SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: November 19, 1999
(Date of earliest event reported)
Commission File No. 333-56213
ACE Securities Corp.
- --------------------------------------------------------------------------------
Delaware 56-2088493
- --------------------------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
6525 Morrison Boulevard, Suite 318
Charlotte, North Carolina 28211
- --------------------------------------------------------------------------------
Address of principal executive offices (Zip Code)
(704) 365-0569
- --------------------------------------------------------------------------------
Registrant's Telephone Number, including area code
No Change
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
ITEM 5. Other Events
------------
On November 18, 1999, ACE Securities Corp. (the "Corporation"), sold
Mortgage Lenders Network Home Equity Loan Trust 1999-2, Asset-Backed Notes,
Series 1999-2, Class A (the "Offered Notes"), having an aggregate original
principal balance of $144,953,790.00. The Offered Notes were issued pursuant to
the Indenture, dated as of November 1, 1999 (the "Agreement"), between the
Issuer and the Indenture Trustee, a copy of which is filed as an exhibit hereto.
Credit support for the Offered Notes is provided by a financial
guaranty insurance policy (the "Note Insurance Policy") issued by Financial
Security Assurance Inc. ("FSA") in favor of the Indenture Trustee for the
benefit of the Noteholders of the Offered Notes.
As of the date of initial issuance, the Offered Notes evidenced
beneficial ownership interests in a trust (the "Trust"), consisting of (i) a
pool of primarily fixed rate and adjustable rate, residential one- to
four-family, first lien mortgage loans; (ii) principal and interest payments on
the the mortgage loans (including prepayment premiums); (iii) the trust's rights
under a mortgage loan sale agreement and a servicing agreement; and (iv) certain
other property.
Interest on the Offered Notes will be distributed on each
Distribution Date (as defined in the Agreement). Monthly distributions in
reduction of the principal balance of the Offered Notes will be allocated to the
Offered Notes in accordance with the priorities set forth in the Agreement.
<PAGE>
ITEM 7. Financial Statements and Exhibits
---------------------------------
Item 601(a)
of Regulation S-K
Exhibit No. Description
- ----------- -----------
(EX-99.1) Indenture, dated as of November 1, 1999,
between the Issuer and the Indenture
Trustee.
(EX-99.2) Servicing Agreement, dated as of
November 1, 1999, among MLN, as
servicer, the Issuer and the Indenture
Trustee.
(EX-99.3) Financial Guaranty Insurance Policy
covering the Class A Notes issued by
Financial Security Assurance Inc.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ACE SECURITIES CORP.
November 19, 1999
By: /S/ Elizabeth Eldridge
------------------------
Name: Elizabeth Eldridge
Title: Vice President
<PAGE>
INDEX TO EXHIBITS
-----------------
Paper (P) or
Exhibit No. Description Electronic (E)
- ----------- ----------- --------------
(EX-99.1) Indenture, dated as of November 1, 1999, E
between the Issuer and the Indenture
Trustee.
(EX-99.2) Servicing Agreement, dated as of E
November 1, 1999, among MLN, as
servicer, the Issuer and the Indenture
Trustee.
(EX-99.3) Financial Guaranty Insurance Policy E
covering the Class A Notes issued by
Financial Security Assurance Inc.
EXECUTION COPY
INDENTURE
BETWEEN
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-2,
AS ISSUER,
AND
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
AS INDENTURE TRUSTEE
Dated as of November 1, 1999
Relating to
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-2
ASSET BACKED NOTES, SERIES 1999-2, CLASS A
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS...........................................................
Section 1.01. General Definitions......................................
ARTICLE II THE NOTES............................................................
Section 2.01. Forms Generally..........................................
Section 2.02. Forms of Certificate of Authentication...................
Section 2.03. General Provisions With Respect to Principal and Interest
Payment..................................................
Section 2.04. Denominations............................................
Section 2.05. Execution, Authentication, Delivery and Dating...........
Section 2.06. Registration, Registration of Transfer and Exchange......
Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes...............
Section 2.08. Payments of Principal and Interest.......................
Section 2.09. Persons Deemed Owner.....................................
Section 2.10. Cancellation.............................................
Section 2.11. Authentication and Delivery of Notes.....................
Section 2.12. Book-Entry Note..........................................
Section 2.13. Termination of Book Entry System.........................
ARTICLE III COVENANTS...........................................................
Section 3.01. Payment of Notes.........................................
Section 3.02. Maintenance of Office or Agency..........................
Section 3.03. Money for Note Payments to Be Held In Trust..............
Section 3.04. Existence of Issuer......................................
Section 3.05. Protection of Trust Estate...............................
Section 3.06. Annual Opinions as to Collateral.........................
Section 3.07. Performance of Obligations; Servicing Agreement..........
Section 3.08. Investment Company Act...................................
Section 3.09. Negative Covenants.......................................
Section 3.10. Annual Statement as to Compliance........................
Section 3.11. Restricted Payments......................................
Section 3.12. Treatment of Notes as Debt for Tax Purposes..............
Section 3.13. Notice of Events of Default..............................
Section 3.14. Further Instruments and Acts.............................
ARTICLE IV SATISFACTION AND DISCHARGE...........................................
Section 4.01. Satisfaction and Discharge of Indenture..................
Section 4.02. Application of Trust Money...............................
ARTICLE V DEFAULTS AND REMEDIES.................................................
Section 5.01. Event of Default.........................................
Section 5.02. Acceleration of Maturity; Rescission and Annulment.......
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee........................................
Section 5.04. Remedies.................................................
Section 5.05. Indenture Trustee May File Proofs of Claim...............
Section 5.06. Indenture Trustee May Enforce Claims Without Possession
ofNotes..................................................
Section 5.07. Application of Money Collected...........................
Section 5.08. Limitation on Suits......................................
Section 5.09. Unconditional Rights of Noteholders to Receive Principal
and Interest.............................................
Section 5.10. Restoration of Rights and Remedies.......................
Section 5.11. Rights and Remedies Cumulative...........................
Section 5.12. Delay or Omission Not Waiver.............................
Section 5.13. Control by Noteholders...................................
Section 5.14. Waiver of Past Defaults..................................
Section 5.15. Undertaking for Costs....................................
Section 5.16. Waiver of Stay or Extension Laws.........................
Section 5.17. Sale of Trust Estate.....................................
Section 5.18. Action on Notes..........................................
Section 5.19. No Recourse to Other Trust Estates or Other Assets of the
Issuer...................................................
Section 5.20. Application of the Trust Indenture Act...................
ARTICLE VI THE INDENTURE TRUSTEE................................................
Section 6.01. Duties of Indenture Trustee..............................
Section 6.02. Notice of Default........................................
Section 6.03. Rights of Indenture Trustee..............................
Section 6.04. Not Responsible for Recitals or Issuance of Notes........
Section 6.05. May Hold Notes...........................................
Section 6.06. Money Held in Trust......................................
Section 6.07. Eligibility, Disqualification............................
Section 6.08. Indenture Trustee's Capital and Surplus..................
Section 6.09. Resignation and Removal; Appointment of Successor........
Section 6.10. Acceptance of Appointment by Successor...................
Section 6.11. Merger, Conversion, Consolidation or Succession to
Business of Indenture Trustee............................
Section 6.12. Preferential Collection of Claims Against Issuer.........
Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees....
Section 6.14. Authenticating Agents....................................
Section 6.15. Review of Mortgage Files.................................
Section 6.16. Indenture Trustee Fees and Expenses......................
Section 6.17. Tax Reporting............................................
ARTICLE VII NOTEHOLDERS' LISTS AND REPORTS......................................
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses
of Noteholders...........................................
Section 7.02. Preservation of Information;Communications to Noteholders
Section 7.03. Reports by Indenture Trustee.............................
Section 7.04. Reports by Issuer........................................
ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES.........
Section 8.01. Collection of Moneys.....................................
Section 8.02. Note Account; Distributions..............................
Section 8.03. Claims Upon the FSA Insurance Policy;FSA Insurance Policy
Payments Account.........................................
Section 8.04. General Provisions Regarding the Note Accounts and
Mortgage Loans...........................................
Section 8.05. Releases of Defective Mortgage Loans.....................
Section 8.06. Reports by Indenture Trustee to Noteholders; Access to
Certain Information......................................
Section 8.07. Trust Estate Mortgage Files..............................
Section 8.08. Amendment to Servicing Agreement.........................
Section 8.09. Delivery of the Mortgage Files Pursuant to Servicing
Agreement................................................
Section 8.10. Servicer as Agent........................................
Section 8.11. Termination of Servicer..................................
Section 8.12. Opinion of Counsel.......................................
Section 8.13. Appointment of Custodians................................
Section 8.14. Rights of the Note Insurer to Exercise Rights of
Noteholders..............................................
Section 8.15. Trust Estate and Accounts Held for Benefit of the Note
Insurer..................................................
Section 8.16. [Reserved.]..............................................
ARTICLE IX SUPPLEMENTAL INDENTURES..............................................
Section 9.01. Supplemental Indentures Without Consent of Noteholders...
Section 9.02. Supplemental Indentures With Consent of Noteholders......
Section 9.03. Execution of Supplemental Indentures.....................
Section 9.04. Effect of Supplemental Indentures........................
Section 9.05. Conformity With Trust Indenture Act......................
Section 9.06. Reference in Notes to Supplemental Indentures............
Section 9.07. Amendments to Governing Documents........................
ARTICLE X REDEMPTION OF NOTES...................................................
Section 10.01. Redemption..............................................
Section 10.02. Form of Redemption Notice...............................
Section 10.03. Notes Payable on Optional Redemption....................
ARTICLE XI MISCELLANEOUS........................................................
Section 11.01. Compliance Certificates and Opinions....................
Section 11.02. Form of Documents Delivered to Indenture Trustee........
Section 11.03. Acts of Noteholders.....................................
Section 11.04. Notices, etc., to Indenture Trustee,the Note Insurer and
Issuer..................................................
Section 11.05. Notices and Reports to Noteholders; Waiver of Notices...
Section 11.06. Rules by Indenture Trustee..............................
Section 11.07. Conflict With Trust Indenture Act.......................
Section 11.08. Effect of Headings and Table of Contents................
Section 11.09. Successors and Assigns..................................
Section 11.10. Separability............................................
Section 11.11. Benefits of Indenture...................................
Section 11.12. Legal Holidays..........................................
Section 11.13. Governing Law...........................................
Section 11.14. Counterparts............................................
Section 11.15. Recording of Indenture..................................
Section 11.16. Issuer Obligation.......................................
Section 11.17. No Petition.............................................
Section 11.18. Inspection..............................................
Section 11.19. Usury...................................................
Section 11.20. Third Party Beneficiary.................................
SCHEDULES AND EXHIBITS
Schedule l.....Mortgage Loan Schedule
Exhibit A......Form of Note
Exhibit B......FSA Insurance Policy
Exhibit C......Form of Notice of Claim
Exhibit D......PMI Mortgage Loans
<PAGE>
CROSS-REFERENCE TABLE
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.(1)
Trust Indenture Act of 1939 Indenture Section
--------------------------- -----------------
Section 310
(a) (1)............................................. 6.07
(a) (2)............................................. 6.07, 6.08
(a) (3)............................................. 6.13
(a) (4)............................................. Not Applicable
(a) (5)............................................. 6.07
(b)................................................. 6.07, 6.09
(c)................................................. Not Applicable
Section 311
(a)................................................. 6.12
(b)................................................. 6.12
(c)................................................. Not Applicable
Section 312
(a)................................................. 7.01(a), 7.02(a)
(b)................................................. 7.02(b)
(c)................................................. 7.02(c)
Section 313
(a)................................................. 7.03(a)
(b)................................................. 7.03(a)
(c)................................................. 11.05
(d)................................................. 7.03(b)
Section 314
(a)(1).............................................. 7.04
(a)(2).............................................. 7.04
(a)(3).............................................. 7.04
(a)(4).............................................. 7.04
(b)(1).............................................. 2.11(c), 11.01
(b)(2).............................................. 3.06
(c)(1).............................................. 2.11(d), 4.01,
8.02(d), 11.01
(c)(2).............................................. 2.11(c), 4.01,
8.02(d), 11.01
(c)(3).............................................. 8.02(d)
(d)(1).............................................. 11.01(a)
(d)(2).............................................. 11.01(a)
(d)(3).............................................. 11.01(a)
(e)................................................. 11.0 1(b)
Section 315
(a)................................................. 6.01(b), 6.01(c)(1)
(b)................................................. 6.02, 11.05
(c)................................................. 6.01(a)
(d)(1).............................................. 6.01(b), 6.01(c)
(d)(2).............................................. 6.01(c)(2)
(d)(3).............................................. 6.01(c)(3)
(e)................................................. 5.15
Section 316
(a)................................................. 5.20
(b)................................................. 5.09
(c)................................................. 5.20
Section 317
(a)(1).............................................. 5.03
(a)(2).............................................. 5.05
(b)................................................. 3.01
Section 318
(a)................................................. 11.07
- --------
(1) This Cross-Reference Table is not part of the Indenture.
<PAGE>
THIS INDENTURE, dated as of November 1, 1999 (as amended or supplemented
from time to time as permitted hereby, this "Indenture"), is between MORTGAGE
LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-2, a Delaware business trust
(together with its permitted successors and assigns, the "Issuer") and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as
indenture trustee (together with its permitted successors in the trusts
hereunder, the "Indenture Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for its Asset Backed Notes, Series 1999-2, Class A (the
"Notes"), issuable as provided in this Indenture. All covenants and agreements
made by the Issuer herein are for the benefit and security of the Holders of the
Notes and the Note Insurer. The Issuer is entering into this Indenture, and the
Indenture Trustee is accepting the trusts created hereby, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer in accordance with its terms have been done.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee, for the exclusive
benefit of the Holders of the Notes and the Note Insurer, all of the Issuer's
right, title and interest in and to (a) the Mortgage Loans listed in Schedule I
to this Indenture (including property that secures a Mortgage Loan that becomes
an REO Property), including the related Mortgage Files delivered or to be
delivered to the Custodian, on behalf of the Indenture Trustee, pursuant to the
Mortgage Loan Sale Agreement, all payments of principal received, collected or
otherwise recovered after the Cut-off Date for each Mortgage Loan, all payments
of interest accruing on each Mortgage Loan after the Cut-off Date therefor
whenever received and all other proceeds received in respect of such Mortgage
Loans, and any Qualified Replacement Mortgage Loan, (b) the Servicing Agreement,
(c) the Mortgage Loan Sale Agreement, (d) the Mortgage Loan Contribution
Agreement, (e) the Management Agreement, (f) the Insurance Policies, (g) all
cash, instruments or other property held or required to be deposited in the
Collection Account and the Note Account, including all investments made with
funds in such accounts (but not including any income on funds deposited in, or
investments made with funds deposited in, the Collection Account and the Note
Account, which income shall belong to and be for the account of the Servicer),
and (h) 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 and condemnation awards. Such Grants are made, however, in
trust, to secure the Notes equally and ratably without prejudice, priority or
distinction between any Note and any other Note by reason of difference in time
of issuance or otherwise, and for the benefit of the Note Insurer to secure (x)
the payment of all amounts due on the Notes in accordance with their terms, (y)
the payment of all other sums payable under this Indenture and (z) compliance
with the provisions of this Indenture, all as provided in this Indenture. All
terms used in the foregoing granting clauses that are defined in Section 1.01
are used with the meanings given in said Section.
The Indenture Trustee acknowledges such Grant, accepts the trusts
hereunder in accordance with the provisions of this Indenture and agrees to
perform the duties herein required to the end that the interests of the Holders
of the Notes may be adequately and effectively protected. The Indenture Trustee
agrees that it will hold the FSA Insurance Policy and the PMI Policy in trust
and that it will hold any proceeds of any claim upon the FSA Insurance Policy
and PMI Policy, solely for the use and benefit of the Noteholders in accordance
with the terms hereof and the FSA Insurance Policy and the PMI Policy,
respectively.
ARTICLE I
DEFINITIONS
SECTION 1.01. GENERAL DEFINITIONS.
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 Indenture, and the definitions of such terms are applicable to the singular
as well as to the plural forms of such terms and to the masculine as well as to
the feminine genders of such terms. Whenever reference is made herein to an
Event of Default or a Default known to the Indenture Trustee or of which the
Indenture Trustee has notice or knowledge, such reference shall be construed to
refer only to an Event of Default or Default of which the Indenture Trustee is
deemed to have notice or knowledge pursuant to Section 6.01(d). All other terms
used herein that are defined in the Trust Indenture Act (as hereinafter
defined), either directly or by reference therein, have the meanings assigned to
them therein.
"ACCOUNTANT": A Person engaged in the practice of accounting who (except
when this Indenture provides that an Accountant must be Independent) may be
employed by or affiliated with the Issuer or an Affiliate of the Issuer.
"ACT": With respect to any Noteholder, as defined in Section 11.03.
"ADMINISTRATIVE FEE AMOUNT": For the Notes and any Payment Date, the sum
of the Monthly Servicing Fee and the Indenture Trustee's Fee, each relating to
such Payment Date.
"AFFILIATE": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract, relation to individuals or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"AGENT": Any Note Registrar, Paying Agent, Authenticating Agent or
Custodian.
"AGGREGATE PRINCIPAL BALANCE": With respect to the Mortgage Loan Pool and
any Payment Date, the aggregate of the Principal Balances of the Mortgage Loans
as of the related Determination Date (or other specified date).
"ASSIGNMENTS": The original instrument of assignment of a Mortgage,
including any interim assignments, from the originator or any other holder of
any Mortgage Loan to the Indenture Trustee (that in each case may, to the extent
permitted by the laws of the state in which the related Mortgaged Property is
located, be a blanket instrument of assignment covering other Mortgages and
Mortgage Notes as well and that may also be an instrument of assignment running
directly from the mortgagee of record under the related Mortgage to the
Indenture Trustee).
"AUTHENTICATING AGENT": The Person, if any, appointed as Authenticating
Agent by the Issuer pursuant to Section 6.14, until any successor Authenticating
Agent for the Notes is named, and thereafter "Authenticating Agent" shall mean
such successor. The Authenticating Agent shall be the Indenture Trustee. Any
Authenticating Agent other than the Indenture Trustee shall sign an instrument
under which it agrees to be bound by all of the terms of this Indenture
applicable to the Authenticating Agent.
"AUTHORIZED OFFICER": With respect to (i) the Indenture Trustee, any
Responsible Officer, (ii) the Owner Trustee, the president, any vice president,
any assistant vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, any trust officer, any financial services
officer or any other officer of the Owner Trustee customarily performing
functions similar to those performed by the above officers and (iii) any other
Person, the Chairman, Chief Operating Officer, President or any Vice President
of such Person.
"AVAILABLE FUNDS": With respect to any Payment Date, the sum of the
amounts described in clauses (a) through (g) below, less (i) the Administrative
Fee Amount in respect of such Payment Date, (ii) Monthly Advances and Servicing
Advances previously made that are reimbursable to the Servicer (other than those
included in liquidation expenses for any Liquidated Mortgage Loan and reimbursed
from the related Liquidation Proceeds and from Insurance Proceeds) with respect
to the related Collection Period to the extent permitted by the Servicing
Agreement and (iii) the aggregate amounts (A) deposited into the Collection
Account or the Note Account that may not be withdrawn therefrom pursuant to a
final and nonappealable order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to Section 362 of the Bankruptcy Code and
that would otherwise have been included in Available Funds on such Payment Date
and (B) received by the Indenture Trustee that are recoverable and sought to be
recovered from the Issuer as a voidable preference by a trustee in bankruptcy
pursuant to the Bankruptcy Code in accordance with a final nonappealable order
of a court of competent jurisdiction:
(a) all scheduled payments of interest received with respect to the
Mortgage Loans and due during the related Due Period and all other
interest payments on or in respect of such Mortgage Loans received by or
on behalf of the Servicer during the related Collection Period (including
Payments Ahead that are allocable to interest for the related Due Period),
net of amounts representing interest accrued on such Mortgage Loans in
respect of any period prior to the Cut-off Dates, plus any Compensating
Interest payments made by the Servicer in respect of the related Mortgage
Loans and any net income from related REO Properties for such Collection
Period;
(b) all scheduled payments of principal received with respect to the
Mortgage Loans and due during the related Due Period and all other
principal payments (including Principal Prepayments and Prepayment
Premiums) received or deemed to be received during the related Collection
Period (including Payments Ahead that are allocable as principal for the
related Due Period) in respect of such Mortgage Loans;
(c) the aggregate of any Trust Insurance Proceeds collected by the
Servicer during the related Collection Period;
(d) the aggregate of any Net Liquidation Proceeds collected by the
Servicer during the related Collection Period;
(e) the aggregate of the Purchase Prices received in respect of any
Mortgage Loans that are required or permitted to be repurchased, released,
removed or substituted by the Seller during or in respect of the related
Collection Period, to the extent such amounts are received by the
Indenture Trustee on or before the related Deposit Date;
(f) the amount of any Monthly Advances made by the Servicer for such
Payment Date; and
(g) the aggregate of amounts deposited in the Note Account during
such Collection Period in connection with redemption of the Notes pursuant
to Article X.
"BANKRUPTCY CODE": The Bankruptcy Reform Act of 1978 (Title 11 of the
United States Code), as amended.
"BASIC DOCUMENTS": This Indenture, the Trust Agreement, the Servicing
Agreement, the Mortgage Loan Sale Agreement, the Mortgage Loan Contribution
Agreement, the Management Agreement, the Insurance Agreement and the
Indemnification Agreement.
"BENEFICIAL OWNER": With respect to a Book-Entry Note, the Person who is
the beneficial owner of such Note as reflected on the books of the Clearing
Agency for the Notes or on the books of a Person maintaining an account with
such Clearing Agency (directly or as an indirect participant, in accordance with
the rules of such Clearing Agency).
"BEST EFFORTS": Efforts determined to be in good faith and reasonably
diligent by the Person performing such efforts, specifically the Issuer or the
Servicer, as the case may be, in its reasonable discretion. Such efforts do not
require the Issuer or the Servicer, as the case may be, to enter into any
litigation, arbitration or other legal or quasi-legal proceeding, nor do they
require the Issuer or the Servicer, as the case may be, to advance or expend
fees or sums of money in addition to those specifically set forth in this
Indenture and the Servicing Agreement.
"BOOK-ENTRY NOTES": Any Notes registered in the name of the Clearing
Agency or its nominee, ownership of which is reflected on the books of the
Clearing Agency or on the books of a person maintaining an account with such
Clearing Agency (directly or as an indirect participant in accordance with the
rules of such Clearing Agency).
"BOOK-ENTRY TERMINATION": The time at which the book-entry registration of
the Book-Entry Notes shall terminate, as specified in Section 2.13.
"BUSINESS DAY": Any day other than (i) a Saturday or Sunday or (ii) a day
that is either a legal holiday or a day on which the Note Insurer is closed or
on which banking institutions in the State of Connecticut, the State of New
York, the State of Minnesota, the State of Maryland, the State of North Carolina
the state in which the Corporate Trust Office is located or the State of
Delaware are authorized or obligated by law, regulation or executive order to be
closed.
"CERTIFICATE": As defined in the Trust Agreement.
"CERTIFICATE DISTRIBUTION ACCOUNT": As defined in the Trust Agreement.
"CERTIFICATEHOLDERS": As defined in the Trust Agreement.
"CLEARING AGENCY": An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities and Exchange Act of 1934, as amended,
and the regulations of the Commission thereunder and shall initially be The
Depository Trust Company of New York, the nominee for which is Cede & Co.
"CLEARING AGENCY PARTICIPANTS": The entities for whom the Clearing Agency
will maintain book-entry records of ownership and transfer of Book-Entry Notes,
which may include securities brokers and dealers, banks and trust companies and
clearing corporations and certain other organizations.
"CLOSING DATE": November 18, 1999, the date of initial issuance of the
Notes.
"CODE": The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, as successor statutes thereto, and applicable
U.S. Department of Treasury regulations issued pursuant thereto in temporary or
final form and proposed regulations thereunder to the extent that, by reason of
their proposed effective date, such proposed regulations would apply.
"COLLATERAL": The items Granted to the Indenture Trustee under the
Granting Clause of this Indenture.
"COLLECTION ACCOUNT": The segregated trust account established by the
Servicer and maintained pursuant to Section 2.02(b) of the Servicing
Agreement.
"COLLECTION PERIOD": As to any Payment Date, the period beginning on the
first day of the calendar month immediately preceding the month in which such
Payment Date occurs (except that, in the case of the first Payment Date, the
related Collection Period will commence on the Cut-off Date for each Mortgage
Loan) and ending on the last day of such calendar month.
"COMBINED LOAN-TO-VALUE RATIO": As defined in the Mortgage Loan Sale
Agreement.
"COMMISSION": The Securities and Exchange Commission, as from time to time
constituted, created under the Securities Exchange Act of 1934, or if at any
time such Commission is not existing and performing the duties now assigned to
it under the Trust Indenture Act, then the body performing such duties at such
time under the Trust Indenture Act or similar legislation replacing the Trust
Indenture Act.
"COMPENSATING INTEREST": As defined in the Servicing Agreement.
"CORPORATE TRUST OFFICE": The principal office of the Indenture Trustee at
which at any particular time its corporate trust business with respect to this
Indenture shall be principally administered, which office at the date of the
execution of this Indenture is located at Sixth Street and Marquette Avenue,
Minneapolis, MN 55479, Attention: Mortgage Lenders Network Home Equity Loan
Trust 1999-2, Series 1999-2, with a copy to the Indenture Trustee at 11000
Broken Land Parkway, MAC N2696-050, Columbia, Maryland 21044, Attention:
Mortgage Lenders Network Home Equity Loan Trust 1999-2, Series 1999-2.
"CUMULATIVE LOSS PERCENTAGE": As defined in the Servicing Agreement.
"CURRENT NOTE BALANCE": With respect to any Note as of any date of
determination, the original principal amount of such Note, reduced by all prior
payments (including Insured Payments), if any, made with respect to principal of
such Note.
"CUSTODIAL AGREEMENT": The Custody Agreement, dated as of November 1,
1999, among the Servicer, the Custodian and the Indenture Trustee.
"CUSTODIAN": A Person who is at any time appointed by the Indenture
Trustee pursuant to Section 8.13 as a document custodian for the Mortgage Files,
which Person shall not be the Issuer or an Affiliate of the Issuer.
The Custodian shall initially be BankBoston, N.A.
"CUT-OFF DATE": November 1, 1999.
"DEFAULT": Any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.
"DEFECTIVE MORTGAGE LOAN": Any Mortgage Loan that is required to be
repurchased or substituted by the Seller pursuant to the Mortgage Loan Sale
Agreement.
"DEFICIENCY AMOUNT": With respect to the Notes and any Payment Date, (A)
the excess, if any, of (i) the Note Interest (net of any Relief Act Interest
Shortfalls and Prepayment Interest Shortfalls) for such Payment Date over (ii)
funds on deposit in the Note Account available to be distributed therefor on
such Payment Date and (B) the Guaranteed Principal Amount.
"DEFINITIVE NOTES": Notes other than Book-Entry Notes.
"DELETED MORTGAGE LOAN": A Mortgage Loan replaced or to be replaced by a
Qualified Replacement Mortgage Loan.
"DELINQUENCY AMOUNT": As of any Payment Date, the product of the Rolling
Delinquency Percentage for such Payment Date and the Mortgage Loans as of the
average Aggregate Principal Balance as of the immediately preceding three
Determination Date.
"DELINQUENCY PERCENTAGE": For any Payment Date, the rolling three month
average of the fraction, expressed as a percentage, (i) the numerator of which
is the aggregate of the Principal Balances as of the related Determination Date
of all Mortgage Loans that were 90 or more days contractually delinquent, in
foreclosure, REO Property or for which the related Mortgagor was in a bankruptcy
proceeding and the related Mortgage Loan was 90 or more days contractually
delinquent or paying a reduced Monthly Payment as a result of a bankruptcy
workout as of end of the related Collection Period and the denominator of which
is the Aggregate Principal Balance of all Mortgage Loans as of the related
Determination Date.
"DEPOSIT DATE": The date each month on which funds on deposit in the
Collection Account are remitted by the Servicer to the Indenture Trustee for
deposit into the Note Account, which date shall be with respect to any Payment
Date, the 18th day of the month in which such Payment Date occurs, or the next
succeeding Business Day, if such 18th day is not a Business Day.
"DEPOSITOR": ACE Securities Corp.
"DETERMINATION DATE": As to any Payment Date, the last day of the Due
Period relating to such Payment Date.
"DUE PERIOD": With respect to any Payment Date, the period commencing on
the second day of the calendar month immediately preceding the calendar month in
which such Payment Date occurs (or, with respect to the first Payment Date,
commencing the day following the Cut-off Date for each Mortgage Loan) and ending
on the first day of the calendar month in which such Payment Date occurs.
"ELIGIBLE ACCOUNT": Either (A) a segregated account or accounts maintained
with an institution the deposits of which are insured by the Bank Insurance Fund
or the Savings Association Insurance Fund of the FDIC, the unsecured and
uncollateralized debt obligations of which shall be rated "AA" or better by S&P
and "Aa2" or better by Moody's and in the highest short term rating category by
S&P and Moody's, and that is either (i) a federal savings and loan association
duly organized, validly existing and in good standing under the federal banking
laws, (ii) an institution duly organized, validly existing and in good standing
under the applicable banking laws of any state, (iii) a national banking
association duly organized, validly existing and in good standing under the
federal banking laws, (iv) a principal subsidiary of a bank holding company, or
(v) which is approved in writing by the Note Insurer or (B) a trust account
maintained with the trust department of a federal or state chartered depository
institution or trust company, having capital and surplus of not less than
$50,000,000, acting in its fiduciary capacity, the unsecured and
uncollateralized debt obligations of which shall be rated "Baa3" or better by
Moody's. Any Eligible Accounts maintained with the Indenture Trustee shall
conform to the preceding clause (B).
"EVENT OF DEFAULT": As defined in Section 5.01.
"EXCESS CASH": With respect to any Payment Date, will be equal to
Available Funds for such Payment Date, reduced by the sum of (i) the amount
payable to the PMI Insurer as premium for such Payment Date under the PMI
Policy, (ii) the Note Insurer Premium owing to the Note Insurer in respect of
the Notes for such Payment Date, (iii) the Note Interest for such Payment Date,
(iv) the Monthly Principal for such Payment Date and (v) the amount owing to the
Note Insurer under the Insurance Agreement for reimbursement for prior draws
made on the FSA Insurance Policy in respect of the Notes and any other amounts
owing to the Note Insurer under the Insurance Agreement (including any unpaid
Note Insurer Premiums in respect of the Notes).
"EXCESS CASH PAYMENT". As defined in clause fourth of Section 8.02(c).
"FDIC": The Federal Deposit Insurance Corporation and its successors in
interest.
"FINAL CERTIFICATION": A certification as to the completeness of each
Mortgage File prepared by the Custodian on behalf of the Indenture Trustee, and
provided by the Indenture Trustee on or before the first anniversary of the
Closing Date pursuant to Section 6.15(b).
"FINAL MATURITY DATE": The Payment Date in November 2030.
"FISCAL AGENT": As defined in the FSA Insurance Policy.
"FSA INSURANCE POLICY": The note guaranty insurance policy No. 50881-N,
dated November 18, 1999, issued by the Note Insurer to the Indenture Trustee for
the benefit of the Noteholders, pursuant to which the Note Insurer guarantees
payment of Insured Payments. A specimen of the FSA Insurance Policy is attached
hereto as Exhibit B.
"FSA INSURANCE POLICY PAYMENTS ACCOUNT": The account established pursuant
to Section 8.03 hereof.
"FULL PREPAYMENT": With respect to any Mortgage Loan, when any one of the
following occurs: (i) payment is made by the Mortgagor to the Servicer of 100%
of the outstanding principal balance of such Mortgage Loan, together with all
accrued and unpaid interest thereon at the Mortgage Interest Rate on such
Mortgage Loan, (ii) payment is made to the Indenture Trustee of the Purchase
Price of such Mortgage Loan in connection with the purchase of such Mortgage
Loan by the Seller or the Servicer or (iii) payment is made to the Servicer of
all Insurance Proceeds and Liquidation Proceeds, and other payments, if any,
that have been determined by the Servicer in accordance with the provisions of
the Servicing Agreement to be finally recoverable, in the Servicer's reasonable
judgment, in respect of such Mortgage Loan.
"GRANT": To assign, transfer, mortgage, pledge, create and grant a
security interest in, deposit, set-over and confirm. A Grant of a Mortgage Loan
and related Mortgage Files, a Permitted Investment, the Servicing Agreement, the
Mortgage Loan Sale Agreement, the Mortgage Loan Contribution Agreement, or any
other instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including, without limitation,
the immediate and continuing right to claim for, collect, receive and give
receipts for principal and interest payments thereunder, insurance proceeds,
Purchase Prices and all other moneys payable thereunder and all proceeds
thereof, 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.
"GUARANTEED PRINCIPAL AMOUNT": (a) With respect to any Payment Date (other
than Payment Date specified in (b)), the Overcollateralization Deficit, if any,
for such Payment Date and (b) on the earlier to occur of the Payment Date in
December, 2030 (after giving effect to all distributions of principal on the
Notes) or the Redemption Date (after giving effect to all distribution of
principal on the Notes), an amount equal to the Note Balance.
"HIGHEST LAWFUL RATE": As defined in Section 11.19.
"INDEMNIFICATION AGREEMENT": As defined in the Insurance Agreement.
"INDENTURE": This instrument as originally executed and, if from time to
time supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof, as so supplemented or
amended. All references in this instrument to designated "Articles", "Sections",
"Subsections" and other subdivisions are to the designated Articles, Sections,
Subsections and other subdivisions of this instrument as originally executed.
The words "herein", "hereof", "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section,
Subsection or other subdivision.
"INDENTURE TRUSTEE": Norwest Bank Minnesota, National Association, a
national banking association, and any Person resulting from or surviving any
consolidation or merger to which it may be a party until a successor Person
shall have become the Indenture Trustee pursuant to the applicable provisions of
this Indenture, and thereafter "Indenture Trustee" shall mean such successor
Person.
"INDENTURE TRUSTEE'S FEE": With respect to the Notes, the Indenture
Trustee's monthly fee, equal to 1/12th of 0.02% of the Aggregate Principal
Balance of the Mortgage Loans as of the first day of the applicable Due Period.
"INDEPENDENT": When used with respect to any specified Person, means such
a Person who (i) is in fact independent of the Issuer and any other obligor upon
the Notes, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer or in any such other obligor or in an
Affiliate of the Issuer or such other obligor, and (iii) is not connected with
the Issuer or any such other obligor as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
Whenever it is herein provided that any Independent Person's opinion or
certificate shall be furnished to the Indenture Trustee, such Person shall be
appointed by an Issuer Order and such opinion or certificate shall state that
the signer has read this definition and that the signer is Independent within
the meaning hereof.
"INDIVIDUAL NOTE": A Note of an original principal amount of $1,000
(provided, however, one Note may be less than that amount); a Note of an
original principal amount in excess of $1,000 shall be deemed to be a number of
Individual Notes equal to the quotient obtained by dividing such original
principal amount by $1,000.
"INITIAL CERTIFICATION": A certification as to the completeness of each
Mortgage File prepared by the Custodian on behalf of the Indenture Trustee and
provided by the Custodian on the Closing Date pursuant to Section 6.15(a).
"INITIAL REDEMPTION DATE": The first Payment Date on which the aggregate
Note Balance is less than 10% of the Original Note Balance.
"INSURANCE AGREEMENT": The Insurance and Indemnity Agreement, dated as of
November 1, 1999, among the Note Insurer, the Issuer, the Seller and the
Depositor.
"INSURANCE POLICIES": All insurance policies insuring any Mortgage Loan or
Mortgaged Property, to the extent the Issuer or the Indenture Trustee has any
interest therein, including the PMI Policy.
"INSURED PAYMENTS": As to the Notes and any Payment Date, the amount
required to be paid by the Note Insurer under the FSA Insurance Policy.
"INSURANCE PROCEEDS": As defined in the Servicing Agreement.
"INTEREST PERIOD": With respect to a Payment Date, the calendar month
immediately preceding the month in which such Payment Date occurs.
"ISSUER": Mortgage Lenders Network Home Equity Loan Trust 1999-2, a
Delaware business trust.
"ISSUER ORDER" and "ISSUER REQUEST": A written order or request of the
Issuer signed on behalf of the Issuer by an Authorized Officer of the Owner
Trustee or, in the case of such order or request required by Section 2.11, by an
Authorized Officer of the holder of the Certificate and delivered to the
Indenture Trustee or the Authenticating Agent, as applicable.
"LETTER AGREEMENT": The Letter of Representations to The Depository Trust
Company from the Indenture Trustee and the Issuer dated November 17, 1999.
"LIQUIDATED MORTGAGE LOAN": As defined in the Servicing Agreement.
"LIQUIDATION DATE": With respect to any Mortgage Loan, the date of the
final receipt of all Liquidation Proceeds, Insurance Proceeds or other payments
with respect to such Mortgage Loan.
"LIQUIDATION PROCEEDS": As defined in the Servicing Agreement.
"LOAN-TO-VALUE RATIO": As defined in the Mortgage Loan Sale Agreement.
"MANAGEMENT AGREEMENT": That certain agreement, dated as of November 1,
1999, between the Issuer and the Indenture Trustee pursuant to which the
Indenture Trustee, as manager, will perform certain obligations of the Issuer
hereunder.
"MATURITY": With respect to any Note, the date on which the entire unpaid
principal amount of such Note becomes due and payable as therein or herein
provided, whether at the Final Maturity Date or by declaration of acceleration,
call for redemption or otherwise.
"MONTHLY ADVANCE": As defined the Servicing Agreement.
"MONTHLY PAYMENT": With respect to any Mortgage Note, the amount of each
monthly payment payable under such Mortgage Note by the Mortgagor in accordance
with its terms, including, one month's accrued interest on the related Principal
Balance at the then applicable Mortgage Interest Rate, but net of any portion of
such monthly payment that represents late payment charges, extension fees or
collections allocable to payments to be made by Mortgagors for payment of
insurance premiums or similar items.
"MONTHLY PRINCIPAL": For the Notes and any Payment Date, an amount equal
to (a) the aggregate of (i) all scheduled payments of principal received (or
advanced or to be advanced on the related Deposit Date) with respect to the
Mortgage Loans and due during the related Due Period and all other amounts
collected, received or otherwise recovered in respect of principal on such
Mortgage Loans (including Principal Prepayments, but not including Payments
Ahead that are not allocable to principal for the related Due Period) during or
in respect of the related Collection Period, (ii) the aggregate of the amounts
allocable to principal deposited in the Note Account on the related Deposit Date
by the Issuer, the Depositor, the Servicer or the Note Insurer in connection
with a repurchase, release, removal or substitution of any Mortgage Loans
pursuant to this Indenture, and (iii) in connection with the redemption of the
Notes, that portion of the Redemption Price in respect of principal, reduced by
(b) the amount of any Overcollateralization Surplus and Payment Date.
"MONTHLY SERVICING FEE": As defined in the Servicing Agreement.
"MOODY'S": Moody's Investors Service, Inc. and its successors in interest.
"MORTGAGE": The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple in real property securing a Mortgage Loan.
"MORTGAGE FILE": As defined in the Mortgage Loan Sale Agreement.
"MORTGAGE INTEREST RATE": With respect to each Mortgage Loan, the rate per
annum set forth in the related Mortgage Note at which interest accrues on such
Mortgage Loan, in each case after giving effect to any modification of a
Mortgage Loan for any period in connection with a bankruptcy or similar
proceeding involving the related Mortgagor or a modification, waiver or
amendment of such Mortgage Loan granted or agreed to by the Servicer in
accordance with the Servicing Agreement.
"MORTGAGE LOAN": Each of the mortgage loans Granted to the Indenture
Trustee under this Indenture as security for the Notes and that from time to
time comprise part of the Trust Estate, including any property that secures a
Mortgage that becomes REO Property. The Mortgage Loans are listed on the
Mortgage Loan Schedule annexed hereto as Schedule I.
"MORTGAGE LOAN CONTRIBUTION AGREEMENT": That certain agreement, dated as
of November 1, 1999, between the Depositor and the Issuer pursuant to which the
Mortgage Loans will be acquired from the Depositor by the Issuer for inclusion
in the Trust Estate.
"MORTGAGE LOAN POOL": The pool of Mortgage Loans Granted to the Indenture
Trustee under this Indenture as security for the Notes.
"MORTGAGE LOAN SALE AGREEMENT": That certain agreement, dated as of
November 1, 1999, between the Seller and the Depositor pursuant to which the
Mortgage Loans will be acquired from the Seller by the Depositor.
"MORTGAGE LOAN SCHEDULE": As of any date, the schedule of mortgage loans
included in the Trust Estate, Schedule I hereto identifies the Mortgage Loans
being Granted to the Indenture Trustee on the Closing Date. The Mortgage Loan
Schedule shall be amended by the Servicer as appropriate from time to time to
reflect the deletion and substitution of Mortgage Loans in accordance with the
terms of the Basic Documents. The Mortgage Loan Schedule shall identify each
Mortgage Loan by the Servicer's loan number and address (including the state) of
the related Mortgaged Property and shall set forth as to each Mortgage Loan the
initial Loan-to-Value Ratio or Combined Loan-to-Value Ratio, the Principal
Balance as of the Cut-off Date, the Mortgage Interest Rate, the currently
Monthly Payment amount and the stated maturity date of the related Mortgage
Note. The Issuer shall cause the initial Mortgage Loan Schedule to be delivered
by the Seller to the Indenture Trustee in both physical and computer-readable
form.
"MORTGAGE NOTE": The note or other instrument evidencing the indebtedness
of a Mortgagor under the related Mortgage Loan.
"MORTGAGED PROPERTY": The underlying property securing a Mortgage Note.
"MORTGAGOR": The obligor under a Mortgage Note.
"NET LIQUIDATION PROCEEDS": As defined in the Servicing Agreement.
"NONRECOVERABLE ADVANCE": As defined in the Servicing Agreement.
"NOTE ACCOUNT": The segregated trust account, which shall be an Eligible
Account, established and maintained pursuant to Section 8.02 and entitled
"Norwest Bank Minnesota, National Association, as Indenture Trustee for Mortgage
Lenders Network Home Equity Loan Trust 1999-2 Home Equity Loan Backed Notes,
Series 1999-2, Class A Note Account," on behalf of the Noteholders and the Note
Insurer.
"NOTE BALANCE": With respect to the Notes, the aggregate of the Current
Note Balances of all Notes Outstanding at the time of determination.
"NOTEHOLDER" or "HOLDER": The Person in whose name a Note is registered in
the Note Register, except that, solely for the purpose of taking any action
under Section 5.02 or giving of any consent pursuant to this Indenture, any Note
registered in the name of the Issuer, the Seller, the Servicer or the Depositor
or any Persons actually known by a Responsible Officer of the Indenture Trustee
to be an Affiliate of the Issuer, the Seller, the Servicer or the Depositor
shall be deemed not to be Outstanding and the percentage interest evidenced
thereby shall not be taken into account in determining whether Holders of the
requisite percentage interests necessary to take any such action or effect any
such consent have acted or consented unless the Issuer, the Seller, the
Servicer, the Depositor or any such Person is an owner of record of all of the
Notes.
"NOTE INSURER": Financial Security Assurance Inc., a New York stock
insurance company, and successors thereto.
"NOTE INSURER PREMIUM LETTER": The commitment letter dated November 1,
1999, from the Note Insurer to the Seller regarding the issuance of a financial
guaranty insurance policy.
"NOTE INSURER DEFAULT": The existence and continuance of any of the
following:
(a) the Note Insurer fails to make a payment required under the FSA
Insurance Policy in accordance with its terms;
(b) the Note Insurer (A) files any petition or commences any case or
proceeding under any provision or chapter of the Bankruptcy Code or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, (B) makes a general
assignment for the benefit of its creditors, or (C) has an order for
relief entered against it under the Bankruptcy Code or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority enters a final and
nonappealable order, judgment or decree (A) appointing a custodian,
trustee, agent or receiver for the Note Insurer or for all or any material
portion of its property or (B) authorizing the taking of possession by a
custodian, trustee, agent or receiver of the Note Insurer (or the taking
of possession of all or any material portion of the property of the Note
Insurer).
Notwithstanding anything to the contrary contained herein, upon the
existence and continuance of a Note Insurer Default, the consent by the Note
Insurer shall not be required to any action or inaction hereunder and the Note
Insurer shall not have any rights with respect thereto; provided, however, that
such rights shall be immediately reinstated following cure of such Note Insurer
Default.
"NOTE INSURER PREMIUM": The premium due to the Note Insurer under the Note
Insurer Premium Letter on the Closing Date and on each Payment Date thereafter,
which amount as to each Payment Date shall be equal to the product of the Note
Insurer Premium Rate and the related Note Balance immediately prior to such
Payment Date.
"NOTE INSURER PREMIUM RATE": The premium percentage specified in the
Note Insurer Premium Letter.
"NOTE INTEREST": As to the Notes and any Payment Date, the amount of
interest payable to Holders of such Notes on such Payment Date, which amount
shall be equal to interest at 1/12th of the Note Interest Rate on the Note
Balance as of the preceding Payment Date (after giving effect to the payment, if
any, in reduction of principal made on such Notes on such preceding Payment
Date). All calculations of interest on the Notes will be computed on the basis
of twelve thirty-day months and a year of 360 days.
"NOTE INTEREST RATE": With respect to each Interest Period prior to the
Initial Redemption Date, 7.583% per annum, and for each Interest Period
thereafter, 8.083% per annum.
"NOTE REGISTER": As defined in Section 2.06.
"NOTE REGISTRAR": As defined in Section 2.06.
"NOTES": The Mortgage Lenders Network Home Equity Loan Trust 1999-2 Asset
Backed Notes, Series 1999-2, Class A, issued pursuant to this Indenture.
"NOTICE OF CLAIM": The notice required to be furnished by the Indenture
Trustee to the Note Insurer in the event an Insured Payment is required to be
paid under the FSA Insurance Policy with respect to any Payment Date, in the
form set forth as Exhibit C hereto.
"OFFICERS' CERTIFICATE": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Operating Officer or
a Vice President of the Seller, the Depositor, the Servicer or, in the case of
the Issuer, an Authorized Officer of the Owner Trustee, as the case may be, and
delivered to the Indenture Trustee, Note Insurer or each Rating Agency, as the
case may be.
"OPINION OF COUNSEL": A written opinion of counsel reasonably acceptable
to the Indenture Trustee and, in the case of opinions delivered to the Note
Insurer, reasonably acceptable to it. Any expense related to obtaining an
Opinion of Counsel for an action requested by a party shall be borne by the
party required to obtain such opinion or seeking to effect the action that
requires the delivery of such Opinion of Counsel, except in such instances where
such opinion is at the request of the Indenture Trustee, in which case such
expense shall be an expense of the Servicer.
"ORIGINAL NOTE BALANCE": The aggregate principal balance of the Notes at
the issue date thereof, equal to $144,953,790.
"OUTSTANDING": As of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Definitive Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Indenture
Trustee or any Paying Agent (other than the Issuer) in trust for the
Holders of such Notes; provided, however, that if such Notes are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor, satisfactory to the Indenture Trustee,
has been made;
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser (as defined by the Uniform Commercial Code
of the applicable jurisdiction); and
(iv) Notes alleged to have been destroyed, lost or stolen that have
been paid as provided for in Section 2.07;
provided, however, that in determining whether the Holders of the requisite
percentage of the Note Balance of the Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Notes
owned by the Issuer, any other obligor upon the Notes or any Affiliate of the
Issuer, the Seller, the Servicer or the Depositor or such other obligor shall be
disregarded and deemed not to be Outstanding, except 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 knows to be so owned shall be so disregarded. Notes
so owned that have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Indenture 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 the Issuer, the
Seller, the Servicer or the Depositor or such other obligor; provided, further,
however, that Notes that have been paid with the proceeds of the FSA Insurance
Policy shall be deemed to be Outstanding for the purposes of this Indenture,
such payment to be evidenced by written notice from the Note Insurer to the
Indenture Trustee, and the Note Insurer shall be deemed to the Holder thereof to
the extent of any payments thereon made by the Note Insurer.
"OVERCOLLATERALIZATION AMOUNT": As to any Payment Date, the amount, if
any, by which (x) the Aggregate Principal Balance of the Mortgage Loans as of
the end of the related Due Period exceeds (y) the Note Balance for such Payment
Date, after taking into account Monthly Principal (disregarding any permitted
reduction thereof in such Monthly Principal due to an Overcollateralization
Surplus made on such Payment Date) to be applied in reduction of the Note
Balance on such Payment Date. If the Aggregate Principal Balance of the Mortgage
Loans is less than the Note Balance for such Payment Date, determined as
provided above, the Overcollateralization Amount and Payment Date shall be zero.
"OVERCOLLATERALIZATION DEFICIENCY AMOUNT": With respect to any Payment
Date is the amount, if any, by which the Required Overcollateralization Amount
exceeds the Overcollateralization Amount.
"OVERCOLLATERALIZATION DEFICIT": As to any Payment Date, the amount, if
any, by which the Note Balance on such Payment Date (after taking into account
any payments to be paid on such Payment Date in reduction of the Note Balance,
including Excess Cash payments) exceeds the Aggregate Principal Balance of the
Mortgage Loans as of the end of the related Due Period. If the Aggregate
Principal Balance of the Mortgage Loans as determined pursuant to the preceding
sentence is greater than the related Note Balance for such Payment Date
determined as provided above, the Overcollateralization Deficit for such Payment
Date shall be zero.
"OVERCOLLATERALIZATION SURPLUS": As to any Payment Date, the amount, if
any, by which (x) the related Overcollateralization Amount on such Payment Date
exceeds (y) the related Required Overcollateralization Amount on such Payment
Date.
"OWNER TRUSTEE": Wilmington Trust Company, a Delaware banking corporation,
not in its individual capacity, but solely as owner trustee under the Trust
Agreement, and any successor owner trustee thereunder.
"OWNER TRUSTEE FEE": The fee payable to the Owner Trustee pursuant to the
Trust Agreement.
"PAYING AGENT": The Indenture Trustee or any other depository institution
or trust company that is authorized by the Issuer pursuant to Section 3.03 to
pay the principal of, or interest on, any Notes on behalf of the Issuer, which
agent, if not the Indenture Trustee, shall have signed an instrument agreeing to
be bound by the terms of this Indenture applicable to the Paying Agent.
"PAYMENT AHEAD": As defined in the Servicing Agreement.
"PAYMENT DATE": The 25th day of each month or, if any such day is not a
Business Day, the Business Day immediately following such 25th day, beginning
December 27, 1999.
"PAYMENT DATE STATEMENT": The statement prepared pursuant to Section
2.08(d) with respect to collection on or in respect of the Mortgage Loans and
other assets of the Trust Estate and payments on or in respect of the Notes,
based upon the information contained in the Servicer Remittance Report prepared
pursuant to the Servicing Agreement and setting forth the following information
with respect to each Payment Date (to the extent the Servicer has made such
information (other than the information described in clause (ii), (iii), (iv),
(v) and (xv) below) available to the Indenture Trustee):
(i) the amount of such payment to Noteholders allocable to (x)
Monthly Principal (separately setting forth Principal Prepayments) and (y)
any principal payments made pursuant to Section 8.02(c)(vi) hereof;
(ii) the amount of such payment to Noteholders allocable to Note
Interest;
(iii) the Note Balance, after giving effect to the payment of
Monthly Principal and any principal payment made pursuant to Section
8.02(c)(vi) hereof applied to reduce such Note Balance on such Payment
Date;
(iv) the Aggregate Principal Balance of the Mortgage Loans as of the
end of the related Due Period;
(v) the amount of Monthly Advances made with respect to such Payment
Date and the aggregate amount of unreimbursed Monthly Advances and
Servicing Advances, if any;
(vi) the number and aggregate of the Principal Balances of Mortgage
Loans (including the Principal Balances of all Mortgage Loans in
foreclosure) contractually delinquent (i) one month, (ii) two months and
(iii) three or more months, as of the end of the related Collection
Period;
(vii) the number and aggregate of the Principal Balances of the
Mortgage Loans in foreclosure or subject to other similar proceedings, and
the number and aggregate of the Principal Balance of Mortgage Loans and in
the aggregate, the Mortgagor of which is known by the Servicer to be in
bankruptcy as of the end of the related Collection Period and the book
value of any real estate acquired through foreclosure, grant of a deed in
lieu of foreclosure or other similar proceedings during the related
Collection Period;
(viii) the aggregate of the Principal Balances of the Mortgage Loans
repurchased by the Seller or purchased by the Servicer, separately setting
forth the aggregate of the Principal Balances of Mortgage Loans and in the
aggregate delinquent for three consecutive monthly installments purchased
by the Servicer at its option pursuant to the Servicing Agreement;
(ix) the amount of any Insured Payments for such Payment Date;
(x) the aggregate amount of the Monthly Servicing Fee paid to or
retained by the Servicer for the related Collection Period;
(xi) the Overcollateralization Amount, the then applicable Required
Overcollateralization Amount, the Overcollateralization Surplus, if any,
and the Overcollateralization Deficit, if any, with respect to such
Payment Date;
(xii) the aggregate Principal Balance of the three largest
outstanding Mortgage Loans as of the related Determination Date;
(xiii) the aggregate amount of Realized Losses incurred during the
related Collection Period and the cumulative amount of Realized Losses
since the Cut-off Date;
(xiv) the amount of premium due to the PMI Insurer under the PMI
Policy;
(xv) the Delinquency Percentage and the Rolling Loss Percentage (as
defined in the Servicing Agreement) relating to such Payment Date; and
(xvi) the number of Mortgage Loan modifications made by the Servicer
during the Collection Period and the type of modification made with
respect to each such Mortgage Loan.
In the case of information furnished pursuant to subclauses (i) and (ii) above,
the amounts shall be expressed as a dollar amount per Individual Note.
"PERCENTAGE INTEREST": With respect to a Note, the undivided percentage
interest (carried to eight places rounded down) obtained by dividing the
original principal balance of such Note by the Original Note Balance and
multiplying the result by 100.
"PERMITTED INVESTMENTS": One or more of the following obligations,
instruments and securities:
(a) direct general obligations of, or obligations fully guaranteed
by, the United States of America, the Federal Home Loan Mortgage
Corporation, Federal National Mortgage Corporation, the Federal Home Loan
Banks or any agency or instrumentality of the United States of America
rated Aa3 or higher by Moody's, the obligations of which are backed by the
full faith and credit of the United States of America;
(b) (i) demand and time deposits in, certificates of deposit of,
banker's acceptances issued by, or federal funds sold by any depository
institution or trust company (including the Indenture Trustee or its agent
acting in their respective commercial capacities) incorporated under the
laws of the United States of America or any state thereof and subject to
supervision and examination by federal and/or state authorities, so long
as, at the time of such investment or contractual commitment providing for
such investment, such depository institution or trust company or its
ultimate parent has a short-term uninsured debt rating in one of the two
highest available rating categories of S&P and of Moody's and provided
that each such investment has an original maturity of no more than 365
days and (ii) any other demand or time deposit or deposit which is fully
insured by the FDIC;
(c) repurchase obligations with a term not to exceed 30 days with
respect to any security described in clause (a) above and entered into
with a depository institution or trust company (acting as a principal)
rated A or higher by S&P and rated A2 or higher by Moody's; provided,
however, that collateral transferred pursuant to such repurchase
obligation must be of the type described in clause (a) above and must (i)
be valued daily at current market price plus accrued interest, (ii)
pursuant to such valuation, be equal, at all times, to 105% of the cash
transferred by the Indenture Trustee in exchange for such collateral and
(iii) be delivered to the Indenture Trustee or, if the Indenture Trustee
is supplying the collateral, an agent for the Indenture Trustee, in such a
manner as to accomplish perfection of a security interest in the
collateral by possession of certified securities.
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or
any state thereof which has a long-term unsecured debt rating in the
highest available rating category of each of the Rating Agencies at the
time of such investment;
(e) commercial paper having an original maturity of less than 365
days and issued by an institution having a short-term unsecured debt
rating in the highest available rating category of each of the Rating
Agencies at the time of such investment;
(f) a guaranteed investment contract approved by each of the Rating
Agencies and the Note Insurer and issued by an insurance company or other
corporation having a long-term unsecured debt rating in the highest
available rating category of each of the Rating Agencies at the time of
such investment;
(g) money market funds having ratings in the two highest available
rating category of Moody's and one of the two highest available rating
categories of S&P at the time of such investment which invest only in
other Permitted Investments (any such money market funds which provide for
demand withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth herein) including money
market funds of the Indenture Trustee and any such funds that are managed
by the Indenture Trustee or its affiliates or which Indenture Trustee or
any affiliate acts as advisor as long as such money market funds satisfy
the criteria of this subparagraph (g); and
(h) any investment approved in writing by the Note Insurer and
written evidence that any such investment will not result in a downgrading
or withdrawal of the rating by each Rating Agency on the Notes.
The Indenture Trustee may purchase from or sell to itself or an affiliate,
as principal or agent, the Permitted Investments listed above. All Permitted
Investments in a trust account under the Indenture shall be made in the name of
the Indenture Trustee for the benefit of the Noteholders and the Note Insurer.
"PERSON": Any individual, corporation, limited liability company,
partnership, joint venture, association joint-stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.
"PMI INSURER": Mortgage Guaranty Insurance Corporation, a monoline private
insurance company organized and created under the laws of the State of
Wisconsin, or its successors in interest.
"PMI MORTGAGE LOANS": The list of Mortgage Loans insured by the PMI
Insurer attached hereto as Exhibit D.
"PMI POLICY": The Primary Mortgage Insurance Policy (No. 04-690-4-2476)
with respect to the PMI Mortgage Loans and all endorsements thereto dated the
Closing Date, issued by the PMI Insurer.
"PREDECESSOR NOTES": With respect to any particular Note, every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purpose of this definition, any Note authenticated
and delivered under Section 2.07 in lieu of a lost, destroyed or stolen Note
shall be deemed to evidence the same debt as the lost, destroyed or stolen Note.
"PREFERENCE CLAIM": As defined in Section 8.03(g) of this Indenture.
"PREPAYMENT INTEREST SHORTFALL": With respect to any Mortgage Loan as to
which a prepayment in whole or in part was received by the Servicer from the
related Mortgagor during a Collection Period, an amount equal to the difference
between (1) 30 days' interest at the Mortgage Interest Rate on the Principal
Balance of such Mortgage Loan (immediately prior to such prepayment) and (2) the
amount of interest actually collected by the Servicer on such Mortgage Loan
during the related Due Period.
"PREPAYMENT PREMIUM": With respect to any Collection Period, any
prepayment premium, penalty or charge payable by a Mortgagor in connection with
any Principal Prepayment on a Mortgage Loan pursuant to the terms of the related
Mortgage Note.
"PRINCIPAL BALANCE": As to any Mortgage Loan and any Determination Date,
the actual outstanding principal amount thereof as of the close of business on
the Determination Date in the preceding month (or, in the case of the first
Payment Date, as of the Cut-off Date) less (i) all scheduled payments of
principal received or advanced (or to be advanced on the related Deposit Date)
with respect to the Mortgage Loan and due during the related Due Period and all
other amounts collected, received or otherwise recovered in respect of principal
on the Mortgage Loan (including Principal Prepayments, but not including
Payments Ahead that are not allocable to principal for the related Due Period)
during or in respect of the related Collection Period, Net Liquidation Proceeds
and Trust Insurance Proceeds allocable to principal recovered or collected in
respect of such Mortgage Loan during the related Collection Period, (ii) the
portion of the Purchase Price allocable to principal to be remitted by the
Seller or the Servicer to the Indenture Trustee on or prior to the related
Deposit Date in connection with a repurchase of such Mortgage Loan pursuant to
the Mortgage Loan Sale Agreement, the Servicing Agreement or Section 8.05
hereof, to the extent such amount is actually remitted on or prior to such
Deposit Date, and (iii) the amount to be remitted by the Seller to the Indenture
Trustee on the related Deposit Date in connection with a substitution of a
Qualified Replacement Mortgage Loan for such Mortgage Loan pursuant to the
Mortgage Loan Sale Agreement and Section 8.05 hereof, to the extent such amount
is actually remitted on or prior to such Deposit Date; provided, however, that
Mortgage Loans that have become Liquidated Mortgage Loans since the end of the
preceding Determination Date (or, in the case of the first Determination Date,
since the Cut-off Date) will be deemed to have a Principal Balance of zero on
the current Determination Date.
"PRINCIPAL PREPAYMENT": As to any Mortgage Loan and Collection Period, any
payment by a Mortgagor or other recovery in respect of principal on a Mortgage
Loan (including Net Liquidation Proceeds and Trust Insurance Proceeds) that, in
the case of a payment by a Mortgagor, is received in advance of its scheduled
due date and is not a Payment Ahead.
"PROCEEDING": Any suit in equity, action at law or other judicial or
administrative proceeding.
"PURCHASE PRICE": With respect to any Defective Mortgage Loan, an amount
equal to (i) the sum of (A) the Principal Balance of such Defective Mortgage
Loan as of the beginning of the Due Period next preceding the Deposit Date on
which such repurchase or purchase is required to occur, (B) interest computed at
the applicable Mortgage Interest Rate on such Principal Balance from the date to
which interest was last paid by the Mortgagor to the last day of the Due Period
immediately preceding the Deposit Date on which such repurchase occurs and (C)
any previously unreimbursed Monthly Advances with respect to principal and
Servicing Advances made on or in respect of such Defective Mortgage Loan, less
(ii) any payments of principal and interest in respect of such Defective
Mortgage Loan made by or on behalf of the related Mortgagor during such Due
Period. With respect to any Qualified Replacement Mortgage Loan, the amount
remitted by the Seller to the Indenture Trustee on or prior to the Deposit Date
relating to a Payment Date in connection with a substitution of such Qualified
Replacement Mortgage Loan for a Mortgage Loan pursuant to the Mortgage Loan Sale
Agreement or Section 8.05 hereof.
"QUALIFIED REPLACEMENT MORTGAGE LOAN": A Mortgage Loan that is substituted
for a Deleted Mortgage Loan pursuant to Section 8.05 that must, at the end of
the Due Period preceding the date of such substitution, (i) have an outstanding
principal balance (when taken together with any other Qualified Replacement
Mortgage Loan being substituted for such Deleted Mortgage Loan), not in excess
of and not substantially less than the unpaid principal balance of the Deleted
Mortgage Loan at the end of the Due Period preceding the date of substitution,
(ii) be of the same type of Mortgage Interest Rate (i.e. fixed or adjustable)
and have the Mortgage Interest Rate not less than the Mortgage Interest Rate on
the Deleted Mortgage Loan, and, with respect to Mortgage Loans which have an
adjustable Mortgage Rate, have maximum rates, minimum rates, margin indices,
gross margins, and caps no more than 1% greater than or less than those of the
Deleted Mortgage Loan, (iii) have a remaining term to maturity not greater than
(and not more than one year less than) that of the Deleted Mortgage Loan, (iv)
have a Loan-to-Value Ratio or Combined Loan-to-Value Ratio equal to or lower
than the Loan-to-Value Ratio or Combined Loan-to-Value Ratio of the Deleted
Mortgage Loan, (v) have the same or better lien priority as the Deleted Mortgage
Loan, (vi) comply as of the date of substitution with each representation and
warranty set forth in Section 4(b) and Exhibit B of the Mortgage Loan Sale
Agreement, (vii) have the same or better property type as the Deleted Mortgage
Loan, (viii) have the same or better occupancy status and (ix) be otherwise
acceptable to the Note Insurer. In the event that one or more mortgage loans are
proposed to be substituted for one or more Deleted Mortgage Loans, the foregoing
tests may be met on a weighted average basis or other aggregate basis acceptable
to the Note Insurer, except that the requirements of clauses (v), (vi), (vii)
and (viii) hereof must be satisfied as to each Qualified Replacement Mortgage
Loan.
"RATING AGENCIES": S&P and Moody's (each, a "Rating Agency"). If any such
agency or a successor is no longer in existence, "Rating Agency" shall be such
nationally recognized statistical credit rating agency, or other comparable
Person, designated by the Servicer, notice of which designation shall be given
to the Indenture Trustee.
"REALIZED LOSS": As defined in the Servicing Agreement.
"RECORD DATE": With respect to any Payment Date, the date on which the
Persons entitled to receive any payment of principal of or interest on any Notes
(or notice of a payment in full of principal) due and payable on such Payment
Date are determined; such date shall be the last Business Day preceding such
Payment Date or, with respect to Definitive Notes, the last Business Day of the
month preceding the month of such Payment Date. With respect to a vote of
Noteholders required or allowed hereunder, the Record Date shall be the later of
(i) 30 days prior to the first solicitation of consents or (ii) the date of the
most recent list of Noteholders furnished to the Indenture Trustee pursuant to
Section 7.01(a) prior to such solicitation.
"REDEMPTION DATE": With respect to the Notes, the Payment Date, if any, on
which the Notes are redeemed pursuant to Article X hereof which date may occur
on or after the Initial Redemption Date.
"REDEMPTION PRICE": With respect to any Note to be redeemed in whole or in
part, an amount equal to 100% of the Current Note Balance of the Note to be so
redeemed, together with accrued and unpaid interest on such amount at the Note
Interest Rate.
"RELIEF ACT": The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
"RELIEF ACT INTEREST SHORTFALL": With respect to any Payment Date, for any
Mortgage Loan to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended Due Period as a result of the
application of the Relief Act, the amount by which (i) interest collectible on
such Mortgage Loan during such Due Period is less than (ii) 30 days' at the
Mortgage Interest Rate on the Principal Balance of such Mortgage Loan before
giving effect to the application of the Relief Act.
"REMITTABLE FUNDS": As defined in the Servicing Agreement.
"REO PROPERTY": As defined in the Servicing Agreement.
"REPRESENTATIVE": Deutsche Bank Securities Inc.
"REQUIRED OVERCOLLATERALIZATION AMOUNT": Means with respect to the Notes:
(a) for any Payment Date on which the Step Down Trigger is not
occurring, the greater of: (i) 4.00% of the Aggregate Principal Balance of
the Mortgage Loans as of the Cut-off Date and (ii) either (A) if the Step
Up Rolling Delinquency Test is met on such Payment Date but neither the
Step Up Rolling Loss Test nor the Step Up Cumulative Loss Test is met on
such Payment Date, 90% of the Delinquency Amount for such Payment Date or
(B) if either the Step Up Rolling Loss Test or the Step Up Cumulative Loss
Test is met on such Payment Date, 150% of the Delinquency Amount for such
Payment Date.
(b) for any Payment Date on which the Step Down Trigger is occurring
the greatest of (i) the lesser of (A) 4.00% of the Aggregate Principal
Balance of the Mortgage Loans as of the Cut-off Date and (B) the Stepped
Down Required Overcollateralized Percentage of the Aggregate Principal
Balance of the Mortgage Loans as of the Determination Date relating to
such Payment Date, (ii) either (A) if the Step Up Rolling Delinquency Test
is met as such Payment Date but neither the Step Up Rolling Loss Test nor
the Step Up Cumulative Loss Test is met on such Payment Date, 90% of the
Delinquency Amount for such Payment Date or (B) if either the Step Up
Rolling Loss Test or the Step Up Cumulative Loss Test is met on such
Payment Date, 150% of the Delinquency Amount for such Payment Date, (iii)
0.50% of the Aggregate Principal Balance of the Mortgage Loans as of the
Cut-Off Date and (iv) three times the Principal Balance of the largest
Mortgage Loan then outstanding.
(c) provided, however, for any Payment Date on which the Step Up
Claims Denial Test is met, the Required Overcollateralization Amount
determined pursuant to clause (a) or (b) above, as applicable, shall be
increased by an amount equal to the product of 1.00% and the Aggregate
Principal Balance of the Mortgage Loans as of the Cut-Off Date.
The Note Insurer may, in its sole discretion, at the request of the
holders of 50% or more of the ownership interests of the Issuer, modify clause
(a), (b) or (c) above.
"REQUIRED PAYMENT AMOUNT": With respect to the Notes and any Payment Date,
the Note Interest (net of any Relief Act Interest Shortfalls and Prepayment
Interest Shortfalls) for such Payment Date plus the amount of any
Overcollateralization Deficit for such Payment Date.
"RESPONSIBLE OFFICER": With respect to the Indenture Trustee, the chairman
or vice-chairman of the board of directors, the chairman or vice-chairman of the
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 trust officer or
assistant trust officer, the controller, any assistant controller or any other
officer of the Indenture Trustee customarily performing functions similar to
those performed by any of the above designated officers and also, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"ROLLING DELINQUENCY PERCENTAGE": As defined in the Servicing Agreement.
"ROLLING LOSS PERCENTAGE": As defined in the Servicing Agreement.
"SALE": The meaning specified in Section 5.17.
"SELLER": Mortgage Lenders Network USA, Inc., a Delaware corporation.
"SERVICER": With respect to any Mortgage Loan, Mortgage Lenders Network
USA, Inc., a Delaware corporation, as Servicer under the Servicing Agreement,
and its permitted successors and assigns thereunder, including any successor
servicers appointed pursuant to Section 6.02 of the Servicing Agreement.
"SERVICER REMITTANCE REPORT": As defined in the Servicing Agreement.
"SERVICING ADVANCE": As defined in the Servicing Agreement.
"SERVICING AGREEMENT": The Servicing Agreement, dated as of November 1,
1999, among the Issuer, the Servicer and the Indenture Trustee, as indenture
trustee, providing, among other things, for the servicing of the Mortgage Loans,
as such agreement may be amended or supplemented from time to time as permitted
hereby and thereby. Such term shall also include any servicing agreement entered
into with a successor servicer.
"SERVICING FEE RATE": 0.50% per annum.
"S&P": Standard & Poor's Rating Services, a Division of The McGraw-Hill
Companies, Inc., and its successors in interest.
"STEP DOWN CUMULATIVE LOSS TEST": The Step Down Cumulative Loss Test will
be met with respect to a Payment Date as follows: (i) for the 31st through the
41st Payment Dates, if the Cumulative Loss Percentage for such Payment Date is
1.75% or less; (ii) for the 42nd through the 53rd Payment Dates, if the
Cumulative Loss Percentage for such Payment Date is 2.25% or less; (iii) for the
54th through the 65th Payment Dates, if the Cumulative Loss Percentage for such
Payment Date is 2.75% or less; and (iv) for any Payment Date after the 65th
Payment Date, if the Cumulative Loss Percentage for such Payment Date is 3.75%
or less.
"STEP DOWN ROLLING DELINQUENCY TEST": The Step Down Rolling Delinquency
Test will be met with respect to a Payment Date if the Rolling Delinquency
Percentage for such Payment Date is 10.00% or less.
"STEP DOWN ROLLING LOSS TEST": The Step Down Rolling Loss Test will be met
with respect to a Payment Date if the Rolling Loss Percentage is less than
1.00%.
"STEP DOWN TRIGGER": For any Payment Date after the 30th Payment Date, the
Step Down Trigger will have occurred if each of the Step Down Cumulative Loss
Test, the Step Down Rolling Delinquency Test and the Step Down Rolling Loss Test
is met. In no event will the Step Down Trigger be deemed to have occurred for
the 30th Payment Date or any preceding Payment Date.
"STEPPED DOWN REQUIRED OVERCOLLATERALIZED PERCENTAGE": For any Payment
Date for which the Step Down Trigger has occurred, a percentage equal to the
greater of (x) 8.00% and (y) (i) the percentage equivalent of a fraction, the
numerator of which is the Overcolleralization Amount as of the immediately
preceding Payment Date and the denominator of which is the Aggregate Principal
Balance of the Mortgage Loans and REO Properties as of such Payment Date, minus
(ii) the percentage equivalent of a fraction, the numerator of which is the
product of (A) the percentage calculated under clause (i) above minus 8.00%
multiplied by (B) the number of consecutive Payment Dates through and including
the Payment Date for which the Stepped Down Required Overcollateralized
Percentage is being calculated, up to a maximum of six, for which the Step Down
Trigger has occurred, and the denominator of which is six.
"STEP UP CLAIMS DENIAL TEST": The Step Up Claims Denial Test will be met
if either of the following events occurs (i) MGIC is downgraded below "A" by S&P
or Moody's, or (ii) the cumulative claims denials for any 12-months preceding a
Payment Date exceed 0.50% of the Aggregate Principal Balance of the Mortgage
Loans covered by the PMI Policy at the beginning of such 12-month period.
"STEP UP CUMULATIVE LOSS TEST": The Step Up Cumulative Loss Test will be
met with respect to a Payment Date as follows: (i) for the 1st through the 12th
Payment Dates, if the Cumulative Loss Percentage for such Payment Date is more
than 0.75%; (ii) for the 13th through the 24th Payment Dates, if the Cumulative
Loss Percentage for such Payment Date is more than 1.50%; (iii) for the 25th
through the 36th Payment Dates, if the Cumulative Loss Percentage for such
Payment Date is more than 2.50%; (iv) for the 37th through the 48th Payment
Dates, if the Cumulative Loss Percentage for such Payment Date is more than
3.75%; and (v) for the 49th Payment Date and any Payment Date thereafter, if the
Cumulative Loss Percentage for such Payment Date is more than 4.25%.
"STEP UP ROLLING DELINQUENCY TEST": The Step Up Rolling Delinquency Test
will be met with respect to a Payment Date if the Rolling Delinquency Percentage
for such Payment Date is more than 10.00%.
"STEP UP ROLLING LOSS TEST": The Step Up Rolling Loss Test will be met
with respect to a Payment Date, if the Rolling Loss Percentage is equal to or
more than 1.25%.
"TRANSITION EXPENSES": As defined in the Servicing Agreement.
"TRUST AGREEMENT": That certain Deposit Trust Agreement, dated as of
November 1, 1999, among the Depositor, the Owner Trustee, Norwest Bank
Minnesota, National Association and the Servicer.
"TRUST ESTATE": All money, instruments and other property subject or
intended to be subject to the lien of this Indenture for the benefit of the
Noteholders and the Note Insurer as of any particular time (including, without
limitation, all property and interests Granted to the Indenture Trustee,
including all proceeds thereof).
"TRUST INDENTURE ACT" or "TIA": The Trust Indenture Act of 1939, as it may
be amended from time to time.
"TRUST INSURANCE PROCEEDS": As defined in the Servicing Agreement.
"TRUST PAYING AGENT": The entity appointed to act as paying agent pursuant
to the Trust Agreement with respect to amounts on deposit from time to time in
the Certificate Distribution Account and distributions thereof to
Certificateholders. The initial Trust Paying Agent is Norwest Bank Minnesota,
National Association.
"U.S. BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, 11
U.S.C. Sections 101, et seq., as amended or supplemented from time to time.
"VICE PRESIDENT": Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
ARTICLE II
THE NOTES
SECTION 2.01. FORMS GENERALLY.
The Notes shall be in substantially the form set forth on Exhibit A
attached hereto. Each Note may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which the Notes
may be listed, or as may, consistently herewith, be determined by the Issuer, as
evidenced by its execution thereof. Any portion of the text of any Note may be
set forth on the reverse thereof with an appropriate reference on the face of
the Note.
The Definitive Notes may be produced in any manner determined by the
Issuer, as evidenced by its execution thereof.
SECTION 2.02. FORMS OF CERTIFICATE OF AUTHENTICATION.
The form of the Authenticating Agent's certificate of authentication is as
follows:
This is one of the Notes referred to in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Authenticating Agent
By:
------------------------------------------
Authorized Signatory
SECTION 2.03. GENERAL PROVISIONS WITH RESPECT TO PRINCIPAL AND INTEREST
PAYMENT.
The Notes shall be designated generally as the "Asset Backed Notes, Series
1999-2" of the Issuer.
The aggregate principal amount of Notes that may be authenticated and
delivered under this Indenture is limited to $144,953,790, except for the Notes
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Notes pursuant to Sections 2.06, 2.07, or 9.06 of this
Indenture. The Notes shall consist of one class designated as Class A, having a
Note Interest Rate and Final Maturity Date as follows:
Designation Original Note Note Interest Rate Final Maturity Date
----------- Balance ------------------ -------------------
-------
Class A 144,953,790 7.583% December 25, 2030
The Notes shall be issued in the form specified in Section 2.01.
Subject to the provisions of Section 3.01, Section 5.07, Section 5.09 and
Section 8.02(d), the principal of the Notes shall be payable in installments
ending no later than the Final Maturity Date unless the unpaid principal of such
Notes become due and payable at an earlier date by declaration of acceleration
or call for redemption or otherwise.
All payments made with respect to any Note shall be applied first to the
interest then due and payable on such Note and then to the principal thereof.
All computations of interest accrued on any Note shall be made on the basis of a
year of 360 days and twelve 30-day months.
Interest on the Notes shall accrue at the Note Interest Rate during each
Interest Period on the Current Note Balance of each Outstanding Note at the end
of such Interest Period. Interest accrued during an Interest Period shall be
payable on the next following Payment Date.
All payments of principal of and interest on any Note shall be made in the
manner specified in Section 2.
Notwithstanding any of the foregoing provisions with respect to payments
of principal of and interest on the Notes, if the Notes have become or been
declared due and payable following an Event of Default and such acceleration of
maturity and its consequences have not been rescinded and annulled, then
payments of principal of and interest on the Notes shall be made in accordance
with Section 5.07.
SECTION 2.04. DENOMINATIONS.
The Notes shall be issuable only as registered Notes in the minimum
denomination of $1,000 and integral multiples of $1,000 in excess thereof, with
the exception of one Note which may be issued in a lesser amount.
SECTION 2.05. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Notes shall be executed on behalf of the Issuer by an Authorized
Officer of the Owner Trustee. The signature of such Authorized Officer of the
Owner Trustee on the Notes may be manual or by facsimile.
Notes bearing the manual or facsimile signature of an individual who was
at any time an Authorized Officer of the Owner Trustee shall bind the Issuer,
notwithstanding that such individual has ceased to be an Authorized Officer of
the Owner Trustee prior to the authentication and delivery of such Notes or was
not an Authorized Officer of the Owner Trustee at the date of such Notes.
At any time and from time to time after the execution and delivery of this
Indenture, the Issuer may deliver Notes executed on behalf of the Issuer to the
Authenticating Agent for authentication; and the Authenticating Agent shall
authenticate and deliver such Notes as in this Indenture provided and not
otherwise.
Each Note authenticated on the Closing Date shall be dated the Closing
Date. All other Notes that are authenticated after the Closing Date for any
other purpose hereunder shall be dated the date of their authentication.
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
Authenticating Agent by the manual signature of one of its authorized officers
or employees, 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 2.06. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Issuer shall cause to be kept a register (the "Note Register") in
which, subject to such reasonable regulations as it may prescribe, the Issuer
shall provide for the registration of Notes and the registration of transfers of
Notes. The Indenture Trustee is hereby initially appointed "Note Registrar" for
the purpose of registering Notes and transfers of Notes as herein provided. The
Indenture Trustee shall remain the Note Registrar throughout the term hereof.
Upon any resignation of the Indenture Trustee, the Issuer shall promptly appoint
a successor, with the approval of the Note Insurer, or, in the absence of such
appointment, the Issuer shall assume the duties of Note Registrar.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, the Owner
Trustee on behalf of the Issuer, shall execute, and the Authenticating Agent
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of any
authorized denominations, and of a like aggregate initial principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Owner Trustee shall execute, and the
Authenticating Agent shall authenticate and deliver, the Notes that the
Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Note Registrar duly executed by the Holder
thereof or its attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Issuer and the Note Registrar may require payment of
a sum sufficient to cover any tax or other governmental charge as may be imposed
in connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.07 not involving any transfer or any exchange
made by the Note Insurer.
The Note Registrar shall not register the transfer of a Note unless the
Note Registrar has received a representation letter from the transferee to the
effect that either (i) the transferee is not, and is not acquiring the Note on
behalf of or with the assets of, an employee benefit plan or other retirement
plan or arrangement that is subject to Title I of the Employee Retirement Income
Security Act or 1974, as amended, or Section 4975 of the Code or (ii) the
acquisition and holding of the Note by the transferee qualifies for exemptive
relief under a Department of Labor Prohibited Transaction Class Exemption. Each
Beneficial Owner of a Book-Entry Note shall be deemed to make one of the
foregoing representations.
SECTION 2.07. MUTILATED, DESTROYED, LOST OR STOLEN NOTES.
If (1) any mutilated Note is surrendered to the Note Registrar or the Note
Registrar receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (2) there is delivered to the Note Registrar such
security or indemnity as may be required by the Note Registrar to save each of
the Issuer, the Note Insurer and the Note Registrar harmless, then, in the
absence of notice to the Issuer or the Note Registrar that such Note has been
acquired by a bona fide purchaser, the Owner Trustee on behalf of the Issuer
shall execute and upon its request the Note Registrar shall authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Note, a new Note or Notes of the same tenor and aggregate initial
principal amount bearing a number not contemporaneously outstanding. If, after
the delivery of such new Note, a bona fide purchaser of the original Note in
lieu of which such new Note was issued presents for payment such original Note,
the Issuer and the Note Registrar shall be entitled to recover such new Note
from the person to whom it was delivered or any person taking therefrom, 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 expenses
incurred by the Issuer or the Note Registrar in connection therewith. If any
such mutilated, destroyed, lost or stolen Note shall have become or shall be
about to become due and payable, or shall have become subject to redemption in
full, instead of issuing a new Note, the Issuer may pay such Note without
surrender thereof, except that any mutilated Note shall be surrendered.
Upon the issuance of any new Note under this Section, the Issuer or the
Note 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
reasonable expenses (including the fees and expenses of the Indenture Trustee or
the Note Registrar) connected therewith.
Every new Note issued pursuant to this Section in lieu of any destroyed,
lost or stolen Note shall constitute an original additional contractual
obligation of the Issuer, whether or not the 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 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 2.08. PAYMENTS OF PRINCIPAL AND INTEREST.
(a) Payments on Notes issued as Book-Entry Notes will be made by or on
behalf of the Indenture Trustee to the Clearing Agency or its nominee. Any
installment of interest or principal payable on any Definitive Notes that is
punctually paid or duly provided for by the Issuer on the applicable Payment
Date shall be paid to the Person in whose name such Note (or one or more
Predecessor Notes) is registered at the close of business on the Record Date for
such Payment Date by either (i) check mailed to such Person's address as it
appears in the Note Register on such Record Date, or (ii) by wire transfer of
immediately available funds to the account of a Noteholder, if such Noteholder
(A) is the registered holder of Definitive Notes having an initial principal
amount of at least $1,000,000 and (B) has provided the Indenture Trustee with
wiring instructions in writing by five Business Days prior to the related Record
Date or has provided the Indenture Trustee with such instructions for any
previous Payment Date, except for the final installment of principal payable
with respect to such Note (or the Redemption Price for any Note called for
redemption, if such redemption will result in payment of the then entire unpaid
principal amount of such Note), which shall be payable as provided in subsection
(b) below of this Section 2.08. A fee may be charged by the Indenture Trustee to
a Noteholder of Definitive Notes for any payment made by wire transfer. Any
installment of interest or principal not punctually paid or duly provided for
shall be payable as soon as funds are available to the Indenture Trustee for
payment thereof, or if Section 5.07 applies, pursuant to Section 5.07.
(b) All reductions in the principal amount of a Note (or one or more
Predecessor Notes) effected by payments of installments of principal made on any
Payment Date shall be binding upon all Holders of such Note and of any Note
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, whether or not such payment is noted on such Note. The final
installment of principal of each Note (including the Redemption Price of any
Note called for optional redemption, if such optional redemption will result in
payment of the entire unpaid principal amount of such Note) shall be payable
only upon presentation and surrender thereof on or after the Payment Date
therefor at the Indenture Trustee's presenting office located within the United
States of America pursuant to Section 3.02.
Whenever the Indenture Trustee expects that the entire remaining unpaid
principal amount of any Note will become due and payable on the next Payment
Date other than pursuant to a redemption pursuant to Article X, it shall, no
later than two days prior to such Payment Date, telecopy or hand deliver to each
Person in whose name a Note to be so retired is registered at the close of
business on such otherwise applicable Record Date a notice to the effect that:
(i) the Indenture Trustee expects that funds sufficient to pay such
final installment will be available in the Note Account on such Payment
Date; and
(ii) if such funds are available, (A) such final installment will be
payable on such Payment Date, but only upon presentation and surrender of
such Note at the office or agency of the Note Registrar maintained for
such purpose pursuant to Section 3.02 (the address of which shall be set
forth in such notice) and (B) no interest shall accrue on such Note after
such Payment Date.
A copy of such form of notice shall be sent to the Note Insurer by the
Indenture Trustee.
Notices in connection with redemptions of Notes shall be mailed to
Noteholders in accordance with Section 10.02.
(c) Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to unpaid principal and
interest that were carried by such other Note. Any checks mailed pursuant to
subsection (a) of this Section 2.08 and returned undelivered shall be held in
accordance with Section 3.03.
(d) Each Payment Date Statement, prepared by the Indenture Trustee based
on the Servicer Remittance Report delivered to the Indenture Trustee pursuant to
the Servicing Agreement, shall be made available via the Indenture Trustee's
internet website and its fax-on-demand service to the Note Insurer, the Rating
Agencies, the Owner Trustee, the Underwriters (as defined in the Insurance
Agreement) and each Noteholder as the statement required pursuant to Section
8.06. Noteholders that are unable to use the above distribution options are
entitled to have a paper copy mailed to them via first class mail by calling the
customer service desk at (301) 815-6600 and indicating such. Neither the
Indenture Trustee nor the Paying Agent shall have any responsibility to
recalculate, verify or recompute information contained in any such tape,
electronic data file or disk or any such Servicer Remittance Report except to
the extent necessary to satisfy all obligations under this Section 2.08(d) and
under Article III of the Servicing Agreement.
Within 90 days after the end of each calendar year, the Indenture Trustee
will be required to furnish to each person who at any time during the calendar
year was a Noteholder, if requested in writing by such person, a statement
containing the information set forth in subclauses (i) and (ii) in the
definition of "Payment Date Statement," aggregated for such calendar year or the
applicable portion thereof during which such person was a Noteholder. Such
obligation will be deemed to have been satisfied to the extent that
substantially comparable information is provided pursuant to any requirements of
the Code as are from time to time in force.
SECTION 2.09. PERSONS DEEMED OWNER.
Prior to due presentment for registration of transfer of any Note, the
Issuer, the Indenture Trustee, any Paying Agent and any other agent of the
Issuer, the Note Insurer or the Indenture Trustee may treat the Person in whose
name any Note is registered as the owner of such Note (a) on the applicable
Record Date for the purpose of receiving payments of the principal of and
interest on such Note and (b) on any other date for all other purposes
whatsoever, and neither the Issuer, the Indenture Trustee, any Paying Agent nor
any other agent of the Issuer, the Note Insurer or the Indenture Trustee shall
be affected by notice to the contrary.
SECTION 2.10. CANCELLATION.
All Notes surrendered for payment, registration of transfer, exchange or
redemption shall, if surrendered to any Person other than the Note Registrar, be
delivered to the Note Registrar and shall be promptly canceled by it. The Issuer
may at any time deliver to the Note Registrar for cancellation any Note
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
canceled by the Note Registrar. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. All canceled Notes held by the Note Registrar shall
be held by the Note Registrar in accordance with its standard retention policy,
unless the Issuer shall direct by an Issuer Order that they be destroyed or
returned to it.
SECTION 2.11. AUTHENTICATION AND DELIVERY OF NOTES.
The Notes shall be executed by an Authorized Officer of the Owner Trustee
on behalf of the Issuer and delivered to the Authenticating Agent for
authentication, and thereupon the same shall be authenticated and delivered by
the Authenticating Agent, upon Issuer Request and upon receipt by the
Authenticating Agent of all of the following:
(a) An Issuer Order authorizing the execution, authentication and delivery
of the Notes and specifying the Final Maturity Date, the principal amount and
the Note Interest Rate (or the manner in which such Note Interest Rate is to be
determined) of such Notes to be authenticated and delivered.
(b) An Issuer Order authorizing the execution and delivery of this
Indenture.
(c) One or more Opinions of Counsel addressed to the Authenticating Agent
and the Note Insurer or upon which the Authenticating Agent and the Note Insurer
is expressly permitted to rely, complying with the requirements of Section
11.01, reasonably satisfactory in form and substance to the Authenticating Agent
and the Note Insurer.
In rendering the opinions set forth above, such counsel may rely upon
officer's certificates of the Issuer, the Owner Trustee, the Servicer and the
Indenture Trustee, without independent confirmation or verification with respect
to factual matters relevant to such opinions. In rendering the opinions set
forth above, such counsel need express no opinion as to (A) the existence of, or
the priority of the security interest created by the Indenture against, any
liens or other interests that arise by operation of law and that do not require
any filing or similar action in order to take priority over a perfected security
interest or (B) the priority of the security interest created by this Indenture
with respect to any claim or lien in favor of the United States or any agency or
instrumentality thereof (including federal tax liens and liens arising under
Title IV of the Employee Retirement Income Security Act of 1974).
The acceptability to the Note Insurer of the Opinion of Counsel delivered
to the Indenture Trustee and the Note Insurer at the Closing Date shall be
conclusively evidenced by the delivery on the Closing Date of the FSA Insurance
Policy.
(d) Pursuant to the authorization of the Depositor, an Officers'
Certificate of the Issuer complying with the requirements of Section 11.01 and
stating that:
(i) the Issuer is not in Default under this Indenture and the
issuance of the Notes will not result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, the Issuer's
Certificate of Trust or any indenture, mortgage, deed of trust or other
agreement or instrument to which the Issuer is a party or by which it is
bound, or any order of any court or administrative agency entered in any
proceeding to which the Issuer is a party or by which it may be bound or
to which it may be subject, and that all conditions precedent provided in
this Indenture relating to the authentication and delivery of the Notes
have been complied with;
(ii) the Issuer is the owner of each Mortgage Loan, free and clear
of any lien, security interest or charge, has not assigned any interest or
participation in any such Mortgage Loan (or, if any such interest or
participation has been assigned, it has been released) and has the right
to Grant each such Mortgage Loan to the Indenture Trustee;
(iii) the information set forth in the Mortgage Loan Schedule
attached as Schedule I to this Indenture is correct;
(iv) the Issuer has Granted to the Indenture Trustee all of its
right, title and interest in each Mortgage Loan;
(v) as of the Closing Date, no lien in favor of the United States
described in Section 6321 of the Code, or lien in favor of the Pension
Benefit Guaranty Corporation described in Section 4068(a) of the Employee
Retirement Income Security Act of 1974, as amended, has been filed as
described in subsections 6323(f) and 6323(g) of the Code upon any property
belonging to the Issuer; and
(vi) attached thereto is a true and correct copy of letters signed
by each Rating Agency confirming that the Notes have been rated in the
highest rating category of such Rating Agency.
(e) An executed counterpart of the Servicing Agreement.
(f) An executed counterpart of the Mortgage Loan Sale Agreement.
(g) An executed counterpart of the Mortgage Loan Contribution
Agreement.
(h) An executed counterpart of the Trust Agreement.
SECTION 2.12. BOOK-ENTRY NOTE.
The Notes will be issued initially as one or more certificates in the name
of the Cede & Co., as nominee for the Clearing Agency maintaining book-entry
records with respect to ownership and transfer of such Notes, and held by the
Clearing Agency or, pursuant to the Clearing Agency's instructions on behalf of
the Clearing Agency, deposited with the Indenture Trustee, and registration of
the Notes may not be transferred by the Note Registrar except upon Book-Entry
Termination. In such case, the Note Registrar shall deal with the Clearing
Agency as representatives of the Beneficial Owners of such Notes for purposes of
exercising the rights of Noteholders hereunder. Each payment of principal of and
interest on a Book-Entry Note shall be paid to the Clearing Agency, which shall
credit the amount of such payments to the accounts of its Clearing Agency
Participants in accordance with its normal procedures. Each Clearing Agency
Participant shall be responsible for disbursing such payments to the Beneficial
Owners of the Book-Entry Notes 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 Beneficial Owners of the Book-Entry Notes that it
represents. All such credits and disbursements are to be made by the Clearing
Agency and the Clearing Agency Participants in accordance with the provisions of
the Notes. None of the Indenture Trustee, the Note Registrar, if any, the
Issuer, or any Paying Agent or the Note Insurer shall have any responsibility
therefor except as otherwise provided by applicable law. Requests and directions
from, and votes of, such representatives shall not be deemed to be inconsistent
if they are made with respect to different Beneficial Owners.
SECTION 2.13. TERMINATION OF BOOK ENTRY SYSTEM.
(a) The book-entry system through the Clearing Agency with respect to the
Book-Entry Notes may be terminated upon the happening of any of the following:
(i) The Clearing Agency advises the Indenture Trustee that the
Clearing Agency is no longer willing or able to discharge properly its
responsibilities as nominee and depositary with respect to the Notes and
the Indenture Trustee is unable to locate a qualified successor clearing
agency satisfactory to the Issuer;
(ii) The Issuer, in its sole discretion, elects to terminate the
book-entry system by notice to the Clearing Agency and the Indenture
Trustee; or
(iii) After the occurrence of an Event of Default (at which time the
Indenture Trustee shall use all reasonable efforts to promptly notify each
Beneficial Owner through the Clearing Agency of such Event of Default),
the Beneficial Owners of no less than 51% of the Note Balance of the
Book-Entry Notes advise the Indenture Trustee in writing, through the
related Clearing Agency Participants and the Clearing Agency, that the
continuation of a book-entry system through the Clearing Agency to the
exclusion of any Definitive Notes being issued to any person other than
the Clearing Agency or its nominee is no longer in the best interests of
the Beneficial Owners.
(b) Upon the occurrence of any event described in subsection (a) above,
the Indenture Trustee shall use all reasonable efforts to notify all Beneficial
Owners, through the Clearing Agency, of the occurrence of such event and of the
availability of Definitive Notes to Beneficial Owners requesting the same, in an
aggregate Current Note Balance representing the interest of each, making such
adjustments and allowances as it may find necessary or appropriate as to accrued
interest and previous calls for redemption. Definitive Notes shall be issued
only upon surrender to the Indenture Trustee of the global Note by the Clearing
Agency, accompanied by registration instructions for the Definitive Notes.
Neither the Issuer nor 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 issuance of the Definitive
Notes, all references herein to obligations imposed upon or to be performed by
the Clearing Agency shall cease to be applicable and the provisions relating to
Definitive Notes shall be applicable.
ARTICLE III
COVENANTS
SECTION 3.01. PAYMENT OF NOTES.
The Issuer will pay or cause to be duly and punctually paid the principal
of, and interest on, the Notes in accordance with the terms of the Notes and
this Indenture. The Notes shall be non-recourse obligations of the Issuer and
shall be limited in right of payment to amounts available from the Trust Estate
as provided in this Indenture and the Issuer shall not otherwise be liable for
payments on the Notes. No person shall be personally liable for any amounts
payable under the Notes. If any other provision of this Indenture conflicts or
is deemed to conflict with the provisions of this Section 3.01, the provisions
of this Section 3.01 shall control.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuer will cause the Note Registrar to maintain its corporate trust
office at a location where 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 may also from time to time at its own expense designate one or
more other offices or agencies within the United States of America where the
Notes may be presented or surrendered for any or all such purposes and may from
time to time rescind such designations; provided, however, any designation of an
office or agency for payment of Notes shall be subject to Section 3.03. The
Issuer will give prompt written notice to the Indenture Trustee and the Note
Insurer of any such designation or rescission and of any change in the location
of any such other office or agency.
SECTION 3.03. MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.
All payments of amounts due and payable with respect to any Notes that are
to be made from amounts withdrawn from the Note Account pursuant to Section
8.02(c) or Section 5.07 shall be made on behalf of the Issuer by the Paying
Agent, and no amounts so withdrawn from the Note Account for payments of Notes
shall be paid over to the Issuer under any circumstances except as provided in
this Section 3.03 or in Section 5.07 or Section 8.02.
With respect to Definitive Notes, if the Issuer shall have a Paying Agent
that is not also the Note Registrar, such Note Registrar shall furnish, no later
than the fifth calendar day after each Record Date, a list, in such form as such
Paying Agent may reasonably require, of the names and addresses of the Holders
of Notes and of the number of Individual Notes held by each such Holder.
Whenever the Issuer shall have a Paying Agent other than the Indenture
Trustee, it will, on or before the Business Day next preceding each Payment Date
direct the Indenture Trustee to deposit with such Paying Agent an aggregate sum
sufficient to pay the amounts then becoming due (to the extent funds are then
available for such purpose in the Note Account), such sum to be held in trust
for the benefit of the Persons entitled thereto. Any moneys deposited with a
Paying Agent in excess of an amount sufficient to pay the amounts then becoming
due on the Notes with respect to which such deposit was made shall, upon Issuer
Order, be paid over by such Paying Agent to the Indenture Trustee for
application in accordance with Article VIII.
Subject to the prior consent of the Note Insurer, any Paying Agent other
than the Indenture Trustee may be appointed by Issuer Order and at the expense
of the Issuer. The Issuer shall not appoint any Paying Agent (other than the
Indenture Trustee) that is not, at the time of such appointment, a depository
institution or trust company whose obligations would be Permitted Investments
pursuant to clause (c) of the definition of the term Permitted Investments. 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,
that such Paying Agent will:
(1) allocate all sums received for payment to the Holders of Notes
on each Payment Date among such Holders in the proportion specified in the
applicable Payment Date Statement, in each case to the extent permitted by
applicable law;
(2) 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;
(3) if such Paying Agent is not the Indenture Trustee, immediately
resign as a Paying Agent and forthwith pay to the Indenture Trustee all
sums held by it in trust for the payment of the Notes if at any time the
Paying Agent ceases to meet the standards set forth above required to be
met by a Paying Agent at the time of its appointment;
(4) if such Paying Agent is not the Indenture Trustee, give the
Indenture Trustee notice of any Default by the Issuer (or any other
obligor upon the Notes) in the making of any payment required to be made
with respect to any Notes for which it is acting as Paying Agent;
(5) if such Paying Agent is not the Indenture Trustee, 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; and
(6) comply with all requirements of the Code, and all regulations
thereunder, with respect to 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;
provided, however, that with respect to withholding and reporting
requirements applicable to original issue discount (if any) on any of the
Notes, the Issuer has provided the calculations pertaining thereto to the
Indenture Trustee and the Paying Agent.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or any other purpose, by Issuer Order direct any
Paying Agent, if other than the Indenture Trustee, 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 such sums were held
by such Paying Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
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 and one-half years after such amount has become due and payable to the
Holder of such Note (or if earlier, three months before the date on which such
amount would escheat to a governmental entity under applicable law) shall be
discharged from such trust and paid to the Issuer; 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. The Indenture Trustee may adopt and
employ, at the expense of the Issuer, any 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 any Agent,
at the last address of record for each such Holder).
SECTION 3.04. EXISTENCE OF ISSUER.
(a) Subject to Sections 3.04(b) and (c) and Section 6.2(a)(ii) of the
Deposit Trust Agreement, the Issuer will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware or under the laws of any other state or the United States of America,
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 Servicing
Agreement, the Insurance Agreement and the Mortgage Loan Contribution Agreement.
(b) Subject to Section 3.09(vii), the prior written consent of the Note
Insurer, and written notice to the Rating Agencies, any entity into which the
Issuer may be merged or with which it may be consolidated, or any entity
resulting from any merger or consolidation to which the Issuer shall be a party,
shall be the successor Issuer under this Indenture without the execution or
filing of any paper, instrument or further act to be done on the part of the
parties hereto, anything in any agreement relating to such merger or
consolidation, by which any such Issuer may seek to retain certain powers,
rights and privileges therefore obtaining for any period of time following such
merger or consolidation to the contrary notwithstanding (other than Section
3.09(vii)).
(c) Upon any consolidation or merger of or other succession to the Issuer
in accordance with this Section 3.04, the Person formed by or surviving such
consolidation or merger (if other than the Issuer) may exercise every right and
power of, and shall have all of the obligations of, the Issuer under this
Indenture with the same effect as if such Person had been named as the Issuer
herein.
SECTION 3.05. 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 as may be necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust Estate;
(ii) maintain or preserve the lien of this Indenture or carry out
more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any of the Mortgage Loans, the Servicing Agreement, the
Mortgage Loan Sale Agreement or the Mortgage Loan Contribution Agreement;
or
(v) preserve and defend title to the Trust Estate and the rights of
the Indenture Trustee, and of the Noteholders, in the Mortgage Loans and
the other property held as part of the Trust Estate against the claims of
all Persons and parties.
(b) 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, or to which it is intended
to be removed, as described in the Opinion of Counsel delivered at the Closing
Date pursuant to Section 2.1l(c), or cause or permit ownership or the pledge of
any portion of the Trust Estate that consists of book-entry securities to be
recorded on the books of a Person located in a different jurisdiction from the
jurisdiction in which such ownership or pledge was recorded at such time unless
the Indenture 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.
SECTION 3.06. ANNUAL OPINIONS AS TO COLLATERAL.
On or before December 31st in each calendar year, beginning in 2000, the
Issuer shall furnish to the Indenture Trustee and the Note Insurer an Opinion of
Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to 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 refiling 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 31st of the
following calendar year.
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING AGREEMENT.
(a) The Issuer shall punctually perform and observe all of its obligations
under this Indenture and the Servicing Agreement.
(b) The Issuer shall not take any action and will use its Best Efforts not
to permit any action to be taken by others that would release any Person from
any of such Person's covenants or obligations under any of the Mortgage Files or
under any instrument included in the Trust Estate, or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any of the documents or instruments contained
in the Mortgage Files, except as expressly permitted in this Indenture, the
Servicing Agreement or such document included in the Mortgage File or other
instrument or unless such action will not adversely affect the interests of the
Holders of the Notes.
(c) If the Issuer shall have knowledge of the occurrence of a default
under the Servicing Agreement, the Issuer shall promptly notify the Indenture
Trustee, the Note Insurer and the Rating Agencies thereof, and shall specify in
such notice the action, if any, the Issuer is taking with respect to such
default.
(d) Upon any termination of the Servicer's rights and powers pursuant to
the Servicing Agreement, the Indenture Trustee shall promptly notify the Rating
Agencies. As soon as any successor Servicer is appointed, the Indenture Trustee
shall notify the Rating Agencies, specifying in such notice the name and address
of such successor Servicer.
SECTION 3.08. INVESTMENT COMPANY ACT.
The Issuer shall at all times conduct its operations so as not to be
subject to, or shall comply with, the requirements of the Investment Company Act
of 1940, as amended (or any successor statute), and the rules and regulations
thereunder.
SECTION 3.09. NEGATIVE COVENANTS.
The Issuer shall not:
(i) sell, transfer, exchange or otherwise dispose of any portion of
the Trust Estate except as expressly permitted by this Indenture or the
Servicing Agreement;
(ii) claim any credit on, or make any deduction from, the principal
of, or interest on, any of the Notes by reason of the payment of any taxes
levied or assessed upon any portion of the Trust Estate;
(iii) engage in any business or activity other than as permitted by
the Trust Agreement or other than in connection with, or relating to, the
issuance of the Notes pursuant to this Indenture or amend the Trust
Agreement, as in effect on the Closing Date, other than in accordance with
Section 11.01;
(iv) incur, issue, assume or otherwise become liable for a
indebtedness other than the Notes;
(v) incur, assume, guaranty or agree to indemnify any Person with
respect to any indebtedness of any Person, except for such indebtedness as
may be incurred by the Issuer in connection with the issuance of the Notes
pursuant to this Indenture;
(vi) dissolve or liquidate in whole or in part (until the
Notes are paid in full);
(vii) (1) permit the validity or effectiveness of this Indenture or
any Grant to be impaired, or permit the lien of this Indenture to be
impaired, amended, hypothecated, subordinated, terminated or discharged,
or permit any Person to be released from any covenants or obligations
under this Indenture, except as may be expressly permitted hereby, (2)
permit any lien, charge, security interest, mortgage or other encumbrance
(other than the lien of this Indenture or any Permitted Encumbrance) 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
(3) permit the lien of this Indenture not to constitute a valid perfected
first priority security interest in the Trust Estate; or
(viii) take any other action that should reasonably be expected to,
or fail to take any action if such failure should reasonably be expected
to, cause the Issuer to be taxable as (a) an association pursuant to
Section 7701 of the Code or (b) a taxable mortgage pool pursuant to
Section 7701(i) of the Code.
SECTION 3.10. ANNUAL STATEMENT AS TO COMPLIANCE.
On or before December 31, 2000, and each December 31 thereafter and upon
receipt of instruction pursuant to the terms of the Management Agreement, the
Issuer shall deliver to the Indenture Trustee, the Note Insurer, the Rating
Agencies and the Underwriters a written statement prepared by the manager
pursuant to the terms of the Management Agreement, signed by an Authorized
Officer of the Owner Trustee, stating that:
(1) a review of the fulfillment by the Issuer during such year of
its obligations under this Indenture has been made under such Authorized
Officer's supervision; and
(2) 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 the fulfillment of any such covenant or condition, specifying each such
Default known to such Authorized Officer and the nature and status
thereof.
SECTION 3.11. 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 or to the Servicer,
(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, distributions to the Servicer, the Indenture Trustee, the
Owner Trustee, the Note Insurer and the Certificateholders as contemplated by,
and to the extent funds are available for such purpose under this Indenture, the
Servicing Agreement or the Trust Agreement and the Issuer will not, directly or
indirectly, make or cause to be made payments to or distributions from either
Note Account except in accordance with this Indenture.
SECTION 3.12. TREATMENT OF NOTES AS DEBT FOR TAX PURPOSES.
The Issuer shall treat the Notes as indebtedness for all federal and state
tax purposes.
SECTION 3.13. NOTICE OF EVENTS OF DEFAULT.
The Issuer shall give the Indenture Trustee, the Note Insurer, the Rating
Agencies and the Underwriters prompt written notice of each Event of Default
hereunder, each default on the part of the Servicer of its obligations under the
Servicing Agreement and each default on the part of the Seller of its
obligations under the Mortgage Loan Sale Agreement.
SECTION 3.14. FURTHER INSTRUMENTS AND ACTS.
Upon request of the Indenture Trustee or the Note Insurer, 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.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE.
Whenever the following conditions shall have been satisfied:
(1) either
(A) 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 2.07, and (ii)
Notes for whose payment money has theretofore been deposited in
trust and thereafter repaid to the Issuer, as provided in Section
3.03) have been delivered to the Note Registrar for cancellation; or
(B) all Notes not theretofore delivered to the Note Registrar
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at the Final Maturity
Date within one year, or
(iii) are to be called for redemption within one year
under irrevocable arrangements satisfactory to the Indenture
Trustee for the giving of notice of redemption by the
Indenture Trustee in the name, and at the expense, of the
Issuer or the Servicer,
and the Issuer or the Servicer, in the case of clauses (B)(i),
(B)(ii) or (B)(iii) above, has irrevocably deposited or caused to be
deposited with the Indenture Trustee, in trust for such purpose, an
amount sufficient to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Indenture Trustee for
cancellation, for principal and interest to the Final Maturity Date
or to the applicable Redemption Date, as the case may be, and in the
case of Notes that were not paid at the Final Maturity Date of their
entire unpaid principal amount, for all overdue principal and all
interest payable on such Notes to the next succeeding Payment Date
therefor;
(2) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer (including, without limitation, amounts due the
Note Insurer hereunder); and
(3) the Issuer has delivered to the Indenture Trustee and the Note
Insurer an Officers' Certificate and an Opinion of Counsel satisfactory in
form and substance to the Indenture Trustee and the Note Insurer each
stating that all conditions precedent herein providing for the
satisfaction and discharge of this Indenture have been complied with;
then, upon Issuer Request, this Indenture and the lien, rights and interests
created hereby and thereby shall cease to be of further effect, and the
Indenture Trustee and each co-trustee and separate trustee, if any, then acting
as such hereunder shall, at the expense of the Issuer (or of the Servicer in the
case of a redemption by the Servicer), execute and deliver all such instruments
as may be necessary to acknowledge the satisfaction and discharge of this
Indenture and shall pay, or assign or transfer and deliver, to the Issuer or
upon Issuer Order all cash, securities and other property held by it as part of
the Trust Estate remaining after satisfaction of the conditions set forth in
clauses (1) and (2) above.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Indenture Trustee and the Paying Agent to the Issuer and the
Holders of Notes under Section 3.03, the obligations of the Indenture Trustee to
the Holders of Notes under Section 4.02 and the provisions of Section 2.07 with
respect to lost, stolen, destroyed or mutilated Notes, registration of transfers
of Notes and rights to receive payments of principal of and interest on the
Notes shall survive.
SECTION 4.02. APPLICATION OF TRUST MONEY.
All money deposited with the Indenture Trustee pursuant to Sections 3.03
and 4.01 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, as the Indenture Trustee may determine, to the Persons
entitled thereto, of the principal and interest for whose payment such money has
been deposited with the Indenture Trustee.
ARTICLE V
DEFAULTS AND REMEDIES
SECTION 5.01. EVENT OF DEFAULT.
"Event of Default", wherever used herein, means, with respect to Notes
issued hereunder, 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):
(1) if the Issuer shall default in the payment on any Payment Date
of any Required Payment Amount or fail to pay the Notes in full on or
before the Final Maturity Date (and in the case of any such default, such
default or failure shall continue for a period of 5 days unremedied);
(2) if the Issuer shall breach or default in the due observance of
any one or more of the covenants set forth in clauses (i) through (viii)
of Section 3.09;
(3) if the Issuer shall breach, or default in the due observance or
performance of, any other of its covenants in this Indenture, and such
Default shall continue for a period of 30 days after there shall have been
given, by registered or certified mail, to the Issuer and the Note Insurer
by the Indenture Trustee at the direction of the Note Insurer, or to the
Issuer and the Indenture Trustee by the Holders of Notes representing at
least 25% of the Note Balance of the Outstanding Notes, with the prior
written consent of the Note Insurer, a written notice specifying such
Default and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder;
(4) if any representation or warranty of the Issuer made in this
Indenture or any certificate or other writing, delivered by the Issuer
pursuant hereto or in connection herewith shall prove to be incorrect in
any material respect as of the time when the same shall have been made
and, within 30 days after there shall have been given, by registered or
certified mail, written notice thereof to the Issuer and the Note Insurer
by the Indenture Trustee at the direction of the Note Insurer, or to the
Issuer and the Indenture Trustee by the Holders of Notes representing at
least 25% of the Note Balance of the Outstanding Notes, with the prior
written consent of the Note Insurer, the circumstance or condition in
respect of which such representation or warranty was incorrect shall not
have been eliminated or otherwise cured; provided, however, that in the
event that there exists a remedy with respect to any such breach that
consists of a purchase obligation, repurchase obligation or right to
substitute under the Basic Documents, then such purchase obligation,
repurchase obligation or right to substitute shall be the sole remedy with
respect to such breach and shall not constitute an Event of Default
hereunder;
(5) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Issuer in an involuntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other
present or future 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 of any substantial
part of its property, or ordering the winding up or liquidation of the
affairs of the Issuer and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days;
(6) the commencement by the Issuer of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency or similar law,
or the consent by the Issuer to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Issuer or of any substantial part of its
property or the making by the Issuer of an 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 corporate action by the Issuer in
furtherance of any of the foregoing; or
(7) the occurrence of an "event of default" under the Insurance
Agreement.
The payment by the Note Insurer of any Insured Payment in an amount
sufficient to cover the related Required Payment Amount pursuant to the FSA
Insurance Policy in respect of any Payment Date shall, at the option of the Note
Insurer, constitute an Event of Default with respect to the Notes.
SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default occurs and is continuing, then and in every such
case, but in each case only with the consent of the Note Insurer in the absence
of a Note Insurer Default, the Indenture Trustee may, and on request of the
Holders of Notes representing not less than 50% of the Note Balance of the
Outstanding Notes, shall, declare all 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 such Notes, in an amount
equal to the Note Balance of such Notes, together with accrued and unpaid
interest thereon to the date of such acceleration, shall become immediately due
and payable, all subject to the prior written consent of the Note Insurer in the
absence of a Note Insurer Default.
At any time after such a declaration of acceleration of maturity of the
Notes 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
provided the Note Insurer or the Holders of Notes representing more than 50% of
the Note Balance of the Outstanding Notes, with the prior written consent of the
Note Insurer, by written notice to the Issuer and the Indenture Trustee, may
rescind and annul such declaration and its consequences if:
(1) the Issuer has paid or deposited with the Indenture Trustee a
sum sufficient to pay:
(A) all payments of principal of, and interest on, all Notes
and all other amounts that would then be due hereunder or upon such
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, its agents and counsel; and
(2) all Events of Default, other than the nonpayment of the
principal of Notes that have become due solely by such acceleration, have
been cured or waived as provided in Section 5.14.
No such rescission shall affect any subsequent Default or impair any right
consequent thereon.
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE.
Subject to the provisions of Section 3.01 and the following sentence, if
an Event of Default occurs and is continuing, the Indenture Trustee shall (at
the direction of the Note Insurer) and may, with the prior written consent of
the Note Insurer, proceed to protect and enforce its rights and the rights of
the Noteholders and the Note Insurer by any Proceedings the Indenture Trustee
deems appropriate 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 enforce any other proper remedy.
Any proceedings brought by the Indenture Trustee on behalf of the Noteholders
and the Note Insurer or any Noteholder against the Issuer shall be limited to
the preservation, enforcement and foreclosure of the liens, assignments, rights
and security interests under the Indenture and no attachment, execution or other
unit or process shall be sought, issued or levied upon any assets, properties or
funds of the Issuer, other than the Trust Estate relative to the Notes in
respect of which such Event of Default has occurred. If there is a foreclosure
of any such liens, assignments, rights and security interests under this
Indenture, by private power of sale or otherwise, no judgment for any deficiency
upon the indebtedness represented by the Notes may be sought or obtained by the
Indenture Trustee or any Noteholder against the Issuer. The Indenture Trustee
shall be entitled to recover the costs and expenses expended by it pursuant to
this Article V including reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee, its agents and counsel.
SECTION 5.04. REMEDIES.
If an Event of Default shall have occurred and be continuing and the Notes
have been declared due and payable and such declaration and its consequences
have not been rescinded and annulled, the Indenture Trustee, at the direction of
the Note Insurer (subject to Section 5.17, to the extent applicable) shall, for
the benefit of the Noteholders and the Note Insurer, do one or more of the
following:
(a) institute Proceedings for the collection of all amounts then payable
on the Notes, or under this Indenture, whether by declaration or otherwise,
enforce any judgment obtained, and collect from the Issuer moneys adjudged due,
subject in all cases to the provisions of Sections 3.01 and 5.03;
(b) in accordance with Section 5.17, 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;
(c) institute Proceedings from time to time for the complete or partial
foreclosure of this Indenture with respect to the Trust Estate;
(d) 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 Indenture Trustee or the Holders of the Notes and the Note
Insurer hereunder; and
(e) refrain from selling the Trust Estate and apply all Remittable Funds
pursuant to Section 5.07.
SECTION 5.05. INDENTURE TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, composition or other judicial
Proceeding relative to the Issuer or any other obligor upon any of the Notes or
the property of the Issuer or of such other obligor or their creditors, the
Indenture Trustee (irrespective of whether the 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 on the Issuer for the
payment of any overdue principal or interest) shall, with the prior written
consent of the Note Insurer, be entitled and empowered, by intervention in such
Proceeding or otherwise to:
(i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes and 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 the reasonable
compensation, expenses, disbursements and advances of the Indenture
Trustee, its agents and counsel) and of the Noteholders and the Note
Insurer allowed in such Proceeding, and
(ii) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any
receiver, assignee, trustee, liquidator, or sequestrator (or other similar
official) in any such Proceeding is hereby authorized by each Noteholder
and the Note Insurer to make such payments to the Indenture Trustee and,
in the event that the Indenture Trustee shall consent to the making of
such payments directly to the Noteholders and the Note Insurer, to pay to
the Indenture Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Indenture
Trustee, its agents and counsel.
Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder or the Note Insurer any plan of reorganization, arrangement,
adjustment or composition affecting any of the Notes or the rights of any Holder
thereof, or the Note Insurer, or to authorize the Indenture Trustee to vote in
respect of the claim of any Noteholder or the Note Insurer in any such
Proceeding.
SECTION 5.06. INDENTURE TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
NOTES.
All rights of action and claims under this Indenture or any of the Notes
may be prosecuted and enforced by the Indenture Trustee without the possession
of any of the Notes or the production thereof in any Proceeding relating
thereto, and any such Proceeding instituted by the Indenture Trustee, at the
direction of the Note Insurer, shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall be for the ratable benefit of
the Holders of the Notes and the Note Insurer in respect of which such judgment
has been recovered after payment of amounts required to be paid pursuant to
clause (i) Section 5.07.
SECTION 5.07. APPLICATION OF MONEY COLLECTED.
If the Notes have been declared due and payable following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, any money collected by the Indenture Trustee pursuant to this Article
or otherwise and any other monies that may then be held or thereafter received
by the Indenture Trustee as security shall be applied in the following order, at
the date or dates fixed by the Indenture Trustee and, in case of the payment of
the entire amount due on account of principal of, and interest on, the Notes,
upon presentation and surrender thereof:
(i) to the Servicer and Indenture Trustee, the unpaid Monthly
Servicing Fee and Indenture Trustee's Fee due under this Indenture;
(ii) to the Servicer any Monthly Advances and Servicing Advances
previously made that are reimbursable to the Servicer (other than those
included in liquidation expenses for any Liquidated Mortgage Loan and
reimbursed from the related Liquidation Proceeds and from Insurance
Proceeds) under the Servicing Agreement;
(iii) to the PMI Insurer, the amount owing to the PMI Insurer for
the premium payable in respect of the PMI Mortgage Loans;
(iv) to the Note Insurer, the Note Insurer Premium due under the FSA
Insurance Agreement;
(v) to the Noteholders, the Note Interest due under this Indenture;
(vi) to the Noteholders, the amount of Monthly Principal for the
Notes with respect to such date, in reduction of the Note Balance until
the Note Balance is reduced to zero;
(vii) to the Note Insurer, the amount owing to the Note Insurer
under the Insurance Agreement for reimbursement for prior draws made on
the FSA Insurance Policy in respect of the Notes and any other amounts
owing to the Note Insurer under the Insurance Agreement (including any
unpaid Note Insurer Premium in respect of the Notes);
(viii) to the Noteholders, the Overcollateralization Deficiency
Amount, if any, due under this Indenture;
(ix) to the Indenture Trustee pursuant to the terms of the Servicing
Agreement, Transition Expenses in excess of $50,000, if any, and other
costs and expenses, if not paid by the Servicer pursuant to the Servicing
Agreement or the Custodial Agreement; and
(x) to the payment of the Note Balance of the Outstanding Notes, up
to the amount of their Current Note Balances, without preference or
priority of any kind;
SECTION 5.08. LIMITATION ON SUITS.
No Holder of a Note shall have any right to institute any Proceedings,
judicial or otherwise, with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Indenture
Trustee and the Note Insurer of a continuing Event of Default;
(2) the Holders of Notes representing not less than 25% of the Note
Balance of the Outstanding Notes shall have made written request to the
Indenture Trustee to institute Proceedings in respect of such Event of
Default in its own name as Indenture Trustee hereunder;
(3) such Holder or Holders have offered to the Indenture Trustee
indemnity in full against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
Proceeding;
(5) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Holders of
Notes representing more than 50% of the Note Balance of the Outstanding
Notes; and
(6) the consent of the Note Insurer shall have been obtained; it
being 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 and for the equal and
ratable benefit of all the Holders of Notes.
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 50% of the Note Balances of the Outstanding Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken notwithstanding any other provision herein to the contrary.
SECTION 5.09. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST.
Subject to the provisions in this Indenture (including Sections 3.01 and
5.03) limiting the right to recover amounts due on a Note to recovery from
amounts in the Trust Estate, the Holder of any Note shall have the right, to the
extent permitted by applicable law, which right is absolute and unconditional,
to receive payment of each installment of interest on such Note on the
respective Payment Date for such installments of interest, to receive payment of
each installment of principal of such Note when due (or, in the case of any Note
called for redemption, on the date fixed for such redemption) 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 5.10. RESTORATION OF RIGHTS AND REMEDIES.
If the Indenture Trustee, the Note Insurer 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, the Note Insurer or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee, the
Note Insurer 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, the
Note Insurer and the Noteholders shall continue as though no such Proceeding had
been instituted.
SECTION 5.11. RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon or reserved to the Indenture
Trustee, the Note Insurer 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 5.12. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Indenture Trustee, the Note Insurer or of 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 or by law to the Indenture Trustee, the Note Insurer or to the
Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Note Insurer or by the Noteholders with
the prior consent of the Note Insurer, as the case may be.
SECTION 5.13. CONTROL BY NOTEHOLDERS.
The Holders of Notes representing more than 50% of the Note Balance of the
Outstanding Notes on the applicable Record Date shall, with the consent of the
Note Insurer, have the right to direct the time, method and place of conducting
any Proceeding for any remedy available to the Indenture Trustee or exercising
any trust or power conferred on the Indenture Trustee; provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture;
(2) any direction to the Indenture Trustee to undertake a Sale of
the Trust Estate shall be by the Holders of Notes representing the
percentage of the Note Balance of the Outstanding Notes specified in
Section 5.17(b)(1), unless Section 5.17(b)(2) is applicable; and
(3) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.01, the Indenture Trustee
need not take any action that it determines might involve it in liability
or be unjustly prejudicial to the Noteholders not consenting.
SECTION 5.14. WAIVER OF PAST DEFAULTS.
The Holders of Notes representing more than 50% of the Note Balance of the
Outstanding Notes on the applicable Record Date may on behalf of the Holders of
all the Notes, and with the consent of the Note Insurer, waive any past Default
hereunder and its consequences, except a Default:
(1) in the payment of principal or any installment of interest on
any Note; or
(2) in respect of a covenant or provision hereof that under Section
9.02 cannot be modified or amended without the consent of the Holder of
each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 5.15. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Note by his
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 shall not apply to any suit instituted by the
Indenture Trustee, to any suit instituted by any Noteholder, or group of
Noteholders, holding in the aggregate Notes representing more than 10% of the
Note Balance of the Outstanding Notes, or to any suit instituted by any
Noteholder for the enforcement of the payment of any Required Payment Amount on
any Note on or after the related Payment Date or for the enforcement of the
payment of principal of any Note on or after the Final Maturity Date (or, in the
case of any Note called for redemption, on or after the applicable Redemption
Date).
SECTION 5.16. 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 of law wherever enacted,
now or at any time hereafter in force, that may affect the covenants in, 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 5.17. SALE OF TRUST ESTATE.
(a) The power to effect any sale (a "Sale") of any portion of the Trust
Estate pursuant to Section 5.04 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 with respect thereto 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.
(b) To the extent permitted by law, the Indenture Trustee shall not
(unless directed by the Note Insurer) in any private Sale sell or otherwise
dispose of the Trust Estate, or any portion thereof, unless:
(1) the Holders of Notes representing not less than 50% of the Note
Balance of the Notes then Outstanding 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 that would be payable to the Holders of the Notes, in full payment
thereof in accordance with Section 5.07, on the Payment Date next
succeeding the date of 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 disposition thereof for
purposes of this Section 5.17(b). In the absence of a Note Insurer Default, no
sale hereunder shall be effective without the consent of the Note Insurer.
(c) Unless the Holders of all Outstanding Notes 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 5.17 has not been
established by the Indenture Trustee and no Person bids an amount equal to or
greater than such amount, the Indenture Trustee, acting in its capacity as
Indenture Trustee on behalf of the Noteholders, shall prevent such sale and bid
an amount (which shall include the Indenture Trustee's right, in its capacity as
Indenture Trustee, to credit bid) at least $1.00 more than the highest other bid
in order to preserve the Trust Estate on behalf of the Noteholders.
(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 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 Outstanding Notes or claims for interest thereon in lieu of cash up to
the amount that 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 public Sale thereof, 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 that
would be payable to the Holders of the Notes as a result of such Sale in
accordance with Section 5.07 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 5.18. ACTION ON NOTES.
The Indenture Trustee's right to seek and recover judgment 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, the Note Insurer
or the Holders of Notes 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.
SECTION 5.19. NO RECOURSE TO OTHER TRUST ESTATES OR OTHER ASSETS OF THE
ISSUER.
The Trust Estate Granted to the Indenture Trustee as security for the
Notes serves as security only for the Notes. Holders of the Notes shall have no
recourse against the trust estate granted as security for any other series of
Notes issued by the Issuer, and no judgment against the Issuer for any amount
due with respect to the Notes may be enforced against either the trust estate
securing any other series or any other assets of the Issuer, nor may any
prejudgment lien or other attachment be sought against any such other trust
estate or any other assets of the Issuer.
SECTION 5.20. APPLICATION OF THE TRUST INDENTURE ACT.
Pursuant to Section 316(a) of the TIA, all provisions automatically
provided for in Section 316(a) are hereby expressly excluded.
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 such of 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
his or her own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Indenture Trustee need perform only those duties that are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Indenture Trustee; and
(2) In the absence of bad faith on its part, the Indenture Trustee
may request and 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. The Indenture Trustee shall, however,
examine such certificates and opinions to determine whether they conform
on their face 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:
(1) This paragraph does not limit the effect of subsection (b) of
this Section 6.01;
(2) 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
(3) 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 pursuant to Section 5.13 or 5.17 or exercising
any trust or power conferred upon the Indenture Trustee under this
Indenture.
(d) Except with respect to duties of the Indenture Trustee prescribed by
the TIA, as to which this Section 6.01(d) shall not apply, for all purposes
under this Indenture, the Indenture Trustee shall not be deemed to have notice
or knowledge of any Event of Default described in Section 5.01(2), 5.01(5) or
5.01(6) or any Default described in Section 5.01(3) or 5.01(4) or of any event
described in Section 3.05 unless a Responsible Officer assigned to and working
in the Indenture Trustee's corporate trust department has actual knowledge
thereof or unless written notice of any event that is in fact such an Event of
Default or Default is received by the Indenture Trustee at the Corporate Trust
Office, and such notice references the Notes generally, the Issuer, the Trust
Estate or this Indenture.
(e) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it under the Servicing Agreement or otherwise.
(f) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to the provisions of this Section.
(g) Notwithstanding any extinguishment of all right, title and interest of
the Issuer in and to the Trust Estate following an Event of Default and a
consequent declaration of acceleration of the Maturity of the Notes, whether
such extinguishment occurs through a Sale of the Trust Estate to another Person,
the acquisition of the Trust Estate by the Indenture Trustee or otherwise, the
rights, powers and duties of the Indenture Trustee with respect to the Trust
Estate (or the proceeds thereof) and the Noteholders and the Note Insurer and
the rights of Noteholders and the Note Insurer shall continue to be governed by
the terms of this Indenture.
(h) The Indenture Trustee or any Custodian appointed pursuant to Section
8.13 shall at all times retain possession of the Mortgage Files in the State of
Minnesota or the State of Massachusetts, except for those Mortgage Files or
portions thereof released to the Servicer or the Note Insurer pursuant to this
Indenture or the Servicing Agreement.
SECTION 6.02. NOTICE OF DEFAULT.
Immediately after the occurrence of any Default known to the Indenture
Trustee, the Indenture Trustee shall transmit by mail to the Note Insurer and
the Underwriters notice of each such Default and, within 90 days after the
occurrence of any Default known to the Indenture Trustee, the Indenture Trustee
shall transmit by mail to all Holders of Notes notice of each such Default,
unless such Default shall have been cured or waived; provided, however, that in
no event shall the Indenture Trustee provide notice, or fail to provide notice
of a Default known to the Indenture Trustee in a manner contrary to the
requirements of the Trust Indenture Act. Concurrently with the mailing of any
such notice to the Holders of the Notes, the Indenture Trustee shall transmit by
mail a copy of such notice to the Rating Agencies.
SECTION 6.03. RIGHTS OF INDENTURE TRUSTEE.
(a) Except as otherwise provided in Section 6.01, 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 any such document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel reasonably
satisfactory in form and substance to the Indenture Trustee. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on any such Officer's Certificate or Opinion of Counsel.
(c) With the consent of the Note Insurer, which consent shall not be
unreasonably withheld, the Indenture Trustee may act through agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers.
SECTION 6.04. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF NOTES.
The recitals contained herein and in the Notes, except the certificates of
authentication on the Notes, shall be taken as the statements of the Issuer, and
the Indenture Trustee and the Authenticating Agent assume no responsibility for
their correctness. The Indenture Trustee makes no representations with respect
to the Trust Estate or as to the validity or sufficiency of this Indenture or of
the Notes. The Indenture Trustee shall not be accountable for the use or
application by the Issuer of the Notes or the proceeds thereof or any money paid
to the Issuer or upon Issuer Order pursuant to the provisions hereof.
SECTION 6.05. MAY HOLD NOTES.
The Indenture Trustee, any Agent, or any other agent of the Issuer, in its
individual or any other capacity, may become the owner or pledgee of Notes and,
subject to Sections 6.07 and 6.13, may otherwise deal with the Issuer or any
Affiliate of the Issuer with the same rights it would have if it were not
Indenture Trustee, Agent or such other agent.
SECTION 6.06. MONEY HELD IN TRUST.
Money held by the Indenture Trustee in trust hereunder need not be
segregated from other funds except to the extent required by this Indenture or
by law. The Indenture Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with the Issuer and
except to the extent of income or other gain on investments that are obligations
of the Indenture Trustee, in its commercial capacity, and income or other gain
actually received by the Indenture Trustee on investments, which are obligations
of others.
SECTION 6.07. ELIGIBILITY, DISQUALIFICATION.
Irrespective of whether this Indenture is qualified under the TIA, this
Indenture shall always have a Indenture Trustee who satisfies the requirements
of TIA Sections 310(a)(1) and 310(a)(5). The Indenture Trustee shall always have
a combined capital and surplus as stated in Section 6.08. The Indenture Trustee
shall be subject to TIA Section 310(b).
SECTION 6.08. INDENTURE TRUSTEE'S CAPITAL AND SURPLUS.
The Indenture Trustee shall at all times have a combined capital and
surplus of at least $50,000,000 or shall be a member of a bank holding company
system, the aggregate combined capital and surplus of which is at least
$100,000,000 and shall at all times be rated "BBB" or better by S&P and "Baa2"
or better by Moody's; provided, however, that the Indenture Trustee's separate
capital and surplus shall at all times be at least the amount required by TIA
Section 310(a)(2). If the Indenture Trustee publishes annual reports of
condition of the type described in TIA Section 310(a)(1), its combined capital
and surplus for purposes of this Section 6.08 shall be as set forth in the
latest such report. If at any time the Indenture Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.08 and TIA Section
310(a)(2), it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 6.09. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Indenture Trustee and no appointment
of a successor Indenture Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Indenture Trustee under
Section 6.10.
(b) The Indenture Trustee may resign at any time by giving written notice
thereof to the Issuer, the Note Insurer and each Rating Agency, in which event
the Issuer will, with the consent of the Note Insurer (and if the Issuer fails
to do so within 30 days, the Note Issuer may) appoint a successor Indenture
Trustee. If an instrument of acceptance by a successor Indenture Trustee shall
not have been delivered to the Indenture Trustee within 30 days after the giving
of such notice of resignation, the resigning Indenture Trustee may petition any
court of competent jurisdiction for the appointment of a successor Indenture
Trustee.
(c) The Indenture Trustee may be removed at any time by the Note Insurer
or, with the consent of the Note Insurer, by Act of the Holders representing at
least 51% of the Note Balance of the Outstanding Notes, by written notice
delivered to the Indenture Trustee and to the Issuer.
(d) If at any time:
(1) the Indenture Trustee shall have a conflicting interest
prohibited by Section 6.07 and shall fail to resign or eliminate such
conflicting interest in accordance with Section 6.07 after written request
therefor by the Issuer or by any Noteholder; or
(2) the Indenture Trustee shall cease to be eligible under Section
6.08 or shall become incapable of acting or shall be adjudged a bankrupt
or insolvent, or a receiver of the Indenture Trustee or of its property
shall be appointed, or any public officer shall take charge or control of
the Indenture Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any such case, (i) the Issuer by an Issuer Order, with the consent of
the Note Insurer, may remove the Indenture Trustee, and the Issuer shall join
with the Indenture Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint a successor Indenture
Trustee acceptable to the Note Insurer and to vest in such successor Indenture
Trustee any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Indenture; provided, however, if the
Issuer and the Note Insurer do not join in such appointment within fifteen (15)
days after the receipt by it of a request to do so, or in case an Event of
Default has occurred and is continuing, the Indenture Trustee may petition a
court of competent jurisdiction to make such appointment, or (ii) subject to
Section 5.15, and, in the case of a conflicting interest as described in clause
(1) above, unless the Indenture Trustee's duty to resign has been stayed as
provided in TIA Section 310(b), the Note Insurer or any Noteholder who has been
a bona fide Holder of a Note for at least six months may, on behalf of himself
and all others similarly situated, with the consent of the Note Insurer,
petition any court of competent jurisdiction for the removal of the Indenture
Trustee and the appointment of a successor Indenture Trustee.
(e) If the Indenture Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of the Indenture Trustee
for any cause, the Issuer (and if the Issuer fails to do so within 30 days, the
Note Issuer may), by an Issuer Order shall promptly appoint a successor
Indenture Trustee acceptable to the Note Insurer. If within one year after such
resignation, removal or incapability or the occurrence of such vacancy a
successor Indenture Trustee shall be appointed by the Note Insurer or, with the
consent of the Note Insurer, by Act of the Holders of Notes representing more
than 50% of the Note Balance of the Outstanding Notes delivered to the Issuer
and the retiring Indenture Trustee, the successor Indenture Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the successor
Indenture Trustee and supersede the successor Indenture Trustee appointed by the
Issuer. If no successor Indenture Trustee shall have been so appointed by the
Issuer, the Note Insurer or Noteholders and shall have accepted appointment in
the manner hereinafter provided, any Noteholder who has been a bona fide Holder
of a Note for at least six months may, on behalf of himself and all others
similarly situated, with the consent of the Note Insurer, petition any court of
competent jurisdiction for the appointment of a successor Indenture Trustee.
(f) The Issuer shall give notice of each resignation and each removal of
the Indenture Trustee and each appointment of a successor Indenture Trustee to
the Holders of Notes and the Note Insurer. Each notice shall include the name of
the successor Indenture Trustee and the address of its Corporate Trust Office.
SECTION 6.10. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
Every successor Indenture Trustee appointed hereunder shall execute,
acknowledge and deliver to the Issuer, the Note Insurer and the retiring
Indenture Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective
and such successor Indenture Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Indenture Trustee. Notwithstanding the foregoing, on request of
the Issuer or the successor Indenture Trustee, such retiring Indenture Trustee
shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor Indenture Trustee all the rights, powers and
trusts of the retiring Indenture Trustee, and shall duly assign, transfer and
deliver to such successor Indenture Trustee all property and money held by such
retiring Indenture Trustee hereunder. Upon request of any such successor
Indenture Trustee, the Issuer shall execute and deliver any and all instruments
for more fully and certainly vesting in and confirming to such successor
Indenture Trustee all such rights, powers and trusts.
No successor Indenture Trustee shall accept its appointment unless at the
time of such acceptance such successor Indenture Trustee shall be qualified and
eligible under this Article.
SECTION 6.11. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS
OF INDENTURE TRUSTEE.
Any corporation into which the Indenture 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 Indenture Trustee
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of the Indenture Trustee, shall be the successor of
the Indenture Trustee hereunder, provided such corporation shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Notes have been authenticated, but not delivered, by the Indenture Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Indenture Trustee may adopt such authentication and deliver the
Notes so authenticated with the same effect as if such successor Indenture
Trustee had authenticated such Notes.
SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER.
The Indenture Trustee (and any co-trustee or separate trustee) shall be
subject to TIA Section 311(a), excluding any creditor relationship listed in TIA
Section 31l(b), and an Indenture Trustee (and any co-trustee or separate
trustee) who has resigned or been removed shall be subject to TIA Section 311(a)
to the extent indicated.
SECTION 6.13. CO-INDENTURE TRUSTEES AND SEPARATE INDENTURE TRUSTEES.
At any time or times, for the purpose of meeting the legal requirements of
the TIA or of any jurisdiction in which any of the Trust Estate may at the time
be located, the Indenture Trustee shall have power to appoint, and, upon the
written request of the Indenture Trustee, of the Note Insurer or of the Holders
of Notes representing more than 50% of the Note Balance of the Outstanding Notes
with respect to which a co-trustee or separate trustee is being appointed with
the consent of the Note Insurer, the Issuer shall for such purpose jointly with
the Indenture Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint, one or more Persons
approved by the Indenture Trustee either to act as co-trustee, jointly with the
Indenture Trustee, of all or any part of the Trust Estate, or to act as separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such Person or Persons in the
capacity aforesaid, any property, title, right or power deemed necessary or
desirable, subject to the other provisions of this Section. If the Issuer does
not join in such appointment within 15 days after the receipt by it of a request
to do so, or in case an Event of Default has occurred and is continuing, the
Indenture Trustee alone shall have power to make such appointment. All fees and
expenses of any co-trustee or separate trustee shall be payable by the Issuer.
Should any written instrument from the Issuer be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right or power, any and all
such instruments shall, on request, be executed, acknowledged and delivered by
the Issuer.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:
(1) The Notes shall be authenticated and delivered and all rights,
powers, duties and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be
deposited or pledged with, the Indenture Trustee hereunder, shall be
exercised, solely by the Indenture Trustee.
(2) The rights, powers, duties and obligations hereby conferred or
imposed upon the Indenture Trustee in respect of any property covered by
such appointment shall be conferred or imposed upon and exercised or
performed by the Indenture Trustee or by the Indenture Trustee and such
co-trustee or separate trustee jointly, as shall be provided in the
instrument appointing such co-trustee or separate trustee, except to the
extent that under any law of any jurisdiction in which any particular act
is to be performed, the Indenture Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers,
duties and obligations shall be exercised and performed by such co-trustee
or separate trustee.
(3) The Indenture Trustee at any time, by an instrument in writing,
executed by it, with the concurrence of the Issuer evidenced by an Issuer
Order, may accept the resignation of or remove any co-trustee or separate
trustee appointed under this Section, and, in case an Event of Default has
occurred and is continuing, the Indenture Trustee shall have power to
accept the resignation of, or remove, any such co-trustee or separate
trustee without the concurrence of the Issuer upon the written request of
the Indenture Trustee, the Issuer shall join with the Indenture Trustee in
the execution, delivery and performance of all instruments and agreements
necessary or proper to effectuate such resignation or removal. A successor
to any co-trustee or separate trustee so resigned or removed may be
appointed in the manner provided in this Section.
(4) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Indenture Trustee, or any
other such trustee hereunder.
(5) Any Act of Noteholders delivered to the Indenture Trustee shall
be deemed to have been delivered to each such co-trustee and separate
trustee.
SECTION 6.14. AUTHENTICATING AGENTS.
The Issuer shall appoint an Authenticating Agent with power to act on its
behalf and subject to its direction in the authentication and delivery of the
Notes designated for such authentication by the Issuer and containing provisions
therein for such authentication (or with respect to which the Issuer has made
other arrangements, satisfactory to the Indenture Trustee and such
Authenticating Agent, for notation on the Notes of the authority of an
Authenticating Agent appointed after the initial authentication and delivery of
such Notes) in connection with transfers and exchanges under Section 2.06, as
fully to all intents and purposes as though the Authenticating Agent had been
expressly authorized by that Section to authenticate and deliver Notes. For all
purposes of this Indenture (other than in connection with the authentication and
delivery of Notes pursuant to Sections 2.05 and 2.11 in connection with their
initial issuance), the authentication and delivery of Notes by the
Authenticating Agent pursuant to this Section shall be deemed to be the
authentication and delivery of Notes "by the Indenture Trustee." Such
Authenticating Agent shall at all times be a Person that both meets the
requirements of Section 6.07 for the Indenture Trustee hereunder and has an
office for presentation of Notes in the United States of America. The Indenture
Trustee shall initially be the Authenticating Agent and shall be the Note
Registrar as provided in Section 2.06. The office from which the Indenture
Trustee shall perform its duties as Note Registrar and Authenticating Agent
shall be the Corporate Trust Office. Any Authenticating Agent appointed pursuant
to the terms of this Section 6.14 or pursuant to the terms of any supplemental
indenture shall deliver to the Indenture Trustee as a condition precedent to the
effectiveness of such appointment an instrument accepting the trusts, duties and
responsibilities of Authenticating Agent and of Note Registrar or co-Note
Registrar and indemnifying the Indenture Trustee for and holding the Indenture
Trustee harmless against, any loss, liability or expense (including reasonable
attorneys' fees) incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance, administration of the trust or
exercise of authority by such Authenticating Agent, Note Registrar or co-Note
Registrar.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of the Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section, without the execution or filing of any further act on the part of the
parties hereto or the Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving written notice
of resignation to the Issuer. The Issuer may at any time terminate the agency of
any Authenticating Agent by giving written notice of termination to such
Authenticating Agent and the Issuer. Upon receiving such a notice of resignation
or upon such a termination, or in case at any time any Authenticating Agent
shall cease to be eligible under this Section, the Issuer shall promptly appoint
a successor Authenticating Agent, shall give written notice of such appointment
to the Indenture Trustee, and shall mail notice of such appointment to all
Holders of Notes.
The Indenture Trustee agrees, subject to Section 6.01(e), to pay to any
Authenticating Agent from time to time reasonable compensation for its services
and the Indenture Trustee shall be entitled to be reimbursed for such payments
pursuant to Section 6.04 of the Servicing Agreement. The provisions of Sections
2.09, 6.04 and 6.05 shall be applicable to any Authenticating Agent.
SECTION 6.15. REVIEW OF MORTGAGE FILES.
(a) Initial Certification. The Indenture Trustee shall, for the benefit of
the Noteholders and the Note Insurer, cause the Custodian to review each
Mortgage File prior to the Closing Date to ascertain that all documents required
to be included in the Mortgage File are included therein, and shall cause the
Custodian to deliver to the Seller, the Representative, the Depositor, the Note
Insurer, the Indenture Trustee and the Servicer on the Closing Date an Initial
Certification in the form attached as Exhibit E-1 to the Custodial Agreement
with respect to each Mortgage Loan to the effect that, except as specifically
noted on a schedule of exceptions thereto, (A) all documents required to be
contained in the Mortgage File are in its possession, (B) such documents have
been reviewed by it and appear regular on their face and relate to such Mortgage
Loan, and (C) based on its examination and only as to the foregoing documents,
the information set forth on the related Mortgage Loan Schedule accurately
reflects information set forth in the Mortgage File.
It is understood that before making the Initial Certification, the
Indenture Trustee shall cause the Custodian to examine the related Mortgage Loan
Documents to confirm that:
(1) each Mortgage Note and Mortgage bears an original signature or
signatures purporting to be that of the Person or Persons named as the
maker and mortgagor/trustor or, if photocopies are permitted, that such
copies bear a reproduction of such signature or signatures;
(2) except for the endorsement in blank, neither the Mortgage nor
any Assignment, on the face or the reverse side(s) thereof, contains
evidence of any unsatisfied claims, liens, security interests,
encumbrances or restrictions on transfer;
(3) the principal amount of the indebtedness secured by the related
Mortgage is identical to the original principal amount of the related
Mortgage Note;
(4) the Assignment of the related Mortgage from the Seller to the
Indenture Trustee is in the form required pursuant to clause (e) of the
definition of "Mortgage Loan Documents" in the Mortgage Loan Sale
Agreement, and bears an original signature of the Seller and any other
necessary party (or signatures purporting to be that of the Seller and any
such other party) or, if photocopies are permitted, that such copies bear
a reproduction of such signature or signatures;
(5) if intervening Assignments are included in the Mortgage File,
each such intervening Assignment bears an original signature of the
related mortgagee and/or the assignee (and any other necessary party) (or
signatures purporting to be that of each such party) or, if photocopies
are permitted, that such copies bear a reproduction of such signature or
signatures;
(6) if either a title insurance policy, a preliminary title report
or a written commitment to issue a title insurance policy is delivered,
the address of the real property set forth in such policy, report or
written commitment is identical to the real property address contained in
the related Mortgage; and
(7) if any of a title insurance policy, certificate of title
insurance or a written commitment to issue a title insurance policy is
delivered, such policy, certificate or written commitment is for an amount
not less than the original principal amount of the related Mortgage Note
and such title insurance policy insures that the related Mortgage creates
a first or second lien, senior in priority to all other deeds of trust,
mortgages, deeds to secure debt, financing statements and security
agreements and to any mechanics' liens, judgment liens or writs of
attachment other than the related senior lien, if applicable, (or if the
title insurance policy or certificate of title insurance has not been
issued, the written commitment for such insurance obligates the insurer to
issue such policy for an amount not less than the original principal
amount of the related Mortgage Note).
(b) Final Certification. On or before one year following the Closing Date,
the Indenture Trustee shall cause the Custodian to deliver to the Seller, the
Representative, the Depositor, the Note Insurer, the Indenture Trustee and the
Servicer a Final Certification in the form attached as Exhibit E-2 to the
Custodial Agreement evidencing the completeness of the Mortgage File for each
Mortgage Loan, except as specifically noted on a schedule of exceptions thereto.
(c) In giving each of the Initial Certification and the Final
Certification, neither the Indenture Trustee nor the Custodian shall be under
any duty or obligation (1) to inspect, review or examine any such documents,
instruments, securities or other papers to determine that they or the signatures
thereto are genuine, enforceable, or appropriate for the represented purpose or
that they have actually been recorded or that they are other than what they
purport to be on their face or (2) to determine whether any Mortgage File should
include a flood insurance policy, any rider, addenda, surety or guaranty
agreement, power of attorney, buy down agreement, assumption agreement,
modification agreement, written assurance or substitution agreement.
(d) Recordation Report. In the event that the Mortgage Loans are required
to be recorded in accordance with the provisions of the Mortgage Loan Sale
Agreement, no later than the fifth Business Day of each third month, commencing
in February 2000, the Indenture Trustee shall cause the Custodian to deliver to
the Servicer and the Note Insurer a recordation report dated as of the first day
of such month, identifying those Mortgage Loans for which it has not yet
received (1) an original recorded Mortgage or a copy thereof certified to be
true and correct by the public recording office in possession of such Mortgage
or (2) an original recorded Assignment of the Mortgage to the Indenture Trustee
and any required intervening Assignments or a copy thereof certified to be a
true and correct copy by the public recording office in possession of such
Assignment.
SECTION 6.16. INDENTURE TRUSTEE FEES AND EXPENSES.
The Indenture Trustee shall be entitled to receive the Indenture Trustee
Fee on each Payment Date as provided herein. The Indenture Trustee also shall be
entitled, pursuant to the provisions of Section 6.04 of the Servicing Agreement,
to (i) payment of or reimbursement for expenses, disbursements and advances
incurred or made by the Indenture Trustee in accordance with any of the
provisions of this Agreement (including, but not limited to, the reasonable
compensation and the expenses and disbursements of its counsel and of all
persons not regularly in its employ) as provided in the Servicing Agreement, and
(ii) indemnification against losses, liability and expenses, including
reasonable attorney's fees, incurred, arising out of or in connection with this
Agreement and the Notes as provided in the Servicing Agreement.
SECTION 6.17. TAX REPORTING.
The Indenture Trustee shall provide on an annual basis, or as otherwise
required by the Owner Trustee, all information relating to payments on the Notes
as is reasonably required by the Owner Trustee pursuant to its obligations under
Section 2(b)(i) of the Management Agreement and Section 2.11(k) of the Deposit
Trust Agreement.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS.
(a) The Issuer shall furnish or cause to be furnished to the Indenture
Trustee (i) semiannually, not less than 45 days nor more than 60 days after the
Payment Date occurring closest to six months after the Closing Date and each
Payment Date occurring at six-month intervals thereafter, all information in the
possession or control of the Issuer, in such form as the Indenture Trustee may
reasonably require, as to names and addresses of the Holders of Notes, and (ii)
at such other times, as the Indenture Trustee 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.
(b) in addition to furnishing to the Indenture Trustee the Noteholder
lists, if any, required under subsection (a), the Issuer shall also furnish all
Noteholder lists, if any, required under Section 3.03 at the times required by
Section 3.03.
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, if any, furnished to the Indenture Trustee as
provided in Section 7.01 and the names and addresses of the 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 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 INDENTURE TRUSTEE.
(a) Within 60 days after December 31 of each year (the "reporting date"),
commencing with the year after the issuance of the Notes, (i) the Indenture
Trustee shall, if required by TIA Section 313(a), mail to all Holders a brief
report dated as of such reporting date that complies with TIA Section 313(a);
(ii) the Indenture Trustee shall, to the extent not set forth in the Payment
Date Statement pursuant to Section 2.08(d), also mail to Holders of Notes and
the Note Insurer with respect to which it has made advances, any reports with
respect to such advances that are required by TIA Section 313(b)(2); and, the
Indenture Trustee shall also mail to Holders of Notes and the Note Insurer any
reports required by TIA Section 313(b)(1). For purposes of the information
required to be included in any such reports pursuant to TIA Sections 313(a)(2),
313(b)(1) (if applicable), or 313(b)(2), the principal amount of indenture
securities outstanding on the date as of which such information is provided
shall be the Note Balance of the then Outstanding Notes covered by the report.
(b) A copy of each report required under this Section 7.03 shall, at the
time of such transmission to Holders of Notes and the Note Insurer be filed by
the Indenture Trustee with the Commission and with each securities exchange upon
which the Notes are listed. The Issuer will notify the Indenture Trustee when
the Notes are listed on any securities exchange.
SECTION 7.04. REPORTS BY ISSUER.
The Issuer (a) shall deliver to 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 by rules and regulations
prescribe) that the Issuer is required to file with the Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and (b)
shall also comply with the other provisions of TIA Section 314(a).
ARTICLE VIII
ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES
SECTION 8.01. COLLECTION OF MONEYS.
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 hold all such money and
property received by it as part of the Trust Estate and shall apply it as
provided in this Indenture.
If the Indenture Trustee shall not have received the Remittable Funds by
close of business on any related Deposit Date, the Indenture Trustee shall,
unless the Issuer or the Servicer shall have made provisions satisfactory to the
Indenture Trustee for delivery to the Indenture Trustee of an amount equal to
such Remittable Funds, deliver a notice, with a copy to the Note Insurer, to the
Issuer and the Servicer of their failure to remit such Remittable Funds and that
such failure, if not remedied by the close of business on the Business Day after
the date upon which such notice is delivered to the Servicer, shall constitute
an event of default under the Servicing Agreement. If the Indenture Trustee
shall subsequently receive any such Remittable Funds by 2:00 p.m. Eastern Time
on such Business Day, such Event of Default shall not be deemed to have
occurred. Notwithstanding any other provision hereof, the Indenture Trustee
shall deliver to the Issuer or the Servicer, or their respective designee or
assignee, any Remittable Funds received with respect to a Mortgage Loan after
the related Deposit Date to the extent that the Issuer or the Servicer,
respectively, previously made payment or provision for payment with respect to
such Remittable Funds in accordance with this Section 8.01, and any such
Remittable Funds shall not be deemed part of the Trust Estate.
Except as otherwise expressly provided in this Indenture and the Servicing
Agreement, if, following delivery by the Indenture Trustee of the notice
described above, the Servicer shall fail to remit the Remittable Funds on any
Deposit Date, the Indenture Trustee shall deliver a second notice to the
Servicer, the Issuer and the Note Insurer by 2:00 p.m. Eastern Time on the third
Business Day prior to the related Payment Date indicating that an event of
default occurred and is continuing under the Servicing Agreement. Thereupon, the
Indenture Trustee shall take such actions as are required of the Indenture
Trustee under Article VI of the Servicing Agreement. In addition, if a default
occurs in any other performance required under the Servicing Agreement, the
Indenture Trustee may, and upon the request of the Note Insurer or, with the
consent of the Note Insurer, the Holders of Notes representing more than 50% of
the Note Balance of the Outstanding Notes shall, 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 to proceed thereafter as provided in Article V.
SECTION 8.02. NOTE ACCOUNT; DISTRIBUTIONS.
(a) The Issuer hereby directs the Indenture Trustee to establish, at the
Corporate Trust Office, one or more separate trust accounts that shall
collectively be the "Note Account" on or before the Closing Date. The Indenture
Trustee shall promptly deposit in the Note Account (i) all Remittable Funds
received by it from the Servicer pursuant to the Servicing Agreement, (ii) any
other funds from any deposits to be made by the Servicer pursuant to the
Servicing Agreement, (iii) any amount required to be deposited in the Note
Account pursuant to Section 8.01, (iv) all amounts received pursuant to Section
8.03, and (v) all other amounts received for deposit in the Note Account,
including the payment of any Purchase Price for a Mortgage Loan received by the
Indenture Trustee. All amounts that are deposited from time to time in a Note
Account are subject to withdrawal by the Indenture Trustee for the purposes set
forth in subsections (c) and (d) of this Section 8.02. All funds withdrawn from
the Note Account pursuant to subsection (c) of this Section 8.02 for the purpose
of making payments to the Holders of Notes shall be applied in accordance with
Section 3.03.
(b) So long as no Default or Event of Default shall have occurred and be
continuing, amounts held in the Note Accounts shall be invested in Permitted
Investments, which Permitted Investments shall mature no later than the Business
Day preceding the immediately following Payment Date.
All income or other gains, if any, from investment of moneys deposited in
the Note Accounts shall be for the benefit of the Servicer and on each Payment
Date, any such amounts may be released from the Note Accounts and paid to the
Servicer as part of its compensation for acting as Servicer. Any loss resulting
from such investment of moneys deposited in a Note Account shall be reimbursed
immediately as incurred to the Note Account by the Servicer. Subject to Section
6.01 and the preceding sentence, neither the Indenture Trustee nor the Servicer
shall in any way be held liable by reason of any insufficiency in the Note
Accounts.
(c) On each Payment Date, the Indenture Trustee shall withdraw amounts on
deposit in the Note Account and pay on a pari passu basis the Indenture Trustee
Fee, Transition Expenses, if any not paid by the Servicer pursuant to the
Servicing Agreement (not to exceed $50,000 in the aggregate), any gains or
income from investments on the Note Account to the Servicer and, provided notice
is given to the Indenture Trustee no later than the 4th Business Day prior to
the Payment Date and to the extent such amounts have not been withdrawn pursuant
to Sections 2.02 and 4.01 of the Servicing Agreement, amounts required to pay
the Servicer any unpaid Servicing Fees then due and to reimburse the Servicer
for Monthly Advances and Servicing Advances previously made by, and not
previously reimbursed to or retained by, the Servicer, which are so reimbursable
to the Servicer pursuant to the Servicing Agreement (as reported in writing by
the Servicer to the Indenture Trustee). After payment of such amounts, unless
the Notes have been declared due and payable pursuant to Section 5.02 and moneys
collected by the Indenture Trustee are being applied in accordance with Section
5.07, Available Funds on deposit in the Note Account on any Payment Date or
Redemption Date shall be withdrawn from such Note Account, in the amounts
required, for application on such Payment Date as follows:
(i) first, to the PMI Insurer, the amount owing for such Payment
Date to the PMI Insurer for the premium payable in respect of the PMI
Mortgage Loans;
(ii) second, to the Note Insurer, the Note Insurer Premium for such
Payment Date in respect of the Notes;
(iii) third, to the Noteholders, the Note Interest with respect to
such Payment Date;
(iv) fourth, to the Noteholders, the amount of Monthly Principal for
the Notes with respect to such Payment Date, in reduction of the Note
Balance until the Note Balance is reduced to zero;
(v) fifth, to the Note Insurer, the amount owing to the Note Insurer
under the Insurance Agreement for reimbursement for prior draws made on
the FSA Insurance Policy in respect of the Notes and any other amounts
owing to the Note Insurer under the Insurance Agreement (including any
unpaid Note Insurer Premium in respect of the Notes);
(vi) sixth, to the Noteholders, the Overcollateralization Deficiency
Amount, if any, on such Payment Date (after giving effect to application
of Monthly Principal for such Payment Date), in reduction of the Note
Balance until the Note Balance is reduced to zero; and
(vii) seventh, to the Indenture Trustee pursuant to the terms of the
Servicing Agreement, Transition Expenses in excess of $50,000, if any, and
other costs and expenses, if not paid by the Servicer pursuant to the
Servicing Agreement or the Custody Agreement.
(d) On or after each Payment Date, so long as the Indenture Trustee shall
have prepared a Payment Date Statement in respect of such Payment Date and (1)
shall have made, or, in accordance with Section 3.03, set aside from amounts in
the Note Account an amount sufficient to make, the payments required to be made
as set forth in Section 8.02(c) as indicated in such Payment Date Statement, and
(2) shall have set aside any amounts that have been deposited in the Note
Account prior to such time that represent amounts that are to be used to make
payments on the Notes on the next succeeding Payment Date, the cash balance, if
any, then remaining in such Note Account shall be withdrawn from such Note
Account by the Indenture Trustee and, so long as no Default or Event of Default
shall have occurred and be continuing, shall be released from the lien of this
Indenture and paid by the Indenture Trustee to the Issuer.
(e) Any payments made by the Indenture Trustee to the Issuer pursuant to
this Section 8.02 shall be remitted to the Certificate Distribution Account
established and maintained pursuant to the Trust Agreement.
(f) In the event the Indenture Trustee is required to establish a
Collection Account pursuant to the Servicing Agreement, the Indenture Trustee
shall establish and maintain such account in the manner required under the
Servicing Agreement. The Indenture Trustee shall reinvest amounts in the
Collection Account at the direction of the Servicer in Permitted Investments.
All income or other gains, if any, from investment of moneys deposited in the
Collection Account shall be for the benefit of the Servicer, and the Indenture
Trustee shall release any such amounts from the Collection Account to the
Servicer on each Deposit Date.
SECTION 8.03. CLAIMS UPON THE FSA INSURANCE POLICY; FSA INSURANCE POLICY
PAYMENTS ACCOUNT.
(a) If, by the close of business on the third Business Day prior to a
Payment Date, the Indenture Trustee determines that a Deficiency Amount for any
Payment Date is greater than zero or that a claim may be made under the FSA
Insurance Policy in respect to any amount paid to Noteholders which is
recoverable in bankruptcy as a preference, then the Indenture Trustee shall give
notice to the Note Insurer by telephone or telecopy of the amount of such
Deficiency Amount or preference. Such notice of such Deficiency Amount shall be
confirmed in writing in the form set forth as Exhibit A to the Endorsement of
the FSA Insurance Policy, to the Note Insurer and the Fiscal Agent (as defined
in the FSA Insurance Policy), if any, at or before 12:00 noon New York time on
the third Business Day prior to such Payment Date. Following Receipt (as defined
in the FSA Insurance Policy) by the Note Insurer of such notice in such form,
the Note Insurer will pay any amount payable under the FSA Insurance Policy on
the later to occur of (i) 12:00 noon New York time on the third Business Day
following such receipt and (ii) 12:00 noon New York time on the Payment Date to
which such deficiency relates, as provided in the Endorsement to the FSA
Insurance Policy.
(b) The Indenture Trustee shall establish a separate special purpose trust
account for the benefit of Holders of the Notes and the Note Insurer referred to
herein as the "FSA Insurance Policy Payments Account" over which the Indenture
Trustee shall have exclusive control and sole right of withdrawal. The Indenture
Trustee shall deposit any amount paid under the FSA Insurance Policy in the FSA
Insurance Policy Payments Account and distribute such amount only for purposes
of payment to Holders of Notes of the Insured Payment for which a claim was
made, and such amount may not be applied to satisfy any costs, expenses or
liabilities of the Servicer, the Indenture Trustee or the Trust Estate. Amounts
paid under the FSA Insurance Policy shall be transferred to the Note Account in
accordance with the next succeeding paragraph and disbursed by the Indenture
Trustee to Holders of Notes in accordance with Section 8.02(c). 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 Insured Payment with other funds
available to make such payment. However, the amount of any payment of principal
of or interest on the Notes to be paid from funds transferred from the FSA
Insurance Policy Payments Account shall be noted as provided in paragraph (c)
below in the Note Register and in the statement to be furnished to Holders of
the Notes pursuant to Section 7.02. Funds held in the FSA Insurance Policy
Payments Account shall not be invested. Proceeds of the FSA Insurance Policy
shall not be considered payment by the Issuer with respect to such Notes, and
the Note Insurer shall become the owner of such unpaid amounts due from the
Issuer in respect of such Insured Payments as the deemed assignee and subrogee
of such Noteholders and shall be entitled to received the reimbursement in
respect thereof. The Indenture Trustee hereby agrees on behalf of each
Noteholder for the benefit of the Note Insurer that it recognizes that to the
extent the Note Insurer makes Insured Payments for the benefit of the
Noteholders, the Note Insurer will be entitled to receive the related
reimbursement in accordance with the priority of distributions referenced in
Section 8.02(c) hereof.
(c) Each Noteholder, by its purchase of Notes, and the Indenture Trustee
hereby agree that, unless a Note Insurer Default exists and is continuing, the
Note Insurer shall have the right to direct all matters relating to the Notes in
any proceeding in a bankruptcy of the Issuer, including, without limitation, any
proceeding relating to a Preference Claim and the posting of any surety or Note
pending any such appeal.
(d) Unless a Note Insurer Default exists and is continuing, the Indenture
Trustee shall cooperate in all respects with any reasonable request by the Note
Insurer for action to preserve or enforce the Note Insurer's rights or interests
hereunder without limiting the rights or affecting the interests of the
Noteholders as otherwise set forth herein.
(e) The Indenture Trustee shall surrender the FSA Insurance Policy to the
Note Insurer for cancellation upon the expiration of the term of the FSA
Insurance Policy as provided in the Insurance Agreement.
On any Payment Date with respect to which a claim has been made under the
FSA Insurance Policy, the amount of any funds received by the Indenture Trustee
as a result of any claim under the FSA Insurance Policy, to the extent required
to make the Insured Payment on such Payment Date, shall be withdrawn from the
FSA Insurance Policy Payments Account and deposited in the Distribution Account
and applied by the Indenture Trustee, together with the other funds to be
withdrawn from the Note Account pursuant to Section 8.02(c) directly to the
payment in full of the Insured Payment due on the Notes. Funds received by the
Indenture Trustee as a result of any claim under the FSA Insurance Policy shall
be deposited by the Indenture Trustee in the FSA Insurance Policy Payments
Account and used solely for payment to the Holders of the Notes and may not be
applied to satisfy any costs, expenses or liabilities of the Servicer, the
Indenture Trustee, or the Trust Estate. Any funds remaining in the FSA Insurance
Policy Payments Account on the first Business Day following a Payment Date shall
be remitted to the Note Insurer, pursuant to the instructions of the Note
Insurer, by the end of such Business Day.
(f) The Indenture Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any Note from moneys
received under the FSA Insurance Policy. The Note Insurer shall have the right
to inspect such records at reasonable times during normal business hours upon
one Business Day's prior notice to the Indenture Trustee.
(g) The Indenture Trustee shall promptly notify the Note Insurer and
Fiscal Agent of any proceeding or the institution of any action, of which a
Responsible Officer of the Indenture Trustee has actual knowledge seeking the
avoidance as a preferential transfer under applicable bankruptcy, insolvency,
receivership or similar law (a "Preference Claim") of any Insured Payment made
with respect to the Notes. Each Holder of the Notes, by its purchase of such
Certificates, the Servicer, and the Indenture Trustee hereby agree that the Note
Insurer (so long as no Note Insurer Default has occurred and is continuing) may
at any time during the continuation of any proceeding relating to a Preference
Claim direct all matters relating to such Preference Claim, including, without
limitation, (i) the direction of any appeal of any order relating to such
Preference Claim and (ii) the posting of any surety, supersedeas or performance
bond pending any such appeal. In addition and without limitation of the
foregoing, the Note Insurer shall be subrogated to the rights of the Servicer,
the Indenture Trustee, and each Holder of the Notes 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 8.04. GENERAL PROVISIONS REGARDING THE NOTE ACCOUNTS AND MORTGAGE
LOANS.
(a) Each Note Account shall relate solely to the Notes and to the Mortgage
Loans, Permitted Investments and other property securing the Notes. Funds and
other property in the Note Account shall not be commingled with any other moneys
or property of the Issuer or any Affiliate thereof except as otherwise expressly
provided for herein. Notwithstanding the foregoing, the Indenture Trustee may
hold any funds or other property received or held by it as part of the Note
Account in collective accounts maintained by it in the normal course of its
business and containing funds or property held by it for other Persons (which
may include the Issuer or an Affiliate), provided that such accounts are under
the sole control of the Indenture Trustee and the Indenture Trustee maintains
adequate records indicating the ownership of all such funds or property and the
portions thereof held for credit to a Note Account.
(b) If any amounts are needed for payment from the Note Account and
sufficient uninvested funds are not available therein to make such payment, the
Indenture Trustee shall cause to be sold or otherwise converted to cash a
sufficient amount of the investments in such Note Account.
(c) The Indenture Trustee shall, at all times while any Notes are
Outstanding, maintain in its possession, or in the possession of an agent whose
actions with respect to such items are under the sole control of the Indenture
Trustee, all certificates or other instruments, if any, evidencing any
investment of funds in the Note Account. The Indenture Trustee shall relinquish
possession of such items, or direct its agent to do so, only for purposes of
collecting the final payment receivable on such investment or certificate or, in
connection with the sale of any investment held in the Note Account, against
delivery of the amount receivable in connection with any sale.
(d) The Indenture Trustee shall not invest any part of the Trust Estate in
Permitted Investments that constitute uncertificated securities (as defined in
Section 8-102 of the Uniform Commercial Code, as enacted in the relevant
jurisdiction) or in any other book-entry securities unless it has received an
Opinion of Counsel reasonably satisfactory in form and substance to the
Indenture Trustee setting forth, with respect to each type of security for which
authority to invest is being sought, the procedures that must be followed to
maintain the lien and security interest created by this Indenture with respect
to the Trust Estate.
SECTION 8.05. RELEASES OF DEFECTIVE MORTGAGE LOANS.
Upon notice or discovery that any of the representations or warranties of
the Seller set forth in Section 4(b) and Exhibit B of the Mortgage Loan Sale
Agreement was materially incorrect or otherwise misleading with respect to any
Mortgage Loan as of the time made, the Indenture Trustee shall direct the Seller
to either (i) within 60 days after the Seller receives actual knowledge of such
incorrectness, eliminate or otherwise cure the circumstance or condition in
respect of which such representation or warranty was incorrect as of the time
made, (ii) withdraw such Defective Mortgage Loan from the lien of this Indenture
following the expiration of such 60-day period by depositing to the Note Account
an amount equal to the Purchase Price for such Mortgage Loan or (iii) substitute
a Qualified Replacement Mortgage Loan for such Defective Mortgage Loan and
deposit any Purchase Price required to be paid in connection with such
substitution pursuant to Section 7 of the Mortgage Loan Sale Agreement, all as
provided in Section 7 of the Mortgage Loan Sale Agreement. Upon any purchase of
or substitution for a Defective Mortgage Loan by the Seller in accordance with
Section 7 of the Mortgage Sale Agreement, the Indenture Trustee shall deliver
the Mortgage File relating to such Defective Mortgage Loan to the Seller, and
the Issuer and the Indenture Trustee shall execute such instruments of transfer
as are necessary to convey title to such Defective Mortgage Loan to the Seller
from the lien of this Indenture.
SECTION 8.06. REPORTS BY INDENTURE TRUSTEE TO NOTEHOLDERS; ACCESS TO
CERTAIN INFORMATION.
On each Payment Date, the Indenture Trustee shall make available the
written report required by Section 2.08(d) to Noteholders of record as of the
related Record Date (including the Clearing Agency, if any). via the Indenture
Trustee's internet website and its fax-on-demand service. The Indenture
Trustee's fax-on-demand service may be accessed by calling (301) 815-6610. The
Indenture Trustee's internet website shall be initially located at
"www.ctslink.com". Assistance in using the website or the fax-on-demand service
can be obtained by calling the Indenture Trustee's customer service desk at
(301) 815-6600. Noteholders that are unable to use the above distribution
options are entitled to have a paper copy mailed to them via first class mail by
calling the customer service desk and indicating such.
The Indenture Trustee shall make available at its Corporate Trust Office,
during normal business hours, for review by any Noteholder or any person
identified to the Indenture Trustee as a prospective Noteholder, originals or
copies of the following items: (a) the Indenture and any amendments thereto, (b)
all Payment Date Statements delivered to the Issuer since the Closing Date, (c)
any Officers' Certificates delivered to the Indenture Trustee since the Closing
Date as described in the Indenture and (d) any Accountants' reports delivered to
the Indenture Trustee since the Closing Date as required under the Servicing
Agreement. Copies of any and all of the foregoing items will be available from
the Indenture Trustee upon request; however, the Indenture Trustee will be
permitted to require payment of a sum sufficient to cover the reasonable costs
and expenses of providing such copies and shall not be required to provide such
copies without reasonable assurances that such sum will be paid.
SECTION 8.07. TRUST ESTATE MORTGAGE FILES.
(a) The Indenture Trustee shall release Mortgage Files or portions thereof
to the Servicer on the terms specified in the Servicing Agreement.
(b) The Indenture Trustee shall, at such time as there are no Notes
outstanding, 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 4.02).
SECTION 8.08. AMENDMENT TO SERVICING AGREEMENT.
The Indenture Trustee may, without the consent of any Holder, enter into
or consent to any amendment or supplement to the Servicing Agreement for the
purpose of increasing the obligations or duties of any party other than the
Indenture Trustee or the Holders of the Notes. The Indenture Trustee may, in its
discretion, decline to enter into or consent to any such supplement or
amendment: (i) unless the Indenture Trustee receives an Opinion of Counsel that
the position of the Holders would not be materially adversely affected or
written confirmation from the Rating Agencies that the then-current implied
ratings on the Notes (without taking into account the FSA Insurance Policy)
would not be adversely affected by such supplement or amendment or (ii) if its
own rights, duties or immunities would be adversely affected.
SECTION 8.09. DELIVERY OF THE MORTGAGE FILES PURSUANT TO SERVICING
AGREEMENT.
As is appropriate for the servicing or foreclosure of any Mortgage Loan,
the Indenture Trustee shall cause the Custodian to deliver to the Servicer of
such Mortgage the Mortgage Files for such Mortgage Loan upon receipt by the
Indenture Trustee and the Custodian on or prior to the date such release is to
be made of:
(a) such Officers' Certificates, if any, as are required by the Servicing
Agreement; and
(b) a "Request for Release" in the form prescribed by the Servicing
Agreement, executed by the Servicer, providing that the Servicer will hold or
retain the Mortgage Files in trust for the benefit of the Indenture Trustee, the
Note Insurer and the Holders of Notes.
SECTION 8.10. SERVICER AS AGENT.
In order to facilitate the servicing of the Mortgage Loans by the Servicer
of such Mortgage Loans, the Servicer of the Mortgage Loans has been appointed by
the Issuer to retain, in accordance with the provisions of the Servicing
Agreement and this Indenture, all Remittable Funds on such Mortgage Loans prior
to their deposit into the Note Account on or prior to the related Deposit Date.
SECTION 8.11. TERMINATION OF SERVICER.
In the event of an event of default specified in Section 6.01 of the
Servicing Agreement, the Indenture Trustee may, with the consent of the Note
Insurer, and shall, upon the direction of the Note Insurer (or as otherwise
provided in the Servicing Agreement), terminate the Servicer as provided in
Section 6.01 and Section 6.02 of the Servicing Agreement. If the Indenture
Trustee terminates the Servicer, the Indenture Trustee shall, pursuant to
Sections 6.01 and 6.02 of the Servicing Agreement, assume the duties of the
Servicer or appoint a successor servicer acceptable to the Issuer, the Note
Insurer and the Rating Agencies and meeting the requirements set forth in the
Servicing Agreement.
SECTION 8.12. OPINION OF COUNSEL.
The Indenture Trustee shall be entitled to receive at least five Business
Days' notice of any action to be taken pursuant to Sections 8.07(a) (other than
in connection with releases of Mortgage Loans that were the subject of a Full
Prepayment of the type described in clause (i) of the definition of the term
"Full Prepayment") and 8.08, accompanied by copies of any instruments involved,
and the Indenture Trustee shall be entitled to receive an Opinion of Counsel, in
form and substance reasonably 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. 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 8.13. APPOINTMENT OF CUSTODIANS.
The Indenture Trustee may, at the written direction of the Issuer and at
no additional cost to the Issuer or to the Indenture Trustee, with the consent
of the Note Insurer, appoint one or more Custodians to hold all or a portion of
the Mortgage Files as agent for the Indenture Trustee. Each Custodian shall (i)
be a financial institution supervised and regulated by the Comptroller of the
Currency, the Board of Governors of the Federal Reserve System, the Office of
Thrift Supervision, or the Federal Deposit Insurance Corporation; (ii) have
combined capital and surplus of at least $10,000,000; (iii) be equipped with
secure, fireproof storage facilities, and have adequate controls on access to
assure the safety and security of the Mortgage Files; (iv) utilize in its
custodial function employees who are knowledgeable in the handling of mortgage
documents and of the functions of a mortgage document custodian; and (v) satisfy
any other reasonable requirements that the Issuer may from time to time deem
necessary to protect the interests of Noteholders and the Note Insurer in the
Mortgage Files. Each Custodian shall be subject to the same obligations and
standard of care as would be imposed on the Indenture Trustee hereunder assuming
the Indenture Trustee retained the Mortgage Files directly. The appointment of
one or more Custodians shall not relieve the Indenture Trustee from any of its
obligations hereunder. If the Servicer is appointed as a Custodian in accordance
with this Section 8.14, it shall fulfill its servicing and custodial duties and
obligations through separate departments and, if it maintains a trust
department, shall fulfill its custodial duties and obligations through such
trust department.
SECTION 8.14. RIGHTS OF THE NOTE INSURER TO EXERCISE RIGHTS OF
NOTEHOLDERS.
By accepting its Notes, each Noteholder agrees that unless a Note Insurer
Default exists, the Note Insurer shall have the right to exercise all rights of
the Noteholders under this Agreement without any further consent of the
Noteholders, including, without limitation:
(i) the right to require the Servicer to effect foreclosures upon
Mortgage Loans upon failure of the Servicer to do so;
(ii) the right to require the Seller to repurchase or substitute for
Defective Mortgage Loans pursuant to Section 8.05;
(iii) the right to direct the actions of the Indenture Trustee
during the continuance of an Event of Default; and
(iv) the right to vote on proposed amendments to this Indenture.
In addition, each Noteholder agrees that, unless a Note Insurer Default
exists, the rights specifically set forth above may be exercised by the
Noteholders only with the prior written consent of the Note Insurer.
Except as otherwise provided in Section 8.03 and notwithstanding any
provision in this Indenture to the contrary, so long as a Note Insurer Default
has occurred and is continuing, the Note Insurer shall have no rights to
exercise any voting rights of the Noteholders hereunder, nor shall the Indenture
Trustee be required to obtain the consent of, or act at the direction of, the
Note Insurer.
SECTION 8.15. TRUST ESTATE AND ACCOUNTS HELD FOR BENEFIT OF THE NOTE
INSURER.
The Indenture Trustee shall hold the Trust Estate and the Mortgage Files
for the benefit of the Noteholders and the Note Insurer and all references in
this Agreement and in the Notes to the benefit of Holders of the Notes shall be
deemed to include the Note Insurer (provided there does not exist a Note Insurer
Default).
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to the Noteholders shall
also be sent to the Note Insurer.
SECTION 8.16. [RESERVED.]
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
With the consent of the Note Insurer and without the consent of the
Holders of any Notes, the Issuer and the Indenture Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(1) 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;
(2) to add to the conditions, limitations and restrictions on the
authorized amount, terms and purposes of the issuance, authentication and
delivery of any Notes, as herein set forth, additional conditions,
limitations and restrictions thereafter to be observed;
(3) to evidence the succession of another Person to the Issuer to
the extent permitted herein, and the assumption by any such successor of
the covenants of the Issuer herein and in the Notes contained;
(4) to add to the covenants of the Issuer, for the benefit of the
Holders of all Notes and the Note Insurer or to surrender any right or
power herein conferred upon the Issuer;
(5) to cure any ambiguity, to correct or supplement any provision
herein that may be defective or inconsistent with any other provision
herein, or to amend any other provisions with respect to matters or
questions arising under this Indenture, which shall not be inconsistent
with the provisions of this Indenture, provided that such action shall not
adversely affect in any material respect the interests of the Holders of
the Notes or the Holders of the Certificates; and provided, further, that
the amendment shall not be deemed to adversely affect in any material
respect the interests of the Holders of the Notes and the Note Insurer if
the Person requesting the amendment obtains letters from the Rating
Agencies that the amendment would not result in the downgrading or
withdrawal of the implied ratings then assigned to the Notes (without
taking into account the FSA Insurance Policy); or
(6) 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.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS.
With the consent of the Note Insurer and with the consent of Holders of
Notes representing not less than a majority of the Note Balance of all
Outstanding Notes by Act of said Holders delivered to the Issuer and the
Indenture Trustee, the Issuer and the Indenture Trustee may 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 Outstanding Note
affected thereby:
(1) change any Payment Date or the Final Maturity Date of the Notes
or reduce the principal amount thereof, the Note Interest Rate thereon or
the Redemption Price with respect thereto, change the earliest date on
which any Note may be redeemed at the option of the Issuer, change any
place of payment where, or the coin or currency in which, any Note or any
interest thereon is payable, or impair the right to institute suit for the
enforcement of the payment of any installment of interest due on any Note
on or after the Final Maturity Date thereof or for the enforcement of the
payment of the entire remaining unpaid principal amount of any Note on or
after the Final Maturity Date (or, in the case of redemption, on or after
the applicable Redemption Date);
(2) reduce the percentage of the Note Balance of the Outstanding
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 provisions of this Indenture or Defaults
hereunder and their consequences provided for in this Indenture;
(3) modify any of the provisions of this Section, Section 5.13 or
Section 5.17(b), except to increase any percentage specified therein or to
provide that certain other provisions of this Indenture cannot be modified
or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(4) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(5) permit the creation of any lien other than the lien of this
Indenture with respect to any part of the Trust Estate (except for
Permitted Encumbrances) or terminate the lien of this Indenture on any
property at any time subject hereto or deprive the Holder of any Note of
the security afforded by the lien of this Indenture;
(6) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the Required Payment Amount for any Payment
Date (including the calculation of any of the individual components of
such Required Payment Amount) or to affect rights of the Holders of the
Notes to the benefits of any provisions for the mandatory redemption of
Notes contained herein; or
(7) incur any indebtedness, other than the Notes, that would cause
the Issuer or the Trust Estate to be treated as a "taxable mortgage pool"
within the meaning of Code Section 7701(i).
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 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, the Indenture Trustee shall
mail to the Holders of the Notes to which such 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 accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Indenture Trustee shall be entitled to
receive, and (subject to Section 6.01) 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 or immunities under this
Indenture or otherwise. The Issuer shall cause executed copies of any
Supplemental Indentures to be delivered to the Rating Agencies and the Note
Insurer.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article, this
Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Notes to which such supplemental indenture relates that have theretofore been
or thereafter are authenticated and delivered hereunder shall be bound thereby.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.
SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES.
Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article 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 shall so
determine, new Notes so modified as to conform, in the opinion of 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.
SECTION 9.07. AMENDMENTS TO GOVERNING DOCUMENTS.
The Indenture Trustee shall, subject to Sections 9.01 and 9.02 hereof,
upon Issuer Request, consent to any proposed amendment to the Issuer's governing
documents, or an amendment to or waiver of any provision of any other document
relating to the Issuer's governing documents, such consent to be given without
the necessity of obtaining the consent of the Holders of any Notes upon receipt
by the Indenture Trustee of:
(i) an Officers' Certificate, to which such proposed amendment or
waiver shall be attached, stating that such attached copy is a true copy
of the proposed amendment or waiver and that all conditions precedent to
such consent specified in this Section 9.07 have been satisfied; and
(ii) written confirmation from the Rating Agencies that the
implementation of the proposed amendment or waiver will not adversely
affect their implied ratings of the Notes (without taking into account the
FSA Insurance Policy).
Notwithstanding the foregoing, the Indenture Trustee may decline to
consent to a proposed waiver or amendment that adversely affects its own rights,
duties or immunities under this Indenture or otherwise.
Nothing in this Section 9.07 shall be construed to require that any Person
obtain the consent of the Indenture Trustee to any amendment or waiver or any
provision of any document where the making of such amendment or the giving of
such waiver without obtaining the consent of the Indenture Trustee is not
prohibited by this Indenture or by the terms of the document that is the subject
of the proposed amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.01. REDEMPTION.
(a) All the Notes may be redeemed in whole, but not in part, on or after
the Initial Redemption Date at the Redemption Price at the option of the holders
of a majority of the ownership interest of the Issuer (the "Residual Majority"),
or at the option of the Servicer if the Residual Majority shall not have
exercised its option to direct the Servicer to redeem the Notes on such
Redemption Date or, if such option is not exercised by the Servicer, at the
option of the Note Insurer; provided, however, that funds in an amount equal to
the Redemption Price, plus any amounts owed to the Note Insurer under the
Insurance Agreement, any unreimbursed Nonrecoverable Advances and any
unreimbursed amounts due and owing to the Indenture Trustee hereunder, must have
been deposited with the Indenture Trustee prior to the Indenture Trustee's
giving notice of such redemption pursuant to Section 10.02 or the Issuer shall
have complied with the requirements for satisfaction and discharge of the Notes
specified in Section 4.01. Notice of the election to redeem the Notes shall be
furnished to the Indenture Trustee not later than thirty (30) days prior to the
Payment Date selected for such redemption, whereupon all such Notes shall be due
and payable on such Payment Date upon the furnishing of a notice pursuant to
Section 10.02 to each Holder of such Notes and the Note Insurer. Any expenses
associated with the compliance of the provisions hereof in connection with a
redemption of the Notes shall be paid by the Note Insurer or the Servicer,
depending upon which party redeems the Notes. In no event shall the Note Insurer
redeem the Notes unless the proceeds received from the Note Insurer would be not
less than the greater of (x) the entire amount that would be payable to the
Holders of the Notes, in full payment thereof on the Payment Date next
succeeding the date of such Sale and (y) the fair market value of the Mortgage
Loans as of the related Payment Date. Upon the redemption of the Notes, Mortgage
Loans in the Trust Estate shall be released and delivered to the Issuer.
(b) Upon receipt of the notice from the Servicer or the Note Insurer of
its election to redeem the Notes pursuant to Section 10.01(a), the Indenture
Trustee shall prepare and deliver to the Issuer, the Servicer and the Note
Insurer, no later than the related Redemption Date, a Payment Date Statement
stating therein that it has determined that the conditions to redemption at the
option of the Servicer or Note Insurer have been satisfied and setting forth the
amount, if any, to be withdrawn from each Note Account and paid to the Servicer
as reimbursement for Nonrecoverable Advances and such other information as may
be required to accomplish such redemption.
SECTION 10.02. FORM OF REDEMPTION NOTICE.
Notice of redemption shall be given by the Indenture Trustee in the name
of and at the expense of the Issuer by first class mail, postage prepaid, mailed
not less than ten days prior to the Redemption Date to each Holder of Notes to
be redeemed, such Holders being determined as of the Record Date for such
Payment Date, and to the Note Insurer.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price at which the Notes of such Series will be
redeemed,
(3) the fact of payment in full on such Notes, the place where such
Notes are to be surrendered for payment of the Redemption Price (which
shall be the office or agency of the Issuer to be maintained as provided
in Section 3.02), and that no interest shall accrue on such Note for any
period after the date fixed for redemption.
Failure to give notice of redemption, or any defect therein, to any Holder
of any Note selected for redemption shall not impair or affect the validity of
the redemption of any other Note.
SECTION 10.03. NOTES PAYABLE ON OPTIONAL REDEMPTION.
Notice of redemption having been given as provided in Section 10.02, the
Notes to be redeemed shall, on the applicable Redemption Date, become due and
payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on such Redemption
Price for any period after such Redemption Date; provided, however, that if such
Redemption Price is not paid on the Redemption Date, the Note Balance shall,
until paid, bear interest from the Redemption Date at the Note Interest Rate.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS.
(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 the Note Insurer an Officers' Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel (with a copy to the Note Insurer), if requested by the Indenture
Trustee, stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of any such
application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
(b) Every certificate, opinion or letter with respect to compliance with a
condition or covenant provided for in this Indenture, including one furnished
pursuant to specific requirements of this Indenture relating to a particular
application or request (other than certificates provided pursuant to TIA Section
314(a)(4)) shall include and shall be deemed to include (regardless of whether
specifically stated therein) the following:
(1) a statement that each individual signing such certificate,
opinion or letter has 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, opinion or letter are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him 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
individual, such condition or covenant has been complied with.
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 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
Opinion of Counsel may be based on the written opinion of other counsel, in
which event such Opinion of Counsel shall be accompanied by a copy of such other
counsel's opinion and shall include a statement to the effect that such counsel
believes that such counsel and the Indenture Trust may reasonably rely upon the
opinion of such other counsel.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Wherever 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 Section 6.01(b)(2).
Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition
precedent to the taking of any action by the Indenture Trustee at the request or
direction of the Issuer, then, notwithstanding that the satisfaction of such
condition is a condition precedent to the Issuer's right to make such request or
direction, the Indenture Trustee shall be protected in acting in accordance with
such request or direction if it does not have knowledge of the occurrence and
continuation of such Default or Event of Default as provided in Section 6.01(d).
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 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
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.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Whenever
such execution is by an officer of a corporation or a member of a partnership on
behalf of such corporation or partnership, such certificate or affidavit shall
also constitute sufficient proof of his authority.
(c) The ownership of 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 of transfer 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 Notes.
SECTION 11.04. NOTICES, ETC., TO INDENTURE TRUSTEE, THE NOTE INSURER AND
ISSUER.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Noteholders or other documents provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(1) 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 and received by the Indenture Trustee at its
Corporate Trust Office and at 11000 Broken Land Parkway, MAC N2696-050,
Columbia, Maryland 21044-3562; or
(2) the Issuer by the Indenture Trustee or by any Noteholder shall
be sufficient for every purpose hereunder (except as provided in Section
5.01(3) and (4)) if in writing and mailed, first-class postage prepaid, to
the Issuer addressed to it at Mortgage Lenders Network Home Equity Loan
Trust 1999-2), in care of Wilmington Trust Company, Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attention:
Corporate Trust Administration, or at any other address previously
furnished in writing to the Indenture Trustee by the Issuer; or
(3) the Note Insurer 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 Financial Security Assurance Inc.
addressed to it at 350 Park Avenue, New York, New York 10022, Attention:
Structured Finance Group (Mortgage Lenders Network Home Equity Loan Trust
1999-2, Asset Backed Notes, Series 1999-2), or at any other address
previously furnished in writing to the Indenture Trustee by the Note
Insurer; or
(4) the Depositor by the Indenture Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage paid, to ACE Securities Corp., 6525 Morrison
Boulevard, Suite 318, Charlotte, North Carolina 28211, Attention:
Elizabeth Eldridge, or at any other address previously furnished in
writing to the Indenture Trustee by the Depositor; or
(5) the Seller or the Servicer by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder if in writing
and mailed, first-class, postage paid, to Mortgage Lenders Network USA,
Inc., Middlesex Corporate Center, 11th Floor, 213 Court Street,
Middletown, Connecticut 06457, Attention: General Counsel or at any other
address previously furnished in writing to the Indenture Trustee by the
Seller or the Servicer; or
(6) the Underwriters by any party or by any Noteholder shall be
sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to (a) First Union Securities Inc., 301
South College Street, Charlotte, North Carolina 28288-0610, fax:
704-383-8121, Attn: Shanker Merchant and (b) Deutsche Bank Securities
Inc., 31 West 52nd Street, New York, NY 10019 Attn: Rodney Hutter.
Notices required to be given to the Rating Agencies by the Issuer or the
Indenture Trustee shall be in writing, personally delivered or mailed
first-class postage pre-paid, to (i) in the case of Moody's, at the following
address: Moody's Investors Service, Inc., Residential Mortgage Monitoring
Department, 99 Church Street, New York, New York 10007, (ii) in the case of S&P,
at the following address: Standard & Poor, 55 Water Street, 41st Floor, New
York, New York, 10004, Attention: Mortgage Surveillance Group; or as to each of
the foregoing, at such other address as shall be designed by written notice to
the other parties.
SECTION 11.05. NOTICES AND REPORTS TO NOTEHOLDERS; WAIVER OF NOTICES.
Where this Indenture provides for notice to Noteholders of any event or
the mailing of any report to Noteholders, such notice or report shall be
sufficiently given (unless otherwise herein expressly provided) if mailed,
first-class postage prepaid, to each Noteholder affected by such event or to
whom such report is required to be mailed, at the address of such Noteholder 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 or the mailing
of such report. In any case where a notice or report to Noteholders is mailed in
the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Noteholder
shall affect the sufficiency of such notice or report with respect to other
Noteholders, and any notice or report that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given or provided.
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 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.
SECTION 11.06. RULES BY INDENTURE TRUSTEE.
The Indenture Trustee may make reasonable rules for any meeting of
Noteholders.
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 TIA, such required provision shall control.
SECTION 11.08. 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.
SECTION 11.09. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Issuer shall bind
its successors and assigns, whether so expressed or not.
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.
Nothing in this Indenture or in the Notes, expressed or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, any separate trustee or Co-trustee appointed under Section 6.14, the
Note Insurer and the Noteholders, 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 of any Payment Date, Redemption Date or any
other date on which principal of or interest on any Note is proposed to be paid
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 nominal date of any such Payment Date, Redemption Date or other date for the
payment of principal of or interest on any Note and no interest shall accrue for
the period from and after any such nominal date, provided such payment is made
in full on such next succeeding Business Day.
SECTION 11.13. GOVERNING LAW.
IN VIEW OF THE FACT THAT NOTEHOLDERS ARE EXPECTED TO RESIDE IN MANY STATES
AND OUTSIDE THE UNITED STATES AND THE DESIRE TO ESTABLISH WITH CERTAINTY THAT
THIS INDENTURE WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAW OF A STATE HAVING A WELL-DEVELOPED BODY OF COMMERCIAL AND FINANCIAL
LAW RELEVANT TO TRANSACTIONS OF THE TYPE CONTEMPLATED HEREIN, THIS INDENTURE AND
EACH NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN.
SECTION 11.14. COUNTERPARTS.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.15. RECORDING OF INDENTURE.
This Indenture is subject to recording in any appropriate public recording
offices, such recording to be effected by the Issuer and at its expense in
compliance with any Opinion of Counsel delivered pursuant to Section 2.11(c) or
3.06.
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 the
Trust Agreement.
SECTION 11.17. NO PETITION.
The Indenture Trustee, by entering into this Indenture, and each
Noteholder and Beneficial Owner, by accepting a Note, hereby covenant and agree
that they will not at any time institute against MLN Depository Corp. or the
Issuer, or join in any institution against MLN Depository Corp. 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. In addition, the Indenture
Trustee will on behalf of the holders of the Notes, (a) file a written objection
to any motion or other proceeding seeking the substantive consolidation of the
Seller with, MLN Depository Corp. or the Issuer, (b) file an appropriate
memorandum of points and authorities or other brief in support of such
objection, or (c) endeavor to establish at the hearing on such objection that
the substantive consolidation of such entity would be materially prejudicial to
the Noteholders.
This Section 11.17 will survive for one year and one day following the
termination of this Indenture.
SECTION 11.18. INSPECTION.
The Issuer agrees that, on reasonable prior notice, it will permit any
representative of the Indenture Trustee and the Note Insurer, during the
Issuer's normal business hours, to examine all of 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 Accountants selected by the
Indenture Trustee or the Note Insurer, as the case may be, and to discuss its
affairs, finances and accounts with its officers, employees and Independent
Accountants (and by this provision the Issuer hereby authorizes its Accountants
to discuss with such representatives such affairs, finances and accounts), all
at such reasonable times and as often as may be reasonably requested. Any
expense incident to the exercise by the Indenture Trustee of any right under
this Section 11.18 shall be borne by the Issuer.
SECTION 11.19. USURY.
The amount of interest payable or paid on any Note under the terms of this
Indenture shall be limited to an amount that shall not exceed the maximum
nonusurious rate of interest allowed by the applicable laws of the United States
or the State of New York (whichever shall permit the higher rate), that could
lawfully be contracted for, charged or received (the "Highest Lawful Rate"). In
the event any payment of interest on any Note exceeds the Highest Lawful Rate,
the Issuer stipulates that such excess amount will be deemed to have been paid
as a result of an error on the part of both the Indenture Trustee, acting on
behalf of the Holder of such Note, and the Issuer, and the Holder receiving such
excess payment shall promptly, upon discovery of such error or upon notice
thereof from the Issuer or the Indenture Trustee, refund the amount of such
excess or, at the option of the Indenture Trustee, apply the excess to the
payment of principal of such Note, if any, remaining unpaid. In addition, all
sums paid or agreed to be paid to the Indenture Trustee for the benefit of
Holders of Notes for the use, forbearance or detention of money shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Notes.
SECTION 11.20. THIRD PARTY BENEFICIARY.
The Note Insurer is intended as a third party beneficiary of this
Indenture shall be binding upon and inure to the benefit of the Note Insurer;
provided that, notwithstanding the foregoing, for so long as a Note Insurer
Default is continuing with respect to its obligations under the FSA Insurance
Policy, the Noteholders shall succeed to the Note Insurer's rights hereunder.
Without limiting the generality of the foregoing, all covenants and agreements
in this Indenture that expressly confer rights upon the Note Insurer shall be
for the benefit of and run directly to the Note Insurer, and the Note Insurer
shall be entitled to rely on and enforce such covenants to the same extent as if
it were a party to this Indenture.
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee and the have
caused this Indenture to be duly executed by their respective officers thereunto
duly authorized, all as of the day and year first above written.
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST
1999-2
By: Wilmington Trust Company,
not in its individual capacity,
but solely as Owner Trustee
By:
--------------------------------------
Authorized Signatory
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
By:
--------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT A FORM OF NOTE
UNLESS THIS NOTE 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 NOTE 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.
THE NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUER, AND IS LIMITED IN RIGHT OF
PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AND THE FSA INSURANCE POLICY
AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUER IS NOT OTHERWISE
PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
Date of Indenture: As of November 1, 1999 Original Note Balance: $_______
First Payment Date: December 27, 1999 CUSIP No.: _______
Denomination: $____________ Note No.: _______
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-2
HOME EQUITY LOAN BACKED NOTES, SERIES 1999-2, CLASS A
Mortgage Lenders Network Home Equity Loan Trust 1999-2, a business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "Issuer"), for value received, hereby promises to pay to Cede & Co.,
or registered assigns, the principal sum of $___________ payable on each Payment
Date in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is $___________ and the denominator of which is
$_____________ (this Note's "Percentage Interest") by (ii) the aggregate amount,
if any, payable from the Note Account in respect of principal on the Notes
pursuant to the Indenture dated as of November 1, 1999, between the Issuer and
Norwest Bank Minnesota, National Association, a national banking association, as
Indenture Trustee (the "Indenture Trustee"); provided, however, that the entire
unpaid principal amount of this Note shall be due and payable on the earlier of
(i) the Payment Date occurring in December 2030 (the "Final Maturity Date"),
(ii) the Redemption Date, if any, pursuant to Article X of the Indenture or
(iii) the date on which an Event of Default shall have occurred and be
continuing, if the Notes have been declared to be immediately due and payable in
the manner provided in Section 5.02 of the Indenture. Capitalized terms used but
not defined herein are defined in Article I of the Indenture.
<PAGE>
Pursuant to the terms of the Indenture, payments will be made on the 25th
day of each month or, if such day is not a Business Day, on the Business Day
immediately following such 25th day (each a "Payment Date"), commencing on the
first Payment Date specified above, to the Person in whose name this Note is
registered at the close of business on the applicable Record Date, in an amount
equal to the product of (a) the Percentage Interest evidenced by this Note and
(b) the sum of the amounts to be paid on Notes with respect to such Payment
Date, all as more specifically set forth in the Indenture.
Notwithstanding the foregoing, in the case of Definitive Notes, upon
written request at least five days prior to the related Record Date with
appropriate instructions by the Holder of this Note (holding an aggregate
initial Note Balance of at least $1,000,000), any payment of principal or
interest, other than the final installment of principal or interest, shall be
made by wire transfer to an account in the United States designated by such
Holder reasonably satisfactory to the Indenture Trustee.
Payments of principal and interest on the Notes will be made on each
Payment Date to Noteholders of record as of the related Record Date. On each
Payment Date, Noteholders will be entitled to receive interest payments in an
aggregate amount equal to the related Note Interest for such Payment Date,
together with principal payments in an aggregate amount equal to the Monthly
Principal plus, until the Overcollateralization Amount is equal to the Required
Overcollateralization Amount, Excess Cash, if any, for such Payment Date. The
"Note Balance" of a Note as of any date of determination is equal to the initial
principal balance thereof as of the Closing Date, reduced by the aggregate of
all amounts previously paid with respect to such Note on account of principal.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Asset Backed Notes, Series 1999-2, Class A, issued under the
Indenture, to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes. To
the extent that any provision of this Note contradicts or is inconsistent with
the provisions of the Indenture, the provisions of the Indenture shall control
and supersede such contradictory or inconsistent provision herein. The Notes are
subject to all terms of the Indenture.
The Notes are and will be equally and ratably secured by the Mortgage
Loans and the other collateral related thereto pledged as security therefor as
provided in the Indenture.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Final Maturity Date and the Redemption
Date, if any, pursuant to Article X of the Indenture. Notwithstanding the
foregoing, the entire unpaid principal amount of the Notes shall be due and
payable on the date on which an Event of Default shall have occurred and be
continuing if the Indenture Trustee, at the direction or upon the prior written
consent of Financial Security Assurance Inc. (the "Note Insurer") in the absence
of a Note Insurer Default, or the Holders of the Notes representing not less
than 50% of the Note Balance of the Outstanding Notes (with the prior written
consent of the Note Insurer in the absence of a Note Insurer Default), shall
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.02 of the Indenture. All principal payments on the Notes shall be
made pro rata to the Noteholders entitled thereto.
The Note Insurer in consideration of the payment of the premium and
subject to the terms of the Note Guaranty Insurance Policy (the "FSA Insurance
Policy") thereby has unconditionally and irrevocably guaranteed the payment of
the Insured Payments.
Pursuant to the Indenture, unless a Note Insurer Default exists (i) the
Note Insurer shall be deemed to be the holder of the Notes for certain purposes
specified in the Indenture and will be entitled to exercise all rights of the
Noteholders thereunder, including the rights of Noteholders relating to the
occurrence of, and the remedies with respect to, an Event of Default, without
the consent of such Noteholders, and (ii) the Indenture Trustee may take actions
which would otherwise be at its option or within its discretion, including
actions relating to the occurrence of, and the remedies with respect to, an
Event of Default, only at the direction of the Note Insurer. In addition, on
each Payment Date, after the Noteholders have been paid all amounts to which
they are entitled, the Note Insurer will be entitled to be reimbursed for any
unreimbursed draws under the FSA Insurance Policy, paid Note Insurer Premium
(each with interest thereon at the "Late Payment Rate" specified in the
Insurance Agreement) and any other amounts owed under the FSA Insurance Policy.
The Issuer shall not be liable upon the indebtedness evidenced by the
Notes except to the extent of amounts available from the Trust Estate which
constitutes security for the payment of the Notes. The assets included in the
Trust Estate and payments under the FSA Insurance Policy will be sole source of
payments on the Notes, and each Holder hereof, by its acceptance of this Note,
agrees that (i) such Note will be limited in right of payment to amounts
available from the Trust Estate and the FSA Insurance Policy as provided in the
Indenture and (ii) such Holder shall have no recourse to the Issuer, the Owner
Trustee, the Indenture Trustee, the Depositor, the Seller, the Servicer or any
of their respective affiliates, or to the assets of any of the foregoing
entities, except the assets of the Issuer pledged to secure the Notes pursuant
to the Indenture.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) on the
Note Register as of the close of business on each Record Date, except that with
respect to Notes 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. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Notwithstanding the foregoing, in the case of Definitive
Notes, upon written request at least five days prior to the related Record Date
with appropriate instructions by the Holder of this Note (holding an aggregate
initial Note Balance of at least $1,000,000), any payment of principal or
interest, other than the final installment of principal or interest, shall be
made by wire transfer to an account in the United States designated by such
Holder reasonably satisfactory to the Indenture Trustee. Any reduction in the
principal amount of this Note (or any one or more Predecessor Notes) effected by
any payments made on any Payment Date shall be binding upon all future Holders
of this Note and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are
expected to be available, as provided in the Indenture, for payment in full of
the then remaining unpaid principal amount of this Note on a Payment Date, then
the Indenture Trustee, in the name of and on behalf of the Issuer, will notify
the Person who was the Holder hereof as of the Record Date preceding such
Payment Date by notice mailed or transmitted by facsimile prior to such Payment
Date, and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Indenture Trustee's principal
Corporate Trust Office or at the office of the Indenture Trustee's agent
appointed for such purposes.
As provided in the Indenture, the Notes may be redeemed in whole, but not
in part, at the option of the Issuer, on any Payment Date on and after the date
on which the Note Balance is less than 10% of the Original Note Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder's attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer
Agent's Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Note Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
The Note Registrar shall not register the transfer of this Note unless the
Note Registrar has received a representation letter from the transferee to the
effect that either (i) the transferee is not, and is not acquiring the Note on
behalf of or with the assets of, an employee benefit plan or other retirement
plan or arrangement that is subject to Title I of the Employee Retirement Income
Security Act or 1974, as amended, or Section 4975 of the Code or (ii) the
acquisition and holding of this Note by the transferee qualifies for exemptive
relief under a Department of Labor Prohibited Transaction Class Exemption. Each
Beneficial Owner, by acceptance of a beneficial interest herein, shall be deemed
to make one of the foregoing representations.
Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the
case of a Beneficial Owner, a beneficial interest in a Note, covenants and
agrees that 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 the Indenture or any certificate or other writing delivered in
connection 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 or employee
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 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.
Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the
case of a Beneficial Owner, a beneficial interest in a Note, covenants and
agrees by accepting the benefits of the Indenture that such Noteholder or
Beneficial Owner will not at any time institute against the MLN Depository Corp.
or the Issuer, or join in any institution against the MLN Depository Corp. or
the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture, the Mortgage Loan Sale Agreement, the Mortgage Loan Contribution
Agreement, the Servicing Agreement, the Management Agreement, the Insurance
Agreement and the Indemnification Agreement (the "Basic Documents").
The Issuer has entered into the Indenture and this Note is 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
secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each
Beneficial Owner by acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and none of the Issuer, the Indenture Trustee or any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Note Insurer and the Holders of Notes
representing a majority of the Note Balance of all Outstanding Notes. The
Indenture also contains provisions permitting the (i) Note Insurer or (ii) if a
Note Insurer Default exists, the Holders of Notes representing specified
percentages of the Note Balance of Outstanding Notes, on behalf of the Holders
of all the Notes, to waive compliance by the Issuer with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Note Insurer or by the Holder of
this Note (or any one or more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the amendment thereof, in certain limited circumstances,
or the waiver of certain terms and conditions set forth in the Indenture,
without the consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
Initially, the Notes will be represented by one Note registered in the
name of CEDE & Co. as nominees of the Clearing Agency. The Notes will be
delivered as provided in the Indenture and subject to certain limitations
therein set forth. The Notes are exchangeable for a like aggregate initial Note
Balance of Notes of different authorized denominations, as requested by the
Holder surrendering the same.
THIS NOTE AND THE 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 AND THEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Unless the certificate of authentication hereon has been executed by the
Authenticating Agent whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Instrument to be signed,
manually or in facsimile, by its Authorized Officer, as of the date set forth
below.
DATE: __________ __, ____
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN
TRUST 1999-2
By: WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Owner Trustee
under the Trust Agreement
By:
--------------------------------------------
Authorized Signatory
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Notes designated above and referred to in the
within-mentioned Indenture.
Date: __________ __, ____
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Authenticating Agent
By:
-----------------------------------------------
Authorized Signatory
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
- --------------------------------------------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints__________________ , attorney, to transfer said Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated: ____________________*/
Signature Guaranteed:
___________________________*/
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in STAMP or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT B FSA INSURANCE POLICY
<PAGE>
EXHIBIT C FORM OF NOTICE OF CLAIM
EXECUTION COPY
============================================
SERVICING AGREEMENT
Dated as of November 1, 1999
among
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-2,
as Issuer,
MORTGAGE LENDERS NETWORK USA, INC.
as Servicer,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Indenture Trustee
============================================
Mortgage Loans
Pledged under an Indenture dated as of November 1, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
Article I DEFINITIONS...........................................................
Section 1.01 Definitions...................................................
Section 1.02 Interest Calculations.........................................
Section 1.03 Determination of Material Adverse Effect......................
Article II ADMINISTRATION AND SERVICING OF MORTGAGE LOANS.......................
Section 2.01 Servicing Generally...........................................
Section 2.02 Collection of Certain Mortgage Loan Payments; Collection
Account.......................................................
Section 2.03 Hazard Insurance Policies.....................................
Section 2.04 Enforcement of Due-on-Sale Clauses............................
Section 2.05 Realization upon Defaulted Mortgage Loans, Options to
Purchase Mortgage Loans.......................................
Section 2.06 Indenture Trustee to Cooperate; Release of Mortgage Files.....
Section 2.07 Servicing Compensation; Payment of Certain Expenses by the
Servicer; Compensating Interest...............................
Section 2.08 Annual Statement as to Compliance.............................
Section 2.09 Annual Independent Public Accountants' Servicing Reports......
Section 2.10 Access to Certain Documentation and Information Regarding
the Mortgage Loans............................................
Section 2.11 Maintenance of Fidelity Bond and Errors and Omissions Policy..
Section 2.12 Notices to the Issuer, the Rating Agencies, the Indenture
Trustee and the Note Insurer..................................
Section 2.13 Reports of Foreclosures and Abandonment of Mortgaged
Properties....................................................
Section 2.14 Servicing for Benefit of the Note Insurer.....................
Section 2.15 Note Redemptions..............................................
Section 2.16 Sub-Servicers and Sub-Servicing Agreements....................
Article III SERVICER REMITTANCE REPORT; OVERSIGHT OF SERVICING..................
Section 3.01 Servicer Remittance Report....................................
Section 3.02 [Reserved]....................................................
Section 3.03 [Reserved]....................................................
Section 3.04 Duties and Responsibilities...................................
Section 3.05 Tax Reporting.................................................
Article IV MONTHLY ADVANCES AND SERVICING ADVANCES..............................
Section 4.01 Monthly Advances; Servicing Advances..........................
Article V THE SERVICER..........................................................
Section 5.01 Representations and Warranties of the Servicer................
Section 5.02 Liability of the Servicer.....................................
Section 5.03 Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer..............................................
Section 5.04 Limitation on Liability of the Servicer and Others............
Section 5.05 Servicer Not to Resign........................................
Article VI DEFAULT..............................................................
Section 6.01 Events of Default.............................................
Section 6.02 Indenture Trustee to Act; Appointment of Successor............
Section 6.03 Notifications to Noteholders..................................
Section 6.04 Payment of Indenture Trustee's Fees and Expenses..............
Article VII TERMINATION.........................................................
Section 7.01 Termination...................................................
Section 7.02 Appointment and Term of the Servicer..........................
Article VIII MISCELLANEOUS PROVISIONS...........................................
Section 8.01 Amendment.....................................................
Section 8.02 Governing Law.................................................
Section 8.03 Notices.......................................................
Section 8.04 Severability of Provisions....................................
Section 8.05 Assignment....................................................
Section 8.06 Third Party Beneficiary, Rating...............................
Section 8.07 Counterparts..................................................
Section 8.08 Intention of the Parties......................................
Section 8.09 Waivers and Modifications.....................................
Section 8.10 Further Agreements............................................
Section 8.11 Attorney-in-Fact..............................................
Section 8.12 Limitation of Liability.......................................
SCHEDULES AND EXHIBITS
Schedule I Mortgage Loan Schedule
Exhibit A Form of Annual Statement as to Compliance
Exhibit B Form of Request for Release
Exhibit C Ancillary Servicing Compensation
Exhibit D Form of Liquidation Report
Exhibit E Form of Servicer Renewal Notice
<PAGE>
THIS SERVICING AGREEMENT (this "Agreement"), dated as of November 1,
1999, among MORTGAGE LENDERS NETWORK HOME EQUITY LOAN TRUST 1999-2, as issuer of
its Asset Backed Notes, Series 1999-2 (the "Issuer"), MORTGAGE LENDERS NETWORK
USA, INC., as servicer (in such capacity, together with permitted successors
hereunder, the "Servicer"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
not in its individual capacity but as trustee pursuant to that certain indenture
(the "Indenture"), dated as of November 1, 1999 (the "Indenture Trustee"),
between the Issuer and the Indenture Trustee, recites and provides as follows:
RECITALS
WHEREAS, the Servicer is engaged in the business of servicing
mortgage loans;
WHEREAS, the Issuer desires to pledge to the Indenture Trustee
certain sub-prime residential mortgage loans, identified on Schedule I hereto
(the "Mortgage Loans") in connection with the issuance of the Issuer's Asset
Backed Notes, Series 1999-2 Class A (the "Notes");
WHEREAS, the Issuer desires to contract with the Servicer for the
servicing responsibilities associated with the Mortgage Loans, and the Servicer
desires to assume the servicing responsibilities associated with such Mortgage
Loans; and
WHEREAS, the Issuer, the Servicer and the Indenture Trustee desire
to execute this Agreement to define each party's rights, duties and obligations
relating to the servicing of the Mortgage Loans.
NOW, THEREFORE, in consideration of the above premises and of the
mutual agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Issuer, the Servicer and the Indenture Trustee hereby 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
Section 1.01. Terms capitalized and not otherwise defined herein shall have the
meanings assigned to such terms in the Indenture, even after the Indenture shall
have been terminated.
"AFFILIATE": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings corresponding to the foregoing.
"AGGREGATE PRINCIPAL BALANCE": As defined in the Indenture.
"AGREEMENT": This Servicing Agreement, dated as of November 1, 1999,
among the Issuer, the Servicer and the Indenture Trustee, and all amendments
hereof and supplements hereto.
"ANCILLARY SERVICING COMPENSATION": Late charges, fees for
insufficient funds, and other items listed on Exhibit C hereto collected by the
Servicer from Mortgagors.
"APPRAISAL": A written appraisal of a Mortgaged Property made by an
appraiser holding all state certifications or licenses provided by the state in
which the Mortgaged Property is located, which appraisal must be written, in
form and substance, to FDIC, Fannie Mae and FHLMC standards, and must meet the
appraisal standards of the Uniform Standards of Professional Appraisal Practice.
"APPRAISED VALUE": With respect to any Mortgaged Property, the
lesser of (a) the value thereof as determined by an Appraisal and (b) the
purchase price paid for the related Mortgaged Property by the Mortgagor with the
proceeds of the related Mortgage Loan; provided, however, that in the case of a
Refinanced Mortgage Loan, the Appraised Value of the Mortgaged Property shall be
equal to the value thereof as determined by an Appraisal.
"BALLOON MORTGAGE LOAN": Any Mortgage Note having an original term
to maturity that is shorter than its amortization schedule, and a final
scheduled Monthly Payment that is disproportionately large in comparison to
other scheduled Monthly Payments.
"BALLOON PAYMENT": The final scheduled Monthly Payment in respect of
a Balloon Mortgage Loan.
"BUSINESS DAY": Any day other than (a) a Saturday or a Sunday or (b)
a day on which the Note Insurer or banking institutions in the State of
Connecticut, the State of New York, the State of Delaware, the State of Maryland
or the State of Minnesota are required or authorized by law, executive order or
governmental decree to be closed.
"CERTIFICATE DISTRIBUTION ACCOUNT": As defined in the Deposit Trust
Agreement.
"CLOSING DATE": On or about November 18, 1999.
"CODE": The Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form and proposed regulations thereunder to the extent that,
by reason of their proposed effective date, such proposed regulations would
apply.
"COLLECTION ACCOUNT": The segregated trust account or accounts,
which shall at all times be an Eligible Account, established and maintained
pursuant to Section 2.02(b) and entitled "[Indenture Trustee], in trust for the
benefit of Holders of Mortgage Lenders Network Home Equity Loan Trust 1999-2
Asset Backed Notes, Series 1999-2 and Financial Security Assurance Inc. as Note
Insurer, Collection Account". References herein to the Collection Account shall
include any Sub-Servicing Account as the context requires. If an Event of
Default described in Section 6.01(f) hereof occurs, the Servicer shall close the
existing Collection Account and cause it to be re-established in the name of the
Indenture Trustee, and transfer all finds from the old Collection Account to the
new Collection Account.
"COLLECTION PERIOD": As to any Deposit Date, the period
beginning on the first day of the calendar month immediately preceding the
month in which such Deposit Date occurs and ending on the last day of such
calendar month.
"COMPENSATING INTEREST": With respect to any Mortgage Loan as to
which a prepayment in whole or in part was received by the Servicer from the
related Mortgagor during a Collection Period, an amount equal to the lesser of
(a) the Monthly Servicing Fee for such Collection Period and (b) the difference
between (1) 30 days' interest at the Mortgage Interest Rate on the Principal
Balance of such Mortgage Loan (immediately prior to such prepayment) and (2) the
amount of interest actually collected by the Servicer on such Mortgage Loan
during the related Due Period.
"CUMULATIVE LOSS PERCENTAGE": As of any Payment Date, the percentage
equivalent of the fraction obtained by dividing (1) the principal amount of
cumulative Realized Losses on the Mortgage Loans from the Cut-off Date through
the end of the related Collection Period by (2) the Initial Pool Balance.
"CUMULATIVE LOSS RATE TRIGGER": The "Cumulative Loss Rate Trigger"
occurs on any date if the Cumulative Loss Percentage for the most recent Payment
Date exceeds the percentage specified in the table below for the period in which
such Payment Date occurs.
Deposit Dates Cumulative
from and including to and including Loss Percentage
------------------ ---------------- ---------------
December 1999 November 2000 1.25%
December 2000 November 2001 2.50%
December 2001 November 2002 3.25%
December 2002 November 2003 4.00%
December 2003 thereafter 4.50%
"CUSTODIAL AGREEMENT": The Custody Agreement dated as of November 1,
1999 among the Servicer, the Custodian and the Indenture Trustee.
"CUSTODIAN": The Custodian under the Custodial Agreement, which
shall initially be BankBoston, N.A.
"CUT-OFF DATE": November 1, 1999.
"DELINQUENCY PERCENTAGE": With respect to the Mortgage Loan Pool for
any Payment Date, the percentage equivalent of the fraction the numerator of
which is equal to (x) the aggregate of the Principal Balances of all Mortgage
Loans that were as of the end of the related Collection Period (i) 90 or more
days contractually delinquent, (ii) REO Property, (iii) in foreclosure, or (iv)
for which the related Mortgagor was in a bankruptcy proceeding or paying a
reduced Monthly Payment as a result of a bankruptcy workout and 90 or more days
contractually delinquent under the Mortgage Note, and the denominator of which
is equal to (y) the Aggregate Principal Balance of the Mortgage Loan Pool as of
the related Determination Date.
"DELINQUENCY RATE TRIGGER": The Rolling Delinquency Percentage
equaling or exceeding 15.00% as of the end of the related Collection Period.
"DEPOSIT DATE": As to any Payment Date, the 18th day of the month in
which Payment Date occurs or, if such 18th day is not a Business Day, the next
succeeding Business Day.
"DEPOSIT TRUST AGREEMENT": The Deposit Trust Agreement, dated as of
November 1, 1999, among ACE Securities Corp., as depositor, Wilmington Trust
Company, as owner trustee, Norwest Bank Minnesota, National Association, as
trust paying agent, and the Servicer, pursuant to which the Issuer was formed.
"DEPOSITOR": ACE Securities Corp., as transferor of the Mortgage
Loans to the Issuer pursuant to the terms of that certain Mortgage Loan
Contribution Agreement, dated as of November 1, 1999, between ACE Securities
Corp. and the Issuer.
"DETERMINATION DATE": As to any Payment Date, the close of business
on the last day of the Due Period relating to such Payment Date.
"DUE PERIOD": As defined in the Indenture.
"ELIGIBLE ACCOUNT": Either (A) a segregated account or accounts
maintained with an institution the deposits of which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund of the FDIC, the
unsecured and uncollateralized debt obligations of which shall be rated "AA" or
better by S&P and "Aa2" or better by Moody's and in the highest short-term
rating category by each of S&P and Moody's, and that is either (1) a federal
savings and loan association duly organized, validly existing and in good
standing under the federal banking laws, (2) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (3) a national banking association duly organized, validly existing and
in good standing under the federal banking laws, (4) a principal subsidiary of a
bank holding company or (5) approved in writing by the Note Insurer or (B) a
trust account maintained with the trust department of a federal or state
chartered depository institution or trust company, having capital and surplus of
not less than $100,000,000, acting in its fiduciary capacity, the unsecured and
uncollateralized debt obligations of which shall be rated "Baa3" or better by
Moody's. Any Eligible Accounts maintained with the Indenture Trustee shall
conform to the preceding clause (B).
"EVENT OF DEFAULT": As defined in Section 6.01.
"FDIC": The Federal Deposit Insurance Corporation and its successors
in interest.
"FEMA": The Federal Emergency Management Agency and its successors
in interest.
"FHLMC": The Federal Home Loan Mortgage Corporation and its
successors in interest.
"FANNIE MAE": The Federal National Mortgage Association and its
successors in interest.
"INDENTURE": The indenture, dated as of November 1, 1999, between
the Issuer and the Indenture Trustee pursuant to which the Mortgage Loans and
certain other assets included in the Trust Estate are pledged as collateral for
the Notes, and any supplements or amendments thereto.
"INDENTURE TRUSTEE": Norwest Bank Minnesota, National Association, a
national banking association, and its successors in interest or any successor
trustee appointed as provided pursuant to the Indenture.
"INDENTURE TRUSTEE FEE": The monthly fee of the Indenture Trustee,
which shall be determined as set forth in the Indenture.
"INITIAL POOL BALANCE": With respect to all Mortgage Loans, the
aggregate of the Principal Balances of the Mortgage Loans determined as of the
Cut-off Date (after application of all payments of principal received in respect
of any such Mortgage Loan before the Cut-off Date), which aggregate amount is
$144,953,790.
"INSURANCE AGREEMENT": the Insurance Agreement, dated as of November
1, 1999 among the Note Insurer, the Issuer, the Seller, the Depositor and the
Indenture Trustee.
"INSURANCE PROCEEDS": With respect to any Deposit Date, proceeds
paid by any insurer (other than the Note Insurer) and received by the Servicer
during the related Collection Period pursuant to any insurance policy covering a
Mortgage Loan or the related Mortgaged Property, including any deductible
payable by the Servicer with respect to a blanket insurance policy pursuant to
Section 2.03 and the proceeds from any fidelity bond or errors and omission
policy pursuant to Section 2.11, net of any component thereof covering any
expenses incurred by or on behalf of the Servicer and specifically reimbursable
under this Agreement.
"INSURED PAYMENT": As defined in the Indenture.
"ISSUER": Mortgage Lenders Network Home Equity Loan Trust 1999-2, as
issuer of the Notes pursuant to the Indenture.
"LIQUIDATED MORTGAGE LOAN": As to any Deposit Date, any Mortgage
Loan (1) as to which the Servicer has determined, in accordance with the
servicing procedures specified herein, that all Liquidation Proceeds that it
expects to recover from or on account of such Mortgage Loan have been recovered,
(2) that has been purchased by the Servicer pursuant to Section 2.05 on or prior
to such Deposit Date or (3) that has been repurchased by the Seller pursuant to
Section 7 of the Mortgage Loan Sale Agreement on or prior to such Deposit Date.
"LIQUIDATION EXPENSES": Expenses that are incurred by the Servicer
in connection with the liquidation of any Mortgage Loan and not recovered under
any insurance policy or from any Mortgagor. Such expenses with respect to any
Liquidated Mortgage Loan shall include, without limitation, legal fees and
expenses, real estate brokerage commissions, any unreimbursed amount expended by
the Servicer pursuant to Section 2.05 respecting the related Mortgage Loan, and
any other related and previously unreimbursed Servicing Advances and Monthly
Advances.
"LIQUIDATION PROCEEDS": Cash (other than Insurance Proceeds)
received in connection with the liquidation of any Mortgaged Property, whether
through trustee's sale, foreclosure sale, condemnation, taking by eminent domain
or otherwise received in respect of any Mortgage Loan foreclosed upon as
described in Section 2.05 (including, without limitation, proceeds from the
rental of the related Mortgaged Property and payments received under the PMI
Policy).
"LIQUIDATION REPORT": A liquidation report in the form of Exhibit D
attached hereto.
"LOAN-TO-VALUE RATIO": With respect to any Mortgage Loan as of its
date of origination, the ratio as of its date of origination borne by the
outstanding principal amount of the Mortgage Loan to the Appraised Value or
sales price of the related Mortgaged Property.
"MONTHLY ADVANCE": As defined in Section 4.01(a).
"MONTHLY PAYMENT": With respect to any Mortgage Note, the amount of
each monthly payment payable by the Mortgagor under such Mortgage Note in
accordance with its terms, including one month's accrued interest on the related
Principal Balance at the applicable Mortgage Interest Rate, but net of any
portion of such monthly payment that represents late payment charges, prepayment
or extension fees or collections allocable to payments to be made by Mortgagors
for payment of insurance premiums or similar items.
"MONTHLY SERVICING FEE": With respect to any Payment Date, 1/12 of
the product of the Servicing Fee Rate and the Aggregate Principal Balance of the
Mortgage Loans as of the first day of the related Due Period (or, in the case of
the first Collection Period, the Initial Pool Balance).
"MOODY'S": Moody's Investors Service, Inc. and its successors in
interest.
"MORTGAGE": The mortgage, deed of trust or other instrument creating
a first lien on an estate in fee simple in real property securing a Mortgage
Loan.
"MORTGAGE FILE": As defined in the Mortgage Loan Sale Agreement.
"MORTGAGE INTEREST RATE": As defined in the Indenture.
"MORTGAGE LOAN": Each of the mortgage loans pledged to the Indenture
Trustee pursuant to the Indenture that from time to time comprise part of the
Trust Estate, all of which originally so held being identified in the Mortgage
Loan Schedule attached hereto as Schedule 1.
"MORTGAGE LOAN DOCUMENTS": As defined in the Mortgage Loan Sale
Agreement and the Indenture.
"MORTGAGE LOAN SALE AGREEMENT": That certain agreement, dated as of
November 1, 1999, between Mortgage Lenders Network USA, Inc., as seller, and the
Depositor, as purchaser, pursuant to which the Depositor acquired the Mortgage
Loans.
"MORTGAGE LOAN SCHEDULE": As of any date, the schedule of Mortgage
Loans then subject to this Agreement. The initial schedule of Mortgage Loans as
of the Cut-off Dates therefor is attached hereto as Schedule 1. The Mortgage
Loan Schedule shall be amended from time to time by the Servicer to reflect the
addition of Mortgage Loans to, and the removal of Mortgage Loans from, the Trust
Estate pursuant to the Indenture. The Mortgage Loan Schedule shall identify each
Mortgage Loan by the Servicer's loan number and address (including the state) of
the related Mortgaged Property and shall set forth as to each Mortgage Loan the
initial Loan-to-Value Ratio or Combined Loan-to-Value Ratio, the Cut-off Date,
the current Monthly Payment amount and the stated maturity date of the related
Mortgage Note. The Mortgage Loan Schedule shall be delivered to the Indenture
Trustee in both physical and computer-readable form.
"MORTGAGE NOTE": The note or other instrument evidencing the
indebtedness of a Mortgagor under the related Mortgage Loan.
"MORTGAGED PROPERTY": The underlying property securing a Mortgage
Loan.
"MORTGAGOR": The obligor under a Mortgage Note.
"NET LIQUIDATION PROCEEDS": As to any Mortgage Loan, Liquidation
Proceeds net of Liquidation Expenses. For all purposes of this Agreement, Net
Liquidation Proceeds shall be allocated first to accrued and unpaid interest on
the related Mortgage Loan through the end of the Collection Period in which the
related liquidation occurred, and then to the Principal Balance thereof.
"NET WORTH": For any fiscal quarter, the sum of the Servicer's
assets reflected on a balance sheet for such fiscal quarter prepared in
accordance with GAAP consistently applied minus the sum of the Servicer's
liabilities required to be shown as such on a balance sheet for such fiscal
quarter prepared in accordance with GAAP consistently applied.
"NONRECOVERABLE ADVANCE": Any Servicing Advance or Monthly Advance
that, in the Servicer's reasonable judgment, would not be ultimately recoverable
by the Servicer from late collections, Insurance Proceeds or Liquidation
Proceeds on the related Mortgage Loan or otherwise, as evidenced by an Officer's
Certificate delivered to the Note Insurer and the Indenture Trustee no later
than the Business Day following the Servicer's determination thereof.
"NOTE ACCOUNT": With respect to the Notes, the segregated trust
account, which shall be an Eligible Account, established and maintained pursuant
to Section 8.02 of the Indenture entitled "Norwest Bank Minnesota, National
Association, as Indenture Trustee for Mortgage Lenders Network Home Equity Loan
Trust 1999-2 Home Equity Loan Backed Notes, Series 1999-2, Class A Note Account"
on behalf of the Noteholders and the Note Insurer.
"NOTE BALANCE": As defined in the Indenture.
"NOTEHOLDER" OR "HOLDER": The Person in whose name a Note is
registered in the Note Register, except that, solely for the purpose of taking
any action under Article Six or giving any consent pursuant to this Agreement,
any Note registered in the name of the Issuer or the Servicer or any Person
actually known to a Responsible Officer of the Indenture Trustee to be an
Affiliate of the Issuer or the Servicer shall be deemed not to be outstanding
and the Voting Interest evidenced thereby shall not be taken into account in
determining whether Holders of the requisite Voting Interests necessary to take
any such action or effect any such consent have acted or consented unless the
Issuer, the Servicer or any such Person is an owner of record of all of the
Notes.
"NOTE INSURANCE POLICY": The Financial Guaranty Insurance Policy No.
50881-N dated November 18, 1999, including any endorsements thereto, issued by
the Note Insurer for the benefit of the Noteholders, pursuant to which the Note
Insurer guarantees payment of Insured Payments.
"NOTE INSURER": Financial Security Assurance Inc., a stock insurance
company organized and created under the laws of the State of New York, and any
successors thereto.
"NOTE INSURER DEFAULT": The existence and continuance of any of the
following:
(a) the Note Insurer fails to make a payment required under the Note
Insurance Policy in accordance with its terms;
(b) the Note Insurer (A) files any petition or commences any case or
proceeding under any provision or chapter of the Bankruptcy Code or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, (B) makes a general
assignment for the benefit of its creditors, or (C) has an order for
relief entered against it under the Bankruptcy Code or any other similar
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority enters a final and
nonappealable order, judgment or decree (A) appointing a custodian,
trustee, agent or receiver for the Note Insurer or for all or any material
portion of its property or (B) authorizing the taking of possession by a
custodian, trustee, agent or receiver of the Note Insurer (or the taking
of possession of all or any material portion of the property of the Note
Insurer).
Notwithstanding anything to the contrary contained herein, upon the
existence and continuance of a Note Insurer Default, the consent by the Note
Insurer shall not be required for any action or inaction hereunder and the Note
Insurer shall not have any rights with respect thereto except that in the case
of an amendment to this Agreement, the Note Insurer shall be entitled to an
Opinion of Counsel to the effect that such amendment does not materially and
adversely impair the Note Insurer's interests if an amendment is requested while
a Note Insurer Default is continuing.
"NOTE INSURER PARTIES": The Note Insurer or its respective agents,
representatives, directors, officers or employees.
"NOTE REGISTER": The register maintained pursuant to Section 2.06 of
the Indenture.
"NOTES": The Mortgage Lenders Network Home Equity Loan Trust 1999-2
Asset Backed Notes, Series 1999-2, Class A, issued pursuant to the Indenture.
"OFFICER'S CERTIFICATE": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Operating Officer or
a Vice President of the Servicer or, in the case of the Issuer, an authorized
signatory of the Owner Trustee, as the case may be, and delivered to the
Indenture Trustee, Note Insurer or each Rating Agency, as the case may be.
"OPINION OF COUNSEL": A written opinion of counsel in form and
substance reasonably acceptable to the Indenture Trustee and, in the case of
opinions delivered to Note Insurer, in form and substance reasonably acceptable
to it. Any expense related to obtaining an Opinion of Counsel for an action
requested by a party shall be borne by the party required to obtain such opinion
or seeking to effect the action that requires the delivery of such Opinion of
Counsel.
"ORIGINAL PRINCIPAL AMOUNT": With respect to any Mortgage Loan, the
original principal amount due under the related Mortgage Note as of its date of
origination.
"PAYMENT AHEAD": Any payment remitted by a Mortgagor with respect to
a Mortgage Note during a Due Period in excess of the Monthly Payment due during
such Due Period with respect to such Mortgage Note, which excess sums the
related Mortgagor has instructed the Servicer to apply to Monthly Payments due
in one or more subsequent Due Periods. A Monthly Payment that was a Payment
Ahead shall, for purposes of computing certain amounts under this Agreement, be
deemed to have been received by the Servicer on the date in the related Due
Period on which such Monthly Payment would have been due if such Monthly Payment
had not been paid as part of a Payment Ahead.
"PAYMENT DATE": The date of payment on the Notes pursuant to the
Indenture, which date is the 25th day of each month or, if such day is not a
Business Day, the Business Day immediately following such 25th day, beginning
December 27, 1999.
"PERCENTAGE INTEREST": As defined in the Indenture.
"PERMITTED INVESTMENTS": One or more of the following obligations,
instruments and securities:
(a) direct obligations of, and obligations fully guaranteed by, the
United States of America, FHLMC, Fannie Mae, the Federal Home Loan Banks
or any agency or instrumentality of the United States of America rated
"Aa3" or higher by Moody's, the obligations of which are backed by the
full faith and credit of the United States of America;
(b) demand and time deposits in, certificates of deposit of,
banker's acceptances issued by or federal funds sold by any depository
institution or trust company (including the Indenture Trustee or its agent
acting in their respective commercial capacities) incorporated under the
laws of the United States of America or any state thereof and subject to
supervision and examination by federal and/or state authorities, so long
as, at the time of such investment or contractual commitment providing for
such investment, such depository institution or trust company or its
ultimate parent has a short-term unsecured debt rating in one of the two
highest available rating categories of S&P and Moody's and provided that
each such investment has an original maturity of no more than 365 days,
and (ii) any other demand or time deposit or deposit which is fully
insured by the Federal Deposit Insurance Corporation;
(c) repurchase obligations with a term not to exceed 30 days with
respect to any security described in clause (a) above and entered into
with a depository institution or trust company (acting as a principal)
rated "A" or higher by S&P and rated "A2" or higher by Moody's; provided,
however, that collateral transferred pursuant to such repurchase
obligation must be of the type described in clause (a) above and must (i)
be valued daily at current market price plus accrued interest, (ii)
pursuant to such valuation, be equal, at all times, to 105% of the cash
transferred by the Indenture Trustee in exchange for such collateral and
(iii) be delivered to the Indenture Trustee or, if the Indenture Trustee
is supplying the collateral, an agent for the Indenture Trustee, in such a
manner as to accomplish perfection of a security interest in the
collateral by possession of certified securities;
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or
any state thereof which has a long-term unsecured debt rating in the
highest available rating category of each of the Rating Agencies at the
time of such investment;
(e) commercial paper having an original maturity of less than 365
days and issued by an institution having a short-term unsecured debt
rating in the highest available rating category of each of the Rating
Agencies at the time of such investment;
(f) a guaranteed investment contract approved by each of the Rating
Agencies and the Note Insurer and issued by an insurance company or other
corporation having a long-term unsecured debt rating in the highest
available rating category of each of the Rating Agencies at the time of
such investment;
(g) money market funds having ratings in one of the two highest
available rating categories of S&P and in the highest available rating
category by Moody's at the time of such investment which invest only in
other Permitted Investments (any such money market funds which provide for
demand withdrawals being conclusively deemed to satisfy any maturity
requirements for Permitted Investments set forth herein), including money
market funds of the Indenture Trustee and any such funds that are managed
by the Indenture Trustee or its affiliates or for which the Indenture
Trustee or any affiliate acts as advisor as long as such money market
funds satisfy the criteria of this subparagraph (g); and
(h) any investment approved in writing by the Note Insurer; provided
that each Rating Agency must have issued written evidence that any such
investment will not result in a downgrading or withdrawal of the rating by
each Rating Agency on the Notes.
"PERSON": Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"PMI POLICY": As defined in the Indenture.
"PREPAYMENT CHARGE": With respect to any Prepayment Period, any
prepayment premium, penalty or charge payable by a Mortgagor in connection with
any Principal Prepayment on a Mortgage Loan pursuant to the terms of the related
Mortgage Note.
"PREPAYMENT CHARGE SCHEDULE": As of any date, the list of Prepayment
Charges on the Mortgage Loans included in the Trust Estate on such date,
attached hereto as Exhibit D (including the Prepayment Charge Summary attached
thereto). The Prepayment Charge Schedule shall set forth the following
information with respect to each Prepayment Charge:
(i) the Mortgage Loan identifying number;
(ii) a code indicating the type of Prepayment Charge;
(iii)the state of origination of the related Mortgage Loan;
(iv) the date on which the first monthly payment was due on the
related Mortgage Loan;
(v) the term of the related Mortgage Loan; and
(vi) the principal balance of the related Mortgage Loan as of the
Cut-off Date.
"PRINCIPAL BALANCE": As to any Mortgage Loan and any Determination
Date, the actual outstanding principal amount thereof as of the close of
business on the Determination Date in the preceding month (or, in the case of
the first Determination Date, as of the Cut-off Date) less (1) all scheduled
payments of principal received or advanced in respect of such Mortgage Loan and
due during the related Due Period, (2) all other amounts collected, received or
otherwise recovered in respect of principal on the Mortgage Loans (including
Principal Prepayments, but not including Payments Ahead that are not allocable
to principal for the related Due Period) during or in respect of the related
Collection Period, (3) Net Liquidation Proceeds and Trust Insurance Proceeds
allocable to principal recovered or collected in respect of such Mortgage Loan
during the related Collection Period, (4) the portion of the Purchase Price
allocable to principal to be remitted to the Indenture Trustee on or prior to
the next succeeding Deposit Date in connection with a release and removal of
such Mortgage Loan pursuant to the Indenture, to the extent such amount is
actually remitted on or prior to such Deposit Date, and (5) the amount to be
remitted by the Seller to the Indenture Trustee on the next succeeding Deposit
Date in connection with a substitution of a Qualified Replacement Mortgage Loan
for such Mortgage Loan pursuant to the Indenture, to the extent such amount is
actually remitted on or prior to such Deposit Date; provided, however, that a
Mortgage Loan that has become a Liquidated Mortgage Loan since the preceding
Determination Date (or, in the case of the first Determination Date, since the
Cut-off Date) will be deemed to have a Principal Balance of zero on the current
Determination Date.
"PRINCIPAL PREPAYMENT": As to any Mortgage Loan and Collection
Period, any payment by a Mortgagor or other recovery in respect of principal on
a Mortgage Loan (including Net Liquidation Proceeds) that, in the case of a
payment by a Mortgagor, is received in advance of its scheduled due date and is
not a Payment Ahead.
"PURCHASE PRICE": As defined in the Indenture.
"RATING AGENCIES": S&P and Moody's (each, a "Rating Agency"). If any
such agency or a successor is no longer in existence, "Rating Agency" shall be
such nationally recognized statistical credit rating agency, or other comparable
Person, designated by the Servicer, notice of which designation shall be given
to the Indenture Trustee and the Note Insurer.
"REALIZED LOSS": With respect to any Liquidated Mortgage Loan, the
amount, if any, by which the Principal Balance of such Mortgage Loan and accrued
and unpaid interest thereon (determined as of the Determination Date immediately
prior to such Mortgage Loan becoming a Liquidated Mortgage Loan) exceeds the Net
Liquidation Proceeds or Purchase Price, if any, in respect of such Mortgage
Loan, which amount shall in no event exceed the Principal Balance of such
Mortgage Loan (determined as of the Determination Date immediately prior to such
Mortgage Loan becoming a Liquidated Mortgage Loan).
"REFINANCED MORTGAGE LOAN": A Mortgage Loan the proceeds of which
were not used to purchase the related Mortgaged Property.
"REMITTABLE FUNDS": With respect to the Mortgage Loans and any
Deposit Date, the amount equal to the aggregate of the following amounts:
(a) all payments in respect of or allocable to interest received (or
deemed to have been received in the case of Payments Ahead) with respect
to the Mortgage Loans due during the related Due Period and all other
interest payments on or in respect of the Mortgage Loans received by or on
behalf of the Servicer during the related Collection Period, net of ---
amounts representing interest accrued on such Mortgage Loans in respect of
any period prior to the Cut-off Date, plus any Compensating Interest
payments made by the Servicer and any net income from related REO
Properties collected during the related Collection Period;
(b) all scheduled payments of principal received (or deemed to have
received, in the case of Payments Ahead) with respect to the Mortgage
Loans due during the related Due Period, and all other principal payments
(including Principal Prepayments) received or deemed to have been received
during the related Collection Period;
(c) all Trust Insurance Proceeds and Net Liquidation Proceeds
received during the related Collection Period; and
(d) the amount of Monthly Advances made by the Servicer in respect
of such Deposit Date pursuant to Section 4.01 (a), but net of the
following amounts:
(1) the Monthly Servicing Fee and any other compensation
payable to the Servicer pursuant to Section 2.07 for the related
Collection Period (except to the extent used to pay Compensating
Interest) to the extent not previously paid to or retained by the
Servicer;
(2) the aggregate amount of Monthly Advances, if not
theretofore recovered from the Mortgagor on whose behalf such
Monthly Advance was made, from subsequent collections on the related
Mortgage Loan (other than those included in the related Liquidation
Expenses or netted out by the Servicer from related Insurance
Proceeds);
(3) the aggregate amount of Servicing Advances, if not
theretofore recovered from the Mortgagor on whose behalf such
Servicing Advance was made, from subsequent collections on the
related Mortgage Loan (other than those included in the related
Liquidation Expenses or netted out by the Servicer from related
Insurance Proceeds);
(4) the aggregate amount of Nonrecoverable Advances not
previously reimbursed to the Servicer;
(5) any amount deposited into the Collection Account that may
not be withdrawn therefrom pursuant to a final and nonappealable
order of a United States bankruptcy court of competent jurisdiction
imposing a stay pursuant to Section 362 of the United States
Bankruptcy Code and that would otherwise have been included in
Remittable Funds on such Deposit Date; and
(6) excess Net Liquidation Proceeds as described in the second
paragraph of Section 2.05.
"REO PROPERTY": As defined in Section 4.01(a).
"RESPONSIBLE OFFICER": When used with respect to the Indenture
Trustee, the Chairman or Vice Chairman of the Board of Directors or Trustees,
the Chairman or Vice Chairman of the Executive or Standing Committee of the
Board of Directors or Trustees, the President, the Chairman of the Committee on
Trust Matters, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, any Assistant Treasurer, the Cashier, any Assistant Cashier, any
Trust Officer or Assistant Trust Officer, the Controller and any Assistant
Controller or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
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.
"ROLLING DELINQUENCY PERCENTAGE": As of any Payment Date, the
average of the Delinquency Percentages as of the last day of each of the three
(or one and two in the case of the first two Payment Dates, as applicable) most
recently ended Collection Periods.
"ROLLING LOSS PERCENTAGE": As of any Payment Date, the percentage
equivalent of a fraction, the numerator of which is the aggregate amount of
Realized Losses incurred during the preceding 12 Collection Periods, and the
denominator of which is the aggregate Principal Balance of the Mortgage Loans as
of the first day of the 12th preceding Collection Period.
"ROLLING LOSS RATE TRIGGER": The Rolling Loss Percentage equaling or
exceeding 1.75% as of any Deposit Date.
"SELLER": Mortgage Lenders Network USA, Inc., as seller of the
Mortgage Loans pursuant to the Mortgage Loan Sale Agreement.
"SERVICER": Mortgage Lenders Network USA, Inc. or any successor
servicer appointed as provided pursuant to this Agreement.
"SERVICER MORTGAGE FILE": As to each Mortgage Loan, a file
maintained by the Servicer that contains (1) an original hazard insurance policy
(and flood insurance policy, if required pursuant to Section 2.03 hereof)
relating to the underlying Mortgaged Property or a certificate of insurance
issued by the insurer or its agent indicating that a hazard insurance policy
(and flood insurance policy, if required pursuant to Section 2.03 hereof) is in
effect with respect to such Mortgaged Property, (2) the originals of all RESPA
and Regulation Z disclosure statements executed by the related Mortgagors, (3)
the appraisal report made in connection with the origination of the Mortgage
Loan (4) the settlement statement for the purchase and/or refinancing of the
underlying Mortgaged Property by the related Mortgagor under the related
Mortgage Note and Mortgage, (5) the originals of any tax service contracts, (6)
documentation relating to any approvals by the Servicer of any modifications of
the original related Mortgage Loan Documents and any releases of collateral
supporting the related Mortgage Loan, together with copies of the documentation
effecting any such modifications or releases, (7) collection notices or form
notices sent to the related Mortgagor, (8) foreclosure correspondence and legal
notifications, if applicable, (9) water and irrigation company stock
certificates, if applicable, and (10) all other documents relating to such
Mortgage Loan which would customarily be maintained in a mortgage loan file by
the Servicer in order to service the mortgage loan properly, as well as any
other documents relating to such Mortgage Loan (other than Mortgage Loan
documents) that come into the Servicer's possession.
"SERVICER REMITTANCE REPORT": The monthly report prepared by the
Servicer and delivered to the parties specified in Section 3.01.
"SERVICER RENEWAL NOTICE": Has the meaning set forth in Section
7.02(b) hereof.
"SERVICING ADVANCES": All reasonable and customary "out-of-pocket"
costs and expenses incurred in the performance by the Servicer of its servicing
obligations, including, but not limited to, the cost of (1) the preservation,
restoration and protection of the Mortgaged Properties, including, without
limitation, advances in respect of real estate taxes and assessments and
insurance premiums on fire, hazard and, if applicable, flood insurance policies,
to the extent not paid by the related Mortgagors, (2) any enforcement or
judicial proceedings with respect to the Mortgage Loans or Mortgaged Properties,
including foreclosures, (3) the management and liquidation of any REO Property,
(4) compliance with the Servicer's obligations under Section 2.03 (other than
its obligation to deposit in the Collection Account amounts representing the
deductible in respect of any blanket hazard insurance policy) and (5)
satisfaction of senior liens.
"SERVICING FEE RATE": 0.50% per annum.
"SERVICING OFFICER": Any officer of the 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 annexed to an
Officer's Certificate furnished to the Indenture Trustee by the Servicer, as
such list may from time to time be amended.
"S&P": Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies, Inc., and its successors in interest.
"SUB-SERVICER": Any Person, including an Affiliate of the Servicer,
with whom the Servicer or, in the event that the Indenture Trustee has assumed
the role of Servicer in accordance with Section 6.02 hereof, the Indenture
Trustee has entered into a Sub-Servicing Agreement and who satisfies the
requirements set forth in Section 2.16 hereof in respect of the qualification of
a Sub-Servicer.
"SUB-SERVICING ACCOUNT": Any segregated trust account, which shall
at all times be an Eligible Account, established and maintained as though it
were a Collection Account pursuant to Section 2.02(b) and entitled "[Indenture
Trustee], in trust for the benefit of Holders of Mortgage Lenders Network Home
Equity Loan Trust 1999-2 Asset Backed Notes, Series 1999-2, Class A and
Financial Security Assurance Inc., as Note Insurer, Collection Account".
References herein to the Collection Account shall include any Sub-Servicing
Account as the context requires.
"SUB-SERVICING AGREEMENT": A written contract between the Servicer
or, in the event that the Indenture Trustee has assumed the role of Servicer in
accordance with Section 6.02 hereof, the Indenture Trustee and any Sub-Servicer
relating to the servicing and/or administration of certain Mortgage Loans.
"TRANSITION EXPENSES": Has the meaning set forth in Section 6.01
hereof.
"TRUST CERTIFICATES": The certificates of beneficial ownership of
the Issuer.
"TRUST ESTATE": As defined in the Indenture.
"TRUST INSURANCE PROCEEDS": Insurance Proceeds that are not applied
to the restoration or repair of the related Mortgaged Property or released to
the related Mortgagor in accordance with the Servicer's normal servicing
procedures, applicable law or the terms of the related Mortgage Loan.
"TRUST PAYING AGENT": As defined in the Deposit Trust Agreement.
"UNDERWRITERS": First Union Securities, Inc. and Deutsche Bank
Securities Inc.
"UNDERWRITING AGREEMENT": The underwriting agreement and the terms
agreement, each dated as of November 10, 1999 among ACE Securities Corp. and
Deutsche Bank Securities Inc., as the representative of the Underwriters.
"VICE PRESIDENT": Any vice president, whether or not designated by a
number or a word or words added before or after the title "vice president".
"VOTING INTEREST": With respect to any provisions hereof providing
for the action, consent or approval of the Holders of all Notes evidencing
specified Voting Interests in the Trust Estate, the Noteholders will
collectively be entitled to 100% of the aggregate Voting Interests represented
by all Notes. Voting Interests allocated to the Notes shall be allocated in
proportion to the Note Balance. With respect to any provision hereof providing
for action, consent or approval of the Notes, each Holder of the Notes will have
a Voting Interest in the Notes equal to such Holder's Percentage Interest in the
Notes.
SECTION 1.02 INTEREST CALCULATIONS.
All calculations of interest at the Mortgage Loan Rate that are made
in respect of the Principal Balance of a Mortgage Loan, shall be made on a daily
basis using a 360-day year of twelve 30-day months.
SECTION 1.03 DETERMINATION OF MATERIAL ADVERSE EFFECT.
Whenever a determination is to be made under this agreement as to
whether a given action, course of conduct, event or set of facts or
circumstances could or would have a material adverse effect on the Trust Estate,
the Note Insurer or any Noteholder (or any similar or analogous determination),
such determination shall be made without giving effect to the insurance provided
by the Note Insurance Policy.
ARTICLE II
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 2.01 SERVICING GENERALLY.
(a) General Duties; Licensing. The Servicer, as servicer, shall
administer the Mortgage Loans with reasonable care, using that degree of skill
and attention that the Servicer exercises with respect to all comparable
mortgage loans that it services for itself or others. The Servicer shall follow
its customary standards, policies and procedures in performing its duties as
Servicer, to the extent not in conflict with the provisions of this Agreement.
Notwithstanding the appointment of any sub-servicer, the Servicer shall remain
liable for the performance of all of the servicing obligations and
responsibilities under this Agreement. The Servicer shall maintain all licenses
and qualifications necessary under the laws of any jurisdiction where Mortgaged
Properties are located for it to perform the servicing obligations hereunder
legally. The Servicer shall cooperate with the Issuer and the Indenture Trustee
and furnish to the Issuer and the Indenture Trustee such information in its
possession as may be necessary or otherwise reasonably requested to enable the
Issuer and the Indenture Trustee to perform their respective duties under the
Indenture. The Issuer and the Indenture Trustee shall cooperate with the
Servicer in furnishing the Servicer with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder; provided, however, that the
Indenture Trustee shall have no duty to prepare any such power of attorney.
(b) Interest Rate and Monthly Payment Adjustments. The Servicer
shall enforce each Mortgage Loan and shall timely calculate, record, report and
apply all Mortgage Interest Rate adjustments in accordance with the related
Mortgage Note. The Servicer's records shall, at all times, reflect the
then-current Mortgage Interest Rate and Monthly Payment and the Servicer shall
timely notify the Mortgagor of any changes to the Mortgage Interest Rate and the
Monthly Payment.
(c) Servicer Authority. Without limiting the generality of the
foregoing, the Servicer (1) shall continue, and is hereby authorized and
empowered by the Issuer and the Indenture Trustee, to execute and deliver, on
behalf of itself, the Issuer, the Noteholders, the Note Insurer and the
Indenture Trustee or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans and with respect to
the related Mortgaged Properties and (2) subject to Section 2.05, to institute
foreclosure proceedings or obtain deeds in lieu of foreclosure so as to convert
ownership of Mortgaged Properties into the name of the Indenture Trustee
pursuant to Section 2.05 of this Agreement. The Servicer may sue to enforce or
collect on any of the Mortgage Loans or any insurance policy covering a Mortgage
Loan, in its own name if possible, or on behalf of the Issuer or the Indenture
Trustee. If the Servicer commences a legal proceeding to enforce a Mortgage Loan
or any such insurance policy, the Issuer and the Indenture Trustee shall
thereupon be deemed to have automatically assigned the Mortgage Loan or the
rights under such insurance policy to the Servicer for purposes of collection
only. If, however, in any suit or legal proceeding for enforcement, it is held
that the Servicer may not enforce or collect on a Mortgage Loan or any insurance
policy covering a Mortgage Loan on the ground that it is not a real party in
interest or a holder entitled to enforce such Mortgage Loan or such insurance
policy, as the case may be, then the Issuer and the Indenture Trustee shall,
upon the written request of a Servicing Officer, execute and return to the
Servicer such powers of attorney and other documents as are necessary or
appropriate to enable the Servicer to enforce such Mortgage Loan or insurance
policy, as the case may be, and which are prepared by the Servicer and submitted
to the Issuer or the Indenture Trustee for execution.
The Servicer, on behalf of the Issuer, the Noteholders and the Note
Insurer, shall prepare, execute, deliver and take all actions reasonably
necessary to protect the Trust Estate pursuant to Section 3.05 of the Indenture
and shall, on behalf of the Issuer, execute and deliver and take any additional
actions as shall be deemed necessary to effect the administrative obligations of
the Issuer under the Indenture.
(d) Independent Contractor Relationship. The relationship of the
Servicer to the Issuer and the Indenture 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.
SECTION 2.02 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS; COLLECTION ACCOUNT.
(a) Collection Procedures. The Servicer shall, to the extent such
procedures shall be consistent with this Agreement, follow such collection
procedures as it follows from time to time with respect to mortgage loans in its
servicing portfolio that are comparable to the Mortgage Loans. The Servicer
shall not materially amend or modify these procedures, policies and practices
with respect to the Mortgage Loans (other than as required by applicable laws
and regulations) without the prior consent of the Note Insurer, and a copy of
any such amendment or modification shall be furnished to the Indenture Trustee
and the Note Insurer. Consistent with the foregoing, the Servicer may in its
discretion (1) waive any late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees that may be collected
in the ordinary course of servicing the Mortgage Loans, (2) if a Mortgagor is in
default or appears about to be in default because of a Mortgagor's financial
condition, arrange with the Mortgagor a schedule for the payment of delinquent
payments due on the related Mortgage Loan or (3) modify payments of monthly
principal and interest on any Mortgage Loan becoming subject to the terms of the
Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "Relief Act"),
in accordance with the Servicer's general policies for comparable mortgage loans
subject to the Relief Act; provided, however, that the Servicer shall not,
without the prior written consent of the Note Insurer, permit any waiver,
modification or variance of a Mortgage Loan which would (1) change the Mortgage
Interest Rate, (2) forgive the payment of any principal or interest, (3) impair
the priority of the lien represented by the related Mortgage, (4) the Servicer
will not, without the Note Insurer's consent, (A) extend any Mortgage Loan more
than once in a calendar year or (B) grant more than three extensions with
respect to any Mortgage Loan or (5) extend the final maturity date of the
Mortgage Loan beyond December 25, 2030, in any case except to the extent
required under the Relief Act unless (i) in its judgment, a material default on
the Mortgage Loan has occurred or a payment default is reasonably foreseeable
and (ii) in its judgment, such modification, waiver or amendment is reasonably
likely to produce a greater recovery with respect to the Mortgage Loan on a
present value basis than would liquidation; and provided further, that the
Servicer shall not waive any Prepayment Charge provision included in a Mortgage
Note unless the Servicer determines, in its best reasonable judgment, that the
related Mortgagor will be in imminent default of all future payments of
principal and interest under the terms of the related Mortgage Note. The
Servicer will not consent to the placement of a deed of trust or mortgage, as
applicable, on any Mortgaged Property that has a priority equal to or higher
than the lien securing the related Mortgage Loan unless such Mortgage Loan is
prepaid in full. No partial release of a Mortgage Loan shall be made if it would
cause the Loan-to-Value Ratio or the Combined Loan-to-Value Ratio of the
Mortgage Loan (taking into account the partial release) to be higher than the
Loan-to-Value Ratio or the Combined Loan-to-Value Ratio of the Mortgage Loan at
origination.
(b) Collection Account. The Servicer shall establish and maintain,
or cause to be established and maintained, one or more Eligible Accounts that in
the aggregate are the Collection Account. At the Servicer's option, amounts held
in the Collection Account shall be invested by the depository institution or
trust company then maintaining the account at the written direction of the
Servicer in Permitted Investments that mature not later than the Deposit Date
next succeeding the date of investment. The Servicer shall not retain any cash
or investment in the Collection Account for a period in excess of 12 months and
cash therein shall be considered transferred on a first-in, first-out basis to
the Indenture Trustee for inclusion in the Note Account, as described in Section
2.02(d). All net income and gain realized from any such investment shall be for
the benefit of the Servicer as additional servicing compensation and shall be
subject to its withdrawal or order from time to time. Any losses realized in
connection with any such investment shall be for the account of the Servicer and
the Servicer shall deposit or cause to be deposited the amount of such loss (to
the extent not offset by income from other investments) in the Collection
Account immediately upon the realization of such loss and shall have no right to
reimbursement therefor. Any benefit resulting from deposits, maintenance or
investment of funds in the Collection Account shall be for the Servicer's
benefit.
(c) Deposits to Collection Account. Subject to the last paragraph of
this Section 2.02(c), the Servicer shall deposit in the Collection Account each
of the following payments on and collections in respect of the Mortgage Loans as
soon as practicable, but in no event later than the close of business on the
second Business Day after its receipt thereof:
(i) all payments in respect of or allocable to interest on the
Mortgage Loans (including any net income from REO Properties), net of the
Monthly Servicing Fees attributable to such payments;
(ii) all collections of principal on or with respect to the Mortgage
Loans;
(iii) all Payments Ahead;
(iv) all Net Liquidation Proceeds; and
(v) all Trust Insurance Proceeds (including, for this purpose, any
amounts required to be credited by the Servicer pursuant to the last
sentence of Section 2.03)
in any case net of its Monthly Servicing Fees, Ancillary Servicing Compensation,
and reimbursable outstanding Servicing Advances and Monthly Advances, to the
extent the Servicer's automated system deducts such amounts from collected funds
prior to deposit of such collected funds into the Collection Account.
The Servicer shall replace all amounts previously withdrawn from the
Collection Account and applied by the Servicer towards the payment of Monthly
Advances pursuant to Section 4.01 (a) or towards the payment of a Servicing
Advance pursuant to Section 4.01 (b) by depositing into the Collection Account
on or prior to the Deposit Date immediately following such withdrawal an amount
equal to the total of all such amounts so applied since the immediately
preceding Deposit Date.
The foregoing requirements respecting deposits to the Collection
Account are exclusive, it being understood that, without limiting the generality
of the foregoing, the Servicer need not deposit in the Collection Account
amounts representing fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or extension or other
administrative charges paid by Mortgagors or amounts received by the Servicer
for the account of Mortgagors for application towards the payment of taxes,
insurance premiums, assessments and similar items. The amounts deposited in the
Collection Account are subject to withdrawal by the Servicer, from time to time,
(1) to make transfers to the Indenture Trustee for deposit into the Note Account
pursuant to Section 2.02(d), (2) to pay itself the Monthly Servicing Fee, to the
extent not already paid to or retained by the Servicer, pursuant to Section
2.07, Ancillary Servicing Compensation, and investment income on Permitted
Investments, (3) to make Servicing Advances or to reimburse itself for Servicing
Advances, as applicable, in either case in accordance with Section 4.01(b), (4)
to make Monthly Advances in accordance with Section 4.01 (a) or to reimburse
itself for payments of Monthly Advances as described in Section 4.01 (a), and
(5) to clear and terminate the Collection Account. In addition, if the Servicer
deposits in the Collection Account any amount not required to be so deposited 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, any provision herein to
the contrary notwithstanding.
Upon such terms as the Note Insurer may approve and upon written
notice to S&P and Moody's, the Servicer may make the deposits to the Collection
Account referred to in Section 2.02(c) on a later day than the second Business
Day after receipt of the amounts required to be so deposited, which terms and
later day shall be specified by the Note Insurer, and confirmed to the Indenture
Trustee, S&P, Moody's and the Servicer in writing; provided however, that in any
event such amounts shall be deposited into the Collection Account no later than
the next succeeding Deposit Date.
(d) Withdrawals; Remittances to Indenture Trustee. At or before
12:00 noon eastern standard time on each Deposit Date, the Servicer shall
withdraw from the Collection Account all amounts on deposit therein that
constitute any portion of Remittable Funds, as reported to the Indenture Trustee
by the Servicer, for the related Deposit Date (including any amounts therein
that are being held for remittance on a subsequent Deposit Date and are applied
toward the Monthly Advances for the related Deposit Date pursuant to Section
4.01(a)) and deposit such amounts into the Note Account. In addition, any
amounts required pursuant to the Indenture to be deposited into the Note Account
in connection with a purchase of any Mortgage Loans by the Servicer pursuant to
the Indenture and any other amounts (including Monthly Advances and Compensating
Interest for such Deposit Date) required by this Agreement to be deposited by
the Servicer with the Indenture Trustee shall be remitted to the Indenture
Trustee for deposit into the Note Account on each Deposit Date. On each Deposit
Date after the Indenture has been satisfied and released for so long as the
Deposit Trust Agreement remains in effect, the Servicer shall remit all
Remittable Funds to the Trust Paying Agent, for deposit into the Certificate
Distribution Account in accordance with the Deposit Trust Agreement.
SECTION 2.03 HAZARD INSURANCE POLICIES.
The Servicer shall cause to be maintained for each Mortgage Loan
(including any Mortgage Loan as to which the related Mortgaged Property has been
acquired on behalf of the Indenture Trustee upon foreclosure, by deed in lieu of
foreclosure or comparable conversion), hazard insurance (including flood
insurance coverage, if obtainable, to the extent such property is located in a
federally designated flood area in such amount as is required under applicable
FEMA guidelines) with extended coverage in an amount that is not less than the
lesser of (1) the maximum insurable value from time to time of the improvements
that are a part of such property or a replacement cost basis, or (2) the
principal balance of such Mortgage Loan, determined in the case of a Mortgage
Loan that has been foreclosed at the time of such foreclosure; provided,
further, that such hazard insurance shall be in an amount not less than such
amount as is necessary to avoid the application of any coinsurance clause
contained in the related hazard insurance policy. Each such hazard insurance
policy shall contain a standard mortgagee loss payable clause naming Mortgage
Lenders Network USA, Inc., its successors and assigns, as mortgagee. The
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.
Amounts collected by the Servicer under any such policies shall be deposited
into the Collection Account in accordance with Section 2.02 to the extent that
they constitute Trust Insurance Proceeds. If the Servicer shall obtain and
maintain a blanket policy, issued by an insurer acceptable to each Rating Agency
and the Note Insurer, insuring against such hazard losses, 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 that is in form and substance consistent with standard
industry practice, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with the first sentence of this Section 2.03, and there shall have
been a loss that would have been covered by such policy, deposit in the
Collection Account in accordance with Section 2.02 the amount not otherwise
payable under the blanket policy because of such deductible clause from its own
funds, and such amount shall not be reimbursable to the Servicer.
SECTION 2.04 ENFORCEMENT OF DUE-ON-SALE CLAUSES.
In any case in which property subject to a Mortgage is voluntarily
conveyed by the Mortgagor, the Servicer will enforce any related due-on-sale
clause to the extent permitted by the related Mortgage Note and Mortgage and by
all applicable laws and regulations, but only to the extent the Servicer does
not believe that such enforcement will (1) adversely affect or jeopardize
coverage under any related insurance policy, (2) result in legal action by the
Mortgagor, or (3) materially increase the risk of default or delinquency on, or
materially impair the security for, such Mortgage Loan.
SECTION 2.05 REALIZATION UPON DEFAULTED MORTGAGE LOANS, OPTIONS TO PURCHASE
MORTGAGE LOANS.
The Servicer, on behalf of and as the agent of the Indenture
Trustee, shall foreclose upon or otherwise comparably convert the ownership of
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 2.02(a) into the name of
the Indenture Trustee; provided, however, that if the Servicer has actual
knowledge or reasonably believes that any Mortgaged Property is affected by
hazardous or toxic wastes or substances, then the Servicer will cause to be
undertaken (in no event at the Indenture Trustee's expense) an environmental
inspection of the Mortgaged Property that complies with Fannie Mae's selling and
servicing guide applicable to single family homes and its servicing procedures.
If the environmental inspection reveals any potentially hazardous substances,
the Servicer will notify the Indenture Trustee and the Note Insurer, and the
Servicer will not foreclose or accept a deed in lieu of foreclosure on the
Mortgaged Property without the consent of the Indenture Trustee and the Note
Insurer. In connection with such foreclosure or other conversion, the Servicer
shall follow such practices and procedures as it shall deem necessary or
advisable and as shall be normal and usual in its general one- to four-family
mortgage loan servicing activities. The foregoing is subject to the proviso that
the Servicer shall not be required to expend its own funds in connection with
any foreclosure or restoration of any Mortgaged Property unless, in the
reasonable judgment of the Servicer, such foreclosure, correction or restoration
will increase Net Liquidation Proceeds (taking into account the reimbursement of
such expenses to the Servicer and any unreimbursed Servicing Advances and
Monthly Advances made or expected to be made with respect to such Mortgage
Loan).
To the extent the Net Liquidation Proceeds derived from any such
foreclosure or conversion exceed the Principal Balance of the related Mortgage
Loan and accrued interest thereon at the applicable Mortgage Interest Rate
through the Determination Date during the Collection Period in which such
foreclosure or conversion occurs (net of any Monthly Advances or Servicing
Advances made by the Servicer with respect to such Mortgage Loan and that were
unreimbursed prior to the receipt of such Net Liquidation Proceeds), such excess
shall be paid directly to the Servicer as additional Servicing Compensation and
shall be free from the lien of the Indenture.
The Servicer must determine, as to each defaulted Mortgage Loan,
when such Mortgage Loan has become a Liquidated Mortgage Loan.
The Servicer, at its sole option, may purchase from the Trust Estate
on any Deposit Date any Mortgage Loan as to which the related Mortgagor has
failed to make full Monthly Payments as required under the related Mortgage Note
for three consecutive months or any Mortgage Loan as to which enforcement
proceedings have been brought by the Servicer at any time following the Cut-off
Date and prior to such Deposit Date at a price equal to the Purchase Price by
transferring such amount to the Indenture Trustee for deposit into the Note
Account on such Deposit Date pursuant to Section 2.02; provided however,
repurchases in excess of 3% of the Principal Balance of the Mortgage Loans as of
the Cut-Off Date will require the consent of the Note Insurer and repurchases up
to 3% of the Principal Balance of the Mortgage Loans as of the Cut-off Date will
require notification to the Note Insurer. The Servicer may only repurchase
Mortgage Loans, pursuant to the preceding sentence, in order of delinquency,
from most delinquent to least or from highest projected loss (as shown on the
Servicer's monthly report) to the lowest projected loss. The Servicer must
provide the Note Insurer with a report as to the ultimate disposition of all
Mortgage Loans repurchased in accordance with this Section 2.05. On any Deposit
Date following the Determination Date as of which the aggregate Note Balance is
equal to or less than 10% of the Original Note Balance, if the holders of more
than 50% of the Trust Certificates shall not have directed the Servicer to
redeem the Notes pursuant to the Indenture, the Servicer, in its sole
discretion, may purchase from the Trust Estate all, but not less than all, of
the Mortgage Loans then included in the Trust Estate at a price equal to the
Purchase Price for each such Mortgage Loan by transferring such amount to the
Indenture Trustee for deposit in the Note Account on such Deposit Date pursuant
to Section 2.02. In the event that the Certificateholders fail to exercise the
option to purchase the Notes or the Servicer fails to exercise the option to
purchase the Mortgage Loans then included in the Trust Estate, the Note Insurer
may purchase the Mortgage Loans then included in the Trust Estate in the same
manner as the Servicer. Upon the receipt by the Indenture Trustee of the
Purchase Price for any Mortgage Loan as to which the Servicer has exercised its
option to purchase pursuant to this paragraph, the Indenture Trustee shall
release to the Servicer the Mortgage File pertaining to each such Mortgage Loan
and the Indenture Trustee and the Issuer shall execute and deliver such
instruments of transfer and all other documents furnished by the Servicer as are
necessary to transfer their respective interests in such Mortgage Loans to the
Servicer. For purposes of this Agreement, any purchase effected in accordance
with this paragraph shall be deemed to be a prepayment of each Mortgage Loan so
purchased.
In the event that title to any Mortgaged Property is acquired as REO
Property by the Indenture Trustee in foreclosure or by deed in lieu of
foreclosure, the deed or certificate of sale shall be issued to the Indenture
Trustee, or to its nominee, on behalf of the Noteholders and the Note Insurer,
and the Servicer shall manage, conserve, protect and operate each such REO
Property for the Noteholders solely for the purpose of its prompt disposition
and sale. The Servicer shall use its best efforts to dispose of each such REO
Property as expeditiously as possible consistent with the goal of maximizing Net
Liquidation Proceeds (taking into account any unreimbursed Servicing Advances
and Monthly Advances made or expected to be made with respect to such REO
Property). None of the Issuer, the Indenture Trustee or the Servicer, acting on
behalf of the Trust Estate, shall provide financing from the Trust Estate to any
purchaser of any such REO Property.
SECTION 2.06 INDENTURE TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES.
(a) Upon the payment in full of the principal balance of any
Mortgage Loan, the Servicer shall notify the Indenture Trustee and the Custodian
by a certification in the form of Exhibit B hereto (a "Request for Release")
(which certification shall include a statement to the effect that all amounts
received in connection with such payment which are required to be deposited to
the Collection Account pursuant to Section 2.02 have been so deposited) of a
Servicing Officer. Such notification shall be made each month at the time that
the Servicer delivers its Servicer Remittance Report to the Issuer and the
Indenture Trustee pursuant to Section 3.01. Upon any such payment in full, the
Servicer is authorized to either (i) procure a deed of full reconveyance
covering the related Mortgaged Property encumbered by such Mortgage, which deed,
except as otherwise provided in applicable law, shall be recorded in the office
of the County Recorder in which the Mortgage is recorded, or (ii), as the case
may be, to procure an instrument of satisfaction or, (iii) if the related
Mortgagor so requests, an assignment without recourse, in each case prepared by
the Servicer at its expense and executed by the Indenture Trustee, which deed of
reconveyance, instrument of satisfaction or assignment shall be delivered by the
Servicer to the Person entitled thereto, it being understood and agreed that no
expenses incurred in connection with such deed of reconveyance, assignment or
instrument of satisfaction shall be reimbursed from amounts at the time on
deposit in the Collection Account.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan or to effect a partial release of any Mortgaged
Property from the lien of the related Mortgage, the Servicer shall deliver to
the Indenture Trustee and the Custodian a Request for Release requesting the
related Mortgagee File or specified documents included therein. The Custodian
shall, within five Business Days after its receipt of such Request for Release,
release the related Mortgage File or the specified documents to the Servicer.
The Servicer shall hold such Mortgage File in trust on behalf of the Indenture
Trustee. Any such Request for Release shall obligate the Servicer to return each
and every document previously requested from the Mortgage File to the Custodian
by the twenty-first day following the release thereof, unless (1) the Mortgage
Loan has been liquidated and the Net Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Collection Account or the Note Account
or (2) the Mortgage File or such document has been delivered to an attorney, or
to a public trustee or other public official as required by law, for the
purposes of initiating or pursuing legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or non-judicially, and
the Servicer has delivered to the Indenture Trustee and the Custodian a
certificate of the Servicer certifying as to the name and address of the Person
to which such Mortgage File or such document was delivered and the purpose or
purposes of such delivery. Upon receipt of an officer's certificate of the
Servicer stating that such Mortgage Loan was liquidated and that all amounts
received or to be received in connection with such liquidation which are
required to be deposited into the Collection Account or the Note Account have
been so deposited, or that such Mortgage Loan has become an REO Property (each,
a "Servicing Officer's Certificate"), the Request for Release shall be released
by the Custodian, on behalf of the Indenture Trustee, to the Servicer.
(c) To the extent not provided for by the powers of attorney
referenced in Section 2.01, upon receipt of a Servicing Officer's Certificate,
the Indenture Trustee shall execute any documents prepared by the Servicer and
delivered to it as necessary or appropriate to enable the Servicer to perform
its obligations hereunder, including, without limitation, documents to enable
the Servicer to convey title to a Mortgaged Property to the Mortgagor or its
designee upon payment of the Mortgage Loan in full or to convey title to an REO
Property to the purchaser thereof, or to convey title to a Mortgaged Property
into the name of the Indenture Trustee pursuant to Section 2.05.
SECTION 2.07 SERVICING COMPENSATION; PAYMENT OF CERTAIN EXPENSES BY THE
SERVICER; COMPENSATING INTEREST.
On each Deposit Date, the Servicer shall be entitled to receive, by
withdrawal by the Servicer from the Collection Account, out of collections of
interest on the Mortgage Loans for the related Collection Period, as servicing
compensation for such Collection Period, the Monthly Servicing Fee, to the
extent not retained by the Servicer from amounts remitted to the Collection
Account pursuant to Section 2.02(c)(i). The Servicer shall also be entitled to
retain any Ancillary Servicing Compensation when received.
The Servicer shall pay Compensating Interest to the Indenture
Trustee on behalf of the Noteholders out of the related Monthly Servicing Fee on
each Deposit Date, to the extent of the amount of the Monthly Servicing Fee, and
shall not be entitled to reimbursement therefor. The Servicer shall be required
to pay all expenses incurred by it in connection with its activities hereunder
(including payment of the fees and expenses relating to the Annual Independent
Public Accountant's Servicing Report described in Section 2.09, and all other
fees and expenses not otherwise expressly stated hereunder for the account of
the Noteholders) and shall not be entitled to reimbursement therefor except as
specifically provided herein.
SECTION 2.08 ANNUAL STATEMENT AS TO COMPLIANCE.
(a) The Servicer will deliver to the Issuer, the Indenture Trustee,
the Note Insurer and each Rating Agency, with a copy to each of the
Underwriters, on or before December 31 of each year, beginning with December 31,
2000, an Officer's Certificate of the Servicer substantially in the form set
forth in Exhibit A hereto stating that (1) 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 statement) and of its performance under this Agreement
has been made under such officer's supervision and (2) to the best of such
officer's knowledge, based on such review, the Servicer has fulfilled all its
material obligations under this Agreement throughout such year (or since the
Closing Date in the case of the first such statement), 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 Servicer shall deliver to the Issuer and the Indenture
Trustee, with a copy to the Note Insurer, each Rating Agency and each of the
Underwriters, promptly after having obtained knowledge thereof, but in no event
later than ten Business Days thereafter, written notice by means of an Officer's
Certificate of any event that with the giving of notice or the lapse of time, or
both, would become an Event of Default. Without duplication of the foregoing,
the Servicer will deliver to the Indenture Trustee a copy of any information it
provides to the Note Insurer under Section 2.02(f) of the Insurance Agreement.
(c) Delivery of such reports, information and documents to the
Indenture Trustee is for informational purposes only and the Indenture Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained herein, including
the Servicer's compliance with any of its covenants hereunder (as to which the
Indenture Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 2.09 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORTS.
On or before December 31 of each year, beginning with December 31,
2000, the Servicer at its expense shall cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer) to furnish a report to the Issuer, the Indenture Trustee, the Note
Insurer and each Rating Agency, with a copy to each of the Underwriters, to the
effect that such firm has examined certain documents and records relating to the
servicing activities of the Servicer for the period covered by such report, and
that such examination, which has been conducted substantially in compliance with
the Uniform Single Attestation Program for Mortgage Bankers (to the extent that
the procedures in such audit guide are applicable to the servicing obligations
set forth in this Agreement), has disclosed no exceptions or errors in records
relating to the servicing activities of the Servicer that, in the opinion of
such firm, are material, except for such exceptions as shall be set forth in
such report. In the event such firm requires the Indenture Trustee to agree to
the procedures performed by such firm, the Servicer shall direct the Indenture
Trustee in writing to so agree; it being understood and agreed that the
Indenture Trustee will deliver such letter of agreement in conclusive reliance
upon the direction of the Servicer, and the Indenture Trustee shall not make any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.
SECTION 2.10 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
MORTGAGE LOANS.
(a) The Servicer shall provide to Noteholders that are federally
insured savings associations and the FDIC and its supervisory agents and
examiners access to the documentation regarding the Mortgage Loans required by
applicable regulations of the Office of Thrift Supervision, and to the Issuer,
the Indenture Trustee and the Note Insurer and their respective agents all
documentation relating to the Mortgage Loans that is in the possession of the
Servicer, such access being afforded without charge but only upon reasonable
request and during normal business hours at the offices of the Servicer. Nothing
in this Section 2.10(a) shall derogate from the obligation of the Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Mortgagors, and the failure of the Servicer to provide access as provided in
this Section as a result of such obligation shall not constitute a breach of
this Section.
(b) The Servicer shall supply information to the Indenture Trustee,
upon reasonable advance notice, in such form as the Indenture Trustee shall
reasonably request, as is required in the Indenture Trustee's reasonable
judgment to enable the Indenture Trustee to make required payments and to
furnish the certificates, statements and reports to Noteholders and the Note
Insurer as required of the Indenture Trustee pursuant to the Indenture, it being
understood that the Servicer is responsible for supplying information concerning
the Mortgage Loans and not for any other information, including, without
limitation, calculation of payments due on the Notes. The Servicer shall also
supply information upon reasonable advance notice, in such form as the Note
Insurer shall reasonably request, as is reasonably requested by the Note Insurer
to enable the Note Insurer to monitor the performance of the Mortgage Loans.
(c) The Servicer shall supply information to the Owner Trustee and
the Trust Paying Agent, upon reasonable advance notice, in such form as the
Owner Trustee or the Trust Paying Agent shall reasonably request, as is required
in the Owner Trustee's or the Trust Paying Agent's reasonable judgment to enable
the Owner Trustee or the Trust Paying Agent to make required payments and to
furnish the certificates, statements and reports to Certificateholders as
required of the Owner Trustee or the Trust Paying Agent pursuant to the Deposit
Trust Agreement, it being understood that the Servicer is responsible for
supplying information concerning the Mortgage Loans and not for any other
information, including, without limitation, calculation of payments due on the
Certificates.
SECTION 2.11 MAINTENANCE OF FIDELITY BOND AND ERRORS AND OMISSIONS POLICY.
The Servicer shall, during the term of its service as Servicer,
maintain in force a (1) policy or policies of insurance covering errors and
omissions in the performance of its obligations as Servicer hereunder and (2)
fidelity bond in respect of its officers, employees and agents, in each case
having coverage amounts acceptable to and otherwise in compliance with the
requirements of Fannie Mae or FHLMC and shall provide a copy of such bond and
policies to the Indenture Trustee and the Note Insurer. The Servicer hereby
agrees that it shall not cancel, amend or modify such fidelity bond or errors
and omissions policy in a manner materially adverse to the Note Insurer without
the consent of the Note Insurer.
SECTION 2.12 NOTICES TO THE ISSUER, THE RATING AGENCIES, THE INDENTURE TRUSTEE
AND THE NOTE INSURER.
In addition to the other notices required to be given to the Issuer,
the Rating Agencies, the Indenture Trustee, the Note Insurer and the
Underwriters by the provisions of this Agreement, the Servicer shall give prompt
notice to the Issuer, each Rating Agency, the Indenture Trustee and the Note
Insurer of (1) any amendment to this Agreement, (2) the occurrence of an Event
of Default and (3) the purchase of any Mortgage Loan pursuant to Section 2.05 by
the Servicer.
SECTION 2.13 REPORTS OF FORECLOSURES AND ABANDONMENT OF MORTGAGED PROPERTIES.
On or before February 28 of each year beginning in 2000, the
Servicer shall file the reports of foreclosures and abandonments of any
Mortgaged Property required by Code Section 6050J with the Internal Revenue
Service. The reports from the Servicer shall be in form and substance sufficient
to meet the reporting requirements imposed by such Section 6050J.
SECTION 2.14 SERVICING FOR BENEFIT OF THE NOTE INSURER.
Provided there does not exist a Note Insurer Default, the Servicer
hereby acknowledges and agrees that it shall service and administer the Mortgage
Loans and any REO Properties, and shall maintain the Collection Account for the
benefit of the Noteholders and for the benefit of the Note Insurer, and all
references in this Agreement to the benefit of or actions on behalf of the
Noteholders shall be deemed to include the Note Insurer.
All notices, statements, reports, certificates or opinions required
by this Agreement to be sent to any other party hereto or to the Noteholders
shall also be sent to the Note Insurer.
SECTION 2.15 NOTE REDEMPTIONS.
(a) In the event the Servicer exercises its right to redeem the
Notes pursuant to Section 10.01 of the Indenture, the Servicer shall, at its own
expense, prepare all documents necessary for the Issuer to sign in connection
with such redemption, and deposit amounts required to be deposited by the Issuer
in connection with such redemption, in each case pursuant to Section 4.01 and
Article X of the Indenture, and shall advise the Issuer as to the actions it
must take in accordance with the Indenture in order to effect such redemption.
The Issuer shall follow all such directions of the Servicer.
SECTION 2.16 SUB-SERVICERS AND SUB-SERVICING AGREEMENTS.
(a) The Servicer (or, in the event the Indenture Trustee assumes the
role of Servicer pursuant to Section 6.02 hereof, the Indenture Trustee) may
enter into Sub-Servicing Agreements for any servicing and administration of
Mortgage Loans with any institution that is acceptable to the Note Insurer and
the Indenture Trustee and that is in compliance with the laws of each
jurisdiction which compliance is necessary to enable it to perform its
obligations under such Sub-Servicing Agreement. The Servicer or, in the event
the Indenture Trustee assumes the role of Servicer pursuant to Section 6.02
hereof, the Indenture Trustee shall give notice to the Note Insurer of the
appointment of any Sub-Servicer pursuant to this Section 2.16. The Servicer (or,
in the event the Indenture Trustee assumes the role of Servicer pursuant to
Section 6.02 hereof, the Indenture Trustee) shall not enter into any
Sub-Servicing Agreement that does not provide for the servicing of the Mortgage
Loans specified therein on a basis consistent with the terms of this Agreement
or that otherwise violates or is contrary to the provisions of this Agreement.
The Servicer (or, in the event the Indenture Trustee assumes the role of
Servicer pursuant to Section 6.02 hereof, the Indenture Trustee) may enter into,
and make amendments to, any Sub-Servicing Agreement or enter into different
forms of Sub-Servicing Agreements; provided, however, that any such amendments
or forms shall be consistent with and not violate the provisions of this
Agreement.
(b) For purposes of this Agreement, the Servicer shall be deemed to
have received payments on Mortgage Loans when any Sub-Servicer has received such
payments. With respect to the Servicer's obligations under Section 2.02 to make
deposits into the Collection Account, the Servicer shall be deemed to have made
such deposits when any Sub-Servicer has made such deposits into a Sub-Servicing
Account if permitted by the related Sub-Servicing Agreement.
(c) Any Sub-Servicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Sub-Servicer shall be deemed
to be between the Sub-Servicer and the Servicer (or, in the event the Indenture
Trustee assumes the role of Servicer pursuant to Section 6.02 hereof, the
Indenture Trustee) alone, and the Note Insurer and the Indenture Trustee, acting
in such capacity, shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to any Sub-Servicer,
except that the Indenture Trustee, acting in such capacity, shall have such
claims or rights that arise as a result of any funds held by a Sub-Servicer in
trust for or on behalf of the Trust Estate, the Noteholders and the Note
Insurer. Notwithstanding the execution of any Sub-Servicing Agreement, the
Servicer or, in the event the Indenture Trustee assumes the role of Servicer
pursuant to Section 6.02 hereof, the Indenture Trustee shall not be relieved of
any liability hereunder and shall remain obligated and liable for the servicing
and administration of the Mortgage Loans.
ARTICLE III
SERVICER REMITTANCE REPORT; OVERSIGHT OF SERVICING
SECTION 3.01 SERVICER REMITTANCE REPORT.
Not later than the third Business Day prior to each Deposit Date,
the Servicer shall deliver to the Issuer, the Indenture Trustee, the Note
Insurer and each of the Underwriters a computer-readable magnetic tape or file
in an electronic format acceptable to the Indenture Trustee and the Note Insurer
(the "Tape" for such month) and a series of hard copy reports generally
including the same information included on the Tape (the "Report," and, together
with the Tape, the "Servicer Remittance Report" for such month) detailing the
payments and collections received in respect of the Mortgage Loans and in the
aggregate during the immediately preceding Collection Period. The Servicer
Remittance Report shall include loan-by-loan information that specifies account
number, borrower name, outstanding principal balance and activity for the
preceding Collection Period and Due Period, as applicable, and any other
information sufficient to enable the Indenture Trustee to report the items
specified in clauses (vi) through (xiv) of the definition of "Payment Date
Statement" in the Indenture, as well as (a) the information set forth on Exhibit
D hereto as to Mortgage Loans that became Liquidated Mortgage Loans during the
related Collection Period, and may be delivered in a separate report in the form
of Exhibit D hereto or as part of the Servicer Remittance Report and (b) any
other information regarding the Mortgage Loans as may be required to enable the
Indenture Trustee to perform its obligations under this Article III or as may
from time to time be agreed to by the Servicer, the Indenture Trustee and the
Note Insurer. The Servicer shall only be required to report information
concerning the Mortgage Loans, and shall not be required to calculate any
required payments on the Notes or to the Note Insurer.
SECTION 3.02 [RESERVED]
SECTION 3.03 [RESERVED]
SECTION 3.04 DUTIES AND RESPONSIBILITIES.
(a) The Indenture Trustee, the Issuer and the Owner Trustee may
conclusively rely, without investigation on its part, as to the truth and
accuracy of the information and data contained in any Report or Tape furnished
to the Indenture Trustee, the Issuer and the Owner Trustee and the Servicer
shall be fully responsible for such information and data and for its conforming
to the requirements of this Agreement.
(b) The Indenture Trustee shall upon reasonable notice and during
normal business hours from the Note Insurer, permit the Note Insurer to review
any books, records or reports of the Indenture Trustee relating to its
obligations under this Agreement.
SECTION 3.05 TAX REPORTING
The Servicer shall provide on an annual basis, or as otherwise
required by the Owner Trustee, all information relating to the Mortgage Loan
Pool as is reasonably required by the Owner Trustee pursuant to its obligations
under Section 2(b)(i) of the Management Agreement and 2.11(k) of the Deposit
Trust Agreement.
ARTICLE IV
MONTHLY ADVANCES AND SERVICING ADVANCES
SECTION 4.01 MONTHLY ADVANCES; SERVICING ADVANCES.
(a) Monthly Advances. On or before each Deposit Date, the Servicer
will transfer to the Indenture Trustee for deposit in the Note Account, in same
day funds, an amount (a "Monthly Advance") equal to the sum of (1) with respect
to all Mortgage Loans for which the Monthly Payment (other than any Balloon
Payment) due during the related Due Period in which the Deposit Date occurs has
not yet been paid, the amount of such late Monthly Payment (net of the Monthly
Servicing Fee attributable to such Mortgage Loan), plus (2) with respect to each
Mortgaged Property that was acquired in foreclosure or similar action (each, an
"REO Property") during or prior to the related Collection Period and as to which
a final sale did not occur during the related Collection Period, an amount equal
to the excess, if any, of the Monthly Payment that would have been due on the
related Mortgage Loan over the net income from such REO Property transferred to
the Note Account for such Payment Date; provided, however, that in no case will
the Servicer be required to make advances with respect to any period following
the final due date with respect to any Mortgage Loan. All or a portion of any
Monthly Advance required to be made on a Deposit Date may be paid out of amounts
on deposit in the Collection Account that are not required to be transferred on
such Deposit Date to the Indenture Trustee for deposit into the Note Account as
any portion of Remittable Funds for the related Deposit Date; provided, however,
[that the Servicer shall be required to replace any such amounts by deposit into
the Collection Account on or before the next Deposit Date and the amount of such
deposit shall thereafter be considered a Monthly Advance for purposes of
reimbursement under this Agreement.]
The Servicer may recover Monthly Advances, if not theretofore
recovered from the Mortgagor on whose behalf such Monthly Advance was made, from
collections on the related Mortgage Loan, including Liquidation Proceeds,
Insurance Proceeds and such other amounts as may be collected by the Servicer
from the Mortgagor or otherwise relating to the Mortgage Loan. In addition, if
the Servicer determines, in its good faith business judgment, that a previously
made Monthly Advance has become a Nonrecoverable Advance, the Servicer may
reimburse itself for such Nonrecoverable Advances from amounts on deposit in the
Collection Account, regardless of whether such amounts are attributable to such
Mortgage Loan. Notwithstanding anything herein to the contrary, no Monthly
Advance need be made hereunder if such Monthly Advance would, if made,
constitute a Nonrecoverable Advance.
(b) Servicing Advances. The Servicer shall from time to time during
the term of this Agreement make such Servicing Advances as the Servicer shall
deem appropriate or advisable under the circumstances and are required pursuant
to the terms of this Agreement. Servicing Advances may be paid by the Servicer
out of amounts on deposit in the Collection Account from time to time; provided,
however, that the Servicer shall be required to replace any such amounts by
deposit into the Collection Account on or before the first Deposit Date
occurring after the payment of a Servicing Advance with such amounts, and the
amount of such deposit shall thereafter be considered a Servicing Advance for
purposes of reimbursement under this Agreement. All Servicing Advances made by
the Servicer shall be reimbursable from collections or recoveries relating to
the Mortgage Loans in respect of which such Servicing Advances have been made
including Liquidation Proceeds and Insurance Proceeds, and such other amounts as
may be collected by the Servicer from the Mortgagor, or from other amounts on
deposit in the Collection Account after the Servicer shall have determined, in
its good faith business judgment that such Servicing Advance has become a
Nonrecoverable Advance. Notwithstanding anything herein to the contrary, no
Servicing Advances need be made hereunder if such Servicing Advance would, if
made, constitute a Nonrecoverable Advance.
ARTICLE V
THE SERVICER
SECTION 5.01 REPRESENTATIONS AND WARRANTIES OF THE SERVICER.
(a) The Servicer hereby represents and warrants to the Issuer, the
Indenture Trustee, the Note Insurer and the Noteholders that, as of the Closing
Date:
(i) The Servicer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Servicer
is in compliance with the laws of each state in which it is acting as
Servicer with respect to a Mortgage Loan to the extent necessary to
perform all servicing obligations with respect to the related Mortgaged
Property hereunder. The Servicer has the power and authority to execute
and deliver this Agreement and to perform its obligations in accordance
herewith. The execution, delivery and performance of this Agreement
(including all instruments of transfer to be delivered pursuant to this
Agreement) by the Servicer and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action. This Agreement evidences the valid and binding
obligation of the Servicer enforceable against the Servicer in accordance
with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or the application of equitable principles in
any proceeding, whether at law or in equity. The consummation of the
transactions contemplated hereby will not result in the breach of any
terms or provisions of the articles of incorporation or by-laws of the
Servicer or result in the breach of any term or provision of, or conflict
with or constitute a default under or result in the acceleration of any
obligation under, any material agreement, indenture or loan or credit
agreement or other material instrument to which the Servicer or its
property is subject, or result in the violation of any law, rule,
regulation, order, judgment or decree to which the Servicer or its
property is subject.
(ii) All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, by
or from any federal, state or other governmental authority or agency, that
are necessary in connection with the execution and delivery by the
Servicer of this Agreement, have been duly taken, given or obtained, as
the case may be, are in full force and effect, are not subject to any
pending proceedings (administrative, judicial or otherwise) with respect
to which the time within which any appeal therefrom may be taken or review
thereof may be obtained has expired or no review thereof may be obtained
or appeal therefrom taken, and are adequate to authorize the consummation
of the transactions contemplated by this Agreement on the part of the
Servicer and the performance by the Servicer of its obligations under this
Agreement.
(iii) There is no action, suit, proceeding or investigation pending
or, to the best of the Servicer's knowledge, threatened against the
Servicer that, either in any one instance or in the aggregate, should
reasonably be expected to result in any material adverse change in the
business, operations, financial condition, properties or assets of the
Servicer or in any material impairment of the right or ability of the
Servicer to carry on its business substantially as now conducted, or in
any material liability on the part of the Servicer or that would draw into
question the validity of this Agreement or the Mortgage Loans or of any
action taken or to be taken in connection with the obligations of the
Servicer contemplated herein, or that should be reasonably expected to
impair the ability of the Servicer to perform under the terms of this
Agreement.
(iv) The Servicer is not in default with respect to any order or
decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default should reasonably
be expected to have consequences that would materially and adversely
affect the condition (financial or other) or operations of the Servicer or
its properties or to have consequences that should reasonably be expected
to adversely affect its performance hereunder;
(v) The collection practices used by the Servicer are in all
material respects legal and customary in the mortgage loan servicing
business for comparable mortgage loans.
(vi) The information set forth in the Prepayment Charge Schedule
(including the Prepayment Charge Summary attached thereto) is complete,
true and correct in all material respects on the date or dates when such
information is furnished and each Prepayment Charge is permissible and
enforceable in accordance with its terms (except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, receivership and other similar laws relating to creditors'
rights generally or the collectability thereof may be limited due to
acceleration in connection with a foreclosure) under applicable law; and
(vii) The Servicer will not waive any Prepayment Charge unless it is
waived in accordance with the standard set forth herein.
Notwithstanding the foregoing, within 90 days of the earlier of the
discovery by the Servicer or receipt of notice by the Servicer if the
breach of the representation or covenant of the Servicer set forth in
5.01(vi) or 5.01(vii) above which materially and adversely affects the
interests of the Holders of the Notes or the Note Insurer in any
Prepayment Charge, the Servicer shall remedy such breach as follows: (a)
if the representation made by the Servicer in section 5.01(vi) above is
breached and a Principal Prepayment has occurred in the applicable
Prepayment Period, the Servicer must pay the amount of the scheduled
Prepayment Charge, for the benefit of the Holders of the Notes and the
Note Insurer, by depositing such amount into the Collection Account, net
of any amount previously collected by the Servicer or paid by the
Servicer, for the benefit of the Holders of Notes or the Note Insurer, in
respect of such Prepayment Charge; and (b) if any of the covenants made by
the Servicer in Section 5.01(vii) above is breached, the Servicer must
remedy such breach by paying the amount of the Prepayment Charge as to
which such covenant was breached, for the benefit of the Holders of the
Notes and the Note Insurer, by depositing such amount into the Collection
Account.
(b) Upon discovery by any party hereto of a breach of any of the
foregoing representations and warranties that materially and adversely affects
the interests of the Noteholders, the party discovering such breach shall give
prompt written notice to the other parties hereto and the Note Insurer. Within
30 days of its discovery or its receipt of notice of breach, the Servicer shall
cure such breach in all material respects.
(c) The Servicer covenants that its computer and other systems used
in servicing the mortgage loans has been modified to operate in manner such that
on and after January 1, 2000 (i) the Servicer can service the mortgage loans in
accordance with the terms of this Agreement and (ii) the Servicer can operate
its business in the same manner as it is operating on the date hereof.
SECTION 5.02 LIABILITY OF THE SERVICER.
The Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed upon and undertaken by the
Servicer herein.
SECTION 5.03 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF,
THE SERVICER.
Any corporation or other entity (1) into which the Servicer may be
merged or consolidated, (2) that may result from any merger, conversion or
consolidation to which the Servicer shall be a party, or (3) that may succeed to
all or substantially all of the business of the Servicer, which corporation or
other entity shall be the successor to the Servicer under this Agreement without
the execution or filing of any document or any further act by any of the parties
to this Agreement; provided that if the Servicer is not the surviving entity, or
if the assumption by the surviving entity is not effective by operation of law,
then the surviving entity shall execute and deliver to the Issuer and the
Indenture Trustee an agreement of assumption to perform every obligation of the
Servicer hereunder and provided further that if the surviving entity is not the
Servicer, the surviving entity must (A) be acceptable to the Note Insurer and
(B) each Rating Agency must have issued written confirmation that the succession
of such successor will not result in a downgrading of the implied rating then
assigned by such Rating Agency to the Notes (without taking into account the
Note Insurance Policy),
SECTION 5.04 LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS.
Neither the Servicer nor any of its directors, officers, employees
or agents shall be under any liability to the Issuer, the Indenture Trustee, the
Trust Estate, the Note Insurer or the Noteholders for any action taken or for
refraining from the taking of any action by the Servicer pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Servicer or any such person against any liability that
would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of the duties of the Servicer or by reason of
reckless disregard of the obligations and duties of the Servicer hereunder. The
Servicer and any director, officer, employee or agent of the 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 Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action that is not incidental to its duties to service the Mortgage Loans in
accordance with this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 5.05 SERVICER NOT TO RESIGN.
Subject to the provisions of Section 5.03 regarding the merger or
consolidation of the Servicer into or with another entity, the Servicer shall
not resign from the obligations and duties hereby imposed on it except upon
determination that the performance of its duties or obligations hereunder is no
longer permissible under applicable law or regulation or are in material
conflict by reason of applicable law or regulation with any other activities
carried on by it at the date of this Agreement. Any such determination
permitting the resignation of the Servicer pursuant to this Section shall be
evidenced by an Opinion of Counsel to such effect delivered to the Issuer, the
Indenture Trustee and the Note Insurer obtained by the Servicer at its own
expense. No resignation pursuant to this Section 5.05 (a) shall become effective
until the Indenture Trustee or a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 6.02
or (b) shall relieve the Servicer of responsibility for any obligations pursuant
to this Agreement that specifically survive the resignation or termination of
the Servicer. Each of the Rating Agencies shall be given written notice of a
resignation of the Servicer pursuant to this Section.
Notwithstanding the foregoing, the Servicer may resign effective
upon its appointment of a successor the appointment of whom has been approved by
the Note Insurer and the Indenture Trustee in writing, but only if each Rating
Agency shall have confirmed in writing that the appointment of such successor
will not result in the downgrading of the then-current implied ratings assigned
by them to the Notes (without taking into account the Note Insurance Policy).
ARTICLE VI
DEFAULT
SECTION 6.01 EVENTS OF DEFAULT.
If any one of the following events (each an "Event of Default")
shall occur and be continuing:
(a) Any failure by the Servicer to (1) make required Monthly
Advances on the related Deposit Date or (2) deposit into the Collection Account
as described in Section 2.02(c) hereof or transfer to the Indenture Trustee for
deposit in the Note Account on the related Deposit Date any other amount
required to be deposited therein under this Agreement, which failure, in the
case of only clause (2) hereof, is not remedied by the close of business on the
Business Day after the date upon which written notice of such failure shall have
been given to the Servicer by the Indenture Trustee or the Note Insurer or to
the Servicer, the Note Insurer and the Indenture Trustee by Holders of Notes
evidencing Voting Interests represented by all Notes aggregating not less than
51%;
(b) Failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the Servicer set
forth in this Agreement or in the Mortgage Loan Sale Agreement, which failure
(1) materially and adversely affects the Noteholders or the Note Insurer and (2)
continues unremedied for a period of 30 days after the date on which written
notice of such failure (which notice shall refer specifically to this Section),
requiring the same to be remedied, shall have been given to the Servicer by the
Indenture Trustee, at the direction of the Note Insurer, or by the Note Insurer,
or, with the consent of the Note Insurer, to the Servicer by the Holders of
Notes evidencing Voting Interests represented by all Notes aggregating not less
than 51%;
(c) The entry against the 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,
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;
(d) The consent by the Servicer to the appointment of a trustee,
conservator or receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to the Servicer or of or relating to substantially
all of its property; or the admission by the Servicer in writing of its
inability to pay its debts generally as they become due, the Servicer's filing
of a petition to take advantage of any applicable bankruptcy, insolvency or
reorganization statute, the Servicer's making of an assignment for the benefit
of its creditors, or the Servicer's voluntary suspension of payment of its
obligations;
(e) The occurrence of a Delinquency Rate Trigger, a Cumulative Loss
Rate Trigger or a Rolling Loss Rate Trigger;
(f) Breach of a covenant or default by the Servicer or any
Affiliate, whether as principal, guarantor or surety, in the payment of any
amount of $100,000 or more of any principal or interest on any indebtedness or
any other obligation, subject to the applicable cure period, if any;
(g) Breach by the Servicer in any material respect of any of its
representations and warranties made herein or in the Mortgage Loan Sale
Agreement (not including Section 4(b) thereof), or in any certificate delivered
pursuant hereto or thereto, and the failure of the Servicer to cure such breach
in all material respects within 30 days after the notice of such breach shall
have been given to the Servicer by the Issuer, the Indenture Trustee, the Note
Insurer or the holders of the Notes evidencing not less than 51% of the voting
rights; or
(h) The cessation of a valid, perfected, first priority security
interest in the Mortgage Loans in favor of the Indenture Trustee;
(i) The filing of any actions, proceedings, or final rulings against
Mortgage Lenders Network USA, Inc. or any successor Servicer which (i) are not
dismissed within 60 days after the initiation thereof, (ii) seek damages from
Mortgage Lenders Network USA, Inc. or any successor Servicer and (iii) when
aggregated are in excess of $500,000; provided, however that the filing of any
actions or proceedings or final rulings against Mortgage Lenders Network USA,
Inc. or any successor Servicer will not constitute an Event of Default hereunder
in the event that the counsel to Mortgage Lenders Network USA, Inc. or any
successor Servicer determines and the counsel to the Note Insurer concurs that
the expected outcome of such actions, proceedings or rulings will not have an
adverse effect upon the Mortgage Lenders Network USA, Inc. or any successor
Servicer; and
(j) The occurrence of an event of default under the Insurance
Agreement.
(k) The Servicer fails to maintain a minimum Net Worth of
$20,000,000.
then, and in each and every such case, so long as such Event of Default shall
not have been remedied by the Servicer, either (1) the Note Insurer or (2) with
the prior written consent of the Note Insurer, either the Indenture Trustee or
the Holders of Notes evidencing Voting Interests represented by all Notes
aggregating not less than 51%, by notice then given in writing to the Servicer
with a copy to the Note Insurer and to the Indenture Trustee, may terminate all
of the rights, responsibilities and obligations of the Servicer as servicer
under this Agreement. 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 Mortgage Loans or otherwise, shall pass to and be vested in
the Indenture Trustee (unless a successor Servicer has been appointed pursuant
to Section 6.02) pursuant to and under this Section and, within a reasonable
period of time not to exceed 90 days, without limitation, the Indenture Trustee
or successor Servicer is hereby 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, 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 the Mortgage
Notes and related documents, or otherwise. The Servicer agrees to cooperate with
the Indenture Trustee in effecting the termination of its responsibilities and
rights as Servicer hereunder, including, without limitation, the transfer to the
Indenture Trustee or successor Servicer for the administration by it of all cash
amounts that shall at the time be held by the Servicer that have been deposited
by the Servicer in the Collection Account or transferred to the Indenture
Trustee for deposit into the Note Account or thereafter received by the Servicer
with respect to the Mortgage Loans.
For purposes of this Section 6.01, the Indenture Trustee shall not
be deemed to have knowledge of an Event of Default unless a Responsible Officer
of the Indenture Trustee assigned to and working in the Indenture Trustee's
Corporate Trust Offices or its Columbia, Maryland office has actual knowledge
thereof or unless written notice of any event which is in fact such an Event of
Default is received by the Indenture Trustee and such notice references the
Notes, Certificates, the Trust, or this Agreement. The Indenture Trustee shall
notify the Servicer in writing immediately upon its becoming aware of a default
described in Section 6.01(a).
All reasonable costs and expenses (including attorneys' fees)
incurred in connection with transferring the Servicer Mortgage Files to a
successor Servicer, amending this Agreement to reflect the appointment of a
successor as Servicer pursuant to this Section 6.01 or otherwise in connection
with the assumption by a successor Servicer of the duties of the predecessor
Servicer hereunder (such expenses, "Transition Expenses") shall be paid in full
by the predecessor Servicer upon presentation of reasonable documentation of
such costs and expenses and to the extent the predecessor Servicer does not for
any reason fully pay such Transition Expenses, any unreimbursed Transition
Expenses shall be paid in accordance with Section 8.02(c) of the Indenture.
SECTION 6.02 INDENTURE TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
On and after the time the Servicer receives a notice of termination
pursuant to Section 6.01 or the Servicer does not receive a Servicer Renewal
Notice pursuant to Section 7.02, the Note Insurer may (and if the Note Insurer
fails to do so, the Indenture Trustee will be obligated to) appoint a successor
Servicer meeting the criteria described below or, if it does not appoint a
successor, or until the successor's appointment takes effect, the Indenture
Trustee shall be the successor in all respects to the Servicer in its capacity
as servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof,
including, without limitation, the obligation to make Monthly Advances and to
pay Compensating Interest. As compensation therefor, the Indenture Trustee shall
be entitled to such compensation as the Servicer would have been entitled to
hereunder if no such notice of termination had been given and to the
reimbursement of all Transition Expenses as described in Section 6.01. In the
event that neither the Note Insurer nor the Indenture Trustee appoint a
successor Servicer, and the Indenture Trustee is unwilling or legally unable to
act as successor Servicer itself, it may petition a court of competent
jurisdiction to appoint, any established housing and home finance institution or
any institution that regularly services non-conforming residential mortgage
loans that is then servicing a non-conforming residential mortgage loan
portfolio and having all licenses, permits and approvals required by applicable
law, and having a net worth of not less than $10,000,000, as the successor to
the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder; provided that
any such successor Servicer (other than the Indenture Trustee or an Affiliate
thereof) shall be acceptable to the Note Insurer; and provided, further, that
the appointment of any such successor Servicer will not result in the
qualification, reduction or withdrawal of the implied rating assigned to the
Notes by any Rating Agency, without taking into account the existence of the
Note Insurance Policy. Pending appointment of a successor to the Servicer
hereunder, unless the Indenture Trustee is prohibited by law from so acting, the
Indenture Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Indenture Trustee may make
such arrangements for the compensation of such successor out of payments on
Mortgage Loans as it and such successor shall agree, which may be greater than
the compensation described above. The Indenture Trustee and such successor shall
take such action, consistent with this Agreement, as shall be necessary to
effect any such succession. The appointment of a successor Servicer shall not
affect any liability of the predecessor Servicer that may have arisen under this
Agreement prior to its termination as Servicer, nor shall any successor Servicer
be liable for any acts or omissions of the predecessor Servicer or for any
breach by such Servicer or the Issuer of any of its representations or
warranties contained herein or in any related document or agreement. Each of the
Rating Agencies shall be given written notice of the appointment of a successor
Servicer pursuant to this Section.
SECTION 6.03 NOTIFICATIONS TO NOTEHOLDERS.
Upon any termination or appointment of a successor to the Servicer
pursuant to this Article Six, the Indenture Trustee shall give prompt written
notice thereof to Noteholders at their respective addresses appearing in the
Note Register, the Issuer, the Note Insurer and to each Rating Agency.
Within 60 days of obtaining actual knowledge of the occurrence of
any Event of Default that remains uncured, the Indenture Trustee shall transmit
by mail to all Noteholders notice of such Event of Default.
SECTION 6.04 PAYMENT OF INDENTURE TRUSTEE'S FEES AND EXPENSES.
(a) On each Payment Date, the Indenture Trustee will be entitled to
retain its Indenture Trustee Fee from amounts deposited into the Note Account on
the related Deposit Date. The Indenture Trustee Fee constitutes compensation for
all services rendered by the Indenture Trustee in the exercise and performance
of any of the powers and duties hereunder or under the Indenture. The Indenture
Trustee shall not enforce any lien it may have on the Trust Estate for payment
of the Indenture Trustee Fee or Transition Expenses.
(b) The Servicer shall pay or reimburse the Indenture Trustee, from
its own funds, upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Indenture Trustee in accordance with any of the
provisions of this Agreement, the Indenture and the Management Agreement, dated
as of November 1, 1999, between the Issuer and Norwest Bank Minnesota, National
Association, as manager (the "Management Agreement"), (including, but not
limited to, the reasonable compensation and the expenses and disbursements of
its counsel and of all persons not regularly in its employ and any Opinion of
Counsel requested to be delivered on behalf of the Indenture Trustee) except for
any such expense, disbursement or advance as may arise from the negligence or
bad faith of the Indenture Trustee or that is otherwise reimbursed to the
Indenture Trustee, and except for routine, recurring or nominal expenses,
disbursements and advances; provided, however, that the Indenture Trustee shall
not refuse to perform any of its duties hereunder or under the Indenture or the
Management Agreement solely as a result of the failure of the Servicer to pay or
reimburse such expenses, disbursements or advances.
(c) The Servicer agrees to indemnify the Indenture Trustee, the
Paying Agent, and their respective agents, directors, employees and officers
(each an "Indemnified Party") from, and hold them harmless against, any and all
losses and liabilities, damages, claims or reasonable expenses (including
reasonable attorneys' fees, expenses and disbursements), incurred or in
connection with this Agreement, the Indenture, the Notes or the Management
Agreement, including, but not limited to, any such loss, liability or expense
incurred, arising in respect of or in connection with any legal action against
the Trust Estate, the Issuer or the Indenture Trustee or any director, officer,
employee or agent thereof, or the performance of any of the Indenture Trustee's
duties hereunder (except in the event it assumes the duties and obligations of
the Servicer hereunder as the result of an Event of Default), the Indenture or
the Management Agreement, other than any loss, liability or expense incurred by
reason of the negligence, bad faith or intentional misconduct of the Indenture
Trustee. Notwithstanding the generality of the foregoing, if any action, suit or
other proceeding is brought against an Indemnified Party for which the
Indemnified Party seeks indemnification hereunder, the Indemnified Party shall
promptly notify the Servicer of the commencement thereof, whereupon the Servicer
will be entitled to participate therein, and to assume the defense thereof, with
counsel selected by the Servicer and reasonably satisfactory to such Indemnified
Party; provided, that, if in the Indemnified Party's reasonable judgment the
Indemnified Party has any claims or defenses that conflict with or differ from
the interests of the Servicer, the Indemnified Party shall be entitled to select
counsel of its choosing and pursue such claims and defenses separately and all
related costs, expenses and liabilities associated with such separate claims or
defenses will continue to be covered by the Servicer's indemnification
obligation hereunder. The Servicer shall not be entitled to settle any
proceeding without the consent of any Indemnified Party with any right of
indemnification hereunder with respect to such proceeding except upon such terms
as will provide each such Indemnified Party reasonable assurance of full
indemnity hereunder.
(d) This Section 6.04 shall survive the termination of this
Agreement resignation or removal of the Indenture Trustee or the Servicer as
regards rights accrued prior to such resignation or removal.
(e) Amounts required to be paid by the Servicer to the Indenture
Trustee under subsections (b) and (c) above shall be paid by the Servicer out of
its own funds and to the extent not paid by the Servicer, such amounts shall be
paid in accordance with Section 8.02(c)(viii) of the Indenture, and shall not be
reimbursable to the Servicer from the Collection Account or netted by the
Servicer out of funds it is required to deposit into the Collection Account.
SECTION 6.05 DUTIES AND RESPONSIBILITIES.
The Servicer, on behalf of the Issuer, shall perform the obligation
of the Issuer pursuant to Sections 2.06(c), 2.06(h)(ii) and 2.06(h)(x) of the
Insurance Agreement.
ARTICLE VII
TERMINATION
SECTION 7.01 TERMINATION.
Except as otherwise specifically set forth herein, the obligations
and responsibilities of the Servicer shall terminate upon the earliest to occur
of (1) the final payment or other liquidation of the Mortgage Loans and the
disposition of all REO Properties and the remittance of all funds due hereunder
with respect to such Mortgage Loans and REO Properties and (2) the satisfaction
and discharge of the indebtedness evidenced by the Notes and the payment of all
amounts due the Note Insurer under the Insurance Agreement and the termination
of the Deposit Trust Agreement.
SECTION 7.02 APPOINTMENT AND TERM OF THE SERVICER.
The Servicer hereby covenants and agrees to act as the Servicer
under this Agreement for an initial term, commencing on the Closing Date and
ending on February 29, 2000, which term may be extended by the Note Insurer for
successive terms of three calendar months thereafter, until the termination of
the Trust Fund pursuant to Article VII. Each such notice of extension (a
"Servicer Renewal Notice"), if any, shall be delivered by the Note Insurer to
the Indenture Trustee, the Depositor and the Servicer. The Servicer hereby
agrees that, upon its receipt of any such Servicer Renewal Notice, the Servicer
shall become bound for the duration of the term covered by such Servicer Renewal
Notice to continue as the Servicer subject to and in accordance with the other
provisions of this Agreement. The Servicer agrees that if as of the fifteenth
(15th) day prior to the last day of any term of the Servicer the Servicer shall
not have received any Servicer Renewal Notice from the Note Insurer, the
Servicer shall within five (5) days thereafter, give written notice of such
non-receipt to the Note Insurer, the Indenture Trustee and the Depositor. The
failure of the Note Insurer to deliver a Servicer Renewal Notice by the end of a
calendar term shall result in the termination of the Servicer.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.01 AMENDMENT.
This Agreement may be amended from time to time by the Servicer, the
Issuer and the Indenture Trustee, without the consent of any of the Noteholders
but only with the prior written consent of the Note Insurer, (1) to cure any
error or any ambiguity or to correct or supplement any provisions herein which
may be inconsistent with any other provisions herein, or (2) to comply with the
requirements of the Code; provided that in all such cases the Indenture Trustee
shall have received written confirmation from each Rating Agency that any such
modifications to this Agreement will not result in a qualification, reduction or
withdrawal of the implied rating assigned to the Notes by such Rating Agency
(without taking into account the Note Insurance Policy); provided, further, that
in all such cases such action shall not, as evidenced by an Opinion of Counsel
furnished by and at the expense of the party requesting such amendment,
adversely affect in any material respect the interests of any Noteholder or the
Note Insurer.
This Agreement may also be amended from time to time by the
Servicer, the Issuer and the Indenture Trustee, with the consent of the Note
Insurer and the Holders of Notes evidencing Voting Interests of the Notes
affected thereby aggregating greater than 50%, 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
of such Notes; provided, however, that no such amendment shall (1) reduce in any
manner the amount of, or delay the timing of, collections of payments on
Mortgage Loans or payments which are required to be deposited into the Note
Account without the consent of all Noteholders or (2) reduce the aforesaid
percentage of the Notes the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all Notes then outstanding.
Promptly after the execution of any such amendment or consent
pursuant to the second preceding paragraph, the Indenture Trustee shall furnish
written notification of the substance of such amendment to each Noteholder and
an executed copy of such amendment to each Rating Agency, with a copy to each of
the Underwriters.
It shall not be necessary for the consent of Noteholders under 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 of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable
requirements as the Indenture Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the
Indenture Trustee and the Note Insurer shall be entitled to receive and rely
upon an Opinion of Counsel furnished by and at the expense of the party
requesting such amendment stating that the execution of such amendment is
authorized or permitted by this Agreement. The Indenture Trustee may, but shall
not be obligated to, enter into any such amendment that affects the Indenture
Trustee's own rights, duties or immunities under this Agreement,
SECTION 8.02 GOVERNING LAW.
This Agreement shall be construed in accordance with the laws of the
State of New York (without regard to conflict of laws principles and the
application of the laws of any other jurisdiction), and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
SECTION 8.03 NOTICES.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered to (a) in the
case of the Issuer, to Wilmington Trust Company at 1100 N. Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration;
Reference Mortgage Lenders Network Home Equity Loan Trust 1999-2; Telecopy (302)
651-8882, with copies to the Indenture Trustee, as Manager, (b) in the case of
the Servicer, at Mortgage Lenders Network USA, Inc., Middlesex Corporate Center,
11th Floor, 213 Court Street, Middletown, Connecticut 06457; Attention General
Counsel, Telecopy (860) 344-5707; (c) in the case of the Indenture Trustee, at
its Corporate Trust Office and at Norwest Bank Minnesota, National Association,
as Indenture Trustee, 11000 Broken Land Parkway, MAC N2696-050 Columbia,
Maryland 21044, Telecopy (410) 884-2360 Attention: Mortgage Lenders Network
1999-2; (d) in the case of the Note Insurer, Financial Security Assurance Inc.,
350 Park Avenue, New York, New York 10022 Telecopy (212) 888-5278, Attention:
Structured Finance Group (Mortgage Lenders Network Home Equity Loan Trust 1999-2
Asset Backed Notes, Series 1999-2); (e) in the case of S&P, to Standard &
Poor's, 55 Water Street, 41st Floor, New York 10004, Attention: Mortgage
Surveillance Group; and (f) in the case of Moody's, to Moody's Investors Service
Inc., Residential Mortgage Monitoring Department, 99 Church Street, New York,
New York 10007, or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party; and (g) in the
case of the Underwriters, to the respective addresses specified in the
Indenture. Any notice required or permitted to be mailed to a Noteholder shall
be given by first class mail, postage prepaid, at its address shown in the Note
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
Noteholder receives such notice. Any notice or other document required to be
delivered or mailed by the Indenture Trustee to any Rating Agency shall be given
on a best efforts basis and only as a matter of courtesy and accommodation and
the Indenture Trustee shall have no liability for failure to deliver such notice
or document to any such Rating Agency.
SECTION 8.04 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 Notes or the rights of the Holders thereof.
SECTION 8.05 ASSIGNMENT.
Notwithstanding anything to the contrary contained herein, except as
provided in Sections 5.03 and 5.05, this Agreement may not be assigned by the
Issuer or the Servicer without the prior written consent of the Note Insurer and
the Holders of Notes evidencing not less than 66% of the Voting Interests of all
Notes.
SECTION 8.06 THIRD PARTY BENEFICIARY, RATING.
The Note Insurer is an intended third-party beneficiary of this
Agreement. This Agreement shall be binding upon and inure to the benefit of the
Note Insurer; provided that, notwithstanding the foregoing, for so long as a
Note Insurer Default is continuing, the Noteholders shall succeed to the Note
Insurer's rights hereunder. Without limiting the generality of the foregoing,
all covenants and agreements in this Agreement that expressly confer rights upon
the Note Insurer shall be for the benefit of and run directly to the Note
Insurer, and the Note Insurer shall be entitled to rely on and enforce such
covenants to the same extent as if it were a party to this Agreement.
SECTION 8.07 COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.
SECTION 8.08 INTENTION OF THE PARTIES.
It is the intention of the parties that the Issuer is conveying, and
the Servicer is receiving, only a contract for servicing and administering the
Mortgage Loans. Accordingly, the parties hereby acknowledge that the Indenture
Trustee remains the sole and absolute record holder of the Mortgage Loans and
all rights related thereto.
SECTION 8.09 WAIVERS AND MODIFICATIONS.
No term or provision of this Agreement may be waived or modified
unless such waiver or modification is in writing and signed by the party against
whom such waiver or modification is sought to be enforced.
SECTION 8.10 FURTHER AGREEMENTS.
The Servicer and the Issuer each agree to execute and deliver to the
other such reasonable and appropriate additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of this
Agreement.
SECTION 8.11 ATTORNEY-IN-FACT.
The Issuer hereby designates the Servicer its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required pursuant to this Agreement or the Indenture.
SECTION 8.12 LIMITATION OF LIABILITY.
It is expressly understood and agreed by the parties hereto that (a)
this Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as Owner Trustee of the Issuer, 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 Wilmington Trust Company 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 Wilmington Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any
Person claiming by, through or under the parties hereto and (d) under no
circumstances shall Wilmington Trust Company 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 any other related documents.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Servicing
Agreement to be duly executed by their respective officers, all as of the day
and year first above written.
MORTGAGE LENDERS NETWORK HOME EQUITY LOAN
TRUST 1999-2, as Issuer
By: Wilmington Trust Company, not in its
individual capacity, but solely as
Owner Trustee
By:
-------------------------------------
Authorized Signatory
MORTGAGE LENDERS NETWORK USA, INC.
as Servicer
By:
-------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Indenture Trustee and not in its
individual capacity
By:
-------------------------------------
Name:
Title:
<PAGE>
Schedule I
Mortgage Loan Schedule
<PAGE>
EXHIBIT A
FORM OF ANNUAL STATEMENT AS TO COMPLIANCE
The undersigned, __________________ (the "Servicer"), in its
capacity as Servicer under that certain Servicing Agreement dated as of November
1, 1999 (the "Servicing Agreement") among Mortgage Lenders Network Home Equity
Loan Trust 1999-2, as Issuer, Mortgage Lenders Network USA, Inc., as Servicer,
and Norwest Bank Minnesota, National Association, as Indenture Trustee, does
hereby certify pursuant to Section 2.08 of the Servicing Agreement that as of
the ____day of_____ , 199_:
(a) review of the activities of the Servicer for the year ended
December 31, 2000 and of its performance under the Servicing
Agreement has been made under my supervision, and
(b) to the best of my knowledge, based on such review, the
Servicer has fulfilled all of its material obligations under
the Servicing Agreement throughout such year.
IN WITNESS WHEREOF, I have hereunto signed my name as of this ____
day of __________, ___.
-------------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
TO: BankBoston, N.A.
100 Federal Street
Mail Stop 01-1B-06
Boston, MA 02110
Attention: Margaret Hurley
RE: Servicing Agreement, dated as of November 1, 1999, among Mortgage
Lenders Network Home Equity Loan Trust 1999-2 (the "Issuer"),
Mortgage Lenders Network USA, Inc., as Servicer, and Norwest Bank
Minnesota, National Association, as Indenture Trustee (the
"Servicing Agreement")
In connection with the administration of the Mortgage Loans held by
you as the Custodian, on behalf of the Indenture Trustee, we request the release
and acknowledge receipt, of the Mortgage File [specify documents if only a
partial Mortgage File is being released]) for the Mortgage Loan described below,
for the reason indicated.
Mortgagor's Name and Address & Zip Code:
Mortgage Loan Number:
Reason for Requesting Documents (check one)
____ 1. Mortgage Loan Paid in Full. (The Servicer hereby certifies that all
amounts received in connection therewith have been deposited into
the Collection Account as provided in the Servicing Agreement.)
____ 2. Mortgage Loan in Foreclosure.
____ 3. Substitution of Qualified Replacement Mortgage Loan
____ 4. Mortgage Loan Liquidated by _______________. (The Servicer hereby
certifies that all proceeds of foreclosure, insurance, condemnation
or other liquidation have been finally received.)
____ 5. Other (explain). ____________________________
If item 1, 3 or 4 above is checked, and if all or part of the
Mortgage File was previously released to us, please release to us our previous
request and receipt on file with you, as well as any additional documents in
your possession relating to the specified Mortgage Loan.
If item 2 or 5 above is checked, upon our return of all of the above
documents to you as the Custodian or Indenture Trustee, please acknowledge your
receipt by signing in the space indicated below, and returning this form:
Capitalized terms used herein but not defined herein have the
meanings ascribed to them in the Servicing Agreement.
MORTGAGE LENDERS NETWORK USA,
INC, AS SERVICER
By:
-------------------------------------
Name:
Title:
Date:
Acknowledgment of Documents returned to the Custodian:
BANKBOSTON, N.A.
By:
-------------------------------------
Name:
Title:
Date:
<PAGE>
EXHIBIT C
POLICY AND PROCEDURE MANUAL
Section: Loan Servicing Division Date:
Servicing Operations Department
Subject: Sub-Prime Loan Fee Schedule
The following list summarizes the costs of our services:
Duplicate Satisfaction/Cancellation
Hazard Insurance Policy Substitution Fee (Mid-term)
Returned Check Fee (Automatically Assessed)
Amortization Schedule
Reinstatement Fee from Foreclosure
Fax Fee
Replacement of Coupon Book
Duplicate Annual Statement (each)
Copy of Documents, i.e., Note, Mortgage, etc. (pkg.)
Automatic Mortgage Payment (ACH)
* Unless limited by regulation
Fees are subject to change without notice. It is the policy of MLN USA to
require certified funds for a minimum of six (6) months when a check or
autodraft (ACH) has been presented twice to a financial institution and it is
not honored by that institution.
Fees for partial releases and other services may vary and will be quoted upon
request.
<PAGE>
EXHIBIT D
Form of Liquidation Report
Customer Name:
Account Number:
Original Principal Balance:
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
Date last paid
Date of foreclosure
Date of REO
Date of REO Disposition
Property Sale Price/Estimated Market Value of disposition
2. Liquidation Proceeds $____________
Principal Prepayment _____________
Property Sale Proceeds _____________
Insurance Proceeds _____________
Other (itemize) _____________
Total Proceeds $____________
3. Liquidation Expenses
Servicing Advances $____________
Delinquency Advances _____________
Monthly Advances _____________
Servicing Fees _____________
Other Servicing Compensation _____________
Total Advances $____________
4. Net Liquidation Proceeds $ $____________
(Item 2 minus Item 3)
5. Principal Balance of Mortgage Loan $____________
6. Loss, if any (Item 5 minus Item 4) $____________
7. Prepayment Charges $____________
<PAGE>
EXHIBIT E
Form of Servicer Renewal Notice
Mortgage Lenders Network USA, Inc.
Middlesex Corporate Center, 11th Floor
213 Court Street
Middletown, CT 06457
Re: Mortgage Lenders Network Home Equity Loan Trust 1999-2 Asset Backed
Notes
Dear Ladies and Gentlemen:
Reference is hereby made to the Servicing Agreement dated as of
November 1, 1999 (the "Agreement") among Mortgage Lenders Network Home Equity
Loan Trust 1999-2, as Issuer, Mortgage Lenders Network USA, Inc., as Servicer,
and Norwest Bank Minnesota, National Association, as Indenture Trustee. The
Indenture Trustee has not received notification from Financial Security
Assurance Inc., as the Note Insurer, that instructs the Indenture Trustee not to
renew the term of Mortgage Lenders Network USA, Inc., as the Servicer under the
Agreement. Therefore, pursuant to Section 7.02 of the Agreement, the Indenture
Trustee hereby notifies Mortgage Lenders Network USA, Inc., that its term as
Servicer has been extended for a successive three calendar month period
beginning with the month of ________, ____.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Indenture Trustee
By:
-------------------------------------
Name:
---------------------------------
Title:
---------------------------------
cc: Financial Security Assurance Corporation
350 Park Avenue
New York, NY 10022
Attn: Structured Finance Group (Mortgage Lenders Network Home Equity Loan
Trust 1999-2 Asset Backed Notes, Series 1999-2)
FINANCIAL GUARANTY
INSURANCE POLICY
FINANCIAL
[LOGO] SECURITY
ASSURANCE(R)
Obligor: As described in Endorsement No. 1 Policy No.: 50881-N
Obligations: $144,953,790 Mortgage Lenders Date of Issuance: 11/18/99
Network Home Equity Loan Trust 1999-2,
Asset-Backed Notes, Series 1999-2,
Class A
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to
each Holder, subject only to the terms of this Policy (which includes each
endorsement hereto), the full and complete payment by the Obligor of Scheduled
Payments of principal of, and interest on, the Obligations.
For the further protection of each Holder, Financial Security irrevocably
and unconditionally guarantees:
(a) payment of the amount of any distribution of principal of, or
interest on, the Obligations made during the Term of this Policy to such
Holder that is subsequently avoided in whole or in part as a preference
payment under applicable law (such payment to be made by Financial
Security in accordance with Endorsement No. 1 hereto).
(b) payment of any amount required to be paid under this Policy by
Financial Security following Financial Security's receipt of notice as
described in Endorsement No. 1 hereto.
Financial Security shall be subrogated to the rights of each Holder to
receive payments under the Obligations to the extent of any payment by Financial
Security hereunder.
Except to the extent expressly modified by an endorsement hereto,
following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Obligation as indicated on
the registration books maintained by or on behalf of the Obligor for such
purpose or, if the Obligation is in bearer form, the holder of the Obligation.
"Scheduled Payments" means payments which are scheduled to be made during the
Term of this Policy in accordance with the original terms of the Obligations
when issued and without regard to any amendment or modification of such
Obligations thereafter; payments which become due on an accelerated basis as a
result of (a) a default by the Obligor, (b) an election by the Obligor to pay
principal or an accelerated basis or (c) any other cause, shall not constitute
"Scheduled Payments" unless Financial Security shall elect, in its sole
discretion, to pay such principal due upon such acceleration together with any
accrued interest to the date of acceleration. "Term of this Policy" shall have
the meaning set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security, and
shall not be modified, altered or affected by any other agreement or instrument,
including any modification or amendment thereto, or by the merger, consolidation
or dissolution of the Obligor. Except to the extent expressly modified by an
endorsement hereto, the premiums paid in respect of this Policy are
nonrefundable for any reason whatsoever, including payment, or provision being
made for payment, of the Obligations prior to maturity. This Policy may not be
canceled or revoked during the Term of this Policy. THIS POLICY IS NOT COVERED
BY PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:
-------------------------------------
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 100NY (5/89)
<PAGE>
Policy No.: 50081-N Date of Issuance: November 18, 1999
ENDORSEMENT NO. 1
TO FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
OBLIGOR: Mortgage Lenders Network Home Equity Loan Trust 1999-2,
pursuant to the Indenture dated as of November 1, 1999 between
Mortgage Lenders Network Home Equity Loan Trust 1999-2 and
Norwest Bank, Minnesota, National Association
OBLIGATIONS: $144,953,790 Mortgage Lenders Network Home Equity Loan Trust
1999-2, Asset-Backed Notes, Series 1999-2, Class A
POLICY NO.: 50881-N
DATE OF ISSUANCE: November 18, 1999
1. Definitions. For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below. Capitalized terms used
herein and not otherwise defined herein shall have the meanings provided in the
Indenture unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday or (ii) a
day on which banking institutions in the City of New York, New York, the States
of New York or Minnesota or in the city in which the corporate trust office of
the Indenture Trustee is located, are authorized or obligated by law or
executive order to be closed.
"Holder" shall not include the Obligor or any affiliates or successors
thereof in the event the Obligor, or any such affiliate or successor, is a
registered or beneficial owner of the Obligation.
"Indenture" means the Indenture, dated as of November 1, 1999, by and
between Mortgage Lenders Network Home Equity Loan Trust 1999-2 as issuer (the
"Issuer") and Norwest Bank, Minnesota, National Association as indenture trustee
(the "Indenture Trustee"), as amended from time to time with the consent of
Financial Security.
"Indenture Trustee" means Norwest Bank, Minnesota, National Association,
in its capacity as Indenture Trustee under the Indenture and any successor in
such capacity.
"Policy" means this Financial Guaranty Insurance Policy and includes each
endorsement thereto.
"Receipt" and "Received" mean actual delivery to Financial Security and to
the Fiscal Agent (as defined below), 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 hereunder by the
Indenture Trustee is not in proper form or is not properly completed, executed
or delivered, it shall be deemed not to have been Received, and Financial
Security or its Fiscal Agent shall promptly so advise the Indenture Trustee and
the Indenture Trustee may submit an amended notice.
"Scheduled Payments" shall mean with respect to any Payment Date the
Required Payment with respect to such Payment Date. Scheduled Payments shall not
include any amounts due in respect of the Obligations attributable to any
increase in interest rate, penalty or other sum payable by the Obligor by reason
of any default or event of default in respect of the Obligations, or by reason
of any deterioration of the creditworthiness of the Obligor, nor shall Scheduled
Payments include, nor shall coverage be provided under this Policy in respect
of, any taxes, withholding or other charge imposed by any governmental authority
due in connection with the payment of any Scheduled Payment to a Holder.
"Term of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) all Scheduled Payments have been
paid that are required to be paid by the Obligor within the meaning of Section
4.01 of the Indenture; (ii) any period during which any Scheduled Payment could
have been avoided in whole or in part as a preference payment under applicable
bankruptcy, insolvency, receivership or similar law shall have expired and (iii)
if any proceedings requisite to avoidance as a preference payment have been
commenced prior to the occurrence of (i) and (ii), a final and nonappealable
order in resolution of each such proceeding has been entered.
2. Notices and Conditions to Payment in Respect of Scheduled Payments.
Following Receipt by Financial Security of a notice and certificate from the
Indenture Trustee in the form attached as Exhibit A to this Endorsement,
Financial Security will pay any amount payable hereunder in respect of Scheduled
Payments on the Obligations out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the third Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the date on
which such payment is due on the Obligations. Payments due hereunder in respect
of Scheduled Payments will be disbursed to the Indenture Trustee by wire
transfer of immediately available funds.
Financial Security shall be entitled to pay any amount hereunder in
respect of Scheduled Payments on the Obligations, including any amount due on
the Obligations on an accelerated basis, whether or not any notice and
certificate shall have been Received by Financial Security as provided above;
provided, however, that by acceptance of this Policy the Indenture Trustee
agrees to provide upon request to Financial Security a notice and certificate in
respect of any such payments made by Financial Security. Financial Security
shall be entitled to pay hereunder any amount due on the Obligations on an
accelerated basis at any time or from time to time, in whole or in part, prior
to the scheduled date of payment thereof; Scheduled Payments insured hereunder
shall not include interest, in respect of principal paid hereunder on an
accelerated basis, accruing from after the date of such payment of principal.
Financial Security's obligations hereunder in respect of Scheduled Payments
shall be discharged to the extent such amounts are paid by the Issuer in
accordance with the Indenture or disbursed by Financial Security as provided
herein whether or not such funds are properly applied by the Indenture Trustee
except as otherwise provided in paragraph 3 of this Endorsement.
3. Notices and Conditions to Payment in Respect of Scheduled Payments
Avoided as Preference Payments. If any Scheduled Payment is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (i) the fourth Business
Day following Receipt by Financial Security from the Indenture Trustee of (A) a
certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that the Holder is required to return
principal of or interest paid on the Obligations during the Term of this Policy
because such payments were avoidable as preference payments under applicable
bankruptcy law (the "Order"), (B) a certificate of the Holder that the Order has
been entered and is not subject to any stay and (C) an assignment duly executed
and delivered by the Holder, in such form as is reasonably required by Financial
Security, and provided to the Holder by Financial Security, irrevocably
assigning to Financial Security all rights and claims of the Holder relating to
or arising under the Obligations against the estate of the Obligor or otherwise
with respect to such preference payment or (ii) the date of Receipt by Financial
Security from the Indenture Trustee of the items referred to in clauses (A), (B)
and (C) above if, at least four Business Days prior to such date of Receipt,
Financial Security shall have Received written notice from the Indenture 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
Indenture Trustee or any Holder directly (unless a Holder has previously paid
such amount to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order, in which case such payment shall be disbursed to
the Indenture Trustee for distribution to such Holder upon proof of such payment
reasonably satisfactory to Financial Security). In connection with the
foregoing, Financial Security shall have the rights provided pursuant to Section
8.03 of the Indenture.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Indenture Trustee at the notice address
specified in the Indenture specifying the name and notice address of the Fiscal
Agent. From and after the date of receipt of such notice by the Indenture
Trustee, (i) copies of all notices and documents required to be delivered to
Financial Security pursuant to this Policy shall be simultaneously delivered to
the Fiscal Agent and to Financial Security and shall not be deemed Received
until Received by both, and (ii) all payments required to be made by Financial
Security under this Policy may be made directly by Financial Security or by the
Fiscal Agent on behalf of Financial Security. The Fiscal Agent is the agent of
Financial Security only and the Fiscal Agent shall in no event be liable to any
Holder for any acts of the Fiscal Agent or any failure of Financial Security to
deposit, or cause to be deposited, sufficient funds to make payments due under
the Policy.
6. Waiver of Defense. To the fullest extent permitted by applicable law,
Financial Security agrees not to assert, and hereby waives, for the benefit of
each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notice. All notices to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by registered
mail or personally delivered or telecopied to Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, New York 10022
Attention: Managing Director - Surveillance
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing
mailed or delivered to the Indenture Trustee.
8. Priorities. In the event that any term or provision of the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association created under Part II of Chapter 631 of the Florida Insurance Code.
In the event Financial Security were to become insolvent, any claims rising
under this Policy are excluded from coverage by the California Insurance
Guaranty Association, established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Indenture Trustee shall surrender this Policy
to Financial Security for cancellation upon expiration of the Term of this
Policy.
<PAGE>
Policy No.: 50081-N Date of Issuance: November 18, 1999
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By:
--------------------------------------
Authorized Officer
<PAGE>
Policy No.: 50081-N Date of Issuance: November 18, 1999
Exhibit A
To Endorsement No. 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of Norwest Bank, Minnesota,
National Association (the "Indenture Trustee"), hereby certifies to Financial
Security Assurance Inc. ("Financial Security"), with reference to Financial
Guaranty Insurance Policy No. 50881-N dated November 18, 1999 (the "Policy")
issued by Financial Security in respect of the Mortgage Lenders Network Home
Equity Loan Trust 1999-2, Asset-Backed Notes, Series 1999-2, Class A (the
"Obligations"), that:
(i) The Indenture Trustee is the Indenture Trustee under the
Indenture for the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Note Payment Account and available for distribution to the
Holders pursuant to the Indenture will be $___________ (the "Shortfall")
less than the aggregate amount of Scheduled Payments with respect to the
Payment date occurring on ____________.
(iii) The Indenture Trustee is making a claim under the Policy for
the Shortfall to be applied to the payment of Scheduled Payments.
(iv) The Indenture Trustee agrees that, following receipt of funds
from Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Scheduled Payments on the Obligations
when due; (b) not apply such funds for any other purpose; (c) not
commingle such funds with other funds held by the Indenture Trustee and
(d) maintain an accurate record of such payments with respect to each
Obligation and the corresponding claim on the Policy and proceeds thereof
and, if the Obligation is required to be surrendered and/or presented for
such payment, shall stamp on each such Obligation the legend "$[insert
applicable amount] paid by Financial Security and the balance hereof has
been cancelled and reissued" and then shall deliver such Obligation to
Financial Security and shall deliver such coupons so paid to Financial
Security.
(v) The Indenture Trustee, on behalf of the Holders, hereby assigns
to Financial Security the rights of the Holders with respect to the
Obligations to the extent of any payments under the Policy, including,
without limitation, any amounts due to the Holders in respect of
securities law violations arising from the offer and sale of the
Obligations. The foregoing assignment is in addition to, and not in
limitation of, rights of subrogation otherwise available to Financial
Security in respect of such payments. Payments to Financial Security in
respect of the foregoing assignment shall in all cases be subject to and
subordinate to the rights of the Holders to receive all Scheduled Payments
in respect of the Obligations. The Indenture Trustee shall take such
action and deliver such instruments as may be reasonably requested or
required by Financial Security to effectuate the purpose or provisions of
this clause (v).
(vi) The Indenture Trustee, on its behalf and on behalf of the
Holders, hereby appoints Financial Security as agent and attorney-in-fact
for the Indenture Trustee and each such Holder in any legal proceeding
with respect to the Obligations. The Indenture Trustee hereby agrees that,
so long as a [Note Insurer Default] (as defined in the Indenture) shall
not exist, Financial Security may at any time during the continuation of
any proceeding by or against the Issuer under the United States Bankruptcy
Code or any other applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (an "Insolvency Proceeding") direct all
matters relating to such Insolvency Proceeding, including without
limitation, (A) all matters relating to any claim in connection with an
Insolvency Proceeding seeking the avoidance as a preferential transfer of
any payment made with respect to the Obligations (a "Preference Claim"),
(B) the direction of any appeal of any order relating to any Preference
Claim at the expense of Financial Security but subject to reimbursement as
provided in the Insurance Agreement and (C) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition, the
Indenture Trustee hereby agrees that Financial Security shall be
subrogated to, and the Indenture Trustee on its behalf and on behalf of
each Holder, hereby delegates and assigns, to the fullest extent permitted
by law, the rights of the Indenture Trustee and each Holder in the conduct
of any Insolvency Proceeding, including, without limitation, all rights of
any party to an adversary proceeding or action with respect to any court
order issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to the
[Policy Payments Account].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
<PAGE>
Policy No.: 50081-N Date of Issuance: November 18, 1999
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered this
Notice of Claim and Certificate as of the _________ day of ______________,
_____.
NORWEST BANK, MINNESOTA,
NATIONAL ASSOCIATION
By:
-------------------------------------
Name:
Title:
- --------------------------------------------------------------------------------
For Financial Security or Fiscal Agent Use Only
Wire transfer sent on_______________________By__________________________________
Confirmation Number_____________________________________________________________
