issued in one or more certificates which
equal the aggregate principal balance of the Certificates and will initially
be registered in the name of Cede & Co., the nominee of DTC. (CEDEL and
Euroclear will hold omnibus positions on behalf of their participants through
customers' securities accounts in CEDEL's and Euroclear's names on the books
of their respective depositaries which in turn will hold such positions
in customers' securities accounts in the depositaries' names on the books of
DTC. Citibank N.A. will act as depositary for CEDEL and Chase will act as
depositary for Euroclear (in such capacities, individually the "Relevant
Depositary" and collectively the "European Depositaries").) Investors may
hold such beneficial interests in the Book-Entry Certificates in minimum
denominations representing Certificate Principal Balances of $1,000 and in
integral multiples in excess thereof. Except as described below, no person
acquiring a Book-Entry Certificate (each, a "beneficial owner") will be
entitled to receive a physical certificate representing such Certificate (a
"Definitive Certificate"). Unless and until Definitive Certificates are
issued, it is anticipated that the only "Certificateholder" of the
Certificates will be Cede & Co., as nominee of DTC. Certificate Owners will
not be Certificateholders as that term is used in the Pooling and Servicing
Agreement. Certificate Owners are only permitted to exercise their rights
indirectly through Participants and DTC.
DISTRIBUTIONS
On each Distribution Date, collections on the Mortgage Loans will be
applied in the following order of priority:
(i) to the Master Servicer, the Servicing Fee;
(ii) as payment for the accrued interest due and any overdue
accrued interest on the respective Security Principal Balance of the
Notes and the Certificates;
(iii) as principal on the Securities, the excess of Principal
Collections over Additional Balances created during the preceding
Collection Period, such amount to be allocated between the Notes and
Certificates pro rata, based on their respective Security Principal
Balances;
(iv) as principal on the Securities, as payment for any Liquidation
Loss Amounts on the Mortgage Loans;
(v) as payment for the premium for the (Letter of Credit)(Surety
Bond);
(vi) to reimburse prior draws made on the (Letter of Credit)(Surety
Bond); and
(vii) any remaining amounts to the Seller.
As to any Distribution Date, the "Collection Period" is the calendar
month preceding the month of such Distribution Date.
"Liquidation Loss Amount" means with respect to any Liquidated Mortgage
Loan, the unrecovered Principal Balance thereof at the end of the Collection
Period in which such Mortgage Loan became a Liquidated Mortgage Loan after
giving effect to the Net Liquidation Proceeds in connection therewith.
INTEREST
Note Rate. Interest will accrue on the unpaid Security Principal
Balance of the Notes at the per annum rate (the "Note Rate") equal to __% per
annum from the Closing Date to the first Distribution Date and thereafter
interest will accrue on the Notes from and including the preceding
Distribution Date to but excluding such current Distribution Date (each, an
"Interest Accrual Period") at (a floating rate equal to LIBOR (as defined
herein) plus __%) (__%). (Interest will be calculated on the basis of the
actual number of days in each Interest Accrual Period by 360.) A failure to
pay interest on any Notes on any Distribution Date that continues for five
days constitutes an Event of Default under the Indenture.
Pass-Through Rate. Interest will accrue on the unpaid Security
Principal Balance of the Certificates at the per annum rate (the
"Pass-Through Rate") equal to __% per annum from the Closing Date to the
first Distribution Date and thereafter interest will accrue on the
Certificates for each Interest Accrual Period at (a floating rate equal to
LIBOR (as defined herein) plus __%) (__%). (Interest will be calculated on
the basis of the actual number of days in each Interest Accrual Period
divided by 360.) A failure to pay interest on any Certificates on any
Distribution Date that continues for five days constitutes an Event of
Default under the Trust Agreement.
OPTIONAL TERMINATION
The Trust will terminate on the Distribution Date following the earlier
of (i) _________________________ and (ii) the final payment or other
liquidation of the last Mortgage Loan in the Trust. The Mortgage Loans will
be subject to optional repurchase by the Master Servicer on any Distribution
Date after the Principal Balance is reduced to an amount less than or equal
to $_____ (__% of the initial Principal Balance). The repurchase price will
be equal to the sum of the outstanding Principal Balance and accrued and
unpaid interest thereon at the weighted average of the Loan Rates through the
day preceding the final Distribution Date.
THE DEPOSITOR
IndyMac ABS, Inc., the Depositor, is a Delaware corporation organized on
January __, 1998 for the limited purpose of acquiring, owning and
transferring mortgage related assets and selling interests therein or bonds
secured thereby. It is a limited purpose finance subsidiary of IndyMac,
Inc., a Delaware corporation. The Depositor maintains its principal office
at 155 North Lake Avenue, Pasadena, California 91101-7139. Its telephone
number is (818) ___-____.
THE INDENTURE
The following summary describes certain terms of the Indenture. The
summary does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the provisions of the Indenture. Whenever
particular sections or defined terms of the Indenture are referred to, such
sections or defined terms are thereby incorporated herein by reference. See
"Description of the Securities" herein for a summary of certain additional
terms of the Indenture.
REPORTS TO NOTEHOLDERS
The Indenture Trustee will mail to each Noteholder, at such Noteholder's
request, at its address listed on the Note Register maintained with the
Indenture Trustee a report setting forth certain amounts relating to the
Notes.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
With respect to the Notes, "Events of Default" under the Indenture will
consist of: (i) a default for five days or more in the payment of any
interest on any Note; (ii) a default in the payment of the principal of or
any installment of the principal of any Note when the same becomes due and
payable; (iii) a default in the observance or performance of any covenant or
agreement of the Trust made in the Indenture, which default materially
affects the rights of the Noteholders, and the continuation of any such
default for a period of 30 days after notice thereof is given to the Trust by
the Indenture Trustee or to the Trust and the Indenture Trustee by the
holders of at least 25% in principal amount of the Notes then outstanding;
(iv) any representation or warranty made by the Trust in the Indenture or in
any certificate delivered pursuant thereto or in connection therewith having
been incorrect in a material respect as of the time made, and such breach not
having been cured within 30 days after notice thereof is given to the Trust
by the Indenture Trustee or to the Trust and the Indenture Trustee by the
holders of at least 25% in principal amount of Notes then outstanding; or
(v) certain events of bankruptcy, insolvency, receivership or liquidation of
the Trust. (The amount of principal required to be paid to Noteholders
under the Indenture will generally be limited to amounts available to be
deposited in the Collection Account. Therefore, the failure to pay
principal on the Notes generally will not result in the occurrence of an
Event of Default until the final scheduled Distribution Date for such
Notes.) If there is an Event of Default with respect to a Note due to late
payment or nonpayment of interest due on a Note, additional interest will
accrue on such unpaid interest at the interest rate on the Note (to the
extent lawful) until such interest is paid. Such additional interest on
unpaid interest shall be due at the time such interest is paid. If there is
an Event of Default due to late payment or nonpayment of principal on a
Note, interest will continue to accrue on such principal at the interest
rate on the Note until such principal is paid. If an Event of Default
should occur and be continuing with respect to the Notes, the Indenture
Trustee or holders of a majority in principal amount of Notes then
outstanding may declare the principal of such Notes to be immediately
due and payable. Such declaration may, under certain circumstances, be
rescinded by the holders of a majority in principal amount of the Notes then
outstanding. If the Notes are due and payable following an Event of Default
with respect thereto, the Indenture Trustee may institute proceedings to
collect amounts due or foreclose on Trust property or exercise remedies as a
secured party. If an Event of Default occurs and is continuing with respect
to the Notes, the Indenture Trustee will be under no obligation to exercise
any of the rights or powers under the Indenture at the request or direction
of any of the holders of the Notes, if the Indenture Trustee reasonably
believes it will not be adequately indemnified against the costs, expenses
and liabilities which might be incurred by it in complying with such request.
Subject to the provisions for indemnification and certain limitations
contained in the Indenture, the holders of a majority in principal amount of
the outstanding Notes will have the right to direct the time, method and
place of conducting any proceeding or any remedy available to the Indenture
Trustee, and the holders of a majority in principal amount of the Notes then
outstanding may, in certain cases, waive any default with respect thereto,
except a default in the payment of principal or interest or a default in
respect of a covenant or provision of the Indenture that cannot be modified
without the waiver or consent of all the holders of the outstanding Notes.
No holder of a Note will have the right to institute any proceeding with
respect to the Indenture, unless (i) such holder previously has given the
Indenture Trustee written notice of a continuing Event of Default, (ii) the
holders of not less than 25% in principal amount of the outstanding Notes
have made written request to the Indenture Trustee to institute such
proceeding in its own name as Indenture Trustee, (iii) such holder or holders
have offered the Indenture Trustee reasonable indemnity, (iv) the Indenture
Trustee has for 60 days failed to institute such proceeding and (v) no
direction inconsistent with such written request has been given to the
Indenture Trustee during the 60-day period by the holders of a majority in
principal amount of the Notes. In addition, the Indenture Trustee and the
Noteholders, by accepting the Notes, will covenant that they will not at any
time institute against the Trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law. With
respect to the Trust, neither the Indenture Trustee nor the Owner Trustee in
its individual capacity, nor any holder of a Certificate representing an
ownership interest in the Trust nor any of their respective owners,
beneficiaries, agents, officers, directors, employees, affiliates, successors
or assigns will, in the absence of an express agreement to the contrary, be
personally liable for the payment of the principal of or interest on the
Notes or for the agreements of the Trust contained in the Indenture.
CERTAIN COVENANTS
The Indenture will provide that the Trust may not consolidate with or
merge into any other entity, unless (i) the entity formed by or surviving
such consolidation or merger is organized under the laws of the United
States, any state or the District of Columbia, (ii) such entity expressly
assumes the Trust's obligation to make due and punctual payments upon the
Notes and the performance or observance of any agreement and covenant of the
Trust under the Indenture, (iii) no Event of Default shall have occurred and
be continuing immediately after such merger or consolidation, (iv) the Trust
has been advised that the ratings of the Securities then in effect would not
be reduced or withdrawn by any Rating Agency as a result of such merger or
consolidation and (v) the Trust has received an opinion of counsel to the
effect that such consolidation or merger would have no material adverse tax
consequence to the Trust or to any Noteholder or Certificateholder. The
Trust will not, among other things, (i) except as expressly permitted by the
Indenture, sell, transfer, exchange or otherwise dispose of any of the assets
of the Trust, (ii) claim any credit on or make any deduction from the
principal and interest payable in respect of the Notes (other
than amounts withheld under the Code or applicable state law) or assert any
claim against any present or former holder of Notes because of the payment of
taxes levied or assessed upon the Trust, (iii) dissolve or liquidate in whole
or in part, (iv) permit the validity or effectiveness of the Indenture to be
impaired or permit any person to be released from any covenants or
obligations with respect to the Notes under the Indenture except as may be
expressly permitted thereby or (v) permit any lien, charge excise, claim,
security interest, mortgage or other encumbrance to be created on or extend
to or otherwise arise upon or burden the assets of the Trust or any part
thereof, or any interest therein or the proceeds thereof. The Trust may not
engage in any activity other than as specified under "The Trust" herein. The
Trust will not incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the Notes and the Indenture.
ANNUAL COMPLIANCE STATEMENT
The Trust will be required to file annually with the Indenture Trustee a
written statement as to the fulfillment of its obligations under the
Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
The Indenture Trustee will be required to mail each year to all
Noteholders a report relating to any change in its eligibility and
qualification to continue as Indenture Trustee under the Indenture, any
amounts advanced by it under the Indenture, the amount, interest rate and
maturity date of any indebtedness owing by the Trust to the Indenture Trustee
in its individual capacity, any change in the property and funds physically
held by the Indenture Trustee as such and any action taken by it that
materially affects the Notes and that has not been previously reported, but
if no such changes have occurred, then no report shall be required.
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture will be discharged with respect to the collateral securing
the Notes upon the delivery to the Indenture Trustee for cancellation of all
the Notes or, with certain limitations, upon deposit with the Indenture
Trustee of funds sufficient for the payment in full of all the Notes.
MODIFICATION OF INDENTURE
With the consent of the holders of a majority in principal amount of the
Notes then outstanding, the Trust and the Indenture Trustee may execute a
supplemental indenture to add provisions to, change in any manner or
eliminate any provisions of, the Indenture, or modify (except as provided
below) in any manner the rights of the Noteholders. Without the consent of
the holder of each outstanding Note affected thereby, however, no
supplemental indenture will: (i) change the due date of any installment of
principal of or interest on any Note or reduce the principal amount thereof,
the interest rate specified thereon or the redemption price with respect
thereto or change any place of payment where or the coin or currency in which
any Note or any interest thereon is payable; (ii) impair the right to
institute suit for the enforcement of certain provisions of the Indenture
regarding payment; (iii) reduce the percentage of the aggregate amount of the
outstanding Notes, the consent of the holders of which is required for any
supplemental indenture or the consent of the holders of which is required for
any waiver of compliance with certain provisions of the Indenture or of
certain defaults thereunder and their consequences as provided for in the
Indenture; (iv) modify or alter the provisions of the Indenture regarding the
voting of Notes held by the Trust, the Depositor or an affiliate of any of
them; (v) decrease the percentage of the aggregate principal amount of Notes
required to amend the sections of the Indenture which specify the applicable
percentage of aggregate principal amount of the Notes necessary to amend the
Indenture or certain other related agreements; or (vi) permit the creation of
any lien ranking prior to or on a parity with the lien of the Indenture with
respect to any of the collateral for the Notes or, except as otherwise
permitted or contemplated in the Indenture, terminate the lien of the
Indenture on any such collateral or deprive the holder of any Note of the
security afforded by the lien of the Indenture. The Trust and the Indenture
Trustee may also enter into supplemental indentures, without obtaining the
consent of the Noteholders, for the purpose of, among other things, adding
any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of modifying in any manner the rights of the
Noteholders; provided that such action will not materially and adversely
affect the interest of any Noteholder.
VOTING RIGHTS
At all times, the voting rights of Noteholders under the Indenture will
be allocated among the Notes pro rata in accordance with their outstanding
principal balances.
CERTAIN MATTERS REGARDING THE INDENTURE TRUSTEE AND THE DEPOSITOR
Neither the Depositor, the Indenture Trustee nor any director, officer
or employee of the Depositor or the Indenture Trustee will be under any
liability to the Trust or the related Noteholders for any action taken or for
refraining from the taking of any action in good faith pursuant to the
Indenture or for errors in judgment; provided, however, that none of the
Indenture Trustee, the Depositor and any director, officer or employee
thereof will be protected against any liability which would otherwise be
imposed by reason of willful malfeasance, bad faith or gross negligence in
the performance of duties or by reason of reckless disregard of obligations
and duties under the Indenture. Subject to certain limitations set forth in
the Indenture, the Indenture Trustee and any director, officer, employee or
agent of the Indenture Trustee shall be indemnified by the Trust and held
harmless against any loss, liability or expense incurred in connection with
investigating, preparing to defend or defending any legal action, commenced
or threatened, relating to the Indenture other than any loss, liability or
expense incurred by reason of willful malfeasance, bad faith or gross
negligence in the performance of its duties under such Indenture or by reason
of reckless disregard of its obligations and duties under the Indenture. Any
such indemnification by the Trust will reduce the amount distributable to the
Noteholders. All persons into which the Indenture Trustee may be merged or
with which it may be consolidated or any person resulting from such merger or
consolidation shall be the successor of the Indenture Trustee under each
Indenture.
THE TRUST AGREEMENT
The following summary describes certain terms of the Trust Agreement.
The summary does not purport to be complete and is subject to, and qualified
in its entirety by reference to, the provisions of the Trust Agreement.
Whenever particular sections or defined terms of the Trust Agreement are
referred to, such sections or defined terms are thereby incorporated herein
by reference. See "Description of the Securities" herein for a summary of
certain additional terms of the Trust Agreement.
AMENDMENT
The Trust Agreement may be amended by the Depositor and the Owner
Trustee, without consent of the Holders, to cure any ambiguity, to correct or
supplement any provision or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions thereof or of
modifying in any manner the rights of such Holders; provided, however, that
such action will not, as evidenced by an opinion of counsel satisfactory to
the Owner Trustee, adversely affect in any material respect the interests of
any Holders. The Trust Agreement may also be amended by the Depositor and
the Owner Trustee with the consent of the holders of Certificates evidencing
at least a majority in principal amount of then outstanding Certificates and
Holders owning Voting Interests (as herein defined) aggregating not less than
a majority of the aggregate Voting Interests for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of the Trust Agreement or modifying in any manner the rights of the Holders.
INSOLVENCY EVENT
"Insolvency Event" means, with respect to any Person, any of the
following events or actions; certain events of insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings with
respect to such Person and certain actions by such Person indicating its
insolvency, reorganization pursuant to bankruptcy proceedings or inability to
pay its obligations. Upon termination of the Trust, the Owner Trustee shall
direct the Indenture Trustee promptly to sell the assets of the Trust (other
than the Collection Account) in a commercially reasonable manner and on
commercially reasonable terms. The proceeds from any such sale, disposition
or liquidation of the Mortgage Loans will be treated as collections on the
Mortgage Loans and deposited in the Collection Account. The Trust Agreement
will provide that the Owner Trustee does not have the power to commence a
voluntary proceeding in bankruptcy with respect to the Trust without the
unanimous prior approval of all Holders (including the Depositor) of the
Trust and the delivery to the Owner Trustee by each Holder (including the
Depositor) of a certificate certifying that the Holder reasonably believes
that the Trust is insolvent.
LIABILITY OF THE DEPOSITOR
Under the Trust Agreement, the Depositor will agree to be liable
directly to an injured party for the entire amount of any losses, claims,
damages or liabilities (other than those incurred by a Noteholder or a Holder
in the capacity of an investor with respect to the Trust) arising out of or
based on the arrangement created by the Trust Agreement.
VOTING INTERESTS
As of any date, the aggregate principal balance of all Certificates
outstanding will constitute the voting interest of the Issuer (the "Voting
Interests"), except that, for purposes of determining Voting Interests,
Certificates owned by the Issuer or its affiliates (other than the Depositor)
will be disregarded and deemed not to be outstanding, and except that, in
determining whether the Owner Trustee is protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Certificates that the Owner Trustee knows to be so owned will be so
disregarded. Certificates so owned that have been pledged in good faith may
be regarded as outstanding if the pledgee establishes to the satisfaction of
the Owner Trustee the pledgor's right so to act with respect to such
Certificates and that the pledgee is not the Issuer or its affiliates.
CERTAIN MATTERS REGARDING THE OWNER TRUSTEE AND THE DEPOSITOR
Neither the Depositor, the Owner Trustee nor any director, officer or
employee of the Depositor or the Owner Trustee will be under any liability to
the Trust or the related Holders for any action taken or for refraining from
the taking of any action in good faith pursuant to the Trust Agreement or for
errors in judgment; provided, however, that none of the Owner Trustee, the
Depositor and any director, officer or employee thereof will be protected
against any liability which would otherwise be imposed by reason of willful
malfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under the Trust
Agreement. Subject to certain limitations set forth in the Trust Agreement,
the Owner Trustee and any director, officer, employee or agent of the Owner
Trustee shall be indemnified by the Trust and held harmless against any loss,
liability or expense incurred in connection with investigating, preparing to
defend or defending any legal action, commenced or threatened, relating to
the Trust Agreement other than any loss, liability or expense incurred by
reason of willful malfeasance, bad faith or gross negligence in the
performance of its duties under such Trust Agreement or by reason of reckless
disregard of its obligations and duties under the Trust Agreement. Any such
indemnification by the Trust will reduce the amount distributable to the
Holders. All persons into which the Owner Trustee may be merged or with
which it may be consolidated or any person resulting from such merger or
consolidation shall be the successor of the Owner Trustee under each Trust
Agreement.
ADMINISTRATION AGREEMENT
The _________________, in its capacity as Administrator, will enter into
the Administration Agreement with the Trust and the Owner Trustee pursuant to
which the Administrator will agree, to the extent provided in such
Administration Agreement, to provide notices and perform other administrative
obligations required by the Indenture and the Trust Agreement.
THE INDENTURE TRUSTEE
( ) is the Indenture Trustee under the Indenture. The mailing
address of the Indenture Trustee is ( ), Attention: Corporate Trust
Department.
THE OWNER TRUSTEE
( ) is the Owner Trustee under the Trust Agreement. The mailing
address of the Owner Trustee is ( ), Attention: Corporate Trust
Administration.
USE OF PROCEEDS
The net proceeds from the sale of the Securities will be applied by the
Depositor towards the purchase price of the Mortgage Loans.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Prospective purchasers should see "Certain Federal Income Tax
Consequences" in the Prospectus for a discussion of the application of
certain federal income and state tax laws to the Trust Fund and the
Securities.
STATE TAX CONSEQUENCES
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Consequences" herein, potential investors should consider
the state income tax consequences of the acquisition, ownership, and
disposition of the Securities offered hereunder. State income tax law may
differ substantially from the corresponding federal tax law, and this
discussion does not purport to describe any aspect of the income tax laws of
any state. Therefore, potential investors should consult their own tax
advisors with respect to the various tax consequences of investments in the
Securities offered hereunder.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended
("ERISA") and Section 4975 of the Code impose certain restrictions on
employee benefit plans subject to ERISA or plans or arrangements subject to
Section 4975 of the Code ("Plans") and on persons who are parties in interest
or disqualified persons ("parties in interest") with respect to such Plans.
Certain employee benefit plans, such as governmental plans and church plans
(if no election has been made under section 410(d) of the Code), are not
subject to the restrictions of ERISA, and assets of such plans may be
invested in the Securities without regard to the ERISA considerations
described below, subject to other applicable federal and state law. However,
any such governmental or church plan which is qualified under section 401(a)
of the Code and exempt from taxation under section 501(a) of the Code is
subject to the prohibited transaction rules set forth in section 503 of the
Code. Any Plan fiduciary which proposes to cause a Plan to acquire any of
the Securities should consult with its counsel with respect to the potential
consequences under ERISA, and the Code, of the Plan's acquisition and
ownership of the Securities. See "ERISA Considerations" in the Prospectus.
Investments by Plans are also subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan.
PROHIBITED TRANSACTIONS
GENERAL
Section 406 of ERISA prohibits parties in interest with respect to a
Plan from engaging in certain transactions (including loans) involving a Plan
and its assets unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Code imposes certain excise taxes (or, in
some cases, a civil penalty may be assessed pursuant to section 502(i) of
ERISA) on parties in interest which engage in non-exempt prohibited
transactions.
PLAN ASSET REGULATION
The United States Department of Labor ("Labor") has issued final
regulations concerning the definition of what constitutes the assets of a
Plan for purposes of ERISA and the prohibited transaction provisions of the
Code (the "Plan Asset Regulation"). The Plan Asset Regulation describes the
circumstances under which the assets of an entity in which a Plan invests
will be considered to be "plan assets" such that any person who exercises
control over such assets would be subject to ERISA's fiduciary standards.
Under the Plan Asset Regulation, generally when a Plan invests in another
entity, the Plan's assets do not include, solely by reason of such
investment, any of the underlying assets of the entity. However, the Plan
Asset Regulation provides that, if a Plan acquires an "equity interest" in an
entity that is neither a "publicly-offered security" (as defined therein) nor
a security issued by an investment company registered under the Investment
Company Act of 1940, the assets of the entity will be treated as assets of
the Plan investor unless certain exceptions apply. If the
(Notes/Certificates) were deemed to be equity interests and no statutory,
regulatory or administrative exemption applies, the Trust could be considered
to hold plan assets by reason of a Plan's investment in the Notes. Such plan
assets would include an undivided interest in any assets held by the Trust.
In such an event, the Trustee and other persons, in providing services with
respect to the Trust's assets, may be parties in interest with respect to
such Plans, subject to the fiduciary responsibility provisions of Title I of
ERISA, including the prohibited transaction provisions of Section 406 of
ERISA, and Section 4975 of the Code with respect to transactions involving
the Trust's assets. Under the Plan Asset Regulation, the term "equity
interest" is defined as any interest in an entity other than an instrument
that is treated as indebtedness under "applicable local law" and which has no
"substantial equity features." Although the Plan Assets Regulation is silent
with respect to the question of which law constitutes "applicable local law"
for this purpose, Labor has stated that these determinations should be made
under the state law governing interpretation of the instrument in question.
In the preamble to the Plan Assets Regulation, Labor declined to provide a
precise definition of what features are equity features or the circumstances
under which such features would be considered "substantial," noting that the
question of whether a plan's interest has substantial equity features is an
inherently factual one, but that in making a determination it would be
appropriate to take into account whether the equity features are such that a
Plan's investment would be a practical vehicle for the indirect provision of
investment management services. Brown & Wood LLP ("ERISA Counsel") has
rendered its opinion that the Notes will be classified as indebtedness
without substantial equity features for ERISA purposes. ERISA Counsel's
opinion is based upon the terms of the Notes, the opinion of Tax Counsel that
the Notes will be classified as debt instruments for federal income tax
purposes and the ratings which have been assigned to the Notes. However, if
contrary to ERISA Counsel's opinion the Notes are deemed to be equity
interests in the Trust and no statutory, regulatory or administrative
exemption applies, the Trust could be considered to hold plan assets by
reason of a Plan's investment in the Notes.
THE UNDERWRITER'S EXEMPTION
Labor has granted to (_______ ) (the "Underwriter") an administrative
exemption (Prohibited Transaction Exemption _____ (the "Exemption")) which
exempts from the application of the prohibited transaction rules of ERISA and
the related excise tax provisions of Section 4975 of the Code transactions
relating to: (i) the acquisition, sale and holding by Plans of certificates
representing an undivided interest in certain asset backed pass-through
trusts with respect to which the Underwriter or any of its affiliates is the
sole underwriter or the manager or co-manager of the underwriting syndicate;
and (ii) the servicing, operation and management of such asset backed
pass-through trusts, provided that the general conditions and certain other
conditions set forth in the Exemption are satisfied. The Exemption will
apply to the acquisition, holding and resale of the Certificates by a Plan
provided that certain conditions (some of which are described below) are met.
Among the conditions that must be satisfied for the Exemption to apply
are the following:
(1) the acquisition of the Certificates by a Plan is on terms
(including the price for the Certificates) that are at least as
favorable to the Plan as they would be in an arm's length transaction
with an unrelated party;
(2) the rights and interest evidenced by the Certificates acquired
by the Plan are not subordinated to the rights and interests evidenced
by other Certificates of the trust;
(3) the Certificates acquired by the Plan have received a rating
at the time of such acquisition that is one of the three highest generic
rating categories from either Standard & Poor's Corporation, Moody's
Investors Service, Inc, Duff & Phelps Inc. or Fitch IBCA, Inc.;
(4) the trustee must not be an affiliate of the Underwriter, the
Trustee, any Master Servicer, any obligor with respect to assets held in
the Trust Fund constituting more than five percent of the aggregate
unamortized principal balance of the assets in the Trust;
(5) the sum of all payments made to and retained by the
Underwriters in connection with the distribution of the Certificates
represents not more than reasonable compensation for underwriting the
Certificates; the sum of all payments made to and retain by the Issuer
pursuant to the assignment of the Mortgage Loans to the Trust Fund
represents not more than the fair market value of such Mortgage Loans;
the sum of all payments made to and retained by the servicer represents
not more than reasonable compensation for such person's services under a
pooling and servicing agreement and reimbursements of such person's
reasonable expenses in connection therewith; and
(6) the Plan investing in the Certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933.
The Underwriter believes that the Exemption will apply to the
acquisition and holding of the Certificates by Plans and that all conditions
of the Exemption other than those within the control of the investors will be
met.
REVIEW BY PLAN FIDUCIARIES
Any Plan fiduciary considering whether to purchase any (Notes/
Certificates) on behalf of a Plan should consult with its counsel
regarding the applicability of the fiduciary responsibility and prohibited
transaction provisions of ERISA and the Code to such investment. Among other
things, before purchasing any (Notes/Certificates), a fiduciary of a Plan
should make its own determination as to whether the Trust, as obligor on the
(Notes/Certificates), is a party in interest with respect to the Plan, the
availability of the exemptive relief provided in the Plan Asset Regulations
and the availability of any other prohibited transaction exemptions.
Purchasers should analyze whether the decision may have an impact with
respect to purchases of the (Notes/Certificates).
LEGAL INVESTMENT CONSIDERATIONS
The appropriate characterization of the Securities under various legal
investment restrictions, and thus the ability of investors subject to these
restrictions to purchase Securities, may be subject to significant
interpretive uncertainties. All investors whose investment authority is
subject to legal restrictions should consult their own legal advisors to
determine whether, and to what extent, the Securities will constitute legal
investments for them. The Depositor makes no representation as to the proper
characterization of the Securities for legal investment or financial
institution regulatory purposes, or as to the ability of particular investors
to purchase Securities under applicable legal investment restrictions. The
uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial institution regulatory
characteristics of the Securities) may adversely affect the liquidity of the
Securities.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Depositor has agreed to sell to (____) (the "Underwriter"),
and the Underwriter has agreed to purchase from the Depositor, the
Securities. The Underwriter is obligated to purchase all the Securities
offered hereby if any are purchased. Distribution of the Securities will be
made by the Underwriter from time to time in negotiated transactions or
otherwise at varying prices to be determined at the time of sale. Proceeds
to the Depositor are expected to be $________________ from the sale of the
Notes and $___________ from the sale of the Certificates, before deducting
expenses payable by the Depositor of $_________. In connection with the
purchase and sale of the Securities, the Underwriter may be deemed to have
received compensation from the Depositor in the form of underwriting
discounts, concessions or commissions.
The Underwriting Agreement provides that the Depositor will indemnify
the Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, or contribute payments the Underwriter may be
required to make in respect thereof. The Depositor is an affiliate of the
Underwriter. The Underwriter is an affiliate of the Depositor.
LEGAL MATTERS
Certain legal matters with respect to the Securities will be passed upon
for the Depositor by Brown & Wood LLP, New York, New York and for the
Underwriter by __________________________.
RATINGS
It is a condition to issuance that each Class of the Notes be rated be
rated not lower than "_________" by ( ) and _______ by ( ). It is a
condition to issuance that the Certificates be rated at least "___" by ( )
and "___" by ( ). A securities rating addresses the likelihood of the
receipt by Certificateholders and Noteholders of distributions on the
Mortgage Loans. The rating takes into consideration the structural, legal
and tax aspects associated with the Certificates and Notes. The ratings on
the Securities do not, however, constitute statements regarding the
possibility that Certificateholders or Noteholders might realize a lower than
anticipated yield. A securities rating is not a recommendation to buy, sell
or hold securities and may be subject to revision or withdrawal at any time
by the assigning rating organization. Each securities rating should be
evaluated independently of similar ratings on different securities.
(The ratings assigned by Duff & Phelps Credit Rating Co. ("DCR") to
securities address the likelihood of the receipt by the holders of such
securities of all distributions to which they are entitled under the
transaction structure. DCR's ratings reflect its analysis of the riskiness
of the mortgages and its analysis of the structure of the transaction as set
forth in the operative documents. DCR's ratings do not address the effect on
yield on the securities attributable to prepayments or recoveries on the
underlying assets.)
(The ratings assigned by Fitch IBCA, Inc. ("Fitch") to securities
address the likelihood of the receipt of all distributions on the assets by
the related holders of securities under the agreements pursuant to which such
securities are issued. Fitch's ratings take into consideration the credit
quality of the related pool, including any credit support providers,
structural and legal aspects associated with such securities, and the extent
to which the payment stream on the pool is adequate to make the payments
required by such securities.
Fitch ratings on such securities do not, however, constitute a statement
regarding frequency of prepayments of the assets.)
(The ratings assigned by Moody's Investors Service, Inc. ("Moody's") to
securities address the likelihood of the receipt by holders of securities of
all distributions to which such holders of securities are entitled. Moody's
ratings on securities do not represent any assessment of the likelihood or
rate of principal prepayments. The ratings do not address the possibility
that holders of securities might suffer a lower than anticipated yield as a
result of prepayments.)
(The ratings assigned by Standard & Poor's Ratings Group, a Division of
The McGraw-Hill Companies ("Standard & Poor's"), to securities address the
likelihood of the receipt of all distributions on the assets by the related
holders of securities under the agreements pursuant to which such securities
are issued. Standard & Poor's ratings take into consideration the credit
quality of the related pool, including any credit support providers,
structural and legal aspects associated with such securities, and the extent
to which the payment stream on such pool is adequate to make payments
required by such securities. Standard & Poor's ratings on such certificates
do not, however, constitute a statement regarding frequency of prepayments on
the related assets. The letter "r" attached to a Standard & Poor's rating
highlights derivative, hybrid and certain other types of securities that
Standard & Poor's believes may experience high volatility or high variability
in expected returns due to non-credit risks. The absence of an "r" symbol in
the rating of a class of securities should not be taken as an indication that
such securities will exhibit no volatility or variability in total return.)
The Depositor has not requested a rating of the Offered Certificates by
any rating agency other than the Rating Agencies; there can be no assurance,
however, as to whether any other rating agency will rate the Offered
Certificates or, if it does, what rating would be assigned by such other
rating agency. The rating assigned by such other rating agency to the
Offered Certificates could be lower than the respective ratings assigned by
the Rating Agencies.
- -------------------------------------- -----------------------------------
NO DEALER, SALESMAN OR OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY $______________
REPRESENTATION NOT CONTAINED IN
THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING HOME EQUITY LOAN
BEEN AUTHORIZED BY THE DEPOSITOR TRUST 199___
OR THE UNDERWRITER. THIS $______ (FIXED) (FLOATING) RATE
PROSPECTUS SUPPLEMENT AND THE ASSET BACKED NOTES
PROSPECTUS DO NOT CONSTITUTE AN $______ (FIXED) (FLOATING) RATE
OFFER OF ANY SECURITIES OTHER THAN ASSET BACKED CERTIFICATES,
THOSE TO WHICH THEY RELATE OR AN
OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, TO ANY PERSON IndyMac ABS, Inc.
IN ANY JURISDICTION WHERE SUCH AN (Depositor)
OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS SUPPLEMENT
PROSPECTUS NOR ANY SALE MADE ( , 199 )
HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION (UNDERWRITER)
CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THEIR
RESPECTIVE DATES.
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TABLE OF CONTENTS
Page
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PROSPECTUS SUPPLEMENT
Summary of Terms
Risk Factors
The Trust
The (Letter of Credit)(Surety
Bond) Issuer
The Master Servicer
The Home Equity Loan Program
Description of the Mortgage Loans
Maturity and Prepayment
Considerations
Description of the Master
Servicing Agreement
Description of the Securities
The Depositor
The Indenture
The Trust Agreement
Administration Agreement
The Indenture Trustee
The Owner Trustee
Use of Proceeds
Certain Federal Income Tax
Consequences
State Tax Consequences
ERISA Considerations
Legal Investment Considerations
Underwriting
Legal Matters
Ratings
PROSPECTUS
Prospectus Supplement or Current
Report on Form 8-K
Incorporation of Certain Documents
by Reference
Available Information
Reports to Securityholders
Summary of Terms
Risk Factors
The Trust Fund
Use of Proceeds
The Depositor
Loan Program
Description of the Securities
- -------------------------------------- -----------------------------------
SUBJECT TO COMPLETION, DATED ________ __, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED ___________, 1998)
$___________
INDYMAC ABS, INC.
DEPOSITOR
(INDYMAC, INC.)
SELLER AND SERVICER
MANUFACTURED HOUSING CONTRACT PASS-THROUGH CERTIFICATES, SERIES 19
PRINCIPAL AND INTEREST PAYABLE ON THE _____ DAY OF EACH MONTH, BEGINNING IN
______ 19__
The Manufactured Housing Contract Pass-Through Certificates, Series 19__
(the "Certificates") will represent beneficial interests in a trust (the
"Trust"), the assets of which will consist primarily of manufactured housing
installment sales contracts and installment loan agreements (the "Contracts")
originated or purchased by (IndyMac, Inc. or an affiliate thereof)
("(IndyMac)") in the ordinary course of its business. Only the Classes
identified in the table below (collectively, the "Offered Certificates") are
offered hereby.
THE CERTIFICATES WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF INDYMAC
ABS, INC., THE TRUSTEE, (INDYMAC), THE SERVICER OR ANY OF THEIR RESPECTIVE
AFFILIATES. THE OFFERED CERTIFICATES WILL NOT BE INSURED OR GUARANTEED BY
ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PARTY.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION SET FORTH UNDER "RISK
FACTORS" ON PAGE S-15 HEREIN AND ON PAGE 15 IN THE ACCOMPANYING PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Underwriting
Discounts Proceeds
Price to and to the
Public(1) Commissions Depositor(1)
Class A- Certificates . . % % %
Class __ Certificates . . . % % %
Class A-R Certificates . . % % %
Class B- Certificates . . . % % %
Class __ Certificates . . . % % %
Total . . . . . . . . . . . $_________ $_________ $_________
(1) Before deducting expenses payable by the Depositor, estimated to be
$_______.
The Offered Certificates are offered by the Underwriter when, as and if
issued by the Depositor, delivered to and accepted by the Underwriter and
subject to the Underwriter's right to reject orders in whole or in part. It
is expected that delivery of the Offered Certificates, in book-entry form,
will be made through the facilities of The Depository Trust Company on or
about _______, 19 , against payment in immediately available funds.
(Underwriter)
The Contracts will be sold to the Depositor by (IndyMac, Inc.
("IndyMac")).
Elections will be made to treat certain assets of the Trust as two
separate real estate mortgage investment conduits (each, a "REMIC") under the
Internal Revenue Code of 1986, as amended (the "Code"). The Regular
Certificates will represent "regular interests" in one of the REMICs. The
Class A-R Certificates will represent beneficial ownership of the "residual
interest" in each REMIC. See "Federal Income Tax Consequences" herein and in
the Prospectus.
The Class A-R Certificates will be subject to certain transfer
restrictions. See "Description of the Certificates -- Restrictions on
Transfer of the Class A-R Certificates" herein.
The Underwriter intends to make a secondary market in the Classes of
Underwritten Certificates being purchased by it, but has no obligation to do
so. There is currently no secondary market for the Offered Certificates and
there can be no assurance that such a market will develop or, if it does
develop, that it will continue or that it will provide Certificateholders
with a sufficient level of liquidity of investment.
____________________
This Prospectus Supplement does not contain complete information about
the offering of the Offered Certificates. Additional information is contained
in the Prospectus of the Depositor dated , 1998 (the "Prospectus") and
purchasers are urged to read both this Prospectus Supplement and the
Prospectus in full. Sales of the Offered Certificates may not be consummated
unless the purchaser has received both this Prospectus Supplement and the
Prospectus.
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL
DEALERS EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER THE PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER THE PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
SUMMARY
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Capitalized terms used herein that are not
otherwise defined shall have the meanings ascribed thereto elsewhere in this
Prospectus Supplement or in the Prospectus. See the Index of Principal Terms
for the location herein of certain principal terms.
Manufactured Housing Contract Pass-Through Certificates, Series 19 (the
"Certificates") will be issued pursuant to a pooling and servicing agreement,
to be dated as of ______, 19 (the "Agreement"), among IndyMac ABS, Inc., as
depositor (the "Depositor"), (IndyMac, Inc.) ("(IndyMac)"), as seller and
servicer (in such capacities, the "Seller" and the "Servicer," respectively),
and , as trustee (the "Trustee"). The Certificates will
be issued in the amounts (with respect to each Class, the "Initial
Certificate Principal Balance") and bear the pass-through rates (with respect
to each Class, the "Pass-Through Rate") set forth below:
INITIAL CERTIFICATE PASS-THROUGH
CLASS PRINCIPAL BALANCE RATE (1)
----- ------------------- ------------
Class A- Certificates . . . . $ %
Class Certificates . . . . $ %
Class A-R Certificates . . . . $ %
Class B- Certificates . . . . $ %
Class Certificates . . . . $ %(1)
- --------------------
(1) Computed on the basis of a (360)-day year of twelve (30)-day months.
The following chart sets forth information regarding securities to be issued
pursuant to the Agreement but which are not offered hereby:
INITIAL CERTIFICATE PASS-THROUGH
CLASS PRINCIPAL BALANCE RATE
----- ------------------- ------------
Class __ Certificates . . . . . $ %
Class __ Certificates . . . . .
- -----------------
Securities Offered . . . The Class A, Class B- and Class Certificates are
the only Certificates being offered hereby (the
"Offered Certificates"). The Offered Certificates
(other than the Class A-R Certificates) will be
issued in book-entry form in minimum denominations
of $1,000 and integral multiples of $1 in excess
thereof (the "Book-Entry Certificates"). The Class
A-R Certificates will be issued in definitive form
as fully registered physical certificates.
The certificates representing the Class A-R
Certificates will be subject to certain transfer
restrictions. See "Description of the Certificates--
Registration of the Offered Certificates--The Class
A-R Certificates" herein. The other Offered
Certificates initially will be represented by
certificates registered in the name of Cede &
Co., as the nominee of The Depository Trust Company
("DTC").
Except as stated otherwise herein, certificates
representing the Offered Certificates will be issued
in definitive form only under the limited
circumstances described herein. All references
herein to "holders" or "holders of the Offered
Certificates" will reflect the rights of beneficial
owners of Offered Certificates issued in book-entry
form ("Certificate Owners") as they may indirectly
exercise such rights through DTC, and participating
members thereof, except as otherwise specified
herein. See "Risk Factors--Book-Entry Registration"
and "Description of the Certificates--Registration
of the Offered Certificates" herein and "Risk
Factors--Book-Entry Registration" in the Prospectus.
The Offered Certificates will evidence undivided
interests in the Contract Pool and certain other
property held in trust for the benefit of the
Certificateholders (collectively, the "Trust Fund").
The undivided percentage interest (the "Percentage
Interest") of a Class A or Class B- Certificate in
distributions on the related Class of Certificates
will equal the percentage obtained from dividing the
denomination of such Certificate by the Initial
Certificate Principal Balance of such Class of
Certificates. The Offered Certificates will not
represent interests in or obligations of the
Depositor, the Trustee, (IndyMac), the Servicer or
any of their respective affiliates. Neither the
Offered Certificates nor the underlying Contracts
will be insured or guaranteed by any governmental
agency or instrumentality or by any other party.
Cut-off Date . . . . . . ________, 19 .
Due Period . . . . . . . With respect to each Distribution Date, the calendar
month preceding the month in which the Distribution
occurs.
Prepayment Period. . . . With respect to each Distribution Date, the calendar
month preceding the month in which the Distribution
Date occurs.
Closing Date . . . . . . ________, 19 .
Interest Accrual Period. With respect to each Distribution Date, the
calendar month preceding the month in which the
Distribution Date occurs. Interest on the
Certificates will be computed on the basis of a
(360)-day year consisting of twelve (30)-day months.
Distribution Dates . . . Distributions on the Certificates will be made on
the day of each month (or, if such day is
not a Business Day, on the immediately succeeding
Business Day), commencing ________, 19 (each, a
"Distribution Date"). A "Business Day" will be any
day other than (i) a Saturday or Sunday or (ii) a
day on which banks in the States of New York or
California are authorized or obligated by law or
executive order to be closed.
Distributions Distributions to the holders of Certificates of a
Class on each Distribution Date will be made in an
amount equal to their respective Percentage
Interests multiplied by the aggregate amount
distributed on such Class of Certificates on such
Distribution Date. So long as the Offered
Certificates are registered in the name of Cede &
Co., as nominee of DTC, distributions on each
Distribution Date will be made to the holders of
record of the related Offered Certificates (the
"Certificateholders") as of the close of business on
the Business Day immediately preceding such
Distribution Date (each, a "Record Date"), except
that the final distribution in respect of the
Certificates will only be made upon presentation and
surrender of the Certificates at the office or
agency appointed by the Trustee for that purpose in
New York, New York. With respect to the Class A-R
Certificates and, if Definitive Certificates
are issued, with respect to the other Offered
Certificates, the Record Date shall be the close of
business on the last Business Day of the month
immediately preceding the month in which such
Distribution Date occurs. As more fully described
herein under "Description of the Certificates--
Distributions-- Priority of Distributions,"
distributions to Certificateholders generally will be
applied first to the payment of interest and interest
shortfalls, second to the payment of any principal
previously due but not distributed and third, if any
principal is then due, to the payment of principal of
the related Class of Certificates. With respect to
each Distribution Date, interest on the Certificates
will accrue during the related Interest Accrual
Period. The Available Distribution Amount with
respect to each Distribution Date will be calculated
as described herein under "Description of the
Certificates--Distributions--Determination of
Available Distribution Amount." On each
Distribution Date, the Available Distribution
Amount will be distributed in the amounts and in the
order of priority set forth herein under
"Description of the Certificates--Distributions--
Priority of Distributions."
Effect of Priority
Sequence of Principal
Distributions. . . . . . The principal amounts described herein under
"Description of the Certificates--Distributions--
Priority of Distributions" generally will be
distributed, to the extent of the Available
Distribution Amount after payment of interest and
interest shortfalls on the Certificates, first to
the Senior Certificates, sequentially beginning with
the Class A-R Certificates and then in numerical
Class order, and then to each Class of Subordinate
Certificates in order of seniority. This should,
unless offset by other cash flow insufficiencies
due to delinquencies and liquidation losses, have
the effect of accelerating the amortization of the
Senior Certificates sequentially beginning with the
Class A-R Certificates and then in numerical Class
order and delaying the amortization of the
Subordinate Certificates, from what it would be
without such prioritization, thereby increasing the
respective interest in the Trust Fund evidenced by
the Subordinate Certificates. Increasing the
respective interest of one or more Classes
of Subordinate Certificates relative to that of the
Senior Certificates is intended to preserve, as
provided herein, the availability on each
Distribution Date of the subordination provided by
the related Subordinate Certificates. The aggregate
amount of principal paid on any Class of
Certificates will not exceed its Initial
Certificate Principal Balance. See "Description of
the Certificates" herein.
Prepayment Considerations
and Risks. . . . . . . The Contracts may be prepaid at any time without
penalty and, accordingly, the rate of principal
payments thereon is likely to vary from time to
time. The Offered Certificates may be sold at a
discount to their principal amounts. A slower than
anticipated rate of principal payments on the
Contracts is likely to result in a lower than
anticipated yield on the Offered Certificates if
they are purchased at a discount. See "Risk
Factors--Prepayment Considerations" and "Yield and
Prepayment Considerations" herein and "Yield
Considerations" and "Yield and Prepayment
Considerations" in the Prospectus.
Subordination of the
Subordinate
Certificates . . . . . The rights of the Subordinate Certificateholders to
receive distributions of amounts collected on or in
respect of the Contracts will be subordinated to
such rights of the Senior Certificateholders to the
extent described herein. Interest and interest
shortfalls on the Subordinate Certificates will not
be subordinated to principal payments on the Senior
Certificates. The foregoing subordination is
intended to enhance the likelihood of receipt by the
holders of each Class of Senior Certificates and
Subordinate Certificates, as applicable, of the full
amount of their monthly payments of interest and the
ultimate receipt by such holders of principal equal
to the related Initial Certificate Principal
Balances.
Overcollateralization. . Excess interest collections will be applied, to the
extent available, to make accelerated payments of
principal to the Certificates. The "Accelerated
Principal Distribution Amount" for any Distribution
Date will be the positive difference, if any,
between the Target Overcollateralization Amount and
the Current Overcollateralization Amount. The
"Overcollateralization Reduction Amount" for any
Distribution Date will be the positive difference,
if any, between the Current Overcollateralization
Amount and the Target Overcollateralization Amount.
The "Current Overcollateralization Amount" will
mean, for any Distribution Date, the positive
difference, if any, between the Pool Balance and the
sum of the Certificate Principal Balances of all
then-outstanding Classes of Certificates. The
"Target Overcollateralization Amount" will mean,
(i) for any Distribution Date prior to the
Cross-over Date, ____% of the Cut-off Date Principal
Balance and (ii) for any other Distribution Date,
the lesser of (a) ____% of the Cut-off Date
Principal Balance and (b) ____% of the then-
outstanding Pool Balance; provided, however, that
so long as any Class of Certificates is outstanding,
the Target Overcollateralization Amount will not be
less than ____% of the Cut-off Date Principal
Balance.
Losses on Liquidated
Contracts. . . . . . . As described herein, on each Distribution Date the
aggregate distribution of principal to the holders
of Certificates is intended to include the Contract
Principal Balance of each Contract that became a
Liquidated Contract during the related Prepayment
Period. If the amounts received by the Servicer in
connection with the liquidation of a Liquidated
Contract, whether through foreclosure thereon or
repossession and resale of the related manufactured
home or otherwise (including insurance proceeds
collected in connection with such liquidation)
("Liquidation Proceeds"), net of reasonable, out-of-
pocket costs and expenses (exclusive of the
Servicer's overhead costs) incurred by the Servicer
in connection with liquidation of any Contract or
disposition of any related REO property
("Liquidation Expenses"), from such Liquidated
Contract are less than the Contract Principal
Balance of such Liquidated Contract, and accrued
and unpaid interest thereon, then to the extent
such deficiency is not covered by any excess
interest collections on nondefaulted Contracts, the
deficiency may, in effect, be absorbed first by a
reduction in the Current Overcollateralization
Amount, then by the Class B- Certificateholders,
then by the Class B- Certificateholders and then by
the Class __ Certificateholders because a portion of
future Available Distribution Amounts funded by
future principal collections on or in respect of the
Contracts, up to the aggregate amount of such
deficiencies, that would otherwise have been
distributable to the related Subordinate
Certificateholders may instead be paid to the Senior
Certificateholders. If the protection afforded to
the holders of a Class of Subordinate Certificates
by the subordination of one or more other Classes of
Subordinate Certificates, is exhausted, the holders
of such Class of Subordinate Certificates will incur
a loss on their investment. If the protection
afforded to the holders of a Class of Senior
Certificates by the subordination of the Subordinate
Certificates is exhausted, the holders of the Senior
Certificates will incur a loss on their investment.
The "Contract Principal Balance" of a Contract will
be its (actual) principal balance, computed as
described herein under "(IndyMac, Inc.--Manufactured
Housing Division-- Servicing)" on the basis of the
(actuarial method) (or) (simple interest method)
(, as the case may be). In general, a "Liquidated
Contract" will be a defaulted Contract as to which
all amounts that the Servicer expects to recover
through the date of sale or other disposition of
the Manufactured Home and any real property securing
such Contract have been received. If the Available
Distribution Amount for any Distribution Date is not
sufficient to distribute an amount equal to the full
Formula Principal Distribution Amount for such
Distribution Date to the Certificateholders, in
addition to interest and interest shortfalls
distributable to the Certificateholders, the
aggregate Certificate Principal Balance will be
greater than the Pool Balance. In such event, the
amount of such deficiency (the "Liquidation Loss
Amount") will be allocated first to the Class B-2
Certificates (the "Class B-2 Liquidation Loss
Amount") to reduce the Class B-2 Adjusted
Certificate Principal Balance. After the Class B-2
Adjusted Certificate Principal Balance has been
reduced to zero, no additional Liquidation Loss
Amount will be allocated to the Class B-2
Certificates and any further Liquidation Loss
Amounts will be allocated to reduce the Class B-1
Adjusted Certificate Principal Balance (the "Class
B-1 Liquidation Loss Amount"). After the Class
B-1 Adjusted Certificate Principal Balance has been
reduced to zero, any further Liquidation Loss Amount
will be allocated to reduce the Class Adjusted
Certificate Principal Balance (the "Class
Liquidation Loss Amount"). In the event the
Adjusted Certificate Principal Balance of a Class of
Subordinate Certificates were to be reduced by a
Liquidation Loss Amount, interest accruing on such
Class will be calculated on such reduced Adjusted
Certificate Principal Balance. On each Distribution
Date, holders of Class B- Certificates will be
entitled to receive from the Available Distribution
Amount for such Distribution Date, one month's
interest at the related Pass-Through Rate on the
Adjusted Certificate Principal Balance of such Class.
Additionally, such holders will be entitled to
receive, prior to any distribution of principal on
the related Class of Certificates and each
subordinate Class of Certificates, one month's
interest at the related Pass-Through Rate on the
Liquidation Loss Amount for such Class as of the
immediately preceding Distribution Date (each, a
"Liquidation Loss Interest Amount"). The "Adjusted
Certificate Principal Balance" of any Class of
Subordinate Certificates on any Distribution Date
will be its Certificate Principal Balance (after
giving effect to the distributions made on the
immediately preceding Distribution Date) less any
Liquidation Loss Amounts allocated to such Class on
such preceding Distribution Date. See "Description
of the Certificates--Subordination of the
Subordinate Certificates" "--Losses on Liquidated
Contracts" and "Yield and Prepayment Considerations"
herein.
Servicer . . . . . . . . (IndyMac) will act as the Servicer of the Contracts
and will be the Master Servicer for purposes of the
Prospectus. See "(IndyMac, Inc.)" and "Description
of the Certificates--Certain Other Matters Regarding
the Servicer" herein.
Advances . . . . . . . . For each Distribution Date, the Servicer will be
obligated to make Advances in respect of the related
Due Period to the extent of delinquent (principal
and interest payments) in respect of the Contracts.
(The Servicer will not make any Advances with
respect to delinquent principal payments on
the Contracts.) The Servicer will be required to
make an Advance only to the extent that it
determines such Advance will be recoverable from
future payments and collections on or in respect of
the related Contracts. Assuming that in the
judgment of the Servicer all delinquent payments on
the Contracts were recoverable, the amount of the
Advance paid out of the funds of the Servicer will
be calculated such that, if it is made, it will
permit a distribution to the Class __
Certificateholders undiminished by such delinquent
payments (of interest). See "Description of the
Certificates--Advances" herein.
Final Distribution
Date . . . . . . . . . To the extent not previously paid prior to such
dates, the outstanding principal amount of each
Class of Offered Certificates will be payable
on the ________ 20__ Distribution Date (the
"Final Scheduled Distribution Date"). The Final
Scheduled Distribution Date has been determined by
adding seven months to the month in which the
maturity date of the Contract with the latest stated
maturity as of the Cut-off Date occurs. Because the
rate of distributions in reduction of the
Certificate Principal Balances of the Offered
Certificates will depend on the rate of amortization
of the Contracts (including amortization due to
prepayments and defaults), the actual final
distribution on any Class of Offered Certificates
could occur significantly earlier than the Final
Scheduled Distribution Date. See "Risk Factors--
Prepayment Considerations" and "Yield and Prepayment
Considerations" herein.
Termination. . . . . . . The Depositor and the Servicer will each have the
option to purchase from the Trust all Contracts then
outstanding and all other property in the Trust Fund
on any Distribution Date on or after the first
Distribution Date as of which the Pool Balance is
less than 10% of the Cut-off Date Principal Balance.
See "Description of the Certificates--Termination"
herein.
If neither the Depositor nor the Servicer exercises
its optional termination right within 90 days after
such right can first be exercised, the Trustee shall
solicit bids for the purchase of all Contracts then
outstanding and all other property in the Trust
Fund. In the event that satisfactory bids are
received as described herein under "Description of
the Certificates--Termination," the sale proceeds
will be distributed to Certificateholders. If
satisfactory bids are not received, the Trustee
shall decline to sell such Contracts and other
property of the Trust Fund, and shall not be under
any obligation to solicit any further bids or
otherwise negotiate any further sale of the
Contracts. See "Description of the Certificates--
Termination" herein.
The Contracts. . . . . . The assets of the Trust will primarily consist of a
pool (the "Contract Pool") of (fixed rate)
manufactured housing installment sales contracts and
installment loan agreements (collectively, the
"Contracts") secured by security interests in
manufactured homes (the "Manufactured Homes")
financed or refinanced with the proceeds of the
Contracts and, with respect to certain of the
Contracts (the "Land-and-Home Contracts"), secured
by liens on the underlying real property on which
the related Manufactured Homes are located. The
Contract Pool will consist of Contracts having
an aggregate Contract Principal Balance as of the
Cut-off Date of $ (the "Cut-off Date
Principal Balance"). The properties underlying the
Contracts as of the Cut-off Date were located in
states. (Substantially all of the Contracts
bear interest at an annual percentage rate (each,
an "APR") which will be equal to or higher than (i)
the sum of the Class A or Class A-R Pass-Through
Rate, as the case may be, and (ii) the rate at which
the Servicing Fee is calculated.) Monthly payments
of principal and interest on the Contracts will be
due on various days (each, a "Due Date") throughout
each Due Period. All of the Contracts are (Actuarial
Contracts) (or) (Simple Interest Contracts). As of
the Cut-off Date, the APRs on the Contracts ranged
from % to % with a weighted average APR of
%. The Contracts have remaining terms to
maturity as of the Cut-off Date of at least 10
months but not more than ___ months and original
terms to maturity of at least ___ months but not
more than ___ months. As of the Cut-off Date, the
Contracts had a weighted average remaining term to
maturity of approximately months, a weighted
average seasoning of approximately months and a
weighted average original loan-to-value ratio of
%. See "The Contract Pool" herein and "Yield
and Prepayment Considerations" in the Prospectus.
The Agreement will require the Servicer to cause to
be maintained one or more standard hazard insurance
policies with respect to each Manufactured Home
(other than a Manufactured Home in repossession) in
an amount and manner described herein under
"Description of the Certificates--Hazard Insurance
Policies." Generally, no other insurance policies
will be provided with respect to any Contract or
Manufactured Home.
Security Interests and
Mortgages on the
Manufactured Homes;
Repurchase
Obligations. . . . . . In connection with the transfer of the Contracts to
the Trustee, (IndyMac) will assign the security
interests in the Manufactured Homes and, with
respect to Land-and-Home Contracts, the liens on the
underlying real property on which the Manufactured
Homes are located to the Trustee. The Servicer will
be required to take such steps as are necessary to
perfect and maintain perfection of the security
interest in each Manufactured Home in the name of
(IndyMac) as lienholder or legal titleholder, but so
long as (IndyMac or an affiliate thereof) is the
Servicer, the Servicer will not be required to
cause notations to be made on any document of title
relating to any Manufactured Home or to execute
any instrument relating to any Manufactured Home
(other than a notation or a transfer instrument
necessary to show (IndyMac) as the lienholder or
legal titleholder). With respect to the Land-and-
Home Contracts, assignments to the Trustee of the
mortgages or deeds of trust securing the Land-and-
Home Contracts (each, a "Mortgage") will be recorded
in the appropriate public office for real property
records(, except in the State of California and in
states where the Seller has reasonably determined
that such recording is not required to protect the
Trustee's interest against the claim of any
subsequent transferee or any successor to or
creditor of the Depositor or the Seller).
As a result of the foregoing, the security interests
in the Manufactured Homes in certain states may not
be effectively transferred to the Trustee or
perfected. See "Risk Factors--Security Interests
and Certain Other Aspects of the Contracts" herein.
To the extent such security interest is perfected
and is effectively transferred to the Trustee, the
Trustee will have a prior claim over subsequent
purchasers of the Manufactured Homes, holders of
subsequently perfected security interests and
creditors of either the Depositor or (IndyMac).
Under the laws of most states, Manufactured Homes
constitute personal property, and perfection of a
security interest in a Manufactured Home is obtained,
depending on applicable state law, either by noting
the security interest on the certificate of title
for the Manufactured Home or by filing a financing
statement under the Uniform Commercial Code. If a
Manufactured Home were relocated to another state
without reperfection of the related security
interest, or if it were to become attached to its
site and a determination were made that the security
interest was subject to real estate title and
recording laws, or as a result of fraud or
negligence, the Trustee could lose its prior
perfected security interest in such Manufactured
Home. See "Risk Factors--Security Interests and
Certain Other Aspects of the Contracts." Federal
and state consumer protection laws impose
requirements upon creditors in connection with
extensions of credit and collections on installment
sales contracts and installment loan agreements,
and certain of these laws make an assignee of such
a contract, such as the Trust Fund, liable to the
obligor thereon for any violation by the lender.
Certain Federal
Income Tax
Consequences . . . . . An election will be made to treat the Contract Pool
and certain other assets of the Trust as a REMIC for
federal income tax purposes (the "Pooling REMIC").
An election also will be made to treat the "regular
interests" in the Pooling REMIC and certain other
assets of the Trust as another REMIC for federal
income tax purposes (the "Issuing REMIC"). The
Regular Certificates will be designated as "regular
interests" in the Issuing REMIC and the Class A-R
Certificates will represent the beneficial ownership
of the "residual interest" in each of the Pooling
REMIC and the Issuing REMIC.
Because the Offered Certificates (other than the
Class A-R Certificates) will be considered REMIC
regular interests, they will be taxable debt
obligations under the Internal Revenue Code of
1986, as amended (the "Code"), and interest paid or
accrued on such Certificates, including any original
issue discount will be taxable to the holders of
such Certificates in accordance with the accrual
method of accounting, regardless of such
Certificateholders' usual methods of accounting.
Each of the Class A Certificates (other than
the Class A-R Certificates), will be issued with
original issue discount only if its stated principal
amount exceeds its issue price. See "Certain
Federal Income Tax Consequences" herein and "Federal
Income Tax Consequences" in the Prospectus. (The
Class __ and Class B-__ Certificates will not be
treated by the Trust as "variable rate debt
instruments" as defined in Treasury Regulations
promulgated under the Code and, therefore, will be
treated as issued with original issue discount as
described in "Certain Federal Income Tax
Consequences" herein and "Federal Income Tax
Consequences" in the Prospectus.) For purposes of
determining the amount and the rate of accrual of
original issue discount and market discount, the
Depositor intends to assume that there will be
prepayments on the Contracts at a rate equal to
___% of the Prepayment Model. No representation is
made as to whether the Contracts will prepay at that
rate or any other rate. See "Certain Federal Income
Tax Consequences" herein and "Federal Income
Tax Consequences" in the Prospectus.
For federal income tax purposes, the Offered
Certificates (other than the Class A-R Certificates)
generally will be treated as "regular interests in
a REMIC" for domestic building and loan
associations, and "real estate assets" for real
estate investment trusts ("REITs"), subject to the
limitations described in "Certain Federal Income Tax
Consequences" herein and "Federal Income Tax
Consequences" in the Prospectus. Similarly,
interest on the Offered Certificates will be
considered "interest on obligations secured by
mortgages on real property" for REITs, subject to
the limitations described in "Federal Income Tax
Consequences" in the Prospectus. The holders of the
Class A-R Certificates, as holders of the residual
interest in the REMICs, will be subject to special
federal income tax rules that may significantly
reduce the after-tax yield of such Certificates.
Further, significant restrictions apply to the
transfer of the Class A-R Certificates. See
"Certain Federal Income Tax Consequences" herein
and "Federal Income Tax Consequences" in the
Prospectus.
ERISA Considerations . . A fiduciary of an employee benefit plan subject
to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or Section 4975
of the Code should carefully review with its
legal advisors whether the purchase or holding
of Class A Certificates could give rise to a
transaction prohibited or not otherwise
permissible under ERISA or the Code. See
"ERISA Considerations" herein and in the
Prospectus.
An employee benefit plan or other plan subject to
ERISA and/or Section 4975 of the Code, or an entity
purchasing Class A-R or Class B-1 Certificates on
behalf of any such employee benefit or other
plan, will not be permitted to purchase or hold such
Certificates unless the opinion of counsel described
under "ERISA Considerations" is delivered to the
Trustee. See "ERISA Considerations" herein and
in the Prospectus.
Legal Investment
Considerations . . . . The Offered Certificates will (not) constitute
"mortgage related securities" under the Secondary
Mortgage Market Enhancement Act of 1984 ("SMMEA").
No representation is made as to the appropriate
characterization of the Offered Certificates under
any laws relating to investment restrictions and
investors should consult their legal advisors. See
"Risk Factors--Limited Liquidity; Lack of SMMEA
Eligibility" and "Legal Investment Considerations"
herein and "Legal Investment" in the Prospectus.
Ratings. . . . . . . . . It is a condition to the issuance of the
Certificates that they be rated "___" by _____ and
"___" by _________ (each a "Rating Agency"). In
general, ratings address credit risk and do not
address the likelihood of prepayments. See
"Ratings" herein and "Risk Factors--Rating of the
Certificates" in the Prospectus.
RISK FACTORS
Prospective investors in the Offered Certificates should consider among other
things, the following risk factors in connection with the purchase of the
Offered Certificates.
GENERAL
An investment in the Offered Certificates may be affected by, among
other things, a downturn in regional or local economic conditions. These
regional or local economic conditions are often volatile and historically
have affected the delinquency, loan loss and repossession experience of
manufactured housing contracts. The geographic location of the Manufactured
Homes is set forth under "The Contract Pool" herein. Moreover, regardless of
its location, manufactured housing generally depreciates in value over time.
Consequently, the market value of the Manufactured Homes could be or become
lower than the Contract Principal Balance of the related Contracts. See "The
Contract Pool" herein and "The Trust Fund--The Contracts" in the Prospectus.
High delinquencies and liquidation losses on the Contracts will have the
effect of reducing, and could eliminate, the protection against losses
afforded by, with respect to (i) the Senior Certificates, the subordination
of the Subordinate Certificates and (ii) the Subordinate Certificates, the
subordination of the Class X Certificates. If any such protection is
eliminated, and the amount of overcollateralization, if any, has been reduced
to zero, the related Certificateholders will bear the risk of losses on the
Contracts and must rely on the value of the Manufactured Homes for recovery
of the outstanding principal of and unpaid interest on any defaulted
Contracts. See "Description of the Certificates--Subordination of the
Subordinate Certificates" and "--Losses on Liquidated Contracts" herein.
Certain statistical information relating to the delinquency, loan loss
and repossession experience of the portfolio of manufactured housing
contracts serviced by (IndyMac) is set forth herein under "(IndyMac, Inc.--
Delinquency and Loss Experience)." Such statistical information relates only
to manufactured housing contracts serviced by (IndyMac) during the periods
indicated and is included herein only for illustrative purposes. There is no
assurance that the Contracts will have characteristics similar to the
manufactured housing contracts to which such statistical information relates.
In addition, the losses experienced upon recovery of principal upon the
liquidation of manufactured housing contracts historically have been sharply
affected by downturns in regional or local economic conditions. These
regional or local economic conditions are often volatile, and no prediction
can be made regarding future economic loss upon liquidation. In light of the
foregoing, no assurance can be given that the losses experienced upon the
liquidation of defaulted Contracts will be similar to any statistical
information contained herein regarding (IndyMac). See "The Trust Fund--The
Contracts" in the Prospectus.
LIMITED HISTORICAL DELINQUENCY, LOSS AND PREPAYMENT INFORMATION
(IndyMac began acquiring and servicing manufactured housing contracts
and installment loan agreements in February 1996 and, from such date to the
present, has substantially increased the volume of such contracts that it has
acquired and/or serviced. Consequently, IndyMac has limited historical
experience with respect to the performance, including the delinquency and
loss experience and the rate of prepayments of these contracts. Accordingly,
neither the delinquency experience and loan loss and liquidation experience
set forth under "IndyMac, Inc.--Delinquency and Loss Experience" nor the
prepayment scenarios set forth under "Yield and Prepayment Considerations"
may be indicative of the performance of the Contracts included in the
Contract Pool. Prospective investors should take these factors into account
when reviewing the information set forthherein and making their investment
decision.)
PREPAYMENT CONSIDERATIONS
The prepayment experience on the Contracts may affect the average life
of the Offered Certificates. Prepayments on the Contracts (which include
both voluntary prepayments and liquidations following default) may be
influenced by a variety of economic, geographic, social and other factors,
including repossessions, aging, seasonality, market interest rates, changes
in housing needs, job transfers and unemployment. See "Yield and Prepayment
Considerations" herein and "Yield and Prepayment Considerations" in the
Prospectus.
YIELD ON THE OFFERED CERTIFICATES
Because interest will not be distributed on the Offered Certificates
until the 25th day (or, if such day is not a Business Day, then on the next
succeeding Business Day) of the month following the Interest Accrual Period
during which such interest accrues on the Certificates, the effective yield
to the holders of the Offered Certificates will be lower than the yield
otherwise produced by their respective Pass-Through Rates and purchase
prices.
The yield to maturity of, and the aggregate amount of distributions on,
each Class of the Offered Certificates will be related to the rate and timing
of principal payments on the Contracts. The rate of principal payments on
the Contracts will be affected by the amortization schedules of the Contracts
and by the rate of principal prepayments thereon (including for this purpose
payments resulting from refinancings and liquidations of the Contracts due to
defaults and repurchases of Contracts by (IndyMac) under certain
circumstances). No assurance can be given as to the rate of principal
payments or prepayments on the Contracts.
LIMITED OBLIGATIONS
The Offered Certificates will not represent an interest in or obligation
of the Depositor, the Trustee, the Underwriter, (IndyMac) or any of their
respective affiliates. Neither the Contracts nor the Offered Certificates
will be insured or guaranteed by any governmental agency or instrumentality,
the Depositor, the Underwriter, (IndyMac), the Servicer or any of their
respective affiliates and the Offered Certificates will be payable only from
amounts payable on or in respect of the assets in the Trust Fund. See "Risk
Factors--Limited Source of Payments -- No Recourse to Sellers, Depositor or
Master Servicer" in the Prospectus.
The Depositor will not be obligated in any way in respect of the
Certificates. The obligations of (IndyMac) in its capacity as Servicer with
respect to the Certificates will be limited to its contractual servicing
obligations. (IndyMac) will, however, make certain representations and
warranties in its capacity as Seller relating to the Contracts. In the event
of an uncured breach of any such representation or warranty that materially
and adversely affects the Certificateholders' interest in a Contract,
(IndyMac), as Seller, may, under certain circumstances, be obligated to
repurchase such Contract. See "Description of the Certificates-- Conveyance
of Contracts" herein.
LIMITED LIQUIDITY; LACK OF SMMEA ELIGIBILITY
The Underwriter intends to make a secondary market in the Offered
Certificates, but will have no obligation to do so. There can be no
assurance that a secondary market for any Class of Offered Certificates will
develop, or if one does develop, that it will continue or provide sufficient
liquidity of investment or that it will remain for the term of the related
Class of Offered Certificates. (The Offered Certificates will not constitute
"mortgage related securities" for purposes of SMMEA. Accordingly,
many institutions with legal authority to invest in SMMEA securities will not
be able to invest in the Offered Certificates, thereby limiting the market
for the Offered Certificates. In light of the foregoing, investors should
consult their own counsel as to whether they have the legal authority to
invest in non-SMMEA securities such as the Offered Certificates.) See "Legal
Investment Considerations" herein and "Risk Factors--Limited Liquidity" in
the Prospectus.
SECURITY INTERESTS AND CERTAIN OTHER ASPECTS OF THE CONTRACTS
Each Contract will be secured by a security interest in a Manufactured
Home (and, in the case of a Land-and-Home Contract, by a Mortgage on the
underlying real property on which the Manufactured Home is located).
Perfection of security interests in Manufactured Homes and enforcement of
rights to realize upon the value of the Manufactured Homes as collateral for
the Contracts are subject to a number of federal and state laws, including
the Uniform Commercial Code (the "UCC") as adopted in each state and, in most
states, certificate of title statutes, but generally not state real estate
laws. The steps necessary to perfect the security interest in a Manufactured
Home will vary from state to state. Because of the expense and
administrative inconvenience involved, (IndyMac) will not amend any
certificate of title to change the lienholder specified therein from
(IndyMac) to the Trustee or file any UCC-3 assignments and will not deliver
any certificate of title to the Trustee or note thereon the Trustee's
interest, although UCC-1 financing statements will be filed to reflect the
sale of the Contracts from (IndyMac) to the Depositor and from the Depositor
to the Trust. Consequently, in some states, in the absence of such an
amendment to the certificate of title, the assignment to the Trustee of the
security interest in the Manufactured Home may not be effective or such
security interest may not be perfected and, in the absence of such notation
or delivery to the Trustee, the assignment of the security interest in the
Manufactured Home may not be effective against creditors of (IndyMac) or a
trustee in bankruptcy of (IndyMac) or such affiliate. Land-and-Home
Contracts will also be secured by a Mortgage on the underlying real property
on which a Manufactured Home is placed. Assignments to the Trustee of such
Mortgages will be recorded in the appropriate public office for real property
records(, except in the State of California and in states where the Seller
has reasonably determined that such recording is not required to protect the
Trustee's interest against the claim of any subsequent transferee or any
successor to or creditor of the Depositor or the Seller). See "Certain Legal
Aspects of the Contracts" herein.
CONSUMER PROTECTION LAWS AND OTHER LIMITATIONS ON LENDERS
Numerous federal and state consumer protection laws impose requirements
on lending under installment sales contracts and installment loan agreements
such as the Contracts, and the failure by the lender or seller of goods to
comply with such requirements could give rise to liabilities of assignees for
amounts due under such agreements and the right of set-off against claims by
such assignees. These laws would apply to the Trust Fund as assignee of the
Contracts. Pursuant to the Agreement, (IndyMac) will represent and warrant
that each Contract complies with all requirements of law and will provide
certain warranties relating to the validity, perfection and priority of the
security interest in each Manufactured Home securing a Contract. A breach of
any such representation and warranty that materially and adversely affects
the Certificateholders' interest in any Contract may, subject to certain
conditions described herein under "Description of the Certificates--
Conveyance of Contracts," create an obligation by (IndyMac) to repurchase
such Contract unless such breach is cured within 90 days after notice
thereof. If (IndyMac) does not honor its repurchase obligation in respect of
a Contract and such Contract were to become defaulted, recovery of amounts
due on such Contract would be dependent on repossession and resale of the
Manufactured Home securing such Contract. Certain other factors, such as the
bankruptcy of an obligor or the application of equitable principles by a
court, may limit the ability of the Certificateholders to receive payments on
the Contracts or to realize upon the Manufactured Homes or may limit the
amount realized to less than the amount due. See "Certain Legal Aspects of
the Contracts" herein and "Certain Legal Aspects of the Contracts" in the
Prospectus.
CERTAIN MATTERS RELATING TO INSOLVENCY
(IndyMac) and the Depositor intend that the transfer of Contracts from
(IndyMac) to the Depositor and from the Depositor to the Trust Fund
constitutes a sale, rather than a pledge of the Contracts to secure
indebtedness of (IndyMac) or the Depositor, as the case may be. However, if
(IndyMac) or the Depositor were to become a debtor under the federal
bankruptcy code, it is possible that a creditor or trustee in bankruptcy of
(IndyMac) or the Depositor, or (IndyMac) or the Depositor as
debtor-in-possession, may argue that the sale of the Contracts by (IndyMac)
or the Depositor, as the case may be, was a pledge of the Contracts rather
than a sale. This position, if presented to or accepted by a court, could
result in a delay in or reduction of distributions to the Certificateholders.
BOOK-ENTRY REGISTRATION
Since transactions in the Book-Entry Certificates can be effected only
through DTC, participating organizations, indirect participants and certain
banks, the ability of a Certificate Owner of Book-Entry Certificates to
pledge a Book-Entry Certificate to persons or entities that do not
participate in the DTC system or otherwise to take action in respect of such
Book-Entry Certificate, may be limited due to lack of a physical certificate
representing such Book-Entry Certificate.
Certificate Owners of Book-Entry Certificates may experience some delay
in their receipt of distributions of interest and principal on the Book-Entry
Certificates since such distributions will be forwarded by the Trustee to DTC
and DTC will credit such distributions to the accounts of its Participants,
which will thereafter credit them to the accounts of such Certificate Owners
either directly or indirectly through indirect participants. See
"Description of the Certificates--Registration of the Offered Certificates"
herein and "Risk Factors--Book-Entry Registration" in the Prospectus.
THE CONTRACT POOL
All of the Contracts will have been purchased or originated by (IndyMac
or an affiliate thereof) in the ordinary course of its business. Each
Contract will be a manufactured housing installment sales contract or
installment loan agreement (collectively, "manufactured housing contracts" or
"contracts"). A description of the general practice of (IndyMac) and its
affiliates with respect to the origination or purchase of manufactured
housing contracts is set forth under "(IndyMac, Inc.--Manufactured Housing
Division--Underwriting Practices)" herein.
The statistical information presented in this Prospectus Supplement
concerning the Contract Pool is based on the Contract Pool as of the Cut-off
Date. Unless otherwise noted, all percentages relating to the Contracts are
measured by the Contract Principal Balance of the related Contracts and the
Contract Pool as of the Cut-off Date.
Under the Agreement, the Manufactured Homes will be required to comply
with the requirements of certain federal statutes which, in the aggregate,
generally require the Manufactured Homes to have a minimum of 400 square feet
of living space and a minimum width in excess of 102 inches and to be of a
kind customarily used at a fixed location. Such statutes also require the
Manufactured Homes to be transportable in one or more sections, built on a
permanent chassis and designed to be used as dwellings, with or without
permanent foundations, when connected to the required utilities. The
Manufactured Homes will also be required to include the plumbing, heating,
air conditioning and electrical systems therein.
The Agreement will require the Servicer to maintain hazard insurance
policies with respect to each Manufactured Home (other than a Manufactured
Home in repossession) in the amounts and manner set forth herein under
"Description of the Certificates--Hazard Insurance Policies." Generally, no
other insurance will be maintained with respect to the Manufactured Homes or
the Contracts.
(IndyMac) will assign to the Trustee the Contracts and all rights to
receive payments on the Contracts (received after the Cut-off Date, whether
due before, on or after the Cut-off Date) (due after the Cut-off Date,
whether received before, on or after the Cut-off Date). See "Description of
the Certificates--Conveyance of Contracts" herein.
The Contract Pool will consist of Contracts having an aggregate
Contract Principal Balance as of the Cut-off Date of $ . Each
Contract was originated on or after ________, 19 and on or before ________,
19 .
Each Contract has a (fixed APR) and provides for level monthly payments
(each, a "Monthly Payment") over the term of such Contract that fully
amortize the principal balance of the Contract. Each Contract provides for
allocation of payments according to (the ("actuarial") (or) (simple interest)
method, (as the case may be),) as described under "(IndyMac, Inc.--
Manufactured Housing Division--Servicing)".
For each Land-and-Home Contract, (IndyMac) either (a) financed the
Manufactured Home and the land on which it is located, or (b) financed the
Manufactured Home and either took as additional security a Mortgage on the
underlying real property on which the Manufactured Home is located or, in
certain cases, took a Mortgage on the underlying real property on which the
Manufactured Home is located in lieu of a down payment in the form of cash or
the value of a trade-in unit. See "Certain Legal Aspects of the Contracts"
herein and "Certain Legal Aspects of the Contracts" in the Prospectus.
Based on Cut-off Date Principal Balance, % of the Contracts are
secured by Manufactured Homes which were new and % of the Contracts are
secured by Manufactured Homes which were used. Based on Cut-off Date
Principal Balance, % of the Contracts are Land-and-Home Contracts. Each
Contract has an APR of at least % and not more than %. The weighted
average APR of the Contracts as of the Cut-off Date is %. The Contracts
have remaining terms to maturity as of the Cut-off Date of at least __ months
but not more than ___ months and original terms to maturity of at least __
months but not more than ___ months. As of the Cut-off Date, the Contracts
had a weighted average remaining term to maturity of approximately
months, a weighted average seasoning of approximately __ months and a
weighted average original loan-to-value ratio of %. The average
outstanding Contract Principal Balance as of the Cut-off Date was
approximately $ . The properties underlying the Contracts were located
as of the Cut-off Date in states. Based on Cut-off Date Principal
Balance, % and % of such properties are located in ,
and , respectively. No other state represented more than (5.00%) of
the Cut-off Date Principal Balance.
Appearing below is some additional information regarding the
characteristics of the Contracts. Unless otherwise indicated by the context,
all such information is as of the Cut-off Date. Percentages may not add to
100.00% due to rounding.
GEOGRAPHICAL DISTRIBUTION OF MANUFACTURED HOMES(1)
- -------------------------------------------------------------------------------
AGGREGATE
CUT-OFF DATE PERCENTAGE OF
GEOGRAPHIC NUMBER OF CONTRACT CUT-OFF DATE
LOCATION CONTRACTS PRINCIPAL BALANCE POOL BALANCE
- -------------------------------------------------------------------------------
Alabama . . . . . . $ %
Arizona . . . . . .
Arkansas . . . . .
California . . . .
Colorado . . . . .
Florida . . . . . .
Georgia . . . . . .
Idaho . . . . . . .
Illinois . . . . .
Indiana . . . . . .
Iowa . . . . . . .
Kansas . . . . . .
Kentucky . . . . .
Louisiana . . . . .
Michigan . . . . .
Minnesota . . . . .
Mississippi . . . .
Missouri . . . . .
Montana . . . . . .
Nebraska . . . . .
Nevada . . . . . .
New Mexico . . . .
New York . . . . .
North Carolina . .
Ohio . . . . . . .
Oklahoma . . . . .
Oregon . . . . . .
Pennsylvania . . .
South Carolina . .
South Dakota . . .
Tennessee . . . . .
Texas . . . . . . .
Utah . . . . . . .
Virginia . . . . .
Washington . . . .
West Virginia . . .
Wyoming . . . . . .
---------- ------------ -------
Total . . . . . $ 100.00%
========== ============ =======
(1) Based on the location of the properties underlying the Contracts as of
the Cut-off Date.
ORIGINAL CONTRACT AMOUNTS
- ------------------------------------------------------------------------------
AGGREGATE CUT-OFF PERCENTAGE OF
ORIGINAL CONTRACT NUMBER OF DATE CONTRACT CUT-OFF DATE
AMOUNT CONTRACTS PRINCIPAL BALANCE POOL BALANCE
- ------------------------------------------------------------------------------
$ 5,000-$ 9,999 . . . $ %
$10,000-$14,999 . . . .
$15,000-$19,999 . . . .
$20,000-$24,999 . . . .
$25,000-$29,999 . . . .
$30,000-$34,999 . . . .
$35,000-$39,999 . . . .
$40,000-$44,999 . . . .
$45,000-$49,999 . . . .
$50,000-$54,999 . . . .
$55,000-$59,999 . . . .
$60,000-$64,999 . . . .
$65,000-$69,999 . . . .
$70,000-$74,999 . . . .
$75,000-$79,999 . . . .
$80,000-$84,999 . . . .
$85,000-$89,999 . . . .
$90,000-$94,999 . . . .
$95,000-$99,999 . . . .
$100,000 or more . . .
---------- ---------- -------
$ %
========== ========== =======
REMAINING TERM TO MATURITY
AGGREGATE CUT-OFF PERCENTAGE OF
NUMBER OF DATE CONTRACT CUT-OFF DATE
REMAINING TERM CONTRACTS PRINCIPAL BALANCE POOL BALANCE
- -------------------------------------------------------------------------------
1 - 60 months
61 - 96 months
97 - 120 months
121 - 156 months
157 - 180 months
181 - 216 months
217 - 240 months
241 - 300 months
301 - 360 months ________ _______ _______
Total . . . .
- -------------------------------------------------------------------------------
APRs
- ------------------------------------------------------------------------------
Aggregate
Cut-off Date Percentage of
Number of Contract Cut-off Date
APRs Contracts Principal Balance Pool Balance
- ------------------------------------------------------------------------------
7.01% - 8.00%
8.01% - 9.00%
9.01% - 10.00%
10.01% - 11.00%
11.01% - 12.00%
12.01% - 13.00%
13.01% - 14.00%
14.01% - 15.00%
Total . . . .
Original Loan-to-Value/(1)/ Ratio/(2)/
- ------------------------------------------------------------------------------
60% or less
61%-65%
66%-70%
71%-75%
76%-80%
81%-85%
86%-90%
91%-95%
96%-100%
Total
/(1)/ "Value" in the above table will be equal to the sum of (a) either
(i) the sum of the down payment (which includes the value of any
trade-in unit), the original amount financed on the related
Contract (which may include sales and other taxes) and
insurance and prepaid finance charges or (ii) the appraisal
value of the home and (b) in the case of any Land-and-Home
Contract, the appraised value of the land securing such Contract
(as appraised by an independent appraiser).
/(2)/ Rounded to the nearest 1%.
(INDYMAC, INC.)
(IndyMac, formerly known as Independent National Mortgage Corporation,
operates a nationwide mortgage conduit business established in 1993 to
purchase mortgage loans that do not typically qualify for sale to the U.S.
government sponsored mortgage agencies. IndyMac formed its Manufactured
Housing Division ("MHD") in December 1995 to both originate directly to
consumers and to purchase manufactured housing retail installment sales
contracts and installment loan agreements from retailers, brokers and other
loan originators. Loans currently originated or purchased by the MHD are
fixed or variable rate and fully amortizing loans and, in general, provide
that the related manufactured home be constructed in compliance with the
Manufactured Home and Construction and Safety Standards instituted by the
Department of Housing and Urban Development ("HUD") in June 1976. The MHD's
primary competition is from local, regional and national banks, independent
finance companies and captive manufactured housing finance companies. The
MHD has its administrative headquarters in San Diego, California and conducts
its operations through six Region Service Centers currently located in
Atlanta, Houston, Indianapolis, Raleigh, San Diego, and Vancouver, WA, and
the Third Party Lending Department (the "TPL Department") in San Diego,
California.)
(In addition to its mortgage conduit business and manufactured housing
operations, IndyMac is engaged in the subprime mortgage lending business and
additional lending operations through its Home Improvement Division ("HID"),
Construction Lending Division ("CLD") and LoanWorks, which make home
improvement and debt consolidation loans, loans for the purchase of lots,
home construction and remodeling and real estate loans to consumers.
IndyMac's principal office is located at 155 North Lake Avenue, Pasadena, CA
91101, telephone (800) 669-2300.)
MANUFACTURED HOUSING DIVISION
(The MHD finances both new and used manufactured homes and originates
retail installment sales contracts and installment loan agreements by
purchasing such contracts from retailers. In addition, the MHD purchases
loans from other originators of manufactured home loans and from approved
IndyMac sellers who deal with other IndyMac divisions. The MHD distributes
its products and services through its Region Service Centers and the TPL
Department in San Diego. The marketing efforts of each Region Service Center
are implemented through account executives located throughout the country and
offer retailers financing programs with varying loan terms, down payment
requirements, interest rates and credit policies. Retailers/loan originators
wishing to offer the MHD financing programs to their customers must submit an
application to the MHD for approval. Upon satisfactory review of the
dealer's/loan originator's credit worthiness, financial strength and
appropriate experience and qualifications, the dealer/loan originator is
approved and a financing agreement is executed. Annual reviews are conducted
to monitor continuing qualifications as well as portfolio performance. The
TPL Department originates Land-and-Home Contracts through sellers which sell
to IndyMac's mortgage conduit business and through selected brokers.)
Underwriting Practices. (Due to the importance of the roles the
manufacturer, the retailer and the home buyer play in the satisfactory
performance of a contract, all three are subject to investigation to manage
credit risk. Manufacturers are evaluated and approved by a centralized unit.
Such manufacturers must be approved by HUD and meet minimum financial
requirements. In addition, the MHD region sales and management staff make
recommendations based on the industry experience of the principals and
relevant market experience with the product. Dealers are also approved by a
centralized unit based upon their financial condition, experience in the
industry and the credit history of the principals. Such approval process
also involves the input of the region sales staff and management. The
dealers are subject to annual performance reviews.)
(The MHD's underwriting guidelines generally require that each
applicant's credit history, residence history, employment history, debt
payment to income ratio and discretionary income be examined. Generally, a
borrower is required to be employed by the same employer a minimum of two
years or be in the same occupational field for at least two years. The
borrower is required to have an established credit history, and the MHD
carefully reviews any derogatory information. In general, the debt payment
to income ratio generally is not permitted to exceed 45%. Discretionary
income requirements are based on family size. Headquarters' approval is
required for certain exceptions, such as applicants with bankruptcies within
the preceding five years, credit bureau scores which are below the required
standards and debt ratios in excess of Region Service Centers' exception
guidelines.)
Servicing. (The MHD services all manufactured housing loans purchased
or originated by IndyMac and its affiliates. The customer service department
(the "Customer Service Department") and collection department (the
"Collection Department") located in each Region Service Center service the
contracts relating to such region. The Collection Department of each Region
Service Center performs all collection efforts. In the event of
delinquencies, collectors evaluate the customer's situation and work with the
customer to eliminate the delinquency in a timely manner. The Collection
Department also monitors accounts which have filed bankruptcy and manages
repossession proceedings and liquidations. All loans purchased or originated
by the TPL Department are serviced in the Region Service Center responsible
for the state in which the manufactured home is located.)
(Each Contract provides for allocation of payments according to the
"actuarial" method, whereby the portion of each Monthly Payment for any
Contract allocable to principal will be equal to the total amount thereof
less the portion allocable to interest. The portion of each Monthly Payment
due in a particular month that is allocable to interest is a precomputed
amount equal to one month's interest on the principal balance of the
Contract, which principal balance is determined by reducing the initial
principal balance by the principal portion of all Monthly Payments that were
due in prior months (whether or not such Monthly Payments were timely made)
and all prior partial principal prepayments. Thus, each payment allocated to
a scheduled monthly payment of a Contract will be applied to interest and to
principal in accordance with such precomputed allocation whether such Monthly
Payment is received in advance of or subsequent to the related Due Dates.
All payments received on the Contracts (other than payments allocated to
items other than principal and interest or payments sufficient to pay the
outstanding principal balance of and all accrued and unpaid interest on such
Contracts) will be applied when received to current and any previously unpaid
Monthly Payments in the order of the Due Dates of such payments.)
(In addition, each Contract provides for allocation of payments
according to the simple interest method, whereby each Monthly Payment for any
Contract will be applied first to interest accrued through the date
immediately preceding the date of payment and then to unpaid principal.
Accordingly, if an obligor pays an installment before its Due Date, the
portion of the payment allocable to interest for the related Due Period will
be less than if the payment had been made on the Due Date, the portion of the
payment applied to reduce the principal balance will be correspondingly
greater, and the principal balance will be amortized more rapidly than
scheduled. Conversely, if an obligor pays an installment after its Due Date,
the portion of the payment allocable to interest for the payment period will
be greater than if the payment had been made on the Due Date, the portion of
the payment applied to reduce the principal balance will be correspondingly
less, and the principal balance will be amortized more slowly than scheduled,
in which case a larger portion of the principal balance may be due on the
final scheduled payment date.)
DELINQUENCY AND LOSS EXPERIENCE
(The following table sets forth information concerning delinquency
experience for the periods indicated for the portfolio of manufactured
housing contracts serviced by the Region Service Centers.)
(The following table sets forth the delinquency experience for the
periods indicated of the portfolio of conventional manufactured housing
contracts originated or purchased and serviced by (IndyMac and its
affiliates), including contracts previously sold in connection with
securitizations. (All of the Contracts in the Trust Fund will be
conventional contracts, meaning that they are not insured or guaranteed by
any governmental agency.)
DELINQUENCY EXPERIENCE(1)
AT ________________,
----------------------------------
19- 19- 19-
---- ---- ----
Total Number of Serviced Assets
IndyMac Originated . . . . . . . . . . . .
Acquired Portfolios . . . . . . . . . . . .
Number of Delinquent Assets(2)
IndyMac Originated:
30-59 days past due . . . . . . . . . .
60-89 days past due . . . . . . . . . .
90 days or more past due . . . . . . . .
Acquired Portfolios:
30-59 days past due . . . . . . . . . .
60-89 days past due . . . . . . . . . .
90 days or more past due . . . . . . . .
Total Number of Assets Delinquent . . . . . .
Total Delinquencies as a Percentage
of Serviced
Assets (3)
IndyMac Originated . . . . . . . . . . . . % % %
Acquired Portfolios . . . . . . . . . . . .
- --------------------
(1) Excludes assets already in repossession.
(2) The period of delinquency is based on the number of days payments are
contractually past due (assuming 30-day months). Consequently, a
payment due on the first day of a month is not 30 days delinquent until
the first day of the following month.
(3) By number of assets.
(The following table sets forth information concerning repossession and
loss experience for the periods indicated for the portfolio of manufactured
housing contracts originated or purchased by the Region Service Centers.)
LOSS EXPERIENCE
AT OR FOR THE FISCAL YEAR
ENDED _____________
----------------------------------
19- 19- 19-
---- ---- ----
(DOLLARS IN THOUSANDS)
Total Number of Serviced
Assets (1) . . . . . . . . . . . . . . . . .
Average Number of Serviced
Assets During Period . . . . . . . . . . . .
Number of Serviced Assets
Repossessed . . . . . . . . . . . . . . . . .
Serviced Assets Repossessed
as a Percentage of Total
Serviced Assets (2) . . . . . . . . . . . . .
Serviced Assets Repossessed
as a Percentage of Average Number of
Serviced Assets . . . . . . . . . . . . . . .
Average Outstanding Principal
Balance of Assets(3)
(IndyMac) Originated . . . . . . . . . . . .
Acquired Portfolios . . . . . . . . . . . . .
Net Losses from Asset
Liquidations (4):
Total Dollars (3)
(IndyMac) Originated . . . . . . . . . . .
Acquired Portfolios . . . . . . . . . . . .
As a Percentage of Average
Outstanding Principal
Balance of Assets (3)(5)
(IndyMac) Originated . . . . . . . . . . .
Acquired Portfolios . . . . . . . . . . . .
(1) As of period end.
(2) Includes assets originated by IndyMac, Inc. and its affiliates and
serviced by IndyMac, Inc. and its affiliates.
(3) Includes assets originated by IndyMac (and its affiliates) and serviced
by IndyMac (and its affiliates) or others.
(4) Net losses represent all losses incurred on portfolios serviced by
IndyMac, Inc. and its affiliates. The calculation of the net losses
includes accrued interest plus expenses of repossession and liquidation.
(5) Total net losses incurred on assets liquidated during the applicable
period expressed as a percentage of the outstanding principal balance of
all assets at the end of the applicable period.
(6) Annualized.
The data presented in the foregoing tables are for illustrative purposes
only and there is no assurance that the delinquency, loan loss or
repossession experience of the Contracts will be similar to that set forth
above. (IndyMac and its affiliates only recently began purchasing and
originating manufactured housing installment sales contracts and installment
loans. Consequently, such contracts and loans have not yet exhibited a loss
and delinquency experience that is representative of the losses and
delinquencies that may be experienced over a longer period of time.) In
addition, the delinquency, loan loss and repossession experience of
manufactured housing contracts historically has been sharply affected by a
downturn in regional or local economic conditions. These regional or local
economic conditions are often volatile, and no predictions can be made
regarding future economic conditions in any particular area. These downturns
have tended to increase the severity of loss on repossession because of the
increased supply of used manufactured homes, which in turn may affect the
supply in other regions.
YIELD AND PREPAYMENT CONSIDERATIONS
GENERAL
The following information supplements, and to the extent inconsistent
therewith supersedes, the information in the Prospectus under "Yield
Considerations" and "Yield and Prepayment Considerations."
The Contracts may be prepaid in full or in part at any time by the
related borrowers (each, an "Obligor") without payment of any prepayment fee
or penalty (although there is generally no refund of any prepaid finance
charges). The prepayment experience of the Contracts (including prepayments
due to liquidations of defaulted Contracts) will affect the life of the
Certificates. It is anticipated that a substantial number of Contracts will
be prepaid in full prior to maturity. A variety of factors, including
homeowner mobility, general and regional economic conditions and prevailing
interest rates may influence prepayments. In addition, repurchases of
Contracts on account of certain breaches of representations and warranties as
described herein under "Description of the Certificates--Conveyance of
Contracts" will have the effect of prepayment of such Contracts and therefore
will affect the lives of the Certificates. Most of the Contracts contain
provisions that prohibit the Obligor from selling the related Manufactured
Home without the prior consent of the holder of the related Contract. Such
provisions are similar to "due-on-sale" clauses and may not be enforceable in
some states. See "Certain Legal Aspects of the Contracts--Land-and-Home
Contracts" herein and "Certain Legal Aspects of the Contracts--Due-on-Sale
Clauses" in the Prospectus. (IndyMac)'s policy is to permit most sales of
Manufactured Homes where the proposed buyer meets its then current
underwriting standards and enters into an assumption agreement. See "--
Weighted Average Life of the Offered Certificates" herein and "Yield and
Prepayment Considerations" in the Prospectus.
The allocation of distributions to the Certificateholders in accordance
with the Agreement will have the effect of accelerating the amortization of
each Class of Offered Certificates in the sequence indicated herein under
"Description of the Certificates--Distributions--Priority of Distributions"
from the amortization that would be applicable if distributions in respect of
the Formula Principal Distribution Amount were made pro rata according to the
Class A- , Class , Class A-R, Class B- and Class Certificate
Principal Balances. As described herein under "Description of the
Certificates--Subordination of the Subordinate Certificates" to the extent
that, on any Distribution Date, the Available Distribution Amount is not
sufficient to permit a full distribution of the Formula Principal
Distribution Amount or the portion thereof due on such Distribution Date to
any Class of Offered Certificates entitled to such distribution, the effect
will be to delay the amortization of such Class of Offered Certificates. If
a purchaser of a Class of Offered Certificates purchases them at a discount
and calculates its anticipated yield to maturity based on an assumed rate of
payment of principal on such Offered Certificates that is faster than the rate
actually realized, such purchaser's actual yield to maturity will be lower
than the yield so calculated by such purchaser.
The rate of distributions of principal of the Offered Certificates and
the yield to maturity of the Offered Certificates also will be directly
related to the rate of payment of principal (including delinquencies and
prepayments) of the Contracts. The rate of principal distributions on the
Offered Certificates and the yield to maturity of the Offered Certificates
will be affected by the rate of delinquencies on the Contracts and the rate
of Obligor defaults resulting in losses on Liquidated Contracts, by the
severity of those losses and by the timing of those losses. If a purchaser
of Offered Certificates calculates its anticipated yield based on an assumed
rate of default and an assumed amount of losses that are lower than the
default rate and amount of losses actually incurred and such amount of losses
actually incurred is not entirely covered by interest collected on the
Contracts in excess of the amount necessary to distribute interest on the
Certificates and exceeds the Current Overcollateralization Amount, if any,
its actual yield to maturity will be lower than that so calculated. The
timing of losses on Liquidated Contracts will also affect an investor's
actual yield to maturity, even if the rate of defaults and severity of losses
are consistent with an investor's expectations. There can be no assurance
that the delinquency, repossession or loss experience set forth herein under
"(IndyMac), Inc.--Delinquency and Loss Experience" will be representative of
the results that may be experienced with respect to the Contracts. There can
be no assurance as to the delinquency, repossession or loss experience with
respect to the Contracts.
On any Distribution Date on or after the Distribution Date, if any, on
which the aggregate Certificate Principal Balance of the Certificates is
greater than the Pool Balance, if the Available Distribution Amount is not
sufficient to permit a full distribution of the Formula Principal
Distribution Amount to the Certificateholders, the Certificateholders
(beginning with the most junior Class of Certificates with a Certificate
Principal Balance (i.e., the Class B- Certificates) until its Certificate
Principal Balance or Adjusted Certificate Principal Balance, as applicable,
has been reduced to zero, then to the second most junior Class (i.e., the
Class B- Certificates) and so forth) will absorb (i) all losses on each
Liquidated Contract in the amount by which its Liquidation Proceeds (net of
Liquidation Expenses and applicable Advances) are less than its Contract
Principal Balance plus accrued and unpaid interest thereon at a percentage
equal to the sum of (a) the weighted average Pass-Through Rate and (b) the
percentage rate used to calculate the Servicing Fee and (ii) other shortfalls
in the Available Distribution Amount and will incur a loss on their
investments. See "Description of the Certificates--Distributions," "--
Subordination of the Subordinate Certificates" and "--Losses on Liquidated
Contracts" herein.
Each of the Depositor and the Servicer will have the option to
repurchase the Contracts and other property in the Trust on any Distribution
Date on or after the first Distribution Date as of which the Pool Balance is
less than 10% of the Cut-off Date Principal Balance. See "Description of the
Certificates--Termination" herein. The exercise of such option or the sale
of the Contracts and such other property of the Trust Fund by the Trustee
under the circumstances described herein under "Description of the
Certificates--Termination" will effect early retirement of all outstanding
Offered Certificates.
Although the APRs on the Contracts vary, prepayments on Contracts
generally will not affect the Pass-Through Rate on the Class (A)
Certificates, because the related Pass-Through Rates are (fixed). The Class
( ) Pass-Through Rates on any Distribution Date will be %, per annum
(computed on the basis of a 360-day year of twelve 30-day months), unless the
Contracts prepay in such a manner that the applicable Weighted Average Net
Contract Rate is less than %, in which case the Class ( ) Pass-Through
Rate will equal such Weighted Average Net Contract Rate.
While partial prepayments of the principal on the Contracts are applied
on the related Due Dates, Obligors are not required to pay interest on the
Contracts after the date of a full prepayment of principal. As a result,
full prepayments of Contracts in advance of the related Due Dates in any
Prepayment Period will reduce the amount of interest received during such
Prepayment Period to less than one month's interest. If a sufficient number
of Contracts are prepaid in full in a Prepayment Period in advance of their
respective Due Dates, interest received during that Prepayment Period may be
less than the interest payable on the Class A and Class B Certificates on the
related Distribution Date. See "Description of the Certificates--Compensating
Interest." Although no assurance can be given in this matter, it is not
expected that the net shortfall of interest received because of prepayments
in full in any Prepayment Period will be great enough, in the absence of
delinquencies and Liquidation Losses, to reduce the Available Distribution
Amount for the related Distribution Date below the amount that would be
required to be distributed to Class A and Class B Certificateholders on such
Distribution Date.
WEIGHTED AVERAGE LIFE OF THE OFFERED CERTIFICATES
The following information is given solely to illustrate the effect of
prepayments of the Contracts on the weighted average life of the Offered
Certificates under the stated assumptions and is not a prediction of the
prepayment rate that might actually be experienced by the Contracts.
Weighted average life refers to the average amount of time from the date
of issuance of a security until each dollar of principal of such security
will be repaid to the investor. The weighted average life of the Offered
Certificates will be affected by the rate at which principal on the Contracts
is paid. Principal payments on Contracts may be in the form of scheduled
amortization or prepayments (for this purpose, the term "prepayment" includes
repayments and liquidations due to default or other dispositions of
Contracts). Prepayments on contracts may be measured by a prepayment
standard or model. The model used in this Prospectus Supplement (the
"Prepayment Model") is based on an assumed rate of prepayment each month of
the Contract Principal Balance of a pool of new Contracts. 100% of the
Prepayment Model assumes prepayment rates of ___% per annum of the Contract
Principal Balance of such Contracts in the first month of the life of the
Contracts and an additional ___% per annum in each month thereafter until the
__th month. Beginning in the __th month and in each month thereafter during
the life of the Contracts, 100% of the Prepayment Model assumes a constant
prepayment rate of ____% per annum.
As used in the following tables, "0% of the Prepayment Model" assumes no
prepayments on the Contracts, "75% of the Prepayment Model" assumes the
Contracts will prepay at rates equal to 75% of the Prepayment Model assumed
prepayment rates, "100% of the Prepayment Model" assumes the Contracts will
prepay at rates equal to 100% of the Prepayment Model assumed prepayment
rates, "160% of the Prepayment Model" assumes the Contracts will prepay at
rates equal to 160% of the Prepayment Model assumed prepayment rates, "200%
of the Prepayment Model" assumes the Contracts will prepay at rates equal to
200% of the Prepayment Model assumed prepayment rates and "300% of the
Prepayment Model" assumes the Contracts will prepay at rates equal to 300% of
the Prepayment Model assumed prepayment rates.
There is no assurance, however, that prepayments of the Contracts will
conform to any level of the Prepayment Model, and no representation is made
that the Contracts will prepay at the prepayment rates shown or any other
prepayment rate. The rate of principal payments on pools of manufactured
housing contracts is influenced by a variety of economic, geographic, social
and other factors, including the level of interest rates and the rate at
which manufactured homeowners sell their manufactured homes or default on
their contracts. Other factors affecting prepayment of manufactured housing
contracts include changes in obligors' housing needs, job transfers,
unemployment and obligors' net equity in the related manufactured homes. In
the case of mortgage loans secured by site-built homes, in general, if
prevailing interest rates fall significantly below the interest rates on such
mortgage loans, the mortgage loans are likely to be subject to higher
prepayment rates than if prevailing interest rates remain at or above the
rates borne by such mortgage loans. Conversely, if prevailing interest rates
rise above the interest rates on such mortgage loans, the rate of prepayment
would be expected to decrease. In the case of manufactured housing
contracts, however, because the outstanding (actual) principal balances are,
in general, much smaller than mortgage loan balances and the original terms
to maturity are generally shorter, the reduction or increase in the size of
the monthly payments on contracts of the same maturity and principal balance
arising from a change in the interest rate thereon is generally much smaller.
Consequently, changes in prevailing interest rates may not have a similar
effect, or may have a similar effect, but to a smaller degree, on the
prepayment rates on manufactured housing contracts.
MODELING ASSUMPTIONS AND MHP TABLES
The prepayment tables set forth below (the "MHP Tables") assume that
Monthly Payments on the Contracts are received by the Servicer on their
respective Due Dates and that on each Distribution Date the Available
Distribution Amount will be sufficient to distribute interest on the Offered
Certificates and an amount equal to the full Formula Principal Distribution
Amount to the Certificateholders and to pay the Servicing Fee to the Servicer
and the Trustee Fee to the Trustee (together with the assumptions set forth
below, the "Modeling Assumptions").
The percentages and weighted average lives in the following tables were
determined assuming that (i) scheduled interest and principal payments on the
Contracts are received in a timely manner and prepayments are made at the
indicated percentages of the Prepayment Model; (ii) neither the Depositor nor
the Servicer exercises its right of optional termination and the Trustee does
not receive satisfactory bids for the sale of the Contracts and other
property in the Trust Fund, in each case as described herein under
"Description of the Certificates--Termination"; (iii) the Contracts will, as
of the Cut-off Date, be grouped into five pools having the additional
characteristics set forth below under "Assumed Contract Characteristics";
(iv) the Initial Certificate Principal Balance and the Pass-Through Rate of
each Class of Certificates is as set forth under "Summary--Securities Issued"
herein; (v) no interest shortfalls will arise in connection with prepayment
in full of the Contracts; (vi) there will be no losses on the Contract Pool;
(vii) the Servicing Fee will be paid to the Servicer; and (viii) the Trustee
Fee will be paid to the Trustee. No representation is made that the
Contracts will experience delinquencies or losses at the respective rates
assumed above or at any other rates.
ASSUMED CONTRACT CHARACTERISTICS
REMAINING
CUT-OF DATE TERM TO
CONTRACT PRINCIPAL MATURITY SEASONING
POOL BALANCE APR (MONTHS) (MONTHS)
------------------ --- ---------- ---------
1 . . . . . . . $
2 . . . . . . .
3 . . . . . . .
4 . . . . . . .
5 . . . . . . .
--------------- ----- -------- --------
Total. . . . $ %
=============== ===== ======== ========
Since the tables that follow were prepared on the basis of the
assumptions in the preceding table (the "Assumed Contract Characteristics"),
there will be discrepancies between the characteristics of the actual
Contracts and the characteristics of the Contracts assumed in preparing the
following tables. Any such discrepancy may have an effect upon the
percentages of the Initial Class A and Initial Class B- Certificate Principal
Balances outstanding and weighted average lives of the Class A and Class B-
Certificates set forth in the tables. In addition, since the actual
Contracts and the Trust Fund will have characteristics which differ from
those assumed in preparing the tables set forth below, distributions of
principal on the Certificates may be made earlier or later than as indicated
in the tables.
It is not likely that the Contracts will prepay at any constant
percentage of the Prepayment Model to maturity or that all Contracts will
prepay at the same rate. In addition, the remaining terms to maturity of the
Contracts (which include recently originated Contracts) could produce slower
distributions of principal than as indicated in the tables at the various
percentages of the Prepayment Model specified even if the weighted average
remaining term to maturity of the Contracts is the same as the weighted
average remaining term to maturity of the Assumed Contract Characteristics.
Investors are urged to make their investment decisions on a basis that
includes their determination as to anticipated prepayment rates under a
variety of the assumptions discussed herein.
Based on the foregoing assumptions, the following tables indicate the
resulting weighted average lives of the Offered Certificates and set forth
the percentage of the Initial Class A, Initial Class and Initial Class B-1
Certificate Principal Balances that would be outstanding after each of the
dates shown at the indicated percentages of the Prepayment Model. In the
following tables, the weighted average life of a Class of Certificates is
determined by (i) multiplying the amount of each principal distribution by
the number of years from the Closing Date to the related Distribution Date,
(ii) summing the results and (iii) dividing the sum by the Initial
Certificate Principal Balance of such Class of Certificates.
PERCENT OF THE INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
<TABLE>
<CAPTION>
Class A- Certificates at the following Class A- Certificates at the following
Distribution Date Percentages of MHP Percentage of MHP
- ----------------- -------------------------------------- --------------------------------------
0% 100% 150% 180% 200% 300% 0% 100% 150% 180% 200% 300%
-- ---- ---- ---- ---- ---- -- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent . . .
January 15 1999 . . .
January 15 2000 . . .
January 15 2001 . . .
January 15 2002 . . .
January 15 2003 . . .
January 15 2004 . . .
January 15 2005 . . .
January 15 2006 . . .
January 15 2007 . . .
January 15 2008 . . .
January 15 2009 . . .
January 15 2010 . . .
January 15 2011 . . .
January 15 2012 . . .
January 15 2013 . . .
January 15 2014 . . .
January 15 2015 . . .
January 15 2016 . . .
January 15 2017 . . .
January 15 2018 . . .
January 15 2019 . . .
January 15 2020 . . .
January 15 2021 . . .
January 15 2022 . . .
January 15 2023 . . .
January 15 2024 . . .
January 15 2025 . . .
January 15 2026 . . .
January 15 2027 . . .
January 15 2028 . . .
Weighted Average Life
(years) . . . . . . .
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF THE INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
Class A-R Certificates at the following Class B- Certificates at the following
Distribution Date Percentages of MHP Percentage of MHP
- ----------------- --------------------------------------- --------------------------------------
0% 100% 150% 180% 200% 300% 0% 100% 150% 180% 200% 300%
-- ---- ---- ---- ---- ---- -- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Percent . . .
January 15 1999 . . .
January 15 2000 . . .
January 15 2001 . . .
January 15 2002 . . .
January 15 2003 . . .
January 15 2004 . . .
January 15 2005 . . .
January 15 2006 . . .
January 15 2007 . . .
January 15 2008 . . .
January 15 2009 . . .
January 15 2010 . . .
January 15 2011 . . .
January 15 2012 . . .
January 15 2013 . . .
January 15 2014 . . .
January 15 2015 . . .
January 15 2016 . . .
January 15 2017 . . .
January 15 2018 . . .
January 15 2019 . . .
January 15 2020 . . .
January 15 2021 . . .
January 15 2022 . . .
January 15 2023 . . .
January 15 2024 . . .
January 15 2025 . . .
January 15 2026 . . .
January 15 2027 . . .
January 15 2028 . . .
Weighted Average Life
(years) . . . . . . .
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF THE INITIAL CERTIFICATE PRINCIPAL BALANCE OUTSTANDING
Class B- Certificates at the following
Distribution Date Percentages of MHP
- ----------------- --------------------------------------
0% 100% 150% 180% 200% 300%
-- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Initial Percent . . . . . . . .
January 15 1999 . . . . . . . .
January 15 2000 . . . . . . . .
January 15 2001 . . . . . . . .
January 15 2002 . . . . . . . .
January 15 2003 . . . . . . . .
January 15 2004 . . . . . . . .
January 15 2005 . . . . . . . .
January 15 2006 . . . . . . . .
January 15 2007 . . . . . . . .
January 15 2008 . . . . . . . .
January 15 2009 . . . . . . . .
January 15 2010 . . . . . . . .
January 15 2011 . . . . . . . .
January 15 2012 . . . . . . . .
January 15 2013 . . . . . . . .
January 15 2014 . . . . . . . .
January 15 2015 . . . . . . . .
January 15 2016 . . . . . . . .
January 15 2017 . . . . . . . .
January 15 2018 . . . . . . . .
January 15 2019 . . . . . . . .
January 15 2020 . . . . . . . .
January 15 2021 . . . . . . . .
January 15 2022 . . . . . . . .
January 15 2023 . . . . . . . .
January 15 2024 . . . . . . . .
January 15 2025 . . . . . . . .
January 15 2026 . . . . . . . .
January 15 2027 . . . . . . . .
January 15 2028 . . . . . . . .
Weighted Average Life (years) .
</TABLE>
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement. The
following description supplements and, to the extent inconsistent therewith
supersedes, the description of the Agreement and the Certificates under
"Description of the Certificates" in the Prospectus and must be read together
therewith. The following summaries describe certain terms of the Agreement,
do not purport to be complete and will be subject to, and will be qualified
in their entirety by reference to, the provisions of the Agreement. When
particular provisions or terms used in the Agreement are referred to, the
actual provisions (including definitions of terms) are incorporated by
reference.
GENERAL
The Offered Certificates (other than the Class A-R Certificates) will be
issued in fully registered form only, in minimum denominations of $1,000 and
integral multiples of $1 in excess thereof. The Class A-R Certificates will
be issued in definitive form as fully registered physical certificates.
Definitive Certificates, if issued, will be transferable and exchangeable at
the Corporate Trust Office of the Trustee. No service charge will be made
for any registration of exchange or transfer, but the Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge.
The Trust Fund will include, among other things, (i) the Contract Pool,
including all rights to receive payments on the Contracts ((received) (due)
after the Cut-off Date whether (due) (received) before, on or after the
Cut-off Date), (ii) security interests in the related Manufactured Homes,
(iii) the amounts held from time to time in an account (the "Certificate
Account") maintained by the Trustee pursuant to the Agreement, (iv) any
property which initially secured a Contract and which is acquired in the
process of realizing thereon, including, in the case of a Land-and-Home
Contract, the underlying real property on which the Manufactured Home is
located, (v) the proceeds of all insurance policies described herein and (vi)
all proceeds of the foregoing. The Depositor will cause the Contracts and
other assets of the Trust Fund to be assigned to the Trustee or a co-trustee.
The Servicer will service the Contracts pursuant to the Agreement.
Distributions of principal and interest on the Certificates will be made
on each Distribution Date to the persons in whose names the Certificates are
registered as of the close of business on the related Record Date. With
respect to each Distribution Date, the Offered Certificates will accrue
interest during the related Interest Accrual Period. If Definitive
Certificates are issued, distributions will be made by check mailed to the
address of the person entitled thereto as it appears on the Certificate
Register, except that a holder of Offered Certificates with original
denominations aggregating at least $5 million may request payment by wire
transfer of funds pursuant to written instructions delivered to the Trustee
at least five Business Days prior to the Record Date. The final distribution
in retirement of the Certificates will be made only upon presentation and
surrender of the Certificates at the office or agency of the Trustee
specified in the final distribution notice to Certificateholders.
To the extent not previously paid prior to such dates, the Certificate
Principal Balance of each Class of Offered Certificates will be payable on
the Final Scheduled Distribution Date.
CONVEYANCE OF CONTRACTS
On the Closing Date, the Depositor will assign to the Trustee or a
co-trustee, without recourse, among other things, all right, title and
interest of the Depositor conveyed to it by (IndyMac) in, to and under the
Contracts, including all principal and interest ((received) (due) on the
Contracts after the Cut-off Date whether (due) (received) before, on or after
the Cut-off Date), and all rights under the standard hazard insurance
policies on the related Manufactured Homes. The Depositor will represent and
warrant only that it had, subject to certain assumptions, good title to, and
was the sole owner of each Contract and any related Mortgage free of any
liens, charges or encumbrances created by the Depositor.
With respect to each Contract, (IndyMac) will deliver or cause to be
delivered to the Trustee or a custodian of the Trustee, as specified in the
Agreement, (i) the original copy of the Contract; (ii) in the case of any
Contract not originated by (IndyMac or an affiliate thereof), the assignment
of the Contract from the originator to (IndyMac or such affiliate) and (iii)
any extension, modification or waiver agreement(s) relating to such Contract.
In addition, with respect to each Land-and-Home Contract, (IndyMac) will (in
addition to the delivery of documents specified in the preceding sentence)
deliver or cause to be delivered to the Trustee or a custodian of the
Trustee, as specified in the Agreement, ((i) the related Mortgage with
evidence of recording thereon,) (ii) an assignment of the Mortgage in
recordable form to the Trustee (which may be a blanket assignment if
permitted in the applicable jurisdiction) and (iii) if applicable, the power
of attorney granted to the Trustee. The assignments to the Trustee of
Mortgages for Land-and-Home Contracts will be recorded in the appropriate
public office for real property records(, except in the State of California
and in states where the Seller has reasonably determined that such recording
is not required to protect the Trustee's interest against the claim of any
subsequent transferee or any successor to or creditor of the Depositor or the
Seller). All Contracts originated or otherwise owned by an affiliate of
(IndyMac, Inc.) have been or will be assigned to (IndyMac, Inc.) in the
ordinary course of business, and such assignment shall be delivered to the
Trustee or a custodian of the Trustee on or prior to the Closing Date. All
other documents relating to such Contract, including the (related mortgage
and) original title document or application for title for the related
Manufactured Home, the credit application, credit reports and verifications,
appraisals, tax and insurance records and payment records, will be maintained
by the Servicer.
(IndyMac) will make certain representations and warranties in respect of
each Contract as of the Closing Date or other specified date, including the
following: (a) as of the Cut-off Date, no Contract was more than 29 days past
due; (b) each Contract and any related Mortgage is a legal, valid and binding
obligation of the Obligor and is enforceable in accordance with its terms
(except as may be limited by laws affecting creditors' rights generally or by
general equitable principles); (c) each Contract is covered by hazard
insurance described below under "Hazard Insurance Policies"; (d) each
Contract complies with all requirements of law; (e) each Contract creates a
valid and enforceable first priority security interest in favor of (IndyMac)
in the Manufactured Home covered thereby and such security interest and, if
applicable, the related Mortgage has been assigned (by way of individual
assignment) by (IndyMac) to the Trustee; and (f) immediately prior to the
transfer thereof to the Depositor, (IndyMac) had good and marketable title to
each Contract, free and clear of any encumbrance, equity, loan, pledge,
charge, claim or security interest, and was the sole owner and had full right
to transfer such Contract and any related Mortgage to the Depositor, no
Contract or any related Mortgage has been sold, assigned or pledged by
(IndyMac) to any person other than the Depositor and prior to the transfer of
the Contracts by (IndyMac) to the Depositor, (IndyMac) was the sole owner and
had the full right to transfer the Contract to the Depositor. Pursuant to
the Agreement, (IndyMac) will be obligated to repurchase, for the purchase
price, or substitute any Contract on the first Business Day after the first
Determination Date which is more than 90 days after (IndyMac) becomes aware,
or after (IndyMac)'s receipt of written notice from the Trustee or the
Servicer, of a breach of any representation or warranty of (IndyMac) with
respect to a Contract that materially and adversely affects the
Certificateholders' interest in such Contract if such breach has not been
cured. The "purchase price" for any Contract will be the unpaid principal
balance of such Contract plus accrued interest thereon at the applicable APR
from the date through which interest was last paid or advanced to the
scheduled payment date for such Contract in month in which such amount is to
be distributed. This repurchase obligation will constitute the sole remedy
available to the Depositor, the Trustee and the Certificateholders for a
breach of a representation or warranty under the Agreement with respect to
the Contracts.
Pursuant to the Agreement, (IndyMac) will also make certain
representations and warranties with respect to the Contracts in the
aggregate, including that the aggregate Contract Principal Balance as of the
Cut-off Date equals the Cut-off Date Principal Balance and no adverse
selection procedures were employed in selecting the Contracts.
PAYMENTS ON CONTRACTS; COLLECTION ACCOUNT; CERTIFICATE ACCOUNT
The Servicer will establish and maintain the Collection Account, and the
Trustee will establish and maintain the Certificate Account. The Collection
Account and the Certificate Account will each be maintained (i) at a
depository institution organized under the laws of the United States or any
State, the deposits of which are insured to the full extent permitted by law
by the Federal Deposit Insurance Corporation (a) the long-term deposit rating
or unsecured long-term debt of which has been assigned one of the two highest
ratings by each Rating Agency or (b) maintained with a depository institution
the short-term unsecured debt obligations of which are rated in the highest
short-term rating category by the Rating Agencies or (c) whose commercial
paper has a rating of P-1 by Moody's and, if rated by Fitch, F-1 by Fitch or
(ii) in the corporate trust department of the Trustee or (iii) at an
institution otherwise acceptable to each Rating Agency (such account, an
"Eligible Account"). Funds in the Collection Account and the Certificate
Account will be invested in Eligible Investments that will mature or be
subject to redemption not later than the Business Day immediately preceding
the Distribution Date next following the date of such investment. Eligible
Investments will include, among other things, obligations of the United
States or of any agency thereof backed by the full faith and credit of the
United States, federal funds, certificates of deposit, time deposits and
bankers' acceptances sold by eligible financial institutions, commercial
paper rated P-1 by Moody's and, if rated by Fitch, F-1 by Fitch and other
obligations acceptable to each Rating Agency.
All payments in respect of principal and interest on the Contracts
received by the Servicer (net of any servicing compensation and certain other
amounts reimbursable to the Servicer pursuant to the Agreement), including
principal prepayments and Liquidation Proceeds (net of Liquidation Expenses),
will be deposited into the Collection Account no later than the second
Business Day following (IndyMac)'s receipt thereof. Amounts received as late
payment fees, extension fees, assumption fees or similar fees will be
retained by the Servicer as additional servicing compensation. See "--
Servicing Compensation" herein and "Description of the Certificates--
Servicing Compensation and Payment of Expenses" in the Prospectus. In
addition, on or prior to the Deposit Date (as defined below) the following
amounts will also be deposited into the Collection Account: (i) the purchase
price paid by (IndyMac) for Contracts repurchased as a result of breach of a
representation or warranty under the Agreement, as described herein under
"Conveyance of Contracts," (ii) all Advances, if any, and (iii) amounts
collected under hazard insurance policies, except to the extent that they are
applied to the restoration of the related Manufactured Home or paid to the
related Obligor in accordance with the normal servicing procedures of the
Servicer. From time to time, as will be provided in the Agreement, the
Servicer will also withdraw funds from the Collection Account to make
payments payable to it as permitted by the Agreement and described in the
definition of the term "Available Distribution Amount."
On the Business Day immediately preceding each Distribution Date (each,
a "Deposit Date"), the Servicer will withdraw funds from the Collection
Account (but only to the extent of the related Available Distribution Amount)
and deposit such funds in the Certificate Account. On each Distribution
Date, the Trustee or its paying agent will withdraw funds from the
Certificate Account (but only to the extent of the related Available
Distribution Amount) to make payments to Certificateholders as described
herein under "--Distributions--Priority of Distributions."
DISTRIBUTIONS
General. Distributions will be made on each Distribution Date to
holders of record on the preceding Record Date, except that the final
distribution in respect of the Certificates will only be made upon
presentation and surrender of the Certificates at the office or agency
appointed by the Trustee for that purpose. Distributions on a Class of
Certificates will be allocated among the Certificates of such Class in
proportion to their respective Percentage Interests. In no event will the
aggregate distributions of principal to a holder of Offered Certificates
exceed the Initial Certificate Principal Balance of the related Class of
Certificates.
Each distribution with respect to an Offered Certificate held in
book-entry form will be paid to DTC, which will credit the amount of such
distribution to the accounts of its Participants in accordance with its
normal procedures. Each Participant will be responsible for disbursing such
distribution to the Certificate Owners that it represents and to each
indirect participating brokerage firm (each, a "brokerage firm" or "indirect
participating firm") for which it acts as agent. Each brokerage firm will be
responsible for disbursing funds to the Certificate Owners that it
represents. All such credits and disbursements with respect to Offered
Certificates held in book-entry form will be made by DTC and the Participants
in accordance with DTC's rules. See "--Registration of the Offered
Certificates" herein.
Available Distribution Amount. On the second Business Day preceding
each Distribution Date (each, a "Determination Date"), the Servicer will
determine the Available Distribution Amount and amounts to be distributed on
the Certificates on such Distribution Date. The "Available Distribution
Amount" with respect to any Distribution Date will be an amount equal to (i)
the sum of (a) Monthly Payments of principal and interest (due) on Contracts
during the related Due Period, to the extent such payments (of interest)
(principal) (were made by the related Obligor) (or advanced by the Servicer)
and (b) unscheduled payments received with respect to the Contracts during
the related Prepayment Period, including principal prepayments, Liquidation
Proceeds (net of Liquidation Expenses) and net insurance proceeds, less (ii)
the sum of (a) the Trustee Fee, (b) the Servicing Fee and other servicing
compensation, (c) payments on Contracts that have been repurchased by
(IndyMac) as a result of a breach of a representation or warranty and any
other payments not required to be deposited in the Certificate Account, (d)
reimbursements to the Servicer for Liquidation Expenses incurred in respect
of Manufactured Homes, (e) reimbursements to the Servicer for Advances in
respect of delinquent Contracts as to which the related late Monthly Payments
have been made, Nonrecoverable Advances and Advances in respect of Liquidated
Contracts, in each case to the extent as will be permitted in the Agreement,
and (f) certain expenses reimbursable to the Depositor as will be permitted
in the Agreement.
Interest. On each Distribution Date, holders of each Class of Class A
Certificates will be entitled to receive, to the extent of the Available
Distribution Amount, (i) interest accrued on such Class during the related
Interest Accrual Period at the related Pass-Through Rate on the Certificate
Principal Balance of such Class immediately prior to that Distribution Date
(the "Interest Distribution Amount" for such Class and Distribution Date),
plus (ii) any amounts distributable under clause (i) above or this clause
(ii) on such Class on the previous Distribution Date but not previously
distributed, plus, to the extent legally permissible, interest accrued on any
such amount during the related Interest Accrual Period at the related
Pass-Through Rate (the "Carryover Interest Distribution Amount" for such
Class and Distribution Date). On each Distribution Date, holders of the
Subordinate Certificates will be entitled to receive, to the extent of the
Available Distribution Amount and on a subordinated basis as described below
under "--Priority of Distributions", (i) interest accrued on such Class
during the related Interest Accrual Period at the related Pass-Through Rate
on the Adjusted Certificate Principal Balance of such Class immediately prior
to that Distribution Date (the "Interest Distribution Amount" for such Class
and Distribution Date), plus (ii) any amounts distributable under clause (i)
above or this clause (ii) on such Class on the previous Distribution Date but
not previously distributed, plus, to the extent legally permissible, interest
accrued on any such amount during the related Interest Accrual Period at the
related Pass-Through Rate (the "Carryover Interest Distribution Amount" for
such Class and Distribution Date).
The "Interest Accrual Period" shall mean, with respect to each
Distribution Date, the calendar month preceding the month in which the
Distribution Date occurs. Interest on the Certificates will be computed on
the basis of a (360)-day year consisting of twelve (30)-day months.
For any Distribution Date, the Pass-Through Rates for the Classes of
Class A Certificates will be as set forth on the cover page hereof.
In addition, on each Distribution Date, to the extent of the Available
Distribution Amount and on a subordinated basis as described below under "--
Priority of Distributions" the holders of the Subordinate Certificates will
be entitled to receive (i) interest accrued during the related Interest
Accrual Period at the related Pass-Through Rate on any related Liquidation
Loss Amount (the "Liquidation Loss Interest Amount" for such Class and
Distribution Date), plus (ii) any amounts distributable under clause (i)
above or this clause (ii) on such Class on the previous Distribution Date but
not previously distributed, plus, to the extent legally permissible, interest
accrued on any such amount during the related Interest Accrual Period at the
related Pass-Through Rate (the "Unpaid Liquidation Loss Interest Shortfall"
for such Class and Distribution Date).
Principal. The "Formula Principal Distribution Amount" for any
Distribution Date will equal (a) the sum of: (i) the sum of the principal
components of all Monthly Payments (scheduled to be) during the related Due
Period on the Contracts that were outstanding during such Due Period
((regardless of whether such Monthly Payments were received by the Servicer
from the related Obligors)), not including any Monthly Payments (due) on
Liquidated Contracts or repurchased Contracts; (ii) the sum of the amounts of
all Principal Prepayments received by the Servicer on the Contracts during
the related Prepayment Period; (iii) with respect to any Contract that became
a Liquidated Contract during the related Prepayment Period, the Contract
Principal Balance thereof on the date of liquidation thereof (determined
without giving effect to such liquidation); and (iv) with respect to any
Contract that was purchased or repurchased by (IndyMac) pursuant to the
Agreement during the related Prepayment Period, the Contract Principal
Balance thereof on the date of purchase or repurchase thereof (determined
without giving effect to such purchase or repurchase); less (b) the
Overcollateralization Reduction Amount, if any, for such Distribution Date.
The "Unpaid Certificate Principal Shortfall" for any Distribution Date will
be, with respect to each Class of Certificates, an amount equal to all
Formula Principal Distribution Amounts distributable on such Class on
previous Distribution Dates that have not yet been distributed on such Class
of Certificates.
The "Class A Formula Principal Distribution Amount" for any Distribution
Date will equal (i) prior to the Cross-over Date, the Formula Principal
Distribution Amount, (ii) on any Distribution Date as to which the Principal
Distribution Tests are not met, the Formula Principal Distribution Amount, or
(iii) on any other Distribution Date, the Class A Percentage of the Formula
Principal Distribution Amount. The "Class Formula Principal Distribution
Amount" for any Distribution Date will equal (i) as long as the Class A
Certificate Principal Balance has not been reduced to zero and prior to the
Cross-over Date, zero, (ii) on any Distribution Date as to which the
Principal Distribution Tests are not met and the Class A Certificate
Principal Balance has not been reduced to zero, zero, (iii) on any
Distribution Date as to which the Principal Distribution Tests are not met
and the Class A Certificate Principal Balance has been reduced to zero, the
Formula Principal Distribution Amount, or (iv) on any other Distribution
Date, the Class Percentage of the Formula Principal Distribution Amount.
The "Class B-1 Formula Principal Distribution Amount" for any Distribution
Date will equal (i) as long as the Class A Certificate Principal Balance and
the Class Certificate Principal Balance have not been reduced to zero and
prior to the Cross-over Date, zero, (ii) on any Distribution Date as to which
the Principal Distribution Tests are not met and the Class A Certificate
Principal Balance and the Class Certificate Principal Balance have not been
reduced to zero, zero, (iii) on any Distribution Date as to which the
Principal Distribution Tests are not met and the Class A Certificate
Principal Balance and the Class Certificate Principal Balance each have
been reduced to zero, the Formula Principal Distribution Amount, or (iv) on
any other Distribution Date, the Class B-1 Percentage of the Formula
Principal Distribution Amount. The "Class B-2 Formula Principal Distribution
Amount" for any Distribution Date will equal (i) as long as the Class A
Certificate Principal Balance, the Class Certificate Principal Balance and
the Class B-1 Certificate Principal Balance have not been reduced to zero and
prior to the Cross-over Date, zero, (ii) on any Distribution Date as to which
the Principal Distribution Tests are not met and the Class A Certificate
Principal Balance, the Class Certificate Principal Balance and the Class
B-1 Certificate Principal Balance have not been reduced to zero, zero, (iii)
on any Distribution Date as to which the Principal Distribution Tests are not
met and the Class A Certificate Principal Balance, the Class Certificate
Principal Balance and the Class B-1 Certificate Principal Balance each have
been reduced to zero, the Formula Principal Distribution Amount, or (iv) on
any other Distribution Date, the Class B-2 Percentage of the Formula
Principal Distribution Amount. For any Distribution Date, if the "Class A
Formula Principal Distribution Amount", the "Class Formula Principal
Distribution Amount", the "Class B-1 Formula Principal Distribution Amount"
or the "Class B-2 Formula Principal Distribution Amount" exceeds the
Certificate Principal Balance with respect to the related Class of
Certificates, less the Unpaid Certificate Principal Shortfall with respect
to such Class and Distribution Date, then such amounts shall be allocated to
the Formula Principal Distribution Amount of the next junior Class of
Certificates. If the Class A Certificate Principal Balance, the Class
Certificate Principal Balance and the Class B-1 Certificate Principal Balance
have not been reduced to zero on or before a Distribution Date, then amounts
then allocable as the Class B-2 Formula Principal Distribution Amount shall
be allocated first to the Class B-1 Formula Principal Distribution Amount,
next to the Class Formula Principal Distribution Amount, and finally to
the Class A Formula Principal Distribution Amount, to the extent that
allocation of such amounts to the Class B-2 Formula Principal Distribution
Amount would reduce the Class B-2 Certificate Principal Balance below the
Class B-2 Floor Amount.
The "Class A Percentage" for a Distribution Date will generally be the
percentage derived from the fraction (which shall not be greater than one),
the numerator of which is the Class A Certificate Principal Balance
immediately prior to such Distribution Date and the denominator of which is
the sum of the Class A Certificate Principal Balance, the Class Adjusted
Certificate Principal Balance and the Class B Adjusted Certificate Principal
Balance, each immediately prior to such Distribution Date. The "Class
Percentage" for a Distribution Date will generally be the percentage derived
from the fraction (which shall not be greater than one), the numerator of
which is the Class Adjusted Certificate Principal Balance immediately prior
to such Distribution Date and the denominator of which is the sum of the
Class A Certificate Principal Balance, the Class Adjusted Certificate
Principal Balance and the Class B Adjusted Certificate Principal Balance,
each immediately prior to such Distribution Date. The "Class B-1 Percentage"
and the "Class B-2 Percentage" for a Distribution Date will generally be
calculated in the same manner as the Class Percentage, appropriately
modified to relate to the Class B-1 or Class B-2 Certificates, as the case
may be.
Priority of Distributions On each Distribution Date the Available
Distribution Amount will be distributed in the following amounts and in the
following order of priority:
a. concurrently, to each Class of Class A Certificates (a) first,
the related Interest Distribution Amount for such Distribution Date,
with the Available Distribution Amount being allocated among such
Classes pro rata based on their respective Interest Distribution Amounts
and (b) second, the related Carryover Interest Distribution Amount, if
any, for such Distribution Date, in each case with the Available
Distribution Amount being allocated among the Classes of Class A
Certificates pro rata based on their respective Carryover Interest
Distribution Amounts;
b. to the Class B- Certificates, (a) first, the related Interest
Distribution Amount for such Distribution Date and (b) second, the
related Carryover Interest Distribution Amount, if any, for such
Distribution Date;
c. concurrently, to each Class of Class A Certificates, the related
Unpaid Certificate Principal Shortfall for the Class A Certificates, if
any, for such Distribution Date, allocated among the Class A
Certificates pro rata based on their respective Certificate Principal
Balances;
d. to the Class A Certificates, the Class A Formula Principal
Distribution Amount allocated in the following manner and in the
following order of priority; provided, however, that on any Distribution
Date on which the Pool Balance is less than or equal to the aggregate
Certificate Principal Balance of the Class A Certificates immediately
prior to such Distribution Date, the Class A Formula Principal
Distribution Amount will be allocated among the Class A Certificates pro
rata based upon their respective Certificate Principal Balances:
(a) to the Class A-R Certificates until the Class A-R
Certificate Principal Balance has been reduced to zero;
(b) to the Class A- Certificates until the Class A-
Certificate Principal Balance has been reduced to zero; and
(c) to the Class Certificates until the Class
Certificate Principal Balance has been reduced to zero.
e. to the Class B- Certificates, (a) first, any related Liquidation
Loss Interest Amount for such Distribution Date, and (b) second, any
related Unpaid Liquidation Loss Interest Shortfall for such Distribution
Date;
f. to the Class B- Certificates, the related Unpaid Certificate
Principal Shortfall for the Class B- Certificates, if any, for such
Distribution Date;
g. to the Class B- Certificates, the Class Formula Principal
Distribution Amount, in reduction of the Certificate Principal Balance
of such Class, until it is reduced to zero;
h. to the Class Certificates, (a) first, any related
Liquidation Loss Interest Amount for such Distribution Date, and (b)
second, any related Unpaid Liquidation Loss Interest Shortfall for such
Distribution Date;
i. to the Class Certificates, the related Unpaid Certificate
Principal Shortfall for the Class Certificates, if any, for such
Distribution Date;
j. to the Class Certificates, the Class Formula Principal
Distribution Amount, in reduction of the Certificate Principal Balance
of such Class, until it is reduced to zero;
k. to the Servicer, an additional servicing fee equal to
one-twelfth of the product of % and the Pool Balance at the
beginning of the related Due Period; and
l. any remainder to the Class A-R Certificates.
The "Cross-over Date" will be the later to occur of (i) the Distribution
Date occurring in _________, 20 or (ii) the first Distribution Date on which
the percentage equivalent of a fraction (which shall not be greater than one)
the numerator of which is the aggregate Adjusted Certificate Balance of the
Subordinate Certificates plus the Current Overcollateralization Amount for
such Distribution Date and the denominator of which is the Pool Balance on
such Distribution Date, equals or exceeds ____ times the percentage
equivalent of a fraction (which shall not be greater than one) the numerator
of which is the aggregate Initial Certificate Principal Balance of the
Subordinate Certificates and the denominator of which is the Cut-off Date
Principal Balance.
The "Principal Distribution Tests" will be met in respect of a
Distribution Date if the following conditions are satisfied: (i) the Average
Sixty-Day Delinquency Ratio (as defined in the Agreement) as of such
Distribution Date does not exceed ____%; (ii) the Average Thirty-Day
Delinquency Ratio (as defined in the Agreement) as of such Distribution Date
does not exceed ____%; (iii) the Cumulative Realized Losses (as defined in
the Agreement) as of such Distribution Date do not exceed a certain specified
percentage of the original Pool Balance, depending on the year in which such
Distribution Date occurs; and (iv) the Current Realized Loss Ratio (as
defined in the Agreement) as of such Distribution Date does not exceed ____%.
The Average Sixty-Day Delinquency Ratio and the Average Thirty-Day
Delinquency Ratio will, in general, be the ratios of the average of the
Contract Principal Balances delinquent 60 days or more and 30 days or more,
respectively, for the preceding three calendar months to the average Pool
Balance for such periods. Cumulative Realized Losses will, in general, be
the aggregate Realized Losses incurred in respect of Liquidated Contracts
since the Cut-off Date. The Current Realized Loss Ratio will, in general, be
the ratio of the aggregate Realized Losses incurred on Liquidated Contracts
for the periods specified in the Agreement to an average Pool Balance
specified in the Agreement.
The "Pool Balance" for any Distribution Date will be equal to (i) the
Cut-off Date Principal Balance, less (ii) the aggregate of the Formula
Principal Distribution Amounts (without subtracting therefrom any
Overcollateralization Reduction Amount) for such Distribution Date and all
prior Distribution Dates. The "Certificate Principal Balance" of each Class
of Certificates will be its Initial Certificate Principal Balance reduced by
all distributions in respect of principal on such Class.
REALIZED LOSSES ON LIQUIDATED CONTRACTS
The Formula Principal Distribution Amount for any Distribution Date is
intended to include the Contract Principal Balance of each Contract that
became a Liquidated Contract during the related Prepayment Period. A
Realized Loss will be incurred on a Liquidated Contract in the amount, if
any, by which the Liquidation Proceeds, net of Liquidation Expenses, from
such Liquidated Contract are less than the Contract Principal Balance of such
Liquidated Contract, plus accrued and unpaid interest thereon, plus amounts
reimbursable to the Servicer for previously unreimbursed Advances. To the
extent that the amount of the Realized Loss is not covered by interest
collected on the nondefaulted Contracts in excess of certain interest
payments due to be distributed on the Class A, Class and Class B
Certificates and any portion of such interest required to be paid to the
Trustee and Servicer as compensation, the amount of such Realized Loss may be
allocated first, to reduce the Current Overcollateralization Amount, and then
to the Subordinate Certificates. See "--Allocation of Liquidation Loss
Amounts".
ALLOCATION OF LIQUIDATION LOSS AMOUNTS
The "Liquidation Loss Amount" for any Distribution Date will be the
amount, if any, by which the aggregate Certificate Principal Balance of all
Certificates (after giving effect to the distributions made on the
immediately preceding Distribution Date) exceeds the Pool Balance for such
immediately preceding Distribution Date. The Liquidation Loss Amount will be
allocated among the Classes of Subordinate Certificates in order of reverse
numerical designation.
SUBORDINATION OF THE SUBORDINATE CERTIFICATES
Credit support for the Class A Certificates will be provided by the
subordination of the Subordinate Certificates, effected by the allocation of
Liquidation Loss Amounts as described herein and by the preferential
application of the Available Distribution Amount to the Class A Certificates
relative to the Subordinate Certificates to the extent described herein. The
primary credit support for the Class Certificates will be the subordination
of the Class B, effected by the allocation of Liquidation Loss Amounts as
described herein and by the preferential allocation of the Available
Distribution Amount to the Class Certificates relative to the Class B
Certificates to the extent described herein. The primary credit support for
the Class B- Certificates will be the subordination of the Class B- ,
effected by the allocation of Liquidation Loss Amounts as described herein
and by the preferential allocation of the Available Distribution Amount to
the Class B- Certificates relative to the Class B- to the extent described
herein. See "--Distributions--Priority of Distributions" above.
OVERCOLLATERALIZATION
Excess interest collections will be applied, to the extent available, to
make accelerated payments of principal to the Certificates. The "Accelerated
Principal Distribution Amount" for any Distribution Date will be the positive
difference, if any, between the Target Overcollateralization Amount and the
Current Overcollateralization Amount. The "Overcollateralization Reduction
Amount" for any Distribution Date will be the positive difference, if any,
between the Current Overcollateralization Amount and the Target
Overcollateralization Amount. The "Current Overcollateralization Amount"
will mean, for any Distribution Date, the positive difference, if any,
between the Pool Balance and the sum of the Certificate Principal Balances of
all then- outstanding Classes of Certificates. The "Target
Overcollateralization Amount" will mean (i) for any Distribution Date prior
to the Cross-over Date, ____% of the Cut-off Date Principal Balance and (ii)
for any other Distribution Date, the lesser of (a) ____% of the Cut-off Date
Principal Balance and (b) ____% of the then-outstanding Pool Balance;
provided, however, that so long as any Class of Certificates is outstanding
the Target Overcollateralization Amount will not be less than ____% of the
Cut-off Date Principal Balance.
ADVANCES
On each Deposit Date, the Servicer will be required to make an advance
to the Trust in respect of the related Due Period and each Contract, the
amount, if any, of the related (Monthly Payment) (allocable to interest) that
was not timely made (each, an "Advance"), except that the Servicer will not
be required to make any Advance that the Servicer believes is not or if made
would not be, ultimately recoverable from future payments made on the related
Contracts, Liquidation Proceeds or otherwise (a "Nonrecoverable Advance").
(The Servicer will not make any Advances with respect to delinquent principal
payments on the Contracts.) On each Distribution Date, the Servicer will be
entitled to reimbursement from collections of late Monthly Payments in
respect of any Advances made and not previously reimbursed. An Advance in
respect of any Due Period will not exceed the amount of (principal and
interest) that would have been paid on or in respect of the Contracts during
the related Due Period assuming that (all Monthly Payments) were received by
the Servicer on the related Due Dates.
Advances are intended to maintain a regular flow of scheduled payments
(of interest) to Certificateholders rather than to guarantee or insure
against losses. The Servicer will reimburse itself for Advances out of
collections of late Monthly Payments. In addition, upon the determination
that a Nonrecoverable Advance has been made in respect of a Contract or upon
a Contract becoming a Liquidated Contract, the Servicer will reimburse itself
out of funds in the Collection Account for the Advances on such Contract
(exclusive of any Advances that were recovered out of Liquidation Proceeds
for the related Contract).
COMPENSATING INTEREST
When an Obligor prepays a Contract between Due Dates, the Obligor is
required to pay interest on the amount prepaid only to the date of prepayment
and not thereafter. Pursuant to the Agreement, so long as (IndyMac) is the
Servicer, the Servicing Fee for any month will be reduced by an amount with
respect to each prepaid Contract sufficient to pass through to
Certificateholders the full amount of interest to which they would be
entitled in respect of such Contract on the related Distribution Date (the
"Compensating Interest"). If shortfalls in interest as a result of
prepayments in any Prepayment Period exceed in the aggregate the amount of
the Servicing Fee for such Distribution Date, the amount of interest
available to be distributed to Certificateholders will be reduced by the
amount of such excess and (IndyMac) will have no obligation to reimburse
such shortfall.
REPORTS TO CERTIFICATEHOLDERS
The Trustee will include with each distribution to each
Certificateholder a statement as of the related Distribution Date setting
forth, among other things:
(i) the aggregate amount distributed on each Class of Certificates,
separately identifying the portion thereof which constitutes principal
and interest;
(ii) the Interest Distribution Amount, Carryover Interest
Distribution Amount, Liquidation Loss Interest Amount and Unpaid
Liquidation Loss Interest Shortfall in respect of each Class of
Certificates;
(iii) the Formula Principal Distribution Amount and Unpaid Certificate
Principal Shortfall in respect of each Class of Certificates;
(iv) the Accelerated Principal Distribution Amount,
Overcollateralization Reduction Amount, Target Overcollateralization
Amount and Current Overcollateralization Amount;
(v) the Class A- , Class , Class A-R, Class B- and Class
Certificate Principal Balances, after giving effect to the distributions
of principal made on such Distribution Date;
(vi) the Adjusted Certificate Principal Balance of the Class B- and
Class Certificates, after giving effect to the distributions of
principal and allocation of Liquidation Loss Amounts made on such
Distribution Date;
(vii) the number of and aggregate Contract Principal Balances of
Contracts with payments delinquent 31 to 59, 60 to 89 and 90 or more
days, respectively;
(viii) the number of and aggregate Contract Principal Balances of
Contracts relating to Manufactured Homes that were repossessed since the
immediately preceding Distribution Date;
(ix) (the aggregate Realized Losses and the Cumulative Realized
Losses for such Distribution Date); and
(x) the amount of fees payable out of the Trust Fund.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee will furnish a report to each Certificateholder of
record at any time during such calendar year as to, among other things, the
aggregate of interest and principal reported pursuant to clause (i) for such
calendar year.
TERMINATION
The Agreement will provide that on any Distribution Date on or after the
first Distribution Date as of which the Pool Balance is less than 10% of the
Cut-off Date Principal Balance, the Depositor and the Servicer will each have
the option to repurchase all outstanding Contracts and all other property of
the Trust Fund at a price equal to the sum of (a) 100% of the unpaid
principal balance as of the final Distribution Date, and (b) the lesser of
(i) the fair market value of any REO Property (as determined by the Depositor
or the Servicer, as the case may be) and (ii) the unpaid principal balance of
each Contract related to any REO Property, plus, in each case, any unpaid
interest on the Certificates due on prior Distribution Dates, together with
interest thereon, to the extent legally permissible, at the related
Pass-Through Rate on the unpaid principal balance (including any Contract as
to which the related Manufactured Home has been repossessed and not yet
disposed of). Notwithstanding the foregoing, the foregoing option will not
be exercisable unless there will be distributed to the Certificateholders an
amount equal to 100% of the Certificate Principal Balance of each Certificate
plus one month's interest thereon at the related Pass-Through Rate, any
previously undistributed shortfalls in interest due thereon, together with
interest thereon, to the extent legally permissible, at the related
Pass-Through Rate, and any unpaid Liquidation Loss Interest Amounts. The
Servicer shall have the prior right to exercise the option to purchase the
Contracts as described above if both the Depositor and the Servicer desire to
exercise such option.
If neither the Depositor nor the Servicer exercises its optional
termination right within 90 days after it first becomes eligible to do so,
the Trustee will solicit bids for the purchase of all Contracts and other
property in the Trust Fund. The Trustee will sell such Contracts and other
property only if the net proceeds to the Trust from such sale would at least
equal the Termination Price. If the net proceeds from such sale would not at
least equal the Termination Price, the Trustee will decline to sell the
Contracts and other property of the Trust and will not be under any
obligation to solicit any further bids or otherwise negotiate any further
sale of the Contracts and other property of the Trust.
The "Termination Price" will equal the sum of (1) any Liquidation
Expenses incurred by the Servicer in respect of any Contract that has not yet
been liquidated, (2) all amounts required to be reimbursed or paid to the
Servicer in respect of previously unreimbursed Advances and (3) the greater
of (a) the sum of (i) the aggregate Contract Principal Balance, plus accrued
and unpaid interest thereon at the related APRs through the end of the Due
Period immediately preceding the Due Period in which the terminating purchase
will occur, plus (ii) the lesser of (A) the aggregate Contract Principal
Balance of each Contract that had been secured by any Manufactured Home
acquired by the Servicer in a repossession or foreclosure (each, an "REO
Property") remaining in the Trust, plus accrued interest thereon at the
related APR through the end of the Due Period immediately preceding the Due
Period in which the terminating purchase will occur, and (B) the current
appraised value of any such REO Property (net of Liquidation Expenses to be
incurred in connection with the disposition of such property estimated in
good faith by the Servicer), such appraisal to be conducted by an appraiser
mutually agreed upon by the Servicer and the Trustee, plus all previously
unreimbursed Advances made in respect of such REO Property, and (b) the
aggregate fair market value of the Trust Fund (as determined by the Servicer
as will be described in the Agreement) plus all previously unreimbursed
Advances. The fair market value of the assets of the Trust as determined for
purposes of a terminating purchase will be deemed to include accrued interest
at the applicable APR on the Contract Principal Balance (including any
Contract that had been secured by a REO Property, which REO Property has not
yet been disposed of by the Servicer) through the end of the Due Period
immediately preceding the Due Period in which the terminating purchase will
occur. The basis for any such valuation shall be furnished by the Servicer
to the Certificateholders upon request.
On the date of any termination of the Trust, the Termination Price will
be distributed (i) first to the Servicer to reimburse it for all previously
unreimbursed Liquidation Expenses and Advances and (ii) second to the
Certificateholders in accordance with the distribution priorities set forth
herein under "--Distributions--Priority of Distributions." Upon the
termination of the Trust and payment of all amounts due on the Certificates
and all administrative expenses associated with the Trust, any remaining
assets of the Trust will be sold and the proceeds distributed to the holders
of the Class A-R Certificates in accordance with the Agreement.
TERMINATION OF AGREEMENT
The Agreement will terminate upon the last action required to be taken
by the Trustee on the final Distribution Date following the earliest to occur
of (i) the purchase by the Depositor or the Servicer of all Contracts and all
other property in the Trust Fund as described herein under "--Termination,"
(ii) the sale of the Contracts and other property in the Trust Fund by the
Trustee as described herein under "--Termination" or (iii) the final payment
or other liquidation (or any Advance with respect thereto) of the last
Contract remaining in the Trust Fund or the disposition of all property
acquired upon repossession of any Manufactured Home.
Upon presentation and surrender of the Offered Certificates, the Trustee
will cause to be distributed, to the extent of funds available, to
Certificateholders on the final Distribution Date in proportion to their
respective Percentage Interests an amount equal to the respective Certificate
Principal Balances of the Offered Certificates, together with any unpaid
interest on such Offered Certificates due on prior Distribution Dates,
together with interest thereon, to the extent legally permissible, at the
related Pass-Through Rate, and any Liquidation Loss Interest Amounts for such
Class and one month's interest at the applicable Pass-Through Rate on such
unpaid Certificate Principal Balances; provided that such funds will be
distributed in the applicable order of priority specified herein under "--
Distributions--Priority of Distributions." If the Agreement is then being
terminated, any amount which remains on deposit in the Certificate Account
(other than amounts retained to meet claims) after distribution to the
holders of the Certificates will be distributed to the Class A-R
Certificateholders in accordance with the Agreement.
SERVICING COMPENSATION
For its servicing of the Contracts, on each Distribution Date (i) the
Servicer will be entitled to receive a monthly servicing fee equal to
one-twelfth of the product of 1.00% and the Pool Balance as of the first day
of the related Due Period (the "Servicing Fee"), whether or not the related
payments on the Contracts are received and (ii) as additional servicing
compensation, the Servicer will receive amounts pursuant to clause (xviii)
under "Description of the Certificates--Distributions--Priority of
Distributions." See "--Payments on Contracts; Collection Account;
Certificate Account" herein.
The Servicer will also be entitled to retain, as compensation for the
additional services provided in connection with the performance of its
servicing obligations under the Agreement, any fees for late payments made by
Obligors, extension fees paid by Obligors for the extension of scheduled
payments and assumption and similar fees for permitted assumptions of
Contracts by purchasers of the related Manufactured Homes. The Servicer also
will be entitled to retain as additional servicing compensation amounts in
respect of interest on principal prepayments in full of a Contract received
after the Contract's Due Date during any Prepayment Period, but,
correspondingly, its Servicing Fee will be reduced by amounts in respect of
interest on principal prepayments in full of a Contract received in advance
of the Contract's Due Date during such Prepayment Period.
COMPENSATION OF THE TRUSTEE
For its services, on each Distribution Date the Trustee will be entitled
to receive a monthly trustee fee as described in the Agreement (the "Trustee
Fee").
CERTAIN OTHER MATTERS REGARDING THE SERVICER
Any person with which the Servicer is merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
the Servicer is a party, or any person succeeding to the business of the
Servicer, will be the successor to the Servicer under the Agreement, so long
as such successor has a net worth of at least $10 million and has serviced at
least $100 million of manufactured housing contracts for at least one year.
HAZARD INSURANCE POLICIES
The Servicer will be obligated to cause to be maintained one or more
hazard insurance policies with respect to each Manufactured Home (other than
any Manufactured Home in repossession) in an amount at least equal to the
lesser of its maximum insurable value or the principal amount due from the
Obligor under the related Contract. Such hazard insurance policies will, at
a minimum, provide fire and extended coverage on terms and conditions
customary in manufactured housing hazard insurance policies, with customary
deductible amounts.
All amounts collected by the Servicer under a hazard insurance policy
will be applied either to the restoration or repair of the related
Manufactured Home or against the principal balance of the related Contract
upon repossession of such Manufactured Home, after reimbursing the Servicer
for amounts previously advanced by it for such purposes. The Servicer may
satisfy its obligation to maintain hazard insurance policies by maintaining a
blanket policy insuring against hazard losses on all the Manufactured Homes.
Such blanket policy may contain a deductible clause, in which case the
Servicer will be required to make payments to the Trust Fund in the amount of
any deductible amounts in connection with insurance claims on repossessed
Manufactured Homes. See "Description of the Certificates-- Standard Hazard
Insurance" and "The Agreements--Hazard Insurance" in the Prospectus.
If the Servicer repossesses a Manufactured Home on behalf of the
Trustee, the Servicer will be required to either maintain a hazard insurance
policy with respect to such Manufactured Home meeting the requirements set
forth above, or to indemnify the Trust against any damage to such
Manufactured Home prior to resale or other disposition.
EVIDENCE AS TO COMPLIANCE
The Servicer will be required to deliver to the Trustee on or before
March 31 of each year, beginning March 31, ____, an officer's certificate
executed by an officer of the Servicer stating that (i) a review of the
activities of the Servicer during the preceding calendar year (or shorter
period in the case of the first such officer's certificate) and of
performance under the Agreement has been made under the supervision of such
officer, and (ii) to the best of such officer's knowledge, the Servicer has
fulfilled all its obligations under the Agreement throughout such year (or
shorter period in the case of the first such officer's certificate), or, if
there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. Such officer's certificate will be accompanied by a statement of a
firm of independent public accountants to the effect that, on the basis of an
examination of certain documents and records relating to servicing of the
Contracts under the Agreement, conducted in accordance with generally
accepted auditing standards or such other audit or review program used by the
Servicer, the Servicer's servicing has been conducted in compliance with the
provisions of the Agreement (or such agreements), except for (i) such
exceptions as such firm believes to be immaterial and (ii) such other
exceptions as may be set forth in such statement.
EVENTS OF DEFAULT
"Events of Default" under the Agreement will consist of (i) any failure
by the Servicer to make any deposit or payment required of it under the
Agreement which continues unremedied for five days after the giving of
written notice of such failure; (ii) any failure by the Servicer duly to
observe or perform in any material respect any of its other covenants or
agreements in the Agreement that materially affects the rights of the
Certificateholders which continues unremedied for 60 days after the giving of
written notice of such failure or breach; and (iii) certain events of
insolvency, readjustment of debt, marshalling of assets and liabilities or
other similar proceedings regarding the Servicer. "Notice" as used in this
paragraph will mean notice to the Servicer by the Trustee or the Depositor,
or to the Servicer, the Trustee and the Depositor by the Holders of
Certificates evidencing, in the aggregate, interests ("Fractional Interests")
at least equal to 25% of the principal balance of all Certificates. The
foregoing description of Events of Default replaces the description under
"The Agreements--Events of Default; Rights Upon Event of Default" in the
Prospectus.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default remains unremedied, the Trustee may, and
at the written direction of the Holders of Certificates evidencing Fractional
Interests aggregating not less than 66 2/3% shall, terminate all of the
rights and obligations of the Servicer under the Agreement and in and to the
related Contracts, whereupon (i) (subject to applicable law regarding the
Trustee's ability to make Advances) the Trustee or (ii) a successor Servicer
appointed by the Trustee with a net worth of at least $10 million that has
serviced at least $100 million of manufactured housing contracts for at least
one year will succeed to all the responsibilities, duties and liabilities of
the Servicer under the Agreement and will be entitled to similar compensation
arrangements. If, however, a bankruptcy trustee or similar official has been
appointed for the Servicer, and no Event of Default other than such
appointment has occurred, such trustee or official may have the power to
prevent the Trustee or such Certificateholders from effecting a transfer of
servicing. If the Trustee is obligated to succeed the Servicer but is
unwilling or unable so to act, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a successor Servicer as
described above. Pending such appointment, the Trustee will be obligated to
act in such capacity. The Trustee and such successor Servicer may agree upon
the servicing compensation to be paid, which in no event may be greater than
a monthly amount specified in the Agreement.
AMENDMENT
The Agreement may be amended by the Depositor, the Servicer and the
Trustee without the consent of any the Certificateholders (i) to cure any
mistake or ambiguity, (ii) to correct any defective provision therein or to
supplement any provision therein that may be inconsistent with any other
provision therein, (iii) to add to the duties of the Depositor, the Seller or
the Servicer, (iv) to add any other provisions with respect to matters or
questions arising thereunder or (v) to modify alter, amend, add to or rescind
any of the provisions contained in the Agreement; provided, however, that in
the case of clause (iv) or (v), any such action will not, as evidenced by an
opinion of counsel (which opinion of counsel shall not be an expense of the
Trustee or the Trust Fund), adversely affect in any material respect the
interests of any Certificateholder; provided further that no such opinion of
counsel shall be required if the Person requesting the amendment obtains a
letter from each Rating Agency stating that the amendment would not result in
the downgrading or withdrawal of the respective ratings then assigned to the
Certificates; it being understood and agreed that any such letter in and of
itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. The Agreement may also be amended, by the
Depositor, the Servicer and the Trustee with the consent of more than 50% (by
Certificate Principal Balance) of the Holders of Certificates of each Class
affected thereby for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Agreement or of
modifying in any manner the rights of the Certificateholders; provided,
however, that no such amendment shall (i) reduce in any manner the amount
of, or delay the timing of, any distributions on any Certificate, without
the consent of the Holder of such Certificate, (ii) adversely affect in any
material respect the interests of the Holders of any Class of Certificates
in a manner other than as described in (i), without the consent of the
Holders of Certificates of such Class evidencing, as to such Class, at least
66 2/3% (by Certificate Principal Balance) of the Certificates of such
Class, or (iii) reduce the aforesaid percentages of Certificates the Holders
of which are required to consent to any such amendment, without the consent
of the Holders of all such Certificates then outstanding.
The Trustee, the Depositor and the Servicer also may at any time and
from time to time amend the Agreement without the consent of the
Certificateholders to modify, eliminate or add to any of its provisions to
such extent as shall be necessary or helpful to (i) maintain the
qualification of either REMIC as a REMIC under the Code, (ii) avoid or
minimize the risk of the imposition of any tax on either REMIC pursuant to
the Code that would be a claim at any time prior to the final redemption of
the Certificates or (iii) comply with any other requirements of the Code,
provided that the Trustee has been provided an opinion of counsel, which
opinion shall be an expense of the party requesting such opinion but in any
case shall not be an expense of the Trustee or the Trust Fund, to the effect
that such action is necessary or helpful to, as applicable, (i) maintain such
qualification, (ii) avoid or minimize the risk of the imposition of such a
tax or (iii) comply with any such requirements of the Code.
VOTING
The Agreement will provide that, solely for the purposes of giving any
consent, notice, waiver, request or demand pursuant to the Agreement, any
Certificate registered in the name of the Depositor, the Servicer or any
affiliate of the Servicer and any Certificate in respect of which the
Servicer or any affiliate thereof is the Certificate Owner shall be deemed
not to be outstanding and the Percentage Interest and Fractional Interest
evidenced thereby shall not be taken into account in determining whether the
requisite amount of Percentage Interests or Fractional Interests necessary to
effect such consent, notice, waiver, request or demand has been obtained,
unless, in the case of (i) the Class A Certificates, all Class A Certificates
are held by such persons, (ii) the Class Certificates, all Class A
Certificates and Class Certificates are held by such persons or (iii) the
Class B Certificates, all Certificates are held by such persons, or, in each
case, the Certificates of the related Class or Classes have been fully paid.
THE TRUSTEE
____________________, a banking corporation organized under the laws of
_____________________, will be the Trustee. Its "Corporate Trust Office" is
located at ___________________________________, telephone (___) ___-____.
The Depositor, (IndyMac) and their respective affiliates may engage in
commercial transactions with the Trustee from time to time.
The Trustee may resign at any time, in which event the Depositor will be
obligated to appoint a successor Trustee. The Depositor may remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances, the
Depositor will also be obligated to appoint a successor Trustee. In
addition, the Holders of Class A Certificates or, after the Certificate
Principal Balance of each Class of Class A Certificates has been reduced to
zero, Holders of Class and Class B Certificates evidencing Fractional
Interests of more than 50% of the Class A or the Class and Class B
Certificates, as the case may be, may remove the Trustee at any time and
appoint a successor Trustee. Any resignation or removal of the Trustee and
appointment of a successor Trustee will not become effective until acceptance
of the appointment by the successor Trustee.
REGISTRATION OF THE OFFERED CERTIFICATES
The Class A- , Class , Class B- and Class Certificates. The
Offered Certificates other than the Class A-R Certificates will be book-entry
Certificates (the "Book-Entry Certificates"). Certificate Owners will hold
their Offered Certificates through DTC if they are participants of such
systems, or indirectly through organizations which are participants in such
systems. The Book-Entry Certificates will be issued as one or more
certificates with aggregate principal balances equal to the aggregate
principal balance of the Offered Certificates and will initially be
registered in the name of Cede & Co., the nominee of DTC. Investors may hold
beneficial interests in the Book-Entry Certificates in minimum denominations
of $1,000. Except as described below, no person acquiring a Book-Entry
Certificate will be entitled to receive a physical certificate representing
such Certificate (a "Definitive Certificate"). Unless and until Definitive
Certificates are issued, it is anticipated that the only "Certificateholder"
of the Offered Certificates will be Cede & Co., as nominee of DTC.
Certificate Owners will not be Certificateholders as that term will be used
in the Agreement. Certificate Owners will be permitted to exercise their
rights only indirectly through DTC and its participating members (the "DTC
Participants").
A Certificate Owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or
other financial intermediary (each, a "Financial Intermediary") that
maintains the beneficial owner's account for such purpose. In turn, the
Financial Intermediary's ownership of such Book-Entry Certificate will be
recorded on the records of DTC (or of a participating firm that acts as agent
for the Financial Intermediary, whose interest will in turn be recorded on
the records of DTC, if the Certificate Owner's Financial Intermediary is not
a DTC Participant).
Certificate Owners will receive all distributions of principal of and
interest on the Offered Certificates from the Trustee through DTC and DTC
Participants. While the Offered Certificates are outstanding (except under
the circumstances described below), under the rules, regulations and
procedures creating and affecting DTC and its operations (the "DTC Rules"),
DTC is required to make book-entry transfers among DTC Participants on whose
behalf it acts with respect to the Offered Certificates and is required to
receive and transmit distributions of principal of, and interest on, the
Offered Certificates. DTC Participants and indirect participants with whom
Certificate Owners have accounts with respect to Offered Certificates will
similarly be required to make book-entry transfers and receive and transmit
such distributions on behalf of their respective Certificate Owners.
Accordingly, although Certificate Owners will not possess certificates
representing their respective interests in the Offered Certificates, the DTC
Rules provide a mechanism by which Certificate Owners will receive
distributions and will be able to transfer their interests.
Certificateholders will not receive or be entitled to receive
certificates representing their respective interests in the Offered
Certificates, except under the limited circumstances described below. Unless
and until Definitive Certificates are issued, Certificateholders who are not
DTC Participants may transfer ownership of Offered Certificates only through
DTC Participants and indirect participants by instructing such DTC
Participants and indirect participants to transfer Offered Certificates, by
book-entry transfer, through DTC for the account of the purchasers of such
Offered Certificates, which account is maintained with their respective DTC
Participants. Under the DTC Rules and in accordance with DTC's normal
procedures, transfers of ownership of Offered Certificates will be executed
through DTC and the accounts of the respective DTC Participants will be
debited and credited. Similarly, the DTC Participants and indirect
participants will make debits or credits, as the case may be, on their
records on behalf of selling and purchasing Certificateholders.
Transfers between DTC Participants will occur in accordance with DTC
Rules.
DTC, which is a New York-chartered limited purpose trust company,
performs services for its participants, some of which (and/or their
representatives) own DTC. In accordance with its normal procedures,
DTC is expected to record the positions held by each DTC Participant in the
Book-Entry Certificates, whether held for its own account or as a nominee for
another person. In general, beneficial ownership of Book-Entry Certificates
will be subject to the DTC Rules as in effect from time to time.
Distributions on Book-Entry Certificates will be made on each
Distribution Date by the Trustee to DTC. DTC will be responsible for
crediting the amount of such payments to the accounts of the applicable DTC
Participants in accordance with DTC's normal procedures. Each DTC
Participant will be responsible for disbursing such payments to the
beneficial owners of the Book-Entry Certificates that it represents and to
each Financial Intermediary for which it acts as agent. Each such Financial
Intermediary will be responsible for disbursing funds to the beneficial
owners of the Book-Entry Certificates that it represents.
Under a book-entry format, beneficial owners of the Book-Entry
Certificates may experience some delay in their receipt of payments, since
such payments will be forwarded by the Trustee to Cede & Co. Because DTC can
only act on behalf of Financial Intermediaries, the ability of a beneficial
owner to pledge Book-Entry Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Book-Entry Certificates, may be limited due to the lack of physical
certificates for such Book-Entry Certificates. In addition, issuance of the
Book-Entry Certificates in book-entry form may reduce the liquidity of the
Offered Certificates in the secondary market since certain potential
investors may be unwilling to purchase Offered Certificates for which they
cannot obtain physical certificates. See "Risk Factors--Limited Liquidity"
herein.
Monthly and annual reports on the Trust will be provided to Cede & Co.,
as nominee of DTC, and may be made available by Cede & Co. to Certificate
Owners upon request, in accordance with the rules, regulations and procedures
creating and affecting the Depository, and to the Financial Intermediaries to
whose DTC accounts the Book-Entry Certificates of such Certificate Owners are
credited.
DTC has advised the Trustee that, unless and until Definitive
Certificates are issued, DTC will take any action permitted to be taken by
the holders of the Book-Entry Certificates under the Agreement only at the
direction of one or more Financial Intermediaries to whose DTC accounts the
Book-Entry Certificates are credited, to the extent that such actions are
taken on behalf of Financial Intermediaries whose holdings include such
Book-Entry Certificates. DTC may take actions, at the direction of the
related Participants, with respect to some Offered Certificates which
conflict with actions taken with respect to other Offered Certificates.
Definitive Certificates will be issued to beneficial owners of the
Book-Entry Certificates, or their nominees, rather than to DTC, only if (a)
DTC or the Depositor advises the Trustee in writing that DTC is no longer
willing, qualified or able to discharge properly its responsibilities as
nominee and depository with respect to the Book-Entry Certificates and the
Depositor or the Trustee is unable to locate a qualified successor, (b) the
Depositor, at its sole option, with the consent of the Trustee, elects to
terminate the book-entry system through DTC or (c) after the occurrence of an
Event of Default, Certificate Owners having Fractional Interests aggregating
not less than 51% of the Book-Entry Certificates advise the Trustee and DTC
through the Financial Intermediaries and the DTC Participants in writing that
the continuation of a book-entry system through DTC (or a successor thereto)
is no longer in the best interests of Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all Certificate
Owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for
re-registration, the Trustee will issue Definitive Certificates, and
thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Agreement.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of Offered Certificates among participants of DTC, it
will be under no obligation to perform or continue to perform such procedures
and such procedures may be discontinued at any time.
Neither the Depositor, the Servicer nor the Trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Certificates held
by Cede & Co., as nominee for DTC, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Class A-R Certificates. The Class A-R Certificates will be issued
in definitive form as one fully registered physical certificate representing
the entire Class A-R Certificate Principal Balance. The certificates
representing the Class A-R Certificates will be subject to certain transfer
restrictions. See "ERISA Considerations--The Class A-R Certificates" herein
and "ERISA Considerations" in the Prospectus.
USE OF PROCEEDS
Substantially all of the net proceeds to be received by the Depositor
from the sale of the Offered Certificates will be used to purchase the
Contracts from (IndyMac), to pay the costs, if any, of carrying the Contracts
until sale of the Offered Certificates and to pay other expenses connected
with pooling the Contracts, issuing the Certificates and selling the Offered
Certificates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
An election will be made to treat the Contract Pool and certain other
assets of the Trust as a REMIC for federal income tax purposes (the "Pooling
REMIC"). An election also will be made to treat the "regular interests" in
the Pooling REMIC and certain other assets of the Trust as another REMIC for
federal income tax purposes (the "Issuing REMIC"). The Regular Certificates
will be designated as "regular interests" in the Issuing REMIC and the Class
A-R Certificates will represent the beneficial ownership of the "residual
interest" in each of the Pooling REMIC and the Issuing REMIC. In order for
the REMIC standards to be met, substantially all of the assets of the Trust
must consist of qualified mortgages or permitted investments. Section
860G(a)(3) of the Code contains the definition of "qualified mortgages" for
REMIC purposes. The regulations promulgated by the Internal Revenue Service
under Sections 860A through 860G of the Code provide that obligations secured
by interests in manufactured housing that qualify as "single family
residences" within the meaning of Section 25(e)(10) of the Code may be
treated as qualified mortgages of the REMIC. Under Section 25(e)(10), the
term "single family residence" includes any manufactured home which has a
minimum of 400 square feet of living space and a minimum width in excess of
102 inches and which is of a kind customarily used in a fixed location.
Accordingly, assuming a timely election to be treated as a REMIC is made and
further assuming the compliance by the Trust Fund with all the terms of the
Agreement, Brown & Wood LLP will be of the opinion that (i) the Pooling REMIC
and the Issuing REMIC will qualify as a REMIC within the meaning of the Code,
(ii) the Class A (other than the Class A-R Certificates), Class and Class B
Certificates will constitute "regular interests" in the Issuing REMIC and
(iii) the Class A-R Certificates will constitute the sole class of "residual
interests" in each of the Pooling REMIC and the Issuing REMIC.
Because the Offered Certificates (other than the Class A-R Certificates)
will be considered REMIC regular interests, they will be taxable debt
obligations under the Internal Revenue Code of 1986, as amended
(the "Code"), and interest paid or accrued on such Certificates, including
any original issue discount will be taxable to the holders of such
Certificates in accordance with the accrual method of accounting, regardless
of such Certificateholders' usual methods of accounting. Each of the Class A
Certificates bears interest at a (fixed rate) and, therefore, each Class
(other than the Class A-R Certificates) will be issued with original issue
discount only if its stated principal amount exceeds its issue price by more
than a statutorily defined de minimis amount. The Class B- Certificates will
not be treated by the Trust as "variable rate debt instruments" as defined in
Treasury Regulations promulgated under the Code and, therefore, will be
treated as issued with original issue discount as described in "Federal
Income Tax Consequences" in the Prospectus. For purposes of determining the
amount and the rate of accrual of original issue discount and market
discount, the Depositor intends to assume that there will be prepayments on
the Contracts at a rate equal to ___% of the Prepayment Model. No
representation is made as to whether the Contracts will prepay at that rate
or any other rate. See "Certain Federal Income Tax Consequences" herein and
"Federal Income Tax Consequences" in the Prospectus.
The Offered Certificates will be treated as (i) assets described in
Section 7701(a)(19)(C) of the Code and (ii) "real estate assets" within the
meaning of Section 856(c)(5) of the Code, in each case to the extent
described in the Prospectus. Interest on the Offered Certificates will be
treated as interest on obligations secured by mortgages on real property
within the meaning of Section 856(c)(3)(B) of the Code to the same extent
that the Offered Certificates are treated as real estate assets. See
"Federal Income Tax Consequences" in the Prospectus.
ORIGINAL ISSUE DISCOUNT
The Offered Certificates (other than the Class A-R Certificates) may be
issued with original issue discount for federal income tax purposes. For
purposes of determining the amount and the rate of accrual of original issue
discount and market discount, the Depositor intends to assume that there will
be prepayments on the Contracts at a rate equal to ___% of the Prepayment
Model. No representation is made as to whether the Contracts will prepay at
that rate or any other rate. See "Yield and Prepayment Considerations"
herein and "Federal Income Tax Consequences" in the Prospectus.
EFFECT OF LOSSES AND DELINQUENCIES
As described herein under "Description of the Certificates," the Class B
Certificates will be subordinated to the Senior Certificates. In the event
there are losses or delinquencies on the Contracts, amounts that otherwise
would be distributed on the Class B-1 Certificates may instead be distributed
on the Senior Certificates. Holders of the Class B-1 Certificates
nevertheless will be required to report interest with respect to such Class
B-1 Certificates under an accrual method without giving effect to delays and
reductions in distributions on such Certificates attributable to losses and
delinquencies on the Contracts in the Contract Pool, except to the extent it
can be established, for tax purposes, that such amounts are uncollectible.
As a result, the amount of income reported by holders of the Class B-1
Certificates in any period could significantly exceed the amount of cash
distributed to such holders in that period. The holders of Class B-1
Certificates will eventually be allowed a loss (or will be allowed to report
a lesser amount of income) to the extent that the aggregate amount of
distributions on such Certificates is reduced as a result of losses and
delinquencies on the Contracts in the Contract Pool. However, the timing and
character of such losses or reductions in income are uncertain, and holders
of the Class B-1 Certificates are urged to consult their own tax advisors on
this point.
CLASS A-R CERTIFICATES
In addition to the stated Initial Certificate Principal Balance, the
Class A-R Certificates will be entitled to receive the proceeds of the
remaining assets of the Trust, if any, after the distribution of all amounts
due to all other Classes of Certificates. It is not anticipated that there
will be any material assets remaining in such circumstances.
The holders of the Class A-R Certificates must include the taxable
income of each REMIC in their federal taxable income. The resulting tax
liability of the holders may exceed cash distributions to such holders during
certain periods. All or a portion of the taxable income from a Class A-R
Certificate recognized by a holder may be treated as "excess inclusion"
income, which with limited exceptions, is subject to U.S. federal income tax.
The Small Business Job Protection Act of 1996 has eliminated the special
rule permitting Section 593 institutions ("thrift institutions") to use net
operating losses and other allowable deductions to offset their excess
inclusion income from REMIC residual certificates that have "significant
value" within the meaning of the REMIC Regulations, effective for taxable
years beginning after December 31, 1995, except with respect to residual
certificates continuously held by a thrift institution since November 1,
1995.
In addition, the Small Business Job Protection Act of 1996 provides
three rules for determining the effect on excess inclusions on the
alternative minimum taxable income of a residual holder. First, alternative
minimum taxable income for such residual holder is determined without regard
to the special rule that taxable income cannot be less than excess
inclusions. Second, a residual holder's alternative minimum taxable income
for a tax year cannot be less than the excess inclusions for the year.
Third, the amount of any alternative minimum tax net operating loss
deductions must be computed without regard to any excess inclusions. These
rules are effective for tax years beginning after December 31, 1986, unless a
residual holder elects to have such rules apply only to tax years beginning
after August 20, 1996.
Furthermore, the Small Business Job Protection Act of 1996, as part of
the repeal of the bad debt reserve method for thrift institutions, repealed
the application of Code Section 593(d) to any taxable year beginning after
December 31, 1995.
Also, purchasers of a Class A-R Certificate should consider carefully
the tax consequences of an investment in Class A-R Certificates discussed in
the Prospectus and should consult their own tax advisors with respect to
those consequences. See "Federal Income Tax Consequences--Taxation of
Holders of Residual Interest Certificates" in the Prospectus. Specifically,
prospective holders of Class A-R Certificates should consult their tax
advisors regarding whether, at the time of acquisition, a Class A-R
Certificate will be treated as a "noneconomic" residual interest, a
"non-significant value" residual interest and a "tax avoidance potential"
residual interest.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Federal Income Tax Consequences"
in the Prospectus.
ERISA CONSIDERATIONS
ERISA imposes certain restrictions on employee benefit plans that are
subject to ERISA ("Plans") and on persons who are fiduciaries with respect to
such Plans. See "ERISA Considerations" in the Prospectus.
CLASS A CERTIFICATES (OTHER THAN THE CLASS A-R CERTIFICATES)
As discussed in the Prospectus under "ERISA Considerations" and subject
to the limitations discussed thereunder, it is expected that the
(Underwriter's) PTE (as such term is defined in the Prospectus) will apply to
the acquisition and holding by Plans of Class A Certificates (other than the
Class A-R Certificates) sold by the Underwriter and that all conditions of
the Underwriter's PTE other than those within the control of the investors
have been met. In addition, as of the date hereof, no Obligor with respect
to Contracts included in the Trust Fund constitutes more than five percent
of the aggregate unamortized principal balance of the assets of the Trust
Fund.
Employee benefit plans that are governmental plans and church plans (in
each case as defined in Section 3(33) of ERISA) are not subject to ERISA
requirements. Accordingly, assets of such plans may be invested in the Class
A Certificates without regard to the ERISA restrictions described above,
subject to applicable provisions of other federal and state laws.
Any Plan fiduciary who proposes to cause a Plan to purchase Class A
Certificates should consult with its own counsel with respect to the
potential consequences under ERISA and the Code, of the Plan's acquisition
and ownership of Class A Certificates. Assets of a Plan or individual
retirement account should not be invested in the Class A Certificates unless
it is clear that the assets of the Trust Fund will not be plan assets or
unless it is clear that the Underwriter's PTE or a prohibited transaction
class exemption will apply and exempt all potential prohibited transactions.
See "ERISA Considerations" in the Prospectus.
CLASS A-R CERTIFICATES
Because the characteristics of the Class A-R Certificates may not meet
the requirements of Prohibited Transaction Class Exemption (83-1) (Class
Exemption for Certain Transactions Involving Mortgage Pool Investment
Trusts), the Underwriter's PTE or any other issued exemption under ERISA, the
purchase and holding of the Class A-R Certificates by a Plan or by individual
retirement accounts or other plans subject to Section 4975 of the Code may
result in prohibited transactions or the imposition of excise taxes or civil
penalties. Consequently, transfers of the Class A-R Certificates will not be
registered by the Trustee unless the Trustee receives: (i) a representation
from the transferee of such Certificate, acceptable to and in form and
substance satisfactory to the Trustee, the Depositor and the Servicer, to the
effect that such transferee is not an employee benefit plan subject to
Section 406 of ERISA or a plan or arrangement subject to Section 4975 of the
Code, nor a person acting on behalf of any such plan or arrangement nor using
the assets of any such plan or arrangement to effect such transfer; (ii) if
the purchaser is an insurance company, a representation that the purchaser is
an insurance company which is purchasing such Certificates with funds
contained in an "insurance company general account" (as such term is defined
in Section V(e) of Prohibited Transactions Class Exemption 95-60 ("PTCE
95-60")) and that the purchase and holding of such Certificates are covered
under PTCE 95-60; or (iii) an opinion of counsel satisfactory to the Trustee,
the Depositor and the Servicer that the purchase or holding of such
Certificate by a Plan, any person acting on behalf of a Plan or using such
Plan's assets, will not result in the assets of the Trust Fund being deemed
to be "plan assets" and subject to the prohibited transaction requirements of
ERISA and the Code and will not subject the Trustee, the Depositor or the
Servicer to any obligation in addition to those undertaken in the Agreement.
Such representation, as described above, shall be deemed to have been made to
the Trustee by the transferee's acceptance of a Class A-R Certificate. In
the event that the representation is violated, or any attempt to transfer to
a Plan or person acting on behalf of a Plan or using such Plan's assets is
attempted without such opinion of counsel, such attempted transfer or
acquisition shall be void and of no effect.
CLASS B-1 CERTIFICATES
As discussed in the Prospectus, because subordinate certificates such as
the Class B-1 Certificates are subordinated to the Class A Certificates, the
Underwriter's PTE will not apply to the Class B-1 Certificates. As such, no
transfer of a Class B-1 Certificate will be permitted to be made to a Plan
unless such Plan, at its expense, delivers to the Trustee and the Depositor
an opinion of counsel to the effect that the purchase or holding of a Class
B-1 Certificate by such Plan will not result in the assets of the Trust Fund
being deemed to be "plan assets" and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Depositor, the
Trustee or the Servicer to any obligation in addition to those undertaken in
the Agreement. Unless such opinion is delivered, each person acquiring a
Class B-1 Certificate will be deemed to represent to the Trustee, the
Depositor and the Servicer that such person is not a Plan subject to ERISA
or Section 4975 of the Code. Purchasers who are insurance companies
purchasing Class B-1 Certificates with funds from their "general accounts"
will be deemed to represent with respect to their acquisition of a
beneficial interest in such Certificates that such purchase is covered under
Section III of the Prohibited Transaction Class Exemption _____. See "ERISA
Considerations" in the Prospectus.
LEGAL INVESTMENT CONSIDERATIONS
The Offered Certificates will (not) constitute "mortgage related
securities" under SMMEA. The appropriate characterization of the Offered
Certificates under various legal investment restrictions, and thus the
ability of investors subject to these restrictions to purchase the Offered
Certificates, may be subject to significant interpretive uncertainties. All
investors whose investment authority is subject to legal restrictions should
consult their own legal advisors to determine whether, and to what extent,
the Offered Certificates will constitute legal investments for them.
The Depositor makes no representation as to the proper characterization
of the Offered Certificates for legal investment or financial institution
regulatory purposes, or as to the ability of particular investors to purchase
Offered Certificates under applicable legal investment restrictions. The
uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial institution regulatory
characteristics of the Offered Certificates) may adversely affect the
liquidity of the Offered Certificates. See "Legal Investment" in the
Prospectus.
UNDERWRITING
Under the terms and subject to the conditions contained in an
Underwriting Agreement dated _________, 19 (the "Underwriting Agreement"),
the Underwriter has agreed to purchase from the Depositor all of the Offered
Certificates. The Underwriting Agreement provides that the obligations of
the Underwriter are subject to certain conditions precedent and that the
Underwriter will be obligated to purchase all the Offered Certificates, if
any are purchased.
The Depositor has been advised by the Underwriter that it proposes to
offer the Offered Certificates to the public initially at the public offering
prices set forth on the cover page of this Prospectus Supplement and to
certain dealers at such price less a concession, based on Initial Certificate
Principal Balances, not in excess of % of the Class A- Certificates,
% of the Class Certificates, % of the Class A-R Certificates,
% of the Class B- Certificates and % of the Class Certificates.
The Underwriter may allow and such dealers may reallow a concession not in
excess of, based on Initial Certificate Principal Balances, % of the
Class A- Certificates, % of the Class Certificates, % of the
Class A-R Certificates, % of the Class B- Certificates and % of
the Class Certificates to certain other dealers. After the initial
public offering of each Class of Offered Certificates, the public offering
price and such concessions for such Class may be changed.
The Underwriting Agreement provides that the Depositor will indemnify
the Underwriter against certain liabilities, including liabilities under
applicable securities laws, or contribute to payments the Underwriter may be
required to make in respect thereof.
Until the distribution of the Certificates is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriter
and certain selling group members to bid for and purchase the Certificates.
As an exemption to these rules, the Underwriter is permitted to engage in
certain transactions that stabilize the price of each Class of Certificates.
Such transactions may consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Certificates.
Neither the Seller nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the Certificates. In
addition, neither the Seller nor the Underwriter makes any representation
that the Underwriter will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
LEGAL MATTERS
The validity of the Certificates, including certain federal income tax
consequences with respect thereto, will be passed upon for the Depositor
Brown & Wood LLP, New York, New York. __________, ________, __________ will
pass upon certain legal matters on behalf of the Underwriter.
RATINGS
It is a condition to issuance that the Certificates be rated "___" by
_____ and "___" by _________.
A securities rating addresses the likelihood of the receipt by
Certificateholders of distributions on the Mortgage Loans. The rating takes
into consideration the characteristics of the Mortgage Loans and the
structural, legal and tax aspects associated with the Certificates. The
ratings on the Certificates do not, however, constitute statements regarding
the likelihood or frequency of prepayments on the Mortgage Loans or the
possibility that Certificateholders might realize a lower than anticipated
yield.
The ratings assigned to the Certificates will depend primarily upon the
creditworthiness of the Certificate Insurer. Any reduction in a rating
assigned to the claims-paying ability of the Certificate Insurer below the
ratings initially assigned to the Certificates may result in a reduction of
one or more of the ratings assigned to the Certificates.
A securities rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by the
assigning rating organization. Each securities rating should be evaluated
independently of similar ratings on different securities.
The Depositor has not requested a rating of the Certificates by any
rating agency other than the Rating Agencies; there can be no assurance,
however, as to whether any other rating agency will rate the Certificates or,
if it does, what rating would be assigned by such other rating agency. The
rating assigned by such other rating agency to the Certificates could be
lower than the respective ratings assigned by the Rating Agencies.
INDEX OF PRINCIPAL TERMS
Set forth below is a list of certain of the more significant capitalized
terms used in this Prospectus Supplement and the pages on which the
definitions of such terms may be found.
TERM PAGE TERM PAGE
- ---- ---- ---- ----
Adjusted Certificate Principal Fractional Interests . . . . . S-52
Balance . . . . . . . . . . S-8 HID . . . . . . . . . . . . . S-23
Advance . . . . . . . . . . . . S-47 HUD . . . . . . . . . . . . . S-23
Agreement . . . . . . . . . . . S-3 IndyMac . . . . . . . . . S-1, S-3
APR . . . . . . . . . . . . . S-10 Initial Certificate Principal
Available Distribution Amount S-41 Balance . . . . . . . . . . S-3
Book-Entry Certificates . S-4, S-54 Interest Accrual Period. . . . S-42
Business Day . . . . . . . . . S-5 Interest Distribution Amount . S-42
Carryover Interest Distribution Issuing REMIC . . . . . . . . S-57
Amount . . . . . . . . . . . S-42 Land-and-Home Contracts. . . . S-10
Certificate Account . . . . . S-38 Liquidated Contract . . . . . . S-8
Certificate Owners . . . . . . S-4 Liquidation Expenses . . . . . S-7
Certificate Principal Balance S-46 Liquidation Loss Amount . S-8, S-46
Certificateholders . . . . . . S-5 Liquidation Loss Interest
Certificates . . . . . . S-1, S-3 Amount . . . . . . . . S-8, S-42
Class A Formula Principal Liquidation Proceeds . . . . . S-7
Distribution Amount . . . . S-43 Manufactured Homes . . . . . S-10
Class A Percentage . . . . . . S-44 Manufactured housing contracts S-18
Class B-1 Formula Principal MHD . . . . . . . . . . . . . S-23
Distribution Amount . . . . S-43 Monthly Payment . . . . . . . S-19
Class B-1 Liquidation Loss Mortgage . . . . . . . . . . S-11
Amount . . . . . . . . . . S-8 Nonrecoverable Advance . . . S-47
Class B-1 Percentage . . . . . S-44 Obligor . . . . . . . . . . . S-27
Class B-2 Formula Principal Offered Certificates . . . . . S-3
Distribution Amount . . . . S-43 Overcollateralization Reduction
Class B-2 Liquidation Loss Amount . . . . . . . . . . . S-7
Amount . . . . . . . . . . S-8 Pass-Through Rate . . . . . . . S-3
Class B-2 Percentage . . . . . S-44 Percentage Interest . . . . . . S-4
Class M Formula Principal Pooling REMIC . . . . . . . . S-57
Distribution Amount . . . . S-43 Prepayment Model . . . . . . S-29
Class M Liquidation Loss Amount S-8 Prepayment Period . . . . . . . S-4
Class M Percentage . . . . . S-44 Principal Distribution Tests . S-45
CLD . . . . . . . . . . . . . S-23 Record Date . . . . . . . . . . S-5
Code . . . . . . . S-2, S-12, S-58 REIT . . . . . . . . . . . . S-13
Compensating Interest . . . . S-48 REMIC . . . . . . . . . . . . . S-2
Contract Pool . . . . . . . . S-10 REO Property . . . . . . . . S-49
Contract Principal Balance . . S-8 Repurchase Price . . . . . . S-40
Contracts . . . . . S-1, S-10, S-18 Seller . . . . . . . . . . . . S-3
Corporate Trust Office . . . S-54 Servicing Fee . . . . . . . . S-50
Cross-over Date . . . . . . . S-45 SMMEA . . . . . . . . . . . . S-13
Current Overcollateralization Target Overcollateralization
Amount . . . . . . . . S-7, S-47 Amount . . . . . . . . S-7, S-47
Cut-off Date . . . . . . . . . S-4 Termination Price . . . . . . S-49
Cut-off Date Pool Balance . . S-10 TPL Department . . . . . . . S-23
Deposit Date . . . . . . . . S-41 Trust . . . . . . . . . . . . S-1
Determination Date . . . . . S-41 Trust Fund . . . . . . . . . S-4
DTC . . . . . . . . . . . . . . S-4 Trustee . . . . . . . . . . . S-3
Due Date . . . . . . . . . . S-10 Trustee Fee . . . . . . . . . S-51
Due Period . . . . . . . . . . S-4 UCC . . . . . . . . . . . . . S-17
Eligible Account . . . . . . S-40 Underwriting Agreement . . . S-62
ERISA . . . . . . . . . . . . S-13 Unpaid Certificate Principal
Events of Default . . . . . . S-52 Shortfall . . . . . . . . S-43
Final Scheduled Distribution Unpaid Liquidation Loss
Date . . . . . . . . . . . . S-9 Interest Shortfall . . . . S-42
Formula Principal Distribution Value . . . . . . . . . . . . S-22
Amount . . . . . . . . . . S-42
- -------------------------------------- ------------------------------------
NO DEALER, SALESPERSON OR OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN
THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE DEPOSITOR OR
ANY UNDERWRITER. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR IndyMac ABS, Inc.
THAT THERE HAS BEEN NO CHANGE IN Depositor
THE AFFAIRS OF THE DEPOSITOR SINCE
SUCH DATE.
---------------------
TABLE OF CONTENTS
PAGE $___________
---- Manufactured Housing Contract Pass-
PROSPECTUS SUPPLEMENT Through Certificates 199___
SUMMARY . . . . . . . . . . . . S-3
RISK FACTORS . . . . . . . . S-15
THE CONTRACT POOL . . . . . . S-18
(INDYMAC, INC.) . . . . . . . S-23 (IndyMac, Inc.)
DESCRIPTION OF THE CERTIFICATES S-37 Seller and Servicer
USE OF PROCEEDS . . . . . . . S-53
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES . . . . . . . S-53
ERISA CONSIDERATIONS . . . . S-56 PROSPECTUS SUPPLEMENT
LEGAL INVESTMENT CONSIDERATIONS
. . . . . . . . . . . . S-57
UNDERWRITING . . . . . . . . S-57
LEGAL MATTERS . . . . . . . . S-58
RATINGS . . . . . . . . . . . S-58
INDEX OF PRINCIPAL TERMS . . S-59
PROSPECTUS
Prospectus Supplement or Current
Report on Form 8-K . . . . . . 3
Available Information . . . . . . 3
Incorporation of Certain
Information by Reference . . . 4
Reports to Certificateholders . . 4
Summary of Terms . . . . . . . . 3
Risk Factors . . . . . . . . . . 15
The Trust Fund . . . . . . . . . 22
Use of Proceeds . . . . . . . . . 26
The Depositor . . . . . . . . . . 26
The Manufactured Housing
Program . . . . . . . . . . . 27
Description of the Certificates . 30
Credit Enhancement . . . . . . . 44
Yield and Prepayment
Considerations. . . . . . . . . 49
The Agreements . . . . . . . . . 52
Certain Legal Aspects of the
Contracts . . . . . . . . . . . . 67
Federal Income Tax
Consequences . . . . . . . . . 86
State Tax Considerations . . . 107
ERISA Considerations . . . . . 107
Legal Investment . . . . . . . 112
Method of Distribution . . . . 113
Legal Matters . . . . . . . . . 114
Financial Information . . . . . 114
Rating . . . . . . . . . . . . 114
Index of Defined Terms . . . . 116
UNTIL _________________, ALL
DEALERS EFFECTING TRANSACTIONS IN
THE OFFERED CERTIFICATES, WHETHER
OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------- ------------------------------------
PROSPECTUS
INDYMAC ABS, INC.
Depositor
Asset Backed Certificates
(Issuable in Series)
This Prospectus relates to the issuance of Asset Backed Certificates
(the "Certificates"), which may be sold from time to time in one or more
series (each, a "Series") by IndyMac ABS, Inc. (the "Depositor") or by a
Trust Fund (as defined below) on terms determined at the time of sale and
described in this Prospectus and the related Prospectus Supplement. The
Certificates of a Series will consist of Certificates which evidence
beneficial ownership of a trust established by the Depositor (each, a "Trust
Fund"). As specified in the related Prospectus Supplement, the Trust Fund for
a Series of Certificates will include certain assets (the "Trust Fund
Assets") which will consist primarily of manufactured housing installment
sales contracts or installment loan agreements (the "Contracts"). The Trust
Fund Assets will be acquired by the Depositor, either directly or indirectly,
from one or more institutions (each, a "Seller"), which may be affiliates of
the Depositor, and conveyed by the Depositor to the related Trust Fund. A
Trust Fund also may include insurance policies, surety bonds, cash accounts,
reinvestment income, guaranties or letters of credit to the extent described
in the related Prospectus Supplement. See "Index of Defined Terms" on Page 95
of this Prospectus for the location of the definitions of certain capitalized
terms.
Each Series of Certificates will be issued in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership of a
specified percentage (which may be 0%) or portion of future interest payments
and a specified percentage (which may be 0%) or portion of future principal
payments on the related Trust Fund Assets. A Series of Certificates may
include one or more classes that are senior in right of payment to one or
more other classes of Certificates of such Series. One or more classes of
Certificates of a Series may be entitled to receive distributions of
principal, interest or any combination thereof prior to one or more other
classes of Certificates of such Series or after the occurrence of specified
events, in each case as specified in the related Prospectus Supplement.
(cover continued on next page)
FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE
CERTIFICATES, SEE THE INFORMATION UNDER "RISK FACTORS" ON PAGE 14.
THE CERTIFICATES OF A GIVEN SERIES WILL REPRESENT BENEFICIAL INTERESTS
IN THE RELATED TRUST FUND ONLY AND WILL NOT REPRESENT INTERESTS IN OR
OBLIGATIONS OF THE DEPOSITOR, THE MASTER SERVICER, ANY SELLER OR ANY
AFFILIATES THEREOF, EXCEPT TO THE EXTENT DESCRIBED IN THE RELATED PROSPECTUS
SUPPLEMENT. THE CERTIFICATES AND THE CONTRACTS WILL NOT BE INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE DEPOSITOR
OR ANY OTHER PERSON OR ENTITY, EXCEPT IN EACH CASE TO THE EXTENT DESCRIBED IN
THE RELATED PROSPECTUS SUPPLEMENT.
THESE CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prior to issuance there will have been no market for the Certificates of
any Series and there can be no assurance that a secondary market for any
Certificates will develop, or if it does develop, that it will continue or
provide Certificateholders with a sufficient level of liquidity of
investment. This Prospectus may not be used to consummate sales of
Certificates of any Series unless accompanied by a Prospectus Supplement.
Offers of the Certificates may be made through one or more different methods,
including offerings through underwriters, as more fully described under
"Method of Distribution" herein and in the related Prospectus Supplement.
May 1, 1998
(continued from cover page)
Distributions to Certificateholders will be made monthly, quarterly,
semi-annually or at such other intervals and on the dates specified in the
related Prospectus Supplement. Distributions on the Certificates of a Series
will be made from the related Trust Fund Assets or proceeds thereof pledged
for the benefit of the Certificateholders as specified in the related
Prospectus Supplement.
The related Prospectus Supplement will describe any insurance or
guarantee provided with respect to the related Series of Certificates
including, without limitation, any insurance or guarantee provided by the
Department of Housing and Urban Development, the United States Department of
Veterans' Affairs or any private insurer or guarantor. The only obligations
of the Depositor with respect to a Series of Certificates will be to obtain
certain representations and warranties from each Seller and to assign to the
Trustee for the related Series of Certificates the Depositor's rights with
respect to such representations and warranties. The principal obligations of
the Master Servicer named in the related Prospectus Supplement with respect
to the related Series of Certificates will be limited to its contractual
servicing obligations, including any obligation it may have to advance
delinquent interest and/or principal payments on the related Trust Fund
Assets.
The yield on each class of Certificates of a Series will be affected by,
among other things, the rate of payments of principal (including prepayments)
on the related Trust Fund Assets and the timing of receipt of such payments
as described under "Risk Factors -- Prepayment and Yield Considerations" and
"Yield and Prepayment Considerations" herein and in the related Prospectus
Supplement. A Trust Fund may be subject to early termination under the
circumstances described under "The Agreements -- Termination"; Optional
Termination herein and in the related Prospectus Supplement.
If specified in the related Prospectus Supplement, one or more elections
may be made to treat a Trust Fund or specified portions thereof as a "real
estate mortgage investment conduit" ("REMIC") or as a financial asset
securitization investment trust ("FASIT") for federal income tax purposes.
See "Federal Income Tax Consequences."
UNTIL 90 DAYS AFTER THE DATE OF EACH PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE SECURITIES COVERED BY SUCH PROSPECTUS
SUPPLEMENT, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION THEREOF, MAY BE
REQUIRED TO DELIVER SUCH PROSPECTUS SUPPLEMENT AND THIS PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS AND
PROSPECTUS SUPPLEMENT WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PROSPECTUS SUPPLEMENT OR CURRENT REPORT ON FORM 8-K
The Prospectus Supplement or Current Report on Form 8-K relating to the
Certificates of each Series to be offered hereunder will, among other things,
set forth with respect to such Certificates, as appropriate: (i) the
aggregate principal amount, interest rate and authorized denominations of
each class of such Series of Certificates; (ii) information as to the assets
of the Trust Fund, including the general characteristics of the related Trust
Fund Assets included therein and, if applicable, the insurance policies,
surety bonds, guaranties, letters of credit or other instruments or
agreements included in the Trust Fund or otherwise, and the amount and source
of any reserve account or other cash account; (iii) the circumstances, if
any, under which the Trust Fund may be subject to early termination; (iv) the
method used to calculate the amount of principal to be distributed or paid
with respect to each class of Certificates; (v) the order of application of
distributions or payments to each of the classes within such Series, whether
sequential, pro rata, or otherwise; (vi) the Distribution Dates with respect
to such Series; (vii) additional information with respect to the method of
distribution of such Certificates; (viii) whether one or more REMIC elections
will be made with respect to the Trust Fund and, if so, the designation of
the regular interests and the residual interests; (ix) whether a FASIT
election will be made with respect to the Trust Fund, and if so, the
designation of the regular interests and the ownership interest; (x) the
aggregate original percentage ownership interest in the Trust Fund to be
evidenced by each class of Certificates; (xi) information as to the nature
and extent of subordination with respect to any class of Certificates that is
subordinate in right of payment to any other class; and (xii) information as
to the Seller, the Master Servicer and the Trustee.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Certificates. This Prospectus, which forms a
part of the Registration Statement, and the Prospectus Supplement relating to
each Series of Certificates contain descriptions of the material terms of the
documents referred to herein and therein, but do not contain all of the
information set forth in the Registration Statement pursuant to the Rules and
Regulations of the Commission. For further information, reference is made to
such Registration Statement and the exhibits thereto. Such Registration
Statement and exhibits can be inspected and copied at prescribed rates at the
public reference facilities maintained by the Commission at its Public
Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
its Regional Offices located as follows: Midwest Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and Northeast Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048.
The Commission also maintains a Web site at http://www.sec.gov from
which such Registration Statement and exhibits may be obtained.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any
Prospectus Supplement with respect hereto and, if given or made, such
information or representations must not be relied upon. This Prospectus and
any Prospectus Supplement with respect hereto do not constitute an offer to
sell or a solicitation of an offer to buy any securities other than the
Certificates offered hereby and thereby nor an offer of the Certificates to
any person in any state or other jurisdiction in which such offer would be
unlawful. The delivery of this Prospectus at any time does not imply that
information herein is correct as of any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed by or on behalf of the Trust Fund
referred to in the accompanying Prospectus Supplement with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), after the date of this Prospectus
and prior to the termination of any offering of the Certificates issued by
such Trust Fund shall be deemed to be incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of the filing of
such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for all purposes of this Prospectus to the extent that a statement
contained herein (or in the accompanying Prospectus Supplement) or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference modifies or replaces such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. Neither the
Depositor nor the Master Servicer for any Series intends to file with the
Commission periodic reports with respect to the related Trust Fund following
completion of the reporting period required by Rule 15d-1 or Regulation 15D
under the Exchange Act.
The Trustee or such other entity specified in the related Prospectus
Supplement on behalf of any Trust Fund will provide without charge to each
person to whom this Prospectus is delivered, on the written or oral request
of such person, a copy of any or all of the documents referred to above that
have been or may be incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated by reference
unless such exhibits are specifically incorporated by reference into the
information that this Prospectus incorporates). Such requests should be
directed to the Corporate Trust Office of the Trustee or the address of such
other entity, in each case as specified in the accompanying Prospectus
Supplement. Included in the accompanying Prospectus Supplement is the name,
address, telephone number, and, if available, facsimile number of the office
or contact person at the Corporate Trust Office of the Trustee or such other
entity.
REPORTS TO CERTIFICATEHOLDERS
Periodic and annual reports concerning the related Trust Fund for a
Series of Certificates will be forwarded to Certificateholders. However, such
reports will neither be examined nor reported on by an independent public
accountant. See "Description of the Certificates -- Reports to
Certificateholders."
SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the related
Prospectus Supplement with respect to the Series of Certificates offered
thereby and to the related Agreement (as such term is defined below) which
will be prepared in connection with each Series of Certificates. Unless
otherwise specified, capitalized terms used and not defined in this Summary
of Terms have the meanings given to them in this Prospectus and in the
related Prospectus Supplement. See "Index of Defined Terms" on page 95 of
this Prospectus for the location of the definitions of certain capitalized
terms.
<TABLE>
<CAPTION>
<S> <C>
Title of Certificates . . . . . . . . . . . Asset Backed Certificates (the "Certificates"), which are issuable in Series.
Depositor . . . . . . . . . . . . . . . . . IndyMac ABS, Inc., a Delaware corporation.
Trustee . . . . . . . . . . . . . . . . . . The trustee(s) (the "Trustee") for each Series of Certificates will be specified in
the related Prospectus Supplement. See "The Agreements" herein for a description of
the Trustee's rights and obligations.
Master Servicer . . . . . . . . . . . . . . The entity or entities named as Master Servicer (the "Master Servicer") in the
related Prospectus Supplement, which may be an affiliate of the Depositor. See "The
Agreements -- Certain Matters Regarding the Master Servicer and the Depositor."
Trust Fund Assets . . . . . . . . . . . . . Assets of the Trust Fund for a Series of Certificates will include certain assets
(the "Trust Fund Assets") which will consist primarily of the Contracts, together
with payments in respect of the Contracts, as specified in the related Prospectus
Supplement. At the time of issuance of the Certificates of the Series, the Depositor
will cause the Contracts constituting the related Trust Fund to be assigned to the
Trustee, without recourse. The Contracts will be collected in a pool (each, a "Pool")
as of the first day of the month of the issuance of the related Series of
Certificates or such other date specified in the related Prospectus Supplement (the
"Cut-off Date"). Trust Fund Assets also may include insurance policies, surety bonds,
cash accounts, reinvestment income, guaranties or letters of credit to the extent
described in the related Prospectus Supplement. See "Credit Enhancement." In
addition, if the related Prospectus Supplement so provides, the related Trust Fund
Assets will include the funds on deposit in an account (a "Pre-Funding Account")
which will be used to purchase additional Contracts during the period specified in
such Prospectus Supplement. See "The Agreements -- Pre-Funding Account."
Contracts . . . . . . . . . . . . . . . . . The Contracts will consist of manufactured housing installment sale contracts and
installment loan agreements secured by a security interest in a new or used
manufactured home (each, a "Manufactured Home"), and, to the extent, if any,
indicated in the related Prospectus Supplement, by a mortgage or deed of trust on the
real estate on which the manufactured home is located. The Contracts may be
conventional Contracts or contracts insured by the Federal Housing Administration
("FHA") or partially guaranteed by the Veterans Administration ("VA"). See "-- Credit
Support -- FHA Insurance." The Manufactured Homes may be located in any of the fifty
states or any other jurisdiction specified in the related Prospectus Supplement. Each
Contract may provide for an annual percentage rate thereon (a "Contract Rate") that
is fixed over its term or that adjusts as described in the related Prospectus
Supplement. The manner of determining scheduled payments due on the Contract will be
described in the related Prospectus Supplement. Each Contract may provide for
scheduled payments to maturity, payments that adjust from time to time to accommodate
changes in the Contract Rate or to reflect the occurrence of certain events, and may
provide for negative amortization or accelerated amortization, in each case as
described in the related Prospectus Supplement. Each Contract may provide for
payments of principal, interest or both, on due dates that occur monthly, quarterly,
semiannually or at such other interval as is specified in the related Prospectus
Supplement. The related Prospectus Supplement will describe the minimum principal
balance of the Contracts at origination and the maximum original term to maturity of
the Contracts. All Contracts will have been purchased by the Depositor, either
directly or through an affiliate, from one or more Sellers.
Description of the Certificates . . . . . . Each Certificate will represent a beneficial ownership interest in, or be secured by
the assets of, a Trust Fund created by the Depositor pursuant to an Agreement among
the Depositor, the Master Servicer and the Trustee for the related Series. The
Certificates of any Series may be issued in one or more classes as specified in the
related Prospectus Supplement. A Series of Certificates may include one or more
classes of senior Certificates (collectively, the "Senior Certificates") and one or
more classes of subordinate Certificates (collectively, the "Subordinated
Certificates"). Certain Series or classes of Certificates may be covered by insurance
policies or other forms of credit enhancement, in each case as described under
"Credit Enhancement" herein and in the related Prospectus Supplement.
One or more classes of Certificates of each Series (i) may be entitled to receive
distributions allocable only to principal, only to interest or to any combination
thereof; (ii) may be entitled to receive distributions only of prepayments of
principal throughout the lives of the Certificates or during specified periods; (iii)
may be subordinated in the right to receive distributions of scheduled payments of
principal, prepayments of principal, interest or any combination thereof to one or
more other classes of Certificates of such Series throughout the lives of the
Certificates or during specified periods; (iv) may be entitled to receive such
distributions only after the occurrence of events specified in the related Prospectus
Supplement; (v) may be entitled to receive distributions in accordance with a
schedule or formula or on the basis of collections from designated portions of the
related Trust Fund Assets; (vi) as to Certificates entitled to distributions
allocable to interest, may be entitled to receive interest at a fixed rate or a rate
that is subject to change from time to time; and (vii) as to Certificates entitled to
distributions allocable to interest, may be entitled to distributions allocable to
interest only after the occurrence of events specified in the related Prospectus
Supplement and may accrue interest until such events occur, in each case as specified
in the related Prospectus Supplement. The timing and amounts of such distributions
may vary among classes or over time, as specified in the related Prospectus
Supplement.
Distributions on the Certificates . . . . . Distributions on the Certificates entitled thereto will be made monthly, quarterly,
semi-annually or at such other intervals and on the dates specified in the related
Prospectus Supplement (each, a "Distribution Date") out of the payments received in
respect of the assets of the related Trust Fund or Funds or other assets pledged for
the benefit of the Certificates as described under "Credit Enhancement" herein to the
extent specified in the related Prospectus Supplement. The amount allocable to
payments of principal and interest on any Distribution Date will be determined as
specified in the related Prospectus Supplement. The Prospectus Supplement for a
Series of Certificates will describe the method for allocating distributions among
Certificates of different classes as well as the method for allocating distributions
among Certificates for any particular class.
Unless otherwise specified in the related Prospectus Supplement, the aggregate
original principal balance of the Certificates will not exceed the aggregate
distributions allocable to principal that such Certificates will be entitled to
receive. If specified in the related Prospectus Supplement, the Certificates will
have an aggregate original principal balance equal to the aggregate unpaid principal
balance of the Trust Fund Assets as of the related Cut-off Date and will bear
interest in the aggregate at a rate equal to the Contract Rate net of the aggregate
servicing fees and any other amounts specified in the related Prospectus Supplement
or at such other interest rate as may be specified in such Prospectus Supplement. If
specified in the related Prospectus Supplement, the aggregate original principal
balance of the Certificates and interest rates on the classes of Certificates will be
determined based on the cash flow on the Trust Fund Assets.
The rate at which interest will be passed through or paid to holders of each class of
Certificates entitled thereto may be a fixed rate or a rate that is subject to change
from time to time from the time and for the periods, in each case, as specified in
the related Prospectus Supplement. Any such rate may be calculated on a loan-by-loan,
weighted average or notional amount in each case as described in the related
Prospectus Supplement.
Credit Enhancement . . . . . . . . . . . . The assets in a Trust Fund or the Certificates of one or more classes in the related
Series may have the benefit of one or more types of credit enhancement as described
in the related Prospectus Supplement. The protection against losses afforded by any
such credit support may be limited. The type, characteristics and amount of credit
enhancement will be determined based on the characteristics of the Contracts
comprising the Trust Fund Assets and other factors and will be established on the
basis of requirements of each Rating Agency rating the Certificates of such Series.
See "Credit Enhancement."
A. Subordination . . . . . . . . . . . . A Series of Certificates may consist of one or more classes of Senior Certificates
and one or more classes of Subordinated Certificates. The rights of the holders of
the Subordinated Certificates of a Series to receive distributions with respect to
the assets in the related Trust Fund will be subordinated to such rights of the
holders of the Senior Certificates of the same Series to the extent described in the
related Prospectus Supplement. This subordination is intended to enhance the
likelihood of regular receipt by holders of Senior Certificates of the full amount of
monthly payments of principal and interest due them. The protection afforded to the
holders of Senior Certificates of a Series by means of the subordination feature will
be accomplished by (i) the preferential right of such holders to receive, prior to
any distribution being made in respect of the related Subordinated Certificates, the
amounts of interest and/or principal due them on each Distribution Date out of the
funds available for distribution on such date in the related Collection Account and,
to the extent described in the related Prospectus Supplement, by the right of such
holders to receive future distributions on the assets in the related Trust Fund that
would otherwise have been payable to the holders of Subordinated Certificates; (ii)
reducing the ownership interest (if applicable) of the related Subordinated
Certificates; or (iii) a combination of clauses (i) and (ii) above. If so specified
in the related Prospectus Supplement, subordination may apply only in the event of
certain types of losses not covered by other forms of credit support, such as hazard
losses not covered by standard hazard insurance policies or losses due to the
bankruptcy or fraud of the borrower. The related Prospectus Supplement will set forth
information concerning, among other things, the amount of subordination of a class or
classes of Subordinated Certificates in a Series, the circumstances in which such
subordination will be applicable, and the manner, if any, in which the amount of
subordination will decrease over time.
B. Reserve Account . . . . . . . . . . . One or more reserve accounts or other cash accounts (each, a "Reserve Account") may
be established and maintained for each Series of Certificates. The related Prospectus
Supplement will specify whether or not such Reserve Accounts will be included in the
corpus of the Trust Fund for such Series and will also specify the manner of funding
such Reserve Accounts and the conditions under which the amounts in any such Reserve
Accounts will be used to make distributions to holders of Certificates of a
particular class or released from such Reserve Accounts.
C. Letter of Credit . . . . . . . . . . . If so specified in the related Prospectus Supplement, credit support may be provided
by one or more letters of credit. A letter of credit may provide limited protection
against certain losses in addition to or in lieu of other credit support, such as
losses resulting from delinquent payments on the Contracts in the related Trust Fund,
losses from risks not covered by standard hazard insurance policies, losses due to
bankruptcy of a borrower and application of certain provisions of the Bankruptcy
Code, and losses due to denial of insurance coverage due to misrepresentations made
in connection with the origination or sale of a Contract. The issuer of the letter of
credit (the "L/C Bank") will be obligated to honor demands with respect to such
letter of credit, to the extent of the amount available thereunder, and to provide
funds under the circumstances and subject to such conditions as are specified in the
related Prospectus Supplement. The liability of the L/C Bank under its letter of
credit will be reduced by the amount of unreimbursed payments thereunder.
The maximum liability of a L/C Bank under its letter of credit will be an amount
equal to a percentage specified in the related Prospectus Supplement of the initial
aggregate outstanding principal balance of the Contracts in the related Trust Fund or
one or more classes of Certificates of the related Series (the "L/C Percentage"). The
maximum amount available at any time to be paid under a letter of credit will be
determined in the manner specified therein and in the related Prospectus Supplement.
D. Insurance Policies; Surety Bonds and
Guarantees . . . . . . . . . . . . . .
If so specified in the related Prospectus Supplement, credit support for a Series may
be provided by an insurance policy and/or a surety bond issued by one or more
insurance companies or sureties. Such certificate guarantee insurance or surety bond
will guarantee timely distributions of interest and/or full distributions of
principal on the basis of a schedule of principal distributions set forth in or
determined in the manner specified in the related Prospectus Supplement. If specified
in the related Prospectus Supplement, one or more bankruptcy bonds, special hazard
insurance policies, other insurance or third-party guarantees may be used to provide
coverage for the risks of default or types of losses set forth in such Prospectus
Supplement.
E. Over-Collateralization . . . . . . . . If so provided in the Prospectus Supplement for a Series of Certificates, a portion
of the interest payment on each Contract may be applied as an additional distribution
in respect of principal to reduce the principal balance of a certain class or classes
of Certificates and, thus, accelerate the rate of payment of principal on such class
or classes of Certificates.
F. Contract Pool Insurance Policy . . . . A pool insurance policy or policies may be obtained and maintained for Contracts
relating to any Series of Certificates, which shall be limited in scope, covering
defaults on the related Contracts in an initial amount equal to a specified
percentage of the aggregate principal balance of all Contracts included in the Pool
as of the related Cut-off Date.
G. FHA Insurance . . . . . . . . . . . . If specified in the related Prospectus Supplement, all or a portion of the Contracts
in a Pool may be (i) insured by the Federal Housing Administration (the "FHA") and/or
(ii) partially guaranteed by the Department of Veterans' Affairs (the "VA"). See
"Certain Legal Aspects of the Contracts -- FHA Insurance and VA Guaranties."
H. Cross-Collateralization . . . . . . . If specified in the related Prospectus Supplement, separate classes of a Series of
Certificates may evidence the beneficial ownership of, or be secured by, separate
groups of assets included in a Trust Fund. In such case, credit support may be
provided by a cross- collateralization feature which requires that distributions be
made with respect to Certificates evidencing a beneficial ownership interest in, or
secured by, one or more asset groups prior to distributions to Subordinated
Certificates evidencing a beneficial ownership interest in, or secured by, other
asset groups within the same Trust Fund. See "Credit Enhancement --
Cross-Collateralization."
If specified in the related Prospectus Supplement, the coverage provided by one or
more of the forms of credit enhancement described in this Prospectus may apply
concurrently to two or more separate Trust Funds. If applicable, the related
Prospectus Supplement will identify the Trust Funds to which such credit enhancement
relates and the manner of determining the amount of coverage provided to such Trust
Funds thereby and of the application of such coverage to the identified Trust Funds.
See "Credit Enhancement -- Cross-Collateralization."
Advances . . . . . . . . . . . . . . . . . The Master Servicer and, if applicable, each servicing institution that services a
Contract in a Pool on behalf of the Master Servicer (each, a "Sub-Servicer") may be
obligated to advance amounts (each, an "Advance") corresponding to delinquent
interest and/or principal payments on such Contract until the date, as specified in
the related Prospectus Supplement, following the date on which the related
Manufactured Home is sold after repossession (and, in the case of Land-and-Home
Contracts, after the related underlying real property is sold in foreclosure) or the
related Contract is otherwise liquidated. Any obligation to make Advances may be
subject to limitations as specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, Advances may be drawn from a cash
account available for such purpose as described in such Prospectus Supplement.
Advances will be reimbursable to the extent described under "Description of the
Certificates -- Advances" herein and in the related Prospectus Supplement.
In the event the Master Servicer or Sub-Servicer fails to make a required Advance,
the Trustee may be obligated to advance such amounts otherwise required to be
advanced by the Master Servicer or Sub-Servicer. See "Description of the Certificates
-- Advances."
Optional Termination . . . . . . . . . . . The Master Servicer or the party specified in the related Prospectus Supplement,
including the holder of the residual interest in a REMIC or the holder of an
ownership interest in a FASIT, may have the option to effect early retirement of a
Series of Certificates through the purchase of the Trust Fund Assets. The Master
Servicer will deposit the proceeds of any such purchase in the Collection Account for
each Trust Fund as described under "The Agreements -- Payments on Contracts; Deposit
to Collection Account." Any such purchase of Trust Fund Assets and property acquired
in respect of Trust Fund Assets evidenced by a Series of Certificates will be made at
the option of the Master Servicer, such other person or, if applicable, such holder
of the REMIC residual interest or FASIT ownership interest, at a price specified in
the related Prospectus Supplement. The exercise of such right will effect early
retirement of the Certificates of that Series, but the right of the Master Servicer,
such other person or, if applicable, such holder of the REMIC residual interest or
FASIT ownership interest to so purchase is subject to the principal balance of the
related Trust Fund Assets being less than the percentage specified in the related
Prospectus Supplement of the aggregate principal balance of the Trust Fund Assets as
of the Cut-off Date for the Series. The foregoing is subject to the provision that if
a REMIC election is made with respect to a Trust Fund, any repurchase will be made
only in connection with a "qualified liquidation" of the REMIC within the meaning of
Section 860F(g)(4) of the Code, and if a FASIT election is made with respect to a
Trust Fund, any repurchase will be made only if such repurchase would not be a
prohibited transaction within the meaning of section 860L(e)(2) of the Code.
Legal Investment . . . . . . . . . . . . . The Prospectus Supplement for each series of Certificates will specify which, if any,
of the classes of Certificates offered thereby constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984
("SMMEA"). Classes of Certificates that qualify as "mortgage related securities" will
be legal investments for certain types of institutional investors to the extent
provided in SMMEA, subject, in any case, to any other regulations which may govern
investments by such institutional investors. Institutions whose investment activities
are subject to review by federal or state authorities should consult with their
counsel or the applicable authorities to determine whether an investment in a
particular class of Certificates (whether or not such class constitutes a "mortgage
related security") complies with applicable guidelines, policy statements or
restrictions. See "Legal Investment."
Federal Income Tax Consequences . . . . . . The federal income tax consequences to Certificateholders will vary depending on
whether one or more elections are made to treat the Trust Fund or specified portions
thereof as either a REMIC or a FASIT under the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"). The Prospectus Supplement for each Series of
Certificates will specify whether such an election will be made.
If a REMIC election or a FASIT election is made, Certificates representing regular
interests in a REMIC or FASIT will generally be treated as evidences of indebtedness
for federal tax purposes. Stated interest on such regular interests will be taxable
as ordinary income and taken into account using the accrual method of accounting,
regardless of the holder's normal accounting method. If neither a REMIC election nor
a FASIT election is made, interest (other than original issue discount ("OID")) on
Certificates that are characterized as indebtedness for federal income tax purposes
will be includible in income by holders thereof in accordance with their usual method
of accounting.
Certain classes of Certificates may be issued with OID. A holder should be aware that
the Code and the Treasury regulations promulgated thereunder do not adequately
address certain issues relevant to prepayable securities, such as the Certificates.
Holders that will be required to report income with respect to the related
Certificates under the accrual method of accounting will do so without giving effect
to delays and reductions in distributions attributable to a default or delinquency on
the Contracts, except possibly to the extent that it can be established that such
amounts are uncollectible. As a result, the amount of income (including OID) reported
by a holder of a Certificate in any period could significantly exceed the amount of
cash distributed to such holder in that period.
In the opinion of Brown & Wood LLP, if a REMIC election is made with respect to a
Series of Certificates, then the arrangement by which such Certificates are issued
will be treated as a REMIC as long as all of the provisions of the relevant Agreement
are complied with and the statutory and regulatory requirements are satisfied.
Certificates will be designated as "regular interests" or "residual interests" in a
REMIC. A REMIC generally will not be subject to entity-level tax. Rather, the taxable
income or net loss of a REMIC will be taken into account by the holders of residual
interests. Such holders will report their proportionate share of the taxable income
of the REMIC whether or not they receive cash distributions from the REMIC
attributable to such income. The portion of the REMIC taxable income consisting of
"excess inclusions" generally may not be offset by otherwise allowable deductions or
losses of the holder, including the net operating deductions.
In the opinion of Brown & Wood LLP, if a FASIT election is made with respect to a
Series of Securities, then the arrangement by which such Securities are issued will
be treated as a FASIT as long as all of the provisions of the relevant Agreement are
complied with and the statutory and regulatory requirements are satisfied.
Securities will be designated as regular interests or as the ownership interest. The
FASIT generally will not be subject to an entity-level tax. Rather, the taxable
income or net loss of the FASIT will be taken into account by the holder of the
ownership interest whether or not the holder receives cash distributions from the
</TABLE>
RISK FACTORS
Investors should consider the following factors in connection with the
purchase of the Certificates.
LIMITED LIQUIDITY
No market for the Certificates of any Series will exist prior to the
issuance thereof, and no assurance can be given that a secondary market will
develop or, if it does develop, that it will provide Certificateholders with
liquidity of investment or will continue for the life of the Certificates of
such Series.
LIMITED SOURCE OF PAYMENTS -- NO RECOURSE TO SELLERS, DEPOSITOR OR MASTER
SERVICER
The Depositor does not have, nor is it expected to have, any significant
assets. Unless otherwise specified in the related Prospectus Supplement, the
Certificates of a Series will be payable solely from the Trust Fund for such
Certificates and will not have any claim against or security interest in the
Trust Fund for any other Series. There will be no recourse to the Depositor
or any other person for any failure to receive distributions on the
Certificates. Further, at the times set forth in the related Prospectus
Supplement, certain Trust Fund Assets and/or any balance remaining in the
Collection Account immediately after making all payments due on the
Certificates of such Series, after making adequate provision for future
payments on certain classes of Certificates and after making any other
payments specified in the related Prospectus Supplement, may be promptly
released or remitted to the Depositor, the Master Servicer, any credit
enhancement provider or any other person entitled thereto and will no longer
be available for making payments to Certificateholders. Consequently, holders
of Certificates of each Series must rely solely upon payments with respect to
the Trust Fund Assets and the other assets constituting the Trust Fund for a
Series of Certificates, including, if applicable, any amounts available
pursuant to any credit enhancement for such Series, for the payment of
principal of and interest on the Certificates of such Series.
The Certificates will not represent an interest in or obligation of the
Depositor, the Master Servicer, any Seller or any of their respective
affiliates. The only obligations, if any, of the Depositor with respect to
the Trust Fund Assets or the Certificates of any Series will be pursuant to
certain representations and warranties. The Depositor does not have, and is
not expected in the future to have, any significant assets with which to meet
any obligation to repurchase Contracts with respect to which there has been a
breach of any representation or warranty which materially and adversely
affects the Certificateholders' interest in such Contracts. If, for example,
the Depositor were required to repurchase a Contract, its only sources of
funds to make such repurchase would be from funds obtained (i) from the
enforcement of a corresponding obligation, if any, on the part of the related
Seller or originator of such Contract or (ii) to the extent provided in the
related Prospectus Supplement, from a Reserve Account or similar credit
enhancement established to provide funds for such repurchases.
The only obligations of any Seller with respect to Trust Fund Assets or
the Certificates of any Series will be pursuant to certain representations
and warranties and certain document delivery requirements. A Seller may be
required to repurchase or substitute for any Contract with respect to which
such representations and warranties or certain document delivery requirements
are breached (and in the case of any such breach of representations and
warranties, such breach materially and adversely affects the
Certificateholders' interest in such Contract). There is no assurance,
however, that such Seller will have the financial ability to effect such
repurchase or substitution.
CREDIT ENHANCEMENT
Although credit enhancement is intended to reduce the risk of delinquent
payments or losses to holders of Certificates entitled to the benefit
thereof, the amount of such credit enhancement will be limited, as set forth
in the related Prospectus Supplement, and may be subject to periodic
reduction in accordance with a schedule or formula or otherwise decline, and
could be depleted under certain circumstances prior to the payment in full of
the related Series of Certificates, and as a result Certificateholders of the
related Series may suffer losses. Moreover, such credit enhancement may not
cover all potential losses or risks. For example, credit enhancement may or
may not cover fraud or negligence by a loan originator or other parties. In
addition, the Trustee will generally be permitted to reduce, terminate or
substitute all or a portion of the credit enhancement for any Series of
Certificates, provided the applicable Rating Agency indicates that the
then-current rating of the Certificates of such Series will not be adversely
affected. See "Credit Enhancement."
PREPAYMENT AND YIELD CONSIDERATIONS
The timing of principal payments of the Certificates of a Series will be
affected by a number of factors, including the following: (i) the extent of
prepayments (including for this purpose prepayments resulting from
refinancing or liquidations of the Contracts due to defaults, casualties,
condemnations and repurchases by the Depositor or a Seller) of the Contracts
comprising the Trust Fund, which prepayments may be influenced by a variety
of factors including general economic conditions, prevailing interest rate
levels, the availability of alternative financing and homeowner mobility,
(ii) the manner of allocating principal and/or payments among the classes of
Certificates of a Series as specified in the related Prospectus Supplement,
(iii) the exercise by the party entitled thereto of any right of optional
termination and (iv) the rate and timing of payment defaults and losses
incurred with respect to the Trust Fund Assets. The repurchase of Contracts
by the Depositor or a Seller may result from repurchases of Trust Fund Assets
due to material breaches of the Depositor's or such Seller's representations
and warranties, as applicable. The yields to maturity and weighted average
lives of the Certificates will be affected primarily by the rate and timing
of prepayment of the Contracts comprising the Trust Fund Assets. In addition,
the yields to maturity and weighted average lives of the Certificates will be
affected by the distribution of amounts remaining in any Pre-Funding Account
following the end of the related Funding Period. Any reinvestment risks
resulting from a faster or slower incidence of prepayment of Contracts held
by a Trust Fund will be borne entirely by the holders of one or more classes
of the related Series of Certificates. See "Yield and Prepayment
Considerations" and "The Agreements -- Pre-Funding Account."
Interest payable on the Certificates of a Series on a Distribution Date
will include all interest accrued during the period specified in the related
Prospectus Supplement. In the event interest accrues over a period ending two
or more days prior to a Distribution Date, the effective yield to
Certificateholders will be reduced from the yield that would otherwise be
obtainable if interest payable on the Certificates were to accrue through the
day immediately preceding each Distribution Date, and the effective yield (at
par) to Certificateholders will be less than the indicated coupon rate. See
"Description of the Certificates -- Distributions on Certificates --
Distributions of Interest."
DEPRECIATION IN VALUE OF MANUFACTURED HOMES
An investment in Certificates may be affected by, among other things, a
downturn in national, regional or local economic conditions. Regional and
local economic conditions are often volatile and, historically, regional and
local economic conditions, as well as national economic conditions, have
affected the delinquency, loan loss and repossession experience of
manufactured housing installment sales contracts and/or installment loan
contracts (hereinafter generally referred to as "contracts" or "manufactured
housing contracts"). Moreover, regardless of its location, manufactured
housing generally depreciates in value. Thus, Certificateholders should
expect that, as a general matter, the market value of any Manufactured Home
will be lower than the outstanding principal balance of the related Contract.
Sufficiently high delinquencies and liquidation losses on the Contracts in a
Contract Pool will have the effect of reducing, and could eliminate, the
protection against loss afforded by any credit enhancement supporting any
class of the related Certificates. If such protection is eliminated with
respect to a class of Certificates, the holders of such Certificates will
bear all risk of loss on the related Contracts and will have to rely on the
value of the related Manufactured Homes (and, in the case of Land-and-Home
Contracts, the related underlying real properties) for recovery of the
outstanding principal of and unpaid interest on any defaulted Contracts in
the related Contract Pool.
SECURITY INTEREST IN UNDERLYING ASSETS MAY NOT BE EFFECTIVE
The Seller in respect of a Contract will represent that such Contract is
secured by a security interest in a Manufactured Home. Perfection of
security interests in the Manufactured Homes and enforcement of rights to
realize upon the value of the Manufactured Homes as collateral for the
Contracts are subject to a number of Federal and state laws, including the
Uniform Commercial Code as adopted in each state and each state's certificate
of title statutes. The steps necessary to perfect the security interest in a
Manufactured Home will vary from state to state. Because of the expense and
administrative inconvenience involved, the Master Servicer will not amend any
certificates of title to change the lienholder specified therein from the
Seller to the Trustee and will not deliver any certificate of title to the
Trustee or note thereon the Trustee's interest. Consequently, in some states,
in the absence of such an amendment, the assignment to the Trustee of the
security interest in the Manufactured Home may not be effective or such
security interest may not be perfected and, in the absence of such notation
or delivery to the Trustee, the assignment of the security interest in the
Manufactured Home may not be effective against creditors of the Seller or a
trustee in bankruptcy of the Seller. In the case of Land-and-Home Contracts,
the Prospectus Supplement for the related Series will state whether
assignments to the Trustee of the mortgage or deed of trust related to the
underlying real property securing such Contracts will be recorded. In some
states in the absence of such recordation the assignment to the Trustee of
such mortgage or deed of trust may not be effective, and in the absence of
such recordation may not be effective against creditors of or purchasers from
the Seller or a trustee in bankruptcy of the Seller.
EFFECT OF VIOLATING CONSUMER PROTECTION LAWS
Delays Due to Liquidation. Even assuming that the Manufactured Homes
provide adequate security for the Contracts, substantial delays could be
encountered in connection with the liquidation of defaulted Contracts and
corresponding delays in the receipt of related proceeds by Certificateholders
could occur. An action to repossess a Manufactured Home securing a Contract
is regulated by state statutes and rules and is subject to many of the delays
and expenses of other lawsuits if defenses or counterclaims are interposed,
sometimes requiring several years to complete. In the event of a default by a
borrower, these restrictions, among other things, may impede the ability of
the Master Servicer to repossess or sell the Manufactured Home or to obtain
liquidation proceeds sufficient to repay all amounts due on the related
Contract. In addition, the Master Servicer will be entitled to deduct from
related liquidation proceeds all expenses reasonably incurred in attempting
to recover amounts due on defaulted Contracts and not yet repaid, including
payments to senior lienholders, legal fees and costs of legal action, taxes
and maintenance and preservation expenses.
Consumer Protection Laws. Applicable state laws generally regulate
interest rates and other charges, require certain disclosures, and require
licensing of certain originators and servicers of Contracts, including the
Truth in Lending Act, the Federal Trade Commission Act, the Fair Credit
Billing Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act,
the Fair Debt Collection Practices Act and the Uniform Consumer Credit Code.
In addition, most states have other laws, public policy and general
principles of equity relating to the protection of consumers, unfair and
deceptive acts and practices which may apply to the origination, servicing
and collection of the Contracts. Depending on the provisions of the
applicable law and the specific facts and circumstances involved, violations
of these laws, policies and principles may limit the ability of the Master
Servicer to collect all or part of the principal of or interest on the
Contracts, may entitle the borrower to a refund of amounts previously paid
and, in addition, could subject the Master Servicer to damages and
administrative sanctions. Losses on such Contracts that are not otherwise
covered by the credit enhancement described in the applicable Prospectus
Supplement will be borne by the holders of one or more classes of
Certificates of the related Series. See "Certain Legal Aspects of the
Contracts."
Holder in Due Course Rules. The so--called "Holder--in--Due--Course"
rule of the Federal Trade Commission is intended to defeat the ability of the
transferor of a consumer credit contract which is the seller of goods which
gave rise to the transaction (and certain related lenders and assignees) to
transfer such contract free of notice of claims by the debtor thereunder.
The effect of this rule is to subject the assignee of such a Contract (such
as the Trust Fund) to all claims and defenses which the obligor under the
Contract could assert against the seller of the Manufactured Home. Liability
under this rule is limited to amounts paid under the Contract; however, the
obligor under the Contract also may be able to assert the rule to set off
remaining amounts due as a defense against a claim brought by the Trust Fund
against such obligor. See "Certain Legal Aspects of the Contracts."
RATING OF THE CERTIFICATES
It will be a condition to the issuance of a class of Certificates
offered hereby that they be rated in one of the four highest rating
categories by the Rating Agency identified in the related Prospectus
Supplement. Any such rating would be based on, among other things, the
adequacy of the value of the related Trust Fund Assets and any credit
enhancement with respect to such class and will represent such Rating
Agency's assessment solely of the likelihood that holders of such class of
Certificates will receive payments to which such Certificateholders are
entitled under the related Agreement. Such rating will not constitute an
assessment of the likelihood that principal prepayments on the related
Contracts will be made, the degree to which the rate of such prepayments
might differ from that originally anticipated or the likelihood of early
optional termination of the Series of Certificates. Such rating shall not be
deemed a recommendation to purchase, hold or sell Certificates, inasmuch as
it does not address market price or suitability for a particular investor.
Such rating will not address the possibility that prepayment at higher or
lower rates than anticipated by an investor may cause such investor to
experience a lower than anticipated yield or that an investor purchasing a
Certificate at a significant premium might fail to recoup its initial
investment under certain prepayment scenarios.
There is also no assurance that any such rating will remain in effect
for any given period of time or that it may not be lowered or withdrawn
entirely by the Rating Agency in the future if in its judgment circumstances
in the future so warrant. In addition to being lowered or withdrawn due to
any erosion in the adequacy of the value of the Trust Fund Assets or any
credit enhancement with respect to a Series of Certificates, such rating
might also be lowered or withdrawn because of, among other reasons, an
adverse change in the financial or other condition of a credit enhancement
provider or a change in the rating of such credit enhancement provider's long
term debt.
The amount, type and nature of credit enhancement, if any, established
with respect to a class of Certificates will be determined on the basis of
criteria established by each Rating Agency rating classes of such Series.
Such criteria are sometimes based upon an actuarial analysis of the behavior
of similar loans in a larger group. Such analysis is often the basis upon
which each Rating Agency determines the amount of credit enhancement required
with respect to each such class. There can be no assurance that the
historical data supporting any such actuarial analysis will accurately
reflect future experience nor any assurance that the data derived from a
large pool of similar loans accurately predicts the delinquency, repossession
or loss experience of any particular pool of Contracts. No assurance can be
given that the values of any Manufactured Homes have remained or will remain
at their levels on the respective dates of origination of the related
Contracts.
BOOK-ENTRY REGISTRATION
If issued in book-entry form, such registration may reduce the liquidity
of the Certificates in the secondary trading market since investors may be
unwilling to purchase Certificates for which they cannot obtain physical
certificates. Since transactions in book-entry Certificates can be effected
only through the Depository Trust Company ("DTC"), participating
organizations, Financial Intermediaries and certain banks, the ability of a
Certificateholder to pledge a book-entry Certificate to persons or entities
that do not participate in the DTC system may be limited due to lack of a
physical certificate representing such Certificates. Certificates Owners will
not be recognized as Certificateholders as such term is used in the related
Agreement, and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and its Participants.
In addition, Certificateholders may experience some delay in their
receipt of distributions of interest and principal on book-entry Certificates
since distributions are required to be forwarded by the Trustee to DTC and
DTC will then be required to credit such distributions to the accounts of
Depository participants which thereafter will be required to credit them to
the accounts of Certificateholders either directly or indirectly through
Financial Intermediaries. See "Description of the Certificates -- Book-Entry
Registration of Certificates."
PRE-FUNDING ACCOUNTS
If so provided in the related Prospectus Supplement, on the closing date
specified in such Prospectus Supplement (the "Closing Date") the Depositor
will deposit cash in an amount (the "Pre-Funded Amount") specified in such
Prospectus Supplement into an account (the "Pre-Funding Account"). In no
event shall the Pre-Funded Amount exceed 50% of the initial aggregate
principal amount of the Certificates of the related Series. The Pre-Funded
Amount will be used to purchase Contracts ("Subsequent Contracts") in a
period from the related Closing Date to a date not more than one year after
such Closing Date (such period, the "Funding Period") from the Depositor
(which, in turn, will acquire such Subsequent Contracts from the Seller or
Sellers specified in the related Prospectus Supplement). The Pre-Funding
Account will be maintained with the Trustee for the related Series of
Certificates and is designed solely to hold funds to be applied by such
Trustee during the Funding Period to pay to the Depositor the purchase price
for Subsequent Contracts. Monies on deposit in the Pre-Funding Account will
not be available to cover losses on or in respect of the related Contracts.
To the extent that the entire Pre-Funded Amount has not been applied to the
purchase of Subsequent Contracts by the end of the related Funding Period,
any amounts remaining in the Pre-Funding Account will be distributed as a
prepayment of principal to Certificateholders on the Distribution Date
immediately following the end of the Funding Period, in the amounts and
pursuant to the priorities set forth in the related Prospectus Supplement.
Any reinvestment risk resulting from such prepayment will be borne entirely
by the holders of one or more classes of the related Series of Certificates.
BANKRUPTCY AND INSOLVENCY RISKS
The Seller and the Depositor will treat the transfer of the Contracts by
the Seller to the Depositor as a sale for accounting purposes. The Depositor
and the Trust Fund will treat the transfer of Contracts from the Depositor to
the Trust Fund as a sale for accounting purposes. As a sale of the Contracts
by the Seller to the Depositor, the Contracts would not be part of the
Seller's bankruptcy estate and would not be available to the Seller's
creditors. However, in the event of the insolvency of the Seller, it is
possible that the bankruptcy trustee or a creditor of the Seller may attempt
to recharacterize the sale of the Contracts as a borrowing by the Seller,
secured by a pledge of the Contracts. Similarly, as a sale of the Contracts
by the Depositor to the Trust Fund, the Contracts would not be part of the
Depositor's bankruptcy estate and would not be available to the Depositor's
creditors. However, in the event of the insolvency of the Depositor, it is
possible that the bankruptcy trustee or a creditor of the Depositor may
attempt to recharacterize the sale of the Contracts as a borrowing by the
Depositor, secured by a pledge of the Contracts. In either case, this
position, if argued before or accepted by a court, could prevent timely
payments of amounts due on the Certificates and result in a reduction of
payments due on the Certificates.
In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee or
the Certificateholders from appointing a successor Master Servicer. The time
period, if any, during which cash collections may be commingled with the
Master Servicer's own funds prior to each Distribution Date will be specified
in the related Prospectus Supplement. In the event of the insolvency of the
Master Servicer and if such cash collections are commingled with the Master
Servicer's own funds for at least ten days, the Trust Fund will likely not
have a perfected interest in such collections since such collections would
not have been deposited in a segregated account within ten days after the
collection thereof, and the inclusion thereof in the bankruptcy estate of
the Master Servicer may result in delays in payment and failure to pay
amounts due on the Certificates of the related Series.
In addition, federal and state statutory provisions, including the
federal bankruptcy laws and state laws affording relief to debtors, may
interfere with or affect the ability of the secured manufactured housing
lender to realize upon its security. For example, in a proceeding under Title
11 of the United States Code Section 101 et seq. and the rules related
thereto, as amended (the "Bankruptcy Code"), a lender may not repossess a
manufactured home (or foreclose on the underlying real property) without the
permission of the bankruptcy court. The rehabilitation plan proposed by the
debtor may provide, if the manufactured home is not the debtor's principal
residence and the court determines that the value of the manufactured home is
less than the principal balance of the related manufactured housing loan, for
the reduction of the secured indebtedness to the value of the manufactured
home as of the date of the commencement of the bankruptcy, rendering the
lender a general unsecured creditor for the difference, and also may reduce
the monthly payments due under such manufactured housing loan, change the
rate of interest and alter the manufactured housing loan repayment schedule.
The effect of any such proceedings under the Bankruptcy Code, including but
not limited to any automatic stay, could result in delays in receiving
payments on the Contracts underlying a Series of Certificates and possible
reductions in the aggregate amount of such payments.
VALUE OF TRUST FUND ASSETS
There is no assurance that the market value of the Trust Fund Assets or
any other assets relating to a Series of Certificates described under "Credit
Enhancement" herein will at any time be equal to or greater than the
principal amount of the Certificates of such Series then outstanding, plus
accrued interest thereon. Moreover, upon an event of default under the
Agreement for a Series of Certificates and a sale of the related Trust Fund
Assets or upon a sale of the assets of a Trust Fund for a Series of
Certificates, the Trustee, the Master Servicer, the credit enhancer, if any,
and any other service provider specified in the related Prospectus Supplement
generally will be entitled to receive the proceeds of any such sale to the
extent of unpaid fees and other amounts owing to such persons under the
related Agreement prior to distributions to Certificateholders. Upon any such
sale, the proceeds thereof may be insufficient to pay in full the principal
of and interest on the Certificates of such Series.
THE TRUST FUND
GENERAL
The Certificates of each Series will represent interests in the assets
of the related Trust Fund. The Trust Fund for each Series will be held by the
Trustee for the benefit of the related Certificateholders. Each Trust Fund
will consist of certain assets (the "Trust Fund Assets") consisting of a pool
(each, a "Pool") comprised of Contracts as specified in the related
Prospectus Supplement, together with payments in respect of such Contracts,
as specified in the related Prospectus Supplement. The Pool will be created
on the first day of the month of the issuance of the related Series of
Certificates or such other date specified in the related Prospectus
Supplement (the "Cut-off Date"). The Certificates will be entitled to payment
from the assets of the related Trust Fund or Funds or other assets pledged
for the benefit of the Certificateholders, as specified in the related
Prospectus Supplement and will not be entitled to payments in respect of the
assets of any other trust fund established by the Depositor.
The Trust Fund Assets will be acquired by the Depositor, either directly
or through affiliates, from originators or sellers which may be affiliates of
the Depositor (the "Sellers"), and conveyed without recourse by the Depositor
to the related Trust Fund. Contracts acquired by the Depositor will have been
originated in accordance with the underwriting criteria specified below under
"The Manufactured Housing Program -- Underwriting Standards" or as otherwise
described in the related Prospectus Supplement. See "The Manufactured Housing
Program -- Underwriting Standards."
The Depositor will cause the Trust Fund Assets to be assigned to the
Trustee named in the related Prospectus Supplement for the benefit of the
holders of the Certificates of the related Series. The Master Servicer named
in the related Prospectus Supplement will service the Trust Fund Assets,
either directly or through other servicing institutions ("Sub-Servicers"),
pursuant to a pooling and servicing agreement (each, an "Agreement") among
the Depositor, the Master Servicer and the Trustee, and will receive a fee
for such services. See "The Manufactured Housing Program" and "The
Agreements." With respect to Contracts serviced by the Master Servicer
through a Sub-Servicer, the Master Servicer will remain liable for its
servicing obligations under the related Agreement as if the Master Servicer
alone were servicing such Contracts.
With respect to each Trust Fund, prior to the initial offering of the
related Series of Certificates, the Trust Fund will have no assets or
liabilities. No Trust Fund is expected to engage in any activities other than
acquiring, managing and holding of the related Trust Fund Assets and other
assets contemplated herein specified and in the related Prospectus Supplement
and the proceeds thereof, issuing Certificates and making payments and
distributions thereon and certain related activities. No Trust Fund is
expected to have any source of capital other than its assets and any related
credit enhancement.
Unless otherwise specified in the related Prospectus Supplement, the
only obligations of the Depositor with respect to a Series of Certificates
will be to obtain certain representations and warranties from the Sellers
and, to the extent such representations and warranties are not made by the
Sellers directly to the Trustee, to assign to the Trustee for such Series of
Certificates the Depositor's rights with respect to such representations and
warranties. See "The Agreements -- Assignment of the Trust Fund Assets." The
obligations of the Master Servicer with respect to the Contracts will consist
principally of its contractual servicing obligations under the related
Agreement (including its obligation to enforce the obligations of the
Sub-Servicers or Sellers, or both, as more fully described herein under "The
Manufactured Housing Program -- Representations by Sellers; Repurchases" and
"The Agreements -- Sub-Servicing By Sellers" and " -- Assignment of the Trust
Fund Assets") and its obligation, if any, to make certain cash advances in
the event of delinquencies in payments in respect of interest and/or
principal on or with respect to the Contracts in the amounts described herein
under "Description of the Certificates -- Advances." The obligations of the
Master Servicer to make advances may be subject to limitations, to the extent
provided herein and in the related Prospectus Supplement.
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* Whenever the terms "Pool" and "Certificates" are used in this
Prospectus, such terms will be deemed to apply, unless the context indicates
otherwise, to one specific Pool and the Securities of one Series including
the Certificates representing certain undivided interests in a single Trust
Fund consisting primarily of the Contracts in such Pool. Similarly, the term
"pass-through rate" will refer to the pass-through rate borne by the
Certificates and the term "Trust Fund" will refer to one specific Trust Fund.
The following is a brief description of the assets expected to be
included in the Trust Funds. If specific information respecting the Trust
Fund Assets is not known at the time the related Series of Certificates
initially is offered, more general information of the nature described below
will be provided in the related Prospectus Supplement, and specific
information will be set forth in a report on Form 8-K to be filed with the
Securities and Exchange Commission within fifteen days after the initial
issuance of such Certificates (the "Detailed Description"). A copy of the
Agreement with respect to each Series of Certificates will be attached to the
Form 8-K and will be available for inspection at the Corporate Trust Office
of the Trustee specified in the related Prospectus Supplement. A schedule of
the Contracts relating to such Series will be attached to the Agreement
delivered to the Trustee upon delivery of the Certificates.
THE CONTRACTS
The Contracts will consist of manufactured housing installment sale
contracts and installment loan agreements secured by a security interest in a
new or used manufactured home (each, a "Manufactured Home"), and, to the
extent, if any, indicated in the related Prospectus Supplement, by a mortgage
or deed of trust on the real estate on which the manufactured home is
located. The Contracts may be conventional Contracts or contracts insured by
the Federal Housing Administration ("FHA") or partially guaranteed by the
Veterans Administration ("VA"). All Contracts will have been purchased by the
Depositor, either directly or through an affiliate, from one or more Sellers.
Unless otherwise specified in the related Prospectus Supplement, the
related Seller will represent the Manufactured Homes securing the Contracts
consist of manufactured homes within the meaning of 42 United States Code,
Section 5402(6), which defines a "manufactured home" as "a structure,
transportable in one or more sections, which in the traveling mode, is eight
body feet or more in width or forty body feet or more in length, or, when
erected on site, is three hundred twenty or more square feet, and which is
built on a permanent chassis designed to be used as a dwelling with or
without a permanent foundation when connected to the required utilities, and
includes the plumbing, heating, air-conditioning, and electrical systems
contained therein; except that such term shall include any structure which
meets all the requirements of this paragraph except the size requirements and
with respect to which the manufacturer voluntarily files a certification
required by the Secretary (of Housing and Urban Development) and complies
with the standards established under this chapter."
The payment terms of the Contracts to be included in a Trust Fund will
be described in the related Prospectus Supplement and may include any of the
following features (or combination thereof), all as described below or in the
related Prospectus Supplement:
(a) Interest may be payable at a fixed rate, a rate adjustable
from time to time in relation to an index (which will be specified in
the related Prospectus Supplement), a rate that is fixed for a period of
time or under certain circumstances and is followed by an adjustable
rate, a rate that otherwise varies from time to time, a rate that is
"stepped-up" or a rate that is convertible from an adjustable rate to a
fixed rate. Changes to an adjustable rate may be subject to periodic
limitations, maximum rates, minimum rates or a combination of such
limitations. Accrued interest may be deferred and added to the principal
of a Contract for such periods and under such circumstances as may be
specified in the related Prospectus Supplement. Contracts may provide
for the payment of interest at a rate lower than the Contract Rate for a
period of time or for the life of the Contract, and the amount of any
difference may be contributed from funds supplied by the seller of the
Manufactured Home or another source.
(b) Principal may be payable on a level debt service basis to
fully amortize the Contract over its term, may be calculated on the
basis of an assumed amortization schedule that is significantly longer
than the original term to maturity or on an interest rate that is
different from the Contract Rate or may not be amortized during all or a
portion of the original term. Payment of all or a substantial portion of
the principal may be due on maturity ("balloon payment"). Principal may
include interest that has been deferred and added to the principal
balance of the Contract.
(c) Monthly payments of principal and interest may be fixed for
the life of the Contract, may increase over a specified period of time
or may change from period to period. Contracts may include limits on
periodic increases or decreases in the amount of monthly payments and
may include maximum or minimum amounts of monthly payments. A Contract
may provide for scheduled payments to maturity or payments that adjust
from time to time to accommodate changes in the Contract Rate or to
reflect the occurrence of certain events or that adjust on the basis of
other methodologies, and may provide for negative amortization or
accelerated amortization, in each case as described in the related
Prospectus Supplement.
(d) Prepayments of principal may be subject to a prepayment fee,
which may be fixed for the life of the Contract or may decline over
time, and may be prohibited for the life of the Contract or for certain
periods ("lockout periods"). Certain Contracts may permit prepayments
after expiration of the applicable lockout period and may require the
payment of a prepayment fee in connection with any such subsequent
prepayment. Other Contracts may permit prepayments without payment
of a fee unless the prepayment occurs during specified time
periods. The Contracts may include "due on sale" clauses which
permit the lender to demand payment of the entire Contract in
connection with the sale or certain transfers of the related
Manufactured Home (and, in the case of a Land-and-Home Contract, the
related underlying real property). Other Contracts may be assumable by
persons meeting the then applicable underwriting standards of the related
Seller.
A Trust Fund may contain certain Land-and-Home Contracts that are
"staged-funding" Contracts, under which the related Seller makes multiple
disbursements to enable the obligor to finance both the purchase of a
Manufactured Home and the acquisition or improvement of the related
underlying real property. For example, such Seller might make disbursements
to enable the obligor to purchase the underlying real property, then to make
improvements on the underlying real property (such as a driveway, well and
septic system), then to purchase and deliver the Manufactured Home, and then
to make final site improvements. Prior to the final disbursement, the
obligor pays only interest on the disbursed amount of the loan; following the
final disbursement, the obligor begins making fully amortizing payments of
principal and interest. Such Seller will represent and warrant in the
related Agreement that all staged-funding Land-and-Home Contracts included in
a Contract Pool will have been fully disbursed within 90 days after the
related Closing Date, and such Seller will be obligated to repurchase at the
related Purchase Price on the next Distribution Date any staged-funding Land-
and-Home Contract that has not been fully disbursed by such date.
Additional Information. Each Prospectus Supplement will contain
information, as of the date of such Prospectus Supplement and to the extent
then specifically known to the Depositor, with respect to the Contracts
contained in the related Pool, including (i) the aggregate outstanding
principal balance and the average outstanding principal balance of the
Contracts as of the applicable Cut-off Date, (ii) the largest principal
balance and the smallest principal balance of any of the Contracts as of the
applicable Cut-off Date, (iii) whether the Manufactured Homes were new or
used at the time of origination of the related Contracts, (iv) the state or
states in which the Manufactured Homes are located at origination of the
related Contracts, (v) information with respect to the prepayment provisions,
if any, of the Contracts, (vi) the original and remaining terms to maturity
of the Contracts, (vii) the earliest origination date and latest maturity
date of any of the Contracts, (viii) the Loan-to-Value Ratios, as applicable,
of the Contracts, (ix) the Contract Rates or annual percentage rates ("APR")
or range of Contract Rates or APR's borne by the Contracts, (x) the maximum
and minimum per annum Contract Rates and (xi) with respect to Contracts with
adjustable Contract Rates ("ARM Contracts"), the index, the frequency of the
adjustment dates, and the maximum Contract Rate or monthly payment variation
at the time of any adjustment thereof and over the life of the ARM Contract,
(xii) the method of allocation of payments on the Contracts (i.e., the simple
interest method, the actuarial method or such other method specified in such
Prospectus Supplement) and (xiii) other information regarding the payment
characteristics of the Contracts. If specific information respecting the
Contracts is not known to the Depositor at the time the related Certificates
are initially offered, more general information of the nature described above
will be provided in the related Prospectus Supplement, and specific
information will be set forth in the Detailed Description.
Unless otherwise specified in the related Prospectus Supplement, the
"Loan-to-Value Ratio" of a Contract at any given time is the fraction,
expressed as a percentage, the numerator of which is the original principal
balance of the related Contract and the denominator of which is the Value in
respect of the Contract. Unless otherwise provided in the related Prospectus
Supplement, the "Value" in respect of any Contract is calculated by
determining the sum of (a) either (i) the sum of the down payment (which
includes the value of any trade-in unit), the original amount financed on the
related Contract (which may include sales and other taxes) and insurance and
prepaid finance charges or (ii) the appraiasal value of the home and (b) in
the case of any Land-and-Home Contract, the appraised value of the land
securing such Contract (as appraised by an independent appraiser).
SUBSTITUTION OF TRUST FUND ASSETS
Substitution of Trust Fund Assets will be permitted in the event of
certain breaches of representations and warranties with respect to any
original Trust Fund Asset or in the event certain documentation with respect
to any Trust Fund Asset is determined by the Trustee to be incomplete. See
"The Manufactured Housing Program -- Representations by Sellers;
Repurchases." The period during which such substitution will be permitted
generally will be indicated in the related Prospectus Supplement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will
be applied by the Depositor to the purchase of Trust Fund Assets or will be
used by the Depositor for general corporate purposes. The Depositor expects
to sell Certificates in Series from time to time, but the timing and amount
of offerings of Certificates will depend on a number of factors, including
the volume of Trust Fund Assets acquired by the Depositor, prevailing
interest rates, availability of funds and general market conditions.
THE DEPOSITOR
IndyMac ABS, Inc., a Delaware corporation (the "Depositor"), was
incorporated in April 1998 for the limited purpose of acquiring, owning and
transferring mortgage and mortgage related assets and selling interests
therein or bonds secured thereby. The Depositor is a limited purpose finance
subsidiary of IndyMac, Inc., a Delaware corporation. The Depositor maintains
its principal office at 155 North Lake Avenue, Pasadena, California 91101.
Its telephone number is (800) 669-2300.
Neither the Depositor nor any of the Depositor's affiliates will insure
or guarantee distributions on the Certificates of any Series.
THE MANUFACTURED HOUSING PROGRAM
UNDERWRITING STANDARDS
The Contracts will have been purchased by the Depositor, either directly
or through affiliates, from one or more Sellers as described in the related
Prospectus Supplement. The Contracts so acquired by the Depositor will have
been originated in accordance with the underwriting criteria for the
applicable Seller or Sellers as described in the related Prospectus
Supplement.
QUALIFICATIONS OF SELLERS
Each Seller will be required to be an institution experienced in
originating and servicing manufactured housing contracts of the type
contained in the related Pool in accordance with accepted practices and
prudent guidelines, and must maintain satisfactory facilities to originate
and service those loans. Other qualifications of each Seller will be
described in the related Prospectus Supplement.
REPRESENTATIONS BY SELLERS; REPURCHASES
Each Seller will have made representations and warranties in respect of
the Contracts sold by such Seller and evidenced by all, or a part, of a
Series of Certificates. Such representations and warranties may include,
among other things: (i) that the Seller had good title to each such Contract
and such Contract was subject to no offsets, defenses, counterclaims or
rights of rescission except to the extent that any buydown agreement may
forgive certain indebtedness of a borrower; (ii) that each Contract
constituted a valid lien on, or a perfected security interest with respect
to, the Manufactured Home (and, in the case of each Land-and-Home Contract,
the underlying real property) (subject only to permissible liens disclosed,
if applicable, and certain other exceptions described in the Agreement);
(iii) that no required payment on a Contract was delinquent more than the
number of days specified in the related Prospectus Supplement; (iv) that each
Contract is covered by hazard insurance; and (v) that each Contract was made
in compliance with, and is enforceable under, all applicable local, state and
federal laws and regulations in all material respects.
If so specified in the related Prospectus Supplement, the
representations and warranties of a Seller in respect of a Contract will be
made not as of the Cut-off Date but as of the date on which such Seller sold
the Contract to the Depositor or one of its affiliates. Under such
circumstances, a substantial period of time may have elapsed between the sale
date and the date of initial issuance of the Series of Certificates
evidencing an interest in such Contract. Since the representations and
warranties of a Seller do not address events that may occur following the
sale of a Contract by such Seller, its repurchase obligation described below
will not arise if the relevant event that would otherwise have given rise to
such an obligation with respect to a Contract occurs after the date of sale
of such Contract by such Seller to the Depositor or its affiliates. However,
the Depositor will not include any Contract in the Trust Fund for any Series
of Certificates if anything has come to the Depositor's attention that would
cause it to believe that the representations and warranties of a Seller will
not be accurate and complete in all material respects in respect of such
Contract as of the date of initial issuance of the related Series of
Certificates. If the Master Servicer is also a Seller of Contracts with
respect to a particular Series of Certificates, such representations will be
in addition to the representations and warranties made by the Master Servicer
in its capacity as a Master Servicer.
The Master Servicer or the Trustee, if the Master Servicer is the
Seller, will promptly notify the relevant Seller of any breach of any
representation or warranty made by it in respect of a Contract which
materially and adversely affects the Certificateholders' interest in such
Contract. Unless otherwise specified in the related Prospectus Supplement, if
such Seller cannot cure any such breach on or prior to the business day after
the first Determination Date which is more than 90 days after such Seller's
receipt of notice from the Master Servicer or the Trustee, as the case may
be, then such Seller will be obligated either (i) to repurchase such Contract
from the Trust Fund at a price (the "Purchase Price") equal to 100% of the
unpaid principal balance thereof as of the date of the repurchase plus
accrued interest thereon to the scheduled monthly payment date for such
Contract in the month following the month of repurchase at the Contract Rate
(less any Advances or amount payable as related servicing compensation if
such Seller is the Master Servicer) or (ii) substitute for such Contract a
replacement loan that satisfies the criteria specified in the related
Prospectus Supplement. If a REMIC election is to be made with respect to a
Trust Fund, unless otherwise specified in the related Prospectus Supplement,
the Master Servicer or a holder of the related residual certificate generally
will be obligated to pay any prohibited transaction tax which may arise in
connection with any such repurchase or substitution and the Trustee must have
received a satisfactory opinion of counsel that such repurchase or
substitution will not cause the Trust Fund to lose its status as a REMIC or
otherwise subject the Trust Fund to a prohibited transaction tax. The Master
Servicer may be entitled to reimbursement for any such payment from the
assets of the related Trust Fund or from any holder of the related residual
certificate. See "Description of the Certificates -- General." Except in
those cases in which the Master Servicer is the Seller, the Master Servicer
will be required under the relevant Agreement to enforce this obligation for
the benefit of the Trustee and the holders of the Certificates, following the
practices it would employ in its good faith business judgment were it the
owner of such Contract. This repurchase or substitution obligation will
constitute the sole remedy available to holders of Certificates or the
Trustee for a breach of representation by a Seller.
Neither the Depositor nor the Master Servicer (unless the Master
Servicer is a Seller) will be obligated to purchase or substitute a Contract
if a Seller defaults on its obligation to do so, and no assurance can be
given that Sellers will carry out their respective repurchase or substitution
obligations with respect to Contracts.
DESCRIPTION OF THE CERTIFICATES
Each Series of Certificates will be issued pursuant to separate pooling
and servicing agreements (each, an "Agreement") among the Depositor, the
Master Servicer and the Trustee. A form of Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Each Agreement, dated as of the related Cut-off Date, will be among the
Depositor, the Master Servicer and the Trustee for the benefit of the holders
of the Certificates of such Series. The provisions of each Agreement will
vary depending upon the nature of the Certificates to be issued thereunder
and the nature of the related Trust Fund. The following are descriptions of
the material provisions which may appear in each Agreement. The descriptions
are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Agreement for each Series of Certificates and the
applicable Prospectus Supplement. The Depositor will provide a copy of the
Agreement (without exhibits) relating to any Series without charge upon
written request of a holder of record of a Certificate of such Series
addressed to IndyMac ABS, Inc., 155 North Lake Avenue, Pasadena, California
91101, Attention: Secondary Marketing, telephone (800) 669-2300.
GENERAL
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued in book-entry or fully registered
form, in the authorized denominations specified in the related Prospectus
Supplement, will evidence specified beneficial ownership interests in the
assets of the related Trust Fund created pursuant to each Agreement and will
not be entitled to payments in respect of the assets included in any other
Trust Fund established by the Depositor. Unless otherwise specified in the
related Prospectus Supplement, the Certificates will not represent
obligations of the Depositor or any affiliate of the Depositor. Certain of
the Contracts may be guaranteed or insured as set forth in the related
Prospectus Supplement. Each Trust Fund will consist of, to the extent
provided in the related Agreement, (i) the Trust Fund Assets, as from time to
time are subject to the related Agreement (exclusive of any amounts specified
in the related Prospectus Supplement ("Retained Interest")), including all
payments of interest and principal received with respect to the Contracts
after the Cut-off Date (to the extent not applied in computing the principal
balance of such Contracts as of the Cut-off Date (the "Cut-off Date Principal
Balance")); (ii) such assets as from time to time are required to be
deposited in the related Collection Account, as described below under "The
Agreements -- Payments on Contracts; Deposits to Collection Account"; (iii)
property which secured a Contract and which is acquired on behalf of the
Certificateholders by repossession (in the case of a Manufactured Home) or
foreclosure or deed in lieu of foreclosure (in the case of underlying real
property securing a Land-and-Home Contract) and (iv) any insurance policies
or other forms of credit enhancement required to be maintained pursuant to
the related Agreement. If so specified in the related Prospectus Supplement,
a Trust Fund may also include one or more of the following: reinvestment
income on payments received on the Trust Fund Assets, a Reserve Account, a
pool insurance policy, a special hazard insurance policy, a bankruptcy bond,
one or more letters of credit, a surety bond, guaranties or similar
instruments.
Each Series of Certificates will be issued in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership of a
specified percentage (which may be 0%) or portion of future interest payments
and a specified percentage (which may be 0%) or portion of future principal
payments on the related Trust Fund Assets. A Series of Certificates may
include one or more classes that are senior in right to payment to one or
more other classes of Certificates of such Series. Certain Series or classes
of Certificates may be covered by insurance policies, surety bonds or other
forms of credit enhancement, in each case as described under "Credit
Enhancement" herein and in the related Prospectus Supplement. One or more
classes of Certificates of a Series may be entitled to receive distributions
of principal, interest or any combination thereof. Distributions on one or
more classes of a Series of Certificates may be made prior to one or more
other classes, after the occurrence of specified events, in accordance with a
schedule or formula or on the basis of collections from designated portions
of the related Trust Fund Assets, in each case as specified in the related
Prospectus Supplement. The timing and amounts of such distributions may vary
among classes or over time as specified in the related Prospectus Supplement.
Distributions of principal and interest (or, where applicable, of
principal only or interest only) on the related Certificates will be made by
the Trustee on each Distribution Date (i.e., monthly, quarterly,
semi-annually or at such other intervals and on the dates as are specified in
the related Prospectus Supplement) in proportion to the percentages specified
in the related Prospectus Supplement. Distributions will be made to the
persons in whose names the Certificates are registered at the close of
business on the dates specified in the related Prospectus Supplement (each, a
"Record Date"). Distributions will be made in the manner specified in the
related Prospectus Supplement to the persons entitled thereto at the address
appearing in the register maintained for holders of Certificates (the
"Certificate Register"); provided, however, that the final distribution in
retirement of the Certificates will be made only upon presentation and
surrender of the Certificates at the office or agency of the Trustee or other
person specified in the notice to Certificateholders of such final
distribution.
The Certificates will be freely transferable and exchangeable at the
Corporate Trust Office of the Trustee as set forth in the related Prospectus
Supplement. No service charge will be made for any registration of exchange
or transfer of Certificates of any Series, but the Trustee may require
payment of a sum sufficient to cover any related tax or other governmental
charge.
Under current law, the purchase and holding of certain classes of
Certificates by or on behalf of any employee benefit plan or other retirement
arrangement (including individual retirement accounts and annuities, Keogh
plans and collective investment funds in which such plans, accounts or
arrangements are invested) subject to provisions of ERISA or the Code may
result in prohibited transactions, within the meaning of ERISA and the Code,
or may subject the Trustee, the Master Servicer or the Depositor to
obligations or liabilities in addition to those undertaken in the related
Agreement. See "ERISA Considerations." Unless otherwise specified in the
related Prospectus Supplement, the transfer of Certificates of such a class
will not be registered unless the transferee (i) represents that it is not,
and is not purchasing on behalf of, any such plan, account or arrangement or
(ii) provides an opinion of counsel satisfactory to the Trustee and the
Depositor that the purchase of Certificates of such a class by or on behalf
of such plan, account or arrangement is permissible under applicable law and
will not subject the Trustee, the Master Servicer or the Depositor to any
obligation or liability in addition to those undertaken in the Agreements.
As to each Series, an election may be made to treat the related Trust
Fund or designated portions thereof either as a REMIC or as a FASIT. The
related Prospectus Supplement will specify whether a REMIC or FASIT election
is to be made. Alternatively, the Agreement for a Series may provide that a
REMIC or FASIT election may be made at the discretion of the Depositor or the
Master Servicer and may only be made if certain conditions are satisfied. As
to any such Series, the terms and provisions applicable to the making of a
REMIC election will be set forth in the related Prospectus Supplement. If a
REMIC election is made with respect to a Series, one of the classes will be
designated as evidencing the sole class of "residual interests" in the
related REMIC, as defined in the Code. All other classes of Certificates in
such a Series will constitute "regular interests" in the related REMIC, as
defined in the Code. If a FASIT election is made with respect to a Series,
one of the classes will be designated as the ownership interest, as defined
in the Code. All other classes of Securities in such a Series will
constitute "regular interests" in the related FASIT, as defined in the Code.
As to each Series with respect to which a REMIC election is to be made, the
Master Servicer or a holder of the related residual certificate in the case
of a REMIC, and the holder of the related ownership interest in the case of a
FASIT, will be obligated to take all actions required in order to comply with
applicable laws and regulations and will be obligated to pay any prohibited
transaction taxes. The Master Servicer, unless otherwise provided in the
related Prospectus Supplement, will be entitled to reimbursement for any such
payment from the assets of the Trust Fund or from any holder of the related
residual certificate in the case of a REMIC, or from the holder of the
related ownership interest in the case of a FASIT.
DISTRIBUTIONS ON CERTIFICATES
General. In general, the method of determining the amount of
distributions on a particular Series of Certificates will depend on the type
of credit support, if any, that is used with respect to such Series. See
"Credit Enhancement." Set forth below are descriptions of various methods
that may be used to determine the amount of distributions on the Certificates
of a particular Series. The Prospectus Supplement for each Series of
Certificates will describe the method to be used in determining the amount of
distributions on the Certificates of such Series.
Distributions allocable to principal and interest on the Certificates
will be made by the Trustee out of, and only to the extent of, funds in the
related Collection Account, including any funds transferred from any Reserve
Account (a "Reserve Account"). As between Certificates of different classes
and as between distributions of principal (and, if applicable, between
distributions of Principal Prepayments, as defined below, and scheduled
payments of principal) and interest, distributions made on any Distribution
Date will be applied as specified in the related Prospectus Supplement. The
Prospectus Supplement will also describe the method for allocating
distributions among Certificates of a particular class.
Available Funds. All distributions on the Certificates of each Series
on each Distribution Date will be made from the Available Funds described
below, in accordance with the terms described in the related Prospectus
Supplement and specified in the Agreement. "Available Funds" for each
Distribution Date will generally equal the amount on deposit in the related
Collection Account on such Distribution Date (net of related fees and
expenses payable by the related Trust Fund) other than amounts to be held
therein for distribution on future Distribution Dates.
Distributions of Interest. Interest will accrue on the aggregate
principal balance of the Certificates (or, in the case of Certificates
entitled only to distributions allocable to interest, the aggregate notional
amount) of each class of Certificates (the "Class Certificate Balance")
entitled to interest from the date, at the pass-through rate or interest
rate, as applicable (which in either case may be a fixed rate or rate
adjustable as specified in such Prospectus Supplement), and for the periods
specified in such Prospectus Supplement. To the extent funds are available
therefor, interest accrued during each such specified period on each class of
Certificates entitled to interest (other than a class of Certificates that
provides for interest that accrues, but is not currently payable, referred to
hereafter as "Accrual Certificates") will be distributable on the
Distribution Dates specified in the related Prospectus Supplement until the
aggregate Class Certificate Balance of the Certificates of such class has
been distributed in full or, in the case of Certificates entitled only to
distributions allocable to interest, until the aggregate notional amount of
such Certificates is reduced to zero or for the period of time designated in
the related Prospectus Supplement. The original Class Certificate Balance of
each Certificate will equal the aggregate distributions allocable to
principal to which such Certificate is entitled. Distributions allocable to
interest on each Certificate that is not entitled to distributions allocable
to principal will be calculated based on the notional amount of such
Certificate. The notional amount of a Certificate will not evidence an
interest in or entitlement to distributions allocable to principal but will
be used solely for convenience in expressing the calculation of interest and
for certain other purposes.
Interest payable on the Certificates of a Series on a Distribution Date
will include all interest accrued during the period specified in the related
Prospectus Supplement. In the event interest accrues over a period ending two
or more days prior to a Distribution Date, the effective yield to
Certificateholders will be reduced from the yield that would otherwise be
obtainable if interest payable on the Certificate were to accrue through the
day immediately preceding such Distribution Date, and the effective yield (at
par) to Certificateholders will be less than the indicated coupon rate.
With respect to any class of Accrual Certificates, if specified in the
related Prospectus Supplement, any interest that has accrued but is not paid
on a given Distribution Date will be added to the aggregate Class Certificate
Balance of such class of Certificates on that Distribution Date.
Distributions of interest on any class of Accrual Certificates will commence
only after the occurrence of the events specified in such Prospectus
Supplement. Prior to such time, the beneficial ownership interest in the
Trust Fund or the principal balance, as applicable, of such class of Accrued
Certificates, as reflected in the aggregate Class Certificate Balance of such
class of Accrual Certificates, will increase on each Distribution Date by the
amount of interest that accrued on such class of Accrual Certificates during
the preceding interest accrual period but that was not required to be
distributed to such class on such Distribution Date. Any such class of
Accrual Certificates will thereafter accrue interest on its outstanding Class
Certificate Balance as so adjusted.
Distributions of Principal. The related Prospectus Supplement will
specify the method by which the amount of principal to be distributed on the
Certificates on each Distribution Date will be calculated and the manner in
which such amount will be allocated among the classes of Certificates
entitled to distributions of principal. The aggregate Class Certificate
Balance of any class of Certificates entitled to distributions of principal
generally will be the aggregate original Class Certificate Balance of such
class of Certificates specified in such Prospectus Supplement, reduced by all
distributions reported to the holders of such Certificates as allocable to
principal and, (i) in the case of Accrual Certificates, unless otherwise
specified in the related Prospectus Supplement, increased by all interest
accrued but not then distributable on such Accrual Certificates and (ii) in
the case of adjustable rate Certificates, subject to the effect of negative
amortization, if applicable.
If so provided in the related Prospectus Supplement, one or more classes
of Certificates will be entitled to receive all or a disproportionate
percentage of the payments of principal which are received from borrowers in
advance of their scheduled due dates and are not accompanied by amounts
representing scheduled interest due after the month of such payments
("Principal Prepayments") in the percentages and under the circumstances or
for the periods specified in such Prospectus Supplement. Any such allocation
of Principal Prepayments to such class or classes of Certificates will have
the effect of accelerating the amortization of such Certificates while
increasing the interests evidenced by one or more other classes of
Certificates in the Trust Fund. Increasing the interests of the other classes
of Certificates relative to that of certain Certificates is intended to
preserve the availability of the subordination provided by such other
Certificates. See "Credit Enhancement -- Subordination."
Unscheduled Distributions. If specified in the related Prospectus
Supplement, the Certificates will be subject to receipt of distributions
before the next scheduled Distribution Date under the circumstances and in
the manner described below and in such Prospectus Supplement. If applicable,
the Trustee will be required to make such unscheduled distributions on the
day and in the amount specified in the related Prospectus Supplement if, due
to substantial payments of principal (including Principal Prepayments) on the
Trust Fund Assets, the Trustee or the Master Servicer determines that the
funds available or anticipated to be available from the Collection Account
and, if applicable, any Reserve Account, may be insufficient to make required
distributions on the Certificates on such Distribution Date. Unless otherwise
specified in the related Prospectus Supplement, the amount of any such
unscheduled distribution that is allocable to principal will not exceed the
amount that would otherwise have been required to be distributed as principal
on the Certificates on the next Distribution Date. Unless otherwise specified
in the related Prospectus Supplement, the unscheduled distributions will
include interest at the applicable pass-through rate (if any) or interest
rate (if any) on the amount of the unscheduled distribution allocable to
principal for the period and to the date specified in such Prospectus
Supplement.
ADVANCES
To the extent provided in the related Prospectus Supplement, the Master
Servicer will be required to advance on or before each Distribution Date
(from its own funds, funds advanced by Sub-Servicers or funds held in the
Collection Account for future distributions to the holders of Certificates of
the related Series), an amount equal to the aggregate of payments of interest
and/or principal that were delinquent on the related Determination Date (as
such term is defined in the related Prospectus Supplement) and were otherwise
not advanced by any Sub-Servicer, subject to the Master Servicer's
determination that such advances may be recoverable out of late payments by
borrowers, Liquidation Proceeds, Insurance Proceeds or otherwise.
In making Advances, the Master Servicer will endeavor to maintain a
regular flow of scheduled interest and/or principal payments to holders of
the Certificates, rather than to guarantee or insure against losses. If
Advances are made by the Master Servicer from cash being held for future
distribution to Certificateholders, the Master Servicer will replace such
funds on or before any future Distribution Date to the extent that funds in
the applicable Collection Account on such Distribution Date would be less
than the amount required to be available for distributions to
Certificateholders on such date. Any Master Servicer funds advanced will be
reimbursable to the Master Servicer out of recoveries on the specific
Contracts with respect to which such Advances were made (e.g., late payments
made by the related borrower, any related Insurance Proceeds, Liquidation
Proceeds or proceeds of any Contract purchased by the Depositor, a
Sub-Servicer or a Seller pursuant to the related Agreement). Advances by the
Master Servicer (and any advances by a Sub-Servicer) also will be
reimbursable to the Master Servicer (or Sub-Servicer) from cash otherwise
distributable to Certificateholders (including the holders of Senior
Certificates) to the extent that the Master Servicer determines that any such
Advances previously made are not ultimately recoverable as described above.
To the extent provided in the related Prospectus Supplement, the Master
Servicer also will be obligated to make Advances, to the extent recoverable
out of Insurance Proceeds, Liquidation Proceeds or otherwise, in respect of
certain taxes and insurance premiums not paid by borrowers on a timely basis.
Funds so advanced are reimbursable to the Master Servicer to the extent
permitted by the related Agreement. The obligations of the Master Servicer to
make advances may be supported by a cash advance reserve fund, a surety bond
or other arrangement of the type described herein under "Credit Enhancement,"
in each case as described in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, in the
event the Master Servicer or a Sub-Servicer fails to make a required Advance,
the Trustee will be obligated to make such Advance in its capacity as
successor servicer. If the Trustee makes such an Advance, it will be entitled
to be reimbursed for such Advance to the same extent and degree as the Master
Servicer or a Sub-Servicer is entitled to be reimbursed for Advances. See
"Description of the Certificates -- Distributions on Certificates."
REPORTS TO CERTIFICATEHOLDERS
Unless otherwise specified in the related Prospectus Supplement, prior
to or concurrently with each distribution on a Distribution Date the Master
Servicer or the Trustee will furnish to each Certificateholder of record of
the related Series a statement setting forth, to the extent applicable to
such Series of Certificates, among other things:
(i) the amount of such distribution allocable to principal,
separately identifying the aggregate amount of Principal
Prepayments, and if so specified in the related Prospectus
Supplement, any applicable prepayment penalties included
therein;
(ii) the amount of such distribution allocable to interest;
(iii) the amount of any Advance;
(iv) the aggregate amount (a) otherwise allocable to the
Subordinated Certificateholders on such Distribution Date and
(b) withdrawn from the Reserve Account, if any, that is
included in the amounts distributed to the Senior
Certificateholders;
(v) the outstanding principal balance or notional amount of each
class of the related Series after giving effect to the
distribution of principal on such Distribution Date;
(vi) the percentage of Principal Prepayments on the Contracts, if
any, which each such class will be entitled to receive on the
following Distribution Date;
(vii) the related amount of the servicing compensation retained
or withdrawn from the Collection Account by the Master
Servicer;
(viii) the number and aggregate principal balances of Contracts
(A) delinquent (exclusive of Contracts in repossession or
liquidation) (1) 31 to 59 days, (2) 60 to 89 days and (3)
90 or more days and (B) in repossession or liquidation,
as of the close of business on the last day of the
calendar month preceding such Distribution Date;
(ix) the number and aggregate principal balances of Contracts
relating to Manufactured Homes that were repossessed since the
immediately preceding Distribution Date;
(xi) the pass-through rate or interest rate, as applicable, if
adjusted from the date of the last statement, of any such
class expected to be applicable to the next distribution to
such class;
(xii) if applicable, the amount remaining in any Reserve
Account at the close of business on the Distribution
Date;
(xiii) the pass-through rate or interest rate, as applicable, as
of the day prior to the immediately preceding
Distribution Date; and
(xiv) any amounts remaining under letters of credit, pool
policies or other forms of credit enhancement.
Where applicable, any amount set forth above may be expressed as a
dollar amount per single Certificate of the relevant class having the
Percentage Interest specified in the related Prospectus Supplement. The
report to Certificateholders for any Series of Certificates may include
additional or other information of a similar nature to that specified above.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer or the Trustee will mail to each
Certificateholder of record at any time during such calendar year a report
(a) as to the aggregate of amounts reported pursuant to (i) and (ii) above
for such calendar year or, in the event such person was a Certificateholder
of record during a portion of such calendar year, for the applicable portion
of such year and (b) such other customary information as may be deemed
necessary or desirable for Certificateholders to prepare their tax returns.
CATEGORIES OF CLASSES OF CERTIFICATES
The Certificates of any Series may be comprised of one or more classes.
Such classes, in general, fall into different categories. The following chart
identifies and generally defines certain of the more typical categories. The
Prospectus Supplement for a series of Certificates may identify the classes
which comprise such Series by reference to the following categories.
<TABLE>
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CATEGORIES OF CLASSES DEFINITION
PRINCIPAL TYPES
<S> <C>
Accretion Directed . . . . . . . . . . . . . A class that receives principal payments from the accreted interest from specified
Accrual Certificates. An Accretion Directed class also may receive principal
payments from principal paid on the underlying Trust Fund Assets for the related
Series.
Component Certificates . . . . . . . . . . . A class consisting of "Components." The Components of a class of Component
Certificates may have different principal and/or interest payment characteristics
but together constitute a single class. Each Component of a class of Component
Certificates may be identified as falling into one or more of the categories in this
chart.
Notional Amount Certificates . . . . . . . . A class having no principal balance and bearing interest on the related notional
amount. The notional amount is used for purposes of the determination of interest
distributions.
Planned Principal Class (also sometimes
referred to as "PACs") . . . . . . . . . . . A class that is designed to receive principal payments using a predetermined
principal balance schedule derived by assuming two constant prepayment rates for the
underlying Trust Fund Assets. These two rates are the endpoints for the "structuring
range" for the Planned Principal Class. The Planned Principal Classes in any Series
of Certificates may be subdivided into different categories (e.g., Primary Planned
Principal Classes, Secondary Planned Principal Classes and so forth) having
different effective structuring ranges and different principal payment priorities.
The structuring range for the Secondary Planned Principal Classes of a Series of
Certificates will be narrower than that for the Primary Planned Principal Class of
such Series.
Scheduled Principal Class . . . . . . . . . . A class that is designed to receive principal payments using a predetermined
principal balance schedule but is not designated as a Planned Principal Class or
Targeted Principal Class. In many cases, the schedule is derived by assuming two
constant prepayment rates for the underlying Trust Fund Assets. These two rates are
the endpoints for the "structuring range" for the Scheduled Principal Class.
Sequential Pay . . . . . . . . . . . . . . . Classes that receive principal payments in a prescribed sequence, that do not have
predetermined principal balance schedules and that under all circumstances receive
payments of principal continuously from the first Distribution Date on which they
receive principal until they are retired. A single class that receives principal
payments before or after all other classes in the same Series of Certificates may be
identified as a Sequential Pay class.
Strip . . . . . . . . . . . . . . . . . . . . A class that receives a constant proportion, or "strip," of the principal payments
on the underlying Trust Fund Assets.
Support Class (also sometimes referred to as
"companion classes") . . . . . . . . . . . . A class that receives principal payments on any Distribution Date only if scheduled
payments have been made on specified Planned Principal Classes, Targeted Principal
Classes and/or Scheduled Principal Classes.
Targeted Principal Class (also sometimes
referred to as "TACs") . . . . . . . . . . . A class that is designed to receive principal payments using a predetermined
principal balance schedule derived by assuming a single constant prepayment rate for
the underlying Trust Fund Assets.
INTEREST TYPES
Fixed Rate . . . . . . . . . . . . . . . . . A class with an interest rate that is fixed throughout the life of the class.
Floating Rate . . . . . . . . . . . . . . . . A class with an interest rate that resets periodically based upon a designated index
and that varies directly with changes in such index.
Inverse Floating Rate . . . . . . . . . . . . A class with an interest rate that resets periodically based upon a designated index
and that varies inversely with changes in such index.
Variable Rate . . . . . . . . . . . . . . . . A class with an interest rate that resets periodically and is calculated by
reference to the rate or rates of interest applicable to specified assets or
instruments (e.g., the Contract Rates borne by the underlying Contracts).
Interest Only . . . . . . . . . . . . . . . . A class that receives some or all of the interest payments made on the underlying
Trust Fund Assets and little or no principal. Interest Only classes have either a
nominal principal balance or a notional amount. A nominal principal balance
represents actual principal that will be paid on the class. It is referred to as
nominal since it is extremely small compared to other classes. A notional amount is
the amount used as a reference to calculate the amount of interest due on an
Interest Only class that is not entitled to any distributions in respect of
principal.
Principal Only . . . . . . . . . . . . . . . A class that does not bear interest and is entitled to receive only distributions in
respect of principal.
Partial Accrual . . . . . . . . . . . . . . . A class that accretes a portion of the amount of accrued interest thereon, which
amount will be added to the principal balance of such class on each applicable
Distribution Date, with the remainder of such accrued interest to be distributed
currently as interest on such class. Such accretion may continue until a specified
event has occurred or until such Partial Accrual class is retired.
Accrual . . . . . . . . . . . . . . . . . . . A class that accretes the amount of accrued interest otherwise distributable on such
class, which amount will be added as principal to the principal balance of such
class on each applicable Distribution Date. Such accretion may continue until some
specified event has occurred or until such Accrual class is retired.
</TABLE>
INDICES APPLICABLE TO FLOATING RATE AND INVERSE FLOATING RATE CLASSES
LIBOR
Unless otherwise specified in the related Prospectus Supplement, on the
LIBOR Determination Date (as such term is defined in the related Prospectus
Supplement) for each class of Certificates of a Series as to which the
applicable interest rate is determined by reference to an index denominated
as LIBOR, the Person designated in the related Agreement (the "Calculation
Agent") will determine LIBOR in accordance with one of the two methods
described below (which method will be specified in the related Prospectus
Supplement):
LIBO Method
If using this method to calculate LIBOR, the Calculation Agent will
determine LIBOR by reference to the quotations set forth on the Reuters
Screen LIBO Page (as defined in the International Swap Dealers Association,
Inc. Code of Standard Wording, Assumptions and Provisions for Swaps, 1986
Edition), offered by the principal London office of each of the designated
reference banks meeting the criteria set forth below (the "Reference Banks")
for making one-month United States dollar deposits in leading banks in the
London Interbank market, as of 11:00 a.m. (London time) on such LIBOR
Determination Date. In lieu of relying on the quotations for those Reference
Banks that appear at such time on the Reuters Screen LIBO Page, the
Calculation Agent will request each of the Reference Banks to provide such
offered quotations at such time.
Under this method LIBOR will be established by the Calculation Agent on
each LIBOR Determination Date as follows:
(a) If on any LIBOR Determination Date two or more Reference Banks
provide such offered quotations, LIBOR for the next Interest Accrual
Period shall be the arithmetic mean of such offered quotations (rounded
upwards if necessary to the nearest whole multiple of 1/32%).
(b) If on any LIBOR Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for the next
Interest Accrual Period (as such term is defined in the related
Prospectus Supplement) shall be whichever is the higher of (i) LIBOR as
determined on the previous LIBOR Determination Date or (ii) the Reserve
Interest Rate. The "Reserve Interest Rate" shall be the rate per annum
which the Calculation Agent determines to be either (i) the arithmetic
mean (rounded upwards if necessary to the nearest whole multiple of
1/32%) of the one-month United States dollar lending rates that New York
City banks selected by the Calculation Agent are quoting, on the
relevant LIBOR Determination Date, to the principal London offices of at
least two of the Reference Banks to which such quotations are, in the
opinion of the Calculation Agent, being so made or (ii) in the event
that the Calculation Agent can determine no such arithmetic mean, the
lowest one-month United States dollar lending rate which New York City
banks selected by the Calculation Agent are quoting on such LIBOR
Determination Date to leading European banks.
(c) If on any LIBOR Determination Date for a class specified in
the related Prospectus Supplement, the Calculation Agent is required but
is unable to determine the Reserve Interest Rate in the manner provided
in paragraph (b) above, LIBOR for the next Interest Accrual Period shall
be LIBOR as determined on the preceding LIBOR Determination Date, or, in
the case of the first LIBOR Determination Date, LIBOR shall be deemed to
be the per annum rate specified as such in the related Prospectus
Supplement.
Each Reference Bank (i) shall be a leading bank engaged in transactions
in Eurodollar deposits in the international Eurocurrency market; (ii) shall
not control, be controlled by, or be under common control with the
Calculation Agent; and (iii) shall have an established place of business in
London. If any such Reference Bank should be unwilling or unable to act as
such or if appointment of any such Reference Bank is terminated, another
leading bank meeting the criteria specified above will be appointed.
BBA Method
If using this method of determining LIBOR, the Calculation Agent will
determine LIBOR on the basis of the British Bankers' Association ("BBA")
"Interest Settlement Rate" for one-month deposits in United States dollars as
found on Telerate page 3750 as of 11:00 a.m. London time on each LIBOR
Determination Date. Interest Settlement Rates currently are based on rates
quoted by eight BBA designated banks as being, in the view of such banks, the
offered rate at which deposits are being quoted to prime banks in the London
interbank market. Such Interest Settlement Rates are calculated by
eliminating the two highest rates and the two lowest rates, averaging the
four remaining rates, carrying the result (expressed as a percentage) out to
six decimal places, and rounding to five decimal places.
If on any LIBOR Determination Date, the Calculation Agent is unable to
calculate LIBOR in accordance with the method forth in the immediately
preceding paragraph, LIBOR for the next Interest Accrual period shall be
calculated in accordance with the LIBOR method described above under "LIBO
Method."
The establishment of LIBOR on each LIBOR Determination Date by the
Calculation Agent and its calculation of the rate of interest for the
applicable classes for the related Interest Accrual Period shall (in the
absence of manifest error) be final and binding.
COFI
The Eleventh District Cost of Funds Index is designed to represent the
monthly weighted average cost of funds for savings institutions in Arizona,
California and Nevada that are member institutions of the Eleventh Federal
Home Loan Bank District (the "Eleventh District"). The Eleventh District Cost
of Funds Index for a particular month reflects the interest costs paid on all
types of funds held by Eleventh District member institutions and is
calculated by dividing the cost of funds by the average of the total amount
of those funds outstanding at the end of that month and of the prior month
and annualizing and adjusting the result to reflect the actual number of days
in the particular month. If necessary, before these calculations are made,
the component figures are adjusted by the Federal Home Loan Bank of San
Francisco ("FHLBSF") to neutralize the effect of events such as member
institutions leaving the Eleventh District or acquiring institutions outside
the Eleventh District. The Eleventh District Cost of Funds Index is weighted
to reflect the relative amount of each type of funds held at the end of the
relevant month. The major components of funds of Eleventh District member
institutions are: (i) savings deposits, (ii) time deposits, (iii) FHLBSF
advances, (iv) repurchase agreements and (v) all other borrowings. Because
the component funds represent a variety of maturities whose costs may react
in different ways to changing conditions, the Eleventh District Cost of Funds
Index does not necessarily reflect current market rates.
A number of factors affect the performance of the Eleventh District Cost
of Funds Index, which may cause it to move in a manner different from indices
tied to specific interest rates, such as United States Treasury bills or
LIBOR. Because the liabilities upon which the Eleventh District Cost of Funds
Index is based were issued at various times under various market conditions
and with various maturities, the Eleventh District Cost of Funds Index may
not necessarily reflect the prevailing market interest rates on new
liabilities of similar maturities. Moreover, as stated above, the Eleventh
District Cost of Funds Index is designed to represent the average cost of
funds for Eleventh District savings institutions for the month prior to the
month in which it its due to be published. Additionally, the Eleventh
District Cost of Funds Index may not necessarily move in the same direction
as market interest rates at all times, since as longer term deposits or
borrowings mature and are renewed at prevailing market interest rates, the
Eleventh District Cost of Funds Index is influenced by the differential
between the prior and the new rates on those deposits or borrowings. In
addition, movements of the Eleventh District Cost of Funds Index, as compared
to other indices tied to specific interest rates, may be affected by changes
instituted by the FHLBSF in the method used to calculate the Eleventh
District Cost of Funds Index.
The FHLBSF publishes the Eleventh District Cost of Funds Index in its
monthly Information Bulletin. Any individual may request regular receipt by
mail of Information Bulletins by writing the Federal Home Loan Bank of San
Francisco, P.O. Box 7948, 600 California Street, San Francisco, California
94120, or by calling (415) 616-1000. The Eleventh District Cost of Funds
Index may also be obtained by calling the FHLBSF at (415) 616-2600.
The FHLBSF has stated in its Information Bulletin that the Eleventh
District Cost of Funds Index for a month "will be announced on or near the
last working day" of the following month and also has stated that it "cannot
guarantee the announcement" of such index on an exact date. So long as such
index for a month is announced on or before the tenth day of the second
following month, the interest rate for each class of Certificates of a Series
as to which the applicable interest rate is determined by reference to an
index denominated as COFI (each, a class of "COFI Certificates") for the
Interest Accrual Period commencing in such second following month will be
based on the Eleventh District Cost of Funds Index for the second preceding
month. If publication is delayed beyond such tenth day, such interest rate
will be based on the Eleventh District Cost of Funds Index for the third
preceding month.
Unless otherwise specified in the related Prospectus Supplement, if on
the tenth day of the month in which any Interest Accrual Period commences for
a class of COFI Certificates the most recently published Eleventh District
Cost of Funds Index relates to a month prior to the third preceding month,
the index for such current Interest Accrual Period and for each succeeding
Interest Accrual Period will, except as described in the next to last
sentence of this paragraph, be based on the National Monthly Median Cost of
Funds Ratio to SAIF-Insured Institutions (the "National Cost of Funds Index")
published by the Office of Thrift Supervision (the "OTS") for the third
preceding month (or the fourth preceding month if the National Cost of Funds
Index for the third preceding month has not been published on such tenth day
of an Interest Accrual Period). Information on the National Cost of Funds
Index may be obtained by writing the OTS at 1700 G Street, N.W., Washington,
D.C. 20552 or calling (202) 906-6677, and the current National Cost of Funds
Index may be obtained by calling (202) 906-6988. If on any such tenth day of
the month in which an Interest Accrual Period commences the most recently
published National Cost of Funds Index relates to a month prior to the fourth
preceding month, the applicable index for such Interest Accrual Period and
each succeeding Interest Accrual Period will be based on LIBOR, as determined
by the Calculation Agent in accordance with the Agreement relating to such
Series of Certificates. A change of index from the Eleventh District Cost of
Funds Index to an alternative index will result in a change in the index
level, and, particularly if LIBOR is the alternative index, could increase
its volatility.
The establishment of COFI by the Calculation Agent and its calculation
of the rates of interest for the applicable classes for the related Interest
Accrual Period shall (in the absence of manifest error) be final and binding.
Treasury Index
Unless otherwise specified in the related Prospectus Supplement, on the
Treasury Index Determination Date (as such term is defined in the related
Prospectus Supplement) for each class of Certificates of a Series as to which
the applicable interest rate is determined by reference to an index
denominated as a Treasury Index, the Calculation Agent will ascertain the
Treasury Index for Treasury securities of the maturity and for the period
(or, if applicable, date) specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the Treasury
Index for any period means the average of the yield for each business day
during the period specified therein (and for any date means the yield for
such date), expressed as a per annum percentage rate, on (i) U.S Treasury
securities adjusted to the "constant maturity" (as further described below)
specified in such Prospectus Supplement or (ii) if no "constant maturity" is
so specified, U.S. Treasury securities trading on the secondary market having
the maturity specified in such Prospectus Supplement, in each case as
published by the Federal Reserve Board in its Statistical Release No.
H.15(519). Statistical Release No. H.15(519) is published on Monday or
Tuesday of each week and may be obtained by writing or calling the
Publications Department at the Board of Governors of the Federal Reserve
System, 21st and C Streets, Washington, D.C. 20551 (202) 452-3244. If the
Calculation Agent has not yet received Statistical Release No. H.15(519) for
such week, then it will use such Statistical Release from the immediately
preceding week.
Yields on U.S. Treasury securities at "constant maturity" are derived
from the U.S. Treasury's daily yield curve. This curve, which relates the
yield on a security to its time to maturity, is based on the closing market
bid yields on actively traded Treasury securities in the over-the-counter
market. These market yields are calculated from composites of quotations
reported by five leading U.S. Government securities dealers to the Federal
Reserve Bank of New York. This method provides a yield for a given maturity
even if no security with that exact maturity is outstanding. In the event
that the Treasury Index is no longer published, a new index based upon
comparable data and methodology will be designated in accordance with the
Agreement relating to the particular Series of Certificates. The Calculation
Agent's determination of the Treasury Index, and its calculation of the rates
of interest for the applicable classes for the related Interest Accrual
Period shall (in the absence of manifest error) be final and binding.
Prime Rate
Unless otherwise specified in the related Prospectus Supplement, on the
Prime Rate Determination Date (as such term is defined in the related
Prospectus Supplement) for each class of Certificates of a Series as to
which the applicable interest rate is determined by reference to an index
denominated as the Prime Rate, the Calculation Agent will ascertain the Prime
Rate for the related Interest Accrual Period. Unless otherwise specified in
the related Prospectus Supplement, the Prime Rate for an Interest Accrual
Period will be the "Prime Rate" as published in the "Money Rates" section of
The Wall Street Journal (or if not so published, the "Prime Rate" as
published in a newspaper of general circulation selected by the Calculation
Agent in its sole discretion) on the related Prime Rate Determination Date.
If a prime rate range is given, then the average of such range will be used.
In the event that the Prime Rate is no longer published, a new index based
upon comparable data and methodology will be designated in accordance with
the Agreement relating to the particular Series of Certificates. The
Calculation Agent's determination of the Prime Rate and its calculation of
the rates of interest for the related Interest Accrual Period shall (in the
absence of manifest error) be final and binding.
BOOK-ENTRY REGISTRATION OF CERTIFICATES
As described in the related Prospectus Supplement, if not issued in
fully registered form, each class of Certificates will be registered as
book-entry certificates (the "Book-Entry Certificates"). Persons acquiring
beneficial ownership interests in the Certificates ("Certificate Owners")
will hold their Certificates through the Depository Trust Company ("DTC") in
the United States, or CEDEL or Euroclear (in Europe) if they are participants
of such systems, or indirectly through organizations which are participants
in such systems. The Book-Entry Certificates will be issued in one or more
certificates which equal the aggregate principal balance of the Certificates
and will initially be registered in the name of Cede & Co., the nominee of
DTC. CEDEL and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositaries which in turn
will hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank, N.A., will act as
depositary for CEDEL and The Chase Manhattan Bank will act as depositary for
Euroclear (in such capacities, individually the "Relevant Depositary" and
collectively the "European Depositaries"). Except as described below, no
person acquiring a Book-Entry Certificate (each, a "beneficial owner") will
be entitled to receive a physical certificate representing such Certificate
(a "Definitive Certificate"). Unless and until Definitive Certificates are
issued, it is anticipated that the only "Certificateholders" of the
Certificates will be Cede & Co., as nominee of DTC. Certificate Owners are
only permitted to exercise their rights indirectly through Participants and
DTC.
The beneficial owner's ownership of a Book-Entry Certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or
other financial intermediary (each, a "Financial Intermediary") that
maintains the beneficial owner's account for such purpose. In turn, the
Financial Intermediary's ownership of such Book-Entry Certificate will be
recorded on the records of DTC (or of a participating firm that acts as agent
for the Financial Intermediary, whose interest will in turn be recorded on
the records of DTC, if the beneficial owner's Financial Intermediary is not a
DTC participant, and on the records of CEDEL or Euroclear, as appropriate).
Certificate Owners will receive all distributions of principal of, and
interest on, the Certificates from the Trustee through DTC and DTC
participants. While the Certificates are outstanding (except under the
circumstances described below), under the rules, regulations and procedures
creating and affecting DTC and its operations (the "Rules"), DTC is required
to make book-entry transfers among Participants on whose behalf it acts with
respect to the Certificates and is required to receive and transmit
distributions of principal of, and interest on, the Certificates.
Participants and indirect participants with whom Certificate Owners have
accounts with respect to Certificates are similarly required to make
book-entry transfers and receive and transmit such distributions on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess certificates, the Rules provide a mechanism by which
Certificate Owners will receive distributions and will be able to transfer
their interest.
Certificate Owners will not receive or be entitled to receive
certificates representing their respective interests in the Certificates,
except under the limited circumstances described below. Unless and until
Definitive Certificates are issued, Certificate Owners who are not
Participants may transfer ownership of Certificates only through Participants
and indirect participants by instructing such Participants and indirect
participants to transfer Certificates, by book-entry transfer, through DTC
for the account of the purchasers of such Certificates, which account is
maintained with their respective Participants. Under the Rules and in
accordance with DTC's normal procedures, transfers of ownership of
Certificates will be executed through DTC and the accounts of the respective
Participants at DTC will be debited and credited. Similarly, the Participants
and indirect participants will make debits or credits, as the case may be, on
their records on behalf of the selling and purchasing Certificate Owners.
Because of time zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a Participant will be
made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be
reported to the relevant Euroclear or CEDEL Participants on such business
day. Cash received in CEDEL or Euroclear as a result of sales of securities
by or through a CEDEL Participant (as defined herein) or Euroclear
Participant (as defined herein) to a DTC Participant will be received with
value on the DTC settlement date but will be available in the relevant CEDEL
or Euroclear cash account only as of the business day following settlement in
DTC.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to
the Relevant Depositary to take action to effect final settlement on its
behalf by delivering or receiving securities in DTC, and making or receiving
payment in accordance with normal procedures for same day funds settlement
applicable to DTC. CEDEL Participants and Euroclear Participants may not
deliver instructions directly to the European Depositaries.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations
("CEDEL Participants") and facilitates the clearance and settlement of
securities transactions between CEDEL Participants through electronic
book-entry changes in accounts of CEDEL Participants, thereby eliminating the
need for physical movement of certificates. Transactions may be settled in
CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. CEDEL interfaces with
domestic markets in several countries. As a professional depository, CEDEL is
subject to regulation by the Luxembourg Monetary Institute. CEDEL
participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Indirect
access to CEDEL is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") and to clear and settle transactions between
Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities
and cash. Transactions may be settled in any of 32 currencies, including
United States dollars. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with DTC described above. Euroclear is operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York ("Morgan" and in
such capacity, the "Euroclear Operator"), under contract with Euroclear
Clearance Systems S.C., a Belgian cooperative corporation (the "Belgian
Cooperative"). All operations are conducted by Morgan, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with
the Euroclear Operator, not the Belgian Cooperative. The Belgian Cooperative
establishes policy for Euroclear on behalf of Euroclear Participants.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries. Indirect
access to Euroclear is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
Morgan is the Belgian branch of a New York banking corporation which is
a member bank of the Federal Reserve System. As such, it is regulated and
examined by the Board of Governors of the Federal Reserve System and the New
York State Banking Department, as well as the Belgian Banking Commission.
Certificates clearance accounts and cash accounts with Morgan are
governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions
govern transfers of securities and cash within Euroclear, withdrawals of
securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants, and has no record of or
relationship with persons holding through Euroclear Participants.
Under a book-entry format, beneficial owners of the Book-Entry
Certificates may experience some delay in their receipt of payments, since
such payments will be forwarded by the Trustee to Cede & Co., as nominee of
DTC. Distributions with respect to Certificates held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by the Relevant Depositary. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. See "Federal Income Tax Consequences
- -Tax Treatment of Foreign Investors" and " -- Tax Consequences to Holders of
the Certificates -- Backup Withholding" herein. Because DTC can only act on
behalf of Financial Intermediaries, the ability of a beneficial owner to
pledge Book-Entry Certificates to persons or entities that do not participate
in the Depository system may be limited due to the lack of physical
certificates for such Book-Entry Certificates. In addition, issuance of the
Book-Entry Certificates in book-entry form may reduce the liquidity of such
Certificates in the secondary market since certain potential investors may be
unwilling to purchase Certificates for which they cannot obtain physical
certificates.
Monthly and annual reports on the Trust will be provided to Cede & Co.,
as nominee of DTC, and may be made available by Cede & Co. to beneficial
owners upon request, in accordance with the rules, regulations and procedures
creating and affecting the Depository, and to the Financial Intermediaries to
whose DTC accounts the Book-Entry Certificates of such beneficial owners are
credited.
DTC has advised the Trustee that, unless and until Definitive
Certificates are issued, DTC will take any action permitted to be taken by
the holders of the Book-Entry Certificates under the applicable Agreement
only at the direction of one or more Financial Intermediaries to whose DTC
accounts the Book-Entry Certificates are credited, to the extent that such
actions are taken on behalf of Financial Intermediaries whose holdings
include such Book-Entry Certificates. CEDEL or the Euroclear Operator, as the
case may be, will take any other action permitted to be taken by a
Certificateholder under the Agreement on behalf of a CEDEL Participant or
Euroclear Participant only in accordance with its relevant rules and
procedures and subject to the ability of the Relevant Depositary to effect
such actions on its behalf through DTC. DTC may take actions, at the
direction of the related Participants, with respect to some Certificates
which conflict with actions taken with respect to other Certificates.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Certificates. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Certificates and instructions for
re-registration, the Trustee will issue Definitive Certificates, and
thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the applicable Agreement.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among
participants of DTC, CEDEL and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
None of the Master Servicer, the Depositor or the Trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Certificates held
by Cede & Co., as nominee of DTC, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
CREDIT ENHANCEMENT
GENERAL
Credit enhancement may be provided with respect to one or more classes
of a Series of Certificates or with respect to the related Trust Fund Assets.
Credit enhancement may be in the form of a limited financial guaranty policy
issued by an entity named in the related Prospectus Supplement, the
subordination of one or more classes of the Certificates of such Series, the
establishment of one or more Reserve Accounts, the use of a cross-
collateralization feature, use of a pool insurance policy, FHA Insurance, VA
Guarantee, bankruptcy bond, special hazard insurance policy, surety bond,
letter of credit, guaranteed investment contract, overcollateralization, or
another method of credit enhancement contemplated herein and described in the
related Prospectus Supplement, or any combination of the foregoing. Unless
otherwise specified in the related Prospectus Supplement, credit enhancement
will not provide protection against all risks of loss and will not guarantee
repayment of the entire principal balance of the Certificates and interest
thereon. If losses occur which exceed the amount covered by credit
enhancement or which are not covered by the credit enhancement,
Certificateholders will bear their allocable share of any deficiencies.
SUBORDINATION
If so specified in the related Prospectus Supplement, protection
afforded to holders of one or more classes of Certificates of a Series by
means of the subordination feature may be accomplished by the preferential
right of holders of one or more other classes of such Series (the "Senior
Certificates") to distributions in respect of scheduled principal, Principal
Prepayments, interest or any combination thereof that otherwise would have
been payable to holders of Subordinated Certificates under the circumstances
and to the extent specified in the related Prospectus Supplement. Protection
may also be afforded to the holders of Senior Certificates of a Series by:
(i) reducing the ownership interest (if applicable) of the related
Subordinated Certificates; (ii) a combination of the immediately preceding
sentence and clause (i) above; or (iii) as otherwise described in the related
Prospectus Supplement. If so specified in the related Prospectus Supplement,
delays in receipt of scheduled payments on the Contracts and losses on
defaulted Contracts may be borne first by the various classes of Subordinated
Certificates and thereafter by the various classes of Senior Certificates, in
each case under the circumstances and subject to the limitations specified in
such Prospectus Supplement. The aggregate distributions in respect of
delinquent payments on the Contracts over the lives of the Certificates or at
any time, the aggregate losses in respect of defaulted Contracts which must
be borne by the Subordinated Certificates by virtue of subordination and the
amount of the distributions otherwise distributable to the Subordinated
Certificateholders that will be distributable to Senior Certificateholders on
any Distribution Date may be limited as specified in the related Prospectus
Supplement. If aggregate distributions in respect of delinquent payments on
the Contracts or aggregate losses in respect of such Contracts were to exceed
an amount specified in the related Prospectus Supplement, holders of Senior
Certificates would experience losses on the Certificates.
In addition to or in lieu of the foregoing, if so specified in the
related Prospectus Supplement, all or any portion of distributions otherwise
payable to holders of Subordinated Certificates on any Distribution Date may
instead be deposited into one or more Reserve Accounts established with the
Trustee or distributed to holders of Senior Certificates. Such deposits may
be made on each Distribution Date, for specified periods or until the balance
in the Reserve Account has reached a specified amount and, following payments
from the Reserve Account to holders of Senior Certificates or otherwise,
thereafter to the extent necessary to restore the balance in the Reserve
Account to required levels, in each case as specified in the related
Prospectus Supplement. Amounts on deposit in the Reserve Account may be
released to the holders of certain classes of Certificates at the times and
under the circumstances specified in such Prospectus Supplement.
If specified in the related Prospectus Supplement, various classes of
Senior Certificates and Subordinated Certificates may themselves be
subordinate in their right to receive certain distributions to other classes
of Senior and Subordinated Certificates, respectively, through a
cross-collateralization mechanism or otherwise.
As between classes of Senior Certificates and as between classes of
Subordinated Certificates, distributions may be allocated among such classes
(i) in the order of their scheduled final distribution dates, (ii) in
accordance with a schedule or formula, (iii) in relation to the occurrence of
events or (iv) otherwise, in each case as specified in the related Prospectus
Supplement. As between classes of Subordinated Certificates, payments to
holders of Senior Certificates on account of delinquencies or losses and
payments to any Reserve Account will be allocated as specified in the related
Prospectus Supplement.
LETTER OF CREDIT
The letter of credit, if any, with respect to a Series of Certificates
will be issued by the bank or financial institution specified in the related
Prospectus Supplement (the "L/C Bank"). Under the letter of credit, the L/C
Bank will be obligated to honor drawings thereunder in an aggregate fixed
dollar amount, net of unreimbursed payments thereunder, equal to the
percentage specified in the related Prospectus Supplement of the aggregate
principal balance of the Contracts as of the related Cut-off Date or of one
or more classes of Certificates (the "L/C Percentage"). If so specified in
the related Prospectus Supplement, the letter of credit may permit drawings
in the event of losses not covered by insurance policies or other credit
support, such as losses arising from damage not covered by standard hazard
insurance policies, losses resulting from the bankruptcy of a borrower and
the application of certain provisions of the Bankruptcy Code, or losses
resulting from denial of insurance coverage due to misrepresentations in
connection with the origination of a Contract. The amount available under the
letter of credit will, in all cases, be reduced to the extent of the
unreimbursed payments thereunder. The obligations of the L/C Bank under the
letter of credit for each Series of Certificates will expire at the earlier
of the date specified in the related Prospectus Supplement or the termination
of the Trust Fund. See "The Agreements -- Termination: Optional Termination."
A copy of the letter of credit for a Series, if any, will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed within
15 days of issuance of the Certificates of the related Series.
INSURANCE POLICIES, SURETY BONDS AND GUARANTIES
If so provided in the Prospectus Supplement for a Series of
Certificates, deficiencies in amounts otherwise payable on such Certificates
or certain classes thereof will be covered by insurance policies and/or
surety bonds provided by one or more insurance companies or sureties. Such
instruments may cover, with respect to one or more classes of Certificates of
the related series, timely distributions of interest and/or full
distributions of principal on the basis of a schedule of principal
distributions set forth in or determined in the manner specified in the
related Prospectus Supplement. In addition, if specified in the related
Prospectus Supplement, a Trust Fund may also include bankruptcy bonds,
special hazard insurance policies, other insurance or guaranties for the
purpose of (i) maintaining timely payments or providing additional protection
against losses on the assets included in such Trust Fund, (ii) paying
administrative expenses or (iii) establishing a minimum reinvestment rate on
the payments made in respect of such assets or principal payment rate on
such assets. Such arrangements may include agreements under which
Certificateholders are entitled to receive amounts deposited in various
accounts held by the Trustee upon the terms specified in such Prospectus
Supplement. A copy of any such instrument for a series will be filed with the
Commission as an exhibit to a Current Report on Form 8-K to be filed with the
Commission within 15 days of issuance of the Certificates of the related
series.
OVER-COLLATERALIZATION
If so provided in the Prospectus Supplement for a Series of
Certificates, a portion of the interest payment on each Contract may be
applied as an additional distribution in respect of principal to reduce the
principal balance of a certain class or classes of Certificates and, thus,
accelerate the rate of payment of principal on such class or classes of
Certificates.
RESERVE ACCOUNTS
If specified in the related Prospectus Supplement, credit support with
respect to a Series of Certificates will be provided by the establishment and
maintenance with the Trustee for such Series of Certificates, in trust, of
one or more Reserve Accounts for such Series. The related Prospectus
Supplement will specify whether or not any such Reserve Accounts will be
included in the Trust Fund for such Series.
The Reserve Account for a Series will be funded (i) by the deposit
therein of cash, United States Treasury securities, instruments evidencing
ownership of principal or interest payments thereon, letters of credit,
demand notes, certificates of deposit or a combination thereof in the
aggregate amount specified in the related Prospectus Supplement, (ii) by the
deposit therein from time to time of certain amounts, as specified in the
related Prospectus Supplement to which the Subordinate Certificateholders, if
any, would otherwise be entitled or (iii) in such other manner as may be
specified in the related Prospectus Supplement.
Any amounts on deposit in the Reserve Account and the proceeds of any
other instrument upon maturity will be held in cash or will be invested in
"Permitted Investments" which, in general, will include obligations of the
United States and certain agencies thereof, certificates of deposit, certain
commercial paper, time deposits and bankers acceptances sold by eligible
commercial banks and certain repurchase agreements of United States
government securities with eligible commercial banks. If a letter of credit
is deposited with the Trustee, such letter of credit will be irrevocable.
Unless otherwise specified in the related Prospectus Supplement, any
instrument deposited therein will name the Trustee, in its capacity as
trustee for the holders of the Certificates, as beneficiary and will be
issued by an entity acceptable to each Rating Agency that rates the
Certificates of the related Series. Additional information with respect to
such instruments deposited in the Reserve Accounts will be set forth in the
related Prospectus Supplement.
Any amounts so deposited and payments on instruments so deposited will
be available for withdrawal from the Reserve Account for distribution to the
holders of Certificates of the related Series for the purposes, in the manner
and at the times specified in the related Prospectus Supplement.
POOL INSURANCE POLICIES
If specified in the related Prospectus Supplement, a separate pool
insurance policy ("Pool Insurance Policy") will be obtained for the Pool and
issued by the insurer (the "Pool Insurer") named in such Prospectus
Supplement. Each Pool Insurance Policy will, subject to the limitations
described therein, cover loss by reason of default in payment on Contracts in
the Pool in an amount equal to a percentage specified in such Prospectus
Supplement of the aggregate principal balance of such Contracts as of the
Cut-off Date. As more fully described in the related Prospectus Supplement,
the Master Servicer will present claims thereunder to the Pool Insurer on
behalf of itself, the Trustee and the holders of the Certificates of the
related Series. The Pool Insurance Policies, however, are not blanket
policies against loss, since claims thereunder may only be made respecting
particular defaulted Contracts and only upon satisfaction of certain
conditions precedent as described in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
original amount of coverage under each Pool Insurance Policy will be reduced
over the life of the related Certificates by the aggregate dollar amount of
claims paid less the aggregate of the net amounts realized by the Pool
Insurer upon disposition of all repossessed or foreclosed properties. The
amount of claims paid will include certain expenses incurred by the Master
Servicer as well as accrued interest on delinquent Contracts to the date of
payment of the claim, unless otherwise specified in the related Prospectus
Supplement. Accordingly, if aggregate net claims paid under any Pool
Insurance Policy reach the original policy limit, coverage under that Pool
Insurance Policy will be exhausted and any further losses will be borne by
the related Certificateholders. A copy of the Pool Insurance Policy for a
Series, if any, will be filed within 15 days of issuance of the Certificates
of such Series with the Commission as an exhibit to a Current Report on Form
8-K.
CROSS-COLLATERALIZATION
If specified in the related Prospectus Supplement, the beneficial
ownership of separate groups of assets included in a Trust Fund may be
evidenced by separate classes of the related Series of Certificates. In such
case, credit support may be provided by a cross-collateralization feature
which requires that distributions be made with respect to Certificates
evidencing a beneficial ownership interest in, or secured by, one or more
asset groups within the same Trust Fund prior to distributions to
Subordinated Certificates evidencing a beneficial ownership interest in, or
secured by, one or more other asset groups within such Trust Fund.
Cross-collateralization may be provided by (i) the allocation of certain
excess amounts generated by one or more asset groups to one or more other
asset groups within the same Trust Fund or (ii) the allocation of losses with
respect to one or more asset groups to one or more other asset groups within
the same Trust Fund. Such excess amounts will be applied and/or such losses
will be allocated to the class or classes of Subordinated Certificates of the
related Series then outstanding having the lowest rating assigned by any
Rating Agency or the lowest payment priority, in each case to the extent and
in the manner more specifically described in the related Prospectus
Supplement. The Prospectus Supplement for a Series which includes a
cross-collateralization feature will describe the manner and conditions for
applying such cross-collateralization feature.
If specified in the related Prospectus Supplement, the coverage provided
by one or more of the forms of credit enhancement described in this
Prospectus may apply concurrently to two or more separate Trust Funds. If
applicable, the related Prospectus Supplement will identify the Trust Funds
to which such credit enhancement relates and the manner of determining the
amount of coverage provided to such Trust Funds thereby and of the
application of such coverage to the identified Trust Funds.
YIELD AND PREPAYMENT CONSIDERATIONS
The yields to maturity and weighted average lives of the Certificates
will be affected primarily by the amount and timing of principal payments
received on or in respect of the Trust Fund Assets included in the related
Trust Fund. The original terms to maturity of the Contracts in a given Pool
will vary depending upon the type of Contracts included therein. Each
Prospectus Supplement will contain information with respect to the type and
maturities of the Contracts in the related Pool. The related Prospectus
Supplement will specify the circumstances, if any, under which the related
Contracts will be subject to prepayment penalties. The prepayment experience
on the Contracts in a Pool will affect the weighted average life of the
related Series of Certificates.
The rate of prepayment on the Contracts cannot be predicted. The
prepayment experience of the related Trust Fund may be affected by a wide
variety of factors, including general economic conditions, prevailing
interest rate levels, the availability of alternative financing and homeowner
mobility. In general, if prevailing rates fall significantly below the
Contract Rates borne by the Contracts, such Contracts are more likely to be
subject to higher prepayment rates than if prevailing interest rates remain
at or above such Contract Rates. Conversely, if prevailing interest rates
rise appreciably above the Contract Rates borne by the Contracts, such
Contracts are more likely to experience a lower prepayment rate than if
prevailing rates remain at or below such Contract Rates. However, there can
be no assurance that such will be the case.
Because of the depreciating nature of manufactured housing, which limits
the possibilities for refinancing, and because the terms and principal
amounts of manufactured housing contracts are generally shorter and smaller
than the terms and principal amounts of mortgage loans secured by site-built
homes, changes in interest rates have a correspondingly smaller effect on the
amount of the monthly payments on manufactured housing contracts than on the
amount of the monthly payments on mortgage loans secured by site-built homes.
Consequently, changes in interest rates may play a smaller role in prepayment
behavior of manufactured housing contracts than they do in the prepayment
behavior of loans secured by mortgages on site-built homes. Conversely,
local economic conditions and certain of the other factors mentioned above
may play a larger role in the prepayment behavior of manufactured housing
contracts than they do in the prepayment behavior of loans secured by
mortgages on site-built homes.
In addition, the enforcement of a "due-on-sale" provision (as described
below) will have the same effect as a prepayment of the related Contract. See
"Certain Legal Aspects of the Contracts -- Due-on-Sale Clauses." Unless
otherwise specified in the related Prospectus Supplement, substantially all
Contracts will contain due-on-sale provisions permitting the lender to
accelerate the maturity of the loan upon sale or certain transfers by the
borrower of the related Manufactured Home (and, in the case of a Land-and-
Home Contract, the related underlying real property). Contracts insured by
the FHA or partially guaranteed by the VA are assumable with the consent of
the FHA and the VA, respectively. Thus, the rate of prepayments on such
Contracts may be lower than that of conventional Contracts bearing comparable
interest rates. The Master Servicer generally will enforce any due-on-sale or
due-on-encumbrance clause, to the extent it has knowledge of the conveyance
or further encumbrance or the proposed conveyance or proposed further
encumbrance of the Manufactured Home (and, in the case of a Land-and-Home
Contract, the underlying real property) and reasonably believes that it is
entitled to do so under applicable law; provided, however, that the Master
Servicer will not take any enforcement action that would impair or threaten
to impair any recovery under any related insurance policy.
When a full prepayment is made on a Contract, the borrower is charged
interest on the principal amount of the Contract so prepaid only for the
number of days in the month actually elapsed up to the date of the
prepayment, rather than for a full month. The effect of prepayments in full
will be to reduce the amount of interest passed through or paid in the
following month to holders of Certificates because interest on the principal
amount of any Contract so prepaid will generally be paid only to the date of
prepayment. Partial prepayments in a given month may be applied to the
outstanding principal balances of the Contracts so prepaid on the first day
of the month of receipt or the month following receipt. In the latter case,
partial prepayments will not reduce the amount of interest passed through or
paid in such month. Unless otherwise specified in the related Prospectus
Supplement, neither full nor partial prepayments will be passed through or
paid until the month following receipt.
Unless otherwise specified in the related Prospectus Supplement, no
scheduled payment on a Contract will be considered delinquent once 90% of the
amount thereof is received. Late payments or payments of less than 100% of
any scheduled payment on a simple interest Contract will result in such
Contract amortizing more slowly than originally scheduled and could extend
the maturity date of any such Contract beyond its original scheduled maturity
date.
Applicable state laws generally regulate interest rates and other
charges, require certain disclosures, and require licensing of certain
originators and servicers of Contracts. In addition, most have other laws,
public policy and general principles of equity relating to the protection of
consumers, unfair and deceptive acts and practices which may apply to the
origination, servicing and collection of the Contracts. Depending on the
provisions of the applicable law and the specific facts and circumstances
involved, violations of these laws, policies and principles may limit the
ability of the Master Servicer to collect all or part of the principal of or
interest on the Contracts, may entitle the borrower to a refund of amounts
previously paid and, in addition, could subject the Master Servicer to
damages and administrative sanctions.
If the rate at which interest is passed through or paid to the holders
of Certificates of a Series is calculated on a Contract-by-Contract basis,
disproportionate principal prepayments among Contracts with different
Contract Rates will affect the yield on such Certificates. In most cases, the
effective yield to Certificateholders will be lower than the yield otherwise
produced by the applicable pass-through rate or interest rate and purchase
price, because while interest will accrue on each Contract from the first day
of the month (unless otherwise specified in the related Prospectus
Supplement), the distribution of such interest will not be made earlier than
the month following the month of accrual.
The yield to an investor who purchases Certificates in the secondary
market at a price other than par will vary from the anticipated yield if the
rate of prepayment on the Contracts is actually different than the rate
anticipated by such investor at the time such Certificates were purchased.
Under certain circumstances, the Master Servicer, the holders of the
residual interests in a REMIC or any person specified in the related
Prospectus Supplement may have the option to purchase the assets of a Trust
Fund thereby effecting earlier retirement of the related Series of
Certificates. See "The Agreements -- Termination; Optional Termination."
The relative contribution of the various factors affecting prepayment
may vary from time to time. There can be no assurance as to the rate of
payment of principal of the Trust Fund Assets at any time or over the lives
of the Certificates.
The Prospectus Supplement relating to a Series of Certificates will
discuss in greater detail the effect of the rate and timing of principal
payments (including prepayments), delinquencies and losses on the yield,
weighted average lives and maturities of such Certificates.
THE AGREEMENTS
Set forth below is a description of the material provisions of each
Agreement which are not described elsewhere in this Prospectus. The
description is subject to, and qualified in its entirety by reference to, the
provisions of each Agreement. Where particular provisions or terms used in
the Agreements are referred to, such provisions or terms are as specified in
the Agreements.
ASSIGNMENT OF THE TRUST FUND ASSETS
At the time of issuance of any series of Certificates, the Depositor
will assign (or cause to be assigned) to the Trustee, without recourse, the
Contracts comprising the related Trust Fund, together with all principal and
interest received (if the Contracts are assigned based on actual principal
balances) or scheduled to be received (if the Contracts are assigned based on
scheduled principal balances) by or on behalf of the Depositor on or with
respect to such Contracts after the Cut-off Date, other than any Retained
Interest specified in the related Prospectus Supplement. The Trustee will,
concurrently with such assignment, deliver such Certificates to the Depositor
in exchange for the Contracts. Each Contract will be identified in a schedule
appearing as an exhibit to the related Agreement. Such schedule will include
detailed information in respect of each Contract included in the related
Trust Fund, including the Contract number, the outstanding principal amount
and the Contract Rate.
The Prospectus Supplement for any Series will state whether the Trustee,
the Master Servicer (which may also be the Seller), as agent for the Trustee,
or a custodian specified in such Prospectus Supplement will maintain custody
of the original Contract, any assignment of such Contract to the Seller and
any extensions, supplements, waivers or modifications to such Contract (the
"Contract Documents").
In order to give notice of the right, title and interest of the Trustee
in the Contracts, the Depositor will cause UCC-1 financing statements to be
executed by the Seller identifying the Depositor as secured party and by the
Depositor identifying the Trustee as the secured party and, in each case,
identifying the Contracts as collateral. Unless otherwise specified in the
related Prospectus Supplement, the Contracts will not be stamped or otherwise
marked to reflect their assignment from the Company to the Trust. Therefore,
if, through negligence, fraud or otherwise, a subsequent purchaser were able
to take physical possession of the Contracts without notice of such
assignment, the interest of the Trustee in the Contracts could be defeated.
With respect to each Land-and-Home Contract, the related Prospectus
Supplement will state whether the Trustee, the Master Servicer (which may
also be the Seller), as agent for the Trustee, or a custodian specified in
such Prospectus Supplement will maintain custody of the original Contract,
the related mortgage or deed of trust and the assignment of such mortgage or
deed of trust in recordable form (such mortgage or deed of trust together
with such assignment, the "Mortgage Documents"), and any assignments of or
extensions, supplements, waivers or modification to such Contract. The
related Prospectus Supplement will also state whether assignments to the
Trustee of the mortgage or deed of trust related to the underlying real
property securing such Contracts will be recorded. In some states in the
absence of such recordation the assignment to the Trustee of such mortgage or
deed of trust may not be effective, and in the absence of such recordation
may not be effective against creditors of or purchasers from the Seller or a
trustee in bankruptcy of the Seller.
Unless otherwise specified in the related Prospectus Supplement, if the
Trustee or custodian specified in the such Prospectus Supplement is delivered
the Contract Documents and/or the Mortgage Documents, the Trustee or
custodian, as the case may be, will review the Contract Documents and the
Mortgage Documents (if any) that have been delivered to it within the time
period specified in the related Prospectus Supplement after receipt thereof.
Unless otherwise specified in the related Prospectus Supplement, if any such
document is found to be missing or defective in any material respect, the
Trustee or such custodian will notify the Master Servicer and the Depositor,
and the Master Servicer will notify the related Seller. If such Seller cannot
cure the omission or defect within the time period specified in the related
Prospectus Supplement after receipt of such notice, such Seller will be
obligated to either (i) purchase the related Contract from the Trust Fund at
the related Purchase Price or (ii) if so specified in the related Prospectus
Supplement, remove such Contract from the Trust Fund and substitute in its
place one or more other Contracts that meets certain requirements set forth
therein. There can be no assurance that a Seller will fulfill this purchase
or substitution obligation. Although the Master Servicer may be obligated to
enforce such obligation to the extent described above under "The Manufactured
Housing Program -- Representations by Sellers; Repurchases," the Master
Servicer will not be obligated to purchase or replace such Contract if the
Seller defaults on its obligation. Unless otherwise specified in the related
Prospectus Supplement, this obligation to cure, purchase or substitute
constitutes the sole remedy available to the Certificateholders or the
Trustee for omission of, or a material defect in, a Contract Document or a
Mortgage Document (if any). The Trustee will be authorized to appoint a
custodian pursuant to a custodial agreement to maintain possession of and, if
applicable, to review the Contract Documents and/or the Mortgage Documents
(if any) as agent of the Trustee.
The Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the Agreement. Unless otherwise specified in the related
Prospectus Supplement, a breach of such representations and warranties by the
Master Servicer does not give rise to an obligation by the Master Servicer to
repurchase any affected Mortgage Loans.
Notwithstanding the foregoing provisions, with respect to a Trust Fund
for which a REMIC election is to be made, no purchase or substitution of a
Contract will be made if such purchase or substitution would result in a
prohibited transaction tax under the Code (unless the Master Servicer or a
holder of the related residual certificate otherwise pays such prohibited
transaction from its own funds as described herein). See "The Manufactured
Housing Program -- Representations by Sellers; Repurchases."
NO RECOURSE TO SELLERS, DEPOSITOR OR MASTER SERVICER
As described above under " -- Assignment of the Contracts," the
Depositor will cause the Contracts comprising the related Trust Fund to be
assigned to the Trustee, without recourse. However, each Seller will be
obligated to repurchase or substitute for any Contract as to which certain
representations and warranties are breached where such breach materially and
adversely affects the Certificateholders' interest in such Contract, or for
failure to deliver certain documents relating to the Contracts as described
herein under "Assignment of the Contracts" and "The Manufactured Housing
Program -- Representations by Sellers; Repurchases." These obligations to
purchase or substitute constitute the sole remedy available to the
Certificateholders or the Trustee for a breach of any such representation or
failure to deliver a constituent document.
PAYMENTS ON CONTRACTS; DEPOSITS TO COLLECTION ACCOUNT
The Master Servicer will establish and maintain or cause to be
established and maintained with respect to the related Trust Fund a separate
account or accounts for the collection of payments on the related Trust
Fund Assets in the Trust Fund (the "Collection Account") which, unless
otherwise specified in the related Prospectus Supplement, must be either
(i) maintained with a depository institution the debt obligations of which
(or in the case of a depository institution that is the principal subsidiary
of a holding company, the obligations of which) are rated in one of the
two highest rating categories by the Rating Agency or Rating Agencies that
rated one or more classes of the related Series of Certificates, (ii) an
account or accounts the deposits in which are fully insured by either the
Bank Insurance Fund (the "BIF") of the Federal Deposit Insurance Corporation
(the "FDIC") or the Savings Association Insurance Fund (as successor to the
Federal Savings and Loan Insurance Corporation ("SAIF")), (iii) an account
or accounts the deposits in which are insured by the BIF or SAIF (to the
limits established by the FDIC), and the uninsured deposits in which are
otherwise secured such that, as evidenced by an opinion of counsel, the
Certificateholders have a claim with respect to the funds in the Collection
Account or a perfected first priority security interest against any
collateral securing such funds that is superior to the claims of any other
depositors or general creditors of the depository institution with which
the Collection Account is maintained or (iv) an account or accounts otherwise
acceptable to each Rating Agency. The collateral eligible to secure
amounts in the Collection Account is limited to Permitted Investments. A
Collection Account may be maintained as an interest bearing account or the
funds held therein may be invested pending each succeeding Distribution
Date in Permitted Investments. Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer or its designee will be entitled
to receive any such interest or other income earned on funds in the
Collection Account as additional compensation and will be obligated to
deposit in the Collection Account the amount of any loss immediately as
realized. The Collection Account may be maintained with the Master Servicer
or with a depository institution that is an affiliate of the Master Servicer,
provided it meets the standards set forth above.
The Master Servicer will deposit or cause to be deposited in the
Collection Account for each Trust Fund, to the extent applicable and unless
otherwise specified in the related Prospectus Supplement and provided in the
Agreement, the following payments and collections received or advances made
by or on behalf of it subsequent to the Cut-off Date (other than payments due
on or before the Cut-off Date and exclusive of any amounts representing
Retained Interest):
(i) all payments on account of principal, including Principal
Prepayments and, if specified in the related Prospectus Supplement, any
applicable prepayment penalties, on the Contracts;
(ii) all payments on account of interest on the Contracts, net of
applicable servicing compensation;
(iii) all proceeds (net of unreimbursed payments of property taxes
insurance premiums and similar items ("Insured Expenses") incurred, and
unreimbursed Advances made, by the Master Servicer, if any) of the
hazard insurance policies, to the extent such proceeds are not applied
to the restoration of the property or released to the obligor in
accordance with the Master Servicer's normal servicing procedures
(collectively, "Insurance Proceeds") and all other cash amounts (net of
unreimbursed expenses incurred in connection with liquidation,
repossession or foreclosure ("Liquidation Expenses") and unreimbursed
Advances made, by the Master Servicer, if any) received and
retained in connection with the liquidation of defaulted Contracts,
by repossession, foreclosure or otherwise ("Liquidation Proceeds"),
together with any net proceeds received on a monthly basis with
respect to any properties acquired on behalf of the Certificateholders
by repossession (in the case of Manufactured Homes) or foreclosure
or deed in lieu of foreclosure (in the case of underlying real property
securing Land-and-Home Contracts);
(iv) all proceeds of any Contract or property in respect thereof
purchased by the Master Servicer, the Depositor or any Seller as
described under "The Manufactured Housing Program -- Representations by
Sellers; Repurchases" or " -- Assignment of Trust Fund Assets" above and
all proceeds of any Contract repurchased as described under " --
Termination; Optional Termination" below;
(v) all payments required to be deposited in the Collection
Account with respect to any deductible clause in any blanket insurance
policy described under " -- Hazard Insurance" below;
(vi) any amount required to be deposited by the Master Servicer in
connection with losses realized on investments for the benefit of the
Master Servicer of funds held in the Collection Account and, to the
extent specified in the related Prospectus Supplement, any payments
required to be made by the Master Servicer in connection with prepayment
interest shortfalls; and
(vii) all other amounts required to be deposited in the
Collection Account pursuant to the Agreement.
The Master Servicer (or the Depositor, as applicable) may from time to
time direct the institution that maintains the Collection Account to withdraw
funds from the Collection Account for the following purposes:
(i) to pay to the Master Servicer the servicing fees described in
the related Prospectus Supplement, the master servicing fees (subject to
reduction) and, as additional servicing compensation, earnings on or
investment income with respect to funds in the amounts in the Collection
Account credited thereto;
(ii) to reimburse the Master Servicer for Advances, such right of
reimbursement with respect to any Contract being limited to amounts
received that represent late recoveries of payments of principal and/or
interest on such Contract (or Insurance Proceeds or Liquidation Proceeds
with respect thereto) with respect to which such Advance was made;
(iii) to reimburse the Master Servicer for any Advances
previously made which the Master Servicer has determined to be
nonrecoverable;
(iv) to reimburse the Master Servicer from Insurance Proceeds for
expenses incurred by the Master Servicer and covered by the related
insurance policies;
(v) to reimburse the Master Servicer for unpaid master servicing
fees and unreimbursed out-of-pocket costs and expenses incurred by the
Master Servicer in the performance of its servicing obligations, such
right of reimbursement being limited to amounts received representing
late recoveries of the payments for which such advances were made;
(vi) to reimburse the Master Servicer or the Depositor for expenses
incurred and reimbursable pursuant to the Agreement;
(vii) to withdraw any amount deposited in the Collection
Account and not required to be deposited therein; and
(viii) to clear and terminate the Collection Account upon
termination of the Agreement.
In addition, unless otherwise specified in the related Prospectus
Supplement, on or prior to the business day immediately preceding each
Distribution Date, the Master Servicer shall withdraw from the Collection
Account the amount of Available Funds, to the extent on deposit, for deposit
in an account maintained by the Trustee for the related Series of
Certificates.
PRE-FUNDING ACCOUNT
If so provided in the related Prospectus Supplement, the Master Servicer
will establish and maintain a Pre-Funding Account, in the name of the related
Trustee on behalf of the related Certificateholders, into which the Depositor
will deposit cash in an amount equal to the Pre-Funded Amount on the related
Closing Date. The Pre-Funding Account will be maintained with the Trustee for
the related Series of Certificates and is designed solely to hold funds to be
applied by such Trustee during the Funding Period to pay to the Depositor the
purchase price for Subsequent Contracts. Monies on deposit in the Pre-Funding
Account will not be available to cover losses on or in respect of the related
Contracts. The Pre-Funded Amount will not exceed 50% of the initial aggregate
principal amount of the Certificates of the related Series. The Pre-Funded
Amount will be used by the related Trustee to purchase Subsequent Contracts
from the Depositor from time to time during the Funding Period. The Funding
Period, if any, for a Trust Fund will begin on the related Closing Date and
will end on the date specified in the related Prospectus Supplement, which in
no event will be later than the date that is one year after the related
Closing Date. Monies on deposit in the Pre-Funding Account may be invested in
Permitted Investments under the circumstances and in the manner described in
the related Agreement. Earnings on investment of funds in the Pre-Funding
Account will be deposited into the related Collection Account or such other
trust account as is specified in the related Prospectus Supplement and losses
will be charged against the funds on deposit in the Pre-Funding Account. Any
amounts remaining in the Pre-Funding Account at the end of the Funding Period
will be distributed to the related Certificateholders in the manner and
priority specified in the related Prospectus Supplement, as a prepayment of
principal of the related Certificates.
In addition, if so provided in the related Prospectus Supplement, on the
related Closing Date the Depositor will deposit in an account (the
"Capitalized Interest Account") cash in such amount as is necessary to cover
shortfalls in interest on the related Series of Certificates that may arise
as a result of utilization of the Pre-Funding Account as described above. The
Capitalized Interest Account shall be maintained with the Trustee for the
related Series of Certificates and is designed solely to cover the
above-mentioned interest shortfalls. Monies on deposit in the Capitalized
Interest Account will not be available to cover losses on or in respect of
the related Contracts. To the extent that the entire amount on deposit in the
Capitalized Interest Account has not been applied to cover shortfalls in
interest on the related Series of Certificates by the end of the Funding
Period, any amounts remaining in the Capitalized Interest Account will be
paid to the Depositor.
SUB-SERVICING BY SELLERS
Each Seller of a Contract or any other servicing entity may act as the
Sub-Servicer for such Contract pursuant to an agreement (each, a
"Sub-Servicing Agreement"), which will not contain any terms inconsistent
with the related Agreement. While each Sub-Servicing Agreement will be a
contract solely between the Master Servicer and the Sub-Servicer, the
Agreement pursuant to which a Series of Certificates is issued will provide
that, if for any reason the Master Servicer for such Series of Certificates
is no longer the Master Servicer of the related Contracts, the Trustee or any
successor Master Servicer must recognize the Sub-Servicer's rights and
obligations under such Sub-Servicing Agreement.
All references in this Prospectus and in the Prospectus Supplement for
any Series to actions, rights or duties of the Master Servicer will be deemed
to include any one or more Sub-Servicers acting on the Master Servicer's
behalf. Notwithstanding the foregoing, unless otherwise provided in the
related Prospectus Supplement, the Master Servicer will remain liable for its
servicing duties and obligations under the Agreement as if the Master
Servicer alone were servicing the Contracts.
COLLECTION PROCEDURES
The Master Servicer will make reasonable efforts to collect all payments
called for under the Contracts and will, consistent with each Agreement and
any Pool Insurance Policy, FHA Insurance, VA Guaranty, bankruptcy bond or
alternative arrangements, follow such collection procedures as are customary
with respect to loans that are comparable to the Contracts. Consistent with
the above, the Master Servicer may, in its discretion, (i) waive any
assumption fee, late payment or other charge in connection with a Contract
and (ii) to the extent not inconsistent with the coverage of such Contract by
a Pool Insurance Policy, FHA Insurance, VA Guaranty, bankruptcy bond or
alternative arrangements, if applicable, arrange with a borrower a schedule
for the liquidation of delinquencies running for no more than 125 days after
the applicable due date for each payment. To the extent the Master Servicer
is obligated to make or cause to be made Advances, such obligation will
remain during any period of such an arrangement.
In any case in which property securing a Contract has been, or is about
to be, conveyed by the obligor, the Master Servicer will, to the extent it
has knowledge of such conveyance or proposed conveyance, exercise or cause to
be exercised its rights to accelerate the maturity of such Contract under any
due-on-sale clause applicable thereto. If these conditions are not met or if
the Master Servicer reasonably believes it is unable under applicable law to
enforce such due-on-sale clause or if such Contract is insured by the FHA or
partially guaranteed by the VA, the Master Servicer will enter into or cause
to be entered into an assumption and modification agreement with the person
to whom such property has been or is about to be conveyed, pursuant to which
such person becomes liable for repayment of the Contract and, to the extent
permitted by applicable law, the obligor remains liable thereon. Any fee
collected by or on behalf of the Master Servicer for entering into an
assumption agreement will be retained by or on behalf of the Master Servicer
as additional servicing compensation. See "Certain Legal Aspects of the
Contracts -- Due-on-Sale Clauses." In connection with any such assumption,
the terms of the related Contract may not be changed.
HAZARD INSURANCE
Except as otherwise specified in the related Prospectus Supplement, the
Master Servicer will require the obligor on each Contract to maintain a
hazard insurance policy providing for no less than the coverage of the
standard form of fire insurance policy with extended coverage customary for
the type of Manufactured Home in the state in which such Manufactured Home is
located. Such coverage will generally be in an amount that equal to the
lesser of (i) the maximum insurable value of the Manufactured Home (and, in
the case of a Land-and-Home Contract, the underlying real property) securing
such Contract and (ii) the outstanding principal balance of the Contract;
provided, however, that the amount of such coverage will be sufficient to
avoid the application of any co-insurance clause in the policy. Each hazard
insurance policy caused to be maintained by the Master Servicer will contain
a standard loss payee clause in favor of the Master Servicer and its
successors and assigns. If any obligor is in default in the payment of
premiums on its hazard insurance policy or policies, the Master Servicer will
pay such premiums out of its own funds, and may add separately such premium
to the obligor's obligations as provided by the Contract, but may not add
such premium to the remaining principal balance of the Contract.
In general, the standard form of fire and extended coverage policy
covers physical damage to or destruction of the improvements securing a
manufactured housing contract by fire, lightning, explosion, smoke, windstorm
and hail, riot, strike and civil commotion, subject to the conditions and
exclusions particularized in each policy. Although the policies relating to
the Contracts may have been underwritten by different insurers under
different state laws in accordance with different applicable forms and
therefore may not contain identical terms and conditions, the basic terms
thereof are dictated by respective state laws, and most such policies
typically do not cover any physical damage resulting from the following: war,
revolution, governmental actions, floods and other water-related causes,
earth movement (including earthquakes, landslides and mud flows), nuclear
reactions, wet or dry rot, vermin, rodents, insects or domestic animals,
theft and, in certain cases, vandalism and hurricanes. The foregoing list is
merely indicative of certain kinds of uninsured risks and is not intended to
be all inclusive. If the Manufactured Home securing a Contract is located in
a federally designated special flood area at the time of origination, the
Master Servicer will require the obligor to obtain and maintain flood
insurance.
The Master Servicer may maintain, in lieu of causing individual hazard
insurance policies to be maintained with respect to each individual Contract,
and will maintain, to the extent that the related Contract does not require
the obligor to maintain a hazard insurance policy with respect to the related
Manufactured Home (and, in the case of a Land-and-Home Contract, the
underlying real property), one or more blanket insurance policies covering
losses on the obligor's interest on the Contracts resulting from the absence
or inefficiency of individual hazard insurance policies. The Master Servicer
will pay the premium for such blanket policy on the basis described therein
and will pay any deductible amount with respect to claims under such policy
relating to the Contracts.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal servicing compensation to be paid to the Master Servicer
in respect of its master servicing activities for each Series of Certificates
will be equal to the percentage per annum described in the related Prospectus
Supplement (which may vary under certain circumstances) of the outstanding
principal balance of each Contract, and such compensation will be retained by
it from collections of interest on such Contract in the related Trust Fund
(the "Master Servicing Fee"). As compensation for its servicing duties, a
Sub-Servicer or, if there is no Sub-Servicer, the Master Servicer will be
entitled to a monthly servicing fee as described in the related Prospectus
Supplement. In addition, the Master Servicer or Sub-Servicer will retain all
prepayment charges, assumption fees and late payment charges, to the extent
collected from borrowers, and any benefit that may accrue as a result of the
investment of funds in the applicable Collection Account (unless otherwise
specified in the related Prospectus Supplement).
The Master Servicer will, to the extent provided in the related
Prospectus Supplement, pay or cause to be paid certain ongoing expenses
associated with each Trust Fund and incurred by it in connection with its
responsibilities under the related Agreement, including, without limitation,
payment of the fees and disbursements of the Trustee, any custodian appointed
by the Trustee, the certificate registrar and any paying agent, and payment
of expenses incurred in enforcing the obligations of Sub-Servicers and
Sellers. The Master Servicer will be entitled to reimbursement of expenses
incurred in enforcing the obligations of Sub-Servicers and Sellers under
certain limited circumstances. Certain other expenses may be borne by the
related Trust Fund as specified in the related Prospectus Supplement.
EVIDENCE AS TO COMPLIANCE
Each Agreement will provide that on or before a specified date in each
year, a firm of independent public accountants will furnish a statement to
the Trustee to the effect that, on the basis of the examination by such firm
of certain documents and records relating to the servicing of manufactured
housing contracts serviced by or on behalf of the Master Servicer under
pooling and servicing agreements similar to such Agreement, such servicing
has been conducted in compliance with such Agreement, except for any
exceptions set forth in such statement.
Each Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by an
officer of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding year.
Copies of the annual accountants' statement and the statement of an
officer of the Master Servicer may be obtained by Certificateholders of the
related Series without charge upon written request to the Master Servicer at
the address set forth in the related Prospectus Supplement.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR
The Master Servicer under each Agreement will be named in the related
Prospectus Supplement. The entity serving as Master Servicer may be an
affiliate of the Depositor and may otherwise have normal business
relationships with the Depositor or the Depositor's affiliates.
Each Agreement will provide that the Master Servicer may not resign from
its obligations and duties under the Agreement except upon a determination
that its duties thereunder are no longer permissible under applicable law.
The Master Servicer may, however, be removed from its obligations and duties
as set forth in the Agreement. No such resignation will become effective
until the Trustee or a successor servicer has assumed the Master Servicer's
obligations and duties under the Agreement.
Each Agreement will further provide that neither the Master Servicer,
the Depositor nor any director, officer, employee, or agent of the Master
Servicer or the Depositor will be under any liability to the related Trust
Fund or Certificateholders for any action taken or for refraining from the
taking of any action in good faith pursuant to the Agreement, or for errors
in judgment; provided, however, that neither the Master Servicer, the
Depositor nor any such person will be protected against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of duties thereunder or by reason of
reckless disregard of obligations and duties thereunder. Each Agreement will
further provide that the Master Servicer, the Depositor and any director,
officer, employee or agent of the Master Servicer or the Depositor will be
entitled to indemnification by the related Trust Fund and will be held
harmless against any loss, liability or expense incurred in connection with
any legal action relating to the Agreement or the Certificates, other than
any loss, liability or expense related to any specific Contract or Contracts
(except any such loss, liability or expense otherwise reimbursable pursuant
to the Agreement) and any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the performance of
duties thereunder or by reason of reckless disregard of obligations and
duties thereunder. In addition, each Agreement will provide that neither the
Master Servicer nor the Depositor will be under any obligation to appear in,
prosecute or defend any legal action which is not incidental to its
respective responsibilities under the Agreement and which in its opinion may
involve it in any expense or liability. The Master Servicer or the Depositor
may, however, in its discretion undertake any such action which it may deem
necessary or desirable with respect to the Agreement and the rights and
duties of the parties thereto and the interests of the Certificateholders
thereunder. In such event, the legal expenses and costs of such action and
any liability resulting therefrom will be expenses, costs and liabilities of
the Trust Fund and the Master Servicer or the Depositor, as the case may be,
will be entitled to be reimbursed therefor out of funds otherwise
distributable to Certificateholders.
Except as otherwise specified in the related Prospectus Supplement, any
person into which the Master Servicer may be merged or consolidated, or any
person resulting from any merger or consolidation to which the Master
Servicer is a party, or any person succeeding to the business of the Master
Servicer, will be the successor of the Master Servicer under each Agreement,
provided that such person is qualified to sell mortgage loans to, and service
mortgage loans on behalf of, the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC") and further
provided that such merger, consolidation or succession does not adversely
affect the then current rating or ratings of the class or classes of
Certificates of such Series that have been rated.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
Except as otherwise specified in the related Prospectus Supplement,
Events of Default under each Agreement will consist of (i) any failure by the
Master Servicer to distribute or cause to be distributed to
Certificateholders of any class any required payment which continues
unremedied for five days after the giving of written notice of such failure
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
such class evidencing not less than 25% of the total distributions allocated
to such class ("Percentage Interests"); (ii) any failure by the Master
Servicer duly to observe or perform in any material respect any of its other
covenants or agreements in the Agreement, which failure materially affects
the rights of Certificateholders and continues unremedied for thirty days
after the giving of written notice of such failure 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 not less
than 25% of the aggregate Percentage Interests constituting such class; and
(iii) certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceeding and certain actions by or on
behalf of the Master Servicer indicating its insolvency, reorganization or
inability to pay its obligations.
If specified in the related Prospectus Supplement, the Agreement will
permit the Trustee to sell the Trust Fund Assets and the other assets of the
Trust Fund described under "Credit Enhancement" herein in the event that
payments in respect thereto are insufficient to make payments required in the
Agreement. The assets of the Trust Fund will be sold only under the
circumstances and in the manner specified in the related Prospectus
Supplement.
Unless otherwise provided in the related Prospectus Supplement, so long
as an Event of Default under an Agreement remains unremedied, the Depositor
or the Trustee may, and at the direction of holders of Certificates of any
class evidencing not less than 66 2/3% of the aggregate Percentage Interests
constituting such class and under such other circumstances as may be
specified in such Agreement, the Trustee shall terminate all of the rights
and obligations of the Master Servicer under the Agreement relating to such
Trust Fund and in and to the related Trust Fund Assets, whereupon the Trustee
will succeed to all of the responsibilities, duties and liabilities of the
Master Servicer under the Agreement, including, if specified in the related
Prospectus Supplement, the obligation to make Advances, and will be entitled
to similar compensation arrangements. In the event that the Trustee is
unwilling or unable so to act, it may appoint, or petition a court of
competent jurisdiction for the appointment of, a manufactured housing loan
servicing institution with a net worth of a least $10,000,000 to act as
successor to the Master Servicer under the Agreement. Pending such
appointment, the Trustee is obligated to act in such capacity. The Trustee
and any such successor may agree upon the servicing compensation to be paid,
which in no event may be greater than the compensation payable to the Master
Servicer under the Agreement.
Unless otherwise provided in the related Prospectus Supplement, no
Certificateholder, solely by virtue of such holder's status as a
Certificateholder, will have any right under any Agreement to institute any
proceeding with respect to such Agreement, unless such holder previously has
given to the Trustee written notice of default and unless the holders of
Certificates of any class of such Series evidencing not less than 66 2/3% of
the aggregate Percentage Interests constituting such class have made written
request upon the Trustee to institute such proceeding in its own name as
Trustee thereunder and have offered to the Trustee reasonable indemnity, and
the Trustee for 60 days has neglected or refused to institute any such
proceeding.
AMENDMENT
Except as otherwise specified in the related Prospectus Supplement, each
Agreement may be amended by the Depositor, the Master Servicer and the
Trustee, without the consent of any of the Certificateholders, (i) to cure
any ambiguity or mistake; (ii) to correct any defective provision therein or
to supplement any provision therein which may be inconsistent with any other
provision therein; (iii) to add to the duties of the Depositor, the Seller or
the Master Servicer, (iv) to add any other provisions with respect to matters
or questions arising thereunder or (v) to modify, alter, amend, add to or
rescind any of the terms or provisions contained in such Agreement; provided,
however, that any such action pursuant to clauses (iv) or (v) above will not,
as evidenced by an opinion of counsel, adversely affect in any material
respect the interests of any Certificateholder; provided, however, that no
opinion of counsel will be required if the person requesting such amendment
obtains a letter from each Rating Agency requested to rate the class or
classes of Certificates of such Series stating that such amendment will not
result in the downgrading or withdrawal of the respective ratings then
assigned to such Certificates. In addition, if a REMIC or FASIT election is
made with respect to a Trust Fund, the related Agreement may be amended to
modify, eliminate or add to any of its provisions to such extent as may be
necessary to maintain the qualification of the related Trust Fund as a REMIC
or FASIT, avoid or minimize the risk of the imposition of any tax on the
REMIC or FASIT or to comply with any other provision of the Code, provided
that the Trustee has received an opinion of counsel to the effect that such
action is necessary or helpful to maintain such qualification, avoid or
minimize the risk of imposition of such a tax or comply with any such
requirement of the Code, as the case may be. Except as otherwise specified in
the related Prospectus Supplement, each Agreement may also be amended by the
Depositor, the Master Servicer and the Trustee with the consent of holders of
Certificates of such Series evidencing not less than 66 2/3% of the aggregate
Percentage Interests of each class affected thereby for the purpose of adding
any provisions to or changing in an manner or eliminating any of the
provisions of the Agreement or of modifying in any manner the rights of the
holders of the related Certificates; provided, however, that no such
amendment may (i) reduce in any manner the amount of or delay the timing of,
payments received on Contracts which are required to be distributed on any
Certificate without the consent of the holder of such Certificate, (ii)
adversely affect in any material respect the interests of the holders of any
class of Certificates in a manner other than as described in the immediately
preceding clause (i), without the consent of the holders of such class
evidencing not less than 66 2/3% of the Percentage Interests of such class or
(iii) reduce the aforesaid percentage of Certificates of any class the
holders of which are required to consent to any such amendment without the
consent of the holders of all Certificates of such class covered by such
Agreement then outstanding. If a REMIC or FASIT election is made with
respect to a Trust Fund, the Trustee will not be entitled to consent to an
amendment to the related Agreement without having first received an opinion
of counsel to the effect that such amendment will not cause such Trust Fund
to fail to qualify as a REMIC or as a FASIT, as the case may be.
TERMINATION; OPTIONAL TERMINATION
Unless otherwise specified in the related Agreement, the obligations
created by each Agreement for each Series of Certificates will terminate upon
the payment to the related Certificateholders of all amounts held in the
Collection Account or by the Master Servicer and required to be paid to them
pursuant to such Agreement following the later of (i) the final payment of or
other liquidation of the last of the Trust Fund Assets subject thereto or the
disposition of all property acquired upon repossession or foreclosure of any
such Trust Fund Assets remaining in the Trust Fund and (ii) the purchase by
the Master Servicer or, if specified in the related Prospectus Supplement a
call right with respect to the Trust Fund Assets after the passage of a
specified period of time or after the principal balance of the Trust Fund
Assets or the Securities has been reduced to a specified level.
Unless otherwise specified by the related Prospectus Supplement, any
such purchase of Trust Fund Assets and property acquired in respect of Trust
Fund Assets will be made at the option of the Master Servicer or such other
person at a price specified in the related Prospectus Supplement. The
exercise of such right will effect early retirement of the Certificates of
that Series, but the right of the Master Servicer or such other person or, if
applicable, such holder of the REMIC residual interest, to so purchase is
subject to the principal balance of the related Trust Fund Assets being less
than the percentage specified in the related Prospectus Supplement of the
aggregate principal balance of the Trust Fund Assets as of the Cut-off Date
for the Series. The foregoing is subject to the provision that if a REMIC
election is made with respect to a Trust Fund, any repurchase pursuant to
clause (ii) above will be made only in connection with a "qualified
liquidation" of the REMIC within the meaning of Section 860F(g)(4) of the
Code.
THE TRUSTEE
The Trustee under each Agreement will be named in the applicable
Prospectus Supplement. The commercial bank or trust company serving as
Trustee may have normal banking relationships with the Depositor, the Master
Servicer and any of their respective affiliates.
CERTAIN LEGAL ASPECTS OF THE CONTRACTS
The following discussion contains summaries, which are general in
nature, of certain legal matters relating to the Contracts. Because such
legal aspects are governed primarily by applicable state law (which laws may
differ substantially), the descriptions do not, except as expressly provided
below, reflect the laws of any particular state, nor encompass the laws of
all states in which the security for the Contracts is situated. The
descriptions are qualified in their entirety by reference to the applicable
federal laws and the appropriate laws of the states in which Contracts may be
originated.
GENERAL
As a result of the assignment of the Contracts to the Trustee, the
Trustee will succeed to all of the rights (including the right to receive
payment on the Contracts) of the obligee under the Contracts. Each Contract
evidences both (a) the obligation of the obligor to repay the loan evidenced
thereby and (b) the grant of a security interest in the Manufactured Home to
secure repayment of such loan. Certain aspects of both features of the
Contracts are described more fully below.
The Contracts generally are "chattel paper" as defined in the Uniform
Commercial Code (the "UCC") in effect in the states in which the Manufactured
Homes initially were registered. Pursuant to the UCC, the sale of chattel
paper is treated in a manner similar to perfection of a security interest in
chattel paper. Under the Agreement, the Master Servicer will transfer
physical possession of the Contracts to the Trustee or its custodian or may
retain physical possession of the Contracts as custodian for the Trustee. In
addition, the Master Servicer will make an appropriate filing of a UCC-1
financing statement in the appropriate states to give notice of the Trustee's
ownership of the Contracts. Unless otherwise specified in the related
Prospectus Supplement, the Contracts will not be stamped or marked otherwise
to reflect their assignment from the Company to the Trustee. Therefore, if,
through negligence, fraud or otherwise, a subsequent purchaser were able to
take physical possession of any Contract without notice of such assignment,
the Trustee's interest in such Contract could be defeated.
MANUFACTURED HOMES
Security Interests in the Manufactured Homes
The Manufactured Homes securing the Contracts may be located in all 50
states and the District of Columbia. Security interests in manufactured
homes may be perfected either by notation of the secured party's lien on the
certificate of title or by delivery of the required documents and payment of
a fee to the state motor vehicle authority, depending on state law. In some
nontitle states, perfection pursuant to the provisions of the UCC is
required. The Seller may effect such notation or delivery of the required
documents and fees, and obtain possession of the certificate of title, as
appropriate under the laws of the state in which any manufactured home
securing a manufactured housing contract is registered. In the event the
Seller fails, due to clerical error, to effect such notation or delivery, or
files the security interest under the wrong law (for example, under a motor
vehicle title statute rather than under the UCC, in a few states), the Seller
may not have a first priority security interest in the Manufactured Home
securing a Contract. As manufactured homes have become larger and often have
been attached to their sites without any apparent intention to move them,
courts in many states have held that manufactured homes, under certain
circumstances, may become subject to real estate title and recording laws.
As a result, a security interest in a manufactured home could be rendered
subordinate to the interests of other parties claiming an interest in the
home under applicable state real estate law. In order to perfect a security
interest in a manufactured home under real estate laws, the holder of the
security interest must file either a "fixture filing" under the provisions of
the UCC or a real estate mortgage under the real estate laws of the state
where the home is located. These filings must be made in the real estate
records office of the county where the home is located. See "-- Land-and-
Home Contracts." So long as the borrower does not permanently attach its
Manufactured Home to its site, a security interest in the Manufactured Home
will be governed by the certificate of title laws or the UCC, and the
notation of the security interest on the certificate of title or the filing
of a UCC financing statement will be effective to maintain the priority of
the security interest in the Manufactured Home. If, however, a Manufactured
Home is permanently attached to its site, other parties could obtain an
interest in the Manufactured Home which is prior to the security interest
originally retained by the Seller and transferred to the Depositor. With
respect to a Series of Certificates and if so described in the related
Prospectus Supplement, the Master Servicer may be required to perfect a
security interest in the Manufactured Home under applicable real estate laws.
The Seller will represent that as of the date of the sale to the Depositor it
has obtained a perfected first priority security interest by proper notation
or delivery of the required documents and fees with respect to substantially
all of the Manufactured Homes securing the Contracts.
The Depositor will cause the security interests in the Manufactured
Homes to be assigned to the Trustee on behalf of the Certificateholders.
Unless otherwise specified in the related Prospectus Supplement, neither the
Depositor nor the Trustee will amend the certificates of title (or file UCC-3
statements) to identify the Trustee as the new secured party, and neither the
Depositor nor the Master Servicer will deliver the certificates of title to
the Trustee or note thereon the interest of the Trustee. Accordingly, the
Seller (or other originator of the Contracts) will continue to be named as
the secured party on the certificates of title relating to the Manufactured
Homes. In some states, such assignment is an effective conveyance of such
security interest without amendment of any lien noted on the related
certificate of title and the new secured party succeeds to Master Servicer's
rights as the secured party. However, in some states, in the absence of an
amendment to the certificate of title (or the filing of a UCC-3 statement),
such assignment of the security interest in the Manufactured Home may not be
held effective or such security interests may not be perfected and in the
absence of such notation or delivery to the Trustee, the assignment of the
security interest in the Manufactured Home may not be effective against
creditors of the Seller (or such other originator of the Contracts) or a
trustee in bankruptcy of the Seller (or such other originator).
In the absence of fraud, forgery or permanent affixation of the
Manufactured Home to its site by the Manufactured Home owner, or
administrative error by state recording officials, the notation of the lien
of the Seller (or other originator of the Contracts) on the certificate of
title or delivery of the required documents and fees will be sufficient to
protect the Certificateholders against the rights of subsequent purchasers of
a Manufactured Home or subsequent lenders who take a security interest in the
Manufactured Home. If there are any Manufactured Homes as to which the
security interest assigned to the Trustee is not perfected, such security
interest would be subordinate to, among others, subsequent purchasers for
value of Manufactured Homes and holders of perfected security interests.
There also exists a risk in not identifying the Trustee as the new secured
party on the certificate of title that, through fraud or negligence, the
security interest of the Trustee could be released.
In the event that the owner of a Manufactured Home moves it to a state
other than the state in which such Manufactured Home initially is registered,
under the laws of most states the perfected security interest in the
Manufactured Home would continue for four months after such relocation and
thereafter only if and after the owner re-registers the Manufactured Home in
such state. If the owner were to relocate a Manufactured Home to another
state and not re-register the Manufactured Home in such state, and if steps
are not taken to re-perfect the Trustee's security interest in such state,
the security interest in the Manufactured Home would cease to be perfected.
A majority of states generally require surrender of a certificate of title to
re-register a Manufactured Home; accordingly, the Master Servicer must
surrender possession if it holds the certificate of title to such
Manufactured Home or, in the case of Manufactured Homes registered in states
which provide for notation of lien, the Seller (or other originator) would
receive notice of surrender if the security interest in the Manufactured Home
is noted on the certificate of title. Accordingly, the Trustee would have
the opportunity to re-perfect its security interest in the Manufactured Home
in the state of relocation. In states which do not require a certificate of
title for registration of a manufactured home, re-registration could defeat
perfection. In the ordinary course of servicing the manufactured housing
contracts, the Master Servicer takes steps to effect such re-perfection upon
receipt of notice of re-registration or information from the obligor as to
relocation. Similarly, when an obligor under a manufactured housing contract
sells a manufactured home, the Master Servicer must surrender possession of
the certificate of title or, if it is noted as lienholder on the certificate
of title, will receive notice as a result of its lien noted thereon and
accordingly will have an opportunity to require satisfaction of the related
manufactured housing contract before release of the lien.
Under the laws of most states, liens for repairs performed on a
Manufactured Home and liens for personal property taxes take priority even
over a perfected security interest. The related Seller will represent that
it has no knowledge of any such liens with respect to any Manufactured Home
securing payment on any Contract. However, such liens could arise at any
time during the term of a Contract. No notice will be given to the Trustee
or Certificateholders in the event such a lien arises.
Enforcement of Security Interests in Manufactured Homes
The Master Servicer on behalf of the Trustee, to the extent required by
the related Agreement, may take action to enforce the Trustee's security
interest with respect to Contracts in default by repossession and resale of
the Manufactured Homes securing such defaulted Contracts. So long as the
Manufactured Home has not become subject to the real estate law, a creditor
can repossess a Manufactured Home securing a Contract by voluntary surrender,
by "self-help" repossession that is "peaceful" (i.e., without breach of the
peace) or, in the absence of voluntary surrender and the ability to repossess
without breach of the peace, by judicial process. The holder of a Contract
must give the debtor a number of days' notice, which varies from 10 to 30
days depending on the state, prior to commencement of any repossession. The
UCC and consumer protection laws in most states place restrictions on
repossession sales, including requiring prior notice to the debtor and
commercial reasonableness in effecting such a sale. The law in most states
also requires that the debtor be given notice of any sale prior to resale of
the unit so that the debtor may redeem at or before such resale. In the
event of such repossession and resale of a Manufactured Home, the Trustee
would be entitled to be paid out of the sale proceeds before such proceeds
could be applied to the payment of the claims of unsecured creditors or the
holders of subsequently perfected security interests or, thereafter, to the
debtor.
Under the laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a debtor for any deficiency on repossession
and resale of the manufactured home securing such debtor's loan. However,
some states impose prohibitions or limitations on deficiency judgments, and
in many cases the defaulting borrower would have no assets with which to pay
a judgment.
Certain other statutory provisions, including federal and state
bankruptcy and insolvency laws and general equitable principles, may limit or
delay the ability of a lender to repossess and resell collateral or enforce a
deficiency judgment.
LAND-AND-HOME CONTRACTS
If so specified in the related Prospectus Supplement, certain Contracts
("Land-and-Home Contracts") may be secured by a lien on the underlying real
property on which the related Manufactured Home is located (in addition to a
lien on the Manufactured Home).
General
The Land-and-Home Contracts will be secured by deeds of trust,
mortgages, security deeds or deeds to secure debt, depending upon the
prevailing practice in the state in which the property subject to the loan is
located. Deeds of trust are used almost exclusively in California instead of
mortgages. A mortgage creates a lien upon the real property encumbered by the
mortgage, which lien is generally not prior to the lien for real estate taxes
and assessments. Priority between mortgages depends on their terms and
generally on the order of recording with a state or county office. There are
two parties to a mortgage, the mortgagor, who is the borrower and owner of
the mortgaged property, and the mortgagee, who is the lender. Under the
mortgage instrument, the mortgagor delivers to the mortgagee a note or bond
and the mortgage. Although a deed of trust is similar to a mortgage, a deed
of trust formally has three parties, the borrower-property owner called the
trustor (similar to a mortgagor), a lender (similar to a mortgagee) called
the beneficiary, and a third-party grantee called the trustee. Under a deed
of trust, the borrower grants the property, irrevocably until the debt is
paid, in trust, generally with a power of sale, to the trustee to secure
payment of the obligation. A security deed and a deed to secure debt are
special types of deeds which indicate on their face that they are granted to
secure an underlying debt. By executing a security deed or deed to secure
debt, the grantor conveys title to, as opposed to merely creating a lien
upon, the subject property to the grantee until such time as the underlying
debt is repaid. The trustee's authority under a deed of trust, the
mortgagee's authority under a mortgage and the grantee's authority under a
security deed or deed to secure debt are governed by law and, with respect to
some deeds of trust, the directions of the beneficiary.
Foreclosure
Deed of Trust. Foreclosure of a deed of trust is generally accomplished
by a non-judicial sale under a specific provision in the deed of trust which
authorizes the trustee to sell the property at public auction upon any
default by the borrower under the terms of the note or deed of trust. In
certain states, such foreclosure also may be accomplished by judicial action
in the manner provided for foreclosure of mortgages. In addition to any
notice requirements contained in a deed of trust, in some states (such as
California), the trustee must record a notice of default and send a copy to
the borrower-trustor, to any person who has recorded a request for a copy of
any notice of default and notice of sale, to any successor in interest to the
borrower-trustor, to the beneficiary of any junior deed of trust and to
certain other persons. In some states (including California), the
borrower-trustor has the right to reinstate the loan at any time following
default until shortly before the trustee's sale. In general, the borrower, or
any other person having a junior encumbrance on the real estate, may, during
a statutorily prescribed reinstatement period, cure a monetary default by
paying the entire amount in arrears plus other designated costs and expenses
incurred in enforcing the obligation. Generally, state law controls the
amount of foreclosure expenses and costs, including attorney's fees, which
may be recovered by a lender. After the reinstatement period has expired
without the default having been cured, the borrower or junior lienholder no
longer has the right to reinstate the loan and must pay the loan in full to
prevent the scheduled foreclosure sale. If the deed of trust is not
reinstated within any applicable cure period, a notice of sale must be posted
in a public place and, in most states (including California), published for a
specific period of time in one or more newspapers. In addition, some state
laws require that a copy of the notice of sale be posted on the property and
sent to all parties having an interest of record in the real property.
Mortgages. Foreclosure of a mortgage is generally accomplished by
judicial action. The action is initiated by the service of legal pleadings
upon all parties having an interest in the real property. Delays in
completion of the foreclosure may occasionally result from difficulties in
locating necessary parties. Judicial foreclosure proceedings are often not
contested by any of the parties. When the mortgagee's right to foreclosure is
contested, the legal proceedings necessary to resolve the issue can be time
consuming. After the completion of a judicial foreclosure proceeding, the
court generally issues a judgment of foreclosure and appoints a referee or
other court officer to conduct the sale of the property. In some states,
mortgages may also be foreclosed by advertisement, pursuant to a power of
sale provided in the mortgage.
Although foreclosure sales are typically public sales, frequently no
third party purchaser bids in excess of the lender's lien because of the
difficulty of determining the exact status of title to the property, the
possible deterioration of the property during the foreclosure proceedings and
a requirement that the purchaser pay for the property in cash or by cashier's
check. Thus the foreclosing lender often purchases the property from the
trustee or referee for an amount equal to the principal amount outstanding
under the loan, accrued and unpaid interest and the expenses of foreclosure
in which event the mortgagor's debt will be extinguished or the lender may
purchase for a lesser amount in order to preserve its right against a
borrower to seek a deficiency judgment in states where such judgment is
available. Thereafter, subject to the right of the borrower in some states to
remain in possession during the redemption period, the lender will assume the
burden of ownership, including obtaining hazard insurance and making such
repairs at its own expense as are necessary to render the property suitable
for sale. The lender will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale of the
property. Depending upon market conditions, the ultimate proceeds of the sale
of the property may not equal the lender's investment in the property. Any
loss may be reduced by the receipt of any mortgage guaranty insurance
proceeds.
Courts have imposed general equitable principles upon foreclosure, which
are generally designed to mitigate the legal consequences to the borrower of
the borrower's defaults under the loan documents. Some courts have been faced
with the issue of whether federal or state constitutional provisions
reflecting due process concerns for fair notice require that borrowers under
deeds of trust receive notice longer than that prescribed by statute. For the
most part, these cases have upheld the notice provisions as being reasonable
or have found that the sale by a trustee under a deed of trust does not
involve sufficient state action to afford constitutional protection to the
borrower.
Rights of Redemption
In some states, after sale pursuant to a deed of trust or foreclosure of
a mortgage, the borrower and foreclosed junior lienors are given a statutory
period in which to redeem the property from the foreclosure sale. In certain
other states (including California), this right of redemption applies only to
sales following judicial foreclosure, and not to sales pursuant to a
non-judicial power of sale. In most states where the right of redemption is
available, statutory redemption may occur upon payment of the foreclosure
purchase price, accrued interest and taxes. In other states, redemption may
be authorized if the former borrower pays only a portion of the sums due. The
effect of a statutory right of redemption is to diminish the ability of the
lender to sell the foreclosed property. The exercise of a right of redemption
would defeat the title of any purchaser from the lender subsequent to
foreclosure or sale under a deed of trust. Consequently, the practical effect
of the redemption right is to force the lender to retain the property and pay
the expenses of ownership until the redemption period has run. In some
states, there is no right to redeem property after a trustee's sale under a
deed of trust.
Anti-Deficiency Legislation; Bankruptcy Laws; Tax Liens
Certain states have imposed statutory and judicial restrictions that
limit the remedies of a beneficiary under a deed of trust or a mortgagee
under a mortgage. In some states, including California, statutes and case law
limit the right of the beneficiary or mortgagee to obtain a deficiency
judgment against borrowers financing the purchase of their residence or
following sale under a deed of trust or certain other foreclosure
proceedings. A deficiency judgment is a personal judgment against the
borrower equal in most cases to the difference between the amount due to the
lender and the fair market value of the real property at the time of the
foreclosure sale. In certain states, including California, if a lender
simultaneously originates a loan secured by a senior lien on a particular
property and a loan secured by a junior lien on the same property, such a
lender as the holder of the junior lien may be precluded from obtaining a
deficiency judgment with respect to the excess of the aggregate amount owed
under both such loans over the proceeds of any sale under a deed of trust or
other foreclosure proceedings. As a result of these prohibitions, it is
anticipated that in most instances the Master Servicer will utilize the
non-judicial foreclosure remedy and will not seek deficiency judgments
against defaulting borrowers.
Some state statutes require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an
attempt to satisfy the full debt before bringing a personal action against
the borrower. In certain other states, the lender has the option of bringing
a personal action against the borrower on the debt without first exhausting
such security; however, in some of these states, the lender, following
judgment on such personal action, may be deemed to have elected a remedy and
may be precluded from exercising remedies with respect to the security.
Consequently, the practical effect of the election requirement, when
applicable, is that lenders will usually proceed first against the security
rather than bringing a personal action against the borrower. In some states,
exceptions to the anti-deficiency statutes are provided for in certain
instances where the value of the lender's security has been impaired by acts
or omissions of the borrower, for example, in the event of waste of the
property. Finally, other statutory provisions limit any deficiency judgment
against the former borrower following a foreclosure sale to the excess of the
outstanding debt over the fair market value of the property at the time of
the public sale. The purpose of these statutes is generally to prevent a
beneficiary or a mortgagee from obtaining a large deficiency judgment against
the former borrower as a result of low or no bids at the foreclosure sale.
In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy
laws, and state laws affording relief to debtors, may interfere with or
affect the ability of the secured mortgage lender to realize upon its
security. For example, in a proceeding under the Bankruptcy Code, a lender
may not foreclose on a mortgaged property without the permission of the
bankruptcy court. The rehabilitation plan proposed by the debtor may provide,
if the mortgaged property is not the debtor's principal residence and the
court determines that the value of the mortgaged property is less than the
principal balance of the mortgage loan, for the reduction of the secured
indebtedness to the value of the mortgaged property as of the date of the
commencement of the bankruptcy, rendering the lender a general unsecured
creditor for the difference, and also may reduce the monthly payments due
under such mortgage loan, change the rate of interest and alter the mortgage
loan repayment schedule. The effect of any such proceedings under the
Bankruptcy Code, including but not limited to any automatic stay, could
result in delays in receiving payments on the Land-and-Home Contracts
underlying a Series of Certificates and possible reductions in the aggregate
amount of such payments.
The federal tax laws provide priority to certain tax liens over the lien
of a mortgage or secured party.
Environmental Risks
Real property pledged as security to a lender may be subject to
unforeseen environmental risks. Under the laws of certain states,
contamination of a property may give rise to a lien on the property to assure
the payment of the costs of clean-up. In several states such a lien has
priority over the lien of an existing mortgage against such property. In
addition, under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the United States
Environmental Protection Agency ("EPA") may impose a lien on property where
EPA has incurred clean-up costs. However, a CERCLA lien is subordinate to
pre-existing, perfected security interests.
Under the laws of some states, and under CERCLA, it is conceivable that
a secured lender may be held liable as an "owner" or "operator" for the costs
of addressing releases or threatened releases of hazardous substances at an
underlying real property, even though the environmental damage or threat was
caused by a prior or current owner or operator. CERCLA imposes liability for
such costs on any and all "responsible parties," including owners or
operators. However, CERCLA excludes from the definition of "owner or
operator" a secured creditor who holds indicia of ownership primarily to
protect its security interest (the "secured creditor exclusion") but without
"participating in the management" of the underlying real property. Thus, if a
lender's activities begin to encroach on the actual management of a
contaminated facility or property, the lender may incur liability as an
"owner or operator" under CERCLA. Similarly, if a lender forecloses and takes
title to a contaminated facility or property, the lender may incur CERCLA
liability in various circumstances, including, but not limited to, when it
holds the facility or property as an investment (including leasing the
facility or property to third party), or fails to market the property in a
timely fashion.
Whether actions taken by a lender would constitute participation in the
management of a mortgaged property, or the business of a borrower, so as to
render the secured creditor exemption unavailable to a lender has been a
matter of judicial interpretation of the statutory language, and court
decisions have been inconsistent. In 1990, the Court of Appeals for the
Eleventh Circuit suggested that the mere capacity of the lender to influence
a borrower's decisions regarding disposal of hazardous substances was
sufficient participation in the management of the borrower's business to deny
the protection of the secured creditor exemption to the lender.
This ambiguity appears to have been resolved by the enactment of the
Asset Conservation, Lender Liability and Deposit Insurance Protection Act of
1996, which was signed into law by President Clinton on September 30, 1996.
This legislation provides that in order to be deemed to have participated in
the management of a mortgaged property, a lender must actually participate in
the operational affairs of the property or the borrower. The legislation also
provides that participation in the management of the property does not
include "merely having the capacity to influence, or unexercised right to
control" operations. Rather, a lender will lose the protection of the
secured creditor exemption only if it exercises decision-making control over
the borrower's environmental compliance and hazardous substance handling and
disposal practices, or assumes day-to-day management of all operational
functions of the mortgaged property.
If a lender is or becomes liable, it can bring an action for
contribution against any other "responsible parties," including a previous
owner or operator, who created the environmental hazard, but those persons or
entities may be bankrupt or otherwise judgment proof. The costs associated
with environmental cleanup may be substantial. It is conceivable that such
costs arising from the circumstances set forth above would result in a loss
to Certificateholders.
CERCLA does not apply to petroleum products, and the secured creditor
exclusion does not govern liability for cleanup costs under federal laws
other than CERCLA, in particular Subtitle I of the federal Resource
Conservation and Recovery Act ("RCRA"), which regulates underground petroleum
storage tanks (except heating oil tanks). The EPA has adopted a lender
liability rule for underground storage tanks under Subtitle I of RCRA. Under
such rule, a holder of a security interest in an underground storage tank or
real property containing an underground storage tank is not considered an
operator of the underground storage tank as long as petroleum is not added
to, stored in or dispensed from the tank. In addition, under the Asset
Conservation, Lender Liability and Deposit Insurance Protection Act of 1996,
the protections accorded to lenders under CERCLA are also accorded to the
holders of security interests in underground storage tanks. It should be
noted, however, that liability for cleanup of petroleum contamination may be
governed by state law, which may not provide for any specific protection for
secured creditors, or alternatively, may not impose liability on secured
creditors at all.
Except as otherwise specified in the related Prospectus Supplement, at
the time the Land-and-Home Contracts were originated, no environmental
assessment or a very limited environmental assessment of the related
underlying real properties was conducted.
DUE-ON-SALE CLAUSES
Unless otherwise specified in the related Prospectus Supplement, each
conventional Contract will contain a due-on-sale clause which will generally
provide that if the obligor sells, transfers or conveys the Manufactured Home
(and, in the case of Land-and-Home Contracts, the underlying real property),
the loan or contract may be accelerated by the secured party or the
mortgagee. Court decisions and legislative actions have placed substantial
restriction on the right of lenders to enforce such clauses in many states.
For instance, the California Supreme Court in August 1978 held that
due-on-sale clauses were generally unenforceable. However, the Garn-St
Germain Depository Institutions Act of 1982 (the "Garn-St Germain Act"),
subject to certain exceptions, preempts state constitutional, statutory and
case law prohibiting the enforcement of due-on-sale clauses. As a result,
due-on-sale clauses have become generally enforceable except in those states
whose legislatures exercised their authority to regulate the enforceability
of such clauses with respect to manufactured housing loans that were (i)
originated or assumed during the "window period" under the Garn-St Germain
Act which ended in all cases not later than October 15, 1982 and (ii)
originated by lenders other than national banks, federal savings institutions
and federal credit unions. FHLMC has taken the position in its published
mortgage servicing standards that, out of a total of eleven "window period
states," five states (Arizona, Michigan, Minnesota, New Mexico and Utah) have
enacted statutes extending, on various terms and for varying periods, the
prohibition on enforcement of due-on-sale clauses with respect to certain
categories of window period loans. Also, the Garn-St Germain Act does
"encourage" lenders to permit assumption of loans at the original rate of
interest or at some other rate less than the average of the original rate and
the market rate.
As to loans secured by an owner-occupied residence, the Garn-St Germain
Act sets forth nine specific instances in which a secured party or mortgagee
covered by the Act may not exercise its rights under a due-on-sale clause,
notwithstanding the fact that a transfer of the property may have occurred.
The inability to enforce a due-on-sale clause may result in transfer of the
related Manufactured Home (and, in the case of Land-and-Home Contracts, the
related underlying real property) to an uncreditworthy person, which could
increase the likelihood of default or may result in a loan bearing an
interest rate below the current market rate being assumed by a new home
buyer, which may affect the average life of the Contracts and the number of
Contracts which may extend to maturity.
In addition, under federal bankruptcy law, due-on-sale clauses may not
be enforceable in bankruptcy proceedings and may, under certain
circumstances, be eliminated by modified terms of the loan resulting from
such bankruptcy proceeding.
ENFORCEABILITY OF PREPAYMENT AND LATE PAYMENT FEES
Forms of notes, contracts, mortgages and deeds of trust used by lenders
may contain provisions obligating the borrower to pay a late charge if
payments are not timely made, and in some circumstances may provide for
prepayment fees or penalties if the obligation is paid prior to maturity. In
certain states, there are or may be specific limitations upon the late
charges which a lender may collect from a borrower for delinquent payments.
Certain states also limit the amounts that a lender may collect from a
borrower as an additional charge if the loan is prepaid. Under certain state
laws, prepayment charges may not be imposed after a certain period of time
following the origination of manufactured housing loans with respect to
prepayments on loans secured by liens encumbering owner-occupied residential
properties. The absence of such a restraint on prepayment, particularly with
respect to fixed rate Contracts having higher Contract Rates, may increase
the likelihood of refinancing or other early retirement of such loans or
contracts. Late charges and prepayment fees are typically retained by
servicers as additional servicing compensation.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V") provides that (subject to
certain conditions governing, among other things, (x) the terms of any
prepayments, (y) late charges and deferral fees and (z) requiring a 30-day
notice period prior to instituting any action leading to repossession of the
related unit) state usury limitations shall not apply to any manufactured
housing loan that is secured by a first lien on certain kinds of manufactured
housing. The Office of Thrift Supervision, as successor to the Federal Home
Loan Bank Board, is authorized to issue rules and regulations and to publish
interpretations governing implementation of Title V. The statute authorized
the states to reimpose interest rate limits by adopting, before April 1,
1983, a law or constitutional provision which expressly rejects an
application of the federal law. Fifteen states adopted such a law prior to
the April 1, 1983 deadline. In addition, even where Title V is not so
rejected, any state is authorized by the law to adopt a provision limiting
discount points or other charges on manufactured housing loans covered by
Title V. Certain states have taken action to reimpose interest rate limits
and/or to limit discount points or other charges.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT
Generally, under the terms of the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended (the "Relief Act"), a borrower who enters military
service after the origination of such borrower's Contract (including a
borrower who is a member of the National Guard or is in reserve status at the
time of the origination of the Contract and is later called to active duty)
may not be charged interest above an annual rate of 6% during the period of
such borrower's active duty status, unless a court orders otherwise upon
application of the lender. It is possible that such interest rate limitation
could have an effect, for an indeterminate period of time, on the ability of
the Master Servicer to collect full amounts of interest on certain of the
Contracts. Unless otherwise provided in the related Prospectus Supplement,
any shortfall in interest collections resulting from the application of the
Relief Act could result in losses to Certificateholders. The Relief Act also
imposes limitations which would impair the ability of the Master Servicer to
repossess or foreclose on the collateral securing an affected Contract during
the borrower's period of active duty status. Moreover, the Relief Act permits
the extension of a Contract's maturity and the re-adjustment of its payment
schedule beyond the completion of military service. Thus, in the event that
such a Contract goes into default, there may be delays and losses occasioned
by the inability to realize upon the Manufactured Home (and, in the case of
Land-and-Home Contracts, the underlying real property) in a timely fashion.
FHA INSURANCE AND VA GUARANTIES
Certain of the Contracts may be FHA insured or VA guaranteed, the
payments upon which, subject to the following discussion, are insured by the
FHA under Title I of the National Housing Act, as amended, or partially
guaranteed by the VA. Any FHA insurance or VA guarantees relating to the
Contracts will be described in the related Prospectus Supplement.
The FHA is responsible for administering various federal programs,
including manufactured home insurance, authorized under the National Housing
Act, as amended. The insurance premiums for FHA insured contracts are
collected by HUD approved lenders or by the servicers of such FHA insured
contracts and are paid to the FHA. The regulations governing FHA
manufactured home insurance provide that insurance benefits are payable upon
the repossession and resale of the collateral and assignment of the contract
to HUD. With respect to a defaulted FHA insured contract, the servicer must
follow applicable regulations before initiating repossession procedures.
Once it is determined, either by the servicer or HUD, that default was caused
by circumstances beyond the lenders control, these regulations require, among
other things, that the lender arrange a face-to-face meeting with the
borrower, initiate a modification or repayment plan, if feasible, and give
the borrower 30 days' notice of default prior to any repossession. Such
plans may involve the reduction or suspension of scheduled contract payments
for a specified period, with such payments to be made upon or before the
maturity date of the contract, or the recasting of payments due under the FHA
insured contract up to and beyond the scheduled maturity date. In addition,
when a default is accompanied by certain other criteria, HUD may provide
relief by making payments to the servicer of such contract in partial or full
satisfaction of amounts due thereunder (which payments are to be repaid by
the borrower to HUD) or by accepting assignment of the contract. With
certain exceptions, at least three full monthly installments must be due and
unpaid under the FHA insured contract, and HUD must have rejected any request
for relief from the lender before the servicer may initiate foreclosure
proceedings. If these regulations are satisfied, the insurance claim is paid
in cash by HUD.
For manufactured housing contracts, the amount of insurance benefits
generally paid by FHA is equal to 90% of the sum of (i) the unpaid principal
amount of the contract at the date of default and uncollected interest earned
to the date of default computed at the contract rate, after deducting the
best price obtainable for the collateral (based in part on a HUD-approved
appraisal) and all amounts retained or collected by the lender from other
sources with respect to the contract, (ii) accrued and unpaid interest on the
unpaid amount of the contract from the date of default to the date of
submission of the claim plus 15 calendar days (but in no event more than nine
months) computed at a rate of 7% per annum, (iii) costs paid to a dealer or
other third party to repossess and preserve the property, (iv) the amount of
any sales commission paid to a dealer or other third party for the resale of
the property, (v) any property taxes, special assessments and other similar
charges and hazard insurance premiums, prorated to the date of disposition of
the property, (vi) uncollected court costs, (vii) legal fees, not to exceed
$500, and (viii) expenses for recording the assignment of the lien on the
collateral to the United States. When entitlement to insurance benefits
results from assignment of the FHA insured contract to HUD, the insurance
payment includes full compensation for interest accrued and unpaid to the
assignment date.
The insurance available to a lender under FHA Title I insurance is
subject to the limit of a reserve amount equal to ten percent of the original
principal balance of all Title I insured loans held by the lender, which
amount is reduced by all claims paid to the lender and which is increased by
an amount equal to ten percent of the original principal balance of insured
loans originated or acquired by the lender.
The maximum guarantee that may be issued by the VA for a VA guaranteed
contract is the lesser of (a) the lesser of $20,000 and 40% of the principal
amount of the contract and (b) the maximum amount of guaranty entitlement
available to the obligor veteran (which may range from $20,000 to zero). The
amount payable under the guarantee will be the percentage of the VA contract
originally guaranteed applied to indebtedness outstanding as of the
applicable date of computation specified in the VA regulations, interest
accrued on the unpaid balance of the loan to the appropriate date of
computation and limited expenses of the contract holder, but in each case
only to the extent that such amounts have not been recovered through resale
of the manufactured home. The amount payable under the guarantee may in no
event exceed the amount of the original guarantee.
The VA may, at its option and without regard to the guarantee, make full
payment to a lender of the unsatisfied amount on a contract upon its
assignment to the VA. With respect to a defaulted VA guaranteed Contract,
the servicer is, absent exceptional circumstances, authorized to announce its
intention to repossess only when the default has continued for three months.
Generally, a claim for the guarantee is submitted after liquidation of the
related collateral.
CONSUMER PROTECTION LAWS
The so-called "Holder-in-Due Course" rule of the Federal Trade
Commission is intended to defeat the ability of the transferor of a consumer
credit contract which is the seller of goods which gave rise to the
transaction (and certain related lenders and assignees) to transfer such
contract free of notice of claims by the debtor thereunder. The effect of
this rule is to subject the assignee of such a contract to all claims and
defenses which the debtor could assert against the seller of goods. Liability
under this rule is limited to amounts paid under a Contract; however, the
obligor also may be able to assert the rule to set off remaining amounts due
as a defense against a claim brought by the Trustee against such obligor.
Numerous other federal and state consumer protection laws impose requirements
applicable to the origination, servicing and enforcement of the Contracts,
including the Truth in Lending Act, the Federal Trade Commission Act, the
Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit
Opportunity Act, the Fair Debt Collection Practices Act and the Uniform
Consumer Credit Code. In the case of some of these laws, the failure to
comply with their provisions may affect the enforceability of the related
contract.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of the anticipated material federal income
tax consequences of the purchase, ownership, and disposition of the
Certificates and is based on advice of Brown & Wood LLP, special counsel to
the Depositor. The summary is based upon the provisions of the Code, the
regulations promulgated thereunder, including, where applicable, proposed
regulations, and the judicial and administrative rulings and decisions now in
effect, all of which are subject to change or possible differing
interpretations. The statutory provisions, regulations, and interpretations
on which this summary is based are subject to change, and such a change could
apply retroactively.
The summary does not purport to deal with all aspects of federal income
taxation that may affect particular investors in light of their individual
circumstances, nor with certain types of investors subject to special
treatment under the federal income tax laws. This summary focuses primarily
upon investors who will hold Certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Code,
but much of the discussion is applicable to other investors as well.
Prospective Investors are advised to consult their own tax advisers
concerning the federal, state, local and any other tax consequences to them
of the purchase, ownership and disposition of the Certificates.
The federal income tax consequences to Holders will vary depending on
whether (i) the Certificates of a Series are classified as indebtedness; (ii)
an election is made to treat the Trust Fund relating to a particular Series
of Certificates as a REMIC or as a FASIT; (iii) the Certificates represent
interests in a grantor trust; or (iv) the Trust Fund relating to a particular
Series of Certificates is classified as a partnership. The Prospectus
Supplement for each Series of Certificates will specify how the Certificates
will be treated for federal income tax purposes and will discuss whether a
REMIC or a FASIT election, if any, will be made with respect to such Series.
Prior to issuance of each Series of Certificates, the Depositor shall file
with the Commission a Form 8-K on behalf of the related Trust Fund containing
an opinion of Brown & Wood LLP with respect to the validity of the
information set forth under "Federal Income Tax Consequences" herein and in
the related Prospectus Supplement.
TAXATION OF DEBT CERTIFICATES
Interest and Acquisition Discount. Certificates representing regular
interests in a REMIC are generally treated as evidences of indebtedness
issued by the REMIC. Certificates representing regular interests in a FASIT
are treated as debt instruments. Stated interest on regular interests in
REMICs and regular interests in FASITs will be taxable as ordinary income and
taken into account using the accrual method of accounting, regardless of the
Holder's normal accounting method. Interest (other than original issue
discount) on Certificates (other than regular interests in REMICs or FASITs)
that are characterized as indebtedness for federal income tax purposes will
be includible in income by holders thereof in accordance with their usual
methods of accounting. Certificates characterized as debt for federal income
tax purposes, including regular interests in REMICs or FASITs, will be
referred to hereinafter collectively as "Debt Certificates."
Debt Certificates that are Compound Interest Certificates (i.e., debt
securities that accrete the amount of accrued interest and add that amount to
the principal balance of the securities until maturity or until some
specified event has occurred) will, and certain of the other Debt
Certificates may, be issued with "original issue discount" ("OID"). The
following discussion is based in part on the rules governing OID which are
set forth in Sections 1271-1275 of the Code and the Treasury regulations
issued thereunder on February 2, 1994, as amended on June 11, 1996, (the "OID
Regulations"). A Holder should be aware, however, that the OID Regulations do
not adequately address certain issues relevant to prepayable securities, such
as the Debt Certificates.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Debt Certificate and its issue price. A
holder of a Debt Certificate must include such OID in gross income as
ordinary interest income as it accrues under a method taking into account an
economic accrual of the discount. In general, OID must be included in income
in advance of the receipt of the cash representing that income. The amount of
OID on a Debt Certificate will be considered to be zero if it is less than a
de minimis amount determined under the Code.
The issue price of a Debt Certificate is the first price at which a
substantial amount of Debt Certificates of that class are sold (excluding
sales to bond houses, brokers, underwriters or wholesalers). If less than a
substantial amount of a particular class of Debt Certificates is sold for
cash on or prior to the related Closing Date, the issue price for such class
will be treated as the fair market value of such class on such Closing Date.
The issue price of a Debt Certificate generally includes the amount paid by
an initial Debt Certificate holder for accrued interest that relates to a
period prior to the issue date of the Debt Certificate ("pre-issuance accrued
interest"). The issue price of a Debt Security may, however, be computed
without regard to such pre-issuance accrued interest if such pre-issuance
accrued interest will be paid on the first payment date following the date of
issuance. This alternative is available only if the first payment date occurs
within one year of the date of issuance. Under this alternative, the payment
of pre-issuance accrued interest will be treated as a non-taxable return of
capital and not as a payment of interest. The stated redemption price at
maturity of a Debt Certificate includes the original principal amount of the
Debt Certificate, but generally will not include stated interest if it is
"qualified stated interest."
Under the OID Regulations, qualified stated interest generally means
interest payable at a single fixed rate or qualified variable rate (as
described below) provided that such interest payments are unconditionally
payable at intervals of one year or less during the entire term of the Debt
Certificate. The OID Regulations state that interest payments are
unconditionally payable only if a late payment or nonpayment is expected to
be penalized or reasonable remedies exist to compel payment or the Debt
Security otherwise provides terms and conditions that make the likelihood of
late payment or nonpayment a remote contingency. Certain Debt Certificates
may provide for default remedies in the event of late payment or nonpayment
of interest. The interest on such Debt Certificates will be unconditionally
payable and constitute qualified stated interest, not OID. However, absent
clarification of the OID Regulations, where Debt Certificates do not provide
for default remedies, the interest payments will be included in the Debt
Certificate's stated redemption price at maturity and taxed as OID. Interest
is payable at a single fixed rate only if the rate appropriately takes into
account the length of the interval between payments. Distributions of
interest on Debt Certificates with respect to which deferred interest will
accrue, will not constitute qualified stated interest payments, in which case
the stated redemption price at maturity of such Debt Certificates includes
all distributions of interest as well as principal thereon. Where the
interval between the issue date and the first Distribution Date on a Debt
Certificate is either longer or shorter than the interval between subsequent
Distribution Dates, all or part of the interest foregone, in the case of the
longer interval, and all of the additional interest, in the case of the
shorter interval, will be included in the stated redemption price at maturity
and tested under the de minimis rule described below. In the case of a Debt
Certificate with a long first period which has non-de minimis OID, all stated
interest in excess of interest payable at the effective interest rate for the
long first period will be included in the stated redemption price at maturity
and the Debt Certificate will generally have OID. Holders of Debt
Certificates should consult their own tax advisors to determine the issue
price and stated redemption price at maturity of a Debt Certificate.
Under the de minimis rule, OID on a Debt Certificate will be considered
to be zero if such OID is less than 0.25% of the stated redemption price at
maturity of the Debt Certificate multiplied by the weighted average maturity
of the Debt Certificate. For this purpose, the weighted average maturity of
the Debt Certificate is computed as the sum of the amounts determined by
multiplying the number of full years (i.e., rounding down partial years) from
the issue date until each distribution in reduction of stated redemption
price at maturity is scheduled to be made by a fraction, the numerator of
which is the amount of each distribution included in the stated redemption
price at maturity of the Debt Certificate and the denominator of which is the
stated redemption price at maturity of the Debt Certificate. Holders
generally must report de minimis OID pro rata as principal payments are
received, and such income will be capital gain if the Debt Certificate is
held as a capital asset. However, accrual method holders may elect to accrue
all de minimis OID as well as market discount under a constant interest
method.
Debt Certificates may provide for interest based on a qualified variable
rate. Under the OID Regulations, interest is treated as payable at a
qualified variable rate and not as contingent interest if, generally, (i)
such interest is unconditionally payable at least annually, (ii) the issue
price of the debt instrument does not exceed the total noncontingent
principal payments and (iii) interest is based on a "qualified floating
rate," an "objective rate," or a combination of "qualified floating rates"
that do not operate in a manner that significantly accelerates or defers
interest payments on such Debt Certificate. In the case of Compound Interest
Certificates, certain Interest Weighted Certificates (as defined herein), and
certain of the other Debt Certificates, none of the payments under the
instrument will be considered qualified stated interest, and thus the
aggregate amount of all payments will be included in the stated redemption
price.
The OID Regulations do not contain provisions specifically interpreting
Code Section 1272(a)(6). Until the Treasury issues guidance to the contrary,
the Trustee intends to base its computation on Code Section 1272(a)(6) and
the OID Regulations as described in this Prospectus. However, because no
regulatory guidance currently exists under Code Section 1272(a)(6), there can
be no assurance that such methodology represents the correct manner of
calculating OID.
The holder of a Debt Certificate issued with OID must include in gross
income, for all days during its taxable year on which it holds such Debt
Certificate, the sum of the "daily portions" of such original issue discount.
The amount of OID includible in income by a holder will be computed by
allocating to each day during a taxable year a pro rata portion of the
original issue discount that accrued during the relevant accrual period. In
the case of a Debt Certificate that is not a regular interest in a REMIC or a
FASIT and the principal payments on which are not subject to acceleration
resulting from prepayments on the Contracts, the amount of OID includible in
income of a Holder for an accrual period (generally the period over which
interest accrues on the debt instrument) will equal the product of the yield
to maturity of the Debt Certificate and the adjusted issue price of the Debt
Certificate, reduced by any payments of qualified stated interest. The
adjusted issue price is the sum of its issue price plus prior accruals or
OID, reduced by the total payments made with respect to such Debt Certificate
in all prior periods, other than qualified stated interest payments.
The amount of OID to be included in income by a holder of a debt
instrument, such as certain classes of the Debt Certificates, that is subject
to acceleration due to prepayments on other debt obligations securing such
instruments (a "Pay-Through Certificate"), is computed by taking into account
the anticipated rate of prepayments assumed in pricing the debt instrument
(the "Prepayment Assumption"). The amount of OID that will accrue during an
accrual period on a Pay-Through Certificate is the excess (if any) of the sum
of (a) the present value of all payments remaining to be made on the
Pay-Through Certificate as of the close of the accrual period and (b) the
payments during the accrual period of amounts included in the stated
redemption price of the Pay-Through Certificate, over the adjusted issue
price of the Pay-Through Certificate at the beginning of the accrual period.
The present value of the remaining payments is to be determined on the basis
of three factors: (i) the original yield to maturity of the Pay-Through
Certificate (determined on the basis of compounding at the end of each
accrual period and properly adjusted for the length of the accrual period),
(ii) events which have occurred before the end of the accrual period and
(iii) the assumption that the remaining payments will be made in accordance
with the original Prepayment Assumption. The effect of this method is to
increase the portions of OID required to be included in income by a Holder to
take into account prepayments with respect to the Contracts at a rate that
exceeds the Prepayment Assumption, and to decrease (but not below zero for
any period) the portions of original issue discount required to be included
in income by a Holder of a Pay-Through Certificate to take into account
prepayments with respect to the Contracts at a rate that is slower than the
Prepayment Assumption. Although original issue discount will be reported to
Holders of Pay-Through Certificates based on the Prepayment Assumption, no
representation is made to Holders that Contracts will be prepaid at that rate
or at any other rate.
The Depositor may adjust the accrual of OID on a class of Debt
Certificates in a manner that it believes to be appropriate, to take account
of realized losses on the Contracts, although the OID Regulations do not
provide for such adjustments. If the IRS were to require that OID be accrued
without such adjustments, the rate of accrual of OID for a class of Debt
Certificates could increase.
Certain classes of Debt Certificates may represent more than one class
of REMIC or FASIT regular interests. Unless otherwise provided in the related
Prospectus Supplement, the Trustee intends, based on the OID Regulations, to
calculate OID on such Certificates as if, solely for the purposes of
computing OID, the separate regular interests were a single debt instrument.
A subsequent holder of a Debt Certificate will also be required to
include OID in gross income, but such a holder who purchases such Debt
Certificate for an amount that exceeds its adjusted issue price will be
entitled (as will an initial holder who pays more than a Debt Certificate's
issue price) to offset such OID by comparable economic accruals of portions
of such excess.
Effects of Defaults and Delinquencies. Holders will be required to
report income with respect to REMIC or FASIT regular interests under an
accrual method without giving effect to delays and reductions in
distributions attributable to a default or delinquency on the Contracts,
except possibly to the extent that it can be established that such amounts
are uncollectible. As a result, the amount of income (including OID) reported
by a holder of such a Certificate in any period could significantly exceed
the amount of cash distributed to such holder in that period. The holder will
eventually be allowed a loss (or will be allowed to report a lesser amount of
income) to the extent that the aggregate amount of distributions on the
Certificates is deducted as a result of a Contract default. However, the
timing and character of such losses or reductions in income are uncertain
and, accordingly, holders of Certificates should consult their own tax
advisors on this point.
Interest Weighted Certificates. It is not clear how income should be
accrued with respect to REMIC or FASIT regular interests or Stripped
Certificates (as defined under " -- Tax Status as a Grantor Trust; General"
herein) the payments on which consist solely or primarily of a specified
portion of the interest payments on qualified mortgages held by the REMIC, on
debt instruments held by the FASIT, or on Contracts underlying Pass-Through
Certificates ("Interest Weighted Certificates"). The Issuer intends to take
the position that all of the income derived from an Interest Weighted
Certificate should be treated as OID and that the amount and rate of accrual
of such OID should be calculated by treating the Interest Weighted
Certificate as a Compound Interest Certificate. However, in the case of
Interest Weighted Certificates that are entitled to some payments of
principal and that are REMIC or FASIT regular interests the Internal Revenue
Service could assert that income derived from an Interest Weighted
Certificate should be calculated as if the Certificate were a security
purchased at a premium equal to the excess of the price paid by such holder
for such Certificate over its stated principal amount, if any. Under this
approach, a holder would be entitled to amortize such premium only if it has
in effect an election under Section 171 of the Code with respect to all
taxable debt instruments held by such holder, as described below.
Alternatively, the Internal Revenue Service could assert that an Interest
Weighted Certificate should be taxable under the rules governing bonds issued
with contingent payments. Such treatment may be more likely in the case of
Interest Weighted Certificates that are Stripped Certificates as described
below. See " -- Tax Status as a Grantor Trust -- Discount or Premium on
Pass-Through Certificates."
Variable Rate Debt Certificates. In the case of Debt Certificates
bearing interest at a rate that varies directly, according to a fixed
formula, with an objective index, it appears that (i) the yield to maturity
of such Debt Certificates and (ii) in the case of Pay-Through Certificates,
the present value of all payments remaining to be made on such Debt
Certificates, should be calculated as if the interest index remained at its
value as of the issue date of such Certificates. Because the proper method of
adjusting accruals of OID on a variable rate Debt Certificate is uncertain,
holders of variable rate Debt Certificates should consult their own tax
advisers regarding the appropriate treatment of such Certificates for federal
income tax purposes.
Market Discount. A purchaser of a Certificate may be subject to the
market discount rules of Sections 1276-1278 of the Code. A Holder that
acquires a Debt Certificate with more than a prescribed de minimis amount of
"market discount" (generally, the excess of the principal amount of the Debt
Certificate over the purchaser's purchase price) will be required to include
accrued market discount in income as ordinary income in each month, but
limited to an amount not exceeding the principal payments on the Debt
Certificate received in that month and, if the Certificates are sold, the
gain realized. Such market discount would accrue in a manner to be provided
in Treasury regulations but, until such regulations are issued, such market
discount would in general accrue either (i) on the basis of a constant yield
(in the case of a Pay-Through Certificate, taking into account a prepayment
assumption) or (ii) in the ratio of (a) in the case of Certificates (or in
the case of a Pass-Through Certificate (as defined herein), as set forth
below, the Contracts underlying such Certificate) not originally issued with
original issue discount, stated interest payable in the relevant period to
total stated interest remaining to be paid at the beginning of the period or
(b) in the case of Certificates (or, in the case of a Pass-Through
Certificate, as described below, the Contracts underlying such Certificate)
originally issued at a discount, OID in the relevant period to total OID
remaining to be paid.
Section 1277 of the Code provides that, regardless of the origination
date of the Debt Certificate (or, in the case of a Pass-Through Certificate,
the Contracts), the excess of interest paid or accrued to purchase or carry a
Certificate (or, in the case of a Pass-Through Certificate, as described
below, the underlying Contracts) with market discount over interest received
on such Certificate is allowed as a current deduction only to the extent such
excess is greater than the market discount that accrued during the taxable
year in which such interest expense was incurred. In general, the deferred
portion of any interest expense will be deductible when such market discount
is included in income, including upon the sale, disposition, or repayment of
the Certificate (or in the case of a Pass-Through Certificate, an underlying
Contract). A holder may elect to include market discount in income currently
as it accrues, on all market discount obligations acquired by such holder
during the taxable year such election is made and thereafter, in which case
the interest deferral rule will not apply.
Premium. A holder who purchases a Debt Certificate (other than an
Interest Weighted Certificate to the extent described above) at a cost
greater than its stated redemption price at maturity, generally will be
considered to have purchased the Certificate at a premium, which it may elect
to amortize as an offset to interest income on such Certificate (and not as a
separate deduction item) on a constant yield method. Although no regulations
addressing the computation of premium accrual on securities similar to the
Certificates have been issued, the legislative history of the 1986 Act
indicates that premium is to be accrued in the same manner as market
discount. Accordingly, it appears that the accrual of premium on a class of
Pay-Through Certificates will be calculated using the prepayment assumption
used in pricing such class. If a holder makes an election to amortize premium
on a Debt Certificate, such election will apply to all taxable debt
instruments (including all REMIC and FASIT regular interests and all
pass-through certificates representing ownership interests in a trust holding
debt obligations) held by the holder at the beginning of the taxable year in
which the election is made, and to all taxable debt instruments acquired
thereafter by such holder, and will be irrevocable without the consent of the
IRS. Purchasers who pay a premium for the Certificates should consult their
tax advisers regarding the election to amortize premium and the method to be
employed.
Regulations dealing with amortizable bond premium specifically do not
apply to prepayable debt instruments described in Code Section 1272(a)(6)
such as the Certificates. Absent further guidance from the IRS, the Trustee
intends to account for amortizable bond premium in the manner described
above. Prospective purchasers of the Certificates should consult their tax
advisors regarding the possible application of the Amortizable Bond Premium
Regulations.
Election to Treat All Interest as Original Issue Discount. The OID
Regulations permit a holder of a Debt Certificate to elect to accrue all
interest, discount (including de minimis market or original issue discount)
and premium in income as interest, based on a constant yield method for Debt
Certificates acquired on or after April 4, 1994. If such an election were to
be made with respect to a Debt Certificate with market discount, the holder
of the Debt Certificate would be deemed to have made an election to include
in income currently market discount with respect to all other debt
instruments having market discount that such holder of the Debt Certificate
acquires during the year of the election or thereafter. Similarly, a holder
of a Debt Certificate that makes this election for a Debt Certificate that is
acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such holder owns or acquires. The election to accrue interest,
discount and premium on a constant yield method with respect to a Debt
Certificate is irrevocable.
TAXATION OF THE REMIC AND ITS HOLDERS
General. In the opinion of Brown & Wood LLP, special counsel to the
Depositor, if a REMIC election is made with respect to a Series of
Certificates, then the arrangement by which the Certificates of that Series
are issued will be treated as a REMIC as long as all of the provisions of the
relevant Agreement are complied with and the statutory and regulatory
requirements are satisfied. Certificates will be designated as "Regular
Interests" or "Residual Interests" in a REMIC, as specified in the related
Prospectus Supplement.
Except to the extent specified otherwise in a Prospectus Supplement, if
a REMIC election is made with respect to a Series of Certificates, (i)
Certificates held by a domestic building and loan association will constitute
"a regular or a residual interest in a REMIC" within the meaning of Code
Section 7701(a)(19)(C)(xi) (assuming that at least 95% of the REMIC's assets
consist of cash, government securities, "loans secured by an interest in real
property," and other types of assets described in Code Section
7701(a)(19)(C)); and (ii) Certificates held by a real estate investment trust
will constitute "real estate assets" within the meaning of Code Section
856(c)(5)(B), and income with respect to the Certificates will be considered
"interest on obligations secured by mortgages on real property or on
interests in real property" within the meaning of Code Section 856(c)(3)(B)
(assuming, for both purposes, that at least 95% of the REMIC's assets are
qualifying assets). If less than 95% of the REMIC's assets consist of assets
described in (i) or (ii) above, then a Certificate will qualify for the tax
treatment described in (i), (ii) or (iii) in the proportion that such REMIC
assets are qualifying assets.
The Small Business Job Protection Act of 1996, as part of the repeal of
the bad debt reserve method for thrift institutions, repealed the application
of Code Section 593(d) to any taxable year beginning after December 31, 1995.
REMIC EXPENSES; SINGLE CLASS REMICS
As a general rule, all of the expenses of a REMIC will be taken into
account by holders of the Residual Interest Certificates. In the case of a
"single class REMIC," however, the expenses will be allocated, under Treasury
regulations, among the holders of the Regular Interest Certificates and the
holders of the Residual Interest Certificates (as defined herein) on a daily
basis in proportion to the relative amounts of income accruing to each Holder
on that day. In the case of a holder of a Regular Interest Certificate who is
an individual or a "pass-through interest holder" (including certain
pass-through entities but not including real estate investment trusts), such
expenses will be deductible only to the extent that such expenses, plus other
"miscellaneous itemized deductions" of the Holder, exceed 2% of such Holder's
adjusted gross income. In addition, for taxable years beginning after
December 31, 1990, the amount of itemized deductions otherwise allowable for
the taxable year for an individual whose adjusted gross income exceeds the
applicable amount (which amount will be adjusted for inflation for taxable
years beginning after 1990) will be reduced by the lesser of (i) 3% of the
excess of adjusted gross income over the applicable amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for such taxable year. The
reduction or disallowance of this deduction may have a significant impact on
the yield of the Regular Interest Certificate to such a Holder. In general
terms, a single class REMIC is one that either (i) would qualify, under
existing Treasury regulations, as a grantor trust if it were not a REMIC
(treating all interests as ownership interests, even if they would be
classified as debt for federal income tax purposes) or (ii) is similar to
such a trust and which is structured with the principal purpose of avoiding
the single class REMIC rules. Unless otherwise specified in the related
Prospectus Supplement, the expenses of the REMIC will be allocated to holders
of the related residual interest securities.
TAXATION OF THE REMIC
General. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC is not generally subject to entity-level tax. Rather, the
taxable income or net loss of a REMIC is taken into account by the holders of
residual interests. As described above, the regular interests are generally
taxable as debt of the REMIC.
Calculation of REMIC Income. The taxable income or net loss of a REMIC
is determined under an accrual method of accounting and in the same manner as
in the case of an individual, with certain adjustments. In general, the
taxable income or net loss will be the difference between (i) the gross
income produced by the REMIC's assets, including stated interest and any
original issue discount or market discount on loans and other assets and (ii)
deductions, including stated interest and original issue discount accrued on
Regular Interest Certificates, amortization of any premium with respect to
Contracts, and servicing fees and other expenses of the REMIC. A holder of a
Residual Interest Certificate that is an individual or a "pass-through
interest holder" (including certain pass-through entities, but not including
real estate investment trusts) will be unable to deduct servicing fees
payable on the loans or other administrative expenses of the REMIC for a
given taxable year, to the extent that such expenses, when aggregated with
such holder's other miscellaneous itemized deductions for that year, do not
exceed two percent of such holder's adjusted gross income.
For purposes of computing its taxable income or net loss, the REMIC
should have an initial aggregate tax basis in its assets equal to the
aggregate fair market value of the regular interests and the residual
interests on the Startup Day (generally, the day that the interests are
issued). That aggregate basis will be allocated among the assets of the REMIC
in proportion to their respective fair market values.
The OID provisions of the Code apply to loans of individuals originated
on or after March 2, 1984, and the market discount provisions apply to loans
originated after July 18, 1984. Subject to possible application of the de
minimis rules, the method of accrual by the REMIC of OID income on such loans
will be equivalent to the method under which holders of Pay-Through
Certificates accrue original issue discount (i.e., under the constant yield
method taking into account the Prepayment Assumption). The REMIC will deduct
OID on the Regular Interest Certificates in the same manner that the holders
of the Regular Interest Certificates include such discount in income, but
without regard to the de minimis rules. See "Taxation of Debt Certificates"
above. However, a REMIC that acquires loans at a market discount must include
such market discount in income currently, as it accrues, on a constant
interest basis.
To the extent that the REMIC's basis allocable to loans that it holds
exceeds their principal amounts, the resulting premium, if attributable to
mortgages originated after September 27, 1985, will be amortized over the
life of the loans (taking into account the Prepayment Assumption) on a
constant yield method. Although the law is somewhat unclear regarding
recovery of premium attributable to loans originated on or before such date,
it is possible that such premium may be recovered in proportion to payments
of loan principal.
Prohibited Transactions and Contributions Tax. The REMIC will be
subject to a 100% tax on any net income derived from a "prohibited
transaction." For this purpose, net income will be calculated without taking
into account any losses from prohibited transactions or any deductions
attributable to any prohibited transaction that resulted in a loss. In
general, prohibited transactions include: (i) subject to limited exceptions,
the sale or other disposition of any qualified mortgage transferred to the
REMIC; (ii) subject to a limited exception, the sale or other disposition of
a cash flow investment; (iii) the receipt of any income from assets not
permitted to be held by the REMIC pursuant to the Code; or (iv) the receipt
of any fees or other compensation for services rendered by the REMIC. It is
anticipated that a REMIC will not engage in any prohibited transactions in
which it would recognize a material amount of net income. In addition,
subject to a number of exceptions, a tax is imposed at the rate of 100% on
amounts contributed to a REMIC after the close of the three-month period
beginning on the Startup Day. The holders of Residual Interest Certificates
will generally be responsible for the payment of any such taxes imposed on
the REMIC. To the extent not paid by such holders or otherwise, however, such
taxes will be paid out of the Trust Fund and will be allocated pro rata to
all outstanding classes of Certificates of such REMIC.
TAXATION OF HOLDERS OF RESIDUAL INTEREST CERTIFICATES
The holder of a Certificate representing a residual interest (a
"Residual Interest Certificate") will take into account the "daily portion"
of the taxable income or net loss of the REMIC for each day during the
taxable year on which such holder held the Residual Interest Certificate. The
daily portion is determined by allocating to each day in any calendar quarter
its ratable portion of the taxable income or net loss of the REMIC for such
quarter, and by allocating that amount among the holders (on such day) of the
Residual Interest Certificates in proportion to their respective holdings on
such day.
The holder of a Residual Interest Certificate must report its
proportionate share of the taxable income of the REMIC whether or not it
receives cash distributions from the REMIC attributable to such income or
loss. The reporting of taxable income without corresponding distributions
could occur, for example, in certain REMIC issues in which the loans held by
the REMIC were issued or acquired at a discount, since mortgage prepayments
cause recognition of discount income, while the corresponding portion of the
prepayment could be used in whole or in part to make principal payments on
REMIC Regular Interests issued without any discount or at an insubstantial
discount (if this occurs, it is likely that cash distributions will exceed
taxable income in later years). Taxable income may also be greater in earlier
years of certain REMIC issues as a result of the fact that interest expense
deductions, as a percentage of outstanding principal on REMIC Regular
Interest Certificates, will typically increase over time as lower yielding
Certificates are paid, whereas interest income with respect to loans will
generally remain constant over time as a percentage of loan principal.
In any event, because the holder of a residual interest is taxed on the
net income of the REMIC, the taxable income derived from a Residual Interest
Certificate in a given taxable year will not be equal to the taxable income
associated with investment in a corporate bond or stripped instrument having
similar cash flow characteristics and pretax yield. Therefore, the after-tax
yield on the Residual Interest Certificate may be less than that of such a
bond or instrument.
Limitation on Losses. The amount of the REMIC's net loss that a holder
may take into account currently is limited to the holder's adjusted basis at
the end of the calendar quarter in which such loss arises. A holder's basis
in a Residual Interest Certificate will initially equal such holder's
purchase price, and will subsequently be increased by the amount of the
REMIC's taxable income allocated to the holder, and decreased (but not below
zero) by the amount of distributions made and the amount of the REMIC's net
loss allocated to the holder. Any disallowed loss may be carried forward
indefinitely, but may be used only to offset income of the REMIC generated by
the same REMIC. The ability of holders of Residual Interest Certificates to
deduct net losses may be subject to additional limitations under the Code, as
to which such holders should consult their tax advisers.
Distributions. Distributions on a Residual Interest Certificate
(whether at their scheduled times or as a result of prepayments) will
generally not result in any additional taxable income or loss to a holder of
a Residual Interest Certificate. If the amount of such payment exceeds a
holder's adjusted basis in the Residual Interest Certificate, however, the
holder will recognize gain (treated as gain from the sale of the Residual
Interest Certificate) to the extent of such excess.
Sale or Exchange. A holder of a Residual Interest Certificate will
recognize gain or loss on the sale or exchange of a Residual Interest
Certificate equal to the difference, if any, between the amount realized and
such holder's adjusted basis in the Residual Interest Certificate at the time
of such sale or exchange. Except to the extent provided in regulations, which
have not yet been issued, any loss upon disposition of a Residual Interest
Certificate will be disallowed if the selling holder acquires any residual
interest in a REMIC or similar mortgage pool within six months before or
after such disposition.
Excess Inclusions. The portion of the REMIC taxable income of a holder
of a Residual Interest Certificate consisting of "excess inclusion" income
may not be offset by other deductions or losses, including net operating
losses, on such holder's federal income tax return. Further, if the holder of
a Residual Interest Certificate is an organization subject to the tax on
unrelated business income imposed by Code Section 511, such holder's excess
inclusion income will be treated as unrelated business taxable income of such
holder. In addition, under Treasury regulations yet to be issued, if a real
estate investment trust, a regulated investment company, a common trust fund,
or certain cooperatives were to own a Residual Interest Certificate, a
portion of dividends (or other distributions) paid by the real estate
investment trust (or other entity) would be treated as excess inclusion
income. If a Residual Certificate is owned by a foreign person excess
inclusion income is subject to tax at a rate of 30% which may not be reduced
by treaty, is not eligible for treatment as "portfolio interest" and is
subject to certain additional limitations. See "Tax Treatment of Foreign
Investors." The Small Business Job Protection Act of 1996 has eliminated the
special rule permitting Section 593 institutions ("thrift institutions") to
use net operating losses and other allowable deductions to offset their
excess inclusion income from REMIC residual certificates that have
"significant value" within the meaning of the REMIC Regulations, effective
for taxable years beginning after December 31, 1995, except with respect to
residual certificates continuously held by a thrift institution since
November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides
three rules for determining the effect on excess inclusions on the
alternative minimum taxable income of a residual holder. First, alternative
minimum taxable income for such residual holder is determined without regard
to the special rule that taxable income cannot be less than excess
inclusions. Second, a residual holder's alternative minimum taxable income
for a tax year cannot be less than excess inclusions for the year. Third, the
amount of any alternative minimum tax net operating loss deductions must be
computed without regard to any excess inclusions. These rules are effective
for tax years beginning after December 31, 1986, unless a residual holder
elects to have such rules apply only to tax years beginning after August 20,
1996.
The excess inclusion portion of a REMIC's income is generally equal to
the excess, if any, of REMIC taxable income for the quarterly period
allocable to a Residual Interest Certificate, over the daily accruals for
such quarterly period of (i) 120% of the long term applicable federal rate on
the Startup Day multiplied by (ii) the adjusted issue price of such Residual
Interest Certificate at the beginning of such quarterly period. The adjusted
issue price of a Residual Interest at the beginning of each calendar quarter
will equal its issue price (calculated in a manner analogous to the
determination of the issue price of a Regular Interest), increased by the
aggregate of the daily accruals for prior calendar quarters, and decreased
(but not below zero) by the amount of loss allocated to a holder and the
amount of distributions made on the Residual Interest Certificate before the
beginning of the quarter. The long-term federal rate, which is announced
monthly by the Treasury Department, is an interest rate that is based on the
average market yield of outstanding marketable obligations of the United
States government having remaining maturities in excess of nine years.
Under the REMIC Regulations, in certain circumstances, transfers of
Residual Certificates may be disregarded. See " -- Restrictions on Ownership
and Transfer of Residual Interest Certificates" and " -- Tax Treatment of
Foreign Investors" below.
Restrictions on Ownership and Transfer of Residual Interest
Certificates. As a condition to qualification as a REMIC, reasonable
arrangements must be made to prevent the ownership of a REMIC residual
interest by any "Disqualified Organization." Disqualified Organizations
include 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, a rural electric or telephone
cooperative described in Section 1381(a)(2)(C) of the Code, or any entity
exempt from the tax imposed by Sections 1-1399 of the Code, if such entity is
not subject to tax on its unrelated business income. Accordingly, the
applicable Agreement will prohibit Disqualified Organizations from owning a
Residual Interest Certificate. In addition, no transfer of a Residual
Interest Certificate will be permitted unless the proposed transferee shall
have furnished to the Trustee an affidavit representing and warranting that
it is neither a Disqualified Organization nor an agent or nominee acting on
behalf of a Disqualified Organization.
If a Residual Interest Certificate is transferred to a Disqualified
Organization after March 31, 1988 (in violation of the restrictions set forth
above), a substantial tax can be imposed on the transferor of such Residual
Interest Certificate at the time of the transfer. In addition, if a
Disqualified Organization holds an interest in a pass-through entity after
March 31, 1988 (including, among others, a partnership, trust, real estate
investment trust, regulated investment company, or any person holding as
nominee), that owns a Residual Interest Certificate, the pass-through entity
will be required to pay an annual tax on its allocable share of the excess
inclusion income of the REMIC.
Under the REMIC Regulations, if a Residual Interest Certificate is a
"noneconomic residual interest," as described below, a transfer of a Residual
Interest Certificate to a United States person will be disregarded for all
Federal tax purposes unless no significant purpose of the transfer was to
impede the assessment or collection of tax. A Residual Interest Certificate
is a "noneconomic residual interest" unless, at the time of the transfer (i)
the present value of the expected future distributions on the Residual
Interest Certificate at least equals the product of the present value of the
anticipated excess inclusions and the highest rate of tax for the year in
which the transfer occurs and (ii) the transferor reasonably expects that the
transferee will receive distributions from the REMIC at or after the time at
which the taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. If a transfer of a Residual Interest
is disregarded, the transferor would be liable for any Federal income tax
imposed upon taxable income derived by the transferee from the REMIC. The
REMIC Regulations provide no guidance as to how to determine if a significant
purpose of a transfer is to impede the assessment or collection of tax. A
similar type of limitation exists with respect to certain transfers of
residual interests by foreign persons to United States persons. See " -- Tax
Treatment of Foreign Investors."
Mark to Market Rules. Prospective purchasers of a REMIC Residual
Interest Certificate should be aware that a REMIC Residual Interest
Certificate acquired after January 3, 1995 cannot be marked-to-market.
ADMINISTRATIVE MATTERS
The REMIC's books must be maintained on a calendar year basis and the
REMIC must file an annual federal income tax return. The REMIC will also be
subject to the procedural and administrative rules of the Code applicable to
partnerships, including the determination of any adjustments to, among other
things, items of REMIC income, gain, loss, deduction, or credit, by the IRS
in a unified administrative proceeding.
TAXATION OF THE FASIT AND ITS HOLDERS
In the opinion of Brown & Wood LLP, special counsel to the Depositor, if
a FASIT election is made with respect to a Series of Securities, then the
arrangement by which the Securities of that Series are issued will be treated
as a FASIT so long as all of the provisions of the relevant Agreement are
complied with and the statutory and regulatory requirements are satisfied.
The Small Business and Job Protection Act of 1996 added Sections 860H
through 860L to the Code (the "FASIT Provisions"), which provide for a new
type of entity for federal income tax purposes known as a "financial asset
securitization investment trust" (a "FASIT"). Although the FASIT provisions
of the Code became effective on September 1, 1997, no Treasury regulations or
other administrative guidance have been issued with respect to those
provisions. Accordingly, definitive guidance cannot be provided with respect
to many aspects of the tax treatment of FASIT regular interest holders.
Investors should also note that the FASIT discussion contained herein
constitutes only a summary of the U.S. federal income tax consequences to the
holders of FASIT interests. With respect to each Series of FASIT regular
interests, the related Prospectus Supplement will provide a detailed
discussion regarding the federal income tax consequences associated with the
particular transaction.
FASIT interests will be classified as either FASIT regular interests,
which generally will be treated as debt for federal income tax purposes, or
FASIT ownership interests, which generally are not treated as debt for such
purposes, but rather as representing rights and responsibilities with respect
to the taxable income or loss of the related FASIT. The Prospectus
Supplement for each Series of Securities will indicate which Securities of
such Series will be designated as regular interests, and which, if any, will
be designated as ownership interests.
Qualification as a FASIT. A Trust Fund will qualify as a FASIT if (i)
a FASIT election is in effect, (ii) certain tests concerning (A) the
composition of the FASIT's assets and (B) the nature of the investors'
interests in the FASIT are met on a continuing basis, and (iii) the Trust
Fund is not a regulated investment company as defined in section 851(a) of
the Code.
Asset Composition. For a Trust Fund to be eligible for FASIT status,
substantially all of the Trust Fund Assets must consist of "permitted assets"
as of the close of the third month beginning after the closing date and at
all times thereafter (the "FASIT Qualification Test"). Permitted assets
include (i) cash or cash equivalents, (ii) debt instruments with fixed terms
that would qualify as regular interests if issued by a REMIC (generally,
instruments that provide for interest at a fixed rate, a qualifying variable
rate, or a qualifying interest-only ("IO") type rate), (iii) foreclosure
property, (iv) certain hedging instruments (generally, interest and currency
rate swaps and credit enhancement contracts) that are reasonably required to
guarantee or hedge against the FASIT's risks associated with being the
obligor on FASIT interests, (v) contract rights to acquire qualifying debt
instruments or qualifying hedging instruments, (vi) FASIT regular interest,
and (vii) REMIC regular interests. Permitted assets do not include any debt
instruments issued by the holder of the FASIT's ownership interest or by any
person related to such holder.
Interests in a FASIT. In addition to the foregoing asset qualification
requirements, the interests in a FASIT also must meet certain requirements.
All of the interests in a FASIT must belong to either of the following: (i)
one or more classes of regular interests or (ii) a single class of ownership
interest that is held by a fully taxable domestic C Corporation.
A FASIT interest generally qualifies as a regular interest if (i) it is
designated as a regular interest, (ii) it has a stated maturity no greater
than thirty years, (iii) it entitles its holder to a specified principal
amount, (iv) the issue price of the interest does not exceed 125% of its
stated principal amount, (v) the yield to maturity of the interest is less
than the applicable Treasury rate published by the IRS plus 5%, and (vi) if
it pays interest, such interest is payable at either (a) a fixed rate with
respect to the principal amount of the regular interest or (b) a permissible
variable rate with respect to such principal amount. Permissible variable
rates for FASIT regular interests are the same as those for REMIC regular
interests (i.e., certain qualified floating rates and weighted average
rates). Interest will be considered to be based on a permissible variable
rate if generally, (i) such interest is unconditionally payable at least
annually, (ii) the issue price of the debt instrument does not exceed the
total noncontingent principal payments and (iii) interest is based on a
"qualified floating rate," an "objective rate," a combination of a single
fixed rate and one or more "qualified floating rate," one "qualified inverse
floating rate," or a combination of "qualified floating rates" that do not
operate in a manner that significantly accelerates or defers interest
payments on such FASIT regular interest.
If an interest in a FASIT fails to meet one or more of the requirements
set out in clauses (iii), (iv), or (v) in the immediately preceding
paragraph, but otherwise meets all requirements to be treated as a FASIT, it
may still qualify as a type of regular interest known as a "High-Yield
Interest." In addition, if an interest in a FASIT fails to meet the
requirement of clause (vi), but the interest payable on the interest consists
of a specified portion of the interest payments on permitted assets and that
portion does not vary over the life of the security, the interest will also
qualify as a High-Yield Interest. A High-Yield Interest may be held only by
domestic C corporations that are fully subject to corporate income tax
("Eligible Corporations"), other FASITs, and dealers in securities who
acquire such interests as inventory, rather than for investment. In
addition, holders of High-Yield Interests are subject to limitations on
offset of income derived from such interest. See "Certain Federal Income Tax
Consequences-Taxation of Trust as a FASIT-Treatment of High-Yield
Interests."
Consequences of Disqualification. If a Trust Fund fails to comply with
one or more of ongoing requirements for FASIT status during any taxable year,
the Code provides that its FASIT status may be lost for that year and
thereafter. If FASIT status is lost, the treatment of the former FASIT and
interests therein for federal income tax purposes is uncertain. Although the
Code authorizes the Treasury to issue regulations that address situations
where a failure to meet the requirements for FASIT status occurs
inadvertently and in good faith, such regulations have not yet been issued.
It is possible that disqualification relief might be accompanied by
sanctions, such as the imposition of a corporate tax on all or a portion of
the FASIT's income for the period of time in which the requirements for FASIT
status are not satisfied.
TREATMENT OF FASIT REGULAR SECURITIES
Payments received by holders of FASIT regular interests generally will
be accorded the same tax treatment under the Code as payments received on
other taxable debt instruments. Holders of FASIT regular interests must
report income from such Securities under an accrual method of accounting,
even if they otherwise would have used the cash receipts and disbursements
method. If the FASIT regular interests is sold, the Holder generally will
recognize gain or loss upon the sale. See "Taxation of Debt Securities"
above.
TREATMENT OF HIGH-YIELD INTEREST
High-Yield Interests are subject to special rules regarding the
eligibility of holders of such interest, and the ability of such holders to
offset income derived from those interests with losses. High-Yield Interests
only may be held by Eligible Corporations, other FASITs, and dealers in
securities who acquire such interests as inventory. If a securities dealer
(other than an Eligible Corporation) initially acquires a High-Yield Interest
as inventory, but later begins to hold it for investment, the dealer will be
subject to an excise tax equal to the income from the High-Yield Interest
multiplied by the highest corporate income tax rate. In addition, transfers
of High-Yield Interests to disqualified holders will be disregarded for
federal income tax purposes, and the transferor will continue to be treated
as the holder of the High-Yield Interest.
The Holder of a High-Yield Interest may not use non-FASIT current losses
or net operating loss carryforwards or carrybacks to offset any income
derived from the High-Yield Interest, for either regular federal income tax
purposes or for alternative minimum tax purposes. In addition, the FASIT
provisions contain an anti-abuse rule that imposes corporate income tax on
income derived from a FASIT regular interest that is held by a pass-through
entity (other than another FASIT) that issues debt or equity securities
backed by the FASIT regular interest and that have the same features as High-
Yield Interests.
TAX TREATMENT OF FASIT OWNERSHIP SECURITIES
A FASIT ownership interest represents the residual equity interest in a
FASIT. As such, the holder of a FASIT ownership interest determines its
taxable income by taking into account all assets, liabilities, and items of
income, gain, deduction, loss, and credit of a FASIT. In general, the
character of the income to the holder of a FASIT ownership interest will be
the same as the character of such income to the FASIT, except that any tax-
exempt interest income taken into account by the holder of a FASIT ownership
interest is treated as ordinary income. In determining that taxable income,
the holder of a FASIT ownership interest must determine the amount of
interest, original issue discount, market discount, and premium recognized
with respect to the FASIT's assets and the FASIT regular interests issued by
the FASIT according to a constant yield methodology and under an accrual
method of accounting. In addition, holders of FASIT Ownership Securities are
subject to the same limitations on their ability to use losses to offset
income from their FASIT regular interests as are holders of High-Yield
Interest.
Rules similar to the wash sale rules applicable to REMIC residual
interests also will apply to FASIT ownership interests. Accordingly, losses
on dispositions of a FASIT ownership interest generally will be disallowed
where within six months before or after the disposition, the seller of such
interest acquires any other FASIT ownership interest that is economically
comparable to a FASIT ownership interest. In addition, if any security that
is sold or contributed to a FASIT by the holders of the related FASIT
ownership interest was required to be marked-to-market under section 475 of
the Code by such holder, then section 475 of the Code will continue to apply
to such securities, except that the amount realized under the mark-to-market
rules or the securities' value after applying special valuation rules
contained in the FASIT provisions. Those special valuation rules generally
require that the value of debt instruments that are not traded on an
established securities market be determined by calculating the present value
of the reasonably expected payments under the instrument using a discount
rate of 120% of the applicable Federal rate, compounded semi-annually.
The holder of a FASIT ownership interest will be subject to a tax equal
to 100% of the net income derived by the FASIT from any "prohibited
transactions." Prohibited transactions include (i) the receipt of income
derived from assets that are not permitted assets, (ii) certain dispositions
of permitted assets, (iii) the receipt of any income derived from any loan
originated by a FASIT, and (iv) in certain cases, the receipt of income
representing a servicing fee or other compensation. Any Series of Securities
for which a FASIT election is made generally will be structured in order to
avoid application of the prohibited transaction tax.
TAX STATUS AS A GRANTOR TRUST
In the absence of a REMIC or FASIT election, a Trust Fund generally will
be classified as a grantor trust if (i) there is either only one class of
Certificates that evidences the entire undivided beneficial ownership of the
Trust Fund Assets, or, if there is more than one class of Certificates, each
class represents a direct investment in the Trust Fund Assets, and (ii) no
power exists under the Agreement to vary the investment of the
Certificateholders. If these conditions are satisfied, the related
Prospectus Supplement will recite that, in the opinion of Brown & Wood LLP,
special counsel to the Depositor, the Trust Fund relating to a Series of
Certificates will be classified for federal income tax purposes as a grantor
trust under Subpart E, Part I of Subchapter J of the Code and not as an
association taxable as a corporation (the Certificates of such Series,
"Pass-Through Certificates"). In some Series there will be no separation of
the principal and interest payments on the Contracts. In such circumstances,
a Holder will be considered to have purchased a pro rata undivided interest
in each of the Contracts. In other cases ("Stripped Certificates"), sale of
the Certificates will produce a separation in the ownership of all or a
portion of the principal payments from all or a portion of the interest
payments on the Contracts.
Each Holder must report on its federal income tax return its share of
the gross income derived from the Contracts (not reduced by the amount
payable as fees to the Trustee and the Master Servicer and similar fees
(collectively, the "Servicing Fee")), at the same time and in the same manner
as such items would have been reported under the Holder's tax accounting
method had it held its interest in the Contracts directly, received directly
its share of the amounts received with respect to the Contracts, and paid
directly its share of the Servicing Fees. In the case of Pass-Through
Certificates other than Stripped Certificates, such income will consist of a
pro rata share of all of the income derived from all of the Contracts and, in
the case of Stripped Certificates, such income will consist of a pro rata
share of the income derived from each stripped bond or stripped coupon in
which the Holder owns an interest. The holder of a Certificate will generally
be entitled to deduct such Servicing Fees under Section 162 or Section 212 of
the Code to the extent that such Servicing Fees represent "reasonable"
compensation for the services rendered by the Trustee and the Master Servicer
(or third parties that are compensated for the performance of services). In
the case of a noncorporate holder, however, Servicing Fees (to the extent not
otherwise disallowed, e.g., because they exceed reasonable compensation) will
be deductible in computing such holder's regular tax liability only to the
extent that such fees, when added to other miscellaneous itemized deductions,
exceed 2% of adjusted gross income and may not be deductible to any extent in
computing such holder's alternative minimum tax liability. In addition, for
taxable years beginning after December 31, 1990, the amount of itemized
deductions otherwise allowable for the taxable year for an individual whose
adjusted gross income exceeds the applicable amount (which amount will be
adjusted for inflation in taxable years beginning after 1990) will be reduced
by the lesser of (i) 3% of the excess of adjusted gross income over the
applicable amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for such taxable year.
Discount or Premium on Pass-Through Certificates. The holder's purchase
price of a Pass-Through Certificate is to be allocated among the Contracts in
proportion to their fair market values, determined as of the time of purchase
of the Certificates. In the typical case, the Trustee (to the extent
necessary to fulfill its reporting obligations) will treat each Contract as
having a fair market value proportional to the share of the aggregate
principal balances of all of the Contracts that it represents, since the
Certificates, unless otherwise specified in the related Prospectus
Supplement, will have a relatively uniform interest rate and other common
characteristics. To the extent that the portion of the purchase price of a
Pass-Through Certificate allocated to a Contract (other than to a right to
receive any accrued interest thereon and any undistributed principal
payments) is less than or greater than the portion of the principal balance
of the Contract allocable to the Certificate, the interest in the Contract
allocable to the Pass-Through Certificate will be deemed to have been
acquired at a discount or premium, respectively.
The treatment of any discount will depend on whether the discount
represents OID or market discount. In the case of a Contract with OID in
excess of a prescribed de minimis amount or a Stripped Certificate, a holder
of a Certificate will be required to report as interest income in each
taxable year its share of the amount of OID that accrues during that year in
the manner described above. OID with respect to a Contract could arise, for
example, by virtue of the financing of points by the originator of the
Contract, or by virtue of the charging of points by the originator of the
Contract in an amount greater than a statutory de minimis exception, in
circumstances under which the points are not currently deductible pursuant to
applicable Code provisions. Any market discount or premium on a Contract will
be includible in income, generally in the manner described above, except that
in the case of Pass-Through Certificates, market discount is calculated with
respect to the Contracts underlying the Certificate, rather than with respect
to the Certificate. A Holder that acquires an interest in a Contract
originated after July 18, 1984 with more than a de minimis amount of market
discount (generally, the excess of the principal amount of the Contract over
the purchaser's allocable purchase price) will be required to include accrued
market discount in income in the manner set forth above. See " -- Taxation
of Debt Certificates; Market Discount" and " -- Premium" above.
In the case of market discount on a Pass-Through Certificate
attributable to Contracts originated on or before July 18, 1984, the holder
generally will be required to allocate the portion of such discount that is
allocable to a loan among the principal payments on the Contract and to
include the discount allocable to each principal payment in ordinary income
at the time such principal payment is made. Such treatment would generally
result in discount being included in income at a slower rate than discount
would be required to be included in income using the method described in the
preceding paragraph.
Stripped Certificates. A Stripped Certificate may represent a right to
receive only a portion of the interest payments on the Contracts, a right to
receive only principal payments on the Contracts, or a right to receive
certain payments of both interest and principal. Certain Stripped
Certificates ("Ratio Strip Certificates") may represent a right to receive
differing percentages of both the interest and principal on each Contract.
Pursuant to Section 1286 of the Code, the separation of ownership of the
right to receive some or all of the interest payments on an obligation from
ownership of the right to receive some or all of the principal payments
results in the creation of "stripped bonds" with respect to principal
payments and "stripped coupons" with respect to interest payments. Section
1286 of the Code applies the OID rules to stripped bonds and stripped
coupons. For purposes of computing original issue discount, a stripped bond
or a stripped coupon is treated as a debt instrument issued on the date that
such stripped interest is purchased with an issue price equal to its purchase
price or, if more than one stripped interest is purchased, the ratable share
of the purchase price allocable to such stripped interest.
Servicing fees in excess of reasonable servicing fees ("excess
servicing") will be treated under the stripped bond rules. If the excess
servicing fee is less than 100 basis points (i.e., 1% interest on the
Contract principal balance) or the Certificates are initially sold with a de
minimis discount (assuming no prepayment assumption is required), any non-de
minimis discount arising from a subsequent transfer of the Certificates
should be treated as market discount. The IRS appears to require that
reasonable servicing fees be calculated on a Contract by Contract basis,
which could result in some Contracts being treated as having more than 100
basis points of interest stripped off.
OID Regulations and judicial decisions provide no direct guidance as to
how the interest and original issue discount rules are to apply to Stripped
Certificates and other Pass-Through Certificates. Under the method described
above for Pay-Through Certificates (the "Cash Flow Bond Method"), a
prepayment assumption is used and periodic recalculations are made which take
into account with respect to each accrual period the effect of prepayments
during such period. However, the 1986 Act does not, absent Treasury
regulations, appear specifically to cover instruments such as the Stripped
Certificates which technically represent ownership interests in the
underlying Contracts, rather than being debt instruments "secured by" those
loans. For tax years beginning after August 5, 1997 the Taxpayer Relief Act
of 1997 may allow use of the Cash Flow Bond Method with respect to Stripped
Certificates and other Pass-Through Certificates because it provides that
such method applies to any pool of debt instruments the yield on which may be
affected by prepayments. Nevertheless, it is believed that the Cash Flow Bond
Method is a reasonable method of reporting income for such Certificates, and
it is expected that OID will be reported on that basis unless otherwise
specified in the related Prospectus Supplement. In applying the calculation
to Pass-Through Certificates, the Trustee will treat all payments to be
received by a holder with respect to the underlying Contracts as payments on
a single installment obligation. The IRS could, however, assert that original
issue discount must be calculated separately for each Contract underlying a
Certificate.
Under certain circumstances, if the Contracts prepay at a rate faster
than the Prepayment Assumption, the use of the Cash Flow Bond Method may
accelerate a Holder's recognition of income. If, however, the Contracts
prepay at a rate slower than the Prepayment Assumption, in some circumstances
the use of this method may decelerate a Holder's recognition of income.
In the case of a Stripped Certificate that is an Interest Weighted
Certificate, the Trustee intends, absent contrary authority, to report income
to Certificate holders as OID, in the manner described above for Interest
Weighted Certificates.
Possible Alternative Characterizations. The characterizations of the
Stripped Certificates described above are not the only possible
interpretations of the applicable Code provisions. Among other possibilities,
the IRS could contend that (i) in certain Series, each non-Interest Weighted
Certificate is composed of an unstripped undivided ownership interest in
Contracts and an installment obligation consisting of stripped principal
payments; (ii) the non-Interest Weighted Certificates are subject to the
contingent payment provisions of the Contingent Regulations; or (iii) each
Interest Weighted Stripped Certificate is composed of an unstripped undivided
ownership interest in Contracts and an installment obligation consisting of
stripped interest payments.
Given the variety of alternatives for treatment of the Stripped
Certificates and the different federal income tax consequences that result
from each alternative, potential purchasers are urged to consult their own
tax advisers regarding the proper treatment of the Certificates for federal
income tax purposes.
Character as Qualifying Contracts. In the case of Stripped
Certificates, there is no specific legal authority existing regarding whether
the character of the Certificates, for federal income tax purposes, will be
the same as the Contracts. The IRS could take the position that the
Contracts' character is not carried over to the Certificates in such
circumstances. Pass-Through Certificates will be, and, although the matter is
not free from doubt, Stripped Certificates should be considered to represent
"real estate assets" within the meaning of Section 856(c)(5)(B) of the Code
and "loans secured by an interest in real property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code; and interest income attributable to
the Certificates should be considered to represent "interest on obligations
secured by mortgages on real property or on interests in real property"
within the meaning of Section 856(c)(3)(B) of the Code. Reserves or funds
underlying the Certificates may cause a proportionate reduction in the
above-described qualifying status categories of Certificates.
SALE OR EXCHANGE
Subject to the discussion below with respect to Trust Funds classified
as partnerships, a Holder's tax basis in its Certificate is the price such
holder pays for a Certificate, plus amounts of original issue or market
discount included in income and reduced by any payments received (other than
qualified stated interest payments) and any amortized premium. Gain or loss
recognized on a sale, exchange, or redemption of a Certificate, measured by
the difference between the amount realized and the Certificate's basis as so
adjusted, will generally be capital gain or loss, assuming that the
Certificate is held as a capital asset. In the case of a Certificate held by
a bank, thrift, or similar institution described in Section 582 of the Code,
however, gain or loss realized on the sale or exchange of a REMIC or FASIT
regular interest will be taxable as ordinary income or loss. In addition,
gain from the disposition of a REMIC or FASIT regular interest that might
otherwise be capital gain will be treated as ordinary income to the extent of
the excess, if any, of (i) the amount that would have been includible in the
holder's income if the yield on such REMIC regular interest had equaled 110%
of the applicable federal rate as of the beginning of such holder's holding
period, over the amount of ordinary income actually recognized by the holder
with respect to such REMIC regular interest. In general, the maximum tax
rate on ordinary income for individual taxpayers is 39.6% and the maximum tax
rate on long-term capital gains for such taxpayers is 28%. The maximum tax
rate on both ordinary income and long-term capital gains of corporate
taxpayers is 35%.
The Taxpayer Relief Act of 1997 reduces the maximum rates on long-term
capital gains recognized on capital assets held by individual taxpayers for
more than eighteen months as of the date of disposition (and would further
reduce the maximum rates on such gains in the year 2001 and thereafter for
certain individual taxpayers who meet specified conditions). Prospective
investors should consult their own tax advisors concerning these tax law
changes.
MISCELLANEOUS TAX ASPECTS
Backup Withholding. Subject to the discussion below with respect to
Trust Funds classified as partnerships, a Holder, other than a holder of a
REMIC Residual Certificate, may, under certain circumstances, be subject to
"backup withholding" at a rate of 31% with respect to distributions or the
proceeds of a sale of certificates to or through brokers that represent
interest or original issue discount on the Certificates. This withholding
generally applies if the holder of a Certificate (i) fails to furnish the
Trustee with its taxpayer identification number ("TIN"); (ii) furnishes the
Trustee an incorrect TIN; (iii) fails to report properly interest, dividends
or other "reportable payments" as defined in the Code; or (iv) under certain
circumstances, fails to provide the Trustee or such holder's securities
broker with a certified statement, signed under penalty of perjury, that the
TIN provided is its correct number and that the holder is not subject to
backup withholding. Backup withholding will not apply, however, with respect
to certain payments made to Holders, including payments to certain exempt
recipients (such as exempt organizations) and to certain Nonresidents (as
defined below). Holders should consult their tax advisers as to their
qualification for exemption from backup withholding and the procedure for
obtaining the exemption.
The Trustee will report to the Holders and to the Master Servicer for
each calendar year the amount of any "reportable payments" during such year
and the amount of tax withheld, if any, with respect to payments on the
Certificates.
TAX TREATMENT OF FOREIGN INVESTORS
Subject to the discussion below with respect to Trust Funds classified
as partnerships is made, under the Code, unless interest (including OID) paid
on a Certificate (other than a Residual Interest Certificate) is considered
to be "effectively connected" with a trade or business conducted in the
United States by a nonresident alien individual, foreign partnership or
foreign corporation ("Nonresidents"), such interest will normally qualify as
portfolio interest (except where (i) the recipient is a holder, directly or
by attribution, of 10% or more of the capital or profits interest in the
issuer or (ii) the recipient is a controlled foreign corporation to which the
issuer is a related person) and will be exempt from federal income tax. Upon
receipt of appropriate ownership statements, the issuer normally will be
relieved of obligations to withhold tax from such interest payments. These
provisions supersede the generally applicable provisions of United States law
that would otherwise require the issuer to withhold at a 30% rate (unless
such rate were reduced or eliminated by an applicable tax treaty) on, among
other things, interest and other fixed or determinable, annual or periodic
income paid to Nonresidents. Holders of Pass-Through Certificates and
Stripped Certificates, including Ratio Strip Certificates, however, may be
subject to withholding to the extent that the Contracts were originated on or
before July 18, 1984.
Interest and OID of Holders who are Non-residents are not subject to
withholding if they are effectively connected with a United States business
conducted by the Holder. They will, however, generally be subject to the
regular United States income tax.
Payments to holders of Residual Interest Certificates who are Non-
residents will generally be treated as interest for purposes of the 30% (or
lower treaty rate) United States withholding tax. Holders should assume that
such income does not qualify for exemption from United States withholding tax
as "portfolio interest." It is clear that, to the extent that a payment
represents a portion of REMIC taxable income that constitutes excess
inclusion income, a holder of a Residual Interest Certificate will not be
entitled to an exemption from or reduction of the 30% (or lower treaty rate)
withholding tax rule. If the payments are subject to United States
withholding tax, they generally will be taken into account for withholding
tax purposes only when paid or distributed (or when the Residual Interest
Certificate is disposed of). The Treasury has statutory authority, however,
to promulgate regulations which would require such amounts to be taken into
account at an earlier time in order to prevent the avoidance of tax. Such
regulations could, for example, require withholding prior to the distribution
of cash in the case of Residual Interest Certificates that do not have
significant value. Under the REMIC Regulations, if a Residual Interest
Certificate has tax avoidance potential, a transfer of a Residual Interest
Certificate to a Nonresident will be disregarded for all federal tax
purposes. A Residual Interest Certificate has tax avoidance potential
unless, at the time of the transfer the transferor reasonably expects that
the REMIC will distribute to the transferee residual interest holder amounts
that will equal at least 30% of each excess inclusion, and that such amounts
will be distributed at or after the time at which the excess inclusions
accrue and not later than the calendar year following the calendar year of
accrual. If a Nonresident transfers a Residual Interest Certificate to a
United States person, and if the transfer has the effect of allowing the
transferor to avoid tax on accrued excess inclusions, then the transfer is
disregarded and the transferor continues to be treated as the owner of the
Residual Interest Certificate for purposes of the withholding tax provisions
of the Code. See " -- Excess Inclusions."
TAX CHARACTERIZATION OF THE TRUST FUND AS A PARTNERSHIP
In the absence of a REMIC or FASIT election, a Trust Fund that is not
classified as a grantor trust will be classified as a partnership for federal
tax purposes. Brown & Wood LLP, special counsel to the Depositor, will
deliver its opinion that a Trust Fund classified as a partnership will not be
a publicly traded partnership taxable as a corporation for federal income tax
purposes. This opinion will be based on the assumption that the terms of the
related Agreement and related documents will be complied with, and on
counsel's conclusions that the nature of the income of the Trust Fund will
exempt it from the rule that certain publicly traded partnerships are taxable
as corporations or the issuance of the Certificates has been structured as a
private placement under an IRS safe harbor, so that the Trust Fund will not
be characterized as a publicly traded partnership taxable as a corporation.
If the Trust Fund were taxable as a corporation for federal income tax
purposes, the Trust Fund would be subject to corporate income tax on its
taxable income. Any such corporate income tax could materially reduce cash
available to make distributions on the Certificates, and Certificateholders
could be liable for any such tax that is unpaid by the Trust Fund.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust Fund as a Partnership. The Trust Fund and the
Master Servicer will agree, and the Certificateholders will agree by their
purchase of Certificates, to treat the Trust Fund as a partnership for
purposes of federal and state income tax, franchise tax and any other tax
measured in whole or in part by income, with the assets of the partnership
being the assets held by the Trust Fund, and the partners of the partnership
being the Certificateholders. However, the proper characterization of the
arrangement involving the Trust Fund, the Certificates and the Master
Servicer is not clear because there is no authority on transactions closely
comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust Fund. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
Indexed Certificates, etc. The following discussion assumes that all
payments on the Certificates are denominated in U.S. dollars, none of the
Certificates are Indexed Certificates or Strip Certificates, and that a
Series of Certificates includes a single class of Certificates. If these
conditions are not satisfied with respect to any given Series of
Certificates, additional tax considerations with respect to such Certificates
will be disclosed in the applicable Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust Fund will not be
subject to federal income tax. Rather, each Certificateholder will be
required to separately take into account such holder's allocated share of
income, gains, losses, deductions and credits of the Trust Fund. The Trust
Fund's income will consist primarily of interest and finance charges earned
on the Contracts (including appropriate adjustments for market discount, OID
and bond premium) and any gain upon collection or disposition of Contracts.
The Trust Fund's deductions will consist primarily of servicing and other
fees, and losses or deductions upon collection or disposition of Contracts.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the related Agreement and related documents). The Agreements will
provide, in general, that the Certificateholders will be allocated taxable
income of the Trust Fund for each month equal to the sum of (i) the interest
that accrues on the Certificates in accordance with their terms for such
month, including interest accruing at the Pass-Through Rate for such month
and interest on amounts previously due on the Certificates but not yet
distributed; (ii) any Trust Fund income attributable to discount on the
Contracts that corresponds to any excess of the principal amount of the
Certificates over their initial issue price (iii) prepayment premium payable
to the Certificateholders for such month; and (iv) any other amounts of
income payable to the Certificateholders for such month. Such allocation will
be reduced by any amortization by the Trust Fund of premium on Contracts that
corresponds to any excess of the issue price of Certificates over their
principal amount. All remaining taxable income of the Trust Fund will be
allocated to the Company. Based on the economic arrangement of the parties,
this approach for allocating Trust Fund income should be permissible under
applicable Treasury regulations, although no assurance can be given that the
IRS would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass-Through
Rate plus the other items described above even though the Trust Fund might
not have sufficient cash to make current cash distributions of such amount.
Thus, cash basis holders will in effect be required to report income from the
Certificates on the accrual basis and Certificateholders may become liable
for taxes on Trust Fund income even if they have not received cash from the
Trust Fund to pay such taxes. In addition, because tax allocations and tax
reporting will be done on a uniform basis for all Certificateholders but
Certificateholders may be purchasing Certificates at different times and at
different prices, Certificateholders may be required to report on their tax
returns taxable income that is greater or less than the amount reported to
them by the Trust Fund.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated
business taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust Fund (including
fees to the Master Servicer but not interest expense) would be miscellaneous
itemized deductions. Such deductions might be disallowed to the individual in
whole or in part and might result in such holder being taxed on an amount of
income that exceeds the amount of cash actually distributed to such holder
over the life of the Trust Fund.
The Trust Fund intends to make all tax calculations relating to income
and allocations to Certificateholders on an aggregate basis. If the IRS were
to require that such calculations be made separately for each Contract, the
Trust Fund might be required to incur additional expense but it is believed
that there would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Contracts were not issued
with OID, and, therefore, the Trust Fund should not have OID income. However,
the purchase price paid by the Trust Fund for the Contracts may be greater or
less than the remaining principal balance of the Contracts at the time of
purchase. If so, the Contract will have been acquired at a premium or
discount, as the case may be. (As indicated above, the Trust Fund will make
this calculation on an aggregate basis, but might be required to recompute it
on a Contract by Contract basis.)
If the Trust Fund acquires the Contracts at a market discount or
premium, the Trust Fund will elect to include any such discount in income
currently as it accrues over the life of the Contracts or to offset any such
premium against interest income on the Contracts. As indicated above, a
portion of such market discount income or premium deduction may be allocated
to Certificateholders.
Section 708 Termination. Pursuant to final regulations issued on May 9,
1997 under Code Section 708, a sale or exchange of 50% or more of the capital
and profits in a partnership would cause a deemed contribution of assets of
the partnership (the "old partnership") to a new partnership (the "new
partnership") in exchange for interests in the new partnership. Such
interests would be deemed distributed to the partners of the old partnership
in liquidation thereof, which would not constitute a sale or exchange.
Accordingly under these new regulations, if the Trust Fund were characterized
as a partnership and a sale of Certificates terminated the partnership under
Code Section 708, the purchaser's basis in its ownership interest would not
change.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates
sold. A Certificateholder's tax basis in a Certificate will generally equal
the holder's cost increased by the holder's share of Trust Fund income
(includible in income) and decreased by any distributions received with
respect to such Certificate. In addition, both the tax basis in the
Certificates and the amount realized on a sale of a Certificate would include
the holder's share of liabilities of the Trust Fund. A holder acquiring
Certificates at different prices may be required to maintain a single
aggregate adjusted tax basis in such Certificates, and, upon sale or other
disposition of some of the Certificates, allocate a portion of such aggregate
tax basis to the Certificates sold (rather than maintaining a separate tax
basis in each Certificate for purposes of computing gain or loss on a sale of
that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share
of unrecognized accrued market discount on the Contracts would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust Fund does not expect to have any other
assets that would give rise to such special reporting requirements. Thus, to
avoid those special reporting requirements, the Trust Fund will elect to
include market discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise
to a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust
Fund's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the
Certificateholders in proportion to the principal amount of Certificates
owned by them as of the close of the last day of such month. As a result, a
holder purchasing Certificates may be allocated tax items (which will affect
its tax liability and tax basis) attributable to periods before the actual
transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or
losses of the Trust Fund might be reallocated among the Certificateholders.
The Trust Fund's method of allocation between transferors and transferees may
be revised to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder
had. The tax basis of the Trust Fund's assets will not be adjusted to reflect
that higher (or lower) basis unless the Trust Fund were to file an election
under Section 754 of the Code. In order to avoid the administrative
complexities that would be involved in keeping accurate accounting records,
as well as potentially onerous information reporting requirements, the Trust
Fund will not make such election. As a result, Certificateholders might be
allocated a greater or lesser amount of Trust Fund income than would be
appropriate based on their own purchase price for Certificates.
Administrative Matters. The Owner Trustee is required to keep or have
kept complete and accurate books of the Trust Fund. Such books will be
maintained for financial reporting and tax purposes on an accrual basis and
the fiscal year of the Trust Fund will be the calendar year. The Trustee will
file a partnership information return (IRS Form 1065) with the IRS for each
taxable year of the Trust Fund and will report each Certificateholder's
allocable share of items of Trust Fund income and expense to holders and the
IRS on Schedule K-1. The Trust Fund will provide the Schedule K-l information
to nominees that fail to provide the Trust Fund with the information
statement described below and such nominees will be required to forward such
information to the beneficial owners of the Certificates. Generally, holders
must file tax returns that are consistent with the information return filed
by the Trust Fund or be subject to penalties unless the holder notifies the
IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust
Fund with a statement containing certain information on the nominee, the
beneficial owners and the Certificates so held. Such information includes (i)
the name, address and taxpayer identification number of the nominee and (ii)
as to each beneficial owner (x) the name, address and identification number
of such person, (y) whether such person is a United States person, a
tax-exempt entity or a foreign government, an international organization, or
any wholly owned agency or instrumentality of either of the foregoing and (z)
certain information on Certificates that were held, bought or sold on behalf
of such person throughout the year. In addition, brokers and financial
institutions that hold Certificates through a nominee are required to furnish
directly to the Trust Fund information as to themselves and their ownership
of Certificates. A clearing agency registered under Section 17A of the
Exchange Act is not required to furnish any such information statement to the
Trust Fund. The information referred to above for any calendar year must be
furnished to the Trust Fund on or before the following January 31. Nominees,
brokers and financial institutions that fail to provide the Trust Fund with
the information described above may be subject to penalties.
The Depositor will be designated as the tax matters partner in the
related Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which
the partnership information return is filed. Any adverse determination
following an audit of the return of the Trust Fund by the appropriate taxing
authorities could result in an adjustment of the returns of the
Certificateholders, and, under certain circumstances, a Certificateholder may
be precluded from separately litigating a proposed adjustment to the items of
the Trust Fund. An adjustment could also result in an audit of a
Certificateholder's returns and adjustments of items not related to the
income and losses of the Trust Fund.
Tax Consequences to Foreign Certificateholders. It is not clear whether
the Trust Fund would be considered to be engaged in a trade or business in
the United States for purposes of federal withholding taxes with respect to
non-U.S. Persons because there is no clear authority dealing with that issue
under facts substantially similar to those described herein. Although it is
not expected that the Trust Fund would be engaged in a trade or business in
the United States for such purposes, the Trust Fund will withhold as if it
were so engaged in order to protect the Trust Fund from possible adverse
consequences of a failure to withhold. The Trust Fund expects to withhold on
the portion of its taxable income, as calculated for this purpose which may
exceed the distributions to Certificateholders, that is allocable to foreign
Certificateholders pursuant to Section 1446 of the Code, as if such income
were effectively connected to a U.S. trade or business, at a rate of 35% for
foreign holders that are taxable as corporations and 39.6% for all other
foreign holders. Subsequent adoption of Treasury regulations or the issuance
of other administrative pronouncements may require the Trust Fund to change
its withholding procedures. In determining a holder's withholding status, the
Trust Fund may rely on IRS Form W-8, IRS Form W-9 or the holder's
certification of nonforeign status signed under penalties of perjury.
The term "U.S. Person" means a citizen or resident of the United States,
a corporation, partnership (or other entity treated as a corporation or
partnership) created or organized in or under the laws of the United States
or any state thereof including the District of Columbia (other than a
partnership that is not treated as a United States person under any
applicable Treasury regulations), or an estate whose income is subject to
U.S. federal income tax regardless of its source of income, or a trust if a
court within the United States is able to exercise primary supervision of the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. Notwithstanding
the preceding sentence, to the extent provided in regulations, certain trusts
in existence on August 20, 1996 and treated as United States persons prior
to such date that elect to continue to be so treated also shall be considered
U.S. Persons.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the
branch profits tax) on its share of the Trust Fund's income. Each foreign
holder must obtain a taxpayer identification number from the IRS and submit
that number to the Trust Fund on Form W-8 in order to assure appropriate
crediting of the taxes withheld. A foreign holder generally would be entitled
to file with the IRS a claim for refund with respect to taxes withheld by the
Trust Fund taking the position that no taxes were due because the Trust Fund
was not engaged in a U.S. trade or business. However, interest payments made
(or accrued) to a Certificateholder who is a foreign person generally will be
considered guaranteed payments to the extent such payments are determined
without regard to the income of the Trust Fund. If these interest payments
are properly characterized as guaranteed payments, then the interest will not
be considered "portfolio interest." As a result, Certificateholders will be
subject to United States federal income tax and withholding tax at a rate of
30 percent, unless reduced or eliminated pursuant to an applicable treaty. In
such case, a foreign holder would only be entitled to claim a refund for that
portion of the taxes in excess of the taxes that should be withheld with
respect to the guaranteed payments.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding
tax of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Federal
Income Tax Consequences," potential investors should consider the state and
local income tax consequences of the acquisition, ownership, and disposition
of the Certificates. State and local income tax law may differ substantially
from the corresponding federal law, and this discussion does not purport to
describe any aspect of the income tax laws of any state or locality.
Therefore, potential investors should consult their own tax advisors with
respect to the various state and local tax consequences of an investment in
the Certificates.
ERISA CONSIDERATIONS
The following describes certain considerations under ERISA and the Code,
which apply only to Certificates of a Series that are not divided into
subclasses. If Certificates are divided into subclasses the related
Prospectus Supplement will contain information concerning considerations
relating to ERISA and the Code that are applicable to such Certificates.
ERISA imposes requirements on employee benefit plans (and on certain
other retirement plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and collective investment funds and
separate accounts in which such plans, accounts or arrangements are invested)
(collectively "Plans") subject to ERISA and on persons who are fiduciaries
with respect to such Plans. Generally, ERISA applies to investments made by
Plans. Among other things, ERISA requires that the assets of Plans be held in
trust and that the trustee, or other duly authorized fiduciary, have
exclusive authority and discretion to manage and control the assets of such
Plans. ERISA also imposes certain duties on persons who are fiduciaries of
Plans. Under ERISA, any person who exercises any authority or control
respecting the management or disposition of the assets of a Plan is
considered to be a fiduciary of such Plan (subject to certain exceptions not
here relevant). Certain employee benefit plans, such as governmental plans
(as defined in ERISA Section 3(32)) and, if no election has been made under
Section 410(d) of the Code, church plans (as defined in ERISA Section 3(33)),
are not subject to ERISA requirements. Accordingly, assets of such plans may
be invested in Certificates without regard to the ERISA considerations
described above and below, subject to the provisions of applicable state law.
Any such plan which is qualified and exempt from taxation under Code
Sections 401(a) and 501(a), however, is subject to the prohibited transaction
rules set forth in Code Section 503.
On November 13, 1986, the United States Department of Labor (the "DOL")
issued final regulations concerning the definition of what constitutes the
assets of a Plan. (Labor Reg. Section 2510.3-101) Under this regulation, the
underlying assets and properties of corporations, partnerships and certain
other entities in which a Plan makes an "equity" investment could be deemed
for purposes of ERISA to be assets of the investing Plan in certain
circumstances. However, the regulation provides that, generally, the assets
of a corporation or partnership in which a Plan invests will not be deemed
for purposes of ERISA to be assets of such Plan if the equity interest
acquired by the investing Plan is a publicly-offered security. A
publicly-offered security, as defined in the Labor Reg. Section 2510.3-101,
is a security that is widely held, freely transferable and registered under
the Securities Exchange Act of 1934, as amended.
In addition to the imposition of general fiduciary standards of
investment prudence and diversification, ERISA prohibits a broad range of
transactions involving Plan assets and persons ("Parties in Interest") having
certain specified relationships to a Plan and imposes additional prohibitions
where Parties in Interest are fiduciaries with respect to such Plan. Because
the Contracts may be deemed Plan assets of each Plan that purchases
Certificates, an investment in the Certificates by a Plan might be a
prohibited transaction under ERISA Sections 406 and 407 and subject to an
excise tax under Code Section 4975 unless a statutory or administrative
exemption applies.
In Prohibited Transaction Exemption 83-1 ("PTE 83-1"), which amended
Prohibited Transaction Exemption 81-7, the DOL exempted from ERISA's
prohibited transaction rules certain transactions relating to the operation
of residential mortgage pool investment trusts and the purchase, sale and
holding of "mortgage pool pass-through certificates" in the initial issuance
of such certificates. PTE 83-1 permits, subject to certain conditions,
transactions which might otherwise be prohibited between Plans and Parties in
Interest with respect to those Plans related to the origination, maintenance
and termination of mortgage pools consisting of mortgage loans secured by
first or second mortgages or deeds of trust on single-family residential
property, and the acquisition and holding of certain mortgage pool
pass-through certificates representing an interest in such mortgage pools by
Plans. If the general conditions (discussed below) of PTE 83-1 are satisfied,
investments by a Plan in Certificates that represent interests in a Pool
consisting of Contracts ("Single Family Certificates") will be exempt from
the prohibitions of ERISA Sections 406(a) and 407 (relating generally to
transactions with Parties in Interest who are not fiduciaries) if the Plan
purchases the Single Family Certificates at no more than fair market value
and will be exempt from the prohibitions of ERISA Sections 406(b)(1) and (2)
(relating generally to transactions with fiduciaries) if, in addition, the
purchase is approved by an independent fiduciary, no sales commission is paid
to the pool sponsor, the Plan does not purchase more than 25% of all Single
Family Certificates, and at least 50% of all Single Family Certificates are
purchased by persons independent of the pool sponsor or pool trustee. PTE
83-1 does not provide an exemption for transactions involving Subordinate
Certificates. Accordingly, unless otherwise provided in the related
Prospectus Supplement, no transfer of a Subordinate Certificate or a
Certificate which is not a Single Family Certificate may be made to a Plan.
The discussion in this and the next succeeding paragraph applies only to
Single Family Certificates. The Depositor believes that, for purposes of PTE
83-1, the term "mortgage pass-through certificate" would include: (i)
Certificates issued in a Series consisting of only a single class of
Certificates; and (ii) Certificates issued in a Series in which there is only
one class of those particular Certificates; provided that the Certificates in
the case of clause (i), or the Certificates in the case of clause (ii),
evidence the beneficial ownership of both a specified percentage of future
interest payments (greater than 0%) and a specified percentage (greater than
0%) of future principal payments on the Contracts. It is not clear whether a
class of Certificates that evidences the beneficial ownership in a Trust Fund
divided into Contract groups, beneficial ownership of a specified percentage
of interest payments only or principal payments only, or a notional amount of
either principal or interest payments, or a class of Certificates entitled to
receive payments of interest and principal on the Contracts only after
payments to other classes or after the occurrence of certain specified
events would be a "mortgage pass-through certificate" for purposes of PTE
83-1.
PTE 83-1 sets forth three general conditions which must be satisfied for
any transaction to be eligible for exemption: (i) the maintenance of a system
of insurance or other protection for the pooled mortgage loans and property
securing such loans, and for indemnifying Certificateholders against
reductions in pass-through payments due to property damage or defaults in
loan payments in an amount not less than the greater of one percent of the
aggregate principal balance of all covered pooled mortgage loans or the
principal balance of the largest covered pooled mortgage loan; (ii) the
existence of a pool trustee who is not an affiliate of the pool sponsor; and
(iii) a limitation on the amount of the payment retained by the pool sponsor,
together with other funds inuring to its benefit, to not more than adequate
consideration for selling the mortgage loans plus reasonable compensation for
services provided by the pool sponsor to the Pool. The Depositor believes
that the first general condition referred to above will be satisfied with
respect to the Certificates in a Series issued without a subordination
feature, or the Certificates only in a Series issued with a subordination
feature, provided that the subordination and Reserve Account, subordination
by shifting of interests, the pool insurance or other form of credit
enhancement described under "Credit Enhancement" herein (such subordination,
pool insurance or other form of credit enhancement being the system of
insurance or other protection referred to above) with respect to a Series of
Certificates is maintained in an amount not less than the greater of one
percent of the aggregate principal balance of the Contracts or the principal
balance of the largest Contract. See "Description of the Certificates"
herein. In the absence of a ruling that the system of insurance or other
protection with respect to a Series of Certificates satisfies the first
general condition referred to above, there can be no assurance that these
features will be so viewed by the DOL. The Trustee will not be affiliated
with the Depositor.
Each Plan fiduciary who is responsible for making the investment
decisions whether to purchase or commit to purchase and to hold Single Family
Certificates must make its own determination as to whether the first and
third general conditions, and the specific conditions described briefly in
the preceding paragraph, of PTE 83-1 have been satisfied, or as to the
availability of any other prohibited transaction exemptions. Each Plan
fiduciary should also determine whether, under the general fiduciary
standards of investment prudence and diversification, an investment in the
Certificates is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio.
The DOL has granted to certain underwriters individual administrative
exemptions (the "Underwriter Exemptions") from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of Section
4975 of the Code with respect to the initial purchase, the holding and the
subsequent resale by Plans of certificates in pass-through trusts that
consist of certain receivables, loans and other obligations that meet the
conditions and requirements of the Underwriter Exemptions.
While each Underwriter Exemption is an individual exemption separately
granted to a specific underwriter, the terms and conditions which generally
apply to the Underwriter Exemptions are substantially identical, and include
the following:
(1) the acquisition of the certificates by a Plan is on terms
(including the price for the certificates) that are at least as
favorable to the Plan as they would be in an arm's-length transaction
with an unrelated party;
(2) the rights and interest evidenced by the certificates acquired
by the Plan are not subordinated to the rights and interests evidenced
by other certificates of the trust fund;
(3) the certificates acquired by the Plan have received a rating
at the time of such acquisition that is one of the three highest generic
rating categories from Standard & Poor's Ratings Group, a Division of
The McGraw-Hill Companies ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Duff & Phelps Credit Rating Co. ("DCR") or Fitch IBCA, Inc.
("Fitch");
(4) the trustee must not be an affiliate of any other member of
the Restricted Group as defined below;
(5) the sum of all payments made to and retained by the
underwriters in connection with the distribution of the certificates
represents not more than reasonable compensation for underwriting the
certificates; the sum of all payments made to and retained by the seller
pursuant to the assignment of the loans to the trust fund represents not
more than the fair market value of such loans; the sum of all payments
made to and retained by the servicer and any other servicer represents
not more than reasonable compensation for such person's services under
the agreement pursuant to which the loans are pooled and reimbursements
of such person's reasonable expenses in connection therewith; and
(6) the Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the Securities
and Exchange Commission under the Securities Act of 1933 as amended.
The trust fund must also meet the following requirements:
(i) the corpus of the trust fund must consist solely of assets of
the type that have been included in other investment pools;
(ii) certificates in such other investment pools must have been
rated in one of the three highest rating categories of S&P, Moody's,
Fitch or DCR for at least one year prior to the Plan's acquisition of
certificates; and
(iii) certificates evidencing interests in such other
investment pools must have been purchased by investors other than Plans
for at least one year prior to any Plan's acquisition of certificates.
Moreover, the Underwriter Exemptions generally provide relief from
certain self-dealing/conflict of interest prohibited transactions that may
occur when the Plan fiduciary causes a Plan to acquire certificates in a
trust as to which the fiduciary (or its affiliate) is an obligor on the
receivables held in the trust provided that, among other requirements: (i) in
the case of an acquisition in connection with the initial issuance of
certificates, at least fifty percent (50%) of each class of certificates in
which Plans have invested is acquired by persons independent of the
Restricted Group, (ii) such fiduciary (or its affiliate) is an obligor with
respect to five percent (5%) or less of the fair market value of the
obligations contained in the trust; (iii) the Plan's investment in
certificates of any class does not exceed twenty-five percent (25%) of all of
the certificates of that class outstanding at the time of the acquisition;
and (iv) immediately after the acquisition, no more than twenty-five percent
(25%) of the assets of the Plan with respect to which such person is a
fiduciary is invested in certificates representing an interest in one or more
trusts containing assets sold or serviced by the same entity. The Underwriter
Exemptions do not apply to Plans sponsored by the Seller, the related
Underwriter, the Trustee, the Master Servicer, any insurer with respect to
the Contracts, any obligor with respect to Contracts included in the Trust
Fund constituting more than five percent (5%) of the aggregate unamortized
principal balance of the assets in the Trust Fund, or any affiliate of such
parties (the "Restricted Group").
The Prospectus Supplement for each Series of Certificates will indicate
the classes of Certificates, if any, offered thereby as to which it is
expected that an Underwriter Exemption will apply.
The Underwriter Exemption contains several requirements, some of which
differ from those in PTE 83-l. The Underwriter Exemption contains an expanded
definition of "certificate" which includes an interest which entitles the
holder to pass-through payments of principal, interest and/or other payments.
The Underwriter Exemption contains an expanded definition of "trust" which
permits the trust corpus to consist of secured consumer receivables. The
definition of "trust," however, does not include any investment pool unless,
inter alia, (i) the investment pool consists only of assets of the type which
have been included in other investment pools, (ii) certificates evidencing
interests in such other investment pools have been purchased by investors
other than Plans for at least one year prior to the Plan's acquisition of
certificates pursuant to the Underwriter Exemption and (iii) certificates in
such other investment pools have been rated in one of the three highest
generic rating categories of the four credit rating agencies noted below.
Generally, the Underwriter Exemption holds that the acquisition of the
certificates by a Plan must be on terms (including the price for the
certificates) that are at least as favorable to the Plan as they would be in
an arm's length transaction with an unrelated party. The Underwriter
Exemption requires that the rights and interests evidenced by the
certificates not be "subordinated" to the rights and interests evidenced by
other certificates of the same trust. The Underwriter Exemption requires that
certificates acquired by a Plan have received a rating at the time of their
acquisition that is in one of the three highest generic rating categories of
S&P, Moody's, Fitch or DCR. The Underwriter Exemption specifies that the pool
trustee must not be an affiliate of the pool sponsor, nor an affiliate of the
Underwriter, the pool servicer, any obligor with respect to mortgage loans
included in the trust constituting more than five percent of the aggregate
unamortized principal balance of the assets in the trust, or any affiliate of
such entities. Finally, the Underwriter Exemption stipulates that any Plan
investing in the certificates must be an "accredited investor" as defined in
Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission
under the Securities Act of 1933.
On July 21, 1997, the DOL published in the Federal Register an amendment
to the Underwriter Exemption which extends exemptive relief to certain
mortgage-backed and asset-backed securities transactions using pre-funding
accounts for trusts issuing pass-through certificates. The amendment
generally allows mortgage loans or other secured receivables (the
"obligations") supporting payments to certificate-holders, and having a value
equal to no more than twenty-five percent (25%) of the total principal amount
of the certificates being offered by the trust, to be transferred to the
trust within a 90-day or three-month period following the closing date (the
"pre-funding period") instead of requiring that all such obligations be
either identified or transferred on or before the closing date. The relief
is available when the following conditions are met:
(1) The ratio of the amount allocated to the pre-funding account
to the total principal amount of the certificates being offered (the
"pre-funding limit") must not exceed twenty-five percent (25%).
(2) All obligations transferred after the closing date (the
"additional obligations") must meet the same terms and conditions for
eligibility as the original obligations used to create the trust, which
terms and conditions have been approved by a rating agency.
(3) The transfer of such additional obligations to the trust
during the pre-funding period must not result in the certificates to be
covered by the Underwriter Exemption receiving a lower credit rating
from a rating agency upon termination of the pre-funding period than the
rating that was obtained at the time of the initial issuance of the
certificates by the trust.
(4) Solely as a result of the use of pre-funding, the weighted
average annual percentage interest rate (the "average interest rate")
for all of the obligations in the trust at the end of the pre-funding
period must not be more than 1.0% lower than the average interest rate
for the obligations which were transferred to the trust on the closing
date.
(5) In order to ensure that the characteristics of the additional
obligations are substantially similar to the original obligations which
were transferred to the trust,
(i) the characteristics of the additional obligations must be
monitored by an insurer or other credit support provider which
is independent of the depositor; or
(ii) an independent accountant retained by the depositor must
provide the depositor with a letter (with copies provided to
each rating agency rating the certificates, the related
underwriter and the related trustee) stating whether or not
the characteristics of the additional obligations conform to
the characteristics described in the related prospectus or
prospectus supplement and/or pooling and servicing agreement.
In preparing such letter, the independent accountant must
use the same type of procedures as were applicable to the
obligations which were transferred to the trust as of the
closing date.
(6) The pre-funding period must end no later than three months or
90 days after the closing date or earlier in certain circumstances if
the pre-funding account falls below the minimum level specified in the
pooling and servicing agreement or an event of default occurs.
(7) Amounts transferred to any pre-funding account and/or
capitalized interest account used in connection with the pre-funding may
be invested only in certain permitted investments.
(8) The related prospectus supplement must describe:
(i) any pre-funding account and/or capitalized interest
account used in connection with a pre-funding account;
(ii) the duration of the pre-funding period;
(iii) the percentage and/or dollar amount of the pre-
funding Limit for the trust; and
(iv) that the amount remaining in the pre-funding account at
the end of the pre-funding period will be remitted to
certificate holders as repayments of principal.
(9) The related pooling and servicing agreement must describe the
permitted investments for the pre-funding account and/or capitalized
interest account and, if not disclosed in the related prospectus or
prospectus supplement, the terms and conditions for eligibility of
additional obligations.
Any Plan fiduciary which proposes to cause a Plan to purchase
Certificates should consult with its counsel concerning the impact of ERISA
and the Code, the applicability of PTE 83-1 and the Underwriter Exemption,
and the potential consequences in their specific circumstances, prior to
making such investment. Moreover, each Plan fiduciary should determine
whether under the general fiduciary standards of investment prudence and
diversification an investment in the Certificates is appropriate for the
Plan, taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
LEGAL INVESTMENT
The Prospectus Supplement for each series of Certificates will specify
which, if any, of the classes of Certificates offered thereby constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Classes of Certificates that qualify as
"mortgage related securities" will be legal investments for persons, trusts,
corporations, partnerships, associations, business trusts, and business
entities (including depository institutions, life insurance companies and
pension funds) created pursuant to or existing under the laws of the United
States or of any state (including the District of Columbia and Puerto Rico)
whose authorized investments are subject to state regulations to the same
extent as, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any such entities. Under
SMMEA, if a state enacts legislation prior to October 4, 1991 specifically
limiting the legal investment authority of any such entities with respect to
"mortgage related securities," securities will constitute legal investments
for entities subject to such legislation only to the extent provided
therein. Approximately twenty-one states adopted such legislation prior to
the October 4, 1991 deadline. SMMEA provides, however, that in no event will
the enactment of any such legislation affect the validity of any contractual
commitment to purchase, hold or invest in securities, or require the sale or
other disposition of securities, so long as such contractual commitment was
made or such securities were acquired prior to the enactment of such
legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in Certificates
without limitations as to the percentage of their assets represented thereby,
federal credit unions may invest in mortgage related securities, and national
banks may purchase securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12
U.S.C. 24 (Seventh), subject in each case to such regulations as the
applicable federal authority may prescribe. In this connection, federal
credit unions should review the National Credit Union Administration ("NCUA")
Letter to Credit Unions No. 96, as modified by Letter to Credit Unions No.
108, which includes guidelines to assist federal credit unions in making
investment decisions for mortgage related securities and the NCUA's
regulation "Investment and Deposit Activities" (12 C.F.R. Part 703), which
sets forth certain restrictions on investment by federal credit unions in
mortgage related securities (in each case whether or not the class of
Certificates under consideration for purchase constituted a "mortgage related
security"). The NCUA issued final regulations effective December 2, 1991 that
restrict and in some instances prohibit the investment by Federal Credit
Unions in certain types of mortgage related securities.
All depository institutions considering an investment in the
Certificates (whether or not the class of Certificates under consideration
for purchase constitutes a "mortgage related security") should review the
Federal Financial Institutions Examination Council's Supervisory Policy
Statement on the Certificates Activities (to the extent adopted by their
respective regulators) (the "Policy Statement") setting forth, in relevant
part, certain securities trading and sales practices deemed unsuitable for an
institution's investment portfolio, and guidelines for (and restrictions on)
investing in mortgage derivative products, including "mortgage related
securities," which are "high-risk mortgage securities" as defined in the
Policy Statement. According to the Policy Statement, such "high-risk mortgage
securities" include securities such as Certificates not entitled to
distributions allocated to principal or interest, or Subordinated
Certificates. Under the Policy Statement, it is the responsibility of each
depository institution to determine, prior to purchase (and at stated
intervals thereafter), whether a particular mortgage derivative product is a
"high-risk mortgage security," and whether the purchase (or retention) of
such a product would be consistent with the Policy Statement.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders guidelines or agreements generally
governing investments made by a particular investor, including, but not
limited to "prudent investor" provisions, percentage-of-assets limits and
provisions which may restrict or prohibit investment in securities which are
not "interest bearing" or "income paying," or in securities which are issued
in book-entry form.
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Certificates or to
purchase Certificates representing more than a specified percentage of the
investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Certificates constitute legal
investments for such investors.
METHOD OF DISTRIBUTION
Certificates are being offered hereby in Series from time to time (each
Series evidencing or relating to a separate Trust Fund) through any of the
following methods:
1. By negotiated firm commitment underwriting and public
reoffering by underwriters;
2. By agency placements through one or more placement agents
primarily with institutional investors and dealers; and
3. By placement directly by the Depositor with institutional
investors.
A Prospectus Supplement will be prepared for each Series which will
describe the method of offering being used for that Series and will set forth
the identity of any underwriters thereof and either the price at which such
Series is being offered, the nature and amount of any underwriting discounts
or additional compensation to such underwriters and the proceeds of the
offering to the Depositor, or the method by which the price at which the
underwriters will sell the Certificates will be determined. Each Prospectus
Supplement for an underwritten offering will also contain information
regarding the nature of the underwriters' obligations, any material
relationship between the Depositor and any underwriter and, where
appropriate, information regarding any discounts or concessions to be allowed
or reallowed to dealers or others and any arrangements to stabilize the
market for the Certificates so offered. In firm commitment underwritten
offerings, the underwriters will be obligated to purchase all of the
Certificates of such Series if any such Certificates are purchased.
Certificates may be acquired by the underwriters for their own accounts and
may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying
prices determined at the time of sale.
Underwriters and agents may be entitled under agreements entered into
with the Depositor to indemnification by the Depositor against certain civil
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribution with respect to payments which such underwriters
or agents may be required to make in respect thereof.
If a Series is offered other than through underwriters, the Prospectus
Supplement relating thereto will contain information regarding the nature of
such offering and any agreements to be entered into between the Depositor and
purchasers of Certificates of such Series.
LEGAL MATTERS
The validity of the Certificates of each Series, including certain
federal income tax consequences with respect thereto, will be passed upon for
the Depositor by Brown & Wood LLP, One World Trade Center, New York, New York
10048.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each Series of
Certificates and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related Series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this Prospectus or in the related Prospectus
Supplement.
RATING
It is a condition to the issuance of the Certificates of each Series
offered hereby and by the Prospectus Supplement that they shall have been
rated in one of the four highest rating categories by the nationally
recognized statistical rating agency or agencies (each, a "Rating Agency")
specified in the related Prospectus Supplement.
Any such rating would be based on, among other things, the adequacy of
the value of the Trust Fund Assets and any credit enhancement with respect to
such class and will reflect such Rating Agency's assessment solely of the
likelihood that holders of a class of Certificates of such class will receive
payments to which such Certificateholders are entitled under the related
Agreement. Such rating will not constitute an assessment of the likelihood
that principal prepayments on the related Contracts will be made, the degree
to which the rate of such prepayments might differ from that originally
anticipated or the likelihood of early optional termination of the Series of
Certificates. Such rating should not be deemed a recommendation to purchase,
hold or sell Certificates, inasmuch as it does not address market price or
suitability for a particular investor. Each security rating should be
evaluated independently of any other security rating. Such rating will not
address the possibility that prepayment at higher or lower rates than
anticipated by an investor may cause such investor to experience a lower than
anticipated yield or that an investor purchasing a Certificate at a
significant premium might fail to recoup its initial investment under certain
prepayment scenarios.
There is also no assurance that any such rating will remain in effect
for any given period of time or that it may not be lowered or withdrawn
entirely by the Rating Agency in the future if in its judgment circumstances
in the future so warrant. In addition to being lowered or withdrawn due to
any erosion in the adequacy of the value of the Trust Fund Assets or any
credit enhancement with respect to a Series, such rating might also be
lowered or withdrawn among other reasons, because of an adverse change in the
financial or other condition of a credit enhancement provider or a change in
the rating of such credit enhancement provider's long term debt.
The amount, type and nature of credit enhancement, if any, established
with respect to a Series of Certificates will be determined on the basis of
criteria established by each Rating Agency rating classes of such Series.
Such criteria are sometimes based upon an actuarial analysis of the behavior
of mortgage loans in a larger group. Such analysis is often the basis upon
which each Rating Agency determines the amount of credit enhancement required
with respect to each such class. There can be no assurance that the
historical data supporting any such actuarial analysis will accurately
reflect future experience nor any assurance that the data derived from a
large pool of manufactured housing loans accurately predicts the delinquency,
repossession, foreclosure or loss experience of any particular pool of
Contracts. No assurance can be given that values of any Manufactured Homes
(and, in the case of Land-and-Home Contracts, any underlying real properties)
have remained or will remain at their levels on the respective dates of
origination of the related Contracts. If the manufactured housing or
residential real estate markets should experience an overall decline in
property values such that the outstanding principal balances of the Contracts
in a particular Trust Fund and any secondary financing on the related
Manufactured Homes (and, in the case of Land-and Home Contracts, the related
underlying real properties) become equal to or greater than the value of the
Manufactured Homes (and, in the case of Land-and-Home Contracts, the
underlying real properties), the rates of delinquencies, repossessions,
foreclosures and losses could be higher than those now generally experienced
in the mortgage lending industry. In additional, adverse economic conditions
(which may or may not affect manufactured housing property values) may affect
the timely payment by obligors of scheduled payments of principal and
interest on the Contracts and, accordingly, the rates of delinquencies,
repossessions, foreclosures and losses with respect to any Trust Fund. To the
extent that such losses are not covered by credit enhancement, such losses
will be borne, at least in part, by the holders of one or more classes of the
Certificates of the related Series.
INDEX OF DEFINED TERMS
TERM PAGE
---- ----
Accretion Directed . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Accrual Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Amortizable Bond Premium Regulations. . . . . . . . . . . . . . . . . . . 77
APR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Balloon payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Belgian Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
BIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 38
Buydown Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Buydown Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Calculation Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Cash Flow Bond Method . . . . . . . . . . . . . . . . . . . . . . . . . . 83
CEDEL Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 63
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5, 21
Capitalized Interest Account . . . . . . . . . . . . . . . . . . . . . . 51
Claimable Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Class Certificate Balance . . . . . . . . . . . . . . . . . . . . . . . . 31
Closed-End Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 73
COFI Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Collateral Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Combined Contract-to-Value Ratio . . . . . . . . . . . . . . . . . . . . 25
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Component Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 34
Contingent Regulations . . . . . . . . . . . . . . . . . . . . . . . . . 74
Cooperative Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Cooperatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Cut-off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 21
Cut-off Date Principal Balance . . . . . . . . . . . . . . . . . . . . . 29
DCR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Debt Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Definitive Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 38
Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 25
Detailed Description . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19, 38
Eleventh District . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
EPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Euroclear Participants . . . . . . . . . . . . . . . . . . . . . . . . . 40
European Depositaries . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
FHA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FHLBSF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Financial Intermediary . . . . . . . . . . . . . . . . . . . . . . . . . 38
Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Fixed Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Floating Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Foreign person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Funding Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Garn-St Germain Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Holder in Due Course Rules . . . . . . . . . . . . . . . . . . . . . . . 18
Home Equity Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 1, 6
Home Improvement Contracts . . . . . . . . . . . . . . . . . . . . . . 1, 6
Home Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Installment Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Insured Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Interest Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Interest Weighted Certificates . . . . . . . . . . . . . . . . . . . . . 76
Inverse Floating Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 35
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
L/C Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 42
L/C Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 42
Liquidation Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Contract Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 22
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Contract-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . . . . . 25
Lockout periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Master Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Master Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43, 93
Morgan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Mortgaged Manufactured Homes . . . . . . . . . . . . . . . . . . . . . . 23
Multifamily Contract . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5
National Cost of Funds Index . . . . . . . . . . . . . . . . . . . . . . 37
NCUA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Nonresidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Notional Amount Certificates . . . . . . . . . . . . . . . . . . . . . . 34
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 73
OID Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
OTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
PACs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Partial Accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 21
Pass-Through Certificates . . . . . . . . . . . . . . . . . . . . . . . . 81
Pay-Through Certificate . . . . . . . . . . . . . . . . . . . . . . . . . 75
Percentage Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Planned Principal Class . . . . . . . . . . . . . . . . . . . . . . . . . 34
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Policy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 21
Pool Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Pool Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Pooling and Servicing Agreement . . . . . . . . . . . . . . . . . . . . . 29
Pre-Funded Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Pre-Funding Account . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 19
Prepayment Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Primary Mortgage Insurance Policy . . . . . . . . . . . . . . . . . . . . 23
Prime Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Principal Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Principal Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Manufactured Homes . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 23
Manufactured Home Improvement Contracts . . . . . . . . . . . . . . . . . 69
Proposed Mark-to-Market Regulations . . . . . . . . . . . . . . . . . . . 81
PTE 83-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Ratio Strip Certificates . . . . . . . . . . . . . . . . . . . . . . . . 82
RCRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Reference Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Refinance Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Regular Interest Certificates . . . . . . . . . . . . . . . . . . . . . . 73
Relevant Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Relief Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 73
Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 30
Reserve Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Residual Interest Certificate . . . . . . . . . . . . . . . . . . . . . . 79
Restricted Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Retained Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Revolving Credit Line Contracts . . . . . . . . . . . . . . . . . . . . . . 5
Riegle Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
SAIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Scheduled Principal Class . . . . . . . . . . . . . . . . . . . . . . . . 34
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5, 21
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Certificate Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Certificate Register . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Senior Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 41
Sequential Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Short-Term Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Single Family Contract . . . . . . . . . . . . . . . . . . . . . . . . 1, 5
Single Family Manufactured Homes . . . . . . . . . . . . . . . . . . . . 23
Single Family Certificates . . . . . . . . . . . . . . . . . . . . . . . 91
SMMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 94
Strip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Stripped Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Sub-Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 21
Sub-Servicing Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 52
Subordinated Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 6
Subsequent Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Support Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
TACs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Targeted Principal Class . . . . . . . . . . . . . . . . . . . . . . . . 35
Terms and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . 40
TIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Title I Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Title I Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Title V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66, 67
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 21
Trust Fund Assets . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5, 21
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 29
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Underwriter Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . 92
U.S. Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
VA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
VA Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Variable Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SUBJECT TO COMPLETION, DATED _________ _____, 1998
PROSPECTUS
IndyMac ABS, Inc.
Depositor
Asset Backed Certificates
Asset Backed Notes
(Issuable in Series)
-------------------------------
This Prospectus relates to the issuance of Asset Backed Certificates (the
"Certificates") and Asset Backed Notes (the "Notes" and, together with the
Certificates, the "Securities"), which may be sold from time to time in one or
more series (each, a "Series") by IndyMac ABS, Inc. (the "Depositor") or by a
Trust Fund (as defined below) on terms determined at the time of sale and
described in this Prospectus and the related Prospectus Supplement. The
Securities of a Series will consist of Certificates which evidence beneficial
ownership of a trust established by the Depositor (each, a "Trust Fund"), and/or
Notes secured by the assets of a Trust Fund. As specified in the related
Prospectus Supplement, the Trust Fund for a Series of Securities will include
certain assets (the "Trust Fund Assets") which will consist of the following
types of mortgage loans (the "Loans"): (i) mortgage loans secured by first
and/or subordinate liens on one- to four-family residential properties,
including manufactured housing that is permanently affixed and treated as real
property under local law, or security interests in shares issued by cooperative
housing corporations (the "Single Family Loans"), (ii) mortgage loans secured by
first and/or subordinate liens on small multifamily residential properties, such
as rental apartment buildings or projects containing five to fifty residential
units (the "Multifamily Loans"), (iii) closed-end and/or revolving home equity
loans (the "Home Equity Loans"), secured in whole or in part by first and/or
subordinate liens on one- to four-family residential properties and (iv) home
improvement installment sale contracts and installment loan agreements (the
"Home Improvement Contracts") that are either unsecured or secured by first or
subordinate liens on one- to four-family residential properties, or by purchase
money security interests in the home improvements financed thereby (the "Home
Improvements"). The Trust Fund Assets will be acquired by the Depositor, either
directly or indirectly, from one or more institutions (each, a "Seller"), which
may be affiliates of the Depositor, and conveyed by the Depositor to the related
Trust Fund. A Trust Fund also may include insurance policies, surety bonds, cash
accounts, reinvestment income, guaranties or letters of credit to the extent
described in the related Prospectus Supplement. See "Index of Defined Terms" on
Page 110 of this Prospectus for the location of the definitions of certain
capitalized terms.
Each Series of Securities will be issued in one or more classes. Each class
of Certificates of a Series will evidence beneficial ownership of a specified
percentage (which may be 0%) or portion of future interest payments and a
specified percentage (which may be 0%) or portion of future principal payments
on the related Trust Fund Assets. Each class of Notes of a Series will be
secured by the related Trust Fund Assets or, if so specified in the related
Prospectus Supplement, a portion thereof. A Series of Securities may include one
or more classes that are senior in right of payment to one or more other classes
of Securities of such Series. One or more classes of Securities of a Series may
be entitled to receive distributions of principal, interest or any combination
thereof prior to one or more other classes of Securities of such Series or after
the occurrence of specified events, in each case as specified in the related
Prospectus Supplement.
(cover continued on next page)
-------------------------------
FORA DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN THE
SECURITIES, SEE THE INFORMATION UNDER "RISK FACTORS" ON PAGE 16.
-------------------------------
THE CERTIFICATES OF A GIVEN SERIES WILL REPRESENT BENEFICIAL INTERESTS IN,
AND THE NOTES OF A GIVEN SERIES WILL REPRESENT OBLIGATIONS OF, THE RELATED TRUST
FUND ONLY AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF THE DEPOSITOR,
THE MASTER SERVICER, ANY SELLER OR ANY AFFILIATES THEREOF, EXCEPT TO THE EXTENT
DESCRIBED IN THE RELATED PROSPECTUS SUPPLEMENT. THE SECURITIES AND THE LOANS
WILL NOT BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY
OR BY THE DEPOSITOR OR ANY OTHER PERSON OR ENTITY, EXCEPT IN EACH CASE TO THE
EXTENT DESCRIBED IN THE RELATED PROSPECTUS SUPPLEMENT.
-------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------------
Prior to issuance there will have been no market for the Securities of any
Series and there can be no assurance that a secondary market for any Securities
will develop, or if it does develop, that it will continue or provide
Securityholders with a sufficient level of liquidity of investment. This
Prospectus may not be used to consummate sales of Securities of any Series
unless accompanied by a Prospectus Supplement. Offers of the Securities may be
made through one or more different methods, including offerings through
underwriters, as more fully described under "Method of Distribution" herein and
in the related Prospectus Supplement.
___________ ____, 1998
(continued from cover page)
Distributions to Securityholders will be made monthly, quarterly,
semi-annually or at such other intervals and on the dates specified in the
related Prospectus Supplement. Distributions on the Securities of a Series will
be made from the related Trust Fund Assets or proceeds thereof pledged for the
benefit of the Securityholders as specified in the related Prospectus
Supplement.
The related Prospectus Supplement will describe any insurance or guarantee
provided with respect to the related Series of Securities including, without
limitation, any insurance or guarantee provided by the Department of Housing and
Urban Development, the United States Department of Veterans' Affairs or any
private insurer or guarantor. The only obligations of the Depositor with respect
to a Series of Securities will be to obtain certain representations and
warranties from each Seller and to assign to the Trustee for the related Series
of Securities the Depositor's rights with respect to such representations and
warranties. The principal obligations of the Master Servicer named in the
related Prospectus Supplement with respect to the related Series of Securities
will be limited to its contractual servicing obligations, including any
obligation it may have to advance delinquent interest and/or principal payments
on the related Trust Fund Assets.
The yield on each class of Securities of a Series will be affected by,
among other things, the rate of payments of principal (including prepayments) on
the related Trust Fund Assets and the timing of receipt of such payments as
described under "Risk Factors -- Prepayment and Yield Considerations" and "Yield
and Prepayment Considerations" herein and in the related Prospectus Supplement.
A Trust Fund may be subject to early termination under the circumstances
described under "The Agreements -- Termination"; Optional Termination herein and
in the related Prospectus Supplement.
If specified in the related Prospectus Supplement, one or more elections
may be made to treat a Trust Fund or specified portions thereof as a "real
estate mortgage investment conduit" ("REMIC") or as a "financial asset
securitization investment trust" ("FASIT") for federal income tax purposes. See
"Federal Income Tax Consequences."
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the securities covered by such Prospectus Supplement,
whether or not participating in the distribution thereof, may be required to
deliver such Prospectus Supplement and this Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus and Prospectus Supplement when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
PROSPECTUS SUPPLEMENT OR CURRENT REPORT ON FORM 8-K
The Prospectus Supplement or Current Report on Form 8-K relating to the
Securities of each Series to be offered hereunder will, among other things, set
forth with respect to such Securities, as appropriate: (i) the aggregate
principal amount, interest rate and authorized denominations of each class of
such Series of Securities; (ii) information as to the assets of the Trust Fund,
including the general characteristics of the related Trust Fund Assets included
therein and, if applicable, the insurance policies, surety bonds, guaranties,
letters of credit or other instruments or agreements included in the Trust Fund
or otherwise, and the amount and source of any reserve account or other cash
account; (iii) the circumstances, if any, under which the Trust Fund may be
subject to early termination; (iv) the circumstances, if any, under which the
Notes of such Series are subject to redemption; (v) the method used to calculate
the amount of principal to be distributed or paid with respect to each class of
Securities; (vi) the order of application of distributions or payments to each
of the classes within such Series, whether sequential, pro rata, or otherwise;
(vii) the Distribution Dates with respect to such Series; (viii) additional
information with respect to the method of distribution of such Securities; (ix)
whether one or more REMIC elections will be made with respect to the Trust Fund
and, if so, the designation of the regular interests and the residual interests;
(x) whether a FASIT election will be made with respect to the Trust Fund and, if
so, the designation of the regular interests and the ownership interest; (xi)
the aggregate original percentage ownership interest in the Trust Fund to be
evidenced by each class of Certificates; (xii) the stated maturity of each class
of Notes of such Series; (xiii) information as to the nature and extent of
subordination with respect to any class of Securities that is subordinate in
right of payment to any other class; and (xiv) information as to the Seller, the
Master Servicer and the Trustee.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended, with respect to the Securities. This Prospectus, which forms a part of
the Registration Statement, and the Prospectus Supplement relating to each
Series of Securities contain descriptions of the material terms of the documents
referred to herein and therein, but do not contain all of the information set
forth in the Registration Statement pursuant to the Rules and Regulations of the
Commission. For further information, reference is made to such Registration
Statement and the exhibits thereto. Such Registration Statement and exhibits can
be inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at its Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its Regional Offices located as follows:
Midwest Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and Northeast Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048. The Commission also maintains a Web site at
http://www.sec.gov from which such Registration Statement and exhibits may be
obtained.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Securities offered
hereby and thereby nor an offer of the Securities to any person in any state or
other jurisdiction in which such offer would be unlawful. The delivery of this
Prospectus at any time does not imply that information herein is correct as of
any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed by or on behalf of the Trust Fund referred
to in the accompanying Prospectus Supplement with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the date of this Prospectus and prior to the
termination of any offering of the Securities issued by such Trust Fund shall be
deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for all purposes of this
Prospectus to the extent that a statement contained herein (or in the
accompanying Prospectus Supplement) or in any other subsequently filed document
which also is or is deemed to be incorporated by reference modifies or replaces
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus. Neither the Depositor nor the Master Servicer for any Series intends
to file with the Commission periodic reports with respect to the related Trust
Fund following completion of the reporting period required by Rule 15d-1 or
Regulation 15D under the Exchange Act.
The Trustee or such other entity specified in the related Prospectus
Supplement on behalf of any Trust Fund will provide without charge to each
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the documents referred to above that have
been or may be incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Such requests should be directed to the Corporate
Trust Office of the Trustee or the address of such other entity, in each case as
specified in the accompanying Prospectus Supplement. Included in the
accompanying Prospectus Supplement is the name, address, telephone number, and,
if available, facsimile number of the office or contact person at the Corporate
Trust Office of the Trustee or such other entity.
REPORTS TO SECURITYHOLDERS
Periodic and annual reports concerning the related Trust Fund for a Series
of Securities will be forwarded to Securityholders. However, such reports will
neither be examined nor reported on by an independent public accountant. See
"Description of the Securities -- Reports to Securityholders."
SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the related Prospectus
Supplement with respect to the Series of Securities offered thereby and to the
related Agreement (as such term is defined below) which will be prepared in
connection with each Series of Securities. Unless otherwise specified,
capitalized terms used and not defined in this Summary of Terms have the
meanings given to them in this Prospectus and in the related Prospectus
Supplement. See "Index of Defined Terms" on page 110 of this Prospectus for the
location of the definitions of certain capitalized terms.
Titleof Securities....................Asset Backed Certificates (the
"Certificates") and Asset Backed
Notes (the "Notes" and, together with
the Certificates, the "Securities"),
which are issuable in Series.
Depositor.............................IndyMac ABS, Inc., a Delaware corporation.
Trustee...............................The trustee(s) (the "Trustee") for each
Series of Securities will be specified
in the related Prospectus Supplement.
See "The Agreements" herein for a
description of the Trustee's rights
and obligations.
Master Servicer.......................The entity or entities named as Master
Servicer (the "Master Servicer")
in the related Prospectus Supplement,
which may be an affiliate of the
Depositor. See "The Agreements --
Certain Matters Regarding the Master
Servicer and the Depositor."
Trust Fund Assets.................... Assets of the Trust Fund for a Series
of Securities will include certain
assets (the "Trust Fund Assets") which
will consist of the Loans, together
with payments in respect of such Trust
Fund Assets, as specified in the
related Prospectus Supplement. At the
time of issuance of the Securities of
the Series, the Depositor will cause
the Loans constituting the related
Trust Fund to be assigned to the
Trustee, without recourse. The Loans
will be collected in a pool (each, a
"Pool") as of the first day of the
month of the issuance of the related
Series of Securities or such other
date specified in the related
Prospectus Supplement (the "Cut-off
Date"). Trust Fund Assets also may
include insurance policies, surety
bonds, cash accounts, reinvestment
income, guaranties or letters of
credit to the extent described in the
related Prospectus Supplement. See
"Credit Enhancement." In addition, if
the related Prospectus Supplement so
provides, the related Trust Fund
Assets will include the funds on
deposit in an account (a "Pre-Funding
Account") which will be used to
purchase additional Loans during the
period specified in such Prospectus
Supplement. See "The Agreements --
Pre-Funding Account."
Loans.................................The Loans will consist of (i) mortgage
loans secured by first and/or subordinate
liens on one- to four-family residential
properties, including manufactured housing
that is permanently affixed and treated
as real property under local law, or
security interests in shares issued by
cooperative housing corporations (the
"Single Family Loans"), (ii) mortgage
loans secured by first and/or subordinate
liens on small multifamily residential
properties, such as rental apartment
buildings or projects containing five to
fifty residential units (the "Multifamily
Loans"), (iii) closed-end loans (the
"Closed-End Loans") and/or revolving home
equity loans or certain balances thereof
(the "Revolving Credit Line Loans,"
together with the Closed-End Loans, the
"Home Equity Loans") and (iv) home im-
provement installment sale contracts and
installment loan agreements (the "Home
Improvement Contracts"). All Loans will
have been purchased by the Depositor,
either directly or through an affiliate,
from one or more Sellers.
As specified in the related Prospectus
Supplement, the Home Equity Loans
will, and the Home Improvement
Contracts may, be secured by mortgages
or deeds of trust or other similar
security instruments creating a lien
on a Mortgaged Property, which may be
subordinated to one or more senior
liens on the Mortgaged Property, as
described in the related Prospectus
Supplement. As specified in the
related Prospectus Supplement, Home
Improvement Contracts may be unsecured
or secured by purchase money security
interests in the Home Improvements
financed thereby. If so specified in
the related Prospectus Supplement, the
Home Equity Loans and the Home
Improvement Contracts may include
Loans (primarily for home improvement
or debt consolidation purposes) that
are in amounts in excess of the value
of the related Mortgaged Properties at
the time of origination. The Mortgaged
Properties and the Home Improvements
are collectively referred to herein as
the "Properties."
Description of the Securities.........Each Security will represent a
beneficial ownership interest in, or
be secured by the assets of, a Trust
Fund created by the Depositor pursuant
to an Agreement among the Depositor,
the Master Servicer and the Trustee
for the related Series. The Securities
of any Series may be issued in one or
more classes as specified in the
related Prospectus Supplement. A
Series of Securities may include one
or more classes of senior Securities
(collectively, the "Senior
Securities") and one or more classes
of subordinate Securities
(collectively, the "Subordinated
Securities"). Certain Series or
classes of Securities may be covered
by insurance policies or other forms
of credit enhancement, in each case as
described under "Credit Enhancement"
herein and in the related Prospectus
Supplement.
One or more classes of Securities of
each Series (i) may be entitled to
receive distributions allocable only
to principal, only to interest or to
any combination thereof; (ii) may be
entitled to receive distributions only
of prepayments of principal throughout
the lives of the Securities or during
specified periods; (iii) may be
subordinated in the right to receive
distributions of scheduled payments of
principal, prepayments of principal,
interest or any combination thereof to
one or more other classes of
Securities of such Series throughout
the lives of the Securities or during
specified periods; (iv) may be
entitled to receive such distributions
only after the occurrence of events
specified in the related Prospectus
Supplement; (v) may be entitled to
receive distributions in accordance
with a schedule or formula or on the
basis of collections from designated
portions of the related Trust Fund
Assets; (vi) as to Securities entitled
to distributions allocable to
interest, may be entitled to receive
interest at a fixed rate or a rate
that is subject to change from time to
time; and (vii) as to Securities
entitled to distributions allocable to
interest, may be entitled to
distributions allocable to interest
only after the occurrence of events
specified in the related Prospectus
Supplement and may accrue interest
until such events occur, in each case
as specified in the related Prospectus
Supplement. The timing and amounts of
such distributions may vary among
classes or over time, as specified in
the related Prospectus Supplement.
Distributions on the Securities.......Distributions on the Securities
entitled thereto will be made monthly,
quarterly, semi-annually or at such
other intervals and on the dates
specified in the related Prospectus
Supplement (each, a "Distribution
Date") out of the payments received in
respect of the assets of the related
Trust Fund or Funds or other assets
pledged for the benefit of the
Securities as described under "Credit
Enhancement" herein to the extent
specified in the related Prospectus
Supplement. The amount allocable to
payments of principal and interest on
any Distribution Date will be
determined as specified in the related
Prospectus Supplement. The Prospectus
Supplement for a Series of Securities
will describe the method for
allocating distributions among
Securities of different classes as
well as the method for allocating
distributions among Securities for any
particular class.
Unless otherwise specified in the
related Prospectus Supplement, the
aggregate original principal balance
of the Securities will not exceed the
aggregate distributions allocable to
principal that such Securities will be
entitled to receive. If specified in
the related Prospectus Supplement, the
Securities will have an aggregate
original principal balance equal to
the aggregate unpaid principal balance
of the Trust Fund Assets as of the
related Cut-off Date and will bear
interest in the aggregate at a rate
equal to the interest rate borne by
the underlying Loans (the "Loan Rate")
net of the aggregate servicing fees
and any other amounts specified in the
related Prospectus Supplement, or at
such other interest rate as may be
specified in such Prospectus
Supplement. If specified in the
related Prospectus Supplement, the
aggregate original principal balance
of the Securities and interest rates
on the classes of Securities will be
determined based on the cash flow on
the Trust Fund Assets.
The rate at which interest will be
passed through or paid to holders of
each class of Securities entitled
thereto may be a fixed rate or a rate
that is subject to change from time to
time from the time and for the
periods, in each case, as specified in
the related Prospectus Supplement. Any
such rate may be calculated on a
loan-by-loan, weighted average or
notional amount in each case as
described in the related Prospectus
Supplement.
CreditEnhancement.....................The assets in a Trust Fund or the
Securities of one or more classes in
the related Series may have the
benefit of one or more types of credit
enhancement as described in the
related Prospectus Supplement. The
protection against losses afforded by
any such credit support may be
limited. The type, characteristics and
amount of credit enhancement will be
determined based on the
characteristics of the Loans
comprising the Trust Fund Assets and
other factors and will be established
on the basis of requirements of each
Rating Agency rating the Securities of
such Series. See "Credit Enhancement."
A. Subordination......................A Series of Securities may consist of
one or more classes of Senior
Securities and one or more classes of
Subordinated Securities. The rights of
the holders of the Subordinated
Securities of a Series to receive
distributions with respect to the
assets in the related Trust Fund will
be subordinated to such rights of the
holders of the Senior Securities of
the same Series to the extent
described in the related Prospectus
Supplement. This subordination is
intended to enhance the likelihood of
regular receipt by holders of Senior
Securities of the full amount of
monthly payments of principal and
interest due them. The protection
afforded to the holders of Senior
Securities of a Series by means of the
subordination feature will be
accomplished by (i) the preferential
right of such holders to receive,
prior to any distribution being made
in respect of the related Subordinated
Securities, the amounts of interest
and/or principal due them on each
Distribution Date out of the funds
available for distribution on such
date in the related Security Account
and, to the extent described in the
related Prospectus Supplement, by the
right of such holders to receive
future distributions on the assets in
the related Trust Fund that would
otherwise have been payable to the
holders of Subordinated Securities;
(ii) reducing the ownership interest
(if applicable) of the related
Subordinated Securities; or (iii) a
combination of clauses (i) and (ii)
above. If so specified in the related
Prospectus Supplement, subordination
may apply only in the event of certain
types of losses not covered by other
forms of credit support, such as
hazard losses not covered by standard
hazard insurance policies or losses
due to the bankruptcy or fraud of the
borrower. The related Prospectus
Supplement will set forth information
concerning, among other things, the
amount of subordination of a class or
classes of Subordinated Securities in
a Series, the circumstances in which
such subordination will be applicable,
and the manner, if any, in which the
amount of subordination will decrease
over time.
B. Reserve Account....................One or more reserve accounts or other
cash accounts (each, a "Reserve
Account") may be established and
maintained for each Series of
Securities. The related Prospectus
Supplement will specify whether or not
such Reserve Accounts will be included
in the corpus of the Trust Fund for
such Series and will also specify the
manner of funding such Reserve
Accounts and the conditions under
which the amounts in any such Reserve
Accounts will be used to make
distributions to holders of Securities
of a particular class or released from
such Reserve Accounts.
C. Letter of Credit...................If so specified in the related
Prospectus Supplement, credit support
may be provided by one or more letters
of credit. A letter of credit may
provide limited protection against
certain losses in addition to or in
lieu of other credit support, such as
losses resulting from delinquent
payments on the Loans in the related
Trust Fund, losses from risks not
covered by standard hazard insurance
policies, losses due to bankruptcy of
a borrower and application of certain
provisions of the Bankruptcy Code, and
losses due to denial of insurance
coverage due to misrepresentations
made in connection with the
origination or sale of a Loan. The
issuer of the letter of credit (the
"L/C Bank") will be obligated to honor
demands with respect to such letter of
credit, to the extent of the amount
available thereunder, and to provide
funds under the circumstances and
subject to such conditions as are
specified in the related Prospectus
Supplement. The liability of the L/C
Bank under its letter of credit will
be reduced by the amount of
unreimbursed payments thereunder.
The maximum liability of a L/C Bank
under its letter of credit will be an
amount equal to a percentage specified
in the related Prospectus Supplement
of the initial aggregate outstanding
principal balance of the Loans in the
related Trust Fund or one or more
classes of Securities of the related
Series (the "L/C Percentage"). The
maximum amount available at any time
to be paid under a letter of credit
will be determined in the manner
specified therein and in the related
Prospectus Supplement.
D. Insurance Policies; Surety Bonds
and Guarantees....................If so specified in the related
Prospectus Supplement, credit support
for a Series may be provided by an
insurance policy and/or a surety bond
issued by one or more insurance
companies or sureties. Such
certificate guarantee insurance or
surety bond will guarantee timely
distributions of interest and/or full
distributions of principal on the
basis of a schedule of principal
distributions set forth in or
determined in the manner specified in
the related Prospectus Supplement. If
specified in the related Prospectus
Supplement, one or more bankruptcy
bonds, special hazard insurance
policies, other insurance or
third-party guarantees may be used to
provide coverage for the risks of
default or types of losses set forth
in such Prospectus Supplement.
E. Over-Collateralization.............If so provided in the Prospectus
Supplement for a Series of Securities,
a portion of the interest payment on
each Loan may be applied as an
additional distribution in respect of
principal to reduce the principal
balance of a certain class or classes
of Securities and, thus, accelerate
the rate of payment of principal on
such class or classes of Securities.
F. Loan Pool Insurance Policy.........A mortgage pool insurance policy or
policies may be obtained and
maintained for Loans relating to any
Series of Securities, which shall be
limited in scope, covering defaults on
the related Loans in an initial amount
equal to a specified percentage of the
aggregate principal balance of all
Loans included in the Pool as of the
related Cut-off Date.
G. FHA Insurance......................If specified in the related Prospectus
Supplement, all or a portion of the
Loans in a Pool may be (i) insured by
the Federal Housing Administration
(the "FHA") and/or (ii) partially
guaranteed by the Department of
Veterans' Affairs (the "VA"). See
"Certain Legal Aspects of the Loans --
The Title I Program."
H. Cross-Collateralization............If specified in the related Prospectus
Supplement, separate classes of a
Series of Securities may evidence the
beneficial ownership of, or be secured
by, separate groups of assets included
in a Trust Fund. In such case, credit
support may be provided by a cross-
collateralization feature which
requires that distributions be made
with respect to Securities evidencing
a beneficial ownership interest in, or
secured by, one or more asset groups
prior to distributions to Subordinated
Securities evidencing a beneficial
ownership interest in, or secured by,
other asset groups within the same
Trust Fund. See "Credit Enhancement --
Cross-Collateralization."
If specified in the related Prospectus
Supplement, the coverage provided by
one or more of the forms of credit
enhancement described in this
Prospectus may apply concurrently to
two or more separate Trust Funds. If
applicable, the related Prospectus
Supplement will identify the Trust
Funds to which such credit enhancement
relates and the manner of determining
the amount of coverage provided to
such Trust Funds thereby and of the
application of such coverage to the
identified Trust Funds. See "Credit
Enhancement--Cross-Collateralization."
Advances..............................The Master Servicer and, if
applicable, each mortgage servicing
institution that services a Loan in a
Pool on behalf of the Master Servicer
(each, a "Sub-Servicer") may be
obligated to advance amounts (each, an
"Advance") corresponding to delinquent
interest and/or principal payments on
such Loan (including, in the case of
Cooperative Loans, unpaid maintenance
fees or other charges under the
related proprietary lease) until the
date, as specified in the related
Prospectus Supplement, following the
date on which the related Property is
sold at a foreclosure sale or the
related Loan is otherwise liquidated.
Any obligation to make Advances may be
subject to limitations as specified in
the related Prospectus Supplement. If
so specified in the related Prospectus
Supplement, Advances may be drawn from
a cash account available for such
purpose as described in such
Prospectus Supplement. Advances will
be reimbursable to the extent
described under "Description of the
Securities -- Advances" herein and in
the related Prospectus Supplement.
In the event the Master Servicer or
Sub-Servicer fails to make a required
Advance, the Trustee may be obligated
to advance such amounts otherwise
required to be advanced by the Master
Servicer or Sub-Servicer. See
"Description of the Securities --
Advances."
Optional Termination..................The Master Servicer or the party
specified in the related Prospectus
Supplement, including the holder of
the residual interest in a REMIC or
the holder of the ownership interest
in a FASIT, may have the option to
effect early retirement of a Series of
Securities through the purchase of the
Trust Fund Assets. The Master Servicer
will deposit the proceeds of any such
purchase in the Security Account for
each Trust Fund as described under
"The Agreements -- Payments on Loans;
Deposit to Security Account." Any such
purchase of Trust Fund Assets and
property acquired in respect of Trust
Fund Assets evidenced by a Series of
Securities will be made at the option
of the Master Servicer, such other
person or, if applicable, such holder
of the REMIC residual interest or
FASIT ownership interest, at a price
specified in the related Prospectus
Supplement. The exercise of such right
will effect early retirement of the
Securities of that Series, but the
right of the Master Servicer, such
other person or, if applicable, such
holder of the REMIC residual interest
or FASIT ownership interest, to so
purchase is subject to the principal
balance of the related Trust Fund
Assets being less than the percentage
specified in the related Prospectus
Supplement of the aggregate principal
balance of the Trust Fund Assets at
the Cut-off Date for the Series. The
foregoing is subject to the provision
that if a REMIC election is made with
respect to a Trust Fund, any
repurchase will be made only in
connection with a "qualified
liquidation" of the REMIC within the
meaning of Section 860F(g)(4) of the
Code, and if a FASIT election is made
with respect to a Trust Fund, any
repurchase will be made only if such
repurchase would not be a prohibited
transaction within the meaning of
section 860L(e)(2) of the Code.
Legal Investment......................The Prospectus Supplement for each
series of Securities will specify
which, if any, of the classes of
Securities offered thereby constitute
"mortgage related securities" for
purposes of the Secondary Mortgage
Market Enhancement Act of 1984
("SMMEA"). Classes of Securities that
qualify as "mortgage related
securities" will be legal investments
for certain types of institutional
investors to the extent provided in
SMMEA, subject, in any case, to any
other regulations which may govern
investments by such institutional
investors. Institutions whose
investment activities are subject to
review by federal or state authorities
should consult with their counsel or
the applicable authorities to
determine whether an investment in a
particular class of Securities
(whether or not such class constitutes
a "mortgage related security")
complies with applicable guidelines,
policy statements or restrictions. See
"Legal Investment."
Federal Income Tax
Consequences..........................The federal income tax consequences to
Securityholders will vary depending on
whether one or more elections are made
to treat the Trust Fund or specified
portions thereof as either a REMIC or
a FASIT under the provisions of the
Internal Revenue Code of 1986, as
amended (the "Code"). The Prospectus
Supplement for each Series of
Securities will specify whether such
an election will be made.
If a REMIC election or a FASIT
election is made, Securities
representing regular interests in a
REMIC or FASIT will generally be
treated as evidences of indebtedness
for federal income tax purposes.
Stated interest on such regular
interests will be taxable as ordinary
income and taken into account using
the accrual method of accounting,
regardless of the holder's normal
accounting method. If neither a REMIC
election nor a FASIT is made, interest
(other than original issue discount
("OID") on Securities that are
characterized as indebtedness for
federal income tax purposes will be
includible in income by holders
thereof in accordance with their usual
method of accounting.
Certain classes of Securities may be
issued with OID. A holder should be
aware that the Code and the Treasury
regulations promulgated thereunder do
not adequately address certain issues
relevant to prepayable securities,
such as the Securities.
Securityholders that will be required
to report income with respect to the
related Securities under the accrual
method of accounting will do so
without giving effect to delays and
reductions in distributions
attributable to a default or
delinquency on the Loans, except
possibly to the extent that it can be
established that such amounts are
uncollectible. As a result, the amount
of income (including OID) reported by
a holder of a Security in any period
could significantly exceed the amount
of cash distributed to such holder in
that period.
In the opinion of Brown & Wood llp, if
a REMIC election is made with respect
to a Series of Securities, then the
arrangement by which such Securities
are issued will be treated as a REMIC
as long as all of the provisions of
the applicable Agreement are complied
with and the statutory and regulatory
requirements are satisfied. Securities
will be designated as "regular
interests" or "residual interests" in
a REMIC. A REMIC generally will not be
subject to entity-level tax. Rather,
the taxable income or net loss of a
REMIC will be taken into account by
the holders of residual interests.
Such holders will report their
proportionate share of the taxable
income of the REMIC whether or not
they receive cash distributions from
the REMIC attributable to such income.
The portion of the REMIC taxable
income consisting of "excess
inclusions" generally may not be
offset by otherwise allowable
deductions of the holder, including
net operating loss deductions.
In the opinion of Brown & Wood llp, if
a FASIT election is made with respect
to a Series of Securities, then the
arrangement by which such Securities
are issued will be treated as a FASIT
as long as all of the provisions of
the applicable Agreement are complied
with and the statutory and regulatory
requirements are satisfied. Securities
will be designated as regular
interests or as the ownership
interest. The FASIT generally will not
be subject to an entity-level tax.
Rather, the taxable income or net loss
of the FASIT will be taken into
account by the holder of the ownership
interest whether or not the holder
receives cash distributions from the
FASIT attributable to such income. The
ownership interest generally must be
held at all times by a domestic C
corporation (an "Eligible
Corporation"). Furthermore, certain
regular interests referred to as
High-Yield interests are only suitable
investments for Eligible Corporations.
Income derived from holding ownership
interests and income derived from
holding High-Yield interests generally
may not be offset by otherwise
allowable deductions, including net
operating loss deductions.
In the opinion of Brown & Wood llp, if
a REMIC or a FASIT election is not
made with respect to a Series of
Securities, then the arrangement by
which such Securities are issued
either will be classified as a grantor
trust under Subpart E, Part I of
Subchapter J of the Code or as a
partnership. The Trust Fund will not
be a publicly traded partnership
taxable as a corporation as long as
all of the provisions of the related
Agreement are complied with and the
statutory and regulatory requirements
are satisfied. If Notes are issued by
such Trust Fund, such Notes will be
treated as indebtedness for federal
income tax purposes. The holders of
the Certificates issued by such Trust
Fund will agree to treat the
Certificates either as equity
interests in a partnership or in a
grantor trust.
Generally, gain or loss will be
recognized on a sale of Securities in
the amount equal to the difference
between the amount realized and the
seller's tax basis in the Securities
sold.
The material federal income tax
consequences for investors associated
with the purchase, ownership and
disposition of the Securities are set
forth herein under "Federal Income --
Tax Consequences." The material
federal income tax consequences for
investors associated with the
purchase, ownership and disposition of
Securities of any particular Series
will be set forth under the heading
"Federal Income Tax Consequences" in
the related Prospectus Supplement. See
"Federal Income Tax Consequences."
ERISA Considerations..................A fiduciary of any employee benefit
plan or other retirement plan or
arrangement subject to the Employee
Retirement Income Security Act of
1974, as amended ("ERISA"), or the
Code should carefully review with its
legal advisors whether the purchase or
holding of Securities could give rise
to a transaction prohibited or not
otherwise permissible under ERISA or
the Code. See "ERISA Considerations."
Certain classes of Securities may not
be transferred unless the Trustee and
the Depositor are furnished with a
letter of representation or an opinion
of counsel to the effect that such
transfer will not result in a
violation of the prohibited
transaction provisions of ERISA and
the Code and will not subject the
Trustee, the Depositor or the Master
Servicer to additional obligations.
See "Description of the
Securities-General" and "ERISA
Considerations."
Risk Factors..........................For a discussion of certain risks
associated with an investment in the
Securities, see "Risk Factors" on page
16 herein and in the related
Prospectus Supplement.
RISK FACTORS
Investors should consider the following factors in connection with the
purchase of the Securities.
Limited Liquidity
No market for the Securities of any Series will exist prior to the issuance
thereof, and no assurance can be given that a secondary market will develop or,
if it does develop, that it will provide Securityholders with liquidity of
investment or will continue for the life of the Securities of such Series.
Limited Source of Payments -- No Recourse to Sellers, Depositor or Master
Servicer
The Depositor does not have, nor is it expected to have, any significant
assets. Unless otherwise specified in the related Prospectus Supplement, the
Securities of a Series will be payable solely from the Trust Fund for such
Securities and will not have any claim against or security interest in the Trust
Fund for any other Series. There will be no recourse to the Depositor or any
other person for any failure to receive distributions on the Securities.
Further, at the times set forth in the related Prospectus Supplement, certain
Trust Fund Assets and/or any balance remaining in the Security Account
immediately after making all payments due on the Securities of such Series,
after making adequate provision for future payments on certain classes of
Securities and after making any other payments specified in the related
Prospectus Supplement, may be promptly released or remitted to the Depositor,
the Master Servicer, any credit enhancement provider or any other person
entitled thereto and will no longer be available for making payments to
Securityholders. Consequently, holders of Securities of each Series must rely
solely upon payments with respect to the Trust Fund Assets and the other assets
constituting the Trust Fund for a Series of Securities, including, if
applicable, any amounts available pursuant to any credit enhancement for such
Series, for the payment of principal of and interest on the Securities of such
Series.
The Securities will not represent an interest in or obligation of the
Depositor, the Master Servicer, any Seller or any of their respective
affiliates. The only obligations, if any, of the Depositor with respect to the
Trust Fund Assets or the Securities of any Series will be pursuant to certain
representations and warranties. The Depositor does not have, and is not expected
in the future to have, any significant assets with which to meet any obligation
to repurchase Loans with respect to which there has been a breach of any
representation or warranty which materially and adversely affects the interests
of the Securityholders in such Loans. If, for example, the Depositor were
required to repurchase a Loan, its only sources of funds to make such repurchase
would be from funds obtained (i) from the enforcement of a corresponding
obligation, if any, on the part of the related Seller or originator of such Loan
or (ii) to the extent provided in the related Prospectus Supplement, from a
Reserve Account or similar credit enhancement established to provide funds for
such repurchases.
The only obligations of any Seller with respect to Trust Fund Assets or the
Securities of any Series will be pursuant to certain representations and
warranties and certain document delivery requirements. A Seller may be required
to repurchase or substitute for any Loan with respect to which such
representations and warranties or certain document delivery requirements are
breached (and in the case of any such breach of representations and warranties,
such breach materially and adversely affects the interest of the Securityholders
in such Loan). There is no assurance, however, that such Seller will have the
financial ability to effect such repurchase or substitution. Although the Master
Servicer may be obligated to enforce such obligation to the extent described
under "Loan Program -- Representations by Sellers; Repurchases," the Master
Servicer will not be obligated to purchase or replace such Loan if the Seller
defaults on its obligation (nor will the Master Servicer otherwise be obligated
to purchase or replace any such Loan for any other reason).
Credit Enhancement
Although credit enhancement is intended to reduce the risk of delinquent
payments or losses to holders of Securities entitled to the benefit thereof, the
amount of such credit enhancement will be limited, as set forth in the related
Prospectus Supplement, and may be subject to periodic reduction in accordance
with a schedule or formula or otherwise decline, and could be depleted under
certain circumstances prior to the payment in full of the related Series of
Securities, and as a result Securityholders of the related Series may suffer
losses. Moreover, such credit enhancement may not cover all potential losses or
risks. For example, credit enhancement may or may not cover fraud or negligence
by a loan originator or other parties. In addition, the Trustee will generally
be permitted to reduce, terminate or substitute all or a portion of the credit
enhancement for any Series of Securities, provided the applicable Rating Agency
indicates that the then-current rating of the Securities of such Series will not
be adversely affected. See "Credit Enhancement."
Prepayment and Yield Considerations
The timing of principal payments of the Securities of a Series will be
affected by a number of factors, including the following: (i) the extent of
prepayments (including for this purpose prepayments resulting from refinancing
or liquidations of the Loans due to defaults, casualties, condemnations and
repurchases by the Depositor or a Seller) of the Loans comprising the Trust
Fund, which prepayments may be influenced by a variety of factors including
general economic conditions, prevailing interest rate levels, the availability
of alternative financing and homeowner mobility, (ii) the manner of allocating
principal and/or payments among the classes of Securities of a Series as
specified in the related Prospectus Supplement, (iii) the exercise by the party
entitled thereto of any right of optional termination and (iv) the rate and
timing of payment defaults and losses incurred with respect to the Trust Fund
Assets. The repurchase of Loans by the Depositor or a Seller may result from
repurchases of Trust Fund Assets due to material breaches of the Depositor's or
such Seller's representations and warranties, as applicable. The yields to
maturity and weighted average lives of the Securities will be affected primarily
by the rate and timing of prepayment of the Loans comprising the Trust Fund
Assets. In addition, the yields to maturity and weighted average lives of the
Securities will be affected by the distribution of amounts remaining in any
Pre-Funding Account following the end of the related Funding Period. Any
reinvestment risks resulting from a faster or slower incidence of prepayment of
Loans held by a Trust Fund will be borne entirely by the holders of one or more
classes of the related Series of Securities. See "Yield and Prepayment
Considerations" and "The Agreements -- Pre-Funding Account."
Interest payable on the Securities of a Series on a Distribution Date will
include all interest accrued during the period specified in the related
Prospectus Supplement. In the event interest accrues over a period ending two or
more days prior to a Distribution Date, the effective yield to Securityholders
will be reduced from the yield that would otherwise be obtainable if interest
payable on the Securities were to accrue through the day immediately preceding
each Distribution Date, and the effective yield (at par) to Securityholders will
be less than the indicated coupon rate. See "Description of the Securities --
Distributions on Securities -- Distributions of Interest."
Balloon Payments
Certain of the Loans as of the related Cut-off Date may not be fully
amortizing over their terms to maturity and, thus, will require substantial
principal payments (i.e., balloon payments) at their stated maturity. Loans with
balloon payments involve a greater degree of risk because the ability of a
borrower to make a balloon payment typically will depend upon its ability either
to timely refinance the loan or to timely sell the related Property. The ability
of a borrower to accomplish either of these goals will be affected by a number
of factors, including the level of available mortgage rates at the time of sale
or refinancing, the borrower's equity in the related Property, the financial
condition of the borrower and tax laws. Losses on such Loans that are not
otherwise covered by the credit enhancement described in the applicable
Prospectus Supplement will be borne by the holders of one or more classes of
Securities of the related Series.
Nature of Mortgages
Property Values. There are several factors that could adversely affect the
value of Properties such that the outstanding balance of the related Loans,
together with any senior financing on the Properties, if applicable, would equal
or exceed the value of the Properties. Among the factors that could adversely
affect the value of the Properties are an overall decline in the residential
real estate market in the areas in which the Properties are located or a decline
in the general condition of the Properties as a result of failure of borrowers
to maintain adequately the Properties or of natural disasters that are not
necessarily covered by insurance, such as earthquakes and floods. Such decline
could extinguish the value of the interest of a junior mortgagee in the Property
before having any effect on the interest of the related senior mortgagee. If
such a decline occurs, the actual rates of delinquencies, foreclosures and
losses on all Loans could be higher than those currently experienced in the
mortgage lending industry in general. Losses on such Loans that are not
otherwise covered by the credit enhancement described in the applicable
Prospectus Supplement will be borne by the holder of one or more classes of
Securities of the related Series.
Delays Due to Liquidation. Even assuming that the Properties provide
adequate security for the Loans, substantial delays could be encountered in
connection with the liquidation of defaulted Loans and corresponding delays in
the receipt of related proceeds by Securityholders could occur. An action to
foreclose on a Property securing a Loan is regulated by state statutes and rules
and is subject to many of the delays and expenses of other lawsuits if defenses
or counterclaims are interposed, sometimes requiring several years to complete.
Furthermore, in some states an action to obtain a deficiency judgment is not
permitted following a nonjudicial sale of a Property. In the event of a default
by a borrower, these restrictions, among other things, may impede the ability of
the Master Servicer to foreclose on or sell the Property or to obtain
liquidation proceeds sufficient to repay all amounts due on the related Loan. In
addition, the Master Servicer will be entitled to deduct from related
liquidation proceeds all expenses reasonably incurred in attempting to recover
amounts due on defaulted Loans and not yet repaid, including payments to senior
lienholders, legal fees and costs of legal action, real estate taxes and
maintenance and preservation expenses.
Disproportionate Effect of Liquidation Expenses. Liquidation expenses with
respect to defaulted loans generally do not vary directly with the outstanding
principal balance of the loan at the time of default. Therefore, assuming that a
servicer took the same steps in realizing upon a defaulted loan having a small
remaining principal balance as it would in the case of a defaulted loan having a
large remaining principal balance, the amount realized after expenses of
liquidation would be smaller as a percentage of the outstanding principal
balance of the small loan than would be the case with the defaulted loan having
a large remaining principal balance.
Home Equity Loans; Junior Liens. Since the mortgages and deeds of trust
securing the Home Equity Loans and the Home Improvement Contracts will be
primarily junior liens subordinate to the rights of the mortgagee under the
related senior mortgage(s) or deed(s) of trust, the proceeds from any
liquidation, insurance or condemnation proceeds will be available to satisfy the
outstanding balance of such junior lien only to the extent that the claims of
such senior mortgagees have been satisfied in full, including any related
foreclosure costs. In addition, if a junior mortgagee forecloses on the property
securing a junior mortgage, it forecloses subject to any senior mortgage and
must either pay the entire amount due on any senior mortgage to the related
senior mortgagee at or prior to the foreclosure sale or undertake the obligation
to make payments on any such senior mortgage in the event the mortgagor is in
default thereunder in order to protect the junior mortgagee's interest in the
property. The Trust Fund will not have any source of funds to satisfy any senior
mortgages or make payments due to any senior mortgagees and may therefore
effectively be prevented from foreclosing on the related property.
Certain states have imposed statutory and judicial restrictions that limit
the remedies of a secured lender in the event that the proceeds of any sale
under a deed of trust or other foreclosure proceedings are insufficient to pay
amounts owed to such secured lender. In certain states, including California, if
a lender simultaneously originates a loan secured by a senior lien on a
particular property and a loan secured by a junior lien on the same property,
such a lender as the holder of the junior lien may be precluded from obtaining a
deficiency judgment with respect to the excess of the aggregate amount owed
under both such loans over the proceeds of any sale under a deed of trust or
other foreclosure proceedings. See "Certain Legal Aspects of the Loans --
Anti-Deficiency Legislation; Bankruptcy Laws; Tax Liens."
Consumer Protection Laws. Applicable state laws generally regulate interest
rates and other charges, require certain disclosures, and require licensing of
certain originators and servicers of Loans. In addition, most states have other
laws, public policy and general principles of equity relating to the protection
of consumers, unfair and deceptive acts and practices which may apply to the
origination, servicing and collection of the Loans. Depending on the provisions
of the applicable law and the specific facts and circumstances involved,
violations of these laws, policies and principles may limit the ability of the
Master Servicer to collect all or part of the principal of or interest on the
Loans, may entitle the borrower to a refund of amounts previously paid and, in
addition, could subject the Master Servicer to damages and administrative
sanctions. See "Certain Legal Aspects of the Loans."
Multifamily Loans
Multifamily lending may be viewed as exposing the lender to a greater risk
of loss than single family residential lending. Owners of multifamily
residential properties rely on monthly lease payments from tenants to pay for
maintenance and other operating expenses of such properties, to fund capital
improvements and to service any mortgage loan and any other debt that may be
secured by such properties. Various factors, many of which are beyond the
control of the owner or operator of such a property, may affect the economic
viability of that property.
Changes in payment patterns by tenants may result from a variety of social,
legal and economic factors. Economic factors including the rate of inflation,
unemployment levels and relative rates offered for various types of housing may
be reflected in changes in payment patterns including increased risks of
defaults by tenants and higher vacancy rates. Adverse economic conditions,
either local or national, may limit the amount of rent that can be charged and
may result in a reduction in timely lease payments or a reduction in occupancy
levels. Occupancy and rent levels may also be affected by construction of
additional housing units, competition and local politics, including rent
stabilization or rent control laws and policies. In addition, the level of
mortgage interest rates may encourage tenants to purchase single family housing.
The Depositor is unable to determine and has no basis to predict whether, or to
what extent, economic, legal or social factors will affect future rental or
payment patterns.
The location and construction quality of a particular building may affect
the occupancy level as well as the rents that may be charged for individual
units. The characteristics of a neighborhood may change over time or in relation
to newer developments. The effects of poor construction quality will increase
over time in the form of increased maintenance and capital improvements. Even
good construction will deteriorate over time if adequate maintenance is not
performed in a timely fashion.
Unsecured Home Improvement and Other Loans
The Trust Fund for any Series may include Home Improvement Contracts that
are not secured by an interest in real estate or otherwise. The Trust Fund for
any Series may also include Home Equity Loans and Home Improvement Contracts
that were originated with Loan-to-Value Ratios or Combined Loan-to-Value Ratios
in excess of the value of the related Mortgaged Property pledged as security
therefor. Under such circumstances, the Trust Fund for the related Series could
be treated as a general unsecured creditor as to any unsecured portion of any
such Loan. In the event of a default under a Loan that is unsecured in whole or
in part, the related Trust Fund will have recourse only against the borrower's
assets generally for the unsecured portion of the Loan, along with all other
general unsecured creditors of the borrower. In a bankruptcy or insolvency
proceeding relating to a borrower on any such Loan, the unsecured obligations of
the borrower with respect to such Loan may be discharged, even though the value
of the borrower's assets made available to the related Trust Fund as a general
unsecured creditor is insufficient to pay amounts due and owing under the
related Loan.
Environmental Risks
Real property pledged as security to a lender may be subject to certain
environmental risks. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to assure the costs of cleanup.
In several states, such a lien has priority over the lien of an existing
mortgage against such property. In addition under the laws of some states and
under the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), a lender may be liable, as an "owner" or
"operator," for costs of addressing releases or threatened releases of hazardous
substances that require remedy at a property, if agents or employees of the
lender have become sufficiently involved in the operations of the borrower,
regardless of whether the environmental damage or threat was caused by a prior
owner. Such costs could result in a loss to the holders of one or more classes
of Securities of the related Series. A lender also risks such liability on
foreclosure of the related property. See "Certain Legal Aspects of the Loans --
Environmental Risks."
Certain Other Legal Aspects of the Loans
Consumer Protection Laws. The Loans may also be subject to federal laws,
including:
(i) the Federal Truth in Lending Act and Regulation Z promulgated
thereunder, which require certain disclosures to the borrowers regarding
the terms of the Loans;
(ii) the Equal Credit Opportunity Act and Regulation B promulgated
thereunder, which prohibit discrimination on the basis of age, race, color,
sex, religion, marital status, national origin, receipt of public
assistance or the exercise of any right under the Consumer Credit
Protection Act, in the extension of credit;
(iii) the Fair Credit Reporting Act, which regulates the use and
reporting of information related to the borrower's credit experience; and
(iv) for Loans that were originated or closed after November 7, 1989,
the Home Equity Loan Consumer Protection Act of 1988, which requires
additional application disclosures, limits changes that may be made to the
loan documents without the borrower's consent and restricts a lender's
ability to declare a default or to suspend or reduce a borrower's credit
limit to certain enumerated events.
The Riegle Act. Certain mortgage loans may be subject to the Riegle
Community Development and Regulatory Improvement Act of 1994 (the "Riegle Act")
which incorporates the Home Ownership and Equity Protection Act of 1994. These
provisions impose additional disclosure and other requirements on creditors with
respect to non-purchase money mortgage loans with high interest rates or high
up-front fees and charges. The provisions of the Riegle Act apply on a mandatory
basis to all mortgage loans originated on or after October 1, 1995. These
provisions can impose specific statutory liabilities upon creditors who fail to
comply with their provisions and may affect the enforceability of the related
loans. In addition, any assignee of the creditor would generally be subject to
all claims and defenses that the consumer could assert against the creditor,
including, without limitation, the right to rescind the mortgage loan.
Holder in Due Course Rules. The Home Improvement Contracts are also subject
to the Preservation of Consumers' Claims and Defenses regulations of the Federal
Trade Commission and other similar federal and state statutes and regulations
(collectively, the "Holder in Due Course Rules"), which are intended to defeat
the ability of the transferor of a consumer credit contract which is the seller
of goods which gave rise to the transaction (and certain related lenders and
assignees) to transfer such contract free of notice of claims by the debtor
thereunder. The effect of the Holder in Due Course Rules is to subject the
assignee of such a Home Improvement Contract (such as the Trust Fund) to all
claims and defenses which the obligor under the Home Improvement Contract could
assert against the seller of the related goods. Liability under this rule is
limited to amounts paid under the Home Improvement Contract; however, the
obligor under the Home Improvement Contract also may be able to assert the rule
to set off remaining amounts due as a defense against a claim brought by the
Trust Fund against such obligor. See "Certain Legal Aspects of the Loans."
Violations of certain provisions of these federal laws may limit the
ability of the Master Servicer to collect all or part of the principal of or
interest on the Loans and in addition could subject the Trust Fund to damages
and administrative enforcement. Losses on such Loans that are not otherwise
covered by the credit enhancement described in the applicable Prospectus
Supplement will be borne by the holders of one or more classes of Securities of
the related Series. See "Certain Legal Aspects of the Loans."
Rating of the Securities
It will be a condition to the issuance of a class of Securities offered
hereby that they be rated in one of the four highest rating categories by the
Rating Agency identified in the related Prospectus Supplement. Any such rating
would be based on, among other things, the adequacy of the value of the related
Trust Fund Assets and any credit enhancement with respect to such class and will
represent such Rating Agency's assessment solely of the likelihood that holders
of such class of Securities will receive payments to which such Securityholders
are entitled under the related Agreement. Such rating will not constitute an
assessment of the likelihood that principal prepayments on the related Loans
will be made, the degree to which the rate of such prepayments might differ from
that originally anticipated or the likelihood of early optional termination of
the Series of Securities. Such rating shall not be deemed a recommendation to
purchase, hold or sell Securities, inasmuch as it does not address market price
or suitability for a particular investor. Such rating will not address the
possibility that prepayment at higher or lower rates than anticipated by an
investor may cause such investor to experience a lower than anticipated yield or
that an investor purchasing a Security at a significant premium might fail to
recoup its initial investment under certain prepayment scenarios.
There is also no assurance that any such rating will remain in effect for
any given period of time or that it may not be lowered or withdrawn entirely by
the Rating Agency in the future if in its judgment circumstances in the future
so warrant. In addition to being lowered or withdrawn due to any erosion in the
adequacy of the value of the Trust Fund Assets or any credit enhancement with
respect to a Series of Securities, such rating might also be lowered or
withdrawn because of, among other reasons, an adverse change in the financial or
other condition of a credit enhancement provider or a change in the rating of
such credit enhancement provider's long term debt.
The amount, type and nature of credit enhancement, if any, established with
respect to a class of Securities will be determined on the basis of criteria
established by each Rating Agency rating classes of such Series. Such criteria
are sometimes based upon an actuarial analysis of the behavior of similar loans
in a larger group. Such analysis is often the basis upon which each Rating
Agency determines the amount of credit enhancement required with respect to each
such class. There can be no assurance that the historical data supporting any
such actuarial analysis will accurately reflect future experience nor any
assurance that the data derived from a large pool of similar loans accurately
predicts the delinquency, foreclosure or loss experience of any particular pool
of Loans. No assurance can be given that the values of any Properties have
remained or will remain at their levels on the respective dates of origination
of the related Loans. If the residential real estate markets should experience
an overall decline in property values such that the outstanding principal
balances of the Loans in a particular Trust Fund and any secondary financing on
the related Properties become equal to or greater than the value of the
Properties, the rates of delinquencies, foreclosures and losses could be higher
than those now generally experienced in the mortgage lending industry. In
addition, adverse economic conditions (which may or may not affect real property
values) may affect the timely payment by mortgagors of scheduled payments of
principal and interest on the Loans and, accordingly, the rates of
delinquencies, foreclosures and losses with respect to any Trust Fund. To the
extent that such losses are not covered by credit enhancement, such losses will
be borne, at least in part, by the holders of one or more classes of Securities
of the related Series. See "Rating."
Book-Entry Registration
If issued in book-entry form, such registration may reduce the liquidity of
the Securities in the secondary trading market since investors may be unwilling
to purchase Securities for which they cannot obtain physical certificates. Since
transactions in book-entry Securities can be effected only through the
Depository Trust Company ("DTC"), participating organizations, Financial
Intermediaries and certain banks, the ability of a Securityholder to pledge a
book-entry Security to persons or entities that do not participate in the DTC
system may be limited due to lack of a physical certificate representing such
Securities. Securities Owners will not be recognized as Securityholders as such
term is used in the related Agreement, and Security Owners will be permitted to
exercise the rights of Securityholders only indirectly through DTC and its
Participants.
In addition, Securityholders may experience some delay in their receipt of
distributions of interest and principal on book-entry Securities since
distributions are required to be forwarded by the Trustee to DTC and DTC will
then be required to credit such distributions to the accounts of Depository
participants which thereafter will be required to credit them to the accounts of
Securityholders either directly or indirectly through Financial Intermediaries.
See "Description of the Securities-Book-Entry Registration of Securities."
Pre-Funding Accounts
If so provided in the related Prospectus Supplement, on the closing date
specified in such Prospectus Supplement (the "Closing Date") the Depositor will
deposit cash in an amount (the "Pre-Funded Amount") specified in such Prospectus
Supplement into an account (the "Pre-Funding Account"). In no event shall the
Pre-Funded Amount exceed 50% of the initial aggregate principal amount of the
Certificates and/or Notes of the related Series of Securities. The Pre-Funded
Amount will be used to purchase Loans ("Subsequent Loans") in a period from the
related Closing Date to a date not more than one year after such Closing Date
(such period, the "Funding Period") from the Depositor (which, in turn, will
acquire such Subsequent Loans from the Seller or Sellers specified in the
related Prospectus Supplement). The Pre-Funding Account will be maintained with
the Trustee for the related Series of Securities and is designed solely to hold
funds to be applied by such Trustee during the Funding Period to pay to the
Depositor the purchase price for Subsequent Loans. Monies on deposit in the
Pre-Funding Account will not be available to cover losses on or in respect of
the related Loans. To the extent that the entire Pre-Funded Amount has not been
applied to the purchase of Subsequent Loans by the end of the related Funding
Period, any amounts remaining in the Pre-Funding Account will be distributed as
a prepayment of principal to Securityholders on the Distribution Date
immediately following the end of the Funding Period, in the amounts and pursuant
to the priorities set forth in the related Prospectus Supplement. Any
reinvestment risk resulting from such prepayment will be borne entirely by the
holders of one or more classes of the related Series of Securities.
Bankruptcy and Insolvency Risks
The Seller and the Depositor will treat the transfer of the Loans by the
Seller to the Depositor as a sale for accounting purposes. The Depositor and the
Trust Fund will treat the transfer of Loans from the Depositor to the Trust Fund
as a sale for accounting purposes. As a sale of the Loans by the Seller to the
Depositor, the Loans would not be part of the Seller's bankruptcy estate and
would not be available to the Seller's creditors. However, in the event of the
insolvency of the Seller, it is possible that the bankruptcy trustee or a
creditor of the Seller may attempt to recharacterize the sale of the Loans as a
borrowing by the Seller, secured by a pledge of the Loans. Similarly, as a sale
of the Loans by the Depositor to the Trust Fund, the Loans would not be part of
the Depositor's bankruptcy estate and would not be available to the Depositor's
creditors. However, in the event of the insolvency of the Depositor, it is
possible that the bankruptcy trustee or a creditor of the Depositor may attempt
to recharacterize the sale of the Loans as a borrowing by the Depositor, secured
by a pledge of the Loans. In either case, this position, if argued before or
accepted by a court, could prevent timely payments of amounts due on the
Securities and result in a reduction of payments due on the Securities.
In the event of a bankruptcy or insolvency of the Master Servicer, the
bankruptcy trustee or receiver may have the power to prevent the Trustee or the
Securityholders from appointing a successor Servicer. The time period, if any,
during which cash collections may be commingled with the Master Servicer's own
funds prior to each Distribution Date will be specified in the related
Prospectus Supplement. In the event of the insolvency of the Master Servicer and
if such cash collections are commingled with the Master Servicer's own funds for
at least ten days, the Trust Fund will likely not have a perfected interest in
such collections since such collections would not have been deposited in a
segregated account within ten days after the collection thereof, and the
inclusion thereof in the bankruptcy estate of the Master Servicer may result in
delays in payment and failure to pay amounts due on the Securities of the
related Series.
In addition, federal and state statutory provisions, including the federal
bankruptcy laws and state laws affording relief to debtors, may interfere with
or affect the ability of the secured mortgage lender to realize upon its
security. For example, in a proceeding under Title 11 of the United States Code
Section 101 et seq. and the rules and regulations promulgated thereunder, as
amended (the "Bankruptcy Code"), a lender may not foreclose on a mortgaged
property without the permission of the bankruptcy court. The rehabilitation plan
proposed by the debtor may provide, if the mortgaged property is not the
debtor's principal residence and the court determines that the value of the
mortgaged property is less than the principal balance of the mortgage loan, for
the reduction of the secured indebtedness to the value of the mortgaged property
as of the date of the commencement of the bankruptcy, rendering the lender a
general unsecured creditor for the difference, and also may reduce the monthly
payments due under such mortgage loan, change the rate of interest and alter the
mortgage loan repayment schedule. The effect of any such proceedings under the
Bankruptcy Code, including but not limited to any automatic stay, could result
in delays in receiving payments on the Loans underlying a Series of Securities
and possible reductions in the aggregate amount of such payments.
Consequences of Owning Original Issue Discount Securities.
Debt Securities that are Compound Interest Securities will be, and certain
of the other Debt Securities may be, issued with original discount for federal
income tax purposes. A holder of Debt Securities issued with original issue
discount will be required to include original issue discount in ordinary gross
income for federal income tax purposes as it accrues, in advance of receipt of
the cash attributable to such income. Accrued but unpaid interest on the Debt
Securities that are Compound Interest Securities generally will be treated as
original issue discount for this purpose. See "Federal Income Tax Consequences
- -- Taxation of Debt Securities -- Interest and Acquisition Discount" and " --
Market Discount" herein.
Value of Trust Fund Assets
There is no assurance that the market value of the Trust Fund Assets or any
other assets relating to a Series of Securities described under "Credit
Enhancement" herein will at any time be equal to or greater than the principal
amount of the Securities of such Series then outstanding, plus accrued interest
thereon. Moreover, upon an event of default under the Agreement for a Series of
Securities and a sale of the related Trust Fund Assets or upon a sale of the
assets of a Trust Fund for a Series of Securities, the Trustee, the Master
Servicer, the credit enhancer, if any, and any other service provider specified
in the related Prospectus Supplement generally will be entitled to receive the
proceeds of any such sale to the extent of unpaid fees and other amounts owing
to such persons under the related Agreement prior to distributions to
Securityholders. Upon any such sale, the proceeds thereof may be insufficient to
pay in full the principal of and interest on the Securities of such Series.
THE TRUST FUND
General
The Securities of each Series will represent interests in the assets of the
related Trust Fund, and the Notes of each Series will be secured by the pledge
of the assets of the related Trust Fund. The Trust Fund for each Series will be
held by the Trustee for the benefit of the related Securityholders. Each Trust
Fund will consist of certain assets (the "Trust Fund Assets") consisting of a
pool (each, a "Pool") comprised of Loans as specified in the related Prospectus
Supplement, together with payments in respect of such Loans, as specified in the
related Prospectus Supplement.* The Pool will be created on the first day of the
month of the issuance of the related Series of Securities or such other date
specified in the related Prospectus Supplement (the "Cut-off Date"). The
Securities will be entitled to payment from the assets of the related Trust Fund
or Funds or other assets pledged for the benefit of the Securityholders, as
specified in the related Prospectus Supplement and will not be entitled to
payments in respect of the assets of any other trust fund established by the
Depositor.
The Trust Fund Assets will be acquired by the Depositor, either directly or
through affiliates, from originators or sellers which may be affiliates of the
Depositor (the "Sellers"), and conveyed without recourse by the Depositor to the
related Trust Fund. Loans acquired by the Depositor will have been originated in
accordance with the underwriting criteria specified below under "Loan Program
- --Underwriting Standards" or as otherwise described in the related Prospectus
Supplement. See "Loan Program -- Underwriting Standards."
The Depositor will cause the Trust Fund Assets to be assigned to the
Trustee named in the related Prospectus Supplement for the benefit of the
holders of the Securities of the related Series. The Master Servicer named in
the related Prospectus Supplement will service the Trust Fund Assets, either
directly or through other servicing institutions ("Sub-Servicers"), pursuant to
a Pooling and Servicing Agreement among the Depositor, the Master Servicer and
the Trustee with respect to a Series consisting of Certificates, or a master
servicing agreement (each, a "Master Servicing Agreement") between the Trustee
and the Master Servicer with respect to a Series consisting of Certificates and
Notes, and will receive a fee for such services. See "Loan Program" and "The
Agreements." With respect to Loans serviced by the Master Servicer through a
Sub-Servicer, the Master Servicer will remain liable for its servicing
obligations under the related Agreement as if the Master Servicer alone were
servicing such Loans.
As used herein, "Agreement" means, with respect to a Series consisting of
Certificates, the Pooling and Servicing Agreement, and with respect to a Series
consisting of Certificates and Notes, the Trust Agreement, the Indenture and the
Master Servicing Agreement, as the context requires.
If so specified in the related Prospectus Supplement, a Trust Fund relating
to a Series of Securities may be a business trust formed under the laws of the
state specified in the related Prospectus Supplement pursuant to a trust
agreement (each, a "Trust Agreement") between the Depositor and the trustee of
such Trust Fund.
With respect to each Trust Fund, prior to the initial offering of the
related Series of Securities, the Trust Fund will have no assets or liabilities.
No Trust Fund is expected to engage in any activities other than acquiring,
managing and holding of the related Trust Fund Assets and other assets
contemplated herein specified and in the related Prospectus Supplement and the
proceeds thereof, issuing Securities and making payments and distributions
thereon and certain related activities. No Trust Fund is expected to have any
source of capital other than its assets and any related credit enhancement.
Unless otherwise specified in the related Prospectus Supplement, the only
obligations of the Depositor with respect to a Series of Securities will be to
obtain certain representations and warranties from the Sellers and, to the
extent such representations and warranties are not made by the Sellers directly
to the Trustee, to assign to the Trustee for such Series of Securities the
Depositor's rights with respect to such representations and warranties. See "The
Agreements -- Assignment of the Trust Fund Assets." The obligations of the
Master Servicer with respect to the Loans will consist principally of its
contractual servicing obligations under the related Agreement (including its
obligation to enforce the obligations of the Sub-Servicers or Sellers, or both,
as more fully described herein under "Loan Program -- Representations by
Sellers; Repurchases" and "The Agreements -- Sub-Servicing By Sellers" and " --
Assignment of the Trust Fund Assets") and its obligation, if any, to make
certain cash advances in the event of delinquencies in payments of interest
and/or principal on or with respect to the Loans in the amounts described herein
under "Description of the Securities -- Advances." The obligations of the Master
Servicer to make advances may be subject to limitations, to the extent provided
herein and in the related Prospectus Supplement.
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* Whenever the terms "Pool", "Certificates", "Notes" and "Securities" are used
in this Prospectus, such terms will be deemed to apply, unless the context
indicates otherwise, to one specific Pool and the Securities of one Series
including the Certificates representing certain undivided interests in, and/or
Notes secured by the assets of, a single Trust Fund consisting primarily of the
Loans in such Pool. Similarly, the term "pass-through rate" will refer to the
pass-through rate borne by the Certificates and the term "interest rate" will
refer to the interest rate borne by the Notes of one specific Series, as
applicable, and the term "Trust Fund" will refer to one specific Trust Fund.
The following is a brief description of the assets expected to be included
in the Trust Funds. If specific information respecting the Trust Fund Assets is
not known at the time the related Series of Securities initially is offered,
more general information of the nature described below will be provided in the
related Prospectus Supplement, and specific information will be set forth in a
report on Form 8-K to be filed with the Securities and Exchange Commission
within fifteen days after the initial issuance of such Securities (the "Detailed
Description"). A copy of the Agreement with respect to each Series of Securities
will be attached to the Form 8-K and will be available for inspection at the
corporate trust office of the Trustee specified in the related Prospectus
Supplement. A schedule of the Loans relating to such Series will be attached to
the Agreement delivered to the Trustee upon delivery of the Securities.
The Loans
General. Loans will consist of Single Family Loans, Multifamily Loans, Home
Equity Loans or Home Improvement Contracts. For purposes hereof, "Home Equity
Loans" includes "Closed-End Loans" and "Revolving Credit Line Loans." If so
specified, the Loans may include cooperative apartment loans ("Cooperative
Loans") secured by security interests in shares issued by private, non-profit,
cooperative housing corporations ("Cooperatives") and in the related proprietary
leases or occupancy agreements granting exclusive rights to occupy specific
dwelling units in such Cooperatives' buildings. As more fully described in the
related Prospectus Supplement, the Loans may be "conventional" loans or loans
that are insured or guaranteed by a governmental agency such as the FHA or VA.
Unless otherwise specified in the related Prospectus Supplement, all of the
Loans in a Pool will have monthly payments due on the first, tenth, fifteenth,
twentieth or twenty-fifth day of each month. The payment terms of the Loans to
be included in a Trust Fund will be described in the related Prospectus
Supplement and may include any of the following features (or combination
thereof), all as described below or in the related Prospectus Supplement:
(a) Interest may be payable at a fixed rate, a rate adjustable from
time to time in relation to an index (which will be specified in the
related Prospectus Supplement), a rate that is fixed for a period of time
or under certain circumstances and is followed by an adjustable rate, a
rate that otherwise varies from time to time, a rate that is "stepped-up"
or a rate that is convertible from an adjustable rate to a fixed rate.
Changes to an adjustable rate may be subject to periodic limitations,
maximum rates, minimum rates or a combination of such limitations. Accrued
interest may be deferred and added to the principal of a Loan for such
periods and under such circumstances as may be specified in the related
Prospectus Supplement. Loans may provide for the payment of interest at a
rate lower than the specified interest rate borne by such Loan (the "Loan
Rate") for a period of time or for the life of the Loan, and the amount of
any difference may be contributed from funds supplied by the seller of the
Property or another source.
(b) Principal may be payable on a level debt service basis to fully
amortize the Loan over its term, may be calculated on the basis of an
assumed amortization schedule that is significantly longer than the
original term to maturity or on an interest rate that is different from the
Loan Rate or may not be amortized during all or a portion of the original
term. Payment of all or a substantial portion of the principal may be due
on maturity ("balloon payment"). Principal may include interest that has
been deferred and added to the principal balance of the Loan.
(c) Monthly payments of principal and interest may be fixed for the
life of the Loan, may increase over a specified period of time or may
change from period to period. Loans may include limits on periodic
increases or decreases in the amount of monthly payments and may include
maximum or minimum amounts of monthly payments.
(d) Prepayments of principal may be subject to a prepayment fee, which
may be fixed for the life of the Loan or may decline over time, and may be
prohibited for the life of the Loan or for certain periods ("lockout
periods"). Certain Loans may permit prepayments after expiration of the
applicable lockout period and may require the payment of a prepayment fee
in connection with any such subsequent prepayment. Other Loans may permit
prepayments without payment of a fee unless the prepayment occurs during
specified time periods. The Loans may include "due on sale" clauses which
permit the mortgagee to demand payment of the entire Loan in connection
with the sale or certain transfers of the related Property. Other Loans may
be assumable by persons meeting the then applicable underwriting standards
of the related Seller.
A Trust Fund may contain certain Loans ("Buydown Loans") that include
provisions whereby a third party partially subsidizes the monthly payments of
the borrowers on such Loans during the early years of such Loans, the difference
to be made up from a fund (a "Buydown Fund") contributed by such third party at
the time of origination of the Loan. A Buydown Fund will be in an amount equal
either to the discounted value or full aggregate amount of future payment
subsidies. The underlying assumption of buydown plans is that the income of the
borrower will increase during the buydown period as a result of normal increases
in compensation and inflation, so that the borrower will be able to meet the
full loan payments at the end of the buydown period. To the extent that this
assumption as to increased income is not fulfilled, the possibility of defaults
on Buydown Loans is increased. The related Prospectus Supplement will contain
information with respect to any Buydown Loan concerning limitations on the
interest rate paid by the borrower initially, on annual increases in the
interest rate and on the length of the buydown period.
The real property which secures repayment of the Loans is referred to as
the "Mortgaged Properties." Home Improvement Contracts may, and the other Loans
will, be secured by mortgages or deeds of trust or other similar security
instruments creating a lien on a Mortgaged Property. In the case of Home Equity
Loans and the Home Improvement Contracts liens generally will be subordinated to
one or more senior liens on the related Mortgaged Properties as described in the
related Prospectus Supplement. As specified in the related Prospectus
Supplement, Home Improvement Contracts may be unsecured or secured by purchase
money security interests in the Home Improvements financed thereby. If so
specified in the related Prospectus Supplement, the Home Equity Loans and the
Home Improvement Contracts may include Loans (primarily for home improvement or
debt consolidation purposes) that are in amounts in excess of the value of the
related Mortgaged Properties at the time of origination. The Mortgaged
Properties and the Home Improvements are collectively referred to herein as the
"Properties." The Properties may be located in any one of the fifty states, the
District of Columbia, Guam, Puerto Rico or any other territory of the United
States.
Loans with certain Loan-to-Value Ratios and/or certain principal balances
may be covered wholly or partially by primary mortgage guaranty insurance
policies (each, a "Primary Mortgage Insurance Policy"). The existence, extent
and duration of any such coverage will be described in the applicable Prospectus
Supplement.
The aggregate principal balance of Loans secured by Properties that are
owner-occupied will be disclosed in the related Prospectus Supplement. Unless
otherwise specified in the related Prospectus Supplement, the sole basis for a
representation that a given percentage of the Loans is secured by Single Family
Properties that are owner-occupied will be either (i) the making of a
representation by the borrower at origination of the Loan either that the
underlying Property will be used by the borrower for a period of at least six
months every year or that the borrower intends to use the Property as a primary
residence or (ii) a finding that the address of the underlying Property is the
borrower's mailing address.
Single Family Loans. The Mortgaged Properties relating to Single Family
Loans will consist of detached or semi-detached one- to four-family dwelling
units, townhouses, rowhouses, individual condominium units, individual units in
planned unit developments, manufactured housing that is permanently affixed and
treated as real property under local law, security interests in shares issued by
cooperative housing corporations, and certain other dwelling units ("Single
Family Properties"). Single Family Properties may include vacation and second
homes, investment properties and leasehold interests. In the case of leasehold
interests, the remaining term of the leasehold and any sublease is at least as
long as the remaining term on the Loan, unless otherwise specified in the
related Prospectus Supplement.
Multifamily Loans. Mortgaged Properties which secure Multifamily Loans may
include small multifamily residential properties such as rental apartment
buildings or projects containing five to fifty residential units, including
mid-rise and garden apartments. Certain of the Multifamily Loans may be secured
by apartment buildings owned by Cooperatives. In such cases, the Cooperative
owns all the apartment units in the building and all common areas. The
Cooperative is owned by tenant-stockholders who, through ownership of stock,
shares or membership certificates in the corporation, receive proprietary leases
or occupancy agreements which confer exclusive rights to occupy specific
apartments or units. Generally, a tenant-stockholder of a Cooperative must make
a monthly payment to the Cooperative representing such tenant-stockholder's pro
rata share of the Cooperative's payments for its mortgage loan, real property
taxes, maintenance expenses and other capital or ordinary expenses. Those
payments are in addition to any payments of principal and interest the
tenant-stockholder must make on any loans to the tenant-stockholder secured by
its shares in the Cooperative. The Cooperative will be directly responsible for
building management and, in most cases, payment of real estate taxes and hazard
and liability insurance. A Cooperative's ability to meet debt service
obligations on a Multifamily Loan, as well as all other operating expenses, will
be dependent in large part on the receipt of maintenance payments from the
tenant-stockholders, as well as any rental income from units the Cooperative
might control. Unanticipated expenditures may in some cases have to be paid by
special assessments on the tenant-stockholders.
Home Equity Loans. The Mortgaged Properties relating to Home Equity Loans
will consist of Single Family Properties. As more fully described in the related
Prospectus Supplement, interest on each Revolving Credit Line Loan, excluding
introductory rates offered from time to time during promotional periods, is
computed and payable monthly on the average daily outstanding principal balance
of such Loan. Principal amounts on a Revolving Credit Line Loan may be drawn
down (up to a maximum amount as set forth in the related Prospectus Supplement)
or repaid under each Revolving Credit Line Loan from time to time, but may be
subject to a minimum periodic payment. Except to the extent provided in the
related Prospectus Supplement, the Trust Fund will not include any amounts
borrowed under a Revolving Credit Line Loan after the Cut-off Date. The full
amount of a Closed-End Loan is advanced at the inception of the Loan and
generally is repayable in equal (or substantially equal) installments of an
amount to fully amortize such Loan at its stated maturity. Except to the extent
provided in the related Prospectus Supplement, the original terms to stated
maturity of Closed-End Loans will not exceed 360 months. Under certain
circumstances, under either a Revolving Credit Line Loan or a Closed-End Loan, a
borrower may choose an interest only payment option and is obligated to pay only
the amount of interest which accrues on the Loan during the billing cycle. An
interest only payment option may be available for a specified period before the
borrower must begin paying at least the minimum monthly payment of a specified
percentage of the average outstanding balance of the Loan.
Home Improvement Contracts. The Trust Fund Assets for a Series of
Securities may consist, in whole or in part, of Home Improvement Contracts
originated by a home improvement contractor, a thrift or a commercial mortgage
banker in the ordinary course of business. The Home Improvements securing the
Home Improvement Contracts may include, but are not limited to, replacement
windows, house siding, new roofs, swimming pools, spas, kitchen and bathroom
remodeling goods, solar heating panels and other exterior and interior
renovations and general remodeling projects. As specified in the related
Prospectus Supplement, the Home Improvement Contracts will either be unsecured
or secured by mortgages on Single Family Properties which are generally
subordinate to other mortgages on the same Property, or secured by purchase
money security interests in the Home Improvements financed thereby. Except as
otherwise specified in the related Prospectus Supplement, the Home Improvement
Contracts will be fully amortizing and may have fixed interest rates or
adjustable interest rates and may provide for other payment characteristics as
described below and in the related Prospectus Supplement. The initial
Loan-to-Value Ratio of a Home Improvement Contract is computed in the manner
described in the related Prospectus Supplement.
Additional Information. Each Prospectus Supplement will contain
information, as of the date of such Prospectus Supplement and to the extent then
specifically known to the Depositor, with respect to the Loans contained in the
related Pool, including (i) the aggregate outstanding principal balance and the
average outstanding principal balance of the Loans as of the applicable Cut-off
Date, (ii) the type of property securing the Loan (e.g., single family
residences, individual units in condominium apartment buildings, small
multi-family properties, other real property or Home Improvements), (iii) the
original terms to maturity of the Loans, (iv) the largest principal balance and
the smallest principal balance of any of the Loans, (v) the earliest origination
date and latest maturity date of any of the Loans, (vi) the Loan-to-Value Ratios
or Combined Loan-to-Value Ratios, as applicable, of the Loans, (vii) the Loan
Rates or annual percentage rates ("APR") or range of Loan Rates or APR's borne
by the Loans, (viii) the maximum and minimum per annum Loan Rates and (ix) the
geographical location of the Loans. If specific information respecting the Loans
is not known to the Depositor at the time the related Securities are initially
offered, more general information of the nature described above will be provided
in the related Prospectus Supplement, and specific information will be set forth
in the Detailed Description.
Unless otherwise specified in the related Prospectus Supplement, the
"Loan-to-Value Ratio" of a Loan at any given time is the fraction, expressed as
a percentage, the numerator of which is the original principal balance of the
related Loan and the denominator of which is the Collateral Value of the related
Property. Unless otherwise specified in the related Prospectus Supplement, the
"Combined Loan-to-Value Ratio" of a Loan at any given time is the ratio,
expressed as a percentage, of (i) the sum of (a) the original principal balance
of the Loan (or, in the case of a Revolving Credit Line Loan, the maximum amount
thereof available at origination) and (b) the outstanding principal balance at
the date of origination of the Loan of any senior mortgage loan(s) or, in the
case of any open-ended senior mortgage loan, the maximum available line of
credit with respect to such mortgage loan at origination, regardless of any
lesser amount actually outstanding at the date of origination of the Loan, to
(ii) the Collateral Value of the related Property. Unless otherwise specified in
the related Prospectus Supplement, the "Collateral Value" of the Property, other
than with respect to certain Loans the proceeds of which were used to refinance
an existing mortgage loan (each, a "Refinance Loan"), is the lesser of (a) the
appraised value determined in an appraisal obtained by the originator at
origination of such Loan and (b) the sales price for such Property. In the case
of Refinance Loans, the "Collateral Value" of the related Property is generally
the appraised value thereof determined in an appraisal obtained at the time of
refinancing.
No assurance can be given that values of the Properties have remained or
will remain at their levels on the dates of origination of the related Loans. If
the residential real estate market should experience an overall decline in
property values such that the sum of the outstanding principal balances of the
Loans and any primary or secondary financing on the Properties, as applicable,
in a particular Pool become equal to or greater than the value of the
Properties, the actual rates of delinquencies, foreclosures and losses could be
higher than those now generally experienced in the mortgage lending industry. In
addition, adverse economic conditions and other factors (which may or may not
affect real property values) may affect the timely payment by borrowers of
scheduled payments of principal and interest on the Loans and, accordingly, the
actual rates of delinquencies, foreclosures and losses with respect to any Pool.
To the extent that such losses are not covered by subordination provisions or
alternative arrangements, such losses will be borne, at least in part, by the
holders of the Securities of the related Series.
Substitution of Trust Fund Assets
Substitution of Trust Fund Assets will be permitted in the event of
breaches of representations and warranties with respect to any original Trust
Fund Asset or in the event certain documentation with respect to any Trust Fund
Asset is determined by the Trustee to be incomplete. See "Loan Program
- --Representations by Sellers; Repurchases." The period during which such
substitution will be permitted generally will be indicated in the related
Prospectus Supplement.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Securities will be
applied by the Depositor to the purchase of Trust Fund Assets or will be used by
the Depositor for general corporate purposes. The Depositor expects to sell
Securities in Series from time to time, but the timing and amount of offerings
of Securities will depend on a number of factors, including the volume of Trust
Fund Assets acquired by the Depositor, prevailing interest rates, availability
of funds and general market conditions.
THE DEPOSITOR
IndyMac ABS, Inc., a Delaware corporation (the "Depositor"), was
incorporated in April 1998 for the limited purpose of acquiring, owning and
transferring mortgage and mortgage related assets and selling interests therein
or bonds secured thereby. The Depositor is a limited purpose finance subsidiary
of IndyMac, Inc., a Delaware corporation. The Depositor maintains its principal
office at [155 North Lake Avenue, Pasadena, California 91101]. Its telephone
number is (800) 669-2300.
Neither the Depositor nor any of the Depositor's affiliates will insure or
guarantee distributions on the Securities of any Series.
LOAN PROGRAM
The Loans will have been purchased by the Depositor, either directly or
through affiliates, from Sellers. Unless otherwise specified in the related
Prospectus Supplement, the Loans so acquired by the Depositor will have been
originated in accordance with the underwriting criteria specified below under
"Underwriting Standards."
Underwriting Standards
Underwriting standards are applied by or on behalf of a lender to evaluate
the borrower's credit standing and repayment ability, and the value and adequacy
of the related Property as collateral. In general, a prospective borrower
applying for a Loan is required to fill out a detailed application designed to
provide to the underwriting officer pertinent credit information, including the
principal balance and payment history with respect to any senior mortgage, if
any, which, unless otherwise specified in the related Prospectus Supplement,
will be verified by the related Seller. As part of the description of the
borrower's financial condition, the borrower generally is required to provide a
current list of assets and liabilities and a statement of income and expenses,
as well as an authorization to apply for a credit report which summarizes the
borrower's credit history with local merchants and lenders and any record of
bankruptcy. In most cases, an employment verification is obtained from an
independent source (typically the borrower's employer) which verification
reports, among other things, the length of employment with that organization and
the borrower's current salary. If a prospective borrower is self-employed, the
borrower may be required to submit copies of signed tax returns. The borrower
may also be required to authorize verification of deposits at financial
institutions where the borrower has demand or savings accounts.
Unless otherwise specified in the related Prospectus Supplement, in
determining the adequacy of the property to be used as collateral, an appraisal
will generally be made of each property considered for financing. The appraiser
is generally required to inspect the property, issue a report on its condition
and, if applicable, verify construction, if new, has been completed. The
appraisal is generally based on the market value of comparable homes, the
estimated rental income (if considered applicable by the appraiser) and the cost
of replacing the home. The value of the property being financed, as indicated by
the appraisal, must be such that it currently supports, and is anticipated to
support in the future, the outstanding loan balance.
The maximum loan amount will vary depending upon a borrower's credit grade
and loan program but will not generally exceed $1,000,000. Variations in maximum
loan amount limits will be permitted based on compensating factors. Compensating
factors may generally include, to the extent specified in the related Prospectus
Supplement, low loan-to-value ratio, low debt-to-income ratio, stable
employment, favorable credit history and the nature of the underlying first
mortgage loan, if applicable.
Each Seller's underwriting standards will generally permit loans with
loan-to-value ratios at origination of up to 100% depending on the loan program,
type and use of the property, creditworthiness of the borrower and
debt-to-income ratio. If so specified in the related Prospectus Supplement, a
Seller's underwriting criteria may permit loans with loan-to-value ratios at
origination in excess of 100%, such as for debt consolidation or home
improvement purposes. Loan-to-value ratios may not be evaluated in the case of
Title I Loans.
After obtaining all applicable employment, credit and property information,
the related Seller may use a debt-to-income ratio to assist in determining
whether the prospective borrower has sufficient monthly income available to
support the payments of principal and interest on the mortgage loan in addition
to other monthly credit obligations. The "debt-to-income ratio" is the ratio of
the borrower's total monthly payments to the borrower's gross monthly income.
The maximum monthly debt-to-income ratio will vary depending upon a borrower's
credit grade and loan program. Variations in the monthly debt-to-income ratio
limit will be permitted based on compensating factors to the extent specified in
the related Prospectus Supplement.
In the case of a Loan secured by a leasehold interest in real property, the
title to which is held by a third party lessor, the related Seller will, unless
otherwise specified in the related Prospectus Supplement, represent and warrant,
among other things, that the remaining term of the lease and any sublease is at
least as long as the remaining term on the Loan.
Certain of the types of Loans that may be included in a Trust Fund are
recently developed and may involve additional uncertainties not present in
traditional types of loans. For example, certain of such Loans may provide for
escalating or variable payments by the borrower. These types of Loans are
underwritten on the basis of a judgment that the borrowers have the ability to
make the monthly payments required initially. In some instances, a borrower's
income may not be sufficient to permit continued loan payments as such payments
increase. These types of Loans may also be underwritten primarily upon the basis
of Loan-to-Value Ratios or other favorable credit factors.
Qualifications of Sellers
Each Seller will be required to satisfy the following qualifications. Each
Seller must be an institution experienced in originating and servicing loans of
the type contained in the related Pool in accordance with accepted practices and
prudent guidelines, and must maintain satisfactory facilities to originate and
service those loans. Unless otherwise specified in the related Prospectus
Supplement, each Seller must be (i) a seller/servicer approved by either the
Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC") and (ii) a mortgagee approved by HUD or an institution the
deposit accounts of which are insured by the Federal Deposit Insurance
Corporation (the "FDIC").
Representations by Sellers; Repurchases
Each Seller will have made representations and warranties in respect of the
Loans sold by such Seller and evidenced by all, or a part, of a Series of
Securities. Such representations and warranties may include, among other things:
(i) that title insurance (or in the case of Properties located in areas where
such policies are generally not available, an attorney's certificate of title)
and any required hazard insurance policy were effective at origination of each
Loan, other than Cooperative Loans and certain Home Equity Loans, and that each
policy (or certificate of title as applicable) remained in effect on the date of
purchase of the Loan from the Seller by or on behalf of the Depositor; (ii) that
the Seller had good title to each such Loan and such Loan was subject to no
offsets, defenses, counterclaims or rights of rescission except to the extent
that any buydown agreement may forgive certain indebtedness of a borrower; (iii)
that each Loan, other than Cooperative Loans, constituted a valid lien on, or a
perfected security interest with respect to, the Property (subject only to
permissible liens disclosed, if applicable, title insurance exceptions, if
applicable, the liens of nondelinquent current real property taxes and
assessments, if applicable, liens arising under federal, state or local laws
relating to hazardous wastes or hazardous substances, if applicable, any liens
for common charges, if applicable, and certain other exceptions described in the
Agreement); (iv) that there were no delinquent tax or assessment liens against
the Property; (v) that no required payment on a Loan was delinquent more than
the number of days specified in the related Prospectus Supplement; and (vi) that
each Loan was made in compliance with, and is enforceable under, all applicable
local, state and federal laws and regulations in all material respects.
If so specified in the related Prospectus Supplement, the representations
and warranties of a Seller in respect of a Loan will be made not as of the
Cut-off Date but as of the date on which such Seller sold the Loan to the
Depositor or one of its affiliates. Under such circumstances, a substantial
period of time may have elapsed between the sale date and the date of initial
issuance of the Series of Securities evidencing an interest in such Loan. Since
the representations and warranties of a Seller do not address events that may
occur following the sale of a Loan by such Seller, its repurchase obligation
described below will not arise if the relevant event that would otherwise have
given rise to such an obligation with respect to a Loan occurs after the date of
sale of such Loan by such Seller to the Depositor or its affiliates. However,
the Depositor will not include any Loan in the Trust Fund for any Series of
Securities if anything has come to the Depositor's attention that would cause it
to believe that the representations and warranties of a Seller will not be
accurate and complete in all material respects in respect of such Loan as of the
date of initial issuance of the related Series of Securities. If the Master
Servicer is also a Seller of Loans with respect to a particular Series of
Securities, such representations will be in addition to the representations and
warranties made by the Master Servicer in its capacity as a Master Servicer.
The Master Servicer or the Trustee, if the Master Servicer is the Seller,
will promptly notify the relevant Seller of any breach of any representation or
warranty made by it in respect of a Loan which materially and adversely affects
the interests of the Securityholders in such Loan. Unless otherwise specified in
the related Prospectus Supplement, if such Seller cannot cure any such breach on
or prior to the business day after the first Determination Date which is more
than 90 days after such Seller's receipt of notice from the Master Servicer or
the Trustee, as the case may be, then such Seller will be obligated either (i)
to repurchase such Loan from the Trust Fund at a price (the "Purchase Price")
equal to 100% of the unpaid principal balance thereof as of the date of the
repurchase plus accrued interest thereon to the scheduled monthly payment date
for such Loan in the month following the month of repurchase at the Loan Rate
(less any Advances or amount payable as related servicing compensation if the
Seller is the Master Servicer) or (ii) substitute for such Loan a replacement
loan that satisfies the criteria specified in the related Prospectus Supplement;
provided, however, that such Seller will not be obligated to make any such
repurchase or substitution (or cure such breach) if such breach constitutes
fraud in the origination of the affected Loan and such Seller did not have
knowledge of such fraud. If a REMIC election is to be made with respect to a
Trust Fund, unless otherwise specified in the related Prospectus Supplement, the
Master Servicer or a holder of the related residual certificate generally will
be obligated to pay any prohibited transaction tax which may arise in connection
with any such repurchase or substitution and the Trustee must have received a
satisfactory opinion of counsel that such repurchase or substitution will not
cause the Trust Fund to lose its status as a REMIC or otherwise subject the
Trust Fund to a prohibited transaction tax. The Master Servicer may be entitled
to reimbursement for any such payment from the assets of the related Trust Fund
or from any holder of the related residual certificate. See "Description of the
Securities -- General." Except in those cases in which the Master Servicer
is the Seller, the Master Servicer will be required under the relevant
Agreement to enforce this obligation for the benefit of the Trustee and the
holders of the Securities, following the practices it would employ in its good
faith business judgment were it the owner of such Loan. This repurchase or
substitution obligation will constitute the sole remedy available to holders
of Securities or the Trustee for a breach of representation by a Seller.
Neither the Depositor nor the Master Servicer (unless the Master Servicer
is a Seller) will be obligated to purchase or substitute a Loan if a Seller
defaults on its obligation to do so, and no assurance can be given that Sellers
will carry out their respective repurchase or substitution obligations with
respect to Loans.
DESCRIPTION OF THE SECURITIES
Each Series of Certificates will be issued pursuant to separate agreements
(each, a "Pooling and Servicing Agreement" or a "Trust Agreement") among the
Depositor, the Master Servicer and the Trustee. A form of Pooling and Servicing
Agreement and Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Each Series of Notes will be
issued pursuant to an indenture (the "Indenture") between the related Trust Fund
and the entity named in the related Prospectus Supplement as trustee (the
"Trustee") with respect to such Series, and the related Loans will be serviced
by the Master Servicer pursuant to a Master Servicing Agreement. A form of
Indenture and Master Servicing Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. A Series of
Securities may consist of both Notes and Certificates. Each Agreement, dated as
of the related Cut-off Date, will be among the Depositor, the Master Servicer
and the Trustee for the benefit of the holders of the Securities of such Series.
The provisions of each Agreement will vary depending upon the nature of the
Securities to be issued thereunder and the nature of the related Trust Fund. The
following are descriptions of the material provisions which may appear in each
Agreement. The descriptions are subject to, and are qualified in their entirety
by reference to, all of the provisions of the Agreement for each Series of
Securities and the applicable Prospectus Supplement. The Depositor will provide
a copy of the Agreement (without exhibits) relating to any Series without charge
upon written request of a holder of record of a Security of such Series
addressed to IndyMac ABS, Inc., 155 North Lake Avenue, Pasadena, California
91101, Attention: Secondary Marketing.
General
Unless otherwise specified in the related Prospectus Supplement, the
Securities of each Series will be issued in book-entry or fully registered form,
in the authorized denominations specified in the related Prospectus Supplement,
will, in the case of Certificates, evidence specified beneficial ownership
interests in, and in the case of Notes, be secured by, the assets of the related
Trust Fund created pursuant to each Agreement and will not be entitled to
payments in respect of the assets included in any other Trust Fund established
by the Depositor. Unless otherwise specified in the related Prospectus
Supplement, the Securities will not represent obligations of the Depositor or
any affiliate of the Depositor. Certain of the Loans may be guaranteed or
insured as set forth in the related Prospectus Supplement. Each Trust Fund will
consist of, to the extent provided in the related Agreement, (i) the Trust Fund
Assets, as from time to time are subject to the related Agreement (exclusive of
any amounts specified in the related Prospectus Supplement ("Retained
Interest")), including all payments of interest and principal received with
respect to the Loans after the Cut-off Date (to the extent not applied in
computing the principal balance of such Loans as of the Cut-off Date (the
"Cut-off Date Principal Balance")); (ii) such assets as from time to time are
required to be deposited in the related Security Account, as described below
under "The Agreements -- Payments on Loans; Deposits to Security Account"; (iii)
property which secured a Loan and which is acquired on behalf of the
Securityholders by foreclosure or deed in lieu of foreclosure and (iv) any
insurance policies or other forms of credit enhancement required to be
maintained pursuant to the related Agreement. If so specified in the related
Prospectus Supplement, a Trust Fund may also include one or more of the
following: reinvestment income on payments received on the Trust Fund Assets, a
Reserve Account, a mortgage pool insurance policy, a special hazard insurance
policy, a bankruptcy bond, one or more letters of credit, a surety bond,
guaranties or similar instruments.
Each Series of Securities will be issued in one or more classes. Each class
of Certificates of a Series will evidence beneficial ownership of a specified
percentage (which may be 0%) or portion of future interest payments and a
specified percentage (which may be 0%) or portion of future principal payments
on, and each class of Notes of a Series will be secured by, the related Trust
Fund Assets. A Series of Securities may include one or more classes that are
senior in right to payment to one or more other classes of Securities of such
Series. Certain Series or classes of Securities may be covered by insurance
policies, surety bonds or other forms of credit enhancement, in each case as
described under "Credit Enhancement" herein and in the related Prospectus
Supplement. One or more classes of Securities of a Series may be entitled to
receive distributions of principal, interest or any combination thereof.
Distributions on one or more classes of a Series of Securities may be made prior
to one or more other classes, after the occurrence of specified events, in
accordance with a schedule or formula or on the basis of collections from
designated portions of the related Trust Fund Assets, in each case as specified
in the related Prospectus Supplement. The timing and amounts of such
distributions may vary among classes or over time as specified in the related
Prospectus Supplement.
Distributions of principal and interest (or, where applicable, of principal
only or interest only) on the related Securities will be made by the Trustee on
each Distribution Date (i.e., monthly, quarterly, semi-annually or at such other
intervals and on the dates as are specified in the related Prospectus
Supplement) in proportion to the percentages specified in the related Prospectus
Supplement. Distributions will be made to the persons in whose names the
Securities are registered at the close of business on the dates specified in the
related Prospectus Supplement (each, a "Record Date"). Distributions will be
made in the manner specified in the related Prospectus Supplement to the persons
entitled thereto at the address appearing in the register maintained for holders
of Securities (the "Security Register"); provided, however, that the final
distribution in retirement of the Securities will be made only upon presentation
and surrender of the Securities at the office or agency of the Trustee or other
person specified in the notice to Securityholders of such final distribution.
The Securities will be freely transferable and exchangeable at the
Corporate Trust Office of the Trustee as set forth in the related Prospectus
Supplement. No service charge will be made for any registration of exchange or
transfer of Securities of any Series, but the Trustee may require payment of a
sum sufficient to cover any related tax or other governmental charge.
Under current law, the purchase and holding of certain classes of
Securities by or on behalf of any employee benefit plan or other retirement
arrangement (including individual retirement accounts and annuities, Keogh plans
and collective investment funds in which such plans, accounts or arrangements
are invested) subject to provisions of ERISA or the Code may result in
prohibited transactions, within the meaning of ERISA and the Code, or may
subject the Trustee, the Master Servicer or the Depositor to obligations or
liabilities in addition to those undertaken in the related Agreement. See "ERISA
Considerations." Unless otherwise specified in the related Prospectus
Supplement, the transfer of Securities of such a class will not be registered
unless the transferee (i) represents that it is not, and is not purchasing on
behalf of, any such plan, account or arrangement or (ii) provides an opinion of
counsel satisfactory to the Trustee and the Depositor that the purchase of
Securities of such a class by or on behalf of such plan, account or arrangement
is permissible under applicable law and will not subject the Trustee, the Master
Servicer or the Depositor to any obligation or liability in addition to those
undertaken in the Agreements.
As to each Series, an election may be made to treat the related Trust Fund
or designated portions thereof either as a REMIC or as a FASIT. The related
Prospectus Supplement will specify whether a REMIC or FASIT election is to be
made. Alternatively, the Agreement for a Series may provide that a REMIC or
FASIT election may be made at the discretion of the Depositor or the Master
Servicer and may only be made if certain conditions are satisfied. As to any
such Series, the terms and provisions applicable to the making of a REMIC or
FASIT election will be set forth in the related Prospectus Supplement. If a
REMIC election is made with respect to a Series, one of the classes will be
designated as evidencing the sole class of "residual interests" in the related
REMIC, as defined in the Code. All other classes of Securities in such a Series
will constitute "regular interests" in the related REMIC, as defined in the
Code. If a FASIT election is made with respect to a Series, one of the classes
will be designated as the ownership interest, as defined in the Code. All other
classes of Securities in such a Series will constitute "regular interests" in
the related FASIT, as defined in the Code. As to each Series with respect to
which a REMIC or FASIT election is to be made, the Master Servicer or a holder
of the related residual in the case of a REMIC, and the holder of the related
ownership interest in the case of a FASIT, certificate will be obligated to take
all actions required in order to comply with applicable laws and regulations and
will be obligated to pay any prohibited transaction taxes. The Master Servicer,
unless otherwise provided in the related Prospectus Supplement, will be entitled
to reimbursement for any such payment from the assets of the Trust Fund or from
any holder of the related residual certificate in the case of a REMIC, or, from
the holder of the related ownership interest in the case of a FASIT.
Distributions on Securities
General. In general, the method of determining the amount of distributions
on a particular Series of Securities will depend on the type of credit support,
if any, that is used with respect to such Series. See "Credit Enhancement." Set
forth below are descriptions of various methods that may be used to determine
the amount of distributions on the Securities of a particular Series. The
Prospectus Supplement for each Series of Securities will describe the method to
be used in determining the amount of distributions on the Securities of such
Series.
Distributions allocable to principal and interest on the Securities will be
made by the Trustee out of, and only to the extent of, funds in the related
Security Account, including any funds transferred from any Reserve Account (a
"Reserve Account"). As between Securities of different classes and as between
distributions of principal (and, if applicable, between distributions of
Principal Prepayments, as defined below, and scheduled payments of principal)
and interest, distributions made on any Distribution Date will be applied as
specified in the related Prospectus Supplement. The Prospectus Supplement will
also describe the method for allocating distributions among Securities of a
particular class.
Available Funds. All distributions on the Securities of each Series on each
Distribution Date will be made from the Available Funds described below, in
accordance with the terms described in the related Prospectus Supplement and
specified in the Agreement. "Available Funds" for each Distribution Date will
generally equal the amount on deposit in the related Security Account on such
Distribution Date (net of related fees and expenses payable by the related Trust
Fund) other than amounts to be held therein for distribution on future
Distribution Dates.
Distributions of Interest. Interest will accrue on the aggregate principal
balance of the Securities (or, in the case of Securities entitled only to
distributions allocable to interest, the aggregate notional amount) of each
class of Securities (the "Class Security Balance") entitled to interest from the
date, at the pass-through rate or interest rate, as applicable (which in either
case may be a fixed rate or rate adjustable as specified in such Prospectus
Supplement), and for the periods specified in such Prospectus Supplement. To the
extent funds are available therefor, interest accrued during each such specified
period on each class of Securities entitled to interest (other than a class of
Securities that provides for interest that accrues, but is not currently
payable, referred to hereafter as "Accrual Securities") will be distributable on
the Distribution Dates specified in the related Prospectus Supplement until the
aggregate Class Security Balance of the Securities of such class has been
distributed in full or, in the case of Securities entitled only to distributions
allocable to interest, until the aggregate notional amount of such Securities is
reduced to zero or for the period of time designated in the related Prospectus
Supplement. The original Class Security Balance of each Security will equal the
aggregate distributions allocable to principal to which such Security is
entitled. Distributions allocable to interest on each Security that is not
entitled to distributions allocable to principal will be calculated based on the
notional amount of such Security. The notional amount of a Security will not
evidence an interest in or entitlement to distributions allocable to principal
but will be used solely for convenience in expressing the calculation of
interest and for certain other purposes.
Interest payable on the Securities of a Series on a Distribution Date will
include all interest accrued during the period specified in the related
Prospectus Supplement. In the event interest accrues over a period ending two or
more days prior to a Distribution Date, the effective yield to Securityholders
will be reduced from the yield that would otherwise be obtainable if interest
payable on the Security were to accrue through the day immediately preceding
such Distribution Date, and the effective yield (at par) to Securityholders will
be less than the indicated coupon rate.
With respect to any class of Accrual Securities, if specified in the
related Prospectus Supplement, any interest that has accrued but is not paid on
a given Distribution Date will be added to the aggregate Class Security Balance
of such class of Securities on that Distribution Date. Distributions of interest
on any class of Accrual Securities will commence only after the occurrence of
the events specified in such Prospectus Supplement. Prior to such time, the
beneficial ownership interest in the Trust Fund or the principal balance, as
applicable, of such class of Accrued Securities, as reflected in the aggregate
Class Security Balance of such class of Accrual Securities, will increase on
each Distribution Date by the amount of interest that accrued on such class of
Accrual Securities during the preceding interest accrual period but that was not
required to be distributed to such class on such Distribution Date. Any such
class of Accrual Securities will thereafter accrue interest on its outstanding
Class Security Balance as so adjusted.
Distributions of Principal. The related Prospectus Supplement will specify
the method by which the amount of principal to be distributed on the Securities
on each Distribution Date will be calculated and the manner in which such amount
will be allocated among the classes of Securities entitled to distributions of
principal. The aggregate Class Security Balance of any class of Securities
entitled to distributions of principal generally will be the aggregate original
Class Security Balance of such class of Securities specified in such Prospectus
Supplement, reduced by all distributions reported to the holders of such
Securities as allocable to principal and, (i) in the case of Accrual Securities,
unless otherwise specified in the related Prospectus Supplement, increased by
all interest accrued but not then distributable on such Accrual Securities and
(ii) in the case of adjustable rate Securities, subject to the effect of
negative amortization, if applicable.
If so provided in the related Prospectus Supplement, one or more classes of
Securities will be entitled to receive all or a disproportionate percentage of
the payments of principal which are received from borrowers in advance of their
scheduled due dates and are not accompanied by amounts representing scheduled
interest due after the month of such payments ("Principal Prepayments") in the
percentages and under the circumstances or for the periods specified in such
Prospectus Supplement. Any such allocation of Principal Prepayments to such
class or classes of Securities will have the effect of accelerating the
amortization of such Securities while increasing the interests evidenced by one
or more other classes of Securities in the Trust Fund. Increasing the interests
of the other classes of Securities relative to that of certain Securities is
intended to preserve the availability of the subordination provided by such
other Securities. See "Credit Enhancement -- Subordination."
Unscheduled Distributions. If specified in the related Prospectus
Supplement, the Securities will be subject to receipt of distributions before
the next scheduled Distribution Date under the circumstances and in the manner
described below and in such Prospectus Supplement. If applicable, the Trustee
will be required to make such unscheduled distributions on the day and in the
amount specified in the related Prospectus Supplement if, due to substantial
payments of principal (including Principal Prepayments) on the Trust Fund
Assets, the Trustee or the Master Servicer determines that the funds available
or anticipated to be available from the Security Account and, if applicable, any
Reserve Account, may be insufficient to make required distributions on the
Securities on such Distribution Date. Unless otherwise specified in the related
Prospectus Supplement, the amount of any such unscheduled distribution that is
allocable to principal will not exceed the amount that would otherwise have been
required to be distributed as principal on the Securities on the next
Distribution Date. Unless otherwise specified in the related Prospectus
Supplement, the unscheduled distributions will include interest at the
applicable pass-through rate (if any) or interest rate (if any) on the amount of
the unscheduled distribution allocable to principal for the period and to the
date specified in such Prospectus Supplement.
Advances
To the extent provided in the related Prospectus Supplement, the Master
Servicer will be required to advance on or before each Distribution Date (from
its own funds, funds advanced by Sub-Servicers or funds held in the Security
Account for future distributions to the holders of Securities of the related
Series), an amount equal to the aggregate of payments of interest and/or
principal that were delinquent on the related Determination Date (as such term
is defined in the related Prospectus Supplement) and were otherwise not advanced
by any Sub-Servicer, subject to the Master Servicer's determination that such
advances may be recoverable out of late payments by borrowers, Liquidation
Proceeds, Insurance Proceeds or otherwise. In the case of Cooperative Loans, the
Master Servicer also may be required to advance any unpaid maintenance fees and
other charges under the related proprietary leases as specified in the related
Prospectus Supplement.
In making Advances, the Master Servicer will endeavor to maintain a regular
flow of scheduled interest and principal payments to holders of the Securities,
rather than to guarantee or insure against losses. If Advances are made by the
Master Servicer from cash being held for future distribution to Securityholders,
the Master Servicer will replace such funds on or before any future Distribution
Date to the extent that funds in the applicable Security Account on such
Distribution Date would be less than the amount required to be available for
distributions to Securityholders on such date. Any Master Servicer funds
advanced will be reimbursable to the Master Servicer out of recoveries on the
specific Loans with respect to which such Advances were made (e.g., late
payments made by the related borrower, any related Insurance Proceeds,
Liquidation Proceeds or proceeds of any Loan purchased by the Depositor, a
Sub-Servicer or a Seller pursuant to the related Agreement). Advances by the
Master Servicer (and any advances by a Sub-Servicer) also will be reimbursable
to the Master Servicer (or Sub-Servicer) from cash otherwise distributable to
Securityholders (including the holders of Senior Securities) to the extent that
the Master Servicer determines that any such Advances previously made are not
ultimately recoverable as described above. To the extent provided in the related
Prospectus Supplement, the Master Servicer also will be obligated to make
Advances, to the extent recoverable out of Insurance Proceeds, Liquidation
Proceeds or otherwise, in respect of certain taxes and insurance premiums not
paid by borrowers on a timely basis. Funds so advanced are reimbursable to the
Master Servicer to the extent permitted by the related Agreement. The
obligations of the Master Servicer to make advances may be supported by a cash
advance reserve fund, a surety bond or other arrangement of the type described
herein under "Credit Enhancement," in each case as described in the related
Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, in the
event the Master Servicer or a Sub-Servicer fails to make a required Advance,
the Trustee will be obligated to make such Advance in its capacity as successor
servicer. If the Trustee makes such an Advance, it will be entitled to be
reimbursed for such Advance to the same extent and degree as the Master Servicer
or a Sub-Servicer is entitled to be reimbursed for Advances. See "Description of
the Securities -- Distributions on Securities."
Reports to Securityholders
Unless otherwise specified in the related Prospectus Supplement, prior to
or concurrently with each distribution on a Distribution Date the Master
Servicer or the Trustee will furnish to each Securityholder of record of the
related Series a statement setting forth, to the extent applicable to such
Series of Securities, among other things:
(i) the amount of such distribution allocable to principal, separately
identifying the aggregate amount of any Principal Prepayments and if
so specified in the related Prospectus Supplement, any applicable
prepayment penalties included therein;
(ii) the amount of such distribution allocable to interest;
(iii) the amount of any Advance;
(iv) the aggregate amount (a) otherwise allocable to the Subordinated
Securityholders on such Distribution Date and (b) withdrawn from the
Reserve Account, if any, that is included in the amounts distributed
to the Senior Securityholders;
(v) the outstanding principal balance or notional amount of each class of
the related Series after giving effect to the distribution of
principal on such Distribution Date;
(vi)the percentage of principal payments on the Loans (excluding
prepayments), if any, which each such class will be entitled to
receive on the following Distribution Date;
(vii)the percentage of Principal Prepayments on the Loans, if any, which
each such class will be entitled to receive on the following
Distribution Date;
(viii) the related amount of the servicing compensation retained or
withdrawn from the Security Account by the Master Servicer, and the
amount of additional servicing compensation received by the Master
Servicer attributable to penalties, fees, excess Liquidation Proceeds
and other similar charges and items;
(ix) the number and aggregate principal balances of Loans (A) delinquent
(exclusive of Loans in foreclosure) (1) 1 to 30 days, (2) 31 to 60
days, (3) 61 to 90 days and (4) 91 or more days and (B) in foreclosure
and delinquent (1) 1 to 30 days, (2) 31 to 60 days, (3) 61 to 90 days
and (4) 91 or more days, as of the close of business on the last day
of the calendar month preceding such Distribution Date;
(x) the book value of any real estate acquired through foreclosure or
grant of a deed in lieu of foreclosure;
(xi) the pass-through rate or interest rate, as applicable, if adjusted
from the date of the last statement, of any such class expected to be
applicable to the next distribution to such class;
(xii) if
applicable, the amount remaining in any Reserve Account at the close
of business on the Distribution Date;
(xiii) the pass-through rate or interest rate, as applicable, as of the day
prior to the immediately preceding Distribution Date; and
(xiv)any amounts remaining under letters of credit, pool policies or other
forms of credit enhancement.
Where applicable, any amount set forth above may be expressed as a dollar
amount per single Security of the relevant class having the Percentage Interest
specified in the related Prospectus Supplement. The report to Securityholders
for any Series of Securities may include additional or other information of a
similar nature to that specified above.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer or the Trustee will mail to each
Securityholder of record at any time during such calendar year a report (a) as
to the aggregate of amounts reported pursuant to (i) and (ii) above for such
calendar year or, in the event such person was a Securityholder of record during
a portion of such calendar year, for the applicable portion of such year and (b)
such other customary information as may be deemed necessary or desirable for
Securityholders to prepare their tax returns.
Categories of Classes of Securities
The Securities of any Series may be comprised of one or more classes. Such
classes, in general, fall into different categories. The following chart
identifies and generally defines certain of the more typical categories. The
Prospectus Supplement for a series of Securities may identify the classes which
comprise such Series by reference to the following categories.
Categories of Classes Definition
PRINCIPAL TYPES
Accretion Directed.............. A class that receives principal payments from
the accreted interest from specified Accrual
Securities. An Accretion Directed class
also may receive principal payments from
principal paid on the underlying Trust Fund
Assets for the related Series.
Component Securities.............A class consisting of "Components." The
Components of a class of Component Securities
may have different principal and/or interest
payment characteristics but together constitute
a single class. Each Component of a class of
Component Securities may be identified as
falling into one or more of the categories in
this chart.
Notional Amount Securities.......A class having no principal balance and bearing
interest on the related notional amount. The
notional amount is used for purposes of the
determination of interest distributions.
Planned Principal Class
(also sometimes referred
to as "PACs")................. A class that is designed to receive principal
payments using a predetermined principal balance
schedule derived by assuming two constant
prepayment rates for the underlying Trust Fund
Assets. These two rates are the endpoints for
the "structuring range" for the Planned
Principal Class. The Planned Principal Classes
in any Series of Securities may be subdivided
into different categories (e.g., Primary Planned
Principal Classes, Secondary Planned Principal
Classes and so forth) having different effective
structuring ranges and different principal
payment priorities. The structuring range for
the Secondary Planned Principal Categories of
Classes of a Series of Securities will be
narrower than that for the Primary Planned
Principal Class of such Series.
Scheduled Principal Class.......A class that is designed to receive principal
payments using a predetermined principal balance
schedule but is not designated as a Planned
Principal Class or Targeted Principal Class. In
many cases, the schedule is derived by assuming
two constant prepayment rates for the underlying
Trust Fund Assets. These two rates are the
endpoints for the "structuring range" for the
Scheduled Principal Class.
Sequential Pay..................Classes that receive principal payments in a
prescribed sequence, that do not have
predetermined principal balance schedules and
that under all circumstances receive payments of
principal continuously from the first
Distribution Date on which they receive
principal until they are retired. A single class
that receives principal payments before or after
all other classes in the same Series of
Securities may be identified as a Sequential Pay
class.
Strip...........................A class that receives a constant proportion, or
"strip," of the principal payments on the
underlying Trust Fund Assets.
Support Class (also sometimes
referred to as "companion
classes").......................A class that receives principal payments on any
Distribution Date only if scheduled payments
have been made on specified Planned Principal
Classes, Targeted Principal Classes and/or
Scheduled Principal Classes.
Targeted Principal Class
(also sometimes referred
to as "TACs")...................A class that is designed to receive principal
payments using a predetermined principal balance
schedule derived by assuming a single constant
prepayment rate for the underlying Trust Fund
Assets.
INTEREST TYPES
Fixed Rate......................A class with an interest rate that is fixed
throughout the life of the class.
Floating Rate...................A class with an interest rate that resets
periodically based upon a designated index and
that varies directly with changes in such index.
Inverse Floating Rate...........A class with an interest rate that resets
periodically based upon a designated index and
that varies inversely with changes in such
index.
Variable Rate...................A class with an interest rate that resets
periodically and is calculated by reference to
the rate or rates of interest applicable to
specified assets or instruments (e.g., the Loan
Rates borne by the underlying Loans).
Interest Only...................A class that receives some or all of the
interest payments made on the underlying Trust
Fund Assets and little or no principal. Interest
Only classes have either a nominal principal
balance or a notional amount. A nominal
principal balance represents actual principal
that will be paid on the class. It is referred
to as nominal since it is extremely small
compared to other classes. A notional amount is
the amount used as a reference to calculate the
amount of interest due on an Interest Only class
that is not entitled to any distributions in
respect of principal.
Principal Only..................A class that does not bear interest and is
entitled to receive only distributions in
respect of principal.
Partial Accrual.................A class that accretes a portion of the amount of
accrued interest thereon, which amount will be
added to the principal balance of such class on
each applicable Distribution Date, with the
remainder of such accrued interest to be
distributed currently as interest on such class.
Such accretion may continue until a specified
event has occurred or until such Partial Accrual
class is retired.
Accrual.........................A class that accretes the amount of accrued
interest otherwise distributable on such class,
which amount will be added as principal to the
principal balance of such class on each
applicable Distribution Date. Such accretion may
continue until some specified event has occurred
or until such Accrual class is retired.
Indices Applicable to Floating Rate and Inverse Floating Rate Classes
LIBOR
Unless otherwise specified in the related Prospectus Supplement, on the
LIBOR Determination Date (as such term is defined in the related Prospectus
Supplement) for each class of Securities of a Series as to which the applicable
interest rate is determined by reference to an index denominated as LIBOR, the
Person designated in the related Agreement (the "Calculation Agent") will
determine LIBOR in accordance with one of the two methods described below (which
method will be specified in the related Prospectus Supplement):
LIBO Method
If using this method to calculate LIBOR, the Calculation Agent will
determine LIBOR by reference to the quotations set forth on the Reuters Screen
LIBO Page (as defined in the International Swap Dealers Association, Inc. Code
of Standard Wording, Assumptions and Provisions for Swaps, 1986 Edition),
offered by the principal London office of each of the designated reference banks
meeting the criteria set forth below (the "Reference Banks") for making
one-month United States dollar deposits in leading banks in the London Interbank
market, as of 11:00 a.m. (London time) on such LIBOR Determination Date. In lieu
of relying on the quotations for those Reference Banks that appear at such time
on the Reuters Screen LIBO Page, the Calculation Agent will request each of the
Reference Banks to provide such offered quotations at such time.
Under this method LIBOR will be established by the Calculation Agent on
each LIBOR Determination Date as follows:
(a) If on any LIBOR Determination Date two or more Reference Banks
provide such offered quotations, LIBOR for the next Interest Accrual Period
shall be the arithmetic mean of such offered quotations (rounded upwards if
necessary to the nearest whole multiple of 1/32%).
(b) If on any LIBOR Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for the next
Interest Accrual Period (as such term is defined in the related Prospectus
Supplement) shall be whichever is the higher of (i) LIBOR as determined on
the previous LIBOR Determination Date or (ii) the Reserve Interest Rate.
The "Reserve Interest Rate" shall be the rate per annum which the
Calculation Agent determines to be either (i) the arithmetic mean (rounded
upwards if necessary to the nearest whole multiple of 1/32%) of the
one-month United States dollar lending rates that New York City banks
selected by the Calculation Agent are quoting, on the relevant LIBOR
Determination Date, to the principal London offices of at least two of the
Reference Banks to which such quotations are, in the opinion of the
Calculation Agent, being so made or (ii) in the event that the Calculation
Agent can determine no such arithmetic mean, the lowest one-month United
States dollar lending rate which New York City banks selected by the
Calculation Agent are quoting on such LIBOR Determination Date to leading
European banks.
(c) If on any LIBOR Determination Date for a class specified in the
related Prospectus Supplement, the Calculation Agent is required but is
unable to determine the Reserve Interest Rate in the manner provided in
paragraph (b) above, LIBOR for the next Interest Accrual Period shall be
LIBOR as determined on the preceding LIBOR Determination Date, or, in the
case of the first LIBOR Determination Date, LIBOR shall be deemed to be the
per annum rate specified as such in the related Prospectus Supplement.
Each Reference Bank (i) shall be a leading bank engaged in transactions in
Eurodollar deposits in the international Eurocurrency market; (ii) shall not
control, be controlled by, or be under common control with the Calculation
Agent; and (iii) shall have an established place of business in London. If any
such Reference Bank should be unwilling or unable to act as such or if
appointment of any such Reference Bank is terminated, another leading bank
meeting the criteria specified above will be appointed.
BBA Method
If using this method of determining LIBOR, the Calculation Agent will
determine LIBOR on the basis of the British Bankers' Association ("BBA")
"Interest Settlement Rate" for one-month deposits in United States dollars as
found on Telerate page 3750 as of 11:00 a.m. London time on each LIBOR
Determination Date. Interest Settlement Rates currently are based on rates
quoted by eight BBA designated banks as being, in the view of such banks, the
offered rate at which deposits are being quoted to prime banks in the London
interbank market. Such Interest Settlement Rates are calculated by eliminating
the two highest rates and the two lowest rates, averaging the four remaining
rates, carrying the result (expressed as a percentage) out to six decimal
places, and rounding to five decimal places.
If on any LIBOR Determination Date, the Calculation Agent is unable to
calculate LIBOR in accordance with the method set forth in the immediately
preceding paragraph, LIBOR for the next Interest Accrual period shall be
calculated in accordance with the LIBOR method described above under "LIBO
Method."
The establishment of LIBOR on each LIBOR Determination Date by the
Calculation Agent and its calculation of the rate of interest for the applicable
classes for the related Interest Accrual Period shall (in the absence of
manifest error) be final and binding.
COFI
The Eleventh District Cost of Funds Index is designed to represent the
monthly weighted average cost of funds for savings institutions in Arizona,
California and Nevada that are member institutions of the Eleventh Federal Home
Loan Bank District (the "Eleventh District"). The Eleventh District Cost of
Funds Index for a particular month reflects the interest costs paid on all types
of funds held by Eleventh District member institutions and is calculated by
dividing the cost of funds by the average of the total amount of those funds
outstanding at the end of that month and of the prior month and annualizing and
adjusting the result to reflect the actual number of days in the particular
month. If necessary, before these calculations are made, the component figures
are adjusted by the Federal Home Loan Bank of San Francisco ("FHLBSF") to
neutralize the effect of events such as member institutions leaving the Eleventh
District or acquiring institutions outside the Eleventh District. The Eleventh
District Cost of Funds Index is weighted to reflect the relative amount of each
type of funds held at the end of the relevant month. The major components of
funds of Eleventh District member institutions are: (i) savings deposits, (ii)
time deposits, (iii) FHLBSF advances, (iv) repurchase agreements and (v) all
other borrowings. Because the component funds represent a variety of maturities
whose costs may react in different ways to changing conditions, the Eleventh
District Cost of Funds Index does not necessarily reflect current market rates.
A number of factors affect the performance of the Eleventh District Cost of
Funds Index which may cause it to move in a manner different from indices tied
to specific interest rates, such as United States Treasury bills or LIBOR.
Because the liabilities upon which the Eleventh District Cost of Funds Index is
based were issued at various times under various market conditions and with
various maturities, the Eleventh District Cost of Funds Index may not
necessarily reflect the prevailing market interest rates on new liabilities of
similar maturities. Moreover, as stated above, the Eleventh District Cost of
Funds Index is designed to represent the average cost of funds for Eleventh
District savings institutions for the month prior to the month in which it is
due to be published. Additionally, the Eleventh District Cost of Funds Index may
not necessarily move in the same direction as market interest rates at all
times, since as longer term deposits or borrowings mature and are renewed at
prevailing market interest rates, the Eleventh District Cost of Funds Index is
influenced by the differential between the prior and the new rates on those
deposits or borrowings. In addition, movements of the Eleventh District Cost of
Funds Index, as compared to other indices tied to specific interest rates, may
be affected by changes instituted by the FHLBSF in the method used to calculate
the Eleventh District Cost of Funds Index.
The FHLBSF publishes the Eleventh District Cost of Funds Index in its
monthly Information Bulletin. Any individual may request regular receipt by mail
of Information Bulletins by writing the Federal Home Loan Bank of San Francisco,
P.O. Box 7948, 600 California Street, San Francisco, California 94120, or by
calling (415) 616-1000. The Eleventh District Cost of Funds Index may also be
obtained by calling the FHLBSF at (415) 616-2600.
The FHLBSF has stated in its Information Bulletin that the Eleventh
District Cost of Funds Index for a month "will be announced on or near the last
working day" of the following month and also has stated that it "cannot
guarantee the announcement" of such index on an exact date. So long as such
index for a month is announced on or before the tenth day of the second
following month, the interest rate for each class of Securities of a Series as
to which the applicable interest rate is determined by reference to an index
denominated as COFI (each, a class of "COFI Securities") for the Interest
Accrual Period commencing in such second following month will be based on the
Eleventh District Cost of Funds Index for the second preceding month. If
publication is delayed beyond such tenth day, such interest rate will be based
on the Eleventh District Cost of Funds Index for the third preceding month.
Unless otherwise specified in the related Prospectus Supplement, if on the
tenth day of the month in which any Interest Accrual Period commences for a
class of COFI Securities the most recently published Eleventh District Cost of
Funds Index relates to a month prior to the third preceding month, the index for
such current Interest Accrual Period and for each succeeding Interest Accrual
Period will, except as described in the next to last sentence of this paragraph,
be based on the National Monthly Median Cost of Funds Ratio to SAIF-Insured
Institutions (the "National Cost of Funds Index") published by the Office of
Thrift Supervision (the "OTS") for the third preceding month (or the fourth
preceding month if the National Cost of Funds Index for the third preceding
month has not been published on such tenth day of an Interest Accrual Period).
Information on the National Cost of Funds Index may be obtained by writing the
OTS at 1700 G Street, N.W., Washington, D.C. 20552 or calling (202) 906-6677,
and the current National Cost of Funds Index may be obtained by calling (202)
906-6988. If on any such tenth day of the month in which an Interest Accrual
Period commences the most recently published National Cost of Funds Index
relates to a month prior to the fourth preceding month, the applicable index for
such Interest Accrual Period and each succeeding Interest Accrual Period will be
based on LIBOR, as determined by the Calculation Agent in accordance with the
Agreement relating to such Series of Securities. A change of index from the
Eleventh District Cost of Funds Index to an alternative index will result in a
change in the index level, and, particularly if LIBOR is the alternative index,
could increase its volatility.
The establishment of COFI by the Calculation Agent and its calculation of
the rates of interest for the applicable classes for the related Interest
Accrual Period shall (in the absence of manifest error) be final and binding.
Treasury Index
Unless otherwise specified in the related Prospectus Supplement, on the
Treasury Index Determination Date (as such term is defined in the related
Prospectus Supplement) for each class of Securities of a Series as to which the
applicable interest rate is determined by reference to an index denominated as a
Treasury Index, the Calculation Agent will ascertain the Treasury Index for
Treasury securities of the maturity and for the period (or, if applicable, date)
specified in the related Prospectus Supplement. Unless otherwise specified in
the related Prospectus Supplement, the Treasury Index for any period means the
average of the yield for each business day during the period specified therein
(and for any date means the yield for such date), expressed as a per annum
percentage rate, on (i) U.S Treasury securities adjusted to the "constant
maturity" (as further described below) specified in such Prospectus Supplement
or (ii) if no "constant maturity" is so specified, U.S. Treasury securities
trading on the secondary market having the maturity specified in such Prospectus
Supplement, in each case as published by the Federal Reserve Board in its
Statistical Release No. H.15(519). Statistical Release No. H.15(519) is
published on Monday or Tuesday of each week and may be obtained by writing or
calling the Publications Department at the Board of Governors of the Federal
Reserve System, 21st and C Streets, Washington, D.C. 20551 (202) 452-3244. If
the Calculation Agent has not yet received Statistical Release No. H.15(519) for
such week, then it will use such Statistical Release from the immediately
preceding week.
Yields on U.S. Treasury securities at "constant maturity" are derived from
the U.S. Treasury's daily yield curve. This curve, which relates the yield on a
security to its time to maturity, is based on the closing market bid yields on
actively traded Treasury securities in the over-the-counter market. These market
yields are calculated from composites of quotations reported by five leading
U.S. Government securities dealers to the Federal Reserve Bank of New York. This
method provides a yield for a given maturity even if no security with that exact
maturity is outstanding. In the event that the Treasury Index is no longer
published, a new index based upon comparable data and methodology will be
designated in accordance with the Agreement relating to the particular Series of
Securities. The Calculation Agent's determination of the Treasury Index, and its
calculation of the rates of interest for the applicable classes for the related
Interest Accrual Period shall (in the absence of manifest error) be final and
binding.
Prime Rate
Unless otherwise specified in the related Prospectus Supplement, on the
Prime Rate Determination Date (as such term is defined in the related Prospectus
Supplement) for each class of Securities of a Series as to which the applicable
interest rate is determined by reference to an index denominated as the Prime
Rate, the Calculation Agent will ascertain the Prime Rate for the related
Interest Accrual Period. Unless otherwise specified in the related Prospectus
Supplement, the Prime Rate for an Interest Accrual Period will be the "Prime
Rate" as published in the "Money Rates" section of The Wall Street Journal (or
if not so published, the "Prime Rate" as published in a newspaper of general
circulation selected by the Calculation Agent in its sole discretion) on the
related Prime Rate Determination Date. If a prime rate range is given, then the
average of such range will be used. In the event that the Prime Rate is no
longer published, a new index based upon comparable data and methodology will be
designated in accordance with the Agreement relating to the particular Series of
Securities. The Calculation Agent's determination of the Prime Rate and its
calculation of the rates of interest for the related Interest Accrual Period
shall (in the absence of manifest error) be final and binding.
Book-Entry Registration of Securities
As described in the related Prospectus Supplement, if not issued in fully
registered form, each class of Securities will be registered as book-entry
certificates (the "Book-Entry Securities"). Persons acquiring beneficial
ownership interests in the Securities ("Security Owners") will hold their
Securities through the Depository Trust Company ("DTC") in the United States, or
CEDEL or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations which are participants in such systems. The
Book-Entry Securities will be issued in one or more certificates which equal the
aggregate principal balance of the Securities and will initially be registered
in the name of Cede & Co., the nominee of DTC. CEDEL and Euroclear will hold
omnibus positions on behalf of their participants through customers' securities
accounts in CEDEL's and Euroclear's names on the books of their respective
depositaries which in turn will hold such positions in customers' securities
accounts in the depositaries' names on the books of DTC. Citibank, N.A., will
act as depositary for CEDEL and The Chase Manhattan Bank will act as depositary
for Euroclear (in such capacities, individually the "Relevant Depositary" and
collectively the "European Depositaries"). Except as described below, no person
acquiring a Book-Entry Security (each, a "beneficial owner") will be entitled to
receive a physical certificate representing such Security (a "Definitive
Security"). Unless and until Definitive Securities are issued, it is anticipated
that the only "Securityholders" of the Securities will be Cede & Co., as nominee
of DTC. Security Owners are only permitted to exercise their rights indirectly
through Participants and DTC.
The beneficial owner's ownership of a Book-Entry Security will be recorded
on the records of the brokerage firm, bank, thrift institution or other
financial intermediary (each, a "Financial Intermediary") that maintains the
beneficial owner's account for such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Security will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will in turn be recorded on the records of DTC, if
the beneficial owner's Financial Intermediary is not a DTC participant, and on
the records of CEDEL or Euroclear, as appropriate).
Security Owners will receive all distributions of principal of, and
interest on, the Securities from the Trustee through DTC and DTC participants.
While the Securities are outstanding (except under the circumstances described
below), under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the Securities and is
required to receive and transmit distributions of principal of, and interest on,
the Securities. Participants and indirect participants with whom Security Owners
have accounts with respect to Securities are similarly required to make
book-entry transfers and receive and transmit such distributions on behalf of
their respective Security Owners. Accordingly, although Security Owners will not
possess certificates, the Rules provide a mechanism by which Security Owners
will receive distributions and will be able to transfer their interest.
Security Owners will not receive or be entitled to receive certificates
representing their respective interests in the Securities, except under the
limited circumstances described below. Unless and until Definitive Securities
are issued, Security Owners who are not Participants may transfer ownership of
Securities only through Participants and indirect participants by instructing
such Participants and indirect participants to transfer Securities, by
book-entry transfer, through DTC for the account of the purchasers of such
Securities, which account is maintained with their respective Participants.
Under the Rules and in accordance with DTC's normal procedures, transfers of
ownership of Securities will be executed through DTC and the accounts of the
respective Participants at DTC will be debited and credited. Similarly, the
Participants and indirect participants will make debits or credits, as the case
may be, on their records on behalf of the selling and purchasing Security
Owners.
Because of time zone differences, credits of securities received in CEDEL
or Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
CEDEL Participants on such business day. Cash received in CEDEL or Euroclear as
a result of sales of securities by or through a CEDEL Participant (as defined
herein) or Euroclear Participant (as defined herein) to a DTC Participant will
be received with value on the DTC settlement date but will be available in the
relevant CEDEL or Euroclear cash account only as of the business day following
settlement in DTC.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to the
Relevant Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same day funds settlement applicable to
DTC. CEDEL Participants and Euroclear Participants may not deliver instructions
directly to the European Depositaries.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") and to clear and settle transactions between
Euroclear Participants through simultaneous electronic book-entry delivery
against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may be settled in any of 32 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York ("Morgan" and in such capacity, the
"Euroclear Operator"), under contract with Euroclear Clearance Systems S.C., a
Belgian cooperative corporation (the "Belgian Cooperative"). All operations are
conducted by Morgan, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Belgian Cooperative. The Belgian Cooperative establishes policy for Euroclear on
behalf of Euroclear Participants. Euroclear Participants include banks
(including central banks), securities brokers and dealers and other professional
financial intermediaries. Indirect access to Euroclear is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
Morgan is the Belgian branch of a New York banking corporation which is a
member bank of the Federal Reserve System. As such, it is regulated and examined
by the Board of Governors of the Federal Reserve System and the New York State
Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with Morgan are governed by
the Terms and Conditions Governing Use of Euroclear and the related Operating
Procedures of the Euroclear System and applicable Belgian law (collectively, the
"Terms and Conditions"). The Terms and Conditions govern transfers of securities
and cash within Euroclear, withdrawals of securities and cash from Euroclear,
and receipts of payments with respect to securities in Euroclear. All securities
in Euroclear are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the Terms and Conditions only on behalf of Euroclear Participants,
and has no record of or relationship with persons holding through Euroclear
Participants.
Under a book-entry format, beneficial owners of the Book-Entry Securities
may experience some delay in their receipt of payments, since such payments will
be forwarded by the Trustee to Cede & Co., as nominee of DTC. Distributions with
respect to Securities held through CEDEL or Euroclear will be credited to the
cash accounts of CEDEL Participants or Euroclear Participants in accordance with
the relevant system's rules and procedures, to the extent received by the
Relevant Depositary. Such distributions will be subject to tax reporting in
accordance with relevant United States tax laws and regulations. See "Federal
Income Tax Consequences -Tax Treatment of Foreign Investors" and " -- Tax
Consequences to Holders of the Notes -- Backup Withholding" herein. Because DTC
can only act on behalf of Financial Intermediaries, the ability of a beneficial
owner to pledge Book-Entry Securities to persons or entities that do not
participate in the Depository system may be limited due to the lack of physical
certificates for such Book-Entry Securities. In addition, issuance of the
Book-Entry Securities in book-entry form may reduce the liquidity of such
Securities in the secondary market since certain potential investors may be
unwilling to purchase Securities for which they cannot obtain physical
certificates.
Monthly and annual reports on the Trust will be provided to Cede & Co., as
nominee of DTC, and may be made available by Cede & Co. to beneficial owners
upon request, in accordance with the rules, regulations and procedures creating
and affecting the Depository, and to the Financial Intermediaries to whose DTC
accounts the Book-Entry Securities of such beneficial owners are credited.
DTC has advised the Trustee that, unless and until Definitive Securities
are issued, DTC will take any action permitted to be taken by the holders of the
Book-Entry Securities under the applicable Agreement only at the direction of
one or more Financial Intermediaries to whose DTC accounts the Book-Entry
Securities are credited, to the extent that such actions are taken on behalf of
Financial Intermediaries whose holdings include such Book-Entry Securities.
CEDEL or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Securityholder under the Agreement on behalf of a
CEDEL Participant or Euroclear Participant only in accordance with its relevant
rules and procedures and subject to the ability of the Relevant Depositary to
effect such actions on its behalf through DTC. DTC may take actions, at the
direction of the related Participants, with respect to some Securities which
conflict with actions taken with respect to other Securities.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability through DTC of
Definitive Securities. Upon surrender by DTC of the global certificate or
certificates representing the Book-Entry Securities and instructions for
re-registration, the Trustee will issue Definitive Securities, and thereafter
the Trustee will recognize the holders of such Definitive Securities as
Securityholders under the applicable Agreement.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Securities among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
None of the Master Servicer, the Depositor or the Trustee will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Securities held by
Cede & Co., as nominee of DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
CREDIT ENHANCEMENT
General
Credit enhancement may be provided with respect to one or more classes of a
Series of Securities or with respect to the related Trust Fund Assets. Credit
enhancement may be in the form of a limited financial guaranty policy issued by
an entity named in the related Prospectus Supplement, the subordination of one
or more classes of the Securities of such Series, the establishment of one or
more Reserve Accounts, the use of a cross- collateralization feature, use of a
mortgage pool insurance policy, FHA Insurance, VA Guarantee, bankruptcy bond,
special hazard insurance policy, surety bond, letter of credit, guaranteed
investment contract, overcollateralization, or another method of credit
enhancement contemplated herein and described in the related Prospectus
Supplement, or any combination of the foregoing. Unless otherwise specified in
the related Prospectus Supplement, credit enhancement will not provide
protection against all risks of loss and will not guarantee repayment of the
entire principal balance of the Securities and interest thereon. If losses occur
which exceed the amount covered by credit enhancement or which are not covered
by the credit enhancement, Securityholders will bear their allocable share of
any deficiencies.
Subordination
If so specified in the related Prospectus Supplement, protection afforded
to holders of one or more classes of Securities of a Series by means of the
subordination feature may be accomplished by the preferential right of holders
of one or more other classes of such Series (the "Senior Securities") to
distributions in respect of scheduled principal, Principal Prepayments, interest
or any combination thereof that otherwise would have been payable to holders of
Subordinated Securities under the circumstances and to the extent specified in
the related Prospectus Supplement. Protection may also be afforded to the
holders of Senior Securities of a Series by: (i) reducing the ownership interest
(if applicable) of the related Subordinated Securities; (ii) a combination of
the immediately preceding sentence and clause (i) above; or (iii) as otherwise
described in the related Prospectus Supplement. If so specified in the related
Prospectus Supplement, delays in receipt of scheduled payments on the Loans and
losses on defaulted Loans may be borne first by the various classes of
Subordinated Securities and thereafter by the various classes of Senior
Securities, in each case under the circumstances and subject to the limitations
specified in such Prospectus Supplement. The aggregate distributions in respect
of delinquent payments on the Loans over the lives of the Securities or at any
time, the aggregate losses in respect of defaulted Loans which must be borne by
the Subordinated Securities by virtue of subordination and the amount of the
distributions otherwise distributable to the Subordinated Securityholders that
will be distributable to Senior Securityholders on any Distribution Date may be
limited as specified in the related Prospectus Supplement. If aggregate
distributions in respect of delinquent payments on the Loans or aggregate losses
in respect of such Loans were to exceed an amount specified in the related
Prospectus Supplement, holders of Senior Securities would experience losses on
the Securities.
In addition to or in lieu of the foregoing, if so specified in the related
Prospectus Supplement, all or any portion of distributions otherwise payable to
holders of Subordinated Securities on any Distribution Date may instead be
deposited into one or more Reserve Accounts established with the Trustee or
distributed to holders of Senior Securities. Such deposits may be made on each
Distribution Date, for specified periods or until the balance in the Reserve
Account has reached a specified amount and, following payments from the Reserve
Account to holders of Senior Securities or otherwise, thereafter to the extent
necessary to restore the balance in the Reserve Account to required levels, in
each case as specified in the related Prospectus Supplement. Amounts on deposit
in the Reserve Account may be released to the holders of certain classes of
Securities at the times and under the circumstances specified in such Prospectus
Supplement.
If specified in the related Prospectus Supplement, various classes of
Senior Securities and Subordinated Securities may themselves be subordinate in
their right to receive certain distributions to other classes of Senior and
Subordinated Securities, respectively, through a cross-collateralization
mechanism or otherwise.
As between classes of Senior Securities and as between classes of
Subordinated Securities, distributions may be allocated among such classes (i)
in the order of their scheduled final distribution dates, (ii) in accordance
with a schedule or formula, (iii) in relation to the occurrence of events or
(iv) otherwise, in each case as specified in the related Prospectus Supplement.
As between classes of Subordinated Securities, payments to holders of Senior
Securities on account of delinquencies or losses and payments to any Reserve
Account will be allocated as specified in the related Prospectus Supplement.
Letter of Credit
The letter of credit, if any, with respect to a Series of Securities will
be issued by the bank or financial institution specified in the related
Prospectus Supplement (the "L/C Bank"). Under the letter of credit, the L/C Bank
will be obligated to honor drawings thereunder in an aggregate fixed dollar
amount, net of unreimbursed payments thereunder, equal to the percentage
specified in the related Prospectus Supplement of the aggregate principal
balance of the Loans on the related Cut-off Date or of one or more classes of
Securities (the "L/C Percentage"). If so specified in the related Prospectus
Supplement, the letter of credit may permit drawings in the event of losses not
covered by insurance policies or other credit support, such as losses arising
from damage not covered by standard hazard insurance policies, losses resulting
from the bankruptcy of a borrower and the application of certain provisions of
the Bankruptcy Code, or losses resulting from denial of insurance coverage due
to misrepresentations in connection with the origination of a Loan. The amount
available under the letter of credit will, in all cases, be reduced to the
extent of the unreimbursed payments thereunder. The obligations of the L/C Bank
under the letter of credit for each Series of Securities will expire at the
earlier of the date specified in the related Prospectus Supplement or the
termination of the Trust Fund. See "The Agreements -- Termination: Optional
Termination." A copy of the letter of credit for a Series, if any, will be filed
with the Commission as an exhibit to a Current Report on Form 8-K to be filed
within 15 days of issuance of the Securities of the related Series.
Insurance Policies, Surety Bonds and Guaranties
If so provided in the Prospectus Supplement for a Series of Securities,
deficiencies in amounts otherwise payable on such Securities or certain classes
thereof will be covered by insurance policies and/or surety bonds provided by
one or more insurance companies or sureties. Such instruments may cover, with
respect to one or more classes of Securities of the related series, timely
distributions of interest and/or full distributions of principal on the basis of
a schedule of principal distributions set forth in or determined in the manner
specified in the related Prospectus Supplement. In addition, if specified in the
related Prospectus Supplement, a Trust Fund may also include bankruptcy bonds,
special hazard insurance policies, other insurance or guaranties for the purpose
of (i) maintaining timely payments or providing additional protection against
losses on the assets included in such Trust Fund, (ii) paying administrative
expenses or (iii) establishing a minimum reinvestment rate on the payments made
in respect of such assets or principal payment rate on such assets. Such
arrangements may include agreements under which Securityholders are entitled to
receive amounts deposited in various accounts held by the Trustee upon the terms
specified in such Prospectus Supplement. A copy of any such instrument for a
series will be filed with the Commission as an exhibit to a Current Report on
Form 8-K to be filed with the Commission within 15 days of issuance of the
Securities of the related series.
Over-Collateralization
If so provided in the Prospectus Supplement for a Series of Securities, a
portion of the interest payment on each Loan may be applied as an additional
distribution in respect of principal to reduce the principal balance of a
certain class or classes of Securities and, thus, accelerate the rate of payment
of principal on such class or classes of Securities.
Reserve Accounts
If specified in the related Prospectus Supplement, credit support with
respect to a Series of Securities will be provided by the establishment and
maintenance with the Trustee for such Series of Securities, in trust, of one or
more Reserve Accounts for such Series. The related Prospectus Supplement will
specify whether or not any such Reserve Accounts will be included in the Trust
Fund for such Series.
The Reserve Account for a Series will be funded (i) by the deposit therein
of cash, United States Treasury securities, instruments evidencing ownership of
principal or interest payments thereon, letters of credit, demand notes,
certificates of deposit or a combination thereof in the aggregate amount
specified in the related Prospectus Supplement, (ii) by the deposit therein from
time to time of certain amounts, as specified in the related Prospectus
Supplement to which the Subordinate Securityholders, if any, would otherwise be
entitled or (iii) in such other manner as may be specified in the related
Prospectus Supplement.
Any amounts on deposit in the Reserve Account and the proceeds of any other
instrument upon maturity will be held in cash or will be invested in "Permitted
Investments" which, in general, will include obligations of the United States
and certain agencies thereof, certificates of deposit, certain commercial paper,
time deposits and bankers acceptances sold by eligible commercial banks and
certain repurchase agreements of United States government securities with
eligible commercial banks. If a letter of credit is deposited with the Trustee,
such letter of credit will be irrevocable. Unless otherwise specified in the
related Prospectus Supplement, any instrument deposited therein will name the
Trustee, in its capacity as trustee for the holders of the Securities, as
beneficiary and will be issued by an entity acceptable to each Rating Agency
that rates the Securities of the related Series. Additional information with
respect to such instruments deposited in the Reserve Accounts will be set forth
in the related Prospectus Supplement.
Any amounts so deposited and payments on instruments so deposited will be
available for withdrawal from the Reserve Account for distribution to the
holders of Securities of the related Series for the purposes, in the manner and
at the times specified in the related Prospectus Supplement.
Pool Insurance Policies
If specified in the related Prospectus Supplement, a separate pool
insurance policy ("Pool Insurance Policy") will be obtained for the Pool and
issued by the insurer (the "Pool Insurer") named in such Prospectus Supplement.
Each Pool Insurance Policy will, subject to the limitations described therein,
cover loss by reason of default in payment on Loans in the Pool in an amount
equal to a percentage specified in such Prospectus Supplement of the aggregate
principal balance of such Loans on the Cut-off Date which are not covered as to
their entire outstanding principal balances by Primary Mortgage Insurance
Policies. As more fully described in the related Prospectus Supplement, the
Master Servicer will present claims thereunder to the Pool Insurer on behalf of
itself, the Trustee and the holders of the Securities of the related Series. The
Pool Insurance Policies, however, are not blanket policies against loss, since
claims thereunder may only be made respecting particular defaulted Loans and
only upon satisfaction of certain conditions precedent as described in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the Pool Insurance Policies will not cover losses due to
a failure to pay or denial of a claim under a Primary Mortgage Insurance Policy.
Unless otherwise specified in the related Prospectus Supplement, the
original amount of coverage under each Pool Insurance Policy will be reduced
over the life of the related Securities by the aggregate dollar amount of claims
paid less the aggregate of the net amounts realized by the Pool Insurer upon
disposition of all foreclosed properties. The amount of claims paid will include
certain expenses incurred by the Master Servicer as well as accrued interest on
delinquent Loans to the date of payment of the claim, unless otherwise specified
in the related Prospectus Supplement. Accordingly, if aggregate net claims paid
under any Pool Insurance Policy reach the original policy limit, coverage under
that Pool Insurance Policy will be exhausted and any further losses will be
borne by the related Securityholders.
Cross-Collateralization
If specified in the related Prospectus Supplement, the beneficial ownership
of separate groups of assets included in a Trust Fund may be evidenced by
separate classes of the related Series of Securities. In such case, credit
support may be provided by a cross-collateralization feature which requires that
distributions be made with respect to Securities evidencing a beneficial
ownership interest in, or secured by, one or more asset groups within the same
Trust Fund prior to distributions to Subordinated Securities evidencing a
beneficial ownership interest in, or secured by, one or more other asset groups
within such Trust Fund. Cross-collateralization may be provided by (i) the
allocation of certain excess amounts generated by one or more asset groups to
one or more other asset groups within the same Trust Fund or (ii) the allocation
of losses with respect to one or more asset groups to one or more other asset
groups within the same Trust Fund. Such excess amounts will be applied and/or
such losses will be allocated to the class or classes of Subordinated Securities
of the related Series then outstanding having the lowest rating assigned by any
Rating Agency or the lowest payment priority, in each case to the extent and in
the manner more specifically described in the related Prospectus Supplement. The
Prospectus Supplement for a Series which includes a cross-collateralization
feature will describe the manner and conditions for applying such
cross-collateralization feature.
If specified in the related Prospectus Supplement, the coverage provided by
one or more of the forms of credit enhancement described in this Prospectus may
apply concurrently to two or more separate Trust Funds. If applicable, the
related Prospectus Supplement will identify the Trust Funds to which such credit
enhancement relates and the manner of determining the amount of coverage
provided to such Trust Funds thereby and of the application of such coverage to
the identified Trust Funds.
YIELD AND PREPAYMENT CONSIDERATIONS
The yields to maturity and weighted average lives of the Securities will be
affected primarily by the amount and timing of principal payments received on or
in respect of the Trust Fund Assets included in the related Trust Fund. The
original terms to maturity of the Loans in a given Pool will vary depending upon
the type of Loans included therein. Each Prospectus Supplement will contain
information with respect to the type and maturities of the Loans in the related
Pool. The related Prospectus Supplement will specify the circumstances, if any,
under which the related Loans will be subject to prepayment penalties. The
prepayment experience on the Loans in a Pool will affect the weighted average
life of the related Series of Securities.
The rate of prepayment on the Loans cannot be predicted. Home equity loans
and home improvement contracts have been originated in significant volume only
during the past few years and the Depositor is not aware of any publicly
available studies or statistics on the rate of prepayment of such loans.
Generally, home equity loans and home improvement contracts are not viewed by
borrowers as permanent financing. Accordingly, such Loans may experience a
higher rate of prepayment than traditional first mortgage loans. On the other
hand, because home equity loans such as the Revolving Credit Line Loans
generally are not fully amortizing, the absence of voluntary borrower
prepayments could cause rates of principal payments lower than, or similar to,
those of traditional fully-amortizing first mortgage loans. The prepayment
experience of the related Trust Fund may be affected by a wide variety of
factors, including general economic conditions, prevailing interest rate levels,
the availability of alternative financing, homeowner mobility and the frequency
and amount of any future draws on any Revolving Credit Line Loans. Other factors
that might be expected to affect the prepayment rate of a pool of home equity
mortgage loans or home improvement contracts include the amounts of, and
interest rates on, the underlying senior mortgage loans, and the use of first
mortgage loans as long-term financing for home purchase and subordinate mortgage
loans as shorter-term financing for a variety of purposes, including home
improvement, education expenses and purchases of consumer durables such as
automobiles. Accordingly, such Loans may experience a higher rate of prepayment
than traditional fixed-rate mortgage loans. In addition, any future limitations
on the right of borrowers to deduct interest payments on home equity loans for
federal income tax purposes may further increase the rate of prepayments of the
Loans. The enforcement of a "due-on-sale" provision (as described below) will
have the same effect as a prepayment of the related Loan. See "Certain Legal
Aspects of the Loans -- Due-on-Sale Clauses." The yield to an investor who
purchases Securities in the secondary market at a price other than par will vary
from the anticipated yield if the rate of prepayment on the Loans is actually
different than the rate anticipated by such investor at the time such Securities
were purchased.
Collections on Revolving Credit Line Loans may vary because, among other
things, borrowers may (i) make payments during any month as low as the minimum
monthly payment for such month or, during the interest-only period for certain
Revolving Credit Line Loans and, in more limited circumstances, Closed-End
Loans, with respect to which an interest-only payment option has been selected,
the interest and the fees and charges for such month or (ii) make payments as
high as the entire outstanding principal balance plus accrued interest and the
fees and charges thereon. It is possible that borrowers may fail to make the
required periodic payments. In addition, collections on the Loans may vary due
to seasonal purchasing and the payment habits of borrowers.
Unless otherwise specified in the related Prospectus Supplement,
substantially all conventional Loans will contain due-on-sale provisions
permitting the mortgagee to accelerate the maturity of the loan upon sale or
certain transfers by the borrower of the related Property. Loans insured by the
FHA, and Single Family Loans partially guaranteed by the VA, are assumable with
the consent of the FHA and the VA, respectively. Thus, the rate of prepayments
on such Loans may be lower than that of conventional Loans bearing comparable
interest rates. The Master Servicer generally will enforce any due-on-sale or
due-on-encumbrance clause, to the extent it has knowledge of the conveyance or
further encumbrance or the proposed conveyance or proposed further encumbrance
of the Property and reasonably believes that it is entitled to do so under
applicable law; provided, however, that the Master Servicer will not take any
enforcement action that would impair or threaten to impair any recovery under
any related insurance policy. See "The Agreements -- Collection Procedures" and
"Certain Legal Aspects of the Loans" for a description of certain provisions of
each Agreement and certain legal developments that may affect the prepayment
experience on the Loans.
The rate of prepayments with respect to conventional mortgage loans has
fluctuated significantly in recent years. In general, if prevailing rates fall
significantly below the Loan Rates borne by the Loans, such Loans are more
likely to be subject to higher prepayment rates than if prevailing interest
rates remain at or above such Loan Rates. Conversely, if prevailing interest
rates rise appreciably above the Loan Rates borne by the Loans, such Loans are
more likely to experience a lower prepayment rate than if prevailing rates
remain at or below such Loan Rates. However, there can be no assurance that such
will be the case.
When a full prepayment is made on a Loan, the borrower is charged interest
on the principal amount of the Loan so prepaid only for the number of days in
the month actually elapsed up to the date of the prepayment, rather than for a
full month. The effect of prepayments in full will be to reduce the amount of
interest passed through or paid in the following month to holders of Securities
because interest on the principal amount of any Loan so prepaid will generally
be paid only to the date of prepayment. Partial prepayments in a given month may
be applied to the outstanding principal balances of the Loans so prepaid on the
first day of the month of receipt or the month following receipt. In the latter
case, partial prepayments will not reduce the amount of interest passed through
or paid in such month. Unless otherwise specified in the related Prospectus
Supplement, neither full nor partial prepayments will be passed through or paid
until the month following receipt.
Even assuming that the Properties provide adequate security for the Loans,
substantial delays could be encountered in connection with the liquidation of
defaulted Loans and corresponding delays in the receipt of related proceeds by
Securityholders could occur. An action to foreclose on a Property securing a
Loan is regulated by state statutes and rules and is subject to many of the
delays and expenses of other lawsuits if defenses or counterclaims are
interposed, sometimes requiring several years to complete. Furthermore, in some
states an action to obtain a deficiency judgment is not permitted following a
nonjudicial sale of a property. In the event of a default by a borrower, these
restrictions among other things, may impede the ability of the Master Servicer
to foreclose on or sell the Property or to obtain liquidation proceeds
sufficient to repay all amounts due on the related Loan. In addition, the Master
Servicer will be entitled to deduct from related liquidation proceeds all
expenses reasonably incurred in attempting to recover amounts due on defaulted
Loans and not yet repaid, including payments to senior lienholders, legal fees
and costs of legal action, real estate taxes and maintenance and preservation
expenses.
Liquidation expenses with respect to defaulted mortgage loans generally do
not vary directly with the outstanding principal balance of the loan at the time
of default. Therefore, assuming that a servicer took the same steps in realizing
upon a defaulted mortgage loan having a small remaining principal balance as it
would in the case of a defaulted mortgage loan having a large remaining
principal balance, the amount realized after expenses of liquidation would be
smaller as a percentage of the remaining principal balance of the small mortgage
loan than would be the case with the other defaulted mortgage loan having a
large remaining principal balance.
Applicable state laws generally regulate interest rates and other charges,
require certain disclosures, and require licensing of certain originators and
servicers of Loans. In addition, most have other laws, public policy and general
principles of equity relating to the protection of consumers, unfair and
deceptive acts and practices which may apply to the origination, servicing and
collection of the Loans. Depending on the provisions of the applicable law and
the specific facts and circumstances involved, violations of these laws,
policies and principles may limit the ability of the Master Servicer to collect
all or part of the principal of or interest on the Loans, may entitle the
borrower to a refund of amounts previously paid and, in addition, could subject
the Master Servicer to damages and administrative sanctions.
If the rate at which interest is passed through or paid to the holders of
Securities of a Series is calculated on a Loan-by-Loan basis, disproportionate
principal prepayments among Loans with different Loan Rates will affect the
yield on such Securities. In most cases, the effective yield to Securityholders
will be lower than the yield otherwise produced by the applicable pass-through
rate or interest rate and purchase price, because while interest will accrue on
each Loan from the first day of the month (unless otherwise specified in the
related Prospectus Supplement), the distribution of such interest will not be
made earlier than the month following the month of accrual.
Under certain circumstances, the Master Servicer, the holders of the
residual interests in a REMIC or any person specified in the related Prospectus
Supplement may have the option to purchase the assets of a Trust Fund thereby
effecting earlier retirement of the related Series of Securities. See "The
Agreements -- Termination; Optional Termination."
The relative contribution of the various factors affecting prepayment may
vary from time to time. There can be no assurance as to the rate of payment of
principal of the Trust Fund Assets at any time or over the lives of the
Securities.
The Prospectus Supplement relating to a Series of Securities will discuss
in greater detail the effect of the rate and timing of principal payments
(including prepayments), delinquencies and losses on the yield, weighted average
lives and maturities of such Securities.
THE AGREEMENTS
Set forth below is a description of the material provisions of each
Agreement which are not described elsewhere in this Prospectus. The description
is subject to, and qualified in its entirety by reference to, the provisions of
each Agreement. Where particular provisions or terms used in the Agreements are
referred to, such provisions or terms are as specified in the Agreements.
Assignment of the Trust Fund Assets
Assignment of the Loans. At the time of issuance of the Securities of a
Series, the Depositor will cause the Loans comprising the related Trust Fund to
be assigned to the Trustee, without recourse, together with all principal and
interest received (if the Contracts are sold based on actual principal balances)
or scheduled to be received (if the Contracts are sold based on scheduled
principal balances) by or on behalf of the Depositor on or with respect to such
Loans after the Cut-off Date and other than any Retained Interest specified in
the related Prospectus Supplement. The Trustee will, concurrently with such
assignment, deliver such Securities to the Depositor in exchange for the Loans.
Each Loan will be identified in a schedule appearing as an exhibit to the
related Agreement. Such schedule will include information as to the outstanding
principal balance of each Loan after application of payments due on or before
the Cut-off Date, as well as information regarding the Loan Rate or APR, the
maturity of the Loan, the Loan-to-Value Ratios or Combined Loan-to-Value Ratios,
as applicable, at origination and certain other information.
Unless otherwise specified in the related Prospectus Supplement, the
Agreement will require that, on or prior to the Closing Date, the Depositor will
also deliver or cause to be delivered to the Trustee (or to the custodian
hereinafter referred to) as to each Single Family Loan or Multifamily Loan,
among other things, (i) the mortgage note or contract endorsed without recourse
in blank or to the order of the Trustee, (ii) the mortgage, deed of trust or
similar instrument (a "Mortgage") with evidence of recording indicated thereon
(except for any Mortgage not returned from the public recording office, in which
case the Depositor will deliver or cause to be delivered a copy of such Mortgage
together with a certificate that the original of such Mortgage was delivered to
such recording office), (iii) an assignment of the Mortgage to the Trustee,
which assignment will be in recordable form in the case of a Mortgage assignment
and (iv) such other security documents, including those relating to any senior
interests in the Property, as may be specified in the related Prospectus
Supplement or the related Agreement. Unless otherwise specified in the related
Prospectus Supplement, the Depositor will promptly cause the assignments of the
related Loans to be recorded in the appropriate public office for real property
records, except in states in which the Seller has reasonably determined (in
certain circumstances, as evidenced by an opinion of counsel acceptable to the
Trustee) that such recording is not required to protect the Trustee's interest
in such Loans against the claim of any subsequent transferee or any successor to
or creditor of the Depositor or the originator of such Loans.
With respect to any Loans that are Cooperative Loans, the Depositor will
cause to be delivered to the Trustee the related original cooperative note
endorsed without recourse in blank or to the order of the Trustee, the original
security agreement, the proprietary lease or occupancy agreement, the
recognition agreement, an executed financing agreement and the relevant stock
certificate, related blank stock powers and any other document specified in the
related Prospectus Supplement. The Depositor will cause to be filed in the
appropriate office an assignment and a financing statement evidencing the
Trustee's security interest in each Cooperative Loan.
With respect to any Loans that are Home Equity Loans, the related
Prospectus Supplement will specify whether the documents relating to such Loans
will be required to be delivered to the Trustee (or a custodian) and whether
assignments of the related Mortgage to the Trustee will be recorded. In the
event documents are not required to be delivered, they will be retained by the
Master Servicer, which may also be the Seller.
With respect to the Home Improvement Contracts, the related Prospectus
Supplement will specify whether the documents relating to such Contracts will be
required to be delivered to the Trustee (or a custodian). Notwithstanding the
foregoing, unless otherwise specified in the related Prospectus Supplement, the
Depositor will not deliver to the Trustee the original Mortgage securing a Home
Improvement Contract. In order to give notice of the right, title and interest
of Securityholders to the Home Improvement Contracts, the Depositor will cause a
UCC-1 financing statement to be executed by the Depositor or the Seller
identifying the Trustee as the secured party and identifying all Home
Improvement Contracts as collateral. Unless otherwise specified in the related
Prospectus Supplement, the Home Improvement Contracts will not be stamped or
otherwise marked to reflect their assignment to the Trustee. Therefore, if,
through negligence, fraud or otherwise, a subsequent purchaser were able to take
physical possession of the Home Improvement Contracts without notice of such
assignment, the interest of Securityholders in the Home Improvement Contracts
could be defeated. See "Certain Legal Aspects of the Loans -- The Home
Improvement Contracts."
The Trustee (or the custodian) will review the loan documents that have
been delivered to it within the time period specified in the related Prospectus
Supplement after receipt thereof, and the Trustee (or the custodian) will hold
such documents in trust for the benefit of the related Securityholders. Unless
otherwise specified in the related Prospectus Supplement, if any such document
is found to be missing or defective in any material respect, the Trustee (or
such custodian) will notify the Master Servicer and the Depositor, and the
Master Servicer will notify the related Seller. If such Seller cannot cure the
omission or defect within the time period specified in the related Prospectus
Supplement after receipt of such notice, such Seller will be obligated to either
(i) purchase the related Loan from the Trust Fund at the Purchase Price or (ii)
if so specified in the related Prospectus Supplement, remove such Loan from the
Trust Fund and substitute in its place one or more other Loans that meets
certain requirements set forth therein. There can be no assurance that a Seller
will fulfill this purchase or substitution obligation. Although the Master
Servicer may be obligated to enforce such obligation to the extent described
above under "Loan Program -- Representations by Sellers; Repurchases," the
Master Servicer will not be obligated to purchase or replace such Loan if the
Seller defaults on its obligation (nor will the Master Servicer otherwise be
obligated to purchase or replace any such Loan for any other reason). Unless
otherwise specified in the related Prospectus Supplement, this obligation of the
Seller to cure, purchase or substitute constitutes the sole remedy available to
the Securityholders or the Trustee for omission of, or a material defect in, a
constituent document.
Notwithstanding the foregoing provisions, with respect to a Trust Fund for
which a REMIC election is to be made, no purchase or substitution of a Loan will
be made if such purchase or substitution would result in a prohibited
transaction tax under the Code (unless the Master Servicer or a holder of the
related residual certificate otherwise pays such prohibited transaction from its
own funds as described herein). See "Loan Program -- Representations by Sellers;
Repurchases."
The Trustee will be authorized to appoint a custodian pursuant to a
custodial agreement to maintain possession of and, if applicable, to review the
documents relating to the Loans as agent of the Trustee.
No Recourse to Sellers, Depositor or Master Servicer
As described above under " -- Assignment of the Loans," the Depositor will
cause the Loans comprising the related Trust Fund to be assigned to the Trustee,
without recourse. However, each Seller will be obligated to repurchase or
substitute for any Loan as to which certain representations and warranties are
breached where such breach materially and adversely affects the interests of the
Securityholders, or for failure to deliver certain documents relating to the
Loans as described herein under "Assignment of the Loans" and "Loan Program --
Representations by Sellers; Repurchases." These obligations to purchase or
substitute constitute the sole remedy available to the Securityholders or the
Trustee for a breach of any such representation or failure to deliver a
constituent document.
Payments on Loans; Deposits to Security Account
The Master Servicer will establish and maintain or cause to be established
and maintained with respect to the related Trust Fund a separate account or
accounts for the collection of payments on the related Trust Fund Assets in the
Trust Fund (the "Security Account") which, unless otherwise specified in the
related Prospectus Supplement, must be either (i) maintained with a depository
institution the debt obligations of which (or in the case of a depository
institution that is the principal subsidiary of a holding company, the
obligations of which) are rated in one of the two highest rating categories by
the Rating Agency or Rating Agencies that rated one or more classes of the
related Series of Securities, (ii) an account or accounts the deposits in which
are fully insured by either the Bank Insurance Fund (the "BIF") of the FDIC or
the Savings Association Insurance Fund (as successor to the Federal Savings and
Loan Insurance Corporation ("SAIF")), (iii) an account or accounts the deposits
in which are insured by the BIF or SAIF (to the limits established by the FDIC),
and the uninsured deposits in which are otherwise secured such that, as
evidenced by an opinion of counsel, the Securityholders have a claim with
respect to the funds in the Security Account or a perfected first priority
security interest against any collateral securing such funds that is superior to
the claims of any other depositors or general creditors of the depository
institution with which the Security Account is maintained or (iv) an account or
accounts otherwise acceptable to each Rating Agency. The collateral eligible to
secure amounts in the Security Account is limited to Permitted Investments. A
Security Account may be maintained as an interest bearing account or the funds
held therein may be invested pending each succeeding Distribution Date in
Permitted Investments. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer or its designee will be entitled to receive any
such interest or other income earned on funds in the Security Account as
additional compensation and will be obligated to deposit in the Security Account
the amount of any loss immediately as realized. The Security Account may be
maintained with the Master Servicer or with a depository institution that is an
affiliate of the Master Servicer, provided it meets the standards set forth
above.
The Master Servicer will deposit or cause to be deposited in the Security
Account for each Trust Fund, to the extent applicable and unless otherwise
specified in the related Prospectus Supplement and provided in the Agreement,
the following payments and collections received or advances made by or on behalf
of it subsequent to the Cut-off Date (other than payments due on or before the
Cut-off Date and exclusive of any amounts representing Retained Interest):
(i) all payments on account of principal, including Principal
Prepayments and, if specified in the related Prospectus Supplement, any
applicable prepayment penalties, on the Loans;
(ii) all payments on account of interest on the Loans, net of
applicable servicing compensation;
(iii) all proceeds (net of unreimbursed payments of property taxes,
insurance premiums and similar items ("Insured Expenses") incurred, and
unreimbursed Advances made, by the Master Servicer, if any) of the hazard
insurance policies and any Primary Mortgage Insurance Policies, to the
extent such proceeds are not applied to the restoration of the property or
released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures (collectively, "Insurance Proceeds") and all other
cash amounts (net of unreimbursed expenses incurred in connection with
liquidation or foreclosure ("Liquidation Expenses") and unreimbursed
Advances made, by the Master Servicer, if any) received and retained in
connection with the liquidation of defaulted Loans, by foreclosure or
otherwise ("Liquidation Proceeds"), together with any net proceeds received
on a monthly basis with respect to any properties acquired on behalf of the
Securityholders by foreclosure or deed in lieu of foreclosure;
(iv) all proceeds of any Loan or property in respect thereof purchased
by the Master Servicer, the Depositor or any Seller as described under
"Loan Program -- Representations by Sellers; Repurchases" or " --
Assignment of Trust Fund Assets" above and all proceeds of any Loan
repurchased as described under " -- Termination; Optional Termination"
below;
(v) all payments required to be deposited in the Security Account with
respect to any deductible clause in any blanket insurance policy described
under " -- Hazard Insurance" below;
(vi) any amount required to be deposited by the Master Servicer in
connection with losses realized on investments for the benefit of the
Master Servicer of funds held in the Security Account and, to the extent
specified in the related Prospectus Supplement, any payments required to be
made by the Master Servicer in connection with prepayment interest
shortfalls; and
(vii) all other amounts required to be deposited in the Security
Account pursuant to the Agreement.
The Master Servicer (or the Depositor, as applicable) may from time to time
direct the institution that maintains the Security Account to withdraw funds
from the Security Account for the following purposes:
(i) to pay to the Master Servicer the servicing fees described in the
related Prospectus Supplement, the master servicing fees (subject to
reduction) and, as additional servicing compensation, earnings on or
investment income with respect to funds in the amounts in the Security
Account credited thereto;
(ii) to reimburse the Master Servicer for Advances, such right of
reimbursement with respect to any Loan being limited to amounts received
that represent late recoveries of payments of principal and/or interest on
such Loan (or Insurance Proceeds or Liquidation Proceeds with respect
thereto) with respect to which such Advance was made;
(iii) to reimburse the Master Servicer for any Advances previously
made which the Master Servicer has determined to be nonrecoverable;
(iv) to reimburse the Master Servicer from Insurance Proceeds for
expenses incurred by the Master Servicer and covered by the related
insurance policies;
(v) to reimburse the Master Servicer for unpaid master servicing fees
and unreimbursed out-of-pocket costs and expenses incurred by the Master
Servicer in the performance of its servicing obligations, such right of
reimbursement being limited to amounts received representing late
recoveries of the payments for which such advances were made;
(vi) to reimburse the Master Servicer or the Depositor for expenses
incurred and reimbursable pursuant to the Agreement;
(vii) to withdraw any amount deposited in the Security Account and not
required to be deposited therein; and
(viii) to clear and terminate the Security Account upon termination of
the Agreement.
In addition, unless otherwise specified in the related Prospectus
Supplement, on or prior to the business day immediately preceding each
Distribution Date, the Master Servicer shall withdraw from the Security Account
the amount of Available Funds, to the extent on deposit, for deposit in an
account maintained by the Trustee for the related Series of Securities.
Pre-Funding Account
If so provided in the related Prospectus Supplement, the Master Servicer
will establish and maintain a Pre-Funding Account, in the name of the related
Trustee on behalf of the related Securityholders, into which the Depositor will
deposit cash in an amount equal to the Pre-Funded Amount on the related Closing
Date. The Pre-Funding Account will be maintained with the Trustee for the
related Series of Securities and is designed solely to hold funds to be applied
by such Trustee during the Funding Period to pay to the Depositor the purchase
price for Subsequent Loans. Monies on deposit in the Pre-Funding Account will
not be available to cover losses on or in respect of the related Loans. The
Pre-Funded Amount will not exceed 50% of the initial aggregate principal amount
of the Certificates and Notes of the related Series. The Pre-Funded Amount will
be used by the related Trustee to purchase Subsequent Loans from the Depositor
from time to time during the Funding Period. The Funding Period, if any, for a
Trust Fund will begin on the related Closing Date and will end on the date
specified in the related Prospectus Supplement, which in no event will be later
than the date that is one year after the related Closing Date. Monies on deposit
in the Pre-Funding Account may be invested in Permitted Investments under the
circumstances and in the manner described in the related Agreement. Earnings on
investment of funds in the Pre-Funding Account will be deposited into the
related Security Account or such other trust account as is specified in the
related Prospectus Supplement and losses will be charged against the funds on
deposit in the Pre-Funding Account. Any amounts remaining in the Pre-Funding
Account at the end of the Funding Period will be distributed to the related
Securityholders in the manner and priority specified in the related Prospectus
Supplement, as a prepayment of principal of the related Securities.
In addition, if so provided in the related Prospectus Supplement, on the
related Closing Date the Depositor will deposit in an account (the "Capitalized
Interest Account") cash in such amount as is necessary to cover shortfalls in
interest on the related Series of Securities that may arise as a result of
utilization of the Pre-Funding Account as described above. The Capitalized
Interest Account shall be maintained with the Trustee for the related Series of
Securities and is designed solely to cover the above-mentioned interest
shortfalls. Monies on deposit in the Capitalized Interest Account will not be
available to cover losses on or in respect of the related Loans. To the extent
that the entire amount on deposit in the Capitalized Interest Account has not
been applied to cover shortfalls in interest on the related Series of Securities
by the end of the Funding Period, any amounts remaining in the Capitalized
Interest Account will be paid to the Depositor.
Sub-Servicing by Sellers
Each Seller of a Loan or any other servicing entity may act as the
Sub-Servicer for such Loan pursuant to an agreement (each, a "Sub-Servicing
Agreement"), which will not contain any terms inconsistent with the related
Agreement. While each Sub-Servicing Agreement will be a contract solely between
the Master Servicer and the Sub-Servicer, the Agreement pursuant to which a
Series of Securities is issued will provide that, if for any reason the Master
Servicer for such Series of Securities is no longer the Master Servicer of the
related Loans, the Trustee or any successor Master Servicer must recognize the
Sub-Servicer's rights and obligations under such Sub-Servicing Agreement.
All references in this Prospectus and in the Prospectus Supplement for any
Series to actions, rights or duties of the Master Servicer will be deemed to
include any one or more Sub-Servicers acting on the Master Servicer's behalf.
Notwithstanding the foregoing, unless otherwise provided in the related
Prospectus Supplement, the Master Servicer will remain liable for its servicing
duties and obligations under the Master Servicing Agreement as if the Master
Servicer alone were servicing the Loans.
Collection Procedures
The Master Servicer will make reasonable efforts to collect all payments
called for under the Loans and will, consistent with each Agreement and any Pool
Insurance Policy, Primary Mortgage Insurance Policy, FHA Insurance, VA Guaranty,
bankruptcy bond or alternative arrangements, follow such collection procedures
as are customary with respect to loans that are comparable to the Loans.
Consistent with the above, the Master Servicer may, in its discretion, (i) waive
any assumption fee, late payment or other charge in connection with a Loan and
(ii) to the extent not inconsistent with the coverage of such Loan by a Pool
Insurance Policy, Primary Mortgage Insurance Policy, FHA Insurance, VA Guaranty,
bankruptcy bond or alternative arrangements, if applicable, arrange with a
borrower a schedule for the liquidation of delinquencies running for no more
than 125 days after the applicable due date for each payment. To the extent the
Master Servicer is obligated to make or cause to be made Advances, such
obligation will remain during any period of such an arrangement.
In any case in which property securing a Loan has been, or is about to be,
conveyed by the mortgagor or obligor, the Master Servicer will, to the extent it
has knowledge of such conveyance or proposed conveyance, exercise or cause to be
exercised its rights to accelerate the maturity of such Loan under any
due-on-sale clause applicable thereto, but only if the exercise of such rights
is permitted by applicable law and will not impair or threaten to impair any
recovery under any Primary Mortgage Insurance Policy. If these conditions are
not met or if the Master Servicer reasonably believes it is unable under
applicable law to enforce such due-on-sale clause or if such Loan is a mortgage
loan insured by the FHA or partially guaranteed by the VA, the Master Servicer
will enter into or cause to be entered into an assumption and modification
agreement with the person to whom such property has been or is about to be
conveyed, pursuant to which such person becomes liable for repayment of the Loan
and, to the extent permitted by applicable law, the mortgagor remains liable
thereon. Any fee collected by or on behalf of the Master Servicer for entering
into an assumption agreement will be retained by or on behalf of the Master
Servicer as additional servicing compensation. See "Certain Legal Aspects of the
Loans --Due-on-Sale Clauses." In connection with any such assumption, the terms
of the related Loan may not be changed.
With respect to Cooperative Loans, any prospective purchaser will generally
have to obtain the approval of the board of directors of the relevant
Cooperative before purchasing the shares and acquiring rights under the related
proprietary lease or occupancy agreement. See "Certain Legal Aspects of the
Loans." This approval is usually based on the purchaser's income and net worth
and numerous other factors. Although the Cooperative's approval is unlikely to
be unreasonably withheld or delayed, the necessity of acquiring such approval
could limit the number of potential purchasers for those shares and otherwise
limit the Trust Fund's ability to sell and realize the value of those shares.
In general a "tenant-stockholder" (as defined in Code Section 216(b)(2) of
a corporation that qualifies as a "cooperative housing corporation" within the
meaning of Code Section 216(b)(1) is allowed a deduction for amounts paid or
accrued within his taxable year to the corporation representing his
proportionate share of certain interest expenses and certain real estate taxes
allowable as a deduction under Code Section 216(a) to the corporation under Code
Sections 163 and 164. In order for a corporation to qualify under Code Section
216(b)(1) for its taxable year in which such items are allowable as a deduction
to the corporation, such Section requires, among other things, that at least 80%
of the gross income of the corporation be derived from its tenant-stockholders
(as defined in Code Section 216(b)(2)). By virtue of this requirement, the
status of a corporation for purposes of Code Section 216(b)(1) must be
determined on a year-to-year basis. Consequently, there can be no assurance that
Cooperatives relating to the Cooperative Loans will qualify under such Section
for any particular year. In the event that such a Cooperative fails to qualify
for one or more years, the value of the collateral securing any related
Cooperative Loans could be significantly impaired because no deduction would be
allowable to tenant-stockholders under Code Section 216(a) with respect to those
years. In view of the significance of the tax benefits accorded
tenant-stockholders of a corporation that qualifies under Code Section
216(b)(1), the likelihood that such a failure would be permitted to continue
over a period of years appears remote.
Hazard Insurance
Except as otherwise specified in the related Prospectus Supplement, the
Master Servicer will require the mortgagor or obligor on each Loan to maintain a
hazard insurance policy providing for no less than the coverage of the standard
form of fire insurance policy with extended coverage customary for the type of
Property in the state in which such Property is located. Such coverage will be
in an amount that is at least equal to the lesser of (i) the maximum insurable
value of the improvements securing such Loan or (ii) the greater of (y) the
outstanding principal balance of the Loan and (z) an amount such that the
proceeds of such policy shall be sufficient to prevent the mortgagor and/or the
mortgagee from becoming a co-insurer. All amounts collected by the Master
Servicer under any hazard policy (except for amounts to be applied to the
restoration or repair of the Property or released to the mortgagor or obligor in
accordance with the Master Servicer's normal servicing procedures) will be
deposited in the related Security Account. In the event that the Master Servicer
maintains a blanket policy insuring against hazard losses on all the Loans
comprising part of a Trust Fund, it will conclusively be deemed to have
satisfied its obligation relating to the maintenance of hazard insurance. Such
blanket policy may contain a deductible clause, in which case the Master
Servicer will be required to deposit from its own funds into the related
Security Account the amounts which would have been deposited therein but for
such clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements securing a Loan by fire,
lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions particularized in each
policy. Although the policies relating to the Loans may have been underwritten
by different insurers under different state laws in accordance with different
applicable forms and therefore may not contain identical terms and conditions,
the basic terms thereof are dictated by respective state laws, and most such
policies typically do not cover any physical damage resulting from the
following: war, revolution, governmental actions, floods and other water-related
causes, earth movement (including earthquakes, landslides and mud flows),
nuclear reactions, wet or dry rot, vermin, rodents, insects or domestic animals,
theft and, in certain cases, vandalism and hurricanes. The foregoing list is
merely indicative of certain kinds of uninsured risks and is not intended to be
all inclusive. If the Property securing a Loan is located in a federally
designated special flood area at the time of origination, the Master Servicer
will require the mortgagor or obligor to obtain and maintain flood insurance.
The hazard insurance policies covering properties securing the Loans
typically contain a clause which in effect requires the insured at all time to
carry insurance of a specified percentage (generally 80% to 90%) of the full
replacement value of the insured property in order to recover the full amount of
any partial loss. If the insured's coverage falls below this specified
percentage, then the insurer's liability in the event of partial loss will not
exceed the larger of (i) the actual cash value (generally defined as replacement
cost at the time and place of loss, less physical depreciation) of the
improvements damaged or destroyed or (ii) such proportion of the loss as the
amount of insurance carried bears to the specified percentage of the full
replacement cost of such improvements. Since the amount of hazard insurance the
Master Servicer may cause to be maintained on the improvements securing the
Loans declines as the principal balances owing thereon decrease, and since
improved real estate generally has appreciated in value over time in the past,
the effect of this requirement in the event of partial loss may be that hazard
insurance proceeds will be insufficient to restore fully the damaged property.
If specified in the related Prospectus Supplement, a special hazard insurance
policy will be obtained to insure against certain of the uninsured risks
described above. See "Credit Enhancement."
The Master Servicer will not require that a standard hazard or flood
insurance policy be maintained on the cooperative dwelling relating to any
Cooperative Loan. Generally, the Cooperative itself is responsible for
maintenance of hazard insurance for the property owned by the Cooperative and
the tenant-stockholders of that Cooperative do not maintain individual hazard
insurance policies. To the extent, however, that a Cooperative and the related
borrower on a Cooperative Loan do not maintain such insurance or do not maintain
adequate coverage or any insurance proceeds are not applied to the restoration
of damaged property, any damage to such borrower's cooperative dwelling or such
Cooperative's building could significantly reduce the value of the collateral
securing such Cooperative Loan to the extent not covered by other credit
support.
If the Property securing a defaulted Loan is damaged and proceeds, if any,
from the related hazard insurance policy are insufficient to restore the damaged
Property, the Master Servicer is not required to expend its own funds to restore
the damaged Property unless it determines (i) that such restoration will
increase the proceeds to Securityholders on liquidation of the Loan after
reimbursement of the Master Servicer for its expenses and (ii) that such
expenses will be recoverable by it from related Insurance Proceeds or
Liquidation Proceeds.
If recovery on a defaulted Loan under any related Insurance Policy is not
available for the reasons set forth in the preceding paragraph, or if the
defaulted Loan is not covered by an Insurance Policy, the Master Servicer will
be obligated to follow or cause to be followed such normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
Loan. If the proceeds of any liquidation of the Property securing the defaulted
Loan are less than the principal balance of such Loan plus interest accrued
thereon that is payable to Securityholders, the Trust Fund will realize a loss
in the amount of such difference plus the aggregate of expenses incurred by the
Master Servicer in connection with such proceedings and which are reimbursable
under the Agreement. In the unlikely event that any such proceedings result in a
total recovery which is, after reimbursement to the Master Servicer of its
expenses, in excess of the principal balance of such Loan plus interest accrued
thereon that is payable to Securityholders, the Master Servicer will be entitled
to withdraw or retain from the Security Account amounts representing its normal
servicing compensation with respect to such Loan and, unless otherwise specified
in the related Prospectus Supplement, amounts representing the balance of such
excess, exclusive of any amount required by law to be forwarded to the related
borrower, as additional servicing compensation.
If the Master Servicer or its designee recovers Insurance Proceeds which,
when added to any related Liquidation Proceeds and after deduction of certain
expenses reimbursable to the Master Servicer, exceed the principal balance of
such Loan plus interest accrued thereon that is payable to Securityholders, the
Master Servicer will be entitled to withdraw or retain from the Security Account
amounts representing its normal servicing compensation with respect to such
Loan. In the event that the Master Servicer has expended its own funds to
restore the damaged Property and such funds have not been reimbursed under the
related hazard insurance policy, it will be entitled to withdraw from the
Security Account out of related Liquidation Proceeds or Insurance Proceeds an
amount equal to such expenses incurred by it, in which event the Trust Fund may
realize a loss up to the amount so charged. Since Insurance Proceeds cannot
exceed deficiency claims and certain expenses incurred by the Master Servicer,
no such payment or recovery will result in a recovery to the Trust Fund which
exceeds the principal balance of the defaulted Loan together with accrued
interest thereon. See "Credit Enhancement."
The proceeds from any liquidation of a Loan will be applied in the
following order of priority: first, to reimburse the Master Servicer for any
unreimbursed expenses incurred by it to restore the related Property and any
unreimbursed servicing compensation payable to the Master Servicer with respect
to such Loan; second, to reimburse the Master Servicer for any unreimbursed
Advances with respect to such Loan; third, to accrued and unpaid interest (to
the extent no Advance has been made for such amount) on such Loan; and fourth,
as a recovery of principal of such Loan.
Realization Upon Defaulted Loans
Primary Mortgage Insurance Policies. If so specified in the related
Prospectus Supplement, the Master Servicer will maintain or cause to be
maintained, as the case may be, in full force and effect, a Primary Mortgage
Insurance Policy with regard to each Loan for which such coverage is required.
Primary Mortgage Insurance Policies reimburse certain losses sustained by reason
of defaults in payments by borrowers. The Master Servicer will not cancel or
refuse to renew any such Primary Mortgage Insurance Policy in effect at the time
of the initial issuance of a Series of Securities that is required to be kept in
force under the applicable Agreement unless the replacement Primary Mortgage
Insurance Policy for such cancelled or nonrenewed policy is maintained with an
insurer whose claims-paying ability is sufficient to maintain the current rating
of the classes of Securities of such Series that have been rated.
FHA Insurance; VA Guaranties. Loans designated in the related Prospectus
Supplement as insured by the FHA will be insured by the FHA as authorized under
the United States Housing Act of 1937, as amended. In addition to the Title I
Program of the FHA, see "Certain Legal Aspects of the Loans -- Title I Program,"
certain Loans will be insured under various FHA programs including the standard
FHA 203(b) program to finance the acquisition of one- to four-family housing
units and the FHA 245 graduated payment mortgage program. These programs
generally limit the principal amount and interest rates of the mortgage loans
insured. Loans insured by FHA generally require a minimum down payment of
approximately 5% of the original principal amount of the loan. No FHA-insured
Loans relating to a Series may have an interest rate or original principal
amount exceeding the applicable FHA limits at the time of origination of such
loan.
Loans designated in the related Prospectus Supplement as guaranteed by the
VA will be partially guaranteed by the VA under the Serviceman's Readjustment
Act of 1944, as amended (a "VA Guaranty"). The Serviceman's Readjustment Act of
1944, as amended, permits a veteran (or in certain instances the spouse of a
veteran) to obtain a mortgage loan guaranty by the VA covering mortgage
financing of the purchase of a one- to four-family dwelling unit at interest
rates permitted by the VA. The program has no mortgage loan limits, requires no
down payment from the purchaser and permits the guaranty of mortgage loans of up
to 30 years' duration. However, no Loan guaranteed by the VA will have an
original principal amount greater than five times the partial VA guaranty for
such Loan. The maximum guaranty that may be issued by the VA under a VA
guaranteed mortgage loan depends upon the original principal amount of the
mortgage loan, as further described in 38 United States Code Section 1803(a), as
amended.
Servicing and Other Compensation and Payment of Expenses
The principal servicing compensation to be paid to the Master Servicer in
respect of its master servicing activities for each Series of Securities will be
equal to the percentage per annum described in the related Prospectus Supplement
(which may vary under certain circumstances) of the outstanding principal
balance of each Loan, and such compensation will be retained by it from
collections of interest on such Loan in the related Trust Fund (the "Master
Servicing Fee"). As compensation for its servicing duties, a Sub-Servicer or, if
there is no Sub-Servicer, the Master Servicer will be entitled to a monthly
servicing fee as described in the related Prospectus Supplement. In addition,
the Master Servicer or Sub-Servicer will retain all prepayment charges,
assumption fees and late payment charges, to the extent collected from
borrowers, and any benefit that may accrue as a result of the investment of
funds in the applicable Security Account (unless otherwise specified in the
related Prospectus Supplement).
The Master Servicer will, to the extent provided in the related Prospectus
Supplement, pay or cause to be paid certain ongoing expenses associated with
each Trust Fund and incurred by it in connection with its responsibilities under
the related Agreement, including, without limitation, payment of the fees and
disbursements of the Trustee, any custodian appointed by the Trustee, the
certificate registrar and any paying agent, and payment of expenses incurred in
enforcing the obligations of Sub-Servicers and Sellers. The Master Servicer will
be entitled to reimbursement of expenses incurred in enforcing the obligations
of Sub-Servicers and Sellers under certain limited circumstances. Certain other
expenses may be borne by the related Trust Fund as specified in the related
Prospectus Supplement.
Evidence as to Compliance
Each Agreement will provide that on or before a specified date in each
year, a firm of independent public accountants will furnish a statement to the
Trustee to the effect that, on the basis of the examination by such firm
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC, the servicing by or on behalf of the Master Servicer of mortgage loans or
private asset backed securities, or under pooling and servicing agreements
substantially similar to each other (including the related Agreement) was
conducted in compliance with such agreements except for any significant
exceptions or errors in records that, in the opinion of the firm, the Audit
Program for Mortgages serviced for FHLMC, or the Uniform Single Attestation
Program for Mortgage Bankers, it is required to report. In rendering its
statement such firm may rely, as to matters relating to the direct servicing of
Loans by Sub-Servicers, 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 firms of independent public accountants
with respect to the related Sub-Servicer.
Each Agreement will also provide for delivery to the Trustee, on or before
a specified date in each year, of an annual statement signed by an officer of
the Master Servicer to the effect that the Master Servicer has fulfilled its
obligations under the Agreement throughout the preceding year.
Copies of the annual accountants' statement and the statement of an officer
of the Master Servicer may be obtained by Securityholders of the related Series
without charge upon written request to the Master Servicer at the address set
forth in the related Prospectus Supplement.
Certain Matters Regarding the Master Servicer and the Depositor
The Master Servicer under each Pooling and Servicing Agreement or Master
Servicing Agreement, as applicable, will be named in the related Prospectus
Supplement. The entity serving as Master Servicer may be an affiliate of the
Depositor and may otherwise have normal business relationships with the
Depositor or the Depositor's affiliates.
Each Agreement will provide that the Master Servicer may not resign from
its obligations and duties under the Agreement except upon a determination that
its duties thereunder are no longer permissible under applicable law. The Master
Servicer may, however, be removed from its obligations and duties as set forth
in the Agreement. No such resignation will become effective until the Trustee or
a successor servicer has assumed the Master Servicer's obligations and duties
under the Agreement.
Each Agreement will further provide that neither the Master Servicer, the
Depositor nor any director, officer, employee, or agent of the Master Servicer
or the Depositor will be under any liability to the related Trust Fund or
Securityholders for any action taken or for refraining from the taking of any
action in good faith pursuant to the Agreement, or for errors in judgment;
provided, however, that neither the Master Servicer, the Depositor nor any such
person will be protected against any liability which would otherwise be imposed
by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. Each Agreement will further provide that the
Master Servicer, the Depositor and any director, officer, employee or agent of
the Master Servicer or the Depositor will be entitled to indemnification by the
related Trust Fund and will be held harmless against any loss, liability or
expense incurred in connection with any legal action relating to the Agreement
or the Securities, other than any loss, liability or expense related to any
specific Loan or Loans (except any such loss, liability or expense otherwise
reimbursable pursuant to the Agreement) and any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, each Agreement will provide that
neither the Master Servicer nor the Depositor will be under any obligation to
appear in, prosecute or defend any legal action which is not incidental to its
respective responsibilities under the Agreement and which in its opinion may
involve it in any expense or liability. The Master Servicer or the Depositor
may, however, in its discretion undertake any such action which it may deem
necessary or desirable with respect to the Agreement and the rights and duties
of the parties thereto and the interests of the Securityholders thereunder. In
such event, the legal expenses and costs of such action and any liability
resulting therefrom will be expenses, costs and liabilities of the Trust Fund
and the Master Servicer or the Depositor, as the case may be, will be entitled
to be reimbursed therefor out of funds otherwise distributable to
Securityholders.
Except as otherwise specified in the related Prospectus Supplement, any
person into which the Master Servicer may be merged or consolidated, or any
person resulting from any merger or consolidation to which the Master Servicer
is a party, or any person succeeding to the business of the Master Servicer,
will be the successor of the Master Servicer under each Agreement, provided that
such person is qualified to sell mortgage loans to, and service mortgage loans
on behalf of, FNMA or FHLMC and further provided that such merger, consolidation
or succession does not adversely affect the then current rating or ratings of
the class or classes of Securities of such Series that have been rated.
Events of Default; Rights Upon Event of Default
Pooling and Servicing Agreement; Master Servicing Agreement. Except as
otherwise specified in the related Prospectus Supplement, Events of Default
under each Agreement will consist of (i) any failure by the Master Servicer to
distribute or cause to be distributed to Securityholders of any class any
required payment which continues unremedied for five days after the giving of
written notice of such failure to the Master Servicer by the Trustee or the
Depositor, or to the Master Servicer, the Depositor and the Trustee by the
holders of Securities of such class evidencing not less than 25% of the total
distributions allocated to such class ("Percentage Interests"); (ii) any failure
by the Master Servicer duly to observe or perform in any material respect any of
its other covenants or agreements in the Agreement, which failure materially
affects the rights of Securityholders and continues unremedied for thirty days
after the giving of written notice of such failure to the Master Servicer by the
Trustee or the Depositor, or to the Master Servicer, the Depositor and the
Trustee by the holders of Securities of any class evidencing not less than 25%
of the aggregate Percentage Interests constituting such class; and (iii) certain
events of insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceeding and certain actions by or on behalf of the
Master Servicer indicating its insolvency, reorganization or inability to pay
its obligations.
If specified in the related Prospectus Supplement, the Agreement will
permit the Trustee to sell the Trust Fund Assets and the other assets of the
Trust Fund described under "Credit Enhancement" herein in the event that
payments in respect thereto are insufficient to make payments required in the
Agreement. The assets of the Trust Fund will be sold only under the
circumstances and in the manner specified in the related Prospectus Supplement.
Unless otherwise provided in the related Prospectus Supplement, so long as
an Event of Default under an Agreement remains unremedied, the Depositor or the
Trustee may, and at the direction of holders of Securities of any class
evidencing not less than 66 2/3% of the aggregate Percentage Interests
constituting such class and under such other circumstances as may be specified
in such Agreement, the Trustee shall terminate all of the rights and obligations
of the Master Servicer under the Agreement relating to such Trust Fund and in
and to the related Trust Fund Assets, whereupon the Trustee will succeed to all
of the responsibilities, duties and liabilities of the Master Servicer under the
Agreement, including, if specified in the related Prospectus Supplement, the
obligation to make Advances, and will be entitled to similar compensation
arrangements. In the event that the Trustee is unwilling or unable so to act, it
may appoint, or petition a court of competent jurisdiction for the appointment
of, a mortgage loan servicing institution with a net worth of a least
$10,000,000 to act as successor to the Master Servicer under the Agreement.
Pending such appointment, the Trustee is obligated to act in such capacity. The
Trustee and any such successor may agree upon the servicing compensation to be
paid, which in no event may be greater than the compensation payable to the
Master Servicer under the Agreement.
Unless otherwise provided in the related Prospectus Supplement, no
Securityholder, solely by virtue of such holder's status as a Securityholder,
will have any right under any Agreement to institute any proceeding with respect
to such Agreement, unless such holder previously has given to the Trustee
written notice of default and unless the holders of Securities of any class of
such Series evidencing not less than 66 2/3% of the aggregate Percentage
Interests constituting such class have made written request upon the Trustee to
institute such proceeding in its own name as Trustee thereunder and have offered
to the Trustee reasonable indemnity, and the Trustee for 60 days has neglected
or refused to institute any such proceeding.
Indenture. Except as otherwise specified in the related Prospectus
Supplement, Events of Default under the Indenture for each Series of Notes
include: (i) a default in the payment of any principal of or interest on any
Note of such Series which continues unremedied for five days after the giving of
written notice of such default is given as specified in the related Prospectus
Supplement; (ii) failure to perform in any material respect any other covenant
of the Depositor or the Trust Fund in the Indenture which continues for a period
of thirty (30) days after notice thereof is given in accordance with the
procedures described in the related Prospectus Supplement; (iii) certain events
of bankruptcy, insolvency, receivership or liquidation of the Depositor or the
Trust Fund; or (iv) any other Event of Default provided with respect to Notes of
that Series including but not limited to certain defaults on the part of the
issuer, if any, of a credit enhancement instrument supporting such Notes.
If an Event of Default with respect to the Notes of any Series at the time
outstanding occurs and is continuing, either the Trustee or the holders of a
majority of the then aggregate outstanding amount of the Notes of such Series
may declare the principal amount (or, if the Notes of that Series have an
interest rate of 0%, such portion of the principal amount as may be specified in
the terms of that Series, as provided in the related Prospectus Supplement) of
all the Notes of such Series to be due and payable immediately. Such declaration
may, under certain circumstances, be rescinded and annulled by the holders of
more than 50% of the Percentage Interests of the Notes of such Series.
If, following an Event of Default with respect to any Series of Notes, the
Notes of such Series have been declared to be due and payable, the Trustee may,
in its discretion, notwithstanding such acceleration, elect to maintain
possession of the collateral securing the Notes of such Series and to continue
to apply distributions on such collateral as if there had been no declaration of
acceleration if such collateral continues to provide sufficient funds for the
payment of principal of and interest on the Notes of such Series as they would
have become due if there had not been such a declaration. In addition, the
Trustee may not sell or otherwise liquidate the collateral securing the Notes of
a Series following an Event of Default, other than a default in the payment of
any principal or interest on any Note of such Series for five days or more,
unless (a) the holders of 100% of the Percentage Interests of the Notes of such
Series consent to such sale, (b) the proceeds of such sale or liquidation are
sufficient to pay in full the principal of and accrued interest, due and unpaid,
on the outstanding Notes of such Series at the date of such sale or (c) the
Trustee determines that such collateral would not be sufficient on an ongoing
basis to make all payments on such Notes as such payments would have become due
if such Notes had not been declared due and payable, and the Trustee obtains the
consent of the holders of 66 2/3% of the Percentage Interests of the Notes of
such Series.
In the event that the Trustee liquidates the collateral in connection with
an Event of Default involving a default for five days or more in the payment of
principal of or interest on the Notes of a Series, the Indenture provides that
the Trustee will have a prior lien on the proceeds of any such liquidation for
unpaid fees and expenses. As a result, upon the occurrence of such an Event of
Default, the amount available for distribution to the Noteholders would be less
than would otherwise be the case. However, the Trustee may not institute a
proceeding for the enforcement of its lien except in connection with a
proceeding for the enforcement of the lien of the Indenture for the benefit of
the Noteholders after the occurrence of such an Event of Default.
Except as otherwise specified in the related Prospectus Supplement, in the
event the principal of the Notes of a Series is declared due and payable, as
described above, the holders of any such Notes issued at a discount from par may
be entitled to receive no more than an amount equal to the unpaid principal
amount thereof less the amount of such discount which is unamortized.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing with respect
to a Series of Notes, the Trustee shall be under no obligation to exercise any
of the rights or powers under the Indenture at the request or direction of any
of the holders of Notes of such Series, unless such holders offered to the
Trustee security or indemnity satisfactory to it against the costs, expenses and
liabilities which might be incurred by it in complying with such request or
direction. Subject to such provisions for indemnification and certain
limitations contained in the Indenture, the holders of a majority of the then
aggregate outstanding amount of the Notes of such Series shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Notes of such Series, and the holders of a majority
of the then aggregate outstanding amount of the Notes of such Series may, in
certain cases, waive any default with respect thereto, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or consent
of all the holders of the outstanding Notes of such Series affected thereby.
Amendment
Except as otherwise specified in the related Prospectus Supplement, each
Agreement may be amended by the Depositor, the Master Servicer and the Trustee,
without the consent of any of the Securityholders, (i) to cure any ambiguity or
mistake; (ii) to correct any defective provision therein or to supplement any
provision therein which may be inconsistent with any other provision therein;
(iii) to add to the duties of the Depositor, the Seller or the Master Servicer,
(iv) to add any other provisions with respect to matters or questions arising
thereunder or (v) to modify, alter, amend, add to or rescind any of the terms or
provisions contained in such Agreement; provided, however, that any such action
pursuant to clauses (iv) or (v) above, will not, as evidenced by an opinion of
counsel, adversely affect in any material respect the interests of any
Securityholder; provided, however, that no opinion of counsel will be required
if the person requesting such amendment obtains a letter from each Rating Agency
requested to rate the class or classes of Securities of such Series stating that
such amendment will not result in the downgrading or withdrawal of the
respective ratings then assigned to such Securities. In addition, if a REMIC or
FASIT election is made with respect to a Trust Fund, the related Agreement may
be amended to modify, eliminate or add to any of its provisions to such extent
as may be necessary or helpful to maintain the qualification of the related
Trust Fund as a REMIC or as a FASIT, avoid or minimize the risk of the
imposition of any tax on the REMIC or FASIT or to comply with any other
provision of the Code, provided that the Trustee has received an opinion of
counsel to the effect that such action is necessary or helpful to maintain such
qualification, avoid or minimize the risk of imposition of such a tax or comply
with any such requirement of the Code, as the case may be. Except as otherwise
specified in the related Prospectus Supplement, each Agreement may also be
amended by the Depositor, the Master Servicer and the Trustee with the consent
of holders of Securities of such Series evidencing not less than 66 2/3% of the
aggregate Percentage Interests of each class affected thereby for the purpose of
adding any provisions to or changing in an manner or eliminating any of the
provisions of the Agreement or of modifying in any manner the rights of the
holders of the related Securities; provided, however, that no such amendment may
(i) reduce in any manner the amount of or delay the timing of, payments received
on Loans which are required to be distributed on any Security without the
consent of the holder of such Security, (ii) adversely affect in any material
respect the interests of the holders of any class of Securities in a manner
other than as described in the immediately preceding clause (i), without the
consent of the holders of Securities of such class evidencing not less than 66
2/3% of the Percentage Interests of such class, or (iii) reduce the aforesaid
percentage of Securities of any class the holders of which are required to
consent to any such amendment without the consent of the holders of all
Securities of such class covered by such Agreement then outstanding. If a REMIC
or FASIT election is made with respect to a Trust Fund, the Trustee will not be
entitled to consent to an amendment to the related Agreement without having
first received an opinion of counsel to the effect that such amendment will not
cause such Trust Fund to fail to qualify as a REMIC or as a FASIT, as the case
may be.
Termination; Optional Termination
Pooling and Servicing Agreement; Trust Agreement. Unless otherwise
specified in the related Agreement, the obligations created by each Pooling and
Servicing Agreement and Trust Agreement for each Series of Securities will
terminate upon the payment to the related Securityholders of all amounts held in
the Security Account or by the Master Servicer and required to be paid to them
pursuant to such Agreement following the later of (i) the final payment of or
other liquidation of the last of the Trust Fund Assets subject thereto or the
disposition of all property acquired upon foreclosure of any such Trust Fund
Assets remaining in the Trust Fund and (ii) the purchase by the Master Servicer
or, if specified in the related Prospectus Supplement, by the holder of a call
right with respect to the Trust Fund Assets after the passage of a specified
period of time or after the principal balance of the Trust Fund Assets or the
Securities has been reduced to a specified level.
Unless otherwise specified by the related Prospectus Supplement, any such
purchase of Trust Fund Assets and property acquired in respect of Trust Fund
Assets will be made at the option of the Master Servicer or such other person at
a price specified in the related Prospectus Supplement. The exercise of such
right will effect early retirement of the Securities of that Series, but the
right of the Master Servicer or such other person to so purchase is subject to
the principal balance of the related Trust Fund Assets being less than the
percentage specified in the related Prospectus Supplement of the aggregate
principal balance of the Trust Fund Assets at the Cut-off Date for the Series.
The foregoing is subject to the provision that if a REMIC election is made
with respect to a Trust Fund, any repurchase pursuant to clause (ii) above
will be made only in connection with a "qualified liquidation" of the REMIC
within the meaning of Section 860F(g)(4) of the Code.
Indenture. The Indenture will be discharged with respect to a Series of
Notes (except with respect to certain continuing rights specified in the
Indenture) upon the delivery to the Trustee for cancellation of all the Notes of
such Series or, with certain limitations, upon deposit with the Trustee of funds
sufficient for the payment in full of all of the Notes of such Series.
In addition to such discharge with certain limitations, the Indenture will
provide that, if so specified with respect to the Notes of any Series, the
related Trust Fund will be discharged from any and all obligations in respect of
the Notes of such Series (except for certain obligations relating to temporary
Notes and exchange of Notes, to register the transfer of or exchange Notes of
such Series, to replace stolen, lost or mutilated Notes of such Series, to
maintain paying agencies and to hold monies for payment in trust) upon the
deposit with the Trustee, in trust, of money and/or direct obligations of or
obligations guaranteed by the United States of America which through the payment
of interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of and each
installment of interest on the Notes of such Series on the last scheduled
Distribution Date for such Notes and any installment of interest on such Notes
in accordance with the terms of the Indenture and the Notes of such Series. In
the event of any such defeasance and discharge of Notes of such Series, holders
of Notes of such Series would be able to look only to such money and/or direct
obligations for payment of principal and interest, if any, on their Notes until
maturity.
The Trustee
The Trustee under each Agreement will be named in the applicable Prospectus
Supplement. The commercial bank or trust company serving as Trustee may have
normal banking relationships with the Depositor, the Master Servicer and any of
their respective affiliates.
CERTAIN LEGAL ASPECTS OF THE LOANS
The following discussion contains summaries, which are general in nature,
of certain legal matters relating to the Loans. Because such legal aspects are
governed primarily by applicable state law (which laws may differ
substantially), the descriptions do not, except as expressly provided below,
reflect the laws of any particular state, nor encompass the laws of all states
in which the security for the Loans is situated. The descriptions are qualified
in their entirety by reference to the applicable federal laws and the
appropriate laws of the states in which Loans may be originated.
General
The Loans for a Series may be secured by deeds of trust, mortgages,
security deeds or deeds to secure debt, depending upon the prevailing practice
in the state in which the property subject to the loan is located. Deeds of
trust are used almost exclusively in California instead of mortgages. A mortgage
creates a lien upon the real property encumbered by the mortgage, which lien is
generally not prior to the lien for real estate taxes and assessments. Priority
between mortgages depends on their terms and generally on the order of recording
with a state or county office. There are two parties to a mortgage, the
mortgagor, who is the borrower and owner of the mortgaged property, and the
mortgagee, who is the lender. Under the mortgage instrument, the mortgagor
delivers to the mortgagee a note or bond and the mortgage. Although a deed of
trust is similar to a mortgage, a deed of trust formally has three parties, the
borrower-property owner called the trustor (similar to a mortgagor), a lender
(similar to a mortgagee) called the beneficiary, and a third-party grantee
called the trustee. Under a deed of trust, the borrower grants the property,
irrevocably until the debt is paid, in trust, generally with a power of sale, to
the trustee to secure payment of the obligation. A security deed and a deed to
secure debt are special types of deeds which indicate on their face that they
are granted to secure an underlying debt. By executing a security deed or deed
to secure debt, the grantor conveys title to, as opposed to merely creating a
lien upon, the subject property to the grantee until such time as the underlying
debt is repaid. The trustee's authority under a deed of trust, the mortgagee's
authority under a mortgage and the grantee's authority under a security deed or
deed to secure debt are governed by law and, with respect to some deeds of
trust, the directions of the beneficiary.
Cooperatives. Certain of the Loans may be Cooperative Loans. The
Cooperative owns all the real property that comprises the project, including the
land, separate dwelling units and all common areas. The Cooperative is directly
responsible for project management and, in most cases, payment of real estate
taxes and hazard and liability insurance. If there is a blanket mortgage on the
Cooperative and/or underlying land, as is generally the case, the Cooperative,
as project mortgagor, is also responsible for meeting these mortgage
obligations. A blanket mortgage is ordinarily incurred by the Cooperative in
connection with the construction or purchase of the Cooperative's apartment
building. The interest of the occupant under proprietary leases or occupancy
agreements to which that Cooperative is a party are generally subordinate to the
interest of the holder of the blanket mortgage in that building. If the
Cooperative is unable to meet the payment obligations arising under its blanket
mortgage, the mortgagee holding the blanket mortgage could foreclose on that
mortgage and terminate all subordinate proprietary leases and occupancy
agreements. In addition, the blanket mortgage on a Cooperative may provide
financing in the form of a mortgage that does not fully amortize with a
significant portion of principal being due in one lump sum at final maturity.
The inability of the Cooperative to refinance this mortgage and its consequent
inability to make such final payment could lead to foreclosure by the mortgagee
providing the financing. A foreclosure in either event by the holder of the
blanket mortgage could eliminate or significantly diminish the value of any
collateral held by the lender who financed the purchase by an individual
tenant-stockholder of Cooperative shares or, in the case of a Trust Fund
including Cooperative Loans, the collateral securing the Cooperative Loans.
The Cooperative is owned by tenant-stockholders who, through ownership of
stock, shares or membership certificates in the corporation, receive proprietary
leases or occupancy agreements which confer exclusive rights to occupy specific
units. Generally, a tenant-stockholder of a Cooperative must make a monthly
payment to the Cooperative representing such tenant-stockholder's pro rata share
of the Cooperative's payments for its blanket mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership
interest in a Cooperative and accompanying rights is financed through a
Cooperative share loan evidenced by a promissory note and secured by a security
interest in the occupancy agreement or proprietary lease and in the related
Cooperative shares. The lender takes possession of the share certificate and a
counterpart of the proprietary lease or occupancy agreement, and a financing
statement covering the proprietary lease or occupancy agreement and the
Cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue for
judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or tenant-stockholder
as an individual as provided in the security agreement covering the assignment
of the proprietary lease or occupancy agreement and the pledge of Cooperative
shares.
Foreclosure
Deed of Trust. Foreclosure of a deed of trust is generally accomplished by
a non-judicial sale under a specific provision in the deed of trust which
authorizes the trustee to sell the property at public auction upon any default
by the borrower under the terms of the note or deed of trust. In certain states,
such foreclosure also may be accomplished by judicial action in the manner
provided for foreclosure of mortgages. In addition to any notice requirements
contained in a deed of trust, in some states (such as California), the trustee
must record a notice of default and send a copy to the borrower-trustor, to any
person who has recorded a request for a copy of any notice of default and notice
of sale, to any successor in interest to the borrower-trustor, to the
beneficiary of any junior deed of trust and to certain other persons. In some
states (including California), the borrower-trustor has the right to reinstate
the loan at any time following default until shortly before the trustee's sale.
In general, the borrower, or any other person having a junior encumbrance on the
real estate, may, during a statutorily prescribed reinstatement period, cure a
monetary default by paying the entire amount in arrears plus other designated
costs and expenses incurred in enforcing the obligation. Generally, state law
controls the amount of foreclosure expenses and costs, including attorney's
fees, which may be recovered by a lender. After the reinstatement period has
expired without the default having been cured, the borrower or junior lienholder
no longer has the right to reinstate the loan and must pay the loan in full to
prevent the scheduled foreclosure sale. If the deed of trust is not reinstated
within any applicable cure period, a notice of sale must be posted in a public
place and, in most states (including California), published for a specific
period of time in one or more newspapers. In addition, some state laws require
that a copy of the notice of sale be posted on the property and sent to all
parties having an interest of record in the real property.
Mortgages. Foreclosure of a mortgage is generally accomplished by judicial
action. The action is initiated by the service of legal pleadings upon all
parties having an interest in the real property. Delays in completion of the
foreclosure may occasionally result from difficulties in locating necessary
parties. Judicial foreclosure proceedings are often not contested by any of the
parties. When the mortgagee's right to foreclosure is contested, the legal
proceedings necessary to resolve the issue can be time consuming. After the
completion of a judicial foreclosure proceeding, the court generally issues a
judgment of foreclosure and appoints a referee or other court officer to conduct
the sale of the property. In some states, mortgages may also be foreclosed by
advertisement, pursuant to a power of sale provided in the mortgage.
Although foreclosure sales are typically public sales, frequently no third
party purchaser bids in excess of the lender's lien because of the difficulty of
determining the exact status of title to the property, the possible
deterioration of the property during the foreclosure proceedings and a
requirement that the purchaser pay for the property in cash or by cashier's
check. Thus the foreclosing lender often purchases the property from the trustee
or referee for an amount equal to the principal amount outstanding under the
loan, accrued and unpaid interest and the expenses of foreclosure in which event
the mortgagor's debt will be extinguished or the lender may purchase for a
lesser amount in order to preserve its right against a borrower to seek a
deficiency judgment in states where such judgment is available. Thereafter,
subject to the right of the borrower in some states to remain in possession
during the redemption period, the lender will assume the burden of ownership,
including obtaining hazard insurance and making such repairs at its own expense
as are necessary to render the property suitable for sale. The lender will
commonly obtain the services of a real estate broker and pay the broker's
commission in connection with the sale of the property. Depending upon market
conditions, the ultimate proceeds of the sale of the property may not equal the
lender's investment in the property. Any loss may be reduced by the receipt of
any mortgage guaranty insurance proceeds.
Courts have imposed general equitable principles upon foreclosure, which
are generally designed to mitigate the legal consequences to the borrower of the
borrower's defaults under the loan documents. Some courts have been faced with
the issue of whether federal or state constitutional provisions reflecting due
process concerns for fair notice require that borrowers under deeds of trust
receive notice longer than that prescribed by statute. For the most part, these
cases have upheld the notice provisions as being reasonable or have found that
the sale by a trustee under a deed of trust does not involve sufficient state
action to afford constitutional protection to the borrower.
When the beneficiary under a junior mortgage or deed of trust cures the
default and reinstates or redeems by paying the full amount of the senior
mortgage or deed of trust, the amount paid by the beneficiary so to cure or
redeem becomes a part of the indebtedness secured by the junior mortgage or deed
of trust. See "Junior Mortgages; Rights of Senior Mortgagees" below.
Cooperative Loans. The Cooperative shares owned by the tenant-stockholder
and pledged to the lender are, in almost all cases, subject to restrictions on
transfer as set forth in the Cooperative's certificate of incorporation and
bylaws, as well as the proprietary lease or occupancy agreement, and may be
cancelled by the Cooperative for failure by the tenant-stockholder to pay rent
or other obligations or charges owed by such tenant-stockholder, including
mechanics' liens against the cooperative apartment building incurred by such
tenant-stockholder. The proprietary lease or occupancy agreement generally
permits the Cooperative to terminate such lease or agreement in the event an
obligor fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the Cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder on its obligations
under the proprietary lease or occupancy agreement. A default by the
tenant-stockholder under the proprietary lease or occupancy agreement will
usually constitute a default under the security agreement between the lender and
the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the Cooperative will take no action to terminate such lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the Cooperative will recognize the
lender's lien against proceeds from the sale of the Cooperative apartment,
subject, however, to the Cooperative's right to sums due under such proprietary
lease or occupancy agreement. The total amount owed to the Cooperative by the
tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the value of the collateral below the outstanding
principal balance of the Cooperative Loan and accrued and unpaid interest
thereon.
Recognition agreements also provide that in the event of a foreclosure on a
Cooperative Loan, the lender must obtain the approval or consent of the
Cooperative as required by the proprietary lease before transferring the
Cooperative shares or assigning the proprietary lease. Generally, the lender is
not limited in any rights it may have to dispossess the tenant-stockholders.
In some states, foreclosure on the Cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the Uniform Commercial
Code (the "UCC") and the security agreement relating to those shares. Article 9
of the UCC requires that a sale be conducted in a "commercially reasonable"
manner. Whether a foreclosure sale has been conducted in a "commercially
reasonable" manner will depend on the facts in each case. In determining
commercial reasonableness, a court will look to the notice given the debtor and
the method, manner, time, place and terms of the foreclosure. Generally, a sale
conducted according to the usual practice of banks selling similar collateral
will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be applied
first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to reimbursement
is subject to the right of the Cooperative to receive sums due under the
proprietary lease or occupancy agreement. If there are proceeds remaining, the
lender must account to the tenant-stockholder for the surplus. Conversely, if a
portion of the indebtedness remains unpaid, the tenant-stockholder is generally
responsible for the deficiency. See "Anti- Deficiency Legislation and Other
Limitations on Lenders" below.
In the case of foreclosure on a building which was converted from a rental
building to a building owned by a Cooperative under a non-eviction plan, some
states require that a purchaser at a foreclosure sale take the property subject
to rent control and rent stabilization laws which apply to certain tenants who
elected to remain in the building but who did not purchase shares in the
Cooperative when the building was so converted.
Environmental Risks
Real property pledged as security to a lender may be subject to unforeseen
environmental risks. Under the laws of certain states, contamination of a
property may give rise to a lien on the property to assure the payment of the
costs of clean-up. In several states such a lien has priority over the lien of
an existing mortgage against such property. In addition, under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), the United States Environmental Protection Agency ("EPA") may impose
a lien on property where EPA has incurred clean-up costs. However, a CERCLA lien
is subordinate to pre-existing, perfected security interests.
Under the laws of some states, and under CERCLA, it is conceivable that a
secured lender may be held liable as an "owner" or "operator" for the costs of
addressing releases or threatened releases of hazardous substances at a
Property, even though the environmental damage or threat was caused by a prior
or current owner or operator. CERCLA imposes liability for such costs on any and
all "responsible parties," including owners or operators. However, CERCLA
excludes from the definition of "owner or operator" a secured creditor who holds
indicia of ownership primarily to protect its security interest (the "secured
creditor exclusion") but without "participating in the management" of the
Property. Thus, if a lender's activities begin to encroach on the actual
management of a contaminated facility or property, the lender may incur
liability as an "owner or operator" under CERCLA. Similarly, if a lender
forecloses and takes title to a contaminated facility or property, the lender
may incur CERCLA liability in various circumstances, including, but not limited
to, when it holds the facility or property as an investment (including leasing
the facility or property to third party), or fails to market the property in a
timely fashion.
Whether actions taken by a lender would constitute participation in the
management of a mortgaged property, or the business of a borrower, so as to
render the secured creditor exemption unavailable to a lender has been a matter
of judicial interpretation of the statutory language, and court decisions have
been inconsistent. In 1990, the Court of Appeals for the Eleventh Circuit
suggested that the mere capacity of the lender to influence a borrower's
decisions regarding disposal of hazardous substances was sufficient
participation in the management of the borrower's business to deny the
protection of the secured creditor exemption to the lender.
This ambiguity appears to have been resolved by the enactment of the Asset
Conservation, Lender Liability and Deposit Insurance Protection Act of 1996,
which was signed into law by President Clinton on September 30, 1996. This
legislation provides that in order to be deemed to have participated in the
management of a mortgaged property, a lender must actually participate in the
operational affairs of the property or the borrower. The legislation also
provides that participation in the management of the property does not include
"merely having the capacity to influence, or unexercised right to control"
operations. Rather, a lender will lose the protection of the secured creditor
exemption only if it exercises decision-making control over the borrower's
environmental compliance and hazardous substance handling and disposal
practices, or assumes day-to-day management of all operational functions of the
mortgaged property.
If a lender is or becomes liable, it can bring an action for contribution
against any other "responsible parties," including a previous owner or operator,
who created the environmental hazard, but those persons or entities may be
bankrupt or otherwise judgment proof. The costs associated with environmental
cleanup may be substantial. It is conceivable that such costs arising from the
circumstances set forth above would result in a loss to Certificateholders.
CERCLA does not apply to petroleum products, and the secured creditor
exclusion does not govern liability for cleanup costs under federal laws other
than CERCLA, in particular Subtitle I of the federal Resource Conservation and
Recovery Act ("RCRA"), which regulates underground petroleum storage tanks
(except heating oil tanks). The EPA has adopted a lender liability rule for
underground storage tanks under Subtitle I of RCRA. Under such rule, a holder of
a security interest in an underground storage tank or real property containing
an underground storage tank is not considered an operator of the underground
storage tank as long as petroleum is not added to, stored in or dispensed from
the tank. In addition, under the Asset Conservation, Lender Liability and
Deposit Insurance Protection Act of 1996, the protections accorded to lenders
under CERCLA are also accorded to the holders of security interests in
underground storage tanks. It should be noted, however, that liability for
cleanup of petroleum contamination may be governed by state law, which may not
provide for any specific protection for secured creditors, or alternatively, may
not impose liability on secured creditors at all.
Except as otherwise specified in the related Prospectus Supplement, at the
time the Loans were originated, no environmental assessment or a very limited
environmental assessment of the Properties was conducted.
Rights of Redemption
In some states, after sale pursuant to a deed of trust or foreclosure of a
mortgage, the borrower and foreclosed junior lienors are given a statutory
period in which to redeem the property from the foreclosure sale. In certain
other states (including California), this right of redemption applies only to
sales following judicial foreclosure, and not to sales pursuant to a
non-judicial power of sale. In most states where the right of redemption is
available, statutory redemption may occur upon payment of the foreclosure
purchase price, accrued interest and taxes. In other states, redemption may be
authorized if the former borrower pays only a portion of the sums due. The
effect of a statutory right of redemption is to diminish the ability of the
lender to sell the foreclosed property. The exercise of a right of redemption
would defeat the title of any purchaser from the lender subsequent to
foreclosure or sale under a deed of trust. Consequently, the practical effect of
the redemption right is to force the lender to retain the property and pay the
expenses of ownership until the redemption period has run. In some states, there
is no right to redeem property after a trustee's sale under a deed of trust.
Anti-Deficiency Legislation; Bankruptcy Laws; Tax Liens
Certain states have imposed statutory and judicial restrictions that limit
the remedies of a beneficiary under a deed of trust or a mortgagee under a
mortgage. In some states, including California, statutes and case law limit the
right of the beneficiary or mortgagee to obtain a deficiency judgment against
borrowers financing the purchase of their residence or following sale under a
deed of trust or certain other foreclosure proceedings. A deficiency judgment is
a personal judgment against the borrower equal in most cases to the difference
between the amount due to the lender and the fair market value of the real
property at the time of the foreclosure sale. In certain states, including
California, if a lender simultaneously originates a loan secured by a senior
lien on a particular property and a loan secured by a junior lien on the same
property, such a lender as the holder of the junior lien may be precluded from
obtaining a deficiency judgment with respect to the excess of the aggregate
amount owed under both such loans over the proceeds of any sale under a deed of
trust or other foreclosure proceedings. As a result of these prohibitions, it is
anticipated that in most instances the Master Servicer will utilize the
non-judicial foreclosure remedy and will not seek deficiency judgments against
defaulting borrowers.
Some state statutes require the beneficiary or mortgagee to exhaust the
security afforded under a deed of trust or mortgage by foreclosure in an attempt
to satisfy the full debt before bringing a personal action against the borrower.
In certain other states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting such security;
however, in some of these states, the lender, following judgment on such
personal action, may be deemed to have elected a remedy and may be precluded
from exercising remedies with respect to the security. Consequently, the
practical effect of the election requirement, when applicable, is that lenders
will usually proceed first against the security rather than bringing a personal
action against the borrower. In some states, exceptions to the anti-deficiency
statutes are provided for in certain instances where the value of the lender's
security has been impaired by acts or omissions of the borrower, for example, in
the event of waste of the property. Finally, other statutory provisions limit
any deficiency judgment against the former borrower following a foreclosure sale
to the excess of the outstanding debt over the fair market value of the property
at the time of the public sale. The purpose of these statutes is generally to
prevent a beneficiary or a mortgagee from obtaining a large deficiency judgment
against the former borrower as a result of low or no bids at the foreclosure
sale.
Generally, Article 9 of the UCC governs foreclosure on Cooperative shares
and the related proprietary lease or occupancy agreement. Some courts have
interpreted section 9-504 of the UCC to prohibit a deficiency award unless the
creditor establishes that the sale of the collateral (which, in the case of a
Cooperative Loan, would be the shares of the Cooperative and the related
proprietary lease or occupancy agreement) was conducted in a commercially
reasonable manner.
In addition to anti-deficiency and related legislation, numerous other
federal and state statutory provisions, including the federal bankruptcy laws,
and state laws affording relief to debtors, may interfere with or affect the
ability of the secured mortgage lender to realize upon its security. For
example, in a proceeding under the Bankruptcy Code, a lender may not foreclose
on a mortgaged property without the permission of the bankruptcy court. The
rehabilitation plan proposed by the debtor may provide, if the mortgaged
property is not the debtor's principal residence and the court determines that
the value of the mortgaged property is less than the principal balance of the
mortgage loan, for the reduction of the secured indebtedness to the value of the
mortgaged property as of the date of the commencement of the bankruptcy,
rendering the lender a general unsecured creditor for the difference, and also
may reduce the monthly payments due under such mortgage loan, change the rate of
interest and alter the mortgage loan repayment schedule. The effect of any such
proceedings under the Bankruptcy Code, including but not limited to any
automatic stay, could result in delays in receiving payments on the Loans
underlying a Series of Securities and possible reductions in the aggregate
amount of such payments.
The federal tax laws provide priority to certain tax liens over the lien of
a mortgage or secured party.
Due-on-Sale Clauses
Unless otherwise specified in the related Prospectus Supplement, each
conventional Loan will contain a due-on-sale clause which will generally provide
that if the mortgagor or obligor sells, transfers or conveys the Property, the
loan or contract may be accelerated by the mortgagee or secured party. Court
decisions and legislative actions have placed substantial restriction on the
right of lenders to enforce such clauses in many states. For instance, the
California Supreme Court in August 1978 held that due-on-sale clauses were
generally unenforceable. However, the Garn-St Germain Depository Institutions
Act of 1982 (the "Garn-St Germain Act"), subject to certain exceptions, preempts
state constitutional, statutory and case law prohibiting the enforcement of
due-on-sale clauses. As a result, due-on-sale clauses have become generally
enforceable except in those states whose legislatures exercised their authority
to regulate the enforceability of such clauses with respect to mortgage loans
that were (i) originated or assumed during the "window period" under the Garn-St
Germain Act which ended in all cases not later than October 15, 1982 and (ii)
originated by lenders other than national banks, federal savings institutions
and federal credit unions. FHLMC has taken the position in its published
mortgage servicing standards that, out of a total of eleven "window period
states," five states (Arizona, Michigan, Minnesota, New Mexico and Utah) have
enacted statutes extending, on various terms and for varying periods, the
prohibition on enforcement of due-on-sale clauses with respect to certain
categories of window period loans. Also, the Garn-St Germain Act does
"encourage" lenders to permit assumption of loans at the original rate of
interest or at some other rate less than the average of the original rate and
the market rate.
As to loans secured by an owner-occupied residence, the Garn-St Germain Act
sets forth nine specific instances in which a mortgagee covered by the Act may
not exercise its rights under a due-on-sale clause, notwithstanding the fact
that a transfer of the property may have occurred. The inability to enforce a
due-on-sale clause may result in transfer of the related Property to an
uncreditworthy person, which could increase the likelihood of default or may
result in a mortgage bearing an interest rate below the current market rate
being assumed by a new home buyer, which may affect the average life of the
Loans and the number of Loans which may extend to maturity.
In addition, under federal bankruptcy law, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances, be
eliminated in any modified mortgage resulting from such bankruptcy proceeding.
Enforceability of Prepayment and Late Payment Fees
Forms of notes, mortgages and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made, and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states, there
are or may be specific limitations upon the late charges which a lender may
collect from a borrower for delinquent payments. Certain states also limit the
amounts that a lender may collect from a borrower as an additional charge if the
loan is prepaid. Under certain state laws, prepayment charges may not be imposed
after a certain period of time following the origination of mortgage loans with
respect to prepayments on loans secured by liens encumbering owner-occupied
residential properties. Since many of the Properties will be owner-occupied, it
is anticipated that prepayment charges may not be imposed with respect to many
of the Loans. The absence of such a restraint on prepayment, particularly with
respect to fixed rate Loans having higher Loan Rates, may increase the
likelihood of refinancing or other early retirement of such loans or contracts.
Late charges and prepayment fees are typically retained by servicers as
additional servicing compensation.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, enacted in March 1980 ("Title V") provides that state usury
limitations shall not apply to certain types of residential first mortgage loans
originated by certain lenders after March 31, 1980. The Office of Thrift
Supervision, as successor to the Federal Home Loan Bank Board, is authorized to
issue rules and regulations and to publish interpretations governing
implementation of Title V. The statute authorized the states to reimpose
interest rate limits by adopting, before April 1, 1983, a law or constitutional
provision which expressly rejects an application of the federal law. Fifteen
states adopted such a law prior to the April 1, 1983 deadline. In addition, even
where Title V is not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on mortgage loans covered by
Title V. Certain states have taken action to reimpose interest rate limits
and/or to limit discount points or other charges.
The Home Improvement Contracts
General. The Home Improvement Contracts, other than those Home Improvement
Contracts that are unsecured or secured by mortgages on real estate (such Home
Improvement Contracts are hereinafter referred to in this section as
"contracts") generally are "chattel paper" or constitute "purchase money
security interests" each as defined in the UCC. Pursuant to the UCC, the sale of
chattel paper is treated in a manner similar to perfection of a security
interest in chattel paper. Under the related Agreement, the Depositor will
transfer physical possession of the contracts to the Trustee or a designated
custodian or may retain possession of the contracts as custodian for the
Trustee. In addition, the Depositor will make an appropriate filing of a UCC-1
financing statement in the appropriate states to, among other things, give
notice of the Trust Fund's ownership of the contracts. Unless otherwise
specified in the related Prospectus Supplement, the contracts will not be
stamped or otherwise marked to reflect their assignment from the Depositor to
the Trustee. Therefore, if through negligence, fraud or otherwise, a subsequent
purchaser were able to take physical possession of the contracts without notice
of such assignment, the Trust Fund's interest in the contracts could be
defeated.
Security Interests in Home Improvements. The contracts that are secured by
the Home Improvements financed thereby grant to the originator of such contracts
a purchase money security interest in such Home Improvements to secure all or
part of the purchase price of such Home Improvements and related services. A
financing statement generally is not required to be filed to perfect a purchase
money security interest in consumer goods. Such purchase money security
interests are assignable. In general, a purchase money security interest grants
to the holder a security interest that has priority over a conflicting security
interest in the same collateral and the proceeds of such collateral. However, to
the extent that the collateral subject to a purchase money security interest
becomes a fixture, in order for the related purchase money security interest to
take priority over a conflicting interest in the fixture, the holder's interest
in such Home Improvement must generally be perfected by a timely fixture filing.
In general, a security interest does not exist under the UCC in ordinary
building material incorporated into an improvement on land. Home Improvement
Contracts that finance lumber, bricks, other types of ordinary building material
or other goods that are deemed to lose such characterization upon incorporation
of such materials into the related property, will not be secured by a purchase
money security interest in the Home Improvement being financed.
Enforcement of Security Interest in Home Improvements. So long as the Home
Improvement has not become subject to the real estate law, a creditor can
repossess a Home Improvement securing a contract by voluntary surrender, by
"self-help" repossession that is "peaceful" (i.e., without breach of the peace)
or, in the absence of voluntary surrender and the ability to repossess without
breach of the peace, by judicial process. The holder of a contract must give the
debtor a number of days' notice, which varies from 10 to 30 days depending on
the state, prior to commencement of any repossession. The UCC and consumer
protection laws in most states place restrictions on repossession sales,
including requiring prior notice to the debtor and commercial reasonableness in
effecting such a sale. The law in most states also requires that the debtor be
given notice of any sale prior to resale of the unit that the debtor may redeem
at or before such resale.
Under the laws applicable in most states, a creditor is entitled to obtain
a deficiency judgment from a debtor for any deficiency on repossession and
resale of the property securing the debtor's loan. However, some states impose
prohibitions or limitations on deficiency judgments, and in many cases the
defaulting borrower would have no assets with which to pay a judgment.
Certain other statutory provisions, including federal and state bankruptcy
and insolvency laws and general equitable principles, may limit or delay the
ability of a lender to repossess and resell collateral or enforce a deficiency
judgment.
Consumer Protection Laws. The so-called "Holder-in-Due Course" rule of the
Federal Trade Commission is intended to defeat the ability of the transferor of
a consumer credit contract which is the seller of goods which gave rise to the
transaction (and certain related lenders and assignees) to transfer such
contract free of notice of claims by the debtor thereunder. The effect of this
rule is to subject the assignee of such a contract to all claims and defenses
which the debtor could assert against the seller of goods. Liability under this
rule is limited to amounts paid under a contract; however, the obligor also may
be able to assert the rule to set off remaining amounts due as a defense against
a claim brought by the Trustee against such obligor. Numerous other federal and
state consumer protection laws impose requirements applicable to the
origination, servicing and enforcement of the contracts, including the Truth in
Lending Act, the Federal Trade Commission Act, the Fair Credit Billing Act, the
Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt
Collection Practices Act and the Uniform Consumer Credit Code. In the case of
some of these laws, the failure to comply with their provisions may affect the
enforceability of the related contract.
Applicability of Usury Laws. Title V of the Depository Institutions
Deregulation and Monetary Control Act of 1980, as amended ("Title V"), provides
that, subject to the following conditions, state usury limitations shall not
apply to any contract which is secured by a first lien on certain kinds of
consumer goods. The contracts would be covered if they satisfy certain
conditions governing, among other things, the terms of any prepayments, late
charges and deferral fees and requiring a 30-day notice period prior to
instituting any action leading to repossession of the related unit.
Title V authorized any state to reimpose limitations on interest rates and
finance charges by adopting before April 1, 1983 a law or constitutional
provision which expressly rejects application of the federal law. Fifteen states
adopted such a law prior to the April 1, 1983 deadline. In addition, even where
Title V was not so rejected, any state is authorized by the law to adopt a
provision limiting discount points or other charges on loans covered by Title V.
Installment Contracts
The Loans may also consist of installment sale contracts. Under an
installment sale contract ("Installment Contract") the seller (hereinafter
referred to in this section as the "lender") retains legal title to the property
and enters into an agreement with the purchaser hereinafter referred to in this
section as the "borrower") for the payment of the purchase price, plus interest,
over the term of such contract. Only after full performance by the borrower of
the contract is the lender obligated to convey title to the property to the
purchaser. As with mortgage or deed of trust financing, during the effective
period of the Installment Contract, the borrower is generally responsible for
maintaining the property in good condition and for paying real estate taxes,
assessments and hazard insurance premiums associated with the property.
The method of enforcing the rights of the lender under an Installment
Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing, or able pursuant to state statute, to enforce the
contract strictly according to its terms. The terms of Installment Contracts
generally provide that upon a default by the borrower, the borrower loses his or
her right to occupy the property, the entire indebtedness is accelerated, and
the buyer's equitable interest in the property is forfeited. The lender in such
a situation does not have to foreclose in order to obtain title to the property,
although in some cases a quiet title action is in order if the borrower has
filed the Installment Contract in local land records and an ejectment action may
be necessary to recover possession. In a few states, particularly in cases of
borrower default during the early years of an Installment Contract, the courts
will permit ejectment of the buyer and a forfeiture of his or her interest in
the property. However, most state legislatures have enacted provisions by
analogy to mortgage law protecting borrowers under Installment Contracts from
the harsh consequences of forfeiture. Under such statutes, a judicial or
nonjudicial foreclosure may be required, the lender may be required to give
notice of default and the borrower may be granted some grace period during which
the Installment Contract may be reinstated upon full payment of the default
amount and the borrower may have a post-foreclosure statutory redemption right.
In other states, courts in equity may permit a borrower with significant
investment in the property under an Installment Contract for the sale of real
estate to share in the proceeds of sale of the property after the indebtedness
is repaid or may otherwise refuse to enforce the forfeiture clause.
Nevertheless, generally speaking, the lender's procedures for obtaining
possession and clear title under an Installment Contract in a given state are
simpler and less time-consuming and costly than are the procedures for
foreclosing and obtaining clear title to a property subject to one or more
liens.
Soldiers' and Sailors' Civil Relief Act
Generally, under the terms of the Soldiers' and Sailors' Civil Relief Act
of 1940, as amended (the "Relief Act"), a borrower who enters military service
after the origination of such borrower's Loan (including a borrower who is a
member of the National Guard or is in reserve status at the time of the
origination of the Loan and is later called to active duty) may not be charged
interest above an annual rate of 6% during the period of such borrower's active
duty status, unless a court orders otherwise upon application of the lender. It
is possible that such interest rate limitation could have an effect, for an
indeterminate period of time, on the ability of the Master Servicer to collect
full amounts of interest on certain of the Loans. Unless otherwise provided in
the related Prospectus Supplement, any shortfall in interest collections
resulting from the application of the Relief Act could result in losses to
Securityholders. The Relief Act also imposes limitations which would impair the
ability of the Master Servicer to foreclose on an affected Loan during the
borrower's period of active duty status. Moreover, the Relief Act permits the
extension of a Loan's maturity and the re-adjustment of its payment schedule
beyond the completion of military service. Thus, in the event that such a Loan
goes into default, there may be delays and losses occasioned by the inability to
realize upon the Property in a timely fashion.
Junior Mortgages; Rights of Senior Mortgagees
To the extent that the Loans comprising the Trust Fund for a Series are
secured by mortgages which are junior to other mortgages held by other lenders
or institutional investors, the rights of the Trust Fund (and therefore the
Securityholders), as mortgagee under any such junior mortgage, are subordinate
to those of any mortgagee under any senior mortgage. The senior mortgagee has
the right to receive hazard insurance and condemnation proceeds and to cause the
property securing the Loan to be sold upon default of the mortgagor, thereby
extinguishing the junior mortgagee's lien unless the junior mortgagee asserts
its subordinate interest in the property in foreclosure litigation and,
possibly, satisfies the defaulted senior mortgage. A junior mortgagee may
satisfy a defaulted senior loan in full and, in some states, may cure a default
and bring the senior loan current, in either event adding the amounts expended
to the balance due on the junior loan. In most states, absent a provision in the
mortgage or deed of trust, no notice of default is required to be given to a
junior mortgagee.
The standard form of the mortgage used by most institutional lenders
confers on the mortgagee the right both to receive all proceeds collected under
any hazard insurance policy and all awards made in connection with condemnation
proceedings, and to apply such proceeds and awards to any indebtedness secured
by the mortgage, in such order as the mortgagee may determine. Thus, in the
event improvements on the property are damaged or destroyed by fire or other
casualty, or in the event the property is taken by condemnation, the mortgagee
or beneficiary under senior mortgages will have the prior right to collect any
insurance proceeds payable under a hazard insurance policy and any award of
damages in connection with the condemnation and to apply the same to the
indebtedness secured by the senior mortgages. Proceeds in excess of the amount
of senior mortgage indebtedness, in most cases, may be applied to the
indebtedness of a junior mortgage.
Another provision sometimes found in the form of the mortgage or deed of
trust used by institutional lenders obligates the mortgagor to pay before
delinquency all taxes and assessments on the property and, when due, all
encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste thereof, and to appear in and defend any action or proceeding purporting
to affect the property or the rights of the mortgagee under the mortgage. Upon a
failure of the mortgagor to perform any of these obligations, the mortgagee is
given the right under certain mortgages to perform the obligation itself, at its
election, with the mortgagor agreeing to reimburse the mortgagee for any sums
expended by the mortgagee on behalf of the mortgagor. All sums so expended by
the mortgagee become part of the indebtedness secured by the mortgage.
The form of credit line trust deed or mortgage generally used by most
institutional lenders which make Revolving Credit Line Loans typically contains
a "future advance" clause, which provides, in essence, that additional amounts
advanced to or on behalf of the borrower by the beneficiary or lender are to be
secured by the deed of trust or mortgage. Any amounts so advanced after the
Cut-off Date with respect to any Mortgage will not be included in the Trust
Fund. The priority of the lien securing any advance made under the clause may
depend in most states on whether the deed of trust or mortgage is called and
recorded as a credit line deed of trust or mortgage. If the beneficiary or
lender advances additional amounts, the advance is entitled to receive the same
priority as amounts initially advanced under the trust deed or mortgage,
notwithstanding the fact that there may be junior trust deeds or mortgages and
other liens which intervene between the date of recording of the trust deed or
mortgage and the date of the future advance, and notwithstanding that the
beneficiary or lender had actual knowledge of such intervening junior trust
deeds or mortgages and other liens at the time of the advance. In most states,
the trust deed or mortgage lien securing mortgage loans of the type which
includes home equity credit lines applies retroactively to the date of the
original recording of the trust deed or mortgage, provided that the total amount
of advances under the home equity credit line does not exceed the maximum
specified principal amount of the recorded trust deed or mortgage, except as to
advances made after receipt by the lender of a written notice of lien from a
judgment lien creditor of the trustor.
The Title I Program
General. Certain of the Loans contained in a Trust Fund may be loans
insured under the FHA Title I Credit Insurance program created pursuant to
Sections 1 and 2(a) of the National Housing Act of 1934 (the "Title I Program").
Under the Title I Program, the FHA is authorized and empowered to insure
qualified lending institutions against losses on eligible loans. The Title I
Program operates as a coinsurance program in which the FHA insures up to 90% of
certain losses incurred on an individual insured loan, including the unpaid
principal balance of the loan, but only to the extent of the insurance coverage
available in the lender's FHA insurance coverage reserve account. The owner of
the loan bears the uninsured loss on each loan.
The types of loans which are eligible for insurance by the FHA under the
Title I Program include property improvement loans ("Property Improvement Loans"
or "Title I Loans"). A Property Improvement Loan or Title I Loan means a loan
made to finance actions or items that substantially protect or improve the basic
livability or utility of a property and includes single family improvement
loans.
There are two basic methods of lending or originating such loans which
include a "direct loan" or a "dealer loan." With respect to a direct loan, the
borrower makes application directly to a lender without any assistance from a
dealer, which application may be filled out by the borrower or by a person
acting at the direction of the borrower who does not have a financial interest
in the loan transaction, and the lender may disburse the loan proceeds solely to
the borrower or jointly to the borrower and other parties to the transaction.
With respect to a dealer loan, the dealer, who has a direct or indirect
financial interest in the loan transaction, assists the borrower in preparing
the loan application or otherwise assists the borrower in obtaining the loan
from lender and the lender may distribute proceeds solely to the dealer or the
borrower or jointly to the borrower and the dealer or other parties. With
respect to a dealer Title I Loan, a dealer may include a seller, a contractor or
supplier of goods or services.
Loans insured under the Title I Program are required to have fixed interest
rates and, generally, provide for equal installment payments due weekly,
biweekly, semi-monthly or monthly, except that a loan may be payable quarterly
or semi-annually in order to correspond with the borrower's irregular flow of
income. The first or last payments (or both) may vary in amount but may not
exceed 150% of the regular installment payment, and the first scheduled payment
may be due no later than two months from the date of the loan. The note must
contain a provision permitting full or partial prepayment of the loan. The
interest rate may be established by the lender and must be fixed for the term of
the loan and recited in the note. Interest on an insured loan must accrue from
the date of the loan and be calculated on a simple interest basis. The lender
must assure that the note and all other documents evidencing the loan are in
compliance with applicable federal, state and local laws.
Each insured lender is required to use prudent lending standards in
underwriting individual loans and to satisfy the applicable loan underwriting
requirements under the Title I Program prior to its approval of the loan and
disbursement of loan proceeds. Generally, the lender must exercise prudence and
diligence to determine whether the borrower and any co-maker is solvent and an
acceptable credit risk, with a reasonable ability to make payments on the loan
obligation. The lender's credit application and review must determine whether
the borrower's income will be adequate to meet the periodic payments required by
the loan, as well as the borrower's other housing and recurring expenses, which
determination must be made in accordance with the expense-to-income ratios
published by the Secretary of HUD.
Under the Title I Program, the FHA does not review or approve for
qualification for insurance the individual loans insured thereunder at the time
of approval by the lending institution (as is typically the case with other
federal loan programs). If, after a loan has been made and reported for
insurance under the Title I Program, the lender discovers any material
misstatement of fact or that the loan proceeds have been misused by the
borrower, dealer or any other party, it shall promptly report this to the FHA.
In such case, provided that the validity of any lien on the property has not
been impaired, the insurance of the loan under the Title I Program will not be
affected unless such material misstatements of fact or misuse of loan proceeds
was caused by (or was knowingly sanctioned by) the lender or its employees.
Requirements for Title I Loans. The maximum principal amount for Title I
Loans must not exceed the actual cost of the project plus any applicable fees
and charges allowed under the Title I Program; provided that such maximum amount
does not exceed $25,000 (or the current applicable amount) for a single family
property improvement loan. Generally, the term of a Title I Loan may not be less
than six months nor greater than 20 years and 32 days. A borrower may obtain
multiple Title I Loans with respect to multiple properties, and a borrower may
obtain more than one Title I Loan with respect to a single property, in each
case as long as the total outstanding balance of all Title I Loans in the same
property does not exceed the maximum loan amount for the type of Title I Loan
thereon having the highest permissible loan amount.
Borrower eligibility for a Title I Loan requires that the borrower have at
least a one-half interest in either fee simple title to the real property, a
lease thereof for a term expiring at least six months after the final maturity
of the Title I Loan or a recorded land installment contract for the purchase of
the real property, and that the borrower have equity in the property being
improved at least equal to the amount of the Title I Loan if such loan amount
exceeds $15,000. Any Title I Loan in excess of $7,500 must be secured by a
recorded lien on the improved property which is evidenced by a mortgage or deed
of trust executed by the borrower and all other owners in fee simple.
The proceeds from a Title I Loan may be used only to finance property
improvements which substantially protect or improve the basic livability or
utility of the property as disclosed in the loan application. The Secretary of
HUD has published a list of items and activities which cannot be financed with
proceeds from any Title I Loan and from time to time the Secretary of HUD may
amend such list of items and activities. With respect to any dealer Title I
Loan, before the lender may disburse funds, the lender must have in its
possession a completion certificate on a HUD approved form, signed by the
borrower and the dealer. With respect to any direct Title I Loan, the borrower
is required to submit to the lender, promptly upon completion of the
improvements but not later than six months after disbursement of the loan
proceeds with one six month extension if necessary, a completion certificate,
signed by the borrower. The lender or its agent is required to conduct an
on-site inspection on any Title I Loan where the principal obligation is $7,500
or more, and on any direct Title I Loan where the borrower fails to submit a
completion certificate.
FHA Insurance Coverage. Under the Title I Program the FHA establishes an
insurance coverage reserve account for each lender which has been granted a
Title I insurance contract. The amount of insurance coverage in this account is
10% of the amount disbursed, advanced or expended by the lender in originating
or purchasing eligible loans registered with FHA for Title I insurance, with
certain adjustments. The balance in the insurance coverage reserve account is
the maximum amount of insurance claims the FHA is required to pay. Loans to be
insured under the Title I Program will be registered for insurance by the FHA
and the insurance coverage attributable to such loans will be included in the
insurance coverage reserve account for the originating or purchasing lender
following the receipt and acknowledgment by the FHA of a loan report on the
prescribed form pursuant to the Title I regulations. The FHA charges a fee of
0.50% per annum of the net proceeds (the original balance) of any eligible loan
so reported and acknowledged for insurance by the originating lender. The FHA
bills the lender for the insurance premium on each insured loan annually, on
approximately the anniversary date of the loan's origination. If an insured loan
is prepaid during the year, FHA will not refund the insurance premium, but will
abate any insurance charges falling due after such prepayment.
Under the Title I Program the FHA will reduce the insurance coverage
available in the lender's FHA insurance coverage reserve account with respect to
loans insured under the lender's contract of insurance by (i) the amount of the
FHA insurance claims approved for payment relating to such insured loans and
(ii) the amount of insurance coverage attributable to insured loans sold by the
lender. The balance of the lender's FHA insurance coverage reserve account will
be further adjusted as required under Title I or by the FHA, and the insurance
coverage therein may be earmarked with respect to each or any eligible loans
insured thereunder, if a determination is made by the Secretary of HUD that it
is in its interest to do so. Originations and acquisitions of new eligible loans
will continue to increase a lender's insurance coverage reserve account balance
by 10% of the amount disbursed, advanced or expended in originating or acquiring
such eligible loans registered with the FHA for insurance under the Title I
Program. The Secretary of HUD may transfer insurance coverage between insurance
coverage reserve accounts with earmarking with respect to a particular insured
loan or group of insured loans when a determination is made that it is in the
Secretary's interest to do so.
The lender may transfer (except as collateral in a bona fide loan
transaction) insured loans and loans reported for insurance only to another
qualified lender under a valid Title I contract of insurance. Unless an insured
loan is transferred with recourse or with a guaranty or repurchase agreement,
the FHA, upon receipt of written notification of the transfer of such loan in
accordance with the Title I regulations, will transfer from the transferor's
insurance coverage reserve account to the transferee's insurance coverage
reserve account an amount, if available, equal to 10% of the actual purchase
price or the net unpaid principal balance of such loan (whichever is less).
However, under the Title I Program not more than $5,000 in insurance coverage
shall be transferred to or from a lender's insurance coverage reserve account
during any October 1 to September 30 period without the prior approval of the
Secretary of HUD.
Claims Procedures Under Title I. Under the Title I Program the lender may
accelerate an insured loan following a default on such loan only after the
lender or its agent has contacted the borrower in a face-to-face meeting or by
telephone to discuss the reasons for the default and to seek its cure. If the
borrower does not cure the default or agree to a modification agreement or
repayment plan, the lender will notify the borrower in writing that, unless
within 30 days the default is cured or the borrower enters into a modification
agreement or repayment plan, the loan will be accelerated and that, if the
default persists, the lender will report the default to an appropriate credit
agency. The lender may rescind the acceleration of maturity after full payment
is due and reinstate the loan only if the borrower brings the loan current,
executes a modification agreement or agrees to an acceptable repayment plan.
Following acceleration of maturity upon a secured Title I Loan, the lender
may either (a) proceed against the property under any security instrument or (b)
make a claim under the lender's contract of insurance. If the lender chooses to
proceed against the property under a security instrument (or if it accepts a
voluntary conveyance or surrender of the property), the lender may file an
insurance claim only with the prior approval of the Secretary of HUD.
When a lender files an insurance claim with the FHA under the Title I
Program, the FHA reviews the claim, the complete loan file and documentation of
the lender's efforts to obtain recourse against any dealer who has agreed
thereto, certification of compliance with applicable state and local laws in
carrying out any foreclosure or repossession, and evidence that the lender has
properly filed proofs of claims, where the borrower is bankrupt or deceased.
Generally, a claim for reimbursement for loss on any Title I Loan must be filed
with the FHA no later than nine months after the date of default of such loan.
Concurrently with filing the insurance claim, the lender shall assign to the
United States of America the lender's entire interest in the loan note (or a
judgment in lieu of the note), in any security held and in any claim filed in
any legal proceedings. If, at the time the note is assigned to the United
States, the Secretary has reason to believe that the note is not valid or
enforceable against the borrower, the FHA may deny the claim and reassign the
note to the lender. If either such defect is discovered after the FHA has paid a
claim, the FHA may require the lender to repurchase the paid claim and to accept
a reassignment of the loan note. If the lender subsequently obtains a valid and
enforceable judgment against the borrower, the lender may resubmit a new
insurance claim with an assignment of the judgment. The FHA may contest any
insurance claim and make a demand for repurchase of the loan at any time up to
two years from the date the claim was certified for payment and may do so
thereafter in the event of fraud or misrepresentation on the part of the lender.
Under the Title I Program the amount of an FHA insurance claim payment,
when made, is equal to the Claimable Amount, up to the amount of insurance
coverage in the lender's insurance coverage reserve account. For the purposes
hereof, the "Claimable Amount" means an amount equal to 90% of the sum of: (a)
the unpaid loan obligation (net unpaid principal and the uncollected interest
earned to the date of default) with adjustments thereto if the lender has
proceeded against property securing such loan; (b) the interest on the unpaid
amount of the loan obligation from the date of default to the date of the
claim's initial submission for payment plus 15 calendar days (but not to exceed
9 months from the date of default), calculated at the rate of 7% per annum; (c)
the uncollected court costs; (d) the attorney's fees not to exceed $500; and (e)
the expenses for recording the assignment of the security to the United States.
Consumer Protection Laws
Numerous federal and state consumer protection laws impose substantive
requirements upon mortgage lenders in connection with the origination, servicing
and enforcement of loans secured by Single Family Properties. These laws include
the federal Truth-in-Lending Act and Regulation Z promulgated thereunder, Real
Estate Settlement Procedures Act and Regulation B promulgated thereunder, Equal
Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act and
related statutes and regulations. In particular, Regulation Z, requires certain
disclosures to the borrowers regarding the terms of the Loans; the Equal Credit
Opportunity Act and Regulation B promulgated thereunder prohibit discrimination
on the basis of age, race, color, sex, religion, marital status, national
origin, receipt of public assistance or the exercise of any right under the
Consumer Credit Protection Act, in the extension of credit; the Fair Credit
Reporting Act regulates the use and reporting of information related to the
borrower's credit experience.
Certain provisions of these laws impose specific statutory liabilities upon
lenders who fail to comply therewith. In addition, violations of such laws may
limit the ability of the Sellers to collect all or part of the principal of or
interest on the Loans and could subject the Sellers and in some cases their
assignees to damages and administrative enforcement.
FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of the anticipated material federal income tax
consequences of the purchase, ownership, and disposition of the Securities and
is based on advice of Brown & Wood llp, special counsel to the Depositor. The
summary is based upon the provisions of the Code, the regulations promulgated
thereunder, including, where applicable, proposed regulations, and the judicial
and administrative rulings and decisions now in effect, all of which are subject
to change or possible differing interpretations. The statutory provisions,
regulations, and interpretations on which this summary is based are subject to
change, and such a change could apply retroactively.
The summary does not purport to deal with all aspects of federal income
taxation that may affect particular investors in light of their individual
circumstances, nor with certain types of investors subject to special treatment
under the federal income tax laws. This summary focuses primarily upon investors
who will hold Securities as "capital assets" (generally, property held for
investment) within the meaning of Section 1221 of the Code, but much of the
discussion is applicable to other investors as well. Prospective Investors are
advised to consult their own tax advisers concerning the federal, state, local
and any other tax consequences to them of the purchase, ownership and
disposition of the Securities.
The federal income tax consequences to Securityholders will vary depending
on whether (i) the Securities of a Series are classified as indebtedness; (ii)
an election is made to treat the Trust Fund relating to a particular Series of
Securities as a REMIC or as a FASIT; (iii) the Securities represent interests in
a grantor trust; or (iv) the Trust Fund relating to a particular Series of
Certificates is classified as a partnership. The Prospectus Supplement for each
Series of Securities will specify how the Securities will be treated for federal
income tax purposes and will discuss whether a REMIC or a FASIT election, if
any, will be made with respect to such Series. Prior to issuance of each Series
of Securities, the Depositor shall file with the Commission a Form 8-K on behalf
of the related Trust Fund containing an opinion of Brown & Wood llp with respect
to the validity of the information set forth under "Federal Income Tax
Consequences" herein and in the related Prospectus Supplement.
Taxation of Debt Securities
Interest and Acquisition Discount. Securities representing regular
interests in a REMIC are generally treated as evidences of indebtedness issued
by the REMIC. Securities representing regular interests in a FASIT are treated
as debt instruments. Stated interest on regular interests in REMICs and regular
interests in FASITs will be taxable as ordinary income and taken into account
using the accrual method of accounting, regardless of the Securityholder's
normal accounting method. Interest (other than original issue discount) on
Securities (other than Regular Interest Securities) that are characterized as
indebtedness for federal income tax purposes will be includible in income by
holders thereof in accordance with their usual methods of accounting. Securities
characterized as debt for federal income tax purposes, including regular
interests in REMICs or FASITs, will be referred to hereinafter collectively as
"Debt Securities."
Debt Securities that are Compound Interest Securities (i.e., debt
securities that accrete the amount of accrued interest and add that amount to
the principal balance of the securities until maturity or until some specified
event has occurred) will, and certain of the other Debt Securities may, be
issued with "original issue discount" ("OID"). The following discussion is based
in part on the rules governing OID which are set forth in Sections 1271-1275 of
the Code and the Treasury regulations issued thereunder, (the "OID
Regulations"). A Securityholder should be aware, however, that the OID
Regulations do not adequately address certain issues relevant to prepayable
securities, such as the Debt Securities.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Debt Security and its issue price. A holder of
a Debt Security must include such OID in gross income as ordinary interest
income as it accrues under a method taking into account an economic accrual of
the discount. In general, OID must be included in income in advance of the
receipt of the cash representing that income. The amount of OID on a Debt
Security will be considered to be zero if it is less than a de minimis amount
determined under the Code.
The issue price of a Debt Security is the first price at which a
substantial amount of Debt Securities of that class are sold (excluding sales to
bond houses, brokers, underwriters or wholesalers). If less than a substantial
amount of a particular class of Debt Securities is sold for cash on or prior to
the related Closing Date, the issue price for such class will be treated as the
fair market value of such class on such Closing Date. The issue price of a Debt
Security generally includes the amount paid by an initial Debt Security holder
for accrued interest that relates to a period prior to the issue date of the
Debt Security. ("pre-issuance accrued interest"). The issue price of a Debt
Security may, however, be computed without regard to such pre-issuance accrued
interest if such pre-issuance accrued interest will be paid on the first payment
date following the date of issuance. This alternative is available only if the
first payment date occurs within one year of the date of issuance. Under this
alternative, the payment of pre-issuance accrued interest will be treated as a
non-taxable return of capital and not as a payment of interest. The stated
redemption price at maturity of a Debt Security includes the original principal
amount of the Debt Security, but generally will not include stated interest if
it is "qualified stated interest."
Under the OID Regulations, qualified stated interest generally means
interest payable at a single fixed rate or qualified variable rate (as described
below) provided that such interest payments are unconditionally payable at
intervals of one year or less during the entire term of the Debt Security. The
OID Regulations state that interest payments are unconditionally payable only if
a late payment or nonpayment is expected to be penalized or reasonable remedies
exist to compel payment or the Debt Security otherwise provides terms and
conditions that make the likelihood of late payment or nonpayment a remote
contingency. Certain Debt Securities may provide for default remedies in the
event of late payment or nonpayment of interest. The interest on such Debt
Securities will be unconditionally payable and constitute qualified stated
interest, not OID. However, absent clarification of the OID Regulations, where
Debt Securities do not provide for default remedies, the interest payments will
be included in the Debt Security's stated redemption price at maturity and taxed
as OID. Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval between payments.
Distributions of interest on Debt Securities with respect to which deferred
interest will accrue, will not constitute qualified stated interest payments, in
which case the stated redemption price at maturity of such Debt Securities
includes all distributions of interest as well as principal thereon. Where the
interval between the issue date and the first Distribution Date on a Debt
Security is either longer or shorter than the interval between subsequent
Distribution Dates, all or part of the interest foregone, in the case of the
longer interval, and all of the additional interest, in the case of the shorter
interval, will be included in the stated redemption price at maturity and tested
under the de minimis rule described below. In the case of a Debt Security with a
long first period which has non-de minimis OID, all stated interest in excess of
interest payable at the effective interest rate for the long first period will
be included in the stated redemption price at maturity and the Debt Security
will generally have OID. Holders of Debt Securities should consult their own tax
advisors to determine the issue price and stated redemption price at maturity of
a Debt Security.
Under the de minimis rule, OID on a Debt Security will be considered to be
zero if such OID is less than 0.25% of the stated redemption price at maturity
of the Debt Security multiplied by the weighted average maturity of the Debt
Security. For this purpose, the weighted average maturity of the Debt Security
is computed as the sum of the amounts determined by multiplying the number of
full years (i.e., rounding down partial years) from the issue date until each
distribution in reduction of stated redemption price at maturity is scheduled to
be made by a fraction, the numerator of which is the amount of each distribution
included in the stated redemption price at maturity of the Debt Security and the
denominator of which is the stated redemption price at maturity of the Debt
Security. Holders generally must report de minimis OID pro rata as principal
payments are received, and such income will be capital gain if the Debt Security
is held as a capital asset. However, accrual method holders may elect to accrue
all de minimis OID as well as market discount under a constant interest method.
Debt Securities may provide for interest based on a qualified variable
rate. Under the OID Regulations, interest is treated as payable at a qualified
variable rate and not as contingent interest if, generally, (i) such interest is
unconditionally payable at least annually, (ii) the issue price of the debt
instrument does not exceed the total noncontingent principal payments and (iii)
interest is based on a "qualified floating rate," an "objective rate," or a
combination of "qualified floating rates" that do not operate in a manner that
significantly accelerates or defers interest payments on such Debt Security. In
the case of Compound Interest Securities, certain Interest Weighted Securities
(as defined herein), and certain of the other Debt Securities, none of the
payments under the instrument will be considered qualified stated interest, and
thus the aggregate amount of all payments will be included in the stated
redemption price.
The OID Regulations do not contain provisions specifically interpreting
Code Section 1272(a)(6). Until the Treasury issues guidance to the contrary, the
Trustee intends to base its computation on Code Section 1272(a)(6) and the OID
Regulations as described in this Prospectus. However, because no regulatory
guidance currently exists under Code Section 1272(a)(6), there can be no
assurance that such methodology represents the correct manner of calculating
OID.
The holder of a Debt Security issued with OID must include in gross income,
for all days during its taxable year on which it holds such Debt Security, the
sum of the "daily portions" of such original issue discount. The amount of OID
includible in income by a holder will be computed by allocating to each day
during a taxable year a pro rata portion of the original issue discount that
accrued during the relevant accrual period. In the case of a Debt Security that
is not a regular interest in a REMIC or a FASIT and the principal payments on
which are not subject to acceleration resulting from prepayments on the Loans,
the amount of OID includible in income of a Securityholder for an accrual period
(generally the period over which interest accrues on the debt instrument) will
equal the product of the yield to maturity of the Debt Security and the adjusted
issue price of the Debt Security, reduced by any payments of qualified stated
interest. The adjusted issue price is the sum of its issue price plus prior
accruals or OID, reduced by the total payments made with respect to such Debt
Security in all prior periods, other than qualified stated interest payments.
The amount of OID to be included in income by a holder of a debt
instrument, such as certain classes of the Debt Securities, that is subject to
acceleration due to prepayments on other debt obligations securing such
instruments (a "Pay-Through Security"), is computed by taking into account the
anticipated rate of prepayments assumed in pricing the debt instrument (the
"Prepayment Assumption"). The amount of OID that will accrue during an accrual
period on a Pay-Through Security is the excess (if any) of the sum of (a) the
present value of all payments remaining to be made on the Pay-Through Security
as of the close of the accrual period and (b) the payments during the accrual
period of amounts included in the stated redemption price of the Pay-Through
Security, over the adjusted issue price of the Pay-Through Security at the
beginning of the accrual period. The present value of the remaining payments is
to be determined on the basis of three factors: (i) the original yield to
maturity of the Pay-Through Security (determined on the basis of compounding at
the end of each accrual period and properly adjusted for the length of the
accrual period), (ii) events which have occurred before the end of the accrual
period and (iii) the assumption that the remaining payments will be made in
accordance with the original Prepayment Assumption. The effect of this method is
to increase the portions of OID required to be included in income by a holder to
take into account prepayments with respect to the Loans at a rate that exceeds
the Prepayment Assumption, and to decrease (but not below zero for any period)
the portions of original issue discount required to be included in income by a
holder of a Pay-Through Security to take into account prepayments with respect
to the Loans at a rate that is slower than the Prepayment Assumption. Although
original issue discount will be reported to holders of Pay-Through Securities
based on the Prepayment Assumption, no representation is made to holders that
Loans will be prepaid at that rate or at any other rate.
The Depositor may adjust the accrual of OID on a class of Debt Securities
in a manner that it believes to be appropriate, to take account of realized
losses on the Loans, although the OID Regulations do not provide for such
adjustments. If the IRS were to require that OID be accrued without such
adjustments, the rate of accrual of OID for a class Debt Securities could
increase.
Certain classes of Debt Securities may represent more than one class of
REMIC or FASIT regular interests. Unless otherwise provided in the related
Prospectus Supplement, the Trustee intends, based on the OID Regulations, to
calculate OID on such Securities as if, solely for the purposes of computing
OID, the separate regular interests were a single debt instrument.
A subsequent holder of a Debt Security will also be required to include OID
in gross income, but such a holder who purchases such Debt Security for an
amount that exceeds its adjusted issue price will be entitled (as will an
initial holder who pays more than a Debt Security's issue price) to offset such
OID by comparable economic accruals of portions of such excess.
Effects of Defaults and Delinquencies. Holders will be required to report
income with respect to REMIC or FASIT regular interests under an accrual method
without giving effect to delays and reductions in distributions attributable to
a default or delinquency on the Loans, except possibly to the extent that it can
be established that such amounts are uncollectible. As a result, the amount of
income (including OID) reported by a holder of such a Security in any period
could significantly exceed the amount of cash distributed to such holder in that
period. The holder will eventually be allowed a loss (or will be allowed to
report a lesser amount of income) to the extent that the aggregate amount of
distributions on the Securities is deducted as a result of a Loan default.
However, the timing and character of such losses or reductions in income are
uncertain and, accordingly, holders of Securities should consult their own tax
advisors on this point.
Interest Weighted Securities. It is not clear how income should be accrued
with respect to REMIC or FASIT regular interests or Stripped Securities (as
defined under " -- Tax Status as a Grantor Trust; General" herein) the payments
on which consist solely or primarily of a specified portion of the interest
payments on qualified mortgages held by the REMIC, on debt instruments held by
the FASIT, or on Loans underlying Pass-Through Securities ("Interest Weighted
Securities"). The Issuer intends to take the position that all of the income
derived from an Interest Weighted Security should be treated as OID and that the
amount and rate of accrual of such OID should be calculated by treating the
Interest Weighted Security as a Compound Interest Security. However, in the case
of Interest Weighted Securities that are entitled to some payments of principal
and that are REMIC or FASIT regular interests the Internal Revenue Service could
assert that income derived from an Interest Weighted Security should be
calculated as if the Security were a security purchased at a premium equal to
the excess of the price paid by such holder for such Security over its stated
principal amount, if any. Under this approach, a holder would be entitled to
amortize such premium only if it has in effect an election under Section 171 of
the Code with respect to all taxable debt instruments held by such holder, as
described below. Alternatively, the Internal Revenue Service could assert that
an Interest Weighted Security should be taxable under the rules governing bonds
issued with contingent payments. Such treatment may be more likely in the case
of Interest Weighted Securities that are Stripped Securities as described below.
See " -- Tax Status as a Grantor Trust -- Discount or Premium on Pass-Through
Securities."
Variable Rate Debt Securities. In the case of Debt Securities bearing
interest at a rate that varies directly, according to a fixed formula, with an
objective index, it appears that (i) the yield to maturity of such Debt
Securities and (ii) in the case of Pay-Through Securities, the present value of
all payments remaining to be made on such Debt Securities, should be calculated
as if the interest index remained at its value as of the issue date of such
Securities. Because the proper method of adjusting accruals of OID on a variable
rate Debt Security is uncertain, holders of variable rate Debt Securities should
consult their own tax advisers regarding the appropriate treatment of such
Securities for federal income tax purposes.
Market Discount. A purchaser of a Security may be subject to the market
discount rules of Sections 1276-1278 of the Code. A holder that acquires a Debt
Security with more than a prescribed de minimis amount of "market discount"
(generally, the excess of the principal amount of the Debt Security over the
purchaser's purchase price) will be required to include accrued market discount
in income as ordinary income in each month, but limited to an amount not
exceeding the principal payments on the Debt Security received in that month
and, if the Securities are sold, the gain realized. Such market discount would
accrue in a manner to be provided in Treasury regulations but, until such
regulations are issued, such market discount would in general accrue either
(i) on the basis of a constant yield (in the case of a Pay-Through Security,
taking into account a prepayment assumption) or (ii) in the ratio of (a) in the
case of Securities (or in the case of a Pass-Through Security (as defined
herein), as set forth below, the Loans underlying such Security) not
originally issued with original issue discount, stated interest payable
in the relevant period to total stated interest remaining to be paid at
the beginning of the period or (b) in the case of Securities (or, in the case
of a Pass-Through Security, as described below, the Loans underlying such
Security) originally issued at a discount, OID in the relevant period to total
OID remaining to be paid.
Section 1277 of the Code provides that, regardless of the origination date
of the Debt Security (or, in the case of a Pass-Through Security, the Loans),
the excess of interest paid or accrued to purchase or carry a Security (or, in
the case of a Pass-Through Security, as described below, the underlying Loans)
with market discount over interest received on such Security is allowed as a
current deduction only to the extent such excess is greater than the market
discount that accrued during the taxable year in which such interest expense was
incurred. In general, the deferred portion of any interest expense will be
deductible when such market discount is included in income, including upon the
sale, disposition, or repayment of the Security (or in the case of a
Pass-Through Security, an underlying Loan). A holder may elect to include market
discount in income currently as it accrues, on all market discount obligations
acquired by such holder during the taxable year such election is made and
thereafter, in which case the interest deferral rule will not apply.
Premium. A holder who purchases a Debt Security (other than an Interest
Weighted Security to the extent described above) at a cost greater than its
stated redemption price at maturity, generally will be considered to have
purchased the Security at a premium, which it may elect to amortize as an offset
to interest income on such Security (and not as a separate deduction item) on a
constant yield method. Although no regulations addressing the computation of
premium accrual on securities similar to the Securities have been issued, the
legislative history of the 1986 Act indicates that premium is to be accrued in
the same manner as market discount. Accordingly, it appears that the accrual of
premium on a class of Pay-Through Securities will be calculated using the
prepayment assumption used in pricing such class. If a holder makes an election
to amortize premium on a Debt Security, such election will apply to all taxable
debt instruments (including all REMIC and FASIT regular interests and all
pass-through certificates representing ownership interests in a trust holding
debt obligations) held by the holder at the beginning of the taxable year in
which the election is made, and to all taxable debt instruments acquired
thereafter by such holder, and will be irrevocable without the consent of the
IRS. Purchasers who pay a premium for the Securities should consult their tax
advisers regarding the election to amortize premium and the method to be
employed.
Regulations dealing with amortizable bond premium specifically do not apply
to prepayable debt instruments described in Code Section 1272(a)(6) such as the
Securities. Absent further guidance from the IRS, the Trustee intends to account
for amortizable bond premium in the manner described above. Prospective
purchasers of the Securities should consult their tax advisors regarding the
possible application of the Amortizable Bond Premium Regulations.
Election to Treat All Interest as Original Issue Discount. The OID
Regulations permit a holder of a Debt Security to elect to accrue all interest,
discount (including de minimis market or original issue discount) and premium in
income as interest, based on a constant yield method for Debt Securities
acquired on or after April 4, 1994. If such an election were to be made with
respect to a Debt Security with market discount, the holder of the Debt Security
would be deemed to have made an election to include in income currently market
discount with respect to all other debt instruments having market discount that
such holder of the Debt Security acquires during the year of the election or
thereafter. Similarly, a holder of a Debt Security that makes this election for
a Debt Security that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such holder owns or acquires. The election to
accrue interest, discount and premium on a constant yield method with respect to
a Debt Security is irrevocable.
Taxation of the REMIC and its Holders
General. In the opinion of Brown & Wood llp, special counsel to the
Depositor, if a REMIC election is made with respect to a Series of Securities,
then the arrangement by which the Securities of that Series are issued will be
treated as a REMIC as long as all of the provisions of the applicable Agreement
are complied with and the statutory and regulatory requirements are satisfied.
Securities will be designated as "Regular Interests" or "Residual Interests" in
a REMIC, as specified in the related Prospectus Supplement.
Except to the extent specified otherwise in a Prospectus Supplement, if a
REMIC election is made with respect to a Series of Securities, (i) Securities
held by a domestic building and loan association will constitute "a regular or a
residual interest in a REMIC" within the meaning of Code Section
7701(a)(19)(C)(xi) (assuming that at least 95% of the REMIC's assets consist of
cash, government securities, "loans secured by an interest in real property,"
and other types of assets described in Code Section 7701(a)(19)(C)); and (ii)
Securities held by a real estate investment trust will constitute "real estate
assets" within the meaning of Code Section 856(c)(5)(B), and income with respect
to the Securities will be considered "interest on obligations secured by
mortgages on real property or on interests in real property" within the meaning
of Code Section 856(c)(3)(B) (assuming, for both purposes, that at least 95% of
the REMIC's assets are qualifying assets). If less than 95% of the REMIC's
assets consist of assets described in (i) or (ii) above, then a Security will
qualify for the tax treatment described in (i), (ii) or (iii) in the proportion
that such REMIC assets are qualifying assets.
The Small Business Job Protection Act of 1996, as part of the repeal of the
bad debt reserve method for thrift institutions, repealed the application of
Code Section 593(d) to any taxable year beginning after December 31, 1995.
REMIC Expenses; Single Class REMICs
As a general rule, all of the expenses of a REMIC will be taken into
account by holders of the Residual Interest Securities. In the case of a "single
class REMIC," however, the expenses will be allocated, under Treasury
regulations, among the holders of the Regular Interest Securities and the
holders of the Residual Interest Securities (as defined herein) on a daily basis
in proportion to the relative amounts of income accruing to each holder on that
day. In the case of a holder of a Regular Interest Security who is an individual
or a "pass-through interest holder" (including certain pass-through entities but
not including real estate investment trusts), such expenses will be deductible
only to the extent that such expenses, plus other "miscellaneous itemized
deductions" of the holder, exceed 2% of such holder's adjusted gross income. In
addition, for taxable years beginning after December 31, 1990, the amount of
itemized deductions otherwise allowable for the taxable year for an individual
whose adjusted gross income exceeds the applicable amount (which amount will be
adjusted for inflation for taxable years beginning after 1990) will be reduced
by the lesser of (i) 3% of the excess of adjusted gross income over the
applicable amount or (ii) 80% of the amount of itemized deductions otherwise
allowable for such taxable year. The reduction or disallowance of this deduction
may have a significant impact on the yield of the Regular Interest Security to
such a holder. In general terms, a single class REMIC is one that either (i)
would qualify, under existing Treasury regulations, as a grantor trust if it
were not a REMIC (treating all interests as ownership interests, even if they
would be classified as debt for federal income tax purposes) or (ii) is similar
to such a trust and which is structured with the principal purpose of avoiding
the single class REMIC rules. Unless otherwise specified in the related
Prospectus Supplement, the expenses of the REMIC will be allocated to holders of
the related residual interest securities.
Taxation of the REMIC
General. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC is not generally subject to entity-level tax. Rather, the
taxable income or net loss of a REMIC is taken into account by the holders of
residual interests. As described above, the regular interests are generally
taxable as debt of the REMIC.
Calculation of REMIC Income. The taxable income or net loss of a REMIC is
determined under an accrual method of accounting and in the same manner as in
the case of an individual, with certain adjustments. In general, the taxable
income or net loss will be the difference between (i) the gross income produced
by the REMIC's assets, including stated interest and any original issue discount
or market discount on loans and other assets and (ii) deductions, including
stated interest and original issue discount accrued on Regular Interest
Securities, amortization of any premium with respect to Loans, and servicing
fees and other expenses of the REMIC. A holder of a Residual Interest Security
that is an individual or a "pass-through interest holder" (including certain
pass-through entities, but not including real estate investment trusts) will be
unable to deduct servicing fees payable on the loans or other administrative
expenses of the REMIC for a given taxable year, to the extent that such
expenses, when aggregated with such holder's other miscellaneous itemized
deductions for that year, do not exceed two percent of such holder's adjusted
gross income.
For purposes of computing its taxable income or net loss, the REMIC should
have an initial aggregate tax basis in its assets equal to the aggregate fair
market value of the regular interests and the residual interests on the Startup
Day (generally, the day that the interests are issued). That aggregate basis
will be allocated among the assets of the REMIC in proportion to their
respective fair market values.
The OID provisions of the Code apply to loans of individuals originated on
or after March 2, 1984, and the market discount provisions apply to loans
originated after July 18, 1984. Subject to possible application of the de
minimis rules, the method of accrual by the REMIC of OID income on such loans
will be equivalent to the method under which holders of Pay-Through Securities
accrue original issue discount (i.e., under the constant yield method taking
into account the Prepayment Assumption). The REMIC will deduct OID on the
Regular Interest Securities in the same manner that the holders of the Regular
Interest Securities include such discount in income, but without regard to the
de minimis rules. See "Taxation of Debt Securities" above. However, a REMIC that
acquires loans at a market discount must include such market discount in income
currently, as it accrues, on a constant interest basis.
To the extent that the REMIC's basis allocable to loans that it holds
exceeds their principal amounts, the resulting premium, if attributable to
mortgages originated after September 27, 1985, will be amortized over the life
of the loans (taking into account the Prepayment Assumption) on a constant yield
method. Although the law is somewhat unclear regarding recovery of premium
attributable to loans originated on or before such date, it is possible that
such premium may be recovered in proportion to payments of loan principal.
Prohibited Transactions and Contributions Tax. The REMIC will be subject to
a 100% tax on any net income derived from a "prohibited transaction." For this
purpose, net income will be calculated without taking into account any losses
from prohibited transactions or any deductions attributable to any prohibited
transaction that resulted in a loss. In general, prohibited transactions
include: (i) subject to limited exceptions, the sale or other disposition of any
qualified mortgage transferred to the REMIC; (ii) subject to a limited
exception, the sale or other disposition of a cash flow investment; (iii) the
receipt of any income from assets not permitted to be held by the REMIC pursuant
to the Code; or (iv) the receipt of any fees or other compensation for services
rendered by the REMIC. It is anticipated that a REMIC will not engage in any
prohibited transactions in which it would recognize a material amount of net
income. In addition, subject to a number of exceptions, a tax is imposed at the
rate of 100% on amounts contributed to a REMIC after the close of the
three-month period beginning on the Startup Day. The holders of Residual
Interest Securities will generally be responsible for the payment of any such
taxes imposed on the REMIC. To the extent not paid by such holders or otherwise,
however, such taxes will be paid out of the Trust Fund and will be allocated pro
rata to all outstanding classes of Securities of such REMIC.
Taxation of Holders of Residual Interest Securities
The holder of a Security representing a residual interest (a "Residual
Interest Security") will take into account the "daily portion" of the taxable
income or net loss of the REMIC for each day during the taxable year on which
such holder held the Residual Interest Security. The daily portion is determined
by allocating to each day in any calendar quarter its ratable portion of the
taxable income or net loss of the REMIC for such quarter, and by allocating that
amount among the holders (on such day) of the Residual Interest Securities in
proportion to their respective holdings on such day.
The holder of a Residual Interest Security must report its proportionate
share of the taxable income of the REMIC whether or not it receives cash
distributions from the REMIC attributable to such income or loss. The reporting
of taxable income without corresponding distributions could occur, for example,
in certain REMIC issues in which the loans held by the REMIC were issued or
acquired at a discount, since mortgage prepayments cause recognition of discount
income, while the corresponding portion of the prepayment could be used in whole
or in part to make principal payments on REMIC Regular Interests issued without
any discount or at an insubstantial discount (if this occurs, it is likely that
cash distributions will exceed taxable income in later years). Taxable income
may also be greater in earlier years of certain REMIC issues as a result of the
fact that interest expense deductions, as a percentage of outstanding principal
on REMIC Regular Interest Securities, will typically increase over time as lower
yielding Securities are paid, whereas interest income with respect to loans will
generally remain constant over time as a percentage of loan principal.
In any event, because the holder of a residual interest is taxed on the net
income of the REMIC, the taxable income derived from a Residual Interest
Security in a given taxable year will not be equal to the taxable income
associated with investment in a corporate bond or stripped instrument having
similar cash flow characteristics and pretax yield. Therefore, the after-tax
yield on the Residual Interest Security may be less than that of such a bond or
instrument.
Limitation on Losses. The amount of the REMIC's net loss that a holder may
take into account currently is limited to the holder's adjusted basis at the end
of the calendar quarter in which such loss arises. A holder's basis in a
Residual Interest Security will initially equal such holder's purchase price,
and will subsequently be increased by the amount of the REMIC's taxable income
allocated to the holder, and decreased (but not below zero) by the amount of
distributions made and the amount of the REMIC's net loss allocated to the
holder. Any disallowed loss may be carried forward indefinitely, but may be used
only to offset income of the REMIC generated by the same REMIC. The ability of
holders of Residual Interest Securities to deduct net losses may be subject to
additional limitations under the Code, as to which such holders should consult
their tax advisers.
Distributions. Distributions on a Residual Interest Security (whether at
their scheduled times or as a result of prepayments) will generally not result
in any additional taxable income or loss to a holder of a Residual Interest
Security. If the amount of such payment exceeds a holder's adjusted basis in the
Residual Interest Security, however, the holder will recognize gain (treated as
gain from the sale of the Residual Interest Security) to the extent of such
excess.
Sale or Exchange. A holder of a Residual Interest Security will recognize
gain or loss on the sale or exchange of a Residual Interest Security equal to
the difference, if any, between the amount realized and such holder's adjusted
basis in the Residual Interest Security at the time of such sale or exchange.
Except to the extent provided in regulations, which have not yet been issued,
any loss upon disposition of a Residual Interest Security will be disallowed if
the selling holder acquires any residual interest in a REMIC or similar mortgage
pool within six months before or after such disposition.
Excess Inclusions. The portion of the REMIC taxable income of a holder of a
Residual Interest Security consisting of "excess inclusion" income may not be
offset by other deductions or losses, including net operating losses, on such
holder's federal income tax return. Further, if the holder of a Residual
Interest Security is an organization subject to the tax on unrelated business
income imposed by Code Section 511, such holder's excess inclusion income will
be treated as unrelated business taxable income of such holder. In addition,
under Treasury regulations yet to be issued, if a real estate investment trust,
a regulated investment company, a common trust fund, or certain cooperatives
were to own a Residual Interest Security, a portion of dividends (or other
distributions) paid by the real estate investment trust (or other entity) would
be treated as excess inclusion income. If a Residual Security is owned by a
foreign person excess inclusion income is subject to tax at a rate of 30% which
may not be reduced by treaty, is not eligible for treatment as "portfolio
interest" and is subject to certain additional limitations. See "Tax Treatment
of Foreign Investors." The Small Business Job Protection Act of 1996 has
eliminated the special rule permitting Section 593 institutions ("thrift
institutions") to use net operating losses and other allowable deductions to
offset their excess inclusion income from REMIC residual certificates that have
"significant value" within the meaning of the REMIC Regulations, effective for
taxable years beginning after December 31, 1995, except with respect to residual
certificates continuously held by a thrift institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides three
rules for determining the effect on excess inclusions on the alternative minimum
taxable income of a residual holder. First, alternative minimum taxable income
for such residual holder is determined without regard to the special rule that
taxable income cannot be less than excess inclusions. Second, a residual
holder's alternative minimum taxable income for a tax year cannot be less than
excess inclusions for the year. Third, the amount of any alternative minimum tax
net operating loss deductions must be computed without regard to any excess
inclusions. These rules are effective for tax years beginning after December 31,
1986, unless a residual holder elects to have such rules apply only to tax years
beginning after August 20, 1996.
The excess inclusion portion of a REMIC's income is generally equal to the
excess, if any, of REMIC taxable income for the quarterly period allocable to a
Residual Interest Security, over the daily accruals for such quarterly period of
(i) 120% of the long term applicable federal rate on the Startup Day multiplied
by (ii) the adjusted issue price of such Residual Interest Security at the
beginning of such quarterly period. The adjusted issue price of a Residual
Interest at the beginning of each calendar quarter will equal its issue price
(calculated in a manner analogous to the determination of the issue price of a
Regular Interest), increased by the aggregate of the daily accruals for prior
calendar quarters, and decreased (but not below zero) by the amount of loss
allocated to a holder and the amount of distributions made on the Residual
Interest Security before the beginning of the quarter. The long-term federal
rate, which is announced monthly by the Treasury Department, is an interest rate
that is based on the average market yield of outstanding marketable obligations
of the United States government having remaining maturities in excess of nine
years.
Under the REMIC Regulations, in certain circumstances, transfers of
Residual Securities may be disregarded. See " -- Restrictions on Ownership and
Transfer of Residual Interest Securities" and " -- Tax Treatment of Foreign
Investors" below.
Restrictions on Ownership and Transfer of Residual Interest Securities. As
a condition to qualification as a REMIC, reasonable arrangements must be made to
prevent the ownership of a REMIC residual interest by any "Disqualified
Organization." Disqualified Organizations include 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, a rural
electric or telephone cooperative described in Section 1381(a)(2)(C) of the
Code, or any entity exempt from the tax imposed by Sections 1-1399 of the Code,
if such entity is not subject to tax on its unrelated business income.
Accordingly, the applicable Pooling and Servicing Agreement will prohibit
Disqualified Organizations from owning a Residual Interest Security. In
addition, no transfer of a Residual Interest Security will be permitted unless
the proposed transferee shall have furnished to the Trustee an affidavit
representing and warranting that it is neither a Disqualified Organization nor
an agent or nominee acting on behalf of a Disqualified Organization.
If a Residual Interest Security is transferred to a Disqualified
Organization after March 31, 1988 (in violation of the restrictions set forth
above), a substantial tax can be imposed on the transferor of such Residual
Interest Security at the time of the transfer. In addition, if a Disqualified
Organization holds an interest in a pass-through entity after March 31, 1988
(including, among others, a partnership, trust, real estate investment trust,
regulated investment company, or any person holding as nominee), that owns a
Residual Interest Security, the pass-through entity will be required to pay an
annual tax on its allocable share of the excess inclusion income of the REMIC.
Under the REMIC Regulations, if a Residual Interest Security is a
"noneconomic residual interest," as described below, a transfer of a Residual
Interest Security to a United States person will be disregarded for all Federal
tax purposes unless no significant purpose of the transfer was to impede the
assessment or collection of tax. A Residual Interest Security is a "noneconomic
residual interest" unless, at the time of the transfer (i) the present value of
the expected future distributions on the Residual Interest Security at least
equals the product of the present value of the anticipated excess inclusions and
the highest rate of tax for the year in which the transfer occurs and (ii) the
transferor reasonably expects that the transferee will receive distributions
from the REMIC at or after the time at which the taxes accrue on the anticipated
excess inclusions in an amount sufficient to satisfy the accrued taxes. If a
transfer of a Residual Interest is disregarded, the transferor would be liable
for any Federal income tax imposed upon taxable income derived by the transferee
from the REMIC. The REMIC Regulations provide no guidance as to how to determine
if a significant purpose of a transfer is to impede the assessment or collection
of tax. A similar type of limitation exists with respect to certain transfers of
residual interests by foreign persons to United States persons. See " -- Tax
Treatment of Foreign Investors."
Mark to Market Rules. Prospective purchasers of a REMIC Residual Interest
Security should be aware that a REMIC Residual Interest Security acquired after
January 3, 1995 cannot be marked-to-market.
Administrative Matters
The REMIC's books must be maintained on a calendar year basis and the REMIC
must file an annual federal income tax return. The REMIC will also be subject to
the procedural and administrative rules of the Code applicable to partnerships,
including the determination of any adjustments to, among other things, items of
REMIC income, gain, loss, deduction, or credit, by the IRS in a unified
administrative proceeding.
Taxation of the FASIT and its Holders
In the opinion of Brown & Wood llp, special counsel to the Depositor, if a
FASIT election is made with respect to a Series of Securities, then the
arrangement by which the Securities of that Series are issued will be treated as
a FASIT so long as all of the provisions of the related Agreement are complied
with and the statutory and regulatory requirements are satisfied.
The Small Business and Job Protection Act of 1996 added Sections 860H
through 860L to the Code (the "FASIT Provisions"), which provide for a new type
of entity for federal income tax purposes known as a "financial asset
securitization investment trust" (a "FASIT"). Although the FASIT provisions of
the Code became effective on September 1, 1997, no Treasury regulations or other
administrative guidance have been issued with respect to those provisions.
Accordingly, definitive guidance cannot be provided with respect to many aspects
of the tax treatment of FASIT regular interest holders. Investors should also
note that the FASIT discussion contained herein constitutes only a summary of
the U.S. federal income tax consequences to the holders of FASIT interests. With
respect to each Series of FASIT regular interests, the related Prospectus
Supplement will provide a detailed discussion regarding the federal income tax
consequences associated with the particular transaction.
FASIT interests will be classified as either FASIT regular interests, which
generally will be treated as debt for federal income tax purposes, or FASIT
ownership interests, which generally are not treated as debt for such purposes,
but rather as representing rights and responsibilities with respect to the
taxable income or loss of the related FASIT. The Prospectus Supplement for each
Series of Securities will indicate which Securities of such Series will be
designated as regular interests, and which, if any, will be designated as
ownership interests.
Qualification as a FASIT. A Trust Fund will qualify as a FASIT if (i) a
FASIT election is in effect, (ii) certain tests concerning (A) the composition
of the FASIT's assets and (B) the nature of the investors' interests in the
FASIT are met on a continuing basis, and (iii) the Trust Fund is not a regulated
investment company as defined in Section 851(a) of the Code.
Asset Composition. For a Trust Fund to be eligible for FASIT status,
substantially all of the Trust Fund Assets must consist of "permitted assets" as
of the close of the third month beginning after the closing date and at all
times thereafter (the "FASIT Qualification Test"). Permitted assets include (i)
cash or cash equivalents, (ii) debt instruments with fixed terms that would
qualify as regular interests if issued by a REMIC (generally, instruments that
provide for interest at a fixed rate, a qualifying variable rate, or a
qualifying interest-only ("IO") type rate), (iii) foreclosure property, (iv)
certain hedging instruments (generally, interest and currency rate swaps and
credit enhancement contracts) that are reasonably required to guarantee or hedge
against the FASIT's risks associated with being the obligor on FASIT interests,
(v) contract rights to acquire qualifying debt instruments or qualifying hedging
instruments, (vi) FASIT regular interest, and (vii) REMIC regular interests.
Permitted assets do not include any debt instruments issued by the holder of the
FASIT's ownership interest or by any person related to such holder.
Interests in a FASIT. In addition to the foregoing asset qualification
requirements, the interests in a FASIT also must meet certain requirements. All
of the interests in a FASIT must belong to either of the following: (i) one or
more classes of regular interests or (ii) a single class of ownership interest
that is held by a fully taxable domestic C Corporation.
A FASIT interest generally qualifies as a regular interest if (i) it is
designated as a regular interest, (ii) it has a stated maturity no greater than
thirty years, (iii) it entitles its holder to a specified principal amount, (iv)
the issue price of the interest does not exceed 125% of its stated principal
amount, (v) the yield to maturity of the interest is less than the applicable
Treasury rate published by the IRS plus 5%, and (vi) if it pays interest, such
interest is payable at either (a) a fixed rate with respect to the principal
amount of the regular interest or (b) a permissible variable rate with respect
to such principal amount. Permissible variable rates for FASIT regular interests
are the same as those for REMIC regular interests (i.e., certain qualified
floating rates and weighted average rates). Interest will generally be
considered to be based on a permissible variable rate if (i) such interest is
unconditionally payable at least annually, (ii) the issue price of the debt
instrument does not exceed the total noncontingent principal payments and (iii)
interest is based on a "qualified floating rate," an "objective rate," a
combination of a single fixed rate and one or more "qualified floating rate,"
one "qualified inverse floating rate," or a combination of "qualified floating
rates" that do not operate in a manner that significantly accelerates or defers
interest payments on such FASIT regular interest.
If an interest in a FASIT fails to meet one or more of the requirements set
out in clauses (iii), (iv), or (v) in the immediately preceding paragraph, but
otherwise meets all requirements to be treated as a FASIT, it may still qualify
as a type of regular interest known as a "High-Yield Interest." In addition, if
an interest in a FASIT fails to meet the requirement of clause (vi), but the
interest payable on the interest consists of a specified portion of the interest
payments on permitted assets and that portion does not vary over the life of the
security, the interest will also qualify as a High-Yield Interest. A High-Yield
Interest may be held only by domestic C corporations that are fully subject to
corporate income tax ("Eligible Corporations"), other FASITs, and dealers in
securities who acquire such interests as inventory, rather than for investment.
In addition, holders of High-Yield Interests are subject to limitations on of
income derived from such interest.
Consequences of Disqualification. If a Trust Fund fails to comply with one
or more of ongoing requirements for FASIT status during any taxable year, the
Code provides that its FASIT status may be lost for that year and thereafter. If
FASIT status is lost, the treatment of the former FASIT and interests therein
for federal income tax purposes is uncertain. Although the Code authorizes the
Treasury to issue regulations that address situations where a failure to meet
the requirements for FASIT status occurs inadvertently and in good faith, such
regulations have not yet been issued. It is possible that disqualification
relief might be accompanied by sanctions, such as the imposition of a corporate
tax on all or a portion of the FASIT's income for the period of time in which
the requirements for FASIT status are not satisfied.
Treatment of FASIT Regular Interests
Payments received by holders of FASIT regular interests generally will be
accorded the same tax treatment under the Code as payments received on other
taxable debt instruments. Holders of FASIT regular interests must report income
from such Securities under an accrual method of accounting, even if they
otherwise would have used the cash receipts and disbursements method. If the
FASIT regular interests is sold, the holder generally will recognize gain or
loss upon the sale. See "-Taxation of Debt Securities" above.
Treatment of High-Yield Interest
High-Yield Interests are subject to special rules regarding the eligibility
of holders of such interest, and the ability of such holders to offset income
derived from those interests with losses. High-Yield Interests only may be held
by Eligible Corporations, other FASITs, and dealers in securities who acquire
such interests as inventory. If a securities dealer (other than an Eligible
Corporation) initially acquires a High-Yield Interest as inventory, but later
begins to hold it for investment, the dealer will be subject to an excise tax
equal to the income from the High-Yield Interest multiplied by the highest
corporate income tax rate. In addition, transfers of High-Yield Interests to
disqualified holders will be disregarded for federal income tax purposes, and
the transferor will continue to be treated as the holder of the High-Yield
Interest.
The holder of a High-Yield Interest may not use non-FASIT current losses or
net operating loss carryforwards or carrybacks to offset any income derived from
the High-Yield Interest, for either regular federal income tax purposes or for
alternative minimum tax purposes. In addition, the FASIT provisions contain an
anti-abuse rule that imposes corporate income tax on income derived from a FASIT
regular interest that is held by a pass-through entity (other than another
FASIT) that issues debt or equity securities backed by the FASIT regular
interest and that have the same features as High-Yield Interests.
Tax Treatment of FASIT Ownership Interests
A FASIT ownership interest represents the residual equity interest in a
FASIT. As such, the holder of a FASIT ownership interest determines its taxable
income by taking into account all assets, liabilities, and items of income,
gain, deduction, loss, and credit of a FASIT. In general, the character of the
income to the holder of a FASIT ownership interest will be the same as the
character of such income to the FASIT, except that any tax-exempt interest
income taken into account by the holder of a FASIT ownership interest is treated
as ordinary income. In determining that taxable income, the holder of a FASIT
ownership interest must determine the amount of interest, original issue
discount, market discount, and premium recognized with respect to the FASIT's
assets and the FASIT regular interests issued by the FASIT according to a
constant yield methodology and under an accrual method of accounting. In
addition, holders of FASIT Ownership Securities are subject to the same
limitations on their ability to use losses to offset income from their FASIT
regular interests as are holders of High-Yield Interest.
Rules similar to the wash sale rules applicable to REMIC residual interests
also will apply to FASIT ownership interests. Accordingly, losses on
dispositions of a FASIT ownership interest generally will be disallowed where
within six months before or after the disposition, the seller of such interest
acquires any other FASIT ownership interest that is economically comparable to a
FASIT ownership interest. In addition, if any security that is sold or
contributed to a FASIT by the holders of the related FASIT ownership interest
was required to be marked-to-market under section 475 of the Code by such
holder, then section 475 of the Code will continue to apply to such securities,
except that the amount realized under the mark-to-market rules or the
securities' value after applying special valuation rules contained in the FASIT
provisions. Those special valuation rules generally require that the value of
debt instruments that are not traded on an established securities market be
determined by calculating the present value of the reasonably expected payments
under the instrument using a discount rate of 120% of the applicable Federal
rate, compounded semi-annually.
The holder of a FASIT ownership interest will be subject to a tax equal to
100% of the net income derived by the FASIT from any "prohibited transactions."
Prohibited transactions include (i) the receipt of income derived from assets
that are not permitted assets, (ii) certain dispositions of permitted assets,
(iii) the receipt of any income derived from any loan originated by a FASIT, and
(iv) in certain cases, the receipt of income representing a servicing fee or
other compensation. Any Series of Securities for which a FASIT election is made
generally will be structured in order to avoid application of the prohibited
transaction tax.
Tax Status as a Grantor Trust
In the absence of a REMIC or FASIT election, a Trust Fund generally will be
classified as a grantor trust if (i) there is either only one class of
Securities that evidences the entire undivided beneficial ownership of the Trust
Fund Assets, or, if there is more than one class of Securities, each class
represents a direct investment in the Trust Fund Assets, and (ii) no power
exists under the related Agreement to vary the investment of the
Securityholders. If these conditions are satisfied, the related Prospectus
Supplement will recite that in the opinion of Brown & Wood llp, special counsel
to the Depositor, the Trust Fund relating to a Series of Securities will be
classified for federal income tax purposes as a grantor trust under Subpart E,
Part I of Subchapter J of the Code (the Securities of such Series, "Pass-Through
Securities"). In some Series there will be no separation of the principal and
interest payments on the Loans. In such circumstances, a holder will be
considered to have purchased a pro rata undivided interest in each of the Loans.
In other cases ("Stripped Securities"), sale of the Securities will produce a
separation in the ownership of all or a portion of the principal payments from
all or a portion of the interest payments on the Loans.
Each holder must report on its federal income tax return its share of the
gross income derived from the Loans (not reduced by the amount payable as fees
to the Trustee and the Servicer and similar fees (collectively, the "Servicing
Fee")), at the same time and in the same manner as such items would have been
reported under the holder's tax accounting method had it held its interest in
the Loans directly, received directly its share of the amounts received with
respect to the Loans, and paid directly its share of the Servicing Fees. In the
case of Pass-Through Securities other than Stripped Securities, such income will
consist of a pro rata share of all of the income derived from all of the Loans
and, in the case of Stripped Securities, such income will consist of a pro rata
share of the income derived from each stripped bond or stripped coupon in which
the holder owns an interest. The holder of a Security will generally be entitled
to deduct such Servicing Fees under Section 162 or Section 212 of the Code to
the extent that such Servicing Fees represent "reasonable" compensation for the
services rendered by the Trustee and the Servicer (or third parties that are
compensated for the performance of services). In the case of a noncorporate
holder, however, Servicing Fees (to the extent not otherwise disallowed, e.g.,
because they exceed reasonable compensation) will be deductible in computing
such holder's regular tax liability only to the extent that such fees, when
added to other miscellaneous itemized deductions, exceed 2% of adjusted gross
income and may not be deductible to any extent in computing such holder's
alternative minimum tax liability. In addition, for taxable years beginning
after December 31, 1990, the amount of itemized deductions otherwise allowable
for the taxable year for an individual whose adjusted gross income exceeds the
applicable amount (which amount will be adjusted for inflation in taxable years
beginning after 1990) will be reduced by the lesser of (i) 3% of the excess of
adjusted gross income over the applicable amount or (ii) 80% of the amount of
itemized deductions otherwise allowable for such taxable year.
Discount or Premium on Pass-Through Securities. The holder's purchase price
of a Pass-Through Security is to be allocated among the Loans in proportion to
their fair market values, determined as of the time of purchase of the
Securities. In the typical case, the Trustee (to the extent necessary to fulfill
its reporting obligations) will treat each Loan as having a fair market value
proportional to the share of the aggregate principal balances of all of the
Loans that it represents, since the Securities, unless otherwise specified in
the related Prospectus Supplement, will have a relatively uniform interest rate
and other common characteristics. To the extent that the portion of the purchase
price of a Pass-Through Security allocated to a Loan (other than to a right to
receive any accrued interest thereon and any undistributed principal payments)
is less than or greater than the portion of the principal balance of the Loan
allocable to the Security, the interest in the Loan allocable to the
Pass-Through Security will be deemed to have been acquired at a discount or
premium, respectively.
The treatment of any discount will depend on whether the discount
represents OID or market discount. In the case of a Loan with OID in excess of a
prescribed de minimis amount or a Stripped Security, a holder of a Security will
be required to report as interest income in each taxable year its share of the
amount of OID that accrues during that year in the manner described above. OID
with respect to a Loan could arise, for example, by virtue of the financing of
points by the originator of the Loan, or by virtue of the charging of points by
the originator of the Loan in an amount greater than a statutory de minimis
exception, in circumstances under which the points are not currently deductible
pursuant to applicable Code provisions. Any market discount or premium on a Loan
will be includible in income, generally in the manner described above, except
that in the case of Pass-Through Securities, market discount is calculated with
respect to the Loans underlying the Certificate, rather than with respect to the
Security. A holder that acquires an interest in a Loan originated after July 18,
1984 with more than a de minimis amount of market discount (generally, the
excess of the principal amount of the Loan over the purchaser's allocable
purchase price) will be required to include accrued market discount in income in
the manner set forth above. See " -- Taxation of Debt Securities; Market
Discount" and " -- Premium" above.
In the case of market discount on a Pass-Through Security attributable to
Loans originated on or before July 18, 1984, the holder generally will be
required to allocate the portion of such discount that is allocable to a loan
among the principal payments on the Loan and to include the discount allocable
to each principal payment in ordinary income at the time such principal payment
is made. Such treatment would generally result in discount being included in
income at a slower rate than discount would be required to be included in income
using the method described in the preceding paragraph.
Stripped Securities. A Stripped Security may represent a right to receive
only a portion of the interest payments on the Loans, a right to receive only
principal payments on the Loans, or a right to receive certain payments of both
interest and principal. Certain Stripped Securities ("Ratio Strip Securities")
may represent a right to receive differing percentages of both the interest and
principal on each Loan. Pursuant to Section 1286 of the Code, the separation of
ownership of the right to receive some or all of the interest payments on an
obligation from ownership of the right to receive some or all of the principal
payments results in the creation of "stripped bonds" with respect to principal
payments and "stripped coupons" with respect to interest payments. Section 1286
of the Code applies the OID rules to stripped bonds and stripped coupons. For
purposes of computing original issue discount, a stripped bond or a stripped
coupon is treated as a debt instrument issued on the date that such stripped
interest is purchased with an issue price equal to its purchase price or, if
more than one stripped interest is purchased, the ratable share of the purchase
price allocable to such stripped interest.
Servicing fees in excess of reasonable servicing fees ("excess servicing")
will be treated under the stripped bond rules. If the excess servicing fee is
less than 100 basis points (i.e., 1% interest on the Loan principal balance) or
the Securities are initially sold with a de minimis discount (assuming no
prepayment assumption is required), any non-de minimis discount arising from a
subsequent transfer of the Securities should be treated as market discount. The
IRS appears to require that reasonable servicing fees be calculated on a Loan by
Loan basis, which could result in some Loans being treated as having more than
100 basis points of interest stripped off.
OID Regulations and judicial decisions provide no direct guidance as to how
the interest and original issue discount rules are to apply to Stripped
Securities and other Pass-Through Securities. Under the method described above
for Pay-Through Securities (the "Cash Flow Bond Method"), a prepayment
assumption is used and periodic recalculations are made which take into account
with respect to each accrual period the effect of prepayments during such
period. However, the 1986 Act does not, absent Treasury regulations, appear
specifically to cover instruments such as the Stripped Securities which
technically represent ownership interests in the underlying Loans, rather than
being debt instruments "secured by" those loans. For tax years beginning after
August 5, 1997 the Taxpayer Relief Act of 1997 may allow use of the Cash Flow
Bond Method with respect to Stripped Securities and other Pass-Through
Securities because it provides that such method applies to any pool of debt
instruments the yield on which may be affected by prepayments. Nevertheless, it
is believed that the Cash Flow Bond Method is a reasonable method of reporting
income for such Securities, and it is expected that OID will be reported on that
basis unless otherwise specified in the related Prospectus Supplement. In
applying the calculation to Pass-Through Securities, the Trustee will treat all
payments to be received by a holder with respect to the underlying Loans as
payments on a single installment obligation. The IRS could, however, assert that
original issue discount must be calculated separately for each Loan underlying a
Security.
Under certain circumstances, if the Loans prepay at a rate faster than the
Prepayment Assumption, the use of the Cash Flow Bond Method may accelerate a
holder's recognition of income. If, however, the Loans prepay at a rate slower
than the Prepayment Assumption, in some circumstances the use of this method may
decelerate a holder's recognition of income.
In the case of a Stripped Security that is an Interest Weighted Security,
the Trustee intends, absent contrary authority, to report income to Security
holders as OID, in the manner described above for Interest Weighted Securities.
Possible Alternative Characterizations. The characterizations of the
Stripped Securities described above are not the only possible interpretations of
the applicable Code provisions. Among other possibilities, the IRS could contend
that (i) in certain Series, each non-Interest Weighted Security is composed of
an unstripped undivided ownership interest in Loans and an installment
obligation consisting of stripped principal payments; (ii) the non-Interest
Weighted Securities are subject to the contingent payment provisions of the
Contingent Regulations; or (iii) each Interest Weighted Stripped Security is
composed of an unstripped undivided ownership interest in Loans and an
installment obligation consisting of stripped interest payments.
Given the variety of alternatives for treatment of the Stripped Securities
and the different federal income tax consequences that result from each
alternative, potential purchasers are urged to consult their own tax advisers
regarding the proper treatment of the Securities for federal income tax
purposes.
Character as Qualifying Loans. In the case of Stripped Securities, there is
no specific legal authority existing regarding whether the character of the
Securities, for federal income tax purposes, will be the same as the Loans. The
IRS could take the position that the Loans' character is not carried over to the
Securities in such circumstances. Pass-Through Securities will be, and, although
the matter is not free from doubt, Stripped Securities should be considered to
represent "real estate assets" within the meaning of Section 856(c)(5)(B) of the
Code and "loans secured by an interest in real property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code; and interest income attributable to the
Securities should be considered to represent "interest on obligations secured by
mortgages on real property or on interests in real property" within the meaning
of Section 856(c)(3)(B) of the Code. Reserves or funds underlying the Securities
may cause a proportionate reduction in the above-described qualifying status
categories of Securities.
Sale or Exchange
Subject to the discussion below with respect to Trust Funds classified as
partnerships made, a holder's tax basis in its Security is the price such holder
pays for a Security, plus amounts of original issue or market discount included
in income and reduced by any payments received (other than qualified stated
interest payments) and any amortized premium. Gain or loss recognized on a sale,
exchange, or redemption of a Security, measured by the difference between the
amount realized and the Security's basis as so adjusted, will generally be
capital gain or loss, assuming that the Security is held as a capital asset. In
the case of a Security held by a bank, thrift, or similar institution described
in Section 582 of the Code, however, gain or loss realized on the sale or
exchange of a REMIC or FASIT regular interest will be taxable as ordinary income
or loss. In addition, gain from the disposition of a REMIC regular interest that
might otherwise be capital gain will be treated as ordinary income to the extent
of the excess, if any, of (i) the amount that would have been includible in the
holder's income if the yield on such REMIC regular interest Security had equaled
110% of the applicable federal rate as of the beginning of such holder's holding
period, over the amount of ordinary income actually recognized by the holder
with respect to such REMIC regular interest. In general, the maximum tax rate on
ordinary income for individual taxpayers is 39.6% and the maximum tax rate on
long-term capital gains for such taxpayers is 28%. The maximum tax rate on both
ordinary income and long-term capital gains of corporate taxpayers is 35%.
The Taxpayer Relief Act of 1997 reduces the maximum rates on long-term
capital gains recognized on capital assets held by individual taxpayers for more
than eighteen months as of the date of disposition (and would further reduce the
maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specified conditions). Prospective investors
should consult their own tax advisors concerning these tax law changes.
Miscellaneous Tax Aspects
Backup Withholding. Subject to the discussion below with respect to Trust
Funds classified as partnerships, a holder, other than a holder of a REMIC
Residual Security, may, under certain circumstances, be subject to "backup
withholding" at a rate of 31% with respect to distributions or the proceeds of a
sale of certificates to or through brokers that represent interest or original
issue discount on the Securities. This withholding generally applies if the
holder of a Security (i) fails to furnish the Trustee with its taxpayer
identification number ("TIN"); (ii) furnishes the Trustee an incorrect TIN;
(iii) fails to report properly interest, dividends or other "reportable
payments" as defined in the Code; or (iv) under certain circumstances, fails to
provide the Trustee or such holder's securities broker with a certified
statement, signed under penalty of perjury, that the TIN provided is its correct
number and that the holder is not subject to backup withholding. Backup
withholding will not apply, however, with respect to certain payments made to
holders, including payments to certain exempt recipients (such as exempt
organizations) and to certain Nonresidents (as defined below). holders should
consult their tax advisers as to their qualification for exemption from backup
withholding and the procedure for obtaining the exemption.
The Trustee will report to the holders and to the Servicer for each
calendar year the amount of any "reportable payments" during such year and the
amount of tax withheld, if any, with respect to payments on the Securities.
Tax Treatment of Foreign Investors
Subject to the discussion below with respect to Trust Funds classified as
partnerships election is made, under the Code, unless interest (including OID)
paid on a Security (other than a Residual Interest Security) is considered to be
"effectively connected" with a trade or business conducted in the United States
by a nonresident alien individual, foreign partnership or foreign corporation
("Nonresidents"), such interest will normally qualify as portfolio interest
(except where (i) the recipient is a holder, directly or by attribution, of 10%
or more of the capital or profits interest in the issuer or (ii) the recipient
is a controlled foreign corporation to which the issuer is a related person) and
will be exempt from federal income tax. Upon receipt of appropriate ownership
statements, the issuer normally will be relieved of obligations to withhold tax
from such interest payments. These provisions supersede the generally applicable
provisions of United States law that would otherwise require the issuer to
withhold at a 30% rate (unless such rate were reduced or eliminated by an
applicable tax treaty) on, among other things, interest and other fixed or
determinable, annual or periodic income paid to Nonresidents. Holders of
Pass-Through Securities and Stripped Securities, including Ratio Strip
Securities, however, may be subject to withholding to the extent that the Loans
were originated on or before July 18, 1984.
Interest and OID of Securityholders who are Nonresidents are not subject to
withholding if they are effectively connected with a United States business
conducted by the holder. They will, however, generally be subject to the regular
United States income tax.
Payments to holders of Residual Interest Securities who are Nonresidents
will generally be treated as interest for purposes of the 30% (or lower treaty
rate) United States withholding tax. Holders should assume that such income does
not qualify for exemption from United States withholding tax as "portfolio
interest." It is clear that, to the extent that a payment represents a portion
of REMIC taxable income that constitutes excess inclusion income, a holder of a
Residual Interest Security will not be entitled to an exemption from or
reduction of the 30% (or lower treaty rate) withholding tax rule. If the
payments are subject to United States withholding tax, they generally will be
taken into account for withholding tax purposes only when paid or distributed
(or when the Residual Interest Security is disposed of). The Treasury has
statutory authority, however, to promulgate regulations which would require such
amounts to be taken into account at an earlier time in order to prevent the
avoidance of tax. Such regulations could, for example, require withholding prior
to the distribution of cash in the case of Residual Interest Securities that do
not have significant value. Under the REMIC Regulations, if a Residual Interest
Security has tax avoidance potential, a transfer of a Residual Interest Security
to a Nonresident will be disregarded for all federal tax purposes. A Residual
Interest Security has tax avoidance potential unless, at the time of the
transfer the transferor reasonably expects that the REMIC will distribute to the
transferee residual interest holder amounts that will equal at least 30% of each
excess inclusion, and that such amounts will be distributed at or after the time
at which the excess inclusions accrue and not later than the calendar year
following the calendar year of accrual. If a Nonresident transfers a Residual
Interest Security to a United States person, and if the transfer has the effect
of allowing the transferor to avoid tax on accrued excess inclusions, then the
transfer is disregarded and the transferor continues to be treated as the owner
of the Residual Interest Security for purposes of the withholding tax provisions
of the Code. See " -- Excess Inclusions."
Tax Characterization of the Trust Fund as a Partnership
In the absence of a REMIC or FASIT election, a Trust Fund that is not
classified as a grantor trust will be classified as a partnership for federal
tax purposes. Brown & Wood llp, special counsel to the Depositor, will deliver
its opinion that a Trust Fund classified as a partnership will not be a publicly
traded partnership taxable as a corporation for federal income tax purposes.
This opinion will be based on the assumption that the terms of the Trust
Agreement and related documents will be complied with, and on counsel's
conclusions that the nature of the income of the Trust Fund will exempt it from
the rule that certain publicly traded partnerships are taxable as corporations
or the issuance of the Securities has been structured as a private placement
under an IRS safe harbor, so that the Trust Fund will not be characterized as a
publicly traded partnership taxable as a corporation.
If the Trust Fund were taxable as a corporation for federal income tax
purposes, the Trust Fund would be subject to corporate income tax on its taxable
income. The Trust Fund's taxable income would include all its income, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust Fund.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness. The Trust Fund will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Special counsel to the Depositor will, except
as otherwise provided in the related Prospectus Supplement, advise the Depositor
that the Notes will be classified as debt for federal income tax purposes. The
tax treatment of the Notes is described under the caption "Taxation of Debt
Securities" set forth above.
Tax Consequences to Holders of the Certificates
Treatment of the Trust Fund as a Partnership. The Trust Fund and the Master
Servicer will agree, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust Fund as a partnership for purposes of federal
and state income tax, franchise tax and any other tax measured in whole or in
part by income, with the assets of the partnership being the assets held by the
Trust Fund, the partners of the partnership being the Certificateholders, and
the Notes being debt of the partnership. However, the proper characterization of
the arrangement involving the Trust Fund, the Certificates, the Notes, the Trust
Fund and the Servicer is not clear because there is no authority on transactions
closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates have certain features characteristic of debt, the
Certificates might be considered debt of the Trust Fund. Any such
characterization would not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
Indexed Securities, etc. The following discussion assumes that all payments
on the Certificates are denominated in U.S. dollars, none of the Certificates
are Indexed Securities or Strip Certificates, and that a Series of Securities
includes a single class of Certificates. If these conditions are not satisfied
with respect to any given Series of Certificates, additional tax considerations
with respect to such Certificates will be disclosed in the applicable Prospectus
Supplement.
Partnership Taxation. As a partnership, the Trust Fund will not be subject
to federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust Fund. The Trust Fund's income will
consist primarily of interest and finance charges earned on the Loans (including
appropriate adjustments for market discount, OID and bond premium) and any gain
upon collection or disposition of Loans. The Trust Fund's deductions will
consist primarily of interest accruing with respect to the Notes, servicing and
other fees, and losses or deductions upon collection or disposition of Loans.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (here, the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the Certificateholders will be allocated taxable income of the
Trust Fund for each month equal to the sum of (i) the interest that accrues on
the Certificates in accordance with their terms for such month, including
interest accruing at the Pass-Through Rate for such month and interest on
amounts previously due on the Certificates but not yet distributed; (ii) any
Trust Fund income attributable to discount on the Loans that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price (iii) prepayment premium payable to the Certificateholders for such month;
and (iv) any other amounts of income payable to the Certificateholders for such
month. Such allocation will be reduced by any amortization by the Trust Fund of
premium on Loans that corresponds to any excess of the issue price of
Certificates over their principal amount. All remaining taxable income of the
Trust Fund will be allocated to the Company. Based on the economic arrangement
of the parties, this approach for allocating Trust Fund income should be
permissible under applicable Treasury regulations, although no assurance can be
given that the IRS would not require a greater amount of income to be allocated
to Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass-Through Rate
plus the other items described above even though the Trust Fund might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the Certificates
on the accrual basis and Certificateholders may become liable for taxes on Trust
Fund income even if they have not received cash from the Trust Fund to pay such
taxes. In addition, because tax allocations and tax reporting will be done on a
uniform basis for all Certificateholders but Certificateholders may be
purchasing Certificates at different times and at different prices,
Certificateholders may be required to report on their tax returns taxable income
that is greater or less than the amount reported to them by the Trust Fund.
All of the taxable income allocated to a Certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) will constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust Fund (including
fees to the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust Fund.
The Trust Fund intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Loan, the Trust Fund
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Loans were not issued with
OID, and, therefore, the Trust Fund should not have OID income. However, the
purchase price paid by the Trust Fund for the Loans may be greater or less than
the remaining principal balance of the Loans at the time of purchase. If so, the
Loan will have been acquired at a premium or discount, as the case may be. (As
indicated above, the Trust Fund will make this calculation on an aggregate
basis, but might be required to recompute it on a Loan by Loan basis.)
If the Trust Fund acquires the Loans at a market discount or premium, the
Trust Fund will elect to include any such discount in income currently as it
accrues over the life of the Loans or to any such premium against interest
income on the Loans. As indicated above, a portion of such market discount
income or premium deduction may be allocated to Certificateholders.
Section 708 Termination. Pursuant to final regulations issued on May 9,
1997 under Code Section 708, a sale or exchange of 50% or more of the capital
and profits in a partnership would cause a deemed contribution of assets of the
partnership (the "old partnership") to a new partnership (the "new partnership")
in exchange for interests in the new partnership. Such interests would be deemed
distributed to the partners of the old partnership in liquidation thereof, which
would not constitute a sale or exchange. Accordingly under these new
regulations, if the Trust Fund were characterized as a partnership and a sale of
Certificates terminated the partnership under Code Section 708, the purchaser's
basis in its ownership interest would not change.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust Fund income (includible
in income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust Fund. A holder acquiring Certificates
at different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Loans would generally be treated as
ordinary income to the holder and would give rise to special tax reporting
requirements. The Trust Fund does not expect to have any other assets that would
give rise to such special reporting requirements. Thus, to avoid those special
reporting requirements, the Trust Fund will elect to include market discount in
income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust
Fund's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificateholders
in proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust Fund might be reallocated among the Certificateholders. The Trust
Fund's method of allocation between transferors and transferees may be revised
to conform to a method permitted by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust Fund's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust Fund were to file an election under
Section 754 of the Code. In order to avoid the administrative complexities that
would be involved in keeping accurate accounting records, as well as potentially
onerous information reporting requirements, the Trust Fund will not make such
election. As a result, Certificateholders might be allocated a greater or lesser
amount of Trust Fund income than would be appropriate based on their own
purchase price for Certificates.
Administrative Matters. The Owner Trustee is required to keep or have kept
complete and accurate books of the Trust Fund. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust Fund will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust Fund and will report each Certificateholder's allocable share of items of
Trust Fund income and expense to holders and the IRS on Schedule K-1. The Trust
Fund will provide the Schedule K-l information to nominees that fail to provide
the Trust Fund with the information statement described below and such nominees
will be required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust Fund or be subject to penalties unless
the holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust Fund
with a statement containing certain information on the nominee, the beneficial
owners and the Certificates so held. Such information includes (i) the name,
address and taxpayer identification number of the nominee and (ii) as to each
beneficial owner (x) the name, address and identification number of such person,
(y) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust Fund information
as to themselves and their ownership of Certificates. A clearing agency
registered under Section 17A of the Exchange Act is not required to furnish any
such information statement to the Trust Fund. The information referred to above
for any calendar year must be furnished to the Trust Fund on or before the
following January 31. Nominees, brokers and financial institutions that fail to
provide the Trust Fund with the information described above may be subject to
penalties.
The Depositor will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust Fund by the appropriate taxing authorities
could result in an adjustment of the returns of the Certificateholders, and,
under certain circumstances, a Certificateholder may be precluded from
separately litigating a proposed adjustment to the items of the Trust Fund. An
adjustment could also result in an audit of a Certificateholder's returns and
adjustments of items not related to the income and losses of the Trust Fund.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
Trust Fund would be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to non-U.S.
Persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust Fund would be engaged in a trade or business in the United States
for such purposes, the Trust Fund will withhold as if it were so engaged in
order to protect the Trust Fund from possible adverse consequences of a failure
to withhold. The Trust Fund expects to withhold on the portion of its taxable
income, as calculated for this purpose which may exceed the distributions to
Certificateholders, that is allocable to foreign Certificateholders pursuant to
Section 1446 of the Code, as if such income were effectively connected to a U.S.
trade or business, at a rate of 35% for foreign holders that are taxable as
corporations and 39.6% for all other foreign holders. Subsequent adoption of
Treasury regulations or the issuance of other administrative pronouncements may
require the Trust Fund to change its withholding procedures. In determining a
holder's withholding status, the Trust Fund may rely on IRS Form W-8, IRS Form
W-9 or the holder's certification of nonforeign status signed under penalties of
perjury.
The term "U.S. Person" means a citizen or resident of the United States, a
corporation, partnership or (other entity treated as a corporation or
partnership) created or organized in or under the laws of the United States or
any state thereof including the District of Columbia (other than a partnership
that is not treated as a United States person under any applicable Treasury
regulations), or an estate whose income is subject to U.S. federal income tax
regardless of its source of income, or a trust if a court within the United
States is able to exercise primary supervision of the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust. Notwithstanding the preceding sentence, to
the extent provided in regulations, certain trusts in existence on August 20,
1996 and treated as United States persons prior to such date that elect to
continue to be so treated also shall be considered U.S. Persons.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return (including, in the case of a corporation, the branch
profits tax) on its share of the Trust Fund's income. Each foreign holder must
obtain a taxpayer identification number from the IRS and submit that number to
the Trust Fund on Form W-8 in order to assure appropriate crediting of the taxes
withheld. A foreign holder generally would be entitled to file with the IRS a
claim for refund with respect to taxes withheld by the Trust Fund taking the
position that no taxes were due because the Trust Fund was not engaged in a U.S.
trade or business. However, interest payments made (or accrued) to a
Certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Trust Fund. If these interest payments are properly
characterized as guaranteed payments, then the interest will not be considered
"portfolio interest." As a result, Certificateholders will be subject to United
States federal income tax and withholding tax at a rate of 30 percent, unless
reduced or eliminated pursuant to an applicable treaty. In such case, a foreign
holder would only be entitled to claim a refund for that portion of the taxes in
excess of the taxes that should be withheld with respect to the guaranteed
payments.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Federal
Income Tax Consequences," potential investors should consider the state and
local income tax consequences of the acquisition, ownership, and disposition of
the Securities. State and local income tax law may differ substantially from the
corresponding federal law, and this discussion does not purport to describe any
aspect of the income tax laws of any state or locality. Therefore, potential
investors should consult their own tax advisors with respect to the various
state and local tax consequences of an investment in the Securities.
ERISA CONSIDERATIONS
The following describes certain considerations under ERISA and the Code,
which apply only to Securities of a Series that are not divided into subclasses.
If Securities are divided into subclasses the related Prospectus Supplement will
contain information concerning considerations relating to ERISA and the Code
that are applicable to such Securities.
ERISA imposes requirements on employee benefit plans (and on certain other
retirement plans and arrangements, including individual retirement accounts and
annuities, Keogh plans and collective investment funds and separate accounts in
which such plans, accounts or arrangements are invested) (collectively "Plans")
subject to ERISA and on persons who are fiduciaries with respect to such Plans.
Generally, ERISA applies to investments made by Plans. Among other things, ERISA
requires that the assets of Plans be held in trust and that the trustee, or
other duly authorized fiduciary, have exclusive authority and discretion to
manage and control the assets of such Plans. ERISA also imposes certain duties
on persons who are fiduciaries of Plans. Under ERISA, any person who exercises
any authority or control respecting the management or disposition of the assets
of a Plan is considered to be a fiduciary of such Plan (subject to certain
exceptions not here relevant). Certain employee benefit plans, such as
governmental plans (as defined in ERISA Section 3(32)) and, if no election has
been made under Section 410(d) of the Code, church plans (as defined in ERISA
Section 3(33)), are not subject to ERISA requirements. Accordingly, assets of
such plans may be invested in Securities without regard to the ERISA
considerations described above and below, subject to the provisions of
applicable state law. Any such plan which is qualified and exempt from taxation
under Code Sections 401(a) and 501(a), however, is subject to the prohibited
transaction rules set forth in Code Section 503.
On November 13, 1986, the United States Department of Labor (the "DOL")
issued final regulations concerning the definition of what constitutes the
assets of a Plan. (Labor Reg. Section 2510.3-101) Under this regulation, the
underlying assets and properties of corporations, partnerships and certain other
entities in which a Plan makes an "equity" investment could be deemed for
purposes of ERISA to be assets of the investing Plan in certain circumstances.
However, the regulation provides that, generally, the assets of a corporation or
partnership in which a Plan invests will not be deemed for purposes of ERISA to
be assets of such Plan if the equity interest acquired by the investing Plan is
a publicly-offered security. A publicly-offered security, as defined in the
Labor Reg. Section 2510.3-101, is a security that is widely held, freely
transferable and registered under the Securities Exchange Act of 1934, as
amended.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA prohibits a broad range of transactions
involving Plan assets and persons ("Parties in Interest") having certain
specified relationships to a Plan and imposes additional prohibitions where
Parties in Interest are fiduciaries with respect to such Plan. Because the Loans
may be deemed Plan assets of each Plan that purchases Securities, an investment
in the Securities by a Plan might be a prohibited transaction under ERISA
Sections 406 and 407 and subject to an excise tax under Code Section 4975 unless
a statutory or administrative exemption applies.
In Prohibited Transaction Exemption 83-1 ("PTE 83-1"), which amended
Prohibited Transaction Exemption 81-7, the DOL exempted from ERISA's prohibited
transaction rules certain transactions relating to the operation of residential
mortgage pool investment trusts and the purchase, sale and holding of "mortgage
pool pass-through certificates" in the initial issuance of such certificates.
PTE 83-1 permits, subject to certain conditions, transactions which might
otherwise be prohibited between Plans and Parties in Interest with respect to
those Plans related to the origination, maintenance and termination of mortgage
pools consisting of mortgage loans secured by first or second mortgages or deeds
of trust on single-family residential property, and the acquisition and holding
of certain mortgage pool pass-through certificates representing an interest in
such mortgage pools by Plans. If the general conditions (discussed below) of PTE
83-1 are satisfied, investments by a Plan in Securities that represent interests
in a Pool consisting of Loans ("Single Family Securities") will be exempt from
the prohibitions of ERISA Sections 406(a) and 407 (relating generally to
transactions with Parties in Interest who are not fiduciaries) if the Plan
purchases the Single Family Securities at no more than fair market value and
will be exempt from the prohibitions of ERISA Sections 406(b)(1) and (2)
(relating generally to transactions with fiduciaries) if, in addition, the
purchase is approved by an independent fiduciary, no sales commission is paid to
the pool sponsor, the Plan does not purchase more than 25% of all Single Family
Securities, and at least 50% of all Single Family Securities are purchased by
persons independent of the pool sponsor or pool trustee. PTE 83-1 does not
provide an exemption for transactions involving Subordinate Securities.
Accordingly, unless otherwise provided in the related Prospectus Supplement, no
transfer of a Subordinate Security or a Security which is not a Single Family
Security may be made to a Plan.
The discussion in this and the next succeeding paragraph applies only to
Single Family Securities. The Depositor believes that, for purposes of PTE 83-1,
the term "mortgage pass-through certificate" would include: (i) Securities
issued in a Series consisting of only a single class of Securities; and (ii)
Securities issued in a Series in which there is only one class of those
particular Securities; provided that the Securities in the case of clause (i),
or the Securities in the case of clause (ii), evidence the beneficial ownership
of both a specified percentage of future interest payments (greater than 0%) and
a specified percentage (greater than 0%) of future principal payments on the
Loans. It is not clear whether a class of Securities that evidences the
beneficial ownership in a Trust Fund divided into Loan groups, beneficial
ownership of a specified percentage of interest payments only or principal
payments only, or a notional amount of either principal or interest payments, or
a class of Securities entitled to receive payments of interest and principal on
the Loans only after payments to other classes or after the occurrence of
certain specified events would be a "mortgage pass-through certificate" for
purposes of PTE 83-1.
PTE 83-1 sets forth three general conditions which must be satisfied for
any transaction to be eligible for exemption: (i) the maintenance of a system of
insurance or other protection for the pooled mortgage loans and property
securing such loans, and for indemnifying Securityholders against reductions in
pass-through payments due to property damage or defaults in loan payments in an
amount not less than the greater of one percent of the aggregate principal
balance of all covered pooled mortgage loans or the principal balance of the
largest covered pooled mortgage loan; (ii) the existence of a pool trustee who
is not an affiliate of the pool sponsor; and (iii) a limitation on the amount of
the payment retained by the pool sponsor, together with other funds inuring to
its benefit, to not more than adequate consideration for selling the mortgage
loans plus reasonable compensation for services provided by the pool sponsor to
the Pool. The Depositor believes that the first general condition referred to
above will be satisfied with respect to the Securities in a Series issued
without a subordination feature, or the Securities only in a Series issued with
a subordination feature, provided that the subordination and Reserve Account,
subordination by shifting of interests, the pool insurance or other form of
credit enhancement described under "Credit Enhancement" herein (such
subordination, pool insurance or other form of credit enhancement being the
system of insurance or other protection referred to above) with respect to a
Series of Securities is maintained in an amount not less than the greater of one
percent of the aggregate principal balance of the Loans or the principal balance
of the largest Loan. See "Description of the Securities" herein. In the absence
of a ruling that the system of insurance or other protection with respect to a
Series of Securities satisfies the first general condition referred to above,
there can be no assurance that these features will be so viewed by the DOL. The
Trustee will not be affiliated with the Depositor.
Each Plan fiduciary who is responsible for making the investment decisions
whether to purchase or commit to purchase and to hold Single Family Securities
must make its own determination as to whether the first and third general
conditions, and the specific conditions described briefly in the preceding
paragraph, of PTE 83-1 have been satisfied, or as to the availability of any
other prohibited transaction exemptions. Each Plan fiduciary should also
determine whether, under the general fiduciary standards of investment prudence
and diversification, an investment in the Securities is appropriate for the
Plan, taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
The DOL has granted to certain underwriters individual administrative
exemptions (the "Underwriter Exemptions") from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of Section 4975
of the Code with respect to the initial purchase, the holding and the subsequent
resale by Plans of certificates in pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of the Underwriter Exemptions.
While each Underwriter Exemption is an individual exemption separately
granted to a specific underwriter, the terms and conditions which generally
apply to the Underwriter Exemptions are substantially identical, and include the
following:
(1) the acquisition of the certificates by a Plan is on terms
(including the price for the certificates) that are at least as favorable
to the Plan as they would be in an arm's-length transaction with an
unrelated party;
(2) the rights and interest evidenced by the certificates acquired by
the Plan are not subordinated to the rights and interests evidenced by
other certificates of the trust fund;
(3) the certificates acquired by the Plan have received a rating at
the time of such acquisition that is one of the three highest generic
rating categories from Standard & Poor's Ratings Group, a Division of The
McGraw-Hill Companies ("S&P"), Moody's Investors Service, Inc. ("Moody's"),
Duff & Phelps Credit Rating Co. ("DCR") or Fitch IBCA, Inc. ("Fitch");
(4) the trustee must not be an affiliate of any other member of the
Restricted Group as defined below;
(5) the sum of all payments made to and retained by the underwriters
in connection with the distribution of the certificates represents not more
than reasonable compensation for underwriting the certificates; the sum of
all payments made to and retained by the seller pursuant to the assignment
of the loans to the trust fund represents not more than the fair market
value of such loans; the sum of all payments made to and retained by the
servicer and any other servicer represents not more than reasonable
compensation for such person's services under the agreement pursuant to
which the loans are pooled and reimbursements of such person's reasonable
expenses in connection therewith; and
(6) the Plan investing in the certificates is an "accredited investor"
as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933 as amended.
The trust fund must also meet the following requirements:
(i) the corpus of the trust fund must consist solely of assets of the
type that have been included in other investment pools;
(ii) certificates in such other investment pools must have been rated
in one of the three highest rating categories of S&P, Moody's, Fitch or DCR
for at least one year prior to the Plan's acquisition of certificates; and
(iii) certificates evidencing interests in such other investment pools
must have been purchased by investors other than Plans for at least one
year prior to any Plan's acquisition of certificates.
Moreover, the Underwriter Exemptions generally provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
the Plan fiduciary causes a Plan to acquire certificates in a trust as to which
the fiduciary (or its affiliate) is an obligor on the receivables held in the
trust provided that, among other requirements: (i) in the case of an acquisition
in connection with the initial issuance of certificates, at least fifty percent
(50%) of each class of certificates in which Plans have invested is acquired by
persons independent of the Restricted Group, (ii) such fiduciary (or its
affiliate) is an obligor with respect to five percent (5%) or less of the fair
market value of the obligations contained in the trust; (iii) the Plan's
investment in certificates of any class does not exceed twenty-five percent
(25%) of all of the certificates of that class outstanding at the time of the
acquisition; and (iv) immediately after the acquisition, no more than
twenty-five percent (25%) of the assets of the Plan with respect to which such
person is a fiduciary is invested in certificates representing an interest in
one or more trusts containing assets sold or serviced by the same entity. The
Underwriter Exemptions do not apply to Plans sponsored by the Seller, the
related Underwriter, the Trustee, the Master Servicer, any insurer with respect
to the Loans, any obligor with respect to Loans included in the Trust Fund
constituting more than five percent (5%) of the aggregate unamortized principal
balance of the assets in the Trust Fund, or any affiliate of such parties (the
"Restricted Group").
The Prospectus Supplement for each Series of Securities will indicate the
classes of Securities, if any, offered thereby as to which it is expected that
an Underwriter Exemption will apply.
The Underwriter Exemption contains several requirements, some of which
differ from those in PTE 83-l. The Underwriter Exemption contains an expanded
definition of "certificate" which includes an interest which entitles the holder
to pass-through payments of principal, interest and/or other payments. The
Underwriter Exemption contains an expanded definition of "trust" which permits
the trust corpus to consist of secured consumer receivables. The definition of
"trust," however, does not include any investment pool unless, inter alia, (i)
the investment pool consists only of assets of the type which have been included
in other investment pools, (ii) certificates evidencing interests in such other
investment pools have been purchased by investors other than Plans for at least
one year prior to the Plan's acquisition of certificates pursuant to the
Underwriter Exemption and (iii) certificates in such other investment pools have
been rated in one of the three highest generic rating categories of the four
credit rating agencies noted below. Generally, the Underwriter Exemption holds
that the acquisition of the certificates by a Plan must be on terms (including
the price for the certificates) that are at least as favorable to the Plan as
they would be in an arm's length transaction with an unrelated party. The
Underwriter Exemption requires that the rights and interests evidenced by the
certificates not be "subordinated" to the rights and interests evidenced by
other certificates of the same trust. The Underwriter Exemption requires that
certificates acquired by a Plan have received a rating at the time of their
acquisition that is in one of the three highest generic rating categories of
S&P, Moody's, Fitch or DCR. The Underwriter Exemption specifies that the pool
trustee must not be an affiliate of the pool sponsor, nor an affiliate of the
Underwriter, the pool servicer, any obligor with respect to mortgage loans
included in the trust constituting more than five percent of the aggregate
unamortized principal balance of the assets in the trust, or any affiliate of
such entities. Finally, the Underwriter Exemption stipulates that any Plan
investing in the certificates must be an "accredited investor" as defined in
Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission under
the Securities Act of 1933.
On July 21, 1997, the DOL published in the Federal Register an amendment to
the Underwriter Exemption which extends exemptive relief to certain
mortgage-backed and asset-backed securities transactions using pre-funding
accounts for trusts issuing pass-through certificates. The amendment generally
allows mortgage loans or other secured receivables (the "obligations")
supporting payments to certificate-holders, and having a value equal to no more
than twenty-five percent (25%) of the total principal amount of the certificates
being offered by the trust, to be transferred to the trust within a 90-day or
three-month period following the closing date (the "pre-funding period") instead
of requiring that all such obligations be either identified or transferred on or
before the closing date. The relief is available when the following conditions
are met:
(1) The ratio of the amount allocated to the pre-funding account to
the total principal amount of the certificates being offered (the
"pre-funding limit") must not exceed twenty-five percent (25%).
(2) All obligations transferred after the closing date (the
"additional obligations") must meet the same terms and conditions for
eligibility as the original obligations used to create the trust, which
terms and conditions have been approved by a rating agency.
(3) The transfer of such additional obligations to the trust during
the pre-funding period must not result in the certificates to be covered by
the Underwriter Exemption receiving a lower credit rating from a rating
agency upon termination of the pre-funding period than the rating that was
obtained at the time of the initial issuance of the certificates by the
trust.
(4) Solely as a result of the use of pre-funding, the weighted average
annual percentage interest rate (the "average interest rate") for all of
the obligations in the trust at the end of the pre-funding period must not
be more than 1.0% lower than the average interest rate for the obligations
which were transferred to the trust on the closing date.
(5) In order to ensure that the characteristics of the additional
obligations are substantially similar to the original obligations which
were transferred to the trust,
(i) the characteristics of the additional obligations must be
monitored by an insurer or other credit support provider which is
independent of the depositor; or
(ii) an independent accountant retained by the depositor must provide
the depositor with a letter (with copies provided to each rating
agency rating the certificates, the related underwriter and the
related trustee) stating whether or not the characteristics of
the additional obligations conform to the characteristics
described in the related prospectus or prospectus supplement
and/or pooling and servicing agreement. In preparing such letter,
the independent accountant must use the same type of procedures
as were applicable to the obligations which were transferred to
the trust as of the closing date.
(6) The pre-funding period must end no later than three months or 90
days after the closing date or earlier in certain circumstances if the
pre-funding account falls below the minimum level specified in the pooling
and servicing agreement or an event of default occurs.
(7) Amounts transferred to any pre-funding account and/or capitalized
interest account used in connection with the pre-funding may be invested
only in certain permitted investments.
(8) The related prospectus supplement must describe:
(i) any pre-funding account and/or capitalized interest account
used in connection with a pre-funding account;
(ii) the duration of the pre-funding period;
(iii)the percentage and/or dollar amount of the pre-funding Limit
for the trust; and
(iv) that the amount remaining in the pre-funding account at the
end of the pre-funding period will be remitted to
certificate holders as repayments of principal.
(9) The related pooling and servicing agreement must describe the
permitted investments for the pre-funding account and/or capitalized
interest account and, if not disclosed in the related prospectus or
prospectus supplement, the terms and conditions for eligibility of
additional obligations.
Any Plan fiduciary which proposes to cause a Plan to purchase Securities
should consult with its counsel concerning the impact of ERISA and the Code, the
applicability of PTE 83-1 and the Underwriter Exemption, and the potential
consequences in their specific circumstances, prior to making such investment.
Moreover, each Plan fiduciary should determine whether under the general
fiduciary standards of investment prudence and diversification an investment in
the Securities is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio.
LEGAL INVESTMENT
The Prospectus Supplement for each series of Securities will specify which,
if any, of the classes of Securities offered thereby constitute "mortgage
related securities" for purposes of the Secondary Mortgage Market Enhancement
Act of 1984 ("SMMEA"). Classes of Securities that qualify as "mortgage related
securities" will be legal investments for persons, trusts, corporations,
partnerships, associations, business trusts, and business entities (including
depository institutions, life insurance companies and pension funds) created
pursuant to or existing under the laws of the United States or of any state
(including the District of Columbia and Puerto Rico) whose authorized
investments are subject to state regulations to the same extent as, under
applicable law, obligations issued by or guaranteed as to principal and interest
by the United States or any such entities. Under SMMEA, if a state enacts
legislation prior to October 4, 1991 specifically limiting the legal investment
authority of any such entities with respect to "mortgage related securities,"
securities will constitute legal investments for entities subject to such
legislation only to the extent provided therein. Approximately twenty-one states
adopted such legislation prior to the October 4, 1991 deadline. SMMEA provides,
however, that in no event will the enactment of any such legislation affect the
validity of any contractual commitment to purchase, hold or invest in
securities, or require the sale or other disposition of securities, so long as
such contractual commitment was made or such securities were acquired prior to
the enactment of such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in Securities
without limitations as to the percentage of their assets represented thereby,
federal credit unions may invest in mortgage related securities, and national
banks may purchase securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
24 (Seventh), subject in each case to such regulations as the applicable federal
authority may prescribe. In this connection, federal credit unions should review
the National Credit Union Administration ("NCUA") Letter to Credit Unions No.
96, as modified by Letter to Credit Unions No. 108, which includes guidelines to
assist federal credit unions in making investment decisions for mortgage related
securities and the NCUA's regulation "Investment and Deposit Activities" (12
C.F.R. Part 703), which sets forth certain restrictions on investment by federal
credit unions in mortgage related securities (in each case whether or not the
class of Securities under consideration for purchase constituted a "mortgage
related security"). The NCUA issued final regulations effective December 2, 1991
that restrict and in some instances prohibit the investment by Federal Credit
Unions in certain types of mortgage related securities.
All depository institutions considering an investment in the Securities
(whether or not the class of Securities under consideration for purchase
constitutes a "mortgage related security") should review the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on the
Securities Activities (to the extent adopted by their respective regulators)
(the "Policy Statement") setting forth, in relevant part, certain securities
trading and sales practices deemed unsuitable for an institution's investment
portfolio, and guidelines for (and restrictions on) investing in mortgage
derivative products, including "mortgage related securities," which are
"high-risk mortgage securities" as defined in the Policy Statement. According to
the Policy Statement, such "high-risk mortgage securities" include securities
such as Securities not entitled to distributions allocated to principal or
interest, or Subordinated Securities. Under the Policy Statement, it is the
responsibility of each depository institution to determine, prior to purchase
(and at stated intervals thereafter), whether a particular mortgage derivative
product is a "high-risk mortgage security," and whether the purchase (or
retention) of such a product would be consistent with the Policy Statement.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to "prudent investor" provisions, percentage-of-assets limits and provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying," or in securities which are issued in book-entry
form.
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Securities or to purchase
Securities representing more than a specified percentage of the investor's
assets. Investors should consult their own legal advisors in determining whether
and to what extent the Securities constitute legal investments for such
investors.
METHOD OF DISTRIBUTION
Securities are being offered hereby in Series from time to time (each
Series evidencing or relating to a separate Trust Fund) through any of the
following methods:
1. By negotiated firm commitment underwriting and public reoffering by
underwriters;
2. By agency placements through one or more placement agents primarily
with institutional investors and dealers; and
3. By placement directly by the Depositor with institutional
investors.
A Prospectus Supplement will be prepared for each Series which will
describe the method of offering being used for that Series and will set forth
the identity of any underwriters thereof and either the price at which such
Series is being offered, the nature and amount of any underwriting discounts or
additional compensation to such underwriters and the proceeds of the offering to
the Depositor, or the method by which the price at which the underwriters will
sell the Securities will be determined. Each Prospectus Supplement for an
underwritten offering will also contain information regarding the nature of the
underwriters' obligations, any material relationship between the Depositor and
any underwriter and, where appropriate, information regarding any discounts or
concessions to be allowed or reallowed to dealers or others and any arrangements
to stabilize the market for the Securities so offered. In firm commitment
underwritten offerings, the underwriters will be obligated to purchase all of
the Securities of such Series if any such Securities are purchased. Securities
may be acquired by the underwriters for their own accounts and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale.
Underwriters and agents may be entitled under agreements entered into with
the Depositor to indemnification by the Depositor against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribution with respect to payments which such underwriters or agents
may be required to make in respect thereof.
If a Series is offered other than through underwriters, the Prospectus
Supplement relating thereto will contain information regarding the nature of
such offering and any agreements to be entered into between the Depositor and
purchasers of Securities of such Series.
LEGAL MATTERS
The validity of the Securities of each Series, including certain federal
income tax consequences with respect thereto, will be passed upon for the
Depositor by Brown & Wood llp, One World Trade Center, New York, New York 10048.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each Series of Securities
and no Trust Fund will engage in any business activities or have any assets or
obligations prior to the issuance of the related Series of Securities.
Accordingly, no financial statements with respect to any Trust Fund will be
included in this Prospectus or in the related Prospectus Supplement.
RATING
It is a condition to the issuance of the Securities of each Series offered
hereby and by the Prospectus Supplement that they shall have been rated in one
of the four highest rating categories by the nationally recognized statistical
rating agency or agencies (each, a "Rating Agency") specified in the related
Prospectus Supplement.
Any such rating would be based on, among other things, the adequacy of the
value of the Trust Fund Assets and any credit enhancement with respect to such
class and will reflect such Rating Agency's assessment solely of the likelihood
that holders of a class of Securities of such class will receive payments to
which such Securityholders are entitled under the related Agreement. Such rating
will not constitute an assessment of the likelihood that principal prepayments
on the related Loans will be made, the degree to which the rate of such
prepayments might differ from that originally anticipated or the likelihood of
early optional termination of the Series of Securities. Such rating should not
be deemed a recommendation to purchase, hold or sell Securities, inasmuch as it
does not address market price or suitability for a particular investor. Each
security rating should be evaluated independently of any other security rating.
Such rating will not address the possibility that prepayment at higher or lower
rates than anticipated by an investor may cause such investor to experience a
lower than anticipated yield or that an investor purchasing a Security at a
significant premium might fail to recoup its initial investment under certain
prepayment scenarios.
There is also no assurance that any such rating will remain in effect for
any given period of time or that it may not be lowered or withdrawn entirely by
the Rating Agency in the future if in its judgment circumstances in the future
so warrant. In addition to being lowered or withdrawn due to any erosion in the
adequacy of the value of the Trust Fund Assets or any credit enhancement with
respect to a Series, such rating might also be lowered or withdrawn among other
reasons, because of an adverse change in the financial or other condition of a
credit enhancement provider or a change in the rating of such credit enhancement
provider's long term debt.
The amount, type and nature of credit enhancement, if any, established with
respect to a Series of Securities will be determined on the basis of criteria
established by each Rating Agency rating classes of such Series. Such criteria
are sometimes based upon an actuarial analysis of the behavior of mortgage loans
in a larger group. Such analysis is often the basis upon which each Rating
Agency determines the amount of credit enhancement required with respect to each
such class. There can be no assurance that the historical data supporting any
such actuarial analysis will accurately reflect future experience nor any
assurance that the data derived from a large pool of mortgage loans accurately
predicts the delinquency, foreclosure or loss experience of any particular pool
of Loans. No assurance can be given that values of any Properties have remained
or will remain at their levels on the respective dates of origination of the
related Loans. If the residential real estate markets should experience an
overall decline in property values such that the outstanding principal balances
of the Loans in a particular Trust Fund and any secondary financing on the
related Properties become equal to or greater than the value of the Properties,
the rates of delinquencies, foreclosures and losses could be higher than those
now generally experienced in the mortgage lending industry. In additional,
adverse economic conditions (which may or may not affect real property values)
may affect the timely payment by mortgagors of scheduled payments of principal
and interest on the Loans and, accordingly, the rates of delinquencies,
foreclosures and losses with respect to any Trust Fund. To the extent that such
losses are not covered by credit enhancement, such losses will be borne, at
least in part, by the holders of one or more classes of the Securities of the
related Series.
INDEX OF DEFINED TERMS
Term Page
---- ----
Accretion Directed............................................................34
Accrual.......................................................................35
Accrual Securities............................................................31
Advance.......................................................................10
Agreement.....................................................................21
Amortizable Bond Premium
Regulations.................................................................77
APR...........................................................................24
Available Funds...............................................................31
Balloon payment...............................................................22
Belgian Cooperative...........................................................40
BIF...........................................................................50
Book-Entry Securities.........................................................38
Buydown Fund..................................................................23
Buydown Loans.................................................................23
Calculation Agent.............................................................35
Cash Flow Bond Method.........................................................83
CEDEL Participants............................................................39
CERCLA....................................................................17, 63
Certificates............................................................1, 5, 21
Capitalized Interest Account..................................................51
Claimable Amount..............................................................72
Class Security Balance........................................................31
Closed-End Loans...............................................................5
Code......................................................................11, 73
COFI Securities...............................................................37
Collateral Value..............................................................25
Combined Loan-to-Value Ratio..................................................25
Commission.....................................................................3
Component Securities..........................................................34
Contingent Regulations........................................................74
Cooperative Loans.............................................................22
Cooperatives..................................................................22
Cut-off Date...............................................................5, 21
Cut-off Date Principal Balance................................................29
DCR...........................................................................93
Debt Securities...............................................................73
Definitive Security...........................................................38
Depositor..................................................................1, 25
Detailed Description..........................................................22
Distribution Date..............................................................7
DOL...........................................................................91
DTC.......................................................................19, 38
Eleventh District.............................................................36
EPA...........................................................................63
ERISA.........................................................................13
Euroclear Operator............................................................40
Euroclear Participants........................................................40
European Depositaries.........................................................38
Exchange Act...................................................................3
FDIC..........................................................................27
FHA............................................................................9
FHLBSF........................................................................36
FHLMC.........................................................................27
Financial Intermediary........................................................38
Fitch.........................................................................93
Fixed Rate....................................................................35
Floating Rate.................................................................35
FNMA..........................................................................27
Foreign person................................................................86
Funding Period................................................................19
Garn-St Germain Act...........................................................65
Holder in Due Course Rules....................................................18
Home Equity Loans...........................................................1, 6
Home Improvement Contracts..................................................1, 6
Home Improvements..............................................................1
Indenture.....................................................................29
Installment Contract..........................................................67
Insurance Proceeds............................................................50
Insured Expenses..............................................................50
Interest Only.................................................................35
Interest Weighted Securities..................................................76
Inverse Floating Rate.........................................................35
IRS...........................................................................74
L/C Bank...................................................................9, 42
L/C Percentage.............................................................9, 42
Liquidation Expenses..........................................................50
Liquidation Proceeds..........................................................50
Loan Rate..................................................................7, 22
Loans..........................................................................1
Loan-to-Value Ratio...........................................................25
Lockout periods...............................................................23
Master Servicer................................................................5
Master Servicing Agreement....................................................21
Master Servicing Fee..........................................................55
Moody's...................................................................43, 93
Morgan........................................................................40
Mortgage......................................................................48
Mortgaged Properties..........................................................23
Multifamily Loan............................................................1, 5
National Cost of Funds Index..................................................37
NCUA..........................................................................94
Nonresidents..................................................................84
Notes...................................................................1, 5, 21
Notional Amount Securities....................................................34
OID.......................................................................11, 73
OID Regulations...............................................................73
OTS...........................................................................37
PACs..........................................................................34
Partial Accrual...............................................................35
Parties in Interest...........................................................91
Pass-Through Rate..........................................................7, 21
Pass-Through Securities.......................................................81
Pay-Through Security..........................................................75
Percentage Interests..........................................................57
Permitted Investments.........................................................43
Planned Principal Class.......................................................34
Plans.........................................................................91
Policy Statement..............................................................95
Pool.......................................................................5, 21
Pool Insurance Policy.........................................................44
Pool Insurer..................................................................44
Pooling and Servicing Agreement...............................................29
Pre-Funded Amount.............................................................19
Pre-Funding Account........................................................5, 19
Prepayment Assumption.........................................................75
Primary Mortgage Insurance
Policy......................................................................23
Prime Rate....................................................................38
Principal Only................................................................35
Principal Prepayments.........................................................32
Properties.................................................................6, 23
Property Improvement Loans....................................................69
Proposed Mark-to-Market
Regulations.................................................................81
PTE 83-1......................................................................91
Purchase Price................................................................27
Rating Agency.................................................................96
Ratio Strip Securities........................................................82
RCRA..........................................................................64
Record Date...................................................................30
Reference Banks...............................................................35
Refinance Loan................................................................25
Regular Interest Securities...................................................73
Relevant Depositary...........................................................38
Relief Act....................................................................68
REMIC......................................................................2, 73
Reserve Account............................................................8, 30
Reserve Interest Rate.........................................................36
Residual Interest Security....................................................79
Restricted Group..............................................................93
Retained Interest.............................................................29
Revolving Credit Line Loans....................................................5
Riegle Act....................................................................18
Rules.........................................................................39
S&P...........................................................................93
SAIF..........................................................................50
Scheduled Principal Class.....................................................34
Securities..............................................................1, 5, 21
Security Account..............................................................49
Security Owners...............................................................38
Security Register.............................................................30
Securityholders...............................................................38
Seller.........................................................................1
Sellers.......................................................................21
Senior Securities..........................................................6, 41
Sequential Pay................................................................34
Series.........................................................................1
Servicing Fee.................................................................81
Short-Term Note...............................................................86
Single Family Loan..........................................................1, 5
Single Family Properties......................................................23
Single Family Securities......................................................91
SMMEA.....................................................................11, 94
Strip.........................................................................34
Stripped Securities...........................................................81
Sub-Servicer..............................................................10, 21
Sub-Servicing Agreement.......................................................52
Subordinated Securities........................................................6
Subsequent Loans..............................................................19
Support Class.................................................................34
TACs..........................................................................35
Targeted Principal Class......................................................35
Terms and Conditions..........................................................40
TIN...........................................................................84
Title I Loans.................................................................69
Title I Program...............................................................69
Title V...................................................................66, 67
Trust Agreement...........................................................21, 29
Trust Fund.................................................................1, 21
Trust Fund Assets.......................................................1, 5, 21
Trustee....................................................................5, 29
UCC...........................................................................63
Underwriter Exemptions........................................................92
U.S. Person...................................................................90
VA.............................................................................9
VA Guaranty...................................................................55
Variable Rate.................................................................35
[THIS PAGE INTENTIONALLY LEFT BLANK]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution*
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the Securities being registered under this
Registration Statement, other than underwriting discounts and commissions:
SEC registration fee.......................................... $
Printing and engraving expenses...............................
Legal fees and expenses.......................................
Trustee fees and expenses.....................................
Accounting fees and expenses..................................
Blue Sky fees and expenses....................................
Rating agency fees............................................
Miscellaneous.................................................
------------
Total................................................. $___________
- ---------
* To be completed by amendment.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he or she is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
such action, suit or proceeding if the person indemnified acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
No indemnification may be made in respect to any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court may deem proper. Section 145
further provides that to the extent a director or officer of a corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to above, or in the defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith.
The Certificate of Incorporation and Bylaws of the Registrant provide, in
effect, that, to the extent and under the circumstances permitted by Section 145
of the General Corporation Law of Delaware, the Registrant shall indemnify any
person who was or is a party or is threatened to be made a party to any action,
suit or proceeding of the type described above by reason of the fact that he or
she is or was a director, officer, employee or agent of the Registrant.
Item 16. Exhibits.
1.1 (a) -- Form of Underwriting Agreement.*
1.1 (b) -- Form of Indemnification and Contribution Agreement.*
3.1 -- Certificate of Incorporation of the Registrant.
3.2 -- By-laws of the Registrant.
4.1 -- Form of Pooling and Servicing Agreement relating to Home Equity
Loan Asset Backed Certificates.
4.2 -- Form of Pooling and Servicing Agreement relating to Mortgage
Pass-Through Certificates.
4.3 -- Form of Pooling and Servicing Agreement relating to Manufactured
Housing Asset Backed Certificates.
4.4 -- Form of Trust Agreement.
4.5 -- Form of Indenture.
4.6 -- Form of Master Servicing Agreement.
5.1 -- Opinion of Brown & Wood llp as to legality of the Securities.
8.1 -- Opinion of Brown & Wood llp as to certain tax matters (included
in Exhibit 5.1).
10.1 -- Form of Loan Purchase Agreement.
23.1 -- Consent of Brown & Wood llp (included in Exhibits 5.1 and 8.1
hereof).
- --------------
* To be filed by amendment.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of a Trust Fund's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934, as amended, that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act of 1939 in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act of 1939.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that (i) it reasonably believes that the security rating
requirement of Transaction Requirement B.5 of Form S-3 will be met by the time
of sale of each Series of Securities to which this Registration Statement
relates and (ii) it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Pasadena, state of California on the 30th day of
April, 1998.
IndyMac ABS, Inc.
By: /s/ S. Blair Abernathy
................................
Name: S. Blair Abernathy
Title: Chairman of the Board,
President and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of S. Blair Abernathy, James Gross and Gwen
J. Eells, or any of them, his/her true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement Amendment has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------- ------------------------------------ -----------------
<S> <C> <C>
/s/ S. Blair Abernathy Chairman of the Board, President April 30, 1998
S. Blair Abernathy and Director
/s/ James Gross First Vice President, Chief April 30, 1998
James Gross Financial Officer and Director
/s/ Gwen J. Eells General Counsel, Secretary April 30, 1998
Gwen J. Eells and Director
/s/ Jeffrey P. Grogin Director April 30, 1998
Jeffrey P. Grogin
/s/ James Banks Director April 30, 1998
James Banks
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Sequential
No. Description of Exhibit Page Number
- ----------- ----------------------- -----------
<S> <C>
1.1(a) -- Form of Underwriting Agreement*.......................................
1.1(b) -- Form of Indemnification and Contribution Agreement*...................
3.1 -- Certificate of Incorporation of the Registrant........................
3.2 -- By-laws of the Registrant.............................................
4.1 --Form of Pooling and Servicing Agreement relating to Home Equity Loan Asset Backed
Certificates..............................................
4.2 --Form of Pooling and Servicing Agreement relating to Mortgage Pass-Through
Certificates..............................................
4.3 -- Form of Pooling and Servicing Agreement relating to Manufactured Housing Asset Backed Certificates.
4.4 --Form of Trust Agreement...............................................
4.5 -- Form of Indenture.....................................................
4.6 --Form of Master Servicing Agreement....................................
5.1 --Opinion of Brown & Wood llp as to legality of the Securities............
8.1 --Opinion of Brown & Wood llp as to certain tax matters (included in Exhibit
5.1).............................................................
10.1 --Form of Loan Purchase Agreement.......................................
23.1 --Consent of Brown & Wood llp (included in Exhibits 5.1 and 8.1)..........
- ---------
* To be filed by amendment.
</TABLE>
Brown & Wood llp
One World Trade Center
New York, New York 10048-0557
Telephone: 212-839-5300
Facsimile: 212-839-5599
May 1, 1998
VIA ELECTRONIC FILING
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: IndyMac ABS, Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
On behalf of IndyMac ABS, Inc. (the "Company") and trusts to be formed by
the Company, we transmit herewith for filing under the Securities Act of 1933,
as amended (the "Act"), a Registration Statement on Form S-3 (the "Registration
Statement") relating to the registration of $1,000,000 in aggregate
principal amount of asset backed certificates and asset backed notes of such
trusts.
Please address any inquiries or comments to the undersigned at (212)
839-5395.
Very truly yours,
/s/ Edward J. Fine
CERTIFICATE OF INCORPORATION
OF
IndyMac ABS, Inc.
The undersigned, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the General Corporation Law of the
State of Delaware (the "GCL"), does hereby certify as follows:
FIRST: The name of the corporation is IndyMac ABS, Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of the corporation's registered agent at
such address is The Corporation Trust Company.
THIRD: The nature of business or purposes to be conducted or
promoted by the Corporation is to engage solely in the following
activities:
a. To acquire, own, hold, sell, transfer, pledge or otherwise
dispose of:
(1) interests in (A) loan agreements, promissory notes or
other evidences of indebtedness (the "Mortgage Loans") secured
by mortgages, deeds of trust, pledge agreements or other
security devices creating first and/or subordinate liens on
single family (one- to four-family) or small multifamily (five-
to fifty- unit) residential properties (including, but not
limited to, detached or semi-detached dwelling units, apartment
buildings, townhouses, rowhouses, individual condominium units
and individual units in planned unit developments (and
manufactured housing that is permanently affixed and treated as
real property under local law) (the "Single Family Properties"
or "Small Multifamily Properties", respectively) or mixed use
properties which consist of structures of not more than three
stories which include one- to four-family residential dwelling
units and space used for retail, professional or other
commercial uses, (B) installment sales contracts, conditional
sales contracts or installment loan agreements on manufactured
housing that is neither permanently affixed nor treated as real
property under local law (the "Manufactured Housing
Contracts"), (C) closed-end and/or revolving home equity loans
(the "Home Equity Loans") secured by first and/or subordinate
liens on Single Family Properties or Small Multifamily
Properties and/or (D) home improvement sale contracts and
installment sale agreements (the "Home Improvement Contracts"
and, together with the Home Equity Loans, the Manufactured
Housing Contracts and the Mortgage Loans, the "Loans") that are
either unsecured or secured primarily by subordinate liens on
Single Family Properties or Small Multifamily Properties or by
purchase money security interests in the home improvements
financed thereby; such Loans may include cooperative apartment
loans secured by shares issued by private, nonprofit,
cooperative housing corporations ("Cooperatives") and the
related proprietary leases or occupancy agreements granting
exclusive rights to occupy specific dwelling units in such
Cooperative buildings or loans secured by apartment buildings
owned by Cooperatives;
(2) mortgage-backed securities insured and/or guaranteed
as to timely payment of interest and/or principal by the
Government National Mortgage Association, Federal National
Mortgage Association or Federal Home Loan Mortgage Corporation;
and
(3) mortgage pass-through certificates and other
collateralized mortgage obligations issued by a financial
institution or other entity engaged generally in the business
of mortgage lending, a public agency or instrumentality of a
state, local or federal government, or a limited purpose
corporation engaged in the business of establishing trusts and
acquiring and selling residential loans to such trusts and
selling beneficial interests in such trusts.
b. To act as settlor or depositor of trusts formed under a
trust agreement, pooling and servicing agreement or other agreement
to issue one or more series (any of which series may be issued in
one or more classes) of trust certificates ("Certificates")
representing interests in Loans and/or to issue pursuant to an
indenture or other agreement one or more series (any of which series
may be issued in one or more classes) of bonds, notes or other
evidences of indebtedness ("Debt Obligations") collateralized by
Loans and/or other property and to enter into any other agreement in
connection with the authorization, issuance, sale and delivery of
Certificates and/or Debt Obligations ("Securities").
c. To hold, pledge, transfer or otherwise deal with Securities,
including Securities representing a senior interest in Loans
("Senior Interests"), representing a subordinated interest in Loans
("Subordinated Interests") or a residual interest in Loans
("Residual Interests").
d. To loan or invest or otherwise apply proceeds from Loans,
funds received in respect of Securities, Senior Interests,
Subordinated Interests or Residual Interests and any other income,
as determined by the Corporation's Board of Directors.
e. To engage in any lawful act or activity to exercise any
powers permitted to corporations organized under the GCL that are
incidental to and necessary or convenient for the accomplishment of
the foregoing purposes.
FOURTH: The total number of shares of all classes of capital stock
that the Corporation shall have authority to issue is 1,000 shares of
common stock, and the par value of such shares shall be $0.01 per share.
FIFTH: The name and mailing address of the sole incorporator is as
follows:
Name Mailing Address
Naji Massouh c/o Brown & Wood LLP
One World Trade Center
New York, NY 10048
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
1. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors.
2. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors shall have concurrent power with
the stockholders to make, alter, amend, change, add to or repeal the
bylaws of the Corporation.
3. The number of directors of the Corporation shall initially
be five and thereafter shall be as from time to time fixed by, or in
the manner provided in, the bylaws of the Corporation. Election of
directors need not be by written ballot unless the bylaws so
provide.
4. At least one director of the Corporation will not be a
director, officer or employee of any direct or indirect parent of
the Corporation or of any affiliate of such parent (other than
CWMBS, Inc., a Delaware corporation, and CWABS, Inc., a Delaware
corporation, or any successor thereto).
5. In addition to the powers and authority hereinabove or by
statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation, subject
nevertheless to the provisions of the GCL, this Certificate of
Incorporation and the bylaws of the Corporation; provided, however,
that no bylaw hereafter adopted by the stockholders shall invalidate
any prior act of the directors that would have been valid if such
bylaw had not been adopted. The Corporation's Board of Directors
will duly authorize all of the Corporation's actions.
6. The Corporation's funds and other assets will not be
commingled with those of any of its stockholders or of any direct or
indirect parent of the Corporation or of any affiliate of any such
parent.
7. The Corporation will maintain separate corporate records and
books of account from those of any of its stockholders or of any
direct or indirect parent of the Corporation or of any affiliate of
any such parent.
EIGHTH: The Corporation shall not issue, assume or guarantee any
debt securities unless such issuance, assumption or guarantee will not
result in the downgrade or withdrawal of the rating then assigned to any
outstanding Securities then rated by such rating agency.
NINTH: A director of the Corporation shall not in the absence of
fraud be disqualified by his office from dealing or contracting with the
Corporation either as a vendor, purchaser or otherwise, nor in the
absence of fraud shall a director of the Corporation be liable to account
to the Corporation for any profit realized by him from or through any
transaction or contract of the Corporation by reason of the fact that he,
or any firm of which he is a member, or any corporation of which he is an
officer, director or stockholder, was interested in such transaction or
contract if such transaction or contract has been authorized, approved or
ratified in the manner provided in the GCL for authorization, approval or
ratification of transactions or contracts between the Corporation and one
or more of its directors or officers, or between the Corporation and any
other corporation, partnership, association or other organization in
which one or more of its directors or officers are directors or officers
or have a financial interest.
TENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the
application in a summary way of the Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for the Corporation under the provisions of Section 291 of the
GCL or on the application of trustees in dissolution or of any receiver
or receivers appointed for the Corporation under the provisions of
Section 279 of the GCL, order a meeting of the creditors or class of
creditors and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors and/or of the stockholders
or class of stockholders of the Corporation, as the case may be, agree to
any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been made, be
binding on all the creditors or class of creditors and/or on all the
stockholders or class of stockholders of the Corporation, as the case may
be, and also on the Corporation.
ELEVENTH: No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174
of the GCL or (iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or modification of this Article
ELEVENTH by the stockholders of the Corporation shall not adversely
affect any right of protection of a director of the Corporation existing
at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
TWELFTH: Notwithstanding any other provision of this Certificate of
Incorporation and any provision of law that otherwise so empowers the
Corporation, the Corporation, for so long as any rated Securities remain
outstanding, shall not:
(i) engage in any business or activity other
than those set forth in Article THIRD;
(ii) dissolve or liquidate, in whole or in part; consolidate or
merge with or into any other entity or convey or transfer its
properties and assets substantially as an entirety to any entity,
unless:
(A) the entity (if other than the Corporation) formed or
surviving the consolidation or merger or which acquires the
properties and assets of the Corporation, is organized and
existing under the laws of the State of Delaware, expressly
assumes the due and punctual payment of, and all obligations of
the Corporation, and has a Certificate of Incorporation
containing provisions substantially similar to the provisions
of Articles THIRD, SEVENTH, EIGHTH, TWELFTH and SIXTEENTH of
this Certificate of Incorporation;
(B) immediately after giving effect to the transaction, no
default or event of default has occurred and is continuing
under any indebtedness of the Corporation or any agreements
relating to such indebtedness; and
(C) the Corporation receives written confirmation from
each rating agency then rating any outstanding Securities that
such merger or consolidation will not result in the downgrade
or withdrawal of the rating then assigned to any Securities
then rated by such rating agency; and
(iii) without the affirmative vote of 100% of the members
of the Board of Directors of the Corporation, institute
proceedings to be adjudicated bankrupt or insolvent, or consent
to the institution of bankruptcy or insolvency proceedings
against it, or file a petition seeking or consent to
reorganization or relief under any applicable federal or state
law relating to bankruptcy, or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Corporation or a substantial part of
its property, or make any assignment for the benefit of
creditors, or admit in writing its inability to pay its debts
generally as they become due, or dissolve, liquidate,
consolidate, merge or sell all or substantially all of the
assets of the Corporation.
THIRTEENTH: The Board of Directors, by the affirmative vote of a
majority of the whole Board, and irrespective of any personal interest of
its members, shall have authority to provide reasonable compensation of
all directors for services, ordinary or extraordinary, to the Corporation
as directors, officers or otherwise.
FOURTEENTH: Meetings of stockholders and directors may be held
within or without the State of Delaware, as the bylaws of the Corporation
may provide. The books and records of the Corporation may be kept
(subject to any provision contained in the GCL) outside the State of
Delaware.
FIFTEENTH: Each person who is or was a director or officer of the
Corporation, and each person who serves or served at the request of the
Corporation as a director or officer (or its equivalent) of another
enterprise, shall be indemnified by the Corporation to the fullest extent
authorized by the GCL as it may be in effect from time to time, except as
to any action, suit or proceeding brought by or on behalf of a director
or officer without prior approval of the Board of Directors.
SIXTEENTH: The Corporation reserves the right to amend, alter,
change or repeal any provisions contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and
all rights conferred upon stockholders herein are granted subject to this
reservation; provided that no such amendment of Articles THIRD, SEVENTH,
EIGHTH, TWELFTH or SIXTEENTH shall be effective without the Corporation
having received confirmation from each rating agency rating any
outstanding Securities that such amendment shall not result in the
termination or lowering of the rating of such Securities.
IN WITNESS WHEREOF, I the undersigned, being the sole
incorporator hereinbefore named, do hereby execute this Certificate of
Incorporation this 29th day of April, 1998.
Naji Massouh
Sole Incorporator
BYLAWS
OF
IndyMac ABS, Inc.
(a Delaware corporation)
ARTICLE I
Stockholders
------------
SECTION 1. Annual Meetings. The annual meeting of stockholders for the
---------------
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year at such date and
time, within or without the State of Delaware, as the Board of Directors shall
determine.
SECTION 2. Special Meetings. Special meetings of stockholders for the
----------------
transaction of such business as may properly come before the meeting may be
called by order of the Board of Directors or by stockholders holding together
at least a majority of all the shares of the Corporation entitled to vote at
the meeting, and shall be held at such date and time, within or without the
State of Delaware, as may be specified by such order. Whenever the directors
shall fail to fix such place, the meeting shall be held at the principal
executive office of the Corporation.
SECTION 3. Notice of Meetings. Written notice of all meetings of the
------------------
stockholders shall be mailed or delivered to each stockholder not less than 10
nor more than 60 days prior to the meeting. Notice of any special meeting
shall state in general terms the purpose or purposes for which the meeting is
to be held.
SECTION 4. Stockholder Lists. The officer who has charge of the stock
-----------------
ledger of the Corporation shall prepare and make, at least 10 days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice
of the meeting, or, if not so specified, at the place where the meeting is to
be held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote in person or by proxy at
any meeting of stockholders.
SECTION 5. Quorum. Except as otherwise provided by law or the
------
corporation's Certificate of Incorporation, a quorum for the transaction of
business at any meeting of stockholders shall consist of the holders of record
of a majority of the issued and outstanding shares of the capital stock of the
Corporation entitled to vote at the meeting, present in person or by proxy. At
all meetings of the stockholders at which a quorum is present, all matters,
except as otherwise provided by law or the Certificate of Incorporation, shall
be decided by the vote of the holders of a majority of the shares entitled to
vote thereat present in person or by proxy. If there be no such quorum, the
holders of a majority of such shares so present or represented may adjourn the
meeting from time to time, without further notice, until a quorum shall have
been obtained. When a quorum is once present it is not broken by the
subsequent withdrawal of any stockholder.
SECTION 6. Organization. Meetings of stockholders shall be presided over
------------
by the Chairman, if any, or if none or in the Chairman's absence the Vice
Chairman, if any, or if none or in the Vice Chairman's absence the President,
if any, or if none or in the President's absence a Vice President, or, if none
of the foregoing is present, by a chairman to be chosen by the stockholders
entitled to vote who are present in person or by proxy at the meeting. The
Secretary of the Corporation, or in the Secretary's absence an Assistant
Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present, the presiding officer of the
meeting shall appoint any person present to act as secretary of the meeting.
SECTION 7. Voting; Proxies; Required Vote. (a) At each meeting of
------------------------------
stockholders, every stockholder shall be entitled to vote in person or by
proxy appointed by instrument in writing, subscribed by much stockholder or by
such stockholder's duly authorized attorney-in-fact (but no such proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period), and, unless the Certificate of Incorporation
provides otherwise, shall have one vote for each share of stock entitled to
vote registered in the name of such stockholder on the books of the
Corporation on the applicable record date fixed pursuant to these Bylaws. At
all elections of directors the voting may but need not be by ballot and a
plurality of the votes cast there shall elect. Except as otherwise required by
law or the Certificate of Incorporation, any other action shall be authorized
by a majority of the votes cast.
(b) Any action required or permitted to be taken at any meeting of
stockholders may, except as otherwise required by law or the Certificate of
Incorporation, be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of record of the issued and outstanding capital stock of
the Corporation having a majority of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted, and the writing or writings are filed
with the permanent records of the Corporation. Prompt notice of the taking of
corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
(c) Where a separate vote by a class or classes, present in person or
represented by proxy, shall constitute a quorum entitled to vote on that
matter, the affirmative vote of the majority of shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class, unless otherwise provided in the Corporation's Certificate
of Incorporation.
SECTION 8. Inspectors. The Board of Directors, in advance of any meeting,
----------
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not so
appointed, the person presiding at the meeting may, but need not, appoint one
or more inspectors. In case any person who may be appointed as an inspector
fails to appear or act, the vacancy may be filled by appointment made by the
directors in advance of the meeting or at the meeting by the person presiding
thereat. Each inspector, if any, before entering upon the discharge of his or
her duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best
of his or her ability. The inspectors, if any, shall determine the number of
shares of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, and the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness
to all stockholders. On request of the person presiding at the meeting, the
inspector or inspectors, if any, shall make a report in writing of any
challenge, question or matter determined by such inspector or inspectors and
execute a certificate of any fact found by such inspector or inspectors.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The business, property and affairs of the
--------------
Corporation shall be managed by, or under the direction of, the Board of
Directors.
SECTION 2. Qualification; Number; Term; Remuneration. (a) Each director
----------------------------------------
shall be at least 18 years of age. A director need not be a stockholder, a
citizen of the United States or a resident of the State of Delaware. The
number of directors constituting the entire Board shall initially be five, or
such other number as may be fixed from time to time by action of the
stockholders or Board of Directors, one of whom may be selected by the Board
of Directors to be its chairman. The use of the phrase "entire Board" herein
refers to the total number of directors which the Corporation would have if
there were no vacancies.
(b) Directors who are elected at an annual meeting of stockholders, and
directors who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal.
(c) Directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance
at each meeting of the Board of Directors or a stated salary as director. No
such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
SECTION 3. Quorum and Manner of Voting. Except as otherwise provided
---------------------------
by law, a majority of the entire Board shall constitute a quorum. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting from time to time to another time and place without notice. The vote
of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
SECTION 4. Places of Meetings. Meetings of the Board of Directors may
------------------
be held at any place within or without the State of Delaware, as may from time
to time be fixed by resolution of the Board of Directors or as may be
specified in the notice of meeting.
SECTION 5. Annual Meeting. Following the annual meeting of stockholders,
--------------
the newly elected Board of Directors shall meet for the purpose of the
election of officers and the transaction of such other business as may
properly come before the meeting. Such meeting may be held without notice
immediately after the annual meeting of stockholders at the same place at
which such stockholders' meeting is held.
SECTION 6. Regular Meetings. Regular meetings of the Board of
----------------
Directors shall be held at such times and places as the Board of Directors
shall from time to time by resolution determine. Notice need not be given of
regular meetings of the Board of Directors held at times and places fixed by
resolution of the Board of Directors.
SECTION 7. Special Meetings. Special meetings of the Board of Directors
----------------
shall be held whenever called by the Chairman of the Board, Chief Executive
Officer, President, or by a majority of the directors then in office.
SECTION 8. Notice of Meetings. A notice of the place, date and time and
------------------
the purpose or purposes of each meeting of the Board of Directors, other than
regular meetings held at times and places fixed by resolution of the Board of
Directors, shall be given to each director by mailing the same at least two
days before the meeting, or by telegraphing or telephoning the same or by
delivering the same personally not later than the day before the day of the
meeting.
SECTION 9. Organization. At all meetings of the Board of Directors, the
------------
Chairman, if any, or if none or in the Chairman's absence or inability to act
the President, or in the President's absence or inability to act any Vice
President who is a member of the Board of Directors, or in such Vice
President's absence or inability to act a chairman chosen by the directors,
shall preside. The Secretary of the Corporation shall act as secretary at all
meetings of the Board of Directors when present, and, in the Secretary's
absence, the presiding officer may appoint any person to act as Secretary.
SECTION 10. Resignation. Any director may resign at any time upon written
-----------
notice to the Corporation and such resignation shall take effect upon receipt
thereof by the President or Secretary, unless otherwise specified in the
resignation. Any or all of the directors may be removed, with or without
cause, by the holders of a majority of the shares of stock outstanding and
entitled to vote for the election of directors.
SECTION 11. Vacancies. Unless otherwise provided in these Bylaws,
---------
vacancies on the Board of Directors, whether caused by resignation, death,
disqualification, removal, an increase in the authorized number of directors
or otherwise, may be filled by the affirmative vote of a majority of the
remaining directors, although less than a quorum, or by a sole remaining
director, or at a special meeting of the stockholders, by the holders of
shares entitled to vote for the election of directors.
SECTION 12. Action by Written Consent; Telephonic Meetings. Any action
----------------------------------------------
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting if all the directors consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors. Subject to applicable notice provisions, members of the
Board of Directors may participate in and hold meetings by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in such
meeting shall be deemed presence in person at such meeting, except where a
person's participation is for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE III
Committees
----------
SECTION 1. Appointment. From time to time the Board of Directors by a
-----------
resolution adopted by a majority of the entire Board may appoint any committee
or committees for any purpose or purposes, to the extent lawful, which shall
have powers as shall be determined and specified by the Board of Directors in
the resolution of appointment.
SECTION 2. Procedures, Quorum and Manner of Acting. Each committee shall
---------------------------------------
fix its own rules of procedure, and shall meet where and as provided by such
rules or by resolution of the Board of Directors. Except as otherwise provided
by law, the presence of a majority of the then appointed members of a
committee shall constitute a quorum for the transaction of business by that
committee, and in every case where a quorum is present the affirmative vote of
a majority of the members of the committee present shall be the act of the
committee. Each committee shall keep minutes of its proceedings, and actions
taken by a committee shall be reported to the Board of Directors.
SECTION 3. Acting by Written Consent; Telephonic Meetings. Any action
----------------------------------------------
required or permitted to be taken at any meeting of any committee of the Board
of Directors may be taken without a meeting if all the members of the
committee consent thereto in writing, and the writing or writings are filed
with the minutes or proceedings of the committee. Subject to applicable notice
provisions, members of any committee of the Board of Directors may participate
in and hold meetings by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and Participation in such meeting shall be deemed
presence in person at such meeting, except where a person's participation is
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
SECTION 4. Terms; Termination. In the event any person shall cease to be
------------------
a director of the Corporation, such person shall simultaneously therewith
cease to be a member of any committee appointed by the Board of Directors.
ARTICLE IV
Officers
--------
SECTION 1. Election and Qualifications. The Board of Directors shall
---------------------------
elect the officers of the Corporation, which shall include a President and a
Secretary, and may include, by election or appointment, one or more Vice
Presidents (any one or more of whom may be given an additional designation of
rank or function), a Treasurer and such assistant secretaries, such assistant
treasurers and such other officers as the Board may from time to time deem
proper. Each officer shall have such powers and duties as may be prescribed by
these Bylaws and as may be assigned by the Board of Directors or the
President. Any two or more offices may be held by the same person except the
offices of President and Secretary.
SECTION 2. Term of Office and Remuneration. The term of office of all
-------------------------------
officers shall be one year or until their respective successors have been
elected and qualified, but any officer may be removed from office, either with
or without cause, at any time by the Board of Directors. Any vacancy in any
office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors. The remuneration of all officers of the
Corporation may be fixed by the Board of Directors or in such manner as the
Board of Directors shall provide.
SECTION 3. Resignation; Removal. Any officer may resign at any time upon
--------------------
written notice to the Corporation and such resignation shall take effect upon
receipt thereof by the President or Secretary, unless otherwise specified in
the resignation. Any officer shall be subject to removal, with or without
cause, at any time by vote of a majority of the entire Board.
SECTION 4. Chairman of the Board. The Chairman of the Board of Directors,
---------------------
if there be one, shall preside at all meetings of the Board of Directors and
shall have such other powers and duties as may from time to time be assigned
by the Board of Directors.
SECTION 5. President and Chief Executive Officer. The President shall be
-------------------------------------
the chief executive officer of the Corporation and shall have such duties as
customarily pertain to that office. The President also shall be a director of
the Corporation. If, at any time and for any reason, the President's term of
office as a director of the Corporation terminates or is terminated, then his
term of office as President of the Corporation shall also be automatically
terminated. The President shall have general management and supervision of the
property, business and affairs of the Corporation and over its other officers;
may appoint and remove assistant officers and other agents and employees,
other than officers referred to in Section 1 of this Article IV; and may
execute and deliver in the name of the Corporation powers of attorney,
contracts, bonds and other obligations and instruments.
SECTION 6. Vice President. A Vice President may execute and deliver in
--------------
the name of the Corporation contracts and other obligations and instruments
pertaining to the regular course of the duties of said office, and shall have
such other authority as from time to time may be assigned by the Board of
Directors or the President.
SECTION 7. Treasurer. The Treasurer shall in general have all duties
---------
incident to the position of Treasurer and such other duties as may be assigned
by the Board of Directors or the President.
SECTION 8. Secretary. The Secretary shall in general have all the duties
---------
incident to the office of Secretary and such other duties as may be assigned
by the Board of Directors or the President.
SECTION 9. Assistant Officers. Any assistant officer shall have such
------------------
powers and duties of the officer such assistant officer assists as such
officer or the Board of Directors shall from time to time prescribe.
ARTICLE V
Books and Records
-----------------
SECTION 1. Location. The books and records of the Corporation may be kept
---------
at such place or places within or outside the State of Delaware as the Board
of Directors or the respective officers in charge thereof may from time to
time determine. The record books containing the names and addresses of all
stockholders, the number and class of shares of stock held by each and the
dates when they respectively became the owners of record thereof shall be kept
by the Secretary as prescribed in the Bylaws and by such officer or agent as
shall be designated by the Board of Directors.
SECTION 2. Addresses of Stockholders. Notices of meetings and all other
-------------------------
corporate notices may be delivered personally or mailed to each stockholder at
the stockholder's address as it appears on the records of the Corporation.
SECTION 3. Fixing Date for Determination of Stockholders of Record. (a)
-------------------------------------------------------
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix a record date, which record date shall
not be more than 60 nor less than 10 days before the date of such meeting. If
no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date which date shall not be more than 10 days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the
Board of Directors is required, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in this
State, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by this chapter, the record
date for determining Stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the Stockholder entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date which record date
shall be not more than 60 days prior to such action. If no record date is
fixed, the record date for determining stockholders for any such purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto.
ARTICLE VI
Certificates Representing Stock
-------------------------------
SECTION 1. Certificate; Signatures. The shares of the Corporation shall
-----------------------
be represented by certificates, provided that the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any
or all classes or series of its stock shall be uncertificated shares. Any such
resolution shall not apply to shares represented by a certificate until such
certificate is surrendered to the Corporation. Notwithstanding the adoption of
such a resolution by the Board of Directors, every holder of stock represented
by certificates and upon request every holder of uncertificated shares shall
be entitled to have a certificate, signed by or in the name of the Corporation
by the Chairman or Vice Chairman of the Board of Directors, or the President
or Vice President, and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, representing the
number of shares registered in certificate form. Any and all signatures on any
such certificate may be facsimiles. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with
the same effect as if he or she were such officer, transfer agent or registrar
at the date of issue. The name of the holder of record of the shares
represented thereby, with the number of such shares and the date of issue,
shall be entered on the books of the Corporation.
SECTION 2. Transfers of Stock. Upon compliance with provisions
------------------
restricting the transfer or registration of transfer of shares of stock, if
any, shares of capital stock shall be transferable on the books of the
Corporation only by the holder of record thereof in person, or by duly
authorized attorney, upon surrender and cancellation of certificates for a
like number of shares, properly endorsed, and the payment of all taxes due
thereon.
SECTION 3. Fractional Shares. The Corporation may, but shall not be
-----------------
required to, issue certificates for fractions of a share where necessary to
effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive
such fractions are determined, or it may issue scrip in registered or bearer
form over the manual or facsimile signature of an officer of the Corporation
or of its agent, exchangeable as therein provided for full shares, but such
scrip shall not entitle the holder to any rights of a stockholder except as
therein provided.
The Board of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the issue, transfer
and registration of certificates representing shares of the Corporation.
SECTION 4. Lost, Stolen or Destroyed Certificates. The Corporation may
--------------------------------------
issue a new certificate of stock in place of any certificate, theretofore
issued by it, alleged to have been lost, stolen or destroyed, and the Board of
Directors may require the owner of any lost, stolen or destroyed certificate,
or his legal representative, to give the Corporation a bond sufficient to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or
the issuance of any such new certificate.
ARTICLE VII
Dividends
---------
Subject always to the provisions of law and the Certificate of
Incorporation, the Board of Directors shall have full power to determine
whether any, and, if any, what part of any, funds legally available for the
payment of dividends shall be declared as dividends and paid to stockholders;
the division of the whole or any part of such funds of the Corporation shall
rest wholly within the lawful discretion of the Board of Directors, and it
shall not be required at any time, against such discretion, to divide or pay
any part of such funds among or to the stockholders as dividends or otherwise;
and before payment of any dividend, there may be set aside out of any funds of
the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may modify or abolish any such reserve
in the manner in which it was created.
ARTICLE VIII
Ratification
------------
Any transaction, questioned in any law suit on the ground of lack of
authority, defective or irregular execution, adverse interest of director,
officer or stockholder, non-disclosure, miscomputation, or the application of
improper principles or practices of accounting, may be ratified before or
after judgment, by the Board of Directors or by the stockholders, and if so
ratified shall have the same force and effect as if the questioned transaction
had been originally duly authorized. Such ratification shall be binding upon
the Corporation and its stockholders and shall constitute a bar to any claim
or execution of any judgment in respect of such questioned transaction.
ARTICLE IX
Corporate Seal
--------------
The corporate seal shall have inscribed thereon the name of the
Corporation and the year of its incorporation, and shall be in such form and
contain such other words and/or figures as the Board of Directors shall
determine. The corporate seal may be used by printing, engraving,
lithographing, stamping or otherwise making, placing or affixing, or causing
to be printed, engraved, lithographed, stamped or otherwise made, placed or
affixed, upon any paper or document, by any process whatsoever, an impression,
facsimile or other reproduction of said corporate seal.
ARTICLE X
Fiscal Year
-----------
The fiscal year of the Corporation shall be fixed, and shall be subject
to change, by the Board of Directors. Unless otherwise fixed by the Board of
Directors, the fiscal year of the Corporation shall be the calendar year.
ARTICLE XI
Waiver of Notice
----------------
Whenever notice is required to be given by these Bylaws or by the
Certificate of Incorporation or by law, a written waiver thereof, signed by
the person or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent to notice.
ARTICLE XII
Bank Accounts, Drafts, Contracts, Etc.
--------------------------------------
SECTION 1. Bank Accounts and Drafts. In addition to such bank accounts as
------------------------
may be authorized by the Board of Directors, the primary financial officer or
any person designated by said primary financial officer, whether or not an
employee of the Corporation, may authorize such bank accounts to be opened or
maintained in the name and on behalf of the Corporation as he or she may deem
necessary or appropriate, and payments from such bank accounts may be made
upon and according to the check of the Corporation in accordance with the
written instructions of said primary financial officer, or other person so
designated by the Treasurer.
SECTION 2. Contracts. The Board of Directors may authorize any person or
---------
persons, in the name and on behalf of the Corporation, to enter into or
execute and deliver any and all deeds, bonds, mortgages, contracts and other
obligations or instruments, and such authority may be general or confined to
specific instances.
SECTION 3. Proxies; Powers of Attorney; Other Instruments. The Chairman,
----------------------------------------------
the President or any other person designated by either of them shall have the
power and authority to execute and deliver proxies, powers of attorney and
other instruments on behalf of the Corporation in connection with the rights
and powers incident to the ownership of stock by the Corporation. The
Chairman, the President or any other person authorized by proxy or power of
attorney executed and delivered by either of them on behalf of the Corporation
may attend and vote at any meeting of stockholders of any company in which the
Corporation may hold stock, and may exercise on behalf of the Corporation any
and all of the rights and powers incident to the ownership of such stock at
any such meeting, or otherwise as specified in the proxy or power of attorney
so authorizing any such person. The Board of Directors, from time to time, may
confer like powers upon any other person.
SECTION 4. Financial Reports. The Board of Directors may appoint the
-----------------
primary financial officer or other fiscal officer or any other officer to
cause to be prepared and furnished to stockholders entitled thereto any
special financial notice and/or financial statement, as the case may be, which
may be required by any provision of law.
ARTICLE XIII
Amendments
----------
The Board of Directors shall have power to adopt, amend or repeal Bylaws.
Bylaws adopted by the Board of Directors may be repealed or changed, and new
Bylaws made, by the stockholders, and the stockholders may prescribe that any
Bylaw made by them shall not be altered, amended or repealed by the Board of
Directors.
B&W Draft 3/30/98
============================================================================
IndyMac ABS, Inc.,
as Depositor,
as Sponsor and Master Servicer,
and
as Trustee
-----------------------
POOLING AND SERVICING AGREEMENT
Dated as of ___________, 199_
----------------------
Home Equity Loan Asset Backed Certificates
Series 199_-_
============================================================================
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
Section 1.01. Definitions.......................................... 1
Section 1.02. Interest Calculations................................ 21
ARTICLE II
Conveyance of Mortgage Loans;
Original Issuance of Certificates;
Tax Treatment
Section 2.01. Conveyance of Mortgage Loans; Retention
of Obligation to Fund Advances Under Credit Line
Agreements.................................................. 23
Section 2.02. Acceptance by Trustee; Retransfer of
Mortgage Loans.............................................. 28
Section 2.03. Representations and Warranties Regarding
the Master Servicer......................................... 30
Section 2.04. Representations and Warranties of the
Sponsor Regfer
of Certain Mortgage Loans................................... 31
Section 2.05. Covenants of the Depositor.................................. 37
Section 2.06. Transfers of Mortgage Loans at Election
of Transferor............................................... 38
Section 2.07. Execution and Authentication of Certificates................ 39
Section 2.08. Tax Treatment............................................... 40
Section 2.09. Representations and Warranties of the Depositor............. 40
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Master Servicer.......................................... 42
Section 3.02. Collection of Certain Mortgage Loan
Payments..................................................... 44
Section 3.03. Withdrawals from the Collection Account...................... 46
Section 3.04. Maintenance of Hazard Insurance;
Property Protection Expenses................................. 46
Section 3.05. Assumption and Modification Agreements....................... 47
Section 3.06. Realization Upon Defaulted Mortgage
Loans; Repurchase of Certain Mortgage Loans.................. 48
Section 3.07. Trustee to Cooperate......................................... 49
Section 3.08. Servicing Compensation; Payment of
Certain Expenses by Master Servicer.......................... 50
Section 3.09. Annual Statement as to Compliance............................ 50
Section 3.10. Annual Servicing Report...................................... 51
Section 3.11. Access to Certain Documentation and
Information Regarding the Mortgage Loans..................... 51
Section 3.12. Maintenance of Certain Servicing
Insurance Policies........................................... 52
Section 3.13. Reports to the Securities and Exchange
Commission................................................... 52
Section 3.14. Tax Returns.................................................. 52
Section 3.15. Information Required by the Internal
Revenue Service Generally and Reports of
Foreclosures and Abandonments of Mortgaged
Property..................................................... 53
ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate......................................... 54
Section 4.02. Claims upon the Policy; Policy Payments
Account....................................................... 57
Section 4.03. Replacement Policy............................................ 59
Section 4.04. Effect of Payments by the Credit
Enhancer; Subrogation......................................... 59
Section 4.05. Optional Advances of the Master
Servicer...................................................... 60
ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions................................................ 61
Section 5.02. Calculation of the Investor Certificate
Rate......................................................... 64
Section 5.03. Statements to Certificateholders............................. 64
Section 5.04. Rights of Certificateholders................................. 66
ARTICLE VI
The Certificates
Section 6.01. The Certificates............................................. 67
Section 6.02. Registration of Transfer and Exchange of
Investor Certificates; Appointment of Registrar.............. 67
Section 6.03. Mutilated, Destroyed, Lost or Stolen
Certificates................................................. 70
Section 6.04. Persons Deemed Owners........................................ 70
Section 6.05. Restrictions on Transfer of Transferor
Certificates................................................. 70
Section 6.06. Appointment of Paying Agent.................................. 72
Section 6.07. Acceptance of Obligations.................................... 73
ARTICLE VII
The Master Servicer, the Sponsor and the Depositor
Section 7.01. Liability of the Sponsor, the Master
Servicer and the Depositor................................... 74
Section 7.02. Merger or Consolidation of, or
Assumption of the Obligations of, the Master
Servicer or the Depositor.................................... 74
Section 7.03. Limitation on Liability of the Master
Servicer and Others.......................................... 74
Section 7.05. Delegation of Duties......................................... 76
Section 7.06. Indemnification of the Trust by the
Master Servicer.............................................. 76
Section 7.07. Indemnification of the Trust by the
Transferor................................................... 76
Section 7.08. Limitation on Liability of the Transferor.................... 77
ARTICLE VIII
Servicing Termination
Section 8.01. Events of Servicing Termination.............................. 78
Section 8.02. Trustee to Act; Appointment of
Successor.................................................... 80
Section 8.03. Notification to Certificateholders........................... 81
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee............................................ 82
Section 9.02. Certain Matters Affecting the Trustee........................ 83
Section 9.03. Trustee Not Liable for Certificates or
Mortgage Loans............................................... 85
Section 9.04. Trustee May Own Certificates................................. 86
Section 9.05. Master Servicer to Pay Trustee's Fees
and Expenses................................................. 86
Section 9.06. Eligibility Requirements for Trustee......................... 87
Section 9.07. Resignation or Removal of Trustee............................ 87
Section 9.08. Successor Trustee............................................ 88
Section 9.09. Merger or Consolidation of Trustee........................... 89
Section 9.10. Appointment of Co-Trustee or Separate
Trustee...................................................... 89
Section 9.11. Limitation of Liability...................................... 90
Section 9.12. Trustee May Enforce Claims Without
Possession of Certificates................................... 91
Section 9.13. Suits for Enforcement........................................ 91
ARTICLE X
Termination
Section 10.01. Termination................................................. 92
[ARTICLE XI
Rapid Amortization Events
Section 11.01. Rapid Amortization Events................................... 95
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment................................................... 97
Section 12.02. Recordation of Agreement.................................... 99
Section 12.03. Limitation on Rights of Certificate-
holders..................................................... 99
Section 12.04. Governing Law...............................................100
Section 12.05. Notices.....................................................100
Section 12.06. Severability of Provisions..................................101
Section 12.07. Assignment..................................................101
Section 12.08. Certificates Nonassessable and Fully
Paid........................................................101
Section 12.09. Third-Party Beneficiaries...................................101
Section 12.10. Counterparts................................................101
Section 12.11. Effect of Headings and Table of
Contents....................................................102
EXHIBIT A - FORM OF INVESTOR CERTIFICATE....................................A-1
EXHIBIT B - FORM OF TRANSFEROR CERTIFICATE..................................B-1
EXHIBIT C - MORTGAGE LOAN SCHEDULE..........................................C-1
Exhibit D - FORM OF CREDIT LINE AGREEMENT...................................D-1
Exhibit E - LETTER OF REPRESENTATIONS.......................................E-1
Exhibit F - FORM OF INVESTMENT LETTER.......................................F-1
Exhibit G - FORM OF REQUEST FOR RELEASE.....................................G-1
This Pooling and Servicing Agreement, dated as of __________, 199_,
among IndyMac ABS, Inc., as Depositor (the "Depositor"), ______________________,
as Sponsor and Master Servicer (in such capacities, the "Sponsor" and the
"Master Servicer", respectively), and ___________________________, as Trustee
(the "Trustee"),
W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article.
Accelerated Principal Distribution Amount: With respect to any
Distribution Date, the amount, if any, required to reduce the Investor
Certificate Principal Balance (after giving effect to the distribution of all
other amounts actually distributed on the Investor Certificates on such
Distribution Date) so that the Invested Amount (immediately following such
Distribution Date) exceeds the Investor Certificate Principal Balance (as so
reduced) by the Required Overcollateralization Amount.
Additional Balance: As to any Mortgage Loan and day, the
aggregate amount of all Draws conveyed to the Trust pursuant to
Section 2.01.
Adjustment Date: With respect to any Interest Period, the
second LIBOR Business Day preceding the first day of such
Interest Period.
Affiliate: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
Agreement: This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
Alternative Principal Payment: As to any Distribution Date,
the amount (but not less than zero) equal to Principal Collections for
such Distribution Date less the aggregate of Additional Balances
created during the related Collection Period.
Appraised Value: [As to any Mortgaged Property, the value established
by any of the following: (i) with respect to Credit Line Agreements with Credit
Limits greater than $[____________], by a full appraisal, (ii) with respect to
Credit Line Agreements with Credit Limits equal to or less than $[____________],
by a drive by inspection of such Mortgaged Property made to establish compliance
with the underwriting criteria then in effect in connection with the application
for the Mortgage Loan secured by such Mortgaged Property, and (iii) with respect
to any Mortgage Loan as to which the Servicer consents to a new senior lien
pursuant to Section 3.01(a), in compliance with the underwriting criteria then
in effect in connection with the application for the related senior mortgage
loan.]
Asset Balance: As to any Mortgage Loan, other than a Liquidated
Mortgage Loan, and day, the related Cut-off Date Asset Balance, plus (i) any
Additional Balance in respect of such Mortgage Loan, minus (ii) all collections
credited as principal against the Asset Balance of any such Mortgage Loan in
accordance with the related Credit Line Agreement. For purposes of this
definition, a Liquidated Mortgage Loan shall be deemed to have an Asset Balance
equal to the Asset Balance of the related Mortgage Loan immediately prior to the
final recovery of related Liquidation Proceeds and an Asset Balance of zero
thereafter.
Assignment of Mortgage: With respect to any Mortgage, an assignment,
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the sale of the Mortgage to the Trustee, which assignment,
notice of transfer or equivalent instrument may be in the form of one or more
blanket assignments covering the Mortgage Loans secured by Mortgaged Properties
located in the same jurisdiction.
Authorized Newspaper: A newspaper of general circulation in the Borough
of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
Available Transferor Subordinated Amount: As to any Distribution Date,
an amount equal to the lesser of (a) the Transferor Principal Balance for such
Distribution Date and (b) the Required Transferor Subordinated Amount for such
Distribution Date.
Bankruptcy Remote Entity: Any special or limited purpose corporation,
partnership or other entity structured in all material respects in accordance
with the requirements of one or more nationally recognized statistical rating
organizations [and the Credit Enhancer] for bankruptcy remote entities.
BIF: The Bank Insurance Fund, as from time to time constituted, created
under the Financial Institutions Reform, Recovery and Enhancement Act of 1989,
or if at any time after the execution of this instrument the Bank Insurance Fund
is not existing and performing duties now assigned to it, the body performing
such duties on such date.
Billing Cycle: With respect to any Mortgage Loan and Collection Period,
the billing period specified in the related Credit Line Agreement and with
respect to which amounts billed are received during such Collection Period.
Book-Entry Certificate: Any Investor Certificate registered in the name
of the Depository or its nominee, ownership of which is reflected on the books
of the Depository or on the books of a Person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which banking institutions in the States of New York or California are
required or authorized by law to be closed.
Certificate: An Investor Certificate or a Transferor
Certificate.
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent, direction, waiver or request pursuant to this Agreement, (x)
any Investor Certificate registered in the name of the Transferor, or any Person
known to a Responsible Officer to be an Affiliate of either the Depositor or the
Transferor and (y) any Investor Certificate for which the Transferor, or any
Person known to a Responsible Officer to be an Affiliate of either such entity
is the Certificate Owner shall be deemed not to be outstanding (unless to the
knowledge of a Responsible Officer (i) the Trans- feror, or such Affiliate is
acting as trustee or nominee for a Person who is not an Affiliate of the
Transferor and who makes the voting decision with respect to such Investor
Certificate or (ii) the Transferor, or such Affiliate is the Certificate Owner
of all the Investor Certificates) and the Percentage Interest evidenced thereby
shall not be taken into account in determining whether the requisite amount of
Percentage Interests necessary to effect any such consent, direction, waiver or
request has been obtained.
Certificate Owner: The Person who is the beneficial owner
of a Book-Entry Certificate.
Certificate Register and Certificate Registrar: The regis-
ter maintained and the registrar appointed pursuant to Section
6.02.
Closing Date: ___________, 199_.
Code: The Internal Revenue Code of 1986, as the same may be
amended from time to time (or any successor statute thereto).
Collateral Value: With respect to any Mortgaged Property, [the lesser
of (i) the Appraised Value of the Mortgaged Property and (ii) in the case of a
Mortgaged Property purchased within one year of the origination of the related
Mortgage Loan, the purchase price of the Mortgaged Property].
Collection Account: The custodial account or accounts cre-
ated and maintained for the benefit of the Investor Certificate-
holders [and the Credit Enhancer] pursuant to Section 3.02(b).
The Collection Account shall be an Eligible Account.
Collection Period: With respect to any Distribution Date
and any Mortgage Loan, the calendar month preceding the month of
such Distribution Date.
Combined Loan-to-Value Ratio: [With respect to any Mortgage Loan as of
any date, the percentage equivalent of the fraction, the numerator of which is
the sum of (i) the Credit Limit (as of the date of execution of the related
Credit Line Agreement (or any subsequent date as of which such Credit Limit may
be determined in connection with an increase in the Credit Limit for such
Mortgage Loan)) and (ii) the outstanding principal balance (as of the date of
execution of the related Credit Line Agreement (or any subsequent date as of
which such outstanding principal balance may be determined in connection with an
increase in the Credit Limit for such Mortgage Loan)) of any mortgage loan or
mortgage loans that are senior or equal in priority to the Mortgage Loan and
which is secured by the same Mortgaged Property and the denominator of which is
the Collateral Value of the related Mortgaged Property.]
Corporate Trust Office: The principal office of the Trustee
at which at any particular time its corporate business shall be
administered, which office on the Closing Date is located at
- --------------------------------------------------------------
Attention: _____________________________.
Credit Enhancement Draw Amount: As to any Distribution Date, an amount
equal to the sum of (x) the amount by which the amount to be distributed to
Investor Certificateholders pursuant to Section 5.01(a)(iii) exceeds the amount
of Investor Interest Collections on deposit in the Collection Account on the
Business Day preceding such Distribution Date that is available to be applied
therefor and the amount if any deposited in the Collection Account in respect
of such Distribution Date pursuant to Section 4.05, (y) the Guaranteed
Principal Distribution Amount and (z) any Preference Claim for such
Distribution Date.
[Credit Enhancer: ___________________________, a _________
_____________________________________, any successor thereto or
any replacement credit enhancer substituted pursuant to Section
4.03.]
[Credit Enhancer Default: The failure by the Credit
Enhancer to make a payment required under the Policy in
accordance with the terms thereof.]
Credit Limit: As to any Mortgage Loan, the maximum Asset
Balance permitted under the terms of the related Credit Line
Agreement.
Credit Limit Utilization Rate: As to any Mortgage Loan, the percentage
equivalent of a fraction the numerator of which is the Cut-off Date Asset
Balance for such Mortgage Loan and the denominator of which is the related
Credit Limit.
Credit Line Agreement: With respect to any Mortgage Loan, the related
credit line account agreement executed by the related Mortgagor and any
amendment or modification thereof.
[Cumulative Loss Test Violation: As defined in the Insurance
Agreement.]
Custodial Agreement: Any Custodial Agreement between any Custodian and
the Trustee, which is reasonably acceptable in form and substance to the Credit
Enhancer, relating to the custody of the Mortgage Loans and the Related
Documents.
Custodian: Any custodian appointed by the Trustee under a
Custodial Agreement to maintain all or a portion of the Mortgage
Files pursuant to Section 2.01(b).
Cut-off Date: ______________, 199_.
Cut-off Date Asset Balance: With respect to any Mortgage
Loan, the unpaid principal balance thereof as of the Cut-off
Date.
Cut-off Date Pool Balance: The Pool Balance calculated as
of the Cut-off Date.
Defective Mortgage Loan: [ Mortgage Loan subject to
retransfer pursuant to Section 2.02, 2.04 or 2.09.]
Deficiency Amount: As defined in Section 5.01(d).
Definitive Certificates: As defined in Section 6.02(c).
Delivery Event: As defined in Section 2.01.
Depositor: IndyMac ABS, Inc., Delaware corporation, or its
successor in interest.
Depository: The initial Depository shall be The Depository Trust
Company, the nominee of which is Cede & Co., as the registered Holder of
Investor Certificates evidencing $[___________] in initial aggregate principal
amount of the Investor Certificates. The Depository shall at all times be a
"clearing corporation" as defined in Section 8-102(3) of the UCC of the State of
New York.
Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time the Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
Determination Date: With respect to any Distribution Date,
the third Business Day prior to such Distribution Date.
Distribution Date: The _________ day of each month, or if
such day is not a Business Day, then the next Business Day,
beginning in _______ 199_.
Draw: With respect to any Mortgage Loan, an additional
borrowing by the Mortgagor subsequent to the Cut-off Date in
accordance with the related Mortgage Note.
Due Date: As to any Mortgage Loan, the _________ day of the
month.
Electronic Ledger: The electronic master record of home
equity credit line mortgage loans maintained by the Master
Servicer or by the Sponsor, as appropriate.
Eligible Account: (i) An account that is maintained with a depository
institution whose debt obligations throughout the time of any deposit therein
are rated in the highest short-term debt rating category by the Rating Agencies,
(ii) one or more accounts with a depository institution having a minimum
long-term unsecured debt rating of "BBB-" by Standard & Poor's and "Baa3" by
Moody's, which accounts are fully insured by either SAIF or BIF, (iii) a
segregated trust account maintained with the Trustee or an Affiliate of the
Trustee in its fiduciary capacity, or (iv) an account otherwise acceptable to
each Rating Agency and the Credit Enhancer, as evidenced at closing by delivery
of a rating letter by each Rating Agency and thereafter by delivery of a letter
from (a) each Rating Agency to the Trustee, within 30 days of receipt of notice
of such deposit, to the effect that such deposit shall not cause such Rating
Agency to reduce or withdraw its then-current rating of the Certificates without
regard to the Policy and (b) from the Credit Enhancer to the Trustee, within 30
days of receipt of notice of such deposit, to the effect that such account is
acceptable to it.
Eligible Investments: (i) obligations of the United States or any
agency thereof, provided the timely payment of such obligations are backed by
the full faith and credit of the United States; (ii) general obligations of or
obligations guaranteed by any state of the United States or the District of
Columbia receiving the highest long-term debt rating of each Rating Agency, or
such lower rating as will not result in the downgrading or withdrawal of the
rating then assigned to the Certificates by any Rating Agency, without regard to
the Policy; (iii) commercial paper issued by [__________________] or any of its
Affiliates; provided that such commercial paper is rated no lower than A-1 by
Standard & Poor's and P-2 by Moody's, and the long-term debt of
[______________________] is rated at least A3 by Moody's, or such lower ratings
as will not result in the downgrading or withdrawal of the rating then assigned
to the Certificates by any Rating Agency, without regard to the Policy; (iv)
commercial or finance company paper which is then receiving the highest
commercial or finance company paper rating of each Rating Agency, or such lower
rating as will not result in the downgrading or withdrawal of the rating then
assigned to the Certificates by any Rating Agency, without regard to the Policy;
(v) certificates of deposit, demand or time deposits, or bankers' acceptances
issued by any depository institution or trust company incorporated under the
laws of the United States or any state thereof and subject to supervision and
examination by federal and/or state banking authorities, provided that the
commercial paper and/or long term unsecured debt obligations of such depository
institution or trust company (or in the case of the principal depository
institution in a holding company system, the commercial paper or long-term
unsecured debt obligations of such holding company, but only if Moody's is not a
Rating Agency) are then rated one of the two highest long-term and the highest
short-term ratings of each Rating Agency for such securities, or such lower
ratings as will not result in the downgrading or withdrawal of the rating then
assigned to the Certificates by any Rating Agency, without regard to the Policy;
(vi) demand or time deposits or certificates of deposit issued by any bank or
trust company or savings institution to the extent that such deposits are fully
insured by the FDIC; (vii) guaranteed reinvestment agreements issued by any
bank, insurance company or other corporation containing, at the time of the
issuance of such agreements, such terms and conditions as will not result in the
downgrading or withdrawal of the rating then assigned to the Certificates by any
Rating Agency, without regard to the Policy; (viii) repurchase obligations with
respect to any security described in clauses (i) and (ii) above, in either case
entered into with a depository institution or trust company (acting as
principal) described in clause (v) above; (ix) securities (other than stripped
bonds, stripped coupons or instruments sold at a purchase price in excess of
115% of the face amount thereof) bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States or any
state thereof which, at the time of such investment, have one of the two
highest ratings of each Rating Agency (except if the Rating Agency is
Moody's, such rating shall be the highest commercial paper rating of
Moody's for any such securities), or such lower rating as will not result
in the downgrading or withdrawal of the rating then assigned to the
Certificates by any Rating Agency, without regard to the Policy, as evidenced
by a signed writing delivered by each Rating Agency; (x) interests
in any money market fund which at the date of acquisition of the interests in
such fund and throughout the time such interests are held in such fund has the
highest applicable rating by each Rating Agency or such lower rating as will not
result in the downgrading or withdrawal of the rating then assigned to the
Certificates by any Rating Agency, without regard to the Policy; (xi) short term
investment funds sponsored by any trust company or national banking association
incorporated under the laws of the United States or any state thereof which on
the date of acquisition has been rated by each Rating Agency in their respective
highest applicable rating category or such lower rating as will not result in
the downgrading or withdrawal of the rating then assigned to the Certificates by
any Rating Agency, without regard to the Policy; and (xii) such other
investments having a specified stated maturity and bearing interest or sold at a
discount acceptable to each Rating Agency as will not result in the downgrading
or withdrawal of the rating then assigned to the Certificates by any Rating
Agency, without regard to the Policy, as evidenced by a signed writing delivered
by each Rating Agency; provided that no such instrument shall be an Eligible
Investment if such instrument evidences either the right to receive (a) only
interest with respect to the obligations underlying such instrument or (b) both
principal and interest payments derived from obligations underlying such
instrument and the interest and principal payments with respect to such
instrument provided a yield to maturity at par greater than 120% of the yield to
maturity at par of the underlying obligations; provided further that no
instrument described hereunder may be purchased at a price greater than par if
such instrument may be prepaid or called at a price less than its purchase price
prior to its stated maturity.
Eligible Substitute Mortgage Loan: [A Mortgage Loan substituted by the
Sponsor for a Defective Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding Asset Balance (or in the case of a
substitution of more than one Mortgage Loan for a Defective Mortgage Loan, an
aggregate Asset Balance), not 10% more or 10% less than the Transfer Deficiency,
if any, relating to such Defective Mortgage Loan; (ii) have a Loan Rate not less
than the Loan Rate of the Defective Mortgage Loan and not more than 1% in excess
of the Loan Rate of such Defective Mortgage Loan; (iii) have a Loan Rate based
on the same Index with adjustments to such Loan Rate made on the same
Interest Rate Adjustment Date as that of the Defective Mortgage Loan; (iv) have
a Gross Margin that is not less than the Gross Margin of the Defective Mortgage
Loan and not more than 100 basis points higher than the Gross Margin for the
Defective Mortgage Loan; (v) have a Mortgage of the same or higher level of
priority as the Mortgage relating to the Defective Mortgage Loan at the time
such Mortgage was transferred to the Trust; (vi) have a remaining term to
maturity not more than six months earlier and not more than 60 months later than
the remaining term to maturity of the Defective Mortgage Loan; (vii) comply with
each representation and warranty set forth in Section 2.04 (deemed to be made as
of the date of substitution); and (viii) have an original Combined Loan-to-Value
Ratio not greater than that of the Defective Mortgage Loan. More than one
Eligible Substitute Mortgage Loan may be substituted for a Defective Mortgage
Loan if such Eligible Substitute Mortgage Loans meet the foregoing attributes in
the aggregate and such substitution is approved in writing in advance by the
Credit Enhancer.]
ERISA: Employee Retirement Income Security Act of 1974, as
amended.
Event of Servicing Termination: As defined in Section 8.01.
FDIC: The Federal Deposit Insurance Corporation or any
successor thereto.
Foreclosure Profit: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Asset Balance (plus accrued and unpaid interest thereon
at the applicable Loan Rate from the date interest was last paid to the end of
the Collection Period during which such Mortgage Loan became a Liquidated
Mortgage Loan) of such Liquidated Mortgage Loan immediately prior to the final
recovery of its Liquidation Proceeds.
Gross Margin: As to any Mortgage Loan, the percentage set
forth as the "Gross Margin" for such Mortgage Loan on Exhibit C
hereto.
[Guaranteed Distribution: With respect to any Distribution
Date, the sum of the (i) the Guaranteed Principal Distribution
Amount and (ii) the amount to be distributed to Certificate-
holders pursuant to Section 5.01(a)(iii) for such Distribution
Date.]
[Guaranteed Principal Distribution Amount: With respect to (i) any
Distribution Date on which the Available Transferor Subordinated Amount and any
Overcollateralization Amount has been reduced to or equals zero, other than the
Distribution Date in ________ ____, the amount, if any, required to reduce the
Investor Certificate Principal Balance (after giving effect to the distributions
of Interest Collections and Principal Collections that are allocable to
principal on the Investor Certificates on such Distribution Date) to the
Invested Amount immediately following such Distribution Date and (ii)
the Distribution Date in ________ ____, the amount by which the outstanding
Investor Certificate Principal Balance (after giving effect to Interest
Collections allocable and distributable as principal on the Investor
Certificates on such Distribution Date) exceeds the sum of the amounts
on deposit in the Collection Account available to be distributed to the Investor
Certificate- holders pursuant to Section 5.01(b) hereof.]
Increased Senior Lien Limitation: As defined in Section
3.01(a).
Index: With respect to each Interest Rate Adjustment Date for a
Mortgage Loan, the highest "prime rate" as published in the "Money Rates" table
of The Wall Street Journal as of the first business day of the calendar month.
Insolvency Event: As defined in Section 11.02(a).
[Insurance Agreement: The insurance and indemnity agreement
dated as of ___________, 199_ among the Depositor, the Sponsor,
the Master Servicer, the Trustee and the Credit Enhancer,
including any amendments and supplements thereto.]
Insurance Proceeds: Proceeds paid by any insurer (other than the Credit
Enhancer) pursuant to any insurance policy covering a Mortgage Loan, or amounts
required to be paid by the Master Servicer pursuant to the last sentence of
Section 3.04, net of any component thereof (i) covering any expenses incurred by
or on behalf of the Master Servicer in connection with obtaining such proceeds,
(ii) that is applied to the restoration or repair of the related Mortgaged
Property, (iii) released to the Mortgagor in accordance with the Master
Servicer's normal servicing procedures or (iv) required to be paid to any holder
of a mortgage senior to such Mortgage Loan.
Interest Collections: As to any Distribution Date, the sum of all
payments by or on behalf of Mortgagors and any other amounts constituting
interest (including without limitation such portion of Insurance Proceeds and
Net Liquidation Proceeds as is allocable to interest on the applicable Mortgage
Loan) collected by the Master Servicer under the Mortgage Loans (excluding any
fees (including annual fees) or late charges or similar administrative fees paid
by Mortgagors) during the related Collection Period minus the Servicing Fee
payable to the Master Servicer with respect to the related Collection Period.
The terms of the related Credit Line Agreement shall determine the portion of
each payment in respect of such Mortgage Loan that constitutes principal or
interest.
Interest Period: With respect to any Distribution Date other than the
first Distribution Date, the period beginning on the preceding Distribution Date
and ending on the day preceding such Distribution Date, and in the case of the
first Distribution Date, the period beginning on the Closing Date and ending on
the day preceding the first Distribution Date.
Interest Rate Adjustment Date: With respect to each Mortgage Loan, any
date on which the Loan Rate is adjusted in accordance with the related Credit
Line Agreement.
Intervening Assignments: As defined in Section 2.01(iv).
Invested Amount: With respect to any Distribution Date, an amount equal
to the Original Invested Amount minus (i) the amount of Principal Collections
previously distributed to Investor Certificateholders and minus (ii) the
Investor Loss Amounts for prior Distribution Dates.
Investor Certificate: Any certificate executed and authen-
ticated by the Trustee substantially in the form set forth in
Exhibit A hereto.
Investor Certificate Distribution Amount: As to any Distribution Date,
the sum of all amounts to be distributed to the Holders of Investor Certificates
pursuant to Article V and Article XI hereof.
Investor Certificateholder: The Holder of an Investor
Certificate.
Investor Certificate Interest: With respect to any Distribution Date,
interest for the related Interest Period at the applicable Investor Certificate
Rate on the Investor Certificate Principal Balance as of the first day of such
Interest Period (after giving effect to the distributions made on the first day
of such Interest Period).
Investor Certificate Principal Balance: With respect to any
Distribution Date, (a) the Original Investor Certificate Principal Balance less
(b) the aggregate of amounts actually distributed as principal on the Investor
Certificates.
Investor Certificate Rate: A per annum rate equal to, with respect to
the first Interest Period, ______%, and for any subsequent Interest Period, a
per annum rate equal to the sum of (a) LIBOR as of the second LIBOR Business Day
prior to the first day of such Interest Period and (b) ____%; provided that in
no event shall the Investor Certificate Rate with respect to any Interest Period
exceed the Maximum Rate for such Interest Period.
Investor Floating Allocation Percentage: With respect to any
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the Invested Amount at the close of business on the preceding
Distribution Date (or at the Closing Date in the case of the first
Distribution Date) and the denominator of which is the Pool Balance, calculated
as of the beginning of the related Collection Period.
Investor Fixed Allocation Percentage: [__%].
Investor Interest Collections: As to any Distribution Date,
the product of (i) the Interest Collections during the related
Collection Period and (ii) the Investor Floating Allocation
Percentage for such Distribution Date.
Investor Loss Amount: With respect to any Distribution Date, the amount
equal to the product of (i) the Investor Floating Allocation Percentage for such
Distribution Date and (ii) the aggregate of the Liquidation Loss Amounts for
such Distribution Date.
Investor Loss Reduction Amount: With respect to any Distribution Date,
the portion, if any, of the Investor Loss Amount for such Distribution Date and
all prior Distribution Dates that has not been distributed to Investor
Certificateholders on such Distribution Date pursuant to Section 5.01(a)(iv) or
5.01(a)(v) or by way of the Credit Enhancement Draw Amount.
Investor Principal Collections: As to any Distribution
Date, the Investor Fixed Allocation Percentage of Principal Collections in
respect of such Distribution Date.
LIBOR: As to any date, the rate for United States dollar deposits for
one month which appears on the Telerate Screen LIBO Page 3750 as of 11:00 A.M.,
London time. If such rate does not appear on such page (or such other page as
may replace that page on that service, or if such service is no longer offered,
such other service for displaying LIBOR or comparable rates as may be reasonably
selected by the Depositor after consultation with the Trustee), the rate will be
the Reference Bank Rate. If no such quotations can be obtained and no Reference
Bank Rate is available, LIBOR will be LIBOR applicable to the preceding
Distribution Date.
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions in the State of New York or in the city
of London, England are required or authorized by law to be closed.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other
than any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing; provided
that any assignment pursuant to Section 7.02 hereof shall not be deemed to
constitute a Lien.
Lifetime Rate Cap: With respect to each Mortgage Loan with respect to
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Loan Rate permitted over the life of such Mortgage Loan under the terms of the
related Credit Line Agreement, as set forth on the Mortgage Loan Schedule.
Liquidated Mortgage Loan: As to any Distribution Date, any Mortgage
Loan in respect of which the Master Servicer has determined, in accordance with
the servicing procedures specified herein, as of the end of the related
Collection Period, that all Liquidation Proceeds which it expects to recover
with respect to the disposition of such Mortgage Loan or the related REO have
been recovered.
Liquidation Expenses: [Out-of-pocket expenses (exclusive of overhead)
which are incurred by the Master Servicer in connection with the liquidation of
any Mortgage Loan and not recovered under any insurance policy, including,
without limitation, legal fees and expenses, any unreimbursed amount expended
pursuant to Section 3.06 (including, without limitation, amounts advanced to
correct defaults on any mortgage loan which is senior to such Mortgage Loan and
amounts advanced to keep current or pay off a mortgage loan that is senior to
such Mortgage Loan) respecting the related Mortgage Loan and any related and
unreimbursed expenditures with respect to real estate property taxes, water or
sewer taxes, condominium association dues, property restoration or preservation
or insurance against casualty, loss or damage.]
Liquidation Loss Amount: With respect to any Distribution Date and any
Mortgage Loan that becomes a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered Asset Balance thereof at the end of such
Collection Period, after giving effect to the Net Liquidation Proceeds applied
in reduction of such Asset Balance.
Liquidation Proceeds: Proceeds (including Insurance Proceeds but not
including amounts drawn under the Policy) received in connection with the
liquidation of any Mortgage Loan or related REO, whether through trustee's sale,
foreclosure sale or otherwise.
Loan Rate: With respect to any Mortgage Loan and as of any day, the per
annum rate of interest applicable under the related Credit Line Agreement to the
calculation of interest for such day on the Asset Balance of such Mortgage Loan.
Loan Rate Cap: With respect to each Mortgage Loan, the lesser of (i)
the Lifetime Rate Cap, if any, or (ii) the applicable state usury ceiling, if
any.
Loan-to-Value Ratio: As of any date of determination with respect to
any mortgage loan, the percentage equivalent of a fraction, the numerator of
which is the outstanding principal balance of such mortgage loan as of such date
of determination and the denominator of which is Collateral Value of the related
Mortgage Property.
Lost Mortgage Note: Any Mortgage Note the original of which
was permanently lost or destroyed and has not been replaced.
Managed Amortization Period: The period from the Closing
Date to and including the Distribution Date in ________ ____.
Master Servicer: ____________________________, a ________
___________ and any successor thereto and any successor
hereunder.
Maximum Principal Payment: With respect to any Distribution
Date, the Investor Fixed Allocation Percentage of the Principal
Collections for such Distribution Date.
Maximum Rate: As to any Interest Period, the Weighted Average Net Loan
Rate for the Collection Period during which such Interest Period begins
(adjusted to an effective rate reflecting accrued interest calculated on the
basis of the actual number of days in the Collection Period commencing in the
month in which such Interest Period commences and a year assumed to consist of
360 days).
Minimum Monthly Payment: With respect to any Mortgage Loan
and any month, the minimum amount required to be paid by the
related Mortgagor in that month.
Minimum Transferor Interest: With respect to any date, an amount equal
to the lesser of (a) [__%] of the Pool Balance on such date and (b) the
Transferor Principal Balance as of the Closing Date.
Moody's: Moody's Investors Service, Inc. or its successor
in interest.
Mortgage: The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File: The mortgage documents listed in Section 2.01 pertaining
to a particular Mortgage Loan and any additional documents required to be added
to the Mortgage File pursuant to this Agreement.
Mortgage Loans: The mortgage loans, including Additional Balances with
respect thereto, that are transferred and assigned to the Trustee pursuant to
Section 2.01, together with the Related Documents, exclusive of Mortgage Loans
that are retransferred to the Depositor, the Master Servicer or the Sponsor from
time to time pursuant to Section 2.02, 2.04, 2.05, 2.06, 2.09 or 3.01 as from
time to time are held as a part of the Trust. The mortgage loans originally so
held are identified in the Mortgage Loan Schedule delivered on the Closing Date.
The Mortgage Loans shall also include any Eligible Substitute Mortgage Loan
Substituted by the Sponsor for a Defective Mortgage Loan pursuant to Sections
2.02 and 2.04.
Mortgage Loan Schedule: With respect to any date, the schedule of
Mortgage Loans included in the Trust on such date. The initial schedule of
Mortgage Loans as of the Cut-off Date is the schedule set forth herein as
Exhibit C, which schedule sets forth as to each Mortgage Loan (i) the Cut-off
Date Asset Balance, (ii) the Credit Limit, (iii) the Gross Margin, (iv) the
Lifetime Rate Cap, (v) the account number, (vi) the current Loan Rate, (vii) the
Combined Loan-to-Value Ratio, (viii) a code specifying the property type, (ix) a
code specifying documentation type and (x) a code specifying lien position. The
Mortgage Loan Schedule will be deemed to be amended from time to time to reflect
Additional Balances.
Mortgage Note: With respect to a Mortgage Loan, the Credit Line
Agreement pursuant to which the related mortgagor agrees to pay the indebtedness
evidenced thereby and secured by the related Mortgage.
Mortgaged Property: The underlying property, including any
real property and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Credit Line
Agreement.
Net Liquidation Proceeds: With respect to any Liquidated
Mortgage Loan, Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate: With respect to any Mortgage Loan and as to any day, the
Loan Rate less the Servicing Fee Rate, the [premium Percentage,] the Trustee Fee
Rate.
Officer's Certificate: A certificate (i) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor, the Transferor or the Master Servicer, or (ii), if
provided for in this Agreement, signed by a Servicing Officer, as the case may
be, and delivered to the Depositor and the Trustee, as the case may be, as
required by this Agreement.
Opinion of Counsel: A written opinion of counsel acceptable to the
Trustee, who may be in-house counsel for the Depositor, the Sponsor, the Master
Servicer or the Transferor (except that any opinion pursuant to Sections 4.03 or
7.04 or relating to taxation must be an opinion of independent outside counsel)
and who, in the case of opinions delivered to [the Credit Enhancer or] the
Rating Agency, is reasonably acceptable to it.
Original Invested Amount: [$___________.]
Original Investor Certificate Principal Balance:
[$-----------.]
Overcollateralization Amount: At the time of reference
thereto, the amount, if any, by which the Invested Amount exceeds
the Investor Certificate Principal Balance.
Overcollateralization Step-Down Amount: With respect to any
Distribution Date, the lesser of (i) the Scheduled Principal Collections
Distribution Amount without giving effect to the proviso in the definition
thereof and (ii) the excess of the Overcollateralization Amount over the
Required Overcollateralization Amount for such Distribution Date.
Paying Agent: Any paying agent appointed pursuant to
Section 6.06.
Percentage Interest: As to any Investor Certificate, the
percentage obtained by dividing the principal denomination of
such Investor Certificate by the Original Investor Certificate
Principal Balance of such Certificate.
Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
[Policy: The certificate guaranty insurance policy number
________, and all endorsements thereto, dated as of the Closing
Date, issued by the Credit Enhancer to the Trustee for the
benefit of the Investor Certificateholders.]
[Policy Payments Account: As defined in Section 4.02(b).]
Pool Balance: With respect to any date, the aggregate of
the Asset Balances of all Mortgage Loans as of such date.
Pool Factor: With respect to any Distribution Date, the
percentage, carried to seven places, obtained by dividing the
Investor Certificate Principal Balance for such Distribution
Date by the Original Investor Certificate Principal Balance.
Preference Claim: As defined in Section 4.02(d).
[Premium: As defined in the Insurance Agreement.]
[Premium Percentage: As defined in the Insurance
Agreement.]
Principal Collections: As to any Distribution Date, the sum of all
payments by or on behalf of Mortgagors and any other amounts constituting
principal (including but not limited to any portion of Insurance Proceeds or Net
Liquidation Proceeds allocable to principal of the applicable Mortgage Loan, and
Transfer Deposit Amounts, but excluding Foreclosure Profits) collected by the
Master Servicer under the Mortgage Loans during the related Collection Period.
The terms of the related Credit Line Agreement shall determine the portion of
each payment in respect of a Mortgage Loan that constitutes principal or
interest.
Purchase Agreement: The Purchase Agreement, dated as of the
Cut-off Date, between [__________________________], as seller,
and the Depositor, as purchaser, with respect to the Mortgage
Loans.
[Rapid Amortization Commencement Date: The earlier of
(i) the Distribution Date in [January 2003] and (ii) the Distri-
bution Date next succeeding the Collection Period in which a
Rapid Amortization Event is deemed to occur pursuant to Section
11.01.]
[Rapid Amortization Event: As defined in Section 11.01.]
[Rapid Amortization Period: The period following the
Managed Amortization Period until the termination of the Trust
pursuant to Section 10.01.]
Rating Agency: Any statistical credit rating agency, or its successor,
that rated the Investor Certificates at the request of the Depositor at the time
of the initial issuance of the Certificates. If such agency or a successor is no
longer in existence, "Rating Agency" shall be such statistical credit rating
agency, or other comparable Person, designated by the Depositor and the Credit
Enhancer, notice of which designation shall be given to the Trustee. References
herein to the highest short-term unsecured rating category of a Rating Agency
shall mean A-1+ or better in the case of Standard & Poor's and P-1 or better in
the case of Moody's and in the case of any other Rating Agency shall mean the
ratings such other Rating Agency deems equivalent to the foregoing ratings.
References herein to the highest long-term rating category of a Rating Agency
shall mean "AAA" in the case of Standard & Poor's and "Aaa" in the case of
Moody's and in the case of any other Rating Agency, the rating such other
Rating Agency deems equivalent to the foregoing ratings.
Record Date: The last day preceding the related Distribution Date;
provided that following the date on which Definitive Certificates are available
pursuant to Section 6.02(c) the Record Date shall be the last day of the
calendar month preceding the month in which the related Distribution Date
occurs.
Reference Bank Rate: As to any Interest Period as follows: the
arithmetic mean (rounded upwards, if necessary, to the nearest one sixteenth of
a percent) of the offered rates for United States dollar deposits for one month
which are offered by the Reference Banks as of 11:00 A.M., London time, on the
second LIBOR Business Day prior to the first day of such Interest Period to
prime banks in the London interbank market for a period of one month in amounts
approximately equal to the outstanding Investor Certificate Principal Balance;
provided that at least two such Reference Banks provide such rate. If fewer than
two offered rates appear, the Reference Bank Rate will be the arithmetic mean of
the rates quoted by one or more major banks in New York City, selected by the
Depositor after consultation with the Trustee, as of 11:00 A.M., New York City
time, on such date for loans in U.S. dollars to leading European banks for a
period of one month in amounts approximately equal to the outstanding Investor
Certificate Principal Balance. If no such quotations can be obtained, the
Reference Bank Rate shall be LIBOR applicable to the preceding Interest Period.
Reference Banks: Three major banks that are engaged in
transactions in the London interbank market, selected by the
Depositor after consultation with the Trustee.
Related Documents: As defined in Section 2.01.
REO: A Mortgaged Property that is acquired by the Trust in
foreclosure or by deed in lieu of foreclosure.
Required Amount: With respect to any Distribution Date, the
amount, if any, by which the sum of the amounts distributable
pursuant to Sections 5.01(a)(i) through 5.01(a)(iv) on such
Distribution Date exceed Investor Interest Collections for such
Distribution Date.
Required Overcollateralization Amount: As defined in the
Insurance Agreement.
Required Transferor Subordinated Amount: As defined in the
Insurance Agreement.
Responsible Officer: When used with respect to the Trustee,
any officer of the Trustee with direct responsibility for the administration
of this Agreement and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
Revolving Period: With respect to each Mortgage Loan, the period
specified for such Mortgage Loan in the related Credit Line Agreement, during
which the Mortgagor is permitted to make Draws.
Rolling Six Month Delinquency Rate: As defined in the
Insurance Agreement.
SAIF: The Savings Association Insurance Fund, as from time to time
constituted, created under the Financial Institutions Reform, Recovery and
Enhancement Act of 1989, or if at any time after the execution of this
instrument the Savings Association Insurance Fund is not existing and performing
duties now assigned to it, the body performing such duties on such date.
Scheduled Principal Collections Distribution Amount: With respect to
any Distribution Date during the Managed Amortization Period and the Investor
Certificates, an amount equal to the lesser of (i) the Maximum Principal Payment
and (ii) the Alternative Principal Payment; provided that on any Distribution
Date, such amount shall be reduced by the Overcollateralization StepDown Amount
for such Distribution Date. With respect to any Distribution Date in respect of
the Rapid Amortization Period, the Maximum Principal Payment; provided that on
any Distribution Date, such amount shall be reduced by the Overcollateralization
Step-Down Amount for such Distribution Date.
Servicing Certificate: A certificate completed and executed
by a Servicing Officer in accordance with Section 4.01.
Servicing Fee: [With respect to any Distribution Date, the product of
(i) the Servicing Fee Rate divided by 12 and (ii) the aggregate Asset Balance of
the Mortgage Loans as of the first day of the Collection Period preceding such
Distribution Date (or as of the close of business on the Cut-off Date with
respect to the first Distribution Date).]
Servicing Fee Rate: [0.50%] per annum.
Servicing Officer: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee (with a copy to the Credit Enhancer) by the Master Servicer on the
Closing Date, as such list may be amended from time to time.
Servicing Standard: That degree of skill and care exercised
by the Master Servicer with respect to mortgage loans comparable
to the Mortgage Loans serviced by the Master Servicer for itself
or others.
Sponsor: ____________________________, a __________________
and any successor thereto.
Standard & Poor's: Standard & Poor's Ratings Group, a
Division of The McGraw-Hill Companies, or its successor in
interest.
Subordinated Transferor Collections: With respect to any
Distribution Date, Interest Collections and Principal Collections
allocable to the Transferor Interest on such Distribution Date up
to the Available Transferor Subordinated Amount for such
Distribution Date.
Telerate Screen LIBO Page 3750: The display designated as page 3750 on
the Telerate Service (or such other page as may replace page 3750 on that
service for the purpose of displaying London inter-bank offered rates of major
banks).
Transfer Date: As defined in Section 2.06.
Transfer Deficiency: As defined in Section 2.02(a).
Transfer Deposit Amount: As defined in Section 2.02(a).
Transfer Notice Date: As defined in Section 2.06.
Transferor or Transferor Certificateholders: The Holders of
the Transferor Certificates.
Transferor Certificates: The certificates executed and
authenticated by the Trustee substantially in the form set forth
in Exhibit B hereto.
Transferor Collections: As to any period, the sum of Trans-
feror Interest Collections and Transferor Principal Collections
for such period.
Transferor Interest Collections: Interest Collections that
are not Investor Interest Collections.
Transferor Principal Balance: As of any date of determination, the
amount equal to (i) the Pool Balance as of the close of business on the day next
preceding such date of determination less (ii) the Invested Amount as of the
close of business on the preceding Distribution Date.
Transferor Principal Collections: On any Distribution Date,
Principal Collections received during the related Collection
Period minus the amount of such Principal Collections required to
be distributed to Investor Certificateholders pursuant to Section
5.01(b).
Trust: The trust created by this Agreement, the corpus of which
consists of the Mortgage Loans, related Credit Agreements such other assets as
shall from time to time be identified as deposited in the Collection Account in
accordance with this Agreement, property that secured a Mortgage Loan and that
has become REO, the interest of the Depositor in certain hazard insurance
policies maintained by the Mortgagors or the Master Servicer in respect of the
Mortgage Loans, the Policy, an assignment of the Depositor's rights under the
Purchase Agreement and all proceeds of each of the foregoing (exclusive of
payments of accrued interest on the Mortgage Loans which are due on or prior to
the Cut-off Date).
Trustee: __________________________________ or any succes-
sor Trustee appointed in accordance with this Agreement that has
accepted such appointment in accordance with this Agreement.
Trustee Fee: [A fee which is separately agreed to between
the Master Servicer and the Trustee.]
Trustee Fee Rate: The per annum rate at which the Trustee
Fee is calculated.
UCC: The Uniform Commercial Code, as amended from time to
time, as in effect in any specified jurisdiction.
Unpaid Investor Certificate Interest Shortfall: With respect to any
Distribution Date, the aggregate amount, if any, of Investor Certificate
Interest that was accrued in respect of a prior Distribution Date and has not
been distributed to Investor Certificateholders.
Weighted Average Net Loan Rate: As to any Collection Period, the
average of the daily Net Loan Rate for each Mortgage Loan (assuming that each
Mortgage Loan is fully indexed) for each day during the related Billing Cycle,
weighted on the basis of the daily average of the related Asset Balances
outstanding for each day in such Billing Cycle for each Mortgage Loan as
determined by the Master Servicer in accordance with the Master Servicer's
normal servicing procedures.
Section 1.02. Interest Calculations. All calculations of interest
hereunder that are made in respect of the Asset Balance of a Mortgage Loan shall
be made on a daily basis using a 365-day year. All calculations of interest on
the Investor Certificates shall be made on the basis of the actual number of
days in an Interest Period and a year assumed to consist of 360 days. The
calculation of the Servicing Fee shall be made on the basis of a 360-day year
consisting of twelve 30-day months. All dollar amounts calculated hereunder
shall be rounded to the nearest cent with one-half of one cent being rounded
down.
ARTICLE II
Conveyance of Mortgage Loans;
Original Issuance of Certificates;
Tax Treatment
Section 2.01. Conveyance of Mortgage Loans; Retention of Obligation to
Fund Advances Under Credit Line Agreements. The Depositor, concurrently with the
execution and delivery of this Agreement, does hereby transfer, assign, set over
and otherwise convey to the Trust without recourse (subject to Sections 2.02 and
2.04) all of its right, title and interest in and to: (i) each Mortgage Loan,
including its Asset Balance (including all Additional Balances) and all
collections in respect thereof [received] [due] after the Cut-off Date
[(excluding payments in respect of accrued interest [due] [received] on or prior
to the Cut-off Date)]; (ii) property that secured a Mortgage Loan that is
acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
rights under the Purchase Agreement; (iv) the Depositor's rights under the
hazard insurance policies; (v) all other assets included or to be included in
the Trust for the benefit of Certificateholders and the Credit Enhancer; and
(vi) all proceeds of the foregoing; provided that neither the Trustee nor the
Trust assumes the obligation under any Credit Line Agreement that provides for
the funding of future advances to the Mortgagor thereunder, and neither the
Trust nor the Trustee shall be obligated or permitted to fund any such future
advances. Additional Balances shall be part of the related Asset Balance and are
hereby transferred to the Trust on the Closing Date pursuant to this Section
2.01, and therefore part of the Trust property. [In addition, on or prior to the
Closing Date, the Depositor shall cause the Credit Enhancer to deliver the
Policy to the Trustee for the benefit of the Investor Certificateholders.] The
foregoing transfer, assignment, set- over and conveyance to the Trust shall be
made to the Trustee, on behalf of the Trust, and each reference in this
Agreement to such transfer, assignment, set-over and conveyance shall be
construed accordingly.
The Depositor agrees to take or cause to be taken such actions and
execute such documents, including without limitation, the filing of all
necessary continuation statements for the UCC-1 financing statements filed in
the State of California (which shall have been filed within 90 days of the
Closing Date) describing the Cut-off Date Asset Balances and Additional Balances
and naming the Depositor as debtor and the Trustee as secured party and any
amendments to UCC-1 financing statements required to reflect a change in the
name or corporate structure of the Depositor or the filing of any additional
UCC-1 financing statements due to the change in the principal office of the
Depositor (within 90 days of any event necessitating such filing) as are
necessary to perfect and protect the Certificateholders' and Credit Enhancer's
interests in each Cut-off Date Asset Balance and Additional Balances and
the proceeds thereof (other than maintaining possession by the Trustee of the
Mortgage Loans and the Mortgage Files, which possession will, subject to the
terms hereof, be maintained by the Master Servicer as custodian and
bailee of the Trustee).
In connection with such transfer and assignment by the Depositor, the
Master Servicer acknowledges that it is holding as custodian and bailee for the
Trustee, the following documents or instruments (the "Related Documents") with
respect to each Mortgage Loan:
(i) (A) the original Mortgage Note endorsed in blank;
or (B) with respect to any Lost Mortgage Note, a lost not affidavit
from the Seller stating that the original Mortgage Note was lost or
destroyed together with a copy of such Note;
(ii) an original Assignment of Mortgage in blank in
recordable form;
(iii) the original recorded Mortgage or, if, in
connection with any Mortgage Loan, the original recorded Mortgage with
evidence of recording thereon cannot be delivered on or prior to the
Closing Date because of a delay caused by the public recording office
where such original Mortgage has been delivered for recordation or
because such original Mortgage has been lost, the Sponsor, at the
direction of the Depositor, shall deliver or cause to be delivered to
the Custodian, as agent for the Trustee, a true and correct copy of
such Mortgage, together with (i) in the case of a delay caused by the
public recording office, an Officer's Certificate of the Depositor
stating that such original Mortgage has been dispatched to the
appropriate public recording official or (ii) in the case of an
original Mortgage that has been lost, a certificate by the appropriate
county recording office where such Mortgage is recorded;
(iv) if applicable, the original intervening
assignments, if any ("Intervening Assignments"), with evidence of
recording thereon, showing a complete chain of title to the Mortgage
from the originator to the Depositor or, if any such original
Intervening Assignment has not been returned from the applicable
recording office or has been lost, a true and correct copy thereof,
together with (i) in the case of a delay caused by the public recording
office, an Officer's Certificate of the Sponsor stating that such
original Intervening Assignment has been dispatched to the appropriate
public recording official for recordation or (ii) in the case of an
original Intervening Assignment that has been lost, a certificate by
the appropriate county recording office where such Mortgage is
recorded;
(v) either (1) for each Mortgage Loan with a Credit
Limit in excess of $[____________], a title policy or (2) for all other
Mortgage Loans, either a title policy, a title search, a limited
coverage policy or other assurance of title with respect to the related
Mortgaged Property;
(vi) the original of any guaranty executed in connection
with the Mortgage Note;
(vii) the original of each assumption, modification,
consolidation or substitution agreement, if any, relating to the
Mortgage Loan; and
(viii) any security agreement, chattel mortgage or
equivalent instrument executed in connection with the Mortgage;
provided that as to any Mortgage Loan, if (a) as evidenced by an Opinion of
Counsel delivered to and in form and substance satisfactory to the Trustee and
the Credit Enhancer, (x) an optical image or other representation of the related
documents specified in clauses (i) through (viii) above are enforceable in the
relevant jurisdictions to the same extent as the original of such document and
(y) such optical image or other representation does not impair the ability of an
owner of such Mortgage Loan to transfer its interest in such Mortgage Loan, and
(b) the retention of such documents in such format will not result in a
reduction in the then current rating of the Investor Certificates, without
regard to the Policy, such optical image or other representation may be held by
the Master Servicer, as custodian for the Trustee or assignee in lieu of the
physical documents specified above.
The Sponsor hereby confirms to the Trustee that it has caused the
portions of the Electronic Ledgers relating to the Mortgage Loans to be clearly
and unambiguously marked, and has made the appropriate entries in its general
accounting records, to indicate that such Mortgage Loans have been transferred
to the Trust at the direction of the Depositor. The Master Servicer hereby
confirms to the Trustee that it has clearly and unambiguously made appropriate
entries in its general accounting records indicating that such Mortgage Loans
constitute part of the Trust and are serviced by it on behalf of the Trust in
accordance with the terms hereof.
Notwithstanding the characterization of the Investor Certificates as
debt for Federal, state and local income and franchise tax purposes, the parties
hereto intend to treat the transfer of the Mortgage Loans as provided herein as
a sale for accounting and other purposes, by the Depositor to the Trust of
all the Depositor's right, title and interest in and to the Mortgage Loans and
other property described above. In the event such transfer is deemed not to be a
sale as contemplated in the immediately preceding sentence, the Depositor hereby
grants to the Trust a security interest in all of the Depositor's right, title
and interest in, to and under the Mortgage Loans whether now existing or
hereafter created, all monies due or to become due on the Mortgage Loans and all
proceeds of any thereof; and this Agreement shall constitute a security
agreement under applicable law.
Except as hereinafter provided, the Master Servicer shall be entitled
to maintain possession of all of the foregoing documents and instruments and
shall not be required to deliver any of them to the Trustee. In the event,
however, that possession of any of such documents or instruments is required by
any Person (including the Trustee) acting as successor master servicer pursuant
to Section 7.04 or 8.02 in order to carry out the duties of Master Servicer
hereunder, then such successor shall be entitled to request delivery, at the
expense of the Master Servicer, of such documents or instruments by the Master
Servicer and to retain such documents or instruments for servicing purposes;
provided that the Trustee or such master servicer shall maintain such documents
at such offices as may be required by any regulatory body having jurisdiction
over such Mortgage Loans.
The Master Servicer's right to maintain possession of the documents
enumerated above shall continue so long as the long term unsecured debt of
[__________________________] is assigned ratings of at least "[____]" by
[Standard & Poor's] and "[____]" by [Moody's]. At such time as the condition
specified in the preceding sentence is not satisfied, as promptly as practicable
but in no event more than 90 days in the case of clause (i) below and 60 days in
the case of clause (ii) below following the occurrence of such event (a
"Delivery Event"), the Master Servicer shall, at its expense, (i) either (x)
record an assignment of Mortgage in favor of the Trustee (which may be a blanket
assignment if permitted by applicable law) in the appropriate real property or
other records or (y) deliver to the Trustee the assignment of such Mortgage in
favor of the Trustee in form for recordation, together with an Opinion of
Counsel addressed to the Trustee [and the Credit Enhancer] to the effect that
recording is not required to protect the Trustee's right, title and interest in
and to the related Mortgage Loan or, in case a court should recharacterize the
sale of the Mortgage Loans as a financing, to perfect a first priority security
interest in favor of the Trustee in the related Mortgage Loan, which Opinion of
Counsel also shall be reasonably acceptable to each of the Rating Agencies (as
evidenced in writing) and the Credit Enhancer, and (ii) unless an Opinion of
Counsel, reasonably acceptable to the Trustee, the Rating Agencies (as evidenced
in writing) and the Credit Enhancer, is delivered to the Trustee [and the Credit
Enhancer] to the effect that delivery of the Mortgage Files is not necessary
to protect the Trustee's right, title and interest in the related Mortgage
Loans; provided that the lack of delivery will not result in a reduction
in the then current rating of the Investor Certificates, without regard
to the Policy, deliver the related Mortgage Files to the Trustee or to a
custodian located in the State of California appointed by the Trustee and
acceptable to the Rating Agencies [and the Credit Enhancer] to be held by
the Custodian on behalf of the Trustee in trust, upon the terms herein
set forth, for the use and benefit of all present and future
Certificateholders and the Custodian on behalf of the Trustee shall retain
possession thereof except to the extent the Master Servicer requires any
Mortgage Files for normal servicing as contemplated by Section 3.07. The Trustee
is hereby appointed as the attorney-in-fact of the Master Servicer with the
power to prepare, execute and record Assignments of Mortgages in the event that
the Master Servicer fails to do so on a timely basis as provided in this
paragraph.
Within 90 days following delivery, if any, of the Mortgage Files to the
Trustee pursuant to the preceding paragraph, the Trustee shall review each such
Mortgage File to ascertain that all required documents set forth in this Section
2.01 have been executed and received, and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule and in so doing the
Trustee may rely on the purported due execution and genuineness of any signature
thereon. If within such 90-day period the Trustee finds any document
constituting a part of a Mortgage File not to have been executed or received or
to be unrelated to the Mortgage Loans identified in said Mortgage Loan Schedule
or, if in the course of its review, the Trustee determines that such Mortgage
File is otherwise defective in any material respect, the Trustee shall promptly
upon the conclusion of its review notify the Sponsor, the Depositor and the
Credit Enhancer, and the Sponsor shall have a period of 90 days after such
notice within which to correct or cure any such defect; provided that the
Sponsor shall not be obligated to correct or cure any such defect if such defect
constitutes fraud in the origination of the related Mortgage Loan and the
Sponsor did not, at the time of origination or on the Closing Date, have actual
knowledge of such fraud.
The Trustee shall have no responsibility for reviewing any Mortgage
File except as expressly provided in this Section 2.01. In reviewing any
Mortgage File pursuant to this Section, the Trustee shall have no responsibility
for determining whether any document is valid and binding, whether the text of
any assignment or endorsement is in proper or recordable form (except, if
applicable, to determine if the Trustee is the assignee or endorsee), whether
any document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any
applicable jurisdiction, whether any Person executing any document is authorized
to do so or whether any signature thereon is genuine, but shall only be
required to determine whether a document has been executed, that it appears to
be what it purports to be, and, where applicable, that it purports to be
recorded.
Section 2.02. Acceptance by Trustee; Retransfer of Mortgage Loans. (a)
The Trustee hereby acknowledges its receipt of the Policy and the Mortgage
Loans, and declares that the Trustee holds and will hold such instrument, and to
the extent that any documents are delivered to it pursuant to Section 2.01, will
hold such documents, and all amounts received by it thereunder and hereunder, in
trust, upon the terms herein set forth, for the use and benefit of all present
and future Certificateholders and the Credit Enhancer. If (x) the time to cure
any defect in respect of any Mortgage Loan of which the Trustee has notified the
Sponsor and the Depositor following the review pursuant to Section 2.01 has
expired in respect of any Mortgage Loan as a result of a material defect in any
document constituting a part of its Mortgage File or (y) the time to cure any
defect in respect of any Mortgage Loan of which the Trustee has notified the
Sponsor and the Depositor following the review pursuant to Section 2.01 has
expired or if at any time any loss is suffered by the Trustee on behalf of the
Certificateholders or the Credit Enhancer, in respect of any Mortgage Loan as a
result of an Assignment of Mortgage to the Trustee not having been recorded as
required by Section 2.01, then on the next succeeding Business Day upon the
deposit to the Collection Account of the Transfer Deposit Amount, if any, and
upon satisfaction of the applicable conditions described herein, all right,
title and interest of the Trust in and to such Mortgage Loan shall be deemed to
be retransferred, reassigned and otherwise reconveyed, without recourse,
representation or warranty, to the Sponsor on such Business Day and the Asset
Balance of such Mortgage Loan shall be deducted from the Pool Balance; provided
that interest accrued on the Asset Balance of such Mortgage Loan to the [end of
the related Collection Period] [Due Date occurring in the calendar month
immediately following the calendar month in which such repurchase occurs] shall
be the property of the Trust; provided further that, for purposes of clause (x)
of this sentence, the Sponsor shall not be obligated to make such retransfer and
repurchase if such defect or omission constitutes fraud in the origination of
the related Mortgage Loan and the Sponsor did not, at the time of such
origination or on the Closing Date, have actual knowledge of such fraud. The
Trustee shall determine if the reduction of such Asset Balance from the Pool
Balance in accordance with the preceding sentence would cause the Transferor
Principal Balance to be less than the Minimum Transferor Interest ("Transfer
Deficiency"), in which event the Trustee shall deliver written notice of such
deficiency to the Sponsor, and within five Business Days after the Business Day
of such retransfer the Sponsor shall either (i) substitute an Eligible
Substitute Mortgage Loan or (ii) deposit into the Collection Account an amount
(the "Transfer Deposit Amount") in immediately available funds equal to the
Transfer Deficiency[, or a combination of both (i) and (ii) above]. Such
reduction or substitution and the actual payment of any Transfer Deposit
Amount, if any, shall be deemed to be payment in full for such Mortgage Loan.
Upon receipt of any Eligible Substitute Mortgage Loan or of written
notification signed by a Servicing Officer to the effect that the
Transfer Deposit Amount in respect of a Defective Mortgage Loan has been
deposited into the Collection Account or, if the Transferor Principal Balance is
not reduced below the Minimum Transferor Interest as a result of the deemed
retransfer of a Defective Mortgage Loan, then as promptly as practicable
following such deemed transfer, the Trustee shall execute such documents and
instruments of transfer presented by the Sponsor, in each case without recourse,
representation or warranty, and take such other actions as shall reasonably be
requested by the Sponsor to effect such transfer by the Trust of such Defective
Mortgage Loan pursuant to this Section. It is understood and agreed that the
obligation of the Sponsor to so accept a transfer of such a Defective Mortgage
Loan and to either convey an Eligible Substitute Mortgage Loan or to make a
deposit of any related Transfer Deposit Amount into the Collection Account shall
constitute the sole remedy available to Certificateholders and the Trustee [and
the Credit Enhancer] against the Sponsor with respect to all defects and
omissions in respect of the Mortgage Files.
The Master Servicer, promptly following the transfer of a Defective
Mortgage Loan from or to the Trust pursuant to this Section, shall amend the
Mortgage Loan Schedule and make appropriate entries in its general account
records to reflect such transfer. The Master Servicer shall, following such
retransfer, appropriately mark its records to indicate that it is no longer
servicing such Mortgage Loan on behalf of the Trust. The Sponsor, promptly
following such transfer, shall appropriately mark its Electronic Ledger and make
appropriate entries in its general account records to reflect such transfer.
Notwithstanding any other provision of this Section, a retransfer of a
Defective Mortgage Loan to the Sponsor pursuant to this Section that would cause
the Transferor Principal Balance to be less than the Minimum Transferor Interest
shall not occur if either the Sponsor fails to convey an Eligible Substitute
Mortgage Loan or to deposit into the Collection Account any related Transfer
Deposit Amount required by this Section with respect to the transfer of such
Defective Mortgage Loan.
(b) As to any Eligible Substitute Mortgage Loan or Loans, the Sponsor
shall, if a Delivery Event has occurred, deliver to the Trustee with respect to
such Eligible Substitute Mortgage Loan or Loans such documents and agreements as
are required to be held by the Trustee in accordance with Section 2.01. For any
Collection Period during which the Sponsor substitutes one or more Eligible
Substitute Mortgage Loans, the Master Servicer shall determine the Transfer
Deposit Amount which amount shall be deposited by the Sponsor in the Collection
Account at the time of substitution. All amounts received in respect of the
Eligible Substitute Mortgage Loan or Loans during the Collection Period in
which the circumstances giving rise to such substitution occur shall not
be a part of the Trust and shall not be deposited by the Master Servicer
in the Collection Account. All amounts received by the Master Servicer during
the Collection Period in which the circumstances giving rise to such
substitution occur in respect of any Defective Mortgage Loan so removed by
the Trust shall be deposited by the Master Servicer in the Collection
Account. Upon such substitution, the Eligible Substitute Mortgage Loan or
Loans shall be subject to the terms of this Agreement in all respects,
and the Sponsor shall be deemed to have made with respect to such Eligible
Substitute Mortgage Loan or Loans, as of the date of substitution, the
covenants, representations and warranties set forth in Section 2.04. The
procedures applied by the Sponsor in selecting each Eligible Substitute Mortgage
Loan shall not be materially adverse to the interests of the Trustee, the
Certificateholders and the Credit Enhancer.
Section 2.03. Representations and Warranties Regarding the Master
Servicer. The Master Servicer represents and warrants to the Trustee [and the
Credit Enhancer] that as of the Closing Date:
(i) The Master Servicer is a ________ corporation,
validly existing and in good standing under the laws of the State of
________, and has the corporate power to own its assets and to transact
the business in which it is currently engaged. The Master Servicer is
duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or any properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or
condition (financial or other) of the Master Servicer;
(ii) The Master Servicer has the power and authority to
make, execute, deliver and perform this Agreement and all of the
transactions contemplated under the Agreement, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement. When executed and delivered, this
Agreement will constitute the legal, valid and binding obligation of
the Master Servicer enforceable in accordance with its terms, except as
enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by the availability of
equitable remedies;
(iii) The Master Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any
governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement, except for such consent, license, approval or authorization,
or registration or declaration, as shall have been obtained or filed,
as the case may be, prior to the Closing Date;
(iv) The execution, delivery and performance of this
Agreement by the Master Servicer will not violate any provision of any
existing law or regulation or any order or decree of any court
applicable to the Master Servicer or any provision of the Certificate
of Incorporation or Bylaws of the Master Servicer, or constitute a
material breach of any mortgage, indenture, contract or other agreement
to which the Master Servicer is a party or by which the Master Servicer
may be bound; and
(v) No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Master Servicer threatened, against the
Master Servicer or any of its properties or with respect to this
Agreement or the Certificates which in the opinion of the Master
Servicer has a reasonable likelihood of resulting in a material adverse
effect on the transactions contemplated by this Agreement.
The representations and warranties set forth in this Section shall survive the
sale and assignment of the Mortgage Loans to the Trust. Upon discovery of a
breach of any representations and warranties which materially and adversely
affects the interests of the Certificateholders or the Credit Enhancer, the
person discovering such breach shall give prompt written notice to the other
parties and to the Credit Enhancer. Within 90 days of its discovery or its
receipt of notice of breach, or, with the prior written consent of a Responsible
Officer of the Trustee, such longer period specified in such consent, the Master
Servicer shall cure such breach in all material respects.
Section 2.04. Representations and Warranties of the Sponsor
Regarding the Mortgage Loans; Retransfer of Certain Mortgage
Loans. (a) The Sponsor hereby represents and warrants to the
Trustee [and the Credit Enhancer] that as of the Cut-off Date,
unless otherwise specifically set forth herein:
(i) As of the Closing Date, this Agreement constitutes a
legal, valid and binding obligation of the Sponsor, enforceable against
the Sponsor in accordance with its terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect affecting
the enforcement of creditors' rights generally and by the availability
of equitable remedies;
(ii) As of the Closing Date with respect to the Mortgage Loans
and as of the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, either (A) the Purchase Agreement constitutes
a valid transfer and assignment to the Depositor of all right, title
and interest of the Sponsor in and to the Cut-off Date Asset Balances
with respect to the applicable Mortgage Loans, all monies due or to
become due with respect thereto (excluding payments in respect of
accrued interest [due] on or prior to the Cut-off Date [or due in the
month of]), and all proceeds of such Cut-off Date Asset Balances with
respect to the Mortgage Loans and such funds as are from time to time
deposited in the Collection Account (excluding any investment earnings
thereon) and all other property specified in the definition of "Asset"
as being part of the corpus of the Trust conveyed to the Trust by the
Sponsor, and upon payment for the Additional Balances, will constitute
a valid transfer and assignment to the Trustee of all right, title and
interest of the Sponsor in and to the Additional Balances, all monies
due or to become due with respect thereto, and all proceeds of such
Additional Balances and all other property specified in the definition
of "Asset" relating to the Additional Balances or (B) the Purchase
Agreement or this Agreement, as appropriate, constitutes a grant of a
security interest (as defined in the UCC as in effect in California) in
such property to the Trustee on behalf of the Trust. If this Agreement
constitutes the grant of a security interest to the Trust in such
property, and if the Trustee obtains and maintains possession of the
Mortgage File for each Mortgage Loan, the Trust shall have a first
priority perfected security interest in such property, subject to the
effect of Section 9-306 of the UCC with respect to collections on the
Mortgage Loans that are deposited in the Collection Account in
accordance with the next to last paragraph of Section 3.02(b); provided
that nothing in this clause (ii) shall be construed to obligate the
Master Servicer to deliver any Mortgage Files other than as set forth
in Section 2.01 hereof;
[(iii) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan and as of the date any Additional Balance is
created, the information set forth in the Mortgage Loan Schedule for
such Mortgage Loans is true and correct in all material respects;]
(iv) The applicable Cut-off Date Asset Balance has not been
assigned or pledged, and the Sponsor is the sole owner and holder of
such Cut-off Date Asset Balance free and clear of any and all liens,
claims, encumbrances, participation interests, equities, pledges,
charges or security interests of any nature, and has full right and
authority, under all governmental and regulatory bodies having
jurisdiction over the ownership of the applicable Mortgage Loan,
to sell, assign or transfer the same pursuant to the Purchase
Agreement;
(v) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, the related Mortgage Note and the Mortgage
with respect to each Mortgage Loan have not been assigned or pledged,
and immediately prior to the sale of the Mortgage Loans to the
Depositor, the Sponsor [was] [is] the sole owner and holder of the
Mortgage Loan free and clear of any and all liens, claims,
encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, and has full right and authority,
under all governmental and regulatory bodies having jurisdiction over
the ownership of the applicable Mortgage Loans, to sell and assign the
same pursuant to the Purchase Agreement;
(vi) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, the related Mortgage is a valid and
subsisting first or second lien, as set forth on the Mortgage Loan
Schedule with respect to each related Mortgage Loan, on the property
therein described, and as of the Cut-off Date the related Mortgaged
Property is free and clear of all encumbrances and liens having
priority over the first or second lien, as applicable, of such Mortgage
except for liens for (i) real estate taxes and special assessments not
yet delinquent and liens or interests arising under or as a result of
any federal, state or local law, regulation or ordinance relating to
hazardous wastes or hazardous substances and, if the related Mortgaged
Property is a unit in a condominium project or planned unit
development, any lien for common charges permitted by statute or
homeowner association fees; (ii) any first mortgage loan secured by
such Mortgaged Property and specified on the Mortgage Loan Schedule;
(iii) covenants, conditions and restrictions, rights of way, easements
and other matters of public record as of the date of recording that are
acceptable to mortgage lending institutions in the area wherein the
related Mortgaged Property is located or specifically reflected in the
appraisal made in connection with the origination of the related
Mortgage Loan; and (iv) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of
the security intended to be provided by such Mortgage;
(vii) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to
any Eligible Substitute Mortgage Loan, there is no valid offset,
defense or counterclaim of any obligor under any Credit Line Agreement
or Mortgage;
(viii) To the best knowledge of the Sponsor, as of the Closing
Date with respect to the Mortgage Loans and the applicable Transfer
Date with respect to any Eligible Substitute Mortgage Loan, there is no
delinquent recording or other tax or fee or assessment lien against any
related Mortgaged Property;
(ix) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, there is no proceeding pending or, to the
best knowledge of the Sponsor, threatened for the total or partial
condemnation of the related Mortgaged Property, and no such property
has been materially damaged by water, fire, earthquake, windstorm,
flood, tornado or similar casualty (excluding casualty from the
presence of hazardous wastes or hazardous substances, as to which the
Seller makes no representations) so as to affect adversely the value of
the related Mortgaged Property as security for such Mortgage Loan;
(x) To the best knowledge of the Sponsor, as of the Closing
Date with respect to the Mortgage Loans and the applicable Transfer
Date with respect to any Eligible Substitute Mortgage Loan, there are
no mechanics' or similar liens or claims which have been filed for
work, labor or material affecting the related Mortgaged Property which
are, or may be, liens prior or equal to the lien of the related
Mortgage, except liens which are fully insured against by the title
insurance policy referred to in clause (xiv);
(xi) No Minimum Monthly Payment is more than 59 days
delinquent (measured on a contractual basis) and with respect to the
Mortgage Loans no more than 0.0% (by Cut-off Date Pool Balance) were
30-59 days delinquent (measured on a contractual basis) and no more
that [___]% (by Cut-off Date Pool Balance) were 60-89 days delinquent
(measured on a contractual basis);
(xii) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, for each Mortgage Loan, the related Mortgage
File contains each of the documents and instruments specified to be
included therein;
(xiii) The related Mortgage Note and the related Mortgage at
origination complied in all material respects with applicable state and
federal laws, including, without limitation, usury, truth-in-lending,
real estate settlement procedures, consumer credit protection, equal
credit opportunity or disclosure laws applicable to the Mortgage Loan;
(xiv) Either a lender's title insurance policy or binder was
issued on the date of origination of the Mortgage Loan and each such
policy is valid and remains in full force and effect, or a title search
or guaranty of title customary in the relevant jurisdiction was
obtained with respect to a Mortgage Loan as to which no title insurance
policy or binder was issued;
[(xv) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, none of the Mortgaged Properties is a mobile
home or manufactured housing unit that is not considered or classified
as part of the real estate under the laws of the jurisdiction in which
it is located;]
[(xvi) As of the Cut-off Date for the Mortgage Loans no more
than [___]% of the Mortgage Loans, by aggregate principal balance, are
secured by Mortgaged Properties located in one United States postal
five-digit zip code;]
[(xvii) The Combined Lone to Value Ratio for each
Mortgage Loan was not in excess of [___]%;]
(xviii) No selection procedure reasonably believed by the
Sponsor to be adverse to the interests of the Certifi- cateholders [or
the Credit Enhancer] was utilized in selecting the Mortgage Loans;
(xix) The Sponsor has not transferred the Mortgage Loans to
the Trust with any intent to hinder, delay or defraud any of its
creditors;
(xx) The Minimum Monthly Payment with respect to any Mortgage
Loan is not less than the interest accrued at the applicable Loan Rate
on the average daily Asset Balance during the interest period relating
to the date on which such Minimum Monthly Payment is due;
(xxi) Within 90 days of the Closing Date with respect to the
Mortgage Loans and, to the extent not already included in such filing
with respect to the Mortgage Loans, the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, the Sponsor will file
UCC-1 financing statements with respect to the Mortgage Loans;
(xxii) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, each Credit Line Agreement and each Mortgage
Loan is an enforceable obligation of the related Mortgagor, except as
the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally;
(xxiii) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, the Sponsor has not received a notice of
default of any senior mortgage loan related to a Mortgaged Property
that has not been cured by a party other than the Master Servicer;
(xxiv) The definition of "Prime Rate" in each Credit Line
Agreement relating to a Mortgage Loan does not differ materially from
the definition in the form of Credit Line Agreement in Exhibit D;
[(xxv) The weighted average remaining term to maturity of the
Mortgage Loans (on a contractual basis) as of the Cut-off Date [for the
Mortgage Loans] is approximately [___] months. One each date that the
Loan Rates have been adjusted, interest rate adjustments on the
Mortgage Loans were made in compliance with the related Mortgage and
the related Mortgage Note and applicable law. Over the term of each
Mortgage Loan, the Loan Rate may not exceed the related Loan Rate Cap,
if any. The Loan Rate Caps range between [___]% and [___]%. The Loan
Rates on the Mortgage Loans range between [___]% and [__]% and the
weighted average Loan Rate is approximately [__]%.]
(xxvi) As of the Closing Date with respect to the Mortgage
Loans and the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, each Mortgaged Property consists of a single
parcel of real property with a one-to-four unit single family residence
erected thereon, or an individual condominium unit, planned unit
development unit or townhouse;
(xxvii) No more than [___]% (by Cut-off Date Pool Balance) of
the Mortgage Loans are secured by real property improved by individual
condominium units, planned unit development units, townhouses or
two-to-four family residences erected thereon, and at least [___]% (by
Cut-off Date Pool Balance) of the Mortgage Loans are secured by real
property with a detached one-family residence erected thereon;
(xxviii) The Credit Limits on the Mortgage Loans range between
$[____________] and $[___________] with an average of approximately
$[_______]. As of the Cut-off Date for the Mortgage Loans, no Mortgage
Loan had a principal balance in excess of approximately
$[_______________] and the average principal balance of the Mortgage
Loans is equal to approximately $[_______]; and
(xxix) Approximately [__]% and [___]% of the Mortgage Loans,
by aggregate principal balance as of the Cut-off Date for the Mortgage
Loans, are first and second liens, respectively.
(b) It is understood and agreed that the representations and warranties
set forth in this Section 2.04 shall survive delivery of the respective Mortgage
Files to the Trustee pursuant to Section 2.01 and the termination of the rights
and obligations of the Master Servicer pursuant to Section 7.04 or 8.02. Upon
discovery by the Sponsor, the Depositor, the Master Servicer[, the Credit
Enhancer] or a Responsible Officer of the Trustee of a breach of any of the
foregoing representations and warranties, that materially and adversely affects
the interests of the Investor Certificateholders [or the Credit Enhancer] in the
related Mortgage Loan, the party discovering such breach shall give prompt
written notice to the other parties and the Credit Enhancer. Within 90 days of
its discovery or its receipt of notice of such breach, the Sponsor shall use all
reasonable efforts to cure such breach in all material respects or shall, not
later than the Business Day next preceding the Distribution Date in the month
following the Collection Period in which any such cure period expired (or such
later date that is acceptable to the Trustee [and the Credit Enhancer] as
evidenced by its written consents), either (a) accept a transfer of such
Mortgage Loan from the Trust or (b) substitute an Eligible Substitute Mortgage
Loan in the same manner and subject to the same conditions as set forth in
Section 2.02; provided that the cure for any breach of a representation and
warranty relating to the characteristics of the Mortgage Loans in the aggregate
shall be a repurchase of or substitution for only the Mortgage Loans necessary
to cause such characteristics to be in compliance with the related
representation and warranty; and provided further that, anything to the contrary
herein notwithstanding, Seller shall have no obligation to cure any such breach
or to repurchase or substitute for such affected Mortgage Loan if the substance
of such breach constitutes fraud in the origination of such affected Mortgage
Loan and the Seller, at the time of such origination and on the Closing Date,
did not have actual knowledge of such fraud. Upon accepting such transfer and
making any required deposit into the Collection Account or substitution of an
Eligible Substitute Mortgage Loan, as the case may be, the Sponsor shall be
entitled to receive an instrument of assignment or transfer from the Trustee to
the same extent as set forth in Section 2.02 with respect to the transfer of
Mortgage Loans under that Section.
It is understood and agreed that the obligation of the Sponsor to so
accept a transfer of a Mortgage Loan as to which such a breach has occurred and
is continuing and to so make any required deposit in the Collection Account or
to substitute an Eligible Substitute Mortgage Loan, as the case may be, shall
constitute the sole remedy available to Investor Certificate- holders, the
Trustee on behalf of Investor Certificateholders [and the Credit Enhancer]
against the Sponsor respecting any breach of representations and
warranties in respect of the Mortgage Loans[; provided that the Sponsor shall
defend and indemnify the Trustee[, the Credit Enhancer] and the Investor
Certificateholders against all reasonable costs and expenses, and all losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and the amount of any settlement entered into with the consent of
the Sponsor (such consent not to be unreasonably withheld), which may
be asserted against or incurred by any of them as a result of any third-party
action arising out of any breach of any such representation and warranty.]
Section 2.05. Covenants of the Depositor. The Depositor
hereby covenants that:
(a) Security Interests. Except for the transfer hereunder, the
Depositor will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Mortgage Loan,
whether now existing or hereafter created, or any interest therein; the
Depositor will notify the Trustee of the existence of any Lien on any Mortgage
Loan immediately upon discovery thereof; and the Depositor will defend the
right, title and interest of the Trust in, to and under the Mortgage Loans,
whether now existing or hereafter created, against all claims of third parties
claiming through or under the Depositor; provided that nothing in this Section
2.05(a) shall prevent or be deemed to prohibit the Depositor from suffering to
exist upon any of the Mortgage Loans any Liens for municipal or other local
taxes and other governmental charges if such taxes or governmental charges shall
not at the time be due and payable or if the Depositor shall currently be
contesting the validity thereof in good faith by appropriate proceedings and
shall have set aside on its books adequate reserves with respect thereto.
(b) Negative Pledge. The Depositor hereby agrees not to transfer,
assign, exchange, pledge, finance, hypothecate, grant a security interest in or
otherwise convey the Transferor Certificates except in accordance with Sections
6.05 and 7.02.
(c) Additional Indebtedness. So long as the Investor Certificates are
outstanding the Depositor will not incur any debt other than debt that (i) is
non-recourse to the assets of the Depositor other than the Mortgage Loans
specifically pledged as security for such debt, or (ii) is subordinated in right
of payment to the rights of the Investor Certificateholders or (iii) is assigned
a rating by each of the Rating Agencies that is the same as the then current
rating of the Investor Certificates.
(d) Downgrading. The Depositor will not engage in any activity which
would result in a downgrading of the Investor Certificates.
(e) Amendment to Certificate of Incorporation. The Depositor will not
amend its Certificate of Incorporation without prior written notice to the
Rating Agencies and the Credit Enhancer.
(f) Principal Place of Business. The Depositor's principal place of
business is in California and it will not change its principal place of business
without prior written notice to the Rating Agencies.
Section 2.06. Transfers of Mortgage Loans at Election of Transferor.
Subject to the conditions set forth below, the Transferor may, but shall not be
obligated to, require the transfer of Mortgage Loans from the Trust to the
Transferor as of the close of business on a Distribution Date (the "Transfer
Date"). On the fifth Business Day (the "Transfer Notice Date") prior to the
Transfer Date designated in such notice, the Trans- feror shall give the Trustee
and the Master Servicer a notice of the proposed transfer that contains a list
of the Mortgage Loans to be transferred. Such transfers of Mortgage Loans shall
be permitted upon satisfaction of the following conditions:
(i) No Rapid Amortization Event has occurred;
(ii) On the Transfer Notice Date the Transferor
Principal Balance (after giving effect to the removal from the Trust of
the Mortgage Loans proposed to be transferred) exceeds the Minimum
Transferor Interest;
(iii) The transfer of any Mortgage Loans on any Transfer
Date during the Managed Amortization Period shall not, in the
reasonable belief of the Transferor, cause a Rapid Amortization Event
to occur or an event which with notice or lapse of time or both would
constitute a Rapid
Amortization Event;
(iv) On or before the Transfer Date, the Transferor
shall have delivered to the Trustee a revised Mortgage Loan Schedule,
reflecting the proposed transfer and the Transfer Date, and the Master
Servicer shall have marked the Electronic Ledger to show that the
Mortgages Loans transferred to the Transferor are no longer owned by
the Trust;
(v) The Transferor shall represent and warrant that no
selection procedures reasonably believed by the Trans- feror to be
adverse to the interests of the Investor Certif- icateholders [or the
Credit Enhancer] were utilized in selecting the Mortgage Loans to be
removed from the Trust;
(vi) In connection with the first transfer of Mortgage
Loans pursuant to this Section, each Rating Agency [and the Credit
Enhancer] shall have received on or prior to the related Transfer
Notice Date notice of such proposed transfer of Mortgage Loans and,
prior to the Transfer Date, shall have notified the Trustee [and
the Credit Enhancer] in writing that such transfer of Mortgage Loans
would not result in a reduction or withdrawal of its then current
rating of the Investor Certificates without regard to the Policy;
(vii) The Transferor shall have delivered to the Trustee
[and the Credit Enhancer] an Officer's Certificate certifying that the
items set forth in subparagraphs (i) through (vi), inclusive, have been
performed or are true and correct, as the case may be. The Trustee may
conclusively rely on such Officer's Certificate, shall have no duty to
make inquiries with regard to the matters set forth therein and shall
incur no liability in so relying.
Upon receiving the requisite information from the Transferor, the Master
Servicer shall perform in a timely manner those acts required of it, as
specified above. Upon satisfaction of the above conditions, on the Transfer Date
the Trustee shall deliver, or cause to be delivered, to the Transferor the
Mortgage File for each Mortgage Loan being so transferred, and the Trustee shall
execute and deliver to the Transferor such other documents prepared by the
Transferor as shall be reasonably necessary to transfer such Mortgage Loans to
the Transferor. Any such transfer of the Trust's right, title and interest in
and to Mortgage Loans shall be without recourse, representation or warranty by
or of the Trustee or the Trust to the Transferor.
Section 2.07. Execution and Authentication of Certificates. The
Trustee, on behalf of the Trust, has caused to be executed, authenticated and
delivered to or upon the order of the Depositor, in exchange for the Trust,
concurrently with the sale, assignment and conveyance to the Trustee of the
Trust, Investor Certificates in authorized denominations and the Transferor
Certificates, together evidencing the ownership of the entire Trust.
Section 2.08. Tax Treatment. It is the intention of the Depositor, the
Transferor and the Investor Certificateholders that the Investor Certificates
will be indebtedness of the Trans- feror for federal, state and local income and
franchise tax purposes and for purposes of any other tax imposed on or measured
by income. The Transferor, the Depositor, the Trustee and each Investor
Certificateholder (or Certificate Owner) by acceptance of its Investor
Certificate (or, in the case of a Certificate Owner, by virtue of such
Certificate Owner's acquisition of a beneficial interest therein) agrees to
treat the Investor Certificates (or beneficial interest therein), for purposes
of federal, state and local income or franchise taxes and any other tax imposed
on or measured by income, as indebtedness of the Trans- feror secured by the
assets of the Trust and to report the transactions contemplated by this
Agreement on all applicable tax returns in a manner consistent with
such treatment. Each Investor Certificateholder agrees that it will cause
any Certificate Owner acquiring an interest in an Investor Certificate through
it to comply with this Agreement as to treatment of the Investor Certificates as
indebtedness for federal, state and local income and franchise tax purposes
and for purposes of any other tax imposed on or measured by income. The
Trustee will prepare and file all tax reports required hereunder.
Section 2.09. Representations and Warranties of the Depositor. The
Depositor represents and warrants to the Trustee on behalf of the
Certificateholders [and the Credit Enhancer] as follows:
(i) This Agreement constitutes a legal, valid and
binding obligation of the Depositor, enforceable against the Depositor
in accordance with its terms, except as enforce- ability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement
of creditors' rights in general and except as such enforceability may
be limited by general principles of equity (whether considered in a
proceeding at law or in equity);
(ii) Immediately prior to the sale and assignment by the
Depositor to the Trustee of each Mortgage Loan, the Depositor was the
sole beneficial owner of each Mortgage Loan (insofar as such title was
conveyed to it by the Sponsor) subject to no prior lien, claim,
participation interest, mortgage, security interest, pledge, charge or
other encumbrance or other interest of any nature;
(iii) As of the Closing Date, the Depositor has
transferred all right, title and interest in the Mortgage Loans to the
Trustee; and
(iv) The Depositor has not transferred the Mortgage
Loans to the Trustee with any intent to hinder, delay or defraud any of
its creditors.
ARTICLE III
Administration and Servicing
of Mortgage Loans
Section 3.01. The Master Servicer. (a) The Master Servicer shall
service and administer the Mortgage Loans in a manner consistent with the terms
of this Agreement and the Servicing Standard and shall have full power and
authority, acting alone or through a subservicer, to do any and all things in
connection with such servicing and administration which it may deem necessary or
desirable, it being understood, however, that the Master Servicer shall at all
times remain responsible to the Trustee and the Certificateholders [and the
Credit Enhancer] for the performance of its duties and obligations hereunder in
accordance with the terms hereof. Any amounts received by any subservicer in
respect of a Mortgage Loan shall be deemed to have been received by the Master
Servicer whether or not actually received by it. Without limiting the generality
of the foregoing, the Master Servicer shall continue, and is hereby authorized
and empowered by the Trustee, to execute and deliver, on behalf of itself, the
Certificateholders and the Trustee, or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, with respect to the Mortgage Loans and with
respect to the Mortgaged Properties. The Trustee shall, upon the written request
of a Servicing Officer, furnish the Master Servicer with any powers of attorney
and other documents necessary or appropriate to enable the Master Servicer to
carry out its servicing and administrative duties hereunder. The Master Servicer
in such capacity may also consent to the placing of a lien senior to that of any
Mortgage on the related Mortgaged Property, provided that (i) the new senior
lien secures a mortgage loan that refinances an existing first mortgage loan and
(ii) the Loan-to-Value Ratio of the new mortgage loan (without taking into
account any closing costs that may be financed by such new mortgage loan) is
equal to or less than the Loan-to- Value Ratio of the first mortgage loan to be
replaced measured as of the Cut-off Date; provided that the aggregate Asset
Balance of such Mortgage Loans with respect to which the senior lien may be so
modified shall not exceed 10% of the Cut-off Date Pool Balance (such 10% herein
referred to as the "Increased Senior Lien Limitation").
[The Master Servicer may also, without prior approval from the Rating
Agencies [or the Credit Enhancer], increase the Credit Limits on Mortgage Loans
provided that (i) new appraisals are obtained and the Combined Loan-to-Value
Ratios of the Mortgage Loans after giving effect to such increase are less than
or equal to the Combined Loan-to-Value Ratios or the Mortgage Loans as of the
Cut-off Date and (ii) such increases are consistent with the Master Servicer's
underwriting policies. In addition, the Master Servicer may (i) increase the
Credit Limits on Mortgage Loans having aggregate Asset Balances of up to
[___]% of the Cut-off Date Pool Balance, provided that (x) the increase in
the Credit Limit of a Mortgage Loan does not cause the Combined Loan-to- Value
Ratio of such Mortgage Loan to exceed [__]%, (y) the increase in the Credit
Limit of a Mortgage Loan does not cause the Combined Loan-to-Value Ratio of
such Mortgage Loan to increase by more than [__]% (for example, a Combined
Loan-to- Value Ratio of [__]% can be increased to [__]%, a Combined Loan-to-
Value Ratio of [__]% can be increased to [__]%, and so forth) and (z) the
increase is consistent with the Master Servicer's underwriting
policies and (ii) increase the Credit Limits on the Mortgage Loans having
aggregate Asset Balances of up to an additional [__]% of the Cut-off Date Pool
Balance, provided that (x) the increase in the Credit Limit of a Mortgage Loan
does not cause the Combined Loan-to-Value Ratio of such Mortgage Loan to exceed
[__]%, (y) the increase in the Credit Limit of a Mortgage Loan does not cause
the Combined Loan-to-Value Ratio of such Mortgage Loan to increase by more than
[__]% (for example, a Combined Loan-to-Value Ratio of [__]% can be increased to
[__]%, a Combined Loan-to-Value Ratio of [__]% can be increased to [__]%, and so
forth) and (z) the increase is consistent with the Master Servicer's
underwriting policies.]
[Furthermore, the Master Servicer may, without prior approval from the
Rating Agencies [and the Credit Enhancer] solicit Mortgagors for a reduction in
Loan Rates; provided that the Master Servicer can only reduce such Loan Rates on
up to 10% of the Mortgage Loans by Cut-off Date Pool Balance. Any such
solicitations shall not result in a reduction in the weighted average Gross
Margin of the Mortgage Loans in the pool by more than [__] basis points taking
into account any such prior reductions.]
In addition, the Master Servicer may agree to changes in the terms of a
Mortgage Loan at the request of the Mortgagor provided that such changes (i) do
not materially and adversely affect the interests of Certificateholders [or the
Credit Enhancer] and (ii) are consistent with prudent and customary business
practice as evidenced by a certificate signed by a Servicing Officer delivered
to the Trustee and the Credit Enhancer.
[In addition to the foregoing, the Master Servicer may solicit
Mortgagors to change any other terms of the related Mortgage Loans, provided
that such changes (i) do not materially and adversely affect the interest of
Certificateholders [or the Credit Enhancer] and (ii) are consistent with the
Servicing Standard. Nothing herein shall limit the right of the Master Servicer
to solicit Mortgagors with respect to new loans (including mortgage loans) that
are not Mortgage Loans.]
The relationship of the Master Servicer (and of any successor to the
Master Servicer as master servicer under this Agreement) to the Trustee under
this Agreement is intended by the parties to be that of an independent
contractor and not that of a joint venturer, partner or agent.
(b) In the event that the rights, duties and obligations of the Master
Servicer are terminated hereunder, any successor to the Master Servicer in its
sole discretion may, to the extent permitted by applicable law, terminate the
existing subservicer arrangements with any subservicer or assume the terminated
Master Servicer's rights under such subservicing arrangements which termination
or assumption will not violate the terms of such arrangements.
Section 3.02. Collection of Certain Mortgage Loan Payments. (a) In
accordance with and to the extent of the Servicing Standard, the Master Servicer
shall make reasonable efforts in accordance with the customary and usual
standards of practice of prudent mortgage servicers to collect all payments
called for under the terms and provisions of the Mortgage Loans to the extent
such procedures shall be consistent with this Agreement. Consistent with the
foregoing, and without limiting the generality of the foregoing, the Master
Servicer may in its discretion (i) waive any late payment charge or any
assumption fees or other fees which may be collected in the ordinary course of
servicing such Mortgage Loan and (ii) arrange with a Mortgagor a schedule for
the payment of interest due and unpaid; provided that such arrangement is
consistent with the Master Servicer's policies with respect to the mortgage
loans it owns or services; provided further that notwithstanding such
arrangement such Mortgage Loans will be included in the information regarding
delinquent Mortgage Loans set forth in the Servicing Certificate and monthly
statement to Certificateholders pursuant to Section 5.03.
(b) The Master Servicer shall establish and maintain a trust account
(the "Collection Account") titled "___________ ______________________, as
Trustee, in trust for the registered holders of Home Equity Loan Asset Backed
Certificates, Series 199_-_." The Collection Account shall be an Eligible
Account. The Master Servicer shall [(i) on the Business Day immediately
preceding each of the first three Distribution Dates, deposit in the Collection
Account any shortfall in the amount required to pay the Investor Certificate
Interest on such Distribution Dates resulting solely from the failure of certain
Mortgage Loans to be fully indexed and (ii) on the Business Day immediately
preceding the first Distribution Date, deposit in the Collection Account any
amounts representing payments on, and any collections in respect of, the
Mortgage Loans received after the Cut-off Date and prior to the Closing Date
(exclusive of payments in respect of accrued interest due on or prior to the
Cut-off Date), and thereafter the Master Servicer, or the Sponsor, as the case
may be, shall] deposit within two Business Days following receipt thereof the
following payments and collections received or made by it (without duplication):
(i) all collections on and in respect of the Mort-
gage Loans;
(ii) the amounts, if any, deposited to the Collection
Account pursuant to Section 4.05;
(iii) Net Liquidation Proceeds net of any related
Foreclosure Profit;
(iv) Insurance Proceeds (including, for this purpose,
any amount required to be credited by the Master Servicer pursuant to
the last sentence of Section 3.04 and excluding the portion thereof, if
any, that has been applied to the restoration or repair of the related
Mortgaged Property or released to the related Mortgagor in accordance
with the normal servicing procedures of the Master Servicer); and
(v) any amounts required to be deposited therein
pursuant to Section 10.01;
provided that with respect to each Collection Period, the Master Servicer shall
be permitted to retain from payments in respect of interest on the Mortgage
Loans, the Servicing Fee for such Collection Period and the amount of any
unreimbursed optional advance made by the Master Servicer pursuant to Section
4.05; provided further that, notwithstanding the foregoing, so long as
___________ is the Master Servicer [and (x) the Master Servicer's long-term
unsecured debt obligations are rated at least "[__]" by Moody's and "[___]" by
Standard & Poor's and (y) the Credit Enhancer's claims-paying ability is rated
"[___]" by Moody's and "[___]" by Standard & Poor's,] the Master Servicer need
not make daily deposits in the Collection Account for any Collection Period, but
instead may make a single deposit in the Collection Account of amounts to be
remitted by it for such Collection Period in immediately available funds on the
Business Day prior to the related Distribution Date. The foregoing requirements
respecting deposits to the Collection Account are exclusive, it being understood
that, without limiting the generality of the foregoing, the Master Servicer need
not deposit in the Collection Account amounts representing Foreclosure Profits,
fees (including annual fees) or late charge penalties payable by Mortgagors, or
amounts received by the Master Servicer for the accounts of Mortgagors for
application towards the payment of taxes, insurance premiums, assessments,
excess pay off amounts and similar items. The Master Servicer shall remit all
Foreclosure Profits to the Sponsor.
The Trustee shall hold amounts deposited in the Collection Account as
trustee for the Certificateholders [and for the Credit Enhancer]. In addition,
the Master Servicer shall notify the Trustee [and the Credit Enhancer] in
writing on each Determination Date of the amount of payments and collections in
the Collection Account allocable to Interest Collections and Principal
Collections for the related Distribution Date. Following such notification,
the Master Servicer shall be entitled to withdraw from the Collection
Account and retain any amounts that constitute income and gain realized
from the investment of such payments and collections.
Amounts on deposit in the Collection Account will, at the direction of
the Master Servicer, be invested in Eligible Investments maturing no later than
the day before the next Distribution Date. All income and gain realized from any
investment in Eligible Investments of funds in the Collection Account shall be
for the benefit of the Master Servicer and shall be subject to its withdrawal
from time to time. The amount of any losses incurred in respect of the principal
amount of any such investments shall be deposited in the Collection Account by
the Master Servicer out of its own funds immediately as realized.
Section 3.03. Withdrawals from the Collection Account.
From time to time, withdrawals may be made from the Collection
Account by the Master Servicer for the following purposes:
(i) To the Master Servicer as payment for its
Servicing Fee pursuant to Section 3.08;
(ii) To pay to the Master Servicer amounts on deposit in the
Collection Account that are not to be included in the distributions and
payments pursuant to Section 5.01 to the extent provided by the second
to the last and the last paragraph of Section 3.02(b); and
(iii) To make or to permit the Paying Agent to make distributions
and payments pursuant to Section 5.01;
provided that, if the Master Servicer makes monthly deposits in the Collection
Account pursuant to the second proviso of Section 3.02(b), in lieu of making the
foregoing withdrawals (except in the case of clause (iii)), the Master Servicer
may make a net deposit in the Collection Account pursuant to Section 3.02(b).
If the Master Servicer deposits in the Collection Account any amount
not required to be deposited therein or any amount in respect of payments by
Mortgagors made by checks subsequently returned for insufficient funds or other
reason for non-payment it may at any time withdraw such amount from the
Collection Account, and any such amounts shall not be included in the amounts to
be deposited in the Collection Account pursuant to Section 3.02(b), any
provision herein to the contrary notwithstanding.
Section 3.04. Maintenance of Hazard Insurance; Property
Protection Expenses. The Master Servicer shall cause to be
maintained for each Mortgage Loan hazard insurance naming the
Master Servicer or the related subservicer as loss payee thereunder
providing extended coverage in an amount which is at least equal to
the lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan from time to time or (ii) the combined principal balance owing on
such Mortgage Loan and any mortgage loan senior to such Mortgage Loan from time
to time. The Master Servicer shall also maintain on property acquired upon
foreclosure, or by deed in lieu of foreclosure, hazard insurance with extended
coverage in an amount which is at least equal to the lesser of (i) the maximum
insurable value from time to time of the improvements which are a part of such
property or (ii) the combined principal balance owing on such Mortgage Loan and
any mortgage loan senior to such Mortgage Loan at the time of such foreclosure
or deed in lieu of foreclosure plus accrued interest and the good-faith estimate
of the Master Servicer of related Liquidation Expenses to be incurred in
connection therewith. Amounts collected by the Master Servicer under any such
policies shall be deposited in the Collection Account to the extent called for
by Section 3.02. In cases in which any Mortgaged Property is located in a
federally designated flood area, the hazard insurance to be maintained for the
related Mortgage Loan shall include flood insurance. All such flood insurance
shall be in such amounts as are required under applicable guidelines of the
Federal Flood Emergency Act. The Master Servicer shall be under no obligation to
require that any Mortgagor maintain earthquake or other additional insurance and
shall be under no obligation itself to maintain any such additional insurance on
property acquired in respect of a Mortgage Loan, other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. If the Master Servicer shall obtain and
maintain a blanket policy consistent with prudent industry standards insuring
against hazard losses on all of the Mortgage Loans in an aggregate amount
prudent under industry standards, it shall conclusively be deemed to have
satisfied its obligations as set forth in the first sentence of this Section
3.04, it being understood and agreed that such policy may contain a deductible
clause on terms substantially equivalent to those commercially available and
maintained by comparable servicers. If such policy contains a deductible clause,
the Master Servicer shall, in the event that there shall not have been
maintained on the related Mortgaged Property a policy complying with the first
sentence of this Section, and there shall have been a loss which would have been
covered by such policy, deposit in the Collection Account the amount not
otherwise payable under the blanket policy because of such deductible clause.
Section 3.05. Assumption and Modification Agreements. In any case in
which a Mortgaged Property has been or is about to be conveyed by the Mortgagor,
the Master Servicer shall exercise its right to accelerate the maturity of such
Mortgage Loan consistent with the then current practice of the Master Servicer
and without regard to the inclusion of such Mortgage Loan in the Trust. If it
elects not to enforce its right to accelerate or if it is prevented from doing
so by applicable law, the Master Servicer (so long as such action conforms
with the underwriting standards generally acceptable in the industry at
the time for new origination) is authorized to take or enter into an assumption
and modification agreement from or with the Person to whom such Mortgaged
Property has been or is about to be conveyed, pursuant to which such Person
becomes liable under the Credit Line Agreement and, to the extent permitted
by applicable law, the Mortgagor remains liable thereon. The Master
Servicer shall notify the Trustee that any assumption and modification agreement
has been completed by delivering to the Trustee an Officer's Certificate
certifying that such agreement is in compliance with this Section 3.05 and by
forwarding to the applicable Custodian, as agent for the Trustee, the original
copy of such assumption and modification agreement. Any such assumption and
modification agreement shall, for all purposes, be considered a part of the
related Mortgage File to the same extent as all other documents and instruments
constituting a part thereof. No change in the terms of the related Credit Line
Agreement may be made by the Master Servicer in connection with any such
assumption to the extent that such change would not be permitted to be made in
respect of the original Credit Line Agreement pursuant to the fourth paragraph
of Section 3.01(a). Any fee collected by the Master Servicer for entering into
any such agreement will be retained by the Master Servicer as additional
servicing compensation.
Section 3.06. Realization Upon Defaulted Mortgage Loans; Repurchase of
Certain Mortgage Loans. The Master Servicer shall use reasonable efforts in
accordance with the Servicing Standard to foreclose upon or otherwise comparably
convert to ownership Mortgaged 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 3.02. The
foregoing is subject to the proviso that the Master Servicer shall not be
required to expend its own funds in connection with any foreclosure or towards
the correction of any default on a related senior mortgage loan or restoration
of any property unless it shall determine that such expenditure will increase
Net Liquidation Proceeds.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be issued to the Trustee, or to its nominee on behalf of
Certificateholders.
The Master Servicer, in its sole discretion, shall have the right to
purchase for its own account from the Trust any Mortgage Loan which is 91 days
or more delinquent at a price equal to the purchase price described below. The
price for any Mortgage Loan purchased hereunder (which shall be an amount equal
to 100% of the Asset Balance of such Mortgage Loan plus accrued interest thereon
at the applicable Loan Rate from the date through which interest was last paid
by the related Mortgagor through the Due Date occurring in the calendar
month immediately following the calendar month in which such repurchase
occurs (provided that such purchase price shall be reduced by any
unreimbursed Servicing Advances with respect to such Mortgage Loan and the Loan
Rate used to determine the accrued interest to be paid by the Master Servicer
shall be computed at the Net Loan Rate) shall be deposited in the Collection
Account and the Trustee, upon receipt of a certificate from the Master Servicer
in the form of Exhibit G hereto, shall release or cause to be released to the
Master Servicer the related Mortgage File and shall execute and deliver such
instruments of transfer or assignment prepared by the Master Servicer, in each
case without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the Master Servicer
shall succeed to all the Trustee's right, title and interest in and to such
Mortgage Loan and all security and documents related thereto. Such assignment
shall be an assignment outright and not for security. The Master Servicer shall
thereupon own such Mortgage Loan, and all security and documents, free of any
further obligation to the Trustee[, the Credit Enhancer] or the
Certificateholders with respect thereto.
Section 3.07. Trustee to Cooperate. On or before each Distribution
Date, the Master Servicer will notify the Trustee of the payment in full of the
Asset Balance of any Mortgage Loan during the preceding Collection Period, which
notification shall be by a certification (which certification shall include a
statement to the effect that all amounts received in connection with such
payment which are required to be deposited in the Collection Account pursuant to
Section 3.02 have been so deposited or credited) of a Servicing Officer. Upon
any such payment in full, the Master Servicer is authorized to execute, pursuant
to the authorization contained in Section 3.01, if the assignments of Mortgage
have been recorded as required hereunder, an instrument of satisfaction
regarding the related Mortgage, which instrument of satisfaction shall be
recorded by the Master Servicer if required by applicable law and be delivered
to the Person entitled thereto. It is understood and agreed that no expenses
incurred in connection with such instrument of satisfaction or transfer shall be
reimbursed from amounts deposited in the Collection Account. If the Trustee is
holding the Mortgage Files, from time to time and as appropriate for the
servicing or foreclosure of any Mortgage Loan, or in connection with the payment
in full of the Asset Balance of any Mortgage Loan, the Trustee shall, upon
request of the Master Servicer and delivery to the Trustee of a Request for
Release substantially in the form attached hereto as Exhibit G signed by a
Servicing Officer, release the related Mortgage File to the Master Servicer and
the Trustee shall execute such documents, in the forms provided by the Master
Servicer, as shall be necessary to the prosecution of any such proceedings or
the taking of other servicing actions. Such trust receipt shall obligate the
Master Servicer to return the Mortgage File to the Trustee when the need
therefor by the Master Servicer no longer exists, unless the Mortgage
Loan shall be liquidated, in which case, upon receipt of a certificate of
a Servicing Officer similar to that hereinabove specified, the trust
receipt shall be released by the Trustee or such Custodian to the Master
Servicer.
In order to facilitate the foreclosure of the Mortgage securing any
Mortgage Loan that is in default following recorda- tion of the assignments of
Mortgage in accordance with the provisions hereof, the Trustee shall, if so
requested in writing by the Master Servicer, execute an appropriate assignment
in the form provided to the Trustee by the Master Servicer to assign such
Mortgage Loan for the purpose of collection to the Master Servicer or to the
related subservicer (any such assignment shall unambiguously indicate that the
assignment is for the purpose of collection only), and, upon such assignment,
the Master Servicer will thereupon bring all required actions in its own name
and otherwise enforce the terms of the Mortgage Loan and deposit the Net
Liquidation Proceeds, exclusive of Foreclosure Profits, received with respect
thereto in the Collection Account. In the event that all delinquent payments due
under any such Mortgage Loan are paid by the Mortgagor and any other defaults
are cured, then the Master Servicer shall promptly reassign such Mortgage Loan
to the Trustee and return the related Mortgage File to the place where it was
being maintained.
Section 3.08. Servicing Compensation; Payment of Certain Expenses by
Master Servicer. The Master Servicer shall be entitled to receive the Servicing
Fee pursuant to Section 3.03 as compensation for its services in connection with
servicing the Mortgage Loans. Moreover, additional servicing compensation in the
form of late payment charges or other receipts not required to be deposited in
the Collection Account (other than Foreclosure Profits) shall be retained by the
Master Servicer. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its activities hereunder (including payment of
all other fees and expenses not expressly stated hereunder to be for the account
of the Certificateholders) and shall not be entitled to reimbursement therefor
except as specifically provided herein. Liquidation Expenses are reimbursable to
the Master Servicer first, from related Liquidation Proceeds and second, from
the Collection Account pursuant to Section 5.01(a)(ix). [reimbursement for out
of pocket expenses]
Section 3.09. Annual Statement as to Compliance. (a) The Master
Servicer will deliver to the Trustee[, the Credit Enhancer] and the Rating
Agencies, on or before __________ of each year, beginning ___________, 199_, an
Officer's Certificate, signed by one officer of the Master Servicer, stating
that (i) a review of the activities of the Master Servicer during the preceding
fiscal year (or such shorter period as is applicable in the case of the first
report) and of its performance under this Agreement has been made under such
officer's supervision and (ii) to the best of such officer's knowledge, based
on such review, the Master Servicer has fulfilled all of its material
obligations under this Agreement throughout such fiscal year, or, if there
has been a default in the fulfillment of any such obligation, specifying
each such default known to such officer and the nature and status thereof.
(b) The Master Servicer shall deliver to the Trustee[, the Credit
Enhancer] and each of the Rating Agencies, promptly after having obtained
knowledge thereof, but in no event later than five Business Days thereafter,
written notice by means of an Officer's Certificate of any event which with the
giving of notice or the lapse of time or both, would become an Event of
Servicing Termination.
Section 3.10. Annual Servicing Report. On or before __________ of each
year, beginning _________, 199_, the Master Servicer, at its expense, shall
cause a firm of nationally recognized independent public accountants (who may
also render other services to the Master Servicer) to furnish a report to [the
Trustee, the Credit Enhancer and] each Rating Agency to the effect that such
firm has examined certain documents and records relating to the servicing of
mortgage loans during the most recent fiscal year then ended under pooling and
servicing agreements (substantially similar to this Agreement, including this
Agreement) that such examination, was conducted substantially in compliance with
the audit guide for audits of non-supervised mortgagees approved by the
Department of Housing and Urban Development for use by independent public
accountants (to the extent that the procedures in such audit guide are
applicable to the servicing obligations set forth in such agreements) and that
such examination has disclosed no items of noncompliance with the provisions of
this Agreement which, in the opinion of such firm, are material, except for such
items of noncompliance as shall be set forth in such report.
Section 3.11. Access to Certain Documentation and Information Regarding
the Mortgage Loans. (a) The Master Servicer shall provide to the Trustee, [the
Credit Enhancer], any Investor Certificateholders that are federally insured
savings and loan associations, the Office of Thrift Supervision, successor to
the Federal Home Loan Bank Board, the FDIC and the supervisory agents and
examiners of the Office of Thrift Supervision access to the documentation
regarding the Mortgage Loans required by applicable regulations of the Office of
Thrift Supervision and the FDIC (acting as operator of the SAIF or the BIF),
such access being afforded without charge but only upon reasonable request and
during normal business hours at the offices of the Master Servicer. Nothing in
this Section 3.11 shall derogate from the obligation of the Master Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Mortgagors and the failure of the Master Servicer to provide access as
provided in this Section 3.11 as a result of such obligation shall not
constitute a breach of this Section 3.11.
(b) The Master Servicer shall supply information in such form as the
Trustee shall reasonably request to the Trustee and the Paying Agent, on or
before the start of the Determination Date preceding the related Distribution
Date, as is required in the Trustee's reasonable judgment to enable the Paying
Agent or the Trustee, as the case may be, to make required distributions and to
furnish the required reports to Certificateholders and to make any claim under
the Policy.
Section 3.12. Maintenance of Certain Servicing Insurance Policies. The
Master Servicer shall during the term of its service as master servicer maintain
in force (i) a policy or policies of insurance covering errors and omissions in
the performance of its obligations as master servicer hereunder and (ii) a
fidelity bond in respect of its officers, employees or agents. Each such policy
or policies and bond together shall comply with the requirements from time to
time of the Federal National Mortgage Association for persons performing
servicing for mortgage loans purchased by such Association.
Section 3.13. Reports to the Securities and Exchange Commission. The
Trustee shall, on behalf of the Trust, cause to be filed with the Securities and
Exchange Commission any periodic reports required to be filed under the
provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder. Upon the
request of the Trustee, each of the Sponsor, the Master Servicer, the Depositor
and the Transferor shall cooperate with the Trustee in the preparation of any
such report and shall provide to the Trustee in a timely manner all such
information or documentation as the Trustee may reasonably request in connection
with the performance of its duties and obligations under this Section.
Section 3.14. Tax Returns. In accordance with Section 2.08 hereof, the
Trustee shall prepare and file any federal, state or local income and franchise
tax return for the Trust as well as any other applicable return and apply for a
taxpayer identification number on behalf of the Trust. The Transferor shall
treat the Mortgage Loans as its property for all federal, state or local tax
purposes and shall report all income earned thereon (including amounts payable
as fees to the Master Servicer) as its income for income tax purposes. In the
event the Trust shall be required pursuant to an audit or administrative
proceeding or change in applicable regulations to file federal, state or local
tax returns, the Trustee shall prepare and file or shall cause to be prepared
and filed any tax returns required to be filed by the Trust; the Trustee shall
promptly sign such returns and deliver such returns after signature to the
Master Servicer and such returns shall be filed by the Master Servicer. The
Trustee shall also prepare or shall cause to be prepared all tax information
required by law to be distributed to Investor Certificateholders. In no event
shall the Trustee or the Master Servicer be liable for any liabilities,
costs or expenses of the Trust, the Investor Certificateholders, the Transferor
Certificateholders or the Certificate Owners arising under any tax law,
including without limitation federal, state or local income and franchise
or excise taxes or any other tax imposed on or measured by income (or any
interest or penalty with respect thereto or arising from a failure to
comply therewith).
Section 3.15. Information Required by the Internal Revenue Service
Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.
The Master Servicer shall prepare and deliver all federal and state information
reports when and as required by all applicable state and federal income tax
laws. In particular, with respect to the requirement under Section 6050J of the
Code to the effect that the Master Servicer shall make reports of foreclosures
and abandonments of any mortgaged property for each year beginning in 199_, the
Master Servicer shall file reports relating to each instance occurring during
the previous calendar year in which the Master Servicer (i) on behalf of the
Trustee acquires an interest in any Mortgaged Property through foreclosure or
other comparable conversion in full or partial satisfaction of a Mortgage Loan,
or (ii) knows or has reason to know that any Mortgaged Property has been
abandoned. The reports from the Master Servicer shall be in form and substance
sufficient to meet the reporting requirements imposed by Section 6050J.
ARTICLE IV
Servicing Certificate
Section 4.01. Servicing Certificate. Not later than each Determination
Date, the Master Servicer shall deliver (a) to the Trustee, the Statement to
Certificateholders required to be prepared pursuant to Section 5.03 and (b) to
the Trustee, the Sponsor, the Depositor, the Paying Agent, [the Credit Enhancer]
and each Rating Agency a Servicing Certificate (in written form or the form of
computer readable media or such other form as may be agreed to by the Trustee
and the Master Servicer), together with an Officer's Certificate to the effect
that such Servicing Certificate is true and correct in all material respects,
stating the related Collection Period, Distribution Date, the series number of
the Certificates, the date of this Agreement, and:
(i) the aggregate amount of collections received on the
Mortgage Loans on or prior to the Determination Date in respect of such
Collection Period;
(ii) the aggregate amount of (a) Interest Collections
and (b) Principal Collections for such Collection Period;
(iii) the Investor Floating Allocation Percentage and
the Investor Fixed Allocation Percentage for such Collection
Period;
(iv) the Investor Interest Collections and Investor
Principal Collections for such Collection Period;
(v) the Transferor Interest Collections and Trans-
feror Principal Collections for such Collection Period;
(vi) Investor Certificate Interest and the Investor
Certificate Rate for the related Interest Period;
(vii) the amount, if any, of such Investor Certificate
Interest that is not payable on account of insufficient Investor
Interest Collections;
(viii) the portion of the Unpaid Investor Certificate
Interest Shortfall, if any, the amount of interest on such shortfall at
the Certificate Rate applicable from time to time (separately stated)
to be distributed on such Distribution Date;
(ix) the Unpaid Investor Certificate Interest Shortfall,
if any, to remain after the distribution on such Distribution Date;
(x) the Accelerated Principal Distribution Amount and
the portion thereof that will be distributed pursuant to Section
5.01(a)(vii);
(xi) the Scheduled Principal Collections Distribution
Amount, separately stating the components thereof;
(xii) the amount of any Transfer Deposit Amount paid by
the Sponsor or the Depositor pursuant to Section 2.02 or 2.04;
(xiii) any accrued and unpaid Servicing Fees for previous
Collection Periods and the Servicing Fee for such Collection Period;
(xiv) the Investor Loss Amount for such Collection
Period;
(xv) the aggregate amount, if any, of Investor Loss
Reduction Amounts for previous Distribution Dates that have not been
previously reimbursed to Investor Certificate- holders pursuant to
Section 5.01(a)(v);
(xvi) the aggregate Asset Balance of the Mortgage Loans
as of the end of the preceding Collection Period and as of the end of
the second preceding Collection Period;
(xvii) the Pool Balance as of the end of the preceding
Collection Period and as of the end of the second preceding
Collection Period;
(xviii) the Invested Amount as of the end of the preced-
ing Collection Period;
(xix) the Investor Certificate Principal Balance and Pool
Factor after giving effect to the distribution on such Distribution
Date and to any reduction on account of the Investor Loss Amount;
(xx) the Transferor Principal Balance and the Available
Transferor Subordinated Amount after giving effect to the distribution
on such Distribution Date;
(xxi) the aggregate amount of Additional Balances created
during the previous Collection Period;
(xxii) the number and aggregate Asset Balances of Mortgage
Loans (x) as to which the Minimum Monthly Payment is delinquent for
30-59 days, 60-89 days and 90 or more days, respectively and (y) that
have become REO, in each case as of the end of the preceding Collection
Period;
(xxiii) whether a Rapid Amortization Event has occurred
since the prior Determination Date, specifying each such Rapid
Amortization Event if one has occurred;
(xxiv) whether an Event of Servicing Termination has
occurred since the prior Determination Date, specifying each such Event
of Servicing Termination if one has occurred;
[ (xxv) the amount to be distributed to the Credit
Enhancer pursuant to Section 5.01(a)(vi) and Section
5.01(a)(viii)(ii), stated separately;]
(xxvi) the Guaranteed Principal Distribution Amount for
such Distribution Date;
(xxvii) the Credit Enhancement Draw Amount, if any, for
such Distribution Date;
(xxviii) the amount to be distributed to the Transferor
pursuant to Section 5.01(a)(x);
(xxix) the amount to be paid to the Master Servicer
pursuant to Section 5.01(a)(ix);
(xxx) the Maximum Rate for the related Collection
Period and the Weighted Average Net Loan Rate;
(xxxi) the expected amount of any optional advances
pursuant to Section 4.05 hereof by the Master Servicer included in the
distribution on such Distribution Date and the aggregate expected
amount of optional advances pursuant to Section 4.05 hereof by the
Master Servicer outstanding as of the close of business on such
Distribution Date;
(xxxii) the Overcollateralization Amount after giving
effect to the distribution to be made on such Distribution
Date;
(xxxiii) the number and principal balances of any Mortgage
Loans transferred to the Transferor pursuant to Section 2.06;
(xxxiv) the aggregate of all Liquidation Loss Amounts since
the Cut-off Date and whether a Cumulative Loss Test Violation has
occurred since the prior Determination Date; and
(xxxv) the Rolling Six Month Delinquency Rate for such
Distribution Date.
The Trustee shall conclusively rely upon the information contained in a
Servicing Certificate for purposes of making distributions pursuant to Section
5.01, shall have no duty to inquire into such information and shall have no
liability in so relying. The format and content of the Servicing Certificate
may be modified by the mutual agreement of the Master Servicer, the Trustee
and the Credit Enhancer. The Master Servicer shall give notice of any such
change to the Rating Agencies.
Section 4.02. Claims upon the Policy; Policy Payments
Account.
(a) If, by the close of business on the third Business Day prior to a
Distribution Date, the sum of the funds then on deposit in the Collection
Account for the related Collection Period which are payable to the Investor
Certificateholders pursuant to Sections 5.01(a) (excluding the amount, if any,
payable pursuant to clause (vii) thereof) and (b) (after giving effect to the
distribution of the Trustee Fee and the Premium) and the amount, if any,
deposited into the Collection Account pursuant to Section 4.05 are insufficient
to pay the Guaranteed Distribution on such Distribution Date, then the Trustee
shall give notice to the Credit Enhancer by telephone or telecopy of the amount
equal to the Credit Enhancement Draw Amount. Such notice of such sum shall be
confirmed in writing in the form of Notice for payment set forth as Exhibit A to
the Policy, to the Credit Enhancer at or before 10:00 a.m., New York City time,
on the second Business Day prior to such Distribution Date. Following receipt by
the Credit Enhancer of such notice in such form, the Credit Enhancer will pay
any amount payable under the Policy as set forth in such form on the later to
occur of (i) 12:00 noon, New York City time, on the second Business Day
following such receipt and (ii) 12:00 noon, New York City time, on the
Distribution Date to which such deficiency relates.
(b) The Trustee shall establish a separate special purpose trust
account, which account shall be an Eligible Account, for the benefit of Holders
of the Investor Certificates and the Credit Enhancer referred to herein as the
"Policy Payments Account" over which the Trustee shall have exclusive control
and sole right of withdrawal. The Trustee shall deposit any amount paid under
the Policy in the Policy Payments Account and distribute such amount only for
purposes of payment to Holders of the Investor Certificates of the Guaranteed
Distribution for which a claim was made and such amount may not be applied to
satisfy any costs, expenses or liabilities of the Master Servicer, the Trustee
or the Trust. Amounts paid under the Policy shall be transferred to the
Collection Account in accordance with the next succeeding paragraph and
disbursed by the Trustee to Holders of Investor Certificates in accordance with
Section 5.01. It shall not be necessary for such payments to be made by checks
or wire transfers separate from the checks or wire transfers used to pay the
Guaranteed Distribution with other funds available to make such payment.
However, the amount of any payment of principal of or interest on the Investor
Certificates to be paid from funds transferred from the Policy Payments
Account shall be noted as provided in paragraph (c) below in the Certificate
Register and in the statement to be furnished to Holders of the Investor
Certificates pursuant to Section 5.03. Funds held in the Policy Payments Account
shall not be invested.
On any Distribution Date with respect to which a claim has been made
under the Policy, the amount of any funds received by the Trustee as a result of
any claim under the Policy, to the extent required to make the Guaranteed
Distribution on such Distribution Date, shall be withdrawn from the Policy
Payments Account and deposited in the Collection Account and applied by the
Trustee, together with the other funds to be withdrawn from the Collection
Account pursuant to Section 5.01 directly to the payment in full of the
Guaranteed Distribution due on the Investor Certificates. Any funds received by
the Trustee shall be used solely for payment to the Holders of Investor
Certificates and may not be applied to satisfy any costs, expenses or
liabilities of the Master Servicer, the Trustee or the Trust. Any funds
remaining in the Policy Payments Account on the first Business Day following a
Distribution Date shall be remitted to the Credit Enhancer, pursuant to the
instructions of the Credit Enhancer, by the end of such Business Day.
[ (c) The Trustee shall keep a complete and accurate record of the amount of
interest and principal paid in respect of any Investor Certificate from moneys
received under the Policy. The Credit Enhancer shall have the right to inspect
such records at reasonable times during normal business hours upon one Business
Day's prior notice to the Trustee.]
(d) The Trustee shall promptly notify the Credit Enhancer of any
proceeding or the institution of any action, of which a Responsible Officer of
the Trustee has actual knowledge, seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership or similar law (a
"Preference Claim") of any distribution made with respect to the Investor
Certificates. Each Investor Certificateholder, by its purchase of Investor
Certificates, the Master Servicer and the Trustee hereby agree that, the Credit
Enhancer (so long as no Credit Enhancer Default exists) may at any time during
the continuation of any proceeding relating to a Preference Claim direct all
matters relating to such Preference Claim, including, without limitation, (i)
the direction of any appeal of any order relating to such Preference Claim and
(ii) the posting of any surety, supersedeas or performance bond pending any such
appeal. In addition and without limitation of the foregoing, the Credit Enhancer
shall be subrogated to the rights of the Master Servicer, the Trustee and each
Investor Certificateholder in the conduct of any such Preference Claim,
including, without limitation, all rights of any party to an adversary
proceeding action with respect to any court order issued in connection with any
such Preference Claim.
Section 4.03. Replacement Policy. In the event of a Credit Enhancer
Default or if the claims paying ability rating of the Credit Enhancer is
downgraded and such downgrade results in a downgrading of the then current
rating of the Investor Certificates (in each case, a "Replacement Event"), the
Depositor may, in accordance with and upon satisfaction of the conditions set
forth in the Policy, including, without limitation, payment in full of all
amounts owed to the Credit Enhancer, but shall not be required to, substitute a
new surety bond or surety bonds for the existing Policy, provided that in each
case the Investor Certificates shall be rated no lower than the rating assigned
by each Rating Agency to the Investor Certificates immediately prior to such
Replacement Event and that such new surety bond will qualify as a "similar
commercially available credit enhancement contract" within the meaning of Treas.
Reg. ss. 1.1001- 3(e)(4)(iv)(B). It shall be a condition to substitution of any
new credit enhancement that there be delivered to the Trustee a legal opinion,
acceptable in form and substance to the Trustee, from counsel to the provider of
such new credit enhancement with respect to the enforceability thereof and such
other matters as the Trustee may require. Upon receipt of the items referred to
above and the taking of physical possession of the new credit enhancement, the
Trustee shall, within five Business Days following receipt of such items and
such taking of physical possession, deliver the replaced Policy to the Credit
Enhancer. Any other form of credit enhancement may also be substituted for the
Policy upon the occurrence of a Replacement Event, provided that the Trustee
receives an Opinion of Counsel to the effect that such substitution will not be
treated as a significant modification within the meaning of Treas. Reg. ss.
1.1001-3.
[Section 4.04. Effect of Payments by the Credit Enhancer; Subrogation.
Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on any of the Investor Certificates which is made with
moneys received pursuant to the terms of the Policy shall not be considered
payment of such Investor Certificates from the Trust and shall not result in the
payment of or the provision for the payment of the principal of or interest on
such Investor Certificates within the meaning of Section 5.01. The Depositor,
the Master Servicer and the Trustee acknowledge, and each Holder by its
acceptance of an Investor Certificate agrees, that without the need for any
further action on the part of the Credit Enhancer, the Depositor, the Master
Servicer, the Trustee or the Certificate Registrar (a) to the extent the Credit
Enhancer makes payments, directly or indirectly, on account of principal of or
interest on any Investor Certificates to the Holders of such Certificates, the
Credit Enhancer will be fully subrogated to the rights of such Holders to
receive such principal and interest from the Trust and (b) the Credit Enhancer
shall be paid such principal and interest but only from the sources and in the
manner provided herein for the payment of such principal and interest.
The Trustee and the Master Servicer shall cooperate in all respects
with any reasonable request by the Credit Enhancer for action to preserve or
enforce the Credit Enhancer's rights or interests under this Agreement without
limiting the rights or affecting the interests of the Holders as otherwise set
forth herein.]
Section 4.05. Optional Advances of the Master Servicer. The Master
Servicer, in its sole discretion, may advance the interest component of any
delinquent Minimum Monthly Payment (or any portion thereof) by depositing such
amount into the Collection Account on or prior to the related Determination
Date.
ARTICLE V
Payments and Statements to
Certificateholders; Rights of Certificateholders
Section 5.01. Distributions.
(a) Distributions of Investor Interest Collections and Investment
Proceeds. Subject to Section 11.02(b), on each Distribution Date, the Trustee or
the Paying Agent, as the case may be, shall distribute out of the Collection
Account to the extent of Investor Interest Collections collected during the
related Collection Period and the amount, if any, deposited into the Collection
Account pursuant to Section 4.05, the following amounts and in the following
order of priority to the following Persons (based on the information set forth
in the Servicing Certificate):
(i) the Trustee Fee for such Distribution Date to
the Trustee;
[(ii) the Premium pursuant to the Insurance Agreement
to the Credit Enhancer;]
(iii) the Investor Certificate Interest for such
Distribution Date to the Investor Certificateholders and the Unpaid
Investor Certificate Interest Shortfall, if any, for such Distribution
Date to the Investor Certificateholders plus, to the extent legally
permissible, interest thereon at the Investor Certificate Rate;
(iv) the Investor Loss Amount for such Distribution Date
to the Investor Certificateholders as principal in reduction of the
Investor Certificate Principal Balance;
(v) to Investor Certificateholders as principal in
reduction of the Investor Certificate Principal Balance the aggregate
amount of the Investor Loss Reduction Amounts, if any, for previous
Distribution Dates that have not been previously reimbursed to Investor
Certificateholders pursuant to this clause (v);
[ (vi) to reimburse the Credit Enhancer for previously
unreimbursed Credit Enhancement Draw Amounts together with
interest thereon at the applicable rate set forth in the
Insurance Agreement;]
(vii) the Accelerated Principal Distribution Amount,
if any, to the Investor Certificateholders;
[(viii) to the Credit Enhancer for any amounts owed to
the Credit Enhancer pursuant to the Insurance Agreement;]
(ix) any amounts required to be paid to the Master
Servicer pursuant to Sections 3.08 and 7.03 which have not been
previously paid to the Master Servicer; and
(x) any remaining amount to the Transferor.
(b) Distribution of Principal Collections. Subject to Section 11.02(b)
and except on the Distribution Date in _______ ____, on each Distribution Date,
the Trustee shall distribute out of the Collection Account to the Investor
Certificateholders the Principal Collections up to the Scheduled Principal
Collections Distribution Amount but not in excess of the Investor Certificate
Principal Balance. On the Distribution Date in ________ ____, the Trustee shall
distribute to Investor Certificateholders Principal Collections up to the
Investor Certificate Principal Balance.
(c) Application of Subordinated Transferor Collections. If, after
applying Investor Interest Collections as provided in Section 5.01(a) above, any
Required Amount remains unpaid, the Trustee shall, based on information set
forth in the Servicing Certificate for such Distribution Date, apply
Subordinated Transferor Collections to make such payments. If Investor Interest
Collections and Subordinated Transferor Collections are insufficient to cover
the Required Amount for such Distribution Date, then the remaining Investor Loss
Amount (but only to the extent of the Available Transferor Subordinated Amount)
shall be reallocated to the Transferor Principal Balance and shall not be
allocated to the Investor Certificates; provided that no such allocation of
Investor Loss Amounts shall reduce the Transferor Principal Balance below zero.
[(d) Distribution of the Credit Enhancement Draw Amount. With respect
to any Distribution Date, to the extent that Investor Interest Collections on
the related Distribution Date and any amounts, if any, deposited to the
Collection Account pursuant to Section 4.05 applied in the order specified in
Section 5.01(a) are insufficient to make distributions as provided in clause
(iii) of Section 5.01(a) above, the Trustee will make such payments (the
"Deficiency Amount") from the amount drawn under the Policy for such
Distribution Date pursuant to Section 4.02. For any Distribution Date as to
which there is a Guaranteed Principal Distribution Amount, the Trustee shall
distribute the Guaranteed Principal Distribution Amount to Certificateholders
from the amount drawn under the Policy for such Distribution Date pursuant to
Section 4.02.]
The aggregate amount of principal distributed to the Investor
Certificateholders under this Agreement shall not exceed the Original Investor
Certificate Principal Balance.
(e) Method of Distribution. The Trustee shall make distri-
butions in respect of a Distribution Date to each Investor Certificateholder
of record on the related Record Date (other than as provided in Section 10.01
respecting the final distribution) by check or money order mailed to such
Investor Certifi- cateholder at the address appearing in the Certificate
Register, or upon written request by an Investor Certificateholder delivered
to the Trustee at least five Business Days prior to such Record Date, by wire
transfer (but only if such Certificate- holder is the Depository or such
Certificateholder owns of record one or more Investor Certificates having
principal denominations aggregating at least $[_______________]), or by such
other means of payment as such Investor Certificateholder and the Trustee shall
agree. Distributions among Investor Certificateholders shall be made in
proportion to the Percentage Interests evidenced by the Investor Certificates
held by such Investor Certificate- holders.
(f) Distributions on Book-Entry Certificates. Each distribution with
respect to a Book-Entry Certificate shall be paid to the Depository, which shall
credit the amount of such distribution to the accounts of its Depository
Participants in accordance with its normal procedures. Each Depository
Participant shall be responsible for disbursing such distribution to the
Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. All such credits and disbursements
with respect to a Book-Entry Certificate are to be made by the Depository and
the Depository Participants in accordance with the provisions of the Investor
Certificates. None of the Trustee, the Paying Agent, the Certificate Registrar,
the Depositor[, the Credit Enhancer] or the Master Servicer shall have any
responsibility therefor except as otherwise provided by applicable law.
(g) Distributions to Holders of Transferor Certificates. On each
Distribution Date, the Trustee shall, based upon the information set forth in
the Servicing Certificate for such Distribution Date and subject to Section
5.01(c), distribute to the Transferor (i) the Transferor Interest Collections
for the related Collection Period and (ii) the portion, if any, of Transferor
Principal Collections for the related Collection Period in excess of Additional
Balances created during such Collection Period; provided that collections
allocable to the Transferor Certificates will be distributed to the Transferor
only to the extent that such distribution will not reduce the amount of the
Transferor Principal Balance as of the related Distribution Date below the
Minimum Transferor Interest. Amounts not distributed to the Transferor because
of such limitations will be retained in the Collection Account until the
Transferor Principal Balance exceeds the Minimum Transferor Interest, at which
time such excess shall be released to the Transferor. If any such amounts are
still retained in the Collection Account upon the commencement of the Rapid
Amortization Period, such amounts will be paid to the Investor Certificate-
holders as a reduction of the Investor Certificate Principal Balance.
Section 5.02. Calculation of the Investor Certificate Rate. On the
second LIBOR Business Day immediately preceding each Distribution Date, the
Trustee shall determine LIBOR for the Interest Period commencing on such
Distribution Date and inform the Master Servicer (at the facsimile number given
to the Trustee in writing) of such rates. On each Determination Date, the
Trustee shall determine the applicable Investor Certificate Rate for the related
Distribution Date.
Section 5.03. Statements to Certificateholders. Concurrently with each
distribution to Investor Certificateholders, the Trustee shall forward to each
Investor Certificateholder, the Master Servicer[, the Credit Enhancer] and each
Rating Agency a statement prepared by the Master Servicer pursuant to Section
4.01 with respect to such distribution setting forth:
(i) the Investor Floating Allocation Percentage for
the preceding Collection Period;
(ii) the Investor Certificate Distribution Amount;
(iii) the amount of Investor Certificate Interest
in such distribution and the related Investor Certificate Rate;
(iv) the amount, if any, of any Unpaid
Investor Certificate Interest Shortfall in such distribution;
(v) the amount, if any, of the remaining
Unpaid Investor Certificate Interest Shortfall after giving
effect to such distribution;
(vi) the amount, if any, of principal in such
distribution, separately stating the components thereof;
(vii) the amount, if any, of the reimbursement of
previous Investor Loss Amounts in such distribution;
(viii) the amount, if any, of the aggregate of unreim-
bursed Investor Loss Reduction Amounts after giving effect to such
distribution;
(ix) the Servicing Fee for such Distribution Date;
(x) the Invested Amount, the Investor Certificate
Principal Balance and the Pool Factor, each after giving effect to such
distribution;
(xi) the Pool Balance as of the end of the preceding
Collection Period and the aggregate of the Asset Balances of the
Mortgage Loans at the close of business on the last day of the related
Collection Period;
(xii) the Credit Enhancement Draw Amount, if any;
(xiii) the number and aggregate Asset Balances of Mortgage
Loans as to which the Minimum Monthly Payment is delinquent for 30-59
days, 60-89 days and 90 or more days, respectively, as of the end of
the preceding Collection Period;
(xiv) the book value (within the meaning of 12 C.F.R. ss.
571.13 or comparable provision) of any real estate acquired through
foreclosure or grant of a deed in lieu of foreclosure;
(xv) the amount of any optional advances pursuant to
Section 4.05 hereof by the Master Servicer included in the distribution
on such Distribution Date and the aggregate amount of optional advances
pursuant to Section 4.05 hereof by the Master Servicer outstanding as
of the close of business on such Distribution Date;
(xvi) the Investor Certificate Rate applicable to such
distribution;
(xvii) the number and principal balances of any Mortgage
Loans retransferred to the Transferor pursuant to (a) Section 2.04 and
(b) Section 2.06;
(xviii) the amount of Subordinated Transferor Collections,
if any, included in such distribution;
(xix) the amount of Overcollateralization Step-Down
Amount, if any, included in such distribution;
(xx) the Available Transferor Subordinated Amount for
such Distribution Date; and
(xxi) the Overcollateralization Amount for the following
Distribution Date.
In the case of information furnished pursuant to clauses (ii), (iii) in
respect of Investor Certificate Interest, (iv), (v), (vi), (vii) and (viii)
above, the amounts shall be expressed as a dollar amount per Investor
Certificate with a $[_________] denomination.
Within 60 days after the end of each calendar year, the Master Servicer
shall prepare or cause to be prepared and shall forward to the Trustee the
information set forth in clauses (iii) and (vi) above aggregated for such
calendar year. Such obligation of the Master Servicer shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer or a Paying Agent pursuant to any requirements
of the Code.
The Trustee shall prepare or cause to be prepared (in a manner
consistent with the treatment of the Investor Certificates as indebtedness of
the Transferor, or as may be otherwise required by Section 3.14) Internal
Revenue Service Form 1099 (or any successor form) and any other tax forms
required to be filed or furnished to Certificateholders in respect of
distributions by the Trustee (or the Paying Agent) on the Investor Certificates
and shall file and distribute such forms as required by law.
Section 5.04. Rights of Certificateholders. The Investor Certificates
shall represent fractional undivided interests in the Trust, including the
benefits of the Collection Account and the right to receive Investor Interest
Collections, Principal Collections and other amounts at the times and in the
amounts specified in this Agreement; the Transferor Certificates shall represent
the remaining interest in the Trust.
ARTICLE VI
The Certificates
Section 6.01. The Certificates. The Investor Certificates and
Transferor Certificates shall be substantially in the forms set forth in
Exhibits A and B, respectively, and shall, on original issue, be executed,
authenticated and delivered by the Trustee to or upon the order of the Depositor
concurrently with the sale and assignment to the Trustee of the Trust. The
Investor Certificates shall be initially evidenced by one or more certificates
representing the entire Original Investor Certificate Principal Balance and
shall be held in minimum dollar denominations of $[____________] and integral
dollar multiples in excess thereof, except that one Investor Certificate may be
in a different denomination of less than $[_________] so that the sum of the
denominations of all outstanding Investor Certificates shall equal the Original
Investor Certificate Principal Balance. The sum of the denominations of all
outstanding Investor Certificates shall equal the Original Investor Certificate
Principal Balance. The Transferor Certificates shall be issuable as one or more
certificates representing the entire interest in the assets of the Trust other
than that represented by the Investor Certificates and shall initially be issued
to the Sponsor.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer under its seal imprinted thereon.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures were affixed, authorized to sign on behalf of
the Trustee shall bind the Trust, notwithstanding that such individuals or any
of them have ceased to be so authorized prior to the authentication and delivery
of such Transferor Certificates or did not hold such offices at the date of such
Transferor Certificate. No Certificate shall be entitled to any benefit under
this Agreement, or be valid for any purpose, unless such Certificate shall have
been manually authenticated by the Trustee substantially in the form provided
for herein, and such authentication upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication. Subject to Section 6.02(c), the Investor Certificates
shall be Book-Entry Certificates. The Transferor Certificates shall not be
Book-Entry Certificates.
Section 6.02. Registration of Transfer and Exchange of Investor
Certificates; Appointment of Registrar. (a) The Certificate Registrar shall
cause to be kept at the Corporate Trust Office a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Certificate
Registrar shall provide for the registration of Investor Certificates and of
transfers and exchanges of Investor Certificates as herein provided. The
Trustee shall initially serve as Certificate Registrar for the purpose of
registering Investor Certificates and transfers and exchanges of Investor
Certificates as herein provided.
Upon surrender for registration of transfer of any Investor Certificate
at any office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph, the Trustee on behalf of the Trust shall
execute, authenticate and deliver, in the name of the designated transferee or
trans- ferees, one or more new Investor Certificates of the same aggregate
Percentage Interest.
At the option of the Investor Certificateholders, Investor Certificates
may be exchanged for other Investor Certificates in authorized denominations and
the same aggregate Percentage Interests, upon surrender of the Investor
Certificates to be exchanged at any such office or agency. Whenever any Investor
Certificates are so surrendered for exchange, the Trustee shall execute and
authenticate and deliver the Investor Certificates which the Investor
Certificateholder making the exchange is entitled to receive. Every Investor
Certificate presented or surrendered for transfer or exchange shall (if so
required by the Trustee or the Certificate Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder thereof or
his attorney duly authorized in writing.
(b) Except as provided in paragraph (c) below, the Book- Entry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) registration of the Investor Certificates
may not be transferred by the Trustee except to another Depository; (ii) the
Depository shall maintain book-entry records with respect to the Certificate
Owners and with respect to ownership and transfers of such Investor
Certificates; (iii) ownership and transfers of registration of the Investor
Certificates on the books of the Depository shall be governed by applicable
rules established by the Depository; (iv) the Depository may collect its usual
and customary fees, charges and expenses from its Depository Participants; (v)
the Trustee shall deal with the Depository as representative of the Certificate
Owners of the Investor Certificates for purposes of exercising the rights of
Holders under this Agreement, and requests and directions for and votes of such
representative shall not be deemed to be inconsistent if they are made with
respect to different Certificate Owners; and (vi) the Trustee may rely and shall
be fully protected in relying upon information furnished by the Depository with
respect to its Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and Persons shown on
the books of such indirect participating firms as direct or indirect Certificate
Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners
that it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The parties hereto are
hereby authorized to execute a Letter of Representations with the Depository or
take such other action as may be necessary or desirable to register a Book-Entry
Certificate to the Depository. In the event of any conflict between the terms of
any such Letter of Representation and this Agreement the terms of this Agreement
shall control.
(c) If (i)(x) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly
its responsibilities as Depository, and (y) the Trustee or the Depositor is
unable to locate a qualified successor, (ii) the Depositor, at its sole option,
with the consent of the Trustee, elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of an Event of Servicing
Termination, the Depository, at the direction of Certificate Owners representing
Percentage Interests aggregating not less than 51% advises the Trustee in
writing that the continuation of a book-entry system through the Depository to
the exclusion of definitive, fully registered Investor Certificates (the
"Definitive Certificates") to Certificate Owners is no longer in the best
interests of the Certificate Owners. Upon surrender to the Certificate Registrar
of the Investor Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall execute and
authenticate the Definitive Certificates. Neither the Depositor nor the Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates, all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates, and the Trustee, the Certificate
Registrar, the Master Servicer and the Depositor shall recognize the Holders of
the Definitive Certificates as Certificateholders hereunder.
No service charge shall be made for any registration of transfer or
exchange of Investor Certificates, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
All Investor Certificates surrendered for registration of transfer or
exchange shall be cancelled by the Certificate Registrar and disposed of
pursuant to its standard procedures.
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates. If (i)
any mutilated Certificate is surrendered to the Certificate Registrar or the
Certificate Registrar receives evidence to its satisfaction of the destruction,
loss or theft of any Certificate, and (ii) there is delivered to the Trustee,
the Depositor and the Certificate Registrar such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Trustee or the Certificate Registrar that such Certificate has been
acquired by a bona fide purchaser, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate of like tenor and Percentage Interest.
Upon the issuance of any new Certificate under this Section 6.03, the Trustee or
the Certificate Registrar may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) connected therewith. Any duplicate Certificate issued
pursuant to this Section 6.03, shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
Section 6.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Master Servicer, the Depositor,
the Trustee, the Certificate Registrar, any Paying Agent and any agent of the
Master Servicer, the Depositor, the Trustee, any Paying Agent or the Certificate
Registrar may treat the Person, including a Depository, in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 5.01 and for all other purposes
whatsoever, and none of the Master Servicer, the Depositor, the Trustee, the
Certificate Registrar, any Paying Agent or any agent of any of them shall be
affected by notice to the contrary.
Section 6.05. Restrictions on Transfer of Transferor Certificates. (a)
The Transferor Certificates shall be assigned, transferred, exchanged, pledged,
financed, hypothecated or otherwise conveyed (collectively, for purposes of this
Section 6.05 and any other Section referring to the Transferor Certificates,
"transferred" or a "transfer") only in accordance with this Section 6.05.
(b) No transfer of a Transferor Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. Except for the initial issuance of the
Transferor Certificate to the Transferor, the Trustee shall require (i) the
trans- feree to execute an investment letter acceptable to and in form and
substance satisfactory to the Trustee certifying to the Trustee the facts
surrounding such transfer, which investment letter shall not be an expense of
the Trustee or (ii) if the investment letter is not delivered, a written
Opinion of Counsel acceptable to and in form and substance satisfactory to
the Trustee and the Depositor that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor,
from said Act or is being made pursuant to said Act, which Opinion of
Counsel shall not be an expense of the Trustee or the Depositor. The
Holder of a Transferor Certificate desiring to effect such transfer shall, and
does hereby agree to, indemnify the Transferor against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
(c) The Transferor Certificates and any interest therein shall not be
transferred except upon satisfaction of the following conditions precedent: (i)
the Person that acquires a Trans- feror Certificate shall (A) be organized and
existing under the laws of the United States of America or any state or the
District of Columbia thereof, (B) expressly assume, by an agreement supplemental
hereto, executed and delivered to the Trustee, the performance of every covenant
and obligation of the Transferor hereunder and (C) as part of its acquisition of
a Transferor Certificate, acquire all rights of the Transferor or any trans-
feree under this Section 6.05(c) to amounts payable to such Transferor or such
transferee under Sections 5.01(a)(x) and 5.01(g); (ii) the Holder of the
Transferor Certificates shall deliver to the Trustee an Officer's Certificate
stating that such transfer and such supplemental agreement comply with this
Section 6.05(c) and that all conditions precedent provided by this Section
6.05(c) have been complied with and an Opinion of Counsel stating that all
conditions precedent provided by this Section 6.05(c) have been complied with,
and the Trustee may conclusively rely on such Officer's Certificate, shall have
no duty to make inquiries with regard to the matters set forth therein and shall
incur no liability in so relying; (iii) the Holder of the Trans- feror
Certificates shall deliver to the Trustee a letter from each Rating Agency
confirming that its rating of the Investor Certificates, after giving effect to
such transfer, will not be reduced or withdrawn without regard to the Policy;
(iv) the transferee of the Transferor Certificates shall deliver to the Trustee
an Opinion of Counsel to the effect that (a) such transfer will not adversely
affect the treatment of the Investor Certificates after such transfer as debt
for federal and applicable state income tax purposes, (b) such transfer will not
result in the Trust being subject to tax at the entity level for federal or
applicable state tax purposes, (c) such transfer will not have any material
adverse impact on the federal or applicable state income taxation of an Investor
Certificateholder or any Certificate Owner and (d) such transfer will not result
in the arrangement created by this Agreement or any "portion" of the Trust,
being treated as a taxable mortgage pool as defined in Section 7701(i) of the
Code; (v) all filings and other actions necessary to continue the perfection of
the interest of the Trust in the Mortgage Loans and the other property conveyed
hereunder shall have been taken or made and (vi) the transferee shall have
assumed the obligations of the Transferor pursuant to Section 7.07 hereof.
Notwithstanding the foregoing, the requirement set forth in subclause
(i)(A) of this Section 6.05(c) shall not apply in the event the Trustee
shall have received a letter from each Rating Agency confirming that its
rating of the Investor Certificates, after giving effect to a proposed
transfer to a Person that does not meet the requirement set forth in
subclause (i)(A), shall not be reduced or withdrawn. Notwithstanding
the foregoing, the requirements set forth in this paragraph (c) shall not
apply to the initial issuance of the Transferor Certificates to the
Transferor.
(d) Except for the initial issuance of the Transferor Certificate to
the Transferor, no transfer of a Transferor Certificate shall be made unless the
Trustee shall have received either (i) a representation letter from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan subject to Section 406 of ERISA, nor a Person acting on
behalf of any such plan, which representation letter shall not be an expense of
the Trustee, (ii) if the purchaser is an insurance company, a representation
that the purchaser is an insurance company which is purchasing such Certificates
with funds contained in an "insurance company general account" (as such term is
defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60")) and that the purchase and holding of such Certificates are covered
under PTCE 95-60, or (iii) in the case of any Transferor Certificate presented
for registration in the name of an employee benefit plan subject to ERISA, and
Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan, an Opinion of Counsel to the effect
that the purchase or holding of such Certificate will not result in the assets
of the Trust being deemed to be "plan assets" and subject to the prohibited
transaction provisions of ERISA and the Code and will not subject the Trustee to
any obligation in addition to those undertaken in this Agreement, which Opinion
of Counsel shall not be an expense of the Trustee or the Depositor.
Section 6.06. Appointment of Paying Agent. (a) The Paying Agent shall
make distributions to Investor Certificateholders from the Collection Account
pursuant to Section 5.01 and shall report the amounts of such distributions to
the Trustee. The duties of the Paying Agent may include the obligation (i) to
withdraw funds from the Collection Account pursuant to Section 3.03 and for the
purpose of making the distributions referred to above and (ii) to distribute
statements and provide information to Certificateholders as required hereunder.
The Paying Agent hereunder shall at all times be a corporation duly incorporated
and validly existing under the laws of the United States of America or any state
thereof, authorized under such laws to exercise corporate trust powers and
subject to supervision or examination by federal or state authorities. The
Paying Agent shall initially be the Trustee. The Trustee may appoint a successor
to act as Paying Agent, which appointment shall be reasonably satisfactory
to the Depositor.
(b) The Trustee shall cause the Paying Agent (if other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent shall hold all
sums, if any, held by it for payment to the Investor Certificateholders in trust
for the benefit of the Investor Certificateholders entitled thereto until such
sums shall be paid to such Certificateholders and shall agree that it shall
comply with all requirements of the Code regarding the withholding of payments
in respect of federal income taxes due from Certificate Owners and otherwise
comply with the provisions of this Agreement applicable to it.
Section 6.07. Acceptance of Obligations. The Transferor,
by its acceptance of the Transferor Certificates, agrees to be
bound by and to perform all the duties of the Transferor set
forth in this Agreement.
ARTICLE VII
The Master Servicer, the Sponsor and the Depositor
Section 7.01. Liability of the Sponsor, the Master Servicer and the
Depositor. The Sponsor and the Master Servicer shall be liable in accordance
herewith only to the extent of the obligations specifically imposed upon and
undertaken by the Sponsor or Master Servicer, as the case may be, herein. The
Depositor shall be liable in accordance herewith only to the extent of the
obligations specifically imposed upon and undertaken by the Depositor herein.
Section 7.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Master Servicer or the Depositor. Any corporation into which
the Master Servicer or the Depositor may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Master Servicer or the Depositor shall be a party, or any corporation succeeding
to the business of the Master Servicer or the Depositor, shall be the successor
of the Master Servicer or the Depositor, as the case may be, hereunder, without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding.
Section 7.03. Limitation on Liability of the Master Servicer and
Others. Neither the Master Servicer nor any of the directors or officers or
employees or agents of the Master Servicer shall be under any liability to the
Trust or the Certificateholders for any action taken or for refraining from the
taking of any action by the Master Servicer in good faith pursuant to this
Agreement, or for errors in judgment; provided that this provision shall not
protect the Master Servicer or any such Person against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties of the Master Servicer or by reason of
reckless disregard of obligations and duties of the Master Servicer hereunder.
The Master Servicer and any director or officer or employee or agent of the
Master Servicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Master Servicer and any director or officer or employee or agent
of the Master Servicer shall be indemnified by the Trust and held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to this Agreement or the Certificates, other than any loss,
liability or expense related to any specific Mortgage Loan or Mortgage Loans
(except as any such loss, liability or expense shall be otherwise reimbursable
pursuant to this Agreement) and any loss, liability or expense incurred by
reason of its willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of its reckless disregard of obli-
gations and duties hereunder. The Master Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to duties to service the Mortgage Loans in accordance with this
Agreement, and which in its opinion may involve it in any expense or liability;
provided that the Master Servicer may in its sole discretion undertake any such
action which it may deem necessary or desirable in respect of this Agreement,
and the rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, the reasonable legal expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Trust and the Master Servicer shall only be
entitled to be reimbursed therefor pursuant to Section 5.01(a)(ix). The Master
Servicer's right to indemnity or reimbursement pursuant to this Section 7.03
shall survive any resignation or termination of the Master Servicer pursuant to
Section 7.04 or 8.01 with respect to any losses, expenses, costs or liabilities
arising prior to such resignation or termination (or arising from events that
occurred prior to such resignation or termination).
Section 7.04. Master Servicer Not to Resign. Subject to the provisions
of Section 7.02, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that the performance
of its obligations or duties hereunder are no longer permissible under
applicable law or are in material conflict by reason of applicable law with any
other activities carried on by it or its subsidiaries or Affiliates, the other
activities of the Master Servicer so causing such a conflict being of a type and
nature carried on by the Master Servicer or its subsidiaries or Affiliates at
the date of this Agreement or (ii) upon satisfaction of the following
conditions: (a) the Master Servicer has proposed a successor master servicer to
the Trustee in writing and such proposed successor master servicer is reasonably
acceptable to the Trustee; (b) each Rating Agency shall have delivered a letter
to the Trustee prior to the appointment of the successor master servicer stating
that the proposed appointment of such successor master servicer as Master
Servicer hereunder will not result in the reduction or withdrawal of the then
current rating of the Investor Certificates without regard to the Policy; and
(c) such proposed successor master servicer is reasonably acceptable to the
Credit Enhancer, as evidenced by a letter to the Trustee; provided that no such
resignation by the Master Servicer shall become effective until the Trustee or
successor master servicer designated by the Master Servicer as provided above
shall have assumed the Master Servicer's responsibilities and obligations
hereunder or the Trustee shall have designated a successor master servicer in
accordance with Section 8.02. Any such resignation shall not relieve the Master
Servicer of responsibility for any of the obligations specified in Sections 8.01
and 8.02 as obligations that survive the resignation or termination of the
Master Servicer. Any such determination permitting the resignation of the
Master Servicer pursuant to clause (i) above shall be evidenced by an
Opinion of Counsel to such effect delivered to the Trustee and the Credit
Enhancer. The Master Servicer shall have no claim (whether by subrogation
or otherwise) or other action against any Certificateholder [or the Credit
Enhancer] for any amounts paid by the Master Servicer pursuant to any provision
of this Agreement.
Section 7.05. Delegation of Duties. In the ordinary course of business,
the Master Servicer at any time may delegate any of its duties hereunder to any
Person, including any of its Affiliates, or any subservicer referred to in
Section 3.01, who agrees to conduct such duties in accordance with standards
comparable to those with which the Master Servicer complies pursuant to Section
3.01. Such delegation shall not relieve the Master Servicer of its liabilities
and responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Section 7.04.
Section 7.06. Indemnification of the Trust by the Master Servicer. The
Master Servicer shall indemnify and hold harmless the Trust and the Trustee from
and against any loss, liability, expense, damage or injury suffered or sustained
by reason of the Master Servicer's actions or omissions in servicing or
administering the Mortgage Loans that are not in accordance with this Agreement,
including, but not limited to, any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim. Any such
indemnification shall not be payable from the assets of the Trust. The
provisions of this indemnity shall run directly to and be enforceable by an
injured party subject to the limitations hereof. The provisions of this Section
7.06 shall survive termination of this Agreement.
Section 7.07. Indemnification of the Trust by the Trans- feror.
Notwithstanding anything to the contrary contained herein, the Transferor (i)
agrees to be liable directly to the injured party for the entire amount of any
losses, claims, damages, liabilities and expenses of the Trust (other than those
attributable to an Investor Certificateholder in the capacity as an investor in
the Investor Certificates as a result of defaults on the Mortgage Loans) to the
extent that the Transferor would be liable if the Trust were a partnership under
the Delaware Revised Uniform Limited Partnership Act in which the Transferor was
a general partner and (ii) shall indemnify and hold harmless the Trust and the
Trustee from and against any loss, liability, expense, damage, claim or injury
(other than those attributable to an Investor Certificateholder in the capacity
as an investor in the Investor Certificates as a result of defaults on the
Mortgage Loans) arising out of or based on this Agreement by reason of any acts,
omissions, or alleged acts or omissions arising out of activities of the Trust
or the Trustee, or the actions of the Master Servicer including, but not
limited to, amounts payable to the Master Servicer pursuant to Section 7.03,
any judgment, award, settlement, reasonable attorneys' fees and other costs
or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim; provided that the Transferor shall
not indemnify the Trustee (but shall indemnify any other injured party) if
such loss, liability, expense, damage or injury is due to the Trustee's
willful malfeasance, bad faith or gross negligence or by reason of the
Trustee's reckless disregard of its obligations hereunder. The provisions of
this indemnity shall run directly to and be enforceable by an injured party
subject to the limitations hereof.
Section 7.08. Limitation on Liability of the Transferor. None of the
directors or officers or employees or agents of the Transferor shall be under
any liability to the Trust, the Trustee or the Certificateholders, it being
expressly understood that all such liability is expressly waived and released as
a condition of, and as consideration for, the execution of this Agreement and
the issuance of the Certificates; provided that this provision shall not protect
any such Person against any liability which would otherwise be imposed by reason
of willful misfeasance, bad faith or gross negligence in the performance of the
duties hereunder. Except as provided in Section 7.07, the Transferor shall not
be under any liability to the Trust, the Trustee or the Certificateholders for
any action taken or for refraining from the taking of any action in its capacity
as Transferor pursuant to this Agreement whether arising from express or implied
duties under this Agreement; provided that this provision shall not protect the
Transferor against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of reckless disregard of its obligations and duties
hereunder. The Transferor and any director or officer or employee or agent of
the Transferor may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder.
ARTICLE VIII
Servicing Termination
Section 8.01. Events of Servicing Termination. If any one
of the following events ("Events of Servicing Termination") shall
occur and be continuing:
(i) Any failure by the Master Servicer to deposit in
the Collection Account any deposit required to be made under the terms
of this Agreement which continues unremedied for a period of five
Business Days (or, if the Master Servicer is permitted to remit
collections on a monthly basis pursuant to Section 3.02(b), three
Business Days) after the date upon which written notice of such failure
shall have been given to the Master Servicer by the Trustee or to the
Master Servicer and the Trustee by [the Credit Enhancer or] Holders of
Investor Certificates evidencing Percentage Interests aggregating not
less than 25%; or
(ii) Failure on the part of the Master Servicer duly to
observe or perform in any material respect any other covenants or
agreements of the Master Servicer set forth in the Certificates or in
this Agreement, which failure materially and adversely affects the
interests of the Certificateholders [or the Credit Enhancer] and
continues unremedied for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, and
stating that such notice is a "Notice of Default" hereunder, shall have
been given to the Master Servicer by the Trustee or to the Master
Servicer and the Trustee by the Credit Enhancer or the Holders of
Investor Certificates evidencing Percentage Interests aggregating not
less than 25%; or
(iii) The entry against the Master Servicer of a decree
or order by a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a trustee,
conservator, receiver or liquidator in any insolvency, conservatorship,
receivership, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(iv) The consent by the Master Servicer to the
appointment of a trustee, conservator, receiver or liquidator in any
insolvency, conservatorship, receivership, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to the Master Servicer or of or relating to substantially all
of its property; or the Master Servicer shall admit in writing its
inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its obligations;
then, and in each and every such case, so long as an Event of Servicing
Termination shall not have been remedied by the Master Servicer, with respect to
an Event of Servicing Termination specified in (i) through (iv), above, either
the Trustee[, the Credit Enhancer] or the Holders of Investor Certificates
evidencing Percentage Interests aggregating not less than 51% with the consent
of [the Credit Enhancer], by notice then given in writing to the Master Servicer
(and to the Trustee if given by [the Credit Enhancer] or the Holders of Investor
Certificates) may terminate all of the rights and obligations of the Master
Servicer as servicer under this Agreement. Any such notice to the Master
Servicer shall also be given to each Rating Agency [and the Credit Enhancer]. On
or after the receipt by the Master Servicer of such written notice, all
authority and power of the Master Servicer under this Agreement, whether with
respect to the Certificates or the Mortgage Loans or otherwise, shall pass to
and be vested in the Trustee pursuant to and under this Section 8.01; and,
without limitation, the Trustee is hereby authorized and empowered to execute
and deliver, on behalf of the Master Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of each Mortgage
Loan and related documents, or otherwise. The Master Servicer agrees to
cooperate with the Trustee in effecting the termination of the responsibilities
and rights of the Master Servicer hereunder, including, without limitation, the
transfer to the Trustee for the administration by it of all cash amounts that
shall at the time be held by the Master Servicer and to be deposited by it in
the Collection Account, or that have been deposited by the Master Servicer in
the Collection Account or thereafter received by the Master Servicer with
respect to the Mortgage Loans. All reasonable costs and expenses (including
attorneys' fees) incurred in connection with transferring the Mortgage Files to
the successor Master Servicer and amending this Agreement to reflect such
succession as Master Servicer pursuant to this Section 8.01 shall be paid by the
predecessor Master Servicer (or if the predecessor Master Servicer is the
Trustee, the initial Master Servicer) upon presentation of reasonable
documentation of such costs and expenses.
Notwithstanding the foregoing, a delay in or failure of performance
under Section 8.01(i) for a period of ten Business Days or under Section
8.01(ii) for a period of 60 Business Days, shall not constitute an Event of
Servicing Termination if such delay or failure could not be prevented by the
exercise of reasonable diligence by the Master Servicer and such delay or
failure was caused by an act of God or the public enemy, acts of declared or
undeclared war, public disorder, rebellion or sabotage, epidemics, landslides,
lightning, fire, hurricanes, earthquakes, floods or similar causes. The
preceding sentence shall not relieve the Master Servicer from using its best
efforts to perform its respective obligations in a timely manner in
accordance with the terms of this Agreement and the Master Servicer shall
provide the Trustee, the Transferor[, the Credit Enhancer] and the
Investor Certificateholders with an Officers' Certificate giving prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations. The Master Servicer shall immediately
notify the Trustee in writing of any Events of Servicing Termination.
Section 8.02. Trustee to Act; Appointment of Successor. (a) On and
after the time the Master Servicer receives a notice of termination pursuant to
Section 8.01 or 7.04, the Trustee shall be the successor in all respects to the
Master Servicer in its capacity as master servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Master
Servicer by the terms and provisions hereof. Notwithstanding the above, if the
Trustee becomes the Master Servicer hereunder, it shall have no responsibility
or obligation (i) of repurchase or substitution with respect to any Mortgage
Loan, (ii) with respect to any representation or warranty of the Master
Servicer, and (iii) for any act or omission of either a predecessor or successor
Master Servicer other than the Trustee. As compensation therefor, the Trustee
shall be entitled to such compensation as the Master Servicer would have been
entitled to hereunder if no such notice of termination had been given. In
addition, the Trustee will be entitled to compensation with respect to its
expenses in connection with conversion of certain information, documents and
record keeping, as provided in Section 7.04(b). Notwithstanding the above, (i)
if the Trustee is unwilling to act as successor Master Servicer, or (ii) if the
Trustee is legally unable so to act, the Trustee may (in the situation described
in clause (i)) or shall (in the situation described in clause (ii)) appoint or
petition a court of competent jurisdiction to appoint, any established housing
and home finance institution, bank or other mortgage loan or home equity loan
servicer having a net worth of not less than $[__________________] 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;
provided that any such successor Master Servicer shall be acceptable to the
Credit Enhancer, as evidenced by the Credit Enhancer's prior written consent,
which consent shall not be unreasonably withheld; provided further that the
appointment of any such successor Master Servicer will not result in the
qualification, reduction or withdrawal of the ratings assigned to the
Certificates by the Rating Agencies without regard to the Policy. Pending
appointment of a successor to the Master Servicer hereunder, unless the
Trustee is prohibited by law from so acting, the Trustee shall act in such
capacity as hereinabove provided. In connection with such appointment and
assumption, the successor shall be entitled to receive compensation out of
payments on Mortgage Loans in an amount equal to the compensation which the
Master Servicer would otherwise have received pursuant to Section 3.08 (or such
lesser compensation as the Trustee and such successor shall agree). The Trustee
and such successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession.
(b) Any successor, including the Trustee, to the Master Servicer as
master servicer shall during the term of its service as master servicer (i)
continue to service and administer the Mortgage Loans for the benefit of
Certificateholders and the Credit Enhancer and (ii) maintain in force a policy
or policies of insurance covering errors and omissions in the performance of its
obligations as Master Servicer hereunder and a fidelity bond in respect of its
officers, employees and agents to the same extent as the Master Servicer is so
required pursuant to Section 3.11. The appointment of a successor Master
Servicer shall not affect any liability of the predecessor Master Servicer which
may have arisen under this Agreement prior to its termination as Master Servicer
(including, without limitation, any deductible under an insurance policy
pursuant to Section 3.04), nor shall any successor Master Servicer be liable for
any acts or omissions of the predecessor Master Servicer or for any breach by
such Master Servicer of any of their representations or warranties contained
herein.
Section 8.03. Notification to Certificateholders. Upon any termination
or appointment of a successor to the Master Servicer pursuant to this Article
VIII or Section 7.04, the Trustee shall give prompt written notice thereof to
the Certificateholders at their respective addresses appearing in the
Certificate Register, the Credit Enhancer and each Rating Agency.
ARTICLE IX
The Trustee
Section 9.01. Duties of Trustee. The Trustee, prior to the occurrence
of an Event of Servicing Termination and after the curing or waiver of all
Events of Servicing Termination which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Servicing Termination has occurred (which has not been
cured or waived) of which a Responsible Officer has knowledge, the Trustee shall
exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs;
provided that if the Trustee is acting as Master Servicer it shall use the same
degree of care and skill as is required of the Master Servicer under this
Agreement.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct; provided that:
(i) prior to the occurrence of an Event of Servicing
Termination of which a Responsible Officer of the Trustee has
knowledge, and after the curing or waiver of all such Events of
Servicing Termination which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express
provisions of this Agreement, the Trustee shall not be liable except
for the performance of such duties and obligations as are specifically
set forth in this Agreement, no implied covenants or obligations shall
be read into this Agreement against the Trustee and, in the absence of
bad faith on the part of the Trustee, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished
to the Trustee and conforming to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an
error of judgment made in good faith by a Responsible Officer of the
Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining or investigating the facts related thereto;
(iii) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the consent or direction of the Credit
Enhancer or in accordance with the direction of the Holders of Investor
Certificates evidencing Percentage Interests aggregating not less than
51% relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Agreement; and
(iv) the Trustee shall not be charged with knowledge of
any failure by the Master Servicer to comply with the obligations of
the Master Servicer referred to in clauses (i) and (ii) of Section 8.01
or of the occurrence of a Rapid Amortization Event unless a Responsible
Officer of the Trustee at the Corporate Trust Office obtains actual
knowledge of such failure or the Trustee receives written notice of
such failure from the Master Servicer, the Credit Enhancer or the
Holders of Investor Certificates evidencing Percentage Interests
aggregating not less than 51%.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. None
of the provisions contained in this Agreement shall in any event require the
Trustee to perform, or be responsible for the manner of performance of, any of
the obligations of the Master Servicer under this Agreement, except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Master Servicer in accordance with
the terms of this Agreement and in no event shall it be required to perform or
accept responsibility for the obligations of the Depositor, the Sponsor or the
Transferor.
Section 9.02. Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 9.01:
(i) the Trustee may request and rely upon, and shall be
protected in acting or refraining from acting upon, any resolution,
Officer's Certificate, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, bond or other paper or document reasonably
believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(ii) the Trustee may consult with counsel and any
written advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action
taken or suffered or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(iii) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Agreement, or
to institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the
Certificateholders or the Credit Enhancer, pursuant to the provisions
of this Agreement, unless such Certificateholders or the Credit
Enhancer shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; the right of the Trustee to perform any
discretionary act enumerated in this Agreement shall not be construed
as a duty, and the Trustee shall not be answerable for other than its
negligence or wilful misconduct in the performance of any such act;
nothing contained herein shall, however, relieve the Trustee of the
obligations, upon the occurrence of an Event of Servicing Termination
(which has not been cured or waived) of which a Responsible Officer has
knowledge, to exercise such of the rights and powers vested in it by
this Agreement, and to use the same degree of care and skill in their
exercise as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs, unless it is acting as Master
Servicer;
(iv) the Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed by
it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement;
(v) prior to the occurrence of an Event of Servicing
Termination and after the curing or waiver of all Events of Servicing
Termination which may have occurred, the Trustee shall not be bound to
make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond or other paper or
documents, unless requested in writing to do so by Holders of Investor
Certificates evidencing Percentage Interests aggregating not less than
51%; provided that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by
it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded
to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such cost, expense or liability as a
condition to such proceeding. The reasonable expense of every such
examination shall be paid by the Master Servicer or, if paid by the
Trustee, shall be reimbursed by the Master Servicer upon demand.
Nothing in this clause (v) shall derogate from the obligation of the
Master Servicer to observe any applicable law prohibiting disclosure
of information regarding the Mortgagors;
(vi) the Trustee shall not be accountable, shall have no
liability and makes no representation as to any acts or omissions
hereunder of the Master Servicer until such time as the Trustee may be
required to act as Master Servicer pursuant to Section 8.02; and
(vii) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through an Affiliate, agents or attorneys or a custodian.
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Depositor, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates) or of any
Mortgage Loan or Related Document. The Trustee shall not be accountable for the
use or application by the Depositor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Depositor or the Master Servicer in respect of the Mortgage Loans or
deposited in or withdrawn from the Collection Account by the Master Servicer.
The Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity and enforceability of any Mortgage or any
Mortgage Loan, or the perfection and priority of any Mortgage or the maintenance
of any such perfection and priority, or for or with respect to the sufficiency
of the Trust or its ability to generate the payments to be distributed to
Certificateholders under this Agreement, including, without limitation: the
existence, condition and ownership of any Mortgaged Property; the existence and
enforceability of any hazard insurance thereon (other than if the Trustee shall
assume the duties of the Master Servicer pursuant to Section 8.02); the validity
of the assignment of any Mortgage Loan to the Trustee or of any intervening
assignment; the completeness of any Mortgage Loan; the performance or
enforcement of any Mortgage Loan (other than if the Trustee shall assume the
duties of the Master Servicer pursuant to Section 8.02); the compliance by the
Depositor, the Sponsor or the Master Servicer with any warranty or
representation made under this Agreement or in any related document or the
accuracy of any such warranty or representation prior to the Trustee's receipt
of notice or other discovery of any non-compliance therewith or any breach
thereof; any investment of monies by or at the direction of the Master Servicer
or any loss resulting therefrom, it being understood that the Trustee shall
remain responsible for any Trust property that it may hold in its individual
capacity; the acts or omissions of any of the Depositor, the Master Servicer
(other than if the Trustee shall assume the duties of the Master Servicer
pursuant to Section 8.02), any subservicer or any Mortgagor; any action
of the Master Servicer (other than if the Trustee shall assume the
duties of the Master Servicer pursuant to Section 8.02), or any subservicer
taken in the name of the Trustee; the failure of the Master Servicer or
any subservicer to act or perform any duties required of it as agent of
the Trustee hereunder; or any action by the Trustee taken at the instruction
of the Master Servicer (other than if the Trustee shall assume the
duties of the Master Servicer pursuant to Section 8.02); provided that
the foregoing shall not relieve the Trustee of its obligation to
perform its duties under this Agreement. The Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder (unless the Trustee shall have
become the successor Master Servicer) or, except as otherwise provided in
Section 3.13, to prepare or file any Securities and Exchange Commission filing
for the Trust or to record this Agreement.
Section 9.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not Trustee and may transact
any banking and trust business with the Sponsor, the Master Servicer, the Credit
Enhancer or the Depositor.
Section 9.05. Master Servicer to Pay Trustee's Fees and Expenses;
Master Servicer to Indemnify. The Master Servicer covenants and agrees to pay to
the Trustee from time to time, and the Trustee shall be entitled to, reasonable
compensation (which shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust) for all services rendered by
it in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee, and the
Master Servicer will pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all Persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith or which is the
responsibility of Certificateholders hereunder. The Master Servicer covenants
and agrees to indemnify the Trustee from, and hold it harmless against, any and
all losses, liabilities, damages, claims or expenses other than those resulting
from the negligence or bad faith of the Trustee. This section shall survive
termination of this Agreement or the resignation or removal of any Trustee
hereunder.
Section 9.06. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation duly incorporated and validly
existing under the laws of the United States of America or any state thereof,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, subject to supervision or
examination by federal or state authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section 9.06, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. The principal office of the Trustee (other
than the initial Trustee) shall be in a state with respect to which an Opinion
of Counsel has been delivered to such Trustee at the time such Trustee is
appointed Trustee to the effect that the Trust will not be a taxable entity
under the laws of such state. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 9.06, the Trustee
shall resign immediately in the manner and with the effect specified in Section
9.07.
Section 9.07. Resignation or Removal of Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving written
notice thereof to the Trans- feror, the Depositor, the Master Servicer, the
Credit Enhancer and each Rating Agency. Upon receiving such notice of
resignation, the Transferor shall promptly appoint a successor Trustee (approved
in writing by the Credit Enhancer, so long as such approval is not unreasonably
withheld) by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Trustee (who shall deliver a copy to the
Master Servicer) and one copy to the successor Trustee; provided that any such
successor Trustee shall be subject to the prior written approval of the
Transferor. If no successor Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 and shall fail to resign after written
request therefor by the Transferor or the Credit Enhancer, or if at any time the
Trustee shall be legally unable to act, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, or if a tax is imposed or threatened with respect to the Trust by
any state in which the Trustee or the Trust is located (which tax cannot be
vacated by the appointment of a co-Trustee or separate trustee pursuant to
Section 9.10), then the Transferor or the Credit Enhancer may remove the
Trustee. If the Transferor or the Credit Enhancer removes the Trustee under the
authority of the immediately preceding sentence, the Transferor shall promptly
appoint a successor Trustee (approved in writing by the Credit Enhancer, which
approval shall not be unreasonably withheld) by written instrument, in
duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor trustee.
The Holders of Investor Certificates evidencing Percentage Interests
aggregating over 50% of all Investor Certificates, or the Credit Enhancer may at
any time remove the Trustee by written instrument or instruments delivered to
the Master Servicer, the Transferor and the Trustee; the Transferor shall
thereupon use its best efforts to appoint a successor trustee in accordance with
this Section.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 9.07 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 9.08.
Section 9.08. Successor Trustee. Any successor Trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the
Transferor, the Depositor, the Master Servicer, the Credit Enhancer and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. The Transferor, the Depositor, the Master Servicer and the
predecessor Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties and
obligations.
No successor Trustee shall accept appointment as provided in this
Section 9.08 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 9.06.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 9.08, the successor Trustee shall mail notice of the succession of
such Trustee hereunder to all Holders of Certificates at their addresses as
shown in the Certificate Register and to each Rating Agency. If the Master
Servicer fails to mail such notice within 30 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Master Servicer.
Section 9.09. Merger or Consolidation of Trustee. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated, or
any Person resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any Person succeeding to all or substantially all
of the business of the Trustee, shall be the successor of the Trustee hereunder,
provided such Person shall be eligible under the provisions of Section 9.06,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding.
Section 9.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Mortgaged Property may at the time be located, the
Transferor and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments necessary to appoint one or more Persons approved by
the Credit Enhancer to act as co-trustee or co-trustees, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust, or any part thereof,
and, subject to the other provisions of this Section 9.10, such powers, duties,
obligations, rights and trusts as the Transferor and the Trustee may consider
necessary or desirable. Any such co-trustee or separate trustee shall be subject
to the written approval of the Master Servicer. If the Transferor shall not have
joined in such appointment within 15 days after the receipt by it of a request
so to do, or in the case an Event of Servicing Termination shall have occurred
and be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 9.06 and no
notice to Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 9.08. The Master Servicer shall be
responsible for the fees of any co-trustee or separate trustee appointed
hereunder.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the
Master Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the
Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be held personally
liable by reason of any act or omission of any other trustee hereunder;
and
(iii) the Master Servicer and the Trustee acting jointly
may at any time accept the resignation of or remove any separate
trustee or co-trustee except that following the occurrence of an Event
of Servicing Termination, the Trustee acting alone may accept the
resignation or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Transferor and the Master Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
Section 9.11. Limitation of Liability. The Certificates are executed by
the Trustee, not in its individual capacity but solely as Trustee of the Trust,
in the exercise of the powers and authority conferred and vested in it by this
Agreement. Each of the undertakings and agreements made on the part of the
Trustee in the Certificates is made and intended not as a personal undertaking
or agreement by the Trustee but is made and intended for the purpose of binding
only the Trust.
Section 9.12. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and such proceeding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee. Any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursement and advances of the Trustee, its agents and counsel, be
for the ratable benefit or the Certifi- cateholders in respect of which such
judgment has been recovered.
Section 9.13. Suits for Enforcement. In case an Event of Servicing
Termination or other default by the Master Servicer, the Transferor, the
Depositor or the Sponsor hereunder shall occur and be continuing, the Trustee,
in its discretion, may proceed to protect and enforce its rights and the rights
of the Investor Certificateholders under this Agreement by a suit, action or
proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or in aid
of the execution of any power granted in this Agreement or for the enforcement
of any other legal, equitable or other remedy, as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of the rights of
the Trustee and the Certificateholders.
ARTICLE X
Termination
Section 10.01. Termination. (a) The respective obligations and
responsibilities of the Sponsor, the Master Servicer, the Depositor, the
Transferor and the Trustee created hereby (other than the obligation of the
Trustee to make certain payments to Certificateholders after the final
Distribution Date and the obligation of the Master Servicer to send certain
notices as hereinafter set forth) shall terminate upon the last action required
to be taken by the Trustee on the final Distribution Date pursuant to this
Article X following the later of (A) payment in full of all amounts owing to the
Credit Enhancer and (B) the earliest of (i) the transfer, under the conditions
specified in Section 10.01(b), to the Transferor of the Investor
Certificateholders' interest in each Mortgage Loan and all property acquired in
respect of any Mortgage Loan remaining in the Trust for an amount equal to the
sum of (w) the Investor Certificate Principal Balance, (x) accrued and unpaid
Investor Certificate Interest through the day preceding the final Distribution
Date, and (y) interest accrued on any Unpaid Investor Certificate Interest
Shortfall, to the extent legally permissible, (ii) the day following the
Distribution Date on which the distribution made to Investor Certificateholders
has reduced the Investor Certificate Principal Balance to zero, (iii) the final
payment or other liquidation of the last Mortgage Loan remaining in the Trust
(including without limitation the disposition of the Mortgage Loans pursuant to
Section 10.02) or the disposition of all property acquired upon foreclosure or
deed in lieu of foreclosure of any Mortgage Loan and (iv) the Distribution Date
in ________ ____; provided that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the date of the last survivor of
the descendants of Joseph P. Kennedy, the late ambassador of the United States
to the Court of St. James's, living on the date hereof. Upon termination in
accordance with clause (i) or (ii) of this Section 10.01, the Trustee shall
execute such documents and instruments of transfer presented by the Transferor,
in each case without recourse, representation or warranty, and take such other
actions as the Transferor may reasonably request to effect the transfer of the
Mortgage Loans to the Transferor.
(b) The Transferor shall have the right to exercise the option to
effect the transfer to the Transferor of each Mortgage Loan pursuant to Section
10.01(a) above on any Distribution Date on or after the Distribution Date
immediately prior to which the Investor Certificate Principal Balance is less
than or equal to 10% of the Original Investor Certificate Principal Balance and
all amounts due and owing to the Credit Enhancer for unpaid premiums and
unreimbursed draws on the Policy, together with interest thereon as provided
under the Insurance Agreement, have been paid.
(c) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Investor Certificateholders may surrender their Investor Certificates to the
Trustee for payment of the final distribution and cancellation, shall be given
promptly by the Trustee (upon receipt of written directions from the Transferor,
if the Transferor is exercising its right to transfer of the Mortgage Loans,
given not later than the first day of the month preceding the month of such
final distribution) to the Credit Enhancer and to the Master Servicer by letter
to Investor Certificateholders mailed not earlier than the 15th day and not
later than the 25th day of the month next preceding the month of such final
distribution specifying (i) the Distribution Date upon which final distribution
of the Investor Certificates will be made upon presentation and surrender of
Investor Certificates at the office or agency of the Trustee therein designated,
(ii) the amount of any such final distribution and (iii) that the Record Date
otherwise applicable to such Distribution Date is not applicable, distributions
being made only upon presentation and surrender of the Investor Certificates at
the office or agency of the Trustee therein specified. In the event written
directions are delivered by the Transferor to the Trustee as described in the
preceding sentence, the Transferor shall deposit in the Collection Account on or
before the Distribution Date for such final distribution in immediately
available funds an amount which, when added to the funds on deposit in the
Collection Account that are payable to the Investor Certificateholders, will be
equal to the retransfer amount for the Mortgage Loans computed as above
provided.
(d) Upon presentation and surrender of the Investor Certificates, the
Trustee shall cause to be distributed to the Holders of Investor Certificates on
the Distribution Date for such final distribution, in proportion to the
Percentage Interests of their respective Investor Certificates and to the extent
that funds are available for such purpose, an amount equal to (i) if such final
distribution is not being made pursuant to the transfer to the Transferor
pursuant to Section 10.01(a)(i), the amount required to be distributed to
Investor Certificateholders pursuant to Section 5.01 for such Distribution Date
and (ii) if such final distribution is being made pursuant to such retransfer,
the amount specified in Section 10.01(a)(i). The distribution on such final
Distribution Date pursuant to a retransfer pursuant to Section 10.01(a)(i) shall
be in lieu of the distribution otherwise required to be made on such
Distribution Date in respect of the Certificates. On the final Distribution Date
prior to having made the distributions called for above, the Trustee shall,
based upon the information set forth in the Servicing Certificate for such
Distribution Date, withdraw from the Collection Account and remit to the Credit
Enhancer the lesser of (x) the amount available for distribution on such
final Distribution Date, net of any portion thereof necessary to pay the
amounts described in clauses (d)(i) and (ii) above and (y) the unpaid
amounts due and owing to the Credit Enhancer for unpaid premiums and
unreimbursed draws on the Policy, together with interest thereon as
provided under the Insurance Agreement.
(e) In the event that all of the Investor Certificate- holders shall
not surrender their Investor Certificates for final payment and cancellation on
or before such final Distribution Date, the Trustee shall on such date cause all
funds in the Collection Account not distributed in final distribution to
Investor Certificateholders to be withdrawn therefrom and credited to the
remaining Investor Certificateholders by depositing such funds in a separate
escrow account for the benefit of such Investor Certificateholders and the
Transferor (if the Transferor has exercised its right to transfer the Mortgage
Loans) or the Trustee (in any other case) shall give a second written notice to
the remaining Investor Certificateholders to surrender their Investor
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Investor
Certificates shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Investor Certificateholders concerning surrender of their
Investor Certificates, and the cost thereof shall be paid out of the funds on
deposit in such escrow account.
[ARTICLE XI
Rapid Amortization Events
Section 11.01. Rapid Amortization Events. If any one of
the following events shall occur during the Managed Amortization
Period:
(a) failure on the part of the Sponsor (i) to make any payment
or deposit required by the terms of this Agreement, on or before the
date occurring three Business Days after the date such payment or
deposit is required to be made herein, or (ii) to cause the Depositor
to duly observe or perform in any material respect the covenants of the
Depositor set forth in Section 2.05 or (iii) duly to observe or perform
in any material respect any other covenants or agreements of the
Sponsor set forth in this Agreement, which failure, in each case,
materially and adversely affects the interests of the
Certificateholders or the Credit Enhancer and which, in the case of
clause (iii), continues unremedied and continues to affect materially
and adversely the interests of the Certificateholders for a period of
60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Sponsor
by the Trustee, or to the Sponsor and the Trustee by either the Credit
Enhancer or the Holders of Investor Certificates evidencing Percentage
Interests aggregating not less than 51%;
(b) any representation or warranty made by the Sponsor or the
Depositor in this Agreement shall prove to have been incorrect in any
material respect when made, as a result of which the interests of the
Investor Certificateholders or the Credit Enhancer are materially and
adversely affected and which continues to be incorrect in any material
respect and continues to affect materially and adversely the interests
of the Certificateholders or the Credit Enhancer for a period of 60
days after the date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the Sponsor or the
Depositor, as the case may be, by the Trustee, or to the Sponsor, the
Depositor and the Trustee by either the Credit Enhancer or the Holders
of Investor Certificates evidencing Percentage Interests aggregating
not less than 51%; provided that a Rapid Amortization Event pursuant to
this subparagraph (b) shall not be deemed to have occurred hereunder if
the Sponsor has accepted retransfer of the related Mortgage Loan or
Mortgage Loans or made a substitution therefor during such period (or
such longer period (not to exceed an additional 60 days) as the Trustee
may specify) in accordance with the provisions hereof;
(c) the Transferor or the Depositor shall voluntarily go into
liquidation, consent to the appointment of a conservator or receiver or
liquidator or similar person in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to the Transferor or the Depositor, or of or relating to all
or substantially all of such Person's property, or a decree or order of
a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator, receiver, liquidator or
similar person in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the
Transferor or the Depositor and such decree or order shall have
remained in force undischarged or unstayed for a period of 30 days; or
the Transferor or the Depositor shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations;
(d) the Trust shall become subject to registration as an
"investment company" under the Investment Company Act of 1940, as
amended; or
(e) the aggregate of all draws under the Policy exceeds 1% of
the Cut-off Date Pool Balance;
then, in the case of any event described in subparagraph (a) or (b) after the
applicable grace period, if any, set forth in such subparagraphs, either the
Trustee, the Credit Enhancer or the Holders of Investor Certificates evidencing
Percentage Interests aggregating more than 51%, by notice given in writing to
the Transferor, the Depositor and the Master Servicer (and to the Trustee if
given by either the Credit Enhancer or the Investor Certificateholders) may
declare that an early amortization event (a "Rapid Amortization Event") has
occurred as of the date of such notice, and in the case of any event described
in subpara- graph (c), (d) or (e), a Rapid Amortization Event shall occur
without any notice or other action on the part of the Trustee, the Credit
Enhancer or the Investor Certificateholders, immediately upon the occurrence of
such event.]
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment. This Agreement may be amended from time to
time by the Sponsor, the Master Servicer, the Depositor and the Trustee, in each
case without the consent of any of the Certificateholders, [but only with the
consent of the Credit Enhancer (which consent shall not be unreasonably
withheld),] (i) to cure any ambiguity or mistake, (ii) to correct any defective
provision herein or to supplement any provision herein which may be inconsistent
with any other provisions herein, (iii) to add to the duties of the Sponsor, the
Depositor, the Transferor or the Master Servicer, (iv) to add any other
provisions with respect to matters or questions arising under this Agreement [or
the Policy, as the case may be,] or (v) to modify, alter, amend, add to or
rescind any of the terms or provisions of this Agreement; provided that any such
action pursuant to clause (iv) or (v) shall not, as evidenced by an Opinion of
Counsel (which Opinion of Counsel shall not be an expense of the Trustee or the
Trust Fund), adversely affect in any material respect the interests of any
Certificateholder [or the Credit Enhancer]; provided further that any such
amendment referred to in the preceding proviso shall not be deemed to adversely
affect in any material respect the interests of the Certificateholders and no
opinion referred to in the preceding proviso shall be required to be delivered
if the Person requesting the amendment obtains a letter from each Rating Agency
stating that such amendment would not result in the downgrading or withdrawal of
the respective ratings then assigned to the Investor Certificates without regard
to the Policy.
This Agreement also may be amended from time to time by the Master
Servicer, the Sponsor, the Depositor and the Trustee[, and the Master Servicer
and the Credit Enhancer, may from time to time consent to the amendment of the
Policy,] with the consent of the Holders of the Investor Certificates evidencing
Percentage Interests aggregating not less than 51%, [and in the case of an
amendment to this Agreement, with the consent of the Credit Enhancer,] for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Certificateholders; provided that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, payments on the Certificates or
distributions or payments under the Policy which are required to be made on any
Certificate without the consent of the Holder of such Certificate, (ii) (A)
adversely effect in any material respect the interests of the Credit Enhancer,
without the consent of the Credit Enhancer] or (B) adversely effect in any
material respect the interests of the Holders of any Class of Certificates in
any other than as described in clause (i) above, without the consent of Holders
of Certificates of such Class evidencing, as to such Class, Percentage Interests
aggregating not less than 66% or (iii) reduce the aforesaid percentage required
to consent to any such amendment, without the consent of the Holders of all such
Certificates then outstanding.
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, which opinion shall not be an expense
of the Trustee or the Trust Fund, to the effect that such amendment will not
cause the imposition of any tax on any REMIC or the Certificateholders or cause
any REMIC to fail to qualify as a REMIC at any time that any Certificates are
outstanding.
Promptly after the execution of any amendment to this
Agreement requiring the consent of Certificateholders, the Trustee shall furnish
written notification of the substance or a copy of such amendment to each
Certificateholder, each Rating Agency and the Credit Enhancer.
It shall not be necessary for the consent of
Certificateholders under this Section 12.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee may prescribe.
Nothing in this Agreement shall require the Trustee to enter
into an amendment without receiving an Opinion of Counsel (which Opinion shall
not be an expense of the Trustee or the Trust Fund), satisfactory to the Trustee
that (i) such amendment is permitted and is not prohibited by this Agreement and
that all requirements for amending this Agreement have been complied with; and
(ii) either (A) the amendment does not adversely affect in any material respect
the interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 12.01.
Section 12.02. Recordation of Agreement. This Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Trustee, but only upon direction of Investor Certificate- holders accompanied by
an Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of Investor Certificateholders. The Investor
Certificate- holders requesting such recordation shall bear all costs and
expenses of such recordation. The Trustee shall have no obligation to ascertain
whether such recordation so affects the interests of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 12.03. Limitation on Rights of Certificateholders. The death or
incapacity of any Investor Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Investor Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as provided
in Sections 8.01, 9.01, 9.02, 11.01 and 12.01) or in any manner otherwise
control the operation and management of the Trust, or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Certificates, be construed so as to constitute the Certificateholders
from time to time as partners or members of an association; nor shall any
Investor Certificateholder be under any liability to any third person by reason
of any action taken by the parties to this Agreement pursuant to any provision
hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of default and of the continuance thereof, as hereinbefore provided, and unless
also the Holders of Investor Certificates evidencing Percentage Interests
aggregating not less than 51% shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other Certifi-
cateholder and the Trustee, that no one or more Holders of Certificates shall
have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder, or to enforce
any right under this Agreement, except in the manner herein provided and for
the equal, ratable and common benefit of all Certificateholders. For the
protection and enforcement of the provisions of this Section 12.03, each and
every Certificate- holder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.
By accepting its Investor Certificate, each Investor Certif-
icateholder agrees that unless a Credit Enhancer Default exists, the Credit
Enhancer shall have the right to exercise all rights of the Investor
Certificateholders under this Agreement without any further consent of the
Investor Certificateholders.
Section 12.04. Governing Law. THIS AGREEMENT SHALL BE CON-
STRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by certified mail, return receipt requested,
to (a) in the case of the Depositor, 4500 Park Granada, Calabasas, California
91302, Attention: Legal Department, (b) in the case of the Master Servicer,
___________________________ Attention: (c) in the case of the Trustee, at the
Corporate Trust Office, (d) in the case of the Credit Enhancer,
__________________________________________, Attention: _______________ (telecopy
number _______________), [(e) in the case of Moody's, Residential Loan
Monitoring Group, 4th Floor, 99 Church Street, New York, New York 10007, and (f)
in the case of Standard & Poor's, 26 Broadway, New York, New York 10004,] or, as
to each party, at such other address as shall be designated by such party in a
written notice to each other party. In each case in which a notice or other
communication to the Credit Enhancer refers to an Event of Servicing Termination
or a claim under the Policy or with respect to which failure on the part of the
Credit Enhancer to respond shall be deemed to constitute consent or acceptance,
then a copy of such notice or other communication should also be sent to the
attention of the General Counsel and shall be marked to indicate "URGENT
MATERIAL ENCLOSED." Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice. Any notice or other document required to be delivered or mailed by
the Trustee to any Rating Agency shall be given on a best efforts basis and only
as a matter of courtesy and accommodation and the Trustee shall have no
liability for failure to deliver such notice or document to any Rating Agency.
Section 12.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 12.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.05, 7.02 and 7.04, this
Agreement may not be assigned by the Depositor or the Master Servicer without
the prior written consent of the Credit Enhancer and Holders of the Investor
Certificates evidencing Percentage Interests aggregating not less than 66%.
Section 12.08. Certificates Nonassessable and Fully Paid. The parties
agree that the Investor Certificateholders shall not be personally liable for
obligations of the Trust, that the beneficial ownership interests represented by
the Certificates shall be nonassessable for any losses or expenses of the Trust
or for any reason whatsoever, and that the Certificates upon execution,
authentication and delivery thereof by the Trustee pursuant to Section 2.08 or
6.02 are and shall be deemed fully paid.
Section 12.09. Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, the Certificateholders,
the Certificate Owners, the Credit Enhancer and their respective successors and
permitted assigns. Except as otherwise provided in this Agreement, no other
Person will have any right or obligation hereunder.
Section 12.10. Counterparts. This instrument may be
executed in any number of counterparts, each of which so executed
shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section 12.11. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
IN WITNESS WHEREOF, the Depositor, the Sponsor, the Master
Servicer and the Trustee have caused this Agreement to be duly executed by their
respective officers all as of the day and year first above written.
INDYMAC ABS,
as Depositor
By:
------------------------------
Name:
Title:
as Sponsor and Master Servicer
By:
------------------------------
Name:
Title:
as Trustee
By:
------------------------------
Name:
Title:
State of New York )
) ss.:
County of New York )
On the ___th day of ________, 199_ before me, a notary public
in and for the State of New York, personally appeared ____________, known to me
who, being by me duly sworn, did depose and say that he resides at
_________________________________, __________; that he is the Vice President of
IndyMac ABS, a Delaware corporation, one of the parties that executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his name
thereto by like order.
------------------------------
Notary Public
[Notarial Seal]
State of New York )
) ss.:
County of New York )
On the __th day of ________, 199_ before me, a notary public
in and for the State of ________, personally appeared _____________________,
known to me who, being by me duly sworn, did depose and say that he resides at
_________________, ____________, ________ _____; that he is the ______________
of __________________________________, a _________________________, one of the
parties that executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the Board of Directors of said corporation;
and that he signed his name thereto by like order.
------------------------------
Notary Public
[Notarial Seal]
State of New York )
) ss.:
County of New York )
On the __th day of ________, 199_ before me, a notary public
in and for the State of New York, personally appeared ____________, known to me
who, being by me duly sworn, did depose and say that he resides at
_________________, ________________; that he is the Executive Vice President of
____________________________, a ________ corporation, one of the parties that
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of said corporation.
------------------------------
Notary Public
[Notarial Seal]
Exhibit A
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS MADE TO CEDE
& CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Original Investor
Certificate Principal Balance
of this Investor
Certificate : $___________
Certificate Rate: : Variable
Initial Aggregate Investor
Certificate Principal Balance
of all Investor Certificates $
CUSIP No. : ____________
Date of Pooling
and Servicing
Agreement : ________ __, ____
Certificate No. : __
Cut-Off Date : ________ __, ____
First Distribution
Date: : ________ __, ____
HOME EQUITY LOAN ASSET BACKED CERTIFICATES,
SERIES 199_-_
INVESTOR CERTIFICATE
evidencing a percentage interest in the distributions
allocable to the Investor Certificates evidencing an undivided
interest in a Trust consisting primarily of a pool of
adjustable rate home equity revolving credit line mortgage
loans sold by
INDYMAC ABS, INC.
This Certificate does not represent an obligation of or interest in
IndyMac ABS, Inc. (the "Depositor"), [__________________________] or the Trustee
referred to below or any of their affiliates. Neither this Certificate nor the
Mortgage Loans are guaranteed or insured by any governmental agency or
instrumentality.
This certifies that ________________ is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
Original Investor Certificate Principal Balance of this Certificate by the
aggregate Original Investor Certificate Principal Balance of all Investor
Certificates) in certain monthly distributions with respect to a Trust
consisting primarily of a pool of mortgage loans (the "Mortgage Loans"),
transferred by the Depositor to the Trustee and serviced by
[__________________________] (in such capacity, the "Master Servicer", including
any successor Master Servicer under the Agreement referred to below). The Trust
was created pursuant to a Pooling and Servicing Agreement dated as specified
above (the "Agreement") among the Depositor, the Master Servicer,
[__________________________], as sponsor (in such capacity, the "Sponsor"), and
__________________________________, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, capitalized terms used herein have the meanings
assigned in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound.
This Certificate is one of the Investor Certificates from a duly
authorized issue of Certificates designated as Home Equity Loan Asset Backed
Certificates, Series 199_-_, representing, to the extent specified in the
Agreement, an undivided interest in: (i) each Mortgage Loan including its Asset
Balance (including all Additional Balances) and all collections in respect
thereof received after the Cut-off Date (excluding payments in respect of
accrued interest due on or prior to the Cut-Off Date), (ii) property that
secured a Mortgage Loan that is acquired by foreclosure or deed in lieu of
foreclosure, (iii) an irrevocable and unconditional limited financial guarantee
insurance policy (the "Policy"), (iv) the Depositor's rights under the hazard
insurance policies in respect of the Mortgage Loans, (v) an assignment of the
Depositor's rights under the purchase agreement dated as of ___________, ____
between the Sponsor, as seller, and the Depositor, as purchaser (collectively,
the "Trust Assets") and (vi) certain other property described in the Agreement.
Distributions on this Certificate will be made by the Trustee, or by
the Paying Agent, if any, appointed pursuant to the Agreement, by check mailed
to the Person entitled thereto as such name and address shall appear on the
Certificate Register or, upon written request by such Person delivered to the
Trustee at least five Business Days prior to the related Record Date, by
wire transfer (but only if such Person owns of record one or more Investor
Certificates having principal denominations aggregating at least
$[__________________]), or by such other means of payment as such
Person and the Trustee shall agree. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee or the Paying Agent, if one has been appointed, of the pendency
of such distribution, and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that purpose.
Pursuant to the terms of the Agreement, a distribution will be
made on the 15th day of each month or if such day is not a Business Day, then on
the next succeeding Business Day (the "Distribution Date"), commencing on the
first Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last day preceding
such Distribution Date (the "Record Date"), in an amount equal to the product of
the Percentage Interest evidenced by this Certificate and the amount required to
be distributed to Holders of Investor Certificates on such Distribution Date
under the terms of the Agreement. Notwithstanding the foregoing, if Definitive
Certificates have become available pursuant to the Agreement, the Record Date
shall be the last day of the calendar month preceding the month of such
Distribution Date.
The Certificates are limited in right of payment to certain
payments on and collections in respect of the Mortgage Loans, all as more
specifically set forth in the Agreement. The Certificateholder, by its
acceptance of this Certificate, agrees that it will look solely to the funds on
deposit in the Collection Account for payment hereunder, and that the Trustee in
its individual capacity is not personally liable to the Certificateholders for
any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.
As provided in the Agreement, withdrawals from the Collection
Account may be made from time to time for purposes other than distributions to
the Investor Certificateholders and, subject to certain conditions in the
Agreement, Mortgage Loans may, at the election of the Transferor, be removed
from the Trust and transferred to the Transferor (as defined in the Agreement).
This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
It is the intention of the Transferor, the Depositor
and the Investor Certificateholders that the Investor Certificates will be
indebtedness for federal, state and local income and franchise tax
purposes and for purposes of any other tax imposed on or measured by income.
The Depositor, the Trustee and the Holder of this Certificate for
Certificate Owner) by acceptance of this Certificate (or, in the case
of a Certificate Owner, by virtue of such Certificate Owner's
acquisition of a beneficial interest herein) agrees to treat the
Investor Certificates (or beneficial interest therein), for purposes of
federal, state and local income or franchise taxes and any other tax
imposed on or measured by income, as indebtedness secured by the
Trust Assets and to report the transactions contemplated by the
Agreement on all applicable tax returns in a manner consistent with
such treatment. Each Holder of this Certificate agrees that it will cause
any Certificate Owner acquiring an interest in this Certificate through
it to comply with the Agreement as to treatment as indebtedness for
federal, state and local income and franchise tax purposes and for purposes of
any other tax imposed on or measured by income.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Sponsor, the Master Servicer, the Depositor and the Trustee, and the rights of
the Certificateholders under the Agreement, at any time by the Sponsor, the
Master Servicer, the Depositor and the Trustee with the consent (i) of the
Holders of Investor Certificates evidencing Percentage Interests aggregating not
less than 51% and (ii) of the Credit Enhancer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Investor Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Certificate
Registrar for such purpose, accompanied by a written instrument of transfer in
form satisfactory to the Master Servicer, the Trustee and the Certificate
Registrar duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates of authorized
denominations, if applicable, and evidencing the same aggregate Percentage
Interest will be issued to the designated transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of a like tenor in authorized
denominations (in the case of the Investor Certificates) and evidencing the
same aggregate Percentage Interest, as requested by the Holder surrendering the
same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee or the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The Trustee, the Sponsor, the Master Servicer, the Depositor, the
Credit Enhancer and the Certificate Registrar and any agent of the foregoing may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and neither the Trustee, the Sponsor, the Master
Servicer, the Depositor, the Credit Enhancer, the Certificate Registrar nor any
such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon distribution to the
Certificateholders, or provision therefor, of the amount required to be so
distributed in accordance with the Agreement upon the later of (i) payment in
full of all amounts owing to the Credit Enhancer and (ii) the earliest of (a)
the transfer, under the conditions specified in the Agreement, to the Transferor
(as defined in the Agreement) of the interest of the Holders of the Investor
Certificates in each Mortgage Loan and all property acquired in respect of any
Mortgage Loan remaining in the Trust, (b) the day following the Distribution
Date on which distributions reduce the Investor Certificate Principal Balance to
zero, (c) the final payment or other liquidation of the last Mortgage Loan
remaining in the Trust and (d) the Distribution Date in ________ ____. The
Transferor may effect an early retirement of the Certificates by paying the
retransfer price and accepting retransfer of the Trust Assets pursuant to the
terms of the Agreement on any Distribution Date after the Investor Certificate
Principal Balance is less than or equal to 10% of the Original Investor
Certificate Principal Balance; provided, however, that in no event shall the
Trust continue beyond the expiration of 21 years from the death of certain
person named in the Agreement. Upon retirement of the Certificates in accordance
with Section 10.01 of the Agreement, the Trustee shall execute such documents
and instruments of transfer presented by the Transferor and take such other
actions as the Transferor may reasonably request to effect the retransfer of the
Mortgage Loans to the Transferor.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual or facsimile signature, this Certificate
shall not be entitled to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
----------------------------------,
not in its individual capacity
but solely as Trustee on behalf of
the Trust
By:
Certificate of Authentication:
This is one of the Investor
Certificates referenced in the
within-mentioned Agreement.
By:
--------------------------
Authorized Officer
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND LAWS OR
IS SOLD OR TRANSFERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM REGISTRATION UNDER
SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
THE PROVISIONS OF SECTION 6.05 OF THE AGREEMENT REFERRED TO HEREIN. NEITHER THIS
CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE TRANSFEREE
DELIVERS TO THE TRUSTEE EITHER A REPRESENTATION LETTER TO THE EFFECT THAT SUCH
TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, THAT IF SUCH TRANSFEREE IS AN INSURANCE
COMPANY THAT THE TRANSFEREE IS AN INSURANCE COMPANY WHICH IS PURCHASING THIS
CERTIFICATE WITH FUNDS CONTAINED IN AN "INSURANCE COMPANY GENERAL ACCOUNT" (AS
SUCH TERM IS DEFINED IN SECTION V(e) OF PROHIBITED TRANSACTION CLASS EXEMPTION
95-60 ("PTCE 95-60")) AND THAT THE PURCHASE AND HOLDING OF THIS CERTIFICATE ARE
COVERED UNDER PTCE 95-60 OR A PLAN SUBJECT TO SECTION 4975 OF THE CODE, OR AN
OPINION OF COUNSEL IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.05(d) OF THE
AGREEMENT REFERRED TO HEREIN. NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY
HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR TO THE CODE WITHOUT THE OPINION OF
COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO
EFFECT.
Date of Pooling and Servicing
Agreement: : ________ __, ____
Cut-off Date : ________ __, ____
Percentage Interest : 100%
Certificate No. : __
First Distribution Date : ________ __, ____
HOME EQUITY LOAN ASSET BACKED CERTIFICATES,
SERIES 199_-_
TRANSFEROR CERTIFICATE
evidencing a percentage interest in the distributions
allocable to the Transferor Certificates evidencing an
undivided interest in a Trust consisting primarily of a pool
of adjustable rate home equity revolving credit line mortgage
loans sold by
INDYMAC ABS, INC.
This Certificate does not represent an obligation of or interest in
IndyMac ABS, Inc. (the "Depositor"), [__________________________] or the Trustee
referred to below or any of their affiliates. Neither this Certificate nor the
underlying Assets are guaranteed or insured by any governmental agency or
instrumentality.
This certifies that ____________________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in the entire
interest not allocated to the Investor Certificates in certain monthly
distributions with respect to a Trust consisting primarily of a pool of mortgage
loans (the "Mortgage Loans"), transferred by the Depositor and serviced by
[__________________________] (in such capacity, the "Master Servicer", including
any successor Master Servicer under the Agreement referred to below). The Trust
was created pursuant to a Pooling and Servicing Agreement dated as specified
above (the "Agreement") among the Depositor, the Master Servicer, as sponsor and
as master servicer (the "Sponsor" or the "Master Servicer," as appropriate), and
__________________________________, as trustee (the "Trustee"), a summary of
certain of the pertinent provisions of which is set forth hereafter. To the
extent not defined herein, capitalized terms used herein have the meanings
assigned in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound.
This Certificate is one of the Transferor Certificates from a duly
authorized issue of Certificates designated as Revolving Home Equity Loan Asset
Backed Certificates, Series 199_-_, representing, to the extent specified in the
Agreement, an undivided interest in: (i) each Mortgage Loan including its Asset
Balance (including all Additional Balances) and all collections in respect
thereof received after the Cut-off Date (excluding payments in respect of
accrued interest due on or prior to the Cut-off Date), (ii) property that
secured a Mortgage Loan that is acquired by foreclosure or deed in lieu of
foreclosure, (iii) the Depositor's rights under the hazard insurance policies in
respect of the Mortgage Loans, (iv) an assignment of the Depositor's rights
under the purchase agreement dated as of ___________, ____ between the Sponsor,
as seller, and the Depositor, as purchaser, and (v) certain other property
described in the Agreement (collectively, the "Trust Assets").
The certificates are limited in right of payment to certain payments on
and collections in respect of the Trust Assets, all as more specifically set
forth in the Agreement. The Certificateholder, by its acceptance of this
Certificate, agrees that it will look solely to the funds available in
accordance with the terms of the Agreement for payment hereunder and that the
Trustee in its individual capacity is not personally liable to the
Certificateholders for any amount payable under this Certificate or the
Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced hereby, and the rights,
duties and immunities of the Trustee.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Sponsor, the Master Servicer, the Depositor and the Trustee, and the rights of
the Certificateholders under the Agreement, at any time by the Sponsor, the
Master Servicer, the Depositor and the Trustee with the consent (i) of the
Holders of Investor Certificates evidencing Percentage Interests aggregating not
less than 51% and (ii) of the Credit Enhancer. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Investor Certificates.
No transfer of this Transferor Certificate shall be made unless such
transfer is exempt from the registration requirements of the Securities Act of
1933, as amended, and any applicable state securities laws or is made in
accordance with said Act and laws. There shall be delivered to the Trustee
either (i) an investment letter acceptable to and in form and substance
satisfactory to the Trustee certifying to the Trustee the facts
surrounding such transfer, which investment letter shall not be an expense of
the Trustee, or (ii) if such letter is not delivered, an Opinion of Counsel
acceptable to and in form and substance satisfactory to the Trustee and the
Depositor that such transfer is exempt (describing the applicable exemption and
the basis therefor) from or is being made pursuant to the registration
requirements of the Securities Act of 1933, as amended, which Opinion of Counsel
shall not be an expense of the Trustee. The Holder hereof desiring to effect
such Transfer shall, and does hereby agree to, indemnify the Transferor against
any liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.
As provided in the Agreement and subject to certain limitations set
forth therein, and subject to the restrictions set forth on the first page
hereof, neither this Certificate nor any legal or beneficial interest herein may
be, directly or indirectly, purchased, transferred, sold, pledged, assigned or
otherwise disposed of, and any proposed transferee hereof shall not become the
registered Holder hereof, without the satisfaction of the conditions set forth
in Section 6.05 of the Agreement.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Trustee, the Master Servicer, the Depositor, the Credit Enhancer
and the Certificate Registrar and any agent of the foregoing may treat the
Person in whose name this Certificate is registered as the owner hereof for all
purposes, and neither the Trustee, the Master Servicer, the Depositor, the
Credit Enhancer, the Certificate Registrar nor any such agent shall be affected
by any notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon distribution to the
Certificateholders, or provision therefor, of the amount required to be so
distributed in accordance with the Agreement upon the later of (i) payment in
full of all amounts owing to the Credit Enhancer and (ii) the earliest of (a)
the transfer, under the conditions specified in the Agreement, to the Transferor
(as defined in the Agreement) of the interest of the Holders of the Investor
Certificates in each Mortgage Loan and all property acquired in respect of any
Mortgage Loan remaining in the Trust, (b) the day following the Distribution
Date on which distributions reduce the Investor Certificate Principal Balance to
zero, (c) the final payment or other liquidation of the last Mortgage Loan
remaining in the Trust or (d) the Distribution Date in ________ ____. The
Transferor may effect an early retirement of the Certificates by paying the
retransfer price and accepting retransfer of the Trust Assets pursuant to
the terms of the Agreement on any Distribution Date after the Investor
Certificate Principal Balance is less than or equal to 10% of the
Original Investor Certificate Principal Balance; provided, however, that in no
event shall the Trust continue beyond the expiration of 21 years from the death
of certain person named in the Agreement. Upon retirement of the Certificates in
accordance with Section 10.01 of the Agreement, the Trustee shall execute such
documents and instruments of transfer presented by the Transferor and take such
other actions as the Transferor may reasonably request to effect the retransfer
of the Mortgage Loans to the Transferor.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee, by manual or facsimile signature this Certificate
shall not be entitled to any benefit under the Agreement, or be valid for any
purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
----------------------------------,
not in its individual capacity but
solely as Trustee on behalf of the
Trust
----------------------------------
Authorized Officer
Certificate of Authentication:
This is one of the Transferor
Certificates referenced in the
within-mentioned Agreement.
By:
----------------------------
Authorized Officer
EXHIBIT C
MORTGAGE LOAN SCHEDULE
[Delivered to Trustee Only]
EXHIBIT D
FORM OF CREDIT LINE AGREEMENT
Exhibit E
FORM OF LETTER OF REPRESENTATIONS
Exhibit F
FORM OF INVESTMENT LETTER [NON-RULE 144A]
FOR TRANSFEROR CERTIFICATES
Date:
IndyMac ABS, Inc.
as Depositor
4500 Park Granada
Calabasas, California 91302
Attention: ________________
- ----------------------------------
as Trustee
Attn:
Re: IndyMac ABS, Inc.;
Home Equity Loan Trust 199_-_,
Home Equity Loan Asset Backed Certificates,
Series 199_-_, Transferor Certificates
Ladies and Gentlemen:
In connection with our acquisition of Transferor Certificates in the
Denomination of , we certify that (a) we understand that the Transferor
Certificates are not being registered under the Securities Act of 1933, as
amended (the "Act"), or any state securities laws and are being transferred to
us in a transaction that is exempt from the registration requirements of the Act
and any such laws, (b) we are an "accredited investor," as defined in Regulation
D under the Act, and have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and risks of
investments in the Transferor Certificates, (c) we have had the opportunity to
ask questions of and receive answers from the Depositor concerning the purchase
of the Transferor Certificates and all matters relating thereto or any
additional information deemed necessary to our decision to purchase the
Transferor Certificates, (d) either (i) we are not an employee benefit plan that
is subject to the Employee Retirement Income Security Act of 1974, as amended,
nor a plan subject to Section 4975 of the Internal Revenue Code of 1986, as
amended, nor are we acting on behalf of any such employee benefit plan, or (ii)
if we are an insurance company, a representation that we are an insurance
company which is purchasing such Certificates with funds contained in an
"insurance company general account" (as such term is defined in Section V(e) of
Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the
purchase and holding of such Certificates are covered under PTCE 95-60, (e) we
are acquiring the Transferor Certificates for investment for our own account and
not with a view to any distribution of such Certificates (but without prejudice
to our right at all times to sell or otherwise dispose of the Transferor
Certificates in accordance with clause (g) below), (f) we have not offered or
sold any Transferor Certificates to, or solicited offers to buy any Transferor
Certificates from, any person, or otherwise approached or negotiated with any
person with respect thereto, or taken any other action which would result in a
violation of Section 5 of the Act, and (g) we will not sell, transfer or
otherwise dispose of any Transferor Certificates unless (1) such sale, transfer
or other disposition is made pursuant to an effective registration statement
under the Act or is exempt from such registration requirements, and if
requested, we will at our expense provide an opinion of counsel satisfactory to
the addressees of this Transferor Certificate that such sale, transfer or other
disposition) may be made pursuant to an exemption from the Act, (2) the
purchaser or transferee of such Transferor Certificate has executed and
delivered to you a certificate to substantially the same effect as this
certificate, and (3) the purchaser or transferee has otherwise complied with any
conditions for transfer set forth in the Pooling and Servicing Agreement dated
as of ___________, ____ (the "Agreement"), among IndyMac ABS, Inc. as Depositor,
____________________________, as Master Servicer, and
____________________________, as Trustee. All capitalized terms used herein but
not defined herein shall have the meanings assigned to them in the Agreement.
Very truly yours,
--------------------------------
Name of Transferee
By:
---------------------------
Name:
Title:
FORM OF INVESTMENT LETTER RULE 144A LETTER
FOR TRANSFEROR CERTIFICATES
Date:
IndyMac ABS, Inc.
as Depositor
4500 Park Granada
Calabasas, California 91302
Attention: ________________
- ----------------------------------
as Trustee
Attn:
Re: IndyMac ABS, Inc.;
Home Equity Loan Trust 199_-_,
Home Equity Loan Asset Backed Certificates,
Series 199_-_, Transferor Certificates
Ladies and Gentlemen:
In connection with our proposed purchase of the Transferor
Certificates, we certify that (a) we understand that the Transferor Certificates
are not being registered under the Securities Act of 1933, as amended (the
"Act"), or any state securities laws and are being transferred to us in a
transaction that is exempt from the registration requirements of the Act and any
such laws, (b) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of investments in
the Transferor Certificates, (c) we have had the opportunity to ask questions of
and receive answers from the Depositor concerning the purchase of the Transferor
Certificates and all matters relating thereto or any additional information
deemed necessary to our decision to purchase the Transferor Certificates, (d)
either (i) we are not an employee benefit plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended, nor a plan subject to
Section 4975 of the Internal Revenue Code of 1986, nor are we acting on behalf
of any such employee benefit plan, or (ii) if we are an insurance company, a
representation that we are an insurance company which is purchasing such
Certificates with funds contained in an "insurance company general account" (as
such term is defined in Section V(e) of Prohibited Transaction Class Exemption
95-60 ("PTCE 95-60")) and that the purchase and holding of such Certificates are
covered under PTCE 95-60, (e) we have not, nor has anyone acting on our behalf
offered, transferred, pledged, sold or otherwise disposed of the Transferor
Certificates, any interest in the Transferor Certificates or any other similar
security to, or solicited any offer to buy or accept a transfer, pledge or other
disposition of the Transferor Certificates, any interest in the Transferor
Certificates or any other similar security from, or otherwise approached
or negotiated with respect to the Transferor Certificates, any interest
in the Transferor Certificates or any other similar security with, any person
in any manner, or made any general solicitation by means of general
advertising or in any other manner, or taken any other action, that would
constitute a distribution of the Transferor Certificates under the Act
or that would render the disposition of the Transferor Certificates a
violation of Section 5 of the Act or require registration pursuant
thereto, nor will act, nor has authorized or will authorize any person
to act, in such manner with respect to the Transferor Certificates and
(f) we are a "qualified institutional buyer" as that term is defined in
Rule 144A under the Act and have completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. We are aware
that the sale to us is being made in reliance on Rule 144A. We are acquiring the
Transferor Certificates for our own account or for resale pursuant to Rule 144A
and further, understand that such Transferor Certificates may be resold, pledged
or transferred only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the Act. All capitalized terms used herein but
not defined herein shall have the meanings assigned to them in the Pooling and
Servicing Agreement dated as of ___________, ____ among IndyMac ABS, Inc. as
Depositor, ____________________________, as Sponsor Master Servicer, and
____________________________, as Trustee.
Name of Buyer
By:_______________________
Name:
Title:
ANNEX 1 TO Exhibit F
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Transferor Certificates described
therein:
1. As indicated below, the undersigned is the President,
Chief Financial Officer, Senior Vice President or other executive
officer of the Buyer.
2. In connection with purchases by the Buyer, the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned and/or
invested on a discretionary basis $ 1 in securities (except for the excluded
securities referred to below) as of the end of the Buyer's most recent fiscal
year (such amount being calculated in accordance with Rule 144A and (ii) the
Buyer satisfies the criteria in the category marked below.
Corporation, etc. The Buyer is a corporation (other than a
bank, savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or
charitable organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended.
Bank. The Buyer (a) is a national bank or banking institution
organized under the laws of any State, territory or the
District of Columbia, the business of which is substantially
confined to banking and is supervised by the state or
territorial banking commission or similar official or is a
foreign bank or equivalent institution, and (b) has an audited
net worth of at least $25,000,000 as demonstrated in its
latest annual financial statements, a copy of which is
attached hereto.
_______________________
1 Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case,
Buyer must own and/or invest on a discretionary basis at least
$10,000,000 in securities.
- ---------- Savings and Loan. The Buyer (a) is a savings and loan
association, building and loan association, cooperative bank,
homestead association or similar institution, which is
supervised and examined by a State or Federal authority having
supervision over any such institutions or is a foreign savings
and loan association or equivalent institution and (b) has an
audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements, a copy of which is
attached hereto.
- ---------- Broker-dealer. The Buyer is a dealer
registered pursuant to Section 15 of the
Securities Exchange Act of 1934.
- ---------- Insurance Company. The Buyer is an insurance company whose
primary and predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by insurance
companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State,
territory or the District of Columbia.
- ----------- State or Local Plan. The Buyer is a plan established and
maintained by a State, its political subdivisions, or any
agency or instrumentality of the State or its political
subdivisions for the benefit of its employees.
- ----------- ERISA Plan. The Buyer is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security
Act of
1974.
- ----------- Investment Advisor. The Buyer is an
investment advisor registered under the
Investment Advisors Act of 1940.
- ---------- Small Business Investment Company. The Buyer is a small
business investment company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958.
- ----------- Business Development Company. The Buyer is a
business development company as defined in
Section 202(a)(22) of the Investment Advisors Act of 1940.
- ----------- Trust Fund. The Buyer is a trust fund whose trustee is a bank
or trust company and whose participants are exclusively State
or Local Plans or ERISA Plans as defined above, and no
participant of the Buyer is an individual retirement account
or an H.R. 10 (Keogh) plan.
3. The term "securities" as used herein does not include (i) securities
of issuers that are affiliated with the Buyer, (ii) securities that are part of
an unsold allotment to or subscription by the Buyer, if the Buyer is a dealer,
(iii) bank deposit notes and certificates of deposit, (iv) loan participations,
(v) repurchase agreements, (vi) securities owned but subject to a repurchase
agreement and (vii) currency, interest rate and commodity swaps.
4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934, as
amended.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Transferor
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.
6. Until the date of purchase of the Rule 144A Securities, the Buyer
will notify each of the parties to which this certification is made of any
changes in the information and conclusions herein. Until such notice is given,
the Buyer's purchase of the Transferor Certificates will constitute a
reaffirmation of this certification as of the date of such purchase. In
addition, if the Buyer is a bank or savings and loan as provided above, the
Buyer agrees that it will furnish to such parties updated annual financial
statements promptly after they become available.
---------------------------------
Name of Buyer
By:
-----------------------------
Name:
Title:
Date:
ANNEX 2 TO Exhibit F
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees that are Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Transferor Certificates described
therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
qualified institutional buyer as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.
2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information With respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.
- ----------- The Buyer owned $____________ in securities (other than
the excluded securities referred to below) as of the end
of the Buyer's most recent fiscal year (such amount
being calculated in accordance With Rule 144A).
- ------------ The Buyer is part of a Family of Investment Companies which
owned in the aggregate $ in securities (other than the
excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein means two
or more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i) securities
of issuers that are affiliated with the Buyer or are part of the Buyer's Family
of Investment Companies, (ii) bank deposit notes and certificates of deposit,
(iii) loan participations, (iv) repurchase agreements, (v) securities owned but
subject to a repurchase agreement and (vi) currency, interest rate and commodity
swaps.
5. The Buyer is familiar with Rule 144A and understands that the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.
6. Until the date of purchase of the Transferor Certificates, the
undersigned will notify the parties listed in the Rule 144A Transferee
Certificate to which this certification relates of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Transferor Certificates will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.
-------------------------------
Name of Buyer
By:
----------------------------
Name:
Title:
IF AN ADVISER:
----------------------------------
Name of Adviser
Date:
Exhibit G
FORM OF REQUEST FOR RELEASE OF DOCUMENTS
[DATE]
- ----------------------------------
as Trustee
Attn:
Re: IndyMac ABS, Inc. Home Equity Loan
Asset Backed Certificates, Series 199_-_
Gentlemen:
In connection with the administration of the Mortgage Loans held by you
as Trustee under the Pooling and Servicing Agreement dated as of ___________,
____, among IndyMac ABS, Inc. as Depositor, [__________________________], as
Sponsor and Master Servicer, and you, as Trustee (the "Agreement"), we hereby
request a release of the Mortgage File held by you as Trustee with respect to
the following described Mortgage Loan for the reason indicated below.
Loan No.:
Reason for requesting file:
- -------- 1. Mortgage Loan paid in full. (The Master Servicer hereby
certifies that all amounts received in connection with the
payment in full of the Mortgage Loan which are required to be
deposited in the Collection Account pursuant to Section 3.02
of the Agreement have been so deposited).
- -------- 2. Retransfer of Mortgage Loan. (The Master Servicer hereby
certifies that the Transfer Deposit Amount has been deposited
in the Collection Account pursuant to the
Agreement).
- -------- 3. The Mortgage Loan is being foreclosed.
- -------- 4. The Mortgage Loan is being re-financed by another depository
institution. (The Master Servicer hereby certifies that all
amounts received in connection with the payment in full of the
Mortgage Loan which are required to be deposited in the
Collection Account pursuant to Section 3.02 of the Agreement
have been so deposited).
5. Other (Describe).
The undersigned acknowledges that the above Mortgage File will be held
by the undersigned in accordance with the provisions of the Agreement and will
promptly be returned to the Trustee when the need therefor by the Master
Servicer no longer exists unless the Mortgage Loan has been liquidated or
retransferred.
Capitalized terms used herein shall have the meanings ascribed to them
in the Agreement.
[-------------------------]
By:
------------------------------
Name:
Title: Servicing Officer
B&W Draft
3/30/98
=============================================================================
IndyMac ABS, Inc.
Depositor
_______________________________
Seller and Master Servicer
and
____________________________
Trustee
___________________________________
POOLING AND SERVICING AGREEMENT
Dated as of _________, 199_
__________________________________
MORTGAGE PASS-THROUGH CERTIFICATES, Series 199_-_
=============================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Accretion Directed Certificates . . . . . . . . . . . . . . . . . . I-1
Accrual Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
Accrual Certificates . . . . . . . . . . . . . . . . . . . . . . . . I-1
Accrual Termination Date . . . . . . . . . . . . . . . . . . . . . . I-1
Adjusted Mortgage Rate . . . . . . . . . . . . . . . . . . . . . . . I-1
Adjusted Net Mortgage Rate . . . . . . . . . . . . . . . . . . . . . I-1
Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-2
Allocable Share . . . . . . . . . . . . . . . . . . . . . . . . . . I-2
Amount Available for Senior Principal . . . . . . . . . . . . . . . I-2
Amount Held for Future Distribution . . . . . . . . . . . . . . . . I-2
Applicable Credit Support Percentage . . . . . . . . . . . . . . . . I-2
Collateral Value . . . . . . . . . . . . . . . . . . . . . . . . . . I-2
Available Funds . . . . . . . . . . . . . . . . . . . . . . . . . . I-3
Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . . I-3
Bankruptcy Coverage Termination Date . . . . . . . . . . . . . . . . I-3
Bankruptcy Loss . . . . . . . . . . . . . . . . . . . . . . . . . . I-3
Bankruptcy Loss Coverage Amount . . . . . . . . . . . . . . . . . . I-3
Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . . I-4
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-4
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-4
Certificate Account . . . . . . . . . . . . . . . . . . . . . . . . I-4
Certificate Balance . . . . . . . . . . . . . . . . . . . . . . . . I-4
Certificate Owner . . . . . . . . . . . . . . . . . . . . . . . . . I-4
Certificate Register . . . . . . . . . . . . . . . . . . . . . . . . I-4
Certificateholder or Holder . . . . . . . . . . . . . . . . . . . . I-4
Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-5
Class A-_ Optimal Amount . . . . . . . . . . . . . . . . . . . . . . I-5
Class A-_ Percentage . . . . . . . . . . . . . . . . . . . . . . . . I-5
Class Certificate Balance . . . . . . . . . . . . . . . . . . . . . I-5
Class Interest Shortfall . . . . . . . . . . . . . . . . . . . . . . I-5
Class Optimal Interest Distribution Amount . . . . . . . . . . . . . I-5
Class PO Deferred Amount . . . . . . . . . . . . . . . . . . . . . . I-6
Class Subordination Percentage . . . . . . . . . . . . . . . . . . . I-6
Class Unpaid Interest Amounts . . . . . . . . . . . . . . . . . . . I-6
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-6
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-6
COFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-6
COFI Certificates . . . . . . . . . . . . . . . . . . . . . . . . . I-6
Component . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-6
Component Balance . . . . . . . . . . . . . . . . . . . . . . . . . I-6
Component Certificates . . . . . . . . . . . . . . . . . . . . . . . I-7
Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . I-7
Cut-off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-7
Cut-off Date Pool Principal Balance . . . . . . . . . . . . . . . . I-7
Cut-off Date Principal Balance . . . . . . . . . . . . . . . . . . . I-7
DCR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-7
Debt Service Reduction . . . . . . . . . . . . . . . . . . . . . . . I-7
Defective Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . I-7
Deficient Valuation . . . . . . . . . . . . . . . . . . . . . . . . I-7
Definitive Certificates . . . . . . . . . . . . . . . . . . . . . . I-8
Deleted Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . I-8
Delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-8
Denomination . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-8
Depositor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-8
Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-8
Depository Participant . . . . . . . . . . . . . . . . . . . . . . . I-8
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . I-8
Discount Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . . I-8
Distribution Account . . . . . . . . . . . . . . . . . . . . . . . . I-8
Distribution Account Deposit Date . . . . . . . . . . . . . . . . . I-8
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . I-9
Due Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
ERISA-Restricted Certificate . . . . . . . . . . . . . . . . . . . . I-9
Escrow Account . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
Excess Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-9
Excess Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . I-10
Expense Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . I-10
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-10
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-10
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-10
Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-10
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-10
Fraud Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-10
Fraud Loss Coverage Amount . . . . . . . . . . . . . . . . . . . . I-10
Fraud Loss Coverage Termination Date . . . . . . . . . . . . . . . I-11
Fraud Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . I-11
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-11
Indirect Participant . . . . . . . . . . . . . . . . . . . . . . . I-11
Initial Bankruptcy Coverage Amount . . . . . . . . . . . . . . . . I-11
Initial Component Balance . . . . . . . . . . . . . . . . . . . . I-11
Initial LIBOR Rate . . . . . . . . . . . . . . . . . . . . . . . . I-11
Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . I-11
Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . I-11
Insured Expenses . . . . . . . . . . . . . . . . . . . . . . . . . I-11
Interest Accrual Period . . . . . . . . . . . . . . . . . . . . . I-11
Interest Determination Date . . . . . . . . . . . . . . . . . . . I-12
Latest Possible Maturity Date . . . . . . . . . . . . . . . . . . I-12
LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-12
LIBOR Certificates . . . . . . . . . . . . . . . . . . . . . . . . I-12
Liquidated Mortgage Loan . . . . . . . . . . . . . . . . . . . . . I-12
Liquidation Proceeds . . . . . . . . . . . . . . . . . . . . . . . I-12
Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . . . I-12
Lost Mortgage Note . . . . . . . . . . . . . . . . . . . . . . . . I-12
Majority in Interest . . . . . . . . . . . . . . . . . . . . . . . I-13
Master Servicer . . . . . . . . . . . . . . . . . . . . . . . . . I-13
Master Servicer Advance Date . . . . . . . . . . . . . . . . . . . I-13
Master Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . I-13
Master Servicing Fee Rate . . . . . . . . . . . . . . . . . . . . I-13
Monthly Statement . . . . . . . . . . . . . . . . . . . . . . . . I-13
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-13
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-13
Mortgage File . . . . . . . . . . . . . . . . . . . . . . . . . . I-13
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . . . I-13
Mortgage Loan Schedule . . . . . . . . . . . . . . . . . . . . . . I-14
Mortgage Note . . . . . . . . . . . . . . . . . . . . . . . . . . I-15
Mortgage Rate . . . . . . . . . . . . . . . . . . . . . . . . . . I-15
Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . I-15
Mortgagor . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-15
National Cost of Funds Index . . . . . . . . . . . . . . . . . . . I-15
Net Prepayment Interest Shortfalls . . . . . . . . . . . . . . . . I-15
Non-Delay Certificates . . . . . . . . . . . . . . . . . . . . . . I-15
Non-Discount Mortgage Loan . . . . . . . . . . . . . . . . . . . . I-15
Non-PO Formula Principal Amount . . . . . . . . . . . . . . . . . I-15
Non-PO Percentage . . . . . . . . . . . . . . . . . . . . . . . . I-16
Nonrecoverable Advance . . . . . . . . . . . . . . . . . . . . . . I-16
Notice of Final Distribution . . . . . . . . . . . . . . . . . . . I-16
Notional Amount . . . . . . . . . . . . . . . . . . . . . . . . . I-16
Notional Amount Certificates . . . . . . . . . . . . . . . . . . . I-16
Offered Certificates . . . . . . . . . . . . . . . . . . . . . . . I-16
Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . I-16
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . I-16
Optional Termination . . . . . . . . . . . . . . . . . . . . . . . I-17
Original Applicable Credit Support Percentage . . . . . . . . . . I-17
Original Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . I-17
Original Subordinated Principal Balance . . . . . . . . . . . . . I-17
OTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-17
Outside Reference Date . . . . . . . . . . . . . . . . . . . . . . I-17
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . I-17
Outstanding Mortgage Loan . . . . . . . . . . . . . . . . . . . . I-18
Ownership Interest . . . . . . . . . . . . . . . . . . . . . . . . I-18
Pass-Through Rate . . . . . . . . . . . . . . . . . . . . . . . . I-18
Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . I-18
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . I-18
Permitted Transferee . . . . . . . . . . . . . . . . . . . . . . . I-19
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-20
Physical Certificate . . . . . . . . . . . . . . . . . . . . . . . I-20
Planned Balance . . . . . . . . . . . . . . . . . . . . . . . . . I-20
Planned Principal Classes . . . . . . . . . . . . . . . . . . . . I-20
PO Formula Principal Amount . . . . . . . . . . . . . . . . . . . I-20
PO Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . I-21
Pool Stated Principal Balance . . . . . . . . . . . . . . . . . . I-21
Prepayment Interest Excess . . . . . . . . . . . . . . . . . . . . I-21
Prepayment Interest Shortfall . . . . . . . . . . . . . . . . . . I-21
Prepayment Period . . . . . . . . . . . . . . . . . . . . . . . . I-21
Prepayment Shifting Percentage . . . . . . . . . . . . . . . . . . I-21
Primary Insurance Policy . . . . . . . . . . . . . . . . . . . . . I-22
Primary Planned Principal Classes . . . . . . . . . . . . . . . . I-22
Principal Prepayment . . . . . . . . . . . . . . . . . . . . . . . I-22
Principal Prepayment in Full . . . . . . . . . . . . . . . . . . . I-22
Private Certificate . . . . . . . . . . . . . . . . . . . . . . . I-22
Pro Rata Share . . . . . . . . . . . . . . . . . . . . . . . . . . I-22
Prospectus Supplement . . . . . . . . . . . . . . . . . . . . . . I-22
PUD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-22
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . I-22
Qualified Insurer . . . . . . . . . . . . . . . . . . . . . . . . I-22
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . . . I-23
Realized Loss . . . . . . . . . . . . . . . . . . . . . . . . . . I-23
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . I-23
Reference Bank . . . . . . . . . . . . . . . . . . . . . . . . . . I-23
Refinancing Mortgage Loan . . . . . . . . . . . . . . . . . . . . I-24
Regular Certificates . . . . . . . . . . . . . . . . . . . . . . . I-24
Relief Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-24
Relief Act Reductions . . . . . . . . . . . . . . . . . . . . . . I-24
REMIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-24
REMIC Change of Law . . . . . . . . . . . . . . . . . . . . . . . I-24
REMIC Provisions . . . . . . . . . . . . . . . . . . . . . . . . . I-24
REO Property . . . . . . . . . . . . . . . . . . . . . . . . . . . I-24
Request for Release . . . . . . . . . . . . . . . . . . . . . . . I-24
Required Coupon . . . . . . . . . . . . . . . . . . . . . . . . . I-24
Required Insurance Policy . . . . . . . . . . . . . . . . . . . . I-24
Residual Certificates . . . . . . . . . . . . . . . . . . . . . . I-24
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . I-25
Restricted Classes . . . . . . . . . . . . . . . . . . . . . . . . I-25
Scheduled Balances . . . . . . . . . . . . . . . . . . . . . . . . I-25
Scheduled Classes . . . . . . . . . . . . . . . . . . . . . . . . I-25
Scheduled Payment . . . . . . . . . . . . . . . . . . . . . . . . I-25
Scheduled Principal Distribution Amount . . . . . . . . . . . . . I-25
Secondary Planned Principal Clauses . . . . . . . . . . . . . . . I-25
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . I-25
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-25
Senior Certificates . . . . . . . . . . . . . . . . . . . . . . . I-25
Senior Credit Support Depletion Date . . . . . . . . . . . . . . . I-25
Senior Percentage . . . . . . . . . . . . . . . . . . . . . . . . I-25
Senior Prepayment Percentage . . . . . . . . . . . . . . . . . . . I-26
Senior Principal Distribution Amount . . . . . . . . . . . . . . . I-26
Servicing Advances . . . . . . . . . . . . . . . . . . . . . . . . I-27
Servicing Officer . . . . . . . . . . . . . . . . . . . . . . . . I-27
Servicing Standard . . . . . . . . . . . . . . . . . . . . . . . . I-27
Special Hazard Coverage Termination Date . . . . . . . . . . . . . I-27
Special Hazard Loss . . . . . . . . . . . . . . . . . . . . . . . I-27
Special Hazard Loss Coverage Amount . . . . . . . . . . . . . . . I-28
Special Hazard Mortgage Loan . . . . . . . . . . . . . . . . . . . I-29
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-29
Startup Day . . . . . . . . . . . . . . . . . . . . . . . . . . . I-29
Stated Principal Balance . . . . . . . . . . . . . . . . . . . . . I-29
Streamlined Documentation Mortgage Loan . . . . . . . . . . . . . I-29
Subordinated Certificates . . . . . . . . . . . . . . . . . . . . I-29
Subordinated Percentage . . . . . . . . . . . . . . . . . . . . . I-29
Subordinated Prepayment Percentage . . . . . . . . . . . . . . . . I-29
Subordinated Principal Distribution Amount . . . . . . . . . . . . I-29
Subservicer . . . . . . . . . . . . . . . . . . . . . . . . . . . I-30
Substitute Mortgage Loan . . . . . . . . . . . . . . . . . . . . . I-30
Substitution Adjustment Amount . . . . . . . . . . . . . . . . . . I-30
Support Classes . . . . . . . . . . . . . . . . . . . . . . . . . I-30
Targeted Balance . . . . . . . . . . . . . . . . . . . . . . . . . I-30
Targeted Principal Classes . . . . . . . . . . . . . . . . . . . . I-30
Tax Matters Person . . . . . . . . . . . . . . . . . . . . . . . . I-30
Tax Matters Person Certificate . . . . . . . . . . . . . . . . . . I-31
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-31
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-31
Trustee Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . I-31
Trustee Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . I-31
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-31
Unscheduled Principal Distribution Amount . . . . . . . . . . . . I-31
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . I-31
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Mortgage Loans . . . . . . . . . . . II-1
SECTION 2.02. Acceptance by Trustee of the Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . II-4
SECTION 2.03. Representations, Warranties and
Covenants of the Seller and
Master Servicer . . . . . . . . . . . . . . . . . II-6
SECTION 2.04. Representations and Warranties of the
Depositor as to the Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . II-9
SECTION 2.05. Delivery of Opinion of Counsel in
Connection with Substitutions . . . . . . . . . . II-9
SECTION 2.06. Execution and Delivery of
Certificates . . . . . . . . . . . . . . . . . . II-10
SECTION 2.07. REMIC Matters . . . . . . . . . . . . . . . . . . . II-10
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.01. Master Servicer to Service Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . III-1
SECTION 3.02. Subservicing; Enforcement of the
Obligations of Servicers . . . . . . . . . . . . III-2
SECTION 3.03. Rights of the Depositor and the
Trustee in Respect of the Master
Servicer . . . . . . . . . . . . . . . . . . . . III-2
SECTION 3.04. Trustee to Act as Master Servicer . . . . . . . . . III-3
SECTION 3.05. Collection of Mortgage Loan
Payments; Certificate Account;
Distribution Account . . . . . . . . . . . . . . III-4
SECTION 3.06. Collection of Taxes, Assessments
and Similar Items; Escrow
Accounts . . . . . . . . . . . . . . . . . . . . III-7
SECTION 3.07. Access to Certain Documentation and
Information Regarding the Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . III-8
SECTION 3.08. Permitted Withdrawals from the
Certificate Account and
Distribution Account . . . . . . . . . . . . . . III-8
SECTION 3.09. Maintenance of Hazard Insurance;
Maintenance of Primary Insurance
Policies . . . . . . . . . . . . . . . . . . . III-10
SECTION 3.10. Enforcement of Due-on-Sale Clauses;
Assumption Agreements . . . . . . . . . . . . . III-12
SECTION 3.11. Realization Upon Defaulted Mortgage
Loans; Repurchase of Certain
Mortgage Loans . . . . . . . . . . . . . . . . III-14
SECTION 3.12. Trustee to Cooperate; Release of
Mortgage Files . . . . . . . . . . . . . . . . III-17
SECTION 3.13. Documents Records and Funds in
Possession of Master Servicer
to be Held for the Trustee . . . . . . . . . . III-18
SECTION 3.14. Servicing Compensation . . . . . . . . . . . . . III-18
SECTION 3.15. Annual Statement as to Compliance . . . . . . . . III-19
SECTION 3.16. Annual Independent Public Accountants'
Servicing Statement; Financial
Statements . . . . . . . . . . . . . . . . . . III-19
SECTION 3.17. Errors and Omissions Insurance;
Fidelity Bonds . . . . . . . . . . . . . . . . III-20
ARTICLE IV
DISTRIBUTIONS AND
ADVANCES BY THE MASTER SERVICER
SECTION 4.01. Advances . . . . . . . . . . . . . . . . . . . . . IV-1
SECTION 4.02. Priorities of Distribution . . . . . . . . . . . . IV-1
SECTION 4.03. Allocation of Realized Losses . . . . . . . . . . . IV-7
SECTION 4.04. Monthly Statements to
Certificateholders . . . . . . . . . . . . . . . IV-8
SECTION 4.05. Determination of Pass-Through Rates
for COFI Certificates . . . . . . . . . . . . . . IV-10
SECTION 4.06. Determination of Pass-Through Rates
for LIBOR Certificates . . . . . . . . . . . . . IV-13
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates . . . . . . . . . . . . . . . . . . V-1
SECTION 5.02. Certificate Register; Registration of
Transfer and Exchange of
Certificates . . . . . . . . . . . . . . . . . . . V-2
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
Certificates . . . . . . . . . . . . . . . . . . . V-7
SECTION 5.04. Persons Deemed Owners . . . . . . . . . . . . . . . . V-8
SECTION 5.05. Access to List of Certificateholders'
Names and Addresses . . . . . . . . . . . . . . . . V-8
SECTION 5.06. Maintenance of Office or Agency . . . . . . . . . . . V-8
ARTICLE VI
THE DEPOSITOR AND THE MASTER SERVICER
SECTION 6.01. Respective Liabilities of the
Depositor and the Master Servicer . . . . . . . . VI-1
SECTION 6.02. Merger or Consolidation of the
Depositor or the Master Servicer . . . . . . . . VI-1
SECTION 6.03. Limitation on Liability of the
Depositor, the Seller, the
Master Servicer and Others . . . . . . . . . . . VI-1
SECTION 6.04. Limitation on Resignation of Master
Servicer . . . . . . . . . . . . . . . . . . . . VI-2
ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . VII-1
SECTION 7.02. Trustee to Act; Appointment of
Successor . . . . . . . . . . . . . . . . . . . . VII-3
SECTION 7.03. Notification to Certificateholders . . . . . . . . VII-4
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee . . . . . . . . . . . . . . . . VIII-1
SECTION 8.02. Certain Matters Affecting the
Trustee . . . . . . . . . . . . . . . . . . . . VIII-2
SECTION 8.03. Trustee Not Liable for Certificates
or Mortgage Loans . . . . . . . . . . . . . . . VIII-3
SECTION 8.04. Trustee May Own Certificates . . . . . . . . . . VIII-3
SECTION 8.05. Trustee's Fees and Expenses . . . . . . . . . . . VIII-4
SECTION 8.06. Eligibility Requirements for
Trustee . . . . . . . . . . . . . . . . . . . . VIII-4
SECTION 8.07. Resignation and Removal of Trustee . . . . . . . VIII-5
SECTION 8.08. Successor Trustee . . . . . . . . . . . . . . . . VIII-6
SECTION 8.09. Merger or Consolidation of Trustee . . . . . . . VIII-6
SECTION 8.10. Appointment of Co-Trustee or
Separate Trustee . . . . . . . . . . . . . . . VIII-7
SECTION 8.11. Tax Matters . . . . . . . . . . . . . . . . . . . VIII-8
SECTION 8.12. Periodic Filings. . . . . . . . . . . . . . . . . VIII-11
ARTICLE IX
TERMINATION
SECTION 9.01. Termination upon Liquidation or
Purchase of all Mortgage Loans . . . . . . . . . IX-1
SECTION 9.02. Final Distribution on the
Certificates . . . . . . . . . . . . . . . . . . IX-1
SECTION 9.03. Additional Termination Requirements . . . . . . . . IX-3
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Amendment . . . . . . . . . . . . . . . . . . . . . . X-1
SECTION 10.02. Recordation of Agreement;
Counterparts . . . . . . . . . . . . . . . . . . . X-2
SECTION 10.03. Governing Law . . . . . . . . . . . . . . . . . . . . X-3
SECTION 10.04. Intention of Parties . . . . . . . . . . . . . . . . X-3
SECTION 10.05. Notices . . . . . . . . . . . . . . . . . . . . . . . X-4
SECTION 10.06. Severability of Provisions . . . . . . . . . . . . . X-5
SECTION 10.07. Assignment . . . . . . . . . . . . . . . . . . . . . X-5
SECTION 10.08. Limitation on Rights of Certificate-holders . . . . . X-5
SECTION 10.09. Inspection and Audit Rights . . . . . . . . . . . . . X-6
SECTION 10.10. Certificates Nonassessable and Fully
Paid . . . . . . . . . . . . . . . . . . . . . . . X-6
Exhibit A: Form of Senior Certificate
(excluding Notional Amount
Certificates) . . . . . . . . . . . . . . . . . . . A-1
Exhibit B: Form of Subordinated Certificate . . . . . . . . . . B-1
Exhibit C: Form of Class A-R Certificate . . . . . . . . . . . . C-1
Exhibit D: Form of Notional Amount Certificate . . . . . . . . . D-1
Exhibit E: Form of Reverse of Certificates . . . . . . . . . . . E-1
Exhibit F: (Reserved) . . . . . . . . . . . . . . . . . . . . . F-1
Exhibit G: Form of Initial Certificates . . . . . . . . . . . . G-1
Exhibit H: Form of Final Certification of Trustee . . . . . . . H-1
Exhibit I: Transfer Affidavit . . . . . . . . . . . . . . . . . I-1
Exhibit J: Form of Transferor Certificate . . . . . . . . . . . J-1
Exhibit K: Form of Investment Letter (Non-Rule 144A) . . . . . . K-1
Exhibit L: Form of Rule 144A Letter . . . . . . . . . . . . . . L-1
Exhibit M: Request for Release (for Trustee) . . . . . . . . . . M-1
Exhibit N: Request for Release (Mortgage Loan)
Paid in Full, Repurchased and
Replaced) . . . . . . . . . . . . . . . . . . . . . N-1
SCHEDULES
---------
Schedule I: Mortgage Loan Schedule . . . . . . . . . . . . . . S-I-1
Schedule II: Representations and Warranties of the
Seller/Master Servicer . . . . . . . . . . . . S-II-1
Schedule III: Representations and Warranties as to
the Mortgage Loans . . . . . . . . . . . . . . S-III-1
Schedule IV: Planned Balance Schedules . . . . . . . . . . . . S-IV-1
THIS POOLING AND SERVICING AGREEMENT, dated as of _______ __, 199_,
among IndyMac ABS, Inc., a Delaware corporation, as depositor (the
"Depositor"), ____________________________, a _______________ corporation, as
seller (in such capacity, the "Seller") and as master servicer (in such
capacity, the "Master Servicer"), and ____________________, a banking
corporation organized under the laws of the __________________, as trustee
(the "Trustee").
WITNESSETH THAT
In consideration of the mutual agreements herein contained, the
parties hereto agree as follows:
PRELIMINARY STATEMENT
The Depositor is the owner of the Trust Fund that is hereby
conveyed to the Trustee in return for the Certificates. The Trust Fund for
federal income tax purposes will consist of a single REMIC. The Certificates
will represent the entire beneficial ownership interest in the Trust Fund.
The Regular Certificates will represent the "regular interests" in the Trust
Fund and the Residual Certificates will represent the single "residual
interest" in the Trust Fund. The "latest possible maturity date" for federal
income tax purposes of all interests created hereby will be the Latest
Possible Maturity Date.
The following table sets forth characteristics of the Certificates,
together with the minimum denominations and integral multiples in excess
thereof in which such Classes shall be issuable (except that one Certificate
of each Class of Certificates may be issued in a different amount and, in
addition, one Residual Certificate representing the Tax Matters Person
Certificate may be issued in a different amount):
<TABLE>
<CAPTION>
Integral
Initial Class Multiples
Certificate Pass-Through Minimum in Excess of
Balance Rate Denomination Minimum
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Class A-_ $__________ ____% $_________ $________
Class A-_ $__________ ____% $_________ $________
Class A-_ $__________ ____% $_________ $________
Class A-_ $__________ _____% $_________ $________
Class A-_ $__________ _____% $_________ $________
Class A-_ $__________ _____% $_________ $________
Class A-_ $__________ (1) $_________ $________
Class PO $__________ (2) $_________ $________
Class X (3) (4) $_______ $_______(5)
Class A-R $__________ ____% $_________ N/A
Class B-_ $__________ ____% $_________ $________
Class B-_ $__________ ____% $_________ $________
Class B-_ $__________ ____% $_________ $________
Class B-_ $__________ ____% $_________ $________
Class B-_ $__________ ____% $_________ $________
Class B-_ $__________ ____% $_________ $________
</TABLE>
_____________________
(1) The Class A-_ Certificates will be comprised of multiple payment
components. The Pass-Through Rate for any Distribution Date will equal
the weighted average of the Pass-Through Rates of the various
Components. The Pass-Through Rate for the first Distribution Date is
_____%.
(2) The Class PO Certificates will be Principal Only Certificates and will
not bear interest.
(3) The Class X Certificates will be Notional Amount Certificates, will have
no principal balance and will bear interest on their Notional Amount
(initially, $________________).
(4) The Pass-Through Rate for the Class X Certificates for any Distribution
Date will be equal to the excess of (a) the average of the Net Mortgage
Rates of the Non-Discount Mortgage Loans, weighted on the basis of their
respective Stated Principal Balances over (b) ____% per annum. The
Pass-Through Rate for the Class X Certificates for the first
Distribution Date is _______%.
(5) Minimum Denomination is based on the Notional Amount of such Class.
Set forth below are designations of Classes of Certificates to the
categories used herein:
Accretion Directed
Certificates. . . . . . Class A-_ Certificates and Class A-_-_
Certificates.
Accrual Certificates . . . Class A-_-_ Certificates.
Book-Entry Certificates . . All Classes of Certificates other than the
Physical Certificates.
Component Certificates . . Class A-_ Certificates.
Components . . . . . . For purposes of calculating distributions, the
Component Certificates will be comprised of
multiple payment components having the
designations, Initial Component Balances and
Pass-Through Rates set forth below:
<TABLE>
<CAPTION>
Initial
Component
Designation Balance Pass-Through Rate
- ----------- --------- -----------------
<S> <C> <C>
Class A-_-_ Notional ____%
Class A-_-_ Notional ____%
Class A-_-_ Notional ____%
Class A-_-_ $____________ ____%
Class A-_-_ $____________ ____%
Class A-_-_ $____________ ____%
</TABLE>
The Class A-_-_, Class A-_-_ and Class A-_-_
Components will have no Component Balances and
will bear interest on their respective Notional
Amounts. The Notional Amount for the Class A-_-
_ Component will equal the outstanding Class
Certificate Balance of the Class A-_
Certificate. The Notional Amount for the Class
A-_-_ Component will equal the outstanding
Class Certificate Balance of the Class A-_
Certificate. The Notional Amount for the Class
A-_-_ Component will
equal the outstanding Class Certificate Balance
of the Class A-_ Certificate.
Delay Certificates . . . All interest-bearing Classes of Certificates
other than the Non-Delay Certificates, if any.
ERISA-Restricted
Certificates . . . . . Class PO and Class X Certificates, Residual
Certificates and Subordinated Certificates.
Floating Rate Certificates. (Class ____ Certificates.)
Inverse Floating Rate
Certificates . . . . . (Class ____ Certificates.)
COFI Certificates. . . . (Class ____ Certificates.)
LIBOR Certificates . . . (Class ____ Certificates.)
Non-Delay Certificates . . (Class ____ Certificates.)
Notional Amount
Certificates . . . . . Class X Certificates and the Class A-_-_, Class
A-_-_ and Class A-_-_ Components.
Offered Certificates . . All Classes of Certificates other than the
Private Certificates.
Physical Certificates . . Residual Certificates, Class PO Certificates,
Class X Certificates, Class A-_ Certificates
and the Subordinated Certificates.
Planned Principal Classes . Class A-_ and Class A-_ Certificates and the
Class A-_-_ and Class A-_-_ Components.
Primary Planned Principal
Classes . . . . . . . (Class ____ Certificates.)
Principal Only
Certificates . . . . . Class PO Certificates.
Private Certificates . . Class A-_, Class B-_, Class B-_ and Class B-_
Certificates.
Rating Agencies . . . . ___________ and __________.
Regular Certificates . . All Classes of Certificates, other than the
Residual Certificates.
Residual Certificates . . Class A-R Certificates.
Scheduled Principal
Classes . . . . . . . (Class ____ Certificates.)
Secondary Planned Principal
Class . . . . . . . (Class ____ Certificates.)
Senior Certificates . . . Class A-_, Class A-_, Class A-_, Class A-_,
Class A-_, Class A-_, Class A-_, Class PO,
Class X and Class A-R Certificates.
Subordinated Certificates . Class B-_, Class B-_, Class B-_, Class B-_,
Class B-_ and Class B-_ Certificates.
Support Classes . . . . Class A-_ and Class A-_ Certificates and the
Class A-_-_ Component.
Targeted Principal
Classes . . . . . . . Class A-_ Certificates and the Class A-_-_,
Class A-_-_ and Class A-_-_ Components.
With respect to any of the foregoing designations as to which the
corresponding reference is "None," all defined terms and provisions herein
relating solely to such designations shall be of no force or effect, and any
calculations herein incorporating references to such designations shall be
interpreted without reference to such designations and amounts. Defined
terms and provisions herein relating to statistical rating agencies not
designated above as Rating Agencies shall be of no force or effect.
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
Accretion Directed Certificates: As specified in the
-------------------------------
Preliminary Statement.
Accrual Amount: With respect to any Class of Accrual
--------------
Certificates and any Distribution Date prior to the Accrual Termination Date,
the amount allocable to interest on each such Class of Accrual Certificates
with respect to such Distribution Date pursuant to Section 4.02(a)(i).
Accrual Certificates: As specified in the Preliminary
--------------------
Statement.
Accrual Termination Date: The earlier to occur of (i) the first
------------------------
Distribution Date following the Distribution Date on which the Component
Balance of the Class A-_-_ Component is reduced to zero, and (ii) the Senior
Credit Support Depletion Date.
Adjusted Mortgage Rate: As to each Mortgage Loan, and at any
----------------------
time, the per annum rate equal to the Mortgage Rate less the Master Servicing
Fee Rate.
Adjusted Net Mortgage Rate: As to each Mortgage Loan, and at
--------------------------
any time, the per annum rate equal to the Mortgage Rate less the related
Expense Rate. For purposes of determining whether any Substitute Mortgage
Loan is a Discount Mortgage Loan or a Non-Discount Mortgage Loan and for
purposes of calculating the applicable PO Percentage and applicable Non-PO
Percentage, each Substitute Mortgage Loan shall be deemed to have an Adjusted
Net Mortgage Rate equal to the Adjusted Net Mortgage Rate of the Deleted
Mortgage Loan for which it is substituted.
Advance: The payment required to be made by the Master Servicer
-------
with respect to any Distribution Date pursuant to Section 4.01, the amount of
any such payment being equal to the aggregate of payments of (principal and)
interest (net of the Master Servicing Fee and net of any net income in the
case of any REO Property) on the Mortgage Loans that were due on the related
Due Date and not received as of the close of business on the related
Determination Date, less the aggregate amount of any such delinquent payments
that the Master Servicer has determined would constitute a Nonrecoverable
Advance if advanced.
Agreement: This Pooling and Servicing Agreement and all
---------
amendments or supplements hereto.
Allocable Share: As to any Distribution Date and any Mortgage
---------------
Loan (i) with respect to the Class X Certificates, (a) the ratio that (x) the
excess, if any, of the Adjusted Net Mortgage Rate with respect to such
Mortgage Loan over the Required Coupon bears to (y) such Adjusted Net
Mortgage Rate or (b) if the Adjusted Net Mortgage Rate with respect to such
Mortgage Loan does not exceed the Required Coupon, zero, (ii) with respect to
the Class PO Certificates, zero and (iii) with respect to each other Class of
Certificates the product of (a) the lesser of (I) the ratio that the Required
Coupon bears to such Adjusted Net Mortgage Rate and (II) one, multiplied by
(b), the ratio that the amount calculated with respect to such Distribution
Date for such Class pursuant to clause (i) of the definition of Class Optimal
Interest Distribution Amount (without giving effect to any reduction of such
amount pursuant to Section 4.02(d)) bears to the amount calculated with
respect to such Distribution Date for each Class of Certificates pursuant to
clause (i) of the definition of Class Optimal Interest Distribution Amount
(in each case without giving effect to any reduction of such amounts pursuant
to Section 4.02(d)).
Amount Available for Senior Principal: As to any Distribution
-------------------------------------
Date, Available Funds for such Distribution Date reduced by the aggregate
amount distributable (or allocable to the Accrual Amount, if applicable) on
such Distribution Date in respect of interest on the Senior Certificates
pursuant to Section 4.02(a)(i).
Amount Held for Future Distribution: As to any Distribution
-----------------------------------
Date, the aggregate amount held in the Certificate Account at the close of
business on the related Determination Date on account of (i) Principal
Prepayments received during the related Prepayment Period and Liquidation
Proceeds received in the month of such Distribution Date and (ii) all
Scheduled Payments due after the related Due Date.
Applicable Credit Support Percentage: As defined in Section
------------------------------------
4.02(e).
Available Funds: As to any Distribution Date, the sum of (a)
---------------
the aggregate amount held in the Certificate Account at the close of business
on the related Determination Date net of the Amount Held for Future
Distribution and net of amounts permitted to be withdrawn from the
Certificate Account pursuant to clauses (i)-(viii), inclusive, of Section
3.08(a) and amounts permitted to be withdrawn from the Distribution Account
pursuant to clauses (i)-(iii) inclusive of Section 3.08(b), (b) the amount of
the related Advance and (c) in connection with Defective Mortgage Loans, as
applicable, the aggregate of the Purchase Prices and Substitution Adjustment
Amounts deposited on the related Distribution Account Deposit Date.
Bankruptcy Code: The United States Bankruptcy Reform Act of
---------------
1978, as amended.
Bankruptcy Coverage Termination Date: The date on which the
------------------------------------
Bankruptcy Loss Coverage Amount is reduced to zero.
Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient
---------------
Valuation or Debt Service Reduction; provided that a Bankruptcy Loss shall
--------
not 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 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 and any related escrow payments in
respect of such Mortgage Loan are being advanced on a current basis by the
Master Servicer, in either case without giving effect to any Debt Service
Reduction or Deficient Valuation.
Bankruptcy Loss Coverage Amount: As of any Determination Date,
-------------------------------
the Bankruptcy Loss Coverage Amount shall equal the Initial Bankruptcy
Coverage Amount as reduced by (i) the aggregate amount of Bankruptcy Losses
allocated to the Certificates since the Cut-off Date and (ii) any permissible
reductions in the Bankruptcy Loss Coverage Amount as evidenced by a letter of
each Rating Agency to the Trustee to the effect that any such reduction will
not result in a downgrading of the then current ratings assigned to the
Classes of Certificates rated by it.
Book-Entry Certificates: As specified in the Preliminary
-----------------------
Statement.
Business Day: Any day other than (i) a Saturday or a Sunday, or
------------
(ii) a day on which banking institutions in the City of New York, New York,
or the State of California or the city in which the Corporate Trust Office of
the Trustee is located are authorized or obligated by law or executive order
to be closed.
Certificate: Any one of the Certificates executed by the
-----------
Trustee in substantially the forms attached hereto as exhibits.
Certificate Account: The separate Eligible Account or Accounts
-------------------
created and maintained by the Master Servicer pursuant to Section 3.05 with a
depository institution in the name of the Master Servicer for the benefit of
the Trustee on behalf of Certificateholders and designated
"____________________________ in trust for the registered holders of IndyMac
ABS, Inc., Mortgage Pass-Through Certificates, Series 199_-_."
Certificate Balance: With respect to any Certificate at any
-------------------
time, the maximum dollar amount of principal to which the Holder thereof is
then entitled hereunder, such amount being equal to the Denomination thereof
(A) minus the sum of (i) all distributions of principal previously made with
respect thereto and (ii) all Realized Losses allocated thereto and, in the
case of any Subordinated Certificates, all other reductions in Certificate
Balance previously allocated thereto pursuant to Section 4.03 and (B) in the
case of any Class of Accrual Certificates, increased by the Accrual Amount
added to the Class Certificate Balance of such Class prior to such date.
Certificate Owner: With respect to any Book-Entry Certificate,
-----------------
the Person who is the beneficial owner of such Book-Entry Certificate.
Certificate Register: The register maintained pursuant to
--------------------
Section 5.02 hereof.
Certificateholder or Holder: The Person in whose name a
---------------------------
Certificate is registered in the Certificate Register, except that, solely
for the purpose of giving any consent pursuant to this Agreement, any
Certificate registered in the name of the Depositor or any affiliate of the
Depositor shall be deemed not to be Outstanding and the Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite amount of Percentage Interests necessary to effect such consent has
been obtained; provided that if any such Person (including the Depositor)
--------
owns 100% of the Percentage Interests evidenced by a Class of Certificates,
such Certificates shall be deemed to be Outstanding for purposes of any
provision hereof that requires the consent of the Holders of Certificates of a
particular Class as a condition to the taking of any action hereunder. The
Trustee is entitled to rely conclusively on a certification of the Depositor
or any affiliate of the Depositor in determining which Certificates are
registered in the name of an affiliate of the Depositor.
Class: All Certificates bearing the same class designation as
-----
set forth in the Preliminary Statement.
Class A-_ Optimal Amount: As to any Distribution Date, an
------------------------
amount equal to the sum of (i) the product of the Class A-_ Percentage and
the Scheduled Principal Distribution Amount and (ii) the product of (A) the
Class A-_ Percentage, (B) the Prepayment Shifting Percentage and (C) the
Unscheduled Principal Distribution Amount.
Class A-_ Percentage: As to any Distribution Date, a fraction,
--------------------
the numerator of which is the Class Certificate Balance of the Class A-_
Certificates on such Distribution Date and the denominator of which is the
aggregate Class Certificate Balances of the Senior Certificates (other than
the Class PO Certificates) on such Distribution Date.
Class Certificate Balance: With respect to any Class and as to
-------------------------
any date of determination, the aggregate of the Certificate Balances of all
Certificates of such Class as of such date.
Class Interest Shortfall: As to any Distribution Date and
------------------------
Class, the amount by which the amount described in clause (i) of the
definition of Class Optimal Interest Distribution Amount for such Class
exceeds the amount of interest actually distributed on such Class on such
Distribution Date pursuant to such clause (i).
Class Optimal Interest Distribution Amount: With respect to any
------------------------------------------
Distribution Date and interest bearing Class or, with respect to any interest
bearing Component, any Component thereof, the sum of (i) one month's interest
accrued during the related Interest Accrual Period at the Pass-Through Rate
for such Class on the related Class Certificate Balance, Component Balance or
Notional Amount, as applicable, subject to reduction as provided in Section
4.02(d) and (ii) any Class Unpaid Interest Amounts for such Class or
Component.
Class PO Deferred Amount: As to any Distribution Date, the
------------------------
aggregate of the applicable PO Percentage of each Realized Loss, other than
any Excess Loss, to be allocated to the Class PO Certificates on such
Distribution Date on or prior to the Senior Credit Support Depletion Date or
previously allocated to the Class PO Certificates and not yet paid to the
Holders of the Class PO Certificates.
Class Subordination Percentage: With respect to any
------------------------------
Distribution Date and each Class of Subordinated Certificates, the quotient
(expressed as a percentage) of (a) the Class Certificate Balance of such
Class of Certificates immediately prior to such Distribution Date divided by
(b) the aggregate of the Class Certificate Balances immediately prior to such
Distribution Date of all Classes of Certificates.
Class Unpaid Interest Amounts: As to any Distribution Date and
-----------------------------
Class of interest bearing Certificates, the amount by which the aggregate
Class Interest Shortfalls for such Class on prior Distribution Dates exceeds
the amount distributed on such Class on prior Distribution Dates pursuant to
clause (ii) of the definition of Class Optimal Interest Distribution Amount.
Closing Date: ___________, 199_.
------------
Code: The Internal Revenue Code of 1986, including any
----
successor or amendatory provisions.
COFI: The Monthly Weighted Average Cost of Funds Index for the
----
Eleventh District Savings Institutions published by the Federal Home Loan
Bank of San Francisco.
COFI Certificates: As specified in the Preliminary Statement.
-----------------
Collateral Value: With respect to any Mortgage Loan, the
----------------
Collateral Value of the related Mortgaged Property shall be:
(i) with respect to a Mortgage Loan other than a Refinancing Mortgage Loan,
the lesser of (a) the value of the Mortgaged Property based upon the
appraisal made at the time of the origination of such Mortgage Loan and (b)
the sales price of the Mortgaged Property at the time of the origination of
such Mortgage Loan; (ii) with respect to a Refinancing Mortgage Loan other
than a Streamlined Documentation Mortgage Loan, the value of the Mortgaged
Property based upon the appraisal made at the time of the origination of such
Refinancing Mortgage Loan; and (iii) with respect to a Streamlined
Documentation Mortgage Loan, (a) if the loan-to-value ratio with respect to
the Original Mortgage Loan at the time of the origination thereof was __% or
less, the value of the Mortgaged Property based upon the appraisal made at
the time of the origination of the Original Mortgage Loan and (b) if the
loan-to-value ratio with respect to the Original Mortgage Loan at the time of
the origination thereof was greater than __%, the value of the Mortgaged
Property based upon the appraisal (which may be a drive-by appraisal) made at
the time of the origination of such Streamlined Documentation Mortgage Loan.
Component: As specified in the Preliminary Statement.
---------
Component Balance: With respect to any Component and any
-----------------
Distribution Date, the Initial Component Balance thereof on the Closing Date,
(A) less all amounts applied in reduction of the principal balance of such
Component and Realized Losses allocated thereto on previous Distribution
Dates and (B) in the case of the Accrual Certificates, increased by all
interest accrued and added to the Component Balance thereof prior to such
Distribution Date.
Component Certificates: As specified in the Preliminary
----------------------
Statement.
Corporate Trust Office: The designated office of the Trustee in
----------------------
the State of New York at which at any particular time its corporate trust
business with respect to this Agreement shall be administered, which office
at the date of the execution of this Agreement is located at
__________________________________ (Attn: ______________________________,
facsimile no. ________________, and which is the address to which notices to
and correspondence with the Trustee should be directed.
Cut-off Date: _________ __, 199_.
------------
Cut-off Date Pool Principal Balance: $______________.
-----------------------------------
Cut-off Date Principal Balance: As to any Mortgage Loan, the
------------------------------
Stated Principal Balance thereof as of the close of business on the Cut-off
Date.
DCR: Duff & Phelps Credit Rating Company, or any successor
---
thereto. If DCR is designated as a Rating Agency in the Preliminary
Statement, for purposes of Section 10.05(b) the address for notices to DCR
shall be Duff & Phelps Credit Rating Company, 17 State Street, 12th Floor,
New York, New York 10004, Attention: ______________, or such other address
as DCR may hereafter furnish to the Depositor and the Master Servicer.
Debt Service Reduction: With respect to any Mortgage Loan, a
----------------------
reduction by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code in the Scheduled Payment for such Mortgage Loan which became
final and non-appealable, except such a reduction resulting from a Deficient
Valuation or any reduction that results in a permanent forgiveness of
principal.
Defective Mortgage Loan: Any Mortgage Loan which is required to
-----------------------
be repurchased pursuant to Section 2.02 or 2.03.
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 Payment that results in a permanent forgiveness of
principal, which valuation or reduction results from an order of such court
which is final and non-appealable in a proceeding under the Bankruptcy Code.
Definitive Certificates: Any Certificate evidenced by a
-----------------------
Physical Certificate and any Certificate issued in lieu of a Book-Entry
Certificate pursuant to Section 5.02(e).
Deleted Mortgage Loan: As defined in Section 2.03(b) hereof.
---------------------
Delinquent: A Mortgage Loan is "Delinquent" if any regularly
----------
scheduled monthly payment due thereon is not made by the close of business on
the day such monthly payment is due. A Mortgage Loan is "30 days Delinquent"
if such monthly payment has not been received by the close of business on the
corresponding day of the month immediately succeeding the month in which such
monthly payment was due. The determination of whether a Mortgage Loan is "60
days Delinquent", "90 days Delinquent", etc. shall be made in like manner.
Denomination: With respect to each Certificate, the amount set
------------
forth on the face thereof as the "Initial Certificate Balance of this
Certificate" or the "Initial Notional Amount of this Certificate" or, if
neither of the foregoing, the Percentage Interest appearing on the face
thereof.
Depositor: IndyMac ABS, Inc., a Delaware corporation, or its
---------
successor in interest.
Depository: The initial Depository shall be The Depository
----------
Trust Company, the nominee of which is CEDE & Co., as the registered Holder
of the Book-Entry Certificates. The Depository shall at all times be a
"clearing corporation" as defined in Section 8-102(3) of the Uniform
Commercial Code of the State of New York.
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: As to any Distribution Date, the ____ day
------------------
of the calendar month in which such Distribution Date occurs (or if such ____
day is not a Business Day the next (preceding) Business Day); provided that
--------
if such ____ day or such Business Day, whichever is applicable, is less than
two Business Days prior to the related Distribution Date, the Determination
Date shall be the first Business Day which is two Business Days preceding
such Distribution Date.
Discount Mortgage Loan: Any Mortgage Loan with an Adjusted Net
----------------------
Mortgage Rate that is less than the Required Coupon.
Distribution Account: The separate Eligible Account created and
--------------------
maintained by the Trustee pursuant to Section 3.05 in the name of the Trustee
for the benefit of the Certificateholders and designated
"_________________________ in trust for registered holders of IndyMac ABS,
Inc. Mortgage Pass-Through Certificates, Series 199_-_." Funds in the
Distribution Account shall be held in trust for the Certificateholders for
the uses and purposes set forth in this Agreement.
Distribution Account Deposit Date: As to any Distribution Date,
---------------------------------
12:30 p.m. Pacific time on the Business Day immediately preceding such
Distribution Date.
Distribution Date: The ____ day of each calendar month after
-----------------
the initial issuance of the Certificates, or if such ____ day is not a
Business Day, the next succeeding Business Day, commencing in ____________,
199_.
Due Date: With respect to any Distribution Date, the first day
--------
of the month in which the related Distribution Date occurs.
Eligible Account: Any of (i) an account or accounts maintained
----------------
with a federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a
depository institution or trust company that is the principal subsidiary of a
holding company, the debt obligations of such holding company) have the
highest short-term ratings of each Rating Agency at the time any amounts are
held on deposit therein, or (ii) an account or accounts in a depository
institution or trust company in which such accounts are insured by the FDIC
(to the limits established by the FDIC) and the uninsured deposits in which
accounts are otherwise secured such that, as evidenced by an Opinion of
Counsel delivered to the Trustee and to each Rating Agency, the
Certificateholders have a claim with respect to the funds in such account or
a perfected first priority 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 or trust company in which such account is maintained, or (iii) a
trust account or accounts maintained with (a) the trust department of a
federal or state chartered depository institution or (b) a trust company,
acting in its fiduciary capacity or (iv) any other account acceptable to each
Rating Agency. Eligible Accounts may bear interest and may include, if
otherwise qualified under this definition, accounts maintained with the
Trustee.
ERISA: The Employee Retirement Income Security Act of 1974, as
-----
amended.
ERISA-Restricted Certificate: As specified in the Preliminary
----------------------------
Statement.
Escrow Account: The Eligible Account or Accounts established
--------------
and maintained pursuant to Section 3.06(a) hereof.
Event of Default: As defined in Section 7.01 hereof.
----------------
Excess Loss: The amount of any (i) Fraud Loss realized after
-----------
the Fraud Loss Coverage Termination Date, (ii) Special Hazard Loss realized
after the Special Hazard Coverage Termination Date or (iii) Bankruptcy Loss
realized after the Bankruptcy Coverage Termination Date.
Excess Proceeds: With respect to any Liquidated Mortgage Loan,
---------------
the amount, if any, by which the sum of any Liquidation Proceeds of such
Mortgage Loan received in the calendar month in which such Mortgage Loan
became a Liquidated Mortgage Loan, net of any amounts previously reimbursed
to the Master Servicer as Nonrecoverable Advance(s) with respect to such
Mortgage Loan pursuant to Section 3.08(a)(iii), exceeds (i) the unpaid
principal balance of such Liquidated Mortgage Loan as of the Due Date in the
month in which such Mortgage Loan became a Liquidated Mortgage Loan plus (ii)
accrued interest at the Mortgage Rate from the Due Date as to which interest
was last paid or advanced (and not reimbursed) to Certificateholders up to
the Due Date applicable to the Distribution Date immediately following the
calendar month during which such liquidation occurred.
Expense Rate: As to each Mortgage Loan, the sum of the related
------------
Master Servicing Fee Rate and the Trustee Fee Rate.
FDIC: The Federal Deposit Insurance Corporation, or any
----
successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
-----
instrumentality of the United States created and existing under Title III of
the Emergency Home Finance Act of 1970, as amended, or any successor thereto.
FIRREA: The Financial Institutions Reform, Recovery, and
------
Enforcement Act of 1989.
Fitch: Fitch IBCA, Inc., or any successor thereto. If Fitch is
-----
designated as a Rating Agency in the Preliminary Statement, for purposes of
Section 10.05(b) the address for notices to Fitch shall be Fitch IBCA, Inc.,
One State Street Plaza, New York, New York 10004, Attention:
_______________________________________, or such other address as Fitch may
hereafter furnish to the Depositor and the Master Servicer.
FNMA: The 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.
Fraud Loan: A Liquidated Mortgage Loan as to which a Fraud Loss
----------
has occurred.
Fraud Loss Coverage Amount: As of the Closing Date,
--------------------------
$_____________ subject to reduction from time to time, by the amount of Fraud
Losses allocated to the Certificates. In addition, on each anniversary of
the Cut-off Date, the Fraud Loss Coverage Amount will be reduced as follows:
(a) on the __________, __________, __________ and __________ anniversaries of
the Cut-off Date, to an amount equal to the lesser of (i) ___% of the then
current Pool Stated Principal Balance and (ii) the excess of the Fraud Loss
Coverage Amount as of the preceding anniversary of the Cut-off Date over the
cumulative amount of Fraud Losses allocated to the Certificates since such
preceding anniversary; and (b) on the __________ anniversary of the Cut-off
Date, to zero.
Fraud Loss Coverage Termination Date: The date on which the
------------------------------------
Fraud Loss Coverage Amount is reduced to zero.
Fraud Losses: Realized Losses on Mortgage Loans as to which a
------------
loss is sustained by reason of a default arising from fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan, including a
loss by reason of the denial of coverage under any related Primary Insurance
Policy because of such fraud, dishonesty or misrepresentation.
Index: With respect to any Interest Accrual Period for the COFI
-----
Certificates or the LIBOR Certificates, the then-applicable index used by the
Trustee pursuant to Section 4.05 to determine the Pass-Through Rate for such
Interest Accrual Period for the COFI Certificates or the LIBOR Certificates,
as applicable.
Indirect Participant: A broker, dealer, bank or other financial
--------------------
institution or other Person that clears through or maintains a custodial
relationship with a Depository Participant.
Initial Bankruptcy Coverage Amount: $_________.
----------------------------------
Initial Component Balance: As specified in the Preliminary
-------------------------
Statement.
Initial LIBOR Rate: Not applicable.
------------------
Insurance Policy: With respect to any Mortgage Loan included in
----------------
the Trust Fund, any insurance policy, including all riders and endorsements
thereto in effect, including any replacement policy or policies for any
Insurance Policies.
Insurance Proceeds: Proceeds paid by an insurer pursuant to any
------------------
Insurance Policy, in each case other than any amount included in such
Insurance Proceeds in respect of Insured Expenses.
Insured Expenses: Expenses covered by an Insurance Policy or
----------------
any other insurance policy with respect to the Mortgage Loans.
Interest Accrual Period: With respect to each Class of Delay
-----------------------
Certificates and any Distribution Date, the calendar month prior to the month
of such Distribution Date. With respect to any Non-Delay Certificates and
any Distribution Date, the one month period commencing on the ____ day of the
month preceding the month in which such Distribution Date occurs and ending
on the ____ day of the month in which such Distribution Date occurs.
Interest Determination Date: With respect to (a) any Interest
---------------------------
Accrual Period for any LIBOR Certificates and (b) any Interest Accrual Period
for the COFI Certificates for which the applicable Index is LIBOR, the second
Business Day prior to the first day of such Interest Accrual Period.
Latest Possible Maturity Date: The Distribution Date following
-----------------------------
the third anniversary of the scheduled maturity date of the Mortgage Loan
having the latest scheduled maturity date as of the Cut-off Date.
LIBOR: The London interbank offered rate for one-month United
-----
States dollar deposits calculated in the manner described in Section 4.06.
LIBOR Certificates: As specified in the Preliminary Statement.
------------------
Liquidated Mortgage Loan: With respect to any Distribution
------------------------
Date, a defaulted Mortgage Loan (including any REO Property) which was
liquidated in the calendar month preceding the month of such Distribution
Date and as to which the Master Servicer has determined (in accordance with
this Agreement) that it has received all amounts it expects to receive in
connection with the liquidation of such Mortgage Loan, including the final
disposition of an REO Property.
Liquidation Proceeds: Amounts, including Insurance Proceeds,
--------------------
received in connection with the partial or complete liquidation of defaulted
Mortgage Loans, whether through trustee's sale, foreclosure sale or otherwise
or amounts received in connection with any condemnation or partial release of
a Mortgaged Property and any other proceeds received in connection with an
REO Property, less the sum of related unreimbursed Master Servicing Fees,
Servicing Advances and Advances.
Loan-to-Value Ratio: With respect to any Mortgage Loan and as
-------------------
to any date of determination, (i) the principal balance of such Mortgage Loan
(at the date of origination) divided by (ii) the Collateral Value of the
related Mortgaged Property.
Lost Mortgage Note: Any Mortgage Note the original of which was
------------------
permanently lost or destroyed and has not been replaced.
Majority in Interest: As to any Class of Regular Certificates,
--------------------
the Holders of Certificates of such Class evidencing, in the aggregate, at
least 51% of the Percentage Interests evidenced by all Certificates of such
Class.
Master Servicer: ____________________________, a ___________
---------------
corporation, and its successors and assigns, in its capacity as master
servicer hereunder.
Master Servicer Advance Date: As to any Distribution Date,
----------------------------
12:30 p.m. Pacific time on the Business Day immediately preceding such
Distribution Date.
Master Servicing Fee: As to each Mortgage Loan and any
--------------------
Distribution Date, an amount payable out of each full payment of interest
received on such Mortgage Loan and equal to one-twelfth of the Master
Servicing Fee Rate multiplied by the Stated Principal Balance of such
Mortgage Loan as of the Due Date in the month of such Distribution Date
(prior to giving effect to any Scheduled Payments due on such Mortgage Loan
on such Due Date), subject to reduction as provided in Section 3.14.
Master Servicing Fee Rate: With respect to each Mortgage Loan,
-------------------------
____% per annum.
Monthly Statement: The statement delivered to the
-----------------
Certificateholders pursuant to Section 4.04.
Moody's: Moody's Investors Service, Inc., or any successor
-------
thereto. If Moody's is designated as a Rating Agency in the Preliminary
Statement, for purposes of Section 10.05(b) the address for notices to
Moody's shall be Moody's Investors Service, Inc., 99 Church Street, New York,
New York 10007, Attention: ___________________________________, or such other
address as Moody's may hereafter furnish to the Depositor or the Master
Servicer.
Mortgage: The mortgage, deed of trust or other 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 listed in Section 2.01
-------------
hereof pertaining to a particular Mortgage Loan and any additional documents
delivered to the Trustee to be added to the Mortgage File pursuant to this
Agreement.
Mortgage Loans: Such of the mortgage loans transferred and
--------------
assigned to the Trustee pursuant to the provisions hereof as from time to
time are held as a part of the Trust Fund (including any REO Property), the
mortgage loans so held being identified in the Mortgage Loan Schedule,
notwithstanding foreclosure or other acquisition of title of the related
Mortgaged Property.
Mortgage Loan Schedule: The list of Mortgage Loans (as from
----------------------
time to time amended by the Master Servicer to reflect the addition of
Substitute Mortgage Loans and the deletion of Deleted Mortgage Loans pursuant
to the provisions of this Agreement) transferred to the Trustee as part of
the Trust Fund and from time to time subject to this Agreement, attached
hereto as Schedule I, setting forth the following information with respect to
each Mortgage Loan:
(i) the loan number;
(ii) the Mortgagor's name and the street address of the Mortgaged
Property, including the Zip code;
(iii) the maturity date;
(iv) the original principal balance;
(v) the Cut-off Date Principal Balance;
(vi) the first payment date of the Mortgage Loan;
(vii) the Scheduled Payment in effect as of the Cut-off Date;
(viii) the Loan-to-Value Ratio at origination;
(ix) a code indicating whether the residential dwelling at the
time of origination was represented to be owner-occupied;
(x) a code indicating whether the residential dwelling is (a) a
detached single family dwelling (b) a unit in a de minimis PUD, (c)
a condominium unit or a unit in a PUD (other than a de minimis
PUD), or (d) a two- to four-unit residential property;
(xi) the Mortgage Rate;
(xii) the represented purpose for the Mortgage Loan;
(xiii) the type of documentation program pursuant to which the
Mortgage Loan was originated, and
(xiv) the Master Servicing Fee for the Mortgage Loan.
Such schedule shall also set forth the total of the amounts
described under (iv) and (v) above for all of the Mortgage Loans.
Mortgage Note: The original executed note or other evidence of
-------------
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage
Loan.
Mortgage Rate: The annual rate of interest borne by a Mortgage
-------------
Note from time to time, net of any interest premium charged by the mortgagee
to obtain or maintain any Primary Insurance Policy.
Mortgaged Property: The underlying property securing a Mortgage
------------------
Loan.
Mortgagor: The obligor(s) on a Mortgage Note.
---------
National Cost of Funds Index: The National Monthly Median Cost
----------------------------
of Funds Ratio to SAIF-Insured Institutions published by the Office of Thrift
Supervision.
Net Prepayment Interest Shortfalls: As to any Distribution
----------------------------------
Date, the amount by which the aggregate of Prepayment Interest Shortfalls
during the related Prepayment Period exceeds an amount equal to one-half of
the aggregate Master Servicing Fee for such Distribution Date before
reduction of the Master Servicing Fee in respect of such Prepayment Interest
Shortfalls.
Non-Delay Certificates: As specified in the Preliminary
----------------------
Statement.
Non-Discount Mortgage Loan: Any Mortgage Loan with an Adjusted
--------------------------
Net Mortgage Rate that is greater than or equal to the Required Coupon.
Non-PO Formula Principal Amount: As to any Distribution Date,
-------------------------------
the sum of the applicable Non-PO Percentage of (a) the principal portion of
each Scheduled Payment (without giving effect, prior to the Bankruptcy
Coverage Termination Date, to any reductions thereof caused by any Debt
Service Reductions or Deficient Valuations) due on each Mortgage Loan on the
related Due Date, (b) the Stated Principal Balance of each Mortgage Loan that
was repurchased by the Seller or the Master Servicer pursuant to this
Agreement as of such Distribution Date, (c) the Substitution Adjustment
Amount in connection with any Deleted Mortgage Loan received with respect to
such Distribution Date, (d) any Insurance Proceeds or Liquidation Proceeds
allocable to recoveries of principal of Mortgage Loans that are not yet
Liquidated Mortgage Loans received during the calendar month preceding the
month of such Distribution Date, (e) with respect to each Mortgage Loan that
became a Liquidated Mortgage Loan during the calendar month preceding the
month of such Distribution Date, the amount of the Liquidation Proceeds
allocable to principal received during the calendar month preceding the month
of such Distribution Date with respect to such Mortgage Loan and (f) all
Principal Prepayments received during the related Prepayment Period.
Non-PO Percentage: As to any Discount Mortgage Loan, a fraction
-----------------
(expressed as a percentage) the numerator of which is the Adjusted Net
Mortgage Rate of such Discount Mortgage Loan and the denominator of which is
the Required Coupon. As to any Non-Discount Mortgage Loan, 100%.
Nonrecoverable Advance: Any portion of an Advance previously
----------------------
made or proposed to be made by the Master Servicer that, in the good faith
judgment of the Master Servicer, will not be ultimately recoverable by the
Master Servicer from the related Mortgagor, related Liquidation Proceeds or
otherwise.
Notice of Final Distribution: The notice to be provided
----------------------------
pursuant to Section 9.02 to the effect that final distribution on any of the
Certificates shall be made only upon presentation and surrender thereof.
Notional Amount: With respect to any Distribution Date and the
---------------
Class X Certificates, the aggregate of the Stated Principal Balances of the
Non-Discount Mortgage Loans as of the Due Date in the month of such
Distribution Date (prior to giving effect to any Scheduled Payments due on
such Mortgage Loans on such Due Date). With respect to any Distribution Date
and (i) the Class A-_-_ Component, the Class Certificate Balance of the Class
A-_ Certificate on such Distribution Date; (ii) the Class A-_-_ Component,
the Class Certificate Balance of the Class A-_ Certificate on such
Distribution Date; and (iii) the Class A-_-_ Component, the Class Certificate
Balance of the Class A-_ Certificate on such Distribution Date.
Notional Amount Certificates: As specified in the Preliminary
----------------------------
Statement.
Offered Certificates: As specified in the Preliminary
--------------------
Statement.
Officer's Certificate: A certificate (i) signed by the Chairman
---------------------
of the Board, the Vice Chairman of the Board, the President, a Managing
Director, a Vice President (however denominated), an Assistant Vice
President, the Treasurer, the Secretary, or one of the Assistant Treasurers
or Assistant Secretaries of the Depositor or the Master Servicer, or (ii), if
provided for in this Agreement, signed by a Servicing Officer, as the case
may be, and delivered to the Depositor and the Trustee, as the case may be,
as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be
------------------
counsel for the Depositor or the Master Servicer, including, in-house
counsel, reasonably acceptable to the Trustee; provided that with respect
--------
to the interpretation or application of the REMIC Provisions, such counsel
must (i) in fact be independent of the Depositor and the Master Servicer,
(ii) not have any direct financial interest in the Depositor or the Master
Servicer or in any affiliate of either, and (iii) not be connected with the
Depositor or the Master Servicer as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar
functions.
Optional Termination: The termination of the trust created
--------------------
hereunder in connection with the purchase of the Mortgage Loans pursuant to
Section 9.01(a) hereof.
Original Applicable Credit Support Percentage: With respect to
---------------------------------------------
each of the following Classes of Subordinated Certificates, the corresponding
percentage described below, as of the Closing Date:
Class B-_ ____%
Class B-_ ____%
Class B-_ ____%
Class B-_ ____%
Class B-_ ____%
Class B-_ ____%
Original Mortgage Loan: The mortgage loan refinanced in
----------------------
connection with the origination of a Refinancing Mortgage Loan.
Original Subordinated Principal Balance: The aggregate of the
---------------------------------------
Class Certificate Balances of the Subordinated Certificates as of the Closing
Date.
OTS: The Office of Thrift Supervision.
---
Outside Reference Date: As to any Interest Accrual Period for
----------------------
the COFI Certificates, the close of business on the tenth day thereof.
Outstanding: With respect to the Certificates as of any date of
-----------
determination, all Certificates theretofore executed and authenticated under
this Agreement except:
(i) Certificates theretofore canceled by the Trustee or delivered
to the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of which other
Certificates have been executed and delivered by the Trustee
pursuant to this Agreement.
Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan
-------------------------
with a Stated Principal Balance greater than zero which was not the subject
of a Principal Prepayment in Full prior to such Due Date and which did not
become a Liquidated Mortgage Loan prior to such Due Date.
Ownership Interest: As to any Residual Certificate, any
------------------
ownership 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.
Pass-Through Rate: For any interest bearing Class of
-----------------
Certificates or Component, the per annum rate set forth or calculated in the
manner described in the Preliminary Statement.
Percentage Interest: As to any Certificate, the percentage
-------------------
interest evidenced thereby in distributions required to be made on the
related Class, such percentage interest being set forth on the face thereof
or equal to the percentage obtained by dividing the Denomination of such
Certificate by the aggregate of the Denominations of all Certificates of the
same Class.
Permitted Investments: (i) obligations of the United States or
---------------------
any agency thereof, provided such obligations are backed by the full faith
and credit of the United States; (ii) general obligations of or obligations
guaranteed by any state of the United States or the District of Columbia
receiving the highest long-term debt rating of each Rating Agency rating the
Certificates, or such lower rating as will not result in the downgrading or
withdrawal of the ratings then assigned to the Certificates by each such
Rating Agency; (iii) commercial paper issued by Countrywide Home Loans, Inc.
or any of its affiliates or commercial or finance company paper which is then
receiving the highest commercial or finance company paper rating of each such
Rating Agency, or such lower rating as will not result in the downgrading or
withdrawal of the ratings then assigned to the Certificates by each such
Rating Agency; (iv) certificates of deposit, demand or time deposits, or
bankers' acceptances issued by any depository institution or trust company
incorporated under the laws of the United States or of any state thereof and
subject to supervision and examination by federal and/or state banking
authorities, provided that the commercial paper and/or long term unsecured
debt obligations of such depository institution or trust company (or in the
case of the principal depository institution in a holding company system, the
commercial paper or long-term unsecured debt obligations of such holding
company, but only if Moody's is not a Rating Agency) are then rated in one of
the two highest long-term and the highest short-term rating of each such
Rating Agency for such securities, or such lower rating category as will not
result in the downgrading or withdrawal of the ratings then assigned to the
Certificates by any such Rating Agency; (iv) demand or time deposits or
certificates of deposit issued by any bank or trust company or savings
institution to the extent that such deposits are fully insured by the FDIC;
(v) guaranteed reinvestment agreements issued by any bank, insurance company
or other corporation containing, at the time of the issuance of such
agreements, such terms and conditions as will not result in the downgrading
or withdrawal of the ratings then assigned to the Certificates by any such
Rating Agency; (vi) repurchase obligations with respect to any security
described in clauses (i) and (ii) above, in either case entered into with a
depository institution or trust company (acting as principal) described in
clause (iv) above; (vii) securities (other than stripped bonds, stripped
coupons or instruments sold at a purchase price in excess of 115% of the face
amount thereof) bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any state
thereof which, at the time of such investment, have one of the two highest
ratings of each Rating Agency (except if the Rating Agency is Moody's, such
rating shall be the highest commercial paper rating of Moody's for any such
securities), or such lower rating as will not result in the downgrading or
withdrawal of the ratings then assigned to the Certificates by any such
Rating Agency, as evidenced by a signed writing delivered by each such Rating
Agency; and (viii) such other investments having a specified stated maturity
and bearing interest or sold at a discount acceptable to each Rating Agency
as will not result in the downgrading or withdrawal of the ratings then
assigned to the Certificates by any such Rating Agency, as evidenced by a
signed writing delivered by each such Rating Agency; provided that no such
--------
instrument shall be a Permitted Investment if such instrument evidences the
right to receive interest only payments with respect to the obligations
underlying such instrument.
Permitted Transferee: Any person other than (i) the United
--------------------
States, any State or political subdivision thereof, or any agency or
instrumentality of any of the foregoing, (ii) a foreign government,
International Organization or any agency or instrumentality of either of the
foregoing, (iii) an organization (except certain farmers' cooperatives
described in section 521 of the Code) which is exempt from tax imposed by
Chapter 1 of the Code (including the tax imposed by section 511 of the Code
on unrelated business taxable income) on any excess inclusions (as defined in
section 860E(c)(l) of the Code) with respect to any Residual Certificate,
(iv) rural electric and telephone cooperatives described in section
1381(a)(2)(C) of the Code, (v) a Person that is not 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 unless such Person has furnished the
transferor and the Trustee with a duly completed Internal Revenue Service
Form 4224, and (vi) any other Person so designated by the Depositor based
upon an Opinion of Counsel that the Transfer of an Ownership Interest in a
Residual Certificate to such Person may cause the REMIC hereunder to fail to
qualify as a REMIC at any time that the Certificates are outstanding. The
terms "United States," "State" and "International Organization" shall have
the meanings set forth in section 7701 of the Code or successor provisions.
A corporation will not be treated as an instrumentality of the United States
or of any State or political subdivision thereof for these purposes if all of
its activities are subject to tax and, with the exception of the FHLMC, a
majority of its board of directors is not selected by such government unit.
Person: Any individual, corporation, partnership, joint
------
venture, association, joint-stock company, trust, unincorporated organization
or government, or any agency or political subdivision thereof.
Physical Certificate: As specified in the Preliminary
--------------------
Statement.
Planned Balance: With respect to the Planned Principal Classes
---------------
and any Distribution Date appearing in Schedule IV hereto, the applicable
amount appearing opposite such Distribution Date for such respective Class or
Component.
Planned Principal Classes: As specified in the Preliminary
-------------------------
Statement.
PO Formula Principal Amount: As to any Distribution Date, the
---------------------------
sum of the applicable PO Percentage of (a) the principal portion of each
Scheduled Payment (without giving effect, prior to the Bankruptcy Coverage
Termination Date, to any reductions thereof caused by any Debt Service
Reductions or Deficient Valuations) due on each Mortgage Loan on the related
Due Date, (b) the Stated Principal Balance of each Mortgage Loan that was
repurchased by the Seller or the Master Servicer pursuant to this Agreement
as of such Distribution Date, (c) the Substitution Adjustment Amount in
connection with any Deleted Mortgage Loan received with respect to such
Distribution Date, (d) any Insurance Proceeds or Liquidation Proceeds
allocable to recoveries of principal of Mortgage Loans that are not yet
Liquidated Mortgage Loans received during the calendar month preceding the
month of such Distribution Date, (e) with respect to each Mortgage Loan that
became a Liquidated Mortgage Loan during the month preceding the calendar
month of such Distribution Date, the amount of Liquidation Proceeds allocable
to principal received during the month preceding the month of such
Distribution Date with respect to such Mortgage Loan and (f) all Principal
Prepayments received during the related Prepayment Period.
PO Percentage: As to any Discount Mortgage Loan, a fraction
-------------
(expressed as a percentage) the numerator of which is the excess of the
Required Coupon over the Adjusted Net Mortgage Rate of such Discount Mortgage
Loan and the denominator of which is the Required Coupon. As to any
Non-Discount Mortgage Loan, 0%.
Pool Stated Principal Balance: As to any Distribution Date, the
-----------------------------
aggregate of the Stated Principal Balances of the Mortgage Loans which were
Outstanding Mortgage Loans on the Due Date in the month preceding the month
of such Distribution Date.
Prepayment Interest Excess: As to any Principal Prepayment
--------------------------
received by the Master Servicer from the first day through the fifteenth day
of any calendar month (other than the calendar month in which the Cut-off
Date occurs), all amounts paid by the related Mortgagor in respect of
interest on such Principal Prepayment. All Prepayment Interest Excess shall
be paid to the Master Servicer as additional master servicing compensation.
Prepayment Interest Shortfall: As to any Distribution Date,
-----------------------------
Mortgage Loan and Principal Prepayment received on or after the sixteenth day
of the month preceding the month of such Distribution Date (or, in the case
of the first Distribution Date, on or after the Cut-off Date) and on or
before the last day of the month preceding the month of such Distribution
Date, the amount, if any, by which one month's interest at the related
Mortgage Rate, net of the Master Servicing Fee Rate, on such Principal
Prepayment exceeds the amount of interest paid in connection with such
Principal Prepayment.
Prepayment Period: As to any Distribution Date, the period from
-----------------
the __th day of the calendar month preceding the month of such Distribution
Date (or, in the case of the first Distribution Date, from the Cut-off Date)
through the __th of the month of such Distribution Date.
Prepayment Shifting Percentage: As to any Distribution Date
------------------------------
occurring during the ____ years beginning on the _____ Distribution Date will
equal 0%. Thereafter, the Prepayment Shifting Percentage for any Distribution
Date occurring on or after the ____ anniversary of the _____ Distribution
Date will be as follows: for any Distribution Date in the _____ year
thereafter, __%; for any Distribution Date in the ______ year thereafter,
__%; for any Distribution Date in the ______ year thereafter, __%; for any
Distribution Date in the ______ year thereafter, __%; and for any
Distribution Date thereafter, 100%.
Primary Insurance Policy: Each policy of primary mortgage
------------------------
guaranty insurance or any replacement policy therefor with respect to any
Mortgage Loan.
Primary Planned Principal Classes: As specified in the
---------------------------------
Preliminary Statement.
Principal Prepayment: Any payment of principal by a Mortgagor
--------------------
on a Mortgage Loan that is received in advance of its scheduled Due Date and
is not accompanied by an amount representing scheduled interest due on any
date or dates in any month or months subsequent to the month of prepayment.
Partial Principal Prepayments shall be applied by the Master Servicer in
accordance with the terms of the related Mortgage Note.
Principal Prepayment in Full: Any Principal Prepayment made by
----------------------------
a Mortgagor of the entire principal balance of a Mortgage Loan.
Private Certificate: As specified in the Preliminary Statement.
-------------------
Pro Rata Share: As to any Distribution Date, the Subordinated
--------------
Principal Distribution Amount and any Class of Subordinated Certificates, the
portion of the Subordinated Principal Distribution Amount allocable to such
Class, equal to the product of the Subordinated Principal Distribution Amount
on such Distribution Date and a fraction, the numerator of which is the
related Class Certificate Balance thereof and the denominator of which is the
aggregate of the Class Certificate Balances of the Subordinated Certificates.
Prospectus Supplement: The Prospectus Supplement dated ________
---------------------
__, 199_ relating to the Offered Certificates.
PUD: Planned Unit Development.
---
Purchase Price: With respect to any Mortgage Loan required to
--------------
be purchased by the Seller pursuant to Section 2.02 or 2.03 hereof or
purchased at the option of the Master Servicer pursuant to Section 3.11, an
amount equal to the sum of (i) 100% of the unpaid principal balance of the
Mortgage Loan on the date of such purchase, and (ii) accrued interest thereon
at the applicable Mortgage Rate from the date through which interest was last
paid by the Mortgagor to the Due Date in the calendar month immediately
following the calendar month in which such purchase occurs; provided that, if
--------
(x) the purchaser is the Master Servicer or (y) the purchaser is the Seller
and the Seller is the Master Servicer, then the foregoing amount shall be
reduced by any unreimbursed Servicing Advances and the rate used to calculate
interest pursuant to clause (ii) above shall be the applicable Adjusted
Mortgage Rate in lieu of the applicable Mortgage Rate.
Qualified Insurer: A mortgage guaranty insurance company duly
-----------------
qualified as such under the laws of the state of its principal place of
business and each state having jurisdiction over such insurer in connection
with the insurance policy issued by such insurer, duly authorized and
licensed in such states to transact a mortgage guaranty insurance business in
such states and to write the insurance provided by the insurance policy
issued by it, approved as a FNMA-approved mortgage insurer and having a
claims paying ability rating of at least "AA" or equivalent rating by a
nationally recognized statistical rating organization. Any replacement
insurer with respect to a Mortgage Loan must have at least as high a claims
paying ability rating as the insurer it replaces had on the Closing Date.
Rating Agency: Each of the Rating Agencies specified in the
-------------
Preliminary Statement. If any such organization or a successor is no longer
in existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, as is designated by the
Depositor, notice of which designation shall be given to the Trustee.
References herein to a given rating category of a Rating Agency shall mean
such rating category without giving effect to any modifiers.
Realized Loss: With respect to each Liquidated Mortgage Loan,
-------------
an amount (not less than zero or more than the Stated Principal Balance of
the Mortgage Loan) as of the date of such liquidation, equal to (i) the
Stated Principal Balance of the Liquidated Mortgage Loan as of the date of
such liquidation, plus (ii) interest at the Adjusted Net Mortgage Rate from
the Due Date as to which interest was last paid or advanced (and not
reimbursed) to Certificateholders up to the Due Date in the month in which
Liquidation Proceeds are required to be distributed on the Stated Principal
Balance of such Liquidated Mortgage Loan from time to time, minus (iii) the
Liquidation Proceeds, if any, received during the month in which such
liquidation occurred, to the extent applied as recoveries of interest at the
Adjusted Net Mortgage Rate and to principal of the Liquidated Mortgage Loan.
With respect to each Mortgage Loan which has become the subject of a
Deficient Valuation, if the principal amount due under the related Mortgage
Note has been reduced, the difference between the principal balance of the
Mortgage Loan outstanding immediately prior to such Deficient Valuation and
the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation. With respect to each Mortgage Loan which has become the subject
of a Debt Service Reduction and any Distribution Date, the amount, if any, by
which the principal portion of the related Scheduled Payment has been
reduced.
Record Date: With respect to any Distribution Date, the close
-----------
of business on the last Business Day of the month preceding the month in
which such Distribution Date occurs.
Reference Bank: As defined in Section 4.05.
--------------
Refinancing Mortgage Loan: Any Mortgage Loan originated in
-------------------------
connection with the refinancing of an existing mortgage loan.
Regular Certificates: As specified in the Preliminary
--------------------
Statement.
Relief Act: The Soldiers' and Sailors' Civil Relief Act of
----------
1940, as amended.
Relief Act Reductions: With respect to any Distribution Date
---------------------
and any Mortgage Loan as to which there has been a reduction in the amount of
interest collectible thereon for the most recently ended calendar month as a
result of the application of the Relief Act, the amount, if any, by which (i)
interest collectible on such Mortgage Loan for the most recently ended
calendar month is less than (ii) interest accrued thereon for such month
pursuant to the Mortgage Note.
REMIC: A "real estate mortgage investment conduit" within the
-----
meaning of section 860D of the Code.
REMIC Change of Law: Any proposed, temporary or final
-------------------
regulation, revenue ruling, revenue procedure or other official announcement
or interpretation relating to REMICs and the REMIC Provisions issued after
the Closing Date.
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 regulations promulgated thereunder, as the foregoing
may be in effect from time to time as well as provisions of applicable state
laws.
REO Property: A Mortgaged Property acquired by the Trust Fund
------------
through foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted Mortgage Loan.
Request for Release: The Request for Release submitted by the
-------------------
Master Servicer to the Trustee, substantially in the form of Exhibits M and
N, as appropriate.
Required Coupon: ____% per annum.
---------------
Required Insurance Policy: With respect to any Mortgage Loan,
-------------------------
any insurance policy that is required to be maintained from time to time
under this Agreement.
Residual Certificates: As specified in the Preliminary
---------------------
Statement.
Responsible Officer: When used with respect to the Trustee, any
-------------------
Vice President, any Assistant Vice President, the Secretary, any Assistant
Secretary, any Trust Officer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above
designated officers and also to whom, with respect to a particular matter,
such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
Restricted Classes: As defined in Section 4.02(e).
------------------
Scheduled Balances: With respect to any Scheduled Classes and
------------------
any Distribution Date appearing in Schedule IV hereto, the applicable amount
appearing in Schedule IV hereto opposite such Distribution Date for such
respective Classes.
Scheduled Classes: As specified in the Preliminary Statement.
-----------------
Scheduled Payment: The scheduled monthly payment on a Mortgage
-----------------
Loan due on any Due Date allocable to principal and/or interest on such
Mortgage Loan which, unless otherwise specified herein, shall give effect to
any related Debt Service Reduction and any Deficient Valuation that affects
the amount of the monthly payment due on such Mortgage Loan.
Scheduled Principal Distribution Amount: With respect to any
---------------------------------------
Distribution Date, the applicable Non-PO Percentage of the amount described
in clauses (a) through (d) of the definition of Non-PO Formula Principal
Amount.
Secondary Planned Principal Clauses: As specified in the
-----------------------------------
Preliminary Statement.
Securities Act: The Securities Act of 1933, as amended.
--------------
Seller: ________________________, a ________ corporation, and
------
its successors and assigns, in its capacity as seller of the Mortgage Loans
to the Depositor.
Senior Certificates: As specified in the Preliminary Statement.
-------------------
Senior Credit Support Depletion Date: The date on which the
------------------------------------
Class Certificate Balance of each Class of Subordinated Certificates has been
reduced to zero.
Senior Percentage: As to any Distribution Date, the percentage
-----------------
equivalent of a fraction the numerator of which is the aggregate of the Class
Certificate Balances of each Class of Senior Certificates (other than the
Class PO Certificates) as of such date and the denominator of which is the
aggregate of the Class Certificate Balances of all Classes of Certificates
(other than the Class PO Certificates) as of such date.
Senior Prepayment Percentage: For any Distribution Date during
----------------------------
the __________ years beginning on the ____ Distribution Date, 100%. The
Senior Prepayment Percentage for any Distribution Date occurring on or after
the __________ anniversary of the first Distribution Date will, except as
provided herein, be as follows: for any Distribution Date in the __________
year thereafter, the Senior Percentage plus __% of the Subordinated
Percentage for such Distribution Date; for any Distribution Date in the
__________ year thereafter, the Senior Percentage plus ___% of the
Subordinated Percentage for such Distribution Date; for any Distribution Date
in the __________ year thereafter, the Senior Percentage plus __% of the
Subordinated Percentage for such Distribution Date; for any Distribution Date
in the __________ year thereafter, the Senior Percentage plus ___% of the
Subordinated Percentage for such Distribution Date; and for any Distribution
Date thereafter, the Senior Percentage for such Distribution Date (unless on
any of the foregoing Distribution Dates the Senior Percentage exceeds the
initial Senior Percentage, in which case the Senior Prepayment Percentage for
such Distribution Date will once again equal 100%). Notwithstanding the
foregoing, no decrease in the Senior Prepayment Percentage will occur if, as
of the first Distribution Date as to which any such decrease applies, (i) the
outstanding principal balance of all Mortgage Loans delinquent ___ days or
more (averaged over the preceding ______ period), as a percentage of the
aggregate principal balance of the Subordinate Certificates (averaged over
the preceding six month period), is equal to or greater than ___% or (ii)
cumulative Realized Losses with respect to the Mortgage Loans exceed (a) with
respect to the Distribution Date on the __________ anniversary of the first
Distribution Date, __% of the Original Subordinated Principal Balance, (b)
with respect to the Distribution Date on the __________ anniversary of the
first Distribution Date, __% of the Original Subordinated Principal Balance,
(c) with respect to the Distribution Date on the __________ anniversary of
the first Distribution Date, __% of the Original Subordinated Principal
Balance, (d) with respect to the Distribution Date on the __________
anniversary of the first Distribution Date, __% of the Original Subordinated
Principal Balance and (e) with respect to the Distribution Date on the
__________ anniversary of the first Distribution Date, __% of the Original
Subordinated Principal Balance.
Senior Principal Distribution Amount: As to any Distribution
------------------------------------
Date, the sum of (i) the Senior Percentage of the applicable Non-PO
Percentage of all amounts described in clauses (a) through (d) of the
definition of "Non-PO Formula Principal Amount" for such Distribution Date,
(ii) with respect to each Mortgage Loan that became a Liquidated Mortgage
Loan during the calendar month preceding the month of such Distribution Date,
the lesser of (x) the Senior Percentage of the applicable Non-PO Percentage
of the Stated Principal Balance of such Mortgage Loan and (y) either (A) the
Senior Prepayment Percentage or (B) if an Excess Loss was sustained with
respect to such Liquidated Mortgage Loan during such prior calendar month,
the Senior Percentage, of the applicable Non-PO Percentage of the amount of
the Liquidation Proceeds allocable to principal received with respect to such
Mortgage Loan, and (iii) the Senior Prepayment Percentage of the applicable
Non-PO Percentage of the amounts described in clause (f) of the definition of
"Non-PO Formula Principal Amount" for such Distribution Date.
Servicing Advances: All customary, reasonable and necessary
------------------
"out of pocket" costs and expenses incurred in the performance by the Master
Servicer of its servicing obligations, including, but not limited to, the
cost of: (i) (a) the preservation, restoration and protection of a Mortgaged
Property, (b) any expenses reimbursable to the Master Servicer pursuant to
Section 3.11 and any enforcement or judicial proceedings, including
foreclosures, (c) the management and liquidation of any REO Property and (d)
compliance with the obligations under Section 3.12; and (ii) reasonable
compensation to the Master Servicer or its affiliates for acting as broker in
connection with the sale of REO Properties and for performing certain default
management and other similar services (including, but not limited to,
appraisal services) in connection with the servicing of defaulted Mortgage
Loans; provided that, for purposes of this clause (ii), only the costs and
--------
expenses incurred in connection with the performance of activities generally
considered to be outside the scope of customary servicing or master servicing
duties shall be treated as 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 facsimile signature appear on a list of servicing
officers furnished to the Trustee by the Master Servicer on the Closing Date
pursuant to this Agreement, as such list may from time to time be amended.
Servicing Standard: That degree of skill and care exercised by
------------------
the Master Servicer with respect to mortgage loans comparable to the Mortgage
Loans serviced by the Master Servicer Date: for itself or others.
Special Hazard Coverage Termination Date: The date on which the
----------------------------------------
Special Hazard Loss Coverage Amount is reduced to zero.
Special Hazard Loss: Any Realized Loss suffered by a Mortgaged
-------------------
Property on account of direct physical loss but not including (i) any loss of
a type covered by a hazard insurance policy or a flood insurance policy
required to be maintained with respect to such Mortgaged Property pursuant to
Section 3.12 to the extent of the amount of such loss covered thereby, or
(ii) any loss caused by or resulting from:
(a) normal wear and tear;
(b) fraud, conversion or other dishonest act on the part of the
Trustee, the Master Servicer or any of their agents or employees
(without regard to any portion of the loss not covered by any errors and
omissions policy);
(c) errors in design, faulty workmanship or faulty materials,
unless the collapse of the property or a part thereof ensues and then
only for the ensuing loss;
(d) nuclear or chemical reaction or nuclear radiation or
radioactive or chemical contamination, all whether controlled or
uncontrolled, and whether such loss be direct or indirect, proximate or
remote or be in whole or in part caused by, contributed to or aggravated
by a peril covered by the definition of the term "Special Hazard Loss";
(e) hostile or warlike action in time of peace and war, including
action in hindering, combating 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;
(f) any weapon of war employing nuclear fission, fusion or other
radioactive force, whether in time of peace or war; or
(g) insurrection, rebellion, revolution, civil war, usurped power
or action taken by governmental authority in hindering, combating or
defending against such an occurrence, seizure or destruction under
quarantine or customs regulations, confiscation by order of any
government or public authority or risks of contraband or illegal
transportation or trade.
Special Hazard Loss Coverage Amount: With respect to the first
-----------------------------------
Distribution Date, $____________. With respect to any Distribution Date
after the first Distribution Date, the lesser of (a) the greatest of (i) ___%
of the aggregate of the principal balances of the Mortgage Loans, (ii)
__________ the principal balance of the largest Mortgage Loan and (iii) the
aggregate of the principal balances of all Mortgage Loans secured by
Mortgaged Properties located in the single California five-digit postal Zip
code area having the highest aggregate principal balance of any such Zip code
area and (b) the Special Hazard Loss Coverage Amount as of the Closing Date
less the amount, if any, of Special Hazard Losses allocated to the
Certificates since the Closing Date. All principal balances for the purpose
of this definition will be calculated as of the first day of the calendar
month preceding the month of such Distribution Date after giving effect to
Scheduled Payments on the Mortgage Loans then due, whether or not paid.
Special Hazard Mortgage Loan: A Liquidated Mortgage Loan as to
----------------------------
which a Special Hazard Loss has occurred.
S&P: Standard & Poor's Ratings Group, a division of The
---
McGraw-Hill Companies, Inc. If S&P is designated as a Rating Agency in the
Preliminary Statement, for purposes of Section 10.05(b) the address for
notices to S&P shall be Standard & Poor's Ratings Group, 26 Broadway, 15th
Floor, New York, New York 10004, Attention: ________________________________,
or such other address as S&P may hereafter furnish to the Depositor and the
Master Servicer.
Startup Day: The Closing Date.
-----------
Stated Principal Balance: As to any Mortgage Loan and Due Date,
------------------------
the unpaid principal balance of such Mortgage Loan as of such Due Date as
specified in the amortization schedule at the time relating thereto (before
any adjustment to such amortization schedule by reason of any moratorium or
similar waiver or grace period) after giving effect to any previous partial
Principal Prepayments and Liquidation Proceeds allocable to principal (other
than with respect to any Liquidated Mortgage Loan) and to the payment of
principal due on such Due Date and irrespective of any delinquency in payment
by the related Mortgagor.
Streamlined Documentation Mortgage Loan: Any Mortgage Loan
---------------------------------------
originated pursuant to the Seller's Streamlined Loan Documentation Program
then in effect.
Subordinated Certificates: As specified in the Preliminary
-------------------------
Statement.
Subordinated Percentage: As to any Distribution Date, 100%
-----------------------
minus the Senior Percentage for such Distribution Date.
Subordinated Prepayment Percentage: As to any Distribution
----------------------------------
Date, 100% minus the Senior Prepayment Percentage for such Distribution Date.
Subordinated Principal Distribution Amount: With respect to any
------------------------------------------
Distribution Date, an amount equal to (A) the sum of (i) the Subordinated
Percentage of the applicable Non-PO Percentage of all amounts described in
clauses (a) through (d) of the definition of "Non-PO Formula Principal
Amount" for such Distribution Date, (ii) with respect to each Mortgage Loan
that became a Liquidated Mortgage Loan during the calendar month preceding
the month of such Distribution Date, the applicable Non-PO Percentage of the
amount of the Liquidation Proceeds allocated to principal received with
respect thereto remaining after application thereof pursuant to clause (ii)
of the definition of Senior Principal Distribution Amount, up to the
Subordinated Percentage of the applicable Non-PO Percentage of the Stated
Principal Balance of such Mortgage Loan and (iii) the Subordinated Prepayment
Percentage of the applicable Non-PO Percentage of all amounts described in
clause (f) of the definition of "Non-PO Formula Principal Amount" for such
Distribution Date reduced by (B) the amount of any payments in respect of
Class PO Deferred Amounts on the related Distribution Date.
Subservicer: Any Person to whom the Master Servicer has
-----------
contracted for the servicing of all or a portion of the Mortgage Loans
pursuant to Section 3.02 hereof.
Substitute Mortgage Loan: A Mortgage Loan substituted by the
------------------------
Seller for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed in a Request for Release, substantially in the
form of Exhibit M, (i) have a Stated Principal Balance, after deduction of
the principal portion of the Scheduled Payment due in the month of
substitution, not in excess of, and not more than __% less than the Stated
Principal Balance of the Deleted Mortgage Loan; (ii) be accruing interest at
a rate no lower than and not more than __% per annum higher than that of the
Deleted Mortgage Loan; (iii) have a Loan-to-Value Ratio no higher than that
of the Deleted Mortgage Loan; (iv) have a remaining term to maturity no
greater than (and not more than ____________ less than) that of the Deleted
Mortgage Loan; and (v) comply with each representation and warranty set forth
in Section 2.03 hereof.
Substitution Adjustment Amount: The meaning ascribed to such
------------------------------
term pursuant to Section 2.03.
Support Classes: As specified in the Preliminary Statement.
---------------
Targeted Balance: With respect to the Targeted Principal
----------------
Classes and any Distribution Date appearing in Schedule IV hereto, the
applicable amount appearing opposite such Distribution Date for such
respective Class or Component.
Targeted Principal Classes: As specified in the Preliminary
--------------------------
Statement.
Tax Matters Person: The Person designated as "tax matters
------------------
person" in the manner provided under Treasury regulation Section 1.860F-4(d)
and temporary Treasury regulation Section 301.6231(a)(7)1T. Initially, the
Tax Matters Person shall be the Trustee.
Tax Matters Person Certificate: The Class A-R Certificate with
------------------------------
a Denomination of $1.00.
Transfer: Any direct or indirect transfer or sale of any
--------
Ownership Interest in a Residual Certificate.
Trustee: ____________________ and its successors and, if a
-------
successor trustee is appointed hereunder, such successor.
Trustee Fee: As to any Distribution Date, an amount equal to
-----------
one-twelfth of the Trustee Fee Rate multiplied by the Pool Stated Principal
Balance with respect to such Distribution Date.
Trustee Fee Rate: With respect to each Mortgage Loan, the per
----------------
annum rate agreed upon in writing on or prior to the Closing Date by the
Trustee and the Depositor.
Trust Fund: The corpus of the trust created hereunder
----------
consisting of (i) the Mortgage Loans and all interest and principal received
on or with respect thereto after the Cut-off Date to the extent not applied
in computing the Cut-off Date Principal Balance thereof; (ii) the Certificate
Account, the Distribution Account, and all amounts deposited therein pursuant
to the applicable provisions of this Agreement; (iv) property that secured a
Mortgage Loan and has been acquired by foreclosure, deed-in-lieu of
foreclosure or otherwise; and (v) all proceeds of the conversion, voluntary
or involuntary, of any of the foregoing.
Unscheduled Principal Distribution Amount: With respect to any
-----------------------------------------
Distribution Date, the sum of (i) with respect to each Mortgage Loan that
became a Liquidated Mortgage Loan during the calendar month preceding the
month of such Distribution Date, the lesser of (x) the applicable Non-PO
Percentage of the Stated Principal Balance of such Mortgage Loan and (y) the
applicable Non-PO Percentage of the amount of the Liquidation Proceeds
allocable to principal received with respect to such Mortgage Loan, and (ii)
the applicable Non-PO Percentage of the amount described in clause (f) of the
definition of Non-PO Formula Principal Amount.
Voting Rights: The portion of the voting rights of all of the
-------------
Certificates which is allocated to any Certificate. As of any date of
determination, (a) 1% of all Voting Rights shall be allocated to each Class
of Notional Amount Certificates, if any (such Voting Rights to be allocated
among the holders of Certificates of each such Class in accordance with their
respective Percentage Interests), and (b) the remaining Voting Rights (or
100% of the Voting Rights if there is no Class of Notional Amount
Certificates) shall be allocated among Holders of the remaining Classes of
Certificates in proportion to the Certificate Balances of their respective
Certificates on such date.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Mortgage Loans.
----------------------------
(a) The Seller, concurrently with the execution and delivery
hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to
the Depositor, without recourse, all the right, title and interest of the
Seller in and to the Mortgage Loans, including all interest and principal
(received) (due) on or with respect to the Mortgage Loans after the Cut-off
Date ((excluding payments in respect of (accrued interest) (due) (received)
on or prior to the Cut-off Date)) (and all interest and principal payments on
the Mortgage Loans received prior to the Cut-off Date in respect of
installments of interest and principal due thereafter, but not including
payments of principal and interest due and payable on the Mortgage Loans on
or before the Cut-off Date). On or prior to the Closing Date, the Seller
shall deliver to the Depositor or, at the Depositor's direction, to the
Trustee or other designee of the Depositor, the Mortgage File for each
Mortgage Loan listed in the Mortgage Loan Schedule. Such delivery of the
Mortgage Files shall be made against payment by the Depositor of the purchase
price, previously agreed to by the Seller and Depositor, for the Mortgage
Loans. (With respect to any Mortgage Loan that does not have a first payment
date on or before the Due Date in the month of the first Distribution Date,
the Seller shall deposit into the Distribution Account on or before the
Distribution Account Deposit Date relating to the first Distribution Date, an
amount equal to one month's interest at the related Adjusted Mortgage Rate on
the Cut-off Date Principal Balance of such Mortgage Loan.)
(b) The Depositor, concurrently with the execution and delivery
hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to
the Trustee for the benefit of the Certificateholders, without recourse, all
the right, title and interest of the Depositor in and to the Trust Fund
together with the Depositor's right to require the Seller to cure certain
breaches of representations or warranties made herein by the Seller or to
repurchase or substitute for any affected Mortgage Loan in accordance
herewith.
(c) In connection with the transfer and assignment set forth in
clause (b) above, the Depositor has delivered or caused to be delivered to
the Trustee for the benefit of the Certificateholders the following documents
or instruments with respect to each Mortgage Loan so assigned:
(i)(A) the original Mortgage Note endorsed by manual or
facsimile signature in blank in the following form: "Pay to the
order of ____________ without recourse," with all intervening
endorsements showing a complete chain of endorsement from the
originator to the Person endorsing it to the Trustee (each such
endorsement being sufficient to transfer all right, title and
interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note); or
((B) with respect to any Lost Mortgage Note, a lost note
affidavit from the Seller stating that the original Mortgage
Note was lost or destroyed, together with a copy of such
Mortgage Note);
((ii) except as provided below, the original recorded Mortgage
or a copy of such Mortgage certified by the Seller as being a true
and complete copy of the Mortgage;)
(iii) a duly executed assignment of the Mortgage (which may be
included in a blanket assignment or assignments), together with,
except as provided below, all interim recorded assignments of such
mortgage (each such assignment, when duly and validly completed, to
be in recordable form and sufficient to effect the assignment of
and transfer to the assignee thereof, under the Mortgage to which
the assignment relates); provided that, if the related Mortgage has
--------
not been returned from the applicable public recording office, such
assignment of the Mortgage may exclude the information to be
provided by the recording office;
(iv) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any; and
(v) except as provided below, the original or duplicate
original lender's title policy and all riders thereto.
In the event that in connection with any Mortgage Loan the
Depositor cannot deliver (a) the original recorded Mortgage, (b) all interim
recorded assignments or (c) the lender's title policy (together with all
riders thereto) satisfying the requirements of clause (ii), (iii) or (v)
above, respectively, concurrently with the execution and delivery hereof
because such document or documents have not been returned from the applicable
public recording office in the case of clause (ii) or (iii) above, or because
the title policy has not been delivered to either the Master Servicer or the
Depositor by the applicable title insurer in the case of clause (v) above,
the Depositor shall promptly deliver to the Trustee, in the case of clause
(ii) or (iii) above, such original Mortgage or such interim assignment, as
the case may be, with evidence of recording indicated thereon upon receipt
thereof from the public recording office, or a copy thereof, certified, if
appropriate, by the relevant recording office, but in no event shall any such
delivery of the original Mortgage and each such interim assignment or a copy
thereof, certified, if appropriate, by the relevant recording office, be made
later than one year following the Closing Date, or, in the case of clause (v)
above, no later than 120 days following the Closing Date; provided in the
--------
event the Depositor is unable to deliver by such date each Mortgage and each
such interim assignment by reason of the fact that any such documents have
not been returned by the appropriate recording office, or, in the case of each
such interim assignment, because the related Mortgage has not been returned
by the appropriate recording office, the Depositor shall deliver such
documents to the Trustee as promptly as possible upon receipt thereof and, in
any event, within 720 days following the Closing Date. The Depositor shall
forward or cause to be forwarded to the Trustee (a) from time to time
additional original documents evidencing an assumption or modification of a
Mortgage Loan and (b) any other documents required to be delivered by the
Depositor or the Master Servicer to the Trustee. In the event that the
original Mortgage is not delivered and in connection with the payment in full
of the related Mortgage Loan and the public recording office requires the
presentation of a "lost instruments affidavit and indemnity" or any
equivalent document, because only a copy of the Mortgage can be delivered
with the instrument of satisfaction or reconveyance, the Master Servicer
shall execute and deliver or cause to be executed and delivered such a
document to the public recording office. In the case where a public
recording office retains the original recorded Mortgage or in the case where
a Mortgage is lost after recordation in a public recording office, the Seller
shall deliver to the Trustee a copy of such Mortgage certified by such public
recording office to be a true and complete copy of the original recorded
Mortgage.
As promptly as practicable subsequent to such transfer and
assignment, and in any event, within thirty (30) days thereafter, the Trustee
shall (i) affix the Trustee's name to each assignment of Mortgage, as the
assignee thereof, (ii) cause such assignment to be in proper form for
recording in the appropriate public office for real property records and
(iii) cause to be delivered for recording in the appropriate public office
for real property records the assignments of the Mortgages to the Trustee,
except that, with respect to any assignments of Mortgage as to which the
Trustee has not received the information required to prepare such assignment
in recordable form, the Trustee's obligation to do so and to deliver the same
for such recording shall be as soon as practicable after receipt of such
information and in any event within thirty (30) days after receipt thereof
and that the Trustee need not cause to be recorded any assignment which
relates to a Mortgage Loan (a) the Mortgaged Property and Mortgage File
relating to which are located in California or (b) in any other jurisdiction
under the laws of which the Seller has reasonably determined that the
recordation of such assignment is not necessary to protect the Trustee's and
the Certificateholders' interest in the related Mortgage Loan; provided that
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if the Mortgage Loan, together with all other Mortgage Loans secured by
Mortgaged Properties located in such other jurisdiction, represented as of the
Cut-off Date 10% or more of the Cut-off Date Pool Principal Balance, the
aforesaid determination of the Seller must be evidenced by an Opinion of
Counsel delivered by the Seller (at the Seller's expense) to the Trustee.
(d) The Seller intends to treat the transfer of the Mortgage Loans
to the Depositor as a sale for all tax, accounting and regulatory purposes.
In the case of Mortgage Loans that have been prepaid in full as of
the Closing Date, the Depositor, in lieu of delivering the above documents to
the Trustee, will deposit in the Certificate Account the portion of such
payment that is required to be deposited in the Certificate Account pursuant
to Section 3.08 hereof.
SECTION 2.02. Acceptance by Trustee of the Mortgage Loans.
-------------------------------------------
The Trustee acknowledges receipt of the documents identified in the
Initial Certification in the form annexed hereto as Exhibit G and declares
that it holds and will hold such documents and the other documents delivered
to it constituting the Mortgage Files, and that it holds or will hold such
other assets as are included in the Trust Fund, in trust for the exclusive
use and benefit of all present and future Certificateholders. The Trustee
acknowledges that it will maintain possession of the Mortgage Notes in the
State of California, unless otherwise permitted by the Rating Agencies.
The Trustee agrees to execute and deliver on the Closing Date to
the Depositor, the Master Servicer and the Seller an Initial Certification in
the form annexed hereto as Exhibit G. Based on its review and examination,
and only as to the documents identified in such Initial Certification, the
Trustee acknowledges that such documents appear regular on their face and
relate to such Mortgage Loan. The Trustee shall be under no duty or
obligation to inspect, review or examine said documents, instruments,
certificates or other papers to determine that the same are genuine,
enforceable or appropriate for the represented purpose or that they have
actually been recorded in the real estate records or that they are other than
what they purport to be on their face.
Not later than 90 days after the Closing Date, the Trustee shall
deliver to the Depositor, the Master Servicer and the Seller a Final
Certification in the form annexed hereto as Exhibit H, with any applicable
exceptions noted thereon.
If, in the course of such review, the Trustee finds any document
constituting a part of a Mortgage File which does not meet the requirements
of Section 2.01, the Trustee shall list such as an exception in the Final
Certification; provided that the Trustee shall not make any determination
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as to whether (i) any endorsement is sufficient to transfer all right, title
and interest of the party so endorsing, as noteholder or assignee thereof, in
and to that Mortgage Note or (ii) any assignment is in recordable form or is
sufficient to effect the assignment of and transfer to the assignee thereof
under the Mortgage to which the assignment relates. The Seller shall promptly
correct or cure such defect within 90 days from the date it was so notified of
such defect and, if the Seller does not correct or cure such defect within
such period, the Seller shall either (a) substitute for the related Mortgage
Loan a Substitute Mortgage Loan, which substitution shall be accomplished in
the manner and subject to the conditions set forth in Section 2.03, or (b)
purchase such Mortgage Loan from the Trustee within 90 days from the date the
Seller was notified of such defect in writing at the Purchase Price of such
Mortgage Loan; provided that the Seller shall not be obligated to correct or
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cure any such defect (or purchase or substitute such Mortgage Loan), if such
defect constitutes fraud in the origination of such Mortgage Loan and the
Seller did not, at the time of origination or on the Closing Date, have
actual knowledge of such fraud; provided further that in no event shall
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such substitution or purchase occur more than 540 days from the Closing Date,
except that if the substitution or purchase of a Mortgage Loan pursuant to
this provision is required by reason of a delay in delivery of any comments
by the appropriate recording office, and there is a dispute between either
the Master Servicer or the Seller and the Trustee over the location or status
of the recorded document, then such substitution or purchase shall occur
within 720 days from the Closing Date. The Trustee shall deliver written
notice to each Rating Agency within 270 days from the Closing Date indicating
each Mortgage Loan (x) which has not been returned by the appropriate
recording office or (y) as to which there is a dispute as to location or
status of such Mortgage Loan. Such notice shall be delivered every 90 days
thereafter until the related Mortgage Loan is returned to the Trustee. Any
such substitution pursuant to (a) above or purchase pursuant to (b) above
shall not be effected prior to the delivery to the Trustee of the Opinion of
Counsel required by Section 2.05 hereof, if any, and any substitution
pursuant to (a) above shall not be effected prior to the additional delivery
to the Trustee of a Request for Release of Documents substantially in the
form of Exhibit N. No substitution is permitted to be made in any calendar
month after the Determination Date for such month. The Purchase Price for
any such Mortgage Loan shall be deposited by the Seller in the Certificate
Account on or prior to the Distribution Account Deposit Date for the
Distribution Date in the month following the month of repurchase and, upon
receipt of such deposit and certification with respect thereto in the form of
Exhibit N hereto, the Trustee shall release the related Mortgage File to the
Seller and shall execute and deliver at the Seller's request such instruments
of transfer or assignment prepared by the Seller, in each case without
recourse, as shall be necessary to vest in the Seller, or a designee, the
Trustee's interest in any Mortgage Loan released pursuant hereto.
The Trustee shall retain possession and custody of each Mortgage
File in accordance with and subject to the terms and conditions set forth
herein. The Master Servicer shall promptly deliver to the Trustee, upon the
execution or receipt thereof, the originals of such other documents or
instruments constituting the Mortgage File as come into the possession of the
Master Servicer from time to time.
It is understood and agreed that the obligation of the Seller to so
substitute for or to so purchase any such Mortgage Loan which does not meet
the requirements of Section 2.01 shall constitute the sole remedy available
to the Trustee, the Depositor and any Certificateholder against the Seller
with respect to any defects in the Mortgage Files.
SECTION 2.03. Representations, Warranties and Covenants of the
------------------------------------------------
Seller and Master Servicer.
- --------------------------
(a) _________________________, in its capacities as Seller and
Master Servicer, hereby makes the representations and warranties set forth in
Schedule II hereto, and by this reference incorporated herein, to the
Depositor and the Trustee, as of the Closing Date, or if so specified
therein, as of the Cut-off Date or the date of origination of the related
Mortgage Loan.
(b) The Seller, in its capacity as Seller, hereby makes the
representations and warranties set forth in Schedule III hereto, and by this
reference incorporated herein, to the Depositor and the Trustee, as of the
Closing Date, or if so specified therein, as of the Cut-off Date.
(c) Upon discovery by any of the parties hereto of a breach of a
representation or warranty made pursuant to Section 2.03(b) that materially
and adversely affects the interests of the Certificateholders in any Mortgage
Loan, the party discovering such breach shall give prompt notice thereof to
the other parties. The Seller hereby covenants that within 90 days of the
earlier of its discovery or its receipt of written notice from any party of a
breach of any representation or warranty made pursuant to Section 2.03(b)
which materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan, it shall cure such breach in all
material respects, and if such breach is not so cured, shall, (i) if such 90-
day period expires prior to the second anniversary of the Closing Date,
remove such Mortgage Loan (a "Deleted Mortgage Loan")
---------------------
from the Trust Fund and substitute in its place a Substitute Mortgage Loan,
in the manner and subject to the conditions set forth in this Section; or
(ii) repurchase the affected Mortgage Loan or Mortgage Loans from the Trustee
at the Purchase Price in the manner set forth below; provided that any such
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substitution pursuant to (i) above shall not be effected prior to the delivery
to the Trustee of the Opinion of Counsel required by Section 2.05 hereof, if
any, and any such substitution pursuant to (i) above shall not be effected
prior to the additional delivery to the Trustee of a Request for Release of
Documents substantially in the form of Exhibit N and the Mortgage File for any
such Substitute Mortgage Loan; and provided further that, anything to the
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contrary herein notwithstanding, the Seller shall have no obligation to cure
any such breach or to repurchase or substitute for such affected Mortgage
Loan if the substance of such breach constitutes fraud in the origination of
such affected Mortgage Loan and the Seller, at the time of such origination
and on the Closing Date, did not have actual knowledge of such fraud. The
Seller shall promptly reimburse the Master Servicer and the Trustee for any
expenses reasonably incurred by the Master Servicer or the Trustee in respect
of enforcing the remedies for such breach.
With respect to any Substitute Mortgage Loan or Loans, the Seller
shall deliver to the Trustee for the benefit of the Certificateholders the
Mortgage Note, the Mortgage, the related assignment of the Mortgage, and such
other documents and agreements as are required by Section 2.01, with the
Mortgage Note endorsed and the Mortgage assigned as required by Section 2.01.
No substitution is permitted to be made in any calendar month after the
Determination Date for such month. Scheduled Payments due with respect to
Substitute Mortgage Loans in the month of substitution shall not be part of
the Trust Fund and will be retained by the Seller on the next succeeding
Distribution Date. For the month of substitution, distributions to
Certificateholders will include the monthly payment due on any Deleted
Mortgage Loan for such month and thereafter the Seller shall be entitled to
retain all amounts received in respect of such Deleted Mortgage Loan. The
Master Servicer shall amend the Mortgage Loan Schedule for the benefit of the
Certificateholders to reflect the removal of such Deleted Mortgage Loan and
the substitution of the Substitute Mortgage Loan or Loans and the Master
Servicer shall deliver the amended Mortgage Loan Schedule to the Trustee.
Upon such substitution, the Substitute Mortgage Loan or Loans shall be
subject to the terms of this Agreement in all respects, and the Seller shall
be deemed to have made with respect to such Substitute Mortgage Loan or
Loans, as of the date of substitution, the representations and warranties
made pursuant to Section 2.03(b) with respect to such Mortgage Loan. Upon
any such substitution and the deposit to the Certificate Account of the
amount required to be deposited therein in connection with such substitution
as described in the following paragraph, the Trustee shall release the
Mortgage File held for the benefit of the Certificateholders relating to such
Deleted Mortgage Loan to the Seller and shall execute and deliver at the
Seller's direction such instruments of transfer or assignment prepared by the
Seller, in each case without recourse, as shall be necessary to vest in the
Seller, or its designee, title to the Trustee's interest in any Deleted
Mortgage Loan substituted for pursuant to this Section 2.03.
For any month in which the Seller substitutes one or more
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 Substitute Mortgage Loans as of the date of substitution
is less than the aggregate Stated Principal Balance of all such Deleted
Mortgage Loans (after application of the scheduled principal portion of the
monthly payments due in the month of substitution). The amount of such
shortage (the "Substitution Adjustment Amount") plus an amount equal to the
------------------------------
aggregate of any unreimbursed Advances with respect to such Deleted Mortgage
Loans shall be deposited in the Certificate Account by the Seller on or before
the Distribution Account Deposit Date for the Distribution Date in the month
succeeding the calendar month during which the related Mortgage Loan became
required to be purchased or replaced hereunder.
In the event that the Seller shall have repurchased a Mortgage
Loan, the Purchase Price therefor shall be deposited in the Certificate
Account pursuant to Section 3.05 on or before the Distribution Account
Deposit Date for the Distribution Date in the month following the month
during which the Seller became obligated hereunder to repurchase or replace
such Mortgage Loan and upon such deposit of the Purchase Price, the delivery
of the Opinion of Counsel required by Section 2.05 and receipt of a Request
for Release of Documents in the form of Exhibit N hereto, the Trustee shall
release the related Mortgage File held for the benefit of the
Certificateholders to such Person, and the Trustee shall execute and deliver
at such Person's direction such instruments of transfer or assignment
prepared by such Person, in each case without recourse, as shall be necessary
to transfer title from the Trustee. It is understood and agreed that the
obligation under this Agreement of any Person to cure, repurchase or replace
any Mortgage Loan as to which a breach has occurred and is continuing shall
constitute the sole remedy against such Persons respecting such breach
available to Certificateholders, the Depositor or the Trustee on their
behalf.
The representations and warranties made pursuant to this Section
2.03 shall survive delivery of the respective Mortgage Files to the Trustee
for the benefit of the Certificateholders.
SECTION 2.04. Representations and Warranties of the Depositor
-----------------------------------------------
as to the Mortgage Loans.
- ------------------------
The Depositor hereby represents and warrants to the Trustee with
respect to each Mortgage Loan as of the date hereof or such other date set
forth herein that as of the Closing Date, and following the transfer of the
Mortgage Loans to it by the Seller, the Depositor had good title to the
Mortgage Loans and the Mortgage Notes were subject to no offsets, defenses or
counterclaims.
The Depositor hereby assigns, transfers and conveys to the Trustee
all of its rights with respect to the Mortgage Loans including, without
limitation, the representations and warranties of the Seller made pursuant to
Section 2.03(b) hereof, together with all rights of the Depositor to require
the Seller to cure certain breaches thereof or to repurchase or substitute
for any affected Mortgage Loan in accordance with this Agreement.
It is understood and agreed that the representations and warranties
set forth in this Section 2.04 shall survive delivery of the Mortgage Files
to the Trustee.
SECTION 2.05. Delivery of Opinion of Counsel in Connection with
-------------------------------------------------
Substitutions.
- -------------
(a) Notwithstanding any contrary provision of this Agreement, no
substitution pursuant to Section 2.02 or Section 2.03 shall be made more than
90 days after the Closing Date unless the Seller delivers to the Trustee an
Opinion of Counsel, which Opinion of Counsel shall not be at the expense of
either the Trustee or the Trust Fund, addressed to the Trustee, to the effect
that such substitution will not (i) result in the imposition of the tax on
"prohibited transactions" on the Trust Fund or contributions after the
Startup Date, as defined in Sections 860F(a)(2) and 860G(d) of the Code,
respectively, or (ii) cause the Trust Fund to fail to qualify as a REMIC at
any time that any Certificates are outstanding.
(b) Upon discovery by the Depositor, the Seller, the Master
Servicer, or the Trustee that any Mortgage Loan does not constitute a
"qualified mortgage" within the meaning of Section 860G(a)(3) of the Code,
the party discovering such fact shall promptly (and in any event within five
(5) Business Days of discovery) give written notice thereof to the other
parties. In connection therewith, the Trustee shall require the Seller, at
the Seller's option, to either (i) substitute, if the conditions in Section
2.03(c) with respect to substitutions are satisfied, a Substitute Mortgage
Loan for the affected Mortgage Loan, or (ii) repurchase the affected Mortgage
Loan within 90 days of such discovery in the same manner as it would a
Mortgage Loan for a breach of representation or warranty made pursuant to
Section 2.03. The Trustee shall reconvey to the Seller the Mortgage Loan to
be released pursuant hereto in the same manner, and on the same terms and
conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty contained in Section 2.03.
SECTION 2.06. Execution and Delivery of Certificates.
--------------------------------------
The Trustee acknowledges the transfer and assignment to it of the
Trust Fund and, concurrently with such transfer and assignment, has executed
and delivered to or upon the order of the Depositor, the Certificates in
authorized denominations evidencing directly or indirectly the entire
ownership of the Trust Fund. The Trustee agrees to hold the Trust Fund and
exercise the rights referred to above for the benefit of all present and
future Holders of the Certificates and to perform the duties set forth in
this Agreement to the best of its ability, to the end that the interests of
the Holders of the Certificates may be adequately and effectively protected.
SECTION 2.07. REMIC Matters.
-------------
The Preliminary Statement sets forth the designations and "latest
possible maturity date" for federal income tax purposes of all interests
created hereby. The "Startup Day" for purposes of the REMIC Provisions shall
be the Closing Date. The "tax matters person" with respect to the REMIC
shall be the Trustee and the Trustee shall hold the Tax Matters Person
Certificate. The REMIC's fiscal year shall be the calendar year.
ARTICLE III
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.01. Master Servicer to Service Mortgage Loans.
-----------------------------------------
For and on behalf of the Certificateholders, the Master Servicer
shall service and administer the Mortgage Loans in accordance with the terms
of this Agreement and the Servicing Standard. In connection with such
servicing and administration, the Master Servicer shall have full power and
authority, acting alone and/or through Subservicers as provided in Section
3.02 hereof, to do or cause to be done any and all things that it may deem
necessary or desirable in connection with such servicing and administration,
including but not limited to, the power and authority, subject to the terms
hereof (i) to execute and deliver, on behalf of the Certificateholders and
the Trustee, customary consents or waivers and other instruments and
documents, (ii) to consent to transfers of any Mortgaged Property and
assumptions of the Mortgage Notes and related Mortgages (but only in the
manner provided in this Agreement), (iii) to collect any Insurance Proceeds
and other Liquidation Proceeds, and (iv) to effectuate foreclosure or other
conversion of the ownership of the Mortgaged Property securing any Mortgage
Loan. The Master Servicer shall not make or permit any modification, waiver
or amendment of any Mortgage Loan which would cause the Trust Fund to fail to
qualify as a REMIC or result in the imposition of any tax under Section
860F(a) or Section 860G(d) of the Code. Without limiting the generality of
the foregoing, the Master Servicer, in its own name or in the name of the
Depositor and the Trustee, is hereby authorized and empowered by the
Depositor and the Trustee, when the Master Servicer believes it appropriate
in its reasonable judgment, to execute and deliver, on behalf of the Trustee,
the Depositor, the Certificateholders or any of them, any and all instruments
of satisfaction or cancellation, or of partial or full release or discharge
and all other comparable instruments, with respect to the Mortgage Loans, and
with respect to the Mortgaged Properties held for the benefit of the
Certificateholders. The Master Servicer shall prepare and deliver to the
Depositor and/or the Trustee such documents requiring execution and delivery
by either or both of them as are necessary or appropriate to enable the
Master Servicer to service and administer the Mortgage Loans to the extent
that the Master Servicer is not permitted to execute and deliver such
documents pursuant to the preceding sentence. Upon receipt of such
documents, the Depositor and/or the Trustee shall execute such documents and
deliver them to the Master Servicer.
In accordance with and to the extent of the Servicing Standard, the
Master Servicer shall advance or cause to be advanced funds as necessary for
the purpose of effecting the payment of taxes and assessments on the
Mortgaged Properties, which advances shall be reimbursable in the first
instance from related collections from the Mortgagors pursuant to Section
3.06, and further as provided in Section 3.08. The costs incurred by the
Master Servicer, if any, in effecting the timely payments of taxes and
assessments on the Mortgaged Properties and related insurance premiums shall
not, for the purpose of calculating monthly distributions to the
Certificateholders, be added to the Stated Principal Balances of the related
Mortgage Loans, notwithstanding that the terms of such Mortgage Loans so
permit.
SECTION 3.02. Subservicing; Enforcement of the Obligations of
Servicers.
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(a) The Master Servicer may arrange for the subservicing of any
Mortgage Loan by a Subservicer pursuant to a subservicing agreement; provided
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that such subservicing arrangement and the terms of the related
subservicing agreement must provide for the servicing of such Mortgage Loans
in a manner consistent with the servicing arrangements contemplated
hereunder. 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. Notwithstanding the provisions of any
subservicing agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer and a Subservicer or
reference to actions taken through a Subservicer or otherwise, the Master
Servicer shall remain obligated and liable to the Depositor, the Trustee and
the Certificateholders for the servicing and administration of the Mortgage
Loans in accordance with the provisions of this Agreement without diminution
of such obligation or liability by virtue of such subservicing agreements or
arrangements or by virtue of indemnification from the Subservicer and to the
same extent and under the same terms and conditions as if the Master Servicer
alone were servicing and administering the Mortgage Loans. All actions of
each Subservicer performed pursuant to the related subservicing agreement
shall be performed as an agent of the Master Servicer with the same force and
effect as if performed directly by the Master Servicer.
(b) For purposes of this Agreement, the Master Servicer shall be
deemed to have received any collections, recoveries or payments with respect
to the Mortgage Loans that are received by a Subservicer regardless of
whether such payments are remitted by the Subservicer to the Master Servicer.
SECTION 3.03. Rights of the Depositor and the Trustee in
------------------------------------------
Respect of the Master Servicer.
- ------------------------------
The Depositor may, but is not obligated to, enforce the obligations
of the Master Servicer hereunder and may, but is not obligated to, perform,
or cause a designee to perform, any defaulted obligation of the Master
Servicer hereunder and in connection with any such defaulted obligation to
exercise the related rights of the Master Servicer hereunder; provided that
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the Master Servicer shall not be relieved of any of its obligations hereunder
by virtue of such performance by the Depositor or its designee. Neither the
Trustee nor the Depositor shall have any responsibility or liability for any
action or failure to act by the Master Servicer nor shall the Trustee or the
Depositor be obligated to supervise the performance of the Master Servicer
hereunder or otherwise.
SECTION 3.04. Trustee to Act as Master Servicer.
---------------------------------
In the event that the Master Servicer shall for any reason no
longer be the Master Servicer hereunder (including by reason of an Event of
Default), the Trustee or its successor shall thereupon assume all of the
rights and obligations of the Master Servicer hereunder arising thereafter
(except that the Trustee shall not be (i) liable for losses of the Master
Servicer pursuant to Section 3.09 hereof or any acts or omissions of the
predecessor Master Servicer hereunder), (ii) obligated to make Advances if it
is prohibited from doing so by applicable law, (iii) obligated to effectuate
repurchases or substitutions of Mortgage Loans hereunder including, but not
limited to, repurchases or substitutions of Mortgage Loans pursuant to
Section 2.02 or 2.03 hereof, (iv) responsible for expenses of the Master
Servicer pursuant to Section 2.03 or (v) deemed to have made any
representations and warranties of the Master Servicer hereunder). Any such
assumption shall be subject to Section 7.02 hereof. If the Master Servicer
shall for any reason no longer be the Master Servicer (including by reason of
any Event of Default), the Trustee or its successor shall succeed to any
rights and obligations of the Master Servicer under each subservicing
agreement.
The Master Servicer shall, upon request of the Trustee, but at the
expense of the Master Servicer, deliver to the assuming party all documents
and records relating to each subservicing agreement or substitute
subservicing agreement and the Mortgage Loans then being serviced thereunder
and an accounting of amounts collected or held by it and otherwise use its
best efforts to effect the orderly and efficient transfer of the substitute
subservicing agreement to the assuming party.
SECTION 3.05. Collection of Mortgage Loan Payments; Certificate
-------------------------------------------------
Account; Distribution Account.
- -----------------------------
(a) In accordance with and to the extent of the Servicing
Standard, the Master Servicer shall make reasonable efforts in accordance
with the customary and usual standards of practice of prudent mortgage
servicers to collect all payments called for under the terms and provisions
of the Mortgage Loans to the extent such procedures shall be consistent with
this Agreement and the terms and provisions of any related Required Insurance
Policy. Consistent with the foregoing, the Master Servicer may in its
discretion (i) waive any late payment charge or any prepayment charge or
penalty interest in connection with the prepayment of a Mortgage Loan and
(ii) extend the due dates for payments due on a Mortgage Note for a period
not greater than 125 days; provided that the Master Servicer cannot extend the
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maturity of any such Mortgage Loan past the date on which the final payment is
due on the latest maturing Mortgage Loan as of the Cut-off Date. In the event
of any such arrangement, the Master Servicer shall make Advances on the
related Mortgage Loan in accordance with the provisions of Section 4.01 during
the scheduled period in accordance with the amortization schedule of such
Mortgage Loan without modification thereof by reason of such arrangements.
The Master Servicer shall not be required to institute or join in litigation
with respect to collection of any payment (whether under a Mortgage, Mortgage
Note or otherwise or against any public or governmental authority with respect
to a taking or condemnation) if it reasonably believes that enforcing the
provision of the Mortgage or other instrument pursuant to which such payment
is required is prohibited by applicable law.
(b) The Master Servicer shall establish and maintain a Certificate
Account into which the Master Servicer shall deposit or cause to be deposited
on a daily basis within one Business Day of receipt, except as otherwise
specifically provided herein, the following payments and collections remitted
by Subservicers or received by it in respect of Mortgage Loans subsequent to
the Cut-off Date (other than in respect of principal and interest due on the
Mortgage Loans on or before the Cut-off Date) and the following amounts
required to be deposited hereunder:
(i) all payments on account of principal on the Mortgage Loans,
including Principal Prepayments;
(ii) all payments on account of interest on the Mortgage Loans, net
of the related Master Servicing Fee;
(iii) all Insurance Proceeds and Liquidation Proceeds, other
than proceeds to be applied to the restoration or repair of the
Mortgaged Property or released to the Mortgagor in accordance with the
Master Servicer's normal servicing procedures;
(iv) any amount required to be deposited by the Master Servicer
pursuant to Section 3.05(e) in connection with any losses on Permitted
Investments;
(v) any amounts required to be deposited by the Master Servicer
pursuant to Section 3.09(b), 3.09(d), and in respect of net monthly
rental income from REO Property pursuant to Section 3.11 hereof;
(vi) all Purchase Prices and all Substitution Adjustment Amounts;
(vii) all Advances made by the Master Servicer pursuant to
Section 4.01; and
(viii) any other amounts required to be deposited hereunder.
In addition, with respect to any Mortgage Loan that is subject to a
buydown agreement, on each Due Date for such Mortgage Loan, in addition to
the monthly payment remitted by the Mortgagor, the Master Servicer shall
cause funds to be deposited into the Certificate Account in an amount
required to cause an amount of interest to be paid with respect to such
Mortgage Loan equal to the amount of interest that has accrued on such
Mortgage Loan from the preceding Due Date at the Mortgage Rate net of the
related Master Servicing Fee on such date.
The foregoing requirements for remittance by the Master Servicer shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment penalties,
late payment charges or assumption fees, if collected, need not be remitted
by the Master Servicer. In the event that the Master Servicer shall remit
any amount not required to be remitted, it may at any time withdraw or direct
the institution maintaining the Certificate Account to withdraw such amount
from the Certificate Account, any provision herein to the contrary
notwithstanding. Such withdrawal or direction may be accomplished by
delivering written notice thereof to the Trustee or such other institution
maintaining the Certificate Account which describes the amounts deposited in
error in the Certificate Account. The Master Servicer shall maintain
adequate records with respect to all withdrawals made pursuant to this
Section. All funds deposited in the Certificate Account shall be held in
trust for the Certificateholders until withdrawn in accordance with Section
3.08.
(c) The Trustee shall establish and maintain, on behalf of the
Certificateholders, the Distribution Account. The Trustee shall, promptly
upon receipt, deposit in the Distribution Account and retain therein the
following:
(i) the aggregate amount remitted by the Master Servicer to the
Trustee pursuant to Section 3.08(a)(ix);
(ii) any amount deposited by the Master Servicer pursuant to
Section 3.05(d) in connection with any losses on Permitted Investments;
and
(iii) any other amounts deposited hereunder which are required
to be deposited in the Distribution Account.
In the event that the Master Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee to withdraw
such amount from the Distribution Account, any provision herein to the
contrary notwithstanding. Such direction may be accomplished by delivering
an Officer's Certificate to the Trustee which describes the amounts deposited
in error in the Distribution Account. All funds deposited in the
Distribution Account shall be held by the Trustee in trust for the
Certificateholders until disbursed in accordance with this Agreement or
withdrawn in accordance with Section 3.08. In no event shall the Trustee
incur liability for withdrawals from the Distribution Account at the
direction of the Master Servicer.
(d) Each institution at which the Certificate Account or the
Distribution Account is maintained shall invest the funds therein as directed
in writing by the Master Servicer in Permitted Investments, which shall
mature not later than (i) in the case of the Certificate Account, the second
Business Day next preceding the related Distribution Account Deposit Date
(except that if such Permitted Investment is an obligation of the institution
that maintains such account, then such Permitted Investment shall mature not
later than the Business Day next preceding such Distribution Account Deposit
Date) and (ii) in the case of the Distribution Account, the Business Day next
preceding the Distribution Date (except that if such Permitted Investment is
an obligation of the institution that maintains such fund or account, then
such Permitted Investment shall mature not later than such Distribution Date)
and, in each case, shall not be sold or disposed of prior to its maturity.
All such Permitted Investments shall be made in the name of the Trustee, for
the benefit of the Certificateholders. All income and gain net of any losses
realized from any such investment of funds on deposit in the Certificate
Account or the Distribution Account shall be for the benefit of the Master
Servicer as servicing compensation and shall be remitted to it monthly as
provided herein. The amount of any realized losses in the Certificate
Account or the Distribution Account incurred in any such account in respect
of any such investments shall promptly be deposited by the Master Servicer in
the Certificate Account or paid to the Trustee for deposit into the
Distribution Account, as applicable. The Trustee in its fiduciary capacity
shall not be liable for the amount of any loss incurred in respect of any
investment or lack of investment of funds held in the Certificate Account or
the Distribution Account and made in accordance with this Section 3.05.
(e) The Master Servicer shall give notice to the Trustee, the
Seller, each Rating Agency and the Depositor of any proposed change of the
location of the Certificate Account prior to any change thereof. The Trustee
shall give notice to the Master Servicer, the Seller, each Rating Agency and
the Depositor of any proposed change of the location of the Distribution
Account prior to any change thereof.
SECTION 3.06. Collection of Taxes, Assessments and Similar
--------------------------------------------
Items; Escrow Accounts.
- ----------------------
(a) To the extent required by the related Mortgage Note and not
violative of current law, the Master Servicer shall establish and maintain
one or more accounts (each, an "Escrow Account") and deposit and retain
therein all collections from the Mortgagors (or advances by the Master
Servicer) for the payment of taxes, assessments, hazard insurance premiums or
comparable items for the account of the Mortgagors. Nothing herein shall
require the Master Servicer to compel a Mortgagor to establish an Escrow
Account in violation of applicable law.
(b) Withdrawals of amounts so collected from the Escrow Accounts
may be made only to effect timely payment of taxes, assessments, hazard
insurance premiums, condominium or PUD association dues, or comparable items,
to reimburse the Master Servicer out of related collections for any payments
made pursuant to Sections 3.01 hereof (with respect to taxes and assessments
and insurance premiums) and 3.09 hereof (with respect to hazard insurance),
to refund to any Mortgagors any sums determined to be overages, to pay
interest, if required by law or the terms of the related Mortgage or Mortgage
Note, to Mortgagors on balances in the Escrow Account or to clear and
terminate the Escrow Account at the termination of this Agreement in
accordance with Section 9.01 hereof. The Escrow Accounts shall not be a part
of the Trust Fund.
(c) The Master Servicer shall advance any payments referred to in
Section 3.06(a) that are not timely paid by the Mortgagors on the date when
the tax, premium or other cost for which such payment is intended is due, but
the Master Servicer shall be required so to advance only to the extent that
such advances, in the good faith judgment of the Master Servicer, will be
recoverable by the Master Servicer out of Insurance Proceeds, Liquidation
Proceeds or otherwise.
SECTION 3.07. Access to Certain Documentation and Information
-----------------------------------------------
Regarding the Mortgage Loans.
- ----------------------------
The Master Servicer shall afford the Depositor and the Trustee
reasonable access to all records and documentation regarding the Mortgage
Loans and all accounts, insurance information and other matters relating to
this Agreement, such access being afforded without charge, but only upon
reasonable request and during normal business hours at the office designated
by the Master Servicer.
Upon reasonable advance notice in writing, the Master Servicer will
provide to each Certificateholder which is a savings and loan association,
bank or insurance company certain reports and reasonable access to
information and documentation regarding the Mortgage Loans sufficient to
permit such Certificateholder to comply with applicable regulations of the
OTS or other regulatory authorities with respect to investment in the
Certificates; provided that the Master Servicer shall be entitled to be
--------
reimbursed by each such Certificateholder for actual expenses incurred by the
Master Servicer in providing such reports and access.
The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of Subordinated
Certificates and the examiners and supervisory agents of the OTS, the FDIC
and such other authorities, access to the documentation regarding the
Mortgage Loans required by applicable regulations of the OTS and the FDIC.
Such access shall be afforded only upon reasonable and prior written request
and during normal business hours at the offices designated by the Master
Servicer. Unless prohibited by applicable laws or regulations, the Master
Servicer shall be entitled to be reimbursed by the related Certificateholders
for actual expenses incurred by the Master Servicer in providing such access.
Nothing in this Section 3.07 shall limit the obligation of the Master
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Mortgagors and the failure of the Master Servicer to provide
access as provided in this Section 3.07 as a result of such obligation shall
not constitute a breach of this Section 3.07.
SECTION 3.8. Permitted Withdrawals from the Certificate
------------------------------------------
Account and Distribution Account.
- --------------------------------
(a) The Master Servicer may from time to time make withdrawals
from the Certificate Account for the following purposes:
(i) to pay to the Master Servicer (to the extent not previously
retained) the servicing compensation to which it is entitled pursuant to
Section 3.14, and to pay to the Master Servicer, as additional servicing
compensation, earnings on or investment income with respect to funds in
or credited to the Certificate Account;
(ii) to reimburse the Master Servicer for unreimbursed Advances
made by it, such right of reimbursement pursuant to this subclause (ii)
being limited to amounts received on the Mortgage Loan(s) in respect of
which any such Advance was made;
(iii) to reimburse the Master Servicer for any Nonrecoverable
Advance previously made;
(iv) to reimburse the Master Servicer for Insured Expenses from the
related Insurance Proceeds;
(v) to reimburse the Master Servicer for (a) unreimbursed
Servicing Advances, the Master Servicer's right to reimbursement
pursuant to this clause (a) with respect to any Mortgage Loan being
limited to amounts received on such Mortgage Loan(s) which represent
late recoveries of the payments for which such advances were made
pursuant to Section 3.01 or Section 3.06 and (b) for unpaid Master
Servicing Fees as provided in Section 3.11;
(vi) to pay to the purchaser, with respect to each Mortgage Loan or
property acquired in respect thereof that has been purchased pursuant to
Section 2.02, 2.03 or 3.11, all amounts received thereon after the date
of such purchase;
(vii) to reimburse the Seller, the Master Servicer or the
Depositor for expenses incurred by any of them and reimbursable pursuant
to Section 6.03;
(viii) to withdraw any amount deposited in the Certificate
Account and not required to be deposited therein;
(ix) on or prior to the Distribution Account Deposit Date, to
withdraw an amount equal to the related Available Funds and the Trustee
Fee for such Distribution Date and remit such amount to the Trustee for
deposit in the Distribution Account; and
(x) to clear and terminate the Certificate Account upon
termination of this Agreement pursuant to Section 9.01 hereof.
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 Certificate Account pursuant to such subclauses (i),
(ii), (iv), (v) and (vi). Prior to making any withdrawal from the
Certificate Account pursuant to subclause (iii), the Master Servicer shall
deliver to the Trustee an Officer's Certificate of a Servicing Officer
indicating the amount of any previous Advance determined by the Master
Servicer to be a Nonrecoverable Advance and identifying the related Mortgage
Loans(s), and their respective portions of such Nonrecoverable Advance.
(b) The Trustee shall withdraw funds from the Distribution Account
for distributions to Certificateholders in the manner specified in this
Agreement (and to withhold from the amounts so withdrawn, the amount of any
taxes that it is authorized to withhold pursuant to the last paragraph of
Section 8.11). In addition, the Trustee may from time to time make
withdrawals from the Distribution Account for the following purposes:
(i) to pay to itself the Trustee Fee for the related Distribution
Date;
(ii) to pay to the Master Servicer as additional servicing
compensation earnings on or investment income with respect to funds in
the Distribution Account;
(iii) to withdraw and return to the Master Servicer any amount
deposited in the Distribution Account and not required to be deposited
therein; and
(iv) to clear and terminate the Distribution Account upon
termination of the Agreement pursuant to Section 9.01 hereof.
SECTION 3.09. Maintenance of Hazard Insurance; Maintenance of
-----------------------------------------------
Primary Insurance Policies.
- --------------------------
(a) The Master Servicer shall cause to be maintained, for each
Mortgage Loan, hazard insurance with extended coverage in an amount that is
at least equal to the lesser of (i) the maximum insurable value of the
improvements securing such Mortgage Loan or (ii) the greater of (y) the
outstanding principal balance of the Mortgage Loan and (z) an amount such
that the proceeds of such policy shall be sufficient to prevent the Mortgagor
and/or the mortgagee from becoming a co-insurer. Each such policy of
standard hazard insurance shall contain, or have an accompanying endorsement
that contains, a standard mortgagee clause. Any amounts collected by the
Master Servicer under any such policies (other than the amounts to be applied
to the restoration or repair of the related Mortgaged Property or amounts
released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures) shall be deposited in the Certificate Account. Any
cost incurred by the Master Servicer in maintaining any such insurance shall
not, for the purpose of calculating monthly distributions to the
Certificateholders or remittances to the Trustee for their benefit, be added
to the principal balance of the Mortgage Loan, notwithstanding that the terms
of the Mortgage Loan so permit. Such costs shall be recoverable by the
Master Servicer out of late payments by the related Mortgagor or out of
Liquidation Proceeds to the extent permitted by Section 3.08 hereof. 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 other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance.
If the Mortgaged Property is located at the time of origination of the
Mortgage Loan in a federally designated special flood hazard area and such
area is participating in the national flood insurance program, the Master
Servicer shall cause flood insurance to be maintained with respect to such
Mortgage Loan. Such flood insurance shall be in an amount equal to the least
of (i) the original principal balance of the related Mortgage Loan, (ii) the
replacement value of the improvements which are part of such Mortgaged
Property, and (iii) the maximum amount of such insurance available for the
related Mortgaged Property under the national flood insurance program.
(b) In the event that the Master Servicer shall obtain and
maintain a blanket policy insuring against hazard losses on all of the
Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first sentence of this Section, it being
understood and agreed that such policy may contain a deductible clause on
terms substantially equivalent to those commercially available and maintained
by comparable servicers. If such policy contains a deductible clause, the
Master Servicer shall, in the event that there shall not have been maintained
on the related Mortgaged Property a policy complying with the first sentence
of this Section, and there shall have been a loss that would have been
covered by such policy, deposit in the Certificate Account the amount not
otherwise payable under the blanket policy because of such deductible clause.
In connection with its activities as Master Servicer of the Mortgage Loans,
the Master Servicer agrees to present, on behalf of itself, the Depositor,
and the Trustee for the benefit of the Certificateholders, claims under any
such blanket policy.
(c) The Master Servicer shall not take any action which would
result in non-coverage under any applicable Primary Insurance Policy of any
loss which, but for the actions of the Master Servicer, would have been
covered thereunder. The Master Servicer shall not cancel or refuse to renew
any such Primary Insurance Policy 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 Insurance Policy for such canceled
or non-renewed policy is maintained with a Qualified Insurer. The Master
Servicer shall not be required to maintain any Primary Insurance Policy with
respect to any Mortgage Loan with a Loan-to-Value Ratio less than or equal to
80% as of any date of determination or, based on a new appraisal, the
principal balance of such Mortgage Loan represents 80% or less of the new
appraised value. The Master Servicer agrees to effect the timely payment of
the premiums on each Primary Insurance Policy, and such costs not otherwise
recoverable shall be recoverable by the Master Servicer from the related
liquidation proceeds.
(d) In connection with its activities as Master Servicer of the
Mortgage Loans, the Master Servicer agrees to present on behalf of itself,
the Trustee and Certificateholders, claims to the insurer under any Primary
Insurance Policies and, in this regard, to take such reasonable action in
accordance with the Servicing Standard as shall be necessary to permit
recovery under any Primary Insurance Policies respecting defaulted Mortgage
Loans. Any amounts collected by the Master Servicer under any Primary
Insurance Policies shall be deposited in the Certificate Account.
SECTION 3.10. Enforcement of Due-on-Sale Clauses; Assumption
----------------------------------------------
Agreements.
- ----------
(a) Except as otherwise provided in this Section, when any
property subject to a Mortgage has been conveyed by the Mortgagor, the Master
Servicer shall, to the extent that it has knowledge of such conveyance and in
accordance with the Servicing Standard, 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, the Master
Servicer is not required to exercise such rights with respect to a Mortgage
Loan if the Person to whom the related Mortgaged Property has been conveyed
or is proposed to be conveyed satisfies the terms and conditions contained in
the Mortgage Note and Mortgage related thereto and the consent of the
mortgagee under such Mortgage Note or Mortgage is not otherwise so required
under such Mortgage Note or Mortgage as a condition to such transfer. In the
event that (i) the Master Servicer is prohibited by law from enforcing any
such due-on-sale clause, (ii) coverage under any Required Insurance Policy
would be adversely affected, (iii) the Mortgage Note does not include a due-
on-sale clause or (iv) nonenforcement is otherwise permitted hereunder, the
Master Servicer is authorized, subject to Section 3.10(b), to take or enter
into an assumption and modification agreement from or with the person to whom
such property has been or is about to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, unless prohibited by
applicable state law, the Mortgagor remains liable thereon, provided that the
Mortgage Loan shall continue to be covered (if-so covered before the Master
Servicer enters such agreement) by the applicable Required Insurance
Policies. The Master Servicer, subject to Section 3.10(b), is also
authorized with the prior approval of the insurers under any Required
Insurance Policies to enter into a substitution of liability agreement with
such Person, pursuant to which the original Mortgagor is released from
liability and such Person is substituted as Mortgagor and becomes liable
under the Mortgage Note. Notwithstanding the foregoing, the Master Servicer
shall not be deemed to be in default under this Section by reason of any
transfer or assumption which the Master Servicer reasonably believes it is
restricted by law from preventing, for any reason whatsoever.
(b) Subject to the Master Servicer's duty to enforce any
due-on-sale clause to the extent set forth in Section 3.10(a), in any case in
which a Mortgaged Property has been conveyed to a Person by a Mortgagor, and
such Person is to enter into an assumption agreement or modification
agreement or supplement to the Mortgage Note or Mortgage that 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 shall prepare and deliver or cause to be prepared
and delivered to the Trustee for signature and shall direct, in writing, the
Trustee to execute 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. In
connection with any such assumption, no material term of the Mortgage Note
may be changed. In addition, the substitute Mortgagor and the Mortgaged
Property must be acceptable to the Master Servicer in accordance with its
underwriting standards as then in effect. Together with each such
substitution, assumption or other agreement or instrument delivered to the
Trustee for execution by it, the Master Servicer shall deliver an Officer's
Certificate signed by a Servicing Officer stating that the requirements of
this subsection have been met in connection therewith. The Master Servicer
shall notify the Trustee that any such substitution or assumption agreement
has been completed by forwarding to the Trustee the original of such
substitution or assumption agreement, which in the case of the original shall
be added to the related Mortgage File and shall, for all purposes, be
considered a part of such Mortgage File to the same extent as all other
documents and instruments constituting a part thereof. Any fee collected by
the Master Servicer for entering into an assumption or substitution of
liability agreement will be retained by the Master Servicer as additional
servicing compensation.
SECTION 3.11. Realization upon Defaulted Mortgage Loans;
------------------------------------------
Repurchase of Certain Mortgage Loans.
- ------------------------------------
The Master Servicer shall use reasonable efforts in accordance with
the Servicing Standard to foreclose upon or otherwise comparably convert the
ownership of Mortgaged Properties in respect of which the related Mortgage
Loans as come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Master Servicer
shall follow the Servicing Standard and shall follow the requirements of the
insurer under any Required Insurance Policy; provided that the Master Servicer
--------
shall not be required to expend its own funds in connection with any
foreclosure 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 after reimbursement to itself of
such expenses and (ii) that such expenses will be recoverable to it through
Liquidation Proceeds (respecting which it shall have priority for purposes of
withdrawals from the Certificate Account). The Master Servicer shall be
responsible for all other costs and expenses incurred by it in any such
proceedings; provided that it shall be entitled to reimbursement thereof
--------
from the liquidation proceeds with respect to the related Mortgaged Property,
as provided in the definition of Liquidation Proceeds. If the Master
Servicer has knowledge that a Mortgaged Property which the Master Servicer is
contemplating acquiring in foreclosure or by deed in lieu of foreclosure is
located within a 1 mile radius of any site listed in the Expenditure Plan for
the Hazardous Substance Clean Up Bond Act of 1984 or other site with
environmental or hazardous waste risks known to the Master Servicer, the
Master Servicer will, prior to acquiring the Mortgaged Property, consider
such risks and only take action in accordance with its established
environmental review procedures.
With respect to any REO Property, the deed or certificate of sale
shall be taken in the name of the Trustee for the benefit of the
Certificateholders, or its nominee, on behalf of the Certificateholders. The
Trustee's name shall be placed on the title to such REO Property solely as
the Trustee hereunder and not in its individual capacity. The Master
Servicer shall ensure that the title to such REO Property references the
Pooling and Servicing Agreement and the Trustee's capacity hereunder.
Pursuant to its efforts to sell such REO Property, the Master Servicer shall
either itself or through an agent selected by the Master Servicer protect and
conserve such REO Property in accordance with the Servicing Standard and may,
incident to its conservation and protection of the interests of the
Certificateholders, rent the same, or any part thereof, as the Master
Servicer deems to be in the best interest of the Certificateholders for the
period prior to the sale of such REO Property. The Master Servicer shall
prepare for and deliver to the Trustee a statement with respect to each REO
Property that has been rented showing the aggregate rental income received
and all expenses incurred in connection with the management and maintenance
of such REO Property at such times as is necessary to enable the Trustee to
comply with the reporting requirements of the REMIC Provisions. The net
monthly rental income, if any, from such REO Property shall be deposited in
the Certificate Account no later than the close of business on each
Determination Date. The Master Servicer shall perform the tax reporting and
withholding required by Sections 1445 and 6050J of the Code with respect to
foreclosures and abandonments, the tax reporting required by Section 6050H of
the Code with respect to the receipt of mortgage interest from individuals
and any tax reporting required by Section 6050P of the Code with respect to
the cancellation of indebtedness by certain financial entities, by preparing
such tax and information returns as may be required, in the form required,
and delivering the same to the Trustee for filing.
In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to two years after its acquisition by the Trust Fund unless the Trustee
shall have been supplied with an Opinion of Counsel to the effect that the
holding by the Trust Fund of such Mortgaged Property subsequent to such
two-year period will not result in the imposition of taxes on "prohibited
transactions" on the REMIC hereunder as defined in section 860F of the Code
or cause the REMIC to fail to qualify as a REMIC at any time that any
Certificates are outstanding, in which case the Trust Fund may continue to
hold such Mortgaged Property (subject to any conditions contained in such
Opinion of Counsel). Notwithstanding any other provision of this Agreement,
no Mortgaged Property acquired by the Trust Fund shall be rented (or allowed
to continue to be rented) or otherwise used for the production of income by
or on behalf of the Trust Fund in such a manner or pursuant to any terms that
would (i) cause such Mortgaged Property to fail to qualify as "foreclosure
property" within the meaning of section 860G(a)(8) of the Code or (ii)
subject the REMIC to the imposition of any federal, state or local income
taxes on the income earned from such Mortgaged Property under Section 860G(c)
of the Code or otherwise, unless the Master Servicer has agreed to indemnify
and hold harmless the Trust Fund with respect to the imposition of any such
taxes.
The decision of the Master Servicer to foreclose on a defaulted
Mortgage Loan shall be subject to a determination by the Master Servicer that
the proceeds of such foreclosure would exceed the costs and expenses of
bringing such a proceeding. The income earned from the management of any REO
Properties, net of reimbursement to the Master Servicer for expenses incurred
(including any property or other taxes) in connection with such management
and net of unreimbursed Master Servicing Fees, Advances and Servicing
Advances, shall be applied to the payment of principal of and interest on the
related defaulted Mortgage Loans (with interest accruing as though such
Mortgage Loans were still current and adjustments, if applicable, to the
Mortgage Rate were being made in accordance with the terms of the Mortgage
Note) and all such income shall be deemed, for all purposes in this
Agreement, to be payments on account of principal and interest on the related
Mortgage Notes and shall be deposited into the Certificate Account. To the
extent the net income received during any calendar month is in excess of the
amount attributable to amortizing principal and accrued interest at the
related Mortgage Rate on the related Mortgage Loan for such calendar month,
such excess shall be considered to be a partial prepayment of principal of
the related Mortgage Loan.
The proceeds from any liquidation of a Mortgage Loan, as well as
any income from an REO Property, will be applied in the following order of
priority: first, to reimburse the Master Servicer for any related
unreimbursed Servicing Advances and Master Servicing Fees; second, to
reimburse the Master Servicer for any unreimbursed Advances; third, to
reimburse the Certificate Account for any Nonrecoverable Advances (or
portions thereof) that were previously withdrawn by the Master Servicer
pursuant to Section 3.08(a)(iii) that related to such Mortgage Loan; fourth,
to accrued and unpaid interest (to the extent no Advance has been made for
such amount or any such Advance has been reimbursed) on the Mortgage Loan or
related REO Property, at the Adjusted Net Mortgage Rate to the Due Date
occurring in the month in which such amounts are required to be distributed;
and fifth, as a recovery of principal of the Mortgage Loan. Excess Proceeds,
if any, from the liquidation of a Liquidated Mortgage Loan will be retained
by the Master Servicer as additional servicing compensation pursuant to
Section 3.14.
The Master Servicer, in its sole discretion, shall have the right
to purchase for its own account from the Trust Fund any Mortgage Loan which
is more than 90 days Delinquent at a price equal to the Purchase Price. The
Purchase Price for any Mortgage Loan purchased hereunder shall be deposited
in the Certificate Account and the Trustee, upon receipt of a certificate
from the Master Servicer in the form of Exhibit N hereto, shall release or
cause to be released to the purchaser of such Mortgage Loan the related
Mortgage File and shall execute and deliver such instruments of transfer or
assignment prepared by the purchaser of such Mortgage Loan, in each case
without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of
such Mortgage Loan shall succeed to all the Trustee's right, title and
interest in and to such Mortgage Loan and all security and documents related
thereto. Such assignment shall be an assignment outright and not for
security. The purchaser of such Mortgage Loan shall thereupon own such
Mortgage Loan, and all security and documents, free of any further obligation
to the Trustee or the Certificateholders with respect thereto.
SECTION 3.12. Trustee to Cooperate; Release of Mortgage
-------------------------------------------
Files.
- -----
Upon the 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 will immediately
notify the Trustee by delivering, or causing to be delivered a "Request for
Release of Documents" substantially in the form of Exhibit N. Upon receipt
of such request, the Trustee shall promptly release the related Mortgage File
to the Master Servicer, and the Trustee shall at the Master Servicer's
direction execute and deliver to the Master Servicer the request for
reconveyance, deed of reconveyance or release or satisfaction of mortgage or
such instrument releasing the lien of the Mortgage in each case provided by
the Master Servicer, together with the Mortgage Note with written evidence of
cancellation thereon. Expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the related
Mortgagor. From time to time and as shall be appropriate for the servicing
or foreclosure of any Mortgage Loan, including for such purpose collection
under any policy of flood insurance, any fidelity bond or errors or omissions
policy, or for the purposes of effecting a partial release of any Mortgaged
Property from the lien of the Mortgage or the making of any corrections to
the Mortgage Note or the Mortgage or any of the other documents included in
the Mortgage File, the Trustee shall, upon delivery to the Trustee of a
Request for Release in the form of Exhibit M signed by a Servicing Officer,
release the Mortgage File to the Master Servicer. Subject to the further
limitations set forth below, the Master Servicer shall cause the Mortgage
File or documents so released to be returned to the Trustee when the need
therefor by the Master Servicer no longer exists, unless the Mortgage Loan is
liquidated and the proceeds thereof are deposited in the Certificate Account,
in which case the Master Servicer shall deliver to the Trustee a Request for
Release of Documents in the form of Exhibit N, signed by a Servicing Officer.
If the Master Servicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Property as authorized by this
Agreement, the Master Servicer shall deliver or cause to be delivered to the
Trustee, for signature, as appropriate, any court pleadings, requests for
trustee's sale or other documents necessary to effectuate such foreclosure or
any legal action brought to obtain judgment against the Mortgagor on the
Mortgage Note or the Mortgage or to obtain a deficiency judgment or to
enforce any other remedies or rights provided by the Mortgage Note or the
Mortgage or otherwise available at law or in equity.
SECTION 3.13. Documents Records and Funds in Possession of
--------------------------------------------
Master Servicer to be Held for the Trustee.
- ------------------------------------------
The Master Servicer shall account fully to the Trustee for any
funds received by the Master Servicer or which otherwise are collected by the
Master Servicer as Liquidation Proceeds or Insurance Proceeds in respect of
any Mortgage Loan. All Mortgage Files and funds collected or held by, or
under the control of, the Master Servicer in respect of any Mortgage Loans,
whether from the collection of principal and interest payments or from
Liquidation Proceeds, including but not limited to, any funds on deposit in
the Certificate Account, shall be held by the Master Servicer for and on
behalf of the Trustee and shall be and remain the sole and exclusive property
of the Trustee, subject to the applicable provisions of this Agreement. The
Master Servicer also agrees that it shall not create, incur or subject any
Mortgage File or any funds that are deposited in the Certificate Account,
Distribution Account or any Escrow Account, or any funds that otherwise are
or may become due or payable to the Trustee for the benefit of the
Certificateholders, to any claim, lien, security interest, judgment, levy,
writ of attachment or other encumbrance, or assert by legal action or
otherwise any claim or right of setoff against any Mortgage File or any funds
collected on, or in connection with, a Mortgage Loan, except, however, that
the Master Servicer shall be entitled to set off against and deduct from any
such funds any amounts that are properly due and payable to the Master
Servicer under this Agreement.
SECTION 3.14. Servicing Compensation.
----------------------
As compensation for its activities hereunder, the Master Servicer
shall be entitled (out of each payment of interest on a Mortgage Loan (or
portion thereof) included in the Trust Fund) to retain or withdraw from the
Certificate Account an amount equal to the Master Servicing Fee for each
Mortgage Loan, provided that the aggregate Master Servicing Fee with respect
to any Distribution Date shall be reduced (i) by an amount equal to the
aggregate of the Prepayment Interest Shortfalls, if any, with respect to such
Distribution Date, but not below an amount equal to one-half of the aggregate
Master Servicing Fee for such Distribution Date before reduction thereof in
respect of such Prepayment Interest Shortfalls, and (ii) with respect to the
first Distribution Date, an amount equal to any amount to be deposited into
the Distribution Account by the Depositor pursuant to Section 2.01(a) and not
so deposited.
Additional servicing compensation in the form of Excess Proceeds,
Prepayment Interest Excess, prepayment penalties, assumption fees, late
payment charges and all income and gain net of any losses realized from
Permitted Investments shall be retained by the Master Servicer to the extent
not required to be deposited in the Certificate Account pursuant to Section
3.05 hereof. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its master servicing activities hereunder
(including payment of any premiums for hazard insurance and any Primary
Insurance Policy and maintenance of the other forms of insurance coverage
required by this Agreement) and shall not be entitled to reimbursement
therefor except as specifically provided in this Agreement.
SECTION 3.15. Annual Statement as to Compliance.
---------------------------------
The Master Servicer shall deliver to the Depositor and the Trustee
on or before 120 days after the end of the Master Servicer's fiscal year,
commencing with its 199_ fiscal year, an Officer's Certificate stating, as to
the signer thereof, that (i) a review of the activities of the Master
Servicer during the preceding calendar year and of the performance of the
Master Servicer under this Agreement has been made under such officer's
supervision , (ii) to the best of such officer's knowledge, based on such
review, the Master Servicer has fulfilled all its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof (and (iii) to the best of such
officer's knowledge, each Subservicer has fulfilled all of its obligations
under its subservicing agreement throughout such year, or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and the status thereof). The
Trustee shall forward a copy of each such statement to each Rating Agency.
SECTION 3.16. Annual Independent Public Accountants' Servicing
------------------------------------------------
Statement; Financial Statements.
- -------------------------------
On or before 120 days after the end of the Master Servicer's fiscal
year, commencing with its 199_ fiscal year, the Master Servicer at its
expense shall cause a nationally or regionally recognized firm of independent
public accountants (who may also render other services to the Master
Servicer, the Seller or any affiliate thereof) which is a member of the
American Institute of Certified Public Accountants to furnish a statement to
the Trustee and the Depositor to the effect that-such firm has examined
certain documents and records relating to the servicing of the Mortgage Loans
under this Agreement or of mortgage loans under pooling and servicing
agreements substantially similar to this Agreement (such statement to have
attached thereto a schedule setting forth the pooling and servicing
agreements covered thereby) and that, on the basis of such examination,
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FNMA and 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 FNMA and 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
FNMA and FHLMC (rendered within one year of such statement) of independent
public accountants with respect to the related Subservicer. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon
request at the Master Servicer's expense, provided such statement is
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delivered by the Master Servicer to the Trustee.
SECTION 3.17. Errors and Omissions Insurance; Fidelity Bonds.
----------------------------------------------
The Master Servicer shall, for so long as it acts as master
servicer under this Agreement, obtain and maintain in force (, and shall
cause each Subservicer to obtain and maintain in force) (a) a policy or
policies of insurance covering errors and omissions in the performance of its
obligations as Master Servicer hereunder (or as Subservicer under the related
subservicing agreement, as the case may be,) and (b) a fidelity bond in
respect of its officers, employees and agents. Each such policy or policies
and bond shall, together, comply with the requirements from time to time of
FNMA or FHLMC for persons performing servicing for mortgage loans purchased
by FNMA or FHLMC. In the event that any such policy or bond ceases to be in
effect, the Master Servicer shall obtain a comparable replacement policy or
bond from an insurer or issuer, meeting the requirements set forth above as
of the date of such replacement.
ARTICLE IV
DISTRIBUTIONS AND
ADVANCES BY THE MASTER SERVICER
SECTION 4.01. Advances.
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The Master Servicer shall determine on or before each Master
Servicer Advance Date whether it is required to make an Advance pursuant to
the definition thereof. If the Master Servicer determines it is required to
make an Advance, it shall, on or before the Master Servicer Advance Date,
either (i) deposit into the Certificate Account an amount equal to the
Advance or (ii) make an appropriate entry in its records relating to the
Certificate Account that any Amount Held for Future Distribution has been
used by the Master Servicer in discharge of its obligation to make any such
Advance. Any funds so applied shall be replaced by the Master Servicer by
deposit in the Certificate Account no later than the close of business on the
next Master Servicer Advance Date. The Master Servicer shall be entitled to
be reimbursed from the Certificate Account for all Advances of its own funds
made pursuant to this Section as provided in Section 3.08. The obligation to
make Advances with respect to any Mortgage Loan shall continue if such
Mortgage Loan has been foreclosed or otherwise terminated and the related
Mortgaged Property has not been liquidated. "The Master Servicer shall
inform the Trustee of the amount of the Advance to be made on each Master
Servicer Advance Date no later than the second Business Day before the
related Distribution Date."
The Master Servicer shall deliver to the Trustee on the related Master
Servicer Advance Date an Officer's Certificate of a Servicing Officer
indicating the amount of any proposed Advance determined by the Master
Servicer to be a Nonrecoverable Advance.
SECTION 4.02. Priorities of Distribution.
--------------------------
(a) On each Distribution Date, the Trustee shall withdraw the
Available Funds from the Distribution Account and apply such funds to
distributions on the Certificates in the following order and priority and, in
each case, to the extent of Available Funds remaining:
((i) to each interest-bearing Class of Senior Certificates,
an amount allocable to interest equal to the related Class Optimal
Interest Distribution Amount, any shortfall being allocated pro
rata among such Classes in proportion to the amount of the Class
Optimal Interest Distribution Amount that would have been
distributed in the absence of such shortfall; provided, that prior
--------
to the Accrual Termination Date, the amount otherwise distributable
as interest on each Class of Accrual Certificates on such
Distribution Date shall be distributed to the Accretion Directed
Certificates as set forth in 4.02(a)(ii) and added to the Class
Certificate Balances of certain Classes as set forth in Section
4.02(b);
(ii) On each Distribution Date until the Accrual Termination
Date, the Accrual Amount will be distributed as principal of the
following Classes of Senior Certificates in the following order of
priority:
(x) to the Class A-_ Certificates, until the Class
Certificate Balance thereof has been reduced to zero; and
(y) to the Class A-_-_ Component until the Component
Balance thereof has been reduced to zero.
On any Distribution Date that the Accrual Amount is in excess of
the amount necessary to reduce the Component Balance of the Class A-_-_
Component to zero, such excess shall be distributed as provided in Section
4.02(b).
(iii) to each Class of Senior Certificates, concurrently
as follows:
(x) to the Class PO Certificates, an amount allocable to
principal equal to the PO Formula Principal Amount, up to the
outstanding Class Certificate Balance of the Class PO
Certificates;
(y) on each Distribution Date prior to the Senior Credit
Support Depletion Date, the Non-PO Formula Principal Amount,
up to the amount of the Senior Principal Distribution Amount
for such Distribution Date, will be distributed as follows:
(A) to the Class A-_ Certificates, the Class A-_
Optimal Amount;
(B) to the Class A-R Certificates until the Class
Certificate Balance thereof has been reduced to zero;
(C) sequentially, to the Class A-_ and Class A-_
Certificates in that order, until the respective Class
Certificate Balances thereof have been reduced to their
respective Planned Balances for such Distribution Date;
(D) sequentially, to the Class A-_ Certificates and
the Class A-_-_ and Class A-_-_ Components, in that
order, until the respective Class Certificate Balance or
Component Balances thereof, as the case may be, have been
reduced to their respective Targeted Balances for such
Distribution Date;
(E) concurrently, to the Class A-_ and Class A-_
Certificates and the Class A-_-_ Component, pro rata
based on their respective Class Certificate Balances or
Component Balance, as the case may be, until the Class
Certificate Balances and Component Balance thereof, as
the case may be, have been reduced to zero;
(F) sequentially, to the Class A-_ Certificates and
the Class A-_-_ and Class A-_-_ Components, in that
order, without regard to their respective Targeted
Balances and until the respective Class Certificate
Balance or Component Balances thereof, as the case may
be, have been reduced to zero;
(G) sequentially, to the Class A-_ and Class A-_
Certificates in that order, without regard to their
respective Planned Balances and until the respective
Class Certificate Balances have been reduced to zero; and
(H) to the Class A-_ Certificates until the Class
Certificate Balance thereof has been reduced to zero.
(iv) to the Class PO Certificates, any Class PO Deferred
Amounts, up to an amount not to exceed the amount calculated
pursuant to clause (A) of the definition of the Subordinated
Principal Distribution Amount for such Distribution Date (with such
amount to be allocated first from amounts calculated pursuant to
clause (a)(iii) of the definition of Subordinated Principal
Distribution Amount);
(v) to each Class of Subordinated Certificates, subject to
paragraph (e) below, in the following order of priority:
(A) to the Class B-_ Certificates, an amount
allocable to interest equal to the Class Optimal Interest
Distribution Amount for such Distribution Date;
(B) to the Class B-_ Certificates, an amount
allocable to principal equal to its Pro Rata Share for
such Distribution Date until the Class Certificate
Balance thereof is reduced to zero;
(C) to the Class B-_ Certificates, an amount
allocable to interest equal to the Class Optimal Interest
Distribution Amount for such Class for such Distribution
Date;
(D) to the Class B-_ Certificates, an amount
allocable to principal equal to its Pro Rata Share for
such Distribution Date until the Class Certificate
Balance thereof is reduced to zero;
(E) to the Class B-_ Certificates, an amount
allocable to interest equal to the Class Optimal Interest
Distribution Amount for such Class for such Distribution
Date;
(F) to the Class B-_ Certificates, an amount
allocable to principal equal to its Pro Rata Share for
such Distribution Date until the Class Certificate
Balance thereof is reduced to zero;
(G) to the Class B-_ Certificates, an amount
allocable to interest equal to the amount of the Class
Optimal Interest Distribution Amount for such Class for
such Distribution Date;
(H) to the Class B-_ Certificates, an amount
allocable to principal equal to its Pro Rata Share for
such Distribution Date until the Class Certificate
Balance thereof has been reduced to zero;
(I) to the Class B-_ Certificates, an amount
allocable to interest equal to the amount of the Class
Optimal Interest Distribution Amount for such Class for
such Distribution Date;
(J) to the Class B-_ Certificates, an amount
allocable to principal equal to its Pro Rata Share for
such Distribution Date until the Class Certificate
Balance thereof has been reduced to zero;
(K) to the Class B-_ Certificates, an amount
allocable to interest equal to the Class Optimal Interest
Distribution Amount for such Class for such Distribution
Date; and
(L) to the Class B-_ Certificates, an amount
allocable to principal equal to its Pro Rata Share for
such Distribution Date until the Class Certificate
Balance thereof is reduced to zero.
(vi) to the Class A-R Certificates, any remaining Available
Funds.)
On any Distribution Date, amounts distributed in respect of Class PO Deferred
Amounts will not reduce the Class Certificate Balance of the Class PO
Certificates.
On any Distribution Date, to the extent the Amount Available for
Senior Principal is insufficient to make the full distribution required to be
made pursuant to clause (iii)(x) above, (A) the amount distributable on the
Class PO Certificates in respect of principal shall be equal to the product
of (1) the Amount Available for Senior Principal and (2) a fraction, the
numerator of which is the PO Formula Principal Amount and the denominator of
which is the sum of the PO Formula Principal Amount and the Senior Principal
Distribution Amount and (B) the amount distributable on the Senior
Certificates, other than the Class PO Certificates, in respect of principal
shall be equal to the product of (1) the Amount Available for Senior
Principal and (2) a fraction, the numerator of which is the Senior Principal
Distribution Amount and the denominator of which is the sum of the Senior
Principal Distribution Amount and the PO Formula Principal Amount.
(b) On each Distribution Date prior to the Accrual Termination
Date, the Accrual Amount for such Distribution Date shall not (except as
provided in the last sentence of this clause (b)) be distributed as interest
with respect to the Class A-_-_ Component but shall instead be added to the
Component Balance of such Component on the related Distribution Date. With
respect to any Distribution Date prior to the Accrual Termination Date on
which principal payments on the Class A-_-_ Component are distributed
pursuant to Section 4.02(a)(iii), the Accrual Amount shall be deemed to have
been added on such Distribution Date to the Class Certificate Balance (and
included in the amount distributable on the Accretion Directed Certificates
pursuant to Section 4.02(a)(ii) for such Distribution Date) and the related
distribution thereon shall be deemed to have been applied concurrently
towards the reduction of all or a portion of the amount so added and, to the
extent of any excess, towards the reduction of the Component Balance of the
Class A-_-_ Component immediately prior to such Distribution Date.
Notwithstanding any such distribution, the Class A-_-_ Component shall
continue to be a Class of Accrual Certificates on each subsequent
Distribution Date until the Accrual Termination Date. Notwithstanding the
foregoing with respect to the Distribution Date on which the Accrual Amount
is in excess of the amount necessary to reduce the Component Balance of the
Class A-___-___ Component to zero, such excess will be distributed on such
Distribution Date as interest on the Class A-_-_ Component.
(c) On each Distribution Date on or after the Senior Credit
Support Depletion Date, notwithstanding the allocation and priority set forth
in Section 4.02(a)(iii)(y), the portion of Available Funds available to be
distributed as principal of the Senior Certificates (other than the Class PO
Certificates) shall be distributed concurrently, as principal, on such
Classes, pro rata, on the basis of their respective Class Certificate
Balances, until the Class Certificate Balances thereof are reduced to zero.
(d) On each Distribution Date, the amount referred to in clause
(i) of the definition of Class Optimal Interest Distribution Amount for each
Class of Certificates for such Distribution Date shall be reduced by (i) the
related Class's pro rata share of Net Prepayment Interest Shortfalls based on
such Class's Class Optimal Interest Distribution Amount for such Distribution
Date without taking into account such Net Prepayment Interest Shortfalls and
(ii) the related Class's Allocable Share of (A) after the Special Hazard
Coverage Termination Date, with respect to each Mortgage Loan that became a
Special Hazard Mortgage Loan during the calendar month preceding the month of
such Distribution Date, the excess of one month's interest at the related
Adjusted Net Mortgage Rate on the Stated Principal Balance of such Mortgage
Loan as of the Due Date in such month over the amount of Liquidation Proceeds
applied as interest on such Mortgage Loan with respect to such month, (B)
after the Bankruptcy Coverage Termination Date, with respect to each Mortgage
Loan that became subject to a Bankruptcy Loss during the calendar month
preceding the month of such Distribution Date, the interest portion of the
related Debt Service Reduction or Deficient Valuation, (C) each Relief Act
Reduction incurred during the calendar month preceding the month of such
Distribution Date and (D) after the Fraud Coverage Termination Date, with
respect to each Mortgage Loan that became a Fraud Loan during the calendar
month preceding the month of such Distribution Date, the excess of one
month's interest at the related Adjusted Net Mortgage Rate on the Stated
Principal Balance of such Mortgage Loan as of the Due Date in such month over
the amount of Liquidation Proceeds applied as interest on such Mortgage Loan
with respect to such month.
(e) Notwithstanding the priority and allocation contained in
Section 4.02(a)(v), if with respect to any Class of Subordinated Certificates
on any Distribution Date the sum of the related Class Subordination
Percentages of such Class and of all Classes of Subordinated Certificates
which have a higher numerical Class designation than such Class (the
"Applicable Credit Support Percentage") is less than the Original Applicable
Credit Support Percentage for such Class, no distribution of Principal
Prepayments will be made to any such Classes (the "Restricted Classes") and
the amount of such Principal Prepayments otherwise distributable to the
Restricted Classes shall be distributed to any Classes of Subordinated
Certificates having lower numerical Class designations than such Class, pro
rata, based on their respective Class Certificate Balances immediately prior
to such Distribution Date and shall be distributed in the sequential order
provided in Section 4.02(a)(v).
SECTION 4.03. Allocation of Realized Losses.
-----------------------------
(a) On or prior to each Determination Date, the Trustee shall
determine the total amount of Realized Losses, including Excess Losses, with
respect to the related Distribution Date.
Realized Losses with respect to any Distribution Date shall be
allocated as follows:
((i) the applicable PO Percentage of any Realized Loss shall be
allocated to the Class PO Certificates; and
(ii) (A) the applicable Non-PO Percentage of any Realized Loss
(other than an Excess Loss) shall be allocated first to the Subordinated
Certificates in reverse order of their respective numerical Class
designations (beginning with the Class of Subordinated Certificates then
outstanding with the highest numerical Class designation) until the
respective Class Certificate Balance of each such Class is reduced to
zero, and second to the Senior Certificates (other than the Class PO
Certificates), pro rata on the basis of their respective Class
Certificate Balances immediately prior to the related Distribution Date,
or, in the case of the Accrual Certificate, the lesser of the Component
Balance or the initial Component Balance thereof, until the Class
Certificate Balances and Component Balance thereof have been reduced to
zero;
(B) the applicable Non-PO Percentage of any Excess Losses shall be
allocated to the Senior Certificates (other than the Class PO
Certificates) and the Subordinated Certificates then outstanding, pro
rata, on the basis of their respective Class Certificate Balances or, in
the case of the Accrual Certificates, on the basis of the lesser of
their initial Component Balance and their then-current Component Balance
immediately prior to the related Distribution Date.)
(b) The Class Certificate Balance of the Class of Subordinated
Certificates then outstanding with the highest numerical Class designation
shall be reduced on each Distribution Date (i) by the amount of any payments
on the Class PO Certificates in respect of Class PO Deferred Amounts and (ii)
by the amount, if any, by which the aggregate of the Class Certificate
Balances of all outstanding Classes of Certificates (after giving effect to
the distribution of principal and the allocation of Realized Losses and Class
PO Deferred Amounts on such Distribution Date) exceeds the Pool Stated
Principal Balance for the following Distribution Date.
(c) Any Realized Loss allocated to a Class of Certificates or any
reduction in the Class Certificate Balance of a Class of Certificates
pursuant to Section 4.03(b) above shall be allocated among the Certificates
of such Class in proportion to their respective Certificate Balances. Any
Realized Loss allocated to a Class of Certificates comprised of Components
shall be allocated among such Components based on their respective Component
Balances.
(d) Any allocation of Realized Losses to a Certificate or to any
Component or any reduction in the Certificate Balance of a Certificate,
pursuant to Section 4.03(b) above shall be accomplished by reducing the
Certificate Balance or Component Balance thereof, as applicable, immediately
following the distributions made on the related Distribution Date in
accordance with the definition of "Certificate Balance" or "Component
Balance," as the case may be.
SECTION 4.04. Monthly Statements to Certificateholders.
----------------------------------------
(a) Not later than each Distribution Date, the Trustee shall
prepare and cause to be forwarded by first class mail to each
Certificateholder, the Master Servicer and the Depositor a statement setting
forth with respect to the related distribution:
(i) the amount thereof allocable to principal, separately
identifying the aggregate amount of any Principal Prepayments and
Liquidation Proceeds included therein;
(ii) the amount thereof allocable to interest, any Class
Unpaid Interest Shortfall included in such
distribution and any remaining Class Unpaid Interest Shortfall
after giving effect to such distribution;
(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 and the allocation
thereof as between principal and interest;
(iv) the Class Certificate Balance of each Class of
Certificates and the Component Balances of each Component after
giving effect to the distribution of principal on such Distribution
Date;
(v) the Pool Stated Principal Balance for the following
Distribution Date;
(vi) the Senior Percentage and Subordinated Percentage for the
following Distribution Date;
(vii) the amount of the Master Servicing Fees paid to or
retained by the Master Servicer with respect to such Distribution
Date;
(viii) the Pass-Through Rate for each such Class of
Certificates with respect to such Distribution Date;
(ix) the amount of Advances included in the distribution on
such Distribution Date and the aggregate amount of Advances
outstanding as of the close of business on such Distribution Date;
(x) the number and aggregate principal amounts of Mortgage
Loans (A) delinquent (exclusive of Mortgage Loans in foreclosure)
(1) 1 to 30 days (2) 31 to 60 days (3) 61 to 90 days and (4) 91 or
more days and (B) in foreclosure and delinquent (1) 1 to 30 days
(2) 31 to 60 days (3) 61 to 90 days and (4) 91 or more days, as of
the close of business on the last day of the calendar month
preceding such Distribution Date;
(xi) with respect to any Mortgage Loan that became an REO
Property during the preceding calendar month, the loan number and
Stated Principal Balance of such Mortgage Loan as of the close of
business on the Determination Date preceding such Distribution Date
and the date of acquisition thereof;
(xii) the total number and principal balance of any REO
Properties (and market value, if available) as of the close of
business on the Determination Date preceding such Distribution
Date;
(xiii) the Senior Prepayment Percentage and Class A-__
Optimal Amount for the following Distribution Date;
(xiv) the aggregate amount of Realized Losses incurred
during the preceding calendar month and aggregate Realized Losses
through such Distribution Date; and
(xv) the Special Hazard Loss Coverage Amount, the Fraud Loss
Coverage Amount and the Bankruptcy Loss Coverage Amount, in each
case as of the related Determination Date.
(b) The Trustee's responsibility for disbursing the above
information to the Certificateholders is limited to the availability,
timeliness and accuracy of the information provided by the Master Servicer.
The Trustee will send a copy of each statement provided pursuant to this
Section 4.04 to each Rating Agency.
(c) On or before the fifth Business Day following the end of each
Prepayment Period (but in no event later than the third Business Day prior to
the related Distribution Date), the Master Servicer shall deliver to the
Trustee (which delivery may be by electronic data transmission) a report in
substantially the form set forth as Schedule V hereto.
(d) Within a reasonable period of time after the end of each
calendar year, the Trustee shall cause to be furnished to each Person who at
any time during the calendar year was a Certificateholder, a statement
containing the information set forth in clauses (a)(i), (a)(ii) and (a)(vii)
of this Section 4.04 aggregated for such calendar year or applicable portion
thereof during which such Person was a Certificateholder. Such obligation of
the Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Trustee
pursuant to any requirements of the Code as from time to time in effect.
(SECTION 4.05. Determination of Pass-Through Rates for COFI
--------------------------------------------
Certificates.
- ------------
The Pass-Through Rate for each Class of COFI Certificates for each
Interest Accrual Period after the initial Interest Accrual Period shall be
determined by the Trustee as provided below on the basis of the Index and the
applicable formulae appearing in footnotes corresponding to the COFI
Certificates in the table relating to the Certificates in the Preliminary
Statement.
Except as provided below, with respect to each Interest Accrual
Period following the initial Interest Accrual Period, the Trustee shall not
later than two Business Days following the publication of the applicable
Index determine the Pass-Through Rate at which interest shall accrue in
respect of the COFI Certificates during the related Interest Accrual Period.
Except as provided below, the Index to be used in determining the
respective Pass-Through Rates for the COFI Certificates for a particular
Interest Accrual Period shall be COFI for the second calendar month preceding
such Interest Accrual Period. If at the Outside Reference Date for any
Interest Accrual Period, COFI for the second calendar month preceding such
Interest Accrual Period has not been published, the Trustee shall use COFI
for the third calendar month preceding such Interest Accrual Period. If COFI
for neither the second nor third calendar months preceding any Interest
Accrual Period has been published on or before the related Outside Reference
Date, the Index for such Interest Accrual Period and for all subsequent
Interest Accrual Periods shall be the National Cost of Funds Index for the
third calendar month preceding such Interest Accrual Period (or the fourth
preceding calendar month if such National Cost of Funds Index for the third
preceding calendar month has not been published by such Outside Reference
Date). In the event that the National Cost of Funds Index for neither the
third nor fourth calendar months preceding an Interest Accrual Period has
been published on or before the related Outside Reference Date, then for such
Interest Accrual Period and for each succeeding Interest Accrual Period, the
Index shall be LIBOR, determined in the manner set forth below.
On each Interest Determination Date so long as the COFI
Certificates are outstanding and the applicable Index therefor is LIBOR, the
Trustee shall either (i) request each Reference Bank to inform the Trustee of
the quotation offered by its principal London office for making one-month
United States dollar deposits in leading banks in the London interbank
market, as of 11:00 a.m. (London time) on such Interest Determination Date or
(ii) in lieu of making any such request, rely on such Reference Bank
quotations that appear at such time on the Reuters Screen LIBO Page (as
defined in the International Swap Dealers Association Inc. Code of Standard
Wording, Assumptions and Provisions for Swaps, 1986 Edition), to the extent
available.
With respect to any Interest Accrual Period for which the
applicable Index is LIBOR, LIBOR for such Interest Accrual Period will be
established by the Trustee on the related Interest Determination Date as
follows:
(a) If on any Interest Determination Date two or more Reference
Banks provide such offered quotations, LIBOR for the next Interest
Accrual Period shall be the arithmetic mean of such offered quotations
(rounding such arithmetic mean upwards if necessary to the nearest whole
multiple of 1/32%).
(b) If on any Interest Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for the next
Interest Accrual Period shall be whichever is the higher of (i) LIBOR as
determined on the previous Interest Determination Date or (ii) the
Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate
per annum which the Trustee determines to be either (i) the arithmetic
mean (rounded upwards if necessary to the nearest whole multiple of
1/32%) of the one-month United States dollar lending rates that New York
City banks selected by the Trustee are quoting, on the relevant Interest
Determination Date, to the principal London offices of at least two of
the Reference Banks to which such quotations are, in the opinion of the
Trustee, being so made, or (ii) in the event that the Trustee can
determine no such arithmetic mean, the lowest one-month United States
dollar lending rate which New York City banks selected by the Trustee
are quoting on such Interest Determination Date to leading European
banks.
From such time as the applicable Index becomes LIBOR until all of
the COFI Certificates are paid in full, the Trustee will at all times retain
at least four Reference Banks for the purposes of determining LIBOR with
respect to each interest Determination Date. The Master Servicer initially
shall designate the Reference Banks. Each "Reference Bank" shall be a
leading bank engaged in transactions in Eurodollar deposits in the
international Eurocurrency market, shall not control, be controlled by, or be
under common control with, the Trustee and shall have an established place of
business in London. If any such Reference Bank should be unwilling or unable
to act as such or if the Master Servicer should terminate its appointment as
Reference Bank, the Trustee shall promptly appoint or cause to be appointed
another Reference Bank. The Trustee shall have no liability or
responsibility to any Person for (i) the selection of any Reference Bank for
purposes of determining LIBOR or (ii) any inability to retain at least four
Reference Banks which is caused by circumstances beyond its reasonable
control.
In determining LIBOR and any Pass-Through Rate for the COFI
Certificates or any Reserve Interest Rate, the Trustee may conclusively rely
and shall be protected in relying upon the offered quotations (whether
written, oral or on the Reuters Screen) from the Reference Banks or the New
York City banks as to LIBOR or the Reserve Interest Rate, as appropriate, in
effect from time to time. The Trustee shall not have any liability or
responsibility to any Person for (i) the Trustee's selection of New York City
banks for purposes of determining any Reserve Interest Rate or (ii) its
inability, following a good-faith reasonable effort, to obtain such
quotations from the Reference Banks or the New York City banks or to
determine such arithmetic mean, all as provided for in this Section 4.05.
The establishment of LIBOR and each Pass-Through Rate for the LIBOR
Certificates by the Trustee shall (in the absence of manifest error) be
final, conclusive and binding upon each Holder of a Certificate and the
Trustee.)
(SECTION 4.06. Determination of Pass-Through Rates for LIBOR
---------------------------------------------
Certificates.
- ------------
On each Interest Determination Date so long as the LIBOR
Certificates are outstanding, the Trustee shall either (i) request each
Reference Bank to inform the Trustee of the quotation offered by its
principal London office for making one-month United States dollar deposits in
leading banks in the London interbank market, as of 11:00 a.m. (London time)
on such Interest Determination Date or (ii) in lieu of making any such
request, rely on such Reference Bank quotations that appear at such time on
the Reuters Screen LIBO Page (as defined in the International Swap Dealers
Association Inc. Code of Standard Wording, Assumptions and Provisions for
Swaps, 1986 Edition), to the extent available.
LIBOR for the next Interest Accrual Period will be established by
the Trustee on each interest Determination Date as follows:
(a) If on any interest Determination Date two or more Reference
Banks provide such offered quotations, LIBOR for the next Interest
Accrual Period shall be the arithmetic mean of such offered quotations
(rounding such arithmetic mean upwards if necessary to the nearest whole
multiple of 1/32%).
(b) If on any Interest Determination Date only one or none of the
Reference Banks provides such offered quotations, LIBOR for the next
Interest Accrual Period shall be whichever is the higher of (i) LIBOR as
determined on the previous Interest Determination Date or (ii) the
Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate
per annum which the Trustee determines to be either (i) the arithmetic
mean (rounded upwards if necessary to the nearest whole multiple of
1/32%) of the one-month United States dollar lending rates that New York
City banks selected by the Trustee are quoting, on the relevant Interest
Determination Date, to the principal London offices of at least two of
the Reference Banks to which such quotations are, in the opinion of the
Trustee, being so made, or (ii) in the event that the Trustee can
determine no such arithmetic mean, the lowest one-month United States
dollar lending rate which New York City banks selected by the Trustee
are quoting on such Interest Determination Date to leading European
banks.
(c) If on any interest Determination Date the Trustee is required
but is unable to determine the Reserve Interest Rate in the manner
provided in paragraph (b) above, LIBOR shall be LIBOR as determined on
the preceding Interest Determination Date, or, in the case of the first
Interest Determination Date, the Initial LIBOR Rate.
Until all of the LIBOR Certificates are paid in full, the Trustee
will at all times retain at least four Reference Banks for the purpose of
determining LIBOR with respect to each Interest Determination Date. The
Master Servicer initially shall designate the Reference Banks. Each
"Reference Bank" shall be a leading bank engaged in transactions in
Eurodollar deposits in the international Eurocurrency market, shall not
control, be controlled by, or be under common control with, the Trustee and
shall have an established place of business in London. If any such Reference
Bank should be unwilling or unable to act as such or if the Master Servicer
should terminate its appointment as Reference Bank, the Trustee shall
promptly appoint or cause to be appointed another Reference Bank. The
Trustee shall have no liability or responsibility to any Person for (i) the
selection of any Reference Bank for purposes of determining LIBOR or (ii) any
inability to retain at least four Reference Banks which is caused by
circumstances beyond its reasonable control.
The Pass-Through Rate for each Class of LIBOR Certificates for each
Interest Accrual Period shall be determined by the Trustee on each Interest
Determination Date so long as the LIBOR Certificates are outstanding on the
basis of LIBOR and the respective formulae appearing in footnotes
corresponding to the LIBOR Certificates in the table relating to the
Certificates in the Preliminary Statement.
In determining LIBOR, any Pass-Through Rate for the LIBOR
Certificates or any Reserve Interest Rate, the Trustee may conclusively rely
and shall be protected in relying upon the offered quotations (whether
written, oral or on the Reuters Screen) from the Reference Banks or the New
York City banks as to LIBOR or the Reserve Interest Rate, as appropriate, in
effect from time to time. The Trustee shall not have any liability or
responsibility to any Person for (i) the Trustee's selection of New York City
banks for purposes of determining any Reserve Interest Rate or (ii) its
inability, following a good-faith reasonable effort, to obtain such
quotations from the Reference Banks or the New York City banks or to
determine such arithmetic mean, all as provided for in this Section 4.06.
The establishment of LIBOR and each Pass-Through Rate for the LIBOR
Certificates by the Trustee shall (in the absence of manifest error) be
final, conclusive and binding upon each Holder of a Certificate and the
Trustee.)
ARTICLE V
THE CERTIFICATES
SECTION 5.01. The Certificates.
----------------
The Certificates shall be substantially in the forms attached
hereto as exhibits. The Certificates shall be issuable in registered form,
in the minimum denominations, integral multiples in excess thereof (except
that one Certificate in each Class may be issued in a different amount which
must be in excess of the applicable minimum denomination) and aggregate
denominations per Class set forth in the Preliminary Statement.
Subject to Section 9.02 hereof respecting the final distribution on
the Certificates, on each Distribution Date the Trustee shall make
distributions to each Certificateholder of record on the preceding Record
Date either (x) by wire transfer in immediately available funds to the
account of such Holder at a bank or other entity having appropriate
facilities therefor, if (i) such Holder has so notified the Trustee at least
five Business Days prior to the related Record Date and (ii) such Holder
shall hold (A) a Notional Amount Certificate, (B) 100% of the Class
Certificate Balance of any Class of Certificates or (C) Certificates of any
Class with aggregate principal Denominations of not less than $1,000,000 or
(y) by check mailed by first class mail to such Certificateholder at the
address of such Holder appearing in the Certificate Register.
The Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee by an authorized officer. Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall
bind the Trustee, notwithstanding that such individuals or any of them have
ceased to be so authorized prior to the countersignature and delivery of such
Certificates or did not hold such offices at the date of such Certificate.
No Certificate shall be entitled to any benefit under this Agreement, or be
valid for any purpose, unless countersigned by the Trustee by manual
signature, and such countersignature upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly executed
and delivered hereunder. All Certificates shall be dated the date of their
countersignature. On the Closing Date, the Trustee shall countersign the
Certificates to be issued at the direction of the Depositor, or any affiliate
thereof.
The Depositor shall provide, or cause to be provided, to the
Trustee on a continuous basis, an adequate inventory of Certificates to
facilitate transfers.
SECTION 5.02. Certificate Register; Registration of Transfer
----------------------------------------------
and Exchange of Certificates.
- ----------------------------
(a) The Trustee shall maintain, or cause to be maintained in
accordance with the provisions of Section 5.06, a Certificate Register for
the Trust Fund in which, subject to the provisions of subsections (b) and (c)
below and 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. Upon surrender for
registration of transfer of any Certificate, the Trustee shall execute and
deliver, in the name of the designated transferee or transferees, one or more
new Certificates of the same Class and aggregate Percentage Interest.
At the option of a Certificateholder, Certificates may be exchanged
for other Certificates of the same Class in authorized denominations and
evidencing the same aggregate Percentage Interest upon surrender of the
Certificates to be exchanged at the office or agency of the Trustee.
Whenever any Certificates are so surrendered for exchange, the Trustee shall
execute, authenticate, and deliver the Certificates which the Certificate-
holder making the exchange is entitled to receive. Every Certificate
presented or surrendered for registration of transfer or exchange shall be
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder thereof or his attorney duly authorized
in writing.
No service charge to the Certificateholders shall be made for any
registration of transfer or exchange of Certificates, but 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 may be required.
All Certificates surrendered for registration of transfer or
exchange shall be cancelled and subsequently destroyed by the Trustee in
accordance with the Trustee's customary procedures.
(b) No transfer of a Private Certificate shall be made unless such
transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under said Act and such state securities laws. In
the event that a transfer is to be made in reliance upon an exemption from
the Securities Act and such laws, in order to assure compliance with the
Securities Act and such laws, the Certificateholder desiring to effect such
transfer and such Certificateholder's prospective transferee shall each
certify to the Trustee in writing the facts surrounding the transfer in
substantially the forms set forth in Exhibit J (the "Transferor
Certification") and (i) deliver a letter in substantially the form of either
Exhibit K (the "Investment Letter") or Exhibit L (the "Rule 144A Letter") or
(ii) there shall be delivered to the Trustee at the expense of the transferor
an Opinion of Counsel that such transfer may be made pursuant to an exemption
from the Securities Act. The Depositor shall provide to any Holder of a
Private Certificate and any prospective transferee designated by any such
Holder, information regarding the related Certificates and the Mortgage Loans
and such other information as shall be necessary to satisfy the condition to
eligibility set forth in Rule 144A(d)(4) for transfer of any such Certificate
without registration thereof under the Securities Act pursuant to the regis-
tration exemption provided by Rule 144A. The Trustee and the Master Servicer
shall cooperate with the Depositor in providing the Rule 144A information
referenced in the preceding sentence, including providing to the Depositor
such information regarding the Certificates, the Mortgage Loans and other
matters regarding the Trust Fund as the Depositor shall reasonably request to
meet its obligation under the preceding sentence. Each Holder of a Private
Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee and the Depositor, the Seller and the Master Servicer
against any liability that may result if the transfer is not so exempt or is
not made in accordance with such federal and state laws.
No transfer of an ERISA-Restricted Certificate shall be made unless
the Trustee shall have received (i) a representation from the transferee of
such Certificate acceptable to and in form and substance satisfactory to the
Trustee (in the event such Certificate is a Private Certificate, such
requirement is satisfied only by the Trustee's receipt of a representation
letter from the transferee substantially in the form of Exhibit K or Exhibit
L), to the effect that such transferee is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan or arrangement subject
to Section 4975 of the Code, or a Person acting on behalf of any such plan or
arrangement, nor using the assets of any such plan or arrangement to effect
such transfer, or (ii) if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general
account" (as such term is defined in Section V(e) of Prohibited Transaction
Class Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of
such Certificates are covered under PTCE 95-60 or (iii) in the case of any
such ERISA-Restricted Certificate presented for registration in the name of
an employee benefit plan subject to ERISA, or a plan or arrangement subject
to Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan or any other Person acting on
behalf of any such plan or arrangement, or using such plan's or arrangement's
assets, an Opinion of Counsel satisfactory to the Trustee, which Opinion of
Counsel shall not be an expense of either the Trustee or the Trust Fund,
addressed to the Trustee to the effect that the purchase or holding of such
ERISA-Restricted Certificate will not result in the assets of the Trust Fund
being deemed to be "plan assets" and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Trustee to any
obligation in addition to those expressly undertaken in this Agreement or to
any liability. For purposes of the preceding sentence, with respect to an
ERISA-Restricted Certificate that is not a Private Certificate, in the event
the representation letter referred to in the preceding sentence is not so
furnished, such representation shall be deemed to have been made to the
Trustee by the transferee (including an initial acquiror) of the ERISA-
Restricted Certificates. Notwithstanding anything else to the contrary
herein, any purported transfer of an ERISA-Restricted Certificate to or on
behalf of an employee benefit plan subject to ERISA or to the Code without
the delivery to the Trustee of an Opinion of Counsel satisfactory to the
Trustee as described above shall be void and of no effect.
To the extent permitted under applicable law (including, but not
limited to, ERISA), the Trustee shall be under no liability to any Person for
any registration of transfer of any ERISA-Restricted Certificate that is in
fact not permitted by this Section 5.02(b) or for making any payments due on
such Certificate to the Holder thereof or taking any other action with
respect to such Holder under the provisions of this Agreement so long as the
transfer was registered by the Trustee in accordance with the foregoing
requirements.
(c) 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 the rights of each Person acquiring any Ownership Interest in
a Residual Certificate are expressly subject to the following provisions:
(i) 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.
(ii) No Ownership Interest in a Residual Certificate may be
registered on the Closing Date or thereafter transferred, and the
Trustee shall not register the Transfer of any Residual Certificate
unless, in addition to the certificates required to be delivered to the
Trustee under subsection (b) above, the Trustee shall have been
furnished with an affidavit (a "Transfer Affidavit") of the initial
------------------
owner or the proposed transferee in the form attached hereto as Exhibit
I.
(iii) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall agree (A) to obtain a Transfer Affidavit from
any other Person to whom such Person attempts to Transfer its Ownership
Interest in a Residual Certificate, (B) to obtain a Transfer Affidavit
from any Person for whom such Person is acting as nominee, trustee or
agent in connection with any Transfer of a Residual Certificate and (C)
not to Transfer its Ownership Interest in a Residual Certificate or to
cause the Transfer of an Ownership Interest in a Residual Certificate to
any other Person if it has actual knowledge that such Person is not a
Permitted Transferee.
(iv) Any attempted or purported Transfer of any Ownership
Interest in a Residual Certificate in violation of the provisions of
this Section 5.02(c) shall be absolutely null and void and shall vest no
rights in the purported Transferee. If any purported transferee shall
become a Holder of a Residual Certificate in violation of the provisions
of this Section 5.02(c), then the last preceding Permitted Transferee
shall be restored to all rights as Holder thereof retroactive to the
date of registration of Transfer of such Residual 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
Section 5.02(b) and this Section 5.02(c) or for making any payments due
on such Certificate to the Holder thereof or taking any other action
with respect to such Holder under the provisions of this Agreement so
long as the Transfer was registered after receipt of the related Trans-
fer Affidavit, Transferor Certificate and either the Rule 144A Letter or
the Investment Letter. The Trustee shall be entitled but not obligated
to recover from any Holder of a Residual Certificate that was in fact
not a Permitted Transferee at the time it became a Holder or, at such
subsequent time as it became other than a Permitted Transferee, all
payments made on such Residual Certificate at and after either such
time. Any such payments so recovered by the Trustee shall be paid and
delivered by the Trustee to the last preceding Permitted Transferee of
such Certificate.
(v) The Depositor shall use its best efforts to make available,
upon receipt of written request from the Trustee, all information
necessary to compute any tax imposed under Section 860E(e) of the Code
as a result of a Transfer of an Ownership Interest in a Residual
Certificate to any Holder who is not a Permitted Transferee.
The restrictions on Transfers of a Residual Certificate set forth
in this Section 5.02(c) shall cease to apply (and the applicable portions of
the legend on a Residual Certificate may be deleted) with respect to
Transfers occurring after delivery to the Trustee of an Opinion of Counsel,
which Opinion of Counsel shall not be an expense of the Trust Fund, the
Trustee, the Seller or the Master Servicer, to the effect that the
elimination of such restrictions will not cause the Trust Fund hereunder to
fail to qualify as a REMIC at any time that the Certificates are outstanding
or result in the imposition of any tax on the Trust Fund, a Certificateholder
or another Person. Each Person holding or acquiring any Ownership Interest
in a Residual Certificate hereby consents to any amendment of this Agreement
which, based on an Opinion of Counsel furnished to the Trustee, is reasonably
necessary (a) to ensure that the record ownership of, or any beneficial
interest in, a Residual Certificate is not transferred, directly or
indirectly, to a Person that is not a Permitted Transferee and (b) to provide
for a means to compel the Transfer of a Residual Certificate which is held by
a Person that is not a Permitted Transferee to a Holder that is a Permitted
Transferee.
(d) The preparation and delivery of all certificates and opinions
referred to above in this Section 5.02 in connection with transfer shall be
at the expense of the parties to such transfers.
(e) Except as provided below, the Book-Entry Certificates shall at
all times remain registered in the name of the Depository or its nominee and
at all times: (i) registration of the Certificates may not be transferred by
the Trustee except to another Depository; (ii) the Depository shall maintain
book-entry records with respect to the Certificate Owners and with respect to
ownership and transfers of such Book-Entry Certificates; (iii) ownership and
transfers of registration of the Book-Entry Certificates on the books of the
Depository shall be governed by applicable rules established by the
Depository; (iv) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants; (v) the Trustee shall
deal with the Depository, Depository Participants and indirect participating
firms as representatives of the Certificate Owners of the Book-Entry
Certificates for purposes of exercising the rights of holders under this
Agreement, and requests and directions for and votes of such representatives
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; and (vi) the Trustee may rely and shall be
fully protected in relying upon information furnished by the Depository with
respect to its Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and persons shown
on the books of such indirect participating firms as direct or indirect
Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates
shall be made in accordance with the procedures established by the Depository
Participant or brokerage firm representing such Certificate Owner. Each
Depository Participant shall only transfer 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.
If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly
discharge its responsibilities as Depository, and (ii) the Trustee or the
Depositor is unable to locate a qualified successor, (y) the Depositor at its
option advises the Trustee in writing that it elects to terminate the book-
entry system through the Depository or (z) after the occurrence of an Event
of Default, Certificate Owners representing at least 51% of the Certificate
Balance of the Book-Entry Certificates together advise the Trustee and the
Depository through the Depository Participants in writing that the
continuation of a book-entry system through the Depository is no longer in
the best interests of the Certificate Owners, the Trustee shall notify all
Certificate Owners, through the Depository, of the occurrence of any such
event and of the availability of definitive, fully-registered Certificates
(the "Definitive Certificates") to Certificate Owners requesting the same.
Upon surrender to the Trustee of the related Class of Certificates by the
Depository, accompanied by the instructions from the Depository for registra-
tion, the Trustee shall issue the Definitive Certificates. None of the
Master Servicer, the Depositor or the Trustee shall be liable for any delay
in delivery of such instruction and each may conclusively rely on, and shall
be protected in relying on, such instructions. The Master Servicer shall
provide the Trustee with an adequate inventory of certificates to facilitate
the issuance and transfer of Definitive Certificates. Upon the issuance of
Definitive Certificates all references herein to obligations imposed upon or
to be performed by the Depository shall be deemed to be imposed upon and
performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder; provided that the
--------
Trustee shall not by virtue of its assumption of such obligations become
liable to any party for any act or failure to act of the Depository.
SECTION 5.03. Mutilated, Destroyed, Lost or Stolen
------------------------------------
Certificates.
- ------------
If (a) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate and (b) there is delivered to the Master Servicer
and the Trustee 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 that
such Certificate has been acquired by a bona fide purchaser, the Trustee
shall execute, countersign and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
like Class, tenor and Percentage Interest. In connection with the issuance
of any new Certificate under this Section 5.03, the Trustee may require the
payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Trustee) connected therewith. Any replacement
Certificate issued pursuant to this Section 5.03 shall constitute complete
and indefeasible evidence of ownership, 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.
---------------------
The Master Servicer, the Trustee and any agent of the Master
Servicer or the Trustee may treat the Person in whose name any Certificate is
registered as the owner of such Certificate for the purpose of receiving
distributions as provided in this Agreement and for all other purposes
whatsoever, and none of the Master Servicer, the Trustee or any agent of the
Master Servicer or the Trustee shall be affected by any notice to the
contrary.
SECTION 5.05. Access to List of Certificateholders' Names and
-----------------------------------------------
Addresses.
---------
If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication which such Certificateholders propose to transmit, or if the
Depositor or Master Servicer shall request such information in writing from
the Trustee, then the Trustee shall, within ten Business Days after the
receipt of such request, provide the Depositor, the Master Servicer or such
Certificateholders at such recipients' expense the most recent list of the
Certificateholders of such Trust Fund held by the Trustee, if any. The
Depositor and every Certificateholder, by receiving and holding a
Certificate, agree that the Trustee shall not be held accountable by reason
of the disclosure of any such information as to the list of the
Certificateholders hereunder, regardless of the source from which such
information was derived.
SECTION 5.06. Maintenance of Office or Agency.
-------------------------------
The Trustee will maintain or cause to be maintained at its expense
an office or offices or agency or agencies in New York City where
Certificates may be surrendered for registration of transfer or exchange.
The Trustee initially designates its Corporate Trust Office for such
purposes. The Trustee will give prompt written notice to the
Certificateholders of any change in such location of any such office or
agency.
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 them herein.
SECTION 6.02. Merger or Consolidation of the Depositor or the
-----------------------------------------------
Master Servicer.
- ---------------
The Depositor and the Master Servicer will each keep in full effect
its existence, rights and franchises as a corporation under the laws of the
United States or under the laws of one of the states thereof 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, or any of the
Mortgage Loans and to perform its respective duties under this Agreement.
Any Person into which the Depositor or the Master Servicer may be
merged or consolidated, or any Person resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party,
or any Person succeeding to the business of the Depositor or the Master
Servicer, shall be the successor of the Depositor or the Master Servicer, as
the case may be, hereunder, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding; provided that the successor or surviving Person
--------
to the Master Servicer shall be qualified to sell mortgage loans to, and to
service mortgage loans on behalf of, FNMA or FHLMC.
SECTION 6.03. Limitation on Liability of the Depositor, the
---------------------------------------------
Seller, the Master Servicer and Others.
- --------------------------------------
None of the Depositor, the Seller, the Master Servicer or any of
the directors, officers, employees or agents of the Depositor, the Seller or
the Master Servicer shall be under any liability to 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 that
--------
this provision shall not protect the Depositor, the Seller, the Master
Servicer or any such Person against any breach of representations or
warranties made by it herein or protect the Depositor, the Seller, the Master
Servicer or any such Person from any liability which would otherwise be
imposed by reasons 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 Seller, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Seller 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 Seller, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Seller 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 audit,
controversy or judicial proceeding relating to a governmental taxing authority
or any legal action relating to this Agreement or the Certificates, other than
any loss, liability or expense related to any specific Mortgage Loan or
Mortgage Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and any loss, liability or
expense incurred by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. None of the Depositor, the
Seller or the Master Servicer shall be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its respective
duties hereunder and which in its opinion may involve it in any expense or
liability; provided that any of the Depositor, the Seller or the Master
--------
Servicer may in its discretion undertake any such action that it may deem
necessary or desirable in respect of this Agreement and the rights and duties
of the parties hereto and interests of the Trustee and the Certificateholders
hereunder. In such event, the legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and liabilities of the
Trust Fund, and the Depositor, the Seller and the Master Servicer shall be
entitled to be reimbursed therefor out of the Certificate Account.
SECTION 6.04. Limitation on Resignation of Master Servicer.
--------------------------------------------
The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (a) upon appointment of a successor master
servicer and receipt by the Trustee of a letter from each Rating Agency that
such a resignation and appointment will not result in a downgrading of the
rating of any of the Certificates, or (b) upon determination that its duties
hereunder are no longer permissible under applicable law. Any such deter-
mination under clause (b) permitting the resignation of the Master Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered to the
Trustee. No such resignation shall become effective until the Trustee or a
successor master servicer shall have assumed the Master Servicer's
responsibilities, duties, liabilities and obligations hereunder.
ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events:
(i) any failure by the Master Servicer to deposit in the
Certificate Account or remit to the Trustee any payment required to
be made with respect to any (Class of) Certificates under the terms
of this Agreement, which failure shall continue unremedied for five
days after the date upon which written notice of such failure 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 such Class) evidencing not less
than 25% of the total distributions allocated to such Class; or
(ii) any failure by the Master Servicer 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 which failure materially affects the rights of
Certificateholders, and such failure shall continue unremedied for
a period of thirty days after the date on which written notice of
such failure 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 not less than 25% of (the total distributions allocated
to such Class); or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment
of a receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceeding,
or for the winding-up or liquidation of its affairs, shall have
been entered against the Master Servicer and such decree or order
shall have remained in force undischarged or unstayed for a period
of 60 consecutive days; or
(iv) the Master Servicer shall consent to the appointment of
a 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 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.
If an Event of Default described in clauses (i) to (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, the Trustee may, or at the
direction of the Holders of Certificates (of any Class) evidencing not less
than 66 2/3% of the total distributions allocated to (such Class), the
Trustee shall by notice in writing to the Master Servicer (with a copy to
each Rating Agency), terminate all of the rights and obligations of the
Master Servicer under this Agreement and in and to the Mortgage Loans and the
proceeds thereof, other than its rights as a Certificateholder hereunder. On
and after the receipt by the Master Servicer of such written notice, all
authority and power of the Master Servicer hereunder, whether with respect to
the Mortgage Loans or otherwise, shall pass to and be vested in the Trustee.
The Trustee shall thereupon make any Advance which the Master Servicer failed
to make, subject to Section 3.04 hereof. 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. Unless expressly provided in such written notice,
no such termination shall affect any obligation of the Master Servicer to pay
amounts owed pursuant to Article VIII. 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 of all cash amounts which shall at
the time be credited to the Certificate Account or thereafter be received
with respect to the Mortgage Loans.
Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of
any late collection of a Scheduled Payment on a Mortgage Loan which was due
prior to the notice terminating such Master Servicer's rights and obligations
as Master Servicer hereunder and received after such notice, that portion
thereof to which such Master Servicer would have been entitled pursuant to
Sections 3.08(a)(i) through (viii),and any other amounts payable to such
Master Servicer hereunder the entitlement to which arose prior to the
termination of its activities hereunder.
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, the Trustee shall, subject to and to
the extent provided in Section 3.04, be the successor to the Master Servicer
in its capacity as master servicer under this Agreement and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the
Master Servicer by the terms and provisions hereof and applicable law
including the obligation to make Advances pursuant to Section 4.01. As
compensation therefor, the Trustee shall be entitled to all funds relating to
the Mortgage Loans that the Master Servicer would have been entitled to
charge to the Certificate Account or Distribution Account if the Master
Servicer had continued to act hereunder. Notwithstanding the foregoing, if
the Trustee has become the successor to the Master Servicer in accordance
with Section 7.01, the Trustee may, if it shall be unwilling to so act, or
shall, if it is prohibited by applicable law from making Advances pursuant to
Section 4.01 or if it is otherwise unable to so act, appoint, or petition a
court of competent jurisdiction to appoint, any established mortgage loan
servicing institution the appointment of which does not adversely affect the
then current rating of the Certificates by each Rating Agency 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. Any successor to the Master Servicer shall be an institution
which is a FNMA-, and FHLMC-, approved seller/servicer in good standing,
which has a net worth of at least $15,000,000, and which is willing to
service the Mortgage Loans and executes and delivers to the Depositor and the
Trustee an agreement accepting such delegation and assignment, which contains
an assumption by such Person of the rights, powers, duties, responsibilities,
obligations and liabilities of the Master Servicer (other than liabilities of
the Master Servicer under Section 6.03 incurred prior to termination of the
Master Servicer under Section 7.01), with like effect as if originally
named as a party to this Agreement; provided that each Rating Agency
--------
acknowledges that its ratings of the Certificates in effect immediately prior
to such assignment and delegation will not be qualified or reduced as a
result of such assignment and delegation. Pending appointment of a successor
to the Master Servicer hereunder, the Trustee, unless the Trustee is
prohibited by law from so acting, shall, subject to Section 3.04, 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 that no such compensation shall be in excess of the
--------
Master Servicing Fee permitted the Master Servicer hereunder. The Trustee and
such successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession. Neither the Trustee nor
any other successor master servicer shall be deemed to be in default hereunder
by reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof or any failure to perform, or any delay in
performing, any duties or responsibilities hereunder, in either case caused by
the failure of the Master Servicer to deliver or provide, or any delay in
delivering or providing, any cash, information, documents or records to it.
Any successor to the Master Servicer as master servicer shall give
notice to the Mortgagors of such change of servicer and shall, during the
term of its service as master servicer maintain in force the policy or
policies that the Master Servicer is required to maintain pursuant to Section
6.05.
SECTION 7.03. Notification to Certificateholders.
----------------------------------
(a) Upon any termination of or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders and to each Rating Agency.
(b) Within 60 days after the occurrence of any Event of Default,
the Trustee shall transmit by mail to all Certificateholders notice of each
such Event of Default hereunder known to the Trustee, unless such Event of
Default shall have been cured or waived.
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.01. Duties of Trustee.
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The Trustee, prior to the occurrence of an Event of Default and
after the curing of all Events of Default that may have occurred, shall
undertake to perform such duties and only such duties as are specifically set
forth in this Agreement. In case an Event of Default has occurred and
remains uncured, the Trustee shall exercise such of the rights and powers
vested in it by this Agreement, and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments
furnished to the Trustee that are specifically required to be furnished
pursuant to any provision of this Agreement, shall examine them to determine
whether they are in the form required by this Agreement; provided that the
--------
Trustee shall not be responsible for the accuracy or content of any such
resolution, certificate, statement, opinion, report, document, order or other
instrument.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct; provided that:
--------
(i) unless an Event of Default known to the Trustee shall
have occurred and be continuing, 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 the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Agreement which it believed in good faith
to be genuine and to have been duly executed by the proper authori-
ties respecting any matters arising hereunder;
(ii) the Trustee shall not be liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless it shall be finally proven that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction of Holders of Certificates
evidencing not less than 25% of the Voting Rights of Certificates
relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee under this Agreement.
SECTION 8.02. Certain Matters Affecting the Trustee.
-------------------------------------
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 and the Trustee shall have no
responsibility to ascertain or confirm the genuineness of any
signature of any such party or parties;
(ii) the Trustee may consult with counsel, financial
advisers or accountants and the advice of any such counsel,
financial advisers or accountants 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 not be 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;
(iv) 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
evidencing not less than 25% of the Voting Rights allocated to each
Class of Certificates;
(v) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents, accountants or attorneys;
(vi) the Trustee shall not be required to risk or expend its
own funds or otherwise incur any financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers hereunder if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity
against such risk or liability is not assured to it;
(vii) the Trustee shall not be liable for any loss on any
investment of funds pursuant to this Agreement (other than as
issuer of the investment security);
(viii) the Trustee shall not be deemed to have knowledge of an
Event of Default until a Responsible Officer of the Trustee shall
have received written notice thereof; and
(ix) the Trustee shall be under no obligation to exercise
any of the trusts, rights or powers vested in it by this Agreement
or to institute, conduct or defend any litigation hereunder or in
relation hereto at the request, order or direction of any of the
Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee
reasonable security or indemnity satisfactory to the Trustee
against the costs, expenses and liabilities which may be incurred
therein or thereby.
SECTION 8.03. Trustee Not Liable for Certificates or Mortgage
-----------------------------------------------
Loans.
- -----
The recitals contained herein and in the Certificates shall be
taken as the statements of the Depositor or the Seller, 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 or of any Mortgage Loan or related document other than
with respect to the Trustee's execution and counter-signature of the
Certificates. The Trustee shall not be accountable for the use or
application by the Depositor or the Master Servicer of any funds paid to the
Depositor or the Master Servicer in respect of the Mortgage Loans or
deposited in or withdrawn from the Certificate Account by the Depositor or
the Master Servicer.
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 as it would have if it
were not the Trustee.
SECTION 8.05. Trustee's Fees and Expenses.
---------------------------
The Trustee, as compensation for its activities hereunder, shall be
entitled to withdraw from the Distribution Account on each Distribution Date
an amount equal to the Trustee Fee for such Distribution Date. The Trustee
and any director, officer, employee or agent of the Trustee shall be
indemnified by the Master Servicer and held harmless against any loss,
liability or expense (including reasonable attorney's fees) (i) incurred in
connection with any claim or legal action relating to (a) this Agreement, (b)
the Certificates or (c) in connection with the performance of any of the
Trustee's duties hereunder, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of any of the Trustee's duties hereunder or incurred by reason of
any action of the Trustee taken at the direction of the Certificateholders;
or (ii) resulting from any error in any tax or information return prepared by
the Master Servicer. Such indemnity shall survive the termination of this
Agreement or the resignation or removal of the Trustee hereunder. Without
limiting the foregoing, the Master Servicer covenants and agrees, except as
otherwise agreed upon in writing by the Depositor and the Trustee, and except
for any such expense, disbursement or advance as may arise from the Trustee's
negligence, bad faith or willful misconduct, to pay or reimburse the Trustee,
for all reasonable expenses, disbursements and advances incurred or made by
the Trustee in accordance with any of the provisions of this Agreement with
respect to: (A) the reasonable compensation and the expenses and
disbursements of its counsel not associated with the closing of the issuance
of the Certificates, (B) the reasonable compensation, expenses and
disbursements of any accountant, engineer or appraiser that is not regularly
employed by the Trustee, to the extent that the Trustee must engage such
persons to perform acts or services hereunder and (C) printing and engraving
expenses in connection with preparing any Definitive Certificates. Except as
otherwise provided herein, the Trustee shall not be entitled to payment or
reimbursement for any routine ongoing expenses incurred by the Trustee in the
ordinary course of its duties as Trustee, Registrar, Tax Matters Person or
Paying Agent hereunder or for any other expenses.
SECTION 8.06. Eligibility Requirements for Trustee.
------------------------------------
The Trustee hereunder shall at all times be a corporation or
association organized and doing business under the laws of the United States
of America or any state, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least $________
subject to supervision or examination by federal or state authority and with
a credit rating which would not cause either of the Rating Agencies to reduce
its respective then current ratings of the Certificates (or having provided
such security from time to time as is sufficient to avoid such reduction).
If such corporation or 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 8.06 the
combined capital and surplus of such corporation or association shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall
cease to be eligible in accordance with the provisions of this Section 8.06,
the Trustee shall resign immediately in the manner and with the effect
specified in Section 8.07 hereof. The entity serving as Trustee may have
normal banking and trust relationships with the Depositor and its affiliates
or the Master Servicer and its affiliates; provided that such entity cannot
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be an affiliate of the Master Servicer other than the Trustee in its role as
successor to the Master Servicer.
SECTION 8.07. Resignation and Removal of Trustee.
----------------------------------
The Trustee may at any time resign and be discharged from the
trusts hereby created by giving written notice of resignation to the
Depositor and the Master Servicer and each Rating Agency not less than 60
days before the date specified in such notice when, subject to Section 8.08,
such resignation is to take effect, and acceptance by a successor trustee in
accordance with Section 8.08 meeting the qualifications set forth in Section
8.06. If no successor trustee meeting such qualifications shall have been so
appointed and have accepted appointment within 30 days after the giving of
such notice or resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 hereof and shall fail to resign after
written request thereto by the Depositor, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged as bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its property
or affairs for the purpose of rehabilitation, conservation or liquidation, or
a tax is imposed with respect to the Trust Fund by any state in which the
Trustee or the Trust Fund is located and the imposition of such tax would be
avoided by the appointment of a different trustee, then the Depositor or the
Master Servicer may remove the Trustee and appoint a successor trustee by
written instrument, in triplicate, one copy of which instrument shall be
delivered to the Trustee, one copy of which shall be delivered to the Master
Servicer and one copy to the successor trustee.
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 by the successor Trustee to the Master
Servicer, one complete set to the Trustee so removed and one complete set to
the successor so appointed. Notice of any removal of the Trustee shall be
given to each Rating Agency by the successor trustee.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.07
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 8.08.
SECTION 8.08. Successor Trustee.
-----------------
Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor and to its predecessor
trustee and the Master Servicer an instrument accepting such appointment
hereunder and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor hereunder, with the like effect as
if originally named as trustee herein. The 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.
No successor trustee shall accept appointment as provided in this
Section 8.08 unless at the time of such acceptance such successor trustee
shall be eligible under the provisions of Section 8.06 hereof and its
appointment shall not adversely affect the then current ratings of the
Certificates.
Upon acceptance of appointment by a successor trustee as provided
in this Section 8.08, the Depositor shall mail notice of the succession of
such trustee hereunder to all Holders of Certificates. If the Depositor
fails to mail such notice within 10 days after acceptance of appointment by
the successor trustee, the successor trustee shall cause such notice to be
mailed at the expense of the Depositor.
SECTION 8.09. Merger or Consolidation of Trustee.
----------------------------------
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to the business of the Trustee, shall be the
successor of the Trustee hereunder, provided that such corporation shall be
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eligible under the provisions of Section 8.06 without the execution or filing
of any paper or further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, 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 any Mortgage Note
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 and for the benefit of the Certificateholders, such
title to the Trust Fund or any part thereof, whichever is applicable, 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 to do so, or in the case an Event of Default shall have occurred and
be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 8.06
and no notice to Certificateholders of the appointment of any co-trustee or
separate trustee shall be required under Section 8.08.
Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) To the extent necessary to effectuate the purposes of
this Section 8.10, all rights, powers, duties and obligations
conferred or imposed upon the Trustee, except for the obligation of
the Trustee under this Agreement to advance funds on behalf of the
Master Servicer, shall be conferred or imposed upon and exercised
or performed by the Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as successor to the
Master Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of
title to the applicable Trust Fund or any portion thereof in any
such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) No trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder and
such appointment shall not, and shall not be deemed to, constitute
any such separate trustee or co-trustee as agent of the Trustee;
(iii) The Trustee may at any time accept the resignation of
or remove any separate trustee or co-trustee; and
(iv) The Master Servicer, and not the Trustee, shall be
liable for the payment of reasonable compensation, reimbursement
and indemnification to any such separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the separate trustees and co-trustees,
when and as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article VIII. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided therein, subject
to all the provisions of this Agreement, specifically including every
provision of this Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee and a copy thereof given to the Master
Servicer and the Depositor.
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. Tax Matters.
-----------
It is intended that the assets with respect to which the REMIC
election pertaining to the Trust Fund is to be made, as set forth in the
Preliminary Statement, shall constitute, and that the conduct of matters
relating to such assets shall be such as to qualify such assets as, a "real
estate mortgage investment conduit" as defined in and in accordance with the
REMIC Provisions. In furtherance of such intention, the Trustee covenants
and agrees that it shall act as agent (and the Trustee is hereby appointed to
act as agent) on behalf of the REMIC and that in such capacity it shall:
(a) prepare and file, or cause to be prepared and filed, in a timely manner,
a U.S. Real Estate Mortgage Investment Conduit Income Tax Return (Form 1066
or any successor form adopted by the Internal Revenue Service) and prepare
and file or cause to be prepared and filed with the Internal Revenue Service
and applicable state or local tax authorities income tax or information
returns for each taxable year with respect to the REMIC, containing such
information and at the times and in the manner as may be required by the Code
or state or local tax laws, regulations, or rules, and furnish or cause to be
furnished to Certificateholders the schedules, statements or information at
such times and in such manner as may be required thereby; (b) within thirty
days of the Closing Date, furnish or cause to be furnished to the Internal
Revenue Service, on Forms 8811 or as otherwise may be required by the Code,
the name, title, address, and telephone number of the person that the holders
of the Certificates may contact for tax information relating thereto,
together with such additional information as may be required by such Form,
and update such information at the time or times in the manner required by
the Code; (c) make or cause to be made elections that such assets be treated
as a REMIC on the federal tax return for its first taxable year (and, if
necessary, under applicable state law); (d) prepare and forward, or cause to
be prepared and forwarded, to the Certificateholders and to the Internal
Revenue Service and, if necessary, state tax authorities, all information
returns and reports as and when required to be provided to them in accordance
with the REMIC Provisions, including without limitation, the calculation of
any original issue discount using the Prepayment Assumption; (e) provide
information necessary for the computation of tax imposed on the transfer of a
Residual Certificate to a Person that is not a Permitted Transferee, or an
agent (including a broker, nominee or other middleman) of a Non-Permitted
Transferee, or a pass-through entity in which a Non-Permitted Transferee is
the record holder of an interest (the reasonable cost of computing and
furnishing such information may be charged to the Person liable for such
tax); (f) to the extent that they are under its control, conduct matters
relating to such assets at all times when any Certificates are outstanding so
as to maintain the status as a REMIC under the REMIC Provisions; (g) not
knowingly or intentionally take any action or omit to take any action that
would cause the termination of the REMIC status; (h) pay, from the sources
specified in the last paragraph of this Section 8.11, the amount of any
federal or state tax, including prohibited transaction taxes as described
below, imposed on the REMIC prior to its termination when and as the same
shall be due and payable (but such obligation shall not prevent the Trustee
or any other appropriate Person from contesting any such tax in appropriate
proceedings and shall not prevent the Trustee from withholding payment of
such tax, if permitted by law, pending the outcome of such proceedings);
(i) ensure that federal, state or local income tax or information returns
shall be signed by the Trustee or such other person as may be required to
sign such returns by the Code or state or local laws, regulations or rules;
(j) maintain records relating to the REMIC, including but not limited to the
income, expenses, assets and liabilities thereof and the fair market value
and adjusted basis of the assets determined at such intervals as may be
required by the Code, as may be necessary to prepare the foregoing returns,
schedules, statements or information; and (k) as and when necessary and
appropriate, represent the REMIC in any administrative or judicial
proceedings relating to an examination or audit by any governmental taxing
authority, request an administrative adjustment as to any taxable year of the
REMIC, enter into settlement agreements with any governmental taxing agency,
extend any statute of limitations relating to any tax item of the REMIC, and
otherwise act on behalf of the REMIC in relation to any tax matter or
controversy involving it.
In order to enable the Trustee to perform its duties as set forth
herein, the Depositor shall provide, or cause to be provided, to the Trustee
within ten (10) days after the Closing Date all information or data that the
Trustee requests in writing and determines to be relevant for tax purposes to
the valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows
of the Certificates and the Mortgage Loans. Thereafter, the Depositor shall
provide to the Trustee promptly upon written request therefor, any such
additional information or data that the Trustee may, from time to time,
reasonably request in order to enable the Trustee to perform its duties as
set forth herein. The Depositor hereby indemnifies the Trustee for any
losses, liabilities, damages, claims or expenses of the Trustee arising from
any errors or miscalculations of the Trustee that result from any failure of
the Depositor to provide, or to cause to be provided, accurate information or
data to the Trustee on a timely basis.
In the event that any tax is imposed on "prohibited transactions"
of the REMIC as defined in Section 860F(a)(2) of the Code, on the "net income
from foreclosure property" of the REMIC as defined in Section 860G(c) of the
Code, on any contribution to the REMIC after the Startup Day pursuant to
Section 860G(d) of the Code, or any other tax is imposed, including, without
limitation, any minimum tax imposed upon the REMIC pursuant to Sections 23153
and 24874 of the California Revenue and Taxation Code, if not paid as
otherwise provided for herein, such tax shall be paid by (i) the Trustee, if
any such other tax arises out of or results from a breach by the Trustee of
any of its obligations under this Agreement, (ii) the Master Servicer, in the
case of any such minimum tax, or if such tax arises out of or results from a
breach by the Master Servicer or Seller of any of their obligations under
this Agreement, (iii) the Seller, if any such tax arises out of or results
from the Seller's obligation to repurchase a Mortgage Loan pursuant to
Section 2.02 or 2.03 or (iv) in all other cases, or in the event that the
Trustee, the Master Servicer or the Seller fails to honor its obligations
under the preceding clause (i),(ii) or (iii), any such tax will be paid with
amounts otherwise to be distributed to the Certificateholders, as provided in
Section 3.08(b).
SECTION 8.12. Periodic Filings.
----------------
Unless otherwise directed in writing by the Depositor, the Trustee
shall prepare, execute and file all periodic reports relating to the Trust
Fund that are required to be filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934. In connection with the
preparation and filing of such periodic reports, the Depositor and the Master
Servicer shall timely provide to the Trustee all material information
available to them which is required to be included in such reports and not
known to them to be in the possession of the Trustee and such other
information as the Trustee reasonably may request from either of them and
otherwise reasonably shall cooperate with the Trustee. The Trustee shall
have no liability with respect to any failure to properly prepare or file
such periodic reports resulting from or relating to the Trustee's inability
or failure to obtain any information not resulting from its own negligence or
willful misconduct.
ARTICLE IX
TERMINATION
SECTION 9.01. Termination upon Liquidation or Purchase of all
-----------------------------------------------
Mortgage Loans.
--------------
Subject to Section 9.03, the obligations and responsibilities of
the Depositor, the Master Servicer and the Trustee created hereby with
respect to the Trust Fund shall terminate upon the earlier of (a) the
purchase by the Master Servicer of all Mortgage Loans (and REO Properties)
remaining in the Trust Fund at the price equal to the sum of (i) 100% of the
Stated Principal Balance of each Mortgage Loan plus one month's accrued
interest thereon at the applicable Adjusted Mortgage Rate and (ii) the lesser
of (x) the appraised value of any REO Property as determined by the higher of
two appraisals completed by two independent appraisers selected by the Master
Servicer at the expense of the Master Servicer and (y) the Stated Principal
Balance of each Mortgage Loan related to any REO Property, in each case plus
accrued and unpaid interest thereon at the applicable Adjusted Mortgage Rate
and (b) the later of (i) the maturity or other liquidation (or any Advance
with respect thereto) of the last Mortgage Loan remaining in the Trust Fund
and the disposition of all REO Property and (ii) the distribution to
Certificateholders of all amounts required to be distributed to them pursuant
to this Agreement. In no event shall the trusts created hereby continue
beyond the earlier of (i) the expiration of 21 years from the death of the
survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the
United States to the Court of St. James's, living on the date hereof and (ii)
the Latest Possible Maturity Date. The right to purchase all Mortgage Loans
and REO Properties pursuant to clause (a) above shall be conditioned upon the
Pool Stated Principal Balance, at the time of any such repurchase, aggre-
gating less than ten percent of the aggregate Cut-off Date Principal Balance
of the Mortgage Loans.
SECTION 9.02. Final Distribution on the Certificates.
--------------------------------------
If on any Determination Date, the Master Servicer determines that
there are no Outstanding Mortgage Loans and no other funds or assets in the
Trust Fund other than the funds in the Certificate Account, the Master
Servicer shall direct the Trustee promptly to send a final distribution
notice to each Certificateholder. If the Master Servicer elects to terminate
the Trust Fund pursuant to clause (a) of Section 9.01, at least 20 days prior
to the date notice is to be mailed to the affected Certificateholders, the
Master Servicer shall notify the Depositor and the Trustee of the date the
Master Servicer intends to terminate the Trust Fund and of the applicable
repurchase price of the Mortgage Loans and REO Properties.
Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their
Certificates for payment of the final distribution and cancellation, shall be
given promptly by the Trustee by letter to Certificateholders mailed not
earlier than the 10th day and no later than the 15th day of the month next
preceding the month of such final distribution. Any such notice shall
specify (a) the Distribution Date upon which final distribution on the
Certificates will be made upon presentation and surrender of Certificates at
the office therein designated, (b) the amount of such final distribution, (c)
the location of the office or agency at which such presentation and surrender
must be made, and (d) that the Record Date otherwise applicable to such
Distribution Date is not applicable, distributions being made only upon
presentation and surrender of the Certificates at the office therein speci-
fied. The Master Servicer will give such notice to each Rating Agency at the
time such notice is given to Certificateholders.
In the event such notice is given, the Master Servicer shall cause
all funds in the Certificate Account to be remitted to the Trustee for
deposit in the Distribution Account on the Business Day prior to the
applicable Distribution Date in an amount equal to the final distribution in
respect of the Certificates. Upon such final deposit with respect to the
Trust Fund and the receipt by the Trustee of a Request for Release therefor,
the Trustee shall promptly release to the Master Servicer the Mortgage Files
for the Mortgage Loans.
Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to Certificateholders of each Class, in the
order set forth in Section 4.02 hereof, on the final Distribution Date and in
proportion to their respective Percentage Interests, with respect to
Certificateholders of the same Class, an amount equal to (i) as to each Class
of Regular Certificates, the Certificate Balance thereof plus (a) accrued
interest thereon (or on their Notional Amount, if applicable) in the case of
an interest bearing Certificate and (b) any Class PO Deferred Amounts in the
case of the Class PO Certificates, and (ii) as to the Residual Certificates,
the amount, if any, which remains on deposit in the Distribution Account
(other than the amounts retained to meet claims) after application pursuant
to clause (i) above.
In the event that any affected Certificateholders shall not
surrender Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Trustee 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 all the applicable
Certificates shall not have been surrendered for cancellation, the Trustee
may take appropriate steps, or may appoint an agent to take appropriate
steps, to contact the remaining Certificateholders concerning surrender of
their Certificates, and the cost thereof shall be paid out of the funds and
other assets which remain a part of the Trust Fund. If within one year after
the second notice all Certificates shall not have been surrendered for
cancellation, the Class A-R Certificateholders shall be entitled to all
unclaimed funds and other assets of the Trust Fund which remain subject
hereto.
SECTION 9.03. Additional Termination Requirements.
-----------------------------------
(a) In the event the Master Servicer exercises its purchase option
as provided in Section 9.01, the Trust Fund shall be terminated in accordance
with the following additional requirements, unless the Trustee has been
supplied with an Opinion of Counsel, at the expense of the Master Servicer,
to the effect that the failure to comply with the requirements of this
Section 9.03 will not (i) result in the imposition of taxes on "prohibited
transactions" on the REMIC as defined in section 860F of the Code, or (ii)
cause the Trust Fund to fail to qualify as a REMIC at any time that any
Certificates are outstanding:
(1) Within 90 days prior to the final Distribution Date set
forth in the notice given by the Master Servicer under Section 9.02, the
Master Servicer shall prepare and the Trustee, at the expense of the
"tax matters person," shall adopt a plan of complete liquidation within
the meaning of section 860F(a)(4) of the Code which, as evidenced by an
Opinion of Counsel (which opinion shall not be an expense of the
Trustee, the Trust Fund or the Tax Matters Person), meets the
requirements of a qualified liquidation; and
(2) Within 90 days after the time of adoption of such a plan
of complete liquidation, the Trustee shall sell all of the assets of the
Trust Fund to the Master Servicer for cash in accordance with Section
9.01.
(b) The Trustee as agent for each REMIC hereby agrees to adopt and
sign such a plan of complete liquidation upon the written request of the
Master Servicer, and the receipt of the Opinion of Counsel referred to in
Section 9.03(a)(1) and to take such other action in connection therewith as
may be reasonably requested by the Master Servicer.
(c) By their acceptance of the Certificates, the Holders thereof
hereby authorize the Master Servicer to prepare and the Trustee to adopt and
sign a plan of complete liquidation.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.01. Amendment.
---------
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 (i) to cure any ambiguity or mistake, (ii) to correct any
defective provision herein or to supplement any provision herein which may be
inconsistent with any other provision herein, (iii) to add to the duties of
the Depositor, the Seller or the Master Servicer, (iv) to add any other
provisions with respect to matters or questions arising hereunder or (v) to
modify, alter, amend, add to or rescind any of the terms or provisions
contained in this Agreement; provided, that any action pursuant to clauses (iv)
--------
or (v) above shall not, as evidenced by an Opinion of Counsel (which Opinion
of Counsel shall not be an expense of the Trustee or the Trust Fund),
adversely affect in any material respect the interests of any
Certificateholder; and provided further that the amendment shall not be
-------- -------
deemed to adversely affect in any material respect the interests of the
Certificateholders if the Person requesting the amendment obtains a letter
from each Rating Agency stating that the amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to the
Certificates; it being understood and agreed that any such letter in and of
itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. The Trustee, the Depositor and the Master Servicer
also may at any time and from time to time amend this Agreement without the
consent of the Certificateholders to modify, eliminate or add to any of its
provisions to such extent as shall be necessary or helpful to (i) maintain the
qualification of the Trust Fund as a REMIC under the Code, (ii) avoid or
minimize the risk of the imposition of any tax on the REMIC pursuant to the
Code that would be a claim at any time prior to the final redemption of the
Certificates or (iii) comply with any other requirements of the Code, provided
--------
that the Trustee has been provided an Opinion of Counsel, which opinion shall
be an expense of the party requesting such opinion but in any case shall not
be an expense of the Trustee or the Trust Fund, to the effect that such action
is necessary or helpful to, as applicable, (i) maintain such qualification,
(ii) avoid or minimize the risk of the imposition of such a tax or (iii)
comply with any such requirements of the Code.
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 a Majority in Interest of each Class of Certificates affected
thereby for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of Certificates; provided that no such
--------
amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments required to be distributed on any Certificate without the consent
of the Holder of such Certificate, (ii) adversely affect in any material
respect the interests of the Holders of any Class of Certificates in a manner
other than as described in (i), without the consent of the Holders of
Certificates of such Class evidencing, as to such Class, Percentage Interests
aggregating 66%, or (iii) reduce the aforesaid percentages of Certificates the
Holders of which are required to consent to any such amendment, without the
consent of the Holders of all such Certificates then outstanding.
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, which opinion shall not be an
expense of the Trustee or the Trust Fund, to the effect that such amendment
will not cause the imposition of any tax on the REMIC or the
Certificateholders or cause the Trust Fund to fail to qualify as a REMIC at
any time that any Certificates are outstanding.
Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish
written notification of the substance or a copy of such amendment to each
Certificateholder and each Rating Agency.
It shall not be necessary for the consent of Certificateholders
under this Section 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.
Nothing in this Agreement shall require the Trustee to enter into
an amendment without receiving an Opinion of Counsel (which Opinion shall not
be an expense of the Trustee or the Trust Fund) satisfactory to the Trustee
that (i) such amendment is permitted and is not prohibited by this Agreement
and that all requirements for amending this Agreement have been complied
with; and (ii) either (A) the amendment does not adversely affect in any
material respect the interests of any Certificateholder or (B) the conclusion
set forth in the immediately preceding clause (A) is not required to be
reached pursuant to this Section 10.01.
SECTION 10.02. Recordation of Agreement; Counterparts.
--------------------------------------
This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages
are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Master Servicer at its
expense, but only upon direction by the Trustee accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially
affects the interests of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement
as herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts
shall be deemed to be an original, and such counterparts shall constitute but
one and the same instrument.
SECTION 10.03. Governing Law.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 10.04. Intention of Parties.
--------------------
It is the express intent of the parties hereto that the conveyance
of (i) the Mortgage Loans by the Seller to the Depositor and (ii) the Trust
Fund by the Depositor to the Trustee each be, and be construed as, an
absolute sale thereof. It is, further, not the intention of the parties that
such conveyances be deemed a pledge thereof. However, in the event that,
notwithstanding the intent of the parties, such assets are held to be the
property of the Seller or the Depositor, or if for any other reason this
Agreement is held or deemed to create a security interest in either of such
assets, then (i) this Agreement shall be deemed to be a security agreement
within the meaning of the Uniform Commercial Code of the State of New York
and (ii) the conveyances provided for in this Agreement shall be deemed to be
an assignment and a grant by (i) the Seller to the Depositor or (ii) the
Depositor to the Trustee, for the benefit of the Certificateholders, of a
security interest in all of the assets transferred, whether now owned or
hereafter acquired.
The Seller and Depositor for the benefit of the Certificateholders
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 the Trust Fund, 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 the Agreement. The
Depositor shall arrange for filing any Uniform Commercial Code continuation
statements in connection with any security interest granted or assigned to
the Trustee for the benefit of the Certificateholders.
SECTION 10.05. Notices.
-------
(a) The Trustee shall use its best efforts to promptly provide
notice to each Rating Agency with respect to each of the following of which
it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Event of Default that has not been cured;
3. The resignation or termination of the Master Servicer or the
Trustee and the appointment of any successor;
4. The repurchase or substitution of Mortgage Loans pursuant to
Section 2.03; and
5. The final payment to Certificateholders.
In addition, the Trustee shall promptly furnish to each Rating
Agency copies of the following:
1. Each report to Certificateholders described in Section 4.04;
2. Each annual statement as to compliance described in Section
3.16;
3. Each annual independent public accountants' servicing report
described in Section 3.17; and
4. Any notice of a purchase of a Mortgage Loan pursuant to Section
2.02, 2.03 or 3.11.
(b) All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when delivered to (a) in
the case of the Depositor, IndyMac ABS, Inc., 155 North Lake Avenue,
Pasadena, California 91101, Attention: _______________, (b) in the case of
the Master Servicer, _____________________________________________,
Attention: _________________ 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, ____________________________________________,
Attention:__________________________________________________, or such other
address as the Trustee may hereafter furnish to the Depositor or Master
Servicer and (d) in the case of the Rating Agencies, the address specified
therefor in the definition corresponding to the name of such Rating Agency.
Notices to Certificateholders shall be deemed given when mailed, first class
postage prepaid, to their respective addresses appearing in the Certificate
Register.
SECTION 10.06. Severability of Provisions.
--------------------------
If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable
from the remaining covenants, agreements, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the
other provisions of this Agreement or of the Certificates or the rights of
the Holders thereof.
SECTION 10.07. Assignment.
----------
Notwithstanding anything to the contrary contained herein, except
as provided in Section 6.02, this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Depositor.
SECTION 10.08. Limitation on Rights of Certificateholders.
------------------------------------------
The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or
to take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
provided 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 party by reason of any action taken by the
parties to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have given to the Trustee a
written notice of an Event of Default and of the continuance thereof, as
herein provided, and unless the Holders of Certificates evidencing not less
than 25% of the Voting Rights evidenced by the Certificates shall also have
made written request to the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs,
expenses, and liabilities to be incurred therein or thereby, and the Trustee,
for 60 days after its receipt of such notice, request and offer of indemnity
shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted
by each Certificateholder with every other Certificateholder and the Trustee,
that no one or more Holders of Certificates shall have any right in any
manner whatever by virtue or by availing itself or themselves of any
provisions of this Agreement to affect, disturb or prejudice the rights of
the Holders of any other of the Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder or to enforce any right
under this Agreement, except in the manner herein provided and for the common
benefit of all Certificateholders. For the protection and enforcement of the
provisions of this Section 10.08, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 10.09. Inspection and Audit Rights.
---------------------------
The Master Servicer agrees that, on reasonable prior notice, it
will permit and will cause each Subservicer to permit any representative of
the Depositor or the Trustee during the Master Servicer's normal business
hours, to examine all the books of account, records, reports and other papers
of the Master Servicer relating to the Mortgage Loans, to make copies and
extracts therefrom, to cause such books to be audited by independent
certified public accountants selected by the Depositor or the Trustee and to
discuss its affairs, finances and accounts relating to the Mortgage Loans
with its officers, employees and independent public accountants (and by this
provision the Master Servicer hereby authorizes said accountants to discuss
with such representative such affairs, finances and accounts), all at such
reasonable times and as often as may be reasonably requested. Any out-of-
pocket expense incident to the exercise by the Depositor or the Trustee of
any right under this Section 10.09 shall be borne by the party requesting
such inspection; all other such expenses shall be borne by the Master
Servicer or the related Subservicer.
SECTION 10.10. Certificates Nonassessable and Fully Paid.
-----------------------------------------
It is the intention of the Depositor that Certificate-holders shall
not be personally liable for obligations of the Trust Fund, that the
interests in the Trust Fund represented by the Certificates shall be
nonassessable for any reason whatsoever, and that the Certificates, upon due
authentication thereof by the Trustee pursuant to this Agreement, are and
shall be deemed fully paid.
* * * * * *
IN WITNESS WHEREOF, the Depositor, the Trustee, the Seller and the
Master Servicer have caused their names to be signed hereto by their
respective officers thereunto duly authorized as of the day and year first
above written.
IndyMac ABS, Inc.
as Depositor
By:
--------------------------------
Name:
Title:
_________________________,
as Trustee
By:
--------------------------------
Name:
Title:
__________________________,
as Seller and Master Servicer
By:
--------------------------------
Name:
Title:
SCHEDULE I
Mortgage Loan Schedule
(Delivered at Closing to Trustee)
SCHEDULE II
IndyMac ABS, Inc.
Mortgage Pass-Through Certificates
Series 199_-_
Representations and Warranties of the Seller/Master Servicer
------------------------------------------------------------
____________________________ ("Seller-Master Servicer") hereby
makes the representations and warranties set forth in this Schedule II to the
Depositor and the Trustee, as of the Closing Date, or if so specified herein,
as of the Cut-off Date. Capitalized terms used but not otherwise defined in
this Schedule II shall have the meanings ascribed thereto in the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") relating to the
above-referenced Series, among Seller-Master Servicer, as seller and master
servicer, IndyMac ABS, Inc., as depositor, and _____________________, as
trustee.
(1) Seller-Master Servicer is duly organized as a _______
corporation and is validly existing and in good standing under the laws
of the State of ___________ and is duly authorized and qualified to
transact any and all business contemplated by the Pooling and Servicing
Agreement to be conducted by Seller-Master Servicer in any state in
which a Mortgaged Property is located or is otherwise not required under
applicable law to effect such qualification and, in any event, is in
compliance with the doing business laws of any such state, to the extent
necessary to ensure its ability to enforce each Mortgage Loan, to
service the Mortgage Loans in accordance with the terms of the Pooling
and Servicing Agreement and to perform any of its other obligations
under the Pooling and Servicing Agreement in accordance with the terms
thereof.
(2) Seller-Master Servicer has the full corporate power and
authority to sell and service each Mortgage Loan, and to execute,
deliver and perform, and to enter into and consummate the transactions
contemplated by the Pooling and Servicing Agreement and has duly
authorized by all necessary corporate action on the part of Seller-
Master Servicer the execution, delivery and performance of the Pooling
and Servicing Agreement; and the Pooling and Servicing Agreement,
assuming the due authorization, execution and delivery thereof by the
other parties thereto, constitutes a legal, valid and binding obligation
of Seller-Master Servicer, enforceable against Seller-Master Servicer in
accordance with its terms, except that (a) the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium, receivership and
other similar laws relating to creditors' rights generally and (b) the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
(3) The execution and delivery of the Pooling and Servicing
Agreement by Seller-Master Servicer, the sale and servicing of the
Mortgage Loans by Seller-Master Servicer under the Pooling and Servicing
Agreement, the consummation of any other of the transactions
contemplated by the Pooling and Servicing Agreement, and the fulfillment
of or compliance with the terms thereof are in the ordinary course of
business of Seller-Master Servicer and will not (A) result in a material
breach of any term or provision of the charter or by-laws of Seller--
Master Servicer or (B) materially conflict with, result in a material
breach, violation or acceleration of, or result in a material default
under, the terms of any other material agreement or instrument to which
Seller-Master Servicer is a party or by which it may be bound, or (C)
constitute a material violation of any statute, order or regulation
applicable to Seller-Master Servicer of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
Seller-Master Servicer; and Seller-Master Servicer is not in breach or
violation of any material indenture or other material agreement or
instrument, or in violation of any statute, order or regulation of any
court, regulatory body, administrative agency or governmental body
having jurisdiction over it which breach or violation may materially
impair Seller-Master Servicer's ability to perform or meet any of its
obligations under the Pooling and Servicing Agreement.
(4) No litigation is pending or, to the best of Seller-Master
Servicer's knowledge, threatened, against Seller-Master Servicer that
would prohibit the execution or delivery of, or performance under, the
Pooling and Servicing Agreement by the Seller-Master Servicer.
SCHEDULE III
IndyMac ABS, Inc.
Mortgage Pass-Through Certificates
Series 199_-_
Representations and Warranties as to the Mortgage Loans
-------------------------------------------------------
____________________________ ("Seller") hereby makes the
representations and warranties set forth in this Schedule III to the
Depositor and the Trustee, as of the Closing Date, or if so specified herein,
as of the Cut-off Date or the date of origination of the related Mortgage
Loan. Capitalized terms used but not otherwise defined in this Schedule III
shall have the meanings ascribed thereto in the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") relating to the above-
referenced Series, among Seller, as seller and master servicer, IndyMac ABS,
Inc., as depositor, and ________________________, as trustee.
(1) The information set forth on Schedule I to the Pooling
and Servicing Agreement with respect to each Mortgage Loan is true and
correct in all material respects as of the Closing Date.
(2) As of the Closing Date, all regularly scheduled monthly
payments due with respect to each Mortgage Loan up to and including the
Due Date immediately prior to the Cut-off Date have been made; and as of
the Cut-off Date, no Mortgage Loan had a regularly scheduled monthly
payment that was 60 or more days Delinquent during the twelve months
prior to the Cut-off Date.
(3) With respect to any Mortgage Loan that is not a
Cooperative Loan, each Mortgage is a valid and enforceable first lien on
the Mortgaged Property subject only to (a) the lien of nondelinquent
current real property taxes and assessments and liens or interests
arising under or as a result of any federal, state or local law,
regulation or ordinance relating to hazardous wastes or hazardous
substances (and, if the related Mortgage Property is a unit in a
condominium project or planned unit development, any lien for common
charges permitted by statute or homeowner association fees), (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 generally acceptable
to mortgage lending institutions in the area wherein the related
Mortgaged Property is located or specifically reflected in the appraisal
made in connection with the origination of the related Mortgage Loan,
and (c) other matters to which like properties are commonly subject
which do not materially interfere with the benefits of the security
intended to be provided by such Mortgage.
(4) Immediately prior to the assignment of the Mortgage Loans
to the Depositor, the Seller had good title to, and was the sole owner
of, each Mortgage Loan free and clear of any pledge, lien, encumbrance
or security interest and had full right and authority, subject to no
interest or participation of, or agreement with, any other party, to
sell and assign the same pursuant to the Pooling and Servicing
Agreement.
(5) As of the date of origination of each Mortgage Loan,
there was no delinquent tax or assessment lien against the related
Mortgaged Property.
(6) There is no valid offset, defense or counterclaim to any
Mortgage Note or Mortgage, including the obligation of the Mortgagor to
pay the unpaid principal of or interest on such Mortgage Note.
(7) 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
(11) below.
(8) To the best of the Seller's knowledge, no Mortgaged
Property has been materially damaged by water, fire, earthquake,
windstorm, flood, tornado or similar casualty (excluding casualty from
the presence of hazardous wastes or hazardous substances, as to which
the Seller makes no representation) so as to affect adversely the value
of the related Mortgaged Property as security for such Mortgage Loan.
(9) Each Mortgage Loan at origination complied in all
material respects with applicable state and federal laws, including,
without limitation, usury, equal credit opportunity, real estate
settlement procedures, truth-in-lending and disclosure laws or any
noncompliance does not have a material adverse effect on the value of
the related Mortgage Loan.
(10) As of the Closing Date, the Seller has not 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.
(11) A lender's policy of title insurance together with a
condominium endorsement and extended coverage endorsement, if
applicable, in an amount at least equal to the Cut-off Date Stated
Principal Balance of each such Mortgage Loan or a commitment (binder) to
issue the same was effective on the date of the origination of each
Mortgage Loan, each such policy is valid and remains in full force and
effect.
(12) Each Mortgage Loan was originated (within the meaning of
Section 3(a) (41) of the Securities Exchange Act, as amended) by an
entity that satisfied at the time of origination the requirements of
Section 3(a)(41) of the Securities Exchange Act of 1934, as amended.
(13) To the best of the Seller's knowledge, all of the
improvements which were included for the purpose of determining the
Collateral Value of the Mortgaged Property lie wholly within the
boundaries and building restriction lines of such property, and no
improvements on adjoining properties encroach upon the Mortgaged
Property, unless such failure to be wholly within such boundaries and
restriction lines or such encroachment, as the case may be, does not
have a material effect on the value of such Mortgaged Property.
(14) To the best of the Seller's knowledge, as of the date of
origination of each Mortgage Loan, no improvement located on or being
part of the Mortgaged Property is in violation of any applicable zoning
law or regulation unless such violation would not have a material
adverse effect on the value of the related Mortgaged Property. To the
best of 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.
(15) The Mortgage Note and the related Mortgage are genuine,
and each is the legal, valid and binding obligation of the maker
thereof, enforceable in accordance with its terms and under applicable
law.
(16) The proceeds of the Mortgage Loan have been fully
disbursed and there is no requirement for future advances thereunder.
(17) The related Mortgage contains customary and enforceable
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.
(18) 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.
(19) At the Cut-off Date, the improvements upon each
Mortgaged Property are covered by a valid and existing hazard insurance
policy with a generally acceptable carrier that provides for fire and
extended coverage and coverage for such other hazards as are customarily
required by institutional single family mortgage lenders in the area
where the Mortgaged Property is located, and the Seller has received no
notice that any premiums due and payable thereon have not been paid; the
Mortgage obligates the Mortgagor thereunder to maintain all such
insurance including flood insurance at the Mortgagor's cost and expense.
Anything to the contrary in this item (19) notwithstanding, no breach of
this item (19) shall be deemed to give rise to any obligation of the
Seller to repurchase or substitute for such affected Mortgage Loan or
Loans so long as the Master Servicer maintains a blanket policy pursuant
to the second paragraph of Section 3.09(a) of the Pooling and Servicing
Agreement.
(20) If at the time of origination of each Mortgage Loan, the
related Mortgaged Property was in an area then 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 then-
current requirements of the Flood Insurance Administration is in effect
with respect to such Mortgaged Property with a generally acceptable
carrier.
(21) To the best of the Seller's knowledge, there is no
proceeding occurring, pending or threatened for the total or partial
condemnation of the Mortgaged Property.
(22) 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 material non-
monetary default, breach, violation or event of acceleration under the
Mortgage or the related Mortgage Note; and the Seller has not waived any
material non-monetary default, breach, violation or event of
acceleration.
(23) Each Mortgage File contains an appraisal of the related
Mortgaged Property in a form acceptable to FNMA or FHLMC.
(24) Any leasehold estate securing a Mortgage Loan has a
stated term at least as long as the term of the related Mortgage Loan.
(25) Each Mortgage Loan was selected from among the
outstanding fixed rate single family mortgage loans in the Seller's
portfolio at the Closing Date as to which the representations and
warranties made with respect to the Mortgage Loans set forth in this
Schedule III can be made. No such selection was made in a manner
intended to adversely affect the interests of the Certificateholders.
((26) (add coop loan reps, as applicable).)
SCHEDULE IV
PRINCIPAL BALANCE SCHEDULES
SCHEDULE V
Form of Monthly Master Servicer Report
LOAN LEVEL REPORTING SYSTEM
DATABASE STRUCTURE
(MONTH, YEAR)
<TABLE>
<CAPTION>
Field Number Field Name Field Type Field Width Dec
------------ ---------- ---------- ----------- ---
<S> <C> <C> <C> <C>
1 INVNUM Numeric 4
2 INVBLK Numeric 4
3 INACNU Character 8
4 BEGSCH Numeric 15 2
5 SCHPRN Numeric 13 2
6 TADPRN Numeric 11 2
7 LIQEPB Numeric 11 2
8 ACTCOD Numeric 11
9 ACTDAT Numeric 4
10 INTPMT Numeric 8
11 PRNPMT Numeric 13 2
12 ENDSCH Numeric 13 2
13 SCHNOT Numeric 13 2
14 SCHPAS Numeric 7 3
15 PRINPT Numeric 7 3
16 PRIBAL Numeric 11 2
17 LPIDTE Numeric 13 2
18 DELPRN Numeric 7
19 PPDPRN Numeric 11 2
20 DELPRN Numeric 11 2
21 NXTCHG Numeric 8
22 ARMNOT Numeric 7 3
23 ARMPAS Numeric 7 3
24 ARMPMT Numeric 11 2
25 ZZTYPE Character 2
26 ISSUID Character 1
27 KEYNAME Character 8
---
TOTAL 240
Suggested Format: DBASE file
Modem transmission
</TABLE>
INVESTOR NUMBER:
----------------
GENERAL INFORMATION
-------------------
Inv. # Blk # CFC # Investor #
------ ----- ----- ----------
Loan
Count:
MASTER SERVICER
LOAN LEVEL REPORTING SYSTEM
<TABLE>
<CAPTION>
CURRENT MONTH SCHEDULED INFORMATION
-----------------------------------
Beg. Total End Pass-
Balance Principal Curtailment Payoff Amt. A/Code A/Date Interest Principal Balance Note thru P&I
- ------- --------- ----------- ----------- ------ ------ -------- --------- ------- ---- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total
Remittance:
(table continued)
CUTOFF: (DATE)
---------------
TRIAL BALANCE INFORMATION ARM LOANS ONLY
------------------------- --------------
Del PPD Next Pass-
UPB LPI Prin. Prin. Chg. Note thru P&I
- --- --- ----- ----- ---- ---- ----- ---
</TABLE>
EXHIBIT A
(FORM OF SENIOR CERTIFICATE)
(UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.)
(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, AS AMENDED (THE "CODE").)
Certificate No. :
Cut-off Date :
First Distribution Date :
Initial Certificate Balance
of this Certificate
("Denomination") : $
Initial Certificate Balances
of all Certificates of
this Class : $
CUSIP :
IndyMac ABS, Inc.
Mortgage Pass-Through Certificates, Series 199 -
- ---
Class ( )
evidencing a percentage interest in the distributions allocable to
the Certificates of the above-referenced Class with respect to a
Trust Fund consisting primarily of a pool of conventional mortgage
loans (the "Mortgage Loans") secured by first liens on one- to
four-family residential properties
IndyMac ABS, Inc., as Depositor
Principal in respect of this Certificate is distributable monthly as set
forth herein. Accordingly, the Certificate Balance at any time may be less
than the Certificate Balance as set forth herein. This Certificate does not
evidence an obligation of, or an interest in, and is not guaranteed by the
Depositor, the Seller, the Master Servicer or the Trustee referred to below
or any of their respective affiliates. Neither this Certificate nor the
Mortgage Loans are guaranteed or insured by any governmental agency or
instrumentality.
This certifies that is the regis
--------------------------------
tered owner of the Percentage Interest evidenced by this Certificate
(obtained by dividing the denomination of this Certificate by the aggregate
Initial Certificate Balances of all Certificates of the Class to which this
Certificate belongs) in certain monthly distributions with respect to a Trust
Fund consisting primarily of the Mortgage Loans deposited by IndyMac ABS,
Inc. (the "Depositor"). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as of the Cut-off Date specified above (the
"Agreement") among the Depositor, ___________________________, as seller (in
such capacity, the "Seller") and as master servicer (in such capacity, the
"Master Servicer"), and ___________________, as trustee (the "Trustee"). 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.
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.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
* * *
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ____________, 19__
______________________,
as Trustee
By ______________________
Countersigned:
By ___________________________
Authorized Signatory of
______________________,
as Trustee
EXHIBIT B
(FORM OF SUBORDINATED CERTIFICATE)
(UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.)
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, AS AMENDED (THE "CODE").
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO CERTAIN CERTIFICATES
AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.
(THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSE OF APPLYING THE
U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES UNDER THE CODE
TO THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS ________________
, 199 . THE INITIAL PER ANNUM RATE OF INTEREST ON THIS CERTIFICATE IS
- --- -
%. ASSUMING THAT THE MORTGAGE LOANS PREPAY AT AN ASSUMED RATE OF
- ----
PREPAYMENT OF % PER ANNUM (THE "PREPAYMENT ASSUMPTION"), THIS
----
CERTIFICATE HAS BEEN ISSUED WITH $ OF OID PER $1,000 OF THE
-----------
ORIGINAL PRINCIPAL AMOUNT OF THIS CERTIFICATE; THE ANNUAL YIELD TO MATURITY
OF THIS CERTIFICATE FOR PURPOSES OF COMPUTING THE ACCRUAL OF OID IS
APPROXIMATELY % (COMPOUNDED MONTHLY); THE AMOUNT OF OID
----------
ALLOCABLE TO THE SHORT FIRST ACCRUAL PERIOD IS $ PER $1,000 OF THE
------
ORIGINAL PRINCIPAL AMOUNT OF THIS CERTIFICATE COMPUTED USING THE MONTHLY
YIELD AND DAILY COMPOUNDING DURING THE SHORT ACCRUAL PERIOD. NO
REPRESENTATION IS MADE THAT THE MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON
THE PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE. THE ACTUAL YIELD TO MATURITY
MAY DIFFER FROM THAT SET FORTH ABOVE, AND THE ACCRUAL OF OID WILL BE
ADJUSTED, IN ACCORDANCE WITH SECTION 1272(a)(6) OF THE CODE, TO TAKE INTO
ACCOUNT EVENTS WHICH HAVE OCCURRED DURING ANY ACCRUAL PERIOD. THE PREPAYMENT
ASSUMPTION IS INTENDED TO BE THE PREPAYMENT ASSUMPTION REFERRED TO IN SECTION
1272(a)(6)(B)(iii) OF THE CODE.)
(THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY ONLY BE MADE IN A TRANSACTION EXEMPTED
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.)
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS
THE TRANSFEREE REPRESENTS TO THE TRUSTEE THAT SUCH TRANSFEREE IS NOT AN
EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED, OR A PLAN SUBJECT TO SECTION 4975 OF THE CODE, OR
DELIVERS TO THE TRUSTEE AN OPINION OF COUNSEL IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. (SUCH REPRESENTATION SHALL
BE DEEMED TO HAVE BEEN MADE TO THE TRUSTEE BY THE TRANSFEREE'S ACCEPTANCE OF
A CERTIFICATE OF THIS CLASS AND BY A BENEFICIAL OWNER'S ACCEPTANCE OF ITS
INTEREST IN A CERTIFICATE OF THIS CLASS.) NOTWITHSTANDING ANYTHING ELSE TO
THE CONTRARY HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON
BEHALF OF AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR TO THE CODE WITHOUT
THE OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL
BE VOID AND OF NO EFFECT.
Certificate No. :
Cut-off Date :
First Distribution Date :
Initial Certificate Balance
of this Certificate
("Denomination") : $
Initial Certificate Balances
of all Certificates of
this Class : $
IndyMac ABS, Inc.
Mortgage Pass-Through Certificates, Series 199 -
- ---
Class ( )
evidencing a percentage interest in the distributions allocable to
the Certificates of the above-referenced Class with respect to a
Trust Fund consisting primarily of a pool of conventional loans
(the "Mortgage Loans") secured by first liens on one- to four-
family residential properties
IndyMac ABS, Inc., as Depositor
Principal in respect of this Certificate is distributable monthly as set
forth herein. Accordingly, the Certificate Balance at any time may be less
than the Certificate Balance as set forth herein. This Certificate does not
evidence an obligation of, or an interest in, and is not guaranteed by the
Depositor, the Seller, the Master Servicer or the Trustee referred to below
or any of their respective affiliates. Neither this Certificate nor the
Mortgage Loans are guaranteed or insured by any governmental agency or
instrumentality.
This certifies that is the regis
---------------------------------
tered owner of the Percentage Interest evidenced by this Certificate
(obtained by dividing the denomination of this Certificate by the aggregate
Initial Certificate Balances of all Certificates of the Class to which this
Certificate belongs) in certain monthly distributions with respect to a Trust
Fund consisting primarily of the Mortgage Loans deposited by IndyMac ABS,
Inc. (the "Depositor"). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as of the Cut-off Date specified above (the
"Agreement") among the Depositor, ____________________________, as seller (in
such capacity, the "Seller") and as master servicer (in such capacity, the
"Master Servicer"), and __________________, as trustee (the "Trustee"). 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.
(No transfer of a Certificate of this Class shall be made unless such
transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under said Act and such laws. In the event that a
transfer is to be made in reliance upon an exemption from the Securities Act
and such laws, in order to assure compliance with the Securities Act and such
laws, the Certificateholder desiring to effect such transfer and such
Certificateholder's prospective transferee shall each certify to the Trustee
in writing the facts surrounding the transfer. In the event that such a
transfer is to be made within three years from the date of the initial
issuance of Certificates pursuant hereto, there shall also be delivered
(except in the case of a transfer pursuant to Rule 144A of the Securities
Act) to the Trustee an Opinion of Counsel that such transfer may be made
pursuant to an exemption from the Securities Act and such state securities
laws, which Opinion of Counsel shall not be obtained at the expense of the
Trustee, the Seller, the Master Servicer or the Depositor. The Holder hereof
desiring to effect such transfer shall, and does hereby agree to, indemnify
the Trustee and the Depositor against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.)
No transfer of a Certificate of this Class shall be made unless the
Trustee shall have received either (i) a representation (letter) from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan subject to Section 406 of ERISA or Section 4975 of the
Code, nor a person acting on behalf of any such plan, which representation
letter shall not be an expense of the Trustee or the Master Servicer, (ii) if
the purchaser is an insurance company, a representation that the purchaser is
an insurance company which is purchasing such Certificates with funds
contained in an "insurance company general account" (as such term is defined
in Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-
60")) and that the purchase and holding of such Certificates are covered
under PTCE 95-60, or (iii) in the case of any such Certificate presented for
registration in the name of an employee benefit plan subject to ERISA or
Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan or any other person acting on
behalf of any such plan, an Opinion of Counsel satisfactory to the Trustee
and the Master Servicer to the effect that the purchase or holding of such
Certificate will not result in the assets of the Trust Fund being deemed to
be "plan assets" and subject to the prohibited transaction provisions of
ERISA and the Code and will not subject the Trustee to any obligation in
addition to those undertaken in the Agreement, which Opinion of Counsel shall
not be an expense of the Trustee or the Master Servicer. (Such
representation shall be deemed to have been made to the Trustee by the
Transferee's acceptance of a Certificate of this Class and by a beneficial
owner's acceptance of its interest in a Certificate of this Class.)
Notwithstanding anything else to the contrary herein, any purported transfer
of a Certificate of this Class to or on behalf of an employee benefit plan
subject to ERISA or to the Code without the opinion of counsel satisfactory
to the Trustee as described above shall be void and of no effect.
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.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
* * *
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ____________, 19__
_____________________,
as Trustee
By ______________________
Countersigned:
By ___________________________
Authorized Signatory of
____________________,
as Trustee
EXHIBIT C
(FORM OF RESIDUAL CERTIFICATE)
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, AS AMENDED (THE "CODE").
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS
THE PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN
ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.
(THIS CERTIFICATE REPRESENTS THE "TAX MATTERS PERSON RESIDUAL INTEREST"
ISSUED UNDER THE POOLING AND SERVICING AGREEMENT REFERRED TO BELOW AND MAY
NOT BE TRANSFERRED TO ANY PERSON EXCEPT IN CONNECTION WITH THE ASSUMPTION BY
THE TRANSFEREE OF THE DUTIES OF THE SERVICER UNDER SUCH AGREEMENT.)
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS
THE TRANSFEREE DELIVERS TO THE TRUSTEE EITHER A REPRESENTATION LETTER TO THE
EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR A PLAN
SUBJECT TO SECTION 4975 OF THE CODE, OR AN OPINION OF COUNSEL IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. NOTWITHSTANDING
ANYTHING ELSE TO THE CONTRARY HEREIN, ANY PURPORTED TRANSFER OF THIS
CERTIFICATE TO OR ON BEHALF OF AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR
TO THE CODE WITHOUT THE OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AS
DESCRIBED ABOVE SHALL BE VOID AND OF NO EFFECT.
Certificate No. :
Cut-off Date :
Initial Certificate Balance
of this Certificate
("Denomination") : $
Initial Certificate Balances
of all Certificates of
this Class : $
CUSIP :
IndyMac ABS, Inc.
Mortgage Pass-Through Certificates, Series 199 -
- ---
evidencing the distributions allocable to the Class A-R
Certificates with respect to a Trust Fund consisting primarily of a
pool of conventional loans (the "Mortgage Loans") secured by first
liens on one- to four-family residential properties
IndyMac ABS, Inc., as Depositor
Principal in respect of this Certificate is distributable monthly as set
forth herein. Accordingly, the Certificate Balance at any time may be less
than the Certificate Balance as set forth herein. This Certificate does not
evidence an obligation of, or an interest in, and is not guaranteed by the
Depositor, the Seller, the Master Servicer or the Trustee referred to below
or any of their respective affiliates. Neither this Certificate nor the
Mortgage Loans are guaranteed or insured by any governmental agency or
instrumentality.
This certifies that is the regis
--------------------------------
tered owner of the Percentage Interest (obtained by dividing the Denomination
of this Certificate by the aggregate Initial Certificate Balances of all
Certificates of the Class to which this Certificate belongs) in certain
monthly distributions with respect to a Trust Fund consisting of the Mortgage
Loans deposited by IndyMac ABS, Inc. (the "Depositor"). The Trust Fund was
created pursuant to a Pooling and Servicing Agreement dated as of the Cut-off
Date specified above (the "Agreement") among the Depositor,
____________________________, as seller (in such capacity, the "Seller") and
as master servicer (in such capacity, the "Master Servicer"), and
___________________, as trustee (the "Trustee"). 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.
Any distribution of the proceeds of any remaining assets of the Trust
Fund will be made only upon presentment and surrender of this Class A-R
Certificate at the Corporate Trust Office or the office or agency maintained
by the Trustee in New York, New York.
No transfer of a Class A-R Certificate shall be made unless the Trustee
shall have received either (i) a representation letter from the transferee of
such Certificate, acceptable to and in form and substance satisfactory to the
Trustee, to the effect that such transferee is not an employee benefit plan
subject to Section 406 of ERISA or Section 4975 of the Code, nor a person
acting on behalf of any such plan, which representation letter shall not be
an expense of the Trustee or the Master Servicer, or (ii) in the case of any
such Class A-R Certificate presented for registration in the name of an
employee benefit plan subject to ERISA, or Section 4975 of the Code (or
comparable provisions of any subsequent enactments), or a trustee of any such
plan or any other person acting on behalf of any such plan, an Opinion of
Counsel satisfactory to the Trustee and the Master Servicer to the effect
that the purchase or holding of such Class A-R Certificate will not result in
the assets of the Trust Fund being deemed to be "plan assets" and subject to
the prohibited transaction provisions of ERISA and the Code and will not
subject the Trustee or the Master Servicer to any obligation in addition to
those undertaken in this Agreement, which Opinion of Counsel shall not be an
expense of the Trustee or the Master Servicer. Notwithstanding anything else
to the contrary herein, any purported transfer of a Class A-R Certificate to
or on behalf of an employee benefit plan subject to ERISA or to the Code
without the opinion of counsel satisfactory to the Trustee as described above
shall be void and of no effect.
Each Holder of this Class A-R Certificate will be deemed to have agreed
to be bound by the restrictions of the Agreement, including but not limited
to the restrictions that (i) each person holding or acquiring any Ownership
Interest in this Class A-R Certificate must be a Permitted Transferee, (ii)
no Ownership Interest in this Class A-R Certificate may be transferred
without delivery to the Trustee of (a) a transfer affidavit of the proposed
transferee and (b) a transfer certificate of the transferor, each of such
documents to be in the form described in the Agreement, (iii) each person
holding or acquiring any Ownership Interest in this Class A-R Certificate
must agree to require a transfer affidavit and to deliver a transfer
certificate to the Trustee as required pursuant to the Agreement, (iv) each
person holding or acquiring an Ownership Interest in this Class A-R
Certificate must agree not to transfer an Ownership Interest in this Class A-
R Certificate if it has actual knowledge that the proposed transferee is not
a Permitted Transferee and (v) any attempted or purported transfer of any
Ownership Interest in this Class A-R Certificate in violation of such
restrictions will be absolutely null and void and will vest no rights in the
purported transferee.
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.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
* * *
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ____________, 19__
______________________,
as Trustee
By ______________________
Countersigned:
By ___________________________
Authorized Signatory of
______________________,
as Trustee
EXHIBIT D
(FORM OF NOTIONAL AMOUNT CERTIFICATE)
(SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE
OF 1986, AS AMENDED (THE "CODE").)
THIS CERTIFICATE HAS NO PRINCIPAL BALANCE AND IS NOT ENTITLED TO ANY
DISTRIBUTIONS IN RESPECT OF PRINCIPAL.
(THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSE OF APPLYING THE
U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES UNDER THE CODE
TO THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS
---------------
, 199 . THE INITIAL PER ANNUM RATE OF INTEREST ON THIS CERTIFICATE IS
- --- -
%. ASSUMING THAT THE MORTGAGE LOANS PREPAY AT AN ASSUMED RATE OF
- ---------
PREPAYMENT OF % PER ANNUM (THE "PREPAYMENT ASSUMPTION"), THIS
---
CERTIFICATE HAS BEEN ISSUED WITH $ OF OID ON THE INITIAL
------------------
POOL STATED PRINCIPAL BALANCE; THE ANNUAL YIELD TO MATURITY OF THIS
CERTIFICATE FOR PURPOSES OF COMPUTING THE ACCRUAL OF OID IS APPROXIMATELY
% (COMPOUNDED MONTHLY); THE AMOUNT OF OID ALLOCABLE TO THE SHORT
- ---------
FIRST ACCRUAL PERIOD IS $ ON THE INITIAL POOL STATED
-------------
PRINCIPAL BALANCE; AND THE METHOD USED TO CALCULATE THE ANNUAL YIELD TO
MATURITY AND THE AMOUNT OF OID ALLOCABLE TO THE SHORT FIRST ACCRUAL PERIOD IS
THE EXACT METHOD AS DEFINED IN PROPOSED TREASURY REGULATIONS. NO
REPRESENTATION IS MADE THAT THE MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON
THE PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE. THE ACTUAL YIELD TO MATURITY
MAY DIFFER FROM THAT SET FORTH ABOVE, AND THE ACCRUAL OF OID WILL BE
ADJUSTED, IN ACCORDANCE WITH SECTION 1272(a)(6) OF THE CODE, TO TAKE INTO
ACCOUNT EVENTS WHICH HAVE OCCURRED DURING ANY ACCRUAL PERIOD. THE PREPAYMENT
ASSUMPTION IS INTENDED TO BE THE PREPAYMENT ASSUMPTION REFERRED TO IN SECTION
1272(a)(6)(B)(iii) OF THE CODE.)
Certificate No. :
Cut-off Date :
First Distribution Date :
Initial Notional Amount
of this Certificate
("Denomination") :
Initial Notional Amount
of all Certificates
of this Class :
CUSIP :
IndyMac ABS, Inc.
Mortgage Pass-Through Certificates, Series 199 -
- ---
Class ( )
evidencing a percentage interest in the distributions allocable to
the Certificates of the above-referenced Class with respect to a
Trust Fund consisting primarily of a pool of conventional loans
(the "Mortgage Loans") secured by first liens on one- to four-
family residential properties
IndyMac ABS, Inc., as Depositor
This Certificate does not evidence an obligation of, or an interest in,
and is not guaranteed by the Depositor, the Seller, the Master Servicer or
the Trustee referred to below or any of their respective affiliates. Neither
this Certificate nor the Mortgage Loans are guaranteed or insured by any
governmental agency or instrumentality.
This certifies that is the regis
--------------------------------
tered owner of the Percentage Interest evidenced by this Certificate
specified above in certain monthly distributions with respect to a Trust Fund
consisting primarily of the Mortgage Loans deposited by IndyMac ABS, Inc.
(the "Depositor"). The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as of Cut-off Date specified above (the
"Agreement") among the Depositor, ________________________, as seller (in
such capacity, the "Seller") and as master servicer (in such capacity, the
"Master Servicer"), and _________________, as trustee (the "Trustee"). 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.
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.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
* * *
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: ____________, 19__
_______________________,
as Trustee
By ______________________
Countersigned:
By ___________________________
Authorized Signatory of
______________________,
as Trustee
EXHIBIT E
(Form of Reverse of Certificates)
IndyMac ABS, Inc.
Mortgage Pass-Through Certificates
This Certificate is one of a duly authorized issue of Certificates
designated as IndyMac ABS, Inc. Mortgage Pass-Through Certificates, of the
Series specified on the face hereof (herein collectively called the
"Certificates"), and representing a beneficial ownership interest in the
Trust Fund created by the Agreement.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account
for payment hereunder and that the Trustee is not liable to the Certificate-
holders for any amount payable under this Certificate or the Agreement or,
except as expressly provided in the Agreement, subject to any liability under
the Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations
of rights, benefits, obligations and duties evidenced thereby, and the
rights, duties and immunities of the Trustee.
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 on the face hereof, to the Person in
whose name this Certificate is registered at the close of business on the
applicable Record Date in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be
distributed to Holders of Certificates of the Class to which this Certificate
belongs on such Distribution Date pursuant to the Agreement. The Record Date
applicable to each Distribution Date is the last Business Day of the month
next preceding the month of such Distribution Date.
Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such
Certificateholder shall have so notified the Trustee in writing at least five
Business Days prior to the related Record Date and such Certificateholder
shall satisfy the conditions to receive such form of payment set forth in the
Agreement, or, if not, by check mailed by first class mail to the address of
such Certificateholder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the Corporate Trust Office
or such other location specified in the notice to Certificateholders of such
final distribution.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of 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 affected by such amendment evidencing the
requisite Percentage Interest, as provided in the Agreement. 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 therefor or in
lieu hereof whether or not notation of such consent is made upon this Cer-
tificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Holders of any of the
Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration
of transfer at the Corporate Trust Office or the office or agency maintained
by the Trustee in New York, New York, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar
duly executed by the holder hereof or such holder's attorney duly authorized
in writing, and thereupon one or more new Certificates of the same Class in
authorized denominations and evidencing the same aggregate Percentage
Interest in the Trust Fund will be issued to the designated transferee or
transferees.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates
are exchangeable for new Certificates of the same Class in authorized
denominations and evidencing the same aggregate Percentage Interest, as
requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee 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 Seller and the Trustee and any
agent of the Depositor or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and neither
the Depositor, the Trustee, nor any such agent shall be affected by any
notice to the contrary.
On any Distribution Date on which the Pool Stated Principal Balance is
less than 10% of the aggregate Cut-off Date Principal Balances of the
Mortgage Loans, the Master Servicer will have the option to repurchase, in
whole, from the Trust Fund all remaining Mortgage Loans and all property
acquired in respect of the Mortgage Loans at a purchase price determined as
provided in the Agreement. In the event that no such optional termination
occurs, the obligations and responsibilities created by the Agreement will
terminate upon the later of the maturity 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 in respect thereof and the distribution to
Certificateholders of all amounts required to be distributed pursuant to the
Agreement. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last
survivor of the descendants living at the date of the Agreement of a certain
person named in the Agreement.
Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.
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)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to
assignee on the Certificate Register of the Trust Fund.
I (We) further direct the Trustee 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
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.
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 who, being by me duly sworn, did depose and say that he executed
the foregoing instrument.
------------------------------
Notary Public
(Notarial Seal)
EXHIBIT F
(RESERVED)
EXHIBIT G
FORM OF INITIAL CERTIFICATION OF TRUSTEE
(date)
(Depositor)
(Master Servicer)
(Seller)
_____________________
_____________________
Re: Pooling and Servicing Agreement among
IndyMac ABS, Inc., as Depositor, ____________
______________, as Seller and Master
Servicer, and _________________, as Trustee,
Mortgage Pass-Through Certificates, Series 199 -
------------------------------------------------
Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), the undersigned,
as Trustee, hereby certifies that, as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed
on the attached schedule) it has received:
(i) the original Mortgage Note endorsed in the following form: "Pay to
the order of __________, without recourse"; and
(ii) a duly executed assignment of the Mortgage (which may be included
in a blanket assignment or assignments).
Based on its review and examination and only as to the foregoing
documents, such documents appear regular on their face and related to such
Mortgage Loan.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in
the Pooling and Servicing Agreement. The Trustee makes no representations as
to: (i) the validity, legality, sufficiency, enforceability or genuineness
of any of the documents contained in each Mortgage File of any of the
Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such
Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.
___________________,
as Trustee
By:
-----------------------------
Name:
Title:
EXHIBIT H
FORM OF FINAL CERTIFICATION OF TRUSTEE
(date)
(Depositor)
(Master Servicer)
(Seller)
_____________________
_____________________
Re: Pooling and Servicing Agreement among
IndyMac ABS, Inc., as Depositor, _____________
_________________, as Seller and Master
Servicer, and ____________________, as Trustee,
Mortgage Pass-Through Certificates, Series 199 -
--------------------------------------------------
Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), the undersigned,
as Trustee, hereby certifies that as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed
on the attached Document Exception Report) it has received:
(i) the original Mortgage Note endorsed in the form provided in
Section 2.01(c) of the Pooling and Servicing Agreement, with all intervening
endorsements showing a complete chain of endorsement from the originator to
the Seller.
(ii) The original recorded Mortgage.
(iii) A duly executed assignment of the Mortgage in the form provided
in Section 2.01(c) of the Pooling and Servicing Agreement, or, if the
Depositor has certified or the Trustee otherwise knows that the related
Mortgage has not been returned from the applicable recording office, a copy
of the assignment of the Mortgage (excluding information to be provided by
the recording office).
(iv) The original or duplicate original recorded assignment or
assignments of the Mortgage showing a complete chain of assignment from the
originator to the Seller.
(v) The original or duplicate original lender's title policy and all
riders thereto or, any one of an original title binder, an original
preliminary title report or an original title commitment, or a copy thereof
certified by the title company.
Based on its review and examination and only as to the foregoing
documents, (a) such documents appear regular on their face and related to
such Mortgage Loan, and (b) the information set forth in items (i), (ii),
(iii), (iv), (vi), and (xi) of the definition of the "Mortgage Loan Schedule"
in Section 1.01 of the Pooling and Servicing Agreement accurately reflects
information set forth in the Mortgage File.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in
the Pooling and Servicing Agreement. The Trustee makes no representations as
to: (i) the validity, legality, sufficiency, enforceability or genuineness
of any of the documents contained in each Mortgage File of any of the
Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such
Mortgage Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.
_______________________,
as Trustee
By :
----------------------------
Name:
Title:
EXHIBIT I
TRANSFER AFFIDAVIT
IndyMac ABS, Inc.
Mortgage Pass-Through Certificates
Series 199_-_
STATE OF )
) ss.:
COUNTY OF )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is an officer of , the
--------------------
proposed Transferee of an Ownership Interest in a Class A-R Certificate (the
"Certificate") issued pursuant to the Pooling and Servicing Agreement, (the
"Agreement"), relating to the above-referenced Series, by and among IndyMac
ABS, Inc., as depositor (the "Depositor"), ___________________________, as
seller and master servicer and ___________________, as Trustee. Capitalized
terms used, but not defined herein or in Exhibit 1 hereto, shall have the
meanings ascribed to such terms in the Agreement. The Transferee has
authorized the undersigned to make this affidavit on behalf of the
Transferee.
2. The Transferee is, as of the date hereof, and will be, as of the
date of the Transfer, a Permitted Transferee. The Transferee is acquiring
its Ownership Interest in the Certificate either (i) for its own account or
(ii) as nominee, trustee or agent for another Person and has attached hereto
an affidavit from such Person in substantially the same form as this
affidavit. The Transferee has no knowledge that any such affidavit is false.
3. The Transferee has been advised of, and understands that (i) a tax
will be imposed on Transfers of the Certificate to Persons that are not
Permitted Transferees; (ii) such tax will be imposed on the transferor, or,
if such Transfer is through an agent (which includes a broker, nominee or
middleman) for a Person that is not a Permitted Transferee, on the agent; and
(iii) the Person otherwise liable for the tax shall be relieved of liability
for the tax if the subsequent Transferee furnished to such Person an
affidavit that such subsequent Transferee is a Permitted Transferee and, at
the time of Transfer, such Person does not have actual knowledge that the
affidavit is false.
4. The Transferee has been advised of, and understands that a tax will
be imposed on a "pass-through entity" holding the Certificate if at any time
during the taxable year of the pass-through entity a Person that is not a
Permitted Transferee is the record holder of an interest in such entity. The
Transferee understands that such tax will not be imposed for any period with
respect to which the record holder furnishes to the pass-through entity an
affidavit that such record holder is a Permitted Transferee and the
pass-through entity does not have actual knowledge that such affidavit is
false. (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 and, except as may be
provided in Treasury Regulations, persons holding interests in pass-through
entities as a nominee for another Person.)
5. The Transferee has reviewed the provisions of Section 5.02(c) of
the Agreement (attached hereto as Exhibit 2 and incorporated herein by
reference) and understands the legal consequences of the acquisition of an
Ownership Interest in the Certificate including, without limitation, the
restrictions on subsequent Transfers and the provisions regarding voiding the
Transfer and mandatory sales. The Transferee expressly agrees to be bound by
and to abide by the provisions of Section 5.02(c) of the Agreement and the
restrictions noted on the face of the Certificate. The Transferee
understands and agrees that any breach of any of the representations included
herein shall render the Transfer to the Transferee contemplated hereby null
and void.
6. The Transferee agrees to require a Transfer Affidavit from any
Person to whom the Transferee attempts to Transfer its Ownership Interest in
the Certificate, and in connection with any Transfer by a Person for whom the
Transferee is acting as nominee, trustee or agent, and the Transferee will
not Transfer its Ownership Interest or cause any Ownership Interest to be
Transferred to any Person that the Transferee knows is not a Permitted
Transferee. In connection with any such Transfer by the Transferee, the
Transferee agrees to deliver to the Trustee a certificate substantially in
the form set forth as Exhibit J to the Agreement (a "Transferor Certificate")
to the effect that such Transferee has no actual knowledge that the Person to
which the Transfer is to be made is not a Permitted Transferee.
7. The Transferee does not have the intention to impede the assessment
or collection of any tax legally required to be paid with respect to the
Certificate.
8. The Transferee's taxpayer identification number is .
------------
9. The Transferee is a U.S. Person as defined in Code Section
7701(a)(30).
10. The Transferee is aware that the Certificate may be a "noneconomic
residual interest" within the meaning of proposed 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.
11. The Transferee is not an employee benefit plan that is subject to
ERISA or a plan that is subject to Section 4975 of the Code, and the
Transferee is not acting on behalf of such a plan.
* * *
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by
its duly authorized officer and its corporate seal to be hereunto affixed,
duly attested, this day of , 19 .
----- ------------------ --
_________________________________
PRINT NAME OF TRANSFEREE
By:
------------------------------
Name:
Title:
(Corporate Seal)
ATTEST:
- ---------------------------
(Assistant) Secretary
Personally appeared before me the above-named , known or
-------------
proved to me to be the same person who executed the foregoing instrument and
to be the of the Transferee, and acknowledged
--------------------
that he executed the same as his free act and deed and the free act and deed
of the Transferee.
Subscribed and sworn before me this day of , 19 .
----- --------- --
------------------------------
NOTARY PUBLIC
My Commission expires the ____ day
of ________________, 19__.
EXHIBIT 1
to EXHIBIT I
Certain Definitions
-------------------
"Ownership Interest": As to any Certificate, any ownership 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.
"Permitted Transferee": Any Person other than (i) the United States,
any State or political subdivision thereof, or any agency or instrumentality
of any of the foregoing, (ii) a foreign government, International
Organization or any agency or instrumentality of either of the foregoing,
(iii) an organization (except certain farmers' cooperatives described in Code
Section 521) which is exempt from tax imposed by Chapter 1 of the Code
(including the tax imposed by Code Section 511 on unrelated business taxable
income) on any excess inclusions (as defined in Code Section 860E(c)(1)) with
respect to any Class A-R Certificate, (iv) rural electric and telephone
cooperatives described in Code Section 1381(a)(2)(c), (v) a Person that is
not 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, and (vi)
any other Person so designated by the Trustee based upon an Opinion of
Counsel that the Transfer of an Ownership Interest in a Class A-R Certificate
to such Person may cause the Trust Fund to fail to qualify as a REMIC at any
time that certain Certificates are Outstanding. The terms "United States,"
"State" and "International Organization" shall have the meanings set forth in
Code Section 7701 or successor provisions. A corporation will not be treated
as an instrumentality of the United States or of any State or political
subdivision thereof if all of its activities are subject to tax, and, with
the exception of the FHLMC, a majority of its board of directors is not
selected by such governmental unit.
"Person": Any individual, corporation, partnership, joint venture,
bank, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political
subdivision thereof.
"Transfer": Any direct or indirect transfer or sale of any Ownership
Interest in a Certificate, including the acquisition of a Certificate by the
Depositor.
"Transferee": Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.
EXHIBIT 2
to EXHIBIT I
Section 5.02(c) of the Agreement
--------------------------------
(c) Each Person who has or who acquires any Ownership Interest in
a Class A-R Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following
provisions, and the rights of each Person acquiring any Ownership Interest in
a Class A-R Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Class A-R Certificate shall be a Permitted Transferee and shall promptly
notify the Trustee of any change or impending change in its status as a
Permitted Transferee.
(ii) No Ownership Interest in a Class A-R Certificate may be
registered on the Closing Date or thereafter transferred, and the
Trustee shall not register the Transfer of any Class A-R Certificate
unless, in addition to the certificates required to be delivered to the
Trustee under subparagraph (b) above, the Trustee shall have been
furnished with an affidavit (a "Transfer Affidavit") of the initial
owner or the proposed transferee in the form attached hereto as Exhibit
I.
(iii) Each Person holding or acquiring any Ownership Interest in a
Class A-R Certificate shall agree (A) to obtain a Transfer Affidavit
from any other Person to whom such Person attempts to Transfer its
Ownership Interest in a Class A-R Certificate, (B) to obtain a Transfer
Affidavit from any Person for whom such Person is acting as nominee,
trustee or agent in connection with any Transfer of a Class A-R
Certificate and (C) not to Transfer its Ownership Interest in a Class A-
R Certificate or to cause the Transfer of an Ownership Interest in a
Class A-R Certificate to any other Person if it has actual knowledge
that such Person is not a Permitted Transferee.
(iv) Any attempted or purported Transfer of any Ownership
Interest in a Class A-R Certificate in violation of the provisions of
this Section 5.02(c) shall be absolutely null and void and shall vest no
rights in the purported Transferee. If any purported transferee shall
become a Holder of a Class A-R Certificate in violation of the
provisions of this Section 5.02(c), then the last preceding Permitted
Transferee shall be restored to all rights as Holder thereof retroactive
to the date of registration of Transfer of such Class A-R Certificate.
The Trustee shall be under no liability to any Person for any registration
of Transfer of a Class A-R Certificate that is in fact not permitted by
Section 5.02(b) and this Section 5.02(c) or for making any payments due on
such Certificate to the Holder thereof or taking any other action with
respect to such Holder under the provisions of this Agreement so long as
the Transfer was registered after receipt of the related Transfer
Affidavit, Transferor Certificate and either the Rule 144A Letter or the
Investment Letter. The Trustee shall be entitled but not obligated to
recover from any Holder of a Class A-R Certificate that was in fact not a
Permitted Transferee at the time it became a Holder or, at such subsequent
time as it became other than a Permitted Transferee, all payments made on
such Class A-R Certificate at and after either such time. Any such
payments so recovered by the Trustee shall be paid and delivered by the
Trustee to the last preceding Permitted Transferee of such Certificate.
(v) The Depositor shall use its best efforts to make available,
upon receipt of written request from the Trustee, all information
necessary to compute any tax imposed under Section 860E(e) of the Code
as a result of a Transfer of an Ownership Interest in a Class A-R
Certificate to any Holder who is not a Permitted Transferee.
EXHIBIT J
FORM OF TRANSFEROR CERTIFICATION
_____________________
Date
IndyMac ABS, Inc.
155 North Lake Avenue
Pasadena, California 91101
Attention: _______________
(Trustee)
_________________________
_________________________
Attention: ____________________________
_______________
Re: IndyMac ABS, Inc. Mortgage Pass-Through Certificates,
Series 199 -_, Class ,
-----------------------------------------------------
Ladies and Gentlemen:
In connection with our disposition of the above Certificates we
certify that (a) we understand that the Certificates have not been registered
under the Securities Act of 1933, as amended (the "Act"), and are being
disposed by us in a transaction that is exempt from the registration
requirements of the Act, (b) we have not offered or sold any Certificates to,
or solicited offers to buy any Certificates from, any person, or otherwise
approached or negotiated with any person with respect thereto, in a manner
that would be deemed, or taken any other action which would result in, a
violation of Section 5 of the Act and (c) to the extent we are disposing of a
Class A-R Certificate, we have no knowledge the Transferee is not a Permitted
Transferee.
Very truly yours,
__________________________
Print Name of Transferor
By:
--------------------------
Authorized Officer
EXHIBIT K
FORM OF INVESTMENT LETTER (NON-RULE 144A)
___________________________
Date
IndyMac ABS, Inc.
155 North Lake Avenue
Pasadena, California 91101
Attention: ________________
(Trustee)
_________________________
_________________________
Attention: _______________________________
_________________
Re: IndyMac ABS, Inc. Mortgage Pass-Through Certificates,
Series 199 -_, Class __
-----------------------------------------------------
Ladies and Gentlemen:
In connection with our acquisition of the above Certificates we
certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is
exempt from the registration requirements of the Act and any such laws, (b)
we are an "accredited investor," as defined in Regulation D under the Act,
and have such knowledge and experience in financial and business matters that
we are capable of evaluating the merits and risks of investments in the
Certificates, (c) we have had the opportunity to ask questions of and receive
answers from the Depositor concerning the purchase of the Certificates and
all matters relating thereto or any additional information deemed necessary
to our decision to purchase the Certificates, (d) we are not an employee
benefit plan that is subject to the Employee Retirement Income Security Act
of 1974, as amended, or a plan or arrangement that is subject to Section 4975
of the Internal Revenue Code of 1986, as amended, nor are we acting on behalf
of any such plan or arrangement, nor are we using the assets of any such plan
or arrangement to effect such acquisition, (e) we are acquiring the
Certificates for investment for our own account and not with a view to any
distribution of such Certificates (but without prejudice to our right at all
times to sell or otherwise dispose of the Certificates in accordance with
clause (g) below), (f) we have not offered or sold any Certificates to, or
solicited offers to buy any Certificates from, any person, or otherwise
approached or negotiated with any person with respect thereto, or taken any
other action which would result in a violation of Section 5 of the Act, and
(g) we will not sell, transfer or otherwise dispose of any Certificates
unless (1) such sale, transfer or other disposition is made pursuant to an
effective registration statement under the Act or is exempt from such
registration requirements, and if requested, we will at our expense provide
an opinion of counsel satisfactory to the addressees of this Certificate that
such sale, transfer or other disposition may be made pursuant to an exemption
from the Act, (2) the purchaser or transferee of such Certificate has
executed and delivered to you a certificate to substantially the same effect
as this certificate, and (3) the purchaser or transferee has otherwise
complied with any conditions for transfer set forth in the Pooling and
Servicing Agreement.
Very truly yours,
______________________________
Print Name of Transferee
By:
--------------------------
Authorized Officer
EXHIBIT L
FORM OF RULE 144A LETTER
________________________
Date
IndyMac ABS, Inc.
155 North Lake Avenue
Pasadena, California 91101
Attention: ________________
(Trustee)
_________________________
_________________________
Attention: _______________________________
____________
Re: IndyMac ABS, Inc. Mortgage Pass-Through Certificates,
Series 199 -_, Class __
-----------------------------------------------------
Ladies and Gentlemen:
In connection with our acquisition of the above Certificates we
certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is
exempt from the registration requirements of the Act and any such laws, (b)
we have such knowledge and experience in financial and business matters that
we are capable of evaluating the merits and risks of investments in the
Certificates, (c) we have had the opportunity to ask questions of and receive
answers from the Depositor concerning the purchase of the Certificates and
all matters relating thereto or any additional information deemed necessary
to our decision to purchase the Certificates, (d) we are not an employee
benefit plan that is subject to the Employee Retirement Income Security Act
of 1974, as amended, or a plan or arrangement that is subject to Section 4975
of the Internal Revenue Code of 1986, as amended, nor are we acting on behalf
of any such plan or arrangement, nor are we using the assets of any such plan
or arrangement to effect such acquisition, (e) we have not, nor has anyone
acting on our behalf offered, transferred, pledged, sold or otherwise
disposed of the Certificates, any interest in the Certificates or any other
similar security to, or solicited any offer to buy or accept a transfer,
pledge or other disposition of the Certificates, any interest in the
Certificates or any other similar security from, or otherwise approached or
negotiated with respect to the Certificates, any interest in the Certificates
or any other similar security with, any person in any manner, or made any
general solicitation by means of general advertising or in any other manner,
or taken any other action, that would constitute a distribution of the
Certificates under the Securities Act or that would render the disposition of
the Certificates a violation of Section 5 of the Securities Act or require
registration pursuant thereto, nor will act, nor has authorized or will
authorize any person to act, in such manner with respect to the Certificates,
(f) we are a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act and have completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. We are
aware that the sale to us is being made in reliance on Rule 144A. We are
acquiring the Certificates for our own account or for resale pursuant to Rule
144A and further, understand that such Certificates may be resold, pledged or
transferred only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the account of
a qualified institutional buyer to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A, or (ii) pursuant
to another exemption from registration under the Securities Act.
ANNEX 1 TO EXHIBIT L
--------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
(For Transferees Other Than Registered Investment Companies)
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under
the Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer
owned and/or invested on a discretionary basis either at least $100,000 in
securities or, if Buyer is a dealer, Buyer must own and/or invest on a
discretionary basis at least $10,000,000 in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule 144A
and (ii) the Buyer satisfies the criteria in the category marked below.
___ Corporation, etc. The Buyer is a corporation (other than a
-----------------
bank, savings and loan association or similar institution), Massachusetts or
similar business trust, partnership, or charitable organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.
___ Bank. The Buyer (a) is a national bank or banking
----
institution organized under the laws of any State, territory or the District
of Columbia, the business of which is substantially confined to banking and
is supervised by the State or territorial banking commission or similar
official or is a foreign bank or equivalent institution, and (b) has an
audited net worth of at least $25,000,000 as demonstrated in its latest
annual financial statements, a copy of which is attached hereto.
----------------------------------
___ Savings and Loan. The Buyer (a) is a savings and loan
----------------
association, building and loan association, cooperative bank, homestead
association or similar institution, which is supervised and examined by a
State or Federal authority having supervision over any such institutions or
is a foreign savings and loan association or equivalent institution and (b)
has an audited net worth of at least $25,000,000 as demonstrated in its
latest annual financial statements, a copy of which is attached hereto.
----------------------------------
___ Broker-dealer. The Buyer is a dealer registered pursuant
-------------
to Section 15 of the Securities Exchange Act of 1934.
___ Insurance Company. The Buyer is an insurance company whose
-----------------
primary and predominant business activity is the writing of insurance or the
reinsuring of risks underwritten by insurance companies and which is subject
to supervision by the insurance commissioner or a similar official or agency
of a State, territory or the District of Columbia.
___ State or Local Plan. The Buyer is a plan established and
-------------------
maintained by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the benefit
of its employees.
___ ERISA Plan. The Buyer is an employee benefit plan within
----------
the meaning of Title I of the Employee Retirement Income Security Act of
1974.
___ Investment Advisor. The Buyer is an investment advisor
------------------
registered under the Investment Advisors Act of 1940.
___ Small Business Investment Company. 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. Buyer is a business
----------------------------
development company as defined in Section 202(a)(22) of the Investment
Advisors Act of 1940.
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) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iv) bank deposit notes and certificates of deposit,
(v) loan participations, (vi) repurchase agreements, (vii) securities owned
but subject to a repurchase agreement and (viii) currency, interest rate and
commodity swaps.
4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Buyer, the Buyer used
the cost of such securities to the Buyer and did not include any of the
securities referred to in the preceding paragraph, except (i) where the Buyer
reports its securities holdings in its financial statements on the basis of
their market value, and (ii) no current information with respect to the cost
of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market. Further, in
determining such aggregate amount, the Buyer may have included securities
owned by subsidiaries of the Buyer, but only if such subsidiaries are
consolidated with the Buyer in its financial statements prepared in
accordance with generally accepted accounting principles and if the
investments of such subsidiaries are managed under the Buyer's direction.
However, such securities were not included if the Buyer is a majority-owned,
consolidated subsidiary of another enterprise and the Buyer is not itself a
reporting company under the Securities Exchange Act of 1934, as amended.
5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the
Certificates are relying and will continue to rely on the statements made
herein because one or more sales to the Buyer may be in reliance on Rule
144A.
6. Until the date of purchase of the Rule 144A Securities, the
Buyer will notify each of the parties to which this certification is made of
any changes in the information and conclusions herein. Until such notice is
given, the Buyer's purchase of the Certificates will constitute a
reaffirmation of this certification as of the date of such purchase. In
addition, if the Buyer is a bank or savings and loan is provided above, the
Buyer agrees that it will furnish to such parties updated annual financial
statements promptly after they become available.
------------------------------
Print Name of Buyer
By:
---------------------------
Name:
Title:
Date:
-------------------------
ANNEX 2 TO EXHIBIT L
--------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
---------------------------------------------------------
(For Transferees That are Registered Investment Companies)
The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under
the Securities Act of 1933, as amended ("Rule 144A") because Buyer is part of
a Family of Investment Companies (as defined below), is such an officer of
the Adviser.
2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i) the
Buyer is an investment company registered under the Investment Company Act of
1940, as amended and (ii) as marked below, the Buyer alone, or the Buyer's
Family of Investment Companies, owned at least $100,000,000 in securities
(other than the excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year. For purposes of determining the amount of
securities owned by the Buyer or the Buyer's Family of Investment Companies,
the cost of such securities was used, except (i) where the Buyer or the
Buyer's Family of Investment Companies reports its securities holdings in its
financial statements on the basis of their market value, and (ii) no current
information with respect to the cost of those securities has been published.
If clause (ii) in the preceding sentence applies, the securities may be
valued at market.
___ The Buyer owned $ in securities (other than the
------------
excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule
144A).
___ The Buyer is part of a Family of Investment Companies which
owned in the aggregate $ in securities (other than
---------
the excluded securities referred to below) as of the end of the Buyer's most
recent fiscal year (such amount being calculated in accordance with Rule
144A).
3. The term "Family of Investment Companies" as used herein
------------------------------
means two or more registered investment companies (or series thereof) that
have the same investment adviser or investment advisers that are affiliated
(by virtue of being majority owned subsidiaries of the same parent or because
one investment adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i)
----------
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) securities issued or guaranteed
by the U.S. or any instrumentality thereof, (iii) bank deposit notes and
certificates of deposit, (iv) loan participations, (v) repurchase agreements,
(vi) securities owned but subject to a repurchase agreement and (vii)
currency, interest rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and under-stands that the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on
Rule 144A. In addition, the Buyer will only purchase for the Buyer's own
account.
6. Until the date of purchase of the Certificates, the undersigned
will notify the parties listed in the Rule 144A Transferee Certificate to
which this certification relates of any changes in the information and
conclusions herein. Until such notice is given, the Buyer's purchase of the
Certificates will constitute a reaffirmation of this certification by the
undersigned as of the date of such purchase.
------------------------------
Print Name of Buyer or Adviser
By:
---------------------------
Name:
Title:
IF AN ADVISER:
------------------------------
Print Name of Buyer
Date:
-------------------------
EXHIBIT M
REQUEST FOR RELEASE OF DOCUMENTS
(for Trustee)
IndyMac ABS, Inc.
Mortgage Pass-Through Certificates
Series 199_-_
Loan Information
- ----------------
Name of Mortgagor:
------------------------------
Servicer
Loan No.:
------------------------------
Trustee
- -------
Name:
------------------------------
Address:
------------------------------
------------------------------
Trustee
Mortgage File No.:
------------------------------
The undersigned Master Servicer hereby acknowledges that it has received
from _______________________, as Trustee (the "Trustee") for the Holders of
Mortgage Pass-Through Certificates, of the above-referenced Series, the
documents referred to below (the "Documents"). All capitalized terms not
otherwise defined in this Request for Release shall have the meanings given
them in the Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") relating to the above-referenced Series among the Trustee,
__________________________, as Seller and Master Servicer and IndyMac ABS,
Inc., as Depositor.
( ) Mortgage Note dated , 19 , in the original principal sum
------------ --
of $ , made by . payable to, or endorsed to the
---------- ------------------
order of, the Trustee.
( ) Mortgage recorded on as instrument no.
----------------- --------
in the County Recorder's Office of the County of
- --------------------
State of in book/reel/docket of official
--------------- ----------------
records at page/image .
----------------
( ) Deed of Trust recorded on __________________ as instrument no. ______
in the County Recorder's Office of the County of ______________________,
State of in book/reel/docket of official
--------------- ---------------
records at page/image .
----------------
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
as instrument no. in the County Recorder's
- ------------- ------------
Office of the County of , State of
----------- ------------
in book/reel/docket of official records
---------------
at page/image .
---------------
( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
( )
----------------------------------------------
( )
----------------------------------------------
( )
----------------------------------------------
( )
----------------------------------------------
The undersigned Master Servicer hereby acknowledges and agrees as
follows:
(1) The Master Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Trustee, solely for the
purposes provided in the Agreement.
(2) The Master Servicer shall not cause or knowingly permit the
Documents to become subject to, or encumbered by, any claim, liens,
security interest, charges, writs of attachment or other impositions nor
shall the Servicer assert or seek to assert any claims or rights of
setoff to or against the Documents or any proceeds thereof.
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee when the need
therefor no longer exists, unless the Mortgage Loan relating to the
Documents has been liquidated and the proceeds thereof have been
remitted to the Certificate Account and except as expressly provided in
the Agreement.
(4) The Documents and any proceeds thereof, including any proceeds
of proceeds, coming into the possession or control of the Master
Servicer shall at all times be earmarked for the account of the Trustee,
and the Master Servicer shall keep the Documents and any proceeds
separate and distinct from all other property in the Master Servicer's
possession, custody or control.
(MASTER SERVICER)
By
------------------------
Its
------------------------
Date: , 19
----------------- --
EXHIBIT N
REQUEST FOR RELEASE OF DOCUMENTS
To: ____________________ Attn: _______________
___________
Re: The Pooling & Servicing Agreement dated ___________ __, 199_ among
_______________________, as Seller and as Master Servicer, IndyMac
ABS, Inc. and ____________________ as Trustee
----------------------------
------------------------------------------------------------------
Ladies and Gentlemen:
In connection with the administration of the Mortgage Loans held by you
as Trustee for IndyMac ABS, Inc., we request the release of the Mortgage Loan
File for the Mortgage Loan(s) described below, for the reason indicated.
FT Account#: Pool #:
Mortgagor's Name, Address and Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
1. Mortgage Loan paid in full (_______________________, Inc. hereby
certifies that all amounts have been received.)
2. Mortgage Loan Liquidated (___________________________ hereby
certifies that all proceeds of foreclosure, insurance, or other
liquidation have been finally received.)
3. Mortgage Loan in Foreclosure.
4. Other (explain):
If item 1 or 2 above is checked, and if all or part of the Mortgage File
was previously released to us, please release to us our previous receipt on
file with you, as well as any additional documents in your possession
relating to the above-specified Mortgage Loan. If item 3 or 4 is checked,
upon return of all of the above documents to you as Trustee, please
acknowledge your receipt by signing in the space indicated below, and
returning this form.
____________________________
____________________________
____________________________
By:
--------------------------
Name:
------------------------
Title:
------------------------
Date:
------------------------
TRUSTEE CONSENT TO RELEASE AND
ACKNOWLEDGEMENT OF RECEIPT
By:
--------------------------
Name:
------------------------
Title:
------------------------
Date:
------------------------
INDYMAC ABS, INC.
as Depositor,
[INDYMAC, INC.,]
as Seller and Servicer,
and
[________________]
as Trustee
----------------------------
POOLING AND SERVICING AGREEMENT
Dated as of [______, 199_]
----------------------------
[______________]
IndyMac Manufactured Housing Contract
Pass-Through Certificates,
Series 1998-_
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions......................................................1
ARTICLE TWO
CONVEYANCE OF CONTRACTS; CUSTODY OF CONTRACTS
Section 2.01. Conveyance of Contracts and Other Rights....................... 28
Section 2.02. Filing; Name Change or Relocation.............................. 29
Section 2.03. Acceptance by Trustee.......................................... 31
Section 2.04. Conditions to Closing.......................................... 31
Section 2.05. Execution and Authentication of Certificates................... 31
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties as to the Seller.................32
Section 3.02. Representations and Warranties as to Each Contract..............33
Section 3.03. Representations and Warranties as to the Contracts..............36
Section 3.04. Representations and Warranties as to the Contract Files........ 37
Section 3.05. Repurchase of Contracts for Breach............................. 38
Section 3.06. Representation and Warranty as to the Depositor................ 39
ARTICLE FOUR
THE CERTIFICATES
Section 4.01. The Certificates................................................40
Section 4.02. Registration of Transfer and Exchange of Certificates...........40
Section 4.03. Book-Entry Certificates.........................................42
Section 4.04. Mutilated, Destroyed, Lost or Stolen Certificates...............43
Section 4.05. Persons Deemed Owners...........................................44
Section 4.06. Appointment of Paying Agent.....................................44
Section 4.07. Access to List of Certificateholder Names and Addresses.........44
Section 4.08. Authenticating Agents...........................................45
Section 4.09. The Class [__] Certificates.....................................45
ARTICLE FIVE
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 5.01. Responsibility for Contract Administration and Servicing....... 48
Section 5.02. Standard of Care............................................... 48
Section 5.03. Subservicing................................................... 48
Section 5.04. Records........................................................ 50
Section 5.05. Inspection..................................................... 50
Section 5.06. Payment of Taxes............................................... 50
Section 5.07. Enforcement.................................................... 51
Section 5.08. Hazard Insurance Policies...................................... 51
Section 5.09. Hazard Insurance Policy Collections; Consent to Manufactured
Home Transfers; Assumption Agreements.......................... 52
Section 5.10. Realization upon Defaulted Contracts........................... 53
Section 5.11. Costs and Expenses............................................. 53
Section 5.12. Trustee to Cooperate........................................... 54
Section 5.13. Servicing and Other Compensation............................... 54
Section 5.14. REO Disposition................................................ 54
ARTICLE SIX
DISTRIBUTIONS
Section 6.01. Monthly Payments............................................... 56
Section 6.02. Withdrawals from the Collection Account........................ 59
Section 6.03. Advances....................................................... 60
Section 6.04. Establishment of and Deposits in the Collection Account and
the Certificate Account........................................ 60
Section 6.05. Transfer of Certificate Account................................ 62
Section 6.06. Transfer of Collection Account................................. 62
ARTICLE SEVEN
REPORTS
Section 7.01. Monthly Reports................................................ 63
Section 7.02. Servicer's Certificate......................................... 63
Section 7.03. Other Data..................................................... 63
Section 7.04. Annual Statement as to Compliance.............................. 63
Section 7.05. Annual Independent Public Accountants' Servicing Report........ 63
Section 7.06. Statements to Certificateholders............................... 64
Section 7.07. Other Reports.................................................. 65
ARTICLE EIGHT
INDEMNITIES; THE DEPOSITOR AND THE SERVICER
Section 8.01. Liabilities to Obligors........................................ 66
Section 8.02. Tax Indemnification............................................ 66
Section 8.03. Servicer's Indemnities......................................... 66
Section 8.04. Operation of Indemnities....................................... 66
Section 8.05. Merger or Consolidation of the Depositor, the Seller or
the Servicer................................................... 66
Section 8.06. Limitation on Liability of the Depositor and Others............ 67
Section 8.07. Assignment by Servicer......................................... 67
Section 8.08. Successor to the Servicer...................................... 68
ARTICLE NINE
DEFAULT
Section 9.01. Events of Default.............................................. 70
Section 9.02. Waiver of Defaults............................................. 71
Section 9.03. Trustee to Act; Appointment of Successor....................... 71
Section 9.04. Notification to Certificateholders............................. 71
Section 9.05. Effect of Transfer............................................. 71
ARTICLE TEN
THE TRUSTEE
Section 10.01. Duties of Trustee............................................. 73
Section 10.02. Certain Matters Affecting the Trustee......................... 74
Section 10.03. Trustee Not Liable for Certificates or Contracts.............. 75
Section 10.04. Trustee May Own Certificates.................................. 75
Section 10.05. Servicer to Pay Fees and Expenses of Trustee.................. 75
Section 10.06. Eligibility Requirements for Trustee.......................... 76
Section 10.07. Resignation and Removal of the Trustee........................ 76
Section 10.08. Successor Trustee............................................. 77
Section 10.09. Merger or Consolidation of Trustee............................ 77
Section 10.10. Appointment of Co-Trustee or Separate Trustee................. 78
Section 10.11. Appointment of Office or Agency............................... 79
Section 10.12. REMIC Administration.......................................... 79
Section 10.13. Tax Matters................................................... 83
ARTICLE ELEVEN
TERMINATION
Section 11.01. Termination................................................... 87
Section 11.02. Auction Call.................................................. 89
ARTICLE TWELVE
MISCELLANEOUS PROVISIONS
Section 12.01. Severability of Provisions.................................... 90
Section 12.02. Limitation on Rights of Certificateholders.................... 90
Section 12.03. Acts of Certificateholders.................................... 91
Section 12.04. Calculations.................................................. 91
Section 12.05. Amendment..................................................... 91
Section 12.06. Recordation of Agreement...................................... 93
Section 12.07. Certificates Nonassessable and Fully Paid..................... 93
Section 12.08. No Petition................................................... 93
Section 12.09. Governing Law................................................. 93
Section 12.10. Notices....................................................... 93
Section 12.11. Merger and Integration of Documents........................... 93
Section 12.12. Headings...................................................... 94
Section 12.13. Counterparts.................................................. 94
EXHIBITS
Exhibit A - Contract Schedule............................................... A-1
Exhibit B - Form of Face of Class A Certificates............................ B-1
Exhibit C - Form of Face of Class [__] Certificates......................... C-1
Exhibit D - Form of Reverse of Certificates................................. D-1
Exhibit E - Form of Face of Class [__] Certificates......................... E-1
Exhibit F - Form of Face of Class [__] Certificates......................... F-1
Exhibit G - Form of Face of Class [__] Certificates......................... G-1
Exhibit H - [Reserved]...................................................... H-1
Exhibit I - Form of Certificate Assignment.................................. I-1
Exhibit J - Form of Servicer's Certificate.................................. J-1
Exhibit K - Form of Transfer Affidavit...................................... K-1
Exhibit L - Form of Investment Letter of Holder of Class [__] Certificates.. L-1
This Pooling and Servicing Agreement, dated as of [______, 199_], is among
Indymac ABS, Inc., as depositor (the "Depositor"), [IndyMac, Inc.], as seller
and servicer (respectively, the "Seller" and the "Servicer"), and
[_____________], as trustee (the "Trustee").
WITNESSETH:
In consideration of the premises and the mutual agreements hereinafter set
forth, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. Whenever used herein, unless the context
otherwise requires, the following words and phrases shall have the following
meanings:
"Accelerated Principal Distribution Amount" means, with respect to any
Distribution Date, the positive difference, if any, between the Target
Overcollateralization Amount and the Current Overcollateralization Amount.
"Adjusted Certificate Principal Balance" means, with respect to any Class
of Subordinate Certificates and any Distribution Date, the Certificate Principal
Balance of the related Class after giving effect to the distributions made on
the immediately preceding Distribution Date, less any Liquidation Loss Amount
allocated to such Class on such preceding Distribution Date.
"Advance" means, with respect to any Due Period and Contract that was
Outstanding as of the first day of such Due Period, the amount, if any, of that
portion of the related Monthly Payment comprising interest accruing with respect
to such Contract that is due in such Due Period that was not timely paid.
"Advance Reimbursement Amount" means any amount received or deemed to be
received by the Servicer pursuant to Section 6.03(c) in reimbursement of an
Advance made out of its own funds.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" or "controlled"
have meanings correlative to the foregoing.
"Agreement" means this Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
"Applicants" shall have the meaning specified in Section 4.07.
"Appraised Value" means, with respect to any Manufactured Home, the value
of such Manufactured Home as determined by a professional appraiser or an
employee of the Servicer who, as part of such employment, regularly appraises
manufactured housing units.
"APR" of a Contract means the annual interest rate specified in such
Contract.
"Authenticating Agent" means an authenticating agent appointed pursuant to
Section 4.08.
"Available Distribution Amount" means, with respect to any Distribution
Date, an amount equal to (i) the sum of (a) Monthly Payments due during the
related Due Period to the extent such payments were made by the related Obligor
or advanced by the Servicer and (b) unscheduled payments received with respect
to the Contracts during the related Prepayment Period, including principal
prepayments, Net Liquidation Proceeds and net insurance proceeds, reduced by
(ii) the sum of (a) aggregate Repossession Profits and (b) amounts permitted to
be withdrawn by the Servicer from the Collection Account pursuant to Section
6.02(a)(i) through (a)(viii).
"Average Sixty-Day Delinquency Ratio" means, with respect to any
Distribution Date, the average of the Sixty-Day Delinquency Ratios for such
Distribution Date and the two immediately preceding Distribution Dates.
"Average Thirty-Day Delinquency Ratio" means, with respect to any
Distribution Date, the average of the Thirty-Day Delinquency Ratios for such
Distribution Date and the two immediately preceding Distribution Dates.
"Benefit Plan" means an employee benefit plan subject to Section 406 of
ERISA or Section 4975 of the Code.
"Book-Entry Certificate" means any Certificate registered in the name of
the Depository or its nominee ownership of which is reflected on the books of
the Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
"Business Day" means any day other than (i) a Saturday or Sunday or (ii) a
day on which banking institutions in the States of New York or [________] are
authorized or obligated by law or executive order to be closed.
"Carryover Interest Distribution Amount" means, with respect to a Class of
Certificates and a Distribution Date, the sum of (i) any Interest Distribution
Amount for such Class distributable on the preceding Distribution Date but not
distributed plus, to the extent legally permissible, interest accrued on any
such amount during the related Interest Accrual Period at the related
Pass-Through Rate and (ii) any amounts distributable under clause (i) above or
this clause (ii) on the preceding Distribution Date but not distributed plus, to
the extent legally permissible, interest accrued on any such amount during the
related Interest Accrual Period at the related Pass-Through Rate.
"Certificate Account" means the custodial account or accounts created and
maintained pursuant to Section 6.04.
"Certificate Owner" means, with respect to a Book-Entry Certificate, the
person who is the beneficial owner of the related Certificate.
"Certificate Principal Balance" of each Class of Certificates means its
Initial Certificate Principal Balance reduced by all distributions in respect of
principal on such Class.
"Certificate Register" and "Certificate Registrar" mean the register
maintained and the registrar (or any successor thereto) appointed pursuant to
Section 4.02.
"Certificateholder" or "Holder" means the Person in whose name a
Certificate is regis- tered in the Certificate Register, except that, solely for
the purposes of giving any consent, notice, waiver, request or demand pursuant
to this Agreement, any Certificate registered in the name of the Depositor, the
Servicer or any Affiliate of the Servicer and any Certificate in respect of
which the Depositor, the Servicer or any Affiliate thereof is the Certificate
Owner (as shall be certified to the Trustee upon its request) shall be deemed
not to be outstanding and the Percentage Interest and Fractional Interest
evidenced thereby shall not be taken into account in determining whether the
requisite amount of Percentage Interests or Fractional Interests necessary to
effect such consent, notice, waiver, request or demand has been obtained,
unless, in the case of (i) the Class A Certificates, all Class A Certificates
are held by such Persons, (ii) the Class [__] Certificates, all Class A
Certificates and Class [__] Certi- ficates are held by such Persons, (iii) the
Class [__] Certificates, all Class A Certificates, Class [__] Certificates and
Class [__] Certificates or (iv) the Class [__] Certificates, all Certificates
are held by such Persons, or, in each case, the Certificates of the related
Class or Classes have been fully paid.
"Certificates" means the Class A Certificates, the Class [__] Certificates,
the Class [__] Certificates and the Class [__] Certificates.
"Class" means all Certificates whose form is identical except for variation
in denomination, principal amount or owner or designation of class.
"Class A Certificate Principal Balance" means, at any time, the Class A
Initial Certificate Principal Balance minus the sum of all amounts previously
distributed to the Class A Certificateholders pursuant to Section 6.01(a)(v),
(a)(vi) and (a)(xvi).
"Class A Certificates" means any one of the Class [__], Class [__], Class
[__], Class [__], Class [__], Class [__] or Class [__] Certificates.
"Class A Distribution Amount" means, with respect to any Distribution Date,
the sum of the Class [__], Class [__], Class [__], Class [__], Class [__], Class
[__] and Class [__] Distribution Amounts.
"Class A Formula Principal Distribution Amount" means, (i) with respect to
any Distribution Date prior to the Cross-over Date, the Formula Principal
Distribution Amount, (ii) on any Distribution Date as to which the Principal
Distribution Tests are not met, the Formula Principal Distribution Amount, or
(iii) on any other Distribution Date, the Class A Percentage of the Formula
Principal Distribution Amount. For any Distribution Date, if the Class A Formula
Principal Distribution Amount exceeds the Class A Certificate Principal Balance
less the Class A Unpaid Certificate Principal Shortfall, then such amounts will
be allocated first to the Class [__] Formula Principal Distribution Amount, then
to the Class [__] Formula Principal Distribution Amount and finally to the Class
[__] Formula Principal Distribution Amount.
"Class A Initial Certificate Principal Balance" means [___________].
"Class A Interest Distribution Amount" means, with respect to any
Distribution Date, the sum of the Class [__], Class [__], Class [__], Class
[__], Class [__], Class [__] and Class [__] Interest Distribution Amounts.
"Class A Percentage" means, with respect to any Distribution Date, the
percentage equivalent of a fraction (not to exceed one), the numerator of which
is the Class A Certificate Principal Balance immediately prior to such
Distribution Date and the denominator of which is the sum of the Class A
Certificate Principal Balance, the Class [__] Adjusted Certificate Principal
Balance and the Class [__] Adjusted Certificate Principal Balance, each
immediately prior to such Distribution Date.
"Class A Unpaid Certificate Principal Shortfall" means, with respect to any
Distribution Date, the excess, if any, of all Formula Principal Distribution
Amounts distributable on the Class A Certificates over the actual amount
distributed to the Class A Certificates in respect of Formula Principal
Distribution Amounts.
"Class [__] Certificate" means the Certificate designated Class [__],
executed and authenticated as provided herein, substantially in the form set
forth in Exhibit F and H.
"Class [__] Certificate Principal Balance" means, at any time, the Class
[__] Initial Certificate Principal Balance minus the sum of all amounts
previously distributed to the Class [__] Certificateholders pursuant to Section
6.01(a)(xvi) and clause (A) of Section 6.01(a)(vi).
"Class [__] Distribution Amount" means, with respect to any Distribution
Date, the aggregate amount distributed to the Class [__] Certificateholders
pursuant to Section 6.01(a).
"Class [__] Initial Certificate Principal Balance" means [_______].
"Class [__] Pass-Through Rate" means [___]% per annum.
"Class [__] Certificate" means any one of the Certificates designated Class
[__], executed and authenticated as provided herein, substantially in the form
set forth in Exhibits B, D and I.
"Class [__] Certificate Principal Balance" means, at any time, the Class
[__] Initial Certificate Principal Balance minus the sum of all amounts
previously distributed to the Class [__] Certificateholders pursuant to Section
6.01(a)(v), (a)(xvi) and clause (B) of Section 6.01(a)(vi).
"Class [__] Distribution Amount" means, with respect to any Distribution
Date, the aggregate amount distributed to Class [__] Certificateholders on such
Distribution Date pursuant to Section 6.01(a).
"Class [__] Initial Certificate Principal Balance" means $[________].
"Class [__] Interest Distribution Amount" means, with respect to any
Distribution Date, an amount equal to interest accrued during the related
Interest Accrual Period at the Class [__] Pass-Through Rate on the Class [__]
Certificate Principal Balance as of the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, on the Class [__] Initial
Certificate Principal Balance).
"Class [__] Pass-Through Rate" means [____]% per annum.
"Class [__] Certificate" means any one of the Certificates designated as
Class [__], executed and authenticated as provided herein, substantially in the
form set forth in Exhibits B, D and I.
"Class [__] Certificate Principal Balance" means, at any time, the Class
[__] Initial Certificate Principal Balance minus the sum of all amounts
previously distributed to the Class [__] Certificateholders pursuant to Section
6.01(a)(v), (a)(xvi) and clause (C) of Section 6.01(a)(vi).
"Class [__] Distribution Amount" means, with respect to any Distribution
Date, the aggregate amount distributed to the Class [__] Certificateholders on
such Distribution Date pursuant to Section 6.01(a).
"Class [__] Initial Certificate Principal Balance" means $[_________].
"Class [__] Interest Distribution Amount" means, with respect to any
Distribution Date, an amount equal to interest accrued during the related
Interest Accrual Period at the Class [__] Pass-Through Rate on the Class [__]
Certificate Principal Balance as of the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, on the Class [__] Initial
Certificate Principal Balance).
"Class [__] Pass-Through Rate" means [____]% per annum.
"Class [__] Certificate" means any one of the Certificates designated Class
[__], executed and authenticated as provided herein, substantially in the form
set forth in Exhibits B, D and I.
"Class [__] Certificate Principal Balance" means, at any time, the Class
[__] Initial Certificate Principal Balance minus the sum of all amounts
previously distributed to the Class [__] Certificateholders pursuant to Section
6.01(a)(v), (a)(xvi) and clause (D) of Section 6.01(a)(vi).
"Class [__] Distribution Amount" means, with respect to any Distribution
Date, the aggregate amount distributed to the Class [__] Certificateholders on
such Distribution Date pursuant to Section 6.01(a).
"Class [__] Initial Certificate Principal Balance" means $[_________].
"Class [__] Interest Distribution Amount" means, with respect to any
Distribution Date, an amount equal to interest accrued during the related
Interest Accrual Period at the Class [__] Pass-Through Rate on the Class [__]
Certificate Principal Balance as of the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, on the Class [__] Initial
Certificate Principal Balance).
"Class [__] Pass-Through Rate" means [_____]% per annum.
"Class [__] Certificate" means any one of the Certificates designated Class
[__], executed and authenticated as provided herein, substantially in the form
set forth in Exhibits B, D and I.
"Class [__] Certificate Principal Balance" means, at any time, the Class
[__] Initial Certificate Principal Balance minus the sum of all amounts
previously distributed to the Class [__] Certificateholders pursuant to Section
6.01(a)(v), (a)(xvi) and clause (E) of Section 6.01(a)(vi).
"Class [__] Distribution Amount" means, with respect to any Distribution
Date, the aggregate amount distributed to the Class [__] Certificateholders on
such Distribution Date pursuant to Section 6.01(a).
"Class [__] Initial Certificate Principal Balance" means $[_____________]
"Class [__] Interest Distribution Amount" means, with respect to any
Distribution Date, an amount equal to interest accrued during the related
Interest Accrual Period at the Class [__] Pass-Through Rate on the Class [__]
Certificate Principal Balance as of the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, on the Class [__] Initial
Certificate Principal Balance).
"Class [__] Pass-Through Rate" means [_____]% per annum.
"Class [__] Certificate" means any one of the Certificates designated Class
[__], executed and authenticated as provided herein, substantially in the form
set forth in Exhibits B, D and I.
"Class [__] Certificate Principal Balance" means, at any time, the Class
[__] Initial Certificate Principal Balance minus the sum of all amounts
previously distributed to the Class [__] Certificateholders pursuant to Section
6.01(a)(v), (a)(xvi) and clause (F) of Section 6.01(a)(vi).
"Class [__] Distribution Amount" means, with respect to any Distribution
Date, the aggregate amount distributed to the Class [__] Certificateholders on
such Distribution Date pursuant to Section 6.01(a).
"Class [__] Initial Certificate Principal Balance" means $[_________].
"Class [__] Interest Distribution Amount" means, with respect to any
Distribution Date, an amount equal to interest accrued during the related
Interest Accrual Period at the Class [__] Pass-Through Rate on the Class [__]
Certificate Principal Balance as of the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, on the Class [__] Initial
Certificate Principal Balance).
"Class [__] Pass-Through Rate" means [_____]% per annum.
"Class [__] Certificate" means any one of the Certificates designated Class
[__], executed and authenticated as provided herein, substantially in the form
set forth in Exhibits B, D and I.
"Class [__] Certificate Principal Balance" means, at any time, the Class
[__] Initial Certificate Principal Balance minus the sum of all amounts
previously distributed to the Class [__] Certificateholders pursuant to Section
6.01(a)(v), (a)(xvi) and clause (G) of Section 6.01(a)(vi).
"Class [__] Distribution Amount" means, with respect to any Distribution
Date, the aggregate amount distributed to the Class [__] Certificateholders on
such Distribution Date pursuant to Section 6.01(a).
"Class [__] Initial Certificate Principal Balance" means $[________].
"Class [__] Interest Distribution Amount" means, with respect to any
Distribution Date, an amount equal to interest accrued during the related
Interest Accrual Period at the Class [__] Pass-Through Rate on the Class [__]
Certificate Principal Balance as of the immediately preceding Distribution Date
(or, in the case of the first Distribution Date, on the Class [__] Initial
Certificate Principal Balance).
"Class [__] Pass-Through Rate" means [_____]% per annum.
"Class [__] Adjusted Certificate Principal Balance" means, with respect to
a Distribution Date, the sum of the Class [__] Adjusted Certificate Principal
Balance and the Class [__] Adjusted Certificate Principal Balance.
"Class [__] Certificate" means any one of the Class [__] or Class [__]
Certificates.
"Class [__] Certificate Principal Balance" means, at any time, the sum of
the Class [__] Certificate Principal Balance and the Class [__] Certificate
Principal Balance.
"Class [__] Distribution Amount" means, with respect to any Distribution
Date, the aggregate amount distributed to Class [__] Certificateholders on such
Distribution Date pursuant to Section 6.01(a).
"Class [__] Initial Certificate Principal Balance" means $[______________]
"Class [__] Adjusted Certificate Principal Balance" means, with respect to
any Distribution Date, the Class [__] Certificate Principal Balance as of such
Distribution Date minus the Class [__] Liquidation Loss Amount, if any.
"Class [__] Certificate" means any one of the Certificates designated Class
[__], executed and authenticated as provided herein, substantially in the form
set forth in Exhibits C, D and I.
"Class [__] Certificate Principal Balance" means, at any time, the Class
[__] Initial Certificate Principal Balance minus the sum of all amounts
previously distributed to the Class [__] Certificateholders pursuant to Section
6.01(a)(xi) and (a)(xii).
"Class [__] Formula Principal Distribution Amount" means (i) with respect
to any Distribution Date as of which the Class A Certificate Principal Balance
and the Class [__] Certificate Principal Balance have not been reduced to zero
and prior to the Cross-over Date, zero, (ii) on any Distribution Date as to
which the Principal Distribution Tests are not met and the Class A Certificate
Principal Balance and the Class [__] Certificate Principal Balance have not been
reduced to zero, (iii) on any Distribution Date as to which the Principal
Distribution Tests are not met and the Class A Certificate Principal Balance and
the Class [__] Certificate Principal Balance have been reduced to zero, the
Formula Principal Distribution Amount, or (iv) on any other Distribution Date,
the Class [__] Percentage of the Formula Principal Distribution Amount. For any
Distribution Date, if the Class [__] Formula Principal Distribution Amount
exceeds the Class [__] Certificate Principal Balance less the Class [__] Unpaid
Certificate Principal Shortfall, then such amounts will be allocated to the
Class [__] Formula Principal Distribution Amount.
"Class [__] Initial Certificate Principal Balance" means $[_________].
"Class [__] Interest Distribution Amount" means, with respect to any
Distribution Date, an amount equal to interest accrued during the related
Interest Accrual Period at the Class [__] Pass-Through Rate on the Class [__]
Adjusted Certificate Principal Balance as of the immediately preceding
Distribution Date (or, in the case of the first Distribution Date, on the Class
[__] Initial Certificate Principal Balance).
"Class [__] Liquidation Loss Amount" means, with respect to any
Distribution Date, the lesser of (i) the amount, if any, by which the sum of the
Class A, Class [__] and Class [__] Certificate Principal Balances exceeds the
Pool Balance and (ii) the Class [__] Certificate Principal Balance, in each case
after giving effect to all distributions of principal made on such Distribution
Date.
"Class [__] Liquidation Loss Interest Amount" means, with respect to any
Distribution Date, interest accrued during the related Interest Accrual Period
at the Class [__] Pass- Through Rate on the Class [__] Liquidation Loss Amount,
if any, for the immediately preceding Distribution Date.
"Class [__] Pass-Through Rate" means, with respect to any Distribution
Date, the lesser of (i) [___]% per annum and (ii) the Weighted Average Net
Contract Rate.
"Class [__] Percentage" means, for any Distribution Date, the percentage
derived from the fraction (which shall not be greater than one), the numerator
of which is the Class [__] Adjusted Certificate Principal Balance immediately
prior to such Distribution Date and the denominator of which is the sum of the
Class A Certificate Principal Balance, the Class [__] Adjusted Certificate
Principal Balance and the Class [__] Adjusted Certificate Principal Balance,
each immediately prior to such Distribution Date.
"Class [__] Unpaid Certificate Principal Shortfall" means, with respect to
any Distribution Date, the excess, if any, of all Formula Principal Distribution
Amounts distributable on the Class [__] Certificates over the actual amount
distributed to the Class [__] Certificates in respect of Formula Principal
Distribution Amounts.
"Class [__] Unpaid Liquidation Loss Interest Shortfall" means, with respect
to any Distribution Date, the sum of (i) any Liquidation Loss Interest Amount
distributable on the preceding Distribution Date but not distributed plus, to
the extent legally permissible, interest accrued on any such amount during the
related Interest Accrual Period at the Class [__] Pass- Through Rate and (ii)
any amounts distributable under clause (i) above or this clause (ii) on the
preceding Distribution Date but not distributed plus, to the extent legally
permissible, interest accrued on any such amount during the related Interest
Accrual Period at the Class [__] Pass-Through Rate.
"Class [__] Adjusted Certificate Principal Balance" means, with respect to
any Distribution Date, the Class [__] Certificate Principal Balance as of such
Distribution Date minus the Class [__] Liquidation Loss Amount, if any.
"Class [__] Certificate" means any one of the Certificates designated Class
[__], executed and authenticated as provided herein, substantially in the form
set forth in Exhibits C, D and I.
"Class [__] Certificate Principal Balance" means, at any time, the Class
[__] Initial Certificate Principal Balance minus the sum of all amounts
previously distributed to the Class [__] Certificateholders pursuant to Section
6.01(a)(xiv) and (a)(xv).
"Class [__] Floor Amount" means, with respect to a Distribution Date (i)
[___]% of the Cut-off Date Pool Balance, if the Class A Certificate Principal
Balance, the Class [__] Certificate Principal Balance and the Class [__]
Certificate Principal Balance have not been reduced to zero immediately prior to
such Distribution Date, and (ii) zero, if the Class A Certificate Principal
Balance, the Class [__] Certificate Principal Balance and the Class [__]
Certificate Principal Balance have been reduced to zero immediately prior to
such Distribution Date.
"Class [__] Formula Principal Distribution Amount" means (i) with respect
to any Distribution Date as of which the Class A Certificate Principal Balance,
the Class [__] Certificate Principal Balance and the Class [__] Certificate
Principal Balance have not been reduced to zero and prior to the Cross-over
Date, zero, (ii) on any Distribution Date as to which the Principal Distribution
Tests are not met and the Class A Certificate Principal Balance, the Class [__]
Certificate Principal Balance and the Class [__] Certificate Principal Balance
have not been reduced to zero, (iii) on any Distribution Date as to which the
Principal Distribution Tests are not met and the Class A Certificate Principal
Balance, the Class [__] Certificate Principal Balance and the Class [__]
Certificate Principal Balance have been reduced to zero, the Formula Principal
Distribution Amount, or (iv) on any other Distribution Date, the Class [__]
Percentage of the Formula Principal Distribution Amount. If the Class A
Certificate Principal Balance, the Class [__] Certificate Principal Balance and
the Class [__] Certificate Principal Balance have not been reduced to zero on or
before a Distribution Date, then amounts then allocable as the Class [__]
Formula Principal Distribution Amount shall be allocated first to the Class [__]
Formula Principal Distribution Amount, next to the Class [__] Formula Principal
Distribution Amount, and finally to the Class A Formula Principal Distribution
Amount, to the extent that allocation of such amounts to the Class [__] Formula
Principal Distribution Amount would reduce the Class [__] Certificate Principal
Balance below the Class [__] Floor Amount.
"Class [__] Initial Certificate Principal Balance" means $[_________].
"Class [__] Interest Distribution Amount" means, with respect to any
Distribution Date, an amount equal to interest accrued during the related
Interest Accrual Period at the Class [__] Pass-Through Rate on the Class [__]
Adjusted Certificate Principal Balance as of the immediately preceding
Distribution Date (or, in the case of the first Distribution Date, on the Class
[__] Initial Certificate Principal Balance).
"Class [__] Liquidation Loss Amount" means, with respect to any
Distribution Date, the lesser of (i) the amount, if any, by which the sum of the
Class A, Class [__], Class [__] and Class [__] Certificate Principal Balances
exceeds the Pool Balance and (ii) the Class [__] Certificate Principal Balance,
in each case after giving effect to all distributions of principal made on such
Distribution Date.
"Class [__] Liquidation Loss Interest Amount" means, with respect to any
Distribution Date, interest accrued during the related Interest Accrual Period
at the Class [__] Pass- Through Rate on the Class [__] Liquidation Loss Amount,
if any, for the immediately preceding Distribution Date.
"Class [__] Pass-Through Rate" means, with respect to any Distribution
Date, the lesser of (i) [____]% per annum and (ii) the Weighted Average Net
Contract Rate.
"Class [__] Percentage" means, for any Distribution Date, the percentage
derived from the fraction (which shall not be greater than one), the numerator
of which is the Class [__] Adjusted Certificate Principal Balance immediately
prior to such Distribution Date and the denominator of which is the sum of the
Class A Certificate Principal Balance, the Class [__] Adjusted Certificate
Principal Balance and the Class [__] Adjusted Certificate Principal Balance,
each immediately prior to such Distribution Date.
"Class [__] Unpaid Certificate Principal Shortfall" means, with respect to
any Distribution Date, the excess, if any, of all Formula Principal Distribution
Amounts distributable on the Class [__] Certificates over the actual amount
distributed to the Class [__] Certificates in respect of Formula Principal
Distribution Amounts.
"Class [__] Unpaid Liquidation Loss Interest Shortfall" means, with respect
to any Distribution Date, the sum of (i) any Liquidation Loss Interest Amount
distributable on the preceding Distribution Date but not distributed plus, to
the extent legally permissible, interest accrued on any such amount during the
related Interest Accrual Period at the Class [__] Pass- Through Rate and (ii)
any amounts distributable under clause (i) above or this clause (ii) on the
preceding Distribution Date but not distributed plus, to the extent legally
permissible, interest accrued on any such amount during the related Interest
Accrual Period at the Class [__] Pass-Through Rate.
"Class [__] Adjusted Certificate Principal Balance" means, with respect to
any Distribution Date, the Class [__] Certificate Principal Balance as of such
Distribution Date minus the Class [__] Liquidation Loss Amount, if any.
"Class [__] Certificate" means any one of the Certificates designated Class
[__], executed and authenticated as provided herein, substantially in the form
set forth in Exhibits E and I.
"Class [__] Certificate Principal Balance" means, at any time, the Class
[__] Initial Certificate Principal Balance minus the sum of all amounts
previously distributed to the Class [__] Certificateholders pursuant to Section
6.01(a)(viii) and (a)(ix).
"Class [__] Distribution Amount" means, with respect to any Distribution
Date, the aggregate amount distributed to the Class [__] Certificateholders on
such Distribution Date pursuant to Section 6.01(a).
"Class [__] Formula Principal Distribution Amount" means, (i) with respect
to any Distribution Date as to which the Class A Certificate Principal Balance
has not been reduced to zero and prior to the Cross-over Date, zero, (ii) on any
Distribution Date as to which the Principal Distribution Tests are not met and
the Class A Certificate Principal Balance has not been reduced to zero, (iii) on
any Distribution Date as to which the Principal Distribution Tests are not met
and the Class A Certificate Principal Balance has been reduced to zero, the
Formula Principal Distribution Amount or (iv) on any other Distribution Date,
the Class [__] Percentage of the Formula Principal Distribution Amount. For any
Distribution Date, if the Class [__] Formula Principal Distribution Amount
exceeds the Class [__] Certificate Principal Balance less the Class [__] Unpaid
Certificate Principal Shortfall, then such amounts will be allocated first to
the Class [__] Formula Principal Distribution Amount and then to the Class [__]
Formula Principal Distribution Amount.
"Class [__] Initial Certificate Principal Balance" means $[_________].
"Class [__] Interest Distribution Amount" means, with respect to any
Distribution Date, an amount equal to interest accrued during the related
Interest Accrual Period at the Class [__] Pass-Through Rate on the Class [__]
Adjusted Certificate Principal Balance as of the immediately preceding
Distribution Date (or, in the case of the first Distribution Date, on the Class
[__] Initial Certificate Principal Balance).
"Class [__] Liquidation Loss Amount" means, with respect to any
Distribution Date, the lesser of (i) the amount, if any, by which the sum of the
Class A and Class [__] Certificate Principal Balances exceeds the Pool Balance
and (ii) the Class [__] Certificate Principal Balance, in each case after giving
effect to all distributions of principal made on such Distribution Date.
"Class [__] Liquidation Loss Interest Amount" means, with respect to any
Distribution Date, interest accrued during the related Interest Accrual Period
at the Class [__] Pass- Through Rate on the Class [__] Liquidation Loss Amount,
if any, for the immediately preceding Distribution Date.
"Class [__] Pass-Through Rate" means, with respect to any Distribution
Date, the lesser of (i) [____]% per annum and (ii) the Weighted Average Net
Contract Rate.
"Class [__] Percentage" means, for any Distribution Date, the percentage
derived from the fraction (which shall not be greater than one), the numerator
of which is the Class [__] Adjusted Certificate Principal Balance immediately
prior to such Distribution Date and the denominator of which is the sum of the
Class A Certificate Principal Balance, the Class [__] Adjusted Certificate
Principal Balance and the Class [__] Adjusted Certificate Principal Balance,
each immediately prior to such Distribution Date.
"Class [__] Unpaid Certificate Principal Shortfall" means, with respect to
any Distribution Date, the excess, if any, of all Formula Principal Distribution
Amounts distributable on the Class [__] Certificates over the actual amount
distributed to the Class [__] Certificates in respect of Formula Principal
Distribution Amounts.
"Class [__] Unpaid Liquidation Loss Interest Shortfall" means, with respect
to any Distribution Date, the sum of (i) any Liquidation Loss Interest Amount
distributable on the preceding Distribution Date but not distributed plus, to
the extent legally permissible, interest accrued on any such amount during the
related Interest Accrual Period at the Class [__] Pass- Through Rate and (ii)
any amounts distributable under clause (i) above or this clause (ii) on the
preceding Distribution Date but not distributed plus, to the extent legally
permissible, interest accrued on any such amount during the related Interest
Accrual Period at the Class [__] Pass-Through Rate.
"Class [__] Certificates" means any one of the Certificates designated
Class [__], executed and authenticated as provided herein, substantially in the
form set forth in Exhibits G, H and I.
"Class [__] Components" means each of the separate notional balance classes
treated as "regular interests" and defined in Section 10.12(g).
"Class [__] Distribution Amount" means, with respect to any Distribution
Date, the aggregate amount distributed to the Class [__] Certificateholders on
such Distribution Date pursuant to Section 6.01(a)(xvii).
"Class [__] Strip Amount" shall have the meaning specified in Section
10.12(g).
"Closing Date" means [_______, 199_].
"Code" means The Internal Revenue Code of 1986, as amended.
"Collection Account" means the custodial account or accounts created and
maintained pursuant to Section 6.04.
"Computer Tape" means the computer tape generated by the Seller which
provides information relating to the Contracts.
"Contract File" means[, with respect to each (1) Contract that is not a
Land Home Contract, (i) the original copy of the Contract; (ii) in the case of a
Contract not originated by IndyMac, the assignment of the related Contract from
the originator to IndyMac; and (iii) any extension, modification or waiver
agreement(s), and (2) each Land Home Contract, (i) the original copy of the
Contract; (ii) the related Mortgage with evidence of recording thereon (or, if
the original Mortgage has not yet been returned by the applicable recording
office, a copy thereof, certified by such recording office, which will be
replaced by the original Mortgage when it is so returned) and any title document
for the related Manufactured Home; (iii) an assignment in recordable form of the
Mortgage to the Trustee (which may be a blanket assignment if permitted in the
applicable jurisdiction); (iv) in the case of a Contract not originated by
IndyMac, the assignment of the related Contract from the originator to IndyMac;
(v) if applicable, the power of attorney granted to the Trustee; and (vi) any
extension, modification or waiver agreement(s)].
"Contract Pool" means the pool of Contracts held in the Trust Fund.
"Contract Principal Balance" means, with respect to any Contract and any
date of determination, the [scheduled] [actual] principal balance of such
Contract as of such date of determination [without giving effect to any
adjustments by reason of bankruptcy or similar proceedings or any waiver,
extension or grace period].
"Contract Schedule" means the list identifying each Contract constituting
part of the corpus of the Trust Fund, which list is attached hereto as Exhibit
A, and which identifies each Contract by contract number and name of the Obligor
and sets forth the Contract Principal Balance of each Contract as of the Cut-off
Date.
"Contracts" means the manufactured housing installment sales contracts and
installment loan agreements described in the Contract Schedule and constituting
part of the Trust Fund, which Contracts are to be sold and assigned by the
Depositor to the Trustee and which are the subject of this Agreement.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate business shall be administered, which
office at the date of execution of this Agreement is located at
[________________________], Attention: [________].
"Cross-over Date" means the later to occur of (i) the [__________]
Distribution Date and (ii) the first Distribution Date as of which the
percentage equivalent of a fraction (which shall not be greater than one) the
numerator of which is the aggregate Adjusted Certificate Principal Balance of
the Subordinate Certificates plus the Current Overcollateralization Amount for
such Distribution Date and the denominator of which is the Pool Balance on such
Distribution Date, equals or exceeds [___] times the percentage equivalent of a
fraction (which shall not be greater than one) the numerator of which is the
aggregate Initial Certificate Principal Balance of the Subordinate Certificates
and the denominator of which is the Cut-off Date Pool Balance.
"Cumulative Realized Loss Test" means, with respect to any Distribution
Date, the following:
(i) if such Distribution Date occurs between [__________] and [______], the
Cumulative Realized Loss Test will be satisfied if Cumulative Realized Losses as
of such Distribution Date are less than or equal to [___]% of the Cut-off Date
Pool Balance;
(ii) if such Distribution Date occurs between [________] and [_____], the
Cumulative Realized Loss Test will be satisfied if Cumulative Realized Losses as
of such Distribution Date are less than or equal to [___]% of the Cut-off Date
Pool Balance; and
(iii) if such Distribution Date occurs after [_______], the Cumulative
Realized Loss Test will be satisfied if Cumulative Realized Losses as of such
Distribution Date are less than or equal to [___]% of the Cut-off Date Pool
Balance;
"Cumulative Realized Losses" means, with respect to any Distribution Date,
the sum of Realized Losses with respect to such Distribution Date and each
preceding Distribution Date.
"Current Overcollateralization Amount" means, with respect to any
Distribution Date, the excess, if any, of (i) the Pool Balance over (ii) the sum
of the Certificate Principal Balances of all then-outstanding Certificates.
"Current Realized Loss Ratio" means, with respect to any Distribution Date,
a fraction, expressed as a percentage, the numerator of which is the aggregate
Realized Losses as of such Distribution Date and each of the two immediately
preceding Distribution Dates, multiplied by four, and the denominator of which
is the arithmetic average of the Pool Balance as of the third preceding
Distribution Date and the Pool Balance as of such Distribution Date.
"Cut-off Date" means [______, 199_].
"Cut-off Date Pool Balance" means $[_____________].
"Deficiency Event" means the Distribution Date, if any, on which the Pool
Balance becomes equal to or less than the Class A Certificate Principal Balance.
"Definitive Certificates" shall have the meaning specified in Section
4.03(b).
"Deposit Date" means, with respect to any Distribution Date, the Business
Day immediately preceding such Distribution Date.
"Depositor" means IndyMac ABS, Inc., or its successor in interest or any
successor under this Agreement appointed as herein provided.
"Depository" means DTC, the nominee of which is Cede & Co., as the
registered Holder of the Book-Entry Certificates, and its successors. The
Depository shall at all times be a "clearing corporation" as defined in Section
8-102(3) of the Uniform Commercial Code of the State of New York.
"Depository Participant" means 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" means, with respect to any Distribution Date, the
third Business Day preceding such Distribution Date.
"Distribution Date" means the [________] day of any month, or if such day
is not a Business Day, the first Business Day immediately succeeding such day,
commencing [_______, 199_].
"DTC" means The Depository Trust Company, and its successors.
"Due Date" means, with respect to any Contract, the day of the month
specified in such Contract on which each Monthly Payment is due, exclusive of
any grace period.
"Due Period" means, with respect to any Distribution Date, the period
commencing on the second day of the month preceding the month in which such
Distribution Date occurs and ending at the close of business on the first day of
the month in which such Distribution Date occurs.
"Electronic Ledger" means the electronic master record of the Seller's
manufactured housing installment sales contracts and installment loan agreements
clearly identifying each Contract that is part of the Trust Fund.
"Eligible Account" means an account that is either (i) maintained with a
depository institution organized under the laws of the United States or any
state, the deposits of which are insured by the Federal Deposit Insurance
Corporation to the fullest extent permitted by law, (a) the long-term deposit
rating or the long-term unsecured debt obligations of which (or in the case of
the principal bank in a bank holding company system, the long-term unsecured
debt obligations of such bank holding company, unless [______] is a Rating
Agency) have received from each Rating Agency one of its two highest long term
ratings, (b) the short-term unsecured debt obligations of which are rated in the
highest short-term rating category by the Rating Agencies or (c) the short term
deposits or commercial paper of which is rated [_] by [____] and, if rated by
[____], [__] by [____], (ii) a trust account maintained with the Trustee in its
corporate trust department in which the funds are either uninvested or invested
solely in Eligible Investments or (iii) otherwise acceptable to each Rating
Agency, as evidenced by a letter from such Rating Agency, without a reduction or
withdrawal of the rating of any Rated Certificates.
"Eligible Investments" means one or more of the following:
(i) obligations of, or guaranteed as to timely payments of principal
and interest by, the United States or any agency or instrumentality
thereof, which 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 long-term unsecured obligations of the party agreeing to
repurchase such obligations are at the time rated by each Rating Agency in
one of its two highest long term rating categories; provided further that
the short-term debt obligations of such party shall be rated [_] by [____]
and, if rated by [____], [_] by [____];
(iii) federal funds, certificates of deposit, time deposits and
bankers'acceptances, each of which shall not have an original maturity of
more than 90 days, of any depository institution or trust company
incorporated under the laws of the United States or any State (including
those of the Trustee or its affiliates); provided that the short-term
obligations of such depository institution or trust company shall have
received the highest rating by the Rating Agencies;
(iv) commercial paper (having original maturities of not more than 270
days) of any corporation incorporated under the laws of the United States
or any State; provided that such commercial paper shall be rated [_] by
[____] and, if rated by [____], [__] by [______];
(v) any money market or common trust fund rated in the highest rating
category by [____] and acceptable to [___] (including funds as to which the
Trustee may act as sponsor, manager, advisor or depository); and
(vi) other obligations or securities that are acceptable as an
Eligible Investment to each Rating Agency, as evidenced by a letter from
such Rating Agency, and will not result in a reduction in or withdrawal of
the rating of any Rated Certificates;
provided that no instrument shall be an Eligible Investment if such instrument
evidences a right to receive only interest payments with respect to the
obligations underlying such instru- ment; provided further that no instrument
shall be an Eligible Investment unless such instrument matures on the Deposit
Date next succeeding the date of investment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means any of the events described in Section 9.01.
"Extension Fee" means any extension fee paid by the Obligor on a Contract.
"Final Scheduled Distribution Date" means the [_________] Distribution
Date.
["Fitch" means Fitch IBCA, Inc., and its successors.]
"Formula Principal Distribution Amount" means, with respect to any
Distribution Date, (a) the sum of the following amounts (i) the sum of the
principal components of all Monthly Payments scheduled to be made during the
related Due Period on the Contracts that were outstanding on the first day of
such Due Period (regardless of whether such Monthly Payments were advanced by
the Servicer or received from the related Obligors), not including any Monthly
Payments due on Liquidated Contracts or Repurchased Contracts; (ii) the sum of
the amounts of all Principal Prepayments received by the Servicer on the
Contracts during the related Prepayment Period; (iii) with respect to any
Contract that became a Liquidated Contract during the related Prepayment Period,
the Contract Principal Balance thereof on the date of liquidation thereof
(determined without giving effect to such liquidation); and (iv) with respect to
any Contract that became a Repurchased Contract during the related Prepayment
Period, the Contract Principal Balance thereof on the date of purchase or
repurchase thereof (determined without giving effect to such purchase or
repurchase); less (b) the Overcollateralization Reduction Amount, if any, for
such Distribution Date.
"Fractional Interest" means, with respect to any Certificate of any Class,
the product of (i) the Percentage Interest evidenced by such Certificate
multiplied by (ii) the amount derived from dividing the Certificate Principal
Balance of such Class by the sum of the Certificate Principal Balances of
Certificates of all Classes. For purposes of the foregoing, the Class [__] and
Class [__] Certificates will have a Certificate Principal Balance of zero.
"Hazard Insurance Policy" means, with respect to each Contract, the policy
of fire and extended coverage insurance required to be maintained for the
related Manufactured Home, pursuant to Section 5.07 which may be a blanket
insurance policy maintained by the Servicer.
"IndyMac" means [IndyMac, Inc.], and its successors.
"Interest Accrual Period" means, with respect to a Distribution Date, the
calendar month preceding the month in which the Distribution Date occurs.
Interest on the Certificates shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
"Interest Distribution Amount" means, with respect to a Class of
Certificates (other than the Class [__] Certificates) and a Distribution Date,
the amount of interest accrued during the related Interest Accrual Period at the
related Pass-Through Rate on, in the case of a Class [_] Certificate, the
Certificate Principal Balance of such Class of Certificates and, in the case of
a Class of Subordinate Certificates, the Adjusted Certificate Principal Balance
of such Class of Subordinate Certificates.
"Issuing REMIC" shall have the meaning set forth in Section 10.12.
"Land Home Contract" means a Contract that is secured, or intended to be
secured, by a lien on the real estate on which the related Manufactured Home is
located.
"Late Payment Fees" means any late payment fees paid by Obligors on
Contracts, determined in accordance with the terms thereof.
"Lien" means any lien, claim, charge, security interest or other
encumbrance.
"Liquidated Contract" means any defaulted Contract as to which the Servicer
has determined that all amounts which it expects to recover from or on account
of such Contract have been recovered; provided that any defaulted Contract in
respect of which the related Manufactured Home and, in the case of Land Home
Contracts, Mortgaged Property have been realized upon and disposed of and the
proceeds of such disposition have been received shall be deemed to be a
Liquidated Contract.
"Liquidation Expenses" means all reasonable out-of-pocket expenses
(exclusive of overhead expenses) which are incurred by the Servicer in
connection with the liquidation of any defaulted Contract, on or prior to the
date on which the related Manufactured Home and, in the case of Land Home
Contracts, Mortgaged Property are disposed of, including, without limitation,
reasonable legal fees and expenses, any unreimbursed amount expended by the
Servicer pursuant to Section 5.06 or 5.11 (to the extent such amount is
reimbursable pursuant to Section 5.06 or 5.08, as the case may be) respecting
such Contract and any unreimbursed expenditures for property taxes or for
property restoration or preservation that are related to such liquidation.
"Liquidation Loss Amount" means, with respect to each Distribution Date,
the amount, if any, by which (i) the aggregate Certificate Principal Balance of
all the Certificates, after all distributions have been made on such
Distribution Date, exceeds (ii) the Pool Balance.
"Liquidation Loss Interest Amount" means, with respect to a Class of
Subordinate Certificates and a Distribution Date, interest accrued during the
related Interest Accrual Period at the related Pass-Through Rate on the
Liquidation Loss Amount for such Class as of the immediately preceding
Distribution Date.
"Liquidation Proceeds" means cash (including insurance proceeds other than
those applied to the restoration of the related Manufactured Home or released to
the related Obligor in accordance with the normal servicing procedures of the
Servicer) received in connection with the liquidation of defaulted Contracts,
whether through repossession or otherwise.
"Loan-to-Value Ratio" means the fraction, expressed as a percentage, the
numerator of which is the original principal balance of the related Contract and
the denominator of which is the Value in respect of the Contract.
"Manufactured Home" means a unit of manufactured housing which meets the
requirements of Section 25(e)(10) of the Code, including all accessions thereto,
securing the indebtedness of the Obligor under a Contract.
"Monthly Payment" means, with respect to any Contract, the amount of each
fixed monthly payment payable by the related Obligor in accordance with the
terms thereof without giving effect to any adjustments by reason of bankruptcy
or similar proceedings or any waiver, extension or grace period.
"Monthly Report" means the monthly report described in Section 7.01.
"Monthly Servicing Fee" means, as of any Distribution Date, an amount equal
to [_____] of [___]% (or, in the case of a successor Servicer engaged at any
time after IndyMac is no longer the Servicer, the percentage agreed upon
pursuant to Section 8.08) of the Pool Balance for the immediately preceding
Distribution Date.
"Monthly Trustee Fee" means, as of any Distribution Date, an amount equal
to one- twelfth of [___]% of the Pool Balance for the immediately preceding
Distribution Date; provided that the aggregate Monthly Trustee Fee for any
calendar year shall not be less than $[____].
["Moody's" means Moody's Investors Service, Inc., and its successors.]
"Mortgage" means the mortgage creating a first lien on an estate in fee
simple in the real property securing a Contract.
"Mortgaged Property" means the property subject to a Mortgage.
"Net Liquidation Loss" means, with respect to a Liquidated Contract, the
amount, if any, by which (i) the unpaid principal balance of such Liquidated
Contract plus accrued and unpaid interest thereon at the related APR to the date
on which such Contract became a Liquidated Contract exceeds (ii) the related Net
Liquidation Proceeds.
"Net Liquidation Proceeds" means, with respect to any Liquidated Contract,
Liquidation Proceeds net of the sum of (i) Liquidation Expenses and (ii) any
amount required to be paid to the Obligor or any other party with an interest in
the Manufactured Home or any related Mortgaged Property that is senior to the
interest of the Trust Fund.
"Nonrecoverable Advance" means any Advance made or proposed to be made
pursuant to Section 6.03, which the Servicer believes, in its good faith
judgment, is not, or if made would not be, ultimately recoverable from
Liquidation Proceeds or otherwise from the related Contract. In determining
whether an Advance is or will be nonrecoverable, the Servicer need not take into
account that it might receive any amounts in a deficiency judgment. The deter-
mination by the Servicer that any Advance is, or if made would constitute, a
Nonrecoverable Advance, shall be evidenced by an Officer's Certificate of the
Servicer delivered to the Trustee and stating the reasons for such
determination.
"Obligor" means each person who is indebted under a Contract or who has
acquired a Manufactured Home subject to a Contract.
"Officer's Certificate" means a certificate signed by the President, a Vice
President, the Treasurer, an Assistant Treasurer, the Secretary, an Assistant
Secretary or any other duly authorized officer of the Depositor or the Servicer,
as the case may be, and delivered to the Trustee as required by this Agreement.
"Opinion of Counsel" means a written opinion of counsel, who may be the
counsel for the Depositor or the Servicer, addressed and delivered to the
Trustee and any other entity or entities specified herein who shall be
reasonably acceptable to the Trustee.
"Original Value" means, with respect to any Manufactured Home that was new
at the time the related Contract was originated, the purchase price of such
Manufactured Home (including, for this purpose, any Mortgaged Property not
constituting a part of the Manufactured Home), plus taxes and, to the extent
financed under such Contract, fees, insurance and prepaid finance charges. With
respect to any Manufactured Home that was used at the time the related Contract
was originated, the total delivered sales price of such Manufactured Home
(including, for this purpose, any Mortgaged Property not constituting a part of
the Manufac- tured Home), plus taxes and, to the extent financed under such
Contract, fees, insurance and prepaid finance charges.
"Outstanding" means, with respect to any Contract as to the time of
reference thereto, a Contract that has not been fully prepaid and has not become
either a Liquidated Contract or a Repurchased Contract prior to such time of
reference.
"Outstanding Amount Advanced" means, with respect to any Distribution Date,
the aggregate of all Advances remitted by the Servicer pursuant to Section 6.03
less the aggregate of all Advance Reimbursement Amounts actually received prior
to such Distribution Date.
"Overcollateralization Reduction Amount" means, with respect to any
Distribution Date, the excess, if any, of (i) the Current Overcollateralization
Amount over (ii) the Target Overcollateralization Amount.
"Ownership Interest" means any legal or beneficial, direct or indirect,
ownership or other interest.
"Pass-Through Rate" means, as to any Class of Certificates, the Class [__]
Pass-Through Rate, the Class [__] Pass-Through Rate, the Class [__] Pass-Through
Rate, the Class [__] Pass-Through Rate, the Class [__] Pass-Through Rate, the
Class [__] Pass-Through Rate, the Class [__] Pass-Through Rate, the Class [__]
Pass-Through Rate, the Class [__] Pass-Through Rate or the Class [__]
Pass-Through Rate, as the case may be.
"Paying Agent" means any paying agent appointed pursuant to Section 4.06.
"Percentage Interest" means, with respect to a Certificate of any Class,
the percentage interest evidenced thereby in distributions required to be made
on the Certificates of such Class, such percentage interest being equal to the
percentage obtained by dividing the denomination of such Certificate by the
aggregate of the denominations of all of the outstanding Certificates of such
Class (or, in the case of a Class [__] Certificate, being equal to the
percentage specified on the face of such Class [__] Certificate).
"Permitted Transferee" means any Person other than (i) the United States, a
State or any political subdivision thereof, any possession of the United States
or any agency or instru- mentality of any of the foregoing (other than an
instrumentality that is a corporation if all of its activities are subject to
tax and, except for the Federal Home Loan Mortgage Corporation, a majority of
its board of directors is not selected by any such governmental unit); (ii) a
foreign government, international organization or agency or instrumentality of
either of the foregoing (other than an instrumentality that is a corporation if
all of its activities are subject to tax and a majority of its board of
directors is not selected by any such governmental unit); (iii) an organization
which is exempt from tax imposed by Chapter 1 of the Code (including the tax
imposed by Code Section 511 on unrelated business taxable income) on any excess
inclusions (as defined in Code Section 860E(c)(1)) with respect to a Class [__]
Certificate (except certain farmers' cooperatives described in Code Section
521); (iv) rural electric and telephone cooperatives described in Code Section
1381(a)(2); (v) a Non-U.S. Person; and (vi) any other Person so designated by
the Servicer based upon an Opinion of Counsel that the Transfer of an Ownership
Interest in a Class [__] Certificate to such Person may cause the Trust Fund to
fail to qualify as a two-tiered REMIC at any time that any Certificates are out-
standing. For purposes of the foregoing, the terms "United States," "State" and
"International Organization" shall have the meanings set forth in Code Section
7701 or successor provisions. A "Non-U.S. Person" means an individual,
corporation, partnership or other person other than 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,
an estate that is subject to U.S. federal income tax regardless of the source of
its income or, for trusts whose taxable years begin after December 31, 1996, a
trust whose administration is subject to the primary supervision of a U.S. court
and which has one or more U.S. fiduciaries who have the authority to control all
substantial decisions of the trust.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or any agency or political subdivision thereof.
"Pool Factor" means, with respect to any Distribution Date and any Class of
Certificates, the percentage, carried out to seven decimal places, obtained by
dividing the Certificate Principal Balance of such Class of Certificates, after
giving effect to all distributions made on such Distribution Date, by the
Initial Certificate Principal Balance of such Class of Certificates.
"Pool Balance" means, with respect to any Distribution Date, (i) the
Cut-off Date Pool Balance less (ii) the aggregate of the Formula Principal
Distribution Amounts (without subtracting therefrom any Overcollateralization
Reduction Amount) for such Distribution Date and all prior Distribution Dates.
"Pooling REMIC" shall have the meaning set forth in Section 10.12.
"Prepayment Interest Excess" means, as to any Principal Prepayment in full
received by the Servicer after a Contract's Due Date during any Prepayment
Period, all amounts paid by the related Obligor in respect of interest during
such Prepayment Period in excess of one month's interest at the related APR on
such Principal Prepayment.
"Prepayment Interest Shortfall" means, as to any Principal Prepayment in
full received by the Servicer prior to a Contract's Due Date during any
Prepayment Period, the amount, if any, by which one month's interest at the
related APR on such Principal Prepayment exceeds the amount of interest paid in
connection with such Principal Prepayment.
"Prepayment Period" means, with respect to a Distribution Date, the
calendar month immediately preceding the month in which such Distribution Date
occurs.
Principal Distribution Tests" will be satisfied with respect to any
Distribution Date, if (i) the Average Sixty-Day Delinquency Ratio is less than
or equal to [___]%, (ii) the Average Thirty-Day Delinquency Ratio is less than
or equal to [___]%, (iii) the Cumulative Realized Loss Test is satisfied and
(iv) the Current Realized Loss Ratio does not exceed [___]%.
"Principal Prepayment" means, with respect to any Contract, a payment or
other recovery of principal made on or in respect thereof (exclusive of
Liquidation Proceeds) which is received in advance of the related Due Date and
applied upon receipt (or, in some instances with respect to a partial
prepayment, upon one or more future Due Dates) to reduce the Contract Principal
Balance of such Contract prior to the Due Date or Due Dates on which such
principal amounts are due.
"PTCE 95-60" means Department of Labor Prohibited Transaction Class
Exemption 95-60.
"Qualified Bidders" means firms and institutions that are engaged in the
business of buying and selling manufactured housing installment sales and
installment loan contracts.
"Rated Certificates" means each Class of Certificates that has been rated
by a Rating Agency.
"Rating Agencies" means [___] and [_____].
"Realized Losses" means, with respect to any Distribution Date, the
aggregate Net Liquidation Losses of all Contracts that became Liquidated
Contracts during the related Due Period.
"Record Date" means (a) with respect to any Distribution Date and the
Book-Entry Certificates, the close of business on the day immediately preceding
such Distribution Date, and (b) with respect to any Distribution Date and the
Definitive Certificates (including the Class [____], Class [__] and Class [___]
Certificates), the close of business on the last Business Day of the month
immediately preceding the month in which such Distribution Date occurs.
"REMIC" means a real estate mortgage investment conduit within the meaning
of Section 860D(a) of the Code.
"REMIC Provisions" means provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Section 860A
through 860G of Subchapter M of Chapter 1 of the Code, and related provisions,
and regulations promulgated thereunder, as the foregoing may be in effect from
time to time.
"REO Property" means any Manufactured Home or Mortgaged Property acquired
by the Servicer in a repossession or foreclosure.
"Repossession Profits" means, with respect to any Distribution Date, the
excess, if any, of Net Liquidation Proceeds in respect of each Contract that
became a Liquidated Contract during the related Due Period over the sum of the
Contract Principal Balance of such Contract plus accrued and unpaid interest
thereon at the related APR from the Due Date to which interest was last paid by
the Obligor to the Due Date in the Due Period in which such Contract became a
Liquidated Contract.
"Repurchase Price" means, with respect to any Repurchased Contract, an
amount equal to the unpaid principal balance of such Contract as of the
beginning of the month of repurchase plus accrued interest from the date through
which interest was last paid to its Due Date in the month in which such Contract
is repurchased.
"Repurchased Contract" means a Contract repurchased or required to be
repurchased by the Seller pursuant to Section 3.05(a).
"Responsible Officer" means, when used with respect to the Trustee, the
chairman or vice chairman of the board of directors, the chairman or vice
chairman of any executive committee of the board of directors, the president,
any Vice President, any assistant vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any assistant
cashier, any trust officer or assistant trust officer, the controller, any
assistant controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
"Sale and Purchase Agreement" means that certain sale and purchase
agreement, dated as of the date hereof, between the Seller and the Depositor,
regarding the sale by the Seller and purchase by the Depositor of the Contracts.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means [IndyMac, Inc.], in its capacity as Seller under the Sale
and Purchase Agreement and this Agreement, and its successors.
"Servicer" means [IndyMac, Inc.], in its capacity as Servicer under the
Sale and Purchase Agreement and this Agreement, or its successor in interest or
any successor under this Agreement as provided by Section 8.07.
"Servicer's Certificate" means an Officer's Certificate of the Servicer
completed, executed and delivered pursuant to Section 7.02, substantially in the
form of Exhibit J.
"Servicing File" means [all documents, records and other items maintained
by the Servicer with respect to a Contract and not included in the corresponding
Contract File, including the original title document or application for title,
the credit application, credit reports and verifications, appraisals, tax and
insurance records, payment records, insurance claim records, correspondence and
the Computer Tape].
"Servicing Officer" means any officer of the Servicer involved in, or
responsible for, the administration and servicing of the Contracts whose name
appears on a list of servicing officers furnished to the Trustee by the
Servicer, as such list may from time to time be amended.
"Sixty-Day Delinquency Ratio" means, with respect to any Distribution Date,
a fraction, expressed as a percentage, the numerator of which is the aggregate
Contract Principal Balance of all Contracts that were delinquent 60 or more days
as of the end of the preceding calendar month (including Contracts in respect of
which the related Manufactured Homes have been repossessed but are still in
inventory), and the denominator of which is the Pool Balance for such
Distribution Date; provided that no Monthly Payment shall be considered
delinquent if 90% of the amount thereof is received on or prior to its scheduled
Due Date; provided further that if the amount remaining outstanding with respect
to any Monthly Payment referred to in the preceding provisio is not received in
full on or before the next Due Date, such Contract will be deemed delinquent as
of such next Due Date.
"State" means any state of the United States or the District of Columbia.
"Subordinate Certificates" means the Class [__] and Class [__]
Certificates.
"Subservicer" means any Person to whom the Servicer has delegated its
duties as Servicer pursuant to a Subservicing Agreement.
"Subservicing Agreement" means an agreement between the Servicer and any
Subservicer, as contemplated by Section 5.03.
"Target Overcollateralization Amount" means (i) with respect to any
Distribution Date prior to the Cross-over Date, [__]% of the Cut-off Date Pool
Balance, and (ii) for any other Distribution Date, the lesser of (a) [__]% of
the Cut-off Date Pool Balance and (b) [___]% of the Pool Balance; provided that,
so long as any Class of Certificates is outstanding, the Target
Overcollateralization Amount will not be less than [___]% of the Cut-off Date
Pool Balance.
"Tax" means any tax, including interest, penalties, additional amounts or
additions to tax.
"Tax Matters Person" means the Person designated as "tax matters person" in
the manner provided under Treasury regulation Section 1.860F-4(d) and
temporary Treasury regulation Section 301.6231(a)(7)-1T. Initially, the Tax
Matters Person shall be the Trustee.
"Tax Matters Person Certificate" means the Class [__] Certificate with a
denomination equal to [___]% of the Class [__] Certificate Principal Balance.
"Termination Price" means the sum of (i) any Liquidation Expenses incurred
by the Servicer in respect of any Contract that has not yet been liquidated,
(ii) all amounts required to be reimbursed or paid to the Servicer in respect of
previously unreimbursed Advances and (iii) the greater of (a) the sum of (1) the
aggregate Contract Principal Balance, plus accrued and unpaid interest thereon
at the related APRs through the end of the Due Period immedi- ately preceding
the Due Period in which the terminating purchase will occur, plus (2) the lesser
of (A) the aggregate Contract Principal Balance of each Contract that had been
secured by any REO Property remaining in the Trust Fund, plus accrued interest
thereon at the related APR through the end of the Due Period immediately
preceding the Due Period in which the terminating purchase will occur, and (B)
the current appraised value of any such REO Property (net of Liquidation
Expenses to be incurred in connection with the disposition of such property
estimated in good faith by the Servicer), such appraisal to be conducted by an
appraiser mutually agreed upon by the Servicer and the Trustee, plus all
previously unreimbursed Advances made in respect of such REO Property, and (b)
the aggregate fair market value of the Trust Fund (as determined by the
Servicer, as of the close of business on the third Business Day next preceding
the date upon which notice of any such termination is furnished to
Certificateholders pursuant to Section 11.01) plus all previously unreimbursed
Advances. The fair market value of the assets of the Trust Fund as determined
for purposes of a terminating purchase will be deemed to include accrued
interest at the applicable APR on the Contract Principal Balance (including any
Contract that had been secured by a REO Property, which REO Property has not yet
been disposed of by the Servicer) through the end of the Due Period immediately
preceding the Due Period in which the terminating purchase will occur. The basis
for any such valuation shall be furnished by the Servicer to the
Certificateholders upon request.
"Thirty-Day Delinquency Ratio" means, with respect to any Distribution
Date, a fraction, expressed as a percentage, the numerator of which is the
aggregate Contract Principal Balance of all Contracts that were delinquent 30 or
more days as of the end of the preceding calendar month (including Contracts in
respect of which the related Manufactured Homes have been repossessed but are
still in inventory), and the denominator of which is the Pool Balance for such
Distribution Date; provided that no Monthly Payment shall be considered
delinquent if 90% of the amount thereof is received on or prior to its scheduled
Due Date; provided further that if the amount remaining outstanding with respect
to any Monthly Payment referred to in the preceding provisio is not received in
full on or before the next Due Date, such Contract will be deemed delinquent as
of such next Due Date.
"Transfer" means any direct or indirect transfer or sale of any Ownership
Interest in a Class [__] Certificate.
"Transfer Affidavit" means an affidavit of the Transferee of a Class [__]
Certificate, substantially in the form of Exhibit K.
"Transferee" means any Person who is acquiring by Transfer any Ownership
Interest in a Class [__] Certificate.
"Trust Fund" means the corpus of the trust created by this Agreement, to
the extent described herein, consisting of the Contracts (including, without
limitation, the security interest created thereby), including all rights to
receive payments on the Contracts due after the Cut-off Date (whether received
before, on or after the Cut-off Date), such assets as shall from time to time be
identified as deposited in the Collection Account and the Certificate Account, a
Manufactured Home and any related Mortgaged Property which secured a Contract
(other than a Repurchased Contract) and which have been acquired in realizing
upon such Contract, the Mortgages, the obligation of the Seller to repurchase
Repurchased Contracts pursuant to Section 3.05, the proceeds of the Hazard
Insurance Policies and all rights of the Depositor under the Sale and Purchase
Agreement.
"Trustee" means [_____], or its successors or assigns under this Agreement.
"Trustee's Fees" means the fees, other than the Monthly Trustee Fee,
expenses and disbursements of the Trustee set forth in Section 10.05.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
"Underwriter" means [_____________].
"United States" means the United States of America.
"Unpaid Certificate Principal Shortfall" means, with respect to a
Distribution Date, the Class A Unpaid Certificate Principal Shortfall in the
case of the Class A Certificates, the Class [__] Unpaid Certificate Principal
Shortfall in the case of the Class [__] Certificates, the Class [__] Unpaid
Certificate Principal Shortfall in the case of the Class [__] Certificates and
the Class [__] Unpaid Certificate Principal Shortfall in the case of the Class
[__] Certificates.
"Unpaid Liquidation Loss Interest Shortfall" means, with respect to a
Distribution Date, the Class [__] Unpaid Liquidation Loss Interest Shortfall
with respect to the Class [__] Certificates, the Class [__] Unpaid Liquidation
Loss Interest Shortfall with respect to the Class [__] Certificates and the
Class [__] Unpaid Liquidation Loss Interest Shortfall with respect to the Class
[__] Certificates.
"Value" means, in respect of any Contract, sum of the down payment (which
includes the value of any trade-in unit) for such Contract, the original amount
financed on such Contract, which may include sales and other taxes, insurance
and prepaid finance charges and, in the case of a Land Home Contract, the value
of the land securing such Contract as appraised by an independent appraiser.
"Vice President" of any Person means any vice president of such Person,
whether or not designated by a number or words before or after the title "Vice
President", who is a duly elected officer of such Person.
"Weighted Average Net Contract Rate" means, with respect to any
Distribution Date, the per annum rate equal to (i) the weighted average of the
APRs borne by the Contracts and applicable to Monthly Payments due in the
related Due Period less (ii) the per annum rate used to calculate the Monthly
Servicing Fee.
ARTICLE TWO
CONVEYANCE OF CONTRACTS; CUSTODY OF CONTRACTS
Section 2.01. Conveyance of Contracts and Other Rights.
The Depositor, concurrently with the execution and delivery hereof, does
hereby transfer, sell, assign, set over and otherwise convey to the Trustee
without recourse (i) all of its right, title and interest in, to and under the
Contracts (including, without limitation, the security interests created
thereby) and any related Mortgages, including all interest and principal with
respect to the Contracts [due] [received] after the Cut-off Date [(whether
[received] [due] before, on or after the Cut-off Date)], (ii) all of the rights
under any Hazard Insurance Policy relating to a Manufactured Home securing a
Contract for the benefit of the creditor of such Contract, (iii) all documents
contained in the Contract Files, (iv) all other of its rights relating to and
payments made with respect to other assets comprising the Trust Fund and (v) all
proceeds of the foregoing.
[In the case of any Land Home Contract, not later than [__] days following
receipt by the Servicer of the original Mortgage with evidence of recording by
the appropriate public recording office indicated thereon, the Servicer shall
(i) affix the Trustee's name to each assignment of Mortgage, as the assignee
thereof, (ii) cause such assignment to be in proper form for recording in the
appropriate public office for real property records and (iii) deliver or cause
to be delivered for recording in the appropriate public office for real property
records the assignments of the Mortgages to the Trustee, except that, with
respect to any assignment of a Mortgage as to which the Servicer has not
received the information required to prepare such assignment in recordable form,
the Servicer's obligation to do so and to deliver the same for such recording
shall be as soon as practicable after receipt of such information and in any
event within [___] days after the receipt thereof, and the Servicer need not
cause to be recorded any assignment which relates to a Land Home Contract
[(a) the Mortgaged Property and Contract File relating to which are located in
[_________] or (b) in any other jurisdiction under the laws of which[, as
evidenced by an Opinion of Counsel delivered by the Seller (at the Seller's
expense) to the Trustee,] the recordation of such assignment is not necessary to
protect the Trustee's and the Certificateholders' interest in the related Land
Home Contract].]
The ownership of each Contract and the contents of the related Contract
File and Servicing File are vested in the Trustee. The contents of each
Servicing File are and shall be held in trust by the Servicer for the benefit of
the Trustee as the owner thereof and the Servicer's possession of the contents
of each Servicing File so retained is for the sole purpose of servicing the
related Contract, and such retention and possession by the Servicer is in a
custodial capacity only. Neither the Depositor nor the Servicer claim any
ownership interest in the Contracts; provided that the Servicer shall retain the
customer list and have the right to solicit obligors for products it customarily
makes available to obligors in general.
It is the intention of the parties hereto that the conveyance of the
Depositor's right, title and interest in and to the Trust Fund pursuant to this
Agreement shall constitute a purchase and sale and not a loan. If the conveyance
of the Contracts from the Seller to the Depositor to the Trustee is
characterized as a pledge and not a sale, then the Depositor shall be deemed to
have transferred to the Trustee, in addition to the Trust Fund, all of the
Depositor's right, title and interest in, to and under the obligation or
obligation deemed to be secured by said pledge; and it is the intention of the
parties hereto that the Seller and the Depositor shall also be deemed to have
granted to the Trustee a first priority security interest in all of the Seller's
and the Depositor's right, title and interest in, to and under the obligation or
obligation deemed to be secured by said pledge and that the Trustee shall be
deemed to be an independent custodian for purposes of perfection of such
security interest.
If the conveyance of the Contracts from the Depositor to the Trustee is
characterized as a pledge, it is the intention of the parties hereto that this
Agreement shall constitute a security agreement under applicable law, and that
each of the Seller and the Depositor shall be deemed to have granted to the
Trustee a first priority security interest in all of its right, title and
interest in, to and under the Contracts, all payments of interest and principal
due on or in respect of the Contracts after the Cut-off Date (whether received
before, on or after the Cut-off Date), all other rights relating to and payments
made in respect of the Trust Fund, and all proceeds thereof. If the trust
created by this Agreement terminates prior to the satisfaction of the claims of
any Person as a Holder or Certificate Owner of any Certificates, the security
interest created hereby shall continue in full force and effect and the Trustee
shall be deemed to be the collateral agent for the benefit of such Person.
Section 2.02. Filing; Name Change or Relocation.
(a)(i) On or prior to the Closing Date, the Seller shall cause to be filed,
in the office of the Secretary of State of the State of [________], UCC-1
financing statements describing the Contracts and other items of the Trust Fund
as collateral and naming the Seller as debtor and the Depositor as secured
party. On or prior to the Closing Date, the Depositor shall cause to be filed,
in the office of the Secretary of State of the State of [______], a UCC-1
financing statement describing the Contracts and other items of the Trust Fund
as collateral and naming the Depositor as debtor and the Trustee as secured
party. The Servicer shall also cause to be filed all necessary continuation
statements for each of the foregoing UCC-1 financing statements.
(ii) Subject to the following sentence, from time to time the Servicer
shall take and cause to be taken such actions and execute such documents as are
necessary to perfect and protect the Certificateholders' interests in the
Contracts and other items of the Trust Fund and their proceeds and the
Manufactured Homes and any related Mortgaged Property against all other Persons,
including, without limitation, the filing of financing statements and
continuation statements, the execution of transfer instruments and the making of
notations on or taking possession of all records or documents of title.
[IndyMac, Inc.], so long as it is the Servicer, shall not be required to cause
notations to be made on any document of title relating to any Manufactured Home
or to execute any transfer instrument (including, without limitation, any UCC-3
assignments) relating to any Manufactured Home (other than a notation or a
transfer instrument necessary to show the Seller as the lienholder or legal
title holder) or, except as provided in Section 2.01 with respect to Land Home
Contracts, to file documents in real property records with respect to a
Manufactured Home or related Contract or any related Mortgaged Property, absent
notice from the Trustee or the Depositor or actual knowledge that such
Manufactured Home (other than a Manufactured Home securing a Land Home Contract)
has become real property under applicable state law; provided that this sentence
shall not have any effect on the representation and warranty in Section 3.02(j)
and the Seller's obligations in respect thereof in Section 3.05; provided
further that the Servicer shall not be required to protect the Trustee from any
Liens on the Contracts, their proceeds or the Manufactured Homes created by the
Depositor or conveyances of the Contracts or their proceeds by the Depositor.
Nothing in the preceding sentence shall be construed to limit the
indemnification obligations of the Servicer set forth in Section 10.05. The
Seller and the Depositor agree to take whatever action is necessary to enable
the Servicer to file financing statements and continuation statements and
otherwise act to perfect and protect the Certificateholders' interests in the
Contracts, the Manufactured Homes and any related Mortgaged Property as set
forth in this Agreement. Assuming that the Depositor and the Trustee perform
such actions as are required at the direction of the Servicer, the Servicer will
maintain a first priority security interest in each Manufactured Home and any
related Mortgaged Property so long as the related Contract is the property of
the Trust; provided that the Seller, so long as it is the Servicer, shall not be
required to cause notations to be made on any document of title relating to any
Manufactured Home, to execute any transfer instrument (including, without
limitation, any UCC-3 assignments) relating to any Manufactured Home (other than
a notation or a transfer instrument necessary to show the Seller as lienholder
or legal title holder) or to file documents in real property records with
respect to a Manufactured Home or related Contract or any related Mortgaged
Property, absent notice from the Trustee, or the Depositor or actual knowledge
that such Manufactured Home (other than a Manufactured Home securing a Land Home
Contract) has become real property under applicable state law or to protect the
Trustee from any Liens created by the Depositor on any Manufactured Home.
(b) During the term of this Agreement, neither the Seller nor the Depositor
shall change its name, identity or structure or relocate its chief executive
office without first giving notice to the Trustee. If any change in the Seller's
or the Depositor's name, identity or structure or the relocation of its chief
executive office would make any financing or continuation statement or notice of
lien filed under this Agreement seriously misleading within the meaning of
applicable provisions of the UCC or any title statute, the Seller or the
Depositor, as the case may be, no later than five days after the effective date
of such change, shall file such amendments as may be required to preserve and
protect the Certificateholders' interests in the Contracts and proceeds thereof
and in the Manufactured Homes.
(c) The Seller hereby represents and warrants that its current chief
executive offices are located in the State of [________]. The Depositor hereby
represents and warrants that its chief executive offices are in the State of
[________]. During the term of this Agreement, the Seller and the Depositor will
each maintain its respective chief executive office in one of the States of the
United States, [except __________].
(d) The Servicer agrees to pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against all
third parties, of the Certificateholders' right, title and interest in, to and
under the Contracts (including, without limitation, the security interest in the
Manufactured Homes granted thereby) and any related Mortgages.
Section 2.03. Acceptance by Trustee. The Trustee hereby acknowledges
conveyance of the Contracts and any related Mortgages to the Trustee and
declares that the Trustee, directly or through a custodian, holds and will hold
such Contract Files in trust for the use and benefit of all present and future
Certificateholders. The Trustee hereby certifies that it has no notice or
knowledge of (i) any adverse Lien with respect to any Contract, (ii) any
Contract being overdue or dishonored, (iii) any evidence on the face of any
Contract of any security interest therein adverse to the Trustee's interest or
(iv) any defense against or claim against any Contract by the Obligor or by any
other party.
Section 2.04. Conditions to Closing. On the Closing Date, the Trustee shall
authenticate and deliver the Certificates only upon receipt of letters from
[_______] and [______] confirming that (i) the Class [__________] and [________]
Certificates have been rated [__] and [__], respectively, (ii) the Class [__]
Certificates have been rated at least [__] and [___], respectively, and (iii)
the Class [__] Certificates have been rated at least [__] and [__],
respectively.
Section 2.05. Contribution of Assets. Except as provided in Section 3.05(a)
as relates to a deposit in lieu of repurchase of a Contract the principal
balance of which is incorrectly set forth on the Contract Schedule, following
the Closing Date, the Trustee shall not accept any contribution of additional
assets to the Trust Fund unless the Depositor has delivered to the Trustee an
Opinion of Counsel to the effect that (i) the contribution of such assets into
the Trust Fund will not cause the Trust Fund to fail to qualify as a two-tiered
REMIC so long as any Certificate is outstanding and (ii) such contribution will
not cause the imposition of Tax on contributions to the Trust Fund after the
"start-up day" (as defined in Section 860G(a)(9) of the Code) with respect
thereto.
Section 2.06. Execution and Authentication of Certificates. The Trustee, on
behalf of the Trust Fund, has caused to be executed, authenticated and delivered
to or upon the order of the Depositor, in exchange for the Trust Fund,
concurrently with the transfer, sale, assignment, setting over and conveyance to
the Trustee of the Trust Fund, Certificates in authorized denominations
evidencing the ownership of the entire Trust Fund.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties as to the Seller. The Seller
makes the following representations and warranties to the other parties hereto
and the Certificateholders. Such representations and warranties shall speak as
of the execution and delivery of this Agreement, but shall survive the sale,
transfer and assignment of the Contracts to the Trustee.
(a) Organization and Good Standing; Licensing. The Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of its incorporation and has the corporate power to own
its assets and to transact the business in which it is currently engaged.
The Seller is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires such
quali- fication and in which the failure so to qualify would have a
material adverse effect on the condition, financial or other, or the
earnings or business affairs of the Seller. The Seller was properly
licensed in each jurisdiction at the time of its purchase of each Contract
in such jurisdiction to the extent required by the laws of such
jurisdiction as applied to the purchase of such Contract and the failure to
be so licensed would have a material adverse effect on the enforceability
of the related Contracts.
(b) Authorization; Binding Obligations. The Seller has the power and
authority to make, execute and deliver this Agreement and perform all of
the trans- actions contemplated to be performed by it under this Agreement,
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement. When executed and delivered,
this Agreement will constitute the legal, valid and binding obligation of
the Seller enforceable in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and by the availability of
equitable remedies.
(c) No Consent Required. The Seller is not required to obtain the
consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, except such as
have been obtained or the failure to obtain will not have a material
adverse effect on the business operations, assets or financial condition of
the Seller.
(d) No Violations. The execution, delivery and performance of this
Agreement by the Seller will not violate any provision of any existing law
or regulation or any order or decree of any court applicable to the Seller
or the charter or bylaws of the Seller, or constitute a material breach of
any mortgage, indenture, contract or other agreement to which the Seller is
a party or by which the Seller may be bound, except for such violations or
breaches that, in the aggregate, will not have a material adverse effect on
the business, operations, assets or financial condition of the Seller.
(e) Litigation. No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending, or to
the knowledge of the Seller threatened, against the Seller or any of its
properties or with respect to this Agreement or the Certificates which, if
adversely determined, would in the opinion of the Seller have a material
adverse effect on the transactions contemplated by this Agreement.
Section 3.02. Representations and Warranties as to Each Contract. The
Contracts have been sold by the Seller to the Depositor pursuant to the Sale and
Purchase Agreement. In connection with such sale, the Seller made the
representations and warranties contained in Sections 3.02 and 3.03 to the
Depositor. As a condition of the purchase by the Depositor, the Depositor has
required that the Seller make such representations and warranties directly to
the Trustee and the Certificateholders so that the Trustee may recover directly
against the Seller on such representations and warranties rather than indirectly
through claims by the Depositor against the Seller. Consequently, the Seller
represents and warrants to the other parties hereto and the Certificateholders
as to each Contract as of the Cut-off Date or the Closing Date, as the case may
be. Such representations and warranties shall speak as of the execution and
delivery of this Agreement (and as to the best knowledge as of such date), but
shall survive the sale, transfer and assignment of the Contracts to the Trustee.
(a) Contract Schedule. As of the Cut-off Date, the information set
forth in the Contract Schedule is true and correct in all material respects
with respect to each Contract.
(b) Payments. As of the Cut-off Date, no Monthly Payment is more than
[__] days past due, and no portion of the Monthly Payment due in the second
month next preceding the month in which the Cut-off Date occurs was made
directly or indirectly by the Seller on behalf of the Obligor.
(c) No Waivers. The terms of the Contract and any related Mortgage
have not been waived, altered or modified in any respect, except by
instruments or documents included in the Contract File.
(d) Binding Obligation. The Contract and any related Mortgage is the
legal, valid and binding obligation of the Obligor thereunder and is
enforceable in accordance with its terms, except as such enforceability may
be limited by laws affecting the enforcement of creditors' rights generally
and by general principles of equity.
(e) Insurance. The Manufactured Home securing the Contract is covered
by a Hazard Insurance Policy in the amount required by Section 5.08, except
to the extent that such an insurance policy has been cancelled and the
Seller has not yet received notification thereof. All premiums due as of
the Closing Date on such insurance have been paid in full or, with respect
to insurance placed by the Servicer, will have been paid in full within
[__] days after the Closing Date.
(f) Origination. The Contract was either (i) originated by a
manufactured housing dealer acting, to the best of the Seller's knowledge,
in the regular course of its business and was purchased by the Seller in
the regular course of its business, (ii) originated by the Seller in the
regular course of its business or (iii) originated by a third-party
originator and purchased in bulk by the Seller.
(g) Lawful Assignment. The Contract and any related Mortgage was not
originated in and is not subject to the laws of any jurisdiction whose laws
would make the transfer of the Contract from the Seller to the Depositor or
the transfer or ownership of the Contract under this Agreement or pursuant
to transfers of Certificates unlawful, void or voidable or render the
Contract unenforceable in any respect.
(h) Compliance with Law. All requirements of any federal, state or
local law, including, without limitation, usury, truth-in-lending and equal
credit opportunity laws and lender licensing laws, applicable to the
Contract and any related Mortgage or the servicing of any Contract have
been complied with to the extent any of the foregoing would have a material
adverse effect on the enforceability of the related Contract.
(i) Contract in Force. The Contract and any related Mortgage has not
been satisfied or subordinated in whole or in part or rescinded, and the
Manufactured Home securing the Contract has not been released from the lien
of the Contract and any related Mortgage in whole or in part.
(j) Valid Security Interest. The Contract, together with any related
Mortgage, creates a valid, subsisting and enforceable first priority
security interest in favor of the Seller in the Manufactured Home covered
thereby and, in the case of a Land Home Contract, a first mortgage lien on
the related Mortgaged Property, subject to (i) the lien of current real
property taxes and assessments, (ii) covenants, conditions and
restrictions, rights of way, easements and other matters of public record
as of the date of recording of such Mortgage, such exceptions appearing of
record being acceptable to mortgage lending institutions generally in the
area wherein the property subject to the Mortgage is located or
specifically reflected in the appraisal obtained in connection with the
origination of the related Land Home Contract obtained by the Seller and
(iii) other matters to which like properties are commonly subject which do
not materially interfere with the benefits of the security intended to be
provided by such Mortgage; such security interest or Mortgage has been
assigned by the Seller to the Depositor and, assuming the due
authorization, execution and delivery by the Depositor of this Agreement,
the Sale and Purchase Agreement and such other instruments relating to the
transfer of the Contract to the Trustee as the Seller has presented to the
Depositor for execution and delivery, by the Depositor to the Trustee, and,
assuming the Depositor has neither conveyed an interest in the Contract or
related Mortgaged Property except pursuant to this Agreement nor created
any Lien on the Contract, their proceeds or any Manufactured Home or
related Mortgaged Property except as contemplated by this Agreement, the
Trustee has a valid and perfected first priority security interest in such
Manufactured Home and, in the case of a Land Home Contract, a first
mortgage lien on the related Mortgaged Property.
(k) Good Title. The Seller purchased the Contract and any related
Mortgage for value and took possession thereof in the ordinary course of
its business, without knowledge that the Contract was subject to any
security interest. Immediately prior to the transfer of the Contract and
any related Mortgage by the Seller to the Depositor, the Seller had good
and marketable title thereto free and clear of any Lien (other than any
Liens created by any financing arrangements in respect of the Contracts,
which Liens will be released concurrently with the issuance of the
Certificates) and was the sole owner thereof with full right to transfer
the Contract and any related Mortgage to the Depositor. Except as otherwise
provided in the parenthetical in the preceding sentence, the Seller has not
sold, assigned or pledged the Contract or any related Mortgage to any
Person other than the Depositor and prior to the transfer of the Contract
and any related Mortgage by the Seller to the Depositor and by the
Depositor to the Trust, the Seller had good and marketable title thereto
free and clear of any Lien, was the sole owner thereof with full right to
transfer the Contact to the Depositor and has transferred all right, title
and interest in, to and under the Contract to the Depositor, free and clear
of any Lien.
(l) No Defaults. To the best of the Seller's knowledge, as of the
Cut-off Date there was no default, breach, violation or event permitting
acceleration existing under the Contract and any related Mortgage and no
event which, with notice and the expiration of any grace or cure period,
would constitute such a default, breach, violation or event permitting
acceleration under such Contract (except payment delinquencies permitted by
clause (b) above). The Seller has not waived any such default, breach,
violation or event permitting acceleration, except by instruments or
documents included in the Contract File.
(m) No Liens. As of the Closing Date, there are, to the best of the
Seller's knowledge, no Liens which have been filed for work, labor or
materials affecting the Manufactured Home securing the Contract which are
or may be liens prior to, or equal or coordinate with, the lien of the
Contract.
(n) Equal Installments. Each Contract has a fixed APR and provides for
level monthly payments of principal and interest (except that the payment
at maturity may be slightly larger) which fully amortize the loan over its
term. Each Contract is computed according to the "actuarial" method.
(o) Enforceability. The Contract and any related Mortgage contains
customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization against the
collateral of the benefits of the security.
(p) One Original. There is only one original executed Contract, which
is in the custody of the Trustee on the Closing Date.
(q) Loan-to-Value Ratio. At the time of its origination, the Contract
had a Loan-to-Value Ratio (rounded to the nearest [_]%) not greater than
[__]%.
(r) Not Real Estate. The related Manufactured Home (other than a Manu-
factured Home that secures a Land Home Contract) is personal property, was
personal property at the time of the execution and delivery of the related
Contract by the parties thereto, and is not and was not, at such time,
considered or classified as part of the real estate on which it is located
under the laws of the jurisdiction in which it is located. The related
Manufactured Home is, to the best of the Seller's knowledge, free of damage
and in good repair.
(s) Notation of Security Interest. If the related Manufactured Home is
located in a state in which notation of a security interest on the title
document is required or permitted to perfect such security interest, the
title document shows, or if a new or replacement title document with
respect to such Manufactured Home is being applied for such title document
will show, the Seller as the holder of a first priority security interest
in such Manufactured Home. If the related Manufactured Home is located in a
state in which the filing of a financing statement or the making of a
fixture filing under the UCC is required to perfect a security interest in
manufactured housing, such filings or recordings have been duly made and
show the Seller as secured party. If the related Manufactured Home secures
a Land Home Contract and is located in a state that does not permit
separate evidence of Liens on the Manufac- tured Home and the property on
which it is located, such Manufactured Home and, in the case of all Land
Home Contracts and any Contracts on Mortgaged Property located in
[_________], the related land securing such Land Home Contract or the
Manufac- tured Home, as the case may be, are subject to a Mortgage properly
filed in the appropriate public recording office and naming [IndyMac, Inc.]
as mortgagee. In either case, assuming the due authorization, execution and
delivery by the Depositor of this Agreement, the Sale and Purchase
Agreement and such other instruments relating to the transfer of the
Contracts to the Trustee as the Seller has presented to the Depositor for
execution and delivery, the Trustee has the same rights as the secured
party of record would have (if such secured party were still the owner of
the Contract) against all Persons claiming an interest in such Manufactured
Home.
(t) Qualified Mortgage for REMIC. Each Contract is secured by a
"single family residence" within the meaning of Section 25(e)(10) of the
Code.
Section 3.03. Representations and Warranties as to the Contracts. The
Seller represents and warrants to the other parties hereto and the
Certificateholders as follows. Such representations and warranties shall speak
as of the execution and delivery of this Agreement, but shall survive the sale,
transfer and assignment of the Contracts to the Trustee.
(a) Amounts. The aggregate principal amounts payable by Obligors under
the Contracts as of the Cut-off Date (including Monthly Payments due on or
after the Cut-off Date but paid prior to the Cut-off Date) equals or
exceeds the Cut-off Date Pool Balance, and each Contract has an APR equal
to or greater than [____]%.
(b) Characteristics. The Contracts have the following characteristics
as of the Cut-off Date: (i) based on Cut-off Date Pool Balance, not more
than (A) [__]% of the Contracts are secured by Manufactured Homes located
in any one state and (B) [___]% of the Contracts are Land Home Contracts;
(ii) no Contract has a remaining term to maturity of less than [__] months
or more than [___] months; (iii) the final scheduled payment date on the
Contract with the latest maturity is in [________]; (iv) based on Cut-off
Date Pool Balance, [____]% of the Contracts relate to purchases of new
Manufactured Homes and [____]% of the Contracts relate to the financing of
used Manufactured Homes; and (v) no Contract was originated before
[_________, 199_].
(c) Computer Tape. The Computer Tape made available to the Servicer as
of the close of business on [_________, 199_] was accurate as of its date
and includes a description of the same Contracts that are described in the
Contract Schedule.
(d) Marking Records. Within one month after the Closing Date, the
Seller will have caused the portions of the Electronic Ledger relating to
the Contracts constituting part of the Trust Fund to be clearly and
unambiguously marked to indicate that such Contracts constitute part of the
Trust Fund and are owned by the Trust Fund in accordance with the terms of
the trust created hereunder.
(e) No Adverse Selection. Except for the effect of the representations
and warranties made in Sections 3.02 and 3.03 and the effect of the
geographical distribution of the Manufactured Homes, no adverse selection
procedures have been employed in selecting the Contracts.
Section 3.04. Representations and Warranties as to the Contract Files. The
Seller represents and warrants to the other parties hereto and the
Certificateholders as follows. Such representations and warranties shall speak
as of the execution and delivery of this Agreement, but shall survive the sale,
transfer and assignment of the Contracts to the Trustee.
(a) Possession. Immediately prior to the Closing Date, the Servicer
will have possession of each original Contract and the Servicer will have
possession of the remainder of the related Contract File (except for any
certificate of title that has not yet been returned from the appropriate
public recording office).
(b) Bulk Transfer Laws. The transfer, assignment and conveyance of the
Contracts and the Contract Files by the Seller pursuant to this Agreement
are not subject to the bulk transfer or any similar statutory provisions in
effect in any applicable jurisdiction.
Section 3.05. Repurchase of Contracts for Breach.
(a) The Seller shall repurchase a Contract (each, a "Repurchased
Contract"), at its Repurchase Price, not later than [__] Business Day[s] after
the first Determination Date which is more than [__] days after the Seller
becomes aware, or receives written notice from the Servicer or the Trustee, of a
breach of a representation or warranty of the Seller set forth in Section 3.02
or 3.03 that materially adversely affects the Certificateholders' interest in
such Contract, unless such breach has been cured. Notwithstanding the foregoing,
with respect to (i) any Contract incorrectly described on the Contract Schedule
with respect to Contract Principal Balance, the Seller may, in lieu of
repurchasing such Contract, deposit in the Collection Account not later than
[__] Business Day[s] after such Determination Date cash in an amount sufficient
to cure such deficiency or discrepancy and (ii) a breach of a representation or
warranty relating to the Contracts in the aggregate and not to each particular
Contract, the Seller may select Contracts to repurchase that, had such Contracts
not been included as part of the Contract Pool, there would have been no breach
of such representation or warranty. Notwithstanding the foregoing, the Seller
shall have no obligation to cure any breach or to repurchase or substitute for
such affected Contract if the substance of such breach constitutes fraud in the
origination of such affected Contract and the Seller, at the time of such
origination and on the Closing Date, did not have actual knowledge of such
fraud.
It is understood and agreed that the obligation of the Seller to repurchase
any Contract as to which certain breaches of representations or warranties have
occurred and are continuing (as provided in the first paragraph of this Section
3.05(a)) shall constitute the sole remedy available to the Certificateholders,
the Depositor or the Trustee with respect to any breach of a representation or
warranty set forth in Section 3.02 or 3.03 [; provided that the Seller shall
defend and indemnify the Trustee, the Trust Fund and Certificateholders against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
suffered by any of them as a result of third-party claims arising out of any
breach of a representation or warranty set forth in Section 3.02.] Nothing in
the preceding sentence shall be construed to limit the indemnification
obligations of the Servicer set forth in Section 10.05. Notwithstanding any
other provision of this Agreement, the obligation of the Seller under this
Section shall not terminate upon an Event of Default.
[Notwithstanding the foregoing provisions of this Section, the Seller shall
not be required to repurchase any Contract on account of a breach of the
representation or warranty contained in Section 3.02(j) or (s) solely on the
basis of failure by the Seller to cause notations to be made on any document of
title relating to any Manufactured Home or to execute any transfer instrument
relating to any Manufactured Home (other than a notation or a transfer
instrument necessary to show the Seller as lienholder or legal title holder) or
to record an assignment of a Mortgage unless a court of competent jurisdiction
has adjudged that, because of such failure, the Trustee does not have a
perfected first-priority security interest in the related Manufactured Home.]
Notwithstanding the foregoing, the Seller shall not deposit cash into the
Collection Account or the Certificate Account pursuant to this Section after the
end of the [___] month period beginning on the Closing Date unless it shall
first have obtained an Opinion of Counsel to the effect that such deposit will
not give rise to any Tax under Section 860F(a)(1) of the Code or Section 860G(d)
of the Code. Any such deposit shall not be invested. If the Seller is required
to purchase a Contract (or deposit cash in the Collection Account or the
Certificate Account), the Seller shall guarantee the payment of any Tax under
Section 860F(a)(1) of the Code or under Section 860G(d) of the Code by paying to
the Trustee the amount of such Tax not later than five Business Days before such
Tax shall be due and payable to the extent that amounts previously paid over to
and then held by the Trustee pursuant to Section 10.12 are insufficient to pay
such Tax and all other Taxes chargeable under Section 10.12. The Trustee shall
hold any amount paid to it pursuant to the preceding sentence in an account that
is not part of the Trust Fund. The Servicer shall give notice to the Trustee at
the time of such repurchase of the amounts due from the Seller pursuant to such
guarantee of Taxes of the Seller and notice as to who should receive such
payment.
In the event any Tax that is guaranteed by the Seller is refunded to the
Trust Fund or otherwise is determined not to be payable, the Seller shall be
repaid the amount of such refund or that portion of any guarantee payment made
by the Seller that is not applied to the payment of such Tax.
(b) Promptly after the repurchase referred to in Section 3.05(a), the
Trustee shall execute such documents as are presented to it by the Seller and
are reasonably necessary to reconvey the Repurchased Contract to the Seller. Any
amount received on or recovered with respect to Repurchased Contracts during or
after the month of repurchase shall be the property of the Seller and need not
be deposited in the Collection Account or the Certificate Account.
Section 3.06. Representation and Warranty as to the Depositor. The
Depositor represents and warrants to the other parties hereto and the
Certificateholders that, immediately prior to the transfer, sale, assignment and
conveyance of the Contracts to the Trustee and assuming that the representation
and warranty in Section 3.02(m) is correct, the Depositor had good title to, and
was the sole owner of, each Contract and any related Mortgage free of any Liens
created by the Depositor, there had been no other sale or assignment thereof by
the Depositor and the Depositor has transferred to the Trustee a security
interest (as defined in the UCC in effect in the State of New York) in the
Contracts and any related Mortgages, which security interest is a perfected,
first priority security interest.
ARTICLE FOUR
THE CERTIFICATES
Section 4.01. The Certificates. Each Class of Certificates shall be
substantially in the related forms annexed hereto as Exhibits, with such
immaterial changes as the Depositor deems appropriate, and (other than the
Class [______] Certificates) shall be issued in minimum denominations of
$[_________] and integral multiples of $[_____] in excess thereof. The Class
[___] Certificates shall be issued as fully registered physical certificates
including one certificate representing the Tax Matters Person Certificate. The
Class [__] Certificates will not have any principal balance.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trust Fund by a Responsible Officer of the Trustee. The
Certificates shall be authenticated by manual signature on behalf of the Trustee
by a Responsible Officer or an Authenticating Agent. Certificates bearing the
manual or facsimile signatures of individuals who were at any time the proper
officers of the Trustee shall bind the Trust Fund, 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 manual authentication by the Trustee or its Authenticating Agent
and such authentication upon any Certificate shall be conclusive evidence, and
the only evidence, that such Certificate has been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication.
Section 4.02. Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at its Corporate Trust Office or, at
the election of the Trustee, at the office of its designated agent in New York
City, 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 transfer and exchanges of Certificates as herein provided. The Trustee
initially appoints itself as the Certificate Registrar.
(b) Subject to Sections 4.02(c) and 11.01(b), upon surrender for
registration of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose, the Trustee shall authenticate and deliver,
in the name of the designated transferee or transferees, a Certificate of a like
aggregate Percentage Interest and dated the date of authentication by the
Trustee. The Holder and beneficial owner of any Subordinate Certificate will be
deemed to represent that it is not a Benefit Plan or a trustee of any such
Benefit Plan or a person acting on behalf of any such plan or acquiring a
Subordinate Certifi- cate with the assets of any such Benefit Plan unless it
delivers to the Trustee, the Depositor and the Servicer (i) an Opinion of
Counsel satisfactory to the Trustee, the Depositor and the Servicer, to the
effect that the purchase or holding of such Subordinate Certificate by the
prospective transferee will not result in the assets of the Trust Fund being
deemed to be "plan assets" and subject to the prohibited transaction provisions
of ERISA and the Code and will not subject the Trustee, the Depositor or the
Servicer to any obligation in addition to those undertaken in this Agreement,
which Opinion of Counsel shall not be an expense of the Trustee, the Depositor
or the Servicer, and (ii) if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
such Subordinate Certificates with funds contained in an "insurance company
general account" (as such term is defined in Section V(e) of PTCE 95-60) and
that the purchase and holding of such Subordinate Certificates are covered under
PTCE 95-60.
(c) No transfer of a Class [__] or Class [__] Certificate shall be made
unless such transfer is made pursuant to an effective registration statement or
in accordance with an exemption from the requirements under the Securities Act
or any applicable state securities laws. If such a transfer is to be made in
reliance upon an exemption from the Securities Act and such state securities
laws, prior to the registration of any such transfer (i) the Trustee, the
Depositor or the Servicer may (except in the case of a transfer to the Servicer
or any Affiliate thereof) require (A) an Opinion of Counsel as to the Securities
Act and a memorandum of law as to state securities laws, in each case acceptable
to and in form and substance satisfactory to the Trustee, the Depositor and the
Servicer that such transfer may be made pursuant to an exemption, describing the
applicable exemption and the basis therefor, from the Securities Act and such
state securities laws or is being made pursuant to the Securities Act and such
state securities laws, which Opinion of Counsel and memorandum of law shall not
be an expense of the Trustee, the Depositor or the Servicer, or (B) an
Investment Letter substantially in the form of Exhibit L.
No transfer of a Class [__] Certificate shall be made unless the Trustee
shall have received either (i) a representation letter from the proposed
Transferee to the effect that such transferee is not a Benefit Plan or a trustee
of any such Benefit Plan or a person acting on behalf of any such Benefit Plan
or acquiring such Certificate with the assets of any such Benefit Plan or (ii)
an Opinion of Counsel satisfactory to the Trustee, the Depositor and the
Servicer, to the effect of the Opinion of Counsel required by Section
4.02(b)(i), which Opinion of Counsel shall not be an expense of the Trustee, the
Depositor or the Servicer, and (ii) the Trustee shall require the Transferee to
execute a Transfer Affidavit.
(d) At the option of the Certificateholder, a Certificate may be exchanged
for another Certificate or Certificates of the same Class and of authorized
denominations of the same aggregate denomination, upon surrender of the
Certificate to be exchanged at any office or agency of the Trustee maintained
for such purpose. Whenever the Certificate is so surrendered for exchange, the
Trustee shall execute and the Trustee or its Authenticating Agent shall
authenticate and deliver, the Certificate or Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for transfer or exchange (if so required by the
Trustee) shall be duly endorsed by, or be accompanied by a written instrument of
transfer in the form satisfactory to the Trustee or the Certificate Registrar
duly executed by, the Holder thereof or his attorney duly authorized in writing.
(e) No service charge shall be made to the Holder for any transfer or
exchange of the Certificate, 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 the Certificate.
(f) All Certificates surrendered for transfer and exchange shall be held in
accordance with the retention policy of the Trustee.
Section 4.03. Book-Entry Certificates.
(a) Except as provided in Section 4.03(b), the Certificates of each Class
(other than the Class [__], Class [__] and Class [__] Certificates) will be
evidenced by Book-Entry Certificates which shall at all times remain registered
in the name of the Depository or its nominee and at all times: (i) registration
of the Class A (other than the Class [__] Certificates), Class [__] and Class
[__] Certificates may not be transferred by the Trustee except to another
Depository; (ii) the Depository shall maintain book-entry records with respect
to the Certificate Owners and with respect to ownership and transfers of such
Class A (other than the Class [__] Certificates), Class [__] and Class [__]
Certificates; (iii) ownership and transfers of registration of the Class A
(other than the Class [__] Certificates), Class [__] and Class [__] Certificates
on the books of the Depository shall be governed by applicable rules established
by the Depository; (iv) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants; (v) the Trustee shall
deal with the Depository as representative of the Certificate Owners of the
Class A (other than the Class [__] Certificates), Class [__] and Class [__]
Certificates for purposes of exercising the rights of Holders under this
Agreement, and requests and directions for and votes of such representatives
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; and (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its Depository Participants and furnished by the Depository Participants with
respect to indirect participating firms and persons shown on the books of such
indirect participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owner. Each Depository
Participant shall only transfer 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.
(b) If (i) the Depositor or the Depository advises the Trustee in writing
that the Depository is no longer willing, qualified or able to properly
discharge its responsibilities as Depository and the Depositor is unable to
locate a qualified successor, (ii) the Depositor at its option may advise the
Trustee in writing that it elects to terminate the book-entry system through the
Depository or (iii) after the occurrence of an Event of Default, Certificate
Owners representing Percentage Interests aggregating not less than [__]% of the
Percentage Interests of the Class A, Class [__] and Class [__] Certificates,
voting as a single Class, advise the Trustee and the Depository through the
Depository Participants in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of the Certificate
Owners, the Trustee shall notify all Certificate Owners, through the Depository,
of the occurrence of any such event and of the availability of definitive, fully
registered Class A, Class [__] and Class [__] Certificates (the "Definitive
Certificates") to Certificate Owners requesting the same. Upon surrender to the
Trustee of the Class A, Class [__] and Class [__] Certificates by the
Depository, accompanied by registration instructions from the Depository for
registration, the Trustee shall issue the Definitive Certificates. Neither the
Depositor nor the Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Certificates, all references
herein to obligations imposed upon or to be performed by the Depository shall be
deemed to be imposed upon and performed by the Trustee, to the extent applicable
with respect to such Definitive Certificates and the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder.
(c) On or prior to the Closing Date, there shall be delivered to the
Depository one Class [__] Certificate, one Class [__] Certificate, Class [_____]
Certificate, one Class [__] Certificate, Class [__] Certificate, one Class [__]
Certificate, one Class [__] Certificate and one Class [__] Certificate, each in
registered form registered in the name of the Depository's nominee, Cede & Co.,
the total face amount of which represents [__]% of the Class [__] Initial
Certificate Principal Balance, Class [__] Initial Certificate Principal Balance,
Class [__] Initial Certificate Principal Balance, Class [__] Initial Certificate
Principal Balance, Class [__] Initial Certificate Principal Balance, Class [__]
Initial Certificate Principal Balance, the Class [__] Initial Certificate
Principal Balance and the Class [__] Initial Certificate Principal Balance,
respectively, in each case rounded down to the nearest $1. Each Class [__],
Class [__], Class [__], Class [__], Class [__], Class [__], Class [__] or Class
[__] Certificate so registered shall bear the following legend:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTA- TIVE OF THE
DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN."
Section 4.04. Mutilated, Destroyed, Lost or Stolen Certificates. If (i) any
mutilated Certificate is surrendered to the Trustee or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee and the Certificate
Registrar such security or indemnity as may be required by it to save each of
them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of the same Class and
of like tenor and denomination. 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 connected therewith. Any replacement 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
destroyed, lost or stolen Certificate shall be found at any time.
Section 4.05. Persons Deemed Owners. The Depositor, the Servicer, the
Trustee, the Certificate Registrar and any Paying Agent may treat the person in
whose name any Certifi- cate is registered as the owner of such Certificate for
the purpose of receiving payments pursuant to Section 6.01 and for all other
purposes whatsoever, and none of the foregoing entities shall be affected by
notice to the contrary.
Section 4.06. Appointment of Paying Agent. The Trustee may appoint a Paying
Agent for the purpose of making distributions to Certificateholders pursuant to
Section 6.01 and payments pursuant to Section 10.12. Any Paying Agent so
appointed either shall be a bank or trust company or shall have a rating
acceptable to each Rating Agency. 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, from amounts in the Certificate Account, a sum
sufficient to make the payments to Certificateholders in the amounts and in the
manner provided for in Section 6.01, such sum to be held in trust for the
benefit of Certificateholders. The Trustee initially appoints itself as Paying
Agent.
The Trustee shall cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee that such Paying Agent is at all times acting as agent for the
Trustee and 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.
Section 4.07. Access to List of Certificateholder Names and Addresses. The
Certificate Registrar will furnish to the Trustee (if the Trustee is not the
Certificate Registrar), the Depositor and the Servicer within five days after
receipt by the Certificate Registrar of a request therefor from the Trustee, the
Depositor or the Servicer in writing, a list, in such form as the Trustee, the
Depositor or the Servicer reasonably may require of the names and addresses of
the Certificateholders as of the most recent Record Date. If Holders of Certifi-
cates of any Class evidencing, as to such Class, aggregate Percentage Interests
of 25% or more (the "Applicants") apply in writing to the Trustee, and such
application states that the Applicants desire to communicate with other
Certificateholders of such Class with respect to their rights under this
Agreement or under the Certificates of such Class and is accompanied by a copy
of the communication which such Applicants proposed to transmit, then the
Trustee, within five Business Days after the receipt of such application, shall
afford such Applicants access during normal business hours to the most recent
list of Certificateholders of such Class held by the Trustee. If such list is as
of a date more than [__] days prior to the date of receipt of such Applicants'
request, the Trustee promptly shall request from the Certificate Registrar a
current list as provided above, and shall afford such Applicants access to such
list promptly upon receipt. Every Certificateholder, by receiving and holding a
Certificate, agrees with the Certificate Registrar and the Trustee that neither
the Servicer, the Certificate Registrar, the Depositor nor the Trustee shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Certificateholders hereunder, regardless of the
source from which such information was derived.
Section 4.08. Authenticating Agents. The Trustee may appoint one or more
Authenti- cating Agents (the "Authenticating Agents") with power to act on its
behalf and subject to its direction in the execution and delivery of the
Certificates. For all purposes of this Agreement, the execution and delivery of
Certificates by the Authenticating Agent pursuant to this Section shall be
deemed to be the execution and delivery of Certificates "by the Trustee."
Section 4.09. The [__] Certificates.
(a) The Class [__] Certificates may not be assigned or transferred except
in accor- dance with Sections 4.02, 4.09 and any other applicable provision of
this Agreement. The Holders of the Class [__] Certificates, by purchasing such
Class [__] Certificates, for purposes of Section 10.12 (i) shall be deemed to
consent to the appointment of the Trustee as (A) the tax matters person for the
Trust Fund and (B) the attorney-in-fact and agent for any person that is the tax
matters person if the Trustee is unable to serve as the tax matters person and
(ii) agrees to execute any documents required to give effect to the provisions
of clause (i) above.
(b) Each Person who has or acquires any Ownership Interest in a Class [__]
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 execute
all instruments of transfer and to do all other things necessary in connection
with any such sale, and the rights of each Person acquiring any Ownership
Interest in a Class [__] Certificate are expressly subject to the following
provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Class [__] Certificate shall be a Permitted Transferee and shall
promptly notify the Trustee of any change or impending change in its
status as a Permitted Transferee.
(ii) In connection with any proposed Transfer of any Ownership
Interest in a Class [__] Certificate, the proposed Transferee shall
deliver to the Trustee, the following:
(A) a Transfer Affidavit; and
(B) an agreement by the proposed Transferee to be bound by and to
abide by the provisions of this Section.
(iii) Notwithstanding the delivery of a Transfer Affidavit
by a proposed Transferee under clause (ii) above, if the Trustee
or a Responsible Officer has actual knowledge that the proposed
Transferee is not a Permitted Transferee, no Transfer of any
Ownership Interest in a Class [__] Certificate to such proposed
Transferee shall be effected.
(iv) Each Person holding or acquiring any Ownership
Interest in a Class [__] Certificate shall agree (A) to
require a Transfer Affidavit from any other Person to whom
such Person attempts to Transfer any Ownership Interest in
such Class [__] Certificate and (B) not to Transfer any
Ownership Interest in such Class [__] Certificate or to
cause the Transfer of any Ownership Interest in such Class
[__] Certificate to any other Person if it has actual
knowledge that such Person is not a Permitted Transferee.
(v) Any attempted or purported Transfer of any
Ownership Interest in a Class [__] Certificate in violation
of the provisions of this Section shall be absolutely null
and void and shall vest no rights in the purported
Transferee. If any purported Transferee shall become the
holder of an Ownership Interest in a Class [__] Certificate
in violation of the provisions of this Section, then, upon
discovery by a Responsible Officer of, or due notification
to the Trustee that the recognition of the Transfer of such
Ownership Interest in such Class [__] Certificate was not in
fact permitted by this Section, the last preceding Permitted
Transferee shall be restored to all rights as Holder thereof
retroactive to the date of Transfer of such Ownership
Interest in such Class [__] Certificate. The Trustee shall
be entitled but not obligated to recover from any Holder of
a Class [__] Certificate that was in fact not a Permitted
Transferee at the time it became a Holder or, at such
subsequent time as it became other than a Permitted
Transferee, all payments made on such Class [__] Certificate
at and after such time. Any such payments so recovered by
the Trustee shall be paid and delivered by the Trustee to
the last preceding Permitted Transferee of such Class [__]
Certificate.
Upon notice to the Trustee that any legal or beneficial interest in any
portion of a Class [__] Certificate has been transferred, either directly or
indirectly, to any Person that is not a Permitted Transferee or an agent thereof
(including a broker, nominee or middleman) in contravention of the foregoing
restrictions, or that is a pass-through entity, as defined in Section 860E(e)(6)
of the Code, an interest in which is held of record by a Person that is not a
"Permitted Transferee", the Trustee shall furnish to the Internal Revenue
Service and those Persons specified in Section 860E(c)(3) and (b) of the Code
such information necessary to the application of Section 860E(e) of the Code as
may be required by the Code, including but not limited to, the present value of
the total anticipated excess inclusions with respect to such Class [__]
Certificate (or portion thereof) for periods after such Transfer and the total
excess inclusions for any taxable year allocable to any holder of an interest in
such pass-through entity which is not a Permitted Transferee. The Trustee may
charge a reasonable fee for computing and furnishing such information to the
transferor or to such agent or to such pass- through entity referred to above;
however, the Trustee shall in no event be excused from furnishing such
information to the Internal Revenue Service. The foregoing restrictions on
transfer contained in this Section shall cease to apply to Transfers occurring
on or after the date on which there shall have been delivered to the Trustee,
the Depositor and the Servicer, in form and substance satisfactory to the
Trustee, an Opinion of Counsel that eliminating such restrictions will not cause
the Trust Fund to fail to qualify as a two-tiered REMIC at any time while the
Certificates are outstanding.
(c) Each Holder of Class [__] Certificates, by purchasing such Class [__]
Certificates, agrees to give the Trustee written notice that it is a
"pass-through interest holder" within the meaning of Temporary Treasury
Regulations Section 1.67-3T(a)(2)(i)(A) immediately upon becoming the Holder of
a Class [__] Certificate, if it is, or is holding such Class [__] Certificates
on behalf of, a "pass-through interest holder".
(d) No Class [__] Certificate shall be registered in the name of the
Depositor or any Person known to a Responsible Officer to be an Affiliate
thereof, and no Subordinate Certificate shall be registered in the name of the
Depositor or any such Affiliate, unless the Trustee shall first have received
written notification from each Rating Agency that such Transfer will not cause a
reduction or withdrawal of the rating then assigned to any of the Rated
Certificates.
ARTICLE FIVE
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 5.01. Responsibility for Contract Administration and Servicing. The
Servicer shall service and administer the Contracts in accordance with and
subject to the terms of this Agreement, shall have full power and authority to
do any and all things which it may deem necessary or desirable in connection
with such servicing and administration; provided that if, as a result of
extending of payments (including any increase in the number of payments) in the
ordinary course of the Servicer's collection procedures, any Contract will be
outstanding on the Final Scheduled Distribution Date, then the Servicer shall
repurchase such Receivable pursuant to Section 3.05. The relationship of the
Servicer (and of any successor Servicer other than the Trustee) to the Trustee
under this Agreement is intended by the parties to be that of independent
contractor and not that of a joint venturer, partner or agent of the Trustee.
Section 5.02. Standard of Care. In managing, administering, servicing and
making collections on the Contracts pursuant to this Agreement, the Servicer
will exercise the same degree of skill and care, consistent with the terms of
this Agreement, that the Servicer exercises in managing, servicing,
administering and collecting on similar manufactured housing installment sales
contracts and installment loan agreements owned and/or serviced by the Servicer;
provided that nothing herein shall require the Servicer to violate any
applicable federal, state or local common or statutory law, regulation or rule.
Without limiting the generality of the foregoing, the Servicer is hereby
authorized and empowered by the Trustee when the Servicer 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 and all
other comparable instruments, with respect to the Contracts and any related
Mortgages and with respect to the Manufactured Homes and any related Mortgaged
Properties. The Servicer shall furnish the Trustee with an Officer's Certificate
and all powers of attorney and other documents necessary or appropriate, in the
judgement of the Servicer, to enable the Servicer to service and administer the
Contracts. For purposes of this Agreement, the Trustee shall be deemed to have
given to the Servicer a power of attorney for purposes of servicing the
Contracts.
Section 5.03. Subservicing.
(a) The Servicer may enter into Subservicing Agreements with one or more
Subservicers for the servicing and administration of certain of the Contracts.
References herein to actions taken or to be taken by the Servicer in servicing
the Contracts include actions taken or to be taken by a Subservicer on behalf of
the Servicer. Each Subservicing Agreement will be upon such terms and conditions
as are not inconsistent with this Agreement and as the Servicer and the
Subservicer have agreed. With the approval of the Servicer, a Subservicer may
delegate its servicing obligations to third-party servicers, but such
Subservicer will remain obligated under the related Subservicing Agreement. The
Servicer and a Subservicer may enter into amendments thereto or different forms
of Subservicing Agreements; provided that any such amendments or different forms
shall be consistent with and not violate the provisions of this Agreement or
materially adversely affect the rights of Certificateholders hereunder.
(b) The 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 that
in the event of termination of any Subservicing Agreement by the Servicer or the
related Subservicer, the Servicer shall either act directly as Servicer of the
related Contract or enter into a Subservicing Agreement with a successor
Subservicer which will be bound by the terms of the related Subservicing
Agreement.
(c) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer or a
Subservicer or reference to actions taken through such Persons or otherwise, the
Servicer shall remain obligated and liable to the Trustee and the
Certificateholders for the servicing and administering of the Contracts in
accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue of such Subservicing Agreements or
arrangements or by virtue of indemnification from a Subservicer and to the same
extent and under the same terms and conditions as if the Servicer alone were
servicing and administering the Contracts. The Servicer shall be entitled to
enter into an agreement with a Subservicer for indemnification of the Servicer
and nothing contained in this Agreement shall be deemed to limit or modify such
indemnification.
(d) Any Subservicing Agreement that may be entered into and any other
transactions or servicing arrangements relating to the Contracts involving a
Subservicer shall be deemed to be between the Subservicer and the Servicer
alone, and neither the Trustee nor the Certificateholders shall be deemed
parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to the Subservicer except as set forth in the
immediately succeeding paragraph.
(e) In the event the Servicer shall for any reason no longer be a servicer
(including, but not limited to, by reason of an Event of Default), the Trustee
or its designee may, at the sole discretion of the Trustee, thereupon assume all
of the rights and obligations of such Servicer under each Subservicing Agreement
selected by the Trustee in its sole discretion. In such event, the Trustee, its
designee or the successor servicer for the Trustee shall be deemed to have
assumed all of the Servicer's interest therein and to have replaced the Servicer
as a party to each such Subservicing Agreement to the same extent as if such
Subservicing Agreement had been assigned to the assuming party except that the
Servicer shall not thereby be relieved of any liability or obligations under the
Subservicing Agreement. The Servicer shall, upon request of the Trustee but at
the expense of the Servicer, deliver to the assuming party all documents and
records relating to each such Subservicing Agreement and the Contracts then
being serviced and an accounting of amounts collected and held by it and
otherwise use its best efforts to effect the orderly and efficient transfer of
the Subservicing Agreement to the assuming party.
Section 5.04. Records. The Servicer, during the period it is servicer
hereunder, shall maintain such books of account and other records as will enable
the Trustee (if the Trustee so elects in its discretion) to determine the status
of each Contract. Without limiting the generality of the preceding sentence, the
Servicer shall keep such records in respect of Liquidation Expenses as will
enable the Trustee (if the Trustee so elects in its discretion) to determine
that the correct amount of Net Liquidation Proceeds in respect of a Liquidated
Contract has been deposited in the Collection Account.
Section 5.05. Inspection.
(a) During the term of this Agreement, the Servicer shall afford the
Trustee and its authorized agents reasonable access during normal business hours
to the Servicer's records relating to the Contracts and will cause its personnel
to provide reasonable assistance in any examination of such records by the
Trustee or any of its authorized agents. The examination and assistance referred
to in this Section will be conducted in a manner which does not interfere
unreasonably with the Servicer's normal operations or customer or employee rela-
tions. Without otherwise limiting the scope of the examination the Trustee may
make, the Trustee or its authorized agents, using generally accepted audit
procedures, may in their discretion verify the status of each Contract and
review the records relating thereto for conformity to Monthly Reports prepared
pursuant to Section 7.01 and compliance with the standards represented to exist
as to each Contract in this Agreement.
(b) At all times during the term hereof, the Servicer shall keep available
a copy of the Contract Schedule at its principal executive office for inspection
by Certificateholders.
Section 5.06. Payment of Taxes. If the Servicer becomes aware of the
nonpayment by an Obligor of a personal property Tax or other Tax or Tax related
charge which may result in a lien upon a Manufactured Home prior to, or equal to
or coordinate with, the lien of the related Contract, the Servicer, consistent
with Section 5.02, shall take action to avoid the attachment of any such lien.
If the Servicer shall have paid any such personal property Tax or other Tax or
Tax related charge directly on behalf of an Obligor, the Servicer shall seek
reimbursement therefor only from the related Obligor (except as provided in the
last sentence of this Section) and may separately add such amount to the
Obligor's obligation as provided by the Contract, but, for the purposes of this
Agreement, may not add such amount to the Contract Principal Balance of the
Contract. If the Servicer shall have repossessed a Manufac- tured Home on behalf
of the Certificateholders and the Trustee, the Servicer shall pay the amount of
any such personal property Tax or other Tax or Tax related charge arising during
the time such Manufactured Home is in the Servicer's possession, unless the
Servicer is contesting in good faith the validity of such personal property Tax
or other Tax or Tax related charge on such Manufactured Home. If the Obligor
does not reimburse the Servicer for payment of taxes pursuant to this Section
and the related Contract is liquidated after a default, the Servicer shall be
reimbursed for its payment of such Taxes out of the related Liquidation
Proceeds.
Section 5.07. Enforcement.
(a) When the Servicer shall sue to enforce or collect upon Contracts, then
it shall bring suit in its own name, if possible, or as agent for the Trust
Fund. If the Servicer elects to commence a legal proceeding to enforce a
Contract, the act of commencement shall be deemed to be an automatic assignment
of the Contract to the Servicer for purposes of collec- tion only. If, however,
in any enforcement suit or legal proceeding it is held that the Servicer may not
enforce a Contract on the ground that it is not a real party in interest or a
holder entitled to enforce the Contract, the Trustee on behalf of the
Certificateholders shall, at the Servicer's expense, take such steps as the
Servicer deems necessary to enforce the Contract, including bringing suit in its
name as Trustee hereunder or the names of the Certifi- cateholders. If there has
been a recovery of attorneys' fees in favor of the Servicer or the Trust Fund in
an action involving the enforcement of a Contract, the Servicer shall be
reimbursed out of such recovery for its reasonable out-of-pocket attorney's fees
and expenses incurred in such enforcement action.
(b) The Servicer shall exercise any rights of recourse against third
Persons that exist with respect to any Contract in accordance with Section 5.02.
In exercising such rights, the Servicer is authorized on the Trustee's behalf to
reassign the Contract or to resell the related Manufactured Home to the Person
against whom recourse exists at the price set forth in the document creating the
recourse.
(c) The Servicer may grant to the Obligor on any Contract any rebate,
refund or adjustment out of the Collection Account that is required because of
an overpayment in connection with the prepayment in full of the Contract or
otherwise. The Servicer, except as required by the Contract or by law, will not
permit any rescission or cancellation of any Contract.
Section 5.08. Hazard Insurance Policies.
(a) Except as otherwise provided in Section 5.08(b), the Servicer shall
cause to be maintained with respect to each Contract (other than Contracts
relating to REO Properties) one or more Hazard Insurance Policies which provide
the same coverage as a standard form fire and extended coverage insurance policy
that is customary in the Servicer's procedures for manufactured housing
contracts owned and/or serviced by the Servicer, issued by a company authorized
to issue such policies in the State in which the Manufactured Home is located,
and in an amount which is not less than the lesser of the maximum insurable
value or the Contract Principal Balance of the related Contract. Each Hazard
Insurance Policy caused to be maintained by the Servicer shall contain a
standard loss payee clause in favor of the Servicer and its successors and
assigns. If any Obligor is in default in the payment of premiums on its Hazard
Insurance Policy or Policies, the Servicer shall pay such premiums out of its
own funds, and may add separately such premium and any related interest to the
Obligor's obliga- tion as provided by the Contract but may not add such premium
and interest to the Contract Principal Balance of the Contract for purposes of
this Agreement. If the Obligor does not reimburse the Servicer for payment of
such premiums and the related Contract is liquidated after a default, the
Servicer shall be reimbursed for its payment of such premiums out of the related
Liquidation Proceeds.
(b) The Servicer may, in lieu of causing individual Hazard Insurance
Policies to be maintained with respect to each Manufactured Home pursuant to
this Section, and shall, to the extent that a Contract does not require the
Obligor to maintain a Hazard Insurance Policy with respect to the related
Manufactured Home, maintain one or more blanket insurance policies covering
losses in a connection with a hazard as provided in Section 5.08(a) resulting
from the absence or insufficiency of individual Hazard Insurance Policies. Any
such blanket policy shall be in the amount sufficient to cover all losses in a
connection with a hazard on the Contracts. The Servicer shall pay, out of its
own funds, the premium for such policy on the basis described therein and shall
deposit in the Collection Account, on the Business Day next preceding the
Determination Date following the Due Period in which the insurance proceeds from
claims in respect of any Contracts under such blanket policy are received, the
deductible amount with respect to such claims. The Servicer shall not, however,
be required to deposit any deductible amount with respect to claims under
individual Hazard Insurance Policies maintained pursuant to Section 5.08(a).
(c) If the Servicer shall have repossessed a Manufactured Home on behalf of
the Trustee or foreclosed upon or otherwise acquired any Mortgaged Property, the
Servicer shall either (i) maintain at its expense a Hazard Insurance Policy with
respect to such Manufactured Home or Mortgaged Property meeting the requirements
of Section 5.08(a) or 5.08(b), except that the Servicer shall be responsible for
depositing any deductible amount with respect to all claims under individual
Hazard Insurance Policies or (ii) indemnify the Trust Fund against any damage to
such Manufactured Home prior to resale or other disposition.
(d) Any cost incurred by the Servicer in maintaining any of the foregoing
insurance, for the purpose of calculating monthly distributions to
Certificateholders, shall not be added to the Contract Principal Balance of any
Contract, notwithstanding that the terms of such Contract so permit. The
Servicer shall not be entitled to reimbursement from the Depositor, the Trustee
or the Certificateholders for such costs. Such costs (other than the cost of the
blanket policy) shall only be recovered out of late payments by the Obligor for
such premiums or, if the related Contract is liquidated after a default, out of
the related Liquidation Proceeds.
Section 5.09. Hazard Insurance Policy Collections; Consent to Manufactured
Home Transfers; Assumption Agreements.
(a) The Servicer agrees to present, on behalf of itself, the Trustee and
Certificateholders, claims to the insurer under any Hazard Insurance Policies
and, in this regard, to take such reasonable action as shall be necessary to
permit recovery under any Hazard Insurance Policies. Any amounts collected by
the Servicer under any such Hazard Insurance Policies shall be deposited in the
Collection Account pursuant to Section 6.04(b)(v), except to the extent they are
applied to the restoration of the related Manufactured Home or released to the
related Obligor in accordance with the normal servicing procedures of the
Servicer.
(b) The Servicer shall not withhold its consent to any transfer of
ownership of a Manufactured Home in accordance with the related Contract unless
the proposed transferee does not meet the Servicer's then applicable
underwriting standards (exclusive of down payment requirements). In addition,
the Servicer shall not withhold such consent if such withholding of consent is
not permitted under applicable law and governmental regulations.
(c) In any case in which a Manufactured Home is to be conveyed to a Person
by an Obligor, and such Person is to enter into an assumption agreement or
modification agreement or supplement to the Contract, upon the closing of such
conveyance, the Servicer shall cause the originals of the assumption agreement,
the release (if any) or the modification or supplement to the Contract to be
included in the related Contract File. Any fee collected by the Servicer for
entering into an assumption or substitution of liability agreement with respect
to such Contract will be retained by the Servicer as additional servicing
compensation. In connection with any such conveyance through an assumption,
modification or supplement, the APR borne by, and all other material terms of,
the related Contract shall not be changed.
Section 5.10. Realization upon Defaulted Contracts. Subject to applicable
law, the Servicer shall repossess, replevin, foreclose upon or otherwise
comparably convert the ownership of Manufactured Homes and any related Mortgaged
Properties securing all Contracts that come into default and which the Servicer
believes in its good faith business judgment will not be brought current;
provided that if the Servicer has actual knowledge that a Mortgaged Property is
affected by hazardous waste, then the Servicer shall not cause the Trust Fund to
acquire title to such Mortgaged Property in a foreclosure or similar proceeding
unless such condition is remediated. In connection with such repossession,
foreclosure or other conversion, the Servicer shall follow such practices and
procedures as it shall deem necessary or advisable and as shall be consistent
with Section 5.02. Subject to the foregoing proviso, in the event that title to
any Mortgaged Property is acquired in foreclosure or by deed in lieu of
foreclosure, the deed or certificate of sale shall be issued to the Trustee, as
Trustee, or, at its election, to its nominee on behalf of the Trustee, as
Trustee. The Servicer shall manage, conserve and protect such Manufactured Homes
and any related Mortgaged Property for the purposes of their prompt disposition
and sale, and shall dispose of such Manufactured Homes and any related Mortgaged
Property on such terms and conditions as are consistent with Sections 5.02 and
10.12.
Section 5.11. Costs and Expenses. All costs and expenses incurred by the
Servicer in carrying out its duties under this Agreement, including all fees and
expenses incurred in connection with the enforcement of Contracts (including
enforcement of defaulted Contracts and repossessions of Manufactured Homes
securing such Contracts), shall be paid by the Servicer and the Servicer shall
not be entitled to reimbursement hereunder, except to the extent such
reimbursement is specifically provided for in this Agreement. Notwithstanding
the foregoing, the Servicer shall be reimbursed out of the Liquidation Proceeds
of a defaulted Contract for Liquidation Expenses incurred by it in realizing
upon the related Manufactured Home and any related Mortgaged Property,
including, but not limited to: (i) costs of refurbishing and securing such
Manufactured Home; (ii) transportation expenses incurred in moving the
Manufactured Home; (iii) reasonable legal fees and expenses of outside counsel
and any associated court costs; (iv) rental expenses (including the payment of
rent not paid by the defaulting Obligor) incurred in maintaining a leasehold
interest for the Manufactured Home; and (v) sales commissions paid to Persons
that are not Affiliates of the Servicer. The Servicer shall not incur the
foregoing Liquidation Expenses unless it determines in its good faith business
judgment that incurring such expenses is in accordance with Section 5.02 and
will increase the Net Liquidation Proceeds from such Manufactured Home.
Section 5.12. Trustee to Cooperate. The Servicer is authorized to execute
an instru- ment in satisfaction of any Contract paid in full and any related
Mortgage and do such other acts and execute such other documents as the Servicer
deems necessary to discharge the Obligor thereunder and eliminate the security
interest in the Manufactured Home and any related Mortgaged Property related
thereto. The Servicer shall determine when a Contract has been paid in full; to
the extent insufficient payments are received on a Contract mistakenly
determined by the Servicer to be prepaid or paid in full and satisfied, the
shortfall shall be paid by the Servicer out of its own funds by deposit into the
Collection Account. Upon request of a Servicing Officer, the Trustee shall
perform such other acts as are reasonably requested by the Servicer (including,
without limitation, the execution of documents), and otherwise cooperate with
the Servicer in enforcement of rights and remedies with respect to Contracts.
Section 5.13. Servicing and Other Compensation. The Servicer, as
compensation for its activities hereunder including, without limitation, the
payment of fees and expenses of the Trustee pursuant to Section 10.05, shall be
entitled to receive on each Distribution Date the Monthly Servicing Fee pursuant
to Section 6.02. Application fees, Late Payment Fees, Extension Fees, processing
fees and any transfer of equity or assumption fees or Repossession Profits shall
be retained by the Servicer as additional servicing compensation. If, for any
Distribution Date, the aggregate Prepayment Interest Excess exceeds the
aggregate Prepayment Interest Shortfall, such excess shall be retained by the
Servicer. If, for any Distribution Date, the aggregate Prepayment Interest
Shortfall exceeds the aggregate Prepayment Interest Excess, the aggregate
Servicing Fee for such Distribution Date shall be reduced (but not below zero)
by an amount equal to such excess.
Section 5.14. REO Disposition The Servicer shall sell each REO Property
within two years of its acquisition by the Trust Fund, unless, at the request of
the Servicer, the Trustee seeks, and subsequently receives, an Opinion of
Counsel, addressed to the Trustee and the Servicer, to the effect that the
holding by the Trust Fund of such REO Property subsequent to such time will not
result in the imposition of Taxes on "prohibited transactions" of the Trust Fund
as defined in Section 860F of the Code or cause the Trust Fund to fail to
qualify as a two-tiered REMIC at any time that any Certificates are outstanding.
The Servicer shall manage, conserve, protect and operate each REO Property
solely for the purpose of its prompt disposition and sale in a manner that does
not cause any such REO Property to fail to qualify as "foreclosure property"
within the meaning of Section 860G(a)(8) or result in the receipt by the Pooling
REMIC or the Issuing REMIC of any "income from non-permitted assets" within the
meaning of Section 860F(a)(2)(B) of the Code or any "net income from foreclosure
property" which is subject to taxation under the REMIC Provisions. Pursuant to
its efforts to sell a REO Property, the Servicer shall either itself or through
an agent selected by it protect and conserve such REO Property in the same
manner and to such extent as is customary in the locality where such REO
Property is located and may, incident to its conservation and protection of the
interests of the Certificateholders, rent the same, or any part thereof, as it
deems to be in the best interests of it and the Certificateholders for the
period prior to the sale of such REO Property.
The disposition of REO Property shall be carried out by the Servicer at
such price and upon such terms and conditions as the Servicer shall deem
necessary or advisable, as shall be normal and usual in its general servicing
activities.
The proceeds from the REO disposition, net of any reimbursement to the
Servicer as provided above, shall be deposited in the Collection Account in
accordance with Section 6.04(b)(ii).
ARTICLE SIX
DISTRIBUTIONS
Section 6.01. Monthly Payments.
(a) On each Distribution Date the Trustee shall, based upon the information
set forth in the related Monthly Report, withdraw from the Certificate Account
an amount equal to the Available Distribution Amount and apply such amount in
the following order of priority:
(i) concurrently, to each Class of Class A Certificates (a) first, the
related Interest Distribution Amount for such Distribution Date, with the
Available Distribution Amount being allocated among such Classes pro rata
based on their respective Interest Distribution Amounts and (b) second, the
related Carryover Interest Distribution Amount, if any, for such
Distribution Date, with the Available Distribution Amount being allocated
among the Classes of Class A Certificates pro rata based on their
respective Carryover Interest Distribution Amounts;
(ii) to the Class [__] Certificates, (a) first, the related Interest
Distribution Amount for such Distribution Date and (b) second, the related
Carryover Interest Distribution Amount, if any, for such Distribution Date;
(iii) to the Class [__] Certificates, (a) first, the related Interest
Distribution Amount for such Distribution Date and (b) second, the related
Carryover Interest Distribution Amount, if any, for such Distribution Date;
(iv) to the Class [__] Certificates, (a) first, the related Interest
Distribution Amount for such Distribution Date and (b) second, the related
Carryover Interest Distribution Amount, if any, for such Distribution Date;
(v) concurrently, to each Class of Class A Certificates, the related
Unpaid Certificate Principal Shortfall for the Class A Certificates, if
any, for such Distribution Date, allocated among the Class A Certificates
pro rata based on their respective Certificate Principal Balances;
(vi) to the Class A Certificates, the Class A Formula Principal
Distribution Amount allocated in the following manner and in the following
order of priority; provided that on any Distribution Date on which the Pool
Balance is less than or equal to the aggregate Certificate Principal
Balance of the Class A Certificates immediately prior to such Distribution
Date, the Class A Formula Principal Distribution Amount will be allocated
among the Class A Certificates pro rata based upon their respective
Certificate Principal Balances:
(A) to the Class [__] Certificates until the Class [__]
Certificate Principal Balance has been reduced to zero;
(B) to the Class [__] Certificates until the [__] Certificate
Principal Balance has been reduced to zero;
(C) to the Class [__] Certificates until the [__] Certificate
Principal Balance has been reduced to zero;
(D) to the Class [__] Certificates until the [__] Certificate
Principal Balance has been reduced to zero;
(E) to the Class [__] Certificates until the [__] Certificate
Principal Balance has been reduced to zero;
(F) to the Class [__] Certificates until the [__] Certificate
Principal Balance has been reduced to zero; and
(G) to the Class [__] Certificates until the [__] Certificate
Principal Balance has been reduced to zero;
(vii) to the Class [__] Certificates, (a) first, any related
Liquidation Loss Interest Amount for such Distribution Date, and (b)
second, any related Unpaid Liquidation Loss Interest Shortfall for such
Distribution Date;
(viii) to the Class [__] Certificates, the related Unpaid Certificate
Principal Shortfall for the Class [__] Certificates, if any, for such
Distribution Date;
(ix) to the Class [__] Certificates, the Class [__] Formula Principal
Distribution Amount, in reduction of the Certificate Principal Balance of
such Class, until it is reduced to zero;
(x) to the Class [__] Certificates, (a) first, any related Liquidation
Loss Interest Amount for such Distribution Date, and (b) second, any
related Unpaid Liquidation Loss Interest Shortfall for such Distribution
Date;
(xi) to the Class [__] Certificates, the related Unpaid Certificate
Principal Shortfall for the Class [__] Certificates, if any, for such
Distribution Date;
(xii) to the Class [__] Certificates, the Class [__] Formula Principal
Distribution Amount, in reduction of the Certificate Principal Balance of
such Class, until it is reduced to zero;
(xiii) to the Class [__] Certificates, (a) first, any related
Liquidation Loss Interest Amount for such Distribution Date, and (b)
second, any related Unpaid Liquidation Loss Interest Shortfall for such
Distribution Date;
(xiv) to the Class [__] Certificates, the related Unpaid Certificate
Principal Shortfall for the Class [__] Certificates, if any, for such
Distribution Date;
(xv) to the Class [__] Certificates, the Class [__] Formula Principal
Distribution Amount, in reduction of the Certificate Principal Balance of
such Class, until it is reduced to zero;
(xvi) to each Class of the Class A Certificates, sequentially in
accordance with clause (vi), the Accelerated Principal Distribution Amount
for such Distribution Date, in reduction of the Certificate Principal
Balance of such Classes, until each is reduced to zero;
(xvii) to the Class [__] Certificates, in the following sequential
order;
(A) the current Class [__] Strip Amount; and
(B) any Class [__] Strip Amounts from previous Distribution Dates
remaining unpaid;
(xviii) to the Servicer, an additional servicing fee equal to
[_______] of the product of [___]% and the Pool Balance at the beginning of
the related Due Period; and
(xix) any remainder to the Class [__] Certificates.
The aggregate amounts distributed to Certificateholders of each Class of
Certificates on account of principal shall not exceed the Initial Certificate
Principal Balance of such Class of Certificates. Distributions to the
Certificateholders shall be made such that the Trustee shall distribute to each
Certificateholder as of the related Record Date an amount equal to, in the case
of (A) the Class A Certificates, the product of the aggregate Percentage
Interest evidenced by such Certificateholder's Class A Certificates and the
Class [__], Class [__], Class [__], Class [__], Class [__], Class [__] or Class
[__] Distribution Amount, as the case may be, for such Distribution Date, (B)
the Class [__] Certificates, the product of the aggregate Percentage Interest
evidenced by such Certificateholder's Class [__] Certificates and the Class [__]
Distribution Amount for such Distribution Date, (C) the Class [__] Certificates,
the product of the aggregate Percentage Interest evidenced by such
Certificateholder's Class [__] Certificates and the Class [__] or [__]
Distribution Amount, as the case may be, for such Distribution Date and (D) the
Class [__] Certificates, the entire amount distributable in respect thereof on
such Distribution Date.
The Trustee shall pay each Certificateholder of record by check mailed to such
Certifi- cateholder at the address for such Certificateholder appearing on the
Certificate Register; provided that (i) so long as DTC or its nominee is the
Depository, or (ii) if neither DTC nor its nominee is the Depository and such
Certificateholder holds Certificates with original denominations aggregating at
least $[_______] and has given the Trustee appropriate written instructions at
least [___] Business Days prior to the related Record Date (which instructions,
until revised, shall remain operative for all Distribution Dates thereafter),
the Trustee shall pay such Certificateholder by wire transfer of funds. If on
any Determination Date the Servicer determines that there are no Contracts
Outstanding and no other funds or assets in the Trust Fund other than the funds
in the Collection Account or the Certificate Account, the Servicer promptly
shall instruct the Trustee to send the final distribution notice to each
Certificateholder and make provision for the final distribution in accordance
with Section 11.01(b). Final payment of any Certificate shall be made only upon
presentation of such Certificate at the office or agency of the Certificate
Registrar.
(b) Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Partici- pant shall be responsible for disbursing
such distribution to the Certificate Owners that it represents and to each
indirect participating brokerage firm (a "brokerage firm" or "indirect
participating firm") for which it acts as agent. Each brokerage firm shall be
responsible for disbursing funds to the Certificate Owners that it represents.
All such credits and disburse- ments with respect to a Book-Entry Certificate
are to be made by the Depository and the Depository Participants in accordance
with the provisions of the related Certificates. Neither the Trustee, the
Certificate Registrar, the Depositor nor the Servicer shall have any responsi-
bility therefor except as otherwise provided by applicable law. To the extent
applicable and not contrary to the rules of the Depository, the Trustee shall
comply with the provisions of the forms of the Certificates as set forth as
Exhibits.
Section 6.02. Withdrawals from the Collection Account.
(a) The Servicer may, from time to time as provided herein, make
withdrawals from the Collection Account of amounts deposited therein pursuant to
Section 6.04 that are attributable to the Contracts for the following purposes:
(i) on each Distribution Date, to pay to the Trustee the Trustee Fee;
(ii) to pay to the Seller with respect to each Repurchased Contract in
respect thereof all amounts received thereon that are specified in such
Section to be property of the Seller;
(iii) to reimburse itself for the payment of Taxes out of Liquidation
Proceeds (to the extent not previously retained from such Liquidation
Proceeds prior to their deposit) or out of payments expressly made by the
related Obligor to reimburse the Servicer for such Taxes, as permitted by
Section 5.06;
(iv) to pay to itself the Monthly Servicing Fee;
(v) to reimburse itself or a previous Servicer out of Liquidation
Proceeds (to the extent not previously retained from Liquidation Proceeds
prior to their deposit in the Collection Account) in respect of a
Manufactured Home and out of payments by the related Obligor (to the extent
of payments expressly made by the Obligor to reimburse the Servicer for
insurance premiums) for expenses incurred by it in respect of such
Manufactured Home that are specified as being reimbursable to it pursuant
to Section 5.07, 5.08 or 5.11 or to a previous Servicer under Section 8.08;
(vi) to reimburse itself for any Nonrecoverable Advance or Advances in
accordance with Section 6.03(c) or 6.03(b) and for Advances in respect of
Liquidated Contracts in accordance with Section 6.03(c);
(vii) after the Certificate Principal Balance of each Class of
Certificates has been reduced to zero, to reimburse the Depositor for
expenses incurred and reimbursable to it pursuant to Section 8.06; and
(viii) to withdraw any amount deposited in the Collection Account that
was not required to be deposited therein (including any collections on the
Contracts that, pursuant to Section 2.01, are not part of the Trust Fund).
(b) On each Deposit Date, the Servicer shall withdraw from the Collection
Account an amount equal to the Available Distribution Amount for the related
Distribution Date and shall deposit such amount in the Certificate Account.
(c) Since, in connection with withdrawals pursuant to Section 6.02(a)(ii),
(a)(iii) and (a)(v), the Servicer's entitlement thereto is limited to
collections or other recoveries on the related Contract, the Servicer shall keep
and maintain separate accounting, on a Contract by Contract basis, for the
purpose of justifying any withdrawal from the Collection Account pursuant to
such clauses.
Section 6.03. Advances.
(a) By the close of business on each Deposit Date, the Servicer shall
deposit in the Collection Account, out of its own funds, an amount equal to the
Advance.
(b) On each Distribution Date, the Servicer shall reimburse itself for the
Outstanding Amount Advanced to the extent of actual collections of late
scheduled payments on the related Contracts.
(c) If the Servicer determines that any Advance made pursuant to Section
6.03(a) has become a Nonrecoverable Advance and at the time of such
determination there exists an Outstanding Amount Advanced, then the Servicer
shall reimburse itself out of funds in the Collection Account for the amount of
such Nonrecoverable Advance, but only to the extent of such Outstanding Amount
Advanced.
Section 6.04. Establishment of and Deposits in the Collection Account and
the Certificate Account.
(a) (i) On or before the Closing Date, the Servicer shall establish and
thereafter maintain one or more Collection Accounts which are Eligible
Accounts, in the form of separate custodial accounts, titled
["___________________"]. The Servicer shall cause monies in the Collection
Account to be invested in Eligible Investments selected by the Servicer,
which shall mature or, in the case of a money market fund, be redeemed not
later than the Determination Date next following the date of such
investment (except that if such Eligible Investment is an obligation of the
institution that maintains the Collection Account, then such Eligible
Investments shall mature or, in the case of a money market fund, be
redeemed not later than the related Deposit Date) and shall not be sold or
disposed of prior to its maturity. All such Eligible Investments shall be
made in the name of the Servicer. The Servicer shall select such Eligible
Investments so as to achieve the following objectives in the order stated:
(i) preservation of principal values and (ii) maximization of income. If an
instrument or account ceases to meet the requirements of an Eligible
Investment or Eligible Account, the Servicer shall cause all monies in such
investment and account to be withdrawn and deposited in an Eligible
Investment (which Eligible Investment shall be selected by the Servicer) or
Eligible Account, as the case may be, within [__] Business Days of the
occurrence of such investment or account ceasing to meet such requirements.
All net income and gain realized from any such investments, to the extent
provided by this Agreement, shall be added to the Collection Account.
(ii) On or before the Closing Date, the Trustee shall establish and
thereafter maintain, one or more Certificate Accounts which are Eligible
Accounts, in the form of separate custodial accounts, titled
[("____________________")], (Depositor) in trust for the Trustee". The
Trustee shall cause monies in the Certificate Account to be invested at the
written direction of the Servicer in Eligible Investments selected by the
Servicer, which shall mature or, in the case of a money market fund, be
redeemed not later than the Deposit Date next following the date of such
investment (except that if such Eligible Investment is an obligation of the
institution that maintains the Certificate Account, then such Eligible
Investments shall mature or, in the case of a money market fund, be
redeemed not later than the related Distribution Date) and shall not be
sold or disposed of prior to its maturity. All such Eligible Investments
shall be made in the name of the Trustee. The Depositor shall select such
Eligible Investments so as to achieve the following objectives in the order
stated: (i) preservation of principal values and (ii) maximization of
income. If an instrument or account ceases to meet the requirements of an
Eligible Investment or Eligible Account, the Trustee shall cause all monies
in such investment and account to be withdrawn and deposited in an Eligible
Investment (which Eligible Investment shall be selected by the Servicer) or
Eligible Account, as the case may be, within [__] Business Days of the
occurrence of such investment or account ceasing to meet such requirements.
All net income and gain realized from any such investments, to the extent
provided by this Agreement, shall be added to the Certificate Account.
(b) No later than the [______] Business Day following the Servicer's
receipt of the amounts delineated in clauses (i) through (v) below, the Servicer
shall deposit in the Collection Account the following amounts (net of all
amounts the Servicer, if [IndyMac, Inc.] is acting as Servicer, would be
entitled to withdraw therefrom pursuant to Section 6.02) in respect of the
related Distribution Date and Due Period:
(i) all amounts received from Obligors with respect to principal of
and interest on the Contracts;
(ii) all Net Liquidation Proceeds and the proceeds of the disposition
of REO Properties;
(iii) all amounts required to be deposited by the Seller pursuant to
Section 3.05(a);
(iv) the Repurchase Price of each Repurchased Contract; and
(v) deductible amounts in respect of Hazard Insurance Policies
pursuant to Section 5.08(b) and, to the extent provided in Section 5.09(a),
amounts collected by the Servicer under Hazard Insurance Policies.
Section 6.05. Transfer of Certificate Account. The Trustee may transfer the
Certificate Account to a different depository institution from time to time, so
long as the Certificate Account remains an Eligible Account. The Trustee shall
give notice of any transfer to the other parties hereto and to each Rating
Agency prior to such transfer.
Section 6.06. Transfer of Collection Account. The Servicer may transfer the
Collection Account to a different depository institution from time to time, so
long as the Collection Account remains an Eligible Account. The Servicer shall
give notice of any transfer to the other parties hereto and to each Rating
Agency prior to such transfer.
ARTICLE SEVEN
REPORTS
Section 7.01. Monthly Reports. Not later than 1:00 p.m., Eastern Standard
Time, on each Determination Date, the Servicer shall cause the Trustee to
receive a "Monthly Report," which shall include with respect to the related
Distribution Date and Due Period, (i) all information with respect to the
Contracts necessary to enable the Trustee to send statements to
Certificateholders pursuant to Section 7.06(a), (ii) the Average Sixty-Day
Delinquency Ratio, the Average Thirty-Day Delinquency Ratio and the Current
Realized Loss Ratio, (iii) the aggregate Contract Principal Balance and number
of cumulative repossessions and (iv) the amount of Cumulative Realized Losses.
The Trustee shall not be under any duty to recalculate or verify the information
provided to it in any Monthly Report.
Section 7.02. Servicer's Certificate. Each Monthly Report shall be
accompanied by a Servicer's Certificate, which shall, among other things,
certify the accuracy of the Monthly Report and that no Event of Default or event
that with notice or lapse of time or both would become an Event of Default has
occurred, or if such event has occurred and is continuing, specify the event and
its status.
Section 7.03. Other Data. Upon the receipt of a request therefor from the
Trustee, the Servicer shall furnish the Trustee with such date regarding the
Contracts and the servicing thereof as may reasonably be requested.
Section 7.04. Annual Statement as to Compliance. The Servicer will deliver
to the Depositor and the Trustee on or before [______] of each year, beginning
with the first [________] that occurs at least three months after the Cut-off
Date, an Officer's Certificate stating, as to the signer thereof, that (i) a
review of the activities of the Servicer during the preceding calendar year (or
since the Closing Date in the case of the first such Officer's Certificate) and
of performance under this Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year (or since the Closing Date in the case of the first such
Officer's Certificate), or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such officer and the
nature and status thereof.
Section 7.05. Annual Independent Public Accountants' Servicing Report. On
or before [_______] of each year, beginning with the first [________] that
occurs at least three months after the Cut-off Date, the 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 and the Trustee to the effect that such firm has examined
certain documents and records relating to the servicing of the Contracts under
this Agreement and that, on the basis of such examination conducted
substantially in compliance with this Agreement (or such other agreements) and
generally accepted auditing standards, nothing came to the attention of such
firm that caused such firm to believe that there were any exceptions or errors
in the records relating to Contracts serviced by the Servicer, insofar as such
exceptions or errors relate to accounting matters. For purposes of such
statement, such firm may assume conclusively that all pooling and servicing
agreements among the Depositor, the Servicer and the Trustee relating to
certificates evidencing an interest in manufactured housing contracts are
substantially similar to one another except for any such pooling and servicing
agreement which by its terms specifically states otherwise.
Section 7.06. Statements to Certificateholders.
(a) Concurrently with each distribution to Certificateholders pursuant to
Article Six, the Trustee shall mail, or cause the Paying Agent to mail, to each
Certificateholder at the address appearing on the Certificate Register a
statement as of the related Distribution Date and Due Period prepared by the
Trustee (in the case of (vii) through (x) and (xii) below, based on information
furnished by the Servicer) setting forth:
(i) the aggregate amount distributed on each Class of Certificates,
separately identifying the portion thereof which constitutes principal and
interest;
(ii) the Interest Distribution Amount, Carryover Interest Distribution
Amount, Liquidation Loss Interest Amount and Unpaid Liquidation Loss
Interest Shortfall in respect of each Class of Certificates;
(iii) the Formula Principal Distribution Amount and Unpaid Certificate
Principal Shortfall in respect of each Class of Certificates;
(iv) the Accelerated Principal Distribution Amount,
Overcollateralization Reduction Amount, Target Overcollateralization Amount
and Current Overcollateralization Amount;
(v) the Class [__], Class [__], Class [__] and Class [__] Certificate
Principal Balances, after giving effect to the distributions of principal
made on such Distribution Date;
(vi) the Adjusted Certificate Principal Balance of the Class [__],
Class [__] and Class [__] Certificates, after giving effect to the
distributions of principal and allocation of Liquidation Loss Amounts made
on such Distribution Date;
(vii) the Monthly Servicing Fee and other servicing compensation;
(viii) the number of and aggregate Contract Principal Balance of
Contracts with payments delinquent 30 to 59, 60 to 89 and 90 or more days,
respectively;
(ix) the number of and aggregate Contract Principal Balance of
Contracts relating to Manufactured Homes that were repossessed since the
immediately preceding Distribution Date;
(x) the number of and aggregate Contract Principal Balance of
Contracts (other than Liquidated Contracts) relating to Manufactured Homes
that were repossessed remaining in the Trust Fund on such Distribution
Date;
(xi) the Pool Factor for each Class of Certificates after giving
effect to the payment of principal to be made on such Distribution Date;
and
(xii) [the Realized Losses and the Cumulative Realized Losses for such
Distribution Date]
such other customary factual information as is available to the Servicer as the
Servicer deems necessary and can be obtained reasonably from its existing data
base to enable Certificateholders to prepare their tax returns.
Within a reasonable period of time after the end of each calendar year,
subject to the next sentence, but in no event later than [__] days after the end
of such year, the Trustee shall prepare and furnish to each Person who at any
time during the calendar year was the Holder of a Certificate, a statement
containing the information set forth in clauses (i) and (ii) above, in the case
of Class A, Class [__] and Class [__] Certificateholders, and (v), (vi) and
(vii) above, in the case of Holders of Subordinated Certificates, aggregated for
such calendar year or applicable portion thereof during which such Person was a
Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of the Code as from time to
time in force.
(b) Within a reasonable period of time after the end of each calendar year,
the Trustee shall furnish or cause to be furnished to each Person who at any
time during the calendar year was a holder of Class [__] Certificates a
statement containing the applicable distribution information provided pursuant
to this Section aggregated for such calendar year or applicable portion thereof
during which such Person was a holder of the Class [__] Certificates. Such
obligation shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Trustee pursuant
to any requirement of the Code.
(c) A Certificateholder holding (or Certificate Owner owning beneficial
interests in) Certificates of a Class representing in the aggregate at least
[__]% of the Percentage Interest of such Class shall, upon written request to
the Trustee, be entitled to receive copies of all reports provided to the
Trustee at such Holder's or Owner's expense.
Section 7.07. Other Reports. The Trustee shall file on behalf of the Trust
all reports required to be filed with the Securities and Exchange Commission or
any exchange or association of securities dealers pursuant to the Securities
Exchange Act of 1934, as amended, or any rules and regulations promulgated
thereunder.
ARTICLE EIGHT
INDEMNITIES; THE DEPOSITOR AND THE SERVICER
Section 8.01. Liabilities to Obligors. No liability to any Obligor under
any of the Contracts arising out of any act or omission to act of the Seller or
the Servicer in servicing the Contracts prior to the Closing Date is intended to
be assumed by any other party hereto, or the Certificateholders under or as a
result of this Agreement and the transactions contemplated hereby and, to the
maximum extent permitted and valid under mandatory provisions of law, each party
hereto and the Certificateholders expressly disclaim such assumption.
Section 8.02. Tax Indemnification. The Seller agrees to pay, and to
indemnify, defend and hold harmless the Trust Fund, the Trustee, the Certificate
Registrar, the Paying Agent, the Depositor and the Certificateholders from any
Taxes which may at any time be asserted with respect to, and as of the date of,
the transfer of the Contracts from the Seller to the Depositor and from the
Depositor to the Trust Fund, including, without limitation, any sales, gross
receipts, general corporation, personal property, privilege or license Taxes
(but not including any income or franchise Taxes or federal, state or other
Taxes arising out of the creation of the Trust Fund and the issuance of the
Certificates or distributions with respect thereto) and costs, expenses and
reasonable counsel fees in defending against the same.
Section 8.03. Servicer's Indemnities. The Servicer shall defend and
indemnify the Trust Fund, the Trustee, the Certificate Registrar, the Paying
Agent, the Depositor and the Certificateholders against any and all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel and expenses of litigation, arising from third party claims
or actions in respect of any action taken or failed to be taken by the Servicer
with respect to any Contract, Manufactured Home or Mortgaged Property and any
failure by the Servicer to perform its obligations in compliance with this
Agreement. This indemnity shall survive any Event of Default (but the
obligations of the Servicer under this Section shall not relate to any actions
of any subsequent Servicer after an Event of Default) and any payment of the
amount owing under, or any repurchase by the Seller of, any such Contract.
Section 8.04. Operation of Indemnities. Indemnification under this Article
shall include, without limitation, reasonable fees and expenses of counsel and
expenses of litigation. If the Seller or the Servicer has made any indemnity
payments to the Trustee pursuant to this Article and the Trustee thereafter
collects any of such amounts from others, the Trustee will repay such amounts
collected to the Seller or the Servicer, as the case may be, together with any
interest collected thereon.
Section 8.05. Merger or Consolidation of the Depositor, the Seller or the
Servicer. The Seller and the Servicer will each keep in full effect its
existence, rights and franchises as a corporation, and will obtain and preserve
its qualification to do business as a foreign corporation in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Contracts and
to perform its duties under this Agreement.
Any person into which the Depositor, the Seller or the Servicer may be
merged or consolidated, or any corporation resulting from any merger, conversion
or consolidation to which any such entity shall be a party, or any Person
succeeding to the business of any such entity, shall be the successor of the
Depositor, the Seller or the 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
that the successor or surviving Person to the Servicer shall satisfy Section
8.08(a)(ii) with respect to the qualifications of a successor to the Servicer.
The Seller, the Depositor and the Servicer shall promptly notify each Rating
Agency of any such merger, conversion or consolidation to which it is a party.
Section 8.06. Limitation on Liability of the Depositor and Others. Neither
the Depositor nor any of its directors, officers, employees or agents shall be
under any liability to the Trustee or the Certificateholders for any action
taken or for refraining from the taking of any action in good faith pursuant to
this Agreement, or for errors in judgment; provided that this provision shall
not protect the Depositor or any such individual against any liability that
would otherwise be imposed by reason of its willful misconduct, bad faith or
negligence. The Depositor and any of its directors, officers, employees or
agents 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 shall not be under any obligation to appear in, prosecute or
defend any legal action which arises under this Agreement and which in its
opinion may involve it in any expense or liability; provided that the Depositor
may in its discretion undertake any such action which it may deem necessary or
desirable in respect to this Agreement and the rights and duties of the parties
hereto. In such event, the legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and liabilities payable
from the Collection Account and the Depositor shall be entitled to be reimbursed
therefor out of monies on deposit in the Collection Account as provided by
Section 6.02(a)(vii); provided that such reimbursement shall be made, from time
to time on one or more Distribution Dates, only out of the Available
Distribution Amount that remains after the distributions to the
Certificateholders on such Distribution Date have been made.
Section 8.07. Assignment by Servicer. The Servicer may, with the prior
written consent of the Depositor and notice to each Rating Agency, 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 satisfactory to the Trustee and the Depositor, in their sole and reasonable
judgment, such Person is willing to service the Contracts and such Person
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
Servicer under this Agreement; provided further that such assignment and
delegation will not cause any Rating Agency to qualify, downgrade or withdraw
its then-current rating of any Rated Certificates, as evidenced by a letter from
each Rating Agency. In the case of any such assignment and delegation, the
Servicer shall be released from its obligations under this Agreement, except
that the Servicer shall remain liable for all liabilities and obligations
incurred by it as Servicer hereunder prior to the satisfaction of the conditions
to such assignment and delegation set forth in the next preceding sentence.
Section 8.08. Successor to the Servicer.
(a) In connection with the termination of the Servicer's responsibilities
and duties under this Agreement pursuant to Section 9.01, the Trustee shall (i)
succeed to and assume all of the Servicer's responsibilities, rights, duties and
obligations under this Agreement (except any liability or responsibility for any
act or omission that arose prior to the Servicer's termination and the duty to
pay and indemnify the Trustee pursuant to Section 10.05), or (ii) appoint a
successor acceptable to the Depositor, which shall have a net worth of not less
than $[________] and shall have serviced for at least one year prior to such
appointment a portfolio of not less than $[_______] aggregate principal amount
of manufactured housing installment sales contracts and/or installment loans and
which shall succeed to all rights and assume all of the responsibilities, duties
and liabilities of the Servicer under this Agreement prior to the termination of
the Servicer's responsibilities, duties and liabilities under this Agreement
(except that the duty to pay and indemnify the Trustee pursuant to Section 10.05
shall be subject to negotiation at the time of such appointment). If the Trustee
becomes the successor to the Servicer in accordance with this Section, the
Trustee may, if it shall be unwilling to continue to so act, or shall, if it is
unable to so act, appoint or petition a court of competent jurisdiction to
appoint, a successor satisfying the requirements in clause (ii) above. In
connection with any appointment of a successor Servicer, the Trustee may make
such arrangements for the compensation of such successor out of payments on
Contracts as it and such successor shall agree or such court shall determine;
provided that no such compensation shall be in excess of a monthly amount equal
to [____] of the product of [_____]% and the Pool Balance for the Distribution
Date in respect of which such compensation is being paid without the consent of
all of the Certificateholders and notice to each Rating Agency. If the
Servicer's duties, responsibilities and liabilities under this Agreement should
be terminated pursuant to Section 8.07 or 9.01, the Servicer shall discharge
such duties and responsibilities during the period from the date it acquires
knowledge of such termination until the effective date thereof with the same
degree of diligence and prudence which it is obligated to exercise under this
Agreement, shall cooperate with the Trustee and any successor Servicer in
effecting the termination of its responsibilities and rights hereunder and shall
take no action whatsoever that might impair or prejudice the rights or financial
condition of its successor. The assign- ment by the Servicer pursuant to Section
8.07 or removal of the Servicer pursuant to Section 9.01 shall not become
effective until a successor Servicer shall be appointed pursuant to this Section
and shall in no event relieve the Seller of liability pursuant to Sections 3.05
and 10.05. Nothing herein shall be construed to impose any obligation of the
Seller upon the Trustee or any successor to the Servicer under any
circumstances.
(b) Any successor Servicer appointed as provided herein shall execute,
acknowledge and deliver to the Servicer and to the Trustee an instrument
accepting such appointment, whereupon such successor Servicer shall become fully
vested with all the rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer, with like effect as if originally named as a party
to this Agreement and the Certificates. Any assignment by or termination of the
Servicer pursuant to Section 8.07 or 9.01 or the termination of this Agree- ment
pursuant to Section 11.01 shall not affect any claims that the Trustee may have
against the Servicer arising prior to any such termination or resignation.
The Servicer shall timely deliver to the successor Servicer the funds in
the Certificate Account, all related funds in the Collection Account and all
Contract Files (to the extent in the Servicer's possession), Servicing Files and
related documents and statements held by it hereunder and the Servicer shall
account for all funds and shall execute and deliver such instruments and do such
other things as reasonably may be required to more fully and definitely vest and
confirm in the successor Servicer all such rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer. Without
limitation, the Trustee is authorized and empowered to execute and deliver on
behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments (including, without limitation, transfer instruments in
respect of certificates of title and financing statements relating to the
Manufactured Homes), and to do any and all acts or things necessary or
appropriate to effect the purposes of such notice of termination.
Upon a successor's acceptance of appointment as successor Servicer, the
Trustee shall notify in writing the Certificateholders of such appointment.
ARTICLE NINE
DEFAULT
Section 9.01. Events of Default. If any one or more of the following events
(each, an "Event of Default") shall occur and be continuing:
(a) any failure by the Servicer to make any deposit or payment, or to
remit to the Trustee any payment, required to be made under the this
Agreement which continues unremedied for a period of [___] days after the
date upon which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Trustee or the
Depositor or to the Servicer, the Trustee and the Depositor by the Holders
of Certificates evidencing Fractional Interests aggregating not less than
[__]%;
(b) failure on the part of the Servicer duly to observe or perform in
any material respect any other of the covenants or agreements on the part
of the Servicer set forth in this Agreement which continues unremedied for
a period of [__] days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the
Servicer by the Trustee or the Depositor, or to the Servicer, the Trustee
and the Depositor by the Holders of Certificates evidencing Fractional
Interests aggregating not less than [__]%;
(c) 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 trustee, 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 Servicer and such decree or order shall
have remained in force undischarged or unstayed for a period of [__] days;
(d) the Servicer shall consent to the appointment of a trustee,
conservator, receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Servicer or of or relating to all or substantially all of
the Servicer's property; or
(e) the Servicer shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, voluntarily suspend payment of its obligations or
take any corporate action in furtherance of any of the foregoing;
then, and in each and every such case, so long as such Event of Default shall
not have been remedied, the Trustee may, and at the written direction of the
Holders of Certificates evidencing Fractional Interests aggregating not less
than [__]% by notice in writing to the Servicer shall, terminate all the rights
and obligations of the Servicer under this Agreement and in, to and under the
Contracts and the proceeds thereof. The Trustee shall send a copy of any such
notice to each Rating Agency. On or after the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Contracts or otherwise, shall pass to and be vested
in the successor appointed pursuant to Section 8.08. Upon the occurrence of an
Event of Default which shall not have been remedied, the Trustee may also pursue
whatever rights it may have at law or in equity to damages, including injunctive
relief and specific performance. The Trustee will have no obligation to take any
action or institute, conduct or defend any litigation under this Agreement at
the request, order or direction of any of the Holders of Certificates unless
such Certificateholders have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which the Trustee may
incur.
Section 9.02. Waiver of Defaults. The Holders of a majority of outstanding
Certificates may waive any default by the Servicer in the performance of its
obligations here- under and its consequences, except that a default in the
making of any required remittance to the Trustee for distribution on any of the
Certificates may be waived only by the affected Certificateholders.
Notwithstanding the foregoing, except in the case of a default by the Servicer
in the making of any required remittance to the Trustee for distribution on any
of the Certificates, the Trustee may waive a default by the Servicer if and so
long as the Trustee in good faith determines that such waiver is in the
interests of the Holders of Certificates. Upon any such waiver of a past
default, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon except to the extent expressly so waived.
Section 9.03. Trustee to Act; Appointment of Successor. On and after the
time the Servicer receives a notice of termination pursuant to Section 9.01, the
Trustee or an entity appointed pursuant to Section 8.08(a)(ii) shall be the
successor in all respects to the Servicer as provided in Section 8.08.
Section 9.04. Notification to Certificateholders.
(a) Upon any such termination pursuant to Section 9.01, the Trustee shall
give prompt written notice thereof to Certificateholders at their respective
addresses appearing in the Certificate Register and to each Rating Agency.
(b) Within [__] days after the occurrence of any Event of Default known to
the Trustee, the Trustee shall transmit by mail to all Holders of Certificates,
notice of such Event of Default unless such Event of Default shall have been
cured or waived.
Section 9.05. Effect of Transfer.
(a) After a transfer of servicing duties to a successor Servicer pursuant
to Section 8.05, 8.07, 8.08 or 9.01, (i) the Trustee or such successor Servicer
may notify Obligors to make payments that are due under the Contracts after the
effective date of the transfer of servicing duties directly to the successor
Servicer and (ii) the replaced Servicer shall have no further obligations with
respect to the management, administration, servicing or collection of the
Contracts but, in the case of a transfer pursuant to Section 8.08 or 9.01, shall
remain liable for any liability of the Servicer arising prior to the date of
transfer and shall remain entitled to any compensation due the Servicer that had
already accrued prior to such transfer.
(b) A transfer of servicing duties to a successor Servicer shall not affect
the rights and duties of the parties hereunder (including but not limited to the
indemnities of the Servicer pursuant to Article Eight) other than those relating
to the management, administration, servicing or collection of the Contracts.
ARTICLE TEN
THE TRUSTEE
Section 10.01. Duties of Trustee. The Trustee, prior to the occurrence of
an Event of Default and after the curing or waiver of all Events of Default
which may have occurred, undertakes to perform such duties and only such duties
as are set forth specifically 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 prudent man would exercise or use under
the circumstances in the conduct of his own affairs, except if it is acting as
Servicer, in which case it shall use the same degree of care and skill as is
required of the Servicer.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are required specifically to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct; provided 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 rely
conclusively, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement;
(ii) the Trustee shall not be liable personally for an error of
judgment made in good faith by a Responsible Officer, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
and
(iii) the Trustee shall not be liable personally with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of Holders of Certificates evidencing
Fractional Interests aggregating not less than [__]% 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) No provision of this Agreement shall be construed to require the
Trustee to expend or risk its own funds or otherwise incur 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 there is
reasonable ground for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
(v) No provision of this Agreement shall be construed to hold the
Trustee accountable for any duty of the Servicer, or for the acts or
omissions of the Servicer, until such time as the Trustee may be required
to act as Servicer pursuant to Section 9.03.
Section 10.02. Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 10.01:
(a) the Trustee may rely upon and shall be protected in acting or
refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) the Trustee may consult with counsel of its selection and any
advice of its counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken or suffered or
omitted by it hereunder in good faith and in accordance with such advice or
Opinion of Counsel;
(c) 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 Certificate- holders 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 or waived), to
exercise such of the rights and powers vested in it by this Agreement, and,
unless it is acting as Servicer, to use the same degree of care and skill
in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(d) the Trustee shall not be liable personally 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;
(e) prior to the occurrence of an Event of Default hereunder and after
the curing or waiver 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 resolu- tion, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other
paper or document, unless requested in writing so to do by the Holders of
Certificates evidencing Fractional Interests aggregating not less than
[__]%; provided 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 such proceeding, and
the reasonable expense of every such examination shall be paid by the
Servicer, if an Event of Default shall have occurred and is continuing, and
otherwise by the Certificateholders requesting the investigation; and
(f) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
attorneys or custodians.
Section 10.03. Trustee Not Liable for Certificates or Contracts. The
recitals contained herein and in the Certificates (other than the certificate of
authentication of the Certificates) shall be taken as the statements of the
Depositor, the Seller or the Servicer, as the case may be, and the Trustee
assumes no responsibility for their correctness. The Trustee makes no
representations or warranties as to the validity or sufficiency of this
Agreement, the Certifi- cates (other than the certificate of authentication of
the Certificates), the Sale and Purchase Agreement or of any Contract or related
document. The Trustee shall not be accountable for the use or application by the
Depositor, the Seller or the Servicer of any of the Certificates or of the
proceeds thereof, or for the use or application of any funds paid to the
Depositor, the Seller or the Servicer in respect of the Contracts or deposited
in or withdrawn from the Certificate Account by the Depositor, or the
Certificate Account or Collection Account by the Seller or the Servicer.
Section 10.04. Trustee May Own Certificates. The Trustee in its individual
or any other capacity may become the owner or pledgee of Certificates and may
transact business with the other parties hereto with the same rights it would
have if it were not Trustee.
Section 10.05. Servicer to Pay Fees and Expenses of Trustee. The Servicer
covenants and agrees to pay, from its own funds to the extent that such
compensation is not paid in accordance with Section 6.02(a)(i), to the Trustee
from time to time, and the Trustee shall be entitled to, reasonable compensation
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trust hereby created and in the exercise and performance
of any of the powers and duties hereunder of the Trustee, and the Servicer will
pay (out of its own funds (except at such times that the Trustee is acting as
successor Servicer hereunder)) or reimburse the Trustee, to the extent requested
by the Trustee, for all reasonable expenses, disbursements and advances incurred
or made by the Trustee in accordance with any of the provisions of this
Agreement and 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 in connection with the appointment of an office or
agency pursuant to Section 10.11, except any such expense, disbursement or
advance as may arise from its negligence or bad faith. The Servicer also
covenants and agrees to indemnify (out of its own funds (except at such times
that the Trustee is acting as successor Servicer hereunder)) the Trustee for,
and to hold it harmless against, any loss, liability or expense, including taxes
(other than taxes based upon, measured by or determined by the income of the
Trustee), incurred without negligence or bad faith on the part of the Trustee
arising out of or in connection with the acceptance or administration of the
trust created by this Agreement and its duties hereunder, including the costs
and expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder. The
covenants in this Section shall be for the benefit of the Trustee in its
capacity as Trustee, Paying Agent and Certificate Registrar hereunder, and shall
survive removal or resignation of the Trustee or the termination of this
Agreement. Except as otherwise provided herein, the Trustee shall not be
entitled to payment or reimbursement for any routine ongoing expenses incurred
by the Trustee in the ordinary course of its duties as Tax Matters Person.
Section 10.06. Eligibility Requirements for Trustee. There shall at all
times be a Trustee hereunder which shall be either (i) [____] or any other
Person into which [____] is merged or consolidated or to which all or
substantially all of the properties and assets of [___] are transferred as an
entirety, provided that such other Person has accepted appointment as Trustee
under this Agreement in accordance with Article Ten, and that such entity is
authorized to exercise corporate trust powers under the laws of the United
States or any State and has all necessary trust powers to perform its
obligations hereunder, or (ii) a corporation or banking association organized
and doing business under the laws of the United States or any State authorized
under such laws to exercise corporate trust powers, having a combined capital
and surplus of at least $[_______], subject to supervision or examination by
federal or state authority and is not an Affiliate of the Servicer. If the
corporation or banking association referred to in clause (ii) above publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation or banking
association shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section, it
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
Section 10.07. Resignation and Removal of the Trustee. The Trustee at any
time may resign and be discharged from the trusts hereby created by giving
written notice thereof to the other parties hereto and each Rating Agency. Upon
receiving such notice of resignation, the Depositor promptly shall 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 [__] days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance with
Section 10.06 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. If no successor trustee shall have been so appointed and
have accepted appointment within [__] days after receipt of such notice of
removal, the removed Trustee may petition any court of competent jurisdiction
for the appointment of a successor trustee.
The Holders of Class A Certificates or, if the Class A Certificate
Principal Balance is zero, Class [__] and Class [__] Certificates, evidencing
Percentage Interests aggregating more than [__]% of the Class A Certificates or
the Class [__] and Class [__] Certificates, voting together as a single class,
as the case may be, may remove the Trustee at any time and appoint a successor
trustee by written instrument or instruments, in triplicate, signed by such
Certificateholders 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.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to this Section shall become effective upon acceptance of
appointment by the successor Trustee as provided in Section 10.08.
Section 10.08. Successor Trustee. Any successor Trustee appointed as
provided in Section 10.07 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 execute and deliver such
instruments and do such other things as reasonably may be required for more
fully and certainly vesting and confirming in the successor Trustee all such
rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this Section
unless at the time of such acceptance such successor Trustee shall be eligible
under Section 10.06.
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 Certificate- holders at their addresses as shown in the
Certificate Register, to the Servicer and to each Rating Agency. If the
Depositor fails to mail such notice within [__] 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 10.09. Merger or Consolidation of Trustee. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be eligible under the provisions of Section 10.06, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
Section 10.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions hereof, at any time, for the purpose of (i)
meeting any legal requirements of any jurisdiction in which any part of the
Trust Fund or property securing the same may be located at the time or (ii)
meeting any legal requirements with respect to the holding of the Contracts or
the Manufactured Homes, the Depositor 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, such powers, duties, obligations, rights and trusts,
as the Depositor and the Trustee may consider necessary or desirable. If the
Depositor shall not have joined in such appointment within [__] days after the
receipt by it of a request so to do, or in case an Event of Default shall have
occurred and be continuing, the Trustee alone 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 10.06 and no
notice to Certificateholders of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 10.08.
In the case of any appointment of a co-trustee or separate trustee pursuant
to this Section, 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 the law of any jurisdiction in which any particular act or
acts are to be performed or any regulation applicable to any of the Contracts
(whether as Trustee hereunder or as successor to the Servicer hereunder), the
Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to the Trust Fund or any portion thereof in any such jurisdiction)
shall be exercised and performed by such separate trustee or co-trustee at the
direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article. 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.
Any separate trustee or co-trustee may, at any time, appoint 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.
Nothing in this Section shall relieve the Trustee of its duties,
obligations or liabilities under this Agreement.
Section 10.11. Appointment of Office or Agency. The Trustee will maintain
or appoint an office or agency in New York, New York where Certificates may be
surrendered for registration of transfer or exchange. The Trustee initially
designates its Corporate Trust Office, for the purpose of keeping the
Certificate Register. The Certificate Register may be kept in an electronic form
capable of printing out a hard copy of the Certificate Register. The Trustee
will maintain an office at the address stated in Section 12.10 where notices and
demands to or upon the Trustee in respect of the Certificates may be served. The
Trustee will give prompt written notice to Certificateholders of any change in
the location of the Certificate Register or any such office or agency.
Section 10.12. REMIC Administration. (a) For federal income tax purposes,
the Trust Fund shall include two REMICs, the Pooling REMIC (the "Pooling REMIC")
and the Issuing REMIC (the "Issuing REMIC"). The Certificates, other than the
Class [__] Certificates, shall be issued by the Issuing REMIC. The Class [__]
Certificates shall represent beneficial ownership of the residual interest
issued by the Pooling REMIC and the residual interest issued by the Issuing
REMIC. The Pooling REMIC shall be evidenced by the Pooling residual interest and
by the Pooling Interests having the characteristics and terms set forth below,
which interests (other than the residual interest the beneficial ownership of
which shall be represented by the Class [__] Certificates) shall be issued by
the Pooling REMIC to the Trustee. The Pooling Interests and the proceeds thereof
shall be assets of the Issuing REMIC.
(b) The Pooling Interests will consist of the [__________] and [__]. Each
Pooling regular interest will bear interest at the Weighted Average Net Contract
Rate.
The initial Pooling Balance of each Pooling Interest and its corresponding
Issuing Class are as follows:
Principal Corresponding
Balance Class
Pooling Interest [__] $[___] [__]
Pooling Interest [__] $[___] [__]
Pooling Interest [__] $[___] [__]
Pooling Interest [__] $[___] [__]
Pooling Interest [__] $[___] [__]
Pooling Interest [__] $[___] [__]
Pooling Interest [__] $[___] [__]
Pooling Interest [__] $[___] [__]
Pooling Interest [__] $[___] [__]
Pooling Interest [__] $[___] [__]
(c) Realized Losses for each Distribution Date shall be allocated
(i) first to Pooling Interest [__];
(ii) second to Pooling Interest [__];
(iii) third to Pooling Interest [__]; and
(iv) fourth, pro rata according to the outstanding principal balances
of Pooling Interests [__], [__], [__], [__], [__], [__] and [__]. No funds
shall be distributed to the Class [__] Certificates with respect to the
Pooling REMIC's residual interest until all prior Realized Losses have been
reimbursed to the Pooling Interests.
(d) The Formula Principal Distribution Amount on each Distribution Date
will be allocated in the following order:
(i) first, to Pooling Interest [__] until its principal balance has
been reduced to what will be the principal balance of its corresponding
class after taking into account the distributions and allocation of
Realized Losses to be made on such Distribution Date;
(ii) second, to Pooling Interest [__] until its principal balance has
been reduced to what will be the principal balance of its corresponding
class after taking into account the distributions and allocation of
Realized Losses to be made on such Distribution Date;
(iii) third, to Pooling Interest [__] until its principal balance has
been reduced to what will be the principal balance of its corresponding
class after taking into account the distributions and allocation of
Realized Losses to be made on such Distribution Date;
(iv) fourth, to Pooling Interest [__] until its principal balance has
been reduced to what will be the principal balance of its corresponding
class after taking into account the distributions and allocation of
Realized Losses to be made on such Distribution Date;
(v) fifth, to Pooling Interest [__] until its principal balance has
been reduced to what will be the principal balance of its corresponding
class after taking into account the distributions and allocation of
Realized Losses to be made on such Distribution Date;
(vi) sixth, to Pooling Interest [__] until its principal balance has
been reduced to what will be the principal balance of its corresponding
class after taking into account the distributions and allocation of
Realized Losses to be made on such Distribution Date;
(vii) seventh, to Pooling Interest [__] until its principal balance
has been reduced to what will be the principal balance of its corresponding
class after taking into account the distributions and allocation of
Realized Losses to be made on such Distribution Date;
(viii) eighth, to Pooling Interest [__] until its principal balance
has been reduced to what will be the principal balance of its corresponding
class after taking into account the distributions and allocation of
Realized Losses to be made on such Distribution Date;
(ix) ninth, to Pooling Interest [__] until its principal balance has
been reduced to what will be the principal balance of its corresponding
class after taking into account the distributions and allocation of
Realized Losses to be made on such Distribution Date; and
(x) tenth, to Pooling Interest [__] until its principal balance has
been reduced to what will be the principal balance of its corresponding
class after taking into account the distributions and allocation of
Realized Losses to be made on such Distribution Date.
(e) The Pooling Interests shall be issued as non-certificated interests.
The Class [__] Certificates shall be issued in fully registered certificated
form and shall be executed and countersigned as provided in Section 4.01 hereof.
(f) On each Distribution Date, in addition to amounts otherwise
distributable thereon pursuant to Section 6.01, the Trustee shall distribute to
the Holder of the Class [__] Certificate with respect to the Pooling residual
interest any amounts remaining in the Pooling REMIC after all amounts required
to be applied pursuant to the preceding paragraphs have been so applied, and
shall distribute to the Holder of the Class [__] Certificate with respect to the
Issuing residual any amounts remaining in the Issuing REMIC after all amounts
required to be applied pursuant to the preceding paragraphs have been so
applied.
(g) The Pooling Interests identified in subparagraph (b) above shall be
designated as the "regular interests" and the Pooling residual, the beneficial
ownership of which shall be represent by the Class [__] Certificate, as the
single class of "residual interest" in the Pooling REMIC for purposes of the
REMIC provisions. Classes [__], [__], [__], [__], [__], [__], [__], and [__]
shall be designated as regular interests in the Issuing REMIC. In addition, [__]
separate regular interests in the Issuing REMIC (each, a "Class [__] Component")
shall have notional balances equal to the principal balances of each Pooling
Interest. Each Class [__] Component shall represent the right to interest on its
notional balance equal to the difference between the Weighted Average Net
Contract Rate and the Pass-Through Rate on the Issuing Class corresponding to
each such Pooling Interest (the "Class [__] Strip Amount"). The beneficial
ownership of all such interests shall be represented by the Class [__]
Certificate. The Issuing residual interest, the beneficial ownership of which
shall also be represented by the Class [__] Certificate, shall be designated as
the single class of "residual interest" in the Issuing REMIC for purposes of the
REMIC Provisions.
(h) Any amounts paid on the Class [__] Certificate shall be treated as
consisting first of the right to current interest. Any amounts in excess of
current interest shall be applied pro rata to any Deferred Amounts. The Class
[__] Certificate shall be treated as entitled to a Deferred Amount to the extent
that the amount distributed on any Distribution Date is less than the amount due
on each regular interest represented by the Class [__] Certificate. Any Realized
Losses allocated to the Class [__] Certificate shall be treated as first
proportionately reducing any Deferred Amounts on each regular interest
represented by the Class [__] Certificate and then its right to current interest
on each regular interest represented by the Class [__] Certificate. Any funds
ultimately available to reimburse such prior Realized Losses shall be applied to
each regular interest represented by the Class [__] Certificate in proportion to
the allocation of prior Realized Losses to such interest relative to the other
regular interests represented by the Class [__] Certificates, and no funds shall
be distributed to the Class [__] Certificates (other than principal
distributions) until all prior Realized Losses have been reimbursed to the Class
[__] Certificates.
(i) The Closing Date is hereby designated as the "Startup Day" of each
REMIC within the meaning of section 86OG(a)(9) of the Code.
(j) The Trustee shall pay any and all tax related expenses (not including
taxes) of each REMIC, including but not limited to any professional fees or
expenses related to audits or any administrative or judicial proceedings with
respect to such REMIC that involve the Internal Revenue Service or state tax
authorities, but only to the extent that (i) such expenses are ordinary or
routine expenses, including expenses of a routine audit, but not expenses of an
external audit by a taxing authority or litigation (except as described in
(ii)); or (ii) such expenses or liabilities (including taxes and penalties) are
attributable to the negligence or willful misconduct of the Trustee in
fulfilling its duties hereunder (including its duties as tax return preparer).
(k) The Trustee shall act as Tax Matters Person for each REMIC and shall
hold the Tax Matters Person Certificate. The Trustee shall prepare, sign, and
file all of each REMIC's federal and state tax and information returns as such
REMIC's direct representative. The expenses of preparing and filing such returns
shall be borne by the Trustee.
(l) The Trustee and the Holders of Certificates shall take any action or
cause each REMIC to take any action necessary to create or maintain the status
of such REMIC as a REMIC under the REMIC Provisions and shall assist each other
as necessary to create or maintain such status. Neither the Trustee nor the
Holder of any Residual Certificate shall take any action, cause any REMIC to
take any action or fail to take (or fail to cause to be taken) any action that,
under the REMIC Provisions, if taken or not taken, as the case may be, could (i)
endanger the status of such REMIC as a REMIC or (ii) result in the imposition of
a tax upon such REMIC (including but not limited to the tax on prohibited
transactions as defined in Code Section 860F(a)(2) and the tax on prohibited
contributions set forth on Section 860G(d) of the Code) (either such event, an
"Adverse REMIC Event") unless the Trustee has received an Opinion of Counsel (at
the expense of the party seeking to take such action) to the effect that the
contemplated action will not endanger such status or result in the imposition of
such a tax.
(m) No additional contributions of assets shall be made to any REMIC,
except as expressly provided in this Agreement with respect to eligible
substitute mortgage loans if permitted by the Servicing Agreement.
(n) The Trustee shall not enter into any arrangement by which any REMIC
will receive a fee or other compensation for services.
(o) Except as provided in Section 3.05, the Trustee shall not sell any
Contract or any other asset of the Trust Fund unless either (i) it has received
an Opinion of Counsel to the effect that such sale will not result in the
imposition of Taxes on "prohibited transactions" on the Trust Fund as defined in
Section 860F of the Code or (ii) the proceeds of such sale, net of any related
Taxes on "prohibited transactions" on the Trust Fund as defined in Section 860F
of the Code, will at least equal the Repurchase Price of such Contract.
Section 10.13. Tax Matters. It is intended that the assets with respect to
which any REMIC election is to be made shall constitute, and that the conduct of
matters relating to such assets shall be such as to qualify such assets as, a
"real estate mortgage investment conduit" as defined in and in accordance with
the REMIC Provisions. In furtherance of such intention, the Trustee covenants
and agrees that it shall act as agent (and the Trustee is hereby appointed to
act as agent) on behalf of any such REMIC and that in such capacity it shall:
(a) prepare and file, or cause to be prepared and filed, in a timely manner, a
U.S. Real Estate Mortgage Investment Conduit Income Tax Return (Form 1066 or any
successor form adopted by the Internal Revenue Service) and prepare and file or
cause to be prepared and filed with the Internal Revenue Service and applicable
state or local tax authorities income tax or infor- mation returns for each
taxable year with respect to any such REMIC, containing such information and at
the times and in the manner as may be required by the Code or state or local tax
laws, regulations, or rules, and furnish or cause to be furnished to
Certificateholders the schedules, statements or information at such times and in
such manner as may be required thereby; (b) within thirty days of the Closing
Date, furnish or cause to be furnished to the Internal Revenue Service, on Forms
8811 or as otherwise may be required by the Code, the name, title, address, and
telephone number of the person that the holders of the Certificates may contact
for tax information relating thereto, together with such additional information
as may be required by such Form, and update such information at the time or
times in the manner required by the Code; (c) make or cause to be made elections
that such assets be treated as a REMIC on the federal tax return for its first
taxable year (and, if necessary, under applicable state law); (d) prepare and
forward, or cause to be prepared and forwarded, to the Certificateholders and to
the Internal Revenue Service and, if necessary, state tax authorities, all
information returns and reports as and when required to be provided to them in
accordance with the REMIC Provisions, including without limitation, the
calculation of any original issue discount using the Prepayment Assumption;
(e) provide information necessary for the computation of tax imposed on the
transfer of a Residual Certificate to a Person that is not a Permitted
Transferee, or an agent (including a broker, nominee or other middleman) of a
Non-Permitted Transferee, or a pass-through entity in which a Non-Permitted
Transferee is the record holder of an interest (the reasonable cost of computing
and furnishing such information may be charged to the Person liable for such
tax); (f) not knowingly or intentionally take any action or omit to take any
action that would cause the termination of the REMIC status; (g) pay, from the
sources specified in the last paragraph of this section, the amount of any
federal or state tax, including prohibited transaction taxes as described below,
imposed on any such REMIC prior to its termination when and as the same shall be
due and payable (but such obligation shall not prevent the Trustee or any other
appropriate Person from contesting any such tax in appropriate proceedings and
shall not prevent the Trustee from withholding payment of such tax, if permitted
by law, pending the outcome of such proceedings); (h) ensure that federal, state
or local income tax or information returns shall be signed by the Trustee or
such other person as may be required to sign such returns by the Code or state
or local laws, regulations or rules; (i) maintain records relating to any such
REMIC, including but not limited to the income, expenses, assets and liabilities
thereof and the fair market value and adjusted basis of the assets determined at
such intervals as may be required by the Code, as may be necessary to prepare
the foregoing returns, schedules, statements or information; and (j) as and when
necessary and appropriate, represent any such REMIC in any administrative or
judicial proceedings relating to an examination or audit by any governmental
taxing authority, request an administrative adjustment as to any taxable year of
any such REMIC, enter into settlement agreements with any governmental taxing
agency, extend any statute of limitations relating to any tax item of any such
REMIC, and otherwise act on behalf of any such REMIC in relation to any tax
matter or controversy involving it. If the Trustee determines, in its sole
discretion, that it is not permitted by applicable law to perform any of the
duties in the preceding sentences, the Servicer shall carry out such duties
pursuant to the instructions of the Trustee and shall be compensated for such
services pursuant to Section 10.05. The Servicer shall not knowingly or
intentionally take any action (or knowingly or intentionally direct the Trustee
to take or omit to take any action) or knowingly or intentionally omit to take
any action (or knowingly or intentionally omit to direct the Trustee to take any
action) if such action or omission (as the case may be) would cause the
termination of the REMIC status of the Trust Fund. The Depositor and the
Servicer shall cooperate with the Trustee or its agent for such purpose in
supplying any information within their control (other than any confidential
information) that is necessary to enable the Trustee to perform its duties under
this Section.
In order to enable the Trustee to perform its duties as set forth herein,
the Depositor shall provide, or cause to be provided, to the Trustee within ten
(10) days after the Closing Date all information or data that the Trustee
requests in writing and determines to be relevant for tax purposes to the
valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows of
the Certificates and the Contracts. Thereafter, the Depositor shall provide to
the Trustee promptly upon written request therefor, any such additional
information or data that the Trustee may, from time to time, reasonably request
in order to enable the Trustee to perform its duties as set forth herein. The
Depositor hereby indemnifies the Trustee for any losses, liabilities, damages,
claims or expenses of the Trustee arising from any errors or miscalculations of
the Trustee that result from any failure of the Depositor to provide, or to
cause to be provided, accurate information or data to the Trustee on a timely
basis.
In the event that any tax is imposed on "prohibited transactions" of the
REMIC as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of the REMIC as defined in Section 860G(c) of the Code, on
any contribution to the REMIC after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax is imposed, including, without limitation, any
minimum tax imposed upon the REMIC pursuant to [______________], if not paid as
otherwise provided for herein, such tax shall be paid by (i) the Trustee, if any
such other tax arises out of or results from a breach by the Trustee of any of
its obligations under this Agreement, (ii) the Servicer, in the case of any such
minimum tax, or if such tax arises out of or results from a breach by the
Servicer or Seller of any of their obligations under this Agreement, (iii) the
Seller, if any such tax arises out of or results from the Seller's obligation to
repurchase a Contract pursuant to Section 3.04 or 3.05 or (iv) in all other
cases, or in the event that the Trustee, the Servicer or the Seller fails to
honor its obligations under the preceding clauses (i),(ii) or (iii), any such
tax will be paid with amounts otherwise to be distributed to the
Certificateholders.
ARTICLE ELEVEN
TERMINATION
Section 11.01. Termination.
(a) The respective obligations and responsibilities of the Seller, the
Depositor, the Servicer (except as to Section 10.05) and the Trustee shall
terminate upon the earliest to occur of: (i) the later of the final payment or
other liquidation (or any Advance with respect thereto) of the last Contract or
the disposition of all property acquired upon repossession of any Contract and
the remittance of all funds due hereunder; (ii) at the option of the Depositor
or the Servicer, on any Distribution Date on or after the first Distribution
Date as of which the Pool Balance is less than [__]% of the Cut-off Date Pool
Balance, upon the purchase of the Contracts at a price equal to the sum of (1)
[___]% of the unpaid principal balance of each Contract as of the final
Distribution Date, and (2) the lesser of (a) the fair market value of any REO
Property (as determined by the Depositor or the Servicer, as the case may be, as
of the close of business on the third Business Day next preceding the date upon
which notice of any such termination is furnished to Certificateholders pursuant
to this Section), and (b)the unpaid principal balance of each Contract related
to any REO Property, plus, in the case of both clause (1) and (2), any Unpaid
Interest Shortfall and Liquidation Loss Interest Amount with respect to any
Class of Certificates, together with one month's interest at the applicable APR
on the unpaid principal balance of each Contract (including any Contract as to
which the related Manufactured Home has been repossessed or foreclosed upon and
not yet disposed of); or (iii) the sale by the Trustee of all Contracts pursuant
to Section 11.02. Notwithstanding the foregoing, in no event shall the trust
created hereby continue beyond the earlier to occur of 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 and [_______]. Notwithstanding the foregoing, the
option specified in clause (ii) above shall not be exercisable if there will not
be distributed to the Holders of Certificates of each Class an amount equal to
the Certificate Principal Balance of such Class of Certificates, together with
interest accrued during the related Interest Accrual Period at the related Pass-
Through Rate, any Carryover Interest Distributable Amount and Unpaid Interest
Shortfall with respect to such Class. The Servicer shall have the prior right to
exercise the option to purchase the Contracts pursuant to clause (ii) above if
both the Depositor and the Servicer desire to exercise such option.
(b) Notice of any termination, specifying the Distribution Date upon which
all Certificateholders may surrender their Certificates to the Trustee for
payment and cancellation, shall be given promptly by the Servicer (if the
Depositor is exercising the option given it in Section 11.01(a), upon direction
by the Depositor given [___] days prior to the date such notice is to be mailed)
by letter to Certificateholders, the Trustee and each Rating Agency mailed no
later than the [___] day of the month preceding the month of such final
distribution specifying (i) the Distribution Date upon which final payment on
the Certificates will 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 and (iii) that the Record Date otherwise applicable to such
Distribution Date will not be applicable, payments being made only upon
presentation and surrender of the Certificates at the office or agency of the
Trustee therein specified. After giving such notice, the Certificate Registrar
shall not register the transfer or exchange of any Certificates. If such notice
is given in connection with the Depositor's or the Servicer's election to
purchase, the Depositor or the Servicer shall deposit in the Certificate Account
on the Business Day prior to the applicable Distribution Date the amount
described in Section 11.01(a)(ii). Upon presentation and surrender of the
Certificates, the Trustee shall cause to be distributed, from funds in the
Certificate Account, to Holders of Certificates of each Class, in proportion to
their respective Percentage Interests, an amount equal to the Certificate
Principal Balance of such Class of Certificates, together with one month's
interest on such Certificate Principal Balance at the related Pass-Through Rate
and any Unpaid Liquidation Loss Interest Shortfall or Carryover Interest
Distribution Amount with respect to such Class. Upon such termination, any
amounts remaining in the Certificate Account (other than amounts retained to
meet claims) shall be paid to the Holders of the Class [__] Certificates.
Following such final deposit, the Trustee shall execute all assignments,
endorsements and other instruments necessary to effectuate such transfer. The
distribution on the final Distribution Date shall be in lieu of the distribution
otherwise required to be made on such Distribution Date in respect of the
Certificates. Any amounts retained in the Certificate Account that are owed to
Certificateholders which have not surrendered their Certificates as of the final
Distribution Date shall be withdrawn from the Certificate Account and held in an
escrow account with the Trustee pending distribution pursuant to Section
11.01(c).
(c) If all of the Certificateholders have not surrendered their
Certificates for cancellation within [___] months after the time specified in
the above-mentioned written notice, the Trustee 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
[___] years after the second notice all Certificates shall not have been
surrendered for cancellation, the Trustee shall so notify the Depositor and the
Depositor may take appropriate steps, or may appoint an agent to take
appropriate and reasonable steps, to contact the remaining Certificateholders
concerning surrender of their Certificates, and the cost thereof shall be paid
out of, and only to the extent of, the funds and other assets which remain in
trust hereunder.
(d) Upon any termination pursuant to the exercise of the purchase option
contained in Section 11.01(a)(ii) or otherwise, the Trust Fund shall be
terminated in accordance with the following additional requirements, unless the
Trustee has received an Opinion of Counsel to the effect that the failure of the
Trust Fund to comply with the requirements of this Section will not (i) result
in the imposition of Taxes on "prohibited transactions" of the Trust Fund as
described in Section 860F of the Code, or (ii) cause the Trust Fund to fail to
qualify as REMICs at any time that any Certificates are outstanding:
(i) within [__] days prior to the final Distribution Date set forth in
the notice given by the Servicer or the Depositor under this Section, the
Trustee shall adopt a plan of complete liquidation of the Trust Fund within
the meaning of section 860F(a)(4) of the Code which, as evidenced by an
Opinion of Counsel (which opinion shall not be an expense of the Trustee or
the Tax Matters Person), meets the requirements of a qualified liquidation;
and
(ii) at or after the time of adoption of such a plan of complete
liquidation and at or prior to the final Distribution Date, the Servicer,
as agent of the Trustee, shall sell all of the assets of the Trust Fund to
the Depositor or the Servicer, as the case may be, for cash.
By their acceptance of the Certificates, the Holders thereof hereby
authorize the Servicer to prepare and the Trustee to adopt and sign a plan of
complete liquidation.
Section 11.02. Auction Call.
(a) If neither the Depositor nor the Servicer exercises its right described
in Section 11.01(a)(ii) within [__] days after the Distribution Date on which
they are first entitled to do so, the Depositor and the Servicer shall so notify
the Trustee, and the Trustee shall use commercially reasonable efforts to
solicit bids for the purchase of all Contracts and other property of the Trust
Fund from no fewer than [___] prospective purchasers that it believes to be
Qualified Bidders. If [IndyMac, Inc.] is then the Servicer, the solicitation of
bids shall be conditioned upon its continuing as servicer of the Contracts on
terms and conditions substantially similar to those set forth in this Agreement.
The Trustee shall provide the Servicer with [__] days written notice prior to
any action pursuant to this Section 11.02.
(b) If the Trustee receives bids from at least [___] Qualified Bidders and
the net proceeds of the highest bid are equal to or greater than the Termination
Price, the Trustee shall promptly advise the Servicer of the highest bid and the
terms of purchase, and the Servicer shall have [___] Business Days, at its
option, to match the terms of such bid. The Trustee shall thereafter sell the
Contracts and other property of the Trust either (i) to the Servicer, if it
shall so elect, or (ii) to the highest bidder, and in either case the Trustee
shall distribute the net proceeds of such sale in redemption of the Certificates
pursuant to Section 6.01. Any such sale must also comply with the requirements
of Section 11.01(b) and the second to the last sentence of Section 11.01(a).
(c) Any costs incurred by the Trustee in connection with such sale
(including without limitation any legal opinions or consents required by Section
11.01(b)) shall be deducted from the bid price of the Contracts and other
property of the Trust in determining the net proceeds therefrom.
(d) If the Trustee does not obtain bids from at least [___] Qualified
Bidders, or does not receive a bid such that the net proceeds therefrom would at
least equal the Termination Price, it shall not sell the Contracts and other
property of the Trust, and shall thereafter have no obligation to attempt to
sell same.
(e) Each of the Depositor and the Servicer shall cooperate with and provide
necessary information to the Trustee in connection with any auction sale as
described herein.
ARTICLE TWELVE
MISCELLANEOUS PROVISIONS
Section 12.01. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms and in no way shall affect the validity or enforceability of
the other covenants, agreements, provisions or terms of this Agreement or of the
Certificates or the rights of the Holders.
Section 12.02. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust Fund, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust Fund, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
No Certificateholder shall have any right to vote (except as expressly
provided 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.
No Certificateholder shall have any right by virtue of any provision of
this Agreement to institute any suit, action or proceeding in equity or at law
upon or under or with respect to this Agreement, unless such Holder previously
shall have given to the Trustee a written notice of default and of the
continuance thereof, as hereinbefore provided, and unless also the Holders of
Certificates of a Class evidencing, as to such Class, Percentage Interests
aggre- gating not less than 25% 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 [__] 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
covenanted expressly by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner 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, or to obtain or seek to obtain priority over or preference
to any other such Holder, or to enforce any right under this Agreement. For the
protection and enforcement of the provisions of this Section, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity.
Section 12.03. Acts of Certificateholders.
(a) Except as otherwise specifically provided herein, whenever
Certificateholder approval, authorization, direction, notice, consent, waiver or
other action is required hereunder, such approval, authorization, direction,
notice, consent, waiver or other action shall be deemed to have been given or
taken on behalf of, and shall be binding upon, all Certi- ficateholders if
agreed to by Holders of Certificates of the specified Class or Classes
evidencing, as to each such Class, Percentage Interests aggregating [__]% or
more.
(b) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
an agent duly appointed in writing; and except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where required, to the Servicer. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and conclusive in favor of the
Trustee, the Servicer and the Depositor if made in the manner provided in this
Section.
(c) The fact and date of the execution by any Certificateholder of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(d) The ownership of Certificates shall be proved by the Certificate
Registrar.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Certificateholder shall bind every Holder of every Certificate
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, or omitted to be done by the Trustee
or the Servicer in reliance thereon, whether or not notation of such action is
made upon such security.
(f) The Trustee may require such additional proof of any matter referred to
in this Section as it shall deem necessary.
Section 12.04. Calculations. Except as otherwise provided in this
Agreement, all interest rate and basis point calculations under this Agreement
will be made on the basis of a 360-day year and twelve 30-day months and will be
carried out to at least three decimal places.
Section 12.05. Amendment. This Agreement may be amended from time to time
by the parties hereto without consent of any Certificateholders, (i) to cure any
ambiguity or to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein, (ii) to correct any defective
provision herein or to supplement any provision herein which may be inconsistent
with any other provision herein, (iii) to add to the duties or obligations of
the Depositor, the Seller or the Servicer, (iv) to add any other provisions with
respect to matters or questions arising hereunder or (v) to modify, alter, add
to or rescind any of the terms or provisions contained in this Agreement;
provided that with respect to any such amendment pursuant to clause (iv) or (v),
such amendment shall not, as evidenced by an Opinion of Counsel (which Opinion
of Counsel shall not be an expense of the Trustee or the Trust Fund), adversely
affect in any material respect the interests of any Certificateholder; provided
further that no such Opinion of Counsel shall be required if the Person
requesting the amendment obtains a letter from each Rating Agency stating that
the amendment would not result in the downgrading or withdrawal of the
respective ratings then assigned to the Certificates; it being understood and
agreed that any such letter in and of itself will not represent a determination
as to the materiality of any such amendment and will represent a determination
only as to the credit issues affecting any such rating.
This Agreement may also be amended from time to time by the parties hereto
without consent of the Certificateholders, to modify, eliminate or add to the
provisions of this Agreement to such extent as shall be necessary to (i)
maintain the qualification of the Trust Fund as REMICs under the Code, (ii)
avoid or minimize the risk of the imposition of any Tax on the REMIC pursuant to
the Code that would be a claim at any time prior to the final redemption of the
Certificates or (ii) comply with other provisions of the Code; provided that in
either such case, there shall have been delivered to the Trustee an Opinion of
Counsel (which Opinion of Counsel shall not be an expense of the Trust or the
Trustee) to the effect that such action is necessary or appropriate (i) to
maintain such qualification, (to) avoid any such Tax or minimize the risk of its
imposition or (iii) to comply with any such requirements of the Code, as the
case may be.
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 [more than
50%] 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 of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of Certificates; provided, however, that no
such amendment shall (i) reduce in any manner the amount of, or delay the timing
of, payments required to be distributed on any Certificate without the consent
of the Holder of such Certificate, (ii) adversely affect in any material respect
the interests of the Holders of any Class of Certificates in a manner other than
as described in (i), without the consent of the Holders of Certificates of such
Class evidencing, as to such Class, Percentage Interests aggregating 66%, or
(iii) reduce the aforesaid percentages of Certificates the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all such Certificates then outstanding.
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, which opinion shall not be an expense of the
Trustee or the Trust Fund, to the effect that such amendment will not cause the
imposition of any tax on any REMIC or the Certificateholders or cause any REMIC
to fail to qualify as a REMIC at any time that any Certificates are outstanding.
Promptly after the execution of any amendment to this Agreement requiring
the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder and each Rating Agency.
It shall not be necessary for the consent of Certificateholders under this
Section 12.05 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.
Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Trust Fund), satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that all
requirements for amending this Agreement have been complied with; and
(ii) either (A) the amendment does not adversely affect in any material respect
the interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 12.05.
Section 12.06. 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 Contracts are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer at its expense with the consent
of the Trustee accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the
Certificateholders or is necessary for the administration or servicing of the
Contracts.
Section 12.07. Certificates Nonassessable and Fully Paid. The interests
represented by the Certificates shall be nonassessable for any losses or
expenses of the Trust or for any reason whatsoever, and upon authentication of a
Certificate by the Trustee or its Authenti- cating Agent, such Certificate shall
be deemed fully paid.
Section 12.08. No Petition. Each of the Seller, the Servicer and the
Trustee covenants and agrees that prior to the date which is [_________] after
the date upon which the last Class of Certificates has been paid in full, it
will not institute against, or join any other Person in instituting against the
Depositor any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other proceedings under any federal or state bankruptcy or similar
law. This Section shall survive termination of this Agreement or the termination
of the Servicer or the Trustee, as the case may be, under this Agreement.
Section 12.09. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
Section 12.10. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at, or telecopied (with transmission confirmed by telephone) to, or
mailed by first class or registered mail, postage prepaid, to in the case of
(i) the Depositor, [_________________], [______________], Attention:
[____________]; (ii) the Servicer, [IndyMac, Inc., 155 N. Lake Avenue, Pasadena,
CA 91101, Attention: General Counsel]; (iii) the Trustee, [________________]
Attention: [____________]; (iv) [Rating Agency], [__________], Attention:
[___________]; (v) [Rating Agency], [___________], Attention:
[____________________]; or (vi) in any such case at such other address specified
in writing to each other entity listed in this Section.
Section 12.11. Merger and Integration of Documents. Except as specifically
stated otherwise herein, this Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 12.12. Headings. The headings herein and Table of Contents are for
purposes of reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.
Section 12.13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused their names to be signed
hereto by their respective officers thereunto duly authorized as of the day and
year first above written.
INDYMAC ABS, INC., as Depositor
By:____________________________________
Name:
Title:
[INDYMAC, INC.], as Seller and Servicer
By:____________________________________
Name:
Title:
[_____________________________], as Trustee
By:____________________________________
Name:
Title:
State of New York )
) ss.:
County of New York )
On the ____ day of __________, 199_ before me, a notary public in and for
said State, personally appeared __________, known to me to be __________ of
[_______________], 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]
State of __________ )
) ss.:
County of __________ )
On the ____ day of __________, 199_ before me, a notary public in and for
said State, personally appeared __________, known to me to be a __________ of
[IndyMac, 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]
State of New York )
) ss.:
County of New York )
On the ____ day of __________, 199_ before me, a notary public in and for
said State, personally appeared _________________, known to me to be a Trust
Officer of [_________________], a national banking association that executed the
within instrument, and also known to be the person who executed it on behalf of
said national 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
[Notarial Seal]
EXHIBIT A
CONTRACT SCHEDULE
EXHIBIT B
FORM OF FACE OF CLASS A CERTIFICATE
[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE. THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSE OF APPLYING
THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS
CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS ______________. THE INITIAL
PER ANNUM RATE OF INTEREST ON THIS CERTIFICATE IS ___%. ASSUMING THAT PRINCIPAL
PAYMENTS ARE MADE ON THE CONTRACTS UNDERLYING THE CERTIFICATES AT A CONSTANT
ANNUAL PREPAYMENT RATE OF __% OF THE PREPAYMENT MODEL, THIS CERTIFICATE HAS BEEN
ISSUED WITH NO MORE THAN $_________ OF OID PER $1,000 OF INITIAL PRINCIPAL
AMOUNT, THE YIELD TO MATURITY IS ___% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE
INITIAL SHORT ACCRUAL PERIOD IS NO MORE THAN $_______ PER $1,000 OF INITIAL
PRINCIPAL AMOUNT, ASSUMING THE YIELD IS ACCRUED ON A DAILY BASIS AND THE COUPON
IS ACCRUED ON A RATABLE BASIS DURING THE INITIAL PERIOD. NO REPRESENTATION IS
MADE AS TO THE RATE AT WHICH PRINCIPAL PAYMENTS WILL BE MADE ON THE CONTRACTS.]
Number ___ [__]-[1][2][3][4][5][6]
Date of Pooling and Servicing Agreement Original Denomination:
and Cut-off Date: [______, 199_] $____________________
Class A Pass-Through Rate: ____%, Class A Initial Certificate Principal
computed on the basis of a 360-day year Balance:
of twelve 30-day months. $____________________
Final Distribution Date: [______, __]
First Distribution Date: [______, 199_]
CUSIP ________________
[INDYMAC, INC.] MANUFACTURED HOUSING CONTRACT
PASS-THROUGH CERTIFICATE,
[SERIES 199_-_, CLASS A [-1][-2][-3][-4][-5][-6]
evidencing a percentage interest in any distributions allocable
to the Class A Certificates with respect to a pool of fixed rate
conventional manufactured housing installment sales contracts and
installment loans sold by
[_____________________________________________________],
which manufactured housing installment sales contracts and
installment loans either were originated or acquired by and are
initially serviced by [IndyMac, Inc.] (the "Seller" and the
"Servicer").
This Certificate does not represent an obligation of or interest in
[_____________________________], the Seller, the Servicer, the Trustee referred
to below or any of their respective affiliates.
Neither this Certificate nor the underlying manufactured housing
installment sales contracts and installment loans are guaranteed or insured by
[______________________________], the Seller, the Servicer, the Trustee, any of
their respective affiliates or by any governmental agency or instrumentality.
THE PORTION OF THE CLASS A INITIAL CERTIFICATE PRINCIPAL BALANCE EVIDENCED
BY THIS CERTIFICATE (THE "CERTIFICATE BALANCE") WILL BE REDUCED BY DISTRIBUTIONS
ON THIS CERTIFICATE THAT ARE ALLOCABLE TO PRINCIPAL. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THIS CERTIFICATE, THE CERTIFICATE BALANCE OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT CERTIFICATE BALANCE BY
INQUIRY OF THE TRUSTEE.
This certifies that ___________________ is the registered owner of an
undivided interest in certain monthly distributions with respect to a pool (the
"Contract Pool") of conventional manufactured housing installment sales
contracts and installment loan agreements (collectively, the "Contracts") sold,
together with certain other property (collectively, the "Trust Fund"), by
IndyMac, ABS, Inc. (the "Depositor"). The Contracts either were originated or
acquired by and are serviced by [IndyMac, Inc.] (the "Seller" and the
"Servicer") and are secured by Manufactured Homes. The Trust Fund was created
pursuant to a Pooling and Servicing Agreement dated as of the date specified
above (the "Agreement"), among the Depositor, the Seller, the Servicer and
[___________], as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. Capitalized terms used herein that
are not otherwise defined shall have the meanings ascribed thereto in the
Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as [IndyMac, Inc.] Manufactured Housing Contract Pass-Through
Certificates, Series 199[_-_] (the "Certificates") and 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.
On each Distribution Date, to the extent described in the Agreement, the
Trustee will cause to be distributed from funds in the Certificate Account to
each Class A Certificateholder an amount equal to the product of the Percentage
Interest evidenced by such Class A Certificateholder's Certificate and the Class
A-__ Distribution Amount to be distributed to such Class of Class A
Certificates.
Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register or by wire transfer to Holders of Class A Certificates
with original denominations aggregating at least $[____________] who have given
the Trustee written instructions at least five Business Days prior to the
related Record Date. Notwithstanding the foregoing, the final distribution on
this Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this Certificate
at the office or agency appointed by the Trustee for that purpose and specified
in such notice of final distribution.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRE- SENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
Reference is hereby made to the further provisions of this Certificate set
forth hereafter, 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 or on
behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated:
[____________________]
By:______________________________
Authorized Officer
[Form of Certificate of Authentication]
This is one of the Certificates referred to in the within-mentioned
Agreement.
By:_______________________ By: [___________________]
Authenticating Agent as Trustee
or
___________________________ _________________________
Authorized Signatory Authorized Signatory
EXHIBIT C
FORM OF FACE OF CLASS [__] CERTIFICATE
[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE. THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSE OF APPLYING
THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS
CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS ____________. THE INITIAL PER
ANNUM RATE OF INTEREST ON THIS CERTIFICATE IS ___%. ASSUMING THAT PRINCIPAL
PAYMENTS ARE MADE ON THE CONTRACTS UNDERLYING THE CER- TIFICATES AT A CONSTANT
ANNUAL PREPAYMENT RATE OF __% OF THE PREPAYMENT MODEL, THIS CERTIFICATE HAS BEEN
ISSUED WITH NO MORE THAN $_________ OF OID PER $1,000 OF INITIAL PRINCIPAL
AMOUNT, THE YIELD TO MATURITY IS ___% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE
INITIAL SHORT ACCRUAL PERIOD IS NO MORE THAN $_______ PER $1,000 OF INITIAL
PRINCIPAL AMOUNT, ASSUMING THE YIELD IS ACCRUED ON A DAILY BASIS AND THE COUPON
IS ACCRUED ON A RATABLE BASIS DURING THE INITIAL PERIOD. NO REPRESENTATION IS
MADE AS TO THE RATE AT WHICH PRINCIPAL PAYMENTS WILL BE MADE ON THE CONTRACTS.]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES, THE CLASS [__] CERTIFICATES [AND THE CLASS [_-1] CERTIFICATES] TO
THE EXTENT DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
[FOR CLASS [_-2] CERTIFICATES: 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 ARTICLE FOUR OF THE POOLING
AND SERVICING AGREEMENT REFERRED TO HEREIN.]
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANS- FERRED
UNLESS THE TRANSFEREE DELIVERS A REPRESENTATION LETTER TO THE TRUSTEE TO THE
EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR A PLAN SUBJECT
TO SECTION 4975 OF THE CODE, OR, IF THE PURCHASER IS AN INSURANCE COMPANY, THAT
THE PURCHASER IS AN INSURANCE COMPANY WHICH IS PURCHASING SUCH CERTI- FICATES
WITH FUNDS CONTAINED IN AN "INSURANCE COMPANY GENERAL ACCOUNT" (AS SUCH TERM IS
DEFINED IN SECTION V(e) OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE
95-60")) AND THAT THE PURCHASE AND HOLDING OF SUCH CERTIFICATES ARE COVERED
UNDER PTCE 95-60 OR DELIVERS TO THE TRUSTEE AN OPINION OF COUNSEL IN ACCOR-
DANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. NOTWITHSTANDING
ANYTHING ELSE TO THE CONTRARY HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE
TO OR ON BEHALF OF AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR TO THE CODE
WITHOUT THE OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE
SHALL BE VOID AND OF NO EFFECT.
Number ___ [___________] Class [_]-[1][2]
Date of Pooling and Servicing Agreement Original Denomination:
and Cut-off Date: $____________________
Class [__]-[1][2] Pass-Through Rate:lesser Class [__]-[1][2] Initial Certificate
of ____%, computed on the basis of a 360- Principal Balance: $_________________
day year, and the Weighted Average Net
Contract Rate
Final Distribution Date:
First Distribution Date: CUSIP ________________
[INDYMAC, INC.] MANUFACTURED HOUSING CONTRACT
PASS-THROUGH CERTIFICATE,
SERIES 199[_-_], CLASS [__]-[1][2]
evidencing a percentage interest in any distributions
allocable to the Class [__] Certificates with respect to a
pool of fixed rate conventional manufactured housing
installment sales contracts and installment loans formed and
sold by
[_________________________________]
which manufactured housing installment sales contracts and installment loans
either were originated or acquired by and are initially serviced by [IndyMac,
Inc.] (the "Seller" and the "Servicer").
This Certificate does not represent an obligation of or interest in
[IndyMac ABS, Inc., the Seller, the Servicer, the Trustee referred to below or
any of their respective affiliates.
Neither this Certificate nor the underlying manufactured housing contracts
and loans are guaranteed or insured by [the Depositor, the Seller, the Servicer,
the Trustee], any of their respective affiliates or by any governmental agency
or instrumentality.
THE PORTION OF THE CLASS [__]-[1][2] INITIAL CERTIFICATE PRINCIPAL BALANCE
EVIDENCED BY THIS CERTIFICATE (THE "CERTIFICATE BALANCE") WILL BE REDUCED BY
DISTRIBUTIONS ON THIS CERTIFICATE THAT ARE ALLOCABLE TO PRINCIPAL. ACCORDINGLY,
FOLLOWING THE INITIAL ISSUANCE OF THIS CERTIFICATE, THE CERTIFICATE BALANCE OF
THIS CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE.
ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT CERTIFICATE BALANCE
BY INQUIRY OF THE TRUSTEE.
This certifies that ___________________ is the registered owner of an
undivided interest in certain monthly distributions with respect to a pool (the
"Contract Pool") of conventional manufactured housing installment sales
contracts and installment loan agreements (collectively, the "Contracts") formed
and sold, together with certain other property (collectively, the "Trust Fund"),
by IndyMac ABS, Inc. (the "Depositor"). The Contracts either were originated or
acquired by and are serviced by [IndyMac, Inc.] (the "Seller" and the
"Servicer") and are secured by Manufactured Homes. The Trust Fund was created
pursuant to a Pooling and Servicing Agreement dated as of the date specified
above (the "Agreement"), among the Depositor, the Seller, the Servicer and
[________________], as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth hereafter. Capitalized terms used
herein that are not otherwise defined shall have the meanings ascribed thereto
in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as [IndyMac, Inc.] Manufactured Housing Contract Pass-Through
Certificates, Series 199[_-_] (the "Certificates") and 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.
On each Distribution Date, to the extent described in the Agreement, the
Trustee will cause to be distributed from funds in the Certificate Account, to
each Class [__] Certificate- holder an amount equal to the product of the
Percentage Interest evidenced by such Class [__] Certificateholder's Certificate
and the Class [__]-[1][2] Distribution Amount. Payments in respect of the Class
[__] Certificates are subordinated to payments in respect of the Class A
Certificates and the Class [__] Certificates and payments in respect of the
Class [__-2] Certificates are subordinated to payments in respect of the Class
[__-1] Certificates, in each case to the extent specified in the Agreement.
Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register or by wire transfer to Holders of Class [__]
Certificates with original denominations aggregating at least $[_________] who
have given the Trustee written instructions at least five Business Days prior to
the related Record Date. Notwithstanding the foregoing, the final distribution
on this Certificate will be made after due notice by the Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that purpose
and specified in such notice of final distribution.
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.]
Reference is hereby made to the further provisions of this Certificate set
forth hereafter, 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 or on
behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: [___________________________]
By:______________________________
Authorized Officer
[Form of Certificate of Authentication]
This is one of the Certificates referred to in the within-mentioned Agreement.
By:___________________________ By: [____________________],
Authenticating Agent as Trustee
or
___________________________ ___________________________
Authorized Signatory Authorized Signatory
EXHIBIT D
FORM OF REVERSE OF CERTIFICATES
As provided in the Agreement, deductions and withdrawals from the
Collection Account will be made from time to time for purposes other than
distributions to Certificate- holders, such purposes including payment of the
Monthly Servicing Fee, reimbursement to the Servicer for certain expenses
incurred by it and reimbursement to the Servicer for previous Advances with
respect to certain delinquent payments [of interest] on the Contracts.
The Trustee will cause to be kept at its Corporate Trust Office in New
York, New York, or at the office of its designated agent, a Certificate Register
in which, subject to such reasonable regulations as it may prescribe, the
Trustee will provide for the registration of Certificates and of transfers and
exchanges of Certificates. Upon surrender for registration of transfer of any
Certificate at any office or agency of the Trustee maintained for such purpose,
the Trustee will, subject to the limitations set forth in the Agreement,
authenticate and deliver, in the name of the designated transferee or
transferees, a Certificate dated the date of authentication by the Trustee.
No service charge will be made to the Holder for any transfer or exchange
of the Certificate, 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 the Certificate. Prior to due presentation of a
Certificate for registration of transfer, the Depositor, the Servicer and the
Trustee may treat the person in whose name any Certificate is registered as the
owner of such Certificate and the Percentage Interest in the Trust Fund
evidenced thereby for the purpose of receiving distributions pursuant to the
Agreement and for all other purposes whatsoever, and neither the Depositor, the
Servicer nor the Trustee will be affected by notice to the contrary.
The Agreement may be amended from time to time by the Depositor, the
Servicer and the Trustee, without the consent of any of the Certificateholders,
(i) to cure any ambiguity or to correct or supplement any provisions therein
which may be inconsistent with any other provisions therein, (ii) to add to the
duties or obligations of the Servicer under the Agreement, (iii) to obtain a
rating by a nationally recognized rating agency or to maintain or improve the
rating of any Class of Certificates then given by a rating agency (it being
understood that none of the Trustee, the Depositor, the Seller or the Servicer
is obligated to obtain, maintain or improve any rating of any Class of
Certificates after the Closing Date), (iv) to amend certain tests or definitions
or (v) to make any other provisions with respect to matters or questions arising
under the Agreement which are not materially inconsistent with the provisions of
the Agreement, including without limitation, provisions relating to the issuance
of definitive Certificates to Certificate Owners; provided, however, with
respect to clause (v) that any such action shall not, as evidenced by an Opinion
of Counsel, adversely affect in any material respect the interests of any
Certificateholder (including, without limitation, the maintenance of the status
of the Trust Fund as REMICs under the Code) and provided further that, in the
case of clause (iv), any such action may be taken only after the Trustee has
received from each Rating Agency a confirmation that such action will not result
in the reduction or withdrawal of any then-current rating of a Certificate. The
Agreement may also be amended from time to time by the Depositor, the Servicer
and the Trustee, without consent of the Certificateholders, to modify, eliminate
or add to the provisions of the Agreement to such extent as shall be necessary
to maintain the qualification of the Trust Fund as REMICs under the Code or
avoid, or minimize the risk of, the imposition of any Tax on the Trust Fund,
unless certain conditions in the Agreement have been complied with, or to
prevent the Trust Fund from entering into certain prohibited transactions under
the Code, provided that such amendment shall not adversely affect in any
material respect the interests of any Certificateholder and there shall have
been delivered to the Trustee an Opinion of Counsel to the effect that such
action is necessary or appropriate for such purposes.
The Agreement may also be amended from time to time by the Depositor, the
Seller, the Servicer and the Trustee with the consent of the Holders of
Certificates of each Class affected thereby evidencing, as to each such Class,
Percentage Interests aggregating not less than 662/3%, for the purpose of adding
any provisions to or changing in any manner or elimi- nating any of the
provisions of the Agreement or of modifying in any manner the rights of the
Holders of Certificates; provided, however, that no such amendment may (i)
reduce in any manner the amount of, or delay the timing of, distributions which
are required to be made on any Certificate without the consent of the Holder of
such Certificate, (ii) reduce the aforesaid percentage of Certificates of a
Class the Holders of which are required to consent to any such amendment,
without the consent of the Holders of all Certificates of such Class then
outstanding or (iii) adversely affect the status of the Trust Fund as REMICs or
cause a Tax to be imposed on the Trust Fund under the REMIC provisions.
The respective obligations and responsibilities of the Depositor, the
Seller, the Servicer and the Trustee under the Agreement will terminate upon:
(i) the later of the final payment or other liquidation (or any advance with
respect thereto) of the last Contract or the disposition of all property
acquired upon repossession of any Contract and the remittance of all funds due
thereunder, (ii) at the option of the Depositor or the Servicer, on any
Distribution Date after the first Distribution Date on which the Pool Balance
was less than [__]% of the Cut-off Date Pool Balance, so long as the Depositor
or the Servicer, as the case may be, deposits in the Certificate Account the
repurchase price specified in the Agreement or (iii) upon the sale of the
Contracts and other property of the Trust Fund by the Trustee if neither the
Depositor nor the Servicer exercises the option in clause (ii) within [__] days
after the Distribution Date on which they are first entitled to do so, as
specified in the Agreement.
EXHIBIT E
FORM OF FACE OF CLASS [__] CERTIFICATE
[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS
ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE. THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSE OF APPLYING
THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS
CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS [___________]. THE INITIAL
PER ANNUM RATE OF INTEREST ON THIS CERTIFICATE IS ___%. ASSUMING THAT PRINCIPAL
PAYMENTS ARE MADE ON THE CONTRACTS UNDERLYING THE CERTIFICATES AT A CONSTANT
ANNUAL PREPAYMENT RATE OF __% OF THE PREPAYMENT MODEL, THIS CERTIFICATE HAS BEEN
ISSUED WITH NO MORE THAN $_________ OF OID PER $1,000 OF INITIAL PRINCIPAL
AMOUNT, THE YIELD TO MATURITY IS ___% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE
INITIAL SHORT ACCRUAL PERIOD IS NO MORE THAN $_______ PER $1,000 OF INITIAL
PRINCIPAL AMOUNT, ASSUMING THE YIELD IS ACCRUED ON A DAILY BASIS AND THE COUPON
IS ACCRUED RATABLY DURING THE INITIAL PERIOD. NO REPRESENTATION IS MADE AS TO
THE RATE AT WHICH PRINCIPAL PAYMENTS WILL BE MADE ON THE CONTRACTS.]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANS- FERRED
UNLESS THE TRANSFEREE DELIVERS A REPRESENTATION LETTER TO THE TRUSTEE TO THE
EFFECT THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR A PLAN SUBJECT
TO SECTION 4975 OF THE CODE, OR, IF THE PURCHASER IS AN INSURANCE COMPANY, THAT
THE PURCHASER IS AN INSURANCE COMPANY WHICH IS PURCHASING SUCH CERTI- FICATES
WITH FUNDS CONTAINED IN AN "INSURANCE COMPANY GENERAL ACCOUNT" (AS SUCH TERM IS
DEFINED IN SECTION V(e) OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE
95-60")) AND THAT THE PURCHASE AND HOLDING OF SUCH CERTIFICATES ARE COVERED
UNDER PTCE 95-60 OR DELIVERS TO THE TRUSTEE AN OPINION OF COUNSEL IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. NOTWITHSTANDING
ANYTHING ELSE TO THE CONTRARY HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE
TO OR ON BEHALF OF AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR TO THE CODE
WITHOUT THE OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE
SHALL BE VOID AND OF NO EFFECT.
Number ___ Class [__]
Date of Pooling and Servicing Agreement Original Denomination:
and Cut-off Date: [__________] $_______________________
Class [__] Pass-Through Rate: lesser of Class [__] Initial Certificate
____%, computed on the basis of a 360-day Principal Balance:
year of twelve 30 day months, or the
Weighted Average Net Contract Rate
Final Distribution Date: [_________]
First Distribution Date: [_________] CUSIP ________________
[INDYMAC, INC.] MANUFACTURED HOUSING CONTRACT
PASS-THROUGH CERTIFICATE,
SERIES 199[_-_], CLASS [__]
evidencing a percentage interest in any distribu- tions allocable
to the Class [__] Certificates with respect to a pool of fixed
rate conventional manu- factured housing installment sales
contracts and installment loans formed and sold by
[______________________________]
which manufactured housing installment sales contracts and installment loans
either were originated or acquired by and are initially serviced by [IndyMac,
Inc.] (the "Seller" and the "Servicer").
This Certificate does not represent an obligation of or interest in the
Depositor, the Seller, the Servicer, the Trustee referred to below or any of
their respective affiliates.
Neither this Certificate nor the underlying manufactured housing contracts
and loans are guaranteed or insured by the Depositor, the Seller, the Servicer,
the Trustee, any of their respective affiliates or by any governmental agency or
instrumentality.
THE PORTION OF THE CLASS [__] INITIAL CERTIFICATE PRINCIPAL BALANCE
EVIDENCED BY THIS CERTIFICATE (THE "CERTIFICATE BALANCE") WILL BE REDUCED BY
DISTRIBUTIONS ON THIS CERTIFICATE THAT ARE ALLOCABLE TO PRINCIPAL. ACCORDINGLY,
FOLLOWING THE INITIAL ISSUANCE OF THIS CERTIFICATE, THE CERTIFICATE BALANCE OF
THIS CERTIFICATE WILL BE DIFFERENT FROM THE ORIGINAL DENOMINATION SHOWN ABOVE.
ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT CERTIFICATE BALANCE
BY INQUIRY OF THE TRUSTEE.
This certifies that ___________________ is the registered owner of an
undivided interest in certain monthly distributions with respect to a pool (the
"Contract Pool") of conventional manufactured housing installment sales
contracts and installment loan agreements (collectively, the "Contracts") formed
and sold, together with certain other property (collectively, the "Trust Fund"),
by IndyMac ABS, Inc. (the "Depositor"). The Contracts either were originated or
acquired by and are serviced by [IndyMac, Inc]. (the "Seller" and the
"Servicer") and are secured by Manufactured Homes. The Trust Fund was created
pursuant to a Pooling and Servicing Agreement dated as of the date specified
above (the "Agreement"), among the Depositor, the Seller, the Servicer and
[____________], as trustee (the "Trustee"), a summary of certain of the
pertinent provisions of which is set forth here- after. Capitalized terms used
herein that are not otherwise defined shall have the meanings ascribed thereto
in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as [IndyMac, Inc.] Manufactured Housing Contract Pass-Through
Certificates, Series 199[_-_] (the "Certificates") and 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.
On each Distribution Date, to the extent described in the Agreement, the
Trustee will cause to be distributed from funds in the Certificate Account to
each Class [__] Certificate- holder an amount equal to the product of the
Percentage Interest evidenced by such Class [__] Certificateholder's Certificate
and the Class [__] Distribution Amount. Payments in respect of the Class [__]
Certificates are subordinated to payments in respect of the Class A Certificates
to the extent specified in the Agreement.
Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register or by wire transfer to Holders of Class [__]
Certificates with original denominations aggregating at least $[___________] who
have given the Trustee written instructions at least five Business Days prior to
the related Record Date. Notwithstanding the foregoing, the final distribution
on this Certificate will be made after due notice by the Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that purpose
and specified in such notice of final distribution.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRE- SENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE &
CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
Reference is hereby made to the further provisions of this Certificate set
forth hereafter, 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 or on
behalf of the Trustee, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: [____________________]
By:_____________________________
Authorized Officer
[Form of Certificate of Authentication]
This is one of the Certificates referred to in the within-mentioned Agreement.
By:__________________________ By: [___________________],
Authenticating Agent as Trustee
or
_____________________________ _______________________________
Authorized Signatory Authorized Signatory
EXHIBIT F
FORM OF FACE OF CLASS [__] CERTIFICATE
[THIS CERTIFICATE REPRESENTS THE "TAX MATTERS PERSON RESIDUAL INTEREST"
ISSUED UNDER THE POOLING AND SERVICING AGREEMENT REFERRED TO BELOW AND MAY NOT
BE TRANSFERRED TO ANY PERSON EXCEPT IN CONNECTION WITH THE ASSUMPTION BY THE
TRANSFEREE OF THE DUTIES OF THE SERVICER UNDER SUCH AGREEMENT.]
THE SMALL BUSINESS JOB PROTECTION ACT OF 1996, AS PART OF THE REPEAL OF THE
BAD DEBT RESERVE METHOD FOR THRIFT INSTITUTIONS, REPEALED THE APPLICATION OF
CODE SECTION 593(d) TO ANY TAXABLE YEAR BEGINNING AFTER DECEMBER 31, 1995.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS
THE BENEFICIAL OWNERSHIP OF TWO "RESIDUAL INTERESTS" ISSUED BY TWO SEPARATE
"REAL ESTATE MORTGAGE INVESTMENT CONDUITS" AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE. THIS
CERTIFICATE MAY ONLY BE TRANSFERRED TO A PERMITTED TRANSFEREE (AS DEFINED IN THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN); ANY SUCH TRANSFER MUST ALSO
SATISFY THE OTHER REQUIREMENTS OF SECTIONS 4.02 AND 4.09 OF SUCH POOLING AND
SERVICING AGREEMENT.
Number ___ Class [__]
Date of Pooling and Servicing Agreement Original Denomination: $[___]
and Cut-off Date: [____________]
Class [__] Pass-Through Rate: [___]%, Class [__] Initial Certificate
computed on the basis of a 360-day year Principal Balance: $[___]
of twelve 30-day months.
Final Distribution Date:[___________]
First Distribution Date: [_______]
[INDYMAC, INC.] MANUFACTURED HOUSING CONTRACT
PASS-THROUGH CERTIFICATE,
SERIES 199[_-_], CLASS [__]
evidencing a percentage interest in any distribu- tions allocable
to the Class [__] Certificates with respect to a pool of fixed
rate conventional manufactured housing installment sales
contracts and installment loans formed and sold by
[________________________________]
which manufactured housing installment sales contracts and installment loans
either were originated or acquired by and are initially serviced by [IndyMac,
Inc.] (the "Seller" and the "Servicer").
This Certificate does not represent an obligation of or interest in
[________________], the Seller, the Servicer or the Trustee referred to below or
any of their affiliates.
Neither this Certificate nor the underlying manufactured housing contracts
are guaranteed or insured by [_______________________], the Seller, the
Servicer, the Trustee, any of their respective affiliates or by any governmental
agency or instrumentality.
This certifies that ______________________________________ is the
registered owner of an undivided interest in certain monthly distributions with
respect to a pool (the "Contract Pool") of conventional manufactured housing
installment sales contracts and installment loan agreements (the "Contracts")
formed and sold, together with certain other property (collectively, the "Trust
Fund"), by IndyMac ABS, Inc. (the "Depositor"). The Contracts either were
originated or acquired by and are serviced by [IndyMac, Inc.] and are secured by
Manufactured Homes. The Trust Fund was created pursuant to a Pooling and
Servicing Agreement dated as of the date specified above (the "Agreement"),
among the Depositor, the Seller, the Servicer and [__________________], as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. Capitalized terms used herein that are not
otherwise defined shall have the meanings ascribed thereto in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as [IndyMac, Inc.] Manufactured Housing Contract Pass-Through
Certificates, Series 199[_-_] (the "Certificates") and 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.
Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register. Notwithstanding the foregoing, the final distribution
on this Certificate will be made after due notice by the Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that purpose
and specified in such notice of final distribution.
The holder of this Class [__] Certificate, by acceptance hereof, agrees
that, in accordance with the requirements of Section 860D(b)(1) of the Code, the
federal tax return of the Trust for its first taxable year shall provide that
the Trust elects to be treated as "real estate mortgage investment conduits"
(the "REMICs") under the Code for such taxable year and all subsequent taxable
years. The Class A, Class [__] and Class [__] Certificates shall be "regular
interests" in the REMICs and the [__] Certificates shall be the "residual
interests" in the REMICs. In addition, the holder of this Class [__]
Certificate, by acceptance hereof, (i) agrees to file tax returns consistent
with and in accordance with any elections, decisions or other reports made or
filed with regard to federal, state or local taxes on behalf of the Trust, (ii)
agrees to cooperate with the Servicer in connection with examinations of the
Trust's affairs by tax authorities, including administrative and judicial
proceedings and (iii) makes the additional agreements, designations and
appointments, and undertakes the responsibilities, set forth in Section 4.09 of
the Agreement.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed.
Dated: [_____________________________]
By:____________________________
Authorized Officer
[Form of Certificate of Authentication]
This is one of the Certificates referred to in the within-mentioned Agreement.
By:___________________________ By: [________________________],
Authenticating Agent as Trustee
or
______________________________ _______________________________
Authorized Signatory Authorized Signatory
EXHIBIT G
FORM OF FACE OF CLASS [__] CERTIFICATE
[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS
BENEFICIAL OWNERSHIP OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT" AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE. THE FOLLOWING INFORMATION IS PROVIDED
SOLELY FOR THE PURPOSE OF APPLYING THE U.S. FEDERAL INCOME TAX ORIGINAL ISSUE
DISCOUNT ("OID") RULES TO THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE
IS [________]. THE INITIAL PER ANNUM RATE OF INTEREST ON THIS CERTIFICATE IS
INTEREST ACCRUING ON INTERESTS ISSUED BY THE POOLING REMIC IN EXCESS OF THE
RATES STATED IN THE POOLING AND SERVICING AGREEMENT. ASSUMING THAT PRINCIPAL
PAYMENTS ARE MADE ON THE CONTRACTS UNDERLYING THE CERTIFICATES AT A CONSTANT
ANNUAL PREPAYMENT RATE OF __% OF THE PREPAYMENT MODEL, THIS CERTIFICATE HAS BEEN
ISSUED WITH NO MORE THAN $_________ OF OID PER $100,000 OF INITIAL NOTIONAL
PRINCIPAL AMOUNT, THE YIELD TO MATURITY IS ___% AND THE AMOUNT OF OID
ATTRIBUTABLE TO THE INITIAL SHORT ACCRUAL PERIOD IS NO MORE THAN $_______ PER
$100,000 OF INITIAL NOTIONAL PRINCIPAL AMOUNT, ASSUMING THE YIELD IS ACCRUED ON
A DAILY BASIS DURING THE INITIAL PERIOD. NO REPRESENTATION IS MADE AS TO THE
RATE AT WHICH PRINCIPAL PAYMENTS WILL BE MADE ON THE CONTRACTS.]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A
CERTIFICATES, THE CLASS [__] CERTIFICATES AND THE CLASS [__] CERTIFICATES TO THE
EXTENT DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND
LAWS OR IS SOLD OR TRANS- FERRED IN TRANSACTIONS WHICH ARE EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN
ACCORDANCE WITH THE PROVISIONS OF SECTIONS 4.02 OF THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
THE SMALL BUSINESS JOB PROTECTION ACT OF 1996, AS PART OF THE REPEAL OF THE
BAD DEBT RESERVE METHOD FOR THRIFT INSTITUTIONS, REPEALED THE APPLICATION OF
CODE SECTION 593(d) TO ANY TAXABLE YEAR BEGINNING AFTER DECEMBER 31, 1995.
Number ___ Class [__]
Date of Pooling and Servicing Agreement Percentage Interest: [___]%
and Cut-off Date: [_____________]
Final Distribution Date:[___________]
First Distribution Date: [_____________]
[INDYMAC, INC.] MANUFACTURED HOUSING CONTRACT
PASS-THROUGH CERTIFICATE,
SERIES 199[_-_], CLASS [__]
evidencing a percentage interest in any distributions allocable
to the Class [__] Certificates with respect to a pool of fixed
rate conventional manufactured housing installment sales
contracts and installment loans formed and sold by
[___________________________].,
which manufactured housing installment sales contracts and installment loans
either were originated or acquired by and are initially serviced by [IndyMac,
Inc.] (the "Seller" and the "Servicer").
This Certificate does not represent an obligation of or interest in
[____________________], the Seller, the Servicer or the Trustee referred to
below or any of their affiliates.
Neither this Certificate nor the underlying manufactured housing contracts
are guaranteed or insured by [_________________________], the Seller, the
Servicer, the Trustee, any of their respective affiliates or by any governmental
agency or instrumentality.
This certifies that ______________________________ is the registered owner
of an undivided interest in certain monthly distributions with respect to a pool
(the "Contract Pool") of conventional manufactured housing installment sales
contracts and installment loan agreements (the "Contracts") formed and sold,
together with certain other property (collectively, the "Trust Fund"), by
IndyMac ABS, Inc. (the "Depositor"). The Contracts either were originated or
acquired by and are serviced by [IndyMac, Inc.] and are secured by Manufactured
Homes. The Trust Fund was created pursuant to a Pooling and Servicing Agreement
dated as of the date specified above (the "Agreement"), among the Depositor, the
Seller, the Servicer and [____________________], as trustee (the "Trustee"), a
summary of certain of the pertinent provisions of which is set forth hereafter.
Capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in the Agreement.
This Certificate is one of a duly authorized issue of Certificates,
designated as [IndyMac, Inc.] Manufactured Housing Contract Pass-Through
Certificates, Series 199[_-_] (the "Certificates") and 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.
On each Distribution Date, to the extent described in the Agreement, the
Trustee will cause to be distributed from funds in the Certificate Account to
each Class [__] Certificateholder an amount equal to the product of the
Percentage Interest evidenced by such Class [__] Certificateholder's Certificate
and the Class [__] Distribution Amount. Payments in respect of the Class [__]
Certificates are subordinated to payments in respect of the [__], Class A and
Class [__] Certificates to the extent specified in the Agreement.
Distributions on this Certificate will be made by check mailed to the
address of the Person entitled thereto, as such name and address shall appear on
the Certificate Register. Notwithstanding the foregoing, the final distribution
on this Certificate will be made after due notice by the Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that purpose
and specified in such notice of final distribution.
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
Dated: [__________________________]
By:__________________________
Authorized Officer
[Form of Certificate of Authentication]
This is one of the Certificates referred to in the within-mentioned Agreement.
By:____________________________ By: [________________________],
Authenticating Agent as Trustee
or
______________________________ _______________________________
Authorized Signatory Authorized Signatory
EXHIBIT H
[RESERVED]
EXHIBIT I
FORM OF CERTIFICATE ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
(PLEASE INSERT SOCIAL SECURITY* OR TAXPAYER IDENTIFICATION NUMBER OF ASSIGNEE)
(*This information, which is voluntary, is being requested to ensure that the
assignee will not be subject to backup withholding under Section 3406 of the
Code.)
_____________________________________________________________________________
(Please Print or Typewrite Name and Address of Assignee)
______________________________________________________________________________
the within Certificate, and all rights thereunder, and hereby does irrevocably
constitute and appoint
_______________________________________________________ Attorney to transfer the
within Certificate on the books kept for the registration thereof, with full
power of substitution in the premises.
Dated:
(Signature guaranty) ____________________________________
NOTICE: The signature to this assign-
ment must correspond with the name as
it appears upon the face of the
within Certificate in every
particular, without alteration or
enlargement or any change whatever.
EXHIBIT J
CERTIFICATE OF SERVICING OFFICER
The undersigned certifies that he is a _______ of [IndyMac, Inc.] (the
"Seller" and the "Servicer") and that as such he is duly authorized to execute
and deliver this certificate on behalf of the Servicer pursuant to Section 7.02
of the Pooling and Servicing Agreement, dated as of [____________] (the
"Agreement"), among the IndyMac ABS, Inc., as depositor, the Seller, the
Servicer and [_____________], as trustee, and further certifies that:
1. The Monthly Report for the period from to attached to this
certificate is complete and accurate in accordance with the requirements of
Sections 7.01 and 7.02 of the Agreement; and
2. As of the date hereof, no Event of Default or event that with
notice or lapse of time or both would become an Event of Default has
occurred.
Capitalized terms used herein that are not otherwise defined shall have the
meanings ascribed thereto in the Agreement.
IN WITNESS WHEREOF, I have affixed hereunto my signature this [___] day of
[_____], 199[_].
[INDYMAC, INC.]
By:_________________________________
Name:
Title:
EXHIBIT K
TRANSFER AFFIDAVIT
State of _______________ )
) ss:
County _________________ )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is an officer of _____________________, a corporation
duly organized and existing under the laws of the State of __________, the
proposed transferee (the "Transferee") of the [IndyMac, Inc.] Manufactured
Housing Contract Pass-Through Certificates, Series 199[_-_], Class [__] (the
"Class [___] Certificates") issued pursuant to the Pooling and Servicing
Agreement, dated as of [______________] (the "Agreement"), among IndyMac ABS,
Inc., as depositor, IndyMac, Inc., as seller and servicer, and [__________], as
trustee. Capitalized terms used, but not defined herein or in Exhibit 1 hereto,
shall have the meanings ascribed thereto in the Agreement. The Transferee has
authorized the undersigned to make this affidavit on behalf of the Transferee.
2. The Transferee is, as of the date hereof, and will be, as of the date of
the Transfer, a Permitted Transferee. The Transferee is acquiring the Class [__]
Certificates either (i) for its own account or (ii) as nominee, trustee or agent
for another Person and has attached hereto an affidavit from such Person in
substantially the same form as this affidavit. The Transferee has no knowledge
that any such affidavit is false.
3. The Transferee has been advised and understands that (i) a tax shall be
imposed on Transfers of Class [__] Certificates to Persons that are not
Permitted Transferees; (ii) such tax is imposed on the transferor, or, if such
Transfer is through an agent (which includes a broker, nominee or middleman) for
a Person that is not a Permitted Transferee on the agent; and (iii) the Person
otherwise liable for the tax shall be relieved of liability for the tax if the
subsequent Transferee furnished to such Person an affidavit that such subsequent
Transferee is a Permitted Transferee and, at the time of Transfer, such Person
does not have actual knowledge that the affidavit is false.
4. The Transferee has been advised of, and understands that a tax shall be
imposed on a "pass-through entity" holding Class [__] Certificates if at any
time during the taxable year of the pass-through entity a Person that is not a
Permitted Transferee is the record holder of an interest in such entity. The
Transferee understands that no tax will be imposed for any period for which the
record holder furnishes to the pass-through entity an affidavit stating that the
record holder is a Permitted Transferee and the pass-through entity does not
have actual knowledge that such affidavit is false. (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 and, except as may be provided in Treasury Regulations,
persons holding interests in pass-through entities as a nominee for another
Person.)
5. Transferee has reviewed Section 4.09 of the Agreement and understands
the legal consequences of the acquisition of the Class [__] Certificates
including, without limitations, the restrictions on subsequent Transfers and the
provisions regarding voiding the Transfer and mandatory sales. The Transferee
expressly agrees to be bound by and to abide by the provisions of Sections 4.02
and 4.09 of the Agreement. The Transferee understands and agrees that any breach
of any of the representations included herein shall render the Transfer to the
Transferee contemplated hereby null and void.
6. The Transferee agrees to require a Transfer Affidavit from any Person to
whom the Transferee attempts to Transfer the Class [__] Certificates and in
connection with any Transfer by a Person for whom the Transferee is acting as
nominee, trustee or agent, and the Transferee will not Transfer the Class [__]
Certificates or cause any Class [__] Certificates to be Transferred to any
Person that the Transferee knows is not a Permitted Transferee.
7. The Transferee's taxpayer identification number is
_______________________.
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
duly authorized officer and its corporate seal to be hereunto affixed, duly
attested, this ___ day of ______, 199___.
[Name of Transferee]
[Corporate Seal] By:_____________________________
Name:
Title:
ATTEST:
______________________________
[Assistant] Secretary
Personally appeared before me the above-named _____________, known or
proved to me to be the same person who executed the foregoing instrument, and to
be the ______________ of the Transferee, and acknowledged that he executed the
same as his free act and deed and the free act and deed of the Transferee.
Subscribed and sworn before me this ___ day of _________, 199___.
________________________________
NOTARY PUBLIC
My commission expires the ___ day of
________, 19___.
EXHIBIT L
FORM OF INVESTMENT LETTER OF HOLDER OF CLASS [__][__] CERTIFICATES
1. The Purchaser is acquiring the Class [__][__] Certificates as principal
for its own account for the purpose of investment [neither the Underwriter nor
any of its Affiliates need represent that it is acquiring for purposes of
investment] and not with a view to or for sale in connection with any
distribution thereof, subject nevertheless to any requirement of law that the
disposition of the Purchaser's property shall at all times be and remain within
its control.
2. The Purchaser has knowledge and experience in financial and business
matters and is capable of evaluating the merits and risks of its investment in
the Class [__][__] Certificates and is able to bear the economic risk of such
investment. The Purchaser is an "accredited investor" within the meaning of Rule
501(a) under the rules and regulations of the Securities and Exchange Commission
under the Securities Act of 1933, as amended. The Purchaser has been given such
information concerning the Class [__][__] Certificates, the underlying Contracts
and the Servicer as it has requested.
3. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale by the Purchaser of the
Class [__][__] Certificates.
4. The Purchaser understands that the Class [__][__] Certificates has not
been and will not be registered under the Securities Act of 1933, as amended, or
any state securities laws and may be resold (which resale is not currently
contemplated) only if an exemption from registration is available, that neither
the Depositor, the Seller, the Servicer nor the Trustee is required to register
the Class [__][__] Certificates and that any transfer must comply with Sections
4.02 and 4.09 of the Pooling and Servicing Agreement. In connection with any
resale of the Class [__] Certificates, the Purchaser shall not make any general
solicitation or advertisement.
5. The Purchaser agrees that it will obtain from any purchaser of the Class
[__][__] Certificates from it the same representations, warranties and
agreements contained in paragraphs 1 through 5.
6. The Purchaser hereby directs the Trustee to register the Class [__][__]
Certificates acquired by the Purchaser in the name of its nominee as follows:
___________________________.
Very truly yours,
By:__________________________________
Name:
Title:
==========================================================================
TRUST AGREEMENT
among
INDYMAC ABS, INC.
as Depositor,
( )
------------------------------
and
( ),
------------------------------
as Owner Trustee
Dated as of ___________, 199__
==========================================================================
Table of Contents
-----------------
Page
----
ARTICLE I
Definitions
SECTION 1.01. Capitalized Terms . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitional Provisions . . . . . . . . . . . . 4
ARTICLE II
Organization
SECTION 2.01. Name . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.02. Office . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03. Purposes and Powers . . . . . . . . . . . . . . . . . 5
SECTION 2.04. Appointment of Owner Trustee . . . . . . . . . . . . 5
SECTION 2.05. Initial Capital Contribution of Owner
Trust Estate . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.06. Declaration of Trust . . . . . . . . . . . . . . . . 5
SECTION 2.07. Liability of the Owners . . . . . . . . . . . . . . . 6
SECTION 2.08. Title to Trust Property . . . . . . . . . . . . . . . 6
SECTION 2.09. Situs of Trust . . . . . . . . . . . . . . . . . . . 6
SECTION 2.10. Representations and Warranties of the
Depositor and the Company . . . . . . . . . . . . . . 6
SECTION 2.11. Federal Income Tax Allocations . . . . . . . . . . . 8
ARTICLE III
Trust Certificates and Transfer of Interests
SECTION 3.01. Initial Ownership . . . . . . . . . . . . . . . . . . 9
SECTION 3.02. The Trust Certificates . . . . . . . . . . . . . . . 9
SECTION 3.03. Authentication of Trust Certificates . . . . . . . . 9
SECTION 3.04. Registration of Transfer and Exchange of
Trust Certificates . . . . . . . . . . . . . . . . . 10
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen
Trust Certificates . . . . . . . . . . . . . . . . . 10
SECTION 3.06. Persons Deemed Owners . . . . . . . . . . . . . . . . 11
SECTION 3.07. Access to List of Certificateholders'
Names and Addresses . . . . . . . . . . . . . . . . . 11
SECTION 3.08. Maintenance of Office or Agency . . . . . . . . . . . 11
SECTION 3.09. Appointment of Paying Agent . . . . . . . . . . . . . 11
SECTION 3.10. Ownership by Company of Trust Certificates . . . . . 12
SECTION 3.11. Book-Entry Trust Certificates . . . . . . . . . . . . 12
SECTION 3.12. Notices to Clearing Agency . . . . . . . . . . . . . 13
SECTION 3.13. Definitive Trust Certificates . . . . . . . . . . . . 13
ARTICLE IV
Actions by Owner Trustee
SECTION 4.01. Prior Notice to Owners with Respect
to Certain Matters . . . . . . . . . . . . . . . . . 14
SECTION 4.02. Action by Owners with Respect to Certain Matters . . 14
SECTION 4.03. Action by Owners with Respect to Bankruptcy . . . . . 14
SECTION 4.04. Restrictions on Owners' Power . . . . . . . . . . . . 15
SECTION 4.05. Majority Control . . . . . . . . . . . . . . . . . . 15
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Establishment of Trust Account . . . . . . . . . . . 15
SECTION 5.02. Application of Trust Funds . . . . . . . . . . . . . 15
SECTION 5.03. Method of Payment . . . . . . . . . . . . . . . . . . 16
SECTION 5.04. No Segregation of Moneys; No Interest . . . . . . . . 16
SECTION 5.05. Accounting and Reports to the Noteholders,
Owners, the Internal Revenue Service and
Others . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.06. Signature on Returns; Tax Matters Partner . . . . . . 16
ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.01. General Authority . . . . . . . . . . . . . . . . . . 17
SECTION 6.02. General Duties . . . . . . . . . . . . . . . . . . . 17
SECTION 6.03. Action upon Instruction . . . . . . . . . . . . . . . 17
SECTION 6.04. No Duties Except as Specified in this
Agreement or in Instructions . . . . . . . . . . . . 18
SECTION 6.05. No Action Except Under Specified Documents
or Instructions . . . . . . . . . . . . . . . . . . . 18
SECTION 6.06. Restrictions . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.01. Acceptance of Trusts and Duties . . . . . . . . . . . 19
SECTION 7.02. Furnishing of Documents . . . . . . . . . . . . . . . 20
SECTION 7.03. Representations and Warranties . . . . . . . . . . . 20
SECTION 7.04. Reliance; Advice of Counsel . . . . . . . . . . . . 20
SECTION 7.05. Not Acting in Individual Capacity . . . . . . . . . . 21
SECTION 7.06. Owner Trustee Not Liable for Trust
Certificates or Mortgage Loans. . . . . . . . . . . 21
SECTION 7.07. Owner Trustee May Own Trust Certificates
and Notes . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.01. Owner Trustee's Fees and Expenses . . . . . . . . . . 21
SECTION 8.02. Indemnification . . . . . . . . . . . . . . . . . . . 22
SECTION 8.03. Payments to the Owner Trustee . . . . . . . . . . . . 22
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement . . . . . . . . . . . 22
SECTION 9.02. Dissolution upon Bankruptcy of the Company . . . . . 23
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.01. Eligibility Requirements for Owner Trustee . . . 24
SECTION 10.02. Resignation or Removal of Owner Trustee . . . . 24
SECTION 10.03. Successor Owner Trustee . . . . . . . . . . . . 24
SECTION 10.04. Merger or Consolidation of Owner Trustee . . . . 25
SECTION 10.05. Appointment of Co-Trustee or Separate
Trustee . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments . . . . . . . . . . . 26
SECTION 11.02. No Legal Title to Owner Trust Estate
in Owners . . . . . . . . . . . . . . . . . . . 27
SECTION 11.03. Limitations on Rights of Others . . . . . . . . 27
SECTION 11.04. Notices . . . . . . . . . . . . . . . . . . . . 28
SECTION 11.05. Severability . . . . . . . . . . . . . . . . . . 28
SECTION 11.06. Separate Counterparts . . . . . . . . . . . . . 28
SECTION 11.07. Successors and Assigns . . . . . . . . . . . . . 28
SECTION 11.08. Covenants of the Company . . . . . . . . . . . . 28
SECTION 11.09. No Petition . . . . . . . . . . . . . . . . . . 28
SECTION 11.10. No Recourse . . . . . . . . . . . . . . . . . . 29
SECTION 11.11. Headings . . . . . . . . . . . . . . . . . . . . 29
SECTION 11.12. GOVERNING LAW . . . . . . . . . . . . . . . . . 29
SECTION 11.13. Depositor Payment Obligation . . . . . . . . . . 29
EXHIBIT A Form of Trust Certificate
EXHIBIT B Form of Certificate of Trust
EXHIBIT C Form of Certificate Depository Agreement
TRUST AGREEMENT (the "Trust Agreement") dated as of ________,
199__, among InndyMac ABS, Inc., a Delaware corporation, as depositor
(the "Depositor"), (_______________________), a (_______) corporation
(the "Company"), and (____________), a (__________________), as owner
trustee (the "Owner Trustee").
WHEREAS, the Company has agreed to assign to the Depositor any and all
of the Company's rights and interests with respect to the Mortgage Loans; and
WHEREAS, in connection therewith, the Company is willing to assume
certain obligations pursuant hereto;
NOW, THEREFORE, the Depositor, the Company and the Owner Trustee hereby
agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Capitalized Terms. For all purposes of this Agreement,
-----------------
the following terms shall have the meanings set forth below:
"Administration Agreement" shall mean the Administration Agreement dated
------------------------
as of ________, 199_, among the Trust, the Indenture Trustee and
(_________________________), as Administrator.
"Agreement" shall mean this Trust Agreement, as the same may be amended
---------
and supplemented from time to time.
"Assignment" shall mean the assignment of right, title and interest of
----------
the Depositor in the Mortgage Loans to the Trust.
"Basic Documents" shall mean the Master Servicing Agreement, the
---------------
Indenture, the Administration Agreement and the other documents and
certificates delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in
------------
Section 11.13.
"Book-Entry Trust Certificate" shall mean a beneficial interest in the
----------------------------
Trust Certificates, ownership and transfers of which shall be made through
book entries by a Clearing Agency as described in Section 3.11.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
----------------------
Delaware Code, 12 Del. Code Section 3801 et seq., as the same may be amended
---- ----
from time to time.
"Certificate" shall mean any of the Book-Entry Trust Certificates or
-----------
Definitive Trust Certificates.
"Certificate Distribution Account" shall have the meaning assigned to
--------------------------------
such term in Section 5.01.
"Certificate of Trust" shall mean the Certificate of Trust in the form
--------------------
of Exhibit B filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Owner" shall mean, with respect to a Book-Entry Trust
-----------------
Certificate, a Person who is the beneficial owner of such Book-Entry Trust
Certificate, as reflected on the books of the Clearing Agency, or on the
books of a Person maintaining an account with such Clearing Agency (directly
as a Clearing Agency Participant or as an indirect participant, in each case
in accordance with the rules of such Clearing Agency).
"Certificate Register" and "Certificate Registrar" shall mean the
-------------------- ---------------------
register mentioned in and the registrar appointed pursuant to Section 3.04.
"Certificateholder" or "Holder" shall mean a Person in whose name a
----------------- ------
Trust Certificate is registered.
"Clearing Agency" shall mean an organization registered as a "clearing
---------------
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
---------------------------
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee,
----------------------
the principal corporate trust office of the Owner Trustee located at
(____________________________), or at such other address as the Owner Trustee
may designate by notice to the Owners, the Depositor and the Company, or the
principal corporate trust office of any successor Owner Trustee at the
address designated by such successor Owner Trustee by notice to the Owners,
the Depositor and the Company.
"Definitive Trust Certificates" shall have the meaning set forth in
-----------------------------
Section 3.11.
"Depositor" shall mean IndyMac ABS, Inc. in its capacity as depositor
---------
hereunder.
"Distribution Date" means, for each Collection Period, the ( ) day of
-----------------
the following month, or if such day is not a Business Day, the immediately
succeeding Business Day, commencing with the date specified in the Agreement.
"Eligible Distribution Account" shall mean an account that is (i)
-----------------------------
maintained with a depository institution whose debt obligations at the time
of any deposit therein have the highest short-term debt rating by the Rating
Agencies, (ii) one or more accounts with a depository institution which
accounts are fully insured by either the Savings Association Insurance Fund
or the Bank Insurance Fund of the Federal Deposit Insurance Corporation
established by such fund, (iii) a segregated trust account maintained with
the Owner Trustee or an affiliate of the Owner Trustee in its fiduciary
capacity or (iv) otherwise acceptable to each Rating Agency as evidenced by a
letter from each Rating Agency to the Owner Trustee, without reduction or
withdrawal of their then currently ratings of the Certificates.
"ERISA" shall have the meaning assigned thereto in Section 11.13.
-----
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Expenses" shall have the meaning assigned to such term in Section 8.02.
--------
"Indemnified Parties" shall have the meaning assigned to such term in
-------------------
Section 8.02.
"Indenture" shall mean the Indenture dated as of ________, 199_ between
---------
the Trust and (_____________________________), as Indenture Trustee.
"Initial Certificate Balance" shall mean $__________.
---------------------------
"Master Servicing Agreement" shall mean the Master Servicing Agreement
--------------------------
dated as of ________1, 199_, among the Trust, as issuer and (______________),
as master servicer, as the same may be amended or supplemented from time to
time.
"Mortgage Loans" shall mean a pool of (adjustable and/or fixed rate)
--------------
home equity revolving credit line loans made or to be made in the future
under certain home equity revolving credit line loan agreements.
"Owner" shall mean each Holder of a Trust Certificate.
-----
"Owner Trust Estate" shall mean all right, title and interest of the
------------------
Trust in and to the property and rights assigned to the Trust pursuant to the
Assignment, all funds on deposit from time to time in the Trust Accounts and
the Certificate Distribution Account and all other property of the Trust from
time to time, including any rights of the Owner Trustee and the Trust
pursuant to the Master Servicing Agreement and the Administration Agreement.
"Owner Trustee" shall mean (____________________), a (_________) banking
-------------
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
"Paying Agent" shall mean any paying agent or co-paying agent appointed
------------
pursuant to Section 3.09 and shall initially be (_____________).
"Rating Agency" shall mean any nationally recognized statistical rating
-------------
organization asked to rate the Certificates.
"Record Date" shall mean, with respect to any Distribution Date, the
-----------
close of business on the day prior to such Distribution Date occurs or, if
Definitive Trust Certificates are issued pursuant to Section 3.14, the last
day of the month preceding such Distribution Date.
"Secretary of State" shall mean the Secretary of State of the State of
------------------
Delaware.
"Treasury Regulations" shall mean regulations, including proposed or
--------------------
temporary Regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trust" shall mean the trust established by this Agreement.
-----
"Trust Account" shall mean any account set up by the Owner Trustee
-------------
pursuant to the provisions of Section 5.01.
"Trust Certificate" shall mean a certificate evidencing the beneficial
-----------------
interest of an Owner in the Trust, substantially in the form attached hereto
as Exhibit A.
SECTION 1.02. Other Definitional Provisions. (a) Capitalized terms
-----------------------------
used and not otherwise defined herein have the meanings assigned to them in
the Master Servicing Agreement or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given
to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such
terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document
shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified; and the term
"including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means
such agreement, instrument or statute as from time to time amended, modified
or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns.
ARTICLE II
Organization
------------
SECTION 2.01. Name. The Trust created hereby shall be known as
----
"(_____________) Home Equity Loan Trust 19 - ," in which name the Owner
-- ----
Trustee may conduct the business of the Trust, make and execute contracts and
other instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. Office. The office of the Trust shall be in care of the
------
Owner Trustee at the Corporate Trust Office or at such other address in
Delaware as the Owner Trustee may designate by written notice to the Owners,
the Depositor and the Company.
SECTION 2.03. Purposes and Powers. (a) The purpose of the Trust is
-------------------
to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement and to sell the Notes and the
Trust Certificates;
(ii) with the proceeds of the sale of the Notes and the Trust
Certificates, to purchase the Mortgage Loans, and to pay the
organizational, start-up and transactional expenses of the Trust and to
pay the balance to the Depositor pursuant to the Master Servicing
Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey
the Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Owners pursuant to the terms of the Master Servicing
Agreement any portion of the Trust Estate released from the Lien of, and
remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation
of the Owner Trust Estate and the making of distributions to the Owners
and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The
Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this
Agreement or the Basic Documents.
SECTION 2.04. Appointment of Owner Trustee. The Depositor hereby
----------------------------
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.05. Initial Capital Contribution of Owner Trust Estate. The
--------------------------------------------------
Depositor hereby sells, assigns, transfers, conveys and sets over to the
Owner Trustee, as of the date hereof, the sum of $(_____________). The Owner
Trustee hereby acknowledges receipt in trust from the Depositor, as of the
date hereof, of the foregoing contribution, which shall constitute the
initial Owner Trust Estate and shall be deposited in the Certificate
Distribution Account. The Depositor shall pay organizational expenses of the
Trust as they may arise or shall, upon the request of the Owner Trustee,
promptly reimburse the Owner Trustee for any such expenses paid by the Owner
Trustee.
SECTION 2.06. Declaration of Trust. The Owner Trustee hereby declares
--------------------
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject to
the obligations of the Trust under the Basic Documents. It is the intention
of the parties hereto that the Trust constitute a business trust under the
Business Trust Statute and that this Agreement constitute the governing
instrument of such business trust. It is the intention of the parties hereto
that, solely for income and franchise tax purposes, the Trust shall be
treated as a partnership, with the assets of the partnership being the
Mortgage Loans and other assets held by the Trust, the partners of the
partnership being the Certificateholders, and the Notes being debt of the
partnership. The parties agree that, unless otherwise required by
appropriate tax authorities, the Trust will file or cause to be filed annual
or other necessary returns, reports and other forms consistent with the
characterization of the Trust as a partnership for such tax purposes.
Effective as of the date hereof, the Owner Trustee shall have all rights,
powers and duties set forth herein and in the Business Trust Statute with
respect to accomplishing the purposes of the Trust.
SECTION 2.07. Liability of the Owners. (a) The Company shall be
-----------------------
liable directly to and will indemnify any injured party for all losses,
claims, damages, liabilities and expenses of the Trust (including Expenses,
to the extent not paid out of the Owner Trust Estate) to the extent that the
Company would be liable if the Trust were a partnership under the Delaware
Revised Uniform Limited Partnership Act in which the Company were a general
partner; provided that the Company shall not be liable for any losses
--------
incurred by a Certificateholder in the capacity of an investor in the Trust
Certificates, or a Noteholder in the capacity of an investor in the Notes.
In addition, any third party creditors of the Trust (other than in connection
with the obligations described in the preceding sentence for which the
Company shall not be liable) shall be deemed third party beneficiaries of
this paragraph and paragraph (c) below. The obligations of the Company under
this paragraph shall be evidenced by the Trust Certificates described in
Section 3.10, which for purposes of the Business Trust Statute shall be
deemed to be a separate class of Trust Certificates from all other Trust
Certificates issued by the Trust; provided that the rights and obligations
--------
evidenced by all Trust Certificates, regardless of class, shall, except as
provided in this Section, be identical.
(b) No Owner, other than to the extent set forth in paragraph (a),
shall have any personal liability for any liability or obligation of the
Trust.
SECTION 2.08. Title to Trust Property. Legal title to all the Owner
-----------------------
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in
which case title shall be deemed to be vested in the Owner Trustee, a co-
trustee and/or a separate trustee, as the case may be.
SECTION 2.09. Situs of Trust. The Trust will be located and
--------------
administered in the State of Delaware. All bank accounts maintained by the
Owner Trustee on behalf of the Trust shall be located in the State of
Delaware or the State of ________. The Trust shall not have any employees in
any state other than Delaware; provided that nothing herein shall restrict
--------
or prohibit the Owner Trustee from having employees within or without the
State of Delaware. Payments will be received by the Trust only in Delaware
or ________, and payments will be made by the Trust only from Delaware or
________. The only office of the Trust will be at the Corporate Trust Office
in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor and the
-------------------------------------------------------
Company. (a) The Depositor hereby represents and warrants to the Owner
- -------
Trustee that:
(i) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware,
with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is
presently conducted.
(ii) The Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such
qualifications.
(iii) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Depositor has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trust and the Depositor has duly
authorized such sale and assignment and deposit to the Trust by all
necessary corporate action; and the execution, delivery and performance
of this Agreement have been duly authorized by the Depositor by all
necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a
party or by which it is bound; nor result in the creation or imposition
of any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to the
Basic Documents); nor violate any law or, to the best of the Depositor's
knowledge, any order, rule or regulation applicable to the Depositor of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Depositor or its properties.
(v) To the Depositor's best knowledge, there are no proceedings or
investigations pending or threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or (C) seeking
any determination or ruling that might materially and adversely affect
the performance by the Depositor of its obligations under, or the
validity or enforceability of, this Agreement.
(vi) The representations and warranties of the Depositor in
Sections (___________) of the (________________________) are true and
correct.
(b) The Company hereby represents and warrants to the Owner Trustee
that:
(i) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of
(_________), with the power
and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted.
(ii) The Company is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its
property or the conduct of its business shall require such
qualifications.
(iii) The Company has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Company has full
power and authority to purchase the Trust Certificates that the Company
has agreed to purchase pursuant to Section 3.10; and the execution,
delivery and performance of this Agreement has been duly authorized by
the Company by all necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under,
the (articles of incorporation) (certificate of incorporation) or bylaws
of the Company, or any indenture, agreement or other instrument to which
the Company is a party or by which it is bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant
to the terms of any such indenture, agreement or other instrument (other
than pursuant to the Basic Documents); nor violate any law or, to the
best of the Company's knowledge, any order, rule or regulation
applicable to the Company of any court or of any federal or state
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Company or its properties.
(v) There are no proceedings or investigations pending or, to the
Company's best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or (C) seeking
any determination or ruling that might materially and adversely affect
the performance by the Company of its obligations under, or the validity
or enforceability of, this Agreement.
(vi) The representations and warranties of the Company in Sections
(_______) of the (____________________) are true and correct.
SECTION 2.11. Federal Income Tax Allocations. Net income of the Trust
------------------------------
for any month as determined for federal income tax purposes (and each item of
income, gain, loss and deduction entering into the computation thereof) shall
be allocated:
(a) among the Certificate Owners as of the first Record Date following
the end of such month, in proportion to their ownership of principal amount
of Trust Certificates on such date, net income in an amount up to the sum of
(i) the Certificateholders' Monthly Interest Distributable Amount for such
month, (ii) interest on the excess, if any, of the Certificateholders'
Interest Distributable Amount for the preceding Distribution Date over the
amount in respect of interest that is actually deposited in the Certificate
Distribution Account on such preceding Distribution Date, to the extent
permitted by law, at the Pass-Through Rate from such preceding Distribution
Date through the current Distribution Date, (iii) the portion of the market
discount on the Mortgage Loans accrued during such month that is allocable to
the excess, if any, of the initial aggregate principal amount of the Trust
Certificates over their initial aggregate issue price, (iv) any amount
expected to be distributed to the Certificateholders pursuant to the Master
Servicing Agreement (to the extent not previously allocated pursuant to this
clause), (v) any Certificateholders' Prepayment Premium distributable to the
Certificateholders with respect to such month and (vi) any other amounts of
income payable to the Certificateholders for such month; such sum to be
reduced by any amortization by the Trust of premium on Mortgage Loans that
corresponds to any excess of the issue price of Certificates over their
principal amount; and
(b) to the Company, to the extent of any remaining net income.
If the net income of the Trust for any month is insufficient for the
allocations described in clause (a) above, subsequent net income shall first
be allocated to make up such shortfall before being allocated as provided in
the preceding sentence. Net losses of the Trust, if any, for any month as
determined for federal income tax purposes (and each item of income, gain,
loss and deduction entering into the computation thereof) shall be allocated
to the Company to the extent the Company is reasonably expected to bear the
economic burden of such net losses, and any remaining net losses shall be
allocated among the Certificate Owners as of the first Record Date following
the end of such month in proportion to their ownership of principal amount of
Trust Certificates on such Record Date. The Company is authorized to modify
the allocations in this paragraph if necessary or appropriate, in its sole
discretion, for the allocations to fairly reflect the economic income, gain
or loss to the Company or to the Certificate Owners, or as otherwise required
by the Code.
ARTICLE III
Trust Certificates and Transfer of Interests
--------------------------------------------
SECTION 3.01. Initial Ownership. Upon the formation of the Trust by
-----------------
the contribution by the Depositor pursuant to Section 2.05 and until the
issuance of the Trust Certificates, the Depositor shall be the sole
beneficiary of the Trust.
SECTION 3.02. The Trust Certificates. The Trust Certificates shall be
----------------------
issued in minimum denominations of $(_______) and in integral multiples of
$1,000 in excess thereof; provided that the Trust Certificates issued to the
--------
Company pursuant to Section 3.10 may be issued in such denomination as
required to include any residual amount. The Trust Certificates shall be
executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Trust Certificates bearing the
manual or facsimile signatures of individuals who were, at the time when such
signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be
so authorized prior to the authentication and delivery of such Trust
Certificates or did not hold such offices at the date of authentication and
delivery of such Trust Certificates.
A transferee of a Trust Certificate shall become a Certificateholder and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Trust
Certificate duly registered in such transferee's name pursuant to Section
3.04.
SECTION 3.03. Authentication of Trust Certificates. Concurrently with
------------------------------------
the initial sale of the Mortgage Loans to the Trust pursuant to the Master
Servicing Agreement, the Owner Trustee shall cause the Trust Certificates in
an aggregate principal amount equal to the Initial Certificate Balance to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Depositor, signed by its chairman of the board, its
president, any vice president, secretary or any assistant treasurer, without
further corporate action by the Depositor, in authorized denominations. No
Trust Certificate shall entitle its Holder to any benefit under this
Agreement or be valid for any purpose unless there shall appear on such Trust
Certificate a certificate of authentication substantially in the form set
forth in Exhibit A, executed by the Owner Trustee or (____________), as the
Owner Trustee's authenticating agent, by manual signature; such
authentication shall constitute conclusive evidence that such Trust
Certificate shall have been duly authenticated and delivered hereunder. All
Trust Certificates shall be dated the date of their authentication.
SECTION 3.04. Registration of Transfer and Exchange of Trust
----------------------------------------------
Certificates. The Certificate Registrar shall keep or cause to be kept, at
- ------------
the office or agency maintained pursuant to Section 3.08, a Certificate
Register in which, subject to such reasonable regulations as it may
prescribe, the Owner Trustee shall provide for the registration of Trust
Certificates and of transfers and exchanges of Trust Certificates as herein
provided. (___________) shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Trust Certificate at
the office or agency maintained pursuant to Section 3.08, the Owner Trustee
shall execute, authenticate and deliver (or shall cause ( )
----------------
as its authenticating agent to authenticate and deliver), in the name of the
designated transferee or transferees, one or more new Trust Certificates in
authorized denominations of a like aggregate amount dated the date of
authentication by the Owner Trustee or any authenticating agent. At the
option of a Holder, Trust Certificates may be exchanged for other Trust
Certificates of authorized denominations of a like aggregate amount upon
surrender of the Trust Certificates to be exchanged at the office or agency
maintained pursuant to Section 3.08.
Every Trust Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer
in form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Trust Certificate surrendered for registration of transfer or exchange
shall be cancelled and subsequently disposed of by the Owner Trustee in
accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Certificates, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
The preceding provisions of this Section notwithstanding, the Owner
Trustee shall not make, and the Certificate Registrar shall not register
transfers or exchanges of, Trust Certificates for a period of 15 days
preceding the due date for any payment with respect to the Trust
Certificates.
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Trust Certificates.
-------------------------------------------------------
If (a) any mutilated Trust Certificate shall be surrendered to the
Certificate Registrar, or if the Certificate Registrar shall receive evidence
to its satisfaction of the destruction, loss or theft of any Trust
Certificate and (b) there shall be delivered to the Certificate Registrar and
the Owner Trustee such security or indemnity as may be required by them to
save each of them harmless, then in the absence of notice that such Trust
Certificate has been acquired by a bona fide purchaser, the Owner Trustee on
behalf of the Trust shall execute and the Owner Trustee or ( ),
-------------
as the Owner Trustee's authenticating agent, shall authenticate and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Trust Certificate, a new Trust Certificate of like tenor and denomination.
In connection with the issuance of any new Trust Certificate under this
Section, the Owner Trustee or the Certificate Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith. Any duplicate Trust Certificate
issued pursuant to this Section shall constitute conclusive evidence of
ownership in the Trust, as if originally issued, whether or not the lost,
stolen or destroyed Trust Certificate shall be found at any time.
SECTION 3.06. Persons Deemed Owners. Prior to due presentation of a
---------------------
Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar or any Paying Agent may treat the Person in whose name
any Trust Certificate is registered in the Certificate Register as the owner
of such Trust Certificate for the purpose of receiving distributions pursuant
to Section 5.02 and for all other purposes whatsoever, and none of the Owner
Trustee, the Certificate Registrar or any Paying Agent shall be bound by any
notice to the contrary.
SECTION 3.07. Access to List of Certificateholders' Names and
-----------------------------------------------
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
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Master Servicer and the Depositor, within 15 days after receipt by the Owner
Trustee of a written request therefor from the Master Servicer or the
Depositor, a list, in such form as the Master Servicer or the Depositor may
reasonably require, of the names and addresses of the Certificateholders as
of the most recent Record Date. If three or more Certificateholders or one
or more Holders of Trust Certificates evidencing not less than 25% of the
Certificate Balance apply in writing to the Owner Trustee, and such
application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Trust Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Owner
Trustee shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to
the current list of Certificateholders. Each Holder, by receiving and
holding a Trust Certificate, shall be deemed to have agreed not to hold any
of the Depositor, the Company, the Certificate Registrar or the Owner Trustee
accountable by reason of the disclosure of its name and address, regardless
of the source from which such information was derived.
SECTION 3.08. Maintenance of Office or Agency. The Owner Trustee shall
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or
offices or agency or agencies where Trust Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Trust Certificates and the Basic
Documents may be served. The Owner Trustee initially designates
(_______________________________) as its office for such purposes. The Owner
Trustee shall give prompt written notice to the Company and to the
Certificateholders of any change in the location of the Certificate Register
or any such office or agency.
SECTION 3.09. Appointment of Paying Agent. The Paying Agent shall make
---------------------------
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02 and shall report the amounts of such distributions
to the Owner Trustee. Any Paying Agent shall have the revocable power to
withdraw funds from the Certificate Distribution Account for the purpose of
making the distributions referred to above. The Owner Trustee may revoke
such power and remove the Paying Agent if the Owner Trustee determines in its
sole discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement in any material respect. The Paying Agent
initially shall be (___________), and any co-paying agent chosen by
(___________) and acceptable to the Owner Trustee. ( ) shall
--------------
be permitted to resign as Paying Agent upon 30 days' written notice to the
Owner Trustee. In the event that (___________) shall no longer be the Paying
Agent, the Owner Trustee shall appoint a successor to act as Paying Agent
(which shall be a bank or trust company). The Owner Trustee shall cause such
successor Paying Agent or any additional Paying Agent appointed by the Owner
Trustee to execute and deliver to the Owner Trustee an instrument in which
such successor Paying Agent or additional Paying Agent shall agree with the
Owner Trustee that, as Paying Agent, such successor Paying Agent or
additional Paying Agent will hold all sums, if any, held by it for payment to
the Certificateholders in trust for the benefit of the Certificateholders
entitled thereto until such sums shall be paid to such Certificateholders.
The Paying Agent shall return all unclaimed funds to the Owner Trustee and
upon removal of a Paying Agent such Paying Agent shall also return all funds
in its possession to the Owner Trustee. The provisions of Sections 7.01,
7.03, 7.04 and 8.01 shall apply to the Owner Trustee also in its role as
Paying Agent, for so long as the Owner Trustee shall act as Paying Agent and,
to the extent applicable, to any other paying agent appointed hereunder. Any
reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
(SECTION 3.10. Ownership by Company of Trust Certificates. The
------------------------------------------
Company shall on the Closing Date purchase Trust Certificates representing at
least __% of the Initial Certificate Balance and shall thereafter retain
beneficial and record ownership of Trust Certificates representing at least
__% of the Certificate Balance. Any attempted transfer of any Trust
Certificate that would reduce such interest of the Company below __% of the
Certificate Balance shall be void. The Owner Trustee shall cause any Trust
Certificate issued to the Company to contain a legend stating "THIS
CERTIFICATE IS NON-TRANSFERABLE".)
SECTION 3.11. Book-Entry Trust Certificates. The Trust Certificates,
-----------------------------
upon original issuance, will be issued in the form of a typewritten Trust
Certificate or Trust Certificates representing Book-Entry Trust Certificates,
to be delivered to The Depository Trust Company, the initial Clearing Agency,
by, or on behalf of, the Trust; provided that one Definitive Trust
--------
Certificate may be issued to the Company pursuant to Section 3.10. Such
Trust Certificate or Trust Certificates shall initially be registered on the
Certificate Register in the name of Cede & Co., the nominee of the initial
Clearing Agency, and no Certificate Owner will receive a definitive Trust
Certificate representing such Certificate Owner's interest in such Trust
Certificate, except as provided in Section 3.13. Unless and until
definitive, fully registered Trust Certificates (the "Definitive Trust
Certificates") have been issued to Certificate Owners pursuant to
Section 3.13:
(a) The provisions of this Section shall be in full force and effect;
(b) The Certificate Registrar and the Owner Trustee shall be entitled
to deal with the Clearing Agency for all purposes of this Agreement
(including the payment of principal of and interest on the Trust Certificates
and the giving of instructions or directions hereunder) as the sole Holder of
the Trust Certificates and shall have no obligation to the Certificate
Owners;
(c) To the extent that the provisions of this Section conflict with any
other provisions of this Agreement, the provisions of this Section shall
control;
(d) The rights of Certificate Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Certificate Depository
Agreement, unless and until Definitive Trust Certificates are issued pursuant
to Section 3.13, the initial Clearing Agency will make book-entry transfers
among the Clearing Agency Participants and receive and transmit payments of
principal of and interest on the Trust Certificates to such Clearing Agency
Participants; and
(e) Whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Trust Certificates
evidencing a specified percentage of the Certificate Balance, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Certificate Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Trust Certificates and
has delivered such instructions to the Owner Trustee.
SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
--------------------------
communication to the Certificateholders is required under this Agreement,
unless and until Definitive Trust Certificates shall have been issued to
Certificate Owners pursuant to Section 3.13, the Owner Trustee shall give all
such notices and communications specified herein to be given to
Certificateholders to the Clearing Agency, and shall have no obligations to
the Certificate Owners.
SECTION 3.13. Definitive Trust Certificates. If (i) the Administrator
------------------------------
advises the Owner Trustee in writing that the Clearing Agency is no longer
willing or able to properly discharge its responsibilities with respect to
the Trust Certificates and the Administrator is unable to locate a qualified
successor, (ii) the Administrator at its option advises the Owner Trustee in
writing that it elects to terminate the book-entry system through the
Clearing Agency or (iii) after the occurrence of an Event of Default or a
Master Servicer Default, Certificate Owners representing beneficial interests
aggregating at least a majority of the Certificate Balance advise the
Clearing Agency in writing that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interest of the
Certificate Owners, then the Clearing Agency shall notify all Certificate
Owners and the Owner Trustee of the occurrence of any such event and of the
availability of the Definitive Trust Certificates to Certificate Owners
requesting the same. Upon surrender to the Owner Trustee of the typewritten
Trust Certificate or Trust Certificates representing the Book-Entry Trust
Certificates by the Clearing Agency, accompanied by registration
instructions, the Owner Trustee shall execute and authenticate the Definitive
Trust Certificates in accordance with the instructions of the Clearing
Agency. Neither the Certificate Registrar nor the Owner Trustee shall be
liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Trust Certificates, the Owner Trustee shall recognize
the Holders of the Definitive Trust Certificates as Certificateholders. The
Definitive Trust Certificates shall be printed, lithographed or engraved or
may be produced in any other manner as is reasonably acceptable to the Owner
Trustee, as evidenced by its execution thereof.
ARTICLE IV
Actions by Owner Trustee
------------------------
SECTION 4.01. Prior Notice to Owners with Respect to Certain Matters.
------------------------------------------------------
With respect to the following matters, the Owner Trustee shall not take
action unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders in writing of the proposed
action and the Owners shall not have notified the Owner Trustee in writing
prior to the 30th day after such notice is given that such Owners have
withheld consent or provided alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims
or lawsuits brought in connection with the collection of the Mortgage Loans)
and the compromise of any action, claim or lawsuit brought by or against the
Trust (except with respect to the aforementioned claims or lawsuits for
collection of the Mortgage Loans;
(b) the election by the Trust to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business
Trust Statute);
(c) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is required;
(d) the amendment of the Indenture by a supplemental indenture in
circumstances where the consent of any Noteholder is not required and such
amendment materially adversely affects the interest of the Owners;
(e) the amendment, change or modification of the Administration
Agreement, except to cure any ambiguity or to amend or supplement any
provision in a manner or add any provision that would not materially
adversely affect the interests of the Owners; or
(f) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement of
a successor Certificate Registrar, or the consent to the assignment by the
Note Registrar, Paying Agent or Indenture Trustee or Certificate Registrar of
its obligations under the Indenture or this Agreement, as applicable.
SECTION 4.02. Action by Owners with Respect to Certain Matters. The
------------------------------------------------
Owner Trustee shall not have the power, except upon the direction of the
Owners, to (a) remove the Administrator under the Administration Agreement
pursuant to Section ( ) thereof, (b) appoint a successor Administrator
----
pursuant to Section ( ) of the Administration Agreement, (c) remove the
---
Master Servicer under the Master Servicing Agreement pursuant to Section ( )
---
thereof or (d) except as expressly provided in the Basic Documents, sell
the Mortgage Loans after the termination of the Indenture. The Owner Trustee
shall take the actions referred to in the preceding sentence only upon
written instructions signed by the Owners.
SECTION 4.03. Action by Owners with Respect to Bankruptcy. The Owner
-------------------------------------------
Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Owners and the delivery to the Owner Trustee by each such Owner of a
certificate certifying that such Owner reasonably believes that the Trust is
insolvent.
SECTION 4.04. Restrictions on Owners' Power. The Owners shall not
-----------------------------
direct the Owner Trustee to take or to refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the
Owner Trustee under this Agreement or any of the Basic Documents or would be
contrary to Section 2.03, nor shall the Owner Trustee be obligated to follow
any such direction, if given.
SECTION 4.05. Majority Control. Except as expressly provided herein,
----------------
any action that may be taken by the Owners under this Agreement may be taken
by the Holders of Trust Certificates evidencing not less than a majority of
the Certificate Balance. Except as expressly provided herein, any written
notice of the Owners delivered pursuant to this Agreement shall be effective
if signed by Holders of Trust Certificates evidencing not less than a
majority of the Certificate Balance at the time of the delivery of such
notice.
ARTICLE V
Application of Trust Funds; Certain Duties
------------------------------------------
SECTION 5.01. Establishment of Trust Account. The Owner Trustee, for
------------------------------
the benefit of the Certificateholders, shall establish and maintain in the
name of the Trust an Eligible Deposit Account (the "Certificate Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders.
The Owner Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Certificate Distribution Account
and in all proceeds thereof. Except as otherwise expressly provided herein,
the Certificate Distribution Account shall be under the sole dominion and
control of the Owner Trustee for the benefit of the Certificateholders. If,
at any time, the Certificate Distribution Account ceases to be an Eligible
Deposit Account, the Owner Trustee (or the Depositor on behalf of the Owner
Trustee, if the Certificate Distribution Account is not then held by the
Owner Trustee or an affiliate thereof) shall within 10 Business Days (or such
longer period, not to exceed 30 calendar days, as to which each Rating Agency
may consent) establish a new Certificate Distribution Account as an Eligible
Deposit Account and shall transfer any cash and/or any investments to such
new Certificate Distribution Account.
SECTION 5.02. Application of Trust Funds. (a) On each Distribution
--------------------------
Date, the Owner Trustee will distribute to Certificateholders, on a pro rata
basis, amounts deposited in the Certificate Distribution Account.
(b) On each Distribution Date, the Owner Trustee shall send to each
Certificateholder the statement or statements provided to the Owner Trustee
by the Master Servicer pursuant to Section (____) of the Master Servicing
Agreement with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to an Owner, such tax shall reduce the
amount otherwise distributable to the Owner in accordance with this Section.
The Owner Trustee is hereby authorized and directed to retain from amounts
otherwise distributable to the Owners sufficient funds for the payment of any
tax that is legally owed by the Trust (but such authorization shall not
prevent the Owner Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings). The amount of any withholding tax
imposed with respect to an Owner shall be treated as cash distributed to such
Owner at the time it is withheld by the Trust and remitted to the appropriate
taxing authority. If there is a possibility that withholding tax is payable
with respect to a distribution (such as a distribution to a non-U.S. Owner),
the Owner Trustee may in its sole discretion withhold such amounts in
accordance with this paragraph (c).
SECTION 5.03. Method of Payment. Subject to Section 9.01(c),
-----------------
distributions required to be made to Certificateholders on any Distribution
Date shall be made to each Certificateholder of record on the preceding
Record Date either by wire transfer, in immediately available funds, to the
account of such Holder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder shall have provided to the
Certificate Registrar appropriate written instructions at least five Business
Days prior to such Distribution Date and such Holder's Trust Certificates in
the aggregate evidence a denomination of not less than $(____________), or,
if not, by check mailed to such Certificateholder at the address of such
holder appearing in the Certificate Register.
SECTION 5.04. No Segregation of Moneys; No Interest. Subject to
-------------------------------------
Sections 5.01 and 5.02, moneys received by the Owner Trustee hereunder need
not be segregated in any manner except to the extent required by law or the
Master Servicing Agreement and may be deposited under such general conditions
as may be prescribed by law, and the Owner Trustee shall not be liable for
any interest thereon.
SECTION 5.05. Accounting and Reports to the Noteholders, Owners, the
------------------------------------------------------
Internal Revenue Service and Others. The Owner Trustee shall (a) maintain
- -----------------------------------
(or cause to be maintained) the books of the Trust on a calendar year basis
and the accrual method of accounting, (b) deliver to each Owner, as may be
required by the Code and applicable Treasury Regulations, such information as
may be required (including Schedule K-1) to enable each Owner to prepare its
federal and state income tax returns, (c) file such tax returns relating to
the Trust (including a partnership information return, IRS Form 1065) and
make such elections as from time to time may be required or appropriate under
any applicable state or federal statute or any rule or regulation thereunder
so as to maintain the Trust's characterization as a partnership for federal
income tax purposes, (d) cause such tax returns to be signed in the manner
required by law and (e) collect or cause to be collected any withholding tax
as described in and in accordance with Section 5.02(c) with respect to income
or distributions to Owners. The Owner Trustee shall elect under Section 1278
of the Code to include in income currently any market discount that accrues
with respect to the Mortgage Loans. The Owner Trustee shall not make the
election provided under Section 754 of the Code.
SECTION 5.06. Signature on Returns; Tax Matters Partner. (a) The
-----------------------------------------
Owner Trustee shall sign on behalf of the Trust the tax returns of the Trust,
unless applicable law requires an Owner to sign such documents, in which case
such documents shall be signed by the Company.
(b) The Company shall be designated the "tax matters partner" of the
Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
ARTICLE VI
Authority and Duties of Owner Trustee
-------------------------------------
SECTION 6.01. General Authority. The Owner Trustee is authorized and
-----------------
directed to execute and deliver the Basic Documents to which the Trust is to
be a party and each certificate or other document attached as an exhibit to
or contemplated by the Basic Documents to which the Trust is to be a party
and any amendment or other agreement or instrument, in each case, in such
form as the Company shall approve, as evidenced conclusively by the Owner
Trustee's execution thereof. In addition to the foregoing, the Owner Trustee
is authorized, but shall not be obligated, to take all actions required of
the Trust pursuant to the Basic Documents. The Owner Trustee is further
authorized from time to time to take such action as the Administrator
recommends with respect to the Basic Documents.
SECTION 6.02. General Duties. It shall be the duty of the Owner
--------------
Trustee to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and the Basic Documents to which the
Trust is a party and to administer the Trust in the interest of the Owners,
subject to the Basic Documents and in accordance with the provisions of this
Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed
to have discharged its duties and responsibilities hereunder and under the
Basic Documents to the extent the Administrator has agreed in the
Administration Agreement to perform any act or to discharge any duty of the
Owner Trustee hereunder or under any Basic Document, and the Owner Trustee
shall not be held liable for the default or failure of the Administrator to
carry out its obligations under the Administration Agreement.
SECTION 6.03. Action upon Instruction. (a) Subject to Article IV and
-----------------------
in accordance with the terms of the Basic Documents, the Owners may by
written instruction direct the Owner Trustee in the management of the Trust.
Such direction may be exercised at any time by written instruction of the
Owners pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such
action is likely to result in liability on the part of the Owner Trustee or
is contrary to the terms hereof or of any Basic Document or is otherwise
contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or
under any Basic Document, the Owner Trustee shall promptly give notice (in
such form as shall be appropriate under the circumstances) to the Owners
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Owners received, the Owner Trustee shall not be liable on
account of such action to any Person. If the Owner Trustee shall not have
received appropriate instruction within 10 days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or
may be necessary under the circumstances) it may, but shall be under no duty
to, take or refrain from taking such action not inconsistent with this
Agreement or the Basic Documents, as it shall deem to be in the best
interests of the Owners, and shall have no liability to any Person for such
action or inaction.
(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to
take with respect to a particular set of facts, the Owner Trustee may give
notice (in such form as shall be appropriate under the circumstances) to the
Owners requesting instruction and, to the extent that the Owner Trustee acts
or refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action not inconsistent with this Agreement
or the Basic Documents, as it shall deem to be in the best interests of the
Owners, and shall have no liability to any Person for such action or
inaction.
SECTION 6.04. No Duties Except as Specified in this Agreement or in
-----------------------------------------------------
Instructions. The Owner Trustee shall not have any duty or obligation to
- ------------
manage, make any payment with respect to, register, record, sell, dispose of,
or otherwise deal with the Owner Trust Estate, or to otherwise take or
refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as
expressly provided by the terms of this Agreement or in any document or
written instruction received by the Owner Trustee pursuant to Section 6.03;
and no implied duties or obligations shall be read into this Agreement or any
Basic Document against the Owner Trustee. The Owner Trustee shall have no
responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection
of any security interest or lien granted to it hereunder or to prepare or
file any Securities and Exchange Commission filing for the Trust or to record
this Agreement or any Basic Document. The Owner Trustee nevertheless agrees
that it will, at its own cost and expense, promptly take all action as may be
necessary to discharge any liens on any part of the Owner Trust Estate that
result from actions by, or claims against, the Owner Trustee that are not
related to the ownership or the administration of the Owner Trust Estate.
SECTION 6.05. No Action Except Under Specified Documents or
---------------------------------------------
Instructions. The Owner Trustee shall not manage, control, use, sell,
- ------------
dispose of or otherwise deal with any part of the Owner Trust Estate except
(i) in accordance with the powers granted to and the authority conferred upon
the Owner Trustee pursuant to this Agreement, (ii) in accordance with the
Basic Documents and (iii) in accordance with any document or instruction
delivered to the Owner Trustee pursuant to Section 6.03.
SECTION 6.06. Restrictions. The Owner Trustee shall not take any
------------
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.03 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for federal income
tax purposes. The Owners shall not direct the Owner Trustee to take action
that would violate the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
----------------------------
SECTION 7.01. Acceptance of Trusts and Duties. The Owner Trustee
-------------------------------
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement. The
Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful (malfeasance, bad faith or gross) negligence
or (ii) in the case of the inaccuracy of any representation or warranty
contained in Section 7.03 expressly made by the Owner Trustee. In
particular, but not by way of limitation (and subject to the exceptions set
forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment
made by a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or any Owner;
(c) No provision of this Agreement or any Basic Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or
under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of the
validity or sufficiency of this Agreement or for the due execution hereof by
the Depositor or the Company or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate, or for or in
respect of the validity or sufficiency of the Basic Documents, other than the
certificate of authentication on the Trust Certificates, and the Owner
Trustee shall in no event assume or incur any liability, duty, or obligation
to any Noteholder or to any Owner, other than as expressly provided for
herein or expressly agreed to in the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or misconduct
of the Administrator, the Seller or Depositor, the Company, the Indenture
Trustee or the Master Servicer under any of the Basic Documents or otherwise
and the Owner Trustee shall have no obligation or liability to perform the
obligations of the Trust under this Agreement or the Basic Documents that are
required to be performed by the Administrator under the Administration
Agreement, the Indenture Trustee under the Indenture or the Master Servicer
or the Seller or Depositor under the Master Servicing Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation under this Agreement or otherwise or in relation to
this Agreement or any Basic Document, at the request, order or direction of
any of the Owners, unless such Owners have offered to the Owner Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby.
The right of the Owner Trustee to perform any discretionary act enumerated in
this Agreement or in any Basic Document shall not be construed as a duty, and
the Owner Trustee shall not be answerable for other than its (willful
malfeasance, bad faith or gross negligence) in the performance of any such
act.
SECTION 7.02. Furnishing of Documents. The Owner Trustee shall furnish
-----------------------
to the Owners promptly upon receipt of a written request therefor, duplicates
or copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the
Basic Documents.
SECTION 7.03. Representations and Warranties. The Owner Trustee hereby
------------------------------
represents and warrants to the Company, for the benefit of the Owners, that:
(a) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of Delaware. It has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this Agreement, nor
the consummation by it of the transactions contemplated hereby nor compliance
by it with any of the terms or provisions hereof will contravene any federal
or Delaware law, governmental rule or regulation governing the banking or
trust powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or bylaws or any
indenture, mortgage, contract, agreement or instrument to which it is a party
or by which any of its properties may be bound.
SECTION 7.04. Reliance; Advice of Counsel. (a) The Owner Trustee
----------------------------
shall incur no liability to anyone in acting upon any signature, instrument,
notice, resolution, request, consent, order, certificate, report, opinion,
bond, or other document or paper believed by it to be genuine and believed by
it to be signed by the proper party or parties. The Owner Trustee may accept
a certified copy of a resolution of the board of directors or other governing
body of any corporate party as conclusive evidence that such resolution has
been duly adopted by such body and that the same is in full force and effect.
As to any fact or matter the method of determination of which is not
specifically prescribed herein, the Owner Trustee may for all purposes hereof
rely on a certificate, signed by the president or any vice president or by
the treasurer or other authorized officers of the relevant party, as to such
fact or matter and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith
in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents
or attorneys pursuant to agreements entered into with any of them, and the
Owner Trustee shall not be liable for the conduct or misconduct of such
agents or attorneys if such agents or attorneys shall have been selected by
the Owner Trustee with reasonable care, and (ii) may consult with counsel,
accountants and other skilled Persons to be selected with reasonable care and
employed by it. The Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the written
opinion or advice of any such counsel, accountants or other such Persons and
not contrary to this Agreement or any Basic Document.
SECTION 7.05. Not Acting in Individual Capacity. Except as provided
---------------------------------
in this Article VII, in accepting the trusts hereby created
(_____________________) acts solely as Owner Trustee hereunder and not in its
individual capacity, and all Persons having any claim against the Owner
Trustee by reason of the transactions contemplated by this Agreement or any
Basic Document shall look only to the Owner Trust Estate for payment or
satisfaction thereof.
SECTION 7.06. Owner Trustee Not Liable for Trust Certificates or
--------------------------------------------------
Mortgage Loans. The recitals contained herein and in the Certificates (other
- --------------
than the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Depositor and the
Company, and the Owner Trustee assumes no responsibility for the correctness
thereof. The Owner Trustee makes no representations as to the validity or
sufficiency of this Agreement, of any Basic Document or of the Trust
Certificates (other than the signature and countersignature of the Owner
Trustee on the Trust Certificates) or the Notes, or of any Mortgage Loan or
related documents. The Owner Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage Loan, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments
to be distributed to Certificateholders under this Agreement or the
Noteholders under the Indenture, including, without limitation: the
existence, condition and ownership of any property securing a Mortgage Loan;
the existence and enforceability of any insurance thereon; the validity of
the assignment of any Mortgage Loan to the Trust or of any intervening
assignment; the performance or enforcement of any Mortgage Loan; the
compliance by the Depositor, the Company or the Master Servicer with any
warranty or representation made under any Basic Document or in any related
document or the accuracy of any such warranty or representation, or any
action of the Administrator, the Indenture Trustee or the Master Servicer or
any subservicer taken in the name of the Owner Trustee.
SECTION 7.07. Owner Trustee May Own Trust Certificates and Notes. The
--------------------------------------------------
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Company, the Administrator, the Indenture Trustee and the Master Servicer in
banking transactions with the same rights as it would have if it were not
Owner Trustee.
ARTICLE VIII
Compensation of Owner Trustee
-----------------------------
SECTION 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee
---------------------------------
shall receive as compensation for its services hereunder such fees as have
been separately agreed upon before the date hereof between the Depositor and
the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed
by the Depositor for its other reasonable expenses hereunder, including the
reasonable compensation, expenses and disbursements of such agents,
representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder.
SECTION 8.02. Indemnification. The Depositor shall be liable as
---------------
primary obligor for, and shall indemnify the Owner Trustee and its
successors, assigns, agents and servants (collectively, the "Indemnified
Parties") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of
any kind and nature whatsoever (collectively, "Expenses") which may at any
time be imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement,
the Basic Documents, the Owner Trust Estate, the administration of the Owner
Trust Estate or the action or inaction of the Owner Trustee hereunder, except
only that the Depositor shall not be liable for or required to indemnify an
Indemnified Party from and against Expenses arising or resulting from any of
the matters described in the third sentence of Section 7.01. The indemnities
contained in this Section shall survive the resignation or termination of the
Owner Trustee or the termination of this Agreement. In any event of any
claim, action or proceeding for which indemnity will be sought pursuant to
this Section, the Owner Trustee's choice of legal counsel shall be subject to
the approval of the Depositor, which approval shall not be unreasonably
withheld.
SECTION 8.03. Payments to the Owner Trustee. Any amounts paid to the
-----------------------------
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part
of the Owner Trust Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
------------------------------
SECTION 9.01. Termination of Trust Agreement. (a) This Agreement
------------------------------
(other than Article VIII) and the Trust shall terminate and be of no further
force or effect (i) upon the final distribution by the Owner Trustee of all
moneys or other property or proceeds of the Owner Trust Estate in accordance
with the terms of the Indenture, the Master Servicing Agreement and Article V
or (ii) at the time provided in Section 9.02. The bankruptcy, liquidation,
dissolution, death or incapacity of any Owner, other than the Company as
described in Section 9.02, shall not (x) operate to terminate this Agreement
or the Trust or (y) entitle such Owner'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 all or any part of the Trust or Owner Trust Estate
or (z) otherwise affect the rights, obligations and liabilities of the
parties hereto.
(b) Except as provided in Section 9.01(a), none of the Depositor, the
Company or any Owner shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Distribution
Date upon which Certificateholders shall surrender their Trust Certificates
to the Paying Agent for payment of the final distribution and cancellation,
shall be given by the Owner Trustee by letter to Certificateholders mailed
within five Business Days of receipt of notice of such termination from the
Master Servicer stating (i) the Distribution Date upon or with respect to
which final payment of the Trust Certificates shall be made upon presentation
and surrender of the Trust Certificates at the office of the Paying Agent
therein designated, (ii) the amount of any such final payment and (iii) that
the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Trust Certificates at the office of the Paying Agent therein specified. The
Owner Trustee shall give such notice to the Certificate Registrar (if other
than the Owner Trustee) and the Paying Agent at the time such notice is given
to Certificateholders. Upon presentation and surrender of the Trust
Certificates, the Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant
to Section 5.02.
In the event that all of the Certificateholders shall not surrender
their Trust Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give
a second written notice to the remaining Certificateholders to surrender
their Trust Certificates for cancellation and receive the final distribution
with respect thereto. If within one year after the second notice all the
Trust Certificates shall not have been surrendered for cancellation, the
Owner Trustee may take appropriate steps, or may appoint an agent to take
appropriate steps, to contact the remaining Certificateholders concerning
surrender of their Trust Certificates, and the cost thereof shall be paid out
of the funds and other assets that shall remain subject to this Agreement.
Any funds remaining in the Trust after exhaustion of such remedies shall be
distributed by the Owner Trustee to the Company.
(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State in accordance with
the provisions of Section 3810 of the Business Trust Statute.
SECTION 9.02. Dissolution upon Bankruptcy of the Company. In the event
------------------------------------------
that an Insolvency Event shall occur with respect to the Company, this
Agreement shall be terminated in accordance with Section 9.01 90 days after
the date of such Insolvency Event, unless, before the end of such 90-day
period, the Owner Trustee shall have received written instructions from
Holders of Certificates (other than the Company) representing more than 50%
of the Certificate Balance (not including the Certificate Balance of the
Trust Certificates held by the Company), to the effect that each such party
disapproves of the liquidation of the Mortgage Loans and of the Trust.
Promptly after the occurrence of any Insolvency Event with respect to the
Company, (A) the Company shall give the Indenture Trustee and the Owner
Trustee written notice of such Insolvency Event, (B) the Owner Trustee shall,
upon the receipt of such written notice from the Company, give prompt written
notice to the Certificateholders and the Indenture Trustee, of the occurrence
of such event and (C) the Indenture Trustee shall, upon receipt of written
notice of such Insolvency Event from the Owner Trustee or the Company, give
prompt written notice to the Noteholders of the occurrence of such event;
provided that any failure to give a notice required by this sentence shall
- --------
not prevent or delay, in any manner, a termination of the Trust pursuant to
the first sentence of this Section 9.02. Upon a termination pursuant to this
Section, the Owner Trustee shall direct the Indenture Trustee promptly to
sell the assets of the Trust (other than the Trust Accounts and the
Certificate Distribution Account) and, on behalf of the Company, in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds of such a sale of the assets of the Trust shall be treated as
collections under the Master Servicing Agreement.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
------------------------------------------------------
SECTION 10.01. Eligibility Requirements for Owner Trustee. The
------------------------------------------
Owner Trustee shall at all times be a corporation satisfying the provisions
of Section 3807(a) of the Business Trust Statute; authorized 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
authorities; and having (or having a parent that has) a rating of at least
(____) by (__________). If such corporation shall publish reports of
condition at least annually pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose 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 Owner Trustee shall cease
to be eligible in accordance with the provisions of this Section, the Owner
Trustee shall resign immediately in the manner and with the effect specified
in Section 10.02.
SECTION 10.02. Resignation or Removal of Owner Trustee. The Owner
---------------------------------------
Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Administrator. Upon
receiving such notice of resignation, the Administrator shall promptly
appoint a successor Owner Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Owner Trustee
and one copy to the successor Owner Trustee. If no successor Owner Trustee
shall have been so appointed and have accepted appointment within 30 days
after the giving of such notice of resignation, the resigning Owner Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign
after written request therefor by the Administrator, or if at any time the
Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt
or insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Administrator may remove the Owner
Trustee. If the Administrator shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the Administrator shall
promptly appoint a successor Owner Trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the outgoing
Owner Trustee so removed and one copy to the successor Owner Trustee, and
shall pay all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section
shall not become effective until acceptance of appointment by the successor
Owner Trustee pursuant to Section 10.03 and payment of all fees and expenses
owed to the outgoing Owner Trustee. The Administrator shall provide notice
of such resignation or removal of the Owner Trustee to each of the Rating
Agencies.
SECTION 10.03. Successor Owner Trustee. Any successor Owner
-----------------------
Trustee appointed pursuant to Section 10.02 shall execute, acknowledge and
deliver to the Administrator and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become
effective, and such successor Owner Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor under this Agreement, with like effect as if
originally named as Owner Trustee. The predecessor Owner Trustee shall upon
payment of its fees and expenses deliver to the successor Owner Trustee all
documents and statements and monies held by it under this Agreement; and the
Administrator and the predecessor Owner Trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for
fully and certainly vesting and confirming in the successor Owner Trustee all
such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice thereof to all
Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within 10 days
after acceptance of such appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense
of the Administrator.
SECTION 10.04. Merger or Consolidation of Owner Trustee. Any
----------------------------------------
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, without the execution or filing of any instrument or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided that such corporation shall be eligible pursuant
--------
to Section 10.01; provided further that the Owner Trustee shall mail notice
-------- -------
of such merger or consolidation to the Rating Agencies.
SECTION 10.05. Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any
part of the Owner Trust Estate may at the time be located, the Administrator
and the Owner Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Administrator and Owner Trustee to act as co-trustee, jointly with the Owner
Trustee, or as separate trustee or separate trustees, of all or any part of
the Owner Trust Estate, and to vest in such Person, in such capacity, such
title to the Trust or any part thereof and, subject to the other provisions
of this Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Owner Trustee may consider necessary or desirable. If
the Administrator shall not have joined in such appointment within 15 days
after the receipt by it of a request so to do, the Owner Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee
under this Agreement shall be required to meet the terms of eligibility as a
successor Owner Trustee pursuant to Section 10.01 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant
to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed by
the Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act or
acts are to be performed, the Owner 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 Owner Trust
Estate or any portion thereof in any such jurisdiction) shall be exercised
and performed singly by such separate trustee or co-trustee, but solely at
the direction of the Owner Trustee;
(b) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement; and
(c) The Administrator and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article. 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 Owner 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 Owner Trustee. Each such instrument shall be
filed with the Owner Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as 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 Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor co-trustee or separate trustee.
ARTICLE XI
Miscellaneous
-------------
SECTION 11.01. Supplements and Amendments. This Agreement may be
--------------------------
amended by the Depositor, the Company and the Owner Trustee, with prior
written notice to the Rating Agencies, without the consent of any of the
Noteholders or the Certificateholders, to cure any ambiguity, to correct or
supplement any provisions in this Agreement or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
in this Agreement or of modifying in any manner the rights of the Noteholders
or the Certificateholders; provided that such action shall not, as evidenced
--------
by an Opinion of Counsel, adversely affect in any material respect the
interests of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Depositor,
the Company and the Owner Trustee, with prior written notice to the Rating
Agencies, with the consent of the Holders (as defined in the Indenture) of
Notes evidencing not less than a majority of the Principal Balance of the
Notes and the consent of the Holders of Certificates evidencing not less than
a majority of the Certificate Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Noteholders
or the Certificateholders; provided that no such amendment shall (a) increase
--------
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Mortgage Loans or distributions that shall be
required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Principal
Balance of the Notes and the Certificate Balance required to consent to any
such amendment, without the consent of the holders of all the outstanding
Notes and Certificates.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment
or consent to each Certificateholder, the Indenture Trustee and each of the
Rating Agencies.
It shall not be necessary for the consent of Certificateholders,
Noteholders or the Indenture Trustee pursuant to this Section to approve the
particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof. The manner
of obtaining such consents (and any other consents of Certificateholders
provided for in this Agreement or in any other Basic Document) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Owner Trustee may
prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall
not be obligated to, enter into any such amendment that affects the Owner
Trustee's own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. No Legal Title to Owner Trust Estate in Owners. The
----------------------------------------------
Owners shall not have legal title to any part of the Owner Trust Estate. The
Owners shall be entitled to receive distributions with respect to their
undivided ownership interest therein only in accordance with Articles V and
IX. No transfer, by operation of law or otherwise, of any right, title or
interest of the Owners to and in their ownership interest in the Owner Trust
Estate shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of legal
title to any part of the Owner Trust Estate.
SECTION 11.03. Limitations on Rights of Others. Except for
-------------------------------
Section 2.07, the provisions of this Agreement are solely for the benefit of
the Owner Trustee, the Depositor, the Company, the Owners, the Administrator
and, to the extent expressly provided herein, the Indenture Trustee and the
Noteholders, and nothing in this Agreement (other than Section 2.07), whether
express or implied, shall be construed to give to any other Person any legal
or equitable right, remedy or claim in the Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions
contained herein.
SECTION 11.04. Notices. (a) Unless otherwise expressly specified
-------
or permitted by the terms hereof, all notices shall be in writing and shall
be deemed given upon receipt by the intended recipient or three Business Days
after mailing if mailed by certified mail, postage prepaid (except that
notice to the Owner Trustee shall be deemed given only upon actual receipt by
the Owner Trustee), if to the Owner Trustee, addressed to the Corporate Trust
Office; if to the Depositor, addressed to IndyMac ABS, Inc., 155 North Lake
Avenue, Pasadena, California 91101, Attention: (______________); if to the
Company, addressed to (_____________________________), Attention:
(____________); or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 11.05. Severability. Any provision of this Agreement that
------------
is prohibited 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 shall not
invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 11.06. Separate Counterparts. This Agreement may be
---------------------
executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.07. Successors and Assigns. All covenants and
----------------------
agreements contained herein shall be binding upon, and inure to the benefit
of, each of the Depositor, the Company, the Owner Trustee and its successors
and each Owner and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other
instrument or action by an Owner shall bind the successors and assigns of
such Owner.
SECTION 11.08. Covenants of the Company. The Company will not at
------------------------
any time institute against the Trust any bankruptcy proceedings under any
United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Trust Certificates, the Notes, the Trust
Agreement or any of the Basic Documents.
SECTION 11.09. No Petition. The Owner Trustee, by entering into
-----------
this Agreement, each Certificateholder, by accepting a Trust Certificate, and
the Indenture Trustee and each Noteholder, by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the Company or the Trust, or join in any institution against the
Company or the Trust of, any bankruptcy proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, this Agreement or any of the
Basic Documents.
SECTION 11.10. No Recourse. Each Certificateholder by accepting
-----------
a Trust Certificate acknowledges that such Certificateholder's Trust
Certificates represent beneficial interests in the Trust only and do not
represent interests in or obligations of the Depositor, the Master Servicer,
the Company, the Administrator, the Owner Trustee, the Indenture Trustee or
any Affiliate thereof and no recourse may be had against such parties or
their assets, except as may be expressly set forth or contemplated in this
Agreement, the Trust Certificates or the Basic Documents.
SECTION 11.11. Headings. The headings of the various Articles and
--------
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO
ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.13. Depositor Payment Obligation. The Depositor shall
----------------------------
be responsible for payment of the Administrator's fees under the
Administration Agreement and shall reimburse the Administrator for all
expenses and liabilities of the Administrator incurred thereunder.
* * * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Trust Agreement to be duly executed by their respective officers
hereunto duly authorized, as of the day and year first above written.
INDYMAC ABS, INC.,
as Depositor,
by:
----------------------------
Name:
Title:
(______________________________),
by:
----------------------------
Name:
Title:
(_____________________),
not in its individual capacity but solely as
Owner Trustee,
by:
----------------------------
Name:
Title:
EXHIBIT A
FORM OF TRUST CERTIFICATE
-------------------------
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NUMBER $_________
R-___________ CUSIP NO. _________
(___________) HOME EQUITY LOAN TRUST 199__-__
(_____)% HOME EQUITY LOAN ASSET BACKED CERTIFICATES, SERIES 199__-__
evidencing a fractional undivided beneficial ownership interest in the Trust,
as defined below, the property of which includes a pool of (fixed-rate)
(adjustable rate) home equity revolving credit line loans caused to be sold
to the Trust by (_______________).
(This Trust Certificate does not represent an interest in or obligation of
(the Depositor, the Seller or the (Master Servicer)) or any of their
respective affiliates, except to the extent described below.)
THIS CERTIFIES THAT (________________________) is the registered owner
of (____________________) DOLLARS nonassessable, fully paid, fractional
undivided interest in (___________) HOME EQUITY LOAN TRUST 199__-__ (the
"Trust") formed by IndyMac ABS, Inc., a Delaware corporation (the
"Depositor"), and (_______________), a (__________) corporation (the
"Company").
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-mentioned
Trust Agreement.
(___________________), (___________________),
as Owner Trustee or as Owner Trustee
by: by: ( ),
-------------------------------- ------------------
Authorized Signatory as Authenticating Agent
by:
---------------------------
Authorized Signatory
The Trust was created pursuant to a Trust Agreement, dated as of
, 199__ (the "Trust Agreement"), among the Depositor, the
- ---------------
Company and (____________), as owner trustee (the "Owner Trustee"), a summary
of certain of the pertinent provisions of which is set forth below. To the
extent not otherwise defined herein, the capitalized terms used herein have
the meanings assigned to them in the Trust Agreement or the Master Servicing
Agreement dated as of ___________, 199__ (as amended and supplemented from
time to time, the "Master Servicing Agreement"), among the Trust, the
Depositor and (_______________), as servicer (the "Master Servicer"), as
applicable.
This Certificate is one of a duly authorized issue of Home Equity
Loan Asset-Backed Certificates, Series 199__-__ (herein called the "Trust
Certificates"). Also issued under the Indenture dated as of ___________,
199__ between the Trust and (________________), as indenture trustee, are the
(_______) classes of Notes designated as (_________________________
_____________________________________________________________________________
_______________________________________________________) (collectively, the
"Notes"). This Trust Certificate is issued under and is subject to the
terms, provisions and conditions of the Trust Agreement, to which Trust
Agreement the Holder of this Trust Certificate by virtue of its acceptance
hereof assents and by which such Holder is bound. The property of the Trust
consists of a pool of (adjustable rate) home equity loan revolving credit
line loans made or to be made in the future (the "Mortgage Loans"), under
certain home equity revolving credit line loan agreements and secured
primarily by second (deeds of trust) (mortgages) on residential properties
that are primarily one- to four-family properties (the "Mortgaged
Properties"); the collections in respect of the Mortgage Loans received after
the Cut-off Date; property that secured a Mortgage Loan which has been
acquired by foreclosure or deed in lieu of foreclosure; (a surety bond) (a
letter of credit); an assignment of the Depositor's rights under the
(________________); rights under certain hazard insurance policies covering
the Mortgaged Properties; and certain other property. (The rights of the
Holders of the Trust Certificates are subordinated to the rights of the
Holders of the Notes, as set forth in the Master Servicing Agreement.)
Under the Trust Agreement, there will be distributed on the
(_______) day of each month or, if such (_______) day is not a Business Day,
the next Business Day (each, a "Distribution Date"), commencing on
___________, 199__, to the Person in whose name this Trust Certificates is
registered at the close of business on the first day of the month or, if
Definitive Certificates are issued, the (_______) day of the prior month (the
"Record Date"), such Certificateholder's fractional undivided interest in the
amount to be distributed to Certificateholders on such Distribution Date. No
distributions of principal will be made on any Certificate until all of the
Notes have been paid in full.
(The Holder of this Trust Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Master
Servicing Agreement and the Indenture.)
It is the intent of the Depositor, the Company, the Master Servicer
and the Certificateholders that, for purposes of federal income, state and
local income and single business tax and any other income taxes, the Trust
will be treated as a partnership and the Certificateholders (including the
Company) will be treated as partners in that partnership. The Company and
the other Certificateholders, by acceptance of a Trust Certificate, agree to
treat, and to take no action inconsistent with the treatment of, the Trust
Certificates for such tax purposes as partnership interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a
Trust Certificate or, in the case of a Certificate Owner, a beneficial
interest in a Trust Certificate, covenants and agrees that such
Certificateholder or Certificate Owner, as the case may be, will not at any
time institute against the Company, or join in any institution against the
Company of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal
or state bankruptcy or similar law in connection with any obligations
relating to the Trust Certificates, the Notes, the Trust Agreement or any of
the Basic Documents.
Distributions on this Trust Certificate will be made as provided in
the Trust Agreement by the Owner Trustee by wire transfer or check mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Trust Certificate or the making of any
notation hereon, except that with respect to Trust Certificates registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee.
Except as otherwise provided in the Trust Agreement and notwithstanding the
above, the final distribution on this Trust Certificate will be made after
due notice by the Owner Trustee of the pendency of such distribution and only
upon presentation and surrender of this Trust Certificate at the office or
agency maintained for that purpose by the Owner Trustee in the Borough of
Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Trust
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 shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Trust Certificate shall not entitle the Holder hereof to any benefit
under the Trust Agreement or the Master Servicing Agreement or be valid for
any purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Trust Certificate to be duly
executed.
INDYMAC ABS, INC.
by: (_____________________), not in its
individual capacity but solely as Owner
Trustee
Dated: by:
----------------------------------------
Authorized Signatory
(REVERSE OF TRUST CERTIFICATE)
The Trust Certificates do not represent an obligation of, or an
interest in, the Depositor, the Master Servicer, the Company, the Owner
Trustee or any affiliates of any of them and no recourse may be had against
such parties or their assets, except as expressly set forth or contemplated
herein or in the Trust Agreement or the Basic Documents. In addition, this
Trust Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections and
recoveries with respect to the Mortgage Loans (and certain other amounts),
all as more specifically set forth herein and in the Master Servicing
Agreement. A copy of each of the Master Servicing Agreement and the Trust
Agreement may be examined by any Certificateholder upon written request
during normal business hours at the principal office of the Depositor and at
such other places, if any, designated by the Depositor.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the Company and the rights of the
Certificateholders under the Trust Agreement at any time by the Depositor,
the Company and the Owner Trustee with the consent of the Holders of the
Trust Certificates and the Notes, each voting as a class, evidencing not less
than a majority of the Certificate Balance and the outstanding principal
balance of the Notes of each such class. Any such consent by the Holder of
this Trust Certificate shall be conclusive and binding on such Holder and on
all future Holders of this Trust Certificate and of any Trust Certificate
issued upon the transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent is made upon this Trust Certificate.
The Trust Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the Holders of any of the Trust
Certificates.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Trust Certificate is
registerable in the Certificate Register upon surrender of this Trust
Certificate for registration of transfer at the offices or agencies of the
Certificate Registrar maintained by the Owner Trustee in the Borough of
Manhattan, The City of New York, accompanied by a written instrument of
transfer in form satisfactory to the Owner 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 Trust Certificates of
authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee. The initial Certificate
Registrar appointed under the Trust Agreement is (_________________), New
York, New York.
Except as provided in the Trust Agreement, the Trust Certificates
are issuable only as registered Trust Certificates without coupons in
denominations of $(__________) and in integral multiples of $(_______) in
excess thereof. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Trust Certificates are exchangeable for new
Trust Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the Holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but
the Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of the
Owner Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and none
of the Owner Trustee, the Certificate Registrar or any such agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Master Servicing Agreement and the disposition of all
property held as part of the Owner Trust Estate. The Master Servicer of the
Mortgage Loans may at its option purchase the Owner Trust Estate at a price
specified in the Master Servicing Agreement, and such purchase of the
Mortgage Loans and other property of the Trust will effect early retirement
of the Trust Certificates; however, such right of purchase is exercisable
only as of the last day of any Collection Period as of which the Pool Balance
is less than or equal to (____)% of the Original Pool Balance.
The Trust Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title I of ERISA, (b) a plan described in Section 4975(e)(1) of
the Code or (c) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding this Trust Certificate, the Holder hereof shall be
deemed to have represented and warranted that it is not a Benefit Plan.
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of
assignee)
- --------------------------------------------------------------------------
the within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
- --------------------------------------------------------------------------
to transfer said Trust Certificate on the books of the Certificate Registrar,
with full power of substitution in the premises.
Dated:
___________________________________________*/
-
Signature Guaranteed:
____________________________*/
-
_________________
*/ NOTICE: The signature to this assignment must correspond with the name
- -
as it appears upon the face of the within Trust Certificate in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by a member firm of the New York Stock Exchange
or a commercial bank or trust company.
EXHIBIT B
CERTIFICATE OF TRUST OF
(___________) HOME EQUITY LOAN TRUST 199___
-------------------------------------------
THIS Certificate of Trust of (___________) HOME EQUITY LOAN TRUST
199__-__ (the "Trust"), dated , 199__, is being duly executed
--------------
and filed by (_____________________), a (___________________________), as
trustee, to form a business trust under the Delaware Business Trust Act (12
Del. Code, Section 3801 et seq.).
- ---------
1. Name. The name of the business trust formed hereby is
----
(___________) HOME EQUITY LOAN TRUST 199__-__.
2. Delaware Trustee. The name and business address of the trustee
----------------
of the Trust in the State of Delaware is (______________), Delaware (____),
Attention: (_______________________________).
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
(______________),
not in its individual capacity but solely
as owner trustee under a Trust Agreement
dated , 199
---------------- --
By:
-------------------------------------
Name:
Title:
EXHIBIT C
(Form of Certificate Depository Agreement)
B&W Draft
3/30/98
(INDYMAC) HOME EQUITY LOAN TRUST 199_-__
Issuer
AND
(_________________)
INDENTURE TRUSTEE
_________________________________________
INDENTURE
Dated as of _________, 199_
__________________________________________
HOME EQUITY ASSET BACKED NOTES
SERIES 199_-__
Cross-reference sheet showing the location in the indenture of the
provisions inserted pursuant to Sections 310 through 318(a) inclusive of the
Trust Indenture Act of 1939.
TIA Indenture Section
--- -----------------
Section 310
(a) (1) . . . . . . . . . . . . . . . . . . 6.11
(a) (2) . . . . . . . . . . . . . . . . . . 6.11
(a) (3) . . . . . . . . . . . . . . . . . . 6.10(b)(i)
(a) (4) . . . . . . . . . . . . . . . . . . Not Applicable
(a) (5) . . . . . . . . . . . . . . . . . . 6.11
(b) . . . . . . . . . . . . . . . . . . 6.11
. . . . . . . . . . . . . . . . . . 6.08
. . . . . . . . . . . . . . . . . . 11.05
(c) . . . . . . . . . . . . . . . . . . Not Applicable
Section 311
(a) . . . . . . . . . . . . . . . . . . 6.12
(b) . . . . . . . . . . . . . . . . . . 6.12
Section 312
(a) . . . . . . . . . . . . . . . . . . 7.01(a)(i)
. . . . . . . . . . . . . . . . . . 7.02(a)(i)
(b) . . . . . . . . . . . . . . . . . . 7.02(a)(ii)
(c) . . . . . . . . . . . . . . . . . . 7.02(a)(iii)
Section 313
(a) . . . . . . . . . . . . . . . . . . 7.04
(b) . . . . . . . . . . . . . . . . . . 7.04
(c) . . . . . . . . . . . . . . . . . . 7.04
. . . . . . . . . . . . . . . . . . 11.05
(d) . . . . . . . . . . . . . . . . . . 7.04
Section 314
(a) . . . . . . . . . . . . . . . . . . 7.03
. . . . . . . . . . . . . . . . . . 11.05
. . . . . . . . . . . . . . . . . . 3.11
(b) (1) . . . . . . . . . . . . . . . . . . 2.03
(b) (2) . . . . . . . . . . . . . . . . . . 3.07
(c) (1) . . . . . . . . . . . . . . . . . . 2.03
. . . . . . . . . . . . . . . . . . 4.10
. . . . . . . . . . . . . . . . . . 11.01
(c) (2) . . . . . . . . . . . . . . . . . . 2.03
. . . . . . . . . . . . . . . . . . 4.10
. . . . . . . . . . . . . . . . . . 11.01
(c) (3) . . . . . . . . . . . . . . . . . . 1.01
. . . . . . . . . . . . . . . . . . 2.02
(d) (1) . . . . . . . . . . . . . . . . . . 1.01
. . . . . . . . . . . . . . . . . . 8.05
(d) (2) . . . . . . . . . . . . . . . . . . 1.01
. . . . . . . . . . . . . . . . . . Not Applicable
(d) (3) . . . . . . . . . . . . . . . . . . 1.01
. . . . . . . . . . . . . . . . . . 2.02
(e) . . . . . . . . . . . . . . . . . . 11.01
Section 315
(a) . . . . . . . . . . . . . . . . . . 6.01(b)
. . . . . . . . . . . . . . . . . . 6.01(c)(i)
(b) . . . . . . . . . . . . . . . . . . 6.05
. . . . . . . . . . . . . . . . . . 11.05
(c) . . . . . . . . . . . . . . . . . . 6.01(a)
(d) . . . . . . . . . . . . . . . . . . 6.01(c)
(d) (1) . . . . . . . . . . . . . . . . . . 6.01(b)
(d) (2) . . . . . . . . . . . . . . . . . . 6.01(c)(ii)
(d) (3) . . . . . . . . . . . . . . . . . . 6.01(c)(iii)
(e) . . . . . . . . . . . . . . . . . . 5.16
Section 316
(a) (1) (A) . . . . . . . . . . . . . . . 5.11
. . . . . . . . . . . . . . . . . 8.01
(a) (1) (B) . . . . . . . . . . . . . . . 5.02
. . . . . . . . . . . . . . . . . 5.12
(a) (2) . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . 5.07
(c) . . . . . . . . . . . . . . . . . Not Applicable
Section 317
(a) (1) . . . . . . . . . . . . . . . . . 5.03
(a) (2) . . . . . . . . . . . . . . . . . 5.03(d)(iv)
(b) . . . . . . . . . . . . . . . . . 3.03
Section 318
(a) . . . . . . . . . . . . . . . . . 11.07
TABLE OF CONTENTS
-----------------
Section Page
------- ----
ARTICLE I
Definitions
1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02. Incorporation by Reference of Trust Indenture Act . . . . . . 2
1.03. Rules of Construction. . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
Original Issuance of Notes
2.01. Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.02. Execution, Authentication and Delivery . . . . . . . . . . . 4
2.03. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
Covenants
3.01. Collection of Payments on Mortgage Loan Accounts . . . . . . 6
3.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . 6
3.03. Money for Payments To Be Held in Trust; Paying Agent;
Certificate Paying Agent . . . . . . . . . . . . . . . . . . 6
3.04. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.05. Payment of Principal and Interest; Defaulted Interest . . . . 9
3.06. Protection of Trust Estate . . . . . . . . . . . . . . . . . 12
3.07. Opinions as to Trust Estate . . . . . . . . . . . . . . . . . 12
3.08. (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.09. Performance of Obligations; Master Servicing Agreement . . . 13
3.10. Negative Covenants . . . . . . . . . . . . . . . . . . . . . 15
3.11. Annual Statement as to Compliance . . . . . . . . . . . . . . 16
3.12. Recording of Assignments . . . . . . . . . . . . . . . . . . 16
3.13. Representations and Warranties Concerning the Mortgage
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.14. Indenture Trustee's Review of Related Documents . . . . . . . 17
3.15. Trust Estate; Related Documents . . . . . . . . . . . . . . . 18
3.16. Amendments to Master Servicing Agreement . . . . . . . . . . 19
3.17. Master Servicer as Agent and Bailee of Indenture Trustee . . 19
3.18. Investment Company Act . . . . . . . . . . . . . . . . . . . 20
3.19. Issuer May Consolidate, etc., Only on Certain Terms . . . . . 20
3.20. Successor or Transferee . . . . . . . . . . . . . . . . . . . 22
3.21. No Other Business . . . . . . . . . . . . . . . . . . . . . . 22
3.22. No Borrowing . . . . . . . . . . . . . . . . . . . . . . . . 23
3.23. Guarantees, Loans, Advances and Other Liabilities . . . . . . 23
3.24. Capital Expenditures . . . . . . . . . . . . . . . . . . . . 23
3.25. (Reserved) . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.26. Restricted Payments . . . . . . . . . . . . . . . . . . . . . 23
3.27. Notice of Events of Default . . . . . . . . . . . . . . . . . 23
3.28. Further Instruments and Acts . . . . . . . . . . . . . . . . 24
3.29. Statements to Noteholders . . . . . . . . . . . . . . . . . . 24
3.30. (Reserved) (Grant of the Additional Loans . . . . . . . . . . 24
3.31. Determination of Note Rate and Certificate Rate. . . . . . . 25
3.32. Payments under the Credit Enhancement Instrument . . . . . . 25
3.33. Replacement Credit Enhancement Instrument . . . . . . . . . . 26
ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
4.01. The Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.02. Registration of and Limitations on Transfer and Exchange of
Notes; Appointment of Certificate Registrar . . . . . . . . . 28
4.03. Mutilated, Destroyed, Lost or Stolen Notes . . . . . . . . . 30
4.04. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . 31
4.05. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . 31
4.06. Book-Entry Notes . . . . . . . . . . . . . . . . . . . . . . 31
4.07. Notices to Depository . . . . . . . . . . . . . . . . . . . . 32
4.08. Definitive Notes . . . . . . . . . . . . . . . . . . . . . . 33
4.09. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . 33
4.10. Satisfaction and Discharge of Indenture . . . . . . . . . . . 33
4.11. Application of Trust Money . . . . . . . . . . . . . . . . . 35
4.12. Subrogation and Cooperation . . . . . . . . . . . . . . . . . 35
4.13. Repayment of Moneys Held by Paying Agent . . . . . . . . . . 36
ARTICLE V
Remedies
5.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . 37
5.02. Acceleration of Maturity; Rescission and Annulment . . . . . 37
5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . 38
5.04. Remedies; Priorities . . . . . . . . . . . . . . . . . . . . 40
5.05. Optional Preservation of the Trust Estate . . . . . . . . . . 43
5.06. Limitation of Suits . . . . . . . . . . . . . . . . . . . . . 43
5.07. Unconditional Rights of Noteholders To Receive Principal and
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.08. Restoration of Rights and Remedies . . . . . . . . . . . . . 44
5.09. Rights and Remedies Cumulative . . . . . . . . . . . . . . . 44
5.10. Delay or Omission Not a Waiver . . . . . . . . . . . . . . . 44
5.11. Control by Noteholders . . . . . . . . . . . . . . . . . . . 45
5.12. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . 45
5.13. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . 46
5.14. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . 46
5.15. Sale of Trust Estate . . . . . . . . . . . . . . . . . . . . 46
5.16. Action on Notes . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VI
The Indenture Trustee
6.01. Duties of Indenture Trustee . . . . . . . . . . . . . . . . . 50
6.02. Rights of Indenture Trustee . . . . . . . . . . . . . . . . . 51
6.03. Individual Rights of Indenture Trustee . . . . . . . . . . . 52
6.04. Indenture Trustee's Disclaimer . . . . . . . . . . . . . . . 52
6.05. Notice of Event of Default . . . . . . . . . . . . . . . . . 52
6.06. Reports by Indenture Trustee to Holders . . . . . . . . . . . 52
6.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . 52
6.08. Replacement of Indenture Trustee . . . . . . . . . . . . . . 53
6.09. Successor Indenture Trustee by Merger . . . . . . . . . . . . 54
6.10. Appointment of Co-Indenture Trustee or Separate Indenture
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.11. Eligibility; Disqualification . . . . . . . . . . . . . . . . 56
6.12. Preferential Collection of Claims Against Issuer . . . . . . 57
6.13. Representation and Warranty . . . . . . . . . . . . . . . . . 57
6.14. Directions to Indenture Trustee . . . . . . . . . . . . . . . 57
6.15. No Consent to Certain Acts of Depositor . . . . . . . . . . . 57
ARTICLE VII
Noteholders' Lists and Reports
7.01. Issuer To Furnish Indenture Trustee Names and Addresses of
Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.02. Preservation of Information; Communications to Noteholders . 58
7.03. Reports by Issuer . . . . . . . . . . . . . . . . . . . . . . 58
7.04. Reports by Indenture Trustee . . . . . . . . . . . . . . . . 59
ARTICLE VIII
Accounts, Disbursements and Releases
8.01. Collection of Money . . . . . . . . . . . . . . . . . . . . . 60
8.02. Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . 60
8.03. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . 62
8.04. Termination Upon Distribution to Noteholders . . . . . . . . 62
8.05. Release of Trust Estate . . . . . . . . . . . . . . . . . . . 62
8.06. Surrender of Notes Upon Final Payment . . . . . . . . . . . . 63
ARTICLE IX
Supplemental Indentures
9.01. Supplemental Indentures Without Consent of Noteholders . . . 64
9.02. Supplemental Indentures With Consent of Noteholders . . . . . 65
9.03. Execution of Supplemental Indentures . . . . . . . . . . . . 67
9.04. Effect of Supplemental Indenture . . . . . . . . . . . . . . 67
9.05. Conformity with Trust Indenture Act . . . . . . . . . . . . . 68
9.06. Reference in Notes to Supplemental Indentures . . . . . . . . 68
ARTICLE X
(Reserved)
ARTICLE XI
Miscellaneous
11.01. Compliance Certificates and Opinions, etc . . . . . . . . . 70
11.02. Form of Documents Delivered to Indenture Trustee . . . . . . 72
11.03. Acts of Noteholders . . . . . . . . . . . . . . . . . . . . 73
11.04. Notices, etc., to Indenture Trustee, Issuer, (Credit
Enhancer) and Rating Agencies . .. . . . . . . . . . . . . . 74
11.05. Notices to Noteholders; Waiver . . . . . . . . . . . . . . . 75
11.06. Alternate Payment and Notice Provisions . . . . . . . . . . 75
11.07. Conflict with Trust Indenture Act . . . . . . . . . . . . . 75
11.08. Effect of Headings . . . . . . . . . . . . . . . . . . . . . 76
11.09. Successors and Assigns . . . . . . . . . . . . . . . . . . . 76
11.10. Separability . . . . . . . . . . . . . . . . . . . . . . . . 76
11.11. Benefits of Indenture . . . . . . . . . . . . . . . . . . . 76
11.12. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 76
11.13. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 76
11.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 76
11.15. Recording of Indenture . . . . . . . . . . . . . . . . . . . 77
11.16. Issuer Obligation . . . . . . . . . . . . . . . . . . . . . 77
11.17. No Petition . . . . . . . . . . . . . . . . . . . . . . . . 77
11.18. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 78
11.19. Authority of the Administrator . . . . . . . . . . . . . . . 78
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Mortgage Loan Schedule
This Indenture, dated as of ______, 199_, between
_____________________________________ 199_-_, a Delaware business trust, as
Issuer (the "Issuer"), and (________________), as Indenture Trustee (the
"Indenture Trustee"),
WITNESSETH THAT:
Each party hereto agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Issuer's
__________________ Home Equity Loan Asset Backed Certificates and Notes,
Series 199__-__ (the "Notes").
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee at the Closing
Date, as Indenture Trustee for the benefit of the Holders of the Notes, all
of the Issuer's right, title and interest in and to whether now existing or
hereafter created (a) the Mortgage Loans and all monies and proceeds due
thereon after the Cut-off Date (exclusive of payments in respect of accrued
interest due on a prior to the Cut-off Date or due in the month of
___________), (b) an assignment of the Depositor's rights under the Mortgage
Loan Purchase Agreement, (c) all funds on deposit in the Funding Account,
including all income from the investment and reinvestment of funds therein,
(d) all funds on deposit from time to time in the Collection Account
allocable to the Mortgage Loans; (e) all funds on deposit from time to time
in the Payment Account and in all proceeds thereof; ((f) the Policy); (g) all
Additional Balances; (h) all REO properties; and (i) all present and future
claims, demands, causes and choses in action in respect of any or all of the
foregoing and all payments on or under, and all proceeds of every kind and
nature whatsoever in respect of, any or all of the foregoing and all payments
on or under, and all proceeds of every kind and nature whatsoever in the
conversion thereof, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, checks, deposit accounts, rights to payment of any and every
kind (including but not limited to all proceeds of any hazard insurance
policy with respect to any Mortgaged Property), and other forms of obli-
gations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the fore-
going (collectively, the "Trust Estate" or the "Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in
this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the
Holders of the Notes, acknowledges such Grant, accepts the trust under this
Indenture in accordance with the provisions hereof and agrees to perform its
duties as Indenture Trustee as required herein.
ARTICLE I
Definition
Section 1.01. Definitions. For all purposes of this Indenture, except
-----------
as otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms used but not otherwise defined herein shall have the meanings
assigned to such terms in Appendix A hereto which are incorporated by reference
herein. All other capitalized terms used herein shall have the meanings
specified herein.
Section 1.02. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.
Section 1.03. Rules of Construction. Unless the context otherwise
---------------------
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words in the
plural include the singular; and
(vi) any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to
time amended, modified or supplemented and includes (in the case of
agreements or instruments) references to all attachments thereto and
instruments incorporated therein; references to a Person are also to its
permitted successors and assigns.
ARTICLE II
Original Issuance of Notes
Section 2.01. Form. The Notes together with the Indenture Trustee's
----
certificate of authentication, shall be in substantially the forms set forth
in Exhibit A with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by
the officers executing such Notes, as evidenced by their execution of the
Notes. Any portion of the text of any Note may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the Authorized Officers executing such Notes,
as evidenced by their execution of such Notes.
The terms of the Notes set forth in Exhibit A are part of the terms of
this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall
--------------------------------------
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not
hold such offices at the date of such Notes.
The Indenture Trustee shall upon Issuer Request authenticate and deliver
Notes for original issue in an aggregate initial principal amount of
$(______________). The aggregate principal amount of Notes outstanding at
any time may not exceed $(_____________).
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum initial Security
Balances of $(________) and in integral multiples of $(______) in excess
thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there
appears on such Note a certificate of authentication substantially in the
form provided for herein executed by the Indenture Trustee by the manual
signature of one of its authorized signatories, and such certificate upon any
Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.
Section 2.03. Opinions of Counsel. On the Closing Date, the Indenture
-------------------
Trustee shall have received: (i) an Opinion of Counsel, in form and
substance reasonably satisfactory to the Indenture Trustee and its counsel,
with respect to securities law matters; (ii) an Opinion of Counsel, in
form and substance reasonably satisfactory to the Indenture Trustee and
its counsel, with respect to the tax status of the arrangement created
by the Indenture; and (iii) an Opinion of Counsel to the Issuer, in form
and substance reasonably satisfactory to the Indenture Trustee and its
counsel, with respect to the due authorization, valid execution and
delivery of this Indenture and with respect to its binding effect on
the Issuer.
ARTICLE III
Covenants
Section 3.01. Collection of Payments on Mortgage Loan Accounts. The
------------------------------------------------
Indenture Trustee shall establish and maintain with itself a trust account
(the "Payment Account") in which the Indenture Trustee shall, subject to the
terms of this paragraph, deposit, on the same day as it is received from the
Master Servicer, each remittance received by the Indenture Trustee with respect
to the Mortgage Loans. The Indenture Trustee shall make all payments of
uprincipal of and interest on the Notes, subject to Section 3.03 as provided
in Section 3.05 herein from moneys on deposit in the
Payment Account.
Section 3.02. Maintenance of Office or Agency. The Issuer will
-------------------------------
maintain in the Borough of Manhattan, The City of New York, an office or
agency where, subject to satisfaction of conditions set forth herein, Notes
may be surrendered for registration of transfer or exchange, and where notices
and demands to or upon the Issuer in respect of the Notes and this Indenture
may be served. The Issuer hereby initially appoints the Indenture Trustee to
serve as its agent for the foregoing purposes. If at any time the Issuer shall
fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and
demands may be made or served at the Corporate Trust Office, and the Issuer
hereby appoints the Indenture Trustee as its agent to receive all such
surrenders, notices and demands.
Section 3.03. Money for Payments To Be Held in Trust; Paying Agent;
-----------------------------------------------------
Certificate Paying Agent. (a) As provided in Section 3.01, all payments
- -------------------------
of amounts due and payable with respect to any Notes that are to be made
from amounts withdrawn from the Payment Account pursuant to Section 3.01
shall be made on behalf of the Issuer by the Indenture Trustee or by the
Paying Agent, and no amounts so withdrawn from the Payment Account for
payments of Notes shall be paid over to the Issuer except as provided
in this Section 3.03.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions
of this Section 3.03, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer of which it has actual knowledge in the making of any payment
required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon
the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes
if at any time it ceases to meet the standards required to be met by a
Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Request direct any Paying Agent to pay to the Indenture Trustee all
sums held in trust by such Paying Agent, such sums to be held by the
Indenture Trustee upon the same trusts as those upon which the sums were held
by such Paying Agent; and upon such payment by any Paying Agent to the Inden-
ture Trustee, such Paying Agent shall be released from all further liability
with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such
trust and be paid to the Issuer on Issuer Request; and the Holder of such
Note shall thereafter, as an unsecured general creditor, look only to the
Issuer for payment thereof (but only to the extent of the amounts so paid to
the Issuer), and all liability of the Indenture Trustee or such Paying Agent
with respect to such trust money shall thereupon cease; provided, however,
that the Indenture Trustee or such Paying Agent, before being required to
make any such repayment, shall at the expense and direction of the Issuer
cause to be published once, in an Authorized Newspaper published in the
English language, notice that such money remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Indenture Trustee shall also adopt and
employ, at the expense and direction of the Issuer, any other reasonable
means of notification of such repayment (including, but not limited to,
mailing notice of such repayment to Holders whose Notes have been called
but have not been surrendered for redemption or whose right to or interest
in moneys due and payable but not claimed is determinable from the records
of the Indenture Trustee or of any Paying Agent, at the last address of
record for each such Holder).
The Issuer hereby appoints (__________________) as Certificate Paying
Agent and Residual Ownership Interest Paying Agent to make payments to
Certificateholders and holders of the Residual Ownership Interest on behalf
of the Issuer in accordance with the provisions of the Certificates, Section
3.05 hereof and the provisions of the Trust Agreement, and (_______________)
hereby accepts such appointment and further agrees that it will be bound by
the provisions of the Trust Agreement relating to the Certificate Paying
Agent and Residual Ownership Interest Paying Agent and will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Certificates and the Residual Ownership Interest in trust
for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided and as
provided in the Trust Agreement and pay such sums to such Persons as
herein and therein provided;
(ii) give the Owner Trustee notice of any default by the Issuer
of which it has actual knowledge in the making of any payment required
to be made with respect to the Certificates;
(iii) at any time during the continuance of any such default, upon
the written request of the Owner Trustee forthwith pay to the Owner
Trustee on behalf of the Issuer all sums so held in trust by such
Certificate Paying Agent;
(iv) immediately resign as Certificate Paying Agent and forthwith
pay to the Owner Trustee on behalf of the Issuer all sums held by it in
trust for the payment of Certificates and the Residual Ownership
Interest if at any time it ceases to meet the standards required to be
met by the Certificate Paying Agent or the Residual Ownership Interest
Paying Agent at the time of its appointment;
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Certificates or the
holders of the Residual Ownership Interest of any applicable withholding
taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith; and
(vi) deliver to the Owner Trustee a copy of the report to
Certificateholders and holders of Residual Ownership Interest prepared
with respect to each Payment Date by the Master Servicer pursuant to
Section 4.01 of the Master Servicing Agreement.
Section 3.04. Existence. The Issuer will keep in full effect its
---------
existence, rights and franchises as a business trust under the laws of
the State of Delaware (unless it becomes, or any successor Issuer
hereunder is or becomes, organized under the laws of any other state
or of the United States of America, in which case the Issuer will keep in
full effect its existence, rights and franchises under the laws of such other
jurisdiction) and will obtain and preserve its qualification to do business
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Indenture, the Notes, the
Mortgage Loans and each other instrument or agreement included in the Trust
Estate.
Section 3.05. Payment of Principal and Interest; Defaulted Interest.
-----------------------------------------------------
(a) On each Payment Date from amounts on deposit in the Payment Account
after making (x) any deposit to the Funding Account pursuant to Section
8.02(b) and (y) any deposits to the Payment Account pursuant to Section
8.02(c)(ii) and Section 8.02(c)(i)(2), the Indenture Trustee, on behalf
of the Issuer shall pay to the Noteholders and the Certificate Paying
Agent, on behalf of the Issuer shall pay to the Certificateholders and
the Certificate Paying Agent, on behalf of the Issuer shall pay to the
holders of the Residual Ownership Interest, and the Indenture Trustee,
in its capacity as agent for the Issuer shall pay to other Persons,
the amounts to which they are entitled as set forth below:
(i) The sum of (x) to the Noteholders the sum of (a) one month's
interest at the Note Rate on the Security Balances of Notes immediately
prior to such Payment Date and (b) any previously accrued and unpaid
interest for prior Payment Dates and (y) to the Certificateholders, the
Certificate Distribution Amount for such Payment Date;
(ii) as principal on the Notes and the Certificates, the
applicable Security Percentage of the Principal Collection Distribution
Amount;
(iii) to the Noteholders and the Certificateholders, as the case
may be, as principal on the Notes and the Certificates, pro rata, based
on the Security Balances from the amount remaining on deposit in the
Payment Account, up to the applicable Security Percentage of Liquidation
Loss Amounts for the related Collection Period;
(iv) to the Noteholders and the Certificateholders, as the case
may be, as principal on the Notes and the Certificates, pro rata, based
on the Security Balances from the amount remaining on deposit in the
Payment Account, up to the applicable Security Percentage of Carryover
Loss Amounts;
((v) to the Credit Enhancer, in the amount of the premium for the
Credit Enhancement Instrument (and for any Additional Credit Enhancement
Instrument);
(vi) to the Credit Enhancer, to reimburse it for prior draws made
on the Credit Enhancement Instrument (and on any Additional Credit
Enhancement Instrument) (with interest thereon as provided in the
Insurance Agreement);)
(vii) to the Noteholders and the Certificateholders, as the case
may be, as principal on the Notes and the Certificates, pro rata, based
on the Security Balances from Security Interest Collections, up to the
Accelerated Principal Distribution Amount for such Payment Date (such
amount, if any, paid pursuant to this clause (vii) being referred to
herein as the "Accelerated Principal Payment Amount");
((viii) to the Credit Enhancer, any other amounts owed to the Credit
Enhancer pursuant to the Insurance Agreement;)
(ix) (Reserved);
(x) to reimburse the Administrator for expenditures made on
behalf of the Issuer with respect to the performance of its duties under
the Indenture; and
(xi) any remaining amounts to the holders of the Residual
Ownership Interest as described in Section 5.01 of the Trust Agreement;
provided, however, (in the event that on a Payment Date a Credit Enhancer
Default shall have occurred and be continuing then the priorities of
distributions described above will be adjusted such that payments of the
Certificate Distribution Amount and all other amounts to be paid in respect
of principal on the Certificates will not be paid until the full amount of
interest and principal in accordance with clauses (i)(x) and (ii) through
(iv) above that are due on the Notes on such Payment Date have been paid and
provided, further,) that on the Final Scheduled Payment Date or other final
Payment Date, the amount to be paid pursuant to clause (ii) above shall be
equal to the Security Balances of the Securities immediately prior to such
Payment Date.
The amounts paid to Noteholders shall be paid to each Class in
accordance with paragraph (b) below. Interest will accrue on the Notes
during an Interest Period on the basis of the actual number of days in such
Interest Period and a year assumed to consist of 360 days.
Any installment of interest or principal, if any, payable on any Note or
Certificate that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, if such Holder holds Notes or Certificates
other than the Designated Certificate of an aggregate initial Principal
Balance of at least $(___________) be paid to each Holder of record on the
preceding Record Date, by wire transfer to an account specified in writing by
such Holder reasonably satisfactory to the Indenture Trustee as of the
preceding Record Date or in all other cases or if no such instructions have
been delivered to the Indenture Trustee, by check to such Noteholder mailed
to such Holder's address as it appears in the Note Register the amount
required to be distributed to such Holder on such Payment Date pursuant to
such Holder's Securities; provided, however, that the Indenture Trustee shall
not pay to such Holders any amount required to be withheld from a payment to
such Holder by the Code.
(b) The principal of each Note shall be due and payable in full on the
Final Scheduled Payment Date for such Note as provided in the related form of
Note set forth in Exhibit A. All principal payments on each Class of Notes
shall be made to the Noteholders of such Class entitled thereto in accordance
with the Percentage Interests represented by such Notes. Upon notice to the
Indenture Trustee by the Issuer, the Indenture Trustee shall notify the
Person in whose name a Note is registered at the close of business on the
Record Date preceding the Final Scheduled Payment Date or other final Payment
Date. Such notice shall be mailed no later than five Business Days prior to
such Final Scheduled Payment Date or other final Payment Date and shall
specify that payment of the principal amount and any interest due with
respect to such Note at the Final Scheduled Payment Date or other final
Payment Date will be payable only upon presentation and surrender of such
Note and shall specify the place where such Note may be presented and
surrendered for such final payment.
Section 3.06. Protection of Trust Estate. (a) The Issuer will from
--------------------------
time to time execute and deliver all such supplements and amendments hereto
and all such financing statements, continuation statements, instruments of
further assurance and other instruments, and will take such other action
necessary or advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate and the rights
of the Indenture Trustee and the Noteholders in such Trust Estate
against the claims of all persons and parties.
(b) Except as otherwise provided in the Master Servicing Agreement or
this Indenture, the Indenture Trustee shall not remove any portion of the
Trust Estate that consists of money or is evidenced by an instrument,
certificate or other writing from the jurisdiction in which it was held at
the date of the most recent Opinion of Counsel delivered pursuant to Section
3.06 (or from the jurisdiction in which it was held as described in the
Opinion of Counsel delivered at the Closing Date pursuant to Section 3.07(a),
if no Opinion of Counsel has yet been delivered pursuant to Section 3.07(b)
unless the Trustee shall have first received an Opinion of Counsel to the
effect that the lien and security interest created by this Indenture with
respect to such property will continue to be maintained after giving effect
to such action or actions.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement
or other instrument required to be executed pursuant to this Section 3.06.
Section 3.07. Opinions as to Trust Estate. (a) On the Closing Date,
---------------------------
the Issuer shall furnish to the Indenture Trustee, the Owner Trustee and to
the Administrator an Opinion of Counsel either stating that, in the opinion of
such counsel, such action has been taken with respect to the delivery of the
Mortgage Notes, the recording of the Assignments of Mortgage, the recording
and filing of this Indenture, any indentures supplemental hereto, and any
other requisite documents, and with respect to the execution and filing of any
financing statements and continuation statements, as are necessary to perfect
and make effective the lien and security interest of this Indenture and
reciting the details of such action, or stating that, in the opinion of such
counsel, no such action is necessary to make such lien and security interest
effective.
(b) On or before December 31 in each calendar year, beginning in 199_,
the Issuer shall furnish to the Indenture Trustee and to the Administrator an
Opinion of Counsel at the expense of the Issuer either stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording of the Assignments of Mortgage, the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental hereto and any
other requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain
the lien and security interest created by this Indenture and reciting the
details of such action or stating that in the opinion of such counsel no such
action is necessary to maintain such lien and security interest. Such Opinion
of Counsel shall also describe the recording, filing, re-recording and refil-
ing of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements
and continuation statements that will, in the opinion of such counsel, be
required to maintain the lien and security interest of this Indenture until
December 31 in the following calendar year.
Section 3.08. (Reserved)
Section 3.09. Performance of Obligations; Master Servicing Agreement.
------------------------------------------------------
(a) The Issuer will punctually perform and observe all of its obligations and
agreements contained in this Indenture, the Basic Documents and in the
instruments and agreements included in the Trust Estate. Except as otherwise
expressly provided therein, the Issuer shall not waive, amend, modify,
supplement or terminate any Basic Document, including without limitation
the Master Servicing Agreement or any provision thereof without the consent
of the Indenture Trustee or the Holders of at least a majority of the Security
Balances of the Notes, the Master Servicer (and the Credit Enhancer).
Upon the taking of any such action with respect to any Basic Document the
Issuer shall give written notice thereof to the Rating Agencies.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such
duties by a Person identified to the Indenture Trustee in an Officer's
Certificate of the Issuer shall be deemed to be action taken by the Issuer.
Initially, the Issuer has contracted with the Administrator to assist the
Issuer in performing its duties under this Indenture.
(c) The Issuer will not take any action or permit any action to be
taken by others which would release any Person from any of such Person's
covenants or obligations under any of the documents relating to the Mortgage
Loans or under any instrument included in the Trust Estate, or which would
result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any of the
documents relating to the Mortgage Loans or any such instrument, except such
actions as the Master Servicer is expressly permitted to take in the Master
Servicing Agreement.
(d) If the Issuer shall have knowledge of the occurrence of an Event of
Servicing Termination, the Issuer shall promptly notify the Indenture Trustee
thereof, and shall specify in such notice the action, if any, the Issuer is
taking in respect of such Event of Servicing Termination. If such Event of
Servicing Termination arises from the failure of the Master Servicer to
perform any of its duties or obligations under the Master Servicing Agreement
with respect to the Mortgage Loans, the Issuer may remedy such failure,
provided that if such Event of Servicing Termination arises from the failure
by the Master Servicer to comply with requirements imposed upon it under
Section 3.04 of the Master Servicing Agreement with respect to hazard
insurance for the Mortgaged Properties securing the Mortgage Loans, the
Issuer shall promptly, as the case may be, pay such premiums or obtain
substitute insurance coverage meeting the requirements of said Section 3.04.
So long as any such Event of Servicing Termination shall be continuing, the
Indenture Trustee may exercise its remedies set forth in Section 7.01 of
the Master Servicing Agreement. Unless granted or permitted by (the Credit
Enhancer or) the Holders of Securities to the extent provided above, the
Issuer may not waive any such Event of Servicing Termination or terminate
the rights and powers of the Master Servicer under the Master Servicing
Agreement.
(e) Upon any termination of the Master Servicer's rights and powers
pursuant to Section 7.01 of the Master Servicing Agreement, all rights,
powers, duties and responsibilities of the Master Servicer with respect to
the Mortgage Loans shall vest in and be assumed by the Indenture Trustee, and
the Indenture Trustee shall be the successor in all respect to the Master
Servicer in its capacity as servicer with respect to the Mortgage
Loans under the Master Servicing Agreement. Upon any such termination, the
Indenture Trustee is hereby authorized, and the Indenture Trustee hereby
agrees, to mail a notice to each Mortgagor directing each such Mortgagor to
mail all payments in respect of the related Mortgage Loan to the Indenture
Trustee or its agent at the address specified in such notice. The Indenture
Trustee may resign as the Master Servicer by giving written notice of such
resignation to the Issuer (and the Credit Enhancer) and in such event will be
released from such duties and obligations, such release to be effective on
the date a new servicer enters into a servicing agreement with the Issuer as
provided below. Upon delivery of any such notice to the Issuer, the Issuer
shall obtain a new servicer, satisfactory in all respects to the Indenture
Trustee (and the Credit Enhancer), which shall enter into a servicing
agreement with the Issuer and the Indenture Trustee, (such agreement to be
not less favorable to the Credit Enhancer in its reasonable judgment, or the
Noteholders if a Credit Enhancer Default shall have occurred and be
continuing,) than the Master Servicing Agreement in any material respect.
If, within 30 days after the delivery of the notice referred to above, the
Issuer shall not have obtained such new servicer, the Indenture Trustee may
appoint, or may petition a court of competent jurisdiction to appoint, a
successor servicer (acceptable to the Credit Enhancer) to service the
Mortgage Loans. In connection with any such appointment, the Indenture
Trustee may make such arrangements for the compensation of such successor as
it and such successor shall agree, and the Issuer shall enter into an agree-
ment with such successor for the servicing of the Mortgage Loans, such
agreement to be substantially similar to the Master Servicing Agreement (or
otherwise acceptable to the Credit Enhancer); provided that any such
compensation of the successor servicer (unless otherwise agreed to by the
Credit Enhancer,) shall not be in excess of the Servicing Fee payable to the
Master Servicer under the Master Servicing Agreement. If the Indenture
Trustee shall succeed to the Master Servicer's duties as servicer of the
Mortgage Loans as provided herein, it shall do so in its individual capacity
and not in its capacity as Indenture Trustee.
(f) The Issuer shall at all times retain an Administrator ((approved by
the Credit Enhancer under the Administration Agreement)) and may enter into
contracts with other Persons for the performance of the Issuer's obligations
hereunder, and performance of such obligations by such Persons shall be
deemed to be performance of such obligations by the Issuer.
Section 3.10. Negative Covenants. So long as any Notes are
------------------
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture, sell,
transfer, exchange or otherwise dispose of the Trust Estate, unless
directed to do so by the Indenture Trustee;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations with respect to
the Notes under this Indenture except as may be expressly permitted
hereby, (B) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien of this Indenture) to
be created on or extend to or otherwise arise upon or burden the Trust
Estate or any part thereof or any interest therein or the proceeds
thereof or (C) permit the lien of this Indenture not to constitute a
valid first priority security interest in the Trust Estate.
Section 3.11. Annual Statement as to Compliance. The Issuer will
---------------------------------
deliver to the Indenture Trustee, within 120 days after the end of each
fiscal year of the Issuer (commencing with the fiscal year 199_), an
Officer's Certificate stating, as to the Authorized Officer signing
such Officer's Certificate, that:
(i) a review of the activities of the Issuer during such year
and of its performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in its compliance with any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
(Section 3.12. Recording of Assignments. The Issuer shall exercise its
------------------------
right under the Mortgage Loan Purchase Agreement with respect to the obligation
of the Seller to submit or cause to be submitted for recording all Assignments
of Mortgages on or prior to _________, 199_ with respect to the Initial Loans
and within (__) days following the related Deposit Date with respect to any
Additional Loans.)
Section 3.13. Representations and Warranties Concerning the Mortgage
------------------------------------------------------
Loans. The Issuer has pledged to the Indenture Trustee all of its rights
- -----
under the Mortgage Loan Purchase Agreement and the Indenture Trustee has the
benefit of the representations and warranties made by the Seller in Section
(_____) thereof, Section (____) thereof and Section (__) thereof concerning
the Mortgage Loans and the right to enforce any remedy against the Seller
provided in such Section (_____) or Section (_____) to the same extent as
though such representations and warranties were made directly to the Indenture
Trustee.
Section 3.14. Indenture Trustee's Review of Related Documents. (a)
-----------------------------------------------
The Indenture Trustee agrees, for the benefit of the holders of the Notes,
to review, or the related Custodian shall review, unless the Indenture
Trustee or such Custodian made such review prior to the Closing Date, on
or prior to ________, 199_ the Related Documents delivered to it on or prior
to the Closing Date and within 90 days of the related Deposit Date, the
Related Documents delivered to it in connection with any Additional Loan,
in each case in connection with the Grant of the Mortgage Loan listed on
the Schedule of Mortgage Loans as security for the Notes. Such review
shall be limited to a determination that all documents referred to in
the definition of the term Related Documents have been executed and are
appropriately endorsed in the manner called for in the Mortgage Loan Purchase
Agreement and that the Related Documents have been delivered with respect to
each such Mortgage Loan (other than the documents related to (i) any Mortgage
Loan so listed which has been subject to a Prepayment in full and termination
of related Mortgage Loan, the proceeds of which have been deposited in the
Collection Account in lieu of delivery of the applicable Related Documents,
(ii) any Mortgage Loan with respect to which the related Mortgaged Property
was foreclosed, repossessed or otherwise converted subsequent to the Cut-off
Date and prior to the Closing Date or with respect to which foreclosure
proceedings have been commenced and for which the related Related Documents
are required in connection with the prosecution of such foreclosure
proceedings and for which the Issuer has delivered a trust receipt called for
by Section 3.15(c) and (iii) any Mortgage Loan as to which the original
Assignment of Mortgage has been submitted for recording), that all such
documents have been executed, and that all such documents relate to the
Mortgage Loans listed on the Schedule of Mortgage Loans. In performing such
review, the Trustee may rely upon the purported genuineness and due execution
of any such document and on the purported genuineness of any signature
thereon.
(b) If any Related Document is defective in any material respect which
may materially and adversely affect the value of the related Mortgage Loan,
the interest of the Indenture Trustee or the Noteholders in such Mortgage
Loan, or if any document required to be delivered to the Indenture Trustee
has not been delivered, the Indenture Trustee or the related Custodian on
behalf of the Indenture Trustee shall notify the Issuer, the Seller, (the
Credit Enhancer) and the Master Servicer immediately after obtaining
knowledge thereof and the Indenture Trustee, as assignee of the Issuer's
rights under the Mortgage Loan Purchase Agreement, shall exercise its
remedies (if any) in respect of any such defect against the Seller as
provided in the Mortgage Loan Purchase Agreement.
Section 3.15. Trust Estate; Related Documents. (a) When required by
-------------------------------
the provisions of this Indenture, the Indenture Trustee shall execute
instruments to release property from the lien of this Indenture, or
convey the Indenture Trustee's interest in the same, in a manner and
under circumstances which are not inconsistent with the provisions
of this Indenture. No party relying upon an instrument executed by the
Indenture Trustee as provided in this Article III shall be bound to ascertain
the Indenture Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(b) In order to facilitate the servicing of the Mortgage Loans, the
Master Servicer is hereby authorized in the name and on behalf of the
Indenture Trustee and the Issuer, to execute assumption agreements,
substitution agreements, and instruments of satisfaction or cancellation or
of partial or full release or discharge, or any other document contemplated
by the Master Servicing Agreement and other comparable instruments with
respect to the Mortgage Loans and with respect to the Mortgaged Properties
subject to the Mortgages (and the Indenture Trustee and the Owner Trustee
shall promptly execute any such documents on request of the Master Servicer),
subject to the obligations of the Master Servicer under the Master Servicing
Agreement. If from time to time the Master Servicer shall deliver to the
Indenture Trustee or the related Custodian copies of any written assurance,
assumption agreement or substitution agreement or other similar agreement
pursuant to Section 3.05 of the Master Servicing Agreement, the Indenture
Trustee or the related Custodian shall check that each of such documents
purports to be an original executed copy (or a copy of the original executed
document if the original executed copy has been submitted for recording and
has not yet been returned) (and, if so, shall file such documents, and upon
receipt of the original executed copy from the applicable recording office or
receipt of a copy thereof certified by the applicable recording office shall
file such originals or certified copies with the Related Documents). If any
such documents submitted by the Master Servicer do not meet the above
qualifications, such documents shall promptly be returned by the Indenture
Trustee or the related Custodian to the Master Servicer, with a direction
to the Master Servicer to forward the correct documentation.
(c) Upon Issuer Request accompanied by an Officers' Certificate of the
Master Servicer pursuant to Section 3.07 of the Master Servicing Agreement to
the effect that a Mortgage Loan has been the subject of a final payment or a
prepayment in full and the related Mortgage Loan has been terminated or that
substantially all Liquidation Proceeds which have been determined by the
Master Servicer in its reasonable judgment to be finally recoverable have
been recovered, and upon deposit to the Collection Account of such final
monthly payment, prepayment in full together with accrued and unpaid interest
to the date of such payment with respect to such Mortgage Loan or, if
applicable, Liquidation Proceeds, the Indenture Trustee and the Issuer shall
promptly release the Related Documents to the Master Servicer upon the order
of the Issuer, along with such documents as the Master Servicer or the
Mortgagor may request as contemplated by the Master Servicing Agreement to
evidence satisfaction and discharge of such Mortgage Loan. If from time to
time and as appropriate for the servicing or foreclosure of any Mortgage
Loan, the Master Servicer requests the Indenture Trustee or the related
Custodian to release the Related Documents and delivers to the Indenture
Trustee or the related Custodian a trust receipt reasonably satisfactory to
the Indenture Trustee or the related Custodian and signed by a Responsible
Officer of the Master Servicer, the Issuer and the Indenture Trustee or the
related Custodian shall release the Related Documents to the Master Servicer.
If such Mortgage Loans shall be liquidated and the Indenture Trustee or the
related Custodian receives a certificate from the Master Servicer as provided
above, then, upon request of the Issuer, the Indenture Trustee or the related
Custodian shall release the trust receipt to the Master Servicer upon the
order of the Issuer.
(d) The Indenture Trustee shall, at such time as there are no Notes
Outstanding (and no amounts due to the Credit Enhancer), release all of the
Trust Estate to the Issuer (other than any cash held for the payment of the
Notes pursuant to Section 3.03 or 4.11), subject, however, to the rights of
the Indenture Trustee under Section 6.07.
Section 3.16. Amendments to Master Servicing Agreement. The Indenture
----------------------------------------
Trustee may enter into any amendment or supplement to the Master Servicing
Agreement only in accordance with Section 8.01 of the Master Servicing
Agreement. The Indenture Trustee may, in its discretion, decline to enter
into or consent to any such supplement or amendment if its own rights, duties
or immunities shall be adversely affected.
Section 3.17. Master Servicer as Agent and Bailee of Indenture Trustee.
--------------------------------------------------------
Solely for purposes of perfection under Section 9-305 of the Uniform Commercial
Code or other similar applicable law, rule or regulation of the state in which
such property is held by the Master Servicer, the Indenture Trustee hereby
acknowledges that the Master Servicer is acting as agent and bailee of the
Indenture Trustee in holding amounts on deposit in the Collection Account
pursuant to Section 3.02 of the Master Servicing Agreement, as well as its
agent and bailee in holding any Related Documents released to the Master
Servicer pursuant to Section 3.15(c), and any other items constituting a
part of the Trust Estate which from time to time come into the possession
of the Master Servicer. It is intended that, by the Master Servicer's
acceptance of such agency pursuant to Section 3.02 of the Master Servicing
Agreement, the Trustee, as a secured party, will be deemed to have
possession of such Related Documents, such moneys and such other items
for purposes of Section 9-305 of the Uniform Commercial Code of the
state in which such property is held by the Master Servicer.
Section 3.18. Investment Company Act. The Issuer shall not become an
----------------------
"investment company" or under the "control" of an "investment company" as
such terms are defined in the Investment Company Act of 1940, as amended
(or any successor or amendatory statute), and the rules and regulations
thereunder (taking into account not only the general definition of the
term "investment company" but also any available exceptions to such
general definition); provided, however, that the Issuer shall be in
compliance with this Section 3.18 if it shall have obtained an order
exempting it from regulation as an "investment company" so long as it is in
compliance with the conditions imposed in such order.
Section 3.19. Issuer May Consolidate, etc., Only on Certain Terms. (a)
---------------------------------------------------
The Issuer shall not consolidate or merge with or into any other Person,
unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any state or the
District of Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee, in
form reasonably satisfactory to the Indenture Trustee, the due and
punctual payment of the principal of and interest on all Notes and
Certificates and the performance or observance of every agreement
and covenant of this Indenture on the part of the Issuer
to be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing;
(iii) the Rating Agencies shall have notified the Issuer that such
transaction shall not cause the rating of the Notes or the Certificates
to be reduced, suspended or withdrawn or to be considered by either
Rating Agency to be below investment grade (without taking into account
the Credit Enhancement Instrument);
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which
is hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any state, (B) expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory to
the Indenture Trustee, the due and punctual payment of the principal of
and interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly agrees by
means of such supplemental indenture that all right, title and interest
so conveyed or transferred shall be subject and subordinate to the rights
of Holders of the Notes, (D) unless otherwise provided in such
supplemental indenture, expressly agrees to indemnify, defend and
hold harmless the Issuer against and from any loss, liability or
expense arising under or related to this Indenture and the Notes
and (E) expressly agrees by means of such supplemental indenture
that such Person (or if a group of Persons, then one specified Person)
shall make all filings with the Commission (and any other appropriate
Person) required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agencies shall have notified the Issuer that such
transaction shall not cause the rating of the Notes or the Certificates
to be reduced, suspended or withdrawn;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
Section 3.20. Successor or Transferee. (a) Upon any consolidation or
-----------------------
merger of the Issuer in accordance with Section 3.19(a), the Person formed
by or surviving such consolidation or merger (if other than the Issuer) shall
succeed to, and be substituted for, and may exercise every right and power of,
the Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.19(b), the Issuer will be released from
every covenant and agreement of this Indenture to be observed or performed
on the part of the Issuer with respect to the Notes immediately upon the
delivery of written notice to the Indenture Trustee that the Issuer is to
be so released.
Section 3.21. No Other Business. The Issuer shall not engage in any
-----------------
business other than financing, purchasing, owning and selling and managing
the Mortgage Loans in the manner contemplated by this Indenture and the
Basic Documents and all activities incidental thereto.
Section 3.22. No Borrowing. The Issuer shall not issue, incur, assume,
------------
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.
Section 3.23. Guarantees, Loans, Advances and Other Liabilities.
-------------------------------------------------
Except as contemplated by this Indenture, the Issuer shall not make any
loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment or
performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become contingently liable, directly or indirectly,
in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any
stock, obligations, assets or securities of, or any other interest in, or
make any capital contribution to, any other Person.
Section 3.24. Capital Expenditures. The Issuer shall not make any
--------------------
expenditure (by long-term or operating lease or otherwise) for capital
assets (either realty or personalty).
Section 3.25. (Reserved)
Section 3.26. Restricted Payments. The Issuer shall not, directly or
-------------------
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or
security in or of the Issuer, (ii) redeem, purchase, retire or otherwise
acquire for value any such ownership or equity interest or security or (iii)
set aside or otherwise segregate any amounts for any such purpose; provided,
however, that the Issuer may make, or cause to be made, (w) distributions to
the Owner Trustee and the Certificateholders as contemplated by, and to the
extent funds are available for such purpose under the Trust Agreement, (x)
payment to the Master Servicer pursuant to the terms of the Master Servicing
Agreement and (y) payments to the Indenture Trustee pursuant to Section
1(a)(ii) of the Administration Agreement and (z) make distributions to the
holders of the Residual Ownership Interest as contemplated by the Trust
Agreement. The Issuer will not, directly or indirectly, make payments to
or distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.
Section 3.27. Notice of Events of Default. The Issuer shall give the
---------------------------
Indenture Trustee, (the Credit Enhancer) and the Rating Agencies prompt
written notice of each Event of Default hereunder and under the Trust
Agreement.
Section 3.28. Further Instruments and Acts. Upon request of the
----------------------------
Indenture Trustee, the Issuer will execute and deliver such further
instruments and do such further acts as may be reasonably necessary
or proper to carry out more effectively the purpose of this Indenture.
Section 3.29. Statements to Noteholders. The Indenture Trustee and the
-------------------------
Certificate Registrar shall forward by mail to each Noteholder and
Certificateholder, respectively, the Statement delivered to it pursuant
to Section 4.01 of the Master Servicing Agreement.
Section 3.30. (Reserved) (Grant of the Additional Loans. (a) In con-
------------------------------
sideration of the delivery on each Deposit Date to or upon the order of the
Issuer of all or a portion of the amount in respect of Security Principal
Collections on deposit in the Funding Account, the Issuer shall, to the
extent of the availability thereof, on such Deposit Date during the Funding
Period Grant to the Indenture Trustee all of its right, title and interest
in the Additional Loans and simultaneously with the Grant of the Additional
Loans the Issuer will deliver the related Related Documents to the Indenture
Trustee or the related Custodian.
(b) The obligation of the Indenture Trustee to accept the Grant of the
Additional Loans and the other property and rights related thereto described
in paragraph (a) above is subject to the satisfaction of each of the
following conditions on or prior to each Deposit Date:
(i) the Indenture Trustee shall not have received written notice
from any Rating Agency (or the Credit Enhancer) to the effect that such
transfer of Additional Loans would adversely affect the then current
rating of the Notes or cause the rating assigned to the Securities to be
below investment grade (without taking into account the Credit
Enhancement Instrument);
(ii) the Indenture Trustee shall have received a revised Mortgage
Loan Schedule, listing the Additional Loans;
(iii) the Master Servicer shall confirm to the Indenture Trustee
that it has deposited in the Collection Account all Principal
Collections and Interest Collections in respect of such Additional Loans
on or after the related Deposit Date for the Additional Loans;
(iv) the Indenture Trustee shall have received a duly completed
and executed Transfer Certificate in the form of Exhibit 1 to the
Mortgage Loan Purchase Agreement;
(v) the Seller at its expense and the Issuer at its expense, as
appropriate, shall have provided the Rating Agencies (and the Credit
Enhancer) with an opinion of counsel relating to the sale of the
Additional Loans to the Issuer and the Grant of the Additional Loans to
the Indenture Trustee which opinion shall be in the form of Exhibit 2 to
the Mortgage Loan Purchase Agreement; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel confirming the
satisfaction of each condition precedent specified in this paragraph
(b).
(c) The obligation of the Indenture Trustee to accept the Grant of an
Additional Loan on the related Deposit Date is subject to each Additional
Loan and the Additional Loans in the aggregate, as the case may be,
satisfying the conditions set forth in the Mortgage Loan Purchase Agreement.)
(Section 3.31. Determination of Note Rate and Certificate Rate. On the
-----------------------------------------------
second LIBOR Business Day immediately preceding (i) the Closing Date in the
case of the first Interest Period and (ii) the first day of each succeeding
Interest Period, the Indenture Trustee shall determine LIBOR and the Note Rate
and the Certificate Rate for such Interest Period and shall inform the Issuer,
the Master Servicer and the Depositor at their respective facsimile numbers
given to the Indenture Trustee in writing thereof.)
(Section 3.32. Payments under the Credit Enhancement Instrument. (a)
------------------------------------------------
On any Payment Date, other than a Dissolution Payment Date, the Indenture
Trustee on behalf of the Noteholders, and in its capacity as Certificate
Paying Agent on behalf of the Certificateholders shall make a draw on the
Credit Enhancement Instrument in an amount if any equal to the sum of (x)
the amount by which the sum of (i) interest accrued at the Note Rate on the
Security Balance of the Notes plus (ii) the Certificate Distribution Amount
exceeds the amount on deposit in the Payment Account available to be
distributed therefor on such Payment Date and (y) the Guaranteed Principal
Payment Amount (the "Credit Enhancement Draw Amount").
(b) The Indenture Trustee shall submit, if a Credit Enhancement Draw
Amount is specified in any Statement to Holders prepared by the Master
Servicer pursuant to Section 4.01 of the Master Servicing Agreement, the
Notice for Payment (as defined in the Credit Enhancement Instrument) in the
amount of the Credit Enhancement Draw Amount to the Credit Enhancer no later
than 2:00 P.M., New York City time, on the second Business Day prior to the
applicable Payment Date. Upon receipt of such Credit Enhancement Draw Amount
in accordance with the terms of the Credit Enhancement Instrument, the
Indenture Trustee shall deposit such Credit Enhancement Draw Amount in the
Payment Account for distribution to Holders pursuant to Section 3.05.
In addition, a draw may be made under the Credit Enhancement Instrument
in respect of any Avoided Payment (as defined in and pursuant to the terms
and conditions of the Credit Enhancement Instrument) and the Indenture
Trustee shall submit a Notice for Payment with respect thereto together with
the other documents required to be delivered to the Credit Enhancer pursuant
to the Credit Enhancement Instrument in connection with a draw in respect of
any Avoided Payment.
(c) In the event that any Additional Credit Enhancement Instruments are
issued pursuant to Section 4.01 and Section 2.02(B) of the Insurance
Agreement, the Indenture Trustee shall be authorized to make draws thereon
subject to the terms and conditions therein.)
(Section 3.33. Replacement Credit Enhancement Instrument. In the event
-----------------------------------------
of a Credit Enhancer Default or if the claims paying ability rating of the
Credit Enhancer is downgraded and such downgrade results in a downgrading of
the then current rating of the Securities (in each case, a "Replacement Event"),
the Issuer, at its expense, in accordance with and upon satisfaction of the
conditions set forth in the Credit Enhancement Instrument, including, without
limitation, payment in full of all amounts owed to the Credit Enhancer, may,
but shall not be required to, substitute a new surety bond or surety bonds for
the existing Credit Enhancement Instrument or may arrange for any other form of
credit enhancement; provided, however, that in each case the Notes and the
ertificates shall be rated no lower than the rating assigned by each Rating
Agency to the Notes and the Certificates immediately prior to such Replacement
Event and the timing and mechanism for drawing on such new credit enhancement
shall be reasonably acceptable to the Indenture Trustee and provided further
that the premiums under the proposed credit enhancement shall not exceed such
premiums under the existing Credit Enhancement Instrument. It shall be a
condition to substitution of any new credit enhancement that there be
delivered to the Indenture Trustee (i) an Opinion of Counsel, acceptable in
form to the Indenture Trustee, from counsel to the provider of such new
credit enhancement with respect to the enforceability thereof and such other
matters as the Indenture Trustee may require and (ii) an Opinion of Counsel
to the effect that such substitution would not (a) adversely affect in any
material respect the tax status of the Notes and the Certificates or (b)
cause the Issuer to be subject to a tax at the entity level or to be
classified as a taxable mortgage pool within the meaning of Section 7701(i)
of the Code. Upon receipt of the items referred to above and payment of all
amounts owing to the Credit Enhancer and the taking of physical possession of
the new credit enhancement, the Indenture Trustee shall, within five Business
Days following receipt of such items and such taking of physical possession,
deliver the replaced Credit Enhancement Instrument to the Credit Enhancer.
In the event of any such replacement the Issuer shall give written notice
thereof to the Rating Agencies.)
ARTICLE IV
The Notes; Satisfaction and Discharge of Indenture
Section 4.01. The Notes. (a) The Notes shall be registered in the
---------
name of a nominee designated by the Depository. Beneficial Owners will
hold interests in the Notes through the book-entry facilities of the
Depository in minimum initial Principal Balances of $(________) and
integral multiples of $(_________) in excess thereof.
The Indenture Trustee may for all purposes (including the making of
payments due on the Notes) deal with the Depository as the authorized
representative of the Beneficial Owners with respect to the Notes for the
purposes of exercising the rights of Holders of Notes hereunder. Except as
provided in the next succeeding paragraph of this Section 4.01, the rights of
Beneficial Owners with respect to the Notes shall be limited to those
established by law and agreements between such Beneficial Owners and the
Depository and Depository Participants. Except as provided in Section 4.08,
Beneficial Owners shall not be entitled to definitive certificates for the
Notes as to which they are the Beneficial Owners. Requests and directions
from, and votes of, the Depository as Holder of the Notes shall not be deemed
inconsistent if they are made with respect to different Beneficial Owners.
The Indenture Trustee may establish a reasonable record date in connection
with solicitations of consents from or voting by Noteholders and give notice
to the Depository of such record date. Without the consent of the Issuer and
the Indenture Trustee, no Note may be transferred by the Depository except to
a successor Depository that agrees to hold such Note for the account of the
Beneficial Owners.
In the event the Depository Trust Company resigns or is removed as
Depository, the Indenture Trustee with the approval of the Issuer may appoint
a successor Depository. If no successor Depository has been appointed within
30 days of the effective date of the Depository's resignation or removal,
each Beneficial Owner shall be entitled to certificates representing the
Notes it beneficially owns in the manner prescribed in Section 4.08.
The Notes shall, on original issue, be executed on behalf of the Issuer
by the Owner Trustee, not in its individual capacity but solely as Owner
Trustee, authenticated by the Note Registrar and delivered by the Indenture
Trustee to or upon the order of the Issuer.
Section 4.02. Registration of and Limitations on Transfer and Exchange
--------------------------------------------------------
of Notes; Appointment of Certificate Registrar. The Note Registrar shall
- ----------------------------------------------
cause to be kept at its Corporate Trust Office a Note Register in which,
subject to such reasonable regulations as it may prescribe, the Note
Registrar shall provide for the registration of Notes and of transfers
and exchanges of Notes as herein provided.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Note at the Corporate Trust
Office, the Indenture Trustee shall execute and the Note Registrar shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes in authorized initial Security Balances
evidencing the same aggregate Percentage Interests.
Subject to the foregoing, at the option of the Noteholders, Notes may be
exchanged for other Notes of like tenor or, in each case in authorized
initial Principal Balances evidencing the same aggregate Percentage Interests
upon surrender of the Notes to be exchanged at the Corporate Trust Office of
the Note Registrar. Whenever any Notes are so surrendered for exchange, the
Indenture Trustee shall execute and the Note Registrar shall authenticate and
deliver the Notes which the Noteholder making the exchange is entitled to
receive. Each Note presented or surrendered for registration of transfer or
exchange shall (if so required by the Note Registrar) be duly endorsed by, or
be accompanied by a written instrument of transfer in form reasonably
satisfactory to the Note Registrar duly executed by, the Holder thereof or
his attorney duly authorized in writing. Notes delivered upon any such
transfer or exchange will evidence the same obligations, and will be entitled
to the same rights and privileges, as the Notes surrendered.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Note Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.
All Notes surrendered for registration of transfer and exchange shall be
cancelled by the Note Registrar and delivered to the Indenture Trustee for
subsequent destruction without liability on the part of either.
The Issuer hereby appoints (___________________) as Certificate
Registrar to keep at its Corporate Trust Office a Certificate Register
pursuant to Section 3.09 of the Trust Agreement in which, subject to such
reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of Residual Ownership Interests and of transfers
and exchanges thereof pursuant to Section 3.05 of the Trust
Agreement. (___________________) hereby accepts such appointment.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
------------------------------------------
mutilated Note is surrendered to the Indenture Trustee, or the Indenture
Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Indenture Trustee
such security or indemnity as may be required by it to hold the Issuer and
the Indenture Trustee harmless, then, in the absence of notice to the Issuer,
the Note Registrar or the Indenture Trustee that such Note has been acquired
by a bona fide purchaser, and provided that the requirements of Section 8-405
of the UCC are met, the Issuer shall execute, and upon its request the
Indenture Trustee shall authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Note, a replacement
Note of the same Class; provided, however, that if any such destroyed, lost
or stolen Note, but not a mutilated Note, shall have become or within seven
days shall be due and payable, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or payable
without surrender thereof. If, after the delivery of such replacement Note
or payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in lieu of
which such replacement Note was issued presents for payment such original
Note, the Issuer and the Indenture Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person to
whom such replacement Note was delivered or any assignee of such Person,
except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage,
cost or expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section 4.03, the
Issuer may require the payment by the Holder of such Note of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section 4.03 in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute
an original additional contractual obligation of the Issuer, whether or not
the mutilated, destroyed, lost or stolen Note shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Notes duly
issued hereunder.
The provisions of this Section 4.03 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 4.04. Persons Deemed Owners. Prior to due presentment for
---------------------
registration of transfer of any Note, the Issuer, the Indenture Trustee
and any agent of the Issuer or the Indenture Trustee may treat the
Person in whose name any Note is registered (as of the day of determination)
as the owner of such Note for the purpose of receiving payments of principal
of and interest, if any, on such Note and for all other purposes whatsoever,
whether or not such Note be overdue, and neither the Issuer, the Indenture
Trustee nor any agent of the Issuer or the Indenture Trustee shall be affected
by notice to the contrary.
Section 4.05. Cancellation. All Notes surrendered for payment,
------------
registration of transfer, exchange or redemption shall, if surrendered
to any Person other than the Indenture Trustee, be delivered to
the Indenture Trustee and shall be promptly cancelled by the Indenture
Trustee. The Issuer may at any time deliver to the Indenture Trustee for
cancellation any Notes previously authenticated and delivered hereunder which
the Issuer may have acquired in any manner whatsoever, and all Notes so
delivered shall be promptly cancelled by the Indenture Trustee. No Notes
shall be authenticated in lieu of or in exchange for any Notes cancelled as
provided in this Section 4.05, except as expressly permitted by this
Indenture. All cancelled Notes may be held or disposed of by the Indenture
Trustee in accordance with its standard retention or disposal policy as in
effect at the time unless the Issuer shall direct by an Issuer Request that
they be destroyed or returned to it; provided, that such Issuer Request is
timely and the Notes have not been previously disposed of by the Indenture
Trustee.
Section 4.06. Book-Entry Notes. The Notes, upon original issuance,
----------------
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial
Depository, by, or on behalf of, the Issuer. Such Notes shall initially
be registered on the Note Register in the name of Cede & Co., the nominee
of the initial Depository, and no Beneficial Owner will receive
a definitive Note representing such Beneficial Owner's interest in such Note,
except as provided in Section 4.08. Unless and until definitive,
fully registered Notes (the "Definitive Notes") have been issued to
Beneficial Owners pursuant to Section 4.08:
(i) the provisions of this Section 4.06 shall be in full force
and effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Depository for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and the
giving of instructions or directions hereunder) as the sole holder of
the Notes, and shall have no obligation to the Owners of Notes;
(iii) to the extent that the provisions of this Section 4.06
conflict with any other provisions of this Indenture, the provisions of
this Section 4.06 shall control;
(iv) the rights of Beneficial Owners shall be exercised only
through the Depository and shall be limited to those established by law
and agreements between such Owners of Notes and the Depository and/or
the Depository Participants pursuant to the Note Depository Agreement.
Unless and until Definitive Notes are issued pursuant to Section 4.08,
the initial Depository will make book-entry transfers among the
Depository Participants and receive and transmit payments of principal
of and interest on the Notes to such Depository Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Security Balances of the Notes,
the Depository shall be deemed to represent such percentage only to the
extent that it has received instructions to such effect from Beneficial
Owners and/or Depository Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
Notes and has delivered such instructions to the Indenture Trustee.
Section 4.07. Notices to Depository. Whenever a notice or other
---------------------
communication to the Note Holders is required under this Indenture,
unless and until Definitive Notes shall have been issued to Beneficial
Owners pursuant to Section 4.08, the Indenture Trustee shall give all
such notices and communications specified herein to be given to Holders
of the Notes to the Depository, and shall have no obligation to the
Beneficial Owners.
Section 4.08. Definitive Notes. If (i) the Administrator advises the
----------------
Indenture Trustee in writing that the Depository is no longer willing or
able to properly discharge its responsibilities with respect to the Notes
and the Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that
it elects to terminate the book-entry system through the Depository or
(iii) after the occurrence of an Event of Default, Owners of Notes
representing beneficial interests aggregating at least a majority of
the Security Balances of the Notes advise the Depository in writing that the
continuation of a book-entry system through the Depository is no longer in
the best interests of the Beneficial Owners, then the Depository shall notify
all Beneficial Owners and the Indenture Trustee of the occurrence of any such
event and of the availability of Definitive Notes to Beneficial Owners
requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Notes representing the Book-Entry Notes by the Depository,
accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Notes in accordance with
the instructions of the Depository. None of the Issuer, the Note Registrar
or the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying
on, such instructions. Upon the issuance of Definitive Notes, the Indenture
Trustee shall recognize the Holders of the Definitive Notes as Noteholders.
Section 4.09. Tax Treatment. The Issuer has entered into this
-------------
Indenture, and the Notes will be issued, with the intention that,
for federal, state and local income, single business and franchise tax
purposes, the Notes will qualify as indebtedness of the Issuer. The Issuer,
by entering into this Indenture, and each Noteholder, by its acceptance of
its Note (and each Beneficial Owner by its acceptance of an interest in the
applicable Book-Entry Note), agree to treat the Notes for federal, state and
local income, single business and franchise tax purposes as indebtedness of
the Issuer.
Section 4.10. Satisfaction and Discharge of Indenture. This Indenture
---------------------------------------
shall cease to be of further effect with respect to the Notes except as to
(i) rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders
to receive payments of principal thereof and interest thereon, (iv)
Sections 3.03, 3.04, 3.06, 3.10, 3.19, 3.21 and 3.22, (v) the rights,
obligations and immunities of the Indenture Trustee hereunder (including the
rights of the Indenture Trustee under Section 6.07 and the obligations of the
Indenture Trustee under Section 4.11) and (vi) the rights of Noteholders as
beneficiaries hereof with respect to the property so deposited with the
Indenture Trustee payable to all or any of them, and the Indenture Trustee,
on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 4.03 and (ii) Notes for whose
payment money has theretofore been deposited in trust or segregated and
held in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.03) have been
delivered to the Indenture Trustee for cancellation; or
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
a. have become due and payable, or
b. will become due and payable at the Final Scheduled
Payment Date within one year,
and the Issuer, in the case of a. or b. above, has irrevocably deposited
or caused to be irrevocably deposited with the Indenture Trustee cash or
direct obligations of or obligations guaranteed by the United States of
America (which will mature prior to the date such amounts are payable),
in trust for such purpose, in an amount sufficient to pay and discharge
the entire indebtedness on such Notes and Certificates then outstanding
not theretofore delivered to the Indenture Trustee for cancellation when
due on the Final Scheduled Payment Date;
(B) the Issuer has paid or caused to be paid all other sums
payable hereunder and under the Insurance Agreement by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee (and the
Credit Enhancer) an Officer's Certificate, an Opinion of Counsel and (if
required by the TIA or the Indenture Trustee) an Independent Certificate
from a firm of certified public accountants, each meeting the applicable
requirements of Section 11.01 and, subject to Section 11.01 each stating
that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with
and, if the Opinion of Counsel relates to a deposit made in connection
with Section 4.10(A)(2)b. above, such opinion shall further be to the
effect that such deposit will not have any material adverse tax
consequences to the Issuer, any Noteholders or any Certificateholders.
Section 4.11. Application of Trust Money. All moneys deposited with
--------------------------
the Indenture Trustee pursuant to Section 4.10 hereof shall be held in trust
and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent or
Certificate Paying Agent, as the Indenture Trustee may determine, to the
Holders of Securities, of all sums due and to become due thereon for principal
and interest; but such moneys need not be segregated from other funds except
to the extent required herein or required by law.
(Section 4.12. Subrogation and Cooperation. (a) The Issuer and the
---------------------------
Indenture Trustee acknowledge that (i) to the extent the Credit Enhancer
makes payments under the Credit Enhancement Instrument on account of
principal of or interest on the Notes or the Certificates, the Credit
Enhancer will be fully subrogated to the rights of such Holders to
receive such principal and interest from the Issuer, and (ii) the Credit
Enhancer shall be paid such principal and interest but only from the sources
and in the manner provided herein and in the Insurance Agreement for the
payment of such principal and interest.
The Indenture Trustee shall cooperate in all respects with any
reasonable request by the Credit Enhancer for action to preserve or enforce
the Credit Enhancer's rights or interest under this Indenture or the
Insurance Agreement without limiting the rights of the Noteholders as
otherwise set forth in the Indenture, including, without limitation, upon the
occurrence and continuance of a default under the Insurance Agreement, a
request to take any one or more of the following actions:
(i) institute Proceedings for the collection of all amounts then
payable on the Notes, or under this Indenture in respect to Notes and
all amounts payable under the Insurance Agreement enforce any judgment
obtained and collect from the Issuer moneys adjudged due;
(ii) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private Sales called and
conducted in any manner permitted by law;
(iii) file or record all Assignments that have not previously been
recorded;
(iv) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture; and
(v) exercise any remedies of a secured party under the Uniform
Commercial Code and take any other appropriate action to protect and
enforce the rights and remedies of the Credit Enhancer hereunder.)
Section 4.13. Repayment of Moneys Held by Paying Agent. In connection
----------------------------------------
with the satisfaction and discharge of this Indenture with respect to the
Notes, all moneys then held by any Administrator other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes
shall, upon demand of the Issuer, be paid to the Indenture Trustee to be
held and applied according to Section 3.05 and thereupon such Paying Agent
shall be released from all further liability with respect to such moneys.
ARTICLE V
Remedies
--------
Section 5.01. Events of Default. "Event of Default," wherever used
-----------------
herein, shall have the meaning provided in Appendix A(; provided, however,
that no Event of Default will occur under clause (i) or clause (ii) of
the definition of "Event of Default" if the Issuer fails to make payments
of principal of and interest on the Notes so long as the Credit
Enhancer makes payments sufficient therefore under the Credit Enhancement
Instrument).
The Issuer shall deliver to the Indenture Trustee (and the Credit
Enhancer), within five days after the occurrence of an Event of Default,
written notice in the form of an Officer's Certificate of any event which
with the giving of notice and the lapse of time would become an Event of
Default under clause (iii) of the definition of "Event of Default", its
status and what action the Issuer is taking or proposes to take with respect
thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If
--------------------------------------------------
an Event of Default should occur and be continuing, then and in every such
case the Indenture Trustee or the Holders of Notes representing not less
than a majority of the Security Balances of all Notes may declare the Notes
to be immediately due and payable, by a notice in writing to the Issuer
(and to the Indenture Trustee if given by Noteholders), and upon any such
declaration the unpaid principal amount of such Class of Notes, together
with accrued and unpaid interest thereon through the date of acceleration,
shall become immediately due and payable. (Unless the prior written
consent of the Credit Enhancer shall have been obtained by the Indenture
Trustee, the Payment Date upon which such accelerated payment is due and
payable shall not be a Payment Date under the Credit Enhancement Instrument
and the Indenture Trustee shall not be authorized under Section 3.32 to
make a draw therefor.)
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided,
the Holders of Notes representing a majority of the Security Balances of all
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee
a sum sufficient to pay:
(A) all payments of principal of and interest on the Notes
and all other amounts that would then be due hereunder or upon the
Notes if the Event of Default giving rise to such acceleration had
not occurred; and
(B) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses, disbursements
and advances of the Indenture Trustee and its agents and counsel;
and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Indenture Trustee. (a) The Issuer covenants that if (i) default is made
- -----------------
in the payment of any interest on any Note when the same becomes due and
payable, and such default continues for a period of five days, or (ii)
default is made in the payment of the principal of or any installment
of the principal of any Note when the same becomes due and payable,
the Issuer will, upon demand of the Indenture Trustee, pay to it, for
the benefit of the Holders of Notes (and of the Credit Enhancer), the
whole amount then due and payable on the Notes for principal and interest,
with interest upon the overdue principal, and in addition thereto such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements
and advances of the Indenture Trustee and its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an
express trust, subject to the provisions of Section 11.17 hereof may
institute a Proceeding for the collection of the sums so due and unpaid, and
may prosecute such Proceeding to judgment or final decree, and may enforce
the same against the Issuer or other obligor upon the Notes and collect in
the manner provided by law out of the property of the Issuer or other obligor
the Notes, wherever situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee subject to the provisions of Section 11.17 hereof may, as more
particularly provided in Section 5.04, in its discretion, proceed to protect
and enforce its rights and the rights of the Noteholders (and the Credit
Enhancer), by such appropriate Proceedings as the Indenture Trustee shall
deem most effective to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture
or in aid of the exercise of any power granted herein, or to enforce
any other proper remedy or legal or equitable right vested in the
Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest
in the Trust Estate, Proceedings under Title 11 of the United States Code or
any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorgani-
zation, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial Proceedings
relative to the Issuer or other obligor upon the Notes, or to the creditors
or property of the Issuer or such other obligor, the Indenture Trustee,
irrespective of whether the principal of any Notes shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective
of whether the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered, by intervention
in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee (including any claim
for reasonable compensation to the Indenture Trustee and each
predecessor Indenture Trustee, and their respective agents, attorneys
and counsel, and for reimbursement of all expenses and liabilities
incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee, except as a result of negligence or bad
faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Noteholders and of the Indenture
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Holders of Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture
Trustee shall consent to the making of payments directly to such Noteholders,
to pay to the Indenture Trustee such amounts as shall be sufficient to cover
reasonable compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and all other
expenses and liabilities incurred, and all advances made, by the Indenture
Trustee and each predecessor Indenture Trustee except as a result of
negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf
of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any Note-
holder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without
the possession of any of the Notes or the production thereof in any trial or
other Proceedings relative thereto, and any such action or proceedings
instituted by the Indenture Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Indenture
Trustee, each predecessor Indenture Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture
to which the Indenture Trustee shall be a party), the Indenture Trustee shall
be held to represent all the Holders of the Notes, and it shall not be
necessary to make any Noteholder a party to any such Proceedings.
Section 5.04. Remedies; Priorities. (a) If an Event of Default shall
--------------------
have occurred and be continuing, the Indenture Trustee subject to the
provisions of Section 11.17 hereof may do one or more of the following
(subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, and all amounts payable under the Insurance
Agreement, enforce any judgment obtained, and collect from the Issuer
and any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee, the Holders of the Notes (and the
Credit Enhancer); and
(iv) sell the Trust Estate or any portion thereof or rights or
interest therein, at one or more public or private sales called and
conducted in any manner permitted by law;
provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, other than a
default in the payment of any principal or interest on the Notes for thirty
(30) days or more, unless (A) the Holders of 100% of the Security Balances of
the Securities (and the Credit Enhancer), which consent will not be
unreasonably withheld consent thereto, (B) the proceeds of such sale or
liquidation distributable to Holders are sufficient to discharge in full all
amounts then due and unpaid upon the Securities for principal and interest
(and to reimburse the Credit Enhancer for any amounts drawn under the Credit
Enhancement Instrument and any other amounts due the Credit Enhancer under
the Insurance Agreement) or (C) the Indenture Trustee determines that the
Mortgage Loans will not continue to provide sufficient funds for the payment
of principal of and interest on either the Notes or the Certificates, as they
would have become due if the Notes had not been declared due and payable, and
the Indenture Trustee obtains the consent of (the Credit Enhancer, which
consent will not be unreasonably withheld, and of) the Holders of not less
than 66-2/3% of the Security Balances of the Securities. In determining such
sufficiency or insufficiency with respect to clause (B) and (C), the
Indenture Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as
to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose. Notwithstanding the foregoing, so long as an
Event of Servicer Termination has not occurred, any Sale of the Trust Estate
shall be made subject to the continued Servicing of the Mortgage Loans by the
Master Servicer as provided in the Master Servicing Agreement.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following
order:
FIRST: to the Indenture Trustee for amounts due under
Section 6.07;
SECOND: to each Class of Noteholders for amounts due and unpaid
on the related Class of Notes for interest and to each Noteholder
of such Class in each case, ratably, without preference or priority
of any kind, according to the amounts due and payable on such Class
of Notes for interest from amounts available in the Trust Estate
for such Noteholders;
THIRD: to Holders of each Class of Notes for amounts due and
unpaid on the related Class of Notes for principal, from amounts
available in the Trust Estate for such Noteholders, and to each
Noteholder of such Class in each case ratably, without preference
or priority of any kind, according to the amounts due and payable
on such Class of Notes for principal, until the Security Balances
of each Class of Notes is reduced to zero;
FOURTH: to the Issuer for amounts required to be distributed to
the Certificateholders in respect of interest and principal
pursuant to the Trust Agreement;
FIFTH: (Reserved) (To the payment of all amounts due and owing to
the Credit Enhancer under the Insurance Agreement);
SIXTH: to the Issuer for amounts due under Article VIII of the
Trust Agreement; and
SEVENTH: to the payment of the remainder, if any to the Issuer or
any other person legally entitled thereto.
The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 5.04. At least 15 days
before such record date, the Issuer shall mail to each Noteholder and the
Indenture Trustee a notice that states the record date, the payment date and
the amount to be paid.
Section 5.05. Optional Preservation of the Trust Estate. If the Notes
-----------------------------------------
have been declared to be due and payable under Section 5.02 following an
Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect
to maintain possession of the Trust Estate. It is the desire of the
parties hereto and the Noteholders that there be at all times sufficient
funds for the payment of principal of and interest on the Securities
and other obligations of the Issuer (including payment to the Credit
Enhancer), and the Indenture Trustee shall take such desire into account
when determining whether or not to maintain possession of the Trust
Estate. In determining whether to maintain possession of the Trust Estate,
the Indenture Trustee may, but need not, obtain and rely upon an opinion of
an Independent investment banking or accounting firm of national reputation
as to the feasibility of such proposed action and as to the sufficiency of
the Trust Estate for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall have
-------------------
any right to institute any Proceeding, judicial or otherwise, with respect
to this Indenture, or for the appointment of a receiver or trustee, or for
any other remedy hereunder, unless and subject to the provisions of
Section 11.17 hereof:
(i) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Security Balances of
the Notes have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its own
name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such
Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders
of a majority of the Security Balances of the Notes.
It is understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights
of any other Holders of Notes or to obtain or to seek to obtain priority
or preference over any other Holders or to enforce any right under
this Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of
Notes, each representing less than a majority of the Security Balances of the
Notes, the Indenture Trustee in its sole discretion may determine what
action, if any, shall be taken, notwithstanding any other provisions of this
Indenture.
Section 5.07. Unconditional Rights of Noteholders To Receive Principal
--------------------------------------------------------
and Interest. Notwithstanding any other provisions in this Indenture, the
- ------------
Holder of any Note shall have the right, which is absolute and unconditional,
to receive payment of the principal of and interest, if any, on such Note on
or after the respective due dates thereof expressed in such Note or in this
Indenture and to institute suit for the enforcement of any such payment,
and such right shall not be impaired without the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies. If the Indenture
----------------------------------
Trustee or any Noteholder has instituted any Proceeding to enforce any
right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason or has been determined
adversely to the Indenture Trustee or to such Noteholder, then and in every
such case the Issuer, the Indenture Trustee and the Noteholders shall,
subject to any determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights
and remedies of the Indenture Trustee and the Noteholders shall continue as
though no such Proceeding had been instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy
------------------------------
herein conferred upon or reserved to the Indenture Trustee or to the
Noteholders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder
or now or hereafter existing at law or in equity or otherwise. The assertion
or employment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other appropriate right
or remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission of
------------------------------
the Indenture Trustee or any Holder of any Note to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article V or by law to the
Indenture Trustee or to the Noteholders may be exercised from time to time,
and as often as may be deemed expedient, by the Indenture Trustee or by
the Noteholders, as the case may be.
Section 5.11. Control by Noteholders. The Holders of a majority of the
----------------------
Security Balances of Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or
power conferred on the Indenture Trustee; provided that:
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction
to the Indenture Trustee to sell or liquidate the Trust Estate shall be
by Holders of Notes representing not less than 100% of the Security
Balances of Notes;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Indenture Trustee elects to retain the Trust Estate
pursuant to such Section, then any direction to the Indenture Trustee by
Holders of Notes representing less than 100% of the Security Balances of
Notes to sell or liquidate the Trust Estate shall be of no force and
effect; and
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction.
Notwithstanding the rights of Noteholders set forth in this Section, subject
to Section 6.01, the Indenture Trustee need not take any action that it
determines might involve it in liability or might materially adversely affect
the rights of any Noteholders not consenting to such action.
Section 5.12. Waiver of Past Defaults. Prior to the declaration of
-----------------------
the acceleration of the maturity of the Notes as provided in Section 5.02,
the Holders of Notes of not less than a majority of the Security Balances
of the Notes may waive any past Event of Default and its consequences
except an Event of Default (a) with respect to payment of principal of
or interest on any of the Notes or (b) in respect of a covenant or
provision hereof which cannot be modified or amended without the consent
of the Holder of each Note (or (c) the waiver of which would materially and
adversely affect the interests of the Credit Enhancer or modify its obliga-
tion under the Credit Enhancement Instrument). In the case of any such
waiver, the Issuer, the Indenture Trustee and the Holders of the Notes
shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent
or other Event of Default or impair any right consequent thereto.
Upon any such waiver, any Event of Default arising therefrom shall be
deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event
of Default or impair any right consequent thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture
---------------------
agree, and each Holder of any Note by such Holder's acceptance thereof
shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Indenture Trustee for any
action taken, suffered or omitted by it as Indenture Trustee, the filing by
any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such
suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section 5.13
shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any
suit instituted by any Noteholder, or group of Noteholders, in each case
holding in the aggregate more than 10% of the Security Balances of the Notes
or (c) any suit instituted by any Noteholder for the enforcement of the
payment of principal of or interest on any Note on or after the respective
due dates expressed in such Note and in this Indenture.
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
--------------------------------
(to the extent that it may lawfully do so) that it will not at any time
insist upon, or plead or in any manner whatsoever, claim or take the
benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, that may affect the covenants
or the performance of this Indenture; and the Issuer (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Indenture Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
Section 5.15. Sale of Trust Estate. (a) The power to effect any sale
--------------------
or other disposition (a "Sale") of any portion of the Trust Estate
pursuant to Section 5.04 is expressly subject to the provisions of
Section 5.05 and this Section 5.15. The power to effect any such
Sale shall not be exhausted by any one or more Sales as to any portion
of the Trust Estate remaining unsold, but shall continue unimpaired
until the entire Trust Estate shall have been sold or all amounts
payable on the Notes and under this Indenture and under the Insurance
Agreement shall have been paid. The Indenture Trustee may from time to time
postpone any public Sale by public announcement made at the time and place of
such Sale. The Indenture Trustee hereby expressly waives its right to any
amount fixed by law as compensation for any Sale.
(b) The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless
(1) the Holders of all Securities and the Credit Enhancer consent
to or direct the Indenture Trustee to make, such Sale, or
(2) the proceeds of such Sale would be not less than the entire
amount which would be payable to the Noteholders under the Notes,
Certificateholders under the Certificates (and the Credit Enhancer in respect
of amounts drawn under the Credit Enhancement Instrument and any other
amounts due the Credit Enhancer under the Insurance Agreement), in full
payment thereof in accordance with Section 5.02, on the Payment Date next
succeeding the date of such Sale, or
(3) The Indenture Trustee determines, in its sole discretion, that
the conditions for retention of the Trust Estate set forth in Section 5.05
cannot be satisfied (in making any such determination, the Indenture Trustee
may rely upon an opinion of an Independent investment banking firm obtained
and delivered as provided in Section 5.05, (and the Credit Enhancer consents
to such Sale, which consent will not be unreasonably withheld) and the
Holders representing at least 66-2/3% of the Security Balances of the
Securities consent to such Sale.
The purchase by the Indenture Trustee of all or any portion of the Trust
Estate at a private Sale shall not be deemed a Sale or other disposition
thereof for purposes of this Section 5.15(b).
(c) Unless the Holders (and the Credit Enhancer) have otherwise
consented or directed the Indenture Trustee, at any public Sale of all or any
portion of the Trust Estate at which a minimum bid equal to or greater than
the amount described in paragraph (2) of subsection (b) of this Section 5.15
has not been established by the Indenture Trustee and no Person bids an
amount equal to or greater than such amount, the Indenture Trustee shall bid
an amount at least $1.00 more than the highest other bid.
(d) In connection with a Sale of all or any portion of the Trust Estate
(1) any Holder or Holders of Notes may bid for and (with the
consent of the Credit Enhancer) purchase the property offered for sale, and
upon compliance with the terms of sale may hold, retain and possess and
dispose of such property, without further accountability, and may, in paying
the purchase money therefor, deliver any Notes or claims for interest thereon
in lieu of cash up to the amount which shall, upon distribution of the net
proceeds of such sale, be payable thereon, and such Notes, in case the
amounts so payable thereon shall be less than the amount due thereon, shall
be returned to the Holders thereof after being appropriately stamped to show
such partial payment;
(2) the Indenture Trustee may bid for and acquire the property
offered for Sale in connection with any Sale thereof, and, subject to any
requirements of, and to the extent permitted by, applicable law in connection
therewith, may purchase all or any portion of the Trust Estate in a private
sale, and, in lieu of paying cash therefor, may make settlement for the
purchase price by crediting the gross Sale price against the sum of (A) the
amount which would be distributable to the Holders of the Notes and Holders
of Certificates (and amounts owing to the Credit Enhancer) as a result of
such Sale in accordance with Section 5.04(b) on the Payment Date next
succeeding the date of such Sale and (B) the expenses of the Sale and of any
Proceedings in connection therewith which are reimbursable to it, without
being required to produce the Notes in order to complete any such Sale or in
order for the net Sale price to be credited against such Notes, and any
property so acquired by the Indenture Trustee shall be held and dealt with by
it in accordance with the provisions of this Indenture;
(3) the Indenture Trustee shall execute and deliver an appropriate
instrument of conveyance transferring its interest in any portion of the
Trust Estate in connection with a Sale thereof;
(4) the Indenture Trustee is hereby irrevocably appointed the
agent and attorney-in-fact of the Issuer to transfer and convey its interest
in any portion of the Trust Estate in connection with a Sale thereof, and to
take all action necessary to effect such Sale; and
(5) no purchaser or transferee at such a Sale shall be bound to
ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent or see to the application of any moneys.
Section 5.16. Action on Notes. The Indenture Trustee's right to seek
---------------
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights
or remedies of the Indenture Trustee or the Noteholders shall be impaired by
the recovery of any judgment by the Indenture Trustee against the Issuer or by
the levy of any execution under such judgment upon any portion of the Trust
Estate or upon any of the assets of the Issuer. Any money or property
collected by the Indenture Trustee shall be applied in accordance with
Section 5.04(b).
Section 5.17. Performance and Enforcement of Certain Obligations.
--------------------------------------------------
(a) Promptly following a request from the Indenture Trustee to do so and
at the Administrator's expense, the Issuer shall take all such lawful
action as the Indenture Trustee may request to compel or secure the
performance and observance by the Seller and the Master Servicer,
as applicable, of each of their obligations to the Issuer under or in
connection with the Mortgage Loan Purchase Agreement and the Master Servicing
Agreement, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the
Mortgage Loan Purchase Agreement and the Master Servicing Agreement to the
extent and in the manner directed by the Indenture Trustee, including the
transmission of notices of default on the part of the Seller or the Master
Servicer thereunder and the institution of legal or administrative actions or
proceedings to compel or secure performance by the Seller or the Master
Servicer of each of their obligations under the Mortgage Loan Purchase
Agreement and the Master Servicing Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee (subject to the rights of the Credit Enhancer under the
Master Servicing Agreement) may, and at the direction (which direction shall
be in writing or by telephone (confirmed in writing promptly thereafter)) of
the Holders of 66-2/3% of the Security Balances of the Notes shall, exercise
all rights, remedies, powers, privileges and claims of the Issuer against the
Seller or the Master Servicer under or in connection with the Mortgage Loan
Purchase Agreement and the Master Servicing Agreement, including the right or
power to take any action to compel or secure performance or observance by the
Seller or the Master Servicer, as the case may be, of each of their
obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Mortgage Loan
Purchase Agreement and the Master Servicing Agreement, as the case may be,
and any right of the Issuer to take such action shall not be suspended.
ARTICLE VI
The Indenture Trustee
---------------------
Section 6.01. Duties of Indenture Trustee. (a) If an Event of Default
---------------------------
has occurred and is continuing, the Indenture Trustee shall exercise the
rights and powers vested in it by this Indenture and use the same degree
of care and skill in their exercise as a prudent person would exercise
or use under the circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is proved
that the Indenture Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it (A) pursuant to Section 5.11 (or (B) from the
Credit Enhancer, which it is entitled to give under any of the Basic
Documents).
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section 6.01.
(e) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
(f) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture.
(g) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of
the TIA.
Section 6.02. Rights of Indenture Trustee. (a) The Indenture Trustee
---------------------------
may rely on any document believed by it to be genuine and to have been signed
or presented by the proper person. The Indenture Trustee need not investigate
any fact or matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee
shall not be responsible for any misconduct or negligence on the part of, or
for the supervision of, any such agent, attorney, custodian or nominee
appointed with due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within
its rights or powers; provided, however, that the Indenture Trustee's conduct
does not constitute willful misconduct, (______) negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relat
ing to this Indenture and the Notes shall be full and complete authorization
and protection from liability in respect to any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture
--------------------------------------
Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee.
Any Administrator, Note Registrar, co-registrar or co-paying agent
may do the same with like rights. However, the Indenture Trustee must comply
with Sections 6.11 and 6.12.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
------------------------------
shall not be responsible for and makes no representation as to the validity
or adequacy of this Indenture or the Notes, it shall not be accountable for
the Issuer's use of the proceeds from the Notes, and it shall not be
responsible for any statement of the Issuer in the Indenture or in any
document issued in connection with the sale of the Notes or in the Notes
other than the Indenture Trustee's certificate of authentication.
Section 6.05. Notice of Event of Default. If an Event of Default
--------------------------
occurs and is continuing and if it is known to a Responsible Officer of
the Indenture Trustee, (the Indenture Trustee shall give notice thereof
to the Credit Enhancer.) The Indenture Trustee shall mail to each
Noteholder notice of the Event of Default within 90 days after it occurs.
Except in the case of an Event of Default in payment of principal of
or interest on any Note, the Indenture Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
---------------------------------------
Trustee shall deliver to each Noteholder such information as may be required
to enable such holder to prepare its federal and state income tax returns.
In addition, upon the Issuer's written request, the Indenture Trustee shall
promptly furnish information reasonably requested by the Issuer that is
reasonably available to the Indenture Trustee to enable the Issuer to
perform its federal and state income tax reporting obligations.
Section 6.07. Compensation and Indemnity. The Issuer shall or shall
--------------------------
cause the Administrator to pay to the Indenture Trustee on each Payment
Date reasonable compensation for its services. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a trustee
of an express trust. The Issuer shall or shall cause the Administrator
to reimburse the Indenture Trustee for all reasonable out-of-pocket
expenses incurred or made by it, including costs of collection, in
addition to the compensation for its services. Such expenses shall
include the reasonable compensation and expenses, disbursements and
advances of the Indenture Trustee's agents, counsel, accountants and
experts. The Issuer shall or shall cause the Administrator to indemnify
the Indenture Trustee against any and all loss, liability or expense
(including attorneys' fees) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder.
The Indenture Trustee shall notify the Issuer and the Administrator promptly
of any claim for which it may seek indemnity. Failure by the Indenture
Trustee to so notify the Issuer and the Administrator shall not relieve the
Issuer or the Administrator of its obligations hereunder. The Issuer shall
or shall cause the Administrator to defend any such claim, and the Indenture
Trustee may have separate counsel and the Issuer shall or shall cause the
Administrator to pay the fees and expenses of such counsel. Neither the
Issuer nor the Administrator need reimburse any expense or indemnify against
any loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section 6.07 shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses after the occurrence of an Event of Default
specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. No resignation or
--------------------------------
removal of the Indenture Trustee and no appointment of a successor
Indenture Trustee shall become effective until the acceptance of
appointment by the successor Indenture Trustee pursuant to this Section 6.08.
The Indenture Trustee may resign at any time by so notifying the Issuer (and
the Credit Enhancer). The Holders of a majority of Security Balances of the
Notes may remove the Indenture Trustee by so notifying the Indenture Trustee
(and the Credit Enhancer) and may appoint a successor Indenture Trustee. The
Issuer shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or insolvent;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon
the resignation or removal of the retiring Indenture Trustee shall become
effective, and the successor Indenture Trustee shall have all the rights,
powers and duties of the Indenture Trustee under this Indenture. The succes-
sor Indenture Trustee shall mail a notice of its succession to Noteholders.
The retiring Indenture Trustee shall promptly transfer all property held by
it as Indenture Trustee to the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Holders of a majority of Security
Balances of the Notes may petition any court of competent jurisdiction for
the appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal
of the Indenture Trustee and the appointment of a successor Indenture
Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under
Section 6.07 shall continue for the benefit of the retiring Indenture
Trustee.
Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
-------------------------------------
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture
Trustee; provided, that such corporation or banking association
shall be otherwise qualified and eligible under Section 6.11. The Indenture
Trustee shall provide the Rating Agencies prior written notice of any such
transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Notes so authenticated; and in case at that time any of the Notes shall not
have been authenticated, any successor to the Indenture Trustee may authen-
ticate such Notes either in the name of any predecessor hereunder or in the
name of the successor to the Indenture Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Indenture Trustee
shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture
---------------------------------------------------------
Trustee. (a) Notwithstanding any other provisions of this Indenture, at
- -------
any time, for the purpose of meeting any legal requirement of any jurisdiction
in which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Trust Estate, or any part hereof, and, subject
to the other provisions of this Section, such powers, duties, obligations,
rights and trusts as the Indenture Trustee may consider necessary or desirable.
No co-trustee or separate trustee hereunder shall be required to meet the
terms of eligibility as a successor trustee under Section 6.11 and no notice
to Noteholders of the appointment of any co-trustee or separate trustee shall
be required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed the Indenture Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust Estate or
any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article VI. 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 Indenture Trustee or separately, as may be provided therein, subject to
all the provisions of this Indenture, specifically including every provision
of this Indenture relating to the conduct of, affecting the liability of, or
affording protection to, the Indenture Trustee. Every such instrument shall
be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture 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 Indenture Trustee, to the extent permitted by
law, without the appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture Trustee
-----------------------------
shall at all times satisfy the requirements of TIA Section 310(a). The
Indenture Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition and it or its parent shall have a long-term debt rating of
(____) or better by (______). The Indenture Trustee shall comply
with TIA Section 310(b), including the optional provision permitted by the
second sentence of TIA Section 310(b)(9); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture
or indentures under which other securities of the Issuer are outstanding
if the requirements for such exclusion set forth in TIA Section 310(b)(1)
are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
------------------------------------------------
Indenture Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). An Indenture Trustee
who has resigned or been removed shall be subject to TIA Section 311(a)
to the extent indicated.
Section 6.13. Representation and Warranty. The Indenture Trustee
---------------------------
represents and warrants to the Issuer, for the benefit of the Noteholders,
that this Indenture has been executed and delivered by one of its
Responsible Officers who is duly authorized to execute and deliver
such document in such capacity on its behalf.
Section 6.14. Directions to Indenture Trustee. The Indenture Trustee
-------------------------------
is hereby directed:
(a) to accept assignment of the Mortgage Loans and hold the assets of
the Trust in trust for the Noteholders;
(b) to issue, execute and deliver the Notes substantially in the form
prescribed by Exhibit A in accordance with the terms of this Indenture; and
(c) to take all other actions as shall be required to be taken by the
terms of this Indenture.
Section 6.15. No Consent to Certain Acts of Depositor. The Indenture
---------------------------------------
Trustee shall not consent to any action proposed to be taken by the
Depositor pursuant to Article (_______________) of the Depositor's
Certificate of Incorporation.
ARTICLE VII
Noteholders' Lists and Reports
------------------------------
Section 7.01. Issuer To Furnish Indenture Trustee Names and Addresses
-------------------------------------------------------
of Noteholders. The Issuer will furnish or cause to be furnished to the
- --------------
Indenture Trustee (a) not more than five days after each Record Date, a
list, in such form as the Indenture Trustee may reasonably require, of
the names and addresses of the Holders of Notes as of such Record Date,
(b) at such other times as the Indenture Trustee (and the Credit Enhancer)
may request in writing, within 30 days after receipt by the Issuer of any
such request, a list of similar form and content as of a date not more
than 10 days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no such list
shall be required to be furnished.
Section 7.02. Preservation of Information; Communications to
----------------------------------------------
Noteholders. (a) The Indenture Trustee shall preserve, in as current
- -----------
a form as is reasonably practicable, the names and addresses of the Holders
of Notes contained in the most recent list furnished to the Indenture
Trustee as provided in Section 7.01 and the names and addresses of Holders of
Notes received by the Indenture Trustee in its capacity as Note Registrar.
The Indenture Trustee may destroy any list furnished to it as provided in
such Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under
the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
-----------------
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may
from time to time by rules and regulations prescribe) that the Issuer
may be required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act;
(ii) file with the Indenture Trustee, and the Commission in
accordance with rules and regulations prescribed from time to time by
the Commission such additional information, documents and reports with
respect to compliance by
the Issuer with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to clauses (i) and (ii) of
this Section 7.03(a) and by rules and regulations prescribed from time
to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA
----------------------------
Section 313(a), within 60 days after each January 1 beginning with
___________, 199_, the Indenture Trustee shall mail to each Noteholder
as required by TIA Section 313(c) (and to the Credit Enhancer) a
brief report dated as of such date that complies with TIA Section 313(a).
The Indenture Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange,
if any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
Accounts, Disbursements and Releases
------------------------------------
Section 8.01. Collection of Money. Except as otherwise expressly
-------------------
provided herein, the Indenture Trustee may demand payment or delivery
of, and shall receive and collect, directly and without intervention
or assistance of any fiscal agent or other intermediary, all money
and other property payable to or receivable by the Indenture Trustee
pursuant to this Indenture. The Indenture Trustee shall apply all such money
received by it as provided in this Indenture. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any
payment or performance under any agreement or instrument that is part of the
Trust Estate, the Indenture Trustee may take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate Proceedings. Any such action shall be without
prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
Section 8.02. Trust Accounts. (a) On or prior to the Closing Date,
--------------
the Issuer shall cause the Indenture Trustee to establish and maintain,
in the name of the Indenture Trustee, for the benefit of the Noteholders
and the Certificateholders (and the Credit Enhancer), the Payment Account
as provided in Section 3.01 of this Indenture.
(b) All moneys deposited from time to time in the Payment Account
pursuant to the Master Servicing Agreement and all deposits therein pursuant
to this Indenture are for the benefit of the Noteholders, the
Certificateholders and the holders of the Residual Ownership Interest and all
investments made with such moneys including all income or other gain from
such investments are for the benefit of the Master Servicer as provided by
the Master Servicing Agreement.
On each Payment Date during the Funding Period the Indenture Trustee
shall withdraw Net Principal Collections from the Payment Account and deposit
Net Principal Collections to the Funding Account.
On each Payment Date, the Indenture Trustee shall distribute all amounts
on deposit in the Payment Account (after giving effect to the withdrawal
referred to in the preceding paragraph) to Noteholders in respect of the
Notes and in its capacity as Certificate Paying Agent to Certificateholders
in the order of priority set forth in Section 3.05 (except as otherwise
provided in Section 5.04(b).
The Master Servicer may direct the Indenture Trustee to invest any funds
in the Payment Account in Eligible Investments maturing no later than the
Business Day preceding each Payment Date and shall not be sold or disposed of
prior to the maturity. Unless otherwise instructed by the Master Servicer,
the Indenture Trustee shall invest all funds in the Payment Account in its
(__________) Short Term Investment Fund so long as it is an Eligible
Investment.
((c) On or before the Closing Date the Issuer shall open, at the
Corporate Trust Office, an account which shall be the "Funding Account". The
Master Servicer may direct the Indenture Trustee to invest any funds in the
Funding Account in Eligible Investments maturing no later than the Business
Day preceding each Payment Date and shall not be sold or disposed of prior to
the maturity. (Unless otherwise instructed by the Master Servicer, the
Indenture Trustee shall invest all funds in the Payment Account in its
_________________________ Fund so long as it is an Eligible Investment.)
During the Funding Period, any amounts received by the Indenture Trustee in
respect of Net Principal Collections for deposit in the Funding Account,
together with any Eligible Investments in which such moneys are or will be
invested or reinvested during the term of the Notes, shall be held by the
Indenture Trustee in the Funding Account as part of the Trust Estate, subject
to disbursement and withdrawal as herein provided.
(i) Amounts on deposit in the Funding Account in respect of Net
Principal Collections may be withdrawn on each Deposit Date and (1) paid
to the Issuer in payment for Additional Loans by the deposit of such
amount to the Collection Account and (2) at the end of the Funding
Period any amounts remaining in the Funding Account after the withdrawal
called for by clause (1) shall be deposited in the Payment Account to be
included in the payment of principal on the Payment Date that is the
last day of the Funding Period.
(ii) Amounts on deposit in the Funding Account in respect of
investment earnings shall be withdrawn on each Payment Date and
deposited in the Payment Account and included in the amounts paid to
Noteholders and Certificateholders.
(d) (i) Any investment in the institution with which the Funding
Account is maintained may mature on such Payment Date and (ii) any other
investment may mature on such Payment Date if the Indenture Trustee shall
advance funds on such Payment Date to the Funding Account in the amount
payable on such investment on such
Payment Date, pending receipt thereof to the extent necessary to make
distributions on the Notes and the Certificates) and shall not be sold or
disposed of prior to maturity.)
Section 8.03. Opinion of Counsel. The Indenture Trustee shall receive
------------------
at least seven days notice when requested by the Issuer to take any action
pursuant to Section 8.05(a), accompanied by copies of any instruments to be
executed, and the Indenture Trustee shall also require, as a condition to
such action, an Opinion of Counsel, in form and substance satisfactory to
the Indenture Trustee, stating the legal effect of any such action,
outlining the steps required to complete the same, and concluding that
all conditions precedent to the taking of such action have been complied
with and such action will not materially and adversely impair the
security for the Notes or the rights of the Noteholders in contravention
of the provisions of this Indenture; provided, however, that such Opinion of
Counsel shall not be required to express an opinion as to the fair value of
the Trust Estate. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any
such action.
Section 8.04. Termination Upon Distribution to Noteholders. This
--------------------------------------------
Indenture and the respective obligations and responsibilities of the
Issuer and the Indenture Trustee created hereby shall terminate upon
the distribution to Noteholders, Certificateholders, holders of the
Residual Ownership Interest and the Indenture Trustee of all amounts
required to be distributed pursuant to Article III; provided, however, that
in no event shall the trust created hereby continue beyond the expiration of
21 years from the death of the 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.
Section 8.05. Release of Trust Estate. (a) Subject to the payment of
-----------------------
its fees and expenses, the Indenture Trustee may, and when required by the
provisions of this Indenture shall, execute instruments to release property
from the lien of this Indenture, or convey the Indenture Trustee's interest
in the same, in a manner and under circumstances that are not inconsistent
with the provisions of this Indenture. No party relying upon an instrument
executed by the Indenture Trustee as provided in Article IV hereunder shall
be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent, or see to the application of any
moneys.
(b) The Indenture Trustee shall, at such time as (i) there are no Notes
Outstanding, (ii) all sums due the Indenture Trustee pursuant to this
Indenture have been paid, (and (iii) all sums due the Credit Enhancer
have been paid,) release any remaining portion of the Trust Estate that
secured the Notes from the lien of this Indenture. The Indenture Trustee
shall release property from the lien of this Indenture pursuant to this
Section 8.05 only upon receipt of an request from the Issuer accompanied
by an Officers' Certificate, an Opinion of Counsel, and (if required by
the TIA) Independent Certificates in accordance with TIA Section
314(c) and 314(d)(1) meeting the applicable requirements as described
herein(, and a letter from the President or any Vice President or any
Secretary of the Credit Enhancer, if any, stating that the Credit Enhancer
has no objection to such request from the Issuer).
Section 8.06. Surrender of Notes Upon Final Payment. By acceptance of
-------------------------------------
any Note, the Holder thereof agrees to surrender such Note to the Indenture
Trustee promptly, prior to such Noteholder's receipt of the final payment
thereon.
ARTICLE IX
Supplemental Indentures
-----------------------
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
((a) Without the consent of the Holders of any Notes but with (the
consent of the Credit Enhancer and) prior notice to the Rating Agencies
(and the Credit Enhancer), the Issuer and the Indenture Trustee,
when authorized by an Issuer Request, at any time and from time to
time, may enter into one or more indentures supplemental hereto (which shall
conform to the provisions of the Trust Indenture Act as in force at the date
of the execution thereof), in form satisfactory to the Indenture Trustee, for
any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required
to be subjected to the lien of this Indenture, or to subject to the lien
of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental indenture;
provided, that such action shall not adversely affect the interests of
the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as shall
be necessary to facilitate the administration of the trusts hereunder by
more than one trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA;
provided, however, that no such indenture supplements shall be entered into
unless the Indenture Trustee shall have received an Opinion of Counsel that
entering into such indenture supplement will not have any material adverse
tax consequences to the Noteholders.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.)
(b) (The Issuer and the Indenture Trustee, when authorized by an Issuer
Request, may, also without the consent of any of the Holders of the Notes but
with (the consent of the Credit Enhancer and) prior notice to the Rating
Agencies (and the Credit Enhancer), enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing
in any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided that such action shall not, as evidenced by an Opinion of
Counsel, (i) adversely affect in any material respect the interests of any
Noteholder or (ii) cause the Issuer to be subject to an entity level tax or
be classified as a taxable mortgage pool within the meaning of Section
7701(i) of the Code; provided further that no such Opinion of Counsel shall
be required with respect to clause (i) in the preceding proviso if the Person
requesting the supplemental indenture obtains prior written confirmation from
each Rating Agency that such supplemental indenture shall not result in the
downgrading or withdrawal of any rating assigned to the Notes; it being
understood and agreed that any such confirmation in and of itself will not
represent a determination as to the materiality of any such supplemental
indenture and will represent a determination only as to the credit issues
affecting the related rating(s).
Section 9.02. Supplemental Indentures With Consent of Noteholders.
---------------------------------------------------
(The Issuer and the Indenture Trustee, when authorized by an Issuer Request,
also may, with prior notice to the Rating Agencies and, (with the written
consent of the Credit Enhancer and) with the consent of the Holders of not
less than a majority of the Security Balances of each Class of Notes, by
Act of such Holders delivered to the Issuer and the Indenture Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of
the Holders of the Notes under this Indenture; provided, however, that no
such supplemental indenture shall, without the consent of the Holder of
each Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof or
the interest rate thereon, change the provisions of this Indenture
relating to the application of collections on, or the proceeds of the
sale of, the Trust Estate to payment of principal of or interest on the
Notes, or change any place of payment where, or the coin or currency in
which, any Note or the interest thereon is payable, or impair the right
to institute suit for the enforcement of the provisions of this
Indenture requiring the application of funds available therefor, as
provided in Article V, to the payment of any such amount due on the
Notes on or after the respective due dates thereof;
(ii) reduce the percentage of the Security Balances of the Notes,
the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding" or modify or alter the exception in
the definition of the term "Holder";
(iv) reduce the percentage of the Security Balances of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section 9.02 except to increase
any percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Note affected thereby;
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including
the calculation of any of the individual components of such calculation);
or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the lien of this Indenture on any property at any time subject
hereto or deprive the Holder of any Note of the security provided by the
lien of this Indenture; and provided, further, that such action shall
not, as evidenced by an Opinion of Counsel, cause the Issuer to be
subject to an entity level tax or be classified as a taxable mortgage
pool within the meaning of Section 7701(i) of the Code.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The
Indenture Trustee shall not be liable for any such determination made in good
faith.
It shall not be necessary for any Act of Noteholders under this Section
9.02 to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section 9.02, the Indenture
Trustee shall mail to the Holders of the Notes to which such amendment or
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture
Trustee to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.)
Section 9.03. Execution of Supplemental Indentures. In executing, or
------------------------------------
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to
receive, and subject to Sections 6.01 and 6.02, shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution
of such supplemental indenture is authorized or permitted by this Indenture.
The Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee's own rights,
duties, liabilities or immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indenture. Upon the execution of
--------------------------------
any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and shall be deemed to be modified and amended in
accordance therewith with respect to the Notes affected thereby, and
the respective rights, limitations of rights, obligations, duties,
liabilities and immunities under this Indenture of the Indenture Trustee,
the Issuer and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every amendment of
-----------------------------------
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act
as then in effect so long as this Indenture shall then be qualified under
the Trust Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
---------------------------------------------
authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX may, and if required by
the Indenture Trustee shall, bear a notation in form approved by the
Indenture Trustee as to any matter provided for in such supplemental
indenture. If the Issuer or the Indenture Trustee shall so determine, new
Notes so modified as to conform, in the opinion of the Indenture Trustee and
the Issuer, to any such supplemental indenture may be prepared and executed
by the Issuer and authenticated and delivered by the Indenture Trustee in
exchange for Outstanding Notes.
ARTICLE X
(Reserved)
ARTICLE XI
Miscellaneous
-------------
Section 11.01. Compliance Certificates and Opinions, etc. (a) Upon
------------------------------------------
any application or request by the Issuer to the Indenture Trustee to take
any action under any provision of this Indenture, the Issuer shall furnish
to the Indenture Trustee (and to the Credit Enhancer) (i) an Officer's
Certificate stating that all conditions precedent, if any, provided for
in this Indenture relating to the proposed action have been complied with,
(ii) an Opinion of Counsel stating that in the opinion of such counsel
all such conditions precedent, if any, have been complied with and (iii)
(if required by the TIA) an Independent Certificate from a firm of certified
public accountants meeting the applicable requirements of this Section 11.01,
except that, in the case of any such application or request as to which the
furnishing of such documents is specifically required by anyprovision of
this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture shall include:
(1) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with; and
(5) if the signer of such Certificate or Opinion is required to be
Independent, the Statement required by the definition of the term
"Independent".
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture,
the Issuer shall, in addition to any obligation imposed in Section 11.01(a)
or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the
Issuer of the Collateral or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (i) above, the Issuer
shall also deliver to the Indenture Trustee an Independent Certificate as to
the same matters, if the fair value to the Issuer of the securities to be so
deposited and of all other such securities made the basis of any such with-
drawal or release since the commencement of the then-current fiscal year of
the Issuer, as set forth in the certificates delivered pursuant to clause (i)
above and this clause (ii), is 10% or more of the Security Balances of the
Notes, but such a certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the Issuer as set forth
in the related Officer's Certificate is less than $25,000 or less than one
percent of the Security Balances of the Notes.
(iii) Whenever any property or securities are to be released from
the lien of this Indenture, the Issuer shall also furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (iii) above, the Issuer
shall also furnish to the Indenture Trustee an Independent Certificate as to
the same matters if the fair value of the property or securities and of all
other property, other than property as contemplated by clause (v) below or
securities released from the lien of this Indenture since the commencement of
the then-current calendar year, as set forth in the certificates required by
clause (iii) above and this clause (iv), equals 10% or more of the Security
Balances of the Notes, but such certificate need not be furnished in the case
of any release of property or securities if the fair value thereof as set forth
in the related Officer's Certificate is less than $25,000 or less than one
percent of the then Security Balances of the Notes.
(v) Notwithstanding any provision of this Indenture, the Issuer
may, without compliance with the requirements of the other provisions of this
Section 11.01, (A) collect, sell or otherwise dispose of Mortgage Loans and
Mortgaged Properties as and to the extent permitted or required by the Basic
Documents or (B) make cash payments out of the Payment Account as and to the
extent permitted or required by the Basic Documents, so long as the Issuer
shall deliver to the Indenture Trustee every six months, commencing
__________, 199_, an Officer's Certificate of the Issuer stating that all the
dispositions of Collateral described in clauses (A) or (B) above that
occurred during the preceding six calendar months were in the ordinary course
of the Issuer's business and that the proceeds thereof were applied in
accordance with the Basic Documents.
Section 11.02. Form of Documents Delivered to Indenture Trustee. In
------------------------------------------------
any case where several matters are required to be certified by, or covered
by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one
such Person, or that they be so certified or covered by only one document,
but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or
several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized
Officer or Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an officer
or officers of the Seller, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Seller, the Issuer or the Administrator, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions
or other instruments under this Indenture, they may, but need not,
be consolidated and form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application, or as evidence of the Issuer's compliance with any term hereof,
it is intended that the truth and accuracy, at the time of the granting of
such application or at the effective date of such certificate or report (as
the case may be), of the facts and opinions stated in such document shall in
such case be conditions precedent to the right of the Issuer to have such
application granted or to the sufficiency of such certificate or report. The
foregoing shall not, however, be construed to affect the Indenture Trustee's
right to rely upon the truth and accuracy of any statement or opinion
contained in any such document as provided in Article VI.
Section 11.03. Acts of Noteholders. (a) Any request, demand,
-------------------
authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by Noteholders may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Noteholders in person or by agents duly appointed in
writing; and except as herein otherwise expressly provided such action shall
become effective when such instrument or instruments are delivered to the
Indenture Trustee, and, where it is hereby expressly required, to the Issuer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided
in this Section 11.03.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of
every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by
the Indenture Trustee or the Issuer in reliance thereon, whether or not
notation of such action is made upon such Note.
Section 11.04. Notices, etc., to Indenture Trustee, Issuer, (Credit
----------------------------------------------------
Enhancer) and Rating Agencies. Any request, demand, authorization,
- -----------------------------
direction, notice, consent, waiver or Act of Noteholders or other
documents provided or permitted by this Indenture shall be in writing
and if such request, demand, authorization, direction, notice, consent,
waiver or act of Noteholders is to be made upon, given or furnished to or
filed with:
(i) the Indenture Trustee by any Noteholder or by the Issuer
shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at the
Corporate Trust Office, or
(ii) the Issuer by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed
first-class, postage prepaid to the Issuer addressed to: (IndyMac) Home
Equity Loan Trust 199_-__ in care of (_____________), (______________)
Attention of (_________) with a copy to the Administrator at
(______________), Attention: (_____________), or at any other address
previously furnished in writing to the Indenture Trustee by the Issuer
or the Administrator. The Issuer shall promptly transmit any notice
received by it from the Noteholders to the Indenture Trustee, or
((iii) the Credit Enhancer by the Issuer, the Indenture Trustee or
by any Noteholders shall be sufficient for every purpose hereunder to in
writing and mailed, first-class postage pre-paid, or personally
delivered or telecopied to: (_______________), Attention:
(______________), Telephone: (_____________), Telecopier:
(___________).)
Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Owner Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to ((i) in
the case of DCR, at the following address: (________________);) (and) ((ii)
in the case of Fitch Investors Service, L.P., at the following address:
(______________);) (and) ((iii) in the case of Moody's, at the following
address: Moody's Investors Service, ABS Monitoring Department, 99 Church
Street, New York, New York 10007); (and) ((iv) in the case of Standard &
Poor's, at the following address: Standard & Poor's Corporation, 26 Broadway
(15th Floor), New York, New York 10004, Attention of Asset Backed
Surveillance Department;) or as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
------------------------------
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if
in writing and mailed, first-class, postage prepaid to each Noteholder
affected by such event, at his address as it appears on the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such notice nor any
defect in any notice so mailed to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed
to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result
of a strike, work stoppage or similar activity, it shall be impractical to
mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed
to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure
to give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute an Event of
Default.
Section 11.06. Alternate Payment and Notice Provisions.
---------------------------------------
Notwithstanding any provision of this Indenture or any of the
Notes to the contrary, the Issuer may enter into any agreement with any
Holder of a Note providing for a method of payment, or notice by the
Indenture Trustee or any Administrator to such Holder, that is different from
the methods provided for in this Indenture for such payments or notices. The
Issuer will furnish to the Indenture Trustee a copy of each such agreement
and the Indenture Trustee will cause payments to be made and notices to be
given in accordance with such agreements.
Section 11.07. Conflict with Trust Indenture Act. If any provision
---------------------------------
hereof limits, qualifies or conflicts with another provision hereof
that is required to be included in this Indenture by any of the
provisions of the Trust Indenture Act, such required provision shall
control.
The provisions of TIA SectionSection 310 through 317 that impose duties
on any person (including the provisions automatically deemed included herein
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
Section 11.08. Effect of Headings. The Article and Section headings
------------------
herein are for convenience only and shall not affect the construction hereof.
Section 11.09. Successors and Assigns. All covenants and agreements in
----------------------
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture
Trustee in this Indenture shall bind its successors, co-trustees and agents.
Section 11.10. Separability. In case any provision in this Indenture
------------
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 11.11. Benefits of Indenture. (The Credit Enhancer and its
---------------------
successors and assigns shall be a third-party beneficiary to the
provisions of this Indenture.) Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Noteholders, and any
other party secured hereunder, and any other Person with an ownership
interest in any part of the Trust Estate, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 11.12. Legal Holidays. In any case where the date on which any
--------------
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such
date, but may be made on the next succeeding Business Day with the same
force and effect as if made on the date on which nominally due, and no
interest shall accrue for the period from and after any such nominal date.
Section 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO
ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.14. Counterparts. This Indenture may be executed in any
------------
number of counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together constitute but one
and the same instrument.
Section 11.15. Recording of Indenture. If this Indenture is subject to
----------------------
recording in any appropriate public recording offices, such recording is to
be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Indenture Trustee or any other
counsel reasonably acceptable to the Indenture Trustee) to the effect
that such recording is necessary either for the protection of the
Noteholders or any other Person secured hereunder or for the enforcement
of any right or remedy granted to the Indenture Trustee under this Indenture.
Section 11.16. Issuer Obligation. No recourse may be taken, directly
-----------------
or indirectly, with respect to the obligations of the Issuer, the Owner
Trustee or the Indenture Trustee on the Notes or under this Indenture
or any certificate or other writing delivered in connection herewith
or therewith, against (i) the Indenture Trustee or the Owner Trustee
in its individual capacity, (ii) any owner of a beneficial interest in the
Issuer or (iii) any partner, owner, beneficiary, agent, officer, director,
employee or agent of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as
any such Person may have expressly agreed (it being understood that the
Indenture Trustee and the Owner Trustee have no such obligations in their
individual capacity) and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any
unpaid consideration for stock, unpaid capital contribution or failure to pay
any installment or call owing to such entity. For all purposes of this
Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the
benefits of, the terms and provisions of Article VI, VII and VIII of the
Trust Agreement.
Section 11.17. No Petition. The Indenture Trustee, by entering into
-----------
this Indenture, and each Noteholder, by accepting a Note, hereby covenant
and agree that they will not at any time institute against the Depositor
or the Issuer, or join in any institution against the Depositor or the
Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, this Indenture or any of the Basic Documents.
Section 11.18. Inspection. The Issuer agrees that, on reasonable prior
----------
notice, it will permit any representative of the Indenture Trustee, during
the Issuer's normal business hours, to examine all the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with
the Issuer's officers, employees, and Independent certified public accountants,
all at such reasonable times and as cause its representatives to hold in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Indenture Trustee may reasonably
determine that such disclosure is consistent with its obligations hereunder.
Section 11.19. Authority of the Administrator. Each of the parties to
------------------------------
this Indenture acknowledges that the Issuer and the Owner Trustee have each
appointed the Administrator to act as its agent to perform the duties and
obligations of the Issuer hereunder. Unless otherwise instructed by the
Issuer or the Owner Trustee, copies of all notices, requests, demands and
other documents to be delivered to the Issuer or the Owner Trustee pursuant
to the terms hereof shall be delivered to the Administrator. Unless otherwise
instructed by the Issuer or the Owner Trustee, all notices, requests, demands
and other documents to be executed or delivered, and any action to be taken,
by the Issuer or the Owner Trustee pursuant to the terms hereof may be
executed, delivered and/or taken by the Administrator pursuant to the
Administration Agreement.
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee 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.
(IndyMac) Home Equity Loan Trust 199_-_
as Issuer
By: (______________________),
not in its individual capacity
but solely as Owner Trustee
By:___________________________________
Name:
Title:
(________________________________),
as Indenture Trustee, as Certificate Paying Agent
and as Certificate Registrar
By:____________________________________
Name:
Title:
(___________________)
hereby accepts the appoint-
ment as Certificate Paying
Agent pursuant to Section
3.03 hereof and as Certifi-
cate Registrar pursuant to
Section 4.02 hereof.
______________________________
By:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared
______________, to me known, who being by me duly sworn, did depose and
say, that he resides at _________________, __________________ _____, that
he is the of the Owner Trustee, one of the
------------------
corporations described in and which executed the above instrument; that he
knows the seal of said corporation; that the seal affixed to said instru-
ment is such corporate seal; that it was so affixed by order of the Board
of Directors of said corporation; and that he signed his name thereto by
like order.
___________________________
Notary Public
(NOTARIAL SEAL)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared
, to me known, who being by me duly sworn, did depose and
- --------------
say, that he resides at
-----------------------------------------------,
that he is the ______________ of ________________, as Indenture Trustee,
one of the corporations described in and which executed the above instru-
ment; that he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by order
of the Board of Directors of said corporation; and that he signed his name
thereto by like order.
___________________________
Notary Public
(NOTARIAL SEAL)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of __________, before me personally appeared
, to me known, who being by me duly sworn, did depose and
- --------------
say, that he resides at
------------------------------------------------
that he is an ________________ of _______________, as Indenture Trustee,
one of the corporations described in and which executed the above instru-
ment; that he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by order
of the Board of Directors of said corporation; and that he signed his name
thereto by like order.
___________________________
Notary Public
(NOTARIAL SEAL)
APPENDIX A
----------
DEFINITIONS
Accelerated Principal Distribution Amount: With respect to any
-----------------------------------------
Payment Date, the lesser of (x) the amount remaining in the Payment
Account after the application of funds on deposit therein in accordance
with clauses (i) through (vi) of Section 3.05 of the Indenture and (y) the
amount required to reach the Required Overcollateralization Amount.
Accelerated Principal Payment Amount: As defined in Section 3.05
------------------------------------
of the Indenture.
Additional Balance: With respect to any Mortgage Loan, any future
------------------
Draw made by the related Mortgagor pursuant to the related Loan Agreement
after the Cut-off Date in the case of an Initial Loan, or after the
Deposit Date in the case of an Additional Loan; provided, however,
-------- -------
that if an Amortization Event occurs, then any Draw after such Amorti-
zation Event shall not be acquired by the Issuer and shall not be an Addi-
tional Balance.
Additional Loans: All home equity line of credit loans sold by
----------------
the Seller to the Issuer after the Closing Date pursuant to Section 2 of
the Loan Purchase Agreement.
Administration Agreement: The Administration Agreement dated as
------------------------
of ___________, 199_ among the Issuer, the Indenture Trustee and (______
________), as Administrator, as it may be amended from time to time.
Administrator: (______________), as administrator under the
-------------
Administration Agreement or any successor Administrator appointed pursuant
to the terms of the Administration Agreement.
Affiliate: With respect to any Person, any other Person con
---------
trolling, controlled by or under common control with such Person. For
purposes of this definition, "control" means the power to direct the
management and policies of a Person, directly or indirectly, whether
through ownership of voting securities, by contract or otherwise and
"controlling" and "controlled" shall have meanings correlative to the
foregoing.
Aggregate Security Balance: With respect to any Payment Date, the
--------------------------
aggregate of the Principal Balances of all Securities as of such date.
(Amortization Event: Any one of the following events:
------------------
(a) the failure on the part of the Seller (i) to make any
payment or deposit required to be made under the Loan Purchase
Agreement within four Business Days after the date such payment or
deposit is required to be made; or (ii) to observe or perform in any
material respect any other covenants or agreements of the Seller set
forth in the Loan Purchase Agreement, which failure continues unreme-
died for a period of 60 days after written notice and such failure
materially and adversely affects the interests of the Securityholders
or the Credit Enhancer;
(b) if any representation or warranty made by the Seller in the
Loan Purchase Agreement proves to have been incorrect in any material
respect when made and which continues to be incorrect in any material
respect for a period of 45 days with respect to any representation or
warranty of the Seller made in Section (___) of the Loan Purchase
Agreement or 90 days with respect to any representation or warranty
made in Section (___) or (___) of the Loan Purchase Agreement after
written notice and as a result of which the interests of the Securit-
yholders or the Credit Enhancer are materially and adversely affected;
provided, however, that an Amortization Event shall not be deemed to
-------- -------
occur if the Seller has repurchased or substituted for the related
Mortgage Loans or all Mortgage Loans, if applicable, during such
period (or within an additional 60 days with the consent of the
Indenture Trustee and the Credit Enhancer) in accordance with the
provisions of the Indenture;
(c) The entry against the Seller of a decree or order by a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership, read-
justment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days;
(d) The Seller shall voluntarily go into liquidation, consent
to the appointment of a conservator, receiver, liquidator or similar
person in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings of or relating to the Seller
or of or relating to all or substantially all of its property, or a
decree or order of a court, agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator,
receiver, liquidator or similar person in any insolvency, readjust-
ment 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 Seller and such decree or
order shall have remained in force undischarged, unbonded or
unstayed for a period of 60 days; or the Seller shall admit in
writing its inability to pay its debts generally as they become
due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its
obligations;
(e) the Issuer becomes subject to regulation by the Commission
as an investment company within the meaning of the Investment Company
Act of 1940, as amended;
(f) an Event of Servicing Termination relating to the Master
Servicer occurs under the Master Servicing Agreement and the Master
Servicer is the Seller; or
(g) the aggregate of all draws under the Credit Enhancement
Instrument exceed 1% of the sum of (i) the Cut-off Date Asset Balance
and (ii) the amount by which the Pool Balance as of the latest date
that the Additional Loans have been transferred to the Issuer exceeds
the Cut-off Date Asset Balance.
In the case of any event described in (a), (b) or (f), an Amortiza-
tion Event will be deemed to have occurred only if, after any applicable
grace period described in such clauses, either the Indenture Trustee, the
Credit Enhancer or, with the consent of the Credit Enhancer, Securityhold-
ers evidencing not less than 51% of the Security Balance of each of the
Notes and the Certificates by written notice to the Seller, the Master
Servicer, the Depositor and the Owner Trustee (and to the Indenture
Trustee, if given by the Credit Enhancer or the Securityholders) may
declare that an Amortization Event has occurred as of the date of such
notice. In the case of any event described in clauses (c), (d), (e), (g)
or (h), an Amortization Event will be deemed to have occurred without any
notice or other action on the part of the Indenture Trustee, the Security-
holders or the Credit Enhancer immediately upon the occurrence of such
event; provided, that any Amortization event described in clauses (g)
--------
or (h) may be waived and deemed of no effect with the written consent
of the Credit Enhancer and each Rating Agency, subject to the
satisfaction of any conditions to such waiver.)
Appraised Value: With respect to any Mortgaged Property, either
---------------
(x) the value set forth in an appraisal of such Mortgaged Property made to
establish compliance with the underwriting criteria then in effect in
connection with the later of the application for the Mortgage Loan secured
by such Mortgaged Property or any subsequent increase or decrease in the
related Credit Limit or to reduce or eliminate the amount of any primary
insurance, or (y) if the sales price of the Mortgaged Property is
considered in accordance with the underwriting criteria applicable to the
Mortgage Loan, the lesser of (i) the appraised value referred to in (x)
above and (ii) the sales price of such Mortgaged Property.
Asset Balance: With respect to any Mortgage Loan, other than a
-------------
Liquidated Mortgage Loan, and as of any day, the related Cut-off Date
Asset Balance or Deposit Date Asset Balance, (plus (i) any Additional
----
Balances in respect of such Mortgage Loan conveyed to the Issuer,) minus
-----
((ii)) all collections credited as principal in respect of any
such Mortgage Loan in accordance with the related Loan Agreement (except
for any such collections that are allocable to the Excluded Amount) and
applied in reduction of the Asset Balance thereof. For purposes of this
definition, a Liquidated Mortgage Loan shall be deemed to have an Asset
Balance equal to the Asset Balance of the related Mortgage Loan immedi-
ately prior to the final recovery of all related Liquidation Proceeds and
an Asset Balance of zero thereafter.
Assignment of Mortgage: With respect to any Mortgage, an assign
----------------------
ment, notice of transfer or equivalent instrument, in recordable form,
sufficient under the laws of the jurisdiction in which the related
Mortgaged Property is located to reflect the conveyance of the Mortgage,
which assignment, notice of transfer or equivalent instrument may be in
the form of one or more blanket assignments covering the Mortgage Loans
secured by Mortgaged Properties located in the same jurisdiction.
Authorized Newspaper: A newspaper of general circulation in the
--------------------
Borough of Manhattan, The City of New York, printed in the English
language and customarily published on each Business Day, whether or not
published on Saturdays, Sundays or holidays.
Authorized Officer: With respect to the Issuer, any officer of
------------------
the Owner Trustee who is authorized to act for the Owner Trustee in
matters relating to the Issuer and who is identified on the list of
Authorized Officers delivered by the Owner Trustee to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented
from time to time thereafter) and, so long as the Administration Agreement
is in effect, any Responsible Officer of the Administrator who is autho-
rized to act for the Administrator in matters relating to the Issuer and
to be acted upon by the Administrator pursuant to the Administration
Agreement and who is identified on the list of Authorized Officers
delivered by the Administrator to the Indenture Trustee on the Closing
Date (as such list may be modified or supplemented from time to time
thereafter).
Basic Documents: The Trust Agreement, the Certificate of Trust,
---------------
the Indenture, the Loan Purchase Agreement, the Insurance Agreement, the
Administration Agreement, the Master Servicing Agreement, the Custodial
Agreement and the other documents and certificates delivered in connection
with any of the above.
Beneficial Owner: With respect to any Note, the Person who is the
----------------
beneficial owner of such Note as reflected on the books of the Depository
or on the books of a Person maintaining an account with such Depository
(directly as a Depository Participant or indirectly through a Depository
Participant, in accordance with the rules of such Depository).
Billing Cycle: With respect to any Mortgage Loan and Due Date,
-------------
the calendar month preceding such Due Date.
Book-Entry Notes: Beneficial interests in the Notes, ownership
----------------
and transfers of which shall be made through book entries by the Deposito-
ry as described in Section 4.06 of the Indenture.
Business Day: Any day other than (i) a Saturday or a Sunday or
------------
(ii) a day on which banking institutions in the State of New York,
(_______________) or (_____________) are required or authorized by law to
be closed.
Business Trust Statute: Chapter 38 of Title 12 of the Delaware
----------------------
Code, 12 Del. Code SectionSection3801 et seq., as the same may be
--- -- ----
amended from time to time.
Carryover Loss Amount: With respect to any Payment Date, the
---------------------
aggregate of Loss Amounts (other than Loss Amounts arising during the
related Collection Period) with respect to which either (i) payments of
principal have not been previously made on the Notes and the Certificates
or (ii) were not reflected in a reduction (not below zero) of the Overcol-
lateralization Amount.
Certificate Distribution Amount: With respect to any Payment
-------------------------------
Date, the sum of (x) the amount accrued during the related Interest Period
on the Principal Balance of the Certificates at the Certificate Rate for
such Interest Period and (y) any Unpaid Certificate Distribution Amount
Shortfall. The amount available for distribution on any Payment Date
shall be allocated first to the amount in clause (x) above, and second to
the amount in clause (y) above.
Certificate Paying Agent: The meaning specified in Section 3.03
------------------------
of the Indenture.
Certificate Percentage: With respect to any Payment Date, the
----------------------
ratio, expressed as a percentage, of the aggregate of the Principal
Balance of the Certificates immediately prior to such Payment Date to the
sum of the aggregate of the Principal Balance of the Securities immediate-
ly prior to such date.
Certificate Rate: With respect to any Interest Period, the per
----------------
annum rate determined by the Master Servicer equal to the sum of (i) LIBOR
and (ii) (______)%; provided, however, that in no event shall the
-------- -------
Certificate Rate with respect to any Interest Period exceed the Maximum
Rate.
Certificate Register: The register maintained by the Certificate
--------------------
Registrar in which the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges of Certifi-
cates.
Certificate Registrar: Initially, (______________), in its
---------------------
capacity as Certificate Registrar, or any successor to the Indenture
Trustee in such capacity.
Certificate of Trust: The Certificate of Trust filed for the
--------------------
Trust pursuant to Section 3810(a) of the Business Trust Statute.
Certificates: The Home Equity Loan Asset-Backed Certificates,
------------
Series 199_-_, each evidencing undivided beneficial interests in the
Issuer and executed by the Owner Trustee in substantially the form set
forth in Exhibit A to the Trust Agreement.
Certificateholder: The Person in whose name a Certificate is
-----------------
registered in the Certificate Register except that, any Certificate
registered in the name of the Issuer, the Owner Trustee or the Indenture
Trustee or any Affiliate of any of them shall be deemed not to be out-
standing and the registered holder will not be considered a Certific-
ateholder or a holder for purposes of giving any request, demand, authori-
zation, direction, notice, consent or waiver under the Indenture or the
Trust Agreement provided that, in determining whether the Indenture
Trustee or the Owner Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Certificates that the Indenture Trustee or the Owner Trustee knows to be
so owned shall be so disregarded. Owners of Certificates that have been
pledged in good faith may be regarded as Holders if the pledgee establish-
es to the satisfaction of the Indenture Trustee or the Owner Trustee, as
the case may be, the pledgee's right so to act with respect to such
Certificates and that the pledgee is not the Issuer, any other obligor
upon the Certificates or any Affiliate of any of the foregoing Persons.
Class: The Notes or the Certificates, as the case may be.
-----
Closing Date: ___________, 199_.
------------
Code: The Internal Revenue Code of 1986, as amended, and the
----
rules and regulations promulgated thereunder.
Collateral: The meaning specified in the Granting Clause of the
----------
Indenture.
Collection Account: The account or accounts created and main
------------------
tained pursuant to Section ( ) of the Master Servicing Agreement. The
Collection Account shall be an Eligible Account.
Collection Period: With respect to any Mortgage Loan and Payment
-----------------
Date other than the first Payment Date, the calendar month preceding any
such Payment Date and with respect to the first Payment Date, the period
from _____________ through (___________).
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan
----------------------------
and any date, the percentage equivalent of a fraction, the numerator of
which is the sum of (i) the greater of (x) the Credit Limit and (y) the
Cut-off Date Asset Balance of such Mortgage Loan and (ii) the outstanding
principal balance as of the date of the origination of such Mortgage Loan
(or any subsequent date as of which such outstanding principal balance may
be determined in connection with an increase or decrease in the Credit
Limit or to reduce the amount of primary insurance for such Mortgage Loan)
of any mortgage loan or mortgage loans that are secured by liens on the
Mortgaged Property that are senior or subordinate to the Mortgage and the
denominator of which is the Appraised Value of the related Mortgaged
Property.
Corporate Trust Office: With respect to the Indenture Trustee,
----------------------
Certificate Registrar, Certificate Paying Agent and Paying Agent, the
principal corporate trust office of the Indenture Trustee and Note
Registrar at which at any particular time its corporate trust business
shall be administered, which office at the date of the execution of this
instrument is located at (______________), except that for purposes of
Section 4.02 of the Indenture and Section 3.09 of the Trust Agreement,
such term shall include the Indenture Trustee's office or agency at
(__________) to the Owner Trustee, the principal corporate trust office of
the Owner Trustee at which at any particular time its corporate trust
business shall be administered, which office at the date of the execution
of this Trust Agreement is located at (___________), Attention: (_______-
___________).
(Credit Enhancement Draw Amount: As defined in Section 3.32 of
------------------------------
the Indenture.
Credit Enhancement Instrument: The security bond number (______
-----------------------------
____), dated as of the Closing Date, issued by the Credit Enhancer to the
Indenture Trustee for the benefit of the Noteholders and to the Certifi-
cate Paying Agent as agent for the Issuer for the benefit of the Certific-
ateholders.
Credit Enhancer: (______________________), a (_______________),
---------------
any successor thereto or any replacement credit enhancer substituted pur-
suant to Section 3.33 of the Indenture.
Credit Enhancer Default: If the Credit Enhancer fails to make a
-----------------------
payment required under the Credit Enhancement Instrument in accordance
with its terms.)
Credit Limit: With respect to any Mortgage Loan, the maximum
------------
Asset Balance permitted under the terms of the related Loan Agreement.
Custodial Agreement: Any Custodial Agreement between the Custodi
-------------------
an, the Indenture Trustee, the Issuer and the Master Servicer relating to
the custody of the Mortgage Loans and the Related Documents.
Custodian: With respect to the Mortgage Loans, (______________),
---------
a (_______________), and its successors and assigns.
Cut-Off Date: With respect to the Initial Loans ________, 199_.
------------
DCR: Duff & Phelps Credit Rating Co. or its successor in inter
---
est.
Default: Any occurrence which is or with notice or the lapse of
-------
time or both would become an Event of Default.
Definitive Notes: The meaning specified in Section 4.06 of the
----------------
Indenture.
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced
---------------------
with an Eligible Substitute Mortgage Loan.
(Deposit Date: The applicable date as of which any Additional
------------
Loan is sold to the Issuer pursuant to the Loan Purchase Agreement.
Deposit Date Asset Balance: With respect to any Additional Loan,
--------------------------
the Asset Balance thereof as of the Deposit Date.)
Depositor: IndyMac ABS, Inc., a Delaware corporation, or its
---------
successor in interest.
Depository or Depository Agency: The Depository Trust Company or
-------------------------------
a successor appointed by the Indenture Trustee with the approval of the
Depositor. Any successor to the Depository shall be an organization
registered as a "clearing agency" pursuant to Section 17A of the Exchange
Act and the regulations of the Securities and Exchange Commission thereunder.
Depository Participant: A Person for whom, from time to time, the
----------------------
Depository effects book-entry transfers and pledges of securities deposit-
ed with the Depository.
Designated Certificate: The meaning specified in Section 3.11 of
----------------------
the Trust Agreement.
Dissolution Payment Date: Following an Event of Default under the
------------------------
Indenture and an acceleration of the Maturity Date of the Notes, a date on
which the proceeds of the sale of the Trust Estate are paid to Securityho-
lders.
Draw: With respect to any Mortgage Loan, a borrowing by the
----
Mortgagor under the related Loan Agreement.
Due Date: With respect to the Mortgage Loans, the (__)th day of
--------
the month.
Eligible Account: An account that is any of the following: (i)
----------------
maintained with a depository institution the short-term 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 deposit 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
Indenture Trustee and each Rating Agency) the Indenture Trustee 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
Eligible 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 Collection
Account, either (A) a trust account or accounts maintained at the
Corporate Trust Department of the Indenture Trustee or (B) an account or
accounts maintained at the Corporate Trust Department of the Indenture
Trustee, as long as its short term debt obligations are rated (___) by
(_____) and (___) by (_____________) or the equivalent or better by each
Rating Agency and its long term debt obligations are rated (___) by
(___) and (___) by (___________) or the equivalent or better by each
Rating Agency, or (iv) in the case of the Collection Account and the
Payment Account, a trust account or accounts maintained in the corporate
trust division of the Indenture Trustee, or (v) 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 Collection Account or the Payment Account will not
reduce the rating assigned to any of the Securities by such Rating
Agency below investment grade (without taking into account the Credit
Enhancement Instrument.)
Eligible Investments: One or more of the following:
--------------------
(i) obligations of the United States or any agency thereof, provided such
obligations are backed by the full faith and credit of the United States;
(ii) general obligations of or obligations guaranteed by any state of the
United States or the District of Columbia receiving the highest long-term
debt rating of each Rating Agency rating the related Series of Securities,
or such lower rating as will not result in the downgrading or withdrawal
of the ratings then assigned to the Securities by each such Rating Agency;
(iii) commercial paper issued by (____________) or any of its Affiliates
or commercial or finance company paper which is then receiving the highest
commercial or finance company paper rating of each such Rating Agency,
or such lower rating as will not result in the downgrading or
withdrawal of the ratings then assigned to the Securities by each
such Rating Agency; (iv) certificates of deposit, demand or time
deposits, or bankers' acceptances issued by any depository institution
or trust company incorporated under the laws of the United States or
of any state thereof and subject to supervision and examination by
federal and/or state banking authorities, provided that the commercial
paper and/or long term unsecured debt obligations of such depository
institution or trust company (or in the case of the principal depository
institution in a holding company system, the commercial paper or long-term
unsecured debt obligations of such holding company, but only if Moody's is
not a Rating Agency) are then rated one of the two highest long-term and
the highest short-term ratings of each such Rating Agency for such securi-
ties, or such lower ratings as will not result in the downgrading or
withdrawal of the rating then assigned to the Securities by any such
Rating Agency; (iv) demand or time deposits or certificates of deposit
issued by any bank or trust company or savings institution to the extent
that such deposits are fully insured by the FDIC; (v) guaranteed rein-
vestment agreements issued by any bank, insurance company or other
corporation containing, at the time of the issuance of such agreements,
such terms and conditions as will not result in the downgrading or
withdrawal of the rating then assigned to the Securities by any such
Rating Agency; (vi) repurchase obligations with respect to any security
described in clauses (i) and (ii) above, in either case entered into with
a depository institution or trust company (acting as principal) described
in clause (iv) above; (vii) securities (other than stripped bonds,
stripped coupons or instruments sold at a purchase price in excess of 115%
of the face amount thereof) bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States or any
state thereof which, at the time of such investment, have one of the two
highest ratings of each Rating Agency (except if the Rating Agency is
Moody's, such rating shall be the highest commercial paper rating of
Moody's for any such securities), or such lower rating as will not result
in the downgrading or withdrawal of the rating then assigned to the
Securities by any such Rating Agency, as evidenced by a signed writing
delivered by each such Rating Agency; and (viii) such other investments
having a specified stated maturity and bearing interest or sold at a
discount acceptable to each Rating Agency as will not result in the
downgrading or withdrawal of the rating then assigned to the Securities of
such Series by any such Rating Agency, as evidenced by a signed writing
delivered by each such Rating Agency; provided that no such instrument
--------
shall be an Eligible Investment if such instrument evidences the right
to receive interest only payments with respect to the obligations
underlying such instrument.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by
---------------------------------
the Depositor for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed in an Officers' Certificate delivered to the
Indenture 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 the outstanding
principal balance of the Deleted Mortgage Loan (the amount of any short-
fall to be deposited by the Seller in the Collection Account in the month
of substitution); (ii) have a Loan Rate not less than the Loan Rate of the
Deleted Mortgage Loan and not more than __% in excess of the Loan Rate of
such Deleted Mortgage Loan; (iii) have a Loan Rate based on the same index
with adjustments to such Loan Rate made on the same interest rate adjust-
ment date as that of the Deleted Mortgage Loan; (iv) have a Margin that is
not less than the Margin of the Deleted Mortgage Loan and not more than
_____ basis points higher than the Margin for the Deleted Mortgage Loan;
(v) have a mortgage of the same or higher level of priority as the
mortgage relating to the Deleted Mortgage Loan; (vi) have a remaining term
to maturity not more than ____ months earlier and not more than ____
months later than the remaining term to maturity of the Deleted Mortgage
Loan; (vii) comply with each representation and warranty as to the
Mortgage Loans set forth in the Loan Purchase Agreement (deemed to be made
as of the date of substitution); (viii) in general, have an original
Combined Loan-to-Value Ratio not greater than that of the Deleted Mortgage
Loans; and (ix) satisfy certain other conditions specified in the Purchase
Agreement. To the extent the Principal Balance of an Eligible Substitute
Mortgage Loan is less than the Principal Balance of the related Deleted
Mortgage Loan, the Seller will be required to make a deposit tot he
Collection Account equal to such difference; and (x) not be __ days or
more delinquent.
ERISA: The Employee Retirement Income Security Act of 1974, as
-----
amended.
Event of Default: With respect to the Indenture, any one of the
----------------
following events (whatever the 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) a default in the payment of any interest on any Note when
the same becomes due and payable, and such default shall continue for
a period of five days; or
(ii) a default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due
and payable; or
(iii) (a Credit Enhancer Default shall have occurred and be
continuing and) there occurs a default in the observance or perfor-
mance of any covenant or agreement of the Issuer made in the Inden-
ture, or any representation or warranty of the Issuer made in the
Indenture or in any certificate or other writing delivered pursuant
hereto or in connection herewith proving to have been incorrect in
any material respect as of the time when the same shall have been
made, and such default shall continue or not be cured, or the circum-
stance or condition in respect of which such representation or
warranty was incorrect shall not have been eliminated or otherwise
cured, for a period of 30 days after there shall have been given, by
registered or certified mail, to the Issuer by the Indenture Trustee
or to the Issuer and the Indenture Trustee by the Holders of at least
25% of the Outstanding Amount of the Notes, a written notice speci-
fying such default or incorrect representation or warranty and
requiring it to be remedied and stating that such notice is a notice
of default hereunder; or
(iv) (a Credit Enhancer Default shall have occurred and be
continuing and) there occurs the filing of a decree or order for
relief by a court having jurisdiction in the premises in respect of
the Issuer or any substantial part of the Trust Estate in an involun-
tary case under any applicable federal or state bankruptcy, insol-
vency or other similar law now or hereafter in effect, or appointing
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the
Trust Estate, or ordering the winding-up or liquidation of the
Issuer's affairs, and such decree or order shall remain unstayed and
in effect for a period of 60 consecutive days; or
(v) (a Credit Enhancer Default shall have occurred and be
continuing and) there occurs the commencement by the Issuer of a
voluntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or the
consent by the Issuer to the entry of an order for relief in an
involuntary case under any such law, or the consent by the Issuer to
the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the assets of the Trust Estate,
or the making by the Issuer of any general assignment for the benefit
of creditors, or the failure by the Issuer generally to pay its debts
as such debts become due, or the taking of any action by the Issuer
in furtherance of any of the foregoing.
Event of Servicer Termination: With respect to the Master Servic
-----------------------------
ing Agreement, an Event of Default as defined in Section 7.01 of the
Master Servicing Agreement.
Exchange Act: The Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
Excluded Amount: For any Payment Date on or after the occurrence
---------------
of an Amortization Event, with respect to all collections whether interest
or principal (other than any amounts received in respect of a Repurchase
Price and pursuant to Section (_________) of the Master Servicing Agree-
ment) ("Total Collections") on all Initial Loans and Additional Loans in
each case including all Draws whether or not transferred to the Issuer
(collectively, "Total Balances of Obligors"), an amount equal to the
product of (A) Total Collections during the related Collection Period and
(B) a fraction equal to one (1) minus a fraction the numerator of which is
-----
(x) the aggregate Asset Balances of the end of the last Collection Period
and the denominator of which is (y) the Total Balances of Obligors.
Expenses: The meaning specified in Section 8.02 of the Trust
--------
Agreement.
FDIC: The Federal Deposit Insurance Corporation or any successor
----
thereto.
Final Scheduled Payment Date: To the extent not previously paid,
----------------------------
the principal balance of each Class of Notes will be due on the Payment
Date in ____________ ____.
Fitch: Fitch IBCA, Inc. or its successor in interest.
-----
FNMA: The Federal National Mortgage Association, or any successor
----
thereto.
Foreclosure Profit: With respect to a Liquidated Mortgage Loan,
------------------
the amount, if any, by which (i) the aggregate of its Net Liquidation
Proceeds exceeds (ii) the related Asset Balance (plus accrued and unpaid
interest thereon at the applicable Loan Rate from the date interest was
last paid through the date of receipt of the final Liquidation Proceeds)
of such Liquidated Mortgage Loan immediately prior to the final recovery
of its Liquidation Proceeds.
(Funding Account: The trust account created and maintained with
---------------
the Indenture Trustee pursuant to Section 8.02 of the Indenture and
referred to therein as the Funding Account. Funds
deposited in the Funding Account shall be held in trust for the uses and
purposes set forth in Article VIII of the Indenture.
Funding Period: The period commencing on the Cut-off Date and
--------------
ending on the earlier of (x) the Payment Date in __________, 199_ and (y)
the occurrence of an Amortization Event.)
Grant: Mortgage, pledge, bargain, sell, warrant, alienate,
-----
remise, release, convey, assign, transfer, create, and grant a lien upon
and a security interest in and right of set-off against, deposit, set over
and confirm pursuant to the Indenture. A Grant of the Collateral or of
any other agreement or instrument shall include all rights, powers and op-
tions (but none of the obligations) of the granting party thereunder,
including the immediate and continuing right to claim for, collect,
receive and give receipt for principal and interest payments in respect of
such collateral or other agreement or instrument and all other moneys
payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options,
to bring proceedings in the name of the granting party or otherwise, and
generally to do and receive anything that the granting party is or may be
entitled to do or receive thereunder or with respect thereto.
Gross Margin: With respect to any Mortgage Loan, the percentage
------------
set forth as the "Gross Margin" for such Mortgage Loan on the Mortgage
Loan Schedule, as adjusted from time to time with respect to any (_______
_______) Loan in accordance with the terms of the Master Servicing
Agreement.
(Guaranteed Principal Payment Amount: With respect to any Payment
-----------------------------------
Date, other than the Dissolution Payment Date, the amount, if any, by
which the Aggregate Security Balance (after giving effect to all amounts
allocable and distributable to principal on the Securities on such Payment
Date) exceeds the sum of (A) the Pool Balance plus (B) all amounts
----
on deposit in the Funding Account on such date (after giving effect
to all withdrawals therefrom and deposits thereto pursuant to Sections
8.02(b) and 8.02(c) of the Indenture on such Payment Date). With
respect to the Payment Date in ________ 20__, if such Payment Date is not
a Dissolution Payment Date, the amount, if any, by which the aggregate of
the Security Balances (after giving effect to all amounts allocable and
distributable to principal on the Securities) exceeds the amount on
deposit in the Payment Account available to be paid as principal on the
Securities (after giving effect to all amounts allocable and distributable
as principal on the Securities on such date).)
Holder: Any of the Noteholders or Certificateholders.
------
Indemnified Party: The meaning specified in Section 8.02 of the
-----------------
Trust Agreement.
Indenture: The indenture dated as of _________, 199_ between the
---------
Issuer and the Indenture Trustee, as Indenture Trustee.
Indenture Trustee: (______________), and its successors and
-----------------
assigns or any successor indenture trustee appointed pursuant to the terms
of the Indenture.
Independent: When used with respect to any specified Person, the
-----------
Person (i) is in fact independent of the Issuer, any other obligor on the
Notes, the Seller, the Depositor and any Affiliate of any of the foregoing
Persons, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the
Seller, the Depositor or any Affiliate of any of the foregoing Persons and
(iii) is not connected with the Issuer, any such other obligor, the
Seller, the Depositor or any Affiliate of any of the foregoing Persons as
an officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
Independent Certificate: A certificate or opinion to be delivered
-----------------------
to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01 of
the Indenture, made by an Independent appraiser or other expert appointed
by an Issuer Order and approved by the Indenture Trustee in the exercise
of reasonable care, and such opinion or certificate shall state that the
signer has read the definition of "Independent" in this Indenture and that
the signer is Independent within the meaning thereof.
Index Rate: (The rate (equal to) (based on) the highest "prime
----------
rate" published in the 'Money Rates' table of The Wall Street Journal as
of the first Business Day of each calendar month.)
Initial Loans: All home equity lines of credit sold by the Seller
-------------
to the Purchaser on ________, 199_ pursuant to the terms of the Loan
Purchase Agreement, as specified in the Mortgage Loan Schedule.
Initial Principal Balance: With respect to the Certificates,
-------------------------
$______________; and the Notes, $___________.
Insolvency Event: With respect to a specified Person, (a) the
----------------
filing of a decree or order for relief by a court having jurisdiction in
the premises in respect of such Person or any substantial part of its
property in an involuntary case under any applicable bankruptcy, insolven-
cy or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such Person or for any substantial part of its
property, or ordering the winding-up or liquidation of such Person's
affairs, and such decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or (b) the commencement by such
Person of a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under
any such law, or the consent by such Person to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person orfor any substantial
part of its property, or the making by such Person of any general assignment
for the benefit of creditors, or the failure by such Person generally to
pay its debts as such debts become due or the admission by such Person
in writing (as to which the Indenture Trustee shall have notice)
of its inability to pay its debts generally, or the adoption by the Board
of Directors or managing member of such Person of a resolution which
authorizes action by such Person in furtherance of any of the foregoing.
(Insurance Agreement: The insurance and reimbursement agreement
-------------------
dated as of ______________, 199_ among the Master Servicer, the Seller,
the Depositor, the Issuer and the Credit Enhancer, including any amend-
ments and supplements thereto.)
Insurance Proceeds: Proceeds paid by any insurer pursuant to any
------------------
insurance policy covering a Mortgage Loan which are required to be
remitted to the Master Servicer, or amounts required to be paid by the
Master Servicer pursuant to the last sentence of Section ( ) of
the Master Servicing Agreement, net of any component thereof (i) covering
any expenses incurred by or on behalf of the Master Servicer in connection
with obtaining such proceeds, (ii) that is applied to the resto
ration or repair of the related Mortgaged Property, (iii) released to the
Mortgagor in accordance with the Master Servicer's normal servicing proce-
dures or (iv) required to be paid to any holder of a mortgage senior to
such Mortgage Loan.
Interest Collections: With respect to any Payment Date, the sum
--------------------
of all payments by or on behalf of Mortgagors and any other amounts
constituting interest (including without limitation such portion of
Insurance Proceeds, Net Liquidation Proceeds and Repurchase Prices as is
allocable to interest on the applicable Mortgage Loan) as is paid by the
Seller or the Master Servicer or is collected by the Servicer under the
Mortgage Loans, reduced by the Servicing Fees for the related Collection
Period and by any fees (including annual fees) or late charges or similar
administrative fees paid by Mortgagors during the related Collection
Period. The terms of the related Loan Agreement shall determine the
portion of each payment in respect of such Mortgage Loan that constitutes
principal or interest.
Interest Period: With respect to any Payment Date other than the
---------------
first Payment Date, the period beginning on the preceding Payment Date and
ending on the day preceding such Payment Date, and in the case of the
first Payment Date, the period beginning on the Closing Date and ending on
the day preceding the first Payment Date.
Issuer: (_________________________) 199_-_, a Delaware business
------
trust, or its successor in interest.
Issuer Request: A written order or request signed in the name of
--------------
the Issuer by any one of its Authorized Officers and delivered to the
Indenture Trustee.
(LIBOR: For any Interest Period other than the first Interest
-----
Period, the rate for United States dollar deposits for one month which
appears on the Telerate Screen Page 3750 as of 11:00 A.M., London time, on
the second LIBOR Business Day prior to the first day of such Interest
Period. With respect to the first Interest Period, the rate for United
States dollar deposits for one month which appears on the Telerate Screen
Page 3750 as of _____ A.M., _________________ time, two LIBOR Business
Days prior to the Closing Date. If such rate does not appear on such page
(or such other page as may replace that page on that service, or if such
service is no longer offered, such other service for displaying LIBOR or
comparable rates as may be reasonably selected by the Indenture Trustee
after consultation with the Master Servicer), the rate will be the
Reference Bank Rate. If no such quotations can be obtained and no
Reference Bank Rate is available, LIBOR will be LIBOR applicable to the
preceding Payment Date.)
LIBOR Business Day: Any day other than (i) a Saturday or a Sunday
------------------
or (ii) a day on which banking institutions in the State of New York,
(__________) or (________), or in the city of London, England are required
or authorized by law to be closed.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypotheca
----
tion, assignment, participation, deposit arrangement, encumbrance, lien
(statutory or other), preference, priority right or interest or other
security agreement or preferential arrangement of any kind or nature
whatsoever, including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing and the filing of any
financing statement under the UCC (other than any such financing statement
filed for informational purposes only) or comparable law of any jurisdic-
tion to evidence any of the foregoing; provided, however,
-------- -------
that any assignment pursuant to Section ( ) of the Master Servicing
Agreement shall not be deemed to constitute a Lien.
Lifetime Rate Cap: With respect to each Mortgage Loan with
-----------------
respect to which the related Mortgage Note provides for a lifetime rate
cap, the maximum Loan Rate permitted over the life of such Mortgage Loan
under the terms of such Mortgage Note, as set forth on the Mortgage Loan
Schedule and initially as set forth on Exhibit A to the Master Servicing
Agreement.
Liquidated Mortgage Loan: With respect to any Payment Date, any
------------------------
Mortgage Loan in respect of which the Master Servicer has determined, in
accordance with the servicing procedures specified in the Master Servicing
Agreement, as of the end of the related Collection Period that substan-
tially all Liquidation Proceeds which it reasonably expects to recover
with respect to the disposition of the related REO have been recovered.
Liquidation Expenses: Out-of-pocket expenses (exclusive of
--------------------
overhead) which are incurred by or on behalf of the Master Servicer in
connection with the liquidation of any Mortgage Loan and not recovered
under any insurance policy, such expenses including, without limitation,
legal fees and expenses, any unreimbursed amount expended (including,
without limitation, amounts advanced to correct defaults on any mortgage
loan which is senior to such Mortgage Loan and amounts advanced to keep
current or pay off a mortgage loan that is senior to such Mortgage Loan)
respecting the related Mortgage Loan and any related and unreimbursed
expenditures for real estate property taxes or for property restoration,
preservation or insurance against casualty loss or damage.
Liquidation Loss Amounts: With respect to any Payment Date and
------------------------
any Mortgage Loan that became a Liquidated Mortgage Loan during the
related Collection Period, the unrecovered portion of the related Asset
Balance thereof at the end of such Collection
Period, after giving effect to the Net Liquidation Proceeds applied in
reduction of the Asset Balance.
Liquidation Proceeds: Proceeds (including Insurance Proceeds (but
--------------------
not including amounts drawn under the Credit Enhancement Instrument))
received in connection with the liquidation of any Mortgage Loan or
related REO, whether through trustee's sale, foreclosure sale or other-
wise.
Loan Agreement: With respect to any Mortgage Loan, the credit
--------------
line account agreement executed by the related Mortgagor and any amendment
or modification thereof.
Loan Purchase Agreement: The Loan Purchase Agreement, dated as of
-----------------------
the Cut-off Date, between the Seller, as seller, and the Depositor, as
purchaser, with respect to the Mortgage Loans.
Loan Rate: With respect to any Mortgage Loan and any day, the sum
---------
of the Index Rate and the Margin.
Margin: The (spread).
------
Master Servicer: (________________), and its successors and
---------------
assigns.
Master Servicing Agreement: The Master Servicing Agreement dated
--------------------------
as of ______________, 199_ between (______________), as Indenture Trustee,
and the Master Servicer, as master servicer.
Master Servicing Fee: With respect to any Collection Period, the
--------------------
product of (i) the Master Servicing Fee Rate divided by 12 and (ii) the
aggregate Asset Balance of the Mortgage Loans, as of the first day of such
Collection Period.
Master Servicing Fee Rate: With respect to any (______________)
-------------------------
Loan, (____)% per annum.
Maximum Pool Balance: As to any Payment Date the highest Pool
--------------------
Balance at the end of any Collection Period from the Closing Date up to
and including the related Collection Period.
Maximum Rate: With respect to any Interest Period, the Weighted
------------
Average Net Loan Rate related to the Due Date in the month preceding the
month in which such Interest Period ends (adjusted to an effective rate
reflecting accrued interest calculated on the basis of the actual number
of days in the Collection Period commencing in the month in which such
Interest Period commences and a year assumed to consist of 360 days).
Moody's: Moody's Investors Service, Inc. or its successor in
-------
interest.
Mortgage: The mortgage, deed of trust or other instrument creat
--------
ing a first or second lien on an estate in fee simple interest in real
property securing a Mortgage Loan.
Mortgage File: The file containing the Related Documents pertain
-------------
ing to a particular Mortgage Loan and any additional documents required to
be added to the Mortgage File pursuant to the Loan Purchase Agreement or
the Master Servicing Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of
----------------------
Mortgage Loans included in the Trust Estate on such date. The initial
schedule of Mortgage Loans as of the Cut-Off Date is the schedule set
forth in Exhibit A of the Master Servicing Agreement, which schedule sets
forth as to each Mortgage Loan (i) the Cut-Off Date Trust Balance, (ii)
the Credit Limit, (iii) the Gross Margin, (iv) the name of the Mortgagor,
(v) the Lifetime Rate Cap, if any, (vi) the loan number, (vii) an indica-
tion as to the applicable Mortgage Loan Group, and (viii) the lien
position of the related Mortgage. The Mortgage Loan Schedule will be
amended from time to time by annex to reflect Additional Loans.
Mortgage Loans: At any time, collectively, all Initial Loans (and
--------------
Additional Loans, in each case including Additional Balances, if any, that
have been sold to the Depositor under the Loan Purchase Agreement,) in
each case together with the Related Documents, and that remain subject to
the terms thereof.
Mortgage Note: With respect to a Mortgage Loan, the Loan Agree
-------------
ment pursuant to which the related mortgagor agrees to pay the indebt-
edness evidenced thereby and secured by the related Mortgage as modified
or amended.
Mortgaged Property: The underlying property, including real
------------------
property and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Loan Agreement.
---------
Net Liquidation Proceeds: With respect to any Liquidated Mortgage
------------------------
Loan, Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate: With respect to any Mortgage Loan and any day, the
-------------
related Loan Rate less the related Servicing Fee Rate.
(Net Principal Collections: With respect to any Distribution
-------------------------
Date, the excess, if any, of Security Principal Collections for the
related Collection Period over the amount of Additional Balances created
during the related Collection Period.)
Notes: The Notes designated as the "Notes" in the Indenture.
-----
Note Owner: The Beneficial Owner of a Note.
----------
Note Rate: With respect to any Interest Period, a per annum rate
---------
determined by the Master Servicer equal to (LIBOR as of the second LIBOR
Business Day) prior to the first day of such Interest Period and (___)%;
provided however, that in no event shall the Note Rate with
- -------- -------
respect to any Interest Period exceed the Maximum Rate for such Interest
Period.
Note Register: The register maintained by the Note Registrar in
-------------
which the Note Registrar shall provide for the registration of Notes and
of transfers and exchanges of Notes.
Note Registrar: The Indenture Trustee, in its capacity as Note
--------------
Registrar.
Noteholder: The Person in whose name a Note is registered in the
----------
Note Register, except that, any Note registered in the name of the
Depositor, the Issuer or the Indenture Trustee or any Affiliate of any of
them shall be deemed not to be outstanding and the registered holder will
not be considered a Noteholder or holder for purposes of giving any re-
quest, demand, authorization, direction, notice, consent or waiver under
the Indenture or the Trust Agreement provided that, in determining whether
the Indenture Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Notes
that the Indenture Trustee or the Owner Trustee knows to be so owned shall
be so disregarded. Owners of Notes that have been pledged in good faith
may be regarded as Holders if the pledgee establishes to the satisfaction
of the Indenture Trustee or the Owner Trustee the pledgee's right so to
act with respect to such Notes and that the pledgee is not the Issuer, any
other obligor upon the Notes or any Affiliate of any of the foregoing
Persons.
Officer's Certificate: With respect to the Master Servicer, a
---------------------
certificate signed by the President, Managing Director, a Director, a Vice
President or an Assistant Vice President, of the Master Servicer and
delivered to the Indenture Trustee. With respect to the Issuer, a
certificate signed by any Authorized Officer of the Issuer, under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section (11.01) of the Indenture, and delivered to the
Indenture Trustee. Unless otherwise specified, any reference in the
Indenture to an Officer's Certificate shall be to an Officer's Certificate
of any Authorized Officer of the Issuer.
Opinion of Counsel: A written opinion of counsel who may be in
------------------
house counsel for the Master Servicer if acceptable to the Indenture
Trustee, (the Credit Enhancer) and the Rating Agencies or counsel for the
Depositor, as the case may be.
Outstanding: With respect to the Notes, as of the date of deter
-----------
mination, all Notes theretofore executed, authenticated and delivered
under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Indenture Trustee for cancellation; and
(ii) Notes in exchange for or in lieu of which other Notes have
been executed, authenticated and delivered pursuant to the Indenture
unless proof satisfactory to the Indenture Trustee is presented that
any such Notes are held by a holder in due course;
(provided, however, that for purposes of effectuating the Credit
-------- -------
Enhancer's right of subrogation as set forth in Section 4.12 of the
Indenture only, all Notes that have been paid with funds provided under
the Credit Enhancement Instrument shall be deemed to be Outstanding until
the Credit Enhancer has been reimbursed with respect thereto.)
Overcollateralization Amount: With respect to any Payment Date,
----------------------------
the amount by which the sum of (x) the Pool Balance as of the last day of
the related Collection Period and (y) the amount on deposit in the Funding
Account in respect of Net Principal Collections, on such Payment Date
exceeds the Aggregate Security Balance on such Payment Date (after
- -------
giving effect to all amounts distributed and allocable to principal
on the Securities and deposits to and withdrawals from the Funding
Account that are applied to reduce the Security Balances on such
Payment Date).
Owner Trust Estate: The corpus of the Issuer created by the Trust
------------------
Agreement which consists of the Mortgage Loans, such assets as shall from
time to time be deposited in the Collection Account and/or the Payment
Account allocable to the Mortgage Loans in accordance with the Trust
Agreement, property that secured a Mortgage Loan and that has become REO,
certain hazard insurance policies maintained by the Mortgagors or by or on
behalf of the Master Servicer in respect of the Mortgage Loans, (the
Credit Enhancement Instrument,) an assignment of the Depositor's rights
under the Loan Purchase Agreement and the obligation of the Depositor to
purchase Additional Balances under the Loan Purchase Agreement and all
proceeds of each of the foregoing.
Owner Trustee: (______________), and its successors and assigns
-------------
or any successor owner trustee appointed pursuant to the terms of the
Trust Agreement.
Paying Agent: Any paying agent or co-paying agent appointed
------------
pursuant to Section 3.03 of the Indenture, which initially shall be
(______________).
Payment Account: The account established by the Indenture Trustee
---------------
pursuant to Section 8.02 of the Indenture and Section (____) of the Master
Servicing Agreement. The Payment Account shall be an Eligible Account.
Payment Date: The (___) day of each month, or if such day is not
------------
a Business Day, then the next Business Day.
Percentage Interest: With respect to any Note, the percentage
-------------------
obtained by dividing the Security Balance of such Note by the aggregate of
the Security Balances of all Notes of the same Class. With respect to any
Certificate, the percentage obtained by dividing the denomination speci-
fied on such Certificate by the Initial Principal Balance of the Certifi-
cates.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
(Policy: The irrevocable and unconditional limited financial
------
guaranty insurance policy number (__________), dated as of the Closing
Date, issued by the Credit Enhancer to the Indenture Trustee for the
benefit of the Noteholders and to the Certificate Paying Agent as agent
for the Issuer for the benefit of the Certificateholders.)
Pool Balance: With respect to any date, the aggregate of the
------------
Asset Balances of all Mortgage Loans as of such date.
Principal Balance: With respect to any Payment Date, the Initial
-----------------
Principal Balance thereof, reduced by all distributions of principal
thereon prior to such Payment Date.
Principal Collection Distribution Amount: For any Payment Date,
----------------------------------------
(i) so long as an Amortization Event has not occurred, Net Principal
Collections and (ii) following an Amortization Event, Security Principal
Collections; provided, however, on any Payment Date with respect to
-------- -------
which the Overcollateralization Amount that would result if determined
without regard to this proviso exceeds the Required Overcollateralization
Amount the Principal Collection Distribution Amount will be reduced by the
amount of such excess until the Overcollateralization Amount equals the
Required Overcollateralization Amount.
Principal Collections: With respect to any Payment Date and any
---------------------
Mortgage Loan, the aggregate of the following amounts:
(i) the total amount of payments made by or on behalf of the
Mortgagor, received and applied as payments of principal on the
Mortgage Loan during the related Collection Period, as reported by
the related Subservicer;
(ii) any Net Liquidation Proceeds, allocable as a recovery of
principal, received in connection with the Mortgage Loan during the
related Collection Period;
(iii) if the Mortgage Loan was purchased by the Master Servicer
pursuant to Section 3.14 of the Master Servicing Agreement, or was
repurchased by the Seller pursuant to the Loan Purchase Agreement,
during the related Collection Period, 100% of the Asset Balance of
the Mortgage Loan as of the date of such purchase or repurchase; and
(iv) any other amounts received as payments on or proceeds of
the Mortgage Loan during the Collection Period to the extent applied
in reduction of the principal amount thereof;
provided that Principal Collections shall not include any Foreclosure
- --------
Profits, and shall be reduced by any amounts withdrawn from the Collection
Account pursuant to clauses (iii), (iv), (vii) and (viii) of Section
( ) of the Master Servicing Agreement other than any portion of such
amounts that are attributable to the Excluded Amount in respect of any
Mortgage Loan that are allocable to principal of such Mortgage Loan and
not otherwise excluded from the amounts specified in (i) - (iv) above.
Proceeding: Any suit in equity, action at law or other judicial
----------
or administrative proceeding.
Purchaser: (____________), a (_____________) corporation, and its
---------
successors and assigns.
Qualified Insurer: A mortgage guaranty insurance company duly
-----------------
qualified as such under the laws of the state of its principal place of
business and each state having jurisdiction over such insurer in connec-
tion with the insurance policy issued by such insurer, duly authorized and
licensed in such states to transact a mortgage guaranty insurance business
in such states and to write the insurance provided by the insurance policy
issued by it, approved as an insurer by the Master Servicer and as a FNMA-
approved mortgage insurer.
Rating Agency: Any nationally recognized statistical rating
-------------
organization, or its successor, that rated the Securities at the request
of the Depositor at the time of the initial issuance of the Securities.
Initially, (________) or (__________). If such organization or a succes-
sor is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating organization, or other comparable Person,
designated by the Depositor, notice of which designation shall be given to
the Indenture Trustee. References herein to the highest short term
unsecured rating category of a Rating Agency shall mean (___) or better in
the case of (__________)and (___) or better in the case of (_____) and in
the case of any other Rating Agency shall mean such equivalent ratings.
References herein to the highest long-term rating category of a Rating
Agency shall mean "(___)" in the case of (__________) and (_____) in the
case of (________) and in the case of any other Rating Agency, such
equivalent rating.
Record Date: With respect to the Notes and any Payment Date, the
-----------
Business Day next preceding such Payment Date and with respect to the
Certificates and any Payment Date, the last Business Day of the month
preceding the month of such Payment Date.
(Reference Bank Rate: With respect to any Interest Period, as
-------------------
follows: the arithmetic mean (rounded upwards, if necessary, to the
nearest one sixteenth of a percent) of the offered rates for United States
dollar deposits for one month which are offered by the Reference Banks as
of _____ A.M., _________________ time, on the second LIBOR Business Day
prior to the first day of such Interest Period to prime banks in the
London interbank market for a period of one month in amounts approximately
equal to the sum of the Outstanding Amount of Notes and the Certificate
Principal Balance; provided that at least two such Reference Banks
--------
provide such rate. If fewer than two offered rates appear, the
Reference Bank Rate will be the arithmetic mean of the rates
quoted by one or more major banks in New York City, selected by the
Depositor after consultation with the Indenture Trustee, as of ______
a.m., ______________ time, on such date for loans in U.S. Dollars to
leading European Banks for a period of one month in amounts approximately
equal to the Aggregate Security Balance. If no such quotations can be
obtained, the Reference Bank Rate shall be the Reference Bank Rate
applicable to the preceding Interest Period.)
Reference Banks: (_________________________________________ ____
---------------
and ______________________.)
Related Documents: With respect to each Mortgage Loan, the
-----------------
documents specified in Section 1(a) of the Loan Purchase Agreement and any
documents required to be added to such documents pursuant to the Loan
Purchase Agreement, the Trust Agreement or the Master Servicing Agreement.
REO: A Mortgaged Property that is acquired by the Issuer in
---
foreclosure or by deed in lieu of foreclosure.
Repurchase Price: With respect to any Mortgage Loan required to
----------------
be repurchased on any date pursuant to the Loan Purchase Agreement or
purchased by the Master Servicer pursuant to the Master Servicing Agree-
ment, an amount equal to the sum of (i) 100% of the Asset Balance thereof
(without reduction for any amounts charged off) and (ii) unpaid
accrued interest at the Loan Rate on the outstanding principal balance
thereof from the Due Date to which interest was last paid by the
Mortgagor to the first day of the month following the month of purchase.
No portion of any Repurchase Price shall be included in the Excluded
Amount for any Payment Date.
(Required Overcollateralization Percentage: The greater of (___)%
-----------------------------------------
and a percentage as determined by (_________) during the Funding Period in
connection with the delivery of Additional Loans.
Required Overcollateralization Amount: As to any Payment Date
-------------------------------------
prior to the Payment Date in (___________), the Required Overcollaterali-
zation Percentage of the greater of (i) the Pool Balance as of the Cut-off
Date and (ii) the Maximum Pool Balance as of the end of the Related
Collection Period (the "Initial Required Overcollateralization Amount").
As to any Payment Date on or after the Payment Date in (_______), the
greater of (A) the lesser of (x) the Initial Required Overcollateraliza-
tion Amount and (y) (___)% of the Pool Balance as of the end of the
related Collection Period and (B) (___)% of the greater of (i) the Pool
Balance as of the Cut-off Date and (ii) the Maximum Pool Balance; Any
scheduled reduction to the Required Overcollateralization Amount described
above shall not be made as of any Payment Date unless (i) the outstanding
Principal Balance of the Mortgage Loans delinquent __ days or more
averaged over the last 12 months as a percentage of the aggregate out-
standing Principal Balance of all Mortgage Loans averaged over the last 12
months does not exceed (____)% (or if the Pool Balance is less than (___)%
of the Maximum Pool Balance, (___)%) and (ii) aggregate Liquidated Loss
Amounts on the Mortgage Loans to date for such Payment Date occurring
during the first two years after the Closing Date or occurring during the
___, ___, ___, or ___ year (or any year thereafter) after the Closing
Date, are less than (___), (___), (____), (___) or (___)% respectively, of
the Maximum Pool Balance and (iii) there has been no draw on the Credit
Enhancement Instrument. The Required Overcollateralization Amount may be
reduced with the prior written consent of the Credit Enhancer and the
Rating Agencies.)
Residual Ownership Interest: Collectively, the beneficial owner
---------------------------
ship interests in the Issuer established under the Trust Agreement that
are entitled to receive all amounts to be paid to the Issuer or its
designee pursuant to Section 3.05(a)(xi) of the Indenture, over the term
thereof.
Residual Ownership Interest Paying Agent: Any residual ownership
----------------------------------------
interest paying agent appointed pursuant to Section 3.03 of the Indenture,
which initially shall be (______________).
Responsible Officer: With respect to the Indenture Trustee, any
-------------------
officer of the Indenture Trustee with direct responsibility for the
administration of the Trust Agreement and also, with respect to a particu-
lar matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
Securities Act: The Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
Security: Any of the Certificates or Notes.
--------
Security Balance: The Principal Balance of the Notes or the
----------------
Certificates, as the case may be.
Securityholder or Holder: Any Noteholder or a Certificateholder.
-------------- ------
Security Interest Collections: With respect to any Payment Date,
-----------------------------
Interest Collections during the related Collection Period excluding the
portion thereof allocable to the Excluded Amount.
Security Percentage: With respect to any Payment Date and Securi
-------------------
ty, the percentage equivalent of a fraction the numerator of which is the
Security Balance of such Security immediately prior to such Payment Date
and the denominator of which is the aggregate of the Security Balances of
all Securities as of such date.
Security Principal Collections: With respect to any Payment Date,
------------------------------
Principal Collections during the related Collection Period excluding the
portion thereof allocable to the Excluded Amount.
Seller: (______________________), and its successors and assigns.
------
Servicing Fee: With respect to any Mortgage Loan, the sum of the
-------------
related Master Servicing Fee and the related Subservicing Fee.
Servicing Fee Rate: With respect to any Mortgage Loan, the sum of
------------------
the related Master Servicing Fee Rate and the related Subservicing Fee
Rate.
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 Indenture Trustee by the Master Servicer, as
such list may be amended from time to time.
Standard & Poor's: Standard & Poor's Ratings Group or its successor
-----------------
in interest.
Subservicer: Any Person with whom the Master Servicer has entered
-----------
into a Subservicing Agreement as a Subservicer by the Master Servicer,
including the Initial Subservicers.
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 ( ) of the Master
Servicing Agreement.
Subservicing Fee: With respect to any Mortgage Loan and any
----------------
Collection Period, the fee retained monthly by the Subservicer (or, in the
case of a nonsubserviced Mortgage Loan, by the Master Servicer) equal to
the product of (i) the Subservicing Fee Rate divided by 12 and (ii) the
aggregate Asset Balance of the Mortgage Loans as of the first day of such
Collection Period.
Subservicing Fee Rate: With respect to any Mortgage Loan, (____)%
---------------------
per annum.
(Substitution Adjustment Amounts: With respect to any Eligible
--------------------------------
Substitute Mortgage Loan, the amount as defined in Section ( ) of the
Loan Purchase Agreement.)
(Telerate Screen Page 3750: The display designated as page 3750
-------------------------
on the Telerate Service (or such other page as may replace page 3750 on
that service for the purpose of displaying London interbank offered rates
of major banks). If such rate does not appear on such page (or such other
page as may replace that page on that service, or if such service is no
longer offered, such other service for displaying LIBOR or comparable
rates as may be selected by the Issuer after consultation with the
Indenture Trustee), the rate will be the Reference Bank Rate.)
Treasury Regulations: Regulations, including proposed or tempo
--------------------
rary Regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include
analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
Trust Agreement: The Trust Agreement dated as of __________, 199_
---------------
between the Owner Trustee, and the Depositor.
Trust Estate: The meaning specified in the Granting Clause of the
------------
Indenture.
Trust Indenture Act or TIA: The Trust Indenture Act of 1939, as
--------------------------
amended from time to time, as in effect on any relevant date.
UCC: The Uniform Commercial Code, as amended from time to time,
---
as in effect in any specified jurisdiction.
Unpaid Certificate Distribution Amount Shortfall: With respect to
------------------------------------------------
any Payment Date, the aggregate amount, if any, of Certificate Distribu-
tion Amount that was accrued in respect of a prior Payment Date and has
not been distributed to Certificateholders.
Weighted Average Net Loan Rate: With respect to the Mortgage
------------------------------
Loans in the aggregate, and any Due Date, the average of the Net Loan Rate
for each Mortgage Loan as of the last day of the related Billing Cycle
weighted on the basis of the related Asset Balances outstanding as of the
last day of the related Billing Cycle (except for the (______________)
Loans where the Net Loan Rate will represent the average Net Loan Rate
during the related Billing Cycles weighted on the basis of the daily Asset
Balance during the related Billing Cycle for such Mortgage Loans) for each
Mortgage Loan as determined by the Master Servicer in accordance with the
Master Servicer's normal servicing procedures.
MASTER SERVICING AGREEMENT
Dated as of ( )
among
(___________________) Home Equity Loan Trust 199_, Issuer
and
(IndyMac, Inc.), Seller and Master Servicer
and
( ), Trustee
Relating to the Mortgage Loans
Pledged as Collateral for the Issuer's
Asset Backed Notes and Asset Backed Certificates,
Series 199_,
in the Aggregate Initial
Principal Amount of $( )
TABLE OF CONTENTS
-----------------
Page
----
PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . 6
Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . 8
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . 9
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . 10
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Excess Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 11
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FHLMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Loan-to-Value Ratio . . . . . . . . . . . . . . . . . . . . . . . . 17
Master Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . 18
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Mortgage File . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Nonrecoverable Advance . . . . . . . . . . . . . . . . . . . . . . . 20
Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . 20
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 20
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Payment Account . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment Account Deposit Date . . . . . . . . . . . . . . . . . . . .
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . 22
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Prepayment Period . . . . . . . . . . . . . . . . . . . . . . . . . 24
Principal Prepayment . . . . . . . . . . . . . . . . . . . . . . . . 25
Principal Prepayment in Full . . . . . . . . . . . . . . . . . . . . 25
Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Qualified Insurer . . . . . . . . . . . . . . . . . . . . . . . . . 25
Realized Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Relief Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Relief Act Reductions . . . . . . . . . . . . . . . . . . . . . . . 27
REO Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Request for Release . . . . . . . . . . . . . . . . . . . . . . . . 27
Required Insurance Policy . . . . . . . . . . . . . . . . . . . . . 27
Servicing Advances . . . . . . . . . . . . . . . . . . . . . . . . . 29
Servicing Officer . . . . . . . . . . . . . . . . . . . . . . . . . 30
Substitute Mortgage Loan . . . . . . . . . . . . . . . . . . . . . . 30
Substitution Adjustment Amount . . . . . . . . . . . . . . . . . . . 30
Trustee Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Trustee Fee Rate . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2. Conveyance of Mortgage Loans; Representations and Warranties . . . . 31
(a) Conveyance of Mortgage Loans; Retention of Obligation to
Fund Advances Under Credit Line Agreements. . . . . . . . . . . 31
(b) Acceptance by Trustee; Retransfer of Mortgage Loans . . . . . . 36
(c) Documents, Records and Funds in Possession of Master Servicer
to be Held for Trustee . . . . . . . . . . . . . . . . . . . . 38
(d) Representations, Warranties and Covenants of the Seller and
the Master Servicer. . . . . . . . . . . . . . . . . . . . . . 40
(e) Covenants of the Master Servicer. . . . . . . . . . . . . . . . 42
(f) Covenants of the Depositor . . . . . . . . . . . . . . . . . . 43
3. Administration and Servicing of Mortgage Loans . . . . . . . . . . 44
(a) Master Servicer to Service Mortgage Loans . . . . . . . . . . . 44
(b) Subservicing; Enforcement of the Obligations of Servicers . . . 47
(c) Successor Servicers . . . . . . . . . . . . . . . . . . . . . . 48
(d) Liability of the Master Servicer . . . . . . . . . . . . . . . 48
(e) No Contractual Relationship Between Servicers and the Trustee . 49
(f) Rights of the Depositor and the Trustee in Respect of the Master
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(g) Trustee to Act as Master Servicer . . . . . . . . . . . . . . . 49
(h) Collection of Mortgage Loan Payments; Collection Accounts;
Payment Account . . . . . . . . . . . . . . . . . . . . . . . . 50
(i) Collection of Taxes, Assessments and Similar Items; Escrow
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
(j) Access to Certain Documentation and Information Regarding the
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . 54
(k) Permitted Withdrawals from the Note Account . . . . . . . . . . 54
(l) Maintenance of Hazard Insurance; Maintenance of Primary
Insurance Policies . . . . . . . . . . . . . . . . . . . . . . 56
(m) Enforcement of Due-On-Sale Clauses; Assumption Agreements . . . 58
(n) Realization Upon Defaulted Mortgage Loans; Repurchase of Certain
Mortgage Loans . . . . . . . . . . . . . . . . . . . . . . . . 60
(o) Access to Certain Documentation . . . . . . . . . . . . . . . . 63
(p) Annual Statement as to Compliance . . . . . . . . . . . . . . . 64
(q) Annual Independent Public Accountants' Servicing Statement;
Financial Statements. . . . . . . . . . . . . . . . . . . . . . 64
(r) Errors and Omissions Insurance; Fidelity Bonds. . . . . . . . . 65
(s) Master Servicer Monthly Data. . . . . . . . . . . . . . . . . . 65
4. Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5. Servicing Compensation . . . . . . . . . . . . . . . . . . . . . . . 66
6. The Master Servicer. . . . . . . . . . . . . . . . . . . . . . . . . 66
(a) Respective Liabilities of the Depositor and the Master
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
(b) Merger or Consolidation of the Depositor or the Master
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
(c) Limitation on Liability of the Depositor, the Seller, Master
Servicer and Others. . . . . . . . . . . . . . . . . . . . . . 67
(d) Limitation on Resignation of the Master Servicer. . . . . . . . 68
7. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
(a) Events of Default . . . . . . . . . . . . . . . . . . . . . . . 68
(b) Trustee to Act; Appointment of Successor. . . . . . . . . . . . 71
(c) Notification to Securityholders . . . . . . . . . . . . . . . . 72
8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
(a) Term of Master Servicing Agreement . . . . . . . . . . . . . . 72
(b) Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 73
(c) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
(d) Inspection and Audit Rights. . . . . . . . . . . . . . . . . . 74
(e) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 74
(f) Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
(g) Severability of Provisions . . . . . . . . . . . . . . . . . . 76
(h) No Joint Venture . . . . . . . . . . . . . . . . . . . . . . . 77
(i) Recordation of Agreement; Counterparts . . . . . . . . . . . . 77
(j) Limitation of Liability of (owner trustee).
(k) Nonpetition Covenants . . . . . . . . . . . . . . . . . . . . . 78
SCHEDULE I: Mortgage Loan Schedule . . . . . . . . . . . . . . . . . S-I-1
SCHEDULE II: Representations and Warranties of
the Master Servicer . . . . . . . . . . . . . . . . . S-II-1
SCHEDULE III: Representations and Warranties as
to the Mortgage Loans . . . . . . . . . . . . . . . . S-III-1
SCHEDULE IV: Representations and Warranties of
the Issuer . . . . . . . . . . . . . . . . . . . . . S-IV-1
EXHIBITS
EXHIBIT A FORM OF INITIAL CERTIFICATION OF TRUSTEE . . . . . . . . . A-1
EXHIBIT B FORM OF FINAL CERTIFICATION OF TRUSTEE . . . . . . . . . . B-1
EXHIBIT C REQUEST FOR RELEASE
(for Trustee) . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D REQUEST FOR RELEASE (Mortgage Loan
Paid in Full, Repurchased and Released) . . . . . . . . . D-1
MASTER SERVICING AGREEMENT
--------------------------
THIS MASTER SERVICING AGREEMENT is made and entered into as of ( ),
by and among (________________) Home Equity Loan Trust 199_, a statutory
business trust formed under the laws of the State of (Delaware) (the
"Issuer"), (IndyMac, Inc.), a (Delaware) corporation (the "Master Servicer"
or, in its capacity as seller, the "Seller") and ( ), a ( ) corporation (in
its capacity as trustee under the Indenture referred to below, the
"Trustee").
PRELIMINARY STATEMENT
The Issuer was formed for the purpose of issuing asset backed notes
and asset backed certificates secured by mortgage collateral. The Issuer has
entered into a trust indenture, dated as of ( ) (the "Indenture"), between
the Issuer and the Trustee, pursuant to which the Issuer intends to issue its
Home Equity Loan Asset Backed Notes and Home Equity Loan Asset Backed
Certificates, Series 199_, in the aggregate initial principal amount of $( )
(the "Securities"). Pursuant to the Indenture, as security for the
indebtedness represented by such Securities, the Issuer is and will be
pledging to the Trustee, or granting the Trustee a security interest in,
among other things, certain Mortgage Loans and Additional Balances, its
rights under this Agreement, the Payment Account, the Collection Account (and
certain Insurance Policies) (as each such term is defined herein).
The parties desire to enter into this Agreement to provide, among
other things, for the servicing of the Mortgage Loans by the Master Servicer.
The Master Servicer acknowledges that, in order further to secure the
Securities, the Issuer is and will be granting to the Trustee a security
interest in, among other things, its rights under this Agreement, and the
Master Servicer agrees that all covenants and agreements made by the Master
Servicer herein with respect to the Mortgage Loans shall also be for the
benefit and security of the Trustee and Holders of the Securities. For its
services hereunder, the Master Servicer will receive a Master Servicing Fee
(as defined herein) with respect to each Mortgage Loan serviced hereunder.
1. Defined Terms.
-------------
Except as otherwise specified or as the context may otherwise
require, the following terms have the respective meanings set forth below for
all purposes of this Agreement, and the definitions of such terms are
applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such terms:
Advance: The payment required to be made by the Master Servicer with
-------
respect to any Distribution Date pursuant to Section 4, the amount
of any such payment being equal to the aggregate of payments of principal
and interest (net of the Master Servicing Fee and net of any net income in
the case of any REO Property) on the Mortgage Loans that were due on the
related Due Date and not received as of the close of business on the related
Determination Date, less the aggregate amount of any such delinquent
payments that the Master Servicer has determined would constitute
a Nonrecoverable Advance if advanced.
Additional Balance: With respect to any Mortgage Loan, any future Draw
------------------
made by the related Mortgagor pursuant to the related Loan Agreement after
the Cut-off Date in the case of an Initial Loan, or after the Deposit Date in
the case of an Additional Loan; provided, however, that if an Amortization
-------- -------
Event occurs, then any Draw after such Amortization Event shall not be
acquired by the Issuer and shall not be an Additional Balance.
Additional Loans: All home equity line of credit loans sold by the
----------------
Depositor to the Issuer after the Closing Date pursuant to Section 2 of the
Loan Purchase Agreement.
Administration Agreement: The Administration Agreement dated as of
------------------------
___________, 199_ among the Issuer, the Trustee and (______________), as
Administrator, as it may be amended from time to time.
Administrator: (______________), as administrator under the
-------------
Administration Agreement or any successor Administrator appointed pursuant to
the terms of the Administration Agreement.
Agreement: Means this Master Servicing Agreement, as the same may be
---------
amended or supplemented from time to time.
Asset Balance: With respect to any Mortgage Loan, other than a Liqui
-------------
dated Mortgage Loan, and as of any day, the related Cut-off Date Asset
Balance or Deposit Date Asset Balance, (plus (i) any Additional Balances in
----
respect of such Mortgage Loan conveyed to the Issuer,) minus ((ii)) all
-----
collections credited as principal in respect of any such Mortgage Loan in
accordance with the related Loan Agreement (except for any such collections
that are allocable to the Excluded Amount) and applied in reduction of the
Asset Balance thereof. For purposes of this definition, a Liquidated
Mortgage Loan shall be deemed to have an Asset Balance equal to the Asset
Balance of the related Mortgage Loan immediately prior to the final recovery
of all related Liquidation Proceeds and an Asset Balance of zero thereafter.
Assignment of Mortgage: With respect to any Mortgage, an assignment,
----------------------
notice of transfer or equivalent instrument, in recordable form, sufficient
under the laws of the jurisdiction in which the related Mortgaged Property is
located to reflect the conveyance of the Mortgage, which assignment, notice
of transfer or equivalent instrument may be in the form of one or more blanket
assignments covering the Mortgage Loans secured by Mortgaged Properties
located in the same jurisdiction.
Bankruptcy Code: Means the United States Bankruptcy Reform Act of 1978,
---------------
as amended.
Basic Documents: The Trust Agreement, the Certificate of Trust, the
---------------
Indenture, the Loan Purchase Agreement, the Insurance Agreement, the
Administration Agreement, the Master Servicing Agreement, the Custodial
Agreement and the other documents and certificates delivered in connection
with any of the above.
Billing Cycle: With respect to any Mortgage Loan and Due Date, the
-------------
calendar month preceding such Due Date.
Business Day: Any day other than (i) a Saturday or a Sunday or (ii) a
------------
day on which banking institutions in the State of New York, (_______________)
or (_____________) are required or authorized by law to be closed.
Certificateholder: The Person in whose name a Certificate is registered
-----------------
in the Certificate Register except that, any Certificate registered in the
name of the Issuer, the Owner Trustee or the Trustee or any Affiliate of any
of them shall be deemed not to be outstanding and the registered holder will
not be considered a Certificateholder or a holder for purposes of giving any
request, demand, authorization, direction, notice, consent or waiver under
the Indenture or the Trust Agreement provided that, in determining whether
the Trustee or the Owner Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Certificates that the Trustee or the Owner Trustee knows to be so owned shall
be so disregarded. Owners of Certificates that have been pledged in good
faith may be regarded as Holders if the pledgee establishes to the
satisfaction of the Trustee or the Owner Trustee, as the case may be, the
pledgee's right so to act with respect to such Certificates and that the
pledgee is not the Issuer, any other obligor upon the Certificates or any
Affiliate of any of the foregoing Persons.
Certificates: The Home Equity Loan Asset Backed Certificates, Series
------------
199_-_, each evidencing undivided beneficial interests in the Issuer and
executed by the Owner Trustee in substantially the form set forth in Exhibit
A to the Trust Agreement.
(IndyMac): Means (IndyMac, Inc.), a (Delaware) corporation, and its
---------
successors and assigns.
Class: The Notes or the Certificates, as the case may be.
-----
Closing Date: ___________, 199_.
------------
Code: The Internal Revenue Code of 1986, as amended, and the rules and
----
regulations promulgated thereunder.
Collateral: The meaning specified in the Granting Clause of the
----------
Indenture.
Collateral Value: With respect to any Mortgaged Property, (either (x)
----------------
the value set forth in an appraisal of such Mortgaged Property made to
establish compliance with the underwriting criteria then in effect in
connection with the later of the application for the Mortgage Loan secured by
such Mortgaged Property or any subsequent increase or decrease in the related
Credit Limit or to reduce or eliminate the amount of any primary insurance,
or (y) if the sales price of the Mortgaged Property is considered in accor-
dance with the underwriting criteria applicable to the Mortgage Loan, the
lesser of (i) the appraised value referred to in (x) above and (ii) the sales
price of such Mortgaged Property).
Collection Account: Means the Eligible Account or Accounts established
------------------
and maintained by the Master Servicer in accordance with Section 3(h)(iii).
Collection Period: With respect to any Mortgage Loan and Payment Date
-----------------
other than the first Payment Date, the calendar month preceding any such
Payment Date and with respect to the first Payment Date, the period from
_____________ through (___________).
Combined Loan-to-Value Ratio: With respect to any Mortgage Loan and any
----------------------------
date, (the percentage equivalent of a fraction, the numerator of which is the
sum of (i) the Credit Limit (as of the date of execution of the related
Credit Line Agreement (or any subsequent date as of which such Credit Limit
may be determined in connection with an increase of the Credit Limit) and
(ii) the outstanding principal balance as of the date of the origination of
such Mortgage Loan (or any subsequent date as of which such outstanding
principal balance may be determined in connection with an increase or
decrease in the Credit Limit or to reduce the amount of primary insurance for
such Mortgage Loan) of any mortgage loan or mortgage loans that are secured
by liens on the Mortgaged Property that are senior or subordinate to the
Mortgage and the denominator of which is the Collateral Value of the related
Mortgaged Property).
Corporate Trust Office: The designated office of the Trustee in the
----------------------
State of ________ at which at any particular time its corporate trust
business with respect to this Agreement shall be administered, which office
at the date of the execution of this Agreement is located at
__________________________________
(Attn: ____________________________________, facsimile no. ________________,
and which is the address to which notices to and correspondence with the
Trustee should be directed.
Credit Limit: With respect to any Mortgage Loan, the maximum Asset
------------
Balance permitted under the terms of the related Loan Agreement.
Custodial Agreement: Any Custodial Agreement between the Custodian, the
-------------------
Trustee, the Issuer and the Master Servicer relating to the custody of the
Mortgage Loans and the Related Documents.
Custodian: With respect to the Mortgage Loans, (______________), a
---------
(_______________), and its successors and assigns.
Cut-Off Date: With respect to the Initial Loans ________, 199_.
------------
DCR: Means Duff & Phelps Credit Rating Company, or any successor
---
thereto. If DCR is designated as a Rating Agency in the Indenture, for
purposes of Section 8(c) the address for notices to DCR shall be Duff &
Phelps Credit Rating Company, 55 E. Monroe Street, 35th Floor, Chicago,
Illinois 60603, Attention: MBS Monitoring, or such other address as DCR may
hereafter furnish to the Issuer and the Master Servicer.
Deleted Mortgage Loan: Has the meaning ascribed thereto in Section 5.
---------------------
(Deposit Date: The applicable date as of which any Additional Loan is
------------
sold to the Issuer pursuant to the Loan Purchase Agreement.
Deposit Date Asset Balance: With respect to any Additional Loan, the
--------------------------
Asset Balance thereof as of the Deposit Date.)
Depositor: (IndyMac Depositor), a Delaware corporation, or its
---------
successor in interest.
Determination Date: As to any Distribution Date, the ____ day of each
------------------
month or if such ____ day is not a Business Day the next preceding Business
Day; provided, however, that if such ____ day or such Business Day, whichever
-------- -------
is applicable, is less than two Business Days prior to the related
Distribution Date, the Determination Date shall be the first Business Day
which is two Business Days preceding such Distribution Date.
Distribution Date: The ____ day of each calendar month after the
-----------------
initial issuance of the Certificates, or if such ____ day is not a Business
Day, the next succeeding Business Day, commencing in____________, 199_.
Draw: With respect to any Mortgage Loan, a borrowing by the Mortgagor
----
under the related Loan Agreement.
Due Date: With respect to the Mortgage Loans, the (__)th day of the
--------
month.
Eligible Account: Any of (i) an account or accounts maintained with a
----------------
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a
depository institution or trust company that is the principal subsidiary of a
holding company, the debt obligations of such holding company) have the
highest short-term ratings of each Rating Agency at the time any amounts are
held on deposit therein, or (ii) an account or accounts in a depository
institution or trust company in which such accounts are insured by the FDIC
(to the limits established by the FDIC) and the uninsured deposits in which
accounts are otherwise secured such that, as evidenced by an Opinion of
Counsel delivered to the Trustee and to each Rating Agency, the
Securityholders have a claim with respect to the funds in such account or a
perfected first priority 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 or trust company in which such account is maintained, or (iii) a
trust account or accounts maintained with (a) the trust department of a
federal or state chartered depository institution or (b) a trust company,
acting in its fiduciary capacity or (iv) any other account acceptable to each
Rating Agency. Eligible Accounts may bear interest, and may include, if
otherwise qualified under this definition, accounts maintained with the
Trustee.
Eligible Substitute Mortgage Loan: A Mortgage Loan substituted by the
---------------------------------
Depositor 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 the outstanding principal balance of the Deleted
Mortgage Loan (the amount of any shortfall to be deposited by the Seller in
the Collection Account in the month of substitution); (ii) have a Loan Rate
not less than the Loan Rate of the Deleted Mortgage Loan and not more than
__% in excess of the Loan Rate of such Deleted Mortgage Loan; (iii) have a
Loan Rate based on the same index with adjustments to such Loan Rate made on
the same interest rate adjustment date as that of the Deleted Mortgage Loan;
(iv) have a Margin that is not less than the Margin of the Deleted
Mortgage Loan and not more than _____ basis points higher than the
Margin for the Deleted Mortgage Loan; (v) have a mortgage of the same
or higher level of priority as the mortgage relating to the Deleted
Mortgage Loan; (vi) have a remaining term to maturity not more
than ____ months earlier and not more than ____ months later than the
remaining term to maturity of the Deleted Mortgage Loan; (vii) comply with
each representation and warranty as to the Mortgage Loans set forth in the
Loan Purchase Agreement (deemed to be made as of the date of substitution);
(viii) in general, have an original Combined Loan-to-Value Ratio not greater
than that of the Deleted Mortgage Loans; and (ix) satisfy certain other
conditions specified in the Purchase Agreement. To the extent the Principal
Balance of an Eligible Substitute Mortgage Loan is less than the Principal
Balance of the related Deleted Mortgage Loan, the Seller will be required to
make a deposit tot he Collection Account equal to such difference; and (x)
not be __ days or more delinquent.
Escrow Account: Means the Eligible Account or Accounts established and
--------------
maintained pursuant to Section 3(i) hereof.
Excess Proceeds: With respect to any Liquidated Mortgage Loan, the
---------------
amount, if any, by which the sum of any Liquidation Proceeds of such Mortgage
Loan received in the calendar month in which such Mortgage Loan became a
Liquidated Mortgage Loan, net of any amounts previously reimbursed to the
Master Servicer as Nonrecoverable Advance(s) with respect to such Mortgage
Loan pursuant to Section 3(k)(i)(C), exceeds (i) the unpaid principal balance
of such Liquidated Mortgage Loan as of the Due Date in the month in which
such Mortgage Loan became a Liquidated Mortgage Loan plus (ii) accrued
interest at the Mortgage Rate from the Due Date as to which interest was last
paid or advanced (and not reimbursed) to Securityholders up to the Due Date
applicable to the Distribution Date immediately following the calendar month
during which such liquidation occurred.
FDIC: The Federal Deposit Insurance Corporation, or any successor
----
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
-----
instrumentality of the United States created and existing under Title III of
the Emergency Home Finance Act of 1970, as amended, or any successor thereto.
FIRREA: The Financial Institutions Reform, Recovery, and Enforcement
------
Act of 1989.
Fitch: Fitch IBCA, Inc., or any successor thereto. If Fitch is
-----
designated as a Rating Agency in the Preliminary Statement, for purposes of
Section 8(c) the address for notices to Fitch shall be Fitch Investors
Service, L.P., One State Street Plaza, New York, New York 10004, Attention:
_______________________________________, or such other address as Fitch may
hereafter furnish to the Depositor and the Master Servicer.
FNMA: The 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.
Gross Margin: With respect to any Mortgage Loan, the percentage set
------------
forth as the "Gross Margin" for such Mortgage Loan on the Mortgage Loan
Schedule, as adjusted from time to time with respect to any (______________)
Loan in accordance with the terms of this Agreement.
Holder: Any of the Noteholders or Securityholders.
------
Increased Senior Lien Limitation: shall have the meaning set forth in
--------------------------------
Section 3(a).
Indenture: Means the trust indenture, dated as of the date hereof,
---------
between the Issuer and the Trustee, as such Indenture may be amended or
supplemented from time to time in accordance with its terms.
(Insurance Agreement: The insurance and reimbursement agreement dated
-------------------
as of ______________, 199_ among the Master Servicer, the Seller, the
Depositor, the Issuer and the Credit Enhancer, including any amendments and
supplements thereto.)
Insurance Policy: Means, with respect to any Mortgage Loan, any
----------------
insurance policy, including all riders and endorsements thereto in effect,
including any replacement policy or policies for any Insurance Policies.
Insurance Proceeds: Proceeds paid by any insurer pursuant to any
------------------
insurance policy covering a Mortgage Loan which are required to be remitted
to the Master Servicer, or amounts required to be paid by the Master Servicer
pursuant to the last sentence of Section ( ) of the Master
Servicing Agreement, net of any component thereof (i) covering any expenses
incurred by or on behalf of the Master Servicer in connection with obtaining
such proceeds, (ii) that is applied to the restoration or repair of the
related Mortgaged Property, (iii) released to the Mortgagor in accordance
with the Master Servicer's normal servicing procedures or (iv) required to be
paid to any holder of a mortgage senior to such Mortgage Loan.
Interest Period: With respect to any Payment Date other than the first
---------------
Payment Date, the period beginning on the preceding Payment Date and ending
on the day preceding such Payment Date, and in the case of the first
Payment Date, the period beginning on the Closing Date and ending on the
day preceding the first Payment Date.
Issuer: (________________) Home Equity Loan Trust 199_-_, a Delaware
------
business trust, or its successor in interest.
Issuer Request: A written order or request signed in the name of the
--------------
Issuer by any one of its Authorized Officers and delivered to the Trustee.
Lien: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
----
assignment, participation, deposit arrangement, encumbrance, lien (statutory
or other), preference, priority right or interest or other security agreement
or preferential arrangement of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the UCC (other
than any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing;
provided, however, that any assignment pursuant to Section ( ) of the
- -------- -------
Master Servicing Agreement shall not be deemed to constitute a Lien.
Lifetime Rate Cap: With respect to each Mortgage Loan with respect to
-----------------
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Loan Rate permitted over the life of such Mortgage Loan under the terms of
such Mortgage Note, as set forth on the Mortgage Loan Schedule and initially
as set forth on Exhibit A to the Master Servicing Agreement.
Liquidated Mortgage Loan: With respect to any Payment Date, any Mort
------------------------
gage Loan in respect of which the Master Servicer has determined, in
accordance with the servicing procedures specified in the Master Servicing
Agreement, as of the end of the related Collection Period that substantially
all Liquidation Proceeds which it reasonably expects to recover with respect
to the disposition of the related REO have been recovered.
Liquidation Expenses: Out-of-pocket expenses (exclusive of overhead)
--------------------
which are incurred by or on behalf of the Master Servicer in connection with
the liquidation of any Mortgage Loan and not recovered under any insurance
policy, such expenses including, without limitation, legal fees and expenses,
any unreimbursed amount expended (including, without limitation, amounts
advanced to correct defaults on any mortgage loan which is senior to such
Mortgage Loan and amounts advanced to keep current or pay off a mortgage loan
that is senior to such Mortgage Loan) respecting the related Mortgage Loan
and any related and unreimbursed expenditures for real estate property taxes
or for property restoration, preservation or insurance against
casualty loss or damage.
Liquidation Loss Amounts: With respect to any Payment Date and any
------------------------
Mortgage Loan that became a Liquidated Mortgage Loan during the related
Collection Period, the unrecovered portion of the related Asset Balance
thereof at the end of such Collection Period, after giving effect to the Net
Liquidation Proceeds applied in reduction of the Asset Balance.
Liquidation Proceeds: Proceeds (including Insurance Proceeds (but not
--------------------
including amounts drawn under the Credit Enhancement Instrument)) received in
connection with the liquidation of any Mortgage Loan or related REO, whether
through trustee's sale, foreclosure sale or otherwise.
Loan Agreement: With respect to any Mortgage Loan, the credit line
--------------
account agreement executed by the related Mortgagor and any amendment or
modification thereof.
Loan Purchase Agreement: The Loan Purchase Agreement, dated as of the
-----------------------
Cut-off Date, between the Seller, as seller, and the Depositor, as purchaser,
with respect to the Mortgage Loans.
Loan Rate: With respect to any Mortgage Loan and any day, the sum of
---------
the Index Rate and the Margin.
Loan-to-Value Ratio: With respect to any Mortgage Loan and as to any
-------------------
date of determination, (i) the principal balance of such Mortgage Loan
divided by (ii) the Collateral Value of the related Mortgaged Property.
Margin: The (spread).
------
Master Servicer: Means (IndyMac, Inc.), a (Delaware) corporation, and
---------------
its successors and assigns, in its capacity as master servicer hereunder.
Master Servicer Advance Date: Means as to any Distribution Date, 12:30
----------------------------
p.m. Pacific time on the Business Day immediately preceding such Distribution
Date.
Master Servicing Fee: As to each Mortgage Loan and any Distribution
--------------------
Date, an amount payable out of each full payment of interest received on such
Mortgage Loan and equal to one-twelfth of the Master Servicing Fee Rate
multiplied by the Stated Principal Balance of such Mortgage Loan as of the
Due Date in the month of such Distribution Date (prior to giving effect to
any Scheduled Payments due on such Mortgage Loan on such Due Date), subject
to reduction as provided in Section 5.
Master Servicing Fee Rate: Means with respect to each Mortgage Loan,
-------------------------
( )% per annum.
Moody's: Moody's Investors Service, Inc., or any successor thereto.
-------
If Moody's is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 8(c) the address for notices to Moody's shall be Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007,
Attention: ___________________________________, or such other address as
Moody's may hereafter furnish to the Depositor or the Master Servicer.
Mortgage: The mortgage, deed of trust or other instrument creating a
--------
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.
Mortgage File: The file containing the Related Documents pertaining to
-------------
a particular Mortgage Loan and any additional documents required to be added
to the Mortgage File pursuant to the Loan Purchase Agreement or the Master
Servicing Agreement.
Mortgage Loan Schedule: With respect to any date, the schedule of
----------------------
Mortgage Loans included in the Trust Estate on such date. The initial
schedule of Mortgage Loans as of the Cut-Off Date is the schedule set forth
in Exhibit A of the Master Servicing Agreement, which schedule sets forth as
to each Mortgage Loan (i) the Cut-Off Date Trust Balance, (ii) the Credit
Limit, (iii) the Gross Margin, (iv) the name of the Mortgagor, (v) the
Lifetime Rate Cap, if any, (vi) the loan number, (vii) an indication as to
the applicable Mortgage Loan Group, and (viii) the lien position of the
related Mortgage. The Mortgage Loan Schedule will be amended from time to
time by annex to reflect Additional Loans.
Mortgage: Means the mortgage, deed of trust or other 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 listed in Section 2(a)(i) hereof
-------------
pertaining to a particular Mortgage Loan and any additional documents
delivered to the Trustee to be added to the Mortgage File pursuant to this
Agreement.
Mortgage Loans: At any time, collectively, all Initial Loans (and
--------------
Additional Loans, in each case including Additional Balances, if any, that
have been sold to the Depositor under the Loan Purchase Agreement,) in each
case together with the Related Documents, and that remain subject to the
terms thereof. Such schedule shall also set forth the total of the amounts
described under (iv) and (v) above for all of the Mortgage Loans.
Mortgage Note: With respect to a Mortgage Loan, the Loan Agreement
-------------
pursuant to which the related mortgagor agrees to pay the indebtedness
evidenced thereby and secured by the related Mortgage as modified or amended.
Mortgaged Property: The underlying property, including real property
------------------
and improvements thereon, securing a Mortgage Loan.
Mortgagor: The obligor or obligors under a Loan Agreement.
---------
Net Liquidation Proceeds: With respect to any Liquidated Mortgage Loan,
------------------------
Liquidation Proceeds net of Liquidation Expenses.
Net Loan Rate: With respect to any Mortgage Loan and any day, the
-------------
related Loan Rate less the related Servicing Fee Rate.
Nonrecoverable Advance: Any portion of an Advance previously made or
----------------------
proposed to be made by the Master Servicer that, in the good faith judgment
of the Master Servicer, will not be ultimately recoverable by the Master
Servicer from the related Mortgagor, related Liquidation Proceeds or
otherwise.
Notes: The Notes designated as the "Notes" in the Indenture.
-----
Noteholder or Holder: Means the Person in whose name a Note is
---------- ------
registered in the Note Register (as defined in the Indenture).
Officer's Certificate: A certificate (i) signed by the Chairman of the
---------------------
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor or the Master Servicer, or (ii), if provided for
in this Agreement, signed by a Servicing Officer, as the case may be, and
delivered to the Depositor and the Trustee, as the case may be, as required
by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may be counsel
------------------
for the Depositor or the Master Servicer, including, in-house counsel,
reasonably acceptable to the Trustee; provided, however, that with respect
-------- -------
to the interpretation or application of the REMIC Provisions, such counsel
must (i) in fact be independent of the Depositor and the Master Servicer,
(ii) not have any direct financial interest in the Depositor or the Master
Servicer or in any affiliate of either, and (iii) not be connected with
the-Depositor or the Master Servicer as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar
functions.
Outstanding: With respect to the Certificates as of any date of
-----------
determination, all Certificates theretofore executed and authenticated under
this Agreement except:
(i) Certificates theretofore canceled by the Trustee or delivered
to the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of which other
Certificates have been executed and delivered by the Trustee
pursuant to this Agreement.
Owner Trust Estate: The corpus of the Issuer created by the Trust
------------------
Agreement which consists of the Mortgage Loans, such assets as shall from
time to time be deposited in the Collection Account and/or the Payment
Account allocable to the Mortgage Loans in accordance with the Trust
Agreement, property that secured a Mortgage Loan and that has become REO,
certain hazard insurance policies maintained by the Mortgagors or by or on
behalf of the Master Servicer in respect of the Mortgage Loans, (the Credit
Enhancement Instrument,) an assignment of the Depositor's rights under the
Loan Purchase Agreement and the obligation of the Depositor to purchase
Additional Balances under the Loan Purchase Agreement and all proceeds of
each of the foregoing.
Owner Trustee: (______________), and its successors and assigns or any
-------------
successor owner trustee appointed pursuant to the terms of the Trust
Agreement.
Paying Agent: Any paying agent or co-paying agent appointed pursuant
------------
to Section 3.03 of the Indenture, which initially shall be (______________).
Payment Account: The account established by the Trustee pursuant to
---------------
Section 8.02 of the Indenture and Section ( ) of the Master Servicing
Agreement. The Payment Account shall be an Eligible Account.
Payment Account: The separate Eligible Account created and maintained
---------------
by the Trustee pursuant to Section 3(h) in the name of the Trustee for the
benefit of the Securityholders and designated "_________________________ in
trust for registered holders of Home Equity Loan Trust Asset Backed
Certificates, Series 199_-_." Funds in the Payment Account shall be held in
trust for the Securityholders for the uses and purposes set forth in this
Agreement.
Payment Account Deposit Date: As to any Distribution Date, 12:30 p.m.
----------------------------
Pacific time on the Business Day immediately preceding such Distribution
Date.
Payment Date: The (___) day of each month, or if such day is not a
------------
Business Day, then the next Business Day.
Percentage Interest: With respect to any Note, the percentage obtained
-------------------
by dividing the Security Balance of such Note by the aggregate of the
Security Balances of all Notes of the same Class. With respect to any
Certificate, the percentage obtained by dividing the denomination specified
on such Certificate by the Initial Principal Balance of the Certificates.
Permitted Investments: At any time, any one or more of the following
---------------------
obligations and securities: (i) obligations of the United States or any
agency thereof, provided such obligations are backed by the full faith and
credit of the United States; (ii) general obligations of or obligations
guaranteed by any state of the United States or the District of Columbia
receiving the highest long-term debt rating of each Rating Agency rating the
related Series of Securities, or such lower rating as will not result in the
downgrading or withdrawal of the ratings then assigned to the Securities by
each such Rating Agency; (iii) commercial or finance company paper
(including, without limitation, commercial paper issued by (IndyMac, Inc.) or
any of its affiliates) which is then receiving the highest commercial or
finance company paper rating of each such Rating Agency, or such lower rating
as will not result in the downgrading or withdrawal of the ratings then
assigned to the Securities by each such Rating Agency; (iv) certificates of
deposit, demand or time deposits, or bankers' acceptances issued by any
depository institution or trust company incorporated under the laws of the
United States or of any state thereof and subject to supervision and
examination by federal and/or state banking authorities, provided that the
commercial paper and/or long term unsecured debt obligations of such
depository institution or trust company (or in the case of the principal
depository institution in a holding company system, the commercial paper or
long-term unsecured debt obligations of such holding company, but only if
Moody's Investors Service, Inc. ("Moody's") is not a Rating Agency) are then
rated one of the two highest long-term and the highest short-term ratings of
each such Rating Agency for such securities, or such lower ratings as will
not result in the downgrading or withdrawal of the rating then assigned to
the Securities by any such Rating Agency; (iv) demand or time deposits or
certificates of deposit issued by any bank or trust company or savings
institution to the extent that such deposits are fully insured by the FDIC;
(v) guaranteed reinvestment agreements issued by any bank, insurance company
or other corporation containing, at the time of the issuance of such
agreements, such terms and conditions as will not result in the downgrading
or withdrawal of the rating then assigned to the Securities by any such
Rating Agency; (vi) repurchase obligations with respect to any security
described in clauses (i) and (ii) above, in either case entered into with a
depository institution or trust company (acting as principal) described in
clause (iv) above; (vii) securities (other than stripped bonds,
stripped coupons or instruments sold at a purchase price in excess of 115% of
the face amount thereof) bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any state
thereof which, at the time of such investment, have one of the two highest
ratings of each Rating Agency (except if the Rating Agency is Moody's, such
rating shall be the highest commercial paper rating of Moody's for any such
securities), or such lower rating as will not result in the downgrading or
withdrawal of the rating then assigned to the Securities by any such Rating
Agency, as evidenced by a signed writing delivered by each such Rating
Agency; and (viii) such other investments having a specified stated maturity
and bearing interest or sold at a discount acceptable to each Rating Agency
as will not result in the downgrading or withdrawal of the rating then
assigned to the Securities of such Series by any such Rating Agency, as
evidenced by a signed writing delivered by each such Rating Agency; provided
--------
that no such instrument shall be a Permitted Investment if such instrument
evidences the right to receive interest only payments with respect to the
obligations underlying such instrument.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
(Policy: The irrevocable and unconditional limited financial guaranty
------
insurance policy number (__________), dated as of the Closing Date, issued by
the Credit Enhancer to the Trustee for the benefit of the Noteholders and to
the Certificate Paying Agent as agent for the Issuer for the benefit of the
Securityholders.)
Pool Balance: With respect to any date, the aggregate of the Asset
------------
Balances of all Mortgage Loans as of such date.
Prepayment Period: As to any Distribution Date, the period from the
-----------------
__th day of the calendar month preceding the month of such Distribution Date
(or, in the case of the first Distribution Date, from the Cut-off Date)
through the __th of the month of such Distribution Date.
Principal Balance: With respect to any Payment Date, the Initial Prin
-----------------
cipal Balance thereof, reduced by all distributions of principal thereon
prior to such Payment Date.
Principal Prepayment: Any payment of principal by a Mortgagor on a
--------------------
Mortgage Loan that is received in advance of its scheduled Due Date and is
not accompanied by an amount representing scheduled interest due on any date
or dates in any month or months subsequent to the month of prepayment.
Partial Principal Prepayments shall be applied by the Master Servicer
in accordance with the terms of the related Mortgage Note.
Principal Prepayment in Full: Any Principal Prepayment made by a
----------------------------
Mortgagor of the entire principal balance of a Mortgage Loan.
Prospectus Supplement: Means the Prospectus Supplement dated ( )
---------------------
relating to the Notes.
Purchase Price: With respect to any Mortgage Loan required to be
--------------
purchased by the Seller pursuant to Section 2(a)(ii) or 2(d)(iv) hereof or
purchased at the option of the Master Servicer pursuant to Section 3(n), (an
amount equal to the sum of (i) 100% of the unpaid principal balance of the
Mortgage Loan on the date of such purchase and (ii) unpaid interest thereon
accrued through the Due Date occurring in the calendar month following the
month in which such purchase occurs, computed at the applicable Loan Rate;
provided that if at the time of purchase the Seller is the Master Servicer
- --------
or the purchase is otherwise by the Master Servicer, (x) the amount described
in clause (ii) shall be computed at the Net Loan Rate and (y) the Purchase
Price shall be reduced by any unreimbursed Advances with respect to such
Mortgage Loan.)
Qualified Insurer: A mortgage guaranty insurance company duly qualified
-----------------
as such under the laws of the state of its principal place of business and
each state having jurisdiction over such insurer in connection with the
insurance policy issued by such insurer, duly authorized and licensed in such
states to transact a mortgage guaranty insurance business in such states and
to write the insurance provided by the insurance policy issued by it,
approved as a FNMA-approved mortgage insurer and having a claims paying
ability rating of at least "__" or equivalent rating by a nationally
recognized statistical rating organization. Any replacement insurer with
respect to a Mortgage Loan must have at least as high a claims paying ability
rating as the insurer it replaces had on the Closing Date.
Rating Agency: Any nationally recognized statistical rating
-------------
organization, or its successor, that rated the Securities at the request of
the Depositor at the time of the initial issuance of the Securities.
Initially, (________) or (__________). If such organization or a successor
is no longer in existence, "Rating Agency" shall be such nationally
recognized statistical rating organization, or other comparable Person,
designated by the Depositor, notice of which designation shall be given to
the Trustee. References herein to the highest short term unsecured rating
category of a Rating Agency shall mean (___) or better in the case of
(__________)and (___) or better in the case of (_____) and in the case of any
other Rating Agency shall mean such equivalent ratings. References herein to
the highest long-term rating category of a Rating Agency shall
mean "(___)" in the case of (__________) and (_____) in the
case of (________) and in the case of any other Rating
Agency, such equivalent rating.
Realized Loss: With respect to each Liquidated Mortgage Loan, an amount
-------------
(not less than zero or more than the Stated Principal Balance of the Mortgage
Loan) as of the date of such liquidation, equal to (i) the Stated Principal
Balance of the Liquidated Mortgage Loan as of the date of such liquidation,
plus (ii) interest at the Adjusted Net Mortgage Rate from the Due Date as to
which interest was last paid or advanced (and not reimbursed) to
Securityholders up to the Due Date in the month in which Liquidation Proceeds
are required to be distributed on the Stated Principal Balance of such
Liquidated Mortgage Loan from time to time, minus (iii) the Liquidation
Proceeds, if any, received during the month in which such liquidation
occurred, to the extent applied as recoveries of interest at the Adjusted Net
Mortgage Rate and to principal of the Liquidated Mortgage Loan. With respect
to each Mortgage Loan which has become the subject of a Deficient Valuation,
if the principal amount due under the related Mortgage Note has been reduced,
the difference between the principal balance of the Mortgage Loan outstanding
immediately prior to such Deficient Valuation and the principal balance of
the Mortgage Loan as reduced by the Deficient Valuation. With respect to
each Mortgage Loan which has become the subject of a Debt Service Reduction
and any Distribution Date, the amount, if any, by which the principal portion
of the related Scheduled Payment has been reduced.
Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
----------
amended.
Relief Act Reductions: With respect to any Distribution Date and any
---------------------
Mortgage Loan as to which there has been a reduction in the amount of
interest collectible thereon for the most recently ended calendar month as a
result of the application of the Relief Act, the amount, if any, by which (i)
interest collectible on such Mortgage Loan for the most recently ended
calendar month is less than (ii) interest accrued thereon for such month
pursuant to the Mortgage Note.
REO Property: A Mortgaged Property acquired by the Issuer through
------------
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Mortgage Loan.
Repurchase Price: With respect to any Mortgage Loan required to be
----------------
repurchased on any date pursuant to the Loan Purchase Agreement or purchased
by the Master Servicer pursuant to the Master Servicing Agreement, an amount
equal to the sum of (i) 100% of the Asset Balance thereof (without reduction
for any amounts charged off) and (ii) unpaid accrued interest at the Loan
Rate on the outstanding principal balance thereof from the Due Date to which
interest was last paid by the Mortgagor to the first day of the month
following the month of purchase. No portion of any Repurchase Price
shall be included in the Excluded Amount for any Payment Date.
Request for Release: The Request for Release submitted by the Master
-------------------
Servicer to the Trustee, substantially in the form of Exhibits C and D, as
appropriate.
Required Insurance Policy: With respect to any Mortgage Loan, any
-------------------------
insurance policy that is required to be maintained from time to time under
this Agreement.
SAIF: Means the Savings Association Insurance Fund, or any successor
----
thereto.
S&P: Means Standard & Poor's Ratings Group, a division of McGraw-Hill
---
Inc. If S&P is designated as a Rating Agency in the Indenture, for purposes
of Section 8(c) the address for notices to S&P shall be Standard & Poor's
Ratings Group, 26 Broadway, 15th Floor, New York, New York 10004, Attention:
Mortgage Surveillance Monitoring, or such other address as S&P may hereafter
furnish to the Issuer and the Master Servicer.
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations promulgated thereunder.
Security: Any of the Certificates or Notes.
--------
Securityholder or Holder: Any Noteholder or any Certificateholder.
-------------- ------
Seller: (IndyMac,Inc.), and its successors and assigns.
------
Servicer Advance: Means the meaning ascribed to such term in Section
----------------
3(h)(iv).
Servicing Account: Means the separate Eligible Account or Accounts
-----------------
created and maintained pursuant to Section 3(h)(ii).
Servicing Advances: All customary, reasonable and necessary "out of
------------------
pocket" costs and expenses incurred in the performance by the Master Servicer
of its servicing obligations, including, but not limited to, the cost of (i)
the preservation, restoration and protection of a Mortgaged Property, (ii)
any expenses reimbursable to the Master Servicer pursuant to Section 3(n) and
any enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3(l).
Servicing Default: Means a servicing default as described under Section
-----------------
7(a) of this Agreement.
Servicing Fee: Means, as to each Mortgage Loan and any Distribution
-------------
Date, an amount equal to one month's interest at the applicable Servicing Fee
Rate on the Stated Principal Balance of such Mortgage Loan.
Servicing Fee Rate: Means, with respect to any Mortgage Loan, the per
------------------
annum rate set forth in the Mortgage Loan Schedule for such Mortgage Loan.
Servicing Officer: Any officer of the Master Servicer involved in, or
-----------------
responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished
to the Trustee by the Master Servicer on the Closing Date pursuant to this
Agreement, as such list may from time to time be amended.
Subservicer: Any Person with whom the Master Servicer has entered into
-----------
a Subservicing Agreement as a Subservicer by the Master Servicer pursuant to
Section 3(b).
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 ( ) of the Master
Servicing Agreement.
Subservicing Fee: With respect to any Mortgage Loan and any Collection
----------------
Period, the fee retained monthly by the Subservicer (or, in the case of a
nonsubserviced Mortgage Loan, by the Master Servicer) equal to the product of
(i) the Subservicing Fee Rate divided by 12 and (ii) the aggregate Asset
Balance of the Mortgage Loans as of the first day of such Collection Period.
Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for
------------------------
a Deleted Mortgage Loan which must, on the date of such substitution, as
confirmed in a Request for Release, substantially in the form of Exhibit C,
(i) have a Stated Principal Balance, after deduction of the principal portion
of the Scheduled Payment due in the month of substitution, not in excess of,
and not more than 10% less than the Stated Principal Balance of the Deleted
Mortgage Loan; (ii) be accruing interest at a rate no lower than and not more
than 1% per annum higher than, that of the Deleted Mortgage Loan; (iii) have
a Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (iv)
have a remaining term to maturity no greater than (and not more than one year
less than that of) the Deleted Mortgage Loan; and (v) comply with each
representation and warranty set forth in Section 2(d) hereof.
Substitution Adjustment Amount: The meaning ascribed to such term
------------------------------
pursuant to Section 2(d)(iv).
Trust Agreement: Means the Trust Agreement, dated as of ( ), between
---------------
the Depositor and the Owner Trustee, as such Trust Agreement may be amended
or supplemented from time to time.
Trustee: Shall mean (______________), and its successors and assigns
-------
or any successor trustee appointed pursuant to the terms of the Indenture.
Trustees: Shall mean the Trustee and the Owner Trustee.
--------
Trust Estate: Shall have the meaning ascribed to such term in the
------------
Indenture.
UCC: The Uniform Commercial Code, as amended from time to time, as in
---
effect in any specified jurisdiction.
Withdrawal Date: Means the ____ day of each month, or if such day is
---------------
not a Business Day, the next preceding Business Day.
2. Conveyance of Mortgage Loans; Representations and Warranties.
------------------------------------------------------------
(a) Conveyance of Mortgage Loans; Retention of Obligation to Fund
-------------------------------------------------------------
Advances Under Credit Line Agreements.
-------------------------------------
The Depositor, concurrently with the execution and delivery of this
Agreement, does hereby transfer, assign, set over and otherwise convey to the
Trust without recourse (subject to Sections 2(b)and 2(d) all of its right,
title and interest in and to (i) each Mortgage Loan, including its Asset
Balance (including all Additional Balances) and all collections in respect
thereof (received) (due) on or after the Cut-off Date ((excluding payments in
respect of accrued interest (due) (received) prior to the Cut-off Date (or
due in the month of ____________))); (ii) property that secured a Mortgage
Loan that is acquired by foreclosure or deed in lieu of foreclosure; (iii)
the Depositor's rights under the Loan Purchase Agreement; (iv) (the
Depositor's rights under the hazard insurance policies,) (v) the Collection
Account (excluding net earnings thereon); (vi) the Policy, (vii) the Payment
Account and (viii) all other assets included or to be included in the Trust
for the benefit of Securityholders; provided, however, neither the Trustee
-------- -------
nor the Trust assumes the obligation under any Credit Line Agreement that
provides for the funding of future advances to the Mortgagor thereunder, and
neither the Trust nor the Trustee shall be obligated or permitted to fund any
such future advances. Additional Balances shall be part of the related Asset
Balance and are hereby transferred to the Trust on the Closing Date pursuant
to this Section 2(a), and therefore part of the Trust property. In addition,
on or prior to the Closing Date, the Depositor shall cause the Credit
Enhancer to deliver the Policy to the Trustee for the benefit of
the Securityholders. The foregoing transfer, assignment, set-over and
conveyance to the Trust shall be made to the Trustee, on behalf of the Trust,
and each reference in this Agreement to such transfer, assignment, set-over
and conveyance shall be construed accordingly.
The Depositor agrees to take or cause to be taken such actions and
execute such documents (including without limitation the filing of all
necessary continuation statements for the UCC-1 financing statements filed in
the State of __________ (which shall have been filed within 90 days of the
Closing Date) describing the Cut-off Date Asset Balances and Additional
Balances and naming the Depositor as debtor and the Trustee as secured party
and any amendments to UCC-1 financing statements required to reflect a change
in the name or corporate structure of the Depositor or the filing of any
additional UCC-1 financing statements due to the change in the principal
office of the Depositor (within 90 days of any event necessitating such
filing) as are necessary to perfect and protect the Securityholders' and
Credit Enhancer's interests in each Cut-off Date Asset Balance and Additional
Balances and the proceeds thereof (other than maintaining possession by the
Trustee of the Mortgage Loans and the Mortgage Files, which possession will,
subject to the terms hereof, be maintained by the Master Servicer as
custodian and bailee of the Trustee).
In connection with such transfer and assignment by the Depositor, the
Master Servicer acknowledges that it is holding as custodian and bailee for
the Trustee the following documents or instruments (the "Related Documents")
with respect to each Mortgage Loan:
(A) the original Mortgage Note endorsed in blank;
(B) an original Assignment of Mortgage (in blank) in recordable
form;
((C) the original recorded Mortgage or, if, in connection with
any Mortgage Loan, the original recorded Mortgage with evidence of
recording thereon cannot be delivered on or prior to the Closing Date
because of a delay caused by the public recording office where such
original Mortgage has been delivered for recordation or because such
original Mortgage has been lost, the Seller, at the direction of the
Depositor, shall deliver or cause to be delivered to the Custodian, as
agent for the Trustee, a true and correct copy of such Mortgage,
together with (i) in the case of a delay caused by the public recording
office, an Officer's Certificate of the Depositor stating that such
original Mortgage has been dispatched to the appropriate public
recording official or (ii) in the case of an original Mortgage that has
been lost, a certificate by the appropriate county recording
office where such Mortgage is recorded;)
(D) if applicable, the original intervening assignments, if any
("Intervening Assignments"), with evidence of recording thereon, showing
a complete chain of title to the Mortgage from the originator to the
Depositor or, if any such original Intervening Assignment has not been
returned from the applicable recording office or has been lost, a true
and correct copy thereof, together with (i) in the case of a delay
caused by the public recording office, an Officer's Certificate of the
Seller stating that such original Intervening Assignment has been
dispatched to the appropriate public recording official for recordation
or (ii) in the case of an original Intervening Assignment that has been
lost, a certificate by the appropriate county recording office where
such Mortgage is recorded;
(E) either (1) for each Mortgage Loan with a Credit Limit in
excess of $_________, a title policy or (2) for all other Mortgage
Loans, either a title policy, a title search or guaranty of title with
respect to the related Mortgaged Property;
(F) the original of any guaranty executed in connection with the
Mortgage Note;
(G) the original of each assumption, modification, consolidation
or substitution agreement, if any, relating to the Mortgage Loan; and
(H) any security agreement, chattel mortgage or equivalent
instrument executed in connection with the Mortgage;
provided, however, that as to any Mortgage Loan, if (a) as evidenced by an
- -------- -------
Opinion of Counsel delivered to and in form and substance satisfactory to the
Trustee and the Credit Enhancer, (x) an optical image or other representation
of the related documents specified in clauses (i) through (viii) above are
enforceable in the relevant jurisdictions to the same extent as the original
of such document and (y) such optical image or other representation does not
impair the ability of an owner of such Mortgage Loan to transfer its interest
in such Mortgage Loan, and (b) the retention of such documents in such format
will not result in a reduction in the then current rating of the Notes or
Certificates, without regard to the Policy, such optical image or other
representation may be held by the Master Servicer, as custodian for the
Trustee or assignee in lieu of the physical documents specified above.
The Seller hereby confirms to the Trustee that it has caused the
portions of its electronic ledgers relating to the Mortgage Loans to be
clearly and unambiguously marked, and has made the appropriate entries in its
general accounting records, to indicate that such Mortgage Loans have been
transferred to the Trust at the direction of the Depositor. The Master
Servicer hereby confirms to the Trustee that it has clearly and unambiguously
made appropriate entries in its general accounting records indicating that
such Mortgage Loans constitute part of the Trust and are serviced by it on
behalf of the Trust in accordance with the terms hereof.
The parties hereto intend that the transaction set forth herein be a
sale by the Depositor to the Trust of all the Depositor's right, title and
interest in and to the Mortgage Loans and other property described above. In
the event the transaction set forth herein is deemed not to be a sale, the
Depositor hereby grants to the Trust a security interest in all of the
Depositor's right, title and interest in, to and under the Mortgage Loans
whether now existing or hereafter created, all monies due or to become due on
the Mortgage Loans and all proceeds of any thereof; and this Agreement shall
constitute a security agreement under applicable law.
Except as hereinafter provided, the Master Servicer shall be entitled to
maintain possession of all of the foregoing documents and instruments and
shall not be required to deliver any of them to the Trustee or the Owner
Trustee. In the event, however, that possession of any of such documents or
instruments is required by any Person (including any such Trustee) acting as
successor servicer pursuant to Section 6(d) or 7(b) in order to carry out the
duties of Master Servicer hereunder, then such successor shall be entitled to
request delivery, at the expense of the Master Servicer, of such documents or
instruments by the Master Servicer and to retain such documents or
instruments for servicing purposes; provided that the Trustee or such
--------
servicers shall maintain such documents at such offices as may be required by
any regulatory body having jurisdiction over such Mortgage Loans.
The Master Servicer's right to maintain possession of the documents
enumerated above shall continue so long as the long term unsecured debt of
(IndyMac,Inc.) is assigned ratings of at least "____" by __________________
and "____" by _______________. At such time as the condition specified in
the preceding sentence is not satisfied, as promptly as practicable but in no
event more than __ days in the case of clause (i) below and __ days in the
case of clause (ii) below following the occurrence of such event (a "Delivery
Event"), the Master Servicer shall, at its expense, (i) either (x) record an
assignment of Mortgage in favor of the Trustee (which may be a blanket
assignment if permitted by applicable law) in the appropriate real property
or other records or (y) deliver to the Trustee the assignment of
such Mortgage in favor of the Trustee in form for recordation, together
with an Opinion of Counsel addressed to the Trustee and the Credit Enhancer
to the effect that recording is not required to protect the Trustee's right,
title and interest in and to the related Mortgage Loan or, in case
a court should recharacterize the sale of the Mortgage Loans as a financing,
to perfect a first priority security interest in favor of the Trustee in
the related Mortgage Loan, which Opinion of Counsel also shall be
reasonably acceptable to each of the Rating Agencies (as evidenced
in writing) and the Credit Enhancer, and (ii) unless an Opinion
of Counsel, reasonably acceptable to the Trustee, the Rating Agencies (as
evidenced in writing) and the Credit Enhancer, is delivered to the Trustee
and the Credit Enhancer to the effect that delivery of the Mortgage Files is
not necessary to protect the Trustee's right, title and interest in the
related Mortgage Loans; provided that the lack of delivery will not result
--------
in a reduction in the then current rating of the "Notes or Certificates",
without regard to the Policy, deliver the related Mortgage Files to
the Trustee or to a custodian located in the State of (California)
appointed by the Trustee and acceptable to the Rating Agencies and
the Credit Enhancer to be held by the Custodian on behalf of the
Trustees in trust, upon the terms herein set forth, for the use and benefit
of all present and future Securityholders and the Custodian on behalf of the
Trustee shall retain possession thereof except to the extent the Master
Servicer requires any Mortgage Files for normal servicing as contemplated by
Section _____. The Trustee is hereby appointed as the attorney-in-fact of
the Master Servicer with the power to prepare, execute and record Assignments
of Mortgages in the event that the Master Servicer fails to do so on a timely
basis as provided in this paragraph.
Within 90 days following delivery, if any, of the Mortgage Files to the
Trustee pursuant to the preceding paragraph, the Trustee shall review each
such Mortgage File to ascertain that all required documents set forth in this
Section 2(a) have been executed and received, and that such documents relate
to the Mortgage Loans identified on the Mortgage Loan Schedule and in so
doing the Trustee may rely on the purported due execution and genuineness of
any signature thereon. If within such 90-day period the Trustee finds any
document constituting a part of a Mortgage File not to have been executed or
received or to be unrelated to the Mortgage Loans identified in said Mortgage
Loan Schedule or, if in the course of its review, the Trustee determines that
such Mortgage File is otherwise defective in any material respect, the
Trustee shall promptly upon the conclusion of its review notify the Issuer
and the Credit Enhancer, and the Seller shall have a period of 90 days after
such notice within which to correct or cure any such defect; provided that
--------
the Seller shall not be obligated to correct or cure any such defect if such
defect constitutes fraud in the origination of the related Mortgage Loan
and the Seller did not, at the time of origination or on the Closing Date,
have actual knowledge of such fraud.
The Trustee shall have no responsibility for reviewing any Mortgage File
except as expressly provided in this Section 2(a). In reviewing any Mortgage
File pursuant to this Section, the Trustee shall have no responsibility for
determining whether any document is valid and binding, whether the text of
any assignment or endorsement is in proper or recordable form (except, if
applicable, to determine if the Trustee is the assignee or endorsee), whether
any document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any
applicable jurisdiction, whether any Person executing any document is
authorized to do so or whether any signature thereon is genuine, but shall
only be required to determine whether a document has been executed, that it
appears to be what it purports to be, and, where applicable, that it purports
to be recorded.
(b) Acceptance by Trustee; Retransfer of Mortgage Loans.
---------------------------------------------------
The Trustee hereby acknowledges its receipt of the Policy and the
Mortgage Loans, and declares that the Trustee holds and will hold such
instrument, and to the extent that any documents are delivered to it pursuant
to Section 2(a), will hold such documents, and all amounts received by it
thereunder and hereunder, in trust, upon the terms herein set forth, for the
use and benefit of all present and future Securityholders and the Credit
Enhancer. If the time to cure any defect in respect of any Mortgage Loan of
which the Trustee has notified the Issuer and the Depositor following the
review pursuant to Section 2(a) has expired or if at any time any loss is
suffered by the Trustee on behalf of the Securityholders or the Credit
Enhancer, in respect of any Mortgage Loan as a result of (i) a defect in any
document constituting a part of its Mortgage File or (ii) an Assignment of
Mortgage to the Trustee not having been recorded as required by Section
2(a),then on the next succeeding Business Day upon satisfaction of the
applicable conditions described herein, all right, title and interest of the
Trust in and to such Mortgage Loan shall be deemed to be retransferred, reas-
signed and otherwise reconveyed, without recourse, representation or
warranty, to the Depositor on such Business Day and the Asset Balance of such
Mortgage Loan shall be deducted from the Pool Balance; provided, however,
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that interest accrued on the Asset Balance of such Mortgage Loan to (the end
of the related Collection Period) (the Due Date occurring in the calendar
month immediately following the calendar month in which such repurchase
occurs) shall be the property of the Trust; provided, further, that the
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Seller shall not be obligated to make such retransfer and repurchase if such
defect or omission constitutes fraud in the origination of the related
Mortgage Loan and the Sponsor did not, at the time of such origination
or on the Closing Date, have actual knowledge of such fraud. Upon
receipt of any Eligible Substitute Mortgage Loan or then as promptly as
practicable following such deemed transfer, the Trustee shall execute such
documents and instruments of transfer presented by the Seller, in each
case without recourse, representation or warranty, and take such
other actions as shall reasonably be requested by the Seller to effect such
transfer by the Trust of such Defective Mortgage Loan pursuant to this
Section.
The Master Servicer, promptly following the transfer of a Defective
Mortgage Loan from or to the Trust pursuant to this Section, shall amend the
Mortgage Loan Schedule and make appropriate entries in its general account
records to reflect such transfer. The Master Servicer shall, following such
retransfer, appropriately mark its records to indicate that it is no longer
servicing such Mortgage Loan on behalf of the Trust. The Seller, promptly
following such transfer, shall appropriately mark its electronic ledger and
make appropriate entries in its general account records to reflect such
transfer.
As to any Eligible Substitute Mortgage Loan or Loans, the Seller shall,
if a Delivery Event has occurred, deliver to the Trustee with respect to such
Eligible Substitute Mortgage Loan or Loans such documents and agreements as
are required to be held by the Trustee in accordance with Section 2(a). For
any Collection Period during which the Seller substitutes one or more
Eligible Substitute Mortgage Loans, the Master Servicer shall determine the
Substitution Adjustment Deposit Amount which amount shall be deposited by the
Seller in the Collection Account at the time of substitution. All amounts
received in respect of the Eligible Substitute Mortgage Loan or Loans during
the Collection Period in which the circumstances giving rise to such
substitution occur shall not be a part of the Issuer and shall not be
deposited by the Master Servicer in the Collection Account. All amounts
received by the Master Servicer during the Collection Period in which the
circumstances giving rise to such substitution occur in respect of any Defec-
tive Mortgage Loan so removed by the Issuer shall be deposited by the Master
Servicer in the Collection Account. Upon such substitution, the Eligible
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects, and the Seller shall be deemed to have made with
respect to such Eligible Substitute Mortgage Loan or Loans, as of the date of
substitution, the covenants, representations and warranties set forth in
Section 2(d). The procedures applied by the Seller in selecting each
Eligible Substitute Mortgage Loan shall not be materially adverse to the
interests of the Trustees, the Securityholders and the Credit Enhancer.
(c) Documents, Records and Funds in Possession of Master Servicer
-------------------------------------------------------------
to be Held for Trustee.
----------------------
(i) Notwithstanding any other provisions of this Agreement, the
Master Servicer shall transmit to the Trustee as required by this Agreement
all documents and instruments in respect of a Mortgage Loan coming into the
possession of the Master Servicer from time to time and shall account fully
to the Trustees for any funds received by the Master Servicer or which
otherwise are collected by the Master Servicer as Liquidation Proceeds or
Insurance Proceeds in respect of any Mortgage Loan. All Mortgage Files and
funds collected or held by, or under the control of, the Master Servicer in
respect of any Mortgage Loans, whether from the collection of principal and
interest payments or from Liquidation Proceeds, including but not limited to,
any funds on deposit in the Collection Account, shall be held by the Master
Servicer for and on behalf of the Trustees and shall be and remain the sole
and exclusive property of the Trustees, subject to the applicable provisions
of this Agreement. The Master Servicer also agrees that it shall not create,
incur or subject any Mortgage File or any funds that are deposited in the
Collection Account, Payment Account or any Escrow Account, or any funds that
otherwise are or may become due or payable to the Trustee for the benefit of
the Securityholders, to any claim, lien, security interest, judgment, levy,
writ of attachment or other encumbrance, or assert by legal action or
otherwise any claim or right of setoff against any Mortgage File or any funds
collected on, or in connection with, a Mortgage Loan, except, however, that
the Master Servicer shall be entitled to set off against and deduct from any
such funds any amounts that are properly due and payable to the Master
Servicer under this Agreement.
(ii) The Master Servicer hereby acknowledges that concurrently with
the execution of this Agreement, the Trustee has acquired and holds a
security interest in the Trustee Mortgage Files and in all Mortgage Loans
represented by such Mortgage Files and in all funds now or hereafter held by,
or under the control of, the Master Servicer that are collected by the Master
Servicer in connection with the Mortgage Loans, whether as Scheduled
Payments, as Principal Prepayments, or as Liquidation Proceeds or Insurance
Proceeds, and in all proceeds of the foregoing and proceeds of proceeds (but
excluding any Master Servicing Fees, Servicing Fees, Trustee Fees and any
other amounts or reimbursements to which the Master Servicer is entitled
under this Agreement). The Master Servicer agrees that so long as the
Mortgage Loans are assigned to the Trustee, all Master Servicer Mortgage
Files and Trustee Mortgage Files (and any documents or instruments
constituting a part of such files), and such funds which come into the
possession or custody of, or which are subject to the control of, the Master
Servicer shall be held by the Master Servicer for and on behalf of the
Trustee as the Trustee's agent and bailee for purposes of perfecting
the Trustee's security interest therein, as provided by Section 9-305
of the Uniform Commercial Code of the state in which such property
is located, or by other laws, as specified in Section _____ of the
Indenture. The Master Servicer hereby accepts such agency and
acknowledges that the Trustee, as secured party, will be deemed to
have possession at all times of all Mortgage Files
and any other documents or instruments constituting a part of such files,
such funds and other items for purposes of Section 9-305 of the Uniform
Commercial Code of the state in which such property is held by the Master
Servicer.
(d) Representations, Warranties and Covenants of the Seller and
-----------------------------------------------------------
the Master Servicer.
-------------------
(i) (IndyMac, Inc.), in its capacities as Seller and Master Servicer,
hereby makes the representations and warranties set forth in Schedule II
hereto, and by this reference incorporated herein, to the Depositor and the
Trustee, as of the Closing Date, or if so specified therein, as of the Cut-
off Date.
(ii) The Seller, in its capacity as Seller, hereby makes the
representations and warranties set forth in Schedule III hereto, and by this
reference incorporated herein, to the Depositor and the Trustee, as of the
Closing Date, or if so specified therein, as of the Cut-off Date.
(iii) Upon discovery by any of the parties hereto of a breach of a
representation or warranty made pursuant to Section 2(d)(ii) that materially
and adversely affects the interests of the Securityholders in the related
Mortgage Loan, the party discovering such breach shall give prompt notice
thereof to the other parties. The Seller hereby covenants that within 90
days of the earlier of its discovery or its receipt of written notice from
any party of a breach of any representation or warranty made pursuant to
Section 2(d)(ii) which materially and adversely affects the interests of the
Securityholders in any Mortgage Loan, it shall cure such breach in all
material respects, and if such breach is not so cured, shall, (i) if such 90-
day period expires prior to the second anniversary of the Closing Date,
remove such Mortgage Loan (a "Deleted Mortgage Loan") from the Issuer and
---------------------
substitute in its place a Substitute Mortgage Loan, in the manner and subject
to the conditions set forth in this Section; or (ii) repurchase the affected
Mortgage Loan or Mortgage Loans from the Trustee at the Purchase Price in the
manner set forth below; provided, however, that any such substitution
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pursuant to (i) above shall not be effected prior to the delivery to the
Trustees of the Opinion of Counsel required by (Section ____ {delivery of
opinion}) hereof, if any, and any such substitution pursuant to (i) above
shall not be effected prior to the additional delivery to the Trustee of a
Request for Release substantially in the form of Exhibit D and the Mortgage
File for any such Substitute Mortgage Loan; provided, further, that, anything
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to the contrary herein notwithstanding, Seller shall have no obligation to
cure any such breach or to repurchase or substitute for such affected
Mortgage Loan if the substance of such breach constitutes fraud in the
origination of such affected Mortgage Loan and the Seller, at the time of
such origination and on the Closing Date, did not have actual knowledge of
such fraud. The Seller shall promptly reimburse the Master Servicer and the
Trustee for any expenses reasonably incurred by the Master Servicer or any
Trustee in respect of enforcing the remedies for such breach.
With respect to any Substitute Mortgage Loan or Loans, the Seller shall
deliver to the Trustee for the benefit of the Securityholders the Mortgage
Note, the Mortgage, the related assignment of the Mortgage, and such other
documents and agreements as are required by Section 2(a), with the Mortgage
Note endorsed and the Mortgage assigned as required by Section 2(a). No
substitution is permitted to be made in any calendar month after the
Determination Date for such month. Scheduled Payments due with respect to
Substitute Mortgage Loans in the month of substitution shall not be part of
the Issuer and will be retained by the Seller on the next succeeding
Distribution Date. For the month of substitution, distributions to
Securityholders will include the monthly payment due on any Deleted Mortgage
Loan for such month and thereafter the Seller shall be entitled to retain all
amounts received in respect of such Deleted Mortgage Loan. The Master
Servicer shall amend the Mortgage Loan Schedule for the benefit of the
Securityholders to reflect the removal of such Deleted Mortgage Loan and the
substitution of the Substitute Mortgage Loan or Loans and the Master Servicer
shall deliver the amended Mortgage Loan Schedule to the Trustees. Upon such
substitution, the Substitute Mortgage Loan or Loans shall be subject to the
terms of this Agreement in all respects, and the Seller shall be deemed to
have made with respect to such Substitute Mortgage Loan or Loans, as of the
date of substitution, the representations and warranties made pursuant to
Section 2(d)(ii) with respect to such Mortgage Loan. Upon any such
substitution and the deposit to the Collection Account of the amount required
to be deposited therein in connection with such substitution as described in
the following paragraph, the Trustee shall release the Mortgage File held for
the benefit of the Securityholders relating to such Deleted Mortgage Loan to
the Seller and shall execute and deliver at the Seller's direction such
instruments of transfer or assignment prepared by the Seller, in each case
without recourse, as shall be necessary to vest title in the Seller, or its
designee, the Trustee's interest in any Deleted Mortgage Loan substituted for
pursuant to this Section 2(d).
For any month in which the Seller substitutes one or more 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 Substitute Mortgage Loans as of the date of
substitution is less than the aggregate Stated Principal Balance of all such
Deleted Mortgage Loans (after application of the scheduled principal portion
of the monthly payments due in the month of substitution). The amount of
such shortage (the "Substitution Adjustment Amount") plus an amount equal to
------------------------------
the aggregate of any unreimbursed Advances with respect to such Deleted
Mortgage Loans shall be deposited in the Collection Account by the Seller on
or before the Payment Account Deposit Date for the Distribution Date in the
month succeeding the calendar month during which the related Mortgage Loan
became required to be purchased or replaced hereunder.
In the event that the Seller shall have repurchased a Mortgage Loan, the
Purchase Price therefor shall be deposited in the Collection Account pursuant
to Section 3(h) on or before the Payment Account Deposit Date for the
Distribution Date in the month following the month during which the Seller
became obligated hereunder to repurchase or replace such Mortgage Loan and
upon such deposit of the Purchase Price, the delivery of the Opinion of
Counsel required by Section 2(d) and receipt of a Request for Release in the
form of Exhibit D hereto, the Trustee shall release the related Mortgage File
held for the benefit of the Securityholders to such Person, and the Trustee
shall execute and deliver at such Person's direction such instruments of
transfer or assignment prepared by such Person, in each case without
recourse, as shall be necessary to transfer title from the Trustee. It is
understood and agreed that the obligation under this Agreement of any Person
to so cure, repurchase or replace any Mortgage Loan as to which such a breach
has occurred and is continuing shall constitute the sole remedy against such
Persons respecting any breach available to Securityholders, the Depositor or
the Trustees on their behalf.
The representations and warranties made pursuant to this Section 2(d)
shall survive delivery of the respective Mortgage Files to the Trustee for
the benefit of the Securityholders.
(e) Covenants of the Master Servicer.
--------------------------------
The Master Servicer hereby covenants to the Depositor and the Trustees
as follows:
(i) the Master Servicer shall comply in the performance of
its obligations under this Agreement with all reasonable rules and
requirements of the insurer under each Required Insurance Policy; and
(ii) no written information, certificate of an officer,
statement furnished in writing or written report delivered to the
Depositor, any affiliate of the Depositor or any Trustee and prepared
by the Master Servicer pursuant to this Agreement will contain any
untrue statement of a material fact or omit to state a material
fact necessary to make such information, certificate, statement or
report not misleading.
(f) Covenants of the Depositor.
--------------------------
The Depositor hereby covenants that, except for the transfer under
the Indenture, the Depositor will not sell, pledge, assign or transfer
to any other Person, or grant, create, incur, assume or suffer to exist
any Lien on any Mortgage Loan, whether now existing or hereafter
created, or any interest therein; the Depositor will notify the Trustee
of the existence of any Lien on any Mortgage Loan immediately upon
discovery thereof; and the Depositor will defend the right, title and
interest of the Trust in, to and under the Mortgage Loans, whether now
existing or hereafter created, against all claims of third parties
claiming through or under the Depositor; provided, however, that nothing
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in this Section 2(e) shall prevent or be deemed to prohibit the
Depositor from suffering to exist upon any of the Mortgage Loans any
Liens for municipal or other local taxes and other governmental charges
if such taxes or governmental charges shall not at the time be due
and payable or if the Depositor shall currently be contesting the
validity thereof in good faith by appropriate proceedings and shall
have set aside on its books adequate reserves with respect thereto.
3. Administration and Servicing of Mortgage Loans.
----------------------------------------------
The parties agree that, subject to the provisions of Section 7 hereof,
the Master Servicer shall service the Mortgage Loans in the manner and on the
terms and conditions set forth below:
(a) Master Servicer to Service Mortgage Loans.
-----------------------------------------
(i) The Master Servicer shall service and administer the Mortgage
Loans in a manner consistent with the terms of this Agreement and with
general industry practice and shall have full power and authority,
acting alone or through a subservicer, to do any and all things in
connection with such servicing and administration which it may deem
necessary or desirable, it being understood, however, that the Master
Servicer shall at all times remain responsible to the Trustees, the
Securityholders and the Credit Enhancer for the performance of its
duties and obligations hereunder in accordance with the terms hereof.
Any amounts received by any subservicer in respect of a Mortgage Loan
shall be deemed to have been received by the Master Servicer whether or
not actually received by it. Without limiting the
generality of the foregoing, the Master Servicer shall continue, and is
hereby authorized and empowered by the Trustee, to execute and deliver,
on behalf of itself, the Securityholders and the Trustee, or any of
them, any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge and all other comparable
instruments, with respect to the Mortgage Loans and with respect to the
Mortgaged Properties. The Trustee shall, upon the written request of a
Servicing Officer, furnish the Master Servicer with any powers of
attorney and other documents necessary or appropriate to enable the
Master Servicer to carry out its servicing and administrative duties
hereunder. The Master Servicer in such capacity may also consent to the
placing of a lien senior to that of any Mortgage on the related
Mortgaged Property, provided that
(x) such Mortgage succeeded to a first lien position after
the related Mortgage Loan was conveyed to the Trust and,
immediately following the placement of such senior lien, such
Mortgage is in a second lien position and the outstanding principal
amount of the mortgage loan secured by such subsequent senior lien
is no greater than the outstanding principal amount of the senior
mortgage loan secured by the Mortgaged Property as of the date the
related Mortgage Loan was originated; or
(y) the Mortgage relating to such Mortgage Loan was in a
second lien position as of the Cut-off Date and the new senior lien
secures a mortgage loan that refinances an existing first mortgage
loan and the outstanding principal amount of the replacement first
mortgage loan immediately following such refinancing is not greater
than the outstanding principal amount of such existing first
mortgage loan at the date of origination of such Mortgage Loan;
provided, further, that such senior lien does not secure a note that provides
- -------- -------
for negative amortization. Notwithstanding the foregoing, the Master
Servicer can consent to the placing of liens senior to that of a Mortgage on
the related Mortgaged Property which have a principal balance in excess of
the principal balance of the senior lien it replaces on Mortgage Loans having
in the aggregate Asset Balances not in excess of ___% of the Cut-off Date
Pool Balance; provided, however, that, with respect to Mortgage Loans which
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as of the Cut-off Date had Combined Loan-to-Value Ratios in excess of ___%,
the aggregate Asset Balance of such Mortgage Loans with respect to which the
senior lien may be so modified shall not exceed _____% of the Cut-off Date
Pool Balance (such ___% and _____% herein referred to as the "Increased
Senior Lien Limitation"). Any such increase to the principal balance of the
senior lien shall not exceed the greater of $_______ and _____% of the
principal balance of the senior lien prior to such increase.
The Master Servicer may also, without prior approval from the Rating
Agencies or the Credit Enhancer, increase the Credit Limits on Mortgage Loans
provided that (i) new appraisals are obtained and the Combined Loan-to-Value
Ratios of the Mortgage Loans after giving effect to such increase are less
than or equal to the Combined Loan-to-Value Ratios or the Mortgage Loans as
of the Cut-off Date and (ii) such increases are consistent with the Master
Servicer's underwriting policies. In addition, the Master Servicer may
increase the Credit Limits on Mortgage Loans having aggregate balances of up
to ____% of the aggregate Cut-off Date Pool Balance, without obtaining new
appraisals provided that (i) the increase in the Credit Limit does not cause
the Combined Loan-to-Value Ratios of the Mortgage Loans to exceed _____% and
(ii) the increase is consistent with the Master Servicer's underwriting
policies.
Furthermore, the Master Servicer may, without prior approval from the
Rating Agencies and the Credit Enhancer solicit Mortgagors for a reduction in
Loan Rates; provided that the Master Servicer can only reduce such Loan
--------
Rates on up to ____% of the Mortgage Loans by Cut-off Date Pool Balance. Any
such solicitations shall not result in a reduction in the weighted average
Gross Margin of the Mortgage Loans in the pool by more than ____ basis points
taking into account any such prior reductions.
In addition, the Master Servicer may agree to changes in the terms of a
Mortgage Loan at the request of the Mortgagor provided that such changes
--------
(i) do not materially and adversely affect the interests of Securityholders
or the Credit Enhancer and (ii) are consistent with prudent and customary
business practice as evidenced by a certificate signed by a Servicing Officer
delivered to the Trustee and the Credit Enhancer.
In addition to the foregoing, the Master Servicer may solicit Mortgagors
to change any other terms of the related Mortgage Loans, provided that such
--------
changes (i) do not materially and adversely affect the interest of
Securityholders or the Credit Enhancer and (ii) are consistent with prudent
and customary business practice as evidenced by a certificate signed by a
Servicing Officer delivered to the Trustee and the Credit Enhancer. Nothing
herein shall limit the right of the Master Servicer to solicit Mortgagors
with respect to new loans (including mortgage loans) that are not Mortgage
Loans.
The relationship of the Master Servicer (and of any successor to the
Master Servicer as servicer under this Agreement) to the Trustee under this
Agreement is intended by the parties to be that of an independent
contractor and not that of a joint venturer, partner or agent.
(ii) In the event that the rights, duties and obligations of the
Master Servicer are terminated hereunder, any successor to the Master
Servicer in its sole discretion may, to the extent permitted by
applicable law, terminate the existing subservicer arrangements with any
subservicer or assume the terminated Master Servicer's rights under such
subservicing arrangements which termination or assumption will not
violate the terms of such arrangements.
(b) Subservicing; Enforcement of the Obligations of Servicers.
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(i) The Master Servicer may arrange for the subservicing of any
Mortgage Loan by a Subservicer pursuant to a subservicing agreement;
provided, however, that such subservicing arrangement and the terms of the
- -------- -------
related subservicing agreement must provide for the servicing of such
Mortgage Loans in a manner consistent with the servicing arrangements
contemplated hereunder. 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. Notwithstanding the provisions
of any subservicing agreement, any of the provisions of this Agreement
relating to agreements or arrangements between the Master Servicer and a
Subservicer or reference to actions taken through a Subservicer or otherwise,
the Master Servicer shall remain obligated and liable to the Depositor, the
Trustees and the Securityholders for the servicing and administration of the
Mortgage Loans in accordance with the provisions of this Agreement without
diminution of such obligation or liability by virtue of such subservicing
agreements or arrangements or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and conditions as
if the Master Servicer alone were servicing and administering the Mortgage
Loans. All actions of each Subservicer performed pursuant to the related
subservicing agreement shall be performed as an agent of the Master Servicer
with the same force and effect as if performed directly by the Master
Servicer.
(ii) For purposes of this Agreement, the Master Servicer shall be
deemed to have received any collections, recoveries or payments with respect
to the Mortgage Loans that are received by a Subservicer regardless of
whether such payments are remitted by the Subservicer to the Master Servicer.
(iii) As part of its servicing activities hereunder, the Master
Servicer, for the benefit of the Trustees and the Securityholders, shall use
its best reasonable efforts to enforce the obligations of each
Subservicer under the related Subservicing Agreement, to the extent that
the non-performance of any such obligation would have material and
adverse effect on a Mortgage Loan. Such enforcement, including,
without limitation, the legal prosecution of claims, termination of
Subservicing Agreements and the pursuit of other appropriate remedies, shall
be in such form and carried out to such an extent and at such time as the
Master Servicer, in its good faith business judgment, would require were it
the owner of the related Mortgage Loans. The Master Servicer shall pay the
costs of such enforcement at its own expense, and shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement to
the extent, if any, that such recovery exceeds all amounts due in respect of
the related Mortgage Loan or (ii) from a specific recovery of costs, expenses
or attorneys fees against the party against whom such enforcement is
directed.
(c) Successor Servicers.
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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
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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
Subservicer or any affiliate of the Master Servicer acts as Subservicer, it
will not assume liability for the representations and warranties of the
Subservicer which it replaces. If the Master Subservicer 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 Subservicer, the Master Servicer may, in the
exercise of its business judgment, release the terminated Servicer from
liability for such representations and warranties.
(d) 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 references to actions taken through a
Subservicer or otherwise, the Master Servicer shall remain obligated and
liable to the Trustees and Securityholders for the servicing and
administering of the Pledged Mortgages in accordance with the provisions of
Section 3(a) without diminution of such obligation or liability by virtue of
such Subservicing Agreements or arrangements or by virtue of
indemnification from the Subservicer and to the same extent and under the
same terms and conditions as if the Master Servicer alone were servicing and
administering the Pledged Mortgages. 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.
(e) No Contractual Relationship Between Subservicers and the
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Trustees.
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Any Servicing Agreement that may be entered into and any other
transactions or services relating to the Mortgage Loans involving a Servicer
in its capacity as such and not as an originator shall be deemed to be
between the Subservicer and the Master Servicer alone and the Trustees and
Securityholders 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(g).
(f) Rights of the Depositor and the Trustees in Respect of the
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Master Servicer.
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The Depositor may, but is not obligated to, enforce the obligations of
the Master Servicer hereunder and may, but is not obligated to, perform, or
cause a designee to perform, any defaulted obligation of the Master Servicer
hereunder and in connection with any such defaulted obligation to exercise
the related rights of the Master Servicer hereunder; provided that the Master
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Servicer shall not be relieved of any of its obligations hereunder by virtue
of such performance by the Depositor or its designee. Neither the Trustees
nor the Depositor shall have any responsibility or liability for any action
or failure to act by the Master Servicer nor shall the Trustees or the
Depositor be obligated to supervise the performance of the Master Servicer
hereunder or otherwise.
(g) Trustee to Act as Master Servicer.
---------------------------------
In the event that the Master Servicer shall for any reason no longer be
the Master Servicer hereunder (including by reason of an Event of Default),
the Trustee or its successor shall thereupon assume all of the rights and
obligations of the Master Servicer hereunder arising thereafter (except that
the Trustee shall not be (i) liable for losses of the Master Servicer
pursuant to Section 3(l) hereof or any acts or omissions of the predecessor
Master Servicer hereunder), (ii) obligated to make Advances if it is
prohibited from doing so by applicable law, (iii) obligated to effectuate
repurchases or substitutions of Mortgage Loans hereunder including, but not
limited to, repurchases or substitutions of Mortgage Loans pursuant to
Section 2(c)(ii) or 2(d) hereof, (iv) responsible for expenses of the Master
Servicer pursuant to Section 2(d) or (v) deemed to have made any
representations and warranties of the Master Servicer hereunder). Any such
assumption shall be subject to Section 7(b) hereof. If the Master Servicer
shall for any reason no longer be the Master Servicer (including by reason of
any Event of Default), the Trustee or its successor shall succeed to any
rights and obligations of the Master Servicer under each subservicing
agreement.
The Master Servicer shall, upon request of the Trustee, but at the
expense of the Master Servicer, deliver to the assuming party all documents
and records relating to each subservicing agreement or substitute
subservicing agreement and the Mortgage Loans then being serviced thereunder
and an accounting of amounts collected or held by it and otherwise use its
best efforts to effect the orderly and efficient transfer of the substitute
subservicing agreement to the assuming party.
(h) Collection of Mortgage Loan Payments; Collection Accounts;
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Payment Account.
---------------
(i) The Master Servicer shall make reasonable efforts in
accordance with the customary and usual standards of practice of prudent
mortgage servicers to collect all payments called for under the terms and
provisions of the Mortgage Loans to the extent such procedures shall be
consistent with this Agreement and the terms and provisions of any related
Required Insurance Policy. Consistent with the foregoing, the Master
Servicer may in its discretion (i) waive any late payment charge or any
prepayment charge or penalty interest in connection with the prepayment of a
Mortgage Loan and (ii) extend the due dates for payments due on a Mortgage
Note for a period not greater than 180 days; provided, however, that the
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Master Servicer cannot extend the maturity of any such Mortgage Loan past the
date on which the final payment is due on the latest maturing Mortgage Loan
as of the Cut-off Date. In the event of any such arrangement, the Master
Servicer shall make Advances on the related Mortgage Loan in accordance with
the provisions of Section 4 during the scheduled period in accordance with
the amortization schedule of such Mortgage Loan without modification thereof
by reason of such arrangements. The Master Servicer shall not be required to
institute or join in litigation with respect to collection of any payment
(whether under a Mortgage, Mortgage Note or otherwise or against any public
or governmental authority with respect to a taking or condemnation) if it
reasonably believes that enforcing the provision of the Mortgage or other
instrument pursuant to which such payment is required is prohibited by
applicable law.
(ii) The Master Servicer shall establish and maintain a Collection
Account into which the Master Servicer shall deposit or cause to be deposited
on a daily basis within one Business Day of receipt, except as otherwise
specifically provided herein, the following payments and collections
remitted by Subservicers or received by it in respect of Mortgage Loans
subsequent to the Cut-off Date (other than in respect of principal
and interest due on the Mortgage Loans on or before the
Cut-off Date) and the following amounts required to be deposited hereunder:
(A) all collections on account of principal on the Mortgage Loans;
(B) all collections on account of interest on the Mortgage Loans,
net of the related Master Servicing Fee;
(C) all Insurance Proceeds and Liquidation Proceeds, other than
proceeds to be applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance with the Master
Servicer's normal servicing procedures;
(D) any amount required to be deposited by the Master Servicer
pursuant to Section 3(h)(v) in connection with any losses on Permitted
Investments;
(E) any amounts required to be deposited by the Master Servicer
pursuant to Section 3(l)(ii), 3(l)(iv), and in respect of net monthly
rental income from REO Property pursuant to Section 3(n) hereof;
(F) all Substitution Adjustment Amounts;
(G) all Advances made by the Master Servicer pursuant to Section
4; and
(H) any other amounts required to be deposited hereunder.
The foregoing requirements for remittance by the Master Servicer shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment penalties,
late payment charges or assumption fees, if collected, need not be remitted
by the Master Servicer. In the event that the Master Servicer shall remit
any amount not required to be remitted, it may at any time withdraw or direct
the institution maintaining the Collection Account to withdraw such amount
from the Collection Account, any provision herein to the contrary
notwithstanding. Such withdrawal or direction may be accomplished by
delivering written notice thereof to the Trustee or such other institution
maintaining the Collection Account which describes the amounts deposited in
error in the Collection Account. The Master Servicer shall maintain adequate
records with respect to all withdrawals made pursuant to this Section. All
funds deposited in the Collection Account shall be held in trust for
the Securityholders until withdrawn in accordance with Section 3(k).
(iii) The Trustee shall establish and maintain, on behalf of
the Securityholders, the Payment Account. The Trustee shall, promptly upon
receipt, deposit in the Payment Account and retain therein the following:
(A) the aggregate amount remitted by the Master Servicer to the
Trustee pursuant to Section 3(k)(i)(I);
(B) any amount deposited by the Master Servicer pursuant to
Section 3(h)(iv) in connection with any losses on Permitted Investments;
and
(C) any other amounts deposited hereunder which are required to be
deposited in the Payment Account.
In the event that the Master Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee to withdraw
such amount from the Payment Account, any provision herein to the contrary
notwithstanding. Such direction may be accomplished by delivering an
Officer's Certificate to the Trustee which describes the amounts deposited in
error in the Payment Account. All funds deposited in the Payment Account
shall be held by the Trustee in trust for the Securityholders until disbursed
in accordance with this Agreement or withdrawn in accordance with Section
3(k). In no event shall the Trustee incur liability for withdrawals from the
Payment Account at the direction of the Master Servicer.
(iv) Each institution at which the Collection Account or the
Payment Account is maintained shall invest the funds therein as directed in
writing by the Master Servicer in Permitted Investments, which shall mature
not later than (i) in the case of the Collection Account, the second Business
Day next preceding the related Payment Account Deposit Date (except that if
such Permitted Investment is an obligation of the institution that maintains
such account, then such Permitted Investment shall mature not later than the
Business Day next preceding such Payment Account Deposit Date) and (ii) in
the case of the Payment Account, the Business Day next preceding the
Distribution Date (except that if such Permitted Investment is an obligation
of the institution that maintains such fund or account, then such Permitted
Investment shall mature not later than such Distribution Date) and, in each
case, shall not be sold or disposed of prior to its maturity. All such
Permitted Investments shall be made in the name of the Trustee, for the
benefit of the Securityholders. All income and gain net of any losses
realized from any such investment of funds on deposit in the Collection
Account or the Payment Account shall be for the benefit of the Master
Servicer as servicing compensation and shall be remitted to it monthly
as provided herein. The amount of any realized losses in the Collection
Account or the Payment Account incurred in any such account in respect
of any such investments shall promptly be deposited by the Master
Servicer in the Collection Account or paid to the Trustee for deposit
into the Payment Account, as applicable. The Trustee in its fiduciary
capacity shall not be liable for the amount of any loss incurred in
respect of any investment or lack of investment of funds held in
the Collection Account or the Payment Account and made in accordance with
this Section 3(h).
(v) The Master Servicer shall give notice to the Trustee, the
Seller, each Rating Agency and the Depositor of any proposed change of the
location of the Collection Account prior to any change thereof. The Trustee
shall give notice to the Master Servicer, the Seller, each Rating Agency and
the Depositor of any proposed change of the location of the Payment Account
prior to any change thereof.
(i) Collection of Taxes, Assessments and Similar Items; Escrow
----------------------------------------------------------
Accounts.
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(i) To the extent required by the related Mortgage Note and not
violative of current law, the Master Servicer shall establish and maintain
one or more accounts (each, an "Escrow Account") and deposit and retain
therein all collections from the Mortgagors (or advances by the Master
Servicer) for the payment of taxes, assessments, hazard insurance premiums or
comparable items for the account of the Mortgagors. Nothing herein shall
require the Master Servicer to compel a Mortgagor to establish an Escrow
Account in violation of applicable law.
(ii) Withdrawals of amounts so collected from the Escrow Accounts
may be made only to effect timely payment of taxes, assessments, hazard
insurance premiums, condominium or PUD association dues, or comparable items,
to reimburse the Master Servicer out of related collections for any payments
made pursuant to Sections 3(a) hereof (with respect to taxes and assessments
and insurance premiums) and 3(l) hereof (with respect to hazard insurance),
to refund to any Mortgagors any sums determined to be overages, to pay
interest, if required by law or the terms of the related Mortgage or Mortgage
Note, to Mortgagors on balances in the Escrow Account or to clear and
terminate the Escrow Account at the termination of this Agreement in
accordance with Section 8(a) hereof. The Escrow Accounts shall not be a part
of the Issuer.
(iii) The Master Servicer shall advance any payments referred
to in Section 3(i)(i) that are not timely paid by the Mortgagors on the date
when the tax, premium or other cost for which such payment is intended is
due, but the Master Servicer shall be required so to advance only to the
extent that such advances, in the good faith judgment of the Master
Servicer, will be recoverable by the Master Servicer out of Insurance
Proceeds, Liquidation Proceeds or otherwise.
(j) Access to Certain Documentation and Information Regarding the
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Mortgage Loans.
--------------
The Master Servicer shall afford the Depositor and the Trustee
reasonable access to all records and documentation regarding the Mortgage
Loans and all accounts, insurance information and other matters relating to
this Agreement, such access being afforded without charge, but only upon
reasonable request and during normal business hours at the office designated
by the Master Servicer.
Upon reasonable advance notice in writing, the Master Servicer will
provide to each Securityholder which is a savings and loan association, bank
or insurance company certain reports and reasonable access to information and
documentation regarding the Mortgage Loans sufficient to permit such
Securityholder to comply with applicable regulations of the OTS or other
regulatory authorities with respect to investment in the Certificates;
provided that the Master Servicer shall be entitled to be reimbursed by each
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such Securityholder for actual expenses incurred by the Master Servicer in
providing such reports and access.
(k) Permitted Withdrawals from the Note Account.
-------------------------------------------
(i) The Master Servicer may from time to time make withdrawals
from the Collection Account for the following purposes:
(A) to pay to the Master Servicer (to the extent not previously
retained by the Master Servicer) the servicing compensation to which it
is entitled pursuant to Section 5, and to pay to the Master Servicer, as
additional servicing compensation, earnings on or investment income with
respect to funds in or credited to the Collection Account;
(B) to reimburse the Master Servicer for unreimbursed Advances
made by it, such right of reimbursement pursuant to this subclause (ii)
being limited to amounts received on the Mortgage Loan(s) in respect of
which any such Advance was made;
(C) to reimburse the Master Servicer for any Nonrecoverable
Advance previously made;
(D) to reimburse the Master Servicer for Insured Expenses from the
related Insurance Proceeds;
(E) to reimburse the Master Servicer for (a) unreimbursed
Servicing Advances, the Master Servicer's right to reimbursement
pursuant to this clause (a) with respect to any Mortgage Loan being
limited to amounts received on such Mortgage Loan(s) which represent
late recoveries of the payments for which such advances were made
pursuant to Section 3(a) or Section 3(i) and (b) for unpaid Master
Servicing Fees as provided in Section 3(n) hereof;
(F) to pay to the purchaser, with respect to each Mortgage Loan or
property acquired in respect thereof that has been purchased pursuant to
Section 2(c)(ii), 2(d) or 3(n), all amounts received thereon after the
date of such purchase;
(G) to reimburse the Seller, the Master Servicer or the Depositor
for expenses incurred by any of them and reimbursable pursuant to
Section 6(c) hereof;
(H) to withdraw any amount deposited in the Collection Account and
not required to be deposited therein;
(I) on or prior to the Payment Account Deposit Date, to withdraw
an amount equal to the related Available Funds and the Trustees Fees for
such Distribution Date and remit such amount to the Trustee for deposit
in the Payment Account; and
(J) to clear and terminate the Collection Account upon termination
of this Agreement pursuant to Section 8 (a) hereof.
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 Collection Account pursuant to such subclauses (i), (ii),
(iv), (v) and (vi). Prior to making any withdrawal from the Collection
Account pursuant to subclause (iii), the Master Servicer shall deliver to the
Trustee an Officer's Certificate of a Servicing Officer indicating the amount
of any previous Advance determined by the Master Servicer to be a
Nonrecoverable Advance and identifying the related Mortgage Loans(s), and
their respective portions of such Nonrecoverable Advance.
(ii) The Trustee shall withdraw funds from the Payment Account for
distributions to Securityholders in the manner specified in this Agreement
(and to withhold from the amounts so withdrawn, the amount of any taxes that
it is authorized to withhold pursuant to the last paragraph of (Section
8.11/trustee)). In addition, the Trustee may from time to time make
withdrawals from the Payment Account for the following purposes:
(A) to pay to itself the Trustee Fee for the related Distribution
Date;
(B) to pay to the Master Servicer as additional servicing
compensation earnings on or investment income with respect to funds in
the Payment Account;
(C) to withdraw and return to the Master Servicer any amount
deposited in the Payment Account and not required to be deposited
therein; and
(D) to clear and terminate the Payment Account upon termination of
the Agreement pursuant to 8(a) hereof.
(l) Maintenance of Hazard Insurance; Maintenance of Primary
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Insurance Policies.
------------------
(i) The Master Servicer shall cause to be maintained, for each
Mortgage Loan, hazard insurance with extended coverage in an amount that is
at least equal to the lesser of (i) the maximum insurable value of the
improvements securing such Mortgage Loan or (ii) the greater of (y) the
outstanding principal balance of the Mortgage Loan and (z) an amount such
that the proceeds of such policy shall be sufficient to prevent the Mortgagor
and/or the mortgagee from becoming a co-insurer. Each such policy of
standard hazard insurance shall contain, or have an accompanying endorsement
that contains, a standard mortgagee clause. Any amounts collected by the
Master Servicer under any such policies (other than the amounts to be applied
to the restoration or repair of the related Mortgaged Property or amounts
released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures) shall be deposited in the Collection Account. Any cost
incurred by the Master Servicer in maintaining any such insurance shall not,
for the purpose of calculating monthly distributions to the Securityholders
or remittances to the Trustee for their benefit, be added to the principal
balance of the Mortgage Loan, notwithstanding that the terms of the Mortgage
Loan so permit. Such costs shall be recoverable by the Master Servicer out
of late payments by the related Mortgagor or out of Liquidation Proceeds to
the extent permitted by Section 3(k) hereof. 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 other
than pursuant to such applicable laws and regulations as shall at any time be
in force and as shall require such additional insurance. If the Mortgaged
Property is located at the time of origination of the Mortgage Loan in a
federally designated special flood hazard area and such area is participating
in the national flood insurance program, the Master Servicer shall cause
flood insurance to be maintained with respect to such Mortgage Loan. Such
flood insurance shall be in an amount equal to the least of (i) the
original principal balance of the related Mortgage Loan, (ii)
the replacement value of the improvements which are part of such
Mortgaged Property, and (iii) the maximum amount of such insurance available
for the related Mortgaged Property under the national flood insurance program.
(ii) In the event that the Master Servicer shall obtain and
maintain a blanket policy insuring against hazard losses on all of the
Mortgage Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first sentence of this Section, it being
understood and agreed that such policy may contain a deductible clause on
terms substantially equivalent to those commercially available and maintained
by comparable servicers. If such policy contains a deductible clause, the
Master Servicer shall, in the event that there shall not have been maintained
on the related Mortgaged Property a policy complying with the first sentence
of this Section, and there shall have been a loss that would have been
covered by such policy, deposit in the Collection Account the amount not
otherwise payable under the blanket policy because of such deductible clause.
In connection with its activities as Master Servicer of the Mortgage Loans,
the Master Servicer agrees to present, on behalf of itself, the Depositor,
and the Trustee for the benefit of the Securityholders, claims under any such
blanket policy.
(iii) The Master Servicer shall not take any action which would
result in non-coverage under any applicable Primary Insurance Policy of any
loss which, but for the actions of the Master Servicer, would have been
covered thereunder. The Master Servicer shall not cancel or refuse to renew
any such Primary Insurance Policy that is in effect at the date of the
initial issuance of the Notes and the Certificates and is required to be kept
in force hereunder unless the replacement Primary Insurance Policy for such
canceled or non-renewed policy is maintained with a Qualified Insurer. The
Master Servicer shall not be required to maintain any Primary Insurance
Policy with respect to any Mortgage Loan with a Loan-to-Value Ratio less than
or equal to 80% as of any date of determination or, based on a new appraisal,
the principal balance of such Mortgage Loan represents 80% or less of the new
appraised value. The Master Servicer agrees to effect the timely payment of
the premiums on each Primary Insurance Policy, and such costs not otherwise
recoverable shall be recoverable by the Master Servicer from the related
liquidation proceeds.
(iv) In connection with its activities as Master Servicer of the
Mortgage Loans, the Master Servicer agrees to present on behalf of itself,
the Trustee and Securityholders, claims to the insurer under any Primary
Insurance Policies and, in this regard, to take such reasonable action as
shall be necessary to permit recovery under any Primary
Insurance Policies respecting defaulted Mortgage Loans. Any amounts
collected by the Master Servicer under any Primary Insurance
Policies shall be deposited in the Collection Account.
(m) Enforcement of Due-On-Sale Clauses; Assumption Agreements.
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(i) Except as otherwise provided in this Section, when any
property subject to a Mortgage has been conveyed by the Mortgagor, the Master
Servicer shall to the extent that it has knowledge of such conveyance,
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, the Master Servicer is not required to exercise such rights with
respect to a Mortgage Loan if the Person to whom the related Mortgaged
Property has been conveyed or is proposed to be conveyed satisfies the terms
and conditions contained in the Mortgage Note and Mortgage related thereto
and the consent of the mortgagee under such Mortgage Note or Mortgage is not
otherwise so required under such Mortgage Note or Mortgage as a condition to
such transfer. In the event that the Master Servicer is prohibited by law
from enforcing any such due-on-sale clause, or if coverage under any Required
Insurance Policy would be adversely affected, or if nonenforcement is
otherwise permitted hereunder, the Master Servicer is authorized, subject to
Section 3(m)(ii), to take or enter into an assumption and modification
agreement from or with the person to whom such property has been or is about
to be conveyed, pursuant to which such person becomes liable under the
Mortgage Note and, unless prohibited by applicable state law, the Mortgagor
remains liable thereon, provided that the Mortgage Loan shall continue to be
covered (if-so covered before the Master Servicer enters such agreement) by
the applicable Required Insurance Policies. The Master Servicer, subject to
Section 3(m)(ii), is also authorized with the prior approval of the insurers
under any Required Insurance Policies to enter into a substitution of
liability agreement with such Person, pursuant to which the original
Mortgagor is released from liability and such Person is substituted as
Mortgagor and becomes liable under the Mortgage Note. Notwithstanding the
foregoing, the Master Servicer shall not be deemed to be in default under
this Section by reason of any transfer or assumption which the Master
Servicer reasonably believes it is restricted by law from preventing, for any
reason whatsoever.
(ii) Subject to the Master Servicer's duty to enforce any
due-on-sale clause to the extent set forth in Section 3(m)(i) hereof, in any
case in which a Mortgaged Property has been conveyed to a Person by a
Mortgagor, and such Person is to enter into an assumption agreement or
modification agreement or supplement to the Mortgage Note or Mortgage
that 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 shall prepare and
deliver or cause to be prepared and delivered to the Trustee for signature
and shall direct, in writing, the Trustee to execute 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. In connection with any such assumption, no material
term of the Mortgage Note may be changed. In addition, the substitute
Mortgagor and the Mortgaged Property must be acceptable to the Master
Servicer in accordance with its underwriting standards as then in effect.
Together with each such substitution, assumption or other agreement or
instrument delivered to the Trustee for execution by it, the Master Servicer
shall deliver an Officer's Certificate signed by a Servicing Officer stating
that the requirements of this subsection have been met in connection
therewith. The Master Servicer shall notify the Trustee that any such
substitution or assumption agreement has been completed by forwarding to the
Trustee the original of such substitution or assumption agreement, which in
the case of the original shall be added to the related Mortgage File and
shall, for all purposes, be considered a part of such Mortgage File to the
same extent as all other documents and instruments constituting a part
thereof. Any fee collected by the Master Servicer for entering into an
assumption or substitution of liability agreement will be retained by the
Master Servicer as additional servicing compensation.
(n) Realization Upon Defaulted Mortgage Loans; Repurchase of
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Certain Mortgage Loans.
----------------------
The Master Servicer shall use reasonable efforts to foreclose upon or
otherwise comparably convert the ownership of properties securing such of the
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments.
In connection with such foreclosure or other conversion, the Master Servicer
shall follow such practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general mortgage servicing
activities and meet the requirements of the insurer under any Required
Insurance Policy; provided, however, that the Master Servicer shall not be
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required to expend its own funds in connection with any foreclosure 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 after reimbursement to itself of such expenses and
(ii) that such expenses will be recoverable to it through Liquidation
Proceeds (respecting which it shall have priority for purposes of
withdrawals from the Collection Account). The Master Servicer shall be
responsible for all other costs and expenses incurred by it in any such
proceedings; provided, however, that it shall be entitled to reimbursement
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thereof from the liquidation proceeds with respect to the related Mortgaged
Property, as provided in the definition of Liquidation Proceeds. If the
Master Servicer has knowledge that a Mortgaged Property which the Master
Servicer is contemplating acquiring in foreclosure or by deed in lieu of
foreclosure is located within a one mile radius of any site listed in the
Expenditure Plan for the Hazardous Substance Clean Up Bond Act of 1984 or
other site with environmental or hazardous waste risks known to the Master
Servicer, the Master Servicer will, prior to acquiring the Mortgaged
Property, consider such risks and only take action in accordance with its
established environmental review procedures.
With respect to any REO Property, the deed or certificate of sale shall
be taken in the name of the Trustee for the benefit of the Securityholders,
or its nominee, on behalf of the Securityholders. The Trustee's name shall
be placed on the title to such REO Property solely as the Trustee under the
Indenture and not in its individual capacity. The Master Servicer shall
ensure that the title to such REO Property references the Indenture and the
Trustee's capacity thereunder. Pursuant to its efforts to sell such REO
Property, the Master Servicer shall either itself or through an agent
selected by the Master Servicer protect and conserve such REO Property in the
same manner and to such extent as is customary in the locality where such REO
Property is located and may, incident to its conservation and protection of
the interests of the Securityholders, rent the same, or any part thereof, as
the Master Servicer deems to be in the best interest of the Securityholders
for the period prior to the sale of such REO Property. The Master Servicer
shall prepare for and deliver to the Trustee a statement with respect to each
REO Property that has been rented showing the aggregate rental income
received and all expenses incurred in connection with the management and
maintenance of such REO Property at such times as is necessary to enable the
Trustee to comply with the reporting requirements of the REMIC Provisions.
The net monthly rental income, if any, from such REO Property shall be
deposited in the Collection Account no later than the close of business on
each Determination Date. (The Master Servicer shall perform the tax
reporting and withholding required by Sections 1445 and 6050J of the Code
with respect to foreclosures and abandonments, the tax reporting required by
Section 6050H of the Code with respect to the receipt of mortgage interest
from individuals and any tax reporting required by Section 6050P of the Code
with respect to the cancellation of indebtedness by certain financial
entities, by preparing such tax and information returns as may be required,
in the form required, and delivering the same to the Trustee for filing.)
In the event that the Issuer acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to two years after its acquisition by the Issuer unless the Trustee
shall have been supplied with an Opinion of Counsel to the effect that the
holding by the Issuer of such Mortgaged Property subsequent to such two-year
period will not result in the imposition of taxes on "prohibited
transactions" of the REMIC defined in Section 860F of the Code or cause the
REMIC to fail to qualify as a REMIC at any time that any Notes or
Certificates are outstanding, in which case the Issuer may continue to hold
such Mortgaged Property (subject to any conditions contained in such Opinion
of Counsel). Notwithstanding any other provision of this Agreement, no
Mortgaged Property acquired by the Issuer shall be rented (or allowed to
continue to be rented) or otherwise used for the production of income by or
on behalf of the Issuer in such a manner or pursuant to any terms that would
(i) cause such Mortgaged Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or (ii)
subject the REMIC to the imposition of any federal, state or local income
taxes on the income earned from such Mortgaged Property under Section 860G(c)
of the Code or otherwise, unless the Master Servicer has agreed to indemnify
and hold harmless the Issuer with respect to the imposition of any such
taxes.
The decision of the Master Servicer to foreclose on a defaulted Mortgage
Loan shall be subject to a determination by the Master Servicer that the
proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any REO
Properties, net of reimbursement to the Master Servicer for expenses incurred
(including any property or other taxes) in connection with such management
and net of unreimbursed Master Servicing Fees, Advances and Servicing
Advances, shall be applied to the payment of principal of and interest on the
related defaulted Mortgage Loans (with interest accruing as though such
Mortgage Loans were still current) and all such income shall be deemed, for
all purposes in this Agreement, to be payments on account of principal and
interest on the related Mortgage Notes and shall be deposited into the
Collection Account. To the extent the net income received during any
calendar month is in excess of the amount attributable to amortizing
principal and accrued interest at the related Mortgage Rate on the related
Mortgage Loan for such calendar month, such excess shall be considered to be
a partial prepayment of principal of the related Mortgage Loan.
The proceeds from any liquidation of a Mortgage Loan, as well as any
income from an REO Property, will be applied in the following order of
priority: first, to reimburse the Master Servicer for any related
unreimbursed Servicing Advances and Master Servicing Fees; second, to
reimburse the Master Servicer for any unreimbursed Advances; third, to
reimburse the Collection Account for any Nonrecoverable Advances (or portions
thereof) that were previously withdrawn by the Master Servicer pursuant to
Section 3(k)(i)(C) that related to such Mortgage Loan; fourth, to accrued and
unpaid interest (to the extent no Advance has been made for such amount or
any such Advance has been reimbursed) on the Mortgage Loan or related REO
Property, at the Adjusted Net Mortgage Rate to the Due Date occurring in the
month in which such amounts are required to be distributed; and fifth, as a
recovery of principal of the Mortgage Loan. Excess Proceeds, if any, from
the liquidation of a Liquidated Mortgage Loan will be retained by the Master
Servicer as additional servicing compensation pursuant to Section 5.
The Master Servicer, in its sole discretion, shall have the right to
purchase for its own account from the Issuer any Mortgage Loan which is 91
days or more delinquent at a price equal to the Purchase Price. The Purchase
Price for any Mortgage Loan purchased hereunder shall be deposited in the
Collection Account and the Trustee, upon receipt of a certificate from the
Master Servicer in the form of Exhibit D hereto, shall release or cause to be
released to the purchaser of such Mortgage Loan the related Mortgage File and
shall execute and deliver such instruments of transfer or assignment prepared
by the purchaser of such Mortgage Loan, in each case without recourse, as
shall be necessary to vest in the purchaser of such Mortgage Loan any
Mortgage Loan released pursuant hereto and the purchaser of such Mortgage
Loan shall succeed to all the Trustee's right, title and interest in and to
such Mortgage Loan and all security and documents related thereto. Such
assignment shall be an assignment outright and not for security. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and
all security and documents, free of any further obligation to the Trustee or
the Securityholders with respect thereto.
(o) Access to Certain Documentation.
-------------------------------
The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of subordinated Notes
or Certificates and the examiners and supervisory agents of the OTS, the FDIC
and such other authorities, access to the documentation regarding the
Mortgage Loans required by applicable regulations of the OTS and the FDIC.
Such access shall be afforded without charge, but only upon reasonable and
prior written request and during normal business hours at the offices
designated by the Master Servicer. Nothing in this Section shall limit the
obligation of the Master Servicer to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors and the failure of the
Master Servicer to provide access as provided in this Section as a result of
such obligation shall not constitute a breach of this Section.
(p) Annual Statement as to Compliance.
---------------------------------
The Master Servicer shall deliver to the Depositor and the Trustees on
or before 120 days after the end of the Master Servicer's fiscal year,
commencing with its 199_ fiscal year, an Officer's Certificate stating, as to
the signer thereof, that (i) a review of the activities of the Master
Servicer during the preceding calendar year and of the performance of the
Master Servicer under this Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge, based on such
review, the Master Servicer has fulfilled all its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof. The Trustee shall forward a
copy of each such statement to each Rating Agency.
(q) Annual Independent Public Accountants' Servicing Statement;
----------------------------------------------------------
Financial Statements.
--------------------
On or before 120 days after the end of the Master Servicer's fiscal
year, commencing with its 199_ fiscal year, the Master Servicer at its
expense shall cause a nationally or regionally recognized firm of independent
public accountants (who may also render other services to the Master
Servicer, the Seller or any affiliate thereof) which is a member of the
American Institute of Certified Public Accountants to furnish a statement to
the Trustees and the Depositor to the effect that-such firm has examined
certain documents and records relating to the servicing of the Mortgage Loans
under this Agreement or of mortgage loans under pooling and servicing
agreements substantially similar to this Agreement (such statement to have
attached thereto a schedule setting forth the pooling and servicing
agreements covered thereby) and that, on the basis of such examination,
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FNMA and 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 FNMA and 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 Audit Program
for Mortgage Bankers or the Audit Program for Mortgages serviced for FNMA and
FHLMC (rendered within one year of such statement)
of independent public accountants with respect to the related Subservicer.
Copies of such statement shall be provided by the Trustee to any
Securityholder upon request at the Master Servicer's expense, provided such
statement is delivered by the Master Servicer to the Trustee.
(r) Errors and Omissions Insurance; Fidelity Bonds.
----------------------------------------------
The Master Servicer shall for so long as it acts as master servicer
under this Agreement, obtain and maintain in force (a) a policy or policies
of insurance covering errors and omissions in the performance of its
obligations as Master Servicer hereunder and (b) a fidelity bond in respect
of its officers, employees and agents. Each such policy or policies and bond
shall, together, comply with the requirements from time to time of FNMA or
FHLMC for persons performing servicing for mortgage loans purchased by FNMA
or FHLMC. In the event that any such policy or bond ceases to be in effect,
the Master Servicer shall obtain a comparable replacement policy or bond from
an insurer or issuer, meeting the requirements set forth above as of the date
of such replacement.
(s) Master Servicer Monthly Data.
----------------------------
On or before noon California time on the Determination Date, the Master
Servicer shall provide by modem to the Trustee with respect to the Mortgage
Loans, an electronic data file (accompanied by a hardcopy report) in a format
which is mutually agreed upon by the Master Servicer and the Trustee. The
Trustee shall be under no duty to recalculate, verify or recompute the
information provided to it by the Master Servicer hereunder.
4. Advances.
--------
The Master Servicer shall determine on or before each Master Servicer
Advance Date whether it is required to make an Advance pursuant to the
definition thereof. If the Master Servicer determines it is required to make
an Advance, it shall, on or before the Master Servicer Advance Date, deposit
into the Collection Account an amount equal to the Advance. The Master
Servicer shall be entitled to be reimbursed from the Collection Account for
all Advances of its own funds made pursuant to this Section as provided in
Section 3(k). The obligation to make Advances with respect to any Mortgage
Loan shall continue if such Mortgage Loan has been foreclosed or otherwise
terminated and the related Mortgaged Property has not been liquidated.
5. Servicing Compensation.
----------------------
As compensation for its activities hereunder, the Master Servicer shall
be entitled to retain or withdraw from the Collection Account an amount equal
to the Master Servicing Fee for each Mortgage Loan, provided that the
aggregate Master Servicing Fee with respect to any Distribution Date shall
be reduced (i) by an amount equal to the aggregate of the Prepayment
Interest Shortfalls, if any, with respect to such Distribution Date,
but not below an amount equal to one-half of the aggregate Master Servicing
Fee for such Distribution Date before reduction thereof in respect of
such Prepayment Interest Shortfalls, and (ii) with respect to the first
Distribution Date, an amount equal to any amount to be deposited into
the Payment Account by the Depositor pursuant to Section 2(a)(i) and
not so deposited.
Additional servicing compensation in the form of Excess Proceeds,
Prepayment Interest Excess, prepayment penalties, assumption fees, late
payment charges and all income and gain net of any losses realized from
Permitted Investments shall be retained by the Master Servicer to the extent
not required to be deposited in the Collection Account pursuant to Section
3(h) hereof. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its master servicing activities hereunder
(including payment of any premiums for hazard insurance and any Primary
Insurance Policy and maintenance of the other forms of insurance coverage
required by this Agreement) and shall not be entitled to reimbursement
therefor except as specifically provided in this Agreement.
6. The Master Servicer.
-------------------
(a) Respective Liabilities of the Depositor and the
________________________________________________________
Master Servicer.
_______________
The Master Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed upon and undertaken by it
herein.
(b) Merger or Consolidation of the Depositor or the Master
------------------------------------------------------
Servicer.
--------
The Depositor and the Master Servicer will each keep in full effect its
existence, rights and franchises as a corporation under the laws of the
United States or under the laws of one of the states thereof 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, or any of the
Mortgage Loans and to perform its respective duties under this Agreement.
Any Person into which the Depositor or the Master Servicer may be merged
or consolidated, or any Person resulting from any merger or consolidation to
which the Depositor or the Master Servicer shall be a party, or any person
succeeding to the business of the Depositor or the Master Servicer, shall be
the successor of the Depositor or the Master Servicer, as the case
may be, hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding; provided, however, that the successor or surviving
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Person to the Master Servicer shall be qualified to sell mortgage loans to,
and to service mortgage loans on behalf of, FNMA or FHLMC.
(c) Limitation on Liability of the Depositor, the Seller, Master
------------------------------------------------------------
Servicer and Others.
-------------------
None of the Depositor, the Seller, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor, the Seller or the
Master Servicer shall be under any liability to the Securityholders 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 Seller, the Master
Servicer or any such Person against any breach of representations or
warranties made by it herein or protect the Depositor, the Seller, the Master
Servicer or any such Person from any liability which would otherwise be
imposed by reasons 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 Seller, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Seller 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 Seller, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Seller or the
Master Servicer shall be indemnified by the Issuer and held harmless against
any loss, liability or expense incurred in connection with any audit,
controversy or judicial proceeding relating to a governmental taxing
authority or any legal action relating to this Agreement, the Notes 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. None of the
Depositor, the Seller or the Master Servicer shall be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
respective duties hereunder and which in its opinion may involve it in any
expense or liability; provided, however, that any of the Depositor, the
-------- -------
Seller or the Master Servicer may in its discretion undertake any such action
that it may deem necessary or desirable in respect of this Agreement and the
rights and duties of the parties hereto and interests of the Trustees and the
Securityholders hereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Issuer, and the Depositor, the Seller and
the Master Servicer shall be entitled to be reimbursed therefor
out of the Collection Account.
(d) Limitation on Resignation of the Master Servicer.
------------------------------------------------
The Master Servicer shall not resign from the obligations and duties
hereby imposed on it except (a) upon appointment of a successor servicer and
receipt by the Trustee of a letter from each Rating Agency that such a
resignation and appointment will not result in a downgrading of the rating of
any of the Certificates, or (b) upon determination that its duties hereunder
are no longer permissible under applicable law. Any such determination under
clause (b) permitting the resignation of the Master Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee.
No such resignation shall become effective until the Trustee or a successor
master servicer shall have assumed the Master Servicer's responsibilities,
duties, liabilities and obligations hereunder.
7. Default.
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(a) Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the following
events:
(i) any failure by the Master Servicer to deposit in the
Collection Account or remit to the Trustee any payment (other than
a payment required to be made under Section 4 hereof) required to
be made with respect to any Class of Certificates under the terms
of this Agreement, which failure shall continue unremedied for five
days after the date upon which written notice of such failure 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 Notes or Certificates of such Class evidencing
not less than 25% of the total distributions allocated to such
Class; or
(ii) any failure by the Master Servicer duly to observe or
perform in any material respect any other of the covenants or
agreements on the part of the Master Servicer contained in this
Agreement, which failure shall continue unremedied for a period of
thirty days after the date on which written notice of such failure
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 Notes or Certificates of any Class evidencing not
less than 25% of the total distributions allocated to such Class; or
(iii) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment
of a receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceeding,
or for the winding-up or liquidation of its affairs, shall have
been entered against the Master Servicer and such decree or order
shall have remained in force undischarged or unstayed for a period
of 60 consecutive days; or
(iv) the Master Servicer shall consent to the appointment of
a 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 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) so long as the Master Servicer is the Seller, any
failure by the Seller to observe or perform in any material respect
any other of the covenants or agreements on the part of the Seller
contained in this Agreement, which failure shall continue
unremedied for a period of 60 days after the date on which written
notice of such failure shall have been given to the Seller by the
Trustee or the Depositor, or to the Seller and the Trustee by the
Holders of Notes or Certificates of any Class evidencing not less
than 25% of the total distributions allocated to such Class; or)
(vii) any failure of the Master Servicer to make any Advance
in the manner and at the time required to be made pursuant to
Section 4 which continues unremedied for a period of one Business
Day after the date of such failure.
If an Event of Default described in clauses (i) to (vi) 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, the Trustee may, or at the direction of
the Holders of Notes or Certificates of any Class evidencing not less than
25% of the total distributions allocated to such Class, the Trustee shall
by notice in writing to the Master Servicer (with a copy to
each Rating Agency), terminate all of the rights and obligations of
the Master Servicer under this Agreement and in and to the Mortgage
Loans and the proceeds thereof, other than its rights as a Securityholder.
If an Event of Default described in clause (vii) hereof shall occur,
the Trustee shall, by notice in writing to the Master
Servicer and the Depositor, terminate all of the rights and obligations of
the Master Servicer under this Agreement and in and to the Mortgage Loans and
the proceeds thereof, other than its rights as a Securityholder. On and
after the receipt by the Master Servicer of such written notice, all
authority and power of the Master Servicer hereunder, whether with respect to
the Mortgage Loans or otherwise, shall pass to and be vested in the Trustee.
(The Trustee shall thereupon make any Advance described in clause (vii)
hereof subject to Section 3(g) hereof.) 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. Unless expressly provided in such written notice,
no such termination shall affect any obligation of the Master Servicer to pay
amounts owed pursuant to Article VIII. 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 of all cash amounts which shall at
the time be credited to the Collection Account, or thereafter be received
with respect to the Mortgage Loans.
Notwithstanding any termination of the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to receive, out of any late
collection of a Scheduled Payment on a Mortgage Loan which was due prior to
the notice terminating such Master Servicer's rights and obligations as
Master Servicer hereunder and received after such notice, that portion
thereof to which such Master Servicer would have been entitled pursuant to
Sections 3(k)(i)(A) through (H),and any other amounts payable to such Master
Servicer hereunder the entitlement to which arose prior to the termination of
its activities hereunder.
(b) Trustee to Act; Appointment of Successor.
----------------------------------------
On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7(a) hereof, the Trustee shall, subject to
and to the extent provided in Section 3(g), be the successor to the Master
Servicer in its capacity as master servicer under this Agreement and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the
Master Servicer by the terms and provisions hereof and applicable law
including the obligation to make Advances pursuant to Section 4. As
compensation therefor, the Trustee shall be entitled to all funds relating to
the Mortgage Loans that the Master Servicer would have been entitled to
charge to the Collection Account or Payment Account if the Master Servicer
had continued to act hereunder. Notwithstanding the foregoing, if the
Trustee has become the successor to the Master Servicer in accordance with
Section 7(a) hereof, the Trustee may, if it shall be unwilling to so act, or
shall, if it is prohibited by applicable law from making Advances pursuant to
Section 4 hereof or if it is otherwise unable to so act, appoint, or petition
a court of competent jurisdiction to appoint, any established mortgage loan
servicing institution the appointment of which does not adversely affect the
then current rating of the Securities by each Rating Agency 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.
Any successor to the Master Servicer shall be an institution which is a FNMA
and FHLMC approved seller/servicer in good standing, which has a net worth of
at least $10,000,000, and which is willing to service the Mortgage Loans and
executes and delivers to the Depositor and the Trustees an agreement
accepting such delegation and assignment, which contains an assumption by
such Person of the rights, powers, duties, responsibilities, obligations and
liabilities of the Master Servicer (other than liabilities of the Master
Servicer under Section 6(c) hereof incurred prior to termination of the
Master Servicer under Section 7(a)), with like effect as if originally named
as a party to this Agreement; and provided further that each Rating Agency
acknowledges that its rating of the Securities in effect immediately prior to
such assignment and delegation will not be qualified or reduced as a result
of such assignment and delegation. Pending appointment of a successor to the
Master Servicer hereunder, the Trustee, unless the Trustee is prohibited by
law from so acting, shall, subject to Section 3(g) hereof, 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 the Master Servicing Fee permitted the Master Servicer hereunder.
The Trustee and such successor shall take such action, consistent with
this Agreement, as shall be necessary to effectuate any such succession.
Neither the Trustee nor any other successor master servicer shall be deemed
to be in default hereunder by reason of any failure to make, or any delay
in making, any distribution hereunder or any portion thereof or any
failure to perform, or any delay in performing, any duties or
responsibilities hereunder, in either case caused by the failure of
the Master Servicer to deliver or provide, or any delay in
delivering or providing, any cash, information, documents or records to it.
Any successor to the Master Servicer as master servicer shall give
notice to the Mortgagors of such change of servicer and shall, during the
term of its service as master servicer maintain in force the policy or
policies that the Master Servicer is required to maintain pursuant to 3(r).
(c) Notification to Securityholders.
-------------------------------
(i) Upon any termination of or appointment of a successor to the
Master Servicer, the Trustee shall give prompt written notice thereof to
Securityholders and to each Rating Agency.
(ii) Within 60 days after the occurrence of any Event of Default,
the Trustee shall transmit by mail to all Securityholders notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.
8. Miscellaneous.
-------------
(a) Term of Master Servicing Agreement.
----------------------------------
The obligations to be performed by the Master Servicer under this
Agreement shall commence on and as of the date on which the Issuer issues the
Securities and shall terminate as to each Mortgage Loan upon (i) the payment
in full of all principal and interest due under such Mortgage Loan or other
liquidation of such Mortgage Loan as contemplated by this Agreement, (ii) the
termination of the Master Servicer's rights and powers under this Agreement
by the Trustee as provided in Section 7(a) of this Agreement, or (iii) the
release by the Trustee of its security interest in any Mortgage Loan.
(b) Assignment.
----------
Notwithstanding anything to the contrary contained herein, except as
provided in Section 6(b), this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Depositor.
(c) Notices.
-------
(i) The Trustee shall use its best efforts to promptly provide
notice to each Rating Agency with respect to each of the following of which
it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Event of Default that has not been cured;
3. The resignation or termination of the Master Servicer or the
Trustee and the appointment of any successor;
4. The repurchase or substitution of Mortgage Loans pursuant to
Section 2(d); and
5. The final payment to Securityholders.
In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:
1. Each report to Securityholders described in the Indenture;
2. Each annual statement as to compliance described in Section
3(p);
3. Each annual independent public accountants' servicing report
described in Section 3(q); and
4. Any notice of a purchase of a Mortgage Loan pursuant to Section
2(c)(ii), 2(d) or 3(n).
(ii) All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when delivered to (a) in
the case of the Depositor, (IndyMac Depositor), 155 North Lake Avenue,
Pasadena, California 91101, Attention: _______________, (b) in the case of
the Master Servicer, _____________________________________________,
Attention: _________________ or such other address as may be hereafter
furnished to the Depositor and the Trustees by the Master Servicer in
writing, (c) in the case of the Trustees,
_______________________________________________________, Attention:
__________________________________________________, or such other address as
the Trustee may hereafter furnish to the Depositor or Master Servicer and (d)
in the case of the Rating Agencies, the address specified therefor in the
definition corresponding to the name of such Rating Agency. Notices to
Securityholders shall be deemed given when mailed, first class postage
prepaid, to their respective addresses appearing in the Certificate Register.
(d) Inspection and Audit Rights.
---------------------------
The Master Servicer agrees that, on reasonable prior notice, it will
permit and will cause each Subservicer to permit any representative of the
Depositor or the Trustee during the Master Servicer's normal business hours,
to examine all the books of account, records, reports and other papers of the
Master Servicer relating to the Mortgage Loans, to make copies and
extracts therefrom, to cause such books to be audited by independent
certified public accountants selected by the Depositor or the
Trustee and to discuss its affairs, finances and accounts relating to
the Mortgage Loans with its officers, employees and independent public
accountants (and by this provision the Master Servicer hereby authorizes
said accountants to discuss with such representative such affairs, finances
and accounts), all at such reasonable times and as often as may be reasonably
requested. Any out-of-pocket expense incident to the exercise by the
Depositor or the Trustee of any right under this Section 8(d)
shall be borne by the party requesting such inspection; all other such
expenses shall be borne by the Master Servicer or the related Subservicer.
(e) Governing Law.
-------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE SECURITY HOLDERS SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.
(f) Amendment.
---------
This Agreement may be amended from time to time by the Issuer(, the
Depositor,) the Master Servicer and the Trustee without the consent of any of
the Securityholders to (i) cure any ambiguity or mistake, (ii) correct any
provision herein or to supplement any provision herein which may be
inconsistent with any other provisions herein, (iii) add to the duties of the
Issuer(, the Depositor) or the Master Servicer, (iv) add any other provisions
with respect to matters or questions arising hereunder or (v) modify, alter,
amend, add to or rescind any of the terms or provisions contained in this
Agreement; provided that any action pursuant to clauses (iv) or (v)
--------
above shall not, as evidenced by an Opinion of Counsel (which Opinion of
Counsel shall not be an expense of the Trustee or the Issuer), adversely
affect in any material respect the interests of any Securityholder; provided
--------
further that any such action shall not be deemed to adversely affect in any
- -------
material respect the interests of the Securityholders (and no such Opinion of
Counsel shall be required) if the Person requesting the amendment obtains a
letter from each Rating Agency stating that the amendment would not result in
the downgrading or withdrawal of the respective ratings then assigned to the
Securities; it being understood and agreed that any such letter in and of
itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. The Trustee, the Issuer, the Depositor and the
Master Servicer also may at any time and from time to time amend this
Agreement without the consent of the Securityholders to modify,
eliminate or add to any of its provisions to such extent as shall
be necessary or helpful to (i) maintain the qualification of
the Issuer as a REMIC under the Code, (ii) avoid or minimize the risk of the
imposition of any tax on the REMIC pursuant to the Code that would be a claim
at any time prior to the final redemption of the Securities or (iii) comply
with any other requirements of the Code; provided that the Trustee has been
--------
provided an Opinion of Counsel, which opinion shall be an expense of the
party requesting such opinion but in any case shall not be an expense of the
Trustee or the Issuer, to the effect that such action is necessary or helpful
to (i) maintain such qualification, (ii) to avoid or minimize the risk of the
imposition of such a tax or (iii) comply with any such requirements of the
Code, as the case may be.
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 a
Majority in Interest of each Class of Notes or Certificates affected thereby
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of Notes or Certificates; provided that no
--------
such amendment shall (i) reduce in any manner the amount of, or delay the
timing of, payments required to be distributed on any Note or Certificate
without the consent of the Holder of such Note or Certificate, (ii) adversely
affect in any material respect the interests of the Holders of any Class of
Notes or Certificates in a manner other than as described in (i), without the
consent of the Holders of Notes or Certificates of such Class evidencing, as
to such Class, Percentage Interests aggregating 66% or (iii) reduce the
aforesaid percentages of Notes or Certificates the Holders of which are
required to consent to any such amendment, without the consent of the Holders
of all such Notes or Certificates then outstanding.
(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, which opinion shall not be an expense
of the Trustee or the Issuer, to the effect that such amendment will not
cause the imposition of any tax on the REMIC or the Securityholders or cause
the Issuer to fail to qualify as a REMIC at any time that any Certificates
are outstanding.)
Promptly after the execution of any amendment to this Agreement
requiring the consent of Securityholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Securityholder and each Rating Agency.
It shall not be necessary for the consent of Securityholders under this
Section 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 Securityholders shall be
subject to such reasonable regulations as the Trustee may prescribe.
Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be
an expense of the Trustee or the Issuer, satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that
all requirements for amending this Agreement have been complied with; and
(ii) either (A) the amendment does not adversely affect in any material
respect the interests of any Securityholder or (B) the conclusion set forth
in the immediately preceding clause (A) is not required to be reached
pursuant to this Section 8(f).
(g) 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.
(h) No Joint Venture.
----------------
The Master Servicer and the Issuer are not partners or joint venturers
with each other and nothing herein shall be construed to make them such
partners or joint venturers or impose any liability as such of either of
them.
(i) Recordation of Agreement; Counterparts.
--------------------------------------
This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages
are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Master Servicer at its
expense, but only upon direction by the Trustee accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially
affects the interests of the Securityholders.
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.
(j) Limitation of Liability of (owner trustee).
------------------------------------------
It is expressly understood and agreed by the parties hereto that (a)
this Agreement is executed and delivered by (owner trustee), not individually
or personally but solely as owner trustee of (________________) Home Equity
Loan Trust 199_ under the Trust Agreement, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
(owner trustee) but is made and intended for the purpose for binding only the
Issuer, (c) nothing herein contained shall be construed as creating any
liability on (owner trustee), other than any liability arising out of its
gross negligence, bad faith or willful misconduct, and (d) under no
circumstances shall (owner trustee) be personally liable for the payment of
any indebtedness or expenses of the Issuer or be liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken by the Issuer under this Agreement or the other Operative
Documents.
(k) Nonpetition Covenants.
---------------------
Notwithstanding any prior termination of this Agreement, the Master
Servicer shall not, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Issuer or the Depositor,
acquiesce, petition or otherwise invoke or cause the Issuer or the Depositor
(or any assignee) to invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Issuer or the
Depositor under any federal or state bankruptcy, insolvency or similar law,
or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or the Depositor or any
substantial part of its property, or ordering the winding up or liquidation
of the affairs of the Issuer or the Depositor.
IN WITNESS WHEREOF, each party has caused this Master Servicing
Agreement to be executed by its duly authorized officer or officers as of the
day and year first above written.
(________________) Home Equity Loan Trust 199_,
as Issuer
By: (owner trustee)
not in its
individual capacity
but solely as
Owner Trustee
By:
--------------------------------
Its:
-------------------------------
(INDYMAC, INC.)
as Seller and Master Servicer
By:
--------------------------------
Its:
-------------------------------
( )
as Trustee
By:
--------------------------------
Its:
-------------------------------
SCHEDULE I
Mortgage Loan Schedule
SCHEDULE II
(________________) Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Representations and Warranties of the Master Servicer
-----------------------------------------------------
____________________________ ("Seller-Master Servicer") hereby makes the
representations and warranties set forth in this Schedule II to the Issuer,
the Depositor and the Trustees, as of the Closing Date, or if so specified
herein, as of the Cut-off Date. Capitalized terms used but not otherwise
defined in this Schedule II shall have the meanings ascribed thereto in the
Indenture (the "Indenture") relating to the above-referenced Series, among
Seller-Master Servicer, as seller and master servicer, (IndyMac Depositor),
as depositor, and _____________________, as trustee.
(i) The Master Servicer is a (Delaware) corporation, validly
existing and in good standing under the laws of the State of (Delaware),
and has the corporate power to own its assets and to transact the
business in which it is currently engaged. The Master Servicer is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business
transacted by it or any properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, or condi-
tion (financial or other) of the Master Servicer;
(ii) The Master Servicer has the power and authority to make,
execute, deliver and perform this Agreement and all of the transactions
contemplated under the Agreement, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement. When executed and delivered, this Agreement will constitute
the legal, valid and binding obligation of the Master Servicer enforce-
able in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies;
(iii) The Master Servicer is not required to obtain the consent of
any other party or any consent, license, approval or authorization from,
or registration or declaration with, any governmental authority, bureau
or agency in connection with the execution, delivery, performance,
validity or enforceability of this Agreement, except for such consent,
license, approval or authorization, or registration or declaration, as
shall have been obtained or filed, as the case may be, prior to the
Closing Date;
(iv) The execution, delivery and performance of this Agreement by
the Master Servicer will not violate any provision of any existing law
or regulation or any order or decree of any court applicable to the
Master Servicer or any provision of the Certificate of Incorporation or
Bylaws of the Master Servicer, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the Master
Servicer is a party or by which the Master Servicer may be bound; and
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the
knowledge of the Master Servicer threatened, against the Master Servicer
or any of its properties or with respect to this Agreement or the
Certificates which in the opinion of the Master Servicer has a reasonable
likelihood of resulting in a material adverse effect on the transactions
contemplated by this Agreement.
SCHEDULE III
(________________) Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Representations and Warranties as to the Mortgage Loans
-------------------------------------------------------
____________________________ ("Seller") hereby makes the
representations and warranties set forth in this Schedule III to the
Depositor and the Trustee, as of the Closing Date, or if so specified herein,
as of the Cut-off Date. Capitalized terms used but not otherwise defined in
this Schedule III shall have the meanings ascribed thereto in the Indenture
(the "Indenture") relating to the above-referenced Series, among Seller, as
seller and master servicer, (IndyMac Depositor), as depositor, and
________________________, as trustee.
(i) As of the Closing Date, this Agreement constitutes a legal,
valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement
of creditors' rights generally and by the availability of equitable
remedies;
(ii) As of the Closing Date with respect to the Mortgage Loans and
as of the applicable Transfer Date with respect to any Eligible
Substitute Mortgage Loan, either (A) the Purchase Agreement constitutes
a valid transfer and assignment to the Depositor of all right, title and
interest of the Seller in and to the Cut-off Date Asset Balances with
respect to the applicable Mortgage Loans, all monies due or to become
due with respect thereto (excluding payments in respect of accrued
interest (due) prior to the Cut-off Date (or due in the month of
_________), and all proceeds of such Cut-off Date Asset Balances with
respect to the Mortgage Loans and such funds as are from time to time
deposited in the Collection Account (excluding any investment earnings
thereon) and all other property specified in the definition of "Asset"
as being part of the corpus of the Trust conveyed to the Trust by the
Seller, and upon payment for the Additional Balances, will constitute a
valid transfer and assignment to the Trustee of all right, title and
interest of the Seller in and to the Additional Balances, all monies due
or to become due with respect thereto, and all proceeds of such
Additional Balances and all other property specified in the definition
of "Asset" relating to the Additional Balances or (B) the Purchase
Agreement or this Agreement, as appropriate, constitutes a grant of a
security interest (as defined in the UCC as in effect in California) in
such property to the Trustee on behalf of the Trust. If this Agreement
constitutes the grant of a security interest to the Trust in such
property, and if the Trustee obtains and maintains possession of the
Mortgage File for each Mortgage Loan, the Trust shall have a first
priority perfected security interest in such property, subject to the
effect of Section 9-306 of the UCC with respect to collections on the
Mortgage Loans that are deposited in the Collection Account in
accordance with the next to last paragraph of Section _______; provided,
--------
however, that nothing in this clause (ii) shall be construed to obligate the
- -------
Master Servicer to deliver any Mortgage Files other than as set forth in
Section 2(a) hereof;
((iii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan and as of the date any Additional Balance is created, the
information set forth in the Mortgage Loan Schedule for such Mortgage
Loans is true and correct in all material respects;)
(iv) The applicable Cut-off Date Asset Balance has not been
assigned or pledged, and the Seller is the sole owner and holder of such
Cut-off Date Asset Balance free and clear of any and all liens, claims,
encumbrances, participation interests, equities, pledges, charges or
security interests of any nature, and has full right and authority,
under all governmental and regulatory bodies having jurisdiction over
the ownership of the applicable Mortgage Loan, to sell, assign or
transfer the same pursuant to the Purchase Agreement;
(v) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the related Mortgage Note and the Mortgage with respect
to each Mortgage Loan have not been assigned or pledged, and the Seller
(immediately prior to the sale of the Mortgage Loans to the Depositor,
the Sponsor was) (is) the sole owner and holder of the Mortgage Loan
free and clear of any and all liens, claims, encumbrances, participation
interests, equities, pledges, charges or security interests of any
nature, and has full right and authority, under all governmental and
regulatory bodies having jurisdiction over the ownership of the appli-
cable Mortgage Loans, to sell and assign the same pursuant to the
Purchase Agreement;
(vi) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the related Mortgage is a valid and subsisting first or
second lien, as set forth on the Mortgage Loan Schedule with respect to
each related Mortgage Loan, on the property therein described, and as of
the Cut-off Date the related Mortgaged Property is free and clear of all
encumbrances and liens having priority over the first or second lien, as
applicable, of such Mortgage except for liens for (i) real estate taxes
and special assessments not yet delinquent and liens or interests
arising under or as a result of any Federal, state or local law,
regulation or ordinance relating to hazardous wastes or hazardous
substances and, if the related Mortgaged Property is a unit in a
condominium project or planned unit development, any lien for common
charges permitted by statute or homeowner association fees; (ii) any
first mortgage loan secured by such Mortgaged Property and specified on
the Mortgage Loan Schedule; (iii) covenants, conditions and
restrictions, rights of way, easements and other matters of public
record as of the date of recording that are acceptable to mortgage
lending institutions in the area wherein the related Mortgaged Property
is located or specifically reflected in the appraisal made in connection
with the origination of the related Mortgage Loan; and (iv) other
matters to which like properties are commonly subject which do not
materially interfere with the benefits of the security intended to be
provided by such Mortgage;
(vii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, there is no valid offset, defense or counterclaim of any
obligor under any Credit Line Agreement or Mortgage;
(viii) To the best knowledge of the Seller, as of the Closing Date
with respect to the Mortgage Loans and the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, there is no delinquent
recording or other tax or fee or assessment lien against any related
Mortgaged Property;
(ix) As of the Closing Date with respect to the Mortgage Loans and
the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, there is no proceeding pending or, to the best knowledge
of the Seller, threatened for the total or partial condemnation of the
related Mortgaged Property, and no such property has been materially
damaged by water, fire, earthquake, windstorm, flood, tornado or similar
casualty (excluding casualty from the presence of hazardous wastes or
hazardous substances, as to which the Seller makes no representations)
so as to affect adversely the value of the related Mortgaged Property
as security for such Mortgage Loan;
(x) To the best knowledge of the Seller, as of the Closing Date
with respect to the Mortgage Loans and the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, there are no
mechanics' or similar liens or claims which have been filed for work,
labor or material affecting the related Mortgaged Property which are, or
may be, liens prior or equal to the lien of the related Mortgage, except
liens which are fully insured against by the title insurance policy
referred to in clause (xiv);
(xi) No Minimum Monthly Payment is more than 89 days delinquent
(measured on a contractual basis); and with respect to the Mortgage
Loans no more than _____% (by Cut-off Date Pool Balance) were 30-59 days
delinquent (measured on a contractual basis) and no more than _____% (by
Cut-off Date Pool Balance) were 60-89 days delinquent (measured on a
contractual basis);
(xii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, for each Mortgage Loan, the related Mortgage File
contains each of the documents and instruments specified to be included
therein;
(xiii) The related Mortgage Note and the related Mortgage at
origination complied in all material respects with applicable state and
federal laws, including, without limitation, usury, truth-in-lending,
real estate settlement procedures, consumer credit protection, equal
credit opportunity or disclosure laws applicable to the Mortgage Loan;
(xiv) Either a lender's title insurance policy or binder was
issued on the date of origination of the Mortgage Loan and each such
policy is valid and remains in full force and effect, or a title search
or guaranty of title customary in the relevant jurisdiction was obtained
with respect to a Mortgage Loan as to which no title insurance policy or
binder was issued;
((xv) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, none of the Mortgaged Properties is a mobile home or a
manufactured housing unit that is not considered or classified as part
of the real estate under the laws of the jurisdiction in which it is
located;)
((xvi) As of the Cut-off Date for the Mortgage Loans no more than
_____% of such Mortgage Loans, by aggregate principal balance, are
secured by Mortgaged Properties located in one United States postal
five-digit zip code;)
((xvii) The Combined Loan-to-Value Ratio for each Mortgage Loan
was not in excess of (___)%;)
(xviii) No selection procedure reasonably believed by the Seller
to be adverse to the interests of the Securityholders (or the Credit
Enhancer) was utilized in selecting the Mortgage Loans;
(xix) The Seller has not transferred the Mortgage Loans to the
Trust with any intent to hinder, delay or defraud any of its creditors;
(xx) The Minimum Monthly Payment with respect to any Mortgage Loan
is not less than the interest accrued at the applicable Loan Rate on the
average daily Asset Balance during the interest period relating to the
date on which such Minimum Monthly Payment is due;
(xxi) Within 90 days of the Closing Date with respect to the
Mortgage Loans and, to the extent not already included in such filing
with respect to the Mortgage Loans, the applicable Transfer Date with
respect to any Eligible Substitute Mortgage Loan, the Seller will file
UCC-1 financing statements with respect to the Mortgage Loans;
(xxii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, each Credit Line Agreement and each Mortgage Loan is an
enforceable obligation of the related Mortgagor, except as the
enforceability thereof may be limited by the bankruptcy, insolvency or
similar laws affecting creditors' rights generally;
(xxiii) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, the Seller has not received a notice of default of any
senior mortgage loan related to a Mortgaged Property that has not been
cured by a party other than the Master Servicer;
(xxiv) The definition of Prime Rate in each Credit Line Agreement
relating to a Mortgage Loan does not differ materially from the
definition in the form of Credit Line Agreement in _________________;
((xxv) The weighted average remaining term to maturity of the
Mortgage Loans on a contractual basis as of the Cut-
off Date for the Mortgage Loans is approximately ___ months. On each
date that the Loan Rates have been adjusted, interest rate adjustments
on the Mortgage Loans were made in compliance with the related Mortgage
and Mortgage Note and applicable law. Over the term of each Mortgage
Loan, the Loan Rate may not exceed the related Loan Rate Cap, if any.
The Loan Rate Caps range between ____% and ____%. The Margins range
between ____% and ____% and the weighted average Margin is approximately
____% as of the Cut-off Date for the Mortgage Loans. The Loan Rates on
such Mortgage Loans range between ____% and _____% and the weighted
average Loan Rate is approximately _____%.)
(xxvi) As of the Closing Date with respect to the Mortgage Loans
and the applicable Transfer Date with respect to any Eligible Substitute
Mortgage Loan, each Mortgaged Property consists of a single parcel of
real property with a one-to-four unit single family residence erected
thereon, or an individual condominium unit, planned unit development
unit or townhouse;
(xxvii) No more than _____% (by Cut-off Date Pool Balance) of the
Mortgage Loans are secured by real property improved by individual
condominium units, planned development units, townhouses or two-to-four
family residences erected thereon, and at least _____% (by Cut-off Date
Pool Balance) of the Mortgage Loans are secured by real property with a
detached one-family residence erected thereon;
(xxviii) The Credit Limits on the Mortgage Loans range between
$________ and $__________ with an average of $_________. As of the Cut-
off Date for the Mortgage Loans, no Mortgage Loan had a principal
balance in excess of approximately $__________ and the average principal
balance of the Mortgage Loans is equal to approximately $_________; and
(xxix) Approximately ____% and _____% of the Mortgage Loans, by
aggregate principal balance as of the Cut-off Date for the Mortgage
Loans, are first and second liens, respectively.
SCHEDULE IV
(________________) Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Representations and Warranties of the Issuer.
--------------------------------------------
(________________) Home Equity Loan Trust 199_ (the "Issuer") hereby
makes the representations and warranties set forth in this Schedule IV to the
Master Servicer and the Trustee, as of the Closing Date. Capitalized terms
used but not otherwise defined in this Schedule IV shall have the meanings
ascribed thereto in the Master Servicing Agreement (the "Master Servicing
Agreement") relating to the above-referenced Series, among (IndyMac, Inc.),
as Master Servicer, (________________) Home Equity Loan Trust 199_, as
Issuer, and ( ), as Trustee.
(1) The Issuer is a statutory business trust duly organized,
validly existing and in good standing under the laws of the State of
(Delaware), and possesses all requisite authority, power, licenses,
permits and franchises to conduct any and all business contemplated by
the Master Servicing Agreement and to comply with its obligations under
the terms of this Agreement, the performance of which have been duly
authorized by all necessary action.
(2) Neither the execution and delivery of the Master Servicing
Agreement by the Issuer, nor the performance and compliance with the
terms thereof by the Issuer will (A) result in a material breach of any
term or provision of the instruments creating the Issuer or governing
its operations, or (B) materially conflict with, result in a material
breach, violation or acceleration of, or result in a material default
under, the terms of any other material agreement or instrument to which
the Issuer is a party or by which it may be bound, or (C) constitute a
material violation of any statute, order or regulation applicable to the
Issuer of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Issuer; and the Issuer is
not in breach or violation of any material indenture or other material
agreement or instrument, or in violation of any statute, order or
regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it which breach or violation
may materially impair the Issuer's ability to perform or meet any of its
obligations under the Master Servicing Agreement.
(3) This Agreement, and all documents and instruments contemplated
hereby, which are executed and delivered by the Issuer, will, assuming
due authorization, execution by and delivery to the other parties hereto
and thereto, constitute valid, legal and binding obligations of the
Issuer, enforceable in accordance with their respective terms, except
that (a) the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, receivership and other similar laws relating to
creditors' rights generally and (b) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(4) No litigation is pending or, to the best of the Issuer's
knowledge, threatened against the Issuer that would materially and
adversely affect the execution, delivery or enforceability of the Master
Servicing Agreement or the ability of the Issuer to perform its
obligations thereunder.
(5) Immediately prior to the transfer and assignment of the
Mortgage Loans to the Trustee, the Issuer had good title to, and was the
sole owner of, each Mortgage Loan free and clear of any liens, charges
or encumbrances or any ownership or participation interests in favor of
any other Person.
EXHIBIT A
FORM OF INITIAL CERTIFICATION OF TRUSTEE
(date)
(Master Servicer)
(Issuer)
_____________________
_____________________
Re: Master Servicing Agreement among (________________) Home
Equity Loan Trust 199_, as Issuer, (IndyMac, Inc.), as
Master Servicer, and ( ), as Trustee, Asset Backed Notes
and Asset Backed Certificates, Series 199_
--------------------------------------
- ------
Gentlemen:
In accordance with Section 2(b) of the above-captioned Master Servicing
Agreement (the "Master Servicing Agreement"), the undersigned, as Trustee,
hereby certifies that, as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan listed in the attached schedule), it
has received:
(i) the original Mortgage Note, endorsed as provided in the following
form: "Pay to the order of ________, without recourse"; and
<PAGE>
(ii) a duly executed assignment of the Mortgage (which may be included
in a blanket assignment or assignments).
Based on its review and examination and only as to the foregoing
documents, such documents appear regular on their face and related to such
Mortgage Loan.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in
the Master Servicing Agreement. The Trustee makes no representations as to:
(i) the validity, legality, sufficiency, enforceability or genuineness of any
of the documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan or (iii)
the correctness of any information set forth in the Mortgage Loan Schedule,
other than the information specified in items (i) through (iv) and (vi)
thereof.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Master Servicing Agreement.
( )
as Trustee
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
EXHIBIT B
FORM OF FINAL CERTIFICATION OF TRUSTEE
(date)
(Master Servicer)
(Issuer)
_____________________
_____________________
Re: Master Servicing Agreement among (________________) Home
Equity Loan Trust 199_, as
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Issuer, (IndyMac, Inc.), as Master Servicer, and ( ), as
Trustee, Asset Backed
Notes and Asset Backed Certificates, Series 199_
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Gentlemen:
In accordance with Section 2(b) of the above-captioned Master Servicing
Agreement (the "Master Servicing Agreement"), the undersigned, as Trustee,
hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or listed on the attached
Document Exception Report) it has received:
(i) The original Mortgage Note, endorsed in the form provided in
Section 2(a) of the Master Servicing Agreement, with all intervening
endorsements showing a complete chain of endorsement from the originator to
the Issuer.
(ii) The original recorded Mortgage.
(iii) A duly executed assignment of the Mortgage in the form provided in
Section 2(a) of the Master Servicing Agreement, or, if the Master Servicer
has certified or the Trustee otherwise knows that the related Mortgage has
not been returned from the applicable recording office, a copy of the
assignment of the Mortgage (excluding information to be provided by the
recording office).
(iv) The original or duplicate original recorded assignment or
assignments of the Mortgage showing a complete chain of assignment from the
originator to the Issuer.
(v) The original or duplicate original lender's title policy and all
riders thereto or, any one of an original title binder, an original
preliminary title report or an original title commitment, or a copy thereof
certified by the title company.
Based on its review and examination and only as to the foregoing
documents, (a) such documents appear regular on their face and related to
such Mortgage Loan, and (b) the information set forth in items (i), (ii),
(iii), (iv), (vi) and (xi) of the definition of the "Mortgage Loan Schedule"
in Section 1 of the Master Servicing Agreement accurately reflects
information set forth in the Trustee Mortgage File.
The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in
the Master Servicing Agreement. The Trustee makes no representations as to:
(i) the validity, legality, sufficiency, enforceability or genuineness of any
of the documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii)
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the collectability, insurability, effectiveness or suitability of any such
Mortgage Loan. Notwithstanding anything herein to the contrary, the Trustee
has made no determination and makes no representations as to whether (i) any
endorsement is sufficient to transfer all right, title and interest of the
party so endorsing, as noteholder or assignee thereof, in and to that
Mortgage Note or (ii) any assignment is in recordable form or sufficient to
effect the assignment of and transfer to the assignee thereof, under the
Mortgage to which the assignment relates.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Master Servicing Agreement.
( ),
as Trustee
By:
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Name:
---------------------------
Title:
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EXHIBIT C
REQUEST FOR RELEASE
(for Trustee)
(________________) Home Equity Loan Trust 199_
Asset Backed Notes and Asset Backed Certificates
Series 199_
Loan Information
- ----------------
Name of Mortgagor:
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Servicer
Loan No.:
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Trustee
- -------
Name:
------------------------------
Address:
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Trustee
Mortgage File No.:
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The undersigned Master Servicer hereby acknowledges that it has received
from ( ), as Trustee for the Holders of Notes of the above-referenced Series,
the documents referred to below (the "Documents"). All capitalized terms not
otherwise defined in this Request for Release shall have the meanings given
them in the Master Servicing Agreement (the "Master Servicing Agreement")
relating to the above-referenced Series among the Trustee, (IndyMac, Inc.),
as Master Servicer, and (________________) Home Equity Loan Trust 199_, as
Issuer.
( ) Mortgage Note dated , 19 , in the original principal sum
------------ --
of $ , made by . payable to, or endorsed to the
---------- ------------------
order of, the Trustee.
( ) Mortgage recorded on as instrument no.
-----------------
in the County Recorder's Office of the County of ,
State of in book/reel/docket of official
records at page/image . --------------------
- ----------- ----------------
( ) Deed of Trust recorded on as instrument no.
------------------
in the County Recorder's Office of the County of ,
State of in book/reel/docket of official
_______________
records at page/image . ------------------
- ------------- ----------------
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
--
as instrument no. in the County Recorder's Office
- -------------- ------------
of the County of , State of in book/reel/docket
---------- ----------------
of official records at page/image .
--
- -------------
( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.
( )
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( )
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( )
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( )
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The undersigned Master Servicer hereby acknowledges and agrees as
follows:
(1) The Master Servicer shall hold and retain possession of the
Documents in trust for the benefit of the Trustee, solely for the
purposes provided in the Agreement.
(2) The Master Servicer shall not cause or knowingly permit the
Documents to become subject to, or encumbered by,
any claim, liens, security interest, charges, writs of attachment or
other impositions nor shall the Master Servicer assert or seek to assert
any claims or rights of setoff to or against the Documents or any
proceeds thereof.
(3) The Master Servicer shall return each and every Document
previously requested from the Mortgage File to the Trustee when the need
therefor no longer exists, unless the Mortgage Loan relating to the
Documents has been liquidated and the proceeds thereof have been
remitted to the Note Account and except as expressly provided in the
Master Servicing Agreement.
(4) The Documents and any proceeds thereof, including any proceeds
of proceeds, coming into the possession or control of the Master
Servicer shall at all times be earmarked for the account of the Trustee,
and the Master Servicer shall keep the Documents and any proceeds
separate and distinct from all other property in the Master Servicer's
possession, custody or control.
(INDYMAC, INC.)
By
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Its
------------------------
Date: , 19
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EXHIBIT D
REQUEST FOR RELEASE OF DOCUMENTS
To: (Trustee) Attn: Mortgage Custody
Services
Re: The Master Servicing Agreement dated ( ) among (IndyMac, Inc.)
("(IndyMac)"), as Master Servicer, (________________) Home Equity Loan Trust
199_, as Issuer, and ( ), as Trustee
Ladies and Gentlemen:
In connection with the administration of the Mortgage Loans held by you as
Trustee for (________________) Home Equity Loan Trust 199_, as Issuer, we
request the release of the Mortgage File for the Mortgage Loan(s) described
below, for the reason indicated.
FT Account#: Pool #:
Mortgagor's Name, Address and Zip Code:
- --------------------------------------
Mortgage Loan Number:
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Reason for Requesting Documents (check one)
- -------------------------------
_______1. Mortgage Loan paid in full ((IndyMac) hereby certifies that all
amounts have been received.)
_______2. Mortgage Loan Liquidated ((IndyMac) hereby certifies that all
proceeds of foreclosure, insurance, or other liquidation have been
finally received.)
_______3. Mortgage Loan in Foreclosure.
_______4. Other (explain): ____________________________________
If item 1 or 2 above is checked, and if all or part of the Trustee Mortgage
File was previously released to us, please release to us our previous receipt
on file with you, as well as an additional documents in your possession
relating to the above-specified Mortgage Loan. If item 3 or 4 is checked,
upon return of all of the above documents to you as Trustee, please
acknowledge your receipt by signing in the space indicated below, and
returning this form.
(INDYMAC, INC.) (address)
By:________________________
Name:______________________
Title:____________________
Date:______________________
TRUSTEE CONSENT TO RELEASE AND
ACKNOWLEDGEMENT OF RECEIPT
By:________________________
Name:______________________
Title:____________________
Date:______________________
LOAN PURCHASE AGREEMENT
This Loan Purchase Agreement (the "Agreement") is made as of
_________, 199_, by and among [ , a Delaware
__________________________
Corporation (the "Seller")], IndyMac ABS, Inc., a Delaware corporation (the
"Company"), and [ ] 199_-__ (the "Issuer"), a
______________________ ___________
.
_________________
Section 1. Representations and Warranties.
______________________________
1. Representations and Warranties of all Parties.
_____________________________________________
The Company, the Seller and the Issuer, each as to itself and not the other,
hereby represents, warrants and agrees that:
(a) Authorization. The execution, delivery and performance of
_____________
this Agreement by it are within its respective powers and have been duly
authorized by all necessary action on its part.
(b) No Conflict. The execution, delivery and performance of this
___________
Agreement will not violate or conflict with (i) its charter, bylaws or trust
agreement, (ii) any resolution or other corporate action by it, (iii) any
decisions, statutes, ordinances, rulings, directions, rules, regulations,
orders, writs, decrees, injunctions, permits, certificates or other
requirements of any court or other governmental or public authority in any
way applicable to or binding upon it, and (iv) will not result in or require
the creation, except as provided in or contemplated by this Agreement, of any
lien, mortgage, pledge, security interest, charge or encumbrance of any kind
upon the Original Mortgage Loans.
(c) Binding Obligation. This Agreement has been duly executed by
__________________
it and is its legally valid and binding obligation, enforceable against it in
accordance with this Agreement's terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, and by general principles of equity.
Section 2. Additional Representations, Warranties and
__________________________________________
Agreements of the Seller and the Company.
________________________________________
(a) The Seller represents and warrants to, and agrees with, the
Company and the Issuer that (i) the Seller has good and valid title to the
[home equity] loans identified in [Schedule __ to] the Indenture (the
"Loans") free and clear of all liens, mortgages, deeds of trust, pledges,
security interests, charges, encumbrances or other claims; and (ii) upon
transfer to the Company, the Company will receive good, valid and marketable
title to all of the Loans, free and clear of any liens, mortgages, deeds of
trust, pledges, security interests, charges, encumbrances or other claims.
(b) The Company represents and warrants to, and agrees with, the
Issuer that upon transfer of the Loans from Seller to the Company, it will
have good and valid title to the Loans free and clear of all liens,
mortgages, deeds of trust, pledges, security interests, charges, encumbrances
or other claims, and, upon transfer to the Issuer, the Issuer will receive
good, valid and marketable title to all of the Loans, free and clear of any
liens, mortgages, deeds of trust, pledges, security interests, charges,
encumbrances or other claims.
Section 3. Conveyance of Loans.
___________________
The Seller, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to the
Company, without recourse, all of the Seller's right, title and interest in
and to (a) the Loans, including the Related Documents and all interest and
principal [received or receivable] [due] on or with respect to the Loans
after the Cut-off Date [and all interest and principal payments on the Loans
received prior to the Cut-off Date in respect of installments of interest and
principal due thereafter,][but not including payments of interest and
principal [due and payable] [received or receivable] on the Loans on or
before the Cut-off Date,] and all other proceeds received in respect of such
Loans, (b) the Seller's rights under the Master Servicing Agreement, (c) the
Insurance Policies, (d) all cash, instruments or other property held or
required to be deposited in the Collection Account or the Payment Account,
(e) all Additional Balances and (f) all proceeds of the conversion, voluntary
or involuntary, of any of the foregoing into cash or other liquid assets,
including, without limitation, all Insurance Proceeds, Liquidation Proceeds
and condemnation awards. On or prior to the Closing Date, the Seller shall
deliver to the Company or, at the Company's direction, to the Trustee or
other designee of the Company, the Trustee Loan File for each Mortgage Loan.
Such delivery of the Trustee Loan Files shall be made against payment by the
Company of the purchase price, previously agreed to by the Seller, for the
Loans.
The Company, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to the
Issuer, without recourse, all of the Company's right, title and interest in
and to (a) the Loans, including the Related Documents and all interest and
principal [received or receivable] on or with respect to the Loans after the
Cut-Off Date [and all interest and principal payments on the Loans received
prior to the Cut-off Date in respect of installments of interest and
principal due thereafter,] [but not including payments of interest and
principal [due and payable] [received or receivable] on the Loans on or
before the Cut-off Date,] and all other proceeds received in respect of such
Loans, (b) the Company's rights under the Master Servicing Agreement,
(c) the Insurance Policies, (d) all cash, instruments or other property held
or required to be deposited in the Collection Account or the Payment Account,
(e) all Additional Balances and (f) all proceeds of the conversion, voluntary
or involuntary, of any of the foregoing into cash or other liquid assets,
including, without limitation, all Insurance Proceeds, Liquidation Proceeds
and condemnation awards. On or prior to the Closing Date, the Company shall
deliver, or cause to be delivered, to the Indenture Trustee the Trustee Loan
Files for each Mortgage Loan. [Such delivery of the Trustee Loan Files shall
be made against delivery by (i) the Indenture Trustee of the Senior Bonds and
the Subordinated Bonds and (ii) the Issuer of the Investor Certificate, in
each case to or upon the order of the Company.]
Section 4. Intention of Parties.
____________________
It is the express intent of the parties hereto that the conveyance
(i) of the Loans by the Seller to the Company and (ii) of the Loans by the
Company to the Issuer each be, and be construed as, an absolute sale thereof.
It is, further, not the intention of the parties that such conveyances be
deemed a pledge thereof. However, in the event that, notwithstanding the
intent of the parties, such assets are held to be the property of the
granting party, or if for any other reason this Agreement is held or deemed
to create a security interest in the Loans, then (i) this Agreement shall be
deemed to be a security agreement within the meaning of the Uniform
Commercial Code of the State of ________ and (ii) the conveyances provided
for in this Agreement shall be deemed to be an assignment and a grant (i) by
the Seller to the Company or (ii) by the Company to the Issuer of a security
interest in all of the assets transferred, whether now owned or hereafter
acquired.
The Seller, the Company and the Issuer 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
the Loans, such security interest would be deemed to be a perfected security
interest of first priority under applicable law and will be maintained as
such throughout the term of this Agreement. The Seller and the Company shall
arrange for filing any Uniform Commercial Code continuation statements in
connection with any security interest granted or assigned hereunder.
Section 5. Miscellaneous.
_____________
(a) Amendments, Etc. No rescission, modification, amendment,
________________
supplement or change of this Agreement shall be valid or effective unless in
writing and signed by all of the parties to this Agreement.
(b) Binding Upon Successors, Etc. The provisions of this
_____________________________
Agreement shall be binding upon and inure to the benefit of the parties to
this Agreement and their respective legal representatives, heirs, successors
or assigns.
(c) Counterparts. This Agreement may be executed in two or more
____________
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(d) Governing Law. This Agreement shall be governed by and
_____________
construed in accordance with the laws of the State of New York.
(e) Headings. The headings of the several parts of this Agreement
________
are inserted for convenience of reference and are not intended to be a part
of or affect the meaning or interpretation of this Agreement.
(f) Authorization. The Company, pursuant to Section 6.03 of the
_____________
Trust Agreement, dated as of _______ __, 199_, between the Owner Trustee and
the Company, as Depositor, hereby authorizes and directs the Owner Trustee to
enter into this Agreement.
(g) Definitions. Capitalized terms not otherwise defined herein
___________
have the meanings ascribed to such terms in the Indenture dated as of
_________, 199_ between the Issuer and ___________________________ _______,
as owner trustee.
IN WITNESS WHEREOF, each party has caused this Loan Purchase Agreement
to be executed by its duly authorized officer or officers as of the day and
year first above written.
[ ]
______________________________________
By:
Name:
Title:
INDYMAC ABS, INC.
By:
Name:
Title:
