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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
Amendment No. 1
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event
Reported) April 6, 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.
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(Exact name of registrant as specified in its charter)
Delaware 333-67329-02 06-1442101
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
600 Steamboat Road
Greenwich, Connecticut 06830
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(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.
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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, was annexed
as Exhibit 99 to a Form 8-K that the Company filed electronically on February
18, 1999. On April 6, 1999, the Pooling and Servicing Agreement was corrected
to reflect accurately the definitions of three terms used therein:
"Overcollateralization Target Amount", "Spread Squeeze Overcollateralization
Increase Amount", and "Spread Squeeze Percentage". Accordingly, the Company is
filing herewith a corrected copy of the Pooling and Servicing Agreement (the
"Corrected Pooling and Servicing Agreement"), which accurately reflects the
above-mentioned definitions. The Corrected Pooling and Servicing Agreement,
without Exhibit D, is annexed hereto as Exhibit 99.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial
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Information and Exhibits.
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(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
99 Corrected Pooling and Servicing Agreement, 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/ Frank Skibo
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Name: Frank Skibo
Title: Vice President
Dated: April 6, 1999
<PAGE>
Exhibit Index
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Exhibit
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99 Corrected Pooling and Servicing
Agreement, without exhibit D.
<PAGE>
EXHIBIT 99
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<PAGE>
EXECUTION COPY
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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
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Option One Mortgage Loan Trust 1999-1
Asset-Backed Certificates, Series 1999-1
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<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
<PAGE>
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:
<PAGE>
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Original Class Initial
Certificate Principal Pass-Through Assumed Final
Class Balance Rate Maturity Dates
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Class A-1...... $ 65,900,000 6.40%(1) February 25, 2029
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Class A-2...... $ 128,437,000 5.43969%(1) February 25, 2029
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Class R........ N/A N/A N/A
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(1) Calculated pursuant to the definition of Pass-Through Rate.
ARTICLE I
DEFINITIONS
Section 1.01. Defined Terms.
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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 the Group II
Certificates 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 Group II 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 General Excess Available Amount for the Group II Certificates
for such Distribution Date, and the denominator of which is the aggregate
Stated Principal Balance of the Group II 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.
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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.
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(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.
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(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.
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Section 4.03. Statements.
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(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.
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(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.
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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.
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(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:__________________________________________
Name:
Title: Vice President
OPTION ONE MORTGAGE CORPORATION,
as Seller and Servicer
By:__________________________________________
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By:__________________________________________
Name:
Title:
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the __th day of January, 1999 before me, a notary public in and
for said State, personally appeared ______________ 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.
____________________________________________
Notary Public
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the __th day of January, 1999 before me, a notary public in and
for said State, personally appeared ______________ known to me to be a
_______________________ of Option One Mortgage Corporation, a 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.
____________________________________________
Notary Public
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the __th day of January, 1999 before me, a notary public in and
for said State, personally appeared _______________, known to me to be
____________________ 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.
____________________________________________
Notary Public
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 : [ ]
___________________________
* Subject to an increase as described in the Agreement.
<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,
1015 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.
_________________________
1 Buyer must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Buyer is a dealer, and, in that case,
Buyer must own and/or invest on a discretionary basis at least $10,000,000
in securities.
___ 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:
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 Minnesota, 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
April 6, 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 revised Pooling and
Servicing Agreement in connection with the above-referenced transaction.
Very truly yours,
/s/ Dominic Pang
Law Clerk
