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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
September 21, 1998
First Alliance Mortgage Loan Trust 1998-3
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(Exact name of registrant as specified in its charter)
APPLICATION
New York 333-44585-04 PENDING
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(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation) Number) Identification No.)
c/o Norwest Bank Minnesota, National Association,
as Trustee
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (612) 667-1234
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N/A
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(Former name or former address, if changed since last report)
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<PAGE>
Item 5. Other Events.
Reference is hereby made to the Registration Statement on Form S-3
(Registration File No. 333-44585) filed by First Alliance Mortgage Company
("First Alliance") with the Securities and Exchange Commission (the
"Commission") on January 21, 1998, as amended by Amendment No. 1 to the
Registration Statement on Form S-3 dated February 3, 1998, pursuant to which
First Alliance registered $750,000,000 aggregate principal amount of its
mortgage loan asset-backed certificates and notes, issuable in various series,
for sale in accordance with the provisions of the Securities Act of 1933, as
amended (the "Act"). Reference is also hereby made to the Prospectus dated March
10, 1998, and the related Prospectus Supplement, dated September 14, 1998, which
were previously filed with the Commission pursuant to Rule 424(b)(5), with
respect to the FIRST ALLIANCE MORTGAGE LOAN TRUST 1998-3 Mortgage Loan Asset
Backed Certificates, Series 1998-3 (the "Certificates").
The Certificates were issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") attached hereto as Exhibit
4.1, dated as of September 1, 1998, between First Alliance Mortgage Company in
its capacities as the Seller (the "Seller") and the Servicer (the "Servicer")
and Norwest Bank Minnesota, National Association, in its capacity as trustee
(the "Trustee"). The Certificates consist of five classes: the Class A-1, Class
A-2, Class A-3 and Class A-4 Certificates (the "Class A Certificates") and the
Class R Certificates (the "Class R Certificates" and, together with the Class A
Certificates, the "Certificates"). Only the Class A Certificates were issued
pursuant to the Registration Statement. The Certificates initially evidence, in
the aggregate, 100% of the undivided beneficial ownership interests in the
Trust.
The assets of the Trust initially will include two pools (each, a
"Mortgage Loan Group") of closed-end mortgage loans (the "Mortgage Loans")
secured by mortgages or deeds of trust on one-to-four family residential
properties. The Class A-1 Fixed Rate Group Certificates, the Class A-2 Fixed
Rate Group Certificates and the Class A-3 Fixed Rate Group Certificates
represent undivided ownership interests in a pool of fixed rate Mortgage Loans
secured by mortgages that may be either in a first or in a junior lien position.
The Class A-4 Variable Rate Group Certificates represent undivided ownership
interests in a pool of variable rate Mortgage Loans secured by mortgages in a
first lien position.
Interest distributions on the Class A Certificates are based on the
Certificate Principal Balance thereof and the then applicable Pass-Through Rate
thereof. The Pass-Through Rate for the Class A-1 Certificates will be 6.200% per
annum. The Pass-Through Rate for the Class A-2 Certificates will be 6.160% per
annum. The Pass-Through Rate for the Class A-3 Certificates will be 6.460% per
annum. The Pass-Through Rate for the Class A-3 Certificates adjusts monthly and
with respect to the first Payment Date will be 5.83203% per annum.
The Class A-1 Certificates have an aggregate principal amount of
$30,000,000. The Class A-2 Certificates have an aggregate principal amount of
$22,000,000. The Class A-3 Certificates have an aggregate principal amount of
$18,000,000. The Class A-4 Certificates have an aggregate principal amount of
$30,000,000.
As of the Closing Date, the Mortgage Loans possessed the
characteristics described in the Prospectus dated March 10, 1998 and the
Prospectus Supplement dated September 14, 1998, filed pursuant to Rule 424(b)(5)
of the Act on September 21, 1998.
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On September 30, 1998, the Trust acquired $24,695,346.98 of
Subsequent Mortgage Loans pursuant to the terms of the Pooling and Servicing
Agreement and the Subsequent Transfer Agreement attached hereto as Exhibit 10.1,
dated as of September 30, 1998, between First Alliance Mortgage Company and the
Trustee on behalf of the Trust. The Subsequent Mortgage Loans possess the
characteristics required by the Prospectus dated March 10, 1998 and the
Prospectus Supplement dated September 14, 1998, filed pursuant to Rule 424(b)(5)
of the Act on September 21, 1998.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
1.1 Underwriting Agreement, dated September 14, 1998,
between First Alliance Mortgage Company and
Prudential Securities Incorporated, acting on its
own behalf and as representative of Wheat First
Securities, Inc., acting through First Union
Capital Markets, a division of Wheat First
Securities, Inc.
4.1 Pooling and Servicing Agreement, dated as of
September 1, 1998, between First Alliance Mortgage
Company, as Seller and Servicer, and Norwest Bank
Minnesota, National Association, as Trustee.
10.1 Subsequent Transfer Agreement, dated as of
September 30, 1998, between First Alliance Mortgage
Company, as Seller and Servicer and First Alliance
Mortgage Loan Trust 1998-3.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
By: FIRST ALLIANCE MORTGAGE COMPANY
By: /s/ Francisco Nebot
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Name: Francisco Nebot
Title: Executive Vice President and
Chief Financial Officer
Dated: October 2, 1998
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EXHIBIT INDEX
Exhibit No. Description Page No.
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1.1 Underwriting Agreement, dated September 14, 1998,
betwee First Alliance Mortgage Company and Prudential
Securities Incorporated, acting on its own behalf and
as representative of Wheat First Securities, Inc.,
acting through First Union Capital Markets, a division
of Wheat First Securities, Inc.
4.1 Pooling and Servicing Agreement, dated as of September 1,
1998, between First Alliance Mortgage Company, as Seller
and Servicer, and Norwest Bank Minnesota, National
Association, as Trustee.
10.1 Subsequent Transfer Agreement, dated as of September 30,
1998, between First Alliance Mortgage Company, as Seller and
Servicer and First Alliance Mortgage Loan Trust 1998-3.
Exhibit 1.1
FIRST ALLIANCE MORTGAGE COMPANY
AND
PRUDENTIAL SECURITIES INCORPORATED,
AS REPRESENTATIVE OF THE SEVERAL UNDERWRITERS
UNDERWRITING AGREEMENT
FOR
FIRST ALLIANCE MORTGAGE LOAN TRUST 1998-3
MORTGAGE LOAN ASSET BACKED CERTIFICATES,
6.200% CLASS A-1 FIXED RATE GROUP CERTIFICATES
6.160% CLASS A-2 FIXED RATE GROUP CERTIFICATES
6.460% CLASS A-3 FIXED RATE GROUP CERTIFICATES
CLASS A-4 VARIABLE RATE GROUP CERTIFICATES
September 14, 1998
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September 14, 1998
First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92614
Prudential Securities Incorporated,
As Representative of the Several Underwriters
One New York Plaza, 15th Floor
New York, New York 10292
First Alliance Mortgage Company (the "Seller") hereby confirms its
agreement to sell certain mortgage loan asset backed certificates to Prudential
Securities Incorporated and Wheat First Securities, Inc., acting through First
Union Capital Markets, a division of Wheat First Securities, Inc. (collectively,
the "Underwriters") as described herein relating to the First Alliance Mortgage
Loan Trust 1998-3 (the "Trust"). Prudential Securities Incorporated will act as
representative of the Underwriters (in such capacity, the "Representative"). The
certificates, together with certain subordinate certificates to be issued by the
Trust, will evidence in the aggregate the entire beneficial interest in a trust
estate (the "Trust Estate") consisting of two pools (the "Mortgage Pools") of
closed-end mortgage loans (the "Initial Mortgage Loans") and such amounts as may
be held by the Trustee in the Pre-Funding Account ("Pre-Funding Account"), the
Capitalized Interest Account (the "Capitalized Interest Account") and any other
accounts held by the Trustee for the Trust. The Initial Mortgage Loans shall
have, as of the close of business on September 1, 1998 (the "Cut-off Date"), an
aggregate principal balance of $75,305,150.14. The certificates are to be issued
under a pooling and servicing agreement dated as of September 1, 1998 (the
"Pooling and Servicing Agreement"), among the Seller, in its individual capacity
and in its capacity as servicer (the "Servicer") and Norwest Bank Minnesota,
National Association, in its capacity as trustee (the "Trustee"). On the Closing
Date, approximately $24,694,849.86 will be deposited in the name of the Trustee
in the Pre-Funding Account from the sale of the Certificates. It is intended
that additional Mortgage Loans satisfying the criteria specified in the Pooling
and Servicing Agreement (the "Subsequent Mortgage Loans") will be purchased by
the Trust for inclusion in both Group I and Group II from the Seller from time
to time on or before October 31, 1998 from funds on deposit in the Pre-Funding
Account at the time of execution and delivery of each Subsequent Transfer
Agreement ("Subsequent Transfer Agreement"). Funds in the Capitalized Interest
Account will be applied by the Trustee to cover shortfalls in interest during
the Funding Period.
On or prior to the date of issuance of the Certificates, the Seller
will obtain two certificate guaranty insurance policies (the "Policies") issued
by MBIA Insurance Corporation (the "Insurer") which will unconditionally and
irrevocably guarantee to the Trustee for the benefit of the holders of the Class
A-1 Certificates, the Class A-2 Certificates, the Class
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A-3 Certificates and the Class A-4 Certificates full and complete payment of all
amounts payable on the Class A-1 Certificates, the Class A-2 Certificates, the
Class A-3 Certificates and the Class A-4 Certificates. All capitalized terms
used but not otherwise defined herein have the respective meanings set forth in
the form of Pooling and Servicing Agreement heretofore delivered to the
Underwriters.
1. Securities. The certificates will be issued in classes as follows:
(i) a senior class with respect to each Mortgage Loan Group consisting of the
Class A-1 Fixed Rate Group Certificates (the "Class A-1 Certificates"), the
Class A-2 Fixed Rate Group Certificates (the "Class A-2 Certificates"), the
Class A-3 Fixed Rate Group Certificates (the "Class A-3 Certificates) and the
Class A-4 Variable Rate Group Certificates (the "Class A-4 Certificates" and
collectively with the Class A-1 Certificates, the Class A-2 Certificates and the
Class A-3 Certificates, the "Class A Certificates") and (ii) a residual class
(the "Class R Certificates"). The Class A Certificates and the Class R
Certificates are hereinafter referred to as the "Certificates."
2. Representations and Warranties of the Seller. The Seller represents
and warrants to, and covenants with, the Underwriters that:
A. The Seller has filed with the Securities and Exchange Commission
(the "Commission"), a registration statement (No. 333-44585) on Form S-3 for the
registration under the Securities Act of 1933, as amended (the "Act"), of
Mortgage Loan Asset Backed Certificates and Notes (issuable in series), which
registration statement, as amended at the date hereof, has become effective.
Such registration statement, as amended to the date of this Agreement, meets the
requirements set forth in Rule 415(a)(1)(vii) under the Act and complies in all
other material respects with such Rule. The Seller proposes to file with the
Commission pursuant to Rule 424(b)(5) under the Act, a supplement dated
September 14, 1998 to the prospectus dated March 10, 1998 relating to the
Certificates and the method of distribution thereof and has previously advised
the Underwriters of all further information (financial and other) with respect
to the Certificates to be set forth therein. Such registration statement,
including the exhibits thereto, as amended at the date hereof, is hereinafter
called the "Registration Statement"; such prospectus dated March 10, 1998, in
the form in which it will be filed with the Commission pursuant to Rule
424(b)(5) under the Act is hereinafter called the "Basic Prospectus"; such
supplement dated September 14, 1998 to the Basic Prospectus, in the form in
which it will be filed with the Commission pursuant to Rule 424(b)(5) of the
Act, is hereinafter called the "Prospectus Supplement"; and the Basic Prospectus
and the Prospectus Supplement together are hereinafter called the "Prospectus."
The Seller will file with the Commission (i) promptly after receipt from any
Underwriter of any Computational Material (as defined herein) a Form 8-K
incorporating such Computational Materials and (ii) within fifteen days of the
issuance of the Certificates a report on Form 8-K setting forth specific
information concerning the related Mortgage Loans (the "8-K").
B. As of the date hereof, when the Registration Statement became
effective, when the Prospectus Supplement is first filed pursuant to Rule
424(b)(5) under the Act, and at the Closing Date, (i) the Registration
Statement, as amended as of any such time, and the Prospectus, as amended or
supplemented as of any such time, will comply in all material respects with the
applicable requirements of the Act and the rules thereunder and (ii) the
Registration Statement, as amended as of any such time, did not and will not
contain any untrue statement of a material fact and did not and will not omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and the Prospectus, as amended or supplemented
as of any such time, did not and will not contain an untrue statement of a
material fact and did not and will not omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the Seller makes
no representations or warranties as to the information contained in or omitted
from the Registration Statement or the Prospectus or any amendment thereof or
supplement thereto in reliance upon and in conformity with the information
furnished in writing to the Seller by or on behalf of any Underwriter
specifically for use in connection with the preparation of the Registration
Statement and the Prospectus.
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C. The Seller is duly organized, validly existing and in good standing
under the laws of the State of California, has full power and authority
(corporate and other) to own its properties and conduct its business as now
conducted by it, and as described in the Prospectus, and is duly qualified to do
business in each jurisdiction in which it owns or leases real property (to the
extent such qualification is required by applicable law) or in which the conduct
of its business requires such qualification except where the failure to be so
qualified does not involve (i) a material risk to, or a material adverse effect
on, the business, properties, financial position, operations or results of
operations of the Seller or (ii) any risk whatsoever as to the enforceability of
any Mortgage Loan.
D. There are no actions, proceedings or investigations pending, or, to
the knowledge of the Seller, threatened, before any court, governmental agency
or body or other tribunal (i) asserting the invalidity of this Agreement, the
Certificates, the Insurance Agreement, the Indemnification Agreement or of the
Pooling and Servicing Agreement, (ii) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by this
Agreement, the Pooling and Servicing Agreement or any Subsequent Transfer
Agreement, (iii) which may, individually or in the aggregate, materially and
adversely affect the performance by the Seller of its obligations under, or the
validity or enforceability of, this Agreement, the Certificates, the Pooling and
Servicing Agreement or any Subsequent Transfer Agreement, or (iv) which may
affect adversely the federal income tax attributes of the Certificates as
described in the Prospectus.
E. The execution and delivery by the Seller of this Agreement, the
Indemnification Agreement, the Insurance Agreement and the Pooling and Servicing
Agreement, the issuance of the Certificates and the transfer and delivery of the
Mortgage Loans to the Trustee by the Seller are within the corporate power of
the Seller and have been, or will be, prior to the Closing Date duly authorized
by all necessary corporate action on the part of the Seller and the execution
and delivery of such instruments, the consummation of the transactions therein
contemplated and compliance with the provisions thereof will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any statute or any agreement or instrument to which the Seller or
any of its affiliates is a party or by which it or any of them is bound or to
which any of the property of the Seller or any of its affiliates is subject, the
Seller's charter or bylaws, or any order, rule or regulation of any court,
governmental agency or body or other tribunal having jurisdiction over the
Seller, any of its affiliates or any of its or their properties; and no consent,
approval, authorization or order of, or filing with, any court or governmental
agency or body or other tribunal is required for the consummation of the
transactions contemplated by this Agreement or the Prospectus in connection with
the issuance and sale of the Certificates by the Seller except pursuant to the
Act. Neither the Seller nor any of its affiliates is a party to, bound by or in
breach or violation of any indenture or other agreement or instrument, or
subject to or in violation of any statute, order, rule or regulation of any
court, governmental agency or body or other tribunal having jurisdiction over
the Seller or any of its affiliates, which materially and adversely affects, or
may in the future materially and adversely affect, (i) the ability of the Seller
to perform its obligations under the Pooling and Servicing Agreement, this
Agreement, the Insurance Agreement, the Indemnification Agreement and any
Subsequent Transfer Agreement or (ii) the business, operations, results of
operations, financial position, income, properties or assets of the Seller,
taken as a whole.
F. This Agreement and the Indemnification Agreement have been duly
executed and delivered by the Seller, and the Pooling and Servicing Agreement,
the Insurance Agreement and any Subsequent Transfer Agreement will be duly
executed and delivered by the Seller, and each constitutes and/or will
constitute, as applicable, the legal, valid and binding obligation of the Seller
enforceable in accordance with their respective terms, except as enforceability
may be limited by (i) bankruptcy, insolvency, liquidation, receivership,
moratorium, reorganization or other similar laws affecting the enforcement of
the rights of creditors and (ii) general principles of equity, whether
enforcement is sought in a proceeding at law or in equity.
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<PAGE>
G. The Certificates will conform in all material respects to the
description thereof to be contained in the Prospectus and will be duly and
validly authorized and, when duly and validly executed, authenticated, issued
and delivered in accordance with the Pooling and Servicing Agreement and sold to
the Underwriters as provided herein, will be validly issued and outstanding and
entitled to the benefits of the Pooling and Servicing Agreement.
H. On the Closing Date, the Initial Mortgage Loans will conform in all
material respects to the description thereof contained in the Prospectus and the
representations and warranties contained in this Agreement will be true and
correct in all material respects. The representations and warranties set out in
the Pooling and Servicing Agreement are hereby made to the Underwriters as
though set out herein, and at the dates specified in the Pooling and Servicing
Agreement, and in any Subsequent Transfer Agreement, such representations and
warranties were, or will be, true and correct in all material respects.
I. The transfer of the Initial Mortgage Loans to the Trust at the
Closing Date will be treated by the Seller for financial accounting and
reporting purposes as a sale of assets and not as a pledge of assets to secure
debt.
J. The Seller possesses all material licenses, certificates, permits or
other authorizations issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now operated by
it and as described in the Prospectus and there are no proceedings, pending or,
to the best knowledge of the Seller, threatened, relating to the revocation or
modification of any such license, certificate, permit or other authorization
which singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the business,
operations, results of operations, financial position, income, property or
assets of the Seller taken as a whole.
K. Any taxes, fees and other governmental charges in connection with
the execution and delivery of this Agreement, the Insurance Agreement, the
Indemnification Agreement, and the Pooling and Servicing Agreement or the
execution and issuance of the Certificates have been or will be paid at or prior
to the Closing Date.
L. There has not been any material adverse change, or any development
involving a prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Seller or its
subsidiaries, taken as a whole, from December 31, 1997 to the date hereof.
M. This Agreement and the Pooling and Servicing Agreement will conform
in all material respects to the descriptions thereof contained in the
Prospectus.
N. The Seller is not aware of (i) any request by the Commission for any
further amendment of the Registration Statement or the Prospectus or for any
additional information, (ii) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose or (iii) any notification with
respect to the suspension of the qualification of the Certificates for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose.
O. Each assignment of Mortgages required to be prepared pursuant to the
Pooling and Servicing Agreement is based on forms recently utilized by the
Seller with respect to mortgaged properties located in the appropriate
jurisdiction and used in the regular course of the Seller's business. Based on
the Seller's experience with such matters it is reasonable to believe that upon
execution each such assignment will be in recordable form and will be sufficient
to effect the assignment of the Mortgage to which it relates as provided in the
Pooling and Servicing Agreement.
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P. The Seller is current in all filings under the Securities Exchange
Act and is eligible to use the Registration Statement.
Any certificate signed by any officer of the Seller and delivered to
the Representative in connection with the sale of the Certificates hereunder
shall be deemed a representation and warranty as to the matters covered thereby
by the Seller to each person to whom the representations and warranties in this
Section 2 are made.
3. Agreements of the Underwriters.
A. The Representative agrees with the Seller that upon the execution
of this Agreement and authorization by the Representative of the release of each
Class of Certificates, the Underwriters shall offer each Class of Certificates
for sale upon the terms and conditions set forth in the Prospectus as amended or
supplemented.
B. The Underwriters may prepare and provide to prospective investors
certain Computational Materials and ABS Term Sheets in connection with the
offering of the Certificates, subject to the following conditions:
1. In connection with the use of Computational Materials, each
Underwriter shall comply with all applicable requirements of the No-Action
Letter, dated May 20, 1994, issued by the Division of Corporation Finance
of the Commission to Kidder, Peabody Acceptance Corporation I, Kidder,
Peabody & Co. Incorporated and Kidder Structured Asset Corporation, as
made applicable to other issuers and the Underwriters by the Division of
Corporation Finance of the Commission in response to the request of the
Public Securities Association ("PSA"), dated May 23, 1994 (collectively,
the "Kidder/PSA Letters"), as well as the PSA Letter referred to below. In
connection with the use of ABS Term Sheets, the Underwriters shall comply
with all applicable requirements of the No-Action Letter, dated February
17, 1995, issued by the Division of Corporation Finance to the Commission
to PSA (the "PSA Letter" and, together with the Kidder/PSA Letters, the
"No-Action Letters").
2. The term "Computational Materials" as used herein shall have
the meaning given to such term in the No-Action Letters, but shall include
only those Computational Materials that have been prepared or delivered to
prospective investors by or at the direction of the Underwriters. The
terms "ABS Term Sheets," "Collateral Term Sheets" and "Structural Term
Sheets" as used herein shall have the meanings given to such terms in the
PSA Letter, but shall include only those ABS Term Sheets, Collateral Term
Sheets or Structural Term Sheets that have been prepared or delivered to
prospective investors by or at the direction of the Underwriters.
3. All Computational Materials and ABS Term Sheets provided to
prospective investors that are required to be filed pursuant to the
No-Action Letters shall bear a legend on each page in a form previously
agreed upon by the Seller and the Representative.
4. Any Computational Materials and ABS Term Sheets are subject to
review by and approval of the Seller prior to their distribution to any
prospective investors and a copy of such Computational Materials and ABS
Term Sheets as are delivered to prospective investors shall, in addition
to the foregoing delivery requirements, be delivered to the Seller
simultaneously with delivery to prospective investors.
5. Each Underwriter shall provide to the Seller, for filing on
Form 8-K as provided in Section 9 hereof, five copies (in such format as
required by the Seller) of all Computational Materials and ABS Term Sheets
that are required to be filed with the Commission pursuant to the No-
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Action Letters. Each delivery of Computational Materials or ABS Term
Sheets to the Seller pursuant to this paragraph shall be effected by
delivering four copies of such material to counsel for the Seller on
behalf of the Seller and one copy of such materials to the Seller. The
Underwriters may provide copies of the foregoing in a consolidated or
aggregate form that includes all information required to be filed. All
Computational Materials and ABS Term Sheets described in this Section must
be provided to the Seller not later than 10:00 a.m., New York time, on the
Business Day before the date on which filing thereof is required pursuant
to the terms of this Agreement. The Underwriters agree that they will not
provide to any investor or prospective investor in the Notes any
Computational Materials or ABS Term Sheets on or after the day on which
Computational Materials and ABS Term Sheets are required to be provided to
the Seller pursuant to this Section (other than copies of Computational
Materials or ABS Term Sheets previously submitted to the Seller in
accordance with this Section for filing pursuant to Section 9 hereof),
unless such Computational Materials or ABS Term Sheets are preceded or
accompanied by the delivery of a Prospectus to such investor or
prospective investor.
6. All information included in the Computational Materials and
ABS Term Sheets shall be generated based on substantially the same
methodology and assumptions that are used to generate the information in
the Prospectus Supplement as set forth therein; provided, however, that
the Computational Materials and ABS Term Sheets may include information
based on alternative methodologies or assumptions specified therein. If
any Computational Materials or ABS Term Sheets that are required to be
filed were based on assumptions with respect to the Mortgage Loans that
are incorrect, that differ from the final information about the Mortgage
Pools in any material respect or on structuring terms that were revised in
any material respect prior to the printing of the Prospectus, to the
extent the Prospectus Supplement does not specifically correct such
inaccuracies, the Underwriters shall prepare revised Computational
Materials or ABS Term Sheets, as the case may be, based on the final
information about the Mortgage Pools and structuring assumptions,
circulate such revised Computational Materials or ABS Term Sheets, as the
case may be, to all recipients of the preliminary versions thereof that
indicated orally to any Underwriter that they would purchase all or any
portion of the Notes and include such revised Computational Materials or
ABS Term Sheets (marked "as revised") in the materials delivered to the
Seller pursuant to 3.B.5.
7. The Seller shall not be obligated to file any Computational
Materials or ABS Term Sheets that (i) in the reasonable determination of
the Seller and any Underwriter and their respective counsel are not
required to be filed pursuant to the No-Action Letters or (ii) have been
determined to contain any material error or omission, provided that, at
the request of the Underwriter, the Seller will file Computational
Materials or ABS Term Sheets that contain a material error or omission if
clearly marked "superseded by materials dated _____________" and
accompanied by corrected Computational Materials or ABS Term Sheets that
are marked "material previously dated __________________, as corrected."
In the event that at any time when a prospectus relating to the Notes is
required to be delivered under the Securities Act, any Computational
Materials or ABS Term Sheets are determined, in the reasonable judgment of
the Seller or the Underwriter to contain a material error or omission, the
Underwriter shall prepare a corrected version of such Computational
Materials or ABS Term Sheets, shall circulate such corrected version of
such Computational Materials or ABS Term Sheets to all recipients of the
prior version thereof that either indicated orally to such Underwriter
that they would purchase all or any portion of the Notes, or actually
purchased all or any portion thereof, and shall deliver copies of such
Computational Materials or ABS Term Sheets (marked "as corrected") to the
Seller for filing with the Commission is a subsequent Form 8-K submission
(subject to the Seller's obtaining an accountant's comfort letter in
respect of such corrected Computational Materials or ABS Term Sheets,
which shall be at the expense of the Underwriter).
C. The Underwriters represent and warrant and agree with the Seller
that, as of the date hereof and as of the Closing Date, that: (i) the
Computational Materials and ABS Term Sheets furnished to the Seller pursuant to
Section 3.B.5 constitute (either in original, aggregated or consolidated form)
all of the
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materials furnished to prospective investors by the Underwriters prior to the
time of delivery thereof to the Seller that are required to be filed with the
Commission with respect to the Notes in accordance with the No-Action Letters,
and such Computational Materials and ABS Term Sheets comply with the
requirements of the No-Action Letters; (ii) on the date any such Computational
Materials and ABS Term Sheets with respect to such Certificates (or any written
or electronic materials furnished to prospective investors on which the
Computational Materials and ABS Term Sheets are based) were last furnished to
each prospective investor and on the date of delivery thereof to the Seller
pursuant to Section 3.B.5 and on the related Closing Date, such Computational
Materials and ABS Terms Sheets (or materials) were accurate in all material
respects when read in conjunction with the Prospectus (taking into account the
assumptions explicitly set forth in the Computational Materials), except to the
extent of any errors therein that are caused by errors in information about the
Mortgage Pools provided to the Underwriters by the Seller; (iii) the
Underwriters have not and will not represent to potential investors that any
Computational Materials or ABS Term Sheets were prepared or disseminated on
behalf of the Seller; and (iv) all Computational Materials and ABS Term Sheets
(or underlying materials distributed to prospective investors on which the
Computational Materials and ABS Term Sheets were based) contained and will
contain the legend in the form previously agreed upon by the Seller and the
Underwriters as required by Section 3.B.3.
Notwithstanding the foregoing, the Underwriters make no representation
or warranty as to whether any Computational Materials or ABS Term Sheets (or any
written or electronic materials furnished to prospective investors on which the
Computational Materials or ABS Term Sheets are based) included or will include
any inaccurate statement resulting directly from any error contained in the
information about the Mortgage Pools provided to the Underwriters by the Seller.
D. Each Underwriter that delivers any Computational Materials and ABS
Term Sheets to the Seller shall deliver to the Seller a certificate, dated as of
the date hereof, to the effect that the representations and warranties of the
Underwriter contained in this Section 3 are true and correct as of such date. If
the Underwriter does not provide any Computational Materials or ABS Term Sheets
to the Seller pursuant to Section 3.B.5, the Underwriter shall be deemed to have
represented, as of the Closing Date, that it did not provide any prospective
investors with any information in written or electronic form in connection with
the offering of the Notes that is required to be filed with the Commission in
accordance with the No-Action Letters.
4. Purchase, Sale and Delivery of the Certificates. The Seller hereby
agrees, subject to the terms and conditions hereof, to sell the Class A
Certificates to the Underwriters, who, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
hereby agree to purchase the entire aggregate principal amount of the Class A
Certificates in the amounts specified in Schedule A hereto. At the time of
issuance of the Certificates, the Initial Mortgage Loans will be sold by the
Seller to the Trust pursuant to the Pooling and Servicing Agreement. The
Subsequent Mortgage Loans will be purchased by the Trust for inclusion in both
Mortgage Loan Groups, from time to time on or before October 31, 1998. The
Seller will be obligated, under the Pooling and Servicing Agreement, to service
the Mortgage Loans either directly or through sub-servicers.
The Class A Certificates to be purchased by the Underwriters will be
delivered by the Seller to the Underwriters (which delivery shall be made
through the facilities of The Depository Trust Company ("DTC")) against payment
of the purchase price therefor, equal to 99.70% of the aggregate principal
amount of the Class A-1 Certificates, 99.70% of the aggregate principal amount
of the Class A-2 Certificates, 99.70% of the aggregate principal amount of the
Class A-3 Certificates and 99.70% of the aggregate principal amount of the Class
A-4 Certificates, plus interest accrued at the Class A-1 Pass-Through Rate on
the Class A-1 Certificates, at the Class A-2 Pass-Through Rate on the Class A-2
Certificates and at the Class A-3 Pass-Through Rate on the Class A-3
Certificates, in each case from September 1, 1998 to, but not including, the
settlement date, by a same day federal funds wire payable to the order of the
Seller. No accrued interest will be payable on the Class A-4 Variable Rate Group
Certificates, which shall be dated their date of delivery.
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The Underwriters' fee shall be 30.00 basis points of each of the Class A
Certificates. The Underwriters shall reimburse the Seller for certain fees and
expenses, in an amount equal to $25,000, incurred by the Seller in connection
with the offering of the Certificates.
Settlement shall take place at the offices of Arter & Hadden LLP, 1801
K Street, N.W., Washington, D.C. 20006, at 10:00 a.m. (E.S.T.), on September 21,
1998, or at such other time thereafter as the Representative and the Seller
determine (such time being herein referred to as the "Closing Date"). The Class
A Certificates will be prepared in definitive form and in such authorized
denominations as the Representative may request, registered in the name of Cede
& Co., as nominee of DTC.
The Seller agrees to have the Certificates available for inspection and
review by the Representative in New York City not later than 1:00 p.m. (E.S.T.)
on the business day prior to the Closing Date.
5. Covenants of the Seller. The Seller covenants and agrees with the
Representative that:
A. The Seller will promptly advise the Representative and its counsel
(i) when any amendment to the Registration Statement shall have become
effective, (ii) of any request by the Commission for any amendment to the
Registration Statement or the Prospectus or for any additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or threatening of
any proceeding for that purpose and (iv) of the receipt by the Seller of any
notification with respect to the suspension of the qualification of the Class A
Certificates for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose. The Seller will not file any amendment to the
Registration Statement or supplement to the Prospectus after the date hereof and
prior to the Closing Date for the Certificates unless the Seller has furnished
the Representative and its counsel copies of such amendment or supplement for
their review prior to filing and will not file any such proposed amendment or
supplement to which any Underwriter reasonably objects, unless such filing is
required by law. The Seller will use its best efforts to prevent the issuance of
any stop order suspending the effectiveness of the Registration Statement and,
if issued, to obtain as soon as possible the withdrawal thereof.
B. If, at any time during the period in which the Prospectus is
required by law to be delivered, any event occurs as a result of which the
Prospectus as then amended or supplemented would include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it shall be necessary to amend or supplement the
Prospectus to comply with the Act or the rules under the Act, the Seller will
promptly prepare and file with the Commission, subject to Paragraph A of this
Section 5, an amendment or supplement that will correct such statement or
omission or an amendment that will effect such compliance and, if such amendment
or supplement is required to be contained in a post-effective amendment to the
Registration Statement, will use its best efforts to cause such amendment of the
Registration Statement to be made effective as soon as possible.
C. The Seller will furnish to the Representative, without charge,
executed copies of the Registration Statement (including exhibits thereto) and,
so long as delivery of a Prospectus by the Underwriters or a dealer may be
required by the Act, as many copies of the Prospectus, as amended or
supplemented, and any amendments and supplements thereto as the Underwriters may
reasonably request. The Seller will pay the expenses of printing (or otherwise
reproducing) all offering documents relating to the offering of the Class A
Certificates.
D. As soon as practicable, but not later than sixteen months after the
date hereof, the Seller will cause the Trust to make generally available to
Certificate Owners of the Trust an earnings statement of the Trust covering a
period of at least 12 months beginning after the effective date of the
Registration
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Statement which will satisfy the provisions of Section 11(a) of the Act and, at
the option of the Seller, will satisfy the requirements of Rule 158 under the
Act.
E. During a period of 20 calendar days from the date as of which this
Agreement is executed, neither the Seller nor any affiliate of the Seller will,
without the Representative's prior written consent (which consent shall not be
unreasonably withheld), enter into any agreement to offer or sell mortgage loan
asset-backed certificates backed by mortgage loans, except pursuant to this
Agreement.
F. So long as any of the Class A Certificates are outstanding, the
Seller will cause to be delivered to the Representative (i) all documents
required to be distributed to Certificate Owners of the Trust and (ii) from time
to time, any other information concerning the Trust filed with any government or
regulatory authority that is otherwise publicly available.
G. The Seller, whether or not the transactions contemplated hereunder
are consummated or this Agreement is terminated, will pay all expenses in
connection with the transactions contemplated herein, including, but not limited
to, the expenses of printing (or otherwise reproducing) all documents relating
to the offering, the reasonable fees and disbursements of its counsel and
expenses of the Representative incurred in connection with (i) the issuance and
delivery of the Certificates, (ii) preparation of all documents specified in
this Agreement, (iii) any fees and expenses of the Trustee, the Insurer and any
other credit support provider (including legal fees), accounting fees and
disbursements, and (iv) any fees charged by investment rating agencies for
rating the Class A Certificates.
H. The Seller agrees that, so long as any of the Class A Certificates
shall be outstanding, it will deliver or cause to be delivered to the
Representative (i) the annual statement as to compliance delivered to the
Trustee pursuant to the Pooling and Servicing Agreement, (ii) the annual
statement of a firm of independent public accountants furnished to the Trustee
pursuant to the Pooling and Servicing Agreement as soon as such statement is
furnished to the Seller and (iii) any information required to be delivered by
the Seller or the Servicer to prepare the report by the Trustee pursuant to
Section 7.8 of the form of Pooling and Servicing Agreement heretofore delivered
to the Representative.
I. The Seller will enter into the Pooling and Servicing Agreement, the
Insurance Agreement, and all related agreements on or prior to the Closing Date.
J. The Seller will endeavor to qualify the Class A Certificates for
sale to the extent necessary under any state securities or Blue Sky laws in any
jurisdictions as may be reasonably requested by the Representative, if any, and
will pay all expenses (including fees and disbursements of counsel) in
connection with such qualification and in connection with the determination of
the eligibility of the Class A Certificates for investment under the laws of
such jurisdictions as the Representative may reasonably designate, if any.
6. Conditions of the Underwriters' Obligation. The obligation of the
Underwriters to purchase and pay for the Class A Certificates as provided herein
and on Schedule A hereto shall be subject to the accuracy as of the date hereof
and the Closing Date (as if made at the Closing Date) of the representations and
warranties of the Seller contained herein (including those representations and
warranties set forth in the Pooling and Servicing Agreement and incorporated
herein), to the accuracy of the statements of the Seller made in any certificate
or other document delivered pursuant to the provisions hereof, to the
performance by the Seller of its obligations hereunder, and to the following
additional conditions:
A. The Registration Statement shall have become effective no later than
the date hereof, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened, and the Prospectus shall have
been filed pursuant to Rule 424(b).
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B. The Representative shall have received the Pooling and Servicing
Agreement and the Class A Certificates in form and substance satisfactory to the
Representative, duly executed by all signatories required pursuant to the
respective terms thereof.
C.1. The Underwriters shall have received the favorable opinion of the
General Counsel to the Seller, with respect to the following items, dated
the Closing Date, to the effect that:
(a) The Seller has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of
California, and is qualified to do business in each state necessary to
enable it to perform its obligations as Servicer under the Pooling and
Servicing Agreement. The Seller has the requisite power and authority
to execute and deliver, engage in the transactions contemplated by, and
perform and observe the conditions of, this Agreement, the Pooling and
Servicing Agreement, any Subsequent Transfer Agreement, the Insurance
Agreement and the Indemnification Agreement.
(b) This Agreement, the Certificates, the Pooling and Servicing
Agreement, the Insurance Agreement and the Indemnification Agreement
have been duly and validly authorized, executed and delivered by the
Seller, all requisite corporate action having been taken with respect
thereto, and each (other than the Certificates) constitutes the valid,
legal and binding agreement of the Seller enforceable against the
Seller in accordance with its respective terms.
(c) Neither the transfer of the Initial Mortgage Loans to the
Trust, the issuance or sale of the Certificates nor the execution,
delivery or performance by the Seller of the Pooling and Servicing
Agreement, this Agreement, any Subsequent Transfer Agreement, the
Insurance Agreement or the Indemnification Agreement (A) conflicts or
will conflict with or results or will result in a breach of, or
constitutes or will constitute a default under, (i) any term or
provision of the articles of incorporation or bylaws of the Seller;
(ii) any term or provision of any material agreement, contract,
instrument or indenture, to which the Seller is a party or is bound; or
(iii) any order, judgment, writ, injunction or decree of any court or
governmental agency or body or other tribunal having jurisdiction over
the Seller; or (B) results in, or will result in the creation or
imposition of any lien, charge or encumbrance upon the Trust Estate or
upon the Certificates, except as otherwise contemplated by the Pooling
and Servicing Agreement.
(d) The endorsement and delivery of each Note, and the
preparation, delivery and recording of an Assignment in recordable
form, with respect to each Mortgage (in the absence of the delivery of
the opinions described in Section 3.5(b)(ii)(y) of the Pooling and
Servicing Agreement), as and in the manner contemplated by the Pooling
and Servicing Agreement, is sufficient fully to transfer to the Trustee
for the benefit of the Owners all right, title and interest of the
Seller in the Note and Mortgage, as noteholder and mortgagee or
assignee thereof, and will be sufficient to permit the Trustee to avail
itself of all protection available under applicable law against the
claims of any present or future creditors of the Seller and to prevent
any other sale, transfer, assignment, pledge or other encumbrance of
the Mortgage Loans by the Seller from being enforceable.
(e) No consent, approval, authorization or order of, registration
or filing with, or notice to, courts, governmental agency or body or
other tribunal is required under the laws of the State of California,
for the execution, delivery and performance of the Pooling and
Servicing Agreement, the Insurance Agreement, this Agreement, the
Indemnification Agreement or the offer, issuance, sale or delivery of
the Certificates or the consummation of any other transaction
contemplated thereby by the Seller, except such which have been
obtained.
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(f) There are no actions, proceedings or investigations pending
or, to such counsel's knowledge, threatened against the Seller before
any court, governmental agency or body or other tribunal (i) asserting
the invalidity of the Pooling and Servicing Agreement, the Insurance
Agreement, this Agreement, the Indemnification Agreement or the
Certificates, (ii) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by the
Pooling and Servicing Agreement, the Indemnification Agreement, the
Insurance Agreement or this Agreement or (iii) which would materially
and adversely affect the performance by the Seller of obligations
under, or the validity or enforceability of, the Pooling and Servicing
Agreement, the Certificates, the Indemnification Agreement, the
Insurance Agreement or this Agreement.
(g) To the best of such counsel's knowledge, the Registration
Statement, the Prospectus Supplement and the Prospectus do not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading with respect to the statements set
forth in the Prospectus under the caption "Certain Legal Aspects of
Mortgage Loans and Related Matters".
2. The Underwriters shall have received the favorable opinion of Arter
& Hadden LLP, special counsel to the Seller, dated the Closing Date, to the
effect that:
(a) The Certificates, assuming due execution and authentication
by the Trustee, and delivery and payment therefor pursuant to this
Agreement are validly issued and outstanding and are entitled to the
benefits of the Pooling and Servicing Agreement.
(b) No consent, approval, authorization or order of, registration
or filing with, or notice to, any governmental authority or court is
required under federal laws or the laws of the State of New York, for
the execution, delivery and performance by the Seller of the Pooling
and Servicing Agreement, this Agreement, any Subsequent Transfer
Agreement, the Indemnification Agreement, the Insurance Agreement or
the offer, issue, sale or delivery of the Certificates or the
consummation of any other transaction contemplated thereby by the
Seller, except such which have been obtained.
(c) Neither the transfer of the Initial Mortgage Loans to the
Trustee, the issuance or sale of the Certificates, nor the execution,
delivery or performance by the Seller of the Pooling and Servicing
Agreement, the Insurance Agreement, any Subsequent Transfer Agreement,
the Indemnification Agreement or this Agreement will (a) conflict with
or result in a breach of, or constitute a default under any law, rule
or regulation of the State of New York or the federal government, or
(b) to such counsel's knowledge, without independent investigation,
results in, or will result in, the creation or imposition of any lien,
charge or encumbrance upon the Trust Estate or upon the Certificates,
except as otherwise contemplated by the Pooling and Servicing
Agreement.
(d) Each Subsequent Transfer Agreement at the time of its
execution and delivery will be sufficient to convey all of the Seller's
right, title and interest in the Subsequent Mortgage Loans to the
Trustee and following the consummation of the transaction contemplated
by each Subsequent Transfer Agreement, the transfer of the Subsequent
Mortgage Loans by the Seller to the Trustee will be a sale thereof.
(e) The Registration Statement, the Prospectus and the Prospectus
Supplement (other than the financial and statistical data included
therein, as to which such counsel need express no opinion), as of the
date on which the Registration Statement was declared effective and as
of the date hereof, comply as to form in all material respects with the
requirements of the
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Act and the rules and regulations thereunder, and such counsel does not
know of any amendment to the Registration Statement required to be
filed, or of any contracts, indentures or other documents of a
character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement,
the Prospectus or the Prospectus Supplement which has not been filed or
described as required.
(f) Neither the qualification of the Pooling and Servicing
Agreement under the Trust Indenture Act of 1939 nor the registration of
the Trust created by such Agreement under the Investment Company Act of
1940 is presently required.
(g) The statements in the Prospectus set forth under the captions
"DESCRIPTION OF THE SECURITIES" and "THE POOLING AND SERVICING
AGREEMENT" and the statements in the Prospectus Supplement set forth
under the captions "DESCRIPTION OF THE OFFERED CERTIFICATES" and "THE
POOLING AND SERVICING AGREEMENT," to the extent such statements purport
to summarize certain provisions of the Certificates or of the Pooling
and Servicing Agreement, are fair and accurate in all material
respects.
(h) Except as to any financial or statistical data contained in
the Registration Statement, the statements set forth in the Prospectus
under the caption "DESCRIPTION OF CREDIT ENHANCEMENT," and in the
Prospectus Supplement under the caption "THE CERTIFICATE INSURANCE
POLICIES AND THE CERTIFICATE INSURER," and any Computational Materials
as to which no opinion or belief need be expressed, to the best of such
counsel's knowledge, the Registration Statement does not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading.
(i) Upon receipt by the Trustee, on behalf of the Owners of the
Certificates, of the related Notes, endorsed as described in the
Pooling and Servicing Agreement, and the receipt by the Seller of the
purchase price for the Certificates and for so long as the Trustee
maintains actual physical possession of such Notes, (i) the Trustee
shall be vested with good and indefeasible title to, and shall be the
sole owner of, and shall obtain all right, title and interest of the
Seller in, each Mortgage Loan, (ii) in the event that the sale of the
Mortgage Loans were to be recharacterized as a financing secured by the
Mortgage Loans, the Trustee has a first perfected security interest in
the Mortgage Loans and (iii) in the jurisdictions listed in such
opinion, the recordation of the assignments of the Mortgages is not
required for the Trustee to obtain such rights, as against creditors
of, and purported transferees of, the Seller.
(j) To the best of the knowledge of such counsel, the Commission
has not issued any stop order suspending the effectiveness of the
Registration Statement or any order directed to any prospectus relating
to the Certificates (including the Prospectus), and has not initiated
or threatened any proceeding for that purpose.
3. The Underwriters shall have received the favorable opinion of Arter
& Hadden LLP, special tax and bankruptcy counsel to the Seller, dated the
Closing Date, to the effect that:
(a) Assuming the REMIC election is made in compliance with the
Pooling and Servicing Agreement, (i) the Trust, exclusive of the
Pre-Funding Account, the Group II Available Funds Cap Carry-Forward
Amount Account and the Capitalized Interest Account (as defined in the
Prospectus Supplement) will qualify as a real estate mortgage
investment conduit ("REMIC") (as defined in the Internal Revenue Code
of 1986, as amended (the "Code")) for Federal income tax purposes and
(ii) each Class of the Offered Certificates (as defined in the
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Prospectus Supplement) will be treated as "regular interests" in the
REMIC and the R Class will be treated as the sole "residual interest"
in the REMIC.
(b) To the best of such counsel's knowledge, there are no
actions, proceedings or investigations pending that would adversely
affect the Trust Estate (exclusive of the Pre-Funding Account, the
Group II Available Funds Cap Carry-Forward Amount Account and the
Capitalized Interest Account) as a real estate mortgage investment
conduit ("REMIC") as such term is defined in the Code.
(c) The statements under the captions "SUMMARY OF PROSPECTUS --
CERTAIN FEDERAL INCOME TAX CONSEQUENCES" and "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES" in the Prospectus and under the captions "SUMMARY --
FEDERAL INCOME TAX ASPECTS" and "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES" in the Prospectus Supplement as they relate to federal
tax matters are true and correct in all material respects.
(d) As a consequence of the qualification of the Trust (exclusive
of the Pre-Funding Account, the Group II Available Funds Cap
Carry-Forward Amount Account and the Capitalized Interest Account) as a
REMIC, the Class A Certificates will be treated as "regular . . .
interest(s) in a REMIC" under Section 7701(a)(19)(C) of the Code and
"real estate assets" under Section 856(c) of the Code in the same
proportion that the assets in the Trust consist of qualifying assets
under such Sections. In addition, as a consequence of the qualification
of the Trust (exclusive of the Pre-Funding Account, the Group II
Available Funds Cap Carry-Forward Amount Account and the Capitalized
Interest Account) as a REMIC, interest on the Class A Certificates will
be treated as "interest on obligations secured by mortgages on real
property" under Section 856(c) of the Code to the extent that such
Class A Certificates are treated as "real estate assets" under Section
856(c) of the Code.
(e) The Trust will not be subject to tax upon its income or
assets by the taxing authority of New York State or New York City.
(f) The Trust will not be subject to the California state income
tax. While REMICs are subject to the California state minimum franchise
tax imposed under Article 2, Section 23153 of the California Revenue
and Taxation Code, such counsel does not express an opinion as to
whether the Trust is subject to such tax.
(g) A court would hold that the conveyance by the Seller of all
right, title and interest in the Mortgage Loans to the Trustee (except
for the Seller's right, title and interest in the principal and
interest due on such Mortgage Loans on or prior to the Cut-Off Date),
constitutes a sale of the Mortgage Loans and not a borrowing by the
Seller secured by the pledge of the Mortgage Loans. A court would find
that, following such conveyance, the Mortgage Loans and proceeds
thereof (net of payments of principal and interest due on such Mortgage
Loans on or prior to the Cut-Off Date) are not property of the estate
of the Seller within the meaning of Section 541 of the Bankruptcy Code,
and, further that the Trustee's rights with respect to the Mortgage
Loans and the proceeds thereof would not subject it to the automatic
stay provisions of Section 362 of the Bankruptcy Code. Since the
conveyance of the Mortgage Loans (net of payments of scheduled
principal due and interest accrued on or prior to the Cut-Off Date)
constitutes a sale of said Mortgage Loans then the payments thereunder
(net of payments of scheduled principal due on and interest accrued on
or prior to the Cut-Off Date) are not property of the estate of the
Seller and the distributions of such payments by the Trustee to the
Owners of the Certificates are not preferential payments made by, for,
or on behalf of the Seller under the provisions of Section 547 of the
Bankruptcy Code.
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(h) If a court characterized the transfer of the Mortgage Loans
to the Trustee, on behalf of the Owners of the Certificates, as a
pledge of collateral rather than an absolute sale or assignment, with
respect to the Mortgage Loans and other property included in the Trust
on the date hereof, to the extent governed by the laws of the State of
New York, a valid security interest has been created in favor of the
Trustee, which security interest of the Trustee will be perfected and
will constitute a first perfected security interest, with respect to
the Seller's right, title and interest in and to the Notes, upon
endorsement and delivery thereof to the Trustee. With respect to the
security interest of the Trustee in the Notes, New York law would
govern.
4. The Underwriters shall have received the favorable opinion of Dewey
Ballantine LLP, special counsel to the Underwriters, dated the Closing Date, to
the effect that:
(a) The Certificates, assuming due execution and authentication
by the Trustee, and delivery and payment therefor pursuant to this
Agreement, are validly issued and outstanding and are entitled to the
benefits of the Pooling and Servicing Agreement.
(b) No fact has come to such counsel's attention which causes
them to believe that the Prospectus (other than the financial statement
and other financial and statistical data contained therein, as to which
such counsel need express no opinion), as of the date thereof,
contained any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) Such other matters as the Underwriters may reasonably
request.
In rendering their opinions, the counsels described in this Paragraph C
may rely, as to matters of fact, on certificates of responsible officers of the
Seller, the Trustee and public officials. Such opinions may also assume the due
authorization, execution and delivery of the instruments and documents referred
to therein by the parties thereto other than the Seller.
D. The Underwriter shall have received a letter from Deloitte & Touche
LLP, dated on or before the Closing Date, in form and substance satisfactory to
the Underwriters and counsel for the Underwriters, to the effect that they have
performed certain specified procedures requested by the Underwriters with
respect to the information set forth in the Prospectus and certain matters
relating to the Seller.
E. The Class A Certificates shall have been rated in the highest rating
category by Moody's Investors Service, Inc., and by Standard & Poor's Ratings
Service, a division of The McGraw-Hill Companies, and such ratings shall not
have been rescinded. The Underwriters and counsel for the Underwriters shall
have received copies of any opinions of counsel supplied to the rating
organizations relating to any matters with respect to the Class A Certificates.
Any such opinions shall be dated the Closing Date and addressed to the
Underwriters or accompanied by reliance letters to the Underwriter or shall
state that the Underwriters may rely upon them.
F. The Underwriters shall have received from the Seller a certificate,
signed by the president, a senior vice president or a vice president of the
Seller, dated the Closing Date, to the effect that the signer of such
certificate has carefully examined the Registration Statement, the Pooling and
Servicing Agreement and this Agreement and that, to the best of his or her
knowledge based upon reasonable investigation:
1. the representations and warranties of the Seller in this Agreement,
and in the Indemnification Agreement, as of the Closing Date, in the Pooling and
Servicing Agreement, in the
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Insurance Agreement and in all related agreements, as of the date specified in
such agreements, are true and correct, and the Seller has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to the Closing Date;
2. there are no actions, suits or proceedings pending, or to the best
of such officer's knowledge, threatened against or affecting the Seller which if
adversely determined, individually or in the aggregate, would be reasonably
likely to adversely affect the Seller's obligations under the Pooling and
Servicing Agreement, the Insurance Agreement, this Agreement or under the
Indemnification Agreement in any material way; and no merger, liquidation,
dissolution or bankruptcy of the Seller is pending or contemplated;
3. the information contained in the Registration Statement and
Prospectus relating to the Seller, the Mortgage Loans or the servicing
procedures of it or its affiliates or the subservicer is true and accurate in
all material respects and nothing has come to his or her attention that would
lead such officer to believe that the Registration Statement and Prospectus
includes any untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein not misleading;
4. the information set forth in the Schedules of Mortgage Loans
required to be furnished pursuant to the Pooling and Servicing Agreement is true
and correct in all material respects;
5. there has been no amendment or other document filed affecting the
articles of incorporation or bylaws of the Seller since August 1, 1996, and no
such amendment has been authorized. No event has occurred since September 17,
1998, which has affected the good standing of the Seller under the laws of the
State of California;
6. there has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the Seller
and its subsidiaries, taken as a whole, from June 30, 1998;
7. on or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading or (B)
any review or possible changes in rating, the direction of which has not been
indicated, in the rating, if any, accorded the Seller or in any rating accorded
any securities of the Seller, if any, by any "nationally recognized statistical
rating organization," as such term is defined for purposes of the Act; and
8. each person who, as an officer or representative of the Seller,
signed or signs the Registration Statement, the Pooling and Servicing Agreement,
this Agreement, the Indemnification Agreement, the Insurance Agreement, or any
other document delivered pursuant hereto, on the date of such execution, or on
the Closing Date, as the case may be, in connection with the transactions
described in the Pooling and Servicing Agreement, the Indemnification Agreement,
the Insurance Agreement and this Agreement was, at the respective times of such
signing and delivery, and is now, duly elected or appointed, qualified and
acting as such officer or representative, and the signatures of such persons
appearing on such documents are their genuine signatures.
The Seller shall attach to such certificate a true and correct copy of
its certificate or articles of incorporation, as appropriate, and bylaws which
are in full force and effect on the date of such certificate and a certified
true copy of the resolutions of its Board of Directors with respect to the
transactions contemplated herein.
G. The Underwriters shall have received an opinion of counsel to the
Trustee, dated the Closing Date and in form and substance satisfactory to the
Underwriters and counsel for the Underwriters, to the effect that:
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1. the Trustee is a national banking association duly organized,
validly existing and in good standing under the laws of the United
States and has the power and authority to enter into and to take all
actions required of it under the Pooling and Servicing Agreement;
2. the Pooling and Servicing Agreement has been duly authorized,
executed and delivered by the Trustee and the Pooling and Servicing
Agreement constitutes the legal, valid and binding obligation of the
Trustee, enforceable against the Trustee in accordance with its terms,
except as enforceability thereof may be limited by (A) bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally, as such laws would apply in
the event of a bankruptcy, insolvency or reorganization or similar
occurrence affecting the Trustee, and (B) general principles of equity
regardless of whether such enforcement is sought in a proceeding at law
or in equity;
3. no consent, approval, authorization or other action by any
governmental agency or body or other tribunal is required on the part
of the Trustee in connection with its execution and delivery of the
Pooling and Servicing Agreement or the performance of its obligations
thereunder;
4. the Certificates have been duly executed, authenticated and
delivered by the Trustee;
5. the execution and delivery of, and performance by the Trustee
of its obligations under, the Pooling and Servicing Agreement do not
conflict with or result in a violation of any statute or regulation
applicable to the Trustee, or the articles or bylaws of the Trustee, or
to the best knowledge of such counsel, any governmental authority
having jurisdiction over the Trustee or the terms of any indenture or
other agreement or instrument to which the Trustee is a party or by
which it is bound; and
6. in the event that the Servicer defaults in its obligation to
make advances under the Pooling and Servicing Agreement, the Trustee or
any affiliate of the Trustee, is not prohibited by a provision of its
Articles of Incorporation or Bylaws or by any provision of the banking
and trust laws of the United States of America or the State of New
York, as the case may be (or any rule, regulation, decree or order
thereunder), from assuming its obligation to make such advances.
In rendering such opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Seller, the Trustee and
public officials. Such opinion may also assume the due authorization, execution
and delivery of the instruments and documents referred to therein by the parties
thereto other than the Trustee.
H. The Underwriters shall have received from the Trustee a certificate,
signed by the President, a senior vice president or an assistant vice president
of the Trustee, dated the Closing Date, to the effect that each person who, as
an officer or representative of the Trustee, signed or signs the Certificates,
the Pooling and Servicing Agreement or any other document delivered pursuant
hereto, on the date hereof or on the Closing Date, in connection with the
transactions described in the Pooling and Servicing Agreement was, at the
respective times of such signing and delivery, and is now, duly elected or
appointed, qualified and acting as such officer or representative, and the
signatures of such persons appearing on such documents are their genuine
signatures.
I. The Policies relating to the Class A Certificates shall have been
duly executed and issued at or prior to the Closing Date and shall conform in
all material respects to the description thereof in the Prospectus.
J. The Underwriters shall have received a favorable opinion of Kutak
Rock, counsel to the Insurer, dated the Closing Date and in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
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1. The Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of New
York. The Insurer is validly licensed and authorized to issue the
Policies and perform its obligations under the Policies in accordance
with the terms thereof, under the laws of the State of New York.
2. The execution and delivery by the Insurer of the Policies, the
Insurance Agreement and the Indemnification Agreement are within the
corporate power of the Insurer and have been authorized by all
necessary corporate action on the part of the Insurer; the Policies
have been duly executed and are the valid and binding obligations of
the Insurer enforceable in accordance with their terms except that the
enforcement of the Policies may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by general
principles of equity.
3. The Insurer is authorized to deliver the Insurance Agreement,
and the Indemnification Agreement, and the Insurance Agreement and the
Indemnification Agreement have been duly executed and are the valid and
binding obligations of the Insurer enforceable in accordance with their
terms except that the enforcement of the Insurance Agreement and the
Indemnification Agreement may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by general
principles of equity and by public policy considerations relating to
indemnification for securities law violations.
4. No consent, approval, authorization or order of any state or
federal court or governmental agency or body is required on the part of
the Insurer, the lack of which would adversely affect the validity or
enforceability of the Policies; to the extent required by applicable
legal requirements that would adversely affect validity or
enforceability of the Policies, the form of the Policies has been filed
with, and approved by, all governmental authorities having jurisdiction
over the Insurer in connection with such Policies.
5. To the extent any Policy constitutes a security within the
meaning of Section 2(1) of the Act, it is a security that is exempt
from the registration requirements of the Act.
6. The information set forth under the caption "THE CERTIFICATE
INSURANCE POLICIES AND THE CERTIFICATE INSURER" in the Prospectus
Supplement dated September 14, 1998, insofar as such statements
constitute a description of the Policies, accurately summarizes the
Policies.
In rendering this opinion, such counsel may rely, as to matters of
fact, on certificates of responsible officers of the Seller, the Trustee, the
Insurer and public officials. Such opinion may assume the due authorization,
execution and delivery of the instruments and documents referred to therein by
the parties thereto other than the Insurer.
K. On or prior to the Closing Date, there has been no downgrading, nor
has any notice been given of (A) any intended or potential downgrading or (B)
any review or possible changes in rating, the direction of which has not been
indicated, in the rating, if any, accorded the Seller or in any rating accorded
any securities of the Seller, if any, by any "nationally recognized statistical
rating organization," as such term is defined for purposes of the Act.
L. On or prior to the Closing Date there shall not have occurred any
downgrading, nor shall any notice have been given of (A) any intended or
potential downgrading or (B) any review or possible change in rating the
direction of which has not been indicated, in the rating accorded the Insurer's
claims paying ability by any "nationally recognized statistical rating
organization," as such term is defined for purposes of the Act.
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M. There has not occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations, since June 30, 1998, of (A) the Seller, its
subsidiaries and affiliates or since June 30, 1998, of (B) the Insurer, that is
in the Underwriters' judgment material and adverse and that makes it in the
Underwriter's judgment impracticable to market the Class A Certificates on the
terms and in the manner contemplated in the Prospectus.
N. The Underwriters shall have received from the Insurer a certificate,
signed by the President, a senior vice president or a vice president of the
Insurer, dated the Closing Date, to the effect that the signer of such
certificate has carefully examined the Policies, the Insurance Agreement, the
Indemnification Agreement and the related documents and that, to the best of his
or her knowledge based on reasonable investigation:
1. each person who as an officer or representative of the
Insurer, signed or signs the Policies, the Insurance Agreement, the
Indemnification Agreement or any other document delivered pursuant
hereto, on the date thereof, or on the Closing Date, in connection with
the transactions described in this Agreement was, at the respective
times of such signing and delivery, and is now a duly authorized
representative of the Insurer and is authorized to execute and deliver
this certificate.
2. The financial data presented in the table set forth under the
heading "THE CERTIFICATE INSURANCE POLICIES AND THE CERTIFICATE
INSURER" in the Prospectus Supplement presents fairly the
capitalization of the Insurer and its wholly-owned subsidiaries as of
December 31, 1997 and June 30, 1998, respectively, and to the best of
the Insurer's knowledge since such date, no material and adverse change
has occurred in the financial position of the Insurer other than as set
forth in the Prospectus Supplement.
3. The audited financial statements dated as of December 31, 1997
and the unaudited financial statements dated as of June 30, 1998
incorporated by reference into the Prospectus Supplement are true and
accurate.
4. The information which relates to the Insurer or the Policies
under the caption titled "THE CERTIFICATE INSURANCE POLICIES AND THE
CERTIFICATE INSURER" in the Prospectus Supplement is true and correct
in all material respects.
5. There are no actions, suits, proceedings or investigations
pending or, to the best of the Insurer's knowledge, threatened against
it at law or in equity or before or by any court, governmental agency,
board or commission or any arbitrator which, if decided adversely,
would materially and adversely affect its condition (financial or
otherwise) or operations or which would materially and adversely affect
its ability to perform its obligations under the Policies or the
Insurance Agreement.
6. The execution and delivery of the Insurance Agreement and the
Policies and the compliance with the terms and provisions thereof will
not conflict with, result in a breach of, or constitute a default under
any of the terms, provisions or conditions of the Restated Charter or
By-Laws of the Insurer or of any agreement, indenture or instrument to
which the Insurer is a party.
7. The issuance of the Policies and the execution, delivery and
performance of the Insurance Agreement have been duly authorized by all
necessary corporate proceedings. No further approvals or filings of any
kind, including, without limitation, any further approvals or further
filing with any governmental agency or other governmental authority, or
any approval of the Insurer's board of directors or stockholders, are
necessary for the Policies and the Insurance Agreement to constitute
the legal, valid and binding obligations of the Insurer.
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The officer of the Insurer certifying to items 2 and 3 shall be an
officer in charge of a principal financial function.
The Insurer shall attach to such certificate a true and correct copy of
its certificate or articles of incorporation, as appropriate, and its bylaws,
all of which are in full force and effect on the date of such certificate.
O. The Underwriters shall have received from Dewey Ballantine LLP,
special counsel to the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Certificates, the Prospectus
and such other related matters as the Underwriters shall reasonably require.
P. The Underwriters and counsel for the Underwriters shall have
received copies of any opinions of counsel to the Seller or the Insurer supplied
to the Trustee relating to matters with respect to the Certificates or the
Policies. Any such opinions shall be dated the Closing Date and addressed to the
Underwriters or accompanied by reliance letters to the Underwriters or shall
state that the Underwriters may rely thereon.
Q. The Underwriters shall have received such further information,
certificates and documents as the Underwriters may reasonably have requested not
fewer than three (3) full business days prior to the Closing Date.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all respects when and as provided in this Agreement, if the
Seller is in breach of any covenants or agreements contained herein or if any of
the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all material respects reasonably satisfactory in form and
substance to the Underwriters and counsel to the Underwriters, this Agreement
and all obligations of the Underwriters hereunder, may be canceled on, or at any
time prior to, the Closing Date by the Underwriters. Notice of such cancellation
shall be given to the Seller in writing, or by telephone or telegraph confirmed
in writing.
7. Expenses. If the sale of the Class A Certificates provided for
herein is not consummated by reason of a default by the Seller in its
obligations hereunder, then the Seller will reimburse the Underwriters, upon
demand, for all reasonable out-of-pocket expenses (including, but not limited
to, the reasonable fees and expenses of Dewey Ballantine LLP) that shall have
been incurred by each of them in connection with their investigation with regard
to the Seller and the Class A Certificates and the proposed purchase and sale of
the Class A Certificates.
8. Indemnification and Contribution. A. Regardless of whether any Class
A Certificates are sold, the Seller will indemnify and hold harmless each
Underwriter, each of its respective officers and directors and each person who
controls such Underwriter within the meaning of the Act or the Securities
Exchange Act of 1934 (the "1934 Act"), against any and all losses, claims,
damages, or liabilities (including the cost of any investigation, legal and
other expenses incurred in connection with any amounts paid in settlement of any
action, suit, proceeding or claim asserted), joint or several, to which they may
become subject, under the Act, the 1934 Act or other federal or state law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained (i) in
the Registration Statement, or any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact necessary to make the statements therein, not misleading or (ii)
in the Basic Prospectus or the Prospectus Supplement or any amendment thereto or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and will reimburse each such indemnified party for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending against such loss, claim, damage, liability or action; provided,
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however, that the Seller shall not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Seller by or on behalf of such Underwriter specifically for use
in connection with the preparation thereof.
B. Regardless of whether any Class A Certificates are sold, each
Underwriter severally agrees to indemnify and hold harmless the Seller, each of
its officers and directors and each person, if any, who controls the Seller
within the meaning of the Act or the 1934 Act against any losses, claims,
damages or liabilities to which they or any of them become subject under the
Act, the 1934 Act or other federal or state law or regulation, at common law or
otherwise, to the same extent as the foregoing indemnity, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in (i) the Registration Statement, or any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading or in (ii) the Basic Prospectus or the
Prospectus Supplement or any amendment thereto or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made therein in reliance upon and
in conformity with written information furnished to the Seller by or on behalf
of such Underwriter specifically for use in the preparation thereof and so
acknowledged in writing, and will reimburse the Seller for any legal or other
expenses reasonably incurred by the Seller in connection with investigating or
defending against such loss, claim, damage, liability or action.
C. In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Paragraphs A and B above such person (hereinafter called the
indemnified party) shall promptly notify the person against whom such indemnity
may be sought (hereinafter called the indemnifying party) in writing thereof;
but the omission to notify the indemnifying party shall not relieve such
indemnifying party from any liability which it may have to any indemnified party
otherwise than under such Paragraph. The indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such proceeding
any indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel, or (ii) the named parties to
any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
for all such indemnified parties, and that all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by the
Underwriters in the case of parties indemnified pursuant to Paragraph A and by
the Seller in the case of parties indemnified pursuant to Paragraph B. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there is a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
above, the indemnifying party agrees that it shall be liable for any settlement
of any proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying
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party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
D. If the indemnification provided for in this Section 8 is unavailable
to an indemnified party in respect of any losses, claims, damages or liabilities
referred to herein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (i)
in such proportion as is appropriate to reflect the relative benefits received
by the Seller and the related Underwriter from the sale of the Certificates or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
relative benefits referred to in clause (i) above but also the relative fault of
the Seller and of the related Underwriter in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considera tions.
The relative benefits received by the Seller and the related
Underwriter shall be deemed to be in such proportion so that the related
Underwriter is responsible for that portion determined by multiplying the total
amount of such losses, claims, damages and liabilities, including legal and
other expenses, by a fraction, the numerator of which is (x) the excess of the
Aggregate Resale Price of the Class A Certificates purchased by such Underwriter
over the aggregate purchase price of the Class A Certificates specified in
Section 4 of this Agreement and the denominator of which is (y) the Aggregate
Resale Price of the Class A Certificates purchased by such Underwriter and the
Seller is responsible for the balance, provided, however, that no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of the immediately preceding
sentence, the "Aggregate Resale Price" of the Class A Certificates at the time
of any determination shall be the weighted average of the purchase prices (in
each case expressed as a percentage of the aggregate principal amount of the
Class A Certificates so purchased), determined on the basis of such principal
amounts, paid to the related Underwriter by all subsequent purchasers that
purchased the Class A Certificates on or prior to such date of determination.
The relative fault of the Seller and the related Underwriter shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Seller or by the related
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
E. The Seller and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in Paragraph D. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in Paragraph D shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, the
Underwriters shall not be required to contribute any amount in excess of the
amount by which the Aggregate Resale Price exceeds the amount of any damages
that the Underwriters have otherwise been required to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission.
F. Reserved.
G. Each Underwriter severally agrees, assuming all information provided
to it by the Seller is accurate and complete in all material respects, to
indemnify and hold harmless the Seller, each of the Seller's officers and
directors and each person who controls the Seller within the meaning of Section
15 of
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the Securities Act against any and all losses, claims, damages or liabilities,
joint or several, to which they may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of a
material fact contained in the Computational Materials provided by such
Underwriter and agrees to reimburse each such indemnified party for any legal or
other expenses reasonably incurred by him, her or it in connection with
investigating or defending or preparing to defend any such loss, claim, damage,
liability or action as such expenses are incurred. The obligations of an
Underwriter under this Section 8(G) shall be in addition to any liability which
such Underwriter may otherwise have.
H. The Seller and each Underwriter each expressly waive, and agree not
to assert, any defense to their respective indemnification and contribution
obligations under this Section 8 which they might otherwise assert based upon
any claim that such obligations are unenforceable under federal or state
securities laws or by reasons of public policy.
I. The obligations of the Seller under this Section 8 shall be in
addition to any liability which the Seller may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls each
Underwriter within the meaning of the Act or the 1934 Act; and the obligations
of each Underwriter under this Section 8 shall be in addition to any liability
that such Underwriter may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Seller and to each person, if any, who
controls the Seller within the meaning of the Act or the 1934 Act; provided,
however, that in no event shall the Seller or any Underwriter be liable for
double indemnification.
9. Information Supplied by the Underwriters. The statements set forth
in the last paragraph on the front cover page of the Prospectus regarding
market-making and under the heading "Underwriting" in the Supplement (to the
extent such statements relate to the Underwriters), together with the
Computational Materials, constitute the only information furnished by the
Underwriters to the Seller for the purposes of Sections 2(B) and 8(A) hereof.
The Underwriters confirm that such statements (to such extent) are correct.
The Seller will cause any Computational Materials with respect to the
Class A Certificates that are delivered to the Seller as provided in Section
3.B.5 to be filed with the Commission on a Current Report on Form 8-K at or
before the time of filing of the Prospectus pursuant to Rule 424(b) under the
Securities Act; to cause any ABS Term Sheets with respect to the Class A
Certificates that are delivered by any Underwriter to the Seller as provided in
Section 3.B.5 to be filed with the Commission on one or more Current Reports on
Form 8-K (i) at or before the time of filing of the Prospectus pursuant to Rule
424(b) of the Rules and Regulations in the case of Structural Term Sheets, and
(ii) within two Business Days of first use in the case of Collateral Term
Sheets. Prior to any such filing of Computational Materials or ABS Term Sheets
(other than any Collateral Term Sheets that are not based on Mortgage Pool
information provided to the Underwriters by the Seller) by the Seller, however,
the Underwriters must comply with their obligations pursuant to Section 3.B and
the Seller must receive a letter from independent, certified public accountants,
satisfactory in form and substance to the Seller and its counsel, to the effect
that such accountants have performed certain specified procedures, all of which
have been agreed to by the Seller, as a result of which they determined that all
information that is included in the Computational Materials and ABS Term Sheets
(if any) provided by the Underwriters to the Seller for filing on Form 8-K, as
provided in Section 3.B and this Section 9, is accurate except as to such
matters that are not deemed by the Seller to be material. The Seller shall file
any corrected Computational Materials or ABS Term Sheets described in Section
3.B.7 as soon as practicable following receipt thereof.
10. Notices. All communications hereunder shall be in writing and, if
sent to the Representative, shall be mailed or delivered or telecopied and
confirmed in writing to the Representative at Prudential Securities
Incorporated, One New York Plaza, 15th Floor, New York, New York 10292,
Attention: Len Blum; and, if sent to the Seller, shall be mailed, delivered or
telegraphed and confirmed in writing to the Seller at the address set forth
above, Attention: Director of Secondary Marketing.
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11. Survival. All representations, warranties, covenants and agreements
of the Seller contained herein or in agreements or certificates delivered
pursuant hereto, the agreements of the Underwriters and the Seller contained in
Section 8 hereof, and the representations, warranties and agreements of the
Underwriters contained in Section 3 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Underwriters or any controlling persons, or any subsequent purchaser or the
Seller or any of its officers, directors or any controlling persons, and shall
survive delivery of and payment for the Certificates. The provisions of Sections
5, 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. Termination. The Underwriters shall have the right to terminate
this Agreement by giving notice as hereinafter specified at any time at or prior
to the Closing Date if (a) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (b) trading of any securities of the
Seller shall have been suspended on any exchange or in any over-the-counter
market, (c) a general moratorium on commercial banking activities shall have
been declared by either federal or New York State authorities, (d) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis which, in the Representative's
reasonable judgment, is material and adverse, and, in the case of any of the
events specified in clauses (a) through (d), such event singly or together with
any other such event makes it in the Representative's reasonable judgment
impractical to market the Class A Certificates. Any such termination shall be
without liability of any other party except that the provisions of Paragraph G
of Section 5 (except with respect to expenses of the Underwriters) and Sections
7 and 8 hereof shall at all times be effective. If the Underwriters elect to
terminate this Agreement as provided in this Section 12, the Seller shall be
notified promptly by the Underwriters by telephone, telegram or facsimile
transmission, in any case, confirmed by letter.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns
(which successors and assigns do not include any person purchasing a Certificate
from the Underwriters), and the officers and directors and controlling persons
referred to in Section 8 hereof and their respective successors and assigns, and
no other persons will have any right or obligations hereunder.
14. Applicable Law; Venue. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York. Any
action or proceeding brought to enforce or arising out of any provision of this
Agreement shall be brought only in a state or federal court located in the
Borough of Manhattan, New York City, New York, and the parties hereto expressly
consent to the jurisdiction of such courts and agree to waive any defense or
claim of forum non conveniens they may have with respect to any such action or
proceeding brought.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall together constitute but one and the same
instrument.
16. Amendments and Waivers. This Agreement may be amended, modified,
altered or terminated, and any of its provisions waived, only in a writing
signed on behalf of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto hereby execute this Underwriting
Agreement, as of the day and year first above written.
FIRST ALLIANCE MORTGAGE COMPANY
By: /s/ Francisco Nebot
-----------------------------------------
Name: Francisco Nebot
Title: Chief Financial Officer/EVP
PRUDENTIAL SECURITIES INCORPORATED,
As Representative of the Several Underwriters
By: /s/ Len Blum
-----------------------------------------
Name: Len Blum
Title: Managing Director
{UNDERWRITING AGREEMENT SIGNATURE PAGE}
<PAGE>
Schedule A
CLASS A-1 CERTIFICATES (1)
<TABLE>
<CAPTION>
Underwriters Principal Purchase Price
- - ------------ --------- --------------
<S> <C> <C>
Prudential Securities Incorporated $19,500,000 $19,441,500
First Union Capital Markets $10,500,000 $10,468,500
----------- -----------
Total $30,000,000 $29,910,000
=========== ===========
</TABLE>
CLASS A-2 CERTIFICATES (2)
<TABLE>
<CAPTION>
Underwriters Principal Purchase Price
- - ------------ --------- --------------
<S> <C> <C>
Prudential Securities Incorporated $14,300,000 $14,257,100
First Union Capital Markets $ 7,700,000 $ 7,676,900
----------- -----------
Total $22,000,000 $21,934,000
=========== ===========
</TABLE>
CLASS A-3 CERTIFICATES (3)
<TABLE>
<CAPTION>
Underwriters Principal Purchase Price
- - ------------ --------- --------------
<S> <C> <C>
Prudential Securities Incorporated $11,700,000 $11,664,900
First Union Capital Markets $ 6,300,000 $ 6,281,100
----------- -----------
Total $18,000,000 $17,946,000
=========== ===========
</TABLE>
CLASS A-4 CERTIFICATES
<TABLE>
<CAPTION>
Underwriters Principal Purchase Price
- - ------------ --------- --------------
<S> <C> <C>
Prudential Securities Incorporated $19,500,000 $19,441,500
First Union Capital Markets $10,500,000 $10,468,500
----------- -----------
Total $30,000,000 $29,910,000
=========== ===========
</TABLE>
(1) Plus accrued interest from September 1, 1998 to (but not including)
September 21, 1998 at the Class A-1 Pass-Through Rate.
(2) Plus accrued interest from September 1, 1998 to (but not including)
September 21, 1998 at the Class A-2 Pass-Through Rate.
(3) Plus accrued interest from September 1, 1998 to (but not including)
September 21, 1998 at the Class A-3 Pass-Through Rate.
Exhibit 4.1
POOLING AND SERVICING AGREEMENT
Relating to
FIRST ALLIANCE MORTGAGE LOAN TRUST
1998-3
Among
FIRST ALLIANCE MORTGAGE COMPANY,
as Seller
FIRST ALLIANCE MORTGAGE COMPANY,
as Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
Dated as of September 1, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
<S> <C> <C>
DEFINITIONS; RULES OF CONSTRUCTION.......................................................................1
1.1. Definitions.....................................................................................1
1.2. Use of Words and Phrases.......................................................................28
1.3. Captions; Table of Contents....................................................................28
1.4. Opinions.......................................................................................28
ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST.............................................................29
2.1. Establishment of the Trust.....................................................................29
2.2. Office.........................................................................................29
2.3. Purposes and Powers............................................................................29
2.4. Appointment of the Trustee; Declaration of Trust...............................................29
2.5. Expenses of Trustee............................................................................29
2.6. Ownership of the Trust.........................................................................29
2.7. Situs of the Trust.............................................................................29
2.8. Miscellaneous REMIC Provisions.................................................................29
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SELLER AND THE SERVICER;
COVENANT OF SELLER TO CONVEY MORTGAGE LOANS.............................................................30
3.1. Representations and Warranties of the Seller...................................................30
3.2. Representations and Warranties of the Servicer.................................................32
3.3. Representations and Warranties of the Seller with Respect to the Mortgage Loans................35
3.4. Covenants of the Seller to Take Certain Actions with Respect to
the Mortgage Loans In Certain Situations.............................................37
3.5. Conveyance of the Mortgage Loans...............................................................39
3.6. Acceptance by Trustee; Certain Substitutions of Mortgage Loans;
Certification by Trustee.............................................................42
3.7. Cooperation Procedures.........................................................................43
3.8. Conveyance of the Subsequent Mortgage Loans....................................................44
3.9. Books and Records..............................................................................46
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES.......................................................................46
4.1. Issuance of Certificates.......................................................................46
4.2. Sale of Certificates...........................................................................46
ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS..................................................................47
5.1. Terms..........................................................................................47
5.2. Forms..........................................................................................47
5.3. Execution, Authentication and Delivery.........................................................47
5.4. Registration and Transfer of Certificates......................................................47
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
5.5. Mutilated, Destroyed, Lost or Stolen Certificates..............................................49
5.6. Persons Deemed Owners..........................................................................50
5.7. Cancellation...................................................................................50
5.8. Limitation on Transfer of Ownership Rights.....................................................50
5.9. Assignment of Rights...........................................................................51
ARTICLE VI
COVENANTS...............................................................................................51
6.1. Distributions..................................................................................51
6.2. Money for Distributions to be Held in Trust; Withholding.......................................51
6.3. Protection of Trust Estate.....................................................................52
6.4. Performance of Obligations.....................................................................52
6.5. Negative Covenants.............................................................................52
6.6. No Other Powers................................................................................53
6.7. Limitation of Suits............................................................................53
6.8. Unconditional Rights of Owners to Receive Distributions........................................54
6.9. Rights and Remedies Cumulative.................................................................54
6.10. Delay or Omission Not Waiver...................................................................54
6.11. Control by Owners..............................................................................54
6.12. Access to Owners of Certificates' Names and Addresses..........................................55
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES....................................................................55
7.1. Collection of Money............................................................................55
7.2. Establishment of Accounts......................................................................55
7.3. The Certificate Insurance Policies.............................................................55
7.4 Pre-Funding Account and Capitalized Interest Account...........................................56
7.5. Flow of Funds..................................................................................57
7.6. Investment of Accounts.........................................................................61
7.7. Eligible Investments...........................................................................62
7.8. Reports by Trustee.............................................................................63
7.9. Additional Reports by Trustee..................................................................65
7.10. Group II Available Funds Cap Trust.............................................................65
ARTICLE VIII
SERVICING AND ADMINISTRATION OF MORTGAGE LOANS..........................................................66
8.1. Servicer and Sub-Servicers.....................................................................66
8.2. Collection of Certain Mortgage Loan Payments...................................................67
8.3. Sub-Servicing Agreements Between Servicer and Sub-Servicers....................................68
8.4. Successor Sub-Servicers........................................................................68
8.5. Liability of Servicer..........................................................................68
8.6. No Contractual Relationship Between Sub-Servicer and Trustee or the Owners.....................68
8.7. Assumption or Termination of Sub-Servicing Agreement by Trustee................................68
8.8. Principal and Interest Account.................................................................69
8.9. Delinquency Advances, Compensating Interest and Servicing Advances.............................70
8.10. Purchase of Mortgage Loans.....................................................................71
8.11. Maintenance of Insurance.......................................................................71
8.12. Due-on-Sale Clauses; Assumption and Substitution Agreements....................................72
8.13. Realization Upon Defaulted Mortgage Loans......................................................73
8.14. Trustee to Cooperate; Release of Files.........................................................73
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
8.15. Servicing Compensation.........................................................................75
8.16. Annual Statement as to Compliance..............................................................75
8.17. Annual Independent Certified Public Accountants' Reports.......................................75
8.18. Access to Certain Documentation and Information Regarding the Mortgage Loans...................75
8.19. Assignment of Agreement........................................................................75
8.20. Events of Servicing Termination................................................................75
8.21. Resignation of Servicer and Appointment of Successor...........................................78
8.22. Waiver of Past Events of Servicing Termination.................................................81
8.23. Inspections by Certificate Insurer; Errors and Omissions Insurance.............................81
8.24. Merger, Conversion, Consolidation or Succession to Business of Servicer........................81
8.25. Notices of Material Events.....................................................................81
8.26. Monthly Servicing Report and Servicing Certificate.............................................82
8.27. Indemnification by the Seller..................................................................84
8.28. Indemnification by the Servicer................................................................85
ARTICLE IX
TERMINATION OF TRUST....................................................................................85
9.1. Termination of Trust...........................................................................85
9.2. Termination Upon Option of Servicer............................................................85
9.3. Termination Upon Loss of REMIC Status..........................................................86
9.4. Disposition of Proceeds........................................................................87
9.5. Netting of Amounts.............................................................................87
ARTICLE X
THE TRUSTEE.............................................................................................88
10.1. Certain Duties and Responsibilities............................................................88
10.2. Removal of Trustee for Cause...................................................................90
10.3. Certain Rights of the Trustee..................................................................91
10.4. Not Responsible for Recitals or Issuance of Certificates.......................................92
10.5. May Hold Certificates..........................................................................92
10.6. Money Held in Trust............................................................................92
10.7. No Lien for Fees...............................................................................92
10.8. Corporate Trustee Required; Eligibility........................................................92
10.9. Resignation and Removal; Appointment of Successor..............................................93
10.10. Acceptance of Appointment by Successor Trustee.................................................94
10.11. Merger, Conversion, Consolidation or Succession to Business of the Trustee.....................94
10.12. Reporting; Withholding.........................................................................95
10.13. Liability of the Trustee.......................................................................95
10.14. Appointment of Co-Trustee or Separate Trustee..................................................95
ARTICLE XI
MISCELLANEOUS...........................................................................................96
11.1. Compliance Certificates and Opinions...........................................................96
11.2. Form of Documents Delivered to the Trustee.....................................................97
11.3. Acts of Owners.................................................................................97
11.4. Notices, etc. to Trustee.......................................................................98
11.5. Notices and Reports to Owners; Waiver of Notices...............................................98
11.6. Rules by Trustee and the Seller................................................................98
11.7. Successors and Assigns.........................................................................98
11.8. Severability...................................................................................98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
11.9. Benefits of Agreement...........................................................................98
11.10. Legal Holidays.................................................................................98
11.11. Governing Law..................................................................................99
11.12. Counterparts...................................................................................99
11.13. Usury..........................................................................................99
11.14. Amendment......................................................................................99
11.15. REMIC Status; Taxes...........................................................................100
11.16. Additional Limitation on Action and Imposition of Tax.........................................101
11.17. Appointment of Tax Matters Person.............................................................102
11.18. The Certificate Insurer.......................................................................102
11.19. Maintenance of Records........................................................................102
11.20. Notices.......................................................................................102
EXHIBIT A-1 -- Form of Class A-1 Certificate
EXHIBIT A-2 -- Form of Class A-2 Certificate
EXHIBIT A-3 -- Form of Class A-3 Certificate
EXHIBIT A-4 -- Form of Class A-4 Certificate
EXHIBIT B -- Form of Class R Certificate
EXHIBIT C -- Mortgage Loan Schedule
EXHIBIT D -- Form of Certificate Re: Mortgage Loans Prepaid in full After the Cut-Off Date
EXHIBIT E -- Form of Initial Certification
EXHIBIT F -- Form of Final Certification
EXHIBIT G -- Form of Delivery Order
EXHIBIT H -- Form of Class R Tax Matters Transfer Certificate
EXHIBIT I -- Form of Notice for Certificate Insurance Policy
EXHIBIT J -- Form of Request for Release
EXHIBIT K -- Form of Subsequent Transfer Agreement
</TABLE>
<PAGE>
POOLING AND SERVICING AGREEMENT, relating to FIRST ALLIANCE
MORTGAGE LOAN TRUST 1998-3, dated as of September 1, 1998, by and among FIRST
ALLIANCE MORTGAGE COMPANY, a California corporation in its capacities as the
Seller and the Servicer (respectively, the "Seller" and the "Servicer"), and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, in
its capacity as trustee (the "Trustee").
WHEREAS, the Seller wishes to establish (x) the Trust and two
subtrusts and (y) the Group II Available Funds Cap Trust and provide for the
allocation and sale of the beneficial interests therein and the maintenance and
distribution thereof;
WHEREAS, the Servicer has agreed to service the Mortgage
Loans, which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when
executed and authenticated by the Trustee, valid instruments, and to make this
Agreement a valid agreement, in accordance with their and its terms, have been
done;
WHEREAS, Norwest Bank Minnesota, National Association is
willing to serve in the capacity of Trustee hereunder; and
WHEREAS, MBIA Insurance Corporation (the "Certificate
Insurer") is intended to be a third party beneficiary of this Agreement and is
hereby recognized by the parties hereto to be a third-party beneficiary of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the Seller, the Servicer and the Trustee
hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.1. Definitions. For all purposes of this Agreement,
the following terms shall have the meanings set forth below, unless the context
clearly indicates otherwise:
"Account": Any account established in accordance with Section
7.2, 7.10(a) or 8.8 hereof.
"Addition Notice": With respect to the transfer of Subsequent
Mortgage Loans to the Trust for inclusion in Group I or Group II pursuant to
Section 3.8 hereof, notice given not less than two Business Days prior to the
Subsequent Transfer Date of the Seller's designation of Subsequent Mortgage
Loans to be sold to the Trust for inclusion in Group I or Group II and the
aggregate Loan Balance of such Subsequent Mortgage Loans to be delivered for
inclusion in each such Group.
"Agreement": This Pooling and Servicing Agreement, as it may
be amended from time to time, and including the Exhibits hereto.
"Appraised Value": The appraised value of any Property based
upon the appraisal or other valuation made at the time of the origination of the
related Mortgage Loan, or, in the case of a Mortgage Loan which is a purchase
money mortgage, the sales price of the Property at such time of origination, if
such sales price is less than such appraised value.
1
<PAGE>
"Authorized Officer": With respect to any Person, any person
who is authorized to act for such Person in matters relating to this Agreement,
and whose action is binding upon such Person and, with respect to the Seller and
the Servicer, initially including those individuals whose names appear on the
lists of Authorized Officers delivered on the Startup Day, and with respect to
the Trustee, any Vice President, Assistant Vice President, Assistant Treasurer
or Assistant Secretary of the Trustee.
"Available Funds": With respect to Group I, the Group I
Available Funds and with respect to Group II, the Group II Available Funds.
"Available Funds Shortfall": Any of the Group I Available
Funds Shortfall or the Group II Available Funds Shortfall.
"Business Day": Any day that is not a Saturday, Sunday or
other day on which commercial banking institutions in the States of New York,
Minnesota or California or in the city in which the Corporate Trust Office is
located or the city in which the principal office of the Certificate Insurer is
located are authorized or obligated by law or executive order to be closed.
"Capitalized Interest Account": The Capitalized Interest
Account established in accordance with Section 7.2 hereof and maintained by the
Trustee.
"Certificate": Any one of the Class A Certificates or the
Class R Certificates, each representing the interests and the rights described
in this Agreement.
"Certificate Account": The Certificate Account established in
accordance with Section 7.2 hereof and maintained by the Trustee; provided that
the funds in such account shall not be commingled with any other funds held by
the Trustee.
"Certificate Insurance Policies": The Group I Certificate
Insurance Policy and the Group II Certificate Insurance Policy.
"Certificate Insurer": MBIA Insurance Corporation or any
successor thereto, as issuer of the Certificate Insurance Policies.
"Certificate Insurer Default": The existence and continuance
of any of the following:
(a) the failure of the Certificate Insurer to make a payment
required under a Certificate Insurance Policy in accordance with the terms
thereof; or
(b) (i) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the Certificate
Insurer in an involuntary case or proceeding under any applicable United States
federal or state bankruptcy, insolvency, rehabilitation, reorganization or other
similar law or (B) a decree or order adjudging the Certificate Insurer as
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, rehabilitation, arrangement, adjustment or composition of or in
respect of the Certificate Insurer under any applicable United States, federal
or state law, or appointing a custodian, receiver, liquidator, rehabilitator,
assignee, trustee, sequestrator or other similar official of any substantial
part of the Certificate Insurer's property, or ordering the winding-up or
liquidation of its affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a period of
90 consecutive days; or
(ii) the commencement by the Certificate Insurer of a
voluntary case or proceeding under any applicable United States federal or state
bankruptcy, insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated as bankrupt or insolvent, or the consent
2
<PAGE>
of the Certificate Insurer to the entry of a decree or order for relief in
respect of the Certificate Insurer in an involuntary case or proceeding under
any applicable United States federal or state bankruptcy, insolvency case or
proceeding against the Certificate Insurer, or the filing by the Certificate
Insurer to the filing of such petition or to the appointment of or the taking
possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or similar official of the Certificate Insurer of any substantial part of its
property, or the failure of the Certificate Insurer to pay debts generally as
they become due, or the admission by the Certificate Insurer in writing of its
inability to pay its debts generally as they become due.
"Certificate Principal Balance": As to the Class A-1
Certificates, the Class A-1 Certificate Principal Balance, as to the Class A-2
Certificates, the Class A-2 Certificate Principal Balance, as to the Class A-3
Certificates, the Class A-3 Certificate Principal Balance and as to the Class
A-4 Certificates, the Class A-4 Certificate Principal Balance. The Class R
Certificates do not have a "Certificate Principal Balance".
"Class": All of the Class A-1 Certificates, all of the Class
A-2 Certificates, all of the Class A-3 Certificates, all of the Class A-4
Certificates or all of the Class R Certificates.
"Class A Certificate": Any one of the Class A-1 Certificates,
the Class A-2 Certificates, the Class A-3 Certificates or the Class A-4
Certificates.
"Class A Distribution Amount": Any of the Class A-1
Distribution Amount, the Class A-2 Distribution Amount, the Class A-3
Distribution Amount or the Class A-4 Distribution Amount.
"Class A-1 Certificate": Any Certificate designated as a
"Class A-1 Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to distributions as set forth herein. The Class A-1
Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-1 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-1
Certificates less any amounts actually distributed on account of the Group I
Principal Distribution Amount to the Owners of the Class A-1 Certificates
pursuant to Section 7.5(d)(iv)(C)(1) hereof with respect to principal thereon on
all prior Payment Dates.
"Class A-1 Certificate Termination Date": The Payment Date on
which the Class A-1 Certificate Principal Balance is reduced to zero.
"Class A-1 Current Interest": With respect to interest
accruing after the Cut-Off Date and as of any Payment Date, the sum of (i) the
aggregate amount of interest accrued on the Class A-1 Certificate Principal
Balance immediately prior to such Payment Date during the related Interest
Accrual Period at the Class A-1 Pass-Through Rate and (ii) any Class A-1
Interest Carry-Forward Amount for such Payment Date.
"Class A-1 Distribution Amount": With respect to a Payment
Date, the sum of (x) the Group I Principal Distribution Amount payable to the
Owners of the Class A-1 Certificates pursuant to Section 7.5(d)(iv)(C)(1) on
such Payment Date and (y) the Class A-1 Current Interest payable to the Owners
of the Class A-1 Certificates pursuant to Section 7.5(d)(iv)(B).
"Class A-1 Interest Carry Forward Amount": With respect to the
Class A-1 Certificates and any Payment Date, the sum of (x) the amount, if any,
by which (i) the Class A-1 Current Interest as of the immediately preceding
Payment Date exceeded (ii) the amount of the actual payments of interest made to
the Owners of the Class A-1 Certificates on such immediately preceding Payment
Date and (y) interest on such amount, calculated at the Class A-1 Pass-Through
Rate for the number of days in the related Interest Accrual Period.
3
<PAGE>
"Class A-1 Pass-Through Rate": 6.200% per annum.
"Class A-1 Principal Carry-Forward Amount": With respect to
any Payment Date, the amount, if any, by which (i) the portion of the Group I
Principal Distribution Amount allocable to the Owners of the Class A-1
Certificates as of the immediately preceding Payment Date exceeded (ii) the
amount of the actual payment of principal made to the Owners of the Class A-1
Certificates on such immediately preceding Payment Date.
"Class A-2 Certificate": Any Certificate designated as a
"Class A-2 Certificate" on the face thereof, in the form of Exhibit A-2 hereto
representing the right to distributions as set forth herein. The Class A-2
Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-2 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-2
Certificates less any amounts actually distributed on account of the Group I
Principal Distribution Amount to the Owners of the Class A-2 Certificates
pursuant to Section 7.5(d)(iv)(C)(2) hereof made with respect to principal
thereon on all prior Payment Dates.
"Class A-2 Certificate Termination Date": The Payment Date on
which the Class A-2 Certificate Principal Balance is reduced to zero.
"Class A-2 Current Interest": With respect to interest
accruing after the Cut-Off Date and as of any Payment Date, the sum of (i) the
aggregate amount of interest accrued on the Class A-2 Certificate Principal
Balance immediately prior to such Payment Date during the related Interest
Accrual Period at the Class A-2 Pass-Through Rate and (ii) any Class A-2
Interest Carry-Forward Amount for such Payment Date.
"Class A-2 Distribution Amount": With respect to a Payment
Date, the sum of (x) the Group I Principal Distribution Amount payable to the
Owners of the Class A-2 Certificates pursuant to Section 7.5(d)(iv)(C)(2) on
such Payment Date and (y) the Class A-2 Current Interest payable to the Owners
of the Class A-2 Certificates pursuant to Section 7.5(d)(iv)(B).
"Class A-2 Interest Carry Forward Amount": With respect to the
Class A-2 Certificates and any Payment Date, the sum of (x) the amount, if any,
by which (i) the Class A-2 Current Interest as of the immediately preceding
Payment Date exceeded (ii) the amount of the actual payments of interest made to
the Owners of the Class A-2 Certificates on such immediately preceding Payment
Date and (y) interest on such amount, calculated at the Class A-2 Pass-Through
Rate for the number of days in the related Interest Accrual Period.
"Class A-2 Pass-Through Rate": 6.160% per annum.
"Class A-2 Principal Carry-Forward Amount": With respect to
any Payment Date, the amount, if any, by which (i) the portion of the Group I
Principal Distribution Amount allocable to the Owners of the Class A-2
Certificates as of the immediately preceding Payment Date exceeded (ii) the
amount of the actual payment of principal made to the Owners of the Class A-2
Certificates on such immediately preceding Payment Date.
"Class A-3 Certificate": Any Certificate designated as a
"Class A-3 Certificate" on the face thereof, in the form of Exhibit A-3 hereto
representing the right to distributions as set forth herein. The Class A-3
Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
4
<PAGE>
"Class A-3 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-3
Certificates less any amounts actually distributed on account of the Group I
Principal Distribution Amount to the Owners of the Class A-3 Certificates
pursuant to Section 7.5(d)(iv)(C)(3) hereof made with respect to principal
thereon on all prior Payment Dates.
"Class A-3 Certificate Termination Date": The Payment Date on
which the Class A-3 Certificate Principal Balance is reduced to zero.
"Class A-3 Current Interest": With respect to interest
accruing after the Cut-Off Date and as of any Payment Date, the sum of (i) the
aggregate amount of interest accrued on the Class A-3 Certificate Principal
Balance immediately prior to such Payment Date during the related Interest
Accrual Period at the Class A-3 Pass-Through Rate and (ii) any Class A-3
Interest Carry-Forward Amount for such Payment Date.
"Class A-3 Distribution Amount": With respect to a Payment
Date, the sum of (x) the Group I Principal Distribution Amount payable to the
Owners of the Class A-3 Certificates pursuant to Section 7.5(d)(iv)(C)(3) on
such Payment Date and (y) the Class A-3 Current Interest payable to the Owners
of the Class A-3 Certificates pursuant to Section 7.5(d)(iv)(B).
"Class A-3 Interest Carry Forward Amount": With respect to the
Class A-3 Certificates and any Payment Date, the sum of (x) the amount, if any,
by which (i) the Class A-3 Current Interest as of the immediately preceding
Payment Date exceeded (ii) the amount of the actual payments of interest made to
the Owners of the Class A-3 Certificates on such immediately preceding Payment
Date and (y) interest on such amount, calculated at the Class A-3 Pass-Through
Rate for the number of days in the related Interest Accrual Period.
"Class A-3 Pass-Through Rate": 6.460% per annum; provided that
on any Payment Date after the Group I Clean-Up Call Date, the Class A-3
Pass-Through Rate shall be the lesser of (x) 6.960% and (y) the Group I
Available Funds Cap.
"Class A-3 Principal Carry-Forward Amount": With respect to
any Payment Date, the amount, if any, by which (i) the portion of the Group I
Principal Distribution Amount allocable to the Owners of the Class A-3
Certificates as of the immediately preceding Payment Date exceeded (ii) the
amount of the actual payment of principal made to the Owners of the Class A-3
Certificates on such immediately preceding Payment Date.
"Class A-4 Certificate": Any Certificate designated as a
"Class A-4 Certificate" on the face thereof, in the form of Exhibit A-4 hereto,
representing the right to distributions as set forth herein. The Class A-4
Certificates shall be issued with an initial aggregate Certificate Principal
Balance equal to the Original Certificate Principal Balance therefor.
"Class A-4 Certificate Principal Balance": As of any time of
determination, the Original Certificate Principal Balance of the Class A-4
Certificates less any amounts actually distributed on account of the Group II
Principal Distribution Amount to the Owners of the Class A-4 Certificates
pursuant to Section 7.5(d)(iv)(E) hereof with respect to principal thereon on
all prior Payment Dates.
"Class A-4 Certificate Termination Date": The Payment Date on
which the Class A-4 Certificate Principal Balance is reduced to zero.
"Class A-4 Current Interest": With respect to interest
accruing after the Cut-Off Date and as of any Payment Date, the sum of (i) the
aggregate amount of interest accrued on the Class A-4 Certificate Principal
Balance immediately prior to such Payment Date during the related Interest
Accrual Period at the Class A-4 Pass-Through Rate and (ii) any Class A-4
Interest Carry-Forward Amount for such Payment Date.
5
<PAGE>
"Class A-4 Distribution Amount": With respect to a Payment
Date, the sum of (x) the Group II Principal Distribution Amount payable to the
Owners of the Class A-4 Certificates pursuant to Section 7.5(d)(iv)(E) on such
Payment Date and (y) the Class A-4 Current Interest payable to the Owners of the
Class A-4 Certificates pursuant to Section 7.5(d)(iv)(D).
"Class A-4 Formula Pass-Through Rate": The rate determined by
clause (x) of the definition of "Class A-4 Pass-Through Rate."
"Class A-4 Interest Carry Forward Amount": With respect to the
Class A-4 Certificates and any Payment Date, the sum of (x) the amount, if any,
by which (i) the Class A-4 Current Interest as of the immediately preceding
Payment Date exceeded (ii) the amount of the actual payments of interest made to
the Owners of the Class A-4 Certificates on such immediately preceding Payment
Date and (y) interest on such amount, calculated at the Class A-4 Pass-Through
Rate for the number of days in the related Interest Accrual Period.
"Class A-4 Pass-Through Rate": For the initial Payment Date,
5.83203%. As of any Payment Date thereafter, the lesser of (x) LIBOR plus, in
the case of any Payment Date on or prior to the Group II Clean-Up Call Date,
0.250% per annum, or in the case of any Payment Date thereafter, 0.500% per
annum and (y) the Group II Available Funds Cap for such Payment Date.
"Class A-4 Principal Carry-Forward Amount": With respect to
any Payment Date, the amount, if any, by which (i) the Group II Principal
Distribution Amount as of the immediately preceding Payment Date exceeded (ii)
the amount of the actual payment of principal made to the Owners of the Class
A-4 Certificates on such immediately preceding Payment Date.
"Class A-4 Termination Date": September 20, 2028.
"Class R Certificate": Any of those Certificates representing
certain residual rights to distributions from the REMIC, designated as a "Class
R Certificate" on the face thereof, in the form of Exhibit B hereto and
evidencing an interest designated as the "residual interest" in the Trust for
purposes of the REMIC Provisions.
"Code": The Internal Revenue Code of 1986, as amended and any
successor statute.
"Combined Loan-to-Value Ratio": With respect to any First
Mortgage Loan, the percentage equal to the Original Principal Amount of the
related Note divided by the Appraised Value of the related Property and with
respect to any Second Mortgage Loan, the percentage equal to (a) the sum of (i)
the remaining principal balance, as of origination of the Second Mortgage Loan
of the Senior Lien note(s) relating to such Second Mortgage Loan and (ii) the
Original Principal Amount of the Note relating to such Second Mortgage Loan
divided by (b) the Appraised Value of the related Property.
"Compensating Interest": As defined in Section 8.9(b) hereof.
"Corporate Trust Office": The principal office of the Trustee
at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0113,
Attention: First Alliance Mortgage Loan Trust 1998-3 or any other office of the
Trustee designated as such hereunder.
"Coupon Rate": The annual rate of interest borne by each
Note.
"Current Interest": As of any Payment Date, the sum of the
Class A-1 Current Interest, the Class A-2 Current Interest, the Class A-3
Current Interest and the Class A-4 Current Interest.
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"Curtailment": With respect to a Mortgage Loan, any payment of
principal received during a Remittance Period as part of a payment that is in
excess of the amount of the monthly payment due for such Remittance Period and
which is not a Prepaid Installment or made in respect of a Paid-in-Full Mortgage
Loan, nor is intended to cure a delinquency.
"Cut-Off Date": September 1, 1998.
"Delinquency Advance": As defined in Section 8.9(a) hereof.
"Delinquent": A Mortgage Loan is "Delinquent" if any payment
due thereon is not made by the close of business on the day such payment is
scheduled to be due. A Mortgage Loan is "30 days Delinquent" if such payment has
not been received by the close of business on the second day of the month
immediately succeeding the month in which such payment was due. Similarly for
"60 days Delinquent," "90 days Delinquent" and so on.
"Delivery Order": The delivery order in the form set forth as
Exhibit G hereto and delivered by the Seller to the Trustee on the Startup Day
pursuant to Section 4.1 hereof.
"Depository": The Depository Trust Company, 7 Hanover Square,
New York, New York 10004 and any successor Depository hereafter named.
"Designated Depository Institution": With respect to any
Account, an institution whose deposits are insured by the Bank Insurance Fund or
the Savings Association Insurance Fund of the FDIC, the long-term deposits of
which shall be rated (x) A or better by Standard & Poor's and (y) A2 or better
by Moody's and in one of the highest short-term rating categories, unless
otherwise approved in writing by the Certificate Insurer and each of Moody's and
Standard & Poor's, and which is any of the following: (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) approved in writing by the Certificate Insurer, Moody's
and Standard & Poor's and, in each case acting or designated by the Servicer as
the depository institution for the Principal and Interest Account; provided,
however, that any such institution or association shall have combined capital,
surplus and undivided profits of at least $100,000,000. Notwithstanding the
foregoing, any Account may be held by (a) the Trustee or (b) an institution
otherwise meeting the preceding requirements except that the only applicable
rating requirement shall be that the unsecured and uncollateralized debt
obligations thereof shall be rated Baa3 or better by Moody's if such institution
has trust powers and the Principal and Interest Account is held by such
institution in its trust capacity and not in its commercial capacity.
"Determination Date": The 12th day of each month, or if such
day is not a Business Day, the next succeeding Business Day.
"Direct Participant" or "DTC Participant": Any broker-dealer,
bank or other financial institution for which the Depository holds Class A
Certificates from time to time as a securities depository.
"Disqualified Organization": "Disqualified Organization" shall
have the meaning set forth from time to time in the definition thereof at
Section 860E(e)(5) of the Code (or any successor statute thereto) and applicable
to the Trust.
"Due Date": The first day of the month of the related Payment
Date.
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"Due Period": With respect to any Payment Date, the period
commencing on the second day of the month preceding the month of such Payment
Date (or, with respect to the first Due Period, the day following the Cut-Off
Date) and ending on the first day of the month of such Payment Date.
"Eligible Investments": Those investments so designated
pursuant to Section 7.7 hereof.
"Event of Default": Any event described in clauses (a) or (b)
of Section 8.20 hereof.
"Event of Servicing Termination": Any event as described in
Section 8.20 hereof.
"Excess Subordinated Amount": With respect to any Mortgage
Loan Group and Payment Date, the excess, if any, of (x) the Subordinated Amount
that would apply to such Mortgage Loan Group on such Payment Date after taking
into account the payment of the related Class A Distribution Amounts on such
Payment Date (except for any distributions of the related Subordination
Reduction Amount on such Payment Date) over (y) the related Specified
Subordinated Amount for such Payment Date.
"Fannie Mae": The Federal National Mortgage Association, a
federally-chartered and privately-owned corporation existing under the Federal
National Mortgage Association Charter Act, as amended, or any successor thereof.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"Fees and Expenses": With respect to any Payment Date, and
Group I, the sum of the Group I Premium Amount and the Group I Trustee Fee; and
with respect to any Payment Date and Group II, the sum of the Group II Premium
Amount and the Group II Trustee Fee.
"FHLMC": The Federal Home Loan Mortgage Corporation, a
corporate instrumentality of the United States created pursuant to the Emergency
Home Finance Act of 1970, as amended, or any successor thereof.
"File": The documents delivered to the Trustee pursuant to
Section 3.5 hereof pertaining to a particular Mortgage Loan and any additional
documents required to be added to the mortgage file pursuant to this Agreement.
"Final Certification": The final certification in the form set
forth as Exhibit F hereto and delivered by the Trustee to the Seller within 90
days after the Startup Day pursuant to Section 3.6 hereof.
"Final Determination": As defined in Section 9.3(a) hereof.
"First Mortgage Loan": A Mortgage Loan which constitutes a
first priority mortgage lien with respect to any Property.
"Fixed Rate Certificate": Any of the Class A-1 Certificates,
the Class A-2 Certificates or the Class A-3 Certificates.
"Fixed Rate Certificate Current Interest": The sum of the
Class A-1 Current Interest, the Class A-2 Current Interest and the Class A-3
Current Interest.
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"Fixed Rate Certificate Principal Balance": As of any time of
determination, the sum of the Class A-1 Certificate Principal Balance, the Class
A-2 Certificate Principal Balance and the Class A-3 Certificate Principal
Balance.
"Fixed Rate Distribution Amount": The sum of the Class A-1
Distribution Amount, the Class A-2 Distribution Amount and the Class A-3
Distribution Amount.
"Fixed Rate Principal Carry Forward Amount": The sum of the
Class A-1 Principal Carry Forward Amount, the Class A-2 Principal Carry Forward
Amount and the Class A-3 Principal Carry Forward Amount.
"Funding Period": With respect to each of Group I and Group
II, the period commencing on the Startup Day and ending on the earliest to occur
of (i) the date on which the amount on deposit in the Pre-Funding Account with
respect to such Group (exclusive of any Pre-Funding Account Earnings with
respect to such Group) is less than $100,000, (ii) the date on which the
Servicer may be removed pursuant to Section 8.20(a) hereof and (iii) October 31,
1998.
"Group I": The pool of Mortgage Loans identified in the
related Schedules of Mortgage Loans as having been assigned to Group I,
including any Qualified Replacement Mortgages delivered in replacement thereof
and each Subsequent Mortgage Loan delivered to the Trust for inclusion therein.
"Group I Amortized Subordinated Amount Requirement": As of any
date of determination, the product of (x) 1.75% and (y) the Group I Maximum
Collateral Amount.
"Group I Available Funds": As defined in Section 7.3(a)(i)
hereof.
"Group I Available Funds Cap": The weighted average of the
Coupon Rates on the Mortgage Loans in Group I less the sum of the rates at which
(i) the Group I Servicing Fee, (ii) the Group I Trustee Fee and (iii) the Group
I Premium Amount are calculated.
"Group I Available Funds Shortfall": As defined in Section
7.5(d)(ii)(A).
"Group I Capitalized Interest Requirement": With respect to
the Payment Dates in October and November 1998, the excess, if any, of (x) the
sum of the interest accruing at a rate equal to the weighted average
Pass-Through Rates of the Fixed Rate Certificates (1) on the aggregate Loan
Balances of the Subsequent Mortgage Loans transferred to the Trust on each
Subsequent Transfer Date during the month preceding the related Payment Date for
the period from the first day of the related Remittance Period to the Subsequent
Cut-Off Date (provided, however, if the related Subsequent Cut-Off Date begins
on or prior to such Remittance Period, the related Loan Balances will be zero),
plus (2) on the Pre-Funded Amount outstanding as of the end of the Remittance
Period for a period equal to the Remittance Period over (y) any Pre-Funding
Account Earnings to be distributed to the Capitalized Interest Account on the
related Payment Date pursuant to Section 7.4(d).
"Group I Certificate Insurance Policy": The certificate
guaranty insurance policy (number 27555) dated September 21, 1998 issued by the
Certificate Insurer to the Trustee for the benefit of the Owners of the Fixed
Rate Certificates.
"Group I Clean-Up Call Date": The first Payment Date on which
the aggregate outstanding Loan Balance of the Mortgage Loans in Group I has
declined to $7,000,000 or less.
"Group I Initial Specified Subordinated Amount": $1,225,000.
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<PAGE>
"Group I Insured Payment": As defined in the Group I
Certificate Insurance Policy.
"Group I Interest Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) all scheduled interest due on or
prior to the Due Date occurring during the related Due Period, with respect to
the Group I Mortgage Loans to the extent collected by the Servicer during the
related Remittance Period, (ii) all Delinquency Advances relating to interest
made by the Servicer on such Remittance Date with respect to the Group I
Mortgage Loans and (iii) all Compensating Interest paid by the Servicer on such
Remittance Date with respect to the Group I Mortgage Loans.
"Group I Maximum Collateral Amount": $70,000,000.
"Group I Monthly Remittance Amount": As of any Remittance
Date, the sum of (i) the Group I Interest Remittance Amount for such Remittance
Date and (ii) the Group I Principal Remittance Amount for such Remittance Date.
"Group I Original Aggregate Loan Balance": The aggregate Loan
Balance of all Initial Mortgage Loans in Group I as of the Cut-Off Date, i.e.,
$50,144,557.74.
"Group I Original Capitalized Interest Amount": $130,000.
"Group I Overfunded Interest Amount": With respect to each
Subsequent Transfer Date, the excess, if any, of (i) interest accruing from the
related Subsequent Cut-Off Date to October 31, 1998 on the aggregate Loan
Balances of the Subsequent Mortgage Loans acquired by the Trust on such
Subsequent Transfer Date, calculated at a rate equal to the weighted average
Pass-Through Rates of the Fixed Rate Certificates over (ii) interest that would
accrue from the Subsequent Cut-Off Date to October 31, 1998 on the aggregate
Loan Balance of the Subsequent Home Equity Loans acquired by the Trust on such
Subsequent Transfer Date, calculated at the rate at which Pre-Funded Amounts are
invested as of such Subsequent Transfer Date.
"Group I Preference Amount": As defined in the Group I
Certificate Insurance Policy.
"Group I Premium Amount": As to any Payment Date, the product
of one-twelfth of (x) the Group I Premium Percentage and (y) the Fixed Rate
Certificate Principal Balance on such Payment Date (before taking into account
any distributions of principal to be made to the Owners of the Fixed Rate
Certificates on such Payment Date).
"Group I Premium Percentage": As defined in the Group I
Certificate Insurance Policy.
"Group I Principal Distribution Amount": With respect to the
Fixed Rate Certificates for any Payment Date, the lesser of:
(x) the Group I Total Available Funds plus any Group I
Insured Payment minus the Fixed Rate Certificate
Current Interest and any Fees and Expenses related to
Group I for such Payment Date; and
(y) the excess, if any, of
(i) the sum, without duplication of:
(a) the Fixed Rate Principal Carry
Forward Amount for such Payment
Date,
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(b) the principal portion of all
scheduled monthly payments on the
Mortgage Loans in Group I due on or
prior to the related Due Date during
the related Due Period, to the
extent actually received by the
Servicer on or prior to the related
Remittance Date or to the extent
advanced by the Servicer on or prior
to the related Remittance Date and
the principal portion of any
Prepayments made by the respective
Mortgagors during the related
Remittance Period,
(c) the Loan Balance of each Mortgage
Loan in Group I that either was
repurchased by the Seller or an
Originator or purchased by the
Servicer on the related Remittance
Date,
(d) any Substitution Amounts delivered
by the Seller or an Originator on
the related Remittance Date in
connection with a substitution of a
Mortgage Loan in Group I (to the
extent such Substitution Amounts
relate to principal),
(e) all Net Liquidation Proceeds
actually collected by the Servicer
with respect to the Mortgage Loans
in Group I during the related
Remittance Period (to the extent
such Net Liquidation Proceeds relate
to principal),
(f) the amount of any Group I
Subordination Deficit for such
Payment Date,
(g) the proceeds received by the Trustee
of any termination as set forth in
Article IX hereof of Group I (to the
extent such proceeds related to
principal),
(h) any moneys released from the
Pre-Funding Account as a prepayment
of the Fixed Rate Certificates on
the Payment Date that immediately
follows the end of the Funding
Period; and
(i) the amount of any Subordination
Increase Amount with respect to
Group I for such Payment Date, to
the extent of any Net Monthly Excess
Cashflow available for such purpose;
over
(ii) the amount of any Subordination Reduction
Amount with respect to Group I for such
Payment Date.
"Group I Principal Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) the scheduled principal due on or
prior to the Due Date occurring during the related Due Period with respect to
Mortgage Loans in Group I to the extent actually collected by the Servicer
during the related Remittance Period, (ii) Prepayments collected in the related
Remittance Period and relating to principal on the Mortgage Loans in Group I,
(iii) the Loan Balance of each such Mortgage Loan in Group I that either was
repurchased by an Originator or by the Seller or purchased by the Servicer on
such Remittance Date, to the extent such Loan Balance was actually deposited in
the Principal and Interest Account, (iv) any Substitution Amounts delivered by
the Seller in connection with a substitution of a Mortgage Loan in Group I, to
the extent such Substitution Amounts relate to principal, (v) all Net
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<PAGE>
Liquidation Proceeds actually collected by the Servicer with respect to such
Mortgage Loans in Group I during the related Remittance Period (to the extent
such Liquidation Proceeds are related to principal), (vi) all Delinquency
Advances relating to principal made by the Servicer on such Remittance Date with
respect to Group I and (vii) the amount of any investment losses required to be
deposited by the Seller or the Servicer pursuant to Sections 7.6(f) or 8.8(b)
hereof.
"Group I Projected Net Monthly Excess Cashflow": As of any
date of calculation, Net Monthly Excess Cashflow relating to Group I (other than
any Subordination Reduction Amount included therein), as calculated pursuant to
Section 7.5(d)(iii) hereof on the Payment Date immediately preceding such date
of calculation.
"Group I Reimbursement Amount": As of any Payment Date, the
sum of (x)(i) all Group I Insured Payments previously received by the Trustee
and not previously repaid to the Certificate Insurer pursuant to Section
7.5(d)(iv)(A)(I) hereof plus (ii) interest accrued on each such Group I Insured
Payment not previously repaid calculated at the Late Payment Rate from the date
the Trustee received the related Group I Insured Payment to, but not including,
such Payment Date and (y)(i) any amounts then due and owing to the Certificate
Insurer relating to Group I under the Insurance Agreement plus (ii) interest on
such amounts at the Late Payment Rate. The Certificate Insurer shall notify the
Trustee and the Seller of the amount of any Group I Reimbursement Amount.
"Group I Servicing Fee": With respect to Group I, as to any
Payment Date, the product of (x) one-twelfth of the Servicing Fee Rate and (y)
the aggregate Loan Balances of the Mortgage Loans in Group I as of the opening
of business on the first day of the related Remittance Period. Such Servicing
Fee is retained by the Servicer pursuant to Sections 8.8(c)(i) and 8.15 hereof.
"Group I Specified Subordinated Amount": Means (a) for any
Payment Date occurring during the period commencing on the Startup Day and
ending on the later of (i) the date on which principal equal to one-half of the
Group I Maximum Collateral Amount has been received and (ii) the 30th Payment
Date following the Startup Day, the greater of (A) the Group I Amortized
Subordinated Amount Requirement and (B) two (2) times the excess, if any, of (x)
one-half of the aggregate Loan Balances of all Mortgage Loans in Group I which
are 90 or more days Delinquent (including REO Properties and Mortgage Loans in
foreclosure) over (y) five times the Group I Projected Net Monthly Excess
Cashflow as of such Payment Date; and (b) for any Payment Date occurring after
the end of the period in clause (a) above, the greatest of (i) the lesser of (A)
the Group I Amortized Subordinated Amount Requirement and (B) 3.50% times the
current Fixed Rate Certificate Principal Balance, (ii) two (2) times the excess
of (A) one-half of the aggregate Loan Balances of all Mortgage Loans in Group I
which are 90 or more days Delinquent (including REO Properties and Mortgage
Loans in foreclosure) over (B) three times the Group I Projected Net Monthly
Excess Cashflow as of such Payment Date and (iii) an amount equal to 0.50% of
the Group I Maximum Collateral Amount; provided, however, notwithstanding the
above, in the event that any Group I Insured Payment or Group II Insured Payment
is made by the Certificate Insurer, the amount described in this clause (b)
shall remain equal to the Group I Amortized Subordinated Amount Requirement. The
Specified Subordinated Amount may be reduced or eliminated by the Certificate
Insurer in its sole discretion. Prior to any such reduction or elimination, the
Servicer and the Certificate Insurer shall give written notice to the Rating
Agencies.
"Group I Subordinated Amount": As of any Payment Date, the
difference, if any, between (x) the sum of (i) the aggregate Loan Balances of
the Mortgage Loans in Group I as of the close of business on the last day of the
related Remittance Period and (ii) any amount on deposit in the Pre-Funding
Account relating to Group I less any Pre-Funding Account Earnings related to
Group I at such time and (y) the Fixed Rate Certificate Principal Balance as of
such Payment Date (after taking into account the payment of the Group I
Principal Distribution Amount (except for any portion thereof related to an
Insured Payment) on such Payment Date).
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<PAGE>
"Group I Subordination Deficit": With respect to any Payment
Date, the amount, if any, by which (x) the Fixed Rate Certificate Principal
Balance, after taking into account the payment of the Group I Principal
Distribution Amount on such Payment Date (except any payment to be made as to
principal from the proceeds of the Group I Certificate Insurance Policy),
exceeds the sum of (y) the aggregate Loan Balance of the Mortgage Loans in Group
I as of the close of business on the last day of the preceding Remittance Period
after taking into account payments of scheduled principal on such Mortgage Loans
due on the Due Date in the calendar month in which such Payment Date occurs and
(z) the portion of the Pre-Funding Account related to Group I as of the close of
business on the last day of the related Remittance Period; provided that for the
purpose of calculating Loan Balances to determine if a Group I Subordination
Deficit exists, the aggregate amount of the principal component of all
unreimbursed Delinquency Advances relating to Group I shall be deducted from the
related actual Loan Balances.
"Group I Total Available Funds": As defined in Section
7.3(a)(i) hereof.
"Group I Total Available Funds Shortfall": As defined in
Section 7.3(b) hereof.
"Group I Total Monthly Excess Spread": With respect to any
Payment Date, the difference between (i) the Group I Interest Remittance Amount
for the Remittance Period relating to such Payment Date and (ii) the sum of (x)
the interest due on the Fixed Rate Certificates on such Payment Date, (y) the
Fees and Expenses related to Group I, if any, for such Payment Date and (z) the
Group I Servicing Fee for such Payment Date.
"Group I Trustee Fee": The amount payable monthly to the
Trustee on each Payment Date, in an amount equal to the product of (x)
one-twelfth of the Trustee Fee Rate and (y) the Fixed Rate Certificate Principal
Balance as of the opening of business on the first day of the related Remittance
Period.
"Group II": The pool of Mortgage Loans identified in the
related Schedules of Mortgage Loans as having been assigned to Group II,
including any Qualified Replacement Mortgages delivered in replacement thereof
and each Subsequent Mortgage Loan delivered to the Trust for inclusion therein.
"Group II Amortized Subordinated Amount Requirement": As of
any date of determination, the product of (x) 2.75% and (y) the Group II Maximum
Collateral Amount.
"Group II Available Funds": As defined in Section 7.3(a)(ii)
hereof.
"Group II Available Funds Cap": As of any Payment Date, the
weighted average of the Coupon Rates on the Mortgage Loans in Group II less the
sum of (a) the rates at which (i) the Group II Servicing Fee, (ii) the Group II
Trustee Fee, (iii) the Group II Premium Amount are determined and (b) beginning
on the seventh Payment Date, 0.50% per annum expressed as a percentage of the
Mortgage Loans in Group II.
"Group II Available Funds Cap Carry-Forward Amortization
Amount": As of any Payment Date, any amount distributed from the Group II
Available Funds Cap Carry-Forward Amount Account on such Payment Date pursuant
to Section 7.5(e) hereof.
"Group II Available Funds Cap Carry-Forward Amount": As of any
Payment Date, the excess, if any, of (x) the sum of (i) the excess, if any,
equal to (a) the aggregate amount of interest due on the Class A-4 Certificates
on all prior Payment Dates, calculated at the Class A-4 Formula Pass-Through
Rate applicable to each such Payment Date over (b) the aggregate amount of
interest due on the Class A-4 Certificates on all prior Payment Dates,
calculated at the Class A-4 Pass-Through Rate applicable to each such Payment
Date, (ii) the amount, if any, described in clause (iii) hereof as of the
immediately preceding Payment Date and (iii) the product of (a) one-twelfth of
the Class A-4 Formula Pass-Through Rate on such
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Payment Date and (b) the sum of the amounts described in clauses (i) and (ii)
preceding over (y) all Group II Available Funds Cap Carry-Forward Amortization
Amounts actually funded on all prior Payment Dates.
"Group II Available Funds Cap Carry-Forward Amount Account":
The Available Funds Cap Carry-Forward Amount Account established pursuant to
Section 7.10 hereof and maintained by the Trustee.
"Group II Available Funds Cap Trust": The First Alliance
Available Funds Cap Trust 1998- 3 created pursuant to Section 7.10(a) hereof.
"Group II Available Funds Shortfall": As defined in Section
7.5(d)(ii)(A).
"Group II Capitalized Interest Requirement": With respect to
the Payment Dates in October and November 1998, the excess, if any, of (x) the
sum of the interest accruing at a rate equal to the Class A-4 Pass-Through Rate
(1) on the aggregate Loan Balances of the Subsequent Mortgage Loans transferred
to the Trust on each Subsequent Transfer Date during the month preceding the
related Payment Date for the period from the first day of the related Remittance
Period to the Subsequent Cut-Off Date (provided, however, if the related
Subsequent Cut-Off Date begins on or prior to such Remittance Period, the
related Loan Balances will be zero), plus (2) on the Pre-Funded Amount
outstanding as of the end of the Remittance Period for a period equal to the
Remittance Period over (y) any Pre-Funding Account Earnings to be distributed to
the Capitalized Interest Account on the related Payment Date pursuant to Section
7.4(d).
"Group II Certificate Insurance Policy": The certificate
guaranty insurance policy (number 27556) dated September 21, 1998 issued by the
Certificate Insurer to the Trustee for the benefit of the Owners of the Class
A-4 Certificates.
"Group II Clean-Up Call Date": The first Payment Date on which
the aggregate outstanding Loan Balance of the Mortgage Loans in Group II has
declined to $3,000,000 or less.
"Group II Initial Specified Subordinated Amount": $825,000.
"Group II Insured Payment": As defined in the Group II
Certificate Insurance Policy.
"Group II Interest Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) all scheduled interest due on or
prior to the Due Date occurring during the related Due Period, with respect to
the Group II Mortgage Loans to the extent collected by the Servicer during the
related Remittance Period, (ii) all Delinquency Advances relating to interest
made by the Servicer on such Remittance Date with respect to the Group II
Mortgage Loans and (iii) all Compensating Interest paid by the Servicer on such
Remittance Date with respect to the Group II Mortgage Loans.
"Group II Maximum Collateral Amount": $30,000,000.
"Group II Monthly Remittance Amount": As of any Remittance
Date, the sum of (i) the Group II Interest Remittance Amount for such Remittance
Date and (ii) the Group II Principal Remittance Amount for such Remittance Date.
"Group II Original Aggregate Loan Balance": The aggregate Loan
Balance of all Initial Mortgage Loans in Group II as of the Cut-Off Date, i.e.,
$25,160,592.40.
"Group II Original Capitalized Interest Amount": $20,000.
"Group II Overfunded Interest Amount": With respect to each
Subsequent Transfer Date, the excess, if any, of (i) interest accruing from the
related Subsequent Cut-Off Date to October 31, 1998 on
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the aggregate Loan Balances of the Subsequent Mortgage Loans acquired by the
Trust on such Subsequent Transfer Date, calculated at a rate equal to the Class
A-4 Pass-Through Rate over (ii) interest that would accrue from the Subsequent
Cut-Off Date to October 31, 1998 on the aggregate Loan Balance of the Subsequent
Home Equity Loans acquired by the Trust on such Subsequent Transfer Date,
calculated at the rate at which Pre-Funded Amounts are invested as of such
Subsequent Transfer Date.
"Group II Preference Amount": As defined in the Group II
Certificate Insurance Policy.
"Group II Premium Amount": As to any Payment Date, the product
of one-twelfth of (x) the Group II Premium Percentage and (y) the Class A-4
Certificate Principal Balance on such Payment Date (before taking into account
any distributions of principal to be made to the Owners of Class A-4
Certificates on such Payment Date).
"Group II Premium Percentage": As defined in the Group II
Certificate Insurance Policy.
"Group II Principal Distribution Amount": With respect to the
Class A-4 Certificates for any Payment Date, the lesser of:
(x) the Group II Total Available Funds plus any Group II
Insured Payment minus the Class A-4 Current Interest
and any Fees and Expenses related to Group II for
such Payment Date; and
(y) the excess, if any, of
(i) the sum, without any duplication of:
(a) the Class A-4 Principal
Carry-Forward Amount for such
Payment Date,
(b) the principal portion of all
scheduled monthly payments on the
Mortgage Loans in Group II due on or
prior to the related Due Date during
the related Due Period, to the
extent actually received by the
Servicer on or prior to the related
Remittance Date or to the extent
advanced by the Servicer on or prior
to the related Remittance Date and
the principal portion of any
Prepayments made by the respective
Mortgagors during the related
Remittance Period,
(c) the Loan Balance of each Mortgage
Loan in Group II that either was
repurchased by the Seller or an
Originator or purchased by the
Servicer on the related Remittance
Date,
(d) any Substitution Amounts delivered
by the Seller or an Originator on
the related Remittance Date in
connection with a substitution of a
Mortgage Loan in Group II (to the
extent such Substitution Amounts
relate to principal),
(e) all Net Liquidation Proceeds
actually collected by the Servicer
with respect to the Mortgage Loans
in Group II during the related
Remittance Period (to the extent
such Net Liquidation Proceeds relate
to principal),
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(f) the amount of any Group II
Subordination Deficit for such
Payment Date,
(g) the proceeds received by the Trustee
of any termination as set forth in
Article IX hereto of Group II (to
the extent such proceeds related to
principal),
(h) any moneys released from the
Pre-Funding Account as a prepayment
of the Class A-4 Certificates on the
Payment Date that immediately
follows the end of the Pre-Funding
Period, and
(i) the amount of any Subordination
Increase Amount with respect to
Group II for such Payment Date, to
the extent of any Net Monthly Excess
Cashflow available for such purpose;
over
(ii) the amount of any Subordination Reduction
Amount with respect to Group II for such
Payment Date.
"Group II Principal Remittance Amount": As of any Remittance
Date, the sum, without duplication, of (i) the scheduled principal due on or
prior to the Due Date occurring during the related Due Period with respect to
Mortgage Loans in Group II to the extent actually collected by the Servicer
during the related Remittance Period, (ii) Prepayments collected in the related
Remittance Period and relating to principal on the Mortgage Loans in Group II,
(iii) the Loan Balance of each such Mortgage Loan in Group II that either was
repurchased by an Originator or by the Seller or purchased by the Servicer on
such Remittance Date, to the extent such Loan Balance was actually deposited in
the Principal and Interest Account, (iv) any Substitution Amounts delivered by
the Seller in connection with a substitution of a Mortgage Loan in Group II, to
the extent such Substitution Amounts relate to principal, (v) all Net
Liquidation Proceeds actually collected by the Servicer with respect to such
Mortgage Loans in Group II during the related Remittance Period (to the extent
such Liquidation Proceeds are related to principal), (vi) all Delinquency
Advances relating to principal made by the Servicer on such Remittance Date with
respect to Group II and (vii) the amount of any investment losses required to be
deposited by the Seller or the Servicer pursuant to Sections 7.6(f) and 8.8(b)
hereof.
"Group II Projected Net Monthly Excess Cashflow": As of any
date of calculation, Net Monthly Excess Cashflow relating to Group II (other
than any Subordination Reduction Amount included therein), as calculated
pursuant to Section 7.5(d)(iii) hereof on the Payment Date immediately preceding
such date of calculation.
"Group II Reimbursement Amount": As of any Payment Date, the
sum of (x)(i) all Group II Insured Payments previously received by the Trustee
and not previously repaid to the Certificate Insurer pursuant to Section
7.5(d)(iv)(A)(1) hereof plus (ii) interest accrued on each such Group II Insured
Payment not previously repaid calculated at the Late Payment Rate from the date
the Trustee received the related Group II Insured Payment to, but not including,
such Payment Date and (y)(i) any amounts then due and owing to the Certificate
Insurer relating to Group II under the Insurance Agreement plus (ii) interest on
such amounts at the Late Payment Rate. The Certificate Insurer shall notify the
Trustee and the Seller of the amount of any Group II Reimbursement Amount.
"Group II Servicing Fee": With respect to Group II, as to any
Payment Date, the product of (x) one-twelfth of the Servicing Fee Rate and (y)
the aggregate Loan Balances of the Mortgage Loans in
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Group II as of the opening of business on the first day of the related
Remittance Period. Such Servicing Fee is retained by the Servicer pursuant to
Sections 8.8(c)(i) and 8.15 hereof.
"Group II Specified Subordinated Amount": Means (a) for any
Payment Date occurring during the period commencing on the Startup Day and
ending on the later of (i) the date on which principal equal to one-half of the
Group II Maximum Collateral Amount has been received and (ii) the 30th Payment
Date following the Startup Day, the greater of (A) the Group II Amortized
Subordinated Amount Requirement and (B) two (2) times the excess, if any, of (x)
one-half of the aggregate Loan Balances of all Mortgage Loans in Group II which
are 90 or more days Delinquent (including REO Properties and Mortgage Loans in
foreclosure) over (y) five times the Group II Projected Net Monthly Excess
Cashflow as of such Payment Date; and (b) for any Payment Date occurring after
the end of the period in clause (a) above, the greatest of (i) the lesser of (A)
the Group II Amortized Subordinated Amount Requirement and (B) 5.50% times the
current Class A-4 Certificate Principal Balance, (ii) two (2) times the excess
of (A) one-half of the aggregate Loan Balances of all Mortgage Loans in Group II
which are 90 or more days Delinquent (including REO Properties and Mortgage
Loans in foreclosure) over (B) three times the Group II Projected Net Monthly
Excess Cashflow as of such Payment Date and (iii) an amount equal to 0.50% of
the Group II Maximum Collateral Amount; provided, however, notwithstanding the
above, in the event that any Group I Insured Payment or Group II Insured Payment
is made by the Certificate Insurer, the amount described in this clause (b)
shall remain equal to the Group II Amortized Subordinated Amount Requirement.
The Specified Subordinated Amount may be reduced or eliminated by the
Certificate Insurer in its sole discretion. Prior to any such reduction or
elimination, the Servicer and the Certificate Insurer shall give written notice
to the Rating Agencies.
"Group II Subordinated Amount": As of any Payment Date, the
difference, if any, between (x) the sum of (i) the aggregate Loan Balances of
the Mortgage Loans in Group II as of the close of business on the last day of
the related Remittance Period and (ii) any amount on deposit in the Pre-Funding
Account relating to Group II less any Pre-Funding Account Earnings related to
Group II at such time and (y) the Class A-4 Certificate Principal Balance as of
such Payment Date (after taking into account the payment of the Class Group II
Principal Distribution Amount (except for any portion thereof related to an
Insured Payment) on such Payment Date).
"Group II Subordination Deficit": With respect to any Payment
Date, the amount, if any, by which (x) the Class A-4 Certificate Principal
Balance, after taking into account the payment of the Group II Principal
Distribution Amount on such Payment Date (except any payment to be made as to
principal from the proceeds of the Group II Certificate Insurance Policy),
exceeds the sum of (y) the aggregate Loan Balance of the Mortgage Loans in Group
II as of the close of business on the last day of the preceding Remittance
Period after taking into account payments of scheduled principal on such
Mortgage Loans due on the Due Date in the calendar month in which such Payment
Date occurs and (z) the portion of the Pre-Funding Account related to Group II
as of the close of business on the last day of the related Remittance Period;
provided that for the purpose of calculating Loan Balances to determine if a
Group II Subordination Deficit exists, the aggregate amount of the principal
component of all unreimbursed Delinquency Advances relating to Group II shall be
deducted from the related actual Loan Balances.
"Group II Total Available Funds": As defined in Section
7.3(a)(ii) hereof.
"Group II Total Available Funds Shortfall": As defined in
Section 7.3(b) hereof.
"Group II Total Monthly Excess Spread": With respect to any
Payment Date, the difference between (i) the Group II Interest Remittance Amount
for the Remittance Period relating to such Payment Date and (ii) the sum of (x)
the interest due on the Class A-4 Certificates on such Payment Date, (y) the
Fees and Expenses related to Group II, if any, for such Payment Date and (z) the
Group II Servicing Fee for such Payment Date.
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<PAGE>
"Group II Trustee Fee": The amount payable monthly to the
Trustee on each Payment Date, in an amount equal to the product of (x)
one-twelfth of the Trustee Fee Rate and (y) the Class A-4 Certificate Principal
Balance as of the opening of business on the first day of the related Remittance
Period.
"Highest Lawful Rate": As defined in Section 11.13.
"Indemnification Agreement": The Indemnification Agreement
dated as of September 14, 1998, among the Certificate Insurer, the Seller and
the Underwriters.
"Indirect Participant": Any financial institution for whom any
Direct Participant holds an interest in a Class A Certificate.
"Initial Certification": The initial certification in the form
set forth as Exhibit E hereto and delivered by the Trustee to the Seller on the
Startup Day pursuant to Section 3.6 hereof.
"Initial Mortgage Loans": The Mortgage Loans to be sold to the
Trust by the Seller on the Startup Day.
"Initial Premium": The initial premium (covering one month)
for Group I and Group II payable by the Seller on behalf of the Trust to the
Certificate Insurer in consideration of the delivery to the Trustee of the
Certificate Insurance Policies.
"Insurance Agreement": The Insurance Agreement dated as of
September 1, 1998, among the Seller, the Servicer, the Trustee and the
Certificate Insurer, as it may be amended from time to time.
"Insurance Policy": Any hazard, flood, title or primary
mortgage insurance policy relating to a Mortgage Loan.
"Insured Payment": A Group I Insured Payment or a Group II
Insured Payment.
"Interest Accrual Period": With respect to the Fixed Rate
Certificates and any Payment Date, the calendar month immediately preceding such
Payment Date. A "Calendar Month" shall be deemed to be 30 days. With respect to
the Class A-4 Certificates and any Payment Date, the period commencing on the
immediately preceding Payment Date (or in the case of the first Payment Date,
the Startup Day) and ending on the day immediately preceding the current Payment
Date. All calculations of interest on the Fixed Rate Certificates will be made
on the basis of a 360-day year assumed to consist of twelve 30-day months and
all calculations of interest on the Class A-4 Certificates will be made on the
basis of the actual number of days elapsed in the related Interest Accrual
Period and in a year of 360 days.
"Interest Determination Date": With respect to any Interest
Accrual Period for the Class A-4 Certificates, the second London Business Day
preceding such Interest Accrual Period or, in case of the first Payment Date,
September 14, 1998.
"Late Payment Rate": For any Payment Date, the rate of
interest, as it is publicly announced by Citibank, N.A. at its principal office
in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 3%. The Late Payment Rate shall be computed on the basis of a year of 365
days calculating the actual number of days elapsed. In no event shall the Late
Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"Latest Termination Date": The later to occur of (i) the Class
A-3 Certificate Termination Date and (ii) the Class A-4 Certificate Termination
Date.
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"LIBOR": With respect to any Interest Accrual Period for the
Class A-4 Certificates, the rate determined by the Trustee on the related
Interest Determination Date on the basis of the offered rates of the Reference
Banks for one-month U.S. dollar deposits, as such rates appear on Telerate Page
3750, as of 11:00 a.m. (London time) on such Interest Determination Date. On
each Interest Determination Date, LIBOR for the related Interest Accrual Period
will be established by the Trustee as follows:
(i) If on such Interest Determination Date two or more
Reference Banks provide such offered quotations,
LIBOR for the related Interest Accrual Period shall
be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole
multiple of 0.0625%).
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations,
LIBOR for the related Interest Accrual Period shall
be the higher of (i) LIBOR as determined on the
previous Interest Determination Date and (ii) the
Reserve Interest Rate.
"Liquidated Loan": As defined in Section 8.13(b) hereof. A
Mortgage Loan which is purchased from the Trust pursuant to Section 3.4, 3.6 or
8.10 hereof is not a "Liquidated Loan".
"Liquidation Expenses": Expenses which are incurred by the
Servicer in connection with the liquidation of any defaulted Mortgage Loan, such
expenses, including, without limitation, legal fees and expenses, and any
unreimbursed Servicing Advances expended by the Servicer pursuant to Sections
8.9(c) and 8.13 with respect to the related Mortgage Loan.
"Liquidation Proceeds": With respect to any Liquidated Loan,
as of any date of determination any amounts (including the proceeds of any
Insurance Policy) recovered by the Servicer in connection with such Liquidated
Loan, whether through trustee's sale, foreclosure sale or otherwise.
"Loan Balance": With respect to a Mortgage Loan, the principal
balance thereof on the CutOff Date with respect to the Initial Mortgage Loans or
the relevant Subsequent Cut-Off Date with respect to the Subsequent Mortgage
Loans, less any related Principal Remittance Amounts relating to such Mortgage
Loan included in previous related Monthly Remittance Amounts that were received
by the Servicer or any Sub-Servicer whether or not delivered to the Trustee,
provided, that the Loan Balance for any Mortgage Loan which has become a
Liquidated Loan shall be zero as of the first day of the Remittance Period
following the Remittance Period in which such Mortgage Loan becomes a Liquidated
Loan, and at all times thereafter.
"Loan Purchase Price": With respect to any Mortgage Loan
purchased from the Trust on a Remittance Date pursuant to Section 3.4, 3.6 or
8.10 hereof, an amount equal to the Loan Balance of such Mortgage Loan as of the
date of purchase, plus one month's interest on the outstanding Loan Balance
thereof as of the beginning of the preceding Remittance Period computed at the
then applicable Coupon Rate less the Servicing Fee Rate, if any, together with,
without duplication, the aggregate amount of (i) all delinquent interest, all
Delinquency Advances and Servicing Advances theretofore made with respect to
such Mortgage Loan and not subsequently recovered from the related Mortgage Loan
and (ii) the interest portion of any Delinquency Advances which the Servicer or
any Sub-Servicer has theretofore failed to remit with respect to such Mortgage
Loan.
"London Business Day": A day on which banks are open for
dealing in foreign currency and exchange in London and New York City.
"Monthly Exception Report": The monthly report delivered by
the Servicer to the Trustee on each Determination Date, pursuant to Section
8.8(d)(ii). Each Monthly Exception Report shall cover the immediately preceding
Remittance Period and shall consist of, for each Mortgage Loan Group and in the
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aggregate (i) an activity report of the Mortgage Loans setting forth the Loan
Balance of Mortgage Loans as of the first day of the related Remittance Period,
scheduled payments due, Prepayments, Liquidated Loan balances, and the resulting
Loan Balance of the Mortgage Loans as of the last day of the related Remittance
Period and (ii) separate reports of (a) payoffs, Curtailments, foreclosures and
bankruptcies, such reports to provide the payment details for each Mortgage Loan
covering the immediately preceding Remittance Period and any Prepayments not
previously reported from a prior Remittance Period, and (b) Prepayments and
delinquencies, such reports to reflect the current status of each Mortgage Loan
with payment details as of the last day of the related Remittance Period.
"Monthly Remittance Amount": With respect to Group I, the
Group I Monthly Remittance Amount and with respect to Group II, the Group II
Monthly Remittance Amount.
"Monthly Servicing Report": As defined in Section 8.26.
"Moody's": Moody's Investors Service, Inc., and any successor
thereto.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first or second lien on an estate in fee simple interest in real
property securing a Note.
"Mortgage Loans": Such of the mortgage loans (including
Initial Mortgage Loans and Subsequent Mortgage Loans) transferred and assigned
to the Trust pursuant to Section 3.5(a) and Section 3.8 hereof, together with
any Qualified Replacement Mortgages substituted therefor in accordance with this
Agreement, as from time to time are held as a part of the Trust Estate, the
Mortgage Loans originally so held being identified in the Schedule of Mortgage
Loans. The term "Mortgage Loan" includes the terms "First Mortgage Loan" and
"Second Mortgage Loan." The term "Mortgage Loan" includes any Mortgage Loan
which is Delinquent, which relates to a foreclosure or which relates to a
Property which is REO Property prior to such Property's disposition by the
Trust. Any mortgage loan which, although intended by the parties hereto to have
been, and which purportedly was, transferred and assigned to the Trust by the
Seller, in fact was not transferred and assigned to the Trust for any reason
whatsoever shall nevertheless be considered a "Mortgage Loan" for all purposes
of this Agreement.
"Mortgage Loan Group": Either Group I or Group II. References
herein to the related Class of Class A Certificates, when used with respect to a
Mortgage Loan Group, shall mean (A) in the case of Group I, the Fixed Rate
Certificates and (B) in the case of Group II, the Class A-4 Certificates.
"Mortgagor": The obligor on a Note.
"Net Liquidation Proceeds": As to any Liquidated Loan,
Liquidation Proceeds net of, without duplication, Liquidation Expenses and
unreimbursed Servicing Advances, unreimbursed Delinquency Advances and accrued
and unpaid Servicing Fees through the date of liquidation relating to such
Liquidated Loan. In no event shall Net Liquidation Proceeds with respect to any
Liquidated Loan be less than zero.
"Net Monthly Excess Cashflow": As defined in Section
7.5(d)(iii) hereof.
"Note": The note or other evidence of indebtedness evidencing
the indebtedness of a Mortgagor under a Mortgage Loan.
"Officer's Certificate": A certificate signed by any
Authorized Officer of any Person delivering such certificate and delivered to
the Trustee.
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<PAGE>
"Operative Documents": Collectively, this Agreement, the
Certificate Insurance Policies, the Certificates, the Insurance Agreement, the
Underwriting Agreement, any Sub-Servicing Agreement, any Subsequent Transfer
Agreement, the Registration Statement and the Indemnification Agreement.
"Original Aggregate Loan Balance": The aggregate Loan Balances
of all Initial Mortgage Loans as of the Cut-Off Date, i.e., $75,305,150.14.
"Original Certificate Principal Balance": As of the Startup
Day and as to each Class of Class A Certificates, the original Certificate
Principal Balances thereof, as follows:
Class A-1 Certificates $30,000,000
Class A-2 Certificates $22,000,000
Class A-3 Certificates $18,000,000
Class A-4 Certificates $30,000,000
The Class R Certificates do not have an Original Certificate
Principal Balance.
"Original Group I Pre-Funded Amount": $19,855,442.26.
"Original Group II Pre-Funded Amount": $4,839,407.60.
"Original Pre-Funded Amount": The amount deposited in the
Pre-Funding Account on the Startup Day from the proceeds of the sale of the
Certificates, which amount is $24,694,849.86.
"Original Principal Amount": With respect to each Note, the
principal amount of such Note on the date of origination thereof.
"Originator": The Seller and any entity from which the Seller
acquires Mortgage Loans.
"Outstanding": With respect to all Certificates of a Class, as
of any date of determination, all such Certificates theretofore executed and
delivered hereunder except:
(i) Certificates theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Certificates or portions thereof for which full and final
payment of money in the necessary amount has been theretofore deposited
with the Trustee in trust for the Owners of such Certificates;
(iii) Certificates in exchange for or in lieu of which other
Certificates have been executed and delivered pursuant to this
Agreement, unless proof satisfactory to the Trustee is presented that
any such Certificates are held by a bona fide purchaser; and
(iv) Certificates alleged to have been destroyed, lost or
stolen for which replacement Certificates have been issued as provided
for in Section 5.5 hereof.
(v) Certificates as to which the Trustee has made the final
distribution thereon, whether or not such Certificates have been
returned to the Trustee.
"Owner": The Person in whose name a Certificate is registered
in the Register, to the extent described in Section 5.6.
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<PAGE>
"Paid-in-Full Mortgage Loan": With respect to any Payment
Date, a Mortgage Loan on which the entire obligation of the related Mortgagor
has been satisfied and the lien on the property may be removed during the
related Remittance Period.
"Pass-Through Rate": As to the Class A-1 Certificates, the
Class A-1 Pass-Through Rate and as to the Class A-2 Certificates, the Class A-2
Pass-Through Rate, as to the Class A-3 Certificates, the Class A-3 Pass-Through
Rate, and as to the Class A-4 Certificates, the Class A-4 Pass-Through Rate.
"Payment Date": Any date on which the Trustee is required to
make distributions to the Owners, which shall be the 20th day of each month, or
if such day is not a Business Day, the next succeeding Business Day, commencing
in the month following the Startup Day.
"Percentage Interest": As to any Class of Class A Certificate,
that percentage, expressed as a fraction, the numerator of which is the
Certificate Principal Balance set forth on such Certificate as of the Cut-Off
Date and the denominator of which is the Original Certificate Principal Balance
of all Class A Certificates of the same Class as of the Cut-Off Date; and as to
any Class R Certificate, that Percentage Interest set forth on such Class R
Certificate.
"Person": Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Pool Cumulative Expected Losses": With respect to a Mortgage
Loan Group and any period, the sum of (i) all Realized Losses with respect to
the Mortgage Loans in such Mortgage Loan Group experienced during such period
and (ii) the product of (A) 0.43 and (B) with respect to any date of
determination, the sum of (x) 25% of the Loan Balances of all Mortgage Loans
which are 30-59 days Delinquent (inclusive), (y) 50% of the Loan Balances of all
Mortgage Loans which are 60-89 days Delinquent (inclusive), and (z) 100% of the
Loan Balances of all Mortgage Loans which are 90 or more days Delinquent
(including, without duplication, REO Properties and Mortgage Loans in
foreclosure).
"Pool Cumulative Realized Losses": With respect to a Mortgage
Loan Group and any period, the sum of all Realized Losses experienced since the
Startup Day with respect to the Mortgage Loans in such Mortgage Loan Group.
"Pool Delinquency Rate": With respect to any Remittance
Period, the fraction, expressed as a percentage, equal to (x) the aggregate
principal balances of all Mortgage Loans in a Mortgage Loan Group 90 or more
days Delinquent (including, without duplication, Mortgage Loans in foreclosure
and REO Properties) as of the close of business on the last day of such
Remittance Period over (y) the Pool Principal Balance of such Mortgage Loan
Group as of the close of business on the last day of such Remittance Period.
"Pool Principal Balance": With respect to any date of
determination thereof, the aggregate principal balances of the Group I Mortgage
Loans or the Group II Mortgage Loans as of such date of determination.
"Pool Rolling Three Month Delinquency Rate": As of any Payment
Date, and for either Mortgage Loan Group, the fraction, expressed as a
percentage, equal to the average of the Pool Delinquency Rates for such Mortgage
Loan Group for each of the three (or one and two, in the case of the first and
second Payment Dates) immediately preceding Remittance Periods.
"Preference Amount": Either of the Group I Preference Amount
or the Group II Preference Amount.
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"Pre-Funded Amount": With respect to any Determination Date,
the amount remaining on deposit in the Pre-Funding Account.
"Pre-Funding Account": The Pre-Funding Account established in
accordance with Section 7.2 hereof and maintained by the Trustee.
"Pre-Funding Account Earnings": With respect to the initial
Payment Date, the actual investment earnings earned during the period from the
Startup Day through October 31, 1998 (inclusive) on the Pre-Funding Account
during such period as calculated by the Trustee pursuant to Section 3.8(e)
hereof.
"Prepaid Installment": With respect to any Mortgage Loan, any
installment of principal thereof and interest thereon received by the Servicer
prior to the scheduled due date for such installment, intended by the Mortgagor
as an early payment thereof and not as a Prepayment with respect to such
Mortgage Loan.
"Prepayment": A Curtailment or a payment causing a Mortgage
Loan to become a Paid-in-Full Mortgage Loan.
"Preservation Expenses": Expenditures made by the Servicer in
connection with a foreclosed Mortgage Loan prior to the liquidation thereof,
including, without limitation, expenditures for real estate property taxes,
hazard insurance premiums, property restoration or preservation.
"Principal and Interest Account": Collectively, each principal
and interest account created by the Servicer pursuant to Section 8.8(a) hereof,
or pursuant to any Sub-Servicing Agreement.
"Principal Remittance Amount": As applicable, the Group I
Principal Remittance Amount or the Group II Principal Remittance Amount.
"Prohibited Transaction": As defined at Section 860F(a)(2) of
the Code (or any successor statute thereto) and applicable to the Trust.
"Property": The underlying property securing a Mortgage Loan.
"Prospectus": The Seller's Prospectus dated March 10, 1998.
"Prospectus Supplement": The First Alliance Mortgage Loan
Trust 1998-3 Prospectus Supplement dated September 14, 1998 to the Prospectus.
"Qualified Liquidation": As defined at Section 860F(a)(4) of
the Code (or any successor statute thereto) and applicable to the Trust and the
Trust Estate.
"Qualified Mortgage": As defined at Section 860G(a)(4) of the
Code (or any successor statute thereto) and applicable to the Trust and the
Mortgage Loan Groups.
"Qualified Replacement Mortgage": A Mortgage Loan substituted
for another pursuant to Section 3.4 or 3.6 hereof, which (i) bears a fixed rate
of interest if the Mortgage Loan to be substituted for is in Group I or bears a
variable rate of interest if the Mortgage Loan to be substituted for is in Group
II, (ii) has a Coupon Rate at least equal to the Coupon Rate of the Mortgage
Loan being replaced (which, in the case of a Mortgage Loan in Group II, shall
mean a Mortgage Loan having the same interest rate index, a margin over such
index and a maximum interest rate at least equal to those applicable to the
Mortgage Loan being replaced), (iii) is of the same or better property type and
the same or better occupancy status as the replaced Mortgage Loan, (iv) shall be
of the same or better credit quality classification (determined in accordance
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with the Originators' credit underwriting guidelines) as the Mortgage Loan being
replaced, (v) shall mature no later than August 1, 2028, (vi) has a Combined
Loan-to-Value Ratio as of the Cut-Off Date, no higher than the Combined
Loan-to-Value Ratio of the replaced Mortgage Loan at such time, (vii) has a Loan
Balance as of the related Replacement Cut-Off Date equal to or less than the
Loan Balance of the replaced Mortgage Loan as of such Replacement Cut-Off Date,
(viii) satisfies the criteria set forth from time to time in the definition
thereof at Section 860G(a)(4) of the Code (or any successor statute thereto) and
applicable to the Trust, all as evidenced by an Officer's Certificate of the
Seller delivered to the Trustee and the Certificate Insurer prior to any such
substitution, (ix) is of the same lien status or better lien status (x) is not
Delinquent, (xi) meets the representations and warranties set out in Section 3.3
hereof and (xii) a valid fixed rate Mortgage Loan, if the Mortgage Loan to be
substituted for is in Group I, and is a valid variable rate Mortgage Loan, if
the Mortgage Loan to be substituted for is in Group II. In the event that one or
more mortgage loans are proposed to be substituted for one or more mortgage
loans, the Certificate Insurer may allow the foregoing tests to be met on a
weighted average basis or other aggregate basis acceptable to the Certificate
Insurer, as evidenced by a written approval delivered to the Trustee by the
Certificate Insurer, except that the requirement of clauses (vi) and (viii)
hereof must be satisfied as to each Qualified Replacement Mortgage.
"Rating Agencies": Moody's and Standard & Poor's or any
successors thereto.
"Realized Loss": As to any Liquidated Loan, the amount, if
any, by which the Loan Balance thereof as of the date of liquidation is in
excess of Net Liquidation Proceeds realized thereon.
"Record Date": With respect to each Payment Date, the last
Business Day of the calendar month immediately preceding the calendar month in
which such Payment Date occurs.
"Reference Banks": Bankers Trust Company, Barclay's Bank PLC
and National Westminster Bank PLC; provided that if any of the foregoing banks
are not suitable to serve as a Reference Bank, then any leading banks selected
by the Trustee which are engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) not controlling, under the control of or under common control with
the Seller or any affiliate thereof, (iii) whose quotations appear on the
Telerate Page 3750 on the relevant Interest Determination Date and (iv) which
have been designated as such by the Trustee.
"Register": The register maintained by the Trustee in
accordance with Section 5.4 hereof, in which the names of the Owners are set
forth.
"Registrar": The Trustee, acting in its capacity as Trustee
appointed pursuant to Section 5.4 hereof, or any duly appointed and eligible
successor thereto.
"Registration Statement": The Registration Statement filed by
the Seller with the Securities and Exchange Commission (Registration Statement
Number 333-44585), including all amendments thereto and including the Prospectus
and Prospectus Supplement constituting a part thereof.
"Reimbursement Amount": A Group I Reimbursement Amount or a
Group II Reimbursement Amount.
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Sections
860A through 860G of the Code, and related
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provisions, and regulations and rulings promulgated thereunder, as the foregoing
may be in effect from time to time.
"Remittance Date": Any date on which the Servicer is required
to remit moneys on deposit in the Principal and Interest Account to the
Certificate Account, which shall be the day two Business Days prior to the
related Payment Date, commencing two days prior to the first Payment Date.
"Remittance Period": The period (inclusive) beginning on the
first day of the calendar month immediately preceding the month in which a
Remittance Date occurs and ending on the last day of such immediately preceding
calendar month.
"REO Property": A Property acquired by the Servicer or any
Sub-Servicer on behalf of the Trust through foreclosure or deed-in-lieu of
foreclosure in connection with a defaulted Mortgage Loan.
"Replacement Cut-Off Date": With respect to any Qualified
Replacement Mortgage, the first day of the calendar month in which such
Qualified Replacement Mortgage is conveyed to the Trust.
"Representation Letter": Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Register under the nominee name of the
Depository.
"Request for Release": The request for release in the form set
forth as Exhibit J hereto.
"Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 0.0625%) of the one-month U.S. dollar lending rates which New York
City banks selected by the Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month U.S. dollar lending rate which New
York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.
"Residual Net Monthly Excess Cashflow": With respect to any
Payment Date, the aggregate Net Monthly Excess Cashflow, if any, remaining with
respect to each of the Mortgage Loan Groups after the making of all applications
described in Sections 7.5(d)(i), 7.5(d)(ii), 7.5(d)(iii) and 7.5(d)(iv) hereof.
"Responsible Officer": When used with respect to the Trustee,
any officer assigned to the corporate trust group (or any successor thereto),
including any vice president, assistant vice president, trust officer, any
assistant secretary, any assistant treasurer, any trust officer or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and having direct
responsibility for the administration of this Agreement.
"Schedule of Mortgage Loans": The Schedule of Mortgage Loans,
separated by Mortgage Loan Group, with respect to the Mortgage Loans listing
each Mortgage Loan in the related Group to be conveyed on the Startup Day (or
Subsequent Transfer Date). Such Schedule of Mortgage Loans shall identify each
Mortgage Loan by the Servicer's loan number and address (including the state) of
the Property and shall set forth as to each Mortgage Loan the lien status, the
Combined Loan-to-Value Ratio, the Loan Balance as of the Cut-Off Date or
Subsequent Cut-Off Date, as the case may be, the Coupon Rate thereof (or, with
respect to Mortgage Loans in Group II, the index, the margin) the current
scheduled monthly payment of principal and interest and the maturity of the
related Note, the property type, occupancy status, Appraised Value and the
Originator of the Mortgage Loan, all as delivered to the Trustee in physical and
computer readable form and delivered to the Certificate Insurer in physical
form.
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"Second Mortgage Loan": A Mortgage Loan which constitutes a
second priority mortgage lien with respect to the related Property.
"Securities Act": The Securities Act of 1933, as amended.
"Seller": First Alliance Mortgage Company, a California
corporation, and its permitted successors and assigns.
"Senior Lien": With respect to any Second Mortgage Loan, the
mortgage loan relating to the corresponding Property having a first priority
lien.
"Servicer": First Alliance Mortgage Company, a California
corporation, and its permitted successors and assigns.
"Servicer Affiliate": A Person (i) controlling, controlled by
or under common control with the Servicer and (ii) which is qualified to service
residential mortgage loans.
"Servicing Advance": As defined in Section 8.9(c) and Section
8.13 hereof.
"Servicing Certificate": A certificate completed by and
executed by an Authorized Officer of the Trustee.
"Servicing Fee Rate": 0.50% per annum.
"Six Month LIBOR Loans": Mortgage Loans whose interest rates
adjust semi-annually based on the London interbank offered rate for six-month
United States Dollar deposits in the London Market and as published in The Wall
Street Journal.
"Specified Subordinated Amount": As applicable, the Group I
Specified Subordinated Amount or the Group II Specified Subordinated Amount.
"Standard & Poor's": Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., and any successor thereto.
"Startup Day": September 21, 1998.
"Subordinated Amount": As applicable, the Group I Subordinated
Amount or the Group II Subordinated Amount.
"Subordination Deficiency Amount": With respect to any
Mortgage Loan Group and Payment Date, the excess, if any, of (i) the related
Specified Subordinated Amount applicable to such Payment Date over (ii) the
related Subordinated Amount applicable to such Payment Date prior to taking into
account the payment of any related Subordination Increase Amount on such Payment
Date.
"Subordination Deficit": As applicable, the Group I
Subordination Deficit or the Group II Subordination Deficit.
"Subordination Increase Amount": With respect to any Mortgage
Loan Group and Payment Date, the lesser of (i) the related Subordination
Deficiency Amount as of such Payment Date (after taking into account the payment
of the related Class A Distribution Amount on such Payment Date (except for any
related Subordination Increase Amount)) and (ii) the aggregate amount of Net
Monthly Excess Cashflow
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to be allocated to such Mortgage Loan Group pursuant to either Section
7.5(d)(iii)(A) or Section 7.5(d)(iii)(B) on such Payment Date.
"Subordination Reduction Amount": With respect to any Mortgage
Loan Group and Payment Date, an amount equal to the lesser of (x) the Excess
Subordinated Amount for such Mortgage Loan Group and Payment Date and (y) the
Principal Remittance Amount for such Mortgage Loan Group for the related
Remittance Period.
"Subsequent Cut-Off Date": The beginning of business on the
date specified in the Subsequent Transfer Agreement with respect to the
Subsequent Mortgage Loans which are transferred and assigned to the Trust
pursuant to the related Subsequent Transfer Agreement.
"Subsequent Mortgage Loans": The Mortgage Loans sold to the
Trust for inclusion in Group I or Group II pursuant to Section 3.8 hereof, which
shall be listed on the Schedules of Mortgage Loans attached to a Subsequent
Transfer Agreement.
"Subsequent Transfer Agreement": The Subsequent Transfer
Agreement dated as of the Subsequent Transfer Date executed by the Trustee and
the Seller substantially in the form of Exhibit K hereto, by which Subsequent
Mortgage Loans are sold and assigned to the Trust.
"Subsequent Transfer Date": The date so specified in each
Subsequent Transfer Agreement, which shall be no later than October 31, 1998.
"Sub-Servicer": Any Person with whom the Servicer has entered
into a Sub-Servicing Agreement and who satisfies any requirements set forth in
Section 8.3 hereof in respect of the qualification of a Sub-Servicer.
"Sub-Servicing Agreement": The written contract between the
Servicer and any Sub-Servicer relating to servicing and/or administration of
certain Mortgage Loans as permitted by Section 8.3.
"Substitution Amount": In connection with the delivery of any
Qualified Replacement Mortgage, if the outstanding principal amount of such
Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is
less than the Loan Balance of the Mortgage Loan being replaced as of such
Replacement Cut-Off Date, an amount equal to such difference together with
accrued and unpaid interest on such amount calculated at the Coupon Rate (net of
the Servicing Fee Rate) of the Mortgage Loan being replaced.
"Tax Matters Person": The Tax Matters Person appointed
pursuant to Section 11.17 hereof.
"Telerate Page 3750": The display designated as page "3750" on
the Bridge Telerate Capital Markets Report (or such other page as may replace
page 3750 on that report for the purpose of displaying London interbank offered
rates of major banks).
"Termination Notice": As defined in Section 9.3(b) hereof.
"Termination Price": As defined in Section 9.2(a) hereof.
"Total Monthly Excess Cashflow": As defined in Section
7.5(d)(ii) hereof.
"Total Monthly Excess Spread": As applicable, the Group I
Total Monthly Excess Spread or the Group II Total Monthly Excess Spread.
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"Trust": First Alliance Mortgage Loan Trust 1998-3, the trust
created under this Agreement.
"Trust Estate": Collectively, all money, instruments and other
property, to the extent such money, instruments and other property are subject
or intended to be held in trust, and in the subtrusts, for the benefit of the
Owners, including all proceeds thereof, including, without limitation, (i) the
Mortgage Loans, (ii) such amounts, including Eligible Investments, as from time
to time may be held in all Accounts (except as otherwise provided herein), (iii)
any Property, the ownership of which has been effected on behalf of the Trust as
a result of foreclosure or acceptance by the Servicer of a deed in lieu of
foreclosure and that has not been withdrawn from the Trust, (iv) any Insurance
Policies relating to the Mortgage Loans and any rights of the Seller under such
Insurance Policies, (v) Net Liquidation Proceeds with respect to any Liquidated
Loan, (vi) the Certificate Insurance Policies and (vii) the proceeds of any of
the above.
"Trustee": Norwest Bank Minnesota, National Association
located on the date of execution of this Agreement at Sixth Street and Marquette
Avenue, Minneapolis, Minnesota 55479-0113, not in its individual capacity but
solely as Trustee under this Agreement, and any successor hereunder.
"Trustee Fee": The fee payable monthly to the Trustee equal to
the sum of the Group I Trustee Fee and the Group II Trustee Fee.
"Trustee Fee Rate": 0.02% per annum.
"Underwriters": Prudential Securities Incorporated and Wheat
First Securities, Inc., acting through First Union Capital Markets, a division
of Wheat First Securities, Inc.
"Underwriting Agreement": The Underwriting Agreement dated as
of September 14, 1998 between the Underwriters and the Seller.
Section 1.2. Use of Words and Phrases. "Herein", "hereby",
"hereunder", "hereof", "hereinbefore", "hereinafter" and other equivalent words
refer to this Agreement as a whole and not solely to the particular section of
this Agreement in which any such word is used. The definitions set forth in
Section 1.1 hereof include both the singular and the plural. Whenever used in
this Agreement, any pronoun shall be deemed to include both singular and plural
and to cover all genders.
Section 1.3. Captions; Table of Contents. The captions or
headings in this Agreement and the Table of Contents are for convenience only
and in no way define, limit or describe the scope and intent of any provisions
of this Agreement.
Section 1.4. Opinions. Each opinion with respect to the
validity, binding nature and enforceability of documents or Certificates may be
qualified to the extent that the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law) and may state
that no opinion is expressed on the availability of the remedy of specific
enforcement, injunctive relief or any other equitable remedy. Any opinion
required to be furnished by any Person hereunder must be delivered by counsel
upon whose opinion the addressee of such opinion may reasonably rely, and such
opinion may state that it is given in reasonable reliance upon an opinion of
another, a copy of which must be attached, concerning the laws of a foreign
jurisdiction.
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ARTICLE II
ESTABLISHMENT AND ORGANIZATION OF THE TRUST
Section 2.1. Establishment of the Trust. The parties hereto do
hereby create and establish, pursuant to the laws of the State of New York and
this Agreement, the Trust, which, for convenience, shall be known as "First
Alliance Mortgage Loan Trust 1998-3" and which shall contain two subtrusts.
Section 2.2. Office. The office of the Trust shall be in care
of the Trustee, at Sixth Street and Marquette Avenue, Minneapolis, Minnesota
55479-0113, or at such other address as the Trustee may designate by notice to
the Seller, the Servicer, the Owners and the Certificate Insurer.
Section 2.3. Purposes and Powers. The purpose of the Trust is
to engage in the following activities and only such activities: (i) the issuance
of the Certificates and the acquiring, owning and holding of Mortgage Loans and
the Trust Estate in connection therewith; (ii) activities that are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith, including the investment of moneys in accordance with this
Agreement; and (iii) such other activities as may be required in connection with
conservation of the Trust Estate and distributions to the Owners; provided,
however, that nothing contained herein shall permit the Trustee to take any
action which would result in the loss of REMIC status for the Trust.
Section 2.4. Appointment of the Trustee; Declaration of Trust.
The Seller hereby appoints the Trustee as trustee of the Trust effective as of
the Startup Day, to have all the rights, powers and duties set forth herein. The
Trustee hereby acknowledges and accepts such appointment, represents and
warrants its eligibility as of the Startup Day to serve as Trustee pursuant to
Section 10.8 hereof and declares that it will hold the Trust Estate in trust
upon and subject to the conditions set forth herein for the benefit of the
Owners and the Certificate Insurer, as their interests may appear.
Section 2.5. Expenses of Trustee. The expenses of the Trust,
including (i) any portion of the Trustee Fee not paid pursuant to Section
7.5(d)(i) hereof, (ii) any reasonable expenses of the Trustee, and (iii) any
other expenses of the Trust that have been reviewed by the Servicer, which
review shall not be required in connection with the enforcement of a remedy by
the Trustee resulting from a default under this Agreement, shall be paid
directly by the Servicer. The Servicer shall pay directly the reasonable fees
and expenses of counsel to the Trustee. The reasonable fees and expenses of the
Trustee's counsel in connection with the review and delivery of this Agreement
and related documentation shall be paid by the Servicer on the Startup Day.
Section 2.6. Ownership of the Trust. On the Startup Day the
ownership interests in the Trust and the subtrusts shall be transferred as set
forth in Section 4.2 hereof, such transfer to be evidenced by sale of the
Certificates as described therein. Thereafter, transfer of any ownership
interest shall be governed by Sections 5.4 and 5.8 hereof.
Section 2.7. Situs of the Trust. It is the intention of the
parties hereto that the Trust constitute a trust under the laws of the State of
New York. The Trust will be created and administered in, the State of Minnesota.
The Trust's only office will be at the office of the Trustee as set forth in
Section 2.2 hereof.
Section 2.8. Miscellaneous REMIC Provisions. (a) The Trust
(other than the Pre-Funding Account, the Group II Available Funds Cap
Carry-Forward Amount Account and the Capitalized Interest Account) shall elect
to be treated as a REMIC under Section 860D of the Code, as described in Section
11.15. Any inconsistencies or ambiguities in this Agreement or in the
administration
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of the Trust shall be resolved in a manner that preserves the validity of the
election of the Trust (other than the Pre-Funding Account and the Capitalized
Interest Account) to be treated as a REMIC.
(b) The Class A Certificates are hereby designated as "regular
interests" in the REMIC and the Class R Certificates are hereby
designated as the "residual interest" in the REMIC, as defined in
Section 860G(a) of the Code.
(c) The Startup Day is hereby designated as the "startup day"
of the REMIC within the meaning of Section 860G(a)(9) of the Code.
(d) The final scheduled Payment Date for any Class of
Certificates is hereby set to be the Payment Date succeeding by one
year the latest maturity date of any Mortgage Loan in the related
Mortgage Loan Group, as follows:
Class Final Scheduled Payment Date
----- ----------------------------
Class A-1 Certificates November 20, 2018
Class A-2 Certificates September 20, 2024
Class A-3 Certificates December 20, 2029
Class A-4 Certificates October 20, 2028
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SELLER AND THE SERVICER;
COVENANT OF SELLER TO CONVEY MORTGAGE LOANS
Section 3.1. Representations and Warranties of the Seller. The
Seller hereby represents, warrants and covenants to the Trustee, the Certificate
Insurer and to the Owners as of the Startup Day that:
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of California
and is in good standing as a foreign corporation in each jurisdiction
in which the nature of its business, or the properties owned or leased
by it, make such qualification necessary. The Seller has all requisite
corporate power and authority to own and operate its properties, to
carry out its business as presently conducted and as proposed to be
conducted and to enter into and discharge its obligations under this
Agreement and the other Operative Documents to which it is a party.
(b) The execution and delivery of this Agreement and the other
Operative Documents to which it is a party by the Seller and its
performance and compliance with the terms of this Agreement and of the
other Operative Documents to which it is a party have been duly
authorized by all necessary corporate action on the part of the Seller
and will not violate the Seller's Articles of Incorporation or Bylaws
or constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or result in the
breach of, any material contract, agreement or other instrument to
which the Seller is a party or by which the Seller is bound, or violate
any statute or any order, rule or regulation of any court, governmental
agency or body or other tribunal having jurisdiction over the Seller or
any of its properties.
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(c) This Agreement and the other Operative Documents to which
the Seller is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a
valid, legal and binding obligation of the Seller, enforceable against
it in accordance with the terms hereof and thereof, except as the
enforcement hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity
(whether considered in a proceeding or action in equity or at law).
(d) The Seller 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 might have consequences
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Seller or its properties or might have
consequences that would materially and adversely affect its performance
hereunder or under the other Operative Documents to which it is a
party.
(e) No action, suit, proceeding or investigation is pending
or, to the best of the Seller's knowledge, threatened against the
Seller which, individually or in the aggregate, might have consequences
that would prohibit the Seller from entering into this Agreement or any
other Operative Document to which it is a party or that would
materially and adversely affect the condition (financial or otherwise)
or operations of the Seller or its properties or might have
consequences that would materially and adversely affect the validity or
enforceability of Mortgage Loans or the Seller's performance hereunder
or under the other Operative Documents to which it is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the Seller
contains any untrue statement of a material fact or omits to state any
material fact necessary to make the certificate, statement or report
not misleading.
(g) The statements contained in the Registration Statement
which describe the Seller or matters or activities for which the Seller
is responsible in accordance with the Operative Documents or which are
attributed to the Seller therein are true and correct in all material
respects, and the Registration Statement does not contain any untrue
statement of a material fact with respect to the Seller or omit to
state a material fact required to be stated therein or necessary in
order to make the statements contained therein with respect to the
Seller not misleading. With respect to matters other than those
referred to in the immediately preceding sentence, to the best of the
Seller's knowledge and belief, the Registration Statement does not
contain any untrue statement of a material fact required to be stated
therein or omit to state any material fact required to be stated
therein or necessary to make the statements contained therein not
misleading.
(h) 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
(other than any such actions, approvals, etc. under any state
securities laws, real estate syndication or "Blue Sky" statutes, as to
which the Seller makes no such representation or warranty), that are
necessary or advisable in connection with the purchase and sale of the
Certificates and the execution and delivery by the Seller of the
Operative Documents to which it is a party, have been duly taken, given
or obtained, as the case may be, are in full force and effect on the
Startup Day, are not subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and either 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 and the other Operative
Documents on the part of the Seller and the performance by the Seller
of its obligations under this Agreement and such of the other Operative
Documents to which it is a party.
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(i) The transactions contemplated by this Agreement are in the
ordinary course of business of the Seller.
(j) The Seller received fair consideration and reasonably
equivalent value in exchange for the sale of the interests in the
Mortgage Loans.
(k) The Seller did not sell any interest in any Mortgage Loan
with any intent to hinder, delay or defraud any of its creditors.
(l) The Seller is solvent and the Seller will not be rendered
insolvent as a result of the sale of the Mortgage Loans.
(m) On the Startup Day, the Trustee will have good title on
behalf of the Trust to each Initial Mortgage Loan and such other items
comprising the corpus of the Trust Estate free and clear of any lien.
(n) There has been no material adverse change in any
information submitted by the Seller in writing to the Certificate
Insurer.
(o) To the best knowledge of the Seller, no event has occurred
which would allow any purchaser of the Class A Certificates not to be
required to purchase the Class A Certificates on the Startup Day.
(p) To the best knowledge of the Seller, no document
(including any information provided in electronic form) submitted by or
on behalf of the Seller to the Certificate Insurer contains any untrue
or misleading statement of a material fact or fails to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading.
(q) To the best knowledge of the Seller, no material adverse
change affecting any security for the Class A Certificates has occurred
prior to delivery of and payment for the Class A Certificates.
(r) The Seller is not in default under any agreement involving
financial obligations or on any outstanding obligation which would
materially adversely impact the financial condition or operations of
the Seller or legal documents associated with the transaction
contemplated in this Agreement.
It is understood and agreed that the representations and
warranties set forth in this Section 3.1 shall survive delivery of the Mortgage
Loans to the Trustee.
Section 3.2. Representations and Warranties of the Servicer.
The Servicer hereby represents, warrants and covenants to the Trustee, the
Certificate Insurer and to the Owners as of the Startup Day that:
(a) The Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
California. The Servicer is in compliance with the laws of each state
in which any Property is located to the extent necessary to enable it
to perform its obligations hereunder and is in good standing as a
foreign corporation in each jurisdiction in which the nature of its
business, or the properties owned or leased by it, make such
qualification necessary. The Servicer has all requisite corporate power
and authority to own and operate its properties, to carry out its
business as presently conducted and as proposed to be conducted and to
enter into and discharge its obligations under this Agreement and the
other Operative Documents to which it is a
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party. The Servicer has equity of at least $20,000,000, as determined
in accordance with generally accepted accounting principles.
(b) The execution and delivery of this Agreement by the
Servicer and its performance and compliance with the terms of this
Agreement and the other Operative Documents to which it is a party have
been duly authorized by all necessary corporate action on the part of
the Servicer and will not violate the Servicer's Articles of
Incorporation or Bylaws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, agreement or
other instrument to which the Servicer is a party or by which the
Servicer is bound or violate any statute or any order, rule or
regulation of any court, governmental agency or body or other tribunal
having jurisdiction over the Servicer or any of its properties.
(c) This Agreement and the other Operative Documents to which
the Servicer is a party, assuming due authorization, execution and
delivery by the other parties hereto and thereto, each constitutes a
valid, legal and binding obligation of the Servicer, enforceable
against it in accordance with the terms hereof and thereof, except as
the enforcement hereof and thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of
equity (whether considered in a proceeding or action in equity or at
law).
(d) 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 might have
consequences that would materially and adversely affect the condition
(financial or otherwise) or operations of the Servicer or its
properties or might have consequences that would materially and
adversely affect its performance hereunder or under the other Operative
Documents to which the Servicer is a party.
(e) No action, suit, proceeding or investigation is pending
or, to the best of the Servicer's knowledge, threatened against the
Servicer which, individually or in the aggregate, might have
consequences that would prohibit its entering into this Agreement or
any other Operative Document to which it is a party or that would
materially and adversely affect the condition (financial or otherwise)
or operations of the Servicer or its properties or might have
consequences that would materially and adversely affect the validity or
the enforceability of the Mortgage Loans or the Servicer's performance
hereunder or under the other Operative Documents to which the Servicer
is a party.
(f) No certificate of an officer, statement furnished in
writing or report delivered pursuant to the terms hereof by the
Servicer contains any untrue statement of a material fact or omits to
state any material fact necessary to make the certificate, statement or
report not misleading.
(g) The statements contained in the Registration Statement
which describe the Servicer or matters or activities for which the
Servicer is responsible in accordance with the Operative Documents or
which are attributed to the Servicer therein are true and correct in
all material respects, and the Registration Statement does not contain
any untrue statement of a material fact with respect to the Servicer or
omit to state a material fact required to be stated therein or
necessary to make the statements contained therein with respect to the
Servicer not misleading. With respect to matters other than those
referred to in the immediately preceding sentence, to the best of the
Servicer's knowledge and belief, the Registration Statement does not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements contained therein not misleading.
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(h) 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
(other than any such actions, approvals, etc. under any state
securities laws, real estate syndication or "Blue Sky" statutes, as to
which the Servicer makes no such representation or warranty), that are
necessary or advisable in connection with the execution and delivery by
the Servicer of the Operative Documents to which it is a party, have
been duly taken, given or obtained, as the case may be, are in full
force and effect on the date hereof, are not subject to any pending
proceedings or appeals (administrative, judicial or otherwise) and
either 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 and the
other Operative Documents on the part of the Servicer and the
performance by the Servicer of its obligations under this Agreement and
such of the other Operative Documents to which it is a party.
(i) The collection practices used by the Servicer with respect
to the Mortgage Loans directly serviced by it have been, and are in all
material respects, legal, proper, prudent and customary in the mortgage
loan servicing business.
(j) The transactions contemplated by this Agreement are in the
ordinary course of business of the Servicer.
(k) There are no Sub-Servicers as of the Startup Day.
(l) The Servicer covenants that it will terminate any
Sub-Servicer within ninety (90) days after being directed by the
Certificate Insurer to do so.
(m) There has been no material adverse change in any
information submitted by the Servicer in writing to the Certificate
Insurer.
(n) To the best knowledge of the Servicer, no event has
occurred which would allow any purchaser of the Class A Certificates
not to be required to purchase the Class A Certificates on the Startup
Day.
(o) To the best knowledge of the Servicer, no document
(including any information provided in electronic form) submitted by or
on behalf of the Servicer to the Certificate Insurer contains any
untrue or misleading statement of a material fact or fails to state a
material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
(p) To the best knowledge of the Servicer, no material adverse
change affecting any security for the Class A Certificates has occurred
prior to delivery of and payment for the Class A Certificates.
(q) The Servicer is not in default under any agreement
involving financial obligations or on any outstanding obligation which
would materially and adversely impact the financial condition or
operations of the Servicer or legal documents associated with the
transaction contemplated in this Agreement.
(r) The Servicer's computer and other systems used in
servicing the Mortgage Loans currently are capable of operating in a
manner so 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.
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It is understood and agreed that the representations and
warranties set forth in this Section 3.2 shall survive delivery of the Mortgage
Loans to the Trustee.
Upon discovery by any of the Originators, the Servicer, the
Seller, any Sub-Servicer, the Certificate Insurer or the Trustee of a breach of
any of the representations and warranties set forth in this Section 3.2 or in
Section 3.1 hereof which materially and adversely affects the interests of the
Owners or of the Certificate Insurer, without regard to any limitation set forth
in such representation or warranty concerning the knowledge of the party making
such representation or warranty as to the facts stated therein, the party
discovering such breach shall give prompt written notice to the other parties
hereto and the Certificate Insurer. Within 30 days of its discovery or its
receipt of notice of breach, the breaching party shall cure such breach in all
material respects and, if such breaching party is the Servicer and upon the
Servicer's continued failure to cure such breach, the Servicer may be removed by
the Trustee or the Certificate Insurer pursuant to Section 8.20 hereof;
provided, however, that if the Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that it is diligently pursuing remedial
action, then the cure period may be extended with the written approval of the
Certificate Insurer.
Section 3.3. Representations and Warranties of the Seller with
Respect to the Mortgage Loans. (a) The Seller makes the following
representations and warranties as to the Mortgage Loans on which the Certificate
Insurer relies in issuing the Certificate Insurance Policies. Such
representations and warranties speak as of the Startup Day (with respect to the
Initial Mortgage Loans) and as of the respective Subsequent Transfer Date (with
respect to the Subsequent Mortgage Loans) but shall survive the sale, transfer,
and assignment of the related Mortgage Loans to the Trust:
(i) The information with respect to each Initial
Mortgage Loan and Subsequent Mortgage Loan set
forth in the related Schedule of Mortgage Loans
is true and correct as of the Cut-Off Date (or
in the case of the Subsequent Mortgage Loans,
on the related Subsequent Transfer Date); the
Group I Original Aggregate Loan Balance in the
Trust as of the Cut-Off Date is $50,144,557.74
and the Group II Original Aggregate Loan
Balance in the Trust as of the Cut-Off Date is
$25,160,592.40.
(ii) All of the original or certified documentation
set forth in Section 3.5 (including all
material documents related thereto) with
respect to each Initial Mortgage Loan has been
or will be delivered to the Trustee on the
Startup Day (or in the case of the Subsequent
Mortgage Loans, as of the related Subsequent
Transfer Date) or as otherwise provided in
Section 3.5;
(iii) Each Mortgage Loan is being serviced by the
Servicer or a Servicer Affiliate;
(iv) The Note related to each Initial Mortgage Loan
in Group I bears a fixed Coupon Rate of at
least 7.400% per annum and the Note related to
each Mortgage Loan in Group II bears a current
Coupon Rate of at least 6.330% per annum;
(v) No more than 1.81% of the Initial Mortgage
Loans in Group I were 30-59 days Delinquent
and, of the Initial Mortgage Loans in Group II,
no more than 2.37% were 30-59 days Delinquent.
(vi) As of the Cut-Off Date, no more than 1.14% of
the Group I Original Aggregate Loan Balance is
secured by Properties located within any single
zip code area, and no more than 1.59% of the
Group II Original Aggregate
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Loan Balance is secured by Properties located
within any single zip code area.
(vii) Each Mortgage Loan conforms, and all such
Mortgage Loans in the aggregate conform, in all
material respects, to the description thereof
set forth in the Registration Statement;
(viii) As of the Cut-Off Date, no more than 2.54% and
2.84% of the Group I Original Aggregate Loan
Balance and the Group II Original Aggregate
Loan Balance, respectively, are secured by
condominiums, townhouses, or planned unit
developments;
(ix) As of the Cut-Off Date, no more than 4.03% and
1.95% of the Group I Original Aggregate Loan
Balance and the Group II Original Aggregate
Loan Balance, respectively, are secured by
investor-owned Properties;
(x) The credit underwriting guidelines applicable
to each Mortgage Loan conform in all material
respects to the description thereof set forth
in the Prospectus;
(xi) No funds provided to borrower from a Second
Mortgage Loan originated by the Seller were
concurrently used as a down payment for a First
Mortgage Loan originated by the Seller;
(xii) All of the Mortgage Loans in Group I and
Group II are actuarial loans;
(xiii) All of the Group II Mortgage Loans are First
Mortgage Loans, and 99.46% of the Group I
Mortgage Loans are First Mortgage Loans subject
only to the exceptions to title set forth in
the title insurance policy, with respect to the
related Mortgage Loan, which exceptions are
generally acceptable to mortgage lending
companies, as applicable, and such other
exceptions to which similar properties are
commonly subject and which do not individually,
or in the aggregate, materially and adversely
affect the benefits of the security intended to
be provided by such Mortgage;
(xiv) As of the Cut-Off Date, none of the Mortgage
Loans in Group II had interest rates which were
not fully indexed;
(xv) The gross margin range for Six Month LIBOR
Loans is 2.990% to 8.790% and, the gross margin
for all Six Month LIBOR Loans when added to the
current index, creates the fully-indexed range;
(xvi) No Mortgage Loan has a remaining term in excess
of 360 months;
(xvii) With respect to each Mortgage Loan in Group II,
each Mortgagor's debt-to-income ratio will
qualify for the related Originator's
underwriting guidelines for a similar credit
grade borrower when the related Mortgage Loan
in Group II is at a rate equal to the
applicable initial Coupon Rate plus 2%;
(xviii) There is no proceeding pending or to the best
of the Seller's knowledge threatened for the
total or partial condemnation of any Property.
No Property is damaged by waste, fire,
earthquake or earth movement, windstorm, flood,
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other types of water damage, tornado, or other
casualty so as to affect adversely the value of
such Property as security for the Mortgage
Loans or the use for which the premises were
intended and each Property free of material
damage and in good repair;
(xix) Each Mortgage Loan complies, and at all times
has complied, in all material respects with all
applicable federal and state laws and
regulations including without limitation the
Truth-in-Lending Act, as amended;
(xx) Each Mortgage Loan is secured by a Property
having an appraised value of less than
$477,000.00;
(xxi) The first Due Date of each Initial Mortgage
Loan is no later than October 1, 1998;
(xxii) On the Startup Day with respect to each Initial
Mortgage Loan and on the related Subsequent
Transfer Date with respect to each Subsequent
Mortgage Loan, the Trustee will have good title
on behalf of the Trust to each Mortgage Loan
transferred on such date free and clear of all
liens, encumbrances, mortgages or rights of
others; and
(xxiii) Each Mortgage Loan constitutes a qualified
mortgage under Section 860G(a)(3)(A) of the
Code and Treasury Regulations Section
1-860G-2(a)(1).
(b) Upon the discovery by the Seller, the Servicer, the
Certificate Insurer or the Trustee of a breach of any of the
representations and warranties made herein in respect of any Mortgage
Loan, without regard to any limitation set forth in such representation
or warranty concerning the knowledge of the Seller or any related
Originator as to the facts stated therein, which materially and
adversely affects the interests of the Owners or of the Certificate
Insurer in such Mortgage Loan the party discovering such breach shall
give prompt written notice to the other parties hereto and the
Certificate Insurer, as their interests may appear. The Servicer shall
promptly notify the related Originator of such breach and request that
such Originator cure such breach or take the actions described in
Section 3.4(b) hereof within the time periods required thereby, and if
such Originator does not cure such breach in all material respects, the
Seller shall cure such breach or take such actions. Except as set forth
in Section 3.4, the obligations of the Seller or Servicer, as the case
may be, shall be limited to the remedies for cure set forth in Section
3.4 with respect to any Mortgage Loan as to which such a breach has
occurred and is continuing; the remedies set forth in Section 3.4 shall
constitute the sole remedy with respect to such breach available to the
Owners, the Trustee and the Certificate Insurer.
The Seller acknowledges that a breach of any representation or
warranty (x) relating to marketability of title sufficient to transfer
unencumbered title to a Mortgage Loan and (y) relating to enforceability of the
Mortgage Loan against the related Mortgagor or Property is a priori the breach
of a representation or warranty which "materially and adversely affects the
interests of the Owners or of the Certificate Insurer" in such Mortgage Loan.
Section 3.4. Covenants of the Seller to Take Certain Actions
with Respect to the Mortgage Loans In Certain Situations. (a) With the provisos
and limitations as to remedies set forth in this Section 3.4, upon the discovery
by any Originator, the Seller, the Servicer, the Certificate Insurer, any
Sub-Servicer or the Trustee that the representations and warranties set forth in
Section 3.3 of this Agreement were untrue in any material respect as of the
Startup Day (or in the case of the Subsequent Mortgage Loans, as of the
respective Subsequent Transfer Date), and that such breach of the
representations and warranties materially
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and adversely affects the interests of the Owners or of the Certificate Insurer,
the party discovering such breach shall give prompt written notice to the other
parties hereto and to the Certificate Insurer.
(b) Upon the earliest to occur of the Seller's discovery, its
receipt of notice of breach from any one of the other parties hereto or
from the Certificate Insurer or such time as a breach of any
representation and warranty materially and adversely affects the
interests of the Owners or of the Certificate Insurer as set forth
above, the Seller hereby covenants and warrants that it shall promptly
cure such breach in all material respects or it shall (or shall cause
an affiliate of the Seller to or an Originator to), subject to the
further requirements of this paragraph, on the second Remittance Date
next succeeding such discovery, receipt of notice or such other time
(i) substitute in lieu of each Mortgage Loan in the related Mortgage
Loan Group which has given rise to the requirement for action by the
Seller a Qualified Replacement Mortgage and deliver the Substitution
Amount applicable thereto, together with the aggregate amount of all
Delinquency Advances and Servicing Advances theretofore made with
respect to such Mortgage Loan, to the Servicer for deposit in the
Principal and Interest Account or (ii) purchase such Mortgage Loan from
the Trust at a purchase price equal to the Loan Purchase Price thereof,
which purchase price shall be delivered to the Servicer for deposit in
the Principal and Interest Account. In connection with any such
proposed purchase or substitution, the Seller, at its expense, shall
cause to be delivered to the Trustee and to the Certificate Insurer an
opinion of counsel experienced in federal income tax matters stating
whether or not such a proposed purchase or substitution would
constitute a Prohibited Transaction for the Trust or would jeopardize
the status of the Trust as a REMIC, and the Seller shall only be
required to take either such action to the extent such action would not
constitute a Prohibited Transaction for the Trust or would not
jeopardize the status of the Trust as a REMIC. Any required purchase or
substitution, if delayed by the absence of such opinion shall
nonetheless occur upon the earlier of (i) the occurrence of a default
or imminent default with respect to the Mortgage Loan or (ii) the
delivery of such opinion. It is understood and agreed that the
obligation of the Seller to cure the defect, or substitute for or
purchase any Mortgage Loan as to which a representation or warranty is
untrue in any material respect and has not been remedied shall
constitute the sole remedy available to the Owners, the Trustee and the
Certificate Insurer.
(c) In the event that any Qualified Replacement Mortgage is
delivered by an Originator or by the Seller to the Trust pursuant to
this Section 3.4 or Section 3.6 hereof, the related Originator and the
Seller shall be obligated to take the actions described in Section
3.4(b) with respect to such Qualified Replacement Mortgage upon the
discovery by any of the Owners, the Seller, the Servicer, the
Certificate Insurer, any Sub-Servicer or the Trustee that any of the
representations and warranties set forth in Section 3.3 above are
untrue in any material respect on the date such Qualified Replacement
Mortgage is conveyed to the Trust such that the interests of the Owners
or the Certificate Insurer in the related Qualified Replacement
Mortgage are materially and adversely affected; provided, however, that
for the purposes of this subsection (c) the representations and
warranties in Section 3.3 above referring to items "as of the Cut-Off
Date" or "as of the Startup Day" shall be deemed to refer to such items
as of the date such Qualified Replacement Mortgage is conveyed to the
Trust.
(d) It is understood and agreed that the covenants set forth
in this Section 3.4 shall survive delivery of the respective Mortgage
Loans (including Qualified Replacement Mortgages) to the Trustee.
(e) The Trustee shall have no duty to conduct any affirmative
investigation other than as specifically set forth in this Agreement as
to the occurrence of any condition requiring the repurchase or
substitution of any Mortgage Loan pursuant to this section or the
eligibility of any Mortgage Loan for purposes of this Agreement.
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Section 3.5. Conveyance of the Mortgage Loans. (a) The Seller,
concurrently with the execution and delivery hereof, hereby transfers, assigns,
sets over and otherwise conveys without recourse, to the Trustee for the benefit
of the Owners of the Certificates and the Certificate Insurer, all right, title
and interest of the Seller in and to each Initial Mortgage Loan listed on the
Schedule of Mortgage Loans delivered by the Seller on the Startup Day, all
right, title and interest in and to principal and interest (including prepaid
interest) due on each such Initial Mortgage Loan after the Cut-Off Date (other
than payments of principal and interest due on or before the Cut-Off Date) and
all its right, title and interest in and to all Insurance Policies; provided,
however, that the Seller reserves and retains all its right, title and interest
in and to principal (including Prepayments) collected and principal and interest
due on each Initial Mortgage Loan on or prior to the Cut-Off Date. The transfer
by the Seller of the Initial Mortgage Loans and the Subsequent Mortgage Loans
set forth on the Schedule of Mortgage Loans is absolute and is intended by the
Owners and all parties hereto to be treated as a sale by the Seller.
It is intended that the sale, transfer, assignment and
conveyance herein contemplated constitute a sale of the Mortgage Loans conveying
good title thereto free and clear of any liens and encumbrances from the Seller
to the Trust and that the Mortgage Loans not be part of the Seller's estate in
the event of an insolvency. In the event that any such conveyance or a
conveyance pursuant to Section 3.8 and any Subsequent Transfer Agreement is
deemed to be a loan, the parties intend that the Seller shall be deemed to have
granted to the Trustee a security interest of first priority in all of the
Seller's right, title and interest in the Mortgage, Note and the File, and that
this Agreement shall constitute a security agreement under applicable law.
In connection with the sale, transfer, assignment, and
conveyance, from the Seller to the Trustee, the Seller has filed, in the
appropriate office or offices in the States of California, a UCC-1 financing
statement executed by the Seller as debtor, naming the Trustee as secured party
and listing the Mortgage Loans (both Initial Mortgage Loans and Subsequent
Mortgage Loans) and the other property described above as collateral. The
characterization of the Seller as a debtor and the Trustee as the secured party
in such financing statements is solely for protective purposes and shall in no
way be construed as being contrary to the intent of the parties that this
transaction be treated as a sale of the Seller's entire right, title and
interest in the Mortgage Loans and the related Files to the Trust. In connection
with such filing, the Seller shall cause to be filed all necessary continuation
statements thereof and to take or cause to be taken such actions and execute
such documents as are necessary to perfect and protect the Trustee's and the
Owners' interests in the Mortgage Loans and the related Files.
(b) In connection with the transfer and assignment of the
Mortgage Loans, the Seller agrees to:
(i) cause to be delivered, on or prior to the
Startup Day (except as otherwise stated below)
without recourse to the Trustee on the Startup
Day with respect to each Initial Mortgage Loan
listed on the Schedule of Mortgage Loans or on
each Subsequent Transfer Date with respect to
each Subsequent Mortgage Loan:
(a) the original Notes or certified copies
thereof, endorsed without recourse by
the related Originator, "Pay to the
order of ____________________________,
without recourse" or "Pay to the order
of holder, without recourse." In the
event that the Mortgage Loan was
acquired by the related Originator in a
merger, the endorsement must be by the
"(related Originator), successor by
merger to (name of predecessor)"; and
in the event that the Mortgage Loan was
acquired or originated by the related
Originator while doing
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business under another name, the
endorsement must be by the "(related
Originator), formerly known as
(previous name)";
(b) originals of all intervening
assignments, showing a complete chain
of assignment from origination to the
related Originator, if any, including
warehousing assignments, with evidence
of recording thereon (or, if an
original intervening assignment has not
been returned from the recording
office, a certified copy thereof, the
original to be delivered to the Trustee
forthwith after return);
(c) originals of all assumption and
modification agreements, if any (or, if
an original assumption and/or
modification agreement has not been
returned from the recording office, a
certified copy thereof, the original to
be delivered to the Trustee forthwith
after return);
(d) either (A) the original Mortgage with
evidence of recording thereon or a
certified copy of the Mortgage as
recorded, or (B) if the original
Mortgage has not yet been returned from
the recording office, a certified copy
of the Mortgage, together with a
receipt from the recording office or
from a title insurance company or a
certificate of an Authorized Person of
the related Originator indicating that
such Mortgage has been delivered for
recording;
(e) the original assignment of Mortgage for
each Mortgage Loan conveying the
Mortgage to "Norwest Bank Minnesota,
National Association, as Trustee of the
First Alliance Mortgage Loan Trust
1998-3, without recourse," which
assignment shall be in form and
substance acceptable for recording in
the state or other jurisdiction where
the mortgaged property is located and,
within 75 Business Days following the
Startup Day with respect to the Initial
Mortgage Loans, or within 75 Business
Days of each Subsequent Transfer Date
with respect to the Subsequent Mortgage
Loans, a recorded assignment of each
such Mortgage; provided that in the
event that the Mortgage Loan was
acquired by the related Originator in a
merger, the assignment of Mortgage must
be by the "(related Originator),
successor by merger to (name of
predecessor)"; and in the event that
the Mortgage Loan was acquired or
originated by the related Originator
while doing business under another
name, the assignment of Mortgage must
be by the "(related Originator),
formerly known as (previous name)"
(subject to the foregoing, and where
permitted under the applicable laws of
the jurisdiction where the mortgaged
property is located, the assignments of
Mortgage may be made by blanket
assignments for Mortgage Loans covering
mortgaged properties situated within
the same county or other permitted
governmental subdivision); and
(f) evidence of title insurance with
respect to the mortgaged property in
the form of a binder or commitment.
(ii) except with respect to Mortgage Loans covered by
opinions of counsel delivered in the manner set
forth below ("Assignment Opinions"), cause, as
soon as possible but no more than 75 Business
Days following the Startup Day
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with respect to the Initial Mortgage Loans, or
within 75 Business Days of each Subsequent
Transfer Date with respect to the Subsequent
Mortgage Loans, the Originators to deliver to
the Trustee copies of all Mortgage assignments
submitted for recording, together with a list of
(x) all Mortgages for which no Mortgage
assignment has yet been submitted for recording
by the related Originator (y) reasons why the
related Originator has not yet submitted such
Mortgage assignments for recording; provided,
however, that with respect to Mortgage Loans
relating to Properties located in the states of
Arizona, California, Colorado, District of
Columbia, Georgia, Idaho, Illinois, Maryland,
Massachusetts, Ohio, Oregon, Pennsylvania,
Virginia and Washington, an Originator shall not
be required to record an assignment of a
Mortgage if the Seller furnishes to the Trustee
and the Certificate Insurer, on or before the
Startup Day with respect to the Initial Mortgage
Loans, or on each Subsequent Transfer Date with
respect to the Subsequent Mortgage Loans, at the
Seller's expense, the Assignment Opinions for
the relevant jurisdictions which opine that
recording is not necessary to perfect the rights
of the Trustee in the related Mortgage (in form
satisfactory to the Certificate Insurer, Moody's
and Standard & Poor's); provided further,
however, notwithstanding the delivery of any
legal opinions, each assignment of mortgage
shall be recorded upon the earliest to occur of:
(i) the instructions by the Certificate Insurer
to so record such assignments (such instructions
shall be given by the Certificate Insurer using
reasonable discretion) or (ii) the occurrence of
an Event of Servicing Termination. With respect
to any Mortgage assignment set forth on the
aforementioned list which has not been submitted
for recording for a reason other than a lack of
original recording information or with respect
to Mortgages not covered by the Assignment
Opinions, the Trustee shall make an immediate
demand on the Seller to cause such Mortgage
assignments to be prepared and shall inform the
Certificate Insurer of the Seller's failure to
cause such Mortgage assignments to be prepared.
Thereafter, the Trustee shall cooperate in
executing any documents prepared by the
Certificate Insurer and submitted to the Trustee
in connection with this provision. Following the
expiration of the 75-Business Day period
following the Startup Day with respect to the
Initial Mortgage Loans, or within 75 Business
Days of each Subsequent Transfer Date with
respect to the Subsequent Mortgage Loans and
except with respect to Mortgages covered by the
Assignment Opinions, the Seller shall cause to
be prepared a Mortgage assignment for any
Mortgage for which original recording
information is subsequently received by the
related Originator and shall promptly deliver a
copy of such Mortgage assignment to the Trustee.
All recording required pursuant to this Section 3.5 shall be
accomplished at the expense of the Originators or of the Seller. Notwithstanding
anything to the contrary contained in this Section 3.5, in those instances where
the public recording office retains the original Mortgage, the assignment of a
Mortgage or the intervening assignments of the Mortgage after it has been
recorded, the Seller shall be deemed to have satisfied its obligations hereunder
upon delivery to the Trustee of a copy of such Mortgage, such assignment or
assignments of Mortgage certified by the public recording office to be a true
copy of the recorded original thereof.
Copies of all Mortgage assignments received by the Trustee
shall be kept in the related File.
(c) In the case of Initial Mortgage Loans which have been
prepaid in full on or after the Cut-Off Date and prior to the Startup
Day, the Seller, in lieu of the foregoing, will deliver within 15
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Business Days after the Startup Day to the Trustee a certification of
an Authorized Officer in the form set forth in Exhibit D.
(d) The Seller shall transfer, assign, set over and otherwise
convey without recourse, to the Trustee all right, title and interest
of the Seller in and to any Qualified Replacement Mortgage delivered to
the Trustee on behalf of the Trust by the Seller pursuant to Section
3.4 or Section 3.6 hereof and all its right, title and interest to
principal and interest due on such Qualified Replacement Mortgage after
the applicable Replacement Cut-Off Date; provided, however, that the
Seller shall reserve and retain all right, title and interest in and to
payments of principal and interest due on such Qualified Replacement
Mortgage on and prior to the applicable Replacement Cut-Off Date.
(e) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage
therefor, the Trustee will transfer, assign, set over and otherwise
convey without recourse, on the Seller's order, all of its right, title
and interest in and to such released Mortgage Loan and all the Trust's
right, title and interest to principal and interest due on such
released Mortgage Loan after the applicable Replacement Cut-Off Date;
provided, however, that the Trust shall reserve and retain all right,
title and interest in and to payments of principal and interest due on
such released Mortgage Loan on and prior to the applicable Replacement
Cut-Off Date.
(f) In connection with any transfer and assignment of a
Qualified Replacement Mortgage to the Trustee on behalf of the Trust,
the Seller agrees to cause to be delivered to the Trustee the items
described in Section 3.5(b) on the date of such transfer and assignment
or if a later delivery time is permitted by Section 3.5(b) then no
later than such later delivery time.
(g) As to each Mortgage Loan released from the Trust in
connection with the conveyance of a Qualified Replacement Mortgage the
Trustee shall deliver on the date of conveyance of such Qualified
Replacement Mortgage, and on the order of the Seller (i) the original
Note, or the certified copy, relating thereto, endorsed without
recourse, to the Seller and (ii) such other documents as constituted
the File with respect thereto.
(h) If a Mortgage assignment is lost during the process of
recording, or is returned from the recorder's office unrecorded due to
a defect therein, the Seller shall prepare a substitute assignment or
cure such defect, as the case may be, and thereafter cause each such
assignment to be duly recorded.
(i) The Seller shall reflect on its records that the Mortgage
Loans have been sold to the Trust.
Section 3.6. Acceptance by Trustee; Certain Substitutions of
Mortgage Loans; Certification by Trustee.
(a) The Trustee agrees to execute and deliver to the Seller,
the Servicer and the Certificate Insurer on the Startup Day an Initial
Certification in the form annexed hereto as Exhibit E to the effect
that, as to each Mortgage Loan listed in the Schedule of Mortgage Loans
(other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such certification as not covered by such
certification), (i) all documents required to be delivered to it
pursuant to this Agreement with respect to such Mortgage Loan are in
its possession, (ii) such documents have been reviewed by it and appear
regular on their face and relate to such Mortgage Loan and (iii) based
on its examination and only as to the foregoing documents, the
information set forth on the Schedule of Mortgage Loans as to loan
number and address accurately reflects information set forth in the
File. The Trustee shall not be under any duty or obligation to inspect,
review or examine said
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documents, instruments, certificates or other papers to determine that
the same are genuine, enforceable or appropriate for the represented
purpose or that they have actually been recorded or that they are other
than what they purport to be on their face. Within 90 days of the
Startup Day (or, with respect to any document delivered after the
Startup Day, within 45 days of receipt and with respect to any
Subsequent Mortgage Loan or Qualified Replacement Mortgage, within 45
days after the assignment thereof) the Trustee shall deliver to the
Seller, Certificate Insurer and the Servicer a Final Certification in
the form annexed hereto as Exhibit F evidencing the completeness of the
Files, with any applicable exceptions noted thereon.
(b) If in the process of reviewing the Files and preparing the
certifications referred to above the Trustee finds any document or
documents constituting a part of a File which is not properly executed,
has not been received within the specified period or is unrelated to
the Mortgage Loans identified in the Schedule of Mortgage Loans, or
that any Mortgage Loan does not conform as to loan number and address
as set forth in the Schedule of Mortgage Loans, the Trustee shall
promptly notify the Seller and the Certificate Insurer. The Seller
shall use reasonable efforts to cure any such defect within 60 days
from the date on which the Seller was notified of such defect, and if
the Seller does not cure such defect in all material respects during
such period, the Seller will (or will cause the related Originator or
an affiliate of the Seller to) on the next succeeding Remittance Date
(i) substitute in lieu of such Mortgage Loan a Qualified Replacement
Mortgage and deliver the Substitution Amount applicable thereto to the
Servicer for deposit in the Principal and Interest Account or (ii)
purchase such Mortgage Loan at a purchase price equal to the Loan
Purchase Price thereof, which purchase price shall be delivered to the
Servicer for deposit in the Principal and Interest Account. In
connection with any such proposed purchase or substitution the Seller
shall cause at the Seller's expense to be delivered to the Trustee and
to the Certificate Insurer an opinion of counsel experienced in federal
income tax matters stating whether or not such a proposed purchase or
substitution would constitute a Prohibited Transaction for the Trust or
would jeopardize the status of the Trust as a REMIC, and the Seller
shall only be required to take either such action to the extent such
action would not constitute a Prohibited Transaction for the Trust or
would not jeopardize the status of the Trust as a REMIC. Any required
purchase or substitution, if delayed by the absence of such opinion
shall nonetheless occur upon the earlier of (i) the occurrence of a
default or imminent default with respect to the Mortgage Loan or (ii)
the delivery of such opinion.
Section 3.7. Cooperation Procedures. (a) The Seller shall, in
connection with the delivery of each Qualified Replacement Mortgage to the
Trustee, provide the Trustee with the information set forth in the Schedule of
Mortgage Loans with respect to such Qualified Replacement Mortgage.
(b) The Seller, the Servicer and the Trustee covenant to
provide each other with all data and information required to be
provided by them hereunder at the times required hereunder, and
additionally covenant reasonably to cooperate with each other in
providing any additional information required to be obtained by any of
them in connection with their respective duties hereunder.
(c) The Servicer shall maintain such accurate and complete
accounts, records and computer systems pertaining to each File as shall
enable it and the Trustee to comply with this Agreement. In performing
its recordkeeping duties the Servicer shall act in accordance with the
servicing standards set forth in this Agreement. The Servicer shall
conduct, or cause to be conducted, periodic audits of its accounts,
records and computer systems as set forth in Sections 8.16 and 8.17
hereof. The Servicer shall promptly report to the Trustee any failure
on its part to maintain its accounts, records and computer systems as
herein provided and promptly take appropriate action to remedy any such
failure.
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(d) The Seller further confirms to the Trustee that it has
caused the portions of the electronic ledger relating to the Mortgage
Loans to be clearly and unambiguously marked to indicate that such
Mortgage Loans have been sold, transferred, assigned and conveyed to
the Trustee and constitute part of the Trust Estate in accordance with
the terms of the trust created hereunder and that the Seller will treat
the transaction contemplated by such sale, transfer, assignment and
conveyance as a sale for accounting purposes.
Section 3.8. Conveyance of the Subsequent Mortgage Loans. (a)
Subject to the satisfaction of the conditions set forth in Section 3.5 and
paragraphs (b), (c) and (d) below (based on the Trustee's review of such
conditions) in consideration of the Trustee's delivery on the Subsequent
Transfer Date to or upon the order of the Seller of all or a portion of the
balance of funds in the Pre-Funding Account, the Seller shall on the Subsequent
Transfer Date sell, transfer, assign, set over and otherwise convey without
recourse, to the Trustee, all of the Seller's right, title and interest in and
to principal and interest (including prepaid interest) due on each Subsequent
Mortgage Loan after the Subsequent Cut-Off Date (other than payments of
principal and interest due on or before the Subsequent Cut-Off Date) which
Subsequent Mortgage Loans shall have been approved by the Certificate Insurer
and which the Seller is causing to be delivered to the Trustee herewith (and all
substitutions therefor as provided by Sections 3.3, 3.4 and 3.6) together with
the related Subsequent Mortgage Loan documents and the Seller's interest in any
Property which secured a Subsequent Mortgage Loan but which has been acquired by
foreclosure or deed in lieu of foreclosure, and all payments thereon and
proceeds of the conversion, voluntary or involuntary, of the foregoing and
proceeds of all the foregoing (including, but not by way of limitation, all
proceeds of any mortgage insurance, hazard insurance and title insurance policy
relating to the Subsequent Mortgage Loans, cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts,
rights to payment of any and every kind, and other forms of obligations and
receivables which at any time constitute all or part of or are included in the
proceeds of any of the foregoing).
The transfer by the Seller of the Subsequent Mortgage Loans
set forth on the related Schedule of Mortgage Loans to the Trust shall be
absolute and shall be intended by the Owners and all parties hereto to be
treated as a sale by the Seller to the Trust. Any Subsequent Mortgage Loan so
transferred will be included in one (and only one) of either Group I or Group
II. The amount released from the Pre-Funding Account shall be one hundred
percent (100%) of the aggregate principal balances of the Subsequent Mortgage
Loans so transferred. Upon the transfer by the Seller of the Subsequent Mortgage
Loans hereunder, such Subsequent Mortgage Loans (and all principal and interest
due thereon subsequent to the Subsequent Cut Off Date) and all other rights and
interests with respect to such Subsequent Mortgage Loans transferred pursuant to
a Subsequent Transfer Agreement shall be deemed for all purposes hereunder to be
part of the Trust Estate. The Seller hereby covenants and agrees to use its best
efforts to ensure that a sufficient amount of Subsequent Mortgage Loans will be
transferred to the Trust during the Funding Period to reduce the Pre-Funded
Amount to less than $100,000 for each Group.
(b) The obligation of the Trustee to accept the transfer of
the Subsequent Mortgage Loans and the other property and rights related
thereto described in paragraph (a) above is subject to the satisfaction
of each of the following conditions on or prior to the related
Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee
and the Certificate Insurer with an Addition
Notice and shall have provided any
information reasonably requested by any of
the foregoing with respect to the Subsequent
Mortgage Loans;
(ii) the Seller shall have delivered to the
Trustee a duly executed Subsequent Transfer
Agreement (including an acceptance by the
Trustee) in substantially the form of
Exhibit K, which shall include a Schedule of
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Mortgage Loans, listing the Subsequent
Mortgage Loans and any other exhibits listed
thereon;
(iii) the Seller shall have deposited in the
Principal and Interest Account all principal
collected and interest due in respect of
such Subsequent Mortgage Loans on or after
the Subsequent Cut Off Date;
(iv) as of the Subsequent Transfer Date, the
Seller is not insolvent, nor will it be made
insolvent by such transfer, nor is it aware
of any pending insolvency;
(v) the Funding Period shall not have ended;
(vi) the Seller shall have delivered to the
Trustee and the Certificate Insurer an
Officer's Certificate confirming the
satisfaction of each condition precedent
specified in items (i) through (v) of this
paragraph (b) and paragraphs (c) and (d)
below and in the Subsequent Transfer
Agreement;
(vii) the Seller shall have delivered to the
Trustee, the Rating Agencies and the
Certificate Insurer opinions of counsel with
respect to the transfer of the Subsequent
Mortgage Loans substantially in the form of
the opinions of counsel delivered to the
Certificate Insurer and the Trustee on the
Startup Day with respect to the Initial
Mortgage Loans (bankruptcy, corporate and
tax); and
(viii) the Certificate Insurer retains the right to
adjust the loss coverage requirements,
including, but not limited to the related
Specified Subordinated Amount, if a final
Mortgage Loan Group differs materially from
the Initial Mortgage Loans in such Mortgage
Loan Group. Prior to any such adjustment,
the Certificate Insurer shall give written
notice to the Rating Agencies.
(c) The obligation of the Trust to purchase Subsequent
Mortgage Loans on the Subsequent Transfer Date for inclusion in Group I
is subject to the following requirements: (i) such Subsequent Mortgage
Loan may not be 30 or more days contractually delinquent as of the
Subsequent Cut Off Date; (ii) the remaining term to maturity of such
Subsequent Mortgage Loan may not exceed 30 years; (iii) such Subsequent
Mortgage Loan will have a Combined Loan-to-Value Ratio of not more than
80% and; (iv) the Certificate Insurer shall have given its consent to
the inclusion of such Subsequent Mortgage Loan; and, (v) following the
purchase of such Subsequent Mortgage Loans by the Trust, the Mortgage
Loans in Group I (including the Subsequent Mortgage Loans in Group I)
(a) will have a weighted average Coupon Rate of at least 9.31%; (b)
will have a weighted average Combined Loan-to-Value Ratio of not more
than 61.21%; (c) will have an average current loan balance of not
greater than $113,383.00 and not more than 10.00% of the Mortgage Loans
in Group I may have a principal balance in excess of $200,000; (d) will
satisfy the representations and warranties set forth in Section 3.3
hereof; and (e) have a first due date no later than October 1, 1998.
(d) The obligation of the Trust to purchase Subsequent
Mortgage Loans on the Subsequent Transfer Date for inclusion in Group
II is subject to the following requirements: (i) such Subsequent
Mortgage Loan may not be 30 or more days contractually delinquent as of
the Subsequent Cut Off Date; (ii) the remaining term to maturity of
such Subsequent Mortgage Loan may not exceed 30 years; (iii) such
Subsequent Mortgage Loan will have a Loan to Value Ratio of
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not more than 85%; and (iv) the Certificate Insurer shall have given
its consent to the inclusion of such Subsequent Mortgage Loan; and, (v)
following the purchase of such Subsequent Mortgage Loans by the Trust,
the Mortgage Loans in Group II (including the Subsequent Mortgage Loans
in Group II) (a) will have a weighted average coupon rate of at least
8.28%; (b) will have a weighted average Loan to Value Ratio of not more
than 63.34%; and (c) will have an average current loan balance not
greater than $120,283.00 and not more than 10.00% of the Mortgage Loans
in Group II may have a principal balance in excess of $200,000; (d)
will satisfy the representations and warranties set forth in Section
3.3 hereof; and (e) have a first due date no later than October 1,
1998.
(e) In connection with each Subsequent Transfer Date and, if
applicable, on the Payment Dates occurring in October and November
1998, as applicable, the Trustee shall determine: (i) the amount and
correct dispositions of the Group I Capitalized Interest Requirement
and the Group II Capitalized Interest Requirement, the Group I
Overfunded Interest Amount, the Group II Overfunded Interest Amount,
the Pre-Funding Account Earnings and the Pre-Funded Amount (and the
portion of such amounts allocable to Group I and Group II) and (ii) any
other necessary matters in connection with the administration of the
Pre-Funding Account and of the Capitalized Interest Account. In the
event that any amounts are released as a result of an error in
calculation to the Owners or the Seller from the Pre-Funding Account or
from the Capitalized Interest Account, such Owners or the Seller shall
immediately repay such amounts to the Trustee.
Section 3.9. Books and Records. The sale of each Mortgage Loan
shall be reflected in the Seller's balance sheets and other financial statements
as a sale of assets by the Seller under generally accepted accounting
principles.
ARTICLE IV
ISSUANCE AND SALE OF CERTIFICATES
Section 4.1. Issuance of Certificates. On the Startup Day,
upon the Trustee's receipt from the Seller of an executed Delivery Order in the
form set forth as Exhibit G hereto, the Trustee shall execute, authenticate and
deliver the Certificates on behalf of the Trust in accordance with the
directions set forth in such Delivery Order.
Section 4.2. Sale of Certificates. At 10:00 a.m. Eastern Time
on the Startup Day, at the offices of Arter & Hadden LLP, 1801 K Street, N.W.,
Washington, D.C. 20006, the Seller will sell and convey the Mortgage Loans and
the money, instruments and other property related thereto to the Trustee, and
the Trustee will (i) deliver to the Underwriters the Class A Certificates with
an aggregate Percentage Interest in each Class equal to 100%, registered in the
name of Cede & Co. or in such other names as the Underwriters shall direct,
against payment of the purchase price thereof by wire transfer of immediately
available funds to the Trustee, and (ii) deliver to First Alliance Portfolio
Services, Inc. a Class R Certificate, with a Percentage Interest equal to 100%.
Upon the Trustee's receipt of the entire net proceeds of the sale of the Class A
Certificates the Seller shall instruct the Trustee to: (a) deposit (i) an amount
equal to the Original Pre-Funded Amount in the Pre-Funding Account and (ii) an
amount equal to the sum of the Group I Original Capitalized Interest Amount and
the Group II Original Capitalized Interest Amount in the Capitalized Interest
Account contributed by the Seller out of such proceeds or otherwise,(b) pay any
fees and expenses identified by the Seller and (c) pay to the Seller the balance
after deducting such amounts. The Seller shall pay directly to the Certificate
Insurer the Initial Premium.
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ARTICLE V
CERTIFICATES AND TRANSFER OF INTERESTS
Section 5.1. Terms. (a) The Certificates are pass-through
securities having the rights described therein and herein. Notwithstanding
references herein or therein with respect to the Certificates as to "principal"
and "interest" no debt of any Person is represented thereby, nor are the
Certificates or the underlying Notes guaranteed by any Person (except that the
Notes may be recourse to the Mortgagors thereof to the extent permitted by law
and except for the rights of the Trustee with respect to the Certificate
Insurance Policies). Distributions on the Certificates are payable solely from
payments received on or with respect to the Mortgage Loans (other than the
Servicing Fees), moneys in the Principal and Interest Account, except as
otherwise provided herein, moneys in the Pre-Funding Account and the Capitalized
Interest Account from earnings on moneys and the proceeds of property held as a
part of the Trust Estate and, upon the occurrence of certain events, from
Insured Payments. Each Certificate entitles the Owner thereof to receive monthly
on each Payment Date, in order of priority of distributions with respect to such
Class of Certificates a specified portion of such payments with respect to the
Mortgage Loans in the related Mortgage Loan Group and certain related Insured
Payments, pro rata in accordance with such Owner's Percentage Interest.
(b) Each Owner is required, and hereby agrees, to return to
the Trustee at the Corporate Trust Office any Certificate prior to the
final distribution due thereon. Any such Certificate as to which the
Trustee has made the final distribution thereon shall be deemed
canceled and shall no longer be Outstanding for any purpose of this
Agreement.
Section 5.2. Forms. The Class A-1 Certificates, the Class A-2
Certificates, the Class A-3 Certificates, the Class A-4 Certificates and the
Class R Certificates shall be in substantially the forms set forth in Exhibits
A-1, A-2, A-3, A-4 and B hereof, respectively, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Agreement or as may in the Seller's judgment be necessary, appropriate or
convenient to comply, or facilitate compliance, with applicable laws, and 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
applicable securities laws or as may, consistently herewith, be determined by
the Authorized Officer of the Trustee executing such Certificates, as evidenced
by his execution thereof.
Section 5.3. Execution, Authentication and Delivery. Each
Certificate shall be executed on behalf of the Trust, by the manual or facsimile
signature of one of the Trustee's Authorized Officers and shall be authenticated
by the manual or facsimile signature of one of the Trustee's Authorized
Officers.
Certificates bearing the manual signature of individuals who
were at any time the proper officers of the Trustee shall, upon proper
authentication by the Trustee, bind the Trust, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
execution and delivery of such Certificates or did not hold such offices at the
date of authentication of such Certificates.
The initial Certificates shall be dated as of the Startup Day
and delivered at the Closing to the parties specified in Section 4.2 hereof.
No Certificate shall be valid until executed and authenticated
as set forth above.
Section 5.4. Registration and Transfer of Certificates. (a)
The Trustee, as registrar, shall cause to be kept a register (the "Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of Certificates and the registration of
transfer of Certificates. The Trustee is hereby appointed registrar (the
"Registrar") for the purpose of registering
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Certificates and transfers of Certificates as herein provided. The Owners and
the Certificate Insurer shall have the right to inspect the Register during
business hours upon reasonable notice (but no less than 2 Business Days) and to
obtain copies thereof.
(b) Subject to the provisions of Section 5.8 hereof, upon
surrender for registration of transfer of any Certificate at the office
designated as the location of the Register, the Trustee shall execute,
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates of a like Class and in the
aggregate principal amount of the Certificate so surrendered.
(c) At the option of any Owner, Certificates of any Class
owned by such Owner may be exchanged for other Certificates authorized
of like Class, tenor, aggregate original principal amount and bearing
numbers not contemporaneously outstanding, upon surrender of the
Certificates to be exchanged at the office designated as the location
of the Register. Whenever any Certificate is so surrendered for
exchange, the Trustee shall execute, authenticate and deliver the
Certificate or Certificates which the Owner making the exchange is
entitled to receive.
(d) All Certificates issued upon any registration of transfer
or exchange of Certificates shall be valid evidence of the same
ownership interests in the Trust and entitled to the same benefits
under this Agreement as the Certificates surrendered upon such
registration of transfer or exchange.
(e) Every Certificate presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to
the Trustee duly executed by the Owner thereof or his attorney duly
authorized in writing.
(f) No service charge shall be made to an Owner for any
registration of transfer or exchange of Certificates, but the Trustee
may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Certificates; any other
expenses in connection with such transfer or exchange shall be an
expense of the Trust.
(g) It is intended that the Class A Certificates be registered
so as to participate in a global book-entry system with the Depository,
as set forth herein. Each Class of Class A Certificates shall, except
as otherwise provided in the next paragraph, be initially issued in the
form of a single fully registered Class A Certificate with a
denomination equal to the Original Certificate Principal Balance of
such Class. Upon initial issuance, the ownership of each such Class A
Certificate shall be registered in the Register in the name of Cede &
Co., or any successor thereto, as nominee for the Depository.
On the Startup Day, no Class A Certificates shall be issued in
denominations of less than $1,000 except for one Certificate of each Class which
may be in a denomination of less than $1,000; accordingly the Trust shall not
issue tail certificates on the Startup Day.
The Seller and the Trustee are hereby authorized to execute
and deliver the Representation Letter with the Depository.
With respect to Class A Certificates registered in the
Register in the name of Cede & Co., as nominee of the Depository, the Seller,
the Servicer and the Trustee shall have no responsibility or obligation to
Direct or Indirect Participants or beneficial owners for which the Depository
holds Class A Certificates from time to time as a Depository. Without limiting
the immediately preceding sentence, the Seller, the Servicer and the Trustee
shall have no responsibility or obligation with respect to (i) the accuracy of
the records of the Depository, Cede & Co., or any Direct or Indirect Participant
with respect to the
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ownership interest in the Class A Certificates, (ii) the delivery to any Direct
or Indirect Participant or any other Person, other than a registered Owner of a
Class A Certificate as shown in the Register, of any notice with respect to the
Class A Certificates or (iii) the payment to any Direct or Indirect Participant
or any other Person, other than a registered Owner of a Class A Certificate as
shown in the Register, of any amount with respect to any distribution of
principal or interest on the Class A Certificates. No Person other than a
registered Owner of a Class A Certificate as shown in the Register shall receive
a certificate evidencing such Class A Certificate.
Upon delivery by the Depository to the Trustee of written
notice to the effect that the Depository has determined to substitute a new
nominee in place of Cede & Co., and subject to the provisions hereof with
respect to the payment of interest by the mailing of checks or drafts to the
registered Owners of Class A Certificates appearing as registered Owners in the
registration books maintained by the Trustee at the close of business on a
Record Date, the name "Cede & Co." in this Agreement shall refer to such new
nominee of the Depository.
(h) In the event that (i) the Depository or the Seller advises
the Trustee and the Certificate Insurer in writing that the Depository
is no longer willing or able to discharge properly its responsibilities
as nominee and depository with respect to the Class A Certificates and
the Seller or the Trustee is unable to locate a qualified successor or
(ii) the Seller at its sole option elects to terminate the book-entry
system through the Depository, the Class A Certificates shall no longer
be restricted to being registered in the Register in the name of Cede &
Co. (or a successor nominee) as nominee of the Depository. At that
time, the Seller may determine that the Class A Certificates shall be
registered in the name of and deposited with a successor depository
operating a global book-entry system, as may be acceptable to the
Seller and at the Seller's expense, or such depository's agent or
designee but, if the Seller does not select such alternative global
book-entry system, then the Class A Certificates may be registered in
whatever name or names registered Owners of Class A Certificates
transferring Class A Certificates shall designate, in accordance with
the provisions hereof.
(i) Notwithstanding any other provision of this Agreement to
the contrary, so long as any Class A Certificate is registered in the
name of Cede & Co., as nominee of the Depository, all distributions of
principal or interest on such Class A Certificates and all notices with
respect to such Class A Certificates shall be made and given,
respectively, in the manner provided in the Representation Letter.
Section 5.5. Mutilated, Destroyed, Lost or Stolen
Certificates. If (i) any mutilated Certificate is surrendered to the Trustee, or
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Certificate, and (ii) in the case of any mutilated Certificate,
such mutilated Certificate shall first be surrendered to the Trustee, and in the
case of any destroyed, lost or stolen Certificate, there shall be first
delivered to the Trustee such security or indemnity as may be reasonably
required by it to hold the Trustee harmless, then, in the absence of notice to
the Trustee that such Certificate has been acquired by a bona fide purchaser,
the Trustee shall execute, authenticate and deliver, in exchange for or in lieu
of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of like Class, tenor and aggregate principal amount, bearing a number not
contemporaneously outstanding.
Upon the issuance of any new Certificate under this Section,
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto; any other
expenses in connection with such issuance shall be an expense of the Trust.
Every new Certificate issued pursuant to this Section in
exchange for or in lieu of any mutilated, destroyed, lost or stolen Certificate
shall constitute evidence of a substitute interest in the Trust and shall be
entitled to all the benefits of this Agreement equally and proportionately with
any and all other
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Certificates of the same Class duly issued hereunder and such mutilated,
destroyed, lost or stolen Certificate shall not be valid for any purpose.
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 Certificates.
Section 5.6. Persons Deemed Owners. The Trustee and any agent
of the Trustee may treat the Person in whose name any Certificate is registered
as the Owner of such Certificate for the purpose of receiving distributions with
respect to such Certificate and for all other purposes whatsoever, and neither
the Trustee nor any agent of the Trustee shall be affected by notice to the
contrary.
Section 5.7. Cancellation. All Certificates surrendered for
registration of transfer or exchange shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be promptly canceled by
it. No Certificate shall be authenticated in lieu of or in exchange for any
Certificate canceled as provided in this Section, except as expressly permitted
by this Agreement. All canceled Certificates may be held by the Trustee in
accordance with its standard retention policy.
Section 5.8. Limitation on Transfer of Ownership Rights. (a)
No sale or other transfer of any Class A Certificate shall be made to the
Seller, any Originator or any of their respective affiliates.
(b) No sale or other transfer of record or beneficial
ownership of a Class R Certificate (whether pursuant to a purchase, a
transfer resulting from a default under a secured lending agreement or
otherwise) shall be made to a Disqualified Organization or agent of a
Disqualified Organization. The transfer, sale or other disposition of a
Class R Certificate (whether pursuant to a purchase, a transfer
resulting from a default under a secured lending agreement or
otherwise) to a Disqualified Organization shall be deemed to be of no
legal force or effect whatsoever and such transferee shall not be
deemed to be an Owner for any purpose hereunder, including, but not
limited to, the receipt of distributions on such Class R Certificate.
Furthermore, in no event shall the Trustee accept surrender for
transfer, registration of transfer, or register the transfer, of any
Class R Certificate nor authenticate and make available any new Class R
Certificate unless the Trustee has received an affidavit from the
proposed transferee that such transferee is not a pension or benefit
plan or individual retirement arrangement that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")
or to Section 4975 of the Code or an entity whose underlying assets are
deemed to be assets of such a plan or arrangement by reason of such
plan's or arrangement's investment in the entity, as determined under
U.S. Department of Labor Regulations 29 C.F.R. ss. 2510.3-101 or
otherwise. Each holder of a Class R Certificate, by his acceptance
thereof, shall be deemed for all purposes to have consented to the
provisions of this Section 5.8(b).
(c) No other sale or other transfer of record or beneficial
ownership of a Class R Certificate shall be made unless such transfer
is exempt from the registration requirements of the Securities Act, as
amended, and any applicable state securities laws or is made in
accordance with said Act and laws. In the event such a transfer is to
be made within three years from the Startup Day, (i) the Trustee and
the Seller shall require a written opinion of counsel acceptable to and
in form and substance satisfactory to the Seller and the Certificate
Insurer in the event that such transfer may be made pursuant to an
exemption, describing the applicable exemption and the basis therefor,
from said Act and laws or is being made pursuant to said Act and laws,
which opinion of counsel shall not be an expense of the Trustee, the
Trust Estate or the Certificate Insurer, and (ii) the Trustee shall
require the Transferee to execute an investment letter acceptable to
and in form and substance satisfactory to the Seller and the
Certificate Insurer certifying to the Trustee, the Certificate Insurer
and the Seller the facts surrounding such transfer, which investment
letter shall not be an expense of the Trustee, the Trust Estate, the
Certificate Insurer or the Seller. The Owner
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of a Class R Certificate desiring to effect such transfer shall, and
does hereby agree to, indemnify the Trustee, the Certificate Insurer
and the Seller against any liability that may result if the transfer is
not so exempt or is not made in accordance with such federal and state
laws.
Section 5.9. Assignment of Rights. An Owner may pledge,
encumber, hypothecate or assign all or any part of its right to receive
distributions hereunder, but such pledge, encumbrance, hypothecation or
assignment shall not constitute a transfer of an ownership interest sufficient
to render the transferee an Owner of the Trust without compliance with the
provisions of Section 5.4 and Section 5.8 hereof.
ARTICLE VI
COVENANTS
Section 6.1. Distributions. On each Payment Date, the Trustee
will withdraw amounts from the Certificate Account and make the distributions
with respect to the Certificates in accordance with the terms of the
Certificates and this Agreement. Such distributions shall be made (i) by check
mailed on each Payment Date or (ii) if requested by any Owner, to such Owner by
wire transfer to an account within the United States designated no later than
five Business Days prior to the related Record Date, made on each Payment Date,
in each case to each Owner of record on the immediately preceding Record Date;
provided, however, that an Owner of a Class A Certificate shall only be entitled
to payment by wire transfer if such Owner owns Class A Certificates in the
aggregate denomination of at least $5,000,000.
Section 6.2. Money for Distributions to be Held in Trust;
Withholding. (a) All payments of amounts due and payable with respect to any
Certificate that are to be made from amounts withdrawn from the Certificate
Account pursuant to Section 7.5 hereof or from Insured Payments shall be made by
and on behalf of the Trustee, and no amounts so withdrawn from the Certificate
Account for payments of the Certificates and no Insured Payment shall be paid
over to the Trustee except as provided in this Section.
(b) The Trustee on behalf of the Trust shall comply with all
requirements of the Code and applicable state and local law with
respect to the withholding from any distributions made by it to any
Owner of any applicable withholding taxes imposed thereon and with
respect to any applicable reporting requirements in connection
therewith.
(c) Any money held by the Trustee in trust for the payment of
any amount due with respect to any Class A Certificate and remaining
unclaimed by the Owner of such Class A Certificate for the period then
specified in the escheat laws of the State of New York after such
amount has become due and payable shall be discharged from such trust
and be paid first to the Certificate Insurer on account of any
Reimbursement Amounts and second to the Owners of the Class R
Certificates; and the Owner of such Class A Certificate shall
thereafter, as an unsecured general creditor, look only to the
Certificate Insurer or the Owners of the Class R Certificates for
payment thereof (but only to the extent of the amounts so paid to the
Certificate Insurer or the Owners of the Class R Certificates), and all
liability of the Trustee with respect to such trust money shall
thereupon cease; provided, however, that the Trustee, before being
required to make any such payment, shall at the expense of the Trust
cause to be published once, in the eastern edition of The Wall Street
Journal, notice that such money remains unclaimed and that, after a
date specified therein, which shall be not fewer than 30 days from the
date of such publication, any unclaimed balance of such money then
remaining will be paid to the Certificate Insurer or the Owners of the
Class R Certificates. The Trustee shall, at the direction of the
Seller, also adopt and employ, at the expense of the Trust, any other
reasonable means of notification of such payment (including but not
limited to mailing notice of such payment to Owners whose right to or
interest in moneys due and
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payable but not claimed is determinable from the Register at the last
address of record for each such Owner).
Section 6.3. Protection of Trust Estate. (a) The Trustee will
hold the Trust Estate in trust for the benefit of the Owners and, upon request
of the Certificate Insurer, or, with the consent of the Certificate Insurer, at
the request and expense of the Seller, will from time to time execute and
deliver all such supplements and amendments hereto pursuant to Section 11.14
hereof and all instruments of further assurance and other instruments, and will
take such other action upon such request from the Seller or the Certificate
Insurer, to:
(i) more effectively hold in trust all or any
portion of the Trust Estate;
(ii) perfect, publish notice of or protect the
validity of any grant made or to be made by
this Agreement;
(iii) enforce any of the Mortgage Loans; or
(iv) preserve and defend title to the Trust Estate
and the rights of the Trustee, and the
ownership interests of the Owners represented
thereby, in such Trust Estate against the
claims of all Persons and parties.
The Trustee shall send copies of any request received from the
Certificate Insurer or the Seller to take any action pursuant to this Section
6.3 to the other party.
(b) The Trustee shall have the power to enforce, shall enforce
the obligations of the other parties to this Agreement and of the
Certificate Insurer, by action, suit or proceeding at law or equity and
shall also have the power to enjoin, by action or suit in equity, any
acts or occurrences which may be unlawful or in violation of the rights
of the Owners; provided, however, that nothing in this Section shall
require any action by the Trustee unless the Trustee shall first (i)
have been furnished indemnity satisfactory to it and (ii) when required
by this Agreement, have been requested to take such action by a
majority of the Percentage Interests represented by the affected Class
or Classes of Class A Certificates then Outstanding or, if there are no
longer any affected Class A Certificates then outstanding, by such
majority of the Percentage Interests represented by the Class R
Certificates.
(c) The Trustee shall execute any instrument required pursuant
to this Section so long as such instrument does not conflict with this
Agreement or with the Trustee's fiduciary duties.
Section 6.4. Performance of Obligations. The Trustee will not
take any action that would release the Seller or the Certificate Insurer from
any of their respective covenants or obligations under any instrument or
document relating to the Trust Estate or the Certificates or which would result
in the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or document, except
as expressly provided in this Agreement or such other instrument or document.
The Trustee may contract with other Persons to assist it in
performing its duties hereunder.
Section 6.5. Negative Covenants. The Trustee will not, to the
extent within the control of the Trustee, take any of the following actions:
(i) sell, transfer, exchange or otherwise dispose of any of
the Trust Estate except as expressly permitted by this Agreement;
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(ii) claim any credit on or make any deduction from the
distributions payable in respect of, the Certificates (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Owner by reason of the payment
of any taxes levied or assessed upon any of the Trust Estate;
(iii) incur, assume or guaranty on behalf of the Trust any
indebtedness of any Person except pursuant to this Agreement;
(iv) dissolve or liquidate the Trust Estate in whole or in
part, except pursuant to Article IX hereof; or
(v) (A) impair the validity or effectiveness of this
Agreement, or release any Person from any covenants or obligations with
respect to the Trust or to the Certificates under this Agreement,
except as may be expressly permitted hereby or (B) create or extend any
lien, charge, adverse claim, security interest, mortgage or other
encumbrance to or upon the Trust Estate or any part thereof or any
interest therein or the proceeds thereof.
Section 6.6. No Other Powers. The Trustee will not, to the
extent within the control of the Trustee, permit the Trust to engage in any
business activity or transaction other than those activities permitted by
Section 2.3 hereof.
Section 6.7. Limitation of Suits. No Owner shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Agreement or the Certificate Insurance Policies or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(1) such Owner has previously given written notice to the
Seller and the Trustee of such Owner's intention to institute such
proceeding;
(2) the Owners of not less than 25% of the Percentage
Interests represented by the affected Class or Classes of Certificates
then Outstanding or, if there are no affected Classes of Class A
Certificates then Outstanding, by such percentage of the Percentage
Interests represented by the Class R Certificates shall have made
written request to the Trustee to institute such proceeding in respect
of such Event of Default;
(3) such Owner or Owners have offered to the Trustee indemnity
against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such proceeding;
(5) as long as any Class A Certificates are Outstanding, the
Certificate Insurer has consented in writing thereto; and
(6) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Certificate
Insurer or by the Owners of a majority of the Percentage Interests
represented by the Class A Certificates or, if there are no Class A
Certificates then Outstanding, by such majority of the Percentage
Interests represented by the Class R Certificates;
it being understood and intended that no one or more Owners shall have any right
in any manner whatever by virtue of, or by availing themselves of, any provision
of this Agreement to affect, disturb or prejudice the rights of any other Owner
of the same Class or to obtain or to seek to obtain priority or preference over
any
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other Owner of the same Class or to enforce any right under this Agreement,
except in the manner herein provided and for the equal and ratable benefit of
all the Owners of the same Class.
In the event the Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Owners, each
representing less than a majority of the applicable Class of Certificates, the
Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provision of this Agreement.
Section 6.8. Unconditional Rights of Owners to Receive
Distributions. Notwithstanding any other provision in this Agreement, the Owner
of any Certificate shall have the right, which is absolute and unconditional, to
receive distributions to the extent provided herein and therein with respect to
such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such
Owner.
Section 6.9. Rights and Remedies Cumulative. Except as
otherwise provided herein, no right or remedy herein conferred upon or reserved
to the Trustee, the Certificate Insurer or to the Owners 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. Except as otherwise provided herein, 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 6.10. Delay or Omission Not Waiver. No delay of the
Trustee, the Certificate Insurer or any Owner of any Certificate to exercise any
right or remedy under this Agreement to 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 VI or by law
to the Trustee, the Certificate Insurer or the Owners may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee, the
Certificate Insurer or the Owners, as the case may be.
Section 6.11. Control by Owners. The Certificate Insurer or
the Owners of a majority of the Percentage Interests represented by the Class A
Certificates then Outstanding, with the consent of the Certificate Insurer
(which may not be unreasonably withheld), or, if there are no longer any Class A
Certificates then Outstanding, by such majority of the Percentage Interests
represented by the Class R Certificates then Outstanding, with the consent of
the Certificate Insurer (which may not be unreasonably withheld), may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee with respect to the Certificates or exercising any trust or power
conferred on the Trustee with respect to the Certificates or the Trust Estate,
including, but not limited to, those powers set forth in Section 6.3, Section
8.20 and Section 10.1 hereof, provided that:
(1) such direction shall not be in conflict with any rule of
law or with this Agreement;
(2) the Trustee shall have been provided with indemnity
satisfactory to it; and
(3) the Trustee may take any other action deemed proper by the
Trustee, which is not inconsistent with such direction; provided,
however, that the Trustee need not take any action which it determines
might involve it in liability or may be unjustly prejudicial to the
Owners not so directing.
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Section 6.12. Access to Owners of Certificates' Names and
Addresses. (a) If any Owner (for purposes of this Section 6.12, an "Applicant")
applies in writing to the Trustee, and such application states that the
Applicant desires to communicate with other Owners with respect to their rights
under this Agreement or under the Certificates and is accompanied by a copy of
the communication which such Applicant proposes to transmit, then the Trustee
shall, at the expense of such Applicant, within ten (10) Business Days after the
receipt of such application, furnish or cause to be furnished to such Applicant
a list of the names and addresses of the Owners of record as of the most recent
Payment Date.
(b) Every Owner, by receiving and holding such list, agrees
with the Trustee that the Trustee shall not be held accountable in any
way by reason of the disclosure of any information as to the names and
addresses of the Owners hereunder, regardless of the source from which
such information was derived.
ARTICLE VII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 7.1. Collection of Money. Except as otherwise
expressly provided herein, the Trustee shall demand payment or delivery of all
money and other property payable to or receivable by the Trustee pursuant to
this Agreement, including (a) all payments due on the Mortgage Loans in
accordance with the respective terms and conditions of such Mortgage Loans and
required to be paid over to the Trustee by the Servicer or by any Sub-Servicer
and (b) Insured Payments. The Trustee shall hold all such money and property
received by it, other than pursuant to or as contemplated by Section 6.2(b)
hereof as part of the Trust Estate and shall apply it as provided in this
Agreement.
Section 7.2. Establishment of Accounts. The Seller shall cause
to be established, and the Trustee shall maintain, at the Corporate Trust
Office, a Certificate Account, a Pre-Funding Account and a Capitalized Interest
Account to be held by the Trustee so long as the Trustee qualifies as a
Designated Depository Institution and if the Trustee does not so qualify, then
by any Designated Depository Institution in the name of the Trust for the
benefit of the Owners of the Certificates and the Certificate Insurer, as their
interests may appear.
Section 7.3. The Certificate Insurance Policies. (a) On the
Business Day prior to each Payment Date the Trustee shall determine with respect
to the immediately following Payment Date:
(i) the amount on deposit in the Certificate
Account on such Payment Date and available to
be distributed to the Owners on such Payment
Date with respect to Group I (disregarding the
sum of (x) the amount of any Insured Payments
and (y) the amount of any expected investment
earnings) and equal to the sum of (A) such
amount excluding the amount of any Total
Monthly Excess Cashflow from either Group on
account of Group I included in such amount plus
(B) any amount of Total Monthly Excess Cashflow
from either Group to be applied on account of
Group I on such Payment Date to the Fixed Rate
Certificates. The amount described in clause
(A) of the preceding sentence with respect to
each Payment Date is the "Group I Available
Funds"; the sum of the amounts described in
clauses (A) and (B) of the preceding sentence
with respect to each Payment Date is the "Group
I Total Available Funds."
(ii) the amount on deposit in the Certificate
Account on such Payment Date and available to
be distributed to the Owners on such Payment
Date with respect
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to Group II (disregarding the sum of (x) the
amount of any Insured Payments and (y) the
amount of any expected investment earnings),
and equal to the sum of (A) such amount
excluding the amount of any Total Monthly
Excess Cashflow from either Group on account of
Group II included in such amount plus (B) any
amount of Total Monthly Excess Cashflow from
either Group to be applied on account of Group
II on such Payment Date to the Class A-4
Certificates. The amount described in clause
(A) of the preceding sentence with respect to
each Payment Date is the "Group II Available
Funds"; the sum of the amounts described in
clauses (A) and (B) of the preceding sentence
with respect to each Payment Date is the "Group
II Total Available Funds".
(b) If (i) the Fixed Rate Certificate Current Interest for any
Payment Date exceeds the Group I Total Available Funds for such Payment
Date after deducting amounts payable therefrom, if any, for the Fees
and Expenses relating to Group I due on such Payment Date and/or (ii) a
Group I Subordination Deficit exists for such Payment Date (any such
event being a "Group I Total Available Funds Shortfall"), the Trustee
shall complete a Notice in the form of Exhibit A to the Group I
Certificate Insurance Policy and submit such notice to the Certificate
Insurer no later than 12:00 noon New York City time on the Business Day
preceding such Payment Date as a claim for an Insured Payment in an
amount equal to such Group I Total Available Funds Shortfall.
Similarly, if (x) the Class A-4 Current Interest for any Payment Date
exceeds the Group II Total Available Funds for such Payment Date after
deducting amounts payable therefrom, if any, for the Fees and Expenses
relating to Group II due on such Payment Date and/or (y) a Group II
Subordination Deficit exists for such Payment Date (any such event
being a "Group II Total Available Funds Shortfall"), the Trustee shall
complete a Notice in the form of Exhibit A to the Group II Certificate
Insurance Policy and submit such notice to the Certificate Insurer no
later than 12:00 noon New York City time on the Business Day preceding
such Payment Date as a claim for an Insured Payment in an amount equal
to such Group II Total Available Funds Shortfall.
(c) The Certificate Insurer shall forward to the Trustee
Insured Payments at such time and in the manner specified in the
related Certificate Insurance Policy. Upon receipt of Insured Payments
from the Certificate Insurer on behalf of Owners, the Trustee shall
deposit such Insured Payments in the Certificate Account and shall
distribute such Insured Payments, or the proceeds thereof, in
accordance with Section 7.5(d)(iv) to the Owners of the Class A
Certificates of the related Class.
(d) The Trustee shall (i) receive Insured Payments as
attorney-in-fact of each Owner of the Class A Certificates of the
related Class receiving any Insured Payment from the Certificate
Insurer and (ii) disburse such Insured Payment to the Owners of Offered
Certificates as set forth in Section 7.5(d)(iv). Insured Payments
disbursed by the Trustee from proceeds of a Certificate Insurance
Policy shall not be considered payment by the Trust nor shall such
payments discharge the obligation of the Trust with respect to the
related Class A Certificates, and the Certificate Insurer shall be
entitled to receive the related Reimbursement Amount pursuant to
Sections 7.5(d)(ii)(C) and 7.5(d)(ii)(D) hereof. Each Owner of Class A
Certificates by its acceptance thereof recognizes that to the extent
the Certificate Insurer makes Insured Payments, either directly or
indirectly (as by paying through the Trustee), to the Owners of such
Class A Certificates the Certificate Insurer will be entitled to
receive the related Reimbursement Amount pursuant to Sections
7.5(d)(ii)(C) and 7.5(d)(ii)(D) hereof.
Section 7.4 Pre-Funding Account and Capitalized Interest
Account. (a) On the Startup Day, the Seller will deposit, on behalf of the
Owners of the Class A Certificates, in the Pre-Funding Account the Original
Pre-Funded Amount, from the proceeds of the sale of the Class A Certificates.
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(b) On any Subsequent Transfer Date, the Seller shall instruct
the Trustee to withdraw from the Pre-Funding Account an amount equal to
100% of the aggregate Loan Balances of the Subsequent Mortgage Loans
sold to the Trust on such Subsequent Transfer Date and pay such amount
to or upon the order of the Seller upon satisfaction of the conditions
set forth in Sections 3.5 and 3.8 hereof with respect to such transfer;
in connection with such instructions the Seller shall additionally
inform the Trustee whether such Subsequent Mortgage Loans are being
transferred to Group I or Group II. In no event shall the Seller be
permitted to instruct the Trustee to release from the Pre-Funding
Account to the Certificate Account with respect to Subsequent Mortgage
Loans to be transferred to Group I an amount in excess of the Original
Group I Pre-Funded Amount or to release from the Pre-Funding Account to
the Certificate Account with respect to Subsequent Mortgage Loans to be
transferred to Group II an amount in excess of the Original Group II
Pre-Funded Amount.
(c) If the Pre-Funded Amount has been reduced to $100,000 or
less on or before the October 1998 or November 1998 Remittance Date,
the Trustee shall withdraw from the Pre-Funding Account the amount
(exclusive of any related Pre-Funding Account Earnings still on deposit
therein) remaining in the Pre-Funding Account, with respect to each
Group of Mortgage Loans and deposit such amount to the Certificate
Account on the October 1998 or November 1998 Remittance Dates,
respectively, which will be distributed to the Owners of the related
Certificates, as applicable, on the related Payment Dates.
(d) On the Payment Dates during and immediately following the
Funding Period, the Trustee shall transfer from the Pre-Funding Account
to the Capitalized Interest Account, the Pre-Funding Account Earnings,
if any, applicable to such Payment Date.
(e) On each Payment Date during and immediately following the
Funding Period, the Trustee shall transfer from the Capitalized
Interest Account to the Certificate Account, (i) with respect to Group
I, the Group I Capitalized Interest Requirement for such Payment Date,
if any, and (ii) with respect to Group II, the Group II Capitalized
Interest Requirement, if any, for such Payment Date.
(f) On each Subsequent Transfer Date the Trustee shall
distribute the Group I Overfunded Interest Amount, if any, and the
Group II Overfunded Interest Amount, if any (each calculated by the
Trustee on the day prior to such Subsequent Transfer Date) from the
Capitalized Interest Account to the Seller and on the Payment Date
immediately following the Funding Period, the Trustee shall distribute
to the Seller any amounts remaining in the Capitalized Interest Account
after taking into account the transfers on such Payment Date described
in clause (e) above. The Capitalized Interest Account shall be closed
at the end of the Funding Period. All amounts, if any, remaining in the
Capitalized Interest Account on such day shall be transferred to the
Seller.
Section 7.5. Flow of Funds. (a) The Trustee shall deposit to
the Certificate Account with respect to Group I, without duplication, upon
receipt, any Group I Insured Payments, the proceeds of any liquidation of the
assets of the Trust, insofar as such assets relate to Group I and the Group I
Monthly Remittance Amount, together with any Substitution Amounts and any Loan
Purchase Price amounts relating to Group I received by the Trustee.
(b) The Trustee shall deposit to the Certificate Account with
respect to Group II, without duplication, upon receipt, any Group II
Insured Payments, the proceeds of any liquidation of the assets of the
Trust, insofar as such assets relate to Group II and the Group II
Monthly Remittance Amount, together with any Substitution Amounts and
any Loan Purchase Price amounts relating to Group II received by the
Trustee.
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(c) [Reserved].
(d) With respect to amounts on deposit in the Certificate
Account, on each Payment Date, the Trustee shall make the following
allocations, disbursements and transfers for each Mortgage Loan Group
from amounts deposited therein pursuant to subsections (a) and (b),
respectively in the following order of priority, and each such
allocation, transfer and disbursement shall be treated as having
occurred only after all preceding allocations, transfers and
disbursements have occurred:
(i) first, on each Payment Date (A) to the
Trustee, the Trustee Fee and (B) to the
Certificate Insurer, (x) from amounts then
on deposit in the Certificate Account with
respect to Group I, the Group I Premium
Amount for such Payment Date and (y) from
amounts then on deposit in the Certificate
Account with respect to Group II, the Group
II Premium Amount for such Payment Date;
(ii) second, on each Payment Date, the Trustee
shall allocate an amount equal to the sum of
(x) the Total Monthly Excess Spread with
respect to such Mortgage Loan Group and
Payment Date plus (y) any Subordination
Reduction Amount with respect to such
Mortgage Loan Group and Payment Date (such
sum being the "Total Monthly Excess
Cashflow" with respect to such Mortgage Loan
Group and Payment Date) with respect to each
Mortgage Loan Group in the following order
of priority:
(A) first, such Total Monthly Excess
Cashflow with respect to each Group
shall be allocated to the payment of
the related Class A Distribution
Amount pursuant to clause (iv) below
on such Payment Date with respect to
the related Mortgage Loan Group in
an amount equal to the difference,
if any, between (x) the related
Class A Distribution Amount
(calculated only with respect to
clause (y) of the definition of the
related Group I or Group II
Principal Distribution Amount and
without any Subordination Increase
Amount) for such Payment Date and
(y) the Available Funds with respect
to such Mortgage Loan Group for such
Payment Date (the amount of such
difference with respect to the
related Mortgage Loan Group) being
the "Group I Available Funds
Shortfall" or the "Group II
Available Funds Shortfall";
(B) second, any portion of the Total
Monthly Excess Cashflow with respect
to such Mortgage Loan Group
remaining after the application
described in clause (A) above shall
be allocated against any Available
Funds Shortfall with respect to the
other Mortgage Loan Group and to the
payment of the Class A Distribution
Amount with respect to the other
Mortgage Loan Group pursuant to
clause (iv) below;
(C) third, any portion of the Total
Monthly Excess Cashflow with respect
to such Mortgage Loan Group
remaining after the allocations
described in clauses (A) and (B)
above shall be allocated to the
payment of any Reimbursement Amount
with respect to the related Mortgage
Loan Group pursuant to clause
(iv)(A)(I) below; and
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(D) fourth, any portion of the Total
Monthly Excess Cashflow with respect
to such Mortgage Loan Group
remaining after the allocations
described in clauses (A), (B) and
(C) above shall be allocated to the
payment of any Reimbursement Amount
with respect to the other Mortgage
Loan Group pursuant to clause
(iv)(A)(I) below.
(iii) third, the amount, if any, of the Total
Monthly Excess Cashflow with respect to a
Mortgage Loan Group on a Payment Date
remaining after the allocations described in
clause (ii) above is the "Net Monthly Excess
Cashflow" with respect to such Mortgage Loan
Group for such Payment Date; such Net
Monthly Excess Cashflow is required to be
allocated in the following order of
priority:
(A) first, such Net Monthly Excess
Cashflow shall be used to reduce to
zero, through the allocation of a
Subordination Increase Amount to the
payment of the related Class A
Distribution Amount pursuant to
clause (iv) below, any Subordination
Deficiency Amount with respect to
the related Mortgage Loan Group as
of such Payment Date;
(B) second, the Net Monthly Excess
Cashflow remaining after the
application described in clause (A)
above shall be used to reduce to
zero, through the allocation of a
Subordination Increase Amount to the
payment of the related Class A
Distribution Amount pursuant to
clause (iv) below, any Subordination
Deficiency Amounts with respect to
the other Mortgage Loan Group;
(C) third, an amount equal to the lesser
of (i) any portion of the Net
Monthly Excess Cashflow remaining
after the applications described in
clauses (A) and (B) above and (ii)
the excess of (a) the Group II
Available Funds Cap Carry-Forward
Amount for such Payment Date over
(b) the amount then on deposit in
the Group II Available Funds Cap
Carry-Forward Amount Account shall
be allocated to the Group II
Available Funds Cap Carry-Forward
Amount Account; and
(D) fourth, any Net Monthly Excess
Cashflow remaining after the
applications described in clauses
(A), (B) and (C) above shall be
allocated to the Servicer and
distributed pursuant to clause
(iv)(A)(II) to the extent of any
unreimbursed Delinquency Advances,
unreimbursed Servicing Advances and
accrued and unpaid Servicing Fees,
in each case as certified to the
Trustee by the Servicer to be owing
to it as of such Payment Date;
(iv) fourth, following the making by the Trustee
of all allocations, transfers and
disbursements described above under Section
7.3 hereof and the prior clauses of this
Section 7.5, from amounts (including any
related Insured Payment which shall be paid
only to the Owners of the Class A
Certificates) then on deposit in the
Certificate Account with respect to the
related Mortgage Loan Group, the Trustee
shall distribute in the following order of
priority:
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(A) distribute (I) to the Certificate
Insurer the amounts described in
clauses (ii)(C) and (ii)(D) above
and (II) to the Servicer the amounts
described in clause (iii)(D) above;
(B) from the amounts then on deposit in
the Certificate Account with respect
to Group I, to the Owners of the
Fixed Rate Certificates, the related
Fixed Rate Certificate Current
Interest thereon until the related
Class A Certificate Termination Date
on a pro rata basis based on each
such Class of Fixed Rate
Certificate's Current Interest
without any priority among the
related Fixed Rate Certificates;
(C) from the amounts then on deposit in
the Certificate Account with respect
to Group I, as a distribution of
principal to the Owners of the
related Class of Fixed Rate
Certificates, the Group I Principal
Distribution Amount shall be
distributed sequentially as follows:
(1) first, to the Owners of the
Class A-1 Certificates
until the Class A-1
Certificate Termination
Date; and
(2) second, to the Owners of
the Class A-2 Certificates
until the Class A-2
Certificate Termination
Date; and
(3) third, to the Owners of the
Class A-3 Certificates
until the Class A-3
Certificate Termination
Date;
(D) from the amounts then on deposit in
the Certificate Account with respect
to Group II, to the Owners of the
Class A-4 Certificates, the Class
A-4 Current Interest until the Class
A-4 Certificate Termination Date;
and
(E) from the amounts then on deposit in
the Certificate Account with respect
to Group II, to the Owners of the
Class A-4 Certificates, the Group II
Principal Distribution Amount until
the Class A-4 Certificate
Termination Date;
Notwithstanding anything to the contrary herein, the amounts described
in Section 7.5(d)(iv)(B) and (D) shall be distributed prior to all
other allocations, distributions and transfers described in Section 7.3
and 7.5 hereof (other than the amount described in Section 7.5(d)(i)).
(v) fifth, following the making by the Trustee
of all allocations, transfers and
disbursements described above under Section
7.3 hereof and the prior clauses of this
Section 7.5, from amounts then on deposit in
the Certificate Account for both Mortgage
Loan Groups, the Trustee shall distribute to
the Owners of the Class R Certificates, the
Residual Net Monthly Excess Cashflow, if
any, for such Payment Date.
(e) On each Payment Date the Trustee shall distribute to the
Owners of the Class A-4 Certificates the amount, if any, then on
deposit in the Group II Available Funds Cap Carry-Forward Amount
Account.
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(f) On any Payment Date during the continuance of any
Certificate Insurer Default, if there is a Subordination Deficit, then
the Group I Principal Distribution Amount for such Payment Date shall
be distributed pro rata to the Owners of any Outstanding Fixed Rate
Certificates on such Payment Date.
(g) Notwithstanding clause (d)(iv) above, the aggregate
amounts distributed on all Payment Dates to the Owners of the related
Class A Certificates on account of principal shall not exceed the
Original Certificate Principal Balance for the related Class A
Certificates.
Section 7.6. Investment of Accounts. (a) So long as no event
described in Sections 8.20(a) or (b) hereof shall have occurred and be
continuing, and consistent with any requirements of the Code, all or a portion
of the Accounts held by the Trustee (except the Certificate Account) shall be
invested and reinvested by the Trustee, for the benefit of the Owners and the
Certificate Insurer, as their interests may appear, as directed in writing by
the Servicer on the Startup Day and from time to time thereafter, in one or more
Eligible Investments bearing interest or sold at a discount. During the
continuance of an event described in Sections 8.20(a) or (b) hereof and
following any removal of the Servicer, the Certificate Insurer shall direct such
investments in the Accounts (except the Certificate Account). No investment in
any Account shall mature later than the second Business Day preceding the next
Payment Date (or, if such investment is an obligation of the Trustee or money
market funds for which the Trustee or an affiliate is the manager or the
advisor, the investment shall mature no later than such Payment Date).
(b) The Trustee, for the benefit of the Owners and the
Certificate Insurer, as their interests may appear shall invest and
reinvest all or a portion of the Certificate Account, at its own
discretion, but only in one or more Eligible Investments bearing
interest or sold at a discount.
(c) If any amounts are needed for disbursement from any
Account held by the Trustee and sufficient uninvested funds are not
available to make such disbursement, the Trustee shall cause to be sold
or otherwise converted to cash a sufficient amount of the investments
in such Account. No investments will be liquidated prior to maturity
unless the proceeds thereof are needed for disbursement.
(d) Subject to Section 10.1 hereof, the Trustee shall not in
any way be held liable by reason of any insufficiency in any Account
held by the Trustee (except the Certificate Account) resulting from any
loss on any Eligible Investment included therein.
(e) The Trustee shall hold funds in the Accounts held by the
Trustee (except the Certificate Account) uninvested upon the occurrence
of either of the following events:
(i) the Servicer or the Certificate Insurer, as
the case may be, shall have failed to give
investment directions to the Trustee within
ten days after receipt of a written request
for such directions from the Trustee; or
(ii) the Servicer or the Certificate Insurer, as
the case may be, shall have failed to give
investment directions to the Trustee with
respect to any investment by the Trustee
that shall mature during the ten-day period
described in clause (i).
(f) For purposes of investment, the Trustee shall aggregate
all amounts on deposit in each Account (except the Certificate
Account). All income or other gain from investments in any Account
(except the Certificate Account) shall be deposited in such Account
immediately on receipt, and any loss resulting from such investments
shall be charged to the Seller, and upon request by the Trustee, the
Seller shall reimburse the Trust for such losses.
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(g) All income or other gain from investments in the
Certificate Account shall be deposited in the Certificate Account
immediately on receipt, and any loss resulting from such investments
shall be charged to the Trustee, which shall reimburse the Trust for
such losses.
(h) Each institution at which the Certificate Account is
maintained shall invest the funds therein in Eligible Investments,
which shall mature not later than the Business Day next preceding the
related Payment Date (except that if such Eligible Investment is an
obligation of the institution that maintains such account, then such
Eligible Investment shall mature not later than such Payment Date) and,
in each case, shall not be sold or disposed of prior to its maturity.
All such Eligible Investments shall be made in the name of the Trustee,
for the benefit of the Owners and the Certificate Insurer. All income
and gain (net of any losses) realized from any such investment of funds
on deposit in the Certificate Account shall be for the benefit of the
Trustee as compensation. The amount of any realized losses in the
Certificate Account incurred in any such account in respect of any such
investments shall promptly be deposited by the Trustee in the
Certificate Account.
(i) The Servicer shall give notice to the Trustee, the Seller,
the Trust, each Rating Agency, and the Certificate Insurer of any
proposed change of the location of the Certificate Account not later
than 30 days and not more than 45 days prior to any change thereof.
Section 7.7. Eligible Investments. The following are Eligible
Investments:
(a) Direct general obligations of the United States or the
obligations of any agency or instrumentality of the United States fully
and unconditionally guaranteed, the timely payment or the guarantee of
which constitutes a full faith and credit obligation of the United
States.
(b) Federal funds, certificates of deposit, time and demand
deposits, and bankers' acceptances (having original maturities of not
more than 365 days) of any domestic bank, the short-term debt
obligations of which have been rated A-1 or better by Standard & Poor's
and P-1 by Moody's.
(c) Investment agreements approved by the Certificate Insurer
provided:
1. The agreement is with a bank or insurance
company which has an unsecured, uninsured
and unguaranteed obligation (or
claims-paying ability) rated Aa2 or better
by Moody's and AA or better by Standard &
Poor's,
2. Moneys invested thereunder may be withdrawn
without any penalty, premium or charge upon
not more than one day's notice (provided
such notice may be amended or canceled at
any time prior to the withdrawal date),
3. The agreement is not subordinated to any
other obligations of such insurance company
or bank,
4. The same guaranteed interest rate will be
paid on any future deposits made pursuant to
such agreement, and
5. The Trustee and the Certificate Insurer
receive an opinion of counsel that such
agreement is an enforceable obligation of
such insurance company or bank.
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(d) Commercial paper (having original maturities of not more
than 365 days) rated A-1 or better by Standard & Poor's and P-1 or
better by Moody's.
(e) Investments in no load money market funds sponsored by the
Trustee or any affiliate of the Trustee or for which the Trustee or any
of its affiliates acts as an advisor, so long as such fund is rated
AAAm or AAAm-G by Standard & Poor's and Aaa by Moody's.
(f) Investments approved in writing by the Certificate Insurer
and acceptable to Moody's and Standard & Poor's.
provided that no instrument described above is permitted to evidence either the
right to receive (a) only interest with respect to obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provided a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations; and provided, further,
that no instrument described above may be purchased at a price greater than par.
Section 7.8. Reports by Trustee. (a) On each Payment Date the
Trustee shall provide to each Owner, the Servicer, the Certificate Insurer, each
of the Underwriters, the Seller, Standard & Poor's and Moody's a written report
(based solely upon the information contained in the Monthly Servicing Report) in
a form to be agreed upon by the Trustee, and the Servicer and setting forth the
following information:
(i) the amount of the distribution with respect
to the related Class of the Class A
Certificates and the Class R Certificates;
(ii) the amount of such distributions allocable
to principal, separately identifying the
aggregate amount of any Prepayments or
Prepaid Installments of principal included
therein, and any Subordination Increase
Amounts with respect to the related Mortgage
Loan Group;
(iii) the amount of such distributions allocable
to interest;
(iv) the Certificate Principal Balance for each
Class of Class A Certificates as of such
Payment Date together with the principal
amount of such Class of Class A Certificates
(based on a Certificate in an original
principal amount of $1,000) then
outstanding, in each case after giving
effect to any payment of principal on such
Payment Date;
(v) the amount of any Insured Payment included
in the amounts distributed with respect to
the Class A Certificates on such Payment
Date;
(vi) information to the extent and in the form
furnished by the Seller pursuant to Section
6049(d)(7)(C) of the Code and the
regulations promulgated thereunder to assist
the Owners in computing their market
discount;
(vii) the total of any Substitution Amounts and
any Loan Purchase Price amounts included in
such distribution;
(viii) the amount of any Subordination Reduction
Amount with respect to each Mortgage Loan
Group;
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(ix) the amounts, if any, of any Realized Losses
in each Mortgage Loan Group for the related
Remittance Period and the cumulative amount
of Realized Losses in each Mortgage Loan
Group since the Startup Day;
(x) for the related Remittance Period and
cumulatively since the Startup Day, the
number and aggregate Loan Balance of
Mortgage Loans in each Group bought back by
the Servicer or the Seller pursuant to
Sections 3.4, 3.6 and 8.10 (identified
separately for each such section);
(xi) the amount of any Group II Available Funds
Cap Carry-Forward Amount; and,
(xiv) identify any loans purchased by the Servicer
pursuant to Section 8.10; and
(xv) for each of the Payment Dates during
and immediately after the Funding Period,
(A) the Pre-Funded Amount previously used to
purchase Subsequent Mortgage Loans, (B) the
Pre-Funded Amount distributed as principal,
(C) the Pre-Funding Account Earnings
transferred to the Capitalized Interest
Account and (D) the amounts transferred from
the Capitalized Interest Account to the
Certificate Account, the Group I Overfunded
Interest Amount, the Group II Overfunded
Interest Amount and the amount transferred
to the Seller, if any.
Items (i) through (iii) above shall, with respect to each
Class of Class A Certificates, be presented on the basis of a Certificate having
a $1,000 denomination. In addition, by January 31 of each calendar year
following any year during which the Certificates are outstanding, the Trustee
shall furnish a report to each Owner of record requesting the same in writing at
any time during each calendar year as to the aggregate of amounts reported
pursuant to (i), (ii) and (iii) with respect to the Certificates for such
calendar year.
(b) In addition, on each Payment Date the Trustee will
distribute to each Owner, the Certificate Insurer, each of the
Underwriters, the Servicer, the Seller, Standard & Poor's and Moody's,
together with the information described in Subsection (a) preceding,
the following information with respect to each Mortgage Loan Group as
of the last day of the related Remittance Period, which is hereby
required to be prepared by the Servicer and furnished to the Trustee
for such purpose on or prior to the related Remittance Date:
(i) the total number of Mortgage Loans in each
Mortgage Loan Group and the aggregate Loan
Balances thereof, together with the number,
aggregate principal balances of such
Mortgage Loans in such Mortgage Loan Group
and the percentage (based on the aggregate
Loan Balances of the Mortgage Loans in such
Mortgage Loan Group) (a) 30-59 days
Delinquent, (b) 60-89 days Delinquent and
(c) 90 or more days Delinquent;
(ii) the number and aggregate Loan Balances of
all Mortgage Loans in each Mortgage Loan
Group and percentage (based on the aggregate
Loan Balances of the Mortgage Loans in such
Mortgage Loan Group) in foreclosure
proceedings (and whether any such Mortgage
Loans are also included in any of the
statistics described in the foregoing clause
(i));
(iii) the number, aggregate Loan Balances of all
Mortgage Loans in each Mortgage Loan Group
and percentage (based on the aggregate Loan
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Balances of the Mortgage Loans in such
Mortgage Loan Group) relating to Mortgagors
in bankruptcy proceedings (and whether any
such Mortgage Loans are also included in any
of the statistics described in the foregoing
clause (i));
(iv) the number, aggregate Loan Balances of all
Mortgage Loans in each Mortgage Loan Group
and percentage (based on the aggregate Loan
Balances of the Mortgage Loans in such
Mortgage Loan Group) relating to REO
Properties and Mortgage Loans in foreclosure
(and whether any such Mortgage Loans are
also included in any of the statistics
described in the foregoing clause (i));
(v) the aggregate Loan Balance of all Mortgage
Loans, in each Mortgage Loan Group after
giving effect to any payment of principal on
such Payment Date; and
(vi) the book value of any REO Property and any
Mortgage Loans in foreclosure in each
Mortgage Loan Group.
(c) The foregoing reports shall be sent to an Owner only
insofar as such Owner owns a Certificate with respect to the related
Mortgage Loan Group.
Section 7.9. Additional Reports by Trustee. (a) The Trustee
shall report to the Seller, the Servicer, Standard & Poor's, Moody's and the
Certificate Insurer with respect to the amount then held in each Account
(including investment earnings accrued or scheduled to accrue) held by the
Trustee and the identity of the investments included therein, as the Seller, the
Servicer or the Certificate Insurer may from time to time request.
(b) Not later than 20 days after each Payment Date, the
Trustee shall forward to the Seller, the Servicer and the Certificate
Insurer a statement, setting forth the status of the Certificate
Account as of the close of business on the last Business Day of the
related Remittance Period showing, for the period covered by such
statement, the aggregate of deposits into and withdrawals from the
Certificate Account.
Section 7.10. Group II Available Funds Cap Trust. (a) The
parties hereto do hereby create and establish a trust for the benefit of the
Owners of the Class A-4 Certificates, the "First Alliance Available Funds Cap
Trust 1998-3" (the "Group II Available Funds Cap Trust"). The Group II Available
Funds Cap Trust shall include the Group II Available Funds Cap Carry-Forward
Amount Account which is held by the Trustee in the name of the Group II
Available Funds Cap Trust for the benefit of the Owners of the Class A-4
Certificates.
(b) On each Payment Date the Trustee shall receive the
allocation, if any, made to the Group II Available Funds Cap
Carry-Forward Amount Account pursuant to Section 7.5(d)(iii)(C) hereof
on such Payment Date and deposit such payment to the Group II Available
Funds Cap CarryForward Amount Account.
(c) On each Payment Date the Trustee shall pursuant to Section
7.5(e) withdraw from the Group II Available Funds Cap Carry-Forward
Amount Account and distribute to the Owners of the Class A-4
Certificates the amount, if any, then on deposit in the Group II
Available Funds Cap Carry-Forward Amount Account.
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(d) It is the intention of the parties that the Group II
Available Funds Cap Trust constitute a trust under the laws of the
State of New York. The Group II Available Funds Cap Trust will be
created and administered in, and the Group II Available Funds Cap
Carry-Forward Amount Account maintained by the Trustee on behalf of the
Group II Available Funds Cap Trust will be located in, the State of
Minnesota. Payments will be received by the Group II Available Funds
Cap Trust only in the State of Minnesota, and payments from the Group
II Available Funds Cap Trust will be made only from the State of
Minnesota.
ARTICLE VIII
SERVICING AND ADMINISTRATION OF MORTGAGE LOANS
Section 8.1. Servicer and Sub-Servicers. (a) Acting directly
or through one or more Sub-Servicers as provided in Section 8.3, the Servicer,
as servicer, shall service and administer the Mortgage Loans in accordance with
this Agreement and with reasonable care, and using that degree of skill and
attention that the Servicer exercises with respect to comparable mortgage loans
that it services for itself or others, and shall have full power and authority,
acting alone, to do or cause to be done any and all things in connection with
such servicing and administration which it may deem necessary or desirable.
(b) The duties of the Servicer shall include collecting and
posting of all payments, responding to inquiries of Mortgagors or by
federal, state or local government authorities with respect to the
Mortgage Loans, investigating delinquencies, reporting tax information
to Mortgagors in accordance with its customary practices and accounting
for collections, furnishing monthly and annual statements to the
Trustee with respect to distributions, paying Compensating Interest and
making Delinquency Advances and Servicing Advances pursuant hereto. The
Servicer shall follow its customary standards, policies and procedures
in performing its duties as Servicer. The Servicer shall cooperate with
the Trustee and furnish to the Trustee with reasonable promptness
information in its possession as may be necessary or appropriate to
enable the Trustee to perform its tax reporting duties hereunder. The
Trustee shall furnish 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.
(c) Without limiting the generality of the foregoing, the
Servicer (i) shall continue, and is hereby authorized and empowered by
the Trustee, to execute and deliver, on behalf of itself, the Owners
and the Trustee or any of them, any and all instruments of satisfaction
or cancellation, or of partial or full release or discharge and all
other comparable instruments, with respect to the Mortgage Loans and
with respect to the related Properties; (ii) may consent to any
modification of the terms of any Note not expressly prohibited hereby
if the effect of any such modification (x) will not be to affect
materially and adversely the security afforded by the related Property,
the timing of receipt of any payments required hereby or the interests
of the Certificate Insurer and (y) will not cause the Trust to fail to
qualify as a REMIC.
(d) The parties intend that the Trust (other than the
Pre-Funding Account and the Capitalized Interest Account) shall
constitute and that the affairs of Trust shall (other than the
Pre-Funding Account and the Capitalized Interest Account) shall be
conducted so as to qualify it as a REMIC. In furtherance of such
intention, the Servicer covenants and agrees that it shall act as agent
(and the Servicer is hereby appointed to act as agent) on behalf of the
Trust and that in such capacity it shall: (i) use its best efforts to
conduct the affairs of the Trust at all times that any Class of
Certificates are outstanding so as to maintain the status of the Trust
as a REMIC under the REMIC Provisions; (ii) not knowingly or
intentionally take any action or omit to take any action that would
cause the termination of the REMIC status of the Trust or that would
subject the Trust to tax and
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(iii) exercise reasonable care not to allow the Trust to receive income
from the performance of services or from assets not permitted under the
REMIC Provisions to be held by a REMIC.
(e) With the consent of the Certificate Issuer, the Servicer
may, and is hereby authorized to, perform any of its servicing
responsibilities with respect to all or certain of the Mortgage Loans
through a Sub-Servicer as it may from time to time designate but no
such designation of a Sub-Servicer shall serve to release the Servicer
from any of its obligations under this Agreement. Such Sub-Servicer
shall have all the rights and powers of the Servicer with respect to
such Mortgage Loans under this Agreement.
(f) Without limiting the generality of the foregoing, but
subject to Sections 8.13 and 8.14, the Servicer in its own name or in
the name of a Sub-Servicer may be authorized and empowered pursuant to
a power of attorney executed and delivered by the Trustee to execute
and deliver, on behalf of itself, the Owners and the Trustee or any of
them, (i) 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
Properties, (ii) to institute foreclosure proceedings or obtain a deed
in lieu of foreclosure so as to effect ownership of any Property on
behalf of the Trustee and (iii) to hold title to any Property upon such
foreclosure or deed in lieu of foreclosure on behalf of the Trustee;
provided, however, that Section 8.14(a) shall constitute a power of
attorney from the Trustee to the Servicer to execute an instrument of
satisfaction (or assignment of mortgage without recourse) with respect
to any Mortgage Loan paid in full (or with respect to which payment in
full has been escrowed). Subject to Sections 8.13 and 8.14, the Trustee
shall execute a power of attorney to the Servicer and any Sub-Servicer
and furnish them with any other documents as the Servicer or such
Sub-Servicer shall reasonably request to enable the Servicer and such
Sub-Servicer to carry out their respective servicing and administrative
duties hereunder.
(g) The Servicer shall give prompt notice to the Trustee and
the Certificate Insurer of any action, of which the Servicer has actual
knowledge, to (i) assert a claim against the Trust or (ii) assert
jurisdiction over the Trust.
(h) Servicing Advances incurred by the Servicer or any
Sub-Servicer in connection with the servicing of the Mortgage Loans
(including any penalties in connection with the payment of any taxes
and assessments or other charges) on any Property shall be recoverable
by the Servicer or such Sub-Servicer to the extent described in Section
8.9(c) and in Section 7.5(d)(iii)(D) hereof.
Section 8.2. Collection of Certain Mortgage Loan Payments. (a)
The Servicer shall, to the extent such procedures shall be consistent with this
Agreement and the terms and provisions of any applicable Insurance Policies
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; provided that the Servicer shall always at least follow collection
procedures that are consistent with or better than standard industry practices.
Consistent with the foregoing, the Servicer may in its discretion (i) waive any
assumption fees, late payment charges, charges for checks returned for
insufficient funds, prepayment fees, if any, or other fees which may be
collected in the ordinary course of servicing the Mortgage Loans, (ii) if a
Mortgagor is in default or 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; provided, however, the
Servicer shall not reschedule the payment of delinquent payments more than one
time in any twelve (12) consecutive months with respect to any Mortgagor or
(iii) 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, in accordance with the Servicer's general policies of the
comparable mortgage loans subject to such Act.
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(b) The Servicer shall hold in escrow on behalf of the related
Mortgagor all Prepaid Installments received by it, and shall apply such
Prepaid Installments as directed by such Mortgagor and as set forth in
the related Note.
Section 8.3. Sub-Servicing Agreements Between Servicer and
Sub-Servicers. The Servicer may enter into Sub-Servicing Agreements for any
servicing and administration of Mortgage Loans with any institution which is
acceptable to the Certificate Insurer and which is in compliance with the laws
of each state necessary to enable it to perform its obligations under such
Sub-Servicing Agreement and (x) has (i) been designated an approved
seller-servicer by FHLMC or Fannie Mae for Mortgage Loans and (ii) has equity of
at least $5,000,000, as determined in accordance with generally accepted
accounting principles or (y) is a Servicer Affiliate. The Servicer shall give
notice to the Certificate Insurer, the Rating Agencies and the Trustee of the
appointment of any Sub-Servicer and shall furnish to the Certificate Insurer and
the Trustee a copy of such Sub-Servicing Agreement. 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. Any such Sub-Servicing
Agreement shall be consistent with and not violate the provisions of this
Agreement.
Section 8.4. Successor Sub-Servicers. With the consent of the
Certificate Issuer, the Servicer may terminate any Sub-Servicing Agreement in
accordance with the terms and conditions of such Sub-Servicing Agreement and
either itself directly service the related Mortgage Loans or enter into a
Sub-Servicing Agreement with a successor Sub-Servicer that qualifies under
Section 8.3.
Section 8.5. Liability of Servicer. The Servicer shall not be
relieved of its obligations under this Agreement notwithstanding any
Sub-Servicing Agreement or any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer and a Sub-Servicer or otherwise,
and the Servicer shall be obligated to the same extent and under the same terms
and conditions as if it alone were servicing and administering the Mortgage
Loans. The Servicer shall be entitled to enter into any agreement with a
Sub-Servicer for indemnification of the Servicer by such Sub-Servicer and
nothing contained in such Sub-Servicing Agreement shall be deemed to limit or
modify this Agreement. The Trust shall not indemnify the Servicer for any losses
due to the Servicer's negligence.
Section 8.6. No Contractual Relationship Between Sub-Servicer
and Trustee or the Owners. 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 alone and the
Certificate Insurer, the Trustee and the Owners shall not be deemed parties
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to any Sub-Servicer except as set forth in Section 8.7.
Section 8.7. Assumption or Termination of Sub-Servicing
Agreement by Trustee. In connection with the assumption of the responsibilities,
duties and liabilities and of the authority, power and rights of the Servicer
hereunder by the Trustee pursuant to Section 8.20, it is understood and agreed
that the Servicer's rights and obligations under any Sub-Servicing Agreement
then in force between the Servicer and a Sub-Servicer may be assumed or
terminated by the Trustee at the Certificate Insurer's option without the
payment of a fee notwithstanding any contrary provision in any Sub-Servicing
Agreement.
The Servicer shall, upon reasonable request of the Trustee,
but at the expense of the Servicer, deliver to the assuming party documents and
records relating to each Sub-Servicing Agreement and an accounting of amounts
collected and held by it and otherwise use its best reasonable efforts to effect
the orderly and efficient transfer of the Sub-Servicing Agreements to the
assuming party.
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Section 8.8. Principal and Interest Account.
(a) The Servicer shall establish in the name of the Trust for
the benefit of the Owners of the Certificates and the Certificate
Insurer and maintain at one or more Designated Depository Institutions
the Principal and Interest Account. The funds held in the Principal and
Interest Account shall not be commingled with any other funds.
Subject to Subsection (c) below, the Servicer and any
Sub-Servicer shall deposit all receipts related to the Mortgage Loans into the
Principal and Interest Account on a daily basis (but no later than the first
Business Day after receipt).
Subject to Subsection (c) below, on the Startup Day, the
Seller and/or the Servicer shall deposit into the Principal and Interest Account
all receipts related to the related Mortgage Loans received after the Cut-Off
Date.
(b) Any investment of funds in the Principal and Interest
Account shall mature or be withdrawable at par on or prior to the
immediately succeeding Remittance Date. All funds in the Principal and
Interest Account may only be held (i) uninvested, up to the limits
insured by the FDIC or (ii) invested in Eligible Investments. The
Principal and Interest Account shall be held in trust in the name of
the Trust and for the benefit of the Owners of the Certificates. Any
investment earnings on funds held in the Principal and Interest Account
shall be for the account of the Servicer and may only be withdrawn from
the Principal and Interest Account by the Servicer on the second
Business Day of the month for the investment earnings for the previous
calendar month. The Servicer shall withdraw from the Principal and
Interest Account, on the second Business Day of the month, investment
earnings for the previous calendar month. The Servicer shall deposit
into the Principal and Interest Account the amount of all losses on
investment of funds in the Principal and Interest Account upon request
from the Trustee. Any references herein to amounts on deposit in the
Principal and Interest Account shall refer to amounts net of investment
earnings.
(c) The Servicer shall deposit to the Principal and Interest
Account all principal and interest collections on the Mortgage Loans
received after the Cut-Off Date, including any Prepayments and Net
Liquidation Proceeds, all Loan Purchase Prices and Substitution Amounts
received or paid by the Servicer with respect to the Mortgage Loans,
other recoveries or amounts related to the Mortgage Loans received by
the Servicer, Compensating Interest and Delinquency Advances together
with any amounts which are reimbursable from the Principal and Interest
Account but net of (i) the Servicing Fee with respect to each Mortgage
Loan and other servicing compensation to the Servicer as permitted by
Section 8.15 hereof, (ii) principal (including Prepayments) due on the
related Mortgage Loans on or prior to the Cut-Off Date, (iii) interest
due on the related Mortgage Loans on or prior to the Cut-Off Date and
(iv) Net Liquidation Proceeds to the extent such Net Liquidation
Proceeds exceed the Loan Balance of the related Mortgage Loan.
(d) (i) The Servicer may make withdrawals from the
Principal and Interest Account only for the
following purposes:
(A) to effect the timely remittance to
the Trustee of the Group I Monthly
Remittance Amount and the Group II
Monthly Remittance Amount due on the
Remittance Date;
(B) to reimburse itself pursuant to
Section 8.9(a) hereof for
unrecovered Delinquency Advances and
Servicing Advances;
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(C) to withdraw investment earnings on
amounts on deposit in the Principal
and Interest Account;
(D) to withdraw amounts that have been
deposited to the Principal and
Interest Account in error; and
(E) to clear and terminate the Principal
and Interest Account following the
termination of the Trust Estate
pursuant to Article IX hereof.
(ii) On the Determination Date of each month, the
Servicer shall send to the Trustee the
Monthly Exception Report detailing the
payments on the Mortgage Loans during the
prior Remittance Period and certifying the
amounts and purpose of withdrawals permitted
pursuant to (d) above from the Principal and
Interest Account. Such report shall contain
the specified data, as described in Section
8.26 hereof, and shall be in the form and
have the specifications as may be agreed to
between the Servicer, the Certificate
Insurer and the Trustee from time to time.
(iii) On each Remittance Date, the Servicer shall
remit to the Trustee by wire transfer, or
otherwise make funds available in
immediately available funds for deposit to
the Certificate Account, the Group I
Interest Remittance Amount and the Group I
Principal Remittance Amount for such
Remittance Date.
(iv) On each Remittance Date, the Servicer shall
remit to the Trustee by wire transfer or
otherwise make funds available in
immediately available funds for deposit to
the Certificate Account, the Group II
Interest Remittance Amount and the Group II
Principal Remittance Amount for such
Remittance Date.
Section 8.9. Delinquency Advances, Compensating Interest and
Servicing Advances. (a) The Servicer is required, not later than each Remittance
Date, to deposit into the Principal and Interest Account an amount equal to the
sum of (i) the interest due (net of the Servicing Fees due) but not collected as
of the last day of the related Remittance Period and, (ii) scheduled principal
due but not collected as of the last day of the related Remittance Period, with
respect to Delinquent Mortgage Loans during the related Due Period but only if,
in its good faith business judgment, the Servicer reasonably believes that such
amount will ultimately be recovered from the related Mortgage Loan. Such amounts
are "Delinquency Advances".
The Servicer shall be permitted to fund its payment of
Delinquency Advances on any Remittance Date and to reimburse itself for any
Delinquency Advances paid from the Servicer's own funds, from collections on any
Mortgage Loan in the same Mortgage Loan Group deposited to the Principal and
Interest Account subsequent to the related Due Period and shall deposit into the
Principal and Interest Account with respect thereto (i) collections from the
Mortgagor whose Delinquency gave rise to the shortfall which resulted in such
Delinquency Advance, (ii) on the Remittance Date in October and November 1998,
interest accrued on each Subsequent Mortgage Loan transferred to the Trust
during the Funding Period, and (iii) Net Liquidation Proceeds recovered on
account of the related Mortgage Loan to the extent of the amount of aggregate
Delinquency Advances related thereto. If not thereto recovered from the related
Mortgagor or the related Net Liquidation Proceeds, Delinquency Advances shall be
recoverable pursuant to Section 7.5(d)(iii)(D).
(b) On or prior to each Remittance Date, the Servicer shall
deposit in the Principal and Interest Account with respect to any
Paid-in-Full Mortgage Loan during the related Remittance
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Period out of its own funds without any right of reimbursement therefor
an amount equal to the difference between (x) 30 days' interest at such
Mortgage Loan's Coupon Rate (less the Servicing Fee Rate) on the Loan
Balance of such Mortgage Loan as of the first day of the related
Remittance Period and (y) to the extent not previously advanced, the
interest (less the Servicing Fee) paid by the Mortgagor with respect to
the Mortgage Loan during such Remittance Period (any such amount paid
by the Servicer, "Compensating Interest"). The Servicer shall in no
event be required to pay Compensating Interest with respect to any
Remittance Period in an amount in excess of the aggregate Servicing Fee
received by the Servicer with respect to all Mortgage Loans for such
Remittance Period. Further, the Servicer is not obligated to cover
shortfalls in collections in interest due to Curtailments.
(c) The Servicer will pay all "out-of-pocket" costs and
expenses incurred in the performance of its servicing obligations,
including, but not limited to, the cost of (i) Preservation Expenses,
(ii) any enforcement or judicial proceedings, including foreclosures,
and (iii) the management and liquidation of REO Property, but is only
required to pay such costs and expenses to the extent the Servicer
reasonably believes such costs and expenses will increase Net
Liquidation Proceeds on the related Mortgage Loan. Each such amount so
paid will constitute a "Servicing Advance". The Servicer may recover
Servicing Advances (x) from the Mortgagors to the extent permitted by
the Mortgage Loans, from Liquidation Proceeds realized upon the
liquidation of the related Mortgage Loan, and (y) as provided in
Section 7.5(d)(iii)(D) hereof. In no case may the Servicer recover
Servicing Advances from principal and interest payments on any Mortgage
Loan or from any amounts relating to any other Mortgage Loan except as
provided pursuant to Section 7.5(d)(iii)(D) hereof.
Section 8.10. Purchase of Mortgage Loans. The Servicer may,
but is not obligated to, purchase for its own account any Mortgage Loan which
becomes Delinquent, in whole or in part, as to four consecutive monthly
installments or any Mortgage Loan as to which enforcement proceedings have been
brought by the Servicer or by any Sub-Servicer pursuant to Section 8.13. Any
such Loan so purchased shall be purchased by the Servicer not later than the
related Remittance Date at a purchase price equal to the Loan Purchase Price
thereof, which purchase price shall be deposited in the Principal and Interest
Account.
Section 8.11. Maintenance of Insurance. (a) The Servicer shall
cause to be maintained with respect to each Mortgage Loan a hazard insurance
policy with a generally acceptable carrier that provides for fire and extended
coverage, and which provides for a recovery by the Servicer on behalf of the
Trust of insurance proceeds relating to such Mortgage Loan in an amount not less
than the least of (i) the outstanding principal balance of the Mortgage Loan,
(ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the full insurable value of the premises.
(b) If the Mortgage Loan at the time of origination relates to
a Property in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards, the
Servicer will cause to be maintained with respect thereto a flood
insurance policy in a form meeting the requirements of the current
guidelines of the Federal Insurance Administration with a generally
acceptable carrier in an amount representing coverage, and which
provides for a recovery by the Servicer on behalf of the Trust of
insurance proceeds relating to such Mortgage Loan of not less than the
least of (i) the outstanding principal balance of the Mortgage Loan,
(ii) the minimum amount required to compensate for damage or loss on a
replacement cost basis and (iii) the maximum amount of insurance that
is available under the Flood Disaster Protection Act of 1973. The
Servicer shall indemnify the Trust and the Certificate Insurer out of
the Servicer's own funds for any loss to the Trust and the Certificate
Insurer resulting from the Servicer's failure to maintain the insurance
required by this Section.
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(c) In the event that the Servicer shall obtain and maintain a
blanket policy insuring against fire, flood and hazards of extended
coverage on all of the Mortgage Loans, then, to the extent such policy
names the Servicer as loss payee and provides coverage in an amount
equal to the aggregate unpaid principal balance on the Mortgage Loans
without co-insurance and otherwise complies with the requirements of
this Section 8.11, the Servicer shall be deemed conclusively to have
satisfied its obligations with respect to fire and hazard insurance
coverage under this Section 8.11, it being understood and agreed that
such blanket policy may contain a deductible clause, in which case the
Servicer shall, in the event that there shall not have been maintained
on the related Property a policy complying with the preceding
paragraphs of this Section 8.11, and there shall have been a loss which
would have been covered by such policy, deposit in the Principal and
Interest Account from the Servicer's own funds the difference, if any,
between the amount that would have been payable under a policy
complying with the preceding paragraphs of this Section 8.11 and the
amount paid under such blanket policy. Upon the request of the Trustee
or the Certificate Insurer, the Servicer shall cause to be delivered to
the Trustee or the Certificate Insurer a certified true copy of such
policy.
Section 8.12. Due-on-Sale Clauses; Assumption and Substitution
Agreements. When a Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Note; provided, however, that the Servicer shall not exercise any
such right if (i) the "due-on-sale" clause, in the reasonable belief of the
Servicer, is not enforceable under applicable law or (ii) the Servicer
reasonably believes that to permit an assumption of the Mortgage Loan would not
materially and adversely affect the interest of the Owners or of the Certificate
Insurer. In such event, the Servicer shall enter into an assumption and
modification agreement with the person to whom such property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Note and, unless prohibited by applicable law or the related Mortgage Loan
documents, the Mortgagor remains liable thereon. If the foregoing is not
permitted under applicable law, the Servicer is authorized to enter into a
substitution of liability agreement with such person, pursuant to which the
original Mortgagor is released from liability and such person is substituted as
Mortgagor and becomes liable under the Note; provided, however, that to the
extent any such substitution of liability agreement would be delivered by the
Servicer outside of its usual procedures for mortgage loans held in its own
portfolio the Servicer shall, prior to executing and delivering such agreement,
obtain the prior written consent of the Certificate Insurer. The Mortgage Loan,
as assumed, shall conform in all respects to the requirements, representations
and warranties of this Agreement. The Servicer shall notify the Trustee that any
such assumption or substitution agreement has been completed by forwarding to
the Trustee the original copy of such assumption or substitution agreement,
which copy shall be added by the Trustee to the related File and which shall,
for all purposes, be considered a part of such File to the same extent as all
other documents and instruments constituting a part thereof. The Servicer shall
be responsible for recording any such assumption or substitution agreements. In
connection with any such assumption or substitution agreement, the required
monthly payment on the related Mortgage Loan shall not be changed but shall
remain as in effect immediately prior to the assumption or substitution, the
stated maturity or outstanding principal amount of such Mortgage Loan shall not
be changed nor shall any required monthly payments of principal or interest be
deferred or forgiven. Any fee collected by the Servicer or the Sub-Servicer for
consenting to any such conveyance or entering into an assumption or substitution
agreement shall be retained by or paid to the Servicer as additional servicing
compensation.
Notwithstanding the foregoing paragraph or any other provision
of this Agreement, the Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
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Section 8.13. Realization Upon Defaulted Mortgage Loans. (a)
The Servicer shall foreclose upon or otherwise comparably effect the ownership
on behalf of the Trust of Properties relating to defaulted Mortgage Loans as to
which no satisfactory arrangements can be made for collection of Delinquent
payments and which the Servicer has not purchased pursuant to Section 8.10. In
connection with such foreclosure or other conversion, the Servicer shall
exercise such of the rights and powers vested in it hereunder, and use the same
degree of care and skill in its exercise or use as prudent mortgage lenders
would exercise or use under the circumstances in the conduct of their own
affairs, including, but not limited to, advancing funds for the payment of
taxes, amounts due with respect to Senior Liens and insurance premiums. Any
amounts so advanced shall constitute "Servicing Advances" within the meaning of
Section 8.9(c) hereof. The Servicer shall sell any REO Property within 35 months
of its acquisition by the Trust, unless the Servicer obtains for the Trustee and
the Certificate Insurer an opinion of counsel experienced in federal income tax
matters and reasonably acceptable to the Certificate Insurer, addressed to the
Trustee, the Certificate Insurer and the Servicer, to the effect that the
holding by the Trust of such REO Property for any greater period will not result
in the imposition of taxes on "Prohibited Transactions" of the Trust as defined
in Section 860F of the Code or cause the Trust to fail to qualify as a REMIC
under the REMIC Provisions at any time that any Certificates are outstanding, in
which case the Servicer shall sell any REO Property by the end of any extended
period specified in any such opinion.
Notwithstanding the generality of the foregoing provisions,
the Servicer shall manage, conserve, protect and operate each REO Property for
the Owners solely for the purpose of its prompt disposition and sale in a manner
which does not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or result in the
receipt by the Trust of any "income from non-permitted assets" within the
meaning of Section 860F(a)(2)(B) of the Code or any "net income from foreclosure
property" which is subject to taxation under the REMIC Provisions. Pursuant to
its efforts to sell such REO Property, the Servicer shall either itself or
through an agent selected by the Servicer protect and conserve such REO Property
in the same manner and to such extent as is customary in the locality where such
REO Property is located and may, incident to its conservation and protection of
the interests of the Owners, rent the same, or any part thereof, as the Servicer
deems to be in the best interest of the Owners for the period prior to the sale
of such REO Property. The Servicer shall take into account the existence of any
hazardous substances, hazardous wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conservation and Recovery Act of 1976, or other federal, state
or local environmental legislation, on a Property in determining whether to
foreclose upon or otherwise comparably convert the ownership of such Property.
(b) The Servicer shall determine, with respect to each
defaulted Mortgage Loan, when it has recovered, whether through
trustee's sale, foreclosure sale or otherwise, all amounts it expects
to recover from or on account of such defaulted Mortgage Loan,
whereupon such Mortgage Loan shall become a "Liquidated Loan".
Section 8.14. Trustee to Cooperate; Release of Files. (a) Upon
the payment in full of any Mortgage Loan (including the repurchase of any
Mortgage Loan or any liquidation of such Mortgage Loan through foreclosure or
otherwise) or the receipt by the Servicer of a notification that payment in full
will be escrowed in a manner customary for such purposes, the Servicer shall
deliver to the Trustee a Request for Release. Upon receipt of such Request for
Release, the Trustee shall promptly release the related File, in trust to (i)
the Servicer, (ii) an escrow agent or (iii) any employee, agent or attorney of
the Trustee, in each case pending its release by the Servicer, such escrow agent
or such employee, agent or attorney of the Trustee, as the case may be. Upon any
such payment in full or the receipt of such notification that such funds have
been placed in escrow, the Servicer is authorized to give, as attorney-in-fact
for the Trustee and the mortgagee under the Mortgage which secured the Note, an
instrument of satisfaction (or assignment of Mortgage without recourse)
regarding the Property relating to such Mortgage, which instrument of
satisfaction or assignment, as the case may be, shall be delivered to the Person
or Persons entitled thereto against receipt therefor of payment in full, it
being understood and agreed that no expense incurred in
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connection with such instrument of satisfaction or assignment, as the case may
be, shall be chargeable to the Principal and Interest Account. In lieu of
executing any such satisfaction or assignment, as the case may be, the Servicer
may prepare and submit to the Trustee a satisfaction (or assignment without
recourse, if requested by the Person or Persons entitled thereto) in form for
execution by the Trustee with all requisite information completed by the
Servicer; in such event, the Trustee shall execute and acknowledge such
satisfaction or assignment, as the case may be, and deliver the same with the
related File, as aforesaid.
(b) From time to time and as appropriate in the servicing of
any Mortgage Loan, including, without limitation, foreclosure or other
comparable conversion of a Mortgage Loan or collection under any
applicable Insurance Policy, the Trustee shall (except in the case of
the payment or liquidation pursuant to which the related File is
released to an escrow agent or an employee, agent or attorney of the
Trustee), upon request of the Servicer and delivery to the Trustee of a
Request for Release, release the related File to the Servicer and shall
execute such documents as shall be necessary to the prosecution of any
such proceedings, including, without limitation, an assignment without
recourse of the related Mortgage to the Servicer; provided that there
shall not be released and unreturned at any one time more than 10% of
the entire number of Files, in which case the Trustee shall reject the
Request for Release. The Trustee shall complete in the name of the
Trustee any endorsement in blank on any Note prior to releasing such
Note to the Servicer. Such receipt shall obligate the Servicer to
return the File to the Trustee when the need therefor by the Servicer
no longer exists unless the Mortgage Loan shall be liquidated in which
case, upon receipt of the liquidation information, in physical or
electronic form, the Request for Release shall be released by the
Trustee to the Servicer.
(c) The Servicer shall have the right to approve applications
of Mortgagors for consent to (i) partial releases of Mortgages, (ii)
alterations and (iii) removal, demolition or division of properties
subject to Mortgages. No application for approval shall be considered
by the Servicer unless: (x) the provisions of the related Note and
Mortgage have been complied with; (y) the Loan-to-Value Ratio or
Combined Loan-to-Value Ratio (which may, for this purpose, be
determined at the time of any such action in a manner reasonably
acceptable to the Certificate Insurer) after any release does not
exceed the Loan-to-Value Ratio or the Combined Loan-to-Value Ratio as
of the Cut-Off Date or Subsequent Cut-Off Date, as applicable, and the
Mortgagor's debt-to-income ratio after any release does not exceed the
debt-to-income ratio as of the Cut-Off Date or Subsequent Cut-Off Date,
as the case may be, and in no event exceeds the maximum debt-to-income
levels under the related Originator's underwriting guidelines for a
similar credit grade borrower and (z) the lien priority of the related
Mortgage is not adversely affected. Upon receipt by the Trustee of an
Officer's Certificate executed on behalf of the Servicer setting forth
the action proposed to be taken in respect of a particular Mortgage
Loan and certifying that the criteria set forth in the immediately
preceding sentence have been satisfied, the Trustee shall execute and
deliver to the Servicer the consent or partial release so requested by
the Servicer. A proposed form of consent or partial release, as the
case may be, shall accompany any Officer's Certificate delivered by the
Servicer pursuant to this paragraph.
(d) On or before the last day of March of each year beginning
in 1999, the Servicer shall file the reports of foreclosures and
abandonments of any Property required by Code Section 6050J with the
Internal Revenue Service and provide a copy of such filing to the
Trustee. The reports from the Servicer shall be in form and substance
sufficient to meet the reporting requirements imposed by such Section
6050J.
(e) No costs associated with the procedures described in this
Section 8.14 shall be an expense of the Trust.
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Section 8.15. Servicing Compensation. As compensation for its
activities hereunder, the Servicer shall be entitled to retain the amount of the
Servicing Fee with respect to each Mortgage Loan. Additional servicing
compensation in the form of prepayment charges, release fees, bad check charges,
assumption fees, late payment charges, prepayment penalties, any other
servicing-related fees, Net Liquidation Proceeds not required to be deposited in
the Principal and Interest Account pursuant to Section 8.8(c)(iv) and similar
items shall, to the extent collected from Mortgagors, be retained by the
Servicer.
Section 8.16. Annual Statement as to Compliance. (a) The
Servicer, at its own expense, will deliver to the Trustee, the Certificate
Insurer, Standard & Poor's and Moody's, on or before the last day of March of
each year, commencing in 1999, an Officer's Certificate stating, as to each
signer thereof, that (i) a review of the activities of the Servicer during such
preceding calendar year and of performance under this Agreement has been made
under such officers' supervision and (ii) to the best of such officers'
knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement for such year, or, if there has been a default in the
fulfillment of all such obligations, specifying each such default known to such
officers and the nature and status thereof including the steps being taken by
the Servicer to remedy such defaults.
(b) The Servicer shall deliver to the Trustee, the Certificate
Insurer, the Owners and the Rating Agencies, promptly after having
obtained knowledge thereof but in no event later than five Business
Days thereafter, written notice by means of an Officer's Certificate of
any event which with the giving of notice or lapse of time, or both,
would become an Event of Servicing Termination.
Section 8.17. Annual Independent Certified Public Accountants'
Reports. On or before the last day of March of each year, commencing in 1999,
the Servicer, at its own expense, shall cause to be delivered to the Trustee,
the Certificate Insurer, Standard & Poor's and Moody's a letter or letters of a
firm of independent, nationally- recognized certified public accountants
reasonably acceptable to the Certificate Insurer stating that such firm has,
with respect to the Servicer's overall servicing operations during the preceding
calendar year, examined such operations in accordance with the requirements of
the Uniform Single Audit Program for Mortgage Bankers, and in either case
stating such firm's conclusions relating thereto.
Section 8.18. Access to Certain Documentation and Information
Regarding the Mortgage Loans. The Servicer shall provide to the Trustee, the
Certificate Insurer, the FDIC and the supervisory agents and examiners of each
of the foregoing access to the documentation regarding the Mortgage Loans
required by applicable state and federal regulations, such access being afforded
without charge but only upon reasonable request and during normal business hours
at the offices of the Servicer designated by it.
Upon any change in the format of the computer tape maintained
by the Servicer in respect of the Mortgage Loans, the Servicer shall deliver a
copy of such computer tape to the Trustee and in addition shall provide a copy
of such computer tape to the Trustee, and the Certificate Insurer at such other
times as the Trustee or the Certificate Insurer may reasonably request.
Section 8.19. Assignment of Agreement. The Servicer may not
assign its obligations under this Agreement, in whole or in part, unless it
shall have first obtained the written consent of the Trustee and the Certificate
Insurer, which such consent shall not be unreasonably withheld; provided,
however, that any assignee must meet the eligibility requirements set forth in
Section 8.21(f) hereof for a successor servicer. Notice of any such assignment
shall be given by the Servicer to the Trustee, the Certificate Insurer and the
Rating Agencies.
Section 8.20. Events of Servicing Termination. (a) The
Trustee (with the consent of the Certificate Insurer) or the Certificate Insurer
(or the Owners pursuant to Section 6.11 hereof) may remove
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the Servicer (including any successor entity serving as the Servicer) upon the
occurrence of any of the following events:
(i) The Servicer shall fail to deliver to the
Trustee any proceeds or required payment,
which failure continues unremedied for five
Business Days following written notice to an
Authorized Officer of the Servicer from the
Trustee or from any Owner;
(ii) The Servicer shall (I) apply for or consent
to the appointment of a receiver, trustee,
liquidator or custodian or similar entity
with respect to itself or its property, (II)
admit in writing its inability to pay its
debts generally as they become due, (III)
make a general assignment for the benefit of
creditors, (IV) be adjudicated a bankrupt or
insolvent, (V) commence a voluntary case
under the federal bankruptcy laws of the
United States of America or file a voluntary
petition or answer seeking reorganization,
an arrangement with creditors or an order
for relief or seeking to take advantage of
any insolvency law or file an answer
admitting the material allegations of a
petition filed against it in any bankruptcy,
reorganization or insolvency proceeding or
(VI) take corporate action for the purpose
of effecting any of the foregoing;
(iii) If without the application, approval or
consent of the Servicer, a proceeding shall
be instituted in any court of competent
jurisdiction, under any law relating to
bankruptcy, insolvency, reorganization or
relief of debtors, seeking in respect of the
Servicer an order for relief or an
adjudication in bankruptcy, reorganization,
dissolution, winding up, liquidation, a
composition or arrangement with creditors, a
readjustment of debts, the appointment of a
trustee, receiver, liquidator, custodian or
similar entity with respect to the Servicer
or of all or any substantial part of its
assets, or other like relief in respect
thereof under any bankruptcy or insolvency
law, and, if such proceeding is being
contested by the Servicer in good faith, the
same shall (A) result in the entry of an
order for relief or any such adjudication or
appointment or (B) continue undismissed or
pending and unstayed for any period of
seventy-five (75) consecutive days;
(iv) The Servicer shall fail to perform any one
or more of its obligations hereunder (other
than the obligations set out in (i) above)
and shall continue in default thereof for a
period of sixty (60) days after the earlier
of (x) notice by the Trustee or the
Certificate Insurer of said failure or (y)
actual knowledge of an officer of the
Servicer; provided, however, that if the
Servicer can demonstrate to the reasonable
satisfaction of the Certificate Insurer that
it is diligently pursuing remedial action,
then the cure period may be extended with
the written approval of the Certificate
Insurer; or
(v) The Servicer shall fail to cure any breach
of any of its representations and warranties
set forth in Section 3.2 which materially
and adversely affects the interests of the
Owners or Certificate Insurer for a period
of sixty (60) days after the Servicer's
discovery or receipt of notice thereof;
provided, however, that if the Servicer can
demonstrate to the reasonable satisfaction
of the Certificate Insurer that it is
diligently pursuing remedial action, then
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the cure period may be extended with the
written approval of the Certificate Insurer.
(b) The Certificate Insurer may remove the Servicer upon the
occurrence of any of the following events:
(i) a Group I Total Available Funds Shortfall
or a Group II Total Available Funds
Shortfall;
(ii) the failure by the Servicer to make any
required Servicing Advance;
(iii) the failure by the Servicer to perform any
one or more of its obligations hereunder,
which failure materially and adversely
affects the interests of the Certificate
Insurer, and the continuance of such failure
for a period of 30 days or such longer
period as agreed to in writing by the
Certificate Insurer.
(iv) the failure by the Servicer to make any
required Delinquency Advance or to pay any
Compensating Interest;
(v) if on any Payment Date the Pool Rolling
Three Month Delinquency Rate exceeds 7.0%
for either Mortgage Loan Group;
(vi) if on any Payment Date occurring in
September of any year, commencing in
September 1999, the aggregate Pool
Cumulative Realized Losses for a Mortgage
Loan Group over the prior twelve month
period exceed 2.0% of the average Pool
Principal Balance of such Mortgage Loan
Group as of the close of business on the
last day of each of the twelve preceding
Remittance Periods; or
(vii) (a) if on any of the first 60 Payment
Dates from the Startup Day the aggregate
Pool Cumulative Expected Losses for a
Mortgage Loan Group for all prior Remittance
Periods since the Startup Day exceed 5.0% of
the Pool Principal Balance of such Mortgage
Loan Group as of the Cut-Off Date and (b) if
on any Payment Date thereafter the aggregate
Pool Cumulative Expected Losses for a
Mortgage Loan Group for all prior Remittance
Periods from the Startup Day exceed 6.5% of
the Pool Principal Balance of such Mortgage
Loan Group as of the Cut-Off Date, provided,
however, with respect to clauses (v), (vi)
and (vii), if the Servicer can demonstrate
to the reasonable satisfaction of the
Certificate Insurer that any such event was
due to circumstances beyond the control of
the Servicer, such event shall not be
considered an event of termination of the
Servicer.
Upon the Trustee's determination that a required Delinquency Advance or
payment of Compensating Interest has not been made by the Servicer, the Trustee
shall so notify in writing an Authorized Officer of the Servicer and the
Certificate Insurer as soon as is reasonably practical.
(c) In the case of clauses (i), (ii), (iii), (iv) or (v) of
Subsection (b) the Owners of Certificates evidencing not less than 33
1/3% of the aggregate Class A Certificate Principal Balance (with the
consent of the Certificate Insurer) by notice then given in writing to
the Servicer (and a copy to the Trustee) may terminate all of the
rights and obligations of the Servicer under this Agreement; provided,
however, that the responsibilities and duties of the initial Servicer
with respect
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to the repurchase of Mortgage Loans pursuant to Section 3.4 shall not
terminate. The Trustee shall mail a copy of any notice given by it
hereunder to the Rating Agencies. 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 Certificates
or the Mortgage Loans or otherwise, shall without further action pass
to and be vested in the Trustee (for this purpose, the term includes an
affiliate thereof) or such successor Servicer as may be appointed
hereunder, and, without limitation, the Trustee is hereby authorized
and empowered (which authority and power are coupled with an interest
and are irrevocable) to execute and deliver, on behalf of the
predecessor 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 or termination, whether to complete the transfer and endorsement
of the Mortgage Loans and related documents or otherwise. The
predecessor Servicer shall cooperate with the successor Servicer or the
Trustee in effecting the termination of the responsibilities and rights
of the predecessor Servicer under this Agreement including the transfer
to the successor Servicer or to the Trustee for administration by it of
all cash accounts that shall at the time be held by the predecessor
Servicer for deposit or shall thereafter be received with respect to a
Mortgage Loan. All reasonable costs and expenses (including attorneys'
fees) incurred in connection with transferring the Files to the
successor Servicer and amending this Agreement to reflect such
succession as Servicer pursuant to this Section 8.20 shall be paid by
the predecessor Servicer upon presentation of reasonable documentation
of such costs and expenses.
(d) If any event described in subsections (a) or (b) above
occurs and is continuing, during the 30 day period following receipt of
notice, the Trustee and the Certificate Insurer shall cooperate with
each other to determine if the occurrence of such event is more likely
than not the result of the acts or omissions of the Servicer or more
likely than not the result of events beyond the control of the
Servicer. If the Trustee and the Certificate Insurer conclude that the
event is the result of the latter, the Servicer may not be terminated,
unless and until some other event set forth in subsection (a) or (b)
has occurred and is continuing. If the Trustee and the Certificate
Insurer conclude that the event is the result of the former, the
Certificate Insurer may terminate the Servicer in accordance with this
Section, and the Trustee shall act as successor Servicer or appoint a
successor Servicer.
If the Trustee and the Certificate Insurer cannot agree, and
the basis for such disagreement is not arbitrary or unreasonable, as to the
cause of the event, the decision of the Certificate Insurer shall control;
provided, however, that if the Certificate Insurer decides to terminate the
Servicer, the Trustee shall be relieved of its obligation to assume the
servicing or to appoint a successor, which shall be the exclusive obligation of
the Certificate Insurer.
For purposes of this Section 8.20, the Trustee shall not be
deemed to have knowledge of an Event of Default unless a Responsible Officer of
the Trustee assigned to and working in the Corporate Trust 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 Trustee and such notice references the
Certificates, the Trust or this Agreement.
The Certificate Insurer agrees to use its best efforts to
inform the Trustee of any materially adverse information regarding the
Servicer's servicing activities that comes to the attention of the Certificate
Insurer from time to time.
Section 8.21. Resignation of Servicer and Appointment of
Successor. (a) Upon the Servicer's receipt of notice of termination pursuant to
Section 8.20 or the Servicer's resignation in accordance with the terms of this
Section 8.21, the predecessor Servicer shall continue to perform its functions
as Servicer under this Agreement, in the case of termination, only until the
date specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice and, in the case of
resignation, until the earlier of (x) the date 45 days from the delivery to the
Certificate Insurer and the
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Trustee of written notice of such resignation (or written confirmation of such
notice) in accordance with the terms of this Agreement and (y) the date upon
which the predecessor Servicer shall become unable to act as Servicer, as
specified in the notice of resignation and accompanying opinion of counsel. All
collections then being held by the predecessor Servicer prior to its removal and
any collections received by the Servicer after removal or resignation shall be
endorsed by it to the Trustee and remitted directly and immediately to the
Trustee or the successor Servicer. In the event of the Servicer's resignation or
termination hereunder, the Trustee shall (at the direction of the Certificate
Insurer) appoint a successor Servicer and the successor Servicer shall accept
its appointment by a written assumption in form acceptable to the Trustee and
the Certificate Insurer, with copies to the Certificate Insurer and the Rating
Agencies. Pending such appointment, the Trustee shall act as the Servicer
hereunder.
(b) The Servicer shall not resign from the obligations and
duties hereby imposed on it, except (i) upon determination that its
duties hereunder are no longer permissible under applicable law or are
in material conflict by reason of applicable law with any other
activities carried on by it, the other activities of the Servicer so
causing such a conflict being of a type and nature carried on by the
Servicer at the date of this Agreement or (ii) upon written consent of
the Certificate Insurer and the Trustee. Any such determination
permitting the resignation of the Servicer shall be evidenced by an
opinion of counsel to such effect which shall be delivered to the
Trustee and the Certificate Insurer.
(c) No removal or resignation of the Servicer shall become
effective until the Trustee or a successor Servicer shall have assumed
the Servicer's responsibilities and obligations in accordance with this
Section.
(d) Upon removal or resignation of the Servicer, the Servicer
also shall promptly deliver or cause to be delivered to a successor
Servicer or the Trustee all the books and records (including, without
limitation, records kept in electronic form) that the Servicer has
maintained for the Mortgage Loans, including all tax bills, assessment
notices, insurance premium notices and all other documents as well as
all original documents then in the Servicer's possession.
(e) Any collections received by the Servicer after removal or
resignation shall be endorsed by it to the Trustee and remitted
directly and immediately to the Trustee, or the successor Servicer.
(f) Upon removal or resignation of the Servicer, the Trustee
(x) shall appoint a successor Servicer in accordance with the
instructions of the Certificate Insurer, or if the Certificate Insurer
fails to provide such instruction, solicit bids for a successor
Servicer as described below and (y) pending the appointment of a
successor Servicer, shall serve as Servicer. The Trustee shall, if the
Certificate Insurer fails to instruct it as to the appointment of a
successor Servicer and if the Trustee is unable to obtain a qualifying
bid and is prevented by law from acting as Servicer, (I) appoint, or
petition a court of competent jurisdiction to appoint, any housing and
home finance institution, bank or mortgage servicing institution which
has been designated as an approved seller-servicer by Fannie Mae or
FHLMC for second mortgage loans and having equity of not less than
$15,000,000 or such lower level as may be acceptable to the Certificate
Insurer as determined in accordance with generally accepted accounting
principles 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 and (II) give notice thereof to the Certificate
Insurer and Rating Agencies. The compensation of any successor Servicer
(including, without limitation, the Trustee) so appointed shall be the
Servicing Fee, together with the other servicing compensation in the
form of assumption fees, late payment charges or otherwise as provided
in Sections 8.8 and 8.15; provided, however, that if the Trustee acts
as successor Servicer, then the former Servicer agrees to pay to the
Trustee at such time that the Trustee becomes such successor Servicer a
set-up fee of fifteen dollars ($15.00)
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for each Mortgage Loan then included in the Trust Estate. The Trustee
shall be obligated to serve as successor Servicer whether or not the
fee described in the preceding sentence is paid by the Seller, but
shall in any event be entitled to receive, and to enforce payment of,
such fee from the former Servicer.
(g) In the event the Trustee solicits bids as provided above,
the Trustee shall solicit, by public announcement, bids from housing
and home finance institutions, banks and mortgage servicing
institutions meeting the qualifications set forth above. Such public
announcement shall specify that the successor Servicer shall be
entitled to the full amount of the aggregate Servicing Fees as
servicing compensation, together with the other servicing compensation
in the form of assumption fees, late payment charges or otherwise as
provided in Sections 8.8 and 8.15. Within thirty days after any such
public announcement, the Trustee shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest satisfactory
bid as to the price they will pay to obtain such servicing. The Trustee
shall deduct from any sum received by the Trustee from the successor to
the Servicer in respect of such sale, transfer and assignment all costs
and expenses of any public announcement and of any sale, transfer and
assignment of the servicing rights and responsibilities hereunder.
After such deductions, the remainder of such sum shall be paid by the
Trustee to the Servicer at the time of such sale.
(h) The Trustee and such successor shall take such action
consistent with this Agreement as shall be necessary to effectuate any
such succession, including the notification to all Mortgagors of the
transfer of servicing if such notification is not done by the Servicer
as required by subsection (j) below. The Servicer agrees to cooperate
with the Trustee and any successor Servicer in effecting the
termination of the Servicer's servicing responsibilities and rights
hereunder and shall promptly provide the Trustee or such successor
Servicer, as applicable, all documents and records reasonably requested
by it to enable it to assume the Servicer's functions hereunder and
shall promptly also transfer to the Trustee or such successor Servicer,
as applicable, all amounts which then have been or should have been
deposited in the Principal and Interest Account by the Servicer or
which are thereafter received with respect to the Mortgage Loans.
Neither the Trustee nor any other successor Servicer shall be held
liable by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by (i) the failure
of the Servicer to deliver, or any delay in delivery, cash, documents
or records to it or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the Servicer.
(i) The Trustee or any other successor Servicer, upon assuming
the duties of Servicer hereunder, shall immediately make all
Delinquency Advances and pay all Compensating Interest which the
Servicer has theretofore failed to remit with respect to the Mortgage
Loans; provided, however, that if the Trustee is acting as successor
Servicer, the Trustee shall only be required to make Delinquency
Advances (including the Delinquency Advances described in this clause
(i)) if, in the Trustee's reasonable good faith judgment, such
Delinquency Advances will ultimately be recoverable from the Mortgage
Loans.
(j) The Servicer which is being removed or is resigning shall
give notice to the Mortgagors and to the Rating Agencies of the
transfer of the servicing to the successor Servicer.
(k) Upon appointment, the successor Servicer shall be the
successor in all respects to the predecessor Servicer and shall be
subject to all the responsibilities, duties and liabilities of the
predecessor Servicer including, but not limited to, the maintenance of
the hazard insurance policy(ies), the fidelity bond and an errors and
omissions policy pursuant to Section 8.23 and shall be entitled to the
Monthly Servicing Fee and all of the rights granted to the predecessor
Servicer by the terms and provisions of this Agreement. The appointment
of a successor Servicer shall not affect
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any liability of the predecessor Servicer which may have arisen under
this Agreement prior to its termination as Servicer (including, without
limitation, any deductible under an insurance policy) nor shall any
successor Servicer be liable for any acts or omissions of the
predecessor Servicer or for any breach by such Servicer of any of its
representations or warranties contained herein or in any related
document or agreement.
(l) The Trustee shall give notice to the Certificate Insurer,
Moody's and Standard & Poor's and the Owners of the occurrence of any
event specified in Section 8.20 of which a Responsible Officer of the
Trustee has actual knowledge.
Section 8.22. Waiver of Past Events of Servicing Termination.
Subject to the rights of the Certificate Insurer pursuant to Section 8.20 to
terminate all of the rights and obligations of the Servicer under this
Agreement, the Owners of at least 51% of the Class A Certificate Principal
Balance may (with the consent of the Certificate Insurer), on behalf of all
Owners of Certificates, waive any default by the Servicer in the performance of
its obligations hereunder and its consequences, except a default in making any
required deposits to or payments from the Principal and Interest Account in
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Event of Servicing Termination arising
therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
Section 8.23. Inspections by Certificate Insurer; Errors and
Omissions Insurance. (a) At any reasonable time and from time to time upon
reasonable notice, the Certificate Insurer, the Trustee, or any agents or
representatives thereof may inspect the Servicer's servicing operations and
discuss the servicing operations of the Servicer with any of its officers or
directors. The costs and expenses incurred by the Servicer or its agents or
representatives in connection with any such examinations or discussions shall be
paid by the Servicer.
(b) The Servicer agrees to maintain errors and omissions
coverage and a fidelity bond, each at least to the extent generally
maintained by prudent mortgage loan servicers having servicing
portfolios of a similar size.
Section 8.24. Merger, Conversion, Consolidation or Succession
to Business of Servicer. Any corporation into which the Servicer may be merged
or converted or with which it may be consolidated, or corporation resulting from
any merger, conversion or consolidation to which the Servicer shall be a party
or any corporation succeeding to all or substantially all of the business of the
Servicer shall be the successor of the Servicer hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto provided that such corporation meets the qualifications set forth in
Section 8.21(f).
Section 8.25. Notices of Material Events. The Servicer shall
give prompt notice to the Certificate Insurer, the Trustee, Moody's and Standard
& Poor's of the occurrence of any of the following events:
(a) Any default or any fact or event which results, or which
with notice or the passage of time, or both, would result in the
occurrence of a default by the Seller, any Originator or the Servicer
under any Operative Document or would constitute a material breach of a
representation, warranty or covenant under any Operative Document;
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against
the Seller or the Servicer in any federal, state or local court or
before any governmental body or agency or before any arbitration board
or any such proceedings threatened by any governmental agency, which,
if adversely determined, would have
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a material adverse effect upon any the Seller's or the Servicer's
ability to perform its obligations under any Operative Document;
(c) The commencement of any proceedings by or against the
Seller or the Servicer under any applicable bankruptcy, reorganization,
liquidation, insolvency or other similar law now or hereafter in effect
or of any proceeding in which a receiver, liquidator, trustee or other
similar official shall have been, or may be, appointed or requested for
the Seller or the Servicer; and
(d) The receipt of notice from any agency or governmental body
having authority over the conduct of any of the Seller's or the
Servicer's business that the Seller or the Servicer is to cease and
desist, or to undertake any practice, program, procedure or policy
employed by the Seller or the Servicer in the conduct of the business
of any of them, and such cessation or undertaking will materially and
adversely affect the conduct of the Seller's or the Servicer's business
or its ability to perform under the Operative Documents or materially
and adversely affect the financial affairs of the Seller or the
Servicer.
Section 8.26. Monthly Servicing Report and Servicing
Certificate. (a) The Servicer shall, not later than the related Determination
Date, deliver to the Trustee, the Rating Agencies and the Certificate Insurer a
Monthly Servicing Report relating to the Group I Mortgage Loans and a Monthly
Servicing Report relating to the Group II Mortgage Loans stating the following:
(i) As to the related Due Period, the Interest
Remittance Amount (in both cases specifying
the (a) scheduled interest collected; (b)
Delinquency Advances relating to interest;
and (c) Compensating Interest paid) and the
Principal Remittance Amount (in both cases
specifying the (1) scheduled principal
collected; (2) Delinquency Advance relating
to Mortgage principal; (3) Prepayments; (4)
Loan Balance of Loans repurchased; (5)
Substitution Amounts; and (6) Net
Liquidation Proceeds (related to
principal));
(ii) With respect to the related Remittance
Period, the Servicing Fee payable to the
Servicer;
(iii) With respect to the related Remittance
Period, the net scheduled principal and
interest payments remitted by the Servicer
to the Principal and Interest Account;
(iv) The scheduled principal and interest
payments on the Mortgage Loans that were
not made by the related Mortgagors as of
the last day of the related Remittance
Period;
(v) The number and aggregate Loan Balances
(computed in accordance with the terms of
the Mortgage Loans) and the percentage of
the total number of Mortgage Loans and of
the Loan Balance which they represent of
Mortgage Loans Delinquent, if any, (i)
30-59 days, (ii) 60-89 days and (iii) 90
days or more, respectively, as of the last
day of the related Remittance Period;
(vi) The number and aggregate Loan Balances of
Mortgage Loans, if any, in foreclosure and
the book value (within the meaning of 12
Code of Federal Regulations Section 571.13
or any comparable provision) of any real
estate acquired through foreclosure or deed
in lieu of foreclosure,
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including REO Properties as of the last day
of the related Remittance Period;
(vii) The Loan Balances (immediately prior to
being classified as Liquidated Mortgage
Loans) of Liquidated Mortgage Loans as of
the last day of the related Remittance
Period;
(viii) Liquidation Proceeds received during the
related Remittance Period;
(ix) The amount of any Liquidation Expenses
being deducted from Liquidation Proceeds or
otherwise being charged to the Principal
and Interest Account with respect to such
Determination Date;
(x) Liquidation Expenses incurred during the
related Remittance Period which are not
being deducted from Liquidation Proceeds or
otherwise being charged to the Principal
and Interest Account with respect to such
Determination Date;
(xi) Net Liquidation Proceeds as of the last
day of the related Remittance Period;
(xii) Insurance payments received from Insurance
Policies during the related Remittance
Period;
(xiii) The number of Mortgage Loans and the
aggregate scheduled Loan Balances as of the
last day of the Due Period relating to the
Payment Date;
(xiv) The Group I Total Available Funds and the
Group II Total Available Funds for each
Remittance Date;
(xv) The number and aggregate Loan Balances and
Loan Purchase Prices of Mortgage Loans
required to be repurchased by the Seller or
purchased by the Servicer as of the
Replacement Cut-Off Date occurring during
the Remittance Period preceding such Date;
(xvi) The number and aggregate Loan Balances of
Mortgage Loans (at the time they became
Defaulted Mortgage Loans) which are being
carried as REO Properties;
(xvii) The amount of any Delinquency Advances made
by the Servicer during the related
Remittance Period and any unreimbursed
Delinquency Advances as of such Payment
Date;
(xviii) The weighted average Coupon Rates of the
Mortgage Loans;
(xix) The Monthly Exception Report;
(xx) The amount of any Substitution Amounts
delivered by the Seller;
(xxi) The number and aggregate Loan Balances of
Mortgage Loans, if any, in bankruptcy
proceedings as of the last day of related
Remittance Period;
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(xxii) The amount of unreimbursed Delinquency
Advances made by the Servicer;
(xxiii) The amounts, if any, of the Realized Losses
for the related Remittance Period and the
cumulative amount of Realized Losses since
the Startup Day.
(xxiv) The amount of unreimbursed Servicing
Advances made by the Servicer;
(xxv) Unpaid Servicing Fees;
(xxvi) The amount of Compensating Interest to be
paid by the Servicer during the related
Remittance Period;
(xxvii) The weighted average net Coupon Rate of the
Mortgage Loans;
(xxviii) For the related Remittance Period and
cumulatively since the Startup Day, the
number and aggregate Loan Balance of
Mortgage Loans bought back by the Servicer
or the Seller pursuant to Section 3.4, 3.6
and 8.10 hereof (identified separately for
each such section).
(xxix) Any other information reasonably requested
by the Certificate Insurer or the Trustee;
(xxx) The aggregate actual Loan Balance as of the
last day of the Due Period relating to the
Payment Date; and
(xxxi) For each of the Payment Dates during and
immediately after the Funding Period, (A)
the Pre-Funded Amount previously used to
purchase Subsequent Mortgage Loans, (B) the
Pre-Funded Amount distributed as principal,
(C) the Pre-Funding Account Earnings
transferred to the Capitalized Interest
Account and (D) the amounts transferred
from the Capitalized Interest Account to
the Certificate Account and the amount
transferred to the Seller, if any.
(b) On each Payment Date, the Trustee shall provide to the
Certificate Insurer, each of the Underwriters, the Seller, Standard &
Poor's and Moody's a written report (the "Servicing Certificate"), as
such form may be revised by the Trustee, the Servicer, Moody's and
Standard & Poor's from time to time, but in every case setting forth
the information required under Section 7.8 hereof, based solely on
information contained in the Monthly Servicing Report.
Section 8.27. Indemnification by the Seller. The Seller agrees
to indemnify and hold the Trustee, the Certificate Insurer and each Owner
harmless against any and all claims, losses, penalties, fines, forfeitures,
legal fees and related costs, judgments, and any other costs, fees and expenses
that the Trustee, the Certificate Insurer and any Owner may sustain in any way
related to the failure of the Seller to perform its duties under this Agreement.
A party against whom a claim is brought shall immediately notify the other
parties and the Rating Agencies if a claim is made by a third party with respect
to this Agreement, and the Seller shall assume (with the consent of the
Certificate Insurer and the Trustee) the defense of any such claim and pay all
expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Certificate Insurer, the Servicer, the Seller, the Trustee and/or
Owner in respect of such claim.
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Section 8.28. Indemnification by the Servicer. The Servicer
agrees to indemnify and hold the Trustee, the Certificate Insurer and each Owner
harmless against any and all claims, losses, penalties, fines, forfeitures,
legal fees and related costs, judgments, and any other costs, fees and expenses
that the Trustee, the Certificate Insurer and any Owner may sustain in any way
related to the failure of the Servicer to perform its duties and service the
Mortgage Loans in compliance with the terms of this Agreement. A party against
whom a claim is brought shall immediately notify the other parties and the
Rating Agencies if a claim is made by a third party with respect to this
Agreement, and the Servicer shall assume (with the consent of the Trustee) the
defense of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the Certificate Insurer, the
Servicer, the Trustee and/or Owner in respect of such claim.
ARTICLE IX
TERMINATION OF TRUST
Section 9.1. Termination of Trust. The Trust created hereunder
and all obligations created by this Agreement will terminate upon the earliest
of (i) the payment to the Owners of all Certificates from amounts other than
those available under the Certificate Insurance Policies of all amounts held by
the Trustee and required to be paid to such Owners pursuant to this Agreement
upon the later to occur of (a) the final payment or other liquidation (or any
advance made with respect thereto) of the last Mortgage Loan in the Trust Estate
or (b) the disposition of all property acquired in respect of any Mortgage Loan
remaining in the Trust Estate, (ii) at any time when a Qualified Liquidation of
both Mortgage Loan Groups included within the Trust is effected as described
below or (iii) as described in Section 9.2, 9.3 and 9.4 hereof; provided, that
the Trust created hereunder shall not terminate at any time that the Certificate
Principal Balance of any Class of Class A Certificates is greater than zero. To
effect a termination of this Agreement pursuant to clause (ii) above, the Owners
of all Certificates then Outstanding shall (x) unanimously direct the Trustee on
behalf of the Trust to adopt a plan of complete liquidation for both Mortgage
Loan Groups, as contemplated by Section 860F(a)(4) of the Code and (y) provide
to the Trustee an opinion of counsel experienced in federal income tax matters
to the effect that such liquidation constitutes a Qualified Liquidation, and the
Trustee either shall sell the Mortgage Loans and distribute the proceeds of the
liquidation of the Trust Estate, or shall distribute equitably in kind all of
the assets of the Trust Estate to the remaining Owners of the Certificates based
on their interests in the Trust, each in accordance with such plan, so that the
liquidation or distribution of the Trust Estate, the distribution of any
proceeds of the liquidation and the termination of this Agreement occur no later
than the close of the 90th day after the date of adoption of the plan of
liquidation and such liquidation qualifies as a Qualified Liquidation. In no
event, however, will the Trust created by this Agreement continue beyond the
expiration of twenty-one (21) years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the United Kingdom, living on the date hereof. The Trustee shall give written
notice of termination of the Agreement to each Owner in the manner set forth in
Section 11.5 hereof.
Section 9.2. Termination Upon Option of Servicer. (a) On any
Remittance Date on or after the Group I Clean-Up Call Date and on any Remittance
Date on or after the Group II Clean-Up Call Date, the Servicer acting directly
or through one or more affiliates may determine to purchase and may cause the
purchase from the Trust of all (but not fewer than all) of the Mortgage Loans
with respect to such Mortgage Loan Group and all property theretofore acquired
in respect of any such Mortgage Loan by foreclosure, deed in lieu of
foreclosure, or otherwise then remaining in such Mortgage Loan Group at a price
equal to the sum of (v) the greater of (i) 100% of the aggregate Loan Balances
of the related Mortgage Loans as of the day of purchase minus amounts actually
remitted by the Servicer representing collections of principal on the Mortgage
Loans during the related Remittance Period and (ii) the greater of (A) the fair
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market value of such Mortgage Loans (disregarding accrued interest) and (B) the
aggregate outstanding Certificate Principal Balance of the related Certificates,
(w) one month's interest on the purchase price computed at the weighted average
Pass-Through Rate of the Fixed Rate Certificates, in the case of Group I, or at
the Class A-4 Pass-Through Rate, in the case of Group II, (x) any Group II
Available Funds Cap Carry-Forward Amount at such time, in the case of Group II,
(y) the related Reimbursement Amount, if any, as of such Remittance Date and (z)
the aggregate amount of any Delinquency Advances and Servicing Advances
remaining unreimbursed, together with any accrued and unpaid Servicing Fees,
each, relating to such Mortgage Loan Group as of such Remittance Date (such
amount, the "Termination Price"). In connection with such purchase, the Servicer
shall remit to the Trustee all amounts then on deposit in the Principal and
Interest Account for deposit to the Certificate Account, which deposit shall be
deemed to have occurred immediately preceding such purchase.
(b) In connection with any such purchase, the Servicer shall
provide to the Trustee an opinion of counsel experienced in federal
income tax matters and reasonably acceptable to the Certificate Insurer
to the effect that such purchase constitutes a Qualified Liquidation of
the Trust Estate.
(c) Promptly following any such purchase, the Trustee will
release the Files to the Servicer, or otherwise upon their order, in a
manner similar to that described in Section 8.14 hereof.
(d) If the Servicer does not exercise its option pursuant to
this Section 9.2 with respect to the Trust Estate, then the Certificate
Insurer may do so on the same terms.
Section 9.3. Termination Upon Loss of REMIC Status. (a)
Following a final determination by the Internal Revenue Service, or by a court
of competent jurisdiction, in either case from which no appeal is taken within
the permitted time for such appeal, or if any appeal is taken, following a final
determination of such appeal from which no further appeal can be taken, to the
effect that the Trust does not and will no longer qualify as a "REMIC" pursuant
to Section 860D of the Code (the "Final Determination"), at any time on or after
the date which is 30 calendar days following such Final Determination, (i) the
Certificate Insurer or the Owners of a majority in Percentage Interest
represented by the Class A Certificates then Outstanding with the consent of the
Certificate Insurer (which consent shall not be unreasonably withheld) may
direct the Trustee on behalf of the Trust to adopt a plan of complete
liquidation, as contemplated by Section 860F(a)(4) of the Code and (ii) the
Certificate Insurer may notify the Trustee of the Certificate Insurer's
determination to purchase from the Trust all (but not fewer than all) Mortgage
Loans in the Trust Estate and all property theretofore acquired by foreclosure,
deed in lieu of foreclosure, or otherwise in respect of any Mortgage Loan then
remaining in the Trust Estate at a price equal to the Termination Price. In
connection with such purchase, the Servicer shall remit to the Trustee all
amounts then on deposit in the Principal and Interest Account for deposit in the
Certificate Account, which deposit shall be deemed to have occurred immediately
preceding such purchase.
(b) Upon receipt of such direction from the Certificate
Insurer, the Trustee shall notify the holders of the Class R
Certificates of such election to liquidate or such determination to
purchase, as the case may be (the "Termination Notice"). The Owner of a
majority of the Percentage Interest of the Class R Certificates then
Outstanding may, on any Remittance Date, within 60 days from the date
of receipt of the Termination Notice (the "Purchase Option Period"), at
their option, purchase from the Trust all (but not fewer than all)
Mortgage Loans in the Trust Estate, and all property theretofore
acquired by foreclosure, deed in lieu of foreclosure, or otherwise in
respect of any Mortgage Loan then remaining in the Trust Estate at a
purchase price equal to the Termination Price.
(c) If, during the Purchase Option Period, the Owners of the
Class R Certificates have not exercised the option described in the
immediately preceding paragraph, then upon the expiration
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of the Purchase Option Period (i) in the event that the Certificate
Insurer or the Owners of the Class A Certificates, with the consent of
the Certificate Insurer have given the Trustee the direction described
in clause (a)(i) above, the Trustee shall sell the Mortgage Loans and
distribute the proceeds of the liquidation of the Trust Estate, each in
accordance with the plan of complete liquidation, such that, if so
directed, the liquidation of the Trust Estate, the distribution of the
proceeds of such liquidation and the termination of this Agreement
occur no later than the close of the 60th day, or such later day as the
Certificate Insurer or the Owners of the Class A Certificates, with the
consent of the Certificate Insurer shall permit or direct in writing,
after the expiration of the Purchase Option Period and (ii) in the
event that the Certificate Insurer has given the Trustee notice of the
Certificate Insurer's determination to purchase the Mortgage Loans in
the Trust Estate described in clause (a)(ii) preceding, the Certificate
Insurer shall, on any Remittance Date within 60 days, purchase all (but
not fewer than all) Mortgage Loans in the Trust Estate, and all
property theretofore acquired by foreclosure, deed in lieu of
foreclosure or otherwise in respect of any Mortgage Loan then remaining
in the Trust Estate. In connection with such purchase, the Servicer
shall remit to the Trustee all amounts then on deposit in the Principal
and Interest Account for deposit to the Certificate Account, which
deposit shall be deemed to have occurred immediately preceding such
purchase.
(d) Following a Final Determination, the Owners of a majority
of the Percentage Interest of the Class R Certificates then Outstanding
may, at their option on any Remittance Date and upon delivery to the
Owners of the Class A Certificates and the Certificate Insurer of an
opinion of counsel experienced in federal income tax matters acceptable
to the Certificate Insurer selected by the Owners of such Class R
Certificates which opinion shall be reasonably satisfactory in form and
substance to the Certificate Insurer, to the effect that the effect of
the Final Determination is to increase substantially the probability
that the gross income of the Trust will be subject to federal taxation,
purchase from the Trust all (but not fewer than all) Mortgage Loans in
the Trust Estate, and all property theretofore acquired by foreclosure,
deed in lieu of foreclosure, or otherwise in respect of any Mortgage
Loan then remaining in the Trust Estate at a purchase price equal to
the Termination Price. In connection with such purchase, the Servicer
shall remit to the Trustee all amounts then on deposit in the Principal
and Interest Account for deposit to the Certificate Account, which
deposit shall be deemed to have occurred immediately preceding such
purchase. The foregoing opinion shall be deemed satisfactory unless the
Certificate Insurer gives the Owners of a majority of the Percentage
Interest of the Class R Certificates notice that such opinion is not
satisfactory within thirty days after receipt of such opinion.
In connection with any such purchase, such Owners shall direct
the Trustee to adopt a plan of complete liquidation as contemplated by Section
860F(a)(4) of the Code and shall provide to the Trustee an opinion of counsel
experienced in federal income tax matters to the effect that such purchase
constitutes a Qualified Liquidation.
Section 9.4. Disposition of Proceeds. The Trustee shall, upon
receipt thereof, deposit the proceeds of any liquidation of a Mortgage Loan
Group pursuant to this Article IX to the Certificate Account; provided, however,
that any amounts representing Servicing Fees, unreimbursed Delinquency Advances
or unreimbursed Servicing Advances relating to such Mortgage Loan Group
theretofore funded by the Servicer from the Servicer's own funds shall be paid
by the Trustee to the Servicer from the proceeds of the Trust Estate.
Section 9.5. Netting of Amounts. If any Person paying the
Termination Price would receive a portion of the amount so paid, such Person may
net any such amount against the Termination Price otherwise payable.
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ARTICLE X
THE TRUSTEE
Section 10.1. Certain Duties and Responsibilities. (a) The
Trustee (i) undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Trustee and (ii) in
the absence of bad faith on its part, may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished pursuant to and conforming to the
requirements of this Agreement; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be furnished
to the Trustee, shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Agreement.
(b) Following the termination of the Servicer hereunder and
pending the appointment of any other Person as successor Servicer, the
Trustee (for this purpose, the term includes an affiliate thereof) is
hereby obligated to perform the duties of the Servicer hereunder and
shall, for such period, have all of the rights of the Servicer; it
being expressly understood, however, by all parties hereto, and the
Owners, agree, prior to any termination of the Servicer pursuant to
Section 8.21, the Servicer shall perform such duties. Specifically, and
not in limitation of the foregoing, the Trustee shall upon termination
or resignation of the Servicer, and pending the appointment of any
other Person as successor Servicer, have the power and duty during its
performance as successor Servicer:
(i) to collect Mortgage payments;
(ii) to foreclose on defaulted Mortgage Loans;
(iii) to enforce due-on-sale clauses and to enter
into assumption and substitution agreements
as permitted by Section 8.12 hereof;
(iv) to deliver instruments of satisfaction
pursuant to Section 8.14 hereof;
(v) to make Delinquency Advances and Servicing
Advances and to pay Compensating Interest,
and
(vi) to enforce the Mortgage Loans.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct, except
that:
(i) this subsection shall not be construed to
limit the effect of subsection (a)
of this Section;
(ii) the Trustee shall not be liable for any
error of judgment made in good faith by an
Authorized Officer, unless it shall be
proved that the Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with
respect to any action taken or omitted to
be taken by it in good faith in accordance
with the direction of the Certificate
Insurer or of the Owners of a majority in
Percentage Interest of the Certificates of
the affected Class or Classes and the
Certificate Insurer relating to the time,
method and place of conducting any
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proceeding for any remedy available to the
Trustee, or exercising any trust or power
conferred upon the Trustee, under this
Agreement relating to such Certificates;
(iv) The Trustee shall not be required to expend
or risk its own funds or otherwise incur
financial liability for the performance of
any of its duties hereunder or the exercise
of any of its rights or powers if there is
reasonable ground for believing that the
repayment of such funds or adequate
indemnity against such risk or liability is
not reasonably assured to it, and none of
the provisions contained in this Agreement
shall in any event require the Trustee to
perform, or be responsible for the manner
of performance of, any of the obligations
of the Servicer under this Agreement except
during such time, if any, as the Trustee
shall be the successor to, and be vested
with the rights, duties, powers and
privileges of, the Servicer in accordance
with the terms of this Agreement;
(v) Subject to the other provisions of this
Agreement and without limiting the
generality of this Section 10.1, the
Trustee shall have no duty (A) to see any
recording, filing, or depositing of this
Agreement or any agreement referred to
herein or any financing statement or
continuation statement evidencing a
security interest, or to see to the
maintenance of any such recording or filing
or depositing or to any rerecording,
refiling or redepositing of any thereof,
(B) to see to any insurance (C) to see to
the payment or discharge of any tax,
assessment, or other governmental charge or
any lien or encumbrance of any kind owing
with respect to, assessed or levied
against, any part of the Trust Estate from
funds available in the Certificate Account,
(D) to confirm or verify the contents of
any reports or certificates of the Servicer
delivered to the Trustee pursuant to this
Agreement believed by the Trustee to be
genuine and to have been signed or
presented by the proper party or parties;
(vi) The Trustee shall not be accountable for
the use or application of any funds paid to
the Seller or the Servicer in respect of
the Mortgage Loans or withdrawn from the
Principal and Interest Account or the
Certificate Account by the Seller or the
Servicer; and
(vii) The Trustee shall not be required to take
notice or be deemed to have notice or
knowledge of any default or any of the
events described in Section 8.20 unless a
Responsible Officer of the Trustee shall
have received written notice thereof or a
Responsible Officer has actual knowledge
thereof. In the absence of receipt of such
notice, the Trustee may conclusively assume
that no default or event described in
Section 8.20 has occurred.
(d) Whether or not therein expressly so provided, every
provision of this Agreement relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to
the provisions of this Section.
(e) No provision of this Agreement shall require the 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
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repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(f) The permissive right of the Trustee to take actions
enumerated in this Agreement shall not be construed as a duty and the
Trustee shall not be answerable for other than its own negligence or
willful misconduct.
(g) The Trustee shall be under no obligation to institute any
suit, or to take any remedial proceeding under this Agreement, or to
take any steps in the execution of the trusts hereby created or in the
enforcement of any rights and powers hereunder until it shall be
indemnified to its satisfaction against any and all costs and expenses,
outlays, counsel fees and other reasonable disbursements and against
all liability, except liability which is adjudicated to have resulted
from its negligence or willful misconduct, in connection with any
action so taken.
Section 10.2. Removal of Trustee for Cause. (a) The Trustee
may be removed pursuant to paragraph (b) hereof upon the occurrence of any of
the following events (whatever the reason for such event 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) the Trustee shall fail to distribute to the
Owners entitled thereto on any Payment Date
amounts available for distribution received
by the Trustee in accordance with the terms
hereof; or
(2) the Trustee shall fail in the performance
of, or breach, any covenant or agreement of
the Trustee in this Agreement, or if any
representation or warranty of the Trustee
made in this Agreement or in any
certificate or other writing delivered
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 such failure or breach
shall continue or not be cured for a period
of 30 days after there shall have been
given, by registered or certified mail, to
the Trustee by the Seller, the Certificate
Insurer or by the Owners of at least 25% of
the aggregate Percentage Interests
represented by the Class A Certificates
then Outstanding, or, if there are no Class
A Certificates then Outstanding, by such
Percentage Interests represented by the
Class R Certificates, a written notice
specifying such failure or breach and
requiring it to be remedied; or
(3) a decree or order of a court or agency or
supervisory authority having jurisdiction
for the appointment of a conservator or
receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets
and liabilities or similar proceedings, or
for the winding-up or liquidation of its
affairs, shall have been entered against
the Trustee, and such decree or order shall
have remained in force undischarged or
unstayed for a period of 75 days; or
(4) a conservator or receiver or liquidator or
sequestrator or custodian of the property
of the Trustee is appointed in any
insolvency, readjustment of debt,
marshalling of assets and liabilities or
similar proceedings of or relating to the
Trustee or relating to all or substantially
all of its property; or
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(5) the Trustee shall become insolvent (however
insolvency is evidenced), generally fail to
pay its debts as they come due, file or
consent to the filing of a petition to take
advantage of any applicable insolvency or
reorganization statute, make an assignment
for the benefit of its creditors,
voluntarily suspend payment of its
obligations or take corporate action for
the purpose of any of the foregoing.
The Seller shall give to Moody's and Standard & Poor's notice
of the occurrence of any such event of which the Seller is aware.
(b) If any event described in Paragraph (a) occurs and is
continuing, then and in every such case (i) the Certificate Insurer or
(ii) with the prior written consent (which shall not be unreasonably
withheld) of the Certificate Insurer (x) the Seller or (y) the Owners
of a majority of the Percentage Interests represented by the Class A
Certificates may, whether or not the Trustee resigns pursuant to
Section 10.9 hereof, immediately, concurrently with the giving of
notice to the Trustee, and without delaying the 30 days required for
notice therein, appoint a successor Trustee pursuant to the terms of
Section 10.9 hereof.
Section 10.3. Certain Rights of the Trustee. Except as
otherwise provided in Section 10.1 hereof:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Seller, the Certificate
Insurer or the Owners of any Class of Certificates mentioned herein
shall be sufficiently evidenced in writing;
(c) whenever in the administration of this Agreement the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officer's
Certificate;
(d) the Trustee may consult with counsel of its selection, and
the written advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reasonable reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement at the request
or direction of any of the Owners pursuant to this Agreement, unless
such Owners shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document, but the Trustee
in its discretion may make such further inquiry or investigation into
such facts or matters as it may see fit; provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this
Agreement, the Trustee may require reasonable indemnity against such
cost, expense or liability as a condition to
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taking any such action. The reasonable expense of every such
examination shall be paid by the Servicer or, if paid by the Trustee,
shall be repaid by the Servicer upon demand by the Trustee from the
Servicer's own funds;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys, and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed and supervised with due care by it hereunder;
(h) the Trustee shall not be personally liable for any action
it takes or omits to take in good faith which it reasonably believes to
be authorized by the Authorized Officer of any Person or within its
rights or powers under this Agreement;
(i) the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or
willful misconduct in the performance of such act; and
(j) the Trustee shall not be required to give any bond or
surety in respect of the execution of the Trust Estate created hereby
or the powers granted hereunder.
Section 10.4. Not Responsible for Recitals or Issuance of
Certificates. The recitals and representations contained herein and in the
Certificates, except any such recitals relating to the Trustee, shall be taken
as the statements of the Seller, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representation as to the validity or
sufficiency of this Agreement, of the Certificates, of the Mortgage Loans or any
document relating thereto other than as to validity and sufficiency of its
authentication of the Certificates.
Section 10.5. May Hold Certificates. The Trustee or any agent
of the Trust, in its individual or any other capacity, may become an Owner or
pledgee of Certificates and may otherwise deal with the Trust with the same
rights it would have if it were not Trustee or such agent.
Section 10.6. Money Held in Trust. Money held by the Trustee
in trust hereunder need not be segregated from other trust funds except to the
extent required herein or required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Seller and except to the extent of income or other gain on
investments which are deposits in or certificates of deposit of the Trustee in
its commercial capacity and income or other gain actually received by the
Trustee on Eligible Investments.
Section 10.7. No Lien for Fees. The Trustee shall have no
lien on the Trust Estate for the payment of any fees and expenses.
Section 10.8. Corporate Trustee Required; Eligibility. There
shall at all times be a Trustee hereunder which shall be a corporation or
association organized and doing business under the laws of the United States of
America or of any State authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $100,000,000, subject
to supervision or examination by the United States of America or any such State
having a rating or ratings acceptable to the Certificate Insurer and having a
long-term deposit rating of at least BBB from Standard & Poor's (or such lower
rating as may be acceptable to Standard & Poor's) and at least Baa2 from Moody's
(or such lower rating as may be acceptable to Moody's). If such Trustee
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
or association shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at
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any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall, upon the request of the Seller with the
consent of the Certificate Insurer (which consent shall not be unreasonably
withheld) or of the Certificate Insurer, resign immediately in the manner and
with the effect hereinafter specified in this Article X.
Section 10.9. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article X shall become effective until the
acceptance of appointment by the successor trustee under Section 10.10 hereof.
(b) The Trustee, or any trustee or trustees hereafter
appointed, may resign at any time by giving written notice of
resignation to the Seller and by mailing notice of resignation by
registered mail, postage prepaid, to the Certificate Insurer and the
Owners at their addresses appearing on the Register. A copy of such
notice shall be sent by the resigning Trustee to Moody's and Standard &
Poor's. Upon receiving notice of resignation, the Seller shall promptly
appoint a successor trustee or trustees reasonably acceptable to the
Certificate Insurer evidenced by its written consent by written
instrument, in duplicate, executed on behalf of the Trust by an
Authorized Officer of the Seller, one copy of which instrument shall be
delivered to the Trustee so resigning and one copy to the successor
trustee or trustees. If no successor trustee shall have been appointed
by the Seller and have accepted appointment within 30 days after the
giving of such notice of resignation, the Trustee shall give notice to
the Certificate Insurer of such failure and the Certificate Insurer
shall have an additional 30 days to appoint a successor trustee. If
after such time no successor has been appointed and accepted then the
resigning trustee may petition any court of competent jurisdiction for
the appointment of a successor trustee. Such court may thereupon, after
such notice, if any, as it may deem proper, appoint a successor
trustee.
(c) If at any time the Trustee shall cease to be eligible
under Section 10.8 hereof and shall fail to resign after written
request therefor by the Seller or by the Certificate Insurer, the
Certificate Insurer or the Seller with the written consent of the
Certificate Insurer may remove the Trustee and appoint a successor
trustee by written instrument, in duplicate, executed on behalf of the
Trust by an Authorized Officer of the Seller, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee.
(d) The Owners of a majority of the Percentage Interests
represented by the Class A Certificates, or, if there are no Class A
Certificates then Outstanding, by such majority of the Percentage
Interests represented by the Class R Certificates, may at any time
remove the Trustee and appoint a successor trustee by delivering to the
Trustee to be removed, to the successor trustee so appointed, to the
Seller and to the Certificate Insurer, copies of the record of the act
taken by the Owners, as provided for in Section 11.3 hereof.
(e) If the Trustee fails to perform its duties in accordance
with the terms of this Agreement or becomes ineligible to serve as
Trustee, the Certificate Insurer may remove the Trustee and appoint a
successor trustee by written instrument, in triplicate, signed by the
Certificate Insurer duly authorized, one complete set of which
instruments shall be delivered to the Seller, one complete set to the
Trustee so removed and one complete set to the successor Trustee so
appointed. If no successor is appointed, then the removed trustee may
petition any court of competent jurisdiction for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any,
as it may deem proper and prescribe, appoint a successor trustee.
(f) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the
Trustee for any cause, the Seller shall promptly appoint a successor
Trustee. If within one year after such resignation, removal or
incapability or the occurrence of such vacancy, a successor Trustee
shall be appointed by act of the Owners of a
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majority of the Percentage Interests represented by the Class A
Certificates then Outstanding or, if there are no Class A Certificates
then Outstanding, by such majority of the Percentage Interest of the
Class R Certificates delivered to the Seller and the retiring Trustee,
the successor Trustee so appointed shall forthwith upon its acceptance
of such appointment become the successor Trustee and supersede the
successor Trustee appointed by the Seller. If no successor Trustee
shall have been so appointed by the Seller or the Owners and shall have
accepted appointment in the manner hereinafter provided, any Owner may,
on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any, as it may
deem proper and prescribe, appoint a successor Trustee.
(g) The Seller shall give notice of any removal of the Trustee
by mailing notice of such event by registered mail, postage prepaid, to
the Certificate Insurer and to the Owners as their names and addresses
appear in the Register. Each notice shall include the name of the
successor Trustee and the address of its corporate trust office.
Section 10.10. Acceptance of Appointment by Successor Trustee.
Every successor Trustee appointed hereunder shall execute, acknowledge and
deliver to the Seller on behalf of the Trust, to the Certificate Insurer and to
its predecessor Trustee an instrument accepting such appointment hereunder and
stating its eligibility to serve as Trustee hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts, duties and obligations of its
predecessor hereunder; but, on request of the Seller, the Certificate Insurer or
the successor Trustee, such predecessor Trustee shall, upon payment of its
charges then unpaid, execute and deliver an instrument transferring to such
successor Trustee all of the rights, powers and trusts of the Trustee so ceasing
to act, and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such Trustee so ceasing to act hereunder. Upon
request of any such successor Trustee, the Seller on behalf of the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts.
Upon acceptance of appointment by a successor Trustee as
provided in this Section, the Seller shall mail notice thereof by first-class
mail, postage prepaid, to the Owners at their last addresses appearing upon the
Register and to the Certificate Insurer. The Seller shall send a copy of such
notice to Moody's and Standard & Poor's. If the Seller fails to mail such notice
within ten days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be mailed at the expense of the
Trust.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor shall be qualified and eligible under
this Article X.
Section 10.11. Merger, Conversion, Consolidation or Succession
to Business of the Trustee. Any corporation or association into which the
Trustee may be merged or converted or with which it may be consolidated, any
corporation or association resulting from any merger, conversion or
consolidation to which the Trustee shall be a party or any corporation or
association succeeding to all or substantially all of the corporate trust
business of the Trustee shall be the successor of the Trustee hereunder, without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; provided, however, that such corporation or association
shall be otherwise qualified and eligible under this Article X. In case any
Certificates have been executed, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation to such Trustee may
adopt such execution and deliver the Certificates so executed with the same
effect as if such successor Trustee had itself executed such Certificates.
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Section 10.12. Reporting; Withholding. The Trustee shall
timely provide to the Owners the Internal Revenue Service's Form 1099 and any
other statement required by applicable Treasury regulations as determined by the
Seller and shall withhold, as required by applicable law, federal, state or
local taxes, if any, applicable to distributions to the Owners, including but
not limited to backup withholding under Section 3406 of the Code and the
withholding tax on distributions to foreign investors under Sections 1441 and
1442 of the Code.
Section 10.13. Liability of the Trustee. The Trustee shall be
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by the Trustee herein. Neither the Trustee nor any
of the directors, officers, employees or agents of the Trustee shall be under
any liability on any Certificate or otherwise to any Account, the Seller, the
Servicer or any Owner for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Trustee or any such
Person against any liability which would otherwise be imposed by reason of
negligent action, negligent failure to act or bad faith in the performance of
duties or by reason of reckless disregard of obligations and duties hereunder.
Subject to the foregoing sentence, the Trustee shall not be liable for losses on
investments of amounts in any Account (except for any losses on investments on
the amounts in the Certificate Account). In addition, the Seller and Servicer
covenant and agree to indemnify the Trustee and the Certificate Insurer, and
when the Trustee is acting as Servicer, the Servicer, from, and hold it harmless
against, any and all losses, liabilities, damages, claims or expenses (including
legal fees and expenses) other than those resulting from the negligence or bad
faith of the Trustee. The Trustee and the Certificate Insurer and any director,
officer, employee or agent thereof may rely and shall be protected in acting or
refraining from acting in good faith on any certificate, notice or other
document of any kind prima facie properly executed and submitted by the
Authorized Officer of any Person respecting any matters arising hereunder.
Provisions of this Section 10.13 shall survive the termination of this
Agreement.
Section 10.14. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or Property may at the time be located, the Servicer and the
Trustee acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Trustee and the
Certificate Insurer to act as co-Trustee or co-Trustees, jointly with the
Trustee, of all or any part of the Trust Estate or separate Trustee or separate
Trustees of any part of the Trust Estate and to vest in such Person or Persons,
in such capacity and for the benefit of the Owners, such title to the Trust
Estate, or any part thereof, and, subject to the other provisions of this
Section 10.14, such powers, duties, obligations, rights and trusts as the
Servicer and the Trustee may consider necessary or desirable. If the Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in the case any event indicated in Sections 8.20(a) or
8.20(b) shall have occurred and be continuing, the Trustee alone shall have the
power to make such appointment (with the written consent of the Certificate
Insurer). No co-Trustee or separate Trustee hereunder shall be required to meet
the terms of eligibility as a successor Trustee under Section 10.8 and no notice
to Owner of the appointment of any co-Trustee or separate Trustee shall be
required under Section 10.8.
Every separate Trustee and co-Trustee shall, to the extent
permitted, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties and obligations
conferred or imposed upon the Trustee shall
be conferred or imposed upon and exercised
or performed by the Trustee and such
separate Trustee or co-Trustee jointly (it
being understood that such separate Trustee
or co-Trustee is not authorized to act
separately without the Trustee joining in
such act), except to the extent that under
any law of any jurisdiction in which any
particular act or acts are to be performed
(whether as Trustee hereunder or as
successor to the
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Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such
act or acts, in which event such rights,
powers, duties and obligations (including
the holding of title to the Trust Estate or
any portion thereof in any such
jurisdiction) shall be exercised and
performed singly by such separate Trustee
or co-Trustee, but solely at the direction
of the Trustee;
(ii) No co-Trustee hereunder shall be held
personally liable by reason of any act or
omission of any other co-Trustee hereunder;
and
(iii) The Servicer and the Trustee acting jointly
may at any time accept the resignation of
or remove any separate Trustee or
co-Trustee.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate Trustees and
co-Trustees, as effectively as if given to each of them. Every instrument
appointing any separate Trustee or co-Trustee shall refer to this Agreement and
the conditions of this Section 10.14. Each separate Trustee and co-Trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of or affording protection
to the Trustee. Every such instrument shall be filed with the Trustee and a copy
thereof given to the Servicer.
Any separate Trustee or co-Trustee may, at any time,
constitute the Trustee, its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate Trustee
or co-Trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.
The Trustee shall give to Moody's, the Seller and the
Certificate Insurer notice of the appointment of any Co-Trustee or separate
Trustee.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Compliance Certificates and Opinions. Upon any
application or request by the Seller, the Certificate Insurer or the Owners to
the Trustee to take any action under any provision of this Agreement, the
Seller, the Certificate Insurer or the Owners, as the case may be, shall furnish
to the Trustee a certificate stating that all conditions precedent, if any,
provided for in this Agreement relating to the proposed action have been
complied with, except that in the case of any such application or request as to
which the furnishing of any documents is specifically required by any provision
of this Agreement relating to such particular application or request, no
additional certificate need be furnished.
Except as otherwise specifically provided herein, each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Agreement shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
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(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based; and
(c) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 11.2. Form of Documents Delivered to the 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 of an Authorized Officer of the Trustee may be
based, insofar as it relates to legal matters, upon an opinion of counsel,
unless such Authorized Officer knows, or in the exercise of reasonable care
should know, that the opinion is erroneous. Any such certificate of an
Authorized Officer of the Trustee or any opinion of counsel may be based,
insofar as it relates to factual matter upon a certificate or opinion of, or
representations by, one or more Authorized Officers of the Seller or of the
Servicer, stating that the information with respect to such factual matters is
in the possession of the Seller or of the Servicer, unless such Authorized
Officer or counsel knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to such matters
are erroneous. Any opinion of counsel may also be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by, an
Authorized Officer of the Trustee, stating that the information with respect to
such matters is in the possession of the Trustee, unless such counsel knows, or
in the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to such matters are erroneous. 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 Trustee 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 Agreement, they may, but need not, be consolidated
and form one instrument.
Section 11.3. Acts of Owners. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by the Owners may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Owners in person or by an agent duly appointed in writing; and, except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where it is
hereby expressly required, to the Seller. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "act" of the Owners 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 Agreement and conclusive in favor of the
Trustee and the Trust, 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 Certificates shall be proved by the
Register.
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(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Owner of any Certificate shall
bind the Owner of every Certificate 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 Trustee or the
Trust in reliance thereon, whether or not notation of such action is
made upon such Certificates.
Section 11.4. Notices, etc. to Trustee. Any request, demand,
authorization, direction, notice, consent, waiver or act of the Owners or other
documents provided or permitted by this Agreement to be made upon, given or
furnished to or filed with the Trustee by any Owner, the Certificate Insurer or
by the Seller shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with and received by the Trustee at its
corporate trust office as set forth in Section 2.2 hereof.
Section 11.5. Notices and Reports to Owners; Waiver of
Notices. Where this Agreement provides for notice to Owners of any event or the
mailing of any report to Owners, such notice or report shall be sufficiently
given (unless otherwise herein expressly provided) if mailed, first-class
postage prepaid, to each Owner affected by such event or to whom such report is
required to be mailed, at the address of such Owner as it appears on the
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 Owners 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 Owner shall affect the sufficiency
of such notice or report with respect to other Owners, and any notice or report
which is mailed in the manner herein provided shall be conclusively presumed to
have been duly given or provided.
Where this Agreement 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 Owners shall be filed with the 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 Owners when such notice is required
to be given pursuant to any provision of this Agreement, then any manner of
giving such notice as shall be satisfactory to the Trustee shall be deemed to be
a sufficient giving of such notice.
Where this Agreement provides for notice to any rating agency
that rated any Certificates, failure to give such notice shall not affect any
other rights or obligations created hereunder.
Section 11.6. Rules by Trustee and the Seller. The Trustee may
make reasonable rules for any meeting of Owners. The Seller may make reasonable
rules and set reasonable requirements for its functions.
Section 11.7. Successors and Assigns. All covenants and
agreements in this Agreement by any party hereto shall bind its successors and
assigns, whether so expressed or not.
Section 11.8. Severability. In case any provision in this
Agreement or in the Certificates 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 11.9. Benefits of Agreement. Nothing in this Agreement
or in the Certificates, expressed or implied, shall give to any Person, other
than the Owners, the Certificate Insurer and the parties hereto and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
Section 11.10. Legal Holidays. In any case where the date of
any Remittance Date, any Payment Date, any other date on which any distribution
to any Owner is proposed to be paid or any date on
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which a notice is required to be sent to any Person pursuant to the terms of
this Agreement shall not be a Business Day, then (notwithstanding any other
provision of the Certificates or this Agreement) payment or mailing 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 or mailed on the nominal date of any such
Remittance Date, such Payment Date or such other date for the payment of any
distribution to any Owner or the mailing of such notice, as the case may be, 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 11.11. Governing Law. In view of the fact that Owners
are expected to reside in many states and outside the United States and the
desire to establish with certainty that this Agreement 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 Agreement and each Certificate 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, without regard to the
conflicts of law principles thereof.
Section 11.12. 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 11.13. Usury. The amount of interest payable or paid
on any Certificate under the terms of this Agreement shall be limited to an
amount which shall not exceed the maximum nonusurious rate of interest allowed
by the applicable laws of the State of New York or any applicable law of the
United States permitting a higher maximum nonusurious rate that preempts such
applicable New York laws, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any Certificate exceeds the Highest Lawful Rate, the Trust stipulates that such
excess amount will be deemed to have been paid to the Owner of such Certificate
as a result of an error on the part of the Trustee acting on behalf of the Trust
and the Owner receiving such excess payment shall promptly, upon discovery of
such error or upon notice thereof from the Trustee on behalf of the Trust,
refund the amount of such excess or, at the option of such Owner, apply the
excess to the payment of principal of such Certificate, if any, remaining
unpaid. In addition, all sums paid or agreed to be paid to the Trustee for the
benefit of Owners of Certificates 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 Certificates.
Section 11.14. Amendment. (a) The Trustee, the Seller and the
Servicer, may at any time and from time to time, with the prior approval of the
Certificate Insurer but without the giving of notice to or the receipt of the
consent of the Owners, amend this Agreement for the purposes of (i) removing the
restriction against the transfer of a Class R Certificate to a Disqualified
Organization (as such term is defined in the Code) if accompanied by an opinion
of counsel experienced in federal income tax matters addressed to the
Certificate Insurer and the Trustee that there is or will be no adverse effect
as a result of such amendment, (ii) complying with the requirements of the Code
including any amendments necessary to maintain REMIC status of the assets of the
Trust treated as a REMIC hereunder, (iii) curing any ambiguity and (iv)
correcting or supplementing any provisions of this Agreement which are
inconsistent with any other provisions of this Agreement or adding provisions to
this Agreement which are not inconsistent with the provisions of this Agreement;
(v) adding any other provisions with respect to matters or questions arising
under this Agreement; or (vi) for any other purpose, provided that in the case
of clause (vi), (A) prior to the effectiveness of such amendment, the Seller
delivers an opinion of counsel acceptable to the Trustee and the Certificate
Insurer that such amendment will not adversely affect in any material respect
the interest of the Owners and the Certificate Insurer and (B) delivers a letter
from each Rating Agency stating that such amendment will not result in a
withdrawal or reduction of the rating of the Class A Certificates without regard
to the Certificate Insurance Policy. Notwithstanding anything to the contrary,
no such amendment shall (a) change in any manner the amount of, or delay the
timing of, payments which are required to be distributed to any Owner without
the consent of the Owner of such Certificate, (b) change the percentages of
Percentage Interest which are required to consent to any such amendments,
without the consent of the
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<PAGE>
Owners of all Certificates of the Class or Classes affected then outstanding or
(c) which affects in any manner the terms or provisions of the related
Certificate Insurance Policy.
(b) This Agreement may be amended from time to time by the
Servicer, the Seller and the Trustee with the consent of the
Certificate Insurer (which consent shall not be withheld if, in an
opinion of counsel addressed to the Trustee and the Certificate
Insurer, failure to amend would adversely affect the interests of the
Owners) and the Owners of 66 2/3% of the Class A Certificates 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 Owners; provided, however, that no such
amendment shall be made that no such amendment shall reduce in any
manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate
without the consent of the Owner of such Certificate or reduce the
percentage for each Class the Owners of which are required to consent
to any such amendment without the consent of the Owners of 100% of each
Class of Certificates.
(c) Each proposed amendment to this Agreement shall be
accompanied by an opinion of counsel nationally recognized in federal
income tax matters and reasonably acceptable to the Certificate Insurer
addressed to the Trustee and to the Certificate Insurer to the effect
that such amendment would not adversely affect the status of the Trust
(other than the Pre-Funding Account, the Group II Available Funds Cap
Carry-Forward Amount Account or the Capitalized Interest Account) as a
REMIC.
(d) The Certificate Insurer, the Owners, Moody's and Standard
& Poor's shall be provided with copies of any amendments to this
Agreement, together with copies of any opinions or other documents or
instruments executed in connection therewith.
Section 11.15. REMIC Status; Taxes. (a) The Tax Matters Person
shall prepare and file or cause to be filed with the Internal Revenue Service
federal tax or information returns with respect to the Trust and the
Certificates containing such information and at the times and in such manner as
may be required by the Code or applicable Treasury regulations and shall furnish
to Owners such statements or information at the times and in such manner as may
be required thereby. For this purpose, the Tax Matters Person may, but need not,
rely on any proposed regulations of the United States Department of the
Treasury. The Tax Matters Person shall indicate the election to treat the Trust
as a REMIC (which election shall apply to the taxable period ending December 31,
1998 and each calendar year thereafter) in such manner as the Code or applicable
Treasury regulations may prescribe. First Alliance Portfolio Services, Inc., as
Tax Matters Person appointed pursuant to Section 11.17 hereof, shall sign all
tax information returns filed pursuant to this Section 11.15. The Tax Matters
Person shall provide information necessary for the computation of tax imposed on
the transfer of a Class R Certificate to a Disqualified Organization, an agent
of a Disqualified Organization or a pass-through entity in which a Disqualified
Organization is the record holder of an interest. The Tax Matters Person shall
provide the Trustee with copies of any Federal tax or information returns filed,
or caused to be filed, by the Tax Matters Person with respect to the Trust or
the Certificates.
(b) The Tax Matters Person shall timely file all reports
required to be filed by the Trust with any federal, state or local
governmental authority having jurisdiction over the Trust, including
other reports that must be filed with the Owners, such as the Internal
Revenue Service's Form 1066 and Schedule Q and the form required under
Section 6050K of the Code, if applicable to REMICs. Furthermore, the
Tax Matters Person shall report to Owners, if required, with respect to
the allocation of expenses pursuant to Section 212 of the Code in
accordance with the specific instructions to the Tax Matters Person by
the Seller with respect to such allocation of expenses. The Tax Matters
Person shall collect any forms or reports from the Owners determined by
the Seller to be required under applicable federal, state and local tax
laws.
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<PAGE>
(c) The Tax Matters Person shall provide to the Internal
Revenue Service and to persons described in Section 860E(e)(3) and (6)
of the Code the information described in Proposed Treasury Regulation
Section 1.860D-1(b)(5)(ii), or any successor regulation thereto. Such
information will be provided in the manner described in Proposed
Treasury Regulation Section 1.860E(2)(a)(5), or any successor
regulation thereto.
(d) The Seller covenants and agrees that within ten Business
Days after the Startup Day it shall provide to the Tax Matters Person
any information necessary to enable the Tax Matters Person to meet its
obligations under subsections (b) and (c) above.
(e) The Trustee, the Seller and the Servicer each covenants
and agrees for the benefit of the Owners and the Certificate Insurer
(i) to take no action which would result in the termination of "REMIC"
status for the Trust (other than the Pre-Funding Account, the Group II
Available Funds Cap Carry-Forward Amount Account or the Capitalized
Interest Account) (ii) not to engage in any "prohibited transaction",
as such term is defined in Section 860F(a)(2) of the Code and (iii) not
to engage in any other action which may result in the imposition on the
Trust of any other taxes under the Code.
(f) The Trust shall, for federal income tax purposes, maintain
books on a calendar year basis and report income on an accrual basis.
(g) Except as otherwise permitted by Section 7.6(b) hereof, no
Eligible Investment shall be sold prior to its stated maturity (unless
sold pursuant to a plan of liquidation in accordance with Article IX
hereof).
(h) Neither the Seller nor the Trustee shall enter into any
arrangement by which the Trustee will receive a fee or other
compensation for services rendered pursuant to this Agreement, which
fee or other compensation is paid from the Trust Estate, other than as
expressly contemplated by this Agreement.
(i) Notwithstanding the foregoing clauses (g) and (h), the
Trustee or the Seller may engage in any of the transactions prohibited
by such clauses, provided that the Trustee shall have received an
opinion of counsel experienced in federal income tax matters and
reasonably acceptable to the Certificate Insurer, which opinion shall
not be at the expense of the Trustee, to the effect that such
transaction does not result in a tax imposed on the Trustee or cause a
termination of REMIC status for the Trust; provided, however, that such
transaction is otherwise permitted under this Agreement.
Section 11.16. Additional Limitation on Action and Imposition
of Tax. (a) Any provision of this Agreement to the contrary notwithstanding, the
Trustee shall not, without having obtained an opinion of counsel experienced in
federal income tax matters and reasonably acceptable to the Certificate Insurer,
which opinion shall not be at the expense of the Trustee, to the effect that
such transaction does not result in a tax imposed on the Trust or cause a
termination of REMIC status for the Trust, (i) sell any assets in the Trust
Estate, (ii) accept any contribution of assets after the Startup Day or (iii)
agree to any modification of this Agreement.
(b) In the event that any tax is imposed on "prohibited
transactions" of the Trust as defined in Section 860F(a)(2) of the
Code, on the "net income from foreclosure property" as defined in
Section 860G(c) of the Code, on any contribution to the Trust after the
Startup Day pursuant to Section 860G(d) of the Code or any other tax
(other than any minimum tax imposed by Sections 23151(a) or 23153(a) of
the California Revenue and Taxation Code) is imposed, such tax shall be
paid by (i) the Trustee, if such tax arises out of or results from a
breach by the Trustee of any of its obligations under this Agreement,
(ii) the Servicer, if such tax arises out of or results from a breach
by the Servicer of any of its obligations under this Agreement or (iii)
the Owners of the Class R
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Certificates in proportion to their Percentage Interests. To the extent
such tax is chargeable against the Owners of the Class R Certificates,
notwithstanding anything to the contrary contained herein, the Trustee
is hereby authorized to retain from amounts otherwise distributable to
the Owners of the Class R Certificates on any Payment Date sufficient
funds to reimburse the Trustee for the payment of such tax (to the
extent that the Trustee has not been previously reimbursed or
indemnified therefor). The Trustee agrees to first seek indemnification
for any such tax payment from any indemnifying parties before
reimbursing itself from amounts otherwise distributable to the Owners
of the Class R Certificates.
Section 11.17. Appointment of Tax Matters Person. A Tax
Matters Person will be appointed for the Trust for all purposes of the Code, and
such Tax Matters Person will perform, or cause to be performed through agents,
such duties and take, or cause to be taken, such actions as are required to be
performed or taken by the Tax Matters Person under the Code. The Tax Matters
Person for the Trust shall be First Alliance Portfolio Services, Inc. as long as
it owns a Class R Certificate or, if First Alliance Portfolio Services, Inc.
does not own a Class R Certificate, may be any other entity selected by First
Alliance Portfolio Services, Inc. that owns a Class R Certificate.
Section 11.18. The Certificate Insurer. The Certificate
Insurer is a third-party beneficiary of this Agreement. Any right conferred to
the Certificate Insurer shall be suspended during any period in which the
Certificate Insurer is in default in its payment obligations under the
Certificate Insurance Policies. During any period of suspension the Certificate
Insurer's rights hereunder shall vest in the Owners of the Class A Certificates
and shall be exercisable by the Owners of at least a majority in Percentage
Interest of the Class A Certificates then Outstanding. At such time as the Class
A Certificates are no longer Outstanding hereunder and the Certificate Insurer
has been reimbursed for all Insured Payments to which it is entitled hereunder,
the Certificate Insurer's rights hereunder shall terminate.
Section 11.19. Maintenance of Records. Each Owner of a Class
R Certificate shall each continuously keep an original executed counterpart of
this Agreement in its official records.
Section 11.20. Notices. All notices hereunder shall be given
as follows, until any superseding instructions are given to all other Persons
listed below:
The Trustee: Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0113
Attention: First Alliance 1998-3
Tel: (612) 667-9764
with a copy to:
Norwest Bank Minnesota, National Association
11000 Broken Land Parkway
Columbia, Maryland 21044-3562
Tel: (410) 884-2086
Fax: (410) 884-2360
The Seller: First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92614-6203
Attention: Director, Secondary Marketing
Tel: (949) 224-8357
Fax: (949) 224-8366
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The Servicer: First Alliance Mortgage Company
17305 Von Karman Avenue
Irvine, California 92614-6203
Attention: Manager, Investor Reporting
Tel: (714) 224-8357
Fax: (714) 224-8366
The Certificate
Insurer: MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management -
Structured Finance (IPM-SF)
First Alliance Mortgage Loan
Trust 1998-3
Tel: (914) 765-3781
Fax: (914) 765-3810
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: The Home Equity Monitoring
Department
Standard & Poor's: Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies
25 Broadway
New York, New York 10004
Attention: Residential Mortgage
Surveillance Dept.
Underwriters: Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10292-2015
Attention: Director, Asset-Backed Finance
Tel: (212) 778-1000
Fax: (212) 778-5099
First Union Capital Markets Corp.
One First Union Center, TW9
Charlotte, North Carolina 28288-0166
Attention: Wallace Saunders
Tel: (704) 374-4868
Fax: (704) 383-8121
103
<PAGE>
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers
thereunto duly authorized, all as of the day and year first above written.
FIRST ALLIANCE MORTGAGE COMPANY,
as Seller
By: /s/ Francisco Nebot
-----------------------------
Name: Francisco Nebot
Title: Executive Vice President, CFO
FIRST ALLIANCE MORTGAGE COMPANY,
as Servicer
By: /s/ Francisco Nebot
----------------------------
Name: Francisco Nebot
Title: Executive Vice President, CFO
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Peter J. Masterman
----------------------------
Name: Peter J. Masterman
Title: Vice President
<PAGE>
Washington )
) ss.:
District of Columbia )
On the 21st day of September, 1998, before me, personally came
Peter J. Masterman, to me known, who being by me duly sworn did depose and say
that his office is located at 11000 Broken Land Parkway, Columbia, MD
21044-3562; that he is a Vice President of Norwest Bank Minnesota, National
Association, the national banking association described herein and that he
executed the above instrument as Trustee; and that he signed his name thereto
under the authority granted by the Board of Directors of said national banking
association.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this Certificate first above written.
/s/ Claudia B. Bixler
----------------------
[NOTARIAL SEAL]
Claudia B. Bixler
Notary Public, District of Columbia
My Commission Expires March 31, 2000
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the 17th day of September, 1998, before me, a Notary
Public, personally appeared Francisco Nebot, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed the
same in his authorized capacity, and that by his signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
[NOTARIAL SEAL]
Notary Public: /s/ Heidi R. Hopper
My Comm. Expires June 11, 2002
Exhibit 10.1
SUBSEQUENT TRANSFER AGREEMENT
First Alliance Mortgage Company in its capacities as seller (the
"Seller") and as servicer (the "Servicer") and First Alliance Mortgage Loan
Trust 1998-3, as the "Purchaser", pursuant to the Pooling and Servicing
Agreement dated as of September 1, 1998, (the "Pooling and Servicing Agreement")
among the Seller, the Servicer, the Purchaser and Norwest Bank Minnesota,
National Association, a national banking association, in its capacity as Trustee
(the "Trustee"), hereby confirm their understanding with respect to the sale by
the Seller and the purchase by the Purchaser of those Mortgage Loans (the
"Subsequent Mortgage Loans") listed on the attached Schedules of Mortgage Loans.
Conveyance of Subsequent Mortgage Loans. As of September 30, 1998 (the
"Subsequent Transfer Date"), the Seller does hereby irrevocably transfer,
assign, set over and otherwise convey to the Purchaser, without recourse (except
as otherwise explicitly provided for herein) all of its right, title and
interest in and to any and all benefits accruing from the Subsequent Mortgage
Loans which are delivered to the Trustee herewith (and all substitutions
therefor as provided by Sections 3.3, 3.4 and 3.6 of the Pooling and Servicing
Agreement), together with the related Subsequent Mortgage Loan documents and the
interest in any Property which secured a Subsequent Mortgage Loan but which has
been acquired by foreclosure or deed in lieu of foreclosure, and all payments
thereon and proceeds of the conversion, voluntary or involuntary, of the
foregoing; and proceeds of all the foregoing (including, but not by way of
limitation, all proceeds of any mortgage insurance, hazard insurance and title
insurance policy relating to the Subsequent Mortgage Loans, cash proceeds,
accounts, accounts receivable, notes, drafts, acceptances, chattel paper,
checks, deposit accounts, rights to payment of any and every kind, and other
forms of obligations and receivables which at any time constitute all or part of
or are included in the proceeds of any of the foregoing). The Seller shall
deliver the original Mortgage or mortgage assignment with evidence of recording
thereon (except as otherwise provided by the Pooling and Servicing Agreement)
and other required documentation in accordance with the terms set forth in
Sections 3.5 and 3.8 of the Pooling and Servicing Agreement.
The costs relating to the delivery of the documents specified in this
Subsequent Transfer Agreement and the Pooling and Servicing Agreement shall be
borne by the Seller.
The Seller hereby affirms the representations and warranties set forth
in the Pooling and Servicing Agreement that relate to the Seller and the
Subsequent Mortgage Loans as of the date hereof. The Seller hereby delivers
notice and confirms that each of the conditions set forth in Section 3.8(b),
3.8(c) and 3.8(d) to the Pooling and Servicing Agreement are satisfied as of the
date hereof.
Pursuant to Section 3.8(a) of the Pooling and Servicing Agreement, the
Seller instructs the Trustee to release one-hundred percent of the aggregate
principal balances of the Subsequent Mortgage Loans so transferred from the
Pre-Funding Account, $24,695,346.98 pursuant to this Subsequent Transfer
Agreement and to include $19,855,544.17 of the Subsequent Mortgage Loans listed
in Exhibit A hereto in Group I and $4,839,802.81 of the Subsequent Mortgage
Loans listed in Exhibit B hereto in Group II.
<PAGE>
All terms and conditions of the Pooling and Servicing Agreement are
hereby ratified, confirmed and incorporated herein, provided that in the event
of any conflict the provisions of this Subsequent Transfer Agreement shall
control over the conflicting provisions of the Pooling and Servicing Agreement.
Terms capitalized herein and not defined herein shall have their
respective meanings as set forth in the Pooling and Servicing Agreement.
FIRST ALLIANCE MORTGAGE NORWEST BANK MINNESOTA,
COMPANY, as Seller NATIONAL ASSOCIATION,
as Trustee for First Alliance Mortgage Loan
Trust 1998-3
By: /s/ Dianne Arneal
---------------------------
Name: Dianne Arneal By: /s/ Peter J. Masterman
Title: Vice President --------------------------
Secondary Marketing Name: Peter J. Masterman
Title: Vice President
FIRST ALLIANCE MORTGAGE
COMPANY, as Servicer Dated: September 30, 1998
By: /s/ Dianne Arneal
---------------------------
Name: Dianne Arneal
Title: Vice President
Secondary Marketing
<PAGE>
EXHIBIT A
LOAN SCHEDULE - 1998-3 (FIXED)
<TABLE>
<CAPTION>
Loan Lien Cut-Off Current
Number Property Address City ST Zip Pos Balance Rate
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
106293 1861 W. BLOSSOM PLACE BREA CA 92821 1 136,783.00 9.400
106295 12052 9TH ST GARDEN GROVE CA 92840 1 65,152.00 7.990
106308 7711 LAURELTON AVE STANTON CA 92841 1 132,990.00 8.990
205054 1524 NOB HILL DRIVE ESCONDIDO CA 92026 1 112,490.00 8.990
205055 8119 BLOSSOM LANE SPRING VALLEY CA 91977 1 102,658.00 8.490
205057 5824 KENT PLACE SAN DIEGO CA 92120 1 217,490.00 8.250
205069 1260 7TH STREET IMPERIAL BEACH CA 91932 1 80,217.00 9.490
304614 6718 MARK KEPPEL STREET PARAMOUNT CA 90723 1 103,983.00 8.990
304621 2612 RUHLAND AVENUE REDONDO BEACH CA 90278 1 172,401.00 8.990
304627 11809 ALBURTIS AVENUE NORWALK CA 90650 2 79,490.00 9.490
304632 2916 WEST 75TH STREET LOS ANGELES CA 90043 1 71,504.00 8.900
304636 11425 DALWOOD AVENUE NORWALK CA 90650 1 57,928.00 8.990
304637 1811-1813-1813 1/2 W. 247th Street LOMITA CA 90717 1 98,845.00 9.900
304640 5207 WEST 98TH STREET LOS ANGELES CA 90045 1 33,107.00 11.390
304641 1633 WEST 56TH STREET LOS ANGELES CA 90062 1 20,504.00 10.390
304649 5104 8TH AVENUE LOS ANGELES CA 90043 1 97,349.00 9.200
304654 334 EAST NORTON STREET LONG BEACH CA 90805 1 53,968.00 8.490
304656 3153 SENASAC AVENUE LONG BEACH CA 90808 1 115,490.00 10.300
405092 1531 52ND AVENUE OAKLAND CA 94601 1 56,524.31 11.750
405849 103 BOLERO PLAZA UNION CITY CA 94587 1 52,494.00 9.900
405850 969 SOUTH 47TH STREET RICHMOND CA 94804 1 35,990.00 8.010
405852 129 SOUTH 39TH STREET RICHMOND CA 94804 1 80,790.00 9.250
405853 305 HUMBOLDT ROAD BRISBANE CA 94005 1 202,219.00 8.490
405855 537 EVELYN LANE HAYWARD CA 94544 1 64,665.00 8.490
405858 2866 GROOM DRIVE RICHMOND CA 94806 1 63,940.00 8.900
405860 754 DELTA STREET SAN FRANCISCO CA 94134 1 128,780.00 8.990
405861 847 3OTH AVENUE SAN FRANCISCO CA 94121 1 103,379.00 9.890
405865 750 MYRA WAY SAN FRANCISCO CA 94127 1 207,716.00 8.890
405866 3866 BALFOUR AVENUE OAKLAND CA 94610 1 195,990.00 10.990
405867 31051 GRANGER AVENUE UNION CITY CA 94587 1 73,617.00 8.990
405868 5701 GRANT AVENUE CARMICHAEL CA 95608 1 76,248.00 8.990
405871 5624 HIGHLAND AVENUE RICHMOND CA 94804 1 51,921.00 8.490
405873 620,620A,622 NATOMA STREET SAN FRANCISCO CA 94103 1 138,859.99 8.490
405874 1581 SAN LORENZO AVENUE BERKELEY CA 94707 1 129,951.00 8.490
405875 191 THRIFT STREET SAN FRANCISCO CA 94112 1 149,480.00 8.490
405880 2924 FLORIDA AVENUE RICHMOND CA 94804 1 64,251.00 8.490
405881 10 MAGGIORA COURT OAKLAND CA 94605 1 180,383.00 8.490
505736 1234 N KEYSTONE STREET BURBANK CA 91506 1 146,783.00 8.490
505743 25821 Quilla Rd.,Valencia Area LOS ANGELES CA 91355 1 149,149.00 8.990
505747 3360 HALDERMAN STREET LOS ANGELES CA 90066 1 237,835.00 9.750
505748 1434 N.BENTON WAY LOS ANGELES CA 90026 1 60,793.00 8.490
505749 17737 Romar St (NORTHRIDGE AREA) LOS ANGELES CA 91325 1 167,642.00 9.990
505751 1427 VENICE STREET SIMI VALLEY CA 93065 1 104,821.00 8.490
505755 19125 Sylvan St,Tarzana Area LOS ANGELES CA 91335 1 111,148.00 8.500
505758 1464 DECKSIDE COURT OXNARD CA 93035 1 93,824.00 7.990
505760 970 MALTMAN AVENUE LOS ANGELES CA 90026 1 99,240.00 9.900
505762 11336 Pala Mesa Dr NORTHRIDGE AREA, LOS ANGELES CA 91326 1 298,345.00 8.990
505763 809 N. ORLANDO AVE. LOS ANGELES CA 90069 1 187,622.00 9.990
605050 2135 KNOX AVENUE PITTSBURG CA 94565 1 77,387.00 8.990
605052 70 VIKING DRIVE PLEASANT HILL CA 94523 1 42,881.00 11.400
707429 3023 1/2- 3025 BOULDER ST, LOS ANGELES CA 90063 1 69,613.00 11.390
707434 317 HOLGER DR MONTEBELLO CA 90640 1 116,611.00 9.700
707435 2833 LOGANRITA AVE ARCADIA AREA CA 91006 1 57,051.00 9.900
707438 7685 SCHOLL ACCESS RD, PASADENA CA 91105 1 83,286.00 9.490
707447 1377 N D ST, FONTANA CA 92336 1 23,651.00 10.990
707448 1026 S, CONCORD ST, LOS ANGELES CA 90023 1 70,133.00 9.900
707449 908 W PINE ST, WEST COVINA CA 91790 1 117,099.00 8.490
707452 13940 MULBERRY DR. WHITTIER AREA CA 90605 1 94,240.00 8.990
707458 1149 FICKEWIRTH AVE LA PUENTE CA 91744 1 80,704.00 8.490
707459 1700 OLD GROVE RD PASADENA AREA CA 91107 1 312,642.00 9.250
806746 6885 IVEGILL CT SAN JOSE CA 95119 1 138,207.00 8.990
806757 1415 ANNAPOLIS WY. SAN JOSE CA 95118 1 200,507.00 8.850
806759 1751 EVERGLADE AVE. SAN JOSE CA 95122 1 126,565.00 8.790
806760 1175 WESTMINSTER AV E PALO ALTO CA 94303 1 75,744.00 8.490
806761 534 CHESTNUT AV MILPITAS CA 95035 1 199,043.00 8.900
806762 331 WISTERIA DR E PALO ALTO CA 94303 1 128,551.00 9.700
806763 908 FARIS DRIVE SAN JOSE CA 95111 1 179,976.00 8.750
806765 1732 ROLL ST. SANTA CLARA CA 95050 1 105,499.00 7.990
806769 1435 WOODLAND AVENUE MENLO PARK CA 94025 1 282,031.99 8.490
806780 1017 SUMMERVIEW DR. SAN JOSE CA 95132 1 64,864.00 8.490
806783 349 N MURPHY AVE SUNNYVALE CA 94086 1 47,212.00 8.890
1602956 517 PAMELA DR SE OLYMPIA WA 98503 1 55,722.00 8.490
1602957 8806 3RD AVE S SEATTLE WA 98108 1 48,588.00 9.900
1602963 320 M.L. KING JR WAY E SEATTLE WA 98112 1 95,682.00 8.490
1602966 605 N. NEWBERRY ST. ARLINGTON WA 98223 1 63,240.00 9.890
1602967 237 169TH ST S SPANAWAY WA 98387 1 36,806.00 9.900
1602969 21219 NE 151ST ST WOODINVILLE WA 98072 1 173,432.00 7.990
1703162 9236 W VIRGINIA DRIVE LAKEWOOD CO 80226 1 34,680.00 9.900
</TABLE>
Loan Current Mat Pmt Prop Occup Appraised Orig
Number Pmt Date Type Type Type Value Type
- - -------------------------------------------------------------------------
106293 1,140.18 11/1/28 A S P 171,000 F
106295 477.61 11/1/28 A S P 170,000 F
106308 1,069.11 11/1/28 A S P 190,000 F
205054 904.31 9/1/28 A S P 150,000 F
205055 788.62 10/1/28 A S P 140,000 F
205057 1,633.93 10/1/28 A S P 290,000 F
205069 673.92 10/1/28 A S P 128,000 F
304614 835.92 10/1/28 A S P 130,000 F
304621 1,385.94 10/1/28 A S P 237,000 F
304627 667.82 10/1/28 A S P 145,000 F
304632 570.20 10/1/28 A S P 126,000 F
304636 465.69 11/1/28 A S P 132,000 F
304637 860.14 11/1/28 A F P 214,000 F
304640 325.08 11/1/28 A S P 132,000 F
304641 185.87 11/1/28 A S I 120,000 F
304649 797.34 11/1/28 A S P 132,000 F
304654 414.58 11/1/28 A S P 109,000 F
304656 1,039.20 11/1/28 A S I 170,000 F
405092 575.24 9/1/26 A S P 95,000 F
405849 456.80 10/1/28 A C I 105,000 F
405850 264.33 11/1/28 A S P 93,000 F
405852 664.64 11/1/28 A S P 101,000 F
405853 1,553.46 11/1/28 A S P 425,000 F
405855 496.76 11/1/28 A S P 153,000 F
405858 509.88 11/1/28 A S P 165,000 F
405860 1,035.27 11/1/28 A S P 184,000 F
405861 898.83 11/1/28 A S P 343,000 F
405865 1,654.92 11/1/28 A S P 277,000 F
405866 1,864.98 11/1/28 A S P 412,000 F
405867 591.81 11/1/28 A S P 150,000 F
405868 612.96 11/1/28 A S P 128,000 F
405871 398.86 11/1/28 A S P 143,000 F
405873 1,066.73 11/1/28 A F P 378,000 F
405874 998.29 11/1/28 A S P 280,000 F
405875 1,148.31 11/1/28 A S P 230,000 F
405880 493.58 12/1/28 A S P 108,000 F
405881 1,385.71 12/1/28 A S P 243,000 F
505736 1,127.59 11/1/28 A S P 212,000 F
505743 1,199.01 11/1/28 A S P 187,000 F
505747 2,043.37 11/1/28 A S P 340,000 F
505748 598.30 11/1/13 A S P 130,000 F
505749 1,469.94 11/1/28 A S P 240,000 F
505751 805.24 11/1/28 A S P 166,000 F
505755 854.63 11/1/28 A S P 172,000 F
505758 687.79 11/1/28 A S P 155,000 F
505760 863.58 11/1/28 A S P 200,000 F
505762 2,398.40 11/1/28 A S P 375,000 F
505763 1,645.13 11/1/28 A S P 420,000 F
605050 622.12 11/1/28 A S P 129,000 F
605052 600.44 11/1/08 A S P 193,000 F
707429 683.54 11/1/28 A F P 194,000 F
707434 997.59 10/1/28 A S P 160,000 F
707435 496.45 11/1/28 A S P 220,000 F
707438 699.71 11/1/28 A S P 200,000 F
707447 225.06 11/1/28 A S I 70,000 F
707448 610.29 11/1/28 A F P 170,000 F
707449 899.56 11/1/28 A S P 180,000 F
707452 757.60 11/1/28 A S P 145,000 F
707458 794.25 12/1/13 A S P 126,000 F
707459 2,572.03 12/1/28 A S P 500,000 F
806746 1,111.05 10/1/28 A S P 243,000 F
806757 1,591.73 11/1/28 A S P 298,000 F
806759 999.31 11/1/28 A S P 182,000 F
806760 581.87 11/1/28 A S P 179,000 F
806761 1,587.24 11/1/28 A S P 285,000 F
806762 1,099.73 11/1/28 A S P 188,000 F
806763 1,415.87 10/1/28 A S P 240,000 F
806765 773.38 10/1/28 A S P 249,000 F
806769 2,166.58 11/1/28 A S P 512,000 F
806780 498.29 11/1/28 A S P 342,000 F
806783 376.15 12/1/28 A S P 265,000 F
1602956 428.06 11/1/28 A S P 100,000 F
1602957 422.81 11/1/28 A S P 80,000 F
1602963 735.03 11/1/28 A S P 163,000 F
1602966 549.84 11/1/28 A S P 115,000 F
1602967 320.28 11/1/28 A S P 78,000 F
1602969 1,271.37 11/1/28 A S P 247,000 F
1703162 301.78 11/1/28 A S P 120,000 F
Page 1
<PAGE>
EXHIBIT A
LOAN SCHEDULE - 1998-3 (FIXED)
<TABLE>
<CAPTION>
Loan Lien Cut-Off Current
Number Property Address City ST Zip Pos Balance Rate
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1703177 1040 KRAMERIA ST DENVER CO 80220 1 80,197.00 8.990
1703181 4775 S KALAMATH ST ENGLEWOOD CO 80110 1 21,012.00 8.490
1803822 14040 BONBURY LANE ORLAND PARK IL 60462 1 41,423.00 8.490
1803845 11256 S. HALE CHICAGO IL 60643 1 69,290.00 9.750
1803848 6340 POWELL STREET DOWNERS GROVE IL 60516 1 46,294.00 8.490
1803849 156 N. WALLER AVENUE CHICAGO IL 60644 1 36,141.00 10.490
1803856 319 W 51ST ST CHICAGO IL 60609 1 33,590.00 10.900
1803868 825 TAYLOR AVENUE AURORA IL 60506 1 57,544.00 9.450
1803873 8234 S. PRAIRIE AVENUE CHICAGO IL 60619 1 39,279.00 9.490
1803876 16529 HILLCREST DRIVE MARKHAM IL 60426 1 23,587.00 8.890
2102093 3623 NE 8TH AVE PORTLAND OR 97212 1 87,540.00 9.490
2102099 3832 NE 115TH AVE PORTLAND OR 97220 1 95,812.00 8.990
2102101 4914 NE 60TH AVE PORTLAND OR 97218 1 48,923.00 10.890
2102112 1407 SE MILLER ST PORTLAND OR 97202 1 85,692.00 8.490
2102114 701 NE HOGAN DR GRESHAM OR 97030 1 83,187.00 10.300
2102118 105 SE133RD AVE PORTLAND OR 97233 1 54,421.00 11.890
2102124 21500 SW BLAINE CT BEAVERTON OR 97006 1 113,887.00 9.490
2102125 4543 NE 24TH AVE PORTLAND OR 97211 1 28,464.00 8.490
2201967 220 S. ROSELLE RD. #516 SCHAUMBURG IL 60193 1 34,707.00 8.900
2201985 246 S. LIBERTY ST. ELGIN IL 60120 1 39,800.00 8.490
2201993 868 N. SHORE DR. CRYSTAL LAKE IL 60014 1 90,557.00 9.750
2202000 1085 PHEASANT RIDGE DRIVE LAKE ZURICH IL 60047 1 123,740.00 8.225
2202002 8425 MADISON DRIVE NILES IL 60714 1 118,939.00 8.900
2401648 717 NW 6TH STREET BOCA RATON FL 33486 1 109,124.00 7.990
2401668 101 BRINY AVE #2811 POMPANO BEACH FL 33062 1 42,723.00 8.490
2401676 15000 SW 105TH CT MIAMI FL 33176 1 103,092.00 8.490
2500417 4950 BOSTON ROAD BRUNSWICK OH 44212 1 29,151.00 9.890
2500420 4207 SPRING CREST DRIVE BROOKLYN OH 44144 1 83,239.00 8.490
2500423 15850 TERRACE ROAD EAST CLEVELAND OH 44112 1 23,141.00 10.390
2500425 1119 BATES ROAD ROCKY RIVER OH 44116 1 94,453.00 8.990
2500429 5236 HAMILTON ROAD MEDINA OH 44256 1 39,712.00 9.490
2600580 1512 W LOMA LANE PHOENIX AZ 80521 1 95,408.00 8.990
2600587 2484 ROOSTER ROAD CAMP VERDE AZ 86322 1 58,833.00 8.990
2600591 4301 E SAN MIGUEL AVE PHOENIX AZ 85018 1 189,725.00 10.490
2600605 657 S MACDONALD MESA AZ 85210 1 52,090.00 9.490
2600609 15917 E WILLIS RD GILBERT AZ 85296 1 143,480.00 7.490
2700640 3792 WEST GANDALF DRIVE TAYLORSVILLE UT 84118 1 55,082.00 8.990
2700649 5958 SOUTH SUNSET VISTA DR. KEARNS UT 84118 1 94,390.00 7.990
2700654 4870 S. SOUTHRIDGE DRIVE TAYLORSVILLE UT 84118 1 78,492.00 7.900
2700658 304 E. HERBERT AVE. SALT LAKE CITY UT 84111 1 34,044.00 8.390
2700660 4196 W. 1500 N. PLAIN CITY UT 84404 1 29,685.00 8.490
2900912 1841 HORACE AVENUE ABINGTON PA 19001 1 95,033.00 8.490
2900933 804 OAK TREE ROAD KENNETT SQUARE PA 19348 1 165,734.00 9.700
3100956 30 PEACH HILL-ABBOTT RD MONTVILLE NJ 07045 1 139,980.00 8.490
3100971 158 SADLER RD BLOOMFIELD NJ 07003 1 100,090.00 10.900
3100975 33 CLAREMONT AVE MONTCLAIR NJ 07042 1 92,378.00 9.490
3100988 556 HERRICK DRIVE DOVER NJ 07801 1 66,108.00 9.900
3100992 5507 BERKSHIRE VALLEY RD OAK RIDGE NJ 07438 1 20,016.00 8.490
3100993 34 MINNEHAHA BLVD LAKE HIAWATHA NJ 07034 1 104,237.00 8.470
3201175 72 MARYLAND AVE FREEPORT NY 11520 1 124,194.00 9.990
3201185 31 NASSAU AVE GLEN COVE NY 11542 1 82,298.00 9.900
3201188 537 S. 13 TH STREET NEW HYDE PK NY 11040 1 151,512.00 7.990
3201193 105 MILLER ROAD HICKSVILLE NY 11801 1 105,145.00 9.890
3201197 9 FRANCES LANE HICKSVILLE NY 11801 1 55,293.00 8.900
3300779 898 BELMONT AVENUE BROOKLYN NY 11208 1 97,170.00 10.400
3300780 148-07 111TH AVENUE JAMAICA NY 11435 1 69,698.00 8.890
3300788 122-58 SPRINGFIELD BLVD SPRINGFIELD GARDENS NY 11413 1 47,971.82 8.890
3300790 643 JEROME STREET BROOKLYN NY 11207 1 90,913.00 8.490
3300792 104-18 37TH DRIVE CORONA NY 11368 1 131,675.00 8.490
3300793 698 ASHFORD STREET BROOKLYN NY 11207 1 103,328.00 9.400
3300795 218 ADELPHI STREET BROOKLYN NY 11205 1 183,740.00 10.590
3300797 84-30 109TH AVENUE OZONE PARK NY 11417 1 111,990.00 9.990
3300798 210-15 89TH AVENUE QUEENS VILLAGE NY 11427 1 91,950.00 8.090
3300799 209-50 112TH ROAD QUEENS VILLAGE NY 11429 1 97,860.00 8.490
3300802 115-20 172ND STREET JAMAICA NY 11434 1 67,437.00 9.900
3300812 108-66 37TH DRIVE CORONA NY 11368 1 79,928.00 9.900
3300815 216-16 115TH TERRACE CAMBRIA HEIGHTS NY 11411 1 84,793.00 8.990
3300820 419 BEACH 44TH STREET FAR ROCKAWAY NY 11691 1 70,183.00 9.490
3400704 226 CONNECTICUT RD UNION NJ 07083 1 99,220.00 9.900
3400707 125 CREEMER AVE ISELIN(WOODBRIDGE TWP) NJ 08830 1 66,939.00 8.490
3400711 2375 WHITTIER AVE WESTFIELD(SCOTCH PLAINS TWP) NJ 07090 1 136,482.00 9.990
3400712 43 EVERGREEN AVE SPRINGFIELD NJ 07081 1 51,413.00 8.490
3400716 76 BEECHWOOD AVE EDISON NJ 08837 1 58,274.00 8.490
3400720 25 GASKILL AVE EDISON NJ 08817 1 20,427.99 9.890
3400725 3 HASTINGS RD OLD BRIDGE NJ 08857 1 104,985.00 8.990
3400727 161 RESERVOIR AVE RANDOLPH NJ 07869 1 118,199.00 9.900
3400730 123 CRICKET LANE WOODBRIDGE NJ 07095 1 20,093.00 8.890
3400734 509 LINCOLN ST LINDEN NJ 07036 1 31,413.00 13.400
</TABLE>
Loan Current Mat Pmt Prop Occup Appraised Orig
Number Pmt Date Type Type Type Value Type
- - ----------------------------------------------------------------------------
1703177 644.71 11/1/28 A S P 130,000 F
1703181 161.42 12/1/28 A S P 105,000 F
1803822 407.67 10/1/13 A S P 240,000 F
1803845 734.03 9/1/13 A S P 91,000 F
1803848 455.60 10/1/13 A S P 189,000 F
1803849 399.28 11/1/13 A S P 60,000 F
1803856 317.35 11/1/28 A S P 62,000 F
1803868 599.15 11/1/13 A S I 94,000 F
1803873 329.99 11/1/28 A S P 108,000 F
1803876 237.69 12/1/13 A S P 60,000 F
2102093 735.45 10/1/28 A S P 109,500 F
2102099 971.22 11/1/13 A S P 140,000 F
2102101 461.84 10/1/28 A S P 117,000 F
2102112 658.29 11/1/28 A S P 170,000 F
2102114 748.53 10/1/28 A S P 128,000 F
2102118 555.18 11/1/28 A S P 137,000 F
2102124 956.79 11/1/28 A S P 134,000 F
2102125 218.66 11/1/28 A S P 115,000 F
2201967 349.96 10/1/13 A C P 67,500 F
2201985 305.75 11/1/28 A S P 105,000 F
2201993 778.02 10/1/28 A S P 140,000 F
2202000 1,198.65 11/1/13 A S P 165,000 F
2202002 948.46 11/1/28 A S P 165,000 F
2401648 799.95 10/1/28 A S P 166,000 F
2401668 420.46 11/1/13 A S P 128,000 F
2401676 791.96 11/1/28 A S P 194,000 F
2500417 311.30 10/1/13 A S P 80,000 F
2500420 639.45 10/1/28 A S P 122,000 F
2500423 254.22 11/1/13 A S P 180,000 F
2500425 957.44 10/1/13 A S P 145,000 F
2500429 414.44 11/1/13 A S P 90,000 F
2600580 766.99 10/1/28 A S P 126,000 F
2600587 472.96 9/1/28 A S P 120,000 F
2600591 1,734.07 10/1/28 A S P 253,000 F
2600605 437.62 10/1/28 A S P 80,000 F
2600609 1,002.25 10/1/28 A S P 205,000 F
2700640 495.23 11/1/18 A S P 119,000 F
2700649 691.94 12/1/28 A S P 118,000 F
2700654 745.59 12/1/13 A S P 108,000 F
2700658 333.05 12/1/13 A S P 95,000 F
2700660 292.15 11/1/13 A S P 125,000 F
2900912 730.05 10/1/28 A S P 117,000 F
2900933 1,417.83 11/1/28 A S P 233,000 F
3100956 1,075.33 11/1/28 A S P 180,000 F
3100971 945.63 11/1/28 A S P 143,000 F
3100975 776.09 11/1/28 A S P 140,000 F
3100988 575.27 11/1/28 A S P 135,000 F
3100992 196.99 11/1/13 A S P 148,000 F
3100993 799.28 11/1/28 A S P 142,000 F
3201175 1,088.97 11/1/28 A S P 179,000 F
3201185 716.15 11/1/28 A S P 230,000 F
3201188 1,110.69 11/1/28 A S P 208,000 F
3201193 914.19 12/1/28 A S P 167,000 F
3201197 440.93 12/1/28 A S P 216,000 F
3300779 881.60 10/1/28 A F I 170,000 F
3300780 555.30 10/1/28 A S P 145,000 F
3300788 382.85 10/1/28 A S P 128,000 F
3300790 698.40 10/1/28 A F P 155,000 F
3300792 1,011.53 10/1/28 A F P 220,000 F
3300793 861.31 10/1/28 A F P 170,000 F
3300795 1,693.12 10/1/28 A F I 260,000 F
3300797 981.96 10/1/28 A S P 140,000 F
3300798 680.47 10/1/28 A S P 173,000 F
3300799 963.09 11/1/13 A S P 162,000 F
3300802 720.56 11/1/13 A S P 160,000 F
3300812 695.53 11/1/28 A F P 175,000 F
3300815 681.65 11/1/28 A S P 117,000 F
3300820 589.62 11/1/28 A F P 130,000 F
3400704 1,060.16 11/1/13 A S P 155,000 F
3400707 514.23 11/1/28 A S P 129,000 F
3400711 1,196.72 11/1/28 A S P 182,000 F
3400712 394.96 11/1/28 A S P 225,000 F
3400716 447.66 11/1/28 A S P 185,000 F
3400720 177.61 11/1/28 A S P 112,000 F
3400725 843.98 12/1/28 A S P 150,000 F
3400727 1,262.95 11/1/13 A S P 173,000 F
3400730 160.09 11/1/28 A S P 53,000 F
3400734 357.34 11/1/28 A S P 119,000 F
Page 2
<PAGE>
EXHIBIT A
LOAN SCHEDULE - 1998-3 (FIXED)
<TABLE>
<CAPTION>
Loan Lien Cut-Off Current
Number Property Address City ST Zip Pos Balance Rate
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3500427 15 PRATT ST. REVERE MA 02151 1 62,301.00 8.990
3500457 53 LONGBOW RD. DANVERS MA 01923 1 128,043.00 11.390
3500476 13 LAWLEY STREET DORCHESTER MA 02122 1 87,737.00 8.490
3500478 10 MILK STREET LEXINGTON MA 02173 1 221,221.00 10.200
3500484 185 LYNN STREET PEABODY MA 01960 1 62,638.00 8.900
3500485 90 S MAIN STREET NATICK MA 01760 1 120,971.00 8.490
3500493 33 PERCIVAL STREET DORCHESTER MA 02122 1 64,279.00 8.990
3500496 108 TURNER STREET QUINCY MA 02169 1 31,512.00 7.990
3500497 12 PHILLIP ROAD BILLERICA MA 01821 1 84,481.00 8.490
3500498 10 CRESCENT STREET W NEWTON MA 02165 1 70,476.00 8.490
3500499 92-94 SYCAMORE ST. BELMONT MA 02178 1 162,936.00 8.850
3500502 58 WELLINGTON HILL STREET MATTAPAN MA 02126 1 70,984.00 8.490
3500507 16 OSCEOLA LANE BILLERICA MA 01821 1 87,844.00 8.490
3500511 27 LINDEN STREET SALEM MA 01970 1 90,290.00 8.900
3500513 12 AUBURN COURT MALDEN MA 02148 1 41,547.00 8.890
3500518 9 FREMONT AVENUE SOMERVILLE MA 02143 1 20,356.00 9.490
3600330 4003 ROY PLACE BLADENSBURG MD 20710 1 103,990.00 9.250
3600332 328 HANNES ST SILVER SPRING MD 20901 1 107,890.00 9.990
3600337 15401 PIN CHERRY LANE GAITHERSBURG MD 20878 1 80,440.00 9.890
3800320 4350 OLD COLUMBIA PIKE ANNANDALE VA 22003 1 102,855.00 8.990
3800322 1676 FT. DAVIS ST SE WASHINGTON DC 20020 1 53,340.00 9.490
3800331 6600 N. 16TH ST ARLINGTON VA 22205 1 89,036.00 9.890
3900326 307 SUDBURY RD LINTHICUM HEIGHTS MD 21090 1 37,116.00 8.890
3900330 886 MARENGO ST ANNAPOLIS MD 21401 1 76,963.00 7.990
3900339 4301 DEER PARK RD. RANDALLSTOWN MD 21133 1 54,645.00 10.990
4400245 3531 OAKTON DRIVE # 1005 MINNETONKA MN 55305 1 28,347.00 8.490
4400251 7390 MAPLEWOOD RD. COLOGNE MN 55322 1 77,989.00 9.290
4400253 7501 THOMAS AVE. S. RICHFIELD MN 55423 1 57,739.00 8.990
4600109 66 N MAIN ST MEDFORD NJ 08055 1 154,040.00 9.490
4600114 32 CROWN POINT CT FREEHOLD NJ 07728 1 169,037.00 8.490
4600121 18 SPRINGCRESS DR DELRAN NJ 08075 1 45,709.00 10.990
4600122 2448 HOLLY HILL RD LAKEHURST(MANCHESTER TWP) NJ 08733 1 79,490.00 9.200
4600123 822 NEW JERSEY AVE TOMS RIVER(DOVER TWP) NJ 08753 1 55,708.00 8.490
4600127 4 CHESTERFIELD CT MT LAUREL NJ 08054 1 110,684.00 8.690
4600132 239 STATE ROUTE 33 FREEHOLD NJ 07728 1 106,195.00 8.490
4600133 66 CREST DR HOWELL NJ 07731 1 54,381.00 8.990
4600148 88 TWILIGHT AVE KEANSBURG NJ 07734 1 21,185.00 8.490
4600150 37 CHERRY ST MEDFORD NJ 08055 1 22,164.00 8.900
4600152 302 GRANT ST RIVERSIDE NJ 08075 1 71,432.00 8.900
4800068 83 PENNINSULA DRIVE BABYLON NY 11702 1 131,483.00 9.900
8303048 4601 WAYNE ROAD MANTUA OH 44255 1 59,963.65 8.500
8303396 550 NEWBRIDGE ST. MENLO PARK CA 94025 1 99,000.00 8.750
8303533 2600 FREEMONT ST. ROLLING MEADOWS IL 60008 1 97,740.78 8.990
8303544 15850 43RD AVENUE S SEATTLE WA 98188 1 69,952.93 7.990
8303576 5545 S. KIMBARK AVE. CHICAGO IL 60637 1 67,500.00 8.990
8303606 203 COMMONWEALTH DRIVE NEWTOWN PA 18940 1 46,000.00 8.750
8303628 1340 THOMPSON ROAD WOODBURN OR 97071 1 36,000.00 8.750
8303629 25270 W. STOUGHTON AVE. INGLESIDE IL 60041 1 69,800.00 8.750
8303637 24030 MARCHAND COURT HAYWARD CA 94541 1 108,000.00 7.990
8303644 2117 WILLAMINA AVE. FOREST GROVE OR 97116 1 62,000.00 8.250
8303659 19002 51ST AVE. SE BOTHELL WA 98012 1 219,859.71 8.250
8303667 5218 KENSINGTON PL. N. SEATTLE WA 98103 1 63,000.00 8.750
8303673 2757 EL SOBRANTE STREET SANTA CLARA CA 95051 1 199,500.00 8.750
8303675 550 E. VINE STREET LEBANON OR 97355 1 87,000.00 7.990
8410551 1065 AUBURN STREET LIVERMORE CA 94550 1 77,000.00 7.750
8410565 14750 SOUTHWEST 158TH STREET MIAMI FL 33187 1 89,200.00 8.710
8410580 35 WESTBROOK RD HOWELL NJ 07731 1 62,200.00 8.000
8410587 344 LOMA DRIVE CAMARILLO AREA CA 93010 1 141,400.00 9.000
8410608 11335 S.E. 35TH AVENUE MILWAUKIE OR 97222 1 84,565.00 7.750
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED RATE LOANS: 215 19,855,544.17
</TABLE>
<PAGE>
Loan Current Mat Pmt Prop Occup Appraised Orig
Number Pmt Date Type Type Type Value Type
- - ----------------------------------------------------------------------------
3500427 500.84 11/1/28 A F I 108,000 F
3500457 1,486.84 11/1/13 A S P 240,000 F
3500476 674.00 10/1/28 A S P 140,000 F
3500478 1,974.15 10/1/28 A S P 295,000 F
3500484 499.50 10/1/28 A S P 165,000 F
3500485 929.31 11/1/28 A F P 210,000 F
3500493 516.74 11/1/28 A F P 155,000 F
3500496 231.00 10/1/28 A S P 105,000 F
3500497 648.99 11/1/28 A S P 145,000 F
3500498 541.40 11/1/28 A S P 241,000 F
3500499 1,293.47 9/1/28 A F P 300,000 F
3500502 698.59 11/1/13 A F P 160,000 F
3500507 864.52 12/1/13 A S P 135,000 F
3500511 720.01 11/1/28 A S P 165,000 F
3500513 331.01 11/1/28 A S P 128,000 F
3500518 212.44 12/1/13 A S P 122,000 F
3600330 855.50 10/1/28 A S P 130,000 F
3600332 946.01 10/1/28 A S P 166,000 F
3600337 699.39 11/1/28 A S P 145,000 F
3800320 826.85 11/1/28 A S P 197,000 F
3800322 448.12 11/1/28 A S P 97,000 F
3800331 774.13 11/1/28 A S P 137,000 F
3900326 295.71 11/1/28 A S P 110,000 F
3900330 564.19 11/1/28 A S P 110,000 F
3900339 519.98 11/1/28 A S P 119,000 F
4400245 217.76 11/1/28 A C P 250,000 F
4400251 643.86 11/1/28 A S P 135,000 F
4400253 464.17 11/1/28 A S P 105,000 F
4600109 1,294.13 11/1/28 A S P 237,000 F
4600114 1,298.55 10/1/28 A S P 230,000 F
4600121 434.95 11/1/28 A S P 194,000 F
4600122 651.07 11/1/28 A S P 106,000 F
4600123 427.95 11/1/28 A S P 115,000 F
4600127 866.01 11/1/28 A S P 160,000 F
4600132 1,045.12 11/1/13 A S P 175,000 F
4600133 437.17 11/1/28 A S P 103,000 F
4600148 162.74 11/1/28 A S P 77,000 F
4600150 223.49 11/1/13 A S P 115,000 F
4600152 569.63 12/1/28 A S P 120,000 F
4800068 1,144.15 11/1/28 A S P 425,000 F
8303048 461.35 8/1/28 A S P 160,000 C
8303396 778.83 9/1/28 A S P 177,000 C
8303533 993.40 8/1/13 A S P 145,000 C
8303544 513.15 8/1/28 A S P 158,000 C
8303576 542.63 9/1/28 A C P 90,000 C
8303606 361.88 9/1/28 A S P 128,000 C
8303628 283.21 9/1/28 A P P 65,500 C
8303629 549.12 9/1/28 A S P 105,000 C
8303637 791.71 9/1/28 A C P 192,200 C
8303644 465.79 9/1/28 A S P 105,000 C
8303659 1,652.79 9/1/28 A S P 277,000 C
8303667 495.62 10/1/28 A S P 215,000 C
8303673 1,569.47 9/1/28 A S P 350,000 C
8303675 637.77 9/1/28 A S P 200,000 C
8410551 551.64 9/1/28 A S P 200,000 C
8410565 889.40 9/1/13 A S P 165,000 C
8410580 594.42 9/1/13 A S P 155,000 C
8410587 1,137.74 9/1/28 A S P 200,000 C
8410608 605.83 9/1/28 A S P 109,000 C
- - ----------------------------------------------------------------------------
Page 3
<PAGE>
EXHIBIT B
LOAN SCHEDULE - 1998-3 (ADJUSTABLE)
<TABLE>
<CAPTION>
Loan Lien Cut-Off Current
Number Property Address City ST Zip Pos Balance Rate
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
106300 722 S YANA DRIVE ANAHEIM CA CA 1 130,483.00 8.390
304663 11271 LOCH LOMOND ROAD LOS ALAMITOS CA CA 1 389,959.00 9.600
405862 347 MUNICH STREET SAN FRANCISCO CA CA 1 170,930.00 8.250
405870 2018 101ST AVENUE OAKLAND CA CA 1 75,390.00 9.600
1301716 2629 ARLENE WAY N.E. ATLANTA GA GA 1 220,966.00 8.490
1602948 25411 31ST AVE S KENT WA WA 1 52,771.00 8.690
1602949 3903 167TH PL SW LYNNWOOD WA WA 1 168,740.00 7.890
1602955 3003 100TH DR SE EVERETT WA WA 1 79,949.00 11.690
1602964 2403 CANYON LANDS CT S PUYALLUP WA WA 1 75,585.00 8.490
1703176 10990 ALBION DR DENVER CO CO 1 92,240.00 8.790
1803819 201 LARCHMONT LANE BLOOMINGDALE IL IL 1 117,543.00 8.250
1803861 1454 E. 77TH STREET CHICAGO IL IL 1 52,369.00 7.990
2102103 4716 NE 77TH AVE PORTLAND OR OR 1 77,898.00 8.500
2102113 2381 WESTFARTHING WAY NW SALEM OR OR 1 95,048.00 9.600
2102119 4860 SW 197TH PL ALOHA OR OR 1 72,167.00 10.990
2201953 440 SOUTH DR. ALGONQUIN IL IL 1 110,239.38 6.990
2201982 691 EASTCHESTER RD. WHEELING IL IL 1 169,690.00 8.450
2202004 4736 N. SPRINGFIELD AVE. CHICAGO IL IL 1 83,390.00 8.690
2900899 61 INDIGO RD. LEVITTOWN PA PA 1 38,282.00 8.990
2900902 42 MOUNTAIN VIEW RD. KINTNERSVILLE PA PA 1 83,296.00 9.200
3300756 548 44TH STREET BROOKLYN NY NY 1 58,458.00 7.490
3300759 142-47 SUTTER AVENUE SOUTH OZONE PARK NY NY 1 116,027.00 9.390
3300796 135-24 232 STREET LAURELTON NY NY 1 131,240.00 9.890
3300809 111-08 223 STREET QUEENS VILLAGE NY NY 1 103,956.00 8.800
3500453 9 THOMAS STREET UNIT C3 SAUGUS MA MA 1 62,363.00 9.990
3900329 622 ANNESLIE RD BALTIMORE MD MD 1 107,411.00 8.600
4400229 2716 FLORIDA AVENUE SOUTH ST. LOUIS PARK MN MN 1 83,989.00 7.890
4800070 285 PATCHOGUE YAPHANK RD E PATCHOGUE NY NY 1 69,539.00 9.000
8303300 2619 CHESTNUT AVENUE ARDMORE (HAVERFORD TWP) PA PA 1 94,560.32 10.500
8303387 2501 REBECCA DRIVE PINOLE CA CA 1 104,397.77 7.990
8303398 4874 GARDNER ROAD S.E. SALEM OR OR 1 103,510.80 6.750
8303409 374 W. 2725 S. BOUNTIFUL UT UT 1 95,603.96 7.250
8303481 5595 UTE HWY. LONGMONT CO CO 1 219,852.08 7.990
8303514 2497 COLE STREET OAKLAND CA CA 1 116,171.84 7.990
8303515 4401 DECATUR ST. DENVER CO CO 1 80,455.94 8.990
8303517 3336 EDINGTON STREET FRANKLIN PARK IL IL 1 50,865.11 8.990
8303564 2128 YOUNGS COURT WALNUT CREEK CA CA 1 188,866.61 7.750
8303586 372 EAST 329TH STREET WILLOWICK OH OH 1 72,100.00 7.990
8303600 301 CRESTVIEW DRIVE TOOELE UT UT 1 96,000.00 6.990
8303608 4765 E. 129TH PLACE THORNTON CO CO 1 89,000.00 7.250
8303663 3225 ARNETT STREET BOULDER CO CO 1 135,000.00 7.990
8410556 5 EUGENE BOULEVARD SOUTH AMBOY NJ NJ 1 165,000.00 7.830
8410561 11340 S.W. 127TH STREET MIAMI FL FL 1 138,500.00 8.530
- - ------------------------------------------------------------------------------------------------------------------------
TOTAL VARIABLE RATE LOANS: 43 4,839,802.81
</TABLE>
<PAGE>
Loan Current Mat Pmt Prop Occup Appraised Orig
Number Pmt Date Type Type Type Value Type
- - ----------------------------------------------------------------------------
106300 993.15 11/1/28 A S P 174,000 F
304663 3,307.48 12/1/28 A S P 700,000 F
405862 1,284.14 11/1/28 A S I 265,000 F
405870 639.43 11/1/28 A S P 116,000 F
1301716 1,697.47 11/1/28 A S P 340,000 F
1602948 412.89 11/1/28 A S P 126,000 F
1602949 1,225.24 11/1/28 A S P 225,000 F
1602955 803.34 11/1/28 A S P 133,000 F
1602964 580.65 11/1/28 A S P 124,000 F
1703176 728.29 10/1/28 A S P 123,000 F
1803819 883.06 10/1/28 A S P 230,000 F
1803861 383.90 11/1/28 A S P 76,000 F
2102103 598.97 10/1/28 A S P 112,000 F
2102113 998.26 10/1/13 A S P 138,000 F
2102119 686.72 11/1/28 A S P 125,000 F
2201953 733.29 9/1/28 A S P 180,000 F
2201982 1,298.76 11/1/28 A S P 235,000 F
2202004 652.46 11/1/28 A S P 139,000 F
2900899 307.75 10/1/28 A S P 94,000 F
2900902 682.24 10/1/28 A S P 118,000 F
3300756 408.35 10/1/28 A F P 188,000 F
3300759 966.32 10/1/28 A F P 155,000 F
3300796 1,141.07 11/1/28 A S P 175,000 F
3300809 821.54 11/1/28 A S P 155,000 F
3500453 546.82 11/1/28 A C I 128,000 F
3900329 833.52 11/1/28 A S P 166,000 F
4400229 609.85 11/1/28 A S P 118,000 F
4800070 559.53 11/1/28 A S P 107,000 F
8303300 1,050.13 7/1/13 A F P 200,000 C
8303387 769.72 7/1/28 A S P 150,000 C
8303398 671.95 8/1/28 A S P 148,000 C
8303409 875.44 8/1/13 A S P 163,000 C
8303481 1,612.75 8/1/28 A S P 325,000 C
8303514 852.19 8/1/28 A S P 155,000 C
8303515 647.14 8/1/28 A S P 115,000 C
8303517 516.97 8/1/13 A S P 110,000 C
8303564 1,354.02 8/1/28 A S P 310,000 C
8303586 528.54 9/1/28 A S P 103,000 C
8303600 638.05 9/1/28 A S P 148,000 C
8303608 607.14 9/1/28 A S P 132,000 C
8303663 989.64 10/1/28 A S P 232,000 C
8410556 1,191.21 9/1/28 A S P 220,000 C
8410561 1,067.89 9/1/28 A S P 185,000 C
Page 4
