AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17,2000
REGISTRATION NO. 333-80417
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
SAMCO MORTGAGE SECURITIES CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-4058702
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 PARK AVENUE
NEW YORK, NEW YORK 10167
(212) 272-2000
(address, including zip code, and telephone number, including area code,
of Registrant's Principal Executive Offices)
------------------
MR. SAMUEL MOLINARO
TREASURER
SAMCO MORTGAGE SECURITIES
CORP.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
(212) 272-2000
(name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies To:
RICHARD F. KADLICK, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
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Approximate date of commencement of proposed sales to the
public: From time to time after the effective date of this
Registration Statement.
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If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check
the following box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
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Calculation of Registration Fee(1)
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT PRICE(2) FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shared Appreciation
Mortgage Pass-Through
Certificates........... $[ ] 100% $[ ] $[ ]
</TABLE>
(1) This Registration Statement also registers an indeterminate amount of
securities to be sold by Bear, Stearns & Co. Inc. in market-making
transactions, where required.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a), exclusive of accrued interest, if any, on
the Shared Appreciation Mortgage Pass-Through Certificates.
(3) $278 has previously been paid.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
=============================================================================
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [ ], 2000
SAMCO MORTGAGE SECURITIES CORP.
DEPOSITOR
[ ] TRUST 2000-[ ]
SHARED APPRECIATION MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2000-[ ]
$[ ]
[FLAG]
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] IN THIS
PROSPECTUS SUPPLEMENT AND PAGE [ ] IN THE PROSPECTUS.
The [ ] Trust 2000-[ ] will issue [ ] classes of offered certificates.
The table on page S-[ ] of this prospectus supplement contains a list of
the classes of offered certificates, including the principal balance,
interest rate and any special characteristics of each class.
OFFERED CERTIFICATES
[Class [ ]] [Appreciation Certificates]
Total [principal][notional] Amount $[ ]
First payment date [ ], 2000
Interest paid/principal paid [Monthly] (25th)
Last possible payment da e [ ], 20[ ]
The underwriter listed below will offer the offered certificates at varying
prices to be determined at the time of sale. The proceeds to SAMCO Mortgage
Securities Corp. from the sale of the offered certificates will be
approximately [ ]% of the principal balance of the offered certificates
plus accrued interest, before deducting $[ ] in expenses.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THE CERTIFICATES OR DETERMINED IF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Underwriter
BEAR, STEARNS & CO. INC.
[ ], 2000
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the offered certificates in two
separate documents that progressively provide more detail: the accompanying
prospectus, which provides general information, some of which may not apply
to your series of certificates and this prospectus supplement, which
describes the specific terms of your series of certificates.
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS SPECIFIC TO YOUR
CERTIFICATES AND ENHANCES THE MORE GENERAL INFORMATION CONTAINED IN THE
ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE MORE DETAILED INFORMATION
CONTAINED IN THIS PROSPECTUS SUPPLEMENT.
NO INVESTOR SHOULD PURCHASE ANY CLASS OF OFFERED CERTIFICATES UNLESS
THE INVESTOR UNDERSTANDS AND IS ABLE TO BEAR THE PREPAYMENT, APPRECIATION
OF THE UNDERLYING MORTGAGED PROPERTIES, CREDIT, LIQUIDITY AND MARKET RISKS
ASSOCIATED WITH THAT CLASS.
THE OFFERED CERTIFICATES ARE COMPLEX SECURITIES AND IT IS IMPORTANT
THAT EACH INVESTOR POSSESS, EITHER ALONE OR TOGETHER WITH AN INVESTMENT
ADVISOR, THE KNOWLEDGE AND INFORMATION NECESSARY TO EVALUATE THE
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IN THE CONTEXT OF THAT INVESTOR'S FINANCIAL SITUATION.
If and when included in this prospectus supplement and the
accompanying prospectus or in documents incorporated in this prospectus
supplement and the accompanying prospectus by reference, the words
"expects," "intends," "anticipates," "estimates" and analogous expressions
are intended to identify forward-looking statements. Any forward-looking
statements, which may include statements contained in "risk factors,"
inherently are subject to a variety of risks and uncertainties that could
cause actual results to differ materially from those projected. The risks
and uncertainties include, among others, overall economic and business
conditions, competition, changes in foreign political, social and economic
conditions, regulatory initiatives and compliance with governmental
regulations, customer preferences and various other matters, many of which
are beyond SAMCO Mortgage Securities Corp.'s control. These forward-
looking statements speak only as of the date of this prospectus supplement.
SAMCO Mortgage Securities Corp. Expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statement contained in this prospectus supplement and the
accompanying prospectus to reflect any change in SAMCO Mortgage Securities
Corp.'s expectations with regard thereto or any change in events,
conditions or circumstances on which any forward-looking statement is
based.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following table of contents and the table
of contents included in the accompanying prospectus provide the pages on
which these captions are located.
SAMCO Mortgage Securities Corp.'s principal offices are located at
245 Park Avenue, New York, New York 10167 and its telephone number is (212)
272-2000.
TABLE OF CONTENTS
Important Notice about Information
Presented in this Prospectus
Supplement and the
Accompanying Prospectus..............................................S-2
Summary Information........................................................S-4
Risk Factors..............................................................S-10
The Trust.................................................................S-11
Description of the SAM Pools..............................................S-12
Introduction..............................................................S-12
The Sellers/Originators...................................................S-15
Description of the Certificates...........................................S-15
Book-Entry Registration...................................................S-15
Definitive Certificates...................................................S-17
Exchangeable Certificates.................................................S-18
Advances..................................................................S-18
Distributions of Interest.................................................S-18
Distributions of Principal................................................S-18
Subordination and Allocation of Losses....................................S-19
The Class R Certificates..................................................S-19
Available Distribution Amount.............................................S-20
Last Scheduled Distribution to
Certificateholders........................................................S-20
The Master Servicer.......................................................S-21
The Servicer..............................................................S-21
Servicing Compensation, Retained Yield
and Payment of Expenses...................................................S-21
Optional Termination of the Trust.........................................S-22
Yield, Appreciation and Prepayment
Considerations............................................................S-22
Yield Considerations with Respect to the
Adjustable Strip Certificates.............................................S-28
Yield Considerations with Respect to the .................................S-30
Residual Certificate Yield Considerations.................................S-31
Additional Information....................................................S-31
The Pooling and Servicing Agreement and
Sale and Servicing Agreement........................................S-32
Representations and Warranties............................................S-32
Credit Enhancements.......................................................S-32
The Pool Insurance Policy.................................................S-32
The Special Hazard [Insurance
Policy][Reserve Fund] [Letter of Credit]..................................S-33
The SAM Repurchase [Reserve Fund]
[Letter of Credit] [Bond].................................................S-35
The Bankruptcy [Reserve Fund] [Letter of
Credit] [Bond]............................................................S-36
Legal Investment Aspects..................................................S-37
ERISA Considerations......................................................S-37
Federal Income Tax Consequences...........................................S-37
Method of Distribution....................................................S-38
Legal Matters.............................................................S-39
Certificate Ratings.......................................................S-39
Glossary of Terms.........................................................S-41
SUMMARY INFORMATION
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS
DOCUMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO
CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS
OF THE OFFERED CERTIFICATES, READ CAREFULLY THIS ENTIRE DOCUMENT AND THE
ACCOMPANYING PROSPECTUS.
THIS SUMMARY PROVIDES AN OVERVIEW OF CALCULATIONS, CASH FLOWS AND
OTHER INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL
DESCRIPTION OF THESE CALCULATIONS, CASH FLOWS AND OTHER INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
WHAT YOU OWN
Your certificates represent ownership of a portion of the trust. The trust
contains a pool of shared appreciation mortgage loans secured by
residential properties with original terms to maturity of not more than [
] years and other assets, as described under "The Trust" in this
prospectus supplement. The value of the underlying mortgage properties
will, as of the date of the appraisal of each underlying SAM, be equal to
or greater than the outstanding principal balance of the offered
certificates. A shared appreciation mortgage loan is a mortgage loan in
which the mortgagor pays a lower rate of interest than a similarly situated
mortgagor would pay on a mortgage loan with no shared appreciation feature,
because he will be required to also pay a pre- determined percentage of the
appreciation in the value of the underlying mortgaged property to the
related mortgagee or lender under a termination or maturity of the shared
appreciation mortgage loan.
THE OFFERED CERTIFICATES REPRESENT INTERESTS ONLY IN THE ASSETS OF THE
TRUST. ALL PAYMENTS TO YOU WILL COME ONLY FROM THE AMOUNTS RECEIVED IN
CONNECTION WITH THOSE ASSETS.
INFORMATION ABOUT THE MORTGAGE POOLS
The mortgage pool consists of approximately [ ] shared appreciation
mortgage loans with an aggregate principal balance as of [ ], 2000 of
approximately $[ ]. The principal balance of the individual shared
appreciation mortgage loans at origination ranged from a minimum of
approximately $[ ] to a maximum of approximately $[ ], with an average
principal balance of approximately $[ ]. The shared appreciation mortgage
loans have a weighted average remaining term to maturity of approximately [
] months as of [ ], 2000. At origination, the shared appreciation mortgage
loans had [fixed][adjustable] interest rates ranging from [ ]% to [ ]% and
a weighted average [fixed] interest rate of [ ]% and a weighted average
appreciation share of [ ]%. The index used to compute stated interest on
the shared appreciation mortgage loans is [ ]. The margins range from [ ]%
to [ ]%. [other relevant adjustable rate characteristics] The range of
appreciation shares is from [ ]% to [ ]%. The shared appreciation mortgage
loans are described in the prospectus as [mortgage subsidy][equity release]
shared appreciation mortgage loans.
[For a further description of the shared appreciation mortgage loans, see
"Description of the SAM Pools" in this prospectus supplement.]
THE OFFERED CERTIFICATES
SAMCO Mortgage Securities Corp. will deposit the shared appreciation
mortgage loans into the trust. SAMCO Mortgage Securities Corp. created the
trust for the purpose of issuing the shared appreciation mortgage
pass-through certificates, series 2000-[ ]. [The approximate initial class
principal balance, certificate interest rate and type of each class of the
offered certificates will be as follows:
Approximate Annual
Initial Class Certificate
Class Principal Balance Interest Rate Type
- ------ ----------------- ------------- ----
[Index to be used for appreciation certificates]
The index's function is to provide a reference to determine the purchase
price to be paid by SAMCO Mortgage Securities Corp. upon the repurchase of
a SAM in the event a buy back of a SAM from the related trust is required
to occur. The index may be linked to the appreciation occurring with
respect to single family homes in either the relevant region or the country
as a whole, depending upon the index used for a particular trust.
In addition to the offered certificates, the trust will issue the [ ]
certificates. [These private certificates are subordinated to the offered
certificates and provide credit enhancement for the offered certificates.]
[The [ ] certificates are not being offered by this prospectus supplement.]
CALCULATION OF APPRECIATION SHARE
The following charts set forth an example of how an appreciation share on a
shared appreciation mortgage loan would be payable to the holder of an
appreciation certificate:
When SAM
When SAM is terminates or
originated matures
House price/value $125,000 $185,000
Loan amount $100,000 $ 82,000
If mortgage obtains a 50% N/A $ 30,000
appreciation share,
one-half of appreciation
that is due to lender
(percentage of
appreciation share that
is due can vary from 30%
- - 60%)
Total pay-off due to N/A $112,000
lender at time of
maturity or termination
If the home is N/A $ 73,000
sold, proceeds to
borrower
House price/value $125,000 $125,000
Loan amount $100,000 $ 97,470
If mortgage obtains a 50% N/A $ 0
appreciation share,
one-half of appreciation
that is due to lender
(percentage of
appreciation share that
is due can vary from 30%
- - 60%)
Total pay-off due to N/A $ 97,470
to lender at time of
maturity or termination
If the home is sold, N/A $ 27,530
proceeds to borrower
In the first example, over the period that the mortgagor had the SAM, the
home increased in value by $60,000 and the SAM amortized by $18,000. In the
second example, over the period that the mortgagor had the SAM, the value
of the home remains the same and the SAM amortized by $2,530. Since the
appreciation share is calculated on the basis of the increase in the value
of the home over the period that the mortgagor had the SAM, in the first
example the mortgagor would owe at the maturity or termination of the SAM
an appreciation share payment of $30,000 (the $60,000 increase in value
times an appreciation share of 50%) and in the second example the mortgagor
would owe an appreciation share payment of zero (the zero increase in value
times an appreciation share of 50%). So, in the first example, the holder
is due $112,000 (the outstanding loan amount plus the appreciation share
payment of $30,000), and, in the second example, the holder is only due the
outstanding loan amount of $97,470. If the home is sold in connection with
the payoff of the SAM, in both cases the borrower is entitled to the
remaining proceeds on the sale of the home.
INITIAL PRINCIPAL BALANCE OF THE CERTIFICATES
The aggregate principal balance of the certificates issued by the trust is
approximately $[ ], subject to an upward or downward variance of no more
than 5%. [The appreciation certificates do not have a principal amount but
have a notional amount of approximately $[ ].]
DISTRIBUTIONS ON THE OFFERED CERTIFICATES
PRIORITY OF DISTRIBUTIONS
The first distribution date will be [ ], 2000. Thereafter, distributions
will be made on the 25th day of each month, or if the 25th day is not a
business day, on the next business day. [description of priority of
interest and principal distributions among the certificates]
DISTRIBUTIONS OF INTEREST
On each distribution date, monthly distributions of interest will be made
to each class of offered certificates entitled to interest to the extent of
available funds.
[The amount of interest each class of certificates accrues each month will
equal 1/12th of the annual certificate interest rate for that class of
certificates multiplied by the related class principal balance or class
notional amount, as applicable.] [additional description of allocation of
interest among classes, as applicable]
[Additional interest on the appreciation of the mortgage property will be
paid to holders of appreciation certificates at the maturity of the shared
appreciation mortgage loans.] [additional description of allocation of
additional interest to appreciation certificate]
[Compensating Interest and Interest Shortfalls. When mortgagors make
prepayments in full, they need not pay a full month's interest. Instead,
they are required to pay interest only to the date of prepayment. The
[master servicer][servicer] of the shared appreciation mortgage loans
[will/will not] pay compensating interest to the certificateholders to
compensate certificateholders for the shortfall in interest this causes.]
DISTRIBUTIONS OF PRINCIPAL
The certificateholders will receive the principal that the mortgagors pay
on the shared appreciation mortgage loans in the trust. [additional
description of allocation of principal among the classes of certificates,
as applicable]
ALLOCATION OF LOSSES
The [master servicer][servicer] will realize a loss to the trust when it
receives all amounts that it expects to recover from any shared
appreciation mortgage loan and that amount is less than the outstanding
principal balance of that mortgage loan and accrued and unpaid interest,
including additional interest, on the balance. LOSSES WILL BE ALLOCATED TO
THE CERTIFICATES BY DEDUCTING THE LOSSES FROM THE PRINCIPAL BALANCE OF THE
CERTIFICATES WITHOUT MAKING ANY PAYMENTS TO THE CERTIFICATEHOLDERS.
[description of subordination features, as applicable, and method of
allocation of losses on the shared appreciation mortgage loans among the
certificates]
CREDIT ENHANCEMENTS
[description of credit enhancements, including subordination, if any]
ADVANCES
[description of obligation, if any, of [master
servicer][servicer][originator][seller] of the shared appreciation mortgage
loans, to make advances to cover shortfalls in payments due on shared
appreciation mortgage loans or to make servicing advances]
YIELD, APPRECIATION AND PREPAYMENT CONSIDERATIONS
The yield to maturity of each class of certificates will depend upon, among
other things:
o the price at which the certificates are purchased;
o the applicable certificate interest rate, if any;
o in the case of appreciation certificates, the amount of appreciation
of the mortgaged properties that secure the shared appreciation
mortgage loans; and
o the rate of prepayments on the shared appreciation mortgage loans.
A higher than anticipated rate of prepayments would reduce the aggregate
principal balance of the shared appreciation mortgage loans more quickly
than expected, thereby reducing the aggregate stated interest payments with
respect to the shared appreciation mortgage loans. Therefore, a higher rate
of principal prepayments could result in a lower than expected yield to
maturity on classes of certificates purchased at a premium. Conversely, a
lower than anticipated rate of principal prepayments could result in a
lower than expected yield to maturity on classes of certificates purchased
at a discount since payments of principal with respect to the shared
appreciation mortgage loans would occur later than anticipated.
A higher than anticipated rate of prepayments would reduce the aggregate
principal balance of the shared appreciation mortgage loans more quickly
than expected and that reduction could also have the effect of reducing the
opportunity for the rate of increase in the value of the related mortgaged
properties to increase. In addition, a mortgagor may choose to prepay a
shared appreciation mortgage loan at a time when real estate values are
declining in order to minimize the amount of appreciation payments. In
those instances, a higher rate of principal prepayments would result in a
lower than expected yield to maturity on the class or classes of
certificates entitled to additional interest payments on the maturity of
the shared appreciation mortgage loans, which are referred to as
appreciation certificates. Appreciation certificates are certificates that
represent an interest in only all or a portion of the additional interest
payments made on the shared appreciation mortgage loans. Stripped
certificates are certificates issued in respect of a SAM Pool that
represent either payments of principal or interest other than additional
interest payments on the shared appreciation component of the shared
appreciation mortgage loans.
The level of appreciation of the mortgaged properties underlying the shared
appreciation mortgaged properties in your trust and, the rate of change of
the index used for calculating the indexed additional interest for any
shared appreciation mortgage loan that is repurchased from your trust for,
or the certificates will affect the yield earned by holders of, the
appreciation certificates. The level of appreciation of the mortgaged
properties underlying the shared appreciation mortgage loans may be
affected by a variety of factors, including but not limited to:
o economic conditions in the area where the mortgaged property is
located;
o the overall level of inflation and unemployment in the economy;
o the overall level of liquidity in the economy; and
o more specifically the level of liquidity in the residential mortgage
market.
You should be aware that if you hold appreciation certificates their yield
may be low, zero or negative, and you should be prepared for the
possibility that you could lose your entire investment in the appreciation
certificates that you have purchased.
Some classes of certificates may be especially sensitive to the rate of
prepayments and the rate of appreciation on the underlying mortgaged
properties. For a discussion of special yield, prepayment and appreciation
certificate considerations applicable to these classes of certificates, see
"Risk Factors" and "Description of the Certificates--Yield, Appreciation
and Prepayment Considerations" in this prospectus supplement.
BOOK-ENTRY REGISTRATION
[In most circumstances, the [ ] certificates will be available only in
book-entry form through the facilities of [The Depository Trust Company].
See "Description of the Certificates --Book-Entry Registration" in this
prospectus supplement.]
DENOMINATIONS
SAMCO Mortgage Securities Corp. is offering the class [ ] certificates in
minimum denominations of $1,000 and in increments of $1.00 in excess of
$1,000 and the class [ ] certificates in minimum denominations of $25,000
and in increments of $1.00 in excess of $25,000.
RATINGS
This prospectus supplement requires that the offered certificates receive
ratings from [ ] to [ ]. The offered certificates will be initially rated
at least investment grade by at least one nationally recognized statistical
rating agency. The ratings on the offered certificates address the
likelihood that the holders of offered certificates will receive all
distributions to which they are entitled on the underlying shared
appreciation mortgage loans. They do not address the likely actual rate of
prepayments or appreciation of the underlying mortgaged properties. The
rate of prepayments or appreciation, if different than originally
anticipated, could adversely affect the yield realized by holders of the
offered certificates or cause certificateholders to fail to recover their
initial investments.
LEGAL INVESTMENT
As of the date of their issuance, the offered certificates [, other than
the class [ ] certificates,] will constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984. See
"Legal Investment Aspects" in this prospectus supplement for important
information concerning possible restrictions on ownership of the offered
certificates by regulated institutions. Investors should consult their own
legal advisors in determining whether and to what extent the offered
certificates constitute legal investments.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations"
in this prospectus supplement and in the accompanying prospectus, the [ ]
certificates may be eligible for purchase by persons investing assets of
employee benefit plans or individual retirement accounts.
TAX STATUS
[A pool of shared appreciation mortgages will be treated as a REMIC, a
FASIT or a grantor trust for federal income tax purposes. Holders of some
types of certificates that are issued will likely be treated as holding
debt instruments with original issue discount. Holders of other
certificates will be subject to different federal income tax treatment.]
For further information regarding the federal income tax consequences of
investing in the offered certificates, including important information
regarding the tax treatment of the residual certificates, see "Federal
Income Tax Consequences" in this prospectus supplement and in the
accompanying prospectus.
RISK FACTORS
[discussion, as applicable, of risk factors, including prepayment
risk, legal risks associated with the origination of shared appreciation
mortgage loans, the risk of investing in the appreciation certificates
which represent interests in the appreciation of the mortgaged properties,
subordination and allocation of losses among the certificates,
adjustable-rate shared appreciation interest-only or principal-only
certificates, book-entry system of registration and federal income tax
consequences]
[Risks associated with servicer waiving fees or charges with respect
to delinquent shared appreciation mortgage loans if applicable] [Risks
related to allowing delinquent shared appreciation mortgage loans to remain
delinquent for an extended period of time, if applicable]
THE TRUST
The primary assets in the trust will consist of SAMs secured by one-
to four-family residential properties [or certificates of interest or
participations]. The trust will also include:
o [related property and interests in property or other interests
in SAMs;]
o [mortgagor pass through securities issued or guaranteed by
government or government sponsored agencies;]
o [privately issued mortgage-backed securities;]
o [primary insurance policies;]
o [the pool insurance policy issued by [ ] and other insurance
policies related to the SAMs;]
o [an advance claims endorsement][covering up to a specified
amount of losses arising from special hazards, some SAM
repurchase defaults by the [master servicer][servicer] and
mortgagor bankruptcy;]
o [a Special Hazard] [Reserve Fund] [Letter of
Credit][Certificate Insurance][Insurance Policy];
o [a SAM Repurchase] [Reserve Fund] [Letter of Credit] [Bond];
o [a Bankruptcy] [Reserve Fund] [Letter of Credit] [Bond];
o [a Fraud][Bond];
o property which secured a SAM and which is acquired by
foreclosure or by deed in lieu of foreclosure after the Cut-Off
Date;
o amounts held from time to time in an account or accounts
established by the [master] servicer; and
o an Eligible Investment.
The SAMs will be assigned to the Trustee, together with all principal and
interest due on the SAMs [other than the Retained Yield] after the Cut-Off
Date. The Trustee will, concurrently with the assignment, authenticate and
deliver the certificates. Each SAM will be identified in the Loan Schedule
which will specify with respect to each SAM, among other things, the
original principal balance and the outstanding principal balance as of the
close of business on the Cut-Off Date, the term of the Mortgage Note and
the stated interest rate and the Appreciation Share, whether the SAM is a
Mortgage Subsidy SAM or Equity Release SAM, the stated maturity of each SAM
and various material information about each mortgagor.
DESCRIPTION OF THE SAM POOLS
Capitalized terms are defined in the Glossary of Terms in the
attached Prospectus or in this Prospectus Supplement.
INTRODUCTION
The SAM Pools will consist of SAMs having an [approximate] aggregate
principal balance outstanding as of [ ], 2000, after deducting payments due
on or before that date. Some of the risks of loss on the SAMs will be
covered up to specified limits by the following:
o [primary insurance policies;]
o [a pool insurance policy;]
o [an advance claims endorsement;]
o [a Special Hazard] [Reserve Fund] [Letter of Credit] [Insurance
Policy];
o [a SAM Repurchase] [Reserve Fund] [Letter of Credit] [Bond];
o [a Bankruptcy] [Reserve Fund] [Letter of Credit] [Bond]; and
o [a Fraud][Bond].
See "Credit Enhancements" in this prospectus supplement and
"Description of Credit Enhancements" in the prospectus.
Each SAM is secured by real property. These properties are one- to
four-family residential properties which may include detached homes,
duplexes, townhouses, condominiums, individual units in planned unit
developments and other attached dwelling units which are part of buildings
consisting of more than four units. The SAMs will have the additional
characteristics described in this prospectus supplement and in the
prospectus. All of the SAMs will be acquired by SAMCO Mortgage Securities
Corp. from EMC Mortgage Corporation. EMC Mortgage Corporation acquired the
SAMs from [list Originators/sellers] under Sale and Servicing Agreements.
The SAMs in each SAM Pool will be originated by Originators and purchased
from lending institutions which meet the requirements set forth in the
attached prospectus.
[All of the SAMs will be screened and underwritten in accordance with
standards set forth in the prospectus.] Each SAM will have been originated
during the period from [ ] through [ ], 2000. Each of the SAMs will have an
original term to maturity of [ ] to [30] years. [The SAM will begin making
periodic payments on [ ].]
As of the Cut-Off Date, the stated rate of interest on each SAM will
be not less than [ ]% and not more than [ ]% per annum. As of the Cut-Off
Date, the weighted average, by principal balance, of the stated interest
rates on the SAMs will be approximately [ ]% per annum. [[ ]% of the SAMs
are adjustable rate SAMs] [description of features of shared appreciation
adjustable-rate mortgage loans, including adjustment date, index, gross
margin, adjustment limits, interest ceilings and floors, method of
establishing initial rate and historical index tables]. [[ ]% of the SAMs
will have been originated as adjustable rate SAMs but converted to fixed
rate SAMs prior to inclusion in the SAM Pools.] [[ ]% of the SAMs will have
been originated as adjustable rate SAMs and may convert to fixed rate SAMs
after inclusion in the SAM Pools.] [[ ]% of the SAMs are Mortgage Subsidy
SAMs.] [[ ]% of the SAMs are Equity Release SAMs.]
At origination, each SAM will have had a principal balance of not
less than $[ ] nor more than $[ ] , and the average principal balance of
the SAMs as of the Cut-Off Date will be approximately $[ ]. All of the SAMs
will have been secured by owner-occupied mortgaged properties, based solely
on representations of the mortgagors obtained at the origination of the
related SAMs.
[Each SAM has a Remittance Rate equal to the stated interest rate for
the SAM less the sum of the Retained Yield, the [[Seller][Servicing] Fee
and the Master Servicing Fee] [Servicing Fee and the Certificate
Administrator Fee] for it. As of the Cut-Off Date, the Pass-Through Rate
for each SAM will be not less than [ ]% and not more than [ ]% per annum.
As of the Cut-Off Date, the weighted average, by principal balance, of the
Remittance Rates for the SAMs will be approximately [ ]% per annum.]
Each SAM provides for the payment of additional interest at the
earlier of the maturity date and the occurrence of a Mortgage Termination
Event. The additional interest payment is equal to the product of the
Appreciation Share and also equals the amount by which the Settlement Value
of the SAM exceeds the Adjusted Value of the SAM at the earlier of the
maturity date of the SAM and the occurrence of a Mortgage Termination
Event. The index used to compute stated interest on the SAMs is [ ]. The
margins range from [ ]% to [ ]%.
The latest original scheduled maturity of any SAM will be [ ][20 ].
As of the Cut-Off Date, the weighted average, by principal balance,
remaining term to maturity of the SAMs will be approximately [ ] months.
[At origination, based upon an appraisal of the mortgaged property
securing each SAM, approximately [ ]% of the SAMs, by principal balance,
will have had a ratio of the principal balance of the SAM to the value of
the mortgaged property greater than or equal to 80%, and approximately [ ]%
of the SAMs (by principal balance) will have had LTVs greater than 80% but
less than or equal to [95]%. [ ]% of the SAMs had a LTV Ratio greater than
[95]%. As of the Cut-Off Date, the weighted average, by principal balance,
of the LTVs of the SAMs will be approximately [ ]%.]
[Approximately [ ]% of the SAMs, by principal balance, will be
covered by primary insurance policies as of the Cut-Off Date.]
[description of other insurance]
No more than [ ]% of the SAMs, by principal balance as of the Cut-Off
Date will be secured by mortgaged properties located in any one zip code
area. A geographic distribution of the mortgaged properties on a [state by
state][zip code by zip code] basis is attached as [Annex I].
Approximately [ ]% of the SAMs, by principal balance as of the
Cut-Off Date will have been originated for the purpose of refinancing
existing mortgage debt, including cash-out refinancings. [Approximately [
]% of the SAMs, by principal balance, will have been originated for the
purpose of refinancing existing SAMs.] Approximately [ ]% of the SAMs, by
principal balance, will have been originated for the purpose of purchasing
the mortgaged property.
[additional description of SAMs as applicable, i.e., the number of
SAMs that provide for Balloon Loans, particular characteristics of SAMs,
whether _____SAMs may provide for negative amortization and Equity Release
SAMs and any special characterization of SAMs; add charts re: SAMs which
were originated for the purpose of purchasing and refinancing the related
mortgaged properties and chart re: mortgagors in specified age groups;
additional chart showing relevant characteristics of SAMs]
[add charts (attached in Annex I) as necessary]
THE SELLERS/ORIGINATORS
[description, as applicable, of [seller's][originator's] underwriting
criteria and loan documentation standards]
DESCRIPTION OF THE CERTIFICATES
The certificates will be issued to certificateholders under the
Pooling and Servicing Agreement, a form of which is filed as an exhibit to
the Registration Statement of which this prospectus supplement is a part.
Reference is made to the prospectus for important additional information
regarding the terms and conditions of the Pooling and Servicing Agreement
and the certificates. The issuance of the certificates is subject to the
condition that they be rated [" "] by [ ] [and will otherwise qualify as
"mortgage related securities" within the meaning of the Secondary Mortgage
Market Enhancement Act of 1984.] [The certificates will be freely
transferable and exchangeable at the office of [ ], the Registrar and
Paying Agent, in [ ], [ ]. The net proceeds of the offering will be
held in trust by SAMCO Mortgage Securities Corp. for the benefit of
certificateholders, subject to release to SAMCO Mortgage Securities Corp.
simultaneously with receipt by the Trustee of the SAMs.
BOOK-ENTRY REGISTRATION
The certificates, other that the Class R certificates, will in most
circumstances be available only in book-entry form through the facilities
of DTC if they are Participants, or indirectly through organizations which
are Participants. Transfers between Participants will occur in the ordinary
way in accordance with DTC rules. Cede & Co., as nominee of DTC, will hold
the global certificate for each class of book-entry certificates. SAMCO
Mortgage Securities Corp. is offering the Class [ ] certificates in minimum
denominations of $1,000 and in increments of $1.00 in excess of $1,000 and
the Class [ ] certificates in minimum denominations of $25,000 and in
increments of $1.00 in excess of $25,000.
DTC has advised SAMCO Mortgage Securities Corp. that it is a limited
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the UCC and a "clearing agency" registered under the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for
its Participants and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include Bear, Stearns & Co. Inc.,
securities brokers and dealers, banks, trust companies and clearing
corporations and may include some other organizations. Indirect access to
the DTC system also is available to other entities, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with an Indirect Participants.
Certificateholders that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, book-entry certificates may do so only through Participants
and Indirect Participants. In addition, unless definitive certificates are
issued, certificateholders will receive all distributions of principal of
and interest on the book- entry certificates through Participants. Under a
book-entry format, certificateholders will receive payments after the
related Distribution Date, because while payments are required to be
forwarded to Cede & Co., as nominee for DTC, on each related Distribution
Date, DTC will forward payments to its Participants which thereafter will
be required to forward them to Indirect Participants or certificateholders.
It is anticipated that the sole "Certificateholder", as that term is used
in the Pooling and Servicing Agreement, of the book-entry certificates will
be Cede & Co., as nominee of DTC, and that book-entry certificateholders
will not be recognized by the [Trustee] as certificateholders under the
Pooling and Servicing Agreement. Book-Entry certificateholders will be
permitted to exercise the rights of certificateholders under the Pooling
and Servicing Agreement only indirectly through Participants, who in turn
will exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the book-entry
certificates and is required to receive and transmit distributions of
principal of and interest on the book-entry certificates. Participants and
Indirect Participants with which certificateholders have accounts with
respect to the book-entry certificates similarly are required to make
book-entry transfers and receive and transmit payments on behalf of their
respective certificateholders.
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and some banks, the ability of a
certificateholder to pledge book-entry certificates to persons or entities
that do not participate in the DTC system, or otherwise take actions in
respect of their certificates, may be limited due to the lack of a physical
certificate for their certificates.
DTC has advised SAMCO Mortgage Securities Corp. that it will take any
action permitted to be taken by a certificateholder under the Pooling and
Servicing Agreement only at the direction of one or more Participants to
whose account with DTC the certificates are credited. Additionally, DTC has
advised SAMCO Mortgage Securities Corp. that it will take permitted actions
with respect to a certificate only at the direction of and on behalf of the
Participant whose holdings include that certificate. DTC may take
conflicting actions with respect to other certificates to the extent that
those actions are taken on behalf of Participants whose holdings include
those certificates.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of book-entry certificates among Participants, it is
under no obligation to perform or continue to perform those procedures and
those procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
The book-entry certificates will be issued in fully registered,
certificated form to certificateholders or their nominees, rather than to
DTC or its nominee, only if:
o SAMCO Mortgage Securities Corp. advises the Trustee in writing
that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the
certificates, and the Trustee or SAMCO Mortgage Securities
Corp. is unable to locate a qualified successor or
o SAMCO Mortgage Securities Corp., at its option, elects to
terminate the book-entry system through DTC.
Upon notice of the occurrence of any of the events described in the
immediately preceding paragraph, DTC is required to notify all Participants
of the availability through DTC of definitive certificates. Upon surrender
by DTC of the definitive certificates representing each class of the
book-entry certificates and instructions for registration, the Trustee will
issue the book-entry certificates in the form of definitive certificates,
and thereafter the Trustee will recognize the holders of definitive
certificates as certificateholders under the Pooling and Servicing
Agreement.
Distribution of principal of and interest on the certificates will be
made by [ ] directly to holders of definitive certificates in accordance
with the procedures set forth in this prospectus supplement and in the
Pooling and Servicing Agreement. Interest and principal payments on each
Distribution Date will be made to holders in whose names the definitive
certificates were registered on the Record Date. Distributions will be made
by check mailed to the address of the holder as it appears on the register
maintained by the Registrar. The final payment on any certificate, whether
definitive certificates or the certificates registered in the name of Cede
& Co. representing each class of the book-entry certificates, will be made
only upon presentation and surrender of certificates at the offices of the
Transfer Agent and Registrar, which shall initially be [ ], or the office
or agency which is specified in the notice of final distribution to holders
of certificates of the class being retired. The Trustee will provide notice
to registered certificateholders not later than the fifth day of the month
in which all remaining outstanding certificates of the applicable class
will be retired.
Definitive certificates will be transferable and exchangeable at the
offices of the Transfer Agent and Registrar. No service charge will be
imposed for any registration of transfer or exchange, but the Transfer
Agent and Registrar may require payment of a sum sufficient to cover any
tax or other governmental charge imposed in connection therewith.]
[EXCHANGEABLE CERTIFICATES]
The Class [ ] Certificates are exchangeable certificates.
ADVANCES
The [master servicer][servicer][seller][Originator] will [not] make
Advances for delinquent payments of principal and interest on SAMs and real
estate taxes, assessments and insurance premiums necessary to maintain the
mortgaged property as described in the prospectus under "Description of the
Certificates--Advances." [No Advance of additional interest payments will
be made to the SAMs]
DISTRIBUTIONS OF INTEREST
[description of amounts passed through to certificateholders as
interest and allocation of amounts passed through to certificateholders as
interest among classes, if any]
DISTRIBUTIONS OF PRINCIPAL
[description of amounts passed through to certificateholders as
principal and allocation of amounts passed through to certificateholders as
principal among classes, if any]
SUBORDINATION AND ALLOCATION OF LOSSES
[description of loss allocation provisions]
Priority of the Senior Certificates. As of Closing Date, the
aggregate current principal amounts of the Class [ ] certificates and of
the Class [ ] certificates, Class [ ] certificates, Class [ ] certificates,
and Class [ ] certificates will equal approximately [ ]% and [ ]%,
respectively, of the aggregate current principal amounts of the
certificates.
The rights of the holders of the Subordinated Certificates to receive
distributions with respect to the SAMs will be subordinated to the rights
of the holders of the Senior Certificates and to each class of Subordinated
Certificates having a lower numerical designation than the holders of the
Subordinated Certificates. The subordination of the Subordinated
Certificates to the Senior Certificates and of Subordinated Certificates to
classes of Subordinated Certificates with a higher payment priority is
intended to increase the likelihood of timely receipt by the holders of the
Senior Certificates and the applicable class of Subordinated Certificates
of the maximum amount to which they are entitled on any Distribution Date
and to provide the Subordinated Certificateholders protection against
losses resulting from defaults on SAMs to the extent described above.
However, in some circumstances, the amount of available
subordination, including the limited subordination provided for excess
losses, may be exhausted and shortfalls in distributions on the Senior
Certificates or Subordinated Certificates, as applicable, could result.
Holders of the Senior Certificates or Subordinated Certificates, as
applicable, will then bear their proportionate share of realized losses in
excess of the total subordination amount.
Priority among the Subordinated Certificates. On each Distribution
Date, the holders of any particular class of Subordinated Certificates will
have a preferential right to receive the amounts due them on the
Distribution Date out of the Distribution Account, prior to any
distribution being made on that date on each class of certificates
subordinated to that class of Subordinated Certificates.
As a result of the subordination of any class of certificates, that
class of certificates will be more sensitive than more senior classes of
certificates to the rate of delinquencies and defaults on the SAMs in the
related SAM Pool, and under some circumstances investors in that class of
certificates may not recover their initial investment.
THE CLASS R CERTIFICATES
On each Distribution Date, any amounts remaining in the Distribution
Account after distributions of interest on and principal of the
certificates [, including additional interest payments or the appreciation
certificates,] and payment of expenses, if any, of the trust will be
distributed to the holder of the Class R certificates together with Excess
Liquidation Proceeds, if any. Distributions of excess amounts to the holder
of the Class R certificates will be subordinate to all payments required to
be made on the certificates on any Distribution Date.
Any amounts remaining in the Distribution Account upon reduction of
the principal balance of the certificates to zero, payment of any
outstanding expenses and termination of the trust will be distributable to
the holder of the Class R certificates. Any remaining assets are expected
to be minimal. See "--Optional Termination of the Trust".
AVAILABLE DISTRIBUTION AMOUNT
On each Distribution Date, the Available Distribution Amount, which
usually includes scheduled principal and interest payments on the SAMs due
on the related [Due Date], principal prepayments received on the SAMs in
the previous calendar month and amounts received with respect to
liquidations and repurchases upon conversions of the SAMs, will be
distributed by or on behalf of the Trustee to the related class of
certificateholders.
The Due Date related to each Distribution Date is the first day of
the month in which the Distribution Date occurs.
LAST SCHEDULED DISTRIBUTION TO CERTIFICATEHOLDERS
Scheduled distributions on the SAMs, assuming defaults or losses on
the SAMs do not exceed amounts that are covered by the credit enhancements
described elsewhere in this prospectus supplement, will be sufficient to
make timely distributions of interest on the certificates and to reduce the
principal balance of each class of certificates to zero not later than its
Last Scheduled Distribution Date set forth below:
Last Scheduled
Class Distribution Date
- ----------------------------------- ---------------------------------------
[List of classes of certificates] [List of Last Scheduled Distribution
Dates for each class of certificates]
The determination of the Last Scheduled Distribution Date or each
class of certificates assumes, among other things, timely payments, without
principal prepayments, of principal of and interest on the SAMs underlying
the certificates, [no conversions to fixed rates or any SAMs], no
repurchases of any SAMs and no optional termination of the trust. Since the
rate of payment, including principal prepayments, of the SAMs can be
expected to exceed the scheduled rate of payments, and could exceed the
scheduled rate by a substantial amount, the actual final Distribution Date
may be earlier, and could be substantially earlier, than the Last Scheduled
Distribution Date indicated.
[THE MASTER SERVICER
description, as applicable, of master servicer's business and
delinquency, foreclosure and loss experience with respect to comparable
shared appreciation loans serviced by the master servicer]
[THE SERVICER
description, as applicable, of servicer's business and delinquency,
foreclosure and loss experience with respect to comparable shared
appreciation loans serviced by the servicer] [Description of servicer's
authority to waive fees or changes or to allow SAMs to remain delinquent,
if applicable]. The servicer's authority to waive fees or charges or to
permit loans to remain delinquent will be set forth in the relevant pooling
and servicing agreements.
SERVICING COMPENSATION, RETAINED YIELD AND PAYMENT OF EXPENSES
[The [Master][Servicer] Fee with respect to each SAM [is expected to]
[will] range from a minimum of [ ]% to a maximum of [ ]% per annum.] The
[initial weighted average] [master][Servicing][Seller][Originator] Fee with
respect to each SAM [is expected to] [will] be approximately [ ]% per
annum. [The Certificate Administrator Fee with respect to each SAM [is
expected to] [will] be approximately [ ]% per annum.] [The Retained Yield
[is expected to] [will] range from [ ]% to [ ]%, with an initial weighted
average Retained Yield of approximately [ ]%. The Retained Yield [is
expected to be] [may be] [sold] [transferred to [the Underwriter for
resale] to] a third party.] See "Description of the Certificates--Retained
Yield" and "--Servicing Compensation and Payment of Expenses" in the
prospectus for information regarding other possible compensation to SAMCO
Mortgage Securities Corp. and the [seller][Originator][master][servicer].
The [master] servicer will pay [all] [some] expenses incurred in connection
with its responsibilities under the Pooling and Servicing Agreement [and
the Sale and Servicing Agreement], subject to reimbursement as described in
the prospectus, including, without limitation, the various items of expense
enumerated in the prospectus. In particular, under the [Pooling and
Servicing Agreement][Sale and Servicing Agreement], each month or year, as
applicable, the [master] servicer will be obligated to pay from the
[Master] Servicing Fee
o the premiums on the pool insurance policy,
o [the fees of the Trustee] and
o some other fees and expenses of the trust, as prescribed by the
Pooling and Servicing Agreement.
Any fees and expenses are expected to aggregate not more than [ ]% per
annum. [The Certificate Administrator will pay the fees and expenses of the
Trustee.]
OPTIONAL TERMINATION OF THE TRUST
On any Distribution Date after the first date on which the aggregate
outstanding principal balance of the SAMs is less than [ ]% of the
aggregate principal balance of the SAMs as of the Cut-Off Date, SAMCO
Mortgage Securities Corp. may repurchase the SAMs and any other property
remaining in the trust, and thereby effect the termination of the trust and
the retirement of the certificates. The repurchase price will equal the sum
of 100% of the aggregate outstanding principal balances of the SAMs, plus
accrued interest thereon at the applicable [stated interest rates] through
the last day of the month of the repurchase plus the Indexed Appreciation
Payments for all the SAMs and the fair market value of all other property
remaining in the trust less expenses of disposition of any property
remaining in the trust. The proceeds of the repurchase will be treated as a
principal prepayment of the SAMs for purposes of distributions to
certificateholders. Accordingly, an optional termination of the trust will
cause the outstanding principal balance of the certificates to be paid in
full. In no event will the trust continue beyond the expiration date
identified in the Pooling and Servicing Agreement. See "Description of
Certificates--Termination and Optional Termination" in the prospectus.
YIELD, APPRECIATION AND PREPAYMENT CONSIDERATIONS
The effective yield to maturity of the certificates will depend upon,
among other things, the price at which the certificates are purchased, the
applicable pass-through rate and the rate of principal payments on the
SAMs. The effective yield to certificateholders will be lower than the
yield otherwise produced by the applicable pass-through rate and purchase
price of the certificates, because principal and interest distributions
will not be payable to the certificateholders until the 25th day of the
month following the month of accrual, without any additional distribution
of interest or earnings thereon with respect to any delay. [Because the
[master] servicer will not be obligated to pass through a full month's
payment of interest with respect to principal prepayments, the effective
yield may also be reduced in the event of interest shortfalls attributable
to Payoffs of, or curtailments with respect to, one or more SAMs.]
Further, the level of the appreciation of the mortgaged
properties underlying the SAMs in the trust will, and the index used for
calculating the Indexed Appreciation Payment for any SAM in the trust or
the appreciation certificates, affect the yield earned by holders of
principally the appreciation certificates. The level of appreciation of the
mortgaged properties underlying the SAMs may be affected by a variety of
factors, including but not limited to:
o economic conditions in the area where the mortgaged property is
located,
o the overall level of inflation and unemployment in the economy,
o the overall level of liquidity in the economy, and, more
specifically,
o the level of liquidity in the residential mortgage market.
The amount of appreciation paid to any holders of appreciation certificates
may also be affected by the amount of principal prepayments that are
occurring on the SAMs. Holders of appreciation certificates should be aware
that their yield may be low, zero or negative and should be prepared that
they can lose their entire investment in the appreciation certificates they
have purchased.
The rate of principal payments on the certificates is directly
related to the rate of payments of principal on the SAMs, which may be in
the form of scheduled payments or principal prepayments. See "Yield
Considerations" in the prospectus. A higher than anticipated rate of
principal prepayments would reduce the aggregate principal balance of the
SAMs more quickly than expected. As a consequence, aggregate interest
payments at the applicable stated interest rate with respect to the SAMs
could be substantially less than expected. Therefore, a higher rate of
principal prepayments could result in a lower than expected yield to
investors in classes of certificates purchased at a premium. The exercise
of a call feature on a class of certificates will have a similar effect on
the yield of that class to a holder of the certificates as an increase in
the rate of prepayments of the certificates. Conversely, a lower than
anticipated rate of principal prepayments could reduce the return to
investors on any classes of certificates purchased at a discount, in that
payments of principal with respect to the SAMs would occur later than
anticipated.
The actual rate of payments of principal and principal prepayments on
the SAMs may be influenced by a variety of economic, geographic, social and
other factors, including the overall economic conditions and homeowner
mobility. In general, if prevailing interest rates fall significantly below
the effective interest rates on the SAMs, that is, the sum of the
applicable stated interest rate and the implicit rate associated with the
payment of additional interest the SAMs are likely to be subject to higher
principal prepayment rates than if prevailing rates remain at or above the
effective interest rates on the SAMs. Conversely, if interest rates rise
above the effective interest rate on the SAMs, the rate of principal
prepayment would be expected to decrease. The rate of payment of principal
will also be affected by any repurchase by SAMCO Mortgage Securities Corp.
of the SAMs. See "Maturity, Average Life, Appreciation and Prepayment
Assumptions" and "Description of Certificates--Termination and Optional
Termination" in the prospectus and "Description of the
Certificates--Optional Termination of the Trust" in this prospectus
supplement. In that event, the repurchase price paid by SAMCO Mortgage
Securities Corp. would be passed through to certificateholders in
accordance with their respective interests.
SAMCO Mortgage Securities Corp. makes no representation as to the
specific factors that will affect the prepayment of the SAMs or the
appreciation of the underlying mortgaged properties or the relative
importance of those factors. Factors not identified by SAMCO Mortgage
Securities Corp. or discussed in this prospectus supplement may
significantly affect the Principal prepayments of the SAMs or the level of
appreciation of the underlying mortgaged properties. In particular, SAMCO
Mortgage Securities Corp. makes no representation as to the percentage of
the principal amount of the SAMs that will be paid as of any date or as to
the overall rate of prepayment or appreciation.
[The SAMs comprising the SAM Pools are adjustable rate shared
appreciation mortgage loans. SAMCO Mortgage Securities Corp. is not aware
of any publicly available statistics that set forth principal prepayment
experience or prepayment forecasts of adjustable rate shared appreciation
mortgage loans over an extended period of time, and its experience with
respect to loans is insufficient to draw any conclusions with respect to
the expected prepayment rates on the adjustable rate shared appreciation
mortgage loans comprising the SAM Pools. The rate of principal prepayments
with respect to adjustable rate shared appreciation mortgage loans has
fluctuated in recent years. As in the case with conventional fixed rate
mortgage loans, adjustable rate mortgage loans may be subject to a greater
rate of principal prepayment in a declining interest rate environment. For
example, if prevailing interest rates fall significantly, adjustable rate
mortgage loans could be subject to higher prepayment rates than if
prevailing interest rates remain constant, because the availability of
fixed rate shared appreciation mortgage loans at competitive interest rates
may encourage mortgagors to refinance their adjustable rate shared
appreciation mortgage loans to "lock in" a lower fixed interest rate. The
features of the adjustable rate shared appreciation mortgage loan programs
of shared appreciation mortgage loan Originators during the past years have
varied significantly in response to market conditions such as interest
rates, consumer demand, regulatory restrictions and other factors. The lack
of uniformity of the terms and provisions of the adjustable rate shared
appreciation mortgage loan programs have made it impracticable to compile
meaningful comparative data on prepayment rates and, accordingly, there can
be no certainty as to the rate of prepayments on the SAMs in stable or
changing interest rate environments.]
[With respect to all SAMs, including SAMs that are Balloon Loans,
payment of the unamortized principal balance and any additional interest
due at maturity, which, based on the amortization schedule of the SAMs, is
expected to be a substantial amount, will depend in part on the mortgagor's
ability to obtain refinancing of the SAM or to sell the mortgaged property
prior to the maturity of the SAMs. The ability to obtain refinancing will
depend on a number of factors prevailing at the time refinancing or sale is
required, including, without limitation, real estate values, the
mortgagor's financial situation, prevailing mortgage loan interest rates,
the mortgagor's equity in the related mortgaged property, tax laws and
prevailing economic conditions.]
[With respect to Equity Release SAMs, payments of the principal
balance and any additional interest due at maturity will [also] depend in
part on the mortgagor's ability to obtain refinancing of the SAM or sell
the mortgaged property prior to the maturity of the SAM. The ability to
obtain refinancing will depend on a number of factors prevailing at the
time the refinancing or sale is required, including:
o real estate values,
o the mortgagor's financial situation,
o prevailing mortgage loan interest rates,
o whether SAMs are being offered,
o tax laws and
o prevailing economic conditions.
In addition, refinancing of Equity Release SAMs may be more difficult than
for other mortgage loans and SAMs, since the typical mortgagor of an Equity
Release SAM may have less current income available to repay the refinancing
than would be acceptable to most financial institutions that would
facilitate the refinancing. There can be no assurance that SAMs or similar
type of mortgages will be used as a method for financing single family
residential real estate at that time.]
[Because distributions on the Adjustable Strip Certificates [consist
primarily of distributions of interest] [are based upon the excess of
interest at the weighted average Remittance Rate on the SAMs over [ ]% per
annum], the yield to maturity on the Adjustable Strip Certificates will be
extremely sensitive to the level of principal prepayments on the SAM, and
may fluctuate significantly from time to time. The yield to maturity on the
class will be particularly sensitive to the rate of prepayments on SAMs
bearing higher interest rates, which could be significantly higher than the
prepayment rates on SAMs bearing lower interest rates, since the rate of
interest payable on the Adjustable Strip Certificates will decrease as a
result of principal prepayments on SAMs with gross margins that are higher
than the weighted average gross margin from time to time on the SAMs.
Investors should fully consider all of the associated risks, including the
risk that an extremely rapid rate of principal prepayments on the SAMs
could result in the failure of investors in Adjustable Strip Certificates
to recoup fully their initial investments. For information regarding yield
considerations on the Adjustable Strip Certificates, see "--Yield
Considerations with Respect to the Adjustable Strip Certificates".]
[Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The model used in this prospectus supplement
assumes a constant annual rate of prepayment each month, expressed as a per
annum percentage of the then-scheduled principal balance of the Indexed
Appreciation Payment.] [Investors in the appreciation certificates will be
affected by the level of appreciation in value of the mortgaged properties.
The model used in this prospectus supplement assumes a constant annual rate
of appreciation each month, expressed as a per annum percentage of the
then-scheduled principal balance of the Mortgage Pool, taking into account
the volatility of the Constant Prepayment Rate.
The [Constant Prepayment Rate] does not purport to be either an
historical description of the appreciation experience of the mortgaged
properties underlying any pool of mortgage loans or a prediction of the
anticipated rate of appreciation of the mortgaged properties underlying any
pool of mortgage loans, including the SAMs, and there is no assurance that
the SAMs will prepay at any given percentage of the [Constant Prepayment
Rate].
The [Constant Appreciation Rate] does not purport to be either an
historical description of the prepayment experience of any pool of mortgage
loans or a predictor of the anticipated rate of prepayments of any pool of
mortgage loans, including the SAMs, and there is no assurance that the SAMs
will prepay at any given percentage of the [Constant Appreciation Rate].
The table set forth below has been prepared on the basis of the
characteristics of the SAMs that are expected to be included in the SAM
Pools and the respective expected initial Principal Balances of the
certificates as set forth in this prospectus supplement and using the
following assumptions:
o The figures shown for 0% of the [Constant Prepayment Rate] were
calculated assuming, among other things, that the SAMs have
stated interest rates of [ ]%, Remittance Rates of [ ]% and
remaining terms to maturity of [ ] months;
o In connection with calculating the figures shown for the other
percentages of the [Constant Prepayment Rate], it was assumed
that the SAMs have stated interest rates and original and
remaining terms to maturity which fall within the parameters
set forth beginning on page [ ] under "Description of the SAM
Pools" in this prospectus supplement;
o The SAMs have an aggregate principal balance of $[ ];
o The SAMs have Remittance Rates which fall within the parameters
set forth beginning on page [ ] under "Description of the SAM
Pools" in this prospectus Supplement;
o Each monthly payment is received on its [Due Date] commencing
[ ], 2000;
o The first monthly payment on the certificates is received on
[ ], 2000;
o No optional termination of the trust occurs and no default in
the payment of any SAM occurs;
o Prepayments on the SAMs are received on the last day of each
month commencing [ ], 2000 at the various percentages of the
[Constant Prepayment Rate] specified in the table; and
o All prepayments will be prepayments in full and 30 days of
interest is received in connection with the principal
prepayments. Certificateholders will receive less than 30 days
of interest on principal prepayments and
o Volatility is at the level indicated in each table.
See "Description of the Certificates--Distributions of Interest" in
this prospectus supplement).
Any discrepancy between the characteristics of the SAMs actually
included in the SAM Pools and the characteristics of the SAMs expected to
be so included may affect the percentages of the outstanding Principal
Balances of the class set forth in the table and the weighted average lives
of the certificates. To the extent that the SAMs that are actually included
in the SAM Pools have characteristics that differ from those assumed in
preparing the following table, the outstanding principal balance of any
class of certificates may be reduced to zero earlier or later than
indicated by the table.
Variations in actual prepayment experience may increase or decrease
the percentages of the original outstanding Principal Balances of a class
and the weighted average lives shown in the following table. Variations may
occur even if the average prepayment experience of all of the SAMs equals
the indicated percentage of the [Constant Prepayment Rate]. There is no
assurance, however, that prepayment of the SAMs will conform to any given
percentage of the [Constant Prepayment Rate].
There are no historical prepayment or appreciation data available for
the SAM Pools, and comparable data are not available because the SAMs do
not constitute a representative sample of the entire shared appreciation
mortgage loan market. In addition, experiences with respect to shared
appreciation mortgage loans may differ from historical data with respect to
mortgage loans underlying mortgage pass-through certificates issued by the
GNMA, FNMA or FHLMC and the prepayments experienced by the mortgage loans
underlying the mortgage pass-through certificates may not be comparable to
prepayments expected to be experienced by the SAM Pools, because the SAMs
may have characteristics which differ from the shared appreciation mortgage
loans underlying certificates issued by GNMA, FNMA and FHLMC.
Based on the foregoing assumptions, the following table indicates the
projected weighted average life of each class of certificates, other than
the Class R certificates, and sets forth the percentages of the initial
outstanding principal balance of each class of certificates that would be
outstanding after each of the dates shown at various constant percentages
of the [Constant Prepayment Rate].
Percentage of Principal Amount
Class Date Outstanding
- ----------------------- --------------- ------------------------------
[Prepayment tables]
[YIELD CONSIDERATIONS WITH RESPECT TO THE ADJUSTABLE STRIP CERTIFICATES
The following table illustrates the significant effect that principal
prepayments on the SAMs have upon the pre-tax yield to maturity of the
Adjustable Strip Certificates. The actual prices to be paid on the
Adjustable Strip Certificates have not been determined and will be
dependent on the characteristics of the SAM Pools as ultimately
constituted. The table shows hypothetical pre-tax yields to maturity for
the Adjustable Strip Certificates, stated on a corporate bond equivalent
basis, under five different prepayment assumptions based on the [Constant
Prepayment Rate]. The table has been prepared based on the same assumptions
underlying the table on page [ ] relating to percentages of the [Constant
Prepayment Rate] [and the percentages of Constant Appreciation Rate], and
the additional assumption that the appreciation certificates are purchased
on [ ] at the purchase prices stated in the table, including accrued
interest from the Cut-Off Date.
Pre-tax
Yield to Maturity
Certificate (Basic Prepayment
Class Price Assumptions)
- -------------------------- --------------- --------------------------
[Yield Charts]
The yields set forth in the preceding table were calculated by
initially determining, for each prepayment assumption shown in the table,
the monthly discount rate which, when applied to the assumed stream of cash
flows to be paid to the Adjustable Strip Certificateholders, would cause
the discounted present value of the assumed stream to equal the assumed
purchase price including accrued interest for the Adjustable Strip
Certificates. These monthly discount rates were then converted to corporate
bond equivalent yields, which are higher than the monthly discount rates,
because they are based on semiannual compounding.
On the basis of a constant prepayment rate of approximately [ ]% of
the [Constant Prepayment Rate], a constant appreciation rate of
approximately [ ]% of the [Constant Appreciation Rate], a purchase price of
$[ ], including accrued interest, and the assumptions described above, the
pre-tax yield to maturity of the Adjustable Strip Certificates would be
approximately 0%. If the actual prepayment rate were to exceed the rate
assumed above, an investor in the Adjustable Strip Certificates would not
fully recoup the initial purchase price of the Adjustable Strip
Certificates.
It is unlikely that the characteristics of the SAMs will correspond
exactly to those assumed in preparing the tables above. The yields to
maturity of the Adjustable Strip Certificates will therefore differ even if
all of the SAMs prepay monthly at the related assumed prepayment rates. In
addition, it is not likely that the SAMs will prepay at a constant
percentage of the [Constant Prepayment Rate] and [Constant Appreciation
Rate] until maturity or that all of the SAMs will prepay at the same
percentage of the [Constant Prepayment Rate] and [Constant Appreciation
Rate], and the timing of changes in the rate of prepayments and
appreciation may affect significantly the yield to maturity received by a
holder of the Adjustable Strip Certificates.
[YIELD CONSIDERATIONS WITH RESPECT TO THE APPRECIATION CERTIFICATES
The following table illustrates the significant effect that
[principal prepayments and] different appreciation rates on the SAMs have
upon the pre-tax yield to maturity of the appreciation certificates. The
actual prices to be paid on the appreciation certificates have not been
determined and will be dependent on the characteristics of the SAM Pools as
ultimately constituted. The table shows hypothetical pre-tax yields to
maturity for the appreciation certificates, stated on a corporate bond
equivalent basis, under [five] different prepayment assumptions based on
the [Constant Prepayment Rate] described above. The table has been prepared
based on the same assumptions underlying the table on page [ ] relating to
percentages of the [Constant Prepayment Rate][and the percentage of the
Constant Appreciation Rate], and the additional assumption that the
appreciation certificates are purchased on [ ] at the purchase prices
stated in the table, including accrued interest from the Cut-Off Date.
Pre-tax
Yield to Maturity
Certificate (Basic Prepayment and
Class Price Appreciation Assumption)
- ---------------------------- --------------- --------------------------
[Yield Charts]
The yields set forth in the preceding table were calculated by
initially determining, for each prepayment [and appreciation] assumption
shown in the table, the monthly discount rate which, when applied to the
assumed stream of cash flows to be paid to the appreciation
certificateholders, would cause the discounted present value of the assumed
stream to equal the assumed purchase price. These monthly discount rates
were then converted to corporate bond equivalent yields, which are higher
than the monthly discount rates because they are based on semiannual
compounding.
On the basis of a constant prepayment rate of approximately [ ]% of
the [Constant Prepayment Rate], constant appreciation rates of
approximately [ ]% of the [Constant Appreciation Rate], a purchase price of
$[ ], and the assumptions described above, the pre-tax yield to maturity of
the appreciation certificates would be approximately 0%. If the actual
prepayment rate or appreciation rate were to exceed the rate assumed above,
an investor in the appreciation certificates would not fully recoup the
initial purchase price of the appreciation certificates.
It is unlikely that the characteristics of the SAMs will correspond
exactly to those assumed in preparing the tables above. The yields to
maturity of the appreciation certificates will therefore differ even if all
of the SAMs prepay monthly at the related assumed prepayment rate and the
related mortgaged properties appreciate at the assumed appreciation rate.
In addition, it is not likely that the SAMs will prepay at a constant
percentage of the [Constant Prepayment Rate][Constant Appreciation Rate]
until maturity or that all of the SAMs will [prepay at the same percentage
of the Constant Prepayment Rate][appreciate at the same percentage of the
Constant Appreciation Rate], and the timing of changes in the rate of
prepayments may affect significantly the yield to maturity received by a
holder of the appreciation certificates.
SAMCO Mortgage Securities Corp. makes no representation that the SAMs
will prepay in the manner or at any of the rates assumed above or that the
underlying mortgaged properties will appreciate at any of the rates assumed
above or that the rate will be constant. Each investor must make its own
decision as to the appropriate prepayment or appreciation assumptions to be
used in deciding whether or not to purchase any of the certificates. Since
the rate of principal payments, including prepayments, with respect to, and
repurchases of, the SAMs and appreciation on the underlying mortgaged
properties will significantly affect the yield to maturity on the
certificates, prospective investors are urged to consult their investment
advisors as to both the anticipated rate of future principal payments,
including prepayments, on the SAMs and appreciation on the underlying
mortgaged properties and the suitability of the certificates to their
investment objectives.]
[RESIDUAL CERTIFICATE YIELD CONSIDERATIONS
Any distributions payable on the residual certificates may be subject
to United States federal income tax withholding in an amount equal to the
total distributions paid thereon which would result in a zero after-tax
rate of return. The residual certificates bear a greater risk of loss than
the other classes of Senior Certificates because of their later priority
for distributions of principal and because the interest thereon is added to
the Principal Balances until the principal distributions commence.
The residual certificateholders should consult their own tax advisors
as to the effect of taxes and the receipt of any payments made to the
residual certificateholders in connection with the purchase of the residual
certificates on after-tax rates of return on the residual certificates.
See "Federal Income Tax Consequences" in the prospectus.]
[ADDITIONAL INFORMATION
SAMCO Mortgage Securities Corp. intends to file with the commission
additional yield tables and other computational materials with respect to
one or more classes of the certificates on a current report on Form 8-K to
be dated [ ]. Tables and materials were prepared by the Underwriter at the
request of prospective investors, based on assumptions provided by, and
satisfying the special requirements of, prospective investors. Tables and
materials are preliminary in nature, and the information contained is
subject to, and superseded by, the information in this prospectus
supplement.]
THE POOLING AND SERVICING AGREEMENT AND SALE AND SERVICING AGREEMENT
The certificates will be issued under the Pooling and Servicing
Agreement. Reference is made to the prospectus for important information
additional to that set forth in this prospectus Supplement regarding the
terms and conditions of the Pooling and Servicing Agreement, [any servicing
agreements] and the certificates. SAMCO Mortgage Securities Corp. will
provide to a prospective or actual certificateholder without charge, upon
written request, a copy, without exhibits, of the Pooling and Servicing
Agreement. Requests should be addressed to [
] at [ ].
REPRESENTATIONS AND WARRANTIES
In the Sale and Servicing Agreement between EMC Mortgage Corporation
and each seller of the SAMs, each seller will represent and warrant to EMC
Mortgage Corporation with respect to all SAMs, among other things, that:
[a summary of the representations and warranties that will be approved here]
[description of remedy for breaches of representations and warranties
including substitution process, if any in the event of a substitution of
SAMs as provided in this prospectus supplement; no more than 5% of the SAMs
relative to the aggregate SAM Pool balance will deviate from the SAM
characteristics on [Closing Date], as described in this prospectus
supplement]
CREDIT ENHANCEMENTS
[THE POOL INSURANCE POLICY
The pool insurance policy for the certificates will be issued by the
Pool Insurer. The pool insurance policy covers loss by reason of default in
payment on single family loans in the SAM Pool. Claims under the pool
insurance policy will be limited to an aggregate initial amount [, to be
specified in the current report on Form 8-K referred to above under
"Description of the SAM Pools--Additional Information"] [equal to not less
than [ ]% of the aggregate principal balance of the SAMs that are not
covered as to their entire outstanding principal balances by primary
insurance policies as of the Cut-Off Date.] [The pool insurance policy will
include an advance claims endorsement.] [The pool insurance policy will
[also] include an endorsement which provides that the insurer will pay
claims presented although claims against the applicable primary insurance
policy have not been settled due to insolvency, bankruptcy, receivership or
assignment for the benefit of creditors of the issuer of the primary
insurance policy.] The coverage provided by the pool insurance policy may
be cancelled or reduced, provided that the then current rating of the
certificates assigned by [the rating agencies] will not be adversely
affected thereby.
The Pool Insurer is a corporation engaged principally in the business
of insuring shared appreciation mortgage loans on residential properties
against default in payment by the mortgagor. At [ ], 2000, the insurer had
at risk $[ ] billion covering approximately $[ ] billion of residential
mortgages. At that date, the insurer had total assets of approximately $[ ]
million, capital and surplus aggregating $[ ] million and statutory
contingency reserves of $[ ] million, resulting in total policyholders'
reserves of approximately $[ ] million. The information set forth in this
paragraph has been provided by the Pool Insurer. SAMCO Mortgage Securities
Corp. makes no representation as to the accuracy or completeness of the
information.] [Audited financial statements of the Pool Insurer are
attached hereto as Annex II.]
[THE SPECIAL HAZARD [INSURANCE POLICY][RESERVE FUND] [LETTER OF CREDIT]
[The Special Hazard Reserve Fund for the SAM Pools will be
established with a financial institution[, the debt obligations of which
are rated at least " " by [ ]] [acceptable to the rating agencies] to cover
a specified amount of losses arising from special hazards. The initial
coverage amount of the Special Hazard Reserve Fund is expected to be
approximately [ ], which is equal to the greatest of:
(a) the aggregate principal balance of the SAMs located in
the single [California] zip code zone that has the
largest aggregate principal balance of SAMs,
(b) [ ]% of the aggregate unpaid principal balance of the
SAMs or
(c) [twice] the unpaid principal balance of the largest single
SAM, in each case calculated as of the Cut-Off Date.
On each anniversary of the Cut-Off Date, the amount of the Special Hazard
Reserve Fund will be reduced to an amount equal to the greatest of clauses
(a), (b) and (c), calculated as of the preceding [ ]. However, if the
balance of the Special Hazard Reserve Fund as of [ ] has been reduced by
payment of special hazard losses to an amount less than the greatest of
clauses (a), (b) and (c), SAMCO Mortgage Securities Corp. will not be
obligated to deposit additional amounts in the Special Hazard Reserve Fund
on the anniversary of the Cut-Off Date to return the amount in the fund to
the required amount. The amount required to be deposited into the Special
Hazard Reserve Fund may be reduced to zero, provided that the then current
rating of the certificates obtained from [the rating agencies] will not be
adversely affected thereby.]
[The Special Hazard Letter of Credit will be issued by [ ],
[ ] in an amount equal to the greatest of:
(a) the aggregate principal balance of the SAMs located in
the single [California] zip code zone that has the
largest aggregate principal balance of SAMs,
(b) [ ]% of the aggregate unpaid principal balance of the
SAMs or
(c) [twice] the unpaid principal balance of the largest single
SAM, in each case calculated as of the Cut-Off Date.
On each anniversary of the Cut-Off Date, the amount available under the
Special Hazard Letter of Credit will be reduced to an amount equal to the
greatest of clauses (a), (b) and (c), calculated as of the preceding [ ].
Moreover, the amount available as of each anniversary of the Cut-Off Date
will in no event be greater than the coverage amount on the immediately
preceding anniversary, reduced by all payments made in respect of special
hazard losses during the year. The coverage provided by the Special Hazard
Letter of Credit may be cancelled or reduced, provided that the then
current rating of the certificates obtained from [ ] will not be adversely
affected thereby.
[The Special Hazard Insurance Policy for the SAM Pools will be issued
by the Special Hazard Insurer, [ ], a [ ] corporation. Claims under the
Special Hazard Insurance Policy initially will be limited to an amount
equal to the greatest of:
(a) [ ]% of the aggregate unpaid principal balance of the
SAMs,
(b) the aggregate principal balance of the SAMs located in
the single [California] zip code zone that has the
largest aggregate principal balance of SAMs or
(c) [twice] the unpaid principal balance of the largest
single SAM, in each case calculated as of the Cut-Off
Date.
On each anniversary of the Cut-Off Date, the amount of coverage will be
reduced to an amount equal to the greatest of clauses (a), (b) and (c),
calculated as of the preceding [ ]. Moreover, the coverage amount of the
Special Hazard Insurance Policy as of each anniversary of the Cut-Off Date
will in no event be greater than the balance on the immediately preceding
anniversary, reduced by all payments made in respect of claims during the
year. The coverage provided by the Special Hazard Insurance Policy may be
cancelled or reduced, provided that the then current rating of the
certificates obtained from [ ] will not be adversely affected thereby. At
December 31, [1999], [ ] had total assets of approximately $ [ ] and total
policyholders' surplus of $[ ]. The information set forth in the preceding
sentence has been provided by [ ], and SAMCO Mortgage Securities Corp.
makes no representation as to the accuracy or completeness of the
information.]]
[THE SAM REPURCHASE [RESERVE FUND] [LETTER OF CREDIT] [BOND]
Some or all of the primary insurance policies may contain an
exclusion from coverage for circumstances involving fraudulent conduct or
negligence by the [seller][master] [servicer] [Originator] or the
mortgagor. The [master] servicer will agree to repurchase any SAM for which
primary insurance policy coverage is ultimately not available solely by
reason of the exclusion. A SAM Repurchase [Reserve Fund] [Letter of Credit]
[Bond] will be [obtained] [established] for the SAM Pools to support the
[master] servicer's repurchase obligation.
The SAM Repurchase [Reserve Fund] [Letter of Credit] [Bond] will be
in an aggregate amount of $[ ], which is equal to [ ]% of the aggregate
outstanding principal balance of the SAMs as of the Cut-Off Date. This
coverage amount will be maintained during the first year of the SAM Pools
and will thereafter be reduced on [the first anniversary of the Cut-Off
Date to [ ]% of the aggregate outstanding principal balance of the SAMs on
that date, and thereafter on] each anniversary of the Cut-Off Date to an
amount equal to [ ]% of the then aggregate outstanding principal balance of
the SAMs. In addition, the coverage provided by the SAM Repurchase [Letter
of Credit] [Bond] may be cancelled or reduced and the amount required to be
deposited into the [Reserve Fund] may be reduced to zero, provided that the
then current rating of the certificates obtained from [ ] will not be
adversely affected thereby. Coverage provided by the SAM Repurchase
[Reserve Fund] [Letter of Credit] [Bond] will terminate five years after
the Cut-Off Date.
[The SAM Repurchase Reserve Fund for the SAM Pools will be established
and maintained with a financial institution, the debt obligations of which are
rated at least " " by [ ]. Amounts placed in the Reserve Fund may be
invested for the benefit of the [master] servicer in instruments rated not
less than " " by [ ]. The Reserve Fund will initially be established at [ ]
with a cash deposit by the [master] servicer.]
[The SAM Repurchase Letter of Credit will be issued by [ ]. As of [
], [1999], [ ] had total assets of approximately $[ ] and total liabilities
of approximately $[ ].] [The information set forth in this paragraph
concerning [ ] has been provided by [ ]. SAMCO Mortgage Securities Corp.
makes no representation as to the accuracy or completeness of the
information.
[The SAM Repurchase Bond will be issued by [ ], a[n] [ ] corporation.
As of [ ], [1999] , [ ] had total assets of approximately $[ ] and total
policyholders' surplus of $[ ]. SAMCO Mortgage Securities Corp. makes no
representation as to the accuracy or completeness of the information.]
[THE BANKRUPTCY [RESERVE FUND] [LETTER OF CREDIT] [BOND]
Under the terms of the [Pooling and Servicing Agreement][applicable
Sale and Servicing Agreement], the [master] servicer will agree to pay to
the Trustee for the benefit of certificateholders any portion of the
principal balance of a SAM that becomes unsecured under a ruling under the
federal Bankruptcy Code. The [master] servicer will also agree to pay to
the Trustee for the benefit of certificateholders any shortfall in payment
of principal and interest resulting from the recasting of any originally
scheduled monthly principal and interest payment under a ruling under the
Bankruptcy Code. These payment obligations will be subject to the
limitations specified in the Pooling and Servicing Agreement. The [master]
servicer will have the option, in lieu of making the payments, to
repurchase any SAM affected by bankruptcy court rulings. To insure the
[master] servicer's obligation to make the payments described above, [a
Bankruptcy [Letter of Credit] [Bond] will be issued by [ ]]. [The [master]
servicer will establish and maintain a bankruptcy reserve fund with a
financial institution, the debt obligations of which are rated at least " "
by [ ]. Amounts placed in the Reserve Fund may be invested for the benefit
of the [master] servicer in instruments rated not less than " " by [ ].]
The [master] servicer's payment obligations and the related coverage
under the Bankruptcy [Reserve Fund] [Letter of Credit] [Bond] shall in no
event exceed $[ ]. The Bankruptcy Coverage shall be reduced by the amount
of any payment by the [master] servicer in accordance with the preceding
paragraph. The [master] servicer's payment obligations and the coverage
amount of the Bankruptcy [Reserve Fund] [Letter of Credit][Bond] may be
cancelled or reduced, provided that the then current rating of the
certificates obtained from [ ] will not be adversely affected thereby. [See
"--The SAM Repurchase [Reserve Fund] [Letter of Credit] [Bond]" above for
some financial information regarding [ ].] [At [ ], [1999], [ ] had total
assets of approximately $[ ], and total liabilities of $[ ]. The
information set forth in the preceding sentence has been provided by [ ],
and SAMCO Mortgage Securities Corp. makes no representation as to the
accuracy or completeness of that information.]]
LEGAL INVESTMENT ASPECTS
[discussion of investments and possible legal ramifications]
ERISA CONSIDERATIONS
Any Plan fiduciary that proposes to cause a Plan to purchase
certificates should consult with its counsel with respect to the potential
consequences under ERISA and the Code of the Plan's acquisition and
ownership of certificates. See "ERISA Considerations" in the prospectus.
[discussion of PTCE 83-1, Underwriter's PTCE, and other prohibited
transaction class exemptions or prohibited transaction exemptions relevant
or potentially relevant to the certificates]
FEDERAL INCOME TAX CONSEQUENCES
[For federal income tax purposes, a SAM Pool will be treated as a
REMIC, a FASIT or a grantor trust, depending on the election that is made
or not made. Any additional interest payments paid on the appreciation
certificates will be excluded from any mortgage pool that elects to be
treated as a REMIC or a FASIT, because, in the case of a REMIC, the
additional interest payments paid on the appreciation certificates would
not flow to a holder of a REMIC regular interest, but rather, would flow to
a holder of a REMIC residual interest, and, in the case of a FASIT, the
additional interest payments paid on the appreciation certificates would
not constitute permitted assets.
Holders of REMIC or FASIT regular certificates will be treated as
holding debt instruments for federal income tax purposes. In general,
interest, including OID to the extent that the certificates are issued with
OID, will be treated as ordinary income to the holders of REMIC or FASIT
regular certificates. The prepayment assumption that will be used in
determining the rate of accrual of OID for federal income tax purposes is [
]% of the Constant Prepayment Rate. See "Description of the Certificates -
Yield, Appreciation and Prepayment Considerations". Holders of REMIC or
FASIT regular certificates will be required to include in income all
interest on the certificates in accordance with the accrual method of
accounting regardless of the holder's usual method of accounting, the
effect of which is that cash basis holders may be required to recognize
income in a year regardless of whether or not they receive a cash
distribution with respect to the certificates.
Holders of pass-through certificates and stripped certificates that
are not appreciation certificates will also be treated as holding debt
instruments for federal income tax purposes. Although there is not
authority directly on point and other characterizations are possible, the
issuer will also treat holders of appreciation certificates as holding debt
instruments for federal income tax purposes. In general, holders of
stripped certificates that are not appreciation certificates will be
subject to federal income tax in the same manner as holders of REMIC or
FASIT regular certificates. The federal income tax consequences to holders
of pass-through certificates and appreciation certificates is less clear.
Nevertheless, the issuer will treat holders of pass-through certificates
and stripped certificates as holding debt instruments that are subject to
Section 1272(a)(6) of the Code and the Contingent Payment Debt Regulations.
Interest, including OID, will be treated as ordinary income to the holders
of those certificates. Holders of pass-through certificates and stripped
certificates will be required to include in income all interest on the
certificates in accordance with the accrual method of accounting regardless
of the holder's usual method of accounting, the effect of which is that
cash basis holders may be required to recognize income in a year regardless
of whether or not they receive a cash distribution with respect to the
certificates.]
METHOD OF DISTRIBUTION
[Subject to the terms and conditions set forth in the Underwriting
Agreement, SAMCO Mortgage Securities Corp. has agreed to sell to the
Underwriter[s], and the Underwriter[s] [has][have] agreed to purchase, all
of the offered certificates. [Bear, Stearns & Co. Inc., an Underwriter, is
an affiliate of SAMCO Mortgage Securities Corp.] The offered certificates
will be offered by the Underwriter[s], only as and if issued and delivered
to and accepted by the Underwriter[s], from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. Proceeds, excluding accrued interest, to SAMCO Mortgage Securities
Corp. from the sale of the certificates, before deducting expenses
estimated to be $[ ], will be approximately [ ]% of the initial aggregate
certificate principal balance of the certificates plus accrued interest
thereon. In connection with the purchase and sale of the offered
certificates, the Underwriter[s] may be deemed to have received
compensation from SAMCO Mortgage Securities Corp. in the form of an
underwriting discount. ]
[SAMCO Mortgage Securities Corp. has agreed to indemnify the
Underwriter[s] against some civil liabilities, including liabilities under
the Securities Act of 1933, as amended, or to contribute to payments the
Underwriter[s] may be required to make.]
[This prospectus supplement and the related prospectus may be used by
Bear, Stearns & Co. Inc., an affiliate of SAMCO Mortgage Securities Corp.,
in connection with offers and sales related to secondary market
transactions in the certificates. Bear, Stearns & Co. Inc., may act as
principal or agent in the transactions. Sales will be made at prices
related to prevailing market prices at the time of sale or otherwise.]
There is currently no secondary market for the certificates and no
assurances are made that a secondary market will develop. The
Underwriter[s] intends to establish a market in the offered certificates,
but it is not obligated to do so. Any secondary market, even if
established, may or may not continue.
[See "SAMCO Mortgage Securities Corp.--Relationships with Affiliates"
in the prospectus for a description of the affiliation between the
Underwriter and SAMCO Mortgage Securities Corp.] [Pending final sale of the
certificates, SAMCO Mortgage Securities Corp. may cause the certificates to
be issued to itself and may enter into repurchase agreements or secured
lending arrangements for purposes of financing the holding of certificates
by SAMCO Mortgage Securities Corp.]
LEGAL MATTERS
Some legal matters will be passed upon for SAMCO Mortgage Securities
Corp. and the Underwriter by [Skadden, Arps, Slate, Meagher & Flom LLP].
CERTIFICATE RATINGS
It is a condition to the issuance of the certificates that they be
rated [" "] by [ ] and the appreciation certificates be rated [" "] by [ ].
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning
rating organization. Each security rating should be evaluated independently
of any other security rating].
The ratings on the certificates address the likelihood of the receipt
by certificateholders of all distributions on the underlying SAMs, in light
of the structural and legal aspects associated with the certificates and
the nature of the underlying SAMs. The ratings do not represent any
assessment of the likelihood that principal prepayments by mortgagors might
differ from those originally anticipated or the rate that appreciation will
occur on the underlying mortgaged properties. As a result of differences in
principal prepayments or appreciation, certificateholders might suffer a
lower than anticipated yield. [The ratings also do not address the
likelihood that the [master] servicer will be able to repurchase any SAM
which has been converted from an adjustable rate loan to a fixed rate
loan.] See "Description of the Certificates--Yield, Appreciation and
Prepayment Considerations" in this prospectus supplement.]
GLOSSARY OF TERMS
"APPRECIATION SHARE" means a percentage set forth in the SAM that the
mortgagor must pay to the Originator.
"AVAILABLE DISTRIBUTION AMOUNT" means the sum of the following
amounts with respect to the SAMs:
(1) the total amount of all cash received by the [master
servicer][servicer][certificate administrator] by the Determination
Date for the Distribution Date (including Advances made by the
[master servicer][servicer][seller][Originator] and withdrawals from
the Reserve Fund), except:
(a) all scheduled payments of principal and interest due on or
before the Cut- Off Date;
(b) all scheduled payments of principal and interest collected
but due on a date subsequent to the related Due Date;
(c) all principal prepayments received after the previous
calendar month (together with any interest payments received
with the principal prepayments to the extent that they
represent the payment of interest accrued on the related SAMs
for the period subsequent to the previous calendar month);
(d) Insurance Proceeds and Liquidation Proceeds received in the
calender month and [proceeds of SAMs repurchased following
conversion of the SAMs to fixed stated interest rates] during
the month;
(e) all amounts in the Distribution Account which are due and
reimbursable to the [master
servicer][servicer][seller][Originator] under the terms of the
Pooling and Servicing Agreement;
(f) the sum of [the Master Servicing Fee and] the Servicing Fee
[and the Certificate Administrator Fee] for each SAM; and
(g) with respect to a SAM, the Excessive Liquidation Proceeds.
(2) all Advances made by the [master
servicer][servicer][seller][Originator] to the Trustee with respect
to the Distribution Date.]
"BALLOON LOANS" means loans where a portion of the payment of
interest on the principal of the loan is deferred until a future date.
"BANKRUPTCY COVERAGE" means the amount of $[ ].
"CLOSING DATE" means [ ].
"CONSTANT PREPAYMENT RATE" means the prepayment standard or model
used in this prospectus supplement which assumes a constant annual rate of
prepayment each month, expressed as a per annum percentage of the
then-scheduled principal balance of the Mortgage Pool.
"CONSTANT APPRECIATION RATE" means the appreciation standard or model
used in this prospectus supplement which assumes a constant annual rate of
appreciation each month, expressed as a per annum percentage of the
then-scheduled principal balance of the Mortgage Pool, taking into account
the volatility of the Constant Appreciation Rate.
"CUT-OFF DATE" means [ ], 2000.
"DETERMINATION DATE" means the Due Date related to each Distribution
Date, or the first day of the month in which the Distribution Date occurs.
"EMC" means EMC Mortgage Corporation.
"EXCESS LIQUIDATION PROCEEDS" means the excess, if any, of aggregate
Liquidation Proceeds received during the previous calendar month over the
amount that would have been received if a Payoff had been made with respect
to the related SAM on the date the Liquidation Proceeds are received.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"LTV" means a ratio of the principal balance of the SAM to the value
of the mortgaged property.
"LAST SCHEDULED DISTRIBUTION DATE" means the Distribution Date that
occurs in the month following the latest scheduled maturity date of any of
the SAMs.
"LOAN SCHEDULE" means a schedule appearing as an exhibit to the
Pooling and Servicing Agreement which will specify with respect to each
SAM, among other things, the original principal balance and the outstanding
principal balance as of the close of business on the Cut-Off Date, the term
of the Mortgage Note and the stated interest rate and the Appreciation
Share, whether the SAM is a Mortgage Subsidy SAM or Equity Release SAM, the
stated maturity of each SAM and various material information about each
mortgagor.
"PAYING AGENT" means [ ].
"POOLING AND SERVICING AGREEMENT" means [ ].
"POOL INSURER" means [ ], the issuer of the pool insurance policy for
the certificates.
"RECORD DATE" means the close of business on the last business day of
the month preceding the month in which the Distribution Date occurs.
"REGISTRAR" means [ ].
"REMITTANCE RATE" means a rate equal to the stated interest rate for
the SAM less the sum of the Retained Yield, the [[seller][Servicing] Fee
and the Master Servicing Fee] [Servicing Fee and the Certificate
Administrator Fee] for the SAM.
"SALE AND SERVICING AGREEMENT" means each Agreement between EMC
Mortgage Corporation and each seller of the SAMs.
"SAM REPURCHASE" means a repurchase by the [master] servicer of any
SAM for which primary insurance policy coverage is ultimately not available
solely due to the fact that a primary insurance policy may contain an
exclusion from coverage for circumstances involving fraudulent conduct or
negligence by the [seller] [master] [servicer] [Originator] of the
mortgagor.
"SENIOR CERTIFICATES" means the class [ ] certificates.
"SUBORDINATED CERTIFICATES" means the class [ ] certificates, class [
] certificates, class [ ] certificates, and class [ ] certificates.
"TRANSFER AGENT" means [ ].
"TRUSTEE" means [ ].
"UNDERWRITING AGREEMENT" means the underwriting agreement, dated as
of [ ], between [ ] and [ ].
PROSPECTUS
SAMCO MORTGAGE SECURITIES CORP.
DEPOSITOR
SHARED APPRECIATION MORTGAGE PASS-THROUGH CERTIFICATES
Consider carefully the risk factors beginning on page [ ] of
this prospectus before buying the certificates.
SAMCO Mortgage Securities Corp. may periodically issue certificates in
series, and each series of certificates will represent interests in a
separate trust established by SAMCO Mortgage Securities Corp. Certificates
of each series will be paid only from the assets of the related trust. Each
series may be divided into multiple classes of certificates, and, if so,
each class may have differing characteristics.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE [ ] IN THIS PROSPEC
TUS AND PAGE S-[ ] IN THE PROSPECTUS SUPPLEMENT.
EACH TRUST WILL CONSIST OF:
1. a pool or pools of shared appreciation mortgage loans secured
by residential properties;
2. related property and interests in property or other interests in
shared appreciation mortgage loans;
3. mortgage pass through securities issued or guaranteed by
government or government sponsored agencies;
4. privately issued mortgaged-backed securities;
5. types of credit enhancement; and
6. various short-term investments.
The certificates may be offered to the public through different methods as
described in "Methods of Distribution" in this prospectus. Bear, Stearns &
Co. Inc. may act as agent or underwriter in connection with the sale of the
certificates. This prospectus and the accompanying prospectus supplement
may be used by Bear, Stearns & Co. Inc. in secondary market transactions in
connection with the offer and sale of any certificates. Bear, Stearns & Co.
Inc. may act as principal or agent in transactions and sales will be made
at prevailing market prices or otherwise.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
___________, 2000
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents that progressively provide more detail: this prospectus, which
provides general information, some of which may not apply to your series of
certificates and the accompanying prospectus supplement, which describes
the specific terms of your series of certificates.
You should rely only on the information provided in this prospectus
and the accompanying prospectus supplement, including the information
incorporated by reference. We have not authorized anyone to provide you
with different information. We are not offering the certificates in any
state where the offer is not permitted.
The information in the prospectus supplement is specific to your
certificates and amplifies on the more general information contained in the
prospectus.
We include cross-references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find
further related discussions. The following table of contents and the table
of contents included in the accompanying prospectus supplement provide the
pages on which these captions are located.
TABLE OF CONTENTS
Risk Factors................................................................5
The SAM Pools..............................................................14
Agency Certificates........................................................19
Private Mortgage-Backed Securities.........................................26
Use of Proceeds............................................................29
Yield Considerations.......................................................29
Effective Interest Rate....................................................30
Maturity, Average Life, Appreciation and
Prepayment Assumptions...............................................32
SAMCO Mortgage Securities Corp.............................................34
EMC Mortgage Corporation...................................................34
Mortgage Purchase Program..................................................34
Loan Standards.............................................................35
Credit, Appraisal and Underwriting Standards...............................36
Representations and Warranties and
Indemnification of SAMCO Mortgage Securities
Corp.......................................................................37
Mortgage Subsidy SAMs and Equity Release
SAMs.......................................................................38
Description of the Certificates............................................40
Introduction...............................................................40
Book-Entry Registration....................................................42
Definitive Certificates....................................................46
Assignment of SAMs.........................................................47
Substitution of SAMs.......................................................49
Representations and Warranties.............................................50
Retained Yield.............................................................51
Payments on SAMs; Deposits to Accounts.....................................52
Distributions on Certificates..............................................54
Advances...................................................................56
Termination and Optional Termination.......................................57
Reports to Certificateholders..............................................58
Description of the Pooling and Servicing Agreement
and the Sale and Servicing Agreement.................................60
Introduction...............................................................60
Servicing..................................................................60
Collection and Other Servicing Procedures..................................61
Servicing Compensation and Payment of
Expenses...................................................................61
Rights Upon Event of Default...............................................63
Amendment..................................................................64
List of Certificateholders.................................................65
The Trustee................................................................65
Duties of the Trustee......................................................65
Resignation of Trustee.....................................................66
Evidence as to Compliance..................................................66
Matters Regarding the Master Servicer, the
Servicer and the Certificate Administrator.................................67
Exchangeable Certificates..................................................68
Introduction...............................................................68
Exchanges..................................................................70
Procedures and Exchange Proportions........................................74
Primary Insurance, Hazard Insurance; Claims................................76
Primary Insurance..........................................................76
Hazard Insurance...........................................................77
Maintenance of Mortgage Impairment Insurance...............................78
Maintenance of Fidelity Bond and Errors and
Omissions Insurance........................................................78
Description of Credit Enhancements.........................................79
Pool Insurance Policies....................................................80
Subordination..............................................................82
Fraud Bond.................................................................83
Bankruptcy Bond............................................................84
Special Hazard Insurance Policies..........................................84
Letter of Credit...........................................................86
Reserve Fund...............................................................86
Certificate Insurance Policies.............................................87
Maintenance of Credit Enhancements; Claims
and Other Realization Upon Defaulted SAMs..................................87
Legal Considerations Concerning SAMS.......................................91
Legal Authority to Originate SAMs..........................................91
Applicability of Usury Laws................................................92
Disclosure Requirements related to SAMs....................................93
Some State Law Considerations..............................................94
Some Legal Considerations Applicable to SAMs...............................94
ERISA Considerations......................................................100
Plan Assets Regulation....................................................100
Prohibited Transaction Class Exemption 83-1...............................101
Other Exemptions..........................................................103
Final Considerations......................................................105
Federal Income Tax Consequences...........................................106
Tax Status of SAM Pools...................................................107
Characterization of REMIC and FASIT Regular
Certificates..............................................................108
Taxation of Owners of REMIC and FASIT
Regular Certificates......................................................109
Taxation of Owners of REMIC Residual
Certificates..............................................................113
Taxation of Owners of FASIT Ownership
Certificates..............................................................118
Sales of REMIC or FASIT Certificates......................................120
Prohibited Transactions and Other Possible
REMIC Taxes...............................................................122
Termination of a REMIC or FASIT...........................................123
Reporting and Other Administrative Matters of
REMICs....................................................................123
Backup Withholding with Respect to REMIC
and FASIT Certificates....................................................124
Foreign Investors in REMIC or FASIT
Certificates..............................................................125
Classification as a Grantor Trust.........................................126
Taxation of Holders of Pass-Through Certificates..........................127
Taxation of Holders of Stripped Certificates..............................130
Information Reporting.....................................................131
Taxation of Holders of Classes of Exchangeable
Certificates..............................................................131
State and Local Taxation..................................................134
Methods of Distribution...................................................134
Legal Investment Aspects..................................................136
Legal Matters.............................................................137
Financial Information.....................................................137
Reports to Certificateholders.............................................137
Where You Can Find More Information.......................................138
Annex II: Global Clearance, Settlement
and Tax Documentation Procedures..................................AII-1
RISK FACTORS
YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS, IN ADDITION TO THE
RISK FACTORS IN THE PROSPECTUS SUPPLEMENT, IN DECIDING WHETHER TO PURCHASE
ANY OF THE CERTIFICATES.
<TABLE>
<S> <C>
LACK OF SECONDARY MARKET MAY LIMIT A secondary market for the certificates of any
YOUR ABILITY TO RESELL YOUR series may not develop. If a secondary market
CERTIFICATES does develop, it might not continue or it might
not be sufficiently liquid to allow you to resell
any of your certificates. An underwriter,
including Bear, Stearns & Co. Inc., may decide
to establish a secondary market for a particular
series of certificates. If so, the prospectus
supplement for that series of certificates will
indicate this intention. However, no
underwriter, including Bear, Stearns & Co. Inc.,
will be obligated to do so. The certificates will
not be listed on any securities exchange.
THERE IS NO SOURCE OF PAYMENTS FOR When you buy a certificate, you will not own an
YOUR CERTIFICATES OTHER THAN interest in SAMCO Mortgage Securities Corp.,
PAYMENTS ON THE SAMS IN THE TRUST Bear, Stearns & Co. Inc. or any of its affiliates.
You will own an interest in the trust established
for that series of certificates. Your payments
come only from assets in the trust. Therefore,
the mortgagors' payments on the shared
appreciation mortgage loans included in the
trust, and any credit enhancements, will be the
sole source of payments to you. If those amounts
are insufficient to make required payments of
interest or principal to you, there is no other
source of payments. Moreover, it is not
anticipated that any governmental agency or any
other entity will guarantee or insure payments on
the certificates or any of the shared
appreciation mortgage loans.
THE SERVICERS WILL HAVE LIMITED The servicers of the shared appreciation
OBLIGATIONS mortgage loans will have limited obligations.
These will usually include: the obligation under
some circumstances to repurchase the shared
appreciation mortgage loans if there has been a
breach of representations and warranties;
advancing payments on the shared appreciation
mortgage loans when the mortgagor is delinquent
if the servicers of the shared appreciation
mortgage loans believe the advance is
recoverable; and various servicing and
administrative obligations made in the Pooling
and Servicing Agreement and servicing contracts.
RISKS ASSOCIATED WITH DECLINING REAL Because your certificates represent an interest in
ESTATE VALUES the shared appreciation mortgage loans, your
investment may be affected by a decline in real
estate values and changes in individual
mortgagors' financial conditions. Investors
should be aware that the value of the mortgaged
properties may decline. If the residential real
estate market experiences an overall decline in
property values, the rates of delinquencies,
foreclosures and losses could be higher than
those now experienced in the mortgage lending
industry as to mortgage loans that are not shared
appreciation mortgage loans.
If the outstanding balance of a shared
appreciation mortgage loan and any secondary
financing on the mortgaged property is greater
than the value of the property, there is an
increased risk of delinquency, foreclosure and
losses on or with respect to the shared
appreciation mortgage loan. To the extent your
certificates do not have any form of credit
enhancements, you will bear all of the risks
resulting from defaults by mortgagors.
THE SHARED APPRECIATION MORTGAGE Shared appreciation mortgage loans are
LOANS MAY BE PRONE TO DEFAULTS sometimes referred to as balloon loans. Shared
appreciation mortgage loans may require a large
payment at their stated maturity. These mortgage
loans may be prone to any increased risk of
Default compared to mortgage loans that do not
have shared appreciation features, because the
ability of a mortgagor to make this final payment
depends on the ability of the mortgagor to
refinance the shared appreciation mortgage loan
or sell the related mortgaged property. If the
mortgagor is unable to obtain financing at
maturity, the mortgagor may default.
Your trust may include shared appreciation
mortgage loans with a negative amortization
feature. The principal balances of shared
appreciation mortgage loans may be increased to
amounts greater than the value of the underlying
mortgaged property and the value may decrease as
described above. This increases the likelihood of
default.
THE VALUE OF SHARED APPRECIATION The value of a mortgaged property subject to an
MORTGAGE LOANS MAY FALL BECAUSE OF equity release mortgage loan may decline more
THE MORTGAGOR'S DISINCENTIVE TO than would have been the case had the mortgaged
PROMOTE APPRECIATION property been subject to a mortgage associated
with a shared appreciation mortgage loan other
than an equity release mortgage loan. The
principal reason why this may occur is that the
mortgagor under an equity release mortgage loan
may have agreed to pay the originator a more
substantial portion of the appreciation in the
value of the mortgaged property since the date of
origination of the mortgage loan than another
type of shared appreciation mortgage loan and
therefore may be less inclined to perform routine
maintenance or make capital expenditures on or
with respect to the property.
An equity release mortgage loan is a shared
appreciation mortgage loan that requires only a
nominal payment of principal and interest from
the related mortgagor during the life of the
shared appreciation mortgage loan or no payment
during that life, but requires a larger
appreciation share payment at the end of the term
of such shared appreciation mortgage loan than a
comparable mortgage subsidy shared appreciation
mortgage.
ESCALATING OR VARIABLE PAYMENTS Your trust may include shared appreciation
REQUIRED BY SOME SHARED mortgage loans that provide for escalating or
APPRECIATION MORTGAGE LOANS MAY BE variable payments by the mortgagor. The
PRONE TO DEFAULT mortgagor may have qualified for the shared
appreciation mortgage loans based on an income
level sufficient to make the initial payments
only. As the required payments increase, the
likelihood of default will increase.
THE CONCENTRATION OF SHARED Your trust may include shared appreciation
APPRECIATION MORTGAGE LOAN IN A mortgage loans that are concentrated in some
PARTICULAR GEOGRAPHIC AREA MAY BE regions, states or zip code areas of the United
PRONE TO INCREASED LEVELS OF DEFAULT States. The geographic units may experience
weak economic conditions or housing markets. This
may cause higher rates of loss and delinquency on
the shared appreciation mortgage loans originated
in these areas. See "Description of the SAM Pool"
in the related prospectus supplement to see if
any of these or other special risk loans are
present in the mortgage pool applicable to your
certificates.
CREDIT ENHANCEMENTS MAY BE LIMITED The prospectus supplement related to your certificates
OR REDUCED AND THIS MAY CAUSE YOUR may specify that credit enhancements will provide some
CERTIFICATES TO BEAR MORE LOSSES OF protection to cover some losses on the underlying shared
MORTGAGOR DEFAULTS appreciation mortgage loans. The forms of
credit enhancement include, but are not limited
to, the following:
o subordination of one or more classes of
certificates to other classes of certificates
in the same series;
o insurance policies on particular classes of
certificates to support payments on those
certificates;
o a letter of credit;
o a mortgage pool insurance policy;
o a special hazard insurance policy;
o a fraud bond;
o a bankruptcy bond;
o a reserve fund; or
o any combination of the above. See
"Description of the Credit
Enhancements". See also "Credit
Enhancements" in the related prospectus
supplement in order to see what forms of
credit enhancements apply to your
certificates.
Regardless of the form of credit
enhancement, an investor should be
aware that:
o the amount of coverage is usually
limited;
o the amount of coverage will usually be
reduced over time according to a
schedule or formula;
o the particular form of credit
enhancements may provide coverage
only to some types of losses, such as
hazard losses, which are normally
covered by standard homeowner's
policies, or special hazard losses, which
are not so covered, on the shared
appreciation mortgage loans, and not to
other losses;
o the particular form of credit
enhancements may provide coverage
only to some certificates and not other
certificates of the same series; and
o if the applicable rating
agencies believe that the
rating on the certificates
will not be adversely
affected, some types of
credit enhancements may be
reduced or terminated.
IF THE RATE OF PREPAYMENTS ON THE The yield to maturity of your certificates will
SHARED APPRECIATION MORTGAGE LOANS depend primarily on the price you paid for your
IS DIFFERENT THAN EXPECTED, YOUR YIELD certificates and the rate of payments on the
shared appreciation mortgage loans in the
applicable trust. The rate of payments includes
all scheduled payments of interest and principal
and payments of a percentage of the increase in
the value of the mortgaged property over the life
of the mortgage loan and additional interest
prepayments of the amount of the increase in the
value of the mortgaged property over the life of
the loan, and liquidations due to defaults and
repurchases of the mortgage loans. If the rate of
prepayments on the shared appreciation mortgage
loans related to your certificates is higher or
lower than anticipated, the yield to maturity may
be adversely affected. The yield on some types of
certificates are more sensitive to variations in
prepayments than others. For example,
certificates that receive only payments of
interest are especially sensitive to variations
in the rate of prepayments. If the rate of
prepayments is high or if a redemption or call
feature of the certificates or the underlying
shared appreciation mortgage loans occurs, the
holders of the certificates may not fully recoup
their initial investment. See "Yield
Considerations" and "Maturity, Average Life,
Appreciation and Prepayment Assumptions" in this
prospectus. See also "Risk Factors" and
"Description of the Certificates--Yield,
Appreciation and Prepayment Considerations" in
the related prospectus supplement for more
information concerning the prepayment risks
pertaining to your certificates.
THE REDEMPTION OF THE CERTIFICATES OR Your certificates may be subject to redemption
THE UNDERLYING SHARED APPRECIATION or other call features. Likewise, the underlying
MORTGAGE LOANS WILL AFFECT YOUR shared appreciation mortgage loans may be
YIELD subject to a call feature which would result in
the retirement of the certificates. That event
would affect the average life and yield of each
class of certificates in a series. In addition,
if you are the purchaser of an appreciation
certificate, your yield will also be affected by
the method for calculating the indexed
appreciation payments for any shared appreciation
mortgage loans or any certificates. See "Yield
Considerations" and "Maturity, Average Life,
Appreciation and Prepayment Assumptions" in this
prospectus.
IF YOU PURCHASE APPRECIATION Appreciation certificates will be allocated some
CERTIFICATES, YOUR YIELD WILL BE or all of the additional interest payments
ESPECIALLY AFFECTED BY CHANGES IN THE generated by the shared appreciation mortgage
VALUE OF THE MORTGAGED PROPERTY loans in your trust. The amount of these
payments for any trust is a function of both the
actual appreciation occurring on the mortgaged
properties underlying the shared appreciation
mortgage loans in the trust that have matured and
the index used for calculating the indexed
appreciation payments for the shared appreciation
mortgage loans in the trust or the certificates.
The value of any mortgaged properties in the
trust may not increase. Similarly, the value of
any mortgaged properties in the trust may
decrease. Thus, as an investor in the
appreciation certificates, you should be aware
that your yield may be low, zero or negative and
you may lose the entire investment in the
appreciation certificates that you purchase. See
"Yield Considerations" and "Maturity, Average
Life, Appreciation and Prepayment Assumptions" in
this prospectus.
VIOLATION OF VARIOUS FEDERAL AND STATE Applicable state laws often regulate interest
LAWS MAY RESULT IN LOSSES ON THE rates and other charges and require disclosures.
SHARED APPRECIATION MORTGAGE LOANS In addition, most states have other laws, public
policies and principles of equity relating to the
protection of consumers, unfair and deceptive
practices, and other practices that may apply to
the origination, servicing and collection of the
shared appreciation mortgage loans.
The shared appreciation mortgage loans may also
be subject to various federal laws. The
Truth-in-Lending Act and Regulation Z and the
Real Estate Settlement Procedures Act and
Regulation X require disclosures to the
mortgagors regarding the terms of the shared
appreciation mortgage loans. The Equal Credit
Opportunity Act and Regulation B and the Fair
Housing Act and the regulations prohibit
discrimination in the provision of housing credit
on the basis of some protected classes. The Fair
Credit Reporting Act regulates the use and
reporting of information related to the
mortgagors' credit experience. Other federal laws
may also apply.
Depending on the provisions of the applicable law
and the specific facts and circumstances
involved, violations of the laws, policies and
principles of equity may limit the ability of a
servicer to collect all or part of the principal
of or interest charged on the shared appreciation
mortgage loans, may entitle the mortgagors to
rescind the loan or to a refund of amounts
previously paid and, in addition, could subject
the owner of the shared appreciation mortgage
loans to damages and administrative sanctions and
thus an investor in the appreciation certificates
could lose some or all of its investment.
However, it is not certain whether any damages
and administrative sanctions will be used against
the owner of shared appreciation mortgage loans,
thus subjecting an investor in the appreciation
certificates to a loss. It is unclear whether any
of these risks may result in certificateholders
incurring losses in excess of their respectable
initial investments in the certificates.
THE CHARACTERIZATION AND FEDERAL Because of the lack of authority directly on
INCOME TAX CONSEQUENCES OF THE point and because various characterizations of
PURCHASE, HOLDING AND DISPOSITION OF appreciation certificates are possible, the
APPRECIATION CERTIFICATES FOR FEDERAL characterization of appreciation certificates for
INCOME TAX PURPOSES IS UNCLEAR federal income tax purposes is unclear. Even if
appreciation certificates constitute debt for
federal income tax purposes, the taxation of a
debt instrument like the appreciation
certificates is unclear. Accordingly, although
the issuer intends to take the position that
appreciation certificates constitute debt subject
to the provisions of section 1272(a)(6) of the
Code, it is possible that the Internal Revenue
Service could successfully assert that this
characterization is incorrect or that, even if
this characterization is correct, that the
federal income tax consequences, including the
timing and amount of income inclusions to
holders, of the purchase, ownership and
disposition of appreciation certificates, differ
from those described under "Federal Income Tax
Consequences-Taxation of Holders of Stripped
Certificates."
APPRECIATION CERTIFICATES MAY BE If the additional interest provision of the shared
SUBJECT TO USURY LAWS appreciation mortgage loans does not fall within
the scope of the Depositary Institutions
Deregulation and Monetary Control Act of 1980 and
the Alternative Mortgage Transaction Parity Act
of 1982 is interpreted not to provide for an
exemption from state usury statutes, individual
state usury laws may apply to shared appreciation
mortgage loans. Only limited case law exists on
the application of these federal acts to shared
appreciation mortgage loans.
</TABLE>
THE SAM POOLS
Capitalized terms are defined in the Glossary of Terms in this
Prospectus.
Each series will consist of a SAM Pool, each of which will consist of
SAMs evidenced by Mortgage Notes secured by Mortgages on mortgaged
properties, Agency Securities issued or guaranteed by GNMA, FNMA or FHLMC
and private issued mortgage-backed securities. The types of mortgaged
properties securing the SAMs in each SAM Pool may include owner-occupied
o attached or detached single-family residences, including
residences in planned unit developments,
o two- to four-family primary residences,
o condominiums or other attached dwelling units and
owner-occupied leasehold interests in the underlying mortgaged
properties and
o any other homes or dwellings that conform with the underwriting
policies and credit criteria of EMC Mortgage Corporation.
In the case of leasehold interests, the term of the leasehold will exceed
the scheduled maturity of the SAM by at least ten years.
Private mortgage-backed securities may include:
o mortgage participation or pass-through certificates
representing beneficial interests in mortgage loans or SAMs,
whereby "beneficial interests" means the right to receive
payments of interest, principal and/or shared appreciation
payments made under the SAMs to the holders of the related
private mortgage-backed securities, and the mortgage loans are
the mortgage loans that are specifically held by or on behalf
of a pass-through trust or vehicle (or participation interest)
for beneficial interests,
o CMOs secured by mortgage loans or SAMs, and
o stripped mortgage-backed securities representing an undivided
interest in all or a part of any of the principal and interest
distributions or the principal or interest distributions on all
of the mortgage loans or SAMs, or any of the principal and
interest distributions or the principal or interest
distributions on some mortgage loans or SAMs.
Agency Securities may include:
o GNMA Certificates,
o FNMA Certificates,
o FHLMC Certificates,
o stripped mortgage-backed securities representing an undivided
interest in all or a part of any of the principal and interest
distributions or the principal or interest distributions on all
of the GNMA, FNMA, FHLMC Certificates, or all or a part of any
of the principal and interest distributions or the principal or
interest distributions on some GNMA, FNMA, FHLMC Certificates
and usually guaranteed to the same extent as the underlying
securities,
o another type of guaranteed pass-through certificate issued or
guaranteed by GNMA, FNMA, FHLMC and described in the related
prospectus supplement, or
o a combination of the Agency Securities.
The SAMs to be purchased by EMC Mortgage Corporation, which will
transfer them to SAMCO Mortgage Securities Corp. for inclusion in a SAM
Pool) will be screened in accordance with the standards set forth under
"SAMCO Mortgage Securities Corp.--Credit, Appraisal and Underwriting
Standards" unless there are changes thereto, which changes are set forth in
the related prospectus supplement. EMC Mortgage Corporation will also
underwrite a percentage of the SAMs to be purchased. The SAMs in each SAM
Pool will be originated by "Originators" in accordance with standards set
forth by EMC Mortgage Corporation and purchased from lending institutions
which meet the requirements set forth under "SAMCO Mortgage Securities
Corp.--Mortgage Purchase Program". With respect to mortgage pass-through
certificates to be issued in series from time to time, an entity, often
being or affiliated with the seller, set forth in the related prospectus
supplement will be responsible for the servicing and administration of the
SAMs and will perform some servicing functions with respect to the SAMs. In
the event that a master servicer or servicer named in the prospectus
supplement, is acting as master servicer or servicer with respect to a
single series,
o the master servicer or servicer will act as master servicer or
servicer for the SAMs in the related SAM Pool as set forth in
the related prospectus supplement,
o the duties, obligations and liabilities of the master servicer
or servicer will relate only to its respective SAM Pool, and
o the master servicer or servicer will calculate amounts
distributable to the certificateholders of the certificates,
prepare tax returns on behalf of the trust fund and provide
some other administrative services specified in the Pooling and
Servicing Agreement.
If so specified in the applicable prospectus supplement, the Trustee may be
the certificate administrator with respect to the series. The servicing of
the SAMs may be performed by the seller which sold the SAMs to EMC Mortgage
Corporation for inclusion in the trust fund or by a qualified servicer
selected by SAMCO Mortgage Securities Corp. and there may not be a master
servicer. The master servicer, the servicer and the certificate
administrator may perform their respective servicing and administrative
responsibilities through agents or independent contractors but shall not
thereby be released from any of their obligations under the Pooling and
Servicing Agreement. See "Description of the Pooling and Servicing
Agreement and the Servicing Agreement--Servicing."
For each series, the applicable prospectus supplement will set
forth information respecting the number and principal amount of SAMs in
each SAM Pool which were originated for the purpose of purchasing and
refinancing the related mortgaged properties and for borrowers on the SAMs
in specified age groups. For each SAM Pool, the related prospectus
supplement will contain specific information as of the date specified in
the prospectus supplement relating to the creation of the trust fund
regarding:
o the aggregate principal balance of the SAMs;
o the range of contractual stated periodic interest payments and
the Appreciation Shares by principal balance;
o the month and year in which the first monthly payments occur,
and the latest maturity of the SAMs;
o the largest and smallest principal balances of the SAMs at
origination;
o the aggregate principal balance of all SAMs having LTVs at
origination exceeding 80% and the maximum permissible
loan-to-value ratio for all SAMs which shall be 95%;
o the types of dwellings constituting the mortgaged properties
securing the SAMs; and
o the geographic distribution of the SAMs, prepared on a
state-by-state or zip code by zip code basis for states
containing 5% or more of the SAM Pool.
To the extent specified in the applicable prospectus supplement, SAMs with
LTVs or principal balances exceeding the limits will be covered partially
by primary insurance policies. In addition, if specified in the applicable
prospectus supplement, SAMCO Mortgage Securities Corp., the master
servicer, a seller or a servicer, as applicable, may obtain or establish
one or more credit enhancements for a SAM Pool. Any credit enhancement will
be described in the applicable prospectus supplement. The credit
enhancements may be limited to one or more classes of certificates and may
include any of the following:
o a pool insurance policy,
o a Special Hazard Insurance Policy,
o a Fraud Bond, a Bankruptcy Bond,
o a Letter of Credit,
o a Reserve Fund,
o a Certificate Insurance Policy, or
o any combination of the foregoing.
Coverage of some risks of default or loss may also be provided to a
particular class or classes of certificates by the subordination in right
of payment of one or more other classes of certificates of the same series
to the right of holders of the class or classes of certificates to receive
payments. See "Description of Credit Enhancements".
All SAMs will be of one or more of the following types of SAMs
of varying terms at origination:
o Mortgage Subsidy SAMs, see "SAMCO Mortgage Securities
Corp.--Mortgage Subsidy SAMs and Equity Release SAMs");
o Equity Release SAMs, see "SAMCO Mortgage Securities
Corp.--Mortgage Subsidy SAMs and Equity Release SAMs"); and
o any other type of SAM described in the applicable prospectus
supplement.
Specific information with respect to the SAMs in a particular
SAM Pool and the applicable credit enhancements which is not included in
the related prospectus supplement will be included in a current report on
Form 8-K which will be available to purchasers of the certificates at or
before the time of initial issuance of the related series of certificates
and which will be filed with the Commission within 15 days thereafter.
Each master servicer has entered or will enter into a contract
with each related servicer to perform, as an independent contractor,
servicing functions for the master servicer subject to its supervision and
may enter into a contract with an independent entity to perform
administrative functions for the SAM Pools, or the Trustee has entered or
will enter into a contract with each related servicer to perform servicing
functions for the SAM sold to the trust by it or for all the SAMs in the
SAM Pool. There may be no master servicer for a particular series of
certificates. In that event, the servicing of the SAMs will be performed by
the servicer specified in the applicable prospectus supplement. The master
servicer may have the right to remove any related servicer of any SAM at
any time if the master servicer considers removal to be in the best
interests of certificateholders, but only for cause as described in the
prospectus supplement. In that event, the master servicer must designate a
replacement servicer, which may include a related master servicer or
servicer, or an affiliate of the master servicer or servicer. Each master
servicer may also perform its administrative and servicing responsibilities
through agents or independent contractors but shall not thereby be released
from any of its responsibilities under the Pooling and Servicing Agreement.
Each master servicer will receive a fee for its services in accordance with
performing its duties and under any Pooling and Servicing Agreement or Sale
and Servicing Agreement, as applicable. The servicer will receive a fee for
performing its services in accordance with performing its duties under any
Pooling and Servicing Agreement or Sale and Servicing Agreement, as
applicable. The fees to a master servicer and the servicers will be paid
from the difference between the stated interest rate on each SAM, or SAM
Pool, if applicable, and the amount needed to pay Master Servicing Fees,
Servicing Fees, Certificate Administrator Fees and any Retained Yield with
respect to the SAM or, if specified in the prospectus supplement, be paid
out of additional interest payments.
With respect to each series, a certificate administrator may be
appointed. If appointed, the certificate administrator will calculate
amounts distributable to the certificateholders, and may prepare tax
returns on behalf of the trust fund and provide some other services
specified in a separate Pooling and Servicing Agreement for the series. The
servicer and the certificate administrator may perform their respective
servicing and administrative responsibilities through agents or independent
contractors but shall not thereby be released from any of their respective
responsibilities under the Pooling and Servicing Agreement. With respect to
each series of certificates, the certificate administrator will receive a
fee for its services, which will be paid from the difference between the
stated interest rate on each SAM and the Remittance Rate, net of any
Retained Yield, with respect to the SAM or if specified in the prospectus
supplement, be paid from additional interest payments in another manner
specified in the related prospectus supplement.
The certificates of each series will represent undivided
interests in a trust consisting of the SAMs included in one or more SAM
Pools for that series and related property. A series may be enhanced by
mortgage loan insurance or other forms of credit enhancement, in each case
as more fully described under the captions "Description of the
Certificates" and "Description of Credit Enhancements" and in the related
prospectus supplement. When each series of certificates is issued, SAMCO
Mortgage Securities Corp. will cause the SAMs in each SAM Pool for that
series to be assigned to an independent bank or trust company as trustee
for the benefit of the holders of certificates of that series, and the
master servicer or the servicer, as applicable, will be responsible for
master servicing the SAMs under the Pooling and Servicing Agreement. The
Trustee may also serve as certificate administrator.
SAMCO Mortgage Securities Corp.'s assignment of the SAMs to the
Trustee will be without recourse, and SAMCO Mortgage Securities Corp.'s
obligations with respect to the SAMs will, unless otherwise indicated in
the prospectus supplement for a series of certificates, be limited to any
representations and warranties made by it in, as well as its contractual
obligations under, the Pooling and Servicing Agreement for each series. In
the event of delinquencies in payments on the SAMs, or the related SAM Pool
for the series, the master servicer, the seller or the Originator, as
specified in the applicable prospectus supplement will only be obligated to
advance cash in the amounts described under "Description of the
Certificates--Advances" relating to its SAM Pool to the extent the Advances
are not made by the servicers. Any Advances by a master servicer, the
servicer, the seller or the Originator will be limited to amounts which, in
the judgment of the entity, ultimately will be reimbursable with respect to
the SAM Pool from principal payments, additional interest payments and the
stated interest paid on the SAMs or amounts paid by or under any applicable
pool insurance policy, any applicable Special Hazard Insurance Policy, any
primary insurance policy, any applicable Letter of Credit, Reserve Fund or
any other applicable policy of insurance, any subordination feature
described in this prospectus or the proceeds of liquidation of a SAM. See
"Description of Credit Enhancements." If so specified in the applicable
prospectus supplement, neither a master servicer nor any other entity will
be obligated to make Advances with respect to SAMs delinquent longer than
the time period specified in the prospectus supplement. See "Description of
the Certificates--Advances" and "Description of Credit Enhancements." A
master servicer is obligated to remit to certificateholders of a series all
amounts relating to the SAMs to the extent the amounts have been collected
or advanced by the servicers or advanced by the master servicer and are due
certificateholders under the terms of the Pooling and Servicing Agreement
for the series. With respect to any series of certificates as to which
there will be no master servicer and the servicing of the SAMs will be
performed by the servicer and the seller or the Originator as specified in
the related prospectus supplement, the servicer may be obligated to make
Advances in the amounts described under "Description of the
Certificates--Advances" limited to amounts which, in the judgment of the
servicer, ultimately will be reimbursable with respect to the SAM Pool from
any of the sources stated above.
AGENCY CERTIFICATES
Government National Mortgage Association
GNMA is a wholly-owned corporate instrumentality of the United
States with the United States Department of Housing and Urban Development.
The Housing Act authorizes GNMA to guarantee the timely payment of the
principal of and interest on certificates which represent an interest in
FHA Loans, or partially guaranteed by the VA.
Section 306(g) of the Housing Act provides that "the full faith
and credit of the United States is pledged to the payment of all amounts
which may be required to be paid under any guarantee under this
subsection." In order to meet its obligations under any guarantee, GNMA
may, under Section 306(d) of the Housing Act, borrow from the United States
Treasury in an amount which is at any time sufficient to enable GNMA, with
no limitations as to amount, to perform its obligations under its
guarantee.
GNMA Certificates
Each GNMA Certificate held in a trust fund, which may be issued
under either the GNMA I Program or the GNMA II Program, will be a "fully
modified pass-through" mortgaged-backed certificate issued and serviced by
a GNMA Issuer approved by GNMA or approved by FNMA as a seller-servicer of
FHA Loans and VA Loans. The mortgage loans underlying the GNMA Certificates
will consist of FHA Loans and VA Loans and is secured by a one- to
four-family residential property or a manufactured home. GNMA will approve
the issuance of each GNMA Certificate in accordance with a guaranty
agreement between GNMA and the GNMA Issuer. Under its guaranty agreement, a
GNMA Issuer will be required to advance its own funds in order to make
timely payments of all amounts due on each GNMA Certificate, even if the
payments received by the GNMA Issuer on the FHA Loans or VA Loans
underlying each GNMA Certificate are less than the amounts due on each GNMA
Certificate.
The full and timely payment of principal of and interest on
each GNMA Certificate will be guaranteed by GNMA, which obligation is
backed by the full faith and credit of the United States. Each GNMA
Certificate will have an original maturity of not more than 30 years, but
may have original maturities of substantially less than 30 years. Each GNMA
Certificate will be based on and backed by a pool of FHA Loans or VA Loans
secured by one- to four-family residential properties or manufactured homes
and will provide for the payment by or on behalf of the GNMA Issuer to the
registered holder of the GNMA Certificate of scheduled monthly payments of
principal and interest equal to the registered holder's proportionate
interest in the aggregate amount of the monthly principal and interest
payment on each FHA Loan or VA Loan underlying the GNMA Certificate, less
the applicable servicing and guarantee fee which together equal the
difference between the interest on the FHA Loan or VA Loan and the
pass-through rate on the GNMA Certificate. In addition, each payment will
include proportionate pass-through payments of any prepayments of principal
on the FHA Loans or VA Loans underlying the GNMA Certificate and
liquidation proceeds in the event of a foreclosure or other disposition of
any FHA Loans or VA Loans.
If a GNMA Issuer is unable to make the payments on a GNMA
Certificate as it becomes due, it must promptly notify GNMA and request
GNMA to make the payment. Upon notification and request, GNMA will make the
payments directly to the registered holder of the GNMA Certificate. In the
event no payment is made by a GNMA Issuer and the GNMA Issuer fails to
notify and request GNMA to make the payment, the holder of the GNMA
Certificate will have recourse only against GNMA to obtain the payment. The
Trustee or its nominee, as registered holder of the GNMA Certificates held
in a trust fund, will have the right to proceed directly against GNMA under
the terms of the guaranty agreements relating to the GNMA Certificates for
any amounts that are not paid when due.
All mortgage loans underlying a particular GNMA I certificate
must have the same interest rate, except for pools of mortgage loans
secured by manufactured homes, over the term of the loan. The interest rate
on the GNMA I certificate will equal the interest rate on the mortgage
loans included in the pool of mortgage loans underlying the GNMA I
certificate, less one-half percentage point per annum of the unpaid
principal balance of the mortgage loans.
Mortgage loans underlying a particular GNMA II certificate may
have per annum interest rates that vary from each other by up to one
percentage point. The interest rate on each GNMA II certificate will be
between one-half percentage point and one and one-half percentage points
lower than the highest interest rate on the mortgage loans included in the
pool of mortgage loans underlying the GNMA II certificate, except for pools
of mortgage loans secured by manufactured homes.
Regular monthly installment payments on each GNMA Certificate
held in a trust fund will be comprised of interest due as specified on the
GNMA Certificate plus the scheduled principal payments on the FHA Loans or
VA Loans underlying the GNMA Certificate due on the first day of the month
in which the scheduled monthly installments on the GNMA Certificate is due.
Regular monthly installments on each GNMA Certificate are required to be
paid to the Trustee as registered holder by the 15th day of each month in
the case of a GNMA I certificate and are required to be mailed to the
Trustee by the 20th day of each month in the case of a GNMA II certificate.
Any principal prepayments on any FHA Loans or VA Loans underlying a GNMA
Certificate held in a trust fund or any other early recovery of principal
on the loan will be passed through to the Trustee as the registered holder
of the GNMA Certificate.
GNMA Certificates may be backed by graduated payment mortgage
loans or by "buydown" mortgage loans for which funds will have been
provided and deposited into escrow accounts for application to the payment
of a portion of the borrowers' monthly payments during the early years of
the mortgage loan. Payments due the registered holders of GNMA Certificates
backed by pools containing "buydown" mortgage loans will be computed in the
same manner as payments derived from other GNMA Certificates and will
include amounts to be collected from both the borrower and the related
escrow account. The graduated payment mortgage loans will provide for
graduated interest payments that, during the early years of the mortgage
loans, will be less than the amount of stated interest on the mortgage
loans. The interest not so paid will be added to the principal of the
graduated payment mortgage loans and, together with interest thereon, will
be paid in subsequent years. The obligations of GNMA and of a GNMA Issuer
will be the same irrespective of whether the GNMA Certificates are backed
by graduated payment mortgage loans or "buydown" loans. No statistics
comparable to the FHA's prepayment experience on level payment, non-buydown
loans are available in respect of graduated payment or buydown mortgages.
GNMA Certificates related to a series of certificates may be held in
book-entry form.
GNMA Certificates may be backed by multifamily mortgage loans
having the characteristics specified in the prospectus supplement.
The GNMA Certificates included a trust fund, and the related
underlying mortgage loans, may have characteristics and terms different
from those described above. Any different characteristics and terms will be
described in the related prospectus supplement.
FNMA
FNMA is a federally chartered and privately owned corporation
organized and existing under the Charter Act. FNMA was originally
established in 1938 as a United States government agency to provide
supplemental liquidity to the mortgage market and was transformed into a
stockholder-owned and privately-managed corporation by legislation enacted
in 1968.
FNMA provides funds to the mortgage market primarily by
purchasing mortgage loans from lenders, thereby replenishing their funds
for additional lending. FNMA acquires funds to purchase mortgage loans from
many capital market investors that may not ordinarily invest in mortgages,
thereby expanding the total amount of funds available for housing.
Operating nationwide, FNMA helps to redistribute mortgage funds from
capital-surplus to capital-short areas.
FNMA Certificates
FNMA Certificates are guaranteed mortgage pass-through
certificates representing fractional undivided interests in a pool of
mortgage loans formed by FNMA. Each mortgage loan must meet the applicable
standards of the FNMA purchase program. Mortgage loans comprising a pool
are either provided by FNMA from its own portfolio or purchased under the
criteria of the FNMA purchase program.
Mortgage loans underlying FNMA Certificates held by a trust
fund will consist of conventional mortgage loans, FHA Loans or VA Loans.
Original maturities of substantially all of the conventional, level payment
mortgage loans underlying a FNMA Certificate are expected to be between
either 8 to 15 years or 20 to 30 years. The original maturities of
substantially all of the fixed rate level payment FHA Loans or VA Loans are
expected to be 30 years.
Mortgage loans underlying a FNMA Certificate may have annual
interest rates that vary by as much as two percentage points from each
other. The rate of interest payable on a FNMA Certificate is equal to the
lowest interest rate of any mortgage loan in the related pool, less a
specified minimum annual percentage representing servicing compensation and
FNMA's guaranty fee. Under a regular servicing option, under which the
mortgagee or other servicers assumes the entire risk of foreclosure losses,
the annual interest rates on the mortgage loans underlying a FNMA
Certificate will be between 50 basis points and 250 basis points greater
than in its annual pass-through rate and under a special servicing option,
under which FNMA assumes the entire risk for foreclosure losses, the annual
interest rates on the mortgage loans underlying a FNMA Certificate will
usually be between 55 basis points and 255 basis points greater than the
annual FNMA Certificate pass-through rate. If specified in the related
prospectus supplement, FNMA Certificates may be backed by adjustable rate
mortgages.
FNMA guarantees to each registered holder of a FNMA Certificate
that it will distribute amounts representing each registered holder's
proportionate share of scheduled principal and interest payments at the
applicable pass-through rate provided for by the FNMA Certificate on the
underlying mortgage loans, whether or not received, and each registered
holder's proportionate share of the full principal amount of any foreclosed
or other finally liquidated mortgage loan, whether or not the principal
amount is actually recovered. The obligations of FNMA under its guarantees
are obligations solely of FNMA and are not backed by, nor entitled to, the
full faith and credit of the United States. Although the Secretary of the
Treasury of the United States has discretionary authority to lend FNMA up
to $2.25 billion outstanding at any time, neither the United States nor any
United States agency is obligated to finance FNMA's operations or to assist
FNMA in any other manner. If FNMA were unable to satisfy its obligations,
distributions to holders of FNMA Certificates would consist solely of
payments and other recoveries on the underlying mortgage loans and,
accordingly, monthly distributions to holders of FNMA Certificates would be
affected by delinquent payments and defaults on the mortgage loans.
FNMA Certificates evidencing interests in pools of mortgage
loans formed on or after May 1, 1985, other than FNMA Certificates backed
by pools containing graduated payment mortgage loans or mortgage loans
secured by multifamily projects, are available in book-entry form only.
Distributions of principal and interest on each FNMA Certificate will be
made by FNMA on the 25th day of each month to the persons in whose name the
FNMA Certificate is entered in the books of the Federal Reserve Banks, or
registered on the FNMA Certificate register in the case of fully registered
FNMA Certificates, as of the close of business on the last day of the
preceding month. With respect to FNMA Certificates issued in book-entry
form, distributions thereon will be made by wire, and with respect to fully
registered FNMA Certificates, distributions thereon will be made by check.
The FNMA Certificates included in a trust fund, and the related
underlying mortgage loans, may have characteristics and terms different
from those described above. Any different characteristics and terms will be
described in the related prospectus supplement.
FHLMC
FHLMC is a publicly-held United States government-sponsored
enterprise created under the FHLMC Act. FHLMC was established primarily for
the purpose of increasing the availability of mortgage credit for the
financing of urgently needed housing. It seeks to provide an enhanced
degree of liquidity for residential mortgage investments primarily by
assisting in the development of secondary markets for conventional
mortgages. The principal activity of FHLMC currently consists of the
purchase of first lien conventional mortgage loans or participation
interests in the mortgage loans and the sale of the mortgage loans or
participations so purchased in the form of mortgage securities, primarily
FHLMC Certificates. FHLMC is confined to purchasing, so far as practicable,
mortgage loans that it deems to be of the quality, type and class which
meet most of the purchase standards imposed by private institutional
mortgage investors.
FHLMC Certificates
Each FHLMC Certificate represents an undivided interest in a
pool of mortgage loans that may consist of first lien conventional loans,
FHA Loans or VA Loans. Freddie Mac certificates are sold under the terms of
a mortgage participation certificate agreement. A Freddie Mac Certificate
may be issued under either Freddie Mac's "Cash Program" or "Guarantor
Program".
Mortgage loans underlying the FHLMC Certificates held by a
trust fund will consist of mortgage loans with original terms to maturity
of between 10 and 30 years or the other period as provided in the related
prospectus supplement. Each mortgage loan underlying the FHLMC Certificates
held by a trust fund must meet the applicable standards set forth in the
FHLMC Act. A FHLMC certificate group may include whole loans, participation
interests in whole loans and undivided interests in whole loans or
participations comprising another FHLMC certificate group. Under the
Guarantor Program, any FHLMC certificate group may include only whole loans
or participation interests in whole loans.
FHLMC guarantees to each registered holder of a FHLMC
certificate the timely payment of interest on the underlying mortgage loans
to the extent of the applicable certificate rate on the registered holder's
pro rata share of the unpaid principal balance outstanding on the
underlying mortgage loans in the FHLMC certificate group represented by the
FHLMC certificate, whether or not received. FHLMC also guarantees to each
registered holder of a FHLMC certificate collection by the holder of all
principal on the underlying mortgage loans, without any offset or
deduction, to the extent of the holder's pro rata share, but does not,
except if and to the extent specified in the prospectus supplement for a
series of certificates, guarantee the timely payment of scheduled
principal. Under FHLMC's "Gold PC Program", FHLMC guarantees the timely
payment of principal based on the difference between the pool factor,
published in the month preceding the month of distribution and the pool
factor published in the month of distribution. Under its guarantees, FHLMC
indemnifies holders of FHLMC Certificates against any diminution in
principal by reason of charges for property repairs, maintenance and
foreclosure. FHLMC may remit the amount due on account of its guarantee of
collection of principal at any time after default on an underlying mortgage
loan, but not later than
o 30 days following foreclosure sale,
o 30 days following payment of the claim by any mortgage insurer,
or
o 30 days following the expiration of any right of redemption,
whichever occurs later, but in any event no later than one year
after demand has been made upon the mortgagor for accelerated
payment of principal.
In taking actions regarding the collection of principal after default on
the mortgage loans underlying FHLMC Certificate, including the timing of
demand for acceleration, FHLMC reserves the right to exercise its judgment
with respect to the mortgage loans in the same manner as for mortgage loans
which it has purchased but not sold. The length of time necessary for FHLMC
to determine that a mortgage loan should be accelerated varies with the
particular circumstances of each mortgagor, and FHLMC has not adopted
standards which require that the demand be made within any specified
period.
FHLMC Certificates are not guaranteed by the United States or
by any Federal Home Loan Bank and do not constitute debts or obligations of
the United States or any Federal Home Loan Bank. The obligations of FHLMC
under its guarantee are obligations solely of FHLMC and are not backed by,
nor entitled to, the full faith and credit of the United States. If FHLMC
were unable to satisfy its obligations, distributions to holders of FHLMC
Certificates would consist solely of payments and other recoveries on the
underlying mortgage loans and, accordingly, monthly distributions to
holders of FHLMC Certificates would be affected by delinquent payments and
defaults on the mortgage loans.
Registered holders of FHLMC Certificates are entitled to
receive their monthly pro rata share of all principal payments on the
underlying mortgage loans received by FHLMC, including any scheduled
principal payments, full and partial repayments of principal and principal
received by FHLMC by virtue of condemnation, insurance, liquidation or
foreclosure, and repurchases of the mortgage loans by FHLMC or the seller.
FHLMC is required to remit each registered FHLMC Certificateholder's pro
rata share of principal payments on the underlying mortgage loans, interest
at the FHLMC pass-through rate and any other sums such as prepayment fees,
within 60 days of the date on which the payments are deemed to have been
received by FHLMC.
Under FHLMC's cash program, there is no limitation on the
amount by which interest rates on the mortgage loans underlying a FHLMC
Certificate may exceed the pass-through rate on the FHLMC Certificate.
Under that program, FHLMC purchases groups of whole mortgage loans from
sellers at specified percentages of their unpaid principal balances,
adjusted for accrued or prepaid interest, which when applied to the
interest rate of the mortgage loans and participations purchased, results
in the yield, expressed as a percentage, required by FHLMC. The required
yield, which includes a minimum servicing fee retained by the servicer, is
calculated using the outstanding principal balance. The range of interest
rates on the mortgage loans and participations in a FHLMC Certificate group
under the cash program will vary since mortgage loans and participations
are purchased and assigned to a FHLMC Certificate group based upon their
yield to FHLMC rather than on the interest rate on the underlying mortgage
loans. Under FHLMC's Guarantor Program, the pass-through rate on a FHLMC
Certificate is established based upon the lowest interest rate on the
underlying mortgage loans, minus a minimum servicing fee and the amount of
FHLMC's management and guaranty income as agreed upon between the seller
and FHLMC.
FHLMC Certificates duly presented for registration of ownership
on or before the last business day of a month are registered effective as
of the first day of the month. The first remittance to a registered holder
of a FHLMC Certificate will be distributed so as to be received normally by
the 15th day of the second month following the month in which the purchaser
became a registered holder of the FHLMC Certificates. Thereafter, the
remittance will be distributed monthly to the registered holder so as to be
received normally by the 15th day of each month. The Federal Reserve Bank
of New York maintains book-entry accounts with respect to FHLMC
Certificates sold by FHLMC on or after January 2, 1985, and makes payments
of principal and interest each month to the registered holders of the FHLMC
Certificates in accordance with the holders' instructions.
Stripped Mortgage-Backed Securities
Agency Securities may consist of one or more stripped
mortgage-backed securities, each as described in this prospectus and in the
related prospectus supplement. Each Agency Security will represent an
undivided interest in all or part of either the principal distributions,
but not the interest distributions, or the interest distributions, but not
the principal distributions, or in some specified portion of the principal
and interest distributions on FHLMC, FNMA, GNMA or other government agency
or government-sponsored agency certificates. The underlying securities may
be held under a trust agreement by FHLMC, FNMA, GNMA or another government
agency or government- sponsored agency, each as trustee, or by another
trustee named in the related prospectus supplement. FHLMC, FNMA or GNMA or
another government agency or government-sponsored agency will guarantee
each stripped Agency Security to the same extent as the entity guarantees
the underlying securities backing the stripped Agency Security. In the
event stripped mortgage backed securities are issued by an agency other
than the agency that issued the underlying agency certificates that
information will be set forth in the related prospectus supplement.
PRIVATE MORTGAGE-BACKED SECURITIES
Private mortgage-backed securities may consist of mortgage
pass-through certificates evidencing a direct or indirect undivided
interest in a pool of mortgage loans or SAMs, or CMOs secured by mortgage
loans or SAMs. Private mortgage-backed securities will have been issued
under a pooling and servicing agreement. The private mortgage-backed
securities in a trust fund may include a class or classes of securities
that are callable at the option of another class or classes of securities.
The seller/servicer of the underlying mortgage loans will have entered into
the PMBS Agreement with the trustee under the PMBS Agreement. The PMBS
Trustee or its agent, or a custodian, will possess the mortgage loans or
SAMs underlying the private mortgage-backed security. Mortgage loans or
SAMs underlying a private mortgage-backed security will be serviced by the
servicer directly or by one or more sub-servicers who may be subject to the
supervision of the PMBS servicer.
Private mortgage-backed securities will
o either have been previously registered under the Securities Act
of 1933, as amended, or will at the time be eligible for sale
under Rule 144(k) under the Securities Act; and
o will be acquired in bona fide secondary market transactions not
from the issuer or its affiliates.
The obligations of the PMBS Issuer will mostly be limited to
representations and warranties with respect to the assets conveyed by it to
the related trust or the assignment by it of the representations and
warranties of another entity from which it acquired the assets. The PMBS
Issuer will not have guaranteed any of the assets conveyed to the related
trust or any of the private mortgage-backed securities issued under the
PMBS Agreement. Additionally, although the mortgage loans or SAMs
underlying the private mortgage-backed securities may be guaranteed by an
agency or instrumentality of the United States, the private mortgage-backed
securities themselves will not be so guaranteed.
Distributions of principal and interest will be made on the
private mortgage-backed securities on the dates specified in the related
prospectus supplement. The private mortgage- backed securities may be
entitled to receive nominal or no principal distributions or nominal or no
interest distributions. Principal and interest distributions will be made
on the private mortgage- backed securities by the PMBS Trustee or the PMBS
servicer. The PMBS Issuer or the PMBS servicer may have the right to
repurchase assets underlying the private mortgage-backed securities after a
date or under other circumstances specified in the related prospectus
supplement.
Credit Support Relating to Private Mortgage-Backed Securities
Credit support in the form of subordination of other private
mortgage certificates issued under the PMBS Agreement, reserve funds,
insurance policies, letters of credit, financial guaranty insurance
policies, guarantees or other credit supports may be provided with respect
to the mortgage loans or SAMs underlying the private mortgage-backed
securities or with respect to the private mortgage-backed securities
themselves.
Additional Information
The related prospectus supplement for a series for which the
trust fund includes private mortgage-backed securities will specify:
o the aggregate approximate principal amount and type of the
private mortgage- backed securities to be included in the trust
fund;
o some characteristics of the mortgage loans or SAMs which
comprise the underlying assets for the private mortgage-backed
securities including to the extent available
o the payment features of the mortgage loans or SAMs,
the approximate aggregate principal balance, if
known, of underlying mortgage loans or SAMs insured
or guaranteed by a governmental entity,
o the servicing fee or range of servicing fees with
respect to the mortgage loans or SAMs,
o the minimum and maximum stated maturities of the
underlying mortgage loans or SAMs and at origination
and
o delinquency experience with respect to the mortgage
loans or SAMs;
o the pass-through or certificate rate of the private
mortgage-backed securities and the method of determination of
the pass-through or certificate rate;
o the PMBS Issuer, the PMBS servicer, if other than the PMBS
Issuer, and the PMBS Trustee for the private mortgage-backed
securities;
o some characteristics of credit support, if any, such as
subordination, reserve funds, insurance policies, letters of
credit or guarantees relating the mortgage loans or SAMs
underlying the private mortgage-backed securities or to the
private mortgage-backed securities themselves;
o the terms on which the underlying mortgage loans or SAMs for
the private mortgage-backed securities, or the private
mortgage-backed securities themselves, may, or are required to,
be purchased prior to their stated maturity or the stated
maturity of the private mortgage-backed securities;
o the terms on which mortgage loans, SAMs or private
mortgage-backed securities may be substituted for those
originally deposited with the PMBS Trustee or the Trustee; and
o any other material information related to the private
mortgage-backed securities.
USE OF PROCEEDS
All of the net proceeds to be received from the sale of each
series of the certificates will be used by SAMCO Mortgage Securities Corp.
to purchase the SAMs related to that series or to return to SAMCO Mortgage
Securities Corp. the amounts previously used to effect the purchases, the
costs of carrying the SAMs until sale of the certificates and other
expenses connected with pooling the SAMs and issuing the certificates, or
for general corporate purposes. SAMCO Mortgage Securities Corp. expects to
issue certificates in series from time to time as part of its continuing
program of acquiring SAMs and selling certificates. See "SAMCO Mortgage
Securities Corp.--Mortgage Purchase Program."
YIELD CONSIDERATIONS
The yield to maturity on any certificate will depend on the
purchase price paid by the certificateholder, the effective interest rate
of the certificate and, if the certificate is an appreciation certificate,
the amount of any additional interest payments passed through to the
certificate. See "Maturity, Average Life, Appreciation and Prepayment
Assumptions" for a discussion of the weighted average life of the
certificates and consideration of the effect of the appreciation of the
mortgaged properties on payments made on the appreciation certificates. Any
prepayment of a SAM, liquidation of a SAM, by foreclosure proceedings or by
virtue of the purchase of a SAM in advance of its stated maturity or
otherwise or, if applicable, the occurrence of an early termination or
other call feature of the certificates of a series or the underlying SAMs
will have the effect of passing through to certificateholders amounts of
principal which would otherwise be passed through in amortized increments
over the remaining term of the SAM, causing interest payments which may
have been expected to continue to be paid over time to stop and an Indexed
Appreciation Payment to be made which may be zero. The effect of
prepayments on the yield to maturity to certificateholders depends on
several factors. For example, if the certificates are purchased above par,
which means for more than 100% of the outstanding principal balance of the
SAMs they represent, prepayments will tend to decrease the yield to
maturity. If the certificates are purchased at a discount, which means for
less than 100% of the outstanding principal balance, prepayments will tend
to increase the yield to maturity. Moreover, in either case, any effect on
the yield may be negatively affected by the payment of smaller than
anticipated additional interest payments. See "Some Legal
Considerations--Some Legal Considerations Applicable to
SAMs--Enforceability of Some Provisions" for a description of provisions of
each SAM and statutory, regulatory and judicial developments that may
affect the prepayment experience, maturity assumptions and appreciation
payments on the SAMs. See also "Description of the
Certificates--Termination and Optional Termination" for a description of
the repurchase of the SAMs in any SAM Pool when the aggregate outstanding
principal balance in any SAM Pool is less than a specified percentage of
the aggregate outstanding principal balance of the SAMs in that SAM Pool on
the related Cut-Off Date. For this purpose, an additional interest payment
may include a payment at the purchase price of the SAM based upon an index
defined in the prospectus supplement and used as a surrogate for what the
additional interest payment would have been had the SAM matured or
terminated. The existence of certificates with an exchange feature will
have no impact on the yield to maturity to certificateholders.
The timing of changes in the rate of principal payments on or
repurchases of the SAMs, including, if applicable, the occurrence of a
redemption, other call or put feature of the certificates of a series or
the underlying SAMs may significantly affect an investor's actual yield to
maturity, even if the average rate of principal payments experienced over
time is consistent with an investor's expectation. The exercise of a call
feature on a class of certificates will have a similar effect on the yield
of that class to a holder of the certificates as an increase in the rate of
prepayments of the certificates. In general, the earlier a prepayment of
principal or a repurchase on the underlying SAMs, including, if applicable,
the occurrence of a redemption or other call feature of the certificates of
a series or the underlying SAMs, the greater will be the effect on an
investor's yield to maturity. As a result, during the period immediately
following the issuance of a series of certificates, the effect on an
investor's yield to maturity of principal payments and repurchases
occurring at a rate higher than anticipated would not be fully offset by a
subsequent like reduction in the rate of principal payments. Additionally,
during the period immediately following the issuance of a series of
certificates, the effect on an investor's yield to maturity of principal
payments and repurchases occurring at a rate lower than anticipated would
not be fully offset by a subsequent like increase in the rate of principal
payments.
EFFECTIVE INTEREST RATE
Each monthly interest payment on a SAM is calculated as set
forth in the applicable prospectus supplement. The pass-through rate will
be calculated as set forth in the applicable prospectus supplement. The
Remittance Rate does not take into account the amount of any additional
interest payments which may be payable to any appreciation certificate.
As described in the applicable prospectus supplement, in some
events, if the amounts available for distribution in respect of interest
are not sufficient to cover the total of all accrued and unpaid interest at
the Remittance Rate, the available amount will be distributed to the
certificateholders, pro rata, in accordance with their respective interests
or in an order of priority described in the applicable prospectus
supplement.
For the sale of certificates under this prospectus, SAMCO
Mortgage Securities Corp. may establish one or more SAM Pools having a
variable, as opposed to a fixed, stated interest rate. A SAM Pool with a
variable stated interest rate may be composed of SAMs that have adjustable
stated interest rates or fixed stated interest rates; provided that the
amount of fixed stated interest rates to be passed through is determined on
a SAM-by-SAM basis as the stated interest rate minus specified fees for
servicing and administrative compensation, which may include any of the
Master Servicing Fee, the Servicing Fee and the Certificate Administrator
Fee, for each SAM, as set forth in the applicable prospectus supplement.
Because the stated interest rates may vary in a SAM Pool, and the servicing
and administrative compensation will be fixed as a percentage of the
principal balance of the SAMs, the Remittance Rate will be affected by
disproportionate principal prepayments among SAMs bearing different stated
interest rates and, consequently, for certificates which are not
appreciation certificates, the yield to maturity on the certificates will
be affected. The characteristics of any variable-rate SAM Pools will be
described in the applicable prospectus supplement. Although stated interest
rates for SAMs in a SAM Pool may vary from SAM to SAM, disproportionate
principal prepayments among the SAMs bearing different stated interest
rates will not affect the return to certificateholders of certificates with
fixed pass-through rates purchased on par.
For any class of certificates that are not appreciation
certificates, the effective yield to maturity to certificateholders will
often be lower than the yield to maturity otherwise produced by the
applicable Pass-Through Rate, because while interest will accrue on each
SAM from the first day of each month, the distribution of interest to
certificateholders at the applicable Pass-Through Rate usually will be made
on a later day, which will be stated in the applicable prospectus
supplement, or, if that day is not a business day, the next succeeding
business day of the month following the month of accrual.
When a prepayment in full is made by the mortgagor on a SAM
during a month, the mortgagor is charged interest on the days in the month
actually elapsed up to the date of the prepayment in full at the daily
interest rate, determined by dividing the stated interest rate by 365, or
360 in the case of a prepayment in full received on a Due Date, which is
applied to the principal amount of the SAM so prepaid. Similarly, when a
SAM is liquidated under a pool insurance policy during a month, the Pool
Insurer will pay interest on the SAM only to the date the claim is paid.
Also, when a partial principal prepayment is made on a SAM together with
the scheduled monthly payment for a month on or after the related Due Date,
the mortgagor does not pay interest on the prepaid amount, and therefore
certificateholders will not receive any interest on the prepaid amount.
To the extent that Compensating Interest is not paid, the
effect of a prepayment in full or a liquidation will be to reduce the
amount of interest passed through on the next Distribution Date, because
interest on the principal amount of the SAM so prepaid was paid only to the
date of the prepayment in full or liquidation and not to the end of the
month of prepayment. The following may apply: prepayments in fulls received
during the period from the first day of a calendar month through the 15th
day of the month will be passed through, without Compensating Interest and
without interest accrued from the first day of the month to the date of the
prepayment in full, on the Distribution Date in the month, and prepayments
in full received during the period from the 15th day of a calendar month
through the last day of the month will be passed through, with Compensating
Interest and with interest at the applicable Pass-Through Rate attributable
to interest paid through the date of the prepayment in full by the
mortgagors, on the Distribution Date in the following month. Proceeds of
SAMs liquidated under a pool insurance policy during a month will be passed
through, with Compensating Interest and interest at the applicable
Pass-Through Rate attributable to interest paid by the Pool Insurer under
an applicable pool insurance policy, on the Distribution Date in the
following month.
Compensating Interest on liquidated SAMs will be passed through
to certificateholders, together with any interest at the applicable
Pass-Through Rate attributable to interest paid by the Pool Insurer under
any applicable pool insurance policy to the date of liquidation on the
Distribution Date of the month following liquidation. Compensating Interest
on prepayments in fulls may be paid on a Distribution Date only with
respect to prepayments in fulls received during the period from the 15th
day of the preceding calendar month through the last day of the preceding
month. The applicable prospectus supplement will specify any limitations on
the extent of or source of funds available for payments of Compensating
Interest.
MATURITY, AVERAGE LIFE, APPRECIATION AND PREPAYMENT ASSUMPTIONS
The SAMs at origination will have varying stated interest
rates, maturities and Appreciation Shares as more fully described in the
applicable prospectus supplement. SAMCO Mortgage Securities Corp. expects
that most SAMs will have maturities at origination of either 15 to 30 years
and the SAMs may be prepaid in full or in part at any time. However, some
of the SAMs may, where permissible under state law, require a penalty for
prepayment in whole or in part in the initial years after origination of
the SAM. The particulars of any prepayment penalties will be disclosed in
the applicable prospectus supplement. The prepayment experience or, if
applicable, the occurrence of an optional termination or other call or put
of the certificates of a series or the underlying SAMs will affect the
weighted average lives of the certificates. The yield on any certificates,
including appreciation certificates, purchased at a premium will be
adversely affected by any increase in the level of prepayments occurring
with respect to any series. A substantial number of SAMs are anticipated to
be paid in full prior to their scheduled maturity.
A number of factors, including homeowner mobility, economic
conditions, enforceability of "due-on-sale" clauses, mortgage market
interest rates, the appreciation of real estate and the availability of
mortgage funds may affect prepayment experience. Most Mortgages executed in
connection with a fixed rate SAM will contain "Mortgage Termination Event"
provisions permitting the holder of the Mortgage Note to accelerate the
maturity of the SAM upon conveyance by the mortgagor of the underlying
mortgaged property. With respect to series of certificates, the master
servicer or the servicer, as applicable, will agree that it will enforce
the Mortgage Termination Event clause contained in each SAM to the extent
it has knowledge of the termination and reasonably believes that it is
entitled to do so under applicable law.
Further, the level of the appreciation of the mortgaged
properties underlying the SAMs in any trust and, to a much lesser degree,
the index used for calculating the indexed appreciation payments for the
SAMs or the certificates will affect the yield earned by holders of the
appreciation certificates of any series. The level of appreciation of the
mortgaged properties underlying the SAMs may be affected by a variety of
factors, including:
o economic conditions in the area where the mortgaged property is
located,
o the level of inflation and unemployment in the economy,
o the level of liquidity in the economy and
o the level of liquidity in the residential mortgage market.
The amount of appreciation paid to any appreciation certificates may also
be affected by the amount of prepayments that are occurring on the SAMs.
Holders of appreciation certificates should be aware that their yield may
be low, zero or negative and should be prepared for the possibility that
they could lose their entire investment in the appreciation certificates
they have purchased.
The prospectus supplement with respect to any series will further
describe the risks that prepayments and low levels of increase in the value
of the mortgaged properties may have on the yield of holders of the
certificates of that series.
The weighted average life of the certificates will be influenced by
the rate at which principal on the SAMs in the trust is paid, which may be
in the form of scheduled amortization of principal prepayments. SAMCO
Mortgage Securities Corp. has to date not compiled information on the
prepayment experience of SAMs. However, based upon published information,
the rate of prepayments on fixed and adjustable rate conventional one- to
four-family mortgage loans has fluctuated significantly in recent years.
SAMCO Mortgage Securities Corp. believes the fluctuation is due to a number
of factors, including those discussed above, and that those factors will
also affect the prepayment experience on the SAMs in any trust.
Accordingly, SAMCO Mortgage Securities Corp. cannot predict what future
prepayment experience will be or what the resulting weighted average life
might be applicable to SAMs. However, principal prepayments on mortgage
loans which are not SAMs are commonly measured relative to a prepayment
standard or model. The model used in this prospectus and in each prospectus
supplement, assumes a constant annual rate of prepayment each month,
expressed as a per annum percentage of the then-scheduled principal balance
of the Mortgage Pool. The prepayment model assumes a constant prepayment
rate as stated in the prospectus supplement. Further, as stated above,
investors in the appreciation certificates will be affected by the level of
appreciation in value of the mortgaged properties. The model used in this
prospectus and each prospectus supplement, assumes a constant annual rate
of appreciation each month, expressed as a per annum percentage of the
then-scheduled principal balance of the Mortgage Pool, taking into account
the volatility of the Constant Appreciation Rate. It is unclear whether
either of these models even has any relevance to the certificates. The
prospectus supplement or current report on Form 8-K for each series of
certificates may contain a table setting forth the projected weighted
average life of each class of certificates of the series and the percentage
of the original principal amounts or notional principal amounts of each
class that would be outstanding on specified Distribution Dates for the
series and the yield on appreciation certificates, based on the assumptions
set forth with respect to the Constant Prepayment Rate and Constant
Appreciation Rate deemed appropriate by SAMCO Mortgage Securities Corp. and
specified in this prospectus.
SAMCO MORTGAGE SECURITIES CORP.
SAMCO Mortgage Securities Corp., a Delaware corporation, is a
wholly-owned subsidiary of EMC Mortgage Corporation. SAMCO Mortgage
Securities Corp. was organized as a special purpose entity for the purpose
of acquiring SAMs and selling interest in the SAMs. SAMCO Mortgage
Securities Corp. does not have, nor is it expected to have in the future,
any significant assets. SAMCO Mortgage Securities Corp.'s principal
executive offices are located at 245 Park Avenue, New York, New York 10167,
telephone (212) 272-2000. Neither SAMCO Mortgage Securities Corp. nor any
of its affiliates is currently a party to any legal proceeding that could
have a material impact on any trust or the interests of a particular Series
of Certificates. If SAMCO Mortgage Securities Corp. or any affiliate does
become a party to such proceeding it will disclose such information in the
related prospectus supplement.
EMC MORTGAGE CORPORATION
EMC Mortgage Corporation is a Delaware Corporation organized on
December 23, 1995. EMC Mortgage Corporation is an affiliate of Bear,
Stearns & Co. Inc. and is a wholly-owned subsidiary of The Bear Stearns
Companies Inc. EMC Mortgage Corporation's principal executive offices are
located at 245 Park Avenue, New York, New York 10167, telephone (212)
272-2000.
MORTGAGE PURCHASE PROGRAM
Set forth below is a description of the principal aspects of EMC
Mortgage Corporation's purchase program for SAMs eligible for inclusion in
a SAM Pool. In the case of most SAM Pools, SAMCO Mortgage Securities Corp.
will represent and warrant to the Trustee that at the time that a SAM was
originated, the Originator was a mortgagee approved by the Secretary of
Housing and Urban Development under Sections 203 and 211 of the National
Housing Act, as amended, or a savings and loan association, a savings bank,
a commercial bank, a licensed mortgage banker or similar banking or lending
institution which is supervised and examined by a federal or state
authority or other entities as may be described in the applicable
prospectus supplement. EMC Mortgage Corporation has approved, or will
approve, individual institutions as eligible Originators by applying its
criteria which include the Originator's depth of mortgage origination
experience, servicing experience and financial stability. Originators will
ordinarily be required to have experience in originating and servicing
conventional residential mortgages and to have a net worth acceptable to
EMC Mortgage Corporation. Each Originator is required to use the services
of qualified underwriters, appraisers and attorneys. Other factors
evaluated by EMC Mortgage Corporation in approving Originators include
delinquency and foreclosure ratio performances for conventional mortgage
loans.
LOAN STANDARDS
The SAMs to be included in each SAM Pool will be loans with fixed or
adjustable rates of interest secured by first mortgages, deeds of trust or
security deeds on residential properties with original principal balances
which usually did not exceed 95% of the value of the mortgaged properties,
unless the loans are FHA insured or VA guaranteed. Each SAM having an LTV
at origination and as of the Cut-Off Date in excess of 80% will be covered
by a primary insurance policy insuring against default all or a specified
portion of the principal amount of the SAM. See "Primary Insurance, Hazard
Insurance; Claims." Each mortgage insurer must be
o a mortgage guaranty insurance company,
o duly qualified under the laws of each state in which the
mortgaged properties are located,
o duly authorized and licensed in those states to transact a
mortgage guaranty insurance business and to write the insurance
provided by the primary insurance policy or the pool insurance
policy, as the case may be,
o approved as a Qualified Insurer.
The SAMs to be included in each SAM Pool will be "one- to
four-family" shared appreciation mortgage loans, which means permanent
loans, as opposed to construction or land development loans, secured by
Mortgages on non-farm properties, including attached or detached
single-family homes, two- to four-family primary residences and
condominiums or other attached dwelling units, including individual
condominiums, row houses, townhouses and other separate dwelling units even
when located in buildings containing five or more units including related
property and interests in property or other interests in SAMs. If specified
in the related prospectus supplement, each SAM may be required to be
secured by an owner occupied primary residence. The mortgaged property may
not be a mobile home or cooperative.
CREDIT, APPRAISAL AND UNDERWRITING STANDARDS
The SAMs to be included in each SAM Pool will be subject to the
various credit, appraisal and underwriting standards described in this
prospectus. SAMCO Mortgage Securities Corp.'s credit, appraisal and
underwriting standards with respect to some SAMs will conform to the
Program as established and maintained by EMC Mortgage Corporation. The
Program may be revised based on opportunities and prevailing conditions in
the residential mortgage market and the market for SAMCO Mortgage
Securities Corp.'s mortgage pass-through certificates. The SAMs are being
underwritten by designated third party sellers involved in the Program.
In addition, SAMCO Mortgage Securities Corp. may purchase SAMs which
do not conform to the underwriting standards set forth by SAMCO Mortgage
Securities Corp. The SAMs may be purchased in negotiated transactions from
sellers who will represent that the SAMs have been originated in accordance
with credit, appraisal and underwriting standards agreed to by SAMCO
Mortgage Securities Corp. SAMCO Mortgage Securities Corp. will usually
review only a limited portion of the SAMs in any delivery of the SAMs for
conformity with the applicable credit, appraisal and underwriting
standards.
The credit, appraisal and underwriting standards utilized in
negotiated transactions and the credit, appraisal and underwriting
standards of insurance companies issuing insurance for SAMS may vary
substantially from the credit, appraisal and underwriting standards set
forth in the Program. The relevant prospectus supplement will detail the
differences in underwriting standards. All of the credit, appraisal and
underwriting standards will provide an underwriting officer with sufficient
information to evaluate the mortgagor's repayment ability and the adequacy
of the mortgaged property as collateral. Due to the variety of underwriting
standards and review procedures that may be applicable to the SAMs included
in any SAM Pool, the related prospectus supplement will not distinguish
among the various credit, appraisal and underwriting standards applicable
to the SAMs nor describe any review for compliance with applicable credit,
appraisal and underwriting standards performed by SAMCO Mortgage Securities
Corp. Moreover, there can be no assurance that every SAM was originated in
conformity with the applicable credit, appraisal and underwriting standards
in all material respects or that the quality or performance of SAMs
underwritten under varying standards as described above will be equivalent
under all circumstances.
The Program's underwriting standards conform largely to the standards
established by FHLMC. The Program's underwriting standards are intended to
evaluate, except in the case of an Equity Release SAM, the prospective
mortgagor's credit standing and repayment ability and the value and
adequacy of the proposed mortgaged property as collateral. In the loan
application process, prospective mortgagors will be required to provide
information regarding factors such as their assets, liabilities, income,
credit history, employment history and other related items. Each
prospective mortgagor will also provide an authorization to apply for a
credit report which summarizes the prospective mortgagor's credit history.
With respect to establishing the prospective mortgagor's ability to make
timely payments in the context of most SAMs, EMC Mortgage Corporation will
require evidence regarding the prospective mortgagor's employment and
income, and of the amount of deposits made to financial institutions where
the mortgagor maintains demand or savings accounts.
The mortgagor will also be required to have an appraisal performed on
the property. In determining the adequacy of the property as collateral, an
independent appraisal is made of each property considered for financing.
The appraiser is required to inspect the property and verify that it is in
good condition and that construction, if new, has been completed. With
respect to the SAMs, the appraisal is based on the market value of
comparable homes and the cost of replacing the home.
Some states where the mortgaged properties may be located are
"anti-deficiency" states where lenders providing credit on one- to
four-family residential properties must usually look solely to the property
for repayment in the event of foreclosure. See "Some Legal
Considerations--Some Legal Considerations Applicable to
SAMs--Anti-Deficiency Legislation and Other Limitations on Originators."
SAMCO Mortgage Securities Corp.'s underwriting standards in all states,
including anti-deficiency states, require that the underwriting officers be
satisfied that the value of the property being financed, as indicated by
the independent appraisal, currently supports and is anticipated to support
in the future the outstanding loan balance, and provides sufficient value
to mitigate the effects of adverse shifts in real estate values.
REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION OF SAMCO MORTGAGE
SECURITIES CORP.
With respect to any series of certificates, each seller will make
representations and warranties with respect to SAMs in the SAM Pool, sold
by it to EMC Mortgage Corporation for inclusion in the trust fund, which
SAMCO Mortgage Securities Corp. deems sufficient to permit it to make its
representations and warranties in respect of the SAMs to the Trustee and
the certificateholders under the related Pooling and Servicing Agreement.
See "Description of the Certificates--Representations and Warranties." Each
seller will also make other representations and warranties. Upon the breach
of any representation or warranty made by a seller that materially and
adversely affects the interests of the certificateholders in a SAM, other
than those breaches which have been cured, SAMCO Mortgage Securities Corp.
may require the seller or the servicer or other party specified in the
prospectus supplement, to repurchase the related SAM. In addition, each
seller will agree to indemnify SAMCO Mortgage Securities Corp. against any
loss or liability incurred by SAMCO Mortgage Securities Corp. on account of
any breach of any representation or warranty made by the seller, any
failure to disclose any matter that makes any representation and warranty
misleading, or any inaccuracy in information furnished by the seller to
SAMCO Mortgage Securities Corp., including any information set forth in
this prospectus or in any prospectus supplement. See "Description of the
Certificates--Assignment of SAMs" and "--Representations and Warranties".
MORTGAGE SUBSIDY SAMS AND EQUITY RELEASE SAMS
The stated interest rate for a SAM will be determined at the time of
loan origination based upon the LTV ratio and the Appreciation Share taken
by the Originator. A lower LTV and higher Appreciation Share will usually
result in a lower stated interest rate. The minimum rate of stated interest
rate will be 35% of the prevailing 30-year fixed interest rate for
residential mortgages. The maximum LTV permitted for the purchase or
refinancing of a home is 95% and for a cash-out refinancing transaction is
75%. See "Primary Insurance, Hazard Insurance; Claims." For Jumbo SAMs, the
maximum LTV is 80% for a purchase or refinancing of a home, respectively.
The minimum permitted LTV is 30%, and a primary insurance policy will be
required in transactions where LTV is greater than 80%. Mortgage Subsidy
SAMs will have stated amortization terms of 15 years or 30 years, unless
earlier terminated in accordance with their terms upon the occurrence of a
Mortgage Termination Event.
During the term of an Equity Release SAM, no payments will be due
until the occurrence of a Mortgage Termination Event. If a Mortgage
Termination Event occurs as a result of the death of a mortgagor, an
appraisal will be performed and the Equity Release SAM will be due and
payable on the date that is nine months after the death.
The principal balance of an Equity Release SAM will not exceed an
amount that would create an LTV in excess of 25%.
Introduction
The SAMs to be included in each SAM Pool will be "one- to
four-family" shared appreciation mortgage loans, which means permanent
loans, as opposed to construction or land development loans, secured by
Mortgages on non-farm properties, including attached or detached
single-family, two- to four-family primary residences and condominiums or
other attached dwelling units, including individual condominiums, row
houses, townhouses and other separate dwelling units even when located in
buildings containing five or more units. Each SAM will almost always be
secured by an owner-occupied primary residence.
Appreciation Share
The future capital appreciation in the mortgaged property is the
amount by which the Settlement Value of the mortgaged property exceeds the
Adjusted Value of the mortgaged property upon the earlier of the maturity
of the Mortgage Subsidy SAM and the occurrence of the Mortgage Termination
Event, which earlier date is referred to as the Termination Date. A
Mortgage Termination Event occurring as a result of the voluntary or
involuntary bankruptcy of the related mortgagor will be enforced subject to
applicable bankruptcy law. The appreciation certificates will receive all
or a portion of the future capital appreciation in the related property
secured by the SAM from the time that the SAM was entered into as disclosed
in the applicable prospectus supplement
The appreciation certificates may be sold under an offering in
connection with this Registration Statement, as specified in the applicable
prospectus supplement, may be sold under another Registration Statement,
may be sold under a private placement under an offering memorandum or may
be sold outside the United States under an offshore transaction complying
with Rule 903 or 904 of Regulation S under the Securities Act.
Settlement Value
The Settlement Value is the appraised value of the mortgaged property
on the Termination Date; provided that:
o there is no sale of the mortgaged property;
o the purchaser is not a relative of the mortgagor; or
o the variance between the sales price, if any, of the mortgaged
property and the appraised value is less than or equal to five
percent.
In the event that the variance is greater than 5% and the sales price is
lower than the appraised value, a subsequent appraisal will be conducted
and a second appraised value will be calculated. The Settlement Value will
equal the average of the first and second appraised values; provided that
the variance between the sales price and the second appraised value is
greater than 5%. The Settlement Value is the sales price in the event that
the variance between the sales price and the first appraised value is
greater than 5% and the sales price is greater than the first appraised
value; or the variance between the sales price and the second appraised
value is not greater than 5%.
Adjusted Value
Upon loan origination, the original value of the mortgaged property
will be calculated. The Original Value will equal the lower of the purchase
price, if any, and the appraised value of the property on the origination
date of the Mortgage Subsidy SAM.
The Casualty Adjustment will be subtracted from the Adjusted Value of
the mortgaged property, only if:
o the mortgagor has not restored the mortgaged property to its
original condition by 180 days from the date of the Casualty;
o SAMCO Mortgage Securities Corp., master servicer or servicer
has made the repairs necessary to restore the mortgaged
property; or
o the decrease in the market value of the mortgaged property due
to the Casualty is greater than 5% of the Adjusted Value
determined prior to the Casualty.
Upon the occurrence of a Mortgage Termination Event, the additional
interest payment payable to the mortgagee will equal the product of the
Appreciation Share and the Settlement Value of the mortgaged property at
the time minus its Original Value.
DESCRIPTION OF THE CERTIFICATES
INTRODUCTION
The certificates of each series will represent undivided interests in
the trust fund created under the Pooling and Servicing Agreement for the
series. The trust fund for each series will consist, to the extent provided
in the Pooling and Servicing Agreement, of:
o the SAMs as from time to time are subject to the Pooling and
Servicing Agreement;
o related property and interests in property or other interests
in SAMs, including property acquired by foreclosure of SAMs or
deed in lieu of foreclosure;
o mortgage pass through securities issued or guaranteed by
government or government sponsored agencies, as specified in
the related prospectus supplement;
o privately issued mortgaged-backed securities, as specified in
the related prospectus supplement;
o any combination, as specified in the related prospectus
supplement, of a Letter of Credit, pool insurance policy,
Special Hazard Insurance Policy, Bankruptcy Bond, Fraud Bond,
Reserve Fund or other type of credit enhancement as described
under "Description of Credit Enhancements;"
o the assets as from time to time are held in the Distribution
Account and the Collection Account or Accounts related to the
SAMs; and
o the Eligible Investments.
Certificates of a given series may be issued in several classes, which may
pay interest at different rates, may represent different allocations of the
right to receive principal and interest and additional interest payments,
and some of which may be subordinated to others. Any class of certificates
may also provide for payments of principal only or interest only or
additional interest payments for disproportionate payments of principal and
interest. Appreciation certificates may be offered in transactions
registered under the Act or in transactions which are exempt under the Act,
as described in the related prospectus supplement. Subordinated classes of
a given series of certificates may or may not be offered by the same
prospectus supplement as the senior classes of the series.
The certificates will be freely transferable and exchangeable for
certificates of the same series and class at the office set forth in the
certificates; provided, however, that some classes of certificates may be
subject to transfer restrictions set forth in the certificates and
described in the applicable prospectus supplement. A reasonable service
charge may be imposed for any registration of exchange or transfer of
certificates, and SAMCO Mortgage Securities Corp. may require payment of a
sum sufficient to cover any tax or other governmental charge. One or more
classes of certificates for any series may be transferable only on the
books of DTC or another depository identified in the prospectus supplement.
Beginning with the month following the month in which the Cut-Off
Date occurs for a series of certificates, distributions of principal and
interest or, where applicable, principal only or interest only, on each
class of certificates will be made either by the Trustee, the servicer, the
master servicer or the certificate administrator, as applicable, acting on
behalf of the Trustee or a Paying Agent appointed by the Trustee on the
25th day or, if the 25th day is not a business day, the business day
immediately following the 25th day, of each calendar month to the persons
in whose names the certificates are registered at the close of business on
the last business day of the month preceding the month in which the
Distribution Date occurs. Distributions for each series will be made by
wire transfer in immediately available funds or by check mailed to, each
certificateholder of record; provided, however, that, the final
distribution in retirement of the certificates for each class of a series
will be made only upon presentation and surrender of the certificates at
the office or agency of SAMCO Mortgage Securities Corp. or the Trustee
specified in the notice to certificateholders of the final distribution.
A series may provide for the issuance of one or more classes of
exchangeable certificates as provided in the related prospectus supplement.
The holders of the Exchangeable Classes will be entitled to exchange all or
a portion of the Exchangeable Classes for proportionate interests in other
related classes of Exchangeable Certificates. See "Exchangeable
Certificates--General." Further, one or more classes of certificates may be
callable at the option of one or more other classes of securities. A Call
Class and its related Callable Class or Classes will be issued under a
separate trust agreement. A Callable Class usually will not be called
unless the market value of the assets in the trust fund for the Callable
Class exceeds the outstanding principal balance of the assets. After the
issuance of the Callable Class, there may be a specified "lockout period"
during which the certificates could not be called. It is anticipated that
Call Classes usually will be offered only on a private basis.
BOOK-ENTRY REGISTRATION
The information in this section concerning DTC, Clearstream, and
Euroclear and their book-entry systems and procedures will apply to each
series of certificates and has been obtained from sources that SAMCO
Mortgage Securities Corp. believes to be reliable, but SAMCO Mortgage
Securities Corp. takes no responsibility for the accuracy of the
information in this section.
Certificateholders may hold their certificates through DTC in the
United States or Clearstream or Euroclear in Europe. The certificates will
be registered in the name of the nominee of DTC. Clearstream and Euroclear
will hold omnibus positions on behalf of the Clearstream Customers and the
Euroclear Participants, respectively, through customers' securities
accounts in Clearstream's and Euroclear's names on the books of their
respective depositaries which in turn will hold the positions in customers'
securities accounts in the Depositaries' names on the books of DTC. SAMCO
Mortgage Securities Corp. has been informed by DTC that DTC's nominee will
be Cede & Co. Accordingly, Cede & Co. is expected to be the holder of
record of the certificates. Senior Certificates will be available for
purchase in book-entry form in minimum denominations of $1,000 and in
increments of $1.00 in excess of $1,000, and Subordinated Certificates will
be available for purchase in book-entry form in minimum denominations of
$25,000 and in increments of $1.00 in excess of $25,000. No person
acquiring an interest in the certificates will be entitled to receive a
certificate representing that person's interest in the certificates. Unless
and until definitive certificates are issued under the limited
circumstances described in this prospectus, all references to actions by
certificateholders will refer to actions taken by DTC upon instructions
from its Participants, as defined, and all references to distributions and
notices to certificateholders will refer to distributions and notices to
DTC or Cede & Co., as the registered holder of the certificates, for
distribution to certificateholders in accordance with DTC procedures. See
"--Definitive Certificates." For additional information regarding clearance
and settlement procedures for the certificates, see Annex I hereto.
DTC is a limited purpose trust company organized under the laws of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
a "clearing agency" registered under the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its participating
organizations and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations, and may include
other organizations including underwriters of any series of certificates.
Indirect access to the DTC system also is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Participant, either directly or indirectly.
DTC management is aware that some computer applications and systems
used for processing data were written using two digits rather than four to
define the applicable year, and therefore may not recognize a date using
"00" as the year 2000. This could result in the inability of these systems
to properly process transactions with dates in the year 2000 and
thereafter. DTC has developed and is implementing a program to address this
problem so that its applications and systems as the same relate to the
timely payment of distributions, including principal and interest payments,
to securityholders, book-entry deliveries and settlement of trades within
DTC continue to function properly. This program includes a technical
assessment and a remediation plan, each of which is complete. Additionally,
DTC plans to implement a testing phase of this program which is expected to
be completed within appropriate time frames.
In addition, DTC is contacting, and will continue to contact, third
party vendors that provide services to DTC to determine the extent of their
year 2000 compliance, and DTC will develop contingency plans as it deems
appropriate to address failures in year 2000 compliance on the part of
third party vendors. However, there can be no assurance that the systems of
third party vendors will be timely converted and will not adversely affect
the proper functioning of DTC's services.
The information set forth in the preceding two paragraphs has been
provided by DTC for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
SAMCO Mortgage Securities Corp. makes no representations as to the accuracy
or completeness of the information.
Transfers between Participants will occur in accordance with DTC
rules. Transfers between Clearstream Customers and Euroclear Participants
will occur in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through
Clearstream Customers or Euroclear Participants, on the other hand, will be
effected in DTC in accordance with DTC rules on behalf of the relevant
European international clearing system by its Depositary; however, the
cross-market transactions will require delivery of instructions to the
relevant European international clearing system by the counterparty in the
system in accordance with its rules and procedures and within its
established deadlines. The relevant European international clearing system
will, if the transaction meets its settlement requirements, deliver
instructions to its Depositary to take action to effect final settlement on
its behalf by delivering or receiving securities in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Clearstream Customers and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in
Clearstream or Euroclear as a result of a transaction with a Participant
will be made during the subsequent securities settlement processing, dated
the business day following the DTC settlement date, and the credits or any
transactions in the securities settled during processing will be reported
to the relevant Clearstream Customer or Euroclear Participant on the
business day. Cash received in Clearstream or Euroclear as a result of
sales of securities by or through a Clearstream Customer or a Euroclear
Participant to a Participant will be received with value on the DTC
settlement date but will be available in the relevant Clearstream or
Euroclear cash account only as of the business day following settlement in
DTC.
Certificateholders that are not Participants or Indirect Participants
may purchase, sell or otherwise transfer ownership of, or other interests
in, the certificates only through Participants and Indirect Participants.
In addition, certificateholders will receive all distributions of
principal, stated interest and additional interest payments from the
Trustee through the Participants. Under a book-entry format,
certificateholders may experience some delay in their receipt of payments,
since the payments will be forwarded by the Trustee to Cede & Co., as
nominee for DTC. DTC will forward the payments to its Participants, which
thereafter will forward them to Indirect Participants or
certificateholders. It is anticipated that the only certificateholder will
be Cede & Co., as nominee of DTC. Certificateholders will not be recognized
by the Trustee as "Certificateholders," as that term is used in the Pooling
and Servicing Agreement, and certificateholders only will be permitted to
exercise the rights of certificateholders indirectly through the
Participants.
Under the rules, regulations and procedures creating and affecting
DTC and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the certificates and
is required to receive and transmit distributions of the principal of and
interest on the certificates. Participants and Indirect Participants with
which certificateholders have accounts with respect to the certificates
similarly are required to make book-entry transfers and receive and
transmit the payments on behalf of their respective certificateholders.
Because DTC can only act on behalf of Participants, who in turn act
on behalf of Indirect Participants and some banks, the ability of a
certificateholder to pledge certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of
those certificates, may be limited due to the lack of a physical
certificate for those certificates.
DTC has advised SAMCO Mortgage Securities Corp. that it will take any
action permitted to be taken by a certificateholder under the Pooling and
Servicing Agreement or any applicable prospectus supplement only at the
direction of one or more Participants to whose account with DTC the
certificates are credited. DTC may take conflicting action with respect to
other undivided interests in the certificates to the extent that those
actions are taken on behalf of Participants whose holdings include those
undivided interests.
Clearstream is incorporated under the laws of Luxembourg as a
professional depository. Clearstream holds securities for its participating
organizations and facilitates the clearance and settlement of securities
transactions between Clearstream Customers through electronic book-entry
changes in accounts of Clearstream Customers, thereby eliminating the need
for physical movement of certificates. Transactions may be settled in
Clearstream in any of 36 currencies, including United States dollars.
Clearstream provides to its Clearstream Customers, among other things,
services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Clearstream deals with domestic securities markets in over 30 countries
through established depository and custodial relationships. Clearstream has
established an electronic bridge with MGT/EOC in Brussels to facilitate
settlement of trades between Clearstream and MGT/EOC. Clearstream currently
accepts over 110,000 securities issues on its books. As a professional
depository, Clearstream is subject to regulation by the Luxembourg
Commission for the Supervision of the Financial Sector, which supervises
Luxembourg banks. Clearstream Customers are recognized financial
institutions around the world, including underwriters, securities brokers
and dealers, banks, trust companies, clearing corporations and other
organizations and may include the underwriters of any series of
certificates. Clearstream Customers in the United States are limited to
securities brokers and dealers and banks. Currently, Clearstream has
approximately 2,000 customers located in over 80 countries, including all
major European countries, Canada and the United States. Indirect access to
Clearstream is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a Clearstream Customer, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers
of securities and cash. Transactions may now be settled in any of 34
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries similar to the
arrangements for cross-market transfers with DTC described above. The
Euroclear System is operated by Morgan Guaranty Trust Company of New York,
Brussels, Belgium office, under contract with Euroclear Clearance System,
S.C., a Belgian cooperative corporation. All operations are conducted by
the Euroclear Operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of Euroclear Participants. Euroclear Participants include banks,
central banks, securities brokers and dealers and other professional
financial intermediaries and may include the underwriters of any series of
certificates. Indirect access to the Euroclear System is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System.
Accordingly, it is regulated and examined by the Board of Governors of the
Federal Reserve System and the New York State Banking Department, as well
as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System and
applicable Belgian law. The Terms and Conditions govern transfers of
securities and cash within the Euroclear System, withdrawal of securities
and cash from the Euroclear System, and receipts of payments with respect
to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants and has no record of or relationship with persons holding
through Euroclear Participants.
Distributions with respect to certificates held through Clearstream
or Euroclear will be credited to the cash accounts of Clearstream Customers
or Euroclear Participants in accordance with the relevant system's rules
and procedures, to the extent received by its Depositary. The distributions
will be subject to tax reporting in accordance with relevant United States
tax laws and regulations. Clearstream or the Euroclear Operator, as the
case may be, will take any other action permitted to be taken by a
certificateholder under the Pooling and Servicing Agreement or any
applicable supplement on behalf of a Clearstream Customer or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its Depositary's ability to effect the actions on its behalf
through DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of investor certificates among
participants of DTC and Euroclear and Clearstream customers, they are under
no obligation to perform or continue to perform the procedures and the
procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
The certificates may be issued in fully registered, certificated form
to certificateholders or their nominees, rather than to DTC or its nominee,
if:
o SAMCO Mortgage Securities Corp. advises the Trustee in writing
that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the
certificates, and the Trustee or SAMCO Mortgage Securities
Corp. is unable to locate a qualified successor;
o SAMCO Mortgage Securities Corp., at its option, elects to
terminate the book-entry system through DTC;
o after the occurrence of an event causing the master servicer or
applicable servicer to be replaced, certificateholders
representing in the aggregate not less than 51% of the
aggregate certificate principal amount of the series advise DTC
through Participants in writing that the continuation of a
book-entry system through DTC, or a successor thereto, is no
longer in the best interest of the certificateholders or
o if so disclosed in the applicable prospectus supplement.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee is required to notify all
certificateholders of the availability through DTC of definitive
certificates. Upon surrender by DTC of a definitive certificate
representing the certificates and instructions for re-registration, the
Trustee will issue the certificates in definitive certificates, and
thereafter the Trustee will recognize the registered holders of the
definitive certificates as certificateholders under the Pooling and
Servicing Agreement.
Distribution of principal, stated interest and additional interest
payments on the certificates will be made by the Trustee directly to
holders of definitive certificates in accordance with the procedures set
forth in this prospectus and in the Pooling and Servicing Agreement. On
each Distribution Date, stated interest, principal and additional interest
payments will be made to holders in whose names the definitive certificates
were registered at the close of business on the related Record Date.
Payments will be made by check mailed to the address of the holder as it
appears on the register maintained by the Trustee. The final distribution
on any certificate, whether definitive certificates or certificates
registered in the name of Cede & Co. representing the certificates,
however, will be made only upon presentation and surrender of the
certificate at the office or agency specified in the notice of final
distribution to certificateholders. The Trustee will provide notice to
registered certificateholders not later than the tenth day of the month of
the final distribution.
Definitive certificates will be transferable and exchangeable at the
offices of the Trustee, or at the other office as SAMCO Mortgage Securities
Corp. designates. No service charge will be imposed for any registration of
transfer or exchange, but the Transfer Agent may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in
connection therewith.
ASSIGNMENT OF SAMS
SAMCO Mortgage Securities Corp. will cause the SAMs to be assigned to
the Trustee, together with all principal, stated interest and additional
interest payments on the SAMs other than principal and interest due, if
any, on or before the Cut-Off Date. The master servicer, applicable
servicer or seller will expressly reserve its rights in and to any Retained
Yield, which accordingly will not constitute part of the trust fund. In
addition, the applicable prospectus supplement may specify that the seller
will retain the right to a specified portion of either principal, stated
interest and additional interest payments payable by the mortgagor. The
Trustee will, concurrently with the assignment, authenticate and deliver
the certificates or cause the certificates to be authenticated and
delivered to SAMCO Mortgage Securities Corp. or its designated agent in
exchange for the trust fund. Each SAM will be identified in the Loan
Schedule. The schedule will include information as of the close of business
on the Cut-Off Date as to:
o the principal balance of each SAM,
o the stated interest rate and the maturity of each Mortgage
Note,
o the Appreciation Shares,
o the servicing, master servicing and certificate Administrator's
Fee, if applicable,
o whether a primary insurance policy has been obtained for each
SAM and
o the then-current scheduled monthly payment of principal and
interest for each SAM.
In addition, each seller will, as to each SAM, deliver or cause to be
delivered to the Trustee the Mortgage Note, an assignment to the Trustee of
the SAM in a form for recording or filing as may be appropriate in the
state where the mortgaged property is located, the original recorded SAM
with evidence of recording or filing indicated thereon, a copy of the title
insurance policy or other evidence of title and evidence of any primary
insurance policy, for the SAM, if applicable. In some instances where
original documents respecting a SAM may not be available prior to execution
of the Pooling and Servicing Agreement, the seller will deliver the
documents to the Trustee within 270 days thereafter unless, as set forth in
the Pooling and Servicing Agreement, the county recorder has not yet
returned the SAM. Notwithstanding the foregoing, a trust fund may
include SAMs where the original Mortgage Note is not delivered to the
Trustee if SAMCO Mortgage Securities Corp. delivers to the Trustee or the
custodian a copy or a duplicate original of the Mortgage Note, together
with an affidavit certifying that the original has been lost or destroyed.
With respect to the SAMs, the Trustee, or its nominee, may not be able to
enforce the Mortgage Note against the related mortgagor. Each Originator,
seller, SAMCO Mortgage Securities Corp., master servicer or servicer, as
applicable, will agree to repurchase SAMs in some circumstances or
substitute for them other qualifying SAMs. See "--Representations and
Warranties".
In instances where, due to a delay on the part of the title insurer,
a copy of the title insurance policy for a particular SAM cannot be
delivered to the Trustee prior to or concurrently with the execution of the
Pooling and Servicing Agreement, SAMCO Mortgage Securities Corp. will
provide a copy of the title insurance policy to the Trustee within 90 days
after SAMCO Mortgage Securities Corp.'s receipt of the original recorded
SAM, any intervening recorded assignments or other documents necessary to
issue the title insurance policy.
The Trustee will review the mortgage documents within 45 days of
their receipt to ascertain that all required documents have been properly
executed and received. The Trustee will hold the documents for each series
in trust for the benefit of certificateholders of the series. If any
document is found by the Trustee not to have been properly executed or
received or to be unrelated to the SAMs identified in the Pooling and
Servicing Agreement, the Trustee will notify the appropriate seller and the
master servicer or servicer. If the seller cannot cure the defect, the
appropriate Originator or seller will substitute a new SAM meeting the
conditions set forth in the Pooling and Servicing Agreement or repurchase
the related SAM from the Trustee at a price equal to:
o 100% of the outstanding principal balance of the SAM, plus
o accrued interest on that amount at the greater of the
applicable stated interest rate on the outstanding principal
balance of the related SAM through the last day of the month of
the repurchase plus the Indexed Appreciation Payment and the
Implied Market Rate on the outstanding principal balance of the
related SAM through the last day of the month of the
repurchase, plus
o any expenses reasonably incurred by the master servicer in
respect of the breach or defect giving rise to the repurchase
obligation.
See "--Substitution of SAMs." The purchase price of any SAM so repurchased
will be passed through to certificateholders as liquidation proceeds in
accordance with the procedures specified under "--Distributions on
Certificates." This substitution or repurchase obligation constitutes the
sole remedy available to the certificateholders or the Trustee for a defect
in a constituent document.
An assignment of each SAM to the Trustee will be recorded or filed.
In some states, the assignment may not be recorded where, in the written
opinion of counsel admitted to practice in the state acceptable to SAMCO
Mortgage Securities Corp. and the Trustee, the filing or recording is not
required to protect the Trustee's interest in the SAM against sale, further
assignment, satisfaction or discharge by the appropriate seller, SAMCO
Mortgage Securities Corp. or the master servicer or any servicer.
SUBSTITUTION OF SAMS
With respect to series of certificates, the applicable seller may
substitute an eligible shared appreciation mortgage loan for a defective
SAM or, if applicable, a SAM in its related SAM Pool, in lieu of
repurchasing the defective SAM or the related mortgaged property. Any
shared appreciation mortgage loan, to be eligible for substitution, must
fit within the description of the SAMs set forth in this prospectus and in
the related prospectus supplement. In the event the seller does substitute
SAMs as provided on the Closing Date for the related SAM Pool no more than
5% of the SAMs by the SAM Pool aggregate principal balance will deviate
from SAM characteristics described in the related prospectus supplement.
See "The SAM Pools."
REPRESENTATIONS AND WARRANTIES
In the agreements under which the SAMs were sold to EMC Mortgage
Corporation for each series of certificates, each seller may represent and
warrant to SAMCO Mortgage Securities Corp. with respect to all SAMs, among
other things, that:
o that title insurance, or in the case of mortgaged properties
located in areas where the policies are not widely available,
an attorney's certificate of title, in the case of each SAMs
and any required hazard insurance policy was in effect on the
date of purchase of the SAM from the Originator by or on behalf
of the seller;
o that the Originator had title to each SAM and the SAM was
subject to no offsets, defenses or counterclaims;
o that each SAM constituted a valid first or other applicable
lien on, or a perfected security interest with respect to, the
mortgaged property, subject only to permissible title insurance
exceptions, if applicable, and some other exceptions described
in the Pooling and Servicing Agreement, and that the mortgaged
property was free from damage and was in good repair;
o that there were no delinquent tax or assessment liens against
the property secured by the SAM;
o that no required payment on a SAM was more than a specified
number of days delinquent;
o that each SAM was made in compliance with, and is enforceable
under, all applicable state and federal laws and regulations in
all material respects;
o that each SAM complies with all LTV requirements and will be
insured as to payment defaults by a primary insurance policy;
o at the time that the SAM was originated, the Originator was a
mortgagee approved by the Secretary of Housing and Urban
Development or a savings and loan association, a savings bank,
a commercial bank, a licensed mortgage banker or similar
banking or lending institution which is supervised and examined
by a federal or state authority;
o that the stated interest rate of any SAM provides for an
Appreciation Share on the SAM of not less than 30% and not
greater than 60%, with a principal balance at origination of no
more than $650,000, and a stated principal balance of at least
$25,000, and there is no negative amortization other than the
Appreciation Shares on the SAMs;
o that the mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of
the SAM in the event that a Mortgage Termination Event occurs,
and the Mortgage Note and mortgage have been originated on the
form provided for in the applicable Pooling and Servicing
Agreement or Sale and Servicing Agreement; and
o that, as of the Closing Date, the mortgaged property is
lawfully occupied by the mortgagor under applicable law.
The applicable prospectus supplement and Pooling and Servicing
Agreement may set forth additional representations and warranties of each
Originator or seller. In addition, with respect to any SAM as to which the
seller delivers to the Trustee or the custodian an affidavit certifying
that the original Mortgage Note has been lost or destroyed, if the SAM
subsequently is in default and the enforcement or of the related mortgage
is materially adversely affected by the absence of the original Mortgage
Note, the Originator or seller will be obligated to repurchase or
substitute for the SAM in the manner described above. SAMCO Mortgage
Securities Corp. may make similar representations and warranties with
respect to the SAMs and will have similar repurchase and substitution
obligations, if applicable.
In the event of the discovery by the Trustee, the master servicer or
the servicer of a breach of any representation or warranty which materially
and adversely affects the interest of the certificateholders in the related
SAM, or the receipt of notice of the breach from the master servicer, the
Trustee or the servicer, as the case may be, will cure the breach,
substitute a new shared appreciation mortgage loan for the SAM or
repurchase the SAM, or any mortgaged property acquired with respect
thereto, on the terms set forth above under "--Assignment of SAMs." The
proceeds of any repurchase will be passed through to certificateholders as
liquidation proceeds. This substitution or repurchase obligation
constitutes the sole remedy available to the certificateholders or the
Trustee for any breach.
RETAINED YIELD
For some series, SAMCO Mortgage Securities Corp., an Originator, a
seller, the master servicer or a servicer, as specified in the related
prospectus supplement, may retain a portion of the interest payable on each
SAM. Any Retained Yield and any earnings from reinvestments will not be
part of the trust fund and therefore will not have any effect on payments
to certificateholders. The Originator, the seller, the master servicer, the
servicer or SAMCO Mortgage Securities Corp., as the case may be, may at its
option transfer to a third party all or a portion of the Restated Yield for
a series of certificates.
PAYMENTS ON SAMS; DEPOSITS TO ACCOUNTS
The master servicer or a servicer servicing the SAMs will be required
to establish and maintain for one or more series of certificates a separate
account or accounts for the collection of payments on the related SAMs,
which must be:
o maintained with a depository institution the debt obligations
of which, or in the case of a depository institution that is
the principal subsidiary of a holding company, the obligations
of the holding company, are rated in one of the two highest
rating categories by Moody's or S&P or another nationally
recognized statistical rating agency specified in the related
prospectus supplement rating the series of certificates;
o an account or accounts the deposits in which are fully insured
by the FDIC;
o an account or accounts the deposits in which are insured by the
FDIC, to the limits established by the FDIC, and the uninsured
deposits in which are invested in Eligible Investments held in
the name of the Trustee, or
o an account or accounts otherwise acceptable to each rating agency.
A Collection Account may be maintained as an interest bearing account or
the funds held in a Collection Account may be invested pending each
succeeding Distribution Date in Eligible Investments. The master servicer
or related servicer or its designee or another person specified in the
prospectus supplement will be entitled to receive any interest or other
income earned on funds in the Collection Account as additional compensation
and will be obligated to deposit or deliver for deposit in the Collection
Account the amount of any loss immediately as realized. The Collection
Account may be maintained with the master servicer or servicer or with a
depository institution that is an affiliate of the master servicer or
servicer, provided it meets the standards set forth above.
The master servicer and servicer will be required to deposit or cause
to be deposited in the Collection Account for each trust fund on a daily
basis the following payments and collections received or Advances made by
or on behalf of it subsequent to the Cut-Off Date, other than payments due
on or before the Cut-Off Date and exclusive of any amounts representing
Retained Yield):
o all payments on account of principal, including principal
prepayments and, if specified in the related prospectus
supplement, prepayment penalties, on the SAMs;
o all payments on account of interest on the SAMs, net of
applicable servicing compensation;
o to the extent specified in the related Pooling and Servicing
Agreement, all proceeds, net of unreimbursed payments of
property taxes, insurance premiums and similar items incurred,
and unreimbursed Advances made, by the related master servicer
or servicer, if any, of the Hazard Insurance Policies and any
primary insurance policies, to the extent the proceeds are not
applied to the restoration of the property or released to the
mortgagor in accordance with the master servicer's or
servicer's normal servicing procedures and all other cash
amounts, net of unreimbursed expenses incurred in connection
with liquidation or foreclosure and unreimbursed advances made,
by the master servicer or servicer, if any, received and
retained in connection with the liquidation of defaulted SAMs,
by foreclosure or otherwise, together with any net proceeds
received with respect to any properties acquired on behalf of
the certificateholders by foreclosure or deed in lieu of
foreclosure;
o all proceeds of any SAM or property purchased as described
above under "--Representations and Warranties;"
o all payments required to be deposited in the Collection Account
with respect to any deductible clause in any blanket insurance
policy described under "Primary Insurance, Hazard Insurance;
Claims--Hazard Insurance";
o any amount required to be deposited by the master servicer or
servicer in connection with losses realized on investments for
the benefit of the master servicer or servicer of funds held in
any account; and
o all other amounts required to be deposited in the Collection
Account under the Pooling and Servicing Agreement.
If acceptable to any rating agency rating the series of certificates,
a Collection Account maintained by the master servicer or servicer may
commingle funds from the SAMs deposited in the trust fund with similar
funds relating to other mortgage loans which are serviced or owned by the
master servicer or servicer. The Pooling and Servicing Agreement may
require that some payments related to the SAMs be transferred from a
Collection Account maintained by the master servicer or servicer into
another account maintained under conditions acceptable to any rating
agency.
The Trustee will be required to establish in its name as Trustee for
one or more series of certificates a trust account or another account
acceptable to any rating agency. The Distribution Account may be maintained
as an interest bearing account or the funds held in the Distribution
Account may be invested pending each succeeding Distribution Date in
Eligible Investments. If there is a master servicer or more than one
servicer for the rated series of certificates, there may be a separate
Distribution Account or a separate subaccount in a single Distribution
Account for funds received from the master servicer. The master servicer or
servicer or its designee or another person specified in the related
prospectus supplement may be entitled to receive any interest or other
income earned on funds in the Distribution Account or subaccount of the
Distribution Account as additional compensation and, if so entitled, will
be obligated to deposit or deliver for deposit in the Distribution Account
or subaccount the amount of any loss immediately as realized. The Trustee
will be required to deposit into the Distribution Account on the business
day received all funds received from the master servicer or the servicer
for deposit into the Distribution Account and any other amounts required to
be deposited into the Distribution Account under the Pooling and Servicing
Agreement. In addition to other purposes specified in the Pooling and
Servicing Agreement, the Trustee will be required to make withdrawals from
the Distribution Account to make distributions to certificateholders. If
the series includes one trust fund which contains a beneficial ownership
interest in another trust fund, funds from the trust assets may be
withdrawn from the Distribution Account included in the latter trust fund
and deposited into another account included in the former trust fund prior
to transmittal to certificateholders with a beneficial ownership interest
in the former trust fund. The Collection Account and the Distribution
Account may be combined into a single Distribution Account.
DISTRIBUTIONS ON CERTIFICATES
For each series, on the date specified in the prospectus supplement,
commencing in the month following the month in which the Cut-Off Date
occurs, the master servicer, the servicer or the certificate administrator,
as applicable, acting on behalf of the Trustee or the Paying Agent will
withdraw from the Distribution Account and distribute to certificateholders
of record on the applicable Record Date, and to holders of residual
interests, if any, who are entitled to receive the distributions under the
terms of the applicable Pooling and Servicing Agreement, to the extent of
their entitlement thereto, an amount in the aggregate equal to the sum of:
o all scheduled payments of principal, interest at the
Pass-Through Rate and additional interest payments either
collected from the mortgagors on the SAMs prior to the related
Determination Date or advanced by the master servicer or
servicer;
o all partial principal prepayments received on the SAMs in the
month prior to the month in which the Distribution Date occurs;
o all Insurance Proceeds or Liquidation Proceeds received during
the Distribution Period, together with interest at the
applicable Pass-Through Rate to the extent described under
"Yield Considerations--Effective Interest Rate;" and
o all prepayment in full received, in each case together with
interest at the applicable Pass-Through Rate, to the extent
described under "Yield Considerations--Effective Interest
Rate;"
less the sum of:
o previously unreimbursed Advances made by the master servicer or
servicer on SAMs which are considered by the master servicer or
servicer as of the Distribution Date to be nonrecoverable;
o amounts expended by the master servicer or servicer in
connection with the preservation or restoration of property
securing SAMs which have been liquidated and related
liquidation expenses; and
o amounts representing other expenses of the master servicer or
servicer, reimbursable under the Pooling and Servicing
Agreement.
In addition, the master servicer or servicer shall usually include
with any distribution an Advance equal to principal and stated interest
payments and additional interest payments due on the first day of the month
in which the Distribution Date occurs and not received as of the close of
business on the 15th day of said month or if that day is not a business
day, the next succeeding business day, subject to the master servicer's or
servicer's determination that the payments are recoverable from future
payments or collections on the SAMs, any subordination feature or Insurance
Proceeds or Liquidation Proceeds. See "--Advances."
The method of allocating the amount withdrawn from the Distribution
Account on each Distribution Date to principal and stated interest and
additional interest payments on a particular series of certificates will be
described in the applicable prospectus supplement. Distributions of
interest and additional interest on each class of certificates will be made
prior to distributions of principal thereon. Each class of certificates may
have a different pass-through rate, and each pass- through rate may be
fixed and the rate may be zero percent, variable or adjustable. The
applicable prospectus supplement will specify the pass-through rate for
each class, or in the case of a variable or adjustable pass-through rate,
the initial pass-through rate and the method for determining the
pass-through rate.
On each Distribution Date for a series of certificates, the Trustee
or the Paying Agent, as the case may be, will distribute to each holder of
record on each Record Date, an amount equal to the Percentage Interest
represented by a certificate, which is not an appreciation certificate,
held by the holder multiplied by the sum of the Class Principal
Distribution Amount for the related class, if that class is entitled to
payments of interest on the Distribution Date, one month's interest at the
applicable pass-through rate on the principal balance or notional principal
balance of that class specified in the applicable prospectus supplement,
less that class's pro rata share of the sum of:
o the shortfalls in collections of interest on prepayments in
full with respect to which distribution is to be made on the
Distribution Date, if any,
o the amount of any deferred interest added to the principal
balance of the SAMs and the outstanding balance of the
certificates on the related Due Date, if applicable,
o one month's interest at the applicable Pass-Through Rate on the
amount of any partial principal prepayments received on the
SAMs in the month preceding the month of the distribution and
o any other interest shortfalls including, without limitation,
shortfalls arising out of application of the Relief Act or
similar legislation or regulations as in effect from time to
time, allocable to certificateholders which are not covered by
Advances or applicable credit enhancements, in each case in the
amount as is allocated to the class on the basis set forth in
the related prospectus supplement.
On each Distribution Date for a series of certificates, the Trustee
or the Paying Agent, as the case may be, will, in most cases, distribute to
each holder of record on the Record Date, an amount equal to the Percentage
Interest represented by each appreciation certificate held by the holder
multiplied by the sum of the Class Appreciation Distribution Amount for the
class, which will represent all or a portion of the additional interest
payments made on the pool of SAMs and, if so specified, a Class Total
Distribution Amount for the related class of certificates.
In the case of a series of certificates which includes two or more
classes of certificates, the timing, sequential order, priority of payment
or amount of distributions in respect of principal, and any schedule or
formula or other provisions applicable to the determination with respect to
each class shall be as provided in the related prospectus supplement.
The master servicer or the servicer, as applicable, will furnish to
the Trustee and to any certificateholder upon request a statement setting
forth the aggregate amount to be distributed on the Distribution Date to
each class of certificates, on account of principal, stated interest and
additional interest, as applicable, stated separately.
ADVANCES
The Originator, the seller, the master servicer or the servicer or
other person designated in the prospectus supplement will be required to
advance on or before each Distribution Date, from its own funds, funds
advanced by others or funds held in any of the accounts for future
distributions to the holders of the certificates, an amount equal to the
aggregate of payments of principal and interest that were delinquent on the
related Determination Date, subject to the person's determination that the
Advances will be recoverable out of late payments by mortgagors,
Liquidation Proceeds, Insurance Proceeds or otherwise with respect to the
specific SAM or, if required by the applicable rating agency, with respect
to any of the SAMs.
In making Advances, the Originator, the seller, the master servicer
or the servicer will endeavor to maintain a regular flow of interest and
principal payments to holders of the certificates, rather than to guarantee
or insure against losses. If Advances are made by the Originator, the
seller, the master servicer or the servicer from cash being held for future
distributions to certificateholders, the Originator, the seller, the master
servicer or the servicer will replace the funds on or before any future
Distribution Date to the extent that funds in the applicable account on the
Distribution Date would be less than the amount required to be available
for distributions to certificateholders on that date. Any Originator,
seller, master servicer or servicer funds advanced will be reimbursable to
the Originator, the seller, the master servicer or the servicer out of
recoveries on the specific SAMs with respect to which Advances were made,
late payments made by the related mortgagor, any related Insurance
Proceeds, Liquidation Proceeds or proceeds of any SAM purchased by a seller
under the circumstances described in this prospectus. Advances by the
Originator, the seller, the master servicer or the servicer also will be
reimbursable to the Originator, the seller, the master servicer or the
servicer from cash otherwise distributable to certificateholders, including
the holders of Senior Certificates, at the time as the Originator, the
seller, the master servicer or the servicer determines that any the
Advances previously made are not ultimately recoverable from the proceeds
with respect to the specific SAM or, if required by the applicable rating
agency, at the time that a loss is realized with respect to a specific SAM.
The Originator, the seller, the master servicer or the servicer also will
be obligated to make Advances, to the extent recoverable out of Insurance
Proceeds, Liquidation Proceeds or otherwise, in respect of some taxes and
insurance premiums not paid by mortgagors on a timely basis. Funds so
advanced are reimbursable to the Originator, the seller, the master
servicer or the servicer to the extent permitted by the Pooling and
Servicing Agreement. If specified in the related prospectus supplement, the
obligations of the Originator, the seller, the master servicer or the
servicer to make Advances may be supported by a cash advance reserve fund,
a surety bond or other arrangement, in each case as described in the
prospectus supplement.
TERMINATION AND OPTIONAL TERMINATION
The obligations created by the Pooling and Servicing Agreement for a
series of certificates will usually terminate upon the payment to the
related certificateholders of all amounts held in any Distribution Accounts
or Collection Accounts or by the master servicer or the servicer and
required to be paid to them under the Pooling and Servicing Agreement
following the later of the final payment or other liquidation of the last
of the trust assets subject thereto or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any mortgaged
property or other assets remaining in the trust fund and the purchase by
the seller, the master servicer, the servicer or other entity specified in
the related prospectus supplement including, if REMIC treatment has been
elected, by the holder of the residual interest in the REMIC, from the
related trust fund of all of the remaining trust assets and all property
acquired in respect of mortgage- related assets remaining in the trust
fund. See "Federal Income Tax Consequences."
Any purchase of trust assets and property acquired in respect of
mortgaged properties evidenced by a series of certificates will be made at
the option of the seller or other entity identified in the related
prospectus supplement, at a price, and in accordance with the procedures,
specified in the related prospectus supplement. The purchase price may not
in all cases equal the entire unpaid principal and accrued unpaid interest
on the certificates that are outstanding at the time of the optional
termination due to the fact that any component of the purchase price based
on existing property; that is, real property acquired following foreclosure
and as to which a realized loss has not yet been taken, will be equal to
the fair market value of the property, less expected liquidation or
foreclosure expenses, and not necessarily the previously outstanding
principal balance of the related loan. There may not be sufficient proceeds
to pay off the then current balance of and accrued unpaid interest on
certificates, including Indexed Appreciation Payments for appreciation
certificates, of the series outstanding. The exercise of the right will
effect early retirement of the certificates, but the right of the seller or
the other entity to so purchase will be subject to the principal balance of
the related trust assets being less than the percentage specified in the
related prospectus supplement of the aggregate principal balance of the
trust assets at the Cut-Off Date for the series. The foregoing is subject
to the provision that if a REMIC election is made with respect to a trust
fund, any repurchase under clause (b) above will be made only in connection
with a "qualified liquidation" of the REMIC within the meaning of Section
860F(g)(4) of the Code.
REPORTS TO CERTIFICATEHOLDERS
Prior to or concurrently with each distribution on a Distribution
Date or at another time specified in the related prospectus supplement or
Pooling and Servicing Agreement, the master servicer, the servicer or the
Trustee will furnish to each certificateholder of record of the related
series a statement setting forth, to the extent applicable or material to
the series of certificates, among other things:
o the amount of the distribution allocable to principal,
separately identifying the aggregate amount of any principal
prepayments and if so specified in the related prospectus
supplement, prepayment penalties included in the distribution;
o the amount of the distribution allocable to interest and
additional interest;
o the amount of any Advance by the master servicer, the servicer,
the seller or the Originator;
o the aggregate amount otherwise allocable to the subordinated
certificateholders on the Distribution Date, and withdrawn from
the Reserve Fund, if any, that is included in the amounts
distributed to the certificateholders;
o the outstanding current principal amount or notional principal
balance of the class after giving effect to the distribution of
principal on the Distribution Date;
o the percentage of principal payments on the SAMs, if any, which
the class will be entitled to receive on the following
Distribution Date;
o the percentage of principal prepayments on the SAMs, if any,
which the class will be entitled to receive on the following
Distribution Date;
o unless the pass-through rate is a fixed rate, the pass-through
rate applicable to the distribution on the Distribution Date;
o the number and aggregate principal balances of SAMs in the
related SAM Pool delinquent (a) one month, (b) two months or
(c) three or more months, and the number and aggregate
principal balances of SAMs in foreclosure;
o the book value of any real estate acquired through foreclosure
or grant of a deed in lieu of foreclosure; and
o if applicable, the amount remaining in any Reserve Account or
the amount remaining of any other credit support, after giving
effect to the distribution on the Distribution Date.
Where applicable, any amount set forth above may be expressed as a
dollar amount per single certificate of the relevant class having a
denomination or interest specified in the related prospectus supplement or
in the report to certificateholders. The report to certificateholders for
any series of certificates may include additional or other information of a
similar nature to that specified above.
In addition, within a reasonable period of time after the end of each
calendar year, the master servicer, the servicer or the Trustee will mail
to each certificateholder of record at any time during the calendar year a
report as to the aggregate of amounts reported for the calendar year and
the other customary information as may be deemed necessary or desirable for
certificateholders to prepare their tax returns.
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT
AND THE SALE AND SERVICING AGREEMENT
INTRODUCTION
Each series of certificates will be issued under a separate Pooling
and Servicing Agreement. Each Pooling and Servicing Agreement will be among
SAMCO Mortgage Securities Corp., as depositor, and the Trustee and master
servicer or servicer named in the prospectus supplement. EMC Mortgage
Corporation will enter into a sale and servicing agreement with each seller
and Originator. Under each Sale and Servicing Agreement the related seller
or Originator will assign all of its right, title and interest to the
related SAMs to EMC Mortgage Corporation and make the representations and
warranties set forth under "Description of the
Certificates--Representations and Warranties," among others. The rights of
EMC Mortgage Corporation under the agreements will be assigned to SAMCO
Mortgage Securities Corp., which will, in turn, assign it to the Trustee.
In the event of a breach of any representation or warranty by the related
Originator or seller that materially adversely affects the interests of the
certificateholders in the related SAM, the breach shall be cured if the SAM
is repurchased as described under "Description of the
Certificates--Assignment of SAMs."
In the Pooling and Servicing Agreement or each Sale and Servicing
Agreement, the master servicer or servicer, as applicable, will agree to
perform diligently some of the services and duties customary to the
servicing of shared appreciation mortgage loans. Any master servicer will
monitor a servicer's performance under any Sale and Servicing Agreement.
The master servicer may have the right to remove any servicer from the
performance of its duties under the Sale and Servicing Agreement. The
duties performed by the servicer include collection and remittance of
principal, stated interest and additional interest payments, administration
of mortgage escrow accounts, collection of insurance claims and, if
necessary, foreclosure.
A form of Pooling and Servicing Agreement and a form of a Sale and
Servicing Agreement are filed as exhibits to the Registration Statement of
which this prospectus is a part. The following discussion summarizes some
provisions expected to be contained in each Pooling and Servicing
Agreement. The applicable prospectus supplement will describe material
features of the related Pooling and Servicing Agreement, which may differ
from the features described in this prospectus.
SERVICING
With respect to each series of certificates, under the Pooling and
Servicing Agreement, the master servicer or servicer will be responsible
for servicing and administering the SAMs, or the SAMs in its respective SAM
Pool, as applicable. The master servicer, as described in the related
prospectus supplement, may provide master servicing for one or more
servicers described in the prospectus supplement.
As specified in each prospectus supplement, the master servicer, the
servicer and the certificate administrator will calculate amounts
distributable to the certificateholders, prepare tax returns on behalf of
the trust fund and provide some other administrative services specified in
the Pooling and Servicing Agreement. The master servicer will perform
largely the same services and duties as a servicer under a Sale and
Servicing Agreement, as well as services of a master servicer described in
this prospectus.
The Trustee may act as the certificate administrator. With respect to
each series of certificates, as established in the applicable Pooling and
Servicing Agreement, a certificate administrator will be appointed and will
receive the Certificate Administrator Fee.
COLLECTION AND OTHER SERVICING PROCEDURES
The master servicer or servicer will make reasonable efforts to
collect all payments called for under the SAMs and will, consistent with
each Pooling and Servicing Agreement and any pool insurance policy, primary
insurance policy, Special Hazard Insurance Policy, Bankruptcy Bond, Fraud
Bond, Letter of Credit, Reserve Fund, Certificate Insurance Policy or
alternative arrangements, follow the collection procedures as are customary
with respect to mortgage loans that are comparable to the SAMs. Consistent
with the above, the master servicer or servicer may, in its discretion,
waive any assumption fee, late payment or other charge in connection with a
SAM and to the extent not inconsistent with the coverage of the SAM by a
pool insurance policy, primary insurance policy, Special Hazard Insurance
Policy, Bankruptcy Bond, Fraud Bond, Letter of Credit, Reserve Fund,
Certificate Insurance Policy or alternative arrangements, if applicable,
arrange with a mortgagor a schedule for the liquidation of delinquencies
running for no more than a period as is specified in the Pooling and
Servicing Agreement or the Sale and Servicing Agreement after the
applicable due date for each payment. The master servicer or servicer
remain obligated to make Advances during any period of the arrangement.
In any case in which property securing a SAM has been, or is about to
be, conveyed by the mortgagor, the master servicer or servicer will, to the
extent it has knowledge of the transfer, exercise or cause to be exercised
its rights to accelerate the maturity of the SAM as a Mortgage Termination
Event, but only if the exercise of those rights is permitted by applicable
law. Any fee collected by or on behalf of the master servicer or servicer
for entering into an assumption agreement will be retained by or on behalf
of the master servicer or servicer as additional servicing compensation.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
With respect to each series of certificates, the master servicer's or
any servicer's primary compensation for their servicing activities will
come from the payment to them, or the retention by them, of an amount equal
to the Master Servicing Fee or the Servicing Fee for each SAM. The master
servicer's or the servicer's primary compensation for supervising the
mortgage servicing and advancing some expenses of a SAM Pool will come from
the payment to it of an amount equal to the Master Servicing Fee or the
Servicing Fee, as applicable, with respect to each SAM, or a SAM in its
respective SAM Pool, in the SAM Pool. The Master Servicing Fee or the
Servicing Fee, with respect to each payment of interest received on a SAM,
will equal one-twelfth of the Master Servicing Fee or the Servicing Fee
annual percentage, as applicable, set forth in the Pooling and Servicing
Agreement, or the Servicing Agreement, as applicable, multiplied by the
outstanding principal balance of the SAM during the month for which the
amount is computed.
With respect to a series of certificates as to which the master
servicer will act as master servicer, the master servicer will retain as
its Master Servicing Fee a portion of the interest payable on each SAM
serviced by it. In addition, the master servicer may retain late charges,
assumption fees and similar charges to the extent collected from
mortgagors. SAMCO Mortgage Securities Corp. expects that the fees and
charges will be negligible in amount. The master servicer may retain as its
Master Servicing Fee an amount which will be calculated as a per annum
percentage for each SAM plus an amount calculated to reimburse it for the
expenses required to be borne by it, which, may include the Trustee's fees
and premiums on or other expenses relating to any pool insurance policy and
other credit enhancements, if applicable.
With respect to series of certificates as to which there will be a
servicer, each servicer will receive a Servicing Fee, as established in the
applicable Pooling and Servicing Agreement.
As principal payments are made on each SAM, the outstanding principal
balance of the SAMs will decline, and thus compensation to the master
servicer or servicer will decrease as the SAMs amortize, subject to any
minimum levels of the compensation set forth in the applicable prospectus
supplement. Principal prepayments, Partial principal prepayments and
liquidations of SAMs prior to maturity will also cause servicing
compensation to the servicer and the master servicer to decrease, subject
to any minimum levels of the compensation set forth in the applicable
prospectus supplement.
In addition to their primary compensation, the master servicer or the
servicer, as applicable, will retain all prepayment fees, assumption fees
and late payment charges, to the extent collected from a mortgagor. The
master servicer's or the servicer's income from the charges will depend
upon their origination and servicing policies.
The master servicer and the servicer, as applicable, are entitled to
reimbursement for some expenses incurred by them in connection with the
liquidation of related defaulted SAMs. Certificateholders of the series
will suffer no loss by reason of the expenses to the extent claims are paid
under any applicable credit enhancements. In the event, however, that
claims are not paid under the policies or alternative coverages, or if
coverage has been exhausted, certificateholders of the series will suffer a
loss to the extent that the proceeds of liquidation of a defaulted SAM,
after reimbursement of each master servicer's and the servicer's expenses,
as applicable, are less than the principal balance of the SAM. In addition,
the master servicer and the servicer, as applicable, are entitled to
reimbursement of expenditures incurred by them in connection with the
restoration of a related damaged mortgaged property, the right of
reimbursement being prior to the rights of certificateholders to receive
any related Insurance Proceeds or Liquidation Proceeds.
RIGHTS UPON EVENT OF DEFAULT
As long as an Event of Default under the Pooling and Servicing
Agreement, for any series remains unremedied, the Trustee or holders of 25%
of the Percentage Interest, as determined in the manner set forth in the
Pooling and Servicing Agreement, may terminate all of the rights
and obligations of the defaulting master servicer or the servicer, as
applicable, under the Pooling and Servicing Agreement, and in and to the
trust fund, whereupon the Trustee will succeed to all the responsibilities,
duties and liabilities of the master servicer or servicer, except to the
extent, as specified in the applicable prospectus supplement, the master
servicer takes over the obligations of a defaulting servicer, under the
Pooling and Servicing Agreement and the successor will be entitled to
similar compensation arrangements and limitations on liability. In the
event that the Trustee is unwilling or unable so to act, it may appoint or
petition a court of competent jurisdiction for the appointment of a housing
and home finance institution with a net worth of at least $10,000,000 to
act as successor to the defaulting master servicer or the servicer under
the Pooling and Servicing Agreement. Pending any appointment, the Trustee
is obligated to act in that capacity. In the event that the Trustee acts as
successor to the master servicer or the servicer, the Trustee will be
obligated to make Advances unless it is prohibited by law from doing so.
The Trustee and the successor may agree upon the compensation to be paid,
which in no event may be greater than the compensation to the master
servicer or the servicer, as applicable. Holders of certificates for a
series evidencing interests aggregating not less than 25% of the trust
fund, as determined in the manner set forth in the Pooling and Servicing
Agreement for that series, may direct the action of the Trustee in pursuing
remedies and exercising powers under the Pooling and Servicing Agreement as
limited by the Pooling and Servicing Agreement.
No certificateholder of any series will have any right under the
Pooling and Servicing Agreement to institute any proceeding with respect to
the Pooling and Servicing Agreement unless the certificateholder previously
has given to the Trustee written notice of default and unless the holders
of certificates for that series evidencing interests aggregating not less
than 25% of the trust fund, as determined in the manner set forth in the
Pooling and Servicing Agreement, have made written request upon the Trustee
to institute the proceeding in its own name as Trustee and have offered to
the Trustee reasonable indemnity. However, the Trustee is under no
obligation to exercise any of the trusts or powers vested in it by the
Pooling and Servicing Agreement for any series or to make any investigation
of matters arising under the Pooling and Servicing Agreement or to
institute, conduct or defend any litigation under the Pooling and Servicing
Agreement or in relation to it at the request, order or direction of any of
the certificateholders, unless the certificateholders have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred.
The Pooling and Servicing Agreement may permit the Trustee to sell
the assets of the trust fund in the event that payments in respect thereto
are insufficient to make the payments required in the Pooling and Servicing
Agreement. The assets of the trust fund may be sold only under the
circumstances and in the manner specified in the related prospectus
supplement.
AMENDMENT
The Pooling and Servicing Agreement may be amended by the parties
thereto, without the consent of any of the certificateholders,
o to cure any ambiguity;
o to correct or supplement any provision which may be defective
or inconsistent with any other provision;
o to comply with any changes in the Code or
o to make any other revisions with respect to matters or
questions arising under the Pooling and Servicing Agreement
which are not inconsistent with its provisions, provided that
the action will not adversely affect in any material respect
the interests of any certificateholder.
In addition, to the extent provided in the Pooling and Servicing Agreement,
a Pooling and Servicing Agreement may be amended without the consent of any
of the certificateholders, to change the manner in which the Distribution
Account, the Collection Account or any other accounts is maintained,
provided that the change does not adversely affect the then current rating
on the class or classes of certificates of the series that have been rated.
In addition, if a REMIC election is made with respect to a trust fund, the
related Pooling and Servicing Agreement may be amended to modify, eliminate
or add to any of its provisions to the extent as may be necessary to
maintain the qualification of the related trust fund as a REMIC, provided
that the Trustee has received an opinion of counsel to the effect that the
action is necessary or helpful to maintain the qualification. Each Pooling
and Servicing Agreement may also be amended by the parties thereto with
consent of holders of certificates of the series evidencing not less than
662/3% of the aggregate Percentage Interests of each class affected thereby
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Pooling and Servicing Agreement or
of modifying in any manner the rights of the holders of the related
certificates; provided, however, that no amendment may reduce in any manner
the amount of or delay the timing of, payments received on trust assets
which are required to be distributed on any certificate without the consent
of the holder of the certificate, or reduce the aforesaid percentage of
certificates of any class of holders which are required to consent to any
amendment without the consent of the holders of all certificates of the
class covered by the Pooling and Servicing Agreement then outstanding. If a
REMIC election is made with respect to a trust fund, the Trustee will not
be entitled to consent to an amendment to the related Pooling and Servicing
Agreement without having first received an opinion of counsel to the effect
that the amendment will not cause the trust fund to fail to qualify as a
REMIC.
LIST OF CERTIFICATEHOLDERS
Upon written request of three or more certificateholders of record of
a series of certificates, for purposes of communicating with other
certificateholders with respect to their rights under the Pooling and
Servicing Agreement for the series, the Trustee will afford the
certificateholders access during business hours to the most recent list of
certificateholders of that series held by the Trustee.
THE TRUSTEE
The identity of the commercial bank, savings and loan association or
trust company named as the Trustee for each series of certificates will be
set forth in the related prospectus supplement. The entity serving as
Trustee may have normal banking relationships with the seller and its
affiliates. In addition, for the purpose of meeting the legal requirements
of some local jurisdictions, the Trustee will have the power to appoint
co-trustees or separate trustees of all or any part of the trust fund
relating to a series of certificates. In the event of the appointment of
co- trustees or separate trustees, all rights, powers, duties and
obligations conferred or imposed upon the Trustee by the applicable Pooling
and Servicing Agreement will be conferred or imposed upon the Trustee and
each separate trustee or co-trustee jointly, or, in any jurisdiction in
which the Trustee shall be incompetent or unqualified to perform required
acts, singly upon the separate trustee or co-trustee who will exercise and
perform the rights, powers, duties and obligations solely at the direction
of the Trustee. The Trustee may also appoint agents to perform any of the
responsibilities of the Trustee, which agents will have any or all of the
rights, powers, duties and obligations of the Trustee conferred on them by
the appointment; provided that the Trustee will continue to be responsible
for its duties and obligations under the Pooling and Servicing Agreement.
DUTIES OF THE TRUSTEE
The Trustee will not make any representations as to the validity or
sufficiency of the Pooling and Servicing Agreement, the certificates or of
any assets or related documents. If no Event of Default, as defined in the
related Pooling and Servicing Agreement, has occurred, the Trustee is
required to perform only those duties specifically required of it under the
Pooling and Servicing Agreement. Upon receipt of the various certificates,
statements, reports or other instruments required to be furnished to it,
the Trustee is required to examine them to determine whether they are in
the form required by the related Pooling and Servicing Agreement. However,
the Trustee will not be responsible for the accuracy or content of any
documents furnished to it by the certificateholders, the master servicer or
the servicer under the Pooling and Servicing Agreement.
The Trustee may be held liable for its own negligent action or
failure to act, or for its own misconduct; provided, however, that the
Trustee will 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 certificateholders following an Event of Default. The
Trustee is not required to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties under the
Pooling and Servicing Agreement, or in the exercise of any of its rights or
powers, if it has reasonable grounds for believing that repayment of the
funds or adequate indemnity against the risk or liability is not reasonably
assured to it.
RESIGNATION OF TRUSTEE
The Trustee may, upon written notice to the seller, resign at any
time, in which event the seller will be obligated to use its best efforts
to appoint a successor Trustee. If no successor Trustee has been appointed
and has accepted the appointment within the period specified in the Pooling
and Servicing Agreement after the giving of the notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for
appointment of a successor Trustee. The Trustee may also be removed at any
time:
o if the Trustee ceases to be eligible to continue under the
Pooling and Servicing Agreement,
o if the Trustee becomes insolvent or
o by the certificateholders evidencing over 50% of the aggregate
voting rights of the certificates in the trust fund upon
written notice to the Trustee and to the seller.
Any resignation or removal of the Trustee and appointment of a successor
Trustee will not become effective until acceptance of the appointment by
the successor Trustee.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement will provide that on or before a
specified date in each year, a firm of independent public accountants will
furnish a statement to the Trustee to the effect that, on the basis of the
examination by the firm conducted substantially in compliance with the
Uniform Single Audit Program for Mortgage Bankers, the Audit Program for
Mortgages serviced for the FHLMC or a program certified by the firm to be
comparable, the servicing by or on behalf of the master servicer or
servicer of mortgage loans, agency securities or private mortgage-backed
securities, under pooling and servicing agreements substantially similar to
each other (including the related Pooling and Servicing Agreement) was
conducted in compliance with the agreements except for any significant
exceptions or errors in records that, in the opinion of the firm, the
Uniform Single Audit Program for Mortgage Bankers, the Audit Program for
Mortgages serviced for FHLMC or the comparable program requires it to
report. In rendering its statement, the firm may rely, as to matters
relating to the direct servicing of mortgage loans, agency securities or
private mortgage-backed securities by servicers, upon comparable statements
for examinations conducted substantially in compliance with the Uniform
Single Audit Program for Mortgage Bankers, the Audit Program for Mortgages
serviced for FHLMC or the comparable program, rendered within one year of
the statement, of firms of independent public accountants with respect to
the related servicer.
The Pooling and Servicing Agreement will also provide for delivery to
the Trustee, on or before a specified date in each year, of an annual
statement signed by an officer of the master servicer or servicer to the
effect that the master servicer or servicer has fulfilled its obligations
under the Pooling and Servicing Agreement throughout the preceding year.
Copies of the annual accountants' statement and the statement of
officers of the master servicer or servicer may be obtained by
certificateholders of the related series without charge upon written
request to the master servicer or servicer at the address set forth in the
related prospectus supplement.
MATTERS REGARDING THE MASTER SERVICER, THE SERVICER AND THE CERTIFICATE
ADMINISTRATOR
One or more master servicer or servicers under the Pooling and
Servicing Agreement, may be named in the related prospectus supplement.
Each entity serving as master servicer or servicer may have normal business
relationships with the seller or the seller's affiliates.
The Pooling and Servicing Agreement will provide that a master
servicer or servicers may not resign from its obligations and duties under
the Pooling and Servicing Agreement, except upon a determination that its
duties under the Pooling and Servicing Agreement are no longer permissible
under applicable law or as otherwise specified in the related prospectus
supplement. No resignation will become effective until the Trustee or a
successor servicer has assumed the master servicer's or servicer's
obligations and duties under the Pooling and Servicing Agreement.
Each Pooling and Servicing Agreement will further provide that
neither the master servicer or servicers, in some instances, the seller nor
any director, officer, employee, or agent of the master servicer, the
servicers or the seller will be under any liability to the Trustee, the
related trust fund or certificateholders for any action taken or for
refraining from the taking of any action in good faith under the Pooling
and Servicing Agreement or for errors in judgment; provided, however, that
neither the master servicer, the servicer, the seller nor any person will
be protected against any breach of warranties or representations made in
the Pooling and Servicing Agreement or any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties under the Pooling and Servicing Agreement or by
reason of reckless disregard of obligations and duties under the Pooling
and Servicing Agreement. The Pooling and Servicing Agreement will further
provide that the master servicer or servicers, in some instances, the
seller and any director, officer, employee or agent of the master servicer,
servicers or the seller will be entitled to indemnification by the trust
fund and will be held harmless against any loss, liability or expense
incurred in connection with any legal action relating to the Pooling and
Servicing Agreement or the certificates, other than any loss, liability or
expense related to any failure to perform its duties in compliance with the
Pooling and Servicing Agreement, except any loss, liability or expense
otherwise reimbursable under the Pooling and Servicing Agreement and any
loss, liability or expense incurred by reason of willful misfeasance, bad
faith or negligence in the performance of duties under the Pooling and
Servicing Agreement or by reason of reckless disregard of obligations and
duties under the Pooling and Servicing Agreement. In addition, the Pooling
and Servicing Agreement will provide that neither the master servicer, the
servicers nor, in some instances, the seller will be under any obligation
to appear in, prosecute or defend any legal action which is not incidental
to its respective responsibilities under the Pooling and Servicing
Agreement and which in its opinion may involve it in any expense or
liability. The master servicer, the servicer or the seller may, however, in
its discretion undertake any action which it may deem necessary or
desirable with respect to the Pooling and Servicing Agreement and the
rights and duties of the parties thereto and the interests of the
certificateholders under the Pooling and Servicing Agreement. In that
event, the legal expenses and costs of the action and any liability
resulting therefrom will be expenses, costs and liabilities of the trust
fund and the master servicer, the servicer or the seller, as the case may
be, will be entitled to be reimbursed therefor out of funds otherwise
distributable to certificateholders.
Any person into which the master servicer or servicers may be merged
or consolidated, or any person resulting from any merger or consolidation
to which the master servicer or servicers is a party, or any person
succeeding to the business of the master servicer or servicers, will be the
successor of the master servicer or servicers under the Pooling and
Servicing Agreement, provided that the person is, among other things,
qualified to sell mortgage loans to, and service mortgage loans on behalf
of, FNMA or FHLMC and further provided that the merger, consolidation or
succession does not adversely affect the then current rating or ratings of
the class or classes of certificates of the trust.
EXCHANGEABLE CERTIFICATES
INTRODUCTION
Some series will provide for the issuance of one or more classes
of Exchangeable Certificates, as set forth in the related prospectus
supplement. In any series, the holders of one or more of the specified
classes of Exchangeable Certificates will be entitled, upon notice and
payment to the Trustee of an administrative fee, to exchange all or a
portion of the classes for proportionate interests in one or more of the
other specified classes of Exchangeable Certificates. The procedures on how
an exchange occurs is more fully described below under "Procedures and
Exchange Proportions." The Combinations for the Exchangeable Certificates
in a series, if any, will be set forth in the prospectus supplement for the
series.
In each series that includes Exchangeable Certificates, all of
the classes of certificates that are shown on the cover page of the related
prospectus supplement will be issued, and those classes that are to be the
basis for the exchange arrangements will be deposited in a separate trust
fund established under a trust agreement between the seller and a trustee.
The Trustee may serve as the trustee. The Exchangeable Certificate Trust
Fund initially will issue classes of Exchangeable Certificates that are
identical in all respects to the classes of certificates deposited in the
trust fund. The amount of Exchangeable Certificates issued by the
Exchangeable Certificate Trust Fund is a fixed and limited amount which
corresponds to the aggregate principal balance of the related class or
classes of certificates which are eligible for exchange. At any time after
their issuance, including immediately after the issuance, these classes of
Exchangeable Certificates may be exchanged, in whole or in part, for other
related classes of Exchangeable Certificates that are part of the same
Combination, as specified in the related prospectus supplement. An exchange
will result in a reduction in the outstanding principal balance of the
Exchangeable Certificates exchanged and an identical increase in the
aggregate principal balance for every certificate of the related
Combination. When an exchange is effected, the Exchangeable Certificate
Trust Fund will cancel the relevant portion or portions of the class or
classes of Exchangeable Certificates that are being exchanged and will
issue the corresponding portion or portions of the class or classes of
other related Exchangeable Certificates into which the class or classes of
certificates are exchangeable. The Exchangeable Certificates can be
exchanged only for proportionate interests in one or more of the other
specified classes of certificates that are issued by the trust that issued
the Exchangeable Certificates. Exchangeable Certificates received in an
exchange may subsequently be exchanged for other Exchangeable Certificates
that are part of the same Combination. The Exchangeable Certificates
exchanged cannot be replaced, except by an exchange of the certificates for
the original Exchangeable Certificates. This process may be repeated again
and again and is limited only by the amount of Exchangeable Certificates
held by an investor and the Combinations available to the class of
Exchangeable Certificates, as further described under "Exchanges." Each
Exchangeable Certificate issued by an Exchangeable Certificate Trust Fund
will represent a beneficial ownership interest in the class or classes of
certificates deposited in the trust fund.
The descriptions in this prospectus of classes of certificates of
a series also apply to the Exchangeable Classes of that series, except
where the context requires otherwise. For example, the Exchangeable Classes
of a series are entitled to receive payments of principal and interest, are
issued in book-entry form or as definitive certificates to
certificateholders in prescribed denominations, may be provided with credit
enhancements, and are subject to yield, appreciation and prepayment
considerations, in the same manner and to the same extent as are the
classes of certificates of the series. Similarly, the discussions under
"ERISA Considerations" and "Some Legal Considerations" apply to
Exchangeable Certificates as well as certificates.
EXCHANGES
Only a holder of an Exchangeable Certificate may initiate an
exchange. An exchange may be initiated by a holder who wishes to hold
certificates with different interest or principal payment characteristics.
An exchange will apply only to the amount of a class of Exchangeable
Certificates held by the holder, regardless of whether the holder owns all
or a portion of the class of Exchangeable Certificates. Holders of any
remaining Exchangeable Certificates of the same class are not required to
participate in exchange, nor is their consent required to permit other
holders to cause the exchange with respect to their Exchangeable
Certificates.
The ability of a holder of a class or classes of Exchangeable
Certificates to exchange the class or classes for another related class or
classes of Exchangeable Certificates within the same Combination will be
subject to three basic constraints, as follows:
o The aggregate principal amount, rounded to whole dollars, of
the Exchangeable Certificates received in the exchange,
immediately after the exchange, must equal that of the
Exchangeable Certificates surrendered for exchange immediately
before the exchange, for this purpose, the principal amount of
any interest only class will always equal $0;
o The annual interest amount payable with respect to the
Exchangeable Certificates received in the exchange must equal
that of the Exchangeable Certificates surrendered for exchange;
and
o The classes must be exchanged in the applicable exchange
proportions, if any, shown in the related prospectus
supplement, which are based at all times on the original
principal amounts, or original notional principal amounts, if
applicable, of the classes.
Within any particular series, one or more types of Combinations
may exist. For example, a class of Exchangeable Certificates with a stated
interest rate that varies directly with changes in an index and a class of
Exchangeable Certificates with a stated interest rate that varies inversely
with changes in an index may be exchangeable for a class of Exchangeable
Certificates with a fixed stated interest rate. Under another Combination,
a class of Exchangeable Certificates that is a principal only class and a
class of Exchangeable Certificates that is an interest only class may be
exchangeable for a class of Exchangeable Certificates that pays both
principal and interest. Further, a class of Exchangeable Certificates that
accretes all of its interest for a period, the accreted interest being
added to the principal of the class, and a class of Exchangeable
Certificates that receives principal payments from the accretions on the
Accrual Class may be exchangeable for a class of Exchangeable Certificates
that receives payments of principal continuously from the first
Distribution Date on which it receives principal until it is retired. Under
another Combination, a class of Exchangeable Certificates that is designed
to receive principal payments in accordance with a predetermined schedule
derived by assuming two constant prepayment rates for the underlying SAMs
and a class of Exchangeable Certificates that receives principal payments
on any Distribution Date only if scheduled payments have been made on the
Planned Amortization Class may be exchangeable for a class of Exchangeable
Certificates that receives payments of principal continuously from the
first Distribution Date on which it receives principal until it is retired
and that also receives a coupon. The foregoing examples describe only some
of the types of Combinations that are possible.
Set forth below are additional examples that illustrate in simple
mathematical terms how some possible Combinations might operate. The first
example shows a Combination in which Exchangeable Certificates of a
principal only class and Exchangeable Certificates of an interest bearing
class are exchangeable for Exchangeable Certificates of a class that has
the aggregate characteristics of the two original classes of Exchangeable
Certificates:
Maximum
Original Original
Principal Interest Principal Interest
Class Amount Rates Class Amount Rate
- --------- ------------ -------- -------- ---------- --------
ES-1 $20,000,000 10% ES-2 $40,000,000 5%
ES-P* 20,000,000 0%
* Class ES-P is a principal only class and will receive no interest.
The following example illustrates a Combination of a Floating
Rate class and an Inverse Floating Rate Exchangeable Certificate which are
exchangeable for a single class of Exchangeable Certificates with a fixed
interest rate:
Maximum
Original Original
Principal Interest Principal Interest
Class Amount Rates Class Amount Rate
- ------- ----------- ----------- ------- ---------- ---------
ES-3 $9,333,330 LIBOR + ES-5 $11,333,330 7%
0.75%
ES-4 2,000,000 36.1666 -
(LIBOR x
4.66667)
In the following Combination, an Exchangeable Certificate that pays
both principal and interest is exchangeable for two Exchangeable
Certificates, one of which pays only interest and the other pays only
principal:
Maximum
Original
Original Principal or
Principal Interest Notional Interes
Class Amount Rate Class Principal t Rates
Amount
- --------- ------------ ---------- -------- ------------ --------
ES-5 $20,000,000 10% ES-P* $20,000,000 0%
ES- 20,000,000 10%
X** (notional)***
- ---------
* Class ES-P is a principal only class and will receive no interest.
** Class ES-X is an interest only class and will receive no
principal.
*** Notional principal amount of ES-X class being exchanged equals
principal amount of ES-P class being exchanged.
In some series, a Combination may include a number of classes of
Exchangeable Certificates that are exchangeable for one another and that
will enable a holder of one of the classes of Exchangeable Certificates to
exchange it for another class of Exchangeable Certificates with a higher or
lower coupon. As discussed below, any exchange also will require the
issuance of a third class of Exchangeable Certificates that will pay only
principal or interest, respectively. The following table illustrates a
Combination:
Maximum
Original
Principal or
Original Notional
Principal Interest Principal Interest
Class Amount Rate Class Amount Rates
- ------- ------------ -------- -------- ------------ --------
ES-6 $20,000,000 7% ES-X* $20,000,000 7%
(notional)
ES-7 20,000,000 6%
ES-8 20,000,000 6.25%
ES-9 20,000,000 6.50%
ES-10 20,000,000 6.75%
ES-11 19,310,344 7.25%
ES-12 18,666,666 7.50%
ES-13 18,064,516 7.75%
ES-14 17,500,000 8.00%
ES-P** 20,000,000 0.00%
- -------------------
* Class ES-X is an interest only class and will receive no
principal.
** Class ES-P is a principal only class and will receive no interest.
The foregoing table shows the maximum amount of each other ES class
that can be created from the related class ES-6 Exchangeable Certificate.
The amounts could not exist concurrently, as any Combination is limited to
the amount of principal and interest distributable on the related
Exchangeable Certificate to be exchanged. One method of calculating the
maximum amount that can be created in a specific combination is to
determine the annual stated interest applicable to the Exchangeable
Certificates to be exchanged, and divide the interest amount by the coupon
of the desired Exchangeable Certificate. The resulting principal amount can
in no case be greater than the principal amount of Exchangeable
Certificates to be exchanged. For example, using the foregoing table, if
class ES-12 is desired, the maximum original principal amount of the class
ES-12 Exchangeable Certificates that could be created would be $18,666,666,
an amount arrived at by dividing the annual stated interest of the class
ES-6 certificates ($1,400,000) by the stated interest of the class ES-12
Exchangeable Certificates (7.50%). Since all of the available stated
interest with respect to the class ES-6 Exchangeable Certificates would be
used to create the class ES-12 Exchangeable Certificates, principal only
class ES-P Exchangeable Certificates would be created to receive the
remainder of the class ES-6 principal in the amount of $1,333,334,
calculated by subtracting the class ES-12 Exchangeable Certificates
original principal amount from the class ES- 6 Exchangeable Certificates
original principal amount.
Similarly, if class ES-9 Exchangeable Certificates are desired,
dividing the stated interest of the class ES-6 Exchangeable Certificates
($1,400,000) by the stated interest of the class ES-9 Exchangeable
Certificates (6.50%) would indicate an original principal amount of
$21,538,461. However, since the class ES-6 Exchangeable Certificates have a
principal balance of $20,000,000, only $20,000,000 of the class ES-9
Exchangeable Certificates could be created. The stated interest applicable
to the class ES-9 Exchangeable Certificates would be $20,000,000 multiplied
by 6.50% or $1,300,000. Since the stated interest of the class ES-6
Exchangeable Certificates is $1,400,000, the interest only class ES-X
Exchangeable Certificates would be created to receive the remaining
$100,000 of interest. The notional amount of the securities would be
calculated by dividing the stated interest ($100,000) by the stated
interest applicable to class ES-X Exchangeable Certificates (7.00%) to
determine the notional amount ($1,428,571).
Under the terms of this Combination, the class ES-9 Exchangeable
Certificates described in the preceding paragraph might also be
exchangeable for the class ES-14 Exchangeable Certificates. If the stated
interest of the class ES-9 Exchangeable Certificates ($1,300,000) is
divided by the stated interest on the class ES-14 Exchangeable Certificates
(8.00%), the maximum original principal amount of the class ES-14
Exchangeable Certificates that can be created is $16,250,000. Since all of
the available stated interest with respect to the class ES-9 Exchangeable
Certificates would be used to create the class ES-14 Exchangeable
Certificates, principal only class ES-P Exchangeable Certificates would be
created to receive the remainder of the class ES-9 principal in the amount
of $3,750,000, calculated by subtracting the class ES-14 Exchangeable
Certificates original principal amount from the class ES-9 Exchangeable
Certificates original principal amount).
The foregoing examples set forth various combinations of Exchangeable
Certificates which differ in interest characteristics, such as interest
only classes, principal only classes and classes which have principal
amounts and bear interest. In some series, a certificateholder may also be
able to exchange its Exchangeable Certificates for other Exchangeable
Certificates that have different principal payment characteristics. For
example, an exchange of two or more classes of Exchangeable Certificates
for a single class of Exchangeable Certificates may result in an
Exchangeable Certificate with the aggregate principal payment
characteristics of the multiple classes of Exchangeable Certificates for
which it was exchanged. In addition, a holder of either an Exchangeable
Certificate representing Appreciation Shares or an Exchangeable Certificate
entitled to receive principal and stated interest payments from the SAMs
could exchange the classes for a single Exchangeable Certificate that
entitles the holder to receive both payments of the Appreciation Share and
principal and stated interest from the SAMs. Further, in some series,
Exchangeable Certificates may be exchangeable for other Exchangeable
Certificates with different credit characteristics. For example, a class
that is senior in priority of payment may be combined with a subordinated
class, to create a new class with the aggregate credit characteristics of
the two classes that were combined.
At any given time, a certificateholder's ability to exchange
Exchangeable Certificates for other Exchangeable Certificates will be
limited by a number of factors. A certificateholder must, at the time of
the proposed exchange, own the class or classes which are permitted to be
exchanged in the proportions necessary in order to effect the desired
exchange. A certificateholder that does not own the class or classes or the
necessary amounts of the class or classes may not be able to obtain the
desired class or classes of Exchangeable Certificates. The
certificateholder of a needed class may refuse or be unable to sell at a
reasonable price or at any price, or some classes may have been purchased
and placed into other financial structures. ERISA or other transfer
restrictions may apply to some of the Exchangeable Certificates in a
Combination, but not to others. In addition, principal payments and
prepayments will, over time, diminish the amounts available for exchange.
PROCEDURES AND EXCHANGE PROPORTIONS
A certificateholder proposing to effectuate an exchange must notify
the Trustee or follow other procedures as described in the related
prospectus supplement. Notice must be given in writing or by telefax not
later than five business days before the proposed exchange date, which
date, subject to the Trustee's approval, can be any business day other than
the first or last business day of the month. The notice must include the
outstanding principal, or notional principal, amount of both the securities
to be exchanged and the securities to be received, and the proposed
exchange date. Promptly after the certificateholder has given the required
notice, the Trustee will provide instructions for delivering the securities
and the payment of the administrative fee to the Trustee by wire transfer.
A certificateholder's notice becomes irrevocable on the second business day
before the proposed exchange date.
An administrative fee will be payable to the Trustee in connection
with each exchange as specified in the related prospectus supplement. Any
exchanges will be subject to the rules, regulations and procedures
applicable to DTC's book-entry securities, in the case of Exchangeable
classes issued in book-entry form.
Where exchange proportions are shown in the related prospectus
supplement for classes of Exchangeable Certificates, SAMCO Mortgage
Securities Corp. will follow the convention of basing the proportions on
the original, rather than on the outstanding, principal or notional
principal amounts of the classes. If the classes receive principal payments
pro rata with each other, the exchange proportions also will apply to their
outstanding principal amounts. If the classes do not receive principal
payments pro rata with each other, an investor can calculate current
exchange proportions for the classes, based on their outstanding principal
amounts, by multiplying the exchange proportion shown in the related
prospectus supplement for each class by its current Class Factor and
dividing each resulting percentage by the sum of the percentages. The
Trustee will include that Class Factor for each class of outstanding
Exchangeable Certificates having a principal amount in the statements it
furnishes to certificateholders in connection with each Distribution Date.
The current Class Factor also will be available to certificateholders upon
request from the Trustee or the seller as specified in the related
prospectus Supplement. A Class Factor for each interest only class having a
notional principal amount will be included in the statements the Trustee
furnishes to certificateholders in connection with each Distribution Date
and also will be available to certificateholders upon request from the
Trustee or the seller as specified in the related prospectus supplement.
The Class Factor will reflect the remaining notional principal amount of
the interest only class in an analogous manner.
The first payment on an Exchangeable Certificate received in an
exchange transaction may be made on the Distribution Date in the month
following the month of the exchange or as specified in the related
prospectus supplement. Any payment will be made to the certificateholder of
record as of the applicable Record Date.
PRIMARY INSURANCE, HAZARD INSURANCE; CLAIMS
As set forth below, a SAM may be required to be covered by a primary
insurance policy and is required to be covered by a Hazard Insurance
Policy. The following is only a brief description of the coverage and does
not purport to describe all of the characteristics of each type of
insurance, although the material terms of the coverage are described in
this prospectus and in the prospectus supplement. The insurance is subject
to underwriting and approval of individual SAMs by the respective insurers
and guarantors. In some cases, however, the issuer of the insurance or
guaranty may delegate underwriting authority to the Originator of the SAM.
To the extent the descriptions of any insurance coverage in this prospectus
do not disclose all the material terms of any insurance coverage, the
related prospectus supplement will disclose all material terms related to
those policies.
PRIMARY INSURANCE
The master servicer or the related servicer will be required to
maintain or in the case of the master servicer, cause each servicer to
maintain, in full force and effect, to the extent specified in the related
prospectus supplement a primary insurance policy with regard to each SAM
for which the coverage is required. The master servicer or servicer will be
required not to cancel or refuse to renew any primary insurance policy in
effect at the time of the initial issuance of a series of certificates that
is required to be kept in force under the applicable Pooling and Servicing
Agreement unless the replacement primary insurance policy for the cancelled
or nonrenewed policy is maintained with an insurer whose claims-paying
ability is sufficient to maintain the current rating of the classes of
certificates of the series that have been rated.
Although the terms and conditions of primary mortgage insurance vary,
the amount of a claim for benefits under a primary insurance policy
covering a SAM usually will consist of the insured percentage of the unpaid
principal amount of the covered SAM and accrued and unpaid interest thereon
and reimbursement of some expenses, less:
o all rents or other payments collected or received by the
insured, other than the proceeds of hazard insurance, that are
derived from or in any way related to the mortgaged property;
o hazard insurance proceeds in excess of the amount required to
restore the mortgaged property and which have not been applied
to the payment of the SAM;
o amounts expended but not approved by the Primary Insurer; o
claim payments previously made by the Primary Insurer and o
unpaid premiums.
Primary insurance policies reimburse some losses sustained by reason
of defaults in payments by mortgagors. Primary insurance policies will not
insure against, and exclude from coverage, a loss sustained by reason of a
default arising from or involving some matters, including:
o fraud or negligence in origination or servicing of the SAMs,
including misrepresentation by the Originator, mortgagor or
other persons involved in the origination of the SAM;
o failure to construct the mortgaged property subject to the SAM
in accordance with specified plans;
o physical damage to the mortgaged property; and
o the related master servicer not being approved as a servicer by
the Primary Insurer.
HAZARD INSURANCE
The master servicer or the related servicer will require the
mortgagor on each SAM to maintain a Hazard Insurance Policy providing for
no less than the coverage of the standard form of fire insurance policy
with extended coverage customary for the type of mortgaged property in the
state in which the mortgaged property is located. The coverage will be in
an amount not less than the replacement value of the improvements securing
the SAM or the principal balance owing on the SAM, whichever is less. All
amounts collected by the master servicer or servicer under any hazard
policy, except for amounts to be applied to the restoration or repair of
the mortgaged property or released to the mortgagor in accordance with the
master servicer's or servicer's normal servicing procedures, will be
deposited in the related Collection Account. In the event that the master
servicer or servicer maintains a blanket policy insuring against hazard
losses on all of the SAMs comprising part of a trust fund, it will
conclusively be deemed to have satisfied its obligation relating to the
maintenance of hazard insurance. The blanket policy may contain a
deductible clause, in which case the master servicer or servicer will be
required to deposit from its own funds into the related Collection Account
the amounts which would have been deposited in the Collection Account but
for the clause. Any additional insurance coverage for mortgaged properties
in a SAM Pool of multifamily loans will be specified in the related
prospectus supplement.
The standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements or manufactured home
securing a SAM by fire, lightning, explosion, smoke, windstorm and hail,
riot, strike and civil commotion, subject to the conditions and exclusions
particularized in each policy. Although the policies relating to the SAMs
may have been underwritten by different insurers under different state laws
in accordance with different applicable forms and therefore may not contain
identical terms and conditions, the basic terms are dictated by respective
state laws, and most policies typically do not cover any physical damage
resulting from the following: war, revolution, governmental actions, floods
and other water-related causes, earth movement - including earthquakes,
landslides and mud flows - nuclear reaction, wet or dry rot, vermin,
rodents, insects or domestic animals, theft and, in some cases, vandalism.
The foregoing list is merely indicative of some kinds of uninsured risks
and is not intended to be all- inclusive. If the mortgaged property
securing a SAM is located in a federally designated special flood area at
the time of origination, the master servicer or servicer will require the
mortgagor to obtain and maintain flood insurance.
The hazard insurance policies covering properties securing the SAMs
typically contain a clause which in effect requires the insured at all
times to carry insurance of a specified percentage, usually 80% to 90%, of
the full replacement value of the insured property in order to recover the
full amount of any partial loss. If the insured's coverage falls below this
specified percentage, then the insurer's liability in the event of partial
loss will not exceed the larger of the actual cash value, which is
approximately the replacement cost at the time and place of loss, less
physical depreciation, of the improvements damaged or destroyed or the
proportion of the loss, without deduction for depreciation, as the amount
of insurance carried bears to the specified percentage of the full
replacement cost of the improvements. Since the amount of hazard insurance
that the master servicer or servicer may cause to be maintained on the
improvements securing the SAMs declines as the principal balances owing
thereon decrease, and since improved real estate usually has appreciated in
value over time in the past, the effect of this requirement in the event of
partial loss may be that hazard insurance proceeds will be insufficient to
restore fully the damaged property. If specified in the related prospectus
supplement, a special hazard insurance policy or an alternative form of
credit enhancement will be obtained to insure against some of the uninsured
risks described above. See "Description of Credit Enhancements--Special
Hazard Insurance Policies."
MAINTENANCE OF MORTGAGE IMPAIRMENT INSURANCE
The master servicer or the related servicer may obtain and maintain a
blanket policy insuring against losses arising from fire and hazards
covered under extended coverage on all of the related SAMs, then, to the
extent the policy provides coverage in an amount equal to the amount
required under the Pooling and Servicing Agreement and otherwise complies
with all other requirements of the Pooling and Servicing Agreement, it
shall conclusively be deemed to have satisfied its obligations as set forth
in the Pooling and Servicing Agreement. Any amounts collected by a master
servicer or servicer under any policy relating to a SAM shall be deposited
in any Collection Account subject to withdrawal under the Pooling and
Servicing Agreement. The policy may contain a deductible clause, in which
case, in the event that there shall not have been maintained on the related
mortgaged property a policy complying with the Pooling and Servicing
Agreement, and there shall have been a loss which would have been covered
by the policy, a master servicer or servicer shall deposit in any
Collection Account at the time of the loss the amount not otherwise payable
under the blanket policy because of the deductible clause, the amount to be
deposited from the master servicer or servicer funds, without reimbursement
therefor. Upon request of SAMCO Mortgage Securities Corp., a master
servicer or servicer shall cause to be delivered to SAMCO Mortgage
Securities Corp. a certified true copy of the policy.
MAINTENANCE OF FIDELITY BOND AND ERRORS AND OMISSIONS INSURANCE
The master servicer or each servicer may maintain with responsible
companies, at its own expense, a blanket Fidelity Bond and an Errors and
Omissions Insurance Policy, with broad coverage on all officers, employees
or other persons acting in any capacity requiring the persons to handle
funds, money, documents or papers relating to the SAMs. Any Fidelity Bond
and Errors and Omissions Insurance Policy will be in the form of the
Mortgage Banker's Blanket Bond and may protect and insure the master
servicer or servicer against losses, including forgery, theft,
embezzlement, fraud, errors and omissions and negligent acts of the
employees. The Fidelity Bond and Errors and Omissions Insurance Policy also
shall protect and insure the master servicer or servicer against losses in
connection with the release or satisfaction of a SAM without having
obtained payment in full of the indebtedness secured thereby.
DESCRIPTION OF CREDIT ENHANCEMENTS
To the extent provided in the applicable prospectus supplement, credit
enhancement for each series of certificates may be comprised of one or more
of the following components, each of which will have a dollar limit. Credit
enhancement components may include coverage with respect to losses that
are:
o attributable to the mortgagor's failure to make any payment of
principal, interest or additional interest payments as required
under the Mortgage Note, but not including Special Hazard
Losses, Extraordinary Losses or other losses resulting from
damage to a mortgaged property, Bankruptcy Losses or Fraud
Losses;
o of a type covered by a Special Hazard Insurance Policy;
o attributable to some actions which may be taken by a bankruptcy
court in connection with a SAM, including a reduction by a
bankruptcy court of the principal balance of or the stated
interest rate on a SAM or an extension of its maturity;
o incurred on defaulted SAMs as to which there was fraudulent
conduct or negligence by any of the Originator, the seller,
SAMCO Mortgage Securities Corp., the master servicer, the
servicer or the mortgagor in connection with the SAMs; and
o attributable to shortfalls in the payment of amounts due to one
or more classes of certificates.
Losses occasioned by war, civil insurrection, some governmental actions,
nuclear reaction, chemical contamination, errors in design, faulty
workmanship or materials or waste by the mortgagor will not be covered. To
the extent that the credit enhancement for any series of certificates is
exhausted, the certificateholders will bear all further risks of loss not
otherwise insured against.
As set forth below and in the applicable prospectus supplement,
o coverage with respect to defaulted SAMs may be provided by one
or more of a Letter of Credit, Reserve Fund or a pool insurance
policy,
o coverage with respect to Special Hazard Losses may be provided
by one or more of a Letter of Credit, Reserve Fund or a Special
Hazard Insurance Policy,
o coverage with respect to Bankruptcy Losses may be provided by
one or more of a Letter of Credit, Reserve Fund or Bankruptcy
Bond and
o coverage with respect to Fraud Losses may be provided by one or
more of a Letter of Credit, Reserve Fund or Fraud Bond.
In addition, in lieu of or in addition to any or all of the foregoing
arrangements, credit enhancement may be in the form of subordination of one
or more classes of certificates to provide credit support to one or more
other classes of certificates.
The amounts and types of credit enhancement arrangements as well as
the provider of the credit enhancement arrangements, if applicable, with
respect to each series of certificates will be set forth in the related
prospectus supplement. To the extent provided in the applicable prospectus
supplement and the Pooling and Servicing Agreement, the credit enhancement
arrangements may be periodically modified, reduced and substituted for
based on the aggregate outstanding principal balance of the SAMs covered
thereby. Credit support for a series of certificates may cover one or more
other series of certificates issued by SAMCO Mortgage Securities Corp. or
others.
To the extent permitted by any applicable rating agency and provided
that the then current ratings of the certificates are maintained, coverage
under any credit enhancement may be cancelled or reduced.
POOL INSURANCE POLICIES
A separate pool insurance policy may be obtained for the SAM Pool and
issued by the insurer named in the related prospectus supplement. Each pool
insurance policy may cover loss by reason of default in payment on single
family loans in the SAM Pool in an amount specified in the prospectus
supplement. As more fully described in this prospectus, the master servicer
or servicer will present claims to the Pool Insurer on behalf of itself,
the Trustee and the holders of the certificates. The pool insurance
policies, however, are not blanket policies against loss, since claims may
only be made respecting particular defaulted SAMs and only upon
satisfaction of some conditions precedent described in this prospectus. A
pool insurance policy usually will not cover losses due to a failure to pay
or denial of a claim under a primary insurance policy.
In general, each pool insurance policy will provide that no claims
may be validly presented unless:
o any required primary insurance policy is in effect for the
defaulted SAM and a claim under a primary insurance policy has
been submitted and settled;
o hazard insurance on the related mortgaged property has been
kept in force and real estate taxes and other protection and
preservation expenses have been paid;
o if there has been physical loss or damage to the mortgaged
property, it has been restored to its physical condition
(reasonable wear and tear excepted) at the time of issuance of
the policy; and
o the insured has acquired good and merchantable title to the
mortgaged property free and clear of liens except some
permitted encumbrances.
Upon satisfaction of these conditions, the Pool Insurer will have the
option either to purchase the mortgaged property at a price equal to the
principal balance of the mortgaged property plus accrued and unpaid
interest at the stated interest rate to the date of purchase plus the
Indexed Appreciation Payment and some expenses incurred by the master
servicer or servicer on behalf of the Trustee and certificateholders, or to
pay the amount by which the sum of the principal balance of the defaulted
SAM plus accrued and unpaid interest at the stated interest rate plus the
Indexed Appreciation Payment to the date of payment of the claim and the
aforementioned expenses exceeds the proceeds received from an approved sale
of the mortgaged property, in either case net of some amounts paid or
assumed to have been paid under the related primary insurance policy. If
any mortgaged property securing a defaulted SAM is damaged and proceeds, if
any, from the related Hazard Insurance Policy or the applicable Special
Hazard Insurance Policy are insufficient to restore the damaged mortgaged
property to a condition sufficient to permit recovery under the pool
insurance policy, the master servicer or servicer will not be required to
expend its own funds to restore the damaged mortgaged property unless it
determines that the restoration will increase the proceeds to
certificateholders on liquidation of the SAM after reimbursement of the
master servicer or servicer for its expenses and the expenses will be
recoverable by it through proceeds of the sale of the mortgaged property or
proceeds of the related pool insurance policy or any related primary
insurance policy.
A pool insurance policy usually will not insure, and many primary
insurance policies do not insure, against loss sustained by reason of a
default arising from, among other things, fraud or negligence in the
origination or servicing of a SAM, including misrepresentation by the
mortgagor, the Originator or persons involved in the SAM's origination, or
failure to construct a mortgaged property in accordance with plans and
specifications. If so specified in the prospectus supplement, an
endorsement to the pool insurance policy, a bond or other credit support
may cover fraud in connection with the origination of SAMs. If specified in
the related prospectus supplement, a failure of coverage attributable to an
event specified above might result in a breach of the related seller's or
Originator's representations described above and might, in turn, give rise
to an obligation on the part of the seller or Originator to purchase the
defaulted SAM if the breach cannot be cured by the seller or Originator. No
pool insurance policy will cover, and many primary insurance policies do
not cover, a claim in respect of a defaulted SAM occurring when the
servicer of the SAM, at the time of default or thereafter, was not approved
by the applicable insurer.
The original amount of coverage under each pool insurance policy will
be reduced over the life of the related certificates by the aggregate
dollar amount of claims paid less the aggregate of the net dollar amounts
realized by the Pool Insurer upon disposition of all foreclosed properties
covered thereby. The amount of claims paid will include some expenses
incurred by the master servicer or servicer as well as accrued interest on
delinquent SAMs to the date of payment of the claim. Accordingly, if
aggregate net claims paid under any pool insurance policy reach the
original policy limit, coverage under that pool insurance policy will be
exhausted and any further losses will be borne by the certificateholders.
The terms of any pool insurance policy relating to a SAM Pool will be
described in the related prospectus supplement.
See "--Fraud Bond" in this prospectus for a discussion of the
possible effect of fraudulent conduct or negligence by the seller, the
master servicer, the servicer or the mortgagor with respect to a SAM on the
coverage of a pool insurance policy.
SUBORDINATION
If so specified in the applicable prospectus supplement,
distributions with respect to scheduled principal, principal prepayments,
stated interest rate, Appreciation Share or any combination of the above
that otherwise would have been payable to one or more classes of
certificates of a series, which may be appreciation certificates, will
instead be payable to holders of one or more other classes of the series,
which may also be appreciation certificates, under the circumstances and to
the extent specified in the prospectus supplement. If specified and as
described in the applicable prospectus supplement, delays in receipt of
payments on the SAMs and losses on defaulted SAMs may be borne first by the
various classes of Subordinated Certificates and thereafter by the various
classes of Senior Certificates. The aggregate distributions in respect of
delinquent payments on the SAMs over the lives of the certificates or at
any time, the aggregate losses in respect of defaulted SAMs which must be
borne by the Subordinated Certificates by virtue of subordination and the
amount of the distributions otherwise distributable to holders of
Subordinated Certificates that will be distributable to holders of Senior
Certificates on any Distribution Date may be limited as specified in the
applicable prospectus supplement. If the aggregate distribution with
respect to delinquent payments on the SAMs or aggregate losses in respect
of the SAMs were to exceed the total amounts payable and available for
distribution to holders of Subordinated Certificates or, if applicable,
were to exceed the specified maximum amount, holders of Senior Certificates
could experience losses on the certificates.
In addition to or in lieu of the foregoing, if so specified in the
applicable prospectus supplement, all or any portion of distributions
otherwise payable to holders of Subordinated Certificates on any
Distribution Date may instead be deposited into one or more reserve
accounts established by the Trustee. If so specified in the applicable
prospectus supplement, the deposits may be made on each Distribution Date,
on each Distribution Date for specified periods or until the balance in the
Reserve Account has reached a specified amount and, following payments from
the Reserve Account to holders of Senior Certificates or otherwise,
thereafter to the extent necessary to restore the balance in the Reserve
Account to required levels, in each case as specified in the prospectus
supplement. If so specified in the applicable prospectus supplement,
amounts on deposit in the Reserve Account may be released to SAMCO Mortgage
Securities Corp., the master servicer, the servicer or the seller, as
applicable, or the holders of any class of certificates at the times and
under the circumstances specified in the prospectus supplement.
If specified in the applicable prospectus supplement, various classes
of Senior Certificates and Subordinated Certificates may themselves be
subordinate in their right to receive some distributions to other classes
of Senior and Subordinated Certificates, respectively, through a cross
support mechanism or otherwise.
As between classes of Senior Certificates and as between classes of
Subordinated Certificates, distributions may be allocated among the
classes:
o in the order of their scheduled final distribution dates, o in
accordance with a schedule or formula,
o in relation to the occurrence of events, or
o otherwise, in each case as specified in the applicable
prospectus supplement.
As between classes of Subordinated Certificates, payments to holders of
Senior Certificates on account of delinquencies or losses and payments to
any Reserve Account will be allocated as specified in the applicable
prospectus supplement.
FRAUD BOND
Some or all of the primary insurance policies covering SAMs in any
SAM Pool may contain an exclusion from coverage for Fraud Losses. To
provide limited protection to certificateholders against losses in the
event that coverage relating to a SAM which otherwise would have been
available under a primary insurance policy is not ultimately available by
reason of an exclusion, if so specified in the applicable prospectus
supplement, a Fraud Instrument may be obtained or established by the master
servicer or the related servicer, as applicable, for the SAM Pool. The
type, coverage amount and term of any Fraud Instrument will be disclosed in
the applicable prospectus supplement or in the related Current report on
Form 8-K, and the coverage amount may be cancelled or reduced during the
life of the SAM Pool, provided that the then current ratings of the
certificates will not be adversely affected thereby. The master servicer or
the servicer, as applicable, may also replace the initial Fraud Instrument
with any other type of Fraud Instrument, provided that the then current
ratings of the certificates will not be adversely affected thereby. The
identity of the issuer of any Fraud Bond, Reserve Fund or Letter of Credit
providing the coverage and some financial information with respect to the
issuer will be contained in the applicable prospectus supplement or in the
related Current report on Form 8-K.
In addition, SAMCO Mortgage Securities Corp. understands that,
regardless of whether exclusion language, such as that described above, is
included in the insurance documents, it is the policy of some or all
issuers of primary insurance policies and of pool insurance policies to
deny coverage in circumstances involving fraudulent conduct or negligence
by any of the related seller, the master servicer, the related servicer or
the mortgagor. It is unclear whether any denial would be upheld by a court.
Neither the repurchase obligation of the master servicer or the related
seller, or servicer, nor any of the Fraud Instruments described above would
apply to any denial of coverage unless, as described above, the denial is
based upon a specific exclusion relating to fraudulent conduct or
negligence which is included in a primary insurance policy.
BANKRUPTCY BOND
The prospectus supplement for some series may specify that the master
servicer or the related servicer has undertaken to pay to the Trustee for
the benefit of certificateholders any portion of the principal balance of a
SAM which becomes unsecured under a proceeding under Chapter 7, 11 or 13 of
the Bankruptcy Code. If the obligation is undertaken, the master servicer
or the related servicer, as applicable, will also agree to pay to the
Trustee for the benefit of certificateholders any shortfall in payment of
principal, stated interest rate and additional interest payments resulting
from the recasting of any originally scheduled monthly principal and stated
interest payment or the payment of additional interest under a ruling under
the Bankruptcy Code. These payment obligations will be subject to the
limitations specified in the applicable Pooling and Servicing Agreement.
The master servicer or the related servicer, as applicable, will have the
option, in lieu of making the payments, to repurchase any SAM affected by
bankruptcy court rulings. To insure the master servicer or the related
servicer's obligation to make the payments described above, the master
servicer or the related servicer, as applicable, will obtain or establish a
Bankruptcy Instrument in an initial amount specified in the prospectus
supplement or in the related Current report on Form 8-K. The prospectus
supplement or Current report on Form 8-K may also specify that, provided
that the then current ratings of the certificates are maintained, coverage
under any Bankruptcy Instrument may be cancelled or reduced. The master
servicer or the related servicer, as applicable, may also replace the
initial method under which the coverage is provided with either of the
other two alternative methods, provided that the then current ratings of
the certificates will not be adversely affected thereby.
SPECIAL HAZARD INSURANCE POLICIES
If specified in the related prospectus supplement, a separate Special
Hazard Insurance Policy will be obtained for the SAM Pool and will be
issued by the Special Hazard Insurer named in the prospectus supplement.
Each Special Hazard Insurance Policy should protect holders of the related
certificates from loss by reason of damage to mortgaged properties caused
by some hazards, including earthquakes and, to a limited extent, tidal
waves and related water damage, not insured against under the standard form
of Hazard Insurance Policy for the respective states in which the mortgaged
properties are located or under a flood insurance policy if the mortgaged
property is located in a federally designated flood area, and loss caused
by reason of the application of the coinsurance clause contained in Hazard
Insurance Policies. See "Primary Insurance, Hazard Insurance;
Claims--Hazard Insurance." Special Hazard Insurance Policies will not cover
losses occasioned by war, civil insurrection, some governmental action,
errors in design, faulty workmanship or materials, except under some
circumstances, nuclear reaction, flood, if the mortgaged property is
located in a federally designated flood area, chemical contamination and
some other risks. The amount of coverage under any Special Hazard Insurance
Policy will be specified in the related prospectus supplement. Each Special
Hazard Insurance Policy will provide that no claim may be paid unless
hazard and, if applicable, flood insurance on the property securing the SAM
has been kept in force and other protection and preservation expenses have
been paid.
Each Special Hazard Insurance Policy will provide that where there
has been damage to property securing a foreclosed SAM, title to which has
been acquired by the insured, and to the extent the damage is not covered
by the Hazard Insurance Policy or flood insurance policy, if any,
maintained by the mortgagor or the master servicer or the related servicer,
the Special Hazard Insurer will pay the lesser of the cost of repair or
replacement of the property or upon transfer of the property to the Special
Hazard Insurer, the unpaid principal balance of the SAM at the time of
acquisition of the property by foreclosure or deed in lieu of foreclosure,
plus accrued interest and the related Indexed Appreciation Payments to the
date of claim settlement and some expenses incurred by the master servicer
or servicer with respect to the property. If the unpaid principal balance
of a SAM plus accrued interest and the related Indexed Appreciation
Payments and some expenses are paid by the Special Hazard Insurer, the
amount of further coverage under the related Special Hazard Insurance
Policy will be reduced by the amount less any net proceeds from the sale of
the property. Any amount paid as the cost of repair of the property will
further reduce coverage by the amount. So long as a pool insurance policy
remains in effect, the payment by the Special Hazard Insurer of the cost of
repair or of the unpaid principal balance of the related SAM plus accrued
interest and some expenses will not affect the total insurance proceeds
paid to certificateholders, but will affect the relative amounts of
coverage remaining under the related Special Hazard Insurance Policy.
Collection of insurance proceeds under a pool insurance policy is
usually not possible if the underlying property has been damaged and not
restored. A Special Hazard Insurance Policy permits full recovery under a
pool insurance policy relating to the SAMs backing the series of
certificates by providing insurance to restore damaged property. Each
Pooling and Servicing Agreement will provide that, if the related pool
insurance policy shall have been terminated or been exhausted through
payment of claims, the master servicer or servicer will be under no further
obligation to maintain the Special Hazard Insurance Policy.
To the extent specified in the related prospectus supplement, the
master servicer or the related servicer may deposit cash, an irrevocable
letter of credit or any other instrument acceptable to any rating agency
rating the certificates of the related series in a special trust account to
provide protection in lieu of or in addition to that provided by a Special
Hazard Insurance Policy. The amount of any Special Hazard Insurance Policy
or of the deposit to the special trust account in lieu of any Special
Hazard Insurance Policy relating to the certificates may be reduced so long
as any reduction will not result in a downgrading of the ratings of the
certificates by any rating agency.
The terms of any Special Hazard Insurance Policy relating to a SAM
Pool have been set forth herein and will be further described in the
related prospectus supplement as additional relevant information becomes
available.
LETTER OF CREDIT
If any component of credit enhancement as to any series of
certificates is to be provided by a Letter of Credit, a bank or other
entity will deliver to the Trustee an irrevocable Letter of Credit. The
Letter of Credit Bank and some information with respect thereto, as well as
the amount available under the Letter of Credit with respect to each
component of credit enhancement, will be specified in the applicable
prospectus supplement. The Letter of Credit will expire on the expiration
date set forth in the related prospectus supplement, unless earlier
terminated or extended in accordance with its terms.
The Letter of Credit may also provide for the payment of Advances
which the master servicer or the related servicer would be obligated to
make with respect to delinquent monthly payments.
RESERVE FUND
If so specified in the related prospectus supplement, the master
servicer, the servicer, SAMCO Mortgage Securities Corp., the Originator or
the seller, as applicable, will deposit or cause to be deposited in a fund
cash or Eligible Investments in specified amounts, or any other instruments
satisfactory to the rating agency or agencies rating the certificates
offered under the prospectus supplement, which will be applied and
maintained in the manner and under the conditions specified in the
prospectus supplement. In the alternative or in addition to the deposit, to
the extent described in the related prospectus supplement, a Reserve Fund
may be funded through application of all or a portion of amounts otherwise
payable on one or more related classes of certificates, from Retained Yield
or otherwise. Amounts in a Reserve Fund may be used to provide one or more
components of credit enhancement, or applied to reimburse the master
servicer or the related servicer, as applicable, as master servicer, or the
related servicer with respect to series of certificates as to which there
will be no master servicer, for outstanding Advances, or may be used for
other purposes, in the manner and to the extent specified in the related
prospectus supplement. Any Reserve Fund will not be deemed to be part of
the related trust fund.
Amounts deposited in any Reserve Fund for a series of certificates
will be invested in Eligible Investments by, or at the direction of, and
for the benefit of the master servicer, the related servicer, SAMCO
Mortgage Securities Corp. or the related seller, as applicable, or any
other person named in the related prospectus supplement. Any amounts
remaining in the Reserve Fund upon the termination of the trust fund will
be returned to whomever deposited the amounts in the Reserve Fund.
CERTIFICATE INSURANCE POLICIES
If so specified and as described in the related prospectus
supplement, the master servicer or the related servicer may obtain one or
more Certificate Insurance Policies, issued by insurers acceptable to the
rating agencies, insuring to the holders of one or more classes of
certificates the payment of amounts due in accordance with the terms of the
class or classes of certificates.
MAINTENANCE OF CREDIT ENHANCEMENTS; CLAIMS AND OTHER REALIZATION UPON
DEFAULTED SAMS
For each series of certificates which will be covered by a pool
insurance policy or a Letter of Credit established in lieu of the policy,
the coverage to be disclosed in the applicable prospectus supplement, the
master servicer or the related servicer, as applicable, will exercise its
best reasonable efforts to keep the pool insurance policy or Letter of
Credit in full force and effect throughout the term of the Pooling and
Servicing Agreement, unless coverage has been exhausted through the payment
of claims or until the instrument is replaced in accordance with the terms
of the Pooling and Servicing Agreement. The master servicer or the related
servicer, as applicable, may agree to pay the premiums for any pool
insurance policy, and the fee for any Letter of Credit, on a timely basis.
In the event that the insurer under the pool insurance policy ceases to be
a Qualified Insurer or the Letter of Credit Bank ceases to be acceptable to
the rating agencies, if any, rating the series of certificates the master
servicer or the related servicer, as applicable, will use its best
reasonable efforts to obtain from another Qualified Insurer or letter of
credit issuer a replacement policy or letter of credit comparable to the
pool insurance policy or Letter of Credit which it replaces, with total
coverage equal to the then outstanding coverage of the pool insurance
policy or Letter of Credit, provided that if the cost of the replacement
policy or letter of credit is greater than the cost of the pool insurance
policy or Letter of Credit being replaced, the coverage of the replacement
policy or letter of credit for a series of certificates may be reduced to a
level that its premium rate or cost does not exceed 150% of the premium
rate or cost of the pool insurance policy or Letter of Credit for a series
of certificates which is rated by one or more rating agencies, or 100% of
the premium rate or cost for the replacement policy or letter of credit for
a series which is not so rated.
In addition, the master servicer or the related servicer, as
applicable, may substitute at any time a pool insurance policy or Letter of
Credit for an existing pool insurance policy or Letter of Credit. In no
event, however, may the master servicer or the related servicer, as
applicable, provide a Letter of Credit in lieu of a pool insurance policy,
or vice versa, or substitute one instrument for another, except under the
circumstances detailed in the preceding paragraph, if the action will
impair the then current ratings, if any, of the certificates.
The master servicer or the related servicer, as applicable, may cause
a primary insurance policy to be maintained in full force and effect with
respect to each SAM it services with a LTV in excess of 80%; provided,
however, that if the LTV of a SAM based on a subsequent appraisal of the
mortgaged property is less than 80%, the primary insurance policy may be
terminated, if so specified in the applicable prospectus supplement. The
master servicer or the related servicer, as applicable, will agree to pay
the premium for each primary insurance policy on a timely basis in the
event that the mortgagor does not make the payments. See "Primary
Insurance, Hazard Insurance; Claims--Primary Insurance."
For each series of certificates which will be covered by a Special
Hazard Instrument, the coverage to be disclosed in the applicable
prospectus supplement, the master servicer or the related servicer, as
applicable, will exercise its best reasonable efforts to keep the Special
Hazard Instrument in full force and effect throughout the term of the
Pooling and Servicing Agreement, unless coverage has been exhausted through
the payment of claims or until the Special Hazard Instrument has been
replaced in accordance with the terms of the Pooling and Servicing
Agreement. So long as any applicable rating on a series of certificates
will be maintained, the master servicer or the related servicer, as
applicable, may at any time replace the initial instrument providing
special hazard coverage with either of the other two alternative methods.
The master servicer or the related servicer, as applicable, may agree to
pay the premium for any Special Hazard Insurance Policy, or Letter of
Credit obtained in lieu of a Special Hazard Insurance Policy, on a timely
basis. Any policy may provide for a fixed premium rate on the declining
balance of the SAMs. In the event that any Special Hazard Insurance Policy
is cancelled or terminated for any reason other than the exhaustion of
total policy coverage, the master servicer or the related servicer, as
applicable, is obligated either to substitute a Letter of Credit or Reserve
Fund or to exercise its best reasonable efforts to obtain from another
insurer a replacement policy comparable to the Special Hazard Insurance
Policy with a total coverage which is equal to the then existing coverage
of the Special Hazard Insurance Policy; provided, however, that if the cost
of any replacement policy shall be greater than the cost of the original
Special Hazard Insurance Policy, the amount of coverage of the replacement
policy may be reduced to a level so that the cost shall be equal to the
cost of the original Special Hazard Insurance Policy. As indicated above,
in lieu of obtaining a replacement Special Hazard Insurance Policy, the
master servicer or the related servicer, as applicable, may obtain a Letter
of Credit or establish a Reserve Fund in accordance with terms prescribed
by any applicable rating agency so that any rating obtained for the
certificates will not be impaired.
For each series of certificates which will be covered by a Fraud
Instrument, the coverage to be disclosed in the applicable prospectus
supplement, the master servicer or the related servicer, as applicable,
with respect to series of certificates as to which there will be no master
servicer, will exercise its best reasonable efforts to maintain and keep
any Fraud Instrument in full force and effect throughout the required term
as set forth in the applicable prospectus Supplement, unless coverage has
been exhausted through the payment of claims. The master servicer or the
related servicer, as applicable, will agree to pay the premium for any
Fraud Bond or Bankruptcy Bond on a timely basis.
For each series of certificates or class of certificates which will
be covered by a Certificate Insurance Policy or a Letter of Credit or
Reserve Fund, the coverage to be disclosed in the applicable prospectus
supplement, the master servicer or the related servicer, as applicable,
will exercise its best reasonable efforts to maintain and keep any
Certificate Insurance Policy, Letter of Credit or Reserve Fund in full
force and effect throughout the required term as set forth in the
applicable prospectus supplement. The master servicer or the related
servicer, as applicable, may agree to pay the premium for any Certificate
Insurance Policy on a timely basis.
The master servicer or the related servicer, as applicable, on behalf
of the Trustee and the certificateholders, will present claims to the
issuer of any applicable primary insurance policy, pool insurance policy,
Special Hazard Insurance Policy or Letter of Credit, or under any Reserve
Fund or other form of credit enhancement, and will take reasonable steps as
necessary to permit recovery under the insurance policies or alternative
coverages respecting defaulted SAMs. With respect to any applicable Fraud
Bond, Bankruptcy Bond or Certificate Insurance Policy, the Trustee will
present claims to the issuer of the bond or policy on behalf of the
certificateholders. As set forth above, all collections by the master
servicer or the related servicer, as applicable, under the policies or
alternative coverages that are not applied to the restoration of the
related mortgaged property are to be deposited in the applicable Collection
Account or the Distribution Account, subject to withdrawal as heretofore
described.
If any property securing a defaulted SAM is damaged and proceeds, if
any, from the related hazard insurance policy or any applicable Special
Hazard Insurance Policy, or Letter of Credit or Reserve Fund, as the case
may be, are insufficient to restore the damaged property to a condition
sufficient to permit recovery under any applicable pool insurance policy or
primary insurance policy, the master servicer or the related servicer, as
applicable, will not be required to expend its own funds to restore the
damaged property unless it determines that the restoration will increase
the proceeds to certificateholders upon liquidation of the SAM after
reimbursement of the master servicer or the related servicer, as
applicable, for its expenses and that the expenses will be recoverable to
it through Liquidation Proceeds or Insurance Proceeds.
If recovery under any pool insurance policy, or Letter of Credit
established in lieu of the policy, or primary insurance policy is not
available, because the master servicer or the servicer, as applicable, has
been unable to make the determinations described in the second preceding
paragraph or otherwise, the master servicer or the related servicer, as
applicable, is nevertheless obligated to follow the normal practices and
procedures as it deems necessary or advisable to realize upon the defaulted
SAM. If the proceeds of any liquidation of the property securing the
defaulted SAM are less than the principal balance of the defaulted SAM plus
accrued and unpaid interest thereon at the applicable Stated Rate, after
deduction of the Retained Yield, if any, or a pro rata portion of the
Retained Yield as required by the applicable Pooling and Servicing
Agreement, plus the applicable Indexed Appreciation Payment,
certificateholders in the aggregate will realize a loss in the amount of
the difference plus the aggregate of expenses incurred by the master
servicer or the related servicer, as applicable, in connection with the
proceedings and which are reimbursable under the Pooling and Servicing
Agreement. In addition, and as set forth above, in the event that the
master servicer or the servicer, as applicable, has expended its own funds
to restore damaged property and the funds have not been reimbursed under
any Special Hazard Insurance Policy, Letter of Credit or Reserve Fund, it
will be entitled to receive from the Distribution Account, out of related
Liquidation Proceeds or Insurance Proceeds, an amount equal to the expenses
incurred by it, in which event the certificateholders may realize a loss up
to the amount so charged. Since Insurance Proceeds cannot exceed deficiency
claims and some expenses incurred by the master servicer or the related
servicer, as applicable, no insurance payments will result in a recovery to
certificateholders which exceeds the principal balance of the defaulted SAM
together with accrued and unpaid interest thereon at the applicable Stated
Rate plus the applicable Indexed Appreciation Payment. In addition, where
property securing a defaulted SAM can be resold for an amount exceeding the
principal balance of any related Mortgage Note together with accrued
interest and any Indexed Appreciation Payment and expenses, it may be
expected that, where retention of any amount is legally permissible, the
insurer will exercise its right under any related pool insurance policy to
purchase the property and realize for itself any excess proceeds. Further,
with respect to some series of certificates, if so provided in the
applicable prospectus supplement, the master servicer or the related
servicer, as applicable, may have the option to purchase from the trust
fund any defaulted SAM after a specified period of delinquency. If a
defaulted SAM is not so removed from the trust fund, then, upon the final
liquidation of the SAM, if a loss is realized which is not covered by any
applicable form of credit enhancement or other insurance, the
certificateholders will bear the loss. However, if a gain results from the
final liquidation of a defaulted SAM which is not required by law to be
remitted to the related mortgagor, the master servicer or the related
servicer, as applicable, may be entitled to retain the gain as additional
servicing compensation.
LEGAL CONSIDERATIONS CONCERNING SAMS
LEGAL AUTHORITY TO ORIGINATE SAMS
Nationally Chartered Lenders
The OCC has informally determined that national banks which it
charters have implicit authority to accept consideration for a mortgage
loan in the form of equity appreciation in the real estate securing the
loan, provided the national bank expects to receive money rather than a
possessory interest in real property and the principal is to be repaid.
National banks are required to comply with OCC requirements when making
residential mortgage loans and these requirements would also apply to SAMs.
In a statement of policy, the OTS determined to the same effect that
Federal Thrifts chartered by the OTS may lend on terms where the principal
is to be repaid and the institution receives a "substantial payment of
interest" periodically. The OTS has not prescribed any other terms or
limitations specific to SAMs. However, the OTS's predecessor, the FHLBB,
originally proposed to cap the maximum share in the appreciation of a
home's value to 40 percent, to limit the maximum term to 10 years, and to
obligate the lender to refinance the mortgage at maturity. These proposed
limits were dropped when the current OTS's SAM statement of policy was
adopted.
State Chartered Lenders
Alternative mortgage transactions, including SAMs, have historically
been subjected to a variety of restrictions. The restrictions differed from
state to state, resulting in difficulties in determining whether a
particular alternative mortgage instrument originated by a state chartered
lender was in compliance with applicable law. These difficulties were
alleviated by the enactment of the Parity Act which allows state chartered
banks, thrifts and most other mortgage lenders to "make, purchase and
enforce" qualifying alternative mortgage transactions, notwithstanding any
state constitution, law or regulation. Alternative mortgage transactions
include any loan or credit sale secured by an "interest in residential real
property, a dwelling, all stock allocated to a dwelling unit in a
residential cooperative housing corporation," or some residential
manufactured homes, "involving any...type of rate, method of determining
return, term, repayment, or other variation...including without limitation,
transactions that involve the sharing of equity or appreciation." In order
to qualify as an alternative mortgage transaction, the Parity Act requires
that a state chartered lender other than a state bank comply with OTS
regulations applicable to federal thrift mortgage lending. The OTS by
regulation specifies that the lenders making any alternative mortgage
transaction, as alternative mortgage transaction is defined by the Parity
Act, are protected by the Parity Act's preemption. Likewise, the OCC
provides the protection to state bank lenders that comply with OCC
adjustable rate mortgage regulations. The Parity Act provides that any
state may reject applicability of its provisions by adopting, prior to
October 15, 1985, a law or constitutional provision expressly rejecting the
application of the provisions. Maine, Massachusetts, New York and South
Carolina have exercised this override of the Parity Act.
APPLICABILITY OF USURY LAWS
National banks and federal thrifts are made subject by their
respective authorizing acts to limits on interest charged by the law of the
state where they are located, subject to penalties. Congress enacted the
Monetary Control Act which preempts the application of any state law or
constitution limiting the "rate or amount of interest, discount points,
finance charges, or other charges which may be charged, taken, received, or
reserved" for loans secured by first liens on residential real property,
stock in a residential cooperative housing corporation or some residential
manufactured homes. Eligible lenders include all national and state banks,
federal and state thrifts, Department of Housing and Urban Development
approved mortgage-insurance program lenders and any person who regularly
extends or arranges for the extension of credit and makes or invests in
residential real property loans, subject to limits. The Monetary Control
Act's preemption is not unlimited. The implementing regulation permits a
state at any time to "adopt a provision of law placing limitations on
discount points or other charges on any loan." In addition, the law does
not preempt any state laws on "prepayment charges, attorneys' fees, late
charges or other provisions designed to protect borrowers."
The Monetary Control Act provides that any state may reject
applicability of its provisions by adopting, prior to April 1, 1983, a law
or constitutional provision expressly rejecting the application of the
provisions. Colorado, Georgia, Hawaii, Kansas, Maine, Massachusetts,
Minnesota, Nebraska, Nevada, North Carolina, South Carolina, South Dakota
and Wisconsin have exercised this override of the Monetary Control Act.
The term "interest" is not defined by the Monetary Control Act. The
preemption protection provided for a SAM by the Monetary Control Act is
qualified by the possibility that equity appreciation could be determined
not to be "interest" and therefore not within the scope of the statute.
Alternatively, a plaintiff could argue that the shared appreciation portion
of the loan is not subject to federal preemption as an "other charge"
subject to state restrictions, or that the equity interest portion of a SAM
is protected from federal preemption by a state "provision designed to
protect borrowers." In the event that equity appreciation is not considered
"interest" under the Monetary Control Act or a state has opted out of the
Monetary Control Act, the Parity Act provides broad preemptive authority
for a qualifying SAM, including the preemption of state usury limitations.
The Parity Act specifically provides that "[a]n alternative mortgage
transaction may be made by a housing creditor in accordance with this
section, notwithstanding any State constitution, law, or regulation." While
the Parity Act's preemption appears to be express, complete and unlimited
by its terms, the limited case law applying the Parity Act has not focused
on the preemption of usury statutes. Rather, the banking agencies and
courts which have applied the Parity Act have focused on the stated purpose
of the statute to provide parity to state chartered institutions or
non-bank lenders with respect to the structure of a loan. They have not
focused on the Parity Act as a mechanism to override state interest rate
ceilings, even though the ability to make an alternative mortgage
transaction might at times be inconsistent with the ceilings.
No SAMs will be originated in the states which have opted out of the
Parity Act. Under the Program, each Originator is required to represent and
warrant to SAMCO Mortgage Securities Corp. that all SAMs are originated in
full compliance with applicable state laws, including usury laws. Based
upon the representations and warranties from the Originators, SAMCO
Mortgage Securities Corp. will, if required by the rating agencies rating
the certificates, make a similar representation and warranty in the Pooling
and Servicing Agreement for each series to the Trustee for the benefit of
certificateholders. See "Description of the Certificates--Representations
and Warranties."
DISCLOSURE REQUIREMENTS RELATED TO SAMS
SAMs, as any other mortgage loan, are subject to the disclosure
requirements of the federal TIL Act and Regulation Z. SAMs are subject to
the disclosure provisions of the TIL Act and Regulation Z, which require
creditors to disclose to consumers the terms of all consumer credit
transactions. Basic credit terms like the payment amounts, the finance
charge, and the total of payments must be disclosed. Rather than develop
specific rules pertaining to the many unique mortgage products, the Board
of Governors of the Federal Reserve System has opted to treat alternative
mortgage instruments such as SAMs within the already developed framework
for mortgage disclosure. As a result, although technically not
variable-rate mortgages, SAMs are treated as variable-rate mortgages, and a
SAM Originator consequently must disclose:
o the circumstances under which the annual percentage rate may
increase;
o any limitations on the increase;
o the effect of an increase; and
o an example of the payment terms that would result from an
increase. Similarly, the OTS has determined that the disclosure
requirements prescribed by the OTS's adjustable rate mortgage
regulation are applicable to alternative mortgage transactions.
Although SAMs would not appear to fit within the OTS's
definition of an adjustable rate mortgage, the OTS would likely
look to the treatment of SAMs under the TIL Act, where SAMs are
subject to variable-rate disclosures.
In addition, the FH Act and the ECOA prohibit discrimination on the
basis of any of a number of prohibited factors. As interpreted by the
courts and applied by the banking and enforcement agencies, underwriting
standards, marketing, pricing and other aspects of mortgage lending may be
regarded as discriminatory if members of protected classes or neighborhoods
that are predominantly constituted of the class members are treated
differently from other mortgagors or neighborhoods. Violations of the fair
lending laws could subject a lender to liability through an action brought
by the federal government or a private party. Lending discrimination may be
established by overt or circumstantial evidence of intentional
discrimination resulting in "disparate treatment," or evidence that a
lender's facially neutral policies and practices resulted in a "disparate
impact" on members of a protected class.
SOME STATE LAW CONSIDERATIONS
If required given the concentration of SAMs originated in any one or
more states, some state law considerations applicable to the SAMs in the
SAM Pool are described in the applicable prospectus supplement.
SOME LEGAL CONSIDERATIONS APPLICABLE TO SAMS
Foreclosure
Foreclosure may be accomplished by judicial action. The action is
initiated by the service of legal pleadings upon all parties having an
interest in the real property. Delays in completion of the foreclosure may
occasionally result from difficulties in locating the necessary defendant
parties. Judicial foreclosure proceedings are usually not contested by any
of the defendant parties. However, when the lender's right to foreclose is
contested, the legal proceedings necessary to resolve the issue can be time
consuming. After the completion of judicial foreclosure, the court would
issue a judgment of foreclosure and would usually appoint a referee or
other court officer to conduct the sale of the property.
In many states, foreclosure of a mortgage or deed of trust may also
be accomplished by a non- judicial sale under a specific provision in the
mortgage or deed of trust which authorizes the sale of the property at
public auction upon default by the mortgagor. The laws of the various
states establish notice requirements for non-judicial foreclosure sales. In
some states, notice of default must be recorded and sent to the mortgagor
and to any person who has recorded a request for a copy of a notice of
default and notice of sale. In addition, notice must be provided in some
states to some other persons including junior lienholders and any other
individual having an interest in the real property. In some states, the
mortgagor, or any other person having a junior encumbrance on the real
estate, may, during a reinstatement period, cure the default by paying the
entire amount in arrears, plus the costs and expenses incurred in enforcing
the obligation. Usually state law controls the amount of foreclosure
expenses and costs, including limited attorneys' fees, which may be
recovered by an Originator. Some states also require a notice of sale to be
posted in a public place and published for a specified period of time in
one or more newspapers. In addition, some state laws require that a copy of
the notice of sale be posted on the property and sent to all parties having
an interest in the real property.
In case of foreclosure under either a mortgage or a deed of trust,
the sale by the receiver or other designated officer or by the trustee is a
public sale. However, because of a number of factors, including the
difficulty a potential buyer at the sale would have in determining the
exact status of title and the fact that the physical condition of the
property may have deteriorated during the foreclosure proceedings, it is
uncommon for a third party to purchase the property at the foreclosure
sale. Rather, it is common for the lender to purchase the property from the
trustee or referee with a credit bid in an amount equal to the principal
amount of the mortgage or deed of trust, accrued and unpaid interest,
including additional interest, and the expenses of foreclosure. Thereafter,
the lender will assume the burdens of ownership, including obtaining
casualty insurance and making the repairs at its own expense as are
necessary to render the property suitable for sale. The lender will
commonly obtain the services of a real estate broker and pay the broker's
commission in connection with the sale of the property. Depending upon
market conditions, the ultimate proceeds of the sale of the property may
not equal the Originator's investment in the property.
Courts have imposed equitable principles upon foreclosure
proceedings. These equitable principles are designed to relieve the
mortgagor from the legal effect of his default under the loan documents.
Examples of judicial remedies that have been fashioned include judicial
requirements that the Originator undertake affirmative and sometimes
expensive actions to determine the causes for the mortgagor's default and
the likelihood that the mortgagor will be able to reinstate the loan. In
some cases, courts have substituted their judgment for the lender's
judgment and have required that lenders reinstate loans or recast payment
schedules in order to accommodate mortgagors who are suffering from a
temporary financial disability. In other cases, courts have limited the
right of the lender to foreclose if the default under the security
instrument is not monetary, such as the mortgagor failing to adequately
maintain or insure the property or the mortgagor executing a second
mortgage or deed of trust affecting the property. Some courts have been
faced with the issue of whether or not federal or state constitutional
provisions reflecting due process concerns for adequate notice require that
borrowers receive notices in addition to the statutorily prescribed
minimum. For the most part, these cases have upheld the notice provisions
as being reasonable or have found that the foreclosure sale does not
involve sufficient state action to afford constitutional protections to the
borrower.
Rights of Redemption
In some states, after sale under a deed of trust or foreclosure of
the mortgage, there are statutory periods during which the mortgagor and
foreclosed junior lienholders may redeem the property from the foreclosure
sale. One effect of the statutory right of redemption is to diminish the
ability of the Originator to sell the foreclosed property, because the
right of redemption would defeat the title of any purchaser from the
Originator subsequent to foreclosure or sale under a deed of trust. As a
practical matter, the Originator may therefore be forced to retain the
mortgagor's property and pay the expenses of ownership until the redemption
period has run.
Anti-Deficiency Legislation and Other Limitations on Originators
Some states have imposed statutory prohibitions which restrict or
eliminate the remedies of an Originator under a deed of trust or a
mortgage. In some states, statutes limit the right of the lender to obtain
a deficiency judgment against the mortgagor following sale under a deed of
trust or foreclosure of the mortgage. A deficiency judgment would be a
personal judgment against the former mortgagor equal in most cases to the
difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Other statutes may require the
lender to exhaust the security afforded under a deed of trust or mortgage
by foreclosure in an attempt to satisfy the full debt before bringing a
personal action against the mortgagor. Some state statutes also prohibit
any deficiency judgment where the loan proceeds were used to purchase an
owner-occupied dwelling. Finally, other statutory provisions limit any
deficiency judgment against the former mortgagor following a judicial sale
to the excess of the outstanding debt over the fair market value of the
property at the time of the public sale. The basic purpose of these
statutes is to prevent a lender from obtaining a large deficiency judgment
against the former mortgagor as a result of low or no bids at the judicial
sale.
In addition to anti-deficiency and related legislation, numerous
other statutory provisions, including the federal bankruptcy laws and state
laws affording relief to debtors, may interfere with or affect the ability
of the secured mortgage lender to collect the full amount of interest due
or realize upon its security. For example, with respect to the Bankruptcy
Code, a court with federal bankruptcy jurisdiction may permit a mortgagor
through his or her Chapter 11, Chapter 12 or Chapter 13 rehabilitative plan
to cure a monetary default in respect of a mortgage loan on the mortgagor's
residence by paying arrearages within a reasonable time period and
reinstating the original mortgage loan payment schedule even though the
lender accelerated the mortgage loan and foreclosure proceedings had
occurred prior to the filing of its petition. Some courts with federal
bankruptcy jurisdiction have approved plans, based on the particular facts
of the reorganization case, that effected the curing of a mortgage loan
default by paying arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also held that the
terms of a mortgage loan secured by property of the mortgagor may be
modified. These courts have held that the modifications may include
reducing the amount of each monthly payment, changing the rate of interest,
altering the repayment schedule, and reducing the lender's security
interest to the value of the residence, thus leaving the lender in the
position of an unsecured creditor for the difference between the value of
the residence and the outstanding balance of the loan.
The Code provides priority to some tax liens over the lien of the
security instrument. Numerous federal and some state consumer protection
laws impose substantive requirements upon lenders in connection with the
origination and the servicing of mortgage loans. These laws include the
federal TIL Act, Real Estate Settlement Procedures Act, ECOA, Fair Credit
Billing Act, Fair Credit Reporting Act and related statutes. These federal
laws impose specific statutory liabilities upon lenders who originate
mortgage loans and who fail to comply with the provisions of the law. In
some cases, this liability may affect assignees of the mortgage loans.
Enforceability of Some Provisions
The standard forms of note, mortgage and deed of trust used by
Originators usually contain "due-on-sale" clauses. These clauses permit the
Originator to accelerate the maturity of the loan if the mortgagor sells,
transfers or conveys the property. The enforceability of these clauses was
the subject of legislation and litigation in many states, and in some cases
the enforceability of these clauses was limited or denied. However, the
Garn-St Germain Act purports to pre-empt state statutory and case law that
prohibits the enforcement of "due-on-sale" clauses and permits lenders to
enforce these clauses in accordance with their terms, subject to some
limited exceptions as described in this prospectus. The Garn-St Germain Act
does "encourage" lenders to permit assumption of loans at the original rate
of interest or at some other rate less than the average of the original
rate and the market rate. In addition, some states have continuing
restrictions on the enforceability of due-on-sale clauses for some loans.
The Garn-St Germain Act also sets forth specific instances in which a
mortgage lender covered thereby, including federal savings associations and
federal savings banks, may not exercise a "due-on-sale" clause,
notwithstanding the fact that a transfer of the property may have occurred.
These include intrafamily transfers, leases of less than three years, the
creation of a junior encumbrance, some transfers by operation of law and
transfers or dispositions described in regulations prescribed by the OTS.
Regulations promulgated under the Garn-St Germain Act by the FHLBB, now the
OTS, and statutes in some states also prohibit the imposition of a
prepayment penalty upon the acceleration of a loan under a "due-on-sale"
clause. In addition, a few states have exercised their rights under the
Garn-St Germain Act to limit the enforceability of the due-on-sale clauses
in some loans made prior to passage of the Garn-St Germain Act.
A consequence of the inability to enforce a due-on-sale clause may be
that a mortgagor's buyer may assume the existing mortgage loan rather than
paying it off, which may have an impact upon the average life of the SAMs
and the ability of the lender to collect equity appreciation from the
mortgagor.
Under the terms of the Relief Act, a mortgagor who enters military
service after the origination of the mortgagor's mortgage loan, including a
mortgagor who is a member of the National Guard or is in reserve status at
the time of the origination of the mortgage loan and is later called to
active duty, may not be charged interest above an annual rate of 6% during
the period of the mortgagor's active duty status, unless a court orders
otherwise upon application of the lender. Any shortfall in interest or
additional interest collections resulting from the application of the
Relief Act, to the extent not covered by any applicable credit
enhancements, could result in losses to the holders of the certificates. In
addition, the Relief Act imposes limitations which would impair the ability
of the master servicer or servicer to foreclose on an affected SAM during
the mortgagor's period of active duty status. Thus, in the event that a SAM
goes into default, there may be delays and losses occasioned by the
inability to realize upon the mortgaged property in a timely fashion.
Environmental Considerations
Real property pledged as security to a lender may be subject to
unforeseen environmental risks. Under the laws of some states,
contamination of a property may give rise to a lien on the property to
assure the payment of costs of clean-up. In several states, a lien has
priority over the lien of an existing mortgage against the property.
In addition, under the laws of some states and under the federal
CERCLA, a lender may be liable, as an "owner" or "operator," for costs
arising out of releases or threatened releases of hazardous substances that
require remedy at a mortgaged property. CERCLA imposes liability for the
costs on any and all "responsible parties," including the current owner or
operator of a contaminated property, regardless of whether or not the
environmental damage was caused by a prior owner. However, CERCLA excludes
from the definition of "owner or operator" a secured creditor who holds
indicia of ownership primarily to protect its security interest but does
not "participate in the management" of a mortgaged property. The conduct
which constitutes "participation in the management," with the result that
the lender would lose the protection of the exclusion for secured
creditors, has been a matter of judicial interpretation of the statutory
language, and court decisions have historically been inconsistent. In 1990,
the United States Court of Appeals for the Eleventh Circuit suggested, in
United States v. Fleet Factors Corp., that the mere capacity of the lender
to influence a borrower's decisions regarding disposal of hazardous
substances was sufficient participation in the management of the borrower's
business to deny the protection of the secured creditor exclusion to the
lender, regardless of whether the lender actually exercised that influence.
Other judicial decisions did not interpret the secured creditor exclusion
as narrowly as did the Fleet Factors decision.
This ambiguity appears to have been resolved by the enactment of the
Asset Conservation Act, which took effect on September 30, 1996. The Asset
Conservation Act provides that in order to be deemed to have participated
in the management of a mortgaged property, a lender must actually
participate in the operational affairs of the property or of the borrower.
The Asset Conservation Act also provides that participation in the
management of the property does not include "merely having the capacity to
influence, or unexercised right to control" operations. Rather, a lender
will lose the protection of the secured creditor exclusion only if it
exercises decision making control over the mortgagor's environmental
compliance and hazardous substance handling and disposal practices, or
assumes day-to-day management of all operational functions of the mortgaged
property. It should also be noted, however, that liability for costs
associated with the investigation and clean-up of environmental
contamination may also be governed by state law, which may not provide any
specific protections to lenders, or, alternatively, may not impose
liability on lenders at all.
CERCLA does not apply to petroleum products, and the secured creditor
exclusion, therefore, does not apply to liability for clean-up costs
associated with releases of petroleum contamination. Federal regulation of
underground petroleum storage tanks, other than heating oil tanks, is
governed by Subtitle I of the federal RCRA. The EPA has promulgated a
lender liability rule for underground storage tanks regulated by Subtitle I
of RCRA. Under the EPA rule, a holder of a security interest in an
underground storage tank, or real property containing an underground
storage tank, is not considered an operator of the underground storage tank
as long as petroleum is not added to, stored in or dispensed from the tank
by the holder of the security interest. Moreover, amendments to RCRA,
enacted in 1996, concurrently with the CERCLA amendments discussed in the
previous paragraph, extend to the holders of security interests in
petroleum underground storage tanks the same protections accorded to
secured creditors under CERCLA. Again, it should be noted, however, that
liability for clean-up of petroleum contamination may be governed by state
law, which may not provide any specific protection for Originators or,
alternatively, may not impose liability on Originators at all.
At the time the SAMs were originated, no environmental assessment or
a very limited environment assessment of the mortgaged properties will have
been conducted.
Violation of Various Federal and State Laws May Result in Losses on the SAMs
Applicable state laws usually regulate interest rates and other
charges and require disclosures. In addition, most states have other laws,
public policies and principles of equity relating to the protection of
consumers, unfair and deceptive practices and other practices that may
apply to the origination, servicing and collection of the SAMs.
The SAMs may also be subject to various federal laws. The
Truth-in-Lending Act and Regulation Z and the Real Estate Settlement
Procedures Act and Regulation X require disclosures to the borrowers
regarding the terms of the SAMs. The Equal Credit Opportunity Act and
Regulation B and the Fair Housing Act and the regulations prohibit
discrimination in the provision of housing credit on the basis of some
protected classes. The Fair Credit Reporting Act regulates the use and
reporting of information related to the borrower's credit experience. Other
federal laws may also apply.
Depending on the provisions of the applicable law and the specific
facts and circumstances involved, violations of the laws, policies and
principles of equity may limit the ability of the master servicer or a
servicer to collect all or part of the principal of or interest on the
SAMs, may entitle the mortgagor to rescind the loan or to a refund of
amounts previously paid and, in addition, could subject the owner of the
SAM to damages and administrative sanctions.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended,
imposes some requirements on employee benefit plans and other benefit plans
or arrangements which are subject to ERISA or Section 4975 of the Code and
on those persons who are fiduciaries with respect to Plans or otherwise
responsible for the investment of "plan assets" of Plans. Moreover, based
on the reasoning of the United States Supreme Court in John Hancock Life
Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517 (1993), an insurance
company's general account may be deemed to include assets of Plans
investing in the general account, e.g., through the purchase of an annuity
contract. In accordance with the fiduciary standards of ERISA, an ERISA
Plan fiduciary should consider whether an investment in the certificates is
permitted by the documents and instruments governing the Plan, consistent
with the Plan's overall investment policy and appropriate in view of the
composition of its investment portfolio.
Employee benefit plans which are governmental plans, as defined in
Section 3(32) of ERISA, and some church plans, as defined in Section 3(33)
of ERISA, are not subject to the requirements of ERISA or Section 4975 of
the Code. Accordingly, assets of the plans may be invested in the
certificates subject to the provisions of applicable state law and, in the
case of any plan which is qualified under Section 401(a) of the Code, the
restrictions imposed under Section 503 of the Code.
In addition to imposing fiduciary standards, ERISA and the Code
prohibit a broad range of transactions involving Plan Assets and some
persons who have some specified relationships to the Plan. If the assets of
a SAM Pool are treated for purposes of ERISA and Section 4975 of the Code
as Plans or other entities holding Plan Assets with respect to Plans,
collective investment funds, insurance company general or separate accounts
that purchase or hold certificates of the applicable series, an investment
in certificates by any Plan Asset Investor might constitute or give rise to
a prohibited transaction under ERISA or Section 4975 of the Code, unless a
statutory or administrative exemption applies. Violation of the prohibited
transaction rules could result in the imposition of excise taxes or other
penalties under ERISA or Section 4975 of the Code, as applicable.
PLAN ASSETS REGULATION
The United States Department of Labor has issued a final regulation
under which the assets of an entity in which a Plan Asset Investor makes an
equity investment will be treated as Plan Assets in some circumstances.
Unless the Regulation provides an exception from this "plan asset"
treatment, and if an exemption is not otherwise available under ERISA, an
undivided portion of the assets of a SAM Pool will be treated, for purposes
of applying the fiduciary standards and prohibited transaction rules of
ERISA and Section 4975 of the Code, as Plan Assets with respect to each
Plan Asset Investor.
The Regulation provides an exception from "plan asset" treatment for
securities issued by an entity if, immediately after the most recent
acquisition of any equity interest in the entity, less than 25% of the
value of each class of equity interests in the entity, excluding interests
held by a person who has discretionary authority or control with respect to
the assets of the entity, or any affiliate of a person, is held by "benefit
plan investors" which are Plans, governmental, foreign and other employee
benefit plans not subject to ERISA and entities holding Plan Assets.
Because the availability of this exemption with respect to any SAM Pool
depends upon the identity of the certificateholders of the applicable
series at any time, there can be no assurance as to whether any series or
class of certificates will qualify for this exemption.
PROHIBITED TRANSACTION CLASS EXEMPTION 83-1
Prohibited Transaction Class Exemption 83-1, Class Exemption for
Certain Transactions Involving Mortgage Pool Investment Trusts, applicable
to SAMs, permits, subject to conditions, some transactions involving the
creation, maintenance and termination of some residential mortgage pools
and the acquisition and holding of some residential mortgage pool
pass-through certificates by Plan Asset Investors, regardless of whether
the mortgage pool is exempt from "plan asset" treatment or the transactions
would otherwise be prohibited under ERISA or Section 4975 of the Code. If
the general conditions of PTCE 83-1 are satisfied, an investment by a Plan
in certificates will be exempt from the prohibitions of Section 406(a) of
ERISA, relating to Plan Asset transactions involving parties-in-interest
who are not fiduciaries, if the certificates are not subordinated to the
rights and interests evidenced by other certificates of the same Mortgage
Pool and are purchased at no more than fair market value, and will be
exempt from the prohibitions of Sections 406(b)(1) and (2) of ERISA,
relating to Plan Asset transactions with fiduciaries if, in addition, the
purchase is approved by an independent fiduciary, the Plan Asset Investor
pays no more for the certificates than would be paid in an arm's length
transaction with an unrelated party, no sales commission is paid to SAMCO
Mortgage Securities Corp. as SAM Pool sponsor, the Plan Asset Investor does
not purchase more than 25% of the certificates of the applicable series,
and at least 50% of the certificates of that series is purchased by persons
independent of SAMCO Mortgage Securities Corp., the Trustee and the
insurer, as applicable.
PTCE 83-1 sets forth three conditions which must be satisfied for any
transaction to be eligible for exemption:
o the existence of a pool trustee who is not an affiliate of the
pool sponsor;
o the maintenance of a system of insurance or other protection
for the pooled shared appreciation mortgage loans and property
securing the loans, and for indemnifying certificateholders
against reductions in pass-through payments due to property
damage or defaults in loan payments; and
o a limitation on the amount of the payment retained by the pool
sponsor, together with other funds inuring to its benefit, to
not more than adequate consideration for selling the shared
appreciation mortgage loans plus reasonable compensation for
services provided by the pool sponsor to the mortgage pool.
The Trustee for each series may be affiliated with SAMCO Mortgage
Securities Corp., and the first condition of PTCE 83-1 will be satisfied
for each series. With respect to the second condition of PTCE 83-1, SAMCO
Mortgage Securities Corp. intends to use its best efforts to establish for
each series of certificates an insurance, indemnification, subordination or
other method of credit support which will adequately protect the SAM Pools
and indemnify certificateholders of the applicable series against
pass-through payment reductions resulting from property damage or defaults
in loan payments. See "Description of Credit Enhancements." The amount,
method and description of the credit support method applicable to a series
of certificates will be set forth in the related prospectus supplement.
With respect to the third condition of PTCE 83-1, SAMCO Mortgage Securities
Corp. intends to use its best efforts to establish for each series a
compensation method which will produce for SAMCO Mortgage Securities Corp.
total compensation which will not exceed adequate consideration for forming
the SAM Pool, selling the certificates and serving as master servicer or
servicer of the SAM Pool. However, SAMCO Mortgage Securities Corp. does not
guarantee that its credit support and compensation methods will be
sufficient to meet the second and third conditions with respect to any
series.
As indicated in the two preceding paragraphs, the continued
maintenance of a system of insurance or other protection for the pooled
shared appreciation mortgage loans and property securing the loans, and for
indemnifying certificateholders against reductions in pass-through payments
due to property damage or defaults in loan payments, is one of the three
conditions that must be satisfied for any transaction involving a SAM Pool
to remain eligible for exemption by PTCE 83-1 from the prohibited
transaction rules of ERISA and Section 4975 of the Code. If the credit
support method established for any series is cancelled or terminated, or if
the credit support is reduced to such an extent that its coverage amount is
less than the greater of 1% of the aggregate unpaid principal balance of
the SAMs or the unpaid principal balance of the largest single SAM, then
the SAM Pool relating to that series may no longer satisfy the conditions
of PTCE 83-1. In that event, the exemption from the prohibited transaction
rules afforded by PTCE 83-1 may no longer be available. See "Description of
Credit Enhancements."
One or more series of certificates may be offered to Plan Asset
Investors through a forward delivery commitment contract, which is a
contract for the purchase of certificates to be delivered at an agreed
future settlement date. PTCE 83-1 permits the sale of certificates to a
Plan Asset Investor under a forward delivery commitment contract, provided
that the forward delivery commitment is expressly approved by a fiduciary
who is independent of SAMCO Mortgage Securities Corp., the Trustee, the
insurer, if any and their respective affiliates, and who has the authority
to manage and control the Plan Assets being committed for investment in the
certificates.
PTCE 83-1 will not provide exemptive relief with respect to a series
of certificates evidencing interests in a trust fund that include loans to
cooperatives. If a series of certificates is subdivided into two or more
classes which are entitled to disproportionate allocations of the principal
and interest payments on the SAMs, the availability of the exemption
afforded by PTCE 83-1 may be adversely affected, as described in the
applicable prospectus supplement. Moreover, if any class of certificates is
entitled to pass-through payments of principal, but no or only nominal
interest, or interest, but no or only nominal principal, PTCE 83-1 will not
exempt holders of that class of certificates from the prohibited
transaction rules of ERISA and Section 4975 of the Code.
OTHER EXEMPTIONS
The DOL also has issued an individual administrative exemption,
Prohibited Transaction Exemption 90-30 as amended by PTE 97-34, to Bear,
Stearns & Co., Inc., which exempts the initial purchase, the holding and
the subsequent resale by Plans of certificates representing interests in
asset-backed pass through trusts that consists of some secured receivables,
loans and other obligations that meet the conditions and requirements of
PTE 90-30 from some of the prohibited transaction rules of ERISA and the
Code. In addition, PTE 90-30 provides that the trust's assets may include
yield supplement agreements or similar yield maintenance arrangements of
the type described above, provided the arrangements do not involve swap
agreements or other notional principle contracts; and some pre-funding
account arrangements. PTE 90-30 may apply to the acquisition and holding of
one or more series of certificates that may be offered to Plan Asset
Investors subject to the satisfaction of some conditions.
Among the conditions that must be satisfied for PTE 90-30 to apply
are the following:
o The acquisition of the certificates by a Plan must be on terms,
including the price, that are at least as favorable to the Plan
as they would be in an arm's length transaction with an
unrelated party;
o The rights and interests evidenced by the certificates acquired
by the Plan may not be subordinated to the rights and interests
evidenced by other certificates of the trust;
o The certificates acquired by the Plan must have received a
rating at the time of the acquisition that is in one of the
three highest generic rating categories form either S&P,
Moody's, D&P or Fitch; o The sum of all payments made to the
Underwriters in connection with the distribution of the
certificates may represent not more than reasonable
compensation for underwriting the certificates. The sum of all
payments made to and retained by the servicer may not represent
more than reasonable compensation for the servicer's services
under the Pooling and Servicing Agreement and reimbursement of
the servicer's reasonable expenses in connection therewith;
o The Trustee must not be an affiliate of any other member of the
Restricted Group; and
o The Plan investing in the certificates must be an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D of the
Securities and Exchange Commission under the Securities Act of
1933.
The trust also must meet the following requirements:
o the corpus of the trust must consist solely of assets of the
type which have been included in other investment pools;
o certificates in other investment pools must have been rated in
one of the three highest rating categories of S&P, Moody's,
Duff & Phelps or Fitch for at least one year prior to the
Plan's acquisition of certificates; and
o certificates evidencing interests in other investment pools
must have been purchased by investors other than plans for at
least one year prior to any Plan's acquisition of certificates.
In order for PTE 90-30 to apply to some self-dealing/conflict of
interest prohibited transactions that may occur when a Plan fiduciary
causes the Plan to acquire certificates, PTE 90- 30 requires, among other
matters, that:
o in the case of an acquisition in connection with the initial
issuance of certificates at least fifty percent of each class
of certificates in which Plans have invested is acquired by
persons independent of the Restricted Group and at least fifty
percent of the aggregate interest in the trust is acquired by
persons independent of the Restricted Group;
o the fiduciary, or its affiliate, is an obligor with respect to
5 percent or less of the fair market value of the obligations
contained in the trust;
o the Plan's investment in each class of certificates does not
exceed twenty-five (25) percent of all of the certificates of
that class outstanding at the time of the acquisition and
o immediately after the acquisition, no more than twenty-five
percent (25%) of the assets of the Plan are invested in
certificates representing an interest in one or more trusts
containing assets sold or serviced by the same entity.
PTE 90-30 does not apply in the case of Plans sponsored by the Underwriter,
the Trustee, the servicer, any obligor with respect to the receivables
included in the trust, any entity deemed to be a "sponsor" of the trust as
that term is defined in PTE 90-30, or any affiliate of any party.
If for any reason the above exemptions do not provide an exemption
for a particular certificateholder who is a Plan Asset Investor, one of
five other prohibited transaction class exemptions issued by the DOL might
apply: PTCE 96-23, Class Exemption for Plan Asset Transactions Determined
by In-House Asset Managers, PTCE 95-60, Class Exemption for Certain
Transactions Involving Insurance Company General Accounts, PTCE 91-38,
Class Exemption for Certain Transactions Involving Bank Collective
Investment Funds, PTCE 90-1, Class Exemption for Certain Transactions
Involving Insurance Company Pooled Separate Accounts, or PTCE 84-14, Class
Exemption for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers. There can be no assurance that any of these
class exemptions will apply with respect to any particular Plan Asset
Investor or, even if it were to apply, that the exemption would apply to
all transactions involving the SAM Pool. In addition, the underwriter with
respect to a particular series may be the recipient of a final prohibited
transaction exemption which, if so specified in the applicable prospectus
supplement, may accord a Plan Asset Investor protection from violations of
the prohibited transaction rules of ERISA and Section 4975 of the Code if
the Plan Asset Investor satisfies the conditions described in the
applicable prospectus supplement.
As noted above, based on the reasoning of the United States Supreme
Court in John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 114 S.
Ct. 517 (1993), an insurance company's general account may be deemed to
include assets of the Plans investing in the general account (e.g., through
the purchase of an annuity contract), and the insurance company might be
treated as a party-in-interest with respect to a Plan by virtue of the
investment. Any purchaser that is an insurance company using the assets of
an insurance company general account should note that the Small Business
Job Protection Act of 1996 added new Section 401(c) of ERISA relating to
the status of the assets of insurance company general accounts under ERISA
and Section 4975 of the Code. Under Section 401(c), the Department of Labor
is required to issue final regulations not later than December 31, 1997
with respect to insurance policies issued on or before December 31, 1998
that are supported by an insurer's general account. The General Account
Regulations are to provide guidance on which assets held by the insurer
constitute "plan assets" for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code. Section 401(c) also
provides that, except in the case of avoidance of the General Account
Regulation and actions brought by the Secretary of Labor relating to some
breaches of fiduciary duties that also constitute breaches of state or
federal criminal law, until the date that is 18 months after the General
Account Regulations become final, no liability under the fiduciary
responsibility and prohibited transaction provisions of ERISA and Section
4975 may result on the basis of a claim that the assets of the general
account of an insurance company constitute the plan assets of any plan. The
plan asset status of insurance company separate accounts is unaffected by
new Section 401(c) of ERISA, and separate account assets continue to be
treated as the plan assets of any plan invested in a separate account.
FINAL CONSIDERATIONS
In summary, SAMCO Mortgage Securities Corp., the Trustee, a master
servicer, a servicer, any insurer, the obligor under any other credit
enhancement instrument, any servicer, any underwriter for any series of
certificates, as applicable, and their respective affiliates might be
considered or might become Parties in Interest with respect to a Plan Asset
Investor. In that event, the acquisition or holding of certificates of the
applicable series or class by or on behalf of the Plan Asset Investor might
be viewed as giving rise to a prohibited transaction under ERISA and
Section 4975 of the Code. Accordingly, before a Plan Asset Investor makes
the investment decision to purchase, to commit to purchase or to hold
certificates of any series or class, the Plan Asset Investor should
determine
o whether adequate protection is accorded by PTCE 83-1, PTE 90-30
or any other prohibited transaction exemption that may be
issued with respect to the applicable series, as described in
the applicable prospectus supplement;
o whether any other prohibited transaction class exemption (if
required) is available under ERISA and Section 4975 of the
Code; or
o whether an exemption from "plan asset" treatment is available
to the applicable SAM Pool.
The Plan Asset Investor should also consult the ERISA discussion, if any,
in the applicable prospectus supplement for further information regarding
the application of ERISA and Section 4975 of the Code to any series or
class of certificates.
ANY PLAN ASSET INVESTOR THAT PROPOSES TO USE PLAN ASSETS TO PURCHASE
CERTIFICATES SHOULD CONSULT WITH ITS OWN COUNSEL WITH RESPECT TO THE
POTENTIAL CONSEQUENCES UNDER ERISA AND THE CODE OF THE ACQUISITION AND
OWNERSHIP OF CERTIFICATES.
FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the purchase, ownership and disposition of the certificates
offered hereunder to initial purchasers of certificates. This discussion
does not address aspects of purchasing, owning and disposing of the
certificates that are specific to particular classes of holders in light of
their personal investment or tax circumstances or to holders subject to
special treatment under the federal income tax laws, such as dealers in
securities, life insurance companies, tax-exempt organizations, financial
institutions and taxpayers subject to the alternative minimum tax. This
discussion assumes that each holder holds its certificates as a capital
asset within the meaning of section 1221 of the Code and does not hold the
certificates as part of a hedge or hedging transaction or other transaction
subject to special treatment under a specific section of the Code or
Treasury regulations. This discussion does not address the state, local or
foreign tax consequences of the purchase, ownership and disposition of
certificates and is based on the Code and Treasury regulations currently in
effect and judicial and administrative interpretations, all of which are
subject to change, possibly with retroactive effect.
We suggest that investors consult their own tax advisors to determine
the federal, state, local and foreign tax consequences to them of the
purchase, ownership and disposition of the certificates offered hereunder.
The following discussion addresses only the federal income tax
consequences applicable to holders of certificates that are issued with
respect to SAM Pools containing Mortgage Subsidy SAMs. If certificates are
issued with respect to SAM Pools containing Equity Release SAMs, disclosure
of any material federal income tax consequences to holders that differ from
those described below will be provided in the relevant prospectus
supplement.
TAX STATUS OF SAM POOLS
Depending on the type of election made, all or a portion of a SAM
Pool will be classified for federal income tax purposes as either a REMIC
or a FASIT. If neither election is made with respect to a SAM Pool or a
portion of a SAM Pool, the SAM Pool or portion will be classified as a
grantor trust for federal income tax purposes. Some SAM Pools may be
classified as more than one REMIC, FASIT or grantor trust or combination of
the foregoing. The tax consequences to holders of certificates issued with
regard to each type of SAM Pool are discussed below.
In the opinion of Skadden, Arps, Slate Meagher & Flom LLP, special
counsel to SAMCO Mortgage Securities Corp., assuming that:
o a REMIC or FASIT election, if any, is timely made on the
required form,
o each master servicer or servicer, as applicable, complies with
all provisions of the related Pooling and Servicing Agreement,
o some representations set forth in the Pooling Agreement are
true,
o there is continued compliance with applicable provisions of the
Code and Treasury regulations,
o the designated portion of a SAM Pool will qualify as a REMIC,
FASIT, or grantor trust, as the case may be,
o in the case of a REMIC, the classes of interests offered will
be considered to be regular interests or residual interests in
that REMIC within the meaning of the REMIC Provisions,
o in the case of a FASIT, the classes of interests offered will
be considered to be regular interests or the ownership interest
in that FASIT within the meaning of the FASIT Provisions, and
o in the case of a grantor trust, each holder of a trust
certificate will be treated as owning its allocable share of
the underlying assets of the trust.
The foregoing opinion, however, does not relate to a particular transaction
and is valid only if confirmed in connection with a particular issuance.
Holders of certificates should be aware that, if an entity with
respect to which a REMIC or FASIT election has been made fails to comply
with one or more of the ongoing requirements of the Code for REMIC or FASIT
status during any taxable year, the Code provides that the entity will not
be treated as a REMIC or FASIT for the year and thereafter. In that event,
an entity electing to be treated as a REMIC or FASIT may be subject to tax
as a separate corporation under Treasury regulations, and the related
certificates may not be accorded the status described below under the
heading "--Characterization of REMIC and FASIT Certificates." In the case
of an inadvertent termination of REMIC or FASIT status, the Code provides
the Treasury Department with authority to issue regulations providing
relief. Any relief, however, may be accompanied by sanctions, such as the
imposition of a corporate tax on all or a portion of the REMIC's or FASIT's
income for the period of time in which the requirements for REMIC or FASIT
status are not satisfied. The legislative history to the FASIT Provisions
indicates that loss of FASIT status results in the retirement of all
regular interests and a deemed reissuance of new securities, resulting in
cancellation of indebtedness income if the old certificates were
characterized as indebtedness but the new securities are treated as equity.
If an entity that is expected to be treated as a grantor trust fails
to so qualify, it will be treated as a partnership for federal income tax
purposes, but may nevertheless be taxable as a corporation because of its
potential qualification as a publicly traded partnership
CHARACTERIZATION OF REMIC AND FASIT REGULAR CERTIFICATES
In general, REMIC or FASIT regular certificates (including High-Yield
Interests) are treated as debt for federal income tax purposes and not as
ownership interests in the assets of a SAM Pool. In addition, REMIC
certificates held by a domestic building and loan association will
constitute a "regular or residual interest in a REMIC" within the meaning
of section 7701(a)(19)(C)(xi) of the Code in the same proportion that the
assets would be treated as "loans . . . secured by an interest in real
property" within the meaning of section 7701(a)(19)(C)(v) of the Code or as
other assets described in section 7701(a)(19)(C) of the Code; and REMIC
certificates held by a real estate investment trust will constitute "real
estate assets" within the meaning of section 856(c)(5)(A) of the Code, and
interest on the REMIC certificates will be considered "interest on
obligations secured by mortgages on real property or on interests in real
property" within the meaning of section 856(c)(3)(B) of the Code in the
same proportion that, for both purposes, the assets would be treated as
"interests in real property" as defined in section 856(c)(6)(C) of the Code
(or, as provided in the legislative history, as "real estate assets" as
defined in section 856(c)(6)(B)) of the Code. Moreover, if 95% or more of
the assets qualify for any of the foregoing treatments, then REMIC
certificates will qualify for the corresponding status in their entirety.
Similarly, if 95% or more of a FASIT's assets are real estate mortgages,
then FASIT regular certificates will qualify as real estate assets for
purposes of sections 7701(a)(19) and 856(c) of the Code. Holders of REMIC
certificates should be aware that the investment of amounts in any reserve
account in non- qualifying assets would, and holding property acquired by
foreclosure pending sale might, reduce the amount of the REMIC certificate
that would qualify for the foregoing treatment.
The REMIC will report the foregoing percentages to holders in the
manner and at the times required by applicable Treasury regulations. REMIC
certificates held by some financial institutions will constitute "evidence
of indebtedness" within the meaning of section 582(c)(1) of the Code; in
addition, REMIC regular certificates acquired by a REMIC in accordance with
the requirements of section 860G(a)(3)(C) or section 860G(a)(4)(B) of the
Code will be treated as "qualified mortgages" for purposes of section
860D(a)(4) of the Code.
TAXATION OF OWNERS OF REMIC AND FASIT REGULAR CERTIFICATES
Except as otherwise stated in this discussion, REMIC regular
certificates and FASIT regular certificates will be treated for federal
income tax purposes as a debt instrument issued by the REMIC or the FASIT,
as applicable, and not as an ownership interest in a SAM Pool. In general,
interest and OID paid or accrued on a REMIC regular certificate or a FASIT
regular certificate will be treated as ordinary income to the holder of the
REMIC or FASIT regular certificate. A principal distribution on a REMIC or
FASIT regular certificate will be treated as a return of capital to the
extent of the holder's basis in the REMIC or FASIT regular certificate.
Holders of REMIC or FASIT regular certificates that otherwise report income
under a cash method of accounting will be required to report income with
respect to REMIC or FASIT regular certificates under an accrual method, the
effect of which is that cash basis holders may be required to recognize
income in a year regardless of whether or not they receive a cash
distribution with respect to a certificate.
Original Issue Discount
Some REMIC or FASIT regular certificates (or stripped certificates,
as described under "Taxation of Holders of Stripped Certificates") may be
issued with OID. Any holders of the certificates issued with OID generally
will be required to include OID in income as it accrues, in accordance with
a constant yield method, in advance of the receipt of the cash attributable
to the income. SAMCO Mortgage Securities Corp. will report annually (or
more often if required) to the Internal Revenue Service and to
certificateholders the information with respect to the original issue
discount accruing on the REMIC or FASIT regular certificates as may be
required under section 6049 of the Code and the Treasury regulations. See
"--Reporting and Other Administrative Matters of REMICs and FASITs" below.
It is anticipated that REMIC and FASIT regular certificates will
accrue interest that is either:
o "qualified stated interest",
o not "qualified stated interest" because it is equal to the
weighted average of a pool of fixed rates or
o interest consisting of an "interest only." A specific
discussion of OID, if any, relating to a particular issuance
will be included in the related prospectus supplement.
Under the de minimis rule, original issue discount on a REMIC or
FASIT regular certificate will be considered to be zero if the OID is less
than the product of (x) 0.25% and (y) the stated redemption price at
maturity of the REMIC or FASIT regular certificate multiplied by the
weighted average life of the REMIC or FASIT regular certificate calculated
in accordance with specific regulations. The Trustee will assume that the
Prepayment Assumption should be taken into account when applying this rule.
A holder of a REMIC or FASIT regular certificate must include any de
minimis OID in income ratably as principal payments are made, although a
Certificateholder may elect to accrue de minimis OID currently based on a
constant yield method.
Each holder of a REMIC regular certificate must include in gross
income the sum of the "daily portions" of OID on its REMIC or FASIT regular
certificate for each day during its taxable year on which it held the REMIC
or FASIT regular certificate. The daily portions of OID will be determined
as follows. A holder will first calculate the portion of the OID that
accrued during each accrual period. Unless otherwise stated in the
applicable prospectus supplement, the first accrual period will begin on
the closing date and end on the first Distribution Date for that REMIC or
FASIT regular certificate. The next accrual period will begin on the first
day following the last day of the immediately preceding accrual period and
will end on the next Distribution Date. For any accrual period, the portion
of OID will equal the excess, if any, of the sum of the present value of
all of the distributions remaining to be made on the REMIC or FASIT regular
certificate, if any, as of the end of the accrual period and the
distributions made on the REMIC or FASIT regular certificate during the
accrual period of amounts included in the stated redemption price at
maturity, over the adjusted issue price of the REMIC or FASIT regular
certificate at the beginning of the accrual period. The present value of
the remaining payments referred to in the preceding sentence will be
calculated based on:
o the yield to maturity of the REMIC or FASIT regular
certificate, calculated as of the settlement date, giving
effect to the Prepayment Assumption,
o events (including actual prepayments) that have occurred prior
to the end of the accrual period, and
o the Prepayment Assumption.
The adjusted issue price of a REMIC or FASIT regular certificate at the
beginning of any accrual period will equal the issue price of the
certificate, increased by the aggregate amount of OID with respect to the
REMIC or FASIT regular certificate that accrued in prior accrual periods,
and reduced by the amount of any distributions made on the REMIC regular
certificate in prior accrual periods of amounts included in the stated
redemption price at maturity. The OID accruing during any accrual period
will be allocated ratably to each day during the period to determine the
daily portion of OID. With respect to an accrual period between the
settlement date and the first Distribution Date on the REMIC regular
certificate (notwithstanding that no distribution is scheduled to be made
on that date) that is shorter than a full accrual period, the OID
Regulations permit the daily portions of OID to be determined according to
any reasonable method.
The adjusted issue price of a REMIC or FASIT regular certificate on
any given day is equal to the sum of the adjusted issue (or, in the case of
the first accrual period, the issue price) of the REMIC or FASIT regular
certificate at the beginning of the accrual period during which that day
occurs and the daily portions of original issue discount for all days
during the accrual period prior to that day reduced by the aggregate amount
of distributions previously made other than distributions of qualified
stated interest.
Variable Rate Certificates. If any variable rate certificates are
issued, disclosure will be provided in the related prospectus supplement.
High-Yield FASIT Certificates
A FASIT certificate will be treated as a "high-yield interest" for
federal income tax purposes, if either (A) it would constitute a FASIT
regular interest under section 860L(b)(1) of the Code but fails to meet one
or more of the following requirements:
o the interest unconditionally entitles the holder to receive a
specified principal amount (or other similar amount),
o the issue price of the interest does not exceed 125% of its
stated principal amount, or
o the yield to maturity on the interest is less than the sum of
(x) the AFR for the calendar month in which the obligation is
issued and (y) 5 percentage points,
or (B) the interest is an "interest only" certificate as to which interest
payments consist of a specified portion of the interest payments on
permitted assets and the portion does not vary during the period the FASIT
certificate is outstanding.
A High-Yield Interest may not be held by a "disqualified holder,"
which is any holder other than
o a domestic C corporation that does not qualify as a regulated
investment company, a real estate investment trust, a REMIC or
a cooperative,
o a FASIT or
o a dealer who temporarily holds the interests for resale to
customers in the ordinary course of business.
The transfer of a High-Yield Interest to a disqualified holder is
disregarded for federal income tax purposes. As a result, the transferor
would be required to include in its income any amounts attributable to the
High-Yield Interest and pay tax thereon, and the disqualified transferee
would not required to include in its income any amounts (other than gain)
attributable to the High-Yield Interest. Income will not be reallocated to
the transferor, however, if (1) the transferee furnishes the transferor
with an affidavit that the former is not a disqualified holder or (2) the
Internal Revenue Service issues a waiver.
The holder of a High-Yield Interest may not use non-FASIT losses to
offset income (including gain or loss from sales and exchanges of the
interests) from the High-Yield Interest. For purposes of applying this
rule, all members of an affiliated group that file a consolidated return
are treated as one taxpayer. Any increase in income of a holder of a
High-Yield Interest that results from the rule described above will be
disregarded in determining the amount of the holder's net operating loss,
as well as the amount of any allowable carryback or carryover.
Realized Losses
Both corporate holders of REMIC or FASIT regular certificates and
noncorporate holders of REMIC or FASIT regular certificates that acquire
the certificates in connection with a trade or business should be allowed
to deduct, as ordinary losses, any losses sustained during a taxable year
in which their certificates become wholly or partially worthless as a
result of one or more realized losses on the shared appreciation mortgages.
However, it appears that a noncorporate holder that does not acquire a
REMIC or FASIT regular certificate in connection with a trade or business
will not be entitled to deduct a loss under section 166 of the Code until
the holder's certificate becomes wholly worthless; that is, until its
outstanding principal balance has been reduced to zero, and the loss will
be characterized as a short-term capital loss.
Each holder of a REMIC or FASIT regular certificate will be required
to accrue interest on its REMIC or FASIT regular certificate, which is a
separate debt obligation, usually without regard to the performance of the
SAM Pool, at least until it can be established that any interest that would
otherwise be required to accrue ultimately will not be recoverable. As a
result, the amount of taxable income reported in any period by the holder
of a REMIC or FASIT regular certificate could exceed the amount of cash
received by the holder in the period. The holder of a REMIC or FASIT
regular certificate will eventually recognize a loss or reduction in
income; however, the law is unclear with respect to the timing and
character of the loss or reduction in income.
Pass-Through of Servicing Fees of "Single Class REMICs"
Unlike a conventional REMIC in which all the income and loss is only
allocated to the holder of a REMIC residual certificate, a "single-class
REMIC" requires that some items of income and loss be allocated among the
holders of REMIC residual certificates and REMIC regular certificates. The
consequence of this rule is that holders of REMIC regular certificates will
be allocated their proportionate share of the expense pertaining to the
servicing fee paid to SAMCO Mortgage Securities Corp. and a corresponding
amount of gross income. The ability of a holder to deduct expenses relating
to the servicing fee and, thus, offset the allocation of gross income may
be limited. Generally, any holder of a REMIC certificate that is an
individual, estate or trust will be able to deduct the expenses in
determining regular tax liability only to the extent that the expenses
together with some other miscellaneous itemized deductions of the
individual, estate or trust exceed 2% of adjusted gross income; in
addition, the holder may not deduct the expenses to any extent in
determining liability for alternative minimum tax. Accordingly, REMIC
regular certificates in a "single class REMIC" may not be appropriate
investments for individuals, estates or trusts because of the rules
regarding miscellaneous deductions, and the persons should consult with
their own tax advisors regarding the advisability of an investment in the
certificates.
A "single-class REMIC" is a REMIC that either would be treated as a
pass-through trust under the provisions of Treasury regulation section
301.7701-4(c) in the absence of a REMIC election or is substantially
similar to a pass-through trust and is structured with the principal
purpose of avoiding the allocation of investment expenses to holders of
REMIC regular certificates.
It is not yet known whether similar rules will apply to "single
class" FASITs.
TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES
An owner of a REMIC residual certificate generally will be required
to report its daily portion of the taxable income or, subject to the
limitation described below under "--Basis Rules and Distributions," the net
loss of the REMIC for each day during a calendar quarter that the Residual
Owner owned the REMIC residual certificate. Any amount included in the
gross income or allowed as a loss of any Residual Owner under this rule
will be treated as ordinary income or loss. Purchasers of REMIC residual
certificates should be aware that taxable income from the certificates
could exceed cash distributions thereon in any taxable year. For example,
if shared appreciation mortgages or interests in shared appreciation
mortgages are acquired by a REMIC at a discount, which is likely given that
the interest rates on shared appreciation mortgages are below market rates
(if the Appreciation Share is not taken into account) at acquisition, then
the holder of a residual interest may recognize income without
corresponding cash distributions. This result could occur because a payment
produces recognition of discount on the shared appreciation mortgage while
the payment could be used in whole or in part to make principal payments on
REMIC regular certificates issued without substantial discount. Taxable
income may also be greater in earlier years as a result of the fact that
interest expense deductions, expressed as a percentage of the outstanding
principal amount of the REMIC regular certificates, will increase over time
as the lower yielding sequences of certificates are paid, whereas interest
income with respect to any given fixed rate shared appreciation mortgage
will remain constant over time as a percentage of the outstanding principal
amount of that loan.
Any payments received by a holder of a REMIC residual certificate in
connection with the acquisition of the certificate will be taken into
account in determining the income of the holder for federal income tax
purposes. Although it appears likely that any the payment would be
includible in income immediately upon its receipt, the Internal Revenue
Service might assert that the payment should be included in income over
time according to an amortization schedule or according to some other
method. Because of the uncertainty concerning the treatment of the
payments, holders of REMIC residual certificates should consult their tax
advisors concerning the treatment of the payments for income tax purposes.
Taxable Income or Net Loss of the REMIC
The taxable income or net loss of the REMIC will reflect a netting of
income from the shared appreciation mortgages, any cancellation of
indebtedness income due to the allocation of realized losses to REMIC
regular certificates, and deductions and losses allowed to the REMIC. The
taxable income or net loss for a given calendar quarter will be determined
in the same manner as for an individual having the calendar year as his
taxable year and using the accrual method of accounting, with some
modifications. The first modification is that a deduction will be allowed
for accruals of interest (including OID) on the REMIC regular certificates.
Second, market discount on the REMIC's assets, if any, equal to the excess
of any shared appreciation mortgage's adjusted issue price over its fair
market value at the time of its transfer to the REMIC usually will be
included in income as it accrues, based on a constant yield and on the
Prepayment Assumption. For this purpose, SAMCO Mortgage Securities Corp.
intends to treat the fair market value of the shared appreciation mortgages
as being equal to the aggregate issue prices of the REMIC regular
certificates and REMIC residual certificates; if one or more classes of
REMIC regular certificates or REMIC residual certificates are retained by
SAMCO Mortgage Securities Corp., SAMCO Mortgage Securities Corp. will
estimate the value of the retained interests in order to determine the fair
market value of the shared appreciation mortgages for this purpose. Third,
no item of income, gain, loss or deduction allocable to a prohibited
transaction (see "--Prohibited Transactions and Other Possible REMIC Taxes"
below) will be taken into account. Fourth, the REMIC SAM Pool usually may
not deduct any item that would not be allowed in calculating the taxable
income of a partnership by virtue of section 703(a)(2) of the Code. Fifth,
the REMIC Regulations provide that the limitation on miscellaneous itemized
deductions imposed on individuals by section 67 of the Code will not be
applied at the SAM Pool level to the servicing fees paid to a master
servicer or servicer. See, however, "--Pass-Through of Servicing Fees"
above. If the deductions allowed to the REMIC exceed its gross income for a
calendar quarter, the excess will be the net loss for the REMIC for that
calendar quarter.
Basis Rules and Distributions
Any distribution by a REMIC to a Residual Owner will not be included
in the gross income of the Residual Owner to the extent it does not exceed
the adjusted basis of the Residual Owner's interest in a REMIC residual
certificate. The distribution will reduce the adjusted basis of the
interest, but not below zero. To the extent a distribution exceeds the
adjusted basis of the REMIC residual certificate, it will be treated as
gain from the sale of the REMIC residual certificate. See "--Sales of REMIC
Certificates" below. The adjusted basis of a REMIC residual certificate is
equal to the amount paid for the REMIC residual certificate, increased by
amounts included in the income of the Residual Owner and decreased by
distributions and by net losses taken into account with respect to the
interest. See "--Taxation of Owners of REMIC Residual Certificates" above.
A Residual Owner is not allowed to take into account any net loss for
any calendar quarter to the extent the net loss exceeds the Residual
Owner's adjusted basis in its REMIC residual certificate as of the close of
the calendar quarter (determined without regard to the net loss). Any loss
disallowed by reason of this limitation may be carried forward indefinitely
to future calendar quarters and, subject to the same limitation, may be
used only to offset income from the REMIC residual certificate.
The effect of these basis and distribution rules is that a Residual
Owner may not amortize its basis in a REMIC residual certificate, but may
only recover its basis through distributions, through the deduction of any
net losses of the REMIC or upon the sale of its REMIC residual certificate
See "Sales of REMIC Certificates" below.
Excess Inclusions
Any "excess inclusions" with respect to a REMIC residual certificate
are subject to some special tax rules. With respect to a Residual Owner,
the excess inclusion for any calendar quarter is defined as the excess (if
any) of the daily portions of taxable income over the sum of the "daily
accruals" for each day during the quarter that the REMIC residual
certificate was held by the Residual Owner. The daily accruals are
determined by allocating to each day during a calendar quarter its ratable
portion of the product of the "adjusted issue price" of the REMIC residual
certificate at the beginning of the calendar quarter and 120 percent of the
long-term AFR (generally, an average of current yields on Treasury
securities of comparable maturity) in effect at the time of issuance of the
REMIC residual certificate. For this purpose, the adjusted issue price of a
REMIC residual certificate as of the beginning of any calendar quarter is
the issue price of the REMIC residual certificate, increased by the amount
of daily accruals for all prior quarters and decreased by any distributions
made with respect to the REMIC residual certificate before the beginning of
the quarter. The issue price of a REMIC residual certificate is the initial
offering price to the public (excluding bond houses and brokers) at which a
substantial amount of the REMIC residual certificates were sold.
An excess inclusion cannot be offset by deductions, losses or loss
carryovers from other activities. For Residual Owners that are subject to
tax on unrelated business taxable income (as defined in section 511 of the
Code), an excess inclusion of the Residual Owner is treated as unrelated
business taxable income. For Residual Owners that are nonresident alien
individuals or foreign corporations generally subject to United States 30%
withholding tax, even if interest paid to the Residual Owners is generally
eligible for exemptions from the tax, an excess inclusion will be subject
to the tax and no tax treaty rate reduction or exemption may be claimed
with respect thereto. See "Foreign Investors in REMIC Certificates" below.
If REMIC residual certificates are found in the aggregate not to have
"significant value," the entire daily portion of taxable income for the
REMIC residual certificates may be treated as excess inclusions. In order
to have significant value, the REMIC residual certificates must have an
aggregate issue price, at issuance, at least equal to two percent of the
aggregate issue prices of all of the related REMIC regular and residual
certificates. In addition, the anticipated weighted average life of the
REMIC residual certificates must equal or exceed 20 percent of the
anticipated weighted average life of the REMIC, based on the Prepayment
Assumption and on any required or permitted clean-up calls or required
liquidation provided for in the REMIC's organizational documents. Each
prospectus supplement under which REMIC residual certificates are offered
will state whether the REMIC residual certificates will have, or may be
regarded as having, "significant value" under the REMIC Regulations;
provided, however, that any disclosure that a REMIC residual certificate
will have "significant value" will be based upon some assumptions, and
SAMCO Mortgage Securities Corp. will make no representation that a REMIC
residual certificate will have "significant value" for purposes of the
above described rules or that a Residual Owner will receive distributions
of amounts calculated under those assumptions.
In the case of any REMIC residual certificates held by a real estate
investment trust, under Treasury regulations not yet promulgated, the
aggregate excess inclusions with respect to the REMIC residual
certificates, reduced (but not below zero) by the real estate investment
trust taxable income (within the meaning of section 857(b)(2) of the Code,
excluding any net capital gain), will be allocated among the shareholders
of the trust in proportion to the dividends received by the shareholders
from the trust, and any amount so allocated will be treated as an excess
inclusion with respect to a REMIC residual certificate as if held directly
by the shareholder.
Noneconomic REMIC Residual Certificates
Under the REMIC Regulations, transfers of "noneconomic" REMIC
residual certificates will be disregarded for all federal income tax
purposes if "a significant purpose of the transfer was to enable the
transferor to impede the assessment or collection of tax." If the transfer
is disregarded, the purported transferor will continue to remain liable for
any taxes due with respect to the income on the "noneconomic" REMIC
residual certificate. The REMIC Regulations provide that a REMIC residual
certificate will be considered a noneconomic residual interest unless, at
the time of its transfer and based on the Prepayment Assumption and any
required or permitted clean-up calls or required liquidation provided for
in the REMIC's organizational documents, the present value of the expected
future distributions (discounted using the AFR) of the REMIC residual
certificate equals at least the present value of the expected tax on the
anticipated excess inclusions, and the transferor reasonably expects that
the transferee will receive distributions with respect to the REMIC
residual certificate at or after the time the taxes accrue on the
anticipated excess inclusions in an amount sufficient to satisfy the
accrued taxes. Accordingly, all transfers of REMIC residual certificates
that may constitute noneconomic residual interests will be subject to some
restrictions under the terms of the related Pooling and Servicing Agreement
that are intended to reduce the possibility of any the transfer being
disregarded. The restrictions will require each party to a transfer to
provide an affidavit that no purpose of the transfer is to impede the
assessment or collection of tax, including some representations as to the
financial condition of the prospective transferee. Prior to purchasing a
REMIC residual certificate, prospective purchasers should consider the
possibility that a purported transfer of the REMIC residual certificate by
a purchaser to another purchaser at some future date may be disregarded in
accordance with the above-described rules, which would result in the
retention of tax liability by the purchaser. The applicable prospectus
supplement will disclose whether offered REMIC residual certificates may be
considered "noneconomic" residual interests under the REMIC Regulations;
provided, however, that any disclosure that a REMIC residual certificate
will or will not be considered "noneconomic" will be based upon some
assumptions, and SAMCO Mortgage Securities Corp. will make no
representation that a REMIC residual certificate will not be considered
"noneconomic" for purposes of the above-described rules or that a REMIC
Residual Owner will receive distributions calculated under the assumptions.
See "--Foreign Investors in REMIC Certificates" below for additional
restrictions applicable to transfers of some REMIC residual certificates to
foreign persons.
Tax-Exempt Investors
Generally, tax exempt organizations that are not subject to federal
income taxation on "unrelated business taxable income" under section 511 of
the Code are treated as "disqualified organizations" under provisions of
the Code. Under provisions of the Pooling and Servicing Agreement, the
organizations usually are prohibited from owning REMIC residual
certificates. For Residual Owners that are subject to tax on unrelated
business taxable income (as defined in section 511 of the Code), an excess
inclusion of the Residual Owner is treated as unrelated business taxable
income. See "--Sales of REMIC Certificates" below.
Mark-to-Market Rules
A REMIC residual certificate is not treated as a security and,
therefore, may not ordinarily be marked to market.
TAXATION OF OWNERS OF FASIT OWNERSHIP CERTIFICATES
A FASIT may issue only one ownership interest, which must be owned by
a domestic C corporation subject to corporate level tax. A FASIT Owner is
treated as owning all the assets and liabilities of a FASIT and thus will
be required to include in income all items of income, gain, deduction, loss
or credit of the FASIT. The character of the income is generally the same
as its character to the FASIT, except that tax-exempt interest is taken
into the income of the holder as ordinary income. As a result, amounts
included in income or allowed as loss will generally constitute ordinary
income or loss.
Purchasers of FASIT Ownership Certificates should be aware that
taxable income from the certificates could exceed cash distributions
thereon in any taxable year. For example, if a FASIT acquires shared
appreciation mortgages at a discount, the payments received in respect of
the shared appreciation mortgage could be used in whole or in part to make
principal payments on FASIT regular certificates issued without substantial
discount leaving little or no cash to distribute to the FASIT Owner that is
required to include the discount in income. Moreover, FASIT Owners could
recognize greater taxable income in earlier years because interest expense
deductions, expressed as a percentage of the outstanding principal amount
of the FASIT regular certificates, will increase over time as the lower
yielding sequences of certificates are paid; whereas interest income paid
in respect to any fixed rate shared appreciation mortgage will remain
constant over time as a percentage of the outstanding principal amount of
that loan.
Any payments received by a FASIT Owner in connection with the
acquisition of the certificate will be taken into account in determining
the income of the holder for federal income tax purposes. Although it
appears likely that any payment would be includible in income immediately
upon its receipt, the Internal Revenue Service could assert that the
payment should be included in income over time according to an amortization
schedule or according to some other method. Because of the uncertainty
concerning the treatment of the payments for income tax purposes, FASIT
Owners should consult their tax advisors.
Taxable Income or Net Loss of a FASIT
The taxable income or net loss of a FASIT will reflect a netting of
income from the shared appreciation mortgages, any cancellation of
indebtedness income due to the allocation of realized losses to FASIT
regular certificates and permitted deductions and losses. Interest paid or
accrued (including OID) to holders of the FASIT regular certificates is
deductible by the FASIT in computing the amount of its net taxable income
passed to the FASIT Owner. Taxable income is calculated using the accrual
method of accounting and the constant yield method and principles, which
apply for purposes of determining OID accrual on debt obligations whose
principal is subject to acceleration apply to all debt obligations held by
a FASIT, is used to calculate the FASIT's interest and discount income and
premium deductions or adjustments. Income from prohibited transactions,
which is subject to a 100% penalty tax as discussed below "- Prohibited
Transactions Tax" is not included in income; however, losses incurred in
prohibited transactions may be deducted in the taxable year of the loss.
Basis Rules and Distributions
Distributions by a FASIT to a FASIT Owner will not be included in the
gross income of the FASIT Owner to the extent the amount of the
distributions does not exceed the FASIT Owner's adjusted basis in its FASIT
Ownership Certificate. The distribution will reduce the adjusted basis of
the interest but not below zero. To the extent a distribution exceeds the
adjusted basis of the FASIT Ownership Certificate, it will be treated as
gain from the sale of the FASIT Ownership Certificate. The adjusted basis
of a FASIT Ownership Certificate is equal to the amount paid for the
certificate, increased by amounts included in the income of the FASIT Owner
and decreased by distributions and by net losses taken into account with
respect to the interest.
A FASIT Owner is not allowed to take into account any net loss for
any calendar quarter to the extent the net loss exceeds the FASIT Owner's
adjusted basis in its FASIT Ownership Certificate as of the close of the
calendar quarter (determined without regard to the net loss). Any loss
disallowed by reason of this limitation may be carried forward indefinitely
to future calendar quarters and, subject to the shared appreciation
mortgagee limitation, may be used only to offset income from the FASIT
Ownership Certificate.
The effect of these basis and distribution rules is that a FASIT
Owner may not amortize its basis in a FASIT Ownership Certificate, but may
only recover its basis through distributions, through the deduction of any
net losses of the FASIT or upon the sale of its FASIT Ownership
Certificate.
Prohibited Transactions Tax
A FASIT Owner is subject to a 100% tax on any income derived from
some "prohibited transactions." Prohibited transactions generally include:
o the receipt of income from dispositions of assets other than
cash and cash equivalents, some permitted debt instruments,
some foreclosure property, some instruments or contracts that
represent a hedge or guarantee of debt held or issued by the
FASIT, contract rights to acquire permitted debt instruments or
hedges, and a regular interest in another FASIT, and
o the disposition of a Permitted Asset other than
o upon the foreclosure, default, or imminent default of a
qualified mortgage,
o upon the bankruptcy or insolvency of the FASIT,
o in complete liquidation of a class of regular interests,
o to avoid a default (or imminent default) on an asset of the
FASIT,
o to facilitate a clean up call,
o to substitute a permitted debt instrument for another
instrument or
o to reduce over-collateralization where a principal purpose
of the disposition was not to avoid recognition of gain
arising from an increase in its market value after its
acquisition by the FASIT.
It is unclear to what extent tax on the transactions could be collected
from the FASIT directly under the applicable statutes rather than from the
FASIT Owner. It is not anticipated that a FASIT will engage in any
prohibited transactions.
Excess Inclusions
FASIT Owners are subject to the same rules regarding "excess
inclusions" as Residual Owners of REMIC residual certificates. See
"Taxation of Owners of REMIC Residual Certificates - Excess Inclusions."
Limitation of Losses
A FASIT Owner cannot offset income and gain from its FASIT Ownership
Certificate with non-FASIT losses. Moreover, a FASIT Owner must disregard
any income arising by reason of a disallowed loss when computing any net
operating loss carryover. Only FASIT losses may be used to offset any FASIT
excess income recognized by a FASIT Owner.
Transfers to Disqualified Holders
Transfer of a FASIT Ownership Certificate to a holder that is not a
domestic C corporation subject to corporate level tax is disregarded for
federal income tax purposes. As a result, the most recent transferor who
was not a disqualified holder would be required to include any income
attributable to the FASIT Ownership Certificate and pay tax thereon. Income
will not be reallocated, however, if the transferee furnishes the
transferor with an affidavit that the former is not a disqualified holder
or the Internal Revenue Service issues a waiver.
SALES OF REMIC OR FASIT CERTIFICATES
If a REMIC or FASIT certificate is sold, the seller will recognize
gain or loss equal to the difference between the amount realized on the
sale and its adjusted basis in the REMIC or FASIT certificate. The adjusted
basis of a REMIC or FASIT regular certificate generally will equal the cost
of the REMIC or FASIT regular certificate to the seller, increased by any
original issue discount included in the seller's gross income with respect
to the REMIC or FASIT regular certificate and reduced by distributions
previously received by the seller of amounts included in the stated
redemption price at maturity of the REMIC or FASIT regular certificate. The
adjusted basis of a REMIC residual certificate will be determined as
described above under "--Taxation of Owners of REMIC residual
certificates--Basis Rules and Distributions," above, and the adjusted basis
of a FASIT Ownership Certificate will be determined as described above
under "-- Taxation of Owners of FASIT Ownership Certificates -- Basis Rules
and Distributions." Gain from the disposition of a REMIC regular
certificate that might otherwise be treated as a capital gain will be
treated as ordinary income to the extent that the gain does not exceed the
excess, if any, of the amount that would have been includible in the
holder's income had income accrued at a rate equal to 110% of the AFR as of
the date of purchase over the amount actually includible in the holder's
income. Except as otherwise provided above and under section 582(c) of the
Code, any gain or any loss on the sale or exchange of a REMIC or FASIT
certificate will be capital gain or loss, provided the REMIC or FASIT
certificate is held as a capital asset (generally, property held for
investment) within the meaning of section 1221 of the Code.
A portion of any gain from the sale of a REMIC or FASIT regular
certificate that might otherwise be capital gain may be treated as ordinary
income to the extent that the certificate is held as part of a "conversion
transaction" within the meaning of section 1258 of the Code. A conversion
transaction is ordinarily one in which the taxpayer has taken two or more
positions in certificates or similar property that reduce or eliminate
market risk, if substantially all of the taxpayer's return is attributable
to the time value of the taxpayer's net investment in the transaction. The
amount of gain so realized in a conversion transaction that is
recharacterized as ordinary income usually will not exceed the amount of
interest that would have accrued on the taxpayer's net investment at 120%
of the AFR at the time the taxpayer enters into the conversion transaction,
subject to appropriate reduction for prior inclusion of interest and other
ordinary income items from the transaction.
A taxpayer's deduction of interest on indebtedness allocable to
property held for investment is limited to a taxpayer's net investment
income for each taxable year. Net investment income for each taxable year
includes net capital gain attributable to the disposition of investment
property only if the taxpayer elects to have the net capital gain taxed at
ordinary income rates rather than capital gains rates.
REMIC Residual Certificates
If a Residual Owner sells a REMIC residual certificate at a loss, the
loss will not be recognized if, within six months before or after the sale
of the REMIC residual certificate, the Residual Owner purchases another
residual interest in any REMIC or any interest in a taxable mortgage pool
(as defined in section 7701(i) of the Code) comparable to a residual
interest in a REMIC. The disallowed loss will be allowed upon the sale of
the other residual interest (or comparable interest) if the rule referred
to in the preceding sentence does not apply to that sale. While the
legislative history states that this rule may be modified by Treasury
regulations, the REMIC Regulations do not address this issue and it is not
clear whether any modification will in fact be implemented or, if
implemented, what the precise nature or effective date of it would be.
The Code makes transfers of a residual interest to some "disqualified
organizations" subject to an additional tax on the transferor in an amount
equal to the maximum corporate tax rate applied to the present value of the
total anticipated excess inclusions (discounted using the AFR) with respect
to the residual interest for the periods after the transfer. For this
purpose, "disqualified organizations" includes the United States, any state
or political subdivision of a state, any foreign government or
international organization or any agency or instrumentality of any of the
foregoing; any tax-exempt entity (other than a Code section 521
cooperative) which is not subject to the tax on unrelated business income;
and any rural electrical and telephone cooperative. The anticipated excess
inclusions must be determined as of the date that the REMIC residual
certificate is transferred and must be based on events that have occurred
up to the time of the transfer, the Prepayment Assumption, and any required
or permitted clean-up calls or required liquidation provided for in the
REMIC's organizational documents. The tax usually is imposed on the
transferor of the REMIC residual certificate, except that it is imposed on
an agent for a disqualified organization if the transfer occurs through the
agent. The Pooling and Servicing Agreement requires, as a prerequisite to
any transfer of a residual certificate, the delivery to the Trustee of an
affidavit of the transferee to the effect that it is not a disqualified
organization and contains other provisions designed to render any attempted
transfer of a REMIC residual certificate to a disqualified organization
void.
In addition, if a "pass-through entity" includes in income excess
inclusions with respect to a REMIC residual certificate, and a disqualified
organization is the record holder of an interest in the entity, then a tax
will be imposed on the entity equal to the product of the amount of excess
inclusions on the REMIC residual certificate that are allocable to the
interest in the pass-through entity held by the disqualified organization
and the highest marginal federal income tax rate imposed on corporations. A
pass-through entity will not be subject to this tax for any period,
however, if the record holder of an interest in the entity furnishes to the
entity the holder's social security number and a statement under penalties
of perjury that the social security number is that of the record holder or
a statement under penalties of perjury that the record holder is not a
disqualified organization. For these purposes, a "pass-through entity"
means any regulated investment company, REIT, trust, partnership or some
other entities described in section 860E(e)(6) of the Code. In addition, a
person holding an interest in a pass-through entity as a nominee for
another person shall, with respect to the interest, be treated as a
pass-through entity.
PROHIBITED TRANSACTIONS AND OTHER POSSIBLE REMIC TAXES
The Code imposes a tax on REMICs equal to 100 percent of the net
income derived from "prohibited transactions." In general, a prohibited
transaction means the disposition of a qualified mortgage other than under
some specified exceptions, the receipt of income from a source other than a
qualified mortgage or some other permitted investments, the receipt of
compensation for services or gain from the disposition of an asset
purchased with the payments on the shared appreciation mortgages for
temporary investment pending distribution on the REMIC certificates. The
Code also imposes a 100 percent tax on the value of any contribution of
assets to the REMIC after the "start-up day" (the day on which the regular
and residual interests are issued), other than under specified exceptions,
and subjects "net income from foreclosure property" to tax at the highest
corporate rate. It is not anticipated that a REMIC will engage in any
transactions or receive any income.
TERMINATION OF A REMIC OR FASIT
In general, no special tax consequences will apply to a holder of a
REMIC or FASIT regular certificate upon the termination of the REMIC or
FASIT by virtue of the final payment or liquidation of the last shared
appreciation mortgage remaining in the REMIC or FASIT. If a Residual
Owner's adjusted basis in its REMIC residual certificate at the time the
termination occurs exceeds the amount of cash distributed to the Residual
Owner in liquidation of its interest, then, although the matter is not
entirely free from doubt, it appears that the Residual Owner would be
entitled to a loss (which would be a capital loss) equal to the amount of
the excess. If a FASIT Owner's adjusted basis in its FASIT Ownership
Certificate at the time the termination occurs exceeds the amount of cash
distributed to the FASIT Owner in liquidation of its interest, then,
although the matter is not entirely free from doubt, it appears that the
FASIT Owner would be entitled to a loss (which would be a capital loss)
equal to the amount of the excess.
REPORTING AND OTHER ADMINISTRATIVE MATTERS OF REMICS AND FASITS
Reporting of interest income, including any original issue discount,
with respect to REMIC or FASIT regular certificates is required annually,
and may be required more frequently under Treasury regulations. In addition
to those holders of REMIC or FASIT regular certificates to whom information
reporting generally applies, some holders of REMIC or FASIT regular
certificates who are generally exempt from information reporting on debt
instruments, such as corporations, banks, registered securities or
commodities brokers, REITs, registered investment companies, common trust
funds, charitable remainder annuity trusts and unitrusts, will be provided
interest and original issue discount income information and the information
set forth in the following paragraph upon request in accordance with the
requirements of the Treasury regulations. The information must be provided
by the later of 30 days after the end of the quarter for which the
information was requested, or two weeks after the receipt of the request.
The REMIC or FASIT must also comply with rules requiring the face of a
REMIC or FASIT certificate issued at more than a de minimis discount to
disclose the amount of original issue discount and the issue date and
requiring the information to be reported to the Treasury Department.
The REMIC or FASIT regular certificate information reports must
include a statement of the "adjusted issue price" of the REMIC or FASIT
regular certificate at the beginning of each accrual period. In addition,
the reports must include information necessary to compute the accrual of
any market discount that may arise upon secondary trading of REMIC or FASIT
regular certificates. Because exact computation of the accrual of market
discount on a constant yield method would require information relating to
the holder's purchase price which the REMIC or FASIT may not have, it
appears that this provision will only require information pertaining to the
appropriate proportionate method of accruing market discount.
The party responsible for complying with the foregoing reporting
rules will be specified in the Pooling and Servicing Agreement.
For purposes of the administrative provisions of the Code, REMICs
will be treated as partnerships and the holders of REMIC residual
certificates will be treated as partners. Unless otherwise stated in the
applicable prospectus supplement, SAMCO Mortgage Securities Corp. will file
federal income tax information returns on behalf of the related REMIC, and
will be designated as agent for, and will act on behalf of the "tax matters
partner" with respect to the REMIC in all respects.
As agent for the tax matters partner, SAMCO Mortgage Securities Corp.
will, subject to notice requirements and various restrictions and
limitations, ordinarily have the authority to act on behalf of the REMIC
and the Residual Owners in connection with the administrative and judicial
review of items of income, deduction, gain or loss of the REMIC, as well as
the REMIC's classification. Residual Owners will usually be required to
report the REMIC items consistently with their treatment on the REMIC's
federal income tax information return and may in some circumstances be
bound by a settlement agreement between the master servicer or servicer, as
agent for the tax matters partner, and the Internal Revenue Service
concerning any REMIC item. Adjustments made to the REMIC tax return may
require a Residual Owner to make corresponding adjustments on its return,
and an audit of the REMIC's tax return, or the adjustments resulting from
an audit, could result in an audit of a Residual Owner's return.
BACKUP WITHHOLDING WITH RESPECT TO REMIC AND FASIT CERTIFICATES
Payments of interest and principal on REMIC and FASIT regular
certificates, as well as payments of proceeds from the sale of REMIC
certificates, may be subject to the "backup withholding tax" under section
3406 of the Code at a rate of 31 percent if recipients of the payments fail
to furnish to the payor information, including their taxpayer
identification numbers, or otherwise fail to establish an exemption from
the tax. Any amounts deducted and withheld from a distribution to a
recipient would be allowed as a credit against the recipient's federal
income tax. Furthermore, penalties may be imposed by the Internal Revenue
Service on a recipient of payments that is required to supply information
but that does not do so in the proper manner.
FOREIGN INVESTORS IN REMIC OR FASIT CERTIFICATES
REMIC or FASIT Regular Certificates
Except as qualified below, payments made on a REMIC or FASIT regular
certificate to a holder of a REMIC or FASIT regular certificate that is a
Non-U.S. Person, or to a person acting on behalf of a Certificateholder,
usually will be exempt from federal income and withholding taxes, provided:
o the holder of the certificate is not subject to United States
tax as a result of a connection to the United States other than
ownership of the certificate,
o the holder of the certificate signs a statement under penalties
of perjury that certifies that the holder is a Non-U.S. Person
and provides the name and address of the holder, and
o the last U.S. Person in the chain of payment to the holder
received the statement from the holder or a financial
institution holding on its behalf and does not have actual
knowledge that the statement is false.
If the holder does not qualify for exemption, distributions of interest,
including distributions in respect of accrued original issue discount, to
the holder may be subject to a withholding tax rate of 30%, subject to
reduction under any applicable tax treaty.
Holders of REMIC or FASIT regular certificates should be aware that
the Internal Revenue Service might take the position that exemption from
U.S. withholding taxes does not apply to a holder that also directly or
indirectly owns 10% or more of the REMIC residual certificates of a
particular series of certificates or a FASIT Ownership Certificate.
Further, the foregoing rules will not apply to exempt a United States
shareholder of a controlled foreign corporation from taxation on the United
States shareholder's allocable portion of the interest or original issue
discount income earned by the controlled foreign corporation.
The United States Treasury Department has issued regulations that may
change the certification procedures regarding withholding on amounts paid
to Non-U.S. Persons after December 31, 2000. Non-U.S. Persons should
consult their tax advisors concerning the effect, if any, of the new
Treasury regulations on them.
REMIC Residual Certificates
Amounts paid to a Residual Owner that is a Non-U.S. Person usually
will be treated as interest for purposes of applying the withholding tax on
Non-U.S. Persons with respect to income on its REMIC residual certificate.
However, it is unclear whether distributions on REMIC residual certificates
will be eligible for the general exemption from withholding tax that
applies to REMIC regular certificates as described above. Treasury
regulations provide that, for purposes of the portfolio interest exception,
payments to the foreign owner of a REMIC residual certificate are to be
considered paid on the obligations held by the REMIC, rather than on the
certificate itself. The payments would thus only qualify for the portfolio
interest exception if the underlying obligations held by the REMIC would so
qualify. The withholding tax ordinarily would be imposed at a rate of 30%
but would be subject to reduction under any tax treaty applicable to the
Residual Owner. However, there is no exemption from withholding tax nor may
the rate of the tax be reduced, under a tax treaty or otherwise, with
respect to any distribution of income that is an excess inclusion. See
"--Taxation of Owners of REMIC Residual Certificates--Excess Inclusions"
above.
Restrictions relating to transfers of REMIC residual certificates to
and by investors who are not U.S. Persons are also imposed by the REMIC
Regulations. First, transfers of REMIC residual certificates to Non-U.S.
Persons that have "tax avoidance potential" are disregarded for all federal
income tax purposes. If the transfer is disregarded, the purported
transferor of a REMIC residual certificate to a Non-U.S. Person would
continue to remain liable for any taxes due with respect to the income on
the REMIC residual certificate. A REMIC residual certificate has tax
avoidance potential unless, at the time of the transfer, the transferor
reasonably expects that the REMIC will distribute to the transferee amounts
that will equal at least 30% of each excess inclusion, and that the amounts
will be distributed at or after the time at which the excess inclusion
accrues and not later than the close of the calendar year following the
calendar year of accrual. This rule does not apply to transfers if the
income from the REMIC residual certificate is taxed in the hands of the
transferee as income effectively connected with the conduct of a U.S. trade
or business. Second, if a Non-U.S. Person transfers a REMIC residual
certificate to a U.S. Person, and the transfer has the effect of allowing
the transferor to avoid tax on accrued excess inclusions, that transfer is
disregarded for all federal income tax purposes and the purported Non-U.S.
Person transferor continues to be treated as the owner of the REMIC
residual certificate. Thus, the REMIC's liability to withhold 30% of the
accrued excess inclusions is not terminated even though the REMIC residual
certificate is no longer held by a Non-U.S. Person.
CLASSIFICATION AS A GRANTOR TRUST
If the applicable prospectus supplement so specifies with respect to
a SAM Pool, the arrangement under which the SAM Pool will be held will be
classified for federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. In some series of trust certificates,
pass-through certificates, there will be no separation of the principal,
interest and additional interest payments on the shared appreciation
mortgages. A holder of a pass-through certificate will be treated as owning
an undivided interest in each of the shared appreciation mortgages in the
SAM Pool. In the cases of stripped certificates, there will be a separation
in the ownership of the principal and interest payment, on the one hand,
and the additional interest payments, on the other hand, on the shared
appreciation mortgages. A holder of a stripped certificate will be treated
as owning an undivided interest in the payments underlying the stripped
certificate.
Each holder of a trust certificate must report on its federal income
tax return its pro rata share of the gross income derived by the trust from
the shared appreciation mortgages (not reduced by Servicing Fees), at the
time and in the same manner as the items would have been reported under the
holder's tax accounting method had it held its interest in the shared
appreciation mortgages directly, received directly its share of the amounts
received with respect to the shared appreciation mortgages, and paid
directly its share of the Servicing Fees. In the case of pass-through
certificates, the gross income will consist of a pro rata share of all of
the income derived from all of the shared appreciation mortgages and, in
the case of stripped certificates, the income will consist of a pro rata
share of the income derived from each stripped bond or stripped coupon in
which the holder of a stripped certificate owns an interest. A holder of a
trust certificate will usually be entitled to deduct Servicing Fees under
section 162 or section 212 of the Code to the extent that the Servicing
Fees represent "reasonable" compensation for services rendered by the
Trustee and the master servicer (and servicer, if other than the master
servicer). In the case of a noncorporate holder, however, Servicing Fees
(to the extent not otherwise disallowed, e.g., because they exceed
reasonable compensation) will be deductible in computing the holder's
regular tax liability only to the extent that the fees, when added to other
miscellaneous itemized deductions, exceed 2% of adjusted gross income and
may not be deductible to any extent in computing the holder's alternative
minimum tax liability. In addition, section 68 of the Code provides that
the amount of itemized deductions otherwise allowable for the taxable year
for an individual whose adjusted gross income exceeds an applicable amount
will be reduced by the lesser of 3% of the excess of adjusted gross income
over the applicable amount or 80% of the amount of itemized deductions
otherwise allowable for the taxable year.
TAXATION OF HOLDERS OF PASS-THROUGH CERTIFICATES
There are no rules that specifically govern the federal income tax
consequences of debt instruments that are both subject to prepayment and
provide for contingent payments. In the absence of direct authority, the
trust will treat the pass-through certificates as being subject to section
1272(a)(6) of the Code and the Contingent Payment Debt Regulations. There
is no authority that prescribes the proper interaction between section
1272(a)(6) of the Code and the Contingent Payment Debt Regulations.
Therefore, there can be no assurance that the Internal Revenue Service will
agree with the treatment of the pass-through certificates set forth below.
Interest Accrual on the Pass-Through Certificates. A holder will be
required to accrue interest (including OID) on a pass-through certificate
regardless of whether the holder uses the cash or accrual method of tax
accounting. As a result, a holder will likely be required to include in its
taxable income for a particular year an amount of interest in excess of the
cash payments received with respect to a pass-through certificate in that
year.
For each accrual period prior to and including the maturity date of a
pass-through certificate, the amount of interest that will accrue, as
original issue discount, on a pass-through certificate will equal the sum
of the present value of all remaining payments expected to be made with
respect to the pass-through certificate as of the close of the period and
the payments made during the accrual period with respect to the
pass-through certificate over the adjusted issue price of the pass-through
certificate at the beginning of the accrual period. The adjusted issue
price is the issue price of the pass-through certificate, increased by any
interest previously accrued with respect to the pass- through certificate
and decreased by the amounts of any payments made with respect to the pass-
through certificate. The issue price of a pass-through certificate is the
first price at which a substantial amount of the pass-through certificates
are sold to the public (excluding sales to bond houses and brokers). This
amount is ratably allocated to each day in the accrual period and is
includible in income as interest by a holder for each day in the accrual
period on which the holder holds the pass-through certificate.
The present value of all remaining payments expected to be made with
respect to a pass-through certificate will be determined by deriving the
comparable yield for the pass-through certificate and a projected payment
schedule for the pass-through certificate and discounting the projected
payments at the comparable yield. The issuer intends to take the position
that the "comparable yield" is the annual yield the issuer would be
expected to pay, as of the issue date, on a debt instrument with no
contingent payments but with terms and conditions otherwise comparable to
those of a pass-through certificate. Although there is no specific
authority that specifically authorizes an issuer to do so, the issuer will
determine the comparable yield based on an aggregate of the mortgage loans
in the SAM Pool rather than on a loan-by-loan basis. It is possible,
however, that the Internal Revenue Service could successfully assert that
the comparable yield is the long-term applicable federal rate. The
"projected payment schedule" is a schedule of the payments expected to be
made with respect to the pass-through certificate, based upon reasonable
prepayment assumptions and the comparable yield. The issuer will make
available to holders the amount of original issue discount accrued with
respect to a pass-through certificate for each accrual period.
Sale or Exchange of Pass-Through Certificates. Upon the sale,
exchange or retirement of a pass-through certificate, a holder will
recognize gain or loss equal to the difference between the amount realized
and the holder's adjusted basis in the pass-through certificate. The
holder's adjusted basis in a pass-through certificate will be the holder's
original basis in the pass-through certificate, increased by any interest
previously accrued by the holder with respect to the pass- through
certificate and decreased by the amount of any payments made with respect
to the pass- through certificate. Any gain recognized upon the sale or
exchange of a pass-through certificate will be ordinary interest income;
any loss will be ordinary loss to the extent of interest previously
included in income by the holder with respect to the pass-through
certificate, and thereafter, capital loss.
Because, however, there is no authority that clearly governs the
taxation of a holder of a pass- through certificate, it is possible that a
holder of a pass-through certificate could be subject to a federal income
tax regime different from that described in this prospectus, under which
the amount and, possibly, the character of a holder's income inclusions and
deductions would differ from those described above.
Market Discount and Premium
A holder of a pass-through certificate that purchases a pass-through
certificate with market discount, that is, at a purchase price less than
its adjusted issue price usually will recognize market discount upon
receipt of a distribution of principal. In particular, a holder will
usually be required to allocate a payment of principal first to accrued
market discount and to recognize ordinary income to the extent the
principal payment does not exceed the aggregate amount of accrued market
discount on the pass-through certificate not previously included in income.
The market discount must be included in income in addition to any original
issue discount includible in income with respect to the pass-through
certificate.
A holder of a pass-through certificate may elect to include market
discount in income currently as it accrues, rather than including it on a
deferred basis in accordance with the foregoing. If made, the election will
apply to all market discount bonds acquired by the holder on or after the
first day of the first taxable year to which the election applies. In
addition, the OID Regulations permit a holder to elect to accrue all
interest and discount (including de minimis market or original issue
discount) as interest based on a constant yield method. It is unclear how
this election would apply to a pass-through certificate. It is possible
that an election with respect to a pass-through certificate would require
that the principles of the Contingent Payment Debt Regulations, to the
extent that they apply to a pass-through certificate, be applied in a
manner that takes into account the discount on the pass-through
certificate. In any event, if an election were made for a pass- through
certificate with market discount, the holder would be deemed to have made
an election to include market discount in income currently with respect to
all other debt instruments having market discount that the holder acquires
during the year of the election or thereafter.
Under a statutory de minimis exception, market discount with respect
to a pass-through certificate will be considered to be zero for purposes of
sections 1276 through 1278 of the Code if the market discount is less than
0.25% of the stated redemption price at maturity of the pass- through
certificate multiplied by the number of complete years to maturity
remaining after the date of its purchase. It is unclear how this rule would
apply to a pass-through certificate, which, under the principles of the
Contingent Payment Debt Regulations, would not have a stated redemption
price at maturity. Nevertheless, it is possible that the stated redemption
price at maturity could be based upon all of the projected payments to be
made under the pass-through certificate, as determined by applying the
principles of the Contingent Payment Debt Regulations. It is also unclear
what amount should be used as the number of complete years to maturity of a
pass- through certificate. In interpreting a similar de minimis rule with
respect to original issue discount on obligations payable in installments,
the OID Regulations refer to the weighted average maturity of obligations,
and it is possible that the same rule should be applied in determining
whether market discount is de minimis.
The Code grants authority to the Treasury Department to issue
regulations providing for the method for accruing market discount of more
than a de minimis amount on debt instruments, the principal of which is
payable in more than one installment. Until the time as regulations are
issued by the Treasury Department, some rules described in the legislative
history will apply. Under those rules, the holder of a bond purchased with
more than de minimis market discount may elect to accrue the market
discount either on the basis of a constant yield method or on the basis of
the appropriate proportionate method described below. Under the
proportionate method for obligations issued with original issue discount,
the amount of market discount that accrues during a period is equal to the
product of the total remaining market discount, multiplied by a fraction,
the numerator of which is the original issue discount accruing during the
period and the denominator of which is the total remaining original issue
discount at the beginning of the period. Under the proportionate method for
obligations issued without original issue discount, the amount of market
discount that accrues during a period is equal to the product of the total
remaining market discount, multiplied by a fraction, the numerator of which
is the amount of stated interest paid during the accrual period and the
denominator of which is the total amount of stated interest remaining to be
paid at the beginning of the period. The Prepayment Assumption, if any,
used in calculating the accrual of original issue discount is to be used in
calculating the accrual of market discount under any of the above methods.
It is unclear how these rules might apply to a pass- through certificate.
TAXATION OF HOLDERS OF STRIPPED CERTIFICATES
A holder of a stripped certificate that consists of the principal and
interest payments on the SAMs, but not the additional interest payments,
should ordinarily be subject to federal income tax in the same manner as
the holder of a REMIC or FASIT regular certificate. See "-- Taxation of
Owners of REMIC and FASIT regular certificates" above.
Although there is no authority directly on point and other
characterizations are possible, the issuer will treat a holder of an
appreciation certificate as holding an interest in a pool of stripped
coupons within the meaning of section 1286(e) of the Code. There are no
rules that specifically govern the federal income tax consequences to
holders of coupons stripped from loans that are subject to prepayment and
that provide for contingent payments. In the absence of direct authority,
the issuer will treat the appreciation certificates as newly-issued debt
instruments subject to section 1272(a)(6) of the Code and the Contingent
Payment Debt Regulations. Accordingly, holders of appreciation certificates
should ordinarily be subject to federal income tax in the same manner as
holders of pass-through certificates, although the rules regarding market
discount and premium will not apply. See "Taxation of Holders of
Pass-Through Certificates" above. In addition to all of the uncertainties
applicable to the taxation of holders of pass-through certificates, in the
case of appreciation certificates, there is no specific authority for the
manner in which the comparable yield is to be determined. Nevertheless, the
issuer intends to take the position that the comparable yield is equal to
the rate that would be expected to apply to a stripped coupon that paid
interest monthly at a rate equal to the difference between the comparable
yield that would have been determined for the shared appreciation mortgages
in the SAM Pool had they not been stripped and the weighted average
interest rate on the stripped certificates issued with respect to the SAM
Pool that are not appreciation certificates. It is possible, however, that
the Internal Revenue Service could successfully assert the position that
the comparable yield should be determined in a different manner or that the
comparable yield should equal the long-term applicable federal rate.
Real Estate Investment Trusts
The interest earned with respect to pass-through certificates or
appreciation certificates by a REIT is subject to the limitations of
sections 856(f) and 856(j) of the Code. Accordingly, a REIT that holds the
certificates could potentially jeopardize its qualification for taxation as
a REIT and expose the income to taxation as a prohibited transaction at a
100 percent rate.
Non-U.S. Persons
Pass-through certificates and appreciation certificates will not be
sold to Non-U.S. Persons.
INFORMATION REPORTING
Income on trust certificates will be reported to holders of trust
certificates on a Form 1099. This form will be mailed to holders of trust
certificates by January 31 following the end of each calendar year.
TAXATION OF HOLDERS OF CLASSES OF EXCHANGEABLE CERTIFICATES
The arrangement by which Exchangeable Classes are created, sold and
administered will be classified as a grantor trust for federal income tax
purposes. The interests in the classes of certificates that have been
exchanged for Exchangeable Classes will be the assets of the Exchangeable
Pool and the Exchangeable Classes represent beneficial ownership of these
interests in the classes of certificates.
Tax Status
The Exchangeable Classes should be considered to represent "real
estate assets" within the meaning of section 856(c)(4)(A) of the Code and
assets described in section 7701(a)(19)(C) of the Code. OID and interest
accruing on Exchangeable Classes should be considered to represent
"interest on obligations secured by mortgages on real property" within the
meaning of section 856(c)(3)(B) of the Code. Exchangeable Classes will be
"qualified mortgages" under section 860G(a)(3) of the Code for a REMIC.
Tax Accounting for Exchangeable Certificates
An Exchangeable Class represents beneficial ownership of an interest
in one or more classes of certificates on deposit in an Exchangeable
Certificate Trust Fund, as specified in the applicable prospectus
supplement. If it represents an interest in more than one class of
certificates, a purchaser must allocate its basis in the Exchangeable Class
among the interests in the classes of certificates in accordance with their
relative fair market values as of the time of acquisition. Similarly, on
the sale of an Exchangeable Class, the holder must allocate the amount
received on the sale among the interests in the classes of certificates in
accordance with their relative fair market values as of the time of sale.
The holder of an Exchangeable Class must account separately for each
interest in a class of certificates (there may be only one interest). Where
the interest represents a pro rata portion of a class of certificates, the
holder of the Exchangeable Class should account for the interest as
described under "--Taxation of Owners of REMIC Regular Certificates" above.
A holder of a Strip will likely be treated as owning, under section 1286 of
the Code, "stripped bonds" to the extent of its share of principal payments
and "stripped coupons" to the extent of its share of interest payments on
the class of certificates. The issuer intends to treat each Strip as a
single debt instrument for purposes of information reporting. The Internal
Revenue Service, however, could take a different position. For example, the
Internal Revenue Service could contend that a Strip should be treated as a
pro rata part of the class of certificates to the extent that the Strip
represents a pro rata portion, and "stripped bonds" or "stripped coupons"
with respect to the remainder. An investor should consult its tax advisor
regarding this matter.
A holder of an Exchangeable Class should calculate OID with respect
to each Strip and include it in ordinary income as it accrues, which may be
prior to the receipt of cash attributable to the income, in accordance with
a constant interest method that takes into account the compounding of
interest. See "--Taxation of Ownership of REMIC and FASIT Regular
Certificates--Original Issue Discount," "Taxation of Holders of
Pass-Through Certificates," and "Taxation of Holders of Stripped
Certificates," above. The holder should determine its yield to maturity
based on its purchase price allocated to the Strip and on a schedule of
payments projected using a prepayment assumption, and then make periodic
adjustments to take into account actual prepayment experience. With respect
to a particular holder, Treasury regulations do not address whether the
prepayment assumption used to calculate original issue discount would be
determined at the time of purchase of the Strip or would be the original
prepayment assumption with respect to the related class of certificates.
Further, if the related class of certificates is subject to redemption as
described in the applicable prospectus supplement, Treasury regulations do
not address the extent to which the prepayment assumption should take into
account the possibility of the retirement of the Strip concurrently with
the redemption of that class of certificates. An investor should consult
its tax advisor regarding these matters. For purposes of information
reporting relating to original issue discount, the original yield to
maturity of the Strip, determined as of the date of issuance of the series,
will be calculated based on the original prepayment assumption.
If original issue discount accruing with respect to a Strip, computed
as described above, is negative for any period, the holder is entitled to
offset the amount only against future positive original issue discount
accruing from the Strip, and income is reported in all cases in this
manner. Although not entirely free from doubt, a holder may be entitled to
deduct a loss to the extent that its remaining basis would exceed the
maximum amount of future payments to which the holder is entitled with
respect to the Strip, assuming no further prepayments of the shared
appreciation mortgages or, perhaps, assuming prepayments at a rate equal to
the prepayment assumption. Although the issue is not free from doubt, all
or a portion of the loss may be treated as a capital loss if the Strip is a
capital asset in the hands of the holder.
A holder realizes gain or loss on the sale of a Strip in an amount
equal to the difference between the amount realized and its adjusted basis
in the Strip. The holder's adjusted basis usually is equal to the holder's
allocated cost of the Strip, increased by income previously included, and
reduced (but not below zero) by distributions previously received. Except
as described below, any gain or loss on the sale is capital gain or loss if
the holder has held its interest as a capital asset and is long-term if the
interest has been held for the long-term capital gain holding period (more
than one year). The gain or loss will be ordinary income or loss
o for a bank or thrift institution or
o to the extent income recognized by the holder is less than the
income that would have been recognized if the yield on the
interest were 110% of the AFR.
If a holder exchanges a Exchangeable Class for several Exchangeable
Classes and then sells one of the Exchangeable Classes so received, the
sale will likely subject the investor to the coupon stripping rules of
section 1286 of the Code. The holder must allocate its basis in the
Exchangeable Class that was given up between the part of the class
underlying the Exchangeable Class which was received and then sold and the
part of the Exchangeable Class that was received and retained, in
proportion to their relative fair market values as of the date of the sale.
The holder is treated as purchasing the interest retained for the amount of
basis allocated to the interest. The holder must calculate OID with respect
to the retained interest as described above.
Although the matter is not free from doubt, a holder that acquires in
one transaction a combination of Exchangeable Classes that may be exchanged
for a single Exchangeable Class that is identical to a class of
certificates that is on deposit in the related Exchangeable Certificate
Trust Fund should be treated as owning the relevant class of certificates.
Exchanges of Exchangeable Certificates
An exchange of an interest in one or more Exchangeable Classes for an
interest in one or more other related Exchangeable Classes that are part of
the same Combination, or vice versa, will not be a taxable exchange. After
the exchange, the holder is treated as continuing to own the interests in
the class or classes of Exchangeable Certificates that it owned immediately
prior to the exchange.
Tax Treatment of Foreign Investors
A holder of an Exchangeable Class is subject to taxation in the same
manner as foreign holders of REMIC regular certificates. See "Foreign
Investors in REMIC Certificates."
Backup Withholding
A holder of an Exchangeable Class is subject to backup withholding
rules to those applicable to REMIC regular certificates. See "--Backup
Withholding with Respect to REMIC Certificates."
Reporting and Administrative Matters
Reports will be made to the Internal Revenue Service and to holders
of record of Exchangeable Classes that are not exempt from the reporting
requirements.
STATE AND LOCAL TAXATION
Many states do not automatically conform to the federal income tax
laws. Consequently, a REMIC or FASIT which would not qualify as a fixed
investment trust for federal income tax purposes may be characterized as a
corporation, a partnership, or some other entity for purposes of state
income tax law. The characterization could result in entity level income or
franchise taxation of a REMIC or FASIT formed in, owning mortgages or
property in, or having servicing activity performed in a state without
conforming REMIC or FASIT provisions in its income or franchise tax law.
Further, holders of REMIC or FASIT regular certificates resident in
nonconforming states may have their ownership of REMIC or FASIT regular
certificates characterized as an interest other than debt of the REMIC or
FASIT such as stock or a partnership interest. Investors are advised to
consult their tax advisors concerning the state and local income tax
consequences of their purchase, ownership and disposition of the
certificates issued hereunder.
METHODS OF DISTRIBUTION
The certificates offered by the related prospectus supplements will
be offered in series. The distribution of the certificates may be effected
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment therefor. If so
specified in the related prospectus supplement, the certificates will be
distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by Bear, Stearns & Co. Inc., an
affiliate of SAMCO Mortgage Securities Corp., acting as underwriter with
other underwriters, if any, named in the related prospectus supplement. In
that event, the related prospectus supplement may also specify that the
underwriters will not only be obligated to pay for any certificates agreed
to be purchased by purchasers under purchase agreements acceptable to SAMCO
Mortgage Securities Corp. In connection with the sale of the certificates,
underwriters may receive compensation from SAMCO Mortgage Securities Corp.
or from purchasers of the certificates in the form of discounts,
concessions or commissions. The related prospectus supplement will describe
any compensation paid by SAMCO Mortgage Securities Corp.
Alternatively, the related prospectus supplement may specify that the
certificates will be distributed by Bear, Stearns & Co. Inc. acting as
agent or in some cases as principal with respect to certificates that it
has previously purchased or agreed to purchase. If Bear, Stearns & Co. Inc.
acts as agent in the sale of securities, Bear Stearns & Co. will receive a
selling commission with respect to each series of certificates, depending
on market conditions, expressed as a percentage of the aggregate principal
balance of the certificates sold hereunder as of the Cut-Off Date. The
exact percentage for each series of certificates will be disclosed in the
related prospectus supplement. To the extent that Bear, Stearns & Co. Inc.
elects to purchase certificates as principal, Bear, Stearns & Co. Inc. may
realize losses or profits based upon the difference between its purchase
price and the sales price. The related prospectus supplement with respect
to any series offered other than through underwriters will contain
information regarding the nature of the offering and any agreements to be
entered into between SAMCO Mortgage Securities Corp. and purchasers of
certificates of the series.
SAMCO Mortgage Securities Corp. will indemnify Bear, Stearns & Co.
Inc. and any underwriters against some civil liabilities, including
liabilities under the Securities Act of 1933, or will contribute to
payments Bear, Stearns & Co. Inc. and any underwriters may be required to
make in respect of the Securities Act.
In the ordinary course of business, Bear, Stearns & Co. Inc. and
SAMCO Mortgage Securities Corp. may engage in various securities and
financing transactions, including repurchase agreements to provide interim
financing of SAMCO Mortgage Securities Corp.'s Mortgage Loans pending the
sale of the Mortgage Loans or interests, including the certificates.
This prospectus and the related prospectus supplement may be used by
Bear, Stearns & Co. Inc. in connection with offers and sales related to
market-making transactions in the certificates. Bear, Stearns & Co. Inc.
may act as principal or agent in the transactions. The sales will be made
at prices related to prevailing market prices at the time of sale or
otherwise.
SAMCO Mortgage Securities Corp. anticipates that the certificates
will be sold primarily to institutional investors. Purchasers of
certificates, including dealers, may, depending on the facts and
circumstances of the purchases, be deemed to be "underwriters" within the
meaning of the Act in connection with reoffers and sales by them of
certificates. Certificateholders should consult with their legal advisors
in this regard prior to any reoffer or sale.
LEGAL INVESTMENT ASPECTS
At the time of their issuance, the certificates which are rated "AAA"
or "AA" by a bank or a nationally recognized statistical rating agency will
constitute "mortgage related securities" for purposes of the SMMEA, and as
will be legal investments for persons, trusts, corporations, partnerships,
associations, business trusts and business entities, including depository
institutions, life insurance companies and pension funds, created under or
existing under the laws of the United States or of any state whose
authorized investments are subject to state regulation to the same extent
that, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any agency or
instrumentality of the United States constitute legal investments for the
entities. Under SMMEA, if a state enacted legislation prior to October 4,
1991 specifically limiting the legal investment authority of any of the
entities with respect to "mortgage related securities," the certificates
will constitute legal investments for entities subject to the legislation
only to the extent provided in the legislation. Some states have enacted
legislation. Investors should consult their own legal advisors in
determining whether and to what extent the certificates constitute legal
investments for the investors.
SMMEA also amended the legal investment authority of
federally-chartered depository institutions as follows: federal savings and
loan associations and federal savings banks may invest in, sell or
otherwise deal with certificates without limitation as to the percentage of
their assets represented thereby; and federal credit unions may invest in
certificates and national banks may purchase certificates for their own
accounts without regard to the limitations generally applicable to
investment securities set forth in 12 U.S.C. ss.ss.24 (Seventh), subject in
each case to the regulations as the applicable federal regulatory authority
may prescribe.
Institutions whose investment activities are subject to review by
some regulatory authorities hereafter may become subject to restrictions on
investment in the certificates, and the restrictions may be retroactively
imposed. The Federal Financial Institutions Examination Council, the
Federal Deposit Insurance Corporation, the Office of the Comptroller of the
Currency, the Board of Governors of the Federal Reserve System and the OTS
have adopted guidelines regarding the suitability of investments in various
types of derivative mortgage-backed securities, including securities like
the certificates. Under the guidelines, regulated institutions are required
to evaluate the suitability of the investments prior to purchase and on an
ongoing basis. In addition, several states have adopted regulations that
would prohibit regulated institutions subject to their jurisdiction from
holding mortgage-backed securities, such as the certificates, including
securities previously purchased. Investors should consult their own legal
advisors in determining whether and to what extent the certificates
constitute legal investments for the investors.
There may be other restrictions on the ability of some investors,
including depository institutions, either to purchase certificates or to
purchase certificates representing more than a specified percentage of the
investors' assets. Investors should consult their own legal advisors in
determining whether and to what extent the certificates constitute legal
investments for the investors.
LEGAL MATTERS
Some legal matters will be passed upon for SAMCO Mortgage Securities
Corp. and the Underwriters, by their special counsel, Skadden, Arps, Slate,
Meagher & Flom LLP, New York, New York.
FINANCIAL INFORMATION
A new trust will be formed with respect to each series of
certificates and no trust fund will engage in any business activities or
have any assets or obligations prior to the issuance of the related series
of certificates. Accordingly, no financial statements with respect to any
trust fund will be included in this prospectus or in the related prospectus
supplement.
REPORTS TO CERTIFICATEHOLDERS
Unless and until definitive certificates are issued, monthly and
annual reports, containing information concerning each trust and prepared
by the master servicer or the servicer, will be sent on behalf of the trust
to Cede & Co. as nominee of DTC and registered holder of the related
certificates, under the related Pooling and Servicing Agreement. See
"Description of the Certificates - Book-Entry Registration." "-Reports to
Certificateholders" and "-Evidence as to Compliance." The reports will not
constitute financial statements prepared in accordance with generally
accepted accounting principles. The servicer does not intend to send any
financial reports of SAMCO Mortgage Securities Corp. to certificateholders.
The master servicer or the servicer will file with the SEC periodic reports
with respect to each trust as are required under the Exchange Act and the
rules and regulations of the SEC.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the certificates with
the SEC. This prospectus is part of the registration statement, but the
registration statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about each trust.
You may read and copy any reports, statements or other information we
file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can request copies of these documents, upon
payment of a duplicating fee, by writing to the SEC. Please call the SEC at
(800) SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings are also available to the public on the
SEC Internet site (http://www.sec.gov).
The SEC allows us to "incorporate by reference" information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus. Information that we file later
with the SEC will automatically update the information in this prospectus.
In all cases, you should rely on the later information over different
information included in this prospectus or the prospectus supplement. We
incorporate by reference any future annual, monthly and special SEC reports
and proxy materials filed by or on behalf of the trust until we terminate
our offering of the certificates.
As a recipient of this prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents,
unless the exhibits are specifically incorporated by reference, at no cost,
by writing or calling us at: 245 Park Avenue, New York, New York 10167,
telephone (212) 272-2000.
GLOSSARY OF TERMS
"AFR" means the applicable federal rate as determined under section
1274(d) of the Code.
"ACCEPTED SERVICING PRACTICES" means collection procedures as are
customary with respect to mortgage loans that are comparable to the SAMs.
"ACCRUAL CLASS" means a class of Exchangeable Certificates that
accretes all of its interest for a period (the accreted interest being
added to the principal of the class).
"ACT" means Rule 903 or 904 of Regulation S under the Securities Act
of 1933, as amended.
"ADJUSTABLE STRIP CERTIFICATE" means a certificate belonging to one
or more classes of certificates of a series, the holder of which is
entitled to receive only interest at a floating rate based on a notional
amount.
"ADJUSTED BASIS" means the U.S. holder's original basis in the
appreciation certificate, increased by any interest previously accrued by
the U.S. holder with respect to the appreciation certificate and decreased
by the amount of any payments made with respect to the appreciation
certificate.
"ADJUSTED ISSUE PRICE" means the issue price of the appreciation
certificate, increased by any interest previously accrued and decreased by
the amount of any payments made with respect to the appreciation
certificate, and is the first price at which a substantial amount of the
appreciation certificates will be sold to the public (excluding sales to
bond houses and brokers).
"ADVANCES" means an advance on or before each Distribution Date by
the Originator, the seller, the master servicer, the servicer or other
person designated in the prospectus supplement (from its own funds, funds
advanced by others or funds held in any of the accounts for future
distributions to the holders of the certificates) of an amount equal to the
aggregate of payments of principal and interest that were delinquent on the
related Determination Date, subject to the person's determination that the
Advances will be recoverable out of late payments by mortgagors,
Liquidation Proceeds, Insurance Proceeds or otherwise with respect to the
specific SAM or, if required by the applicable rating agency, with respect
to any of the SAMs.
"AGENCY SECURITIES" means mortgage pass-through securities.
"APPRECIATION SHARE" means a percentage of the future capital
appreciation in the mortgaged property that is assessed by the mortgagor to
be paid to the Originator upon a Mortgage Termination Event with payment or
at maturity.
"ASSET CONSERVATION ACT" means the Asset Conservation, Lender
Liability and Deposit Insurance Protection Act of 1996.
"BANKRUPTCY BOND" means a bond which may be obtained covering certain
lossess resulting from action which may be taken by a bankruptcy court in
connection with a single family loan, cooperative loan or contract.
"BANKRUPTCY CODE" means Chapter 7, 11 or 13 of the federal Bankruptcy
Code, as amended.
"BANKRUPTCY INSTRUMENT" means one or more of a Letter of Credit,
Reserve Fund or Bankruptcy Bond which may provide coverage with respect to
Bankruptcy Losses.
"BANKRUPTCY LOSS" means any loss attributable to some actions which
may be taken by a bankruptcy court in connection with a SAM, including a
reduction by a bankruptcy court of the principal balance of or the stated
interest rate on a SAM or an extension of its maturity, as set forth in the
applicable prospectus supplement.
"BUDGET ACT" means the Omnibus Budget Reconciliation Act of 1993.
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980.
"CMOS" means Collateralized Mortgage Obligations.
"CALL CLASS" means each class of securities that can exercise a call
of a Callable Class of securities.
"CALL RIGHT" means the right of the counterparty, having entered into
a redemption agreement with an entity electing to be treated as a REMIC, to
cause a redemption of the outstanding certificates beginning on the
Distribution Date and subject to payment of the redemption price and other
conditions that may be specified in the applicable prospectus supplement.
"CALLABLE CLASS" means one or more classes of certificates which may
be callable at the option of one or more other classes of securities.
"CALLABLE CLASS CERTIFICATE" means a certificate to which a Call
Right may apply.
"CASUALTY" means the occurrence of damage or destruction by flood,
fire or other casualties.
"CASUALTY ADJUSTMENT" means an amount equal to the estimated cost to
restore the mortgaged property following the occurrence of a Casualty.
"CERTIFICATE ADMINISTRATOR" means that Person who calculates amounts
distributable to the certificateholders, prepares tax returns on behalf of
the trust fund and provides other administrative services specified in the
Pooling and Servicing Agreement .
"CERTIFICATE ADMINISTRATOR FEE" means a fee paid to the Certificate
Administrator for its services, paid from the difference between the stated
interest rate on each SAM and the Remittance Rate (net of any Retained
Yield) with respect to the SAM or if specified in the prospectus
supplement, paid from additional interest payments in another manner
specified in the related prospectus supplement.
"CERTIFICATE INSURANCE POLICIES" means insurance policies obtained by
the master servicer or the related servicer, issued by insurers acceptable
to the rating agencies, which insures to the holders of one or more classes
of certificates the payment of amounts due in accordance with the terms of
the class or classes of certificates, subject to the limitations and
exceptions as are set forth in the applicable prospectus supplement.
"CERTIFICATEHOLDER(S)" means the holder(s) of any series of shared
appreciation mortgage pass-through certificates.
"CHARTER ACT" means the Federal National Mortgage Association Charter
Act.
"CLASS APPRECIATION DISTRIBUTION AMOUNT" means, for a Class of
appreciation certificates for any Distribution Date, all or a portion of
the Appreciation Share allocable to the class for the Distribution Date, as
described in the related prospectus supplement.
"CLASS FACTOR" means a truncated seven-digit decimal which, when
multiplied by the original principal amount of that Class, equals its
remaining principal amount, after giving effect to any payment of (or
addition to) principal to be made on the Distribution Date in the following
month.
"CLASS PRINCIPAL DISTRIBUTION AMOUNT" means an amount for a class of
certificates for any Distribution Date equal to the portion, if any, of the
principal balance allocable to the Class for the Distribution Date, as
described in the related prospectus supplement.
"CLASS TOTAL DISTRIBUTION AMOUNT" means an amount equal to the
Percentage Interest represented by a certificate, which is not an
appreciation certificate, held by the holder multiplied by the sum of the
Class Principal Distribution Amount for the class, if the class is entitled
to payments of interest on the Distribution Date, one month's interest at
the applicable pass-through rate on the principal balance or notional
principal balance of the class specified in the applicable prospectus
supplement, less the class's pro rata share of the sum of
o the shortfalls in collections of interest on prepayments in full with
respect to which distribution is to be made on the Distribution Date,
if any,
o the amount of any deferred interest added to the principal balance of
the SAMs and/or the outstanding balance of the certificates on the
related Due Date,
o one month's interest at the applicable Pass-Through Rate on the
amount of any partial prepayments received on the SAMs in the month
preceding the month of the distribution and
o any other interest shortfalls (including, without limitation,
shortfalls arising out of application of the Relief Act or similar
legislation or regulations as in effect from time to time) allocable
to certificateholders which are not covered by Advances or applicable
credit enhancements, in each case in the amount as is allocated to
the class on the basis set forth in the related prospectus
supplement.
"CLEARSTREAM" means Clearstream Banking Luxembourg, societe anonyme.
"CLEARSTREAM CUSTOMERS" means participating organizations, including
underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and some other organizations and possibly the
underwriters of any series of certificates, for whom Clearstream holds
securities.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLECTION ACCOUNT" means a separate account or accounts for the
collection of payments on the related SAMs, established and maintained for
one or more series of certificates by the master servicer or a servicer
servicing the SAMs, which must be
o maintained with a depository institution the debt obligations of
which (or in the case of a depository institution that is the
principal subsidiary of a holding company, the obligations of the
holding company) are rated in one of the two highest rating
categories by a rating agency rating the series of certificates,
o an account or accounts the deposits in which are fully insured by the
Federal Deposit Insurance Corporation (the "FDIC"),
o an account or accounts the deposits in which are insured by the FDIC
(to the limits established by the FDIC), and the uninsured deposits
in which are invested in Eligible Investments held in the name of the
Trustee, or
o an account or accounts otherwise acceptable to each rating agency.
"COMBINATIONS" means related classes of Exchangeable Certificates
which are exchangeable for one another.
"COMPARABLE YIELD" means the annual yield the issuer would be
expected to pay, as of the issue date, on a debt instrument with no
contingent payments but with terms and conditions otherwise comparable to
those of an appreciation certificate.
"COMPENSATING INTEREST" means a full month's payment of interest (to
the extent of any applicable limits) at the applicable Pass-Through Rate on
a SAM for which a prepayment in full is made or which is liquidated, less
the interest at the applicable Pass-Through Rate attributable to interest
paid by the mortgagor or by the Pool Insurer under an applicable pool
insurance policy through the date of a prepayment in full.
"CONDEMNATION ADJUSTMENT" means an amount equal to: the Adjusted
Value determined immediately prior to the adjustment, minus the product of
the Adjusted Value determined immediately prior to the adjustment
multiplied by a fraction, the numerator of which is the appraised value of
the mortgaged property determined immediately after any partial taking by
eminent domain and the denominator of which is the appraised value
determined immediately prior to the partial taking.
"CONSTANT APPRECIATION RATE" means a standard or model which assumes
a constant annual rate of appreciation each month, expressed as a per annum
percentage of the then- scheduled principal balance of the Mortgage Pool,
taking into account the volatility of the constant appreciation rate.
"CONSTANT PREPAYMENT RATE" means a prepayment standard or model which
assumes a constant annual rate of prepayment each month, expressed as a per
annum percentage of the then- scheduled principal balance of the Mortgage
Pool.
"CONTINGENT PAYMENT DEBT REGULATIONS" means Treasury Regulation
Section 1.1275-4.
"COOPERATIVE" means Euroclear Clearance System, S.C., a Belgian
cooperative corporation responsible for establishing policy for the
Euroclear System on behalf of Euroclear Participants.
"CUT-OFF DATE" means the date specified in the prospectus supplement
relating to the creation of the trust fund.
"D&P" means Duff & Phelps Inc.
"DOL" means the United States Department of Labor.
"DTC" means the Depositary Trust Company.
"DEFAULTED MORTGAGE LOSS" means any loss attributable to the
mortgagor's failure to make any payment of principal, interest or
additional interest payments as required under the Mortgage Note, but not
including Special Hazard Losses, Extraordinary Losses or other losses
resulting from damage to a mortgaged property, Bankruptcy Losses or Fraud
Losses, as set forth in the applicable prospectus supplement.
"DEPOSITARIES" means Clearstream's and Euroclear's respective
depositaries which hold omnibus positions in customers' securities accounts
in the Depositaries' names on the books of DTC.
"DEPOSITOR EMPLOYEES" means all officers, employees or other persons
acting in any capacity requiring the persons to handle funds, money,
documents or papers relating to the SAMs.
"DETERMINATION DATE" means the tenth day preceding each Distribution
Date.
"DISTRIBUTION ACCOUNT" means a trust account or another account
acceptable to any rating agency established by the Trustee in its name as
Trustee for one or more series of certificates and maintained as an
interest bearing account, the funds in which are held to be invested
pending each succeeding Distribution Date in Eligible Investments.
"DISTRIBUTION DATE" means the 25th day (or if the 25th day is not a
business day, the business day immediately following the 25th day) of each
calendar month.
"DISTRIBUTION PERIOD" means the month prior to the month in which the
Distribution Date occurs.
"DUE DATE" means a date on which the monthly payment for a SAM is
due.
"ECOA" means the Equal Credit Opportunity Act, which prohibits
discrimination on the basis of any of a number of prohibited factors.
"EMC" means EMC Mortgage Corporation.
"EPA" means the United States Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ELIGIBLE INVESTMENTS" means obligations of the United States and
some United States agencies, certificates of deposit, some commercial
paper, time deposits and bankers' acceptances sold by eligible commercial
banks and some other instruments acceptable to the applicable rating
agency, all invested by, or at the direction of, and for the benefit of the
master servicer, the related servicer, SAMCO Mortgage Securities Corp. or
the related seller, as applicable, or any other person named in the
prospectus supplement and which have a maturity prior to the next
Distribution Date.
"EQUITY RELEASE SAM" means a residential mortgage loan under which
the mortgagor pays no interest or principal to the holder of the SAM
periodically but pays all principal due and the Appreciation Share upon the
occurrence of a Mortgage Termination Event.
"ERRORS AND OMISSIONS INSURANCE POLICY" means an insurance policy
with broad coverage on Depositor's Employees maintained by the master
servicer or each servicer at its own expense which protects and insures the
master servicer or servicer against losses in connection with the release
or satisfaction of a SAM without having obtained payment in full of the
indebtedness secured thereby and, if so stated in the related prospectus
supplement, protects and insures, in the form of the Mortgage Banker's
Blanket Bond, the master servicer or servicer against losses, including
forgery, theft, embezzlement, fraud, errors and omissions and negligent
acts of the Depositor Employees.
"EUROCLEAR OPERATOR"or "EUROCLEAR" means Morgan Guaranty Trust
Company of New York, Brussels, Belgium office, conductor of all operations.
"EUROCLEAR PARTICIPANTS" means participants of the Euroclear System
including banks (including central banks), securities brokers and dealers
and other professional financial intermediaries and possibly the
underwriters of any series of certificates.
"EVENTS OF DEFAULT" means an event, under the Pooling and Servicing
Agreement, generally including
o any failure by the master servicer or servicer to cause to be
deposited in the Distribution Account or Collection Account, as
applicable, any amount so required to be deposited under the Pooling
and Servicing Agreement and the failure continues unremedied for two
business days or the other time period as is specified in the
agreement;
o any failure by the master servicer or servicer duly to observe or
perform in any material respect any of its other covenants or
agreements in the Pooling and Servicing Agreement, which continues
unremedied for 60 days or the other time period as is specified in
the Pooling and Servicing Agreement, after the giving of written
notice of the failure to the master servicer or servicer by the
Trustee, or to the master servicer or servicer and the Trustee by the
holders of certificates of any Class evidencing not less than 25% of
the Percentage Interests evidenced by the Class;
o some events of insolvency, readjustment of debt, marshaling of assets
and liabilities or similar proceedings and some actions by or on
behalf of the master servicer or servicer indicating its insolvency,
reorganization or inability to pay its obligations; and
o the master servicer or servicer assigning or delegating its duties or
rights in contravention of the provisions permitting the assignment
or delegation under the Pooling and Servicing Agreement.
"EXCHANGEABLE CERTIFICATES" means certificates which are entitled to
be exchanged for all or a portion of other related classes of certificates.
"EXCHANGEABLE CERTIFICATE TRUST FUND" means a trust fund, established
under a trust agreement between the seller and a trustee, which issues
Classes of Exchangeable Certificates that are identical in all respects to
the Classes of certificates deposited in the trust fund.
"EXCHANGEABLE CLASS(ES)" means classes of a series which are
exchangeable and represent beneficial ownership of an interest in one or
more classes of certificates on deposit in an Exchangeable Certificate
Trust Fund, as specified in the applicable prospectus supplement.
"EXCHANGEABLE POOL" means a pool of Exchangeable Classes which are to
be created, sold, and administered.
"EXCHANGED EXCHANGEABLE CLASS" means a single Exchangeable Class
which is exchanged for several Received Exchangeable Classes.
"EXTRAORDINARY LOSSES" means any uncovered loss attributable to
shortfalls in the payment of amounts due to one or more classes of
certificates. Losses occasioned by war, civil insurrection, some
governmental actions, nuclear reaction, chemical contamination, errors in
design, faulty workmanship or materials or waste by the mortgagor, as set
forth in the applicable prospectus supplement.
"FASIT" means a financial asset securitization investment trust
within the meaning of section 860L of the Code.
"FASIT CERTIFICATES" means certificates issued in respect of a SAM
Pool classified as a FASIT for federal income tax purposes.
"FASIT OWNER" is an owner of a FASIT Ownership Certificate.
"FASIT OWNERSHIP CERTIFICATE" means a FASIT certificate that is
treated as an "ownership interest" within the meaning of section 860L(b)(2)
of the Code.
"FASIT PROVISIONS" means sections 860H through 860L of the Code.
"FASIT REGULAR CERTIFICATE" means a FASIT certificate that is treated
as a "regular interest" within the meaning of section 860L(b)(1) of the
Code.
"FH ACT" means the Fair Housing Act, which prohibits discrimination
on the basis of any of a number of prohibited factors.
"FHA LOANS" means a pool of mortgage loans insured by the FHA under
the Housing Act, or Title V of the Housing Act of 1949.
"FHLBB" means the Federal Home Loan Bank Board, the OTS's
predecessor.
"FHLMC ACT" means the Federal Home Loan Mortgage Corporation Act,
Title III of the Emergency Home Finance Act of 1970.
"FHLMC CERTIFICATES" means mortgage participation certificates issued
and guaranteed as to timely payment of interest and ultimate, but usually
not timely, payment of principal by FHLMC (formerly, the Federal Home Loan
Mortgage Corporation).
"FNMA CERTIFICATES" means guaranteed mortgage pass-through
certificates issued and guaranteed as to timely payment of principal and
interest by the Federal National Mortgage Association.
"FEDERAL THRIFTS" means federal savings and loan associations and
savings banks which, according to a statement of policy by the OTS, may
lend on terms where the principal is to be repaid and the institution
receives a "substantial payment of interest" periodically.
"FIDELITY BOND" means a blanket fidelity bond with broad coverage on
Depositor's Employees maintained by the master servicer or each servicer at
its own expense which protects and insures the master servicer or servicer
against losses in connection with the release or satisfaction of a SAM
without having obtained payment in full of the indebtedness secured thereby
and, if so stated in the related prospectus supplement, protects and
insures, in the form of the Mortgage Banker's Blanket Bond, the master
servicer or servicer against losses, including forgery, theft,
embezzlement, fraud, errors and omissions and negligent acts of the
Depositor Employees.
"FITCH" means Fitch IBCA, Inc.
"FLOATING RATE CLASS" means a class of Exchangeable Certificates with
a stated interest rate that varies directly with changes in an index.
"FRAUD BOND" means an amount of coverage for certificateholders
against loss in the event that coverage relating to a SAM which otherwise
would have been available under a primary insurance policy is not available
because of an exclusion in the primary insurance policy, from coverage of
Fraud Loss. The terms and amounts of coverage under any Fraud Bond will be
specified in the related prospectus supplement.
"FRAUD INSTRUMENT" means one or more of a Letter of Credit, Reserve
Fund or Fraud Bond which may provide coverage with respect to Fraud Losses.
"FRAUD LOSS" means any loss incurred on defaulted SAMs as to which
there was fraudulent conduct or negligence by any of the Originator, the
seller, SAMCO Mortgage Securities Corp., the master servicer, the servicer
or the mortgagor in connection with the SAMs, as set forth in the
applicable prospectus supplement.
"GNMA CERTIFICATES" means fully modified pass-through mortgage-backed
certificates guaranteed as to timely payment of principal and interest by
the Government National Mortgage Association.
"GNMA ISSUER" means a mortgage banking company or other financial
concern approved by GNMA or approved by FNMA as a seller-servicer of FHA
Loans and/or VA Loans.
"GARN-ST GERMAIN ACT" means the Garn-St Germain Depository
Institutions Act of 1982, which purports to pre-empt state statutory and
case law that prohibits the enforcement of "due-on-sale" clauses and
permits lenders to enforce these clauses in accordance with their terms,
subject to some limited exceptions.
"GENERAL ACCOUNT REGULATIONS" means final regulations issued by the
DOL not later than December 31, 1997 with respect to insurance policies
issued on or before December 31, 1998 that are supported by an insurer's
general account, which provide guidance on which assets held by the insurer
constitute "plan assets" for purposes of the fiduciary responsibility
provisions of ERISA and Section 4975 of the Code.
"GLOBAL SECURITIES" means the globally offered mortgage pass-through
certificates, which are available only in book-entry form and are tradeable
as home market instruments in both European and U.S. domestic markets.
"HAZARD INSURANCE POLICY" means an insurance policy on each SAM
providing for no less than the coverage of the standard form of fire
insurance policy with extended coverage customary for the type of mortgaged
property in the state in which the mortgaged property is located, the
amount of which is not less than the replacement value of the improvements
securing the SAM or the principal balance owing on the SAM, whichever is
less.
"HIGH-YIELD INTEREST" means a FASIT regular certificate that is
treated as a "high-yield interest" within the meaning of section
860L(b)(1)(B) of the Code.
"HOUSING ACT" means the amended section 306(g) of Title II of the
National Housing Act of 1934.
"IMPLIED MARKET RATE" means with respect to any SAM, a typical market
interest rate for a comparable single-family mortgage product having the
same principal terms as the related SAM but not having a shared
appreciation mortgage feature.
"INDEXED APPRECIATION PAYMENT" means as to any SAM or class of
certificates, an amount determined by reference to an index of single
family residential house appreciation which estimates the additional
interest payment or Payments which would have been due on the SAM or SAM
Pool had a Mortgage Termination Event occurred with respect to the SAM at
the time that the repurchase obligation arose.
"INDIRECT PARTICIPANTS" means banks, brokers, dealers and trust
companies that clear through or indirectly maintain a custodial
relationship with a Participant.
"INSURANCE PROCEEDS" means all proceeds (net of Insured Expenses and
unreimbursed advances made, by the related master servicer or servicer, if
any) of the Hazard Insurance Policies and any primary insurance policies,
to the extent the proceeds are not applied to the restoration of the
property or released to the mortgagor in accordance with the master
servicer's or servicer's normal servicing procedures.
"INSURED EXPENSES" means unreimbursed payments of property taxes,
insurance premiums and similar items incurred.
"INVERSE FLOATING RATE CLASS" means a class of Exchangeable
Certificates with a stated interest rate that varies inversely with changes
in an index.
"JUMBO SAM" means a SAM having an initial principal amount of greater
than $650,000.
"LTV" means the loan-to-value ratio for the related SAM.
"LETTER OF CREDIT" means a letter provided as credit enhancement to a
series of certificates, set to expire on the expiration date set forth in
the related prospectus supplement, unless earlier terminated or extended in
accordance with its terms.
"LETTER OF CREDIT BANK" means a bank or other entity responsible for
delivering the Letter of Credit to the Trustee.
"LIQUIDATION EXPENSES" means unreimbursed expenses incurred in
connection with liquidation or foreclosure.
"LIQUIDATION PROCEEDS" means all cash amounts (net of Liquidation
Expenses and unreimbursed advances made, by the master servicer or
servicer, if any) received and retained in connection with the liquidation
of defaulted SAMs, by foreclosure or otherwise.
"MGT/EOC" means Morgan Guaranty Trust as the Operator of the
Euroclear System.
"MASTER SERVICING FEE" means a fee paid to each master servicer for
its services in accordance with performing its duties and under any Pooling
and Servicing Agreement or Servicing Agreement, as applicable.
"MONETARY CONTROL ACT" means the Depository Institutions Deregulation
and Monetary Control Act of 1980 which preempts the application of any
state law or constitution limiting the "rate or amount of interest,
discount points, finance charges, or other charges which may be charged,
taken, received, or reserved" for loans secured by first liens on
residential real property, stock in a residential cooperative housing
corporation or some residential manufactured homes.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGE BANKER'S BLANKET BOND" means a blanket bond, the form of
which any Fidelity Bond and Errors and Omissions Insurance Policy may take
if so stated in the related prospectus supplement, which protects and
insures the master servicer or servicer against losses, including forgery,
theft, embezzlement, fraud, errors and omissions and negligent acts of the
Depositor's Employees..
"MORTGAGE LOANS" means any of the loans in a Mortgage Pool consisting
of single family loans, multifamily loans, cooperative loans or contracts.
"MORTGAGE NOTES" means promissory notes which evidence SAMs.
"MORTGAGE POOL" means a pool of Mortgage Loans.
"MORTGAGE SUBSIDY SAM" means a residential mortgage loan under which
the mortgagor pays to the Originator an interest rate that is below, and
may be substantially below, the market interest rate for the loans and the
Appreciation Share that is calculated in connection with the Mortgage
Subsidy SAM.
"MORTGAGE SUBSIDY SAMS" means fixed or adjustable rate shared
appreciation mortgage loans which currently pay interest.
"MORTGAGE TERMINATION EVENT" means
o any transfer of any interest in the mortgaged property, other than a
Permitted Transfer;
o total taking of the mortgaged property as the result of any
condemning authority exercising rights of eminent domain;
o the commencement of foreclosure proceedings in connection with any
lien junior to SAMCO Mortgage Securities Corp.'s security interest in
the mortgaged property;
o the voluntary or involuntary filing of any petition seeking to extend
to the mortgagor the protection of any state or federal bankruptcy
law;
o no mortgagor occupying the mortgaged property for a period greater
than 12 months or the rental of the mortgaged property;
o the repayment (including through refinancing) of the principal amount
of the SAM; and
o at the option of SAMCO Mortgage Securities Corp., a default by the
mortgagor with respect to any amounts due (including any amounts
required to be escrowed), or any covenant or representation made, by
the mortgagor under the Mortgage Note or the Mortgage.
"MORTGAGES" means first and secured mortgages, deeds of trust or
security deeds.
"MULTIPLE VARIABLE RATE" means a rate for stated interest at more
than one qualified floating rate, or at a single fixed rate and one or more
qualified floating rates or a single "qualified inverse floating rate."
"NON-U.S. PERSON" means a person that is not a U.S. Person, whose
collections of payment are ordinarily exempt from U.S. federal income and
withholding taxes, provided
o the holder of the certificate is not subject to U.S. tax as a result
of a connection to the United States other than ownership of the
certificate,
o the holder of the certificate signs a statement under penalties of
perjury that certifies that the holder is a Non-U.S. Person, and
provides the name and address of the holder, and
o the last U.S. Person in the chain of payment to the holder received
the statement from the holder or a financial institution holding on
its behalf and does not have actual knowledge that the statement is
false.
"OCC" means the Office of the Comptroller of the Currency which has
informally determined that national banks which it charters have implicit
authority to accept consideration for a mortgage loan in the form of equity
appreciation in the real estate securing the loan, provided the national
bank expects to receive money rather than a possessory interest in real
property and the principal is to be repaid.
"OID" means original issue discount.
"OID REGULATIONS" means the Treasury regulations promulgated under
sections 1271 through 1275 of the Code.
"OTS" means the Office of Thrift Supervision.
"ORIGINAL VALUE" means a value equal to the lower of the purchase
price, if any, and the appraised value of the property on the origination
date of the Mortgage Subsidy SAM.
"ORIGINATORS" means an originator of a SAM which is a mortgagee
approved by the Secretary of Housing and Urban Development under Sections
203 and 211 of the National Housing Act, as amended, or a savings and loan
association, a savings bank, a commercial bank, a licensed mortgage banker
or similar banking or lending institution which is supervised and examined
by a federal or state authority or the other entities as may be described
in the applicable prospectus supplement.
"PARITY ACT" means the Alternative Mortgage Transaction Parity Act of
1982.
"PARTICIPANTS" means participating organizations including securities
brokers and dealers, banks, trust companies and clearing corporations, and
possibly some other organizations including underwriters of any series of
certificates.
"PARTIES IN INTEREST" means some persons who have specified
relationships to the Plan, for whom a broad range of transactions involving
Plan Assets is prohibited.
"PAYING AGENT" means a paying agent appointed by the Trustee.
"PERCENTAGE INTEREST" means the interest represented by a certificate
of a particular class which is equal to the percentage obtained by dividing
the initial principal balance or notional amount of the certificate by the
aggregate initial amount or notional amount of all the certificates of the
class.
"PERMITTED ASSETS" has the meaning contained in section 860L(c)(1) of
the Code.
"PERMITTED TRANSFER" means
o a transfer by devise, descent, or operation of law on the death of a
joint tenant or tenant by the entirety;
o a transfer to a relative resulting from the death of the mortgagor;
o a transfer where the mortgagor's spouse or children become an owner
of the mortgaged property;
o a transfer resulting from a decree of a dissolution of marriage,
legal separation agreement, or from an incidental property settlement
agreement, by which the mortgagor's spouse becomes an owner of the
mortgaged property;
o a transfer into an inter vivos trust in which the mortgagor is and
remains a beneficiary and which does not relate to a transfer of
rights of occupancy in the property;
o the creation of a lien or other encumbrance subordinate to the SAMCO
Mortgage Securities Inc.'s security instrument which does not relate
to a transfer of rights of occupancy in the mortgaged property;
o the creation of a purchase money security interest for household
appliances; or (viii) any other transfer or disposition described in
regulations prescribed by the OTS.
"PLAN ASSET INVESTORS" means entities holding Plan Assets with
respect to Plans, collective investment funds, insurance company general or
separate accounts that purchase or hold certificates of the applicable
series.
"PLAN ASSET(S)" means the investable assets of any Plan.
"PLANNED AMORTIZATION CLASS" means a class of Exchangeable
Certificates that is designed to receive principal payments in accordance
with a predetermined schedule derived by assuming two constant prepayment
rates for the underlying SAMs.
"PLAN(S)" means employee benefit plans and other benefit plans or
arrangements which are subject to ERISA or Section 4975 of the Code, upon
which some requirements are imposed by ERISA.
"PMBS AGREEMENT" means a pooling and servicing agreement under which
private mortgage-backed securities are issued.
"PMBS ISSUER" means a financial institution or other entity engaged
in the business of mortgage lending or the acquisition of mortgage loans or
SAMs, a public agency or instrumentality of a state, local or federal
government, or a limited purpose or other corporation organized for the
purpose of among other things, establishing trusts and acquiring and
selling housing loans to the trusts and selling beneficial interests in the
trusts.
"PMBS SERVICER" means a FNMA or FHLMC approved servicer and, if FHA
Loans underlie the private mortgage-backed securities, approved by HUD as
an FHA mortgagee, or another servicer specified in the related prospectus
supplement.
"PMBS TRUSTEE" means the trustee under the PMBS Agreement with whom
the seller/servicer of the underlying mortgage loans enters into the PMBS
Agreement.
"POOL INSURER" means the insurer named in the related prospectus
supplement responsible for issuing the pool insurance policy.
"POST-IMPROVEMENT APPRAISED VALUE" means the appraised value of the
mortgaged property conducted after the completion of a Qualifying Major
Home Improvement.
"PRE-IMPROVEMENT APPRAISED VALUE" means the appraised value of the
mortgaged property determined prior to the commencement of a Qualifying
Major Home Improvement.
"PREPAYMENT ASSUMPTION" means the mortgage prepayment assumption used
to calculate OID as required under section 1272(a)(6) of the Code and the
Treasury regulations promulgated under that section.
"PRIMARY INSURER" means the issuer of the related primary insurance
policy.
"PRINCIPAL BALANCE" means a balance equal to the initial principal
amount reduced by all voluntary prepayments of principal actually made on
or before the date; and the portion of all Liquidation Proceeds, Insurance
Proceeds or income from the mortgaged property applied to or prior to the
date as a payment of principal on the Equity Release SAM.
"PROJECTED PAYMENT SCHEDULE" means a schedule of the payments
expected to be made with respect to the appreciation certificate, based
upon reasonable prepayment assumptions and the Comparable Yield.
"PTCE 83-1" means Prohibited Transaction Class Exemption 83-1, which
permits, subject to conditions, some transactions involving the creation,
maintenance and termination of some residential mortgage pools and the
acquisition and holding of some residential mortgage pool pass-through
certificates by Plan Asset Investors, regardless of whether the mortgage
pool is exempt from "plan asset" treatment or the transactions would
otherwise be prohibited under ERISA or Section 4975 of the Code.
"PTE" means Prohibited Transaction Exemption, an individual
administrative exemption.
"PTE 90-30" means Prohibited Transaction Exemption 90-30, issued by
the DOL to Bear Stearns & Co., Inc., which exempts the initial purchase,
the holding and the subsequent resale by Plans of certificates representing
interests in asset-backed pass through trusts that consist of secured
receivables, loans and other obligations that meet the conditions and
requirements of PTE 90-30 from some of the prohibited transaction rules of
ERISA and the Code, and provide that the trust's assets may include yield
supplement agreements or similar yield maintenance arrangements of the type
described above, provided the arrangements do not involve swap agreements
or other notional principle contracts; and some pre-funding account
arrangements.
"QUALIFIED INSURER" means a mortgage guaranty insurance company which
is duly qualified as an insurer under the laws of each state in which the
mortgaged properties are located, duly authorized and licensed in the
states to transact a mortgage guaranty insurance business and to write the
insurance provided by the primary insurance policy or the pool insurance
policy, as the case may be, and which is approved as an insurer by FHLMC or
FNMA or any successor entity and by SAMCO Mortgage Securities Corp.
"QUALIFYING MAJOR HOME IMPROVEMENT" means an improvement made to the
mortgaged property which increases the value of the mortgaged property and
o is a major improvement having a minimum total project value of the
greater of $5,000 and 3% of the Original Value or Adjusted Value, if
one exists;
o is completed within six months of the start date of the Qualifying
Major Home Improvements; and
o excludes some work or items, including, but not limited to,
o ordinary maintenance and repair, including the replacement of
roofing,
o decorations, wallpaper, paint and the replacement of appliances
and floor coverings,
o landscaping, plants, patios, decks, fences and sheds, and
o replacement or updating of existing systems such as heating,
air conditioning, septic and wells.
"RCRA" means the federal Resource Conservation and Recovery Act.
"REIT" means a real estate investment trust within the meaning of
section 856(a) of the Code.
"REMIC" means a real estate mortgage investment conduit within the
meaning of section 860D of the Code.
"REMIC CERTIFICATE" means a certificate issued in respect of a SAM
Pool classified as a REMIC for federal income tax purposes.
"REMIC PROVISIONS" means sections 860A through 860G of the Code.
"REMIC REGULAR CERTIFICATE" means a REMIC certificate that is treated
as a "regular interest" within the meaning of section 860G(a)(1) of the
Code.
"REMIC REGULATIONS" means the Treasury regulations issued under the
provisions of the Code relating to REMICs.
"REMIC RESIDUAL CERTIFICATE" means a REMIC certificate that is
treated as a "residual interest" within the meaning of section 860G(a)(2)
of the Code.
"REMIC SAM POOL" means a SAM Pool consisting of REMIC certificates
which represent interests in the Pool.
"RECEIVED EXCHANGEABLE CLASS" means any Exchangeable Class which is
given to the holder/seller of any single Exchanged Exchangeable Class, the
sale of which makes the investor subject to the coupon stripping rules of
Section 1286 of the Code.
"RECORD DATE" means the close of business on the last business day of
the month preceding the month in which the Distribution Date occurs.
"REGULATION" means a final regulation, issued by the DOL, under which
the assets of an entity in which a Plan Asset Investor makes an equity
investment are to be treated as Plan Assets in some circumstances.
"RELIEF ACT" means the Soldiers' and Sailors' Civil Relief Act of
1940, as amended.
"REMITTANCE RATE" means the difference between the stated interest
rate on each SAM (or SAM Pool, if applicable) and the amount needed to pay
Master Servicing Fees, Servicing Fees, Certificate Administrator Fees and
any Retained Yield.
"RESERVE ACCOUNT" means one or more reserve accounts established by
the Trustee.
"RESERVE FUND" means a fund funded, applied and maintained by the
master servicer, SAMCO Mortgage Securities Corp., the Originator or the
seller, as applicable, in the manner and under the conditions specified in
the prospectus supplement.
"RESIDUAL OWNER" means an owner of a REMIC residual certificate.
"RESTRICTED GROUP" means the Underwriter, the Trustee, the servicer,
any obligor with respect to the receivables included in the trust, any
entity deemed to be a "sponsor" of the trust as the term is defined in PTE
90-30, or any affiliate of any party, to which PTE 90-30 does not apply.
"RETAINED YIELD" means a portion of the interest payable on each SAM
set as a fixed rate and not part of the trust fund.
"RULES" means the rules, regulations and procedures creating and
affecting DTC and its operations.
"S&P" means Standard & Poor's, a division of the McGraw-Hill
companies.
"SAM PERCENTAGE" means a percentage of a SAM which is equal to the
Appreciation Share.
"SAM POOL" means a pool of shared appreciation mortgage loans.
"SAMS" means fixed or adjustable rate shared appreciation mortgage
loans, which currently pay interest or currently pay no interest.
"SMMEA" means the Secondary Mortgage Market Enhancement Act of 1984.
"SALE AND SERVICING AGREEMENT" means an agreement by which SAMs are
sold to EMC Mortgage Corporation by an Originator or seller.
"SALES PRICE" means the sales price, if any, of mortgaged property.
"SENIOR CERTIFICATES" means one or more classes of certificates of a
series, which may be appreciation certificates, holders of which receive,
if so specified in the applicable prospectus supplement, payments that
otherwise would have been payable to the holders of the Subordinated
Certificates.
"SERVICING AGREEMENT" means any contract entered into by the master
servicer or Trustee for the performance of some administrative and
servicing functions for the SAMs, which may be the related Sale and
Servicing Agreement.
"SERVICING FEES" means the amounts payable as fees to the Trustee and
the master servicer or servicer, if any, and other similar fees.
"SETTLEMENT VALUE" means the appraised value of the mortgaged
property on the Termination Date; provided that
o there is no sale of the mortgaged property;
o the purchaser is not a relative of the mortgagor; or
o the variance between the Sales Price and the appraised value is
less than or equal to five percent.
"SIMPLIFICATION ACT" means the Tax Simplification and Technical
Corrections Bill of 1993, presently pending before the United States
Congress, which would apply a tax on an annual basis to "large
partnerships."
"SINGLE VARIABLE RATE" means a rate for payment of "qualified stated
interest," which is either a single fixed rate that appropriately takes
into account the length of the interval between payments or the current
values of a single "qualified floating rate" or "objective rate."
"SPECIAL HAZARD INSTRUMENT" means one or more of a Letter of Credit,
Reserve Fund or a Special Hazard Insurance Policy which may provide
coverage with respect to Special Hazard Losses, as set forth in the
applicable prospectus supplement.
"SPECIAL HAZARD INSURANCE POLICY" means an insurance policy, the
amount of which is specified in the prospectus supplement, which protects
holders of the related certificates from loss by reason of damage to
mortgaged properties caused by some hazards (including earthquakes and, to
a limited extent, tidal waves and related water damage) not insured against
under the standard form of Hazard Insurance Policy for the respective
states in which the mortgaged properties are located or under a flood
insurance policy if the mortgaged property is located in a federally
designated flood area, and loss caused by reason of the application of the
coinsurance clause contained in Hazard Insurance Policies, but does not
cover losses occasioned by war, civil insurrection, some governmental
action, errors in design, faulty workmanship or materials (except under
some circumstances), nuclear reaction, flood (if the mortgaged property is
located in a federally designated flood area), chemical contamination and
some other risks.
"SPECIAL HAZARD LETTER OF CREDIT" means a letter provided as credit
enhancement to a series of certificates, set to expire on the expiration
date set forth in the related prospectus supplement, unless earlier
terminated or extended in accordance with its terms.
"SPECIAL HAZARD LOSS" means any loss of a type often covered by a
Special Hazard Insurance Policy, as set forth in the applicable prospectus
supplement.
"SPECIAL HAZARD RESERVE FUND" means a fund funded, applied and
maintained by the master servicer, SAMCO Mortgage Securities Corp., the
Originator or the seller, as applicable, in the manner and under the
conditions specified in the prospectus supplement.
"SPECIAL HAZARD LOSS" means any loss of a type often covered by a
Special Hazard Insurance Policy, as set forth in the applicable prospectus
supplement.
"STATED INTEREST" means the amount of fixed interest paid on a SAM.
"STRIP" means an interest that represents beneficial ownership of a
disproportionate part of the principal and interest payments on a class of
certificates.
"SUBORDINATED CERTIFICATES" means one or more Classes of certificates
of a series, which may be appreciation certificates, distributions for
which are, if so specified in the applicable prospectus supplement, payable
to holders of the Senior Certificates.
"TERMINATION DATE" means the earlier of the maturity of the Mortgage
Subsidy SAM and the occurrence of the Mortgage Termination Event.
"TERMS AND CONDITIONS" means the Terms and Conditions Governing Use
of Euroclear and the related Operating Procedures of the Euroclear System
and applicable Belgian law which govern transfers of securities and cash
within the Euroclear System, withdrawal of securities and cash from the
Euroclear System, and receipts of payments with respect to securities in
the Euroclear System.
"TIL ACT" means the federal Truth in Lending Act, the disclosure
provisions of which require creditors to disclose to consumers the terms of
all consumer credit transactions.
"TRUSTEE" means an independent bank or trust company acting as
trustee for the benefit of a series of certificateholders and as designated
in each prospectus supplement.
"UNDERWRITER" means Bear Stearns & Co. Inc.
"U.S. PERSON" means
o a citizen or resident of the United States,
o a corporation or partnership (including any entity treated as a
partnership or corporation for federal income tax purposes) created
or organized in or under the laws of the United States, any state or
the District of Columbia, or
o an estate or trust that is subject to U.S. federal income tax
regardless of the source of its income or
o a trust if a United States court is able to exercise primary
supervision over its administrators and one or more United States
person have the authority to control all of its substantial
decisions.
"VA LOANS" means a pool of mortgage loans partially guaranteed by the
VA under the Servicemen's Readjustment Act of 1944, as amended, or Chapter
37 of Title 38, United States Code.
"WEIGHTED AVERAGE LIFE" means the average amount of time that elapses
from the date of issuance of a certificate until each dollar of principal
is repaid to the certificateholders.
ANNEX II
GLOBAL CLEARANCE, SETTLEMENT
AND TAX DOCUMENTATION PROCEDURES
Except in some limited circumstances, the Global Securities to be
issued in series from time to time will be available only in book-entry
form. Investors in the Global Securities may hold Global Securities through
any of the DTC, Clearstream or Euroclear. The Global Securities will be
tradeable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in
same-day funds.
Secondary market trading between investors holding Global Securities
through Clearstream and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in
accordance with conventional eurobond practice, which involves seven
calendar day settlement.
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream or Euroclear and
DTC Participants holding certificates will be effected on a
delivery-against-payment basis through the respective Depositaries of
Clearstream and Euroclear, in that capacity, and as DTC Participants.
Non-U.S. holders of Global Securities will be subject to U.S.
withholding taxes unless they meet requirements and deliver appropriate
U.S. tax documents to the securities clearing organization or their
participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the
name of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on
their behalf as direct and indirect Participants in DTC. As a result,
Clearstream and Euroclear will hold positions on behalf of their
participants through their respective Depositaries, which in turn will hold
those positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to prior mortgage pass-through
certificates. Investor securities custody accounts will be credited with
their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through
Clearstream or Euroclear accounts will follow the settlement procedures
applicable to conventional eurobonds, except that there will be no
temporary global security and no "lock-up" or restricted period. Global
Securities will be credited to the securities custody accounts on the
settlement date against payment in same- day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and
seller's accounts are located to ensure that settlement can be made on the
desired value date.
Trading between DTC Participants. Secondary market trading between
DTC Participants will be settled using the procedures applicable to prior
mortgage pass-through certificates issues in same-day funds.
Trading between Clearstream Customers or Euroclear Participants.
Secondary market trading between Clearstream Customers or Euroclear
Participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds.
Trading between DTC seller and Clearstream or Euroclear purchaser.
When Global Securities are to be transferred from the account of a DTC
Participant to the account of a Clearstream Customer or a Euroclear
Participant, the purchaser will send instructions to Clearstream or
Euroclear through a Clearstream Customer or Euroclear Participant at least
one business day prior to settlement. Clearstream or Euroclear will
instruct the respective Depositary, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on
the Global Securities from and including the last coupon payment date to
and excluding the settlement date. Payment will then be made by the
respective Depositary to the DTC Participant's account against delivery of
the Global Securities. After settlement has been completed, the Global
Securities will be credited to the respective clearing system and by the
clearing system, in accordance with its usual procedures, to the
Clearstream Customer's or Euroclear Participant's account. The Global
Securities credit will appear the next day, European time, and the cash
debit will be back-valued to, and the interest on the Global Securities
will accrue from, the value date (which would be the preceding day when
settlement occurred in New York). If settlement is not completed on the
intended value date which is the day that the trade fails, the Clearstream
or Euroclear cash debit will be valued instead as of the actual settlement
date.
Clearstream Customers and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to
pre-position funds for settlement, either from cash on hand or existing
lines of credit, as they would for any settlement occurring within
Clearstream or Euroclear. Under this approach, they may take on credit
exposure to Clearstream or Euroclear until the Global Securities are
credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream Customers or Euroclear Participants can elect
not to pre-position funds and allow that credit line to be drawn upon the
finance settlement. Under this procedure, Clearstream Customers or
Euroclear Participants purchasing Global Securities would incur overdraft
charges for one day, assuming they cleared the overdraft when the Global
Securities were credited to their accounts. However, interest on the Global
Securities would accrue from the value date. Therefore, in many cases the
investment income on the Global Securities earned during that one-day
period may substantially reduce or offset the amount of overdraft charges,
although this result will depend on each Clearstream Customer's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC Participants can employ their usual procedures for sending Global
Securities to the respective Depositary for the benefit of Clearstream
Customers or Euroclear Participants. The sale proceeds will be available to
the DTC seller on the settlement date. Thus, to the DTC Participant a
cross-market transaction will settle no differently than a trade between
two DTC Participants.
Trading between Clearstream or Euroclear seller and DTC purchaser.
Due to time zone differences in their favor, Clearstream Customers and
Euroclear Participants may employ their customary procedures for
transactions in which Global Securities are to be transferred by the
respective clearing system, through the respective Depositary, to a DTC
Participant. The seller will send instructions to Clearstream or Euroclear
through a Clearstream Customer or Euroclear Participant at least one
business day prior to settlement. In these cases, Clearstream or Euroclear
will instruct the respective Depositary, as appropriate, to deliver the
bonds to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date. The payment
will then be reflected in the account of the Clearstream Customer or
Euroclear Participant the following day, and receipt of the cash proceeds
in the Clearstream Customer's or Euroclear Participant's account would be
back-valued to the value date, which would be the preceding day, when
settlement occurred in New York. Should the Clearstream Customer or
Euroclear Participant have a line of credit with its respective clearing
system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed
on the intended value date which is the day that the trade fails, receipt
of the cash proceeds in the Clearstream Customer's or Euroclear
Participant's account would instead be valued as of the actual settlement
date. Finally, day traders that use Clearstream or Euroclear and that
purchase Global Securities from DTC Participants for delivery to
Clearstream Customers or Euroclear Participants should note that these
trades would automatically fail on the sale side unless affirmative action
were taken. At least three techniques should be readily available to
eliminate this potential problem:
(a) borrowing through Clearstream or Euroclear for one day,
until the purchase side of the day trade is reflected in their
Clearstream or Euroclear accounts, in accordance with the clearing
system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would
give the Global Securities sufficient time to be reflected in their
Clearstream or Euroclear account in order to settle the sale side of
the trade; or
(c) staggering the value dates for the buy and sell sides of
the trade so that the value date for the purchase from the DTC
Participant is at least one day prior to the value date for the sale
to the Clearstream Customer or Euroclear Participant.
SOME U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through
Clearstream or Euroclear, or through DTC if the holder has an address
outside the U.S., will be subject to the 30% U.S. withholding tax that
ordinarily applies to payments of interest, including original issue
discount, on registered debt issued by U.S. Persons, unless, under
currently applicable law, each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business in the chain of intermediaries between the beneficial
owner and the U.S. entity required to withhold tax complies with applicable
certification requirements and the beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
certificates that are non-U.S. Persons usually can obtain a complete
exemption from the withholding tax by filing a signed Form W-8
(Certificate of Foreign Status). If the information shown on Form W-8
changes, a new Form W-8 must be filed within 30 days of the change.
Exemption for non-U.S. Persons with effectively connected
income (Form 4224). A non-U.S. Person, including a non-U.S.
corporation or bank with a U.S. branch, for which the interest income
is effectively connected with its conduct of a trade or business in
the United States, can obtain an exemption from the withholding tax
by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the conduct of a Trade or Business in the
United States).
Exemption or reduced rate for non-U.S. Persons resident in
treaty countries (Form 1001). Non-U.S. Persons that are
certificateholders residing in a country that has a tax treaty with
the United States can obtain an exemption or reduced tax rate,
depending on the treaty terms, by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only
for a reduced rate, withholding tax will be imposed at that rate
unless the filer alternatively files Form W-8. Form 1001 may be filed
by the certificateholder or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain
a complete exemption from the withholding tax by filing Form W-9
(Payer's Request for Taxpayer Identification Number and
Certification).
U.S. Federal Income Tax Reporting Procedure. The certificate
Owner of a Global Security or, in the case of a Form 1001 or a Form
4224 filer, his agent, files by submitting the appropriate form to
the person through whom it holds, the clearing agency, in the case of
persons holding directly on the books of the clearing agency. Form
W-8 and Form 1001 are effective for three calendar years and Form
4224 is effective for one calendar year.
This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global
Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of the Global
Securities. Further, the U.S. Treasury Department has recently finalized
new regulations that will revise some aspects of the current system for
withholding on amounts paid to foreign persons. Under these regulations,
interest or original issue discount paid to a nonresident alien would
continue to be exempt from U.S. withholding taxes, including backup
withholding, provided that the holder complies with the new certification
procedures.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Registration fee............................. $98,275
Printing and engraving....................... 25,000
Legal fees and expenses ..................... 75,000
Accounting fees and expenses................. 25,000
Trustee's fees and expenses ................. 10,000
Blue Sky Qualification Fees and Expenses
(including Counsel Fees)............... 5,000
Rating Agency Fee............................ 148,000
Miscellaneous ............................... 10,000
--------
Total............................ $378,775
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of
Delaware, as amended, under which the Registrant is incorporated, empowers
a corporation, subject to some limitations, to indemnify its directors and
officers against the actual and reasonable expenses of defending litigation
against them in their capacities as directors and officers.
Section 13 of Article III of SAMCO Mortgage Securities Corp.'s
By-Laws provides as follows:
The provisions of this Section 13 shall apply to the directors
and officers of the corporation in accordance with Article III and V
of these By-Laws as more fully set forth in this prospectus.
(1) As used in this Article:
(a) "acted properly" as to any person shall mean that the
person acted in good faith; acted in a manner not clearly
opposed to any written policy of the corporation or which
he reasonably believed to be in the best interests of the
corporation; and with respect to any criminal action or
proceeding, had no reasonable cause to believe that this
conduct was unlawful. The termination of any proceeding
by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act
properly.
(b) "agent" shall mean any person who is or was a director,
officer or employee of the corporation and/or any
subsidiary; a trustee or a fiduciary under any employee
pension, profit sharing, welfare or similar plan or trust
of the corporation and/or any subsidiary; serving at the
request of the corporation as a director, officer or
employee of or in a similar capacity in another
corporation, partnership, joint venture, trust or other
enterprise (which shall, for the purpose of this Article
be deemed to include not-for-profit or for-profit
entities of any type), whether acting in that capacity or
in any other capacity including, without limitation, as a
trustee or fiduciary under any employee pension, profit
sharing, welfare or similar plan or trust.
(c) "expenses" shall include attorneys' fees and any expenses
of establishing a right to indemnification under this
Article.
(d) "proceeding" shall mean any threatened, pending or
completed action or proceeding, whether civil or
criminal, and whether judicial, legislative or
administrative and shall include investigative action by
any person or body.
(e) "subsidiary" shall mean a corporation, 50% or more of the
shares of which at the time outstanding have voting power
for the election of directors, is owned directly or
indirectly by the corporation or by one or more
subsidiaries or by the corporation and one or more
subsidiaries.
(2) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any proceeding
(other than an action by or in the right of the corporation),
by reason of the fact that the person is or was an agent
against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in
connection with the proceeding if the person acted properly.
(3) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any proceeding by
or in the right of the corporation to procure a judgment in its
favor by reason of the fact that the person is or was an agent
against amounts paid in settlement and against expenses
actually and reasonably incurred by him in connection with the
defense or settlement of the proceeding if he acted properly,
except that no indemnification shall be made in respect of any
claim, issue or matter as to which the person shall have been
adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless and only to
the extent that the Court of Chancery or the court in which the
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for the expenses which the
Court of Chancery or other court shall deem proper.
(4) Expenses incurred in deferring a proceeding shall be paid by
the corporation to or on behalf of an agent in advance of the
final disposition of the proceeding if:
(a) there is a reasonable basis to believe that the agent may
be entitled to indemnification under this Article;
(b) advance payments would not result in undue financial
hardship to the corporation; and
(c) the corporation shall have received an undertaking by or
on behalf of the agent to repay the amount unless it
shall ultimately be determined that he is entitled to be
indemnified by the corporation as authorized in this
Article.
(5) Any indemnification or advance under paragraph (b), (c) or (d)
of this Article (unless ordered by a court), shall be made by
the corporation only as authorized in the specific proceeding
upon a determination that indemnification or advancement to the
person is proper in the circumstances. That determination shall
be made
(a) by the Chairman of the Board so long as he was not made a
party to the proceeding;
(b) if the Chairman of the Board were made a party by the
Board of Directors, by a majority vote of a quorum
consisting of directors who were not made parties to the
proceeding;
(c) if a quorum in (b) above is not obtainable, or, even if
obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written
opinion, or
(d) by the shareholders.
(6) The corporation shall indemnify or advance funds to any person
described in Section (a)(ii)(C) only after that person shall
have sought indemnification or an advance from the corporation,
partnership, pint venture, trust or other enterprise in which
he was serving at the corporation's request, shall have failed
to receive the indemnification or advance and shall have
assigned irrevocable to the corporation any right to receive
indemnification which he might be entitled to assert against
the other corporation, partnership, joint venture, trust or
other enterprise.
(7) The indemnification provided to an agent by this Article
(a) shall not be deemed exclusive of any other rights to
which the agent may be entitled by law or under any
articles of incorporation, By-Law, agreement, vote of
shareholders or disinterested directors or otherwise; and
(b) shall inure to the benefit of the legal representatives
of the agent or his estate, whether those representatives
are court appointed or otherwise designated, and to the
benefit of the heirs of the agent.
(8) The indemnification and advances provided to an agent by this
Article shall extend to and include claims for payments arising
out of any proceeding commenced or based on actions of an agent
taken prior to the effective date of this Article; provided
that payment of those claims had not been agreed to or denied
by the corporation at the effective date.
(9) The invalidity or unenforceability of any provision in this
Article shall not affect the validity or enforceability of the
remaining provisions of this Article.
There is directors' and officers' liability insurance presently
outstanding, which insures directors and officers of SAMCO Mortgage
Securities Corp. against claims arising out of the performance of their
duties.
The Pooling and Servicing Agreement for each series of certificates
will provide that no director, officer, employee or agent of SAMCO Mortgage
Securities Corp. is liable to any holder of certificates or to the trustee
on behalf of the holders of those certificates, or to any other person,
except on account of the director's, officer's, employee's or agent's own
willful misfeasance, bad faith, gross negligence or reckless disregard of
duty. The Pooling and Servicing Agreement for each series will further
provide that, with the exceptions stated above, a director, officer,
employee or agent of SAMCO Mortgage Securities Corp. is entitled to be
indemnified by the trust fund against all liability in connection with the
mortgage pool evidenced by that series.
ITEM 16. EXHIBITS
Exhibit Description of Exhibit
- ------- ----------------------
1.1 Form of Underwriting Agreement (to be utilized for firm
commitment underwritings and public reoffering by
underwriters).
3.1 Certificate of Incorporation of SAMCO Mortgage Securities
Corp.
3.2 By-Laws of SAMCO Mortgage Securities Corp.
4.1 Form of Sale and Servicing Agreement between SAMCO Mortgage
Securities Corp. and applicable master servicer or servicer,
including exhibits thereto.
4.2 Form of Pooling and Servicing Agreement between SAMCO Mortgage
Securities Corp. and Trustee, including Forms of certificates
as exhibits thereto.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to the certificates.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to tax matters.
24.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in Exhibit 5.1 hereto).
24.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in Exhibit 8.1 hereto).
25.1 Powers of Attorney.
ITEM 17. UNDERTAKINGS.
SAMCO Mortgage Securities Corp. hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
o to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
o to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement
(or the most recent post-effective amendment of the
Registration Statement), which individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
o to include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to the
information in the Registration Statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed
to be a new registration statement relating to those securities, and
the offering of those securities at that time shall be deemed to be
the initial bona fide offering.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
4. That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
under Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating
to those securities, and the offering of those securities at that
time shall be deemed to be the initial bona fide offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling SAMCO Mortgage Securities Corp. under the foregoing provisions,
SAMCO Mortgage Securities Corp. has been informed that in the opinion of
the Securities and Exchange Commission the indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against those liabilities, other
than the payment by SAMCO Mortgage Securities Corp. of expenses incurred or
paid by a director, officer or controlling person of SAMCO Mortgage
Securities Corp. in the successful defense of any action, suit or
proceeding, is asserted by the director, officer or controlling person in
connection with the securities being registered, SAMCO Mortgage Securities
Corp. will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether the indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of the issue.
SAMCO Mortgage Securities Corp. hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing
of the Registrant's annual report under Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to
those securities, and the offering of those securities at that time shall
be deemed to be the initial bona fide offering.
SIGNATURES
Under the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3, except for the
security rating requirement which it will meet by the time of sale, and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of New York, State of
New York, on the 17th day of March, 2000.
SAMCO MORTGAGE SECURITIES CORP.
as Depositor
By: /s/ Jeffery Mayer
---------------------------
Jeffery Mayer
Under the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
President/Chairman of March 17, 2000
/s/ Jeffery Mayer the Board of Directors
- ---------------------------- (Principal Executive Office
Jeffery Mayer
/s/ Samuel L. Molinaro Jr. Vice President/Treasurer March 17, 2000
- ---------------------------- (Principal Financial Officer)
Samuel L. Molinaro Jr.
/s/ Paul M. Friedman Director/Vice President/ March 17, 2000
- ---------------------------- Assistant Secretary
Paul M. Friedman
/s/ Terry L. Purchal Controller March 17, 2000
- ---------------------------
Terry L. Purchal
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION OF EXHIBIT
- ------- ----------------------
1.1 Form of Underwriting Agreement (to be utilized for firm
commitment underwritings and public reoffering by
underwriters).
3.1 Certificate of Incorporation of SAMCO Mortgage Securities
Corp.
3.2 By-Laws of SAMCO Mortgage Securities Corp.
4.1 Form of Sale and Servicing Agreement between SAMCO Mortgage
Securities Corp. and applicable master servicer or servicer,
including Forms of certificates as exhibits thereto.
4.2 Form of Pooling and Servicing Agreement between SAMCO Mortgage
Securities Corp. and Trustee, including Forms of certificates
as exhibits thereto.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to the certificates.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with
respect to tax matters (included in Exhibit 5.1 hereto).
24.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in Exhibit 5.1 hereto).
24.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in Exhibit 8.1 hereto).
25.1 * Powers of Attorney.
- ------------
* Filed previously.
EXHIBITS
EXHIBIT 1.1
BEAR STEARNS MORTGAGE SECURITIES INC.
SHARED APPRECIATION MORTGAGE PASS-THROUGH
CERTIFICATES UNDERWRITING AGREEMENT
____ __, 2000
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Dear Sirs:
1. Introduction. SAMCO Mortgage Securities Corp, a Delaware
corporation (the "Company"), from time to time proposes to issue and sell
Shared Appreciation Mortgage Pass- Through Certificates ("Certificates") in
various series (each a "Series"), and, within each Series, in various
classes, in one or more offerings on terms determined at the time of sale.
The Certificates of each series will be issued pursuant to a pooling and
servicing agreement (each, a "Pooling and Servicing Agreement") among the
Company, as depositor, one or more master servicers which may include the
Company and a third-party trustee (the "Trustee"). Upon issuance, the
Certificates of each series will evidence undivided interests in the Trust
Fund (as defined in the Pooling and Servicing Agreement) established for
such series containing shared appreciation mortgages ("SAMs") or, in the
event the Trust Fund, or a portion thereof, constitutes the upper tier of a
two-tier real estate mortgage investment conduit ("REMIC"), the Trust Fund
may contain interests issued by a lower tier trust which will contain
shared appreciation mortgages, all as described in the Prospectus (as
defined below). Terms not defined herein which are defined in the Pooling
and Servicing Agreement shall have the meanings ascribed to them in the
Pooling and Servicing Agreement.
Whenever the Company determines to make an offering of a Series of
Certificates (an "Offering") through you or an underwriting syndicate
managed or co-managed by you, it will offer to enter into an agreement
("Terms Agreement") providing for the sale of such Certificates to, and the
purchase and offering thereof by, you and such other co-managers and
underwriters, if any, which have been selected by you and have authorized
you to enter into such Terms Agreement and other related documentation on
their behalf (the "Underwriters," which term shall include you whether
acting alone in the sale of Certificates or as a co-manager or as a member
of an underwriting syndicate). The Terms Agreement relating to each
Offering shall specify the principal amount of Certificates to be issued
and their terms not otherwise specified in the Pooling and Servicing
Agreement, the price at which the Certificates are to be purchased by each
of the Underwriters from the Company and the initial public offering price
or the method by which the price at which the Certificates are to be sold
will be determined. The Terms Agreement, which shall be substantially in
the form of Exhibit A hereto, may take the form of an exchange of any
standard form of written telecommunication between you and the Company.
Each Offering governed by this Agreement, as supplemented by the applicable
Terms Agreement, shall inure to the benefit of and be binding upon the
Company and each of the Underwriters participating in the Offering of such
Certificates.
The Company hereby agrees with the Underwriters as follows:
2. Representations and Warranties of the Company.
The Company represents and warrants to you as of the date hereof, and to
the Underwriters named in the applicable Terms Agreement as of the date of
such Terms Agreement, as follows:
(a) A registration statement, including a prospectus, and such
amendments thereto as may have been required to the date hereof, relating
to the Certificates and the offering thereof from time to time in
accordance with Rule 415 under the Securities Act of 1933, as amended
("Act"), have been filed with the Securities and Exchange Commission
("Commission") and such registration statement as amended has become
effective. Such registration statement as amended and the prospectus
relating to the sale of Certificates constituting a part thereof as from
time to time amended or supplemented (including any prospectus filed with
the Commission pursuant to Rule 424 of the rules and regulations of the
Commission ("Rules and Regulations") under the Act, including any documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act which were filed under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") on or before the Effective Date of the Registration
Statement or the date of the Prospectus Supplement, are respectively
referred to herein as the "Registration Statement" and the "Prospectus";
provided, however, that a supplement to the Prospectus (a "Prospectus
Supplement") prepared pursuant to Section 5(a) hereof shall be deemed to
have supplemented the Prospectus only with respect to the Offering of the
Series of Certificates to which it relates. The conditions of Rule 415
under the Act have been satisfied with respect to the Company and the
Registration Statement.
(b) On the effective date of the Registration Statement, the
Registration Statement and the Prospectus conformed in all material
respects to the requirements of the Act and the Rules and Regulations, and
did not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and on the date of each Terms Agreement,
the Registration Statement and the Prospectus will conform in all material
respects to the requirements of the Act and the Rules and Regulations, and
the Prospectus will not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading; provided, however, that the foregoing does not
apply to (i) statements or omissions in such documents based upon written
information furnished to the Company by any Underwriter specifically for use
therein or (ii) any Current Report (as defined in Section 5(b) below) or in any
amendment thereof or supplement thereto, incorporated by reference in such
Registration Statement or such Prospectus (or any amendment thereof or
supplement thereto).
(c) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus except as otherwise stated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, earnings, affairs, regulatory situation or business
prospects of the Company whether or not arising in the ordinary course of
business and (B) there have been no transactions entered into by the
Company which are material, other than those in the ordinary course of
business.
(d) This Agreement has been, and the Pooling and Servicing Agreement,
when executed and delivered as contemplated hereby and thereby will have
been, duly executed and delivered by the Company and each constitutes, or
will constitute when so executed and delivered, a legal, valid and binding
instrument enforceable against the Company in accordance with its terms,
subject, as to the enforceability of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting the rights
of creditors generally, and to general principles of equity and the
discretion of the court (regardless of whether enforceability of such
remedies is considered in a proceeding in equity or at law).
(e) At the applicable Closing Date, each applicable Terms Agreement
will have been duly authorized, executed and delivered by the Company and
will be a legal, valid and binding obligation of the Company enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and other laws affecting the rights of
creditors generally, and to general principles of equity and the discretion
of the court (regardless of whether enforceability of such remedies is
considered in a proceeding in equity or at law).
(f) The issuance of the Certificates has been duly authorized by the
Company and, when such Certificates are executed and authenticated in
accordance with the Pooling and Servicing Agreement and delivered against
payment pursuant to this Agreement, such Certificates will be validly
issued and outstanding; and the Certificates will be entitled to the
benefits provided by the Pooling and Servicing Agreement. The Certificates
are in all material respects in the form contemplated by the Pooling and
Servicing Agreement.
(g) Neither the Company nor the Trust Fund is or, as a result of the
offer and sale of the Certificates as contemplated in this Agreement will
become, an "investment company" as defined in the Investment Company Act of
1940, as amended (the "Investment Company Act"), or an "affiliated person"
of any such "investment company" that is registered or is required to be
registered under the Investment Company Act (or an "affiliated person" of
any such "affiliated person"), as such terms are defined in the Investment
Company Act.
(h) The representations and warranties made by the Company in the
Pooling and Servicing Agreement and made in any Officer's Certificate of
the Company delivered pursuant to the Pooling and Servicing Agreement will
be true and correct at the time made and on the Closing Date.
3. Purchase, Sale and Delivery of Certificates. Delivery of and
payment for the Certificates shall be made at your office or at such other
location as you shall make known at such time as shall be specified in the
applicable Terms Agreement, each such time being herein referred to as a
"Closing Date." Delivery of the Certificates shall be made by the Company
to the Underwriters against payment of the purchase price specified in the
applicable Terms Agreement in Federal Funds by wire or check. Unless
delivery is made through the facilities of the Depository Trust Company,
the Certificates so to be delivered will be in definitive, fully registered
form, in such denominations and registered in such names as you request,
and will be made available for inspection and packaging at your office at
least twenty-four hours prior to the applicable Closing Date.
4. Offering by Underwriters. It is understood that the Underwriters
propose to offer the Certificates for sale to the public as set forth in the
Prospectus.
5. Covenants of the Company. The Company covenants and agrees with you
and the several Underwriters participating in the Offering of any Series of
Certificates that:
(a) In connection with the execution of each Terms Agreement, the
Company will prepare a Prospectus Supplement to be filed under the Act
setting forth the principal amount of Certificates covered thereby and
their terms not otherwise specified in the Prospectus, the price at which
the Certificates are to be purchased by the Underwriters from the Company,
either the initial public offering price or the method by which the price
at which the Certificates are to be sold will be determined, the selling
concession and reallowance, if any, any delayed delivery arrangements, and
such other information as you and the Company deem appropriate in
connection with the offering of the Certificates, but the Company will not
file any amendments to the Registration Statement or any amendments or
supplements to the Prospectus, unless it shall first have delivered copies
of such amendments or supplements to you, and you shall not have objected
thereto promptly after receipt thereof. The Company will advise you or your
counsel promptly (i) when notice is received from the Commission that any
post-effective amendment to the Registration Statement has become or will
become effective, and (ii) of any order or communication suspending or
preventing, or threatening to suspend or prevent, the offer and sale of the
Certificates, or of any proceedings or examinations that may lead to such
an order or communication, whether by or of the Commission or any authority
administering any state securities or Blue Sky law, as soon as the Company
is advised thereof, and will use its best efforts to prevent the issuance of
any such order or communication and to obtain as soon as possible its
lifting, if issued.
(b) The Company will cause any Computational Materials and any
Structural Term Sheets (each as defined in Section 8 below) with respect to
each Series of Certificates that are delivered by the Underwriters to the
Company pursuant to Section 8 to be filed with the Commission on a Current
Report on Form 8-K (a "Current Report") pursuant to Rule 13a-11 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") on the
business day immediately following the day on which such Computational
Materials and Structural Term Sheets are delivered to counsel for the
Company by any of the Underwriters prior to 10:30 a.m. (and will use its
best efforts to cause such Computational Materials and Structural Term
Sheets to be so filed prior to 2:00 p.m., New York time, on such business
day), and will promptly advise you when such Current Report has been so
filed. The Company will cause one Collateral Term Sheet (as defined in
Section 9 below) with respect to an Offering of a Series that is delivered
by any of the Underwriters to the Company in accordance with the provisions
of Section 9 to be filed with the Commission on a Current Report pursuant
to Rule 13a-11 under the Exchange Act on the business day immediately
following the day on which such Collateral Term Sheet is delivered to
counsel for the Company by any of the Underwriters prior to 10:30 a.m. In
addition, if at any time prior to the availability of the related
Prospectus Supplement, any of the Underwriters has delivered to any
prospective investor a subsequent Collateral Term Sheet that reflects, in
the reasonable judgment of such Underwriter and the Company, a material
change in the characteristics of the SAMs for the related Series from those
on which a Collateral Term Sheet with respect to the related Series
previously filed with the Commission was based, the Company will cause any
such Collateral Term Sheet that is delivered by such Underwriter to the
Company in accordance with the provisions of Section 9 to be filed with the
Commission on a Current Report on the business day immediately following
the day on which such Collateral Term Sheet is delivered to counsel for the
Company by such Underwriter prior to 2:00 p.m. In each case, the Company
will promptly advise you when such Current Report has been so filed.
Notwithstanding the four preceding sentences, the Company shall have no
obligation to file any materials provided by any of the Underwriters
pursuant to Sections 8 and 9 which (i) in the reasonable determination of
the Company are not required to be filed pursuant to the Kidder Letters or
the PSA Letter (each as defined in Section 8 below), or (ii) contain
erroneous information or contain any untrue statement of a material fact
or, when read in conjunction with the Prospectus and Prospectus Supplement,
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; it being understood, however,
that the Company shall have no obligation to review or pass upon the
accuracy or adequacy of, or to correct, any Computational Materials or ABS
Term Sheets (as defined in Section 9 below) provided by such Underwriter to
the Company pursuant to Section 8 or Section 9 hereof. The Company shall
give notice to you and such Underwriter of its determination not to file
any materials pursuant to clause (i) of the preceding sentence and agrees
to file such materials if such Underwriter or you reasonably object to such
determination within one business day after receipt of such notice.
(c) If at any time when a prospectus relating to the Certificates is
required to be delivered under the Act any event occurs as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any
time to amend the Prospectus to comply with the Act, the Company promptly
will prepare and file with the Commission an amendment or supplement which
will correct such statement or omission or an amendment which will effect
such compliance; provided, however, that the Company will not be required
to file any such amendment or supplement with respect to any Computational
Materials, Structural Term Sheets or Collateral Term Sheets incorporated by
reference in the Prospectus other than any amendments or supplements of
such Computational Materials or Structural Term Sheets that are furnished
to the Company by the Underwriter pursuant to Section 8(e) hereof or any
amendments or supplements of such Collateral Term Sheets that are furnished
to the Company by the Underwriter pursuant to Section 9(d) hereof which are
required to be filed in accordance therewith.
(d) With respect to each Series of Certificates, the Company will
make generally available to the holders of the Certificates and will
deliver to you, in each case as soon as practicable, an earnings statement
covering the twelve-month period beginning after the date of the Terms
Agreement in respect of such series of Certificates, which will satisfy the
provisions of Section 11(a) of the Act with respect to the Certificates.
(e) The Company will furnish to you copies of the Registration
Statement (two of which will be signed and will include all documents and
exhibits thereto or incorporated by reference therein), each related
preliminary prospectus, the Prospectus, and all amendments and supplements
to such documents, in each case as soon as available and in such quantities
as you request.
(f) The Company will arrange for the qualification of the
Certificates for sale and the determination of their eligibility for
investment under the laws of such jurisdictions as you reasonably designate
and will continue such qualifications in effect so long as reasonably
required for the distribution; provided, however, that the Company shall
not be required to qualify to do business in any jurisdiction where it is
not qualified on the date of the related Terms Agreement or to take any
action which would subject it to general or unlimited service of process in
any jurisdiction in which it is not, on the date of the related Terms
Agreement, subject to such service of process.
(g) The Company will pay all expenses incidental to the performance
of its obligations under this Agreement and any Terms Agreement and will
reimburse the Underwriters for any expenses (including fees and
disbursements of counsel and accountants) incurred by them in connection
with qualification of the Certificates and determination of their
eligibility for investment under the laws of such jurisdictions as you
designate and the printing of memoranda relating thereto, for any fees
charged by the nationally recognized statistical rating agencies for the
rating of the Certificates, for the filing fee of the National Association
of Securities Dealers, Inc. relating to the Certificates, if applicable, and
for expenses incurred in distributing preliminary prospectuses to the
Underwriters.
(h) During the period when a prospectus is required by law to be
delivered in connection with the sale of the Certificates pursuant to this
Agreement, the Company will file or cause to be filed, on a timely and
complete basis, all documents that are required to be filed by the Company
with the Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.
(i) So long as the Certificates of a Series shall be outstanding, the
Company will deliver to you the annual statement of compliance delivered to
the Trustee pursuant to the Pooling and Servicing Agreement and the annual
statement of a firm of independent public accountants furnished to the
Trustee pursuant to the Pooling and Servicing Agreement as soon as such
statements are furnished to the Trustee.
6. Conditions to the Obligations of the Underwriters. The obligations
of the Underwriters named in any Terms Agreement to purchase and pay for
the Certificates will be subject to the accuracy of the representations and
warranties on the part of the Company as of the date hereof, the date of
the applicable Terms Agreement and the applicable Closing Date, to the
accuracy of the statements made in any officers' certificates (each an
"Officer's Certificate") pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and to the
following additional conditions precedent:
(a)(i) At the time the applicable Terms Agreement is executed,
Deloitte & Touche and/or any other firm of certified independent public
accountants acceptable to you shall have furnished to you a letter,
addressed to you, and in form and substance satisfactory to you in all
respects, stating in effect that using the assumptions and methodology used
by the Company, all of which shall be described in such letter or the
Prospectus Supplement, they have recalculated such numbers, percentages and
weighted average lives set forth in the Prospectus as you may reasonably
request, compared the results of their calculations to the corresponding
items in the Prospectus, and found each such number, percentage, and
weighted average life set forth in the Prospectus to be in agreement with
the results of such calculations. To the extent historical financial
delinquency or related information is included with respect to one or more
master servicers, such letter or letters shall also relate to such
information.
(a)(ii) At the Closing Date, _________________ and/or any other firm
of certified independent public accountants acceptable to you shall have
furnished to you a letter, addressed to you, and in form and substance
satisfactory to you in all respects, relating to the extent such
information is not covered in the letter or letters provided pursuant to
clause (a)(i), to a portion of the information set forth on the SAM
Schedule attached to the Pooling and Servicing Agreement and the
characteristics of the SAMs, as presented in the Prospectus Supplement or
the Form 8-K relating thereto, or if a letter relating to the same
information is provided to the Trustee, indicating that you are entitled to
rely upon its letter to the Trustee.
(b) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall not
have been any change, or any development involving a prospective change, in
or affecting the business or properties of the Company or any of its
affiliates the effect of which, in any case, is, in your judgment, so
material and adverse as to make it impracticable or inadvisable to proceed
with the Offering or the delivery of the Certificates as contemplated by
the Registration Statement and the Prospectus. All actions required to be
taken and all filings required to be made by the Company under the Act and
the Exchange Act prior to the sale of the Certificates shall have been duly
taken or made; and prior to the applicable Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted, or
to the knowledge of the Company or you, shall be contemplated by the
Commission or by any authority administering any state securities or Blue
Sky law.
(c) Unless otherwise specified in any applicable Terms Agreement for
a Series, the Certificates shall be rated in one of the four highest grades
by one or more nationally recognized statistical rating agencies specified
in said Terms Agreement.
(d) You shall have received the opinion of counsel for the Company,
dated the applicable Closing Date, to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its assets and conduct its
business as described in the Prospectus, and the Company is duly qualified
as a foreign corporation to transact business and is in good standing under
the laws of the State of New York.
(ii) Each of this Agreement and the applicable Terms Agreement
have been duly authorized, executed and delivered by the Company and
assuming due and valid authorization and execution by the other parties
thereto, constitutes the legal, valid and binding obligation of the Company
enforceable in accordance with its terms, subject to the effect of
bankruptcy, insolvency, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally and court
decisions with respect thereto and to the application of equitable
principles in any proceeding, whether at law or in equity. Such counsel's
opinion may be qualified, in the case of the indemnity provisions in this
Agreement, to applicable law or judicial policy.
(iii) The Pooling and Servicing Agreement has been duly and
validly authorized, executed and delivered by the Company and assuming due
and valid authorization and execution by the other parties thereto,
constitutes the valid and binding agreement of the Company, enforceable in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect
thereto and to the application of equitable principles in any proceeding,
whether at law or in equity.
(iv) The Certificates are in a form authorized by the Pooling
and Servicing Agreement, have been duly and validly authorized by all
necessary corporate action and, when executed and authenticated as
specified in the Pooling and Servicing Agreement and delivered against
payment pursuant to this Agreement and the related Terms Agreement, will be
validly issued and outstanding; and the Certificates will be entitled to
the benefits of the Pooling and Servicing Agreement.
(v) The Registration Statement has become effective under the
Act, and, to the best of such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act, and the Registration Statement and the
Prospectus, and each amendment or supplement thereto, as of their
respective effective or issue dates, complied as to form in all material
respects with the requirements of the Act and the Rules and Regulations
thereunder; such counsel has no reason to believe that either the
Registration Statement as of its effective date contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary in order to make the statements therein
not misleading, or the Prospectus as of the date of any Terms Agreement
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
opinion as to the financial statements or other financial data or notes
thereto or any statistical or tabular data contained or incorporated by
reference in the Registration Statement or the Prospectus).
(vi) The statements in the Prospectus and Prospectus Supplement
under the heading "Federal Income Tax Consequences," to the extent that
they constitute matters of law or legal conclusions, have been prepared or
reviewed by such counsel and provide a fair summary of such law or
conclusions; the statements in the Prospectus to the extent modified by the
statements in the Prospectus Supplement under the headings, "Description of
the Certificates" and Description of The Pooling and Servicing Agreement"
and such other headings as you may request, insofar as such statements
constitute a summary of the proposed transaction and of the provisions of
the Certificates or the Pooling and Servicing Agreement, constitute a fair
and accurate summary of such transaction and provisions.
(vii) Neither the Company nor the Trust Fund is, or as a result
of the offer and sale of the Certificates as contemplated in the Prospectus
and in this Agreement will become, an "investment company" as defined in
the Investment Company Act, or an "affiliated person" of any such
"investment company" that is registered or is required to be registered
under the Investment Company Act (or an "affiliated person" of any such
"affiliated person"), as such terms are defined in the Investment Company
Act.
(viii) The Certificates offered pursuant to the Registration
Statement and indicated as such in the Prospectus Supplement will be
mortgage related securities, as defined in Section 3(a)(41) of the Exchange
Act, so long as such Certificates are rated in one of the two highest grades
by at least one nationally recognized statistical rating agency.
(ix) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended.
Each opinion also shall relate to such other matters as may be
specified in the related Terms Agreement or as to which you reasonably may
request. In rendering any such opinion, counsel for the Company may rely on
certificates of responsible officers of the Company, the Trustee, and
public officials or, as to matters of law other than New York or Federal
law, on opinions of other counsel (copies of which opinions shall be
delivered to you), provided that, in cases of opinions of other counsel,
counsel for the Company shall include in its opinion a statement of its
belief that both it and you are justified in relying on such opinions.
(e) You shall have received from counsel for the Company a letter,
dated as of the Closing Date, stating that you may rely on the opinions
delivered by such firm under the Pooling and Servicing Agreement and to the
rating agency or agencies rating the Certificates as if such opinions were
addressed directly to you (copies of which opinions shall be delivered to
you).
(f) You shall have received from counsel for the Underwriters, if
such counsel is different from counsel to the Company, such opinion or
opinions, dated as of the Closing Date, with respect to the validity of the
Certificates, the Registration Statement, the Prospectus and other related
matters as the Underwriters may require, and the Company shall have
furnished to such counsel such documents as they may have requested from it
for the purpose of enabling them to pass upon such matters.
(g) You shall have received Officer's Certificates signed by such of
the principal executive, financial and accounting officers of the Company
as you may request, dated as of the Closing Date, in which such officers,
to the best of their knowledge after reasonable investigation, shall state
that the representations and warranties of the Company in this Agreement
are true and correct; that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to the Closing Date; that no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated; that, subsequent to the
respective dates as of which information is given in the Prospectus, and
except as set forth or contemplated in the Prospectus, there has not been
any material adverse change in the general affairs, business, key
personnel, capitalization, financial condition or results of operations of
the Company; that except as otherwise stated in the Prospectus, there are
no material actions, suits or proceedings pending before any court or
governmental agency, authority or body or, to their knowledge, threatened,
affecting the Company or the transactions contemplated by this Agreement;
and that attached thereto are true and correct copies of a letter or
letters from the one or more nationally recognized statistical rating
agencies specified in the applicable Terms Agreement confirming that,
unless otherwise specified in said Terms Agreement, the Certificates have
been rated in one of the four highest grades by each of such agencies and
that such rating has not been lowered since the date of such letter.
The Company will furnish you with such conformed copies of such
opinions, certificates, letters and documents as you reasonably request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects with respect to a particular
Offering when and as provided in this Agreement and the related Terms
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement and the related Terms Agreement shall not be in
all material respects reasonably satisfactory in form and substance to you,
this Agreement (with respect to the related Offering) and the related Terms
Agreement and all obligations of the Underwriters hereunder (with respect
to the related Offering) and thereunder may be canceled at, or at any time
prior to, the related Closing Date by the Underwriter. Notice of such
cancellation shall be given to the Company in writing, or by telephone or
telegraph confirmed in writing.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
against any and all losses, claims, damages, liabilities and expenses
whatsoever (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation),
joint or several, to which they or any of them may become subject under the
Act, the Exchange Act, or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement relating to the applicable
Series of Certificates (the "Applicable Registration Statement") as it
became effective or in any amendment or supplement thereof, or in the
Applicable Registration Statement or the related Prospectus, or in any
amendment thereof, or arise out of or are based upon the omission or
alleged omission (in the case of any Computational Materials or ABS Term
Sheets in respect of which the Company agrees to indemnify the
Underwriters, as set forth below, when such are read in conjunction with
the related Prospectus and Prospectus Supplement) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that (i) the Company
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein (A) in reliance upon and in conformity with written information
furnished to the Company as herein stated by or on behalf of the
Underwriters specifically for use in connection with the preparation
thereof or (B) in any Current Report or any amendment or supplement
thereof, except to the extent that any untrue statement or alleged untrue
statement therein or omission therefrom results (or is alleged to have
resulted) directly from an error (a "SAM Pool Error") in the information
concerning the characteristics of the SAMs furnished by the Company to the
Underwriters in writing or by electronic transmission that was used in the
preparation of either (x) any Computational Materials or ABS Term Sheets (or
amendments or supplements thereof) included in such Current Report (or
amendment or supplement thereof) or (y) any written or electronic materials
furnished to prospective investors on which the Computational Materials (or
amendments or supplements) were based, (ii) such indemnity with respect to
any Corrected Statement (as defined below) in such Prospectus (or Prospectus
Supplement thereto) shall not inure to the benefit of the Underwriters (or
any person controlling any Underwriter) from whom the person asserting any
loss, claim, damage or liability purchased the Certificates of the related
Series that are the subject thereof if such person did not receive a copy of
a Prospectus Supplement to such Prospectus at or prior to the confirmation
of the sale of such Certificates and the untrue statement or omission of a
material fact contained in such Prospectus (or Prospectus Supplement
thereto) was corrected (a "Corrected Statement") in such other supplement
and such supplement was furnished by the Company to the Underwriters prior
to the delivery of such confirmation, and (iii) such indemnity with respect
to any SAM Pool Error shall not inure to the benefit of the Underwriters (or
any person controlling any Underwriter) from whom the person asserting any
loss, claim, damage or liability received any Computational Materials (or
any written or electronic materials on which the Computational Materials are
based) or ABS Term Sheets that were prepared on the basis of such SAM Error,
if, prior to the time of confirmation of the sale of the applicable Series
of Certificates to such person, the Company notified the Underwriters in
writing of the SAM Pool Error or provided in written or electronic form
information superseding or correcting such SAM Pool Error (in any such case,
a "Corrected SAM Pool Error"), and the Underwriters failed to notify such
person thereof or to deliver to such person corrected Computational
Materials (or underlying written or electronic materials) or ABS Term
Sheets. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.
(b) The Underwriters severally, and not jointly, agree to indemnify
and hold harmless the Company, each of the directors of the Company, each
of the officers of the Company who shall have signed the Applicable
Registration Statement, and each other person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any losses, claims, damages, liabilities and expenses
whatsoever (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever,
and any and all amounts paid in settlement of any claim or litigation),
joint or several, to which they or any of them may become subject under the
Act, the Exchange Act or otherwise, insofar as such losses, liabilities,
claims, damages or expenses (or actions in respect thereof) arise out of or
are based upon (A) any untrue statement or alleged untrue statement of a
material fact contained in the Applicable Registration Statement, as
originally filed or any amendment thereof, or any related preliminary
prospectus or the Prospectus, or in any amendment thereof or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, in each case to the extent,
but only to the extent, that any such loss, claim, damage, liability or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance
upon and in conformity with written information furnished to the Company, by
or on behalf of such Underwriter expressly for use therein; or (B) any
Computational Materials or ABS Term Sheets (or amendments or supplements
thereof) furnished to the Company by such Underwriter pursuant to Section 8
and incorporated by reference in such Registration Statement or the related
Prospectus, Prospectus Supplement or any amendment or supplement thereof
(except that no such indemnity shall be available for any losses, claims,
damages or liabilities, or actions in respect thereof resulting from any SAM
Pool Error, other than a Corrected SAM Pool Error). This indemnity will be
in addition to any liability which the Underwriters may otherwise have. The
Company acknowledges that, unless otherwise set forth in the applicable
Terms Agreement, the statements set forth in the last paragraph of the cover
page and under the caption "Method of Distribution" and the stabilization
legend required by Item 502(d)(1) under Regulation S-K of the Act included
in the Prospectus Supplement relating to a Series of Certificates constitute
the only information furnished in writing by or on behalf of any Underwriter
expressly for use in the Applicable Registration Statement or the Prospectus
or in any amendment thereof or supplement thereto, as the case may be (other
than any Computational Materials or ABS Term Sheets (or amendments or
supplements thereof) furnished to the Company by such Underwriter), and each
Underwriter confirms, on its behalf, that such statements are correct.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify each party
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not
relieve it from any liability which it may have under this Section 7 except
to the extent that it has been prejudiced in any material respect by such
failure or from any liability which it may have otherwise). In case any
such action is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein, and to the extent that it may elect by
written notice delivered to the indemnified party promptly after receiving
the aforesaid notice from such indemnified party, to assume the defense
thereof, with counsel satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have
the right to employ its or their own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such indemnified
party or parties unless (i) the employment of such counsel shall have been
authorized in writing by one of the indemnifying parties in connection with
the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) such
indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional
to those available to one or all of the indemnifying parties (in which case
the indemnifying parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses shall be borne by the indemnifying parties.
Anything in this subsection to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent; provided, however, that such consent was not
unreasonably withheld.
(d) In order to provide for contribution in circumstances in which
the indemnification provided for in Section 7 hereof is for any reason held
to be unavailable, on grounds of public policy or otherwise, from the
Company or the Underwriters or is insufficient to hold harmless a party
indemnified thereunder, the Company and the Underwriters shall contribute
to the aggregate losses, claims, damages, liabilities and expenses of the
nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and
any amount paid in settlement of, any action, suit or proceeding or any
claims asserted, but after deducting in the case of losses, claims,
damages, liabilities and expenses suffered by the Company any contribution
received by the Company from persons, other than the Underwriters, who may
also be liable for contribution, including persons who control the Company
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Applicable
Registration Statement and directors of the Company) to which the Company
and the Underwriters may be subject (i) in the case of any losses, claims,
damages and liabilities (or actions in respect thereof) which do not arise
out of or are not based upon any untrue statement or omission of a material
fact in any Computational Materials or ABS Term Sheets (or any amendments
or supplements thereof), in such proportions as is appropriate to reflect
the relative benefits received by the Company on one hand and the
Underwriters on the other from the Offering of the Certificates as to which
such loss, liability, claim, damage or expense is claimed to arise or, if
such allocation is not permitted by applicable law or indemnification is
not available as a result of the indemnifying party not having received
notice as provided in Section 7(c) hereof, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but
also the relative fault of the Company on one hand and the Underwriters on
the other in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations or (ii) in the case of any losses,
claims, damages and liabilities (or actions in respect thereof) which arise
out of or are based upon any untrue statement or omission of a material
fact in any Computational Materials or ABS Term Sheets (or any amendments
or supplements thereof) or in any written or electronic materials
distributed to prospective investors on which the Computational Materials
are based, in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the Underwriter that furnished
such Computational Materials or ABS Term Sheets on the other in connection
with the statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions in respect thereof) as well as any other
relevant equitable considerations; provided, however, that in no case shall
such Underwriter be responsible under this subparagraph (ii) for any amount
in excess of the aggregate Purchase Price for the Offered Certificates.
The relative benefits received by the Company on one hand and
the Underwriters on the other shall be deemed to be in the same proportion
as (x) the total proceeds from the Offering (net of underwriting discounts
and commissions but before deducting expenses) received by the Company and
(y) the underwriting discounts and commissions received by the Underwriters,
respectively, in each case as set forth in the Terms Agreement in respect of
the Offering of the Certificates as to which such loss, liability, claim,
damage or expense is claimed to arise. The relative fault of the Company on
one hand and the Underwriters on the other shall be determined by reference
to, among other things, (A) in the case of clause (i) of the preceding
paragraph, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on one hand or the Underwriters on the
other, (B) in the case of clause (ii) of the preceding paragraph, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to any untrue statement or
omission of a material fact in any Computational Materials or ABS Term
Sheets (or any amendments or supplements thereof) or in any written or
electronic materials distributed by the applicable Underwriter to
prospective investors on which the Computational Materials are based, and
(C) in the case of either clause (i) or clause (ii) of the preceding
paragraph, the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Company and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above. Notwithstanding the
provisions of this Section 7(d), (x) except as otherwise provided in Section
7(d)(ii), in no case shall the Underwriters be liable or responsible for any
amount in excess of the underwriting discount set forth in the Terms
Agreement relating to the Certificates as to which such losses, claims,
damages, liabilities or expenses are claimed to arise, and (y) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section
7(d), each person, if any, who controls any Underwriter within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the
same rights to contribution as such Underwriter, and each person, if any,
who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, each officer of the Company who shall
have signed the Applicable Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject
in each case to clauses (i) and (ii) of this Section 7(d). Any party
entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect
of which a claim for contribution may be made against another party or
parties under this Section 7(d), notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or
parties shall not relieve the party or parties from whom contribution may be
sought from any obligation it or they may have under this Section 7(d) or
otherwise. No party shall be liable for contribution with respect to any
action or claim settled without its consent; provided, however, that such
consent was not unreasonably withheld.
8. Computational Materials and Structural Term Sheets. (a) Not
later than 2:00 p.m., New York time, on the business day before the date on
which the Current Report relating to the Certificates of a Series is
required to be filed by the Company with the Commission pursuant to Section
5(b) hereof, you and any other applicable Underwriter shall deliver to the
Company, and unless otherwise agreed to by the Company, in a form reasonably
convertible to an EDGAR filing format, a copy of all materials provided by
the Underwriters to prospective investors in such Certificates which
constitute (i) "Computational Materials, within the meaning of the no-action
letter dated May 20, 1994 issued by the Division of Corporation Finance of
the Commission to Kidder, Peabody Acceptance Corporation I, Kidder, Peabody
& Co. Incorporated, and Kidder Structured Asset Corporation and the
no-action letter dated May 27, 1994 issued by the Division of Corporation
Finance of the Commission to the Public Securities Association (together,
the "Kidder Letters") and the filing of such material is a condition of the
relief granted in such letter (such materials being the "Computational
Materials"), and (ii) "Structural Term Sheets" within the meaning of the
no-action letter dated February 17, 1995 issued by the Division of
Corporation Finance of the Commission to the Public Securities Association
(the "PSA Letter") and the filing of such material is a condition of the
relief granted in such letter (such materials being the "Structural Term
Sheets"). Each delivery of Computational Materials and Structural Term
Sheets to the Company by you and any other applicable Underwriter pursuant
to this paragraph (a) shall be effected by delivering a copy of such
materials to counsel for the Company on behalf of the Company at the address
specified by the Company and one copy of such materials to the Company.
(b) You and each other Underwriter, by virtue of its
having executed and delivered the related Terms Agreement, which shall
incorporate this Section 8(b) by reference, represents and warrants to and
agrees with the Company, as of the date of the related Terms Agreement and
as of the Closing Date, that:
(i) the Computational Materials furnished to the Company
pursuant to Section 8(a) constitute (either in original, aggregated or
consolidated form) all of the materials furnished to prospective investors
by such Underwriter prior to the time of delivery thereof to the Company
that are required to be filed with the Commission with respect to the
Offering of the Certificates in accordance with the Kidder Letters, and
such Computational Materials comply with the requirements of the Kidder
Letters;
(ii) the Structural Term Sheets furnished to the Company
pursuant to Section 8(a) constitute all of the materials furnished to
prospective investors by such Underwriter prior to the time of delivery
thereof to the Company that are required to be filed with the Commission as
"Structural Term Sheets" with respect to the related Offering of the
Certificates in accordance with the PSA Letter, and such Structural Term
Sheets comply with the requirements of the PSA Letter;
(iii) on the date any such Computational Materials or
Structural Term Sheets with respect to the Offering of the Certificates (or
any written or electronic materials furnished to prospective investors on
which the Computational Materials are based) were last furnished to each
prospective investor and on the date of delivery thereof to the Company
pursuant to Section 8(a) and on the related Closing Date, such Computational
Materials (or such other materials) or Structural Term Sheets did not and
will not include any untrue statement of a material fact or, when read in
conjunction with the related Prospectus and Prospectus Supplement, omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; and
(iv) all Computational Materials (or underlying materials
distributed to prospective investors on which the Computational Materials
were based) or Structural Term Sheets furnished to prospective investors
contained and will contain a legend, prominently displayed on the first
page thereof, to the effect that the Company has not prepared, reviewed or
participated in the preparation of such materials and is not responsible
for the accuracy thereof.
Notwithstanding the foregoing, you and each such Underwriter make no
representation or warranty as to whether any Computational Materials or
Structural Term Sheets (or any written or electronic materials on which the
Computational Materials are based) included or will include any untrue
statement resulting directly from any SAM Pool Error (except any Corrected
SAM Pool Error, with respect to materials prepared after the receipt by the
Underwriters from the Company of notice of such Corrected SAM Pool Error or
materials superseding or correcting such Corrected SAM Pool Error).
(c) Each Underwriter delivering Computational Materials
shall cause a firm of public accountants to furnish to the Company a
letter, dated as of the date on which such Underwriter delivers any
Computational Materials (which term shall be deemed to include, for
purposes of this paragraph (c), calculated statistical information
delivered to prospective investors in the form of a Structural Term Sheet)
to the Company pursuant to Section 8(a), in form and substance satisfactory
to the Company, stating in effect that they have verified the mathematical
accuracy of any calculations performed by such Underwriter and set forth in
such Computational Materials.
(d) The Underwriters acknowledge and agree that the
Company has not authorized and will not authorize the distribution of any
Computational Materials (or any written or electronic materials on which
the Computational Materials are based) or Structural Term Sheets to any
particular prospective investor, and agrees that any Computational
Materials or Structural Term Sheets with respect to any Series of
Certificates furnished to prospective investors shall include a disclaimer
in the form described in paragraph (b) (iv) above. The Underwriters agree
that they will not represent to prospective investors that any
Computational Materials or Structural Term Sheets were prepared or
disseminated on behalf of the Company.
(e) If, at any time when a prospectus relating to the
Certificates of a Series is required to be delivered under the Act, it
shall be necessary to amend or supplement the related Prospectus or
Prospectus Supplement as a result of an untrue statement of a material fact
contained in any Computational Materials or Structural Term Sheets provided
by an Underwriter pursuant to this Section 8 or the omission to state
therein a material fact required, when considered in conjunction with the
related Prospectus and Prospectus Supplement, to be stated therein or
necessary to make the statements therein, when read in conjunction with the
related Prospectus and Prospectus Supplement, not misleading, or if it shall
be necessary to amend or supplement any Current Report relating to any
Computational Materials or Structural Term Sheets to comply with the Act or
the rules thereunder, such Underwriter promptly will prepare and furnish to
the Company for filing with the Commission an amendment or supplement which
will correct such statement or omission or an amendment which will effect
such compliance. Such Underwriter will deliver an Officer's Certificate to
the Company representing and warranting to the Company that, as of the date
of delivery of such amendment or supplement to the Company, such amendment
or supplement will not include any untrue statement of a material fact or,
when read in conjunction with the related Prospectus and Prospectus
Supplement, omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that such Underwriter will make no representation or warranty as to whether
any such amendment or supplement will include any untrue statement resulting
directly from any SAM Pool Error (except any Corrected SAM Pool Error, with
respect to any such amendment or supplement prepared after the receipt by
such Underwriter from the Company of notice of such Corrected SAM Pool Error
or materials superseding or correcting such Corrected SAM Pool Error). The
Company shall have no obligation to file such amendment or supplement if (i)
the Company determines that such amendment or supplement contains any untrue
statement of a material fact or, when read in conjunction with the related
Prospectus and Prospectus Supplement, omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; it being understood, however, that the Company shall have no
obligation to review or pass upon the accuracy or adequacy of, or to
correct, any such amendment or supplement provided by such Underwriter to
the Company pursuant to this paragraph (e) or (ii) the Company reasonably
determines that such filing is not required under the Act and such
Underwriter does not object as provided below. The Company shall give notice
to such Underwriter of its determination not to file an amendment or
supplement pursuant to clause (ii) of the preceding sentence and agrees to
file such amendment or supplement if such Underwriter reasonably objects to
such determination within one business day after receipt of such notice.
9. Collateral Term Sheets. (a) Prior to the delivery of any
"Collateral Term Sheet" within the meaning of the PSA Letter, the filing of
which material is a condition of the relief granted in such letter (such
material being the "Collateral Term Sheets"), to a prospective investor in
the Certificates, the applicable Underwriter shall notify the Company and
its counsel by telephone of its intention to deliver such materials and the
approximate date on which the first such delivery of such materials is
expected to occur. Not later than 10:30 a.m., New York time, on the
business day immediately following the date on which any Collateral Term
Sheet was first delivered to a prospective investor in the Certificates of
an offered series, such applicable Underwriter shall deliver to the
Company, and unless otherwise agreed to by the Company, in a form
reasonably convertible to an EDGAR format, a complete copy of all materials
provided by such Underwriter to prospective investors in such Certificates
which constitute "Collateral Term Sheets." Each delivery of a Collateral
Term Sheet to the Company pursuant to this paragraph (a) shall be effected
by delivering a copy of such materials to counsel for the Company on behalf
of the Company at the address specified by the Company and one copy of such
materials to the Company. (Collateral Term Sheets and Structural Term
Sheets are, together, referred to herein as "ABS Term Sheets.") At the time
of each such delivery, such Underwriter shall indicate in writing
that the materials being delivered constitute Collateral Term Sheets, and,
if there has been any prior such delivery with respect to the related
Series, shall indicate whether such materials differ in any material
respect from any Collateral Term Sheets previously delivered to the Company
with respect to such Series pursuant to this Section 9(a) as a result of
the occurrence of a material change in the characteristics of the related
SAM.
(b) You and each other Underwriter, by virtue of its
having executed and delivered the related Terms Agreement, which shall
incorporate this Section 9(b) by reference, represents and warrants to and
agrees with the Company as of the date of the related Terms Agreement and
as of the Closing Date, that:
(i) The Collateral Term Sheets furnished to the Company
pursuant to Section 9(a) constitute all of the materials furnished to
prospective investors by such Underwriter prior to time of delivery thereof
to the Company that are required to be filed with the Commission as
"Collateral Term Sheets" with respect to the related Offering of the
Certificates in accordance with the PSA Letter, and such Collateral Term
Sheets comply with the requirements of the PSA Letter;
(ii) On the date any such Collateral Term Sheets with respect
to the Offering of the Certificates were last furnished to each prospective
investor and on the date of delivery thereof to the Company pursuant to
Section 9(a) and on the related Closing Date, such Collateral Term Sheets
did not and will not include any untrue statement of a material fact or,
when read in conjunction with the Prospectus and Prospectus Supplement,
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and
(iii) such Underwriter has not represented to any prospective
investor that any Collateral Term Sheets with respect to any Series were
prepared or disseminated on behalf of the Company, and, except as otherwise
disclosed by such Underwriter to the Company in writing prior to the date
hereof, all Collateral Term Sheets previously furnished to prospective
investors included a disclaimer to the effect set forth in Section
8(b)(iv).
Notwithstanding the foregoing, you and each such Underwriter make no
representation or warranty as to whether any Collateral Term Sheet included
or will include any untrue statement or material omission resulting
directly from any SAM Pool Error (except any Corrected SAM Pool Error, with
respect to materials prepared after the receipt by such Underwriter from
the Company of notice of such Corrected SAM Pool Error or materials
superseding or correcting such Corrected SAM Pool Error).
(c) Each Underwriter delivering Collateral Term Sheets
acknowledges and agrees that any Collateral Term Sheets with respect to any
Series of Certificates furnished to prospective investors from and after
the date hereof shall include a disclaimer to the effect set forth in
Section 8(d) hereof, and to the effect that the information contained in
such materials supersedes the information contained in any prior Collateral
Term Sheet with respect to such Series of Certificates being offered and
will be superseded by the description of the related SAM in the related
Prospectus Supplement. The Underwriters agree that they will not represent
to any prospective investors that any Collateral Term Sheets were prepared
or disseminated on behalf of the Company.
(d) If, at any time when a prospectus relating to the
Certificates of a Series is required to be delivered under the Act, it
shall be necessary to amend or supplement the related Prospectus as a
result of an untrue statement of a material fact contained in any
Collateral Term Sheets provided by an Underwriter pursuant to this Section
9 or the omission to state therein a material fact required, when
considered in conjunction with the related Prospectus and Prospectus
Supplement, to be stated therein or necessary to make the statements
therein, when read in conjunction with the related Prospectus and
Prospectus Supplement, not misleading, or if it shall be necessary to amend
or supplement any Current Report relating to any Collateral Term Sheets to
comply with the Act or the rules thereunder, such Underwriter promptly will
prepare and furnish to the Company for filing with the Commission an
amendment or supplement which will correct such statement or omission or an
amendment which will effect such compliance. Such Underwriter will deliver
an Officer's Certificate to the Company representing and warranting to the
Company that, as of the date of delivery of such amendment or supplement to
the Company, such amendment or supplement will not include any untrue
statement of a material fact or, when read in conjunction with the related
Prospectus and Prospectus Supplement, omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, however, such Underwriter will make no
representation or warranty as to whether any such amendment or supplement
will include any untrue statement resulting directly from any SAM Pool
Error (except any Corrected SAM Pool Error, with respect to any such
amendment or supplement prepared after the receipt by such Underwriter from
the Company of notice of such Corrected SAM Pool Error or materials
superseding or correcting such Corrected SAM Pool Error). The Company shall
have no obligation to file such amendment or supplement if the Company
determines that (i) such amendment or supplement contains any untrue
statement of a material fact or, when read in conjunction with the related
Prospectus and Prospectus Supplement, omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; it being understood, however, that the Company shall have
no obligation to review or pass upon the accuracy or adequacy of, or to
correct, any such amendment or supplement provided by such Underwriter to
the Company pursuant to this paragraph (d) or (ii) such filing is not
required under the Act. The Company shall give notice to such Underwriter
of its determination not to file an amendment or supplement pursuant to
clause (ii) of the preceding sentence.
10. Default of Underwriters. If any Underwriter or Underwriters
participating in an Offering of Certificates default in their obligations
to purchase Certificates hereunder and under the Terms Agreement and the
aggregate purchase price of Certificates which such defaulting Underwriter
or Underwriters agreed but failed to purchase does not exceed 10% of the
aggregate purchase price of the Certificates then being purchased, you may
make arrangements satisfactory to the Company for the purchase of such
Certificates by other persons, including any of the Underwriters, but if no
such arrangements are made by the Closing Date the non-defaulting
Underwriters shall be obligated severally, in proportion to their
respective total commitments as set forth in the applicable Terms Agreement
(for all classes of Certificates), to purchase the Certificates which such
defaulting Underwriter or Underwriters agreed but failed to purchase. If
any Underwriter or Underwriters so default and the aggregate purchase price
of Certificates with respect to which such default or defaults occur is
more than 10% of the aggregate purchase price of Certificates then being
purchased, and arrangements satisfactory to you and the Company for the
purchase of such Certificates by other persons are not made within 36 hours
after such default, the Terms Agreement as to which such offering relates
will terminate without liability on the part of any non-defaulting
Underwriter or the Company, except as provided in Section 11. As used in
this Agreement, the term "Underwriter" includes any person substituted for
an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
11. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties, and other
statements of the Company or its officers and of the several Underwriters
set forth in or made pursuant to this Agreement will remain in full force
and effect, regardless of any investigation, or statement as to the result
thereof, made by or on behalf of any Underwriter or the Company or any of
its officers or directors or any controlling person, and will survive
delivery of and payment for the Certificates and any termination of this
Agreement or any Terms Agreement, including any termination pursuant to
Section 10.
12. Termination. You shall have the right to terminate any Terms
Agreement at any time prior to the applicable Closing Date if any domestic
or international event or act or occurrence has materially disrupted, or in
your opinion will in the immediate future materially disrupt, securities
markets; or if trading on the New York or American Stock Exchanges shall
have been suspended, or minimum or maximum prices for trading shall have
been fixed, or maximum ranges for prices for securities shall have been
required on the New York or American Stock Exchanges by the New York or
American Stock Exchanges or by order of the Commission or any other
governmental authority having jurisdiction; or if the United States shall
have become involved in a war or major hostilities; or if a banking
moratorium has been declared by a state or Federal authority, or if a
banking moratorium in foreign exchange trading by major international banks
or persons has been declared; or if any new restriction materially and
adversely affecting the distribution of the series of Certificates as to
which such Terms Agreement relates shall have become effective; or if there
shall have been such change in the market for securities in general or in
political, financial or economic conditions as in your judgment would be so
materially adverse as to make it inadvisable to proceed with the Offering,
sale and delivery of the Series of Certificates as to which such Terms
Agreement relates on the terms contemplated in such Terms Agreement. Any
notice of termination pursuant to this Section 12 shall be by telephone,
telex, or telegraph, confirmed in writing by letter.
13. Notices. All communications hereunder will be in writing, and,
if sent to the Underwriters, will be mailed, delivered or telegraphed and
confirmed to you at 245 Park Avenue, New York, New York 10167, Attention:
General Counsel or if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at 245 Park Avenue, New York, New York
10167, Attention: Michael Hellenbrand; provided, however, that any notice
to an Underwriter pursuant to Section 7 will be mailed, delivered or
telegraphed to such Underwriter at the address furnished by it.
14. Successors. This Agreement and the Terms Agreement will inure to
the benefit of and be binding upon the parties hereto and thereto, and
their respective successors and the officers and directors and controlling
persons referred to in Section 7, and no other person will have any right
or obligation hereunder or thereunder.
15. Representation of Underwriters. You will act for the several
Underwriters in connection with each Offering of Certificates governed by
this Agreement, and any action under this Agreement and any Terms Agreement
taken by you will be binding upon all the Underwriters identified in such
Terms Agreement.
16. Construction. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York, without
giving effect to principles of conflict of laws.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed duplicate hereof,
whereupon it will become a binding agreement among the Company and the
several Underwriters in accordance with its terms.
Very truly yours,
SAMCO MORTGAGE SECURITIES CORP.
By:______________________
Name:
Title:
The foregoing Underwriting Agreement hereby is confirmed and accepted as of
the date first above written.
BEAR, STEARNS & CO. INC.
By:_______________________
Title
EXHIBIT A
SAMCO MORTGAGE SECURITIES CORP.
Shared Appreciation Mortgage Pass-Through Certificates
FORM OF TERMS AGREEMENT
Dated: _________, 199_
To: BEAR STEARNS [AND _____________]
Re: Underwriting Agreement dated June __, l996
Series Designation: Series 19 __ - __
Class Designation Schedule:
Terms of the Certificates:
- -------------------------
Original
Principal Interest Price to
Class Amount Rate Public(1)(2)
- ----- --------- -------- ------------
- ----------------------------
(1) Do not include if the Certificates will be offered from time to time by
the Underwriter in negotiated transactions at varying prices to be
determined at the time of sale.
(2) Plus accrued interest, if any, at the applicable rate from _____________ .
Distribution Dates: The __th day of each month or, if such __th day is not a
business day, the next succeeding business day commencing ________________ .
Certificate Rating:
- ------------------
SAM Assets: The initial amounts to be included in any Reserve Account and
other accounts are as set forth, and the SAMs to be included in the Trust
Fund are as described, in Annex A hereto.
Purchase Price: The aggregate purchase price payable by the Underwriter for
the Certificates covered by this Agreement will be $_________________.
[Purchase price may also be separately stated by class.]
Credit Enhancement:
- ------------------
[Include pool policies, letters of credit, bonds, subordination and similar
arrangements.]
Closing Date: ______, 19__, ____ a.m., N.Y. Time
The undersigned, agrees, subject to the terms and provisions of the
above-referenced Underwriting Agreement, which is incorporated herein in
its entirety and made a part hereof, to purchase the respective principal
amounts of the Classes of the above-referenced Series of Certificates set
forth [herein] [on Schedule I attached hereto].
SAMCO MORTGAGE SECURITIES CORP.
By: _________________________
Senior Managing Director
[ADDITIONAL UNDERWRITERS]
By: __________________________
Title:
Accepted:
SAMCO MORTGAGE SECURITIES CORP.
By: _________________________
Schedule I (for multiple underwriters)
Underwriters
Name Class Class Class Class Class
Bear, Stearns $ $ $ $ $
& Co. Inc.
[Other
Underwriters]
----- ----- ----- ----- -----
Total
EXHIBIT 3.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE
OF INCORPORATION OF "SAMCO MORTGAGE SECURITIES CORP.," FILED IN THIS OFFICE
ON THE TWENTY-SECOND DAY OF APRIL, A.D., 1999, AT 4:30 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
Edward J. Freel, Secretary of State
3033539 8100 AUTHENTICATION: 9703873
991160059 DATE: 04-23-99
CERTIFICATE OF INCORPORATION
of
SAMCO MORTGAGE SECURITIES CORP.
(the "corporation")
Adopted in accordance with the provisions of Sections 101 and 102 of the
Delaware General Corporation Law
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes
hereafter stated, under the provisions and subject to the requirements of
the laws of the State of Delaware (particularly Chapter 1, Title 8 of the
Delaware Code and the acts amendatory thereof and supplemental thereto, and
known, identified and referred to as the "General Corporation Law of the
State of Delaware") hereby certifies that:
1. The name of the corporation is SAMCO Mortgage Securities Corp.
2. The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange
Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation
Trust Company.
3. The purpose for which the corporation is organized is to engage
in the following activities:
(a) to purchase or otherwise acquire, own, hold, sell, transfer,
assign, pledge, finance, refinance and otherwise deal with (i)
loans or participations therein secured by mortgages, deeds of
trust or similar liens or residential or commercial properties;
(ii) loans or participations therein secured by security
interests in or similar liens or shares issued by cooperative
housing corporations and the related proprietary leases or
occupancy agreements; (iii) conditional sales contracts or
installment sales or loan agreements or participations therein
secured by manufactured housing; (iv) mortgage loans,
certificates or other securities guaranteed by the Government
National Mortgage Association; (v) mortgage loans, certificates
or other securities issued or guaranteed by the Federal National
Mortgage Association; (vi) mortgage loans, certificates or other
securities issued or guaranteed by the Federal Home Loan
Mortgage Corporation; and (vii) mortgage pass-through
certificates, collateralized mortgage obligations or other types
of mortgage-related securities issued by any person or entity
(collectively, clauses (i) through (vii) are referred to as the
'Mortgage Collateral");
(b) to authorize, issue, sell, deliver or otherwise deal with
bonds, notes or other obligations secured primarily by one or
more types of Mortgage Collateral (the "Bonds");
(c) (i) to act as settlor or depositor of trusts formed to issue
series of Bonds secured by Mortgage Collateral and to invest in
or to sell beneficial interest in the same, and (ii) to act as
settlor or depositor of trusts the assets of which consist of
certain Mortgage Collateral and to sell beneficial interests in
the same (the "Certificates");
(d) to transfer, pledge or assign the rights to any amounts
remitted or to be remitted to the corporation by any trustee
under an indenture or pooling and servicing agreement entered
into with the corporation in connection with the issuance of
the Bonds or Certificates; and
(e) to engage in any activity and to exercise any powers permitted
to corporations under the laws of the State of Delaware which
are incidental to the foregoing and necessary or convenient to
accomplish the foregoing, including the ability to hold or
invest cash balances on an interim basis in certain short-term
investments, plus any investment income on such investments,
with such investments to include any investments permitted
under any indenture or pooling and servicing agreement pursuant
to which Bonds or Certificates may be issued.
4 The total number of shares of stock that the corporation shall
have authority to issue is 1000 shares of Common Stock, $.01
par value for each share, all of which shall be of the same
class. Each holder thereof shall be entitled to one vote at all
meetings of stockholders of each share of such stock standing
in his name on the books of the corporation on the record date
fixed for such meeting.
5 Election of directors need not be by ballot unless the By-laws
of the corporation shall so provide. The books of the
corporation may (subject to any statutory requirements) be kept
at such place whether within or outside the State of Delaware
as may be designated by the Board of Directors or in the
By-laws of the corporation.
6 In furtherance and not in limitation of the power conferred
upon the Board of Directors, without the assent or vote of the
stockholders, shall have the power to make, alter, amend or
repeal the By-laws of the corporation.
7 Notwithstanding any other provision of this certificate of
incorporation and any provision of law that otherwise so
empowers the corporation, the corporation shall not, without
the prior written consent of the trustee from time to time
under any indenture pursuant to the corporation shall issue
Bonds, do any of the following:
(a) dissolve or liquidate, in whole or in part;
(b) merge or consolidate with any other corporation other than a
corporation wholly- owned, directly or indirectly, by any
entity owning 100% of the stock of the corporation and having a
certificate of incorporation containing provisions identical to
the provisions of Article 3 and this Article 7; or
(c) amend this certificate of incorporation to alter in any manner
or delete Article 3 or this Article 7.
8. Subject to the limitation in Article 7 of this certificate of
incorporation, the corporation reserves the right to amend,
alter, change or repeal any provision contained in this
certificate of incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
9. The corporation is to have perpetual existence.
10. No director shall have any personal liability to the
corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (a) for
any breach of such director's duty or loyalty to the
corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 174 of the General
Corporation Law of Delaware, or (d) for any transaction from
which such director derived an improper personal benefit.
11. The name and address of the incorporator is Nancy Lopez, Bear,
Stearns & Co. Inc., 115 South Jefferson Road, Whippany, NJ 07981.
IN WITNESS WHEREOF, the undersigned, being the sole incorporator of
the corporation, does make this certificate, hereby declaring and
certifying that this is my act and deed and that the facts herein stated
are true, and accordingly have hereunto set my hand this 22nd day of April,
1999.
Nancy Lopez
Incorporator
EXHIBIT 3.2
BY-LAWS
SAMCO MORTGAGE SECURITIES CORP.
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such
place, at such time, and on such date as the Board of Directors shall each
year fix, which date shall be, within either thirteen months after the date
of incorporation or after its last meeting of stockholders.
Section 2. Special Meetings.
Special meetings of the stockholders, for any purpose or purposes
prescribed in the notice of the meeting, may be called by the Board of
Directors or the Chief Executive Officer and shall be held at such place,
on such date, and at such time as they or he or she shall fix. A special
meeting of the stockholders shall be called by the Chairman of the Board
upon receipt of a written request of stockholders owning a majority of the
stock of the Corporation then issued and outstanding and entitled to vote
on matters to be submitted to stockholders of the Corporation. Any such
written request shall state a proper purpose or purposes of the meeting.
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten nor more than sixty days
before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to
time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and
time thereof are announced at the meeting at which the adjournment is
taken; provided, however, that if the date of any adjourned meeting is more
than thirty days after the date for which the meeting was originally
noticed, or if a new record date is fixed for the adjourned meeting,
written notice of the place, date and time of the adjourned meeting shall
be given in conformity herewith. At any adjourned meeting, any business may
be transacted which might have been transacted at the original meeting.
Section 4. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chief Executive Officer of the Corporation
or, in his or her absence, such person as may be chosen by the holders of a
majority of the shares entitled to vote who are present, in person or by
proxy, shall call to order any meeting of the stockholders and act as
chairman of the meeting. In the absence of the Secretary of the
Corporation, the Secretary of the meeting shall be such person as the
Chairman appoints.
Section 5. Conduct of Business.
The Chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of
the manner of voting and the conduct of discussion as seems to him or her
in order.
Section 6. Consent of Stockholders in Lieu of Meeting.
Any action required to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents
in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted and
shall be delivered to the Corporation to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered
office shall be made by hand or by certified or registered mail, return
receipt requested.
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective
to take the corporate action referred to therein unless, within sixty days
of the date of the earliest dated consent is delivered to the Corporation,
a written consent or consents signed by a sufficient number of holders to
take action are delivered to the Corporation in the manner prescribed in
the first paragraph of this Section.
ARTICLE II - BOARD OF DIRECTORS
Section 1. Number and Term of Office.
The number of directors who shall constitute the whole Board shall
consist of one or more as determined by the Board of Directors. Each
director shall be elected for a term of one year and until his or her
successor is elected and qualified, or until his or her earlier removal at
the discretion of the majority of shareholders or until his or her earlier
resignation, except as otherwise provided herein or required by law.
Whenever the authorized number of directors is increased between
annual meetings of the shareholders, a majority of the directors then in
office shall have the power to elect such new directors for the balance of
a term and until their successors are elected and qualified. Any decrease
in the authorized number of directors shall not become effective until the
expiration of the term of the directors then in office unless, at the time
of such decrease, there shall be vacancies on the Board which are being
eliminated by the decrease.
Section 2. Vacancies.
If the office of any director becomes vacant by reason of death,
resignation, disqualification, removal or other cause, a majority of the
directors remaining in office, although less than a quorum, may elect a
successor for the unexpired term and until his or her successor is elected
and qualified.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such
place or places, on such date or dates, and at such time or times as shall
have been established by the Board of Directors and publicized among all
directors. A notice of each regular meeting shall not be required.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by one-third
of the directors then in office (rounded up to the nearest whole number) or
by the Chief Executive Officer and shall be held at such place, on such
date, and at such time as they or he or she shall fix. Notice of the place,
date, and time of each such special meeting shall be given each director by
whom it is not waived by mailing written notice not less than five days
before the meeting or by telegraphing, telecopying, cabling, or personally
delivering the same not less than twenty-four hours before the meeting.
Unless otherwise indicated in the notice thereof, any and all business may
be transacted at a special meeting.
Section 5. Quorum.
At any meeting of the Board of Directors, a majority of the total
number of the whole Board shall constitute a quorum for all purposes. If a
quorum shall fail to attend any meeting, a majority of those present may
adjourn the meeting to another place, date, or time, without further notice
or waiver thereof.
Section 6. Participation in Meetings by Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation
shall constitute presence in person at such meeting.
Section 7. Conduct of Business.
At any meeting of the Board of Directors, business shall be
transacted in such order and manner as the Board may from time to time
determine, and all matters shall be determined by the vote of a majority of
the directors present, except as otherwise provided herein or required by
law. Action may be taken by the Board of Directors without a meeting if all
members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the whole Board,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure
of the whole Board and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or
members, designating, if it desires, other directors as alternate members
who may replace any absent or disqualified member at any meeting of the
committee. Any committee so designated may exercise the power and authority
of the Board of Directors to declare a dividend, to authorize the issuance
of stock or to adopt a certificate of ownership and merger pursuant to
Section 253 of the Delaware General Corporation Law if the resolution which
designates the committee or a supplemental resolution of the Board of
Directors shall so provide. In the absence or disqualification of any
member of any committee and any alternate member in his place, the member
or members of the committee present at the meeting and not disqualified
from voting, whether or not he or she or they constitute a quorum, may by
unanimous vote appoint another member of the Board of Directors to act at
the meeting in the place of the absent or disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be
made for notice to members of all meetings; one-third of the members shall
constitute a quorum unless the committee shall consist of one or two
members, in which event one member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Any
action required may be taken by any committee without a meeting if all
members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of such committee.
ARTICLE IV - OFFICERS
Section 1. Generally.
The officers of the Corporation shall consist of a Chief Executive
Officer, a President, a Secretary, a Treasurer and such other officers as
may from time to time be appointed by the Board of Directors. Officers
shall be elected by the Board of Directors, which shall consider that
subject at its first meeting after every annual meeting of stockholders.
Each officer shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Any number of
offices may be held by the same person.
All officers of the Corporation shall have such authority and perform
such duties in the management and operation of the Corporation as shall be
prescribed in resolutions of the Board of Directors designating and
choosing such officers and prescribing their authority and duties, and
shall have such additional authority and duties as are incident to their
offices except to the extent that such resolutions may be inconsistent
therewith.
Section 2. Delegation of Authority.
The Board of Directors may from time to time delegate the powers or
duties of any officer to any other officers, agents, or to any person named
by the Board, notwithstanding any provision hereof.
Section 3. Removal.
Any officer of the Corporation may be removed at any time, with or
without cause, by the Board of Directors.
Section 4. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the Chief Executive
Officer, the President or any officer of the Corporation authorized by the
Chief Executive Officer or the President shall have the power to vote and
otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of
any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation
may possess by reason of its ownership of securities in such other
corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the Chief Executive Officer or the
President and by the Secretary or the Treasurer, certifying the number of
shares owned by him or her. Any or all of the signatures on the certificate
may be facsimile.
Section 2. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as
the Board of Directors may establish concerning proof of such loss, theft
or destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
ARTICLE VI - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these by-laws, facsimile signatures of
any officer or officers of the Corporation may be used whenever and as
authorized by the Board of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the
name of the Corporation, which seal shall be in the charge of the
Secretary. If and when so directed by the Board of Directors or a committee
thereof, duplicates of the seal may be kept and used by the Treasurer or by
an Assistant Secretary or Assistant Treasurer.
Section 3. Reliance Upon Books, Reports and Records.
Each director, each member of any committee designated by the Board
of Directors, and each officer of the Corporation shall, in the performance
of his or her duties, be fully protected in relying in good faith upon the
books of account or other records of the Corporation, including reports
made to the Corporation by any of its officers, by an independent certified
public accountant, or by an appraiser selected with reasonable care.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
ARTICLE VII - AMENDMENTS
These By-Laws may be amended or repealed by the Board of Directors at
any meeting or by the stockholders at any meeting.
EXHIBIT 4.1
BEAR STEARNS MORTGAGE CAPITAL CORPORATION,
a Delaware corporation,
Purchaser
and
[Seller],
a _______________________,
Seller and Servicer
---------------------------------------------
SALE AND SERVICING AGREEMENT
Dated as of ____ __, ____
---------------------------------------------
Shared Appreciation Mortgage Loans
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.......... .........................................2
ARTICLE II
THE SAMS PROGRAM... ..........................................13
Section 2.1 Publicity and Marketing....................13
Section 2.2 Education Program..........................13
Section 2.3 Origination Fee............................13
ARTICLE III
SALE OF SAMS; POSSESSION OF MORTGAGE FILES;
BOOKS AND RECORDS; CUSTODIAL AGREEMENT; DELIVERY OF
DOCUMENTS......................................................14
Section 3.1 Sale of SAMs; Possession of Mortgage Files;
Maintenance of Servicing Files.............14
Section 3.2 Books and Records; Transfers of SAMs.......15
Section 3.3 Custodial Agreement........................16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES;
REMEDIES AND BREACH............................................17
Section 4.1 Representations and Warranties.............17
Section 4.2 Representations and Warranties Regarding
Individual SAMs............................19
Section 4.3 Remedies for Breach of Representations
and Warranties.............................27
Section 4.4 Review of SAMs.............................29
Section 4.5 SAM Defaults...............................30
ARTICLE V
ADMINISTRATION AND SERVICING OF SAMS...........................30
Section 5.1 The Servicer to Act as Servicer............30
Section 5.2 Liquidation of SAMs........................33
Section 5.3 Collection of SAM Payments.................34
Section 5.4 Establishment of, and Deposits to,
Collection Account.........................34
Section 5.5 Permitted Withdrawals From
Collection Account.........................36
Section 5.6 Establishment of, and Deposits to,
Escrow Account.............................37
Section 5.7 Permitted Withdrawals From Escrow Account..38
Section 5.8 Payment of Taxes, Insurance
and Other Charges..........................39
Section 5.9 Protection of Accounts.....................40
Section 5.10 Maintenance of Hazard Insurance............40
Section 5.11 Maintenance of Mortgage
Impairment Insurance.......................42
Section 5.12 Maintenance of Fidelity Bond and Errors
and Omissions Insurance....................42
Section 5.13 Inspections................................43
Section 5.14 Restoration of Mortgaged Property..........43
Section 5.15 Maintenance of Primary Mortgage
Insurance Policy; Claims...................43
Section 5.16 Title, Management and Disposition of
REO Property...............................44
Section 5.17 Real Estate Owned Reports..................47
Section 5.18 Liquidation Reports........................47
Section 5.19 Reports of Foreclosures and Abandonments
of Mortgaged Property......................47
Section 5.20 Appraisals: Qualified Major
Home Improvements..........................47
Section 5.21 Fees That The Servicer Will Collect........47
Section 5.22 Certificate of Occupancy...................48
ARTICLE VI
PAYMENTS TO PURCHASER..........................................48
Section 6.1 Remittances................................48
Section 6.2 Statements to Purchaser....................49
Section 6.3 Monthly Advances by Servicer...............50
ARTICLE VII
GENERAL SERVICING PROCEDURES...................................50
Section 7.1 Transfers of Mortgaged Property............50
Section 7.2 Satisfaction of Mortgages and
Release of Mortgage Files..................52
Section 7.3 Servicing Compensation.....................53
Section 7.4 Annual Statement as to Compliance..........53
Section 7.5 Annual Independent Public Accountants'
Servicing Report...........................53
Section 7.6 Right to Examine Servicer Records..........54
Section 7.7 Removal of SAMs from Inclusion under this
Agreement upon a Whole Loan Transfer or
Pass-Through Transfer......................54
Section 7.8 Compliance with REMIC Provisions...........56
ARTICLE VIII
SERVICER TO COOPERATE..........................................56
Section 8.1 Provision of Information...................56
ARTICLE IX
THE SERVICER...................................................57
Section 9.1 Liability of the Servicer..................57
Section 9.2 Merger or Consolidation of the Servicer....57
Section 9.3 Limitation on Liability of Servicer
and Others.................................58
Section 9.4 Limitation on Resignation and Assignment
by the Servicer............................58
ARTICLE X
DEFAULT........................................................59
Section 10.1 Servicer Events of Default.................59
Section 10.2 Waiver of Defaults.........................61
ARTICLE XI
TERMINATION....................................................61
Section 11.1 Termination................................61
Section 11.2 Termination Without Cause..................61
ARTICLE XII
MISCELLANEOUS PROVISIONS.......................................62
Section 12.1 Successor to Servicer......................62
Section 12.2 Amendment..................................63
Section 12.3 Governing Law..............................63
Section 12.4 Duration of Agreement......................63
Section 12.5 Notices....................................63
Section 12.6 Severability of Provisions.................64
Section 12.7 Relationship of Parties....................64
Section 12.8 Execution; Successors and Assigns..........64
Section 12.9 Recordation of Assignments of Mortgage.....65
Section 12.10 Assignment by Purchaser....................65
EXHIBITS
EXHIBIT A FORM OF SAM SCHEDULE
EXHIBIT B CONTENTS OF EACH SERVICING FILE
EXHIBIT C CONTENTS OF EACH MORTGAGE FILE
EXHIBIT D-1 FORM OF CUSTODIAL AGREEMENT WITH EXHIBITS
EXHIBIT D-2 INITIAL CERTIFICATION
EXHIBIT D-3 FINAL CERTIFICATION
EXHIBIT D-4 REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT EXHIBIT E-1
FORM OF COLLECTION ACCOUNT CERTIFICATION EXHIBIT E-2 FORM OF
COLLECTION ACCOUNT LETTER AGREEMENT EXHIBIT F-1 FORM OF ESCROW
ACCOUNT CERTIFICATION EXHIBIT F-2 FORM OF ESCROW ACCOUNT LETTER
AGREEMENT EXHIBIT G FORM OF MONTHLY REMITTANCE ADVICE EXHIBIT H FORM
OF TRANSFER SUPPLEMENT
SCHEDULE I LIST OF APPROVED APPRAISERS
SCHEDULE II MORTGAGE TERMINATION EVENTS
SCHEDULE IIIQUALIFIED MAJOR HOME IMPROVEMENTS
SCHEDULE IV MORTGAGE NOTE
SCHEDULE V MORTGAGE
This is a Sale and Servicing Agreement for Shared
Appreciation Mortgage Loans, dated and effective as of _________ __, ____,
and is executed between BEAR STEARNS MORTGAGE CAPITAL CORPORATION, a
Delaware corporation, as Purchaser (the "Purchaser"), and [Seller], a
____________________, as Seller and Servicer (in its capacity as Seller
hereunder, the "Seller," and in its capacity as Servicer hereunder, the
"Servicer").
W I T N E S S E T H
WHEREAS, the Purchaser and the Seller have simultaneously
herewith entered into a commitment letter regarding the origination and
sale of SAMs (hereinafter, the "SAMs Program") pursuant to which, among
other things, the Purchaser has agreed to purchase from time to time from
the Seller and the Seller has agreed to sell to such affiliate Portfolios
of SAMs; the Purchaser and the Seller are entering into this Agreement in
order to bind each other with respect to matters agreed to in such letter
of intent and to reach agreement about various other matter of concern to
each; and
WHEREAS, the Purchaser and ____________ (the "Parties")
wish to agree to the terms of such Purchase occurring pursuant to the
Commitment; and
WHEREAS, each of the SAMs to be sold hereunder conforms
with the requirements of the SAMs Program and has been originated in a
manner contemplated by the Parties and this Agreement; and
WHEREAS, the Purchaser and ______________, as Seller and
Servicer, wish to prescribe the manner of purchase of the SAMs and the
management, servicing and control of the SAMs;
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Purchaser and
_______________, as Seller and Servicer, hereby agree as follows:
ARTICLE I - DEFINITIONS
Accepted Servicing Practices: With respect to any SAM,
each SAM shall be serviced in accordance with the servicing practices and
collection procedures that are in accordance with the Fannie Mae Guide or
Freddie Mac Guide.
Additional Interest: With respect to any SAM, the amount
of, or manner in which, as the context requires, Additional Interest in
calculated in the applicable Mortgage Note.
Advances: All Monthly Payments and Servicing Advances
made by the Servicer with respect to any SAM.
Agreement: This Sale and Servicing Agreement and all
amendments hereof and supplements hereto, including as the context
requires, any Transfer Supplement.
Applicable Credit Rating: [A credit rating of "AAA", in
the case of S&P or a rating of AAA, in the case of Fitch, for any long-term
deposit or security or a rating of "A-1+", in the case of S&P, or "F-1"+,
in the case of Fitch, for any short-term deposit or security.]
Appraised Value: Means the Initial Appraised Value of a
SAM or the appraised value of any appraisal required pursuant to any SAM.
Appreciation Share: With respect to any Mortgage Note,
the percentage of appreciation in the value of the Mortgaged Property from
the date of origination of such SAM to the earlier of (i) the date on which
any Mortgage Termination Event occurs and (ii) the maturity date thereof
with respect to the related SAM that the Mortgagor must pay to the
Mortgagee.
Assignment of Mortgage: An assignment of the Mortgage,
notice of transfer or equivalent instrument in recordable form, sufficient
under the laws of the jurisdiction wherein the related Mortgaged Property
is located to reflect the sale of the SAM to the Purchaser.
BIF: The Bank Insurance Fund or any successor thereto.
Business Day: Any day other than (i) a Saturday or
Sunday, or (ii) a day on which national banking associations and
federally-chartered savings and loan institutions in the States of New York
or the principal place of business of the Servicer are authorized or
obligated by law or executive order to be closed.
Closing Date: The Closing Date specified in any Transfer
Supplement, which is the date as to which the sale of any Portfolio is
designated to occur.
Code: The Internal Revenue Code of 1986, as it may be
amended from time to time or any successor statute thereto, and applicable
U.S. Department of the Treasury regulations issued pursuant thereto.
Collection Account: As to any SAM, any separate account
or accounts created and maintained pursuant to Section 5.4 of this
Agreement for the collection of all payments made on the SAMs.
Condemnation Proceeds: As to any SAM, all awards or
settlements in respect of a Mortgaged Property, whether permanent or
temporary, partial or entire, by exercise of the power of eminent domain or
condemnation, to the extent not required to be released to a Mortgagor in
accordance with the terms of the related documents in the Mortgage File.
[Conforming SAM: A SAM that is eligible for purchase under
- -------------------.]
Custodial Agreement: The agreement governing the
retention of the originals of each Mortgage Note, Mortgage, Assignment of
Mortgage and other documents in the Mortgage File, a form of which is
annexed hereto as Exhibit D-1.
Custodian: The Custodian, as designated in the Transfer
Supplement, or its successor in interest or assigns or any successor to the
Custodian.
Cut-off Date: The Cut-off Date specified in any Transfer
Supplement, which is the date as to which all of the specified
representations and warranties regarding any Portfolio sold by the Seller
to the Purchaser hereunder and such Transfer Supplement relate back unless
otherwise stated in such representations and warranties.
Deleted SAM: A SAM which is repurchased by the Seller in
accordance with the terms of this Agreement or which is, in the case of a
substitution pursuant to Section 4.3, replaced or to be replaced with a
Qualified Substitute SAM.
Determination Date: As to any SAM, the __th day (or if
such __th day is not a Business Day, the Business Day immediately preceding
such __th day) of the month of the related Distribution Date.
Disqualified Organization: An organization defined as
such in Section 860E(e) of the Code.
Distribution Date: The __nd day (or if such __nd day is
not a Business Day, the immediately succeeding Business Day) of any month.
Due Date: The 1st day of the month in which the related
Monthly Payment is due on a SAM, exclusive of any days of grace.
Due Period: With respect to each Distribution Date, the
period commencing on the second day of the month preceding the month of the
Distribution Date and ending in the first day of the month of the
Distribution Date.
Errors and Omissions Insurance Policy: An errors and
omissions insurance policy or policies to be maintained by the Servicer
pursuant to Section 5.12.
Escrow Account: As to any SAM, any separate account or
accounts created and maintained pursuant to Section 5.6.
Escrow Payments: With respect to any SAM, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, and any other payments required to be escrowed by the Mortgagor
with the Mortgagee pursuant to the Mortgage or any other related document.
Event of Default: Any one of the conditions or
circumstances enumerated in Section 11.1.
Fannie Mae: The Federal National Mortgage Association or
any successor thereto.
Fannie Mae Guide: The Fannie Mae Selling Guide and the
Fannie Mae Servicing Guide and all amendments or additions thereto.
FDIC: The Federal Deposit Insurance Corporation, or any
successor thereto.
Fidelity Bond: A fidelity bond to be maintained by the
Servicer pursuant to Section 5.12
Fitch: Fitch IBCA, Inc. or any successor thereto.
Freddie Mac: The Federal Home Loan Mortgage Corporation
or any successor thereto.
Freddie Mac Guide: The Freddie Mac Selling Guide and the
Freddie Mac Servicing Guide and all amendments or additions thereto.
Implied Market Rate: With respect to any SAM, a typical
market interest rate for a comparable single-family mortgage product having
the same principal terms (e.g., the same maturity and same LTV) but not
having a shared appreciation mortgage feature.
Indexed Appreciation Payment: With respect to any
Portfolio, [to come].
Initial Appraised Value: The amount set forth in an
appraisal made in connection with the origination of the related SAM as the
value of the Mortgaged Property.
Insurance Proceeds: With respect to any SAM, proceeds of
insurance policies insuring the SAM or the related Mortgaged Property.
[Jumbo SAM: A SAM that is not a Conforming SAM.]
Lien: A security interest, lien, charge, pledge, equity,
or encumbrance of any kind other than tax liens, mechanics' liens, and any
liens that attach to the applicable SAM by operation of law.
Liquidation Proceeds: All amounts (other than Insurance
Proceeds) received and retained in connection with the liquidation of
defaulted SAMs, by foreclosure or otherwise, together with any net proceeds
received on a monthly basis with respect to any Mortgaged Properties
acquired on behalf of the Purchaser by foreclosure or deed in lieu of
foreclosure.
LTV: With respect to any SAM, the ratio of the original
principal balance of the SAM as of the date of origination (unless
otherwise indicated) to the lesser of (a) the Appraised Value of the
Mortgaged Property and (b) if the SAM was made to finance the acquisition
of the related Mortgaged Property, the purchase price of the Mortgaged
Property, expressed as a percentage.
Monthly Advance: The portion of the Monthly Payment
delinquent with respect to each SAM at the close of business on the
Determination Date required to be advanced by the Servicer pursuant to
Section 6.3 on the Business Day immediately preceding the Distribution Date
of the month of the related Due Date for such Monthly Payment.
Monthly Payment: The scheduled monthly payment of
principal and interest on a SAM.
Monthly Remittance Advice: The statement delivered to the
Purchaser, a form of which is attached hereto as Exhibit G.
Moody's: Moody's Investors Service, Inc., any successors
thereto.
Mortgage: The mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a Lien on an estate in fee simple
in real property securing the Mortgage Note.
Mortgage File: With respect to any SAM, the items
pertaining to a particular SAM referred to in Exhibit C annexed hereto and
any additional documents required to be added to the Mortgage File pursuant
to this Agreement.
Mortgage Note: The note or other evidence of the
indebtedness of a Mortgagor secured by a Mortgage.
Mortgage Termination Event: With respect to any SAM, the
events specified in the related Mortgage Note (which shall substantially
conform with the events shown on Schedule II hereto as provided herein) as
to which the Mortgagor is required to fully repay its liability thereunder.
Mortgagee: The lender on a Mortgage Note.
Mortgaged Property: The real property securing repayment
of the debt evidenced by a Mortgage Note.
Mortgagor: The obligor on a Mortgage Note.
Net Insurance Proceeds: All Insurance Proceeds (net of
unreimbursed Advances), to the extent such proceeds are not applied to the
restoration of the Mortgaged Property or released to the Mortgagor in
accordance with the Servicer's normal servicing procedures.
Net Liquidation Proceeds: Liquidation Proceeds (net of
unreimbursed Advances) and any net proceeds received on a monthly basis
with respect to any Mortgaged Properties acquired by the Purchaser by
foreclosure or deed in lieu of foreclosure.
Officer's Certificate: A certificate signed by the
Chairman of the Board and Chief Executive Officer, the President, any
Executive Vice President, any Senior Vice President, any First Vice
President, any Vice President or any Assistant Vice President and by the
Treasurer or the Secretary or one of the Assistant Treasurers or Assistant
Secretaries of the Seller or the Servicer, as applicable, and delivered to
the Purchaser as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, who may
be an employee of the Seller or the Servicer, as applicable, acceptable to
the Purchaser.
OTS: Office of Thrift Supervision or any successor thereto.
Pass-Through Transfer: The sale or transfer of some or
all of the SAMs to a trust as part of a publicly issued or privately
placed, rated or unrated, mortgage pass-through transaction.
Permitted Investments: Any one or more of the obligations
and securities listed below which investment provides for a date of
maturity not later than the Business Day immediately preceding the
Distribution Date in each month:
(i) direct obligations of, and obligations the timely
payment of which are fully guaranteed by the United States of America or
any agency or instrumentality of the United States of America the
obligations of which are backed by the full faith and credit of the United
States of America;
(ii) (a) demand or time deposits, federal funds or
bankers' acceptances issued by any depository institution or trust company
incorporated under the laws of the United States of America or any state
thereof (including a Servicer acting in its commercial banking capacity)
and subject to supervision and examination by federal and/or state banking
authorities, provided that the commercial paper and/or the short-term debt
rating and/or the long-term unsecured debt obligations of such depository
institution or trust company at the time of such investment or contractual
commitment providing for such investment have the Applicable Credit Rating
or better from each Rating Agency and (b) any other demand or time deposit
or certificate if deposit that is fully insured by the Federal Deposit
Insurance Corporation;
(iii) repurchase obligations with respect to (a) any
security described in clause (i) above or (b) any other security issued or
guaranteed by an agency or instrumentality of the United States of America,
the obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a depository
institution or trust company (acting as principal) described in clause
(ii)(a) above where the trustee holds the security therefor;
(iv) [securities bearing interest or sold at a discount
issued by any corporation (including a Servicer incorporated under the laws
of the United States of America or any state thereof] that have the
Applicable Credit Rating or better from each Rating Agency 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 one year after the date of issuance
thereof) having the Applicable Credit Rating or better from each Rating
Agency at the time of such investment;
(vi) any other demand, money market or time deposit,
obligation, security or investment as may be acceptable to the Purchaser;
and
(vii) any money market or common trust fund having the
Applicable Credit Rating or better from each Rating Agency, including any
such fund for which a Servicer or any affiliate of a Servicer acts as a
manager or an advisor;
provided, however, that no instruments or security shall be a
Permitted Investment if such instrument or security evidences a right to
receive only interest payments with respect to the obligations underlying
such instrument or if such security provides for payment of both principal
and interest with a yield to maturity in excess of 120% of the yield to
maturity at par or if such instrument or security is purchased at a price
greater than par.
Person: Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof.
Portfolio: A SAM or group of SAMs sold to the Purchaser
pursuant to the terms hereof and a related Transfer Supplement.
Prepayment Interest Shortfall: The sum of the differences
between interest actually received in a Due Period as a result of a
Principal Prepayment or other unscheduled receipt of principal (including
as a result of a liquidation) on each SAM as to which such a payment is
received and the interest portion of the Monthly Payment of such SAM
scheduled to be due at the applicable Remittance Rate.
Primary Mortgage Insurance Policy: A policy of primary
mortgage guaranty insurance issued by a Qualified Insurer, as required by
this Agreement with respect to certain SAMs.
Prime Rate: The prime rate announced to be in effect from
time to time, as published as the average rate in The Wall Street Journal.
Principal Prepayment: Any full or partial payment or
other recovery of principal made on a SAM which is received in advance of
its scheduled Due Date, including any prepayment penalty or premium
thereon, which is not accompanied by an amount of interest representing
scheduled interest due on any date or dates in any month or months
subsequent to the month of prepayment.
Purchaser: Bear Stearns Mortgage Capital Corporation, a
Delaware corporation or its successor in interest or any successor to the
Purchaser under this Agreement as herein provided.
Qualified Depository: As to any SAM, (a) ___________ or
(b) any depository the accounts of which are insured by the FDIC through the
BIF or the SAIF and the debt obligations of which are rated "A2," "Aa" and
"A-" or better by Moody's, S&P and Fitch, respectively or such depository as
shall be acceptable to Moody's, S&P and Fitch, as applicable.
Qualified Insurer: A mortgage guaranty insurance company
duly authorized and licensed where required by law to transact mortgage
guaranty insurance business and approved as an insurer by Freddie Mac or
Fannie Mae.
Qualified Substitute SAM: A SAM eligible to be
substituted by the Seller for a Deleted SAM which must, on the date of such
substitution, [(i) have a Stated Interest Rate within 25 basis points of
the Stated Interest Rate of the Deleted SAM; (ii) an Appreciation Share
equal to the Deleted SAM; (iii) an LTV within 10 basis points of the
Deleted SAM; (iv) have a remaining term to maturity not greater than and
not more than one year less than that of the Deleted SAM; and (v) comply
with each representation and warranty set forth in Sections 4.1 and 4.2].
Rating Agency: Any of S&P, Moody's or Fitch.
Record Date: The close of business on the last Business
Day of the month preceding the month of the related Distribution Date.
REMIC: A real estate mortgage investment conduit as
defined in Section 860D of the Code.
Remittance Rate: With respect to each SAM, the annual
rate of interest remitted to the Purchaser, equal to the Stated Interest
Rate minus the sum of (i) the Servicing Fee Rate and (ii) any Retained
Yield.
REO Disposition: The final sale by the Servicer of any
REO Property.
REO Disposition Proceeds: All amounts received with
respect to an REO Disposition pursuant to Section 5.16.
REO Property: A Mortgaged Property acquired by the
Servicer on behalf of the Purchaser through foreclosure or by deed in lieu
of foreclosure, as described in Section 5.16.
Repurchase Price: With respect to any SAM, a price equal
to (i) the Scheduled Principal Balance of the SAM, plus (ii) interest on
such Scheduled Principal Balance at the Remittance Rate from the date on
which interest has last been paid up to, and not including, the date of
repurchase, less amounts received from or on behalf of the Mortgagor in
respect of such repurchased SAM which are being held in the Collection
Account for distribution in the month of repurchase, plus (iii) the greater
of (a) the Indexed Appreciation Payment or (b) the Implied Market Rate
times the Principal Prepayment, plus (iv) expenses reasonably incurred or
to be incurred by the Purchaser in respect of the breach or defect giving
rise to the repurchase obligation, including any expenses arising out of
the repurchase obligation and any negative cost of carrying the SAM
incurred by the Purchaser during the period prior to it being repurchased
by the Seller.
Retained Yield: Any additional fees or payments made by a
Mortgagor that a Servicer is entitled to and is not part of the Servicing
Fee.
SAIF: The Savings Association Insurance Fund, or any
successor thereto.
SAM: An individual shared appreciation mortgage loan
which is the subject of this Agreement, each SAM originally sold and
subject to this Agreement being identified on the SAM Schedule, which SAM
includes without limitation the Mortgage File, the Monthly Payments,
Principal Prepayments, REO Disposition Proceeds, Condemnation Proceeds,
Insurance Proceeds, Liquidation Proceeds and all other rights, benefits,
proceeds and obligations arising from or in connection with such SAM.
SAM Discount: The excess of the Implied Market Rate for a
SAM over the Stated Interest Rate on such SAM.
SAM Schedule: A schedule of SAMs delivered in electronic
format to the Purchaser on the related Closing Date in the form of Schedule
A.
Scheduled Principal Balance: With respect to any SAM, as
of any Determination Date the original principal balance thereof, reduced by
(i) the principal portion of all Monthly Payments then due on or before such
Determination Date, whether or not received, and (ii) all amounts allocable
to unscheduled principal payments received on or before the last day of the
Due Period preceding such date of determination.
Securities Act of 1933 or the 1933 Act: The Securities Act
of 1933, as amended.
Seller: ______________________, a
____________________________, or its successor in interest and assigns.
Servicer: _____________________, a
__________________________, or its successors in interest and assigns, or
any successor servicer as provided herein.
Servicing Advances: All customary, reasonable and
necessary "out of pocket" costs and expenses other than Monthly Advances
(including reasonable attorneys' fees and disbursements) incurred in the
performance by the Servicer in connection with a default or other
unanticipated occurrence with respect to a SAM (and not including the
performance of its ordinary and customary activities as Servicer),
including, but not limited to, the cost of (a) the preservation, restoration
and protection of the Mortgaged Property, (b) any enforcement or judicial
proceedings, including foreclosures, (c) the management and liquidation of
any REO Property and (d) any advances of taxes and insurance premiums made
pursuant to Section 5.8 as a consequence of the default by the Mortgagor on
its obligation to pay such amounts.
Servicing Fee: With respect to any SAM, the annual fee
which shall, for a period of one full month, be equal to one-twelfth of the
product of (a) the Servicing Fee Rate and (b) the Scheduled Principal
Balance of such SAM. Such fee shall be payable monthly, computed on the
basis of the same Scheduled Principal Balance and period respecting which
any related interest payment on a SAM is computed. Such fee shall be paid
from collections on such SAM only and limited to the interest portion of
the Monthly Payment collection by Servicer.
Servicing Fee Rate: __________% per annum.
Servicing File: With respect to each SAM, the file
retained by the Servicer consisting of originals of all documents listed in
Exhibit B hereto which are not delivered to the Custodian and copies of the
Mortgage File.
Servicing Officer: Any officer of the Servicer involved
in, or responsible for, the administration and servicing of the SAMs whose
name appears on a list of servicing officers furnished by the Servicer to
the Purchaser and the Custodian upon request, as such list may from time to
time be amended.
S&P: Standard & Poor's Ratings Services, A Division of The
McGraw-Hill Companies, Inc. or any successor thereto.
Stated Interest Rate: The annualized regular rate of
interest borne on a Mortgage Note.
Transfer Supplement: The document pursuant to which a SAM
or Portfolio of SAMs is sold by the Seller to the Buyer (which may be
transmitted in electronic form by the Seller to the Purchaser) in the form
attached thereto as Exhibit H.
Whole Loan Transfer: The sale or transfer of some or all
of the ownership interest in the SAMs by the Purchaser to one or more third
parties in whole loan or participation format, which third party may be
Fannie Mae or Freddie Mac.
ARTICLE II - THE SAMS PROGRAM
Section 1. Publicity and Marketing.
The Purchaser and the Seller shall cooperate with each
other to develop a public relations program for the SAMs Program. The
Purchaser shall have the right to approve all print, television and radio
advertisements, all press releases and other advertising material or public
statements regarding the SAMs used by the Seller in connection with such
SAMs Program during the term of this Agreement. In addition, the Seller
shall not use the name Bear, Stearns & Co. Inc., BSMCC or any form thereof,
in any form of marketing without approval by the Purchaser. The Seller
agrees to indemnify the Purchaser and hold it harmless from and against any
and all claims, losses, damages, penalties, fines, forfeitures, legal fees
and related costs, judgments, and any other costs, fees and expenses that
the Purchaser may sustain in any way related to the use by the Seller of
such print, television and radio advertisements, all press releases and
other advertising material or public statements regarding the SAMs used by
the Seller in connection with such SAMs Program. The Seller shall bear the
cost of any advertising or marketing incurred by it with regard to the SAMs
Program.
Section 2. Education Program.
The Seller shall develop and present to the Purchaser a
program for educating its correspondents and originators and the homeowners
regarding SAMs that is reasonably satisfactory to the Purchaser. The
Purchaser and the Seller agree that the SAM consumer handbook or a similar
document shall be a part of this education program.
Section 3. Origination Fee.
The Purchaser shall be paid a fee of [$ ] (to be netted
from settlement figures) for each SAM closed by the Seller and purchased by
the Purchaser hereunder, payable upon purchase of such SAM by the Seller.
ARTICLE III - SALE OF SAMS; POSSESSION OF MORTGAGE FILES;
BOOKS AND RECORDS; CUSTODIAL AGREEMENT; DELIVERY OF DOCUMENTS
Section 1. Sale of SAMs; Possession of Mortgage Files;
Maintenance of Servicing Files.
From time to time, subject to the terms and conditions
hereof and pursuant to a Transfer Supplement, the Seller may sell,
transfer, assign, set over and convey to the Purchaser, without recourse,
all the right, title and interest of the Seller in and to a Portfolio of
SAMs sold to the Purchaser pursuant to the terms hereof and a related
Transfer Supplement. On the closing date for each sale of any Portfolio
hereunder, the Seller shall execute a Transfer Supplement to convey the
SAMs sold to the Purchaser. Each Transfer Supplement shall be executed by
the Seller and Purchaser and shall be in the form of Exhibit H. Pursuant to
Section 3.3, on or before the date of such sale, the Seller shall deliver
the documents of the related Mortgage File to the Custodian.
The contents of each Mortgage File not delivered to the
Custodian are and shall be held in trust by the Servicer for the benefit of
the Purchaser. The Servicer shall maintain a Servicing File consisting of a
copy of the contents of each Mortgage File and the originals of the
documents in each Mortgage File not delivered to the Custodian. The
possession of each Servicing File by the Servicer is at the will of the
Purchaser for the sole purpose of servicing the related SAM and such
retention and possession by the Servicer is in a custodial capacity only.
Upon the sale of the SAMs, the ownership of each Mortgage Note, the related
Mortgage and the related Mortgage File and Servicing File shall vest
immediately in the Purchaser, and the ownership of all records and
documents with respect to the related SAM prepared by or which come into
the possession of the Servicer shall vest immediately in the Purchaser and
shall be retained and maintained by the Servicer, in trust, at the will of
the Purchaser and only in such custodial capacity. Each Servicing File and
the Servicer's books and records shall each be marked appropriately to
reflect clearly the sale of the related SAMs to the Purchaser. The Servicer
shall release its custody of the contents of any Servicing File only in
accordance with written instructions from the Custodian, unless such
release is required as incidental to the Servicer's servicing of the SAMs
or is in connection with a repurchase of any SAM pursuant to Section 4.3,
4.4 or 7.2.
It is the intention of the parties to this Agreement and
each Transfer Supplement that each conveyance of the Seller's right, title
and interest in and to the SAMs pursuant to this Agreement shall constitute
a purchase and sale and not a loan. If each conveyance of the SAMs from the
Seller to the Purchaser is characterized as a pledge and not a sale, then
the Seller shall be deemed to have transferred to the Purchaser, all of the
Seller's right, title and interest in, to and under the obligation deemed
to be secured by said pledge; and it is the intention of this Agreement
that the Seller shall also be deemed to have granted to the Purchaser a
first priority perfected security interest in all of the Seller's right,
title, and interest in, to, and under the obligation deemed to be secured
by said pledge and that the Custodian shall be deemed to be an independent
custodian for purposes of perfection of such security interest. If each
conveyance of the SAMs from the Seller to the Purchaser
is characterized as a pledge, it is the intention of this Agreement that
this Agreement shall constitute a security agreement under applicable law,
and that the Seller shall be deemed to have granted to the Purchaser a
first priority perfected security interest in all of Seller's right, title
and interest in, to and under the SAMs, all payments of principal of or
interest on such SAMs, including additional interest and all other rights
relating to and payments made in respect of the SAMs.
Section 2. Books and Records; Transfers of SAMs.
From and after each related Cut-off Date, all rights
arising with respect to the Portfolio of SAMs sold pursuant to any Transfer
Supplement including but not limited to all funds received on or in
connection with the SAMs, shall be received and held by the Servicer in
trust for the benefit of the Purchaser and the Servicer shall effectuate a
transfer of record title to the related Mortgages to the Purchaser.
Pursuant to the Custodial Agreement, the Custodian shall hold all of the
Mortgage Notes and other portions of the Mortgage File as described in such
Custodial Agreement.
The sale of each SAM shall be reflected on the Seller's
balance sheet and other financial statements of the Seller as a sale of
such SAMs by the Seller. The Servicer shall be responsible for maintaining,
and shall maintain, a complete set of books and records for each SAM which
shall be marked clearly to reflect the ownership of each SAM by the
Purchaser. In particular, the Servicer shall maintain in its possession,
available for inspection by the Purchaser, or its designee, evidence of
compliance with applicable laws, rules and regulations, including but not
limited to documentation as to the method used in determining the
applicability of the provisions of the Flood Disaster Protection Act of
1973, as amended, to the Mortgaged Property, documentation evidencing
insurance coverage and eligibility of any condominium project for approval
by Fannie Mae and periodic inspection reports as required by Section 5.13.
To the extent that original documents are not required for purposes of
realization of Liquidation Proceeds or Insurance Proceeds, documents
maintained by the Servicer may be in the form of microfilm or microfiche or
such other reliable means of recreating original documents, including but
not limited to, optical imagery techniques so long as the Servicer complies
with the requirements of the Fannie Mae Guide, as amended from time to
time.
The Seller intends to treat the transfer of any SAMs to
the Purchaser pursuant to this Agreement as a sale for accounting and tax
purposes with respect to the Seller on a non- consolidated basis.
The Servicer shall maintain with respect to each SAM and
shall make available for inspection, upon reasonable notice, at the offices
of the Servicer during normal business hours, by the Purchaser or its
designees the related Servicing File during the time the Purchaser retains
ownership of a SAM and thereafter in accordance with applicable laws and
regulations.
Section 3. Custodial Agreement.
Pursuant to the Custodial Agreement delivered to the
Purchaser contemporaneously with the delivery of this Agreement and with
respect to the sale of each Portfolio to the Purchaser hereunder and each
Transfer Supplement, the Seller will deliver and release to the Custodian
the documents in the Mortgage File as are required by this Agreement.
The Seller shall deliver all documents in the Mortgage
File for each SAM sold to the Purchaser to the Custodian as described
herein and the Custodian shall certify its receipt of all of such documents
required to be delivered pursuant to the Custodial Agreement, as evidenced
by an Initial Certification with respect to such Portfolio, of the
Custodian in the form annexed to the Custodial Agreement. The Servicer
shall be responsible for maintaining the Custodial Agreement for the
benefit of the Purchaser and shall pay all fees and expenses of the
Custodian.
As proposed in the Custodial Agreement, in the event that
an Officer's Certificate of the Seller is required to be delivered to the
Custodian because of a delay caused by the public recording office in
returning any recorded document to the Seller, the Seller shall deliver to
the Custodian, within 180 days of the Closing Date, an Officer's
Certificate which shall (i) identify the recorded document, (ii) state that
the recorded document has not been delivered to the Custodian due solely to
a delay caused by the public recording office, (iii) state the amount of
time generally required by the applicable recording office to record and
return a document submitted for recordation, and (iv) specify the date that
the applicable recorded document will be delivered to the Custodian. The
Seller shall be required to deliver to the Custodian the applicable
recorded document by the date specified in clause (iv) above. An extension
of the date specified in clause (iv) above may be requested from the
Purchaser. If delivery is not completed within 180 days, the Seller shall
repurchase the related SAM at the repurchase price in accordance with
Section 4.3 hereof.
The Servicer shall forward to the Custodian original
documents evidencing an assumption, modification, consolidation or
extension of any SAM entered into in accordance with Section 5.1 or 7.1
within one week of their execution; provided, however, that the Servicer
shall provide the Custodian with a certified true copy of any such document
submitted for recordation within one week of its execution and shall
provide the original of any document submitted for recordation or a copy of
such document certified by the appropriate public recording office to be a
true and complete copy of the original within 180 days of its submission
for recordation.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES;
REMEDIES AND BREACH
Section 1. Representations and Warranties.
As of the date hereof, and as of any Closing Date, the
Seller, as seller, and, if so stated in such representation or warranty, as
Servicer, makes the following representations and warranties:
(a) Due Organization and Authority. The Seller, is
duly organized, validly existing and in good standing under the laws 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 each
state where a Mortgaged Property is located if required to conduct business
of the type conducted by the Seller, and in any event the Seller is in
compliance with the laws of any such state to the extent necessary to ensure
the enforceability of any SAM sold hereunder and the servicing of any such
SAM in accordance with the terms of this Agreement and any Transfer
Supplement; the Seller has the full power and authority to execute and
deliver this Agreement and any Transfer Supplement and to perform in
accordance herewith and therewith; the execution, delivery and performance
of this Agreement and any Transfer Supplement (including all instruments of
transfer to be delivered pursuant to this Agreement and any Transfer
Supplement) by the Seller and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Seller; this Agreement and any Transfer Supplement each evidences the valid,
binding and enforceable obligation of the Seller, except that (i) the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights generally
and (ii) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought;
and all requisite corporate action has been taken by the Seller to make this
Agreement and any Transfer Supplement valid and binding upon the Seller in
accordance with its terms;
(b) Ordinary Course of Business. The consummation of
the transactions contemplated by this Agreement are in the ordinary course
of business of the Seller, and the transfer, assignment and conveyance of
the Mortgage Notes and the Mortgages by the Seller pursuant to this
Agreement are not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction;
(c) No Conflicts. Neither the execution and delivery
of this Agreement or any Transfer Supplement, the acquisition of SAMs by the
Seller, the sale of SAMs to the Purchaser or the transactions contemplated
hereby or thereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement or any Transfer Supplement, will conflict with
or result in a breach of any of the terms, conditions or provisions of the
Seller's charter or by-laws or any material agreement or instrument to which
the Seller is now a party or by which it is bound, or constitute a default
or result in an acceleration under any of the foregoing, or result in the
violation of any applicable law, rule, regulation, order, judgment or decree
to which the Seller or its property is subject, or impair the ability of the
Purchaser to realize on the SAMs, in any material respect, or impair the
value of the SAMs in any material respect;
(d) Ability to Service. The Seller, as Servicer
hereunder, is an approved seller/servicer of residential SAMs for Fannie Mae
or Freddie Mac with such facilities, procedures and has the personnel
necessary for the sound servicing of such SAMs. The Seller is in good
standing to sell SAMs to and service SAMs for Fannie Mae or Freddie Mac and
no event has occurred which would make the Seller unable to comply with
eligibility requirements or which would require notification to either
Fannie Mae or Freddie Mac;
(e) Reasonable Servicing Fee. The Seller, as
Servicer hereunder, acknowledges and agrees that the Servicing Fee, as
calculated at the Servicing Fee Rate, represents reasonable compensation for
performing such services as compensation for the servicing and
administration of the SAMs pursuant to this Agreement;
(f) Ability to Perform. The Seller does not believe,
nor does it have any reason or cause to believe, that it cannot perform each
and every covenant to be performed by the Seller contained in this Agreement
and any Transfer Supplement;
(g) No Litigation Pending. There is no action, suit,
proceeding or investigation pending or threatened against the Seller which,
either in any one instance or in the aggregate, may result in any material
adverse change in the business, operations, financial condition, properties
or assets of the Seller, or in any material impairment of the right or
ability of the Seller to carry on its business substantially as now
conducted, or in any material liability on the part of the Seller, or which
would draw into question the validity of this Agreement or any Transfer
Supplement or the SAMs or of any action taken or to be taken in connection
with the obligations of the Seller contemplated herein, or which would be
likely to impair materially the ability of the Seller to perform under the
terms of this Agreement or any Transfer Supplement;
(h) No Consent Required. No consent, approval,
authorization or order of any court or governmental agency or body is
required for the execution, delivery and performance by the Seller of or
compliance by the Seller with this Agreement or any Transfer Supplement or
the sale of the SAMs as evidenced by the consummation of the transactions
contemplated by this Agreement, or if required, such approval has been
obtained prior to the Closing Date;
(i) No Untrue Information. Neither this Agreement,
any Transfer Supplement nor any statement, report or other document
furnished by the Seller or to be furnished pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact relating to the Seller or the SAMs;
(j) Financial Statements. The Seller has delivered
to the Purchaser consolidated financial statements of [its parent company]
as to its last three complete fiscal years and any later quarter ended more
than 60 days prior to the execution of this Agreement. All such financial
statements fairly present the pertinent results of operations and changes in
financial position at the end of each such period of the parent company and
its subsidiaries and have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as set forth in the notes thereto. [In addition, the Seller
has delivered information as to its mortgage loan loss experience for the
immediately preceding three-year period, in each case with respect to SAMs
owned by it and such SAMs serviced for others during such period, and all
such information so delivered, to the best of Seller's information and
belief, is true and correct in all material respects.] There has been no
change in the business, operations, financial condition, properties or
assets of the Seller since the date of the parent company's most recently
provided financial statements that would have a material adverse effect on
its ability to perform its obligations under this Agreement;
(k) No Brokers' Fees. The Seller has not dealt with
any broker, investment banker, agent or other person that may be entitled to
any commission or compensation in connection with the sale of any Portfolio
of SAMs to the Purchaser;
(l) Fair Consideration. The consideration received
by the Seller upon the sale of the SAMs under this Agreement constitutes
fair consideration and reasonably equivalent value for the SAMs; and
(m) Year 2000 Compliance. The Seller's (and
Servicer's) computer and other systems used in booking and servicing the
SAMs will be modified and maintained to operate in a manner such that at all
times, including on and after January 1, 2000, (i) the Servicer can service
the SAMs in accordance with the terms of this Agreement and (ii) the Seller
and Servicer can operate its business in the same manner as it is operating
on the date hereof.
Section 2. Representations and Warranties Regarding Individual SAMs.
The Seller makes the following representations and
warranties with respect to each individual SAM sold to the Purchaser on the
related Closing Date:
(a) SAMs as Described. The information set forth in
the SAM Schedule attached to the applicable Transfer Supplement is complete,
true and correct in all material respects;
(b) Payments Current. As of the Closing Date, all
payments due with respect to the SAM prior to the related Cut-Off Date have
been made. Each SAM has not been delinquent 30 days or more at any time
prior to the Cut-Off Date. The Seller has not advanced funds, or induced,
solicited or knowingly received any advance of funds from a party other than
the owner of the Mortgaged Property subject to the Mortgage, directly or
indirectly, for the payment of any amount required by the SAM;
(c) No Outstanding Charges. There are no defaults in
complying with the terms of the Mortgages, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
leasehold payments or ground rents which previously became due and owing
have been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item which remains unpaid and which has
been assessed but is not yet due and payable;
(d) Original Terms Unmodified. The terms of the
Mortgage Note and Mortgage have not been impaired, waived, altered or
modified in any respect, except by a written instrument which has been
recorded, if necessary to protect the interests of the Purchaser and which
has been delivered to the Custodian. The substance of any such waiver,
alteration or modification has been approved by the issuer of any related
Primary Mortgage Insurance Policy and the title insurer, to the extent
required by the policy, and its terms are reflected on the related SAM
Schedule. No Mortgagor has been released, in whole or in part, except in
connection with an assumption agreement approved by the issuer of any
related Primary Mortgage Insurance Policy and the title insurer, to the
extent required by the policy, and which assumption agreement is part of the
Mortgage File delivered to the Custodian and the terms of which are
reflected in the related SAM Schedule;
(e) No Defenses. The SAM is not subject to any right
of rescission, set-off, counterclaim or defense, including without
limitation the defense of usury, nor will the operation of any of the terms
of the Mortgage Note or the Mortgage, or the exercise of any right
thereunder, render either the Mortgage Note or the Mortgage unenforceable,
in whole or in part, or subject to any right of rescission, set-off,
counterclaim or defense, including without limitation the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto, and no Mortgagor was a debtor in any state or
federal bankruptcy or insolvency proceeding at the time that the SAM was
originated and, as of the Closing Date, no Mortgagor is insolvent or in
bankruptcy;
(f) Hazard Insurance. Pursuant to the terms of the
Mortgage, all buildings or other improvements upon the Mortgaged Property
are insured by a generally acceptable insurer against loss by fire and
extended coverage and coverage for such other hazards as are customary in
the area where the Mortgaged Property is located pursuant to insurance
policies conforming to the requirements of Section 5.10. If upon origination
of the SAM, the Mortgaged Property was in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards (and such flood insurance has been made available) a flood insurance
policy meeting the requirements of the current guidelines of the Flood
Insurance Administration is in effect which policy conforms to the
requirements of Section 5.10. All individual insurance policies contain a
standard mortgagee clause naming the Seller and its successors and assigns
as mortgagee, and all premiums thereon have been paid. The Mortgage
obligates the Mortgagor thereunder to maintain the hazard insurance policy
at the Mortgagor's cost and expense, and on the Mortgagor's failure to do
so, authorizes the holder of the Mortgage to obtain and maintain such
insurance at such Mortgagor's cost and expense, and to seek reimbursement
therefor from the Mortgagor. Where required by state law or regulation, the
Mortgagor has been given an opportunity to choose the carrier of the
required hazard insurance, provided the policy is not a "master" or
"blanket" hazard insurance policy covering the common facilities of a
planned unit development. The hazard insurance policy is the valid and
binding obligation of the insurer and is in full force and effect. The
Seller has not engaged in, and has no knowledge of the Mortgagor's having
engaged in, any act or omission which would impair the coverage of any such
policy, the benefits of the endorsement provided for herein, or the validity
and binding effect of either;
(g) Compliance with Applicable Laws. Any applicable
requirements of federal, state or local law including, without limitation,
usury, truth-in-lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity or disclosure laws applicable to the
SAM have been complied with, and the Seller shall maintain in its possession
copies of all of its current licenses regarding the origination of the SAMs,
available for the Purchaser's inspection;
(h) No Satisfaction of Mortgage. The Mortgage has
not been satisfied, cancelled, subordinated or rescinded, in whole or in
part, and the Mortgaged Property has not been released from the lien of the
Mortgage, in whole or in part, nor has any instrument been executed that
would effect any such release, cancellation, subordination or rescission.
The Seller has not waived the performance by the Mortgagor of any action, if
the Mortgagor's failure to perform such action would cause the SAM to be in
default, nor has the Seller waived any default resulting from any action or
inaction by the Mortgagor;
(i) Valid Lien. The Mortgage is a valid first or
second priority perfected Lien on the Mortgaged Property. The Mortgaged
Property is free and clear of all prior Liens and encumbrances and no rights
or condition may exist that could give rise to such Liens, except for (1)
the lien of non-delinquent current real property taxes and assessments not
yet due and payable, (2) covenants, conditions and restrictions, rights of
way, easements and other matters of public record as of the date of
recording which are acceptable to mortgage lending institutions generally
and either (A) which are referred to or otherwise considered in the
appraisal made for the originator of the SAM, (B) which do not adversely
affect the Initial Appraised Value of the Mortgaged Property as set forth in
such appraisal, and (3) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the security
intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property. The Mortgage is a legal,
valid and binding obligation of the related Mortgagor, enforceable according
to its terms and conditions, and free from any right of setoff, counterclaim
or other claim or defense. No part of the Mortgaged Property has been
released from the Mortgage. The terms of the Mortgage has not in any
material manner been modified, amended or in any way waived or changed,
except as stated in a written modification agreement that is acceptable to
and delivered to the Seller and Servicer;
(j) Validity of Mortgage Documents. The Mortgage
Note and the Mortgage are genuine, and each is the legal, valid and binding
obligation of the maker thereof enforceable in accordance with its terms
except that (i) enforceability thereof may be subject to bankruptcy,
insolvency, moratorium, receivership and other similar laws relating to
creditors' rights generally and (ii) the remedy of specific performance and
injunctive relief and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which a
proceeding thereof may be brought. All parties to the Mortgage Note and the
Mortgage and any other related agreement had legal capacity to enter into
the SAM and to execute and deliver the Mortgage Note and the Mortgage and
any other related agreement, and the Mortgage Note and the Mortgage have
been duly and properly executed by such parties. The Seller has taken all
necessary action to transfer title to each Mortgaged Property to the
Purchaser. The documents, instruments and agreements submitted for loan
underwriting were not falsified and contain no untrue statement of material
fact. No fraud was committed by any party in connection with the origination
or servicing of the SAM;
(k) Full Disbursement of Proceeds. Each SAM has been
closed and its proceeds have been fully disbursed and there is no
requirement for future advances thereunder, and any and all requirements as
to completion of any on-site or off-site improvement and as to disbursements
of any escrow funds therefor have been complied with. All costs, fees and
expenses incurred in making or closing the SAM and the recording of the
Mortgage were paid, and the Mortgagor is not entitled to any refund of any
amounts paid or due under the Mortgage Note or Mortgage;
(l) Ownership. The Seller is the sole owner of
record and holder of the SAM; the SAM is not assigned or pledged to any
other person, and the Seller has good and marketable title thereto, and has
full right to transfer and sell the SAM therein to the Purchaser free and
clear of any encumbrance, equity, participation interest, lien, pledge,
charge, claim or security interest, other than any such encumbrance, equity,
Lien, pledge, claim or security interest permitted pursuant to clause (j)
above, and has full right and authority subject to no interest or
participation of, or agreement with, any other party, to sell and assign
each SAM pursuant to the related Transfer Supplement;
(m) Doing Business. All parties which have had any
interest in the SAM, whether as mortgagee, assignee, pledgee or otherwise,
are (or, during the period in which they held and disposed of such interest,
were) (1) in compliance with any applicable licensing requirements of the
laws of the state wherein the Mortgaged Property is located, and (2)(a)
organized under the laws of such state, or (b) qualified to do business in
such state, or [(c) federally-chartered savings and loan associations or
national banks having principal offices in such state,] or (d) not required
to qualify to do business in such state;
(n) LTV, Primary Mortgage Insurance Policy. No SAM
has a LTV equal to or greater than 95%. The original LTV of the SAM either
was not more than 80% or the excess over 80% is and will be insured as to
payment defaults by a Primary Mortgage Insurance Policy until the LTV of
such SAM is reduced to 80%. All provisions of such Primary Mortgage
Insurance Policy have been and are being complied with, such policy is in
full force and effect, and all premiums due thereunder have been paid. No
action, inaction, or event has occurred and no state of facts exists that
has, or will result in the exclusion from, denial of, or defense to
coverage. Any SAM subject to a Primary Mortgage Insurance Policy obligates
the Mortgagor thereunder to maintain the Primary Mortgage Insurance Policy
and to pay all premiums and charges in connection therewith. The Stated
Interest Rate for the SAM as set forth on the SAM Schedule is net of any
such insurance premium. No action, inaction or event has occurred and no
state of facts exists or has existed that has resulted or would result in
the exclusion from, denial of, or defense to coverage under any applicable
Primary Mortgage Insurance Policy or bankruptcy bond, irrespective of the
cause of such failure of coverage. In connection with the placement of any
such insurance, no commission, fee or other compensation has been or will be
received by the Seller or any designee of the Seller or any corporation in
which the Seller or any officer, director or employee had a financial
interest at the time of placement of such insurance;
(o) Title Insurance. The SAM is covered by a
lender's title insurance policy or other generally acceptable form of policy
of insurance acceptable to Purchaser, issued by a title insurer acceptable
to the Purchaser and qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring the Seller, its successors and
assigns, as to the first priority lien of the Mortgage in the original
principal amount of the SAM, and against any loss by reason of the
invalidity or unenforceability of the lien resulting from the provisions of
the Mortgage providing also for the shared appreciation feature of the SAM,
[and endorsed for SAM coverage in the form attached hereto as Exhibit __]
subject only to the exceptions contained in clauses (1) and (2) of paragraph
(i) of this Section 4.2. Additionally, such lender's title insurance policy
affirmatively insures ingress and egress, and against encroachments by or
upon the Mortgaged Property or any interest therein. The Seller is the sole
insured of such lender's title insurance policy, and such lender's title
insurance policy is in full force and effect and will be in force and effect
upon the consummation of the transactions contemplated by this Agreement. No
claims have been made under such lender's title insurance policy, and no
prior holder of the Mortgage, including the Seller, has done, by act or
omission, anything which would impair in any material respect the coverage
of such lender's title insurance policy;
(p) No Defaults. There is no default, breach,
violation or event of acceleration existing under the Mortgage or the
Mortgage Note and no event which, with the passage of time or with notice
and the expiration of any grace or cure period, would constitute a default,
breach, violation or event of acceleration, and the Seller has not waived
any default, breach, violation or event of acceleration;
(q) No Mechanics' Liens. There are no mechanics' or
similar Liens or claims which have been filed for work, labor or material
(and no rights are outstanding that under the law could give rise to such
Liens) affecting the related Mortgaged Property which are or may be Liens
prior to, or equal or coordinate with, the Lien of the related Mortgage;
(r) Location of Improvements; No Encroachments. All
improvements which were considered in determining the Initial Appraised
Value of the Mortgaged Property lay wholly within the boundaries and
building restriction lines of the Mortgaged Property and, no improvements on
adjoining properties encroach upon the Mortgaged Property. No improvement
located on or being part of the Mortgaged Property is in violation of any
applicable zoning law or regulation;
(s) Origination; Payment Terms. At the time that the
SAM was originated, the Originator and Seller was a Mortgagee approved by
the Secretary of Housing and Urban Development pursuant to Sections 203 and
211 of the National Housing Act, as amended, or a savings and loan
association, a savings bank, a commercial bank, a licensed mortgage banker
or similar banking or lending institution which is supervised and examined
by a federal or state authority. The Stated Interest Rate as determined
pursuant to the SAM is a fixed interest rate [adjustable rate] and the SAM
provides for an Appreciation Share of not less than 30% and not greater than
60%. [other federal income tax requirements] The Mortgage Note is payable on
the first day of each month in monthly installments of principal and
interest, sufficient to amortize the principal amount of the SAM fully by
the stated maturity date, over an original term of not more than forty years
from commencement of amortization, with a principal balance at origination
of no more than $650,000 [and a Stated Principal Balance of at least
$25,000]. [There is no negative amortization other than appreciation rights
on the SAMs];
(t) Customary Provisions. The Mortgage contains
customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization against the
Mortgaged Property of the benefits of the security provided thereby,
including, (i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial foreclosure. Upon default by
a Mortgagor on a SAM and foreclosure on, or trustee's sale of, the Mortgaged
Property pursuant to the proper procedures, the holder of the SAM will be
able to deliver good and marketable title to the Mortgaged Property. There
is no homestead or other exemption available to a Mortgagor which would
interfere with the right to sell the Mortgaged Property at a trustee's sale
or the right to foreclose the Mortgage;
(u) Conformance with SAM Program Standards. The SAM
was underwritten in accordance with the (i) Purchaser's underwriting
standards applicable at origination which have been amended from time to
time, the most current of which are attached hereto as Exhibit __ and (ii)
the Fannie Mae Guide or Freddie Mac Guide without regard to the conforming
mortgage loan limits of the Fannie Mae Guide or Freddie Mac Guide. The SAM
is in conformity with the standards of the Purchaser's SAM origination
Program and the Mortgage Note and Mortgage are on forms attached hereto as
Exhibit [ ] under the SAMs Program;
(v) Occupancy of the Mortgaged Property. As of the
Closing Date, the Mortgaged Property is lawfully occupied by the Mortgagor
under applicable law. All inspections, licenses and certificates required to
be made or issued with respect to all occupied portions of the Mortgaged
Property and, with respect to the use and occupancy of the same, including
but not limited to certificates of occupancy and fire underwriting
certificates, have been made or obtained from the appropriate authorities.
All of the Mortgagors represented at the time of origination of the related
SAM that the Mortgagor would occupy the Mortgaged Property as the
Mortgagor's primary residence;
(w) No Additional Collateral. The Mortgage Note is
not and has not been secured by any collateral except the Lien of the
corresponding Mortgage and the security interest of any applicable security
agreement or chattel mortgage referred to in clause (i) above;
(x) Deeds of Trust. In the event that the Mortgage
constitutes a deed of trust, a trustee, duly qualified under applicable law
to serve as such, has been properly designated and currently so serves and
is named in the Mortgage, and no fees or expenses are or will become payable
by the Purchaser to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor;
(y) Acceptable Investment. The Seller has no
knowledge of any circumstances or conditions with respect to the Mortgage,
the Mortgaged Property, the Mortgagor or the Mortgagor's creditstanding not
reflected in the representations set forth herein, or in the documents
delivered to the Custodian or in the Mortgage File, that in its opinion
could reasonably be expected to cause private institutional investors to
regard the SAM as an unacceptable investment or cause the SAM to become
delinquent;
(z) Delivery of Mortgage Documents. The Mortgage
Note, the Mortgage, the Assignment of Mortgage and any other documents
required to be delivered for the SAM by the Seller under the Custodial
Agreement attached as Exhibit D-1 hereto have been delivered to the
Custodian;
(aa) Transfer of SAMs. The Assignment of Mortgage is
in recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located;
(bb) Mortgage Termination Event; Due on Sale. The
SAM contains Mortgage Termination Events substantially as shown on Schedule
II hereto. The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the SAM in
the event that the Mortgaged Property is sold or transferred without the
prior written consent of the Mortgagee thereunder and the SAM was originated
on forms substantially equivalent to the Mortgage Note (Schedule IV) and the
Mortgage (Schedule V);
(cc) No Buydown Provisions; No Graduated Payments or
Contingent Interests. The SAM does not contain provisions pursuant to which
Monthly Payments are paid or partially paid with funds deposited in any
separate account established by the Seller, the Mortgagor or anyone on
behalf of the Mortgagor, or paid by any source other than the Mortgagor nor
does it contain any other similar provisions currently in effect which may
constitute a "buydown" provision. The SAM is not a graduated payment SAM;
(dd) Absence of Future Advances. The SAM does not
provide for future advances;
(ee) Mortgaged Property Undamaged. There is no
proceeding pending or threatened for the total or partial condemnation of
the Mortgaged Property. The Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, windstorm, flood, tornado or other casualty;
(ff) Collection Practices; Escrow Payments. The
origination, servicing and collection practices used with respect to the SAM
have been in accordance with Accepted Servicing Practices, and have been in
compliance with applicable laws and regulations. With respect to escrow
deposits and Escrow Payments, all such payments are in the possession of the
Seller and there exist no deficiencies in connection therewith for which
customary arrangements for repayment thereof have not been made or for which
repayment is not provided for in the Mortgage. All Escrow Payments have been
collected in compliance with applicable state and federal law. An escrow of
funds is not prohibited by applicable law and has been established in an
amount sufficient to pay for each applicable item which remains unpaid and
which has been assessed but is not yet due and payable. No escrow deposits
or Escrow Payments or other charges or payments due the Seller have been
capitalized under the Mortgage or the Mortgage Note. Any interest required
to be paid pursuant to applicable state and local law has been properly paid
and credited. As modified by the terms hereof, the SAM will be serviced in
accordance with the Fannie Mae Guide or Freddie Mac Guide without regard to
the conforming mortgage loan limits of the Fannie Mae Guide or Freddie Mac
Guide;
(gg) Appraisal. The Mortgage File contains an
appraisal of the related Mortgaged Property signed prior to the approval of
the SAM application by a qualified appraiser chosen from Schedule I hereto
and whose compensation is not affected by the approval or
disapproval of the SAM, and the appraisal and such appraiser both satisfy
the requirements of Title XI of the Federal Institutions Reform, Recovery,
and Enforcement Act of 1989 and the regulations promulgated thereunder, all
as in effect on the date that the SAM was originated. Such appraisal was
performed in accordance with the Statement regarding Policies and
Methodologies for performing Appraisals attached as Schedule A to each
Mortgage Note;
(hh) Soldiers' and Sailors' Relief Act. The
Mortgagor has not notified the Seller, and the Seller has no knowledge of
any relief requested by the Mortgagor under the Soldiers' and Sailors' Civil
Relief Act of 1940;
(ii) Environmental Matters. The Mortgaged Property
is free from any and all toxic or hazardous substances and there exists no
violation of any local, state or federal environmental law, rule or
regulation;
(jj) No Construction Loans. No SAM (i) was made in
connection with the construction or rehabilitation of a Mortgaged Property
which has not been completed or (ii) provides for future advances of funds
by the Seller which have not yet been advanced; and
(kk) Each of the Mortgaged Properties consists of a
single parcel of real property with a detached single-family residence
erected thereon, or a two- to four-family dwelling, or a townhouse, or an
individual condominium unit in a condominium project or an individual unit
in a planned unit development. No Mortgaged Property consists of a single
parcel of real property with a cooperative housing development erected
thereon. Any condominium unit or planned unit development either conforms
with applicable Freddie Mac or Fannie Mae requirements regarding such
dwelling or is covered by a waiver confirming that such condominium unit or
planned unit development is acceptable to Freddie Mac or Fannie Mae or is
otherwise "warrantable" with respect thereto. No such residence is a mobile
home or manufactured dwelling. None of the Mortgaged Properties are investor
owned properties.
Section 3. Remedies for Breach of Representations and Warranties.
It is understood and agreed that the representations and
warranties set forth in Sections 4.1 and 4.2 shall survive the sale of the
SAMs to the Purchaser and the delivery of the documents in the Mortgage
File to the Custodian and shall inure, as to each SAM, to the benefit of
the Purchaser, notwithstanding any restrictive or qualified endorsement on
any Mortgage Note or Assignment of Mortgage or the examination or failure
to examine any Mortgage File. Upon discovery by either the Seller or the
Purchaser of a breach of any of the foregoing representations and
warranties which materially and adversely affects the value of the SAMs or
the interest of the Purchaser (or which materially and adversely affects
the interests of the Purchaser in the related SAM in the case
of a representation and warranty relating to a particular SAM), the party
discovering such breach shall give prompt written notice to the other
parties.
Within 60 days of the earlier of either discovery by or
notice to the Seller of any breach of a representation or warranty which
materially and adversely affects the value of any SAMs, the Seller shall
use its best efforts promptly to cure such breach in all material respects
and, if such breach cannot be cured, the Seller shall, at the Purchaser's
option, repurchase such SAM at the Repurchase Price. In the event of a
breach of any representation or warranty set forth in Section 4.1 which
materially and adversely affects the value of any SAMs, and such breach
cannot be cured within 60 days of the earlier of either discovery by or
notice to the Seller of such breach, all of the SAMs shall, at the
Purchaser's option, be repurchased by the Seller at the Repurchase Price.
However, if the breach shall involve a representation or warranty set forth
in Section 4.2 and the Seller discovers or receives notice of any such
breach within two years of the Closing Date, the Seller shall, at the
Purchaser's option and provided that the Seller has a Qualified Substitute
SAM, rather than repurchase the SAM as provided above, remove such SAM (a
"Deleted SAM") and substitute in its place a Qualified Substitute SAM or
SAMs. If the Seller has no Qualified Substitute SAM, it shall repurchase
the deficient SAM. The Seller shall be obligated to repurchase any SAM for
which an event or condition has occurred which would constitute a breach of
representation and warranty set forth in Sections 4.1 and 4.2. Any
repurchase of a SAM or SAMs pursuant to the foregoing provisions of this
Section 4.3 shall be accomplished by deposit in the Collection Account of
the amount of the Repurchase Price.
At the time of repurchase or substitution, the Purchaser
and the Seller shall arrange for the reassignment of the Deleted SAM to the
Seller and the delivery to the Seller of any documents held by the
Custodian relating to the Deleted SAM. In the event of a repurchase or
substitution, the Seller shall, simultaneously with such reassignment, give
written notice to the Purchaser that such repurchase or substitution has
taken place, amend the SAM Schedule to reflect the withdrawal of the
Deleted SAM from this Agreement, and, in the case of substitution, identify
a Qualified Substitute SAM and amend the SAM Schedule to reflect the
addition of such Qualified Substitute SAM to this Agreement. In connection
with any such substitution, the Seller shall be deemed to have made as to
such Qualified Substitute SAM the representations and warranties set forth
in this Agreement except that all such representations and warranties set
forth in this Agreement shall be deemed made as of the date of such
substitution. The Seller shall effect such substitution by delivering to
the Custodian for such Qualified Substitute SAM the documents required by
Section 3.3, with the Mortgage Note endorsed as required by Section 3.3. No
substitution will be made in any calendar month after the Determination
Date for such month. The Seller shall deposit in the Collection Account the
Monthly Payment due on such Qualified Substitute SAM or SAMs in the month
following the date of such substitution. Monthly Payments due with respect
to Qualified Substitute SAMs in the month of substitution shall be retained
by the Seller.
For any month in which the Seller substitutes a Qualified
Substitute SAM for a Deleted SAM, the Seller shall determine the amount (if
any) by which the aggregate principal balance of all Qualified Substitute
SAMs as of the date of substitution is less than the aggregate Stated
Principal Balance of all Deleted SAMs (after application of Scheduled
Monthly Payments of principal due in the month of substitution). The amount
of such shortfall shall be distributed by the Seller in the month of
substitution pursuant to Section 6.1. Accordingly, on the date of such
substitution, the Seller shall deposit from its own funds into the
Collection Account an amount equal to the amount of such shortfall.
In addition to such repurchase or substitution
obligation, the Seller shall indemnify the Purchaser and hold it harmless
against any losses, damages, penalties, fines, forfeitures, reasonable and
necessary legal fees and related costs, judgments, and other costs and
expenses resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, a breach of the representations and
warranties contained in this Agreement which causes the sale of the SAMs to
any subsequent purchaser (other than or the Purchaser). It is understood
and agreed that the obligations of the Seller set forth in this Section 4.3
to cure, substitute for or repurchase a defective SAM and to indemnify the
Purchaser as provided in this Section 4.3 constitute the sole remedies of
the Purchaser respecting a breach of the foregoing representations and
warranties.
Any cause of action against the Seller relating to or
arising out of the breach of any representations and warranties made in
Sections 4.1 and 4.2 shall accrue as to any SAM upon (i) discovery of such
breach by the Purchaser or notice thereof by the Seller to the Purchaser or
the certificateholders, (ii) failures by the Seller to cure such breach or
repurchase such SAM as specified above, and (iii) demand upon the Seller by
the Purchaser or the certificateholders for compliance with this Agreement.
Section 4. Review of SAMs. From the Closing Date until 60 days after
the Closing Date, the Purchaser shall have the right to review each
Mortgage File, to conduct property inspections, obtain appraisal
recertifications and otherwise to underwrite the SAMs and to reject any SAM
which in the Purchaser's reasonable discretion, based upon whether or not
such Mortgage Loan is "investment grade," as determined in accordance with
the Purchaser's underwriting criteria is an unacceptable investment. In the
event that the Purchaser so rejects any SAM, the Seller shall, no later
than the 60th day following the Closing Date, repurchase the rejected SAM
in the manner prescribed in Section 4.3 at the Repurchase Price. Any
rejected SAM shall be removed from the terms of this Agreement.
Section 5. SAM Defaults. In the event there is a default in the
payment of principal and/or interest with respect to any SAM purchased
pursuant to this Agreement which occurs within 180 days of the Closing
Date, the Purchaser shall have the right to cause the Seller (i) to
repurchase the SAM at the Repurchase Price or (ii) to substitute a
conforming SAM as provided in Section 4.3 hereof.
ARTICLE V - ADMINISTRATION AND SERVICING OF SAMS
Section 1. The Servicer to Act as Servicer.
The Servicer, as an independent contractor, shall service
and administer the SAMs and shall have full power and authority, acting
alone, to do any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable,
consistent with the terms of this Agreement and with Accepted Servicing
Practices and shall exercise the same care that it customarily employs for
its own account. Except as set forth in this Agreement, the Servicer shall
service the SAMs, except to the extent modified herein, in strict
compliance with Accepted Servicing Practices, which include, but are not
limited to, provisions regarding the liquidation of SAMs, the collection of
SAM payments, the payment of taxes, insurance and other charges, the
maintenance of hazard insurance with a Qualified Insurer, the maintenance
of fidelity bond and errors and omissions insurance, inspections, the
restoration of Mortgaged Property, the maintenance of Primary Mortgage
Insurance Policies, insurance claims, and title insurance, management of
REO Property, permitted withdrawals with respect to the payment of expenses
for REO Property, liquidation reports, and reports of foreclosures and
abandonments of Mortgaged Property, the transfer of Mortgaged Property, the
release of Mortgage Files, annual statements, and examination of records
and facilities. In the event of any conflict, inconsistency or discrepancy
between any of the servicing provisions of this Agreement and any of the
servicing provisions of the Fannie Mae Guide, the provisions of this
Agreement shall control and be binding upon the Purchaser and the Servicer.
The Purchaser may, at its option, deliver powers-of-attorney to the
Servicer sufficient to allow the Servicer as servicer to execute all
documentation requiring execution on behalf of Purchaser with respect to
the servicing of the SAMs, including satisfactions, partial releases,
modifications and foreclosure documentation or, in the alternative, shall
as promptly as reasonably possible, execute and return such documentation
to the Servicer.
Consistent with the terms of this Agreement, the Servicer
may waive, modify or vary any term of any SAM or consent to the postponement
of compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Servicer's reasonable and prudent determination such
waiver, modification, postponement or indulgence is not materially adverse
to the Purchaser; provided, that the Servicer shall not make any future
advances with respect to a SAM and that unless the Servicer has obtained the
proper written consent of the Purchaser, the Servicer shall not permit any
modification with respect to any SAM that would change the Stated Interest
Rate or the manner in which Additional Interest is calculated, defer or
forgive the payment of principal or interest or Additional Interest, reduce
or increase the outstanding principal balance (except for actual payments of
principal) release any collateral from the SAM or change the final maturity
date on such SAM. In the event of any such modification which permits the
deferral of Stated Interest, Additional Interest or principal payments on
any SAM, the Servicer shall, on the Business Day immediately preceding the
Distribution Date in any month in which any such principal or interest
payment has been deferred, advance from its own funds, in accordance with
Section 6.3, the difference between (a) the sum of such month's principal
and one month's interest at the Remittance Rate on the unpaid principal
balance of such SAM and (b) the amount paid by the Mortgagor. The Servicer
shall be entitled to reimbursement for such advances to the same extent as
for all other advances made pursuant to Section 6.3. Without limiting the
generality of the foregoing, the Servicer shall continue, and is hereby
authorized and empowered, to execute and deliver on behalf of itself and the
Purchaser, all instruments of satisfaction or cancellation, or of partial or
full release, discharge and all other comparable instruments, with respect
to the SAMs and with respect to the Mortgaged Properties.
[Insert Partial Releases from Mortgage Note]
In servicing and administering the SAMs, the Servicer
shall employ procedures (including collection procedures) and exercise the
same care that it customarily employs and exercises in servicing and
administering SAMs for its own account, giving due consideration to
Accepted Servicing Practices where such practices do not conflict with the
requirements of this Agreement.
The Servicer shall perform all of its servicing
responsibilities hereunder or may, with the Purchaser's prior written
approval, which approval can be withheld for any or no reason, cause a
subservicer to perform any such servicing responsibilities on its behalf,
but the use by the Servicer of a subservicer shall not release the Servicer
from any of its obligations hereunder and the Servicer shall remain
responsible hereunder for all acts and omissions of each sub servicer as
fully as if such acts and omissions were those of the Servicer. [Any such
sub servicer that the Purchaser shall be requested to consent to must be a
Freddie Mac approved seller/servicer or a Fannie Mae seller/servicer in
good standing and no event shall have occurred, including but not limited
to, a change in insurance coverage, which would make it unable to comply
with the eligibility requirements for lenders imposed by Freddie Mac or for
seller/servicers by Fannie Mae, or which would require notification to
Freddie Mac or Fannie Mae.] The Servicer shall pay all fees and expenses of
each sub servicer from its own funds, and a sub servicer's fee shall not
exceed the Servicing Fee.
At the cost and expense of the Servicer, without any
right of reimbursement from the Collection Account, the Servicer shall be
entitled to terminate the rights and responsibilities of a sub servicer and
arrange, with the Purchaser's prior written approval, which approval can be
withheld for any or no reason, for any servicing responsibilities to be
performed by a successor sub servicer meeting the requirements in the
preceding paragraph, provided, however, that nothing contained herein shall
be deemed to prevent or prohibit the Servicer, at the Servicer's option,
from electing to service the related SAMs itself. In the event that the
Servicer's responsibilities and duties under this Agreement are terminated
pursuant to Section 11.1 or 12.1, and if requested to do so by the
Purchaser, the Servicer shall at its own cost and expense terminate the
rights and responsibilities of each sub servicer effective as of the date
of termination of the Servicer. The Servicer shall pay all fees, expenses
or penalties necessary in order to terminate the rights and
responsibilities of each sub servicer from the Servicer's own funds without
reimbursement from the Purchaser.
Notwithstanding any of the provisions of this Agreement
relating to agreements or arrangements between the Servicer and a sub
servicer or any reference herein to actions taken through a sub servicer or
otherwise, the Servicer shall not be relieved of its obligations to the
Purchaser and shall be obligated to the same extent and under the same
terms and conditions as if it alone were servicing and administering the
SAMs. The Servicer shall be entitled to enter into an agreement with a sub
servicer for indemnification of the Servicer by the sub servicer and
nothing contained in this Agreement shall be deemed to limit or modify such
indemnification.
Any subservicing agreement and any other transactions or
services relating to the SAMs involving a sub servicer shall be deemed to
be between such sub servicer and the Servicer alone, and the Purchaser
shall have no obligations, duties or liabilities with respect to such sub
servicer including no obligation, duty or liability of Purchaser to pay
such sub servicer's fees and expenses. For purposes of distributions and
advances by the Servicer pursuant to this Agreement, the Servicer shall be
deemed to have received a payment on a Mortgage Loan when a sub servicer
has received such payment.
Notwithstanding the foregoing, if SAMs are sold by the
Purchaser to Fannie Mae or Freddie Mac pursuant to a Whole Loan Transfer,
the Servicer, at the direction of Purchaser, shall service such SAMs for
Fannie Mae or Freddie Mac, as the case may be, in accordance with such
entity's guidelines; and shall make distributions of principal and interest
as either Fannie Mae or Freddie Mac shall require. The Servicer shall make
to such respective entity such entity's required servicing representations
and warranties as of the date of sale of the SAMs by the Purchaser to
Fannie Mae or Freddie Mac, as applicable.
Section 2. Liquidation of SAMs.
The Servicer shall use its reasonable efforts, consistent
with the procedures that the Servicer would use in servicing loans for its
own account and the requirements of the Fannie Mae Guide or Freddie Mac
Guide, to foreclose upon or otherwise comparably convert the ownership of
properties securing such of the SAMs 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 5.1. The Servicer shall use its
reasonable efforts to realize upon defaulted SAMs in such manner as will
maximize the receipt of principal and interest by the Purchaser, taking into
account, among other things, the timing of foreclosure proceedings. The
foregoing is subject to the provisions that, in any case in which Mortgaged
Property shall have suffered damage, the Servicer shall not be required to
expend its own funds toward the restoration of such property unless it shall
determine in its discretion (i) that such restoration will increase the
proceeds of liquidation of the related SAM to the Purchaser after
reimbursement to itself for such expenses, and (ii) that such expenses will
be recoverable by the Servicer through Insurance Proceeds or Liquidation
Proceeds from the related Mortgaged Property, as contemplated in Section
5.5. The Servicer shall notify the Purchaser in writing of the commencement
of foreclosure proceedings. The Servicer shall be responsible for all costs
and expenses incurred by it in any such proceedings or functions as
Servicing Advances; provided, however, that it shall be entitled to
reimbursement therefor from the related Mortgaged Property, as contemplated
in Section 5.5.
Notwithstanding anything to the contrary contained
herein, in connection with a foreclosure or acceptance of a deed in lieu of
foreclosure, in the event the Servicer has reasonable cause to believe that
a Mortgaged Property is contaminated by hazardous or toxic substances or
wastes, or if the Purchaser otherwise requests an environmental inspection
or review of such Mortgaged Property to be conducted by a qualified
inspector, the Servicer shall promptly provide the Purchaser with a written
report of the environmental inspection upon completion of such inspection.
After reviewing the environmental inspection report, the
Purchaser shall determine how the Servicer shall proceed with respect to
the Mortgaged Property. In the event (a) the environmental inspection
report indicates that the Mortgaged Property is contaminated by hazardous
or toxic substances or wastes and (b) the Purchaser directs the Servicer to
proceed with foreclosure or acceptance of a deed in lieu of foreclosure,
the Servicer shall be reimbursed for all reasonable costs associated with
such foreclosure or acceptance of a deed in lieu of foreclosure and any
related environmental clean up costs, as applicable, from the related
Liquidation Proceeds, or if the Liquidation Proceeds are insufficient to
reimburse fully the Servicer, the Servicer shall be entitled to be
reimbursed from amounts in the Collection Account pursuant to Section 5.5
hereof.
Section 3. Collection of SAM Payments.
Continuously from the date hereof until the principal and
interest on all SAMs are paid in full, the Servicer shall proceed in
accordance with Accepted Servicing Practices to collect all payments due
under each of the SAMs when the same shall become due and payable and shall
ascertain and estimate in accordance with Accepted Servicing Practices
Escrow Payments and all other charges that will become due and payable with
respect to the SAM and the Mortgaged Property, to the end that the
installments payable by the Mortgagors will be sufficient to pay such
charges as and when they become due and payable.
Section 4. Establishment of, and Deposits to, Collection Account.
The Servicer shall segregate and hold all funds collected
and received pursuant to a SAM separate and apart from any of its own funds
and general assets and shall establish and maintain one or more collection
accounts, in the form of time deposit or demand accounts, titled
"Collection Account, in trust for the Purchaser, pursuant to that certain
Sale and Servicing Agreement dated as of ______ [2000], by and between Bear
Stearns Mortgage Capital Corporation and ________." The Collection Account
shall be established with a Qualified Depository acceptable to the
Purchaser. Any funds deposited in a Collection Account shall at all times
be fully insured to the full extent permitted under applicable law or must
be invested in Permitted Investments for the benefit
of the Purchaser. Funds deposited in the Collection Account may be drawn on
by the Servicer in accordance with Section 5.5. The creation of any
Collection Account shall be evidenced by a certification in the form of
Exhibit E-1 hereto and a letter agreement in the form of Exhibit E-2 hereto
shall be executed in connection herewith by such Depository, in the case of
an account held by a depository other than ____. A copy of such
certification or letter agreement shall be furnished to the Purchaser as
pledgee of the Collateral.
The Servicer shall deposit in the Collection Account on a
daily basis, and retain therein, the following collections received by the
Servicer and payments made by the Servicer after the Cut-off Date, other
than payments of amounts due on or before the Cut-off Date, or received by
the Servicer prior to the Cut-off Date but allocable to a period subsequent
thereto:
(1) all payments on account
of principal on the SAMs;
(2) all payments on account of
Stated Interest and Additional Interest on the SAMs, in the case
of Stated Interest, adjusted to the Remittance Rate;
(3) all Liquidation Proceeds;
(4) all Insurance Proceeds
including amounts required to be deposited pursuant to Section
5.10 (other than proceeds to be held in the Escrow Account and
applied to the restoration or repair of the Mortgaged Property
or released to the Mortgagor in accordance with Section 5.14),
Section 5.11 and Section 5.15;
(5) all Condemnation
Proceeds which are not applied to the restoration or repair of
the Mortgaged Property or released to the Mortgagor in
accordance with Section 5.14;
(6) any amount required to be
deposited in the Collection Account pursuant to Section 5.1,
5.9, 6.3, 7.1 or 7.2;
(7) the Repurchase Price and any
other amounts payable in connection with the repurchase of any
SAM pursuant to Section 4.3 or 4.4 and all amounts required to
be deposited by the Servicer in connection with a shortfall in
principal amount of any Qualified Substitute SAM pursuant to
Section 4.3;
(8) any amounts required to be
deposited by the Servicer pursuant to Section 5.11 in connection
with the deductible clause in any blanket hazard insurance
policy;
(9) any amounts received with
respect to or related to any REO Property and all REO Distribution
Proceeds pursuant to Section 5.16; and
(10) Prepayment Interest
Shortfall in an amount not to exceed the Servicing Fee due to
the Servicer.
The foregoing requirements for deposit into the
Collection Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments in the nature of
late payment charges need not be deposited by the Servicer into the
Collection Account. Any interest paid on funds deposited in the Collection
Account by the depository institution holding such Accounts or on Permitted
Investments into which such amounts are invested shall accrue to the
benefit of the Servicer and the Servicer shall be entitled to retain and
withdraw such interest from the Collection Account pursuant to Section 5.5.
Section 5. Permitted Withdrawals From Collection Account.
The Servicer shall, from time to time, withdraw funds
from any Collection Account for the following purposes:
(1) to pay the Purchaser in the
amounts and in the manner provided for in Section 6.1;
(2) to reimburse itself for
Monthly Advances of the Servicer's funds made pursuant to
Section 6.3, the Servicer's right to reimburse itself pursuant
to this subclause (ii) being taken first from amounts received
on the related SAM which represent late payments of principal
and/or interest respecting which any such advance was made, it
being understood that, in the case of any such reimbursement,
the Servicer's right thereto shall be prior to the rights of the
Purchaser, except that, where the Servicer is required to
repurchase a SAM pursuant to Section 4.3, 4.4 or 7.2, the
Servicer's right to such reimbursement shall be subsequent to
the payment to the Purchaser of the Repurchase Price pursuant to
such sections and all other amounts required to be paid to the
Purchaser with respect to such SAM and it being further
understood that upon liquidation of the related SAM, the
Servicer shall have the right to reimburse itself for Monthly
Advances from payments of principal and/or interest on the
remainder of the SAMs;
(3) to reimburse itself for
unreimbursed Servicing Advances and for any unpaid Servicing
Fees, the Servicer's right to reimburse itself pursuant to this
subclause (iii) with respect to any SAM being limited to
related Liquidation Proceeds, Condemnation Proceeds, Insurance
Proceeds and such other amounts as may be collected by the
Servicer from the Mortgagor or otherwise related to the SAM, it
being understood that, in the case of any such reimbursement,
the Servicer's right thereto shall be prior to the rights of
the Purchaser, except where the Servicer is required to
repurchase a SAM pursuant to Section 4.3, 4.4 or 7.2, in which
case the Servicer's right to such reimbursement shall be
subsequent to the payment to the Purchaser of the Repurchase
Price pursuant to such sections and all other amounts required
to be paid to the Purchaser with respect to such SAM and it
being further understood that upon the liquidation of the
related SAM, the Servicer shall have the right to reimburse
itself for unreimbursed Servicing Advances and unpaid Servicing
Fees from Liquidation Proceeds, Condemnation Proceeds,
Insurance Proceeds and such other amounts as may be collected
by the Servicer on the remainder of the SAMs;
(4) to pay itself interest on
funds deposited in the Collection Account and itself the
Servicing Fee from that portion of any payment or recovery
which represents interest with respect to a particular SAM;
(5) to reimburse itself for
expenses incurred and reimbursable to it pursuant to Section [ ];
(6) to pay any amount required to
be paid pursuant to Section 5.16 related to any REO Property, it
being understood that in the case of any such expenditure or
withdrawal related to a particular REO Property, the amount of
such expenditure or withdrawal from the Collection Account shall
be limited to amounts on deposit in the Collection Account with
respect to the related REO Property;
(7) to transfer money to the
account created pursuant to a securitization in the amounts and
in the manner specified in the agreements pursuant to which the
Purchaser intends to effect a Pass-Through Transfer or Whole
Loan Transfer, if applicable; and
(8) to clear and terminate the
Collection Account upon the termination of this Agreement.
On each Distribution Date, the Servicer shall withdraw
all funds from such Collection Account. The Servicer may use such withdrawn
funds only for the purposes described in this Section 5.5.
Section 6. Establishment of, and Deposits to, Escrow Account.
The Servicer shall segregate and hold all funds collected
and received pursuant to a SAM constituting Escrow Payments separate and
apart from any of its own funds and general assets and shall establish and
maintain one or more Escrow Accounts, in the form of time deposit or demand
accounts, titled, "Escrow Account, in trust for the Purchaser, pursuant to
that certain Sale and Servicing Agreement dated as of ______ [2000], by and
between Bear Stearns Mortgage Capital Corporation and ________." The Escrow
Accounts shall be established with a Qualified Depository, in a manner
which shall provide maximum available insurance thereunder. Any funds
deposited in an Escrow Account shall at all times be fully insured to the
full extent permitted under applicable law or must be invested in Permitted
Investments for the benefit of the Purchaser. Funds deposited in any Escrow
Account may be drawn on by the Servicer in accordance with Section 5.7. The
creation of any Escrow Account shall be evidenced by a certification in the
form of Exhibit F-1 hereto and a letter agreement in the form of Exhibit
F-2 hereto shall be executed in connection therewith with said Depository.
The Servicer shall deposit in such Escrow Account on a daily
basis and retain therein:
(1) all Escrow Payments
collected on account of the SAMs, for the purpose of effecting
timely payment of any such items as required under the terms of
this Agreement;
(2) all amounts representing
Insurance Proceeds or Condemnation Proceeds which are to be
applied to the restoration or repair of any Mortgaged Property;
and
(3) Servicing Advances for SAMs
and the Escrow Payments with respect to which are insufficient
to cover escrow disbursements.
The Servicer shall make withdrawals from any Escrow
Account only to effect such payments as are required under this Agreement,
as set forth in Section 5.7. The Servicer shall be entitled to retain any
interest paid on funds deposited in such Escrow Account by the depository
institution, other than interest on escrowed funds required by law to be
paid to the Mortgagor. To the extent required by law, the Servicer shall
pay interest on escrowed funds to the Mortgagor notwithstanding that such
Escrow Account may be non-interest bearing or that interest paid thereon is
insufficient for such purposes.
Section 7. Permitted Withdrawals From Escrow Account.
Withdrawals from any Escrow Account may be made by the
Servicer only:
(1) to effect timely payments of
ground rents, taxes, assessments, water rates, mortgage
insurance premiums, fire and hazard insurance premiums or other
items constituting Escrow Payments for the related Mortgage
permitted by the Mortgage;
(2) to reimburse the Servicer for
any Servicing Advances made by the Servicer pursuant to Section
5.8 with respect to a related SAM, but only from amounts
received on the related SAM which represent late collections of
Escrow Payments thereunder;
(3) to refund to any Mortgagor any
funds found to be in excess of the amounts required under the
terms of the related SAM;
(4) for transfer to the Collection
Account and application to reduce the principal balance of the
SAM in accordance with the terms of the related Mortgage and
Mortgage Note;
(5) for application to restoration
or repair of the Mortgaged Property in accordance with the
procedures outlined in Section 5.14;
(6) to pay to the Servicer or any
Mortgagor to the extent required by law, any interest paid on
the funds deposited in the Escrow Account;
(7) for transfer to the
Collection Account in connection with the acquisition of REO
Property; and
(8) to clear and terminate the
Escrow Account on the termination of this Agreement.
Section 8. Payment of Taxes, Insurance and Other Charges.
With respect to each SAM, the Servicer shall maintain
accurate records reflecting the status of ground rents, taxes, assessments,
water rates, sewer rents, and other charges which are or may become a Lien
upon the Mortgaged Property and the status of Primary Mortgage Insurance
Policy premiums, if any, and fire and hazard insurance coverage and shall
obtain, from time to time, all bills for the payment of such charges
(including renewal premiums) and shall effect payment thereof prior to the
applicable penalty or termination date, employing for such purpose deposits
of the Mortgagor in the Escrow Account which shall have been estimated and
accumulated by the Servicer in amounts sufficient for such purposes, as
allowed under the terms of the Mortgage. To the extent that a Mortgage does
not provide for Escrow Payments, the Servicer shall determine that any such
payments are made by the Mortgagor at the time that they first become due.
The Servicer assumes full responsibility for the timely payment of all such
bills and shall effect timely payment of all such charges irrespective of
each Mortgagor's faithful performance in the payment of same or the making
of the Escrow Payments, and the Servicer shall make Advances from its own
funds to effect such payments.
Section 9. Protection of Accounts.
The Servicer may transfer any Collection Account or any
Escrow Account to a different Qualified Depository from time to time with
the prior approval of the Purchaser. Amounts on deposit in any Collection
Account and any Escrow Account may at the option of the Servicer be invested
in Eligible Investments; provided that in the event that amounts on deposit
in any Collection Account or any Escrow Account (which shall be properly
titled to insure the funds in such account on a loan-by-loan basis) exceed
the amount fully insured by the FDIC (the "Insured Amount") the Servicer
shall be obligated to invest the excess amount over the Insured Amount in
Eligible Investments on the next Business Day as such excess amount becomes
present in any Collection Account or any Escrow Account. Any such Eligible
Investment shall mature no later than the Determination Date next following
the date of such Eligible Investment; provided, however, that if such
Eligible Investment is an obligation of a Qualified Depository (other than
the Servicer) that maintains any Collection Account or any Escrow Account,
then such Eligible Investment may mature on such Distribution Date. Any such
Eligible Investment shall be made in the name of the Servicer in trust for
the benefit of the Purchaser. All income on or gain realized from any such
Eligible Investment shall be for the benefit of the Servicer and may be
withdrawn at any time by the Servicer. Any losses incurred in respect of any
such investment shall be deposited in any Collection Account or any Escrow
Account, by the Servicer out of its own funds immediately as realized.
Section 10. Maintenance of Hazard Insurance.
The Servicer shall cause to be maintained for, to the
extent permitted in each SAM, hazard insurance such that all buildings upon
the Mortgaged Property are insured against loss by fire, hazards of
extended coverage and such other hazards as are customary in the area where
the Mortgaged Property is located, in an amount which is at least equal to
the full replacement value of the improvements securing such SAM (where
permitted) by companies that currently reflect a General Policy Rating in
Best's Key Rating Guide ("Best's") currently acceptable to Fannie Mae and
are licensed to do business in the state wherein its property subject to
the policy is located (a "Best's Approved Insurer").
If upon origination of the SAM, the related Mortgaged
Property was located in an area identified in the Federal Register by the
Flood Emergency Management Agency as having special flood hazards (and such
flood insurance has been made available) a flood insurance policy meeting
the requirements of the current guidelines of the Flood Insurance
Administration is in effect with a Best's Approved Insurer in an amount
representing coverage equal to the lesser of (i) the outstanding principal
balance of the SAM, (ii) the minimum amount required, under the terms of
coverage, to compensate for any damage or loss on a replacement cost basis
(or the unpaid balance of the mortgage if replacement cost coverage is not
available for the type of building insured) and (iii) the maximum amount of
insurance which is available under the Flood Disaster Protection Act of
1973, as amended. If at any time during the term of the SAM, the Servicer
determines in accordance with applicable law and pursuant to the Fannie Mae
Guides and Freddie Mac Guides that a Mortgaged Property is located in a
special flood hazard area and is not covered by flood insurance or is
covered in an amount less than the amount required by the Flood Disaster
Protection Act of 1973, as amended, the Servicer shall notify the related
Mortgagor that the Mortgagor must obtain such flood insurance coverage, and
if said Mortgagor fails to obtain the required flood insurance coverage
within forty-five (45) days after such notification, the Servicer shall
immediately force place the required flood insurance on the Mortgagor's
behalf.
It is understood and agreed that no other additional
insurance need be required by the Servicer or the Mortgagor or maintained
on property acquired in respect of the SAMs, other than pursuant to the
Fannie Mae Guide or Freddie Mac Guide or such applicable state or federal
laws and regulations as shall at any time be in force and as shall require
such additional insurance. All such policies shall be endorsed with
standard mortgagee clauses with loss payable to the Servicer and its
successors and/or assigns and shall provide for at least thirty days prior
written notice of any cancellation, reduction in the amount or material
change in coverage to the Servicer. The Servicer shall not interfere with
the Mortgagor's freedom of choice in selecting either his insurance carrier
or agent, provided, however, that the Servicer shall not accept any such
insurance policies from insurance companies unless such companies are a
Best's Approved Insurer. The Servicer shall determine that such policies
provide sufficient risk coverage and amounts, that they insure the property
owner and that they properly describe the property address.
[The Servicer shall cause to be maintained on each
Mortgaged Property earthquake or such other or additional insurance as may
be required pursuant to such applicable laws and regulations as shall at
any time be in force and as shall require such additional insurance, or
pursuant to the requirements of any private mortgage guaranty insurer, or
as may be required to conform with Accepted Servicing Practices.]
In the event that the Purchaser or the Servicer shall
determine that the Mortgaged Property should be insured against loss or
damage by hazards and risks not covered by the insurance required to be
maintained by the Mortgagor pursuant to the terms of the Mortgage, the
Servicer shall communicate and consult with the Mortgagor with respect to
the need for such insurance and bring to the Mortgagor's attention the
desirability of protection of the Mortgaged Property.
Pursuant to Section 5.4, any amounts collected by the
Servicer under any such policies (other than amounts to be deposited in any
Escrow Account and applied to the restoration or repair of the related
Mortgaged Property, or property acquired in liquidation of the SAM, or to
be released to the Mortgagor, in accordance with the Servicer's normal
servicing procedures as specified in Section 5.14) shall be deposited in
any Collection Account subject to withdrawal pursuant to Section 5.5.
Section 11. Maintenance of Fidelity Bond and Errors and
Omissions Insurance.
The Servicer shall maintain with responsible companies,
at its own expense, a blanket Fidelity Bond and an Errors and Omissions
Insurance Policy, with broad coverage on all officers, employees or other
persons acting in any capacity requiring such persons to handle funds,
money, documents or papers relating to the SAMs ("Company Employees"). Any
such Fidelity Bond and Errors and Omissions Insurance Policy shall be in
the form of the Mortgage Banker's Blanket Bond and shall protect and insure
the Servicer against losses, including forgery, theft, embezzlement,
fraud, errors and omissions and negligent acts of such Company Employees.
Such Fidelity Bond and Errors and Omissions Insurance Policy also shall
protect and insure the Servicer against losses in connection with the
release or satisfaction of a SAM without having obtained payment in full of
the indebtedness secured thereby. No provision of this Section 5.12
requiring such Fidelity Bond and Errors and Omissions Insurance Policy
shall diminish or relieve the Servicer from its duties and obligations as
set forth in this Agreement. The minimum coverage under any such bond and
insurance policy shall be at least equal to the corresponding amounts
required by Fannie Mae in the Fannie Mae Guide or Freddie Mac in the
Freddie Mac Guide. Upon the request of the Purchaser, the Servicer shall
cause to be delivered to the holder of such fidelity bond and insurance
policy a certified true copy of such fidelity bond and insurance policy.
The Servicer shall notify the Purchaser within five Business Days of
receipt of notice that such Fidelity Bond or Errors and Omission Policy
will be, or has been, materially modified or terminated. The Purchaser and
its successors or assigns as their interests may appear must be named as
loss payees on the Fidelity Bond and as additional insured on the Errors
and Omission Policy.
Section 12. Inspections.
The Servicer shall inspect the Mortgaged Property as
often as deemed necessary by the Servicer to assure itself that the value
of the Mortgaged Property is being preserved. In addition, if any SAM is
more than [60 days] delinquent, the Servicer shall inspect the Mortgaged
Property unless the Servicer deems such inspection unnecessary in
accordance with Accepted Servicing Practices and shall conduct subsequent
inspections in accordance with Accepted Servicing Practices or as may be
required by the primary mortgage guaranty insurer. The Servicer shall keep
a written report or electronic record of each such inspection.
Section 13. Restoration of Mortgaged Property.
The Servicer need not obtain the approval of the
Purchaser prior to releasing any Insurance Proceeds or Condemnation
Proceeds to the Mortgagor to be applied to the restoration or repair of the
Mortgaged Property if such release is in accordance with Accepted Servicing
Practices. At a minimum, the Servicer shall comply with the following
conditions in connection with any such release of Insurance Proceeds or
Condemnation Proceeds:
(1) the Servicer shall receive
satisfactory independent verification of completion of repairs and
issuance of any required approvals with respect thereto;
(2) the Servicer shall take all
steps necessary to preserve the priority of the Lien of the
Mortgage, including, but not limited to requiring waivers with
respect to mechanics' and materialmen's Liens;
(3) the Servicer shall verify
that the SAM is not in default; and
(4) pending repairs or
restoration, the Servicer shall place the Insurance Proceeds or
Condemnation Proceeds in any Escrow Account.
Section 14. Maintenance of Primary Mortgage Insurance Policy; Claims.
With respect to each SAM with a LTV in excess of 80%, the
Servicer shall, without any cost to the Purchaser, maintain or cause the
Mortgagor to maintain in full force and effect a Primary Mortgage Insurance
Policy insuring that portion of the SAM in excess of 80% of value, and
shall pay or shall cause the Mortgagor to pay the premium thereon on a
timely basis, until the LTV of such SAM is reduced to 80% or less. In the
event that such Primary Mortgage Insurance Policy shall be terminated, the
Servicer shall obtain from another Qualified Insurer a comparable
replacement policy, with a total coverage equal to the remaining coverage
of such terminated Primary Mortgage Insurance Policy. If the insurer shall
cease to be a Qualified Insurer, the Servicer shall determine whether
recoveries under the Primary Mortgage Insurance Policy are jeopardized for
reasons related to the financial condition of such insurer, it being
understood that the Servicer shall in no event have any responsibility or
liability for any failure to recover under the Primary Mortgage Insurance
Policy for such reason. If the Servicer determines that recoveries are so
jeopardized, it shall notify the Purchaser and the Mortgagor, if required,
and obtain from another Qualified Insurer a replacement insurance policy.
The Servicer shall not take any action which would result in noncoverage
under any applicable Primary Mortgage Insurance Policy of any loss which,
but for the actions of the Servicer would have been covered thereunder. In
connection with any assumption or substitution agreement entered into or to
be entered into pursuant to Section 7.1, the Servicer shall promptly notify
the insurer under the related Primary Mortgage Insurance Policy, if any, of
such assumption or substitution of liability in accordance with the terms
of such Primary Mortgage Insurance Policy and shall take all actions which
may be required by such insurer as a condition to the continuation of
coverage under such Primary Mortgage Insurance Policy. If such Primary
Mortgage Insurance Policy is terminated as a result of such assumption or
substitution of liability, the Servicer shall obtain a replacement Primary
Mortgage Insurance Policy as provided above.
In connection with its activities as servicer, the
Servicer agrees to prepare and present claims to the insurer under any
Primary Mortgage Insurance Policy in a timely fashion in accordance with
the terms of such Primary Mortgage Insurance Policy and, in this regard, to
take such action as shall be necessary to permit recovery under any Primary
Mortgage Insurance Policy respecting a defaulted SAM. Pursuant to Section
5.4, any amounts collected by the Servicer under any Primary Mortgage
Insurance Policy shall be deposited in the Collection Account, subject to
withdrawal pursuant to Section 5.5.
Section 15. Title, Management and Disposition of REO Property.
In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be taken in the name of the Purchaser or its
designee. The Person or Persons holding such title other than the Purchaser
shall acknowledge in writing that such title is being held as nominee for
the Purchaser.
The Servicer shall manage, conserve, protect and operate
each REO Property for the Purchaser solely for the purpose of its prompt
disposition and sale. The Servicer, either itself or through an agent
selected by the Servicer shall manage, conserve, protect and operate the
REO Property in the same manner that it manages, conserves, protects and
operates other foreclosed property for its own account, and in the same
manner that similar property in the same locality as the REO Property is
managed. Each REO Disposition shall be carried out by the Servicer at such
price and upon such terms and conditions as the Servicer deems to be in the
best interest of the Purchaser. The REO Disposition Proceeds from the sale
of the REO Property shall be promptly deposited in the Collection Account.
As soon as practical thereafter, the expenses of such sale shall be paid
and the Servicer shall reimburse itself for any related unreimbursed
Servicing Advances, unpaid Servicing Fees or unreimbursed Monthly Advances
made pursuant to Section 6.3, in accordance with Section 5.5. The net cash
proceeds of such sale remaining in any Collection Account shall be
distributed as set forth in Section 6.1 hereof
The Servicer shall also maintain on each REO Property
fire and hazard insurance with extended coverage in amount which is at
least equal to the maximum insurable value of the improvements which are a
part of such property, liability insurance and, to the extent required and
available under the Flood Disaster Protection Act of 1973, as amended,
flood insurance in the amount required above.
The Servicer shall withdraw from any Collection Account
as set forth in Section 5.5 herein funds necessary for the proper
operation, management and maintenance of the REO Property, including the
cost of maintaining any hazard insurance pursuant to Section 5.10 and the
fees of any managing agent of the Servicer or the Servicer itself. The REO
management fee shall be an amount that is reasonable and customary in the
area where the Mortgaged Property is located. The Servicer shall make
monthly distributions on each Distribution Date to the Purchaser of the net
cash flow from the REO Property (which shall equal the revenues from such
REO Property net of the expenses described in this Section 5.16 and of any
reserves reasonably required from time to time to be maintained to satisfy
anticipated liabilities for such expenses).
The Servicer shall notify the Purchaser in accordance
with the Fannie Mae Guide or Freddie Mac Guide of each acquisition of REO
Property upon such acquisition, and thereafter assume the responsibility
for marketing such REO Property in accordance with Accepted Servicing
Practices. Thereafter, the Servicer shall continue to provide certain
administrative services to the Purchaser relating to such REO Property as
set forth in this Section 5.16. The REO Property must be sold within three
years following the end of the calendar year of the date of acquisition,
unless a REMIC election has been made with respect to the arrangement under
which the SAMs and REO Property are held and (i) the Purchaser shall have
obtained an Opinion of Counsel to the effect that the holding by the
related trust of such Mortgaged Property subsequent to such three-year
period (and specifying the period beyond such three-year period for which
the Mortgaged Property may be held will not result in the imposition of
taxes on "prohibited transactions" of the related trust as defined in
Section 860F of the Code, or cause the related REMIC to fail to qualify as
a REMIC, in which case the related trust may continue to hold such
Mortgaged Property (subject to any conditions contained in such Opinion of
Counsel), or (ii) the Purchaser (at the Servicer's expense) or the Servicer
shall have applied for, prior to the expiration of such three-year period,
an extension of such three-year period in the manner contemplated by
Section 856(e)(3) of the Code, in which case the three-year period shall be
extended by the applicable period. If a period longer than three years is
permitted under the foregoing sentence and is necessary to sell any REO
Property, (i) the Servicer shall report monthly to the Purchaser as to
progress being made in selling such REO Property and (ii) if, with the
written consent of the Purchaser, a purchase money mortgage is taken in
connection with such sale, such purchase money mortgage shall name the
Servicer as mortgagee, and such purchase money mortgage shall not be held
pursuant to this Agreement, but instead a separate participation agreement
between the Servicer and Purchaser shall be entered into with respect to
such purchase money mortgage.
Notwithstanding any other provision of this Agreement, if
a REMIC election has been made, no Mortgaged Property held by a REMIC shall
be rented (or allowed to continue to be rented) or otherwise use for the
production of income by or on behalf of the related trust or sold in such a
manner or pursuant to any terms that would (i) cause such Mortgaged
Property to fail to qualify at any time as "foreclosure property" within a
meaning of Section 860G(a)(8) of the Code, (ii) subject the related trust
to the imposition of any federal or state income taxes on "net income from
foreclosure property" with respect to such Mortgaged Property within the
meaning of Section 860G(c) of the Code, or (iii) cause the sale of such
Mortgaged Property to result in the receipt by the related trust of any
income from non-permitted assets as described in Section 860F(a)(2)(B) of
the Code, unless the Servicer has agreed to indemnify and hold harmless the
related trust with respect to the imposition of any such taxes.
The Servicer shall cause each REO Property to be
inspected promptly upon the acquisition of title thereto and shall cause
each REO Property to be inspected at least monthly thereafter or more
frequently as may be required by the circumstances. The Servicer shall make
or cause the inspector to make a written report of each such inspection.
Such reports shall be retained in the Mortgage File and copies thereof
shall be forwarded by the Servicer to the Purchaser.
Section 16. Real Estate Owned Reports.
Together with the statement furnished pursuant to Section
6.2, the Servicer shall furnish to the Purchaser on or before the
Distribution Date each month a statement with respect to any REO Property
covering the operation of such REO Property for the previous month and the
Servicer's efforts in connection with the sale of such REO Property and any
rental of such REO Property incidental to the sale thereof for the previous
month. That statement shall be accompanied by such other information as the
Purchaser shall reasonably request.
Section 17. Liquidation Reports.
Upon the foreclosure sale of any Mortgaged Property or
the acquisition thereof by the Purchaser pursuant to a deed in lieu of
foreclosure, the Servicer shall submit to the Purchaser a liquidation
report with respect to such Mortgaged Property.
Section 18. Reports of Foreclosures and Abandonments
of Mortgaged Property.
Following the foreclosure sale or abandonment of any
Mortgaged Property, the Servicer shall report such foreclosure or
abandonment as required pursuant to Section 6050J of the Code.
Section 19. Appraisals: Qualified Major Home Improvements. As
required by each Mortgage Note, the Servicer shall cause the Mortgagors to
conduct appraisals to determine the value of the Mortgaged Property in the
context of Qualified Major Home Improvements (as such term is defined in
the related Mortgage Note) and on the earlier of the maturity date of the
related SAM and the occurrence of a Mortgage Termination Event. The
Servicer shall adjust the Adjusted Value of the Mortgaged Property and the
Settlement Value of each such SAM as provided in such Mortgage Note as a
result of such appraisals and calculate any amount due to the Mortgagor
upon the maturity of the related SAM or the occurrence of a Mortgage
Termination Event. Multiple appraisals shall be conducted as provided in
such Mortgage Note. The appraiser conducting any such appraisal, and the
initial appraisal, shall be chosen from a schedule of appraisers attached
hereto as Schedule I. Such schedule may be amended from time to time by the
Purchaser in its able discretion. A Qualified Major Home Improvement shall
include any improvement items shown on Schedule III. Such schedule may be
amended from time to time by the Purchaser in its sole discretion for any
SAMs to be originated by the Seller.
Section 20. Fees That The Servicer Will Collect. As provided in such
Mortgage Note, the Servicer will charge and collect from each Mortgagor:
(i) at the maturity date for the SAM or upon the Mortgagor's knowledge of
the occurrence of a Mortgage Termination Event, a fee for the costs
associated with the payoff in full of the Mortgage Note; and (ii) in
connection with each Qualified Major Home Improvement (as such term is
defined in the related Mortgage Note), a fee for the costs
associated with adjusting the Mortgaged Property's Adjusted Value resulting
from the Qualified Major Home Improvement (as such term is defined the
related Mortgage Note) and otherwise complying with such Mortgage Note. The
amount of all fees collected pursuant to this Section shall be specified in
the Mortgage Note.
Section 21. Certificate of Occupancy. In accordance with the Mortgage
Note, the Servicer will cause each Mortgagor to sign an occupancy
certificate provided by the Seller from time to time, certifying that the
Mortgaged Property is occupied.
ARTICLE VI - PAYMENTS TO PURCHASER
Section 1. Remittances.
On each Distribution Date, the Servicer shall remit to
the Purchaser (i) all amounts credited to the Collection Account as of the
close of business on the related preceding Determination Date, except
Principal Prepayments received on or after the first day of the calendar
month in which the Distribution Date occurs shall be remitted to the
Purchaser on the next following Distribution Date, net of charges against
or withdrawals from the Collection Account pursuant to Section 5.5, plus,
to the extent not already deposited in the Collection Account, the sum of
(ii) all Monthly Advances, if any, which the Servicer is obligated to
distribute pursuant to Section 6.3 and (iii) all Prepayment Interest
Shortfalls that the Servicer is required to make up pursuant to Section 5.5
minus (iv) any amounts attributable to Monthly Payments collected but due
on a Due Date or Dates subsequent to the related preceding Determination
Date, which amounts shall be remitted on the related Distribution Date next
succeeding the Due Period for such amounts. It is understood that with
respect to each Closing Date, by operation of Section 5.4, the remittance
on the first Distribution Date with respect to SAMs purchased pursuant to
the related Transfer Supplement is to include principal collected after the
related Cut-off Date through the related preceding Determination Date plus
interest, adjusted to the related Remittance Rate collected through such
Determination Date exclusive of any portion thereof allocable to the period
prior to the related Cut-off Date, with the adjustments specified in
clauses (ii), (iii) and (iv) above.
With respect to any remittance received by the Purchaser
after the Business Day on which such payment was due hereunder, the
Servicer shall pay to the Purchaser interest on any such late payment at an
annual rate equal to the Prime Rate, adjusted as of the date of each
change, plus two percentage points, but in no event greater than the
maximum amount permitted by applicable law. Such interest shall be
deposited in the Collection Account by the Servicer on the date such late
payment is made and shall cover the period commencing with the day
following such Business Day and ending with the Business Day on which such
payment is made, both inclusive. Such interest shall be remitted along with
the distribution payable on the next succeeding related Distribution Date.
The payment by the Servicer of any such interest shall not be deemed an
extension of time for payment or a waiver of any Event of Default by the
Servicer.
Section 2. Statements to Purchaser.
The Servicer shall furnish to the Purchaser an individual
SAM accounting report (a "Report"), as of the last Business Day of each
month, in the Servicer's assigned loan number order to document SAM payment
activity on an individual SAM basis. With respect to each month, such
Report shall be received by the Purchaser no later than the fifth Business
Day of the following month of the related Distribution Date on a disk or
tape or other computer-readable format, in such format as may be mutually
agreed upon by both the Purchaser and the Servicer, and in hard copy, which
Report shall contain the following:
(1) with respect to each Monthly Payment (on
both an actual and scheduled basis with respect to SAM balances
and on an actual basis with respect to paid-through dates), the
amount of such remittance allocable to principal (including a
separate breakdown of any Principal Prepayment, including the
date of such prepayment, and any prepayment penalties or
premiums, along with a detailed report of interest (including
any Prepayment Interest Shortfall) on Principal Prepayment
amounts remitted in accordance with Section 6.1);
(2) with respect to each Monthly Payment, the
amount of such remittance allocable to principal, Stated
Interest and Additional Interest;
(3) the amount of servicing compensation
received by the Servicer during the prior distribution period;
(4) the aggregate Stated Principal Balance of
the SAMs;
(5) the amount of Monthly Advances made by
the Servicer pursuant to Section 6.3;
(6) the aggregate of any expenses reimbursed
to the Servicer during the prior distribution period pursuant
to Section 5.5;
(7) the number and aggregate outstanding
principal balances of SAMS (a) delinquent (1) 30 to 59 days,
(2) 60 to 89 days, (3) 90 days or more; (b) as to which
foreclosure has commenced; and (c) as to which REO Property has
been acquired; and
(8) such other reports as may reasonably be
required by the Purchaser.
The Servicer shall also provide a trial balance, sorted
in the Purchaser's assigned loan number order, in such form as the Servicer
and the Purchaser shall agree, with each such Report.
The Servicer shall prepare and file any and all
information statements or other filings required to be delivered to any
governmental taxing authority or to the Purchaser pursuant to any
applicable law with respect to the SAMs and the transactions contemplated
hereby. In addition, the Servicer shall provide the Purchaser with such
information concerning the SAMs as is necessary for the Purchaser to
prepare its federal income tax return as the Purchaser may reasonably
request from time to time.
In addition, not more than 60 days after the end of each
calendar year, the Servicer shall furnish to the Purchaser an annual
statement in accordance with the requirements of applicable federal income
tax law as to the aggregate of remittances of principal and interest,
including Additional Interest, for the applicable portion of such year.
Section 3. Monthly Advances by Servicer.
On the Business Day immediately preceding each
Distribution Date, the Servicer shall deposit in the Collection Account
from its own funds an amount equal to all Monthly Payments (with interest
adjusted to the Remittance Rate) which were due on the SAMs during the
applicable Due Period and which were delinquent at the close of business on
the immediately preceding Determination Date or which were deferred
pursuant to Section 5.1. The Servicer's obligation to make such Monthly
Advances as to any SAM will continue through the last Monthly Payment due
prior to the payment in full of the SAM, or through the last Distribution
Date prior to the Distribution Date for the distribution of all Liquidation
Proceeds and other payments or recoveries (including Insurance Proceeds and
Condemnation Proceeds) with respect to the SAM unless the Servicer provides
an Officer's Certificate based on the Servicer's reasonable determination
stating that such Monthly Advance would not be recoverable. [The Servicer
shall obtain an appraisal to support its conclusion that such Advance is
not recoverable.]
ARTICLE VII - GENERAL SERVICING PROCEDURES
Section 1. Transfers of Mortgaged Property.
The Servicer shall enforce the Mortgage Termination Event
provision of the Mortgage Note and Mortgage in accordance with Accepted
Servicing Practices and applicable law contained in any Mortgage or
Mortgage Note and to deny assumption by the person to whom the
Mortgaged Property has been or is about to be sold whether by absolute
conveyance or by contract of sale, and whether or not the Mortgagor remains
liable on the Mortgage and the Mortgage Note. When the Mortgaged Property
has been conveyed by the Mortgagor, the Servicer shall, to the extent it
has knowledge of such conveyance, exercise its rights to accelerate the
maturity of such SAM under the Mortgage Termination Event clause; provided,
however, that the Servicer shall not exercise such rights if prohibited by
law or the related Mortgage Note from doing so or if the exercise of such
rights would impair or threaten to impair any recovery under the related
Primary Mortgage Insurance Policy, if any.
If the Servicer reasonably believes it is unable under
applicable law to enforce such Mortgage Termination Event clause, the
Servicer shall with the Purchaser's prior written approval enter into (i)
an assumption and modification agreement with the person to whom such
property has been conveyed, pursuant to which such person becomes liable
under the Mortgage Note and the original Mortgagor remains liable thereon
or (ii) in the event that the Servicer is unable under applicable law to
require that the original Mortgagor remain liable under the Mortgage Note
and the Servicer has the prior consent of the primary mortgage guaranty
insurer, a substitution of liability agreement with the purchaser of the
Mortgaged Property pursuant to which the original Mortgagor is released
from liability and the purchaser of the Mortgaged Property is substituted
as Mortgagor and becomes liable under the Mortgage Note. If an assumption
fee is collected by the Servicer for entering into an assumption agreement,
such fee will be retained by the Servicer as additional servicing
compensation. In connection with any such assumption, neither the Stated
Interest Rate borne by the related Mortgage Note, the Appreciation Share,
any Mortgage Termination Events, the term of the SAM, nor the outstanding
principal amount of the SAM shall be changed.
In connection with any such assumption or substitution of
liability, the Servicer shall follow the underwriting practices and
procedures of the Fannie Mae Guide or Freddie Mac Guide. The Servicer shall
notify the Purchaser that any such substitution of liability or assumption
agreement has been completed by forwarding to the Purchaser the original of
any such substitution of liability 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. All fees collected
by the Servicer for entering into an assumption or substitution of
liability agreement shall belong to the Servicer.
Notwithstanding the foregoing paragraphs of this Section
or any other provision of this Agreement, the Servicer shall not be deemed
to be in default, breach or any other violation of its obligations
hereunder by reason of any assumption of a SAM by operation of law or any
assumption which the Servicer may be restricted by law from preventing, for
any reason whatsoever. For purposes of this Section 7.1, 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 2. Satisfaction of Mortgages and Release of Mortgage Files.
Upon the payment in full of any SAM, or the receipt by
the Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Servicer shall notify the Purchaser
in the Monthly Remittance Advice as provided in Section 6.2 and may request
the release of any documents in the Mortgage File. Upon receipt of such
certification and request, the Purchaser shall promptly release or cause
the Custodian to promptly release the related documents in the Mortgage
File to the Servicer and the Servicer shall prepare and deliver for
execution by the Purchaser or at the Purchaser's option execute under the
authority of a power of attorney delivered to the Servicer by the Purchaser
any satisfaction or release. No expense incurred in connection with any
instrument of satisfaction or deed of reconveyance shall be chargeable to
the Collection Account.
If the Servicer satisfies or releases a Mortgage without
first having obtained payment in full of the indebtedness secured by the
Mortgage or should the Servicer otherwise prejudice any rights the
Purchaser may have under the mortgage instruments, upon written demand of
the Purchaser, the Servicer shall repurchase the related SAM at the
Repurchase Price by deposit thereof in the Collection Account within two
Business Days of receipt of such demand by the Purchaser. The Servicer
shall maintain the Fidelity Bond and Errors and Omissions Insurance Policy
as provided for in Section 5.12 insuring the Servicer against any loss it
may sustain with respect to any SAM not satisfied in accordance with the
procedures set forth herein.
From time to time and as appropriate for the servicing or
foreclosure of the SAM including for the purpose of collection under any
Primary Mortgage Insurance Policy, upon request of the Servicer and
delivery to the Custodian of a servicing receipt signed by a Servicing
Officer, the Custodian shall release the portion of the Mortgage File held
by the Custodian to the Servicer. Such servicing receipt shall obligate the
Servicer to return promptly the related documents in the Mortgage File to
the Custodian, when the need therefor by the Servicer no longer exists,
unless the SAM has been liquidated and the Liquidation Proceeds relating to
the SAM 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 pubic official as required by law, for purposes of initiating or
pursuing legal action or other proceedings for the foreclosure of the
Mortgaged Property either judicially or non-judicially, and the Servicer
has promptly delivered to the Purchaser or the Custodian a certificate of a
Servicing Officer certifying as to the name and address of the Person to
which such Mortgage File or such document was delivered and the purpose or
purposes of such delivery. Upon receipt of a certificate of a Servicing
Officer stating that such SAM was liquidated, the servicing receipt shall
be released by the Purchaser or the Custodian, as applicable, to the
Servicer.
Section 3. Servicing Compensation.
As compensation for its services hereunder, the Servicer
shall be entitled to retain from interest payments on each SAM, the amount
of its Servicing Fee with respect thereto. The Servicing Fee shall be
payable monthly and shall be computed on the basis of the same unpaid
principal balance and for the period respecting which any related interest
payment on a SAM is computed. The Servicing Fee shall be payable only at
the time of and with respect to those SAMs for which payment is in fact
made of the entire amount of the Monthly Payment. The obligation of the
Purchaser to pay the Servicing Fee is limited to, and payable solely from,
the interest portion of such Monthly Payments collected by the Servicer.
Additional servicing compensation includes late charges
and other ancillary income. The Servicer shall be required to pay all
expenses incurred by it in connection with its servicing activities
hereunder and shall not be entitled to reimbursement thereof except as
specifically provided for herein.
Section 4. Annual Statement as to Compliance.
The Servicer shall deliver to the Purchaser, on or before
December 31 each year beginning December 31, 199_, an Officer's
Certificate, stating that (i) a review of the activities of the Servicer
during the preceding [fiscal] year ended and of performance under this
Agreement has been made under such officer's supervision, (ii) the Servicer
has complied with the provisions of Article III and Article V, and (iii) to
the best of such officer's knowledge, based on such review, the Servicer
has fulfilled its obligations in all material respects 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 and the action being taken by the Servicer to
cure such default.
Section 5. Annual Independent Public Accountants' Servicing Report.
On or before December 31, of each year, beginning with
the first December 31 that occurs at least six months after the date of
execution of this Agreement, the Servicer, at its expense, shall cause a
firm of independent public accountants that is a member of the American
Institute of Certified Public Accountants to furnish a statement to the
Purchaser to the effect that such firm has examined certain documents and
records relating to the servicing of SAMs and that, on the basis of an
examination conducted substantially in compliance with the Uniform Single
Audit Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for Fannie Mae or Freddie Mac, such servicing has been conducted
in compliance with such agreements except for such significant exceptions
or errors in records that, in the opinion of such firm, the Uniform Single
Audit Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for Fannie Mae or Freddie Mac requires it to report. In rendering
such statement, such firm may rely, as to matters relating to direct
servicing of SAMs by the Servicer, upon comparable statements for
examinations conducted substantially in compliance with the Uniform Single
Audit Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for Fannie Mae or Freddie Mac (rendered within one year of such
statement) of independent public accountants with respect to the Servicer.
The Servicer shall forward a copy of each such report to the Rating Agency.
Section 6. Right to Examine Servicer Records.
The Purchaser shall have the right to reasonable access
to the books, records, or other information of the Servicer, whether held
by the Servicer or by another on its behalf, with respect to or concerning
this Agreement or the SAMs, during regular business hours or at such other
times as may be reasonable under applicable circumstances, upon reasonable
advance notice.
The Servicer shall provide to the Purchaser and any
supervisory agents or examiners representing a state or federal
governmental agency having jurisdiction over the Purchaser, including but
not limited to OTS, Fannie Mae, Freddie Mac and other similar entities,
access to any documentation regarding SAMs in the possession of the
Servicer which may be required by any applicable regulations. Such access
shall be afforded without charge, upon reasonable request, during normal
business hours and at the offices of the Servicer, and in accordance with
the applicable federal government agency, Fannie Mae, OTS, or any other
similar regulations.
Section 7. Removal of SAMs from Inclusion under this Agreement upon a
Whole Loan Transfer or Pass-Through Transfer.
(a) The Servicer acknowledges that with respect to
some or all of the SAMs, the Purchaser intends to effect one or more Whole
Loan Transfers and/or one or more Pass-Through Transfers. With respect to
each Whole Loan Transfer or Pass-Through Transfer, as the case may be,
entered into by the Purchaser, the Servicer agrees:
(i) to cooperate fully with the Purchaser,
any prospective purchaser, any rating agency or any party to any agreement
executed in connection with such Whole Loan Transfer or Pass-Through
Transfer, with respect to all reasonable requests and due diligence
procedures and to use its best efforts to facilitate such Whole Loan
Transfer or Pass-Through Transfer, as the case may be, and
(ii) to execute all agreements executed in
connection with such Whole Loan Transfer or Pass-Through Transfer that
govern the servicing and administration of the SAMs (and any agreements and
other documents incidental thereto) as the Purchaser shall request, which
governing documents, in the case of a Pass-Through Transfer, shall contain
provisions customarily included in publicly issued or privately placed
rated secondary mortgage market transactions and, in the case of a Whole
Loan Transfer, shall contain servicing provisions in accordance with the
Fannie Mae or Freddie Mac Guide, at the Servicer's option, plus all
provisions herein which are unique to the servicing of SAMs; and
(iii) as of the closing date of the Whole
Loan Transfer or Pass-Through Transfer, as the case may be, (a) to restate,
for the benefit of the owners of the SAMs, the representations and
warranties contained in Sections 4.1 and 4.2, (b) to make, for the benefit
of the owners of the SAMs, the same representations and warranties that the
Purchaser is giving with respect to the Whole Loan Transfer or Pass-Through
Transfer, as the case may be, and (c) to make those certain servicing
representations and warranties required by Fannie Mae or Freddie Mac, as
the case may be, with respect to such Whole Loan Transfer, to such entity,
as applicable; and
(iv) with respect to a Pass-Through Transfer
only, at the Purchaser's request, (a) to execute an agreement, as servicer,
with a certificateholder of the related subordinate securities issued in
connection with such Pass-Through Transfer, in the form of Investor
Agreement attached hereto as [Exhibit ,] which shall govern the treatment
of delinquent SAMs and (b) to deliver to the Purchaser, for inclusion in
the offering document for the related securities, origination and servicing
disclosure as may be necessary and as may be mutually agreed upon by the
Servicer and the Purchaser, and in connection with the delivery of such
disclosure, an agreed-upon procedures letter concerning such disclosure,
which letter shall be issued by an accounting firm selected by the Servicer
and acceptable to the Purchaser.
(b) Subject to the first sentence of this Section
7.7(b), in connection with any Whole Loan Transfer or Pass-Through
Transfer, the Servicer may be required to do the following, including but
not limited to:
(i) deliver an Opinion of Counsel or
Opinions of Counsel required by any Rating Agency or any
underwriter for the Whole Loan Transfer or Pass-Through Transfer;
(ii) permit any Rating Agency,
insurer or underwriter to perform due diligence on the Servicer;
(iii) submit to the Purchaser disclosure
regarding the business of the Servicer which is intended for
use in the prospectus or offering circular related to the Whole
Loan Transfer or Pass-Through Transfer; or
(iv) enter into any supplemental
agreements or amendment to this Agreement required by the
Rating Agencies in order to permit the Servicer to serve as the
servicer in the Whole Loan Transfer or Pass-Through Transfer or
reasonably required by the Purchaser.
If any of the Rating Agencies rating any securities
issued pursuant to a Pass- Through Transfer or if the Master Servicer do
not approve of the Servicer servicing any such SAMs in a Pass-Through
Transfer or Whole Loan Transfer then the Servicer shall transfer servicing
to the servicer of the trust created as a result of such Pass-Through
Transfer in the manner specified in Section 13.1. The Servicer shall serve
as servicer for any trust created as a result of such Pass- Through
Transfer under this Agreement if the Servicer otherwise qualifies as a
servicer as provided herein, if the Servicer sells the Portfolio to the
Purchaser on a servicing-retained basis as provided in the applicable
Transfer Supplement and the applicable Rating Agencies approve. If such
sale is made on a servicing-released basis, the Servicer shall be required
to transfer its obligations to a successor Servicer for the Pass-Through or
Whole Loan Transfer.
All SAMs not sold or transferred pursuant to a Whole Loan
Transfer or Pass- Through Transfer shall continue to be serviced in
accordance with the terms of this Agreement.
Section 8. Compliance with REMIC Provisions.
If a REMIC election has been made with respect to the
arrangement under which the SAMs and REO Property are held, the Servicer
shall not take any action, cause the REMIC to take any action or fail to
take (or fail to cause to be taken) any action that, under the REMIC
Provisions, if taken or not taken, as the case may be could (i) endanger
the status of the REMIC as a REMIC or (ii) result in the imposition of a
tax upon the REMIC (including but not limited to the tax on "prohibited
transactions" as defined in Section 860F(a)(2) of the Code and the tax on
"contribution" to a REMIC set forth in Section 860G(d) of the Code unless
the Servicer has received an Opinion of Counsel (at the expense of the
party seeking to take such actions) to the effect that the contemplated
action will not endanger such REMIC status or result in the imposition of
any such tax.
ARTICLE VIII - SERVICER TO COOPERATE
Section 1. Provision of Information.
During the term of this Agreement, the Servicer shall
furnish to the Purchaser such periodic, special, or other reports or
information and copies or originals of any documents contained in the
Servicing File for each SAM, whether or not provided for herein, as shall
be necessary, reasonable, or appropriate with respect to the Purchaser. All
such reports, documents or information shall be provided by and in
accordance with all reasonable instructions and directions which the
Purchaser may give.
The Servicer shall execute and deliver all such
instruments and take all such action as the Purchaser may reasonably
request from time to time, in order to effectuate the purposes and to carry
out the terms of this Agreement.
ARTICLE IX - THE SERVICER
Section 1. Liability of the Servicer.
The Servicer agrees to indemnify the Purchaser and hold
it harmless from and against any and all claims, losses, damages,
penalties, fines, forfeitures, legal fees and related costs, judgments, and
any other costs, fees and expenses that the Purchaser may sustain in any
way related to the failure of the Servicer to perform its duties hereunder
and service the SAMs in strict compliance with the terms of this Agreement
and for breach of any representation or warranty of the Servicer contained
herein. The Purchaser shall immediately notify the Servicer if a claim is
made by a third party with respect to this Agreement or the SAMs. The
Servicer shall assume (with the consent of the Purchaser and with counsel
reasonably satisfactory to the Purchaser) the defense of any such claim and
pay all expenses in connection therewith, including counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be
entered against it or the Purchaser in respect of such claim but failure to
so notify the Servicer shall not limit its obligations hereunder. The
Servicer agrees that it will not enter into any settlement of any such
claim without the consent of the Purchaser unless such settlement includes
an unconditional release of the Purchaser from all liability that is the
subject matter of such claim. The provisions of this Section 9.1 shall
survive termination of this Agreement.
Section 2. Merger or Consolidation of the Servicer.
Except as otherwise expressly provided in this Agreement,
the Servicer shall keep in full effect its existence, rights and franchises
as a corporation, and shall obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement or any of the SAMs and to perform its
duties under this Agreement.
Any person into which the Servicer may be merged or
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Servicer shall be a party, or any Person
succeeding to the business of the Servicer, shall be the successor of the
Servicer hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding; provided, however, that the successor or
surviving Person shall be an institution (i) having a net worth of not less
than $25,000,000, (ii) if a depository institution, whose deposits are
insured by the FDIC through the BIF or the SAIF, and (iii) [which is a
Fannie Mae or Freddie Mac approved lender in good standing].
Section 3. Limitation on Liability of Servicer and Others.
Neither the Servicer nor any of the directors, officers,
employees or agents of the Servicer shall be under any liability to the
Purchaser for any action taken or for refraining from the taking of any
action in good faith pursuant to this Agreement, or for errors in judgment;
provided, however, that this provision shall not protect the Servicer or
any such person against any breach of warranties or representations made
herein, or failure to perform its obligations in compliance with any
standard of care set forth in this Agreement, or any liability which would
otherwise be imposed by reason of negligence or any breach of the terms and
conditions of this Agreement. The Servicer and any director, officer,
employee or agent of the Servicer may rely in good faith on any document of
any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder. The Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action which is
not incidental to its duties to service the SAMs in accordance with this
Agreement and which in its opinion may involve it in any expense or
liability; provided, however, that the Servicer may, with the consent of
the Purchaser undertake any such action which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto. In such event, the Servicer shall be entitled to
reimbursement from the Purchaser of the reasonable legal expenses and costs
of such action.
Section 4. Limitation on Resignation and Assignment by the Servicer.
With respect to the retention of the Servicer to service
the SAMs hereunder, the Servicer acknowledges that the Purchaser has acted
in reliance upon the Servicer's independent status, the adequacy of its
servicing facilities, plan, personnel, records and procedures, its
integrity, reputation and financial standing and the continuance thereof.
Without in any way limiting the generality of this Section, the Servicer
shall not either assign this Agreement or the servicing hereunder or
delegate its rights or duties hereunder or any portion thereof, or sell or
otherwise dispose of all or substantially all of its property or assets,
without the prior written approval of the Purchaser, which consent shall be
granted or withheld in the Purchaser's sole discretion; provided that the
Servicer may assign the Agreement and the servicing hereunder without the
consent of Purchaser to an affiliate of the Servicer to which all servicing
of the Servicer is assigned so long as (i) such affiliate is a Fannie Mae
or Freddie Mac approved servicer and (ii) if it is intended that such
affiliate be spun off to the shareholders of the Servicer, such affiliate
have a GAAP net worth of at least $10,000,000 and (iii) such affiliate
shall deliver to the Purchaser a certification pursuant to which such
affiliate shall agree to be bound by the terms and conditions of this
Agreement and shall certify that such affiliate is a Fannie Mae or Freddie
Mac approved servicer in good standing.
The Servicer shall not resign from the obligations and
duties hereby imposed on it as to any SAM except by mutual consent of the
Servicer and the Purchaser or upon the determination that its duties
hereunder are no longer permissible under applicable law and such
incapacity cannot reasonably be cured by the Servicer. Any such
determination permitting the resignation of the Servicer shall be evidenced
by an Opinion of Counsel to such effect delivered to the Purchaser which
Opinion of Counsel shall be in form and substance acceptable to the
Purchaser. No such resignation shall become effective until a successor
shall have assumed the Servicer's responsibilities and obligations
hereunder in the manner provided in Section 12.1.
Subject to the terms hereof (including release by the
Seller of such rights in the context of a sale by the Seller of a Portfolio
to the Purchaser pursuant to a Transfer Supplement and the transfer of such
rights by the Servicer in the context of a Pass-Through Transfer or Whole
Loan Transfer), the Servicer shall be prohibited from selling it servicing
rights, or transferring its servicing obligations, hereunder the life of
any SAM sold hereunder. The terms of any servicing agreement shall be
approved by the Purchaser, in its sole discretion.
ARTICLE X - DEFAULT
Section 1. Servicer Events of Default.
Each of the following shall constitute an Event of
Default on the part of the Servicer:
(1) any failure by the Servicer
to remit to any Collection Account, any payment required to be
made under the terms of this Agreement which failure continues
unremedied for one Business Day; or
(2) any failure by the Servicer
duly to observe or perform in any material respect any other of
the covenants or agreements on the part of the Servicer set
forth in this Agreement, any Transfer Supplement or in the
Custodial Agreement which continues unremedied for a period of
30 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the
Servicer by the Purchaser or by the Custodian; or
(3) any failure by the Servicer
to maintain any required licenses to do business in any jurisdiction
where the Mortgaged Property is located; or
(4) jurisdiction for the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, including bankruptcy, marshalling
of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been
entered against the Servicer and such decree or order shall
have remained in force undischarged or unstayed for a period of
60 days; or
(5) the Servicer shall consent
to the appointment of a conservator or receiver or liquidator
in any insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings of or relating to the
Servicer or of or relating to all or substantially all of its
property; or
(6) the Servicer shall admit
in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of any applicable
insolvency, bankruptcy or reorganization statute, make an
assignment for the benefit of its creditors, voluntarily
suspend payment of its obligations or cease its normal business
operations for [six] Business Days; or
(7) the Servicer or its parent
enters into a consent agreement or otherwise agrees in writing
with any federal or state regulatory agency or authority to
restrict its activities, if the default of such agreement by
the Servicer or its parent entitles such applicable federal or
state agency to place the Servicer in receivership or
conservatorship; or
(8) the Servicer's total capital
falls below fifty percent (50%) of any regulatory capital
requirement imposed by its principal supervisory regulatory
authority or its successor; or
(9) the Servicer ceases to be
approved by either Fannie Mae or Freddie Mac as a mortgage loan
seller and servicer for more than thirty days; or
(10) the Servicer attempts to
assign its right to servicing compensation hereunder or the
Servicer attempts, without the consent of the Purchaser, to
sell or otherwise dispose of all or substantially all of its
property or assets or to assign this Agreement or the servicing
responsibilities hereunder or to delegate its duties hereunder
or any portion thereof except as otherwise permitted herein.
In each and every such case, so long as an Event of
Default shall not have been remedied, in addition to whatsoever rights the
Purchaser may have at law or equity to damages, including injunctive relief
and specific performance, the Purchaser, by notice in writing to the
Servicer, may terminate all of the rights and obligations of the Servicer
under this Agreement and in and to the SAMs and the proceeds thereof other
than its rights to receive unpaid but accrued Servicing Fees.
Upon receipt by the Servicer of such written notice, all
authority and power of the Servicer under this Agreement, whether with
respect to the SAMs or otherwise, shall pass to and be vested in the
successor appointed pursuant to Section 12.1. Upon written request from the
Purchaser, the Servicer shall prepare, execute and deliver to the successor
entity designated by the Purchaser any and all documents and other
instruments, place in such successor's possession all Mortgage Files, and
do or cause to be done all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, including but not
limited to the transfer and endorsement or assignment of the SAMs and
related documents, at the Servicer's sole expense.
Section 2. Waiver of Defaults.
By a written notice, the Purchaser may waive any default
by the Servicer in the performance of its obligations hereunder and its
consequences. Upon any waiver of a past default, such default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver
shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived.
ARTICLE XI - TERMINATION
Section 1. Termination.
This Agreement shall terminate upon (a) the exercise by
the Purchaser of its rights required by Section 11.2 and (b) the final
payment or other liquidation (or any advance with respect thereto) (other
than the Commitment which shall terminate as provided in Article II hereof)
of the last SAM sold hereunder or the disposition of any REO Property with
respect to such SAM and the remittance of all funds due hereunder.
Section 2. Termination Without Cause.
The Purchaser may, at its sole option, terminate any
rights the Servicer may have hereunder, with or without cause, upon 30 days
written notice. Any such notice of termination shall be in writing and
delivered to the Servicer by registered mail as provided in Section 12.5 of
this Agreement. If the Purchaser so terminates the rights of the Servicer
without cause, the Purchaser shall pay the Servicer a termination fee equal
to the fair market value of the rights of the Servicer under this Agreement
at the time of termination, as mutually agreed upon between the Servicer
and the Purchaser. If the Servicer and the Purchaser are unable to so agree
within thirty days after receipt by the Servicer of the termination notice,
such fair market value shall be determined within thirty days thereafter by
an investment banking firm of national standing with principal offices in
New York City, which determination shall be final and binding upon the
Servicer and the Purchaser. Upon the termination of the Servicer's rights
under this Agreement, the Purchaser shall have the right to cause the
Servicer to enter into a servicing agreement or pooling and servicing
agreement the terms of which are substantially similar to the terms of this
Agreement.
ARTICLE XII - MISCELLANEOUS PROVISIONS
Section 1. Successor to Servicer.
Prior to termination of the Servicer's responsibilities
and duties under this Agreement pursuant to Section 10.4, 11.1 or 12.2, the
Purchaser shall succeed to such obligations or appoint a successor having
the characteristics set forth in clauses (i) through (iii) of Section 10.2
and which shall succeed to all rights and assume all of the
responsibilities, duties and liabilities of the Servicer under this
Agreement prior to the termination of Servicer's responsibilities, duties
and liabilities under this Agreement. In connection with such appointment
and assumption, the Purchaser may make such arrangements for the
compensation of such successor out of payments on SAMs as it and such
successor shall agree. In the event that the Servicer's duties,
responsibilities and liabilities under this Agreement should be terminated
pursuant to the aforementioned sections, the Servicer shall discharge such
duties and responsibilities during the period from the date it acquires
knowledge of such termination until the effective date thereof with the
same degree of diligence and prudence which it is obligated to exercise
under this Agreement and shall take no action whatsoever that might impair
or prejudice the rights or financial condition of its successor. The
resignation or removal of the Servicer pursuant to the aforementioned
sections shall not become effective until a successor shall be appointed
pursuant to this Section 12.1 and shall in no event relieve the Servicer of
the representations and warranties made pursuant to Sections 4.1 and 4.2
and the remedies available to the Purchaser under Sections 4.3 and 4.4, it
being understood and agreed that the provisions of such Sections 4.1, 4.2,
4.3 and 4.4 shall be applicable to the Servicer notwithstanding any such
sale, assignment, resignation or termination of the Servicer, or the
termination of this Agreement.
Any successor appointed as provided herein shall execute,
acknowledge and deliver to the Servicer and the Purchaser an instrument
accepting such appointment, wherein the successor shall make the
representations and warranties set forth in Section 4.1, except for
subsections [(i), (l) and (m)] thereof, whereupon such successor shall
become fully vested with all the rights, powers, duties, responsibilities,
obligations and liabilities of the Servicer, with like effect as if
originally named as a party to this Agreement. Any termination or
resignation of the Servicer or termination of this Agreement pursuant to
Section 10.4, 11.1 or 12.2 shall not affect any claims that the Purchaser
may have against the Servicer arising out of the Servicer's actions or
failure to act prior to any such termination or resignation.
The Servicer shall deliver promptly to the successor
servicer the funds in any Collection Account and Escrow Account and all
Mortgage Files and related documents and statements held by it hereunder
and the Servicer shall account for all funds and shall execute and deliver
such instruments and do such other things as may reasonably be required to
more fully and definitively vest in the successor all such rights, powers,
duties, responsibilities, obligations and liabilities of the Servicer.
Upon a successor's acceptance of appointment as such, the
Servicer shall notify the Purchaser by mail of such appointment in
accordance with the procedures set forth in Section 13.5.
Section 2. Amendment.
With respect to any SAM, this Agreement may only be
amended with the written consent of the Purchaser, and the Servicer in its
capacity as Seller and Servicer hereunder.
The costs and expenses associated with any such amendment
shall be borne by the party requesting the amendment.
Section 3. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS. THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 4. Duration of Agreement.
This Agreement shall continue in existence and effect
until terminated as herein provided. This Agreement shall continue
notwithstanding the Whole Loan Transfer or Pass-Through Transfer by the
Purchaser.
Section 5. Notices.
All demands, notices and communications hereunder shall
be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by registered mail, postage prepaid, addressed as
follows:
(i) if to ____:
Attention:
or such other address as may hereafter be furnished to the Purchaser
in writing by ____;
(ii) if to Purchaser:
Attention:
Section 6. Severability of Provisions.
If any one or more of the covenants, agreements,
provisions or terms of this Agreement shall be held invalid for any reason
whatsoever, 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.
Section 7. Relationship of Parties.
Nothing herein contained shall be deemed or construed to
create a partnership or joint venture between the parties hereto and the
services of the Servicer shall be rendered as an independent contractor and
not as agent for the Purchaser.
Section 8. Execution; Successors and Assigns.
This Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts,
each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement. This
Agreement shall inure to the benefit of and be binding upon the Servicer
and the Purchaser and their respective successors and assigns.
Section 9. Recordation of Assignments of Mortgage.
To the extent permitted by applicable law, each of the
Assignments of Mortgage 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 Mortgaged Properties are situated,
and in any other appropriate public recording office or elsewhere, such
recordation to be effected at the Seller's expense.
Section 10. Assignment by Purchaser.
Subject to the last sentence of this Section 13.10, the
Purchaser shall have the right, without the consent of the Seller, to
assign its interest under this Agreement with respect to a single SAM,
Portfolio of SAMs or all SAMs serviced hereunder to another Person. Upon
such assignment of rights and assumption of obligations, the assignee shall
accede to the rights and obligations hereunder of the Purchaser with
respect to such SAMs and the Purchaser as assignor shall be released from
all obligations hereunder with respect to such SAMs from and after the date
of such assignment and assumption. All references to the Purchaser in this
Agreement shall be deemed to include its assignee. Notwithstanding anything
contained in this Agreement to the contrary, the rights of the Purchaser to
indemnity from the Seller pursuant to Section 4.3, are not assignable and
shall inure only to the benefit of the Purchaser and to no other Person.
Section 11. Solicitation of Mortgagors.
The Seller and Servicer shall not knowingly conduct any
solicitations exclusively targeted to the Mortgagors for the purpose of
inducing or encouraging the early prepayment or refinancing of the related
Mortgage Loans. It is understood and agreed that promotions undertaken by
the Seller or the Servicer or any agent or affiliate of the Seller or the
Servicer which are directed to the general public at large or any Mortgagor
whose mortgage loan is serviced by the Seller or the Servicer, including,
without limitation, mass mailings based on commercially acquired mailing
lists, newspaper, radio and television advertisements shall not constitute
solicitation under this Section 12.11.
IN WITNESS WHEREOF, the Seller and the Purchaser have
caused their names to be signed hereto by their respective officers
thereunto duly authorized as of the day and year first above written.
BEAR STEARNS MORTGAGE
CAPITAL CORPORATION,
as Purchaser
By:_______________________________
Name:
Title:
[Seller/Servicer]
By:______________________________
Name:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the __ day of ________, 199_ before me, a Notary
Public in and for said State, personally appeared ________, known to me to
be ______________ of __________________, the __________ that executed the
within instrument and also known to me to be the person who executed it on
behalf of said __________, and acknowledged to me that such __________
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed
my office seal the day and year in this certificate first above written.
---------------------------
Notary Public
My Commission expires ________
STATE OF )
) ss.:
COUNTY OF )
On the __ day of _______, 199_ before me, a Notary Public
in and for said State, personally appeared __________, known to me to be
______________ of __________________, the __________ that executed the
within instrument and also known to me to be the person who executed it on
behalf of said __________, and acknowledged to me that such __________
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed
my office seal the day and year in this certificate first above written.
---------------------------
Notary Public
My Commission expires ________
EXHIBIT A
FORM OF SAM SCHEDULE
With respect to individual SAMs:
Loan Number Borrower SSN
Seller ID Number Co-Borrower SSN
Servicer ID Number Borrower Age
Borrower Name Co-Borrower Age
Co-Borrower Name Number of Borrowers
Street Address of Mortgaged Property First Time Homebuyer (Y/N)
City Borrower Gender
State Co-Borrower Gender
Zip Code Borrower Race
Property Type Co-Borrower Race
Number of Units Borrower Income
Original Term Co-Borrower Income
Original LTV Monthly Housing Expense
Orig Appraisal Value Monthly Total Debt
Date of Orig Appraisal Housing Ratio
Sales Price (if applicable) Debt Ratio
State Interest Rate (Note Rate) Automated Market Value
Market Rate Condo Class
Appreciation Share Condo Project Name
Note Date Condo Project Code
First Pay Date GSE Data for 2-4 Family
Stated Maturity Date Eligible Rents Unit 1
Monthly Payment No. of Bedrooms Unit 1
Original Balance Eligible Rents Unit 2
Interest Paid to Date as of Cut-Off No. of Bedrooms Unit 2
Actual UPB as of Cut-off Eligible Rents Unit 3
Scheduled UPB as of Cut-off No. of Bedrooms Unit 3
Servicing Fee Eligible Rents Unit 4
Net Rate No. of Bedrooms Unit 4
PMI Certificate Number Delinquency
PMI Insurer Delinquency Counter
Mort Loss Percent Last Distribution Date on which
a payment is applied to the
outstanding principal balance
of the SAM
Remittance Rate as of Cut-off
Loan Purpose Number of Borrowers
Documentation Type (Full/Alt Only Implied Market Rate for the SAM
Occupancy (Primary Res Only) FICO Score
Prepayment Year Built
With respect to any Portfolio of SAMs:
Number of SAMs Current outstanding principal
balance of the SAMs
Weighted average Appreciation Share Weighted average Stated Interest
Rate of the SAMs
Weighted average maturity of the SAMs
EXHIBIT B
CONTENTS OF EACH SERVICING FILE
With respect to each SAM, the Servicing File shall include each
of the following items, which shall be available for inspection by the
Purchaser, and which shall be retained by the Servicer in the Servicing
File or delivered to the Custodian pursuant to Sections 3.1 and 3.3 of the
Sale and Servicing Agreement to which this Exhibit is attached (the
"Agreement"):
(a) A copy of the Mortgage File
(b) The original of any power of attorney.
(c) A copy of the original hazard insurance policy
and, if required by law, flood insurance policy, in accordance with
Section 5.10 of the Agreement.
(d) Residential loan application.
(e) SAM closing statement.
(f) Verification of employment and income.
(g) Verification of acceptable evidence of source
and amount of downpayment.
(h) Credit report on the Mortgagor.
(i) Residential appraisal report.
(j) Photograph of the Mortgaged Property.
(k) Survey of the Mortgaged Property.
(l) A copy of each instrument necessary to complete
identification of any exception set forth in the exception schedule in the
title policy, i.e., map or plat, restrictions, easements, sewer agreements,
home association declarations, etc.
(m) All required disclosure statements.
(n) If available, termite report, structural
engineer's report, water potability and septic certification.
(o) Sales contract.
(p) Tax receipts, insurance premium receipts,
ledger sheets, payment history from date of origination, insurance claim files,
correspondence, current and historical computerized data files, and all other
processing, underwriting and closing papers and records which are customarily
contained in a SAM file and which are required to document the SAM or to
service the SAM.
In the event an Officer's Certificate of the Seller is
delivered to the Custodian because of a delay caused by the public
recording office in returning any recorded document, the Seller shall
deliver to the Custodian, within 180 days of the Closing Date, an Officer's
Certificate which shall (i) identify the recorded document, (ii) state that
the recorded document has not been delivered to the Custodian due solely to
a delay caused by the public recording office, (iii) state the amount of
time generally required by the applicable recording office to record and
return a document submitted for recordation, and (iv) specify the date the
applicable recorded document will be delivered to the Custodian. The Seller
shall be required to deliver to the Custodian the applicable recorded
document by the date specified in (iv) above. An extension of the date
specified in (iv) above may be requested from the Purchaser, which consent
shall not be unreasonably withheld.
EXHIBIT C
CONTENTS OF EACH MORTGAGE FILE
The Mortgage File for each SAM shall include each of the
following items, which shall be delivered to the Custodian pursuant to
Section 3.1 of the Sale and Servicing Agreement to which this Exhibit is
annexed (the "Agreement"):
(a) The original Mortgage Note bearing all intervening
endorsements, endorsed "Pay to the order of ___________, without recourse"
and signed in the name of the Seller by an authorized officer. If the SAM
was acquired by the Servicer in a merger, the endorsement must be by
"_______________, successor by merger to [name of predecessor]." If the SAM
was acquired or originated by the Servicer while doing business under
another name, the endorsement must be by "_______________ formerly known as
[previous name]." To the extent that there is no space on the face of the
Mortgage Note for endorsements, the endorsement may be contained on an
allonge, if state law so allows;
(b) The original of any guarantee executed in
connection with the Mortgage Note, if any;
(c) 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. If in connection with any SAM, the Seller cannot deliver
or cause to be delivered the original Mortgage with evidence of recording
thereon on or prior to the Closing Date because of a delay caused by the
public recording office where such Mortgage has been delivered for
recordation or because such Mortgage has been lost or because such public
recording office retains the original recorded Mortgage, the Seller shall
deliver or cause to be delivered to the Custodian, a photocopy of such
Mortgage, together with (i) in the case of a delay caused by the public
recording office, an Officer's Certificate of the Seller stating that such
Mortgage has been dispatched to the appropriate public recording office for
recordation and that the original recorded Mortgage or a copy of such
Mortgage certified by such public recording office to be a true and
complete copy of the original recorded Mortgage will be promptly delivered
to the Custodian upon receipt thereof by the Seller; or (ii) in the case of
a Mortgage where a public recording office retains the original recorded
Mortgage or in the case where a Mortgage is lost after recordation in a
public recording office, a copy of such Mortgage certified by such public
recording office to be true and complete copy of the original recorded
Mortgage;
(d) The originals of all assumption, modification,
consolidation or extension agreements, with evidence of recording thereon;
(e) Any rider executed in connection with the
related Mortgage Note or Mortgage;
(f) The original Assignment of Mortgage from the
Seller, either in blank or in such form as directed by the Purchaser, which
assignment shall be in form and substance acceptable for recording
certified by an authorized officer of the Seller to be a true and correct
copy thereof; the originals, with evidence of recording thereon or in the
case where a public recording office retains the original Assignment of
Mortgage, a copy certified by such public recording office to be a true and
complete copy of the original recorded Assignment of Mortgage shall be
delivered promptly upon receipt thereof by the Seller;
(g) The originals of all intervening assignments
of mortgage with evidence of recording thereon, including warehousing
assignments, if any, or if any such intervening assignment has not been
returned from the applicable recording office or has been lost or if such
public recording office retains the original recorded assignments of
mortgage, the Seller shall deliver or cause to be delivered to the
Custodian, a photocopy of such intervening assignment, together with (i) in
the case of a delay caused by the public recording office, an Officer's
Certificate of the Seller stating that such intervening assignment of
mortgage has been dispatched to the appropriate public recording office for
recordation and that such original recorded intervening assignment of
mortgage or a copy of such intervening assignment of mortgage certified by
the appropriate public recording office or by the title insurance company
that issued the title policy to be a true and complete copy of the original
recorded intervening assignment of mortgage will be promptly delivered to
the Custodian upon receipt thereof by the Seller; or (ii) in the case of an
intervening assignment where a public recording office retains the original
recorded intervening assignment or in the case where an intervening
assignment is lost after recordation in a public recording office, a copy
of such intervening assignment certified by such public recording office to
be a true and complete copy of the original recorded intervening
assignment;
(h) The Primary Mortgage Insurance Policy or
certificate of insurance where required pursuant to the Agreement;
(i) SAM closing statement (Form HUD-1) and any other
truth-in- lending or real estate settlement procedure forms required by
law;
(j) The original mortgagee title insurance policy
[or attorney's opinion of title and abstract of title];
(k) The original of any security agreement, chattel
mortgage or equivalent executed in connection with the Mortgage; and
(l) Such other documents as the Purchaser may
require.
EXHIBIT D-1
BEAR STEARNS MORTGAGE CAPITAL CORPORATION,
Purchaser
and
[Seller],
Seller
and
[Custodian],
Custodian
-------------------------
CUSTODIAL AGREEMENT
______ 1, 199_
-------------------------
Shared Appreciation Mortgage Loans
TABLE OF CONTENTS
Section 1 Definitions.......................................
Section 2 Delivery of Custodial Files.......................
Section 3 Initial Certification of the Custodian............
Section 4 Obligations of the Custodian......................
Section 5 Final Certification...............................
Section 6 Future Defects....................................
Section 7 Release for Servicing.............................
Section 8 Release for Payment...............................
Section 9 Fees of Custodian.................................
Section 10 Removal of Custodian..............................
Section 11 Transfer of Custodial Files upon Termination......
Section 12 Examination of Custodial Files....................
Section 13 Insurance of Custodian............................
Section 14 Counterparts......................................
Section 15 Periodic Statements...............................
Section 16 Governing Law.....................................
Section 17 Copies of Mortgage Documents......................
Section 18 No Adverse Interest of Custodian..................
Section 19 Termination by Custodian..........................
Section 20 Term of Agreement.................................
Section 21 Notices...........................................
Section 22 Successor and Assigns.............................
Section 23 Indemnification of Custodian......................
THIS AGREEMENT, dated as of _____1, by and among Bear
Stearns Mortgage Capital Corporation, a Delaware corporation having an
address at ________________________________ (the "Purchaser") and
____________________, a _______________ having an address at
________________________ (the "Seller"), and _________________, a
_____________ having an address at _______________________________ (the
"Custodian");
W I T N E S S E T H
WHEREAS, the Purchaser has agreed to purchase certain SAMs
(each, a "SAM") from the Seller as whole loans, pursuant to the terms and
conditions of a Sale and Servicing Agreement of even date herewith, between
the Purchaser and the Seller named therein (the "Sale and Servicing
Agreement");
WHEREAS, ____ is to service the SAMs pursuant to the terms and
conditions of the Sale and Servicing Agreement; and
WHEREAS, the Custodian is a ___________________________
regulated by _______________________________, and is otherwise authorized
to act as Custodian pursuant to this Agreement. The Purchaser desires to
have the Custodian take possession of the Mortgages and Mortgage Notes,
along with certain other documents specified herein, as the bailee of the
Purchaser and any future purchaser, including any applicable Trustee, in
accordance with the terms and conditions hereof.
NOW, THEREFORE, in consideration of the mutual undertakings
herein expressed, the parties hereto hereby agree as follows:
Section 1. Definitions.
-----------
Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Sale and Servicing Agreement.
Agreement: This Custodial Agreement and all amendments and
attachments hereto and supplements hereof.
Assignment of Mortgage: An assignment of the Mortgage,
notice of transfer or equivalent instrument in recordable form, sufficient
under the laws of the jurisdiction wherein the related Mortgaged Property
is located to reflect the sale of the Mortgage to the Purchaser, which
assignment, notice of transfer or equivalent instrument may be in the form
of one or more blanket assignments covering the SAMs secured by Mortgaged
Properties located in the same jurisdiction, if permitted by law.
Custodian: _________________________or any successor in
interest or assigns, or any successor to the Custodian under this Agreement
as herein provided.
Final Certification: A final certification as to each SAM or
Portfolio of SAMs, which Final Certification is delivered to the Purchaser
by the Custodian in the form annexed hereto as Exhibit D-3.
Initial Certification: An initial certification as to each
SAM or Portfolio of SAMs, which Initial Certification is delivered to the
Purchaser by the Custodian in the form annexed hereto as Exhibit D-2.
Mortgage: The mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a first lien on a first priority
ownership interest in an unsubordinated estate in fee simple in real
property securing the Mortgage Note.
Mortgage Note: The note or other evidence of the
indebtedness of a Mortgagor secured by a Mortgage.
Mortgage File: As to each SAM, documents which are part of
the Mortgage File which are delivered to the Custodian or which at any time
come into the possession of the Custodian.
Mortgaged Property: The real property securing repayment of
the debt evidenced by a Mortgage Note.
Person: Any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof.
Primary Mortgage Insurance Policy: A policy of primary
mortgage guaranty insurance issued by a Qualified Insurer, as required by
the Sale and Servicing Agreement with respect to certain SAMs.
Purchaser: Bear Stearns Mortgage Capital Corporation, or its
successor in interest or assigns.
Qualified Insurer: A mortgage guaranty insurance company
duly authorized and licensed where required by law to transact mortgage
guaranty insurance business and approved as an insurer by Fannie Mae.
SAM Schedule: A schedule of SAMs delivered in electronic
format to the Purchaser on the related Closing Date, such schedule setting
forth the following information with respect to each SAM: (1) the
identifying number for the SAM; (2) the Mortgagor's name; (3) the street
address of the Mortgaged Property including the state code; (4) a code
indicating whether the Mortgaged Property is a single family residence or a
2-4 family residence; (5) the original months to maturity or the remaining
months to maturity from the Cut-off Date, in any case based on the original
amortization schedule, and if different, the maturity expressed in the same
manner but based on the actual amortization schedule; (6) the LTV at
origination; (7) the Stated Interest Rate as of __________; (8) the
Appreciation Share; (9) the date on which the SAM was originated; (10) the
stated maturity date; (11) the amount of the Monthly Payment; (12) the last
Distribution Date on which a payment was actually applied to the
outstanding principal balance of the SAM; (13) the original principal
balance of the SAM; (14) the principal balance of the SAM as of the close
of business on the Cut-off Date, after deduction of payments of principal
due on or before the Cut-off Date, whether or not collected; (15) the
Remittance Rate as of the Cut-off Date; (16) the Primary Mortgage Insurance
Policy certificate number, if any; (17) the Primary Mortgage Insurance
Policy, if any, (18) the year the residence was originally built, (19) the
age, gender and social security number of the Mortgagor and any
co-Mortgagors, (20) a code indicating whether the Mortgagor is a first time
home buyer, (21) the total number of Mortgagors for any one Mortgaged
Property and (22) the Implied Market Rate for the SAM. With respect to any
Portfolio in the aggregate, the SAM Schedule shall set forth the following
information, as of the related Cut-off Date: (1) the number of SAMs; (2)
the current aggregate outstanding principal balance of the SAMs; (3) the
weighted average Stated Interest Rate of the SAMs; (4) the weighted average
Appreciation Share; and (5) the weighted average maturity of the SAMs.
Seller: __________________________ or its successor in
interest or assigns, or any successor to the Seller under the Sale and
Servicing Agreement as therein provided.
Servicer: ___________________________ or its successor in
interest or assigns, or any successor to the Servicer under the Sale and
Servicing Agreement as therein provided.
Section 2. Delivery of Mortgage Files.
--------------------------
The Seller has delivered and released to the Custodian the
following original documents pertaining to each of the SAMs identified in
the Mortgage File and SAM Schedule annexed to the Sale and Servicing
Agreement, a copy of which Mortgage File and SAM Schedule is annexed to the
Custodian's counterpart of this Agreement:
(a) the original Mortgage Note bearing all intervening
endorsements, endorsed "Pay to the order of , without recourse" and signed
in the name of the Seller by an authorized officer. If the SAM was acquired
by the Servicer in a merger, the endorsement must be by "_______________,
successor by merger to [name of predecessor]". If the SAM was acquired or
originated by the Servicer while doing business under another name, the
endorsement must be by "_______________ formerly known as [previous name]".
To the extent that there is no space on the face of the Mortgage Note for
endorsements, the endorsement may be contained on an allonge, if state law
so allows;
(b) the original of any guarantee executed in connection
with the Mortgage Note, if any;
(c) 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. If in connection with any SAM, the Seller cannot deliver or cause
to be delivered the original Mortgage with evidence of recording thereon on
or prior to the Closing Date because of a delay caused by the public
recording office where such Mortgage has been delivered for recordation or
because such Mortgage has been lost or because such public recording office
retains the original recorded Mortgage, the Seller shall deliver or cause
to be delivered to the Custodian, a photocopy of such Mortgage, together
with (i) in the case of a delay caused by the public recording office, an
Officer's Certificate of the Seller stating that such Mortgage has been
dispatched to the appropriate public recording office for recordation and
that the original recorded Mortgage or a copy of such Mortgage certified by
such public recording office to be a true and complete copy of the original
recorded Mortgage will be promptly delivered to the Custodian upon receipt
thereof by the Seller; or (ii) in the case of a Mortgage where a public
recording office retains the original recorded Mortgage or in the case
where a Mortgage is lost after recordation in a public recording office, a
copy of such Mortgage certified by such public recording office to be true
and complete copy of the original recorded Mortgage;
(d) the originals of all assumption, modification,
consolidation or extension agreements, with evidence of recording thereon;
(e) any rider executed in connection with the related
Mortgage Note or Mortgage;
(f) the original Assignment of Mortgage from the
Seller, either in blank or in such form as directed by the Purchaser, which
assignment shall be in form and substance acceptable for recording
certified by an authorized officer of the Seller to be a true and correct
copy thereof; the originals, with evidence of recording thereon or in the
case where a public recording office retains the original Assignment of
Mortgage, a copy certified by such public recording office to be a true and
complete copy of the original recorded Assignment of Mortgage shall be
delivered promptly upon receipt thereof by the Seller;
(g) the originals of all intervening assignments of
mortgage with evidence of recording thereon, including warehousing
assignments, if any, or if any such intervening assignment has not been
returned from the applicable recording office or has been lost or if such
public recording office retains the original recorded assignments of
mortgage, the Seller shall deliver or cause to be delivered to the
Custodian, a photocopy of such intervening assignment, together with (i) in
the case of a delay caused by the public recording office, an Officer's
Certificate of the Seller stating that such intervening assignment of
mortgage has been dispatched to the appropriate public recording office for
recordation and that such original recorded intervening assignment of
mortgage or a copy of such intervening assignment of mortgage certified by
the appropriate public recording office or by the title insurance company
that issued the title policy to be a true and complete copy of the original
recorded intervening assignment of mortgage will be promptly delivered to
the Custodian upon receipt thereof by the Seller; or (ii) in the case of an
intervening assignment where a public recording office retains the original
recorded intervening assignment or in the case where an intervening
assignment is lost after recordation in a public recording office, a copy
of such intervening assignment certified by such public recording office to
be a true and complete copy of the original recorded intervening
assignment;
(h) the Primary Mortgage Insurance Policy or certificate
of insurance where required pursuant to the Agreement;
(i) SAM closing statement (Form HUD-1) and any other
truth-in-lending or real estate settlement procedure forms required by law;
(j) the original mortgagee title insurance policy;
(k) the original of any security agreement, chattel
mortgage or equivalent executed in connection with the Mortgage; and
(l) such other documents as the Purchaser may require.
In the event an Officer's Certificate of the Seller is
delivered to the Custodian because of a delay caused by the public
recording office in returning any recorded document, the Seller shall
deliver to the Custodian, within 180 days of the Closing Date, an Officer's
Certificate which shall (i) identify the recorded document, (ii) state that
the recorded document has not been delivered to the Custodian due solely to
a delay caused by the public recording office, (iii) state the amount of
time generally required by the applicable recording office to record and
return a document submitted for recordation, and (iv) specify the date the
applicable recorded document will be delivered to the Custodian. The Seller
shall be required to deliver to the Custodian the applicable recorded
document by the date specified in (iv) above. An extension of the date
specified in (iv) above may be requested from the Purchaser.
From time to time, the Servicer shall forward to the
Custodian additional original documents pursuant to Section 3.1 or 3.3 of
the Sale and Servicing Agreement or additional documents evidencing an
assumption, modification, consolidation or extension of a SAM approved by
the Servicer, in accordance with Section 3.4 of the Sale and Servicing
Agreement. All such mortgage documents held by the Custodian as to each SAM
shall constitute the "Mortgage File."
Section 3. Initial Certification of the Custodian.
On or prior to and as a condition to each Closing Date, the
Custodian shall deliver to the Purchaser an Initial Certification to the
effect that the Custodian has received a Custodial File with respect to
each SAM on the applicable SAM Schedule and, as to each SAM, specifying any
document which has not been received.
Section 4. Obligations of the Custodian.
With respect to the Mortgage Note, the Mortgage and the
Assignment of Mortgage and other documents constituting each Custodial File
which is delivered to the Custodian or which come into the possession of
the Custodian, the Custodian is the custodian for and the bailee of the
Purchaser exclusively. The Custodian shall hold all mortgage documents
received by it constituting the Custodial File for the exclusive use and
benefit of the Purchaser, and shall make disposition thereof only in
accordance with the Agreement and the instructions furnished by the
Purchaser in writing. The Custodian shall segregate and maintain continuous
custody of all mortgage documents constituting the Custodial File in secure
and fireproof facilities in accordance with customary standards for such
custody.
Section 5. Final Certification.
Within 60 days after each Closing Date, the Custodian shall
ascertain that all documents referred to in paragraphs (a), (b), (c), (f),
(g), (l) and (m) and shall note whether the documents referred to in
paragraph (d) of Section 2 are in its possession, and shall deliver to the
Purchaser a Final Certification to the effect that, as to each SAM listed
in the SAM Schedule (other than any SAM paid in full or any SAM
specifically identified in such certification as not covered by such
certification): (i) all documents required to be delivered to it pursuant
to paragraphs (a), (b), (f), (g), (l) and (m) and shall note whether the
documents referred to in paragraph (d) of Section 2 of this Agreement are
in its possession; (ii) such documents have been reviewed by it and appear
regular on their face and relate to such SAM; (iii) based on its
examination and only as to the foregoing documents, the information set
forth in items (1), (2), (11), (12) and (16) of the SAM Schedule respecting
such SAM is correct; and (iv) each Mortgage Note has been endorsed as
provided in Section 2 of this Agreement. The Custodian shall not be
responsible except as expressly set forth in this agreement, to verify the
validity, sufficiency or genuineness of any document in any Custodial File.
Section 6. Future Defects.
During the term of this Agreement, if the Custodian
discovers any defect with respect to the Custodial File, the Custodian
shall give written specification of such defect to the Seller, the
Purchaser and any applicable Trustee.
Section 7. Release for Servicing.
From time to time and as appropriate for the foreclosure or
servicing of any of the SAMs, the Custodian is hereby authorized, upon
written receipt from the Servicer of a request for release of documents and
receipt in the form annexed hereto as Exhibit D-4, to release to the
Servicer the related Custodial File or the documents set forth in such
request and receipt to the Servicer. All documents so released to the
Servicer shall be held by the Seller in trust for the benefit of the
Purchaser in accordance with Section 3.1 of the Sale and Servicing
Agreement. The Servicer shall return to the Custodian the Custodial File or
other such documents when the Servicer's need therefor in connection with
such foreclosure or servicing no longer exists, unless the SAM shall be
liquidated in which case, upon receipt of an additional request for release
of documents and receipt certifying such liquidation from the Servicer to
the Custodian in the form annexed hereto as Exhibit D-4, the Servicer's
request and receipt submitted pursuant to the first sentence of this
Section 7 shall be released by the Custodian to the Servicer.
Section 8. Release for Payment.
Upon the repurchase or rejection of any SAM pursuant to
Article IV or Section 7.2 of the Sale and Servicing Agreement, or upon the
payment in full of any SAM, and upon receipt by the Custodian of the
Servicer's request for release of documents and receipt in the form annexed
hereto as Exhibit D-4 (which certification shall include a statement to the
effect that all amounts received in connection with such payment or
repurchase have been credited to the Collection Account as provided in the
Sale and Servicing Agreement), the Custodian shall promptly release the
related Custodial File to the Servicer.
Section 9. Fees of Custodian.
The Custodian shall charge such fees for its services under
this Agreement as are set forth in a separate agreement between the
Custodian and the Seller, the payment of which fees, together with the
Custodian's expenses in connection herewith, shall be solely the obligation
of the Seller.
Section 10. Removal of Custodian.
The Purchaser, with or without cause, or following a
resignation, removal or termination of the Servicer or an Event of Default
by the Servicer as defined under the Sale and Servicing Agreement, or upon
a failure by the Custodian to perform or observe any term of this
Agreement, may remove and discharge the Custodian from the performance of
its duties under this Agreement by written notice from the Purchaser to the
Custodian, with a copy to the Seller and the Servicer. Having given notice
of such removal, the Purchaser promptly shall appoint a successor Custodian
to act on behalf of the Purchaser by written instrument, one original
counterpart of which instrument shall be delivered to the Purchaser, with a
copy to the Seller and the Servicer and an original to the successor
Custodian. In the event of any such removal, the Custodian shall promptly
transfer to the successor Custodian, as directed, all Custodial Files being
administered under this Agreement, and shall assign the Mortgages and
endorse the Mortgage Notes to the successor Custodian if the endorsements
on the Mortgage Notes and the Assignments of Mortgages have been completed
in the name of the Custodian. In the event of any such appointment, the
Seller shall be responsible for the fees of the successor Custodian.
Section 11. Transfer of Mortgage Files Upon Termination.
If the Custodian is furnished evidence satisfactory to it
that the Sale and Servicing Agreement has been terminated as to any or all
of the SAMs, upon written request of the Purchaser and receipt of proof
satisfactory to the Custodian of the ownership of the SAMs, the Custodian
shall release to such Persons as the Purchaser shall designate the
Custodial Files relating to such SAMs as the Purchaser shall request.
Section 12. Examination of Mortgage Files.
Upon reasonable prior notice to the Custodian, the Purchaser
and its agents, accountants, attorneys and auditors will be permitted
during normal business hours to examine the Custodial Files, documents,
records and other papers in the possession of or under the control of the
Custodian relating to any or all of the SAMs.
Section 13. Insurance of Custodian.
At its own expense, the Custodian shall maintain at all
times during the existence of this Agreement and keep in full force and
effect fidelity insurance, theft of documents insurance, forgery insurance
and errors and omissions insurance. All such insurance shall be in amounts,
with standard coverage and subject to deductibles, all as is customary for
insurance typically maintained by banks which act as Custodian and in
amounts and with insurance companies reasonably acceptable to the
Purchaser. The minimum coverage under any such bond and insurance policies
shall be at least equal to the corresponding amounts required by Fannie Mae
in the Fannie Mae Guide. A certificate of the respective insurer as to each
such policy, with a copy of such policy attached, shall be furnished to the
Purchaser, upon request, containing the statement of the insurer or
endorsement evidencing that such insurance shall not terminate prior to
receipt by the Purchaser, by registered mail, of 30 days' prior written
notice thereof.
Section 14. Counterparts.
For the purpose of facilitating the execution 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
constitute and be one and the same instrument.
Section 15. Periodic Statements.
Within 10 days of each anniversary of the date of this
Agreement, or upon the request of the Purchaser at any other time, the
Custodian shall provide to the Purchaser a list of all the SAMs for which
the Custodian holds a Custodial File pursuant to this Agreement. Such list
may be in the form of a copy of the SAM Schedule with manual deletions to
specifically denote any SAMs paid off or repurchased since the date of this
Agreement.
SECTION 16. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS. THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 17. Copies of Mortgage Documents.
Upon the request of the Purchaser and at the cost and
expense of the Purchaser, the Custodian shall provide the Purchaser with
copies of the Mortgage Notes, Mortgages, Assignment of Mortgages and other
documents relating to one or more of the SAMs.
Section 18. No Adverse Interest of Custodian.
By execution of this Agreement, the Custodian represents and
warrants that it currently holds, and during the existence of this
Agreement shall hold, no adverse interest, by way of security or otherwise,
in any SAM, and hereby waives and releases any such interest which it may
have in any SAM as of the date hereof.
Section 19. Termination by Custodian.
The Custodian may terminate its obligations under this
Agreement upon at least 60 days' notice to the Seller, the Servicer, the
Purchaser. In the event of such termination, the Seller shall appoint a
successor Custodian, subject to approval by the Purchaser. The payment of
such successor Custodian's fees and expenses shall be solely the
responsibility of the Seller. Upon such appointment, the Custodian shall
promptly transfer to the successor Custodian, as directed, all Custodial
Files being administered under this Agreement and shall assign the
Mortgages and endorse the Mortgage Notes to the successor Custodian, if the
endorsements on the Mortgage Notes and the Assignments of Mortgage have
been completed in the name of the Custodian, or as otherwise directed by
the Purchaser.
Section 20. Term of Agreement.
Unless terminated pursuant to Section 11 or Section 19
hereof, this Agreement shall terminate upon the final payment or other
liquidation (or advance with respect thereto) of the last SAM or the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any SAM, and/or the final remittance of all funds due on the
Note. In such event all documents remaining in the Custodial Files shall be
released in accordance with the written instructions of the Purchaser.
Section 21. Notices.
All demands, notices and communications hereunder shall be
in writing and shall be deemed to have been duly given if personally
delivered at or mailed by registered mail, postage prepaid, addressed as
follows:
(i) if to the Seller or Servicer:
Attention:
(ii) if to Purchaser:
Attention:
(iii) if to the Custodian:
Attention:
Section 22. Successor and Assigns.
This Agreement shall inure to the benefit of the successors
and assigns of the parties hereto. The Purchaser may assign its rights
hereunder by delivering written notice to the Custodian that all or a
portion of its interest in the SAMs have been transferred and instructing
the Custodian to act for such transferee.
Section 23. Indemnification of Custodian.
The Servicer agrees to indemnify the Custodian for, and to
hold it harmless against, any loss, liability or expense incurred by the
Custodian (other than through the negligence, bad faith or willful
misconduct of the Custodian) arising out of, or in connection with, any
suit, claim or other action relating to the Custodian's performance of this
Agreement, provided that the Custodian shall have given the Servicer prompt
written notice of any claim after the Custodian shall have knowledge
thereof. While maintaining control over its own defense, the Custodian
shall cooperate and consult fully with the Servicer in preparing such
defense. The Servicer shall have the right, but not the obligation, to
assume control over the defense of any suit or other action for which there
is a potential liability of the Servicer hereunder. Notwithstanding
anything herein to the contrary, the Servicer shall not be liable for
settlement of any such claim by the Custodian made without the consent of
the Servicer, which consent shall not be unreasonably withheld.
The Custodian agrees to indemnify the Servicer for, and to
hold it harmless against, any loss, liability or expense incurred by the
Servicer (other than through the negligence, bad faith or willful
misconduct of the Servicer) arising out of, or in connection with, any
suit, claim or other action arising out of or relating to negligence, bad
faith or willful misconduct by the Custodian in its performance of this
Agreement, provided that the Servicer shall have given the Custodian prompt
written notice of any claim after the Servicer shall have knowledge
thereof. While maintaining control over its own defense, the Servicer shall
cooperate and consult fully with the Custodian in preparing such defense.
The Custodian shall have the right, but not the obligation, to assume
control over the defense of any suit or other action for which there is a
potential liability of the Custodian hereunder. Notwithstanding anything
herein to the contrary, the Custodian shall not be liable for settlement of
any such claim by the Servicer made without the consent of the Custodian,
which consent shall not be unreasonably withheld.
IN WITNESS WHEREOF, Bear Stearns Mortgage Capital
Corporation, the Purchaser and the Custodian have caused their names to be
duly signed hereto by their respective officers thereunto duly authorized,
all as of the date first above written.
BEAR STEARNS MORTGAGE
CAPITAL CORPORATION
(Purchaser)
By:_____________________________
Name:
Title:
[Servicer]
(Servicer)
By:_____________________________
Name:
Title:
[Custodian]
(Custodian)
By:_____________________________
Name:
Title:
EXHIBIT D-2
INITIAL CERTIFICATION
______________, [20__]
Bear Stearns Mortgage Capital Corporation
[Address]
Re: The Custodial Agreement, dated as of ______ 1,
[200_], by and among Bear Stearns Mortgage
Capital Corporation as the Purchaser,
______________________ as the Custodian, and
_____________________ as the ____, executed
pursuant to the Sale and Servicing Agreement,
Shared Appreciation Mortgages, dated of even
date therewith.
Ladies and Gentlemen:
In accordance with the provisions of Section 3 of the
above-referenced Custodial Agreement, the undersigned, as the Custodian,
hereby certifies that it has received a complete Custodial File with
respect to each SAM identified on the SAM Schedule with the exception of
the documents specified on Schedule A attached hereto.
[Custodian].
By:_____________________________
Name:
Title:
EXHIBIT D-3
FINAL CERTIFICATION
____________, [200_]
Bear Stearns Mortgage Capital Corporation
[Address]
Re: The Custodial Agreement, dated as of ____ 1,
[200_], by and among Bear Stearns Mortgage
Capital Corporation as the Purchaser,
___________________ as the Custodian, and
_____________________ as the _________, executed
pursuant to the Sale and Servicing Agreement,
Shared Appreciation Mortgages, _________, dated
of even date therewith.
Ladies and Gentlemen:
In accordance with the provisions of Section 5 of the
above-referenced Custodial Agreement, the undersigned, as the Custodian,
hereby certifies that as to each SAM listed in the SAM Schedule (other than
any SAM paid in full or any SAM listed on the attachment hereto) it has
reviewed the Custodial Files and has determined that (i) all documents
required to be delivered to it pursuant to the Custodial Agreement are in
its possession; (ii) such documents have been reviewed by it and appear
regular on their face and related to such SAM; (iii) based on its
examination and only as to the foregoing documents, the information set
forth in the SAM Schedule respecting such SAM is correct; and (iv) each
Mortgage Note has been endorsed as provided in Section 2 of the Custodial
Agreement except as noted on Schedule A attached hereto.
[Custodian]
By:_____________________________
Name:
Title:
EXHIBIT D-4
REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT
To:_________________________________[Address]
Re: The Custodial Agreement, dated as of _____ 1, [200_],
by and among Bear Stearns Mortgage Capital Corporation
as the Purchaser, _____________________as the
Custodian, and ________________________ as the
Servicer, executed pursuant to the Sale and Servicing
Agreement, Shared Appreciation Mortgages_______, dated
as of the date therewith.
In connection with the administration of the SAMs held by
you as the Custodian on behalf of the Purchaser, we request the release,
and acknowledge receipt, of the (Custodial File/[specify documents]) for
the SAM described below, for the reason indicated.
Mortgagor's Name, Address & Zip Code:
------------------------------------
SAM Number:
----------
Reason for Requesting Documents (check one)
-------------------------------
___1. SAM Paid in Full. (The Servicer hereby certifies that all
amounts received in connection therewith have been credited to
the Certificate Account as provided in the Sale and Servicing
Agreement.)
___2. SAM Repurchase Pursuant to Article IV or Section 7.2 of the
Sale and Servicing Agreement. (The Servicer hereby certifies
that the repurchase price has been credited to any Collection
Account as provided in the Sale and Servicing Agreement.)
___3. SAM Liquidated By ___________________. (The Servicer hereby
certifies that all proceeds of foreclosure, insurance,
condemnation or other liquidation have been finally received
and credited to any Collection Account pursuant to the Sale and
Servicing Agreement.)
___4. SAM in Foreclosure
___5. Other (explain)
If box 1, 2 or 3 above is checked, and if all or part of
the Custodial File was previously released to us, please release to us our
previous request and receipt on file with you, as well as any additional
documents in your possession relating to the specified SAM.
If box 4 or 5 above is checked, upon our return of all of
the above documents to you as the Custodian, please acknowledge your
receipt by signing in the space indicated below, and returning this form.
[Servicer],
as Servicer
By:________________________________
Name:
Title:
Date:
Acknowledgment of Documents returned to the Custodian:
[Custodian]
By:_____________________________
Name:
Title:
Date:
EXHIBIT E-1
FORM OF COLLECTION ACCOUNT CERTIFICATION
_____________________, [200_]
__________________________ hereby certifies that it has
established the account described below as a Collection Account pursuant to
Section 5.4 of the Sale and Servicing Agreement, dated as of ________1,
[200_], SAMs ______.
Title of Account: _______________________________ .
Account Number:
Address of office or branch of the ____ at which Account is
maintained:
[Servicer],
as Servicer
By:_____________________________
Name:
Title:
EXHIBIT E-2
FORM OF COLLECTION ACCOUNT LETTER AGREEMENT
_________________, [200_]
To:
(the "Depository")
As Servicer under the Sale and
Servicing Agreement, dated as of [Cut-off Date], the "Agreement"), we
hereby authorize and request you to establish an account, as a Collection
Account pursuant to Section 5.4 of the Agreement, to be designated as
"________________________________." All deposits in the account shall be
subject to withdrawal therefrom by order signed by the Servicer. You may
refuse any deposit which would result in violation of the requirement that
the account be fully insured as described below. This letter is submitted
to you in duplicate. Please execute and return one original to us.
[Servicer],
as Servicer
By:________________________________
Name:
Title:
Date:
The undersigned, as Depository, hereby
certifies that the above described account has been established under
Account Number __________, at the office of the Depository indicated above,
and agrees to honor withdrawals on such account as provided above. The full
amount deposited at any time in the account will be insured by the Federal
Deposit Insurance Corporation through the Bank Insurance Fund ("BIF") or
the Savings Association Insurance Fund ("SAIF").
Depository
By:________________________________
Name:
Title:
Date:
EXHIBIT F-1
FORM OF ESCROW ACCOUNT CERTIFICATION
__________________, [200_]
___________________________________ hereby certifies that it
has established the account described below as an Escrow Account pursuant
to Section 5.6 of the Sale and Servicing Agreement, dated as of _____1,
[200_].
Title of Account: "________________________ and various Mortgagors."
Account Number:
Address of office or branch of the ____ at which Account is
maintained:
[Servicer],
as Servicer
By:_____________________________
Name:
Title:
EXHIBIT F-2
FORM OF ESCROW ACCOUNT LETTER AGREEMENT
___________________, [200_]
To:
(the "Depository")
As Seller under the Sale and Servicing Agreement, dated as
of _____1, [200_] (the "Agreement"), we hereby authorize and request you to
establish an account, as an Escrow Account pursuant to Section 5.6 of the
Agreement, to be designated as "_____________________________." All
deposits in the account shall be subject to withdrawal therefrom by order
signed by the ____. You may refuse any deposit which would result in
violation of the requirement that the account be fully insured as described
below. This letter is submitted to you in duplicate. Please execute and
return one original to us.
[Servicer]
as Servicer
By:_____________________________
Name:
Title:
Date:
The undersigned, as Depository, hereby certifies that the above
described account has been established under Account Number ______, at the
office of the Depository indicated above, and agrees to honor withdrawals
on such account as provided above. The full amount deposited at any time in
the account will be insured by the Federal Deposit Insurance Corporation
through the Bank Insurance Fund ("BIF") or the Savings Association
Insurance Fund ("SAIF").
Depository
By:__________________________
Name:
Title:
Date:
EXHIBIT G
FORM OF MONTHLY REMITTANCE ADVICE
EXHIBIT H
FORM OF TRANSFER SUPPLEMENT
This TRANSFER SUPPLEMENT (the "Transfer Supplement") dated ,
between BEAR STEARNS MORTGAGE CAPITAL CORPORATION, a Delaware corporation,
located at 245 Park Avenue, New York, New York 10167 (the "Purchaser") and
, a , located at (the "Seller") and is made pursuant to the terms and
conditions of that certain Sale and Servicing Agreement (the "Agreement")
dated as of , 199,_ between the Seller and the Purchaser, the provisions of
which are incorporated herein as if set forth in full herein, as such terms
and conditions may be modified or supplemented hereby. All initially
capitalized terms used herein unless otherwise defined shall have the
meanings ascribed thereto in the Agreement.
The Purchaser hereby purchases from the Seller and the Seller
hereby sells to the Purchaser, all of the Seller's right, title and
interest in and to the shared appreciation mortgage loans (the "SAMs")
described on the SAM Schedule annexed hereto as Schedule I, all Primary
Mortgage Insurance Policies associated therewith, all Hazard Insurance
Policies associated therewith, all title policies, amendments, waivers,
guarantees and other documents in the Mortgage File, all other documents
noted in Section 3 hereof, and all proceeds of the foregoing pursuant to
and in accordance with the terms and conditions set forth in the Agreement,
as same may be supplemented or modified hereby. Hereinafter, the Seller
shall service the SAMs for the benefit of the Purchaser and all subsequent
transferees of the SAMs pursuant to and in accordance with the terms and
conditions set forth in the Agreement.
(1) Definitions
For purposes of the SAMs to be sold pursuant to this Transfer
Supplement, the following terms shall have the following meanings:
SAM: residential first lien shared appreciation
mortgage loan having a term of not more than
____ years, and which is listed on the SAM
Schedule.
Closing Date:
Cut-off Date:
Custodian:
Aggregate Principal Balance
(as of the Cut-Off Date) $
Initial Weighted Average
Remittance Rate: %.
Purchase Price Percentage That certain purchase price percentage
set forth in the letter of intent, dated
, 1999, between the Seller and the
Purchaser, as may be adjusted as setforth
therein.
[Servicing Fee Rate]: %.
[Appreciation Index] ; [ days for look back date.]
[Servicing Retained]
[Servicing Released]
(2) Additional Closing Conditions.
In addition to the conditions specified in the Agreement, the
obligation of each of the Seller and the Purchaser is subject to the
fulfillment, on or prior to the applicable Closing Date, of the following
additional conditions:
[None.]
(3) Additional Mortgage File Documents.
----------------------------------
In addition to the contents of the Mortgage File specified in
the Agreement, the following documents shall be delivered with respect to
the SAMs:
[None.]
(4) Additional Representations and Warranties.
In addition to the representations and warranties set forth in
the Agreement, as of the date hereof and as of the Closing Date, the Seller
makes the following additional representations and warranties to the
Purchaser with respect to each SAM to be sold on a Closing Date:
[None.]
5. Appraisal.
The Initial Appraisal Value of each Mortgaged Property is set
forth in Schedule I attached hereto. Such Appraisal was conducted in
accordance with the Mortgage Note. In addition, as set forth is the
Mortgage Notes, additional Appraisals will be conducted from time to time.
[None.]
6. Mortgage Termination Events
In addition to the Mortgage Termination Events specified in the related
Mortgage Notes, the following events will constitute Mortgage Termination
Events.
[None.]
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective duly authorized officers as of the date
first above written.
BEAR STEARNS MORTGAGE CAPITAL CORPORATION
By:______________________________________
Name:
Title:
[SELLER]
By:______________________________________
Name:
Title:
SCHEDULE I
LIST OF APPROVED APPRAISERS
SCHEDULE II
MORTGAGE TERMINATION EVENTS
Each Mortgage Note shall contain substantially the following Mortgage
Termination Events:
(a) Any transfer of any interest in the Mortgaged Property,
other than:
(i) a transfer by devise, descent, or operation of law on
the death of a joint tenant or tenant by the entirety;
(ii) a transfer to a relative resulting from the death of
the Mortgagor;
(iii) a transfer where the Mortgagor's spouse or children
become an owner of the Mortgaged Property;
(iv) a transfer resulting from a decree of a dissolution
of marriage, legal separation agreement, or from an
incidental property settlement agreement, by which the
Mortgagor's spouse becomes an owner of the Mortgaged
Property;
(v) a transfer into an inter vivos trust in which the
Mortgagor is and remains a beneficiary and which does not
relate to a transfer of rights of occupancy in the
property;
(vi) the creation of a lien or other encumbrance
subordinate to the Depositor's security instrument which
does not relate to a transfer of rights of occupancy in
the Mortgaged Property;
(vii) the creation of a purchase money security interest
for household appliances; or
(viii) any other transfer or disposition described in
regulations prescribed by the Office of Thrift
Supervision.
(b) Total taking of the Mortgaged Property as the result of any
condemning authority exercising rights of eminent domain;
(c) The commencement of foreclosure proceedings in connection
with any lien junior to the Note holder's security interest in the
Mortgaged Property;
(d) The voluntary or involuntary filing of any petition seeking
to extend to the Mortgagor the protection of any state or federal
bankruptcy law;
(e) No Mortgagor occupying the Mortgaged Property for a period
greater than 12 months or the rental of the Mortgaged Property;
(f) The repayment (including through refinancing) of the
principal amount of the SAM; and
(g) At the option of the Note Holder, a default by the
Mortgagor with respect to any amounts due (including any amounts required
to be escrowed), or any covenant or representation made, by the Mortgagor
under the Mortgage Note or the Mortgage.
SCHEDULE III
QUALIFIED MAJOR HOME IMPROVEMENTS
A Qualified Major Home Improvement is an improvement made to the
Mortgage Property which increases the value of the Mortgage Property and:
(a) is a major improvement having a minimum total project
value of the greater of $5,000 and 3% of the Original
Value of the Mortgaged Property or Adjusted Value, if one
exists;
(b) is completed within six months of the start date of the
Qualified Major Home Improvements; and
(c) excludes certain work or items, including, but not limited
to, the following:
(i) ordinary maintenance and repair, including the
replacement of roofing;
(ii) decorations, wallpaper, paint and the replacement of
appliances and floor coverings;
(iii) landscaping, plants, patios, decks, fences and sheds;
and
(iv) replacement or updating of existing systems such
as, heating, air conditioning, septic and wells.
"Original Value" is an amount used to calculate the Adjusted Value
and is:
(a) the lower of the purchase price of the property or the
Initial Appraisal Amount if the Mortgagor is purchasing
the property at the origination of the Note; or
(b) the Initial Appraisal Amount if the Mortgagor is
refinancing the property at the origination of the Note.
"Adjusted Value" is an amount equal to the Original Value (or if the
Original Value has been adjusted, the most recent Adjusted Value), minus
the sum of any adjustments for casualty or condemnations.
SCHEDULE IV
MORTGAGE NOTE
SCHEDULE V
MORTGAGE
EXHIBIT 4.2
SAMCO MORTGAGE SECURITIES CORP.,
SELLER,
,
MASTER SERVICER,
and
,
TRUSTEE
---------------------------------,
POOLING AND SERVICING AGREEMENT
Dated as of , 2000
--------------------------------
SAMCO Mortgage Securities Corp. Trust 2000-1
Mortgage Pass-Through Certificates
Series 2000-1
TABLE OF CONTENTS
Page
ARTICLE I
Definitions.................................................. 2
ARTICLE II
Conveyance of SAMs; Original Issuance of Certificates........34
Section 2.01 Conveyance of SAMs to Trustee.......................34
Section 2.02 Acceptance of SAMs by Trustee.......................36
Section 2.03 Representations, Warranties and Covenants
of the Master Servicer............................38
Section 2.03A. Representations, Warranties and Covenants
of the Seller.....................................40
Section 2.04 Substitution of SAMs................................41
Section 2.05 Representations and Warranties of the Trustee.......42
Section 2.06 Issuance of Certificates............................44
Section 2.07 Representations and Warranties Concerning
the Seller........................................44
ARTICLE III
Administration and Servicing of SAMs.........................47
Section 3.01 Master Servicer to Assure Servicing.................47
Section 3.02 Sub-Servicing Agreements Between Master
Servicer and Sub-Servicers........................48
Section 3.03 Successor Sub-Servicers.............................49
Section 3.04 Liability of the Master Servicer....................49
Section 3.05 Assumption or Termination of Sub-Servicing
Agreements by Trustee.............................50
Section 3.06 Collection of SAM Payments..........................51
Section 3.07 Collection of Taxes, Assessments and
Similar Items; Servicing Accounts.................52
Section 3.08 Access to Certain Documentation and
Information Regarding the SAMs....................53
Section 3.09 Maintenance of Primary Mortgage Insurance
Policies; Collection Thereunder...................54
Section 3.10 Maintenance of Hazard Insurance and Fidelity
Coverage..........................................54
Section 3.11 Due-on-Sale Clauses; Assumption Agreements..........57
Section 3.12 Realization Upon Defaulted SAMs.....................58
Section 3.13 Trustee to Cooperate; Release of Mortgage Files.....59
Section 3.14 Servicing and Master Servicing Compensation.........61
Section 3.15 Annual Statement of Compliance......................61
Section 3.16 Annual Independent Public Accountants'
Servicing Report..................................62
Section 3.17 REMIC-Related Covenants.............................63
Section 3.18 Additional Information..............................63
Section 3.19 Optional Purchase of Defaulted SAMs.................63
Section 3.20 Periodic Filings with the Securities and
Exchange Commission; Additional Information.......63
ARTICLE IV
Accounts.....................................................64
Section 4.01 Collection Accounts.................................64
Section 4.02 Distribution Account................................66
Section 4.03 Permitted Withdrawals and Transfers from
the Distribution Account..........................68
ARTICLE V
Certificates.................................................72
Section 5.01 Certificates........................................72
Section 5.02 Registration of Transfer and Exchange of
Certificates......................................76
Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates...82
Section 5.04 Persons Deemed Owners...............................82
Section 5.05 Transfer Restrictions on Residual Certificates......82
Section 5.06 Restrictions on Transferability of Private
Certificates......................................84
Section 5.07 ERISA Restrictions..................................85
Section 5.08 Rule 144A Information...............................86
ARTICLE VI
Payments to Certificateholders...............................87
Section 6.01 Distributions on the Certificates...................87
Section 6.02 [Reserved]..........................................89
Section 6.03 Allocation of Losses................................89
Section 6.04 [Reserved]..........................................92
Section 6.05 Payments............................................92
Section 6.06 Statements to Certificateholders....................92
Section 6.07 Reports to the Trustee and the Master Servicer......95
Section 6.08 Monthly Advances....................................98
Section 6.09 Compensating Interest Payments......................98
Section 6.10 Reports of Foreclosures and Abandonment
of Mortgaged Property.............................99
ARTICLE VII
The Master Servicer.........................................100
Section 7.01 Liabilities of the Master Servicer.................100
Section 7.02 Merger or Consolidation of the Master Servicer.....100
Section 7.03 Indemnification of the Trustee.....................100
Section 7.04 Limitation on Liability of the Master Servicer
and Others.......................................101
Section 7.05 Master Servicer Not to Resign......................102
Section 7.06 [Reserved].........................................102
Section 7.07 Sale and Assignment of Master Servicing............102
ARTICLE VIII
Default.....................................................104
Section 8.01 Events of Default..................................104
Section 8.02 Trustee to Act; Appointment of Successor...........106
Section 8.03 Notification to Certificateholders.................107
Section 8.04 Waiver of Defaults.................................107
Section 8.05 List of Certificateholders.........................107
ARTICLE IX
Concerning the Trustee......................................108
Section 9.01 Duties of Trustee..................................108
Section 9.02 Certain Matters Affecting the Trustee..............110
Section 9.03 Trustee Not Liable for Certificates or SAMs........112
Section 9.04 Trustee May Own Certificates.......................113
Section 9.05 Trustee's Fees and Expenses........................113
Section 9.06 Eligibility Requirements for Trustee...............113
Section 9.07 Insurance..........................................114
Section 9.08 Resignation and Removal of the Trustee.............114
Section 9.09 Successor Trustee..................................115
Section 9.10 Merger or Consolidation of Trustee.................116
Section 9.11 Appointment of Co-Trustee or Separate Trustee......116
Section 9.12 Master Servicer Shall Provide Information as
Reasonably Required..............................117
Section 9.13 Federal Information Returns and Reports to
Certificateholders...............................118
ARTICLE X
Termination.................................................120
Section 10.01 Termination Upon Repurchase by the Seller
or its Designee or Liquidation of All SAMs.......120
Section 10.02 Additional Termination Requirements................123
ARTICLE XI
Miscellaneous Provisions....................................125
Section 11.01 Intent of Parties..................................125
Section 11.02 Amendment..........................................125
Section 11.03 Recordation of Agreement...........................126
Section 11.04 Limitation on Rights of Certificateholders.........126
Section 11.05 Acts of Certificateholders.........................127
Section 11.06 [Reserved].........................................128
Section 11.07 Governing Law......................................128
Section 11.08 Notices............................................129
Section 11.09 Severability of Provisions.........................129
Section 11.10 Successors and Assigns.............................129
Section 11.11 Article and Section Headings.......................129
Section 11.12 Counterparts.......................................130
Section 11.13 Notice to Rating Agencies..........................130
EXHIBITS
Exhibit A-1 - Form of Face of Certificates
Exhibit A-2 - Form of Reverse of Certificates
Exhibit B- SAM Schedule
Exhibit C- Representations and Warranties of the Seller
Concerning the SAMs
Exhibit D- Form of Request for Release
Exhibit E- Form of Affidavit pursuant to Section 860E(e)(4)
Exhibit F-1 - Form of Investment Letter
Exhibit F-2 - Form of Rule 144A and Related Matters Certificate
Exhibit G- Form of Trustee's Initial Certification
Exhibit H- Form of Trustee's Final Certification
Exhibit I- Form of ERISA Letter for Class X Certificates
POOLING AND SERVICING AGREEMENT
Pooling and Servicing Agreement dated as of ,
2000, among , as the depositor (the "Depositor"), , as
master servicer (the "Master Servicer"), and, a banking association, as
trustee (the "Trustee").
PRELIMINARY STATEMENT
On or prior to the Closing Date, the Seller has acquired
the SAMs from , in its individual capacity and in its capacity as
trustee (" "). On the Closing Date, the Seller will sell the SAMs and
certain other property to the Trust Fund and receive in consideration therefor
Certificates evidencing the entire beneficial ownership interest in the
Trust Fund. will be the Master Servicer for the SAMs.
The Trustee shall make an election for the assets
included in the Trust Fund to be treated for federal income tax purposes as
a REMIC. On , 2000 (the "Startup Day"), all the Classes of Certificates
except for the Class R Certificate will be designated "regular interests"
in such REMIC. The Class R Certificates will be designated the "residual
interest" in such REMIC.
The SAMs will have an Outstanding Principal Balance as of
the Cut-off Date, after deducting all Scheduled Principal due on or before
the Cut-off Date, of $ . The initial principal amount of the Certificates
will not exceed such Outstanding Principal Balance.
In consideration of the mutual agreements herein
contained, the Seller, the Master Servicer and the Trustee agree as
follows:
ARTICLE I
Definitions
Whenever used in this Agreement, the following words and
phrases, unless otherwise expressly provided or unless the context
otherwise requires, shall have the meanings specified in this Article.
Account: The Distribution Account, the Collection
Accounts or the Servicing Accounts as the context may require.
Accrued Certificate Interest: For any Certificate (other
than a Class PO Certificate) for any Distribution Date, the interest
accrued during the related Interest Accrual Period at the applicable
Pass-Through Rate on the Current Principal Amount (or, in the case of a
Class X Certificate, the Notional Amount) of such Certificate immediately
prior to such Distribution Date, calculated on the basis of a 360-day year
consisting of twelve 30-day months, less (i) in the case of an
interest-bearing Senior Certificate, such Certificate's share of any Net
Interest Shortfall and, after the Cross-Over Date, the interest portion of
any Realized Losses and (ii) in the case of a Subordinate Certificate, such
Certificate's share of any Net Interest Shortfall and the interest portion
of any Realized Losses.
Additional Interest: With respect to any SAM, the amount
of, or manner in which, as the context requires, Additional Interest in
calculated in the applicable Mortgage Note.
Advancing Date: The Business Day preceding the related
Distribution Date.
Affiliate: As to any Person, any other Person
controlling, controlled by or under common control with such Person.
"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. "Controlled" and "Controlling" have
meanings correlative to the foregoing. The Trustee may conclusively presume
that a Person is not an Affiliate of another Person unless a Responsible
Officer of the Trustee has actual knowledge to the contrary.
Agreement: This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
Allocable Share: With respect to each Class of
Subordinate Certificates:
(a) as to any Distribution Date and amounts distributable pursuant
to clauses (i) and (iii) of the Subordinate Optimal Principal
Amount, the fraction, expressed as a percentage, the numerator
of which is the Current Principal Amount of such Class and the
denominator of which is the aggregate Current Principal Amount
of all Classes of Subordinate Certificates; and
(b) as to any Distribution Date and amounts distributable pursuant
to clause (ii), (iv) and (v) of the Subordinate Optimal
Principal Amount, and as to each Class of Subordinate
Certificates (other than the Class of Subordinate Certificates
having the lowest numerical designation as to which the Class
Prepayment Distribution Trigger shall not be applicable) for
which (x) the related Class Prepayment Distribution Trigger has
been satisfied on such Distribution Date, the fraction,
expressed as a percentage, the numerator of which is the
Current Principal Amount of such Class and the denominator of
which is the aggregate Current Principal Amount of all Classes
of Subordinate Certificates and (y) the related Prepayment
Distribution Trigger has not been satisfied on such
Distribution Date, 0%; provided that if on a Distribution Date,
the Current Principal Amount of any Class of Subordinate
Certificates for which the related Class Prepayment
Distribution Trigger was satisfied on such Distribution Date is
reduced to zero, any amounts distributed pursuant to this
clause (b), to the extent of such Class's remaining Allocable
Share, shall be distributed to the remaining Classes of
Subordinate Certificates which satisfy the Class Prepayment
Distribution Trigger and to the Subordinate Class having the
lowest numerical designation in reduction of their respective
Current Principal Amounts in the order of their numerical Class
designations.
Applicable Credit Rating: A credit rating of Aaa, in the
case of S&P or a credit rating of AAA, in the case of Fitch, for any
long-term deposit or security or a rating of A- 1+, in the case of S&P, or
F-1 in the case of Fitch, for any short-term deposit or security.
Applicable State Law: For purposes of Section 9.13(d),
the Applicable State Law shall be (a) the law of the State of New York; and
(b) the law of the State of , and (c) such other state law whose
applicability shall have been brought to the attention of the Trustee by
either (i) an Opinion of Counsel delivered to it, or (ii) written notice
from the appropriate taxing authority as to the applicability of such state
law.
Appraised Value: Means the Initial Appraised Value of a
SAM or the appraised value of any appraisal required pursuant to any SAM.
Appreciation Share: With respect to any Mortgage Note,
the percentage of appreciation in the value of the Mortgaged Property from
the date of origination of such SAM to the earlier of (i) the date on which
any Mortgage Termination Event occurs and (ii) the maturity date thereof
with respect to the related SAM that the Mortgagor must pay to the
Mortgagee.
Assumed Final Distribution Date: With respect to the
Certificates, , 20 .
Available Funds: With respect to any Distribution Date,
an amount equal to the aggregate of the following amounts with respect to
the SAMs: (a) all previously undistributed payments on account of principal
(including the principal portion of Scheduled Payments, Principal
Prepayments and the principal portion of Insurance Proceeds and Net
Liquidation Proceeds) and all previously undistributed payments on account
of interest and Additional Interest received on or after the Cut-off Date
and on or prior to the related Determination Date, (b) any Monthly Advances
(including Distribution Account Advances) and Compensating Interest
Payments by the Master Servicer with respect to such Distribution Date and
(c) any amount reimbursed by the Trustee pursuant to Subsection 4.02(d) in
connection with losses on Permitted Investments, except:
(i) all payments that were due on or before the
Cut-off Date;
(ii) all Principal Prepayments and Liquidation
Proceeds received after the applicable Prepayment Period;
(iii) all payments, other than Principal
Prepayments, that represent early receipt of Scheduled
Payments due on a date or dates subsequent to the related
Due Date;
(iv) amounts received on particular SAMs as late
payments of principal or interest and respecting which,
and to the extent that, there are any unreimbursed
Monthly Advances (including Distribution Account
Advances);
(v) amounts of Monthly Advances (including
Distribution Account Advances) determined to be
Nonrecoverable Advances;
(vi) amounts permitted to be withdrawn from the
Distribution Account pursuant to Subsection 4.03(a); and
(vii) amounts withdrawn by the Trustee pursuant to
Subsection 4.03(b) to pay the Trustee's Fee and expenses.
Balloon SAM: A SAM that provided on the Cut-off Date for
amortization on the basis of an amortization schedule extending beyond its
stated maturity by more than twelve months with a disproportionate
Scheduled Payment due on its stated maturity date equal to the remaining
principal balance of such SAM.
Balloon Payments: With respect to a Balloon SAM, the
principal portion of the Scheduled Payment due on its stated maturity equal
to the remaining principal balance of the Balloon SAM.
Bankruptcy Code: The United States Bankruptcy Code, as
amended as codified in 11 U.S.C. ss.101-1330.
Book-Entry Certificates: Initially, all Classes of
Certificates other than the Class X, Class R, Class ______, Class _____ and
Class _____ Certificates.
BSMCC: Bear Stearns Mortgage Capital Corporation.
Business Day: Any day other than (i) a Saturday or a
Sunday, or (ii) a day on which the New York Stock Exchange is closed or on
which banking institutions in New York City, ________, _________ or any
other jurisdiction in which the Corporate Trust Office or the principal
place of business of the Master Servicer is located are authorized or
obligated by law or executive order to be closed.
Certificate: Any mortgage pass-through certificate
evidencing a beneficial ownership interest in the Trust Fund signed and
countersigned by the Trustee in substantially the forms annexed hereto as
Exhibit A-1 and A-2, with the blanks therein appropriately completed.
Certificate Owner: Any Person who is the beneficial owner
of a Certificate registered in the name of the Depository or its nominee.
Certificate Register: The register maintained pursuant to
Section 5.02.
Certificateholder: A Holder of a Certificate.
Class: With respect to the Certificates, A, PO, X, B, C,
D, E, F, G and R.
Class PO Cash Shortfall: As defined in Section 6.01
(a)(C).
Class PO Deferred Amount: With respect to each
Distribution Date through the Cross-Over Date, the aggregate of all amounts
allocable on such Distribution Date to the Class PO Certificates in respect
of the principal portion of any Realized Losses on Discount SAMs and Class
PO Cash Shortfall, and all amounts previously allocated in respect of such
losses and such shortfall to the Class PO Certificates and not distributed
on prior Distribution Dates. No interest shall accrue on any Class PO
Deferred Amount.
Class PO Deferred Payment Writedown Amount: With respect
to any Distribution Date, the amount if any, distributed on such date in
respect of the Class PO Deferred Amount pursuant to Section 6.01(a)(A)
fourth.
Class PO Principal Distribution Amount: On each
Distribution Date, an amount, without duplication, equal to the sum of:
(i) the PO Percentage of all scheduled payments of
principal due on each Discount SAM on the related Due
Date as specified in the amortization schedule at the
time applicable thereto (after adjustments for previous
principal prepayments, but before any adjustment to such
amortization schedule by reason of any bankruptcy or
similar proceeding or any moratorium or similar waiver or
grace period);
(ii) the PO Percentage of the Scheduled Principal
Balance of each Discount SAM which was the subject of a
Voluntary Principal Prepayment in full received by the
Master Servicer during the applicable Prepayment Period;
(iii) the PO Percentage of all Voluntary Principal
Prepayments in part for each Discount SAM received during
the applicable Prepayment Period;
(iv) the lesser of (a) the PO Percentage of the sum
of (A) all Net Liquidation Proceeds allocable to
principal on each Discount SAM which became a Liquidated
SAM during the related Prepayment Period (other than a
Discount SAM described in the immediately following
clause (B)) and (B) the Scheduled Principal Balance of
each Discount SAM purchased by an Insurer from the
Trustee during the related Prepayment Period pursuant to
the related Primary Mortgage Insurance Policy, if any, or
otherwise; and (b) the PO Percentage of the sum of (A)
the Scheduled Principal Balance of each Discount SAM
which became a Liquidated SAM during the related
Prepayment Period (other than a Discount SAM described in
the immediately following clause (B)) and (B) the
Scheduled Principal Balance of each such SAM that was
purchased by an Insurer from the Trustee during the
related Prepayment Period pursuant to the related Primary
Mortgage Insurance Policy, if any, or otherwise; and
(v) the PO Percentage of the sum of (a) the
Scheduled Principal Balance of each Discount SAM or REO
Property which was repurchased by the Seller or a prior
transferor of such SAM on such Distribution Date
pursuant to Section 2.02 or 2.03(A)(b) or which was
purchased pursuant to Section 3.19 and (b) the excess, if
any, of the Scheduled Principal Balance of a Discount SAM
that has been replaced by the Seller or a prior
transferor of such SAM with a Substitute SAM pursuant to
Section 2.04 on such Distribution Date over the Scheduled
Principal Balance of such Substitute SAM.
Class Prepayment Distribution Trigger: For each Class of
Subordinate Certificates for any Distribution Date, the Class Prepayment
Distribution Trigger is satisfied if the fraction (expressed as a
percentage), the numerator of which is the aggregate Current Principal
Amount of such Class and each Class of Subordinate Certificates subordinate
thereto, if any, and the denominator of which is the Scheduled Principal
Balances of all of the SAMs as of the related Due Date, equals or exceeds
such percentage calculated as of the Closing Date.
Closing Date: ____________ __, 2000.
Code: The Internal Revenue Code of 1986, as amended.
Collection Account: A segregated account established and
maintained by the Master Servicer or any Sub-Servicer with respect to the
SAMs and with respect to REO Property in a Designated Depository
Institution for receipt of principal and interest and other amounts as
described in Section 4.01.
Compensating Interest Payments: As defined in Section 6.09.
Corporate Trust Office: The office of the Trustee at
which at any particular time its corporate trust business is administered,
which office, at the date of the execution of this Agreement, is located at
_____________________________, Attention:
Cross-Over Date: The first Distribution Date on which the
aggregate Current Principal Amount of the Subordinate Certificates has been
reduced to zero (giving effect to all distributions on such Distribution
Date).
Current Principal Amount: With respect to any Certificate
(other than a Class X Certificate) as of any Distribution Date, the initial
principal amount of such Certificate as reduced by (A) the sum of (i) all
amounts distributed on previous Distribution Dates on such Certificate with
respect to principal, (ii) the principal portion of all Realized Losses
allocated prior to such Distribution Date to such Certificate, and (iii) in
the case of a Subordinate Certificate, such Certificate's pro rata share,
if any, of the Subordinate Certificate Writedown Amount for previous
Distribution Dates. With respect to any Class of Certificates (other than
the Class X Certificates), the Current Principal Amount thereof will equal
the sum of the Current Principal Amounts of all Certificates in such Class.
Notwithstanding the foregoing, solely for purposes of giving consents,
directions, waivers, approvals, requests and notices, the Class R
Certificate after the Distribution Date on which it receives the
distribution of the last dollar of its original principal amount shall be
deemed to have a Current Principal Amount equal to its Current Principal
Amount on the day immediately preceding such Distribution Date.
Cut-off Date: ______________ __, 2000.
Cut-off Date Balance: $_______________
Debt Service Reduction: Any reduction of the Scheduled
Payments which a Mortgagor is obligated to pay with respect to a SAM as a
result of any proceeding under the Bankruptcy Code or any other similar
state law or other proceeding.
Debtor Relief Laws: Any applicable liquidation,
conservatorship, receivership, bankruptcy, insolvency, rearrangement,
moratorium, reorganization, or similar debtor relief laws affecting the
rights of creditors generally from time to time in effect.
Defaulted SAM: Any SAM as to which the Mortgagor has
failed to make unexcused payment in full of three or more consecutive
Scheduled Payments.
Deficient Valuation: With respect to any SAM, a valuation
of the Mortgaged Property by a court of competent jurisdiction in an amount
less than the then outstanding indebtedness under the SAM, which valuation
results from a proceeding initiated under the Bankruptcy Code or any other
similar state law or other proceeding.
Depository: The Depository Trust Company, the nominee of
which is Cede & Co., or any successor thereto.
Depository Agreement: The meaning specified in Subsection
5.01(a) hereof.
Depository Participant: A broker, dealer, bank or other
financial institution or other Person for whom from time to time the
Depository effects book-entry transfers and pledges of securities deposited
with the Depository.
Designated Depository Institution: A depository
institution (commercial bank, mutual savings bank or savings and loan
association) or trust company (which may include the Trustee), the deposits
of which are insured by the FDIC or Bank Insurance Fund to the extent
provided by law or the Federal Home Loan Bank of Cincinnati.
Determination Date: The 10th day of the month preceeding
the Distribution Date, or if such day is not a Business Day, the preceding
Business Day.
Discount Mortgage Loan: Any SAM with a Remittance Rate
less than _____ per annum.
Distribution Account: The account or accounts created and
maintained pursuant to Section 4.02, which shall be denominated
"__________________ as Trustee f/b/o holders of Structured Asset Mortgage
Investments Trust 2000-1, Mortgage Pass-Through Certificates, Series 2000-1
- - Distribution Account."
Distribution Account Advance: As of any Determination
Date, the amount on deposit in a Collection Account which is not required
to be transferred to the Distribution Account for distribution during the
calendar month in which such Determination Date occurs but which is
deposited in the Distribution Account and used to make a distribution to
Certificateholders during such calendar month on account of Scheduled
Payments on the SAMs due on the Due Date for such month not being paid on
or before such Determination Date except insofar as such unpaid amounts are
the result of application of the Relief Act.
Distribution Date: The 25th day of any month, beginning
in the month immediately following the month of the Closing Date, or, if
such 25th day is not a Business Day, the Business Day immediately
following.
DTC Custodian: _________________________, or its
successors in interest as custodian for the Depository.
Due Date: With respect to each SAM, the date in each
month on which its Scheduled Payment is due if such due date is the first
day of a month and otherwise is deemed to be the first day of the following
month.
Due Period: With respect to any Distribution Date, the
period commencing on the second day of the month preceding the month in
which the Distribution Date occurs and ending at the close of business on
the first day of the month in which the Distribution Date occurs.
Eligible Account:
(i) maintained with a depository institution the
debt obligations of which (or in the case of a depository
institution that is the principal subsidiary of a holding
company, the obligations of such holding company) are
rated in one of the two highest rating categories by
either Rating Agency,
(ii) an account or accounts the deposits in which
are fully insured by the Federal Deposit Insurance
Corporation (the "FDIC"),
(iii) an account or accounts the deposits in which
are insured by the FDIC (to the limits established by the
FDIC), and the uninsured deposits in which are invested
in Eligible Investments held in the name of the Trustee,
or
(iv) an account or accounts otherwise acceptable to
each Rating Agency.
ERISA: The Employee Retirement Income Security Act of
1974, as amended.
Event of Default: An event described in Section 8.01.
Excess Liquidation Proceeds: To the extent that such
amount is not required by law to be paid to the related Mortgagor, the
amount, if any, by which Liquidation Proceeds with respect to a Liquidated
SAM exceed the sum of (i) the Outstanding Principal Balance of such SAM and
accrued but unpaid interest at the related Stated Interest Rate through the
last day of the month in which the related Liquidation Date occurs, plus
(ii) related Liquidation Expenses.
Fannie Mae: Fannie Mae (formerly the Federal National
Mortgage Association) or any successor thereto.
FDIC: Federal Deposit Insurance Corporation or any
successor thereto.
Fitch: Fitch IBCA, Inc.
Fractional Undivided Interest: With respect to any Class
of Certificates (other than the Class X Certificates), the fractional
undivided interest evidenced by any Certificate of such Class, the
numerator of which is the Current Principal Amount of such Certificate and
the denominator of which is the Current Principal Amount of such Class.
With respect to the Class X Certificates, the fractional undivided interest
evidenced by any Certificate of such Class the numerator of which is the
Notional Amount applicable to such Certificate and the denominator of
which is the Notional Amount of the applicable Class. With respect to the
Certificates in the aggregate, the fractional undivided interest evidenced
by each of the Class X and Class R Certificates will be deemed to equal 1%
multiplied by a fraction the numerator of which is the Current Principal
Amount or Notional Amount of each such Certificate and the denominator of
which is the aggregate Current Principal Amount or Notional Amount of each
such Class and (ii) a Certificate of any other Class will be deemed to
equal 98% multiplied by a fraction, the numerator of which is the Current
Principal Amount of such Certificate and the denominator of which is the
Current Principal Amount of all the Certificates.
Freddie Mac: Freddie Mac, formerly the Federal Home Loan
Mortgage Corporation, or any successor thereto.
Funds Transfer Date: The Business Day prior to the
related Distribution Date in any month.
Global Certificate: Any Private Certificate registered in
the name of the Depository or its nominee, beneficial interests in which
are reflected on the books of the Depository or on the books of a Person
maintaining an account with such Depository (directly or as an indirect
participant in accordance with the rules of such Depository). As of the
Closing Date there will be no Global Certificates.
Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, subject to Subsections
11.02(b) and 11.05(e), solely for the purpose of giving any consent
pursuant to this Agreement, any Certificate registered in the name of the
Seller, the Master Servicer, a Sub-Servicer, if any, or the Trustee, or any
Affiliate thereof shall be deemed not to be outstanding and the Fractional
Undivided Interest evidenced thereby shall not be taken into account in
determining whether the requisite percentage of Fractional Undivided
Interests necessary to effect any such consent has been obtained.
Implied Market Rate: With respect to any SAM, a typical
market interest rate for a comparable single-family mortgage product having
the same principal terms (e.g., the same maturity and same LTV) but not
having a shared appreciation mortgage feature.
Indemnified Persons: The Trustee, its officers,
directors, agents and employees and any separate or co-trustee and its
officers, directors, agents and employees.
Independent: When used with respect to any specified
Person, this term means that such Person (a) is in fact independent of the
Seller or the Master Servicer and of any Affiliate of the Seller or the
Master Servicer, (b) does not have any direct financial interest or any
material indirect financial interest in the Seller or the Master Servicer,
or any Affiliate of the Seller or the Master Servicer, and (c) is not
connected with the Seller or the Master Servicer, or any Affiliate as an
officer, employee, promoter, underwriter, trustee, partner, director or
person performing similar functions.
Indexed Appreciation Payment: With respect to any
Portfolio, [to come].
Individual Certificate: Any Private Certificate
registered in the name of the Holder other than the Depository or its
nominee.
Initial Appraised Value: The amount set forth in an
appraisal made in connection with the origination of the related SAM as the
value of the Mortgaged Property.
Institutional Accredited Investor: Any Person meeting the
requirements of Rule 501 (a)(1), (2), (3) or (7) of Regulation D under the
Securities Act or any entity all the equity holders in which come within
such paragraphs.
Insurance Policy: With respect to any SAM, any Primary
Mortgage Insurance Policy, standard hazard insurance policy, flood
insurance policy or title insurance policy.
Insurance Proceeds: Amounts paid by the insurer under any
Insurance Policy covering any SAM or Mortgaged Property other than amounts
required to be paid over to the Mortgagor pursuant to law or the related
Mortgage Note or Security Instrument and other than amounts used to repair
or restore the Mortgaged Property or to reimburse Insured Expenses.
Insured Expenses: Expenses covered by any Insurance
Policy.
Insurer: Any issuer of an Insurance Policy.
Interest Accrual Period: With respect to each
Distribution Date, for each Class of interest bearing Certificates, the
calendar month preceding the month in which the Distribution Date occurs,
commencing in ___________, 2000.
Interest Shortfall: With respect to any Distribution Date
and each SAM that during the related Prepayment Period was the subject of a
Voluntary Principal Prepayment, or constitutes a Relief Act SAM, an amount
determined as follows:
(a) partial principal prepayments: The difference between (i) one
month's interest at the applicable Remittance Rate on the
amount of such prepayment and (ii) the amount of interest for
the calendar month of such prepayment (adjusted to the
applicable Remittance Rate) received at the time of such
prepayment;
(b) principal prepayments in full received during the relevant
Prepayment Period: The difference between (i) one month's
interest at the applicable Remittance Rate on the Scheduled
Principal Balance of such SAM immediately prior to such
prepayment and (ii) the amount of interest for the calendar
month of such prepayment (adjusted to the applicable Remittance
Rate) received at the time of such prepayment; and
(c) Relief Act SAMs: As to any Relief Act SAM, the excess of (i) 30
days' interest (or, in the case of a principal prepayment in
full, interest to the date of prepayment) on the Scheduled
Principal Balance thereof (or, in the case of a principal
prepayment in part, on the amount so prepaid) at the related
Remittance Rate over (ii) 30 days' interest (or, in the case of
a principal prepayment in full, interest to the date of
prepayment) on such Scheduled Principal Balance (or, in the
case of a Principal Prepayment in part, on the amount so
prepaid) at the Remittance Rate required to be paid by the
Mortgagor as limited by application of the Relief Act.
Investment Letter: The letter to be furnished by each
Institutional Accredited Investor which purchases any Class of Private
Certificates in connection with such purchase, substantially in the form
set forth as Exhibit F-1 hereto.
Liquidated SAM: Any defaulted SAM as to which the Master
Servicer has determined that all amounts it expects to recover from or on
account of such SAM have been recovered.
Liquidation Date: With respect to any Liquidated SAM, the
date on which the Master Servicer has certified that such SAM has become a
Liquidated SAM.
Liquidation Expenses: With respect to a SAM in
liquidation, unreimbursed expenses paid or incurred by or for the account
of the Master Servicer and not recovered by the Master Servicer under any
Primary Mortgage Insurance Policy for reasons other than the Master
Servicer's failure to ensure the maintenance of or compliance with a
Primary Mortgage Insurance Policy, such expenses including (a) property
protection expenses, (b) property sales expenses, (c) foreclosure and sale
costs, including court costs and reasonable attorneys' fees, and (d)
similar expenses reasonably paid or incurred in connection with
liquidation.
Liquidation Proceeds: Cash received in connection with
the liquidation of a defaulted SAM, whether through trustee's sale,
foreclosure sale, Insurance Proceeds, condemnation proceeds or otherwise.
Loan Summary and Remittance Report: The report to be
submitted by the Master Servicer to the Trustee pursuant to Subsection
6.07(b).
Loan-to-Value Ratio: The fraction, expressed as a
percentage, the numerator of which is the original principal balance of the
related SAM and the denominator of which is the Original Value of the
related Mortgaged Property.
Loss Allocation Limitation: The meaning specified in
Section 6.03(b)(B) hereof.
Master Servicer: With respect to the SAMs, _______, or
its successor in interest, or any successor master servicer with respect to
the SAMs appointed as herein provided.
Master Servicing Fee: As to any SAM and Distribution
Date, an amount equal to the product of (i) the Scheduled Principal Balance
of such SAM as of the Due Date in the preceding calendar month and (ii) the
Master Servicing Fee Rate. Any Master Servicing Fee in excess of [ ]% per
annum will be set aside by the Master Servicer to pay for lender funded
mortgage insurance and will not be treated as servicing compensation to the
Master Servicer and will not be available to make Compensating Interest
Payments.
Master Servicing Fee Rate: With respect to each SAM, the
per annum rate set forth on the SAM Schedule which shall be between [ ]%
and [ ]% per annum.
Monthly Advance: The advance (including a Distribution
Account Advance) required to be made by the Master Servicer on the related
Advancing Date pursuant to Section 6.08.
Moody's: Moody's Investors Service, Inc., and its
successors and assigns.
Mortgage File: The mortgage documents listed in Section
2.01(b) pertaining to a particular SAM and any additional documents
required to be added to the Mortgage File pursuant to this Agreement.
Mortgage Note: The originally executed note or other
evidence of the indebtedness of a Mortgagor under the related SAM.
Mortgage Termination Event: With respect to any SAM, the
events specified in the related Mortgage Note (which shall substantially
conform with the events shown on Schedule __ hereto as provided herein) as
to which the Mortgagor is required to fully repay its liability thereunder.
Mortgaged Property: Land and improvements securing the
indebtedness of a Mortgagor under the related SAM or, in the case of REO
Property, such REO Property.
Mortgagor: The obligor on a Mortgage Note.
Net Interest Shortfall: With respect to any Distribution
Date, the Interest Shortfall, if any, for such Distribution Date net of
Compensating Interest Payments made with respect to such Distribution Date.
Net Liquidation Proceeds: As to any Liquidated SAM,
Liquidation Proceeds net of (i) Liquidation Expenses which are payable
therefrom to the Master Servicer in accordance with this Agreement and (ii)
unreimbursed advances by the Master Servicer or a Sub-Servicer and Monthly
Advances including Distribution Account Advances.
Non-Discount SAM: Any SAM with a Remittance Rate equal to
or greater than [ ]% per annum.
Non-PO Percentage: With respect to any Discount SAM, the
Remittance Rate thereof divided by [ ]%.
Nonrecoverable Advance: Any advance (i) which was
previously made or is proposed to be made by the Master Servicer and (ii)
which, in the good faith judgment of the Master Servicer, as evidenced by
an Officer's Certificate, will not or, in the case of a proposed advance,
would not, be ultimately recoverable by the Master Servicer from
Liquidation Proceeds, Insurance Proceeds or future payments on the SAM for
which such advance was made.
Notional Amount: On any Distribution Date, with respect
to the Class X Certificates an amount equal to the aggregate of the
Scheduled Principal Balances of the Non- Discount SAMs as of the related
Due Date.
Offered Certificate: Any Class A, Class PO, Class X,
Class B, Class C, Class D and Class R Certificate.
Offered Subordinate Certificates: The Class B, Class C
and Class D Certificates.
Officer's Certificate: A certificate signed by the
Chairman of the Board, the Vice Chairman of the Board, the President or a
Vice President or Assistant Vice President or other authorized officer of
the Master Servicer and delivered to the Trustee, as required by this
Agreement.
Opinion of Counsel: A written opinion of counsel who is
or are acceptable to the Trustee and who, unless required to be Independent
(an "Opinion of Independent Counsel"), may be internal counsel for the
Master Servicer.
Original Subordinate Principal Balance: The sum of the
aggregate Current Principal Amounts of each Class of Subordinate
Certificates as of the Cut-off Date.
Original Value: The lesser of (i) the Appraised Value or
(ii) sales price of a Mortgaged Property at the time of origination of a
SAM, except that in instances where either (i) or (ii) is unavailable, the
other may be used to determine Original Value, or if both (i) and (ii) are
unavailable, Original Value may be determined from other sources reasonably
acceptable to the Trustee.
Outstanding SAM: With respect to any Due Date, a SAM
which, prior to such Due Date, was not the subject of a Principal
Prepayment in full, did not become a Liquidated SAM and was not purchased
pursuant to Sections 2.02, 2.03A or 3.19 or replaced pursuant to Section
2.04.
Outstanding Principal Balance: As of the time of any
determination, the principal balance of a SAM remaining to be paid by the
Mortgagor, or, in the case of an REO Property, the principal balance of the
related SAM remaining to be paid by the Mortgagor at the time such property
was acquired by the Trust Fund less any Net Insurance Proceeds with respect
thereto to the extent applied to principal.
Pass-Through Rate: As to each Class of Certificates,
other than the Class PO Certificates, the rate of interest set forth, or
determined as provided with respect thereto, in Section 5.01. Any monthly
calculation of interest at a stated rate shall be based upon annual
interest at such rate divided by twelve.
Permitted Investments: Any one or more of the following
obligations or securities held in the name of the Trustee for the benefit
of the Certificateholders:
(i) direct obligations of, and obligations the
timely payment of which are fully guaranteed by the
United States of America or any agency or instrumentality
of the United States of America the obligations of which
are backed by the full faith and credit of the United
States of America;
(ii) (a) demand or time deposits, federal funds or
bankers' acceptances issued by any depository institution
or trust company incorporated under the laws of the
United States of America or any state thereof (including
the Trustee acting in its commercial banking capacity)
and subject to supervision and examination by federal
and/or state banking authorities, provided that the
commercial paper and/or the short-term debt rating and/or
the long-term unsecured debt obligations or deposits of
such depository institution or trust company at the time
of such investment or contractual commitment providing
for such investment have the Applicable Credit Rating or
better from each Rating Agency and (b) any other demand
or time deposit or certificate of deposit that is fully
insured by the Federal Deposit Insurance Corporation;
(iii) repurchase obligations with respect to (a)
any security described in clause (i) above or (b) any
other security issued or guaranteed by an agency or
instrumentality of the United States of America, the
obligations of which are backed by the full faith and
credit of the United States of America, in either case
entered into with a depository institution or trust
company (acting as principal) described in clause (ii)(a)
above where the Trustee holds the security therefor;
(iv) securities bearing interest or sold at a
discount issued by any corporation (including the
Trustee) incorporated under the laws of the United States
of America or any state thereof that have the Applicable
Credit Rating or better from each Rating Agency at the
time of such investment or contractual commitment
providing for such investment; provided, however, that
securities issued by any particular corporation will not
be Permitted Investments to the extent that investments
therein will cause the then outstanding principal amount
of securities issued by such corporation and held as part
of the Trust to exceed 10% of the aggregate Outstanding
Principal Balances and amounts of all the SAMs and
Permitted Investments held as part of the Trust;
(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 one year after the date of
issuance thereof) having the Applicable Credit Rating or
better from each Rating Agency at the time of such
investment;
(vi) a Reinvestment Agreement issued by any bank,
insurance company or other corporation or entity;
(vii) any other demand, money market or time
deposit, obligation, security or investment as may be
acceptable to each Rating Agency as evidenced in writing
by each Rating Agency to the Trustee; and
(viii) any money market funds (including, without
limitation, BT Institutional Treasury Money Fund) the
collateral of which consists of obligations fully
guaranteed by the United States of America or any agency
or instrumentality of the United States of America the
obligations of which are backed by the full faith and
credit of the United States of America (which may include
repurchase obligations secured by collateral described in
clause (i) and having the Applicable Credit Rating or
better from each Rating Agency;
Securities Legend: "THIS CERTIFICATE HAS NOT BEEN AND
WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS. THE HOLDER HEREOF,
BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY BE
REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH
THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON THAT THE HOLDER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING
FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT
THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3) IN CERTIFICATED FORM TO
AN "INSTITUTIONAL ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF IN RULE
501(a)(1), (2), (3) or (7) OF REGULATION D UNDER THE ACT OR ANY ENTITY IN
WHICH ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS PURCHASING NOT
FOR DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE
RECEIPT BY THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN
THE AGREEMENT AND (B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE
ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH
CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES
AND ANY OTHER APPLICABLE JURISDICTION.
Person: Any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
Physical Certificates: Initially, the Class X
Certificates, the Private Certificates and the Residual Certificate.
Plan: As defined in Section 5.07(a).
PO Percentage: With respect to any Discount SAM, the
fraction, expressed as a percentage, equal to [ ]% minus the Remittance
Rate thereof divided by [ ]%; and with respect to any Non-Discount SAM, 0%.
Prepayment Period: With respect to any SAM and any
Distribution Date, the calendar month preceding the month of such
Distribution Date.
Primary Mortgage Insurance Policy: Any primary mortgage
guaranty insurance policy issued in connection with a SAM which provides
compensation to a Mortgage Note holder in the event of default by the
obligor under such Mortgage Note or the related Security Instrument, or any
replacement policy therefor.
Principal Prepayment: Any payment (whether partial or
full) or other recovery of principal on a SAM which is received in advance
of its scheduled Due Date to the extent that it is not accompanied by an
amount as to interest representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment,
including Insurance Proceeds and the purchase price in connection with any
purchase of a SAM, any cash deposit in connection with the substitution of
a SAM, and the principal portion of Net Liquidation Proceeds.
Private Certificate: Any Class B, Class C or Class D
Certificate.
QIB: A Qualified Institutional Buyer as defined in Rule
144A promulgated under the Securities Act.
Qualified Insurer: Any insurance company duly qualified
as such under the laws of the state or states in which the related
Mortgaged Property or Mortgaged Properties is or are located, duly
authorized and licensed in such state or states to transact the type of
insurance business in which it is engaged and approved as an insurer by the
Master Servicer, so long as the claims paying ability of which is
acceptable to the Rating Agencies for pass-through certificates having the
same rating as the Certificates rated by the Rating Agencies as of the
Closing Date.
Rating Agencies: S&P and Moody's.
Rating Agency Eligible Account: An account, including one
maintained with the Trustee, which either (i) is a trust account maintained
with the corporate trust department of a depository institution or trust
company (including, without limitation, the Trustee) organized under the
laws of the United States of America or any one of the states thereof or
the District of Columbia which is not affiliated with the Master Servicer,
any Sub-Servicer or any other master servicer other than the Trustee, (ii)
is maintained with an entity which is an institution whose deposits are
insured by the FDIC or the Bank Insurance Fund, the unsecured and
uncollateralized long-term debt obligations of which shall be rated "A" or
higher by S&P and "A" or higher by Fitch, or one of the two highest
short-term ratings by each Rating Agency, and which is either (a) a federal
savings association duly organized, validly existing and in good standing
under the federal banking laws, (b) an institution duly organized, validly
existing and in good standing under the applicable banking laws of any
state, (c) a national banking association under the federal banking laws,
(d) a principal subsidiary of a bank holding company, or (e) the Federal
Home Loan Bank of ___________ or (iii) otherwise meets the requirements of
each Rating Agency for the maintenance of the ratings on the Certificates.
Realized Loss: Any (i) Deficient Valuation or (ii) as to
any Liquidated SAM, the positive amount, if any, of (x) the Outstanding
Principal Balance of such Liquidated SAM plus accrued and unpaid interest
thereon at the Stated Interest Rate through the last day of the month of
such liquidation less (y) the related Net Liquidation Proceeds with respect
to such SAM.
Record Date: With respect to any Distribution Date, the
close of business on the last Business Day of the month immediately
preceding the month of such Distribution Date.
Reinvestment Agreements: One or more reinvestment
agreements, acceptable to the Rating Agencies, from a bank, insurance
company or other corporation or entity (including the Trustee).
Relief Act: The Soldiers' and Sailors' Civil Relief Act
of 1940, as amended.
Relief Act SAM: Any SAM as to which the Scheduled Payment
thereof has been reduced due to the application of the Relief Act.
REMIC: A real estate mortgage investment conduit, as
defined in the Code.
REMIC Assets: That group of assets contained in the Trust
Fund designated as a REMIC consisting of (i) the SAMs, (ii) the
Distribution Account, (iii) any REO Property and (iv) any proceeds of the
foregoing.
REMIC Opinion: An Opinion of Independent Counsel, to the
effect that the proposed action described therein would not, under the
REMIC Provisions, (i) cause the REMIC Assets to fail to qualify as a REMIC
while any regular interest in such REMIC is outstanding, (ii) result in a
tax on prohibited transactions or (iii) constitute a taxable contribution
after the Startup Day.
REMIC Provisions: The provisions of the federal income
tax law relating to REMICs, which appear at Sections 860A through 860G of
the Code, and related provisions and regulations promulgated thereunder, as
the foregoing may be in effect from time to time.
Remittance Rate: With respect to each SAM, the annual
rate of interest remitted to the Master Servicer, equal to the Stated
Interest Rate minus the sum of (i) the Master Servicing Fee Rate and
Trustee Fee and (ii) any Retained Yield.
REO Property: A Mortgaged Property acquired in the name
of the Trustee, for the benefit of Certificateholders, by foreclosure or
deed-in-lieu of foreclosure in connection with a defaulted SAM.
Repurchase Price: With respect to any SAM (or any
property acquired with respect thereto) required to be repurchased pursuant
to Section 2.02 or 2.03A an amount equal to the sum of (i) the Scheduled
Principal Balance of the SAM, plus (ii) interest on such Scheduled
Principal Balance at the Remittance Rate from the date on which interest
has last been paid up to, and not including, the date of repurchase, less
amounts received from or on behalf of the Mortgagor in respect of such
repurchased SAM which are being held in the Distribution Account for
distribution in the month of repurchase, plus (iii) the greater of (a) the
Indexed Appreciation Payment or (b) the Implied Market Rate times the
accrued interest on the Outstanding Principal Balance on the related SAM
since the most recent interest payment on such SAM Principal Prepayment,
plus (iv) expenses reasonably incurred or to be incurred by the Master
Servicer in respect of the breach or defect giving rise to the repurchase
obligation, including any expenses arising out of the repurchase obligation
and any negative cost of carrying the SAM incurred by the Master Servicer
during the period prior to it being repurchased by the Seller.
Request for Release: A request for release in the form
attached hereto as Exhibit D.
Required Insurance Policy: With respect to any SAM, any
insurance policy which is required to be maintained from time to time under
this Agreement with respect to such SAM.
Residual Certificate: The Class R Certificate.
Responsible Officer: Any officer assigned to the
corporate trust department or similar department of the Trustee (or any
successor division or department thereto), and also, with respect to a
particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
Retained Yield: Any additional fees or payments made by a
Mortgagor that the Master Servicer is entitled to and is not part of the
Master Servicing Fee.
Rule 144A Certificate: The certificate to be furnished by
each purchaser of a Private Certificate which is a Qualified Institutional
Buyer as defined under Rule 144A promulgated under the Securities Act,
substantially in the form set forth as Exhibit F-2 hereto.
SAM: A share appreciation SAM transferred and assigned to
the Trustee pursuant to Section 2.01 or Section 2.04 and held as a part of
the Trust Fund, as identified in the SAM Schedule, including a Mortgage
Loan the property securing which has become an REO Property.
SAMCO: SAMCO Mortgage Securities Corp.
SAM Schedule: The schedule, attached hereto as Exhibit B
with respect to the SAMs and as amended from time to time to reflect the
repurchase or substitution of SAMs pursuant to this Agreement.
"S&P": Standard & Poor's, a division of The McGraw-Hill
Companies, Inc., or its successors in interest.
"Sale and Servicing Agreement": Those certain sale and
servicing agreements between BSMCC and each seller named thereto a list of
which is attached as Schedule ___ hereto.
Scheduled Payment: With respect to any SAM and any month,
the scheduled payment or payments of principal and interest due during such
month on such SAM which either is payable by a Mortgagor in such month
under the related Mortgage Note or, in the case of REO Property, would
otherwise have been payable under the related Mortgage Note.
Scheduled Principal: The principal portion of any
Scheduled Payment.
Scheduled Principal Balance: With respect to any SAM on
any Distribution Date, (i) the unpaid principal balance of such SAM as of
the close of business on the related Due Date (i.e., taking account of the
principal payment to be made on such Due Date and irrespective of any
delinquency in its payment), as specified in the amortization schedule at
the time relating thereto (before any adjustment to such amortization
schedule by reason of any bankruptcy or similar proceeding occurring after
the Cut-off Date (other than a Deficient Valuation) or any moratorium or
similar waiver or grace period) less (ii) any Principal Prepayments
(including the principal portion of Net Liquidation Proceeds) received
during or prior to the related Prepayment Period; provided that the
Scheduled Principal Balance of a Liquidated SAM is zero.
Securities Act: The Securities Act of 1933, as amended.
Subordinate Certificates: The Class B, Class C, Class D,
Class _, Class _ and Class _ Certificates.
Security Instrument: A written instrument creating a
valid first lien on a Mortgaged Property securing a Mortgage Note, which
may be any applicable form of mortgage, deed of trust, deed to secure debt
or security deed, including any riders or addenda thereto.
Seller: SAMCO Mortgage Securities Corp., a Delaware
corporation, or its successors in interest.
Senior Certificates: The Class A, Class PO, Class X and
Class R Certificates.
Senior P&I Certificates: The Senior Certificates other
than the Class PO Certificates.
Senior P&I Optimal Principal Amount: As to any
Distribution Date, an amount equal to the sum, without duplication, of the
following (but in no event greater than the aggregate Current Principal
Amounts of the Senior P&I Certificates immediately prior to such
Distribution Date):
(i) the Senior Percentage of the Non-PO Percentage
of all scheduled payments of principal allocated to the
Scheduled Principal Balance due on each Outstanding SAM
on the related Due Date as specified in the amortization
schedule at the time thereto (after adjustments for
previous Principal Prepayments but before any adjustment
to such amortization schedule by reason of any bankruptcy
or similar proceeding or any moratorium or similar waiver
or grace period);
(ii) the Senior Prepayment Percentage of the Non-PO
Percentage of all Voluntary Principal Prepayments in part
received during the related Prepayment Period with
respect to each SAM together with the Senior Prepayment
Percentage of the Non-PO Percentage of the Scheduled
Principal Balance of each SAM which was the subject of a
Voluntary Principal Prepayment in full during the related
Prepayment Period;
(iii) the lesser of (a) the Senior Prepayment
Percentage of the Non-PO Percentage of the sum of (A) all
Net Liquidation Proceeds allocable to principal received
in respect of each SAM which became a Liquidated SAM
during the related Prepayment Period (other than SAMs
described in the immediately following clause (B)) and
(B) the Scheduled Principal Balance of each such SAM
purchased by an Insurer from the Trustee during the
related Prepayment Period, pursuant to the related
Primary Mortgage Insurance Policy, if any, or otherwise;
and (b) the Senior Percentage of the Non-PO Percentage of
the sum of (A) the Scheduled Principal Balance of each
SAM which became a Liquidated SAM during the related
Prepayment Period (other than the SAMs described in the
immediately following clause (B)) and (B) the Scheduled
Principal Balance of each such SAM that was purchased by
an Insurer from the Trustee during the related Prepayment
Period pursuant to the related Primary Mortgage Insurance
Policy, if any, or otherwise,
(iv) the Senior Prepayment Percentage of the Non-PO
Percentage of the Scheduled Principal Balance of each SAM
or REO Property which was purchased by the Seller or a
prior transferor of such SAM on such Distribution Date
pursuant to Section 2.02 or 2.03A(b) or which was
purchased pursuant to Section 3.19; and
(v) the Senior Prepayment Percentage of the Non-PO
Percentage of the excess, if any, of the Scheduled
Principal Balance of a SAM that has been replaced by the
Seller or a prior transferor of such SAM with a
Substitute SAM pursuant to Section 2.04 on such
Distribution Date over the Scheduled Principal Balance of
such Substitute SAM.
Senior Percentage: Initially ______ %. On any
Distribution Date, the lesser of (i) 100% and (ii) the percentage (carried
to six places rounded up) obtained by dividing the aggregate Current
Principal Amounts of all the Senior P&I Certificates immediately preceding
such Distribution Date by the aggregate Scheduled Principal Balance of the
SAMs (other than the PO Percentage thereof) as of the beginning of the
related Due Period.
Senior Prepayment Percentage: On any Distribution Date
occurring during the periods set forth below, as follows:
Period (dates inclusive) Senior Prepayment Percentage
____________, 1999 - 100%
___________, 200_
____________, 200_ - Senior Percentage plus 70% of the
___________, 200_ Subordinate Percentage
____________, 200_ - Senior Percentage plus 60% of the
___________, 200_ Subordinate Percentage
____________, 200_ - Senior Percentage plus 40% of the
___________, 200_ Subordinate Percentage
____________, 200_ - Senior Percentage plus 20% of the
___________, 200_ Subordinate Percentage
____________, 200_ and thereafter Senior Percentage.
(i) the Subordinate Prepayment Percentage of the
Non-PO Percentage of the sum of (a) the Scheduled
Principal Balance of each SAM which was purchased by the
Seller or a prior transferor of such SAM on such
Distribution Date pursuant to Section 2.02 or 2.03A(b) or
which was purchased pursuant to Section 3.19 and (b) the
difference, if any, between the Scheduled Principal
Balance of a SAM that has been replaced by the Seller or
a prior transferor of such SAM with a substitute SAM
pursuant to Section 2.04 on such Distribution Date over
the Scheduled Principal Balance of such substitute SAM;
and
(ii) on the Distribution Date on which the Current
Principal Amounts of the Senior P&I Certificates have all
been reduced to zero, 100% of any Senior P&I Optimal
Principal Amount.
Servicing Account: The separate account(s) created and
maintained by the Master Servicer or each Sub-Servicer with respect to the
SAMs or with respect to REO Property in a Designated Depository Institution
for collection of taxes, assessments, insurance premiums and comparable
items as described in Section 3.07.
Servicing Advances: All reasonable and customary "out of
pocket" costs and expenses incurred in the performance by the Master
Servicer or any Sub-Servicer of its servicing obligations, including, but
not limited to, the cost of (i) the preservation, restoration and
protection of the Mortgaged Property, (ii) any enforcement or judicial
proceedings, including foreclosures, (iii) the management and liquidation
of the REO Property, including reasonable fees paid to any independent
contractor in connection therewith, (iv) compliance with the obligations
under Section 3.07 or 3.10, and (v) in connection with the liquidation of a
SAM, expenditures relating to the purchase or maintenance of the first lien
on the Mortgaged Property pursuant to Section 3.12, all of which reasonable
and customary out-of-pocket costs and expenses are reimbursable to the
Master Servicer or any Sub-Servicer to the extent provided in Sections
4.02(b) and 4.03(b).
Servicing Officer: Any officer of the Master Servicer or
of an agent or independent contractor through which all or part of the
Master Servicer's master servicing responsibilities are carried out,
involved in, or responsible for, the administration and servicing of the
SAMs whose name and specimen signature appear on a list of servicing
officers furnished to the Trustee by the Master Servicer as such list may
from time to time be amended in accordance with the foregoing.
Startup Day: __________ __, 2000.
Stated Interest Rate: The annual rate at which interest
accrues from time to time on any SAM pursuant to the related Mortgage Note,
which rate as of the Cut-off Date is equal to the "Stated Interest Rate"
set forth with respect thereto on the SAM Schedule.
Subordinate Prepayment Percentage: On any Distribution
Date, 100% minus the Senior Prepayment Percentage, except that on any
Distribution Date after the Current Principal Amounts of the Senior
Certificates have each been reduced to zero, the Subordinate Prepayment
Percentage will equal 100%.
Subordinate Certificate Writedown Amount: As to any
Distribution Date, the amount by which (a) the sum of the Current Principal
Amounts of all of the Certificates (after giving effect to the distribution
of principal and the allocation of applicable Realized Losses and any
applicable Class PO Deferred Payment Writedown Amount in reduction of the
Current Principal Amounts of such Certificates on such Distribution Date)
exceeds (b) the aggregate Scheduled Principal Balances of the SAMs on the
Due Date related to such Distribution Date.
Subordinate Optimal Principal Amount: As to any
Distribution Date, an amount equal to the sum, without duplication, of the
following (but in no event greater than the aggregate Current Principal
Amounts of the Subordinate Certificates immediately prior to such
Distribution Date):
(i) the Subordinate Percentage of the Non-PO
Percentage of the principal portion of all Monthly
Payments due on each Outstanding SAM on the related Due
Date, as specified in the amortization schedule at the
time applicable thereto (after adjustment for previous
Principal Prepayments but before any adjustment to such
amortization schedule by reason of any bankruptcy or
similar proceeding or any moratorium or similar waiver or
grace period);
(ii) the Subordinate Prepayment Percentage of the
Non-PO Percentage of each Voluntary Principal Payment in
part during the related Prepayment Period with respect to
each SAM and the Subordinate Prepayment Percentage of the
Non-PO Percentage of the Scheduled Principal Balance of
each SAM that was the subject of a Voluntary Principal
Prepayment in full during the related Prepayment Period;
(iii) the excess, if any, of the Non-PO Percentage
of (A) all Net Liquidation Proceeds allocable to
principal received during the related Prepayment Period
over (B) the sum of the amounts distributable pursuant to
clause (iii) of the definition of Senior P&I Optimal
Principal Amount and clause (iv) of the definition of the
Class PO Distribution Amount on such Distribution Date;
Substitute SAM: A SAM tendered to the Trustee pursuant to
Section 2.04, in each case, in the opinion of the Master Servicer, (i)
which has an Outstanding Principal Balance not materially greater nor
materially less than the SAM for which it is to be substituted; (ii) which
has a Stated Interest Rate and Remittance Rate within 25 basis points of
the SAM for which it is being substituted; (iii) which has a maturity date
not greater than and not more than one year less than that of the SAM for
which it is being substituted and not later than the latest maturity date
of any SAM; (iv) which is of the same property type and occupancy type as
such SAM; (v) which has a Loan-to-Value Ratio within 10 basis points of the
Loan-to-Value Ratio of the SAM for which it is being substituted ; (vi)
which is current in payment of principal and interest as of the date of
substitution; (vii) as to which the payment terms do not vary in any
material respect from the payment terms of the SAM for which it is to be
substituted and (viii) which has an Appreciation Share equal to the SAM for
which it is being substituted, and complies with the representations and
warranties of the Sale and Servicing Agreement.
Sub-Servicing Agreement: The written contract between the
Master Servicer and a Sub-Servicer and any successor Sub-Servicer relating
to servicing and administration of certain SAMs as provided in Section 3.02
Subordinate Percentage: On any Distribution Date, 100%
minus the Senior Percentage, initially [ ]%.
Uninsured Cause: Any cause of damage to a Mortgaged
Property or REO Property such that the complete restoration of such
Mortgaged Property or REO Property is not fully reimbursable by the hazard
insurance policies required to be maintained pursuant to Section 3.10,
without regard to whether or not such policy is maintained.
Voluntary Principal Prepayment: With respect to any
Distribution Date, any Principal Prepayment received from the related
Mortgagor on a SAM.
Sub-Servicer: Any Person with which the Master Servicer
has entered into a Sub-Servicing Agreement and which meets the
qualifications of a Sub-Servicer pursuant to Section 3.02.
Trustee's Fees: With respect to each Distribution Date,
the amount to be paid to the Trustee calculated monthly on a SAM by SAM
basis, equal to, with respect to all SAMs, the product of (x) the Scheduled
Principal Balance of the SAMs on the Due Date in the month prior to the
month of such Distribution Date and (y) one-twelfth of [ ]%.
Tax Matters Person: The Holder of the Class R Certificate
as more particularly set forth in Section 9.13 hereof.
Trust Fund or Trust: The trust created by this Agreement,
consisting of the SAMs and the other assets described in Section 2.01(a).
Trustee: ____________________ or its successor in
interest, or any successor trustee appointed as herein provided.
After the aggregate current Principal Amounts of the Subordinate
Certificates have been reduced to zero, the Subordinate Optimal Principal
Amount shall be zero.
In addition, no reduction of the Senior Prepayment Percentage shall
occur on any Distribution Date unless, as of the last day of the month
preceding such Distribution Date, either (A) (i)(x) the aggregate Scheduled
Principal Balance of SAMs delinquent 60 days or more (including for this
purpose any such SAMs in foreclosure and such SAMs with respect to which
the related Mortgaged Property has been acquired by the Trust), averaged
over the last six months, as a percentage of the sum of the aggregate
Current Principal Amount of the Subordinate Certificates does not exceed [
]% or (y) the aggregate Scheduled Principal Balance of SAMs delinquent 60
days or more (including for this purpose any such SAMs in foreclosure and
SAMs with respect to which the related Mortgaged Property has been acquired
by the Trust), averaged over the last six months, as a percentage of the
aggregate Scheduled Principal Balances of the SAMs averaged over the last
six months, does not exceed [ ]; and (ii) cumulative Realized Losses on
such SAMs do not exceed (a) [ ] of the Original Subordinate Principal
Balance if such Distribution Date occurs between and including __________
200_ and ___________ 200_, (b) [ ] of the Original Subordinate Principal
Balance if such Distribution Date occurs between and including ___________
200_ and __________ 200_, (c) [ ] of the Original Subordinate Principal
Balance if such Distribution Date occurs between and including ___________
200_ and __________ 200_, (d) [ ] of the Original Subordinate Principal
Balance for such Certificate Group if such Distribution Date occurs between
and including ___________ 200_ and _________ 200_, and (e) [ ] of the
Original Subordinate Principal Balance for such Certificate Group if such
Distribution Date occurs during or after ____________ 200_; or (B) (i) the
aggregate Scheduled Principal Balance of SAMs delinquent 60 days or more
(including for this purpose any such SAMs in foreclosure and SAMs with
respect to which the related Mortgaged Property has been acquired by the
Trust), averaged over the last six months, does not exceed [ ]; and (ii)
cumulative Realized Losses on such SAMs do not exceed (a) [ ] of the
aggregate Current Principal Amounts of the Original Subordinate Principal
Balance if such Distribution Date occurs between and including ____________
200_ and ___________ 200_, (b) [ ] of the Original Subordinate Principal
Balance if such Distribution Date occurs between and including _________
200_ and ___________ 200_, (c) [ ] of the Original Subordinate Principal
Balance if such Distribution Date occurs between and including ____________
200_ and ____________ 200_, (d) [ ] of the Original Subordinate Principal
Balance if such Distribution Date occurs between and including ____________
200_ and ____________ 200_, and (e) [ ] of the Original Subordinate
Principal Balance if such Distribution Date occurs during or after
___________ 200_.
Notwithstanding the foregoing, if on any Distribution Date the Senior
Percentage exceeds the Senior Percentage as of the Cut-Off Date, the Senior
Prepayment Percentage for such Distribution Date will equal 100%. On the
Distribution Date on which the Current Principal Amounts of the Senior
Certificates are reduced to zero, the Senior Prepayment Percentage shall be
the minimum percentage sufficient to effect such reduction and thereafter
shall be zero.
provided, however, that no instrument or security shall be a
Permitted Investment if such instrument or security evidences a right to
receive only interest payments with respect to the obligations underlying
such instrument or if such security provides for payment of both principal
and interest with a yield to maturity in excess of 120% of the yield to
maturity at par or if such instrument or security is purchased at a price
greater than par.
ARTICLE II
Conveyance of SAMs;
Original Issuance of Certificates
Section 2.01 Conveyance of SAMs to Trustee. (a) The
Seller concurrently with the execution and delivery of this Agreement,
sells, transfers and assigns to the Trust without recourse all its right,
title and interest in and to (i) the SAMs identified in the SAM Schedule,
including all interest and principal due with respect to the SAMs after the
Cut-off Date, but excluding any payments of principal and interest due on
or prior to the Cut-off Date; (ii) such assets as shall from time to time
be credited or are required by the terms of this Agreement to be credited
to the Distribution Account (excluding any income to the Master Servicer
from Permitted Investments under Subsection 4.02(d)), (iii) such assets
relating to the SAMs as from time to time may be held by the Master
Servicer or a Sub-Servicer in Collection Accounts (excluding any income to
the Master Servicer or any Sub-Servicer from Permitted Investments under
Subsection 4.01(a)), (iv) any Servicing Accounts (to the extent the
mortgagee has a claim thereto and excluding any income to the Master
Servicer or Sub-Servicer or interest payable to Mortgagors pursuant to
applicable law), (v) any REO Property, (vi) the Required Insurance Policies
and any amounts paid or payable by the insurer under any Insurance Policy
(to the extent the mortgagee has a claim thereto), (vii) [Reserved] and
(viii) any proceeds of the foregoing. Although it is the intent of the
parties to this Agreement that the conveyance of the Seller's right, title
and interest in and to the SAMs and other assets in the Trust Fund pursuant
to this Agreement shall constitute a purchase and sale and not a loan, in
the event that such conveyance is deemed to be a loan, it is the intent of
the parties to this Agreement that the Seller shall be deemed to have
granted to the Trustee a first priority perfected security interest in all
of the Seller's right, title and interest in, to and under the SAMs and
other assets in the Trust Fund, and that this Agreement shall constitute a
security agreement under applicable law.
(b) In connection with the above transfer and assignment, the
Seller hereby deposits with the Trustee, with respect to each
SAM, (i) the original Mortgage Note, endorsed without recourse
to the order of the Trustee and showing an unbroken chain of
endorsements from the original payee thereof to the Person
endorsing it to the Trustee, (ii) the original Security
Instrument, which shall have been recorded, with evidence of
such recording indicated thereon, (iii) the assignment (which
may be in the form of a blanket assignment if permitted in the
jurisdiction in which the Mortgaged Property is located) to the
Trustee of the Security Instrument, with evidence of recording
with respect to each SAM in the name of the Trustee thereon
(or, if clause (x) in the provision below applies, shall be in
recordable form), (iv) all intervening assignments of the
Security Instrument, if applicable and only to the extent
available to the Seller with evidence of recording thereon, (v)
the original of any guarantee executed in connection with the
Mortgage Note, (vi) the original policy of title insurance or
mortgagee's certificate of title insurance or commitment or
binder for title insurance and (vii) originals of all
assumption, modification, consolidation or extension
agreements, if applicable and available; (viii) 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; (ix) any rider executed in connection with the related
Mortgage Note or Mortgage; (x) the Primary Mortgage Insurance
Policy or certificate of insurance where required pursuant to
the related Sale and Servicing Agreements; and (xi) SAM closing
statement (Form HUD-1) and any other truth- in-lending or real
estate settlement procedure form required by law; provided,
however, that in lieu of the foregoing, the Seller may deliver
the following documents, under the circumstances set forth
below: (xii) in lieu of the original Security Instrument,
assignments to the Trustee or intervening assignments thereof
which have been delivered are being delivered or will, upon
receipt of recording information relating to the Security
Instrument required to be included thereon, be delivered to
recording offices for recording and have not been returned to
the Seller in time to permit their delivery as specified above,
the Seller may deliver a true copy thereof with a certification
by the Seller, a prior transferor or an officer of the title
insurer on the face of such copy, substantially as follows:
"Certified to be a true and correct copy of the original, which
has been transmitted for recording"; and (y) in lieu of the
Security Instrument, assignment to the Trustee, or intervening
assignments thereof if the applicable jurisdiction retains the
originals of such documents (as evidenced by a certification
from the Seller, a prior transferor or an officer of the title
insurer to such effect) the Seller may deliver photocopies of
such documents containing an original certification by the
judicial or other governmental authority of the jurisdiction
where such documents were recorded; and provided, further,
however, that in the case of SAMs which have been prepaid in
full after the Cut-off Date and prior to the Closing Date, the
Seller, in lieu of delivering the above documents, may deliver
to the Trustee a certification of a Servicing Officer to such
effect and shall deposit all amounts paid in respect of such
SAMs in the Distribution Account on the Closing Date. The
Seller shall deliver such original documents (including any
original documents as to which certified copies had previously
been delivered) to the Trustee promptly after they are
received. The Seller shall cause, at its expense, the Security
Instrument and intervening assignments, if any, and the
assignment of the Security Instrument to the Trustee to be
recorded not later than 180 days after the Closing Date.
Section 2.02 Acceptance of SAMs by Trustee. (a) The
Trustee acknowledges receipt of, subject to its further review and the
exceptions which may be noted pursuant to the procedures described below,
the documents (or certified copies thereof) delivered to it pursuant to
Section 2.01 and declares that it holds and will continue to hold those
documents and any amendments, replacements or supplements thereto and all
other assets of the Trust Fund delivered to it as Trustee in trust for the
use and benefit of all present and future Holders of the Certificates. No
later than 45 days after the Closing Date (or, with respect to any
Substitute SAM, within 5 Business Days after the receipt by the Trustee
thereof), the Trustee agrees, for the benefit of the Certificateholders, to
review each Mortgage File delivered to it and to execute and deliver, or
cause to be executed and delivered, to the Seller and the Master Servicer
an Initial Certification substantially in the form annexed hereto as
Exhibit G. In conducting such review, the Trustee will ascertain whether
all required documents have been executed and received and whether those
documents relate, determined on the basis of the Mortgagor name, original
principal balance and loan number, to the SAMs it has received, as
identified in Exhibit B to this Agreement, as supplemented; provided,
however, that with respect to those documents described in subclause
(b)(iv), (v) and (vi) of Section 2.01, the Trustee's obligations shall
extend only to documents actually delivered pursuant to such subsections.
In performing any such review, the Trustee may conclusively rely on the
purported due execution and genuineness of any such document and on the
purported genuineness of any signature thereon. If the Trustee finds any
document constituting part of the Mortgage File not to have been executed
or received, or to be unrelated to the SAMs identified in Exhibit B or to
appear to be defective on its face, the Trustee shall promptly notify the
Seller. The Seller shall correct or cure (or shall cause a prior transferor
of the SAM to correct or cure) any such defect within 90 days from the date
of notice from the Trustee of the defect and if such defect is not
corrected or cured within such period, and such defect materially and
adversely affects the interests of the Certificateholders in the related
SAM, the Seller will, subject to Section 2.04, within 90 days from the
Trustee's notification purchase (or cause a prior transferor of such SAM to
purchase) such SAM at the Repurchase Price; provided, however, that if such
defect relates solely to the inability of the Seller to deliver the
original Security Instrument or intervening assignments thereof, or a
certified copy because the originals of such documents, or a certified copy
have not been returned by the applicable jurisdiction, the Seller shall not
be required to purchase such SAM if the Seller delivers such original
documents or certified copy promptly upon receipt, but in no event later
than 270 days after the Closing Date. The foregoing repurchase obligation
shall not apply in the event that the Seller cannot deliver such original
or copy of any document submitted for recording to the appropriate
recording office in the applicable jurisdiction because such document has
not been returned by such office; provided that the Seller shall instead
deliver (or cause a prior transferor of the SAM to deliver) a recording
receipt of such recording office or, if such receipt is not available, a
certificate of a Servicing Officer confirming that such documents have been
accepted for recording, and delivery to the Trustee shall be effected by
the Seller (or a prior transferor of the SAM) within thirty days of receipt
of the original recorded document.
(b) No later than 180 days after the Closing Date, the Trustee will
review, for the benefit of the Certificateholders, the Mortgage
Files delivered to it and will execute and deliver or cause to
be executed and delivered to the Seller and the Master
Servicer, a Final Certification substantially in the form
annexed hereto as Exhibit H. In conducting such review, the
Trustee will ascertain whether an original of each document
required to be recorded has been returned from the recording
office with evidence of recording thereon or a certified copy
has been obtained from the recording office. If the Trustee
finds any document constituting part of the Mortgage File has
not been received, or to be unrelated, determined on the basis
of the Mortgagor name, original principal balance and loan
number, to the SAMs identified in Exhibit B or to appear
defective on its face, the Trustee shall promptly notify the
Seller (provided, however, that (i) with respect to those
documents described in subclause (b)(iv), (v) and (vi) of
Section 2.01, the Trustee's obligations shall extend only to
documents actually delivered pursuant to such subsections. The
Seller shall correct or cure (or shall cause a prior transferor
of the SAM to correct or cure) any such defect or shall deliver
to the Trustee an Opinion of Counsel to the effect that such
defect does not materially or adversely affect the interests of
Certificateholders in such SAM within 90 days from the date of
notice from the Trustee of the defect and if such defect is not
corrected or cured within such period, and if such defect
materially and adversely affects the interests of the
Certificateholders in the related SAM, the Seller will, subject
to Section 2.04, within 90 days from the Trustee's notification
purchase (or cause a prior transferor of the SAM to Purchase)
such SAM at the Repurchase Price; provided, however, that if
such defect relates solely to the inability of the Seller to
deliver the original Security Instrument or intervening
assignments thereof, or a certified copy, because the originals
of such documents, or a certified copy, have not been returned
by the applicable jurisdiction, the Seller shall not be
required to purchase such SAM, if the Seller delivers such
original documents or certified copy promptly upon receipt, but
in no event later than 360 days after the Closing Date. The
foregoing repurchase obligation shall not apply in the event
that the Seller cannot deliver such original or copy of any
document submitted for recording to the appropriate recording
office in the applicable jurisdiction because such document has
not been returned by such office; provided that the Seller
shall instead deliver (or cause a prior transferor of the SAM
to deliver) a recording receipt of such recording office or, if
such receipt is not available, a certificate of a Servicing
Officer confirming that such documents have been accepted for
recording, and delivery to the Trustee shall be effected by the
Seller (or a prior transferor of the SAM) within thirty days of
receipt of the original recorded document.
(c) In the event that a SAM is purchased in accordance with
Subsections 2.02(a) or (b) above, the Seller shall provide or
cause to be provided the Repurchase Price to the Trustee for
deposit in the Distribution Account and shall provide or cause
to be provided to the Trustee written notification detailing
the components of the Repurchase Price, on or prior to the
related Determination Date. Upon deposit of the Repurchase
Price in the Distribution Account, the Trustee shall release to
the purchaser the related Mortgage File and shall execute and
deliver all instruments of transfer or assignment, without
recourse, furnished to it by the purchaser as are necessary to
vest in the purchaser title to and rights under the SAM. Such
purchase shall be deemed to have occurred on the date on which
the Repurchase Price in available funds is received by the
Trustee. The Trustee shall amend the SAM Schedule to reflect
such repurchase and shall promptly notify the Master Servicer
and the Rating Agencies of such amendment. The obligation of
the Seller to repurchase (or cause the repurchase of) any SAM
as to which such a defect in a constituent document exists
shall be the sole remedy respecting such defect available to
the Certificateholders or to the Trustee on their behalf.
Section 2.03 Representations, Warranties and Covenants of
the Master Servicer.
(a) _______ hereby represents and warrants to the Trustee as of the
Closing Date that:
(i) It is a corporation duly organized, validly
existing and in good standing under the laws of the state
of its incorporation and is in good standing as a foreign
corporation in each jurisdiction where such qualification
is necessary and throughout the term of this Agreement
will remain a corporation duly organized, validly
existing and in good standing under the laws of the state
of its incorporation or any state of reincorporation and
in good standing as a foreign corporation in each
jurisdiction where such qualification is necessary
(except, in the case of foreign corporation qualification
both on the date hereof and in the future, where the
failure so to qualify would not reasonably be expected to
have a material adverse effect on the Master Servicer's
ability to enter into this Agreement or to perform its
obligations hereunder), and has the corporate power and
authority to perform its obligations under this
Agreement;
(ii) The execution and delivery of this Agreement
have been duly authorized by all requisite corporate
action;
(iii) This Agreement, assuming due authorization,
execution, and delivery by the other parties hereto, will
constitute its legal, valid and binding obligation,
enforceable in accordance with its terms, except only as
such enforcement may be limited by applicable Debtor
Relief Laws and that certain equitable remedies may not
be available regardless of whether enforcement is sought
in equity or at law;
(iv) Its execution and delivery of this Agreement
and its performance and compliance with the terms of this
Agreement will not (A) violate its certificate of
incorporation or bylaws (B) to its knowledge, violate any
law or regulation, or any administrative or judicial
decree or order to which it is subject or (C) constitute
a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, or
result in the breach of, any material contract, agreement
or other instrument to which it is a party or which may
be applicable to it or any of its assets;
(v) To its best knowledge, after reasonable
investigation, it is not in default with respect to any
order or decree of any court or any order, regulation or
demand of any federal, state, municipal or governmental
agency, which default would reasonably be expected to
have consequences that would materially and adversely
affect its financial condition or operations or its
performance hereunder;
(vi) It 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 to be
performed by it;
(vii) The consummation of the transactions
contemplated by this Agreement are in the ordinary course
of its business;
(viii) No litigation is pending or, to its best
knowledge, threatened against it, which could be
reasonably expected to materially and adversely affect
its entering into this Agreement or performing its
obligations under this Agreement or which would have a
material adverse effect on its financial condition; and
(ix) Its computer programs, systems and
applications used in servicing the SAMs will be replaced
or modified and maintained to operate in such manner that
at all times, including on and after January 1, 2000, it
can service the SAMs in accordance with the terms of this
Agreement.
Section 2.03A. Representations, Warranties and Covenants
of the Seller.
(a) The Seller hereby makes the representations and warranties to
the Trustee set forth in Exhibit C hereto regarding the SAMs.
(b) If the Seller, the Master Servicer or the Trustee discovers a
breach of any of the representations and warranties set forth
in Exhibit C, and such breach existed on the date the
representation and warranty was made, which breach materially
and adversely affects the value of the interests of
Certificateholders or the Trustee in the related SAMs, the
party discovering the breach shall give prompt written notice
of the breach to the other parties. The Seller within 90 days
of its discovery or receipt of notice that such breach has
occurred (whichever occurs earlier), shall (or shall cause a
prior transferor of the SAM to) cure the breach in all material
respects or, subject to Section 2.04, purchase the SAM or any
property acquired with respect thereto from the Trustee;
provided, however, that if there is a breach of any
representation set forth in Exhibit C and the SAM or the
related property acquired with respect thereto has been sold,
then the purchaser shall pay, in lieu of the Repurchase Price,
any excess of the Repurchase Price over the Net Liquidation
Proceeds received upon such sale. (If the Net Liquidation
Proceeds exceed the Repurchase Price, any excess shall be paid
to the purchaser to the extent not required by law to be paid
to the borrower.) Any such purchase shall be made by the
purchaser providing (or causing to be provided) to the Trustee
an amount equal to the Repurchase Price for deposit in the
Distribution Account and the Trustee, upon receipt of the
Repurchase Price and of written notification, on or prior to
the related Determination Date, which notification shall detail
the components of such Repurchase Price, shall release to the
purchaser the related Mortgage File and shall execute and
deliver all instruments of transfer or assignment furnished to
it by the purchaser, without recourse, as are necessary to vest
in the purchaser title to and rights under the SAM or any
property acquired with respect thereto. Such purchase shall be
deemed to have occurred on the date on which the Repurchase
Price in available funds is received by the Trustee. The
Trustee shall amend the SAM Schedule to reflect such repurchase
and shall promptly notify the Master Servicer and the Rating
Agencies of such amendment. Enforcement of the obligation of
the Seller to purchase or substitute a Substitute SAM for (or
to cause the purchase or substitution for) any SAM or any
property acquired with respect thereto (or pay (or cause the
payment of) the Repurchase Price as set forth in the above
proviso) as to which a breach has occurred and is continuing
shall constitute the sole remedy respecting such breach
available to the Certificateholders or the Trustee on their
behalf.
Section 2.04 Substitution of SAMs. Notwithstanding
anything to the contrary in this Agreement, in lieu of purchasing a SAM
pursuant to Sections 2.02 or 2.03A, the Seller may, no later than the date
by which such purchase would otherwise be required, tender (or cause the
tender) to the Trustee a Substitute SAM accompanied by an Officer's
Certificate of the Seller that such Substitute SAM conforms to the
requirements set forth in the definition of "Substitute SAM"; provided,
however, that substitution pursuant to this Section 2.04 in lieu of
purchase shall not be permitted after the termination of the two-year
period beginning on the Startup Day. The Trustee shall examine the Mortgage
File for any Substitute SAM in the manner set forth in Section 2.02(a) and
shall notify the Master Servicer and the Seller in writing, within five
Business Days after receipt, whether or not the documents relating to the
Substitute SAM satisfy the requirements of the third sentence of Subsection
2.02(a). Within two Business Days after such notification, the Seller shall
provide (or cause to be provided) to the Trustee for deposit in the
Distribution Account the amount, if any, by which the Outstanding Principal
Balance as of the next preceding Due Date of the SAM for which substitution
is being made, after giving effect to Scheduled Principal due on such date,
exceeds the Outstanding Principal Balance as of such date of the Substitute
SAM, after giving effect to Scheduled Principal due on such date, which
amount shall be treated for the purposes of this Agreement as if it were
the payment of a portion of the Repurchase Price for the purchase of a SAM.
After such notification, and, if any such excess exists, upon receipt of
such deposit, the Trustee shall accept such Substitute SAM. In the event of
such a substitution, accrued interest on the Substitute SAM for the month
in which the substitution occurs and any Principal Prepayments made thereon
during such month shall be the property of the Trust Fund and accrued
interest for such month on the SAM for which the substitution is made and
any Principal Prepayments made thereon during such month shall be the
property of the Seller (or other transferor). The Scheduled Principal on a
Substitute SAM due on the Due Date in the month of substitution shall be
the property of the Seller (or other transferor) and the Scheduled
Principal on the SAM for which the substitution is made due on such Due
Date shall be the property of the Trust Fund. Upon acceptance of the
Substitute SAM, the Trustee shall release to the Seller (or other
transferor) the Mortgage File related to any SAM released pursuant to this
Section 2.04 and shall execute and deliver all instruments of transfer or
assignment, without recourse, in form as provided to it as are necessary to
vest in the Seller (or other transferor) title to and rights under any SAM
released pursuant to this Section 2.04. The Seller (or other transferor)
shall deliver the documents related to the Substitute SAM in accordance
with the provisions of Subsections 2.01(b) and 2.02(b), with the date of
acceptance of the Substitute SAM deemed to be the Closing Date for purposes
of the time periods set forth in those Subsections. The representations and
warranties set forth in Exhibit C shall be deemed to have been made by the
Seller with respect to each Substitute SAM as of the date of acceptance of
such SAM by the Trustee. The Trustee shall amend the SAM Schedule to
reflect such substitution and shall provide a copy of such amended SAM
Schedule to the Master Servicer and the Rating Agencies.
Section 2.05 Representations and Warranties of the
Trustee. The Trustee hereby represents and warrants to the Seller and the
Master Servicer, as of the Closing Date (and in the case of paragraphs (iv)
and (v) below throughout the term of the Agreement), that:
(i) The Trustee is a __________ banking association
duly organized, validly existing and in good standing
under the laws of the United States with a principal
place of business in ______________;
(ii) Subject to the right of the Trustee to appoint
a co-trustee or separate trustee under Section 9.11
hereof in order to meet the legal requirements of a
particular jurisdiction, the Trustee has full power,
authority and legal right to execute and deliver this
Agreement and to perform its obligations under this
Agreement and has taken all necessary action to authorize
the execution, delivery and performance by it of this
Agreement and the Certificates;
(iii) To the best of the Trustee's knowledge, after
reasonable investigation, the execution and delivery by
the Trustee of this Agreement and the Certificates and
the performance by the Trustee of its obligations under
this Agreement and the Certificates will not violate any
provision of the Trustee's Articles of Association or
By-Laws or any law or regulation governing the Trustee or
any order, writ, judgment or decree of any court,
arbitrator or governmental authority or agency applicable
to the Trustee or any of its assets. To the best of the
Trustee's knowledge, after reasonable investigation, such
execution, delivery and performance will not require the
authorization, consent or approval of, the giving of
notice to, the filing or registration with, or the taking
of any other action with respect to, any governmental
authority or agency regulating the activities of a
national association located in ___________. To the best
of the Trustee's knowledge, after reasonable
investigation, such execution, delivery and performance
will not conflict with, or result in a breach or
violation of, any material indenture, mortgage, deed of
trust, lease or other agreement or instrument to which
the Trustee is a party or by which it or its properties
is bound;
(iv) This Agreement has been duly executed and
delivered by the Trustee. This Agreement, when executed
and delivered, will constitute the valid, legal and
binding obligation of the Trustee, enforceable against
the Trustee in accordance with its terms, except as the
enforcement thereof may be limited by applicable Debtor
Relief Laws and that certain equitable remedies may not
be available regardless of whether enforcement is sought
in equity or at law;
(v) All funds received by the Trustee and required
to be deposited in the Distribution Account pursuant to
this Agreement will be promptly so deposited; and
(vi) The Trustee shall modify and/or maintain its
internal computer systems and its other internal systems
used in performing its duties and obligations under this
Agreement to assure that the Trustee can perform its
duties and obligations in accordance with the terms of
this Agreement, including, without limitation, on and
after January 1, 2000; provided, however, that neither
this covenant or any other term or condition of this
Agreement shall be deemed to render the Trustee directly
or indirectly liable for: (a) any failure by the Master
Servicer or any other third party (including any failure
to deliver timely and accurate information to the Trustee
at all times) or the inability of the Trustee to perform
any of its duties hereunder by reason of any such
failure, (b) any other act or omission by the Master
Servicer or any other third party relating to the Master
Servicer's or other third party's maintenance or
modification of its systems required to perform any of
its duties under or relating to this Agreement, (c) any
incompatibility of the Trustee's internal systems with
the Master Servicer's or any third party's systems, and
(d) the inability of the Trustee to perform any of its
duties hereunder by reason of any failure or disruption
of telecommunications, electrical or other utility
services furnished to the Trustee by third parties, it
being expressly understood and agreed that the Trustee
shall be responsible only for its own internal systems
and shall not be required to monitor, review or audit any
third party's systems, plans, or preparations in order to
ascertain whether such third party is capable of
performing its duties under or relating to this
Agreement.
Section 2.06 Issuance of Certificates. The Trustee
acknowledges the assignment to it of the SAMs and the other assets
comprising the Trust Fund and, concurrently therewith, has signed, and
countersigned and delivered to the Seller, in exchange therefor,
Certificates in such authorized denominations representing such Fractional
Undivided Interests as the Seller has requested. The Trustee agrees that it
will hold the SAMs and such other assets segregated on the books of the
Trustee in trust for the benefit of the Certificateholders.
Section 2.07 Representations and Warranties Concerning
the Seller. The Seller hereby represents and warrants to the Trustee and
the Master Servicer as follows:
(i) the Seller (a) is a corporation duly organized,
validly existing and in good standing under the laws of
the State of Delaware and (b) is qualified and in good
standing as a foreign corporation to do business in each
jurisdiction where such qualification is necessary,
except where the failure so to qualify would not
reasonably be expected to have a material adverse effect
on the Seller's business as presently conducted or on the
Seller's ability to enter into this Agreement and to
consummate the transactions contemplated hereby;
(ii) the Seller has full corporate power to own its
property, to carry on its business as presently conducted
and to enter into and perform its obligations under this
Agreement;
(iii) the execution and delivery by the Seller of
this Agreement have been duly authorized by all necessary
corporate action on the part of the Seller; and neither
the execution and delivery of this Agreement, nor the
consummation of the transactions herein contemplated, nor
compliance with the provisions hereof, will conflict with
or result in a breach of, or constitute a default under,
any of the provisions of any law, governmental rule,
regulation, judgment, decree or order binding on the
Seller or its properties or the articles of incorporation
or by-laws of the Seller, except those conflicts,
breaches or defaults which would not reasonably be
expected to have a material adverse effect on the
Seller's ability to enter into this Agreement and to
consummate the transactions contemplated hereby;
(iv) the execution, delivery and performance by the
Seller of this Agreement and the consummation of the
transactions contemplated hereby do not require the
consent or approval of, the giving of notice to, the
registration with, or the taking of any other action in
respect of, any state, federal or other governmental
authority or agency, except those consents, approvals,
notices, registrations or other actions as have already
been obtained, given or made;
(v) this Agreement has been duly executed and
delivered by the Seller and, assuming due authorization,
execution and delivery by the other parties hereto,
constitutes a valid and binding obligation of the Seller
enforceable against it in accordance with its terms
(subject to applicable bankruptcy and insolvency laws and
other similar laws affecting the enforcement of the
rights of creditors generally); and
(vi) there are no actions, suits or proceedings
pending or, to the knowledge of the Seller, threatened
against the Seller, before or by any court,
administrative agency, arbitrator or governmental body
(i) with respect to any of the transactions contemplated
by this Agreement or (ii) with respect to any other
matter which in the judgment of the Seller will be
determined adversely to the Seller and will if determined
adversely to the Seller materially and adversely affect
the Seller's ability to enter into this Agreement or
perform its obligations under this Agreement; and the
Seller is not in default with respect to any order of any
court, administrative agency, arbitrator or governmental
body so as to materially and adversely affect the
transactions contemplated by this Agreement.
ARTICLE III
Administration and Servicing of SAMs
Section 3.01 Master Servicer to Assure Servicing.
(a) The Master Servicer shall supervise, or take such actions as
are necessary to ensure, the servicing and administration of
the SAMs and any REO Property in accordance with this Agreement
and its normal servicing practices (including making any
Servicing Advances), which generally conform to the standards
of an institution prudently servicing shared appreciation
mortgage loans for its own account and shall have full
authority to do anything it reasonably deems appropriate or
desirable in connection with such servicing and administration.
The Master Servicer may perform its responsibilities relating
to servicing through other agents or independent contractors,
but shall not thereby be released from any of its
responsibilities as hereinafter set forth. The authority of the
Master Servicer, in its capacity as master servicer, shall
include, without limitation, the power to (i) consult with and
advise any Sub-Servicer regarding administration of a related
SAM, (ii) approve any recommendation by a Sub-Servicer to
foreclose on a related SAM, (iii) supervise the filing and
collection of insurance claims and take or cause to be taken
such actions on behalf of the insured person thereunder as
shall be reasonably necessary to prevent the denial of coverage
thereunder, and (iv) effectuate foreclosure or other conversion
of the ownership of the Mortgaged Property securing a related
SAM, including the employment of attorneys, the institution of
legal proceedings, the collection of deficiency judgments, the
acceptance of compromise proposals, the filing of claims under
any Primary Mortgage Insurance Policy and any other matter
pertaining to a delinquent SAM. The authority of the Master
Servicer shall include, in addition, the power on behalf of the
Certificateholders, the Trustee or any of them to (i) execute
and deliver customary consents or waivers and other instruments
and documents, (ii) consent to transfers of any related
Mortgaged Property and assumptions of the related Mortgage
Notes and Security Instruments (in the manner provided in this
Agreement) and (iii) collect any Insurance Proceeds and
Liquidation Proceeds. Without limiting the generality of the
foregoing, the Master Servicer may, and is hereby authorized,
and empowered by the Trustee to, execute and deliver, on behalf
of itself, the Certificateholders, the Trustee, or any of them,
any instruments of satisfaction, cancellation, partial or full
release, discharge and all other comparable instruments, with
respect to the related SAMs, the Insurance Policies and the
accounts related thereto, and the Mortgaged Properties. The
Master Servicer may exercise this power in its own name or in
the name of a Sub-Servicer. (b) Notwithstanding the provisions
of Subsection 3.01(a), the Master Servicer shall not take any
action inconsistent with the interest of the Trustee or the
Certificateholders in the SAMs or with the rights and interests
of the Trustee or the Certificateholders under this Agreement.
(c) The Trustee shall furnish the Master Servicer with any powers
of attorney and other documents in form as provided to it
necessary or appropriate to enable the Master Servicer to
service and administer the related SAMs and REO Property.
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
SAMs and for the performance of any and all other activities of
the Master Service hereunder, subject to the prior approval of
such Sub-Servicers by the Rating Agencies. Each Sub-Servicer
shall be either (i) an institution the accounts of which are
insured by the FDIC or (ii) another entity that engages in the
business of originating or servicing shared appreciation
mortgage loans, and in either case shall be authorized to
transact business in the state or states in which 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 in either case shall be a Freddie
Mac or Fannie Mae approved mortgage servicer. Any Sub-Servicing
Agreement entered into by the Master Servicer shall include the
provision that such Agreement may be immediately terminated (x)
with cause and without any termination fee by any Master
Servicer hereunder other than [Master Servicer name] or (y)
without cause in which case the Master Servicer shall be
responsible for any termination fee or penalty resulting
therefrom. In addition, any Sub-Servicing Agreement shall
provide for servicing of the SAMs consistent with the terms of
this Agreement. With the consent of the Trustee, which consent
shall not be unreasonably withheld, the Master Servicer and the
Sub-Servicers may enter into Sub-Servicing Agreements 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 Holders of Certificates entitled to at least 51%
of the Fractional Undivided Interests of all the Certificates
in the aggregate.
(b) As part of its servicing activities hereunder, the Master
Servicer, for the benefit of the Trustee and the
Certificateholders, shall enforce the obligations of each Sub-
Servicer under the related Sub-Servicing Agreement. 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 SAMs. The Master
Servicer shall pay the costs of such enforcement at its own
expense, but shall be reimbursed therefor only (i) from a
general recovery resulting from such enforcement only to the
extent, if any, that such recovery exceeds all amounts due in
respect of the related SAMs or (ii) from a specific recovery of
costs, expenses or attorneys' fees against the party against
whom such enforcement is directed.
Section 3.03 Successor Sub-Servicers. The Master Servicer
shall be entitled to terminate any Sub-Servicing Agreement that may exist
in accordance with the terms and conditions of such Sub-Servicing Agreement
and without any limitation by virtue of this Agreement; provided, however,
that upon termination, the Master Servicer shall either act as servicer of
the related SAM or enter into an appropriate contract with a successor
Sub-Servicer pursuant to which such successor Sub-Servicer will be bound by
all relevant terms of the related Sub-Servicing Agreement pertaining to the
servicing of such SAM.
Section 3.04 Liability of the Master Servicer.
(a) Notwithstanding any Sub-Servicing Agreement, any of 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 under all circumstances remain
obligated and primarily liable to the Trustee and the
Certificateholders for the servicing and administering of the
SAMs and any REO Property in accordance with this Agreement.
The obligations and liability of the Master Servicer shall not
be diminished by virtue of Sub-Servicing Agreements or by
virtue of indemnification of the Master Servicer by any
Sub-Servicer, or any other Person. The obligations and
liability of the Master Servicer shall remain of the same
nature and under the same terms and conditions as if the Master
Servicer alone were servicing and administering the related
SAMs. The Master Servicer shall, however, be entitled to enter
into indemnification agreements with any Sub-Servicer or other
Person and nothing in this Agreement shall be deemed to limit
or modify such indemnification. For the purposes of this
Agreement, the Master Servicer shall be deemed to have received
any payment on a SAM on the date the Sub-Servicer received such
payment; provided, however, that this sentence shall not apply
to the Trustee acting as the Master Servicer; provided,
further, however, that the foregoing provision shall not affect
the obligation of the Master Servicer if it is also the Trustee
to advance amounts which are not Nonrecoverable Advances.
(b) Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the SAMs involving a
Sub-Servicer in its capacity as such and not as an originator
shall be deemed to be between the Sub-Servicer and the Master
Servicer alone, and the Trustee and Certificateholders 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 3.05.
Section 3.05 Assumption or Termination of Sub-Servicing
Agreements by Trustee.
(a) If the Trustee or its designee shall assume the master
servicing obligations of the Master Servicer in accordance with
Section 8.02, the Trustee, to the extent necessary to permit
the Trustee to carry out the provisions of Section 8.02 with
respect to the SAMs, shall succeed to all of the rights and
obligations of the Master Servicer under each of the
Sub-Servicing Agreements. In such event, the Trustee or its
designee as the successor master servicer shall be deemed to
have assumed all of the Master Servicer's rights and
obligations therein and to have replaced the Master Servicer as
a party to such Sub-Servicing Agreements to the same extent as
if such Sub-Servicing Agreements had been assigned to the
Trustee or its designee as a successor master servicer, except
that the Trustee or its designee as a successor master servicer
shall not be deemed to have assumed any obligations or
liabilities of the Master Servicer arising prior to such
assumption and the Master Servicer shall not thereby be
relieved of any liability or obligations under such Sub-
Servicing Agreements.
(b) In the event that the Trustee or its designee as successor
master servicer for the Trustee assumes the servicing
obligations of the Master Servicer under Section 8.02, upon the
reasonable request of the Trustee or such designee as successor
master servicer, the Master Servicer shall at its own expense
deliver to the Trustee, or at its written request to such
designee, photocopies of all documents and records, electronic
or otherwise, relating to the Sub-Servicing Agreements and the
related SAMs or REO Property then being serviced and an
accounting of amounts collected and held by it, if any, and
will otherwise cooperate and use its reasonable best efforts to
effect the orderly and efficient transfer of the Sub-Servicing
Agreements, or responsibilities hereunder to the Trustee, or at
its written request to such designee as successor master
servicer.
(c) Upon assuming the role of Master Servicer the Trustee may elect
to terminate any Sub-Servicing Agreements entered into by the
preceding Master Servicer, in which case any termination fee or
penalty shall be paid by such preceding Master Servicer.
Section 3.06 Collection of SAM Payments.
(a) The Master Servicer will make remittances itself or will
coordinate and monitor remittances by Sub-Servicers to the
Trustee with respect to the SAMs in accordance with this
Agreement.
(b) The Master Servicer shall make its reasonable best efforts to
collect or cause to be collected all payments required under
the terms and provisions of the SAMs and shall follow, and use
its best efforts to cause Sub-Servicers to follow, collection
procedures comparable to the collection procedures of prudent
mortgage lenders servicing mortgage loans for their own account
to the extent such procedures shall be consistent with this
Agreement. Consistent with the foregoing, the Master Servicer
may in its discretion (i) waive or permit to be waived any late
payment charge, prepayment charge, assumption fee, or any
penalty interest in connection with the prepayment of a SAM and
(ii) suspend or temporarily reduce or permit to be suspended or
temporarily reduced regular monthly payments for a period of up
to six months, or arrange or permit an arrangement with a
Mortgagor for a scheduled liquidation of delinquencies. In the
event the Master Servicer shall consent to the deferment of the
due dates for payments due on a Mortgage Note, the Master
Servicer shall nonetheless make a Monthly Advance or shall
cause the related Sub-Servicer to make an advance to the same
extent as if such installment were due, owing and delinquent
and had not been deferred through liquidation of the Mortgaged
Property; provided, however, that the obligation of the Master
Servicer to make a Monthly Advance shall apply only to the
extent that the Master Servicer believes, in good faith, that
such advances are not Nonrecoverable Advances.
(c) Notwithstanding anything in this Agreement to the contrary, the
Master Servicer may not make any advances of amounts coming due
in the future with respect to a SAM and the Master Servicer
shall not (unless the Mortgagor is in default with respect to
the SAM or such default is, in the judgment of the Master
Servicer, reasonably foreseeable) permit (i) any modification
with respect to any SAM that would change the Stated Interest
Rate, reduce or increase the principal balance (except for
reductions resulting from actual payments of principal) or
change the final maturity date on such SAM or (ii) any
modification, waiver or amendment of any term of any SAM that
would both (A) effect an exchange or reissuance of such SAM
under Section 1001 of the Code (or final, temporary or proposed
Treasury regulations promulgated thereunder) and (B) cause the
Trust Fund 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. Any extension of the final maturity date of any SAM
shall be calculated such that the SAM will be paid in full on
the reset final maturity date if the related Mortgagor
continues to make its then-current Scheduled Payments on a
timely basis.
(d) As soon as the Master Servicer has determined that all amounts
which it expects to recover from or on account of a SAM have
been recovered and that no further Liquidation Proceeds will be
received in connection therewith, the Master Servicer shall
provide to the Trustee, along with the next Loan Summary and
Remittance Report provided under Section 6.07(b), a certificate
of a Servicing Officer that such SAM became a Liquidated SAM.
Section 3.07 Collection of Taxes, Assessments and Similar
Items; Servicing Accounts.
(a) The Master Servicer shall establish and maintain or cause the
Sub-Servicers to establish and maintain, in addition to the
Collection Accounts, one or more Servicing Accounts. The Master
Servicer or a Sub-Servicer will deposit and retain therein all
otherwise unapplied collections from the Mortgagors, including
amounts collected for the payment of taxes, assessments,
insurance premiums, or comparable items as agent of the
Mortgagors.
(b) The deposits in the Servicing Accounts shall be held in a
Designated Depository Institution in an account designated as a
"SAM Servicing Account," held in trust by the Master Servicer
or a Sub-Servicer as Trustee of Taxes and Insurance Custodial
Account for borrowers and for the Seller (and its successors
and assigns) acting on its own behalf and for the Seller as
agent for holders of various pass-through securities and other
interests in shared appreciation mortgage loans sold by it; and
agent for various mortgagors, as their interests may appear or
under such other designation as may be permitted by a
Sub-Servicing Agreement. The amount at any time credited to a
Servicing Account must be fully insured by the FDIC, or, to the
extent that such deposits exceed the limits of such insurance,
such excess must be (i) transferred to another fully insured
account in another Designated Depository Institution or (ii) if
permitted by applicable law, invested in Permitted Investments
held in trust by the Master Servicer or a Sub-Servicer as
described above and maturing, or be subject to redemption or
withdrawal, no later than the date on which such funds are
required to be withdrawn, and in no event later than 45 days
after the date of investment. The Master Servicer may, or may
permit a Sub- Servicer to, establish Servicing Accounts not
conforming to the foregoing requirements to the extent that
such Servicing Accounts are Rating Agency Eligible Accounts.
Withdrawals of amounts from the Servicing Accounts may be made
only to effect timely payment of taxes, assessments, insurance
premiums, or comparable items, to transfer previously unapplied
collections to a Collection Account, to reimburse the Master
Servicer or a Sub-Servicer for any advances made with respect
to such items, to refund to any Mortgagors any sums as may be
determined to be overages, to pay interest, if required, to
Mortgagors on balances in the Servicing Accounts or to clear
and terminate the Servicing Accounts at or any time after the
termination of this Agreement in accordance with Section 10.01.
Section 3.08 Access to Certain Documentation and
Information Regarding the SAMs. The Master Servicer shall provide, and
shall cause any Sub-Servicer to provide, to the Trustee and the Seller
access to the records and documentation regarding the related SAMs and REO
Property and the servicing thereof and to the Certificateholders, the FDIC,
and the supervisory agents and examiners of the FDIC (to which the Trustee
shall also provide) access to the documentation regarding the related SAMs
required by applicable regulations, such access being afforded without
charge but only upon reasonable prior written request and during normal
business hours at the offices of the Master Servicer, the Sub-Servicers or
the Trustee that are designated by these entities; provided, however, that,
unless otherwise required by law, the Trustee, the Master Servicer or the
Sub-Servicer shall not be required to provide access to such records and
documentation if the provision thereof would violate the legal right to
privacy of any Mortgagor provided, further, however, that the Trustee and
the Seller shall coordinate their requests for such access so as not to
impose an unreasonable burden on, or cause an interruption of, the business
of the Master Servicer or any Sub-Servicer. The Master Servicer, the Sub-
Servicers and the Trustee shall allow representatives of the above entities
to photocopy any of the records and documentation and shall provide
equipment for that purpose at a charge that covers their own actual
out-of-pocket costs.
Section 3.09 Maintenance of Primary Mortgage Insurance
Policies; Collection Thereunder. The Master Servicer shall, or shall cause
the related Sub-Servicer to, in accordance with applicable law, exercise
its best reasonable efforts to maintain and keep in full force and effect
each Primary Mortgage Insurance Policy by a Qualified Insurer, or other
insurer satisfactory to the Rating Agencies, with respect to each
conventional SAM as to which as of the Cut-off Date such a Primary Mortgage
Insurance Policy was in effect (or, in the case of a Substitute SAM, the
date of substitution) and the original principal amount of the related
Mortgage Note exceeded 80% of the Original Value in an amount at least
equal to the excess of such original principal amount over 75% of such
Original Value until the principal amount of any such SAM is reduced below
80% of the Original Value or, based upon a new appraisal, the principal
amount of such SAM represents less than 80% of the new appraised value. The
Master Servicer shall, or shall cause the related Sub-Servicer to, effect
the timely payment of the premium on each Primary Mortgage Insurance
Policy. The Master Servicer and the related Sub-Servicer shall have the
power to substitute for any Primary Mortgage Insurance Policy another
substantially equivalent policy issued by another Qualified Insurer;
provided that such substitution is subject to the condition, to be
evidenced by a writing from each Rating Agency, that it would not cause the
ratings on the Certificates to be downgraded or withdrawn.
Section 3.10 Maintenance of Hazard Insurance and Fidelity
Coverage.
(a) The Master Servicer shall maintain and keep, or cause each
Sub-Servicer to maintain and keep, with respect to each SAM and
each REO Property, in full force and effect hazard insurance
and other such hazards as are customary in the area where the
Mortgage Property is located (fire insurance with extended
coverage) in an amount equal to at least the lesser of the
Outstanding Principal Balance of the SAM or the current
replacement cost of the Mortgaged Property, by companies that
currently reflect a General Policy in Best's Key Rating Guide
("Best's") currently acceptable to Fannie Mae and are licensed
to do business in the state wherein its property subject to the
policy is located (a "Best's Approved Insurer") and containing
a standard mortgagee clause; provided, however, that the amount
of hazard insurance may not be less than the amount necessary
to prevent loss due to the application of any co-insurance
provision of the related policy. Unless applicable state law
requires a higher deductible, the deductible on such hazard
insurance policy may be no more than $1000 or 1% of the
applicable amount of coverage, whichever is less. In the case
of a condominium unit, the required hazard insurance shall take
the form of a multiperil policy covering the entire condominium
project, in an amount equal to at least 100% of the insurable
value based on replacement cost.
(b) Any amounts collected by the Master Servicer or a Sub-Servicer
under any such hazard insurance policy (other than amounts to
be applied to the restoration or repair of the Mortgaged
Property or amounts released to the Mortgagor in accordance
with the Master Servicer's or a Sub-Servicer's normal servicing
procedures, the terms of the Mortgage Note, the Security
Instrument or applicable law) shall be deposited initially in a
Collection Account, for transmittal to the Distribution
Account, subject to withdrawal pursuant to Section 4.03.
(c) Any cost incurred by a Master Servicer or a Sub-Servicer in
maintaining any such hazard insurance policy shall not be added
to the amount owing under the SAM for the purpose of
calculating monthly distributions to Certificateholders,
notwithstanding that the terms of the SAM so permit. Such costs
shall be recoverable by the Master Servicer or a Sub-Servicer
out of related late payments by the Mortgagor or out of
Insurance Proceeds or Liquidation Proceeds or by the Master
Servicer from the Repurchase Price, to the extent permitted by
Section 4.03.
(d) No earthquake or other additional insurance is to be required
of any Mortgagor or maintained on property acquired with
respect to a Security Instrument other than pursuant to such
applicable laws and regulations as shall at any time be in
force and shall require such additional insurance. The Master
Servicer shall cause an ongoing review to be performed of the
SAMs to determine which, if any, of the Mortgaged Properties
are located in a federally designated special flood hazard area
and for each Mortgaged Property found to be located in a
federally designated special flood hazard area, the Master
Servicer shall use its best reasonable efforts to cause with
respect to the SAMs and each REO Property, flood insurance (to
the extent available and in accordance with mortgage servicing
industry practice) to be maintained. Such flood insurance shall
cover the Mortgaged Property, including all items taken into
account in arriving at the Appraised Value on which the SAM was
based, and shall be in an amount equal to the lesser of (i) the
Outstanding Principal Balance of the related SAM and (ii) the
minimum amount required under the terms of coverage to
compensate for any damage or loss on a replacement cost basis
(or the unpaid balance of the mortgage if replacement cost
coverage is not available for the type of building insured) and
(iii) the maximum amount of insurance which is available under
the Flood Disaster Protection Act of 1973, as amended. Unless
applicable state law requires a higher deductible, the
deductible on such flood insurance may not exceed $1,000 or 1%
of the applicable amount of coverage, whichever is less.
(e) If insurance has not been maintained complying with Subsections
3.10(a) and (d) and there shall have been a loss which would
have been covered by such insurance had it been maintained, the
Master Servicer shall pay, or cause the related Sub- Servicer
to pay, for any necessary repairs.
(f) The Master Servicer shall present, or cause the related
Sub-Servicer to present, if it is a permitted claimant, claims
under the related hazard insurance or flood insurance policy.
(g) The Master Servicer shall obtain and maintain at its own
expense and for the duration of this Agreement a blanket
fidelity bond and an errors and omissions insurance policy and
shall cause each Sub-Servicer to obtain and maintain an errors
and omissions insurance policy covering such Sub-Servicer's
officers, employees and other persons acting on its behalf in
connection with its activities under this Agreement. The amount
of coverage shall be at least equal to the coverage maintained
by the Master Servicer acceptable to Fannie Mae or Freddie Mac
to service loans for it or otherwise in an amount as is
commercially available at a cost that is generally not regarded
as excessive by industry standards. The Master Servicer shall
promptly notify the Trustee of any material change in the terms
of such bond or policy. The Master Servicer shall provide
annually to the Trustee a certificate of insurance that such
bond and policy are in effect. If any such bond or policy
ceases to be in effect, the Master Servicer shall, to the
extent possible, give the Trustee ten days' notice prior to any
such cessation and shall use its best efforts to obtain a
comparable replacement bond or policy, as the case may be. Any
amounts relating to the SAMs collected under such bond or
policy shall be remitted to the Distribution Account to the
extent that such amounts have not previously been paid to such
account.
Section 3.11 Due-on-Sale Clauses; Assumption Agreements.
(a) In any case in which the Master Servicer is notified by any
Mortgagor or Sub- Servicer that a Mortgaged Property relating
to a SAM has been or is about to be conveyed by the Mortgagor,
the Master Servicer shall enforce, or shall instruct such
Sub-Servicer to enforce, any due-on-sale clause contained in
the related Security Instrument to the extent permitted under
the terms of the related Mortgage Note and by applicable law
unless the Master Servicer reasonably believes such enforcement
is likely to result in legal action by the Mortgagor. If the
Master Servicer reasonably believes that such due-on-sale
clause cannot be enforced under applicable law or if the SAM
does not contain a due-on-sale clause, the Master Servicer is
authorized, and may authorize any Sub-Servicer, to consent to a
conveyance subject to the lien of the Mortgage, and to take or
enter into an assumption agreement from or with the Person to
whom such property has been or is about to be conveyed,
pursuant to which such Person becomes liable under the related
Mortgage Note and unless prohibited by applicable state law,
such Mortgagor remains liable thereon, on condition, however,
that the related SAM shall continue to be covered (if so
covered before the Master Servicer or the related Sub-Servicer
enters into such agreement) by any applicable Primary Mortgage
Insurance Policy. The Master Servicer shall notify the Trustee,
whenever possible, before the completion of such assumption
agreement, and shall forward to the Trustee the original copy
of such assumption agreement, which copy shall be added by the
Trustee to the related Mortgage File and which 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. In connection with any such assumption
agreement, the interest rate on the related SAM shall not be
changed and no other material alterations in the SAM shall be
made unless such material alteration would not cause the REMIC
to fail to qualify as a REMIC for federal income tax purposes,
as evidenced by a REMIC Opinion. If the interest rate on an
assumed SAM is increased due to both (i) permitted increases
upon assumption under the terms of such SAM and (ii) all
applicable restrictions hereunder being satisfied, the Master
Servicer shall, as part of the report to the Trustee and the
Seller pursuant to Section 6.07(b) hereof, provide therefor on
a revised SAM Schedule. In any event, the Master Servicer shall
advise the Trustee in writing of the entry into of any material
modification of a SAM in connection with an assumption and
shall provide the Trustee with a copy of such REMIC Opinion.
Any fee or additional interest collected by the Master Servicer
or Sub-Servicer for consenting to any such conveyance or
entering into any such assumption agreement may be retained by
the Master Servicer or the related Sub-Servicer as additional
servicing compensation.
(b) 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 SAM by operation of
law or any conveyance by the Mortgagor of the related Mortgaged
Property or assumption of a SAM which the Master Servicer
reasonably believes, based on prudent servicing standards, it
may be restricted by law from preventing, for any reason
whatsoever or if the exercise of such right would impair or
threaten to impair any recovery under any applicable Insurance
Policy, or, in the Master Servicer's judgment, be reasonably,
likely to result in legal action by the Mortgagor or would
otherwise adversely affect the Certificateholders.
Section 3.12 Realization Upon Defaulted SAMs.
(a) The Master Servicer shall, or shall direct the related
Sub-Servicer to, foreclose upon or otherwise comparably convert
the ownership of properties securing any SAMs that come into
and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments
pursuant to Section 3.06 except that the Master Servicer shall
not, and shall not direct the related Sub-Servicer, if any, to,
foreclose upon or otherwise comparably convert a Mortgaged
Property if there is evidence of environmental hazards or toxic
waste thereon and the Master Servicer determines it would be
imprudent to do so or not in accordance with appropriate
servicing standards. The Master Servicer can conclusively rely
on results of third party inspections from parties it
reasonably believes are qualified to conduct such inspections.
In connection with such foreclosure or other conversion, the
Master Servicer in conjunction with the related Sub-Servicer,
if any, shall use its best reasonable efforts to preserve REO
Property and to realize upon defaulted SAMs in such manner as
to maximize the receipt of principal and interest by the
Certificateholders, taking into account, among other things,
the timing of foreclosure and the considerations set forth in
Subsection 3.12(b). The foregoing is subject to the proviso
that the Master Servicer shall not be required to expend its
own funds in connection with any foreclosure or towards the
restoration of any property unless it determines in good faith
(i) that such restoration or foreclosure will increase the
proceeds of liquidation of the SAM to Certificateholders after
reimbursement to itself for such expenses and (ii) that such
expenses will be recoverable to it either through Liquidation
Proceeds (respecting which it shall have priority for purposes
of reimbursements from the Distribution Account pursuant to
Section 4.03) or through Insurance Proceeds (respecting which
it shall have similar priority). The Master Servicer shall be
responsible for all other costs and expenses incurred by it in
any such proceedings; provided, however, that it shall be
entitled to reimbursement thereof (as well as its normal
servicing compensation), and in respect of the Master Servicer
only, to receive Excess Liquidation Proceeds as additional
servicing compensation to the extent that transfers or
withdrawals from the Distribution Account with respect thereto
are permitted under Section 4.03. Any income from or other
funds (net of any income taxes) generated by REO Property shall
be deemed for purposes of this Agreement to be Insurance
Proceeds. Any REO Property acquired shall be acquired in the
name of the Trustee, as trustee for the benefit of the
Certificateholders.
(b) The Trust Fund shall not acquire any real property (or any
personal property incident to such real property) except in
connection with a default or reasonably foreseeable default of
a SAM. In the event that the Trust Fund acquires any real
property (or personal property incident to such real property)
in connection with a default or reasonably foreseeable default
of a SAM, such property shall be disposed of by the Trust Fund
before the close of the third taxable year following the
taxable year in which the Trust Fund acquired such property
("grace period") unless the Trustee shall have received a REMIC
Opinion with respect to such longer retention or the Master
Servicer applies for and receives an extension of the grace
period under Section 856(e)(3) of the Code, in which case such
three year period will be extended by the grace period set
forth in such REMIC Opinion or approved application, as the
case may be. The Trustee shall have no obligation to pay for
such REMIC Opinion.
Section 3.13 Trustee to Cooperate; Release of Mortgage Files.
(a) Upon payment in full of any SAM or the receipt by the Master
Servicer of a notification that payment in full will be
escrowed in a manner customary for such purposes, the Master
Servicer will immediately notify the Trustee by a certification
signed by a Servicing Officer in the Form of Exhibit D (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 Distribution
Account have been or will be so deposited therein) and shall
request delivery to the Master Servicer or a Sub-Servicer, as
the case may be, of the Mortgage File. Upon receipt of such
certification and request, the Trustee shall promptly release
the related Mortgage File to the Master Servicer or a
Sub-Servicer and execute and deliver to the Master Servicer,
without recourse, the request for reconveyance, deed of
reconveyance or release or satisfaction of mortgage or such
instrument releasing the lien of the Security Instrument
(furnished by the Master Servicer), together with the Mortgage
Note with written evidence of cancellation thereon. No expenses
incurred in connection with any instrument of satisfaction or
deed of reconveyance shall be chargeable to the Distribution
Account.
(b) From time to time as is appropriate for the servicing or
foreclosure of any SAM or collection under a Required Insurance
Policy, the Master Servicer shall deliver to the Trustee a
Request for Release signed by a Servicing Officer on behalf of
the Master Servicer in substantially the form attached as
Exhibit D hereto. Upon receipt of the Request for Release, the
Trustee shall deliver the Mortgage File or any document therein
to the Master Servicer or Sub-Servicer, as the case may be.
(c) The Master Servicer shall cause each Mortgage File or any
document therein released pursuant to Subsection 3.13(b) to be
returned to the Trustee when the need therefor no longer
exists, unless the SAM has become a Liquidated SAM and the
Liquidation Proceeds relating to the SAM have been deposited in
the Distribution Account or such Mortgage File is being used to
pursue foreclosure or other legal proceedings. Prior to return
of a Mortgage File or any document to the Trustee, the Master
Servicer, the related Insurer or Sub-Servicer to whom such file
or document was delivered shall retain such file or document in
its respective control unless 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, to
initiate or pursue legal action or other proceedings for the
foreclosure of the Mortgaged Property either judicially or
non-judicially, and the Master Servicer has delivered to the
Trustee a certificate of a Servicing Officer certifying as to
the name and address of the Person to which such Mortgage File
or such document was delivered and the purpose or purposes of
such delivery. If a SAM becomes a Liquidated SAM, the Master
Servicer shall deliver the Request for Release with respect
thereto to the Trustee upon deposit of the related Liquidation
Proceeds in the Distribution Account.
(d) The Trustee shall execute and deliver to the Master Servicer
any court pleadings, requests for trustee's sale or other
documents necessary or desirable to (i) the foreclosure or
trustee's sale with respect to a Mortgaged Property; (ii) any
legal action brought to obtain judgment against any Mortgagor
on the Mortgage Note or Security Instrument; (iii) obtain a
deficiency judgment against the Mortgagor; or (iv) enforce any
other rights or remedies provided by the Mortgage Note or
Security Instrument or otherwise available at law or equity.
Together with such documents or pleadings the Master Servicer
shall deliver to the Trustee a certificate of a Servicing
Officer in which it requests the Trustee to execute the
pleadings or documents. The certificate shall certify and
explain the reasons for which the pleadings or documents are
required. It shall further certify that the Trustee's execution
and delivery of the pleadings or documents will not invalidate
any insurance coverage under the Required Insurance Policies or
invalidate or otherwise affect the lien of the Security
Instrument, except for the termination of such a lien upon
completion of the foreclosure or trustee's sale.
Section 3.14 Servicing and Master Servicing Compensation.
(a) As compensation for its activities hereunder, the Master
Servicer shall be entitled to receive the Master Servicing Fee
from full payments of accrued interest on each SAM.
(b) The Master Servicer may retain additional servicing
compensation in the form of prepayment charges, if any,
assumption fees, tax service fees, fees for statement of
account or payoff, late payment charges, interest on amounts
deposited in any Accounts or Permitted Investments of such
amounts, or otherwise. The Master Servicer is also entitled to
receive Excess Liquidation Proceeds as additional servicing
compensation. The Master Servicer shall be required to pay all
expenses it incurs in connection with servicing activities
under this Agreement, including fees and expenses to
Sub-Servicers, and shall not be entitled to reimbursement
except as provided in this Agreement. Expenses to be paid by
the Master Servicer under this Subsection 3.14(b) shall include
payment of the expenses of the accountants retained pursuant to
Section 3.16.
Section 3.15 Annual Statement of Compliance. Within 120
days after the last day of each fiscal year of the Master Servicer,
currently _________, commencing in ______, the Master Servicer at its own
expense, shall deliver to the Trustee, with a copy to the Rating Agencies,
an Officer's Certificate stating, as to the signer thereof, that (i) a
review of the activities of the Master Servicer during the preceding fiscal
year or applicable portion thereof and of performance under this Agreement
has been made under such officer's supervision, (ii) to the best of such
officer's knowledge, based on such review, the Master Servicer has
fulfilled all its obligations under this Agreement for 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 including the steps being taken by the Master Servicer to
remedy such default; (iii) a review of the activities of each Sub-Servicer,
if any, during the Sub-Servicer's most recently ended fiscal year on or
prior to such December 31st and its performance under its Sub-Servicing
Agreement has been made under such Officer's supervision; and (iv) to the
best of the Servicing Officer's knowledge, based on his review and the
certification of an officer of the Sub-Servicer (unless the Servicing
Officer has reason to believe that reliance on such certification is not
justified), either each Sub-Servicer has performed and fulfilled its
duties, responsibilities and obligations under this Agreement and its
Sub-Servicing Agreement in all material respects throughout the year, or,
if there has been a default in performance or fulfillment of any such
duties, responsibilities or obligations, specifying the nature and status
of each such default known to the Servicing Officer. Copies of such
statements shall be provided by the Master Servicer to the
Certificateholders upon request or by the Trustee at the expense of the
Master Servicer should the Master Servicer fail to provide such copies.
Section 3.16 Annual Independent Public Accountants'
Servicing Report.
(a) Within 120 days after the last day of each fiscal year of the
Master Servicer, currently ________, commencing in _______, the
Master Servicer, at its expense, shall cause a firm of
Independent public accountants who are members of the American
Institute of Certified Public Accountants to furnish a letter
to the Master Servicer, which will be provided to the Trustee
and the Rating Agencies providing the results of such firm's
examination of the Master Servicer's overall servicing
activities for such fiscal year conducted in accordance with
the requirements of the Uniform Single Attestation Program for
Mortgage Bankers. In connection with the engagement to deliver
any such report (or other accountants' report or certificate
hereunder) the Trustee is authorized and directed to enter into
such agreed-upon- procedures or engagement letter as such
accountants may request and shall be indemnified by the Trust
hereunder in so doing.
(b) Within 120 days after the last day of the fiscal year of each
Sub-Servicer or a Master Servicer other than [Master Servicer
name] or the Trustee, commencing in _______, the Master
Servicer, at its expense, shall furnish to the Trustee the most
recently available letter or letters from one or more firms of
Independent certified public accountants who are members of the
American Institute of Certified Public Accountants reporting
the results of such firm's examination of the servicing
procedures of any Sub-Servicer and any Master Servicer (other
than [Master Servicer name] or the Trustee) in accordance with
the requirements of the Uniform Single Attestation Program for
Mortgage Bankers, or such other program as may be certified as
being comparable by such accountants.
Section 3.17 REMIC-Related Covenants. For as long as the
REMIC Assets shall exist, the Master Servicer and the Trustee shall act in
accordance herewith to assure continuing treatment of the REMIC Assets as a
REMIC, and the Trustee shall comply with any directions of the Master
Servicer to assure such continuing treatment. In particular, the Trustee
shall not (a) sell or permit the sale of all or any portion of the SAMs or
of any Permitted Investment unless such sale is as a result of a repurchase
of the SAMs pursuant to this Agreement or the Trustee has received a REMIC
Opinion prepared at the expense of the Trust Fund; and (b) other than with
respect to a substitution pursuant to Section 2.04, accept any contribution
to the REMIC Assets after the Startup Day without receipt of a REMIC
Opinion.
Section 3.18 Additional Information. The Master Servicer
agrees to furnish the Seller from time to time upon reasonable request,
such further information, reports and financial statements as the Seller
deems appropriate to prepare and file all necessary reports with the
Securities and Exchange Commission.
Section 3.19 Optional Purchase of Defaulted SAMs. The
Master Servicer shall have the right, but not the obligation, to purchase
any Defaulted SAM for a price equal to the Repurchase Price therefor. Any
such purchase shall be accomplished as provided in Subsection 2.02(c)
hereof.
Section 3.20 Periodic Filings with the Securities and
Exchange Commission; Additional Information. The Trustee agrees to
cooperate with the Seller in connection with the filing by the Seller with
the Securities and Exchange Commission of any and all reports, statements
and information respecting the Trust Fund and/or the Certificates required
to be filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended.
Section 3.21 Reports of Foreclosures and Abandonments of
Mortgaged Property.
Following the foreclosure sale or abandonment of any
Mortgaged Property, the Master Servicer shall report such foreclosure or
abandonment as required pursuant to Section 6050J of the Code.
Section 3.22 Appraisals: Qualified Major Home
Improvements. As required by each Mortgage Note, the Master Servicer shall
cause the Mortgagors to conduct appraisals to determine the value of the
Mortgaged Property in the context of Qualified Major Home Improvements (as
such term is defined in the related Mortgage Note) and on the earlier of
the maturity date of the related SAM and the occurrence of a Mortgage
Termination Event. The Master Servicer shall adjust the Adjusted Value of
the Mortgaged Property and the Settlement Value of each such SAM as
provided in such Mortgage Note as a result of such appraisals and calculate
any amount due to the Mortgagor upon the maturity of the related SAM or the
occurrence of a Mortgage Termination Event. Multiple appraisals shall be
conducted as provided in such Mortgage Note. The appraiser conducting any
such appraisal, and the initial appraisal, shall be chosen from a schedule
of appraisers attached hereto as Schedule I. Such schedule may be amended
from time to time by the Purchaser in its able discretion. A Qualified
Major Home Improvement shall include any improvement items shown on
Schedule [III]. Such schedule may be amended from time to time by the
Purchaser in its sole discretion for any SAMs to be originated by the
Seller.
Section 3.23 Fees That The Servicer Will Collect. As
provided in such Mortgage Note, the Master Servicer will charge and collect
from each Mortgagor: (i) at the maturity date for the SAM or upon the
Mortgagor's knowledge of the occurrence of a Mortgage Termination Event, a
fee for the costs associated with the payoff in full of the Mortgage Note;
and (ii) in connection with each Qualified Major Home Improvement (as such
term is defined in the related Mortgage Note), a fee for the costs
associated with adjusting the Mortgaged Property's Adjusted Value resulting
from the Qualified Major Home Improvement (as such term is defined the
related Mortgage Note) and otherwise complying with such Mortgage Note. The
amount of all fees collected pursuant to this Section shall be specified in
the Mortgage Note.
Section 3.24 Certificate of Occupancy. In accordance with
the Mortgage Note, the Master Servicer will cause each Mortgagor to sign an
occupancy certificate provided by the Seller from time to time, certifying
that the Mortgaged Property is occupied.
ARTICLE IV
Accounts
Section 4.01 Collection Accounts.
(a) The Master Servicer shall establish and maintain if it is
servicing the SAMs and shall require each Sub-Servicer to
establish and maintain a Collection Account complying with the
requirements set forth in this Section 4.01, with records to be
kept with respect thereto on a SAM by SAM basis, into which
accounts shall be deposited within 2 Business Days of receipt
all collections of principal and interest on any SAM and with
respect to any REO Property received by the Master Servicer, or
a Sub-Servicer, including Principal Prepayments, Insurance
Proceeds, Liquidation Proceeds, and advances made from the
Sub-Servicer's own funds (less servicing compensation as
permitted by Subsection 3.14(a)) and all other amounts to be
deposited in the Collection Accounts. The Master Servicer is
hereby authorized to make withdrawals from and deposits to the
related Collection Accounts for purposes required or permitted
by this Agreement. All Collection Accounts shall be held in a
Designated Depository Institution and segregated on the books
of such institution. The amount at any time credited to a
Collection Account shall be fully insured by the FDIC or, to
the extent that such balance exceeds the lesser of $100,000 or
the limits of such insurance, such excess must be transferred
to the Distribution Account or invested in Permitted
Investments or may be deposited in a Rating Agency Eligible
Account, including an account at the ____________________, in
the name of the Trustee for the benefit of Certificateholders
and not commingled with any other funds. The Master Servicer
may, and the Master Servicer may permit a Sub-Servicer to,
transfer funds to other accounts (which shall for purposes
hereof be deemed to be Collection Accounts), commingle
accounts, or to establish Collection Accounts not conforming to
the foregoing requirements, to the extent that such other
accounts or Collection Accounts are Rating Agency Eligible
Accounts.
Amounts on deposit in a Collection Account may be
invested in Permitted Investments in the name of the Trustee for the
benefit of Certificateholders and, except as provided in the preceding
paragraph, not commingled with any other funds, such Permitted Investments
to mature, or to be subject to redemption or withdrawal, no later than the
date on which such funds are required to be withdrawn for deposit in the
Distribution Account, and shall be held until required for such deposit.
The income earned from Permitted Investments made pursuant to this Section
4.01 shall be paid to the Master Servicer or the related Sub-Servicer as
additional compensation for its obligations under this Agreement, and the
risk of loss of moneys required to be distributed to the Certificateholders
resulting from such investments shall be borne by and be the risk of the
Master Servicer or the related Sub-Servicer. The Master Servicer shall
itself, or shall cause the related Sub-Servicer to, deposit the amount of
any such loss in the related Collection Account within two Business Days of
receipt of notification of such loss but not later than the second Business
Day prior to the Distribution Date on which the moneys so invested are
required to be distributed to the Certificateholders.
(b) On or before each Funds Transfer Date, the Master Servicer
shall withdraw or shall cause to be withdrawn from the
Collection Accounts and shall immediately deposit or cause to
be deposited in the Distribution Account amounts representing
the following collections and payments (other than with respect
to principal of or interest on the SAMs due on or before the
Cut-off Date):
(i) Scheduled Payments on the SAMs received or any
portion thereof advanced by the Master Servicer or
Sub-Servicers which were due on or before the related Due
Date, net of the amount thereof comprising the Master
Servicing Fee due the Master Servicer;
(ii) Full Principal Prepayments and any Liquidation
Proceeds received by the Master Servicer or Sub-Servicers
with respect to such SAMs in the related Prepayment
Period, with interest to the date of prepayment or
liquidation, net of the amount thereof comprising the
Master Servicing Fee due the Master Servicer;
(iii) Partial prepayments of principal received by
the Master Servicer or Sub-Servicers for such SAMs in the
related Prepayment Period; and
(iv) Any amount to be used as a Distribution
Account Advance.
(c) Withdrawals may be made from a Collection Account only to make
remittances as provided in Subsections 4.01(b) or 4.03(c); to
reimburse the Master Servicer or a Sub-Servicer for advances of
principal and interest which have been recovered by subsequent
collection from the related Mortgagor; to remove amounts
deposited in error; to remove fees, charges or other such
amounts deposited on a temporary basis; or to clear and
terminate the account at the termination of this Agreement in
accordance with Section 10.01. As provided in Section 4.02(b)
certain amounts otherwise due to the Master Servicer may be
retained by it and need not be deposited in the Distribution
Account.
(d) The Master Servicer shall deliver to the Trustee on or prior to
the Determination Date in each month a statement from the
institution at which each Collection Account is maintained
showing deposits and withdrawals during the prior month.
Section 4.02 Distribution Account.
(a) The Trustee shall establish and maintain in the name of the
Trustee, for the benefit of the Certificateholders, the
Distribution Account as a segregated Rating Agency Eligible
Account or Accounts. The Trustee will deposit in the
Distribution Account as received the following amounts:
(i) Any amounts withdrawn from a Collection Account
pursuant to Subsection 4.01(b);
(ii) Any Monthly Advance and any Compensating
Interest Payments;
(iii) Any Insurance Proceeds or Liquidation
Proceeds received by the Master Servicer which were not
deposited in a Collection Account;
(iv) The Repurchase Price with respect to any SAMs
purchased pursuant to Sections 2.02, 2.03A or 3.19, any
amounts which are to be treated pursuant to Section 2.04
as the payment of such a Repurchase Price, and all
proceeds of any SAMs or property acquired with respect
thereto repurchased by the Seller or its designee
pursuant to Section 10.01;
(v) Any amounts required to be deposited with
respect to losses on Permitted Investments pursuant to
Subsection 4.02(d) below; and
(vi) Any other amounts received by the Master
Servicer or the Trustee and required to be deposited in
the Distribution Account pursuant to this Agreement.
(b) All amounts (other than income earned on Permitted Investments)
deposited to the Distribution Account shall be held by the
Trustee in the name of the Trustee in trust for the benefit of
the Certificateholders and in accordance with the terms and
provisions of this Agreement, subject to the right of the
Master Servicer to require the Trustee to make withdrawals
therefrom as provided herein. The foregoing requirements for
crediting the Distribution Account shall be exclusive, it being
understood and agreed that, without limiting the generality of
the foregoing, payments in the nature of (i) prepayment or late
payment charges or assumption, tax service, statement account
or payoff, substitution, satisfaction, release and other like
fees and charges and (ii) the items enumerated in Subsections
4.03(a)(ii), (iii), (iv), (v), (vii), (viii), (x) and (xii)
need not be credited by the Master Servicer or the related
Sub-Servicer to the Distribution Account and may be retained by
the Master Servicer or the related Sub-Servicer as servicing
compensation. In the event that the Master Servicer shall
deposit or cause to be deposited to the Distribution Account
any amount not required to be credited thereto, the Trustee,
upon receipt of a written request therefor signed by a
Servicing Officer of the Master Servicer, shall promptly
transfer such amount to the Master Servicer, any provision
herein to the contrary notwithstanding.
(c) The Distribution Account shall constitute a segregated Rating
Agency Eligible Account of the Trust Fund segregated on the
books of the Trustee and held by the Trustee in trust. The
amount at any time credited to the Distribution Account shall
be (i) fully insured by the FDIC or the Bank Insurance Fund to
the maximum coverage provided thereby, (ii) invested, in the
name of the Trustee, or its nominee, for the benefit of the
Certificateholders, in such Permitted Investments described in
clause (viii) of the definition of Permitted Investments to be
held by the Trustee as the Trustee shall determine, or (iii)
from the maturity of any Permitted Investment on the Business
Day prior to a Distribution Date through the distribution of
such funds on such Distribution Date or at such other time and
in such amount as, in the judgment of the Trustee, cannot
reasonably be invested in accordance with items (i) or (ii) of
this sentence, held by the Trustee uninvested in such
Distribution Account. All Permitted Investments shall mature or
be subject to redemption or withdrawal on or before, and shall
be held until, the next succeeding Distribution Date if the
obligor for such Permitted Investment is the Trustee or, if
such obligor is any other Person, the Business Day preceding
such Distribution Date.
(d) The income earned from Permitted Investments made pursuant to
this Section 4.02 shall be paid to the Trustee, as additional
compensation for its obligations under this Agreement, and the
risk of loss of moneys required to be distributed to the
Certificateholders resulting from such investments shall be
borne by and be the risk of the Trustee. The amount of any such
loss shall be deposited by the Trustee in the Distribution
Account within two Business Days of receipt of notification of
such loss but not later than the second Business Day prior to
the Distribution Date on which the moneys so invested are
required to be distributed to the Certificateholders.
Section 4.03 Permitted Withdrawals and Transfers from the
Distribution Account.
(a) The Trustee will, from time to time on demand of the Master
Servicer, make or cause to be made such withdrawals or
transfers from the Distribution Account as the Master Servicer
has designated for such transfer or withdrawal as specified in
a certificate signed by a Servicing Officer (upon which the
Trustee may conclusively rely) for the following purposes
(limited in the case of amounts due the Master Servicer to
those not withdrawn from the Collection Account in accordance
with the terms of this Agreement):
(i) [Reserved];
(ii) to reimburse the Master Servicer or any
Sub-Servicer for any Monthly Advance or Servicing Advance
of its own funds or any advance of such Sub-Servicer's
own funds, the right of the Master Servicer or a Sub-
Servicer to reimbursement pursuant to this subclause (ii)
being limited to amounts received on a particular SAM
(including, for this purpose, the Repurchase Price
therefor, Insurance Proceeds and Liquidation Proceeds)
which represent late payments or recoveries of the
principal of or interest on such SAM respecting which
such Monthly Advance or Servicing Advance was made;
(iii) to reimburse the Master Servicer or any
Sub-Servicer from Insurance Proceeds or Liquidation
Proceeds relating to a particular SAM for amounts
expended by the Master Servicer or such Sub-Servicer
pursuant to Section 3.12 in good faith in connection with
the restoration of the related Mortgaged Property which
was damaged by an Uninsured Cause or in connection with
the liquidation of such SAM;
(iv) to reimburse the Master Servicer or any
Sub-Servicer from Insurance Proceeds relating to a
particular SAM for Insured Expenses incurred with respect
to such SAM and to reimburse the Master Servicer or such
Sub-Servicer from Liquidation Proceeds from a particular
SAM for Liquidation Expenses incurred with respect to
such SAM; provided that the Master Servicer shall not be
entitled to reimbursement for Liquidation Expenses with
respect to a SAM to the extent that (i) any amounts with
respect to such SAM were paid as Excess Liquidation
Proceeds pursuant to clause (xii) of this Subsection
4.03(a) to the Master Servicer; and (ii) such Liquidation
Expenses were not included in the computation of such
Excess Liquidation Proceeds;
(v) to pay the Master Servicer or any Sub-Servicer
(payment to any Sub-Servicer to be subject to prior
payment to the Master Servicer of an amount equal to the
Master Servicing Fee), as appropriate, from Liquidation
Proceeds or Insurance Proceeds received in connection
with the liquidation of any SAM, the amount which it or
such Sub-Servicer would have been entitled to receive
under subclause (x) of this Subsection 4.03(a) as
servicing compensation on account of each defaulted
scheduled payment on such SAM if paid in a timely manner
by the related Mortgagor, but only to the extent that the
aggregate of Liquidation Proceeds and Insurance Proceeds
with respect to such SAM, after any reimbursement to the
Master Servicer or any Sub-Servicer, pursuant to
subclauses (ii), (iii), (iv) and (vii) of this Subsection
4.03(a), exceeds the Outstanding Principal Balance of
such SAM plus accrued and unpaid interest thereon at the
related Stated Interest Rate less the Master Servicing
Fee Rate to but not including the date of payment;
(vi) to pay the Master Servicer or any Sub-Servicer
(payment to any Sub-Servicer to be subject to prior
payment to the Master Servicer of the portion of the
Master Servicing Fee which the Master Servicer is
entitled to retain as evidenced in writing to the Trustee
by the Master Servicer, as appropriate) from the
Repurchase Price for any SAM, the amount which it or such
Sub-Servicer would have been entitled to receive under
subclause (x) of this Subsection 4.03(a) as servicing
compensation, but only to the extent that the Repurchase
Price with respect to such SAM after any reimbursement to
the related Master Servicer and Sub-Servicer pursuant to
subclauses (ii) and (vii) of this Subsection 4.03(a)
exceeds the Outstanding Principal Balance of such SAM
plus accrued and unpaid interest thereon at the related
Stated Interest Rate less the Master Servicing Fee Rate
through the last day of the month of repurchase;
(vii) to reimburse the Master Servicer or any
Sub-Servicer for Servicing Advances pursuant to Sections
3.07, 3.09 and 3.10, the right to reimbursement pursuant
to this subclause being limited to amounts received on
the related SAM (including, for this purpose, the
Repurchase Price therefor, Insurance Proceeds and
Liquidation Proceeds) which represent late recoveries of
the payments for which such advances were made;
(viii) to pay the Master Servicer or any
Sub-Servicer, as the case may be, with respect to each
SAM that has been purchased pursuant to Section 2.02,
2.03A, 2.04, 3.19 or 10.01, all amounts received thereon,
representing recoveries of principal that reduce the
Outstanding Principal Balance of the related SAM below
the Outstanding Principal Balance used in calculating the
Repurchase Price or representing interest included in the
calculation of the Repurchase Price or accrued after the
end of the month during which such repurchase occurs;
(ix) to reimburse the Master Servicer or any
Sub-Servicer for any Monthly Advance or Servicing
Advance, after a Realized Loss has been allocated with
respect to the related SAM if the Monthly Advance or
Servicing Advance has not been reimbursed pursuant to
clauses (ii) and (vii);
(x) to pay the Master Servicer and any Sub-Servicer
servicing compensation as set forth in Section 3.14;
(xi) to reimburse the Master Servicer for expenses,
costs and liabilities incurred by and reimbursable to it
pursuant to Subsection 7.04(d);
(xii) to pay to the Master Servicer, as additional
servicing compensation, any Excess Liquidation Proceeds;
(xiii) to clear and terminate the Distribution
Account pursuant to Section 10.01; and
(xiv) to remove amounts deposited in error.
The Master Servicer shall keep and maintain separate
accounting, on a SAM by SAM basis, for the purpose of accounting for any
reimbursement from the Distribution Account pursuant to subclauses (i)
through (vii), inclusive, and (ix) or with respect to any such amounts
which would have been covered by such subclauses had the amounts not been
retained by the Master Servicer without being deposited in the Distribution
Account under Section 4.02(b).
(b) On each Distribution Date, the Trustee shall make the following
payments in the priority set forth from the funds in the
Distribution Account:
(i) First, the Trustee's Fees and expenses shall be
paid to the Trustee in accordance with Section 9.05(a);
and
(ii) Second, the amount distributable to the
Holders of the Certificates shall be payable in
accordance with Section 6.01.
(c) Notwithstanding the provisions of this Section 4.03, the Master
Servicer may, but is not required to, allow the Sub-Servicers
to deduct from amounts received by them or from the related
Collection Account, prior to deposit in the Distribution
Account, any portion to which such Sub-Servicers are entitled
as servicing compensation (including income on Permitted
Investments) or reimbursement of any reimbursable advances made
by such Sub-Servicers.
(d) The Trustee shall be permitted to make withdrawals or transfers
from the Distribution Account to remove amounts deposited by
the Trustee in error.
ARTICLE V
Certificates
Section 5.01 Certificates.
(a) The Depository, the Seller and the Trustee have entered into a
Depository Agreement dated as of _____________, 2000 (the
"Depository Agreement). Except for the Residual Certificate,
the Class X Certificates, the Individual Certificates and as
provided in Subsection 5.01(b), the 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 a successor to
the Depository; (ii) ownership and transfers of registration of
such Certificates on the books of the Depository shall be
governed by applicable rules established by the Depository;
(iii) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants; (iv) the
Trustee shall deal with the Depository as representative of
such Certificate Owners of the respective Class of Certificates
for purposes of exercising the rights of Certificateholders
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;
and (v) the Trustee may rely and shall be fully protected in
relying upon information furnished by the Depository with
respect to its Depository Participants.
The Class X Certificates, the Class R Certificate and the
Private Certificates are initially Physical Certificates. If at any time
the Holders of all of the Certificates of one or more such Classes request
that the Trustee cause such Class to become Global Certificates, the
Trustee and the Seller will take such action as may be reasonably required
to cause the Depository to accept such Class or Classes for trading if it
may legally be so traded.
All transfers by Certificate Owners of such respective
Classes of Book- Entry Certificates and any Global 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 it represents or of brokerage firms for which it acts as
agent in accordance with the Depository's normal procedures.
(b) If (i)(A) the Seller advises the Trustee in writing that the
Depository is no longer willing or able to properly discharge
its responsibilities as Depository and (B) the
Trustee or the Seller is unable to locate a qualified successor
within 30 days or (ii) the Seller at its option advises the
Trustee in writing that it elects to terminate the book-entry
system through the Depository, the Trustee shall request that
the Depository notify all Certificate Owners of the occurrence
of any such event and of the availability of definitive, fully
registered Certificates to Certificate Owners requesting the
same. Upon surrender to the Trustee of the Certificates by the
Depository, accompanied by registration instructions from the
Depository for registration, the Trustee shall issue such
definitive Certificates. Neither the Seller, the Master
Servicer 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.
(c) [Reserved]
(d) The Classes of the Certificates shall have the following
designations, initial principal or notional amounts and
Pass-Through Rates:
Designation Initial Principal or Pass-Through Rate
Notional Amount
Class A Certificates _______ _______
Class PO Certificates _______ (1)
Class X Certificates (2) (2)
Class B Certificates _______ _______
Class C Certificates _______ _______
Class D Certificates _______ _______
Class E Certificates _______ _______
Class F Certificates _______ _______
Class G Certificates _______ _______
Class R Certificate _______ _______
-------------
(1) The Class PO Certificates are principal only certificates and
will not bear interest. The Current Principal Amount of the
Class PO Certificates initially will be the amount shown above
and is composed of strips of principal from the Discount SAMs.
(2) The Class X Certificates will have a Notional Amount equal to
the sum of the aggregate Scheduled Principal Balances of the
Non-Discount SAMs. They will bear interest on their Notional
Amount at a variable Pass-Through Rate equal to the weighted
average of the excess of (i) the Remittance Rates of the
Non-Discount SAMs over (ii) ______ % per annum. For the Class X
Certificates, the initial Notional Amount will be $
____________ and the Pass-Through Rate for the initial Interest
Accrual Period is ______% per annum.
(e) With respect to each Distribution Date, each Class of
Certificates (other than the Class PO Certificates) shall
accrue interest during the related Interest Accrual Period.
With respect to each Distribution Date and each such Class of
Certificates, interest shall be calculated, on the basis of a
360-day year comprised of twelve 30- day months, based upon the
respective Pass-Through Rate set forth, or determined as
provided above, and the Current Principal Amount or Notional
Amount, as the case may be, of such Class applicable to such
Distribution Date.
(f) The Certificates shall be substantially in the forms set forth
in Exhibit A-1 and A-2. On original issuance, the Trustee shall
sign, countersign and shall deliver them at the direction of
the Seller. Pending the preparation of definitive Certificates
of any Class, the Trustee may sign and countersign temporary
Certificates that are printed, lithographed or typewritten, in
authorized denominations for Certificates of such Class,
substantially of the tenor of the definitive Certificates in
lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as
the officers or authorized signatories executing such
Certificates may determine, as evidenced by their execution of
such Certificates. If temporary Certificates are issued, the
Seller will cause definitive Certificates to be prepared
without unreasonable delay. After the preparation of definitive
Certificates, the temporary Certificates shall be exchangeable
for definitive Certificates upon surrender of the temporary
Certificates at the office of the Trustee, without charge to
the Holder. Upon surrender for cancellation of any one or more
temporary Certificates, the Trustee shall sign and countersign
and deliver in exchange therefor a like aggregate principal
amount, in authorized denominations for such Class, of
definitive Certificates of the same Class. Until so exchanged,
such temporary Certificates shall in all respects be entitled
to the same benefits as definitive Certificates.
(g) Each Class of Book-Entry Certificates will be registered as a
single Certificate of such Class held by a nominee of the
Depository or the DTC Custodian, and beneficial interests will
be held by investors through the book-entry facilities of the
Depository in minimum denominations of (i) in the case of the
Senior Certificates which are Book-Entry Certificates, $1,000
and in each case increments of $1.00 in excess thereof, and
(ii) in the case of the Offered Subordinate Certificates,
$1,000 and increments of $1.00 in excess thereof, except that
one Certificate of each such Class may be issued in a different
amount so that the sum of the denominations of all outstanding
Certificates of such Class shall equal the Current Principal
Amount of such Class on the Closing Date. On the Closing Date,
the Trustee shall execute and countersign Physical Certificates
all in an aggregate principal amount that shall equal the
Current Principal Amount of such Class on the Closing Date. The
Class X Certificates will be issued in certificated
fully-registered form in minimum denominations of $1,000 and in
each case increments of $1.00 in excess thereof, except that
one Certificate of such Class may be issued in a different
amount so that the sum of the denominations of all of the
Outstanding Certificates of such Class shall equal the Notional
Amount of such Class on the Closing Date. The Private
Certificates will be issued in certificated fully-registered
form in minimum denominations of $50,000 and increments of
$1.00 in excess thereof, except that one Certificate of each
such Class may be issued in a different amount so that the sum
of the denominations of all outstanding Certificates of such
Class shall equal the Current Principal Amount of such Class on
the Closing Date. The Class R Certificate shall be issued in
certificated fully-registered form in the denomination of $100.
Each Class of Global Certificates, if any, shall be issued in
fully registered form in minimum dollar denominations of
$50,000 and integral multiples of $1.00 in excess thereof,
except that one Certificate of each Class may be in a different
denomination so that the sum of the denominations of all
outstanding Certificates of such Class shall equal the Current
Principal Amount of such Class on the Closing Date. On the
Closing Date, the Trustee shall execute and countersign (i) in
the case of each Class of Offered Certificates (other than the
Class X Certificates), the Certificate in the entire Current
Principal Amount of the respective Class and (ii) in the case
of the Class X Certificates and each Class of Private
Certificates, all in an aggregate Notional Amount or principal
amount that shall equal the Notional Amount or Current
Principal Amount of each such respective Class on the Closing
Date. The Certificates referred to in clause (i) and if at any
time there are to be Global Certificates, the Global
Certificates shall be delivered by the Seller to the Depository
or pursuant to the Depository's instructions, shall be
delivered by the Seller on behalf of the Depository to and
deposited with the DTC Custodian. The Trustee shall sign the
Certificates by facsimile or manual signature and countersign
them by manual signature on behalf of the Trustee by one or
more authorized signatories, each of whom shall be a
Responsible Officer of the Trustee or its agent. A Certificate
bearing the manual and facsimile signatures of individuals who
were the authorized signatories of the Trustee or its agent at
the time of issuance shall bind the Trustee, notwithstanding
that such individuals or any of them have ceased to hold such
positions prior to the delivery of such Certificate.
(h) No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless there appears on
such Certificate the manually executed countersignature of the
Trustee or its agent, and such countersignature upon any
Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly executed and
delivered hereunder. All Certificates issued on the Closing
Date shall be dated the Closing Date. All Certificates issued
thereafter shall be dated the date of their countersignature.
(i) The Closing Date is hereby designated as the "startup" day of
the REMIC Assets within the meaning of Section 860G(a)(9) of
the Code.
(j) For federal income tax purposes, the REMIC Assets shall have a
tax year that is a calendar year and shall report income on an
accrual basis.
(k) The Trustee shall cause the REMIC Assets to elect to be treated
as a REMIC under Section 860D of the Code. Any inconsistencies
or ambiguities in this Agreement or in the administration of
any Trust established hereby shall be resolved in a manner that
preserves the validity of such elections.
(l) The Assumed Final Distribution Date for the Certificates is
_________, 20__.
Section 5.02 Registration of Transfer and Exchange of
Certificates.
(a) The Trustee shall maintain at its Corporate Trust Office a
Certificate Register in which, subject to such reasonable
regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges
of Certificates as herein provided.
(b) Subject to Subsection 5.01(a) and, in the case of any Global
Certificate or Physical Certificate upon the satisfaction of
the conditions set forth below, upon surrender for registration
of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose, the Trustee shall sign,
countersign and shall deliver, in the name of the designated
transferee or transferees, a new Certificate of a like Class
and aggregate Fractional Undivided Interest, but bearing a
different number.
(c) By acceptance of an Individual Certificate, whether upon
original issuance or subsequent transfer, each holder of such a
Certificate acknowledges the restrictions on the transfer of
such Certificate set forth in the Securities Legend and agrees
that it will transfer such a Certificate only as provided
herein. In addition to the provisions of Subsection 5.02(h),
the following restrictions shall apply with respect to the
transfer and registration of transfer of an Individual
Certificate to a transferee that takes delivery in the form of
an Individual Certificate:
(i) The Trustee shall register the transfer of an
Individual Certificate if the requested transfer is being
made to a transferee who has provided the Trustee with a
Rule 144A Certificate.
(ii) The Trustee shall register the transfer of any
Individual Certificate if (x) the transferor has advised
the Trustee in writing that the Certificate is being
transferred to an Institutional Accredited Investor; and
(y) prior to the transfer the transferee furnishes to the
Trustee an Investment Letter (and the Trustee shall be
fully protected in so doing), provided that, if based
upon an Opinion of Counsel to the effect that the
delivery of (x) and (y) above are not sufficient to
confirm that the proposed transfer is being made pursuant
to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act and
other applicable laws, the Trustee shall as a condition
of the registration of any such transfer require the
transferor to furnish such other certifications, legal
opinions or other information prior to registering the
transfer of an Individual Certificate as shall be set
forth in such Opinion of Counsel.
(d) Subject to Subsection 5.02(h), so long as a Global Certificate
of such Class is outstanding and is held by or on behalf of the
Depository, transfers of beneficial interests in such Global
Certificate, or transfers by holders of Individual Certificates
of such Class to transferees that take delivery in the form of
beneficial interests in the Global Certificate, may be made
only in accordance with this Subsection 5.02(d) and in
accordance with the rules of the Depository:
(i) In the case of a beneficial interest in the
Global Certificate being transferred to an Institutional
Accredited Investor, such transferee shall be required to
take delivery in the form of an Individual Certificate or
Certificates and the Trustee shall register such transfer
only upon compliance with the provisions of Subsection
5.02(c)(ii).
(ii) In the case of a beneficial interest in a
Class of Global Certificates being transferred to a
transferee that takes delivery in the form of an
Individual Certificate or Certificates of such Class,
except as set forth in clause (i) above, the Trustee
shall register such transfer only upon compliance with
the provisions of Subsection 5.02(c)(i).
(iii) In the case of an Individual Certificate of a
Class being transferred to a transferee that takes
delivery in the form of a beneficial interest in a Global
Certificate of such Class, the Trustee shall register
such transfer if the transferee has provided the Trustee
with a Rule 144A Certificate.
(iv) No restrictions shall apply with respect to
the transfer or registration of transfer of a beneficial
interest in the Global Certificate of a Class to a
transferee that takes delivery in the form of a
beneficial interest in the Global Certificate of such
Class; provided that each such transferee shall be deemed
to have made such representations and warranties
contained in the Rule 144A Certificate as are sufficient
to establish that it is a QIB.
(e) Subject to Subsection 5.02(h), an exchange of a beneficial
interest in a Global Certificate of a Class for an Individual
Certificate or Certificates of such Class, an exchange of an
Individual Certificate or Certificates of a Class for a
beneficial interest in the Global Certificate of such Class and
an exchange of an Individual Certificate or Certificates of a
Class for another Individual Certificate or Certificates of
such Class (in each case, whether or not such exchange is made
in anticipation of subsequent transfer, and, in the case of the
Global Certificate of such Class, so long as such Certificate
is outstanding and is held by or on behalf of the Depository)
may be made only in accordance with this Subsection 5.02(e) and
in accordance with the rules of the Depository:
(i) A holder of a beneficial interest in a Global
Certificate of a Class may at any time exchange such
beneficial interest for an Individual Certificate or
Certificates of such Class.
(ii) A holder of an Individual Certificate or
Certificates of a Class may exchange such Certificate or
Certificates for a beneficial interest in the Global
Certificate of such Class if such holder furnishes to the
Trustee a Rule 144A Certificate.
(iii) A holder of an Individual Certificate of a
Class may exchange such Certificate for an equal
aggregate principal amount of Individual Certificates of
such Class in different authorized denominations without
any certification.
(f) (i) Upon acceptance for exchange or transfer of an Individual
Certificate of a Class for a beneficial interest in a Global
Certificate of such Class as provided herein, the Trustee shall
cancel such Individual Certificate and shall (or shall request
the Depository to) endorse on the schedule affixed to the
applicable Global Certificate (or on a continuation of such
schedule affixed to the Global Certificate and made a part
thereof) or otherwise make in its books and records an
appropriate notation evidencing the date of such exchange or
transfer and an increase in the certificate balance of the
Global Certificate equal to the certificate balance of such
Individual Certificate exchanged or transferred therefor.
(ii) Upon acceptance for exchange or transfer of a
beneficial interest in a Global Certificate of a Class
for an Individual Certificate of such Class as provided
herein, the Trustee shall (or shall request the
Depository to) endorse on the schedule affixed to such
Global Certificate (or on a continuation of such schedule
affixed to such Global Certificate and made a part
thereof) or otherwise make in its books and records an
appropriate notation evidencing the date of such exchange
or transfer and a decrease in the certificate balance of
such Global Certificate equal to the certificate balance
of such Individual Certificate issued in exchange
therefor or upon transfer thereof.
(g) The Securities Legend shall be placed on any Individual
Certificate issued in exchange for or upon transfer of another
Individual Certificate or of a beneficial interest in a Global
Certificate.
(h) Subject to the restrictions on transfer and exchange set forth
in this Section 5.02 and Sections 5.06 and 5.07, the holder of
any Individual Certificate may transfer or exchange the same in
whole or in part (in an initial certificate balance equal to
the minimum authorized denomination set forth in Section
5.01(g) above or any integral multiple of $1.00 in excess
thereof) by surrendering such Certificate at the Corporate
Trust Office or at such other office as may be designated by
the Trustee for this purpose, or at the office of any transfer
agent, together with an executed instrument of assignment and
transfer satisfactory in form and substance to the Trustee in
the case of transfer and a written request for exchange in the
case of exchange. The holder of a beneficial interest in a
Global Certificate may, subject to the rules and procedures of
the Depository, cause the Depository (or its nominee) to notify
the Trustee in writing of a request for transfer or exchange of
such beneficial interest for an Individual Certificate or
Certificates. Following a proper request for transfer or
exchange, the Trustee shall, within five Business Days of such
request made at such Corporate Trust Office, sign, countersign
and deliver at such Corporate Trust Office, to the transferee
(in the case of transfer) or holder (in the case of exchange)
or send by first class mail at the risk of the transferee (in
the case of transfer) or holder (in the case of exchange) to
such address as the transferee or holder, as applicable, may
request, an Individual Certificate or Certificates, as the case
may require, for a like aggregate Fractional Undivided Interest
and in such authorized denomination or denominations as may be
requested. The presentation for transfer or exchange of any
Individual Certificate shall not be valid unless made at the
Corporate Trust Office or at such other office as may be
designated by the Trustee for this purpose by the registered
holder in person, or by a duly authorized attorney-in-fact. As
of the Closing Date, the Trustee designates its office
maintained at _____________________________________ as the
office for accepting Certificates for transfer or surrender in
accordance with this Article V.
(i) At the option of the Certificateholders, Certificates may be
exchanged for other Certificates of authorized denominations of
a like Class and aggregate Fractional Undivided Interest, upon
surrender of the Certificates to be exchanged at any such
office or agency; provided, however, that no Certificate may be
exchanged for new Certificates unless the original Fractional
Undivided Interest represented by each such new Certificate (i)
is at least equal to the minimum authorized denomination, or
(ii) is acceptable to the Seller as indicated to the Trustee in
writing. Whenever any Certificates are so surrendered for
exchange, the Trustee shall sign and countersign and the
Trustee shall deliver the Certificates which the
Certificateholder making the exchange is entitled to receive.
(j) If the Trustee so requires, every Certificate presented or
surrendered for transfer or exchange shall be duly endorsed by,
or be accompanied by a written instrument of transfer, with a
signature guarantee, in form satisfactory to the Trustee, duly
executed by the holder thereof or his or her attorney duly
authorized in writing.
(k) No service charge shall be made for any transfer or exchange of
Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of
Certificates.
(l) The Trustee shall cancel all Certificates surrendered for
transfer or exchange but shall retain such Certificates in
accordance with its standard retention policy or for such
further time as is required by the record retention
requirements of the Securities Exchange Act of 1934, as
amended, and thereafter may destroy such Certificates.
(m) The following legend shall be placed on Certificates for each
Class of Subordinate Certificates and on the Class X
Certificates, whether upon original issuance or upon issuance
of any other Certificate of any such Class in exchange therefor
or upon transfer thereof and each transfer of Certificates of
such Classes shall be subject to the provisions thereof:
THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY,
OR ON BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT
ARRANGEMENT WHICH IS SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, AND/OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED,
UNLESS THE PROPOSED TRANSFER AND/OR HOLDING OF A CERTIFICATE
AND THE SERVICING, MANAGEMENT AND/OR OPERATION OF THE TRUST AND
ITS ASSETS: (I) WILL NOT RESULT IN ANY PROHIBITED TRANSACTION
WHICH IS NOT COVERED UNDER AN INDIVIDUAL OR CLASS PROHIBITED
TRANSACTION EXEMPTION, INCLUDING, BUT NOT LIMITED TO,
PROHIBITED TRANSACTION EXEMPTION ("PTE") 84-14, PTE 91-38, PTE
90-1, PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE RISE TO ANY
ADDITIONAL FIDUCIARY DUTIES ON THE PART OF THE MASTER SERVICER
OR THE TRUSTEE, WHICH WILL BE DEEMED REPRESENTED BY AN OWNER OF
A BOOK-ENTRY CERTIFICATE OR A GLOBAL CERTIFICATE AND WILL BE
EVIDENCED BY A REPRESENTATION TO SUCH EFFECT BY OR ON BEHALF OF
A HOLDER OF A PRIVATE CERTIFICATE OR CLASS X CERTIFICATE. THE
ABOVE RESTRICTIONS SHALL NOT APPLY TO THE CLASS X CERTIFICATES
EITHER: (I) IN THE EVENT THAT THE CLASS X CERTIFICATES ARE
UNDERWRITTEN, PLACED BY AN ENTITY WHICH HAS BEEN GRANTED AN
EXEMPTION BY THE DEPARTMENT OF LABOR SIMILAR TO PTE 90-30, OR
SUCH ENTITY ACTS AS A SELLING AGENT FOR SUCH CLASS X
CERTIFICATES OR (II) IN SECONDARY MARKET TRANSFERS THEREAFTER.
Section 5.03 Mutilated, Destroyed, Lost or Stolen
Certificates.
(a) If (i) any mutilated Certificate is surrendered to the Trustee,
or the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (ii) there
is delivered to the Trustee such security or indemnity as it
may require to save it harmless, and (iii) the Trustee has not
received notice that such Certificate has been acquired by a
third Person, the Trustee shall sign, countersign and deliver,
in exchange for or in lieu of any such mutilated, destroyed,
lost or stolen Certificate, a new Certificate of like tenor and
Fractional Undivided Interest but in each case bearing a
different number. The mutilated, destroyed, lost or stolen
Certificate shall thereupon be canceled of record by the
Trustee and shall be of no further effect and evidence no
rights.
(b) Upon the issuance of any new Certificate under this Section
5.03, the Trustee may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith. Any
duplicate Certificate issued pursuant to this Section 5.03
shall constitute complete and indefeasible evidence of
ownership in the Trust Fund, as if originally issued, whether
or not the lost, stolen or destroyed Certificate shall be found
at any time.
Section 5.04Persons Deemed Owners. Prior to due
presentation of a Certificate for registration of transfer, the Seller, the
Master Servicer, the Trustee and any agent of the Seller, the Master
Servicer or the Trustee may treat the Person in whose name any Certificate
is registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 6.01 and for all other purposes
whatsoever. Neither the Seller, the Master Servicer, the Trustee nor any
agent of the Seller, the Master Servicer or the Trustee shall be affected
by notice to the contrary. No Certificate shall be deemed duly presented
for a transfer effective on any Record Date unless the Certificate to be
transferred is presented no later than the close of business on the fifth
Business Day preceding such Record Date.
Section 5.05 Transfer Restrictions on Residual Certificates.
(a) The Residual Certificate, or interests therein, may not be
transferred without the prior express written consent of the
Tax Matters Person and the Seller. As a prerequisite to such
consent, the proposed transferee must provide the Tax Matters
Person, the Seller and the Trustee with an affidavit that the
proposed transferee is not a Disqualified Organization (as
defined in Subsection 5.05(b)) (and, unless the Tax Matters
Person and the Seller consent to the transfer to a person who
is not a U.S. Person, an affidavit that it is a U.S. Person) as
provided in Subsection 5.05(b).
(b) No transfer, sale or other disposition of a Residual
Certificate (including a beneficial interest therein) may be
made unless, prior to the transfer, sale or other disposition
of a Residual Certificate, the proposed transferee (including
the initial purchaser thereof) delivers to the Tax Matters
Person, the Seller and the Trustee an affidavit in the form
attached hereto as Exhibit E stating, among other things, that
as of the date of such transfer (i) such transferee is not any
of (A) 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 (other than an instrumentality that is a corporation
all of whose activities are subject to tax under Chapter 1 of
Subtitle A of the Code and (except in the case of Freddie Mac)
a majority of whose board of directors is not selected by the
United States, or any state or political subdivision thereof),
(B) any organization that is exempt from any tax imposed by
Chapter 1 of Subtitle A of the Code, other than (x) a
tax-exempt farmers' cooperative within the meaning of Section
521 of the Code or (y) an organization that is subject to the
tax imposed by Section 511 of the Code on "unrelated business
taxable income" or (C) a corporation operating on a cooperative
basis that is engaged in furnishing electric energy or
providing telephone service to persons in rural areas (within
the meaning of Section 1381(a)(2)(C) of the Code) (any Person
described in (A), (B), or (C) being referred to herein as a
"Disqualified Organization") and that (ii) such transferee is
not acquiring such Residual Certificate for the account of a
Disqualified Organization. Neither the Tax Matters Person nor
the Seller shall consent to a transfer of a Residual
Certificate if it has actual knowledge that any statement made
in the affidavit issued pursuant to the preceding sentence is
not true. Notwithstanding any transfer, sale or other
disposition of a Residual Certificate to a Disqualified
Organization, such transfer, sale or other disposition shall be
deemed to be of no legal force or effect whatsoever and such
Disqualified Organization shall not be deemed to be a Holder of
a Residual Certificate for any purpose hereunder, including,
but not limited to, the receipt of distributions thereon. If
any purported transfer shall be in violation of the provisions
of this Subsection 5.05(b), then the prior Holder thereof
shall, upon discovery that the transfer of such Residual
Certificate was not in fact permitted by this Subsection
5.05(b), be restored to all rights as a Holder thereof
retroactive to the date of the purported transfer. None of the
Trustee, the Seller or the Tax Matters Person shall be under
any liability to any Person for any registration or transfer of
a Residual Certificate that is not permitted by this Subsection
5.05(b) or for making payments due on such Residual Certificate
to the purported Holder thereof or taking any other action with
respect to such purported Holder under the provisions of this
Agreement so long as the written affidavit referred to above
was received with respect to such transfer, and the Tax Matters
Person, the Seller or the Trustee, as applicable, had no
knowledge, that it was untrue. The prior Holder shall be
entitled to recover from any purported Holder of a Residual
Certificate that was in fact not a permitted transferee under
this Subsection 5.05(b) at the time it became a Holder all
payments made on such Residual Certificate. Each Holder of a
Residual Certificate, by acceptance thereof, shall be deemed
for all purposes to have consented to the provisions of this
Subsection 5.05(b) and to any amendment of this Agreement
deemed necessary (whether as a result of new legislation or
otherwise) by counsel of the Tax Matters Person or the Seller
to ensure that the Residual Certificate is not transferred to a
Disqualified Organization and that any transfer of such
Residual Certificate will not cause the imposition of a tax
upon the Trust or cause REMIC Assets to fail to qualify as a
REMIC.
(c) Unless the Tax Matters Person and the Seller shall have
consented in writing (which consent may be withheld in such
person's sole discretion), the Residual Certificate (including
a beneficial interest therein) may not be purchased by or
transferred to any person who is not a "United States person,"
as such term is defined in Section 7701(a)(30) of the Code.
(d) By accepting a Residual Certificate, the purchaser thereof
agrees to be a Tax Matters Person, and appoints the Trustee to
act as its agent with respect to all matters concerning the tax
obligations of the Trust, other than those matters regarding
transfer restrictions contained in this Section 5.05.
Section 5.06 Restrictions on Transferability of
Private Certificates.
(a) No offer, sale, transfer or other disposition (including
pledge) of a Private Certificate shall be made by any Holder
thereof unless registered under the Securities Act, or an
exemption from the registration requirements of the Securities
Act and any applicable state securities or "Blue Sky" laws is
available and the prospective transferee (other than the
Seller) of such Certificate signs and delivers to the Trustee
an Investment Letter, if the transferee is an Institutional
Accredited Investor, in the form set forth as Exhibit F-1
hereto, or a Rule 144A Certificate, if the transferee is a QIB,
in the form set forth as Exhibit F-2 hereto. Notwithstanding
the provisions of the immediately preceding sentence, no
restrictions shall apply with respect to the transfer or
registration of transfer of a beneficial interest in a Physical
Certificate that is a Global Certificate of a Class to a
transferee that takes delivery in the form of a beneficial
interest in the Global Certificate of such Class provided that
each such transferee shall be deemed to have made such
representations and warranties contained in the Rule 144A
Certificate as are sufficient to establish that it is a QIB. In
the case of a proposed transfer of a Private Certificate to a
transferee other than a QIB, the Trustee may require an Opinion
of Counsel that such transaction is exempt from the
registration requirements of the Securities Act. The cost of
such opinion shall not be an expense of the Trustee or the
Trust Fund.
(b) Each Private Certificate shall bear a Securities Legend.
Section 5.07 ERISA Restrictions.
(a) Subject to the provisions of subsection (b), no Certificates of
a Class of Private Certificates or the Class X Certificates may
be acquired directly or indirectly by, or on behalf of, an
employee benefit plan or other retirement arrangement which is
subject to Title I of ERISA and/or Section 4975 of the Code,
unless the proposed transferee provides a representation or
certification to the Trustee substantially in the form of
Exhibit I hereto (upon which the Trustee is authorized to rely)
to the effect that the proposed transfer and/or holding of a
Certificate and the servicing, management and operation of the
Trust: (i) will not result in a prohibited transaction under
Section 406 of ERISA or Section 4975 of the Code which is not
covered under an individual or class prohibited transaction
exemption including but not limited to Department of Labor
Prohibited Transaction Exemption ("PTE") 84-14 (Class Exemption
for Plan Asset Transactions Determined by Independent Qualified
Professional Asset Managers), PTE 91-38 (Class Exemption for
Certain Transactions Involving Bank Collective Investment
Funds), PTE 90-1 (Class Exemption for Certain Transactions
Involving Insurance Company Pooled Separate Accounts), PTE
95-60 (Class Exemption for Certain Transactions Involving
Insurance Company General Accounts) and PTCE 96-23 (Class
Exemption for Plan Asset Transactions Determined by In-House
Asset Managers and (ii) will not give rise to any additional
fiduciary duties under ERISA on the part of the Master Servicer
or the Trustee. The above restrictions shall not apply to the
Class X Certificates either: (i) in the event that the Class X
Certificates are underwritten, placed by an entity which has
been granted an exemption by the Department of Labor similar to
PTE 90-30, or such entity acts as a selling agent for such
Class X Certificates or (ii) in secondary market transfers
thereafter, and the Trustee receives a representation or
certification (upon which the Trustee is authorized to rely)
from the holder of Class X Certificates to such effect.
(b) Any Person acquiring an interest in a Book-Entry Certificate or
a Global Certificate which is a Subordinate Certificate or in a
Class X Certificate, by acquisition of such Certificate, shall
be deemed to have represented to the Trustee that it is either:
(i) not acquiring an interest in such Certificate directly or
indirectly by, or on behalf of, an employee benefit plan or
other retirement arrangement which is subject to Title I of
ERISA and/or Section 4975 of the Code, or (ii) such Person
provides a representation or certification to the Trustee to
the effect that the transfer and/or holding of an interest in
such Certificate and the servicing, management and/or operation
of the Trust and its assets: (I) will not result in any
prohibited transaction which is not covered under an individual
or class prohibited transaction exemption, including, but not
limited to, PTE 84-14, PTE 91-38, PTE 90-1, PTE 95-60 or PTE
96-23 and (II) will not give rise to any additional fiduciary
duties on the part of the Master Servicer or the Trustee. The
above restrictions shall not apply to the Class X Certificates
either: (i) in the event that the Class X Certificates are
underwritten, placed by an entity which has been granted an
exemption by the Department of Labor similar to PTE 90-30, or
such entity acts as a selling agent for such Class X
Certificates or (ii) in secondary market transfers thereafter.
(c) Any attempted or purported transfer of any Certificate in
violation of the provisions of Subsections (a) or (b) above
shall be void ab initio and such Certificate shall be
considered to have been held continuously by the prior
permitted Certificateholder. Any transferor of any Certificate
in violation of such provisions, shall indemnify and hold
harmless the Trustee from and against any and all liabilities,
claims, costs or expenses incurred by the Trustee as a result
of such attempted or purported transfer.
Section 5.08Rule 144A Information. For so long as any
Private Certificates are outstanding and are "restricted securities" within
the meaning of Rule 144(a)(3) of the Securities Act, (1) the Master
Servicer will provide or cause to be provided to any Holder of such
Certificates and any prospective purchaser thereof designated by such a
Holder, upon the request of such Holder or prospective purchaser, the
information required to be provided to such Holder or prospective purchaser
by Rule 144A(d)(4) under the Securities Act; and (2) the Master Servicer
shall update such information from time to time in order to prevent such
information from becoming false and misleading and will take such other
actions as are necessary to ensure that the safe harbor exemption from the
registration requirements of the Securities Act under Rule 144A is and will
be available for resales of such Certificates conducted in accordance with
Rule 144A.
ARTICLE VI
Payments to Certificateholders
Section 6.01 Distributions on the Certificates.
(a) Interest and principal on the Certificates will be distributed
monthly on each Distribution Date, commencing in __________
2000, in an aggregate amount equal to the Available Funds for
such Distribution Date.
(A) On each Distribution Date, the Available Funds will
be distributed in the following order of priority among
the Certificates except as otherwise noted:
first, to the interest-bearing Classes of
Senior Certificates, the Accrued Certificate Interest on
each such Class for such Distribution Date. As described
below, Accrued Certificate Interest on each such Class of
Certificates is subject to reduction in the event of
certain Net Interest Shortfalls allocable thereto. Any
Net Interest Shortfalls shall be allocated among the
Senior Certificates as provided in Section 6.01(c);
second, to the interest-bearing Classes of
Senior Certificates, any Accrued Certificate Interest
thereon remaining undistributed from previous
Distribution Dates, to the extent of remaining Available
Funds, any shortfall in available amounts being allocated
among such Classes in proportion to the amount of such
Accrued Certificate Interest remaining undistributed for
each such Class for such Distribution Date;
third, to the Senior Certificates (other than
the Class X Certificates) in reduction of the Current
Principal Amounts thereof:
(a) the Senior P&I Optimal Principal Amount, sequentially to the
Class R Certificate and then to the Class A Certificates, until
their respective Current Principal Amounts have been reduced to
zero; and
(b) the Class PO Principal Distribution Amount for such
Distribution Date, to the Class PO Certificates, until the
Current Principal Amount of the Class PO Certificates has been
reduced to zero;
fourth, the Class PO Deferred Amount for such
Distribution Date, to the Class PO Certificates;
provided, that (i) on any Distribution Date,
distributions pursuant to this priority fourth shall not
exceed the excess, if any, of (x) the Available Funds
remaining after giving effect to distributions pursuant
to clauses first through third under Section 6.01(a)(A)
above over (y) the sum of the amount of Accrued
Certificate Interest for such Distribution Date and
Accrued Certificate Interest remaining undistributed from
previous Distribution Dates on all Classes of Subordinate
Certificates then outstanding, (ii) such distributions
shall not reduce the Current Principal Amount of the
Class PO Certificates and (iii) no distribution will be
made in respect of the Class PO Deferred Amount after the
Cross-Over Date; and
fifth, sequentially, in the following order,
to the Class B, Class C, Class D, Class E, Class F and
Class G Certificates, in each case up to an amount equal
to and in the following order: (a) the Accrued
Certificate Interest thereon for such Distribution Date,
(b) any Accrued Certificate Interest thereon remaining
undistributed from previous Distribution Dates and (c)
such Class's Allocable Share for such Distribution Date.
(B) On each Distribution Date after the Cross-Over Date,
distributions of principal on the outstanding Senior
Certificates (other than Class PO Certificates) will be
made pro rata among all such Senior Certificates,
regardless of the allocation, or sequential nature, of
principal payments described in priority third in Section
6.01(a)(A) above, based upon the then Current Principal
Amounts of such Senior Certificates.
(C) If, after distributions have been made pursuant to
priorities first and second under Section 6.01(a)(A)
above on any Distribution Date, the remaining Available
Funds are less than the sum of the Senior P&I Optimal
Principal Amount and the Class PO Principal Distribution
Amount for such Distribution Date, such amounts shall be
proportionately reduced, and such remaining Available
Funds will be distributed on the Senior Certificates
(other than the Class X Certificates) on the basis of
such reduced amounts. Notwithstanding any reduction in
principal distributable to the Class PO Certificates
pursuant to this paragraph, the principal balance of the
Class PO Certificates shall be reduced not only by
principal so distributed but also by the difference
between (i) principal distributable to the Class PO
Certificates in accordance with clause (b) of priority
third above and (ii) principal actually distributed to
the Class PO Certificates after giving effect to this
paragraph (such difference, the "Class PO Cash
Shortfall"). The Class PO Cash Shortfall with respect to
any Distribution Date will be added to the Class PO
Deferred Amount.
(b) No Accrued Certificate Interest will be payable with respect to
any Class of Certificates after the Distribution Date on which
the outstanding Current Principal Amount or Notional Amount of
such Certificate has been reduced to zero.
(c) If on any Distribution Date the Available Funds for the Senior
Certificates is less than the Accrued Certificate Interest on
the Senior Certificates for such Distribution Date prior to
reduction for Net Interest Shortfall and the interest portion
of Realized Losses, the shortfall will be allocated among the
holders of each Class of interest- bearing Senior Certificates
in proportion to the respective amounts of Accrued Certificate
Interest that would have been allocated thereto in the absence
of such Net Interest Shortfall or Realized Losses for such
Distribution Date. In addition, the amount of any interest
shortfalls that are covered by subordination as provided in
Section 6.03(g) will constitute unpaid Accrued Certificate
Interest and will be distributable to Holders of the
Certificates entitled to such amounts on subsequent
Distribution Dates to the extent of the Available Funds after
current interest distributions are made as required herein. Any
amounts so carried forward will not bear interest. Shortfalls
in interest payments will not be offset by a reduction in
servicing compensation of the Master Servicer or otherwise,
except to the extent of Compensating Interest Payments.
Section 6.02 [Reserved]
Section 6.03 Allocation of Losses.
(a) On or prior to each Determination Date, the Master Servicer
shall determine and report to the Trustee the amount of any
Realized Loss in respect of each SAM that occurred during the
immediately preceding calendar month. The Trustee shall then
with respect to each SAM allocate Realized Losses on a pro rata
basis between the PO Percentage of the Scheduled Principal
Balance of a SAM which suffered a Realized Loss and the Non-PO
Percentage of the Scheduled Principal Balance of such SAM.
(b) (A) With respect to any Determination Date, the principal
portion of each Realized Loss on a SAM shall be allocated as
follows:
(i) The PO Percentage of any such Realized Loss
shall be allocated to the Class PO Certificates; and
(ii) The Non-PO Percentage of any such Realized
Loss shall be allocated as follows:
first, to the Class G Certificates until the
Current Principal Amount thereof has been reduced to
zero;
second, to the Class F Certificates until the
Current Principal Amount thereof has been reduced to
zero;
third, to the Class E Certificates until the
Current Principal Amount thereof has been reduced to
zero;
fourth, to the Class D Certificates until the
Current Principal Amount thereof has been reduced to
zero;
fifth, to the Class C Certificates until the
Current Principal Amount thereof has been reduced to
zero;
sixth, to the Class B Certificates until the
Current Principal Amount thereof has been reduced to
zero;
seventh, to the Classes of Senior
Certificates (other than the Class X and Class PO
Certificates), pro rata, in accordance with their Current
Principal Amounts.
(B) Notwithstanding the foregoing, no such allocation of
any Realized Loss shall be made on a Distribution Date to
the extent that such allocation would result in the
reduction of the aggregate Current Principal Amounts of
all the Certificates as of such Distribution Date, after
giving effect to all distributions and prior allocations
of Realized Losses on such date, to an amount less than
the aggregate Scheduled Principal Balance of the SAMs as
of the first day of the month of such Distribution Date
(such limitation, the "Loss Allocation Limitation").
(c) Any Realized Losses allocated to a Class of Certificates
pursuant to Subsection 6.03(b) shall be allocated among the
Certificates of such Class in proportion to their respective
Current Principal Amounts. Any allocation of Realized Losses
pursuant to this Subsection 6.03(c) shall be accomplished by
reducing the Current Principal Amount of the related
Certificates on the related Distribution Date in accordance
with Subsection 6.03(d).
(d) Realized Losses allocated in accordance with this Section 6.03
shall be allocated on the Distribution Date in the month
following the month in which such loss was incurred and, in the
case of the principal portion thereof, after giving effect to
distributions made on such Distribution Date, except that the
aggregate amount of Realized Losses to be allocated to the
Class PO Certificates on any Distribution Date through the
Cross-Over Date will be taken into account in determining
distributions in respect of the Class PO Deferred Amount for
such Distribution Date.
(e) On each Distribution Date, the Trustee shall determine the
Subordinate Certificate Writedown Amount, if any. Any such
Subordinate Certificate Writedown Amount shall effect a
corresponding reduction in the Current Principal Amount of (i)
if prior to the Cross-Over Date, the Current Principal Amounts
of the Subordinate Certificates in the reverse order of their
numerical Class designations and (ii) from and after the
Cross-Over Date, the Senior Certificates, pro rata based on
their respective Current Principal Amounts, which reduction
shall occur on such Distribution Date after giving effect to
distributions made on such Distribution Date.
(f) On each Distribution Date, on or prior to the Cross-Over Date
the Trustee shall determine the Class PO Deferred Payment
Writedown Amount. Any such Class PO Deferred Payment Writedown
Amount shall effect a corresponding reduction in the Current
Principal Amount of the Subordinate Certificates in the reverse
order of their numerical Class designations.
(g) The interest portion of any Realized Losses on SAMs occurring
on or prior to the Cross-Over Date will not be allocated among
any Certificates, but will reduce the amount of Available Funds
on the related Distribution Date. As a result of the
subordination of the Subordinate Certificates in right of
distribution, such Realized Losses will be borne first by the
Subordinate Certificates in inverse order of their numerical
Class designations.
Section 6.04 [Reserved]
Section 6.05 Payments.
(a) [Reserved].
(b) On each Distribution Date, other than the final Distribution
Date, the Trustee shall distribute to each Certificateholder of
record on the directly preceding Record Date the
Certificateholder's pro rata share of its Class (based on the
aggregate Fractional Undivided Interest represented by such
Holder's Certificates) of all amounts required to be
distributed on such Distribution Date to such Class. The
Trustee shall calculate such amounts based upon the information
provided the Master Servicer pursuant to Subsection 6.07(b).
(c) Payment of the above amounts to each Certificateholder shall be
made (i) by check mailed to each Certificateholder entitled
thereto at the address appearing in the Certificate Register or
(ii) upon receipt by the Trustee on or before the fifth
Business Day preceding the Record Date of written instructions
from a Certificateholder holding Certificates representing an
initial aggregate Current Principal Amount and/or Notional
Amount of not less than $1,000,000 by wire transfer to a United
States dollar account maintained by the payee at any United
States depository institution with appropriate facilities for
receiving such a wire transfer; provided, however, that the
final payment in respect of each Class of Certificates will be
made only upon presentation and surrender of such respective
Certificates at the office or agency of the Trustee specified
in the notice to Certificateholders of such final payment.
Section 6.06 Statements to Certificateholders. (a)
Concurrently with each distribution to Certificateholders, the Trustee
shall forward by first-class mail to each Certificateholder, with a copy to
the Seller, the Master Servicer and the Rating Agencies, a statement
setting forth the following information, expressed with respect to clauses
(i), (ii), (iii), (iv), (v) and (vii) in the aggregate and as a Fractional
Undivided Interest representing an initial Current Principal Amount of
$1,000 or in the case of the Class X Certificates, a Notional Amount of
$1,000 or in the case of the Class R Certificate, an initial Current
Principal Amount of $100:
(i) the Current Principal Amount (or Notional
Amount in the case of the Class X Certificate) of each
Class of Certificates immediately prior to such
Distribution Date [Appreciation Certificates?];
(ii) the amount of the distribution allocable to
principal on each applicable Class of Certificates;
(iii) the aggregate amount of interest and
Additional Interest accrued at the related Pass-Through
Rate with respect to each Class of interest-bearing
Certificates during the related Interest Accrual Period;
(iv) the Net Interest Shortfall and any other
adjustments to interest at the related Pass-Through Rate
necessary to account for any difference between interest
accrued and aggregate interest distributed with respect
to each Class of interest-bearing Certificates;
(v) the amount of the distribution allocable to
interest and Additional Interest on each interest-bearing
Class of Certificates [Appreciation Share?];
(vi) the Pass-Through Rate for each Class of
interest-bearing Certificates with respect to such
Distribution Date;
(vii) the Current Principal Amount (or Notional
Amount in the case of the Class X Certificates) of each
Class of Certificates after such Distribution Date
[Appreciation Certificates?];
(viii)the amount of any Monthly Advances,
Compensating Interest Payments and unreimbursed advances
by the Master Servicer included in such distribution;
(ix) the amount of any Realized Losses during the
related Prepayment Period and cumulatively since the
Cut-off Date and the amount and source (separately
identified) of any distribution in respect thereof
included in such distribution;
(x) the amount of Scheduled Principal and Principal
Prepayments, (including but separately identifying the
principal amount of principal prepayments, Insurance
Proceeds, the purchase price in connection with the
purchase of SAMs, cash deposits in connection with
substitutions of SAMs and Net Liquidation Proceeds) and
the number and principal balance of SAMs purchased or
substituted for during the relevant period and
cumulatively since the Cut-off Date;
(xi) the number of SAMs (excluding REO Property)
remaining in the Trust Fund as of the end of the related
Due Period;
(xii) information regarding any SAM delinquencies
as of the end of the related Due Period, including the
aggregate number, aggregate Outstanding Principal Balance
and aggregate Scheduled Principal Balance of SAMs
delinquent one month, two months and three months or
more;
(xiii)the number of SAMs in the foreclosure process
as of the end of the related Due Period and the aggregate
Outstanding Principal Balance of such SAMs;
(xiv) the number and aggregate Outstanding
Principal Balance of all SAMs as to which the Mortgaged
Property was REO Property as of the end of the related
Due Period;
(xv) the book value (the sum of (A) the Outstanding
Principal Balance of the SAM, (B) accrued interest
through the date of foreclosure and (C) foreclosure
expenses) of any REO Property; provided that, in the
event that such information is not available to the
Master Servicer and the Trustee on the Distribution Date,
such information shall be furnished promptly after it
becomes available;
(xvi) the amount of Realized Losses allocated to
each Class of Certificates since the prior Distribution
Date and in the aggregate for all prior Distribution
Dates;
(xvii) the then applicable Senior Percentage, Senior
Prepayment Percentage, Subordinate Percentage and
Subordinate Prepayment Percentage;
(xviii) the percentage of principal payments on the
SAM's, if any, which each Class will be entitled to
receive on the following Distribution Date; and
(xix) the percentage of Principal Prepayments on
the SAM's, if any, which each Class will be entitled to
receive on the following Distribution Date.
The information set forth above shall be calculated, or
reported, as the case may be, by the Trustee based on data provided by the
Master Servicer pursuant to Section 6.07(b) and, with respect to prior
periods, Section 6.06, upon which the Trustee may conclusively rely. The
information furnished by the Master Servicer shall be sufficient for the
Trustee to calculate any payments or statements it is required to make.
(b) By April 30 of each year beginning in 2000, the Trustee will
furnish a report to each Holder of the Certificates of record
at any time during the prior calendar year as to the aggregate
of amounts reported pursuant to subclauses (a)(ii) and (a)(v)
above with respect to the Certificates, plus information with
respect to the amount of servicing compensation and such other
customary information as the Master Servicer determines and
advises the Trustee to be necessary and/or to be required by
the Internal Revenue Service or by a federal or state law or
rules or regulations to enable such Holders to prepare their
tax returns for such calendar year. Copies of such report shall
also be furnished to the Master Servicer. Such obligations
shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the
Trustee pursuant to the requirements of the Code.
The Master Servicer shall supply to the Trustee in a
timely manner the information required for the statements described above
which, where appropriate, shall be the information from which the Trustee
can calculate the statements it is required to make.
Section 6.07 Reports to the Trustee and the Master
Servicer. (a) Not later than 15 days after each Distribution Date, the
Trustee shall forward to the Master Servicer a statement setting forth the
status of the Distribution Account as of the close of business on the last
day of the month of the Distribution Date and showing, for the month
covered by such statement, deposits in or withdrawals from the Distribution
Account.
(b) On or before the Determination Date, the Master Servicer shall
provide to the Trustee (and with respect to the information
contained in subclause (xiv) hereof, the Seller), with respect
to the SAMs and the REO Properties, respectively, a Loan
Summary and Remittance Report in such electronic format as the
Trustee may reasonably request and in such hardcopy format as
the Master Servicer and the Trustee shall agree which, if there
are Sub-Servicers, shall be based upon reports from
Sub-Servicers, if any, received by the Master Servicer on or
before the seventh Business Day of such month with respect to
the SAMs and REO Properties and containing the following
information (in respect of the REO Properties, only such
information which is applicable):
(i) Aggregate deposits to and withdrawals from the
Distribution Account since the date of the prior
statement, stated separately for each category of deposit
specified in Section 4.02 and each category of withdrawal
specified in Section 4.03, indicating separately the
aggregate of amounts withdrawn which are not applicable
to a particular SAM;
(ii) Amount of Available Funds expected for the
related Distribution Date and attributable to each of the
following categories:
(A) Scheduled Principal;
(B) Principal Prepayments (stated separately for
(u) partial prepayments, (v) full prepayments, (w) Net
Liquidation Proceeds, stating Liquidation Proceeds and
Liquidation Expenses separately), (x) Insurance Proceeds,
(y) the purchase price in connection with the purchase of
a SAM, and (z) any cash deposit in connection with the
substitution of a SAM;
(C) regularly scheduled interest on the SAMs;
(D) Monthly Advances made by the Master Servicer;
(E) Distribution Account Advances;
(F) Compensating Interest Payments; and
(G) reimbursements in connection with losses on
Permitted Investments.
(iii) Aggregate Outstanding Principal Balances of
the SAMs as of the related Due Date, without giving
effect to payments due on such date;
(iv) Realized Losses for the prior month and in the
aggregate from the Closing Date;
(v) [intentionally omitted];
(vi) [intentionally omitted];
(vii) Aggregate Scheduled Principal Balance of the
SAMs as of the related Due Date;
(viii) Book value of any collateral acquired by
means of foreclosure, grant of deed in lieu of
foreclosure or otherwise in respect of any SAM;
(ix) Number and aggregate principal balance of SAMs
which are 30, 60, 90 and 120 or more days delinquent as
calculated by the Master Servicer, those which are in
foreclosure, those with respect to which the related
Mortgagor has had an order for relief entered in
connection with bankruptcy proceeding and those which are
REO Property;
(x) Interest Shortfall with respect to the related
Distribution Date and portion thereof resulting from
Voluntary Principal Prepayments in full or the provisions
of the Relief Act;
(xi) [intentionally omitted]
(xii) Amount, if any, by which the aggregate of
Scheduled Payments on the SAMs that were due on the
related Due Date and delinquent, other than as a result
of the Relief Act, as of the Determination Date exceeds
the sum of the Monthly Advances to be made by the Master
Servicer and Distribution Account Advances for such
Distribution Date;
(xiii) Aggregate Master Servicing Fee for the
related Due Period;
(xiv) Such other information regarding each SAM,
including, but not limited to, an updated schedule of the
Scheduled Principal Balances of the SAMs as of the
related Due Date, in such electronic format, as may be
reasonably requested by the Trustee and, if requested, in
such hardcopy or electronic format as the Master Servicer
and the Trustee shall agree and, with respect to
information to be provided to the Seller may be in the
"Salomon 500" format and should be sent to the attention
of __________;
Section 6.08 Monthly Advances. If the Scheduled Payment
(together with any advances from any Sub-Servicers) on a SAM that was due
on a related Due Date and is delinquent other than as a result of
application of the Relief Act exceeds the amount deposited in the
Distribution Account which will be used for a Distribution Account Advance
with respect to such SAM, the Master Servicer will deposit in the
Distribution Account not later than the Advancing Date immediately
preceding the related Distribution Date an amount equal to such deficiency
net of the related Master Servicing Fee for such SAM except to the extent
the Master Servicer determines any such advance to be nonrecoverable from
late payments Liquidation Proceeds, Insurance Proceeds or future payments
on the SAM for which such Monthly Advance was made. Subject to the
foregoing, the Master Servicer shall continue to make such advances through
the date that the related Mortgaged Property has, in the judgment of the
Master Servicer, been completely liquidated. Any amount used as a
Distribution Account Advance shall be replaced by the Master Servicer by
deposit in the Distribution Account on or before any future date on which
and to the extent that funds in the Distribution Account on such date are
less than the amount required to be transferred by the Master Servicer to
such subaccount of the Distribution Account. If applicable, on the fifth
Business Day preceding each Distribution Date, the Master Servicer shall
present an Officer's Certificate to the Trustee (i) stating that the Master
Servicer elects not to make a Monthly Advance in a stated amount and (ii)
detailing the reason it deems the advance to be nonrecoverable.
Section 6.09Compensating Interest Payments. The Master
Servicer shall deposit in the Distribution Account not later than the
Advancing Date immediately preceding the related Distribution Date an
amount equal to the lesser of (i) the aggregate amounts determined pursuant
to subclauses (a) and (b) of the definition of Interest Shortfall for the
related Distribution Date and (ii) the Master Servicing Fee for such
Distribution Date (other than the portion used to cover lender paid primary
mortgage insurance premiums) (such amount, the "Compensating Interest
Payment"). The Master Servicer shall not be entitled to any reimbursement
of any Compensating Interest Payment.
Section 6.10Reports of Foreclosures and Abandonment of
Mortgaged Property. Each year the Master Servicer shall report or cause to
be reported to the Internal Revenue Service foreclosures and abandonments
of any Mortgaged Property as required by Section 6050J of the Code and
shall provide a copy of such report to the Trustee.
ARTICLE VII
The Master Servicer
Section 7.01 Liabilities of the Master Servicer. The
Master Servicer shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by it herein.
Only the Master Servicer, any successor Master Servicer or the Trustee
acting as Master Servicer shall be liable with respect to the servicing of
the SAMs and the REO Property for actions taken by any such Person in
contravention of the Master Servicer's duties hereunder.
Section 7.02 Merger or Consolidation of the Master
Servicer. (a) The Master Servicer will keep in full force and effect its
existence, rights and franchises as a corporation under the laws of the
state of its incorporation, and will obtain and preserve its qualification
to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the SAMs and
to perform its duties under this Agreement.
(b) Any Person into which the Master Servicer may be merged or
consolidated, or any corporation resulting from any merger or
consolidation to which the Master Servicer shall be a party, or
any Person succeeding to the business of the Master Servicer,
shall be the successor of the Master Servicer hereunder,
without the execution or filing of any paper or further act on
the part of any of the parties hereto, anything herein to the
contrary notwithstanding. Such entity shall also be qualified
to sell mortgage loans and shared appreciation mortgage loans
to and service mortgage loans and shared appreciation mortgage
loans on behalf of Freddie Mae and Fannie Mae. In addition,
such merger, consolidation or succession may not adversely
affect the then current rating or ratings assigned to any Class
of Certificates by either Rating Agency.
Section 7.03 Indemnification of the Trustee. The Master
Servicer agrees to indemnify the Indemnified Persons for, and to hold them
harmless against, any claim, loss, liability or expense incurred on their
part, arising out of any breach by the Master Servicer of its obligations
under this Agreement, including the costs and expenses (including
reasonable legal fees and expenses) of defending themselves; provided that
with respect to any such claim, the Trustee shall have given the Master
Servicer and the Seller written notice thereof promptly after the Trustee
shall have with respect to such claim knowledge thereof. The Master
Servicer shall assume the defense of any claim for which an Indemnified
Person is entitled to indemnification pursuant to this Section 7.03, and
the Master Servicer shall pay all expenses in connection therewith,
including reasonable legal fees, and shall promptly pay, discharge and
satisfy any judgment or decree which may be rendered against an Indemnified
Person in respect of such claim.
Section 7.04Limitation on Liability of the Master
Servicer and Others. Subject to the obligation of the Master Servicer to
indemnify the Indemnified Persons pursuant to Section 7.03:
(a) Neither the Master Servicer nor any of the directors, officers,
employees or agents of the Master Servicer shall be under any
liability to the Indemnified Persons, the Seller, the Trust
Fund or the Certificateholders for taking any action or for
refraining from taking any action 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 breach of warranties or
representations made herein or any liability which would
otherwise be imposed by reason of such Person's willful
misfeasance, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations and
duties hereunder.
(b) The Master Servicer and any director, officer, 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.
(c) The Master Servicer and any director, officer, employee or
agent of the Master Servicer shall be indemnified by the Trust
and held harmless thereby against any loss, liability or
expense incurred in connection with any legal proceedings
relating to this Agreement or the Certificates (including
reasonable legal fees and disbursements of counsel), other than
(i) any loss, liability or expense related to its failure to
perform its duties in compliance with this Agreement (except as
any such loss, liability or expense shall be otherwise
reimbursable pursuant to this Agreement) and (ii) any loss,
liability or expense incurred by reason of such Person's
willful misfeasance, bad faith or negligence in the performance
of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder.
(d) The Master Servicer shall not be under any obligation to appear
in, prosecute or defend any legal action that is not incidental
to its duties under this Agreement and that in its opinion may
involve it in any expense or liability; provided, however, the
Master Servicer may in its discretion undertake any such action
which it may deem necessary or desirable with respect to this
Agreement and the rights and duties of the parties hereto and
the interests of the Certificateholders hereunder. In such
event, the legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs and
liabilities of the Trust Fund, and the Master Servicer shall be
entitled to be reimbursed therefor out of the Distribution
Account as provided by Subsection 4.03(a). Nothing in this
Subsection 7.04(d) shall affect the Master Servicer's
obligation to supervise, or to take such actions as are
necessary to ensure, the servicing and administration of the
SAMs pursuant to Subsection 3.01(a).
(e) In taking or recommending any course of action pursuant to this
Agreement, unless specifically required to do so pursuant to
this Agreement, the Master Servicer shall not be required to
investigate or make recommendations concerning potential
liabilities which the Trust might incur as a result of such
course of action by reason of the condition of the Mortgaged
Properties but shall give notice to the Trustee if it has
notice of such potential liabilities.
Section 7.05 Master Servicer Not to Resign. Except as
provided in Section 7.07, the Master Servicer shall not resign from the
obligations and duties hereby imposed on it except upon a determination
that any such duties hereunder are no longer permissible under applicable
law and such impermissibility cannot be cured. Any such determination
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Independent Counsel to such effect delivered to the Trustee. No
such resignation by the Master Servicer shall become effective until the
Trustee or a successor to the Master Servicer reasonably satisfactory to
the Trustee shall have assumed the responsibilities and obligations of the
Master Servicer in accordance with Section 8.02 hereof. The Trustee shall
notify the Rating Agencies of the resignation of the Master Servicer.
Section 7.06 [Reserved]
Section 7.07 Sale and Assignment of Master Servicing. The
Master Servicer may sell and assign its rights and delegate its duties and
obligations in their entirety as Master Servicer under this Agreement;
provided, however, that: (i) the purchaser or transferee accepting such
assignment and delegation (a) shall be a Person which shall be qualified to
service SAMs for Fannie Mae or Freddie Mac; (b) shall have a net worth of
not less than $10,000,000 (unless otherwise approved by each Rating Agency
pursuant to clause (ii) below); (c) shall be reasonably satisfactory to the
Trustee (as evidenced in a writing signed by the Trustee) as having a
comparable servicing ability to that of the Master Servicer on the Closing
Date; (d) shall execute and deliver to the Trustee an agreement, in form
and substance reasonably satisfactory to the Trustee, which contains an
assumption by such Person of the due and punctual performance and
observance of each covenant and condition to be performed or observed by it
as master servicer under this Agreement and any custodial agreement from
and after the effective date of such agreement; (ii) each Rating Agency
shall be given prior written notice of the identity of the proposed
successor to the Master Servicer and each Rating Agency's rating of the
Certificates in effect immediately prior to such assignment, sale and
delegation will not be downgraded, qualified or withdrawn as a result of
such assignment, sale and delegation, as evidenced by a letter to such
effect delivered to the Master Servicer and the Trustee; and (iii) the
Master Servicer assigning and selling the master servicing shall deliver to
the Trustee an Officer's Certificate and an Opinion of Independent Counsel,
each stating that all conditions precedent to such action under this
Agreement have been completed and such action is permitted by and complies
with the terms of this Agreement. No such assignment or delegation shall
affect any liability of the Master Servicer arising prior to the effective
date thereof.
ARTICLE VIII
Default
Section 8.01Events of Default. "Event of Default,"
wherever used herein, means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) The Master Servicer fails to cause to be
deposited in the Distribution Account any amount so
required to be deposited pursuant to this Agreement, and
such failure continues unremedied for a period of two
Business Days after the date such deposit was required to
be made; or
(ii) The Master Servicer fails to observe or
perform in any material respect any other covenants and
agreements set forth in the Certificates or this
Agreement to be performed by it, which covenants and
agreements materially affect the rights of
Certificateholders, and such failure continues unremedied
for a period of 60 days after the date on which written
notice of such failure, properly requiring the same to be
remedied, shall have been given to the Master Servicer by
the Trustee or to the Master Servicer and the Trustee by
the Holders of Certificates evidencing Fractional
Undivided Interests aggregating not less than 25% of the
Trust Fund; or
(iii) There is entered against the Master Servicer
a decree or order by a court or agency or supervisory
authority having jurisdiction in the premises for the
appointment of a conservator, receiver or liquidator in
any insolvency, readjustment of debt, marshaling 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 is unstayed and
in effect for a period of 60 consecutive days, or an
involuntary case is commenced against the Master Servicer
under any applicable insolvency or reorganization statute
and the petition is not dismissed within 60 days after
the commencement of the case; or
(iv) The Master Servicer consents to the
appointment of a conservator or receiver or liquidator in
any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or
relating to the Master Servicer or substantially all of
its property; or the Master Servicer admits in writing
its inability to pay its debts generally as they become
due, files a petition to take advantage of any applicable
insolvency or reorganization statute, makes an assignment
for the benefit of its creditors, or voluntarily suspends
payment of its obligations; or
(v) The Master Servicer assigns or delegates its
duties or rights under this Agreement in contravention of
the provisions permitting such assignment or delegation
under Sections 7.05 or 7.07.
In each and every such case, so long as such Event of Default with
respect to the Master Servicer shall not have been remedied, either the
Trustee or the Holders of Certificates evidencing Fractional Undivided
Interests aggregating not less than 25% of the principal of the Trust Fund,
by notice in writing to the Master Servicer (and to the Trustee if given by
such Certificateholders), with a copy to the Rating Agencies, may terminate
all of the rights and obligations (but not the liabilities) of the Master
Servicer under this Agreement and in and to the SAMs and/or the REO
Property serviced by the Master Servicer and the proceeds thereof. Upon the
receipt by the Master Servicer of the written notice, all authority and
power of the Master Servicer under this Agreement, whether with respect to
the Certificates, the SAMs, REO Property or under any other related
agreements, including the Sub-Servicing Agreements (but only to the extent
that such other agreements relate to the SAMs or REO Property) shall,
subject to Section 8.02, automatically and without further action pass to
and be vested in the Trustee pursuant to this Section 8.01; and, without
limitation, 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 or assignment of the SAMs and related documents, or otherwise.
The Master Servicer agrees to cooperate with the Trustee in effecting the
termination of the Master Servicer's rights and obligations hereunder,
including, without limitation, the transfer to the Trustee of (i) the
property and amounts which are then or should be part of the Trust or which
thereafter become part of the Trust; (ii) originals or copies of all
documents of the Master Servicer reasonably requested by the Trustee to
enable it to assume the Master Servicer's duties thereunder; and (iii) the
rights and obligations of the Master Servicer under any Sub-Servicing
Agreements with respect to the SAMs. In addition to any other amounts which
are then, or, notwithstanding the termination of its activities under this
Agreement, may become payable to the Master Servicer under this Agreement,
the Master Servicer shall be entitled to receive, out of any amount
received on account of a SAM or REO Property, that portion of such payments
which it would have received as reimbursement pursuant to Section 3.14 if
notice of termination had not been given. The termination of the rights and
obligations of the Master Servicer shall not affect any obligations
incurred by the Master Servicer prior to such termination.
Section 8.02 Trustee to Act; Appointment of Successor.
Upon the receipt by the Master Servicer of a notice of termination pursuant
to Section 8.01 or an Opinion of Independent Counsel pursuant to Section
7.05 to the effect that the Master Servicer is legally unable to act or to
delegate its duties to a Person which is legally able to act, the Trustee
shall automatically become the successor in all respects to the Master
Servicer in its capacity under this Agreement and the transactions set
forth or provided for herein and shall thereafter be subject to all the
responsibilities, duties, liabilities and limitations on liabilities
relating thereto placed on the Master Servicer by the terms and provisions
hereof; provided, however, that the Trustee (i) shall be under no
obligation to purchase any SAM pursuant to Section 10.01; and (ii) shall
have no obligation whatsoever with respect to any liability incurred by the
Master Servicer (other than to make advances deemed recoverable and not
previously made) at or prior to the time of receipt by the Master Servicer
of such notice or by the Trustee of such Opinion of Independent Counsel,
including any liabilities associated with either Master Servicer's failure
to modify its computer and any other systems in a manner such that such
Master Servicer can service the related SAMs in accordance with the terms
of this Agreement on and after January 1, 2000. As compensation therefor,
the Trustee shall be entitled to all funds relating to the SAMs which the
Master Servicer would have been entitled to retain if the Master Servicer
had continued to act hereunder, except for those amounts due the Master
Servicer as reimbursement for advances previously made or expenses
previously incurred. Notwithstanding the above, the Trustee may, if it
shall be unwilling so to act, or shall, if it is legally unable so to act,
appoint or petition a court of competent jurisdiction to appoint, any
established housing and home finance institution which is a Fannie Mae or
Freddie Mac-approved servicer, and with respect to a successor to the
Master Servicer only, having a net worth of not less than $10,000,000, 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. Pending appointment of a successor to the Master
Servicer hereunder, the Trustee shall act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the Trustee
may make such arrangements for the compensation of such successor out of
payments on the SAMs as it and such successor shall agree; provided,
however, that no such compensation shall be in excess of that permitted the
Trustee under this Subsection 8.02(a), and that such successor shall
undertake and assume the obligations of the Trustee to pay compensation to
any third Person acting as an agent or independent contractor in the
performance of master servicing responsibilities hereunder. The Trustee and
such successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession.
(a) If the Trustee shall succeed to any duties of the Master
Servicer respecting the SAMs as provided herein, it shall do so
in a separate capacity and not in its capacity as Trustee and,
accordingly, the provisions of Article IX shall be inapplicable
to the Trustee in its duties as the successor to the Master
Servicer in the servicing of the SAMs (although such provisions
shall continue to apply to the Trustee in its capacity as
Trustee); the provisions of Article VII, however, shall apply
to it in its capacity as successor master servicer.
Section 8.03 Notification to Certificateholders. Upon any
termination or appointment of a successor to the Master Servicer, the
Trustee shall give prompt written notice thereof to Certificateholders at
their respective addresses appearing in the Certificate Register and to the
Rating Agencies.
Section 8.04 Waiver of Defaults. The Trustee shall
transmit by mail to all Certificateholders, within 60 days after the
occurrence of any Event of Default known to the Trustee, unless such Event
of Default shall have been cured, notice of each such Event of Default
hereunder known to the Trustee. The Holders of Certificates evidencing
Fractional Undivided Interests aggregating not less than 51% of the Trust
Fund may, on behalf of all Certificateholders, waive any default by the
Master Servicer in the performance of its obligations hereunder and the
consequences thereof, except a default in the making of or the causing to
be made any required distribution on the Certificates. Upon any such waiver
of a past default, such default shall be deemed to cease to exist, and any
Event of Default arising therefrom shall be deemed to have been timely
remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived. The Master Servicer shall give
notice of any such waiver to the Rating Agencies.
Section 8.05 List of Certificateholders. Upon written
request of three or more Certificateholders of record, for purposes of
communicating with other Certificateholders with respect to their rights
under this Agreement, the Trustee will afford such Certificateholders
access during business hours to the most recent list of Certificateholders
held by the Trustee.
ARTICLE IX
Concerning the Trustee
Section 9.01Duties of Trustee. (a) The Trustee, prior to
the occurrence of an Event of Default and after the curing or waiver of all
Events of Default which may have occurred, undertakes to perform such
duties and only such duties as are specifically set forth in this Agreement
as duties of the Trustee. If an Event of Default has occurred and has not
been cured or waived, 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 person would exercise under the
circumstances in the conduct of his own affairs.
(b) Upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments which
are specifically required to be furnished to the Trustee
pursuant to any provision of this Agreement, the Trustee shall
examine them to determine whether they are in the form required
by this Agreement; provided, however, that the Trustee shall
not be responsible for the accuracy or content of any
resolution, certificate, statement, opinion, report, document,
order or other instrument furnished by the Master Servicer
hereunder.
(c) The Trustee shall make monthly distributions and the final
distribution to the Certificateholders as provided in Sections
6.01 and 10.01 herein.
(d) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct;
provided, however, that:
(i) Prior to the occurrence of an Event of Default,
and after the curing or waiver of all such Events of
Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely by
the express provisions of this Agreement, the Trustee
shall not be liable except for the performance of such
duties and obligations as are specifically set forth in
this Agreement, no implied covenants or obligations shall
be read into this Agreement against the Trustee and, in
the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this
Agreement;
(ii) The Trustee shall not be liable for an error
of judgment made in good faith by a Responsible Officer
or Responsible Officers of the Trustee, unless it shall
be proved that the Trustee was negligent in ascertaining
the pertinent facts;
(iii) The Trustee shall not be liable with respect
to any action taken, suffered or omitted to be taken by
it in good faith in accordance with the directions of the
Holders of Certificates evidencing Fractional Undivided
Interests aggregating not less than 25% of the Trust
Fund, if such action or non-action relates to the time,
method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust
or other power conferred upon the Trustee, under this
Agreement; and
(iv) The Trustee shall not be required to take
notice or be deemed to have notice or knowledge of any
default or Event of Default unless a Responsible Officer
of the Trustee's corporate trust department shall have
actual knowledge thereof. In the absence of such notice,
the Trustee may conclusively assume there is no such
default or Event of Default.
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.
(e) All funds received by the Trustee and required to be deposited
in the Distribution Account pursuant to this Agreement will be
promptly so deposited by the Trustee.
Section 9.02 Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 9.01:
(i) The Trustee may rely and shall be protected in
acting or refraining from acting in reliance on any
resolution, Officer's Certificate, certificate of a
Servicing Officer, certificate of auditors or any other
certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other
paper or document believed by it to be genuine and to
have been signed or presented by the proper party or
parties;
(ii) The Trustee may consult with counsel and any
Opinion of Counsel shall be full and complete
authorization and protection with respect to 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 trusts or powers vested in it by this
Agreement, other than its obligation to give notices
pursuant to 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 pursuant to the provisions of this
Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be
incurred therein or thereby. Nothing contained herein
shall, however, relieve the Trustee of the obligation,
upon the occurrence of an Event of Default of which a
Responsible Officer of the Trustee's corporate trust
department has actual knowledge (which has not been
cured) to exercise such of the rights and powers vested
in it by this Agreement, and to use the same degree of
care and skill in their exercise, as a prudent person
would exercise under the circumstances in the conduct of
his own affairs;
(iv) The Trustee shall not be 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 an Event of Default
hereunder and after the curing or waiver of all Events of
Default 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 document, unless
requested in writing to do so by Holders of Certificates
evidencing Fractional Undivided Interests aggregating not
less than 25% of the Trust Fund and provided that 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, 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
expense or liability as a condition to taking any such
action. The reasonable expense of every such examination
shall be paid by the Certificateholders requesting the
investigation;
(vi) The Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or through agents or attorneys; provided,
however, that the Trustee may not appoint any agent to
perform its custodial or paying agent functions under
this Agreement without the express written consent of the
Master Servicer, which consent will not be unreasonably
withheld. The Trustee shall not be liable or responsible
for the misconduct or negligence of any of the Trustee's
agents or attorneys or a custodian or paying agent
appointed hereunder by the Trustee with due care and,
when required, with the consent of the Master Servicer;
(vii) Should the Trustee deem the nature of any
action required on its part, other than a payment or
transfer under Subsection 4.02(b) or Section 4.03, to be
unclear, the Trustee may require prior to such action
that it be provided by the Master Servicer with
reasonable further instructions;
(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
accountable for other than its negligence or willful
misconduct in the performance of any such act;
(ix) The Trustee shall not be required to give any
bond or surety with respect to the execution of the trust
created hereby or the powers granted hereunder;
(x) The Trustee shall have no duty to conduct any
affirmative investigation as to the occurrence of any
condition requiring the repurchase of any SAM by the
Seller pursuant to this Agreement or the eligibility of
any SAM for purposes of this Agreement; and
(xi) To the extent the Trustee has not received a
required remittance from the Master Servicer on or prior
to a Distribution Date, it shall not be required to make
the distribution provided for in Section 6.01 until it
has received such funds.
Section 9.03 Trustee Not Liable for Certificates or SAMs.
The recitals contained herein and in the Certificates (other than the
signature and countersignature of the Trustee on the Certificates) shall be
taken as the statements of the Seller, and the Trustee shall have no
responsibility for their correctness. The Trustee makes no representation
as to the validity or sufficiency of the Certificates (other than the
signature and countersignature of the Trustee on the Certificates) or of
any SAM except as expressly provided in Sections 2.02 and 2.05 hereof. The
Trustee's signature and countersignature (or countersignature of its agent)
on the Certificates shall be solely in its capacity as Trustee and shall
not constitute the Certificates an obligation of the Trustee in any other
capacity. The Trustee shall not be accountable for the use or application
by the Seller of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Seller
with respect to the SAMs. Subject to the provisions of Section 2.05, the
Trustee shall not be responsible for the legality or validity of this
Agreement or any document or instrument relating to this Agreement, the
validity of the execution of this Agreement or of any supplement hereto or
instrument of further assurance, or the validity, priority, perfection or
sufficiency of the security for the Certificates issued hereunder or
intended to be issued hereunder. 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 SAM, 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 Fund or
its ability to generate the payments to be distributed to
Certificateholders, under this Agreement. 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 or to
record this Agreement.
Section 9.04 Trustee May Own Certificates. The Trustee in
its individual capacity or in any capacity other than as Trustee hereunder
may become the owner or pledgee of any Certificates with the same rights it
would have if it were not Trustee, and may otherwise deal with the parties
hereto.
Section 9.05 Trustee's Fees and Expenses. (a) The Trustee
will be paid the Trustee's Fee each calendar month from the Distribution
Account, pursuant to Subsection 4.03(b). The Trust Fund will be liable for
the Trustee's expenses, including all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by the Trustee in the
administration of the trusts hereunder as set forth in a fee letter sent by
the Trustee to the Seller (including the reasonable compensation, expenses
and disbursements of its counsel) except any such expense, disbursement or
advance as may arise from its negligence or intentional misconduct or which
is the responsibility of the Certificateholders or the Master Servicer
hereunder. Such compensation and reimbursement obligation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust.
(b) To the extent not otherwise indemnified against by the Master
Servicer hereunder, the Trust shall indemnify the Indemnified
Persons for, and will hold them harmless against, any loss,
liability or expense incurred on their part, arising out of, or
in connection with, this Agreement and the Certificates,
including the costs and expenses (including reasonable legal
fees and expenses) of defending themselves against any such
claim other than (i) any loss, liability or expense related to
such Indemnified Person's failure to perform such Indemnified
Person's duties in strict compliance with this Agreement
(except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement) and (ii) any
loss, liability or expense incurred by reason of such
Indemnified Person's willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason
of reckless disregard of obligations and duties hereunder. This
indemnity shall survive the resignation or removal of the
Trustee and the termination of this Agreement.
Section 9.06 Eligibility Requirements for Trustee. (a) The
Trustee and any successor Trustee shall during the entire duration of this
Agreement be a state bank or trust company or a national banking
association organized and doing business under the laws of such state or
the United States of America, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus and undivided
profits of at least $[40,000,000] or, in the case of a successor Trustee,
$[50,000,000], subject to supervision or examination by federal or state
authority and, in the case of a successor Trustee other than pursuant to
Section 9.10, rated in one of the three highest long-term debt categories
of, or otherwise acceptable to, each of the Rating Agencies. The Trustee
shall not be an Affiliate of the Master Servicer, unless the Trustee acts
as successor Master Servicer hereunder. If the Trustee publishes reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purposes of this
Section 9.06 the combined capital and surplus of such corporation shall be
deemed to be its total equity capital (combined capital and surplus) as set
forth in its most recent report of condition so published. In case at any
time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 9.06, the Trustee shall resign immediately in
the manner and with the effect specified in Section 9.08.
Section 9.07 Insurance. The Trustee, at its own expense,
shall at all times maintain and keep in full force and effect: (i) fidelity
insurance, (ii) theft of documents insurance and (iii) forgery insurance
(which may be collectively satisfied by a "Financial Institution Bond"
and/or a "Bankers' Blanket Bond"). All such insurance shall be in amounts,
with standard coverage and subject to deductibles, as are customary for
insurance typically maintained by banks which act as custodians for
investor-owned mortgage pools. A certificate of an officer of the
Trustee as to the Trustee's compliance with this Section 9.07 shall be
furnished to the Master Servicer or any Certificateholder upon reasonable
written request.
Section 9.08 Resignation and Removal of the Trustee. (a)
The Trustee may at any time resign and be discharged from the Trust hereby
created by giving written notice thereof to the Master Servicer, with a
copy to the Rating Agencies. Upon receiving such notice of resignation, the
Master Servicer shall promptly appoint a successor Trustee by written
instrument, in triplicate, one copy of which instrument shall be delivered
to each of the resigning Trustee and the successor Trustee. If no successor
Trustee shall have been so appointed and have 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.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 9.06 and shall fail
to resign after written request therefor by the Master Servicer
or if at any time the Trustee shall become incapable of acting,
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 Master Servicer shall be
entitled to remove the Trustee and appoint a successor Trustee
by written instrument, in triplicate, one copy of which
instrument shall be delivered to each of the Trustee so removed
and the successor Trustee.
(c) The Holders of Certificates evidencing Fractional Undivided
Interests aggregating not less than 51% of the Trust Fund may
at any time remove the Trustee and appoint a successor Trustee
by written instrument or instruments, in triplicate, signed by
such Holders or their attorneys-in-fact duly authorized, one
complete set of which instruments shall be delivered to each of
the Master Servicer, the Trustee so removed and the successor
so appointed.
(d) No resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this
Section 9.08 shall become effective except upon appointment of
and acceptance of such appointment by the successor Trustee as
provided in Section 9.09.
Section 9.09 Successor Trustee. (a) Any successor Trustee
appointed as provided in Section 9.08 shall execute, acknowledge and
deliver to the Master Servicer and to its predecessor Trustee an instrument
accepting such appointment hereunder. The resignation or removal of the
predecessor Trustee shall then 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 herein. The
predecessor Trustee shall after payment of its outstanding fees and
expenses promptly deliver to the successor Trustee all assets and records
of the Trust held by it hereunder, and the Master Servicer and the
predecessor Trustee shall execute and deliver such instruments and do such
other things as may reasonably be required for more fully and certainly
vesting and confirming in the successor Trustee all such rights, powers,
duties and obligations.
(b) No successor Trustee shall accept appointment as provided in
this Section 9.09 unless at the time of such acceptance such
successor Trustee shall be eligible under the provisions of
Section 9.06.
(c) Upon acceptance of appointment by a successor Trustee as
provided in this Section 9.09, the successor Trustee shall mail
notice of the succession of such Trustee hereunder to all
Certificateholders at their addresses as shown in the
Certificate Register and to the Rating Agencies. The Master
Servicer shall pay the cost of any mailing by the successor
Trustee.
Section 9.10 Merger or Consolidation of Trustee. Any state
bank or trust company or national banking association into which the
Trustee may be merged or converted or with which it may be consolidated or
any state bank or trust company or national banking association resulting
from any merger, conversion or consolidation to which the Trustee shall be
a party, or any state bank or trust company or national banking association
succeeding to all or substantially all of the corporate trust business of
the Trustee, shall be the successor of the Trustee hereunder, provided such
state bank or trust company or national banking association shall be
eligible under the provisions of Section 9.06. Such succession shall be
valid 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 9.11 Appointment of Co-Trustee or Separate
Trustee. (a) Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust or property constituting the same may at the time be
located, the Master Servicer and the Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee and the Master Servicer 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, such title to the Trust, or any part
thereof, and, subject to the other provisions of this Section 9.11, such
powers, duties, obligations, rights and trusts as the Master Servicer and
the Trustee may consider necessary or desirable.
(b) If the Master Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a written
request so to do, or in case an Event of Default with respect
to the Master Servicer shall have occurred and be continuing,
the Trustee shall have the power to make such appointment
without the Master Servicer.
(c) No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor Trustee under
Section 9.06 hereunder and no notice to Certificateholders of
the appointment of co-trustee(s) or separate trustee(s) shall
be required under Section 9.08 hereof.
(d) In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 9.11, all rights, powers,
duties and obligations conferred or imposed upon the Trustee
and required to be conferred on such co-trustee shall be
conferred or imposed upon and exercised or performed by the
Trustee and such separate trustee or co-trustee jointly, 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 by such separate trustee or co-trustee
at the direction of the Trustee.
(e) 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 IX. 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.
(f) To the extent not prohibited by law, any separate trustee or
co-trustee may, at any time, request the Trustee, its agent or
attorney-in-fact, with full power and authority, to do any
lawful act under or with respect to 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.
(g) No trustee under this Agreement shall be personally liable by
reason of any act or omission of another trustee under this
Agreement. The Master Servicer and the Trustee acting jointly
may at any time accept the resignation of or remove any
separate trustee or co-trustee, except that following the
occurrence of any Event of Default which has not been cured,
the Trustee acting alone may accept the resignation of or
remove any separate trustee or co-trustee.
Section 9.12 Master Servicer Shall Provide Information as
Reasonably Required. The Master Servicer shall furnish to the Trustee,
during the term of this Agreement, such periodic, special, or other reports
or information (and in such electronic format or other means acceptable to
the Trustee) as may reasonably be requested by the Trustee in order to
fulfill its duties and obligations under this Agreement.
Section 9.13 Federal Information Returns and Reports to
Certificateholders. (a) For Federal income tax purposes, the taxable year
of the REMIC Assets shall be a calendar year and the Trustee shall maintain
or cause the maintenance of the books of each of the REMIC Assets on the
accrual method of accounting.
(b) The Trustee shall prepare and file or cause to be filed with
the Internal Revenue Service Federal tax information returns
with respect to each of the REMIC Assets, the Trust Fund, if
applicable, and the Certificates containing such information
and at the times and in the manner as may be required by the
Code or applicable Treasury regulations, and shall furnish to
each Holder of Certificates at any time during the calendar
year for which such returns or reports are made such statements
or information at the times and in the manner as may be
required thereby. In connection with the foregoing, the Trustee
shall provide the name and address of the person who can be
contacted to obtain information required to be reported to the
holders of regular interests in each of the REMIC Assets (the
"REMIC Reporting Agent") as required by IRS Form 8811. The
Trustee shall make the elections to treat each of the REMIC
Assets as a REMIC (which election shall apply to the taxable
period ending December 31, 1998 and each calendar year
thereafter) in such manner as the Code or applicable Treasury
regulations may prescribe. The Trustee shall sign all tax
information returns filed pursuant to this Section and any
other returns as may be required by the Code, and in doing so
shall rely entirely upon, and shall have no liability for
information provided by, or calculations provided by, the
Seller or the Master Servicer. The Holder of the Class R
Certificate is hereby designated as the "Tax Matters Person"
(within the meaning of Treas. Reg. ss.ss. 1.860F-4(d)) for the
REMIC Assets. The Trustee is hereby designated and appointed as
the agent of such Tax Matters Person. Any Holder of a Residual
Certificate will by acceptance thereof appoint the Trustee as
agent and attorney-in-fact for the purpose of acting as Tax
Matters Person for the REMIC Assets during such time as the
Trustee does not own any such Residual Certificate. In the
event that the Code or applicable Treasury regulations prohibit
the Trustee from signing tax or information returns or other
statements, or the Trustee from acting as Tax Matters Person
(as an agent or otherwise), the Trustee shall take whatever
action that in its sole good faith judgment is necessary for
the proper filing of such information returns or for the
provision of a tax matters person, including designation of the
Holder of a Residual Certificate to sign such returns or act as
tax matters person. Each Holder of a Residual Certificate shall
be bound by this Section.
(c) The Trustee shall provide upon request such information (which
shall be provided by the Master Servicer) as required in
Section 860D(a)(6)(B) of the Code to the Internal Revenue
Service, to any Person purporting to transfer a Residual
Certificate to a Person other than a transferee permitted by
Section 5.05(b), and to any regulated investment company, real
estate investment trust, common trust fund, partnership, trust,
estate, organization described in Section 1381 of the Code, or
nominee holding an interest in a pass-through entity described
in Section 860E(e)(6) of the Code, any record holder of which
is not a transferee permitted by Section 5.05(b) (or which is
deemed by statute to be an entity with a disqualified member).
(d) The Trustee shall prepare and file or cause to be filed any
state income tax returns required under Applicable State Law
with respect to each of the REMIC Assets or the Trust Fund.
ARTICLE X
Termination
Section 10.0Termination Upon Repurchase by the Seller or
its Designee or Liquidation of All SAMs. (a) Subject to Section 10.02, the
respective obligations and responsibilities of the Seller, the Master
Servicer and the Trustee created hereby, other than the obligation of the
Trustee or the Master Servicer to make payments to Certificateholders as
hereinafter set forth and to the Trustee, shall terminate upon:
(i) the repurchase by or at the direction of the
Seller or its designee of all SAMs and all property
remaining in the Trust at a price equal to (a) 100% of
the Outstanding Principal Balance of each SAM (other than
a SAM related to REO Property) as of the date of
repurchase, net of the principal portion of any
unreimbursed Monthly Advances made by the purchaser,
together with interest at the applicable Stated Interest
Rate accrued but unpaid through and including the last
day of the month of repurchase, plus (b) the appraised
value of any REO Property less the good faith estimate of
the Seller of liquidation expenses to be incurred in
connection with its disposal thereof, (but not more than
the Outstanding Principal Balance of the related SAM,
together with interest at the applicable Stated Interest
Rate accrued on that balance but unpaid through and
including the last day of the month of repurchase), such
appraisal to be calculated by an appraiser mutually
agreed upon by the Seller and the Trustee at the expense
of the Seller; or
(ii) the later of the making of the final payment
or other liquidation, or any advance with respect
thereto, of the last SAM remaining in the Trust Fund or
the disposition of all property acquired with respect to
any SAM; upon foreclosure or deed in lieu of foreclosure
of any Mortgaged Property or other assets remaining in
the Trust Fund, provided, however, that in the event that
an advance has been made, but not yet recovered, at the
time of such termination, the Person having made such
advance shall be entitled to receive, notwithstanding
such termination, any payments received subsequent
thereto with respect to which such advance was made.
(b) In no event, however, 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,
living on the date of this Agreement.
(c) [Reserved.]
(d) The right of the Seller or its designee to repurchase all SAMs
pursuant to Subsection 10.01(a)(i) above shall be exercisable
only if (i) the aggregate Scheduled Principal Balance of such
SAMs at the time of any such repurchase is less than [ ]% of
the Cut-off Date Balance or (ii) the Seller based upon an
Opinion of Counsel delivered to the Trustee, has determined
that the REMIC status of the REMIC Assets has been lost or that
a substantial risk exists that such REMIC status will be lost
for the then-current taxable year. At any time thereafter, the
Seller may elect to terminate the Trust at any time, and upon
such election, the Seller or its designee shall repurchase all
the SAMs.
(e) [Reserved].
(f) Provided that the Trustee has received timely notice, the
Trustee shall give notice of any termination to the
Certificateholders, with a copy to the Rating Agencies, upon
which the Certificateholders shall surrender their Certificates
to the Trustee for payment of the final distribution and
cancellation. To the extent reasonably practical, such notice
shall be given by letter, 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, and shall specify (i) the
Distribution Date upon which final payment of the Certificates
will be made upon presentation and surrender of the
Certificates at the office of the Trustee therein designated,
(ii) the amount of any such final payment and (iii) that the
Record Date otherwise applicable to such Distribution Date is
not applicable, payments being made only upon presentation and
surrender of the Certificates at the office of the Trustee
therein specified.
(g) If the option of the Seller to repurchase or cause the
repurchase of all SAMs under Subsection 10.01(a)(i) above is
exercised, the Seller and/or its designee, as the case may be,
shall deliver to the Trustee for deposit in the Distribution
Account, by the Business Day prior to the applicable
Distribution Date, an amount equal to the repurchase price for
the SAMs being purchased by it and all property acquired with
respect to such SAMs remaining in the Trust. Upon the
presentation and surrender of the Certificates, the Trustee
shall distribute an amount equal to (i) the amount otherwise
distributable to the Certificateholders (other than the holder
of the Class R Certificate) on such Distribution Date but for
such repurchase, (ii) the Current Principal Amount and any
accrued but unpaid interest at the Pass-Through Rate to the
Certificateholders of each Class, and (iii) the remainder to
the Class R Certificateholder. If the Available Funds are not
sufficient to pay all of the related Certificates in full, any
such deficiency will be allocated to the outstanding Class or
Classes of Subordinate Certificates having the highest
numerical designation or, if after the Cross-Over Date, to the
Senior Certificates pro rata. Upon deposit of the required
repurchase price and following such final Distribution Date,
the Trustee shall promptly release to the Seller and/or its
designee, as the case may be, the Mortgage Files for the
remaining SAMs, and the Accounts shall terminate, subject to
the Trustee's obligation to hold any amounts payable to
Certificateholders in trust without interest pending final
distributions pursuant to Subsection 10.01(i).
(h) In the event that this Agreement is terminated by reason of the
payment or liquidation of all SAMs or the disposition of all
property acquired with respect to all SAMs under Subsection
10.01(a)(ii) above, the Master Servicer shall deliver to the
Trustee for deposit in the Distribution Account all
distributable amounts remaining in its Collection Account and
shall cause any Sub-Servicers to deliver to the Trustee for
deposit in the Distribution Account all distributable amounts
remaining in their Collection Accounts. Upon the presentation
and surrender of the Certificates, the Trustee shall distribute
to the Certificateholders, in accordance with their respective
interests, all distributable amounts remaining in the
Distribution Account. Upon deposit by any Sub-Servicers of such
distributable amounts and delivery to the Trustee of an
Officer's Certificate from the Master Servicer certifying that
such deposit has been made, and following such final
Distribution Date, the Trustee shall promptly release to the
Master Servicer the Mortgage Files for the remaining SAMs, and
the Accounts shall terminate, subject to the Trustee's
obligation to hold any amounts payable to the
Certificateholders in trust without interest pending final
distributions pursuant to Subsection 10.01(ii).
(i) If not all of the Certificateholders shall surrender their
Certificates for cancellation within six months after the time
specified in the above-mentioned written notice, the Trustee
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 six months after the second notice, not all
the Certificates shall have been surrendered for cancellation,
the Trustee may take appropriate steps, or appoint any agent to
take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates,
and the cost thereof shall be paid out of the funds and other
assets which remain subject to this Agreement.
Section 10.0 Additional Termination Requirements. (a) If
the option of the Seller to repurchase all the SAMs under Subsection
10.01(a)(i) above is exercised, the Trust and the REMIC Assets shall be
terminated in accordance with the following additional requirements, unless
the Trustee has been furnished with an Opinion of Counsel to the effect
that the failure of the Trust to comply with the requirements of this
Section 10.02 will not (i) result in the imposition of taxes on "prohibited
transactions" as defined in Section 860F of the Code on the REMIC Assets or
(ii) cause the REMIC to fail to qualify as a REMIC at any time that any
Regular Certificates are outstanding:
(i) within 90 days prior to the final Distribution
Date, at the written direction of the Seller, the
Trustee, as agent for the Tax Matters Person, shall adopt
a plan of complete liquidation of the Trust Fund and the
REMIC Assets provided to it by the Seller meeting the
requirements of a "Qualified Liquidation" under Section
860F of the Code and any regulations thereunder;
(ii) at or after the time of adoption of such a
plan of complete liquidation and at or prior to the final
Distribution Date, the Trustee shall sell for cash all of
the assets of the Trust to or at the direction of the
Seller; and
(iii) at the time of the making of the final
payment on the Certificates, the Trustee shall distribute
or credit from the Distribution Account to the extent on
deposit therein (or cause to be distributed or credited)
(i) to the Certificateholders, other than the Holder of
the Class R Certificate, the Current Principal Amount of
the Certificates plus 30 days' interest thereon at the
applicable Pass-Through Rate, and (ii) to the Class R
Certificateholder, all cash on hand from the Distribution
Account (other than cash retained to meet claims); and
the Trust and the REMIC Assets shall terminate at such
time.
(b) By their acceptance of the Residual Certificates, the Holders
thereof hereby (i) agree to adopt such a plan of complete
liquidation upon the written request of the Seller and to take
such action in connection therewith as may be reasonably
requested by the Seller and (ii) appoint the Seller as their
attorney-in-fact, with full power of substitution, for purposes
of adopting such a plan of complete liquidation. The Trustee
shall adopt such plan of liquidation by filing the appropriate
statement on the final tax return of the REMIC Assets.
ARTICLE XI
Miscellaneous Provisions
Section 11.0 Intent of Parties. The parties intend that
the REMIC Assets shall be treated as a REMIC for federal income tax
purposes and that the provisions of this Agreement should be construed in
furtherance of this intent.
Section 11.0 Amendment. (a) This Agreement may be amended
from time to time by the Seller, the Trustee and the Master Servicer,
without notice to or the consent of any of the Certificateholders, to cure
any ambiguity, to correct or supplement any provisions herein that may be
defective or inconsistent with any other provisions herein, to comply with
any changes in the Code or to make any other provisions with respect to
matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement; provided, however, that
such action shall not, as evidenced by an Opinion of Independent Counsel,
adversely affect in any material respect the interests of any
Certificateholder.
(b) This Agreement may also be amended from time to time by the
Seller, the Trustee and the Master Servicer, with the consent
of the Holders of Certificates evidencing Fractional Undivided
Interests aggregating not less than 66% of the Trust Fund or of
the applicable Class or Classes if such amendment affects only
such Class or Classes 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 Certificateholders; provided, however, that no
such amendment -------- ------- shall (i) reduce in any manner
the amount of, or delay the timing of, payments received on
SAMs which are required to be distributed on any Certificate
without the consent of the Holder of such Certificate, (ii)
reduce the aforesaid percentage of Certificates the Holders of
which are required to consent to any such amendment, without
the consent of the Holders of all Certificates then
outstanding, or (iii) cause the REMIC Assets to fail to qualify
as a REMIC for federal income tax purposes, as evidenced by an
Opinion of Independent Counsel which shall be provided to the
Trustee other than at the Trustee's expense. Notwithstanding
any other provision of this Agreement, for purposes of the
giving or withholding of consents pursuant to this Section
11.02(b), Certificates registered in the name of or held for
the benefit of the Seller, the Master Servicer or a
Sub-Servicer or any Affiliate thereof shall be entitled to vote
their Fractional Undivided Interests with respect to matters
affecting such Certificates.
(c) Promptly after the execution of any such amendment, the Trustee
shall furnish a copy of such amendment or written notification
of the substance of such amendment to each Certificateholder,
with a copy to the Rating Agencies.
(d) In the case of an amendment under Subsection 11.02(b) above, it
shall not be necessary for the Certificateholders to approve
the particular form of such an amendment. Rather, it shall be
sufficient if the Certificateholders approve the substance of
the amendment. 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.
Section 11.0 Recordation of Agreement. 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
Mortgaged Properties are situated, and in any other appropriate public
recording office or elsewhere. The Master Servicer shall effect such
recordation, at its expense upon the request in writing of a
Certificateholder, but only if such direction is accompanied by an Opinion
of Counsel (provided at the expense of the Certificateholder requesting
recordation) to the effect that such recordation would materially and
beneficially affect the interests of the Certificateholders or is required
by law.
Section 11.0Limitation on Rights of Certificateholders.
(a) The death or incapacity of any Certificateholder shall not terminate
this Agreement or the Trust, nor 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, nor
otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
(b) Except as expressly provided in this Agreement, no
Certificateholders 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 establish the
Certificateholders from time to time as partners or members of
an association; nor shall any Certificateholders 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.
(c) 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, under or with respect to
this Agreement against the Seller, the Master Servicer or any
successor to any such parties unless (i) such Certificateholder
previously shall have given to the Trustee a written notice of
a continuing default, as herein provided, (ii) the Holders of
Certificates evidencing Fractional Undivided Interests
aggregating not less than 51% of the Trust Fund 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 and expenses and liabilities to be
incurred therein or thereby, and (iii) the Trustee, for 60 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.
(d) No one or more Certificateholders shall have any right by
virtue of any provision of this Agreement to affect the rights
of any other Certificateholders or to obtain or seek to obtain
priority or preference over any other such Certificateholder,
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 11.04, each and
every Certificateholder and the Trustee shall be entitled to
such relief as can be given either at law or in equity.
Section 11.0 Acts of Certificateholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement to be given or taken by Certificateholders may
be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by such Certificateholders in person or by an agent
duly appointed in writing. Except as herein otherwise expressly provided,
such action shall become effective when such instrument or instruments are
delivered to the Trustee and, where it is expressly required, to the
Seller. 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 Seller, if made in
the manner provided in this Section 11.05.
(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 a 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. Where 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 or her authority. The fact and date of the execution of
any such instrument or writing, or the authority of the
individual executing the same, may also be proved in any other
manner which the Trustee deems sufficient.
(c) The ownership of Certificates (notwithstanding any notation of
ownership or other writing on such Certificates, except an
endorsement in accordance with Section 5.02 made on a
Certificate presented in accordance with Section 5.04) shall be
proved by the Certificate Register, and neither the Trustee,
the Seller, the Master Servicer nor any successor to any such
parties shall be affected by any notice to the contrary.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action of the holder of any Certificate shall
bind every future holder of the same Certificate and the holder
of every Certificate issued upon the registration of transfer
or exchange thereof, if applicable, or in lieu thereof with
respect to anything done, omitted or suffered to be done by the
Trustee, the Seller, the Master Servicer or any successor to
any such party in reliance thereon, whether or not notation of
such action is made upon such Certificates.
(e) In determining whether the Holders of the requisite percentage
of Certificates evidencing Fractional Undivided Interests have
given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Certificates owned by the Trustee,
the Seller, the Master Servicer or any Sub-Servicer or any
Affiliate thereof shall be disregarded except as otherwise
provided in Section 11.02(b) and except that, in determining
whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or
waiver, only Certificates which the Trustee knows to be so
owned shall be so disregarded. Certificates which have been
pledged in good faith to the Trustee, the Seller, the Master
Servicer or any Sub-Servicer or any Affiliate thereof may be
regarded as outstanding if the pledgor establishes to the
satisfaction of the Trustee the pledgor's right to act with
respect to such Certificates and that the pledgor is not an
Affiliate of the Trustee, the Seller, the Master Servicer or
any Sub-Servicer, as the case may be.
Section 11.0 [Reserved]
Section 11.0 Governing Law. THIS AGREEMENT AND THE
CERTIFICATES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS RULES AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.0 Notices. All demands and notices hereunder
shall be in writing and shall be deemed given when delivered at or mailed
by registered mail, return receipt requested, postage prepaid, or by
recognized overnight courier, to (i) in the case of the Seller, SAMCO
Mortgage Securities Corp., 245 Park Avenue, New York, New York 10167,
Attention: Vice President-Servicing (but with respect to monthly reports
sent pursuant to Section 6.07(b), Attention: __________), or to such other
address as may hereafter be furnished to the other parties hereto in
writing; in the case of the Master Servicer, _________________________
Attention: __________ or such other address as may hereafter be furnished
to the other parties hereto in writing; (iii) in the case of the Trustee,
at its Corporate Trust Office, or such other address as may hereafter be
furnished to the other parties hereto in writing; or (iv) in the case of
the Rating Agencies, (x) Fitch IBCA, Inc., One State Street Plaza, New
York, New York 10004 Attention: Residential SAM Structured Finance, and (y)
Standard & Poor's, a Division of The McGraw-Hill Companies, Inc., 26
Broadway, New York, New York, 10004, Attention: Residential Mortgage
Surveillance. Any notice delivered to the Seller, the Master Servicer or
the Trustee under this Agreement shall be effective only upon receipt. Any
notice required or permitted to be mailed to a Certificateholder, unless
otherwise provided herein, shall be given by first-class mail, postage
prepaid, at the address of such Certificateholder as shown in the
Certificate Register. Any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given,
whether or not the Certificateholder receives such notice.
Section 11.0 Severability of Provisions. If any one or
more of the covenants, agreements, provisions or terms of this Agreement
shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms shall be deemed severed 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 11.1 Successors and Assigns. The provisions of
this Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties hereto.
Section 11.1 Article and Section Headings. The article and
section headings herein are for convenience of reference only, and shall
not limit or otherwise affect the meaning hereof.
Section 11.1 Counterparts. This Agreement may be executed
in two or more counterparts each of which when so executed and delivered
shall be an original but all of which together shall constitute one and the
same instrument.
Section 11.1 Notice to Rating Agencies. The article and
section headings herein are for convenience of reference only, and shall
not limited or otherwise affect the meaning hereof. The Trustee shall use
its best efforts to promptly provide notice to each Rating Agency with
respect to each of the following of which it has actual knowledge:
1. Any material change or amendment to this Agreement;
2. The occurrence of any Event of Default that has not
been cured;
3. The resignation or termination of the Master Servicer
or the Trustee;
4. The repurchase or substitution of SAMs;
5. The final payment to Certificateholders; and
6. Any change in the location of the Distribution Account.
In addition, in accordance with Section 6.06 and Section
3.16, the Trustee and the Master Servicer, respectively, shall promptly
furnish to each Rating Agency copies of the following:
1. Each report to Certificateholders described in
Section 6.06; and
2. Each annual independent public accountants' servicing
report received as described in Section 3.16.
IN WITNESS WHEREOF, the Seller, _____ as Master Servicer
and the Trustee have caused their names to be signed hereto by their
respective officers thereunto duly authorized as of the day and year first
above written.
SAMCO MORTGAGE SECURITIES
CORP., as Seller
By: /s/
----------------------------
Name:
Title:
--------------------------------,
as Master Servicer
By: /s/
---------------------------
Name:
Title:
---------------------, as Trustee
By: /s/
---------------------------
Name:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the ____ day of __________, 2000 before me, a notary
public in and for said State, personally appeared __________, known to me
to be a __________ of SAMCO Mortgage Securities Corp., the corporation that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year in this certificate first above
written.
/s/
---------------------------------
Notary Public
No.
Commission Expires _________________
[Notarial Seal]
STATE OF __________ )
) ss.:
COUNTY OF __________ )
On the ____ day of __________, 2000 before me, a notary
public in and for said State, personally appeared__________, known to me to
be the President of _____________________, the corporation that executed
the within instrument, and also known to me to be the person who executed
it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year in this certificate first above
written.
/s/
----------------------------------
Notary Public
Commission Expires ___________________
[Notarial Seal]
STATE OF __________ )
) ss.:
COUNTY OF __________ )
On the ____ day of ___________, 2000 before me, a notary
public in and for said State, personally appeared ___________, known to me
to be a ____________ of ____________________, that executed the within
instrument, and also known to me to be the person who executed it on behalf
of said trust company and acknowledged to me that such trust company
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year in this certificate first above
written.
/s/
----------------------------------
Notary Public
No.
Commission Expires __________
[Notarial Seal]
EXHIBIT A-1
FORM OF FACE OF CERTIFICATES
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, STRUCTURED ASSET MORTGAGE INVESTMENTS INC., LIBERTY LENDING
SERVICES, INC. OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES AND IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. A-1
SERIES 1998-10
EVIDENCING A BENEFICIAL INTEREST IN THE BELOW NAMED
TRUST CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS:
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
CUSIP NO. 86358H ER 6
<S> <C> <C>
CUT-OFF DATE : NOVEMBER 1, 1998 CLASS : A
FIRST DISTRIBUTION Date : DECEMBER 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE: JULY 25, 2028 OF THIS CERTIFICATE
MASTER SERVICER : LIBERTY LENDING SERVICES, ( "DENOMINATION") : $200,000,000
PASS-THROUGH RATE : 6.90% APPROXIMATE ORIGINAL CLASS
PRINCIPAL AMOUNT : $211,895,600
</TABLE>
THIS CERTIFIES THAT CEDE & CO.
is the registered owner of the Fractional Undivided Interest
evidenced hereby in the beneficial ownership interest of Certificates of
the same Class as this Certificate in a trust (the "Trust") consisting
primarily of conventional, first lien, fixed rate, fully amortizing or
balloon payment, mortgage loans, secured by one- to four-family residences
and condominium units located primarily in California (collectively, the
"Mortgage Loans"), which will be sold to the Trust by Structured Asset
Mortgage Investments Inc. ("SAMI"). The Mortgage Loans were sold by Liberty
Savings Bank, F.S.B ("Liberty") in its individual capacity and as trustee
to SAMI. Liberty Lending Services, Inc. ("LLSI") will act as master
servicer of the Mortgage Loans (the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust
was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), by and among SAMI, as
seller, LLSI, as Master Servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined
herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement
the Holder of this Certificate by virtue of its acceptance hereof assents
and by which such Holder is bound.
Interest on this Certificate will accrue during the month prior
to the month in which a Distribution Date (as hereinafter defined) occurs
on the Current Principal Amount hereof at a per annum rate equal to the
Pass-Through Rate. The Trustee will distribute on the 25th day of each
month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day
of the calendar month preceding the month of such Distribution Date, an
amount equal to the product of the Fractional Undivided Interest evidenced
by this Certificate and the amount required to be distributed to Holders of
Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date immediately following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the
date on which the Current Principal Amount or Notional Amount, as
applicable, of this Class of Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name
and address shall appear on the Certificate Register or, if such Person so
requests by notifying the Trustee in writing as specified in the Agreement
and if such Person holds Certificates with an initial aggregate Current
Principal Amount and/or initial aggregate Notional Amount, as applicable,
of not less than $1,000,000, in immediately available funds (by wire
transfer or otherwise) to the account specified in writing by such Person
to the Trustee. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED
SIGNATORY OF THE TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE
ENTITLED TO ANY BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS CERTIFICATE TO BE
DULY EXECUTED.
<TABLE>
<CAPTION>
Dated: November 30, 1998
Countersigned: BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Not in its individual capacity but
solely as Trustee
<S> <C> <C>
By__________________________ By_________........................
Authorized signatory of Bankers Trust Company....... AUTHORIZED OFFICER
of California, N.A., not in its individual
capacity but solely as Trustee
</TABLE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, STRUCTURED ASSET MORTGAGE INVESTMENTS INC., LIBERTY LENDING
SERVICES, INC. OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES AND IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. A-2 SERIES 1998-10
EVIDENCING A BENEFICIAL INTEREST IN THE BELOW NAMED
TRUST CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS:
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
CUSIP NO. 86358H ER 6
<S> <C> <C> <C>
CUT-OFF DATE : NOVEMBER 1, 1998 CLASS : A
FIRST DISTRIBUTION Date : DECEMBER 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE: JULY 25, 2028 OF THIS CERTIFICATE
MASTER SERVICER : LIBERTY LENDING SERVICES, ("DENOMINATION") : $11,895,600
PASS-THROUGH RATE : 6.90% APPROXIMATE ORIGINAL CLASS
PRINCIPAL AMOUNT : $211,895,600
</TABLE>
THIS CERTIFIES THAT CEDE & CO.
is the registered owner of the Fractional Undivided Interest
evidenced hereby in the beneficial ownership interest of Certificates of
the same Class as this Certificate in a trust (the "Trust") consisting
primarily of conventional, first lien, fixed rate, fully amortizing or
balloon payment, mortgage loans, secured by one- to four-family residences
and condominium units located primarily in California (collectively, the
"Mortgage Loans"), which will be sold to the Trust by Structured Asset
Mortgage Investments Inc. ("SAMI"). The Mortgage Loans were sold by Liberty
Savings Bank, F.S.B ("Liberty") in its individual capacity and as trustee
to SAMI. Liberty Lending Services, Inc. ("LLSI") will act as master
servicer of the Mortgage Loans (the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust
was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), by and among SAMI, as
seller, LLSI, as Master Servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined
herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement
the Holder of this Certificate by virtue of its acceptance hereof assents
and by which such Holder is bound.
Interest on this Certificate will accrue during the month prior
to the month in which a Distribution Date (as hereinafter defined) occurs
on the Current Principal Amount hereof at a per annum rate equal to the
Pass-Through Rate. The Trustee will distribute on the 25th day of each
month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day
of the calendar month preceding the month of such Distribution Date, an
amount equal to the product of the Fractional Undivided Interest evidenced
by this Certificate and the amount required to be distributed to Holders of
Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date immediately following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the
date on which the Current Principal Amount or Notional Amount, as
applicable, of this Class of Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name
and address shall appear on the Certificate Register or, if such Person so
requests by notifying the Trustee in writing as specified in the Agreement
and if such Person holds Certificates with an initial aggregate Current
Principal Amount and/or initial aggregate Notional Amount, as applicable,
of not less than $1,000,000, in immediately available funds (by wire
transfer or otherwise) to the account specified in writing by such Person
to the Trustee. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED
SIGNATORY OF THE TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE
ENTITLED TO ANY BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS CERTIFICATE TO BE
DULY EXECUTED.
<TABLE>
<CAPTION>
Dated: November 30, 1998
Countersigned: BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Not in its individual capacity but solely as Trustee
<S> <C> <C>
By__________________________ By_____________________________............................
Authorized signatory of Bankers Trust Company............ AUTHORIZED OFFICER
of California, N.A., not in its individual
</TABLE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, STRUCTURED ASSET MORTGAGE INVESTMENTS INC., LIBERTY LENDING
SERVICES, INC. OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES AND IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.
THE YIELD TO THE HOLDER OF THIS CERTIFICATE WILL BE
SENSITIVE TO THE RATE OF PRINCIPAL PAYMENTS ON THE DISCOUNT MORTGAGE LOANS.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. PO-1 SERIES 1998-10
EVIDENCING A BENEFICIAL INTEREST IN THE BELOW NAMED
TRUST CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS:
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
CUSIP NO. 86358H ES 4
<S> <C> <C> <C>
CUT-OFF DATE : NOVEMBER 1, 1998 CLASS : PO
FIRST DISTRIBUTION Date : DECEMBER 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE : JULY 25, 2028 OF THIS CERTIFICATE
MASTER SERVICER : LIBERTY LENDING SERVICES, ("DENOMINATION") : $90,487
PASS-THROUGH RATE : N/A APPROXIMATE ORIGINAL CLASS
PRINCIPAL AMOUNT : $90,487
</TABLE>
THIS CERTIFIES THAT CEDE & CO.
is the registered owner of the Fractional Undivided Interest
evidenced hereby in the beneficial ownership interest of Certificates of
the same Class as this Certificate in a trust (the "Trust") consisting
primarily of conventional, first lien, fixed rate, fully amortizing or
balloon payment, mortgage loans, secured by one- to four-family residences
and condominium units located primarily in California (collectively, the
"Mortgage Loans"), which will be sold to the Trust by Structured Asset
Mortgage Investments Inc. ("SAMI"). The Mortgage Loans were sold by Liberty
Savings Bank, F.S.B ("Liberty") in its individual capacity and as trustee
to SAMI. Liberty Lending Services, Inc. ("LLSI") will act as master
servicer of the Mortgage Loans (the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust
was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), by and among SAMI, as
seller, LLSI, as Master Servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined
herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement
the Holder of this Certificate by virtue of its acceptance hereof assents
and by which such Holder is bound.
The Class PO Certificates are principal only certificates and
will receive no interest. The Trustee will distribute on the 25th day of
each month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day
of the calendar month preceding the month of such Distribution Date, an
amount equal to the product of the Fractional Undivided Interest evidenced
by this Certificate and the amount required to be distributed to Holders of
Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date immediately following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the
date on which the Current Principal Amount or Notional Amount, as
applicable, of this Class of Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name
and address shall appear on the Certificate Register or, if such Person so
requests by notifying the Trustee in writing as specified in the Agreement
and if such Person holds Certificates with an initial aggregate Current
Principal Amount and/or initial aggregate Notional Amount, as applicable,
of not less than $1,000,000, in immediately available funds (by wire
transfer or otherwise) to the account specified in writing by such Person
to the Trustee. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED
SIGNATORY OF THE TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE
ENTITLED TO ANY BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS CERTIFICATE TO BE
DULY EXECUTED.
<TABLE>
<CAPTION>
Dated: November 30, 1998
Countersigned: BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Not in its individual capacity but solely as Trustee
<S> <C> <C>
By__________________________ By_____________________............................
Authorized signatory of Bankers Trust Company...... AUTHORIZED OFFICER
of California, N.A., not in its individual
capacity but solely as Trustee
</TABLE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, STRUCTURED ASSET MORTGAGE INVESTMENTS INC., LIBERTY LENDING
SERVICES, INC. OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES AND IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
THE NOTIONAL AMOUNT OF THIS CERTIFICATE WILL DECREASE AS THE
PRINCIPAL BALANCES OF THE NON-DISCOUNT MORTGAGE LOANS DECREASE.
ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE
NOTIONAL AMOUNT OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION
SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS THEN
NOTIONAL AMOUNT BY INQUIRY OF THE TRUSTEE NAMED HEREIN.
THE YIELD TO THE HOLDER OF THIS CERTIFICATE WILL BE EXTREMELY
SENSITIVE TO THE RATE OF PRINCIPAL PAYMENTS ON THE MORTGAGE LOANS.
THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY,
OR ON BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT
WHICH IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, UNLESS THE PROPOSED TRANSFER AND/OR HOLDING OF A
CERTIFICATE AND THE SERVICING, MANAGEMENT AND/OR OPERATION OF THE TRUST AND
ITS ASSETS: (I) WILL NOT RESULT IN ANY PROHIBITED TRANSACTION WHICH IS NOT
COVERED UNDER AN INDIVIDUAL OR CLASS PROHIBITED TRANSACTION EXEMPTION,
INCLUDING, BUT NOT LIMITED TO, PROHIBITED TRANSACTION EXEMPTION ("PTE")
84-14, PTE 91-38, PTE 90-1, PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE
RISE TO ANY ADDITIONAL FIDUCIARY DUTIES ON THE PART OF THE MASTER SERVICER
OR THE TRUSTEE, WHICH WILL BE DEEMED REPRESENTED BY AN OWNER OF A
BOOK-ENTRY CERTIFICATE OR A GLOBAL CERTIFICATE AND WILL BE EVIDENCED BY A
REPRESENTATION TO SUCH EFFECT BY OR ON BEHALF OF A HOLDER OF A PRIVATE
CERTIFICATE OR CLASS X CERTIFICATE. THE ABOVE RESTRICTIONS SHALL NOT APPLY
TO THE CLASS X CERTIFICATES EITHER: (I) IN THE EVENT THAT THE CLASS X
CERTIFICATES ARE UNDERWRITTEN, PLACED BY AN ENTITY WHICH HAS BEEN GRANTED
AN EXEMPTION BY THE DEPARTMENT OF LABOR SIMILAR TO PTE 90-30, OR SUCH
ENTITY ACTS AS A SELLING AGENT FOR SUCH CLASS X CERTIFICATES OR (II) IN
SECONDARY MARKET TRANSFERS THEREAFTER.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. X-1 SERIES 1998-10
EVIDENCING A BENEFICIAL INTEREST IN THE BELOW NAMED
TRUST CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS:
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
CUSIP NO. 86358H ET 2
<S> <C> <C>
CUT-OFF DATE : NOVEMBER 1, 1998 CLASS : X
FIRST DISTRIBUTION DATE : DECEMBER 25, 1998 INITIAL NOTIONAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE: JULY 25, OF THIS CERTIFICATE
MASTER SERVICER : LIBERTY LENDING SERVICES, ("DENOMINATION") : $222,864,136
PASS-THROUGH RATE : VARIABLE APPROXIMATE ORIGINAL CLASS
NOTIONAL AMOUNT : $222,864,136
</TABLE>
THIS CERTIFIES THAT LIBERTY SAVINGS BANK, F.S.B.
is the registered owner of the Fractional Undivided Interest
evidenced hereby in the beneficial ownership interest of Certificates of
the same Class as this Certificate in a trust (the "Trust") consisting
primarily of conventional, first lien, fixed rate, fully amortizing or
balloon payment, mortgage loans, secured by one- to four-family residences
and condominium units located primarily in California (collectively, the
"Mortgage Loans"), which will be sold to the Trust by Structured Asset
Mortgage Investments Inc. ("SAMI"). The Mortgage Loans were sold by Liberty
Savings Bank, F.S.B ("Liberty") in its individual capacity and as trustee
to SAMI. Liberty Lending Services, Inc. ("LLSI") will act as master
servicer of the Mortgage Loans (the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust
was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), by and among SAMI, as
seller, LLSI, as Master Servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined
herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement
the Holder of this Certificate by virtue of its acceptance hereof assents
and by which such Holder is bound.
This Class of Certificates will have a Notional Amount equal to
the aggregate Scheduled Principal Balance of the Mortgage Loans with Net
Rates equal to or greater than 6.90% per annum and will bear interest
thereon at a variable Pass-Through Rate equal to the weighted average of
the excess (a) the Net Rate on each such Mortgage Loan over (b) 6.90% per
annum. Interest on this Certificate will accrue during the month prior to
the month in which a Distribution Date (as hereinafter defined) occurs on
the then Notional Amount hereof at a per annum rate equal to the
Pass-Through Rate. The Trustee will distribute on the 25th day of each
month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day
of the calendar month preceding the month of such Distribution Date, an
amount equal to the product of the Fractional Undivided Interest evidenced
by this Certificate and the amount required to be distributed to Holders of
Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date immediately following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the
date on which the Current Principal Amount or Notional Amount, as
applicable, of this Class of Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name
and address shall appear on the Certificate Register or, if such Person so
requests by notifying the Trustee in writing as specified in the Agreement
and if such Person holds Certificates with an initial aggregate Current
Principal Amount and/or initial aggregate Notional Amount, as applicable,
of not less than $1,000,000, in immediately available funds (by wire
transfer or otherwise) to the account specified in writing by such Person
to the Trustee. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED
SIGNATORY OF THE TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE
ENTITLED TO ANY BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS CERTIFICATE TO BE
DULY EXECUTED.
<TABLE>
<CAPTION>
Dated: November 30, 1998
Countersigned: BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Not in its individual capacity but solely as Trustee
<S> <C> <C>
By__________________________ By_____________________............................
Authorized signatory of Bankers Trust Company...... AUTHORIZED OFFICER
of California, N.A., not in its individual
capacity but solely as Trustee
</TABLE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, STRUCTURED ASSET MORTGAGE INVESTMENTS INC., LIBERTY LENDING
SERVICES, INC. OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES AND IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY,
OR ON BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT
WHICH IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, UNLESS THE PROPOSED TRANSFER AND/OR HOLDING OF A
CERTIFICATE AND THE SERVICING, MANAGEMENT AND/OR OPERATION OF THE TRUST AND
ITS ASSETS: (I) WILL NOT RESULT IN ANY PROHIBITED TRANSACTION WHICH IS NOT
COVERED UNDER AN INDIVIDUAL OR CLASS PROHIBITED TRANSACTION EXEMPTION,
INCLUDING, BUT NOT LIMITED TO, PROHIBITED TRANSACTION EXEMPTION ("PTE")
84-14, PTE 91-38, PTE 90-1, PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE
RISE TO ANY ADDITIONAL FIDUCIARY DUTIES ON THE PART OF THE MASTER SERVICER
OR THE TRUSTEE, WHICH WILL BE DEEMED REPRESENTED BY AN OWNER OF A
BOOK-ENTRY CERTIFICATE OR A GLOBAL CERTIFICATE AND WILL BE EVIDENCED BY A
REPRESENTATION TO SUCH EFFECT BY OR ON BEHALF OF A HOLDER OF A PRIVATE
CERTIFICATE OR CLASS X CERTIFICATE. THE ABOVE RESTRICTIONS SHALL NOT APPLY
TO THE CLASS X CERTIFICATES EITHER: (I) IN THE EVENT THAT THE CLASS X
CERTIFICATES ARE UNDERWRITTEN, PLACED BY AN ENTITY WHICH HAS BEEN GRANTED
AN EXEMPTION BY THE DEPARTMENT OF LABOR SIMILAR TO PTE 90-30, OR SUCH
ENTITY ACTS AS A SELLING AGENT FOR SUCH CLASS X CERTIFICATES OR (II) IN
SECONDARY MARKET TRANSFERS THEREAFTER.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. B-1-1 SERIES 1998-10
EVIDENCING A BENEFICIAL INTEREST IN THE BELOW NAMED
TRUST CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE
LOANS:
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
CUSIP NO. 86358H EU 9
<S> <C> <C> <C>
CUT-OFF DATE : NOVEMBER 1, 1998 CLASS : B-1
FIRST DISTRIBUTION DATE : DECEMBER 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE: JULY 25, 2028 OF THIS CERTIFICATE
MASTER SERVICER : LIBERTY LENDING SERVICES, ("DENOMINATION") : $6,856,700
PASS-THROUGH RATE : 6.90% APPROXIMATE ORIGINAL CLASS
PRINCIPAL AMOUNT : $6,856,700
</TABLE>
THIS CERTIFIES THAT CEDE & CO.
is the registered owner of the Fractional Undivided Interest
evidenced hereby in the beneficial ownership interest of Certificates of
the same Class as this Certificate in a trust (the "Trust") consisting
primarily of conventional, first lien, fixed rate, fully amortizing or
balloon payment, mortgage loans, secured by one- to four-family residences
and condominium units located primarily in California (collectively, the
"Mortgage Loans"), which will be sold to the Trust by Structured Asset
Mortgage Investments Inc. ("SAMI"). The Mortgage Loans were sold by Liberty
Savings Bank, F.S.B ("Liberty") in its individual capacity and as trustee
to SAMI. Liberty Lending Services, Inc. ("LLSI") will act as master
servicer of the Mortgage Loans (the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust
was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), by and among SAMI, as
seller, LLSI, as Master Servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined
herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement
the Holder of this Certificate by virtue of its acceptance hereof assents
and by which such Holder is bound.
Interest on this Certificate will accrue during the month prior
to the month in which a Distribution Date (as hereinafter defined) occurs
on the Current Principal Amount hereof at a per annum rate equal to the
Pass-Through Rate. The Trustee will distribute on the 25th day of each
month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day
of the calendar month preceding the month of such Distribution Date, an
amount equal to the product of the Fractional Undivided Interest evidenced
by this Certificate and the amount required to be distributed to Holders of
Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date immediately following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the
date on which the Current Principal Amount or Notional Amount, as
applicable, of this Class of Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name
and address shall appear on the Certificate Register or, if such Person so
requests by notifying the Trustee in writing as specified in the Agreement
and if such Person holds Certificates with an initial aggregate Current
Principal Amount and/or initial aggregate Notional Amount, as applicable,
of not less than $1,000,000, in immediately available funds (by wire
transfer or otherwise) to the account specified in writing by such Person
to the Trustee. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED
SIGNATORY OF THE TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE
ENTITLED TO ANY BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS CERTIFICATE TO BE
DULY EXECUTED.
<TABLE>
<CAPTION>
Dated: November 30, 1998
Countersigned: BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Not in its individual capacity but solely as Trustee
<S> <C> <C>
By__________________________ By_____________________............................
Authorized signatory of Bankers Trust Company...... AUTHORIZED OFFICER
of California, N.A., not in its individual
capacity but solely as Trustee
</TABLE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, STRUCTURED ASSET MORTGAGE INVESTMENTS INC., LIBERTY LENDING
SERVICES, INC. OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES AND IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR
INDIRECTLY BY, OR ON BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT WHICH IS SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, AND/OR SECTION 4975 OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, UNLESS THE PROPOSED TRANSFER
AND/OR HOLDING OF A CERTIFICATE AND THE SERVICING, MANAGEMENT AND/OR
OPERATION OF THE TRUST AND ITS ASSETS: (I) WILL NOT RESULT IN ANY
PROHIBITED TRANSACTION WHICH IS NOT COVERED UNDER AN INDIVIDUAL OR CLASS
PROHIBITED TRANSACTION EXEMPTION, INCLUDING, BUT NOT LIMITED TO, PROHIBITED
TRANSACTION EXEMPTION ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE 95-60 OR PTE
96-23 AND (II) WILL NOT GIVE RISE TO ANY ADDITIONAL FIDUCIARY DUTIES ON THE
PART OF THE MASTER SERVICER OR THE TRUSTEE, WHICH WILL BE DEEMED
REPRESENTED BY AN OWNER OF A BOOK-ENTRY CERTIFICATE OR A GLOBAL CERTIFICATE
AND WILL BE EVIDENCED BY A REPRESENTATION TO SUCH EFFECT BY OR ON BEHALF OF
A HOLDER OF A PRIVATE CERTIFICATE OR CLASS X CERTIFICATE. THE ABOVE
RESTRICTIONS SHALL NOT APPLY TO THE CLASS X CERTIFICATES EITHER: (I) IN THE
EVENT THAT THE CLASS X CERTIFICATES ARE UNDERWRITTEN, PLACED BY AN ENTITY
WHICH HAS BEEN GRANTED AN EXEMPTION BY THE DEPARTMENT OF LABOR SIMILAR TO
PTE 90-30, OR SUCH ENTITY ACTS AS A SELLING AGENT FOR SUCH CLASS X
CERTIFICATES OR (II) IN SECONDARY MARKET TRANSFERS THEREAFTER.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. B-2-1 SERIES 1998-10
EVIDENCING A BENEFICIAL INTEREST IN THE BELOW NAMED
TRUST CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS:
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
CUSIP NO. 86358H EV 7
<S> <C> <C> <C>
CUT-OFF DATE : NOVEMBER 1, 1998 CLASS : B-2
FIRST DISTRIBUTION DATE : DECEMBER 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE: JULY 25, 2028 OF THIS CERTIFICATE
MASTER SERVICER : LIBERTY LENDING SERVICES, ("DENOMINATION") : $3,999,700
PASS-THROUGH RATE : 6.90% APPROXIMATE ORIGINAL CLASS
PRINCIPAL AMOUNT : $3,999,700
</TABLE>
THIS CERTIFIES THAT CEDE & CO.
is the registered owner of the Fractional Undivided Interest
evidenced hereby in the beneficial ownership interest of Certificates of
the same Class as this Certificate in a trust (the "Trust") consisting
primarily of conventional, first lien, fixed rate, fully amortizing or
balloon payment, mortgage loans, secured by one- to four-family residences
and condominium units located primarily in California (collectively, the
"Mortgage Loans"), which will be sold to the Trust by Structured Asset
Mortgage Investments Inc. ("SAMI"). The Mortgage Loans were sold by Liberty
Savings Bank, F.S.B ("Liberty") in its individual capacity and as trustee
to SAMI. Liberty Lending Services, Inc. ("LLSI") will act as master
servicer of the Mortgage Loans (the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust
was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), by and among SAMI, as
seller, LLSI, as Master Servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined
herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement
the Holder of this Certificate by virtue of its acceptance hereof assents
and by which such Holder is bound.
Interest on this Certificate will accrue during the month prior
to the month in which a Distribution Date (as hereinafter defined) occurs
on the Current Principal Amount hereof at a per annum rate equal to the
Pass-Through Rate. The Trustee will distribute on the 25th day of each
month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day
of the calendar month preceding the month of such Distribution Date, an
amount equal to the product of the Fractional Undivided Interest evidenced
by this Certificate and the amount required to be distributed to Holders of
Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date immediately following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the
date on which the Current Principal Amount or Notional Amount, as
applicable, of this Class of Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name
and address shall appear on the Certificate Register or, if such Person so
requests by notifying the Trustee in writing as specified in the Agreement
and if such Person holds Certificates with an initial aggregate Current
Principal Amount and/or initial aggregate Notional Amount, as applicable,
of not less than $1,000,000, in immediately available funds (by wire
transfer or otherwise) to the account specified in writing by such Person
to the Trustee. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED
SIGNATORY OF THE TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE
ENTITLED TO ANY BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS
CERTIFICATE TO BE DULY EXECUTED.
<TABLE>
<CAPTION>
Dated: November 30, 1998
Countersigned: BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Not in its individual capacity but solely as Trustee
<S> <C> <C>
By__________________________ By_____________________............................
Authorized signatory of Bankers Trust Company...... AUTHORIZED OFFICER
of California, N.A., not in its individual
capacity but solely as Trustee
</TABLE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, STRUCTURED ASSET MORTGAGE INVESTMENTS INC., LIBERTY LENDING
SERVICES, INC. OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES AND IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY,
OR ON BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT
WHICH IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, UNLESS THE PROPOSED TRANSFER AND/OR HOLDING OF A
CERTIFICATE AND THE SERVICING, MANAGEMENT AND/OR OPERATION OF THE TRUST AND
ITS ASSETS: (I) WILL NOT RESULT IN ANY PROHIBITED TRANSACTION WHICH IS NOT
COVERED UNDER AN INDIVIDUAL OR CLASS PROHIBITED TRANSACTION EXEMPTION,
INCLUDING, BUT NOT LIMITED TO, PROHIBITED TRANSACTION EXEMPTION ("PTE")
84-14, PTE 91-38, PTE 90-1, PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE
RISE TO ANY ADDITIONAL FIDUCIARY DUTIES ON THE PART OF THE MASTER SERVICER
OR THE TRUSTEE, WHICH WILL BE DEEMED REPRESENTED BY AN OWNER OF A
BOOK-ENTRY CERTIFICATE OR A GLOBAL CERTIFICATE AND WILL BE EVIDENCED BY A
REPRESENTATION TO SUCH EFFECT BY OR ON BEHALF OF A HOLDER OF A PRIVATE
CERTIFICATE OR CLASS X CERTIFICATE. THE ABOVE RESTRICTIONS SHALL NOT APPLY
TO THE CLASS X CERTIFICATES EITHER: (I) IN THE EVENT THAT THE CLASS X
CERTIFICATES ARE UNDERWRITTEN, PLACED BY AN ENTITY WHICH HAS BEEN GRANTED
AN EXEMPTION BY THE DEPARTMENT OF LABOR SIMILAR TO PTE 90-30, OR SUCH
ENTITY ACTS AS A SELLING AGENT FOR SUCH CLASS X CERTIFICATES OR (II) IN
SECONDARY MARKET TRANSFERS THEREAFTER.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. B-3-1 SERIES 1998-10
EVIDENCING A BENEFICIAL INTEREST IN THE BELOW NAMED
TRUST CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS:
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
CUSIP NO. 86358H EW 5
<S> <C> <C> <C>
CUT-OFF DATE : NOVEMBER 1, 1998 CLASS : B-3
FIRST DISTRIBUTION DATE : DECEMBER 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE: JULY 25, 2028 OF THIS CERTIFICATE
MASTER SERVICERS : LIBERTY LENDING SERVICES, ("DENOMINATION") : $2,285,600
PASS-THROUGH RATE : 6.90% APPROXIMATE ORIGINAL CLASS
PRINCIPAL AMOUNT : $2,285,600
</TABLE>
THIS CERTIFIES THAT CEDE & CO.
is the registered owner of the Fractional Undivided Interest
evidenced hereby in the beneficial ownership interest of Certificates of
the same Class as this Certificate in a trust (the "Trust") consisting
primarily of conventional, first lien, fixed rate, fully amortizing or
balloon payment, mortgage loans, secured by one- to four-family residences
and condominium units located primarily in California (collectively, the
"Mortgage Loans"), which will be sold to the Trust by Structured Asset
Mortgage Investments Inc. ("SAMI"). The Mortgage Loans were sold by Liberty
Savings Bank, F.S.B ("Liberty") in its individual capacity and as trustee
to SAMI. Liberty Lending Services, Inc. ("LLSI") will act as master
servicer of the Mortgage Loans (the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust
was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), by and among SAMI, as
seller, LLSI, as Master Servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined
herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement
the Holder of this Certificate by virtue of its acceptance hereof assents
and by which such Holder is bound.
Interest on this Certificate will accrue during the month prior
to the month in which a Distribution Date (as hereinafter defined) occurs
on the Current Principal Amount hereof at a per annum rate equal to the
Pass-Through Rate. The Trustee will distribute on the 25th day of each
month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day
of the calendar month preceding the month of such Distribution Date, an
amount equal to the product of the Fractional Undivided Interest evidenced
by this Certificate and the amount required to be distributed to Holders of
Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date immediately following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the
date on which the Current Principal Amount or Notional Amount, as
applicable, of this Class of Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name
and address shall appear on the Certificate Register or, if such Person so
requests by notifying the Trustee in writing as specified in the Agreement
and if such Person holds Certificates with an initial aggregate Current
Principal Amount and/or initial aggregate Notional Amount, as applicable,
of not less than $1,000,000, in immediately available funds (by wire
transfer or otherwise) to the account specified in writing by such Person
to the Trustee. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED
SIGNATORY OF THE TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE
ENTITLED TO ANY BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS
CERTIFICATE TO BE DULY EXECUTED.
<TABLE>
<CAPTION>
Dated: November 30, 1998
Countersigned: BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Not in its individual capacity but solely as Trustee
<S> <C> <C>
By__________________________ By_____________________............................
Authorized signatory of Bankers Trust Company...... AUTHORIZED OFFICER
of California, N.A., not in its individual
capacity but solely as Trustee
</TABLE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, STRUCTURED ASSET MORTGAGE INVESTMENTS INC., LIBERTY LENDING
SERVICES, INC. OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES AND IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
"RESIDUAL INTEREST" IN THE "REMIC ASSETS" AS DEFINED IN THE AGREEMENT
REFERRED TO BELOW, WHICH IS A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" (A
"REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND
860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), AND IS
NOT TREATED AS INDEBTEDNESS OF THE TRUST REFERRED TO BELOW. EACH PURCHASER
OF THE INTEREST REPRESENTED BY THIS CERTIFICATE WILL BE REQUIRED TO
REPRESENT IN AN AFFIDAVIT THAT IT IS NOT A "DISQUALIFIED ORGANIZATION" AND
WILL NOT TRANSFER THIS CERTIFICATE TO A "DISQUALIFIED ORGANIZATION." THE
TERM "DISQUALIFIED ORGANIZATION" IS DEFINED IN SECTION 860(E)(5) OF THE
CODE AND IN THE AGREEMENT. EACH PURCHASER WILL ALSO BE REQUIRED TO
REPRESENT IN SUCH AFFIDAVIT THAT (A) IT IS NOT ACQUIRING CERTIFICATES FOR
THE ACCOUNT OF A DISQUALIFIED ORGANIZATION AND (B) IT WILL NOT TRANSFER
THIS CERTIFICATE UNLESS (1) IT HAS RECEIVED A SIMILAR AFFIDAVIT FROM THE
PROPOSED TRANSFEREE AND (2) AS OF THE TIME OF THE TRANSFER, IT DOES NOT
HAVE ACTUAL KNOWLEDGE THAT THE AFFIDAVIT OF THE PROPOSED TRANSFEREE IS
FALSE. IN THE EVENT THAT LEGISLATION IS ENACTED WHICH WOULD SUBJECT THE
TRUST REFERRED TO BELOW TO TAX (OR DISQUALIFY THE TRUST REFERRED TO BELOW)
ON THE TRANSFER OF AN INTEREST REPRESENTED BY THIS CERTIFICATE TO ANY OTHER
PERSON OR PERSONS, STRUCTURED ASSET MORTGAGE INVESTMENTS INC. SHALL,
WITHOUT FURTHER ACTION ON THE PART OF THE HOLDERS OF THE CLASS R
CERTIFICATES BE EMPOWERED, TO THE FULLEST EXTENT POSSIBLE AND AS IF THEY
HAD SO VOTED, TO AMEND THE AGREEMENT REFERRED TO BELOW TO RESTRICT OR
PROHIBIT PROSPECTIVELY SUCH TRANSFER. THIS CERTIFICATE MAY NOT BE
TRANSFERRED TO A NON-U.S. PERSON AS DESCRIBED IN SECTION 5.05(C) OF THE
AGREEMENT REFERRED TO BELOW WITHOUT THE PRIOR WRITTEN CONSENT OF THE TAX
MATTERS PERSON AND STRUCTURED ASSET MORTGAGE INVESTMENTS INC.
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. R-1 SERIES 1998-10
EVIDENCING A BENEFICIAL INTEREST IN THE BELOW NAMED
TRUST CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS:
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
CUSIP NO. 86358H EX 3
<S> <C> <C> <C>
CUT-OFF DATE : NOVEMBER 1, 1998 CLASS : R
FIRST DISTRIBUTION DATE : DECEMBER 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE: JULY 25, OF THIS CERTIFICATE
MASTER SERVICER : LIBERTY LENDING SERVICES, ("DENOMINATION") : $100
PASS-THROUGH RATE : 6.90% APPROXIMATE ORIGINAL CLASS
PRINCIPAL AMOUNT : $100
</TABLE>
THIS CERTIFIES THAT BEAR STEARNS SECURITIES CORP.
is the registered owner of the Fractional Undivided Interest
evidenced hereby in the beneficial ownership interest of Certificates of
the same Class as this Certificate in a trust (the "Trust") consisting
primarily of conventional, first lien, fixed rate, fully amortizing or
balloon payment, mortgage loans, secured by one- to four-family residences
and condominium units located primarily in California (collectively, the
"Mortgage Loans"), which will be sold to the Trust by Structured Asset
Mortgage Investments Inc. ("SAMI"). The Mortgage Loans were sold by Liberty
Savings Bank, F.S.B ("Liberty") in its individual capacity and as trustee
to SAMI. Liberty Lending Services, Inc. ("LLSI") will act as master
servicer of the Mortgage Loans (the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust
was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), by and among SAMI, as
seller, LLSI, as Master Servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined
herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement
the Holder of this Certificate by virtue of its acceptance hereof assents
and by which such Holder is bound.
Interest on this Certificate will accrue during the month prior
to the month in which a Distribution Date (as hereinafter defined) occurs
on the Current Principal Amount hereof at a per annum rate equal to the
Pass-Through Rate. The Trustee will distribute on the 25th day of each
month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day
of the calendar month preceding the month of such Distribution Date, an
amount equal to the product of the Fractional Undivided Interest evidenced
by this Certificate and the amount required to be distributed to Holders of
Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date immediately following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the
date on which the Current Principal Amount or Notional Amount, as
applicable, of this Class of Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name
and address shall appear on the Certificate Register or, if such Person so
requests by notifying the Trustee in writing as specified in the Agreement
and if such Person holds Certificates with an initial aggregate Current
Principal Amount and/or initial aggregate Notional Amount, as applicable,
of not less than $1,000,000, in immediately available funds (by wire
transfer or otherwise) to the account specified in writing by such Person
to the Trustee. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED
SIGNATORY OF THE TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE
ENTITLED TO ANY BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS
CERTIFICATE TO BE DULY EXECUTED.
<TABLE>
<CAPTION>
Dated: November 30, 1998
Countersigned: BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Not in its individual capacity but solely as Trustee
<S> <C> <C>
By__________________________ By_____________________............................
Authorized signatory of Bankers Trust Company...... AUTHORIZED OFFICER
of California, N.A., not in its individual
capacity but solely as Trustee
</TABLE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, STRUCTURED ASSET MORTGAGE INVESTMENTS INC., LIBERTY LENDING
SERVICES, INC. OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES AND IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE
LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING
FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(A)(1),(2)(3) OR (7) OF
REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH ALL THE EQUITY OWNERS
COME WITHIN SUCH PARAGRAPHS PURCHASING NOT FOR DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A LETTER
SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B) A
REPRESENTATION OR CERTIFICATION AS TO COMPLIANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION.
THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON
BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT WHICH
IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED, UNLESS THE PROPOSED TRANSFER AND/OR HOLDING OF A CERTIFICATE
AND THE SERVICING, MANAGEMENT AND/OR OPERATION OF THE TRUST AND ITS ASSETS:
(I) WILL NOT RESULT IN ANY PROHIBITED TRANSACTION WHICH IS NOT COVERED
UNDER AN INDIVIDUAL OR CLASS PROHIBITED TRANSACTION EXEMPTION, INCLUDING,
BUT NOT LIMITED TO, PROHIBITED TRANSACTION EXEMPTION ("PTE") 84-14, PTE
91-38, PTE 90-1, PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE RISE TO ANY
ADDITIONAL FIDUCIARY DUTIES ON THE PART OF THE MASTER SERVICER OR THE
TRUSTEE, WHICH WILL BE DEEMED REPRESENTED BY AN OWNER OF A BOOK-ENTRY
CERTIFICATE OR GLOBAL CERTIFICATE AND WILL BE EVIDENCED BY A REPRESENTATION
TO SUCH EFFECT BY OR ON BEHALF OF A HOLDER OF A PRIVATE CERTIFICATE OR
CLASS X CERTIFICATE. THE ABOVE RESTRICTIONS SHALL NOT APPLY TO THE CLASS X
CERTIFICATES EITHER: (I) IN THE EVENT THAT THE CLASS X CERTIFICATES ARE
UNDERWRITTEN, PLACED BY AN ENTITY WHICH HAS BEEN GRANTED AN EXEMPTION BY
THE DEPARTMENT OF LABOR SIMILAR TO PTE 90-30, OR SUCH ENTITY ACTS AS A
SELLING AGENT FOR SUCH CLASS X CERTIFICATES OR (II) IN SECONDARY MARKET
TRANSFERS THEREAFTER.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. B-4-1 SERIES 1998-10
EVIDENCING A BENEFICIAL INTEREST IN THE BELOW NAMED
TRUST CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS:
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
CUSIP NO.
<S> <C> <C> <C>
CUT-OFF DATE : NOVEMBER 1, 1998 CLASS : B-4
FIRST DISTRIBUTION DATE : DECEMBER 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE: JULY 25, 2028 OF THIS CERTIFICATE
MASTER SERVICER : LIBERTY LENDING SERVICES, ("DENOMINATION") : $1,599,900
PASS-THROUGH RATE : 6.90% APPROXIMATE ORIGINAL CLASS
PRINCIPAL AMOUNT : $1,599,900
</TABLE>
THIS CERTIFIES THAT LIBERTY SAVINGS BANK, F.S.B.
is the registered owner of the Fractional Undivided Interest
evidenced hereby in the beneficial ownership interest of Certificates of
the same Class as this Certificate in a trust (the "Trust") consisting
primarily of conventional, first lien, fixed rate, fully amortizing or
balloon payment, mortgage loans, secured by one- to four-family residences
and condominium units located primarily in California (collectively, the
"Mortgage Loans"), which will be sold to the Trust by Structured Asset
Mortgage Investments Inc. ("SAMI"). The Mortgage Loans were sold by Liberty
Savings Bank, F.S.B ("Liberty") in its individual capacity and as trustee
to SAMI. Liberty Lending Services, Inc. ("LLSI") will act as master
servicer of the Mortgage Loans (the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust
was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), by and among SAMI, as
seller, LLSI, as Master Servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined
herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement
the Holder of this Certificate by virtue of its acceptance hereof assents
and by which such Holder is bound.
Interest on this Certificate will accrue during the month prior
to the month in which a Distribution Date (as hereinafter defined) occurs
on the Current Principal Amount hereof at a per annum rate equal to the
Pass-Through Rate. The Trustee will distribute on the 25th day of each
month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day
of the calendar month preceding the month of such Distribution Date, an
amount equal to the product of the Fractional Undivided Interest evidenced
by this Certificate and the amount required to be distributed to Holders of
Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date immediately following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the
date on which the Current Principal Amount or Notional Amount, as
applicable, of this Class of Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name
and address shall appear on the Certificate Register or, if such Person so
requests by notifying the Trustee in writing as specified in the Agreement
and if such Person holds Certificates with an initial aggregate Current
Principal Amount and/or initial aggregate Notional Amount, as applicable,
of not less than $1,000,000, in immediately available funds (by wire
transfer or otherwise) to the account specified in writing by such Person
to the Trustee. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED
SIGNATORY OF THE TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE
ENTITLED TO ANY BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS
CERTIFICATE TO BE DULY EXECUTED.
<TABLE>
<CAPTION>
Dated: November 30, 1998
Countersigned: BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Not in its individual capacity but solely as Trustee
<S> <C> <C>
By__________________________ By_____________________............................
Authorized signatory of Bankers Trust Company...... AUTHORIZED OFFICER
of California, N.A., not in its individual
capacity but solely as Trustee
</TABLE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, STRUCTURED ASSET MORTGAGE INVESTMENTS INC., LIBERTY LENDING
SERVICES, INC. OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES AND IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE
LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING
FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(A)(1),(2)(3) OR (7) OF
REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH ALL THE EQUITY OWNERS
COME WITHIN SUCH PARAGRAPHS PURCHASING NOT FOR DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A LETTER
SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B) A
REPRESENTATION OR CERTIFICATION AS TO COMPLIANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION.
THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON
BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT WHICH
IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED, UNLESS THE PROPOSED TRANSFER AND/OR HOLDING OF A CERTIFICATE
AND THE SERVICING, MANAGEMENT AND/OR OPERATION OF THE TRUST AND ITS ASSETS:
(I) WILL NOT RESULT IN ANY PROHIBITED TRANSACTION WHICH IS NOT COVERED
UNDER AN INDIVIDUAL OR CLASS PROHIBITED TRANSACTION EXEMPTION, INCLUDING,
BUT NOT LIMITED TO, PROHIBITED TRANSACTION EXEMPTION ("PTE") 84-14, PTE
91-38, PTE 90-1, PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE RISE TO ANY
ADDITIONAL FIDUCIARY DUTIES ON THE PART OF THE MASTER SERVICER OR THE
TRUSTEE, WHICH WILL BE DEEMED REPRESENTED BY AN OWNER OF A BOOK-ENTRY
CERTIFICATE OR GLOBAL CERTIFICATE AND WILL BE EVIDENCED BY A REPRESENTATION
TO SUCH EFFECT BY OR ON BEHALF OF A HOLDER OF A PRIVATE CERTIFICATE OR
CLASS X CERTIFICATE. THE ABOVE RESTRICTIONS SHALL NOT APPLY TO THE CLASS X
CERTIFICATES EITHER: (I) IN THE EVENT THAT THE CLASS X CERTIFICATES ARE
UNDERWRITTEN, PLACED BY AN ENTITY WHICH HAS BEEN GRANTED AN EXEMPTION BY
THE DEPARTMENT OF LABOR SIMILAR TO PTE 90-30, OR SUCH ENTITY ACTS AS A
SELLING AGENT FOR SUCH CLASS X CERTIFICATES OR (II) IN SECONDARY MARKET
TRANSFERS THEREAFTER.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. B-5-1 SERIES 1998-10
EVIDENCING A BENEFICIAL INTEREST IN THE BELOW NAMED
TRUST CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS:
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
CUSIP NO.
<S> <C> <C> <C>
CUT-OFF DATE : NOVEMBER 1, 1998 CLASS : B-5
FIRST DISTRIBUTION : DECEMBER 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE: JULY 25, 2028 OF THIS CERTIFICATE
MASTER SERVICER : LIBERTY LENDING SERVICES, ("DENOMINATION") : $685,700
PASS-THROUGH RATE : 6.90% APPROXIMATE ORIGINAL CLASS
PRINCIPAL AMOUNT : $685,700
</TABLE>
THIS CERTIFIES THAT LIBERTY SAVINGS BANK, F.S.B.
is the registered owner of the Fractional Undivided Interest
evidenced hereby in the beneficial ownership interest of Certificates of
the same Class as this Certificate in a trust (the "Trust") consisting
primarily of conventional, first lien, fixed rate, fully amortizing or
balloon payment, mortgage loans, secured by one- to four-family residences
and condominium units located primarily in California (collectively, the
"Mortgage Loans"), which will be sold to the Trust by Structured Asset
Mortgage Investments Inc. ("SAMI"). The Mortgage Loans were sold by Liberty
Savings Bank, F.S.B ("Liberty") in its individual capacity and as trustee
to SAMI. Liberty Lending Services, Inc. ("LLSI") will act as master
servicer of the Mortgage Loans (the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust
was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), by and among SAMI, as
seller, LLSI, as Master Servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined
herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement
the Holder of this Certificate by virtue of its acceptance hereof assents
and by which such Holder is bound.
Interest on this Certificate will accrue during the month prior
to the month in which a Distribution Date (as hereinafter defined) occurs
on the Current Principal Amount hereof at a per annum rate equal to the
Pass-Through Rate. The Trustee will distribute on the 25th day of each
month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day
of the calendar month preceding the month of such Distribution Date, an
amount equal to the product of the Fractional Undivided Interest evidenced
by this Certificate and the amount required to be distributed to Holders of
Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date immediately following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the
date on which the Current Principal Amount or Notional Amount, as
applicable, of this Class of Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name
and address shall appear on the Certificate Register or, if such Person so
requests by notifying the Trustee in writing as specified in the Agreement
and if such Person holds Certificates with an initial aggregate Current
Principal Amount and/or initial aggregate Notional Amount, as applicable,
of not less than $1,000,000, in immediately available funds (by wire
transfer or otherwise) to the account specified in writing by such Person
to the Trustee. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED
SIGNATORY OF THE TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE
ENTITLED TO ANY BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS
CERTIFICATE TO BE DULY EXECUTED.
<TABLE>
<CAPTION>
Dated: November 30, 1998
Countersigned: BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Not in its individual capacity but solely as Trustee
<S> <C> <C>
By__________________________ By_____________________............................
Authorized signatory of Bankers Trust Company...... AUTHORIZED OFFICER
of California, N.A., not in its individual
capacity but solely as Trustee
</TABLE>
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF, OR AN
INTEREST IN, STRUCTURED ASSET MORTGAGE INVESTMENTS INC., LIBERTY LENDING
SERVICES, INC. OR THE TRUSTEE REFERRED TO BELOW OR ANY OF THEIR RESPECTIVE
AFFILIATES AND IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THIS CERTIFICATE IS A "REGULAR INTEREST" IN A "REAL ESTATE
MORTGAGE INVESTMENT CONDUIT" (A "REMIC"), AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").
THE CURRENT PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE
INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE,
AGREES THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE
LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A") TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A (A "QIB"), PURCHASING
FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED
INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(A)(1),(2)(3) OR (7) OF
REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH ALL THE EQUITY OWNERS
COME WITHIN SUCH PARAGRAPHS PURCHASING NOT FOR DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A LETTER
SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND (B) A
REPRESENTATION OR CERTIFICATION AS TO COMPLIANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE UNITED STATES AND ANY OTHER APPLICABLE JURISDICTION.
THIS CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON
BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT WHICH
IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED, AND/OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED, UNLESS THE PROPOSED TRANSFER AND/OR HOLDING OF A CERTIFICATE
AND THE SERVICING, MANAGEMENT AND/OR OPERATION OF THE TRUST AND ITS ASSETS:
(I) WILL NOT RESULT IN ANY PROHIBITED TRANSACTION WHICH IS NOT COVERED
UNDER AN INDIVIDUAL OR CLASS PROHIBITED TRANSACTION EXEMPTION, INCLUDING,
BUT NOT LIMITED TO, PROHIBITED TRANSACTION EXEMPTION ("PTE") 84-14, PTE
91-38, PTE 90-1, PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE RISE TO ANY
ADDITIONAL FIDUCIARY DUTIES ON THE PART OF THE MASTER SERVICER OR THE
TRUSTEE, WHICH WILL BE DEEMED REPRESENTED BY AN OWNER OF A BOOK-ENTRY
CERTIFICATE OR GLOBAL CERTIFICATE AND WILL BE EVIDENCED BY A REPRESENTATION
TO SUCH EFFECT BY OR ON BEHALF OF A HOLDER OF A PRIVATE CERTIFICATE OR
CLASS X CERTIFICATE. THE ABOVE RESTRICTIONS SHALL NOT APPLY TO THE CLASS X
CERTIFICATES EITHER: (I) IN THE EVENT THAT THE CLASS X CERTIFICATES ARE
UNDERWRITTEN, PLACED BY AN ENTITY WHICH HAS BEEN GRANTED AN EXEMPTION BY
THE DEPARTMENT OF LABOR SIMILAR TO PTE 90-30, OR SUCH ENTITY ACTS AS A
SELLING AGENT FOR SUCH CLASS X CERTIFICATES OR (II) IN SECONDARY MARKET
TRANSFERS THEREAFTER.
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGH CERTIFICATE,
NO. B-6-1 SERIES 1998-10
EVIDENCING A BENEFICIAL INTEREST IN THE BELOW NAMED
TRUST CONSISTING OF CONVENTIONAL, FIRST LIEN MORTGAGE LOANS:
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
CUSIP NO.
<S> <C> <C> <C>
CUT-OFF DATE : NOVEMBER 1, 1998 CLASS : B-6
FIRST DISTRIBUTION : DECEMBER 25, 1998 INITIAL PRINCIPAL AMOUNT
ASSUMED FINAL DISTRIBUTION DATE: JULY 25, 2028 OF THIS CERTIFICATE
MASTER SERVICER : LIBERTY LENDING SERVICES, ("DENOMINATION") : $1,142,814
PASS-THROUGH RATE : 6.90% APPROXIMATE ORIGINAL CLASS
PRINCIPAL AMOUNT : $1,142,814
</TABLE>
THIS CERTIFIES THAT LIBERTY SAVINGS BANK, F.S.B.
is the registered owner of the Fractional Undivided Interest
evidenced hereby in the beneficial ownership interest of Certificates of
the same Class as this Certificate in a trust (the "Trust") consisting
primarily of conventional, first lien, fixed rate, fully amortizing or
balloon payment, mortgage loans, secured by one- to four-family residences
and condominium units located primarily in California (collectively, the
"Mortgage Loans"), which will be sold to the Trust by Structured Asset
Mortgage Investments Inc. ("SAMI"). The Mortgage Loans were sold by Liberty
Savings Bank, F.S.B ("Liberty") in its individual capacity and as trustee
to SAMI. Liberty Lending Services, Inc. ("LLSI") will act as master
servicer of the Mortgage Loans (the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust
was created pursuant to the Pooling and Servicing Agreement dated as of the
Cut-off Date specified above (the "Agreement"), by and among SAMI, as
seller, LLSI, as Master Servicer, and Bankers Trust Company of California,
N.A., as trustee (the "Trustee"), a summary of certain of the pertinent
provisions of which is set forth hereafter. To the extent not defined
herein, capitalized terms used herein shall have the meaning ascribed to
them in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement
the Holder of this Certificate by virtue of its acceptance hereof assents
and by which such Holder is bound.
Interest on this Certificate will accrue during the month prior
to the month in which a Distribution Date (as hereinafter defined) occurs
on the Current Principal Amount hereof at a per annum rate equal to the
Pass-Through Rate. The Trustee will distribute on the 25th day of each
month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered at the close of business on the last Business Day
of the calendar month preceding the month of such Distribution Date, an
amount equal to the product of the Fractional Undivided Interest evidenced
by this Certificate and the amount required to be distributed to Holders of
Certificates of the same Class as this Certificate. The Assumed Final
Distribution Date is the Distribution Date immediately following the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the
date on which the Current Principal Amount or Notional Amount, as
applicable, of this Class of Certificates will be reduced to zero.
Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name
and address shall appear on the Certificate Register or, if such Person so
requests by notifying the Trustee in writing as specified in the Agreement
and if such Person holds Certificates with an initial aggregate Current
Principal Amount and/or initial aggregate Notional Amount, as applicable,
of not less than $1,000,000, in immediately available funds (by wire
transfer or otherwise) to the account specified in writing by such Person
to the Trustee. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of
such distribution and only upon presentation and surrender of this
Certificate at the office or agency appointed by the Trustee for that
purpose and designated in such notice.
UNLESS THIS CERTIFICATE HAS BEEN COUNTERSIGNED BY AN AUTHORIZED
SIGNATORY OF THE TRUSTEE BY MANUAL SIGNATURE, THIS CERTIFICATE SHALL NOT BE
ENTITLED TO ANY BENEFIT UNDER THE AGREEMENT, OR BE VALID FOR ANY PURPOSE.
IN WITNESS WHEREOF, THE TRUSTEE HAS CAUSED THIS
CERTIFICATE TO BE DULY EXECUTED.
<TABLE>
<CAPTION>
Dated: November 30, 1998
Countersigned: BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
Not in its individual capacity but solely as Trustee
<S> <C> <C>
By__________________________ By_____________________............................
Authorized signatory of Bankers Trust Company...... AUTHORIZED OFFICER
of California, N.A., not in its individual
capacity but solely as Trustee
</TABLE>
EXHIBIT A-2
FORM OF REVERSE OF CERTIFICATES
STRUCTURED ASSET MORTGAGE INVESTMENTS TRUST 1998-10
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-10
This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the
"Certificates"), issued in ten Classes. The Certificates, in the aggregate,
evidence the entire beneficial ownership interest in the Trust formed
pursuant to the Agreement.
The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust for payment hereunder and that
the Trustee is not liable to the Certificateholders for any amount payable
under this Certificate or the Agreement or, except as expressly provided in
the Agreement, subject to any liability under the Agreement.
This Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for the interests, rights and
limitations of rights, benefits, obligations and duties evidenced hereby,
and the rights, duties and immunities of the Trustee.
The Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of
the Master Servicer and the rights of the Certificateholders under the
Agreement from time to time by the Master Servicer and the Trustee with the
consent of the Holders of Certificates evidencing Fractional Undivided
Interests aggregating not less than 51% (or in certain cases, Holders of
Certificates of affected Classes evidencing such percentage of the
Fractional Undivided Interests thereof). Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon
all future Holders of this Certificate and of any Certificate issued upon
the transfer hereof or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of
the Holders of any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is
registrable with the Trustee upon surrender of this Certificate for
registration of transfer at the offices or agencies maintained by the
Trustee in the City of Irvine, State of California, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder hereof or such Holder's attorney duly
authorized in writing, and thereupon one or more new Certificates in
authorized denominations representing a like aggregate Fractional Undivided
Interest will be issued to the designated transferee. In the case of
classes of Certificates not registered under the Securities Act of 1933, as
amended, additional documentation will be required to be provided to the
Trustee prior to the effectiveness of a transfer.
The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the
Agreement. As provided in the Agreement and subject to certain limitations
therein set forth, this Certificate is exchangeable for one or more new
Certificates evidencing the same Class and in the same aggregate Fractional
Undivided Interest, as requested by the Holder surrendering the same.
No service charge will be made to the Certificateholders for
any such registration of transfer, but the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith. The Master Servicer, the Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered
as the owner hereof for all purposes, and neither the Master Servicers, the
Trustee nor any such agent shall be affected by notice to the contrary.
The obligations created by the Agreement and the Trust created
thereby (other than the obligations to make payments to Certificateholders
with respect to the termination of the Agreement) shall terminate upon the
earlier of (i) the later of the (A) final payment or other liquidation (or
Monthly Advance with respect thereto) of the last Mortgage Loan remaining
in the Trust and (B) disposition of all property acquired upon foreclosure
or deed in lieu of foreclosure of any Mortgage Loan and the remittance of
all funds due under the Agreement, or (ii) the optional repurchase by the
party named in the Agreement of all the Mortgage Loans and other related
assets in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the Distribution Date on which the
aggregate Scheduled Principal Balance of the Mortgage Loans is less than
10% of the aggregate Cut-off Date Scheduled Principal Balance of the
Mortgage Loans. The exercise of such right will effect the early retirement
of the Certificates. The Trust also may be terminated on any Distribution
Date upon the determination, based upon an opinion of counsel, that the
REMIC status of the REMIC Assets has been lost or that a substantial risk
exists that such status will be lost for the then current year. In no
event, however, will the Trust created by the Agreement continue beyond the
expiration of 21 years after the death of certain persons identified in the
Agreement.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
(Please print or typewrite name and address including postal zip code assignee)
the within Certificate and hereby authorizes the transfer of
registration of such interest to the assignee on the Certificate Register
of the Trust Fund.
I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee
and deliver such Certificate
to the following address:
Dated:
Signature by or on behalf of assignor
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for purposes of distribution:
Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to
for the account of
account number ______________, or, if mailed by check to
.
Applicable statements should be mailed to
.
This information is provided by
,
the assignee named above, or
,
as its agent.
EXHIBIT B
MORTGAGE LOAN SCHEDULE
(Available Upon Request)
EXHIBIT C
Representations and Warranties of the Seller
Concerning the Mortgage Loans
(a) The information set forth and to be set forth in the
Mortgage Loan Schedule was and will be true and correct in all material
respects at the date or dates respecting which such information is
furnished;
(b) [Reserved].
(c) The Mortgage Loan has not been delinquent 30 days or more
on more than one occasion during the 12 months preceding the Cut-Off Date.
As of the Closing Date, the Mortgage Loan will not be dishonored and will
not be delinquent in payment more than 30 days, except for no more than
three Mortgage Loans representing less than 0.25% of the Cut-off Date
Scheduled Principal Balance of the Mortgage Loans which will be 59 days or
less delinquent; there are no defaults under the terms of the Mortgage
Loan; and the Seller has not advanced funds, or induced, solicited or
knowingly received any advance of funds from a party other than the owner
of the Mortgaged Property subject to the Mortgage, directly or indirectly,
for the payment of any amount required by the Mortgage Loan;
(d) There are no delinquent taxes, ground rents, assessments or
other outstanding charges affecting the related Mortgaged Property;
(e) The Mortgage Note and the Mortgage are not subject to any
right of rescission, set-off, counterclaim or defense, including the
defense of usury, nor will the operation of any of the terms of the
Mortgage Note and the Mortgage, or the exercise of any right thereunder,
render the Mortgage Note or Mortgage unenforceable, in whole or in part, or
subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto;
(f) The Mortgage has not been satisfied, canceled or
subordinated, in whole or in part, or rescinded, and the Mortgaged Property
has not been released from the lien of the Mortgage, in whole or in part,
except with respect to certain releases in part that do not materially
affect the value of the Mortgaged Property, nor has any instrument been
executed that would effect any such satisfaction, release, cancellation,
subordination or rescission;
(g) Immediately prior to the transfer and assignment to the
Trust, the Mortgage Note and the Mortgage were not subject to an assignment
or pledge, and the Seller had good and marketable title to and was the sole
owner of, and had full right to transfer and sell, the Mortgage Loan to the
Trust free and clear of any encumbrance, equity, lien, pledge, charge,
claim or security interest;
(h) There is no default, breach, violation or event of
acceleration existing under the Mortgage or the related Mortgage Note and
no event, which, with the passage of time or with notice and the expiration
of any grace or cure period, would constitute a default, breach, violation
or event permitting acceleration; and neither the Seller nor any prior
mortgagee has waived any default, breach, violation or event permitting
acceleration;
(i) There are no mechanics, or similar liens or claims which
have been filed for work, labor or material affecting the related Mortgaged
Property which are or may be liens prior to or equal to the lien of the
related Mortgage;
(j) All improvements subject to the Mortgage lie wholly within
the boundaries and building restriction lines of the Mortgaged Property
(and wholly within the project with respect to a condominium unit) except
for de minimus encroachments permitted by the Fannie Mae Guide (MBS Special
Servicing Option) and which has been noted on the appraisal, and no
improvements on adjoining properties encroach upon the Mortgaged Property
except those which are insured against by a title insurance policy and all
improvements on the property comply with all applicable zoning and
subdivision laws and ordinances;
(k) The Mortgaged Property at origination of the Mortgage Loan
and currently is free of damage and waste or any such damage and waste is
adequately covered by an insurance policy, and at origination of the
Mortgage Loan and currently there is, no proceeding pending for the total
or partial condemnation thereof;
(l) The original Loan-to-Value Ratio of each Mortgage Loan
either was not more than 95.00% or the excess over 80.00% is insured as to
payments defaults by a Primary Mortgage Insurance Policy issued by a
primary mortgage insurer acceptable to Fannie Mae and Freddie Mac until the
Loan-to-Value Ratio of such Mortgage Loan is reduced to 80.00% except for
one Mortgage Loan within an original Loan-to-Value Ratio of 84.71% which
does not have a Primary Mortgage Insurance Policy;
(m) The Mortgage creates a first lien or a first priority
ownership interest in an estate in fee simple in real property securing the
related Mortgage Note, free and clear of all adverse claims, liens and
encumbrances having priority over the first lien of the Mortgage subject
only to (1) the lien of non-delinquent current real property taxes and
assessments not yet due and payable, (2) covenants, conditions and
restrictions, rights of way, easements and other matters of public record
as of the date of recording which are acceptable to mortgage lending
institutions generally and either (A) which are referred to or otherwise
considered in the appraisal made for the originator of the Mortgage Loan,
or (B) which do not adversely affect the appraised value of the Mortgaged
Property as set forth in such appraisal, and (3) other matters to which
like properties are commonly subject which do not materially interfere with
the benefits of the security intended to be provided by the Mortgage or the
use, enjoyment, value or marketability of the related Mortgaged Property;
(n) The terms of the Mortgage Note and the Mortgage have not
been impaired, waived, altered or modified in any respect, except by
written instruments which have been recorded to the extent any such
recordation is required by applicable law, and copies of which written
instruments are included in the Mortgage File. No other instrument of
waiver, alteration or modification has been executed, and no Mortgage has
been released, in whole or in part, from the terms thereof except in
connection with an assumption agreement, which assumption agreement is part
of the Mortgage File and the terms of which are reflected in the Mortgage
Loan Schedule;
(o) All buildings upon the Mortgaged Property are insured by a
generally acceptable insurer pursuant to standard hazard policies
conforming to the requirements of the Pooling and Servicing Agreement. All
such standard hazard policies are in effect and on the date of origination
contained a standard mortgagee clause naming the originator and its
successors in interest as loss payee and such clause is still in effect and
all premiums due thereon have been paid. If the Mortgaged Property is
located in an area identified by the Federal Emergency Management Agency as
having special flood hazards under the Flood Disaster Protection Act of
1973, as amended, such Mortgaged Property is covered by flood insurance in
an amount not less than that set forth in the Pooling and Servicing
Agreement. The Mortgage obligates the Mortgagor thereunder to maintain all
such insurance at the Mortgagor's cost and expense, and on the Mortgagor's
failure to do so, authorizes the holder of the Mortgage to maintain such
insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor;
(p) Any and all requirements of any federal, state or local law
including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit opportunity
or disclosure laws applicable to the Mortgage Loan have been complied with
in all material respects;
(q) The Mortgage is a valid, subsisting and enforceable
(subject to the exceptions set forth in clause (m) above) first lien on the
Mortgaged Property, including all buildings on the Mortgaged Property and
all installations and mechanical, electrical, plumbing, heating and air
conditioning systems affixed to such buildings, and all additions,
alterations and replacements made at any time with respect to the foregoing
securing the Mortgage Note's original principal balance. The Mortgage and
the Mortgage Note do not contain any evidence of any other security
interest or other interest or right thereto. Such lien is free and clear of
all adverse claims, liens and encumbrances having priority over the first
lien of the Mortgage subject only to permitted encumbrances set forth in
clause (m) (1), (2) and (3) above. Any security agreement, chattel mortgage
or equivalent document related to and delivered in connection with the
Mortgage Loan establishes and creates a valid, subsisting and enforceable
first lien and first priority security interest on the property described
therein;
(r) The Mortgage Note and the related Mortgage are original and
genuine and each is the legal, valid and binding obligation of the maker
thereof, enforceable in all respects in accordance with its terms subject
to bankruptcy, insolvency and other laws of general application affecting
the rights of creditors, and the Seller has taken all action necessary to
transfer such rights of enforceability to the Trust. All parties to the
Mortgage Note and the Mortgage had the legal capacity to enter into the
Mortgage Loan and to execute and deliver the Mortgage Note and the
Mortgage. The Mortgage Note and the Mortgage have been duly and properly
executed by such parties. The proceeds of the Mortgage Loan have been fully
disbursed and there is no requirement for future advances thereunder, and
any and all requirements as to completion of any on-site or off-site
improvements and as to disbursements of any escrow funds therefor have been
complied with;
(s) The Mortgage Loan is covered by an ALTA lender's title
insurance policy or other generally acceptable form of policy of insurance,
issued by a title insurer qualified to do business in the jurisdiction
where the Mortgaged Property is located, insuring (subject to the
exceptions contained in (m) (1), (2) and (3) above) the originator, its
respective successors and assigns, as to the first priority lien of the
Mortgage in the original principal amount of the Mortgage Loan. The
originator, its respective successors and assigns are the sole insured of
such lender's title insurance policy, such lender's title insurance policy
is in full force and effect and will be in full force and effect upon the
consummation of the transactions contemplated by the Pooling and Servicing
Agreement and this Agreement and will inure to the benefit of the Trust and
its assigns without any further act. No claims have been made under such
lender's title insurance policy, and no prior holder of the related
Mortgage has done, by act or omission, anything which would impair the
coverage of such lender's title insurance policy;
(t) Each Mortgage Loan was originated by or for Headlands
Mortgage Company ("Headlands"). Each Mortgage Loan complies in all material
respects with all the terms, conditions and requirements of Headlands'
underwriting standards in effect at the time of origination of such
Mortgage Loan; provided, that certain Mortgage Loans may have
characteristics outside of such underwriting guidelines where compensating
factors are present acceptable to the mortgage banking industry. The
Mortgage Note and Mortgage are on uniform Fannie Mae/Freddie Mac
instruments or are on forms acceptable to Fannie Mae or Freddie Mac. The
Mortgage Loan bears interest at a fixed rate as set forth in the Mortgage
Loan Schedule, and Monthly Payments under the Mortgage Note are due and
payable on the first day of each month. The Mortgage Loan contains the
usual and enforceable provisions of the originator at the time of
origination for the acceleration of the payment of the unpaid principal
amount if the related Mortgaged Property is sold without the prior consent
of the mortgagee thereunder;
(u) The related Mortgage contains enforceable provisions such
as to render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security
provided thereby, including, (1) in the case of a Mortgage designated as a
deed of trust, by trustee's sale, and (2) otherwise by judicial
foreclosure. There is no homestead or other exemption available to the
Mortgagor which would interfere with the right to sell the Mortgaged
Property at a trustee's sale or the right to foreclose the Mortgage;
(v) If the Mortgage constitutes a deed of trust, a trustee,
duly qualified if required under applicable law to act as such, has been
properly designated and currently so serves and is named in the Mortgage,
and no fees or expenses are or will become payable by the Trust to the
trustee under the deed of trust, except in connection with a trustee's sale
or attempted sale after default by the Mortgagor;
(w) The Mortgage File contains an appraisal of the related
Mortgaged Property made and signed prior to the final approval of the
mortgage loan application by a qualified appraiser, approved by the
originator thereof. The appraisal is in a form generally acceptable to
Fannie Mae or Freddie Mac;
(x) The related Mortgage Note is not and has not been secured
by any collateral except the lien of the corresponding Mortgage and the
security interest of any applicable security agreement or chattel mortgage
referred to above and such collateral does not serve as security for any
other obligation;
(y) The Mortgagor has received all disclosure materials
required by applicable law with respect to the making of such mortgage
loans;
(z) [Reserved];
(aa) Each Mortgage Loan has an original term to maturity of not
more than 30 years, with interest payable in arrears on the first day of
each month. No Mortgage Loan contains terms or provisions which would
result in negative amortization;
(bb) Each of the Mortgaged Properties consists of a single
parcel of real property with single-family residence erected thereon, or a
two- to four-family dwelling, or an individual condominium unit in a
condominium project. Any condominium unit either conforms with applicable
Fannie Mae or Freddie Mac requirements regarding such dwellings or is
covered by a waiver confirming that such condominium unit is acceptable to
Fannie Mae or Freddie Mac or is otherwise "warrantable" with respect
thereto;
(cc) The Mortgage Loans were originated with full, or
alternative or reduced documentation;
(dd) The Assignment of Mortgage is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located; and
(ee) Each Mortgage Loan was originated by, (i) a savings and
loan association, savings bank, commercial bank, credit union, insurance
company or similar institution which is supervised and examined by a
federal or State authority, (ii) a mortgagee approved by the Secretary of
Housing and Urban Development pursuant to Section 203 and 211 of the
National Housing Act or (iii) a mortgage banker or broker licensed or
authorized to do business in the jurisdiction in which the related
Mortgaged Property is located, applying the same standards and procedures
used by the applicable seller in originating Mortgage Loans directly.
EXHIBIT D
REQUEST FOR RELEASE
(for Trustee)
Loan Information
Name of Mortgagor: _____________________________
Loan No.: ____________________________
Trustee
Name: Bankers Trust Company of California N.A.
Address: 3 Park Plaza, 16th Floor
Irvine, CA 92614
Attention: Corporate Trust Department,
ref: Bear Stearns/Liberty (SAMI) 1998-10
Trustee Mortgage
File No.: _____________________________
Master Servicer
Name: Liberty Lending Services, Inc.
Address: 2251 Rombach Avenue
Wilmington, OH 45177 ATTN:
______________
Certificates: Mortgage Pass-Through Certificates,
Series 1998-10
The undersigned hereby acknowledges that it has received
from Bankers Trust Company of California, N.A., as Trustee for the holders
of Structured Asset Mortgage Investments Trust 1998-10, Mortgage
Pass-Through Certificates, Series 1998-10, the documents referred to below
(the "Documents"). All capitalized terms not otherwise defined in this
Request for Release shall have the meanings given them in the Pooling and
Servicing Agreement dated as of November 1, 1998 (the "Pooling and
Servicing Agreement") among the Trustee, Liberty Lending Services, Inc. and
Structured Asset Mortgage Investments Inc.
( ) Mortgage Note dated ________, 19__, in the original
principal sum of $____________, made by _____________,
payable to, or endorsed to the order of, the Trustee.
( ) Mortgage recorded on _____________ as instrument
no. _____________ in the County Recorder'sCounty off the
_______________, State of __________book/reel/docket
_______________ of official repage/image ________.
( ) Deed of Trust recorded on _______________ as instrument
no. _________ in the County Recorder's Office of the County
of _______________, State of _______________ in
book/reel/docket __________ of official records at
page/image ____________________.
( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
______________ as instrument no. ______ in the County
Recorder's Office of the County of _______________,
State of _______________ in book/reel/docket __________ of
official records at page/image _______________.
( ) Other documents, including any amendments, assignments
or other assumptions of the Mortgage Note or Mortgage:
( )______________________________
( )______________________________
( )______________________________
The undersigned hereby acknowledges and agrees as follows:
(1) The Master Servicer shall, and if the Master Servicer
releases the Documents to a Sub-Servicer or related Insurer the
Master Servicer shall cause such Sub-Servicer or related Insurer
to, hold and retain possession of the Documents in trust for the
benefit of the Trustee, solely for the purposes provided in the
Agreement.
(2) The Master Servicer shall not cause or permit the
Documents to become subject to, or encumbered by, any claim,
liens, security interest, charges, writs of attachment or other
impositions nor shall the Master Servicer assert or seek to
assert any claims or rights of setoff to or against the
Documents or any proceeds thereof.
(3) The Master Servicer shall return the Documents to the
Trustee when the need therefor no longer exists, unless the
Mortgage Loan relating to the Documents has been liquidated and
the proceeds thereof have been remitted to the Certificate
Account or the Documents are being used to pursue foreclosure or
other legal proceedings and except as expressly provided in the
Agreement.
(4) Prior to the return of the Documents to the Trustee,
the Master Servicer shall, and if the Master Servicer releases
such Documents to a Sub- Servicer or related Insurer, the Master
Servicer shall cause such Sub-Servicer or related Insurer to,
retain the Documents in its control unless the Documents have
been delivered to an attorney, or to a public trustee or other
public official as required by law, to initiate or pursue legal
action or other proceedings for the foreclosure of the Mortgaged
Property either judicially or nonjudicially, and the Master
Servicer has delivered to the Trustee a certificate of a
Servicing Officer certifying as to the name and address of the
Person to which the Documents were delivered and the purpose or
purposes of such delivery.
(5) The Documents and any proceeds thereof, including any
proceeds of proceeds, coming into the possession or control of
the Master Servicer shall at all times be earmarked for the
account of the Trustee, and the Master Servicer shall keep the
Documents and any proceeds separate and distinct from all other
property in the possession, custody or control of the Master
Servicer.
Date: ______________________, 19__
LIBERTY LENDING SERVICES, INC.
By: _______________________________________
Name:
Title:
EXHIBIT E
Affidavit pursuant to
Section 860E(e)(4) of the
Internal Revenue Code of
1986, as amended, and for
other purposes
STATE OF )
) ss:
COUNTY OF )
[NAME OF OFFICER], being first duly sworn, deposes and
says:
1. That he is [Title of Officer] of [Name of Investor]
(the "Investor"), a [savings institution] [corporation] duly organized and
existing under the laws of [the State of__________] [the United States], on
behalf of which he makes this affidavit.
2. That (i) the Investor is not a "disqualified
organization" as defined in Section 860E(e)(5) of the Internal Revenue Code
of 1986, as amended, and will not be a disqualified organization as of
[Closing Date] [date of purchase]; (ii) it is not acquiring the Structured
Asset Mortgage Investments Trust 1998-10, Mortgage Pass-Through
Certificates, Series 1998-10, Class R Certificate (the "Residual
Certificate") for the account of a disqualified organization; (iii) it
consents to any amendment of the Pooling and Servicing Agreement that shall
be deemed necessary by Structured Asset Mortgage Investments Inc. (upon
advice of counsel) to constitute a reasonable arrangement to ensure that
the Residual Certificate will not be owned directly or indirectly by a
disqualified organization; and (iv) it will not transfer such Residual
Certificate unless (a) it has received from the transferee an affidavit in
substantially the same form as this affidavit containing these same four
representations and (b) as of the time of the transfer, it does not have
actual knowledge that such affidavit is false.
3. That the Investor is one of the following: (i) a
citizen or resident of the United States, (ii) a corporation, partnership
or other entity taxable as such created or organized in or under the laws
of the United States or any political subdivision thereof or (iii) an
estate that is subject to U.S. federal income tax regardless of the source
of its income, or (iv) a trust other than a "foreign trust," as defined in
Section 7701(a)(31) of the Code.
4. That the Investor's taxpayer identification number is
___________.
5. That no purpose of the acquisition of the Residual
Certificate is to avoid or impede the assessment or collection of tax.
6. That the Investor understands that, as the holder of
the Residual Certificate, the Investor may incur tax liabilities in excess
of any cash flows generated by such Residual Certificate.
7. That the Investor intends to pay taxes associated with
holding the Residual Certificate as they become due.
IN WITNESS WHEREOF, the Investor has caused this
instrument to be executed on its behalf, pursuant to authority of its Board
of Directors, by its [Title of Officer] this day of , 20__.
[NAME OF INVESTOR]
By:
[Name of Officer]
[Title of Officer]
[Address of Investor for
receipt of distributions]
Address of Investor for
receipt of tax information:
__________________________
__________________________
Personally appeared before me the above-named [Name of
Officer], known or proved to me to be the same person who executed the
foregoing instrument and to be the [Title of Officer] of the Investor, and
acknowledged to me that he executed the same as his free act and deed and
the free act and deed of the Investor.
Subscribed and sworn before me this ___ day of _______, 20__.
_____________________________
NOTARY PUBLIC
COUNTY OF ___________________
STATE OF ____________________
My commission expires the ___ day of _____________, 19__.
EXHIBIT F-1
FORM OF INVESTMENT LETTER
[Date]
[SELLER]
Bankers Trust Company of
California, N.A.
3 Park Plaza, 16th Floor
Irvine, California 92614
Attention: Attention: Corporate Trust Department,
ref: Bear Stearns/Liberty (SAMI) 1998-10
Structured Asset Mortgage Investments Inc.
245 Park Avenue
New York, New York 10167
Re: Structured Asset Mortgage Investments Trust 1998-10,
Mortgage Pass- Through Certificates, Series 1998-10 (the
"Certificates"), including the Class B-4, Class B-5,
Class B-6 (the "Privately Offered Certificates
Dear Ladies and Gentlemen:
In connection with our purchase of Privately Offered
Certificates, we confirm that:
(i) we understand that the Privately Offered
Certificates are not being registered under
the Securities Act of 1933, as amended (the
"Act") or any applicable state securities or
"Blue Sky" laws, and are being sold to us in
a transaction that is exempt from the
registration requirements of such laws;
(ii) any information we desired concerning the
Certificates, including the Privately Offered
Certificates, the trust in which the
Certificates represent the entire beneficial
ownership interest (the "Trust") or any other
matter we deemed relevant to our decision to
purchase Privately Offered Certificates has
been made available to us;
(iii) we are able to bear the economic risk of
investment in Privately Offered Certificates;
we are an institutional "accredited investor"
as defined in Section 501(a) of Regulation D
promulgated under the Act and a sophisticated
institutional investor;
(iv) we are acquiring Privately Offered
Certificates for our own account, not as
nominee for any other person, and not with a
present view to any distribution or other
disposition of the Privately Offered
Certificates;
(v) we agree the Privately Offered Certificates
must be held indefinitely by us (and may not
be sold, pledged, hypothecated or in any way
disposed of) unless subsequently registered
under the Act and any applicable state
securities or "Blue Sky" laws or an exemption
from the registration requirements of the Act
and any applicable state securities or "Blue
Sky" laws is available;
(vi) we agree that in the event that at some
future time we wish to dispose of or exchange
any of the Privately Offered Certificates
(such disposition or exchange not being
currently foreseen or contemplated), we will
not transfer or exchange any of the Privately
Offered Certificates unless:
(A) (1) the sale is to an Eligible
Purchaser (as defined below), (2) if required
by the Pooling and Servicing Agreement (as
defined below) a letter to substantially the
same effect as either this letter or, if the
Eligible Purchaser is a Qualified
Institutional Buyer as defined under Rule
144A of the Act, the Rule 144A and Related
Matters Certificate in the form attached to
the Pooling and Servicing Agreement (as
defined below) (or such other documentation
as may be acceptable to the Trustee) is
executed promptly by the purchaser and
delivered to the addressees hereof and (3)
all offers or solicitations in connection
with the sale, whether directly or through
any agent acting on our behalf, are limited
only to Eligible Purchasers and are not made
by means of any form of general solicitation
or general advertising whatsoever; and
(B) if the Privately Offered Certificate
is not registered under the Act (as to which
we acknowledge you have no obligation), the
Privately Offered Certificate is sold in a
transaction that does not require
registration under the Act and any applicable
state securities or "blue sky" laws and, if
Bankers Trust Company of California, N.A.(the
"Trustee") so requests, a satisfactory
Opinion of Counsel is furnished to such
effect, which Opinion of Counsel shall be an
expense of the transferor or the transferee;
(vii) we agree to be bound by all of the terms
(including those relating to restrictions on
transfer) of the Pooling and Servicing
Agreement (as defined below), pursuant to
which the Trust was formed; we have reviewed
carefully and understand the terms of the
Pooling and Servicing Agreement;
(viii) we either: (i) are not acquiring the
Privately Offered Certificate directly or
indirectly by, or on behalf of, an employee
benefit plan or other retirement arrangement
which is subject to Title I of the Employee
Retirement Income Security Act of 1974, as
amended ("ERISA"), and/or section 4975 of the
Internal Revenue Code of 1986, as amended
(the "Code"), or (ii) hereby certify that the
proposed transfer and/or holding of a
Privately Offered Certificate and the
servicing, management and/or operation of the
Trust: (i) will not result in a prohibited
transaction under Section 406 of ERISA or
Section 4975 of the Code which is not covered
under an individual or class prohibited
transaction exemption including but not
limited to Department of Labor Prohibited
Transaction Exemption ("PTE") 84-14 (Class
Exemption for Plan Asset Transactions
Determined by Independent Qualified
Professional Asset Managers), PTE 91-38
(Class Exemption for Certain Transactions
Involving Bank Collective Investment Funds),
PTE 90-1 (Class Exemption for Certain
Transactions Involving Insurance Company
Pooled Separate Accounts), PTE 95-60 (Class
Exemption for Certain Transactions Involving
Insurance Company General Accounts) and PTCE
96-23 (Class Exemption for Plan Asset
Transactions Determined by In-House Asset
Managers and (ii) will not give rise to any
additional fiduciary duties under ERISA on
the part of the Master Servicer or the
Trustee.
(ix) We understand that each of the Class B-4, B-5
and B-6 Certificates bears, and will continue
to bear, legends to substantially the
following effect: "THIS CERTIFICATE HAS NOT
BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER ANY STATE
SECURITIES LAWS. THE HOLDER HEREOF, BY
PURCHASING THIS CERTIFICATE, AGREES THAT THIS
CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE
WITH THE SECURITIES ACT AND OTHER APPLICABLE
LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT ("RULE 144A") TO A PERSON
THAT THE HOLDER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A (A "QIB"), PURCHASING
FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR
THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS
INFORMED, IN EACH CASE, THAT THE REOFFER,
RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (2) PURSUANT
TO AN EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN
"INSTITUTIONAL ACCREDITED INVESTOR" WITHIN
THE MEANING THEREOF IN RULE 501(a)(1), (2),
(3) or (7) OF REGULATION D UNDER THE ACT OR
ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS
COME WITHIN SUCH PARAGRAPHS PURCHASING NOT
FOR DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY
THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE
FORM PROVIDED IN THE AGREEMENT AND (B) THE
RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE
ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER,
RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT AND OTHER APPLICABLE
LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED
STATES AND ANY OTHER APPLICABLE
JURISDICTION." "THIS CERTIFICATE MAY NOT BE
ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON
BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT WHICH IS SUBJECT TO
TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, AND/OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED, UNLESS THE PROPOSED
TRANSFER AND/OR HOLDING OF A CERTIFICATE AND
THE SERVICING, MANAGEMENT AND/OR OPERATION OF
THE TRUST AND ITS ASSETS: (I) WILL NOT RESULT
IN ANY PROHIBITED TRANSACTION WHICH IS NOT
COVERED UNDER AN INDIVIDUAL OR CLASS
PROHIBITED TRANSACTION EXEMPTION, INCLUDING,
BUT NOT LIMITED TO, PROHIBITED TRANSACTION
EXEMPTION ("PTE") 84-14, PTE 91-38, PTE 90-1,
PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE
RISE TO ANY ADDITIONAL FIDUCIARY DUTIES ON
THE PART OF THE MASTER SERVICER OR THE
TRUSTEE, WHICH WILL BE DEEMED REPRESENTED BY
AN OWNER OF A BOOK- ENTRY CERTIFICATE OR A
GLOBAL CERTIFICATE AND WILL BE EVIDENCED BY A
REPRESENTATION TO SUCH EFFECT BY OR ON BEHALF
OF A HOLDER OF A PRIVATE CERTIFICATE OR CLASS
X CERTIFICATE. THE ABOVE RESTRICTIONS SHALL
NOT APPLY TO THE CLASS X CERTIFICATES EITHER:
(I) IN THE EVENT THAT THE CLASS X
CERTIFICATES ARE UNDERWRITTEN, PLACED BY AN
ENTITY WHICH HAS BEEN GRANTED AN EXEMPTION BY
THE DEPARTMENT OF LABOR SIMILAR TO PTE 90-30,
OR SUCH ENTITY ACTS AS A SELLING AGENT FOR
SUCH CLASS X CERTIFICATES OR (II) IN
SECONDARY MARKET TRANSFERS THEREAFTER."
"Eligible Purchaser" means a corporation, partnership or other
entity which we have reasonable grounds to believe and do believe (i) can
make representations with respect to itself to substantially the same
effect as the representations set forth herein, and (ii) is either a
Qualified Institutional Buyer as defined under Rule 144A of the Act or an
institutional "Accredited Investor" as defined under Rule 501 of the Act.
Terms not otherwise defined herein shall have the meanings
assigned to them in the Pooling and Servicing Agreement dated as of
November 1, 1998 among Structured Asset Mortgage Investments Inc., Liberty
Lending Services, Inc. and Bankers Trust Company of California, N.A., as
Trustee (the "Pooling and Servicing Agreement").
If the Purchaser proposes that its Certificates be registered
in the name of a nominee on its behalf, the Purchaser has identified such
nominee below, and has caused such nominee to complete the Nominee
Acknowledgment at the end of this letter.
Name of Nominee (if any):___________________
IN WITNESS WHEREOF, this document has been executed by the
undersigned who is duly authorized to do so on behalf of the undersigned
Eligible Purchaser on the ____ day of ________, 19__.
Very truly yours,
[PURCHASER]
By:__________________________
(Authorized Officer)
[By:__________________________
Attorney-in-fact]
---------------------------------------------
Nominee Acknowledgment
The undersigned hereby acknowledges and agrees that as to the
Certificates being registered in its name, the sole beneficial owner
thereof is and shall be the Purchaser identified above, for whom the
undersigned is acting as nominee.
[NAME OF NOMINEE]
By:__________________________
(Authorized Officer)
[By:__________________________
Attorney-in-fact]
EXHIBIT F-2
FORM OF RULE 144A AND RELATED MATTERS CERTIFICATE
[Date]
[SELLER]
Bankers Trust Company of
California, N.A.
3 Park Plaza, 16th Floor
Irvine, CA 92614
Attention: Attention: Corporate Trust Department,
ref: Bear Stearns/Liberty (SAMI) 1998-10
Structured Asset Mortgage Investments Inc.
245 Park Avenue
New York, New York 10167
Re: Structured Asset Mortgage Investments Trust 1998-10
Mortgage Pass- Through Certificates, Series 1998-10 (the
"Certificates"), including the Class B-4, Class B-5,
Class B-6 Cert(the "Privately Offered Certificates")
Dear Ladies and Gentlemen:
In connection with our purchase of Privately Offered
Certificates, the undersigned certifies to each of the parties to whom this
letter is addressed that it is a qualified institutional buyer (as defined
in Rule 144A under the Securities Act of 1933, as amended (the "Act")) as
follows:
1. It owned and/or invested on a discretionary basis
eligible securities (excluding affiliate's securities,
bank deposit notes and CD's, loan participations,
repurchase agreements, securities owned but subject to a
repurchase agreement and swaps), as described below:
Date: _____________, 19__ (must be on or after the close of
its most recent fiscal year)
Amount: $_________________; and
2. The dollar amount set forth above is:
a. greater than $100 million and the undersigned is one of the
following entities:
(1) o an insurance company as defined in Section
2(13) of the Act; or1
(2) o an investment company registered under the
Investment Company Act or any business
development company as defined in Section
2(a)(48) of the Investment Company Act of
1940; or
(3) o a Small Business Investment Company
licensed by the U.S. Small Business
Administration under Section 301(c) or
(d) of the Small Business Investment
Act of 1958; or
(4) o a plan (i) established and maintained
by a state, its political subdivisions,
or any agency or instrumentality of a
state or its political subdivisions,
the laws of which permit the purchase
of securities of this type, for the
benefit of its employees and (ii) the
governing investment guidelines of
which permit the purchase of securities
of this type; or
- ---------------------
1 A purchase by an insurance company for one or more of its separate
accounts, as defined by Section 2(a)(37) of the Investment Company
Act of 1940, which are neither registered nor required to be
registered thereunder, shall be deemed to be a purchase for the
account of such insurance company.
(5) o a business development company as
defined in Section 202(a)(22) of the
Investment Advisers Act of 1940; or
(6) o a corporation (other than a U.S. bank,
savings and loan association or
equivalent foreign institution),
partnership, Massachusetts or similar
business trust, or an organization
described in Section 501(c)(3) of the
Internal Revenue Code; or
(7) o a U.S. bank, savings and loan
association or equivalent foreign
institution, which has an audited net
worth of at least $25 million as
demonstrated in its latest annual
financial statements; or
(8) o an investment adviser registered under the
Investment Advisers Act; or
b. o greater than $10 million, and the undersigned
is a broker- dealer registered with the SEC;
or
c. o less than $10 million, and the undersigned is
a broker- dealer registered with the SEC and
will only purchase Rule 144A securities in
transactions in which it acts as a riskless
principal (as defined in Rule 144A); or
d. o less than $100 million, and the undersigned
is an investment company registered under the
Investment Company Act of 1940, which,
together with one or more registered
investment companies having the same or an
affiliated investment adviser, owns at least
$100 million of eligible securities; or
e. o less than $100 million, and the undersigned
is an entity, all the equity owners of which
are qualified institutional buyers.
The undersigned further certifies that it is purchasing a
Privately Offered Certificate for its own account or for the account of
others that independently qualify as "Qualified Institutional Buyers" as
defined in Rule 144A. It is aware that the sale of the Privately Offered
Certificates is being made in reliance on its continued compliance with
Rule 144A. It is aware that the transferor may rely on the exemption from
the provisions of Section 5 of the Act provided by Rule 144A. The
undersigned understands that the Privately Offered Certificates may be
resold, pledged or transferred only to (i) a person reasonably believed to
be a Qualified Institutional Buyer that purchases for its own account or
for the account of a Qualified Institutional Buyer to whom notice is given
that the resale, pledge or transfer is being made in reliance in Rule 144A,
or (ii) an institutional "accredited investor," as such term is defined
under Rule 501 of the Act in a transaction that otherwise does not
constitute a public offering.
The undersigned agrees that if at some future time it
wishes to dispose of or exchange any of the Privately Offered Certificates,
it will not transfer or exchange any of the Privately Offered Certificates
to a Qualified Institutional Buyer without first obtaining a Rule 144A and
Related Matters Certificate in the form hereof from the transferee and
delivering such certificate to the addressees hereof. Prior to making any
transfer of Privately Offered Certificates, if the proposed Transferee is
an institutional "accredited investor," the transferor shall obtain from
the transferee and deliver to the addressees hereof an Investment Letter in
the form attached to the Pooling and Servicing Agreement dated as of
November 1, 1998 among Structured Asset Mortgage Investments Inc., as
Seller, Liberty Lending Services, Inc. as Master Servicer, and Bankers
Trust Company of California, N.A., as Trustee, pursuant to which the
Certificates were issued.
The undersigned certifies that it either: (i) is not
acquiring the Privately Offered Certificate directly or indirectly by, or
on behalf of, an employee benefit plan or other retirement arrangement
which is subject to Title I of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and/or section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code"), or (ii) the proposed transfer and/or
holding of a Privately Offered Certificate and the servicing, management
and/or operation of the Trust and its assets: (i) will not result in a
prohibited transaction under Section 406 of ERISA or Section 4975 of the
Code which is not covered under an individual or class prohibited
transaction exemption including but not limited to Department of Labor
Prohibited Transaction Exemption ("PTE") 84-14 (Class Exemption for Plan
Asset Transactions Determined by Independent Qualified Professional Asset
Managers), PTE 91-38 (Class Exemption for Certain Transactions Involving
Bank Collective Investment Funds), PTE 90-1 (Class Exemption for Certain
Transactions Involving Insurance Company Pooled Separate Accounts), PTE
95-60 (Class Exemption for Certain Transactions Involving Insurance Company
General Accounts) and PTCE 96-23 (Class Exemption for Plan Asset
Transactions Determined by In-House Asset Managers and (ii) will not give
rise to any additional fiduciary duties under ERISA on the part of the
Master Servicer or the Trustee.
If the Purchaser proposes that its Certificates be
registered in the name of a nominee on its behalf, the Purchaser has
identified such nominee below, and has caused such nominee to complete the
Nominee Acknowledgment at the end of this letter.
Name of Nominee (if any):___________________
IN WITNESS WHEREOF, this document has been executed by the
undersigned who is duly authorized to do so on behalf of the undersigned
Eligible Purchaser on the ____ day of ________, 19__.
Very truly yours,
[PURCHASER]
By:__________________________
(Authorized Officer)
[By:__________________________
Attorney-in-fact]
----------------------------------------
Nominee Acknowledgment
The undersigned hereby acknowledges and agrees that as to the
Certificates being registered in its name, the sole beneficial owner
thereof is and shall be the Purchaser identified above, for whom the
undersigned is acting as nominee.
[NAME OF NOMINEE]
By:__________________________
(Authorized Officer)
[By:__________________________
Attorney-in-fact]
EXHIBIT G
FORM OF INITIAL CERTIFICATION
Structured Asset Mortgage Investments Inc.
245 Park Avenue
New York, New York 10167
Liberty Lending Services, Inc.
2251 Rombach Avenue
Wilmington, OH 45177
Re: Pooling and Servicing Agreement dated as of
November 1, 1998, among Structured Asset
Mortgage Investments Inc., as seller, Liberty
Lending Services, Inc., as master servicer,
and Bankers Trust Company of California,
N.A., as trustee, regarding Structured Asset
Mortgage Investments Trust 1998-10, Mortgage
Pass-Through Certificates, Series 1998-10
-------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies
that, except as otherwise noted on the attached exception report, that as
to each Mortgage Loan listed on the Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or listed on the attachment hereto) it has
reviewed the Mortgage File and the Mortgage Loan Schedule and has
determined that: (i) all documents required to be included in the Mortgage
File pursuant to the Pooling and Servicing Agreement are in its possession;
(ii) such documents have been reviewed by it and appear regular on their
face, have, where applicable, been executed and relate to such Mortgage
Loan; and (iii) based on examination by it, and only as to such documents,
the information set forth in the Mortgage Loan Schedule as to Mortgagor
Name, original principal balance and loan number respecting such Mortgage
Loan is correct and accurately reflects the information in the Mortgage
Loan File.
The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The
Trustee makes no representation that any documents specified in subclauses
(iv), (v) and (vii) of Section 2.01(b) should be included in any Mortgage
File. The Trustee makes no representations as to: (i) the validity,
legality, enforceability or genuineness of any of the documents contained
in each Mortgage File of any of the Mortgage Loans identified on the
Mortgage Loan Schedule or (ii) the collectibility, insurability,
effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., as
Trustee
By:_______________________
Name:
Title:
EXHIBIT H
FORM OF FINAL CERTIFICATION
Structured Asset Mortgage Investments Inc.
245 Park Avenue
New York, New York 10167
Liberty Lending Services, Inc.
2251 Rombach Avenue
Wilmington, OH 45177
Re: Pooling and Servicing Agreement dated as of
November 1, 1998, among Structured Asset
Mortgage Investments Inc., as seller, Liberty
Lending Services, Inc., as master servicer,
and Bankers Trust Company of California,
N.A., as trustee, regarding Structured Asset
Mortgage Investment Trust 1998-10, Mortgage
Pass-Through Certificates, Series 1998-10
-------------------------------------------------
Ladies and Gentlemen:
In accordance with Section 2.02 of the above-captioned Pooling
and Servicing Agreement, the undersigned, as Trustee, hereby certifies
that, except as otherwise noted on the attached exception report, that as
to each Mortgage Loan listed on the Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or listed on the attachment hereto) it has
received the documents set forth in Section 2.01 and has determined that
(i) all documents required to be included in the Mortgage File pursuant to
the Pooling and Servicing Agreement are in its possession; (ii) such
documents have been reviewed by it and appear regular on their face, have,
where applicable, been executed and relate to such Mortgage Loan; and (iii)
based on examination by it, and only as to such documents, the information
set forth in the Mortgage Loan Schedule as to Mortgagor name, original
principal balance and loan number respecting such Mortgage Loan is correct
and accurately reflects the information in the Mortgage Loan File.
The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Pooling and Servicing Agreement. The
Trustee makes no representation that any documents specified in subclauses
(iv), (v) and (vii) of Section 2.01(b) should be included in any Mortgage
File. The Trustee makes no representations as to: (i) the validity,
legality, enforceability or genuineness of any of the documents contained
in each Mortgage File of any of the Mortgage Loans identified on the
Mortgage Loan Schedule or (ii) the collectability, insurability,
effectiveness or suitability of any such Mortgage Loan.
Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Pooling and
Servicing Agreement.
BANKERS TRUST COMPANY OF
CALIFORNIA, N.A. as Trustee
By:_______________________
Name:
Title:
EXHIBIT I
FORM OF ERISA LETTER FOR CLASS X CERTIFICATES
[Date]
[SELLER]
Bankers Trust Company of
California, N.A.
3 Park Plaza, 16th Floor
Irvine, California 92614
Attention: Attention: Corporate Trust Department,
ref: Bear Stearns/Liberty (SAMI) 1998-10
Structured Asset Mortgage Investments Inc.
245 Park Avenue
New York, New York 10167
Re: Structured Asset Mortgage Investments Trust 1998-10,
Mortgage Pass-Through Certificates, Series 1998-10 (the
"Certificates"), including the Class X Certificates(the
"Class X Certificates")
-------------------------------------------------------
Dear Ladies and Gentlemen:
In connection with our purchase of Class X Certificates, we
confirm that:
(i) we either:
(A) (i) are not acquiring the Class X
Certificates directly or indirectly by, or on
behalf of, an employee benefit plan or other
retirement arrangement which is subject to Title I
of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and/or section 4975 of
the Internal Revenue Code of 1986, as amended (the
"Code"), or (ii) hereby certify that the proposed
transfer and/or holding of a Class X Certificate
and the servicing, management and/or operation of
the Trust: (i) will not result in a prohibited
transaction under Section 406 of ERISA or Section
4975 of the Code which is not covered under an
individual or class prohibited transaction
exemption including but not limited to Department
of Labor Prohibited Transaction Exemption ("PTE")
84-14 (Class Exemption for Plan Asset Transactions
Determined by Independent Qualified Professional
Asset Managers), PTE 91-38 (Class Exemption for
Certain Transactions Involving Bank Collective
Investment Funds), PTE 90-1 (Class Exemption for
Certain Transactions Involving Insurance Company
Pooled Separate Accounts), PTE 95-60 (Class
Exemption for Certain Transactions Involving
Insurance Company General Accounts) and PTCE 96-23
(Class Exemption for Plan Asset Transactions
Determined by In-House Asset Managers and (ii) will
not give rise to any additional fiduciary duties
under ERISA on the part of either Master Servicer
or the Trustee; or
(B) hereby certify that the Class X
Certificates either: (i) are underwritten, placed
by an entity which has been granted an exemption by
the Department of Labor similar to PTE 90-30, or
such entity acts as a selling agent for such Class
X Certificates or (ii) are being transferred in a
secondary market transfer thereafter;
(ii) We understand that if (B) above does not
apply, the Class X Certificates bear, and
will continue to bear, a legend to
substantially the following effect: "THIS
CERTIFICATE MAY NOT BE ACQUIRED DIRECTLY OR
INDIRECTLY BY, OR ON BEHALF OF, AN EMPLOYEE
BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT
WHICH IS SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, AND/OR SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED, UNLESS THE
PROPOSED TRANSFER AND/OR HOLDING OF A
CERTIFICATE AND THE SERVICING, MANAGEMENT
AND/OR OPERATION OF THE TRUST AND ITS ASSETS:
(I) WILL NOT RESULT IN ANY PROHIBITED
TRANSACTION WHICH IS NOT COVERED UNDER AN
INDIVIDUAL OR CLASS PROHIBITED TRANSACTION
EXEMPTION, INCLUDING, BUT NOT LIMITED TO,
PROHIBITED TRANSACTION EXEMPTION ("PTE")
84-14, PTE 91-38, PTE 90-1, PTE 95-60 OR PTE
96-23 AND (II) WILL NOT GIVE RISE TO ANY
ADDITIONAL FIDUCIARY DUTIES ON THE PART OF
THE MASTER SERVICER OR THE TRUSTEE, WHICH
WILL BE DEEMED REPRESENTED BY AN OWNER OF A
BOOK- ENTRY CERTIFICATE OR A GLOBAL
CERTIFICATE AND WILL BE EVIDENCED BY A
REPRESENTATION TO SUCH EFFECT BY OR ON BEHALF
OF A HOLDER OF A PRIVATE CERTIFICATE OR CLASS
X CERTIFICATE. THE ABOVE RESTRICTIONS SHALL
NOT APPLY TO THE CLASS X CERTIFICATES EITHER:
(I) IN THE EVENT THAT THE CLASS X
CERTIFICATES ARE UNDERWRITTEN, PLACED BY AN
ENTITY WHICH HAS BEEN GRANTED AN EXEMPTION BY
THE DEPARTMENT OF LABOR SIMILAR TO PTE 90-30,
OR SUCH ENTITY ACTS AS A SELLING AGENT FOR
SUCH CLASS X CERTIFICATES OR (II) IN
SECONDARY MARKET TRANSFERS THEREAFTER."
Terms not otherwise defined herein shall have the meanings
assigned to them in the Pooling and Servicing Agreement dated as of
November 1, 1998 among Structured Asset Mortgage Investments Inc., Liberty
Lending Services, Inc. and Bankers Trust Company of California, N.A., as
Trustee (the "Pooling and Servicing Agreement").
If the Purchaser proposes that its Certificates be registered
in the name of a nominee on its behalf, the Purchaser has identified such
nominee below, and has caused such nominee to complete the Nominee
Acknowledgment at the end of this letter.
Name of Nominee (if any):___________________
IN WITNESS WHEREOF, this document has been executed by the
undersigned who is duly authorized to do so on behalf of the undersigned on
the ____ day of ________, 19__.
Very truly yours,
[PURCHASER]
By:__________________________
(Authorized Officer)
[By:__________________________
Attorney-in-fact]
---------------------------------------
Nominee Acknowledgment
The undersigned hereby acknowledges and agrees that as to the
Certificates being registered in its name, the sole beneficial owner
thereof is and shall be the Purchaser identified above, for whom the
undersigned is acting as nominee.
[NAME OF NOMINEE]
By:__________________________
(Authorized Officer)
[By:__________________________
Attorney-in-fact]
EXHIBIT 5.1
[ ], 2000
SAMCO Mortgage Securities Corp.
245 Park Avenue
New York, NY 10167
Re: SAMCO Mortgage Securities Corp.
Registration Statement on Form S-3
Ladies and Gentlemen:
We will act as counsel for SAMCO Mortgage Securities Corp., a
Delaware corporation (the "Company"), in connection with the offering, from
time to time, in one or more Series (each, a "Series") of the Company's
Shared Appreciation Mortgage Pass- Through Certificates (the
"Certificates"). The Certificates are being registered pursuant to the
Securities Act of 1933, as amended (the "Act"), by means of a Registration
Statement of the Company on Form S-3. The Certificates will be offered
pursuant to the prospectus, as supplemented by a prospectus supplement (the
"Base Prospectus" and "Prospectus Supplement," respectively), which will be
filed with the Securities and Exchange Commission (the "Commission")
pursuant to Rule 424 under the Act. As set forth in the Registration
Statement, each Series of Securities will be issued under and pursuant to
the conditions of a pooling and servicing agreement (the "Agreement")
between the Company and a bank or trust company, as trustee (the
"Trustee").
This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K under the Act.
In connection with this opinion, we have examined copies of the
Company's Amended and Restated Articles of Incorporation, Bylaws, the form
of Agreement (as incorporated by reference as an exhibit to the
Registration Statement) and the forms of Certificates included in the
Agreement. We also have examined originals or copies, certified or
otherwise identified to our satisfaction, of such records of the Company
and such agreements, certificates of public officials, certificates of
officers or other representatives of the Company and others, and such other
documents, certificates and records as we have deemed necessary or
appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies and the authenticity of the originals of such latter
documents. In making our examination of executed documents, we have assumed
that the parties thereto, other than the Company, had the power, corporate
or other, to enter into and perform all obligations thereunder and have
also assumed the due authorization by all requisite action, corporate or
other, and execution and delivery by such parties of such documents and the
validity and binding effect thereof on such parties. As to any facts
material to the opinions expressed herein which we have not independently
established or verified, we have relied upon statements and representations
of officers and other representatives of the Company and others.
Members of our firm are admitted to the bar in the State of New
York and we do not express any opinion as to the laws of any jurisdiction
other than the General Corporation Law of the State of Delaware, and we do
not express any opinion as to the effect of any other laws on the opinion
stated herein.
Based upon the foregoing, we are of the opinion that:
1. When the Agreement has been duly and validly authorized by
all necessary action on the part of the Company and has been duly executed
and delivered by the Company and the Trustee, such Agreement will
constitute a legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other laws relating to
or affecting creditors' rights generally or by general equity principles.
2. When a Series of Certificates has been duly authorized by
all necessary action on the part of the Company (subject to the terms
thereof being otherwise in compliance with applicable law at such time),
duly executed and authenticated by the Trustee for such Series in
accordance with the terms of the Agreement and issued and delivered against
payment therefor as described in the Registration Statement, such Series of
Certificates will be legally and validly issued, fully paid and
nonassessable, and the holders thereof will be entitled to the benefits of
the Agreement.
3. The statements set forth in the Prospectus under the heading
"Federal Income Tax Consequences," to the extent that they constitute
matters of law or legal conclusions with respect thereto, are correct.
We hereby consent to the filing of this opinion with the
Commission as Exhibit 5.1 to the Registration Statement. We also consent to
the reference to us under the caption "Legal Matters" in the Base
Prospectus and Prospectus Supplement. In giving this consent, we do not
thereby admit that we are included in the category of persons whose consent
is required under Section 7 of the Act or the rules and regulations of the
Commission.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER &
FLOM LLP
EXHIBIT 25.1
POWER OF ATTORNEY
Terry L. Purchal whose signature appears below does hereby make,
constitute and appoint Paul M. Friedman, Howard Rubin, Joseph T. Jurkowski
Jr., and Samuel L. Molinaro as his/her true and lawful attorney with power
to execute, deliver and file, for and on his or her behalf, and in his or
her name and in his or her capacity or capacities as stated below, any
amendment or amendments to this Registration Statement, making such changes
in the Registration Statement as such person deems appropriate.
/s/ Terry L. Purchal
Name: Terry L. Purchal
Title: Controller
Date: March 2, 2000
