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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event
Reported) February 25, 1999
FINANCIAL ASSET SECURITIES CORP., (as depositor under the Pooling and
Servicing Agreement, dated as of January 1, 1998, providing for the
issuance of the Option One Mortgage Loan Trust 1999-1, Asset-Backed
Certificates, Series 1999-1).
FINANCIAL ASSET SECURITIES CORP.
(Exact name of registrant as specified in its charter)
Delaware 333-67329-02 06-1442101
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
600 Steamboat Road
Greenwich, Connecticut 06830
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (203) 625-2700
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<PAGE>
Item 5. Other Events.
Financial Security Assurance Inc. has issued a certificate guaranty
insurance policy, dated January 25, 1999, guaranteeing payments on the Class A-1
and Class A-2 Certificates (the "Policy"). The Policy, including Endorsement No.
1 thereto, is attached hereto as Exhibit 10.
Financial Asset Securities Corp. (the "Company") entered into a Pooling and
Servicing Agreement dated as of January 1, 1999 (the "Pooling and Servicing
Agreement"), by and among the Company, as depositor, Option One Mortgage
Corporation (the "Seller"), as seller and servicer, and Norwest Bank Minnesota,
National Association, as trustee (the "Trustee"), providing for the issuance of
the Option One Mortgage Loan Trust 1999-1 Asset-Backed Certificates, Series
1999-1, Class A-1, Class A-2 and Class R (the "Certificates"). The Pooling and
Servicing Agreement, without Exhibit D, is annexed hereto as Exhibit 99.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
10 The Policy issued by Financial Security Assurance Inc.,
including Endorsement No. 1 thereto.
99 The Pooling and Servicing Agreement, dated as of January 1,
1999, by and among the Company, the Seller and the Trustee,
without Exhibit D.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
FINANCIAL ASSET SECURITIES CORP.
By: /s/ James Raeger
---------------------------
Name: James Raeger
Title: Vice President
Dated: February 25, 1999
<PAGE>
Exhibit Index
Exhibit
10 The Policy issued by Financial Security Assurance Inc.,
including Endorsement No. 1 thereto.
99 Pooling and Servicing Agreement,
dated as of January 1, 1999, by
and among, the Company, the Seller
and the Trustee, without exhibit D.
<PAGE>
EXHIBIT 10
<PAGE>
[LOGO] FINANCIAL GUARANTY
FINANCIAL INSURANCE POLICY
SECURITY
ASSURANCESM
Trust: As described in Endorsement No. 1 Policy No.: 50770-N
Certificates: $194,337,000 Option One Mortgage Date of Issuance: 01/25/99
Loan Trust 1999-1, Asset-
Backed Certificates, Series
1999-1, Class A-1 and Class A-2
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), for
consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY GUARANTEES to the
Trustee for the benefit of each Holder, subject only to the terms of this Policy
(which includes each endorsement hereto), the full and complete payment of
Guaranteed Distributions with respect to the Certificates of the Trust referred
to above.
For the further protection of each Holder, Financial Security
irrevocably and unconditionally guarantees payment of the amount of any
distribution of principal or interest with respect to the Certificates made
during the Term of this Policy to such Holder that is subsequently avoided in
whole or in part as a preference payment under applicable law.
Payment of any amount required to be paid under this Policy will be
made following receipt by Financial Security of notice as described in
Endorsement No. 1 hereto.
Financial Security shall be subrogated to the right of each Holder to
receive distributions with respect to each Certificate held by such Holder to
the extent of any payment by Financial Security hereunder.
Except to the extent expressly modified by Endorsement No. 1 hereto,
the following terms shall have the meanings specified for all purposes of this
Policy. "Holder" means the registered owner of any Certificate as indicated on
the registration books maintained by or on behalf of the Trustee for such
purpose or, if the Certificate is in bearer form, the holder of the Certificate.
"Trustee", "Guaranteed Distributions" and "Term of this Policy" shall have the
meanings set forth in Endorsement No. 1 hereto.
This Policy sets forth in full the undertaking of Financial Security,
and shall not be modified, altered or affected by any other agreement or
instrument, including any modification or amendment thereto. Except to the
extent expressly modified by an endorsement hereto, the premiums paid in respect
of this Policy are nonrefundable for any reason whatsoever. This Policy may not
be canceled or revoked during the Term of this Policy. An acceleration payment
shall not be due under this Policy unless such acceleration is at the sole
option of Financial Security. THIS POLICY IS NOT COVERED BY THE
PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW
YORK INSURANCE LAW.
In witness whereof, FINANCIAL SECURITY ASSURANCE INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By /s/ Robert P. Cochran
--------------------------------
AUTHORIZED OFFICER
A subsidiary of Financial Security Assurance Holdings Ltd.
350 Park Avenue, New York, N.Y. 10022-6022 (212) 826-0100
Form 101NY (5/89)
<PAGE>
ENDORSEMENT NO. 1 TO
FINANCIAL GUARANTY INSURANCE POLICY
FINANCIAL SECURITY ASSURANCE INC.
TRUST: Established pursuant to the Pooling and Servicing
Agreement dated as of January 1, 1999 among Financial
Asset Securities Corp., as Depositor, Option One Mortgage
Corporation, as Seller and Servicer and Norwest Bank
Minnesota, National Association, as Trustee
POLICY NO.: 50770-N
CERTIFICATES: $194,337,000 Option One Mortgage Loan Trust 1999-1,
Asset-Backed Certificates, Series 1999- 1, Class A- 1 and
Class A-2
DATE OF ISSUANCE: January 25, 1999
1. Definitions. For all purposes of this Policy, the terms specified
below shall have the meanings or constructions provided below. Capitalized terms
used herein and not otherwise defined herein shall have the meanings provided in
the Pooling and Servicing Agreement unless the context shall otherwise require.
"Business Day" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in the State of California, the State
of New York or in the city in which the Corporate Trust Office of the Trustee is
located, are authorized or obligated by law or executive order to be closed.
"Final Distribution Date" means the Distribution Date coinciding with
or following a purchase by either the Seller or Financial Security in accordance
with the terms of clause (i) of the first paragraph of Section 10.01 or in
accordance with the terms of Section 10.02 of the Pooling and Servicing
Agreement.
"Guaranteed Distributions" means, with respect to each Distribution
Date, the distribution to be made to the Class A Certificates on such
Distribution Date, in an aggregate amount equal to the sum of (i) the Interest
Distributable Amount (net of any Relief Act Interest Shortfalls and Prepayment
Interest Shortfalls) on the Certificates, (ii) the excess, if any, of (a) the
aggregate Certificate Principal Balance of all of the Class A Certificates then
outstanding over (b) the aggregate principal balances of the Mortgage Loans then
outstanding and (iii) if (but only if) such Distribution Date is the Final
Distribution Date or Maturity Date for the Class A Certificates, the outstanding
Certificate Principal Balance of the Class A Certificates (without duplication
of amounts included pursuant to clause (ii)), in each case in accordance with
the original terms of the Class A Certificates when issued and without regard to
any amendment or modification of the Class A Certificates or the Pooling and
Servicing Agreement which has not been consented to by Financial Security.
Guaranteed Distributions shall not include, nor shall coverage be provided under
this Policy in respect of any taxes, withholding or other charge imposed by any
governmental authority.
<PAGE>
Policy No.: 50770-N Date of Issuance: January 25, 1999
"Maturity Date" means the Distribution Date coinciding with or
following the final payment or other liquidation of the last Mortgage Loan or
REO Property as described in clause (ii) of the first paragraph of Section 11.01
of the Pooling and Servicing Agreement, subject to the proviso set forth
therein.
"Policy" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of January 1, 1999 among Financial Asset Securities Corp.,
Option One Mortgage Corporation and Norwest Bank Minnesota, National Association
with respect to Option One Mortgage Loan Trust 1999-1, Asset Backed
Certificates, Series 1999-1, as amended from time to time with the consent of
Financial Security.
"Receipt" and "Received" mean actual delivery to Financial Security and
to the Fiscal Agent (as defined below), if any, at or prior to 12:00 noon, New
York City time, on a Business Day; delivery either on a day that is not a
Business Day, or after 12:00 noon, New York City time, shall be deemed to be
Received on the next Succeeding Business Day. If any notice or certificate given
hereunder by the Trustee is not in proper form or is not properly completed,
executed or delivered, it shall be deemed to have been Received, and Financial
Security or its Fiscal Agent shall promptly so advise the Trustee and the
Trustee may submit an amended notice.
"Term of This Policy" means the period from and including the Date of
Issuance to and including the date on which (i) the Certificate Principal
Balance of all of the Class A Certificates is zero, (ii) any period during which
any payment on the Class A Certificates could have been avoided in whole or in
part as a preference payment under applicable bankruptcy, insolvency,
receivership or similar law, has expired, and (iii) if any proceedings requisite
to avoidance as a preference payment have been commenced prior to the occurrence
of (i) and (ii), a final and nonappealable order in resolution of each such
proceeding has been entered.
"Trustee" means Norwest Bank Minnesota, National Association, in its
capacity as Trustee under the Pooling and Servicing Agreement and any successor
in such capacity.
2. Notices and Conditions to Payment in Respect of Guaranteed
Distributions. Following Receipt by Financial Security of a notice and
certificate from the Trustee, or its agent designated under the Pooling and
Servicing Agreement, in the form attached as Exhibit A to this Endorsement,
Financial Security will pay any amount payable hereunder in respect of
Guaranteed Distributions out of the funds of Financial Security on the later to
occur of (a) 12:00 noon, New York City time, on the second Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the
Distribution Date to which such claim relates. Payments due hereunder in respect
of Guaranteed Distributions will be disbursed by wire transfer of immediately
available funds to the Policy Payments Account established pursuant to the
Pooling and Servicing Agreement or, if no such Policy Payments Account has been
established, to the Trustee.
Financial Security shall be entitled to pay any amount hereunder in
respect of Guaranteed Distributions, including any acceleration payment, whether
or not any notice and certificate shall have been received by Financial Security
as provided above; provided, however, that by its acceptance of this Policy the
Trustee agrees to provide upon written request to Financial Security a notice
and certificate in respect of any such payments made by Financial Security.
Financial Security shall be entitled to pay principal hereunder (including
Realized Losses) on an accelerated basis if Financial Security shall so elect in
its sole discretion, at anytime or from time to time, in whole or in part, at an
earlier Distribution Date than provided in the definition of "Guaranteed
Distributions," if such principal would have been payable under the Pooling and
Servicing Agreement were funds sufficient to make such payment available to the
Trustee for such purposes. Guaranteed Distributions insured hereunder shall not
include interest, in respect of principal paid hereunder on an accelerated basis
accruing from after the date of such payment of principal. Financial Security's
obligations hereunder in respect of Guaranteed Distributions shall be discharged
to the extent funds are disbursed by Financial Security as provided herein
whether or not such funds are properly applied to the Trustee.
3. Notices and Conditions to Payment in Respect of Guaranteed
Distributions Avoided as Preference Payments. If any Guaranteed Distribution is
avoided as a preference payment under applicable bankruptcy, insolvency,
receivership or similar law, Financial Security will pay such amount out of the
funds of Financial Security on the later of (a) the date when due to be paid
pursuant to the Order referred to below or (b) the first to occur of (i) the
fourth Business Day following Receipt by Financial Security from the Trustee of
(A) a certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that the Holder is required to return
principal or interest distributed with respect to the Class A Certificates
during the Term of this Policy because such distributions were avoidable as
preference payments under applicable bankruptcy law (the "Order"), (B) a
certificate of the Holder that the Order has been entered and is not subject to
any stay and (C) an assignment duly executed and delivered by the Holder, in
such form as is reasonably required by Financial Security and provided to the
Holder by Financial Security, irrevocably assigning to Financial Security all
rights and claims of the Holder relating to or arising under the Class A
Certificates against the debtor which made such preference payment or otherwise
with respect to such preference payment or (ii) the date of Receipt by Financial
Security from the Trustee of the items referred to in clauses (A), (B) and (C)
above if, at least four Business Days prior to such date of Receipt, Financial
Security shall have Received written notice from the Trustee that such items
were to be delivered on such date and such date was specified in such notice.
Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order and not to the
Trustee or any Holder directly (unless a Holder has previously paid such amount
to the receiver, conservator, debtor-in-possession or trustee in bankruptcy
named in the Order, in which case such payment shall be disbursed to the Trustee
for distribution to such Holder upon proof of such payment reasonably
satisfactory to Financial Security). In connection with the foregoing, Financial
Security shall have the rights provided pursuant to Section 7.06 of the Pooling
and Servicing Agreement.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term of this Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Trustee at the notice address specified in the
Pooling and Servicing Agreement specifying the name and notice address of the
Fiscal Agent. From and after the date of receipt of such notice by the Trustee,
(i) copies of all notices and documents required to be delivered to Financial
Security pursuant to this Policy shall be simultaneously delivered to the Fiscal
Agent and to Financial Security and shall not be deemed Received until Received
by both and (ii) all payments required to be made by Financial Security under
this Policy may be made directly by Financial Security or by the Fiscal Agent on
behalf of Financial Security. The Fiscal Agent is the agent of Financial
Security only and the Fiscal Agent shall in no event be liable to any Holder for
any acts of the Fiscal Agent or any failure of Financial Security to deposit, or
cause to be deposited, sufficient funds to make payments due under this Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the benefit
of each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defense of fraud), whether acquired
by subrogation, assignment or otherwise, to the extent that such rights and
defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notices. All notices to be given hereunder shall be in writing
(except as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to Financial Security as
follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President - Surveillance
Re: Option One Mortgage Loan Trust 1999-1
Asset-Backed Certificates, Series 1999-1
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by writing,
mailed or delivered to the Trustee.
8. Priorities. In the event any term or provision on the face of this
Policy is inconsistent with the provisions of this Endorsement, the provisions
of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered
by the Property/Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law. This Policy is not covered by the Florida Insurance
Guaranty Association created under Part II of Chapter 631 of the Florida
Insurance Code. In the event Financial Security were to become insolvent, any
claims arising under this Policy are excluded from coverage by the California
Insurance Guaranty Association, established pursuant to Article 14.2 of Chapter
I of Part 2 of Division I of the California Insurance Code.
10. Surrender of Policy. The Trustee shall surrender this Policy to
Financial Security for cancellation upon expiration of the Term of this Policy.
<PAGE>
Policy No.: 50770-N Date of Issuance: January 25, 1999
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By: ___________________________
Authorized Officer
<PAGE>
Policy No.: 50770-N Date of Issuance: January 25, 1999
Exhibit A
To Endorsement 1
NOTICE OF CLAIM AND CERTIFICATE
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
The undersigned, a duly authorized officer of Norwest Bank Minnesota,
National Association (the "Trustee"), hereby certifies to Financial Security
Assurance Inc. ("Financial Security"), with reference to Financial Guaranty
Insurance Policy No. 50770-N dated January 25, 1999 (the "Policy") issued by
Financial Security in inspect of the Option One Mortgage Loan Trust 1999-1,
Asset-Backed Certificates, Series 1999-1, Class A-1 and Class A-2 (the
"Certificates"), that:
(i) The Trustee is the Trustee under the Pooling and Servicing
Agreement for the Holders.
(ii) The sum of all amounts on deposit (or scheduled to be on
deposit) in the Distribution Account and available for distribution to
the Holders of the Guaranteed Distributions pursuant to the Pooling and
Servicing Agreement will be $_________ (the "Shortfall") less than the
Guaranteed Distributions with respect to the Distribution Date
occurring on ___________________.
(iii) The Trustee is making a claim under the Policy for the
Shortfall to be applied to distributions of principal or interest or
both with respect to the Certificates.
(iv) The Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply
the same directly to the payment of Guaranteed Distributions on the
Certificates when due; (b) not apply such funds for any other purpose;
(c) not commingle such funds with other funds held by the Trustee and
(d) maintain an accurate record of such payments with respect to each
Certificate and the corresponding claim on the Policy and proceeds
thereof and, if the Certificate is required to be surrendered for such
payment, shall stamp on each such Certificate the legend "$[INSERT
APPLICABLE AMOUNT] paid by Financial Security and the balance hereof
has been canceled and reissued" and then shall deliver such Certificate
to Financial Security.
(v) The Trustee, on behalf of the Holders, hereby assigns to
Financial Security the rights of the Holders with respect to the
Certificates to the extent of any payments under the Policy, including,
without limitation, any amounts due to the Holders in respect of
securities law violations arising from the offer and sale of the
Certificates. The foregoing assignment is in addition to, and not in
limitation of, rights of subrogation otherwise available to Financial
Security in respect of such payments. The Trustee shall take such
action and deliver such instruments as may be reasonably requested or
required by Financial Security to effectuate the purpose or provisions
of this clause (v).
(vi) The Trustee, on its behalf and on behalf of the Holders,
hereby appoints Financial Security as agent and attorney-in-fact for
the Trustee and each such Holder in any legal proceeding with respect
to the Certificates. The Trustee hereby agrees, so long as a
Certificate Insurer Default (as defined in the Pooling and Servicing
Agreement) shall not exist, Financial Security may at any time during
the continuation of any proceeding by or against the Depositor under
the United States Bankruptcy Code or any other applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (an "Insolvency
Proceeding") direct all matters relating to such Insolvency Proceeding.
In addition, the Trustee hereby agrees that Financial Security shall be
subrogated to, and the Trustee on its behalf and on behalf of each
Holder, hereby delegates and assigns, to the fullest extent permitted
by law, the rights of the Trustee and each Holder in the conduct of any
Insolvency Proceeding, including, without limitation, all rights of any
party to an adversary proceeding or action with respect to any court
order issued in connection with any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to Policy
Payments Account.
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
IN WITNESS WHEREOF, the Trustee has executed and delivered this Notice
of Claim and Certificate as of the _____ day of ______________, ____.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By: _________________________
Title: ______________________
- ------------------------------------
For Financial Security or Fiscal Agent Use Only
Wire transfer sent on ______________ by ___________________
Confirmation Number _____________________________
<PAGE>
EXHIBIT 99
<PAGE>
EXECUTION COPY
===============================================================================
FINANCIAL ASSET SECURITIES CORP.,
Depositor
OPTION ONE MORTGAGE CORPORATION,
Seller and Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of January 1, 1999
---------------------------------
Option One Mortgage Loan Trust 1999-1
Asset-Backed Certificates, Series 1999-1
===============================================================================
<PAGE>
Table of Contents
Page
ARTICLE I
DEFINITIONS
Section 1.01.Defined Terms....................................................1
Section 1.02.Accounting......................................................32
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01.Conveyance of Mortgage Loans....................................32
Section 2.02.Acceptance by Trustee...........................................35
Section 2.03.Repurchase or Substitution of Mortgage Loans by the Seller......37
Section 2.04.Representations and Warranties of the Seller with Respect
to the Mortgage Loans...........................................39
Section 2.05.Representations, Warranties and Covenants of the Servicer.......40
Section 2.06.Representations and Warranties of the Depositor.................42
Section 2.07.Issuance of Certificates........................................43
Section 2.08.Representations and Warranties of the Seller....................43
Section 2.09.Covenants of the Seller.........................................45
ARTICLE III
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 3.01.Servicers to Act as Servicers...................................45
Section 3.02.Sub-Servicing Agreements Between Servicer and Sub-Servicers.....47
Section 3.03.Successor Sub-Servicers.........................................48
Section 3.04.Liability of the Servicer.......................................49
Section 3.05.No Contractual Relationship Between Sub-Servicers and the
Trustee or Certificateholders...................................49
Section 3.06.Assumption or Termination of Sub-Servicing Agreements
by Trustee......................................................49
Section 3.07.Collection of Certain Mortgage Loan Payments....................50
Section 3.08.Sub-Servicing Accounts..........................................50
Section 3.09.Collection of Taxes, Assessments and Similar Items;
Servicing Accounts..............................................51
Section 3.10.Collection Account and Distribution Account.....................52
Section 3.11.Withdrawals from the Collection Account and
Distribution Account............................................54
Section 3.12.Investment of Funds in the Collection Account and
the Distribution Account........................................55
Section 3.13.[Reserved]......................................................56
Section 3.14.Maintenance of Hazard Insurance and Errors and Omissions
and Fidelity Coverage...........................................56
Section 3.15.Enforcement of Due-On-Sale Clauses; Assumption Agreements.......58
Section 3.16.Realization Upon Defaulted Mortgage Loans.......................59
Section 3.17.Trustee to Cooperate; Release of Mortgage Files.................61
Section 3.18.Servicing Compensation..........................................62
Section 3.19.Reports to the Trustee; Collection Account Statements...........63
Section 3.20.Statement as to Compliance......................................63
Section 3.21.Independent Public Accountants' Servicing Report................63
Section 3.22.Access to Certain Documentation; Filing of Reports
by Trustee......................................................64
Section 3.23.Title, Management and Disposition of REO Property...............64
Section 3.24.Obligations of the Servicer in Respect of Prepayment
Interest Shortfalls.............................................67
Section 3.25.[Reserved]......................................................67
Section 3.26.Obligations of the Servicer in Respect of Mortgage Rates
and Monthly Payments............................................67
Section 3.27.Solicitations...................................................68
ARTICLE IV
FLOW OF FUNDS
Section 4.01.Distributions...................................................68
Section 4.02.Reserved........................................................71
Section 4.03.Statements......................................................71
Section 4.04.Remittance Reports; Advances....................................74
ARTICLE V
THE CERTIFICATES
Section 5.01.The Certificates................................................75
Section 5.02.Registration of Transfer and Exchange of Certificates...........76
Section 5.03.Mutilated, Destroyed, Lost or Stolen Certificates...............80
Section 5.04.Persons Deemed Owners...........................................80
Section 5.05.Appointment of Paying Agent.....................................81
ARTICLE VI
THE SELLER, THE SERVICER AND THE DEPOSITOR
Section 6.01.Liability of the Seller, the Servicer and the Depositor.........81
Section 6.02.Merger or Consolidation of, or Assumption of the
Obligations of, the Seller, the Servicer
or the Depositor................................................81
Section 6.03.Limitation on Liability of the Servicer and Others..............82
Section 6.04.Servicer Not to Resign..........................................82
Section 6.05.Delegation of Duties............................................83
Section 6.06.Reserved........................................................83
Section 6.07.Inspection......................................................83
ARTICLE VII
DEFAULT
Section 7.01.Servicer Events of Termination..................................84
Section 7.02.Trustee to Act; Appointment of Successor........................86
Section 7.03.Waiver of Defaults..............................................87
Section 7.04.Notification to Certificateholders..............................87
Section 7.05.Survivability of Servicer Liabilities...........................88
ARTICLE VIII
THE TRUSTEE
Section 8.01.Duties of Trustee...............................................88
Section 8.02.Certain Matters Affecting the Trustee...........................89
Section 8.03.Trustee Not Liable for Certificates or Mortgage Loans...........90
Section 8.04.Trustee May Own Certificates....................................91
Section 8.05.Seller to Pay Trustee Expenses..................................91
Section 8.06.Eligibility Requirements for Trustee............................92
Section 8.07.Resignation or Removal of Trustee...............................92
Section 8.08.Successor Trustee...............................................93
Section 8.09.Merger or Consolidation of Trustee..............................94
Section 8.10.Appointment of Co-Trustee or Separate Trustee...................94
Section 8.11.Limitation of Liability.........................................95
Section 8.12.Trustee May Enforce Claims Without Possession of Certificates...95
Section 8.13.Suits for Enforcement...........................................96
Section 8.14.Waiver of Bond Requirement......................................96
Section 8.15.Waiver of Inventory, Accounting and Appraisal Requirement.......96
ARTICLE IX
REMIC ADMINISTRATION
Section 9.01.REMIC Administration............................................96
Section 9.02.Prohibited Transactions and Activities..........................98
Section 9.03.Indemnification with Respect to Certain Taxes and
Loss of REMIC Status............................................98
Section 9.04.[Reserved]......................................................99
ARTICLE X
TERMINATION
Section 10.01. Termination................................................99
Section 10.02. Additional Termination Requirements.......................101
ARTICLE XI
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 11.01. Rights of the Certificate Insurer To Exercise Rights
of Class A Certificateholders.............................102
Section 11.02. Trustee To Act Solely with Consent of the Certificate
Insurer...................................................102
Section 11.03. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer.......................................103
Section 11.04. Claims Upon the Policy; Policy Payments Account...........103
Section 11.05. Effect of Payments by the Certificate Insurer;
Subrogation...............................................105
Section 11.06. Notices to the Certificate Insurer........................105
Section 11.07. Third-Party Beneficiary...................................105
Section 11.08. Trustee to Hold the Policy................................105
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment.................................................106
Section 12.02. Recordation of Agreement; Counterparts....................107
Section 12.03. Limitation on Rights of Certificateholders................107
Section 12.04. Governing Law; Jurisdiction...............................108
Section 12.05. Notices...................................................108
Section 12.06. Severability of Provisions................................109
Section 12.07. Article and Section References............................109
Section 12.08. Notice to the Rating Agencies.............................109
Section 12.09. Further Assurances........................................110
Section 12.10. Benefits of Agreement.....................................110
Section 12.11. Acts of Certificateholders................................110
<PAGE>
EXHIBITS:
Exhibit A Form of Class A Certificates
Exhibit B Form of Class R Certificates
Exhibit C [Reserved]
Exhibit D Mortgage Loan Schedule
Exhibit E Request for Release
Exhibit F-1 Form of Trustee's Initial Certification
Exhibit F-2 Form of Trustee's Final Certification
Exhibit F-3 Form of Receipt of Mortgage Note
Exhibit G [Reserved]
Exhibit H Form of Lost Note Affidavit
Exhibit I Form of ERISA Representation
Exhibit J Form of Investment Letter
Exhibit K Form of Class R Certificate Transfer Affidavit
Exhibit L Form of Transferor Certificate
Exhibit M Form of Liquidation Report
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This Pooling and Servicing Agreement is dated as of January 1, 1999
(the "Agreement"), among FINANCIAL ASSET SECURITIES CORP., as depositor (the
"Depositor"), OPTION ONE MORTGAGE CORPORATION, as seller (in such capacity, the
"Seller") and servicer (in such capacity, the "Servicer") and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, as trustee (the "Trustee").
PRELIMINARY STATEMENT:
The Depositor intends to sell pass-through certificates (collectively,
the "Certificates"), to be issued hereunder in multiple classes, which in the
aggregate will evidence the entire beneficial ownership interest in the Trust
Fund created hereunder. The Certificates will consist of three classes of
certificates, designated as (i) the Class A-1 Certificates, (ii) the Class A-2
Certificates and (iii) the Class R Certificates.
As provided herein, the Trustee shall elect that the Trust Fund
(exclusive of the Collection Account) be treated for federal income tax purposes
as a real estate mortgage investment conduit ("REMIC"). The Class A-1 and Class
A-2 Certificates represent ownership of all of the "regular interests" in the
REMIC, and the Class R Certificates represent the sole class of "residual
interest" in the REMIC for purposes of the REMIC Provisions.
The following table sets forth (or describes) the Class designation,
Pass-Through Rate and Original Class Certificate Principal Balance for each
Class of Certificates comprising the interests in the Trust Fund created
hereunder:
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===============================================================================
Original Class Initial
Certificate Principal Pass-Through Assumed Final
Class Balance Rate Maturity Dates
================== ------------------------- --------------- ================
Class A-1......... $ 65,900,000 6.40%(1) February 25, 2029
================== ------------------------- --------------- =================
Class A-2......... $ 128,437,000 5.43969%(1) February 25, 2029
================== ========================= =============== ==================
Class R........... N/A N/A N/A
================== ========================= =============== ==================
(1) Calculated pursuant to the definition of Pass-Through Rate.
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.
Whenever used in this Agreement or in the Preliminary Statement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article. Unless otherwise specified, all
calculations in respect of interest on the Group II Certificates shall be made
on the basis of the actual number of days elapsed on the basis of a 360-day year
and all other calculations of interest described herein shall be made on the
basis of a 360-day year consisting of twelve 30-day months.
Many of the defined terms listed below may apply to both Loan Groups /
Certificate Groups and are sometimes used in this Agreement to refer to a
particular Loan Group / Certificate Group by the adjectival use of the words
"Group I" and "Group II".
"1933 Act": The Securities Act of 1933, as amended.
"Account": Either of the Collection Account and Distribution Account.
"Accrual Period": With respect to (i) the Group I Certificates and each
Distribution Date, the calendar month prior to the month of such Distribution
Date or (ii) the Group II Certificates and (A) the first Distribution Date, the
period commencing on the Closing Date and ending on February 24, 1999, or (B)
any subsequent Distribution Date, the period commencing on the preceding
Distribution Date and ending on the day preceding the current Distribution Date.
"Adjustment Date": With respect to each Group II Mortgage Loan, each
adjustment date, on which the Mortgage Rate of a Group II Mortgage Loan changes
pursuant to the related Mortgage Note. The first Adjustment Date following the
Cut-off Date as to each Group II Mortgage Loan is set forth in the Mortgage Loan
Schedule.
"Advance": As to any Mortgage Loan or REO Property, any advance made by
the Servicer in respect of any Distribution Date pursuant to Section 4.04.
"Adverse REMIC Event": As defined in Section 9.01(f) hereof.
"Affiliate": With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.
"Agreement": This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
"Annual Loss Percentage": With respect to any Distribution Date, a
fraction, expressed as a percentage, the numerator of which is the aggregate of
all Realized Losses for the twelve months ending on the last day of the
preceding month and the denominator of which is the aggregate Stated Principal
Balance of the Mortgage Loans and REO Properties as of the first day of the
twelfth preceding calendar month.
"Applicable Regulations": As to any Mortgage Loan, all federal, state
and local laws, statutes, rules and regulations applicable thereto.
"Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect or
record the sale of the Mortgage.
"Assumed Final Maturity Date": As to each Class of Certificates, the
date set forth as such in the Preliminary Statement.
"Available Funds": The sum of the Group I Available Funds and Group II
Available Funds.
"Available Funds Cap": For any Distribution Date and Loan Group, the
difference between (A) the average of the Mortgage Rates of the Mortgage Loans
in such Loan Group as of the first day of the month preceding the month of such
Distribution Date (or, in the case of the first Distribution Date, the Closing
Date), weighted on the basis of the related Principal Balances as of such date
and (B) the sum of (i) the Servicing Fee Rate and (ii) the rate at which the
premium and Premium Supplement payable to the Certificate Insurer multiplied by
a fraction, the numerator of which is the Certificate Principal Balance of the
related Class of Certificates and the denominator of which is the aggregate
Principal Balance of the related Loan Group, is calculated and (iii) 0.50%. For
purposes of computing the Available Funds Cap with respect to Certificate Group
II, calculations will be made on the basis of the actual number of days in the
related Due Period and a 360-day year.
"Balloon Mortgage Loan": A Mortgage Loan that provides for the payment
of the unamortized principal balance of such Mortgage Loan in a single payment
at the maturity of such Mortgage Loan that is substantially greater than the
preceding monthly payment.
"Balloon Payment": A payment of the unamortized principal balance of a
Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is
substantially greater than the preceding Monthly Payment.
"Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11 of the
United States Code), as amended.
"Basic Principal Distribution Amount": With respect to each Certificate
Group and any Distribution Date, the excess of (i) the related Principal
Remittance Amount for such Distribution Date over (ii) the related
Overcollateralization Release Amount, if any, for such Distribution Date.
"Book-Entry Certificates": Any of the Certificates that shall be
registered in the name of the Depository or its nominee, the ownership of which
is reflected on the books of the Depository or on the books of a Person
maintaining an account with the Depository (directly, as a "Depository
Participant", or indirectly, as an indirect participant in accordance with the
rules of the Depository and as described in Section 5.02 hereof). On the Closing
Date, the Class A Certificates shall be Book-Entry Certificates.
"Business Day": Any day other than a Saturday, a Sunday or a day on
which the Certificate Insurer or banking or savings institutions in the State of
Delaware, the State of New York, the State of Maryland, the State of California,
the State of Minnesota, the Commonwealth of Pennsylvania or in the city in which
the Corporate Trust Office of the Trustee is located are authorized or obligated
by law or executive order to be closed.
"Certificate": Any Regular Certificate or Class R Certificate.
"Certificate Group": Either the Group I Certificates or the Group II
Certificates.
"Certificateholder" or "Holder": The Person in whose name a Certificate
is registered in the Certificate Register and the Certificate Insurer to the
extent of Cumulative Insurance Payments, except that a Disqualified Organization
or non-U.S. Person shall not be a Holder of a Class R Certificate for any
purpose hereof.
"Certificate Insurer": Financial Security Assurance Inc., a stock
insurance company organized and created under the laws of the State of New York,
or its successors in interest.
"Certificate Margin": On each Distribution Date (A) on or prior to the
Optional Termination Date, 0.50% per annum and (B) after the Optional
Termination Date, 1.00%.
"Certificate Owner": With respect to each Book-Entry Certificate, any
beneficial owner thereof.
"Certificate Principal Balance": With respect to any Class of
Certificates and any Distribution Date, will be equal to the Certificate
Principal Balance thereof on the Closing Date (the "Original Certificate
Principal Balance") reduced by the sum of all amounts actually distributed in
respect of principal of such Class on all prior Distribution Dates.
"Certificate Register" and "Certificate Registrar": The register
maintained and registrar appointed pursuant to Section 5.02 hereof.
"Class": Collectively, Certificates which have the same priority of
payment and bear the same class designation and the form of which is identical
except for variation in the Percentage Interest evidenced thereby.
"Class A Certificate": Any one of the Class A-1 Certificates or Class
A-2 Certificates as designated on the face thereof substantially in the form
annexed hereto as Exhibit A, executed by the Trustee and authenticated and
delivered by the Trustee, representing the right to distributions as set forth
herein and therein.
"Class A Certificateholder": Any Holder of a Class A Certificate.
"Class R Certificate": The Class R Certificate executed by the Trustee,
and authenticated and delivered by the Certificate Registrar, substantially in
the form annexed hereto as Exhibit B and evidencing the ownership of the
uncertificated Residual Interest in the REMIC.
"Close of Business": As used herein, with respect to any Business Day,
5:00 p.m.
"Closing Date": January 25, 1999.
"Code": The Internal Revenue Code of 1986 as it may be amended from
time to time.
"Collection Account": The account or accounts created and maintained by
the Servicer pursuant to Section 3.10(a), which shall be entitled "Option One
Mortgage Corporation, as Servicer for Norwest Bank Minnesota, National
Association, as Trustee, in trust for registered Holders of Option One Mortgage
Loan Trust 1999-1, Asset-Backed Certificates, Series 1999-1", and which must be
an Eligible Account.
"Compensating Interest": As defined in Section 3.24 hereof.
"Corporate Trust Office": The principal corporate trust office of the
Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at Sixth and Marquette,
Minneapolis, Minnesota 55479, Attention: Option One Series 1999-1, or at such
other address as the Trustee may designate from time to time by notice to the
Certificateholders, the Depositor, the Certificate Insurer, the Servicer and the
Seller.
"Custodian": Norwest Bank Minnesota, National Association, as custodian
of the Mortgage Files, and any successor thereto.
"Cut-off Date": With respect to any Mortgage Loan, the later of (i) the
date of origination of such Mortgage Loan or (ii) January 1, 1999.
"Cut-off Date Aggregate Principal Balance": With respect to each Loan
Group, the aggregate of the Cut-off Date Principal Balances of the Mortgage
Loans in such Loan Group.
"Cut-off Date Principal Balance": With respect to any Mortgage Loan,
the unpaid principal balance thereof as of the Cut-off Date (or as of the
applicable date of substitution with respect to a Qualified Substitute Mortgage
Loan).
"Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.
"Deficiency Amount": With respect to any Distribution Date, (A) the
excess, if any, of (i) Interest Distributable Amount for the Class A
Certificates (net of any Relief Act Interest Shortfalls and Prepayment Interest
Shortfalls) over (ii) funds on deposit in the Distribution Account available to
be distributed therefor on such Distribution Date and (B) the Guaranteed
Principal Amount.
"Deficient Valuation": With respect to any Mortgage Loan, a valuation
of the related Mortgaged Property by a court of competent jurisdiction in an
amount less than the then outstanding principal balance of the Mortgage Loan,
which valuation results from a proceeding initiated under the Bankruptcy Code.
"Definitive Certificates": As defined in Section 5.02(c) hereof.
"Deleted Mortgage Loan": A Mortgage Loan replaced or to be replaced by
one or more Qualified Substitute Mortgage Loans.
"Delinquency Percentage": With respect to each Loan Group, any
Distribution Date and the related Due Period, the rolling three month average of
the fraction, expressed as a percentage, the numerator of which is the sum of
the aggregate of the Principal Balances of all Mortgage Loans in such Loan Group
that are (i) 60 or more days Delinquent, (ii) in bankruptcy and 60 or more days
Delinquent under the applicable Mortgage Note, (iii) in foreclosure and 60 or
more days Delinquent, or (iv) REO Properties as of the close of business on the
last day of such Due Period, and the denominator of which is the related Loan
Group Balance as of the close of business on the last day of such Due Period;
provided, however, that to the extent that Mortgage Loans in either Loan Group
purchased by the Seller pursuant to Section 3.16(c) have an aggregate Stated
Principal Balance in excess of 3.00% of the aggregate Stated Principal Balance
of the Mortgage Loans in such Loan Group as of the Cut-off Date, such Mortgage
Loans shall not be included in either the numerator or the denominator for
purposes of calculating the Delinquency Percentage.
"Delinquent": Any Mortgage Loan, the Monthly Payment due on a Due Date
with respect to which is not made by the Close of Business on the next scheduled
Due Date for such Mortgage Loan.
"Depositor": Financial Asset Securities Corp., a Delaware corporation,
or any successor in interest.
"Depository": The initial Depository shall be The Depository Trust
Company, whose nominee is Cede & Co., or any other organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. The Depository shall initially be the registered Holder of the
Book-Entry Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(3) of the Uniform Commercial Code of
the State of New York.
"Depository Participant": A broker, dealer, bank or other financial
institution or other person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
"Determination Date": With respect to any Distribution Date, the 15th
day of the calendar month in which such Distribution Date occurs or, if such
15th day is not a Business Day, the Business Day immediately preceding such 15th
day.
"Directly Operate": With respect to any REO Property, the furnishing or
rendering of services to the tenants thereof, the management or operation of
such REO Property, the holding of such REO Property primarily for sale to
customers, the performance of any construction work thereon or any use of such
REO Property in a trade or business conducted by the REMIC other than through an
Independent Contractor; provided, however, that the Trustee (or the Servicer on
behalf of the Trustee) shall not be considered to Directly Operate an REO
Property solely because the Trustee (or the Servicer on behalf of the Trustee)
establishes rental terms, chooses tenants, enters into or renews leases, deals
with taxes and insurance, or makes decisions as to repairs or capital
expenditures with respect to such REO Property.
"Disqualified Organization": A "disqualified organization" under
Section 860E of the Code, which as of the Closing Date is any of: (i) the United
States, any state or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (ii) any organization (other than a cooperative described in Section
521 of the Code) which is exempt from the tax imposed by Chapter 1 of the Code
unless such organization is subject to the tax imposed by Section 511 of the
Code, (iii) any organization described in Section 1381(a)(2)(C) of the Code,
(iv) an "electing large partnership" within the meaning of Section 775 of the
Code or (v) any other Person so designated by the Trustee based upon an Opinion
of Counsel provided by nationally recognized counsel to the Trustee that the
holding of an ownership interest in a Class R Certificate by such Person may
cause the Trust Fund or any Person having an ownership interest in any Class of
Certificates (other than such Person) to incur liability for any federal tax
imposed under the Code that would not otherwise be imposed but for the transfer
of an ownership interest in the Class R Certificate to such Person. A
corporation will not be treated as an instrumentality of the United States or of
any state or political subdivision thereof, if all of its activities are subject
to tax and, a majority of its board of directors is not selected by a
governmental unit. The term "United States", "state" and "international
organizations" shall have the meanings set forth in Section 7701 of the Code.
"Distribution Account": The trust account or accounts created and
maintained by the Trustee pursuant to Section 3.10(b) which shall be entitled
"Distribution Account, Norwest Bank Minnesota, National Association, as Trustee,
in trust for the registered Certificateholders of Option One Mortgage Loan Trust
1999-1, Asset-Backed Certificates, Series 1999-1" and which must be an Eligible
Account.
"Distribution Date": The 25th day of any calendar month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in February 1999.
"Due Date": With respect to each Mortgage Loan and any Distribution
Date, the first day of the calendar month in which such Distribution Date occurs
on which the Monthly Payment for such Mortgage Loan was due, exclusive of any
days of grace.
"Due Period": With respect to any Distribution Date, the period
commencing on the second day of the month preceding the month in which such
Distribution Date occurs and ending on the first day of the month in which such
Distribution Date occurs.
"Eligible Account": Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the short-term unsecured debt obligations of such holding company) are
rated P-1 by Moody's and A-1 by S&P (or comparable ratings if Moody's and S&P
are not the Rating Agencies) at the time any amounts are held on deposit
therein, (ii) an account or accounts the deposits in which are fully insured by
the FDIC (to the limits established by such corporation), the uninsured deposits
in which account are otherwise secured such that, as evidenced by an Opinion of
Counsel delivered to the Trustee and to each Rating Agency, the
Certificateholders will have a claim with respect to the funds in such account
or a perfected first priority security interest against such collateral (which
shall be limited to Permitted Investments) securing such funds that is superior
to claims of any other depositors or creditors of the depository institution
with which such account is maintained, (iii) a trust account or accounts
maintained with the trust department of a federal or state chartered depository
institution, national banking association or trust company acting in its
fiduciary capacity or (iv) an account otherwise (A) acceptable to each Rating
Agency without reduction or withdrawal of their then current ratings of the
Certificates as evidenced by a letter from each Rating Agency to the Trustee and
the Certificate Insurer and (B) acceptable to the Certificate Insurer. Eligible
Accounts may bear interest.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Payments": The amounts constituting ground rents, taxes,
assessments, water rates, fire and hazard insurance premiums and other payments
required to be escrowed by the Mortgagor with the mortgagee pursuant to any
Mortgage Loan.
"Estate in Real Property": A fee simple estate in a parcel of real
property.
"Extra Principal Distribution Amount": With respect to a Certificate
Group and any Distribution Date, the lesser of (x) the related General Excess
Available Amount for such Distribution Date and (y) the related
Overcollateralization Deficiency Amount for such Distribution Date.
"FDIC": Federal Deposit Insurance Corporation or any successor thereto.
"Fannie Mae": Federal National Mortgage Association or any successor
thereto.
"Final Recovery Determination": With respect to any defaulted Mortgage
Loan or any REO Property (other than a Mortgage Loan or REO Property purchased
by the Seller or the Servicer pursuant to or as contemplated by Section 2.03 or
10.01), a determination made by the Servicer that all Insurance Proceeds,
Liquidation Proceeds and other payments or recoveries which the Servicer, in its
reasonable good faith judgment, expects to be finally recoverable in respect
thereof have been so recovered. The Servicer shall maintain records, prepared by
a Servicing Officer, of each Final Recovery Determination made thereby.
"Fiscal Agent": As defined in the Policy.
"Fitch": Fitch IBCA, Inc. or its successor in interest.
"Foreclosure Price": The amount reasonably expected to be received from
the sale of the related Mortgaged Property net of any expenses associated with
foreclosure proceedings.
"FHLMC": The Federal Home Loan Mortgage Corporation ("FHLMC"), or any
successor thereto.
"General Excess Available Amount": With respect to a Certificate Group
and each Distribution Date, the amount, if any, by which the related Available
Funds for such Distribution Date exceeds the aggregate amount distributed on
such Distribution Date pursuant to paragraphs (i) through (v) of clauses (A) or
(B), as applicable, under Section 4.01.
"Gross Margin": With respect to each Group II Mortgage Loan, the fixed
percentage set forth in the related Mortgage Note that is added to the Index on
each Adjustment Date in accordance with the terms of the related Mortgage Note
used to determine the Mortgage Rate for such Mortgage Loan.
"Group I Available Funds": With respect to any Distribution Date and
Loan Group I, an amount equal to the excess of (i) the sum of (a) the aggregate
of the related Monthly Payments received on or prior to the Determination Date,
(b) Liquidation Proceeds, Insurance Proceeds, Principal Prepayments and other
unscheduled recoveries of principal and interest in respect of the Group I
Mortgage Loans during the related Prepayment Period, excluding prepayment
penalties, (c) the aggregate of any amounts received in respect of a related REO
Property withdrawn from any REO Account and deposited in the Collection Account
for such Distribution Date, (d) the aggregate of any amounts deposited in the
Collection Account by the Servicer in respect of related Prepayment Interest
Shortfalls for such Distribution Date, (e) the aggregate of any related Advances
made by the Servicer for such Distribution Date and (f) the aggregate of any
related advances made by the Trustee for such Distribution Date pursuant to
Section 7.02, over (ii) the sum of (a) related amounts reimbursable or payable
to the Servicer pursuant to Section 3.11(a), and (b) related amounts deposited
in the Collection Account or the Distribution Account, as the case may be, in
error.
"Group I Loan Balance": As of any date, the aggregate of the Principal
Balances of all Mortgage Loans in Loan Group I as of such date.
"Group I Certificates": The Class A-1 Certificates.
"Group I Mortgage Loan": A Mortgage Loan which provides for a fixed
Mortgage Rate payable with respect thereto.
"Group II Available Funds": With respect to any Distribution Date and
Loan Group II, an amount equal to the excess of (i) the sum of (a) the aggregate
of the related Monthly Payments received on or prior to the Determination Date,
(b) Liquidation Proceeds, Insurance Proceeds, Principal Prepayments and other
unscheduled recoveries of principal and interest in respect of the Group II
Mortgage Loans during the related Prepayment Period, excluding prepayment
penalties, (c) the aggregate of any amounts received in respect of a related REO
Property withdrawn from any REO Account and deposited in the Collection Account
for such Distribution Date, (d) the aggregate of any amounts deposited in the
Collection Account by the Servicer in respect of related Prepayment Interest
Shortfalls for such Distribution Date, (e) the aggregate of any related Advances
made by the Servicer for such Distribution Date and (f) the aggregate of any
related advances made by the Trustee for such Distribution Date pursuant to
Section 7.02, over (ii) the sum of (a) related amounts reimbursable or payable
to the Servicer pursuant to Section 3.11(a), and (b) related amounts deposited
in the Collection Account or the Distribution Account, as the case may be, in
error.
"Group II Available Funds Cap Carryover Amount": With respect to the
Class A-2 Certificates and any Distribution Date on which the Pass-Through Rate
for such Certificates is based upon the related Available Funds Cap, the sum of
(A) the excess of (i) the amount of interest such Certificates would otherwise
be entitled to receive on such Distribution Date had such rate been calculated
at the Pass-Through Rate without giving effect to the related Available Funds
Cap, up to the Maximum Cap, over (ii) the amount of interest payable on such
Certificates at the Available Funds Cap for such Distribution Date and (B) the
Group II Available Funds Cap Carryover Amount for all previous Distribution
Dates not previously paid, together with interest thereon at a rate equal to the
related Pass-Through Rate, up to the Maximum Cap for such Certificates for such
Distribution Date (it being understood that such amount is not covered by the
Policy).
"Group II Certificates": The Class A-2 Certificates.
"Group II Formula Rate": For any Distribution Date and the Group II
Certificates, LIBOR plus the Certificate Margin.
"Group II Loan Balance": As of any date, the aggregate of the Principal
Balances of all Mortgage Loans in Loan Group II as of such date.
"Group II Mortgage Loan": A Mortgage Loan which provides at any period
during the life of such loan for the adjustment of the Mortgage Rate payable in
respect thereto.
"Guaranteed Principal Amount": means (a) for any Distribution Date
(other than a Distribution Date specified in (b)), the amount, if any, by which
the Certificate Principal Balances of the Class A-1 and the Class A-2
Certificates exceed the Pool Balance at the end of the previous month (after
giving effect to all distributions of principal on the related Class A
Certificates on such Distribution Date) and (b) on the Distribution Date in
February 25, 2029 (after giving effect to all other distributions of principal
on the Class A Certificates), an amount equal to the aggregate Certificate
Principal Balance of the Class A Certificates.
"Independent": When used with respect to any specified Person, any such
Person who (a) is in fact independent of the Depositor, the Servicer and their
respective Affiliates, (b) does not have any direct financial interest in or any
material indirect financial interest in the Depositor or the Servicer or any
Affiliate thereof, and (c) is not connected with the Depositor or the Servicer
or any Affiliate thereof as an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions; provided,
however, that a Person shall not fail to be Independent of the Depositor or the
Servicer or any Affiliate thereof merely because such Person is the beneficial
owner of 1% or less of any class of securities issued by the Depositor or the
Servicer or any Affiliate thereof, as the case may be.
"Independent Contractor": Either (i) any Person (other than the
Servicer) that would be an "independent contractor" with respect to the REMIC
within the meaning of Section 856(d)(3) of the Code if the REMIC were a real
estate investment trust (except that the ownership tests set forth in that
section shall be considered to be met by any Person that owns, directly or
indirectly, 35% or more of any Class of Certificates), so long as the REMIC does
not receive or derive any income from such Person and provided that the
relationship between such Person and the REMIC is at arm's length, all within
the meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any other
Person (including the Servicer) if the Trustee has received an Opinion of
Counsel to the effect that the taking of any action in respect of any REO
Property by such Person, subject to any conditions therein specified, that is
otherwise herein contemplated to be taken by an Independent Contractor will not
cause such REO Property to cease to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code (determined without regard to the
exception applicable for purposes of Section 860D(a) of the Code), or cause any
income realized in respect of such REO Property to fail to qualify as Rents from
Real Property.
"Index": With respect to each Group II Mortgage Loan and with respect
to each related Adjustment Date, the index as specified in the related Mortgage
Note.
"Initial Certificate Principal Balance": With respect to any Regular
Certificate, the amount designated "Initial Certificate Principal Balance" on
the face thereof.
"Insurance Agreement": The insurance and indemnity agreement, dated as
of January 25, 1999, among the Certificate Insurer, the Seller, the Depositor
and the Trustee.
"Insurance Proceeds": Proceeds of any title policy, hazard policy or
other insurance policy (other than the Policy) covering a Mortgage Loan, to the
extent such proceeds are not to be applied to the restoration of the related
Mortgaged Property or released to the Mortgagor in accordance with the
procedures that the Servicer would follow in servicing mortgage loans held for
its own account, subject to the terms and conditions of the related Mortgage
Note and Mortgage.
"Insurer Default": The existence and continuance of any of the
following:
(a) the Certificate Insurer fails to make a payment required under
the Policy in accordance with its terms;
(b) the Certificate Insurer (A) files any petition or commences
any case or proceeding under any provision or chapter of the Bankruptcy
Code or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, (B) makes a
general assignment for the benefit of its creditors, or (C) has an
order for relief entered against it under the Bankruptcy Code or any
other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization which is final and
nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority enters a final and
nonappealable order, judgment or decree (A) appointing a custodian,
trustee, agent or receiver for the Certificate Insurer or for all or
any material portion of its property or (B) authorizing the taking of
possession by a custodian, trustee, agent or receiver of the
Certificate Insurer (or the taking of possession of all or any material
portion of the property of the Certificate Insurer).
"Interest Determination Date": With respect to the Class A Certificates
and for each Accrual Period, the second LIBOR Business Day preceding the
commencement of such Accrual Period.
"Interest Distributable Amount": With respect to any Distribution Date
and each Class of Class A Certificates, the sum of (i) the related Monthly
Interest Distributable Amount for such Class for such Distribution Date and (ii)
the related Unpaid Interest Shortfall Amount for such Class for such
Distribution Date.
"Late Collections": With respect to any Mortgage Loan, all amounts
received subsequent to the Determination Date immediately following any related
Due Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Liquidation Proceeds or otherwise, which represent late payments or
collections of principal and/or interest due (without regard to any acceleration
of payments under the related Mortgage and Mortgage Note) but delinquent on a
contractual basis for such Due Period and not previously recovered.
"LIBOR": With respect to each Accrual Period other than the initial
Accrual Period, 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 United States dollar deposits, as such rates appear on the Telerate
Screen 3750, as of 11:00 a.m. (London time) on such Interest Determination Date.
On each Interest Determination Date, LIBOR for the related 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 Accrual
Period shall be the arithmetic mean of such offered quotations (rounded
upwards if necessary to the nearest whole multiple of 1/16 of 1%); and
(ii) If on such Interest Determination Date fewer than two
Reference Banks provide such offered quotations, LIBOR for the related
Accrual Period shall be the higher of (i) LIBOR as determined on the
previous Interest Determination Date and (ii) the Reserve Interest
Rate.
"LIBOR Business Day": Any day on which banks in London, England and The
City of New York are open and conducting transactions in foreign currency and
exchange.
"Liquidated Mortgage Loan": As to any Distribution Date, any Mortgage
Loan in respect of which the Servicer has determined, in accordance with the
servicing procedures specified herein, as of the end of the related Prepayment
Period, that all Liquidation Proceeds which it expects to recover with respect
to the liquidation of the Mortgage Loan or disposition of the related REO
Property have been recovered.
"Liquidation Event": With respect to any Mortgage Loan, any of the
following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery
Determination is made as to such Mortgage Loan; or (iii) such Mortgage Loan is
removed from the Trust Fund by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.03 or Section 10.01. With respect to
any REO Property, either of the following events: (i) a Final Recovery
Determination is made as to such REO Property; or (ii) such REO Property is
removed from the Trust Fund by reason of its being sold or purchased pursuant to
Section 3.23 or Section 10.01.
"Liquidation Proceeds": The amount (other than amounts received in
respect of the rental of any REO Property prior to REO Disposition) received by
the Servicer in connection with (i) the taking of all or a part of a Mortgaged
Property by exercise of the power of eminent domain or condemnation, (ii) the
liquidation of a defaulted Mortgage Loan by means of a trustee's sale,
foreclosure sale or otherwise, or (iii) the repurchase, substitution or sale of
a Mortgage Loan or an REO Property pursuant to or as contemplated by Section
2.03, Section 3.23 or Section 10.01.
"Loan-to-Value Ratio": As of any date and Mortgage Loan, the fraction,
expressed as a percentage, the numerator of which is the Principal Balance of
the Mortgage Loan, and the denominator of which is the Value of the related
Mortgaged Property.
"Loan Group": Either Loan Group I or Loan Group II, as the context
requires.
"Loan Group Balance": Either the Group I Loan Balance or the Group II
Loan Balance, as applicable.
"Loan Group I": The pool of Mortgage Loans identified in the related
Mortgage Loan Schedule as having been assigned to Loan Group I.
"Loan Group II": The pool of Mortgage Loans identified in the related
Mortgage Loan Schedule as having been assigned to Loan Group II.
"Losses": As defined in Section 9.03.
"Lost Note Affidavit": With respect to any Mortgage Loan as to which
the original Mortgage Note has been permanently lost or destroyed and has not
been replaced, an affidavit from the Seller certifying that the original
Mortgage Note has been lost, misplaced or destroyed (together with a copy of the
related Mortgage Note and indemnifying the Trust against any loss, cost or
liability resulting from the failure to deliver the original Mortgage Note) in
the form of Exhibit H hereto.
"Majority Certificateholders": The Holders of Certificates evidencing
at least 51% of the Voting Rights.
"Majority Class R Certificateholders": The Holders of Class R
Certificates evidencing at least a 51% Percentage Interest in the Class R
Certificates.
"Maximum Cap": For any Distribution Date and with respect to the Group
II Mortgage Loans, the weighted average of the Maximum Mortgage Rates less the
sum of (A) the Servicing Fee Rate and (B) the rate at which the premium and
Premium Supplement payable to the Certificate Insurer multiplied by a fraction,
the numerator of which is the Certificate Principal Balance of the related Group
of Certificates and the denominator of which is the current outstanding
Principal Balance of the related Mortgage Loan Group, is calculated.
"Maximum Mortgage Rate": With respect to each Group II Mortgage Loan,
the percentage set forth in the related Mortgage Note as the maximum Mortgage
Rate thereunder.
"Minimum Mortgage Rate": With respect to each Group II Mortgage Loan,
the percentage set forth in the related Mortgage Note as the minimum Mortgage
Rate thereunder.
"Monthly Interest Distributable Amount": With respect to each Class of
Class A Certificates and for any Distribution Date, the amount of interest
accrued during the related Accrual Period at the related Pass-Through Rate on
the Certificate Principal Balance of such Class immediately prior to such
Distribution Date (or, in the case of the first Distribution Date, from the
Closing Date).
"Monthly Payment": With respect to any Mortgage Loan, the scheduled
monthly payment of principal and interest on such Mortgage Loan which is payable
by the related Mortgagor from time to time under the related Mortgage Note,
determined: (a) after giving effect to (i) any Deficient Valuation and/or Debt
Service Reduction with respect to such Mortgage Loan and (ii) any reduction in
the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Servicer pursuant to Section 3.01; and (c) on the assumption that all other
amounts, if any, due under such Mortgage Loan are paid when due.
"Moody's": Moody's Investors Service, Inc. or its successor in
interest.
"Mortgage": The mortgage, deed of trust or other instrument creating a
first lien on, or first priority security interest in, a Mortgaged Property
securing a Mortgage Note.
"Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Loan": Each mortgage loan transferred and assigned to the
Trustee pursuant to Section 2.01 or Section 2.03(d) as from time to time held as
a part of the Trust Fund, the Mortgage Loans so held being identified in the
Mortgage Loan Schedule.
"Mortgage Loan Purchase Agreement": The agreement between the Seller
and the Depositor, regarding the transfer of the Mortgage Loans by the Seller to
or at the direction of the Depositor.
"Mortgage Loan Schedule": As of any date, the list of Mortgage Loans
included in the Trust Fund on such date, separately identifying the Group II
Mortgage Loans and the Group I Mortgage Loans, attached hereto as Schedule 1.
The Mortgage Loan Schedule shall be prepared by the Seller and shall set forth
the following information with respect to each Mortgage Loan:
(1) the Mortgage Loan identifying number;
(2) the Mortgagor's name;
(3) the street address of the Mortgaged Property including the
state and zip code;
(4) a code indicating whether the Mortgaged Property was
represented by the borrower, at the time of origination, as being
owner-occupied;
(5) the type of Residential Dwelling constituting the Mortgaged
Property;
(6) the original months to maturity;
(7) the stated remaining months to maturity from the Cut-off Date
based on the original amortization schedule;
(8) the Loan-to-Value Ratio at origination;
(9) the Mortgage Rate in effect immediately following the Cut-off
Date;
(10) the date on which the first Monthly Payment was due on the
Mortgage Loan;
(11) the stated maturity date;
(12) the amount of the Monthly Payment at origination;
(13) the amount of the Monthly Payment due on the first Due Date
after the Cut-off Date;
(14) the last Due Date on which a Monthly Payment was actually
applied to the unpaid Stated Principal Balance;
(15) the original principal amount of the Mortgage Loan;
(16) the Stated Principal Balance of the Mortgage Loan as of the
Close of Business on the Cut-off Date;
(17) a code indicating the purpose of the Mortgage Loan (i.e.,
purchase financing, rate/term refinancing, cash-out refinancing);
(18) the Mortgage Rate at origination;
(19) a code indicating the documentation program (i.e., full
documentation, limited documentation, stated income documentation);
(20) the risk grade;
(21) the Value of the Mortgaged Property;
(22) the sale price of the Mortgaged Property, if applicable;
(23) the actual unpaid principal balance of the Mortgage Loan as
of the Cut-off Date;
(24) the type and term of the related Prepayment Premium;
(25) the rounding code; and
(26) the program code.
The Mortgage Loan Schedule shall set forth the following information,
as of the Cut-off Date with respect to the Mortgage Loans in the aggregate and
for each Loan Group: (1) the number of Mortgage Loans; (2) the current Principal
Balance of the Mortgage Loans; (3) the weighted average Mortgage Rate of the
Mortgage Loans; and (4) the weighted average maturity of the Mortgage Loans. The
Mortgage Loan Schedule shall be amended from time to time by the Seller in
accordance with the provisions of this Agreement. With respect to any Qualified
Substitute Mortgage Loan, Cut-off Date shall refer to the related Cut-off Date
for such Mortgage Loan, determined in accordance with the definition of Cut-off
Date herein.
"Mortgage Note": The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan.
"Mortgage Pool": The pool of Mortgage Loans, identified on Schedule 1
from time to time, and any REO Properties acquired in respect thereof.
"Mortgage Rate": With respect to each Mortgage Loan, the annual rate at
which interest accrues on such Mortgage Loan from time to time in accordance
with the provisions of the related Mortgage Note, which rate (i) in the case of
each Group I Mortgage Loan shall remain constant at the rate set forth in the
Mortgage Loan Schedule as the Mortgage Rate in effect immediately following the
Cut-off Date and (ii) in the case of each Group II Mortgage Loan (A) as of any
date of determination until the first Adjustment Date following the Cut-off Date
shall be the rate set forth in the Mortgage Loan Schedule as the Mortgage Rate
in effect immediately following the Cut-off Date and (B) as of any date of
determination thereafter shall be the rate as adjusted on the most recent
Adjustment Date, to equal the sum, rounded to the next highest or nearest 0.125%
(as provided in the Mortgage Note), of the Index, determined as set forth in the
related Mortgage Note, plus the related Gross Margin subject to the limitations
set forth in the related Mortgage Note. With respect to each Mortgage Loan that
becomes an REO Property, as of any date of determination, the annual rate
determined in accordance with the immediately preceding sentence as of the date
such Mortgage Loan became an REO Property.
"Mortgaged Property": The underlying property securing a Mortgage Loan,
including any REO Property, consisting of an Estate in Real Property improved by
a Residential Dwelling.
"Mortgagor": The obligor on a Mortgage Note.
"Net Liquidation Proceeds": With respect to any Liquidated Mortgage
Loan or any other disposition of related Mortgaged Property (including REO
Property) the related Liquidation Proceeds net of Advances, Servicing Advances,
Servicing Fees and any other accrued and unpaid servicing fees received and
retained in connection with the liquidation of such Mortgage Loan or Mortgaged
Property.
"Net Loan Rate": With respect to any Mortgage Loan (or the related REO
Property), as of any date of determination, a per annum rate of interest equal
to the then applicable Mortgage Rate for such Mortgage Loan minus the Servicing
Fee Rate.
"Net Prepayment Interest Shortfall": With respect to each Loan Group
and any Distribution Date, the excess, if any, of any Prepayment Interest
Shortfalls in such Loan Group for such date over the related Compensating
Interest.
"New Lease": Any lease of REO Property entered into on behalf of the
Trust, including any lease renewed or extended on behalf of the Trust if the
Trust has the right to renegotiate the terms of such lease.
"Nonrecoverable Advance": Any Advance or Servicing Advance previously
made in respect of a Mortgage Loan or REO Property that, in the good faith
business judgment of the Servicer, will not be ultimately recoverable from Late
Collections, Insurance Proceeds or Liquidation Proceeds on such Mortgage Loan or
REO Property as provided herein.
"Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Servicer, the Seller or the
Depositor, as applicable.
"Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be a salaried counsel for the Depositor or the Servicer, acceptable
to the Trustee, except that any opinion of counsel relating to (a) the
qualification of any REMIC as a REMIC or (b) compliance with the REMIC
Provisions which must be an opinion of Independent counsel.
"Optional Termination Date": The first Distribution Date on which the
Seller or the Certificate Insurer may opt to terminate the Trust Fund pursuant
to Section 10.01.
"Original Class Certificate Principal Balance": With respect to the
Class A Certificates, the corresponding amounts set forth opposite such Class
above in the Preliminary Statement and, with respect to the Class R
Certificates, zero.
"Other Insurance Proceeds": Proceeds of any title policy, hazard policy
or other insurance policy covering a Mortgage Loan, to the extent such proceeds
are not to be applied to the restoration of the related Mortgaged Property or
released to the Mortgagor in accordance with the procedures that the Servicer
would follow in servicing mortgage loans held for its own account.
"Overcollateralization Deficiency Amount": With respect to any
Distribution Date and each Certificate Group, the amount, if any, by which the
related Overcollateralization Target Amount exceeds the related
Overcollateralized Amount on such Distribution Date (after giving effect to
distributions in respect of the related Basic Principal Distribution Amount on
such Distribution Date).
"Overcollateralization Release Amount": With respect to each
Certificate Group and any Distribution Date (A) prior to the occurrence of a
Step Down Trigger, zero, and (B) on or after the occurrence of a Step Down
Trigger, the lesser of (x) the related Principal Remittance Amount for such
Distribution Date and (y) the excess, if any, of (i) the related
Overcollateralized Amount for such Distribution Date, assuming that 100% of the
related Principal Remittance Amount is applied as a principal payment on the
related Certificate Group on such Distribution Date over (ii) the related
Overcollateralization Target Amount for such Distribution Date.
"Overcollateralization Target Amount": With respect to each Certificate
Group and any Distribution Date, an amount equal to 3.50% of the initial Stated
Principal Balance of the Group I Mortgage Loans or 5.25% of the initial Stated
Principal Balance of the Group II Mortgage Loans, respectively, subject to the
following: (i) if the Step Up Trigger has occurred, the Overcollateralized
Target Amount with respect to each Certificate Group for such Distribution Date
will be an amount equal to the aggregate Stated Principal Balance, as of such
Distribution Date, of (A) the Mortgage Loans in the Related Loan Group that are
30 days or more delinquent as of the Close of Business of the last Business Day
of the calendar month preceding such Distribution Date and (B) REO Properties in
respect of the related Loan Group; (ii) if the Step Up Trigger has not occurred
but the Step Up Spread Squeeze Test is met, the Overcollateralized Target Amount
with respect to each Certificate Group for such Distribution Date will be an
amount equal to the sum of (A) the Overcollateralized Target Amount for such
Distribution Date determined as though the Step Up Spread Squeeze Test were not
met plus (B) the Spread Squeeze Overcollateralization Increase Amount; or (iii)
if neither the Step Up Trigger has occurred nor the Step Up Spread Squeeze Test
is met but the Step Down Trigger has occurred, the Overcollateralized Target
Amount with respect to each Certificate Group for such Distribution Date will be
an amount equal to the greater of (A) the greater of (1) 0.50% of the aggregate
Stated Principal Balance of the Mortgage Loans in the related Loan Group as of
the Cut-off Date and (2) the aggregate Stated Principal Balance, as of such
Distribution Date, of the largest outstanding Mortgage Loan in the related Loan
Group and (B) the lesser of (x) 3.50% of the initial Stated Principal Balance of
the Group I Mortgage Loans or 5.25% of the initial Stated Principal Balance of
the Group II Mortgage Loans, as applicable, and (y) the Stepped Down Required
Overcollateralized Percentage of the aggregate Stated Principal Balance of the
Mortgage Loans and REO Properties in respect of the related Loan Group as of
such Distribution Date.
"Overcollateralized Amount": For any Distribution Date and each
Certificate Group, the amount, if any, by which (i) the related Loan Group
Balance on the last day of the immediately preceding Due Period exceeds (ii) the
Certificate Principal Balance of such Class of Class A Certificates as of such
Distribution Date after giving effect to distributions to be made on such Class
A Certificates on such Distribution Date.
"Ownership Interest": As to any Certificate, any ownership or security
interest in such Certificate, including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.
"Pass-Through Rate": As to any Distribution Date and (i) with respect
to the Class A-1 Certificates, the lesser of (a) (1) 6.40% per annum on or prior
to the Optional Termination Date or (2) 6.90% after the Optional Termination
Date and (b) the related Available Funds Cap for such Distribution Date, and
(ii) with respect to the Class A-2 Certificates, the lesser of (a) the Group II
Formula Rate and (b) the related Available Funds Cap for such Distribution Date.
"Paying Agent": Any paying agent appointed pursuant to Section 5.05.
"Percentage Interest": With respect to any Certificate (other than a
Class R Certificate), a fraction, expressed as a percentage, the numerator of
which is the Initial Certificate Principal Balance represented by such
Certificate and the denominator of which is the Original Class Certificate
Principal Balance of the related Class. With respect to a Class R Certificate,
the portion of the Class evidenced thereby, expressed as a percentage, as stated
on the face of such Certificate; provided, however, that the sum of all such
percentages for each such Class totals 100%.
"Periodic Rate Cap": With respect to each Group II Mortgage Loan and
any Adjustment Date therefor, the fixed percentage set forth in the related
Mortgage Note, which is the maximum amount by which the Mortgage Rate for such
Mortgage Loan may increase or decrease (without regard to the Maximum Mortgage
Rate or the Minimum Mortgage Rate) on such Adjustment Date from the Mortgage
Rate in effect immediately prior to such Adjustment Date.
"Permitted Investments": Any one or more of the following obligations
or securities acquired at a purchase price of not greater than par, regardless
of whether issued or managed by the Depositor, the Servicer, the Trustee or any
of their respective Affiliates or for which an Affiliate of the Trustee serves
as an advisor:
(i) direct obligations of, or obligations fully guaranteed
as to timely payment of principal and interest by, the United States or
any agency or instrumentality thereof, provided such obligations are
backed by the full faith and credit of the United States;
(ii) (A) demand and time deposits in, certificates of
deposit of, bankers' acceptances issued by or federal funds sold by any
depository institution or trust company (including the Trustee or its
agent acting in their respective commercial capacities) incorporated
under the laws of the United States of America or any state thereof and
subject to supervision and examination by federal and/or state
authorities, so long as, at the time of such investment or contractual
commitment providing for such investment, such depository institution
or trust company or its ultimate parent has a short-term uninsured debt
rating in one of the two highest available rating categories of S&P and
the highest available rating category of Moody's and provided that each
such investment has an original maturity of no more than 365 days and
(B) any other demand or time deposit or deposit which is fully insured
by the FDIC;
(iii) repurchase obligations with a term not to exceed 30
days with respect to any security described in clause (i) above and
entered into with a depository institution or trust company (acting as
principal) rated A or higher by S&P and rated A2 or higher by Moody's,
provided, however, that collateral transferred pursuant to such
repurchase obligation must be of the type described in clause (i) above
and must (A) be valued daily at current market prices plus accrued
interest or (B) pursuant to such valuation, be equal, at all times, to
105% of the cash transferred by the Trustee in exchange for such
collateral and (C), be delivered to the Trustee or, if the Trustee is
supplying the collateral, an agent for the Trustee, in such a manner as
to accomplish perfection of a security interest in the collateral by
possession of certificated securities;
(iv) securities bearing interest or sold at a discount that
are issued by any corporation incorporated under the laws of the United
States of America or any State thereof and that are rated by a Rating
Agency in its highest long-term unsecured rating categories at the time
of such investment or contractual commitment providing for such
investment;
(v) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on demand
or on a specified date not more than 30 days after the date of
acquisition thereof) that is rated by a Rating Agency in its highest
short-term unsecured debt rating available at the time of such
investment;
(vi) units of money market funds registered under the
Investment Company Act of 1940 including funds managed or advised by
the Trustee or an affiliate thereof having a rating by S&P of AAA-G,
AAA-m, or AA-m, and if rated by Moody's, rated Aaa, Aa1 or Aa2; and
(vii) if previously confirmed in writing to the Trustee,
any other demand, money market or time deposit, or any other
obligation, security or investment, as may be acceptable to the Rating
Agencies and the Certificate Insurer in writing as a permitted
investment of funds backing securities having ratings equivalent to its
highest initial rating of the Class A Certificates;
provided, that no instrument described hereunder shall evidence either the right
to receive (a) only interest with respect to the obligations underlying such
instrument or (b) both principal and interest payments derived from obligations
underlying such instrument and the interest and principal payments with respect
to such instrument provide a yield to maturity at par greater than 120% of the
yield to maturity at par of the underlying obligations.
"Permitted Transferee": Any Transferee of a Residual Certificate other
than a Disqualified Organization or a non-U.S. Person.
"Person": Any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Policy": The Certificate Guaranty Insurance Policy (No. 50770-N) with
respect to the Class A Certificates and all endorsements thereto dated the
Closing Date, issued by the Certificate Insurer for the benefit of the Holders
of each Class of Class A Certificates.
"Policy Payments Account": The account established pursuant to Section
11.04 hereof.
"Pool Balance": As of any date of determination, the aggregate
principal balance of the Mortgage Loans.
"Preference Amount": As defined in the Policy.
"Preference Claim": As defined in Section 11.04(d).
"Premium Amount": As to any Distribution Date and each Class of Class A
Certificates, the product of the Premium Percentage for such Class and the
related Certificate Principal Balance before giving effect to distributions to
be made on such Distribution Date.
"Premium Percentage": As defined in the Insurance Agreement for each
Class of Class A Certificates.
"Premium Supplement": As defined in the Insurance Agreement.
"Prepayment Assumption": As defined in the Prospectus Supplement.
"Prepayment Interest Excess": With respect to any Distribution Date,
for each Mortgage Loan that was the subject of a Principal Prepayment in full
during the portion of the related Prepayment Period occurring between the first
day and the 15th day of the calendar month in which such Distribution Date
occurs, an amount equal to interest at the applicable Net Loan Rate on the
amount of such Principal Prepayment for the number of days commencing on the
first day of the calendar month in which such Distribution Date occurs and
ending on the date on which such prepayment is so applied.
"Prepayment Interest Shortfall": With respect to any Distribution Date,
for each Mortgage Loan that was the subject of a Principal Prepayment in full
during the portion of the related Prepayment Period occurring between the 16th
day and the last day of the calendar month preceding the month in which such
Distribution Date occurs, an amount equal to interest at the applicable Net Loan
Rate on the amount of such Principal Prepayment for the number of days
commencing on the date on which the prepayment is applied and ending on the last
day of the calendar month preceding the month in which such Distribution Date
occurs. The obligations of the Servicer in respect of any Prepayment Interest
Shortfall are set forth in Section 3.24.
"Prepayment Period": With respect to any Distribution Date, the period
commencing on the 16th day of the month preceding the month in which such
Distribution Date occurs (or, in the case of the first Distribution Date,
commencing on the Cut-Off Date) and ending on the 15th day of the month in which
such Distribution Date occurs.
"Prepayment Premium": With respect to any Mortgage Loan, the penalties
or premiums, if any, due in connection with a full or partial prepayment of such
Mortgage Loan in accordance with the terms thereof.
"Principal Balance": As to any Mortgage Loan and any day, other than a
Liquidated Mortgage Loan, the related Cut-off Date Principal Balance, minus all
collections credited against the Principal Balance of any such Mortgage Loan.
For purposes of this definition, a Liquidated Mortgage Loan shall be deemed to
have a Principal Balance equal to the Principal Balance of the related Mortgage
Loan as of the final recovery of related Liquidation Proceeds and a Principal
Balance of zero thereafter. As to any REO Property and any day, the Principal
Balance of the related Mortgage Loan immediately prior to such Mortgage Loan
becoming REO Property minus and REO Principal Amortization received with respect
thereto on or prior to such day.
"Principal Distribution Amount": With respect to each Loan Group and
any Distribution Date (other than the Final Scheduled Distribution Date), the
sum of (i) the related Basic Principal Distribution Amount and (ii) the related
Extra Principal Distribution Amount for such Distribution Date.
"Principal Prepayment": Any payment of principal made by the Mortgagor
on a Mortgage Loan which is received in advance of its scheduled Due Date and
which is not accompanied by an amount of interest representing the full amount
of scheduled interest due on any Due Date in any month or months subsequent to
the month of prepayment.
"Principal Remittance Amount": With respect to each Loan Group and any
Distribution Date, the sum of (i) each scheduled payment of principal collected
or advanced on the related Mortgage Loans by the Servicer in the related Due
Period, (ii) the principal portion of all partial and full principal prepayments
of such Mortgage Loans applied by the Servicer during the related Prepayment
Period, (iii) the principal portion of all related Net Liquidation Proceeds and
Insurance Proceeds received during such Prepayment Period, (iv) that portion of
the Purchase Price, representing principal of any repurchased Mortgage Loan in
such Loan Group, deposited to the Collection Account during such Prepayment
Period, (v) the principal portion of any related Substitution Adjustments
deposited in the Collection Account during such Prepayment Period, and (vi) on
the Distribution Date on which the Trust Fund is to be terminated pursuant to
Section 10.01, that portion of the Termination Price, in respect of principal
for such Loan Group.
"Property Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are received by the Servicer and are not to be applied to the
restoration of the related Mortgaged Property or released to the Mortgagor in
accordance with Accepted Servicing Procedures, subject to the terms and
conditions of the related Mortgage Note and Mortgage.
"Prospectus Supplement": That certain Prospectus Supplement dated
January 20, 1999 relating to the public offering of the Class A Certificates.
"Purchase Price": With respect to any Mortgage Loan or REO Property to
be purchased pursuant to or as contemplated by Section 2.03 or 10.01, and as
confirmed by an Officers' Certificate from the Servicer to the Trustee, an
amount equal to the sum of (i) 100% of the Principal Balance thereof as of the
date of purchase (or such other price as provided in Section 10.01), (ii) in the
case of (x) a Mortgage Loan, accrued interest on such Principal Balance at the
applicable Mortgage Rate in effect from time to time from the Due Date as to
which interest was last covered by a payment by the Mortgagor or an advance by
the Servicer, which payment or advance had as of the date of purchase been
distributed pursuant to Section 4.01, through the end of the calendar month in
which the purchase is to be effected, and (y) an REO Property, the sum of (1)
accrued interest on such Principal Balance at the applicable Mortgage Rate in
effect from time to time from the Due Date as to which interest was last covered
by a payment by the Mortgagor or an advance by the Servicer through the end of
the calendar month immediately preceding the calendar month in which such REO
Property was acquired, plus (2) REO Imputed Interest for such REO Property for
each calendar month commencing with the calendar month in which such REO
Property was acquired and ending with the calendar month in which such purchase
is to be effected, net of the total of all net rental income, Insurance
Proceeds, Liquidation Proceeds and Advances that as of the date of purchase had
been distributed as or to cover REO Imputed Interest pursuant to Section 4.04,
(iii) any unreimbursed Servicing Advances and Advances and any unpaid Servicing
Fees allocable to such Mortgage Loan or REO Property, (iv) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan or REO Property pursuant to Section 3.23, and (v) in the case of a Mortgage
Loan required to be purchased pursuant to Section 2.03, expenses reasonably
incurred or to be incurred by the Servicer or the Trustee in respect of the
breach or defect giving rise to the purchase obligation.
"Qualified Insurer": Any insurance company acceptable to Fannie Mae.
"Qualified Substitute Mortgage Loan": A mortgage loan substituted for a
Deleted Mortgage Loan pursuant to the terms of this Agreement which must, on the
date of such substitution, (i) have an outstanding principal balance, after
application of all scheduled payments of principal and interest due during or
prior to the month of substitution, not in excess of, and not more than 5% less
than, the outstanding principal balance of the Deleted Mortgage Loan as of the
Due Date in the calendar month during which the substitution occurs, (ii) if a
Group I Mortgage Loan, have a Mortgage Rate not less than (and not more than one
percentage point in excess of) the Mortgage Rate of the Deleted Mortgage Loan,
(iii) if a Group II Mortgage Loan, have a Maximum Mortgage Rate not less than
the Maximum Mortgage Rate on the Deleted Mortgage Loan, (iv) if a Group II
Mortgage Loan, have a Minimum Mortgage Rate not less than the Minimum Mortgage
Rate of the Deleted Mortgage Loan, (v) if a Group II Mortgage Loan, have a Gross
Margin equal to or greater than the Gross Margin of the Deleted Mortgage Loan,
(vi) if a Group II Mortgage Loan, have a next Adjustment Date not more than two
months later than the next Adjustment Date on the Deleted Mortgage Loan, (vii)
have a remaining term to maturity not greater than (and not more than one year
less than) that of the Deleted Mortgage Loan, (viii) are current as of the date
of substitution, (ix) have a Loan-to-Value Ratio as of the date of substitution
equal to or lower than the Loan-to-Value Ratio of the Deleted Mortgage Loan as
of such date, (x) have a risk grading determined by the Seller at least equal to
the risk grading assigned on the Deleted Mortgage Loan, (xi) have been
underwritten or reunderwritten by the Seller in accordance with the same
underwriting criteria and guidelines as the Deleted Mortgage Loan and (xii)
conform to each representation and warranty set forth in Section 2.04 hereof
applicable to the Deleted Mortgage Loan. In the event that one or more mortgage
loans are substituted for one or more Deleted Mortgage Loans, the amounts
described in clause (i) hereof shall be determined on the basis of aggregate
principal balances, the Mortgage Rates described in clause (ii) hereof shall be
determined on the basis of weighted average Mortgage Rates, the risk gradings
described in clause (x) hereof shall be satisfied as to each such mortgage loan,
the terms described in clause (vii) hereof shall be determined on the basis of
weighted average remaining term to maturity, the Loan-to-Value Ratios described
in clause (ix) hereof shall be satisfied as to each such mortgage loan and,
except to the extent otherwise provided in this sentence, the representations
and warranties described in clause (xii) hereof must be satisfied as to each
Qualified Substitute Mortgage Loan or in the aggregate, as the case may be.
"Rating Agency or Rating Agencies": S&P, Fitch and Moody's or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor and
acceptable to the Certificate Insurer, notice of which designation shall be
given to the Trustee and Servicer.
"Realized Loss": With respect to any Liquidated Mortgage Loan, the
amount of loss realized equal to the portion of the Principal Balance remaining
unpaid after application of all Net Liquidation Proceeds in respect of such
Mortgage Loan.
"Receipt": As defined in the Policy.
"Record Date": With respect to Certificate Group I, the last day of the
calendar month preceding the month in which the related Distribution Date occurs
and (ii) with respect to Certificate Group II, the Close of Business on the
Business Day immediately preceding the related Distribution Date; provided,
however, that following the date on which Definitive Certificates for a Class
are available pursuant to Section 5.02, the Record Date shall be the last day of
the calendar month preceding the month in which the related Distribution Date
occurs.
"Reference Banks": Those banks (i) with an established place of
business in London, England, (ii) not controlling, under the control of or under
common control with the Depositor or the Servicer or any affiliate thereof,
(iii) whose quotations appear on the Telerate Screen 3750 on the relevant
Interest Determination Date and (iv) which have been designated as such by the
Depositor; provided, however, that if fewer than two of such banks provide a
LIBOR rate, then any leading banks selected by the Depositor which are engaged
in transactions in United States dollar deposits in the international
Eurocurrency market.
"Regular Certificate": Any of the Class A Certificates.
"Related Group": With respect to the Group I Certificates, Loan Group I
and with respect to the Group II Certificates, Loan Group II.
"Relief Act": The Soldiers' and Sailors Civil Relief Act of 1940, as
amended.
"Relief Act Interest Shortfall": With respect to any Distribution Date
and Loan Group, for any Mortgage Loan in such Loan Group to which there has been
a reduction in the amount of interest collectible thereon for the most recently
ended Due Period as a result of the application of the Relief Act, the amount by
which (i) interest collectible on such Mortgage Loan during such Due Period is
less than (ii) one month's interest on the Principal Balance of such Mortgage
Loan at the Loan Rate for such Mortgage Loan before giving effect to the
application of the Relief Act.
"REMIC": A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations and rulings promulgated thereunder, as the foregoing may be in
effect from time to time.
"Remittance Report": A report prepared by the Servicer and delivered to
the Trustee pursuant to Section 4.04.
"Rents from Real Property": With respect to any REO Property, gross
income of the character described in Section 856(d) of the Code.
"REO Account": The account or accounts maintained by the Servicer in
respect of an REO Property pursuant to Section 3.23.
"REO Disposition": The sale or other disposition of an REO Property on
behalf of the Trust Fund.
"REO Imputed Interest": As to any REO Property, for any calendar month
during which such REO Property was at any time part of the Trust Fund, one
month's interest at the applicable Net Loan Rate on the Principal Balance of
such REO Property (or, in the case of the first such calendar month, of the
related Mortgage Loan if appropriate) as of the Close of Business on the
Distribution Date in such calendar month.
"REO Principal Amortization": With respect to any REO Property, for any
calendar month, the excess, if any, of (a) the aggregate of all amounts received
in respect of such REO Property during such calendar month, whether in the form
of rental income, sale proceeds (including, without limitation, that portion of
the Termination Price paid in connection with a purchase of all of the Mortgage
Loans and REO Properties pursuant to Section 10.01 that is allocable to such REO
Property) or otherwise, net of any portion of such amounts (i) payable pursuant
to Section 3.23 in respect of the proper operation, management and maintenance
of such REO Property or (ii) payable or reimbursable to the Servicer pursuant to
Section 3.23 for unpaid Servicing Fees in respect of the related Mortgage Loan
and unreimbursed Servicing Advances and Advances in respect of such REO Property
or the related Mortgage Loan, over (b) the REO Imputed Interest in respect of
such REO Property for such calendar month.
"REO Property": A Mortgaged Property acquired by the Servicer on behalf
of the Trust Fund through foreclosure or deed-in-lieu of foreclosure, as
described in Section 3.23.
"Request for Release": A release signed by a Servicing Officer, in the
form of Exhibit E attached 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
1/16 of 1%) of the one-month United States dollar lending rates which banks in
The City of New York selected by the Depositor 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, in the case of any Interest Determination Date after
the initial Interest Determination Date, the lowest one-month United States
dollar lending rate which such New York banks selected by the Depositor are
quoting on such Interest Determination Date to leading European banks.
"Residential Dwelling": Any one of the following: (i) a detached
one-family dwelling, (ii) a detached two- to four-family dwelling, (iii) a
one-family dwelling unit in a Fannie Mae eligible condominium project, (iv) a
manufactured home, or (v) a detached one-family dwelling in a planned unit
development, none of which is a co-operative or mobile home.
"Responsible Officer": When used with respect to the Trustee, the
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman or
Vice Chairman of the Executive or Standing Committee of the Board of Directors
or Trustees, the President, any vice president, any assistant vice president,
the Secretary, any assistant secretary, the Treasurer, any assistant treasurer,
the Cashier, any assistant cashier, any trust officer or assistant trust
officer, the Controller and any assistant controller or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and, with respect to a particular matter, to whom
such matter is referred because of such officer's knowledge of and familiarity
with the particular subject.
"Rolling Delinquency Percentage": With respect to any Distribution
Date, the average of the Delinquency Percentages as of the last day of each of
the three (or one or two, in the case of the first and second Distribution
Dates) preceding calendar months.
"S&P": Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., and its successors, and, if such division shall for any reason no longer
perform the functions of a securities rating agency, "S&P" shall be deemed to
refer to any other "nationally recognized rating organization," as set forth on
the most current list of such organizations released by the Securities and
Exchange Commission.
"Seller": Option One Mortgage Corporation, a California corporation, or
its successor in interest, in its capacity as seller under the Mortgage Loan
Purchase Agreement.
"Servicer": Option One Mortgage Corporation, a California corporation,
or any successor servicer appointed as herein provided, in its capacity as
Servicer hereunder.
"Servicer Affiliate": A Person (i) controlling, controlled by or under
common control with the Servicer or which is 50% or more owned by the Servicer
and (ii) which is qualified to service residential mortgage loans.
"Servicer Event of Termination": One or more of the events described in
Section 7.01.
"Servicer Remittance Date": With respect to any Distribution Date, the
20th day of the calendar month in which such Distribution Date occurs (or, if
such 20th day is not a Business Day, the next succeeding Business Day).
"Servicing Account": The account or accounts created and maintained
pursuant to Section 3.09.
"Servicing Advances": All customary, reasonable and necessary "out of
pocket" costs and expenses (including reasonable attorneys' fees and expenses)
incurred by the Servicer in the performance of its servicing obligations,
including, but not limited to, the cost of (i) the preservation, restoration,
inspection and protection of the Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, (iii) the management and
liquidation of the REO Property and (iv) compliance with the obligations under
Sections 3.01, 3.09, 3.16, and 3.23.
"Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the Servicing Fee Rate on the same principal amount
on which interest on such Mortgage Loan accrues for such calendar month. A
portion of such Servicing Fee may be retained by any Sub-Servicer as its
servicing compensation.
"Servicing Fee Rate": 0.50% per annum.
"Servicing Officer": Any officer of the Servicer involved in, or
responsible for, the administration and servicing of Mortgage Loans, whose name
and specimen signature appear on a list of servicing officers furnished by the
Servicer to the Trustee and the Depositor on the Closing Date, as such list may
from time to time be amended.
"Servicing Standard": Shall mean the standards set forth in Section
3.01.
"Spread Squeeze Condition": The Spread Squeeze Condition will be met
with respect to a Distribution Date if the Spread Squeeze Percentage for such
Distribution Date is less than (a) 1.75% for any Distribution Date between
February 1999 and January 2001 and (b) 3.00% for any Distribution Date beginning
in or after February 2001.
"Spread Squeeze Overcollateralization Increase Amount": For any
Distribution Date on which the Step Up Spread Squeeze Test is met, an amount
determined as follows:
(a) if the Spread Squeeze Condition is met for such Distribution
Date, the Spread Squeeze Overcollateralization Increase Amount for such
Distribution Date shall be equal to the product obtained by multiplying
(i) three, (ii) the excess, if any, of the percentage applicable to
such Distribution Date set forth in the definition of "Spread Squeeze
Condition" over the Spread Squeeze Percentage for such Distribution
Date and (iii) the aggregate Stated Principal Balance of the Mortgage
Loans as of the Cut-off Date; or
(b) if the Spread Squeeze Condition is not met for such
Distribution Date, the Spread Squeeze Overcollateralization Increase
Amount for such Distribution Date shall be equal to (A) the Spread
Squeeze Overcollateralization Increase Amount for the most recent
Distribution Date for which the Spread Squeeze Condition was met minus
(B) the product obtained by multiplying (i) one sixth of the amount
determined under clause (A) above and (ii) the number of consecutive
Distribution Dates through and including the current Distribution Date
for which the Spread Squeeze Condition was not met.
"Spread Squeeze Percentage": With respect to any Distribution Date, the
percentage equivalent of a fraction, the numerator of which is the product of 12
and the sum of the General Excess Available Amounts for both Certificate Groups
for such Distribution Date, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties as of such
Distribution Date.
"Startup Day": As defined in Section 9.01(b) hereof.
"Stated Principal Balance": With respect to any Mortgage Loan: (a) as
of any date of determination up to but not including the Distribution Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, the outstanding principal balance of such Mortgage
Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule, minus the
sum of (i) the principal portion of each Monthly Payment due on a Due Date
subsequent to the Cut-off Date, to the extent received from the Mortgagor or
advanced by the Servicer and distributed pursuant to Section 4.01 on or before
such date of determination, (ii) all Principal Prepayments received after the
Cut-off Date, to the extent distributed pursuant to Section 4.01 on or before
such date of determination, (iii) all Liquidation Proceeds and Insurance
Proceeds applied by the Servicer as recoveries of principal in accordance with
the provisions of Section 4.03, to the extent distributed pursuant to Section
4.01 on or before such date of determination, and (iv) any Realized Loss
incurred with respect thereto as a result of a Deficient Valuation made during
or prior to the Due Period for the most recent Distribution Date coinciding with
or preceding such date of determination; and (b) as of any date of determination
coinciding with or subsequent to the Distribution Date on which the proceeds, if
any, of a Liquidation Event with respect to such Mortgage Loan would be
distributed, zero. With respect to any REO Property: (a) as of any date of
determination up to but not including the Distribution Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of the Trust Fund, minus the aggregate amount of REO
Principal Amortization in respect of such REO Property for all previously ended
calendar months, to the extent distributed pursuant to Section 4.01 on or before
such date of determination; and (b) as of any date of determination coinciding
with or subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, zero.
"Step Down Cumulative Loss Test": The Step Down Cumulative Loss Test
will be met with respect to a Distribution Date as follows: (i) for the 36th
through the 47nd Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is 1.50% or less; (ii) for the 48th through the 59th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is 2.00% or less; (iii) for the 60th through the 71st Distribution Dates, if the
Cumulative Loss Percentage for such Distribution Date is 2.40% or less; and (iv)
for any Distribution Date after the 71st Distribution Date, if the Cumulative
Loss Percentage for such Distribution Date is 2.75% or less.
"Step Down Rolling Delinquency Test": The Step Down Rolling Delinquency
Test will be met with respect to a Distribution Date if the Rolling Delinquency
Percentage for such Distribution Date is 10% or less.
"Step Down Rolling Loss Test": The Step Down Rolling Loss Test will be
met with respect to a Distribution Date if the Annual Loss Percentage is less
than 1.25%.
"Step Down Trigger": For any Distribution Date after the 30th
Distribution Date, the Step Down Trigger will have occurred if each of the Step
Down Cumulative Loss Test, the Step Down Rolling Delinquency Test and the Step
Down Rolling Loss Test is met. In no event will the Step Down Trigger be deemed
to have occurred for the 30th Distribution Date or any preceding Distribution
Date.
"Stepped Down Required Overcollateralized Percentage": For any
Distribution Date for which the Step Down Trigger has occurred, a percentage
equal to (i) the percentage equivalent of a fraction, the numerator of which is
3.50% of the initial Stated Principal Balance of the Group I Mortgage Loans and
5.25% of the initial Stated Principal Balance of the Group II Mortgage Loans and
the denominator of which is the aggregate Stated Principal Balance of the
related Group of Mortgage Loans and REO Properties as of such Distribution Date,
minus (ii) the percentage equivalent of a fraction, the numerator of which is
the product of (A) the percentage calculated under clause (i) above minus 7.00%
with respect to the Group I Mortgage Loans and 10.50% with respect to the Group
II Mortgage Loans, multiplied by (B) the number of consecutive Distribution
Dates through and including the Distribution Date for which the Stepped Down
Required Overcollateralized Percentage is being calculated, up to a maximum of
six, for which the Step Down Trigger has occurred, and the denominator of which
is six.
"Step Up Cumulative Loss Test": The Step Up Cumulative Loss Test will
be met with respect to a Distribution Date as follows: (i) for the 1st through
the 12th Distribution Dates, if the Cumulative Loss Percentage for such
Distribution Date is more than 1.00%; (ii) for the 13th through the 24th
Distribution Dates, if the Cumulative Loss Percentage for such Distribution Date
is more than 1.50%; (iii) for the 25th through the 36th Distribution Dates, if
the Cumulative Loss Percentage for such Distribution Date is more than 1.90%;
(iv) for the 37th through the 48th Distribution Dates, if the Cumulative Loss
Percentage for such Distribution Date is more than 2.40%; and (v) for the 49th
Distribution Date and any Distribution Date thereafter, if the Cumulative Loss
Percentage for such Distribution Date is more than 3.00%.
"Step Up Rolling Delinquency Test": The Step Up Rolling Delinquency
Test will be met with respect to a Distribution Date if the Rolling Delinquency
Percentage for such Distribution Date is more than 12.00%.
"Step Up Rolling Loss Test": The Step Up Rolling Loss Test will be met
with respect to a Distribution Date, if the Annual Loss Percentage is equal to
or more than 1.40%.
"Step Up Spread Squeeze Test": The Step Up Spread Squeeze Test will be
met with respect to a Distribution Date if the Spread Squeeze Condition is met
for such Distribution Date or was met for any of the five preceding Distribution
Dates.
"Step Up Trigger": For any Distribution Date, the Step Up Trigger will
have occurred if any one of the Step Up Cumulative Loss Test, the Step Up
Rolling Delinquency Test or the Step Up Rolling Loss Test is met.
"Sub-Servicer": Any Person with which either Servicer has entered into
a Sub-Servicing Agreement and which meets the qualifications of a Sub-Servicer
pursuant to Section 3.02.
"Sub-Servicing Account": An account established by a Sub-Servicer which
meets the requirements set forth in Section 3.08 and is otherwise acceptable to
the applicable Servicer.
"Sub-Servicing Agreement": The written contract between either Servicer
and a Sub-Servicer relating to servicing and administration of certain Mortgage
Loans as provided in Section 3.02.
"Substitution Adjustment": As defined in Section 2.03(d) hereof.
"Tax Matters Person": The tax matters person appointed pursuant to
Section 9.01(e) hereof.
"Tax Returns": The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of the REMIC Taxable Income or Net Loss Allocation, or any successor
forms, to be filed on behalf of the REMIC Trust in its capacity as a REMIC under
the REMIC Provisions, together with any and all other information reports or
returns that may be required to be furnished to the Certificateholders of the
related Group or filed with the Internal Revenue Service or any other
governmental taxing authority under any applicable provisions of federal, state
or local tax laws.
"Termination Price": As defined in Section 10.01(a) hereof.
"Trust": Option One Mortgage Loan Trust 1999-1, the trust created
hereunder.
"Trust Fund": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to a portion of which REMIC election is to be made, such entire
Trust Fund consisting of: (i) such Mortgage Loans as from time to time are
subject to this Agreement, together with the Mortgage Files relating thereto,
and together with all collections thereon and proceeds thereof, (ii) any REO
Property, together with all collections thereon and proceeds thereof, (iii) the
Trustee's rights with respect to the Mortgage Loans under all insurance policies
required to be maintained pursuant to this Agreement and any proceeds thereof,
(iv) the Depositor's rights under the Mortgage Loan Purchase Agreement
(including any security interest created thereby); (v) the Policy and (vi) the
Collection Account, the Distribution Account (subject to the last sentence of
this definition) and any REO Account and such assets that are deposited therein
from time to time and any investments thereof, together with any and all income,
proceeds and payments with respect thereto. Notwithstanding the foregoing,
however, (a) a REMIC election will not be made with respect to the Collection
Account, and (b) the Trust Fund specifically excludes (1) all Prepayment
Premiums and all payments and other collections of principal and interest due on
the Mortgage Loans on or before the Cut-off Date and (2) all income and gain
realized from Permitted Investments of funds on deposit in the Distribution
Account.
"Trustee": Norwest Bank Minnesota, National Association, a national
banking association, or any successor trustee appointed as herein provided.
"Uninsured Cause": Any cause of damage to a Mortgaged Property such
that the complete restoration of such property is not fully reimbursable by the
hazard insurance policies required to be maintained pursuant to Section 3.14.
"United States Person or U.S. Person": A citizen or resident of the
United States, a corporation, partnership or other entity treated as a
corporation or partnership for federal income tax purposes (other than a
partnership that is not treated as a U.S. Person pursuant to any applicable
Treasury regulations) created or organized in, or under the laws of, the United
States, any state thereof or the District of Columbia, or an estate the income
of which from sources without the United States is includible in gross income
for United States federal income tax purposes regardless of its connection with
the conduct of a trade or business within the United States, or a trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have authority
to control all substantial decisions of the trust. The term "United States"
shall have the meaning set forth in Section 7701 of the Code or successor
provisions.
"Unpaid Interest Shortfall Amount": With respect to each Class of Class
A Certificates and (i) the first Distribution Date, zero, and (ii) any
Distribution Date after the first Distribution Date, the amount, if any, by
which (a) the sum of (1) the Monthly Interest Distributable Amount for such
Class for the immediately preceding Distribution Date and (2) the outstanding
Unpaid Interest Shortfall Amount, if any, for such Class for such preceding
Distribution Date exceeds (b) the aggregate amount distributed on such Class in
respect of interest pursuant to clause (a) of this definition on such preceding
Distribution Date, plus interest on the amount of interest due but not paid on
the Certificates of such Class on such preceding Distribution Date, to the
extent permitted by law, at the Pass-Through Rate for such Class for the related
Accrual Period.
"Value": With respect to any Mortgage Loan, and the related Mortgaged
Property, the lesser of:
(i) the lesser of (a) the value thereof as determined by an
appraisal made for the originator of the Mortgage Loan at the time or
origination of the Mortgage Loan by an appraiser who met the minimum
requirements of Fannie Mae and FHLMC, and (b) the value thereof as
determined by a review appraisal conducted by the Seller in the event
any such review appraisal determines an appraised value more than 10%
lower than the value thereof, in the case of a Mortgaged Loan with a
Loan-to-Value Ratio less than or equal to 80%, or more than 5% lower
than the value thereof, in the case of a Mortgage Loan with a
Loan-to-Value Ratio greater than 80%, as determined by the appraisal
referred to in clause (i)(a) above; and
(ii) the purchase price paid for the related Mortgaged Property by
the Mortgagor with the proceeds of the Mortgage Loan; provided,
however, that :
(A) in the case of a refinanced Mortgage Loan (which is a
Mortgage Loan the proceeds of which were not used to
purchase the related Mortgaged Property), such value of
the Mortgaged Property is based solely upon the lesser of
(i) the value determined by an appraisal made for the
originator of such refinanced Mortgaged Loan at the time
of origination of such refinanced Mortgage Loan by an
appraiser who met the minimum requirements of Fannie Mae
and FHLMC and (ii) the value thereof as determined by a
review appraisal conducted by the Seller in the event any
such review appraisal determines an appraised value more
than 10% lower than the value thereof, in the case of a
Mortgage Loan with a Loan-to-Value Ratio less than or
equal to 80%, or more than 5% lower than the value
thereof, in the case of a Mortgage Loan with a
Loan-to-Value Ratio greater than 80%, as determined by
the appraisal referred to in clause (ii)(A)(i) above, and
in the case of a Mortgage Loan originated in connection with a "lease
option purchase," such value of the Mortgaged Property is based on the lower of
the value determined by an appraisal made for the originator of such Mortgage
Loan at the time of origination or the sale price of such Mortgaged Property if
the "lease option purchase price" was set less than 12 months prior to
origination, and is based on the value determined by an appraisal made for the
originator of such Mortgage Loan at the time of the origination if the "lease
option purchase price" was set 12 months or more prior to origination.
"Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. Except as otherwise
expressly provided for herein, on any date on which no Insurer Default exists
and is continuing and the Class A Certificates are outstanding or any amounts
are owed the Certificate Insurer under the Insurance Agreement, all of the
Voting Rights allocated to the Certificateholders shall be vested in the
Certificate Insurer. However, if an Insurer Default exists and is continuing and
no amounts are owed to the Certificate Insurer under the Insurance Agreement,
the Voting Rights allocated among Holders of such Certificates outstanding shall
be the fraction, expressed as a percentage, the numerator of which is the
aggregate Certificate Balance of all the Certificates of such Class then
outstanding and the denominator of which is the aggregate Certificate Balance of
all the Certificates then outstanding. The Voting Rights allocated to a Class of
Certificates shall be allocated among all holders of each such Class in
proportion to the outstanding Certificate Balance of such Certificates;
provided, however, that any Certificate registered in the name of the Servicer,
the Depositor or the Trustee or any of their respective affiliates shall not be
included in the calculation of Voting Rights; provided further that when none of
the Regular Certificates are outstanding, 100% of the Voting Rights shall be
allocated among Holders of the Class R Certificates in accordance with such
Holders' respective Percentage Interests in the Certificates of such Class.
Section 1.02. Accounting.
Unless otherwise specified herein, for the purpose of any definition or
calculation, whenever amounts are required to be netted, subtracted or added or
any distributions are taken into account such definition or calculation and any
related definitions or calculations shall be determined without duplication of
such functions.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans.
The Depositor, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey to the Trustee
without recourse for the benefit of the Certificateholders and the Certificate
Insurer all the right, title and interest of the Depositor, including any
security interest therein for the benefit of the Depositor, in and to (i) each
Mortgage Loan identified on the Mortgage Loan Schedule, including the related
Cut-off Date Principal Balance, all interest accruing thereon on and after the
Cut-off Date and all collections in respect of interest and principal due after
the Cut-off Date (excluding, however, the right to receive any Prepayment
Premiums); (ii) property which secured each such Mortgage Loan and which has
been acquired by foreclosure or deed in lieu of foreclosure; (iii) its interest
in any insurance policies in respect of the Mortgage Loans; (iv) all proceeds of
any of the foregoing; (vi) the rights of the Depositor under the Mortgage Loan
Purchase Agreement, and (vii) all other assets included or to be included in the
Trust Fund. Such assignment includes all interest and principal due to the
Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
Loans.
In connection with such transfer and assignment, the Seller, on behalf
of the Depositor, does hereby deliver to, and deposit with the Trustee, or its
designated agent (the "Custodian"), the following documents or instruments with
respect to each Mortgage Loan (a "Mortgage File") so transferred and assigned:
(i) the original Mortgage Note, endorsed either (A) in blank, in which
case the Trustee shall cause the endorsement to be completed or
(B) in the following form: "Pay to the order of Norwest Bank
Minnesota, National Association, as Trustee under the Pooling and
Servicing Agreement, dated as of January 1, 1999, Option One
Mortgage Loan Trust 1999-1, Asset-Backed Certificates, Series
1999-1, without recourse", or with respect to any lost Mortgage
Note, an original Lost Note Affidavit stating that the original
mortgage note was lost, misplaced or destroyed, together with a
copy of the related mortgage note; provided, -------- however,
that such substitutions of Lost Note Affidavits for original
Mortgage Notes may occur only with ------- respect to Mortgage
Loans, the aggregate Cut-off Date Principal Balance of which is
less than or equal to 1.00% of the Pool Balance as of the Cut-off
Date;
(ii) the original Mortgage with evidence of recording thereon, and the
original recorded power of attorney, if the Mortgage was executed
pursuant to a power of attorney, with evidence of recording
thereon or, if such Mortgage or power of attorney has been
submitted for recording but has not been returned from the
applicable public recording office, has been lost or is not
otherwise available, a copy of such Mortgage or power of attorney,
as the case may be, certified to be a true and complete copy of
the original submitted for recording;
(iii)an original Assignment of Mortgage, in form and substance
acceptable for recording. The Mortgage shall be assigned either
(A) in blank or (B) to "Norwest Bank Minnesota, National
Association, as Trustee under the Pooling and Servicing Agreement,
dated as of January 1, 1999, Option One Mortgage Loan Trust
1999-1, Asset-Backed Certificates, Series 1999-1, without
recourse";
(iv) an original copy of any intervening assignment of Mortgage showing
a complete chain of assignments;
(v) the original or a certified copy of lender's title insurance
policy; and
(vi) the original or copies of each assumption, modification, written
assurance or substitution agreement, if any.
The Trustee agrees to execute and deliver (or cause the Custodian to
execute and deliver) to the Depositor on or prior to the Closing Date an
acknowledgment of receipt of the original Mortgage Note (with any exceptions
noted), substantially in the form attached as Exhibit F-3 hereto.
The Seller shall promptly (and in no event later than 60 Business Days
following the Closing Date) submit or cause to be submitted for recording, at
the Seller's expense and at no expense to the Trust Fund, the Trustee or the
Certificate Insurer, in the appropriate public office for real property records,
each Assignment referred to in Sections 2.01(iii) and (iv) above. In the event
that any such Assignment is lost or returned unrecorded because of a defect
therein, the Seller shall promptly prepare or cause to be prepared a substitute
Assignment or cure or cause to be cured such defect, as the case may be, and
thereafter cause each such Assignment to be duly recorded.
If any of the documents referred to in Section 2.01(ii), (iii) or (iv)
above has as of the Closing Date been submitted for recording but either (x) has
not been returned from the applicable public recording office or (y) has been
lost or such public recording office has retained the original of such document,
the obligations of the Seller to deliver such documents shall be deemed to be
satisfied upon (1) delivery to the Trustee or the Custodian no later than the
Closing Date, of a copy of each such document certified by the Seller in the
case of (x) above or the applicable public recording office in the case of (y)
above to be a true and complete copy of the original that was submitted for
recording and (2) if such copy is certified by the Seller, delivery to the
Trustee or the Custodian, promptly upon receipt thereof of either the original
or a copy of such document certified by the applicable public recording office
to be a true and complete copy of the original. If the original lender's title
insurance policy, or a certified copy thereof, was not delivered pursuant to
Section 2.01(v) above, the Seller shall deliver or cause to be delivered to the
Trustee or the Custodian, the original or a copy of a written commitment or
interim binder or preliminary report of title issued by the title insurance or
escrow company, with the original or a certified copy thereof to be delivered to
the Trustee or the Custodian, promptly upon receipt thereof. The Seller shall
deliver or cause to be delivered to the Trustee or the Custodian promptly upon
receipt thereof any other documents constituting a part of a Mortgage File
received with respect to any Mortgage Loan, including, but not limited to, any
original documents evidencing an assumption or modification of any Mortgage
Loan.
Upon discovery or receipt of notice of any materially defective
document in, or that a document is missing from, a Mortgage File, the Seller
shall have 90 days to cure such defect or deliver such missing document to the
Trustee or the Custodian. If the Seller does not cure such defect or deliver
such missing document within such time period, the Seller shall either
repurchase or substitute for such Mortgage Loan in accordance with Section 2.03.
The Seller shall cause the Assignments of Mortgage which were delivered in blank
and cause to be completed and shall cause all Assignments referred to in Section
2.01(iii) hereof and, to the extent necessary, in Section 2.01(iv) hereof to be
recorded; provided, however, the Seller need not cause to be recorded any
Assignment which relates to a Mortgage Loan in any jurisdiction under the laws
of which, as evidenced by an Opinion of Counsel delivered by the Seller to the
Trustee, the Certificate Insurer and the Rating Agencies, the recordation of
such assignment is not necessary to protect the Trustee's interest in the
related Mortgage Loan. The Seller shall be required to deliver such assignments
for recording within 30 days of the Closing Date. The Seller shall furnish the
Trustee, or its designated agent, with a copy of each assignment of Mortgage
submitted for recording. In the event that any such Assignment is lost or
returned unrecorded because of a defect therein, the Seller shall promptly have
a substitute Assignment prepared or have such defect cured, as the case may be,
and thereafter cause each such Assignment to be duly recorded. In the event that
any Mortgage Note is endorsed in blank as of the Closing Date, promptly
following the Closing Date the Seller shall cause to be completed such
endorsements "Pay to the order of Norwest Bank Minnesota, National Association,
as Trustee under the Pooling and Servicing Agreement, dated as of January 1,
1999, Option One Mortgage Loan Trust 1999-1, Series 1999-1, without recourse."
The Depositor herewith delivers to the Trustee an executed copy of the
Mortgage Loan Purchase Agreement.
In addition, on or prior to the Closing Date, the Seller shall cause
the Certificate Insurer to deliver the Policy to the Trustee.
The Servicer shall forward to the Custodian original documents
evidencing an assumption, modification, consolidation or extension of any
Mortgage Loan entered into in accordance with this Agreement within two weeks of
their execution; provided, however, that the Servicer shall provide the
Custodian with a certified true copy of any such document submitted for
recordation within two weeks of its execution, and shall provide the original of
any document submitted for recordation or a copy of such document certified by
the appropriate public recording office to be a true and complete copy of the
original within 270 days of its submission for recordation. In the event that
the Servicer cannot provide a copy of such document certified by the public
recording office within such 270 day period, the Servicer shall deliver to the
Custodian, within such 270 day period, an Officer's Certificate of the Servicer
which shall (A) identify the recorded document, (B) state that the recorded
document has not been delivered to the Custodian due solely to a delay caused by
the public recording office, (C) state the amount of time generally required by
the applicable recording office to record and return a document submitted for
recordation, if known, and (D) specify the date the applicable recorded document
is expected to be delivered to the Custodian, and, upon receipt of a copy of
such document certified by the public recording office, the Servicer shall
immediately deliver such document to the Custodian. In the event the appropriate
public recording office will not certify as to the accuracy of such document,
the Servicer shall deliver a copy of such document certified by an officer of
the Servicer to be a true and complete copy of the original to the Custodian.
Section 2.02. Acceptance by Trustee.
The Trustee acknowledges the receipt of the Policy and, subject to the
provisions of Section 2.01 and subject to the review described below and any
exceptions noted on the exception report described in the next paragraph below,
the documents referred to in Section 2.01 above and all other assets included in
the definition of "Trust Fund" and declares that it holds and will hold such
documents and the other documents delivered to it constituting a Mortgage File,
and that it holds or will hold all such assets and such other assets included in
the definition of "Trust Fund" in trust for the exclusive use and benefit of all
present and future Certificateholders and the Certificate Insurer.
The Trustee agrees, for the benefit of the Certificateholders and the
Certificate Insurer, to review, or that it has reviewed (or to cause the
Custodian to review or that it has caused the Custodian to have reviewed) each
Mortgage File on or prior to the Closing Date (or, with respect to any document
delivered after the Startup Day, within 45 days of receipt and with respect to
any Qualified Substitute Mortgage, within 45 days after the assignment thereof).
The Trustee further agrees, for the benefit of the Certificateholders and the
Certificate Insurer, to certify in substantially the form attached hereto as
Exhibit F-1, within 45 days after the Closing Date (or, with respect to any
document delivered after the Startup Day, within 45 days of receipt and with
respect to any Qualified Substitute Mortgage, within 45 days after the
assignment thereof) that, as to each Mortgage Loan listed in the Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in the exception report annexed thereto as not being
covered by such certification), (i) all documents required to be delivered to it
pursuant Section 2.01 of this Agreement are in its possession, (ii) such
documents have been reviewed by it and have not been mutilated, damaged or torn
and relate to such Mortgage Loan and (iii) based on its examination and only as
to the foregoing, the information set forth in the Mortgage Loan Schedule that
corresponds to items (i) and (ii) of the Mortgage Loan Schedule accurately
reflects information set forth in the Mortgage File. It is herein acknowledged
that, in conducting such review, the Trustee (or the Custodian, as applicable)
is under no duty or obligation to inspect, review or examine any such documents,
instruments, certificates or other papers to determine that they 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.
Prior to the first anniversary date of this Agreement the Trustee shall
deliver (or cause the Custodian to deliver) to the Depositor, the Servicer and
the Certificate Insurer a final certification in the form annexed hereto as
Exhibit F-2 evidencing the completeness of the Mortgage Files, with any
applicable exceptions noted thereon.
If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above, the Trustee
(or the Custodian, as applicable) finds any document or documents constituting a
part of a Mortgage File to be missing or defective in any material respect, at
the conclusion of its review the Trustee shall so notify the Seller, the
Depositor, the Servicer and the Certificate Insurer. In addition, upon the
discovery by the Seller, Depositor or the Servicer (or upon receipt by the
Trustee of written notification of such breach) of a breach of any of the
representations and warranties made by the Seller in the related Mortgage Loan
Purchase Agreement in respect of any Mortgage Loan which materially adversely
affects such Mortgage Loan or the interests of the related Certificateholders in
such Mortgage Loan, the party discovering such breach shall give prompt written
notice to the other parties to this Agreement and the Certificate Insurer.
The Depositor and the Trustee intend that the assignment and transfer
herein contemplated constitute a sale of the Mortgage Loans, the related
Mortgage Notes and the related documents, conveying good title thereto free and
clear of any liens and encumbrances, from the Depositor to the Trustee and that
such property not be part of the Depositor's estate or property of the Depositor
in the event of any insolvency by the Depositor. In the event that such
conveyance is deemed to be, or to be made as security for, a loan, the parties
intend that the Depositor shall be deemed to have granted and does hereby grant
to the Trustee a first priority perfected security interest in all of the
Depositor's right, title and interest in and to the Mortgage Loans, the related
Mortgage Notes and the related documents, and that this Agreement shall
constitute a security agreement under applicable law.
Section 2.03. Repurchase or Substitution of Mortgage Loans by the
Seller.
(a) Upon discovery or receipt of written notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Seller of any representation, warranty or covenant under the
Mortgage Loan Purchase Agreement or in Section 2.04 in respect of any Mortgage
Loan which materially adversely affects the value of such Mortgage Loan or the
interest therein of the Certificateholders or the Certificate Insurer, the
Trustee shall promptly notify the Seller, the Certificate Insurer and the
Servicer of such defect, missing document or breach and request that the Seller
deliver such missing document or cure such defect or breach within 90 days from
the date the Seller was notified of such missing document, defect or breach, and
if the Seller does not deliver such missing document or cure such defect or
breach in all material respects during such period, the Trustee shall enforce
the Seller's obligation under the Mortgage Loan Purchase Agreement and cause the
Seller to repurchase such Mortgage Loan from the Trust Fund at the Purchase
Price on or prior to the Determination Date following the expiration of such 90
day period (subject to Section 2.03(e)); provided that, in connection with any
such breach that could not reasonably have been cured within such 90 day period,
if the Seller shall have commenced to cure such breach within such 90 day
period, the Seller shall be permitted to proceed thereafter diligently and
expeditiously to cure the same within the additional period provided under the
Mortgage Loan Purchase Agreement. The Purchase Price for the repurchased
Mortgage Loan shall be deposited in the Collection Account, and the Trustee,
upon receipt of written certification from the Servicer of such deposit, shall
release to the Seller the related Mortgage File and shall execute and deliver
such instruments of transfer or assignment, in each case without recourse, as
the Seller shall furnish to it and as shall be necessary to vest in the Seller
any Mortgage Loan released pursuant hereto and the Trustee shall have no further
responsibility with regard to such Mortgage File (it being understood that the
Trustee shall have no responsibility for determining the sufficiency of such
assignment for its intended purpose). In lieu of repurchasing any such Mortgage
Loan as provided above, the Seller may cause such Mortgage Loan to be removed
from the Trust Fund (in which case it shall become a Deleted Mortgage Loan) and
substitute one or more Qualified Substitute Mortgage Loans in the manner and
subject to the limitations set forth in Section 2.03(d). It is understood and
agreed that the obligation of the Seller to cure or to repurchase (or to
substitute for) any Mortgage Loan as to which a document is missing, a material
defect in a constituent document exists or as to which such a breach has
occurred and is continuing shall constitute the sole remedy against the Seller
respecting such omission, defect or breach available to the Trustee on behalf of
the Certificateholders and the Certificate Insurer.
(b) [Reserved]
(c) Within 90 days of the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of any representation, warranty
or covenant of the Servicer set forth in Section 2.05 which materially and
adversely affects the interests of the Certificateholders or the Certificate
Insurer in any Mortgage Loan, the Servicer shall cure such breach in all
material respects.
(d) Any substitution of Qualified Substitute Mortgage Loans for Deleted
Mortgage Loans made pursuant to Section 2.03(a) must be effected prior to the
last Business Day that is within two years after the Closing Date. As to any
Deleted Mortgage Loan for which the Seller substitutes a Qualified Substitute
Mortgage Loan or Loans, such substitution shall be effected by the Seller
delivering to the Trustee, for such Qualified Substitute Mortgage Loan or Loans,
the Mortgage Note, the Mortgage, the Assignment to the Trustee, and such other
documents and agreements, with all necessary endorsements thereon, as are
required by Section 2.01, together with an Officers' Certificate providing that
each such Qualified Substitute Mortgage Loan satisfies the definition thereof
and specifying the Substitution Adjustment (as described below), if any, in
connection with such substitution. The Trustee shall acknowledge receipt for
such Qualified Substitute Mortgage Loan or Loans and, within ten Business Days
thereafter, shall review such documents as specified in Section 2.02 and deliver
to the Servicer and the Certificate Insurer, with respect to such Qualified
Substitute Mortgage Loan or Loans, a certification substantially in the form
attached hereto as Exhibit F-1, with any applicable exceptions noted thereon.
Within one year of the date of substitution, the Trustee shall deliver to the
Servicer and the Certificate Insurer a certification substantially in the form
of Exhibit F-2 hereto with respect to such Qualified Substitute Mortgage Loan or
Loans, with any applicable exceptions noted thereon. Monthly Payments due with
respect to Qualified Substitute Mortgage Loans in the month of substitution are
not part of the Trust Fund and will be retained by the Seller. For the month of
substitution, distributions to Certificateholders will reflect the collections
and recoveries in respect of such Deleted Mortgage Loan in the Due Period
preceding the month of substitution and the Depositor or the Seller, as the case
may be, shall thereafter be entitled to retain all amounts subsequently received
in respect of such Deleted Mortgage Loan. The Seller shall give or cause to be
given written notice to the Certificateholders and the Certificate Insurer that
such substitution has taken place, shall amend the Mortgage Loan Schedule to
reflect the removal of such Deleted Mortgage Loan from the terms of this
Agreement and the substitution of the Qualified Substitute Mortgage Loan or
Loans and shall deliver a copy of such amended Mortgage Loan Schedule to the
Trustee and the Certificate Insurer. Upon such substitution, such Qualified
Substitute Mortgage Loan or Loans shall constitute part of the Mortgage Pool and
shall be subject in all respects to the terms of this Agreement and, in the case
of a substitution effected by the Seller, the Mortgage Loan Purchase Agreement,
including, in the case of a substitution effected by the Seller all applicable
representations and warranties thereof included in the Mortgage Loan Purchase
Agreement and all applicable representations and warranties thereof set forth in
Section 2.04, in each case as of the date of substitution.
For any month in which the Seller substitutes one or more Qualified
Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Servicer
will determine the amount (the "Substitution Adjustment"), if any, by which the
aggregate Purchase Price of all such Deleted Mortgage Loans exceeds the
aggregate, as to each such Qualified Substitute Mortgage Loan, of the principal
balance thereof as of the date of substitution, together with one month's
interest on such principal balance at the applicable Net Loan Rate. On the date
of such substitution, the Seller will deliver or cause to be delivered to the
Servicer for deposit in the Collection Account an amount equal to the
Substitution Adjustment, if any, and the Trustee, upon receipt of the related
Qualified Substitute Mortgage Loan or Loans and certification by the Servicer of
such deposit, shall release to the Seller the related Mortgage File or Files and
shall execute and deliver such instruments of transfer or assignment, in each
case without recourse, as the Seller shall deliver to it and as shall be
necessary to vest therein any Deleted Mortgage Loan released pursuant hereto.
In addition, the Seller shall obtain at its own expense and deliver to
the Trustee and the Certificate Insurer an Opinion of Counsel to the effect that
such substitution will not cause (a) any federal tax to be imposed on the Trust
Fund, including without limitation, any federal tax imposed on "prohibited
transactions" under Section 860F(a)(l) of the Code or on "contributions after
the startup date" under Section 860G(d)(l) of the Code, or (b) the REMIC to fail
to qualify as a REMIC at any time that any Certificate is outstanding. If such
Opinion of Counsel can not be delivered, then such substitution may only be
effected at such time as the required Opinion of Counsel can be given.
(e) Upon discovery by the Seller, the Servicer, the Certificate Insurer
or the Trustee that any Mortgage Loan does not constitute a "qualified mortgage"
within the meaning of Section 860G(a)(3) of the Code, the party discovering such
fact shall within two Business Days give written notice thereof to the other
parties and the Certificate Insurer. In connection therewith, the Seller shall
repurchase or, subject to the limitations set forth in Section 2.03(d),
substitute one or more Qualified Substitute Mortgage Loans for the affected
Mortgage Loan within 90 days of the earlier of discovery or receipt of such
notice with respect to such affected Mortgage Loan. Any such repurchase or
substitution shall be made in the same manner as set forth in Section 2.03(a),
if made by the Seller. The Trustee shall reconvey to the Seller the Mortgage
Loan to be released pursuant hereto in the same manner, and on the same terms
and conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty.
Section 2.04. Representations and Warranties of the Seller with Respect
to the Mortgage Loans.
The Seller hereby represents and warrants to the Trustee for the
benefit of the Certificateholders and the Certificate Insurer that, as of the
Closing Date or as of such other date specifically provided herein, the
representations and warranties made by the Seller pursuant to Section 3.01 of
the Mortgage Loan Purchase Agreement are hereby being made to the Trustee and
are true and correct as of the Closing Date.
With respect to the representations and warranties set forth in this
Section 2.04 that are made to the best of the Seller's knowledge or as to which
the Seller has no knowledge, if it is discovered by the Depositor, the Seller,
the Servicer or the Trustee that the substance of such representation and
warranty is inaccurate and such inaccuracy materially and adversely affects the
value of the related Mortgage Loan or the interest therein of the
Certificateholders or the Certificate Insurer then, notwithstanding the Seller's
lack of knowledge with respect to the substance of such representation and
warranty being inaccurate at the time the representation or warranty was made,
such inaccuracy shall be deemed a breach of the applicable representation or
warranty.
Within ninety days of its discovery or its receipt of notice of any
such missing or materially defective documentation or any such breach of a
representation or warranty, the Seller shall promptly deliver such missing
document or cure such defect or breach in all material respects, or in the event
such defect or breach cannot be cured, the Seller shall repurchase the affected
Mortgage Loan or cause the removal of such Mortgage Loan from the Trust Fund and
substitute for it one or more Qualified Substitute Mortgage Loans, in either
case, in accordance with Section 2.03.
It is understood and agreed that the representations and warranties set
forth in this Section 2.04 shall survive delivery of the Mortgage Files to the
Trustee and shall inure to the benefit of the Certificateholders and the
Certificate Insurer notwithstanding any restrictive or qualified endorsement or
assignment. Upon discovery by any of the Depositor, the Servicer, the Seller or
the Trustee of a breach of any of the foregoing representations and warranties
which materially and adversely affects the value of any Mortgage Loan or the
interests therein of the Certificateholders or the Certificate Insurer, the
party discovering such breach shall give prompt written notice to the other
parties and the Certificate Insurer, and in no event later than two Business
Days from the date of such discovery. It is understood and agreed that the
obligations of the Seller set forth in Section 2.03(a) to cure, substitute for
or repurchase a Mortgage Loan pursuant to the Mortgage Loan Purchase Agreement
constitute the sole remedies available to the Certificateholders, the
Certificate Insurer or to the Trustee on their behalf respecting a breach of the
representations and warranties contained in this Section 2.04.
Section 2.05. Representations, Warranties and Covenants of the
Servicer.
The Servicer hereby represents, warrants and covenants to the Trustee,
for the benefit of each of the Trustee, the Certificate Insurer and the
Certificateholders and to the Depositor that as of the Closing Date or as of
such date specifically provided herein:
(i) The Servicer is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its formation and has
all licenses necessary to carry on its business as now being conducted
and is licensed, qualified and in good standing in the states where the
Mortgaged Property is located if the laws of such state require
licensing or qualification in order to conduct business of the type
conducted by the Servicer or to ensure the enforceability or validity
of each Mortgage Loan; the Servicer has the power and authority to
execute and deliver this Agreement and to perform in accordance
herewith; the execution, delivery and performance of this Agreement
(including all instruments of transfer to be delivered pursuant to this
Agreement) by the Servicer and the consummation of the transactions
contemplated hereby have been duly and validly authorized; this
Agreement evidences the valid, binding and enforceable obligation of
the Servicer, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally; and all requisite corporate
action has been taken by the Servicer to make this Agreement valid and
binding upon the Servicer in accordance with its terms;
(ii) The consummation of the transactions contemplated by this
Agreement are in the ordinary course of business of the Servicer and
will not result in the breach of any term or provision of the charter
or by-laws of the Servicer or result in the breach of any term or
provision of, or conflict with or constitute a default under or result
in the acceleration of any obligation under, any agreement, indenture
or loan or credit agreement or other instrument to which the Servicer
or its property is subject, or result in the violation of any law,
rule, regulation, order, judgment or decree to which the Servicer or
its property is subject;
(iii) The execution and delivery of this Agreement by the Servicer
and the performance and compliance with its obligations and covenants
hereunder do not require the consent or approval of any governmental
authority or, if such consent or approval is required, it has been
obtained;
(iv) This Agreement, and all documents and instruments
contemplated hereby which are executed and delivered by the Servicer,
constitute and will constitute valid, legal and binding obligations of
the Servicer, enforceable in accordance with their respective terms,
except as the enforcement thereof may be limited by applicable
bankruptcy laws and general principles of equity;
(v) [Reserved];
(vi) The Servicer does not believe, nor does it have any reason or
cause to believe, that it cannot perform each and every covenant
contained in this Agreement;
(vii) There is no action, suit, proceeding or investigation
pending or, to its knowledge, threatened against the Servicer that,
either individually or in the aggregate, (A) may result in any change
in the business, operations, financial condition, properties or assets
of the Servicer that might prohibit or materially and adversely affect
the performance by such Servicer of its obligations under, or validity
or enforceability of, this Agreement, or (B)may result in any material
impairment of the right or ability of the Servicer to carry on its
business substantially as now conducted, or (C) may result in any
material liability on the part of the Servicer, or (D) would draw into
question the validity or enforceability of this Agreement or of any
action taken or to be taken in connection with the obligations of the
Servicer contemplated herein, or (E) would otherwise be likely to
impair materially the ability of the Servicer to perform under the
terms of this Agreement;
(viii) Neither this Agreement nor any information, certificate of
an officer, statement furnished in writing or report delivered to the
Trustee by the Servicer in connection with the transactions
contemplated hereby contains any untrue statement of a material; and
(ix) The Servicer covenants that its computer and other systems
used in servicing the Mortgage Loans will be modified to operate in a
manner such that on and after January 1, 2000 (i) the Servicer can
service the Mortgage Loans in accordance with the terms of this
Agreement and (ii) the Servicer can operate its business in the same
manner as it is operating on the date hereof.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 2.05 shall survive delivery of the Mortgage
Files to the Trustee and shall inure to the benefit of the Trustee, the
Depositor, the Certificate Insurer and the Certificateholders. Upon discovery by
any of the Depositor, the Servicer, the Seller or the Trustee of a breach of any
of the foregoing representations, warranties and covenants which materially and
adversely affects the value of any Mortgage Loan or the interests therein of the
Certificateholders or the Certificate Insurer, the party discovering such breach
shall give prompt written notice (but in no event later than two Business Days
following such discovery) to the Servicer, the Seller, the Certificate Insurer
and the Trustee.
Section 2.06. Representations and Warranties of the Depositor.
The Depositor represents and warrants to the Trust and the Trustee on
behalf of the Certificateholders and the Certificate Insurer as follows:
(i) This agreement constitutes a legal, valid and binding
obligation of the Depositor, enforceable against the Depositor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general an except as such enforceability may be
limited by general principles of equity (whether considered in a
proceeding at law or in equity);
(ii) Immediately prior to the sale and assignment by the Depositor
to the Trustee on behalf of the Trust of each Mortgage Loan, the
Depositor had good and marketable title to each Mortgage Loan (insofar
as such title was conveyed to it by the Seller) subject to no prior
lien, claim, participation interest, mortgage, security interest,
pledge, charge or other encumbrance or other interest of any nature;
(iii) As of the Closing Date, the Depositor has transferred all
right, title interest in the Mortgage Loans to the Trustee on behalf of
the Trust;
(iv) The Depositor has not transferred the Mortgage Loans to the
Trustee on behalf of the Trust with any intent to hinder, delay or
defraud any of its creditors;
(v) The Depositor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Delaware,
with full corporate power and authority to own its assets and conduct
its business as presently being conducted;
(vi) The Depositor is not in violation of its articles of
incorporation or by-laws or in default in the performance or observance
of any material obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which the Depositor is a party or by which it or
its properties may be bound, which default might result in any material
adverse changes in the financial condition, earnings, affairs or
business of the Depositor or which might materially and adversely
affect the properties or assets, taken as a whole, of the Depositor;
(vii) The execution, delivery and performance of this Agreement by
the Depositor, and the consummation of the transactions contemplated
thereby, do not and will not result in a material breach or violation
of any of the terms or provisions of, or, to the knowledge of the
Depositor, constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the
Depositor is a party or by which the Depositor is bound or to which any
of the property or assets of the Depositor is subject, nor will such
actions result in any violation of the provisions of the articles of
incorporation or by-laws of the Depositor or, to the best of the
Depositor's knowledge without independent investigation, any statute or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Depositor or any of its properties or
assets (except for such conflicts, breaches, violations and defaults as
would not have a material adverse effect on the ability of the
Depositor to perform its obligations under this Agreement);
(viii) To the best of the Depositor's knowledge without any
independent investigation, no consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body of the United States or any other jurisdiction is
required for the issuance of the Certificates, or the consummation by
the Depositor of the other transactions contemplated by this Agreement,
except such consents, approvals, authorizations, registrations or
qualifications as (a) may be required under State securities or Blue
Sky laws, (b) have been previously obtained or (c) the failure of which
to obtain would not have a material adverse effect on the performance
by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement; and
(ix) There are no actions, proceedings or investigations pending
before or, to the Depositor's knowledge, threatened by any court,
administrative agency or other tribunal to which the Depositor is a
party or of which any of its properties is the subject: (a) which if
determined adversely to the Depositor would have a material adverse
effect on the business, results of operations or financial condition of
the Depositor; (b) asserting the invalidity of this Agreement or the
Certificates; (c) seeking to prevent the issuance of the Certificates
or the consummation by the Depositor of any of the transactions
contemplated by this Agreement, as the case may be; or (d) which might
materially and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, this
Agreement.
Section 2.07. Issuance of Certificates.
The Trustee acknowledges the assignment to it of the Mortgage Loans and
the delivery to it of the Mortgage Files, subject to the provisions of Sections
2.01 and 2.02, together with the assignment to it of all other assets included
in the Trust Fund, receipt of which is hereby acknowledged. Concurrently with
such assignment and delivery and in exchange therefor, the Trustee, pursuant to
the written request of the Depositor executed by an officer of the Depositor,
has executed, authenticated and delivered to or upon the order of the Depositor,
the Certificates in authorized denominations. The interests evidenced by the
Certificates, constitute the entire beneficial ownership interest in the Trust
Fund.
Section 2.08. Representations and Warranties of the Seller.
The Seller hereby represents and warrants to the Trust and the Trustee
on behalf of the Certificateholders and the Certificate Insurer that as of the
Closing Date or as of such date specifically provided herein:
(i) The Seller is duly organized, validly existing and in good standing
as a corporation under the laws of the State of California and has the power and
authority to own its assets and to transact the business in which it is
currently engaged. The Seller is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the business transacted
by it or properties owned or leased by it requires such qualification and in
which the failure to so qualify would have a material adverse effect on (a) its
business, properties, assets or condition (financial or other), (b) the
performance of its obligations under this Agreement, (c) the value or
marketability of the Mortgage Loans, or (d) its ability to foreclose on the
related Mortgaged Properties.
(ii) The Seller has the power and authority to make, execute, deliver
and perform this Agreement and to consummate all of the transactions
contemplated hereunder and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement. When executed and
delivered, this Agreement will constitute the Seller's legal, valid and binding
obligations enforceable in accordance with its terms, except as enforcement of
such terms may be limited by (1) bankruptcy, insolvency, reorganization,
receivership, moratorium or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies, (2) general
equity principals (regardless of whether such enforcement is considered in a
proceeding in equity or at law) or (3) public policy considerations underlying
the securities laws, to the extent that such policy considerations limit the
enforceability of the provisions of this Agreement which purport to provide
indemnification from securities laws liabilities.
(iii) The Seller holds all necessary licenses, certificates and permits
from all governmental authorities necessary for conducting its business as it is
presently conducted. It is not required to obtain the consent of any other party
or any consent, license, approval or authorization from, or registration or
declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Agreement, except for such consents, licenses, approvals or authorizations, or
registrations or declarations as shall have been obtained or filed, as the case
may be, prior to the Closing Date.
(iv) The execution, delivery and performance of this Agreement by the
Seller will not conflict with or result in a breach of, or constitute a default
under, any provision of any existing law or regulation or any order or decree of
any court applicable to the Seller or any of its properties or any provision of
its articles of incorporation or by-laws, or constitute a material breach of, or
result in the creation or imposition of any lien, charge or encumbrance upon any
of its properties pursuant to any mortgage, indenture, contract or other
agreement to which it is a party or by which it may be bound.
(v) No certificate of an officer, written statement 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.
(vi) The transactions contemplated by this Agreement are in the
ordinary course of the Seller's business.
(vii) The Seller is not insolvent, nor will the Seller be made
insolvent by the transfer of the Mortgage Loans to the Depositor, nor is the
Seller aware of any pending insolvency.
(viii) The Seller is not in violation of, and the execution and
delivery of this Agreement by it and its performance and compliance with the
terms of this Agreement will not constitute a violation with respect to any
order or decree of any court, or any order or regulation of any federal, state,
municipal or governmental agency having jurisdiction, which violation would
materially and adversely affect the Seller's condition (financial or otherwise)
or operations or any of the Seller's properties, or materially and adversely
affect the performance of any of its duties hereunder.
(ix) There are no actions or proceedings against, or investigations of,
the Seller pending or, to its knowledge, threatened, before any court,
administrative agency or other tribunal (i) that, if determined adversely, would
prohibit the Seller from entering into this Agreement, (ii) seeking to prevent
the consummation of any of the transactions contemplated by this Agreement or
(iii) that, if determined adversely, would prohibit or materially and adversely
affect the Seller's performance of any of its respective obligations under, or
the validity or enforceability of, this Agreement.
(x) The Seller did not transfer the Mortgage Loans to the Depositor
with any intent to hinder, delay or defraud any of its creditors.
(xi) The Seller acquired title to the Mortgage Loans in good faith,
without notice of any adverse claims.
(xii) The transfer, assignment and conveyance of the Mortgage Notes and
the Mortgages by the Seller to the Depositor are not subject to the bulk
transfer laws or any similar statutory provisions in effect in any applicable
jurisdiction.
Section 2.09. Covenants of the Seller. The Seller hereby covenants that
except for the transfer hereunder, the Seller will not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to exist
any lien on any Mortgage Loan, or any interest therein; the Seller will notify
the Trustee, as assignee of the Depositor, of the existence of any lien on any
Mortgage Loan immediately upon discovery thereof, and the Seller will defend the
right, title and interest of the Trust, as assignee of the Depositor, in, to and
under the Mortgage Loans, against all claims of third parties claiming through
or under the Seller; provided, however, that nothing in this Section 2.09 shall
prevent or be deemed to prohibit the Seller from suffering to exist upon any of
the Mortgage Loans any liens for municipal or other local taxes and other
governmental charges if such taxes or governmental charges shall not at the time
be due and payable or if the Seller shall currently be contesting the validity
thereof in good faith by appropriate proceedings and shall have set aside on its
books adequate reserves with respect thereto.
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
Section 3.01. Servicer to Act as Servicer.
The Servicer shall service and administer the Mortgage Loans on behalf
of the Trustee and in the best interests of and for the benefit of the
Certificateholders and the Certificate Insurer (as determined by the Servicer in
its reasonable judgment) in accordance with the terms of this Agreement and the
Mortgage Loans and, to the extent consistent with such terms, in the same manner
in which it services and administers similar mortgage loans for its own
portfolio, giving due consideration to customary and usual standards of practice
of mortgage lenders and loan servicers administering similar mortgage loans but
without regard to:
(i) any relationship that the Servicer, any Sub-Servicer or any
Affiliate of the Servicer or any Sub-Servicer may have with the related
Mortgagor;
(ii) the ownership or non-ownership of any Certificate by the
Servicer or any Affiliate of the Servicer;
(iii) the Servicer's obligation to make Advances or Servicing
Advances; or
(iv) the Servicer's or any Sub-Servicer's right to receive
compensation for its services hereunder or with respect to any
particular transaction.
To the extent consistent with the foregoing, the Servicer shall seek to maximize
the timely and complete recovery of principal and interest on the Mortgage
Notes. Subject only to the above-described servicing standards and the terms of
this Agreement and of the Mortgage Loans, the Servicer shall have full power and
authority, acting alone or through Sub-Servicers as provided in Section 3.02, to
do or cause to be done any and all things in connection with such servicing and
administration which it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Servicer in its own name or in the name of a
Sub-Servicer is hereby authorized and empowered by the Trustee when the Servicer
believes it appropriate in its best judgment in accordance with the servicing
standards set forth above, to execute and deliver, on behalf of the
Certificateholders and the Trustee, and upon notice to the Trustee, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Mortgage
Loans and the Mortgaged Properties and to institute foreclosure proceedings or
obtain a deed-in-lieu of foreclosure so as to convert the ownership of such
properties, and to hold or cause to be held title to such properties, on behalf
of the Trustee and Certificateholders. The Servicer shall service and administer
the Mortgage Loans in accordance with applicable state and federal law and shall
provide to the Mortgagors any reports required to be provided to them thereby.
The Servicer shall also comply in the performance of this Agreement with all
reasonable rules and requirements of each insurer under any standard hazard
insurance policy. Subject to Section 3.17, the Trustee shall execute, at the
written request of the Servicer, and furnish to the Servicer and any
Sub-Servicer any special or limited powers of attorney and other documents
necessary or appropriate to enable the Servicer or any Sub-Servicer to carry out
their servicing and administrative duties hereunder; provided, such limited
powers of attorney or other documents shall be prepared by the Servicer and
submitted to the Trustee for execution. The Trustee shall not be liable for the
actions of the Servicer or any Sub-Servicers under such powers of attorney.
Subject to Section 3.09 hereof, in accordance with the standards of the
preceding paragraph, the Servicer shall advance or cause to be advanced funds as
necessary for the purpose of effecting the timely payment of taxes and
assessments on the Mortgaged Properties, which advances shall be Servicing
Advances reimbursable in the first instance from related collections from the
Mortgagors pursuant to Section 3.09, and further as provided in Section 3.11.
Any cost incurred by the Servicer or by Sub-Servicers in effecting the timely
payment of taxes and assessments on a Mortgaged Property shall not, for the
purpose of calculating distributions to Certificateholders, be added to the
unpaid Principal Balance of the related Mortgage Loan, notwithstanding that the
terms of such Mortgage Loan so permit.
Notwithstanding anything in this Agreement to the contrary, the
Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.03) and the Servicer shall not (i) permit any
modification with respect to any Mortgage Loan that would change the Mortgage
Rate, reduce or increase the Principal Balance (except for reductions resulting
from actual payments of principal) or change the final maturity date on such
Mortgage Loan (unless, as provided in Section 3.07, the Mortgagor is in default
with respect to the Mortgage Loan or such default is, in the judgment of the
Servicer, reasonably foreseeable) or (ii) permit any modification, waiver or
amendment of any term of any Mortgage Loan that would both (A) effect an
exchange or reissuance of such Mortgage Loan under Section 1001 of the Code (or
Treasury regulations promulgated thereunder) and (B) cause the REMIC to fail to
qualify as a REMIC under the Code or the imposition of any tax on "prohibited
transactions" or "contributions after the startup date" under the REMIC
Provisions.
The Servicer may delegate its responsibilities under this Agreement;
provided, however, that no such delegation shall release the Servicer from the
responsibilities or liabilities arising under this Agreement.
Section 3.02. Sub-Servicing Agreements Between Servicer and
Sub-Servicers.
(a) The Servicer may enter into Sub-Servicing Agreements with
Sub-Servicers for the servicing and administration of the Mortgage Loans;
provided, however, that any Sub-Servicer shall be acceptable to the Certificate
Insurer and provided such agreements would not result in a withdrawal or a
downgrading by any Rating Agency of the rating or any shadow rating on any Class
of Certificates. The Trustee is hereby authorized to acknowledge, at the request
of the Servicer, any Sub-Servicing Agreement that meets the requirements
applicable to Sub-Servicing Agreements set forth in this Agreement and that is
otherwise permitted under this Agreement.
Each Sub-Servicer shall be (i) authorized to transact business in the
state or states where the related Mortgaged Properties it is to service are
situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub-Servicing
Agreement and (ii) a FHLMC or Fannie Mae approved mortgage servicer. Each
Sub-Servicing Agreement must impose on the Sub-Servicer requirements conforming
to the provisions set forth in Section 3.08 and provide for servicing of the
Mortgage Loans consistent with the terms of this Agreement. The Servicer will
examine each Sub-Servicing Agreement and will be familiar with the terms
thereof. The terms of any Sub-Servicing Agreement will not be inconsistent with
any of the provisions of this Agreement. The Servicer and the Sub-Servicers may
enter into and make amendments to the Sub-Servicing Agreements or enter into
different forms of Sub-Servicing Agreements; provided, however, that any such
amendments or different forms shall be consistent with and not violate the
provisions of this Agreement, and that no such amendment or different form shall
be made or entered into which could be reasonably expected to be materially
adverse to the interests of the Certificateholders without the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights; provided, further, that the consent of the Holders of
Certificates entitled to at least 66% of the Voting Rights shall not be required
(i) to cure any ambiguity or defect in a Sub-Servicing Agreement, (ii) to
correct, modify or supplement any provisions of a Sub-Servicing Agreement, or
(iii) to make any other provisions with respect to matters or questions arising
under a Sub-Servicing Agreement, which, in each case, shall not be inconsistent
with the provisions of this Agreement. Any variation without the consent of the
Certificate Insurer and the Holders of Certificates entitled to at least 66% of
the Voting Rights from the provisions set forth in Section 3.08 relating to
insurance or priority requirements of Sub-Servicing Accounts, or credits and
charges to the Sub-Servicing Accounts or the timing and amount of remittances by
the Sub-Servicers to the Servicer, are conclusively deemed to be inconsistent
with this Agreement and therefore prohibited. The Servicer shall deliver to the
Trustee and the Certificate Insurer copies of all Sub-Servicing Agreements, and
any amendments or modifications thereof, promptly upon the Servicer's execution
and delivery of such instruments.
(b) As part of its servicing activities hereunder, the Servicer, for
the benefit of the Trustee, the Certificateholders and the Certificate Insurer,
shall enforce the obligations of each Sub-Servicer under the related
Sub-Servicing Agreement and of the Seller under the Mortgage Loan Purchase
Agreement, including, without limitation, any obligation to make advances in
respect of delinquent payments as required by a Sub-Servicing Agreement, or to
purchase a Mortgage Loan on account of missing or defective documentation or on
account of a breach of a representation, warranty or covenant, as described in
Section 2.03(a). Such enforcement, including, without limitation, the legal
prosecution of claims, termination of Sub-Servicing Agreements, and the pursuit
of other appropriate remedies, shall be in such form and carried out to such an
extent and at such time as the Servicer, in its good faith business judgment,
would require were it the owner of the related Mortgage Loans. The Servicer
shall pay the costs of such enforcement at its own expense, and shall be
reimbursed therefor only (i) from a general recovery resulting from such
enforcement, to the extent, if any, that such recovery exceeds all amounts due
in respect of the related Mortgage Loans, or (ii) from a specific recovery of
costs, expenses or attorneys' fees against the party against whom such
enforcement is directed. Enforcement of the Mortgage Loan Purchase Agreement
against the Seller shall be effected by the Servicer to the extent it is not the
Seller, and otherwise by the Trustee in accordance with the foregoing provisions
of this paragraph.
Section 3.03. Successor Sub-Servicers.
The Servicer or the Certificate Insurer shall be entitled to terminate
any Sub-Servicing Agreement and the rights and obligations of any Sub-Servicer
pursuant to any Sub-Servicing Agreement in accordance with the terms and
conditions of such Sub-Servicing Agreement. In the event of termination of any
Sub-Servicer, all servicing obligations of such Sub-Servicer shall be assumed
simultaneously by the Servicer without any act or deed on the part of such
Sub-Servicer or the Servicer, and the Servicer either shall service directly the
related Mortgage Loans or shall enter into a Sub-Servicing Agreement with a
successor Sub-Servicer which qualifies under Section 3.02.
Any Sub-Servicing Agreement shall include the provision that such
agreement may be immediately terminated by the Servicer, the Trustee (if the
Trustee is acting as Servicer) or the Certificate Insurer without fee, in
accordance with the terms of this Agreement, in the event that the Servicer (or
the Trustee, if such party is then acting as Servicer) shall, for any reason, no
longer be the Servicer (including termination due to a Servicer Event of
Termination).
Section 3.04. Liability of the Servicer.
Notwithstanding any Sub-Servicing Agreement or the provisions of this
Agreement relating to agreements or arrangements between the Servicer and a
Sub-Servicer or reference to actions taken through a Sub-Servicer or otherwise,
the Servicer shall remain obligated and primarily liable to the Trustee, the
Certificateholders and the Certificate Insurer for the servicing and
administering of the Mortgage Loans in accordance with the provisions of Section
3.01 without diminution of such obligation or liability by virtue of such
Sub-Servicing Agreements or arrangements or by virtue of indemnification from
the Sub-Servicer and to the same extent and under the same terms and conditions
as if the Servicer 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 this Agreement shall be deemed to limit or modify such indemnification.
Section 3.05. No Contractual Relationship Between Sub-Servicers and the
Trustee or Certificateholders.
Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Servicer alone, and the Trustee, Certificateholders or the Certificate Insurer
shall not be deemed parties thereto and shall have no claims, rights,
obligations, duties or liabilities with respect to the Sub-Servicer except as
set forth in Section 3.06. The Servicer shall be solely liable for all fees owed
by it to any Sub-Servicer, irrespective of whether the Servicer's compensation
pursuant to this Agreement is sufficient to pay such fees.
Section 3.06. Assumption or Termination of Sub-Servicing Agreements by
Trustee.
In the event the Servicer shall for any reason no longer be the
servicer (including by reason of the occurrence of a Servicer Event of
Termination), the Trustee shall thereupon assume all of the rights and
obligations of the Servicer under each Sub-Servicing Agreement that the Servicer
may have entered into, unless the Trustee or the Certificate Insurer elects to
terminate any Sub-Servicing Agreement in accordance with its terms as provided
in Section 3.03. Upon such assumption, the Trustee (or the successor servicer
appointed pursuant to Section 7.02) shall be deemed, subject to Section 3.03, to
have assumed all of the departing Servicer's interest therein and to have
replaced the departing Servicer as a party to each Sub-Servicing Agreement to
the same extent as if each Sub-Servicing Agreement had been assigned to the
assuming party, except that (i) the departing Servicer shall not thereby be
relieved of any liability or obligations under any Sub-Servicing Agreement that
arose before it ceased to be the Servicer and (ii) neither the Trustee nor any
successor Servicer shall be deemed to have assumed any liability or obligation
of the Servicer that arose before it ceased to be the Servicer.
The Servicer at its expense shall, upon request of Trustee, deliver to
the assuming party all documents and records relating to each Sub-Servicing
Agreement and the Mortgage Loans then being serviced and an accounting of
amounts collected and held by or on behalf of it, and otherwise use its best
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.
Section 3.07. Collection of Certain Mortgage Loan Payments.
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement and the terms
and provisions of any applicable insurance policies, follow such collection
procedures as it would follow with respect to mortgage loans comparable to the
Mortgage Loans and held for its own account. Consistent with the foregoing, the
Servicer may in its discretion (i) waive any late payment charge or, if
applicable, any penalty interest, or (ii) extend the due dates for the Monthly
Payments due on a Mortgage Note for a period of not greater than 180 days;
provided, however, that any extension pursuant to clause (ii) above shall not
affect the amortization schedule of any Mortgage Loan for purposes of any
computation hereunder, except as provided below. In the event of any such
arrangement pursuant to clause (ii) above, the Servicer shall make timely
advances on such Mortgage Loan during such extension pursuant to Section 4.04
and in accordance with the amortization schedule of such Mortgage Loan without
modification thereof by reason of such arrangement. Notwithstanding the
foregoing, in the event that any Mortgage Loan is in default or, in the judgment
of the Servicer, such default is reasonably foreseeable, the Servicer,
consistent with the standards set forth in Section 3.01, may also waive, modify
or vary any term of such Mortgage Loan (including modifications that would
change the Mortgage Rate, forgive the payment of principal or interest or extend
the final maturity date of such Mortgage Loan), accept payment from the related
Mortgagor of an amount less than the Stated Principal Balance in final
satisfaction of such Mortgage Loan, or consent to the postponement of strict
compliance with any such term or otherwise grant indulgence to any Mortgagor
(any and all such waivers, modifications, variances, forgiveness of principal or
interest, postponements, or indulgences collectively referred to herein as
"forbearance"), provided, however, that in no event shall the Servicer grant any
such forbearance (other than as permitted by the second sentence of this
Section) with respect to any one Mortgage Loan more than once in any 12 month
period or more than three times over the life of such Mortgage Loan. The
Servicer's analysis supporting any forbearance and the conclusion that any
forbearance meets the standards of Section 3.01 (including the standard that
such forbearance will maximize the timely and complete recovery of principal and
interest on the Mortgage Notes) shall be reflected in writing in the Mortgage
File and shall be provided to the Certificate Insurer upon request.
Section 3.08. Sub-Servicing Accounts.
In those cases where a Sub-Servicer is servicing a Mortgage Loan
pursuant to a Sub-Servicing Agreement, the Sub-Servicer will be required to
establish and maintain one or more accounts (collectively, the "Sub-Servicing
Account"). The Sub-Servicing Account shall be an Eligible Account and shall
comply with all requirements of this Agreement relating to the Collection
Account. The Sub-Servicer shall deposit in the clearing account in which it
customarily deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and in no event
more than one Business Day after the Sub-Servicer's receipt thereof, all
proceeds of Mortgage Loans received by the Sub-Servicer less its servicing
compensation to the extent permitted by the Sub-Servicing Agreement, and shall
thereafter deposit such amounts in the Sub-Servicing Account, in no event more
than two Business Days after the receipt of such amounts. The Sub-Servicer shall
thereafter deposit such proceeds in the Collection Account or remit such
proceeds to the Servicer for deposit in the Collection Account not later than
two Business Days after the deposit of such amounts in the Sub-Servicing
Account. For purposes of this Agreement, the Servicer shall be deemed to have
received payments on the Mortgage Loans when the Sub-Servicer receives such
payments.
Section 3.09. Collection of Taxes, Assessments and Similar Items;
Servicing Accounts.
The Servicer shall establish and maintain, or cause to be established
and maintained, one or more accounts (the "Servicing Accounts"), into which all
Escrow Payments shall be deposited and retained. Servicing Accounts shall be
Eligible Accounts. The Servicer shall deposit in the clearing account in which
it customarily deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and in no event
more than one Business Day after the Servicer's receipt thereof, all Escrow
Payments collected on account of the Mortgage Loans and shall thereafter deposit
such Escrow Payments in the Servicing Accounts, in no event more than two
Business Days after the receipt of such Escrow Payments, all Escrow Payments
collected on account of the Mortgage Loans for the purpose of effecting the
timely payment of any such items as required under the terms of this Agreement.
Withdrawals of amounts from a Servicing Account may be made only to (i) effect
payment of taxes, assessments, hazard insurance premiums, and comparable items
in a manner and at a time that assures that the lien priority of the Mortgage is
not jeopardized (or, with respect to the payment of taxes, in a manner and at a
time that avoids the loss of the Mortgaged Property due to a tax sale or the
foreclosure as a result of a tax lien); (ii) reimburse the Servicer (or a
Sub-Servicer to the extent provided in the related Sub-Servicing Agreement) out
of related collections for any Servicing Advances made pursuant to Section 3.01
(with respect to taxes and assessments) and Section 3.14 (with respect to hazard
insurance); (iii) refund to Mortgagors any sums as may be determined to be
overages; (iv) pay interest, if required and as described below, to Mortgagors
on balances in the Servicing Account; or (v) clear and terminate the Servicing
Account at the termination of the Servicer's obligations and responsibilities in
respect of the Mortgage Loans under this Agreement in accordance with Article X.
The Servicer will be responsible for the administration of the Servicing
Accounts and will be obligated to make Servicing Advances to such accounts when
and as necessary to avoid the lapse of insurance coverage on the Mortgaged
Property, or which the Servicer knows, or in the exercise of the required
standard of care of the Servicer hereunder should know, is necessary to avoid
the loss of the Mortgaged Property due to a tax sale or the foreclosure as a
result of a tax lien. If any such payment has not been made and the Servicer
receives notice of a tax lien with respect to the Mortgage being imposed, the
Servicer will, within 10 business days of such notice, advance or cause to be
advanced funds necessary to discharge such lien on the Mortgaged Property. As
part of its servicing duties, the Servicer or Sub-Servicers shall pay to the
Mortgagors interest on funds in the Servicing Accounts, to the extent required
by law and, to the extent that interest earned on funds in the Servicing
Accounts is insufficient, to pay such interest from its or their own funds,
without any reimbursement therefor.
Section 3.10. Collection Account and Distribution Account.
(a) On behalf of the Trust Fund, the Servicer shall establish and
maintain, or cause to be established and maintained, one or more accounts (such
account or accounts, the "Collection Account"), held in trust for the benefit of
the Trustee, the Certificateholders and the Certificate Insurer. On behalf of
the Trust Fund, the Servicer shall deposit or cause to be deposited in the
clearing account in which it customarily deposits payments and collections on
mortgage loans in connection with its mortgage loan servicing activities on a
daily basis, and in no event more than one Business Day after the Servicer's
receipt thereof, and shall thereafter deposit in the Collection Account, in no
event more than two Business Days after the Servicer's receipt thereof, as and
when received or as otherwise required hereunder, the following payments and
collections received or made by it subsequent to the Cut-off Date (other than in
respect of principal or interest on the Mortgage Loans due on or before the
Cut-off Date) or payments (other than Principal Prepayments) received by it on
or prior to the Cut-off Date but allocable to a Due Period subsequent thereto:
(i) all payments on account of principal, including Principal
Prepayments (but not Prepayment Premiums), on the Mortgage Loans;
(ii) all payments on account of interest (net of the related
Servicing Fee) on each Mortgage Loan;
(iii) all Insurance Proceeds and Liquidation Proceeds (other than
proceeds collected in respect of any particular REO Property and
amounts paid in connection with a purchase of Mortgage Loans and REO
Properties pursuant to Section 10.01);
(iv) any amounts required to be deposited pursuant to Section 3.12
in connection with any losses realized on Permitted Investments with
respect to funds held in the Collection Account;
(v) any amounts required to be deposited by the Servicer pursuant
to the second paragraph of Section 3.14(a) in respect of any blanket
policy deductibles;
(vi) all proceeds of any Mortgage Loan repurchased or purchased in
accordance with Section 2.03 or Section 10.01; and
(vii) all amounts required to be deposited in connection with
Substitution Adjustments pursuant to Section 2.03.
The foregoing requirements for deposit in the Collection Account shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of late payment charges,
ancillary income and assumption fees, or insufficient funds charges need not be
deposited by the Servicer in the Collection Account and may be retained by the
Servicer as additional compensation. In the event the Servicer shall deposit in
the Collection Account any amount not required to be deposited therein, it may
at any time withdraw such amount from the Collection Account, any provision
herein to the contrary notwithstanding.
(b) On behalf of the Trust Fund, the Trustee shall establish and
maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Trustee, the Certificateholders
and the Certificate Insurer. On behalf of the Trust Fund, the Servicer shall
deliver to the Trustee in immediately available funds for deposit in the
Distribution Account on or before the Close of Business New York time (i) on the
Servicer Remittance Date, that portion of the Available Funds (calculated
without regard to the references in the definition thereof to amounts that may
be withdrawn from the Distribution Account) for the related Distribution Date
then on deposit in the Collection Account, and (ii) on each Business Day as of
the commencement of which the balance on deposit in the Collection Account
exceeds $75,000 following any withdrawals pursuant to the next succeeding
sentence, the amount of such excess, but only if the Collection Account
constitutes an Eligible Account solely pursuant to clause (ii) of the definition
of "Eligible Account." If the balance on deposit in the Collection Account
exceeds $75,000 as of the commencement of business on any Business Day and the
Collection Account constitutes an Eligible Account solely pursuant to clause
(ii) of the definition of "Eligible Account," the Servicer shall, on or before
the Close of Business New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Servicer,
the Trustee, the Seller or any Sub-Servicer pursuant to Section 3.11 and shall
pay such amounts to the Persons entitled thereto.
(c) Funds in the Collection Account and the Distribution Account may be
invested in Permitted Investments in accordance with the provisions set forth in
Section 3.12. The Servicer shall give notice to the Trustee and the Certificate
Insurer of the location of the Collection Account maintained by it when
established and prior to any change thereof. The Trustee shall give notice to
the Servicer, the Depositor and the Certificate Insurer of the location of the
Distribution Account when established and prior to any change thereof.
(d) Funds held in the Collection Account at any time may be delivered
by the Servicer to the Trustee for deposit in an account (which may be the
Distribution Account and must satisfy the standards for the Distribution Account
as set forth in the definition thereof) and for all purposes of this Agreement
shall be deemed to be a part of the Collection Account; provided, however, that
the Trustee shall have the sole authority to withdraw any funds held pursuant to
this subsection (d). In the event the Servicer shall deliver to the Trustee for
deposit in the Distribution Account any amount not required to be deposited
therein, it may at any time request that the Trustee withdraw such amount from
the Distribution Account and remit to it any such amount, any provision herein
to the contrary notwithstanding. In addition, the Servicer, with respect to
items (i) through (iv) below, shall deliver to the Trustee from time to time for
deposit, and the Trustee, with respect to items (i) through (iv) below, shall so
deposit, in the Distribution Account:
(i) any Advances, as required pursuant to Section 4.04;
(ii) any amounts required to be deposited pursuant to Section
3.23(d) or (f) in connection with any REO Property;
(iii) any amounts to be paid in connection with a purchase of
Mortgage Loans and REO Properties pursuant to Section 10.01; and
(iv) any Compensating Interest to be deposited pursuant to Section
3.24 in connection with any Prepayment Interest Shortfall.
(e) [Reserved].
(f) The Servicer shall deposit in the Collection Account any
amounts required to be deposited pursuant to Section 3.12(b) in
connection with losses realized on Permitted Investments with respect
to funds held in the Collection Account.
Section 3.11. Withdrawals from the Collection Account and Distribution
Account.
(a) The Servicer shall, from time to time, make withdrawals from the
Collection Account for any of the following purposes or as described in Section
4.03:
(i) to remit to the Trustee for deposit in the Distribution
Account the amounts required to be so remitted pursuant to Section
3.10(b) or permitted to be so remitted pursuant to the first sentence
of Section 3.10(d);
(ii) subject to Section 3.16(d), to reimburse the Servicer for
Advances, but only to the extent of amounts received which represent
Late Collections (net of the related Servicing Fees) of Monthly
Payments, Liquidation Proceeds and Insurance Proceeds on Mortgage Loans
with respect to which such Advances were made in accordance with the
provisions of Section 4.03;
(iii) subject to Section 3.16(d), to pay the Servicer or any
Sub-Servicer (a) any unpaid Servicing Fees, (b) any unreimbursed
Servicing Advances with respect to each Mortgage Loan, but only to the
extent of any Late Collections, Liquidation Proceeds and Insurance
Proceeds received with respect to such Mortgage Loan, and (c) any
Servicing Advances with respect to the final liquidation of a Mortgage
Loan that are Nonrecoverable Advances, but only to the extent that Late
Collections, Liquidation Proceeds and Insurance Proceeds received with
respect to such Mortgage Loan are insufficient to reimburse the
Servicer or any Sub-Servicer for Servicing Advances;
(iv) to pay to the Servicer as servicing compensation (in addition
to the Servicing Fee) on the Servicer Remittance Date any interest or
investment income earned on funds deposited in the Collection Account;
(v) to pay to the Seller, with respect to each Mortgage Loan that
has previously been purchased or replaced pursuant to Section 2.03 or
Section 3.16(c) all amounts received thereon subsequent to the date of
purchase or substitution, as the case may be;
(vi) to reimburse the Servicer for any Advance previously made
which the Servicer has determined to be a Nonrecoverable Advance in
accordance with the provisions of Section 4.04;
(vii) to pay, or to reimburse the Servicer for Servicing Advances
in respect of, expenses incurred in connection with any Mortgage Loan
pursuant to Section 3.16(b)
(viii) to pay to the Servicer on a Servicer Remittance Date the
excess of aggregate Prepayment Interest Excesses for the related
Distribution Date over aggregate Prepayment Interest Shortfalls for
such Distribution Date; and
(ix) to clear and terminate the Collection Account pursuant to
Section 10.01.
The Servicer shall keep and maintain separate accounting, on a Mortgage
Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from
the Collection Account, to the extent held by or on behalf of it, pursuant to
subclauses (ii), (iii), (iv), (v), (vi) and (vii) above. The Servicer shall
provide written notification to the Trustee, on or prior to the next succeeding
Servicer Remittance Date, upon making any withdrawals from the Collection
Account pursuant to subclause (vi) above; provided that an Officer's Certificate
in the form described under Section 4.04(d) shall suffice for such written
notification to the Trustee in respect hereof.
(b) The Trustee shall, from time to time, make withdrawals from the
Distribution Account, for any of the following purposes, without priority:
(i) to make distributions in accordance with Section 4.01;
(ii) to pay any amounts in respect of taxes pursuant to Section
9.01(g); and
(iii) to clear and terminate the Distribution Account pursuant to
Section 10.01.
Section 3.12. Investment of Funds in the Collection Account and the
Distribution Account.
(a) The Servicer may direct any depository institution maintaining the
Collection Account, and the Trustee may direct any depository institution
maintaining the Distribution Account (each such account, for purposes of this
Section 3.12, an "Investment Account"), to invest the funds in such Investment
Account in one or more Permitted Investments bearing interest or sold at a
discount, and maturing, unless payable on demand, (i) no later than the Business
Day immediately preceding the date on which such funds are required to be
withdrawn from such account pursuant to this Agreement, if a Person other than
the Trustee is the obligor thereon, and (ii) no later than the date on which
such funds are required to be withdrawn from such account pursuant to this
Agreement, if the Trustee is the obligor thereon. All such Permitted Investments
shall be held to maturity, unless payable on demand. Any investment of funds in
an Investment Account shall be made in the name of the Trustee (in its capacity
as such), or in the name of a nominee of the Trustee. The Trustee shall be
entitled to sole possession (except with respect to investment direction of
funds held in the Collection Account and any income and gain realized thereon)
over each such investment, and any certificate or other instrument evidencing
any such investment shall be delivered directly to the Trustee or its agent,
together with any document of transfer necessary to transfer title to such
investment to the Trustee or its nominee. In the event amounts on deposit in an
Investment Account are at any time invested in a Permitted Investment payable on
demand, the Trustee shall:
(x) consistent with any notice required to be given thereunder,
demand that payment thereon be made on the last day such
Permitted Investment may otherwise mature hereunder in an
amount equal to the lesser of (1) all amounts then payable
thereunder and (2) the amount required to be withdrawn on
such date; and
(y) demand payment of all amounts due thereunder promptly upon
determination by a Responsible Officer of the Trustee that
such Permitted Investment would not constitute a Permitted
Investment in respect of funds thereafter on deposit in the
Investment Account.
(b) All income and gain realized from the investment of funds deposited
in the Collection Account and any REO Account held by or on behalf of the
Servicer shall be for the benefit of the Servicer and shall be subject to its
withdrawal in accordance with Section 3.11 or Section 3.23, as applicable. The
Servicer shall deposit in the Collection Account or any REO Account, as
applicable, the amount of any loss of principal incurred in respect of any such
Permitted Investment made with funds in such accounts immediately upon
realization of such loss.
(c) All income and gain realized from the investment of funds deposited
in the Distribution Account shall be for the benefit of the Trustee. The Trustee
shall deposit in the Distribution Account the amount of any loss of principal
incurred in respect of any such Permitted Investment made with funds in such
accounts immediately upon realization of such loss.
(d) Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment, or
if a default occurs in any other performance required under any Permitted
Investment, the Trustee may and, subject to Section 8.01 and Section 8.02(a)(v),
upon the request of the Certificate Insurer or the Holders of Certificates
representing more than 50% of the Voting Rights allocated to any Class of
Certificates, shall take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
proceedings.
Section 3.13. [Reserved] Section 3.14. Maintenance of Hazard Insurance
and Errors and Omissions and Fidelity Coverage.
(a) The Servicer shall cause to be maintained for each Mortgage Loan
fire insurance with extended coverage on the Mortgaged Property in an amount
which is at least equal to the lesser of the current Principal Balance of such
Mortgage Loan and the amount necessary to fully compensate for any damage or
loss to the improvements that are a part of such property on a replacement cost
basis, in each case in an amount not less than such amount as is necessary to
avoid the application of any coinsurance clause contained in the related hazard
insurance policy. The Servicer shall also cause to be maintained fire insurance
with extended coverage on each REO Property in an amount which is at least equal
to the lesser of (i) the maximum insurable value of the improvements which are a
part of such property and (ii) the outstanding Principal Balance of the related
Mortgage Loan at the time it became an REO Property. The Servicer will comply in
the performance of this Agreement with all reasonable rules and requirements of
each insurer under any such hazard policies. Any amounts to be collected by the
Servicer under any such policies (other than amounts to be applied to the
restoration or repair of the property subject to the related Mortgage or amounts
to be released to the Mortgagor in accordance with the procedures that the
Servicer would follow in servicing loans held for its own account, subject to
the terms and conditions of the related Mortgage and Mortgage Note) shall be
deposited in the Collection Account, subject to withdrawal pursuant to Section
3.11, if received in respect of a Mortgage Loan, or in the REO Account, subject
to withdrawal pursuant to Section 3.23, if received in respect of an REO
Property. Any cost incurred by the Servicer in maintaining any such insurance
shall not, for the purpose of calculating distributions to Certificateholders
and the Certificate Insurer, be added to the unpaid Principal Balance of the
related Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so
permit. It is understood and agreed that no earthquake or other additional
insurance is to be required of any Mortgagor other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. If the Mortgaged Property or REO Property is
at any time in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards and flood insurance
has been made available, the Servicer will cause to be maintained a flood
insurance policy in respect thereof. Such flood insurance shall be in an amount
equal to the lesser of (i) the unpaid Principal Balance of the related Mortgage
Loan and (ii) the maximum amount of such insurance available for the related
Mortgaged Property under the national flood insurance program (assuming that the
area in which such Mortgaged Property is located is participating in such
program).
In the event that the Servicer shall obtain and maintain a blanket
policy with an insurer having a General Policy Rating of A:X or better in Best's
Key Rating Guide (or such other rating that is comparable to such rating)
insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first two sentences of this Section 3.14, it being understood and agreed that
such policy may contain a deductible clause, in which case the Servicer shall,
in the event that there shall not have been maintained on the related Mortgaged
Property or REO Property a policy complying with the first two sentences of this
Section 3.14, and there shall have been one or more losses which would have been
covered by such policy, deposit to the Collection Account from its own funds the
amount not otherwise payable under the blanket policy because of such deductible
clause. In connection with its activities as administrator and servicer of the
Mortgage Loans, the Servicer agrees to prepare and present, on behalf of itself,
the Trustee, Certificateholders and the Certificate Insurer, claims under any
such blanket policy in a timely fashion in accordance with the terms of such
policy.
(b) The Servicer shall keep in force during the term of this Agreement
a policy or policies of insurance covering errors and omissions for failure in
the performance of the Servicer's obligations under this Agreement, which policy
or policies shall be in such form and amount that would meet the requirements of
Fannie Mae or FHLMC if it were the purchaser of the Mortgage Loans, unless the
Servicer has obtained a waiver of such requirements from Fannie Mae or FHLMC.
The Servicer shall also maintain a fidelity bond in the form and amount that
would meet the requirements of Fannie Mae or FHLMC, unless the Servicer has
obtained a waiver of such requirements from Fannie Mae or FHLMC. The Servicer
shall be deemed to have complied with this provision if an Affiliate of the
Servicer has such errors and omissions and fidelity bond coverage and, by the
terms of such insurance policy or fidelity bond, the coverage afforded
thereunder extends to the Servicer. Any such errors and omissions policy and
fidelity bond shall by its terms not be cancelable without thirty days' prior
written notice to the Trustee. The Servicer shall also cause each Sub-Servicer
to maintain a policy of insurance covering errors and omissions and a fidelity
bond which would meet such requirements.
Section 3.15. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
The Servicer will, to the extent it has knowledge of any conveyance or
prospective conveyance of any Mortgaged Property by any Mortgagor (whether by
absolute conveyance or by contract of sale, and whether or not the Mortgagor
remains or is to remain liable under the Mortgage Note and/or the Mortgage),
exercise its rights to accelerate the maturity of such Mortgage Loan under the
"due-on-sale" clause, if any, applicable thereto; provided, however, that the
Servicer shall not be required to take such action if in its sole business
judgment the Servicer believes it is not in the best interests of the Trust Fund
and shall not exercise any such rights if prohibited by law from doing so. If
the Servicer reasonably believes it is unable under applicable law to enforce
such "due-on-sale" clause, or if any of the other conditions set forth in the
proviso to the preceding sentence apply, the Servicer will enter into an
assumption and modification agreement from or with the person to whom such
property has been conveyed or is proposed to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, to the extent permitted by
applicable state law, the Mortgagor remains liable thereon. The Servicer is also
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as the Mortgagor and becomes liable under the Mortgage
Note, provided that no such substitution shall be effective unless such person
satisfies the underwriting criteria of the Servicer and has a credit risk rating
at least equal to that of the original Mortgagor. In connection with any
assumption or substitution, the Servicer shall apply such underwriting standards
and follow such practices and procedures as shall be normal and usual in its
general mortgage servicing activities and as it applies to other mortgage loans
owned solely by it. The Servicer shall not take or enter into any assumption and
modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy. Any fee collected by
the Servicer in respect of an assumption, modification or substitution of
liability agreement shall be retained by the Servicer as additional servicing
compensation. In connection with any such assumption, no material term of the
Mortgage Note (including but not limited to the related Mortgage Rate and the
amount of the Monthly Payment) may be amended or modified, except as otherwise
required pursuant to the terms thereof. The Servicer shall notify the Trustee
that any such substitution, modification or assumption agreement has been
completed by forwarding to the Trustee the executed original of such
substitution, modification or assumption agreement, which document shall be
added to the related Mortgage File and shall, for all purposes, be considered a
part of such Mortgage File to the same extent as all other documents and
instruments constituting a part thereof.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or by the terms of the Mortgage Note or any
assumption which the Servicer may be restricted by law from preventing, for any
reason whatever. For purposes of this Section 3.15, the term "assumption" is
deemed to also include a sale (of the Mortgaged Property) subject to the
Mortgage that is not accompanied by an assumption or substitution of liability
agreement.
Section 3.16. Realization Upon Defaulted Mortgage Loans.
(a) The Servicer shall use its best efforts, consistent with Servicing
Standard, to foreclose upon or otherwise comparably convert the ownership of
properties securing such of the Mortgage Loans (including selling any such
Mortgage Loans other than converting the ownership of the related properties) as
come into and continue in default and as to which no satisfactory arrangements
can be made for collection of delinquent payments pursuant to Section 3.07. The
Servicer shall be responsible for all costs and expenses incurred by it in any
such proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Servicer as contemplated in Section
3.11 and Section 3.23. The foregoing is subject to the provision that, in any
case in which Mortgaged Property shall have suffered damage from an Uninsured
Cause, the Servicer shall not be required to expend its own funds toward the
restoration of such property unless it shall determine in its discretion that
such restoration will increase the proceeds of liquidation of the related
Mortgage Loan after reimbursement to itself for such expenses.
(b) Notwithstanding the foregoing provisions of this Section 3.16 or
any other provision of this Agreement, with respect to any Mortgage Loan as to
which the Servicer has received actual notice of, or has actual knowledge of,
the presence of any toxic or hazardous substance on the related Mortgaged
Property, the Servicer shall not, on behalf of the Trustee, either (i) obtain
title to such Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property, if, as a result of any such action,
the Trustee, the Trust Fund, the Certificateholders or the Certificate Insurer
would be considered to hold title to, to be a "mortgagee-in-possession" of, or
to be an "owner" or "operator" of such Mortgaged Property within the meaning of
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, or any comparable law, unless the Servicer
has also previously determined, based on its reasonable judgment and a report
prepared by a Person who regularly conducts environmental audits using customary
industry standards, that:
(1) such Mortgaged Property is in compliance with applicable
environmental laws or, if not, that it would be in the best economic
interest of the Trust Fund to take such actions as are necessary to
bring the Mortgaged Property into compliance therewith; and
(2) there are no circumstances present at such Mortgaged Property
relating to the use, management or disposal of any hazardous
substances, hazardous materials, hazardous wastes, or petroleum-based
materials for which investigation, testing, monitoring, containment,
clean-up or remediation could be required under any federal, state or
local law or regulation, or that if any such materials are present for
which such action could be required, that it would be in the best
economic interest of the Trust Fund to take such actions with respect
to the affected Mortgaged Property.
The cost of the environmental audit report contemplated by this Section
3.16 shall be advanced by the Servicer, subject to the Servicer's right to be
reimbursed therefor from the Collection Account as provided in Section
3.11(a)(vii), such right of reimbursement being prior to the rights of
Certificateholders to receive any amount in the Collection Account received in
respect of the affected Mortgage Loan or other Mortgage Loans.
If the Servicer determines, as described above, that it is in the best
economic interest of the Trust Fund to take such actions as are necessary to
bring any such Mortgaged Property into compliance with applicable environmental
laws, or to take such action with respect to the containment, clean-up or
remediation of hazardous substances, hazardous materials, hazardous wastes or
petroleum-based materials affecting any such Mortgaged Property, then the
Servicer shall take such action as it deems to be in the best economic interest
of the Trust Fund; provided that any amounts disbursed by the Servicer pursuant
to this Section 3.16(b) shall constitute Servicing Advances, subject to Section
4.04(d). The cost of any such compliance, containment, cleanup or remediation
shall be advanced by the Servicer, subject to the Servicer's right to be
reimbursed therefor from the Collection Account as provided in Section
3.11(a)(iii) and (a)(vii), such right of reimbursement being prior to the rights
of Certificateholders to receive any amount in the Collection Account received
in respect of the affected Mortgage Loan or other Mortgage Loans.
(c) The Servicer may at its option purchase from each Loan Group, any
Mortgage Loan or related REO Property that is 60 days or more delinquent, which
the Servicer determines in good faith will otherwise become subject to
foreclosure proceedings (evidence of such determination to be delivered in
writing to the Trustee and the Certificate Insurer prior to purchase), at a
price equal to the Purchase Price; provided, however, that (i) the Servicer
shall purchase any such Mortgage Loans or related REO Properties on the basis of
delinquency, purchasing the most delinquent Mortgage Loans or related REO
Properties first and (ii) after it has purchased 3.00% of the Mortgage Loans or
related REO Properties in each Loan Group, by aggregate Stated Principal Balance
of the Mortgage Loans in such Loan Group as of the Cut-off Date, pursuant to
clause (i) above, the Servicer must also obtain the consent of the Certificate
Insurer prior to any further purchases, provided that failure of the Certificate
Insurer to respond within five Business Days following actual receipt of any
such request for consent by the Servicer shall be deemed to constitute consent
to the additional purchases identified in such request for consent. The Purchase
Price for any Mortgage Loan or related REO Property purchased hereunder shall be
deposited in the Distribution Account, and the Trustee, upon receipt of such
deposit, shall release or cause to be released to the Servicer the related
Mortgage File and shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as the Servicer shall furnish and as
shall be necessary to vest in the Servicer title to any Mortgage Loan or related
REO Property released pursuant hereto.
(d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: first, to reimburse the
Servicer or any Sub-Servicer for any related unreimbursed Servicing Advances and
Advances, pursuant to Section 3.11(a)(ii) or (a)(iii); second, to accrued and
unpaid interest on the Mortgage Loan, to the date of the Final Recovery
Determination, or to the Due Date prior to the Distribution Date on which such
amounts are to be distributed if not in connection with a Final Recovery
Determination; and third, as a recovery of principal of the Mortgage Loan. If
the amount of the recovery so allocated to interest is less than the full amount
of accrued and unpaid interest due on such Mortgage Loan, the amount of such
recovery will be allocated by the Servicer as follows: first, to unpaid
Servicing Fees; and second, to the balance of the interest then due and owing.
The portion of the recovery so allocated to unpaid Servicing Fees shall be
reimbursed to the Servicer or any Sub-Servicer pursuant to Section 3.11(a)(iii).
Section 3.17. Trustee to Cooperate; Release of Mortgage Files.
(a) Upon the payment in full of any Mortgage Loan, or the receipt by
the Servicer of a notification that payment in full shall be escrowed in a
manner customary for such purposes, the Servicer shall deliver to the Trustee
two executed copies of a completed certification (which certification shall
include a statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 3.10 have been or will be so deposited)
of a Servicing Officer and shall request delivery to it of the Mortgage File.
Upon receipt of such certification and request, the Trustee shall, within five
Business Days, release and send by overnight mail, at the expense of the
Servicer, the related Mortgage File to the Servicer. The Trustee agrees to
indemnify the Servicer, out of its own funds, for any loss, liability or expense
(other than special, indirect, punitive or consequential damages which will not
be paid by the Trustee) incurred by the Servicer as a proximate result of the
Trustee's breach of its obligations pursuant to this Section 3.17. No expenses
incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Collection Account or the Distribution
Account. The Trustee will provide to the Certificate Insurer an updated listing
of any Mortgage Files released pursuant to this Section 3.17(a) on March 30,
June 30, September 30 and December 30 of each year, beginning in March 1999 and
as otherwise requested by the Certificate Insurer or the Trustee.
(b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trustee shall, upon any
request made by or on behalf of the Servicer and delivery to the Trustee of a
Request for Release in the form of Exhibit E, release the related Mortgage File
to the Servicer, and the Trustee shall, at the direction of the Servicer,
execute such documents as shall be necessary to the prosecution of any such
proceedings. Such Request for Release shall obligate the Servicer to return each
and every document previously requested from the Mortgage File to the Trustee
when the need therefor by the Servicer no longer exists, unless the Mortgage
Loan has been liquidated and the Liquidation Proceeds relating to the Mortgage
Loan have been deposited in the Collection Account or the Mortgage File or such
document has been delivered to an attorney, or to a public trustee or other
public official as required by law, for purposes of initiating or pursuing legal
action or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Servicer has delivered, or caused to be
delivered, to the Trustee an additional Request for Release certifying as to
such liquidation or action or proceedings. Upon the request of the Trustee or
the Certificate Insurer, the Servicer shall provide notice to the Trustee and
the Certificate Insurer of the name and address of the Person to which such
Mortgage File or such document was delivered and the purpose or purposes of such
delivery. Upon receipt of a certificate of a Servicing Officer stating that such
Mortgage Loan was liquidated and that all amounts received or to be received in
connection with such liquidation that are required to be deposited into the
Collection Account have been so deposited, or that such Mortgage Loan has become
an REO Property, any outstanding Requests for Release with respect to such
Mortgage Loan shall be released by the Trustee to the Servicer or its designee.
(c) Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer or the Sub-Servicer, as the case may
be, and upon the request of the Certificate Insurer the Servicer shall deliver
or cause to be delivered to the Certificate Insurer copies of, any court
pleadings, requests for trustee's sale or other documents necessary to the
foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal
action brought to obtain judgment against any Mortgagor on the Mortgage Note or
Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or
rights provided by the Mortgage Note or Mortgage or otherwise available at law
or in equity. Each such certification shall include a request that such
pleadings or documents be executed by the Trustee and a statement as to the
reason such documents or pleadings are required and that the execution and
delivery thereof by the Trustee will not invalidate or otherwise affect the lien
of the Mortgage, except for the termination of such a lien upon completion of
the foreclosure or trustee's sale.
Section 3.18. Servicing Compensation.
As compensation for the activities of the Servicer hereunder, the
Servicer shall be entitled to the Servicing Fee with respect to each Mortgage
Loan payable solely from payments of interest in respect of such Mortgage Loan,
subject to Section 3.24. In addition, the Servicer shall be entitled to recover
unpaid Servicing Fees out of Insurance Proceeds or Liquidation Proceeds to the
extent permitted by Section 3.11(a)(iii) and out of amounts derived from the
operation and sale of an REO Property to the extent permitted by Section 3.23.
The right to receive the Servicing Fee may not be transferred in whole or in
part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement; provided, however, that
the Servicer may pay from the Servicing Fee any amounts due to a Sub-Servicer
pursuant to a Sub-Servicing Agreement entered into under Section 3.02.
Additional servicing compensation in the form of assumption fees,
ancillary income and late payment charges, insufficient funds charges or
otherwise (subject to Section 3.24 and other than Prepayment Premiums) shall be
retained by the Servicer only to the extent such fees or charges are received by
the Servicer. The Servicer shall also be entitled pursuant to Section
3.11(a)(iv) to withdraw from the Collection Account and pursuant to Section
3.23(b) to withdraw from any REO Account, as additional servicing compensation,
interest or other income earned on deposits therein, subject to Section 3.12 and
Section 3.24. The Servicer shall be required to pay all expenses incurred by it
in connection with its servicing activities hereunder (including premiums for
the insurance required by Section 3.14, to the extent such premiums are not paid
by the related Mortgagors or by a Sub-Servicer and servicing compensation of
each Sub-Servicer) and shall not be entitled to reimbursement therefor except as
specifically provided herein.
Section 3.19. Reports to the Trustee; Collection Account Statements.
Not later than twenty days after each Distribution Date, the Servicer
shall forward, upon request, to the Trustee, the Certificate Insurer and the
Depositor the most current available bank statement for the Collection Account.
Copies of such statement shall be provided by the Trustee to any
Certificateholder and to any Person identified to the Trustee as a prospective
transferee of a Certificate, upon request at the expense of the requesting
party, provided such statement is delivered by the Servicer to the Trustee.
Section 3.20. Statement as to Compliance.
The Servicer will deliver to the Trustee, the Certificate Insurer and
the Depositor not later than 90 days following the end of the fiscal year of the
Servicer (which, as of the Startup Day, ends on the last day of April),
commencing in 1999, which as of the Closing Date ends on the last day of April,
an Officers' Certificate stating, as to each signatory thereof, that (i) a
review of the activities of the Servicer during the preceding year and of
performance under this Agreement has been made under such officers' supervision
and (ii) to the best of such officers' knowledge, based on such review, the
Servicer has fulfilled all of its obligations under this Agreement throughout
such year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof. Copies of any such statement shall be provided by the
Trustee to any Certificateholder and to any Person identified to the Trustee as
a prospective transferee of a Certificate, upon request at the expense of the
requesting party, provided such statement is delivered by the Servicer to the
Trustee.
Section 3.21. Independent Public Accountants' Servicing Report.
Not later than 90 days following the end of each fiscal year of the
Servicer, commencing in 1999, the Servicer, at its expense, shall cause a
nationally recognized firm of independent certified public accountants to
furnish to the Servicer a report stating that (i) it has obtained a letter of
representation regarding certain matters from the management of the Servicer
which includes an assertion that the Servicer has complied with certain minimum
residential mortgage loan servicing standards, identified in the Uniform Single
Attestation Program for Mortgage Bankers established by the Mortgage Bankers
Association of America, with respect to the servicing of residential mortgage
loans during the most recently completed fiscal year and (ii) on the basis of an
examination conducted by such firm in accordance with standards established by
the American Institute of Certified Public Accountants, such representation is
fairly stated in all material respects, subject to such exceptions and other
qualifications that may be appropriate. In rendering its report such firm may
rely, as to matters relating to the direct servicing of residential mortgage
loans by Sub-Servicers, upon comparable reports of firms of independent
certified public accountants rendered on the basis of examinations conducted in
accordance with the same standards (rendered within one year of such report)
with respect to those Sub-Servicers. Immediately upon receipt of such report,
the Servicer shall furnish a copy of such report to the Trustee, the Certificate
Insurer and each Rating Agency. Copies of such statement shall be provided by
the Trustee to any Certificateholder upon request at the Servicer's expense,
provided that such statement is delivered by the Servicer to the Trustee.
Section 3.22. Access to Certain Documentation; Filing of Reports by
Trustee.
(a) The Servicer shall provide to the Office of Thrift Supervision, the
FDIC, and any other federal or state banking or insurance regulatory authority
that may exercise authority over any Certificateholder, access to the
documentation regarding the Mortgage Loans required by applicable laws and
regulations. Such access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the offices of the
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans will be provided to any Certificateholder, the Certificate
Insurer, the Trustee and to any Person identified to the Servicer as a
prospective transferee of a Certificate, upon reasonable request during normal
business hours at the offices of the Servicer designated by it at the expense of
the Person requesting such access.
(b) The Trustee shall, on behalf of the Trust Fund, prepare, sign and
file with the Securities and Exchange Commission any and all reports, statements
and information respecting the Trust which the Depositor determines are required
to be filed with the Securities and Exchange Commission pursuant to Sections
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, each such
report, statement and information to be filed on or prior to the required filing
date for such report, statement or information. Upon the request of the Trustee,
each of the Seller, the Servicer and the Depositor shall cooperate with the
Trustee in the preparation of any such report and shall provide to the Trustee
in a timely manner all such information or documentation as the Trustee may
reasonably request in connection with the performance of its duties and
obligations under this Section.
Section 3.23. Title, Management and Disposition of REO Property.
(a) The deed or certificate of sale of any REO Property shall be taken
in the name of the Trustee, or its nominee, in trust for the benefit of the
Certificateholders and the Certificate Insurer. The Servicer, on behalf of the
REMIC, shall either sell any REO Property by the end of the third full taxable
year after the taxable year in which the REMIC acquires ownership of such REO
Property for purposes of Section 860G(a)(8) of the Code or request from the
Internal Revenue Service, no later than 60 days before the day on which the
three-year grace period would otherwise expire, an extension of such three-year
period, unless the Servicer shall have delivered to the Trustee an Opinion of
Counsel, addressed to the Trustee, the Certificate Insurer and the Depositor, to
the effect that the holding by the REMIC of such REO Property subsequent to
three years after its acquisition will not result in the imposition on the REMIC
of taxes on "prohibited transactions" thereof, as defined in Section 860F of the
Code, or cause the REMIC to fail to qualify as a REMIC under Federal law at any
time that any Certificates are outstanding. The Servicer shall manage, conserve,
protect and operate each REO Property for the Certificateholders solely for the
purpose of its prompt disposition and sale in a manner which does not cause such
REO Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or result in the receipt by the REMIC of any
"income from non-permitted assets" within the meaning of Section 860F(a)(2)(B)
of the Code, or any "net income from foreclosure property" which is subject to
taxation under the REMIC Provisions.
(b) The Servicer shall separately account for all funds collected and
received in connection with the operation of any REO Property and shall
establish and maintain, or cause to be established and maintained, with respect
to REO Properties an account held in trust for the Trustee for the benefit of
the Certificateholders and the Certificate Insurer (the "REO Account"), which
shall be an Eligible Account. The Servicer shall be permitted to allow the
Collection Account to serve as the REO Account, subject to separate ledgers for
each REO Property. The Servicer shall be entitled to retain or withdraw any
interest income paid on funds deposited in the REO Account.
(c) The Servicer shall have full power and authority, subject only to
the specific requirements and prohibitions of this Agreement, to do any and all
things in connection with any REO Property as are consistent with the manner in
which the Servicer manages and operates similar property owned by the Servicer
or any of its Affiliates, all on such terms and for such period as the Servicer
deems to be in the best interests of Certificateholders. In connection
therewith, the Servicer shall deposit, or cause to be deposited in the clearing
account in which it customarily deposits payments and collections on mortgage
loans in connection with its mortgage loan servicing activities on a daily
basis, and in no event more than one Business Day after the Servicer's receipt
thereof, and shall thereafter deposit in the REO Account, in no event more than
two Business Days after the Servicer's receipt thereof, all revenues received by
it with respect to an REO Property and shall withdraw therefrom funds necessary
for the proper operation, management and maintenance of such REO Property
including, without limitation:
(i) all insurance premiums due and payable in respect of such REO
Property;
(ii) all real estate taxes and assessments in respect of such REO
Property that may result in the imposition of a lien thereon; and
(iii) all costs and expenses necessary to maintain such REO
Property.
To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Servicer shall advance from
its own funds such amount as is necessary for such purposes if, but only if, the
Servicer would make such advances if the Servicer owned the REO Property and if
in the Servicer's judgment, the payment of such amounts will be recoverable from
the rental or sale of the REO Property.
Notwithstanding the foregoing, neither the Servicer nor the Trustee
shall:
(i) authorize the Trust Fund to enter into, renew or extend any
New Lease with respect to any REO Property, if the New Lease by its
terms will give rise to any income that does not constitute Rents from
Real Property;
(ii) authorize any amount to be received or accrued under any New
Lease other than amounts that will constitute Rents from Real Property;
(iii) authorize any construction on any REO Property, other than
the completion of a building or other improvement thereon, and then
only if more than ten percent of the construction of such building or
other improvement was completed before default on the related Mortgage
Loan became imminent, all within the meaning of Section 856(e)(4)(B) of
the Code; or
(iv) authorize any Person to Directly Operate any REO Property on
any date more than 90 days after its date of acquisition by the Trust
Fund;
unless, in any such case, the Servicer has obtained an Opinion of Counsel,
provided to the Trustee and the Certificate Insurer, to the effect that such
action will not cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code at any time that
it is held by the REMIC, in which case the Servicer may take such actions as are
specified in such Opinion of Counsel.
The Servicer may contract with any Independent Contractor for the
operation and management of any REO Property, provided that:
(i) the terms and conditions of any such contract shall not be
inconsistent herewith;
(ii) any such contract shall require, or shall be administered to
require, that the Independent Contractor pay all costs and expenses
incurred in connection with the operation and management of such REO
Property, including those listed above and remit all related revenues
(net of such costs and expenses) to the Servicer as soon as
practicable, but in no event later than thirty days following the
receipt thereof by such Independent Contractor;
(iii) none of the provisions of this Section 3.23(c) relating to
any such contract or to actions taken through any such Independent
Contractor shall be deemed to relieve the Servicer of any of its duties
and obligations to the Trustee on behalf of the Certificateholders and
the Certificate Insurer with respect to the operation and management of
any such REO Property; and
(iv) the Servicer shall be obligated with respect thereto to the
same extent as if it alone were performing all duties and obligations
in connection with the operation and management of such REO Property.
The Servicer shall be entitled to enter into any agreement with any Independent
Contractor performing services for it related to its duties and obligations
hereunder for indemnification of the Servicer by such Independent Contractor,
and nothing in this Agreement shall be deemed to limit or modify such
indemnification. The Servicer shall be solely liable for all fees owed by it to
any such Independent Contractor, irrespective of whether the Servicer's
compensation pursuant to Section 3.18 is sufficient to pay such fees; provided,
however, that to the extent that any payments made by such Independent
Contractor would constitute Servicing Advances if made by the Servicer, such
amounts shall be reimbursable as Servicing Advances made by the Servicer.
(d) In addition to the withdrawals permitted under Section 3.23(c), the
Servicer may from time to time make withdrawals from the REO Account for any REO
Property: (i) to pay itself or any Sub-Servicer unpaid Servicing Fees in respect
of the related Mortgage Loan; and (ii) to reimburse itself or any Sub-Servicer
for unreimbursed Servicing Advances and Advances made in respect of such REO
Property or the related Mortgage Loan. On the Servicer Remittance Date, the
Servicer shall withdraw from each REO Account maintained by it and deposit into
the Distribution Account in accordance with Section 3.10(d)(ii), for
distribution on the related Distribution Date in accordance with Section 4.01,
the income from the related REO Property received during the prior calendar
month, net of any withdrawals made pursuant to Section 3.23(c) or this Section
3.23(d).
(e) Subject to the time constraints set forth in Section 3.23(a), each
REO Disposition shall be carried out by the Servicer at such price and upon such
terms and conditions as the Servicer shall deem necessary or advisable, as shall
be normal and usual in its Servicing Standard.
(f) The proceeds from the REO Disposition, net of any amount required
by law to be remitted to the Mortgagor under the related Mortgage Loan and net
of any payment or reimbursement to the Servicer or any Sub-Servicer as provided
above, shall be deposited in the Distribution Account in accordance with Section
3.10(d)(ii) on the Servicer Remittance Date in the month following the receipt
thereof for distribution on the related Distribution Date in accordance with
Section 4.01. Any REO Disposition shall be for cash only (unless changes in the
REMIC Provisions made subsequent to the Startup Day allow a sale for other
consideration).
(g) The Servicer shall file information returns with respect to the
receipt of mortgage interest received in a trade or business, reports of
foreclosures and abandonments of any Mortgaged Property and cancellation of
indebtedness income with respect to any Mortgaged Property as required by
Sections 6050H, 6050J and 6050P of the Code, respectively. Such reports shall be
in form and substance sufficient to meet the reporting requirements imposed by
such Sections 6050H, 6050J and 6050P of the Code.
Section 3.24. Obligations of the Servicer in Respect of Prepayment
Interest Shortfalls.
Not later than the Close of Business on each Servicer Remittance Date,
the Servicer shall remit to the Collection Account an amount ("Compensating
Interest") equal to the lesser of (A) (1) the aggregate of the Prepayment
Interest Shortfalls for the related Distribution Date minus (2) the aggregate of
the Prepayment Interest Excesses for the related Distribution Date and (B) its
aggregate Servicing Fee received in the related Due Period. The Servicer shall
not have the right to reimbursement for any amounts remitted to the Trustee in
respect of Compensating Interest. Such amounts so remitted shall be included in
the Available Funds relating to the Loan Group experiencing the Principal
Prepayments and distributed therewith on the next Distribution Date. If on any
Servicer Remittance Date the amount deposited into the Collection Account is the
amount calculated in (B), such amount shall be allocated between the Available
Funds of each Loan Group pro rata based on the aggregate Prepayment Interest
Shortfall experienced by both Loan Groups during the related Due Period. The
Servicer shall not be obligated to pay Compensating Interest with respect to
Relief Act Interest Shortfalls.
Section 3.25. [Reserved].
Section 3.26. Obligations of the Servicer in Respect of Mortgage Rates
and Monthly Payments.
In the event that a shortfall in any collection on or liability with
respect to the Mortgage Loans in the aggregate results from or is attributable
to adjustments to Mortgage Rates, Monthly Payments or Stated Principal Balances
that were made by the Servicer in a manner not consistent with the terms of the
related Mortgage Note and this Agreement, the Servicer, upon discovery or
receipt of notice thereof, immediately shall deliver to the Trustee for deposit
in the Distribution Account from its own funds the amount of any such shortfall
and shall indemnify and hold harmless the Trust Fund, the Trustee, the
Certificate Insurer, the Depositor and any successor servicer in respect of any
such liability. Such indemnities shall survive the termination or discharge of
this Agreement. Notwithstanding the foregoing, this Section 3.26 shall not limit
the ability of the Servicer to seek recovery of any such amounts from the
related Mortgagor under the terms of the related Mortgage Note, as permitted by
law.
Section 3.27. Solicitations.
From and after the Closing Date, the Servicer agrees that it will not
take any action or permit or cause any action to be taken by any of its agents
and Affiliates, or by any independent contractors or independent mortgage
brokerage companies on the Servicer's behalf, to personally, by telephone or
mail, solicit the Mortgagor under any Mortgage Loan for the purpose of
refinancing such Mortgage Loan; provided, that the Servicer may solicit any
Mortgagor for whom the Servicer has received a request for verification of
mortgage, a request for demand for payoff, a mortgagor initiated written or
verbal communication indicating a desire to prepay the related Mortgage Loan, or
the mortgagor initiates a title search; provided further, it is understood and
agreed that promotions undertaken by the Servicer or any of its Affiliates which
(i) concern optional insurance products or other additional products or (ii) are
directed to the general public at large, including, without limitation, mass
mailings based on commercially acquired mailing lists, newspaper, radio and
television advertisements shall not constitute solicitation under this Section,
nor is the Servicer prohibited from responding to unsolicited requests or
inquiries made by a Mortgagor or an agent of a Mortgagor.
ARTICLE IV
FLOW OF FUNDS
Section 4.01. Distributions.
(a) On each Distribution Date the Trustee shall withdraw from the
Distribution Account the sum of (a) the Group I Available Funds and (b) the
Group II Available Funds, and make the following disbursements and transfers as
described below and to the extent of Available Funds.
(A) With respect to the Group I Certificates, the Group I Available
Funds shall be distributed in the following order of priority:
(i) to the Certificate Insurer, the amount owing to the Certificate
Insurer under the Insurance Agreement for the premium and Premium Supplement
payable in respect of the Class A-1 Certificates;
(ii) to the Holders of the Class A-1 Certificates, the related Interest
Distributable Amount for such Class for such Distribution Date;
(iii) to the Holders of the Class A-2 Certificates, an amount equal to
the excess, if any, of (x) the related Interest Distributable Amount for such
Class for such Distribution Date over (y) the amount actually distributed to the
Holders of the Class A-2 Certificates on such Distribution Date pursuant to
subclause (B)(ii) below from the Group I Available Funds;
(iv) to the Certificate Insurer, the amount owing to the Certificate
Insurer under the Insurance Agreement for reimbursement for prior draws made on
the Policy in respect of the Class A Certificates and any other amounts owing to
the Certificate Insurer under the Insurance Agreement with respect to the Class
A Certificates;
(v) to the Holders of the Class A-1 Certificates, an amount equal to
the Group I Basic Principal Distribution Amount;
(vi) to the Holders of the Class A-1 Certificates, an amount equal to
the Group I Extra Principal Distribution Amount;
(vii) to the Holders of the Class A-2 Certificates, an amount equal to
the excess, if any, of (x) the Group II Principal Distribution Amount for such
Distribution Date over (y) the amount actually distributed to the Holders of the
Class A-2 Certificates on such Distribution Date pursuant to subclauses (B)(v)
and (B)(vi) below from the Group II Available Funds, plus, any remaining
Overcollateralization Deficiency Amount for such Distribution Date for the Class
A-2 Certificates; and
(viii) to the Servicer, any indemnification or reimbursement pursuant
to Section 6.03.
(B) With respect to the Group II Certificates, the Group II Available
Funds shall be distributed in the following order of priority:
(i) to the Certificate Insurer, the amount owing to the Certificate
Insurer under the Insurance Agreement for the premium and Premium Supplement
payable in respect of the Class A-2 Certificates;
(ii) to the Holders of the Class A-2 Certificates, the related Interest
Distributable Amount for such Class for such Distribution Date;
(iii) to the Holders of the Class A-1 Certificates, an amount equal to
the excess, if any, of (x) the related Interest Distributable Amount for such
Class for such Distribution Date over (y) the amount actually distributed to the
Holders of the Class A-1 Certificates on such Distribution Date pursuant to
subclause (A)(ii) above from the Group II Available Funds;
(iv) to the Certificate Insurer, the amount owing to the Certificate
Insurer under the Insurance Agreement for reimbursement for prior draws made on
the Policy in respect of the Class A Certificates and any other amounts owing to
the Certificate Insurer under the Insurance Agreement with respect to the Class
A Certificates;
(v) to the Holders of the Class A-2 Certificates, an amount equal to
the Group II Basic Principal Distribution Amount;
(vi) to the Holders of the Class A-2 Certificates, the Class A-2
Principal Distribution Amount, an amount equal to the Group II Extra Principal
Distribution Amount;
(vii) to the holders of the Class A-1 Certificates, an amount equal to
the excess, if any, of (x) the Group I Principal Distribution Amount for such
Distribution Date over (y) the amount actually distributed to holders of the
Class A-1 Certificates on such Distribution Date pursuant to subclauses (A)(v)
and (A)(vi) above from the Group I Available Funds, plus, any remaining
Overcollateralization Deficiency Amount for the Class A-1 Certificates for such
Distribution Date; and
(viii) to the Servicer, any indemnification or reimbursement pursuant
to Section 6.03.
(C) To the Holders of the Class A-2 Certificates, the Group II
Available Funds Cap Carryover Amount, if any, for such Distribution Date.
(D) To the Holders of the Class R Certificates, the remaining amount.
Notwithstanding the foregoing, on any Distribution Date, all amounts
representing Prepayment Premiums in respect of the Mortgage Loans in each Loan
Group received during the related Due Period will be distributed to the Seller.
(b) Method of Distribution. The Trustee shall make distributions in respect of a
Distribution Date to each Certificateholder of record on the related Record Date
(other than as provided in Section 10.01 respecting the final distribution), in
the case of Certificateholders of the Regular Certificates, by check or money
order mailed to such Certificateholder at the address appearing in the
Certificate Register, or by wire transfer. Distributions among
Certificateholders shall be made in proportion to the Percentage Interests
evidenced by the Certificates held by such Certificateholders.
(c) Distributions on Book-Entry Certificates. Each distribution with respect to
a Book-Entry Certificate shall be paid to the Depository, which shall credit the
amount of such distribution to the accounts of its Depository Participants in
accordance with its normal procedures. Each Depository Participant shall be
responsible for disbursing such distribution to the Certificate Owners that it
represents and to each indirect participating brokerage firm (a "brokerage firm"
or "indirect participating firm") for which it acts as agent. Each brokerage
firm shall be responsible for disbursing funds to the Certificate Owners that it
represents. All such credits and disbursements with respect to a Book-Entry
Certificate are to be made by the Depository and the Depository Participants in
accordance with the provisions of the Certificates. None of the Trustee, the
Depositor, the Servicer or the Seller shall have any responsibility therefor
except as otherwise provided by applicable law.
(d) Distribution of Insured Payments. With respect to any Distribution Date, in
the event of an Insured Payment, the Trustee shall make such payments from the
amount drawn under the Certificate Insurance Policy for the purposes specified
in the Policy. The Certificate Insurer shall be deemed to be the assignee of the
Holders of the Class A-1 Certificates and the Holders of the Class A-2
Certificates to the extent of any amount of Insured Payments disbursed by the
Trustee from proceeds of the Certificate Insurance Policy and to such extent,
shall be the subrogee of each such Holder of the Class A-1 Certificates and each
such Holder of the Class A-2 Certificates; provided, however, that any such
right of subrogation inuring to the Certificate Insurer hereunder or otherwise
shall be and is subordinated to the rights under this Agreement of the Holders
of the Class A-1 Certificates and the Holders of the Class A-2 Certificates and
in accordance with Section 11.04.
Section 4.02. Reserved.
Section 4.03. Statements.
(a) On each Distribution Date, based, as applicable, on information
provided to it by the Servicer, the Trustee shall prepare and forward by mail to
each Holder of the Regular Certificates, the Servicer, the Certificate Insurer
and the Rating Agencies, a statement as to the distributions made on such
Distribution Date:
(i) the amount of the distribution made on such Distribution Date
to the Holders of each Class of Class A Certificates, separately
identified, allocable to principal;
(ii) the amount of the distribution made on such Distribution Date
to the Holders of each Class of Class A Certificates allocable to
interest, separately identified;
(iii) the Overcollateralized Amount, the Overcollateralization
Release Amount, the Overcollateralization Deficiency Amount and the
Overcollateralization Target Amount as of such Distribution Date for
each Class of Class A Certificates and the Excess Spread for each
related Loan Group for such Distribution Date;
(iv) the aggregate amount of servicing compensation received by
the Servicer during the related Due Period and such other customary
information as the Trustee deems necessary or desirable, or which a
Certificateholder reasonably requests, to enable Certificateholders to
prepare their tax returns;
(v) the aggregate amount of Advances for the related Due Period;
(vi) the Pool Principal Balance and the Loan Group Balance for
each Loan Group at the Close of Business at the end of the related Due
Period;
(vii) the number, weighted average remaining term to maturity and
weighted average Mortgage Rate of the Mortgage Loans as of the related
Due Date; (viii) separately stated for each Loan Group, the number and
aggregate unpaid principal balance of Mortgage Loans (a) 30 to 59 days
past due on a contractual basis, (b) 60 to 89 days past due on a
contractual basis, (c) 90 or more days past due on a contractual basis,
(d) as to which foreclosure proceedings have been commenced and (e) in
bankruptcy as of the Close of Business on the last day of the calendar
month preceding such Distribution Date;
(ix) with respect to any Mortgage Loan that became an REO Property
during the preceding calendar month, the loan number of such Mortgage
Loan, the unpaid principal balance and the Principal Balance of such
Mortgage Loan as of the date it became an REO Property;
(x) the book value of any REO Property as of the Close of Business
on the last Business Day of the calendar month preceding the
Distribution Date, and, cumulatively, the total number and cumulative
principal balance of all REO Properties as of the Close of Business of
the last day of the preceding due period;
(xi) the aggregate amount of Principal Prepayments made during the
related Prepayment Period;
(xii) the aggregate amount of Realized Losses incurred during the
related Due Period and the cumulative amount of Realized Losses;
(xiii) the aggregate amount of extraordinary Trust Fund expenses
withdrawn from the Collection Account for such Distribution Date;
(xiv) the Class Certificate Principal Balance of each Class of
Class A Certificates, after giving effect to the distributions made on
such Distribution Date;
(xv) the Interest Distributable Amount in respect of each Class of
Class A Certificates for such Distribution Date and the respective
portions thereof, if any, remaining unpaid following the distributions
made in respect of such Certificates on such Distribution Date;
(xvi) the aggregate amount of any Prepayment Interest Shortfalls
and the Unpaid Interest Shortfall Amount for such Distribution Date, to
the extent not covered by payments by the Servicer pursuant to Section
3.26;
(xvii) the aggregate Premium Amount to be paid to the Certificate
Insurer;
(xviii) the Group II Available Funds Cap Carryover Amount, if any,
for such Distribution Date and the amount remaining unpaid after
reimbursements therefor on such Distribution Date;
(xix) any Overcollateralization Deficiency Amount after giving
effect to the distribution of principal on such Distribution Date;
(xx) whether the Step Down Cumulative Loss Test, Step Down Rolling
Delinquency Test, Step Down Rolling Loss Test, Step Up Cumulative Loss
Test, Step Up Rolling Delinquency Test, Step Up Rolling Loss Test
and/or Step Up Spread Squeeze Test have been met, the cumulative
realized losses with respect to each Loan Group, as a percentage of the
original Loan Group Balance, the Delinquency Percentage and the Annual
Loss Percentage;
(xxi) the Available Funds with respect to each Loan Group;
(xxii) the Pass-Through Rate for the Class A-2 Certificates for
such Distribution Date;
(xxiii) the Liquidation Report (see Exhibit M) for such
Distribution Date;
(xxiv) the aggregate Principal Balance of Mortgage Loans purchased
by the Servicer or Seller during the related Due Period and indicating
the Section of this Agreement requiring or allowing the purchase of
each such Mortgage Loan; and
(xxv) the aggregate amount representing collections of Prepayment
Premiums.
The Trustee shall forward such report concurrently with each
distribution to the Certificateholders, the Certificate Insurer (at 350 Park
Avenue, New York, New York 10022, Attention: Surveillance Department) and the
Rating Agencies on the related Distribution Date. The Trustee may also make such
reports available each month to each party referred to in this paragraph via the
Trustee's website, electronic bulletin board and its fax-on-demand service. The
Trustee's website can be accessed at http://www.ctslink.com". The Trustee's
electronic bulletin board may be accessed by calling (301) 815-6620, and its
fax-on-demand service may be accessed by calling (301) 815-6610. The Trustee may
fully rely upon and shall have no liability with respect to information provided
by the Servicer.
In the case of information furnished pursuant to subclauses (i) through
(iii) above, the amounts shall be expressed in a separate section of the report
as a dollar amount for each Class for each $1,000 original dollar amount as of
the Cut-off Date.
(b) Within a reasonable period of time after the end of each calendar
year, the Trustee shall, upon written request, furnish to each Person who at any
time during the calendar year was a Certificateholder of a Regular Certificate,
if requested in writing by such Person, such information as is reasonably
necessary to provide to such Person a statement containing the information set
forth in subclauses (i) through (iii) above, aggregated for such calendar year
or applicable portion thereof during which such Person was a Certificateholder.
Such obligation of the Trustee shall be deemed to have been satisfied to the
extent that substantially comparable information shall be prepared and furnished
by the Trustee to Certificateholders pursuant to any requirements of the Code as
are in force from time to time.
(c) On each Distribution Date, the Trustee shall forward to the Class R
Certificateholders a copy of the reports forwarded to the Regular
Certificateholders in respect of such Distribution Date with such other
information as the Trustee deems necessary or appropriate.
(d) Within a reasonable period of time after the end of each calendar
year, the Trustee shall deliver to each Person who at any time during the
calendar year was a Class R Certificateholder, if requested in writing by such
Person, such information as is reasonably necessary to provide to such Person a
statement containing the information provided pursuant to the previous paragraph
aggregated for such calendar year or applicable portion thereof during which
such Person was a Class R Certificateholder. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be prepared and furnished to Certificateholders by
the Trustee pursuant to any requirements of the Code as from time to time in
force.
Section 4.04. Remittance Reports; Advances.
(a) On the second Business Day following each Determination Date but in
no event later than the Servicer Remittance Date, the Servicer shall deliver to
the Trustee by telecopy or electronic mail (or by such other means as the
Servicer and the Trustee may agree from time to time) a Remittance Report with
respect to the related Distribution Date. Not later than the Close of Business
New York time on the Servicer Remittance Date, the Servicer shall deliver or
cause to be delivered to the Trustee in addition to the information provided on
the Remittance Report, such other information reasonably available to it with
respect to the Mortgage Loans as the Trustee may reasonably require to perform
the calculations necessary to make the distributions contemplated by Section
4.01 and to prepare the statements to Certificateholders contemplated by Section
4.03. The Trustee shall not be responsible to recompute, recalculate or verify
any information provided to it by the Servicer.
(b) The amount of Advances to be made by the Servicer for any
Distribution Date shall equal, subject to Section 4.04(d), the sum of (i) the
aggregate amount of Monthly Payments (net of the related Servicing Fee), due
during the related Due Period in respect of the Mortgage Loans, which Monthly
Payments were delinquent on a contractual basis as of the Close of Business on
the related Determination Date and (ii) with respect to each REO Property, which
REO Property was acquired during or prior to the related Due Period and as to
which REO Property an REO Disposition did not occur during the related Due
Period, an amount equal to the excess, if any, of the REO Imputed Interest on
such REO Property for the most recently ended calendar month, over the net
income from such REO Property transferred to the Distribution Account pursuant
to Section 3.23 for distribution on such Distribution Date. For purposes of the
preceding sentence, the Monthly Payment on each Balloon Mortgage Loan with a
delinquent Balloon Payment is equal to the assumed monthly payment that would
have been due on the related Due Date based on the original principal
amortization schedule for the such Balloon Mortgage Loan.
On or before the Close of Business New York time on the Servicer
Remittance Date, the Servicer shall remit in immediately available funds to the
Trustee for deposit in the Distribution Account an amount equal to the aggregate
amount of Advances, if any, to be made in respect of the Mortgage Loans and REO
Properties for the related Distribution Date either (i) from its own funds or
(ii) from the Collection Account, to the extent of funds held therein for future
distribution (in which case it will cause to be made an appropriate entry in the
records of Collection Account that amounts held for future distribution have
been, as permitted by this Section 4.04, used by the Servicer in discharge of
any such Advance) or (iii) in the form of any combination of (i) and (ii)
aggregating the total amount of Advances to be made by the Servicer with respect
to the Mortgage Loans and REO Properties. Any amounts held for future
distribution and so used shall be appropriately reflected in the Servicer's
records and replaced by the Servicer by deposit in the Collection Account on or
before any future Servicer Remittance Date to the extent that the Available
Funds for the related Distribution Date (determined without regard to Advances
to be made on the Servicer Remittance Date) shall be less than the total amount
that would be distributed to the Classes of Certificateholders pursuant to
Section 4.01 on such Distribution Date if such amounts held for future
distributions had not been so used to make Advances. The Trustee will provide
notice to the Servicer by telecopy by the Close of Business on any Servicer
Remittance Date in the event that the amount remitted by the Servicer to the
Trustee on such date is less than the Advances required to be made by the
Servicer for the related Distribution Date, as set forth in the related
Remittance Report.
(c) The obligation of the Servicer to make such Advances is mandatory,
notwithstanding any other provision of this Agreement but subject to (d) below,
and, with respect to any Mortgage Loan, shall continue until the Mortgage Loan
is paid in full or until the recovery of all Liquidation Proceeds thereon.
(d) Notwithstanding anything herein to the contrary, no Advance or
Servicing Advance shall be required to be made hereunder by the Servicer if such
Advance or Servicing Advance would, if made, constitute a Nonrecoverable
Advance. The determination by the Servicer that it has made a Nonrecoverable
Advance or that any proposed Advance or Servicing Advance, if made, would
constitute a Nonrecoverable Advance, shall be evidenced by an Officers'
Certificate of the Servicer delivered to the Depositor and the Trustee.
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates.
Each of the Class A and Class R Certificates shall be substantially in
the forms annexed hereto as exhibits, and shall, on original issue, be executed,
authenticated and delivered by the Trustee to or upon the order of the Depositor
concurrently with the sale and assignment to the Trustee of the Trust Fund. Each
Class of the Class A Certificates shall be initially evidenced by one or more
Certificates representing a Percentage Interest with a minimum dollar
denomination of $50,000 and integral dollar multiples of $1,000 in excess
thereof, except that one Certificate of each such Class of Certificates may be
in a different denomination so that the sum of the denominations of all
outstanding Certificates of such Class shall equal the Class Certificate
Principal Balance of such Class on the Closing Date. The Class R Certificates
are issuable only in minimum Percentage Interests of 25%.
The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature on behalf of the Trustee by a Responsible Officer.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures were affixed, authorized to sign on behalf of
the Trustee shall bind the Trust, notwithstanding that such individuals or any
of them have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of such
Certificate. No Certificate shall be entitled to any benefit under this
Agreement or be valid for any purpose, unless such Certificate shall have been
manually authenticated by the Trustee substantially in the form provided for
herein, and such authentication upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication. Subject to Section 5.02(c), the Class A Certificates
shall be Book-Entry Certificates. The Class R Certificates shall not be
Book-Entry Certificates.
Section 5.02. Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall cause to be kept at the Corporate
Trust Office a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. The Trustee shall initially serve as Certificate Registrar for
the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided.
Upon surrender for registration of transfer of any Certificate at any
office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph and, in the case of a Class R Certificate,
upon satisfaction of the conditions set forth below, the Trustee on behalf of
the Trust shall execute, authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Certificates of the same aggregate
Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged
for other Certificates in authorized denominations and the same aggregate
Percentage Interests, upon surrender of the Certificates to be exchanged at any
such office or agency. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute on behalf of the Trust and authenticate and
deliver the Certificates which the Certificateholder making the exchange is
entitled to receive. Every Certificate presented or surrendered for registration
of transfer or exchange shall (if so required by the Trustee or the Certificate
Registrar) be duly endorsed by, or be accompanied by a written instrument of
transfer satisfactory to the Trustee and the Certificate Registrar duly executed
by, the Holder thereof or his attorney duly authorized in writing.
(b) Except as provided in paragraph (c) below, the Book-Entry
Certificates shall at all times remain registered in the name of the Depository
or its nominee and at all times: (i) registration of such Certificates may not
be transferred by the Trustee except to another Depository; (ii) the Depository
shall maintain book-entry records with respect to the Certificate Owners and
with respect to ownership and transfers of such Certificates; (iii) ownership
and transfers of registration of such Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall for all
purposes deal with the Depository as representative of the Certificate Owners of
the Certificates for purposes of exercising the rights of Holders under this
Agreement, and requests and directions for and votes of such representative
shall not be deemed to be inconsistent if they are made with respect to
different Certificate Owners; (vi) the Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with respect
to its Depository Participants and furnished by the Depository Participants with
respect to indirect participating firms and Persons shown on the books of such
indirect participating firms as direct or indirect Certificate Owners; and (vii)
the direct participants of the Depository shall have no rights under this
Agreement under or with respect to any of the Certificates held on their behalf
by the Depository, and the Depository may be treated by the Trustee and its
agents, employees, officers and directors as the absolute owner of the
Certificates for all purposes whatsoever.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners
that it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The parties hereto are
hereby authorized to execute a Letter of Representations with the Depository or
take such other action as may be necessary or desirable to register a Book-Entry
Certificate to the Depository. In the event of any conflict between the terms of
any such Letter of Representation and this Agreement, the terms of this
Agreement shall control.
(c) If (i)(x) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly
its responsibilities as Depository and (y) the Trustee or the Depositor is
unable to locate a qualified successor, (ii) the Depositor, at its sole option,
with the consent of the Trustee, elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of a Servicer Event of
Termination, the Certificate Owners of each Class of Class A Certificates
representing Percentage Interests of such Classes aggregating not less than 51%
advises the Trustee and Depository through the Financial Intermediaries and the
Depository Participants in writing that the continuation of a book-entry system
through the Depository to the exclusion of definitive, fully registered
certificates (the "Definitive Certificates") to Certificate Owners is no longer
in the best interests of the Certificate Owners. Upon surrender to the
Certificate Registrar of the Book-Entry Certificates by the Depository,
accompanied by registration instructions from the Depository for registration,
the Trustee shall, at the Depositor's expense, in the case of (ii) above, or the
Seller's expense, in the case of (i) and (iii) above, execute on behalf of the
Trust and authenticate the Definitive Certificates. Neither the Depositor nor
the Trustee shall be liable for any delay in delivery of such instructions and
may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Certificates, the Trustee, the
Certificate Registrar, the Servicer, any Paying Agent and the Depositor shall
recognize the Holders of the Definitive Certificates as Certificateholders
hereunder.
(d) Except with respect to the initial transfer of the Class R
Certificates by the Depositor, no transfer, sale, pledge or other disposition of
any Class R Certificate shall be made unless such disposition is exempt from the
registration requirements of the Securities Act of 1933, as amended (the "1933
Act"), and any applicable state securities laws or is made in accordance with
the 1933 Act and laws. In the event of any such transfer, (i) unless such
transfer is made in reliance upon Rule 144A (as evidenced by the investment
letter delivered to the Trustee, in substantially the form attached hereto as
Exhibit J under the 1933 Act, the Trustee and the Depositor shall require a
written Opinion of Counsel (which may be in-house counsel) acceptable to and in
form and substance reasonably satisfactory to the Trustee and the Depositor that
such transfer may be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from the 1933 Act or is being made pursuant to
the 1933 Act, which Opinion of Counsel shall not be an expense of the Trustee or
the Depositor or (ii) the Trustee shall require the transferor to execute a
transferor certificate (in substantially the form attached hereto as Exhibit L)
and the transferee to execute an investment letter (in substantially the form
attached hereto as Exhibit J) acceptable to and in form and substance reasonably
satisfactory to the Depositor and the Trustee certifying to the Depositor and
the Trustee the facts surrounding such transfer, which investment letter shall
not be an expense of the Trustee or the Depositor. The Holder of a Class R
Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee and the Depositor against any liability that may result if
the transfer is not so exempt or is not made in accordance with such federal and
state laws.
No transfer of an Class R Certificate shall be made unless the Trustee
shall have received either (i) a representation from the transferee of such
Certificate, acceptable to and in form and substance satisfactory to the Trustee
and the Depositor, (such requirement is satisfied only by the Trustee's receipt
of a representation letter from the transferee substantially in the form of
Exhibit I hereto, as appropriate), to the effect that such transferee is not an
employee benefit plan or arrangement subject to Section 406 of ERISA or a plan
subject to Section 4975 of the Code, nor a person acting on behalf of any such
plan or arrangement nor using the assets of any such plan or arrangement to
effect such transfer or (ii) if the purchaser is an insurance company, a
representation that the purchaser is an insurance company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such term is defined in Section V(e) of Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60") and that the purchase and holding of such
Certificates are covered under PTCE 95-60 or (iii) in the case of any such Class
R Certificate presented for registration in the name of an employee benefit plan
subject to ERISA or a plan or arrangement subject to Section 4975 of the Code
(or comparable provisions of any subsequent enactments), or a trustee of any
such plan or any other person acting on behalf of any such plan or arrangement
or using such plan's or arrangement's assets, an Opinion of Counsel satisfactory
to the Trustee which Opinion of Counsel shall not be an expense of either the
Trustee or the Trust, addressed to the Trustee, to the effect that the purchase
or holding of such Class R Certificate will not result in the assets of the
Trust being deemed to be "plan assets" and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Trustee to any
obligation in addition to those expressly undertaken in this Agreement or to any
liability. For purposes of clause (i) of the preceding sentence, such
representation shall be deemed to have been made to the Trustee by the
transferee's acceptance of an Class R Certificate (or the acceptance by a
Certificate Owner of the beneficial interest in any such Class of Class R
Certificates) unless the Trustee shall have received from the transferee an
alternative representation acceptable in form and substance to the Depositor.
Notwithstanding anything else to the contrary herein, any purported transfer of
an Class R Certificate to or on behalf of an employee benefit plan subject to
ERISA or to the Code without the delivery to the Trustee of an Opinion of
Counsel satisfactory to the Trustee as described above shall be void and of no
effect.
Each Person who has or who acquires any Ownership Interest in a Class R
Certificate shall be deemed by the acceptance or acquisition of such Ownership
Interest to have agreed to be bound by the following provisions and to have
irrevocably appointed the Depositor or its designee as its attorney-in-fact to
negotiate the terms of any mandatory sale under clause (v) below and to execute
all instruments of transfer and to do all other things necessary in connection
with any such sale, and the rights of each Person acquiring any Ownership
Interest in a Class R Certificate are expressly subject to the following
provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall be a Permitted Transferee and shall promptly
notify the Trustee of any change or impending change in its status as a
Permitted Transferee.
(ii) No Person shall acquire an Ownership Interest in a Class R
Certificate unless such Ownership Interest is a pro rata undivided
interest.
(iii) In connection with any proposed transfer of any Ownership
Interest in a Class R Certificate, the Trustee shall as a condition to
registration of the transfer, require delivery to it, in form and
substance satisfactory to it, of each of the following:
A. an affidavit in the form of Exhibit K hereto from the
proposed transferee to the effect that such transferee is a
Permitted Transferee and that it is not acquiring its Ownership
Interest in the Class R Certificate that is the subject of the
proposed transfer as a nominee, trustee or agent for any Person
who is not a Permitted Transferee; and
B. a covenant of the proposed transferee to the effect that
the proposed transferee agrees to be bound by and to abide by the
transfer restrictions applicable to the Class R Certificates.
(iv) Any attempted or purported transfer of any Ownership Interest
in a Class R Certificate in violation of the provisions of this Section
shall be absolutely null and void and shall vest no rights in the
purported transferee. If any purported transferee shall, in violation
of the provisions of this Section, become a Holder of a Class R
Certificate, then the prior Holder of such Class R Certificate that is
a Permitted Transferee shall, upon discovery that the registration of
transfer of such Class R Certificate was not in fact permitted by this
Section, be restored to all rights as Holder thereof retroactive to the
date of registration of transfer of such Class R Certificate. The
Trustee shall be under no liability to any Person for any registration
of transfer of a Class R Certificate that is in fact not permitted by
this Section or for making any distributions due on such Class R
Certificate to the Holder thereof or taking any other action with
respect to such Holder under the provisions of this Agreement so long
as the Trustee received the documents specified in clause (iii). The
Trustee shall be entitled to recover from any Holder of a Class R
Certificate that was in fact not a Permitted Transferee at the time
such distributions were made all distributions made on such Class R
Certificate. Any such distributions so recovered by the Trustee shall
be distributed and delivered by the Trustee to the prior Holder of such
Class R Certificate that is a Permitted Transferee.
(v) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Class R Certificate in violation of the
restrictions in this Section, then the Trustee shall have the right but
not the obligation, without notice to the Holder of such Class R
Certificate or any other Person having an Ownership Interest therein,
to notify the Depositor to arrange for the sale of such Class R
Certificate. The proceeds of such sale, net of commissions (which may
include commissions payable to the Depositor or its affiliates in
connection with such sale), expenses and taxes due, if any, will be
remitted by the Trustee to the previous Holder of such Class R
Certificate that is a Permitted Transferee, except that in the event
that the Trustee determines that the Holder of such Class R Certificate
may be liable for any amount due under this Section or any other
provisions of this Agreement, the Trustee may withhold a corresponding
amount from such remittance as security for such claim. The terms and
conditions of any sale under this clause (v) shall be determined in the
sole discretion of the Trustee and it shall not be liable to any Person
having an Ownership Interest in a Class R Certificate as a result of
its exercise of such discretion.
(vi) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Class R Certificate in violation of the
restrictions in this Section, then the Trustee upon receipt of
reasonable compensation will provide to the Internal Revenue Service,
and to the persons specified in Sections 860E(e)(3) and (6) of the
Code, information needed to compute the tax imposed under Section
860E(e)(5) of the Code on transfers of residual interests to
disqualified organizations.
The foregoing provisions of this Section shall cease to apply to transfers
occurring on or after the date on which there shall have been delivered to the
Trustee, in form and substance satisfactory to the Trustee, (i) written
notification from each Rating Agency that the removal of the restrictions on
Transfer set forth in this Section will not cause such Rating Agency to
downgrade its rating of the Certificates and (ii) an Opinion of Counsel to the
effect that such removal will not cause the REMIC hereunder to fail to qualify
as a REMIC.
(e) No service charge shall be made for any registration of transfer or
exchange of Certificates of any Class, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates.
All Certificates surrendered for registration of transfer or exchange
shall be cancelled by the Certificate Registrar and disposed of pursuant to its
standard procedures.
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
If (i) any mutilated Certificate is surrendered to the Certificate
Registrar or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate and (ii) there is delivered to
the Trustee, the Depositor and the Certificate Registrar such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Trustee or the Certificate Registrar that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute on behalf of the Trust, authenticate and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like tenor and Percentage Interest. Upon the issuance of any new
Certificate under this Section, the Trustee or the Certificate Registrar may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee and the Certificate Registrar) in
connection therewith. Any duplicate Certificate issued pursuant to this Section,
shall constitute complete and indefeasible evidence of ownership in the Trust,
as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
Section 5.04. Persons Deemed Owners.
The Servicer, the Depositor, the Trustee, the Certificate Registrar,
any Paying Agent and any agent of the Servicer, the Depositor, the Certificate
Insurer, the Certificate Registrar, any Paying Agent or the Trustee may treat
the Person, including a Depository, in whose name any Certificate is registered
as the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 4.01 and for all other purposes whatsoever, and none of the
Servicer, the Trust, the Certificate Insurer, the Trustee nor any agent of any
of them shall be affected by notice to the contrary.
Section 5.05. Appointment of Paying Agent.
(a) The Paying Agent shall make distributions to Certificateholders
from the Distribution Account pursuant to Section 4.01 and shall report the
amounts of such distributions to the Trustee. The duties of the Paying Agent may
include the obligation (i) to withdraw funds from the Collection Account
pursuant to Section 3.11(a) and for the purpose of making the distributions
referred to above and (ii) to distribute statements and provide information to
Certificateholders as required hereunder. The Paying Agent hereunder shall at
all times be an entity duly incorporated and validly existing under the laws of
the United States of America or any state thereof, authorized under such laws to
exercise corporate trust powers and subject to supervision or examination by
federal or state authorities. The Paying Agent shall initially be the Trustee.
The Trustee may appoint a successor to act as Paying Agent, which appointment
shall be reasonably satisfactory to the Depositor and the Certificate Insurer.
(b) The Trustee shall cause the Paying Agent (if other than the
Trustee) to execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee that such Paying Agent shall hold all
sums, if any, held by it for payment to the Certificateholders in trust for the
benefit of the Certificateholders entitled thereto until such sums shall be paid
to such Certificateholders and shall agree that it shall comply with all
requirements of the Code regarding the withholding of payments in respect of
Federal income taxes due from Certificate Owners and otherwise comply with the
provisions of this Agreement applicable to it.
ARTICLE VI
THE SELLER, THE SERVICER AND THE DEPOSITOR
Section 6.01. Liability of the Seller, the Servicer and the Depositor.
The Seller and the Servicer shall be liable in accordance herewith only
to the extent of the obligations specifically imposed upon and undertaken by the
Seller or Servicer, as the case may be, herein. The Depositor shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
upon and undertaken by the Depositor.
Section 6.02. Merger or Consolidation of, or Assumption of the
Obligations of, the Seller, the Servicer or the Depositor.
Any entity into which the Seller, the Servicer or Depositor may be
merged or consolidated, or any entity resulting from any merger, conversion or
consolidation to which the Seller, the Servicer or the Depositor shall be a
party, or any corporation succeeding to the business of the Seller, the Servicer
or the Depositor, shall be the successor of the Seller, the Servicer or the
Depositor, as the case may be, hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided, however, that the successor
Servicer shall satisfy all the requirements of Section 7.02 with respect to the
qualifications of a successor Servicer.
Section 6.03. Limitation on Liability of the Servicer and Others.
Neither the Servicer nor any of the directors or officers or employees
or agents of the Servicer shall be under any liability to the Trust or the
Certificateholders for any action taken or for refraining from the taking of any
action by the Servicer in good faith pursuant to this Agreement, or for errors
in judgment; provided, however, that this provision shall not protect the
Servicer or any such Person against any liability which would otherwise be
imposed by reason of its willful misfeasance, bad faith or negligence in the
performance of duties of the Servicer or by reason of its reckless disregard of
its obligations and duties of the Servicer hereunder; provided, further, that
this provision shall not be construed to entitle the Servicer to indemnity in
the event that amounts advanced by the Servicer to retire any senior lien exceed
Liquidation Proceeds (in excess of related liquidation expenses) realized with
respect to the related Mortgage Loan. The preceding sentence shall not limit the
obligations of the Servicer pursuant to Section 8.05. The Servicer and any
director or officer or employee or agent of the Servicer may rely in good faith
on any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder. The Servicer and any director
or officer or employee or agent of the Servicer shall be indemnified by the
Trust and held harmless against any loss, liability or expense incurred in
connection with any legal action relating to this Agreement or the Certificates,
other than any loss, liability or expense related to any specific Mortgage Loan
or Mortgage Loans (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and any loss, liability or
expense incurred by reason of its willful misfeasance, bad faith or negligence
in the performance of duties hereunder or by reason of its reckless disregard of
obligations and duties hereunder. The Servicer may undertake any such action
which it may deem necessary or desirable in respect of this Agreement, and the
rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, unless the Depositor or the
Servicer acts without the consent of the Certificate Insurer prior to an Insurer
Default or without the consent of Holders of Certificates entitled to at least
51% of the Voting Rights after an Insurer Default, the reasonable legal expenses
and costs of such action and any liability resulting therefrom shall be
expenses, costs and liabilities of the Trust and the Servicer shall be entitled
to be reimbursed therefor only pursuant to Sections 4.01(a)(A)(viii) and
4.01(a)(B)(viii). The Servicer's right to indemnity or reimbursement pursuant to
this Section shall be subject to the payment priority described in Section
4.01(a) and shall survive any resignation or termination of the Servicer
pursuant to Section 6.04 or 7.01 with respect to any losses, expenses, costs or
liabilities arising prior to such resignation or termination (or arising from
events that occurred prior to such resignation or termination). This paragraph
shall apply to the Servicer solely in its capacity as Servicer hereunder and in
no other capacities.
Section 6.04. Servicer Not to Resign.
Subject to the provisions of Section 7.01 and Section 6.02, the
Servicer shall not resign from the obligations and duties hereby imposed on it
except (i) upon determination that the performance of its obligations or duties
hereunder are no longer permissible under applicable law or are in material
conflict by reason of applicable law with any other activities carried on by it
or its subsidiaries or Affiliates, the other activities of the Servicer so
causing such a conflict being of a type and nature carried on by the Servicer or
its subsidiaries or Affiliates at the date of this Agreement or (ii) upon
satisfaction of the following conditions: (a) the Servicer has proposed a
successor servicer to the Trustee in writing and such proposed successor
servicer is reasonably acceptable to the Trustee and the Certificate Insurer;
(b) each Rating Agency shall have delivered a letter to the Trustee prior to the
appointment of the successor servicer stating that the proposed appointment of
such successor servicer as Servicer hereunder will not result in the reduction
or withdrawal of the then current rating of the Regular Certificates or the
ratings that are in effect without taking into account the Policy and (c) such
proposed successor servicer is reasonably acceptable to the Certificate Insurer,
as evidenced by a letter to the Trustee; provided, however, that no such
resignation by the Servicer shall become effective until such successor servicer
or, in the case of (i) above, the Trustee shall have assumed the Servicer's
responsibilities and obligations hereunder or the Trustee shall have designated
a successor servicer in accordance with Section 7.02. Any such resignation shall
not relieve the Servicer of responsibility for any of the obligations specified
in Sections 7.01 and 7.02 as obligations that survive the resignation or
termination of the Servicer. Any such determination permitting the resignation
of the Servicer pursuant to clause (i) above shall be evidenced by an Opinion of
Counsel to such effect delivered to the Trustee. Any such determination
permitting the resignation of the Servicer shall be evidenced by an Opinion of
Counsel to such effect delivered to the Trustee.
Section 6.05. Delegation of Duties.
In the ordinary course of business, the Servicer at any time may
delegate any of its duties hereunder to any Person, including any of its
Affiliates, who agrees to conduct such duties in accordance with standards
comparable to those set forth in Section 3.01. Such delegation shall not relieve
the Servicer of its liabilities and responsibilities with respect to such duties
and shall not constitute a resignation within the meaning of Section 6.04. The
Servicer shall provide the Trustee and the Certificate Insurer with 60 days
prior written notice prior to the delegation of any of its duties to any Person
other than any of the Servicer's Affiliates or their respective successors and
assigns.
Section 6.06. Reserved.
Section 6.07. Inspection.
Each of the Seller and the Servicer shall afford the Certificate
Insurer, upon reasonable notice, during normal business hours, access to all
records maintained by the Seller and the Servicer, respectively, in respect of
its rights and obligations hereunder and access to officers of the Servicer and
the Seller responsible for such obligations. Upon request, the Servicer and the
Seller, respectively, shall furnish to the Certificate Insurer its most recent
publicly available financial statements and such other information relating to
its capacity to perform its obligations under this Agreement.
ARTICLE VII
DEFAULT
Section 7.01. Servicer Events of Termination.
(a) If any one of the following events ("Servicer Events of
Termination") shall occur and be continuing:
(i) (A) The failure by the Servicer to make any Advance; or (B)
any other failure by the Servicer to deposit in the Collection Account
or Distribution Account any deposit required to be made under the terms
of this Agreement which continues unremedied for a period of one
Business Day after the date upon which written notice of such failure
shall have been given to the Servicer and the Certificate Insurer by
the Trustee or to the Trustee by the Certificate Insurer or by any
Holder of a Regular Certificate evidencing at least 25% of the Voting
Rights; or
(ii) The failure by the Servicer to make any required Servicing
Advance which failure continues unremedied for a period of 30 days, or
the failure by the Servicer duly to observe or perform, in any material
respect, any other covenants, obligations or agreements of the Servicer
as set forth in this Agreement, which failure continues unremedied for
a period of 30 days, after the date (A) on which written notice of such
failure, requiring the same to be remedied, shall have been given to
the Servicer by the Trustee or to the Trustee by the Certificate
Insurer or by any Holder of a Regular Certificate evidencing at least
25% of the Voting Rights or (B) actual knowledge of such failure by a
Servicing Officer of the Servicer; or
(iii) The entry against the Servicer of a decree or order by a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for
a period of 60 days; or
(iv) The Servicer shall voluntarily go into liquidation, consent
to the appointment of a conservator or receiver or liquidator or
similar person in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its property;
or a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a
conservator, receiver, liquidator or similar person in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Servicer and such decree or order shall
have remained in force undischarged, unbonded or unstayed for a period
of 60 days; or the Servicer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take
advantage of any applicable insolvency or reorganization statute, make
an assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations; or
(v) cumulative Realized Losses or delinquencies equal or exceed
the levels specified in the Insurance Agreement;
(b) then, and in each and every such case, so long as a Servicer Event
of Termination shall not have been remedied within the applicable grace period,
(x) with respect solely to clause (i)(A) above, if such Advance is not made by
2:00 P.M., New York time, on the Business Day immediately following the Servicer
Remittance Date, the Trustee shall at the direction of the Certificate Insurer
or may with the consent of the Certificate Insurer terminate all of the rights
and obligations of the Servicer under this Agreement and the Trustee, or a
successor servicer appointed in accordance with Section 7.02, shall immediately
make such Advance and assume, pursuant to Section 7.02, the duties of a
successor Servicer and (y) in the case of (i)(B), (ii), (iii), (iv) and (v)
above, the Trustee shall, at the direction of the Certificate Insurer or the
Holders of each Class of Regular Certificates evidencing Percentage Interests
aggregating not less than 51% (with the consent of the Certificate Insurer), by
notice then given in writing to the Servicer (and to the Trustee if given by
Holders of Certificates or the Certificate Insurer), terminate all of the rights
and obligations of the Servicer as servicer under this Agreement. Any such
notice to the Servicer shall also be given to each Rating Agency, the Depositor
and the Seller. On or after the receipt by the Servicer (and by the Trustee if
such notice is given by the Holders or the Certificate Insurer) 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 pass
to and be vested in the Trustee pursuant to and under this Section; and, without
limitation, and the Trustee is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, any and
all documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of each Mortgage
Loan and related documents or otherwise. The Servicer agrees to cooperate with
the Trustee (or the applicable successor Servicer) in effecting the termination
of the responsibilities and rights of the Servicer hereunder, including, without
limitation, the delivery to the Trustee of all documents and records requested
by it to enable it to assume the Servicer's functions under this Agreement
within ten Business Days subsequent to such notice, the transfer within one
Business Day subsequent to such notice to the Trustee (or the applicable
successor Servicer) and the Certificate Insurer for the administration by it of
all cash amounts that shall at the time be held by the Servicer and to be
deposited by it in the Collection Account, the Distribution Account, any REO
Account or any Servicing Account or that have been deposited by the Servicer in
such accounts or thereafter received by the Servicer with respect to the
Mortgage Loans or any REO Property received by the Servicer. All reasonable
costs and expenses (including attorneys' fees) incurred in connection with
transferring the Mortgage Files to the successor Servicer and amending this
Agreement to reflect such succession as Servicer pursuant to this Section shall
be paid by the predecessor Servicer (or if the predecessor Servicer is the
Trustee, the initial Servicer) upon presentation of reasonable documentation of
such costs and expenses.
(c) The Servicer hereby covenants and agrees to act as the Servicer
under this Agreement for an initial term, commencing on the Closing Date and
ending on April 25, 1999, which term shall be extendable by the Certificate
Insurer for successive terms of three calendar months thereafter, until the
termination of the Trust Fund pursuant to Article X. Each such notice of
extension (a "Servicer Extension Notice") shall be delivered by the Certificate
Insurer to the Trustee, the Depositor and the Servicer. The Servicer hereby
agrees that, upon its receipt of any such Servicer Extension Notice, the
Servicer shall become bound for the duration of the term covered by such
Servicer Extension Notice to continue as the Servicer subject to and in
accordance with the other provisions of this Agreement. The Servicer agrees that
if as of the fifteenth (15th) day prior to the last day of any term of the
Servicer the Servicer shall not have received any Servicer Extension Notice from
the Certificate Insurer, the Servicer shall within five (5) days thereafter,
give written notice of such non-receipt to the Certificate Insurer, the Trustee
and the Depositor. The failure of the Certificate Insurer to deliver a Servicer
Extension Notice by the end of a calendar term shall result in the termination
of the Servicer. If the term of the Servicer shall expire without the
Certificate Insurer having delivered to the Servicer a Servicer Extension
Notice, but the Servicer shall continue without objection from the Depositor,
the Trustee or the Certificate Insurer to perform the functions of servicer
hereunder (and in the absence of ground for termination under any agreement
referred to in Section 7.04), the Servicer shall be entitled to receive a
prorated portion of the Servicing Fee specified hereunder for the time during
which it shall so act; provided, that it is understood and agreed that the
foregoing provision for payment of the prorated Servicing Fee is intended solely
to avoid unjust enrichment of the Trust Fund and does not contemplate or give
rise to any implicit renewal of the Servicer's term. The foregoing provisions of
this paragraph shall not apply to the Trustee in the event the Trustee succeeds
to the rights and obligations of the Servicer and the Trustee shall continue in
such capacity until the earlier of the termination of this Agreement pursuant to
Article X or the appointment of a successor Servicer.
Section 7.02. Trustee to Act; Appointment of Successor.
(a) Within 90 days of the time the Servicer (and the Trustee, if notice
is sent by the Holders) receives a notice of termination pursuant to Section
7.01 or 6.04, the Trustee (or such other successor Servicer as is acceptable to
the Certificate Insurer and approved in accordance with this Agreement) shall be
the successor in all respects to the Servicer in its capacity as servicer under
this Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof arising on and after
its succession. As compensation therefor, the Trustee (or such other successor
Servicer) shall be entitled to such compensation as the Servicer would have been
entitled to hereunder if no such notice of termination had been given.
Notwithstanding the above, (i) if the Trustee is unwilling to act as successor
Servicer or (ii) if the Trustee is legally unable so to act, the Trustee shall
appoint or petition a court of competent jurisdiction to appoint, any
established housing and home finance institution, bank or other mortgage loan or
home equity loan servicer having a net worth of not less than $50,000,000 as the
successor to the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer hereunder; provided,
that the appointment of any such successor Servicer shall be acceptable to the
Certificate Insurer, as evidenced by the Certificate Insurer's prior written
consent which consent shall not be unreasonably withheld and, provided further,
will not result in the qualification, reduction or withdrawal of the ratings
assigned to the Certificates or the ratings that are in effect without taking
into account the Policy by the Rating Agencies as evidenced by a letter to such
effect from the Rating Agencies. Pending appointment of a successor to the
Servicer hereunder, unless the Trustee is prohibited by law from so acting, the
Trustee shall act in such capacity as hereinabove provided. In connection with
such appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Mortgage Loans in an amount equal to the
compensation which the Servicer would otherwise have received pursuant to
Section 3.18 (or such other compensation as the Trustee and such successor shall
agree, not to exceed the Servicing Fee). The appointment of a successor Servicer
shall not affect any liability of the predecessor Servicer which may have arisen
under this Agreement prior to its termination as Servicer to pay any deductible
under an insurance policy pursuant to Section 3.14 or to indemnify the Trustee
pursuant to Section 6.26), 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. The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession.
(b) Any successor, including the Trustee, to the Servicer as servicer
shall during the term of its service as servicer continue to service and
administer the Mortgage Loans for the benefit of Certificateholders and the
Certificate Insurer, and maintain in force a policy or policies of insurance
covering errors and omissions in the performance of its obligations as Servicer
hereunder and a Fidelity Bond in respect of its officers, employees and agents
to the same extent as the Servicer is so required pursuant to Section 3.14.
Section 7.03. Waiver of Defaults.
The Certificate Insurer or the Majority Certificateholders may with the
consent of the Certificate Insurer, on behalf of all Certificateholders, waive
any events permitting removal of the Servicer as servicer pursuant to this
Article VII, provided, however, that the Majority Certificateholders may not
waive a default in making a required distribution on a Certificate without the
consent of the Holder of such Certificate. Upon any waiver of a past default,
such default shall cease to exist and any Servicer Event of 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 thereto except to the extent expressly so waived.
Notice of any such waiver shall be given by the Trustee to the Rating Agencies.
Section 7.04. Notification to Certificateholders.
(a) Upon any termination or appointment of a successor the Servicer
pursuant to this Article VII or Section 6.04, the Trustee shall give prompt
written notice thereof to the Certificate Insurer, the Certificateholders at
their respective addresses appearing in the Certificate Register and each Rating
Agency.
(b) No later than 60 days after the occurrence of any event which
constitutes or which, with notice or a lapse of time or both, would constitute a
Servicer Event of Termination for five Business Days after a Responsible Officer
of the Trustee becomes aware of the occurrence of such an event, the Trustee
shall transmit by mail to all Certificateholders notice of such occurrence
unless such default or Servicer Event of Termination shall have been waived or
cured. Such notice shall be given to the Certificate Insurer promptly after any
such occurrence.
Section 7.05. Survivability of Servicer Liabilities.
Notwithstanding anything herein to the contrary, upon termination of
the Servicer hereunder, any liabilities of the Servicer which accrued prior to
such termination shall survive such termination.
ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties of Trustee.
The Trustee, prior to the occurrence of a Servicer Event of Termination
and after the curing of all Servicer Events of Termination which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. If a Servicer Event of Termination has
occurred (which has not been cured) of which a Responsible Officer has
knowledge, the Trustee shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement; provided, however, that the
Trustee will not be responsible for the accuracy or content of any such
resolutions, certificates, statements, opinions, reports, documents or other
instruments. If any such instrument is found not to conform to the requirements
of this Agreement in a material manner the Trustee shall take such action as it
deems appropriate to have the instrument corrected, and if the instrument is not
corrected to the Trustee's satisfaction, the Trustee will provide notice thereof
to the Certificate Insurer and will, at the expense of the Seller, which expense
shall be reasonable given the scope and nature of the required action, take such
further action as directed by the Certificate Insurer.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:
(i) prior to the occurrence of a Servicer Event of Termination,
and after the curing of all such Servicer Events of Termination which
may have occurred, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement, the
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement
against the Trustee and, in the absence of bad faith on the part of the
Trustee, the Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Trustee and conforming to
the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer of the Trustee,
unless it shall be proved that the Trustee was negligent in
ascertaining or investigating the facts related thereto;
(iii) the Trustee shall not be personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction of the Certificate Insurer or in
accordance with the direction of the Majority Certificateholders (with
the consent of the Certificate Insurer, so long as no Insurer Default
exists) relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising or
omitting to exercise any trust or power conferred upon the Trustee,
under this Agreement; and
(iv) the Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with the obligations of the Servicer
referred to in clauses (i) and (ii) of Section 7.01(a) unless a
Responsible Officer of the Trustee at the Corporate Trust Office
obtains actual knowledge of such failure or the Trustee receives
written notice of such failure from the Servicer, the Certificate
Insurer, or the Majority Certificateholders.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, 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.
Section 8.02. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.01:
(i) the Trustee may request and rely upon, and shall be protected
in acting or refraining from acting upon, any resolution, Officer's
Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond or other paper or document reasonably believed
by it to be genuine and to have been signed or presented by the proper
party or parties, and the manner of obtaining consents and of
evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable regulations as
the Trustee may prescribe;
(ii) the Trustee may consult with counsel and any Opinion of
Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the Certificateholders or the
Certificate Insurer, pursuant to the provisions of this Agreement,
unless such Certificateholders and the Certificate Insurer shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or
thereby; the right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or
willful misconduct in the performance of any such act;
(iv) the Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(v) prior to the occurrence of a Servicer Event of Termination and
after the curing of all Servicer Events of Termination which may have
occurred, the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or documents, unless requested in writing to do so
by the Certificate Insurer or the Majority Certificateholder (with the
consent of the Certificate Insurer, so long as no Insurer Default
exists and is continuing); 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 such proceeding. The
reasonable expense of every such examination shall be paid by the
Servicer or, if paid by the Trustee, shall be reimbursed by the
Servicer upon demand. Nothing in this clause (v) shall derogate from
the obligation of the Servicer to observe any applicable law
prohibiting disclosure of information regarding the Mortgagors;
(vi) the Trustee shall not be accountable, shall have no liability
and makes no representation as to any acts or omissions hereunder of
the Servicer until such time as the Trustee may be required to act as
Servicer pursuant to Section 7.02 and thereupon only for the acts or
omissions of the Trustee as successor Servicer;
(vii) 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 or a custodian; and
(viii) 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.
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates (other than the
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Seller, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates) or of any
Mortgage Loan or related document. The Trustee shall not be accountable for the
use or application by the Servicer, or for the use or application of any funds
paid to the Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the Collection Account by the Servicer. The Trustee shall at no
time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Mortgage or any Mortgage Loan, or the
perfection and priority of any Mortgage or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Trust
or its ability to generate the payments to be distributed to Certificateholders
under this Agreement, including, without limitation: the existence, condition
and ownership of any Mortgaged Property; the existence and enforceability of any
hazard insurance thereon (other than if the Trustee shall assume the duties of
the Servicer pursuant to Section 7.02); the validity of the assignment of any
Mortgage Loan to the Trustee or of any intervening assignment; the completeness
of any Mortgage Loan; the performance or enforcement of any Mortgage Loan (other
than if the Trustee shall assume the duties of the Servicer pursuant to Section
7.02); the compliance by the Depositor, the Seller or the Servicer with any
warranty or representation made under this Agreement or in any related document
or the accuracy of any such warranty or representation prior to the Trustee's
receipt of notice or other discovery of any non-compliance therewith or any
breach thereof; any investment of monies by or at the direction of the Servicer
or any loss resulting therefrom, it being understood that the Trustee shall
remain responsible for any Trust property that it may hold in its individual
capacity; the acts or omissions of any of the Servicer (other than if the
Trustee shall assume the duties of the Servicer pursuant to Section 7.02), any
Sub-Servicer or any Mortgagor; any action of the Servicer (other than if the
Trustee shall assume the duties of the Servicer pursuant to Section 7.02), or
any Sub-Servicer taken in the name of the Trustee; the failure of the Servicer
or any Sub-Servicer to act or perform any duties required of it as agent of the
Trustee hereunder; or any action by the Trustee taken at the instruction of the
Servicer (other than if the Trustee shall assume the duties of the Servicer
pursuant to Section 7.02); provided, however, that the foregoing shall not
relieve the Trustee of its obligation to perform its duties under this
Agreement, including, without limitation, the Trustee's duty to review the
Mortgage Files pursuant to Section 2.01. The Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder (unless the Trustee shall have
become the successor Servicer).
Section 8.04. Trustee May Own Certificates.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not Trustee and may transact any banking and trust business with the
Seller, the Servicer, the Depositor or their Affiliates.
Section 8.05. Seller to Pay Trustee Expenses.
The Seller will pay or reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the Trustee
in accordance with any of the provisions of this Agreement (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all persons not regularly in its employ) except any such expense, disbursement
or advance as may arise from its negligence or bad faith or which is the
responsibility of Certificateholders or the Trustee hereunder. In addition, the
Seller covenants and agrees to indemnify the Trustee and its officers,
directors, employees and agents from, and hold it harmless against, any and all
losses, liabilities, damages, claims or expenses incurred in connection with any
legal action relating to this Agreement or the Certificates, other than any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or negligence of the Trustee in the performance of its duties hereunder or by
reason of the Trustee's reckless disregard of obligations and duties hereunder.
This section shall survive termination of this Agreement or the resignation or
removal of any Trustee hereunder.
Section 8.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be an entity duly organized
and validly existing under the laws of the United States of America or any state
thereof, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 and a minimum long-term
debt rating of Baa3 by Moody's and a short-term rating of at least A-1 by S&P,
and subject to supervision or examination by federal or state authority. If such
entity publishes reports of condition at least annually, pursuant to law or to
the requirements of the aforesaid supervising or examining authority, then for
the purposes of this Section 8.06, the combined capital and surplus of such
entity shall be deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. The principal office of the
Trustee (other than the initial Trustee) shall be in a state with respect to
which an Opinion of Counsel has been delivered to such Trustee at the time such
Trustee is appointed Trustee to the effect that the Trust will not be a taxable
entity under the laws of such state. In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section 8.06, the
Trustee shall resign immediately in the manner and with the effect specified in
Section 8.07.
Section 8.07. Resignation or Removal of Trustee.
The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Depositor, the Servicer,
the Certificate Insurer and each Rating Agency. Upon receiving such notice of
resignation, the Depositor shall promptly appoint a successor Trustee (approved
in writing by the Certificate Insurer, so long as such approval shall not be
unreasonably withheld) by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Trustee and one copy to the
successor Trustee. If no successor Trustee shall have been so appointed and
having accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 and shall fail to resign after written
request therefor by the Certificate Insurer of the Depositor, with the consent
of the Certificate Insurer (so long as no Insurer Default exists) or if at any
time the Trustee shall be legally unable to act, or shall be adjudged a bankrupt
or insolvent, or a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor, the Certificate Insurer or the Servicer may
remove the Trustee. If the Depositor, Certificate Insurer or the Servicer
removes the Trustee under the authority of the immediately preceding sentence,
the Depositor shall promptly appoint a successor Trustee (approved in writing by
the Certificate Insurer, so long as such approval is not unreasonably withheld)
by written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee.
The Majority Certificateholders may, with the prior written consent of
the Certificate Insurer (so long as no Insurer Default exists and is
continuing), at any time remove the Trustee by written instrument or instruments
delivered to the Servicer, the Depositor and the Trustee; the Depositor shall
thereupon use its best efforts to appoint a successor trustee in accordance with
this Section.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 8.07 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in Section 8.08.
Notwithstanding anything to the contrary contained herein, so long as
no Insurer Default exists, the Trustee may not be removed by the Depositor or
the Certificateholders without the prior written consent of the Certificate
Insurer, which consent shall not be unreasonably withheld.
Section 8.08. Successor Trustee.
Any successor Trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor, the Certificate Insurer, the
Servicer and to its predecessor Trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor Trustee
shall become effective, and such successor Trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor hereunder, with like effect as if
originally named as Trustee. The Depositor, the Servicer and the predecessor
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Trustee all such rights, powers, duties and obligations.
No successor Trustee shall accept appointment as provided in this
Section 8.08 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section 8.06 and the appointment of such
successor Trustee shall not result in a downgrading of the Regular Certificates
by either Rating Agency, as evidenced by a letter from each Rating Agency.
Upon acceptance of appointment by a successor Trustee as provided in
this Section 8.08, the successor Trustee shall mail notice of the appointment of
a successor Trustee hereunder to all Holders of Certificates at their addresses
as shown in the Certificate Register and to each Rating Agency.
Notwithstanding anything to the contrary contained herein, so long as
no Insurer Default exists, the appointment of any successor Trustee pursuant to
any provision of this Agreement will be subject to the prior written consent of
the Certificate Insurer, which consent shall not be unreasonably withheld.
Section 8.09. Merger or Consolidation of Trustee.
Any entity into which the Trustee may be merged or converted or with
which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any entity
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such entity shall be eligible under the provisions of
Section 8.06 and 8.08, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
Section 8.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust or any Mortgaged Property may at the time be located, the
Depositor and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee and the Certificate Insurer to act as co-trustee or co-trustees, jointly
with the Trustee, or separate trustee or separate trustees, of all or any part
of the Trust, and to vest in such Person or Persons, in such capacity and for
the benefit of the Certificateholders, such title to the Trust, or any part
thereof, and, subject to the other provisions of this Section 8.10, such powers,
duties, obligations, rights and trusts as the Servicer and the Trustee may
consider necessary or desirable. Any such co-trustee or separate trustee shall
be subject to the written approval of the Servicer and the Certificate Insurer
(so long as no Insurer Default exists and is continuing). If the Servicer and
the Certificate Insurer 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 a Servicer Event
of Termination shall have occurred and be continuing, the Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor
trustee under Section 8.06, and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 8.08. The Servicer shall be responsible for the fees of any co-trustee
or separate trustee appointed hereunder.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Servicer and the Trustee, with the consent of the
Certificate Insurer (so long as no Insurer Default exists and is
continuing), acting jointly may at any time accept the resignation of
or remove any separate trustee or co-trustee except that following the
occurrence of a Servicer Event of Termination, the Trustee acting alone
may accept the resignation or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Depositor, the Certificate Insurer and 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.
Section 8.11. Limitation of Liability.
The Certificates are executed by the Trustee, not in its individual
capacity but solely as Trustee of the Trust, in the exercise of the powers and
authority conferred and vested in it by the Trust Agreement. Each of the
undertakings and agreements made on the part of the Trustee in the Certificates
is made and intended not as a personal undertaking or agreement by the Trustee
but is made and intended for the purpose of binding only the Trust.
Section 8.12. Trustee May Enforce Claims Without Possession of
Certificates.
(a) All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and such proceeding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee for the benefit of all
Holders of such Certificates, subject to the provisions of this Agreement. Any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursement and advances of the Trustee, its agents and
counsel, be for the ratable benefit or the Certificateholders and the
Certificate Insurer in respect of which such judgment has been recovered.
(b) The Trustee shall afford the Seller, the Depositor, the Servicer,
the Certificate Insurer and each Certificateholder upon reasonable notice during
normal business hours, access to all records maintained by the Trustee in
respect of its duties hereunder and access to officers of the Trustee
responsible for performing such duties. Upon request, the Trustee shall furnish
the Depositor, the Servicer, the Certificate Insurer and any requesting
Certificateholder with its most recent financial statements. The Trustee shall
cooperate fully with the Seller, the Servicer, the Depositor, the Certificate
Insurer and such Certificateholder and shall make available to the Seller, the
Servicer, the Depositor, the Certificate Insurer and such Certificateholder for
review and copying such books, documents or records as may be requested with
respect to the Trustee's duties hereunder. The Seller, the Depositor, the
Servicer, the Certificate Insurer and the Certificateholders shall not have any
responsibility or liability for any action or failure to act by the Trustee and
are not obligated to supervise the performance of the Trustee under this
Agreement or otherwise.
Section 8.13. Suits for Enforcement.
In case a Servicer Event of Termination or other default by the
Servicer or the Depositor hereunder shall occur and be continuing, the Trustee,
shall, at the direction of the Certificate Insurer, or may, with the consent of
the Certificate Insurer, may proceed to protect and enforce its rights and the
rights of the Certificateholders or the Certificate Insurer under this Agreement
by a suit, action or proceeding in equity or at law or otherwise, whether for
the specific performance of any covenant or agreement contained in this
Agreement or in aid of the execution of any power granted in this Agreement or
for the enforcement of any other legal, equitable or other remedy, as the
Trustee, being advised by counsel, and subject to the foregoing, shall deem most
effectual to protect and enforce any of the rights of the Trustee, the
Certificate Insurer and the Certificateholders.
Section 8.14. Waiver of Bond Requirement.
The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee post a bond or other surety with any
court, agency or body whatsoever.
Section 8.15. Waiver of Inventory, Accounting and Appraisal
Requirement.
The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee file any inventory, accounting or
appraisal of the Trust with any court, agency or body at any time or in any
manner whatsoever.
ARTICLE IX
REMIC ADMINISTRATION
Section 9.01. REMIC Administration.
(a) REMIC elections as set forth in the Preliminary Statement shall be
made by the Trustee on Form 1066 or other appropriate federal tax or information
return for the taxable year ending on the last day of the calendar year in which
the Certificates are issued. The regular interests and residual interest in the
REMIC shall be as designated in the Preliminary Statement.
(b) The Closing Date is hereby designated as the "Startup Day" of the
REMIC within the meaning of section 86OG(a)(9) of the Code.
(c) The Servicer shall pay any and all tax related expenses (not
including taxes) of the REMIC, including but not limited to any professional
fees or expenses related to audits or any administrative or judicial proceedings
with respect to the REMIC that involve the Internal Revenue Service or state tax
authorities, but only to the extent that (i) such expenses are ordinary or
routine expenses, including expenses of a routine audit but not expenses of
litigation (except as described in (ii)); or (ii) such expenses or liabilities
(including taxes and penalties) are attributable to the negligence or willful
misconduct of the Servicer in fulfilling its duties hereunder (including its
duties as tax return preparer). The Servicer shall be entitled to reimbursement
of expenses to the extent provided in clause (i) above from the Collection
Account.
(d) The Trustee shall prepare, and the Trustee shall sign and file, all
of the REMIC's federal and state tax and information returns as the REMIC's
direct representative. The expenses of preparing and filing such returns shall
be borne by the Trustee.
(e) The Holder of the Class R Certificate at any time holding the
largest Percentage Interest thereof shall be the "tax matters person" as defined
in the REMIC Provisions (the "Tax Matters Person") with respect to the REMIC and
shall act as Tax Matters Person for the REMIC. The Trustee, as agent for the Tax
Matters Person, shall perform on behalf of the REMIC all reporting and other tax
compliance duties that are the responsibility of the REMIC under the Code, the
REMIC Provisions, or other compliance guidance issued by the Internal Revenue
Service or any state or local taxing authority. Among its other duties, if
required by the Code, the REMIC Provisions, or other such guidance, the Trustee,
as agent for the Tax Matters Person, shall provide (i) to the Treasury or other
governmental authority such information as is necessary for the application of
any tax relating to the transfer of a Residual Certificate to any disqualified
person or organization and (ii) to the Certificateholders such information or
reports as are required by the Code or REMIC Provisions.
(f) The Trustee, the Servicer and the Holders of Certificates shall
take any action or cause the REMIC to take any action necessary to create or
maintain the status of the REMIC as a REMIC under the REMIC Provisions and shall
assist each other as necessary to create or maintain such status. Neither the
Trustee, the Servicer nor the Holder of any Residual Certificate shall take any
action, cause the REMIC to take any action or fail to take (or fail to cause to
be taken) any action that, under the REMIC Provisions, if taken or not taken, as
the case may be, could (i) endanger the status of the REMIC as a REMIC or (ii)
result in the imposition of a tax upon the REMIC (including but not limited to
the tax on prohibited transactions as defined in Code Section 860F(a)(2) and the
tax on prohibited contributions set forth on Section 860G(d) of the Code)
(either such event, an "Adverse REMIC Event") unless the Trustee and the
Servicer have received an Opinion of Counsel (at the expense of the party
seeking to take such action) to the effect that the contemplated action will not
endanger such status or result in the imposition of such a tax. In addition,
prior to taking any action with respect to the REMIC or the assets therein, or
causing the REMIC to take any action, which is not expressly permitted under the
terms of this Agreement, any Holder of a Residual Certificate will consult with
the Trustee and the Servicer, or their respective designees, in writing, with
respect to whether such action could cause an Adverse REMIC Event to occur with
respect to the REMIC, and no such Person shall take any such action or cause the
REMIC to take any such action as to which the Trustee or the Servicer has
advised it in writing that an Adverse REMIC Event could occur.
(g) Each Holder of a Residual Certificate shall pay when due any and
all taxes imposed on the REMIC by federal or state governmental authorities. To
the extent that such Trust taxes are not paid by a Residual Certificateholder,
the Trustee shall pay any remaining REMIC taxes out of current or future amounts
otherwise distributable to the Holder of the Residual Certificate in the REMIC
or, if no such amounts are available, out of other amounts held in the
Distribution Account, and shall reduce amounts otherwise payable to Holders of
regular interests in the REMIC, as the case may be.
(h) The Trustee, as agent for the Tax Matters Person, shall, for
federal income tax purposes, maintain books and records with respect to the
REMIC on a calendar year and on an accrual basis.
(i) No additional contributions of assets shall be made to the REMIC,
except as expressly provided in this Agreement with respect to eligible
substitute mortgage loans.
(j) Neither the Trustee nor the Servicer shall enter into any
arrangement by which the REMIC will receive a fee or other compensation for
services.
(k) On or before April 15 of each calendar year beginning in 2000, the
Servicer shall deliver to the Trustee and each Rating Agency an Officer's
Certificate stating the Servicer's compliance with the provisions of this
Section 9.01.
Section 9.02. Prohibited Transactions and Activities.
Neither the Depositor, the Servicer nor the Trustee shall sell, dispose
of, or substitute for any of the Mortgage Loans, except in a disposition
pursuant to (i) the foreclosure of a Mortgage Loan, (ii) the bankruptcy of the
Trust Fund, (iii) the termination of the REMIC pursuant to Article X of this
Agreement, (iv) a substitution pursuant to Article II of this Agreement or (v) a
repurchase of Mortgage Loans pursuant to Article II of this Agreement, nor
acquire any assets for the REMIC, nor sell or dispose of any investments in the
Distribution Account for gain, nor accept any contributions to the REMIC after
the Closing Date, unless it has received an Opinion of Counsel (at the expense
of the party causing such sale, disposition, or substitution) that such
disposition, acquisition, substitution, or acceptance will not (a) affect
adversely the status of the REMIC as a REMIC or of the interests therein other
than the Residual Certificates as the regular interests therein, (b) affect the
distribution of interest or principal on the Certificates, (c) result in the
encumbrance of the assets transferred or assigned to the Trust Fund (except
pursuant to the provisions of this Agreement) or (d) cause the REMIC to be
subject to a tax on prohibited transactions or prohibited contributions pursuant
to the REMIC Provisions.
Section 9.03. Indemnification with Respect to Certain Taxes and Loss of
REMIC Status.
In the event that the REMIC fails to qualify as a REMIC, loses its
status as a REMIC, or incurs federal, state or local taxes as a result of a
prohibited transaction or prohibited contribution under the REMIC Provisions due
to the negligent performance by the Servicer of its duties and obligations set
forth herein, the Servicer shall indemnify the Holder of the related Residual
Certificate against any and all losses, claims, damages, liabilities or expenses
("Losses") resulting from such negligence; provided, however, that the Servicer
shall not be liable for any such Losses attributable to the action or inaction
of the Trustee, the Depositor or the Holder of such Residual Certificate, as
applicable, nor for any such Losses resulting from misinformation provided by
the Holder of such Residual Certificate on which the Servicer has relied. The
foregoing shall not be deemed to limit or restrict the rights and remedies of
the Holder of such Residual Certificate now or hereafter existing at law or in
equity. Notwithstanding the foregoing, however, in no event shall the Servicer
have any liability (1) for any action or omission that is taken in accordance
with and in compliance with the express terms of, or which is expressly
permitted by the terms of, this Agreement, (2) for any Losses other than arising
out of a negligent performance by the Servicer of its duties and obligations set
forth herein, and (3) for any special or consequential damages to
Certificateholders (in addition to payment of principal and interest on the
Certificates).
Section 9.04. [Reserved].
ARTICLE X
TERMINATION
Section 10.01. Termination.
(a) The respective obligations and responsibilities of the Seller, the
Servicer, the Depositor and the Trustee created hereby (other than the
obligation of the Trustee to make certain payments to Certificateholders after
the final Distribution Date and the obligation of the Servicer to send certain
notices as hereinafter set forth) shall terminate upon notice to the Trustee
upon the later of (A) the payment in full of all amounts owing to the
Certificate Insurer unless the Certificate Insurer shall otherwise consent and
(B) the earliest of (i) the Distribution Date on which the Certificate Principal
Balance of each Class of Class A Certificates has been reduced to zero, (ii) the
final payment or other liquidation of the last Mortgage Loan in the Trust, (iii)
the optional purchase by the Seller or the Certificate Insurer of the Mortgage
Loans as described below and (iv) the Distribution Date in February 25, 2029.
Notwithstanding the foregoing, in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late ambassador of the United
States to the Court of St. James's, living on the date hereof.
The Seller or, if such option is not exercised by the Seller, the
Certificate Insurer may, at its option, terminate this Agreement on any date on
which the aggregate of the Principal Balances of the Mortgage Loans on such date
is equal to or less than 10% of the aggregate of the Principal Balances of the
Mortgage Loans on the Cut-off Date, by purchasing, on the next succeeding
Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a
price equal to the sum of the outstanding Stated Principal Balance of the
Mortgage Loans and accrued and unpaid interest thereon at the weighted average
of the Mortgage Rates through the end of the Due Period preceding the final
Distribution Date plus unreimbursed Servicing Advances, Advances; any amount
owed the Certificate Insurer under the Insurance Agreement, any unpaid Servicing
Fees allocable to such Mortgage Loans and REO Properties, and any accrued and
unpaid Group II Available Funds Cap Carryover Amount (the "Termination Price").
In connection with any such purchase pursuant to the preceding
paragraph, the Servicer shall deposit in the Distribution Account all amounts
then on deposit in the Collection Account, which deposit shall be deemed to have
occurred immediately preceding such purchase.
Any such purchase shall be accomplished by deposit into the
Distribution Account on the Determination Date before such Distribution Date of
the Termination Price and the delivery of an opinion of counsel in form and
substance acceptable to the Certificate Insurer that such termination is a
"Qualified Transaction" under Section 860F of the Code. The Seller shall
indemnify the Certificate Insurer for any claims under the Policy due to the
Seller's exercise of such option.
(b) Notice of any termination, specifying the Distribution Date (which
shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment
of the final distribution and cancellation, shall be given promptly by the
Trustee upon the Trustee receiving notice of such date from the Servicer, by
letter to the Certificate Insurer and the Certificateholders mailed not earlier
than the 15th day and not later than the 25th day of the month next preceding
the month of such final distribution specifying (1) the Distribution Date upon
which final distribution of the Certificates will be made upon presentation and
surrender of such Certificates at the office or agency of the Trustee therein
designated, (2) the amount of any such final distribution and (3) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
distributions being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified.
(c) Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to the Holders of the Certificates on the
Distribution Date for such final distribution, in proportion to the Percentage
Interests of their respective Class and to the extent that funds are available
for such purpose, an amount equal to the amount required to be distributed to
such Holders in accordance with the provisions of Section 4.01 for such
Distribution Date. On the final Distribution Date, the Trustee will withdraw
from the Distribution Account and remit to the Certificate Insurer the lesser of
(x) the amount available for distribution on such final Distribution Date, net
of any portion thereof necessary to pay holders of Class A Certificates pursuant
to Section 4.01 and due and unpaid Monthly Advances and Servicing Fees, (y) the
unpaid amounts due and owing to the Certificate Insurer pursuant to Section 4.01
and the Insurance Agreement.
(d) In the event that all Certificateholders shall not surrender their
Certificates for final payment and cancellation on or before such final
Distribution Date, the Trustee shall promptly following such date cause all
funds in the Distribution Account not distributed in final distribution to
Certificateholders to be withdrawn therefrom and credited to the remaining
Certificateholders by depositing such funds in a separate Servicing Account for
the benefit of such Certificateholders, and the Seller (if the Seller has
exercised its right to purchase the Mortgage Loans) or the Trustee (in any other
case) shall give a second written notice to the remaining Certificateholders, to
surrender their Certificates for cancellation and receive the final distribution
with respect thereto. If within nine months after the second notice all the
Certificates shall not have been surrendered for cancellation, the Class R
Certificateholder shall be entitled to all unclaimed funds and other assets
which remain subject hereto, and the Trustee upon transfer of such funds shall
be discharged of any responsibility for such funds, and the Certificateholders
shall look to the Class R Certificateholder for payment.
Section 10.02. Additional Termination Requirements.
(a) In the event that the Certificate Insurer or the Seller exercises
its purchase option as provided in Section 10.01, the Trust shall be terminated
in accordance with the following additional requirements, unless the Trustee
shall have been furnished with an Opinion of Counsel to the effect that the
failure of the Trust to comply with the requirements of this Section will not
(i) result in the imposition of taxes on "prohibited transactions" of the Trust
as defined in Section 860F of the Code or (ii) cause the REMIC constituting part
of the Trust Fund to fail to qualify as a REMIC at any time that any
Certificates are outstanding:
(i) Within 90 days prior to the final Distribution Date, the Trustee
shall adopt and sign a plan of complete liquidation of the REMIC meeting the
requirements of a "Qualified Liquidation" under Section 860F of the Code and any
regulations thereunder;
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the final Distribution Date, the Trustee
shall sell all of the assets of the Trust to the Majority Class R
Certificateholder or the Servicer, as applicable, for cash pursuant to
the terms of the plan of complete liquidation; and
(iii) At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited (A) to the Holders of each of the Class A
Certificates, the related Class Certificate Principal Balance, plus one
month's interest thereon at the applicable Pass-Through Rate and (B) to
the Certificate Insurer, all amounts owing to the Certificate Insurer
under this Agreement and the Insurance Agreement and the Trust shall
terminate at such time.
(b) By their acceptance of Certificates, the Holders thereof hereby
agree to appoint the Trustee as their attorney in fact to: (i) adopt such a plan
of complete liquidation (and the Certificateholders hereby appoint the Trustee
as their attorney in fact to sign such plan) as appropriate or upon the written
request of the Certificate Insurer and (ii) to take such other action in
connection therewith as may be reasonably required to carry out such plan of
complete liquidation all in accordance with the terms hereof.
ARTICLE XI
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 11.01. Rights of the Certificate Insurer To Exercise Rights of
Class A Certificateholders.
Each of the Depositor, the Servicer, the Trustee, and, by accepting its
Certificate, each Class A Certificateholder, agrees that unless an Insurer
Default has occurred and is continuing, the Certificate Insurer shall have the
right to exercise all rights of the Class A Certificateholders under this
Agreement (except as provided in clause (i) of the second paragraph of Section
12.01) without any further consent of the Class A Certificateholders, including,
without limitation:
(a) the right to require the Seller to repurchase or substitute for
Mortgage Loans pursuant to Section 2.03;
(b) the right to give notices of breach or to terminate the rights and
obligations of the Servicer as Servicer pursuant to Section 7.01;
(c) the right to direct the actions of the Trustee during the
continuance of a Servicer Event of Termination pursuant to Sections 7.01 and
7.02;
(d) the right to consent to or direct any waivers of Servicer Events of
Termination pursuant to Section 7.03;
(e) the right to direct the Trustee to investigate certain matters
pursuant to Section 8.02(a)(v); and
(f) the right to remove the Trustee pursuant to Section 8.07 hereof.
In addition, each Class A Certificateholder agrees that, unless an
Insurer Default has occurred and is continuing, the rights specifically set
forth above may be exercised by the Class A Certificateholders only with the
prior written consent of the Certificate Insurer.
Section 11.02. Trustee To Act Solely with Consent of the Certificate
Insurer.
Unless an Insurer Default has occurred and is continuing, the Trustee
shall not:
(a) agree to any amendment pursuant to Section 12.01; or
(b) undertake any litigation pursuant to Section 8.02(a)(iii);
without the prior written consent of the Certificate Insurer which consent shall
not be unreasonably withheld.
Section 11.03. Trust Fund and Accounts Held for Benefit of the
Certificate Insurer.
The Trustee shall hold the Trust Fund and the Mortgage Files for the
benefit of the Certificateholders and the Certificate Insurer and all references
in this Agreement (including, without limitation, in Sections 2.01 and 2.02) and
in the Certificates to the benefit of Holders of the Certificates shall be
deemed to include the Certificate Insurer. The Trustee shall cooperate in all
reasonable respects with any reasonable request by the Certificate Insurer for
action to preserve or enforce the Certificate Insurer's rights or interests
under this Agreement and the Certificates.
The Servicer hereby acknowledges and agrees that it shall service and
administer the Mortgage Loans and any REO Properties, and shall maintain the
Collection Account and any REO Account, for the benefit of the
Certificateholders and for the benefit of the Certificate Insurer, and all
references in this Agreement (including, without limitation, in Section 3.01) to
the benefit of or actions on behalf of the Certificateholders shall be deemed to
include the Certificate Insurer. Unless an Insurer Default has occurred and is
continuing, the Servicer shall not terminate any sub-servicing agreements
without cause without the prior consent of the Certificate Insurer. Unless an
Insurer Default has occurred and is continuing, neither the Servicer nor the
Depositor shall undertake any litigation pursuant to Section 6.03 (other than
litigation to enforce their respective rights hereunder) without the prior
consent of the Certificate Insurer.
Section 11.04. Claims Upon the Policy; Policy Payments Account.
(a) If, by the Close of Business on the third Business Day prior to a
Distribution Date, the Trustee determines that a Deficiency Amount for any
Distribution Date is greater than zero, then the Trustee shall give notice to
the Certificate Insurer by telephone or telecopy of the amount of such
Deficiency Amount. Such notice of such Deficiency Amount shall be confirmed in
writing in the form set forth as Exhibit A to the Endorsement of the Policy, to
the Certificate Insurer and the Fiscal Agent (as defined in the Policy), if any,
at or before 10:00 a.m. New York time on the second Business Day prior to such
Distribution Date. Following Receipt (as defined in the Policy) by the
Certificate Insurer of such notice in such form, the Certificate Insurer or the
Fiscal Agent will pay any amount payable under the Policy on the later to occur
of (i) 12:00 noon New York time on the second Business Day following such
receipt and (ii) 12:00 noon New York time on the Distribution Date to which such
deficiency relates, as provided in the Endorsement to the Policy.
(b) The Trustee shall establish a separate special purpose trust
account for the benefit of Holders of the Class A Certificates and the
Certificate Insurer referred to herein as the "Policy Payments Account" over
which the Trustee shall have exclusive control and sole right of withdrawal. The
Trustee shall deposit any amount paid under the Policy in the Policy Payments
Account and distribute such amount only for purposes of payment to Holders of
Class A Certificates of the Insured Payment for which a claim was made, and such
amount may not be applied to satisfy any costs, expenses or liabilities of the
Servicer, the Trustee or the Trust Fund. Amounts paid under the Policy shall be
transferred to the Distribution Account in accordance with the next succeeding
paragraph and disbursed by the Trustee to Holders of Class A Certificates in
accordance with Section 4.01(c) or Section 10.01, as applicable. It shall not be
necessary for such payments to be made by checks or wire transfers separate from
the checks or wire transfers used to pay the Insured Payment with other funds
available to make such payment. However, the amount of any payment of principal
of or interest on the Class A Certificates to be paid from funds transferred
from the Policy Payments Account shall be noted as provided in paragraph (c)
below in the Certificate Register and in the statement to be furnished to
Holders of the Class A Certificates pursuant to Section 4.02. Funds held in the
Policy Payments Account shall not be invested.
On any Distribution Date with respect to which a claim has been made
under the Policy, the amount of any funds received by the Trustee as a result of
any claim under the Policy, to the extent required to make the Insured Payment
on such Distribution Date, shall be withdrawn from the Policy Payments Account
and deposited in the Distribution Account and applied by the Trustee, together
with the other funds to be withdrawn from the Distribution Account pursuant to
Section 4.01(c) or Section 10.01, as applicable, directly to the payment in full
of the Insured Payment due on the Class A Certificates. Funds received by the
Trustee as a result of any claim under the Policy shall be deposited by the
Trustee in the Policy Payments Account and used solely for payment to the
Holders of the Class A Certificates and may not be applied to satisfy any costs,
expenses or liabilities of the Servicer, the Trustee, or the Trust Fund. Any
funds remaining in the Policy Payments Account on the first Business Day
following a Distribution Date shall be remitted to the Certificate Insurer,
pursuant to the instructions of the Certificate Insurer, by the end of such
Business Day.
(c) The Trustee shall keep a complete and accurate record of the amount
of interest and principal paid in respect of any Class A Certificate from moneys
received under the Policy. The Certificate Insurer shall have the right to
inspect such records at reasonable times during normal business hours upon one
Business Day's prior notice to the Trustee.
(d) The Trustee shall promptly notify the Certificate Insurer and
Fiscal Agent of any proceeding or the institution of any action, of which a
Responsible Officer of the Trustee has actual knowledge seeking the avoidance as
a preferential transfer under applicable bankruptcy, insolvency, receivership or
similar law (a "Preference Claim") of any Insured Payment made with respect to
the Class A Certificates. Each Holder of the Class A Certificates, by its
purchase of such Certificates, the Servicer, and the Trustee hereby agree that
the Certificate Insurer (so long as no Insurer Default has occurred and is
continuing) may at any time during the continuation of any proceeding relating
to a Preference Claim direct all matters relating to such Preference Claim,
including, without limitation, (i) the direction of any appeal of any order
relating to such Preference Claim and (ii) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition and without
limitation of the foregoing, the Certificate Insurer shall be subrogated to the
rights of the Servicer, the Trustee, and each Holder of the Class A Certificates
in the conduct of any such Preference Claim, including, without limitation, all
rights of any party to an adversary proceeding action with respect to any court
order issued in connection with any such Preference Claim.
Section 11.05. Effect of Payments by the Certificate Insurer;
Subrogation.
Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on any of the Class A Certificates which is
made with moneys received pursuant to the terms of the Policy shall not be
considered payment of such Class A Certificates from the Trust Fund and shall
not result in the payment of or the provision for the payment of the principal
of or interest on such Certificates within the meaning of Section 4.01. The
Depositor, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Class A Certificate agrees, that without the need for any
further action on the part of the Certificate Insurer, the Depositor, the
Servicer or the Trustee (a) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on any
Class A Certificates to the Holders of such Certificates, the Certificate
Insurer will be fully subrogated to the rights of such Holders to receive such
principal and interest from the Trust Fund and (b) the Certificate Insurer shall
be paid such principal and interest but only from the sources and in the manner
provided herein for the payment of such principal and interest.
The Trustee and the Servicer shall cooperate in all respects with any
reasonable request by the Certificate Insurer for action to preserve or enforce
the Certificate Insurer's rights or interests under this Agreement without
limiting the rights or affecting the interests of the Holders as otherwise set
forth herein.
Section 11.06. Notices to the Certificate Insurer.
All notices, statements, reports, certificates or opinions required by
this Agreement to be sent to any other party hereto or to any of the
Certificateholders shall also be sent to the Certificate Insurer.
Section 11.07. Third-Party Beneficiary.
The Certificate Insurer shall be a third-party beneficiary of this
Agreement, entitled to enforce the provisions hereof as if a party hereto.
Section 11.08. Trustee to Hold the Policy.
The Trustee will hold the Policy in trust as agent for the Holders of
the Class A Certificates for the purpose of making claims thereon and
distributing the proceeds thereof. Upon the later of (i) the date upon which the
aggregate Certificate Principal Balance of the Class A Certificates has been
reduced to zero and all Insured Payments have been made and (ii) the date the
Term of the Policy (as defined in the Policy) ends, the Trustee, shall surrender
the Policy to the Certificate Insurer for cancellation. Each Holder of Class A
Certificates, by accepting its Certificates, appoints the Trustee as
attorney-in-fact for the purpose of making claims on the Policy.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment.
This Agreement may be amended from time to time by Seller, the
Depositor, the Servicer and the Trustee; and without the consent of the
Certificateholders, but only with the consent of the Certificate Insurer (which
consent shall not be unreasonably withheld), (i) to cure any ambiguity, (ii) to
correct or supplement any provisions herein which may be defective or
inconsistent with any other provisions herein or (iii) to make any other
provisions with respect to matters or questions arising under this Agreement or
the Policy, as the case may be, which shall not be inconsistent with the
provisions of this Agreement; provided, however, that any such action listed in
clause (i) through (iii) above shall be deemed not to adversely affect in any
respect the interests of any Certificateholder, if evidenced by (i) written
notice to the Depositor, the Servicer and the Trustee from the Rating Agencies
that such action will not result in the reduction or withdrawal of the rating of
any outstanding Class of Certificates with respect to which it is a Rating
Agency or (ii) an Opinion of Counsel delivered to the Servicer and the Trustee.
In addition, this Agreement may be amended from time to time by Seller,
the Depositor, the Servicer and the Trustee with the consent of the Certificate
Insurer (which consent shall not be unreasonably withheld) with the consent of
the Majority Certificateholders for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders of Certificates; provided,
however, that no such amendment or waiver shall (x) reduce in any manner the
amount of, or delay the timing of, payments on the Certificates or distributions
or payments under the Policy which are required to be made on any Certificate
without the consent of the Holder of such Certificate, (y) adversely affect in
any material respect the interests of the Holders of any Class of Certificates
in a manner other than as described in clause (x) above, without the consent of
the Holders of Certificates of such Class evidencing at least a 66% Percentage
Interest in such Class, or (z) reduce the percentage of Voting Rights required
by clause (y) above without the consent of the Holders of all Certificates of
such Class then outstanding. Upon approval of an amendment, a copy of such
amendment shall be sent to the Rating Agencies.
Notwithstanding any provision of this Agreement to the contrary, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel, delivered by (and at the expense of)
the Person seeking such Amendment, to the effect that such amendment will not
result in the imposition of a tax on the REMIC constituting part of the Trust
Fund pursuant to the REMIC Provisions or cause the REMIC constituting part of
the Trust to fail to qualify as a REMIC at any time that any Certificates are
outstanding and that the amendment is being made in accordance with the terms
hereof.
Promptly after the execution of any such amendment the Trustee shall
furnish, at the expense of the Person that requested the amendment if such
Person is Seller or the Servicer (but in no event at the expense of the
Trustee), otherwise at the expense of the Trust, a copy of such amendment and
the Opinion of Counsel referred to in the immediately preceding paragraph to the
Servicer, the Certificate Insurer and each Rating Agency.
It shall not be necessary for the consent of Certificateholders under
this Section 12.01 to approve the particular form of any proposed amendment;
instead it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Trustee may prescribe.
The Trustee may, but shall not be obligated to, enter into any
amendment pursuant to this 12.01 Section that affects its rights, duties and
immunities under this Agreement or otherwise.
Section 12.02. Recordation of Agreement; Counterparts.
To the extent permitted by applicable law, this Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer at the expense of the Trust, but only upon direction of
Certificateholders or the Certificate Insurer accompanied by an Opinion of
Counsel to the effect that such recordation materially and beneficially affects
the interests of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall together constitute but
one and the same instrument.
Section 12.03. Limitation on Rights of Certificateholders.
The death or incapacity of any Certificateholder shall not (i) operate
to terminate this Agreement or the Trust, (ii) entitle such Certificateholder's
legal representatives or heirs to claim an accounting or to take any action or
proceeding in any court for a partition or winding up of the Trust, or (iii)
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
Except as expressly provided for herein, no Certificateholder shall
have any right to vote or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth or contained in the terms of the Certificates be
construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any provision of
this Agreement to institute any suit, action or proceeding in equity or at law
upon or under or with respect to this Agreement, unless such Holder previously
shall have given to the Trustee a written notice of default and of the
continuance thereof, as hereinbefore provided, and unless also the Holders of
Certificates entitled to at least 25% of the Voting Rights shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee for 15 days after
its receipt of such notice, request and offer of indemnity, shall have neglected
or refused to institute any such action, suit or proceeding. It is understood
and intended, and expressly covenanted by each Certificateholder with every
other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, which priority or
preference is not otherwise provided for herein, or to enforce any right under
this Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all Certificateholders. For the protection and enforcement
of the provisions of this Section 12.03 each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
Section 12.04. Governing Law; Jurisdiction.
This Agreement shall be construed in accordance with the laws of the
State of New York, and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws. With respect to any
claim arising out of this Agreement, each party irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in The City of New
York, and each party irrevocably waives any objection which it may have at any
time to the laying of venue of any suit, action or proceeding arising out of or
relating hereto brought in any such courts, irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought
in any inconvenient forum and further irrevocably waives the right to object,
with respect to such claim, suit, action or proceeding brought in any such
court, that such court does not have jurisdiction over such party, provided that
service of process has been made by any lawful means.
Section 12.05. Notices.
All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
first class mail, postage prepaid, or by express delivery service, to (a) in the
case of Seller and/or Servicer, Option One Mortgage Corporation, 3 Ada Road,
Irvine, California 92618, Attention: William O'Neill, or such other address or
telecopy number as may hereafter be furnished to the Depositor and the Trustee
in writing by Seller, (b) in the case of the Trustee, Norwest Bank Minnesota,
National Association, Sixth and Marquette, Minneapolis, Minnesota 55479,
Attention: Option One Series 1999-1, with a copy to Norwest Bank Minnesota,
National Association, 11000 Broken Land Parkway, Columbia, Maryland 21044,
Attention: Option One Mortgage Loan Trust Series 1999-1, or such other address
or telecopy number as may hereafter be furnished to the Depositor, Seller and
the Servicer in writing by the Trustee, (c) in the case of the Depositor,
Financial Asset Securities Corp., 600 Steamboat Road, Greenwich, Connecticut
06830, Attention: General Counsel, (203) 625-6065 (telecopy number (203)
629-4571), or such other address or telecopy number as may be furnished to
Seller, the Servicer and the Trustee in writing by the Depositor, and (d) in the
case of the Certificate Insurer, Financial Security Assurance Inc., 350 Park
Avenue, New York, New York 10022, Attention: Surveillance Department. Any notice
required or permitted to be mailed to a Certificateholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register. Notice of any Servicer Default shall be given by telecopy
and by certified mail. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have duly been given when mailed,
whether or not the Certificateholder receives such notice. A copy of any notice
required to be telecopied hereunder shall also be mailed to the appropriate
party in the manner set forth above.
Section 12.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall for any reason whatsoever be held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.
Section 12.07. Article and Section References.
All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.
Section 12.08. Notice to the Rating Agencies.
(a) Each of the Trustee and the Servicer shall be obligated to use its
best reasonable efforts promptly to provide notice to the Rating Agencies with
respect to each of the following of which a Responsible Officer of the Trustee
or Servicer, as the case may be, has actual knowledge:
(i) any material change or amendment to this Agreement;
(ii) the occurrence of any Servicer Event of Termination that has
not been cured or waived;
(iii) the resignation or termination of the Servicer or the
Trustee;
(iv) the final payment to Holders of the Certificates of any
Class;
(v) any change in the location of any Account; and
(vi) if the Trustee is acting as successor Servicer pursuant to
Section 7.02 hereof, any event that would result in the inability of
the Trustee to make Advances.
(b) In addition, (i) the Trustee shall promptly furnish to each Rating
Agency copies of each Statement to Certificateholders described in Section 4.03
hereof; and
(i) the Servicer shall promptly furnish to each Rating Agency
copies of the following:
(A) each annual statement as to compliance described in
Section 3.20 hereof;
(B) each annual independent public accountants' servicing
report described in Section 3.21 hereof; and
(C) each notice delivered pursuant to Section 7.01(a) hereof
which relates to the fact that the Servicer has not made an
Advance.
Any such notice pursuant to this Section 12.08 shall be in writing and
shall be deemed to have been duly given if personally delivered or mailed by
first class mail, postage prepaid, or by express delivery service to Fitch IBCA,
Inc., One State Street Plaza, 30th Floor, New York, NY 10004, Attention: Beth
Cronin; Moody's Investors Service, Inc., 99 Church Street, New York, NY 10048,
Attention: MBS Monitoring/Option One Mortgage Loan Trust 1999-1; and Standard &
Poor's, a division of The McGraw-Hill Companies, Inc., 25 Broadway, 12th Floor,
New York, NY 10004, Attention: Mortgage Surveillance Group.
Section 12.09. Further Assurances.
Notwithstanding any other provision of this Agreement, neither the
Regular Certificateholders nor the Trustee shall have any obligation to consent
to any amendment or modification of this Agreement unless they have been
provided reasonable security or indemnity against their out-of-pocket expenses
(including reasonable attorneys' fees) to be incurred in connection therewith.
Section 12.10. Benefits of Agreement.
Nothing in this Agreement or in the Certificates, expressed or implied,
shall give to any Person, other than the Certificateholders, 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 12.11. Acts of Certificateholders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by the
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
agent duly appointed in writing, and such action shall become effective when
such instrument or instruments are delivered to the Trustee, Seller and the
Servicer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "act" of the
Certificateholders 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 12.11.
(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 a 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 a signer acting in a capacity other than his or her
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other action by any Certificateholder shall bind every future Holder
of such Certificate and the Holder 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 Certificate.
<PAGE>
IN WITNESS WHEREOF, Seller, the Depositor, the Servicer and the Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized, all as of the day and year first above written.
FINANCIAL ASSET SECURITIES CORP.,
as Depositor
By: /s/ Frank Skibo
--------------------------------
Name: Frank Skibo
Title: Vice President
OPTION ONE MORTGAGE CORPORATION,
as Seller and Servicer
By: /s/ Rod Colombi
--------------------------------
Name: Rod Colombi
Title: Vice President
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By: /s/ Amy Wahl
------------------------------
Name:
Title:
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of January, 1999 before me, a notary public in and for
said State, personally appeared Frank Skibo known to me to be a Vice President
of Financial Asset Securities Corp., a Delaware corporation that executed the
within instrument, and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Edward M. Owens
---------------------------
Notary Public
<PAGE>
STATE OF CALIFORNIA )
) ss.:
COUNTY OF ORANGE )
On the 22nd day of January, 1999 before me, a notary public in and for
said State, personally appeared Rod Colombi known to me to be a Vice President
of Option One Mortgage Corporation, the Company that executed the within
instrument, and also known to me to be the person who executed it on behalf of
said corporation, and acknowledged to me that such corporation executed the
within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Dale Sugimoto
---------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 25th day of January, 1999 before me, a notary public in and for
said State, personally appeared Amy Wahl, known to me to be Assistant Vice
President of Norwest Bank Minnesota, National Association, a national banking
association that executed the within instrument, and also known to me to be the
person who executed it on behalf of said association, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ Edward M. Owen
---------------------------
Notary Public
<PAGE>
EXHIBIT A
FORM OF CLASS A CERTIFICATES
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUSTEE OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.
Certificate No. : [__________]
Cut-off Date : With respect to any Mortgage Loan,
the later of (i) the date of
origination of such Mortgage Loan
or (ii) January 1, 1999
First Distribution Date : February 25, 1999
Initial Certificate Principal
Balance of this Certificate
("Denomination") : [$_________]
Original Class Certificate
Principal Balance of this
Class : [$_________]
Percentage Interest : 100%
Initial Pass-Through Rate* : [__________]
CUSIP : [__________]
Class : [A]
Assumed Maturity Date : [ ]
<PAGE>
Option One Mortgage Loan Trust 1999-1
Asset-Backed Certificates,
Series 1999-1
Class [A]
evidencing the Percentage Interest in the distributions allocable to
the Certificates of the above-referenced Class with respect to the
Trust consisting of first lien [fixed] [variable rate] mortgage loans
(the "Mortgage Loans")
FINANCIAL ASSET SECURITIES CORP., as Depositor
Principal in respect of this Certificate is distributable monthly as
set forth herein. Accordingly, the Certificate Principal Balance of this Class
[A] Certificate at any time may be less than the Initial Certificate Principal
Balance set forth on the face hereof, as described herein. This Class [A]
Certificate does not evidence an obligation of, or an interest in, and is not
guaranteed by the Depositor, the Seller, the Servicer, or the Trustee referred
to below or any of their respective affiliates.
This certifies that CEDE & CO. is the registered owner of the
Percentage Interest evidenced by this Class [A] Certificate (obtained by
dividing the Denomination of this Class [A] Certificate by the Original Class
Certificate Principal Balance) in certain monthly distributions with respect to
a Trust consisting primarily of the Mortgage Loans deposited by Financial Asset
Securities Corp. (the "Depositor"). The Trust was created pursuant to a Pooling
and Servicing Agreement dated as of January 1, 1999 (the "Agreement") among the
Depositor, Option One Mortgage Corporation, as seller and servicer (the "Seller"
and "Servicer"), and Norwest Bank Minnesota, National Association, a national
banking association, as Trustee (the "Trustee"). To the extent not defined
herein, the capitalized terms used herein have the meanings assigned in the
Agreement. This Class [A] Certificate is issued under and is subject to the
terms, provisions and conditions of the Agreement, to which Agreement the Holder
of this Class [A] Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound.
Reference is hereby made to the further provisions of this Class [A]
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
This Class [A] Certificate shall not be entitled to any benefit under
the Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.
<PAGE>
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Certificate to be duly executed.
Dated: [January ], 1999
OPTION ONE MORTGAGE LOAN TRUST 1999-1
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
not in its individual capacity, but
solely as Trustee
By _____________________________________
This is one of the Class [A] Certificates
referenced in the within-mentioned Agreement
By ________________________________
Authorized Signatory of
Norwest Bank Minnesota,
National Association, as Trustee
<PAGE>
[Reverse of Class [A] Certificate]
OPTION ONE MORTGAGE LOAN TRUST 1999-1
Asset-Backed Certificates,
Series 1999-1
This Certificate is one of a duly authorized issue of Certificates
designated as Option One Mortgage Loan Trust 1999-1, Asset-Backed Certificates,
Series 1999-1 (herein collectively called the "Certificates"), and representing
a beneficial ownership interest in the Trust created by the Agreement.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day then the
first Business Day following such Distribution Date (the "Distribution Date"),
commencing on the first Distribution Date specified on the face hereof, to the
Person in whose name this Certificate is registered at the close of business on
the applicable Record Date in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to Holders of Certificates of the Class to which this Certificate belongs on
such Distribution Date pursuant to the Agreement.
Distributions on this Certificate shall be made by check or money order
mailed to the address of the person entitled thereto as it appears on the
Certificate Register or, upon the request of a Certificateholder owning Regular
Certificates of a Class having Denominations aggregating at least $5,000,000, by
wire transfer or otherwise, as set forth in the Agreement. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the office or agency of the
Trustee specified in the notice to Certificateholders of such final
distribution.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any
time, with the consent of the Certificate Insurer, by the Depositor, the Seller,
the Servicer and the Trustee and of Holders of the requisite percentage of the
Percentage Interests of each Class of Certificates affected by such amendment,
as specified in the Agreement. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange therefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the office or agency maintained by the Trustee in New York, New York
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates of the same Class in authorized denominations and evidencing the
same aggregate Percentage Interest in the Trust will be issued to the designated
transferee or transferees.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Depositor, the Seller and the Trustee and any agent of the
Depositor or the Trustee may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Depositor, the
Trustee nor any such agent shall be affected by any notice to the contrary.
On any Distribution Date following the date at which the remaining
aggregate Principal Balance of the Mortgage Loans is less than 10% of the
aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date, the
Seller may purchase, in whole, from the Trust the Mortgage Loans at a purchase
price determined as provided in the Agreement. In the event that no such
optional termination occurs, the obligations and responsibilities created by the
Agreement will terminate upon notice to the Trustee upon the later of (A) the
payment in full of all amounts owing to the Certificate Insurer unless the
Certificate Insurer shall otherwise consent and (B) the earliest of (i) the
Distribution Date on which the aggregate Class Certificate Principal Balance of
the Class A Certificates has been reduced to zero, (ii) the final payment or
other liquidation of the last Mortgage Loan in the Trust and (iii) the
Distribution Date in _______ 2029. In no event, however, will the trust created
by the Agreement continue beyond the expiration of 21 years from the death of
the last survivor of the descendants living at the date of the Agreement of a
certain person named in the Agreement.
Capitalized terms used herein that are defined in the Agreement shall
have the meanings ascribed to them in the Agreement, and nothing herein shall be
deemed inconsistent with that meaning.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- -------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:
- -----------------------------------------------------------------------------.
Dated: _____________
_____________________________________
Signature by or on behalf of assignor
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of
distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds
to__________________________________________________________________________for
the account of______________________________________________________________,
account number ________________________, or, if mailed by check, to
_____________________________________________________________________Applicable
statements should be mailed to ___________________________________________
- -----------------------------------------------------------------------------.
This information is provided by _____________________________________,
the assignee named above, or _________________________________________________,
as its agent.
<PAGE>
EXHIBIT B
FORM OF CLASS R CERTIFICATES
SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY ONLY BE MADE IN A TRANSACTION EXEMPTED
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.
THIS CLASS R CERTIFICATE HAS NO PRINCIPAL BALANCE, DOES NOT BEAR INTEREST AND
WILL NOT RECEIVE ANY DISTRIBUTIONS EXCEPT AS PROVIDED HEREIN.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.
NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE DELIVERS TO THE TRUSTEE EITHER A REPRESENTATION LETTER TO THE EFFECT
THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR A PLAN SUBJECT TO SECTION
4975 OF THE CODE, OR AN OPINION OF COUNSEL IN ACCORDANCE WITH THE PROVISIONS OF
THE AGREEMENT REFERRED TO HEREIN. NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY
HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR TO THE CODE WITHOUT THE OPINION OF
COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO
EFFECT.
<PAGE>
Certificate No. : [__________]
Percentage Interest : 100%
OPTION ONE MORTGAGE LOAN TRUST 1999-1
Asset-Backed Certificates,
Series 1999-1
Class R
evidencing the Percentage Interest in the distributions allocable to
the Certificates of the above-referenced Class with respect to the
Trust consisting primarily of a pool of first and second lien fixed and
variable rate mortgage loans (the "Mortgage Loans")
FINANCIAL ASSET SECURITIES CORP., as Depositor
This Certificate does not evidence an obligation of, or an interest in,
and is not guaranteed by the Depositor, the Seller, the Servicer or the Trustee
referred to below or any of their respective affiliates.
This certifies that Option One Mortgage Corporation is the registered
owner of the Percentage Interest evidenced by this Certificate specified above
in the interest represented by all Certificates of the Class to which this
Certificate belongs in a Trust consisting primarily of the Mortgage Loans
deposited by Financial Asset Securities Corp. (the "Depositor"). The Trust was
created pursuant to a Pooling and Servicing Agreement dated as of January 1,
1999 (the "Agreement") among the Depositor, Option One Mortgage Corporation, as
seller and servicer (the "Seller" and "Servicer") and Norwest Bank Minnesota,
National Association, a national banking association, as trustee (the
"Trustee"). To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.
This Certificate does not have a principal balance or pass-through rate
and will be entitled to distributions only to the extent set forth in the
Agreement. In addition, any distribution of the proceeds of any remaining assets
of the Trust will be made only upon presentment and surrender of this
Certificate at the Corporate Trust Office or the office or agency maintained by
the Trustee in Minneapolis, Minnesota.
No transfer of a Certificate of this Class shall be made unless such
transfer is made pursuant to an effective registration statement under the Act
and any applicable state securities laws or is exempt from the registration
requirements under said Act and such laws. In the event that a transfer is to be
made in reliance upon an exemption from the Act and such laws, in order to
assure compliance with the Act and such laws, the Certificateholder desiring to
effect such transfer and such Certificateholder's prospective transferee shall
each certify to the Trustee and the Depositor in writing the facts surrounding
the transfer. In the event that such a transfer is not to be made pursuant to
Rule 144A of the Act, there shall be delivered to the Trustee and the Depositor
of an Opinion of Counsel that such transfer may be made pursuant to an exemption
from the Act, which Opinion of Counsel shall not be obtained at the expense of
the Trustee, the Seller or the Depositor; or there shall be delivered to the
Trustee and the Depositor a transferor certificate by the transferor and an
investment letter shall be executed by the transferee. The Holder hereof
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee and the Depositor against any liability that may result if the transfer
is not so exempt or is not made in accordance with such federal and state laws.
No transfer of a Certificate of this Class shall be made unless the
Trustee shall have received either (i) a representation letter from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan subject to Section 406 of ERISA or Section 4975 of the
Code, nor a person acting on behalf of any such plan, which representation
letter shall not be an expense of the Trustee, or (ii) if the purchaser is an
insurance company, a representation that the purchaser is an insurance company
which is purchasing such Certificates with funds contained in an "insurance
company general account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60")) and that the purchase and
holding of such Certificates are covered under PTCE 95-60. Notwithstanding
anything else to the contrary herein, any purported transfer of a Certificate of
this Class to or on behalf of an employee benefit plan subject to ERISA or to
the Code without the opinion of counsel satisfactory to the Trustee as described
above shall be void and of no effect.
Each Holder of this Certificate will be deemed to have agreed to be
bound by the restrictions of the Agreement, including but not limited to the
restrictions that (i) each person holding or acquiring any Ownership Interest in
this Certificate must be a Permitted Transferee, (ii) no Ownership Interest in
this Certificate may be transferred without delivery to the Trustee of (a) a
transfer affidavit of the proposed transferee and (b) a transfer certificate of
the transferor, each of such documents to be in the form described in the
Agreement, (iii) each person holding or acquiring any Ownership Interest in this
Certificate must agree to require a transfer affidavit and to deliver a transfer
certificate to the Trustee as required pursuant to the Agreement, (iv) each
person holding or acquiring an Ownership Interest in this Certificate must agree
not to transfer an Ownership Interest in this Certificate if it has actual
knowledge that the proposed transferee is not a Permitted Transferee and (v) any
attempted or purported transfer of any Ownership Interest in this Certificate in
violation of such restrictions will be absolutely null and void and will vest no
rights in the purported transferee. The Trustee will provide the Internal
Revenue Service and any pertinent persons with the information needed to compute
the tax imposed under the applicable tax laws on transfers of residual interests
to disqualified organizations, if any person other than a Permitted Transferee
acquires an Ownership Interest on a Class R Certificate in violation of the
restrictions mentioned above.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized officer of the Trustee.
* * *
<PAGE>
IN WITNESS WHEREOF, the Trustee on behalf of the Trust has caused this
Certificate to be duly executed.
Dated: [January ], 1999
OPTION ONE MORTGAGE LOAN TRUST 1999-1
By: NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Trustee
By ___________________________
This is one of the Class R Certificates
referenced in the within-mentioned Agreement
By ________________________________
Authorized Signatory of
Norwest Bank Minnesota, National Association,
a national banking association, as Trustee
<PAGE>
[Reverse of Class R Certificate]
Option One Mortgage Loan Trust 1999-1
Asset-Backed Certificates,
Series 1999-1
This Certificate is one of a duly authorized issue of Certificates
designated as Option One Mortgage Loan Trust 1999-1, Asset-Backed Certificates,
Series 1999-1 (herein collectively called the "Certificates"), and representing
a beneficial ownership interest in the Trust created by the Agreement.
The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.
This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.
Pursuant to the terms of the Agreement, a distribution will be made on
the 25th day of each month or, if such 25th day is not a Business Day then the
first Business Day following such Distribution Date (the "Distribution Date"),
commencing on the first Distribution Date specified on the face hereof, to the
Person in whose name this Certificate is registered at the close of business on
the applicable Record Date in an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount required to be distributed
to Holders of Certificates of the Class to which this Certificate belongs on
such Distribution Date pursuant to the Agreement.
Distributions on this Certificate shall be made by check or money order
mailed to the address of the person entitled thereto as it appears on the
Certificate Register or, upon the request of a Certificateholder owning Regular
Certificates of a Class having Denominations aggregating at least $5,000,000, by
wire transfer or otherwise, as set forth in the Agreement. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the office or agency of the
Trustee specified in the notice to Certificateholders of such final
distribution.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any
time, with the consent of the Certificate Insurer, by the Depositor, the Seller,
the Servicer and the Trustee and of Holders of the requisite percentage of the
Percentage Interests of each Class of Certificates affected by such amendment,
as specified in the Agreement. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange therefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Depositor, the Seller and the Trustee and any agent of the
Depositor or the Trustee may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Depositor, the
Trustee nor any such agent shall be affected by any notice to the contrary.
On any Distribution Date following the date at which the remaining
aggregate Principal Balance of the Mortgage Loans is less than 10% of the
aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date
specified in the Agreement, the Seller may purchase, in whole, from the Trust
the Mortgage Loans at a purchase price determined as provided in the Agreement.
In the event that no such optional termination occurs, the obligations and
responsibilities created by the Agreement will terminate upon notice to the
Trustee upon the later of (A) the payment in full of all amounts owing to the
Certificate Insurer unless the Certificate Insurer shall otherwise consent and
(B) the earliest of (i) the Distribution Date on which the aggregate Class
Certificate Principal Balance of the Class A and Class B Certificates has been
reduced to zero, (ii) the final payment or other liquidation of the last
Mortgage Loan in the Trust and (iii) the Distribution Date in ____ 2029. In no
event, however, will the trust created by the Agreement continue beyond the
expiration of 21 years from the death of the last survivor of the descendants
living at the date of the Agreement of a certain person named in the Agreement.
Capitalized terms used herein that are defined in the Agreement shall
have the meanings ascribed to them in the Agreement, and nothing herein shall be
deemed inconsistent with that meaning.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- -------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)
the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust.
I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:
- ------------------------------------------------------------------------------
Dated: _____________
____________________________________
Signature by or on behalf of assignor
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds
to_____________________________________________________________________________
for the account of__________________________________________________________,
account number ________________________, or, if mailed by check, to
___________________--__________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________.
This information is provided by ______________________________________,
the assignee named above, or __________________________________________________,
as its agent.
<PAGE>
EXHIBIT C
[RESERVED]
<PAGE>
EXHIBIT D
MORTGAGE LOAN SCHEDULE
[PROVIDED TO TRUSTEE ONLY]
<PAGE>
EXHIBIT E
REQUEST FOR RELEASE OF DOCUMENTS
To: Norwest Bank Minnesota, National Association,
1051 10TH Avenue S.E.
Minneapolis, MN 55414
Attn: _____________________
Re: Pooling and Servicing Agreement dated as of January 1, 1999 among
Financial Asset Securities Corp., as Depositor, Option One Mortgage
Corporation, as Seller and Servicer and Norwest Bank Minnesota,
National Association, as Trustee
In connection with the administration of the Mortgage Loans held by you
as Trustee pursuant to the above-captioned Pooling and Servicing
Agreement, we request the release, and hereby acknowledge receipt, of
the Trustee's Mortgage File for the Mortgage Loan described below, for
the reason indicated.
Mortgage Loan Number:
Mortgagor Name, Address & Zip Code:
Reason for Requesting Documents (check one):
_____ 1. Mortgage Paid in Full
_____ 2. Foreclosure
_____ 3. Substitution
_____ 4. Other Liquidation (Repurchases, etc.)
_____ 5. Nonliquidation Reason: _________________
Address to which Trustee should deliver the Trustee's Mortgage File:
______________________________________________________________________________
______________________________________________________________________________
By:______________________
(authorized signer)
Issuer:____________________
Address:___________________
___________________
Date: ___________________
Trustee
Norwest Bank Minnesota, National Association
Please acknowledge the execution of the above request by your signature
and date below:
---------------------- ----------
Signature Date
Documents returned to Trustee:
---------------------- ----------
Trustee Date
<PAGE>
EXHIBIT F-1
FORM OF TRUSTEE'S INITIAL CERTIFICATION
___________
Date
Financial Asset Securities Corp.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), dated as of January 1, 1999 among Financial Asset Securities Corp.,
as Depositor, Option One Mortgage Corporation, as Seller and Servicer and
Norwest Bank Minnesota, National Association, as Trustee with respect to Option
One Mortgage Loan Trust 1999-1, Asset-Backed Certificates, Series 1999-1 .
Ladies and Gentlemen:
In accordance with Section 2.02 of the Pooling and Servicing Agreement,
subject to review of the contents thereof, the undersigned, as Trustee, hereby
certifies that it (or its custodian) has received the documents listed in
Section 2.01 of the Pooling and Servicing Agreement for each Mortgage File
pertaining to each Mortgage Loan listed on Exhibit D, to the Pooling and
Servicing Agreement, subject to any exceptions noted on Schedule I hereto.
Capitalized words and phrases used herein and not otherwise defined
herein shall have the respective meanings assigned to them in the Pooling and
Servicing Agreement. This Certificate is subject in all respects to the terms of
Section 2.02 of the Pooling and Servicing Agreement and the Pooling and
Servicing Agreement sections cross-referenced therein.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee
By:______________________________
Name:
Title:
<PAGE>
EXHIBIT F-2
FORM OF TRUSTEE'S FINAL CERTIFICATION
___________
[Date]
Financial Asset Securities Corp.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), dated as of January 1, 1999 among Financial Asset Securities Corp.,
as Depositor, Option One Mortgage Corporation, as Seller and Servicer and
Norwest Bank Minnesota, National Association, as Trustee with respect to Option
One Mortgage Loan Trust 1999-1, Asset-Backed Certificates, Series 1999-1 .
Ladies and Gentlemen:
In accordance with Section 2.02 of the Pooling and Servicing Agreement,
the undersigned, as Trustee, hereby certifies that as to each Mortgage Loan
listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full
or listed on Schedule I hereto) it (or its custodian) has received the
applicable documents listed in Section 2.01 of the Pooling and Servicing
Agreement.
The undersigned hereby certifies that as to each Mortgage Loan
identified on the Mortgage Loan Schedule, other than any Mortgage Loan listed on
Schedule I hereto, it has reviewed the documents listed above and has determined
that each such document appears to be complete and, based on an examination of
such documents, the information set forth in the Mortgage Loan Schedule is
correct.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement. This
Certificate is qualified in all respects by the terms of said Pooling and
Servicing Agreement.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT F-3
FORM OF RECEIPT OF MORTGAGE NOTE
Financial Asset Securities Corp.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Option One Mortgage Loan Trust 1999-1,
Asset-Backed Certificates, Series 1999-1
Ladies and Gentlemen:
Pursuant to Section 2.01 of the Pooling and Servicing Agreement, dated
as of January 1, 1999, among Financial Asset Securities Corp., as Depositor,
Option One Mortgage Loan Corporation, as Seller (the "Seller" and "Servicer and
Norwest Bank Minnesota, National Association, as Trustee (the "Trustee"), we
hereby acknowledge the receipt of the original Mortgage Note (a copy of which is
attached hereto as Exhibit 1) with any exceptions thereto listed on Exhibit 2.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By:________________________________________
Name:
Title:
<PAGE>
EXHIBIT G
[RESERVED]
<PAGE>
EXHIBIT H
FORM OF LOST NOTE AFFIDAVIT
Personally appeared before me the undersigned authority to administer
oaths, ______________________ who first being duly sworn deposes and says:
Deponent is ______________________ of ______________________________, successor
by merger to _________________________________________ ("Seller") and who has
personal knowledge of the facts set out in this affidavit.
On ___________________, _________________________ did execute and
deliver a promissory note in the principal amount of $__________.
That said note has been misplaced or lost through causes unknown and is
presently lost and unavailable after diligent search has been made. Seller's
records show that an amount of principal and interest on said note is still
presently outstanding, due, and unpaid, and Seller is still owner and holder in
due course of said lost note.
Seller executes this Affidavit for the purpose of inducing Norwest Bank
Minnesota, National Association, as trustee on behalf of Option One Mortgage
Loan Trust 1999-1, Asset-Backed Certificates, Series 1999-1, to accept the
transfer of the above described loan from Seller.
Seller agrees to indemnify Norwest Bank Minnesota, National
Association, Financial Asset Securities Corp. and Option One Mortgage
Corporation harmless for any losses incurred by such parties resulting from the
above described promissory note has been lost or misplaced.
By: __________________________________
__________________________________
STATE OF )
) SS:
COUNTY OF )
On this ____ day of _______ 199__, before me, a Notary Public, in and
for said County and State, appeared ________________________, who acknowledged
the extension of the foregoing and who, having been duly sworn, states that any
representations therein contained are true.
Witness my hand and Notarial Seal this ____ day of _______ 199__.
__________________________
__________________________
My commission expires _______________.
<PAGE>
EXHIBIT I
FORM OF ERISA REPRESENTATION
Financial Asset Securities Corp.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Option One Mortgage Loan Trust 1999-1,
Asset-Backed Certificates, Series 1999-1
Ladies and Gentlemen:
1. The undersigned is the ______________________ of (the
"Transferee") a [corporation duly organized] and existing under the laws of
__________, on behalf of which he makes this affidavit.
2. The Transferee either (x) is not an employee benefit plan
subject to Section 406 or Section 407 of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code"), the Trustee of any such plan or a person
acting on behalf of any such plan nor a person using the assets of any such plan
or (2) if the Transferee is an insurance company, such Transferee is purchasing
such Certificates with funds contained in an "Insurance Company General Account"
(as such term is defined in Section v(e) of the Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates are covered under PTCE 95-60; or (y) shall deliver to the Trustee
and the Depositor an opinion of counsel (a "Benefit Plan Opinion") satisfactory
to the Trustee and the Depositor, and upon which the Trustee and the Depositor
shall be entitled to rely, to the effect that the purchase or holding of such
Certificate by the Transferee will not result in the assets of the Trust Fund
being deemed to be plan assets and subject to the prohibited transaction
provisions of ERISA or the Code and will not subject the Trustee or the
Depositor to any obligation in addition to those undertaken by such entities in
the Pooling and Servicing Agreement, which opinion of counsel shall not be an
expense of the Trustee or the Depositor.
3. The Transferee hereby acknowledges that under the terms of
the Pooling and Servicing Agreement (the "Agreement") among Financial Asset
Securities Corp., as Depositor, Option One Mortgage Corporation, as Seller and
Servicer (the "Seller" and "Servicer") and Norwest Bank Minnesota, National
Association, as Trustee (the "Trustee"), no transfer of the ERISA-Restricted
Certificates shall be permitted to be made to any person unless the Depositor
and Trustee have received a certificate from such transferee in the form hereof.
<PAGE>
IN WITNESS WHEREOF, the Transferee has executed this
certificate.
---------------------------------
[Transferee]
By:______________________________
Name:
Title:
<PAGE>
EXHIBIT J
FORM OF INVESTMENT LETTER [NON-RULE 144A]
[DATE]
[Depositor]
[Depositor Address]
[Trustee]
[Trustee Address]
Re: Option One Mortgage Loan Trust 1999-1,
Asset-Backed Certificates, Series 1999-1
Ladies and Gentlemen:
In connection with our acquisition of the above-captioned
Certificates, we certify that (a) we understand that the Certificates are not
being registered under the Securities Act of 1933, as amended (the "Act"), or
any state securities laws and are being transferred to us in a transaction that
is exempt from the registration requirements of the Act and any such laws, (b)
we are an "accredited investor," as defined in Regulation D under the Act, and
have such knowledge and experience in financial and business matters that we are
capable of evaluating the merits and risks of investments in the Certificates,
(c) we have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) we are not an employee benefit plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended, or a
plan that is subject to Section 4975 of the Internal Revenue Code of 1986, as
amended, nor are we acting on behalf of any such plan, (e) we are acquiring the
Certificates for investment for our own account and not with a view to any
distribution of such Certificates (but without prejudice to our right at all
times to sell or otherwise dispose of the Certificates in accordance with clause
(g) below), (f) we have not offered or sold any Certificates to, or solicited
offers to buy any Certificates from, any person, or otherwise approached or
negotiated with any person with respect thereto, or taken any other action which
would result in a violation of Section 5 of the Act, and (g) we will not sell,
transfer or otherwise dispose of any Certificates unless (1) such sale, transfer
or other disposition is made pursuant to an effective registration statement
under the Act or is exempt from such registration requirements, and if
requested, we will at our expense provide an opinion of counsel satisfactory to
the addressees of this Certificate that such sale, transfer or other disposition
may be made pursuant to an exemption from the Act, (2) the purchaser or
transferee of such Certificate has executed and delivered to you a certificate
to substantially the same effect as this certificate, and (3) the purchaser or
transferee has otherwise complied with any conditions for transfer set forth in
the Pooling and Servicing Agreement.
Very truly yours,
[NAME OF TRANSFEREE]
By:_________________________
Authorized Officer
<PAGE>
FORM OF RULE 144A INVESTMENT LETTER
[DATE]
[Depositor]
[Depositor Address]
[Trustee]
[Trustee Address]
Re: Option One Mortgage Loan Trust 1999-1,
Asset-Backed Certificates, Series 1999-1
Ladies and Gentlemen:
In connection with our acquisition of the above Certificates
we certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we have had
the opportunity to ask questions of and receive answers from the Depositor
concerning the purchase of the Certificates and all matters relating thereto or
any additional information deemed necessary to our decision to purchase the
Certificates, (c) we are not an employee benefit plan that is subject to the
Employee Retirement Income Security Act of 1974, as amended, or a plan that is
subject to Section 4975 of the Internal Revenue Code of 1986, as amended, nor
are we acting on behalf of any such plan, (d) we have not, nor has anyone acting
on our behalf offered, transferred, pledged, sold or otherwise disposed of the
Certificates, any interest in the Certificates or any other similar security to,
or solicited any offer to buy or accept a transfer, pledge or other disposition
of the Certificates, any interest in the Certificates or any other similar
security from, or otherwise approached or negotiated with respect to the
Certificates, any interest in the Certificates or any other similar security
with, any person in any manner, or made any general solicitation by means of
general advertising or in any other manner, or taken any other action, that
would constitute a distribution of the Certificates under the Securities Act or
that would render the disposition of the Certificates a violation of Section 5
of the Securities Act or require registration pursuant thereto, nor will act,
nor has authorized or will authorize any person to act, in such manner with
respect to the Certificates, (e) we are a "qualified institutional buyer" as
that term is defined in Rule 144A under the Securities Act and have completed
either of the forms of certification to that effect attached hereto as Annex 1
or Annex 2. We are aware that the sale to us is being made in reliance on Rule
144A. We are acquiring the Certificates for our own account or for resale
pursuant to Rule 144A and further, understand that such Certificates may be
resold, pledged or transferred only (i) to a person reasonably believed to be a
qualified institutional buyer that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is given that the
resale, pledge or transfer is being made in reliance on Rule 144A, or (ii)
pursuant to another exemption from registration under the Securities Act.
Very truly yours,
[NAME OF TRANSFEREE]
By:__________________________
Authorized Officer
<PAGE>
ANNEX 1 TO EXHIBIT J
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees Other Than Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
i. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.
ii. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis $ 1 in securities (except for the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being calculated in accordance with Rule 144A and (ii)
the Buyer satisfies the criteria in the category marked below.
___ Corporation, etc. The Buyer is a corporation
(other than a bank, savings and loan association or similar
institution), Massachusetts or similar business trust,
partnership, or charitable organization described in Section
501(c)(3) of the Internal Revenue Code of 1986, as amended.
___ Bank. The Buyer (a) is a national bank or banking
institution organized under the laws of any State, territory
or the District of Columbia, the business of which is
substantially confined to banking and is supervised by the
State or territorial banking commission or similar official or
is a foreign bank or equivalent institution, and (b) has an
audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements, a copy of which is
attached hereto.
___ Savings and Loan. The Buyer (a) is a savings and
loan association, building and loan association, cooperative
bank, homestead association or similar institution, which is
supervised and examined by a State or Federal authority having
supervision over any such institutions or is a foreign savings
and loan association or equivalent institution and (b) has an
audited net worth of at least $25,000,000 as demonstrated in
its latest annual financial statements, a copy of which is
attached hereto.
___ Broker-dealer. The Buyer is a dealer registered
pursuant to Section 15 of the Securities Exchange Act of 1934.
___ Insurance Company. The Buyer is an insurance
company whose primary and predominant business activity is the
writing of insurance or the reinsuring of risks underwritten
by insurance companies and which is subject to supervision by
the insurance commissioner or a similar official or agency of
a State, territory or the District of Columbia.
___ State or Local Plan. The Buyer is a plan
established and maintained by a State, its political
subdivisions, or any agency or instrumentality of the State or
its political subdivisions, for the benefit of its employees.
___ ERISA Plan. The Buyer is an employee benefit plan
within the meaning of Title I of the Employee Retirement
Income Security Act of 1974.
___ Investment Advisor. The Buyer is an investment
advisor registered under the Investment Advisors Act of 1940.
___ Small Business Investment Company. Buyer is a
small business investment company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958.
___ Business Development Company. Buyer is a business
development company as defined in Section 202(a)(22) of the
Investment Advisors Act of 1940.
iii. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iv) bank deposit notes and certificates of deposit,
(v) loan participations, (vi) repurchase agreements, (vii) securities owned but
subject to a repurchase agreement and (viii) currency, interest rate and
commodity swaps.
iv. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Buyer, the
Buyer used the cost of such securities to the Buyer and did not include any of
the securities referred to in the preceding paragraph, except (i) where the
Buyer reports its securities holdings in its financial statements on the basis
of their market value, and (ii) no current information with respect to the cost
of those securities has been published. If clause (ii) in the preceding sentence
applies, the securities may be valued at market. Further, in determining such
aggregate amount, the Buyer may have included securities owned by subsidiaries
of the Buyer, but only if such subsidiaries are consolidated with the Buyer in
its financial statements prepared in accordance with generally accepted
accounting principles and if the investments of such subsidiaries are managed
under the Buyer's direction. However, such securities were not included if the
Buyer is a majority-owned, consolidated subsidiary of another enterprise and the
Buyer is not itself a reporting company under the Securities Exchange Act of
1934, as amended.
v. The Buyer acknowledges that it is familiar with Rule 144A
and understands that the seller to it and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.
vi. Until the date of purchase of the Rule 144A Securities,
the Buyer will notify each of the parties to which this certification is made of
any changes in the information and conclusions herein. Until such notice is
given, the Buyer's purchase of the Certificates will constitute a reaffirmation
of this certification as of the date of such purchase. In addition, if the Buyer
is a bank or savings and loan is provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.
Print Name of Buyer
By:_______________________
Name:
Title:
Date:_____________________
<PAGE>
ANNEX 2 TO EXHIBIT J
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
[For Transferees That are Registered Investment Companies]
The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:
1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.
2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i) the
Buyer is an investment company registered under the Investment Company Act of
1940, as amended and (ii) as marked below, the Buyer alone, or the Buyer's
Family of Investment Companies, owned at least $100,000,000 in securities (other
than the excluded securities referred to below) as of the end of the Buyer's
most recent fiscal year. For purposes of determining the amount of securities
owned by the Buyer or the Buyer's Family of Investment Companies, the cost of
such securities was used, except (i) where the Buyer or the Buyer's Family of
Investment Companies reports its securities holdings in its financial statements
on the basis of their market value, and (ii) no current information with respect
to the cost of those securities has been published. If clause (ii) in the
preceding sentence applies, the securities may be valued at market.
___ The Buyer owned $ in securities (other than the
excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated
in accordance with Rule 144A).
___ The Buyer is part of a Family of Investment
Companies which owned in the aggregate $ in securities (other
than the excluded securities referred to below) as of the end
of the Buyer's most recent fiscal year (such amount being
calculated in accordance with Rule 144A).
3. The term "Family of Investment Companies" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).
4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) securities issued or guaranteed by
the U.S. or any instrumentality thereof, (iii) bank deposit notes and
certificates of deposit, (iv) loan participations, (v) repurchase agreements,
(vi) securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.
5. The Buyer is familiar with Rule 144A and understands that
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.
6. Until the date of purchase of the Certificates, the
undersigned will notify the parties listed in the Rule 144A Transferee
Certificate to which this certification relates of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.
Print Name of Buyer or Adviser
By:_______________________
Name:
Title:
Date:_____________________
IF AN ADVISER:
__________________________
Print Name of Buyer
Date:_____________________
<PAGE>
Exhibit 1
<PAGE>
Exhibit 2
<PAGE>
EXHIBIT K
AFFIDAVIT OF TRANSFER OF RESIDUAL CERTIFICATES
PURSUANT TO SECTION 5.02(d)
OPTION ONE MORTGAGE LOAN TRUST 1999-1,
ASSET-BACKED CERTIFICATES, SERIES 1999-1
STATE OF )
) ss.:
COUNTY OF )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is an officer of , the proposed Transferee of an
Ownership Interest in a Class R Certificate (the "Certificate") issued pursuant
to the Pooling and Servicing Agreement, (the "Agreement"), relating to the
above-referenced Certificates, among Financial Asset Securities Corp., as
Depositor, Option One Mortgage Corporation, as Seller and Servicer (the "Seller"
and "Servicer") and Norwest Bank Minnesota, National Association, as Trustee
(the "Trustee"). Capitalized terms used, but not defined herein or in Exhibit 1
hereto, shall have the meanings ascribed to such terms in the Agreement. The
Transferee has authorized the undersigned to make this affidavit on behalf of
the Transferee.
2. The Transferee is, as of the date hereof, and will be, as of the
date of the Transfer, a Permitted Transferee. The Transferee is acquiring its
Ownership Interest in the Certificate either (i) for its own account or (ii) as
nominee, trustee or agent for another Person and has attached hereto an
affidavit from such Person in substantially the same form as this affidavit. The
Transferee has no knowledge that any such affidavit is false.
3. The Transferee has been advised of, and understands that (i) a tax
will be imposed on Transfers of the Certificate to Persons that are not
Permitted Transferees; (ii) such tax will be imposed on the transferor, or, if
such Transfer is through an agent (which includes a broker, nominee or
middleman) for a Person that is not a Permitted Transferee, on the agent; and
(iii) the Person otherwise liable for the tax shall be relieved of liability for
the tax if the subsequent Transferee furnished to such Person an affidavit that
such subsequent Transferee is a Permitted Transferee and, at the time of
Transfer, such Person does not have actual knowledge that the affidavit is
false.
4. The Transferee has been advised of, and understands that a tax will
be imposed on a "pass-through entity" holding the Certificate if at any time
during the taxable year of the pass-through entity a Person that is not a
Permitted Transferee is the record holder of an interest in such entity. The
Transferee understands that such tax will not be imposed for any period with
respect to which the record holder furnishes to the pass-through entity an
affidavit that such record holder is a Permitted Transferee and the pass-through
entity does not have actual knowledge that such affidavit is false. (For this
purpose, a "pass-through entity" includes a regulated investment company, a real
estate investment trust or common trust fund, a partnership, trust or estate,
and certain cooperatives and, except as may be provided in Treasury Regulations,
persons holding interests in pass-through entities as a nominee for another
Person.)
5. The Transferee has reviewed the provisions of Section 5.02(d) of the
Agreement (attached hereto as Exhibit 2 and incorporated herein by reference)
and understands the legal consequences of the acquisition of an Ownership
Interest in the Certificate including, without limitation, the restrictions on
subsequent Transfers and the provisions regarding voiding the Transfer and
mandatory sales. The Transferee expressly agrees to be bound by and to abide by
the provisions of Section 5.02(d) of the Agreement and the restrictions noted on
the face of the Certificate. The Transferee understands and agrees that any
breach of any of the representations included herein shall render the Transfer
to the Transferee contemplated hereby null and void.
6. The Transferee agrees to require a Transfer Affidavit from any
Person to whom the Transferee attempts to Transfer its Ownership Interest in the
Certificate, and in connection with any Transfer by a Person for whom the
Transferee is acting as nominee, trustee or agent, and the Transferee will not
Transfer its Ownership Interest or cause any Ownership Interest to be
Transferred to any Person that the Transferee knows is not a Permitted
Transferee. In connection with any such Transfer by the Transferee, the
Transferee agrees to deliver to the Trustee a certificate substantially in the
form set forth as Exhibit K to the Agreement (a "Transferor Certificate") to the
effect that such Transferee has no actual knowledge that the Person to which the
Transfer is to be made is not a Permitted Transferee.
7. The Transferee does not have the intention to impede the assessment
or collection of any tax legally required to be paid with respect to the
Certificate.
8. The Transferee's taxpayer identification number is .
9. The Transferee is a U.S. Person as defined in Code Section
7701(a)(30).
10. The Transferee is aware that the Certificate may be a "noneconomic
residual interest" within the meaning of proposed Treasury regulations
promulgated pursuant to the Code and that the transferor of a noneconomic
residual interest will remain liable for any taxes due with respect to the
income on such residual interest, unless no significant purpose of the transfer
was to impede the assessment or collection of tax.
11. The Transferee is not an employee benefit plan that is subject to
ERISA or a plan that is subject to Section 4975 of the Code, nor are we acting
on behalf of such a plan.
<PAGE>
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
duly authorized officer and its corporate seal to be hereunto affixed, duly
attested, this day of , 19 .
[NAME OF TRANSFEREE]
By:______________________
Name:
Title:
[Corporate Seal]
ATTEST:
_____________________
[Assistant] Secretary
Personally appeared before me the above-named , known or proved to me
to be the same person who executed the foregoing instrument and to be the of the
Transferee, and acknowledged that he executed the same as his free act and deed
and the free act and deed of the Transferee.
Subscribed and sworn before me this ______ day of ________, 19__.
____________________
NOTARY PUBLIC
My Commission expires the
____ day of _____, 19___.
<PAGE>
EXHIBIT 1 to EXHIBIT K
Certain Definitions
"Ownership Interest": As to any Certificate, any ownership interest in
such Certificate, including any interest in such Certificate as the Holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial.
"Permitted Transferee": Any Person other than (i) the United States,
any State or political subdivision thereof, or any agency or instrumentality of
any of the foregoing, (ii) a foreign government, International Organization or
any agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in Code Section 521) which is
exempt from tax imposed by Chapter 1 of the Code (including the tax imposed by
Code Section 511 on unrelated business taxable income) on any excess inclusions
(as defined in Code Section 860E(c)(1)) with respect to any Residual
Certificate, (iv) rural electric and telephone cooperatives described in Code
Section 1381(a)(2)(c), (v) a Person that is not a citizen or resident of the
United States, a corporation, partnership, or other entity created or organized
in or under the laws of the United States, any state thereof or the District of
Columbia, or an estate or trust whose income from sources without the United
States is includible in gross income for United States federal income tax
purposes regardless of its connection with the conduct of a trade or business
within the United States, (vi) an "electing large partnership" as set forth in
Code Section 775, and (vii) any other Person so designated by the Trustee based
upon an Opinion of Counsel that the Transfer of an Ownership Interest in a
Residual Certificate to such Person may cause the Trust Fund to fail to qualify
as a REMIC at any time that certain Certificates are Outstanding. The terms
"United States," "State" and "International Organization" shall have the
meanings set forth in Code Section 7701 or successor provisions. A corporation
will not be treated as an instrumentality of the United States or of any State
or political subdivision thereof if all of its activities are subject to tax,
and, with the exception of the FHLMC, a majority of its board of directors is
not selected by such governmental unit.
"Person": Any individual, corporation, partnership, joint venture,
bank, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
"Transfer": Any direct or indirect transfer or sale of any Ownership
Interest in a Certificate, including the acquisition of a Certificate by the
Depositor.
"Transferee": Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.
<PAGE>
EXHIBIT 2 to EXHIBIT K
Section 5.02(d) of the Agreement
(d) No transfer, sale, pledge or other disposition of any Class R
Certificate shall be made unless such disposition is exempt from the
registration requirements of the Securities Act of 1933, as amended (the "1933
Act"), and any applicable state securities laws or is made in accordance with
the 1933 Act and laws. In the event of any such transfer, other than the
transfer of the Tax Matters Person Residual Interest to the Trustee (i) unless
such transfer is made in reliance upon Rule 144A under the 1933 Act, the Trustee
and the Depositor shall require a written Opinion of Counsel (which may be
in-house counsel) acceptable to and in form and substance reasonably
satisfactory to the Trustee and the Depositor that such transfer may be made
pursuant to an exemption, describing the applicable exemption and the basis
therefor, from the 1933 Act or is being made pursuant to the 1933 Act, which
Opinion of Counsel shall not be an expense of the Trustee or the Depositor or
(ii) the Trustee shall require the transferor to execute a transferor
certificate (in substantially the form attached hereto as Exhibit K) and the
transferee to execute an investment letter (in substantially the form attached
hereto as Exhibit K) acceptable to and in form and substance reasonably
satisfactory to the Depositor and the Trustee certifying to the Depositor and
the Trustee the facts surrounding such transfer, which investment letter shall
not be an expense of the Trustee or the Depositor. The Holder of a Class R
Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee and the Depositor against any liability that may result if
the transfer is not so exempt or is not made in accordance with such federal and
state laws.
No transfer of a Class R Certificate shall be made unless the Trustee
shall have received either (i) a representation from the transferee of such
Certificate acceptable to and in form and substance satisfactory to the Trustee,
such requirement is satisfied only by the Trustee's receipt of a representation
letter from the transferee substantially in the form of Exhibit I or Exhibit K,
to the effect that such transferee is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan subject to Section 4975 of
the Code, nor a person acting on behalf of any such plan or arrangement nor
using the assets of any such plan or arrangement to effect such transfer, or
(ii) if the purchaser is an insurance company, a representation that the
purchaser is an insurance company which is purchasing such Certificates with
funds contained in an "insurance company general account" (as such term is
defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60") and that the purchase and holding of such Certificates are covered under
PTCE 95-60 or (iii) in the case of any such Class R Certificate presented for
registration in the name of an employee benefit plan subject to ERISA, or a plan
or arrangement subject to Section 4975 of the Code (or comparable provisions of
any subsequent enactments), or a trustee of any such plan or any other person
acting on behalf of any such plan or arrangement or using such plan's or
arrangement's assets, an Opinion of Counsel satisfactory to the Trustee, which
Opinion of Counsel shall not be an expense of either the Trustee or the Trust,
addressed to the Trustee, to the effect that the purchase or holding of such
Class R Certificate will not result in the assets of the Trust being deemed to
be "plan assets" and subject to the prohibited transaction provisions of ERISA
and the Code and will not subject the Trustee to any obligation in addition to
those expressly undertaken in this Agreement or to any liability.
Notwithstanding anything else to the contrary herein, any purported transfer of
a Class R Certificate to or on behalf of an employee benefit plan subject to
ERISA or to the Code without the delivery to the Trustee of an Opinion of
Counsel satisfactory to the Trustee as described above shall be void and of no
effect.
Each Person who has or who acquires any Ownership Interest in a Class R
Certificate shall be deemed by the acceptance or acquisition of such Ownership
Interest to have agreed to be bound by the following provisions and to have
irrevocably appointed the Depositor or its designee as its attorney-in-fact to
negotiate the terms of any mandatory sale under clause (v) below and to execute
all instruments of transfer and to do all other things necessary in connection
with any such sale, and the rights of each Person acquiring any Ownership
Interest in a Class R Certificate are expressly subject to the following
provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall be a Permitted Transferee and shall
promptly notify the Trustee of any change or impending change
in its status as a Permitted Transferee.
(ii) No Person shall acquire an Ownership Interest in a Class R
Certificate unless such Ownership Interest is a pro rata
undivided interest.
(iii)In connection with any proposed transfer of any Ownership
Interest in a Class R Certificate, the Trustee shall as a
condition to such consent, require delivery to it, in form
and substance satisfactory to it, of each of the following:
(A) an affidavit in the form of Exhibit I hereto from the
proposed transferee to the effect that such transferee is
a Permitted Transferee and that it is not acquiring its
Ownership Interest in the Class R Certificate that is the
subject of the proposed transfer as a nominee, trustee or
agent for any Person who is not a Permitted Transferee;
and
(B) a covenant of the proposed transferee to the effect that
the proposed transferee agrees to be bound by and to
abide by the transfer restrictions applicable to the
Class R Certificates.
(iv) Any attempted or purported transfer of any Ownership Interest
in a Class R Certificate in violation of the provisions of
this Section 5.02 shall be absolutely null and void and shall
vest no rights in the purported transferee. If any purported
transferee shall, in violation of the provisions of this
Section 5.02, become a Holder of a Class R Certificate, then
the prior Holder of such Class R Certificate that is a
Permitted Transferee shall, upon discovery that the
registration of transfer of such Class R Certificate was not
in fact permitted by this Section 5.02, be restored to all
rights as Holder thereof retroactive to the date of
registration of transfer of such Class R Certificate. The
Trustee shall be under no liability to any Person for any
registration of transfer of a Class R Certificate that is in
fact not permitted by this Section 5.02 or for making any
distributions due on such Class R Certificate to the Holder
thereof or taking any other action with respect to such
Holder under the provisions of the Agreement so long as the
transfer was not registered upon the express written consent
of the Trustee. The Trustee shall be entitled to recover from
any Holder of a Class R Certificate that was in fact not a
Permitted Transferee at the time such distributions were made
all distributions made on such Class R Certificate. Any such
distributions so recovered by the Trustee shall be
distributed and delivered by the Trustee to the prior Holder
of such Class R Certificate that is a Permitted Transferee.
(v) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Class R Certificate in violation of
the restrictions in this Section 5.02, then the Trustee shall
have the right but not the obligation, without notice to the
Holder of such Class R Certificate or any other Person having
an Ownership Interest therein, to notify the Depositor to
arrange for the sale of such Class R Certificate. The
proceeds of such sale, net of commissions (which may include
commissions payable to the Depositor or its affiliates in
connection with such sale), expenses and taxes due, if any,
will be remitted by the Trustee to the previous Holder of
such Class R Certificate that is a Permitted Transferee,
except that in the event that the Trustee determines that the
Holder of such Class R Certificate may be liable for any
amount due under this Section 5.02 or any other provisions of
this Agreement, the Trustee may withhold a corresponding
amount from such remittance as security for such claim. The
terms and conditions of any sale under this clause (v) shall
be determined in the sole discretion of the Trustee, and it
shall not be liable to any Person having an Ownership
Interest in a Class R Certificate as a result of its exercise
of such discretion.
(vi) If any Person other than a Permitted Transferee acquires any
Ownership Interest in a Class R Certificate in violation of
the restrictions in this Section 5.02, then the Trustee,
based on information provided to the Trustee by the Depositor
will provide to the Internal Revenue Service, and to the
persons specified in Sections 860E(e)(3) and (6) of the Code,
information needed to compute the tax imposed under Section
860E(e)(5) of the Code on transfers of residual interests to
disqualified organizations.
The foregoing provisions of this Section 5.02(d) shall cease to apply
to transfers occurring on or after the date on which there shall have been
delivered to the Trustee, in form and substance satisfactory to the Trustee, (i)
written notification from each Rating Agency that the removal of the
restrictions on Transfer set forth in Section 5.02 will not cause such Rating
Agency to downgrade its rating of the Certificates and (ii) an Opinion of
Counsel to the effect that such removal will not cause the Trust to fail to
qualify as a REMIC or have any adverse impact on the REMIC.
The Tax Matters Person Residual Interest shall at all times be
registered in the name of Norwest Bank Minnestoa, National Association.
<PAGE>
EXHIBIT L
FORM OF TRANSFEROR CERTIFICATE
[DATE]
Financial Asset Securities Corp.
600 Steamboat Road
Greenwich, Connecticut 06830
Re: Option One Mortgage Loan Trust 1999-1,
Asset-Backed Certificates, Series 1999-1
Ladies and Gentlemen:
In connection with our disposition of the above Certificates we certify
that (a) we understand that the Certificates have not been registered under the
Securities Act of 1933, as amended (the "Act"), and are being disposed by us in
a transaction that is exempt from the registration requirements of the Act, (b)
we have not offered or sold any Certificates to, or solicited offers to buy any
Certificates from, any person, or otherwise approached or negotiated with any
person with respect thereto, in a manner that would be deemed, or taken any
other action which would result in, a violation of Section 5 of the Act, (c) to
the extent we are disposing of a Class [ ] Certificate, we have no knowledge the
Transferee is not a Permitted Transferee and (d) no purpose of the proposed
disposition of a Class [ ] Certificate is to impede the assessment or collection
of tax.
Very truly yours,
[---------------------]
By: ______________________________
<PAGE>
EXHIBIT M
Form of Liquidation Report
Customer Name:
Account Number:
Original Principal Balance:
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
Date last paid
Date of foreclosure
Date of REO
Date of REO Disposition
Property Sale Price/Estimated Market Value at disposition
2. Liquidation Proceeds
Principal Prepayment $____________
Property Sale Proceeds ____________
Insurance Proceeds ____________
Other (itemize) ____________
Total Proceeds $____________
3. Liquidation Expenses
Servicing Advances $____________
Delinquency Advances ____________
Monthly Advances ____________
Servicing Fees ____________
Other Servicing Compensation ____________
Total Advances $____________
4. Net Liquidation Proceeds $____________
(Item 2 minus Item 3)
5. Principal Balance of Mortgage Loan $____________
6. Loss, if any (Item 5 minus Item 4) $____________
<PAGE>
BROWN & WOOD LLP
One World Trade Center
New York, New York 10048
Telephone: (212) 839-5300
Facsimile: (212) 839-5599
January 25, 1999
BY MODEM
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Option One Mortgage Loan Trust
Asset-Backed Certificates, Series 1999-1
Ladies and Gentlemen:
On behalf of Financial Asset Securities Corp. (the "Company"), we
enclose herewith for filing, pursuant to the Securities and Exchange Act of
1934, the Company's Current Report on Form 8-K, for the Pooling and Servicing
Agreement and the Financial Security Assurance Policy in connection with the
above-referenced transaction.
Very truly yours,
/s/ Edward B. Locke
Edward B. Locke
