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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 28, 1999
OPTION ONE MORTGAGE ACCEPTANCE CORPORATION
(AS DEPOSITOR UNDER THE POOLING AND SERVICING AGREEMENT,
DATED AS OF APRIL 1, 1999, PROVIDING FOR THE ISSUANCE OF
ASSET-BACKED CERTIFICATES,
SERIES 1999-2)
Option One Mortgage Acceptance Corporation
------------------------------------------
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
Delaware 333-14625 33-0727357
-------- --------- ----------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
3 Ada Road
Irvine, California 92618
------------------ -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (949) 790-8100
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<PAGE>
-2-
Item 2. Acquisition or Disposition of Assets
------------------------------------
Description of the Certificates and the Mortgage Pools
On April 28,1999, a single series of certificates, entitled
Option One Mortgage Loan Trust, Asset-Backed Certificates, Series 1999-2 (the
"Certificates"), were issued pursuant to a pooling and servicing agreement,
dated as of April 1, 1999 (the "Agreement"), attached hereto as Exhibit 4.1,
among Option Mortgage Acceptance Corporation as depositor (the "Depositor"),
Option One Mortgage Corporation ("Option One") as master servicer (in such
capacity, the "Master Servicer") and Norwest Bank Minnesota, National
Association as trustee (the "Trustee"). The Certificates consist of ten classes
of certificates (collectively, the "Certificates"), designated as the "Class A-1
Certificates", "Class A-2 Certificates", "Class A-3 Certificates", "Class A-4
Certificates," "Class A-5 Certificates", "Class A-6 Certificates", "Class A-7
Certificates", "Class A-8 Certificates", (collectively, the "Class A
Certificates"), the "Class P Certificates" and Class R Certificates". The
Certificates evidence in the aggregate the entire beneficial ownership interest
in a trust fund (the "Trust Fund"), consisting of three pools (the "Mortgage
Pools") of conventional, one- to four- family, fixed rate and adjustable rate,
first lien and second lien mortgage loans having original terms to maturity up
to 30 years (the "Mortgage Loans"). The Mortgage Pools consist of Mortgage Loans
having an aggregate principal balance of $286,131, 890.00 as of April 1, 1999
(the "Cut-off Date"). The Mortgage Loans were purchased pursuant to the Mortgage
Loan Purchase Agreement, dated April 26, 1999 (the "Purchase Agreement") between
Option One and the Depositor. The Class A Certificates were sold by the
Depositor to Greenwich Capital Markets, Inc. (the "Underwriter"), pursuant to an
Underwriting Agreement, dated December 18, 1998 between the Depositor and the
Underwriter.
The Certificates have the following initial Certificate
Balances and Pass-Through Rates:
Initial Certificate
Class Principal Balance Pass-through Rate
- ----- ----------------- -----------------
A-1 $74,000,000 5.88
A-2 $50,000,000 5.92
A-3 $24,000,000 Variable
A-4 $52,000,000 Variable
A-5 $15,791,000 Variable
A-6 $19,000,000 Variable
A-7 $38,433,000 Variable
A-8 $94,761,000 Variable
<PAGE>
-3-
Initial Certificate
Class Principal Balance Pass-through Rate
- ----- ----------------- -----------------
P $100.00 Variable
R 100% Percentage In Variable
The Certificates, other than the Class P Certificates and, the
Class R Certificates, and the Mortgage Loans are more particularly described in
the Prospectus, dated March 6, 1997, and the Prospectus Supplement, dated April
26, 1999, as previously filed with the Securities and Exchange Commission
pursuant to Rule 424(b). The Class P Certificates and the Class R Certificates
have not been and will not be publicly offered by the Depositor. Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
them in the Prospectus Supplement.
<PAGE>
-4-
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Not applicable
(b) Not applicable
(c) Exhibits
Exhibit No. Description
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4.1 Pooling and Servicing Agreement,
dated as of April 1, 1999, by and
among Option One Mortgage Acceptance
Corporation as Depositor, Option One
Mortgage Corporation as master
servicer and Norwest Bank Minnesota,
National Association as Trustee,
relating to the Series 1999-2
Certificates.
<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 thereunto duly authorized.
Dated: April 28, 1999
OPTION ONE MORTGAGE
ACCEPTANCE CORPORATION
By: /s/ William O'Neill
------------------------------
Name: William O'Neill
Title: Senior Vice President
<PAGE>
Index to Exhibits
-----------------
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
4.1 Pooling and Servicing Agreement, dated as of 7
April 1, 1999, by and among Option One Mortgage
Acceptance Corporation as Depositor, Option One
Mortgage Corporation as master servicer and Norwest
Bank Minnesota, National Association as Trustee
relating to the Series 1999-2 Certificates.
Exhibit 4.1
SEE TAB 3
<PAGE>
[EXECUTION COPY]
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OPTION ONE MORTGAGE ACCEPTANCE CORPORATION,
Depositor
OPTION ONE MORTGAGE CORPORATION,
Master Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Trustee
POOLING AND SERVICING AGREEMENT
Dated as of April 1, 1999
--------------------------------------------
Option One Mortgage Loan Trust 1999-2
Asset-Backed Certificates, Series 1999-2
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<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Defined Terms..........................................................................3
Section 1.02. Accounting............................................................................41
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans..........................................................42
Section 2.02. Acceptance by Trustee.................................................................45
Section 2.03. Repurchase or Substitution of Mortgage Loans by the Seller............................46
Section 2.04. Intentionally Omitted.................................................................49
Section 2.05. Representations, Warranties and Covenants of the Master Servicer......................49
Section 2.06. Representations and Warranties of the Depositor.......................................52
Section 2.07. Issuance of Certificates..............................................................54
Section 2.08. Conveyance of the Subsequent Mortgage Loans...........................................54
Section 2.09. Conveyance of Uncertificated REMIC I Regular Interests; Acceptance of
REMIC II by the Trustee...............................................................57
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
Section 3.01. Master Servicer to Act as Master Servicer.............................................58
Section 3.02. Sub-Servicing Agreements Between Master Servicer and
Sub-Servicers.........................................................................60
Section 3.03. Successor Sub-Servicers...............................................................61
Section 3.04. Liability of the Master Servicer......................................................61
Section 3.05. No Contractual Relationship Between Sub-Servicers and the Trustee or
Certificateholders....................................................................62
Section 3.06. Assumption or Termination of Sub-Servicing Agreements by Trustee......................62
Section 3.07. Collection of Certain Mortgage Loan Payments..........................................62
Section 3.08. Sub-Servicing Accounts................................................................63
Section 3.09. Collection of Taxes, Assessments and Similar Items; Servicing
Accounts..............................................................................64
Section 3.10. Collection Account and Distribution Account...........................................64
Section 3.11. Withdrawals from the Collection Account and Distribution Account......................67
i
<PAGE>
Section 3.12. Investment of Funds in the Interest Coverage Account, Collection Account
and the Distribution Account..........................................................69
Section 3.13. Use of Funds Held for Future Distribution.............................................70
Section 3.14. Maintenance of Hazard Insurance and Errors and Omissions and
Fidelity Coverage.....................................................................70
Section 3.15. Enforcement of Due-On-Sale Clauses; Assumption Agreements.............................72
Section 3.16. Realization Upon Defaulted Mortgage Loans.............................................73
Section 3.17. Trustee to Cooperate; Release of Mortgage Files.......................................75
Section 3.18. Servicing Compensation................................................................76
Section 3.19. Reports to the Trustee; Collection Account Statements.................................77
Section 3.20. Statement as to Compliance............................................................77
Section 3.21. Independent Public Accountants' Servicing Report......................................77
Section 3.22. Access to Certain Documentation; Filing of Reports by Trustee.........................78
Section 3.23. Title, Management and Disposition of REO Property.....................................78
Section 3.24. Obligations of the Master Servicer in Respect of Prepayment Interest
Shortfalls............................................................................81
Section 3.25. [Reserved]............................................................................82
Section 3.26. Obligations of the Master Servicer in Respect of Mortgage Rates and Monthly
Payments..............................................................................82
Section 3.27. Solicitations.........................................................................82
ARTICLE IV
FLOW OF FUNDS
Section 4.01. Distributions.........................................................................82
Section 4.02. Reserved..............................................................................87
Section 4.03. Statements............................................................................87
Section 4.04. Remittance Reports; Advances..........................................................90
Section 4.05. Pre-Funding Account...................................................................91
Section 4.06. Interest Coverage Account.............................................................93
Section 4.07. Distributions on the Uncertificated REMIC I Regular Interests.........................94
ARTICLE V
THE CERTIFICATES
Section 5.01. The Certificates......................................................................96
Section 5.02. Registration of Transfer and Exchange of Certificates.................................96
Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates....................................101
Section 5.04. Persons Deemed Owners................................................................101
Section 5.05. Appointment of Paying Agent..........................................................101
ii
<PAGE>
ARTICLE VI
THE MASTER SERVICER AND THE DEPOSITOR
Section 6.01. Liability of the Master Servicer and the Depositor...................................102
Section 6.02. Merger or Consolidation of, or Assumption of the Obligations of, the Master
Servicer or the Depositor............................................................102
Section 6.03. Limitation on Liability of the Master Servicer and Others............................102
Section 6.04. Master Servicer Not to Resign........................................................103
Section 6.05. Delegation of Duties.................................................................104
Section 6.06. Reserved.............................................................................104
Section 6.07. Inspection...........................................................................104
ARTICLE VII
DEFAULT
Section 7.01. Master Servicer Events of Termination................................................104
Section 7.02. Trustee to Act; Appointment of Successor.............................................107
Section 7.03. Waiver of Defaults...................................................................108
Section 7.04. Notification to Certificateholders...................................................108
Section 7.05. Survivability of Master Servicer Liabilities.........................................109
ARTICLE VIII
THE TRUSTEE
Section 8.01. Duties of Trustee....................................................................109
Section 8.02. Certain Matters Affecting the Trustee................................................110
Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans................................112
Section 8.04. Trustee May Own Certificates.........................................................112
Section 8.05. Seller to Pay Trustee Expenses.......................................................113
Section 8.06. Eligibility Requirements for Trustee.................................................113
Section 8.07. Resignation or Removal of Trustee....................................................113
Section 8.08. Successor Trustee....................................................................114
Section 8.09. Merger or Consolidation of Trustee...................................................115
Section 8.10. Appointment of Co-Trustee or Separate Trustee........................................115
Section 8.11. Limitation of Liability..............................................................116
Section 8.12. Trustee May Enforce Claims Without Possession of Certificates........................117
Section 8.13. Suits for Enforcement................................................................117
Section 8.14. Waiver of Bond Requirement...........................................................117
Section 8.15. Waiver of Inventory, Accounting and Appraisal Requirement............................117
iii
<PAGE>
ARTICLE IX
REMIC ADMINISTRATION
Section 9.01. REMIC Administration.................................................................118
Section 9.02. Prohibited Transactions and Activities...............................................119
Section 9.03. Indemnification with Respect to Certain Taxes and Loss of REMIC
Status...............................................................................120
Section 9.04. [Reserved]...........................................................................120
ARTICLE X
TERMINATION
Section 10.01. Termination..........................................................................120
Section 10.02. Additional Termination Requirements..................................................122
ARTICLE XI
CERTAIN MATTERS REGARDING THE CERTIFICATE INSURER
Section 11.01. Rights of the Certificate Insurer To Exercise Rights of Class A
Certificateholders...................................................................123
Section 11.02. Trustee To Act Solely with Consent of the Certificate Insurer........................124
Section 11.03. Trust Fund and Accounts Held for Benefit of the Certificate Insurer..................124
Section 11.04. Claims Upon the Policy; Policy Payments Account......................................124
Section 11.05. Effect of Payments by the Certificate Insurer; Subrogation...........................126
Section 11.06. Notices to the Certificate Insurer...................................................126
Section 11.07. Third-Party Beneficiary..............................................................126
Section 11.08. Trustee to Hold the Policy...........................................................127
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Amendment............................................................................127
Section 12.02. Recordation of Agreement; Counterparts...............................................128
Section 12.03. Limitation on Rights of Certificateholders...........................................128
Section 12.04. Governing Law; Jurisdiction..........................................................129
Section 12.05. Notices..............................................................................129
Section 12.06. Severability of Provisions...........................................................130
Section 12.07. Article and Section References.......................................................130
Section 12.08. Notice to the Rating Agencies........................................................130
Section 12.09. Further Assurances...................................................................131
Section 12.10. Benefits of Agreement................................................................131
Section 12.11. Acts of Certificateholders...........................................................131
</TABLE>
iv
<PAGE>
EXHIBITS:
Exhibit A Form of Class A Certificates
Exhibit B Form of Class R Certificates
Exhibit C Form of Mortgage Loan Purchase Agreement
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 Form of Class P Certificates
Exhibit H Form of Lost Note Affidavit
Exhibit I Form of ERISA Representation
Exhibit J Form of Investment Letter
Exhibit K Form of Class P or Class R Certificate Transfer Affidavit
Exhibit L Form of Transferor Certificate
Exhibit M Form of Liquidation Report
Exhibit N Form of Subsequent Transfer Instrument
Exhibit O Form of Addition Notice
Schedule I Prepayment Premium Schedule
v
<PAGE>
This Pooling and Servicing Agreement is dated as of April 1, 1999 (the
"Agreement"), among OPTION ONE MORTGAGE ACCEPTANCE CORPORATION, as depositor
(the "Depositor"), OPTION ONE MORTGAGE CORPORATION, as master servicer (the
"Master 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 ten classes of
certificates, designated as (i) the Class A-1 Certificates, (ii) the Class A-2
Certificates, (iii) the Class A-3 Certificates, (iv) the Class A-4 Certificates,
(v) the Class A-5 Certificates, (vi) the Class A-6 Certificates, (vii) the Class
A-7 Certificates, (viii) the Class A-8 Certificates, (ix) the Class P
Certificates and (x) the Class R Certificates.
As provided herein, the Trustee will make an election to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement (exclusive of the Pre-Funding Accounts
and the Interest Coverage Accounts) as a real estate mortgage investment conduit
(a "REMIC") for federal income tax purposes, and such segregated pool of assets
will be designated as "REMIC I." The Class R-I Interest will represent the sole
class of "residual interests" in REMIC I for purposes of the REMIC Provisions
(as defined herein) under federal income tax law. The following table
irrevocably sets forth the designation, the Uncertificated REMIC I Pass-Through
Rate, the initial Uncertificated Principal Balance, and solely for purposes of
satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the "latest possible
maturity date" for each of the Uncertificated REMIC I Regular Interests. None of
the REMIC I Regular Interests will be certificated.
<TABLE>
<CAPTION>
Uncertificated REMIC I Initial Uncertificated Assumed Final
Designation Pass-Through Rate Principal Balance Maturity Date (1)
----------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
I-LT1 Variable(2) $211,312,141.10 May 25, 2029
I-LT2 Variable(2) $23,479,137.90 May 25, 2029
II-LT1 Variable(2) $34,589,884.50 May 25, 2029
II-LT2 Variable (2) $3,843,320.50 May 25, 2029
III-LT1 Variable (2) $87,025,909.50 May 25, 2029
III-LT2 Variable (2) $9,669,545.50 May 25, 2029
Class P N/A $100.00 May 25, 2029
</TABLE>
- -------------------
(1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date in the month following the maturity
date for the Mortgage Loan with the latest maturity date has been
designated as the "latest possible maturity date" for each REMIC I
Regular Interest.
(2) Calculated in accordance with the definition of "Uncertificated REMIC I
Pass-Through Rate" herein.
As provided herein, the Trustee shall make an election to treat the
segregated pool of assets consisting of the Uncertificated REMIC I Regular
Interests as a REMIC for federal income tax purposes, and such segregated pool
of assets will be designated as REMIC II. The Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6, Class A-7 and Class A-8 Certificates represent
<PAGE>
ownership of all of the "regular interests" in the REMIC, and the Class R-II
Interest represents the sole class of "residual interests" in the REMIC for
purposes of the REMIC Provisions. The Class R Certificates represent an
undivided interest in the Class R-I Interest and the Class R-II Interest.
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:
<TABLE>
<CAPTION>
Original Class Initial
Certificate Principal Pass-Through Assumed Final
Class Balance Rate Maturity Dates
================================================================================================================
<S> <C> <C> <C>
Class A-1.................... $ 74,000,000 5.88% May 25, 2029
================================================================================================================
Class A-2.................... $ 50,000,000 5.92% May 25, 2029
================================================================================================================
Class A-3.................... $ 24,000,000 6.02% May 25, 2029
================================================================================================================
Class A-4.................... $ 52,000,000 6.34%(1) May 25, 2029
================================================================================================================
Class A-5.................... $ 15,791,000 6.76%(1) May 25, 2029
================================================================================================================
Class A-6.................... $ 19,000,000 6.32%(1) May 25, 2029
================================================================================================================
Class A-7.................... $ 38,433,000 6.48%(1) May 25, 2029
================================================================================================================
Class A-8.................... $ 94,761,000 Variable(2) May 25, 2029
================================================================================================================
Class R...................... N/A N/A N/A
================================================================================================================
</TABLE>
(1) Subject to the limitations set forth in the definition of Pass-Through Rate.
(2) Calculated pursuant to the definition of Pass-Through Rate.
2
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.01. DEFINED TERMS.
Whenever used in this Agreement or in the Preliminary Statement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article. Unless otherwise specified, all
calculations in respect of interest on the Group III 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. The Class P
Certificates are not entitled to distributions in respect of interest and,
accordingly, will not accrue interest.
Many of the defined terms listed below may apply to each of the 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" and "Group III".
"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 and Group II
Certificates and each Distribution Date, the calendar month prior to the month
of such Distribution Date or (ii) the Group III Certificates and (A) the first
Distribution Date, the period commencing on the Closing Date and ending on May
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.
"Addition Notice": With respect to the transfer of Subsequent Mortgage
Loans to the Trust Fund pursuant to Section 2.08, a notice of the Depositor's
designation of the Subsequent Mortgage Loans to be sold to the Trust Fund and
the aggregate principal balance of such Subsequent Mortgage Loans as of the
Subsequent Cut-off Date. The Addition Notice shall be given not later than three
Business Days prior to the related Subsequent Transfer Date and shall be
substantially in the form attached hereto as Exhibit O.
"Adjustment Date": With respect to each Group III Mortgage Loan, each
adjustment date, on which the Mortgage Rate of such Group III Mortgage Loan
changes pursuant to the related Mortgage Note. The first Adjustment Date
following the Cut-off Date as to each Group III Mortgage
Loan is set forth in the Mortgage Loan Schedule.
"Advance": As to any Mortgage Loan or REO Property, any advance made by
the Master Servicer in respect of any Distribution Date pursuant to Section
4.04.
"Adverse REMIC Event": As defined in Section 9.01(f) hereof.
3
<PAGE>
"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.
"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, the Group II
Available Funds and the Group III Available Funds.
"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
4
<PAGE>
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": Any of the Group I Certificates, Group II
Certificates or the Group III 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, 0.28% per annum and (B) after the Optional
Termination Date, 0.56% per annum.
"Certificate Owner": With respect to each Book-Entry Certificate, any
beneficial owner thereof.
"Certificate Principal Balance": With respect to any Class of
Certificates immediately prior to any Distribution Date, will be equal to the
Initial Certificate Principal Balance thereof 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, Class A-2
Certificates, Class A-3 Certificates, Class A-4 Certificates, Class A-5
Certificates, Class A-6 Certificates, Class A-7 Certificates or Class A-8
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 P Certificate": The Class P Certificate executed by the Trustee,
and authenticated and delivered by Certificate Registrar, substantially in the
form annexed hereto as Exhibit G and evidencing a regular interest in REMIC I.
5
<PAGE>
"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 Class
R-I Interest and the Class R-II Interest.
"Class R-I Interest": The uncertificated Residual Interest in REMIC I.
"Class R-II Interest": The uncertificated Residual Interest in REMIC
II.
"Close of Business": As used herein, with respect to any Business Day,
5:00 p.m.
"Closing Date": April 28, 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 Master Servicer pursuant to Section 3.10(a), which shall be entitled for
"Norwest Bank Minnesota, National Association, as Trustee, in trust for
registered Holders of Option One Mortgage Loan Trust 1999-2, Asset-Backed
Certificates, Series 1999-2," or such other account title as consented to in
writing by the Certificate Insurer 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 1999-2, 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 Master Servicer
and the Seller.
"Cumulative Loss Percentage": With respect to any Distribution Date and
the Mortgage Loans in (A) Loan Group I and Loan Group II, in the aggregate, the
percentage equivalent of the fraction obtained by dividing (i) the aggregate of
Realized Losses on the Group I Mortgage Loans and the Group II Mortgage Loans
from the Cut-off Date through the end of the related Prepayment Period by (ii)
the sum of the Initial Principal Balances of the Group I Mortgage Loans, the
Initial Principal Balances of the Group II Mortgage Loans, the Original
Pre-Funded Amount for Loan Group I and the Original Pre-Funded Amount for Loan
Group II or (B) Loan Group III, the percentage equivalent of the fraction
obtained by dividing (i) the aggregate of Realized Losses on the Group III
Mortgage Loans from the Cut-off Date through the end of the related Prepayment
Period by (ii) the sum of the Initial Principal Balances of the Group III
Mortgage Loans and the Original Pre-Funded Amount for Group III.
"Custodian": Norwest Bank Minnesota, National Association, as custodian
of the Mortgage Files, and any successor thereto.
"Cut-off Date": With respect to each Mortgage Loan, the later of (i)
the date of origination of such Mortgage Loan or (ii) April 1, 1999.
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"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 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.
"Delinquent": Any Mortgage Loan, the Monthly Payment due on a Due Date
which is not made by the Close of Business on the next scheduled Due Date for
such Mortgage Loan. For example, a Mortgage Loan is 60 or more days Delinquent
if the Monthly Payment due on a Due Date is not made by the Close of Business on
the second scheduled Due Date after such Due Date.
"Depositor": Option One Mortgage Acceptance Corporation, 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.
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"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 Master
Servicer on behalf of the Trustee) shall not be considered to Directly Operate
an REO Property solely because the Trustee (or the Master 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
1999-2, Asset-Backed Certificates, Series 1999-2" 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 May 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, (or, in the case of
any Mortgage Loan under the terms of which the Monthly Payment for such Mortgage
Loan was due on a day other than the first day of the calendar
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month in which such Distribution Date occurs, the day during the related Due
Period on which such Monthly Payment 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 (and AAA by Fitch IBCA if rated by Fitch
IBCA) (or comparable ratings if Moody's, Fitch IBCA 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.
"Excess Overcollateralized Amount": With respect to each Certificate
Group and any Distribution Date, the excess, if any, of (i) the related
Overcollateralized Amount for such Distribution Date, assuming that 100% of the
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; provided,
however, that the Excess Overcollateralized Amount shall be limited to the
amount obtained using the following formula:
n x E.O.A.
---
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where "n" is equal to the number of Distribution Dates that have occurred since
the later of the Distribution Date in October 2001 or the most recent
Distribution Date for which the related Overcollateralization Target Amount
equaled the related Step Up Required Overcollateralization Amount (provided,
however, that "n" shall never be greater than 6) and "E.O.A." is equal to the
amount of the related Excess Overcollateralized Amount that would otherwise be
obtained for such Distribution Date without regard to the provisions of this
proviso.
"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 Master Servicer pursuant to or as contemplated by Section
2.03 or 10.01), a determination made by the Master Servicer that all Insurance
Proceeds, Liquidation Proceeds and other payments or recoveries which the Master
Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Master Servicer shall
maintain records, prepared by a Servicing Officer, of each Final Recovery
Determination made thereby.
"Fiscal Agent": As defined in the Policy.
"Fitch IBCA": Fitch IBCA, Inc., and its successors, and, if such
division shall for any reason no longer perform the functions of a securities
rating agency, "Fitch IBCA" 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 and approved by
the Certificate Insurer.
"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.
"Freddie Mac": The Federal Home Loan Mortgage Corporation, or any
successor thereto.
"Funding Period": With respect to each of Group I, Group II and Group
III, the period beginning on the Closing Date and ending on the earlier to occur
of the date upon which (a) the amount on deposit in the related Pre-Funding
Account has been reduced to zero or (b) May 31, 1999.
"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),
(B) or (C), as applicable, under Section 4.01.
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"Gross Margin": With respect to each Group III 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, (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 Master
Servicer in respect of related Prepayment Interest Shortfalls for such
Distribution Date, (e) the aggregate of any related Advances made by the Master
Servicer for such Distribution Date, (f) the aggregate of any related advances
made by the Trustee for such Distribution Date pursuant to Section 7.02, (g) any
interest for the Group I Certificates paid under the Policy, plus a PRO RATA
share, based on the Overcollateralization Deficit, for the Group I Certificates
of amounts paid under the Policy in respect of principal, (h) with respect to
the Distribution Date immediately following the end of the related Funding
Period, any amounts in the related Pre-Funding Account after giving effect to
any purchase of Subsequent Mortgage Loans and (i) with respect to each
Distribution Date during the related Funding Period, any amounts withdrawn by
the Trustee from the related Interest Coverage Account for distribution on the
Group I Certificates over (ii) the sum of (a) related amounts reimbursable or
payable to the Master Servicer pursuant to Section 3.11(a), (b) related amounts
deposited in the Collection Account or the Distribution Account, as the case may
be, in error and (c) the amount of any Prepayment Premiums collected by the
Master Servicer in connection with the full or partial prepayment of any of the
Mortgage Loans and any Master Servicer Prepayment Premium Payment Amount.
"Group I Certificates": The Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5 and Class A-6 Certificates.
"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 Mortgage Loan": A first or second lien Mortgage Loan which
provides for a fixed Mortgage Rate payable with respect thereto and has a
principal balance at origination which conforms to Fannie Mae and Freddie Mac
guidelines. The Group I Mortgage Loans are identified as such on the Mortgage
Loan Schedule.
"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, (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
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Collection Account by the Master Servicer in respect of related Prepayment
Interest Shortfalls for such Distribution Date, (e) the aggregate of any related
Advances made by the Master Servicer for such Distribution Date, (f) the
aggregate of any related advances made by the Trustee for such Distribution Date
pursuant to Section 7.02, (g) any interest for the Group II Certificates paid
under the Policy, plus a PRO RATA share, based on the Overcollateralization
Deficit, for the Group II Certificates of amounts paid under the Policy in
respect of principal, (h) with respect to the Distribution Date immediately
following the end of the related Funding Period, any amounts in the related
Pre-Funding Account after giving effect to any purchase of Subsequent Mortgage
Loans and (i) with respect to each Distribution Date during the related Funding
Period, any amounts withdrawn by the Trustee from the related Interest Coverage
Account for distribution on the Group II Certificates over (ii) the sum of (a)
related amounts reimbursable or payable to the Master Servicer pursuant to
Section 3.11(a), (b) related amounts deposited in the Collection Account or the
Distribution Account, as the case may be, in error and (c) the amount of any
Prepayment Premiums collected by the Master Servicer in connection with the full
or partial prepayment of any of the Mortgage Loans and any Master Servicer
Prepayment Premium Payment Amount.
"Group II Certificates": The Class A-7 Certificates.
"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 first lien Mortgage Loan which provides for
a fixed Mortgage Rate payable with respect thereto, has a principal balance at
origination which did not conform to Fannie Mae and Freddie Mac guidelines. The
Group II Mortgage Loans are identified as such on the Mortgage Loan Schedule.
"Group III Available Funds": With respect to any Distribution Date and
Loan Group III, 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 III Mortgage Loans during the related Prepayment Period,
(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 Master Servicer in respect of related Prepayment Interest
Shortfalls for such Distribution Date, (e) the aggregate of any related Advances
made by the Master Servicer for such Distribution Date, (f) the aggregate of any
related advances made by the Trustee for such Distribution Date pursuant to
Section 7.02, (g) any interest for the Group III Certificates paid under the
Policy, plus a PRO RATA share, based on the Overcollateralization Deficit, for
the Group III Certificates of amounts paid under the Policy in respect of
principal, (h) with respect to the Distribution Date immediately following the
end of the related Funding Period, any amounts in the related Pre-Funding
Account after giving effect to any purchase of Subsequent Mortgage Loans and (i)
with respect to each Distribution Date during the related Funding Period, any
amounts withdrawn by the Trustee from the related Interest Coverage Account for
distribution on the Group III Certificates over (ii) the sum of (a) related
amounts reimbursable or payable to the Master Servicer pursuant to Section
3.11(a), (b) related amounts deposited in the Collection Account or the
Distribution Account, as the case may be, in error and (c) the amount of any
Prepayment Premiums
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collected by the Master Servicer in connection with the full or partial
prepayment of any of the Mortgage Loans and any Master Servicer Prepayment
Premium Payment Amount.
"Group III Certificates": The Class A-8 Certificates.
"Group III Formula Rate": For any Distribution Date and the Group III
Certificates, the lesser of (i) LIBOR plus the Certificate Margin and (ii) the
Maximum Cap.
"Group III Loan Balance": As of any date, the aggregate of the
Principal Balances of all Mortgage Loans in Loan Group III as of such date.
"Group III 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, and has a principal balance at origination which did not
conform to Fannie Mae and Freddie Mac guidelines. The Group III Mortgage Loans
are identified as such on the Mortgage Loan Schedule.
"Group III Net WAC Cap Carryover Amount": With respect to the Class A-8
Certificates and any Distribution Date, the sum of (A) the excess of (i) if on
such Distribution Date the Pass- Through Rate for such Certificates is based
upon the related Net WAC Cap, 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 Net WAC
Cap, over (ii) the amount of interest payable on such Certificates at the Net
WAC Cap for such Distribution Date and (B) the Group III Net WAC 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 for such
Certificates for such Distribution Date (it being understood that such amount is
not covered by the Policy).
"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 Group I Certificates, the Class A-7
Certificates and the Class A-8 Certificates exceed the Pool Balance as of the
related Determination Date (after giving effect to all distributions of
principal on the Class A Certificates on such Distribution Date) and (b) on the
Distribution Date in May 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 Master 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 Master
Servicer or any Affiliate thereof, and (c) is not connected with the Depositor
or the Master 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 Master 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 Master Servicer or any Affiliate thereof, as the
case may be.
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"Independent Contractor": Either (i) any Person (other than the Master
Servicer) that would be an "independent contractor" with respect to REMIC I and
REMIC II within the meaning of Section 856(d)(3) of the Code if such 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 each such
REMIC does not receive or derive any income from such Person and provided that
the relationship between such Person and such 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 Master 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 III 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.
"Initial Mortgage Loan": Any of the Mortgage Loans included in the
Trust Fund as of the Closing Date.
"Insurance Agreement": The insurance and indemnity agreement, dated as
of April 28, 1999, among the Certificate Insurer, the Seller and the Depositor.
"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 Master 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.
"Insured Payment": Shall mean with respect to the Class A Certificates
as of any Distribution Date, the sum of (i) any shortfall in amounts available
in the Distribution Account to pay the Interest Distributable Amount on such
Certificates for the related Accrual Period, (ii) the excess, if any, of (a) the
aggregate Certificate Principal Balance of the Class A Certificates then
outstanding over (b) the aggregate principal balances of the Mortgage Loans then
outstanding plus any amounts remaining in the Pre-Funding Accounts and (iii)
without duplication of the amount specified in clause (ii), the aggregate
Certificate Principal Balance of the Class A Certificates to the extent unpaid
on the final Distribution Date or the earlier termination of the Trust.
"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;
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(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 Coverage Account": With respect to each Loan Group, the
account established and maintained pursuant to Section 4.06 , as defined
therein.
"Interest Coverage Amount": With respect to each Loan Group, the amount
to be paid by the Depositor to the Trustee for deposit in the related Interest
Coverage Account on the Closing Date pursuant to Section 4.06, which amount is
$295,567.46 with respect to Loan Group I, $57,644.76 with respect to Loan Group
II and $97,924.21 with respect to Loan Group III.
"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 London interbank offered rate for
one-month United States dollar deposits, as such rate appears on the Telerate
Page 3750, as of 11:00 a.m. (London time) on such Interest Determination Date.
If such rate does not appear on Telerate Page 3750, the rate for such Interest
Determination Date will be determined on the basis of the offered rates of the
Reference Banks for one-month United States dollar deposits, as of 11:00 a.m.
(London time) on such Interest Determination Date. The Trustee will request the
principal London office of each of the Reference Banks to provide a quotation of
its
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rate. On such 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 Master 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 Master 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, with respect to any second lien Mortgage Loan, the
Principal Balance of the related first lien Mortgage Loan), and the denominator
of which is the Value of the related Mortgaged Property.
"Loan Group": Loan Group I, Loan Group II or Loan Group III, as the
context requires.
"Loan Group Balance": The Group I Loan Balance, the Group II Loan
Balance or the Group III Loan Balance, as applicable.
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"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.
"Loan Group III": The pool of Mortgage Loans identified in the related
Mortgage Loan Schedule as having been assigned to Loan Group III.
"Lockout Certificate Percentage": With respect to the Class A-6
Certificates and each Distribution Date, the percentage equal to the aggregate
Certificate Principal Balance of the Class A-6 Certificates immediately prior to
such Distribution Date divided by the sum of the aggregate Certificate Principal
Balances of the Group I Certificates immediately prior to such Distribution
Date.
"Lockout Distribution Percentage": With respect to any Distribution
Date, the percentage indicated below:
<TABLE>
<CAPTION>
Distribution Date Lockout Distribution Percentage
--------------------------------------------- -------------------------------------------------------
<S> <C> <C>
May 1999 through April 2002 0%
May 2002 through April 2004 45% of the Lockout Certificate Percentage
May 2004 through April 2005 80% of the Lockout Certificate Percentage
May 2005 through April 2006 100% of the Lockout Certificate Percentage
the lesser of (x) 300% of the Lockout
May 2006 and thereafter Certificate Percentage and (y) 100%
</TABLE>
Notwithstanding the foregoing, if the Certificate Principal Balances of the
Group I Certificates (other than the Class A-6 Certificates) have been reduced
to zero, the Lockout Distribution Percentage will be equal to 100%.
"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.
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"Master Servicer": Option One Mortgage Corporation, a California
corporation, or any successor servicer appointed as herein provided, in its
capacity as Master Servicer hereunder.
"Master Servicer Affiliate": A Person (i) controlling, controlled by or
under common control with the Master Servicer or which is 50% or more owned by
the Master Servicer and (ii) which is qualified to service residential mortgage
loans.
"Master Servicer Event of Termination": One or more of the events
described in Section 7.01.
"Master Servicer Prepayment Premium Payment Amount": The amounts
payable by the Master Servicer in respect of any waived Prepayment Premiums
pursuant to Section 2.05 or Section 3.01.
"Master 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).
"Maximum Cap": For any Distribution Date and with respect to the Group
III Mortgage Loans, a per annum rate equal to the product of (x) weighted
average of the Maximum Mortgage Rates of the Mortgage Loans in the related Loan
Group as of the first day of the month preceding the month of such Distribution
Date less the sum of (A) the Servicing Fee Rate, (B) the rate at which the
premium and Premium Supplement are payable to the Certificate Insurer multiplied
by a fraction, the numerator of which is the Certificate Principal Balance of
the related Group of Certificates immediately prior to such Distribution Date
and the denominator of which is the current outstanding Principal Balance of the
related Loan Group as of the first day of the month preceding the month of such
Distribution Date, (C) the related Senior Residual Distribution Amount for such
Distribution Date multiplied by a fraction, the numerator of which is twelve and
the denominator of which is the aggregate Principal Balance of the related Loan
Group as of the first day of the month preceding the month of such Distribution
Date and (D) 0.50% and (y) a fraction, the numerator of which is 30 and the
denominator of which is the actual number of days elapsed in the related Accrual
Period.
"Maximum Mortgage Rate": With respect to each Group III 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 III 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) reduced by any Net Prepayment Interest Shortfalls and Relief Act
Interest Shortfalls for the related Loan Group.
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<PAGE>
"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 Master 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 or second lien on, or first priority or second 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 Master
Servicer, in its capacity as Seller and the Depositor, regarding the transfer of
the Mortgage Loans by the Seller to or at the direction of the Depositor,
substantially in the form attached hereto as Exhibit C.
"Mortgage Loan Schedule": As of any date, the list of Mortgage Loans
included in REMIC I on such date, separately identifying the Group I Mortgage
Loans, the Group II Mortgage Loans and the Group III Mortgage Loans, attached
hereto as Exhibit D, as supplemented by each schedule of Subsequent Mortgage
Loans attached to a Subsequent Transfer Instrument. The Mortgage Loan Schedule
shall be prepared by the Seller and shall set forth the following information
with respect to each Mortgage Loan, as applicable:
(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;
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<PAGE>
(7) the stated remaining months to maturity from the Cut-off
Date (or Subsequent Cut-off Date, with respect to a Subsequent Mortgage
Loan) 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 (or Subsequent Cut-off Date, with respect to a Subsequent
Mortgage Loan);
(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 Cutoff Date (or Subsequent Cut-off Date, with respect to
a Subsequent Mortgage Loan);
(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 (or Subsequent Cut-off
Date, with respect to a Subsequent Mortgage Loan);
(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 (or Subsequent Cut-off Date, with respect
to a Subsequent Mortgage Loan);
(24) the type and term of the related Prepayment Premium;
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<PAGE>
(25) the rounding code;
(26) the program code;
(27) a code indicating the lien priority for Group I
Mortgage Loans;
(28) the minimum Mortgage Rate;
(29) the maximum Mortgage Rate;
(30) the Gross Margin;
(31) the next Adjustment Date; and
(32) the Periodic Rate Cap.
The Mortgage Loan Schedule shall set forth the following information,
with respect to the Mortgage Loans in the aggregate and for each Loan Group as
of the Cut-off Date (or Subsequent Cut-off Date, with respect to a Subsequent
Mortgage Loan): (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 Exhibit D
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 and Group II 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 (or Subsequent Cut-off Date, with respect to a
Subsequent Mortgage Loan) and (ii) in the case of each Group III Mortgage Loan
(A) as of any date of determination until the first Adjustment Date following
the Cut-off Date (or Subsequent Cut-off Date, with respect to a Subsequent
Mortgage Loan) shall be the rate set forth in the Mortgage Loan Schedule as the
Mortgage Rate in effect immediately following the Cut-off Date (or Subsequent
Cutoff Date, with respect to a Subsequent Mortgage Loan) 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
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<PAGE>
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 Mortgage Rate": With respect to each Distribution Date and Loan
Group, the weighted 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 Cut-off
Date), weighted on the basis of the related Principal Balances as of such date
minus the sum of (i) the Servicing Fee Rate, (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 immediately prior to such Distribution Date and
the denominator of which is the aggregate Principal Balance of the related Loan
Group as of the first day of the month preceding the month of such Distribution
Date and (iii) 0.50%. For purposes of computing the Net Mortgage Rate with
respect to Certificate Group III, calculations will be made on the basis of the
actual number of days in the related Due Period and a 360-day year.
"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.
"Net WAC Cap": For any Distribution Date, (a) with respect to Group I
Certificates, a rate equal to the weighted average of the Uncertificated REMIC I
Regular Interest I-LT1 and Uncertificated REMIC I Regular Interest I-LT2
Pass-Through Rates, weighted on the basis of their related Uncertificated
Principal Balances; (b) with respect to Group II Certificates, a rate equal to
the weighted average of the Uncertificated REMIC I Regular Interest II-LT1 and
Uncertificated REMIC I Regular Interest II-LT2 Pass-Through Rates, weighted on
the basis of their related Uncertificated Principal Balances; (c) with respect
to Group III Certificates, a rate equal to the weighted average of the
Uncertificated REMIC I Regular Interest III-LT1 and Uncertificated REMIC I
Regular Interest III-LT2 Pass-Through Rates, weighted on the basis of their
related Uncertificated Principal Balances.
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<PAGE>
"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 Master 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 Master 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 Master 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 and Class P Certificates, the corresponding amounts set forth opposite
such Class above in the Preliminary Statement and, with respect to the Class R
Certificates, zero.
"Original Pre-Funded Amount": With respect to each Loan Group, the
amount deposited by the Depositor in the related Pre-Funding Account on the
Closing Date, which amount is $51,556,304 with respect to Loan Group I,
$9,528,106 with respect to Loan Group II and $22,703,739 with respect to Loan
Group III.
"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 Deficit": With respect to any Distribution Date
and each Certificate Group is equal to the excess, if any, of (a) the aggregate
Certificate Principal Balance of such Certificate Group then outstanding over
(b) the sum of (i) the aggregate principal balances of the Mortgage Loans of
such Certificate Group then outstanding plus (ii) the related Pre-Funded Amount,
if any.
"Overcollateralization Release Amount": With respect to each
Certificate Group and any Distribution Date, the lesser of (x) the related
Principal Remittance Amount for such Distribution Date and (y) the related
Excess Overcollateralized Amount.
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<PAGE>
"Overcollateralization Target Amount": With respect to each Certificate
Group and any Distribution Date prior to the Stepdown Date, an amount equal to
the greater of (i) (a) 1.75% of the initial Stated Principal Balance of the
Group I Mortgage Loans and the related Original Pre-Funded Amount, (b) 1.75% of
the initial Stated Principal Balance of the Group II Mortgage Loans and the
related Original Pre-Funded Amount or (c) 4.75% of the initial Stated Principal
Balance of the Group III Mortgage Loans and the related Original Pre-Funded
Amount, respectively, or (ii) the related Step Up Required Overcollateralization
Amount, plus, in the case of the Group III Mortgage Loans, the Spread Squeeze
Overcollateralization Increase Amount. With respect to each Certificate Group
and any Distribution Date on or after the Stepdown Date, an amount equal to the
greater of (i) (a) 3.50% of the aggregate Stated Principal Balance of the Group
I Mortgage Loans, (b) 3.50% of the aggregate Stated Principal Balance of the
Group II Mortgage Loans or (c) 9.50% of the aggregate Stated Principal Balance
of the Group III Mortgage Loans, respectively, (ii) the related Step Up Required
Overcollateralization Amount and (iii) 0.50% of the initial Stated Principal
Balance of the Mortgage Loans in the related Loan Group and the related Original
Pre-Funded Amount, plus, in the case of the Group III Mortgage Loans and with
respect to clause (i)(c) and clause (ii) of this sentence, the Spread Squeeze
Overcollateralization Increase Amount. Notwithstanding the foregoing, if the
Master Servicer so requests, the Overcollateralization Target Amount may, with
the consent of the Certificate Insurer, be reduced below the amounts set forth
above.
"Overcollateralized Amount": For any Distribution Date and each
Certificate Group, the amount, if any, by which (i) the related Loan Group
Balance and the amounts remaining in the related Pre-Funding Account as of the
related Determination Date exceeds (ii) the Certificate Principal Balance of the
related 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, 5.88% per annum, (ii) with respect to the Class
A-2 Certificates, 5.92% per annum, (iii) with respect to the Class A-3
Certificates, 6.02% per annum, (iv) with respect to the Class A-4 Certificates,
the lesser of (a)(1) 6.34% per annum on or prior to the Optional Termination
Date or (2) 6.84% after the Optional Termination Date and (b) the related Net
WAC Cap for such Distribution Date, (v) with respect to the Class A-5
Certificates, the lesser of (a)(1) 6.76% per annum on or prior to the Optional
Termination Date or (2) 7.26% after the Optional Termination Date and (b) the
related Net WAC Cap for such Distribution Date, (vi) with respect to the Class
A-6 Certificates, the lesser of (a)(1)6.32% per annum on or prior to the
Optional Termination Date or (2) 6.82% after the Optional Termination Date and
(b) the related Net WAC Cap for such Distribution Date, (vii) with respect to
the Class A-7 Certificates, the lesser of (a)(1) 6.48% per annum on or prior to
the Optional Termination Date or (2) 6.98% after the Optional Termination Date
and (b) the related Net WAC Cap for such Distribution Date and (viii) with
respect to the Class A-8 Certificates, the lesser of (a) the Group III Formula
Rate and (b) the related Net WAC Cap for such Distribution Date.
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"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 III 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 Master 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 Fitch IBCA if rated by Fitch IBCA) 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 AAA by Fitch IBCA if rated by
Fitch IBCA) 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, (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;
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<PAGE>
(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 category 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 AAA by Fitch IBCA if rated by Fitch IBCA), 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, limited liability company,
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. 50803-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).
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"Pre-Funding Account": With respect to each Loan Group, the account
established and maintained pursuant to Section 4.05, as defined herein.
"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 letter agreement among the
Seller, the Depositor and the Certificate Insurer 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 Determination Date 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 day
after the Determination Date in the preceding month 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 Master
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 day after the Determination Date in the calendar month
preceding the calendar 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 Determination Date of the calendar month in which such Distribution Date
occurs.
"Prepayment Premium": With respect to any Mortgage Loan, the charges or
premiums, if any, due in connection with a full or partial prepayment of such
Mortgage Loan in accordance with the terms thereof (other than any Master
Servicer Prepayment Premium Payment Amount).
"Prepayment Premium Schedule": As of any date, the list of Prepayment
Premiums on the Mortgage Loans included in the Trust Fund on such date, attached
hereto as Schedule I (including the Prepayment Premium Summary attached
thereto). The Prepayment Premium Schedule shall set forth the following
information with respect to each Prepayment Premium:
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(i) the Mortgage Loan identifying number;
(ii) a code indicating the type of Prepayment Premium;
(iii) the state of origination of the related Mortgage Loan;
(iv) the date on which the first monthly payment was due on the
related Mortgage Loan;
(v) the term of the related Mortgage Loan; and
(vi) the principal balance of the related Mortgage Loan as of
the Cut-off Date (or Subsequent Cut-off Date, with respect
to a Subsequent Mortgage Loan).
The Prepayment Premium Schedule shall be amended from time to time by
the Master Servicer in accordance with the provisions of this Agreement.
"Principal Balance": As to any Mortgage Loan other than a Liquidated
Mortgage Loan, and any day, 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 any REO Principal Amortization
received with respect thereto on or prior to such day.
"Principal Distribution Amount": With respect to any Certificate Group
and any Distribution Date, the sum of (i) the related Basic Principal
Distribution Amount for such Distribution Date 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 Master Servicer that were due
during the related Due Period, (ii) the principal portion of all partial and
full principal prepayments of such Mortgage Loans applied by the Master 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.
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"Prospectus Supplement": That certain Prospectus Supplement dated April
26, 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 Master 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 Master 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 Master 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 Master 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 or the Mortgage
Loan Purchase Agreement which must, on the date of such substitution, (i) have
an outstanding principal balance (or in the case of a substitution of more than
one mortgage loan for a Deleted Mortgage Loan, an aggregate 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 or Group II 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 III Mortgage Loan, have a Maximum Mortgage Rate
not less than the Maximum Mortgage Rate on the Deleted Mortgage Loan, (iv) if a
Group III Mortgage Loan, have a Minimum Mortgage Rate not less than the Minimum
Mortgage Rate of the Deleted Mortgage Loan, (v) if a Group III Mortgage Loan,
have a Gross Margin equal to or greater than the Gross Margin of the Deleted
Mortgage Loan, (vi) if a Group III 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) be
current as of the date of substitution, (ix) have a
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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 3.01 of the Mortgage Loan
Purchase Agreement 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 satisfied for each such mortgage loan, 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 (provided that no such mortgage loan
may have a remaining term to maturity longer than the Deleted Mortgage Loan),
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 IBCA 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 Master 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 (i) Certificate Group I and Certificate
Group II, the last day of the calendar month preceding the month in which the
related Distribution Date occurs and (ii) Certificate Group III, 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, the Seller or the Master Servicer or any
affiliate thereof and (iii) 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.
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"Related Group": With respect to the Group I Certificates, Loan Group
I, with respect to the Group III Certificates, Loan Group II and with respect to
the Group III Certificates, Loan Group III.
"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 with respect 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 I": The segregated pool of assets subject hereto, constituting
the primary trust created hereby and to be administered hereunder, with respect
to which a REMIC election is to be made 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) and (v) 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 REMIC election will not be made with
respect to the Interest Coverage Accounts and the Pre-Funding Accounts.
"REMIC II": The segregated pool of assets consisting of the
Uncertificated REMIC I Regular Interests conveyed in trust to the Trustee for
the benefit of the holders of the Class A Certificates and Class R Certificates,
with respect to which a separate REMIC election is to be made.
"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 Master 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.
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"REO Account": The account or accounts maintained by the Master
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 Master 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 Master 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.
"Residual Certificate": The Class R Certificates.
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"Residual Interest": The sole class of "residual interests" in a REMIC
within the meaning of Section 860G(a)(2) of the Code.
"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.
"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 and approved by the Certificate Insurer.
"Seller": Option One Mortgage Corporation, a California corporation, or
its successor in interest, in its capacity as seller under the Mortgage Loan
Purchase Agreement.
"Senior Residual Distribution Amount": Shall mean, (A) with respect to
Loan Group I: the notional amount equal to Uncertificated REMIC I Regular
Interest I-LT2 times a rate equal to (X) for the first 12 Distribution Dates,
6.00%, or (Y) for the next 18 Distribution Dates, 4.00%, (B) with respect to
Loan Group II: the notional amount equal to Uncertificated REMIC I Regular
Interest II- LT2 times a rate equal to (X) for the first 12 Distribution Dates,
6.00%, or (Y) for the next 18 Distribution Dates, 4.00% and (C) with respect to
Loan Group III: the notional amount equal to Uncertificated REMIC I Regular
Interest III-LT2 times a rate equal to (X) for the first 12 Distribution Dates,
4.00%, or (Y) for the next 18 Distribution Dates, 2.50%, and, for each Loan
Group and each Distribution Date thereafter, the Senior Residual Distribution
Amount shall equal zero.
"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 Master 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
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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 Master 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
Master 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.
"Servicing Transfer Costs": Shall mean all reasonable costs and
expenses incurred by the Trustee in connection with the transfer of servicing
from a predecessor servicer, including, without limitation, any reasonable costs
or expenses associated with the complete transfer of all servicing data and the
completion, correction or manipulation of such servicing data as may be required
by the Trustee to correct any errors or insufficiencies in the servicing data or
otherwise to enable the Trustee to service the Mortgage Loans properly and
effectively.
"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) 2.00% for any Distribution Date between May
2000 and April 2001 and (b) 3.00% for any Distribution Date beginning in or
after May 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 III
Mortgage Loans as of the related Determination Date plus the amounts
remaining in the related Pre-Funded Account; 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 III Certificates for such
Distribution Date, and the denominator of
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which is the aggregate Stated Principal Balance of the Group III 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 (or Subsequent Cut-off Date, as applicable), 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 (or
Subsequent Cut-off Date, as applicable), to the extent received from the
Mortgagor or advanced by the Master 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 (or Subsequent Cut-off Date, as applicable), 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 Master 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.
"Stepdown Date": With respect to each Certificate Group, the later of
(i) the Distribution Date in November 2001 or (ii) the Distribution Date on
which the Overcollateralization Target Amount has been met and the aggregate
outstanding principal balance of the Mortgage Loans in the related Loan Group is
less than or equal to the sum of (i) one-half of the Cut-off Date Aggregate
Principal Balance of such Loan Group plus (ii) one-half of the related Original
Pre-Funded Amount.
"Step Up Cumulative Loss Test": The Step Up Cumulative Loss Test will
be met with respect to Certificate Group I and Certificate Group II in the
aggregate or Certificate Group III and a Distribution Date as follows: (i) for
the 1st through the 12th Distribution Dates, if the related 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 1.60% in the case of Certificate Group I and
Certificate Group II and 1.80% in the case of Certificate Group III; (iii) for
the 25th through the 36th Distribution Dates, if the Cumulative Loss Percentage
for such Distribution Date is more than 2.00% in the case of Certificate Group I
and
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Certificate Group II and 2.50% in the case of Certificate Group III; (iv) for
the 37th through the 48th Distribution Dates, if the Cumulative Loss Percentage
for such Distribution Date is more than 2.60% in the case of Certificate Group I
and Certificate Group II and 3.00% in the case of Certificate Group III; and (v)
for the 49th Distribution Date and any Distribution Date thereafter, if the
Cumulative Loss Percentage for such Distribution Date is more than 3.20% in the
case of Certificate Group I and Certificate Group II and 3.75% in the case of
Certificate Group III.
"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 Required Overcollateralization Amount": With respect to
Certificate Group I and any Distribution Date on which the Step Up Cumulative
Loss Test is not met, (a)(i) 50% of the Stated Principal Balance of the Mortgage
Loans in Certificate Group I and Certificate Group II that are 90 days or more
Delinquent as of the last day of the preceding calendar month, in foreclosure or
converted to REO Property, minus (ii) 2.5 times the sum of the General Excess
Available Amount for Certificate Group I and the General Excess Available Amount
for Certificate Group II, multiplied by (b) a fraction, the numerator of which
is the Overcollateralization Target Amount for the Group I Certificates for the
previous month and the denominator of which is the sum of the
Overcollateralization Target Amounts for the Group I Certificates and the Group
II Certificates for the previous month. With respect to Certificate Group II and
any Distribution Date on which the Step Up Cumulative Loss Test is not met, (a)
(i) 50% of the Stated Principal Balance of the Mortgage Loans in Certificate
Group I and Certificate Group II that are 90 days or more Delinquent as of the
last day of the preceding calendar month, in foreclosure or converted to REO
Property, minus (ii) 2.5 times the sum of the General Excess Available Amount
for Certificate Group I and the General Excess Available Amount for Certificate
Group II, multiplied by (b) a fraction, the numerator of which is the
Overcollateralization Target Amount for the Group II Certificates for the
previous month and the denominator of which is the sum of the
Overcollateralization Target Amounts for the Group I Certificates and the Group
II Certificates for the previous month. With respect to Certificate Group I or
Certificate Group II and any Distribution Date on which the Step Up Cumulative
Loss Test for Certificate Group I and Certificate Group II is met, twice the
amount set forth in the preceding sentence. With respect to Certificate Group I
and Certificate Group II and the first thirty Distribution Dates, the Step Up
Required Overcollateralization Amount will be capped at 7% of the current
principal balance of the Mortgage Loans in the related Loan Group and amounts
remaining in the related Pre-Funding Account. With respect to Certificate Group
III and any Distribution Date on which the Step Up Cumulative Loss Test is not
met, (i) 75% of the Stated Principal Balance of the Mortgage Loans in
Certificate Group III that are 90 days or more Delinquent as of the last day of
the preceding calendar month, in foreclosure or converted to REO Property, minus
(ii) 2.5 times the General Excess Available Amount for Certificate Group III.
With respect to Certificate Group III and any Distribution Date on which the
Step Up Cumulative Loss Test for Certificate Group III is met, the stated
Principal Balance of the Mortgage Loans in Certificate Group III that are 90
days or more delinquent as of the last day of the preceding calendar month, in
foreclosure or converted to REO Property.
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"Subsequent Cut-off Date": With respect to those Subsequent Mortgage
Loans sold to the Trust Fund pursuant to a Subsequent Transfer Instrument, the
first day of the month in which the related Subsequent Transfer Date occurs.
"Subsequent Mortgage Loan": A Mortgage Loan sold by the Depositor to
the Trust Fund pursuant to Section 2.08, such Mortgage Loan being identified on
the Mortgage Loan Schedule attached to a Subsequent Transfer Instrument.
"Subsequent Mortgage Loan Purchase Agreement": The agreement between
the Depositor and the Master Servicer, in its capacity as Seller, regarding the
transfer of the Subsequent Mortgage Loans by the Seller to the Depositor.
"Subsequent Transfer Date": With respect to each Subsequent Transfer
Instrument, the date on which the related Subsequent Mortgage Loans are sold to
the Trust Fund.
"Subsequent Transfer Instrument": Each Subsequent Transfer Instrument,
dated as of a Subsequent Transfer Date, executed by the Trustee and the
Depositor substantially in the form attached hereto as Exhibit N, by which
Subsequent Mortgage Loans are transferred to the Trust Fund.
"Sub-Servicer": Any Person with which either Master 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 Master Servicer.
"Sub-Servicing Agreement": The written contract between either Master
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 by the Trustee on behalf of each of REMIC I and REMIC II,
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 1999-2, the trust created
hereunder.
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"Trust Fund": REMIC I, REMIC II, the Interest Coverage Accounts and the
Pre-Funding Accounts.
"Trustee": Norwest Bank Minnesota, National Association, a national
banking association, or any successor trustee appointed as herein provided.
"Uncertificated Principal Balance": With respect to each Uncertificated
REMIC I Regular Interest on any date of determination, an amount equal to (i)
$211,312,141.10, with respect to Uncertificated REMIC I Regular Interest I-LT1;
$23,479,137.90, with respect to Uncertificated REMIC I Regular Interest I-LT2;
$34,589,884.50, with respect to Uncertificated REMIC I Regular Interest II-LT1;
$3,843,320.50, with respect to Uncertificated REMIC I Regular Interest II-LT2;
$87,025,909.50, with respect to Uncertificated REMIC I Regular Interest III-LT1;
$9,669,545.50, with respect to Uncertificated REMIC I Regular Interest III-LT2,
minus (ii) the sum of (x) the aggregate of all amounts previously deemed
distributed with respect to such interest and applied to reduce the
Uncertificated Principal Balance thereof pursuant to Section 4.07(b).
"Uncertificated REMIC I Accrued Interest": With respect to each
Uncertificated REMIC I Regular Interest on each Distribution Date, an amount
equal to one month's interest at the Uncertificated REMIC I Pass-Through Rate on
the Uncertificated Principal Balance of such Uncertificated REMIC I Regular
Interest. Uncertificated REMIC I Accrued Interest will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. In each case,
Uncertificated REMIC I Accrued Interest will be reduced by the amount of all
shortfalls in respect of interest deemed allocated to the related Uncertificated
REMIC I Regular Interest pursuant to Section 4.07.
"Uncertificated REMIC I Pass-Through Rate":
(a) With respect to Uncertificated REMIC I Regular Interest I-LT1, the
Net Mortgage Rate of the Group I Mortgage Loans;
(b) with respect to Uncertificated REMIC I Regular Interest I-LT2, (X)
for the first 12 Distribution Dates, the Net Mortgage Rate of the Group I
Mortgage Loans minus 6.00%, (Y) for the next 18 Distribution Dates, the Net
Mortgage Rate of the Group I Mortgage Loans minus 4.00% and (Z) for each
Distribution Date thereafter, the Net Mortgage Rate of the Group I Mortgage
Loans;
(c) with respect to Uncertificated REMIC I Regular Interest II-LT1, the
Net Mortgage Rate of the Group II Mortgage Loans;
(d) with respect to Uncertificated REMIC I Regular Interest II-LT2, (X)
for the first 12 Distribution Dates, the Net Mortgage Rate of the Group II
Mortgage Loans minus 6.00%, (Y) for the next 18 Distribution Dates, the Net
Mortgage Rate of the Group II Mortgage Loans minus 4.00% and (Z) for each
Distribution Date thereafter, the Net Mortgage Rate of the Group II Mortgage
Loans;
(e) with respect to Uncertificated REMIC I Regular Interest III-LT1,
the Net Mortgage Rate of the Group III Mortgage Loans;
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(f) with respect to the Uncertificated REMIC I Regular Interests
III-LT2, (X) for the first 12 Distribution Dates, the Net Mortgage Rate of the
Group III Mortgage Loans minus 4.00%, (Y) for the next 18 Distribution Dates,
the Net Mortgage Rate of the Group III Mortgage Loans minus 2.50% and (Z) for
each Distribution Date thereafter, the Net Mortgage Rate of the Group III
Mortgage Loans.
"Uncertificated REMIC I Regular Interest I-LT1": An uncertificated
partial undivided beneficial ownership interest in REMIC I having an initial
Uncertificated Principal Balance equal to $211,312,141.10 and which bears
interest at a rate equal to the Uncertificated REMIC I Pass-
Through Rate.
"Uncertificated REMIC I Regular Interest I-LT2": An uncertificated
partial undivided beneficial ownership interest in REMIC I having an initial
Uncertificated Principal Balance equal to $23,479,137.90 and which bears
interest at a rate equal to the Uncertificated REMIC I Pass-
Through Rate.
"Uncertificated REMIC I Regular Interest II-LT1": An uncertificated
partial undivided beneficial ownership interest in REMIC I having an initial
Uncertificated Principal Balance equal to $34,589,884.50 and which bears
interest at a rate equal to the Uncertificated REMIC I Pass- Through Rate.
"Uncertificated REMIC I Regular Interest II-LT2": An uncertificated
partial undivided beneficial ownership interest in REMIC I having an initial
Uncertificated Principal Balance equal to $3,843,320.50 and which bears interest
at a rate equal to the Uncertificated REMIC I Pass- Through Rate.
"Uncertificated REMIC I Regular Interest III-LT1": An uncertificated
partial undivided beneficial ownership interest in REMIC I having an initial
Uncertificated Principal Balance equal to $87,025,909.50 and which bears
interest at a rate equal to the Uncertificated REMIC I Pass-
Through Rate.
"Uncertificated REMIC I Regular Interest III-LT2": An uncertificated
partial undivided beneficial ownership interest in REMIC I having an initial
Uncertificated Principal Balance equal to $9,669,545.50 and which bears interest
at a rate equal to the Uncertificated REMIC I Pass- Through Rate.
"Uncertificated REMIC I Regular Interests": Uncertificated REMIC I
Regular Interest I-LT1, Uncertificated REMIC I Regular Interest I-LT2,
Uncertificated REMIC I Regular Interest II-LT1, Uncertificated REMIC I Regular
Interest II-LT2, Uncertificated REMIC I Regular Interest III-LT1, and
Uncertificated REMIC I Regular Interest III-LT2.
"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.
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"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 Freddie Mac, 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 Freddie Mac 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
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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
(B) 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. At all times the Class A and
Class R Certificates shall have 99% of the Voting Rights and the Class P
Certificates shall have 1% of the Voting Rights. 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 Class A 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 the Class A Certificates outstanding shall be
the fraction, expressed as a percentage, the numerator of which is the aggregate
Certificate Balance of all of the Class A Certificates then outstanding and the
denominator of which is the aggregate unpaid principal balance of the Mortgage
Loans. The Voting Rights allocated to the Residual Certificates shall be 99%
minus that portion of the Voting Rights allocated to the Class A Certificates
calculated in accordance with the formula set forth in the preceding sentence.
The Voting Rights allocated to the Class A Certificates shall be allocated among
the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class A-7
and Class A-8 Certificates in proportion to the outstanding Certificate
Principal Balance of such Certificates and the Voting Rights allocated to any
Class of Class A Certificates shall be allocated among all holders of each such
Class in proportion to the outstanding Certificate Principal Balance of such
Certificates; PROVIDED, HOWEVER that when none of the Regular Certificates are
outstanding, 100% of the Voting Rights shall be allocated among Holders of the
Class R Certificates in accordance with such Holders' respective Percentage
Interests in the Certificates of such Class.
Section 1.02. ACCOUNTING.
Unless otherwise specified herein, for the purpose of any definition or
calculation, whenever amounts are required to be netted, subtracted or added or
any distributions are taken into account such definition or calculation and any
related definitions or calculations shall be determined without
duplication of such functions.
ARTICLE II
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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; (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 Master 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 Initial Mortgage Loan so transferred and assigned and the
Seller, on behalf of the Depositor, shall, in accordance with Section 2.08,
deliver or caused to be delivered to the Trustee with respect to each Subsequent
Mortgage Loan, the following documents or instruments (with respect to each
Mortgage Loan, a "Mortgage File") :
(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, 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;
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(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, 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 Master Servicer, in its capacity as Seller under the Mortgage Loan
Purchase Agreement, shall promptly (and in no event later than 60 Business Days
following the Closing Date (or Subsequent Transfer Date, with respect to the
Subsequent Mortgage Loans)) 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 (or Subsequent Transfer Date, with respect to
Subsequent Mortgage Loans) 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 (or Subsequent Closing Date, with respect to Subsequent Mortgage
Loans), 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.
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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; provided, however, notwithstanding the delivery of any
Opinion of Counsel, each Assignment of Mortgage shall be submitted for recording
by the Seller in the manner described above, at no expense to the Trust Fund or
Trustee, upon the earliest to occur of: (i) reasonable direction by Holders of
Certificates entitled to at least 25% of the Voting Rights or the Certificate
Insurer, (ii) the occurrence of a Master Servicer Event of Termination, (iii)
the occurrence of a bankruptcy, insolvency or foreclosure relating to the
Seller, (iv) the occurrence of a servicing transfer as described in Section 7.02
hereof and (iv) if the Seller is not the Master Servicer and with respect to any
one Assignment of Mortgage, the occurrence of a bankruptcy, insolvency or
foreclosure relating to the Mortgagor under the related Mortgage.
Notwithstanding the foregoing, if the Seller fails to pay the cost of recording
the Assignments of Mortgage, such expense will be paid by the Trustee and the
Trustee shall be reimbursed for such expenses by the Trust. The Seller shall be
required to deliver such assignments for recording within 30 days of the Closing
Date (or Subsequent Transfer Date, with respect to Subsequent Mortgage Loans).
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 (or Subsequent Transfer Date, with respect to Subsequent Mortgage
Loans), promptly following the Closing Date (or Subsequent Transfer Date, with
respect to Subsequent Mortgage Loans) the Seller shall cause to be completed
such endorsements "Pay to the order of Norwest Bank Minnesota, National
Association, as Trustee, 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 Master 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 Master 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
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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 Master Servicer cannot
provide a copy of such document certified by the public recording office within
such 270 day period, the Master Servicer shall deliver to the Custodian, within
such 270 day period, an Officer's Certificate of the Master 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 Master 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 Master Servicer shall deliver a copy of such document certified by
an officer of the Master 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, with respect to each Initial
Mortgage Loan or the Subsequent Transfer Date, with respect to each Subsequent
Mortgage Loan (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, with respect to each Initial Mortgage Loan and the Subsequent
Transfer Date, with respect to each Subsequent Mortgage Loan (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
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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 Master
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 Master Servicer and the Certificate Insurer. In addition, upon
the discovery by the Seller, Depositor or the Master Servicer (or upon receipt
by the Trustee of written notification of such breach) of a breach of any of the
representations and warranties made by the Seller in the related Mortgage Loan
Purchase Agreement in respect of any Mortgage Loan which materially adversely
affects such Mortgage Loan or the interests of the related Certificateholders in
such Mortgage Loan, the party discovering such breach shall give prompt written
notice to the other parties to this Agreement and the Certificate Insurer.
The Depositor and the Trustee intend that the assignment and transfer
herein contemplated constitute a sale of the Mortgage Loans, the related
Mortgage Notes and the related documents, conveying good title thereto free and
clear of any liens and encumbrances, from the Depositor to the Trustee and that
such property not be part of the Depositor's estate or property of the Depositor
in the event of any insolvency by the Depositor. In the event that such
conveyance is deemed to be, or to be made as security for, a loan, the parties
intend that the Depositor shall be deemed to have granted and does hereby grant
to the Trustee a first priority perfected security interest in all of the
Depositor's right, title and interest in and to the Mortgage Loans, the related
Mortgage Notes and the related documents, and that this Agreement shall
constitute a security agreement under applicable law.
Section 2.03. REPURCHASE OR SUBSTITUTION OF MORTGAGE LOANS BY THE
SELLER.
(a) Upon discovery or receipt of written notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by the Seller of any representation, warranty or covenant under the
Mortgage Loan Purchase Agreement 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 Master 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
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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 Master 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) Subject to Section 2.03(e), within 90 days of the earlier of
discovery by the Depositor or receipt of notice by the Depositor of the breach
of any representation or warranty of the Depositor set forth in Section 2.06
with respect to 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 Depositor shall (i) cure such breach in all material
respects, (ii) repurchase the Mortgage Loan from the Trust at the Purchase Price
or (iii) cause such Mortgage Loan to be removed from the Trust Fund (in which
case it shall become a Deleted Mortgage Loan) and substituted for by one or more
Qualified Substitute Mortgage Loans by the Seller in the manner and subject to
the limitations set forth in Section 2.03(d). If any such breach is a breach of
any of the representations and warranties included in Section 2.06(xi), and the
Depositor is unable to cure such breach, the Depositor shall cause the Seller to
repurchase or substitute the smallest number of Mortgage Loans as shall be
required to make such representation or warranty true and correct. The Purchase
Price for any repurchased Mortgage Loan shall be delivered to the Master
Servicer for deposit in the Collection Account, and, upon receipt thereof, the
Master Servicer shall at the Depositor's direction release to the Depositor the
related Mortgage File and the Trustee shall execute and deliver such instruments
of transfer or assignment furnished by the Depositor, in each case without
recourse, as the Depositor shall furnish to it and as shall be necessary to vest
in the Depositor any Mortgage Loan released pursuant hereto.
(c) Within 90 days of the earlier of discovery by the Master Servicer
or receipt of notice by the Master Servicer of the breach of any representation,
warranty or covenant of the Master 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 Master Servicer shall cure such
breach in all material respects.
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(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 Master 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 Master 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 Seller 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 by the Seller, 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 the Mortgage Loan Purchase
Agreement, including all applicable representations and warranties thereof
included in the Mortgage Loan Purchase Agreement 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 Master
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 Master 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
Master 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.
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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) either REMIC or
REMIC II, 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 Master 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 or the Depositor, as the case may be, 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. Such repurchase or substitution shall be made (i) by the Seller
if the affected Mortgage Loan's status as a non-qualified mortgage is or results
from a breach of any representation, warranty or covenant made by the Seller
under the Mortgage Loan Purchase Agreement, or (ii) the Depositor, if the
affected Mortgage Loan's status as a non-qualified mortgage is a breach of any
representation or warranty of the Depositor set forth in Section 2.06, or if its
status as a non-qualified mortgage is a breach of no representation or warranty.
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, or Section 2.03(b), if made by
the Depositor. The Trustee shall reconvey to the Depositor or the Seller, as the
case may be, 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. INTENTIONALLY OMITTED.
Section 2.05. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
MASTER SERVICER.
The Master 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 Master 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 Master Servicer or to ensure the enforceability
or validity of each Mortgage Loan; the Master 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 Master 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
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Master 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 Master Servicer to make this Agreement
valid and binding upon the Master 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 Master Servicer
and will not result in the breach of any term or provision of the
charter or by-laws of the Master 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 Master Servicer or its property is subject, or result in the
violation of any law, rule, regulation, order, judgment or decree to
which the Master Servicer or its property is subject;
(iii) The execution and delivery of this Agreement by the Master
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 Master
Servicer, constitute and will constitute valid, legal and binding
obligations of the Master 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 Master 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 Master 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 Master Servicer that might prohibit or materially and
adversely affect the performance by such Master 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
Master Servicer to carry on its business substantially as now
conducted, or (C) may result in any material liability on the part of
the Master 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 Master Servicer contemplated
herein, or (E) would otherwise be likely to impair materially the
ability of the Master 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 Master Servicer in connection with the transactions
contemplated hereby contains any untrue statement of a material fact;
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(ix) The Master 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
Master Servicer can service the Mortgage Loans in accordance with the
terms of this Agreement and (ii) the Master Servicer can operate its
business in the same manner as it is operating on the date hereof;
(x) The information set forth in the Prepayment Premium Schedule
(including the Prepayment Premium Summary attached thereto) is
complete, true and correct in all material respects on the date or
dates when such information is furnished and each Prepayment Premium is
permissible and enforceable in accordance with its terms (except to the
extent that the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, receivership and other similar laws affecting
creditor's rights generally or the collectibility thereof may be
limited due to acceleration in connection with a foreclosure) under
applicable state law; and
(xi) The Master Servicer will not waive any Prepayment Premium
unless it is waived in accordance with the standard set forth in
Section 3.01.
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 Master 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, Prepayment
Premium 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 Master
Servicer, the Seller, the Certificate Insurer and the Trustee. Notwithstanding
the foregoing, within 90 days of the earlier of discovery by the Master Servicer
or receipt of notice by the Master Servicer of the breach of the representation
or covenant of the Master Servicer set forth in Sections 2.05(x) or 2.05(xi)
above which materially and adversely affects the interests of the Holders of the
Class P Certificates in any Prepayment Premium, the Master Servicer shall remedy
such breach as follows: (a) if the representation made by the Master Servicer in
Section 2.05(x) above is breached and a Principal Prepayment has occurred in the
applicable Prepayment Period, the Master Servicer must pay the amount of the
scheduled Prepayment Premium, for the benefit of the Holders of the Class P
Certificates, by depositing such amount into the Collection Account, net of any
amount previously collected by the Master Servicer and paid by the Master
Servicer, for the benefit of the Holders of the Class P Certificates, in respect
of such Prepayment Premium; and (b) if any of the covenants made by the Master
Servicer in Section 2.05(xi) above is breached, the Master Servicer must pay the
amount of such waived Prepayment Premium, for the benefit of the holders of the
Class P Certificates, by depositing such amount into the Collection Account. The
foregoing shall not, however, limit any remedies available to the
Certificateholders, the Depositor, the Certificate Insurer or the Trustee on
behalf of the Certificateholders, pursuant to the Mortgage Loan Purchase
Agreement signed by the Master Servicer in its capacity as Seller, respecting a
breach of the representations, warranties and covenants of the Master Servicer
in its capacity as Seller contained in the Mortgage Loan Purchase Agreement.
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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
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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;
(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;
(x) The Initial Mortgage Loans have original terms to maturity
ranging from 10 to 30 years;
(xi) No more than approximately 22.70%; 7.63%, 6.49% and 5.41% of
the Initial Mortgage Loans, by Cut-off Date Principal Balance will be
secured by Mortgaged Properties located in California, Florida,
Massachusetts, and Illinois; and approximately 82.59% of the Initial
Mortgage Loans, by Cut-off Date Principal Balance will be secured by
real property with a single family residence erected thereon and
approximately 3.52% of the Initial Mortgage Loans, by the Cut-off Date
Principal Balance are secured by condominiums;
(xii) As of the Cut-off Date, each Initial Mortgage Loan, had a
Loan-to-Value Ratio that was less than or equal to 100.00%;
(xiii) With respect to each Group I and Group II Mortgage Loan,
the Mortgage Note related thereto bears a fixed Mortgage Rate; and with
respect to each Group III Mortgage Loan, the Mortgage Rate will be
adjusted on each Adjustment Date to equal the Index plus the Gross
Margin, rounded to the nearest or next highest 0.125%, subject to the
Periodic Rate Cap, the Maximum Mortgage Rate and the Minimum Mortgage
Rate; and
(xiv) The average Cut-off Date Principal Balance of the Initial
Mortgage Loans is $106,805.48.
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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. CONVEYANCE OF THE SUBSEQUENT MORTGAGE LOANS.
(a) Subject to the conditions set forth in paragraph (b) below in
consideration of the Trustee's delivery on the Subsequent Transfer Dates to or
upon the order of the Depositor of all or a portion of the balance of funds in
the Pre-Funding Accounts, the Depositor shall on any Subsequent Transfer Date
sell, transfer, assign, set over and convey without recourse to the Trust Fund
but subject to the other terms and provisions of this Agreement all of the
right, title and interest of the Depositor in and to (i) the Subsequent Mortgage
Loans identified on the Mortgage Loan Schedule attached to the related
Subsequent Transfer Instrument delivered by the Depositor on such Subsequent
Transfer Date, (ii) principal due and interest accruing on the Subsequent
Mortgage Loans after the related Subsequent Cut-off Date and (iii) all items
with respect to such Subsequent Mortgage Loans to be delivered pursuant to
Section 2.01 and the other items in the related Mortgage Files; PROVIDED,
HOWEVER, that the Depositor reserves and retains all right, title and interest
in and to principal received and interest accruing on the Subsequent Mortgage
Loans prior to the related Subsequent Cut-off Date. The transfer to the Trustee
for deposit in the Mortgage Pool by the Depositor of the Subsequent Mortgage
Loans identified on the Mortgage Loan Schedule shall be absolute and is intended
by the Depositor, the Master Servicer, the Trustee and the Certificateholders to
constitute and to be treated as a sale of the Subsequent Mortgage Loans by the
Depositor to the Trust Fund. The related Mortgage File for each Subsequent
Mortgage Loan shall be delivered to the Trustee at least three Business Days
prior to the related Subsequent Transfer Date.
The purchase price paid by the Trustee from amounts released from
the Pre-Funding Accounts shall be one-hundred percent (100%) of the aggregate
Stated Principal Balance of the Subsequent Mortgage Loans so transferred (as
identified on the Mortgage Loan Schedule provided by the Depositor). This
Agreement shall constitute a fixed-price purchase contract in accordance
with Section 860G(a)(3)(A)(ii) of the Code.
(b) The Depositor shall transfer to the Trustee for deposit in the
Mortgage Pool the Subsequent Mortgage Loans and the other property and rights
related thereto as described in paragraph (a) above, and the Trustee shall
release funds from the Pre-Funding Accounts, only upon the satisfaction of each
of the following conditions on or prior to the related Subsequent Transfer Date:
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(i) the Depositor shall have provided the Trustee with a timely
Addition Notice and shall have provided any information reasonably
requested by the Trustee with respect to the Subsequent Mortgage Loans;
(ii) the Depositor shall have delivered to the Trustee a duly
executed Subsequent Transfer Instrument, which shall include a Mortgage
Loan Schedule listing the Subsequent Mortgage Loans, and the Master
Servicer, in its capacity as Seller, shall have delivered a computer
file containing such Mortgage Loan Schedule to the Trustee at least
three Business Days prior to the related Subsequent Transfer Date;
(iii) as of each Subsequent Transfer Date, as evidenced by
delivery of the Subsequent Transfer Instrument, substantially in the
form of Exhibit N, the Depositor shall not be insolvent nor shall it
have been rendered insolvent by such transfer nor shall it be aware of
any pending insolvency;
(iv) such sale and transfer shall not result in a material adverse
tax consequence to the Trust Fund or the Certificateholders;
(v) the related Funding Period shall not have terminated;
(vi) the Depositor shall not have selected the Subsequent Mortgage
Loans in a manner that it believed to be adverse to the interests of
the Certificateholders;
(vii) the Depositor shall have delivered to the Trustee a
Subsequent Transfer Instrument confirming the satisfaction of the
conditions precedent specified in this Section 2.08 and, pursuant to
the Subsequent Transfer Instrument, assigned to the Trustee without
recourse for the benefit of the Certificateholders all the right, title
and interest of the Depositor, in, to and under the Subsequent Mortgage
Loan Purchase Agreement, to the extent of the Subsequent Mortgage
Loans;
(viii) the Depositor shall have delivered to the Trustee a letter
from an Independent accountant (with copies provided to each Rating
Agency) stating that the characteristics of the Subsequent Mortgage
Loans conform to the characteristics set forth in paragraphs (c), (d)
and (e) below;
(ix) the Depositor shall have delivered to the Trustee an Opinion
of Counsel addressed to the Trustee and the Rating Agencies with
respect to the transfer of the Subsequent Mortgage Loans substantially
in the form of the Opinion of Counsel delivered to the Trustee on the
Closing Date regarding the true sale of the Subsequent Mortgage Loans;
and
(x) the Depositor shall have received the written consent of the
Certificate Insurer to the transfer of the Subsequent Loans.
(c) The obligation of the Trust Fund to purchase a Subsequent
Mortgage Loan to be included in Loan Group I on any Subsequent Transfer Date is
subject to the satisfaction of the conditions set forth in the immediately
following paragraph and the accuracy of the following
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representations and warranties with respect to each such Subsequent Mortgage
Loan determined as of the applicable Subsequent Cut-off Date: (i) such
Subsequent Mortgage Loan may not be 30 or more days delinquent as of the related
Subsequent Cut-off Date; (ii) the original term to stated maturity of such
Subsequent Mortgage Loan will not be less than 120 months and will not exceed
360 months; (iii) such Subsequent Mortgage Loan will not have a loan-to-value
ratio greater than 95.00%; (iv) such Subsequent Mortgage Loans will have, as of
the Subsequent Cut-off Date, a weighted average term since origination not in
excess of 6 months; (v) no such Subsequent Mortgage Loan shall have a Mortgage
Rate less than 6.250% or greater than 15.250%; (vi) such Subsequent Mortgage
Loan shall have been serviced by the Master Servicer since originated or
purchased by the Depositor; (vii) such Subsequent Mortgage Loan must have a
first payment date occurring on or before July 1, 1999; and (viii) such
Subsequent Mortgage Loan shall have been underwritten in accordance with the
criteria set forth under "Option One Mortgage Corporation--Underwriting
Standards" in the Prospectus Supplement.
In addition, following the purchase of any Subsequent Mortgage
Loan to be included in Loan Group I by the Trust, the Group I Mortgage Loans
(including such Subsequent Mortgage Loans) will as of the Subsequent Cut-off
Date: (i) have a weighted average original term to stated maturity of not more
than 290 months; (ii) have a weighted average Mortgage Rate of not less than
9.500% and not more than 10.500%; (iii) have a weighted average loan-to-value
ratio of not more than 80.00%; and (iv) have no Mortgage Loan with a principal
balance in excess of $240,000, in each case, as applicable, by aggregate
principal balance of the Group I Mortgage Loans as of the Subsequent Cut-off
Date. In the sole discretion of the Certificate Insurer, Subsequent Mortgage
Loans with characteristics varying from those set forth above may be purchased
by the Trust; provided, however that the addition of such Mortgage Loans will
not materially affect the aggregate characteristics of Group I.
(d) The obligation of the Trust Fund to purchase a Subsequent
Mortgage Loan to be included in Loan Group II on any Subsequent Transfer Date is
subject to the satisfaction of the conditions set forth in the immediately
following paragraph and the accuracy of the following representations and
warranties with respect to each such Subsequent Mortgage Loan determined as of
the applicable Subsequent Cut-off Date:(i) such Subsequent Mortgage Loan may not
be 30 or more days delinquent as of the related Subsequent Cut-off Date; (ii)
the original term to stated maturity of such Subsequent Mortgage Loan will not
be less than 180 months and will not exceed 360 months; (iii) such Subsequent
Mortgage Loan will not have a loan-to-value ratio greater than 95.00%; (iv) such
Subsequent Mortgage Loans will have, as of the related Subsequent Cut-off Date,
a weighted average term since origination not in excess of 6 months; (v) no
Subsequent Mortgage Loan shall have a Mortgage Rate less than 7.250% or greater
than 11.000%; (vi) such Subsequent Mortgage Loan shall have been serviced by the
Master Servicer since originated or purchased by the Depositor; (vii) such
Subsequent Mortgage Loan must have a first payment date occurring on or before
July 1, 1999; and (viii) such Subsequent Mortgage Loan shall have been
underwritten in accordance with the criteria set forth under "Option One
Mortgage Corporation--Underwriting Standards" in the Prospectus Supplement.
In addition, following the purchase of any Subsequent Mortgage
Loan to be including in Loan Group II by the Trust, the Group II Mortgage Loans
(including such Subsequent Mortgage
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Loans) will as of the Subsequent Cut-off Date: (i) have a weighted average
original term to stated maturity of not more than 305 months; (ii) have a
weighted average Mortgage Rate of not less than 8.500% and not more than 9.500%;
(iii) have a weighted average loan-to-value ratio of not more than 80.00%; and
(iv) have no Mortgage Loan with a principal balance in excess of $900,000, in
each case, as applicable, by aggregate principal balance of the Group II
Mortgage Loans as of the Subsequent Cut-off Date. In the sole discretion of the
Certificate Insurer, Subsequent Mortgage Loans with characteristics varying from
those set forth above may be purchased by the Trust; provided, however that the
addition of such Mortgage Loans will not materially affect the aggregate
characteristics of Group II.
(e) The obligation of the Trust Fund to purchase a Subsequent
Mortgage Loan to be included in Loan Group III on any Subsequent Transfer Date
is subject to the satisfaction of the conditions set forth in the immediately
following paragraph and the accuracy of the following representations and
warranties with respect to each such Subsequent Mortgage Loan determined as of
the applicable Subsequent Cut-off Date:(i) such Subsequent Mortgage Loan may not
be 30 or more days delinquent as of the related Subsequent Cut-off Date; (ii)
the original term to stated maturity of such Subsequent Mortgage Loan will not
be less than 180 months and will not exceed 360 months; (iii) such Subsequent
Mortgage Loan may not provide for negative amortization; (iv) such Subsequent
Mortgage Loan will not have a loan-to-value ratio greater than 95.00%; (v) such
Subsequent Mortgage Loans will have, as of the Subsequent Cut-off Date, a
weighted average term since origination not in excess of 6 months; (vi) no
Subsequent Mortgage Loan shall have a Mortgage Rate less than 6.500% or greater
than 12.000%; (vii) such Subsequent Mortgage Loan shall have been serviced by
the Master Servicer since originated or purchased by the Depositor; (viii) such
Subsequent Mortgage Loan must have a first payment date occurring on or before
July 1, 1999; (ix) Gross Margin not less than 3.500%; (x) Maximum Rate not less
than 12.500%; (xi) Minimum Rate not less than 6.500%; and (xii) such Subsequent
Mortgage Loan shall have been underwritten in accordance with the criteria set
forth under "Option One Mortgage Corporation-- Underwriting Standards" in the
Prospectus Supplement.
In addition, following the purchase of any Subsequent Mortgage
Loan to be included in Loan Group III, the Group III Mortgage Loans (including
such Subsequent Mortgage Loans) will as of the Subsequent Cut-off Date: (i) have
a weighted average original term to stated maturity of not more than 360 months;
(ii) have a weighted average Mortgage Rate of not less than 8.750% and not more
than 9.750%; (iii) have a weighted average loan-to-value ratio of not more than
85.00%; (iv) have no Mortgage Loan with a principal balance in excess of
$900,000; and (v) have a weighted average Gross Margin not less than 5.000%, in
each case, as applicable, by aggregate principal balance of the Group III
Mortgage Loans as of the Subsequent Cut-off Date. In the sole discretion of the
Certificate Insurer, Subsequent Mortgage Loans with characteristics varying from
those set forth above may be purchased by the Trust; provided, however that the
addition of such Mortgage Loans will not materially affect the aggregate
characteristics of Group III.
Section 2.09. CONVEYANCE OF UNCERTIFICATED REMIC I REGULAR INTERESTS;
ACCEPTANCE OF REMIC II BY THE TRUSTEE. The Company, concurrently with the
execution and delivery hereof, does hereby transfer, assign, set over and
otherwise convey to the Trustee without recourse all the right, title and
interest of the Depositor in and to the Uncertificated REMIC I Regular Interests
for the
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benefit of the Certificateholders and the Certificate Insurer. The Trustee
acknowledges receipt of the REMIC I Regular Interests (which are uncertificated)
and declares that it holds and will hold the same in trust for the exclusive use
and benefit of all present and future Certificateholders and the
Certificate Insurer.
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
Section 3.01. MASTER SERVICER TO ACT AS MASTER SERVICER.
The Master 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 Master
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 Master Servicer, any Sub-Servicer or
any Affiliate of the Master Servicer or any Sub-Servicer may have with
the related Mortgagor;
(ii) the ownership or non-ownership of any Certificate by the
Master Servicer or any Affiliate of the Master Servicer;
(iii) the Master Servicer's obligation to make Advances or
Servicing Advances; or
(iv) the Master 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 Master Servicer (a) shall seek
to maximize the timely and complete recovery of principal and interest on the
Mortgage Notes and (b) shall waive (or permit a subservicer to waive) a
Prepayment Premium only under the following circumstances: (i) such waiver is
standard and customary in servicing similar Mortgage Loans and (ii) either (A)
such waiver would, in the reasonable judgement of the Master Servicer, maximize
recovery of total proceeds taking into account the value of such Prepayment
Premium and the related Mortgage Loan and, if such waiver is made in connection
with a refinancing of the related Mortgage Loan, such refinancing is related to
a default or a reasonably foreseeable default or (B) such waiver is made in
connection with a refinancing of the related Mortgage Loan unrelated to a
default or a reasonably foreseeable default where (x) the related mortgagor has
stated to the Master Servicer or an applicable subservicer an intention to
refinance the related Mortgage Loan and (y) the Master Servicer has concluded in
its reasonable judgement that the waiver of such Prepayment Premium would induce
such mortgagor to refinance with the Master Servicer. If a Prepayment Premium is
waived as permitted by meeting the standards described in clauses (i) and
(ii)(B) above, then the Master Servicer is required to pay
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the amount of such waived Prepayment Premium, for the benefit of the Holders of
the Class P Certificates, by depositing such amount into the Collection Account
together with and at the time that the amount prepaid on the related Mortgage
Loan is required to be deposited into the Collection Account. Notwithstanding
any other provisions of this Agreement, any payments made by the Master Servicer
in respect of any waived Prepayment Premiums pursuant to clauses (i) and (ii)(B)
above shall be deemed to be paid outside of the Trust Fund. Subject only to the
above-described servicing standards and the terms of this Agreement and of the
Mortgage Loans, the Master 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 Master Servicer in its own name or in the name of a Sub-Servicer
is hereby authorized and empowered by the Trustee when the Master 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 Master 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 Master 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 Master Servicer, and furnish to the
Master Servicer and any Sub-Servicer any special or limited powers of attorney
and other documents necessary or appropriate to enable the Master 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 Master Servicer and submitted to the Trustee for execution. The
Trustee shall not be liable for the actions of the Master 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 Master 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 Master 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 Master
Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.04) and the Master 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
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or such default is, in the judgment of the Master 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 either REMIC I or REMIC II 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.
Section 3.02. SUB-SERVICING AGREEMENTS BETWEEN MASTER SERVICER AND
SUB-SERVICERS.
(a) The Master 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 Master 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 Freddie Mac 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 Master 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 Master 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 Master Servicer, are conclusively deemed
to be inconsistent with this Agreement and therefore prohibited. The Master
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 Master Servicer's execution and delivery of such instruments.
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(b) As part of its servicing activities hereunder, the Master 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 Master Servicer, in its good faith business
judgment, would require were it the owner of the related Mortgage Loans. The
Master Servicer shall pay the costs of such enforcement at its own expense, and
shall be reimbursed therefor only (i) from a general recovery resulting from
such enforcement, to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Mortgage 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 Master 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 Master 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 Master Servicer without any act or deed
on the part of such Sub- Servicer or the Master Servicer, and the Master
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 Master Servicer, the Trustee (if
the Trustee is acting as Master Servicer) or the Certificate Insurer without
fee, in accordance with the terms of this Agreement, in the event that the
Master Servicer (or the Trustee, if such party is then acting as Master
Servicer) shall, for any reason, no longer be the Master Servicer (including
termination due to a Master Servicer Event of Termination).
Section 3.04. LIABILITY OF THE MASTER SERVICER.
Notwithstanding any Sub-Servicing Agreement or the provisions of this
Agreement relating to agreements or arrangements between the Master Servicer and
a Sub-Servicer or reference to actions taken through a Sub-Servicer or
otherwise, the Master 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 Master Servicer alone were servicing and
administering the
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Mortgage Loans. The Master Servicer shall be entitled to enter into any
agreement with a Sub- Servicer for indemnification of the Master 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
Master 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 Master Servicer shall be solely liable for all
fees owed by it to any Sub-Servicer, irrespective of whether the Master
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 Master Servicer shall for any reason no longer be the
servicer (including by reason of the occurrence of a Master Servicer Event of
Termination), the Trustee shall thereupon assume all of the rights and
obligations of the Master Servicer under each Sub-Servicing Agreement that the
Master 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 Master Servicer's interest
therein and to have replaced the departing Master 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 Master
Servicer shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement that arose before it ceased to be the Master Servicer
and (ii) neither the Trustee nor any successor Master Servicer shall be deemed
to have assumed any liability or obligation of the Master Servicer that arose
before it ceased to be the Master Servicer.
The Master 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. All Servicing Transfer Costs
shall be paid by the predecessor Master Servicer upon presentation of reasonable
documentation of such costs, and if such predecessor Master Servicer defaults in
its obligation to pay such costs, such costs shall be paid by the successor
Master Servicer or the Trustee (in which case the successor Master Servicer or
the Trustee, as applicable, shall be entitled to reimbursement therefor from the
assets of the Trust).
Section 3.07. COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS.
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The Master 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 Master 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 Master 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 Master Servicer, such default is reasonably foreseeable, the
Master 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 Master 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 Master 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 Master 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
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Agreement, the Master 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 Master 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 Master 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 Master
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 Master 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 Master Servicer's obligations and responsibilities in respect of the
Mortgage Loans under this Agreement in accordance with Article X. In the event
the Master Servicer shall deposit in a Servicing Account any amount not required
to be deposited therein, it may at any time withdraw such amount from such
Servicing Account, any provision herein to the contrary notwithstanding. The
Master 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 Master Servicer knows, or in the exercise of the required
standard of care of the Master 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 Master
Servicer receives notice of a tax lien with respect to the Mortgage being
imposed, the Master 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 Master 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 Master Servicer shall establish
and maintain, or cause to be established and maintained, one or more accounts
(such account or accounts, the "Collection
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Account"), held in trust for the benefit of the Trustee, the Certificateholders
and the Certificate Insurer. On behalf of the Trust Fund, the Master 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 Master Servicer's receipt thereof, and
shall thereafter deposit in the Collection Account, in no event more than two
Business Days after the Master 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 or Subsequent Cut-off
Date, as applicable, (other than in respect of principal or interest on the
Mortgage Loans due on or before the Cut-off Date or Subsequent Cut-off Date, as
applicable) or payments (other than Principal Prepayments) received by it on or
prior to the Cut-off Date or Subsequent Cut-off Date, as applicable, 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 Master 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;
(vii) all amounts required to be deposited in connection with
Substitution Adjustments pursuant to Section 2.03; and
(viii) all Prepayment Premiums collected by the Master Servicer in
connection with the Principal Prepayment of any of the Mortgage Loans.
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 Servicing Fees, late
payment charges, assumption fees, insufficient funds charges and ancillary
income need not be deposited by the Master Servicer in the Collection Account
and may be retained by the Master Servicer as additional compensation. In the
event the Master Servicer shall deposit in the Collection Account any amount not
required to be deposited therein, it may at any time
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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 Master 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
Master 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 the amount of all Prepayment
Premiums collected by the Master Servicer in connection with the Principal
Prepayment of any of the Mortgage Loans 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 Master 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 Master Servicer, the Trustee, the Seller or any
Sub-Master 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 Master 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 Master 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 Master 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 Master 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
Master 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;
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(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;
(iv) any Compensating Interest to be deposited pursuant to Section
3.24 in connection with any Prepayment Interest Shortfall; and
(v) any amounts required to be paid to the Trustee pursuant to the
Agreement, including, but not limited to Section 3.06 and Section 7.02.
(e) [Reserved].
(f) The Master 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 Master Servicer shall, from time to time, make withdrawals from
the Collection Account for any of the following purposes or as described in
Section 4.04:
(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 Master Servicer
for (a) any unreimbursed Advances 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 4.04; (b) any unreimbursed
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 Master
Servicer for such unreimbursed Advances; or (c) subject to Section 3.13
and Section 4.04(b), any unreimbursed Advances to the extent of funds
held in the Collection Account for future distribution that were not
included in Available Funds for the preceding Distribution Date;
(iii) subject to Section 3.16(d), to pay the Master 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
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Proceeds received with respect to such Mortgage Loan are insufficient
to reimburse the Master Servicer or any Sub-Servicer for Servicing
Advances;
(iv) to pay to the Master Servicer as servicing compensation (in
addition to the Servicing Fee) on the Master 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 Master Servicer for any Advance or Servicing
Advance previously made which the Master Servicer has determined to be
a Nonrecoverable Advance in accordance with the provisions of Section
4.04;
(vii) to pay, or to reimburse the Master Servicer for Servicing
Advances in respect of, expenses incurred in connection with any
Mortgage Loan pursuant to Section 3.16(b);
(viii) to reimburse the Master Servicer for expenses incurred by
or reimbursable to the Master Servicer pursuant to Section 6.03;
(ix) to pay itself any Prepayment Interest Excess; and
(x) to clear and terminate the Collection Account pursuant to
Section 10.01.
The foregoing requirements for withdrawal from the Collection Account
shall be exclusive. 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.
The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account, to the extent held by or on behalf of
it, pursuant to subclauses (ii), (iii), (iv), (v), (vi) and (vii) above. The
Master Servicer shall provide written notification to the Trustee, on or prior
to the next succeeding Master 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);
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(iii) to clear and terminate the Distribution Account pursuant to
Section 10.01; and
(iv) to pay any amounts required to be paid to the Trustee
pursuant to this Agreement, including but not limited to funds required
to be paid pursuant to Section 3.06 and Section 7.02.
Section 3.12. INVESTMENT OF FUNDS IN THE INTEREST COVERAGE ACCOUNT,
COLLECTION ACCOUNT AND THE DISTRIBUTION ACCOUNT.
(a) The Master Servicer may direct any depository institution
maintaining the Interest Coverage Account and 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
Interest Coverage Account and 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 Interest Coverage Account, Collection Account and any REO Account held by
or on behalf of the Master Servicer shall be for the benefit of the Master
Servicer and shall be subject to its withdrawal in accordance with Section 3.11
or Section 3.23, as applicable. The Master Servicer shall deposit in the
Interest Coverage Account, 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.
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(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. USE OF FUNDS HELD FOR FUTURE DISTRIBUTION.
The Master Servicer may, pursuant to Section 3.11(ii), reimburse itself
for unreimbursed Advances from funds held in the Collection Account for future
distribution that were not included in Available Funds for the preceding
Distribution Date upon written consent from the Certificate Insurer; provided,
however, that the Master Servicer is obligated to redeposit such amounts into
the Distribution Account on or before the Master Servicer Remittance Date
relating to the Distribution Date on which such amounts are to be distributed to
the extent funds in the Collection Account are insufficient to make the required
distribution on such Distribution Date. On or before each such reimbursement,
the Master Servicer shall give written notice to the Trustee and the Certificate
Insurer of the amount of such reimbursement. The Master Servicer shall cease
using funds held in the Collection Account for future distribution for such
purpose upon the earliest to occur of: (i) the long-term senior unsecured debt
obligations of Block Financial Corporation, one of the guarantors of certain
obligations of the Master Servicer under this Agreement, fall below a rating of
"A" by S&P or Moody's; (ii) a change in ownership of the Master Servicer; or
(iii) the Certificate Insurer in its sole discretion withdraws its consent in
writing.
Section 3.14. MAINTENANCE OF HAZARD INSURANCE AND ERRORS AND
OMISSIONS AND FIDELITY COVERAGE.
(a) The Master Servicer shall cause to be maintained for each Mortgage
Loan hazard 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 Master Servicer shall also cause to be maintained
hazard 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 Master 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 Master Servicer under any such
policies (other than amounts to be applied to the restoration or repair of the
property subject to the
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related Mortgage or amounts to be released to the Mortgagor in accordance with
the procedures that the Master 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 Master 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 Master 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 Master 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 Master 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 Master 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 Master 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 Master 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 Freddie Mac if it were the purchaser of
the Mortgage Loans, unless the Master Servicer has obtained a waiver of such
requirements from Fannie Mae or Freddie Mac. The Master Servicer shall also
maintain a fidelity bond in the form and amount that would meet the requirements
of Fannie Mae or Freddie Mac, unless the Master Servicer has obtained a waiver
of such requirements from Fannie Mae or Freddie Mac. The Master Servicer shall
be deemed to have complied with this provision if an Affiliate of the Master
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 Master 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 Master Servicer shall also cause each
Sub-Servicer to maintain
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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 Master 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 Master Servicer shall not be required to take such action if in its
sole business judgment the Master 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 Master 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
Master 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 Master 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 Master Servicer and has a credit risk rating at least equal to
that of the original Mortgagor. In connection with any assumption or
substitution, the Master 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 Master 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 Master Servicer in respect of an assumption, modification or substitution of
liability agreement shall be retained by the Master 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 Master 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.
The Master Servicer shall be entitled to any Prepayment Interest
Excess, which it may withdraw from the Collection Account pursuant to Section
3.11(a).
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Master 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 Master Servicer may be restricted by law from
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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 Master 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 Master 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 Master
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 Master 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 Master 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 Master 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 Master
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.
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The cost of the environmental audit report contemplated by this Section
3.16 shall be advanced by the Master Servicer, subject to the Master 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 Master 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 Master 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
Master 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 Master Servicer,
subject to the Master 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 Master Servicer may at its option purchase from each Loan
Group, any Mortgage Loan or related REO Property that is 90 days or more
delinquent, which the Master 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 Master 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, by aggregate Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date, pursuant to clause (i)
above, the Master 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 Master 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 Master Servicer the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment, in each case without recourse, as the Master Servicer shall
furnish and as shall be necessary to vest in the Master 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
Master Servicer or any Sub-Servicer for any related unreimbursed Servicing
Advances pursuant to Section 3.11(a)(iii) and Advances pursuant to Section
3.11(a)(ii); SECOND, to accrued and unpaid interest on the Mortgage Loan, to the
date of the Final Recovery Determination, or to the Due Date
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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 Master
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 Master 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 Master Servicer of a notification that payment in full shall be escrowed in
a manner customary for such purposes, the Master 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 Master Servicer, the related Mortgage File to the Master
Servicer. The Trustee agrees to indemnify the Master 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 Master 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 upon written request an updated listing
of any Mortgage Files released pursuant to this Section 3.17(a) no more
frequently than four times per year.
(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 Master Servicer and delivery to the Trustee
of two copies of a Request for Release in the form of Exhibit E signed by a
Servicing Officer (or in a mutually agreeable electronic format that will, in
lieu of a signature on its face, originate from a Servicing Officer), release
the related Mortgage File to the Master Servicer, and the Trustee shall, at the
direction of the Master Servicer, execute such documents as shall be necessary
to the prosecution of any such proceedings. Such Request for Release shall
obligate the Master Servicer to return each and every document previously
requested from the Mortgage File to the Trustee when the need therefor by the
Master 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 Master 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 Master 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
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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 Master Servicer or its designee.
(c) Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Master Servicer or the Sub-Servicer, as the
case may be, and upon the request of the Certificate Insurer the Master 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 Master Servicer hereunder,
the Master 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 Master 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 Master Servicer's responsibilities and obligations under this Agreement;
PROVIDED, HOWEVER, that the Master 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, late
payment charges, insufficient funds charges, ancillary income or otherwise
(other than Prepayment Premiums) shall be retained by the Master Servicer only
to the extent such fees or charges are received by the Master Servicer. The
Master 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
Master 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.
The Master Servicer shall be entitled to any Prepayment Interest
Excess, which it may withdraw from the Collection Account pursuant to Section
3.11(a)(ix).
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Section 3.19. REPORTS TO THE TRUSTEE; COLLECTION ACCOUNT
STATEMENTS.
Not later than twenty days after each Distribution Date, the Master
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 Master Servicer to the
Trustee.
Section 3.20. STATEMENT AS TO COMPLIANCE.
The Master 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 Master Servicer (which, as of the Closing Date, ends on the last day
of April), commencing in 2000, an Officers' Certificate stating, as to each
signatory thereof, that (i) a review of the activities of the Master 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 Master 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 Master 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
Master Servicer, commencing in 2000, the Master Servicer, at its expense, shall
cause a nationally recognized firm of independent certified public accountants
to furnish to the Master Servicer a report stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Master Servicer which includes an assertion that the Master 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 Master 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 Master Servicer's expense, provided that
such statement is delivered by the Master Servicer to the Trustee.
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Section 3.22. ACCESS TO CERTAIN DOCUMENTATION; FILING OF REPORTS BY
TRUSTEE.
(a) The Master 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
Master 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 Master
Servicer as a prospective transferee of a Certificate, upon reasonable request
during normal business hours at the offices of the Master 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 Master 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 Master Servicer, on behalf
of REMIC I, shall either sell any REO Property by the end of the third full
taxable year after the taxable year in which such 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 Master 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 either REMIC I or REMIC II to fail
to qualify as a REMIC under Federal law at any time that any Certificates are
outstanding. The Master 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 either REMIC I or REMIC II 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.
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(b) The Master 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 Master Servicer shall be
permitted to allow the Collection Account to serve as the REO Account, subject
to separate ledgers for each REO Property. The Master Servicer shall be entitled
to retain or withdraw any interest income paid on funds deposited in the REO
Account.
(c) The Master 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 Master Servicer manages and operates similar property owned
by the Master Servicer or any of its Affiliates, all on such terms and for such
period as the Master Servicer deems to be in the best interests of
Certificateholders. In connection therewith, the Master 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 Master Servicer's receipt thereof, and shall
thereafter deposit in the REO Account, in no event more than two Business Days
after the Master 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 Master Servicer shall advance
from its own funds such amount as is necessary for such purposes if, but only
if, the Master Servicer would make such advances if the Master Servicer owned
the REO Property and if in the Master 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 Master 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;
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(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 Master 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 Master Servicer may take such actions
as are specified in such Opinion of Counsel.
The Master 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 Master 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 Master 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 Master 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 Master 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 Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Master Servicer shall be solely liable for
all fees owed by it to any such Independent Contractor, irrespective of whether
the Master 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 Master
Servicer, such amounts shall be reimbursable as Servicing Advances made by the
Master Servicer.
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(d) In addition to the withdrawals permitted under Section 3.23(c), the
Master 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 Master Servicer
Remittance Date, the Master 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 Master Servicer at such price and
upon such terms and conditions as the Master 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 Master 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 Master 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 Master 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 MASTER SERVICER IN RESPECT OF
PREPAYMENT INTEREST SHORTFALLS.
Not later than the Close of Business on each Master Servicer Remittance
Date, the Master Servicer shall remit to the Collection Account an amount
("Compensating Interest") equal to the lesser of (A) the aggregate of the
Prepayment Interest Shortfalls for the related Distribution Date and (B) its
aggregate Servicing Fee received in the related Due Period. The Master 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 Master 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 all Loan Groups during
the related Due Period. The Master Servicer shall not be obligated to pay
Compensating Interest with respect to Relief Act Interest Shortfalls.
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Section 3.25. [Reserved].
Section 3.26. OBLIGATIONS OF THE MASTER 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 Master Servicer in a manner not consistent with the terms
of the related Mortgage Note and this Agreement, the Master Servicer, upon
discovery or receipt of notice thereof, immediately shall deposit in the
Collection 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 Master 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 Master 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 Master 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 Master Servicer may solicit
any Mortgagor for whom the Master 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 Master 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 Master Servicer
prohibited from responding to unsolicited requests or inquiries made by a
Mortgagor or an agent of a Mortgagor.
ARTICLE IV
FLOW OF FUNDS
Section 4.01. DISTRIBUTIONS.
(a) On each Distribution Date the Trustee shall withdraw from the
Distribution Account the Available Funds (to the extent of the portion of
Available Funds that remains in the Distribution Account after taking into
account any amounts withdrawn from the Distribution Account pursuant to Section
8.05, to the extent such amounts have not previously been reimbursed), and make
the following disbursements and transfers as described below and to the extent
of Available Funds
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remaining (provided that amounts included in Available Funds from payments under
the Policy shall be used only to make the related distribution for the Class A
Certificates and for no other purpose).
(A) 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 Amount and Premium
Supplement payable in respect of the Group I Certificates;
(ii) CONCURRENTLY, (A) to the Holders of the Group I Certificates, the
related Interest Distributable Amount for each such Class for such Distribution
Date, and (B) to the Holders of the Class R Certificates (in respect of the
Class R-I Interest), the related Senior Residual Distribution Amount for such
Class for such Distribution Date, on a PRO RATA basis, based upon each such
Class' entitlement to funds pursuant to this subclause (ii) (except that amounts
from payments on the Policy shall be paid to the Holders of the Group I
Certificates, and shall be disregarded in determining the entitlement of the
Class R Certificates);
(iii)CONCURRENTLY, to the Holders of the Class A-7 Certificates and the
Class A-8 Certificates, an amount equal to the excess, if any, of (x) the
related Interest Distributable Amount for each such Class for such Distribution
Date over (y) the amount actually distributed to the Holders of such Classes of
Certificates on such Distribution Date pursuant to subclause (B)(ii) and
subclause (C)(ii) below, respectively, on a PRO RATA basis, based upon each such
Class' entitlement to funds pursuant to this subclause (iii);
(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 Group I Certificates, an amount equal to the
Group I Basic Principal Distribution Amount;
(vi) to the Holders of the Group I Certificates, an amount equal to the
Group I Extra Principal Distribution Amount; and
(vii) CONCURRENTLY, to the Holders of the Class A-7 Certificates and
Class A-8 Certificates, an amount equal to the excess, if any, of (x) the Group
II Principal Distribution Amount and the Group III Principal Distribution Amount
plus any remaining related Overcollateralization Deficiency Amounts,
respectively, for such Distribution Date over (y) the amount actually
distributed to the Holders of such Classes of Certificates on such Distribution
Date pursuant to subclauses (B)(v) and (B)(vi) or subclauses (C)(v) and (C)(vi)
below, respectively, on a PRO RATA basis, based upon each such Class'
entitlement to funds pursuant to this subclause (vii).
The distributions to the Group I Certificates set forth in
subclauses (A)(v) and (A)(vi) above shall be paid as follows: (i) first to the
holders of the Class A-6 Certificates, the Lockout Distribution Percentage of
the Group I Basic Principal Distribution Amount or Extra Principal
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Distribution Amount, as applicable, until the Certificate Principal Balance of
the Class A-6 Certificates has been reduced to zero; (ii) second, to the holders
of the Class A-1 Certificates until the Certificate Principal Balance of the
Class A-1 Certificates is reduced to zero, (iii) third, to the holders of the
Class A-2 Certificates until the Certificate Principal Balance of the Class A-2
Certificates has been reduced to zero, (iv) fourth, to the holders of the Class
A-3 Certificates until the Certificate Principal Balance of the Class A-3
Certificates has been reduced to zero, (v) fifth, to the holders of the Class
A-4 Certificates until the Certificate Principal Balance of the Class A-4 has
been reduced to zero, (vi) sixth, to the holders of the Class A-5 Certificates
until the Certificate Principal Balance of the Class A-5 Certificates has been
reduced to zero, and (vii) seventh, to the holders of the Class A-6 Certificates
until the Certificate Principal Balance of the Class A-6 Certificates has been
reduced to zero. Notwithstanding the foregoing priorities, if an Insurer Default
exists, the priority of distributions of principal among the Group I
Certificates will be disregarded and distributions allocated to principal will
be paid on such Distribution Date and on each succeeding Distribution Date to
holders of the Group I Certificates, on a PRO RATA basis, based on the
Certificate Principal Balances thereof.
(B) 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 Amount and Premium
Supplement payable in respect of the Class A-7 Certificates;
(ii) CONCURRENTLY, (A) to the Holders of the Class A-7 Certificates,
the related Interest Distributable Amount for such Class for such Distribution
Date and (B) to the Holders of the Class R Certificates (in respect of the Class
R-I Interest), the related Senior Residual Distribution Amount for such Class
for such Distribution Date, on a PRO RATA basis, based upon each such Class'
entitlement to funds pursuant to this subclause (ii) (except that amounts from
payments on the Policy shall be paid to the Holders of the Class A-7
Certificates and shall be disregarded in determining the entitlement of the
Class R Certificates);
(iii)CONCURRENTLY, (A) to the Holders of the Group I Certificates and
the Class A-8 Certificates, an amount equal to the excess, if any, of (x) the
related Interest Distributable Amount for each such Class for such Distribution
Date over (y) the amount actually distributed to the Holders of such Classes of
Certificates on such Distribution Date pursuant to subclause (A)(ii) above and
subclause (C)(ii) below, respectively, on a PRO RATA basis, based upon each such
Class' entitlement to funds pursuant to this subclause (iii);
(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-7 Certificates, an amount equal to
the Group II Basic Principal Distribution Amount;
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(vi) to the Holders of the Class A-7 Certificates, an amount equal to
the Group II Extra Principal Distribution Amount; and
(vii) CONCURRENTLY, to the Holders of the Group I Certificates and
Class A-8 Certificates, an amount equal to the excess, if any, of (x) the Group
I Principal Distribution Amount and the Group III Principal Distribution Amount
plus any remaining related Overcollateralization Deficiency Amounts,
respectively, for such Distribution Date over (y) the amount actually
distributed to the Holders of such Classes of Certificates on such Distribution
Date pursuant to subclauses (A)(v) and (A)(vi) above or subclauses (C)(v) and
(C)(vi) below, respectively, on a PRO RATA basis, based upon each such Class'
entitlement to funds pursuant to this subclause (vii).
(C) The Group III 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 Amount and Premium
Supplement payable in respect of the Class A-8 Certificates;
(ii) CONCURRENTLY, (A) to the Holders of the Class A-8 Certificates,
the related Interest Distributable Amount for such Class for such Distribution
Date and (B) to the Holders of the Class R Certificates (in respect of the Class
R-I Interest), the related Senior Residual Distribution Amount for such Class
for such Distribution Date, on a PRO RATA basis, based upon each such Class'
entitlement to funds pursuant to this subclause (ii) (except that amounts from
payments on the Policy shall be paid to the Holders of the Class A-8
Certificates and shall be disregarded in determining the entitlement of the
Class R Certificates);
(iii)CONCURRENTLY, to the Holders of the Group I Certificates and Class
A-7 Certificates, an amount equal to the excess, if any, of (x) the related
Interest Distributable Amount for each such Class for such Distribution Date
over (y) the amount actually distributed to the Holders of such Classes of
Certificates on such Distribution Date pursuant to subclause (A)(ii) and
subclause (B)(ii) above, respectively, on a PRO RATA basis, based upon each such
Class' entitlement to funds pursuant to this subclause (iii);
(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-8 Certificates, an amount equal to
the Group III Basic Principal Distribution Amount;
(vi) to the Holders of the Class A-8 Certificates, an amount equal to
the Group III Extra Principal Distribution Amount;
(vii) CONCURRENTLY, to the Holders of the Group I Certificates and
Class A-7 Certificates, an amount equal to the excess, if any, of (x) the Group
I Principal Distribution Amount and the Group II Principal Distribution Amount
plus any remaining related Overcollateralization Deficiency
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Amounts for such Distribution Date over (y) the amount actually distributed to
Holders of such Classes of Certificates on such Distribution Date pursuant to
subclauses (A)(v) and (A)(vi) and subclauses (B)(v) and (B)(vi) above,
respectively, on a PRO RATA basis, based upon each such Class' entitlement to
funds pursuant to this subclause (vii).
(D) From all remaining Available Funds, to the Holders of the Class A-8
Certificates, the Group III Net WAC Cap Carryover Amount, if any, for such
Distribution Date.
(E) On each Distribution Date, any remaining amounts after giving
effect to the distributions specified in (A), (B), (C) and (D) above will be
paid to the holders of the Residual Certificates (in respect of the Class R-II
Interest); provided that if such Distribution Date is a Distribution Date
following the latest date on which a Prepayment Premium may be required to be
paid on any Mortgage Loan, then any such remaining amounts will be distributed
first, to the Holders of the Class P Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; and second, to the Holders
of the Residual Certificates (in respect of the Class R-II Interest).
The Group I Certificates are "sequential pay" classes such that, except
as provided in subclause (A) above, the holders of the Class A-6 Certificates
will receive no payments of principal until the Certificate Principal Balance of
the Class A-5 Certificates is reduced to zero, the holders of the Class A-5
Certificates will receive no payments of principal until the Certificate
Principal Balance of the Class A-4 Certificates has been reduced to zero, the
holders of the Class A-4 Certificates will receive no payments of principal
until the Certificate Principal Balance of the Class A-3 Certificates has been
reduced to zero, and the holders of the Class A-3 Certificates will receive no
payment of principal until the Certificate Principal Balance of the Class A-2
Certificates has been reduced to zero and the holders of the Class A-2
Certificates will receive no payment of principal until the Certificate
Principal Balance of the Class A-1 Certificates has been reduced to zero.
(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 Master Servicer or the
Seller shall have any responsibility therefor except as otherwise provided by
applicable law.
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(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 Group I Certificates, the Holders of the Class
A-7 Certificates and the Holders of the Class A-8 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 Group I Certificates, each such Holder of the Class A-7
Certificates and each such Holder of the Class A-8 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 Group I Certificates, the Holders of the Class
A-7 Certificates and the Holders of the Class A-8 Certificates and in accordance
with Section 11.04.
Section 4.02. RESERVED.
Section 4.03. STATEMENTS.
(a) On each Distribution Date, based, as applicable, on information
provided to it by the Master Servicer, the Trustee shall prepare and make
available to each Holder of the Regular Certificates, the Master Servicer and
the Rating Agencies, and forward by mail to the Certificate Insurer, 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 and the amount of the distribution
made to the Holders of the Class P Certificates allocable to Prepayment
Premiums;
(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 Master Servicer with respect to 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;
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(vii) the number, aggregate principal balance, weighted average
remaining term to maturity and weighted average Mortgage Rate of the
Mortgage Loans as of the related Determination Date and the number and
aggregate principal balance of all Subsequent Mortgage Loans added
during the preceding Prepayment Period;
(viii) separately stated for each Loan Group, the number and
aggregate unpaid principal balance of Mortgage Loans that were (A)
Delinquent (exclusive of Mortgage Loans in bankruptcy or foreclosure
and REO Properties) (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or
more days, (B) as to which foreclosure proceedings have been commenced
and Delinquent (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more
days, (C) in bankruptcy and Delinquent (1) 30 to 59 days, (2) 60 to 89
days and (3) 90 or more days, in each case as of the close of business
on the last day of the calendar month preceding such Distribution Date
and (D) REO Properties;
(ix) with respect to any Mortgage Loan that became an REO Property
during the preceding Prepayment Period, 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 Prepayment Period 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 Prepayment 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 Prepayment 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 Master Servicer pursuant to
Section 3.26;
(xvii) the aggregate Premium Amount to be paid to the Certificate
Insurer;
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(xviii) the Group III Net WAC 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 Up Cumulative Loss Test and/or Step Up
Spread Squeeze Test have been met and the cumulative realized losses
with respect to each Loan Group, as a percentage of the original Loan
Group Balance;
(xxi) the Available Funds with respect to each Loan Group;
(xxii) the Pass-Through Rate for the Class A-8 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 Master Servicer or Seller during the related Prepayment Period
and indicating the Section of this Agreement requiring or allowing the
purchase of each such Mortgage Loan;
(xxv) the number of delinquent Mortgage Loans sold during the
preceding Prepayment Period, the aggregate outstanding principal
balance of such Mortgage Loans and the aggregate sale price;
(xxvi) the amount on deposit in the Pre-Funding Accounts and the
Interest Coverage Accounts; and
(xxvii) for the distribution occurring on the Distribution Date
immediately following the end of the related Funding Period, the
balance on deposit in the related Pre-Funding Account that has not been
used to purchase Subsequent Mortgage Loans and that is being
distributed to the related Classes of Class A Certificates as a
mandatory prepayment of principal, if any, on such Distribution Date.
The Trustee shall make available such report concurrently with each
distribution to the Certificateholders and the Rating Agencies, and forward it
to the Certificate Insurer 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 Master 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.
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(b) Within a reasonable period of time after the end of each calendar
year, the Trustee shall, upon written request, furnish to each Person who at any
time during the calendar year was a Certificateholder of a Regular Certificate,
if requested in writing by such Person, such information as is reasonably
necessary to provide to such Person a statement containing the information set
forth in subclauses (i) through (iii) above, aggregated for such calendar year
or applicable portion thereof during which such Person was a Certificateholder.
Such obligation of the Trustee shall be deemed to have been satisfied to the
extent that substantially comparable information shall be prepared and furnished
by the Trustee to Certificateholders pursuant to any requirements of the Code as
are in force from time to time.
(c) On each Distribution Date, the Trustee shall forward to the Class R
Certificateholders a copy of the reports forwarded to the Regular
Certificateholders in respect of such Distribution Date with such other
information as the Trustee deems necessary or appropriate.
(d) Within a reasonable period of time after the end of each calendar
year, the Trustee shall deliver to each Person who at any time during the
calendar year was a Class R Certificateholder, if requested in writing by such
Person, such information as is reasonably necessary to provide to such Person a
statement containing the information provided pursuant to the previous paragraph
aggregated for such calendar year or applicable portion thereof during which
such Person was a Class R Certificateholder. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be prepared and furnished to Certificateholders by
the Trustee pursuant to any requirements of the Code as from time to time in
force.
Section 4.04. REMITTANCE REPORTS; ADVANCES.
(a) On the second Business Day following each Determination Date but in
no event later than the Master Servicer Remittance Date, the Master Servicer
shall deliver to the Trustee by telecopy or electronic mail (or by such other
means as the Master 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 Master Servicer Remittance Date, the
Master 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 Master Servicer.
(b) The amount of Advances to be made by the Master 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
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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 Master Servicer
Remittance Date, the Master 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
Master 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 Master Servicer with respect to the Mortgage Loans and REO Properties.
Any amounts held for future distribution used by the Master Servicer to make an
Advance as permitted in the preceding sentence or withdrawn by the Master
Servicer as permitted in Section 3.11(a)(ii) in reimbursement of Advances
previously made shall be appropriately reflected in the Master Servicer's
records and replaced by the Master Servicer by deposit in the Collection Account
on or before any future Master 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 Master 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 or reimburse for
previously made Advances. The Trustee will provide notice to the Master Servicer
by telecopy by the Close of Business on any Master Servicer Remittance Date in
the event that the amount remitted by the Master Servicer to the Trustee on such
date is less than the Advances required to be made by the Master Servicer for
the related Distribution Date, as set forth in the related Remittance Report.
(c) The obligation of the Master 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 Master Servicer
if such Advance or Servicing Advance would, if made, constitute a Nonrecoverable
Advance. The determination by the Master 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 Master Servicer delivered to the Depositor and the
Trustee.
Section 4.05. PRE-FUNDING ACCOUNT.
(a) With respect to each Loan Group, no later than the Closing
Date, the Trustee shall establish and maintain a segregated trust account that
is an Eligible Account, which shall be titled, with respect to Loan Group I,
"Group I Pre-Funding Account, Norwest Bank Minnesota, National
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Association, as trustee for the registered holders of Option One Mortgage Loan
Trust 1999-2, Asset- Backed Certificates, Series 1999-2" (the "Group I
Pre-Funding Account"), with respect to Loan Group II, "Group II Pre-Funding
Account, Norwest Bank Minnesota, National Association, as trustee for the
registered holders of Option One Mortgage Loan Trust 1999-2, Asset-Backed
Certificates, Series 1999-2" (the "Group II Pre-Funding Account") and with
respect to Loan Group III, "Group III Pre-Funding Account, Norwest Bank
Minnesota, National Association, as trustee for the registered holders of Option
One Mortgage Loan Trust 1999-2, Asset-Backed Certificates, Series 1999-2" (the
"Group III Pre-Funding Account"). The Trustee shall, promptly upon receipt,
deposit in the related Pre-Funding Account and retain therein the Original
Pre-Funded Amount with respect to the related Loan Group remitted on the Closing
Date to the Trustee by the Depositor. Funds deposited in the related Pre-Funding
Account shall be held in trust by the Trustee for the Certificateholders for the
uses and purposes set forth herein.
(b) The Trustee will invest funds deposited in the Pre-Funding
Accounts in Permitted Investments of the kind described in clause (vi) of the
definition of Permitted Investments with a maturity date no later than the
second Business Day preceding each Distribution Date. For federal income tax
purposes, the Depositor shall be the owner of the Pre-Funding Account and shall
report all items of income, deduction, gain or loss arising therefrom. All
income and gain realized from investment of funds deposited in the Pre-Funding
Accounts shall be transferred to the related Interest Coverage Account on the
Business Day immediately preceding each Distribution Date. The Master Servicer
shall deposit in the related Pre-Funding Account the amount of any net loss
incurred in respect of any such Permitted Investment immediately upon
realization of such loss without any right of reimbursement therefor. At no time
will the related Pre-Funding Account be an asset REMIC I or REMIC II.
(c) Amounts on deposit in the related Pre-Funding Account shall be
withdrawn by the Trustee as follows:
(i) On any Subsequent Transfer Date, the Trustee shall withdraw
from the related Pre-Funding Account an amount equal to 100% of
the Stated Principal Balances of the Subsequent Mortgage Loans
with respect to the related Loan Group transferred and assigned to
the Trustee for deposit in the Mortgage Pool on such Subsequent
Transfer Date and pay such amount to or upon the order of the
Depositor upon satisfaction of the conditions set forth in Section
2.08 with respect to such transfer and assignment;
(ii) If the amount on deposit in the related Pre-Funding Account
has not been reduced to zero during the related Funding Period, on
the day immediately following the termination of the related
Funding Period, the Trustee shall deposit into the Distribution
Account any amounts remaining in the related Pre-Funding Account
for distribution in accordance with the terms hereof;
(iii) To withdraw any amount not required to be deposited in the
related Pre-Funding Account or deposited therein in error; and
(iv) To clear and terminate the related Pre-Funding Account upon
the earlier to occur of (A) the Distribution Date immediately
following the end of the related Funding
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Period and (B) the termination of this Agreement, with any amounts
remaining on deposit therein being paid to the Holders of the
Certificates then entitled to distributions
in respect of principal.
Withdraws pursuant to clauses (i), (ii) and (iii) shall be treated as
contributions of cash to REMIC I on the date of withdrawal.
Section 4.06. INTEREST COVERAGE ACCOUNT.
(a) With respect to each Loan Group, no later than the Closing
Date, the Trustee shall establish and maintain a segregated trust account that
is an Eligible Account, which shall be titled, with respect to Loan Group I,
"Group I Interest Coverage Account, Norwest Bank Minnesota, National
Association, as trustee for the registered holders of Option One Mortgage Loan
Trust 1999- 2, Asset-Backed Certificates, Series 1999-2" (the "Group I Interest
Coverage Account"), with respect to Loan Group II, "Group II Interest Coverage
Account, Norwest Bank Minnesota, National Association, as trustee for the
registered holders of Option One Mortgage Loan Trust 1999-2, Asset- Backed
Certificates, Series 1999-2" (the "Group II Interest Coverage Account") and with
respect to Loan Group III, Interest Coverage Account, Norwest Bank Minnesota,
National Association, as trustee for the registered holders of Option One
Mortgage Loan Trust 1999-2, Asset-Backed Certificates, Series 1999-2" (the
"Group III Interest Coverage Account"). The Trustee shall, promptly upon
receipt, deposit in the related Interest Coverage Account and retain therein the
Interest Coverage Amount with respect to each Loan Group remitted on the Closing
Date to the Trustee by the Depositor. Funds deposited in the related Interest
Coverage Account shall be held in trust by the Trustee for the
Certificateholders for the uses and purposes set forth herein.
(b) For federal income tax purposes, the Depositor shall be the
owner of the Interest Coverage Accounts and shall report all items of income,
deduction, gain or loss arising therefrom. At no time will the Interest Coverage
Account be an asset of the REMIC. All income and gain realized from investment
of funds deposited in the related Interest Coverage Account shall be for the
sole and exclusive benefit of the Master Servicer and shall be remitted by the
Trustee to the Master Servicer no later than the first Business Day following
receipt of such income and gain by the Trustee. The Master Servicer shall
deposit in the related Interest Coverage Account the amount of any net loss
incurred in respect of any such Permitted Investment immediately upon
realization of such loss.
(c) With respect to each Loan Group and on each Distribution Date
during the related Funding Period and on the Distribution Date immediately
following the end of the related Funding Period, the Trustee shall withdraw from
the related Interest Coverage Account and deposit in the Distribution Account an
amount, as provided in the related Remittance Report, equal to (i) 30 days'
interest on the Original Pre-Funded Amount with respect to each Loan Group
calculated at an annual rate equal to the weighted average of the Net Mortgage
Rates of the Mortgage Loans in the related Loan Group as of the commencement of
the related Due Period, minus (ii) the sum of (1) any interest payments received
on Subsequent Mortgage Loans during the related Due Period and (2) any Advances
in respect of interest portions of delinquent Monthly Payments on the Subsequent
Mortgage Loans conveyed to the Trustee during the related Due Period. Such
withdrawal and deposit shall be treated as a contribution of cash by the
Depositor to REMIC I on the date thereof.
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(d) Upon the earlier of (i) the Distribution Date immediately
following the end of the related Funding Period, (ii) the reduction of the
Certificate Principal Balance of the Class A Certificates to zero or (iii) the
termination of this Agreement in accordance with Section 10.01, any amount
remaining on deposit in the related Interest Coverage Account after
distributions pursuant to paragraph (c) above shall be withdrawn by the Trustee
and paid to the Depositor or its designee.
Section 4.07. DISTRIBUTIONS ON THE UNCERTIFICATED REMIC I REGULAR
INTERESTS.
(a) On each Distribution Date, the following amounts, in the
following order of priority, shall be distributed by REMIC I to REMIC II on
account of the Uncertificated REMIC I Regular Interests and Class P Certificates
or withdrawn from the Collection Account:
(i) to the holders of the Uncertificated REMIC I Regular
Interests, PRO RATA, in an amount equal to (A) the Uncertificated
Accrued Interest for such Distribution Date, plus (B) any amounts
in respect thereof remaining unpaid from previous Distribution
Dates;
and
(ii) (x) on each Distribution Date, with respect to the Group I
Mortgage Loans, all principal received on the Group I Mortgage
Loans under the definition of Principal Remittance Amount shall be
paid to the Uncertificated REMIC I Regular Interest I-LT1 until
its Uncertificated Principal Balance has been reduced to zero and
then shall be paid to the Uncertificated REMIC I Regular Interest
I-LT2 until its Uncertificated Balance has been reduced to zero
(except as provided in clause (iii));
(y) on each Distribution Date, with respect to the Group II
Mortgage Loans, all principal received on the Group II Mortgage
Loans under the definition of Principal Remittance Amount shall
be paid to the Uncertificated REMIC I Regular Interest II-LT1
until its Uncertificated Principal Balance has been reduced to
zero and then shall be paid to the Uncertificated REMIC I Regular
Interest II-LT2 until its Uncertificated Balance has been reduced
to zero;
(z) on each Distribution Date, with respect to the Group III
Mortgage Loans, all principal received on the Group III Mortgage
Loans under the definition of Principal Remittance Amount shall be
paid to the Uncertificated REMIC I Regular Interest III- LT1 until
its Uncertificated Principal Balance has been reduced to zero and
then shall be paid to the Uncertificated REMIC I Regular Interest
III-LT2 until its Uncertificated Balance has been reduced to zero;
(iii) If such Distribution Date is a Distribution Date on which
payments are to be made to the Class P Certificates pursuant to
Section 4.01(a)(E), the amount of such payment shall be deducted
from the amount allocated under clause (ii) above, and shall
instead be distributed to the Holders of the Class P Certificates.
(iv) 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
Prepayment Period will be distributed to the Holders of the Class
P
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Certificates and will not be available for distribution to the
Holders of the Class A Certificates. The payment of such
Prepayment Premiums to the Holders of the Class P Certificates
shall not be applied to reduce the Certificate Principal Balance
thereof.
(b) Notwithstanding the deemed distributions on the Uncertificated
REMIC I Regular Interests described in this Section 4.07, distributions of funds
from the Certificate Account shall be
made only in accordance with Section 4.01.
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ARTICLE V
THE CERTIFICATES
Section 5.01. THE CERTIFICATES.
Each of the Class A, Class P 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
P Certificates shall be initially evidenced by one or more Certificates
representing a Percentage Interest with a minimum dollar denomination of $20 and
integral dollar multiples thereof. The Class R Certificates are issuable only in
minimum Percentage Interests of 25%.
The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature on behalf of the Trustee by a Responsible Officer.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures were affixed, authorized to sign on behalf of
the Trustee shall bind the Trust, notwithstanding that such individuals or any
of them have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of such
Certificate. No Certificate shall be entitled to any benefit under this
Agreement or be valid for any purpose, unless such Certificate shall have been
manually authenticated by the Trustee substantially in the form provided for
herein, and such authentication upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication. Subject to Section 5.02(c), the Class A Certificates
shall be Book-Entry Certificates. The Class R Certificates shall not be
Book-Entry Certificates.
Section 5.02. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
(a) The Certificate Registrar shall cause to be kept at the Corporate
Trust Office a Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Certificate Registrar shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. The Trustee shall initially serve as Certificate Registrar for
the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided.
Upon surrender for registration of transfer of any Certificate at any
office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph and, in the case of a Class P Certificate or
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
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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. In addition,
with respect to each Class R Certificate, the holder thereof may exchange, in
the manner described above, such Class R Certificate for two separate
certificates, each representing such holder's respective Percentage Interest in
the Class R-I Interest and the Class R-II Interest as evidenced by the Class R
Certificate.
(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.
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(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 Master 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%
advise 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 Master 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 P and
Class R Certificates by the Depositor, no transfer, sale, pledge or other
disposition of any Class P or 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 P or 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 P or 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
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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)
in the case of any such Class P or 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 P or Class R Certificate is permissible under applicable law, will not
constitute or result in any non-exempt prohibited transaction under Section 406
or ERISA or Section 4975 of the Code (or comparable provisions of any subsequent
enactments), and will not subject the Trustee, the Depositor or the Servicer to
any obligation or liability (including obligations or liabilities under ERISA or
Section 4975 of the Code) in addition to those undertaken in this Agreement.
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
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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 either REMIC I or REMIC II 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
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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, the Certificate Insurer 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 Master Servicer, the Depositor, the Trustee, the Certificate
Insurer, the Certificate Registrar, any Paying Agent and any agent of the Master
Servicer, the Depositor, the Trustee, 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 Master 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.
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(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 MASTER SERVICER AND THE DEPOSITOR
Section 6.01. LIABILITY OF THE MASTER SERVICER AND THE DEPOSITOR.
The Master Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically imposed upon and undertaken by Master
Servicer 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 MASTER SERVICER OR THE DEPOSITOR.
Any entity into which the Master Servicer or Depositor may be merged or
consolidated, or any entity resulting from any merger, conversion or
consolidation to which the Master Servicer or the Depositor shall be a party, or
any corporation succeeding to the business of the Master Servicer or the
Depositor, shall be the successor of the Master Servicer or the Depositor, as
the case may be, hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding; PROVIDED, HOWEVER, that the successor Master Servicer
shall satisfy all the requirements of Section 7.02 with respect to the
qualifications of a successor Master Servicer.
Section 6.03. LIMITATION ON LIABILITY OF THE MASTER SERVICER AND
OTHERS.
Neither the Master Servicer nor any of the directors or officers or
employees or agents of the Master Servicer shall be under any liability to the
Trust or the Certificateholders for any action taken or for refraining from the
taking of any action by the Master Servicer in good faith pursuant to this
Agreement, or for errors in judgment; PROVIDED, HOWEVER, that this provision
shall not protect the Master 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 Master Servicer or by reason
of its reckless disregard of its obligations and duties of the Master Servicer
hereunder; PROVIDED, FURTHER, that this provision shall not be construed to
entitle the Master Servicer to indemnity in the event that amounts advanced by
the Master 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
Master Servicer
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pursuant to Section 8.05. The Master Servicer and any director or officer or
employee or agent of the Master Servicer may rely in good faith on any document
of any kind PRIMA FACIE properly executed and submitted by any Person respecting
any matters arising hereunder. The Master Servicer and any director or officer
or employee or agent of the Master Servicer shall be indemnified by the Trust
and held harmless against any loss, liability or expense incurred in connection
with any legal action relating to this Agreement or the Certificates, other than
any loss, liability or expense related to any specific Mortgage Loan or Mortgage
Loans (except as any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) and any loss, liability or expense
incurred by reason of its willful misfeasance, bad faith or negligence in the
performance of duties hereunder or by reason of its reckless disregard of
obligations and duties hereunder. The Master 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 Master
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 Master Servicer shall be
entitled to be reimbursed therefor from the Collection Account as and to the
extent provided in Section 3.11, any such right of reimbursement being prior to
the rights of the Certificateholders to receive any amount in the Collection
Account. The Master Servicer's right to indemnity or reimbursement pursuant to
this Section shall survive any resignation or termination of the Master 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 Master Servicer solely in its capacity as Master Servicer
hereunder and in no other capacities.
Section 6.04. MASTER SERVICER NOT TO RESIGN.
Subject to the provisions of Section 7.01 and Section 6.02, the Master
Servicer shall not resign from the obligations and duties hereby imposed on it
except (i) upon determination that the performance of its obligations or duties
hereunder are no longer permissible under applicable law or are in material
conflict by reason of applicable law with any other activities carried on by it
or its subsidiaries or Affiliates, the other activities of the Master Servicer
so causing such a conflict being of a type and nature carried on by the Master
Servicer or its subsidiaries or Affiliates at the date of this Agreement or (ii)
upon satisfaction of the following conditions: (a) the Master Servicer has
proposed a successor 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 Master Servicer hereunder will not
result in the reduction or withdrawal of the then current rating of the Class A
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 Master Servicer shall become effective until
such successor servicer or, in the case of (i) above, the Trustee shall have
assumed the Master 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 Master Servicer of
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responsibility for any of the obligations specified in Sections 7.01 and 7.02 as
obligations that survive the resignation or termination of the Master Servicer.
Any such determination permitting the resignation of the Master Servicer
pursuant to clause (i) above shall be evidenced by an Opinion of Counsel to such
effect delivered to the Trustee. Any such determination permitting the
resignation of the Master 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 Master 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 Master Servicer of its liabilities and responsibilities with respect to such
duties and shall not constitute a resignation within the meaning of Section
6.04. Except as provided in Section 3.02, no such delegation is permitted that
results in the delegee subservicing any Mortgage Loans. The Master 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 Master Servicer's Affiliates or their respective successors and assigns.
Section 6.06. RESERVED.
Section 6.07. INSPECTION.
Each of the Seller and the Master Servicer shall afford the Certificate
Insurer, upon reasonable notice, during normal business hours, access to all
records maintained by the Seller and the Master Servicer, respectively, in
respect of its rights and obligations hereunder and access to officers of the
Master Servicer and the Seller responsible for such obligations. Upon request,
the Master 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. MASTER SERVICER EVENTS OF TERMINATION.
(a) If any one of the following events ("Master Servicer Events of
Termination") shall occur and be continuing:
(i) (A) The failure by the Master Servicer to make any Advance; or
(B) any other failure by the Master 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 Master Servicer and the
Certificate Insurer by the Trustee or to
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the Trustee by the Certificate Insurer or by any Holders of a Regular
Certificate evidencing at least 25% of the Voting Rights; or
(ii) The failure by the Master Servicer to make any required
Servicing Advance which failure continues unremedied for a period of 30
days, or the failure by the Master Servicer duly to observe or perform,
in any material respect, any other covenants, obligations or agreements
of the Master 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 Master Servicer by the Trustee
or to the Trustee by the Certificate Insurer or by any Holders 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 Master
Servicer; or
(iii) The entry against the Master Servicer of a decree or order
by a court or agency or supervisory authority having jurisdiction in
the premises for the appointment of a trustee, conservator, receiver or
liquidator in any insolvency, conservatorship, receivership,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for
a period of 60 days; or
(iv) The Master 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
Master 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 Master Servicer and such decree or order
shall have remained in force undischarged, unbonded or unstayed for a
period of 60 days; or the Master Servicer shall admit in writing its
inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations; or
(v) a Performance Test Violation occurs under the Insurance
Agreement and the Certificate Insurer so notifies the Trustee;
(b) then, and in each and every such case, so long as a Master 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 5:00 P.M., New York time, on the Business Day immediately following the
Master Servicer Remittance Date (provided the Trustee shall give the Master
Servicer notice of such failure to advance by 5:00 P.M. New York time on the
Master 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 Master 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
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successor Master 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 Master Servicer (and to the Trustee if given
by Holders of Certificates or the Certificate Insurer), terminate all of the
rights and obligations of the Master Servicer as servicer under this Agreement.
Any such notice to the Master Servicer shall also be given to each Rating
Agency, the Depositor and the Seller. On or after the receipt by the Master
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
Master Servicer under this Agreement, whether with respect to the Certificates
or the Mortgage Loans or otherwise, shall pass to and be vested in the Trustee
pursuant to and under this Section; and, without limitation, and the Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of each Mortgage Loan and related
documents or otherwise. The Master Servicer agrees to cooperate with the Trustee
(or the applicable successor Master Servicer) in effecting the termination of
the responsibilities and rights of the Master Servicer hereunder, including,
without limitation, the delivery to the Trustee of all documents and records
requested by it to enable it to assume the Master 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 Master Servicer) and the Certificate Insurer for the
administration by it of all cash amounts that shall at the time be held by the
Master Servicer and to be deposited by it in the Collection Account, the
Distribution Account, any REO Account or any Servicing Account or that have been
deposited by the Master Servicer in such accounts or thereafter received by the
Master Servicer with respect to the Mortgage Loans or any REO Property received
by the Master Servicer. All reasonable costs and expenses (including attorneys'
fees) incurred in connection with transferring the Mortgage Files to the
successor Master Servicer and amending this Agreement to reflect such succession
as Master Servicer pursuant to this Section shall be paid by the predecessor
Master Servicer (or if the predecessor Master Servicer is the Trustee, the
initial Master Servicer) upon presentation of reasonable documentation of such
costs and expenses and to the extent not paid by the Master Servicer, by the
Trust.
(c) The Master Servicer hereby covenants and agrees to act as the
Master Servicer under this Agreement for an initial term, commencing on the
Closing Date and ending on September 30, 1999, which term shall be extendable in
its sole discretion 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 "Master Servicer Extension Notice")
shall be delivered by the Certificate Insurer to the Trustee, the Depositor and
the Master Servicer. The Master Servicer hereby agrees that, upon its receipt of
any such Master Servicer Extension Notice, the Master Servicer shall become
bound for the duration of the term covered by such Master Servicer Extension
Notice to continue as the Master Servicer subject to and in accordance with the
other provisions of this Agreement. The Master Servicer agrees that if as of the
fifteenth (15th) day prior to the last day of any term of the Master Servicer
the Master Servicer shall not have received any Master Servicer Extension Notice
from the Certificate Insurer, the Master 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 Master Servicer Extension Notice by
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the end of a calendar term shall result in the termination of the Master
Servicer. If the term of the Master Servicer shall expire without the
Certificate Insurer having delivered to the Master Servicer a Master Servicer
Extension Notice, but the Master 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 7.01), the Master 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 Master 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 Master 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 Master
Servicer.
Section 7.02. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.
(a) Within 90 days of the time the Master Servicer (and the Trustee, if
notice is sent by the Holders) receives a notice of termination pursuant to
Section 7.01 or 6.04 or if a Master Servicer Extension Notice is not delivered
or contemplated by Section 7.01, the Trustee (or such other successor Master
Servicer as is acceptable to the Certificate Insurer and approved in accordance
with this Agreement) shall be the successor in all respects to the Master
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 Master
Servicer by the terms and provisions hereof arising on and after its succession.
Notwithstanding the foregoing, the parties hereto agree that the Trustee, in its
capacity as successor Master Servicer, immediately will assume all of the
obligations of the Master Servicer to make advances. Notwithstanding the
foregoing, the Trustee, in its capacity as successor Master Servicer, shall not
be responsible for the lack of information and/or documents that it cannot
obtain through reasonable efforts. As compensation therefor, the Trustee (or
such other successor Master Servicer) shall be entitled to such compensation as
the Master Servicer would have been entitled to hereunder if no such notice of
termination had been given. Notwithstanding the above, (i) if the Trustee is
unwilling to act as successor Master Servicer or (ii) if the Trustee is legally
unable so to act, the Certificate Insurer shall appoint a successor Master
Servicer, and if the Certificate Insurer does not, 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
Master Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Master Servicer hereunder;
PROVIDED, that the appointment of any such successor Master 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 Master Servicer hereunder, unless the Trustee is prohibited by
law from so acting, the Trustee shall act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the successor
shall be entitled to receive compensation out of payments on Mortgage Loans in
an amount equal to the compensation which
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the Master 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 Master Servicer shall
not affect any liability of the predecessor Master Servicer which may have
arisen under this Agreement prior to its termination as Master Servicer to pay
any deductible under an insurance policy pursuant to Section 3.14 or to
indemnify the Trustee pursuant to Section 3.06), nor shall any successor Master
Servicer be liable for any acts or omissions of the predecessor Master Servicer
or for any breach by such Master Servicer of any of 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. All Servicing Transfer
Costs shall be paid by the predecessor Master Servicer upon presentation of
reasonable documentation of such costs, and if such predecessor Master Servicer
defaults in its obligation to pay such costs, such costs shall be paid by the
successor Master Servicer or the Trustee (in which case the successor Master
Servicer or the Trustee, as applicable, shall be entitled to reimbursement
therefor from the assets of the Trust).
(b) Any successor, including the Trustee, to the Master 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 Master
Servicer hereunder and a Fidelity Bond in respect of its officers, employees and
agents to the same extent as the Master Servicer is so required pursuant to
Section 3.14.
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 Master 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 Master 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 Master
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
Master 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
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such default or Master 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 MASTER SERVICER LIABILITIES.
Notwithstanding anything herein to the contrary, upon termination of
the Master Servicer hereunder, any liabilities of the Master 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 Master Servicer Event of
Termination and after the curing of all Master 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 Master 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 Master Servicer Event of
Termination, and after the curing of all such Master 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
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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 Master Servicer to comply with the obligations of the
Master 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 Master 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 Master Servicer under this Agreement, except during
such time, if any, as the Trustee shall be the successor to, and be vested with
the rights, duties, powers and privileges of, the Master Servicer in accordance
with the terms of this Agreement.
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;
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(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 Master Servicer Event of
Termination and after the curing of all Master 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 Master Servicer or, if paid by the
Trustee, shall be reimbursed by the Master Servicer upon demand and, if
not reimbursed by the Master Servicer, shall be reimbursed by the
Trust. Nothing in this clause (v) shall derogate from the obligation of
the Master Servicer to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors;
(vi) the Trustee shall not be accountable, shall have no liability
and makes no representation as to any acts or omissions hereunder of
the Master Servicer until such time as the Trustee may be required to
act as Master Servicer pursuant to Section 7.02 and thereupon only for
the acts or omissions of the Trustee as successor Master 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.
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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 Master Servicer, or for the use or application of any
funds paid to the Master Servicer in respect of the Mortgage Loans or deposited
in or withdrawn from the Collection Account by the Master Servicer. The Trustee
shall at no time have any responsibility or liability for or with respect to the
legality, validity and enforceability of any Mortgage or any Mortgage Loan, or
the perfection and priority of any Mortgage or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Trust
or its ability to generate the payments to be distributed to Certificateholders
under this Agreement, including, without limitation: the existence, condition
and ownership of any Mortgaged Property; the existence and enforceability of any
hazard insurance thereon (other than if the Trustee shall assume the duties of
the Master Servicer pursuant to Section 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 Master
Servicer pursuant to Section 7.02); the compliance by the Depositor, the Seller
or the Master Servicer with any warranty or representation made under this
Agreement or in any related document or the accuracy of any such warranty or
representation prior to the Trustee's receipt of notice or other discovery of
any non-compliance therewith or any breach thereof; any investment of monies by
or at the direction of the Master Servicer or any loss resulting therefrom, it
being understood that the Trustee shall remain responsible for any Trust
property that it may hold in its individual capacity; the acts or omissions of
any of the Master Servicer (other than if the Trustee shall assume the duties of
the Master Servicer pursuant to Section 7.02), any Sub- Servicer or any
Mortgagor; any action of the Master Servicer (other than if the Trustee shall
assume the duties of the Master Servicer pursuant to Section 7.02), or any
Sub-Servicer taken in the name of the Trustee; the failure of the Master
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 Master Servicer (other than if the Trustee shall assume the
duties of the Master 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 Master Servicer).
Section 8.04. TRUSTEE MAY OWN CERTIFICATES.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not Trustee and may transact any banking and trust business with the
Seller, the Master Servicer, the Depositor or their Affiliates.
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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 and any amounts paid by the Trustee for
the recording of Assignments of Mortgage pursuant to Section 2.01) 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. If the Seller
defaults in its obligations to pay or reimburse the Trustee any amount as
required under this Section 8.05, the Trustee shall be entitled to be paid or
reimbursed such amount at any time from the assets of the Trust Fund consisting
of any amounts on deposit at such time in the Collection Account or the
Distribution Account.
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 AAA by Fitch IBCA if rated by Fitch IBCA), 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 Master
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
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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 or 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 Master Servicer
may remove the Trustee. If the Depositor, Certificate Insurer or the Master
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 Master 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
Master 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 Master Servicer and
the predecessor Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties and
obligations.
No successor Trustee shall accept appointment as provided in this
Section 8.08 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of Section
8.06
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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 Master 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 Master Servicer and the
Certificate Insurer (so long as no Insurer Default exists and is continuing). If
the Master 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 Master 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 Master Servicer shall be responsible
for the fees of any co-trustee or separate trustee appointed hereunder.
Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
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(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
(whether as Trustee hereunder or as successor to the Master Servicer
hereunder), the Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed
singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be held personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Master Servicer and the Trustee, 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 Master 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 Master Servicer.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor Trustee.
Section 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.
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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 of 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 Master
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 Master Servicer, the Certificate Insurer and any requesting
Certificateholder with its most recent financial statements. The Trustee shall
cooperate fully with the Seller, the Master Servicer, the Depositor, the
Certificate Insurer and such Certificateholder and shall make available to the
Seller, the Master 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 Master 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 Master Servicer Event of Termination or other default by the
Master 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.
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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 860G(a)(9) of the Code.
(c) The Master 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 Master Servicer in fulfilling its duties hereunder. The Master
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 direct
representative each of REMIC I and REMIC II. 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 each of REMIC I and REMIC II. The Trustee,
as agent for the Tax Matters Person, shall perform on behalf of each REMIC all
reporting and other tax compliance duties that are the responsibility of such
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.
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(f) The Trustee, the Master 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 each of REMIC I and REMIC II 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 Master Servicer nor the Holder of
any Residual Certificate shall take any action, cause either REMIC to take any
action or fail to take (or fail to cause to be taken) any action that, under the
REMIC Provisions, if taken or not taken, as the case may be, could (i) endanger
the status of such REMIC as a REMIC or (ii) result in the imposition of a tax
upon 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 Master 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 either 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 Master 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 either REMIC to take any such
action as to which the Trustee or the Master 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 both REMIC I and REMIC II 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 REMIC I and REMIC II 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 REMIC I and REMIC II, 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 REMIC I
and REMIC II on a calendar year and on an accrual basis.
(i) No additional contributions of assets shall be made to either REMIC
I or REMIC II, except as expressly provided in this Agreement with respect to
eligible substitute mortgage loans.
(j) Neither the Trustee nor the Master Servicer shall enter into any
arrangement by which either REMIC I or REMIC II will receive a fee or other
compensation for services.
(k) On or before April 15 of each calendar year beginning in 2000, the
Master Servicer shall deliver to the Trustee and each Rating Agency an Officer's
Certificate stating the Master Servicer's compliance with the provisions of this
Section 9.01.
Section 9.02. PROHIBITED TRANSACTIONS AND ACTIVITIES.
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Neither the Depositor, the Master 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 either REMIC I or REMIC II 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 either REMIC, nor sell or dispose of any
investments in the Distribution Account for gain, nor accept any contributions
to either 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 either REMIC I or REMIC II 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 either REMIC I or REMIC II 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 either REMIC I or REMIC II 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 Master Servicer of its duties
and obligations set forth herein, the Master Servicer shall indemnify the
Trustee and 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 Master 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 Master 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 Master 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 Master 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.
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(a) The respective obligations and responsibilities of the Seller, the
Master 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 Master 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 May 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 Master Servicer or, if such option is not exercised by the Master
Servicer, 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 sum of the aggregate
Principal Balances of the Mortgage Loans on the Cut-off Date plus the Original
Pre- Funded Amount with respect to each Loan Group, by purchasing, on the next
succeeding Distribution Date, all of the outstanding Mortgage Loans and REO
Properties at a price equal to the greater of the Stated Principal Balance of
the Mortgage Loans and REO Properties or the market value of the Mortgage Loans
and REO Properties, in each case plus 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 III Net WAC Cap Carryover Amount (the
"Termination Price").
In connection with any such purchase pursuant to the preceding
paragraph, the Master 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 Master 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
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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 and any
amount payable or reimbursable to the Trustee pursuant to this Agreement,
including, but not limited to, Section 3.06 and Section 7.02, (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, REMIC I and REMIC II 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 either REMIC or REMIC
II 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
Master Servicer shall adopt and the Trustee shall sign a plan of
complete liquidation of REMIC I and REMIC II meeting the requirements
of a "Qualified Liquidation" under Section 860F of the Code and any
regulations thereunder;
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(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 Fund to the Certificate
Insurer or the Master 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 Master 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 with respect to the matters discussed in 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 Master Servicer as Master Servicer pursuant to Section 7.01;
(c) the right to direct the actions of the Trustee during the
continuance of a Master Servicer
Event of Termination pursuant to Sections 7.01 and 7.02;
(d) the right to consent to or direct any waivers of Master Servicer
Events of Termination pursuant to Section 7.03;
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(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; provided,
however, that in the event that an Insurer Default has occurred and is
continuing, the Certificate Insurer's consent shall be required for an amendment
that would affect the Certificate Insurer's right to reimbursement; 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 Master 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 Master 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 Master 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
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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
Master 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 4.03.
Funds held in the Policy Payments Account shall not be invested.
On any Distribution Date with respect to which a claim has been made
under the Policy, the amount of any funds received by the Trustee as a result of
any claim under the Policy, to the extent required to make the 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 Master 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.
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(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 Master 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 Master 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 Master 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 Master
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 Master 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.
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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 Master 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 Master 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 Master Servicer and
the Trustee.
In addition, this Agreement may be amended from time to time by Seller,
the Depositor, the Master 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.
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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 either REMIC I or REMIC II constituting
part of the Trust Fund pursuant to the REMIC Provisions or cause either 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 Master 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
Master 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 Section 12.01 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
Master 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.
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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 Master Servicer, Option One Mortgage Corporation, 3 Ada
Road, Irvine, California 92618, Attention: William O'Neill, or such other
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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 1999-2, with a copy to Norwest Bank
Minnesota, National Association, 11000 Broken Land Parkway, Columbia, Maryland
21044, Attention: Option One Mortgage Loan Trust Series 1999-2, or such other
address or telecopy number as may hereafter be furnished to the Depositor,
Seller and the Master Servicer in writing by the Trustee, (c) in the case of the
Depositor, Option One Mortgage Acceptance Corporation, 3 Ada Road, Irvine,
California 92618, Attention: William O'Neill, or such other address or telecopy
number as may be furnished to Seller, the Master 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 Master 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 Master 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 Master Servicer, as the case may be, has actual
knowledge:
(i) any material change or amendment to this Agreement;
(ii) the occurrence of any Master Servicer Event of Termination
that has not been cured or waived;
(iii) the resignation or termination of the Master Servicer or the
Trustee;
(iv) the final payment to Holders of the Certificates of any
Class;
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(v) any change in the location of any Account; and
(vi) if the Trustee is acting as successor Master 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 make available to each
Rating Agency copies of each Statement to Certificateholders described in
Section 4.03 hereof; and
(i) the Master Servicer shall promptly furnish to each Rating
Agency copies of the following:
i) each annual statement as to compliance described in
Section 3.20 hereof;
ii) each annual independent public accountants'
servicing report described in Section 3.21 hereof;
and
iii) each notice delivered pursuant to Section 7.01(a)
hereof which relates to the fact that the Master
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, New York, New York 10004, Attention: Residential
Mortgage Group; Moody's Investors Service, Inc., 99 Church Street, New York, NY
10048, Attention: MBS Monitoring/Option One Mortgage Loan Trust 1999-2; 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.
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(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
Master 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.
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IN WITNESS WHEREOF, Seller, the Depositor, the Master 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.
OPTION ONE MORTGAGE ACCEPTANCE
CORPORATION,
as Depositor
By: /s/ William L. O'Neill
--------------------------------
Name: William L. O'Neill
Title: Senior Vice President
OPTION ONE MORTGAGE CORPORATION,
as Master Servicer
By: /s/ William L. O'Neill
--------------------------------
Name: William L. O'Neill
Title: Senior Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
as Trustee
By: /s/ Amy Wahl
--------------------------------
Name: Amy Wahl
Title: Assistant Vice President
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STATE OF )
) ss.:
COUNTY OF )
On the __th day of April, 1999 before me, a notary public in and for
said State, personally appeared ______________ known to me to be a Vice
President of Option One Mortgage Acceptance Corporation, 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
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STATE OF )
) ss.:
COUNTY OF )
On the __th day of April, 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
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STATE OF )
)ss.:
COUNTY OF )
On the ___th day of April, 1999 before me, a notary public in and for
said State, personally appeared Amy Wahl, known to me to be Assistant Vice
President of Norwest Bank Minnesota, National Association, a national banking
association that executed the within instrument, and also known to me to be the
person who executed it on behalf of said association, and acknowledged to me
that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
--------------------------------
Notary Public
136
