As filed with the Securities and Exchange Commission on February 8, 2000
Registration No. 333-
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
FINANCE AMERICA SECURITIES, LLC
DELAWARE 75-2845187
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Three World Financial Center
20th Floor
New York, New York 10285
(212) 526-1360
--------------------
(Address, including zip code, and telephone number, including area code,
of principal executive offices)
--------------------
Brian Libman
Chief Executive Officer
Finance America Securities, LLC
16802 Aston Street
Irvine, California 92606
(949) 440-1670
--------------------
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
--------------------
With a copy to:
Karen H. Cornell H. John Steele
General Counsel and Vice President Brown & Wood LLP
Finance America, LLC 1666 K Street, N.W.
15301 Spectrum Drive, Suite 370 Washington, D.C. 20006-1208
Addison, Texas 75001 (202) 533-1460
(972) 980-2617 (202) 533-1399 (fax)
(972) 980-2627 (fax)
Approximate date of commencement of proposed sale to the public:
From time to time on or after the effective date of the registration
statement, as determined by market conditions and pursuant to Rule 415.
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, please 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. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE REGISTRATION
PER UNIT(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Asset-Backed Certificates $1,000,000 100% $1,000,000 $264.00
and Asset-Backed Notes.......
=============================================================================================================
(1) Estimated for the purpose of calculating the registration fee.
</TABLE>
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 the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
The information in this prospectus supplement is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus supplement is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION, FEBRUARY [ ], 2000
PROSPECTUS SUPPLEMENT (to prospectus dated [ ])
$[ ] (APPROXIMATE)
FINANCE AMERICA SECURITIES, LLC
[ ] TRUST
[ ] PASS-THROUGH CERTIFICATES
[ ]
ORIGINATOR
[ ]
SERVICER
------
The trust fund will issue certificates including the following:
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS
PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS.
For a list of capitalized terms used in this prospectus supplement and
the prospectus, see the index of defined terms beginning on page S-[ ] of this
prospectus supplement and on page [ ] of the prospectus.
The certificates will represent interests in the trust fund only and will
not represent interests in or obligations of any other entity.
This prospectus supplement may be used to offer and sell the certificates
only if accompanied by the prospectus.
CLASS INTEREST
CLASS PRINCIPAL AMOUNT(1) RATE
----- ------------------- -----
[ ]........................... $[ ] [ ]
[ ]........................... [ ] [ ]
[ ]........................... [ ] [ ]
___________________
(1) These amounts are approximate, as described in this
prospectus supplement.
(2) Interest will accrue on the Class [ ] and [ ]
Certificates at [described as applicable].
This prospectus supplement and the accompanying prospectus relate only to
the offering of the certificates listed in the table above and not to the
other classes of certificates that will be issued by the trust fund as
described in this prospectus supplement.
[Describe assets of trust fund.]
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE CERTIFICATES OR DETERMINED THAT
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[Describe underwriting arrangements.]
On or about [ ], delivery of the certificates offered by this
prospectus supplement will be made through the book-entry facilities
of [ ].
[UNDERWRITER(S)]
The date of this prospectus supplement is [ ]
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS:
We provide information to you about the certificates offered by this
prospectus supplement in two separate documents that progressively provide
more detail: (1) the accompanying prospectus, which provides general
information, some of which may not apply to your certificates, and (2) this
prospectus supplement, which describes the specific terms of your
certificates.
IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. 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. We do not claim that the information in this prospectus
supplement and prospectus is accurate as of any date other than the dates
stated on their respective covers.
---------------------------------------
Dealers will deliver a prospectus supplement and prospectus when
acting as underwriters of the certificates and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the certificates
will be required to deliver a prospectus supplement and prospectus for ninety
days following the date of this prospectus supplement.
---------------------------------------
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.
<PAGE>
TABLES OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
Summary of Terms..............................7
The Offered Certificates....................7
The Mortgage Loans..........................9
[The Pre-Funding Account....................9
Servicing of the Mortgage Loans.............9
Optional Purchase of Mortgage Loans.........9
Tax Status.................................10
ERISA Considerations.......................10
Legal Investment Considerations............10
Ratings of the Certificates................10
Risk Factors.................................11
[Some of the loans in the mortgage
pool are more likely to default than
others, and higher than expected
defaults on these loans could reduce
the yield on your certificates.............11
[Mortgage Loan Interest Rates May
Limit Interest Rates on the
Certificates...............................11
[Potential Inadequacy of Credit
Enhancement for the Certificates...........12
[Special Risks for the Class
[Mezzanine/Subordinate] Certificates.......13
[Effect of Lack of Primary Mortgage
Insurance on the Class [ ]
Certificates...............................14
Unpredictability and Effect of
Prepayments................................14
[Geographic Concentration of Mortgage
Loans......................................15
Real Estate Market May Affect
Performance of Mortgage Loans..............15
[Early Principal Payment From Cash
Remaining in Pre-Funding Account...........16
You will not receive physical
certificates, which can cause delays
in distributions and hamper your
ability to pledge or resell your
certificates...............................16
Potential Disruption of Computer
Systems....................................16
Limited Ability to Resell Certificates.....16
Description of the Certificates..............17
General....................................17
[Pre-Funding Account.......................18
Book-Entry Registration....................18
Distributions of Interest..................20
[Determination of Index....................21
Distributions of Principal.................21
Credit Enhancement.........................22
[The Reserve Fund..........................23
Page
Final Scheduled Distribution Date..........24
Reports to Certificateholders..............24
Optional Purchase of Mortgage Loans;
Termination of the Trust Fund..............24
The Trustee................................25
[The Insurance Policy........................25
The Insurer................................25
Insurer Financial Information..............25
Where You Can Obtain Additional
Information About the Insurer..............25
Year 2000 Disclosure.......................26
Financial Strength Ratings of the Insurer..26
The Insurance Policy.......................26
Description of the Mortgage Pool.............26
General....................................26
Adjustable Rate Mortgage Loans.............27
[The Index.................................27
The Mortgage Loans.........................27
[Subsequent Mortgage Loans.................35
Additional Information.......................35
[The Originator..............................36
General....................................36
Lending Activities and Loan Sales..........36
Underwriting Guidelines....................36
[The Servicer................................37
General....................................37
Loan Servicing.............................37
Servicing Practices and Experience.........37
The Pooling and Servicing Agreement..........39
General....................................39
Assignment of Mortgage Loans...............39
Voting Rights..............................40
General Servicing Provisions...............40
Prepayment Interest Shortfalls.............41
Advances...................................41
Servicing Advances.........................41
Collection of Taxes and Insurance
Premiums ..................................42
Insurance Coverage.........................42
Purchases of Defaulted Mortgage Loans......42
Evidence as to Compliance..................42
Servicing Compensation and Payment of
Expenses ..................................42
Subservicing...............................43
Resignation or Removal of the Servicer.....43
Yield Considerations.........................43
General....................................43
Overcollateralization......................45
[Subordination of the Class
[Mezzanine/Subordinate] Certificates.......45
Weighted Average Life......................46
Federal Income Tax Considerations............49
General....................................49
Taxation of Offered Certificates...........49
State Income Tax Considerations..............49
Legal Investment Considerations..............49
Use of Proceeds..............................50
Underwriting.................................50
ERISA Considerations.........................50
Experts......................................50
Legal Matters................................51
Ratings......................................51
Glossary of Defined Terms....................52
Annex I......................................1
<PAGE>
PROSPECTUS
Page
Risk Factors.................................1
Limited Liquidity May Result in Delays
in Liquidations or Lower Returns.........1
Payments on Securities Are Limited to
the Assets of Trust......................1
Enhancement May Be Insufficient to
Cover Losses.............................1
Timing and Rate of Prepayments May
Result in Lower Yield ...................2
Junior Liens May Result in Increased
Losses in Foreclosure Proceedings........2
Decrease in Value of Mortgaged
Property May Result in Losses ...........3
Costs for Cleaning Environmentally
Contaminated Property May Result in
Losses ..................................3
State and Federal Laws May Limit
Ability to Collect on Loans .............3
Rating of the Securities Do Not Assure
Payment .................................4
Liquidation Value of Trust Assets May
Be Insufficient to Satisfy All
Claims Against Trust.....................4
Description of the Securities................4
General...................................4
Payments of Principal.....................6
Final Scheduled Distribution Date.........6
Special Redemption........................6
Optional Redemption, Purchase of Trust
Assets or Securities, Termination of
Trust ..................................7
Weighted Average Life of the Securities...7
Book-Entry Registration and Definitive
Securities..............................8
The Trusts...................................13
General...................................13
The Loans.................................14
Private Securities........................19
Agency Securities.........................21
Page
FHA Loans and VA Loans....................24
Collection and Distribution Accounts......25
Enhancement..................................26
Subordinate Securities....................26
Cross-Support Provisions..................27
Financial Guaranty Insurance Policy or
Surety Bond ............................27
Insurance.................................27
Reserve Funds.............................28
Minimum Principal Payment Agreement.......29
Derivative Products.......................29
Other Insurance, Surety Bonds,
Guaranties, Letters of Credit and
Similar Instruments or Agreements ......29
Servicing of Loans...........................30
General...................................30
Collection Procedures; Escrow Accounts....30
Deposits to and Withdrawals From the
Collection Account .....................31
Advances and Limitations..................33
Maintenance of Insurance Policies and
Other Servicing Procedures .............33
Realization Upon Defaulted Loans........35
Enforcement of Due-On-Sale Clauses......36
Servicing Compensation and Payment of
Expenses ...............................36
Evidence as to Compliance.................37
Termination and Liability of a Servicer...37
The Agreements...............................39
Assignment of Trust Assets................39
Pre-Funding Account.......................42
Reports to Securityholders................43
Events of Default; Rights Upon Event
of Default .............................44
The Trustee...............................46
Duties of the Trustee.....................47
Resignation of Trustee....................47
Amendment of Agreement....................48
Voting Rights.............................48
Page
REMIC Administrator.......................48
Termination...............................49
Legal Aspects of the Loans...................50
Mortgages.................................50
Foreclosure on Mortgages..................51
Environmental Risks.......................53
Rights of Redemption......................54
Junior Mortgages; Rights of Senior
Mortgages ..............................54
Anti-Deficiency Legislation and the
Bankruptcy Code ........................56
Due-On-Sale Clauses In Mortgage Loans......57
Enforceability of Prepayment and Late
Payment Fees ............................58
Equitable Limitations on Remedies..........58
Applicability of Usury Laws................69
Applicability of Lending Laws..............59
Cooperative Loans..........................59
Foreclosure on Cooperative Loans...........61
Manufactured Housing and Home
Improvement Contracts .....................62
Installment Contracts......................64
Soldiers' and Sailors' Civil Relief
Act of 1940 .............................65
Consumer Protection Laws...................66
The Depositor................................66
General...................................66
Use of Proceeds..............................67
Federal Income Tax Considerations............67
General...................................67
Taxation of Debt Securities...............68
Taxation of the REMIC and its Holders.....74
REMIC Expenses; Single Class REMICs.......75
Page
Taxation of the REMIC.....................76
Taxation of Holders of Residual
Interest Securities .....................78
Administrative Matters.....................81
Tax Status as a Grantor Trust..............81
Sale or Exchange...........................85
Miscellaneous Tax Aspects..................85
Tax Treatment of Foreign Investors.........86
Tax Characterization of the Trust as a
Partnership .............................87
Tax Consequences to Holders of the
Notes ...................................88
Tax Consequences to Holders of the
Certificates ............................90
FASIT Securities...........................96
Tax Treatment of FASIT Regular Securities..99
Tax Treatment of FASIT Ownership
Securities .............................100
Foreign Securityholders...................101
State Tax Considerations....................101
Erisa Considerations........................102
Legal Investment Considerations.............107
Ratings.....................................107
Plan of Distribution........................108
Legal Matters...............................108
Available Information.......................108
Incorporation Of Documents By Reference.....109
Index of Defined Terms......................110
<PAGE>
SUMMARY OF TERMS
o THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
SUPPLEMENT 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 OFFERING OF THE CERTIFICATES, IT IS NECESSARY THAT
YOU READ CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING
PROSPECTUS.
o WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH
FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU
SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH
FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION.
o [WHENEVER WE REFER TO A PERCENTAGE OF SOME OR ALL OF THE MORTGAGE
LOANS IN THE TRUST FUND OR IN ANY POOL, THAT PERCENTAGE HAS BEEN
CALCULATED ON THE BASIS OF THE TOTAL PRINCIPAL BALANCE OF THOSE
MORTGAGE LOANS AS OF [ ], UNLESS WE SPECIFY OTHERWISE. WE EXPLAIN IN
THIS PROSPECTUS SUPPLEMENT UNDER "DESCRIPTION OF THE CERTIFICATES--
DISTRIBUTIONS OF PRINCIPAL" HOW THE PRINCIPAL BALANCE OF A MORTGAGE
LOAN IS DETERMINED. WHENEVER WE REFER IN THIS SUMMARY OF TERMS OR IN
THE RISK FACTORS SECTION OF THIS PROSPECTUS SUPPLEMENT TO THE TOTAL
PRINCIPAL BALANCE OF ANY MORTGAGE LOANS, WE MEAN THE TOTAL OF THEIR
PRINCIPAL BALANCES, UNLESS WE SPECIFY OTHERWISE.]
THE OFFERED CERTIFICATES
Finance America Securities, LLC's [ ___________ ] Pass-Through
Certificates consist of the following classes: [ ___________ ]. Only the [
___________ ] Certificates are being offered by this prospectus supplement.
These certificates will be issued in book-entry form.
SEE "DESCRIPTION OF THE CERTIFICATES -- GENERAL" IN THIS PROSPECTUS
SUPPLEMENT FOR A DISCUSSION OF THE MINIMUM DENOMINATIONS AND THE INCREMENTAL
DENOMINATIONS OF EACH CLASS OF CERTIFICATES.
The certificates represent ownership interests in a trust fund, the assets
of which consist primarily of [describe assets of trust.]
The certificates will have an approximate total initial principal amount
of $[ ]. Any difference between the total principal amount of the certificates
on the date they are issued and the approximate total principal amount of the
certificates on the date of this prospectus supplement will not exceed 5%.
PAYMENTS ON THE CERTIFICATES
Principal and interest on the certificates will be payable on the [25th]
day of each month, beginning in [ ___________ ]. However, if the [25th] day is
not a business day, distributions will be made on the next business day after
the [25th] day of the month.
INTEREST PAYMENTS
Interest will accrue on each class of certificates, [other than the Class
[Residual/Principal Only] Certificate], at the applicable annual rates
described in this prospectus supplement.
SEE "DESCRIPTION OF THE CERTIFICATES -- DISTRIBUTIONS OF INTEREST" IN THIS
PROSPECTUS SUPPLEMENT.
PRINCIPAL PAYMENTS
The amount of principal payable on the certificates, [other than the Class
[Residual/Principal Only] Certificate], will be determined by (1) funds
actually received on the mortgage loans in [each] pool that are available to
make payments on the certificates, (2) the amount of interest received or
advanced on the mortgage loans that is used to pay principal on the
certificates, calculated as described in this prospectus supplement, (3)
[formulas that allocate a portion of principal payments received on the
mortgage loans to each class of certificates, as described in this prospectus
supplement,] and (4) [ ]. Funds actually received on the mortgage loans may
consist of expected, scheduled payments, and unexpected payments resulting
from prepayments or defaults by borrowers, liquidation of defaulted mortgage
loans, or repurchases of mortgage loans under the circumstances described in
this prospectus supplement.
WE EXPLAIN HOW PRINCIPAL IS PAID ON THE CERTIFICATES UNDER "DESCRIPTION OF
THE CERTIFICATES -- DISTRIBUTIONS OF PRINCIPAL" IN THIS PROSPECTUS SUPPLEMENT.
[PREPAYMENT PENALTIES ON THE MORTGAGE LOANS
The holder of the Class [ ] Certificate will be entitled to receive any
prepayment penalties received on the mortgage loans. These amounts will not be
available to make payments on other classes of certificates.
SEE "DESCRIPTION OF THE CERTIFICATES" AND "DESCRIPTION OF THE MORTGAGE
POOLS -- GENERAL" IN THIS PROSPECTUS SUPPLEMENT.]
LIMITED RECOURSE
The only source of cash available to make interest and principal payments
on the certificates will be the assets of the trust fund. The trust fund will
have no other source of cash and no entity other than the trust fund will be
required or expected to make any payments on the certificates.
ENHANCEMENT OF LIKELIHOOD OF PAYMENT ON THE CERTIFICATES
[DESCRIBE ANY APPLICABLE FINANCIAL GUARANTY INSURANCE POLICY OR GUARANTEE.]
[SUBORDINATION OF PAYMENTS
The [senior] certificates will have a payment priority as a group over the
Class [Mezzanine/Subordinate] Certificates both for payments of interest and
payments of principal. No amounts will be paid to the Holder of the Class
[Subordinate] Certificate on any distribution date until all amounts due to
the senior certificates and the Class [Mezzanine] Certificates on that date
have been paid and overcollateralization has reached the required level.]
[OVERCOLLATERALIZATION
On the closing date, the total principal balance of the mortgage loans is
expected to [approximately equal/exceed the total principal amount of the
certificates]. Any interest received on the mortgage loans in excess of the
amount needed to pay interest on the certificates and certain expenses and
fees of the trust fund will be used to reduce the total principal amount of
the certificates to a level set by the rating agencies until the mortgage
loans have a total principal balance that exceeds the total outstanding
principal amount of the certificates by the amount required by the rating
agencies. This condition is referred to as "overcollateralization." We cannot
assure you that sufficient interest will be generated by the mortgage loans to
create overcollateralization, to increase overcollateralization to the level
required by the rating agencies, or, if such level is attained, to maintain it
at that level.
SEE "RISK FACTORS -- POTENTIAL INADEQUACY OF Credit ENHANCEMENT FOR THE
CLASS [MEZZANINE/SUBORDINATE] CERTIFICATES" AND "DESCRIPTION OF THE
CERTIFICATES -- CREDIT ENHANCEMENT -- SUBORDINATION" AND "--
OVERCOLLATERALIZATION" IN THIS PROSPECTUS SUPPLEMENT.]
[ALLOCATION OF LOSSES
As described in this prospectus supplement, amounts representing losses on
the mortgage loans in excess of overcollateralization will be applied to
reduce the principal amount of the Class [Senior] Certificates until their
principal amount has been reduced to zero.
o If a loss has been allocated to reduce the principal amount of your
Class [Mezzanine/Subordinate] Certificate, you will receive no payment
in respect of that reduction at that time.
o After overcollateralization has been created and has been increased to
the required level, you will receive the amount of that loss if there
are sufficient funds to pay you, as described in this prospectus
supplement, but you will not receive any interest on that amount.
After the principal amount of the Class [Mezzanine/Subordinate]
Certificates has been reduced to zero, amounts representing losses on the
mortgage loans will be paid to holders of the senior certificates by
[Certificate Insurer], to the extent funds available are insufficient to cover
such losses.
SEE "DESCRIPTION OF THE CERTIFICATES -- CREDIT ENHANCEMENT -- ALLOCATION
OF LOSSES" AND "THE INSURANCE POLICY" IN THIS PROSPECTUS SUPPLEMENT.]
THE MORTGAGE LOANS
On the closing date, which is expected to be on or about [ ],
the assets of the trust fund will consist of [two] pools of mortgage loans with
a total principal balance of approximately $[ ]. The mortgage
loans will be secured by mortgages, deeds of trust, or other security
instruments, all of which are referred to in this prospectus supplement
as mortgages.
[Description of mortgage loans.]
[Description of pre-funding account and additional mortgage loans if
applicable.]
[The mortgage loans in the trust fund will not be insured or guaranteed by
any government agency.]
SEE "DESCRIPTION OF THE MORTGAGE POOLS" IN THIS PROSPECTUS SUPPLEMENT FOR
A GENERAL DESCRIPTION OF THE MORTGAGE LOANS AND "[THE ORIGINATOR]" IN THIS
PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF THE UNDERWRITING GUIDELINES APPLIED
IN ORIGINATING THE MORTGAGE LOANS.
[THE PRE-FUNDING ACCOUNT
On the closing date, approximately $[ _________ ] will be deposited by [
________ ] in a pre-funding account maintained by [ __________ ]. It is
intended that additional mortgage loans will be sold to the trust fund by the
depositor from time to time, from [ _______ ] until [ _______ ], paid for with
the funds on deposit in the pre-funding account.
[Description of pre-funding account and additional mortgage loans if
applicable.]
SEE "DESCRIPTION OF THE CERTIFICATES --PRE-FUNDING ACCOUNT" IN THIS
PROSPECTUS SUPPLEMENT.]
SERVICING OF THE MORTGAGE LOANS
The mortgage loans will be serviced by [ ].
SEE "[THE SERVICER]" AND "THE POOLING AND SERVICING AGREEMENT" IN THIS
PROSPECTUS SUPPLEMENT.
OPTIONAL PURCHASE OF MORTGAGE LOANS
[ ____________________ ] will have the option to purchase all of the
mortgage loans and the other property of the trust fund, [other than the
insurance policy], after the total principal balance of the mortgage loans
declines to less than [ ]% of their initial total principal balance; if [
______________________ ] does not exercise that option, [ ] may purchase the
Mortgage Loans and other property of the trust fund.
If the mortgage loans and other assets are purchased, the
certificateholders will be paid accrued interest and principal equal to the
outstanding principal amount of the certificates.
SEE "DESCRIPTION OF THE CERTIFICATES -- OPTIONAL PURCHASE OF MORTGAGE
LOANS; TERMINATION OF THE TRUST FUND" IN THIS PROSPECTUS SUPPLEMENT FOR A
DESCRIPTION OF THE PURCHASE PRICE TO BE PAID FOR THE MORTGAGE LOANS.
TAX STATUS
[REMIC, grantor trust or FASIT status to be described as applicable.]
SEE "FEDERAL INCOME TAX CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND
IN THE ACCOMPANYING PROSPECTUS FOR ADDITIONAL INFORMATION CONCERNING THE
APPLICATION OF FEDERAL INCOME TAX LAWS TO THE CERTIFICATES.
ERISA CONSIDERATIONS
[Generally, the Class [Senior] Certificates may, but the Class [Mezzanine/
Subordinate] Certificates may not, be purchased by employee benefit plans or
individual retirement accounts subject to the Employee Retirement Income
Security Act of 1974 or Section 4975 of the Internal Revenue Code of 1986. A
fiduciary of an employee benefit plan or an individual retirement account must
determine that the purchase of a certificate is consistent with its fiduciary
duties under applicable law and does not result in a nonexempt prohibited
transaction under applicable law.]
SEE "ERISA CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN THE
PROSPECTUS FOR A MORE COMPLETE DISCUSSION OF THESE ISSUES.
LEGAL INVESTMENT CONSIDERATIONS
[None of the Certificates/Only the Class [Senior/Mezzanine] Certificates]
will constitute "mortgage related securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984.
There are other restrictions on the ability of certain types of investors
to purchase the certificates that prospective investors should consider.
SEE "LEGAL INVESTMENT CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT AND IN
THE PROSPECTUS.
RATINGS OF THE CERTIFICATES
The certificates will initially have the following ratings from [ ]:
[Rating [Rating
Class Agency] Agency]
----- ------ ------
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
These ratings are not recommendations to buy, sell or hold these certificates.
A rating may be changed or withdrawn at any time by the assigning rating
agency.
o The ratings do not address the possibility that, as a result of
principal prepayments, the yield on your certificates may be lower
than anticipated.
SEE "RATINGS" IN THIS PROSPECTUS SUPPLEMENT FOR A MORE COMPLETE DISCUSSION
OF THE CERTIFICATE RATINGS.
<PAGE>
RISK FACTORS
THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER,
IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT
IN THE CERTIFICATES. YOU SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION SET
FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS.
<TABLE>
<CAPTION>
<S> <C>
[SOME OF THE LOANS IN THE The payment schedules for most of the mortgage loans in the pool require the
MORTGAGE POOL ARE MORE LIKELY borrower to pay off the principal balance of the loan gradually over the life of
TO DEFAULT THAN OTHERS, AND the loan. Some of the mortgage loans in the pool, however, have payment
HIGHER THAN EXPECTED DEFAULTS schedules under which the borrowers makes relatively small payments of principal
ON THESE LOANS COULD REDUCE THE over the life of the loan, and then must make a large final payment at maturity
YIELD ON YOUR CERTIFICATES that pays off the entire principal balance outstanding. This final payment is
usually much larger than the previous monthly payments. Because the borrower's
ability to make this final payment usually depends on the ability to refinance
the loan or sell the underlying property, the risk of default is greater than on
fully amortizing loans. High rates of default on these types of loans in the
pool could result in greater losses on the subordinated certificates.
The ability of a borrower to refinance the type of loan described above or sell
the mortgaged property will depend upon a number of factors, including:
o the level of mortgage interest rates;
o the borrower's equity in the mortgage property;
o general economic conditions; and
o the availability of credit.
We cannot predict how these factors will affect the default rate of these
mortgage loans in the pool. You should refer to "Description of the Mortgage
Pool" for information on the percentage of loans in the mortgage loan pool that
consists of these loans.]
[MORTGAGE LOAN INTEREST RATES [LIBOR may increase or decrease at different times and in different amounts than
MAY LIMIT INTEREST RATES ON THE the index applicable to the adjustable rate mortgage loans.]
CERTIFICATES
[The trust fund will include a reserve fund whose primary asset will be
[describe if applicable]].
SEE "DESCRIPTION OF THE CERTIFICATES -- THE RESERVE FUND" IN THIS PROSPECTUS
SUPPLEMENT. FOR DETAILED INFORMATION ON THE INTEREST RATES OF THE MORTGAGE
LOANS, SEE "DESCRIPTION OF THE MORTGAGE POOLS" IN THIS PROSPECTUS SUPPLEMENT.]
[POTENTIAL INADEQUACY OF CREDIT The Certificates are not insured by any financial guaranty insurance policy. The
ENHANCEMENT FOR THE CERTIFICATES overcollateralization feature described in this prospectus supplement is
intended to enhance the likelihood that holders of more senior Classes of
Certificates will receive regular payments of interest and principal, but is
limited in nature and may be insufficient to cover all losses on the mortgage
loans or shortfalls in interest payments on the mortgage loans.
In order to create, increase and maintain overcollateralization, it will be
necessary that the mortgage loans generate more interest than is needed to pay
interest on the certificates as well as fees and expenses of the trust fund and
other amounts that are described in this prospectus supplement. We expect that
the mortgage loans will generate more interest than is needed to pay those
amounts, at least during certain periods, because the weighted average of the
interest rates on the mortgage loans will be higher, at the time the
certificates are issued, than the weighted average of the interest rates on the
certificates. We cannot assure you, however, that enough excess interest will be
generated to reach the overcollateralization levels required by the rating
agencies. The following factors will affect the amount of excess interest that
the mortgage loans will generate:
o PREPAYMENTS. Every time a mortgage loan with an interest rate higher
than the weighted average of the interest rates on the certificates is
prepaid, total excess interest after the date of prepayment will be
reduced because that mortgage loan will no longer be outstanding and
generating interest. The effect on your certificates of this reduction
will be influenced by the amount of prepaid loans and the
characteristics of the prepaid loans. Prepayment of a
disproportionately high number of high interest rate mortgage loans
would have a greater negative effect on future excess interest.
o DEFAULTS. The rate of defaults on the mortgage loans may turn out to be
higher than expected. Defaulted mortgage loans may be liquidated, and
liquidated mortgage loans will no longer be outstanding and generating
interest.
o LEVEL OF LIBOR. If LIBOR increases, more money will be needed to pay
interest to certificateholders, so less money will be available as
excess interest.]
[SPECIAL RISKS FOR THE CLASS The rights of holders of Class [Mezzanine/Subordinate] Certificates to receive
[MEZZANINE/SUBORDINATE] payments of interest are subordinate to the rights of holders of senior
CERTIFICATES certificates to receive payments of interest, and the rights of holders of Class
[Mezzanine/Subordinate] Certificates to receive payments of principal are
subordinate to the rights of holders of senior certificates to receive payments
of principal.
In addition, you should consider the following:
o If you buy a Class [Mezzanine/Subordinate] Certificate and losses on
the mortgage loans exceed excess interest and any overcollateralization
that has been created, the principal amount of your certificate will be
reduced proportionately with the principal amounts of the other Class
[Mezzanine/Subordinate] Certificates by the amount of that excess;
o If, after overcollateralization is created in the required amount, the
mortgage loans generate interest in excess of the amount needed to pay
interest and principal on the certificates and fees and expenses of the
trust fund, the excess interest will be used to pay you and other
holders of Class [Mezzanine/Subordinate] Certificates the amount of any
reduction in the principal balances of the Class
[Mezzanine/Subordinate] Certificates caused by application of losses.
o We cannot assure you, however, that any excess interest will be
generated and, in any event, no interest will be paid to you on the
amount by which your principal balance was reduced because of the
application of losses.
SEE "DESCRIPTION OF THE CERTIFICATES -- CREDIT ENHANCEMENT -- SUBORDINATION" AND
"-- ALLOCATION OF LOSSES" IN THIS PROSPECTUS SUPPLEMENT.]
[EFFECT OF LACK OF PRIMARY Approximately [ ]% of the mortgage loans have loan-to-value ratios greater than
MORTGAGE INSURANCE ON THE 80%. None of the mortgage loans are covered by a primary mortgage insurance
CLASS [ ] CERTIFICATES policy. If borrowers default on their mortgage loans, there is a greater
likelihood of losses than if the loans were insured. We cannot assure you that
the applicable credit enhancement will be adequate to cover those losses.
SEE "DESCRIPTION OF THE CERTIFICATES -- CREDIT ENHANCEMENT -- SUBORDINATION" AND
"-- ALLOCATION OF LOSSES" IN THIS PROSPECTUS SUPPLEMENT.]
UNPREDICTABILITY AND EFFECT Borrowers may prepay their mortgage loans in whole or in part at any time;
OF PREPAYMENTS [however, approximately [ ____ ]% of the mortgage loans require the payment of a
prepayment penalty in connection with some voluntary prepayments, which may
discourage these borrowers from prepaying their mortgage loans]. Prepayments of
principal may also be caused by liquidations of or insurance payments on the
mortgage loans. A prepayment of a mortgage loan will usually result in a
prepayment on the certificates.
The prepayment experience on the mortgage loans may affect the average life of
the certificates. The rate of principal payments on the mortgage loans is from
time to time influenced by a variety of economic, demographic, geographic,
social, tax, legal and other factors. There can be no assurance as to the rate
of prepayment on the mortgage loans or that the rate of payments will conform to
the model described in this prospectus supplement.
If prevailing interest rates fall significantly below the interest rates on the
mortgage loans, principal prepayments are likely to be higher than if prevailing
rates remain at or above the interest rates on the mortgage loans. As a result,
the actual maturity of the certificates could occur significantly earlier than
expected. Conversely, if prevailing interest rates rise significantly above the
interest rates on the mortgage loans, principal prepayments are likely to be
lower than if prevailing rates remain at or below the interest rates on the
mortgage loans and the maturity of the certificates could occur significantly
later than expected. In addition, certain prepayments may result in the
collection of less interest than would otherwise be the case in the month of
prepayment.
o If you purchase your certificates at a discount and principal is repaid
more slowly than you anticipate, then your yield may be lower than you
anticipate.
o If you purchase your certificates at a premium and principal is repaid
faster than you anticipate, then your yield may be lower than you
anticipate.
SEE "YIELD CONSIDERATIONS" IN THIS PROSPECTUS SUPPLEMENT FOR A DESCRIPTION OF
FACTORS THAT MAY INFLUENCE THE RATE AND TIMING OF PREPAYMENTS ON THE MORTGAGE
LOANS.
[GEOGRAPHIC CONCENTRATION Approximately [ ]% of the mortgage loans expected to be in the pool on the
OF MORTGAGE LOANS closing date are secured by properties in [California]. Delinquencies, defaults
and losses on the mortgage loans may be higher than if fewer of the mortgage
loans were concentrated in one state because the following conditions in
[California] will have a disproportionate impact on the mortgage loans in
general:
o Declines in the [California] residential real estate market may reduce
the values of properties located in that state, which would result in
an increase in the loan-to-value ratios.
o Properties in [California] may be more susceptible than homes located
in other parts of the country to certain types of uninsured hazards,
such as earthquakes, as well as floods, wildfires, mudslides and other
natural disasters.
Natural disasters affect regions of the United States from time to time, and may
result in increased losses on mortgage loans in those regions, or in insurance
payments that will constitute prepayments of those mortgage loans.
FOR ADDITIONAL INFORMATION REGARDING THE GEOGRAPHIC DISTRIBUTION OF THE MORTGAGE
LOANS IN EACH POOL, SEE THE APPLICABLE TABLE UNDER "DESCRIPTION OF THE MORTGAGE
POOLS" IN THIS PROSPECTUS SUPPLEMENT.]
REAL ESTATE MARKET MAY AFFECT A decline in the real estate values or in economic conditions generally could
PERFORMANCE OF MORTGAGE LOANS increase the rates of delinquencies, foreclosures and losses on the mortgage
loans to a level that is significantly higher than those experienced currently;
and no assurance can be given that values of the properties securing the
mortgage loans will not decline since the date of origination of the mortgage
loan. If the credit enhancement described in this prospectus supplement is not
enough to protect your certificates from these losses, the yield on your
certificates may be reduced.
[EARLY PRINCIPAL PAYMENT FROM If the cash in the pre-funding account on the closing date is not used to
CASH REMAINING IN PRE-FUNDING acquire additional mortgage loans by [ _______________ ], then that cash will be
ACCOUNT [paid to you on a proportionate basis with the other certificateholders in
reduction of the principal balance of your certificates.] If the amount of that
cash is substantial, you will receive a significant unexpected early payment of
principal in (or before) [ ____________ ]. We cannot assure you that you will be
able to reinvest that money in another investment with a comparable yield.]
YOU WILL NOT RECEIVE PHYSICAL Your ownership of the certificates will be registered electronically with DTC.
CERTIFICATES, WHICH CAN CAUSE The lack of physical certificates could:
DELAYS IN DISTRIBUTIONS AND
HAMPER YOURABILITY TO PLEDGE o result in payment delays on the certificates because the trustee will
OR RESELL YOUR CERTIFICATES be sending distributions on the certificates to DTC instead of directly
to you;
o make it difficult for you to pledge your certificates if physical
certificates are required by the party demanding the pledge; and
o could hinder your ability to resell the certificates because some
investors may be unwilling to buy certificates that are not in physical
form.
SEE "DESCRIPTION OF THE CERTIFICATES -- BOOK-ENTRY REGISTRATION" IN THIS
PROSPECTUS SUPPLEMENT.
POTENTIAL DISRUPTION The transition from the year 1999 to the year 2000 may interfere with the
OF COMPUTER SYSTEMS ability of computer systems used by the servicer, the trustee, The Depository
Trust Company and other parties to process information. This could disrupt
collection of payments on the mortgage loans and calculation and distribution of
payments on the certificates.
LIMITED ABILITY TO The underwriter is not required to assist in resales of the certificates,
RESELL CERTIFICATES although it may do so. A secondary market for any class of certificates may not
develop. If a secondary market does develop, it might not continue or it might
not be sufficiently liquid to allow you to resell any of your certificates. The
certificates will not be listed on any securities exchange.
[Additional risk factors to be provided if applicable.]
</TABLE>
<PAGE>
DESCRIPTION OF THE CERTIFICATES
GENERAL
The [ ] Pass-Through Certificates will consist of the following
Classes: [ ] (together, the "Certificates").
The [ _____ ] Certificates are referred to herein as the "Senior
Certificates." Only the Class [ ____ ] Certificates (the "Offered
Certificates") are offered hereby. The Class [ ] Certificates are referred to
herein as the "LIBOR Certificates." The Class [ _____ ] Certificates are
referred to herein as the "Subordinate Certificates." The Class R Certificate
is also referred to as the "Residual Certificate."
The Class [Residual] Certificate will be issued as a single
Certificate in fully registered, certificated form.
The Certificates represent beneficial ownership interests in a trust
fund (the "Trust Fund"), the assets of which consist primarily of (1)
[describe mortgage loans] (the "Mortgage Loans"), (2) the assets that from
time to time are identified as deposited in respect of the Mortgage Loans in
the Collection Account and the Certificate Account (each as defined herein),
(3) property acquired by foreclosure of Mortgage Loans or deed in lieu of
foreclosure, (4) any applicable insurance policies and all proceeds thereof,
and (5) [describe other assets, as applicable].
Each Class of Offered Certificates will be issued in the respective
approximate initial total principal amount set forth or described on the cover
page hereof. The total principal amount of each Class of Offered Certificates
is referred to herein as the "Class Principal Amount" for that Class. The
Class [ ] Certificate will be issued without a principal amount or interest
rate, and will be entitled only to the amounts that are described herein. The
total initial Certificate Principal Amount (as defined herein) of the
Certificates and the initial Class Principal Amount of each Class of Offered
Certificates may be increased or decreased by up to 5% to the extent that the
Cut-off Date Balance (as defined herein) of the Mortgage Loans is increased or
decreased as described under "Description of the Mortgage Pool" herein.
Distributions on the Certificates will be made on the [25th] day of
each month or, if the [25th] day is not a Business Day, on the next succeeding
Business Day, commencing in [ ] (each, a "Distribution Date"), to
Certificateholders of record on the applicable Record Date. The "Record Date"
for each Distribution Date will be the close of business on the last Business
Day of the calendar month immediately preceding the month in which that
Distribution Date occurs.
o A "Business Day" is generally any day other than a Saturday or
Sunday or a day on which banks in New York or [California] are
closed.
Distributions on the Offered Certificates will be made to each
registered holder entitled thereto, either (1) by check mailed to the
Certificateholder's address as it appears on the books of the Trustee (as
defined herein), or (2) at the request, submitted to the Trustee in writing at
least five Business Days prior to the related Record Date, of any holder of an
Offered Certificate (at the holder's expense) in immediately available funds;
provided, that the final distribution in respect of any Certificate will be
made only upon presentation and surrender of the Certificate at the Corporate
Trust Office (as defined herein) of the Trustee. See "-- The Trustee" herein.
[PRE-FUNDING ACCOUNT
On the Closing Date approximately $[ ___________________ ] (the
"Pre-Funded Amount") will be deposited in an account (the "Pre-Funding
Account") maintained by the Trustee, which account shall be part of the trust
fund. During the period (the "Pre-Funding Period") from the Closing Date until
[ ______________ ], the Pre-Funded Amount will be maintained in the
Pre-Funding Account. The Pre-Funded Amount will be reduced during the
Pre-Funding Period by the amount of Subsequent Mortgage Loans (as defined
herein) deposited in the trust fund in accordance with the Pooling and
Servicing Agreement. During the Pre-Funding Period, the Pre-Funded Amount will
be used only to purchase Subsequent Mortgage Loans. Immediately following the
Pre-Funding Period, any Pre-Funded Amount remaining will be distributed to
Classes of Certificates then entitled to payments of principal on the next
Distribution Date.
Amounts on deposit in the Pre-Funding Account will be invested in
Eligible Investments and all investment earnings on amounts on deposit in the
Pre-Funding Account will be distributed to [ ______________ ] following the
Pre-Funding Period.]
BOOK-ENTRY REGISTRATION
GENERAL. The Offered Certificates (the "Book-Entry Certificates") will
be issued, maintained and transferred on the book-entry records of The
Depository Trust Company ("DTC") in the United States [, or through
Clearstream Banking, societe anonyme (formerly Cedelbank) ("Clearstream") or
the Euroclear System ("Euroclear") in Europe] and through [its/their]
participating organizations (each, a "Participant"). The Book-Entry
Certificates will be issued in minimum denominations in principal amount of $[
________________ ] and integral multiples of $1 in excess thereof.
Each Class of Book-Entry Certificates will be represented by one or
more certificates registered in the name of the nominee of DTC. The Depositor
has been informed by DTC that DTC's nominee will be Cede & Co. [Clearstream
and Euroclear will hold omnibus positions on behalf of their Participants
through customers' securities accounts in Clearstream's and Euroclear's names
on the books of their respective depositaries, which in turn will hold
positions in customers' securities accounts in the depositaries' names on the
books of DTC.] No person acquiring an interest in a Book-Entry Certificate
(each, a "Beneficial Owner") will be entitled to receive a certificate
representing an interest (a "Definitive Certificate"), except as set forth
below under "-- Definitive Certificates" and in the Prospectus under
"Description of the Securities -- Book-Entry Registration and Definitive
Securities -- Definitive Securities."
Unless and until Definitive Certificates are issued, it is anticipated
that:
o the only "Certificateholder" of the Offered Certificates will be
Cede & Co., as nominee of DTC, and Beneficial Owners will not be
Certificateholders as that term is used in the Pooling and
Servicing Agreement (as defined herein).
o Beneficial Owners will receive all distributions of principal
of, and interest on, the Offered Certificates from the Trustee
through DTC [, Clearstream or Euroclear, as applicable,] and
[its/their] Participants.
o while the Offered Certificates are outstanding, under the rules,
regulations and procedures creating and affecting DTC
[Clearstream and Euroclear] and [its/their] operations, DTC
[Clearstream and Euroclear] [is/are] required to make book-entry
transfers among Participants on whose behalf it acts with
respect to the Offered Certificates and is required to receive
and transmit distributions of principal of, and interest on, the
Offered Certificates. Participants and indirect participants
with whom Beneficial Owners have accounts with respect to
Offered Certificates are similarly required to make book-entry
transfers and receive and transmit distributions on behalf of
their respective Beneficial Owners. Accordingly, although
Beneficial Owners will not possess certificates, DTC
[Clearstream and Euroclear] [has/have] in place a mechanism by
which Beneficial Owners will receive distributions and will be
able to transfer their interest.
None of the Depositor, the Servicer or the Trustee [or additional
parties] (as those terms are defined herein) will have any responsibility for
any aspect of the records relating to or payments made on account of
beneficial ownership interests of the Book-Entry Certificates held by Cede &
Co., as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to those beneficial ownership interests.
Certain computer applications and systems that DTC uses for processing
dates ("Systems") based upon calendar dates, including dates before, on, and
after January 1, 2000, may encounter certain problems related to the Systems'
use of only two digits to calculate calendar dates ("Year 2000 Problems").
Year 2000 Problems could cause DTC's Systems, as they relate to the timely
payment of distributions (including principal and interest payments) to
securityholders, book-entry deliveries, and settlement of trades within DTC,
to cease functioning appropriately. DTC has advised the Depositor that it has
developed and is implementing a technical assessment and remediation plan
(which includes a testing phase) to deal with Year 2000 Problems. However,
DTC's ability to perform its services also depends upon other parties
including, among others, issuers and their agents, third party software and
hardware vendors, and third party service and information providers (including
telecommunication and electrical utility service providers). In general, the
extent of computer problems that may occur due to Year 2000 Problems is not
yet clear.
For a more complete description of book-entry registration and
clearance and the rules and regulations governing DTC [,Clearstream and
Euroclear], see "Description of the Securities -- Book-Entry Registration and
Definitive Securities" in the Prospectus" [and "Global Clearance, Settlement
and Tax Documentation Procedures" in Annex I to this Prospectus Supplement].
DEFINITIVE CERTIFICATES. Definitive Certificates will be issued to
Beneficial Owners or their nominees, respectively, rather than to DTC or its
nominee, only under the limited conditions set forth in the Prospectus under "
Description of the Securities -- Book-Entry Registration and Definitive
Securities -- Definitive Securities." Upon the occurrence of an event
described in that section, the Trustee is required to direct DTC to notify
Participants who have ownership of Book-Entry Certificates as indicated on the
records of DTC of the availability of Definitive Certificates for their
Book-Entry Certificates. Upon surrender by DTC of the Definitive Certificates
representing the Book-Entry Certificates and upon receipt of instructions from
DTC for re-registration, the Trustee will re-issue the Book-Entry Certificates
as Definitive Certificates in the respective principal amounts owned by
individual Beneficial Owners, and thereafter the Trustee will recognize the
holders of the Definitive Certificates as Certificateholders under the Pooling
and Servicing Agreement.
DISTRIBUTIONS OF INTEREST
The amount of interest distributable on each Distribution Date in
respect of each Class of Certificates (other than the Class
[Residual/Principal Only] Certificate) will equal the sum of [to be provided
as applicable]. Interest will accrue on the Offered Certificates on the basis
of a 360-day year and the actual number of days in each Accrual Period.
o The "Interest Rate" for each Class of Certificates will be the
applicable annual rate described below.
[If [ _____________________ ] does not exercise its option to purchase
the Mortgage Loans when it is first entitled to do so, as described under "--
Optional Purchase of Mortgage Loans; Termination of the Trust Fund" herein,
then with respect to each succeeding Distribution Date, the [ ___________ ]
will be increased to _______ %]. Subject to the preceding proviso, the
Interest Rates for the Class [ ___________ ] Certificates will be the
applicable annual rate determined as follows:
o [To be provided as applicable].
o The "Net Mortgage Rate" for any Mortgage Loan equals the
Mortgage Rate thereof MINUS the Total Expense Rate (as defined
herein).
o The "Total Expense Rate" for each Distribution Date is the sum
of [the Servicing Fee Rate and the Trustee Fee Rate (each as
defined herein)].
The "Certificate Principal Amount" of any Offered Certificate for any
date of determination will equal that Certificate Principal Amount on [
__________ ] (the "Closing Date") as reduced by all amounts previously
distributed on that Certificate in respect of principal and, in the case of a
Class [ ____ ] Certificate, any Applied Loss Amount (as defined herein)
previously allocated to that Certificate.
For each Distribution Date, the "Accrual Period" applicable to each
Class of Offered Certificates will be the period beginning on the immediately
preceding Distribution Date (or on the Closing Date, in the case of the first
Accrual Period) and ending on the day immediately preceding the related
Distribution Date.
o The "Interest Remittance Amount" for any Distribution Date will
equal the sum of [to be provided if applicable].
On each Distribution Date, the Interest Remittance Amount will be
distributed in the following order of priority:
[To be provided as applicable.]
When a principal prepayment in full is made on a Mortgage Loan, the
borrower is charged interest only to the date of the prepayment, instead of
for a full month, with a resulting reduction in interest payable for the month
during which the prepayment is made. Prepayments in part will be applied [as
of the date of receipt.] Full or partial prepayments (or proceeds of other
liquidations) received in any Prepayment Period will be distributed to holders
of Offered Certificates on the Distribution Date following that Prepayment
Period. To the extent that, as a result of a full or partial prepayment, a
borrower is not required to pay a full month's interest on the amount prepaid,
a shortfall (a "Prepayment Interest Shortfall") in the amount available to
make distributions of interest on the Certificates could result. [A Prepayment
Interest Shortfall will result from a prepayment in full only if that
prepayment is received on or after the [16th] day of a calendar month. If a
prepayment in full is received on or prior to the [15th] day of a calendar
month, there will be an excess of interest over one month's interest for that
Mortgage Loan ("Prepayment Interest Excess") available for distribution to
Certificateholders on the related Distribution Date.] [The Servicer is
obligated to fund Prepayment Interest Shortfalls [resulting from prepayments
in full] that exceed Prepayment Interest Excess that exceed Prepayment
Interest Excess but only in an amount up to the total of the Servicing Fees
for the applicable Distribution Date.] See "The Pooling and Servicing
Agreement -- Prepayment Interest Shortfalls" herein. Any such payment by the
Servicer is referred to herein as "Compensating Interest." Any Prepayment
Interest Shortfalls not funded by the Servicer ("Net Prepayment Interest
Shortfalls") will reduce the Interest Remittance Amount available for
distribution on the related Distribution Date.
[DETERMINATION OF INDEX
On the second Business Day preceding the beginning of each Accrual
Period (each such date, an "Index Determination Date"), the Trustee will
determine the Index for that Accrual Period.
On each Index Determination Date, the Index for the next succeeding
Accrual Period will be established by the Trustee as follows:
[To be provided if applicable.]]
DISTRIBUTIONS OF PRINCIPAL
Distributions of principal on the Class [ ___________ ] Certificates
will be made primarily from [to be provided.]
o The "Principal Distribution Amount" for [each Mortgage Pool for]
any Distribution Date will be equal to the sum of [to be
provided.]
o The "Principal Remittance Amount" for [each Mortgage Pool for]
any Distribution Date will be equal to the sum of [to be
provided.]
o The "Due Period" for any Distribution Date is the one-month
period beginning on [the second day of the calendar month
immediately preceding the month in which that Distribution Date
occurs and ending on the first day of the month in which that
Distribution Date occurs.]
o The "Prepayment Period" for each Distribution Date is the
one-month period beginning on the Cut-off Date, in the case of
[the first Distribution Date, and on the day immediately
following the close of the immediately preceding Prepayment
Period, in the case of each subsequent Distribution Date, and
ending on the [ ]th day (or if that day is not a Business Day,
the immediately preceding Business Day) of the month in which
that Distribution Date occurs].
On each Distribution Date, the Principal Distribution Amount will be
distributed in the following order of priority:
[To be provided as applicable].
CREDIT ENHANCEMENT
Credit enhancement for the Offered Certificates consists of [the
Insurance Policy, the subordination of the Subordinate Certificates, the
priority of application of Realized Losses (as defined herein) and
overcollateralization], in each case as described herein. [The Insurance
Policy is described under "The Insurance Policy" below.]
[SUBORDINATION. The rights of holders of the Class
[Mezzanine/Subordinate] Certificates to receive distributions with respect to
the Mortgage Loans will be subordinated, to the extent described herein, to
the rights of holders of the Senior Certificates, as described under "--
Distributions of Interest" and "-- Distributions of Principal." The limited
protection afforded to holders of Class [Senior] Certificates is accomplished
by the preferential right of holders of Offered Certificates to receive
interest and principal available for distribution on each Distribution Date,
prior to any distribution being made in respect of interest or principal on
any Distribution Date in respect of Certificates having a lower priority. This
feature is intended to enhance the likelihood of regular receipt by holders of
Senior Certificates of the full amount of interest and principal due thereon,
and to afford holders of Senior Certificates some protection against Realized
Losses incurred on the Mortgage Loans.
No amounts will be distributed to the holder of the Class
[Mezzanine/Subordinate] Certificate on any Distribution Date unless all
amounts due to the holders of the Class [Senior] Certificates have been
distributed.]
[ALLOCATION OF LOSSES. If a Mortgage Loan becomes a Liquidated
Mortgage Loan during any Prepayment Period, the related Net Liquidation
Proceeds, to the extent allocable to principal, may be less than the
outstanding principal balance of the Mortgage Loan. The amount of that
insufficiency is a "Realized Loss." Realized Losses on Mortgage Loans will
have the effect of reducing amounts distributable in respect of, first, the
Class [Subordinate] Certificate (both through the application of Monthly
Excess Interest to fund the deficiency and through a reduction in the
Overcollateralization Amount for the related Distribution Date), and second,
the Class [Mezzanine] Certificates, before reducing amounts distributable in
respect of the Senior Certificates.
o A "Liquidated Mortgage Loan" is, in general, a defaulted
Mortgage Loan as to which the Servicer has determined that all
amounts that it expects to recover in respect of that Mortgage
Loan have been recovered (exclusive of any possibility of a
deficiency judgment).
To the extent that Realized Losses occur, those Realized Losses will
reduce the Total Loan Balance, and thus may reduce the Overcollateralization
Amount. As described herein, the Overcollateralization Amount is created,
increased and maintained by application of Monthly Excess Cashflow to make
distributions of principal on the Offered Certificates.
If on any Distribution Date after giving effect to all Realized Losses
incurred during the related Due Period and distributions of principal on that
Distribution Date, the total Certificate Principal Amount of the Certificates
exceeds the Total Loan Balance for that Distribution Date (such excess, an
"Applied Loss Amount"), the Class Principal Amount of the Class [Subordinate]
Certificates will be reduced by that amount, until the Class Principal Amount
thereof has been reduced to zero. The Class Principal Amounts of the Senior
Certificates will not be reduced by allocation of Applied Loss Amounts.
Holders of Class [Subordinate] Certificates will not receive any
distributions in respect of Applied Loss Amounts, except to the extent of
Monthly Excess Cashflow received after the Realized Losses are applied to the
Certificates, as described below.]
[OVERCOLLATERALIZATION. The weighted average Net Mortgage Rate of the
Mortgage Loans is generally expected to be higher than the weighted average of
the interest rates of the Certificates, thus generating certain excess
interest collections. To the extent described herein, Monthly Excess Interest
will be applied on any Distribution Date in reduction of the Certificate
Principal Amounts of the Offered Certificates. This application of interest
collections as distributions of principal will cause the total Certificate
Principal Amount of the Certificates to amortize more rapidly than the Total
Loan Balance, creating, increasing and maintaining overcollateralization.
However, Realized Losses will reduce any such overcollateralization, and could
result in an Overcollateralization Deficiency.
For each Distribution Date, the Monthly Excess Interest and any Excess
Principal will be the "Monthly Excess Cashflow," which will be applied in the
following order of priority:
[To be provided as applicable.]]
[THE RESERVE FUND
The Reserve Fund will be an asset of the Trust but not of the REMIC.
The holder of the Residual Certificate will be the owner of the Reserve Fund,
and amounts on deposit in the Reserve Fund will be invested at the direction
of the holder of the [Residual] Certificate as provided in the Pooling and
Servicing Agreement. The Reserve Fund will consist of [to be provided as
applicable].
Withdrawals will be made from the Reserve Fund for the benefit of the
Offered Certificates as described under "-- Overcollateralization" above.
The only asset of the Reserve Fund on the Closing Date will be [to be
provided as applicable.]
If on any Distribution Date the sum of the amount on deposit in the
Reserve Fund and the Overcollateralization Amount exceeds the Targeted
Overcollateralization Amount, the excess will be released to the [Residual]
Certificateholder, provided that the amount remaining in the Reserve Fund
equals or exceeds the reserve fund requirement specified in the Pooling and
Servicing Agreement.]
FINAL SCHEDULED DISTRIBUTION DATE
It is expected that scheduled distributions on the Mortgage Loans,
assuming no defaults or losses that are not covered by the limited credit
support described herein, will be sufficient to make timely distributions of
interest on the Offered Certificates and to reduce the Class Principal Amount
of each Class of the Senior Certificates to zero not later than [
_______________________ ] and of the Class [ ] Certificates not later than [
]. As to each Class, the actual final Distribution Date may be earlier or
later, and could be substantially earlier, than the applicable Final Scheduled
Distribution Date.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date the Trustee will make available to each
Certificateholder a statement containing the following information:
o the amount of principal distributed on that date to holders of
each Class of Offered Certificates;
o the amount of interest distributed on that date to holders of
each Class of Offered Certificates;
o the Interest Rate applicable to each Class of Offered
Certificates;
o the Class Principal Amount of each Class of Offered Certificates
after distributions on that date;
o the amount of the Servicing Fees and Trustee Fee paid with
respect to that date;
o the Total Loan Balance as of the related Distribution Date;
o the amount of any Realized Losses on the Mortgage Loans during
the immediately preceding calendar month and total Realized
Losses since the Cut-off Date;
o the number and aggregate Principal Balance of Mortgage Loans (1)
remaining outstanding, (2) delinquent by one, two, three or four
or more monthly payments, (3) in foreclosure, and (4) with
respect to REO Property;
o any amount distributed to the holder of the [Residual]
Certificate; and
o certain other information to the extent provided in the Pooling
and Servicing Agreement.
OPTIONAL PURCHASE OF MORTGAGE LOANS; TERMINATION OF THE TRUST FUND
On any Distribution Date after the date on which the Total Loan
Balance is less than [ ]% of the Cut-off Date Balance, the holder of the [
_________________________ ] Certificate will (subject to the terms of the
Pooling and Servicing Agreement) have the option to purchase the Mortgage
Loans, any REO Property and any other related property for a price equal to
the sum of [(1) 100% of the total outstanding principal balance of the
Mortgage Loans plus accrued interest thereon at the applicable Mortgage Rate,
(2) the fair market value of all other property being purchased, (3) any
unpaid Servicing Fees and certain other amounts payable to the Servicer and
the Trustee and (4) [ _____________________________________ ];] provided, that
the purchase price will not be less than the total Certificate Principal
Amount of the Offered Certificates, plus accrued interest thereon. If the
holder of the [ ______________________ ] Certificate does not exercise that
option, the [ __________ ] will then have the same purchase option. If either
purchase option is exercised, the Trust Fund will be terminated (such event,
an "Optional Termination").
If the [ __________________ ] does not exercise its option as
described above when it is first entitled to do so, [to be provided if
applicable].
THE TRUSTEE
[ ___________________________________________ ], a [
_____________________________ ] banking corporation, will be the Trustee under
the Pooling and Servicing Agreement (the "Trustee"). The Trustee will be paid
a monthly fee (the "Trustee Fee") calculated as a fixed percentage equal to [
________ ]% annually (the "Trustee Fee Rate") on the Total Loan Balance. As
additional compensation, the Trustee will be entitled to [to be provided as
applicable]. The Trustee's "Corporate Trust Office" for purposes of
presentment and surrender of the Offered Certificates for the final
distribution thereon and for all other purposes is located at [
__________________________________________________ ], or such address as the
Trustee may designate from time to time by notice to the Certificateholders,
the Depositor and the Servicer.
[THE INSURANCE POLICY
The following information has been supplied by
[ ] (the "Insurer") for inclusion in this Prospectus
Supplement. Accordingly, the Depositor, the Servicer and the Underwriter do not
make any representation as to the accuracy and completeness of this information.
The Insurer does not accept any responsibility for the accuracy or
completeness of this Prospectus Supplement or any information or disclosure
contained herein, or omitted herefrom, other than with respect to the accuracy
of the information regarding the Certificate Guaranty Insurance Policy (the
"Insurance Policy") and the Insurer set forth below under this heading "The
Insurance Policy." Additionally, the Insurer makes no representation regarding
the Certificates or the advisability of investing in the Certificates.
THE INSURER
[To be provided if applicable.]
INSURER FINANCIAL INFORMATION
[To be provided if applicable.]
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION ABOUT THE INSURER
[To be provided if applicable.]
YEAR 2000 DISCLOSURE
[To be provided if applicable.]
FINANCIAL STRENGTH RATINGS OF THE INSURER
[To be provided if applicable.]
THE INSURANCE POLICY
[To be provided if applicable.]]
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of approximately [ ______________ ]
[description of Mortgage Loans] Mortgage Loans with original terms to maturity
from the first due date of the scheduled monthly payment (a "Monthly Payment")
of not more than [30] years, having a total Principal Balance as of the
Cut-off Date (after giving effect to Monthly Payments due on that date) of
approximately $[ _______________________________ ] (the "Cut-off Date
Balance"). The Mortgage Loans were originated or acquired by the originators
described herein generally in accordance with the underwriting guidelines
described herein.
Wherever reference is made herein to a percentage of some or all of
the Mortgage Loans, the percentage is determined (unless otherwise specified)
on the basis of the total Principal Balance of the related Mortgage Loans as
of the Cut-off Date.
All of the Mortgage Loans are secured by mortgages or deeds of trust
or other similar security instruments creating [to be provided as applicable.]
The Mortgage Loans to be included in the Mortgage Pool will be acquired by the
Depositor from [Finance America, LLC] (the "Seller"), which acquired the
Mortgage Loans from [ ____________________ ]. See "[The Originator]" and "The
Pooling and Servicing Agreement -- Assignment of Mortgage Loans" herein.
Pursuant to its terms, each Mortgage Loan, other than a loan secured
by a condominium unit, is required to be covered by a standard hazard
insurance policy in an amount generally equal to the lower of the unpaid
principal amount thereof or the replacement value of the improvements on the
Mortgaged Property. Generally, a condominium association is responsible for
maintaining hazard insurance covering the entire building. See "Servicing the
Loans -- Maintenance of Insurance Policies and Other Servicing Procedures" in
the Prospectus.
[Approximately [ ____ ]% of the Mortgage Loans have Loan-to-Value
Ratios in excess of 80%. None of those Mortgage Loans or any other Mortgage
Loans are covered by primary mortgage insurance policies. The "Loan-to-Value
Ratio" of a Mortgage Loan at any time is the ratio of the principal balance of
the Mortgage Loan at the date of determination to (a) in the case of a
purchase, the lesser of the sale price of the Mortgaged Property and its
appraised value at the time of sale, or (b) in the case of a refinance or
modification, the appraised value of the Mortgaged Property at the time of
refinance or modification.]
[Approximately [ ____ ]% of the Mortgage Loans are fully amortizing.
Approximately [ ]% of the Mortgage Loans will have original terms to maturity
that are shorter than their amortization schedules, leaving final payments
("Balloon Payments") due on their maturity dates that are significantly larger
than other monthly payments (such loans, "Balloon Loans"). The Balloon Loans
are generally expected to have original terms to maturity of [15] years. The
ability of the borrower to repay a Balloon Loan at maturity frequently will
depend on the borrower's ability to refinance the loan. Any loss on a Balloon
Loan as a result of the borrower's inability to refinance the loan will be
borne by Certificateholders, to the extent not covered by the applicable
credit enhancement. Neither the Servicer nor the Trustee will make any
Advances with respect to delinquent Balloon Payments.]
ADJUSTABLE RATE MORTGAGE LOANS
[Describe adjustment of adjustable rate Mortgage Loans, if
applicable.]
[THE INDEX
The Index applicable to the determination of the Mortgage Rates for
the Adjustable Rate Mortgage Loans will be [describe if applicable].]
THE MORTGAGE LOANS
The Mortgage Loans are expected to have the following approximate
total characteristics as of the Cut-off Date. Prior to the issuance of the
Certificates, the Mortgage Loans may be removed from the Trust Fund as a
result of incomplete documentation or otherwise, if the Depositor deems
removal necessary or appropriate. In addition, a limited number of other
mortgage loans may be included in the Trust Fund prior to the issuance of the
Offered Certificates.
Number of Mortgage Loans.................
Initial Pool Balance..................... $
Mortgage Rates:
Weighted Average..................... %
Range................................ % to %
Weighted Average Remaining Term to Maturity (in months)
The Principal Balances of the Mortgage Loans range from approximately
$[ ] to approximately $[ ]. The
Mortgage Loans have an average Principal Balance of approximately
$[ ].
The weighted average Loan-to-Value Ratio at origination of the
Mortgage Loans is approximately [ ]%.
No more than approximately [ ]% of the Mortgage Loans are secured by
Mortgaged Properties located in any one zip code area.
The following tables set forth as of the Cut-off Date the number,
total Principal Balance and percentage of the Mortgage Loans having the stated
characteristics shown in the tables in each range. (The sum of the amounts of
the percentages in the following tables may not equal the totals due to
rounding.)
CUT-OFF DATE PRINCIPAL BALANCES
PERCENTAGE OF
MORTGAGE LOANS
RANGE OF NUMBER OF TOTAL BY TOTAL
PRINCIPAL BALANCES ($) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------- -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total........... $ 100.00%
The average Cut-off Date Principal Balance is approximately $ .
LOAN-TO-VALUE RATIOS
PERCENTAGE OF
MORTGAGE LOANS
RANGE OF ORIGINAL NUMBER OF TOTAL BY TOTAL
LOAN-TO-VALUE RATIOS (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------------ -------------- ----------------- -----------------
$ %
______________ _________________ ________________
Total................ $ 100.00%
The weighted average original Loan-to-Value Ratio is approximately %.
MORTGAGE RATES
PERCENTAGE OF
MORTGAGE LOANS
RANGE OF NUMBER OF TOTAL BY TOTAL
MORTGAGE RATES(%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ----------------- -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total......... $ 100.00%
- ---------
* Reflects current Mortgage Rates of Adjustable Rate Mortgage Loans.
The weighted average Mortgage Rate is approximately _______ % per
annum.
LOAN TYPES
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
LOAN TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- --------- -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total...... $ 100.00%
ORIGINAL TERMS TO MATURITY
PERCENTAGE OF
MORTGAGE LOANS
RANGE OF NUMBER OF TOTAL BY TOTAL
MATURITIES (MONTHS) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------------- -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total........ $ 100.00%
The weighted average original term to maturity is approximately
________ months.
REMAINING TERMS TO MATURITY
PERCENTAGE OF
MORTGAGE LOANS
REMAINING TERM TO NUMBER OF TOTAL BY TOTAL
MATURITY (MONTHS) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ----------------- -------------- ----------------- -----------------
$ %
_______________ __________________ _________________
Total.......... $ 100.00%
The weighted average remaining term to maturity of the fully
amortizing Mortgage Loans is approximately ________ months.
GEOGRAPHIC DISTRIBUTION
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
STATE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----- -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total........ $ 100.00%
PROPERTY TYPES
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
PROPERTY TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------- -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total....... $ 100.00%
LOAN PURPOSES
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
LOAN PURPOSE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------ -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total........ $ 100.00%
OCCUPANCY STATUS
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
OCCUPANCY STATUS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------- -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total......... $ 100.00%
DOCUMENTATION TYPES
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
DOCUMENTATION TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------ -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total.......... $ 100.00%
CREDIT GRADES
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
CREDIT GRADE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------ -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total....... $ 100.00%
PREPAYMENT PENALTIES
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
PREPAYMENT PENALTY MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------ -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total.......... $ 100.00%
MAXIMUM RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS
PERCENTAGE OF
MORTGAGE LOANS
RANGE OF NUMBER OF TOTAL BY TOTAL
MAXIMUM RATES (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----------------- -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total....... $ 100.00%
The weighted average Maximum Rate of the Adjustable Rate Mortgage
Loans is approximately % per annum.
MINIMUM RATES OF THE ADJUSTABLE RATE MORTGAGE LOANS
PERCENTAGE OF
MORTGAGE LOANS
RANGE OF NUMBER OF TOTAL BY TOTAL
MINIMUM RATES (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------------ -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total....... $ 100.00%
The weighted average Minimum Rate of the Adjustable Rate Mortgage
Loans is approximately % per annum.
<TABLE>
<CAPTION>
GROSS MARGINS OF THE ADJUSTABLE RATE MORTGAGE LOANS
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
RANGE OF GROSS MARGINS (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
______________ _________________ _________________
Total................. $ 100.00%
</TABLE>
The weighted average Gross Margin of the Adjustable Rate Mortgage
Loans is approximately % per annum.
NEXT ADJUSTMENT DATE OF THE ADJUSTABLE RATE MORTGAGE LOANS
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
NEXT ADJUSTMENT DATE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- -------------------- -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total......... $ 100.00%
INITIAL FIXED TERM/SUBSEQUENT ADJUSTABLE RATE TERM
OF THE ADJUSTABLE RATE MORTGAGE LOANS
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
INITIAL FIXED TERM/SUBSEQUENT NUMBER OF TOTAL BY TOTAL
ADJUSTABLE RATE TERM MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
-------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
______________ _________________ _________________
Total................. $ 100.00%
</TABLE>
PERIODIC CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
PERIODIC CAP (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------- -------------- ----------------- -----------------
$ 100.00%
______________ _________________ _________________
Total........... $ 100.00%
INITIAL CAPS OF THE ADJUSTABLE RATE MORTGAGE LOANS
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
INITIAL CAP (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
--------------- -------------- ----------------- -----------------
$ %
______________ _________________ _________________
Total........ $ 100.00%
[SUBSEQUENT MORTGAGE LOANS
The obligation of the Trust Fund to purchase additional Mortgage Loans
(the "Subsequent Mortgage Loans") on [any] date, as specified in the Pooling
and Servicing Agreement (each, a "Subsequent Transfer Date") will be subject
to the Subsequent Mortgage Loans meeting the following criteria: [to be
provided as applicable]. These criteria will be based on the characteristics
of the Subsequent Mortgage Loans on the related Subsequent Transfer Date.
The characteristics of Subsequent Mortgage Loans may vary
significantly from time to time subject to the requirements described above,
and may bear no particular relationship to the characteristics of the initial
Mortgage Loans at any time. It is expected that a substantial portion of the
Subsequent Mortgage Loans will be [to be provided if applicable.]]
ADDITIONAL INFORMATION
The description in this Prospectus Supplement of the Mortgage Pool and
the Mortgaged Properties is based upon the Mortgage Pool as constituted at the
close of business on the Cut-off Date, as adjusted for Monthly Payments due on
or before that date. A Current Report on Form 8-K will be available to
purchasers of the Offered Certificates and will be filed, together with the
Pooling and Servicing Agreement, with the Securities and Exchange Commission
within fifteen days after the initial issuance of the Offered Certificates. In
the event that Mortgage Loans are removed from or added to the Mortgage Pool
as set forth herein under "Description of the Mortgage Pool," the removal or
addition, to the extent material, will be noted in the Current Report on Form
8-K.
[THE ORIGINATOR
The information in this section has been provided by [the Originator].
None of the Depositor, the Trustee, the Insurer, the Underwriter or any of
their respective affiliates has made or will make any representation as to the
accuracy or completeness of this information.
GENERAL
[Description of the Originator.]
LENDING ACTIVITIES AND LOAN SALES
[ ________________________________ ] originates real estate loans
through its network of offices and loan origination centers. [
________________________________ ] also participates in secondary market
activities by originating and selling mortgage loans while continuing to
service the majority of the loans sold. In other cases [ ]'s whole loan sale
agreements provide for the transfer of servicing rights.
[ ________________________________ ]'s primary lending activity is
funding loans to enable borrowers to purchase or refinance residential real
property, which loans are secured by first or second liens on the related real
property. [ ________________________________ ]'s single-family real estate
loans are predominantly "conventional" mortgage loans, meaning that they are
not insured by the Federal Housing Administration or partially guaranteed by
the U.S. Department of Veterans Affairs.
The following table summarizes [ ________________________________ ]'s
one- to four-family residential mortgage loan origination and sales activity
for the periods shown below. Sales activity may include sales of mortgage
loans purchased by [ ] from other loan originators.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 THREE MONTHS ENDED MARCH 31,
--------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
Originated and
<S> <C> <C> <C> <C> <C> <C> <C>
purchased.... $ $ $ $ $ $ $
Sales........ $ $ $ $ $ $ $
- --------------------------------------------------------------------------------------------
</TABLE>
UNDERWRITING GUIDELINES
The Mortgage Loans were originated generally in accordance with
guidelines (the "Underwriting Guidelines") established by [
__________________________________ ]. The Underwriting Guidelines are
primarily intended to evaluate the value and adequacy of the mortgaged
property as collateral and are also intended to consider the borrower's credit
standing and repayment ability. On a case-by-case basis and only with the
approval of two or more senior lending officers, [
__________________________________ ] may determine that, based upon
compensating factors, a prospective borrower not strictly qualifying under the
underwriting risk category guidelines described below warrants an underwriting
exception. Compensating factors may include, but are not limited to, low
loan-to-value ratio, low debt-to-income ratio, good credit history, stable
employment and time in residence at the applicant's current address. It is
expected that a substantial number of the Mortgage Loans will have been
originated under underwriting exceptions.]
[Describe Originator's underwriting guidelines.]
[THE SERVICER
The information in this section has been provided by [the Servicer].
None of the Depositor, the Trustee, the Insurer, the Underwriter or any of
their respective affiliates has made or will make any representation as to the
accuracy or completeness of this information.
GENERAL
[Description of the Servicer]
LOAN SERVICING
[To be provided as applicable.]
SERVICING PRACTICES AND EXPERIENCE
[To be provided as applicable.]
The following table sets forth the delinquency and loss experience at
the dates indicated for residential (one- to four-family and multifamily)
first lien mortgage loans serviced by the Servicer that were originated or
purchased by the Servicer:
<TABLE>
<CAPTION>
DELINQUENCIES AND FORECLOSURES
(DOLLARS IN THOUSANDS)
As of As of As of
[ ] [ ] [ ]
-------------------------------- --------------------------------- ------------------------------------
Percent Percent Percent Percent Percent Percent
By No. By By By By No. By By By By By By
of Dollar Number Dollar of Dollar Number Dollar By No. Dollar Number Dollar
Loans Amount of Loans Amount Loans Amount of Loans Amount of Loans Amount of Loans Amount
------ ------- --------- -------- ------- ------ -------- ------ -------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Portfolio $ % % $ % % $ % %
Period of
Delinquency(1)
30-59 Days... % % $ % % $ % %
60-89 Days... % % $ % % $ % %
90 Days or more. % % $ % % $ % %
Total Delinquent
Loans % % $ % % $ % %
Loans in Foreclosure(2) % % $ % % $ % %
_______________
(1) Includes [ ] loans totaling $[ ] for [ ], which were
delinquent at the time of transfer to the Servicer.
(2) Loans in foreclosure are also included under the subheading "90 Days
or more" and the heading "Total Delinquent Loans."
</TABLE>
<TABLE>
<CAPTION>
REAL ESTATE OWNED
(DOLLARS IN THOUSANDS)
As of As of As of
[ ] [ ] [ ]
----------------------- ------------------------ ---------------------
By By By
By No. Dollar By No. Dollar By No. Dollar
of Loans Amount of Loans Amount of Loans Amount
---------- -------- ------------ --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio $ $ $
Foreclosed Loans (1) $ $ $
Foreclosure Ratio (2) % % % % % %
</TABLE>
(1) For the purposes of these tables, "Foreclosed Loans" means the
principal balance of mortgage loans secured by mortgaged properties
the title to which has been acquired by the Servicer.
(2) The "Foreclosure Ratio" is equal to the aggregate principal
balance or number of Foreclosed Loans divided by the aggregate
principal balance, or number, as applicable, of mortgage loans in the
Total Portfolio at the end of the indicated period.
<TABLE>
<CAPTION>
LOAN LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
As of As of As of
[ ] [ ] [ ]
-------------- --------------- ------------
<S> <C> <C> <C>
Total Portfolio (1) $ $ $
Net Losses (2, 3) $ $ $
Net Losses as a Percentage of
Total Portfolio % % %
</TABLE>
(1) "Total Portfolio" on the date stated above is the principal
balance of the mortgage loans outstanding on the last day of the
period.
(2) "Net Losses" are actual losses incurred on liquidated properties
and shortfall payoffs for each respective period. Losses on liquidated
properties are calculated as net sales proceeds less book value
(exclusive of loan purchase premium or discount). Shortfall payoffs
are calculated as the difference between principal payoff amount and
unpaid principal at the time of payoff.
(3) As of [ ], includes $[ ] of losses attributable to loans
which were delinquent at the time of transfer to the Servicer.
There can be no assurance that the delinquency and loss experience of
the Mortgage Loans will correspond to the loss experience of the Servicer's
mortgage portfolio set forth in the table above. The statistics shown above
represent the delinquency and loss experience for the Servicer's total
servicing portfolio only for the periods presented, whereas the total
delinquency and loss experience on the Mortgage Loans will depend on the
results over the life of the Trust. The Servicer's portfolio includes mortgage
loans with payment and other characteristics that are not representative of
the payment and other characteristics of the Mortgage Loans. A substantial
number of the Mortgage Loans may also have been originated based on
Underwriting Guidelines that are less stringent than those generally
applicable to the servicing portfolio reflected in the table. If the
residential real estate market experiences an overall decline in property
values, the actual rates of delinquencies, foreclosures and losses could be
higher than those previously experienced by the Servicer. In addition, adverse
economic conditions (which may or may not affect real property values) may
affect the timely payment by borrowers of scheduled payments of principal and
interest on the Mortgage Loans and, accordingly, the actual rates of
delinquencies, foreclosures and losses on to the Mortgage Loans.]
THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of [
______________________________ ] among the Depositor, the Servicer and the
Trustee. Reference is made to the Prospectus for important information in
addition to that set forth in this Prospectus Supplement regarding the terms
and conditions of the Pooling and Servicing Agreement and the Offered
Certificates. Offered Certificates in certificated form will be transferable
and exchangeable at the Corporate Trust Office of the Trustee. [
_______________________________________________ ] will serve as Certificate
Registrar and Paying Agent.
ASSIGNMENT OF MORTGAGE LOANS
The Depositor will assign the Mortgage Loans to the Trustee, together
with all principal and interest received with respect to the Mortgage Loans on
and after the Cut-off Date, other than Monthly Payments due on or before that
date. Each Mortgage Loan will be identified in a schedule appearing as an
exhibit to the Pooling and Servicing Agreement that will specify with respect
to each Mortgage Loan, among other things, the original principal balance and
the Principal Balance as of the close of business on the Cut-off Date, the
Mortgage Rate, the Monthly Payment and the maturity date.
The Trustee will, concurrently with the assignment to it of the
property constituting the Trust, authenticate and deliver the Certificates.
[As to each Mortgage Loan, the following documents are generally
required to be delivered to the Trustee or its custodian (the "Custodian") in
accordance with the Pooling and Servicing Agreement:
o the related original Mortgage Note endorsed without recourse to
the Trustee or in blank;
o the original Mortgage with evidence of recording indicated
thereon (or, if the original recorded Mortgage has not yet been
returned by the recording office, a copy certified to be a true
and complete copy of the Mortgage sent for recording), the
original security agreement and related documents;
o an original assignment of the Mortgage to the Trustee or in blank
in recordable form and originals of all intervening assignments,
if any, showing a complete chain of title from origination to the
Trustee;
o the policies of title insurance issued with respect to each
Mortgage Loan; and
o the originals of any assumption, modification, extension or
guaranty agreements.
Where necessary to protect the interest of the Trustee in the Mortgage Loans,
the assignments of each Mortgage to the Trustee are required to be submitted
for recording promptly after the Closing Date.]
Under the terms of the agreement (the "Mortgage Loan Purchase
Agreement") pursuant to which the Seller purchased Mortgage Loans from [the
Originator] and the Depositor purchased Mortgage Loans from the Seller, the
Custodian [has conducted an initial review of the mortgage loan documents and
has notified] the Depositor [, the Originator] and [the Seller] as to each
mortgage loan document that either has not yet been delivered to the Depositor
as required or appears to be not properly executed, not in conformity with the
description of the Mortgage Loan on the Mortgage Loan schedule or otherwise
defective. If any Mortgage Loan document is not delivered or any material
defect in a document is not cured within the time period specified in the
Mortgage Loan Purchase Agreement, [the Originator] will be required to
repurchase the affected Mortgage Loan for a price equal to the unpaid
principal balance thereof plus accrued interest thereon (the "Repurchase
Price") or, in certain circumstances, to substitute another mortgage loan.
[[The Originator] has made to the Seller and the Depositor under the
Mortgage Loan Purchase Agreement representations and warranties regarding the
Mortgage Loans intended to address certain material conditions that may arise
with respect to the Mortgage Loans. These include, among others, the following
representations and warranties: [representations and warranties to be
provided]. The Seller's and the Depositor's rights under these representations
and warranties will be assigned to the Trustee for the benefit of
Certificateholders. In the event of a breach of any of these representations
or warranties that materially and adversely affects the value of any Mortgage
Loan or the interests of Certificateholders or the Insurer, [the Originator]
will be obligated, within 60 days following its discovery of a breach or
receipt of notice of a breach to cure the breach or purchase the affected
Mortgage Loan from the Trust Fund for the Repurchase Price or, in certain
circumstances, to substitute another mortgage loan.]
To the extent that any Mortgage Loan as to which a representation or
warranty has been breached is not repurchased by [the Originator] and a
Realized Loss occurs on the Mortgage Loan, holders of Offered Certificates, in
particular the Class [Subordinate] Certificates, may incur a loss if the
applicable credit enhancement is not sufficient to cover that loss.
VOTING RIGHTS
Voting rights of Certificateholders under the Pooling and Servicing
Agreement will be allocated among the Classes of Certificates and among the
Certificates of each Class as provided in the Pooling and Servicing Agreement.
GENERAL SERVICING PROVISIONS
The Mortgage Loans will be serviced by the Servicer in accordance with
the provisions of the Pooling and Servicing Agreement.
[The Servicer will be required to use reasonable efforts to collect
all amounts due under each Mortgage Loan and to administer the Mortgage Loans
in accordance with generally accepted servicing practices. See "[The Servicer]
- -- Servicing Practices and Experience." The Servicer will be required to
deposit all amounts collected and recovered with respect to the Mortgage Loans
within [______] Business Days of receipt thereof in a separate account in the
name of the Trustee (the "Collection Account"); on the [ ____ ] day of each
month, or if that date is not a Business Day, on the immediately following
Business Day, the Servicer will be required to transfer the Interest
Remittance Amount and the Principal Remittance Amount to a separate account
maintained by the Trustee for the benefit of the Certificateholders (the
"Certificate Account").
The Servicer will be prohibited under the Pooling and Servicing
Agreement from making any material modification to the terms of a Mortgage
Loan, including a change in the Mortgage Rate other than as provided in the
Mortgage Note, deferral or forgiveness of a Monthly Payment or extension of
the maturity date, unless the Mortgage Loan is in default or default is, in
the judgment of the Servicer, reasonably foreseeable.
The Servicer will also be prohibited from waiving any prepayment
premium except in the case of a default or imminent default, and then may
waive the prepayment premium only if the waiver would maximize amounts
collected under the Mortgage Loan.]
PREPAYMENT INTEREST SHORTFALLS
When a borrower prepays a Mortgage Loan in full or in part between
Monthly Payment dates, the borrower pays interest on the amount prepaid only
from the last Monthly Payment date to the date of prepayment, with a resulting
reduction in interest payable for the month during which the prepayment is
made. [Any Prepayment Interest Shortfall resulting from a prepayment in full
or in part is required to be paid by the Servicer, but only to the extent that
the shortfall does not exceed the total of the Servicing Fees for the
applicable Distribution Date.]
ADVANCES
[The Servicer will be obligated to make advances ("Advances") with
respect to delinquent payments of principal of and interest on the Mortgage
Loans (other than Balloon Payments), adjusted to the related Mortgage Rate
less the Servicing Fee Rate, to the extent that those Advances, in its
judgment, are recoverable from future payments and collections, insurance
payments or proceeds of liquidation of a Mortgage Loan. The Trustee will be
obligated to make any required Advance if the Servicer fails in its obligation
to do so, to the extent provided in the Pooling and Servicing Agreement. The
Servicer or the Trustee, as applicable, will be entitled to recover any
Advances made by it with respect to a Mortgage Loan out of late payments
thereon or out of related liquidation proceeds and insurance proceeds or, if
the Servicer determines that those Advances are not recoverable from those
sources, then from collections on other Mortgage Loans. These reimbursements
may increase Realized Losses.
The purpose of making Advances is to maintain a regular cash flow to
Certificateholders, rather than to guarantee or insure against losses. No
party will be required to make any Advances with respect to reductions in the
amount of the Monthly Payments on Mortgage Loans due to reductions made by a
bankruptcy court in the amount of a Monthly Payment owed by a borrower or a
reduction of the applicable Mortgage Rate by application of the Relief Act.]
SERVICING ADVANCES
The Servicer will be required to advance its own funds for certain
purposes, including preserving and restoring Mortgaged Properties, payment of
delinquent taxes and insurance premiums, managing and disposing of REO
Properties, and legal proceedings. Advances for these and similar purposes are
referred to as "Servicing Advances." The Servicer will be reimbursed for
Servicing Advances made with respect to a Mortgage Loan out of late payments
thereon, to the extent provided in the Pooling and Servicing Agreement, or out
of related liquidation proceeds and insurance proceeds, if the Servicer
determines that Servicing Advances are not recoverable from those sources,
then from collections and other recoveries on other Mortgage Loans. The
Pooling and Servicing Agreement will require that the Servicer not make a
Servicing Advance that is not expected to be recoverable from proceeds of the
related Mortgage Loan unless, in the Servicer's judgment, making that
Servicing Advance is in the best interests of the Certificateholders.
COLLECTION OF TAXES AND INSURANCE PREMIUMS
The Servicer will, to the extent required by the related loan
documents, maintain escrow accounts for the collection of hazard insurance
premiums as well as real estate taxes and similar items with respect to the
Mortgage Loans, and will make Servicing Advances with respect to delinquencies
in required escrow payments by the related borrowers.
INSURANCE COVERAGE
The Servicer is required to obtain and thereafter maintain in effect a
bond or similar form of insurance coverage (which may provide blanket
coverage) insuring against loss occasioned by the errors and omissions of
their respective officers and employees.
PURCHASES OF DEFAULTED MORTGAGE LOANS
The Servicer may, but will not be obligated to, purchase any Mortgage
Loan that becomes three months or more delinquent in payment or as to which
the Servicer has started foreclosure proceedings, for a price equal to the
unpaid principal balance plus interest accrued and unpaid.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement will provide that each year a firm
of independent accountants will furnish a statement to the Trustee to the
effect that the firm has examined certain documents and records relating to
the servicing of mortgage loans by the Servicer and that, on the basis of that
examination, the firm is of the opinion that the servicing has been conducted
in accordance with applicable accounting standards, except for those
exceptions as the firm believes to be immaterial and those exceptions set
forth in the statement.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer will be paid a monthly fee (the "Servicing Fee") with
respect to each Mortgage Loan calculated as [ ____ ]% annually (the "Servicing
Fee Rate") on the outstanding principal balance of each Mortgage Loan. The
Servicer will also be entitled to receive, to the extent provided in the
Pooling and Servicing Agreement, additional compensation, in the form of any
interest or other income earned on funds it has deposited in the Collection
Account pending remittance to the Trustee, as well as certain customary fees
and charges paid by borrowers (other than prepayment premiums).
[The Servicing Fee is subject to reduction as described above under
"-- Prepayment Interest Shortfalls."]
SUBSERVICING
The Servicer will be prohibited from assigning the responsibility for
servicing the Mortgage Loans, except as permitted by the Pooling and Servicing
Agreement, but it may employ one or more subservicers. If the Servicer chooses
to employ subservicers, the Servicer will remain liable for fulfillment of its
obligations under the Pooling and Servicing Agreement, and will be considered
to have itself received any payment received by a subservicer whether or not
the subservicer actually remits that payment.
RESIGNATION OR REMOVAL OF THE SERVICER
The Servicer will agree in the Pooling and Servicing Agreement not to
resign except with the consent of the Trustee, unless the Servicer delivers to
the Trustee an opinion of legal counsel to the effect that the Servicer is no
longer permitted under applicable law to perform the duties of the Servicer
under the Pooling and Servicing Agreement.
If the Servicer is in default under the Pooling and Servicing
Agreement, the Trustee or Certificateholders having a majority of Voting
Rights may remove the Servicer. [Events of default include:
o failure by the Servicer to remit any required payment, including
any Advance, to the Trustee for [one] Business Day after receipt
of written notice that the payment has not been made;
o failure by the Servicer to make a required Servicing Advance for
[60] days after receipt of written notice that the Servicing
Advance has not been made;
o failure by the Servicer to fulfill any other material requirement
under the Pooling and Servicing Agreement within the applicable
time period;
o insolvency of the Servicer; and
o other events specified in the Pooling and Servicing Agreement.]
[If the Servicer is removed, the Trustee will immediately assume the
role of Servicer under the Pooling and Servicing Agreement unless another
Servicer is appointed pursuant to the Pooling and Servicing Agreement. The
Trustee will solicit bids from prospective successor Servicers as provided in
the Pooling and Servicing Agreement. If a qualifying bid is not received, the
Trustee will continue to service the Mortgage Loans if it is legally qualified
to do so until the Trustee appoints a successor Servicer as provided in the
Pooling and Servicing Agreement. If the servicing rights are sold, any
proceeds of the sale after deduction of expenses will be paid to the
predecessor Servicer.]
YIELD CONSIDERATIONS
GENERAL
The yields to maturity (or to early termination) on the Offered
Certificates will be affected by the rate of principal payments on the
Mortgage Loans (including prepayments, which may include amounts received by
virtue of purchase, condemnation, insurance or foreclosure) on the Mortgage
Loans. Yields will also be affected by the extent to which Mortgage Loans
bearing higher Mortgage Rates prepay at a more rapid rate than Mortgage Loans
with lower Mortgage Rates, the amount and timing of borrower delinquencies and
defaults resulting in Realized Losses, the application of Monthly Excess
Cashflow, the purchase price paid for the Offered Certificates and other
factors.
Principal prepayments may be influenced by a variety of economic,
geographic, demographic, social, tax, legal and other factors. In general, if
prevailing interest rates fall below the interest rates on the Mortgage Loans,
the Mortgage Loans are likely to be subject to higher prepayments than if
prevailing rates remain at or above the interest rates on the Mortgage Loans.
Conversely, if prevailing interest rates rise above the interest rates on the
Mortgage Loans, the rate of prepayment would be expected to decrease. Other
factors affecting prepayment of the Mortgage Loans include such factors as
changes in borrowers' housing needs, job transfers, unemployment, borrowers'
net equity in the mortgaged properties, changes in the value of the mortgaged
properties, mortgage market interest rates and servicing decisions. The
Mortgage Loans generally have due-on-sale clauses.
[Approximately [ ______ ]% of the Mortgage Loans are subject to
prepayment premiums during intervals ranging from one to five years following
origination, as described under "Description of the Mortgage Pools" herein.
The prepayment premiums may have the effect of reducing the amount or the
likelihood of prepayment of these Mortgage Loans during intervals when a
prepayment premium would be payable.]
The rate of principal payments on the Mortgage Loans will also be
affected by the amortization schedules of the Mortgage Loans, the rate and
timing of prepayments by the borrowers, liquidations of defaulted Mortgage
Loans, repurchases of Mortgage Loans due to certain breaches of
representations and warranties or defective documentation and exercise by [the
holder of the Residual Certificate] of its right to purchase all of the
Mortgage Loans as described herein. The timing of changes in the rate of
prepayments, liquidations and purchases of the related Mortgage Loans may
significantly affect the yield to an investor, even if the average rate of
principal payments experienced over time is consistent with an investor's
expectation. Because the rate and timing of principal payments on the Mortgage
Loans will depend on future events and on a variety of factors (as described
more fully herein and in the Prospectus under "Yield Considerations") no
assurance can be given as to the rate or the timing of principal payments on
the Offered Certificates. In general, the earlier a prepayment of principal of
the related Mortgage Loans, the greater the effect on an investor's yield. The
effect on an investor's yield of principal payments occurring at a rate higher
(or lower) than the rate anticipated by the investor during the period
immediately following the issuance of the Certificates may not be offset by a
subsequent like decrease (or increase) in the rate of principal payments.
From time to time, areas of the United States may be affected by
flooding, severe storms, landslides, wildfires or other natural disasters.
[The Originator] will represent and warrant that as of the Closing Date each
Mortgaged Property was free of material damage. In the event of an uncured
breach of this representation and warranty that materially and adversely
affects the value of a Mortgage Loan, [the Originator] will be required to
repurchase the affected Mortgage Loan or, under certain circumstances,
substitute another mortgage loan. If any damage caused by earthquakes,
flooding, storms, wildfires, or landslides (or other cause) occurs after the
Closing Date, [the Originator] will not have any repurchase obligation. In
addition, the standard hazard policies covering the Mortgaged Properties
generally do not cover damage caused by earthquakes, flooding and landslides,
and earthquake, flood or landslide insurance may not have been obtained with
respect to the affected Mortgaged Properties. As a consequence, Realized
Losses could result. To the extent that the insurance proceeds received with
respect to any damaged Mortgage Properties are not applied to the restoration
thereof, the proceeds will be used to prepay the related Mortgage Loans in
whole or in part. Any repurchases or repayments of the Mortgage Loans may
reduce the weighted average lives of the Offered Certificates and will reduce
the yields on the Offered Certificates to the extent they are purchased at a
premium.
Prepayments, liquidations and purchases of the Mortgage Loans will
result in distributions to holders of the related Certificates of principal
amounts that would otherwise be distributed over the remaining terms of those
Mortgage Loans. The rate of defaults on the Mortgage Loans will also affect
the rate and timing of principal payments on the Mortgage Loans. In general,
defaults on mortgage loans are expected to occur with greater frequency in
their early years.
The yields on the Class [ ] Certificates may be adversely affected by
Net Prepayment Interest Shortfalls on the Mortgage Loans.
The yields to investors in the Offered Certificates may be affected by
the purchase of defaulted Mortgage Loans by the Servicer and by the exercise
by [ ] of its right to purchase the Mortgage Loans, as described under
"Description of the Certificates -- Optional Purchase of Mortgage Loans;
Termination of the Trust Fund" herein, or the failure of [ ____________ ] to
exercise that right.
If the purchaser of an Offered Certificate offered at a discount from
its initial principal amount calculates its anticipated yield to maturity (or
early termination) based on an assumed rate of payment of principal that is
faster than that actually experienced on the related Mortgage Loans, the
actual yield may be lower than that so calculated. Conversely, if the
purchaser of a Certificate offered at a premium calculates its anticipated
yield based on an assumed rate of payment of principal that is slower than
that actually experienced on the related Mortgage Loans, the actual yield may
be lower than that so calculated.
[The Interest Rates applicable to the Offered Certificates will be
affected by the level of [describe index] from time to time, and by the
Mortgage Rates of the Mortgage Loans from time to time as described under
"Risk Factors -- Mortgage Loan Interest Rates May Limit Interest Rates on the
Certificates."]
OVERCOLLATERALIZATION
[Describe if applicable.]
[SUBORDINATION OF THE CLASS [MEZZANINE/SUBORDINATE] CERTIFICATES
As described herein, the Senior Certificates are senior to the Class
[Mezzanine/ Subordinate] Certificates, and the Senior Certificates will have a
preferential right to receive amounts in respect of interest to the extent of
the Interest Remittance Amount and amounts in respect of principal to the
extent of the Principal Distribution Amount for the related Mortgage Pool. As
a result, the yield on the Class [Mezzanine/Subordinate] Certificates will be
particularly sensitive to delinquencies and losses on the Mortgage Loans.]
WEIGHTED AVERAGE LIFE
Weighted average life refers to the average amount of time that will
elapse from the date of issuance of a security to the date of distribution to
the investor of each dollar distributed in net reduction of principal of the
security (assuming no losses). The weighted average lives of the Offered
Certificates will be influenced by, among other things, the rate at which
principal of the related Mortgage Loans is paid, which may be in the form of
scheduled amortization, prepayments or liquidations.
Prepayments on mortgage loans are commonly measured relative to a [ ]
prepayment standard or model. The model used in this Prospectus Supplement
represents [ __________________________ ]. [ ________________________________ ]
does not purport to be either a historical description of the prepayment
experience of any pool of mortgage loans or a prediction of the anticipated
rate of prepayment of any mortgage loans, including the Mortgage Loans to be
included in the Trust.
[The following tables were prepared based on the following
assumptions, among other things (collectively, the "Modeling Assumptions"):
o the initial Class Principal Amounts are as set forth on the cover
of this Prospectus Supplement, and the Interest Rates are as
described herein;
o each Monthly Payment of principal and interest is timely received
on the first day of each month starting in [ ];
o principal prepayments are received in full on the first day of
each month starting in [ ] and there are no Net Prepayment
Interest Shortfalls;
o prepayments are received on the Mortgage Loans at the [ ] rate;
o there are no defaults or delinquencies on the Mortgage Loans;
o Distribution Dates occur on the [ ]th day of each month, starting
in [ ];
o there are no re-purchases or substitutions of the Mortgage Loans;
o [the Mortgage Rates of the Adjustable Rate Mortgage Loans adjust
semi-annually;]
o [the value of the Index is [ ]%;]
o [the value of LIBOR is %;]
o the Certificates are issued on [ ];
o the sum of the Trustee Fee Rate and the Servicing Fee Rate is
[ ]%; and
o the Mortgage Loans were aggregated into assumed mortgage loans
having the following characteristics:]
ASSUMED MORTGAGE LOAN CHARACTERISTICS
ORIGINAL REMAINING
GROSS TERM TO TERM TO LOAN
PRINCIPAL COUPON MATURITY MATURITY AGE GROSS
LOAN TYPE BALANCE($) RATE(%)(MONTHS) (MONTHS) (MONTHS) MARGIN(%)
The actual characteristics of the Mortgage Loans may, and the
performance of the Mortgage Loans will, differ from the assumptions used in
constructing the tables set forth below, which are hypothetical in nature and
are provided only to give a general sense of how the principal cash flows
might behave under varying prepayment scenarios. For example, it is not
expected that the Mortgage Loans will prepay at a constant rate until
maturity, that all of the Mortgage Loans will prepay at the same rate or that
there will be no defaults or delinquencies on the Mortgage Loans. Moreover,
the diverse remaining terms to maturity of the Mortgage Loans could produce
slower or faster principal distributions than indicated, even if the weighted
average remaining term to maturity of the Mortgage Loans is as assumed. Any
difference between those assumptions and the actual characteristics and
performance of the Mortgage Loans or actual prepayment or loss experience will
cause the percentages of initial Class Principal Amounts outstanding over time
and the weighted average lives of the Offered Certificates to differ (which
difference could be material) from the corresponding [assumed prepayment
rates].
Subject to the foregoing discussion and assumptions, the following
tables indicate the weighted average lives of the Offered Certificates and set
forth the percentages of the initial Class Principal Amounts of the Offered
Certificates that would be outstanding after each of the Distribution Dates
shown at the indicated [assumed prepayment rates].
The weighted average life of an Offered Certificate is determined by
(1) multiplying the net reduction, if any, of the applicable Class Principal
Amount by the number of years from the date of issuance of the Offered
Certificate to the related Distribution Date, (2) adding the results and (3)
dividing the sum by the total of the net reductions of Class Principal Amount
described in (1) above.
PERCENTAGE OF INITIAL CLASS PRINCIPAL AMOUNT OF THE
CLASS [ ] CERTIFICATES OUTSTANDING UNDER THE FOLLOWING [PREPAYMENT RATES]
Distribution Date [ ] [ ] [ ] [ ] [ ] [ ]
- ----------------- --- --- --- --- --- ---
Initial Percentage......... 100 100 100 100 100 100
Weighted Average
Life in Years
With Optional Termination...........
Without Optional Termination........
- ---------
* Based upon the assumption that [ __________________________ ] exercises
its option to repurchase the Mortgage Loans as described under
"Description of the Certificates -- Optional Purchase of Mortgage Loans;
Termination of the Trust Fund" herein, except in the case of the "Weighted
Average Life With Optional Termination."
FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
[The Trust Agreement provides that the Trustee will elect to treat the
Trust Fund as a [REMIC] [grantor trust] [FASIT]. Upon the issuance of the
Offered Certificates, Brown & Wood LLP ("Tax Counsel") will deliver its
opinion to the effect that, assuming compliance with the Pooling and Servicing
Agreement, for federal income tax purposes, [the Trust Fund will qualify as a
REMIC within the meaning of Section 860D of the Internal Revenue Code of 1986,
as amended (the "Code"), and that the Offered Certificates will represent the
ownership of regular interests in the REMIC.] [Offered Certificates will be
treated as debt and the trust will not be characterized as an association, a
publicly traded partnership taxable as a corporation, or a taxable mortgage
pool.] [The trust will qualify as a FASIT.]
TAXATION OF OFFERED CERTIFICATES
[To be provided as applicable.]
STATE INCOME TAX CONSIDERATIONS
In addition to the federal income tax matters described under "Federal
Income Tax Considerations" above, prospective investors should consider the
state income tax consequences of the acquisition, ownership and disposition of
the Offered Certificates. State income tax law may differ substantially from
the corresponding federal tax law, and this discussion does not purport to
describe any aspect of the income tax laws of any state. Therefore,
prospective investors should consult their own tax advisors with respect to
the various tax consequences of investments in the Offered Certificates.
LEGAL INVESTMENT CONSIDERATIONS
[The [Senior Certificates] [none of the Certificates] will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA"), for so long as they are rated
in one of the two highest rating categories by one or more nationally
recognized rating agencies, and, as such, are legal investments for certain
entities to the extent provided in SMMEA.] These investments, however, will be
subject to general regulatory considerations governing investment practices
under state and federal laws.
Institutions whose investment activities are subject to review by
certain regulatory authorities may be or may become subject to restrictions,
which may be retroactively imposed by the regulatory authorities, on the
investment by those institutions in certain mortgage related securities. In
addition, several states have adopted or may adopt regulations that prohibit
certain state-chartered institutions from purchasing or holding similar types
of securities.
Accordingly, investors should consult their own legal advisors to
determine whether and to what extent the Offered Certificates may be purchased
by them.
See "Legal Investment Considerations" in the Prospectus.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be applied by
the Depositor, or an affiliate thereof, toward the purchase of the Mortgage
Loans from the Seller.
UNDERWRITING
[Subject to the terms and conditions provided in the underwriting
agreement and in a terms agreement (collectively, the "Underwriting
Agreement") between the Depositor, the Seller and the Underwriter, the
Depositor and the Seller has agreed to sell to the Underwriter, and the
Underwriter has agreed to purchase from the Depositor, all of the Offered
Certificates.
The distribution of the Offered Certificates by the Underwriter will
be effected in each case from time to time in one or more negotiated
transactions, or otherwise, at varying prices to be determined, in each case,
at the time of sale. The Underwriter may effect these transactions by selling
the Certificates to or through dealers, and dealers may receive from the
Underwriter, for whom they act as agent, compensation in the form of
underwriting discounts, concessions or commissions. The Underwriter and any
dealers that participate with the Underwriter in the distribution of the
Certificates may be deemed to be an underwriter, and any discounts,
commissions or concessions received by them, and any profit on the resale of
the Certificates purchased by them, may be deemed to be underwriting discounts
and commissions under the Securities Act of 1933, as amended (the "Act"). The
Underwriting Agreement provides that the Depositor will indemnify the
Underwriter against certain civil liabilities, including liabilities under the
Act.]
Expenses incurred by the Depositor in connection with this offering
are expected to be approximately $[ ].
ERISA CONSIDERATIONS
[Employee benefit plans ("Plans") that are subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and any person
utilizing the assets of a Plan, may not purchase the Class
[Mezzanine/Subordinate] Certificates, except that any insurance company may
purchase the Class [Mezzanine/Subordinate] Certificates with assets of its
general account if the exemptive relief granted by the Department of Labor for
transactions involving insurance company general accounts in Prohibited
Transaction Exemption 95-60, 60 Fed. Reg. 35925 (July 12, 1995) is available
with respect to the investment. The Pooling and Servicing Agreement will
include certain restrictions on the transfer of the Offered Certificates.]
See "ERISA Considerations" in the accompanying Prospectus.
EXPERTS
[To be described.]
LEGAL MATTERS
Certain legal matters with respect to the Certificates will be passed
upon for the Depositor by Brown & Wood LLP, Washington, D.C. Certain legal
matters will be passed upon for the Underwriter by [
__________________________ ].
RATINGS
It is a condition to the issuance of the [ ___________ ] Certificates
that they be rated "[ _____ ]" by [Rating Agency] and "[ _______ ]" by [Rating
Agency] (the "Rating Agencies "). It is a condition to the issuance of the
Class [ ] Certificates that they be rated "[ ]" by [Rating Agency] and "[
_________ ]" by [Rating Agency].
A securities 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. A securities rating addresses the likelihood of
the receipt by holders of Offered Certificates of distributions in the amount
of scheduled payments on the Mortgage Loans. The rating takes into
consideration the characteristics of the Mortgage Loans and the structural,
legal and tax aspects associated with the Offered Certificates. The ratings on
the Offered Certificates do not represent any assessment of the likelihood or
rate of principal prepayments. The ratings do not address the possibility that
holders of Offered Certificates might suffer a lower than anticipated yield
due to prepayments.
The security ratings assigned to the Offered Certificates should be
evaluated independently from similar ratings on other types of securities. 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 either Rating Agency.
The Depositor has not requested a rating of the Offered Certificates
by any rating agency other than the Rating Agencies; there can be no
assurance, however, as to whether any other rating agency will rate the
Offered Certificates or, if it does, what rating would be assigned by the
other rating agency. The rating assigned by the other rating agency to the
Offered Certificates could be lower than the ratings assigned by the Rating
Agencies.
GLOSSARY OF DEFINED TERMS
[To be provided.]
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Finance
America Securities, LLC [ ________________ ] Pass-Through Certificates (the
"Global Securities") will be available only in book-entry form. Investors in
the Global Securities may hold the Global Securities through any of DTC,
Clearstream or Euroclear. The Global Securities will be tradable 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 (i.e., 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 and prior mortgage loan asset backed
certificates issues.
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 and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless those holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities
clearing organizations 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 the positions in
accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to prior mortgage loan asset backed
certificates issues. 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
loan asset backed certificates issues in same-day funds.
TRADING BETWEEN CLEARSTREAM AND/OR EUROCLEAR PARTICIPANTS. Secondary
market trading between Clearstream Participants 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 Participant or a Euroclear
Participant, the purchaser will send instructions to Clearstream or Euroclear
through a Clearstream Participant 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 interest payment date to and excluding
the settlement date, on the basis of either the actual number of days in the
accrual period and a year assumed to consist of 360 days or a 360-day year of
twelve 30-day months as applicable to the related class of Global Securities.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month.
Payment will then be made by the respective Depositary of 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 Participant's or Euroclear Participant's
account. The securities credit will appear the next day (European time) and
the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (that would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Clearstream or Euroclear cash
debt will be valued instead as of the actual settlement date.
Clearstream Participants 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 preposition
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 Participants or Euroclear Participants can elect
not to preposition funds and allow that credit line to be drawn upon the
finance settlement. Under this procedure, Clearstream Participants 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 Participant'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 European Depositary for the benefit of
Clearstream Participants or Euroclear Participants. The sale proceeds will be
available to the DTC seller on the settlement date. Thus, to the DTC
Participants 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 Participants 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
Participant 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 Global Securities to the
DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last interest payment
to and excluding the settlement date on the basis of either the actual number
of days in the accrual period and a year assumed to consist of 360 days or a
360-day year of twelve 30-day months as applicable to the related class of
Global Securities. For transactions settling on the 31st of the month, payment
will include interest accrued to and excluding the first day of the following
month. The payment will then be reflected in the account of the Clearstream
Participant or Euroclear Participant the following day, and receipt of the
cash proceeds in the Clearstream Participant'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 Participant
or Euroclear Participant have a line of credit with its respective clearing
system and elect to be in debt in anticipation of receipt of the sale proceeds
in its account, the back-valuation will extinguish any overdraft incurred over
that one day period. If settlement is not completed on the intended value date
(that is, the trade fails), receipt of the cash proceeds in the Clearstream
Participant'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
Participants 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:
o 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;
o borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to the 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
o 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 or Euroclear Participant.
CERTAIN 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 generally
applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons, unless (1) 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 (2) 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 Global
Securities that are non-U.S. Persons 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 Beneficial Owners 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
Certificate Owner 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.
The term "U.S. Person" means (1) a citizen or resident of the United
States, (2) a corporation or partnership organized in or under the laws of the
United States or any state or the District of Columbia (other than a
partnership that is not treated as a United States person under any applicable
Treasury regulations), (3) an estate the income of which is includible in
gross income for United States tax purposes, regardless of its source, or (4)
a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in regulations,
certain trusts in existence on August 20, 1996 and treated as United States
persons prior to that date that elect to continue to be so treated also will
be considered U.S. Persons. 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.
<PAGE>
$[ ]
(APPROXIMATE)
FINANCE AMERICA SECURITIES, LLC
[ ] TRUST
[ ] PASS-THROUGH CERTIFICATES,
[ ,]
ORIGINATOR
[ ,]
SERVICER
--------------------------------
PROSPECTUS SUPPLEMENT
---------------------------------
[UNDERWRITER(S)]
<PAGE>
The information in this prospectus supplement is not complete and may be
changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus supplement is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION, FEBRUARY [ ], 2000
PROSPECTUS SUPPLEMENT (to prospectus dated [ ])
$[ ] (APPROXIMATE)
FINANCE AMERICA SECURITIES, LLC
[ ] TRUST [ ]
ASSET BACKED NOTES
[ ]
ORIGINATOR
[ ]
SERVICER
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-[ ] OF THIS
PROSPECTUS SUPPLEMENT AND ON PAGE [ ] OF THE PROSPECTUS.
For a list of capitalized terms used in this prospectus supplement and the
prospectus, see the glossary of defined terms beginning on page S-[ ] of this
prospectus supplement and on page [ ] of the prospectus.
The notes will represent obligations of the trust only and will not
represent interests in or obligations of any other entity.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
The trust will issue the following notes:
ORIGINAL CLASS INTEREST PRICE UNDERWRITING PROCEEDS
CLASS PRINCIPAL AMOUNT(1) RATE(2) TO PUBLIC DISCOUNT TO DEPOSITOR
-------- ------------------- ------- --------- -------- ------------
[ ] $[ ] [ ]% $[ ] [ ]% $[ ]
______________
(1) This amount is approximate, as described in this prospectus
supplement.
(2) The interest rate is subject to increase as described in this
prospectus supplement.
This prospectus supplement and the accompanying prospectus relate only to
the offering of the notes and not to the residual certificate that will be
issued by the trust as described in this prospectus supplement.
[Describe assets of trust fund.]
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE NOTES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[Describe underwriting arrangements.]
On or about [ _____________ ], delivery of the notes offered by this
[UNDERWRITER(S)] prospectus supplement will be made through The date of this
prospectus supplement is [ ] the book-entry facilities of The Depository Trust
Company.
[Underwriter(s)]
The date of this prospectus supplement is [ ]
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS:
We provide information to you about the notes offered by this
prospectus supplement in two separate documents that progressively provide
more detail: (1) the accompanying prospectus, which provides general
information, some of which may not apply to your notes, and (2) this
prospectus supplement, which describes the specific terms of your notes.
IF INFORMATION VARIES BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not authorized anyone to provide you with different information.
We are not offering the notes in any state where the offer is not
permitted. We do not claim that the information in this prospectus supplement
and prospectus is accurate as of any date other than the dates stated on their
respective covers.
-------------------
Dealers will deliver a prospectus supplement and prospectus when
acting as underwriters of the notes and with respect to their unsold
allotments or subscriptions. In addition, all dealers selling the notes will
be required to deliver a prospectus supplement and prospectus for ninety days
following the date of this prospectus supplement.
--------------------
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 tables of contents and the table of
contents included in the accompanying prospectus provide the pages on which
these captions are located.
<PAGE>
TABLES OF CONTENTS
PROSPECTUS SUPPLEMENT
Page
----
Summary of Terms...................................7
The Offered Notes...............................7
The Mortgage Loans..............................8
[The Pre-Funding Account........................9
Servicing of the Mortgage Loans.................9
Optional Purchase of Mortgage Loans.............9
Tax Status......................................9
ERISA Considerations............................9
Legal Investment Considerations.................9
Ratings of the Notes...........................10
Risk Factors......................................11
Unpredictability and Effect of Prepayments.....11
[Effect of Creation and Maintenance of
Overcollateralization on Payments of
Principal on the Notes.........................11
[Geographic Concentration of Mortgage
Loans .........................................12
[Some of the Loans in the Mortgage Pool
Are More Likely to Default Than Others,
And Higher Than Expected Defaults On These
Loans could Reduce the Yield On Your Notes.....13
[Effect of Lack of Primary Mortgage
Insurance on the Notes ........................13
Real Estate Market May Affect Performance
of Mortgage Loans .............................13
[Early Principal Payment From Cash
Remaining in Pre-Funding Account ..............14
You Will Not Receive Physical Notes, Which
Can Cause Delays In Distributions and
Hamper Your Ability to Pledge or Resell
Your Notes ....................................14
Potential Disruption of Computer Systems.......14
Limited Ability to Resell Notes................14
Description of the Trust..........................15
General........................................15
The Owner Trustee..............................15
The Residual Certificate.......................15
Description of the Notes..........................15
General........................................15
[Pre-Funding Account...........................16
Book-Entry Registration........................17
Page
----
Payments.......................................18
Payment Priorities.............................19
Overcollateralization..........................19
Maturity Date..................................19
Reports to Noteholders.........................19
Optional Redemption............................20
Rights of Noteholders Upon Occurrence
of Event of Default ...........................20
The Indenture Trustee..........................20
[The Insurance Policy.............................21
The Insurer....................................21
Insurer Financial Information..................21
Where You Can Obtain Additional Information
About the Insurer .............................21
Year 2000 Disclosure...........................21
Financial Strength Ratings of the Insurer .....21
The Insurance Policy...........................21
Description of the Mortgage Pool..................21
General........................................21
Payments on the Mortgage Loans.................22
Characteristics of the Mortgage Loans..........22
[Subsequent Mortgage Loans.....................28
Additional Information............................29
The Originator....................................29
General........................................29
Lending Activities and Loan Sales..............29
Underwriting Guidelines........................30
The Servicer......................................30
General........................................30
Loan Servicing.................................30
Servicing Practices and Experience.............30
Description of the Transfer and Servicing
Agreements ....................................32
Sale and Assignment of the Mortgage Loans .....32
Trust Fees and Expenses........................34
Voting Rights..................................34
General Servicing Provisions...................34
No Delinquency Advances........................34
Servicing Advances.............................34
Insurance Coverage.............................35
Evidence as to Compliance......................35
Servicing Compensation and Payment of
Expenses ......................................35
Subservicing...................................35
Page
----
Resignation or Removal of the Servicer.........35
Collection Account, Note Distribution
Account and Certificate Distribution
Account .......................................36
The Owner Trustee and Indenture Trustee .......37
Duties of the Owner Trustee and Indenture
Trustee .......................................38
Yield Considerations..............................39
General........................................39
Overcollateralization..........................41
Maturity Date..................................42
Weighted Average Life..........................42
Page
Federal Income Tax Considerations.................45
General........................................45
Certain U.S. Federal Income Tax
Documentation Requirements ....................45
State Income Tax Considerations...................45
ERISA Considerations..............................45
Legal Investment Considerations...................46
Use of Proceeds...................................46
Underwriting......................................46
Experts...........................................47
Legal Matters.....................................47
Ratings...........................................47
Glossary of Defined Terms.........................49
Annex I........................................... 1
<PAGE>
PROSPECTUS
Page
----
Risk Factors ......................................1
Limited Liquidity May Result in Delays in
Liquidations or Lower Returns ................1
Payments on Securities Are Limited
to the Assets of Trust .......................1
Enhancement May Be Insufficient to
Cover Losses .................................1
Timing and Rate of Prepayments
May Result in Lower Yield ....................2
Junior Liens May Result in
Increased Losses in Foreclosure
Proceedings ..................................2
Decrease in Value of
Mortgaged Property May Result in Losses ......3
Costs for Cleaning Environmentally
Contaminated Property May
Result in Losses .............................3
State and Federal Laws May Limit
Ability to Collect on Loans ..................3
Rating of the Securities Do Not
Assure Payment ...............................4
Liquidation Value of Trust Assets
May Be Insufficient to Satisfy All
Claims Against Trust .........................4
Description of the Securities .....................4
General ........................................4
Payments of Principal ..........................6
Final Scheduled Distribution Date ..............6
Special Redemption .............................6
Optional Redemption, Purchase of
Trust Assets or Securities,
Termination of Trust .........................7
Weighted Average Life of the
Securities ...................................7
Book-Entry Registration and
Definitive Securities ........................8
The Trusts .......................................13
General .......................................13
The Loans .....................................14
Private Securities ............................19
Agency Securities .............................21
Page
FHA Loans and VA Loans ........................24
Collection and Distribution Accounts ..........25
Enhancement ......................................26
Subordinate Securities ........................26
Cross-Support Provisions ......................27
Financial Guaranty Insurance Policy
or Surety Bond ..............................27
Insurance .....................................27
Reserve Funds .................................28
Minimum Principal Payment Agreement ...........29
Derivative Products ...........................29
Other Insurance, Surety Bonds, Guaranties,
Letters of Credit and Similar Instruments
or Agreements ...............................29
Servicing of Loans ...............................30
General .......................................30
Collection Procedures; Escrow Accounts ........30
Deposits to and Withdrawals From
the Collection Account ......................31
Advances and Limitations ......................33
Maintenance of Insurance Policies
and Other Servicing Procedures ..............33
Realization Upon Defaulted Loans ..............35
Enforcement of Due-On-Sale Clauses ............36
Servicing Compensation and
Payment of Expenses .........................36
Evidence as to Compliance .....................37
Termination and Liability of a Servicer .......37
The Agreements ...................................39
Assignment of Trust Assets ....................39
Pre-Funding Account ...........................42
Reports to Securityholders ....................43
Events of Default; Rights Upon Event
of Default ..................................44
The Trustee ...................................46
Duties of the Trustee .........................47
Resignation of Trustee ........................47
Amendment of Agreement ........................48
Voting Rights .................................48
Page
----
REMIC Administrator ...........................48
Termination ...................................49
Legal Aspects of the Loans .......................50
Mortgages .....................................50
Foreclosure on Mortgages ......................51
Environmental Risks ...........................53
Rights of Redemption ..........................54
Junior Mortgages; Rights of Senior Mortgages ..54
Anti-Deficiency Legislation and the
Bankruptcy Code .............................56
Due-On-Sale Clauses In Mortgage Loans .........57
Enforceability of Prepayment and
Late Payment Fees ...........................58
Equitable Limitations on Remedies .............58
Applicability of Usury Laws ...................69
Applicability of Lending Laws .................59
Cooperative Loans .............................59
Foreclosure on Cooperative Loans ..............61
Manufactured Housing and Home
Improvement Contracts .........................62
Installment Contracts .........................64
Soldiers' and Sailors' Civil Relief Act
of 1940 .....................................65
Consumer Protection Laws ......................66
The Depositor ....................................66
General .......................................66
Use of Proceeds ..................................67
Federal Income Tax Considerations ................67
General .......................................67
Taxation of Debt Securities ...................68
Taxation of the REMIC and its Holders .........74
REMIC Expenses; Single Class REMICs ...........75
Page
----
Taxation of the REMIC .........................76
Taxation of Holders of Residual
Interest Securities .........................78
Administrative Matters ........................81
Tax Status as a Grantor Trust .................81
Sale or Exchange ..............................85
Miscellaneous Tax Aspects .....................85
Tax Treatment of Foreign Investors ............86
Tax Characterization of the Trust as a
Partnership .................................87
Tax Consequences to Holders of the Notes ......88
Tax Consequences to Holders of the
Certificates ................................90
FASIT Securities ..............................96
Tax Treatment of FASIT Regular Securities .....99
Tax Treatment of FASIT Ownership Securities ...100
Foreign Securityholders .......................101
State Tax Considerations .........................101
Erisa Considerations .............................102
Legal Investment Considerations ..................107
Ratings ..........................................107
Plan of Distribution .............................108
Legal Matters ....................................108
Available Information ............................108
Incorporation Of Documents By Reference ..........109
Index of Defined Terms ...........................110
<PAGE>
SUMMARY OF TERMS
o THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
SUPPLEMENT 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 OFFERING OF THE NOTES, IT IS NECESSARY THAT YOU READ
CAREFULLY THIS ENTIRE PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS.
o WHILE THIS SUMMARY CONTAINS AN OVERVIEW OF CERTAIN CALCULATIONS, CASH
FLOW PRIORITIES, AND OTHER INFORMATION TO AID YOUR UNDERSTANDING, YOU
SHOULD READ CAREFULLY THE FULL DESCRIPTION OF THESE CALCULATIONS, CASH
FLOW PRIORITIES AND OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS BEFORE MAKING ANY INVESTMENT DECISION.
o WHENEVER WE REFER TO A PERCENTAGE OF SOME OR ALL OF THE MORTGAGE LOANS IN
THE TRUST, THAT PERCENTAGE HAS BEEN CALCULATED ON THE BASIS OF THE TOTAL
PRINCIPAL BALANCE OF THOSE MORTGAGE LOANS AS OF [ ], UNLESS WE SPECIFY
OTHERWISE. WE EXPLAIN IN THIS PROSPECTUS SUPPLEMENT UNDER "DESCRIPTION OF
THE NOTES-- RELATED DEFINITIONS" HOW THE PRINCIPAL BALANCE OF A MORTGAGE
LOAN IS DETERMINED. WHENEVER WE REFER IN THIS SUMMARY OF TERMS OR IN THE
RISK FACTORS SECTION OF THIS PROSPECTUS SUPPLEMENT TO THE TOTAL PRINCIPAL
BALANCE OF ANY MORTGAGE LOANS, WE MEAN THE TOTAL OF THEIR PRINCIPAL
BALANCES DETERMINED BY THAT METHOD, UNLESS WE SPECIFY OTHERWISE.
THE OFFERED NOTES
Finance America Securities, LLC [ __________ ] Trust [ ________ ] is
offering the Class [ ] Asset Backed Notes as part of Series [ _____ ]. The
notes will be issued in book-entry form.
See "Description of the Notes -- General" in this prospectus supplement
for a discussion of the minimum denominations and the incremental
denominations of the notes.
The notes will represent obligations of the trust and will be secured by
the assets of the trust, which consist primarily of [describe assets of the
trust.]
The notes will have an approximate total initial principal amount of $[ ].
Any difference between the total principal amount of the notes on the date
they are issued and the approximate total principal amount of the notes on the
date of this prospectus supplement will not exceed 5%.
PAYMENTS ON THE NOTES
Principal and interest on the notes will be payable on the [25]th day of
each month, beginning in [ ________________ ]. However, if the [25]th day is
not a business day, payments will be made on the next business day after the
[25]th day of the month.
INTEREST PAYMENTS
Interest will accrue on the notes at the annual rate described in this
prospectus supplement.
SEE "DESCRIPTION OF THE NOTES -- PAYMENTS -- PAYMENTS OF INTEREST" IN THIS
PROSPECTUS SUPPLEMENT.
PRINCIPAL PAYMENTS
The amount of principal payable on the notes will be determined by (1)
funds actually received on the mortgage loans that are available to make
payments on the notes, (2) the amount of interest received on the mortgage
loans that is used to pay principal on the notes, calculated as described in
this prospectus supplement, (3) [the amount of principal received on the
mortgage loans that is released to the residual certificate, calculated as
described in this prospectus supplement,] and (4) [ ______________ ]. Funds
actually received on the mortgage loans may consist of expected, scheduled
payments, and unexpected payments resulting from prepayments or defaults by
borrowers, liquidation of defaulted mortgage loans, or repurchases of mortgage
loans under the circumstances described in this prospectus supplement.
We explain how principal is paid on the notes under "Description of the
Notes -- Payments -- Payments of Principal" in this Prospectus Supplement.
The last possible day on which the principal of the notes could become
payable in full is [ ] and is referred to as the maturity date. The notes
could be paid in full before the maturity date.
LIMITED RECOURSE
The only source of cash available to make interest and principal payments
on the notes will be the assets of the trust. The trust will have no other
source of cash and no entity other than the trust will be required or expected
to make any payments on the notes.
ENHANCEMENT OF LIKELIHOOD OF PAYMENT ON THE NOTES
[Describe any applicable financial guaranty insurance policy or guarantee.]
[Subordination of Payments
No amounts will be paid to the holder of the residual certificate on any
distribution date until all amounts due to the notes on that date have been
paid and overcollateralization has reached the required level.]
[Overcollateralization
On the closing date, the total principal balance of the mortgage loans is
expected to exceed the total principal amount of the notes by approximately
[ ]%. This condition is referred to as "overcollateralization." Any
interest received on the mortgage loans in excess of the amount needed to pay
interest on the notes and certain expenses and fees of the trust will be used
to reduce the total principal amount of the notes to a level set by [ ], until
the mortgage loans have a total principal balance that exceeds the total
outstanding principal amount of the notes by the required amount. We cannot
assure you that sufficient interest will be generated by the mortgage loans to
increase overcollateralization to the required level, or to maintain it at
that level.
See "Description of the Notes -- Overcollateralization" in this prospectus
supplement.]
THE MORTGAGE LOANS
On the closing date, which is expected to be on or about [ _____________
], the assets of the trust will consist primarily of mortgage loans with a
total principal balance of approximately $[ ____________________ ]. The
mortgage loans will be secured by mortgages, deeds of trust, or other security
instruments, all of which are referred to in this prospectus supplement as
mortgages.
[Description of mortgage loans.]
[Description of pre-funding account and additional mortgage loans if
applicable.]
[The mortgage loans in the trust fund will not be insured or guaranteed by
any government agency.]
See "Description of the Mortgage Pool" in this prospectus supplement for a
general description of the mortgage loans and "The Originator" in this
prospectus supplement for a description of the underwriting guidelines applied
in originating the mortgage loans.
[THE PRE-FUNDING ACCOUNT
On the closing date, approximately $[ _________ ] will be deposited by [
________ ] in a pre-funding account maintained by [ __________ ]. It is
intended that additional mortgage loans will be sold to the trust by the
depositor from time to time, from [ _______ ] until [ ], paid for with the
funds on deposit in the pre-funding account.
[Description of pre-funding account and additional mortgage loans if
applicable.]
See "Description of the Notes -- Pre-Funding Account" in this prospectus
supplement.]
SERVICING OF THE MORTGAGE LOANS
The mortgage loans will be serviced by [ ].
See "The Servicer" and "Description of the Transfer and Servicing
Agreements" in this prospectus supplement.
OPTIONAL PURCHASE OF MORTGAGE LOANS
[ ______________ ] will have the option to purchase all of the mortgage
loans and the other assets of the trust, after the total principal balance of
the mortgage loans declines to less than [ ____ ]% of their initial total
principal balance; if [ __________ ] does not exercise that option, [ ____ ]
may purchase the mortgage loans and other assets of the trust.
If the mortgage loans and other assets are purchased, the noteholders will
be paid accrued interest, and principal equal to the outstanding principal
amount of the notes.
See "Description of the Notes -- Optional Redemption" in this prospectus
supplement for a description of the purchase price to be paid for the mortgage
loans.
TAX STATUS
[Tax status to be described as applicable.]
See "Federal Income Tax Considerations" in this prospectus supplement and
in the accompanying prospectus for additional information concerning the
application of federal income tax laws to the notes.
ERISA CONSIDERATIONS
[Generally, the notes may [not] be purchased by employee benefit plans or
individual retirement accounts subject to the Employee Retirement Income
Security Act of 1974 or Section 4975 of the Internal Revenue Code of 1986. A
fiduciary of an employee benefit plan or an individual retirement account must
determine that the purchase of a certificate is consistent with its fiduciary
duties under applicable law and does not result in a nonexempt prohibited
transaction under applicable law.]
See "Erisa Considerations" in this prospectus supplement and in the prospectus
for a more complete discussion of these issues.
LEGAL INVESTMENT CONSIDERATIONS
[The notes will [not] constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984.]
There are other restrictions on the ability of certain types of investors
to purchase the notes that prospective investors should consider.
See "Legal Investment Considerations" in this prospectus supplement and in
the prospectus.
RATINGS OF THE NOTES
The notes will initially be rated "[ ]" by [Rating Agency], and "[ ____ ]"
by [Rating Agency].
These ratings are not recommendations to buy, sell or hold these notes. A
rating may be changed or withdrawn at any time by the assigning rating agency.
o The ratings do not address the possibility that, as a result of principal
prepayments, the yield on your notes may be lower than anticipated.
See "Ratings" in this prospectus supplement for a more complete discussion
of the note ratings.
<PAGE>
RISK FACTORS
THE FOLLOWING INFORMATION, WHICH YOU SHOULD CAREFULLY CONSIDER,
IDENTIFIES CERTAIN SIGNIFICANT SOURCES OF RISK ASSOCIATED WITH AN INVESTMENT
IN THE NOTES. YOU SHOULD ALSO CAREFULLY CONSIDER THE INFORMATION SET FORTH
UNDER "RISK FACTORS" IN THE PROSPECTUS.
UNPREDICTABILITY AND EFFECT OF Borrowers may prepay their mortgage
PREPAYMENTS loans in whole or in part at any time;
however, approximately [ ] of the
mortgage loans require the payment of
a prepayment penalty in connection
with any voluntary prepayment during [
_______________________ ]. The
prepayment penalties may be waived by
the servicer. A prepayment of a
mortgage loan will usually result in a
prepayment on the notes.
o If you purchase your notes at a
discount and principal is repaid
slower than you anticipate, then
your yield may be lower than you
anticipate.
o If you purchase your notes at a
premium and principal is repaid
faster than you anticipate, then
your yield may be lower than you
anticipate.
The rate at which defaults and losses
occur on the mortgage loans will affect
the rate of payment of principal on the
notes. We encourage you to review the
information in this prospectus
supplement about the underwriting
guidelines applied in originating the
mortgage loans, the credit quality of
the mortgage loans and the collateral
for the mortgage loans.
SEE "YIELD CONSIDERATIONS" IN THIS
PROSPECTUS SUPPLEMENT FOR A DESCRIPTION
OF FACTORS THAT MAY INFLUENCE THE RATE
AND TIMING OF PREPAYMENTS ON THE
MORTGAGE LOANS.
[The prepayment experience of the
mortgage loans may differ significantly
from that of first lien residential
mortgage loans, or junior lien mortgage
loans with a principal balance lower
than the value of the related
property.]
[EFFECT OF CREATION AND MAINTENANCE We describe in this prospectus
MAINTENANCE OF supplement the underwriting guidelines
OVERCOLLATERALIZATION ON used in originating the mortgage loans,
PAYMENTS OF PRINCIPAL ON THE the collateral for the mortgage loans
NOTES and the servicing of the mortgage
loans. These and other factors will
affect the rate of defaults and losses
on the mortgage loans, which in turn
will affect the rate at which
overcollateralization is created or
maintained. When overcollateralization
is less than the level required by [
____ ], a portion of interest
collections on the mortgage loans will
be used to make principal payments on
the notes. This will accelerate the
rate at which you receive payments of
principal. When overcollateralization
is greater than the level required by [
____ ], a portion of principal
collections on the mortgage loans will
be released to the residual
certificate. This will slow the rate at
which you receive payments of
principal.]
[GEOGRAPHIC CONCENTRATION OF Approximately [ ]% of the mortgage
MORTGAGE LOANS loans expected to be in the trust on
the closing date are secured by
properties in [California]. The rate of
delinquencies and defaults, and
therefore the rate of prepayments, on
the mortgage loans may be higher than
if fewer of the mortgage loans were
concentrated in one state because the
following conditions in [California]
will have a disproportionate impact on
the mortgage loans in general:
o Weak economic conditions in
[California] (which may or may
not affect real property values)
may affect the ability of
borrowers to repay their mortgage
loans on time;
o Declines in the [California]
residential real estate market
may reduce the values of
properties located in
[California], which would result
in an increase in the combined
loan-to-value ratios;
o Properties in [California] may be
more susceptible than homes
located in other parts of the
country to certain types of
uninsurable hazards, such as
earthquakes, as well as floods,
mudslides and other natural
disasters; and
o Any increase in the market value
of properties located in
[California] would reduce the
combined loan-to-value ratios of
the mortgage loans and could,
therefore, make alternative
sources of financing available to
the borrowers at lower interest
rates, which could result in an
increased rate of prepayment of
the mortgage loans.
Natural disasters affect regions of the
United States from time to time, and
may result in increased losses on
mortgage loans in those regions, or in
insurance payments that will constitute
prepayments of those mortgage loans.
For additional information regarding
the geographic distribution of the
mortgage loans in the trust, see the
applicable table under "Description of
the Mortgage Pool" in this prospectus
supplement.]
[SOME OF THE LOANS IN THE MORTGAGE The payment schedules for most of the
POOL ARE MORE LIKELY TO DEFAULT mortgage loans in the pool require the
THAN OTHERS, AND HIGHER THAN borrower to pay off the principal
EXPECTED DEFAULTS ON THESE LOANS balance of the loan gradually over the
COULD REDUCE THE YIELD ON YOUR life of the loan. Some of the mortgage
NOTES loans in the pool, however, have
payment schedules under which the
borrowers makes relatively small
payments of principal over the life of
the loan, and then must make a large
final payment at maturity that pays
off the entire principal balance
outstanding. This final payment is
usually much larger than the previous
monthly payments. Because the
borrower's ability to make this final
payment usually depends on the ability
to refinance the loan or sell the
underlying property, the risk of
default is greater than on other types
of loans. High rates of default on
these types of loans in the pool will
result in greater losses on your
notes.
The ability of a borrower to refinance
the type of loan described above or
sell the mortgaged property will depend
upon a number of factors, including:
o the level of mortgage interest
rates;
o the borrower's equity in the
mortgage property;
o general economic conditions; and
o the availability of credit.
We cannot predict how these factors will
affect the default rate of these
mortgage loans in the pool. You should
refer to "Description of the Mortgage
Pool" for information on the percentage
of loans in the mortgage pool that
consists of these loans.]
[EFFECT OF LACK OF PRIMARY MORTGAGE Approximately [ ____ ]% of the
INSURANCE ON THE NOTES mortgage loans have loan-to-value
ratios greater than [ ____ ]%. None of
the mortgage loans are covered by a
primary mortgage insurance policy. If
borrowers default on their mortgage
loans, there is a greater likelihood
of losses than if the loans were
insured. We cannot assure you that the
applicable credit enhancement will be
adequate to cover those losses.
See "Description of the Notes" in this
prospectus supplement.]
REAL ESTATE MARKET MAY AFFECT A decline in the real estate values
PERFORMANCE OF MORTGAGE LOANS or in economic conditions generally
could increase the rates of
delinquencies, foreclosures and losses
on the mortgage loans to a level that
is significantly higher than those
experienced currently; and no
assurance can be given that values of
the properties securing the mortgage
loans will not decline since the date
of origination of the mortgage loan.
If the credit enhancement described in
this prospectus supplement is not
enough to protect your notes from
these losses, the yield on your notes
may be reduced.
[EARLY PRINCIPAL PAYMENT FROM CASH If the cash in the pre-funding
REMAINING IN PRE-FUNDING ACCOUNT account on the closing date is not
used to acquire additional mortgage
loans by [ _______________ ], then
that cash will be [paid to you on a
proportionate basis with the other
noteholders in reduction of the
principal balance of your notes.] If
the amount of that cash is
substantial, you will receive a
significant unexpected early payment
of principal in (or before) [
____________ ]. We cannot assure you
that you will be able to reinvest that
money in another investment with a
comparable yield.]
YOU WILL NOT RECEIVE PHYSICAL NOTES, Your ownership of the notes will be
WHICH CAN CAUSE DELAYS IN registered electronically with DTC.
DISTRIBUTIONS AND HAMPER YOUR The lack of physical notes could:
ABILITY TO PLEDGE OR RESELL YOUR
NOTES o result in payment delays on the
notes because the indenture
trustee will be sending
distributions on the notes to DTC
instead of directly to you;
o make it difficult for you to pledge
your notes if physical notes are
required by the party demanding
the pledge; and
o could hinder your ability to resell
the notes because some investors
may be unwilling to buy notes that
are not in physical form.
See "Description of the Notes --
Book-Entry Registration" in this
prospectus supplement.
POTENTIAL DISRUPTION OF COMPUTER The transition from the year 1999 to the
SYSTEMS year 2000 may interfere with the
ability of computer systems used by
the servicer, the indenture trustee,
the note registrar, The Depository
Trust Company and other parties to
process information. This could
disrupt collection of payments on the
mortgage loans and calculation and
distribution of payments on the notes.
LIMITED ABILITY TO RESELL NOTES The underwriter is not required to
assist in resales of the notes,
although it may do so. A secondary
market for the notes may not develop.
If a secondary market does develop, it
might not continue or it might not be
sufficiently liquid to allow you to
resell any of your notes. The
certificates will not be listed on any
securities exchange.
[Additional risk factors to be provided if applicable.]
DESCRIPTION OF THE TRUST
GENERAL
Finance America Securities, LLC [ __________ ] Trust [ _______ ] (the
"Trust" or the "Issuer") will be a [statutory business trust] [common law
trust] formed under the laws of [ ] pursuant to a Trust Agreement (the "Trust
Agreement") dated as of [ ] (the "Cut-off Date") between Finance America
Securities, LLC as depositor (the "Depositor") and [ ____________________ ] as
owner trustee (the "Owner Trustee"), for the transactions described in this
Prospectus Supplement. The Trust will not engage in any activity other than
acquiring, holding and managing the Mortgage Loans (as defined herein) and the
other assets of the Trust and proceeds therefrom, issuing the Securities (as
defined herein), making payments on the Securities, and engaging in related
activities.
On or about [ _____________ ] (the "Closing Date"), the Trust will
purchase the Mortgage Loans from the Depositor pursuant to a Sale and
Servicing Agreement (as amended and supplemented from time to time, the "Sale
and Servicing Agreement") dated as of the Cut-off Date, among the Trust, the
Depositor, the Servicer and [ _____________________ ], as indenture trustee
(the "Indenture Trustee").
The Trust's principal offices are located in [ ].
THE OWNER TRUSTEE
[ ] will act not in its individual capacity but solely as the Owner
Trustee under the Trust Agreement. [ ] is a [ ] banking corporation and its
principal offices are located at [ ]. The compensation of the Owner Trustee
will be paid by [ ].
THE RESIDUAL CERTIFICATE
The equity interest in the Trust will be represented by a residual
interest certificate (the "Residual Certificate").
The holder of the Residual Certificate (the "Residual
Certificateholder," and together with the Noteholders (as defined herein), the
"Securityholders") will be entitled to receive [to be described as
applicable].
DESCRIPTION OF THE NOTES
GENERAL
The Trust will issue the Class [ ] Notes (the "Notes") pursuant to an
Indenture dated as of the Cut-off Date (the "Indenture") between the Issuer
and the Indenture Trustee. The Trust will also issue the Residual Certificate
pursuant to the Trust Agreement. The Notes and the Residual Certificate are
referred to herein as the "Securities." Only the Notes are offered hereby. The
Notes will be secured by the Trust Estate (as defined below) pursuant to the
Indenture.
The "Trust Estate" will consist primarily of [describe as applicable].
The Notes will be issued in the approximate initial total principal
amount specified on the cover page hereof (the "Original Class Principal
Amount"). The total principal amount of the Notes outstanding at any time is
referred to herein as the "Class Principal Amount." The Residual Certificate
will be issued without a principal amount or interest rate, and will be
entitled only to the amounts that are described herein. The Original Class
Principal Amount of the Notes may be increased or decreased by up to 5% to the
extent that the Cut-off Date Balance (as defined herein) of the Mortgage Loans
is increased or decreased as described under "Description of the Mortgage
Pool" herein.
Payments on the Notes will be made on the [25th] day of each month or,
if the [25th] day is not a Business Day, on the next succeeding Business Day,
commencing in [ ] (each, a "Distribution Date"), to holders of Notes
("Noteholders") of record on the applicable Record Date. The "Record Date" for
each Distribution Date will be the close of business on the last Business Day
of the calendar month immediately before the month in which that Distribution
Date occurs.
o A "Business Day" is generally any day other than a
Saturday or Sunday or a day on which banks in [New York] or
[California] are closed.
Payments on the Notes will be made to each registered holder entitled
thereto, either (1) by check mailed to the Noteholder's address as it appears
on the books of the Indenture Trustee, or (2) at the request, submitted to the
Indenture Trustee in writing not later than the related Record Date, of any
Noteholder (at the Noteholder's expense) in immediately available funds;
provided, that the final payment for any Note will be made only upon
presentation and surrender of the Note at the Corporate Trust Office (as
defined herein) of the Indenture Trustee or the office of the Note Registrar
(as defined herein). See "-- The Indenture Trustee" herein.
[PRE-FUNDING ACCOUNT
On the Closing Date approximately $[ ___________________ ] (the
"Pre-Funded Amount") will be deposited in an account (the "Pre-Funding
Account") maintained by the Trustee. During the period (the "Pre-Funding
Period") from the Closing Date until [ ______________ ], the Pre-Funded Amount
will be maintained in the Pre-Funding Account. The Pre-Funded Amount will be
reduced during the Pre-Funding Period by the amount of Subsequent Mortgage
Loans (as defined herein) purchased by the Trust in accordance with the [Sale
and Servicing Agreement]. During the Pre-Funding Period, the Pre-Funded Amount
will be used only to purchase Subsequent Mortgage Loans. Immediately following
the Pre-Funding Period, any Pre-Funded Amount remaining will be distributed to
Notes then entitled to payments of principal on the next Distribution Date.
Amounts on deposit in the Pre-Funding Account will be invested in
Eligible Investments and all investment earnings on amounts on deposit in the
Pre-Funding Account will be distributed to [
_______________________________________________ ] following the Pre-Funding
Period.]
BOOK-ENTRY REGISTRATION
GENERAL. The Notes (the "Book-Entry Notes") will be issued, maintained
and transferred on the book-entry records of The Depository Trust Company
("DTC") in the United States [, or through Clearstream Banking, societe
anonyme (formerly Cedelbank) ("Clearstream") or the Euroclear System
("Euroclear") in Europe] and through [its/their] participating organizations
(each, a "Participant"). The Book-Entry Notes will be issued in minimum
denominations in principal amount of $[ _______ ] and integral multiples of $1
in excess thereof.
Each Class of Book-Entry Notes will be represented by one or more
certificates registered in the name of the nominee of DTC. The Depositor has
been informed by DTC that DTC's nominee will be Cede & Co. [Clearstream and
Euroclear will hold omnibus positions on behalf of their Participants through
customers' securities accounts in Clearstream's and Euroclear's names on the
books of their respective depositaries, which in turn will hold positions in
customers' securities accounts in the depositaries' names on the books of
DTC.] No person acquiring an interest in a Book-Entry Note (each, a
"Beneficial Owner") will be entitled to receive a certificate representing an
interest (a "Definitive Note"), except as set forth below under "-- Definitive
Notes" and in the prospectus under "Description of the Securities --
Book-Entry Registration and Definitive Securities -- Definitive Securities."
Unless and until Definitive Notes are issued, it is anticipated that:
o the only "Noteholder" of the Notes will be Cede & Co., as nominee of
DTC, and Beneficial Owners will not be Noteholders as that term is
used in the Indenture.
o Beneficial Owners will receive all distributions of principal of, and
interest on, the Offered Notes from the Indenture Trustee through DTC
[, Clearstream or Euroclear, as applicable,] and [its/their]
Participants.
o while the Notes are outstanding, under the rules, regulations and
procedures creating and affecting DTC [Clearstream and Euroclear] and
[its/their] operations, DTC [Clearstream and Euroclear] [is/are]
required to make book-entry transfers among Participants on whose
behalf it acts with respect to the Notes and is required to receive
and transmit distributions of principal of, and interest on, the
Notes. Participants and indirect participants with whom Beneficial
Owners have accounts with respect to Notes are similarly required to
make book-entry transfers and receive and transmit distributions on
behalf of their respective Beneficial Owners. Accordingly, although
Beneficial Owners will not possess certificates, DTC [Clearstream and
Euroclear] [has/have] in place a mechanism by which Beneficial Owners
will receive distributions and will be able to transfer their
interest.
None of the Depositor, the Servicer, the Owner Trustee or the
Indenture Trustee [or additional parties] (as those terms are defined herein)
will have any responsibility for any aspect of the records relating to or
payments made on account of beneficial ownership interests of the Book-Entry
Notes held by Cede & Co., as nominee for DTC, or for maintaining, supervising
or reviewing any records relating to those beneficial ownership interests.
Certain computer applications and systems that DTC uses for processing
dates ("Systems") based upon calendar dates, including dates before, on, and
after January 1, 2000, may encounter certain problems related to the Systems'
use of only two digits to calculate calendar dates ("Year 2000 Problems").
Year 2000 Problems could cause DTC's Systems, as they relate to the timely
payment of distributions (including principal and interest payments) to
securityholders, book-entry deliveries, and settlement of trades within DTC,
to cease functioning appropriately. DTC has advised the Depositor that it has
developed and is implementing a technical assessment and remediation plan
(which includes a testing phase) to deal with Year 2000 Problems. However,
DTC's ability to perform its services also depends upon other parties
including, among others, issuers and their agents, third party software and
hardware vendors, and third party service and information providers (including
telecommunication and electrical utility service providers). In general, the
extent of computer problems that may occur due to Year 2000 Problems is not
yet clear.
For a more complete description of book-entry registration and
clearance and the rules and regulations governing DTC [,Clearstream and
Euroclear], see "Description of the Securities -- Book-Entry Registration and
Definitive Securities" in the prospectus.
DEFINITIVE NOTES. Definitive Notes will be issued to Beneficial Owners
or their nominees, respectively, rather than to DTC or its nominee, only under
the limited conditions set forth in the prospectus under "Description of the
Securities -- Book-Entry Registration and Definitive Securities -- Definitive
Securities." Upon the occurrence of an event described in that section, the
Trustee is required to direct DTC to notify Participants who have ownership of
Book-Entry Notes as indicated on the records of DTC of the availability of
Definitive Notes for their Book-Entry Notes. Upon surrender by DTC of the
Definitive Notes representing the Book-Entry Notes and upon receipt of
instructions from DTC for re-registration, the Trustee will re-issue the
Book-Entry Notes as Definitive Notes in the respective principal amounts owned
by individual Beneficial Owners, and thereafter the Trustee will recognize the
holders of the Definitive Notes as Noteholders under the Indenture and the
Sale and Servicing Agreement.
PAYMENTS
Payments on the Notes on each Distribution Date will be made from the
Available Collection Amount. The Available Collection Amount will be
determined as [to be provided as applicable.]
o With respect to each Distribution Date, the "Due Period" is the
calendar month immediately before that Distribution Date.
PAYMENTS OF INTEREST. Interest on the Class Principal Amount of the
Notes will accrue during each Accrual Period (as defined herein) at the
interest rate specified on the front cover hereof (the "Interest Rate") and
will be payable to Noteholders on each Distribution Date, starting in [
_____________________ ]. [If the Residual Certificateholder does not exercise
its option to purchase the Mortgage Loans and the other assets of the Trust
when it is first entitled to do so, as described under "--Optional Redemption"
herein, then with respect to each succeeding Distribution Date the Interest
Rate will be increased [to be provided as applicable.]] See "-- Optional
Redemption" herein. Interest on the Notes will be calculated on the basis of a
360-day year of twelve 30-day months.
o The "Accrual Period" for the Notes will be the calendar month
immediately preceding the month in which the related Distribution Date
occurs.
Payments of interest on the Notes will be made from [to be provided as
applicable].
PAYMENTS OF PRINCIPAL. Principal payments will be made to Noteholders
on each Distribution Date in an amount generally equal to [to be provided as
applicable].
o The "Principal Distribution Amount" for any Distribution Date will be
equal to the sum of [to be provided as applicable].
PAYMENT PRIORITIES
On each Distribution Date, the Available Funds will be applied in the
following order of priority:
[to be provided as applicable.]
OVERCOLLATERALIZATION
On the Closing Date the Cut-off Date Balance is expected to exceed the
Original Class Principal Amount of the Notes by approximately $[ _____________
]. The weighted average Net Mortgage Loan Rate (as defined below) of the
Mortgage Loans is generally expected to be higher than the Interest Rate of
the Notes, thus generating certain excess interest collections. To the extent
described herein, Excess Spread will be applied on any Distribution Date as
[to be provided as applicable].
o The "Net Mortgage Loan Rate" for any Mortgage Loan equals [to be
provided as applicable].
MATURITY DATE
The Class Principal Amount of the Notes and all interest accrued and
unpaid on the Notes will be payable in full on [ _____________ ] (the
"Maturity Date"). See "--Rights of Noteholders Upon Occurrence of an Event of
Default" below. The actual final Distribution Date for the Notes could be
substantially earlier than the Maturity Date.
REPORTS TO NOTEHOLDERS
On each Distribution Date the Indenture Trustee will make available to
each Noteholder a statement containing the following information:
o the amount of principal distributed on that date to
Noteholders;
o the amount of interest distributed on that date to
Noteholders;
o the amount of any outstanding Noteholders' Interest
Carryforward Amount for the Notes after distributions on that
date;
o the Class Principal Amount of the Notes after distributions on
that date;
o the amount of the Servicing Fees paid with respect to that
date;
o the Total Loan Balance as of the related Distribution Date;
o the number and total Principal Balance of Mortgage Loans (1)
remaining outstanding, (2) delinquent by one, two, three or
four or more monthly payments, (3) in foreclosure, and (4)
with respect to REO Property;
o any amount distributed to the holder of the Residual
Certificate; and
o certain other information to the extent provided in the Sale
and Servicing Agreement.
OPTIONAL REDEMPTION
On any Distribution Date after the date on which the Total Loan
Balance is less than [ ]% of the Cut-off Date Balance, [ _____________________
] will (subject to the terms of the Sale and Servicing Agreement) have the
option to purchase the Mortgage Loans, any REO Property and any other assets
of the Trust for the Termination Price. If [ _______________ ] does not
exercise that option, [ ____ ] will then have the same purchase option. If
either purchase option is exercised, the Notes will be redeemed and the
Residual Certificate and the Trust will be terminated (such event, an
"Optional Redemption").
If the Residual Certificateholder does not exercise its option as
described above when it is first entitled to do so, the Interest Rate of the
Notes will be increased as described under "-- Payments of Interest" herein.
RIGHTS OF NOTEHOLDERS UPON OCCURRENCE OF EVENT OF DEFAULT
Under the Indenture, a failure to pay the full amount of the
Noteholders' Interest Distribution Amount within [five] days of the
Distribution Date on which that payment is due (without regard to the amount
of Available Funds) or failure to pay the entire outstanding principal amount
of the Notes on the Maturity Date, will constitute an event of default (an
"Event of Default").
Upon the occurrence of an Event of Default, the holders of Notes
evidencing more than [ ]% of the Class Principal Amount of the Notes then
outstanding may exercise their remedies under the Indenture. These remedies
include [to be provided as applicable].
THE INDENTURE TRUSTEE
[ _________________________________ ], a [________________________],
will be the Indenture Trustee under the Indenture. The Indenture Trustee will
be entitled to [describe applicable fees of the indenture trustee]. The
Indenture Trustee's "Corporate Trust Office" is located at [
_________________________________________________ ], or such address as the
Indenture Trustee may designate from time to time by notice to the
Noteholders, the Depositor and the Servicer.
[THE INSURANCE POLICY
The following information has been provided by [ ______ ] (the
"Insurer") for inclusion in this Prospectus Supplement. Neither the Depositor
nor the Underwriter makes any representation as to the accuracy or
completeness of this information.
The Insurer does not accept any responsibility for the accuracy or
completeness of this Prospectus Supplement or any information or disclosure
contained herein, or omitted herefrom, other than with respect to the accuracy
of the information regarding the Note Guaranty Insurance Policy (the
"Insurance Policy") and the Insurer set forth below under this heading "The
Insurance Policy." Additionally, the Insurer makes no representation regarding
the Notes or the advisability of investing in the Notes.
THE INSURER
[To be provided if applicable.]
INSURER FINANCIAL INFORMATION
[To be provided if applicable.]
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION ABOUT THE INSURER
[To be provided if applicable.]
YEAR 2000 DISCLOSURE
[To be provided if applicable.]
FINANCIAL STRENGTH RATINGS OF THE INSURER
[To be provided if applicable.]
THE INSURANCE POLICY
[To be provided if applicable.]]
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of approximately [ _____ ] Mortgage
Loans with original terms to maturity of not more than [thirty] years, having
a total Principal Balance as of the Cut-off Date of approximately $[
___________ ] (the "Cut-off Date Balance"). The Mortgage Loans are secured by
[to be provided as applicable] ("Mortgages"). All of the Mortgage Loans will
be [description of Mortgage Loans.]
Generally, the Mortgage Loans were originated or acquired by the
Originator (as defined herein) in one of the following ways:
o [to be provided as applicable].
All of the Mortgage Loans are secured by mortgages or deeds of trust
or other similar security instruments creating [to be provided as applicable.]
For a description of the underwriting criteria applicable to the Mortgage
Loans, see "The Originator -- Underwriting Guidelines" herein.
The Servicer will be required to service the Mortgage Loans pursuant
to the Sale and Servicing Agreement and will be compensated for these services
as described under "Description of the Transfer and Servicing Agreements --
Servicing" herein.
PAYMENTS ON THE MORTGAGE LOANS
[To be provided as applicable.]
CHARACTERISTICS OF THE MORTGAGE LOANS
The Mortgage Loans are expected to have the following approximate
total characteristics as of the Cut-off Date. Prior to the issuance of the
Notes, Mortgage Loans may be removed from the Mortgage Pool as a result of
incomplete documentation or otherwise, if the Depositor deems removal
necessary or appropriate. In addition, a limited number of other home loans
may be included in the Mortgage Pool prior to the issuance of the Notes.
Wherever reference is made herein to a percentage of some or all of
the Mortgage Loans, the percentage is determined (unless otherwise specified)
on the basis of the total principal balance of the related Mortgage Loans as
of the Cut-off Date.
Pursuant to its terms, each Mortgage Loan, other than a loan secured
by a condominium unit, is required to be covered by a standard hazard
insurance policy in an amount generally equal to the lower of the unpaid
principal amount thereof or the replacement value of the improvements on the
Mortgaged Property. Generally, a condominium association is responsible for
maintaining hazard insurance covering the entire building. See "Servicing the
Loans -- Maintenance of Insurance Policies and Other Servicing Procedures" in
the Prospectus.
[Approximately [ ____ ]% of the Mortgage Loans have Loan-to-Value
Ratios in excess of 80%. None of those Mortgage Loans or any other Mortgage
Loans are covered by primary mortgage insurance policies. The "Loan-to-Value
Ratio" of a Mortgage Loan at any time is the ratio of the principal balance of
the Mortgage Loan at the date of determination to (a) in the case of a
purchase, the lesser of the sale price of the Mortgaged Property and its
appraised value at the time of sale, or (b) in the case of a refinance or
modification, the appraised value of the Mortgaged Property at the time of
refinance or modification.]
[Approximately [ ____ ]% of the Mortgage Loans are fully amortizing.
Approximately [ ]% of the Mortgage Loans will have original terms to maturity
that are shorter than their amortization schedules, leaving final payments
("Balloon Payments") due on their maturity dates that are significantly larger
than other monthly payments (such loans, "Balloon Loans"). The Balloon Loans
are generally expected to have original terms to maturity of [15] years. The
ability of the borrower to repay a Balloon Loan at maturity frequently will
depend on the borrower's ability to refinance the loan. Any loss on a Balloon
Loan as a result of the borrower's inability to refinance the loan will be
borne by Certificateholders, to the extent not covered by the applicable
credit enhancement. Neither the Servicer nor the Trustee will make any
Advances with respect to delinquent Balloon Payments.]
Approximately [ ____ ] of the Mortgage Loans provide for payment by
the borrower of a prepayment premium in connection with full or partial
prepayments of principal within [three to five years] of the date of
origination of the loan, generally equal to [to be provided as applicable].
The Mortgage Loan Rates of the Mortgage Loans range from approximately
[ _______ ]% annually to [ _______ ]% annually. The weighted average Mortgage
Loan Rate of the Mortgage Loans is approximately [ _______ ]% annually.
The Principal Balances of the Mortgage Loans range from approximately
$[ ] to $[ ]. The Mortgage Loans have an average Principal Balance of
approximately $[ _____ ].
The weighted average Combined Loan-to-Value Ratio at origination of
the Mortgage Loans is approximately [ ]%.
No more than approximately [ _______ ]% of the Mortgage Loans are
secured by Mortgaged Properties located in any one zip code area.
The following tables set forth as of the Cut-off Date the number,
total Principal Balance and percentage of the Mortgage Loans having the stated
characteristics shown in the tables in each range. (The sum of the amounts of
the total Principal Balances and the percentages in the following tables may
not equal the totals due to rounding.)
CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
RANGE OF NUMBER OF TOTAL BY TOTAL
PRINCIPAL BALANCES ($) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
The average Cut-off Date Principal Balance is approximately $ .
</TABLE>
LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
RANGE OF ORIGINAL NUMBER OF TOTAL BY TOTAL
LOAN-TO-VALUE RATIOS (%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------------ -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
The weighted average original Loan-to-Value Ratio is approximately %.
</TABLE>
MORTGAGE RATES
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
RANGE OF NUMBER OF TOTAL BY TOTAL
MORTGAGE RATES(%) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
- ---------
</TABLE>
* Reflects current Mortgage Rates of Adjustable Rate Mortgage Loans.
The weighted average Mortgage Rate is approximately _______ % per
annum.
LOAN TYPES
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
LOAN TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
--------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
</TABLE>
ORIGINAL TERMS TO MATURITY
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
RANGE OF MATURITIES (MONTHS) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
</TABLE>
The weighted average original term to maturity is approximately
________ months.
REMAINING TERMS TO MATURITY
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
REMAINING TERM TO NUMBER OF TOTAL BY TOTAL
MATURITY (MONTHS) MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
</TABLE>
The weighted average remaining term to maturity of the fully
amortizing Mortgage Loans is approximately ________ months.
GEOGRAPHIC DISTRIBUTION
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
STATE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
----- -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
</TABLE>
PROPERTY TYPES
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
PROPERTY TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
</TABLE>
LOAN PURPOSES
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
LOAN PURPOSE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------ -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
</TABLE>
OCCUPANCY STATUS
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
OCCUPANCY STATUS MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
---------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
</TABLE>
DOCUMENTATION TYPES
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
DOCUMENTATION TYPE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------ -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
</TABLE>
CREDIT GRADES
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
CREDIT GRADE MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------ -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
</TABLE>
PREPAYMENT PENALTIES
<TABLE>
<CAPTION>
PERCENTAGE OF
MORTGAGE LOANS
NUMBER OF TOTAL BY TOTAL
PREPAYMENT PENALTY MORTGAGE LOANS PRINCIPAL BALANCE PRINCIPAL BALANCE
------------------ -------------- ----------------- -----------------
<S> <C> <C> <C>
$ %
_____ _____________________ ________
Total................. $ 100.00%
</TABLE>
[SUBSEQUENT MORTGAGE LOANS
The obligation of the Trust to purchase additional Mortgage Loans (the
"Subsequent Mortgage Loans") on [any] date, as specified in the [Sale and
Servicing Agreement] (each, a "Subsequent Transfer Date") will be subject to
the Subsequent Mortgage Loans meeting the following criteria: [to be provided
as applicable]. These criteria will be based on the characteristics of the
Subsequent Mortgage Loans on the related Subsequent Transfer Date.
The characteristics of Subsequent Mortgage Loans may vary
significantly from time to time, subject to the requirements described above,
and may bear no particular relationship to the characteristics of the initial
Mortgage Loans at any time. It is expected that a substantial portion of the
Subsequent Mortgage Loans will be [to be provided if applicable.]]
ADDITIONAL INFORMATION
The description in this Prospectus Supplement of the Mortgage Pool and
the Mortgaged Properties is based upon the Mortgage Pool as constituted at the
close of business on the Cut-off Date. A Current Report on Form 8-K will be
available to purchasers of the Notes and will be filed, together with the Sale
and Servicing Agreement, the Indenture and the Trust Agreement, with the
Securities and Exchange Commission (the "SEC") within fifteen days after the
initial issuance of the Notes. In the event that Mortgage Loans are removed
from or added to the Mortgage Pool as described herein under "Description of
the Mortgage Pool," the removal or addition, to the extent material, will be
noted in the Current Report on Form 8-K.
THE ORIGINATOR
The information in this section has been provided by [the Originator.]
None of the Depositor, the Trustee, the Insurer, the Underwriter or any of
their respective affiliates has made or will make any representation as to the
accuracy or completeness of this information.
GENERAL
[Description of the Originator.]
LENDING ACTIVITIES AND LOAN SALES
[ ________________________________ ] originates real estate loans
through its network of offices and loan origination centers. [
________________________________ ] also participates in secondary market
activities by originating and selling mortgage loans while continuing to
service the majority of the loans sold. In other cases [ ]'s whole loan sale
agreements provide for the transfer of servicing rights.
[ ________________________________ ]'s primary lending activity is
funding loans to enable borrowers to purchase or refinance residential real
property, which loans are secured by first or second liens on the related real
property. [ ________________________________ ]'s single-family real estate
loans are predominantly "conventional" mortgage loans, meaning that they are
not insured by the Federal Housing Administration or partially guaranteed by
the U.S. Department of Veterans Affairs.
The following table summarizes [ ________________________________ ]'s
one- to four-family residential mortgage loan origination and sales activity
for the periods shown below. Sales activity may include sales of mortgage
loans purchased by [ ] from other loan originators.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED ,
---------- ---------------------
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
-------------------------------------------------- ----------------------
Originated and
<S> <C> <C> <C> <C> <C> <C> <C>
purchased.... $ $ $ $ $ $ $
Sales........ $ $ $ $ $ $ $
</TABLE>
UNDERWRITING GUIDELINES
The Mortgage Loans were originated generally in accordance with
guidelines (the "Underwriting Guidelines") established by [
__________________________________ ]. The Underwriting Guidelines are
primarily intended to evaluate the value and adequacy of the mortgaged
property as collateral and are also intended to consider the borrower's credit
standing and repayment ability. On a case-by-case basis and only with the
approval of two or more senior lending officers, [
__________________________________ ] may determine that, based upon
compensating factors, a prospective borrower not strictly qualifying under the
underwriting risk category guidelines described below warrants an underwriting
exception. Compensating factors may include, but are not limited to, low
loan-to-value ratio, low debt-to-income ratio, good credit history, stable
employment and time in residence at the applicant's current address. It is
expected that a substantial number of the Mortgage Loans will have been
originated under underwriting exceptions.]
[Describe Originator's underwriting guidelines.]
THE SERVICER
The information in this section has been provided by the Servicer.
None of the Depositor, the Trustee, the Insurer, the Underwriter or any of
their respective affiliates has made or will make any representation as to the
accuracy or completeness of this information.
GENERAL
[Description of the Servicer]
LOAN SERVICING
[To be provided as applicable.]
SERVICING PRACTICES AND EXPERIENCE
[To be provided as applicable.]
The following table sets forth the delinquency and loss experience at
the dates indicated for residential (one- to four-family and multifamily)
first lien mortgage loans serviced by the Servicer that were originated or
purchased by the Servicer:
<TABLE>
<CAPTION>
DELINQUENCIES AND FORECLOSURES
(DOLLARS IN THOUSANDS)
As of As of As of
[ ] [ ] [ ]
-------------------------------- --------------------------------- ---------------------------------
Percent Percent Percent Percent Percent Percent
By No. By By By By No. By By By By No. By By By
of Dollar Number Dollar of Dollar Number Dollar of Dollar Number Dollar
Loans Amount of Loans Amount Loans Amount of Loans Amount Loans Amount of Loans Amount
----- ------ -------- ------- ----- ------- -------- ------ ----- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Portfolio $ % % $ % % $ % %
Period of
Delinquency(1) % %
30-59 Days... $ % % $ % %
60-89 Days... % % $ % % $ % %
90 Days or more. % % $ % % $ % %
Total Delinquent % %
Loans $ % % $ % %
Loans in Foreclosure(2) % % $ % % $ % %
</TABLE>
(1) Includes [ ] loans totaling $[ ] for [ ], which were delinquent at the
time of transfer to the Servicer.
(2) Loans in foreclosure are also included under the subheading "90 Days
or more" and the heading "Total Delinquent Loans."
<TABLE>
<CAPTION>
REAL ESTATE OWNED
(DOLLARS IN THOUSANDS)
As of As of As of
[ ] [ ] [ ]
--------------------- ------------------------- ----------------------
By By By
By No. Dollar By No. Dollar By No. Dollar
of Loans Amount of Loans Amount of Loans Amount
<S> <C> <C> <C> <C> <C> <C>
Total Portfolio $ $ $
Foreclosed Loans (1) $ $ $
Foreclosure Ratio (2) % % % % % %
</TABLE>
(1) For the purposes of these tables, "Foreclosed Loans" means the
principal balance of mortgage loans secured by mortgaged properties
the title to which has been acquired by the Servicer.
(2) The "Foreclosure Ratio" is equal to the aggregate principal balance or
number of Foreclosed Loans divided by the aggregate principal balance,
or number, as applicable, of mortgage loans in the Total Portfolio at
the end of the indicated period.
LOAN LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
As of As of As of
[ ] [ ] [ ]
------------------ ------------- -------------
Total Portfolio (1) $ $ $
Net Losses (2, 3) $ $ $
Net Losses as a Percentage of
Total Portfolio % % %
__________________
(1) "Total Portfolio" on the date stated above is the principal balance of
the mortgage loans outstanding on the last day of the period.
(2) "Net Losses" are actual losses incurred on liquidated properties and
shortfall payoffs for each respective period. Losses on liquidated
properties are calculated as net sales proceeds less book value
(exclusive of loan purchase premium or discount). Shortfall payoffs
are calculated as the difference between principal payoff amount and
unpaid principal at the time of payoff.
(3) As of [ ], includes $[ ] of losses attributable to loans which were
delinquent at the time of transfer to the Servicer.
There can be no assurance that the delinquency and loss experience of
the Mortgage Loans will correspond to the loss experience of the Servicer's
mortgage portfolio set forth in the table above. The statistics shown above
represent the delinquency and loss experience for the Servicer's total
servicing portfolio only for the periods presented, whereas the total
delinquency and loss experience on the Mortgage Loans will depend on the
results over the life of the Trust. The Servicer's portfolio includes mortgage
loans with payment and other characteristics that are not representative of
the payment and other characteristics of the Mortgage Loans. A substantial
number of the Mortgage Loans may also have been originated based on
Underwriting Guidelines that are less stringent than those generally
applicable to the servicing portfolio reflected in the table. If the
residential real estate market experiences an overall decline in property
values, the actual rates of delinquencies, foreclosures and losses could be
higher than those previously experienced by the Servicer. In addition, adverse
economic conditions (which may or may not affect real property values) may
affect the timely payment by borrowers of scheduled payments of principal and
interest on the Mortgage Loans and, accordingly, the actual rates of
delinquencies, foreclosures and losses on to the Mortgage Loans.]
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes certain terms of the Sale and
Servicing Agreement, the Indenture, the Trust Agreement, and the
Administration Agreement (collectively, the "Transfer and Servicing
Agreements"). The summary does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all the provisions of the
Transfer and Servicing Agreements. The following summary supplements, and to
the extent inconsistent, replaces, the description of the general terms and
provisions of the Transfer and Servicing Agreements under the heading "The
Agreements" in the Prospectus.
SALE AND ASSIGNMENT OF THE MORTGAGE LOANS
On the Closing Date, the [Finance America, LLC] (the "Seller") will
sell the Mortgage Loans (other than the right to receive certain charges
payable by borrowers) to the Depositor, and the Depositor will sell the
Mortgage Loans (other than those amounts) to the Trust. The Trust will,
concurrently, deliver or cause to be delivered the Securities to the
Depositor. The Trust will pledge and assign the Mortgage Loans to the
Indenture Trustee in exchange for the Notes. Each Mortgage Loan will be
identified in a schedule appearing as an exhibit to the Sale and Servicing
Agreement (the "Mortgage Loan Schedule").
[In addition, the Depositor will, as to each Mortgage Loan, deliver to
a custodian appointed by the Indenture Trustee (the "Custodian") the following
documents (together, with respect to each Mortgage Loan, a "Mortgage Loan
File"):
o the related Note endorsed to the order of the Indenture
Trustee, or in blank, without recourse,
o any assumption and modification agreements and the Mortgage
with evidence of recording indicated thereon (except for any
Mortgage not returned from the public recording office),
o an assignment of the Mortgage in the name of the Indenture
Trustee, or in blank, in recordable form, and
o any intervening assignments of the Mortgage.]
Assignments of the Mortgages to the Indenture Trustee will be recorded
following the Closing Date in the real property records of the states in which
the related Mortgaged Properties are located to protect the Indenture
Trustee's interest in the Mortgage Loans. In the event that, with respect to
any Mortgage Loan, the Depositor cannot deliver the assignment with evidence
of recording thereon concurrently with the conveyance thereof under the Sale
and Servicing Agreement because they have not yet been returned by the public
recording office, the Depositor will deliver or cause to be delivered to the
Custodian a certified true photocopy of the assignment. The Depositor will
deliver or cause to be delivered to the Custodian any assignment with evidence
of recording indicated thereon upon receipt thereof from the public recording
office. The Custodian will review (or cause to be reviewed) each Mortgage Loan
File within ninety days after the conveyance of the related Mortgage Loan to
the Trust to ascertain that all required documents have been executed and
received.
Under the terms of the agreement (the "Mortgage Loan Purchase
Agreement") pursuant to which the Depositor will purchase the Mortgage Loans
from the Seller and the Sale and Servicing Agreement, the Custodian will
conduct an initial review of the Mortgage Loan documents and will notify the
Depositor and the Seller as to each Mortgage Loan document that either has not
yet been delivered to the Depositor as required or appears to be not properly
executed, not in conformity with the description of the Mortgage Loan on the
Mortgage Loan schedule or otherwise defective. If any Mortgage Loan document
is not delivered or any material defect in a document is not cured within the
time period specified in the Mortgage Loan Purchase Agreement, the Seller will
be required to repurchase the affected Mortgage Loan for a price equal to the
unpaid principal balance thereof plus accrued interest thereon (the
"Repurchase Price") or, in certain circumstances, to substitute another
Mortgage Loan that satisfies the requirements specified in the Sale and
Servicing Agreement.
The Seller will make to the Depositor under the Mortgage Loan Sale
Agreement representations and warranties regarding the Mortgage Loans intended
to address certain material conditions that may arise with respect to the
Mortgage Loans. These include, among others, the following representations and
warranties: [representations and warranties to be provided]. The Depositor's
rights under these representations and warranties will be assigned to the
Indenture Trustee for the benefit of the Noteholders. In the event of a breach
of any of these representations or warranties that materially and adversely
affects the value of any Mortgage Loan or the interests of the Noteholders,
the Seller will be obligated, within [60] days following its discovery of a
breach or receipt of notice of a breach, to cure the breach or purchase the
affected Mortgage Loan from the Trust for the Repurchase Price or, in certain
circumstances, to substitute another Mortgage Loan.
No assurance can be given that, at any particular time, the Seller
will be capable, financially or otherwise, of repurchasing defective Mortgage
Loans or substituting additional Mortgage Loans for defective Mortgage Loans.
TRUST FEES AND EXPENSES
The Servicer is entitled to the Servicing Fee and reimbursement for
certain expenses as described under "-- Servicing Compensation and Payment of
Expenses" below. The fees and expenses of the Indenture Trustee, the Owner
Trustee and the Custodian will be paid by [ ].
VOTING RIGHTS
Voting rights of Securityholders under the Transfer and Servicing
Agreements will be allocated among the Notes and the Residual Certificate as
provided in the Transfer and Servicing Agreements.
GENERAL SERVICING PROVISIONS
The Mortgage Loans will be serviced by the Servicer in accordance with
the provisions of the Sale and Servicing Agreement.
[Describe servicing provisions as applicable.]
NO DELINQUENCY ADVANCES
In the event of a delinquency or default with respect to a Mortgage
Loan, neither the Servicer nor any Subservicer (as defined below) will have
any obligation to advance scheduled monthly payments of principal or interest
with respect to the Mortgage Loan.
SERVICING ADVANCES
The Servicer or any Subservicer will make reasonable and customary
expense advances with respect to the Mortgage Loans (each, a "Servicing
Advance") and will be entitled to reimbursement for Servicing Advances as
described herein. Servicing Advances may include costs and expenses advanced
for the preservation, restoration and protection of any Mortgaged Property,
including advances to pay delinquent real estate taxes and assessments. Any
Servicing Advances by the Servicer or any Subservicer will be reimbursable
from late collections on the related Mortgage Loan, or with respect to any
Liquidated Mortgage Loan from the related Liquidation Proceeds. Servicing
Advances remaining outstanding will be reimbursed, to the extent of Available
Funds, as described under "Description of the Notes -- Payment Priorities."
INSURANCE COVERAGE
The Servicer is required to obtain and thereafter maintain in effect a
bond or similar form of insurance coverage (which may provide blanket
coverage) insuring against loss occasioned by the errors and omissions of its
officers and employees.
EVIDENCE AS TO COMPLIANCE
The Sale and Servicing Agreement will provide that each year a firm of
independent accountants will furnish a statement to the Indenture Trustee to
the effect that the firm has examined certain documents and records relating
to the servicing of home loans by the Servicer and that, on the basis of that
examination, the firm is of the opinion that the servicing has been conducted
in accordance with applicable accounting standards, except for those
exceptions that the firm believes to be immaterial and those exceptions set
forth in the statement.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer will be paid a monthly fee (the "Servicing Fee") with
respect to each Mortgage Loan calculated at [ _____ ]% annually (the
"Servicing Fee Rate") on the outstanding principal balance of each Mortgage
Loan. No Servicing Fee will be payable on a Liquidated Mortgage Loan unless
the Servicer determines that additional collection efforts are warranted with
respect to that Mortgage Loan. The Servicer will be entitled to reimbursement
from collections on the Mortgage Loans for certain expenses before any amounts
are paid to Noteholders.
SUBSERVICING
The Servicer will be prohibited from assigning the responsibility for
servicing the Mortgage Loans, except as permitted by the Sale and Servicing
Agreement, but it may employ one or more subservicers ("Subservicers") as
provided under the Sale and Servicing Agreement. If the Servicer chooses to
employ Subservicers, the Servicer will remain liable for fulfillment of its
obligations under the Sale and Servicing Agreement, and will be considered to
have itself received any payment received by a Subservicer whether or not the
Subservicer actually remits that payment.
RESIGNATION OR REMOVAL OF THE SERVICER
The Servicer will agree in the Sale and Servicing Agreement not to
resign except with the consent of [ ____ ], unless the Servicer delivers to [
____ ] an opinion of legal counsel to the effect that the Servicer is no
longer permitted under applicable law to perform the duties of the Servicer
under the Sale and Servicing Agreement.
If the Servicer is in default under the Sale and Servicing Agreement,
the Indenture Trustee or Noteholders having a majority of voting rights may
remove the Servicer. [Events of default include:
o failure by the Servicer to remit any required payment to the
Indenture Trustee for [one] Business Day after receipt of
written notice that the payment has not been made;
o failure by the Servicer to deposit collections or other
recoveries on the Mortgage Loans in the Collection Account on
a daily basis in accordance with the Sale and Servicing
Agreement;
o failure by the Servicer to fulfill any other material
requirement under the Sale and Servicing Agreement within the
applicable time period;
o failure by the Servicer to be qualified to service home loans
for either Fannie Mae or Freddie Mac;
o failure by the Servicer to maintain any applicable licenses in
each jurisdiction where Mortgaged Properties are located;
o failure by the Servicer to maintain a minimum net worth of
$_______________;
o insolvency of the Servicer; and
o other events specified in the Sale and Servicing Agreement.]
[If the Servicer is removed, the Indenture Trustee will immediately
assume the role of Servicer under the Sale and Servicing Agreement unless
another Servicer is appointed pursuant to the Sale and Servicing Agreement.
The Indenture Trustee may continue to service the Mortgage Loans if it is
legally qualified to do so or may appoint a successor Servicer as provided in
the Sale and Servicing Agreement].
COLLECTION ACCOUNT, NOTE DISTRIBUTION ACCOUNT AND CERTIFICATE DISTRIBUTION
ACCOUNT
The Servicer is required to deposit in a segregated account (the
"Collection Account") within [ ____ ] Business Days of receipt all payments
received on or after the Cut-off Date on account of principal and interest on
the Mortgage Loans, all Net Liquidation Proceeds, Insurance Proceeds, Released
Mortgaged Property Proceeds, any amounts payable in connection with the
repurchase or substitution of any Mortgage Loan and any amount required to be
deposited in the Collection Account in connection with the redemption of the
Notes. Withdrawals will be made from the Collection Account only for the
purposes specified in the Sale and Servicing Agreement. The Collection Account
may be maintained at any depository institution that satisfies the
requirements specified in the Sale and Servicing Agreement.
Amounts on deposit in the Collection Account will be invested as
provided in the Sale and Servicing Agreement. All interest and any other
investment earnings on amounts on deposit in the Collection Account will be
paid to [ _____________ ]. Any net losses on these investments will be paid by
[ ______________ ].
The Servicer will establish and maintain with the Paying Agent an
account on behalf of the Noteholders, into which amounts released from the
Collection Account for payment to the Noteholders will be deposited and from
which all payments to the Noteholders will be made (the "Note Distribution
Account"). The Servicer will also establish and maintain with the Paying Agent
an account in the name of the Owner Trustee on behalf of the Residual
Certificateholder, into which amounts released from the Collection Account for
distribution to the Residual Certificateholder will be deposited and from
which all distributions to the Residual Certificateholder will be made (the
"Certificate Distribution Account").
On the [ _____ ] day of each month, or if the [ ____ ] day is not a
Business Day, the preceding Business Day, the Servicer will remit the
Available Funds to the Paying Agent for deposit into the Note Distribution
Account and Certificate Distribution Account by making appropriate withdrawals
from the Collection Account. On each Distribution Date, the Indenture Trustee
will make withdrawals from the Note Distribution Account and Certificate
Distribution Account for application as described under "Description of the
Notes -- Payment Priorities" herein. Amounts on deposit in the Note
Distribution Account and Certificate Distribution Account will be invested as
provided in the Sale and Servicing Agreement. All interest and any other
investment earnings on amounts on deposit in the Note Distribution Account and
Certificate Distribution Account will be retained by the Indenture Trustee as
its compensation. Any net losses on these investments will be paid by the
Indenture Trustee.
THE OWNER TRUSTEE AND INDENTURE TRUSTEE
The Owner Trustee, the Indenture Trustee and any of their respective
affiliates may hold Securities in their own names or as pledgees. For the
purpose of meeting the legal requirements of certain jurisdictions, the
Servicer, the Owner Trustee and the Indenture Trustee acting jointly (or in
some instances, the Owner Trustee or the Indenture Trustee acting alone) will
have the power to appoint co-trustees or separate trustees of all or any part
of the Trust. In the event of an appointment of another trustee all rights,
powers, duties and obligations conferred or imposed upon the Owner Trustee by
the Sale and Servicing Agreement and the Trust Agreement and upon the
Indenture Trustee by the Indenture will be conferred or imposed upon the Owner
Trustee and the Indenture Trustee, respectively, and in each case the separate
trustee or co-trustee, jointly, or, in any jurisdiction in which the Owner
Trustee or Indenture Trustee will be incompetent or unqualified to perform
certain acts, singly upon the separate trustee or co-trustee, which will
exercise and perform these rights, powers, duties and obligations solely at
the direction of the Owner Trustee or the Indenture Trustee, as applicable.
The Owner Trustee and the Indenture Trustee may resign at any time, in
which event the Servicer will be obligated to appoint a successor thereto. The
Servicer may also remove the Owner Trustee or the Indenture Trustee if either
ceases to be eligible to continue as Owner Trustee or Indenture Trustee under
the Trust Agreement or the Indenture, as the case may be, becomes legally
unable to act or becomes insolvent. In these circumstances, the Servicer will
be obligated to appoint a successor Owner Trustee or a successor Indenture
Trustee, as applicable. Any resignation or removal of the Owner Trustee or
Indenture Trustee and appointment of a successor thereto will not become
effective until acceptance of the appointment by the successor.
The Trust Agreement and Indenture will provide that the Owner Trustee
and Indenture Trustee will be entitled to indemnification by the Depositor
for, and will be held harmless against, any loss, liability or expense
incurred by the Owner Trustee or Indenture Trustee not resulting from its own
willful misfeasance, bad faith or negligence (other than by reason of a breach
of any of its representations or warranties to be set forth in the Trust
Agreement or Indenture, as the case may be).
DUTIES OF THE OWNER TRUSTEE AND INDENTURE TRUSTEE
The Owner Trustee will make no representations as to the validity or
sufficiency of the Trust Agreement, the Residual Certificate (other than the
execution and authentication thereof), the Notes or any Mortgage Loans or
related documents, and will not be accountable for the use or application by
the Depositor or the Servicer of any funds paid to the Depositor or the
Servicer in respect of the Securities or the Mortgage Loans, or the investment
of any monies by the Servicer before these monies are deposited into the
Collection Account, the Note Distribution Account or the Certificate
Distribution Account. So long as no Event of Default has occurred and is
continuing, the Owner Trustee will be required to perform only those duties
specifically required of it under the Trust Agreement. Generally, those duties
will be limited to the receipt of the various certificates, reports or other
instruments required to be furnished to the Owner Trustee under the Trust
Agreement, in which case it will only be required to examine them to determine
whether they conform to the requirements of the Trust Agreement. The Owner
Trustee will not be charged with knowledge of a failure by the Servicer to
perform its duties under the Sale and Servicing Agreement, which failure
constitutes an Event of Default, unless the Owner Trustee has actual knowledge
of any failure.
The Owner Trustee will be under no obligation to exercise any of the
rights or powers vested in it by the Trust Agreement or to make any
investigation of matters arising thereunder or to institute, conduct or defend
any litigation thereunder or in relation thereto at the request, order or
direction of the holder of the Residual Certificate, unless the Residual
Certificateholder has offered to the Owner Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby. Subject to the rights or consent of the Noteholders and
Indenture Trustee, the Residual Certificateholder will not have any right
under the Trust Agreement to institute any proceeding with respect to the
Trust Agreement, unless the Residual Certificateholder previously has given to
the Owner Trustee written notice of the occurrence of an Event of Default and
(1) the Event of Default arises from the Servicer's failure to remit payments
when due or (2) the holder of the Residual Certificate has made written
request upon the Owner Trustee to institute a proceeding in its own name as
the Owner Trustee thereunder and have offered to the Owner Trustee reasonable
indemnity, and the Owner Trustee for 30 days has neglected or refused to
institute any proceedings.
The Indenture Trustee will make no representations as to the validity
or sufficiency of the Indenture, the Residual Certificate, the Notes (other
than the execution and authentication thereof) or any Mortgage Loans or
related documents, and will not be accountable for the use or application by
the Depositor, the Servicer or the Owner Trustee of any funds paid to the
Depositor, the Servicer or the Owner Trustee in respect of the Securities or
the Mortgage Loans, or the investment of any monies by the Servicer before
those monies are deposited into the Collection Account or the Note
Distribution Account. So long as no Event of Default under the Indenture or
the Sale and Servicing Agreement has occurred or is continuing, the Indenture
Trustee will be required to perform only those duties specifically required of
it under the Transfer and Servicing Agreements. Generally, those duties will
be limited to the receipt of the various certificates, reports or other
instruments required to be furnished to the Indenture Trustee under the
Indenture, in which case it will only be required to examine them to determine
whether they conform to the requirements of the Indenture. The Indenture
Trustee will not be charged with knowledge of a failure by the Servicer to
perform its duties under the Sale and Servicing Agreement, which failure
constitutes an Event of Default under the Indenture or the Sale and Servicing
Agreement, unless the Indenture Trustee obtains actual knowledge of any
failure.
The Indenture Trustee will be under no obligation to exercise any of
the rights or powers vested in it by the Indenture or to make any
investigation of matters arising thereunder or to institute, conduct or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the Noteholders, unless those Noteholders have offered to
the Indenture Trustee reasonable security or indemnity against the costs,
expenses and liabilities that may be incurred therein or thereby. No
Noteholder will have any right under the Indenture to institute any proceeding
with respect to the Indenture, unless the holder previously has given to the
Indenture Trustee written notice of the occurrence of an Event of Default and
(1) the Event of Default arises from the Servicer's failure to remit payments
when due or (2) Noteholders evidencing not less than [ ]% of the Class
Principal Amount of the Notes, acting together as a single class, have made
written request upon the Indenture Trustee to institute a proceeding in its
own name as the Indenture Trustee thereunder and have offered to the Indenture
Trustee reasonable indemnity, and the Indenture Trustee for 30 days has
neglected or refused to institute any proceedings. See "Description of the
Notes -- Rights of Noteholders Upon Occurrence of Event of Default" herein.
YIELD CONSIDERATIONS
GENERAL
The yields to maturity (or to early termination) on the Notes will be
affected by the rate of principal payments on the Mortgage Loans (including
prepayments, which may include amounts received by virtue of purchase,
condemnation, insurance or foreclosure) on the Mortgage Loans. Yields will
also be affected by the extent to which Mortgage Loans bearing higher Mortgage
Loan Rates prepay at a more rapid rate than Mortgage Loans with lower Mortgage
Loan Rates, the amount and timing of borrower delinquencies and defaults
resulting in Realized Losses, the application of Monthly Excess Cashflow, the
purchase price paid for the Notes and other factors.
Principal prepayments may be influenced by a variety of economic,
geographic, demographic, social, tax, legal and other factors. These factors
may include changes in borrowers' housing needs, job transfers, unemployment,
borrowers' net equity, if any, in the mortgaged properties, servicing
decisions, homeowner mobility, the existence and enforceability of
"due-on-sale" clauses, seasoning of loans, market interest rates for similar
types of loans and the availability of funds for the loans. Nearly all of the
Mortgage Loans contain due-on-sale provisions and the Servicer will generally
enforce these provisions unless (1) the Servicer, in a manner consistent with
its servicing practices, permits the purchaser of the related Mortgaged
Property to assume the Mortgage Loan, or (2) enforcement is not permitted by
applicable law. In certain cases, the Servicer may, in a manner consistent
with its servicing practices, permit a borrower who is selling his principal
residence and purchasing a new one to substitute the new Mortgaged Property as
collateral for the related Mortgage Loan, or may simply release its lien on
the existing collateral, leaving the related Mortgage Loan unsecured. In that
event, the Servicer will generally require the borrower to make a partial
prepayment in reduction of the principal balance of the Mortgage Loan to the
extent that the borrower has received proceeds from the sale of the prior
residence that will not be applied to the purchase of the new residence.
Approximately [ _____ ] of the Mortgage Loans are subject to
prepayment penalties during the first [three to five years] after origination.
Prepayment penalties may have the effect of reducing the amount or the
likelihood of prepayments on the Mortgage Loans. A prepayment premium may be
waived by the Servicer under certain circumstances. The remaining Mortgage
Loans may be prepaid in full or in part at any time without penalty.
In general, if prevailing interest rates fall below the interest rates
on the Mortgage Loans, the Mortgage Loans are likely to be subject to higher
prepayments than if prevailing rates remain at or above the interest rates on
the Mortgage Loans. Conversely, if prevailing interest rates rise above the
interest rates on the Mortgage Loans, the rate of prepayment would be expected
to decrease.
The rate of principal payments on the Mortgage Loans will also be
affected by the amortization schedules of the Mortgage Loans, the rate and
timing of prepayments by the borrowers, liquidations of defaulted Mortgage
Loans and repurchases of Mortgage Loans due to certain breaches of
representations and warranties or defective documentation as described herein.
The timing of changes in the rate of prepayments, liquidations and purchases
of the related Mortgage Loans may significantly affect the yield to an
investor, even if the average rate of principal payments experienced over time
is consistent with an investor's expectation. Because the rate and timing of
principal payments on the Mortgage Loans will depend on future events and on a
variety of factors (as described more fully herein and in the Prospectus under
"Yield Considerations") no assurance can be given as to the rate or the timing
of principal payments on the Notes. In general, the earlier a prepayment of
principal of the related Mortgage Loans, the greater the effect on an
investor's yield. The effect on an investor's yield of principal payments
occurring at a rate higher (or lower) than the rate anticipated by the
investor during the period immediately following the issuance of the Notes may
not be offset by a subsequent like decrease (or increase) in the rate of
principal payments.
From time to time, areas of the United States may be affected by
flooding, severe storms, landslides, wildfires or other natural disasters.
[The Seller] will represent and warrant that as of the Closing Date each
Mortgaged Property was free of material damage. In the event of an uncured
breach of this representation and warranty that materially and adversely
affects the value of a Mortgage Loan, [the Seller] will be required to
repurchase the affected Mortgage Loan or, under certain circumstances,
substitute another mortgage loan. If any damage caused by earthquakes,
flooding, storms, wildfires, or landslides (or other cause) occurs after the
Closing Date, [the Seller] will not have any repurchase obligation. In
addition, the standard hazard policies covering the Mortgaged Properties
generally do not cover damage caused by earthquakes, flooding and landslides,
and earthquake, flood or landslide insurance may not have been obtained with
respect to the affected Mortgaged Properties. As a consequence, Realized
Losses could result. To the extent that the insurance proceeds received with
respect to any damaged Mortgage Properties are not applied to the restoration
thereof, the proceeds will be used to prepay the related Mortgage Loans in
whole or in part. Any repurchases or repayments of the Mortgage Loans may
reduce the weighted average lives of the Notes and will reduce the yields on
the Notes to the extent they are purchased at a premium.
In addition, any future limitations on the rights of borrowers to
deduct interest payments on mortgage loans for federal income tax purposes may
result in a higher rate of prepayment on the Mortgage Loans.
The Depositor and the Seller make no representations as to the
particular factors that will affect the prepayment of the Mortgage Loans, as
to the relative importance of these factors, or as to the percentage of the
principal balance of the Mortgage Loans that will be paid as of any date.
Payments of principal at a faster rate than anticipated will decrease
the yield on Notes purchased at a premium; payments of principal at a slower
rate than anticipated will decrease the yield on Notes purchased at a
discount. The effect on an investor's yield due to payments of principal
occurring at a rate that is faster (or slower) than the rate anticipated by
the investor during any period following the issuance of the Notes will not be
entirely offset by a subsequent like reduction (or increase) in the rate of
payments of principal during any subsequent period.
The rate of delinquencies and defaults on the Mortgage Loans and of
recoveries, if any, on defaulted Mortgage Loans and foreclosed properties will
affect the rate and timing of principal payments on the Mortgage Loans, and,
accordingly, the weighted average life of the Notes. Certain factors may
influence delinquencies and defaults, including origination and underwriting
standards, loan-to-value ratios and delinquency history. In general, defaults
on Mortgage Loans are expected to occur with greater frequency in their early
years, although little data is available with respect to the rate of default
on similar types of home loans. The rate of default on Mortgage Loans with
high loan-to-value ratios, or on Mortgage Loans secured by junior liens, may
be higher than that of home loans with lower loan-to-value ratios or secured
by first liens on comparable properties. In addition, the rate and timing of
prepayments, defaults and liquidations on the Mortgage Loans will be affected
by the general economic condition of the area in which the related Mortgaged
Properties are located or the related borrower is residing. See "Description
of the Mortgage Pool" herein. The risk of delinquencies and losses is greater
and voluntary principal prepayments are less likely in regions where a weak or
deteriorating economy exists, as may be evidenced by, among other factors,
increasing unemployment or falling property values.
Investors in the Notes will bear the risk of reinvestment of amounts
received in respect of principal on the Notes at yields that may be lower than
the yield on the Notes.
The yields to investors in the Notes may be affected by the exercise
by [ ] of its right to purchase the Mortgage Loans, as described under
"Description of the Notes -- Optional Redemption" herein, or the failure of [
________________________ ] to exercise that right.
If the purchaser of a Note offered at a discount from its initial
principal amount calculates its anticipated yield to maturity (or early
termination) based on an assumed rate of payment of principal that is faster
than that actually experienced on the related Mortgage Loans, the actual yield
may be lower than that so calculated. Conversely, if the purchaser of a Note
offered at a premium calculates its anticipated yield based on an assumed rate
of payment of principal that is slower than that actually experienced on the
related Mortgage Loans, the actual yield may be lower than that so calculated.
The effective yield to holders of the Notes will be lower than the
yield otherwise produced by the Interest Rate and the purchase price because
monthly payments will not be payable until the [ ____ ] day (or later) of the
month following the Accrual Period.
OVERCOLLATERALIZATION
[Describe as applicable.]
MATURITY DATE
The Maturity Date of the Notes is as set forth under "Description of
the Notes -- Maturity Date" herein. The Maturity Date of the Notes was
determined by [to be provided as applicable]. The actual maturity of the Notes
may be significantly earlier than the Maturity Date.
WEIGHTED AVERAGE LIFE
The following information illustrates the effect of prepayments of the
Mortgage Loans on the weighted average life of the Notes under certain stated
assumptions and is not a prediction of the prepayment rate that might actually
be experienced on the Mortgage Loans. Weighted average life refers to the
average amount of time that will elapse from the date of issuance of a
security to the date of distribution to the investor of each dollar
distributed in net reduction of principal of the security (assuming no
losses). The weighted average life of the Notes will be influenced by, among
other things, the rate at which principal of the Mortgage Loans is paid, which
may be in the form of scheduled amortization or prepayments (for this purpose,
the term "prepayment" includes unscheduled reductions of principal, including
without limitation those resulting from full or partial prepayments,
refinancings, liquidations and write-offs due to defaults, casualties or other
dispositions, substitutions and repurchases by or on behalf of the Seller or
the Depositor) and [to be provided as applicable].
Prepayments on loans such as the Mortgage Loans are commonly measured
relative to a prepayment standard or model. The model used in this Prospectus
Supplement for the Mortgage Loans represents [to be provided as applicable]. [
____ ] does not purport to be either a historical description of the
prepayment experience or any pool of loans or a prediction of the anticipated
rate of prepayment of any pool of loans, including the Mortgage Loans. Neither
the Depositor nor the Underwriter makes any representation about the
appropriateness of the [ ____ ] model.
[The following table was prepared based on the following assumptions,
among other things (collectively, the "Modeling Assumptions"):
o the initial Class Principal Amount and the Interest Rate are
as set forth on the cover of this Prospectus Supplement;
o each scheduled payment of principal and interest on a Mortgage
Loan is timely received on the last day of each month starting
in [ ];
o principal prepayments are received in full on the last day of
each month starting in [ ], and each prepayment includes 30
days of interest on the Mortgage Loan;
o prepayments are received on the Mortgage Loans at the
applicable constant rates indicated;
o there are no defaults or delinquencies on the Mortgage Loans;
o Distribution Dates occur on the [ ] day of each month,
starting in [ ];
o there are no re-purchases or substitutions of the Mortgage
Loans;
o the Notes are issued on [ ]; and
o the Mortgage Loans were aggregated into assumed Mortgage Loans
having the following characteristics:]
HOME NET HOME REMAINING
HOME LOAN LOAN TERM TO
LOAN PRINCIPAL INTEREST INTEREST MATURITY
NUMBER BALANCE RATE RATE (IN MONTHS)
- --------- ----------- ----------- ---------- -----------
The actual characteristics of the Mortgage Loans may, and the
performance of the Mortgage Loans will, differ from the assumptions used in
constructing the table below, which is hypothetical in nature and is provided
only to give a general sense of how the principal cash flows might behave
under varying prepayment scenarios. For example, it is not expected that the
Mortgage Loans will prepay at a constant rate until maturity, that all of the
Mortgage Loans will prepay at the same rate or that there will be no defaults
or delinquencies on the Mortgage Loans. Moreover, the diverse remaining terms
to maturity of the Mortgage Loans could produce slower or faster principal
payments than indicated in the table in the [assumed prepayment rate]
specified, even if the weighted average remaining term to maturity of the
Mortgage Loans is as assumed. Any difference between those assumptions and the
actual characteristics and performance of the Mortgage Loans or actual
prepayment or loss experience will cause the percentages of Original Principal
Amounts outstanding over time and the weighted average lives of the Notes to
differ (which difference could be material) from the corresponding information
in the table for each indicated [assumed prepayment rate].
Subject to the foregoing discussion and assumptions, the following
tables indicate the weighted average lives of the Notes and set forth the
percentages of the Original Principal Amount of the Notes that would be
outstanding after each of the Distribution Dates shown at the indicated
[assumed prepayment rate].
The weighted average life of the Notes is determined by (1)
multiplying the net reduction, if any, of the Class Principal Amount by the
number of years from the date of issuance of the Note to the related
Distribution Date, (2) adding the results and (3) dividing the sum by the
total of the net reductions of Class Principal Amount referred to in clause
(1) and rounding to one decimal place.
<TABLE>
<CAPTION>
PERCENTAGE OF ORIGINAL PRINCIPAL AMOUNT OF THE NOTES
OUTSTANDING AT THE FOLLOWING [PREPAYMENT RATES]
Class [ ]
---------------------------------------------------------------
Distribution Date [ ]% [ ]% [ ]% [ ]% [ ]% [ ]% [ ]%
- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial Percentage................... 100 100 100 100 100 100 100
Weighted Average
Life in Years
With Optional Redemption.........
Without Optional Redemption......
- ---------
</TABLE>
* Based upon the assumption that [ _____________________________ ] does not
exercise its option to repurchase the Mortgage Loans as described under
"Description of the Notes -- Optional Redemption" herein.
FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
[In the opinion of Brown & Wood LLP, for federal income tax purposes,
the Notes will be characterized as debt, and the Trust will not be a business
entity classified as an association (or a publicly traded partnership) treated
as a corporation or a taxable mortgage pool. Each Noteholder, by the
acceptance of a Note, will agree to treat the Notes as indebtedness for
federal income tax purposes. See "Federal Income Tax Considerations" in the
Prospectus for additional information concerning the application of federal
income tax laws to the Trust and the Notes.]
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
[To be provided as applicable.]
STATE INCOME TAX CONSIDERATIONS
In addition to the federal income tax matters described under "Federal
Income Tax Considerations" above, prospective investors should consider the
state income tax consequences of the acquisition, ownership and disposition of
the Notes. State income tax law may differ substantially from the
corresponding federal tax law, and this discussion does not purport to
describe any aspect of the income tax laws of any state. Therefore,
prospective investors should consult their own tax advisors with respect to
the various tax consequences of investments in the Notes.
ERISA CONSIDERATIONS
[Except as described below, the Notes may be purchased by an employee
benefit plan or an individual retirement account (a "Plan") subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"). A
fiduciary of a Plan must determine that the purchase of a Note is consistent
with its fiduciary duties under ERISA and does not result in a nonexempt
prohibited transaction as defined in Section 406 of ERISA or Section 4975 of
the Code. For additional information regarding treatment of the Notes under
ERISA, See "ERISA Considerations" in the Prospectus.
The Notes may not be purchased with the assets of a Plan if the
Depositor, the Servicer, the Indenture Trustee, the Owner Trustee or any of
their affiliates (a) has investment or administrative discretion with respect
to the Plan assets; (b) has authority or responsibility to give, or regularly
gives, investment advice with respect to the Plan assets, for a fee and
pursuant to an agreement or understanding that such advice (1) will serve as a
primary basis for investment decisions with respect to such Plan assets and
(2) will be based on the particular investment needs for the Plan; or (c) is
an employer maintaining or contributing to the Plan.]
LEGAL INVESTMENT CONSIDERATIONS
[The Notes will [not] constitute "mortgage related securities" under
the Secondary Mortgage Market Enhancement Act of 1984. Accordingly, many
institutions with legal authority to invest in "mortgage related securities"
may [not] be legally authorized to invest in the Notes.]
Institutions whose investment activities are subject to review by
certain regulatory authorities may be or may become subject to restrictions,
which may be retroactively imposed by the regulatory authorities, on the
investment by those institutions in certain mortgage related securities. In
addition, several states have adopted or may adopt regulations that prohibit
certain state-chartered institutions from purchasing or holding similar types
of securities.
Accordingly, investors should consult their own legal advisors to
determine whether and to what extent the Notes may be purchased by them.
See "Legal Investment Considerations" in the Prospectus.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be applied by the
Depositor, or an affiliate thereof, toward the purchase of the Mortgage Loans.
UNDERWRITING
[Subject to the terms and conditions provided in the underwriting
agreement and in a terms agreement (collectively, the "Underwriting
Agreement") between the Depositor and the Underwriter, the Depositor has
agreed to sell to the Underwriter, the Seller and the Underwriter has agreed
to purchase from the Depositor, all of the Notes.
The Underwriter has advised the Depositor that the Underwriter intends
to initially offer the Notes to the public at the price specified on the front
cover of this Prospectus Supplement. After the initial public offering of the
Notes, the public offering price may be changed. The Underwriting Agreement
provides that the Depositor will indemnify the Underwriter against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
Until the distribution of the Notes is completed, the rules of the SEC
may limit the ability of the Underwriter and certain selling group members to
bid for and purchase the Notes. As an exception to these rules, the
Underwriter is permitted to engage in certain transactions that stabilize the
price of the Notes. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Notes.
If the Underwriter creates a short position in the Notes in connection
with the offering, that is, if they sell more Notes than the amount specified
on the cover page of this Prospectus Supplement, the Underwriter may reduce
that short position by purchasing Notes in the open market.
In general, purchases of a security for the purpose of stabilization
or to reduce a short position could cause the price of the security to be
higher than it might be in the absence of those purchases.
Neither the Depositor nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Notes. In addition,
neither the Depositor nor the Underwriter makes any representation that the
Underwriter will engage in these transactions or that these transactions, once
begun, will not be discontinued without notice.]
Expenses incurred by the Depositor in connection with this offering
are expected to be approximately $[ ].
The Underwriter expects to make a secondary market in the Notes, but
has no obligation to do so. There can be no assurance that any such secondary
market will develop, or, if it does develop, that it will continue.
[ ______________________ ] has entered into an agreement with the
Depositor to purchase the Residual Certificate simultaneously with the
purchase of the Notes.
EXPERTS
[To be provided as applicable].
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon
for the Depositor by Brown & Wood LLP, Washington, D.C. Certain legal matters
will be passed upon for the Underwriter by [ ____________________________ ].
RATINGS
It is a condition to the issuance of the Notes that they be rated "[
]" by [Rating Agency] and "[ ]" by [Rating Agency]. [Rating Agency] and
[Rating Agency] are referred to herein as the "Rating Agencies."
A securities 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. A securities rating addresses the likelihood of
the receipt by holders of Notes of distributions in the amount of scheduled
payments on the Mortgage Loans. The rating takes into consideration the
characteristics of the Mortgage Loans and the structural, legal and tax
aspects associated with the Notes. The ratings on the Notes do not represent
any assessment of the likelihood or rate of principal prepayments. The ratings
do not address the possibility that holders of Notes might suffer a lower than
anticipated yield due to prepayments.
The security ratings assigned to the Notes should be evaluated
independently from similar ratings on other types of securities. 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 either Rating Agency.
The Depositor has not requested a rating of the Notes by any rating
agency other than the Rating Agencies; there can be no assurance, however, as
to whether any other rating agency will rate the Notes or, if it does, what
rating would be assigned by the other rating agency. The rating assigned by
the other rating agency to the Notes could be lower than the ratings assigned
by the Rating Agencies.
GLOSSARY OF DEFINED TERMS
[To be provided.]
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Finance
America Securities, LLC [ ________________ ] Asset Backed Notes (the "Global
Securities") will be available only in book-entry form. Investors in the
Global Securities may hold the Global Securities through any of DTC,
Clearstream or Euroclear. The Global Securities will be tradable 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 (i.e., 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 and prior mortgage loan asset backed
certificates issues.
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 and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless those holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities
clearing organizations 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 the positions in
accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to prior mortgage loan asset backed
certificates issues. 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
loan asset backed certificates issues in same-day funds.
TRADING BETWEEN CLEARSTREAM AND/OR EUROCLEAR PARTICIPANTS. Secondary
market trading between Clearstream Participants 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 Participant or a Euroclear
Participant, the purchaser will send instructions to Clearstream or Euroclear
through a Clearstream Participant 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 interest payment date to and excluding
the settlement date, on the basis of either the actual number of days in the
accrual period and a year assumed to consist of 360 days or a 360-day year of
twelve 30-day months as applicable to the related class of Global Securities.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month.
Payment will then be made by the respective Depositary of 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 Participant's or Euroclear Participant's
account. The securities credit will appear the next day (European time) and
the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (that would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Clearstream or Euroclear cash
debt will be valued instead as of the actual settlement date.
Clearstream Participants 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 preposition
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 Participants or Euroclear Participants can elect
not to preposition funds and allow that credit line to be drawn upon the
finance settlement. Under this procedure, Clearstream Participants 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 Participant'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 European Depositary for the benefit of
Clearstream Participants or Euroclear Participants. The sale proceeds will be
available to the DTC seller on the settlement date. Thus, to the DTC
Participants 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 Participants 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
Participant 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 Global Securities to the
DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last interest payment
to and excluding the settlement date on the basis of either the actual number
of days in the accrual period and a year assumed to consist of 360 days or a
360-day year of twelve 30-day months as applicable to the related class of
Global Securities. For transactions settling on the 31st of the month, payment
will include interest accrued to and excluding the first day of the following
month. The payment will then be reflected in the account of the Clearstream
Participant or Euroclear Participant the following day, and receipt of the
cash proceeds in the Clearstream Participant'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 Participant
or Euroclear Participant have a line of credit with its respective clearing
system and elect to be in debt in anticipation of receipt of the sale proceeds
in its account, the back-valuation will extinguish any overdraft incurred over
that one day period. If settlement is not completed on the intended value date
(that is, the trade fails), receipt of the cash proceeds in the Clearstream
Participant'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
Participants 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:
o 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;
o borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to the 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
o 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 or Euroclear Participant.
CERTAIN 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 generally
applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons, unless (1) 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 (2) 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 Global
Securities that are non-U.S. Persons 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 Beneficial Owners 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
Certificate Owner 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.
The term "U.S. Person" means (1) a citizen or resident of the United
States, (2) a corporation or partnership organized in or under the laws of the
United States or any state or the District of Columbia (other than a
partnership that is not treated as a United States person under any applicable
Treasury regulations), (3) an estate the income of which is includible in
gross income for United States tax purposes, regardless of its source, or (4)
a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in regulations,
certain trusts in existence on August 20, 1996 and treated as United States
persons prior to that date that elect to continue to be so treated also will
be considered U.S. Persons. 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.
<PAGE>
$[ ]
(APPROXIMATE)
FINANCE AMERICA SECURITIES, LLC
[ ] TRUST [ ]
ASSET BACKED NOTES
[ ]
ORIGINATOR
[ ]
SERVICER
-------------------------
PROSPECTUS SUPPLEMENT
-------------------------
[UNDERWRITER(S)]
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
securities and exchange commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prIor to registration or qualification under the securities laws of
any such state.
Subject to completion, dated February [[ ]], 2000
Prospectus
FINANCE AMERICA SECURITIES, LLC
Asset-Backed Certificates
Asset-Backed Notes
(Issuable in series)
Finance America Securities, LLC, as the depositor, may offer from time to time
under this prospectus and the related prospectus supplement asset-backed notes
and asset-backed certificates which may be sold from time to time in one or
more series. Each series of securities will be issued in one or more classes.
The prospectus supplement will set forth the specific assets of the trust and
the seller or sellers from whom the depositor acquired the assets. The assets
may include:
(a) one or more pools of:
o mortgage loans, which may include closed-end and/or revolving
home equity loans or certain balances thereof or participation
interests therein and loans of which the proceeds have been
applied to the purchase or refinance of the related mortgaged
property, secured by mortgages on predominantly residential use
properties, including home equity loans with loan-to-value
ratios in excess of the appraised value of the mortgaged
property,
o manufactured housing installment sales contracts and installment
loan agreements or participation interests therein secured by
either security interests in the manufactured homes or by
mortgages on real estate on which the related manufactured homes
are located,
o home improvement installment sales contracts and installment
loan agreements or participation interests therein which may be
unsecured, secured by mortgages primarily on one- to four-family
residential properties, or secured by purchase money security
interests in the related home improvements,
o private securities, and
o agency securities,
(b) all monies due under the above assets, which may be net of
certain amounts payable to the servicer, and
(c) funds or accounts established for the trust or one or more forms
of enhancement.
The prospectus supplement will state if the trust will make a REMIC election
for federal income tax purposes.
For a discussion of certain risks associated with an investment in the
securities, see Risk Factors on page 2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the offered securities or determined if
this prospectus is accurate or complete. Making any contrary representation is
a criminal offense.
The date of this Prospectus is February [[ ]], 2000
<PAGE>
TABLE OF CONTENTS
Page
----
Risk Factors...............................................................1
Limited Liquidity May Result in Delays
in Liquidations or Lower Returns.......................................1
Payments on Securities Are Limited to
the Assets of Trust....................................................1
Enhancement May Be Insufficient to
Cover Losses...........................................................1
Timing and Rate of Prepayments May
Result in Lower Yield..................................................2
Junior Liens May Result in Increased
Losses in Foreclosure Proceedings......................................2
Decrease in Value of Mortgaged Property
May Result in Losses...................................................3
Costs for Cleaning Environmentally
Contaminated Property May Result in
Losses.................................................................3
State and Federal Laws May Limit
Ability to Collect on Loans............................................3
Ratings of the Securities Do Not Assure Payment..........................4
Liquidation Value of Trust Assets May
Be Insufficient to Satisfy All Claims
Against Trust..........................................................4
Description of the Securities...............................................4
General..................................................................4
Payments of Principal....................................................6
Final Scheduled Distribution Date........................................6
Special Redemption.......................................................6
Optional Redemption, Purchase of Trust Assets or Securities,
Termination of Trust...................................................7
Weighted Average Life of the
Securities............................................................7
Book-Entry Registration and Definitive Securities........................8
The Trusts.................................................................13
General.................................................................13
The Loans...............................................................14
Private Securities......................................................19
Agency Securities.......................................................21
FHA Loans and VA Loans..................................................24
Collection and Distribution Accounts....................................25
Enhancement................................................................26
Subordinate Securities..................................................26
Cross-Support Provisions................................................27
Financial Guaranty Insurance Policy or Surety Bond......................27
Insurance...............................................................27
Reserve Funds...........................................................28
Minimum Principal Payment
Agreement............................................................29
Derivative Products.....................................................29
Other Insurance, Surety Bonds,
Guarantees, Letters of Credit and
Similar Instruments or Agreements....................................29
Servicing of Loans.........................................................30
General.................................................................30
Collection Procedures; Escrow
Accounts.............................................................30
Deposits to and Withdrawals From the Collection Account.................31
Advances and Limitations................................................33
Maintenance of Insurance Policies and Other Servicing Procedures........33
Realization Upon Defaulted Loans........................................35
Enforcement of Due-On-Sale Clauses......................................36
Servicing Compensation and Payment
of Expenses..........................................................36
Evidence as to Compliance...............................................37
Termination and Liability of a
Servicer.............................................................37
The Agreements.............................................................39
Assignment of Trust Assets..............................................39
Pre-Funding Account.....................................................42
Reports to Securityholders..............................................43
Events of Default; Rights Upon Event
of Default...........................................................44
The Trustee.............................................................46
Duties of the Trustee...................................................47
Resignation of Trustee..................................................47
Amendment of Agreement..................................................48
Voting Rights...........................................................48
REMIC Administrator.....................................................48
Termination.............................................................49
Legal Aspects of the Loans.................................................50
Mortgages...............................................................50
Foreclosure on Mortgages................................................51
Environmental Risks.....................................................53
Rights of Redemption....................................................54
Junior Mortgages; Rights of Senior Mortgages............................54
Anti-Deficiency Legislation and the Bankruptcy Code.....................56
Due-On-Sale Clauses In Mortgage
Loans................................................................57
Enforceability of Prepayment and Late Payment Fees......................58
Equitable Limitations on Remedies.......................................58
Applicability of Usury Laws.............................................59
Applicability of Lending Laws...........................................59
Cooperative Loans.......................................................59
Foreclosure on Cooperative Loans........................................61
Manufactured Housing and Home Improvement Contracts.....................62
Installment Contracts...................................................64
Soldiers' and Sailors' Civil Relief Act of 1940.........................65
Consumer Protection Laws................................................66
The Depositor..............................................................66
General.................................................................66
Use of Proceeds............................................................67
Federal Income Tax Considerations..........................................67
General.................................................................67
Taxation of Debt Securities.............................................68
Taxation of the REMIC and its
Holders..............................................................74
REMIC Expenses; Single Class
REMICs...............................................................75
Taxation of the REMIC...................................................76
Taxation of Holders of Residual Interest Securities.....................78
Administrative Matters..................................................81
Tax Status as a Grantor Trust...........................................81
Sale or Exchange........................................................85
Miscellaneous Tax Aspects...............................................85
Tax Treatment of Foreign Investors......................................86
Tax Characterization of the Trust as a Partnership......................87
Tax Consequences to Holders of the Notes................................88
Tax Consequences to Holders of the Certificates.........................90
FASIT Securities........................................................96
Tax Treatment of FASIT Regular Securities...............................99
Tax Treatment of FASIT Ownership Securities............................100
Foreign Securityholders................................................101
State Tax Considerations..................................................101
ERISA Considerations......................................................102
Legal Investment Considerations...........................................107
Ratings...................................................................107
Plan of Distribution......................................................108
Legal Matters.............................................................108
Available Information.....................................................108
Incorporation of Documents by
Reference.............................................................109
Index of Defined Terms....................................................110
<PAGE>
Risk Factors
You should carefully consider the following risk factors prior to any
purchase of the securities.
Limited Liquidity May Result in Delays in Liquidations or Lower Returns
There will be no market for the securities of any series prior to their
issuance, and there can be no assurance that a secondary market will develop
or, if it does develop, that it will provide holders with liquidity of
investment or that any market will continue for the life of the securities.
One or more underwriters, as specified in the prospectus supplement, may
expect to make a secondary market in the securities, but they have no
obligation to do so. Absent a secondary market for the securities you may
experience a delay if you choose to sell your securities or the price you
receive may be less than you would receive for a comparable liquid security.
Payments on Securities Are Limited to the Assets of Trust
The depositor does not have, nor is it expected to have, any significant
assets. The securities will be payable solely from the assets of the trust,
including if applicable, any amounts available pursuant to any enhancement.
There will be no recourse to the depositor or, except as provided in the
prospectus supplement, any other person for any default on the notes or any
failure to receive distributions on the certificates. If payments from the
assets of the trust become insufficient to make payments on the securities, no
other assets would be available for payment of the deficiency and you could
experience a loss.
In addition, as specified in the prospectus supplement, at certain times,
trust assets and any funds remaining in the collection account or distribution
account immediately after making all payments due on the securities and other
required payments, may be released or remitted to the depositor, the servicer,
the provider of any enhancement or any other entitled person and will not be
available for making payments to securityholders.
We refer you to "The Agreements - Assignment of Trust Assets."
Enhancement May Be Insufficient to Cover Losses
Although enhancement is intended to reduce the risk that delinquent
payments or losses will affect your investment, the amount of the enhancement,
if any, will be limited, as set forth in the prospectus supplement. The
available enhancement may decline or be depleted before the securities are
paid in full, and as a result, you may suffer losses. For example, enhancement
may be insufficient in cases of greater than anticipated losses or where the
enhancement provider is unable to meet its obligations.
We refer you to "Enhancement."
Timing and Rate of Prepayments May Result in Lower Yield
The yield to maturity experienced by a holder of securities may be
affected by the rate and timing of payment of principal of the trust assets.
An investor who purchases a security at a discount may realize a lower yield
if prepayments are less than anticipated; alternatively, an investor who
purchases a security at a premium may realize a lower yield if prepayments are
greater than anticipated. The rate and timing of principal payments of the
securities of a series will be affected by a number of factors, including the
following:
o the extent of prepayments of the loans and the underlying loans
relating to the private securities and the agency securities, which
prepayments may be influenced by a variety of factors,
o delinquencies which may lead to liquidation of mortgaged properties,
resulting in early payment of principal,
o the manner of allocating principal payments among the classes of
securities as specified in the prospectus supplement, and
o the exercise by the entitled party of any right of optional
termination. Prepayments may also result from repurchases of these
assets due to material breaches of the seller's or depositor's
representations and warranties.
We refer you to "Description of the Securities--Weighted Average Life of
Securities."
Interest payable on the securities on a distribution date will include
all interest accrued during the period specified in the prospectus supplement.
In the event interest accrues during the calendar month prior to a
distribution date, the effective yield to holders will be reduced from the
yield that would otherwise be obtainable if interest payable on the security
were to accrue through the day immediately preceding each distribution date,
and the effective yield at par to holders will be less than the indicated
coupon rate.
We refer you to "Description of the Securities--Payments of Interest."
Junior Liens May Result in Increased Losses in Foreclosure Proceedings
The mortgages may be junior liens subordinate to the rights of the
mortgagee under the senior mortgage or mortgages on the same mortgaged
property. The proceeds from any liquidation, insurance or condemnation
proceedings will be available to satisfy the outstanding balance of the junior
mortgage only to the extent that the claims of senior mortgagees have been
satisfied in full, including any related foreclosure costs. In addition, a
junior mortgagee may not foreclose on the property securing a junior mortgage
unless it forecloses subject to the senior mortgages, in which case it must
either pay the entire amount due on the senior mortgages to the senior
mortgagees at or prior to the foreclosure sale or undertake the obligation to
make payments on the senior mortgages in the event the mortgagor is in
default. The trust will not have any source of funds to satisfy the senior
mortgages or make payments due to the senior mortgagees. Furthermore, the
servicer of the mortgage loan may determine that the satisfaction of the
senior mortgage would not result in enhanced collections to the trust on such
mortgage.
Decrease in Value of Mortgaged Property May Result in Losses
There are several factors that could adversely affect the value of
properties such that the outstanding balance of the related loan, together
with any senior financing on the properties if the loan is a junior interest,
would equal or exceed the value of the properties. Among the factors that
could adversely affect the value of the properties are an overall decline in
the residential real estate market in the areas in which the properties are
located or a decline in the general condition of the properties as a result of
failure of borrowers to maintain adequately the properties or the occurrence
of natural disasters that are not necessarily covered by insurance, such as
earthquakes and floods. If the loan is secured by a junior lien, any decline
in value could extinguish the value of a junior interest in property before
having any effect on the related senior interest. If a decline is significant,
it may also affect senior interests in the property. If a decline occurs, the
rates of delinquencies, foreclosure and losses on the loans may increase,
resulting in losses in the securities.
Costs for Cleaning Environmentally Contaminated Property May Result in Losses
Under certain state and federal laws, an environmentally contaminated
property may give rise to a lien on the property to assure the costs of
cleanup. In addition these laws may impute liability for clean-up costs to the
lender if the lender was involved in the operations of the borrower, even if
the environmental damage was caused by a prior owner. Any lien or costs
attached to a contaminated property could result in a loss to securityholders.
We refer you to "Certain Legal Aspects of the Loans--Environmental Risks"
in this prospectus for more detail.
State and Federal Laws May Limit Ability to Collect on Loans
Applicable federal and state laws regulate interest rates and other
charges and require certain disclosures. In addition, other laws, public
policy and general principles of equity relating to the protection of
consumers, unfair and deceptive practices and debt collection practices may
apply to the origination, servicing and collection of the mortgage loans.
Depending on the provisions of the applicable law and the specific facts
involved, violations may limit the ability to collect all or part of the
principal of or interest on the mortgage loans. In some cases, the borrower
may be entitled to a refund of amounts previously paid and, could subject the
trust to damages and administrative enforcement.
Home improvement contracts are also subject to federal and state laws
which protect a homeowner from defective craftsmanship or incomplete work by a
contractor. These laws may permit the borrower to withhold payment if the work
does not meet the quality and durability standards agreed to by the homeowner
and the contractor. These laws also may have the effect of subjecting the
trust to all claims and defenses which the borrower had against the seller.
We refer you to "Certain Legal Aspects of the Loans" in this prospectus
for more detail.
Ratings of the Securities Do Not Assure Payment
It will be a condition to the issuance of the securities offered hereby
that they be rated in one of the four highest rating categories by each rating
agency identified in the prospectus supplement. The ratings of the securities
will be based on, among other things, the adequacy of the value of the trust
assets and any enhancement. The rating should not be deemed a recommendation
to purchase, hold or sell the securities, particularly since the ratings do
not address market price or suitability for an investor. There is no assurance
that the ratings will remain in effect over the life of the securities, and
such ratings may be lowered or withdrawn.
We refer you to "Rating" in this prospectus for more detail.
Liquidation Value of Trust Assets May Be Insufficient to Satisfy All Claims
Against Trust
There is no assurance that the market value of the trust assets at any
time will be adequate to repay the full amount due on the securities. In
addition, under any situation in which the trust assets are required to be
sold, the proceeds will be paid to cover administrative costs before being
paid to you. The net proceeds may be insufficient to pay the principal and
interest on the securities.
Description of the Securities
General
The securities will be issued in series. The notes will be issued
pursuant to an indenture between the trust and the trustee identified in the
prospectus supplement. In addition, a sale and servicing agreement among the
depositor, one or more sellers specified in the prospectus supplement, one or
more servicers specified in the prospectus supplement if the series relates to
loans, and the trustee will be entered into in connection with the issuance of
notes. A form of indenture and a form of sale and servicing agreement have
been filed as exhibits to the registration statement of which this prospectus
forms a part. The certificates will be issued pursuant to either a pooling and
servicing agreement or a trust agreement among the depositor, one or more
sellers specified in the prospectus supplement, one or more servicers
specified in the prospectus supplement if the series relates to loans, and the
trustee. A form of pooling and servicing agreement and trust agreement have
been filed as exhibits to the registration statement of which this prospectus
forms a part. A series may consist of both notes and certificates. The term
"Agreement" is used in this prospectus to refer to, with respect to a series
of certificates, the pooling and servicing agreement or trust agreement, and
with respect to a series of notes, collectively, the indenture and the sale
and servicing agreement, as the context requires.
The following summaries describe material provisions in the Agreements
common to each series of securities. The summaries do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, the provisions of the Agreements and the prospectus supplement relating to
each series of securities. Where particular provisions or terms used in the
Agreements are referred to, the actual provisions are incorporated herein by
reference as part of such summaries.
Each series of securities will consist of one or more classes of
securities, one or more of which may be:
o compound interest securities,
o fixed interest securities,
o variable interest securities,
o planned amortization class securities,
o zero coupon securities,
o principal only securities,
o interest only securities, or
o participating securities.
A series may also include one or more classes of subordinate securities. The
securities of each series will be issued only in fully registered certificated
form, without coupons, in the authorized denominations for each class
specified in the prospectus supplement ("Definitive Securities"). Upon
satisfaction of the conditions, if any, applicable to a class of a series, as
described in the prospectus supplement, the transfer of the securities may be
registered and the securities may be exchanged at the office of the trustee
without the payment of any service charge other than any tax or governmental
charge payable in connection with such registration of transfer or exchange.
If specified in the prospectus supplement, one or more classes of a series may
be issued in book-entry form only ("Book-Entry Securities"). See "--
Book-Entry Registration and Definitive Securities".
As specified in the prospectus supplement, payments of principal of
and interest on a series of securities will be made on the distribution dates
specified in the prospectus supplement by check mailed to registered
securityholders at their registered addresses. Payments may be made by wire
transfer, which may be at the expense of the requesting securityholder, as
described in the prospectus supplement. The final payments of principal in
retirement of each security will be made only upon presentation and surrender
of such security at the office of the trustee specified in the prospectus
supplement. Notice of the final payment on a security will be mailed to the
holder of such security before the distribution date on which the final
principal payment on any security is expected to be made to the holder of such
security.
Payments of principal of and interest on the securities will be made by
the trustee, or a paying agent on behalf of the trustee, as specified in the
prospectus supplement. Typically, all payments with respect to the trust
assets for a series, together with reinvestment income thereon, amounts
withdrawn from any reserve fund, and amounts available pursuant to any other
enhancement specified in the prospectus supplement will be deposited directly
into a separate collection account established by the trustee or the servicer.
The amount deposited to the collection account, if and as provided in the
prospectus supplement, may be net of certain amounts payable to the servicer
and any other person specified in the prospectus supplement. Amounts on
deposit in the collection account will be deposited into the distribution
account and will be available to make payments on securities of a series on
the next distribution date. See "The Trusts--Collection and Distribution
Accounts."
Payments of Principal
On each distribution date, principal payments will be made to those
securityholders entitled to principal, to the extent set forth in the
prospectus supplement. The principal payments will be made in an aggregate
amount determined as specified in the prospectus supplement and will be
allocated among the respective classes of a series in the manner, at the times
and in the priority set forth in the prospectus supplement.
Interest only securities are not entitled to principal. Interest only
securities may be assigned a notional amount, but such value will be used
primarily for the calculation of interest payments and will not represent the
right to receive any distributions allocable to principal.
Final Scheduled Distribution Date
The final scheduled distribution date with respect to each class of notes
is the date on which the principal of the class of notes will be fully paid.
With respect to each class of certificates, the final scheduled distribution
date will be the date on which the entire aggregate principal balance of the
class of certificates is expected to be reduced to zero. These calculations
will be based on the assumptions described in the prospectus supplement. The
final scheduled distribution date for each class of securities will be
specified in the prospectus supplement.
The actual final distribution date of the securities of a series will
depend primarily upon the rate of principal payment of the loans and the
underlying loans relating to the private securities and the agency securities,
as applicable, in the trust. Since payments on the trust assets, including
prepayments, will be used to make distributions in reduction of the
outstanding principal amount of the securities, it is likely that the actual
final distribution date of any class will occur earlier, and may occur
substantially earlier, than its final scheduled distribution date.
Furthermore, with respect to the certificates, as a result of delinquencies,
defaults and liquidations of the trust assets in the trust, the actual final
distribution date of any certificate may occur later than its final scheduled
distribution date. No assurance can be given as to the actual prepayment
experience with respect to the trust assets. See "Weighted Average Life of the
Securities".
Special Redemption
If specified in the prospectus supplement, under certain circumstances,
one or more classes of securities may be subject to special redemption, in
whole or in part, if a determination is made that the amount of interest that
will accrue on the trust assets will be less than the amount of interest that
will accrue on the securities. In such event, the trustee will redeem a
principal amount of securities to cause the available interest amount to equal
the amount of interest that will accrue on the securities after such
redemption.
Optional Redemption, Purchase of Trust Assets or Securities, Termination of
Trust
The depositor or other party specified in the prospectus supplement may,
at its option, redeem, in whole or in part, one or more classes of notes or
purchase one or more classes of certificates of any series, on any
distribution date under the circumstances, if any, specified in the prospectus
supplement. Alternatively, if specified in the prospectus supplement, the
depositor, or another party specified in the prospectus supplement may, at its
option, cause an early termination of a trust by repurchasing all of the trust
assets from the trust. Notice of such redemption, purchase or termination must
be given to securityholders by the depositor or the trustee prior to the
related date. The redemption, purchase or repurchase price will be set forth
in the prospectus supplement. If specified in the prospectus supplement, in
the event that a REMIC election has been made, the trustee shall receive a
satisfactory opinion of counsel that the optional redemption, purchase or
termination will be conducted so as to constitute a "qualified liquidation"
under Section 860F of the Code.
In addition, the prospectus supplement may provide other circumstances
under which securityholders could be fully paid significantly earlier than
would otherwise be the case if payments or distributions were solely based on
the activity of the trust assets.
Weighted Average Life of the Securities
Weighted average life refers to the average amount of time that will
elapse from the date of issue of a security until each dollar of principal of
such security will be repaid to the investor. In general, the weighted average
life of a security will be influenced by the rate at which the amount financed
under the loans or underlying loans, as applicable, included in the trust is
paid, which may be in the form of scheduled amortization or prepayments.
Prepayments on loans and other receivables can be measured relative to a
prepayment standard or model. The prospectus supplement will describe the
prepayment standard or model, if any, used and may contain tables setting
forth the projected weighted average life of each class of securities and the
percentage of the original principal amount of each class of securities that
would be outstanding on specified distribution dates based on the assumptions
stated in the prospectus supplement.
There is, however, no assurance that prepayment of the loans or
underlying loans, as applicable, included in the trust will conform to any
level of any prepayment standard or model specified in the prospectus
supplement. The rate of principal prepayments on pools of loans is influenced
by a variety of economic, demographic, geographic, legal, tax, social and
other factors.
The rate of prepayments of conventional housing loans and other
receivables has fluctuated significantly in recent years. In general, however,
if prevailing interest rates fall significantly below the interest rates on
the loans or underlying loans, as applicable, for a series, such loans are
likely to prepay at rates higher than if prevailing interest rates remain at
or above the interest rates borne by such loans. In this regard, it should be
noted that the loans or underlying loans, as applicable, for a series may have
different interest rates. In addition, the weighted average life of the
securities may be affected by the varying maturities of the loans or
underlying loans, as applicable. If any loans or underlying loans, as
applicable, for a series have actual terms-to-stated maturity of less than
those assumed in calculating the final scheduled distribution date of the
related securities, one or more classes of the series may be fully paid prior
to their respective final scheduled distribution dates, even in the absence of
prepayments.
Book-Entry Registration and Definitive Securities
General.
If provided for in the prospectus supplement, one or more classes of the
securities of any series will be issued as Book-Entry Securities, and each of
these classes will be represented by one or more single securities registered
in the name of a nominee for the depository, The Depository Trust Company
("DTC") and, if provided in the prospectus supplement, additionally through
Clearstream Banking, societe anonyme (formerly Cedelbank) ("Clearstream") or
the Euroclear System ("Euroclear"). Each class of Book-Entry Securities will
be issued in one or more certificates or notes, as the case may be, that equal
the initial principal amount of the related class of the securities and will
initially be registered in the name of Cede & Co.
No person acquiring an interest in a Book-Entry Security (each, a
"Beneficial Owner") will be entitled to receive a Definitive Security, except
as set forth below under "--Definitive Securities." Unless and until
Definitive Securities are issued for the Book-Entry Securities under the
limited circumstances described in the applicable prospectus supplement or
this prospectus, all references to actions by securityholders with respect to
the Book-Entry Securities will refer to actions taken by DTC, Clearstream or
Euroclear upon instructions from their Participants (as defined below), and
all references herein to distributions, notices, reports and statements to
securityholders with respect to the Book-Entry Securities will refer to
distributions, notices, reports and statements to DTC, Clearstream or
Euroclear, as applicable, for distribution to Beneficial Owners by DTC in
accordance with the procedures of DTC and if applicable, Clearstream and
Euroclear.
Beneficial Owners will hold their Book-Entry Securities through DTC in
the United States, or, if the securities are offered for sale globally,
through Clearstream or Euroclear in Europe if they are participating
organizations ("Participants") of those systems. Participants include
securities brokers and dealers, banks, trust companies and clearing
corporations and may include some other organizations. Indirect access to the
DTC, Clearstream and Euroclear systems 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
("Indirect Participants").
DTC
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 Uniform Commercial Code ("UCC") and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). DTC was
created to hold securities for its Participants, some of which (and/or their
representatives) own DTC, and facilitate the clearance and settlement of
securities transactions between its Participants through electronic book-entry
changes in their accounts, thereby eliminating the need for physical movement
of securities. In accordance with its normal procedures, DTC is expected to
record the positions held by each of its Participants in the Book-Entry
Securities, whether held for its own account or as a nominee for another
person. In general, beneficial ownership of Book-Entry Securities will be
subject to the rules, regulations and procedures governing DTC and its
Participants as in effect from time to time.
Clearstream
Clearstream holds securities for its Participants and facilitates the
clearance and settlement of securities transactions between its Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of securities. Transactions may be
settled by Clearstream in any of 36 currencies, including United States
dollars. Clearstream provides to its Participants, among other things,
services for safekeeping, administration, clearance and settlement of
internationally-traded securities and securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. Clearstream
is registered as a bank in Luxembourg and is subject to regulation by the
Commission de Surveillance du Secteur Financier. Clearstream Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. 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 Participant of
Clearstream, either directly or indirectly.
Euroclear
Euroclear was created in 1968 to hold securities for its Participants and
to clear and settle transactions between its Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need
for physical movement of securities and any risk from lack of simultaneous
transfers of securities and cash. Transactions may be settled in any of 32
currencies, including United States dollars. Euroclear includes various other
services, including securities lending and borrowing, and interfaces with
domestic markets in several countries generally similar to the arrangements
for cross-market transfers with DTC described above. Euroclear is operated by
the Brussels, Belgium office of Morgan Guaranty Trust Company of New York (the
"Euroclear Operator"), under contract with Euroclear Clearance Systems S.C., a
Belgian cooperative corporation (the "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 Corporation. The Cooperative
Corporation establishes policy for Euroclear on behalf of its Participants.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries. Indirect
access to Euroclear is also available to other firms that clear through or
maintain a custodial relationship with a Participant of Euroclear, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation that is a member bank of the Federal Reserve System, and 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 (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within Euroclear,
withdrawals of securities and cash from Euroclear, and receipts of payments
with respect to securities in Euroclear. All securities in Euroclear are held
on a fungible basis without attribution of specific securities to specific
securities clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of its Participants, and has no record of or
relationship with persons holding through Participants of Euroclear.
Clearstream and Euroclear will hold omnibus positions on behalf of their
Participants through customers' securities accounts in Clearstream's and
Euroclear's names on the books of their respective depositaries which in turn
will hold positions in customers' securities accounts in the depositaries
names on the books of DTC. Citibank will act as depositary for Clearstream and
The Chase Manhattan Bank will act as depositary for Euroclear (individually
the "Relevant Depositary" and collectively, the "European Depositaries").
Beneficial Ownership of Book-Entry Securities
Except as described below, no Beneficial Owner will be entitled to
receive a physical certificate or note. Unless and until Definitive Securities
are issued, it is anticipated that the only "securityholder" of the securities
will be Cede & Co., as nominee of DTC. Beneficial Owners will not be
"certificateholders" or "noteholders" as that term is used in any Agreement.
Beneficial Owners are only permitted to exercise their rights indirectly
through Participants, DTC, Clearstream or Euroclear, as applicable.
The Beneficial Owner's ownership of a Book-Entry Security will be
recorded on the records of the brokerage firm, bank, thrift institution or
other financial intermediary (each, a "Financial Intermediary") that maintains
the Beneficial Owner's account for that purpose. In turn, the Financial
Intermediary's ownership of a Book-Entry Security will be recorded on the
records of DTC (or of a Participant that acts as agent for the Financial
Intermediary, whose interest will in turn be recorded on the records of DTC,
if the Beneficial Owner's Financial Intermediary is not a Participant of DTC
and on the records of Clearstream or Euroclear, as appropriate).
Beneficial Owners will receive all distributions of principal of, and
interest on, the securities from the trustee through DTC and its Participants.
While the securities are outstanding (except under the circumstances described
below), under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
among Participants on whose behalf it acts with respect to the securities and
is required to receive and transmit distributions of principal of, and
interest on, the securities. Participants and Indirect Participants with whom
Beneficial Owners have accounts with respect to the securities are similarly
required to make book-entry transfers and receive and transmit distributions
on behalf of their respective Beneficial Owners. Accordingly, although
Beneficial Owners will not possess certificates or notes, the Rules provide a
mechanism by which Beneficial Owners will receive distributions and will be
able to transfer their interest.
Beneficial Owners will not receive or be entitled to receive physical
certificates or notes representing their respective interests in the
securities, except under the limited circumstances described below. Unless and
until Definitive Securities are issued, Beneficial Owners who are not
Participants may transfer ownership of securities only through Participants
and Indirect Participants by instructing the Participants and Indirect
Participants to transfer securities, by book-entry transfer, through DTC for
the account of the purchasers of the securities, which account is maintained
with their respective Participants. Under the Rules and in accordance with
DTC's normal procedures, transfer of ownership of Book-Entry Securities will
be executed through DTC and the accounts of the respective Participants at DTC
will be debited and credited. Similarly, the Participants and Indirect
Participants will make debits or credits, as the case may be, on their records
on behalf of the selling and purchasing Beneficial Owners.
Because of time zone differences, any credits of securities received in
Clearstream or Euroclear as a result of a transaction with a Participant will
be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. These credits or any
transactions in securities settled during this processing will be reported to
the relevant Participants of Clearstream or Euroclear on that business day.
Cash received in Clearstream or Euroclear as a result of sales of securities
by or through a Participant of Clearstream or Euroclear to a Participant of
DTC 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. For information with respect to tax
documentation procedures relating to the securities, see "Federal Income Tax
Considerations -- Tax Treatment of Foreign Investors" herein and, if the
Book-Entry Securities are globally offered and the prospectus supplement so
provides, see "Global Clearance, Settlement and Tax Documentation Procedures
- -- Certain U.S. Federal Income Tax Documentation Requirements" in Annex I to
the prospectus supplement.
Transfers between Participants of DTC will occur in accordance with DTC
Rules. Transfers between Participants of Clearstream or Euroclear will occur
in accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Participants
of Clearstream or Euroclear, on the other, will be effected in DTC in
accordance with the DTC Rules on behalf of the relevant European international
clearing system by the Relevant Depositary; however, cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in that system in accordance with its
rules and procedures and within its established deadlines (European time). The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to the Relevant 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.
Participants of Clearstream or Euroclear may not deliver instructions directly
to the European Depositaries.
Distributions on the Book-Entry Securities will be made on each
distribution date by the trustee to DTC. DTC will be responsible for crediting
the amount of each distribution to the accounts of the applicable Participants
of DTC in accordance with DTC's normal procedures. Each Participant of DTC
will be responsible for disbursing the distribution to the Beneficial Owners
of the Book-Entry Securities that it represents and to each Financial
Intermediary for which it acts as agent. Each Financial Intermediary will be
responsible for disbursing funds to the Beneficial Owners of the Book-Entry
Securities that it represents.
Under a book-entry format, Beneficial Owners of the Book-Entry Securities
may experience some delay in their receipt of payments, because the
distributions will be forwarded by the Trustee to Cede & Co. Any distributions
on Securities held through Clearstream or Euroclear will be credited to the
cash accounts of Participants of Clearstream or Euroclear in accordance with
the relevant system's rules and procedures, to the extent received by the
Relevant Depositary. These distributions will be subject to tax reporting in
accordance with relevant United States tax laws and regulations. See "Federal
Income Tax Considerations -- Tax Treatment of Foreign Investors" herein.
Because DTC can only act on behalf of Financial Intermediaries, the ability of
a Beneficial Owner to pledge Book-Entry Securities to persons or entities that
do not participate in the depository system, or otherwise take actions in
respect of Book-Entry Securities, may be limited due to the lack of physical
securities for the Book-Entry Securities. In addition, issuance of the
Book-Entry Securities in book-entry form may reduce the liquidity of the
securities in the secondary market since certain potential investors may be
unwilling to purchase securities for which they cannot obtain physical
securities.
Monthly and annual reports will be provided to Cede & Co., as nominee of
DTC, and may be made available by Cede & Co. to Beneficial Owners upon
request, in accordance with the rules, regulations and procedures creating and
affecting the depository, and to the Financial Intermediaries to whose DTC
accounts the Book-Entry Securities of Beneficial Owners are credited.
Generally, DTC will advise the applicable trustee that unless and until
Definitive Securities are issued, DTC will take any action permitted to be
taken by the holders of the Book-Entry Securities under the Agreement only at
the direction of one or more Financial Intermediaries to whose DTC accounts
the Book-Entry Securities are credited, to the extent that actions are taken
on behalf of Financial Intermediaries whose holdings include the Book-Entry
Securities. If the Book-Entry Securities are globally offered, Clearstream or
the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a securityholder under the Agreement, on behalf of a
Participant of Clearstream or Euroclear only in accordance with its relevant
rules and procedures and subject to the ability of the Relevant Depositary to
effect those actions on its behalf through DTC. DTC may take actions, at the
direction of the related Participants, with respect to some securities that
conflict with actions taken with respect to other securities.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Book-Entry Securities among
Participants of DTC, Clearstream and Euroclear, they are under no obligation
to perform or continue to perform these procedures and the procedures may be
discontinued at any time.
None of the depositor, any servicer, the trustee, any securities
registrar or paying agent or any of their affiliates will have any
responsibility for any aspect of the records relating to or payments made on
account of beneficial ownership interests of the Book-Entry Securities or for
maintaining, supervising or reviewing any records relating to those beneficial
ownership interests.
Definitive Securities
Securities initially issued in book-entry form will be issued as
Definitive Securities to Beneficial Owners or their nominees, rather than to
DTC or its nominee only (1) if the depositor advises the trustee in writing
that DTC is no longer willing or able to properly discharge its
responsibilities as depository for the securities and the depositor is unable
to locate a qualified successor, (2) if the depositor, at its option, elects
to end the book-entry system through DTC or (3) in accordance with any other
provisions described in the prospectus supplement.
Upon 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 Securities for the Beneficial Owners.
Upon surrender by DTC of the security or securities representing the
Book-Entry Securities, together with instructions for registration, the
trustee will issue (or cause to be issued) to the Beneficial Owners identified
in those instructions the Definitive Securities to which they are entitled,
and thereafter the trustee will recognize the holders of those Definitive
Securities as securityholders under the Agreement.
The Trusts
General
The notes will be secured by the pledge of the assets of the trust, and
the certificates will represent interests in the trust assets, or in a group
of assets specified in the prospectus supplement. The trust of each series
will include assets purchased from the depositor composed of:
o the loans, o enhancements,
o properties that secured a loan but which are acquired by foreclosure or
deed in lieu of foreclosure or repossession, and
o the amount, if any, initially deposited in the collection account or
distribution account for a series as specified in the prospectus
supplement.
The securities will be non-recourse obligations of the trust. Typically,
the assets of the trust will serve as collateral for only one series of
securities. Noteholders may only proceed against such collateral in the case
of a default and may not proceed against any assets of the depositor, any of
its affiliates or the assets of the trust not pledged to secure such notes.
The trust assets for a series will be sold by the seller or sellers to
the depositor and by the depositor to the trust. Private securities will be
purchased by the depositor in secondary market transactions, not from the
issuer of the securities or an affiliate of the issuer. Agency securities will
be purchased either in the secondary market or otherwise. Loans may be
purchased by the depositor in privately negotiated transactions, which may
include transactions with affiliates of the depositor. The trust assets will
be transferred by the depositor to the trust. Loans relating to a series will
be serviced by the servicer or servicers specified in the prospectus
supplement, which may be an affiliate of the depositor, pursuant to a pooling
and servicing agreement or a sale and servicing agreement.
A trust relating to a series of securities may be a business trust formed
pursuant to a trust agreement between the depositor and the trustee, as
described in the prospectus supplement. The trust assets may consist of any
combination of loans, private securities and agency securities, as specified
in the prospectus supplement.
With respect to each trust, prior to the initial offering of the related
series of securities, the trust will have no assets or liabilities. No trust
is expected to engage in any activities other than acquiring, managing and
holding the trust assets and other assets contemplated herein and in the
prospectus supplement and the related proceeds, issuing securities and making
payments and distributions thereon and certain related activities. No trust is
expected to have any source of capital other than its assets and any related
enhancement.
The Loans
The term "loans" as used in this prospectus includes mortgage loans,
which may be closed-end or revolving credit line home equity loans,
manufactured housing installment sales contracts and installment loan
agreements, and home improvement contracts, as well as participation interests
in loans.
Mortgage Loans.
The properties which secure repayment of the mortgage loans are referred
to as the "mortgaged properties". The trust assets for a series may consist,
in whole or in part, of mortgage loans or participation interests therein,
which may include closed-end and revolving home equity loans or certain
balances thereof and loans of which the proceeds have been applied to the
purchase of the related mortgaged property secured by mortgages on
predominantly residential use properties which may be subordinated to other
mortgages on the same mortgaged property, including home equity loans with
loan-to-value ratios in excess of the appraised value of the mortgaged
property. The mortgage loans may have fixed interest rates or adjustable
interest rates and may provide for other payment characteristics as described
in this section or in the prospectus supplement. If provided in the prospectus
supplement, the mortgage loans may include loans insured by the Federal
Housing Administration ("FHA") or partially guaranteed by the Veteran's
Administration ("VA"). See "--FHA Loans and VA Loans".
As more fully described in the prospectus supplement, interest on each
revolving credit line loan, excluding introductory rates offered from time to
time during promotional periods, may be computed and payable monthly on the
average daily outstanding principal balance of such loan. From time to time
principal amounts on the revolving credit line loans may be drawn down up to a
maximum amount as set forth in the prospectus supplement or repaid. If
specified in the prospectus supplement, new draws by borrowers under the
revolving credit line loans will automatically become part of the trust. As a
result, the aggregate balance of the revolving credit line loans will
fluctuate from day to day as new draws by borrowers are added to the trust and
principal payments are applied to such balances and the amounts of such draws
and payments will usually differ each day, as more specifically described in
the prospectus supplement.
Typically, the full principal amount of a closed-end loan is advanced at
origination of the loan and is repayable in equal or substantially equal
installments of an amount sufficient to fully amortize such loan at its stated
maturity. As more fully described in the prospectus supplement, interest on
each mortgage loan is calculated on the basis of the outstanding principal
balance of such loan multiplied by the interest rate thereon and further
multiplied by a fraction described in the prospectus supplement. The original
terms to stated maturity of the loans usually will not exceed 360 months.
Under certain circumstances, under either a revolving credit line loan or a
closed-end loan, a borrower may choose an interest only payment option and is
obligated to pay only the amount of interest which accrues on the loan during
the billing cycle. An interest only payment option may be available for a
specified period before the borrower must begin paying at least the minimum
monthly payment of a specified percentage of the average outstanding balance
of the loan.
The mortgaged properties will include predominantly residential use
property. The mortgaged properties may consist of:
o detached individual dwellings,
o individual condominiums,
o townhouses,
o duplexes, triplexes, or quadriplexes,
o row houses,
o cooperative dwellings,
o individual units in planned unit developments, and
o other attached dwelling units.
As specified in the prospectus supplement, each single family property will be
located on land owned in fee simple by the borrower or on land leased by the
borrower. Attached dwellings may include structures where each borrower owns
the land upon which the unit is built, with the remaining adjacent land owned
in common or dwelling units subject to a proprietary lease or occupancy
agreement in a cooperatively owned apartment building.
The mortgaged properties may also include properties that are used for
predominantly residential dwelling but may also have an unrelated business
use. Included in this category are properties containing five or more
residential units with or without accompanying commercial space. These
mixed-use properties may be owner occupied or investment properties and the
loan purpose may be a refinancing or a purchase.
Typically, mortgages on cooperative dwellings consist of a lien on the
shares issued by such cooperative dwelling and the proprietary lease or
occupancy agreement relating to such cooperative dwelling and not a lien on
the underlying land or improvement.
The aggregate principal balance of loans secured by mortgaged properties
that are owner-occupied will be disclosed in the prospectus supplement. The
basis for a representation that a given percentage of the loans are secured by
single family property that is owner-occupied usually is either:
o the making of a representation by the mortgagor at origination of the
loan either that the underlying mortgaged property will be used by the
mortgagor for a period of at least six months every year or that the
mortgagor intends to use the mortgaged property as a primary residence,
or
o a finding that the address of the underlying mortgaged property is the
mortgagor's mailing address as reflected in the related servicer's
records.
To the extent specified in the prospectus supplement, the mortgaged properties
may include non-owner occupied investment properties and vacation and second
homes.
The initial combined loan-to-value ratio of a loan is computed in the
manner described in the prospectus supplement and may take into account the
amounts of any related senior mortgage loans.
The loans may include home equity loans with combined loan-to-value
ratios in excess of 100%, generally up to a maximum of 135%. For these high
loan-to-value loans, more emphasis in the underwriting analysis is placed on
the borrower's payment history and ability to repay debt, rather than on the
collateral value of the mortgaged property. High loan-to-value loans are
generally targeted as debt consolidation loans for repeat or frequent
borrowers with generally strong credit ratings. Lending decisions for high
loan-to-value loans are based on an analysis of the prospective mortgagor's
documented cash flow and credit history supplemented by a collateral
evaluation deemed appropriate by the originator.
Manufactured Housing Contracts.
The trust assets may consist, in whole or in part, of manufactured
housing contracts or participation interests therein. As specified in the
prospectus supplement, the manufactured housing contracts will be secured by
either manufactured homes or by mortgages on the real estate on which the
manufactured homes are located. The manufactured housing contracts will be
conventional contracts or contracts insured by the FHA or partially guaranteed
by the VA. See "--FHA Loans and VA Loans". The manufactured housing contracts
will be fully amortizing and may have fixed interest rates or adjustable
interest rates or may provide for other payment characteristics as described
below and to the extent and in the manner specified in the prospectus
supplement.
The manufactured homes securing the manufactured housing contracts will
consist of manufactured homes within the meaning of 42 United States Code,
Section 5402(6), which defines a "manufactured home" as "a structure,
transportable in one or more sections, which in the traveling mode, is eight
body feet or more in width or forty body feet or more in length, or, when
erected on site, is three hundred twenty or more square feet, and which is
built on a permanent chassis and designed to be used as a dwelling with or
without a permanent foundation when connected to the required utilities, and
includes the plumbing, heating, air-conditioning, and electrical systems
contained therein; except that such term shall include any structure which
meets all the requirements of this paragraph except the size requirements and
with respect to which the manufacturer voluntarily files a certification
required by the Secretary of Housing and Urban Development and complies with
the standards established under this chapter."
Manufactured homes, unlike mortgaged properties, generally depreciate in
value. Consequently, at any time after origination it is possible, especially
in the case of contracts with high loan-to-value ratios at origination, that
the market value of a manufactured home may be lower than the principal amount
outstanding under the related contract.
Home Improvement Contracts.
The trust assets for a series may consist, in whole or part, of home
improvement installment sales contracts and installment loan agreements
originated by a home improvement contractor in the ordinary course of business
or participation interests therein. As specified in the prospectus supplement,
the home improvement contracts will either be unsecured or secured by the
mortgages primarily on single family properties which are usually subordinate
to other mortgages on the same mortgaged property or by purchase money
security interests in home improvements and may be insured by the FHA or
partially guaranteed by the VA. See "--FHA Loans and VA Loans". The home
improvement contracts will be fully amortizing and may have fixed interest
rates or adjustable interest rates or may provide for other payment
characteristics as described in this section and in the prospectus supplement.
The home improvements securing the home improvement contracts may
include, but are not limited to, replacement windows, house siding, new roofs,
swimming pools, satellite dishes, kitchen and bathroom remodeling goods and
solar heating panels.
If applicable, the initial loan-to-value ratio of a home improvement
contract is computed in the manner described in the prospectus supplement.
Additional Information.
The selection criteria which shall apply with respect to the loans,
including, but not limited to, the loan-to-value ratios or combined
loan-to-value ratios, as applicable, original terms to maturity and
delinquency information, will be specified in the prospectus supplement.
Some loans may be delinquent or non-performing as specified in the
prospectus supplement. Loans may be originated by or acquired from an
affiliate of the depositor. To the extent provided in the prospectus
supplement, additional loans may be periodically added to the trust, or may be
removed from time to time if certain asset value tests are met, as described
in the prospectus supplement.
The loans for a series may include loans that do not amortize their
entire principal balance by their stated maturity in accordance with their
terms and require a balloon payment of the remaining principal balance at
maturity, as specified in the prospectus supplement. As further described in
the prospectus supplement, the loans for a series may include loans that do
not have a specified stated maturity.
The prospectus supplement for each series will provide information with
respect to the loans that are trust assets as of a specified date, including,
among other things, and to the extent relevant:
(a) the aggregate unpaid principal balance of the loans or the aggregate
unpaid principal balance included in the trust for the related
series;
(b) the range and weighted average interest rate on the loans, and, in
the case of adjustable rate loans, the range and weighted average of
the current interest rates, margins and the lifetime rate caps, if
any;
(c) the range and average outstanding principal balance of the loans;
(d) the weighted average original and remaining term-to-stated maturity
of the loans and the range of original and remaining terms-to-stated
maturity, if applicable;
(e) the range and weighted average of combined loan-to-value ratios or
loan-to-value ratios for the loans, as applicable;
(f) the percentage, by principal balance as of a specified date, of
loans that accrue interest at adjustable or fixed interest rates;
(g) any special hazard insurance policy or bankruptcy bond or other
enhancement relating to the loans;
(h) the percentage, by principal balance as of a specified date, of
loans that are secured by mortgaged properties, manufactured homes,
home improvements or are unsecured;
(i) the geographic distribution of any mortgaged properties securing the
loans;
(j) the percentage of loans, by principal balance as of a specified
date, that are secured by single family properties, shares relating
to cooperative dwellings, condominium units, investment property and
vacation or second homes;
(k) the lien priority of the loans;
(l) the credit limit utilization rate of any revolving credit line
loans; and
(m) the delinquency status of the loans.
The prospectus supplement will also specify any other limitations on the types
or characteristics of loans for a series.
If information of the nature described above respecting the loans is not
known to the depositor at the time the securities are initially offered,
approximate or more general information of the nature described in the
previous paragraph will be provided in the prospectus supplement and
additional information will be set forth in a Current Report on Form 8-K to be
available to investors on the date of issuance of the related series and to be
filed with the Securities and Exchange Commission ("SEC") within 15 days after
the initial issuance of such securities.
Private Securities
General.
Trust assets for a series may consist, in whole or in part, of private
securities which include pass-through certificates representing beneficial
interests in loans and collateralized obligations secured by loans. The
private securities will have previously been:
o offered and distributed to the public pursuant to an effective
registration statement, or
o purchased in a transaction not involving any public offering from a
person who is not an affiliate of the issuer of such securities at
the time of sale nor an affiliate at any time during the three
preceding months; provided a period of two years has elapsed since
the later of the date the securities were acquired from the issuer
or an affiliate.
Although individual loans underlying the private securities may be
insured or guaranteed by the United States or an agency or instrumentality of
the United States, they need not be, and private securities themselves will
not be so insured or guaranteed. The underlying loans may be fixed rate, level
payment, fully amortizing loans or adjustable rate loans or loans having
balloon or other irregular payment features. The underlying loans will be
secured by mortgages on mortgaged properties.
All purchases of private securities for a series by the seller or sellers
will be made in secondary market transactions, not from the issuer of such
private securities or any affiliate of the issuer. As a result, no such
purchases of private securities offered and distributed to the public pursuant
to an effective registration statement will be made by any seller or the
depositor for at least ninety days after the initial issuance of such private
securities.
Private securities will have been issued pursuant to a pooling and
servicing agreement, a trust agreement or similar agreement (a "PS
Agreement"). The seller/servicer of the underlying loans will have entered
into the PS Agreement with the trustee under such PS Agreement (the "PS
Trustee"). The PS Trustee or its agent, or a custodian, will possess the
underlying loans. Underlying loans will be serviced by a servicer (the "PS
Servicer") directly or by one or more sub-servicers who may be under the
supervision of the PS Servicer.
The sponsor of the private securities (the "PS Sponsor") will be a
financial institution or other entity engaged generally in the business of
lending; a public agency or instrumentality of a state, local or federal
government; or a limited purpose corporation organized for the purpose of,
among other things, establishing trusts and acquiring and selling loans to
such trusts, and selling beneficial interests in such trusts. If so specified
in the prospectus supplement, the PS Sponsor may be an affiliate of the
depositor. As specified in the prospectus supplement, the obligations of the
PS Sponsor will be limited to certain representations and warranties with
respect to the assets conveyed by it to the related trust. Typically, the PS
Sponsor will not have guaranteed any of the assets conveyed to the related
trust or any of the private securities issued under the PS Agreement.
Additionally, although the underlying loans may be guaranteed by an agency or
instrumentality of the United States, the private securities themselves will
not be so guaranteed.
Distributions of principal and interest will be made on the private
securities on the dates specified in the prospectus supplement. The private
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 securities by the PS Trustee or the PS Servicer.
As specified in the prospectus supplement, payments on the private securities
will be distributed directly to the trustee as the registered owner of such
private securities. The PS Sponsor or the PS Servicer may have the right to
repurchase the underlying loans after a certain date or under other
circumstances specified in the prospectus supplement.
Enhancement Relating to Private Securities.
Enhancement in the form of reserve funds, subordination of other private
securities issued under the PS Agreement, guarantees, letters of credit, cash
collateral accounts, insurance policies or other types of enhancement may be
provided with respect to the underlying loans or with respect to the private
securities themselves. The type, characteristics and amount of enhancement
will be a function of certain characteristics of the underlying loans and
other factors and will have been established for the private securities on the
basis of requirements of the nationally recognized statistical rating
organization that rated the private securities.
Additional Information.
The prospectus supplement for a series for which the trust assets
includes private securities will specify the material terms of the private
securities, which may include:
(a) the aggregate approximate principal amount and type of the private
securities to be included in the trust for such series;
(b) certain characteristics of the underlying loans including:
o the payment features of the underlying loans, i.e., whether they
are fixed rate or adjustable rate and whether they provide for
fixed level payments or other payment features,
o the approximate aggregate principal balance, if known, of the
underlying loans insured or guaranteed by a governmental entity,
o the servicing fee or range of servicing fees with respect to the
underlying loans,
o the minimum and maximum stated maturities of the underlying
loans at origination,
o the lien priority and credit utilization rates, if any, of the
underlying loans, and
o the delinquency status and year of origination of the underlying
loans;
(c) the maximum original term-to-stated maturity of the private
securities;
(d) the weighted average term-to-stated maturity of the private
securities;
(e) the pass-through or certificate rate or ranges for the private
securities;
(f) the PS Sponsor, the PS Servicer (if other than the PS Sponsor) and
the PS Trustee for such private securities;
(g) certain characteristics of credit support, if any, such as reserve
funds, insurance policies, letters of credit or guarantees relating
to the underlying loan or to such private securities themselves;
(h) the terms on which underlying loans may, or are required to, be
purchased prior to their stated maturity or the stated maturity of
the private securities; and
(i) the terms on which underlying loans may be substituted for those
originally underlying the private securities.
If information of the nature described above representing the private
securities is not known to the depositor at the time the securities are
initially offered, approximate or more general information of the nature
described above will be provided in the prospectus supplement and the
additional information, if available, will be set forth in a Current Report on
Form 8-K to be available to investors on the date of issuance of the related
series and will be filed with the SEC within 15 days of the initial issuance
of the securities.
Agency Securities
Trust assets for a series may consist, in whole or in part, of agency
securities which include securities issued by the Government National Mortgage
Association ("Ginnie Mae"), the Federal Home Loan Mortgage Corporation
("Freddie Mac") and Fannie Mae ("Fannie Mae").
All of the agency securities will be registered in the name of the
trustee or its nominee or, in the case of agency securities issued only in
book-entry form, a financial intermediary that is a member of the Federal
Reserve System or of a clearing corporation on the books of which the security
is held. Each agency security will evidence an interest in a pool of eligible
mortgage loans and in principal distributions and interest distributions
thereon.
The descriptions of Ginnie Mae, Freddie Mac and Fannie Mae certificates
in the prospectus supplement, if any, are descriptions of certificates
representing proportionate interests in a pool of mortgage loans and in the
payments of principal and interest thereon. Ginnie Mae, Freddie Mac or Fannie
Mae may also issue mortgage-backed securities representing a right to receive
distributions of interest only or principal only or disproportionate
distributions of principal or interest or to receive distributions of
principal and interest prior or subsequent to distributions on other
certificates representing interests in the same pool of mortgage loans. The
terms of the agency certificates to be included in a trust and of the
underlying mortgage loans will be described in the prospectus supplement.
Ginnie Mae.
Ginnie Mae is a wholly owned corporate instrumentality of the United
States within the Department of Housing and Urban Development ("HUD"). Section
306(g) of Title III of the National Housing Act of 1934, as amended (the
"Housing Act"), authorizes Ginnie Mae to guarantee the timely payment of the
principal of and interest on certificates that are based on and backed by a
pools of loans guaranteed or insured by the FHA or the VA and by pools of
other eligible mortgage loans.
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 guaranty under this subsection". To meet its
obligations under its guarantees, Ginnie Mae is authorized to borrow from the
United States Treasury with no limitations as to amount.
Freddie Mac.
Freddie Mac is a corporate instrumentality of the United States created
pursuant to Title III of the Emergency Home Finance Act of 1970, as amended.
Freddie Mac 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 Freddie Mac currently
consists of the purchase of first lien conventional residential mortgage loans
or participation interests in such mortgage loans and the resale of the
mortgage loans so purchased in the form of mortgage securities. Freddie Mac is
confined to purchasing, so far as practicable, conventional mortgage loans and
participation interests in conventional mortgage loans which it deems to be of
such quality, type and class as to meet the purchase standards imposed by
private institutional mortgage investors.
Freddie Mac certificates are not guaranteed by the United States and do
not constitute debts or obligations of the United States. The obligations of
Freddie Mac under its guaranty are obligations solely of Freddie Mac and are
not backed by, or entitled to, the full faith and credit of the United States.
If Freddie Mac were unable to satisfy its obligations, distributions to
holders of Freddie Mac certificates would consist solely of payments and other
recoveries on the underlying mortgage loans and, accordingly, monthly
distributions to holders of Freddie Mac certificates would be affected by
delinquent payments and defaults on such mortgage loans.
Freddie Mac 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
Freddie Mac certificate will be distributed so as to be received normally by
the 15th day or other date designated by Freddie Mac of the second month
following the month in which the purchaser became a registered holder of such
Freddie Mac certificate. Thereafter, such 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 Freddie Mac certificates sold by Freddie Mac on or
after January 2, 1985, and makes payments of principal and interest each month
to the registered holders in accordance with such holders' instructions.
Fannie Mae.
Fannie Mae is a federally chartered and privately owned corporation
organized and existing under the Federal National Mortgage Association Charter
Act, as amended. Fannie Mae 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.
Fannie Mae provides funds to the mortgage market primarily by purchasing
mortgage loans from lenders, allowing lenders to make more loans. Fannie Mae
acquires funds to purchase mortgage loans from many capital market investors
that may not ordinarily invest in mortgages, expanding the total amount of
funds available for housing. Operating nationwide, Fannie Mae helps to
redistribute mortgage funds from capital-surplus to capital-short areas.
Fannie Mae guarantees to each registered holder of a Fannie Mae
certificate that it will distribute amounts representing scheduled principal
and interest at the applicable pass-through rate on the underlying mortgage
loans, whether or not received, and such holder's proportionate share of the
full principal amount of any foreclosed or other finally liquidated mortgage
loan, whether or not such principal amount is actually recovered. If Fannie
Mae were unable to perform such obligations, distributions on Fannie Mae
certificates would consist solely of payments and other recoveries on the
underlying mortgage loans and, accordingly, delinquencies and defaults would
affect monthly distributions to holders of Fannie Mae certificates. The
obligations of Fannie Mae under its guarantees are obligations solely of
Fannie Mae and are not backed by, nor entitled to, the full faith and credit
of the United States.
Fannie Mae certificates evidencing interests in pools of mortgage loans
formed on or after May 1, 1985, other than Fannie Mae 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 Fannie Mae certificate will be made by Fannie
Mae on the 25th day of each month or other date designated by Fannie Mae to
the persons in whose name the Fannie Mae certificate is entered in the books
of the Federal Reserve Banks or other clearing corporation in which the
certificates are held, or registered on the Fannie Mae certificate register in
the case of fully registered Fannie Mae certificates, as of the close of
business on the last day of the preceding month. With respect to Fannie Mae
certificates issued in book-entry form, distributions thereon will be made by
wire, and with respect to fully registered Fannie Mae certificates,
distributions thereon will be made by check.
Stripped Securities.
Agency securities may consist of one or more stripped securities, each as
described in this prospectus and in the prospectus supplement. Each such
agency security will represent an undivided interest in all or part of either
only the principal distributions or only the interest distributions, or in
some specified portion of the principal and interest distributions on certain
Freddie Mac, Fannie Mae or Ginnie Mae certificates. The underlying securities
will be held under a trust agreement by Freddie Mac, Fannie Mae or Ginnie Mae,
each as trustee, or by another trustee named in the prospectus supplement. The
prospectus supplement will specify whether Freddie Mac, Fannie Mae or Ginnie
Mae will guarantee each stripped agency security to the same extent as such
entity guarantees the underlying securities backing such stripped agency
security.
FHA Loans and VA Loans
FHA loans will be insured by the FHA as authorized under the Housing Act,
and the United States Housing Act of 1937, as amended. One- to four-family FHA
loans will be insured under various FHA programs including the standard FHA
203-b programs to finance the acquisition of one- to four-family housing units
and the FHA 245 graduated payment mortgage program. The FHA loans generally
require a minimum down payment of approximately 5% of the original principal
amount of the FHA loan. No FHA loan may have an interest rate or original
principal balance exceeding the applicable FHA limits at the time of
origination of that FHA loan.
Mortgage loans and contracts that are FHA loans are insured by the FHA
(as described in the prospectus supplement, up to an amount equal to 90% of
the sum of the unpaid principal of the FHA loan, a portion of the unpaid
interest and certain other liquidation costs) pursuant to Title I of the
Housing Act.
There are two primary FHA insurance programs that are available for
multifamily loans. Sections 221(d)(3) and (d)(4) of the Housing Act allow HUD
to insure multifamily loans that are secured by newly constructed and
substantially rehabilitated multifamily rental projects. Section 244 of the
Housing Act provides for co-insurance of those loans made under Sections
221(d)(3) and (d)(4) by HUD/FHA and a HUD-approved co-insurer. Generally the
term of this type of multifamily loan may be up to 40 years and the ratio of
the loan amount to property replacement cost can be up to 90%.
Section 223(f) of the Housing Act allows HUD to insure multifamily loans
made for the purchase or refinancing of existing apartment projects that are
at least three years old. Section 244 also provides for co-insurance of
mortgage loans made under Section 223(f). Under Section 223(f), the loan
proceeds cannot be used for substantial rehabilitation work, but repairs may
be made for up to, in general, the greater of 15% of the value of the project
and a dollar amount per apartment unit established from time to time by HUD.
In general the loan term may not exceed 35 years and a loan-to-value ratio of
no more than 85% is required for the purchase of a project and 70% for the
refinancing of a project.
VA loans will be partially guaranteed by the VA under the Servicemen's
Readjustment Act of 1944, as amended (the "Servicemen's Readjustment Act").
The Servicemen's Readjustment Act permits a veteran (or in some instances the
spouse of a veteran) to obtain a mortgage loan guarantee by the VA insuring
the payments on the mortgage financing for the purchase of a one- to
four-family dwelling unit at interest rates permitted by the VA. The program
has no mortgage loan limits, requires no down payment from the purchasers and
permits the guarantee of mortgage loans of up to 30 years' duration. The
maximum guarantee that may be issued by the VA under this program will be set
forth in the prospectus supplement.
Collection and Distribution Accounts
A separate collection account will be established by the trustee or any
servicer, in the name of the trustee, for each series of securities for
receipt of the amount of cash, if any, specified in the prospectus supplement
to be initially deposited by the depositor, all amounts received on or with
respect to the trust assets and, usually, a portion of the income earned
thereon. As specified in the prospectus supplement, the trustee shall be
required to apply a portion of the amount in the collection amount, together
with reinvestment earnings from Eligible Investments, to the payment of
certain amounts payable to the related servicer under the related Agreement
and any other person specified in the prospectus supplement, and to deposit a
portion of the amount in the collection account into a distribution account to
be established by the trustee for such series, each in the manner and at the
times established in the prospectus supplement. Certain amounts available
pursuant to any enhancement, as provided in the prospectus supplement, will
also be deposited in the distribution account. All amounts deposited in the
distribution account will be available, as specified in the prospectus
supplement, for:
o application to the payment of principal of and interest on such
series of securities on the next distribution date,
o the making of adequate provision for future payments on certain
classes of securities, and
o any other purpose specified in the prospectus supplement.
After applying the funds in the collection account as described above,
any funds remaining in the collection account may be paid over to the related
servicer, the depositor, any provider of enhancement with respect to such
series or any other entitled person in the manner and at the times established
in the prospectus supplement. The trustee will invest the funds in the
collection and distribution accounts in Eligible Investments. In the case of
funds in the collection account, the trustee will generally invest the funds
no later than the day preceding the date the funds are due to be deposited in
the distribution account or otherwise distributed and, in the case of funds in
the distribution account, the trustee will generally invest the funds no later
than the day preceding the next distribution date for the related series of
securities. "Eligible Investments" include, as is acceptable to the rating
agency, among other investments:
o obligations of the United States and certain government agencies,
o federal funds,
o certificates of deposit,
o commercial paper,
o demand and time deposits and banker's acceptances,
o certain repurchase agreements of United States government securities,
and
o certain guaranteed investment contracts.
Notwithstanding any of the foregoing, amounts may be deposited and
withdrawn pursuant to any deposit agreement or minimum principal payment
agreement as specified in the prospectus supplement.
Enhancement
If stated in the prospectus supplement relating to a series of
securities, simultaneously with the depositor's assignment of the trust assets
to the trustee, the seller or the depositor will create by the cash flow
priority allocations or otherwise obtain enhancement in favor of the trustee
on behalf of some or all securityholders. Enhancement may take the form of:
o an irrevocable letter of credit,
o surety bond or insurance policy,
o reserve funds,
o subordinate securities,
o interest rate swap agreements, cap agreements or floor agreements,
o a combination of the above, or
o as otherwise described in the prospectus supplement.
Enhancement will support the payment of principal and interest on the
securities, and may be applied for other purposes to the extent and under the
conditions set forth in the prospectus supplement. If so specified in the
prospectus supplement, any of the enhancements may be structured so as to
protect against losses relating to more than one trust.
Subordinate Securities
If specified in the prospectus supplement, enhancement for a series may
consist of one or more classes of subordinate securities. The rights of
holders of subordinate securities to receive distributions on any distribution
date will be subordinate in right and priority to the rights of holders of
senior securities of the series, but only to the extent described in the
prospectus supplement.
Cross-Support Provisions
If the trust assets for a series are divided into separate groups, each
supporting a separate class or classes of securities of a series, credit
support may be provided by cross-support provisions requiring that
distributions be made on securities evidencing interests in one group of
mortgage loans before distributions on securities evidencing interests in a
different group of mortgage loans within the trust. The prospectus supplement
for a series that includes a cross-support provision will describe the manner
and conditions for applying those provisions.
Financial Guaranty Insurance Policy or Surety Bond
Credit enhancement may be provided in the form of a financial guaranty
insurance policy or a surety bond issued by an insurer named therein, if
specified in the prospectus supplement.
Insurance
If stated in the prospectus supplement, enhancement for a series may
consist of pool insurance, special hazard insurance policies, bankruptcy bonds
and other types of insurance relating to the trust assets, as described in
this section and in the prospectus supplement.
Pool Insurance Policy.
If specified in the prospectus supplement, the seller or the depositor
will obtain a pool insurance policy for the loans in the trust. The pool
insurance policy will cover most losses caused by default, but will not cover
the portion of the principal balance of any loan that is required to be
covered by any primary mortgage insurance policy. The amount and terms of any
such coverage will be set forth in the prospectus supplement.
Special Hazard Insurance Policy.
Although the terms of special hazard insurance policies vary to some
degree, they typically provide that, where there has been damage to property
securing a defaulted or foreclosed loan and title to which has been acquired
by the insured and to the extent such damage is not covered by the standard
hazard insurance policy or any flood insurance policy, if applicable, required
to be maintained with respect to such property, or in connection with partial
loss resulting from the application of the coinsurance clause in a standard
hazard insurance policy, the special hazard insurer will pay the lesser of:
(a) the cost of repair or replacement of such property, or
(b) upon transfer of such property to the special hazard insurer, the
unpaid principal balance of such loan at the time of acquisition of
such property by foreclosure or deed in lieu of foreclosure, plus
accrued interest to the date of claim settlement and certain expenses
incurred by the related servicer with respect to such property.
If the unpaid principal balance plus accrued interest and certain expenses is
paid by the special hazard insurer, the amount of further coverage under the
special hazard insurance policy will be reduced by such amount less any net
proceeds from the sale of such property. Any amount paid as the cost of repair
of such property will reduce coverage by such amount. Special hazard insurance
policies typically do not cover losses occasioned by war, civil insurrection,
certain governmental actions, errors in design, faulty workmanship or
materials, nuclear reaction, flood (if the mortgaged property is in a
federally designated flood area), chemical contamination and certain other
risks.
Restoration of the property with the proceeds described under clause (a)
above is expected to satisfy the condition under any pool insurance policy
that such property be restored before a claim under such pool insurance policy
may be validly presented with respect to the defaulted loan secured by such
property. The payment described under clause (b) above will render unnecessary
presentation of a claim in respect of such loan under any pool insurance
policy. Therefore, so long as such 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 loan plus accrued interest and certain
expenses will not affect the total insurance proceeds paid to holders of the
securities, but will affect the relative amounts of coverage remaining under
the special hazard insurance policy and pool insurance policy.
Bankruptcy Bond.
In the event of a bankruptcy of a borrower, the bankruptcy court may
establish the value of the property securing the related loan at an amount
less than the then outstanding principal balance of such loan. The amount of
the secured debt could be reduced to such value, and the holder of such loan
would become an unsecured creditor to the extent the outstanding principal
balance of such loan exceeds the value so assigned to the property by the
bankruptcy court. In addition, certain other modifications of the terms of a
loan can result from a bankruptcy proceeding. See "Legal Aspects of the
Loans". If provided in the prospectus supplement, the depositor, the seller or
other entity specified in the prospectus supplement will obtain a bankruptcy
bond or similar insurance contract covering losses resulting from proceedings
with respect to borrowers under the Bankruptcy Code. The bankruptcy bond will
cover certain losses resulting from a reduction by a bankruptcy court of
scheduled payments of principal of and interest on a loan or a reduction by
such court of the principal amount of a loan and will cover certain unpaid
interest on the amount of such a principal reduction from the date of the
filing of a bankruptcy petition.
The bankruptcy bond will provide coverage in the aggregate amount
specified in the prospectus supplement for all loans in the trust for such
series. Typically, the aggregate amount of coverage will be reduced by
payments made under the bankruptcy bond and will not be restored.
Reserve Funds
If so specified in the prospectus supplement relating to a series of
securities, the depositor or the seller will establish one or more reserve
funds with the trustee as part of the trust for such series or for the benefit
of any enhancer. The depositor or seller will deposit in the reserve funds
cash, a letter or letters of credit, cash collateral accounts, Eligible
Investments, or other instruments or assets meeting the criteria of each
rating agency rating the securities in the amount specified in the prospectus
supplement. In the alternative or in addition to such deposit, a reserve fund
may be funded over time through application of all or a portion of the excess
cash flow from the trust assets, as described in the prospectus supplement. If
applicable, the initial amount of the reserve fund and the reserve fund
maintenance requirements for a series of securities will be described in the
prospectus supplement.
Amounts withdrawn from any reserve fund will be applied by the trustee to
make payments on the securities of a series, to pay expenses, to reimburse any
enhancer or for any other purpose, in the manner and to the extent specified
in the prospectus supplement.
Amounts deposited in a reserve fund will be invested by the trustee, in
Eligible Investments maturing no later than the day specified in the
prospectus supplement.
Minimum Principal Payment Agreement
If stated in the prospectus supplement relating to a series of
securities, the depositor or the seller will enter into a minimum principal
payment agreement with an entity meeting the criteria of the rating agency
pursuant to which the entity will provide certain payments on the securities
of such series in the event that aggregate scheduled principal payments and
prepayments on the trust assets for such series are not sufficient to make
certain payments on the securities of such series, as provided in the
prospectus supplement.
Derivative Products
If specified in the prospectus supplement, derivative products may be
included as assets of the trust. Derivative products may consist of a swap to
convert floating or fixed rate payments, as applicable on the loans, private
securities or agency securities into fixed or floating rate payments, as
applicable, on the securities or in a cap or floor agreement intended to
provide protection against changes in floating rates of interest payable on
the loans, private securities, agency securities or the securities.
Other Insurance, Surety Bonds, Guarantees, Letters of Credit and Similar
Instruments or Agreements
A trust may also include other insurance, guarantees, surety bonds,
letters of credit or similar arrangements for the purpose of:
o maintaining timely payments to securityholders or providing
additional protection against losses on the assets included in such
trust,
o paying administrative expenses, or
o establishing a minimum principal payment rate on such assets.
These arrangements may include agreements under which securityholders are
entitled to receive amounts deposited in various accounts held by the trustee
upon the terms specified in the prospectus supplement.
Servicing of Loans
General
The servicer or servicers will provide customary servicing functions with
respect to loans comprising the trust assets in the trust pursuant to the
related sale and servicing agreement or pooling and servicing agreement, as
the case may be. In performing its functions, any servicer will be required to
exercise the same degree of skill and care that it customarily exercises with
respect to similar receivables or loans owned or serviced by it. In addition,
if specified in the prospectus supplement, a servicer may act as custodian and
will be responsible for maintaining custody of the loans and related
documentation on behalf of the trustee.
Collection Procedures; Escrow Accounts
Any servicer will make reasonable efforts to collect all payments
required to be made under the loans and will, consistent with the terms of the
related Agreement for a series and any applicable enhancement, follow such
collection procedures as it follows with respect to comparable loans held in
its own portfolio. A servicer may, unless otherwise specified in the
prospectus supplement, in its discretion:
o waive any assumption fee, late payment charge, or other charge in
connection with a loan, and
o to the extent provided in the related Agreement, arrange with an
obligor a schedule for curing delinquencies by modifying the due
dates for scheduled payments on such loan.
As specified in the prospectus supplement, a servicer, to the extent
permitted by law, may establish and maintain escrow or impound accounts with
respect to loans in which payments by obligors to pay taxes, assessments,
mortgage and hazard insurance premiums, and other comparable items will be
deposited. If loans do not require such payments under the loan documents, the
related servicer would not be required to establish any escrow account with
respect to such loans. Withdrawals from the escrow accounts are to be made to
effect timely payment of:
o taxes,
o assessments,
o mortgage and hazard insurance,
o to refund to obligors amounts determined to be overages,
o to pay interest to obligors on balances in the escrow account to the
extent required by law,
o to repair or otherwise protect the property securing the related
loan, and
o to clear and terminate such escrow account.
The servicer will be responsible for the administration of the escrow accounts
and may make advances to such account when a deficiency exists.
Deposits to and Withdrawals From the Collection Account
As specified in the prospectus supplement, the trustee or any servicer
will establish the collection account in the name of the trustee. Typically,
the collection account will be an account maintained:
o at a depository institution, the long-term unsecured debt obligations
of which at the time of any deposit are rated by each rating agency
rating the securities of such series at levels satisfactory to each
rating agency, or
o in an account or accounts the deposits in which are insured to the
maximum extent available by the FDIC or which are secured in a manner
meeting requirements established by each rating agency.
As specified in the prospectus supplement, the funds held in the
collection account may be invested, pending remittance to the trustee, in
Eligible Investments. If so specified in the prospectus supplement, the
related servicer will be entitled to receive as additional compensation any
interest or other income earned on funds in the collection account.
As specified in the prospectus supplement, any servicer, the trustee, the
depositor or any seller, as appropriate, will deposit into the collection
account on the business day following the closing date any amounts
representing scheduled payments due after the related cut-off date but
received by a servicer on or before the closing date, and thereafter, within
the time period specified in the prospectus supplement after the date of
receipt, the following payments and collections received or made by it, other
than in respect of principal of and interest on the trust assets due on or
before such cut-off date:
o all payments on account of principal, including prepayments, on the
trust assets;
o all payments on account of interest on the trust assets after
deducting, at the discretion of the related servicer but only to the
extent of the amount permitted to be withdrawn or withheld from the
collection account in accordance with the related Agreement, the
servicing fee,
o all amounts received by any servicer in connection with the
liquidation of trust assets or property acquired in respect of
liquidation, whether through foreclosure sale, repossession or
otherwise, including payments in connection with such trust assets
received from the obligor, other than amounts required to be paid or
refunded to the obligor pursuant to the terms of the applicable loan
documents or otherwise pursuant to law, exclusive of, the servicing
fee,
o all proceeds under any title insurance, hazard insurance or other
insurance policy covering any trust asset, other than proceeds to be
applied to the restoration or repair of the related property or
released to the obligor in accordance with the related Agreement,
o all amounts required to be deposited from any applicable reserve fund
pursuant to the related Agreement,
o all advances of delinquent payments of principal and interest on a
loan or of other payments specified in the Agreement made by the
related servicer if required pursuant to the related Agreement, and
o all repurchase prices of any trust assets repurchased by the related
servicer, the depositor or the related seller pursuant to the related
Agreement.
Typically, a servicer is permitted, from time to time, to make
withdrawals from the collection account for each series for the following
purposes:
o to reimburse itself for advances for such series made by it pursuant
to the related Agreement (generally limited to recoveries in respect
of particular loans),
o to the extent provided in the related Agreement, to reimburse itself
for any advances for such series that the servicer determines in good
faith it will be unable to recover from the borrower or any other
sources,
o to reimburse itself from liquidation proceeds for liquidation
expenses and for amounts expended by it in good faith in connection
with the restoration of damaged property and, if available from
recoveries on the related loan, to pay to itself out of such excess
the amount of any unpaid servicing fee and any assumption fees, late
payment charges, or other charges on the related loan,
o in the event it has elected not to pay itself the servicing fee out
of the interest component of any scheduled payment, late payment or
other recovery with respect to a particular loan prior to the deposit
of such scheduled payment, late payment or recovery into the
collection account, to pay to itself the servicing fee, as adjusted
pursuant to the related Agreement, from any such scheduled payment,
late payment or such other recovery, to the extent permitted by the
related Agreement,
o to reimburse itself for expenses incurred by it and recoverable by it
or reimbursable to it pursuant to the related Agreement,
o to pay to the applicable person with respect to each trust asset or
REO property that has been repurchased or removed from the trust by
the depositor, any servicer or any seller pursuant to the related
Agreement, all amounts received thereon and not distributed as of the
date on which the related repurchase price was determined,
o to make payments to the trustee of such series for deposit into the
distribution account, if any, or for remittance to the
securityholders of such series in the amounts and in the manner
provided for in the related Agreement, and
o to clear and terminate the collection account pursuant to the related
Agreement.
In addition, if a servicer deposits in the collection account for a
series any amount not required to be deposited, it may, at any time, withdraw
such amount from such collection account.
Advances and Limitations
The prospectus supplement will describe the circumstances, if any, under
which a servicer will make advances with respect to delinquent payments on
loans. A servicer may be obligated to make advances of, among other things,
delinquent payments of interest and/or principal, and such obligations may be
limited in amount, or may not be activated until a certain portion of a
specified reserve fund is depleted. Advances are intended to provide liquidity
and, except to the extent specified in the prospectus supplement, not to
guarantee or insure against losses. Accordingly, any funds advanced are
recoverable by the related servicer out of amounts received on particular
loans which represent late recoveries of principal or interest, proceeds of
insurance policies or liquidation proceeds respecting which any such advance
was made. If an advance is made and subsequently determined to be
nonrecoverable from late collections, proceeds of insurance policies, or
liquidation proceeds from the related loan, a servicer may be entitled to
reimbursement from other funds in the collection account, distribution
account, or from a specified reserve fund, to the extent specified in the
prospectus supplement.
Maintenance of Insurance Policies and Other Servicing Procedures
Standard Hazard Insurance; Flood Insurance.
Except as specified in the prospectus supplement, a servicer will be
required to maintain or either (a) cause the obligor on each loan to maintain
or (b) require the obligor to agree to acquire and maintain a standard hazard
insurance policy providing coverage of the standard form of fire insurance
with extended coverage for certain other hazards as is customary in the state
in which the related property is located; however, in the case of clause (b),
the related servicer may not verify compliance by the obligor. The standard
hazard insurance policies will provide for coverage at least equal to the
applicable state standard form of fire insurance policy with extended coverage
for property of the type securing the loans. In general, the standard form of
fire and extended coverage policy will cover physical damage to or destruction
of, the related property caused by fire, lightning, explosion, smoke,
windstorm, hail, riot, strike and civil commotion, as limited by each policy.
Because the standard hazard insurance policies relating to the loans will be
underwritten by different hazard insurers and will cover properties located in
various states, the policies will not contain identical terms and conditions.
The basic terms are usually determined by state law but will be similar in
many respects. Most hazard insurance policies typically do not cover any
physical damage resulting from:
o war,
o revolution,
o governmental actions,
o floods and other water-related causes,
o earth movement, including earthquakes, landslides, and mudflows,
o nuclear reaction,
o wet or dry rot,
o vermin,
o rodents,
o insects or domestic animals,
o theft, and
o in certain cases, vandalism.
The foregoing list is merely indicative of certain kinds of uninsured risks
and is not intended to be all inclusive. Uninsured losses not covered by a
special hazard insurance policy or other form of enhancement will reduce
distributions to securityholders. When a property securing a loan is located
in a flood area identified by HUD pursuant to the Flood Disaster Protection
Act of 1973, as amended, the related servicer will be required to cause flood
insurance to be maintained with respect to such property, to the extent
available, and if such insurance is placed by such servicer, the associated
premiums may be added to the balance of the related loan.
The standard hazard insurance policies covering properties securing loans
typically will contain a "coinsurance" clause which, in effect, will require
the insured at all times to carry hazard insurance of a specified percentage
(generally 80% to 90%) of the full replacement value of the property,
including the improvements on any property, in order to recover the full
amount of any partial loss. If the insured's coverage falls below this
specified percentage, such clause will provide that the hazard insurer's
liability in the event of partial loss will not exceed the greater of:
o the actual cash value, i.e., the replacement cost less physical
depreciation, of the property, including the improvements, if any,
damaged or destroyed, or
o such 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 such property and improvements.
Since the amount of hazard insurance to be maintained on the improvements
securing the loans declines as the principal balances owing thereon decrease,
and since the value of the properties will fluctuate in value over time, the
effect of this requirement in the event of partial loss may be that hazard
insurance proceeds will be insufficient to restore fully the damage to the
affected property.
Typically, coverage will be in an amount at least equal to the greater of
the amount necessary to avoid the enforcement of any co-insurance clause
contained in the policy and the outstanding principal balance of the related
loan. A servicer typically will also maintain on REO property that secured a
defaulted loan and that has been acquired upon foreclosure, deed in lieu of
foreclosure, or repossession, a standard hazard insurance policy in an amount
that is at least equal to the maximum insurable value of such REO property. No
earthquake or other additional insurance will be required of any obligor or
will be maintained on REO property acquired in respect of a defaulted loan,
other than pursuant to such applicable laws and regulations as shall at any
time be in force and shall require such additional insurance.
Any amounts collected by a servicer under any policies of insurance,
other than amounts to be applied to the restoration or repair of the property,
released to the obligor in accordance with normal servicing procedures or used
to reimburse the servicer for amounts to which it is entitled to
reimbursement, will be deposited in the collection account. In the event that
a servicer obtains and maintains a blanket policy insuring against hazard
losses on all of the loans, written by an insurer acceptable to each rating
agency which assigns a rating to such series, it will conclusively be deemed
to have satisfied its obligations to cause to be maintained a standard hazard
insurance policy for each loan or related REO property. This blanket policy
may contain a deductible clause, in which case the related servicer will, in
the event that there has been a loss that would have been covered by such
policy absent such deductible clause, deposit in the collection account the
amount not otherwise payable under the blanket policy because of the
application of such deductible clause.
Realization Upon Defaulted Loans
Any servicer will use its reasonable best efforts to foreclose upon,
repossess or otherwise comparably convert the ownership of the properties
securing the related loans as the loans come into and continue in default and
as to which no satisfactory arrangements can be made for the collection of
delinquent payments.
In connection with such foreclosure or other conversion, a servicer will
follow such practices and procedures as it deems necessary or advisable and as
are normal and usual in its servicing activities with respect to comparable
loans serviced by it. However, a servicer will not be required to expend its
own funds in connection with any foreclosure or towards the restoration of the
property unless it determines that:
o such restoration or foreclosure will be in the best interests of the
securityholders, or
o such expenses will be recoverable by it either through liquidation
proceeds or the proceeds of insurance.
Notwithstanding anything to the contrary herein, in the case of a trust for
which a REMIC election has been made, a servicer shall liquidate any property
acquired through foreclosure within three years after the acquisition of the
beneficial ownership of such property. While the holder of a property acquired
through foreclosure can often maximize its recovery by providing financing to
a new purchaser, the trust, if applicable, will have no ability to do so and
neither the related servicer nor the depositor will be required to do so.
A servicer may arrange with the obligor on a defaulted loan, a
modification of such loan to the extent provided in the prospectus supplement.
Such modifications may only be entered into if they meet the underwriting
policies and procedures employed by the servicer in servicing receivables for
its own account and meet the other conditions set forth in the prospectus
supplement.
Enforcement of Due-On-Sale Clauses
Typically, when any property is about to be conveyed by the obligor, a
servicer will, to the extent it has knowledge of such prospective conveyance
and prior to the conveyance, exercise the mortgagee's rights to accelerate the
maturity of the related loan under the applicable "due-on-sale" clause, if
any, unless it reasonably believes that such clause is not enforceable under
applicable law. In such event, a servicer is authorized to accept from or
enter into an assumption agreement with the person to whom such property has
been or is about to be conveyed, pursuant to which such person becomes liable
under the loan and pursuant to which the original obligor is released from
liability and such person is substituted as the obligor and becomes liable
under the loan. Any fee collected in connection with an assumption will be
retained by the servicer as additional servicing compensation. The terms of a
loan may not be changed in connection with an assumption.
Servicing Compensation and Payment of Expenses
Any servicer will be entitled to a periodic fee as servicing compensation
in an amount to be determined as specified in the prospectus supplement. The
servicing fee may be fixed or variable. In addition, any servicer may be
entitled to servicing compensation in the form of assumption fees, late
payment charges and similar items, or excess proceeds following disposition of
property in connection with defaulted loans.
When an obligor makes a principal prepayment in full between due dates on
the related loan, the obligor will usually be required to pay interest on the
amount prepaid only to the date of prepayment. If and to the extent provided
in the prospectus supplement, in order that one or more classes of the
securityholders of a series will not be adversely affected by any resulting
shortfall in interest, the amount of the servicing fee may be reduced to the
extent necessary to include in the related servicer's remittance to the
trustee for deposit into the distribution account an amount equal to one
month's interest on the related loan less the servicing fee. If the aggregate
amount of such shortfalls in a month exceeds the servicing fee for such month,
a shortfall to securityholders may occur.
As specified in the prospectus supplement, a servicer will be entitled to
reimbursement for certain expenses incurred by it in connection with the
liquidation of defaulted loans. The related securityholders will suffer no
loss by reason of such expenses to the extent expenses are covered under
related insurance policies or from excess liquidation proceeds. If claims are
either not made or paid under the applicable insurance policies or if coverage
has been exhausted, the related securityholders will suffer a loss to the
extent that liquidation proceeds, after reimbursement of such servicer's
expenses, are less than the outstanding principal balance of and unpaid
interest on the related loan which would be distributable to securityholders.
In addition, a servicer will be entitled to reimbursement of expenditures
incurred by it in connection with the restoration of property securing a
defaulted loan, such right of reimbursement being prior to the rights of the
securityholders to receive any related proceeds of insurance policies,
liquidation proceeds or amounts derived from other enhancement. Typically, a
servicer is also entitled to reimbursement from the collection account for
advances.
In general, the rights of a servicer to receive funds from the collection
account for a series, whether as the servicing fee or other compensation, or
for the reimbursement of advances, expenses or otherwise, have priority over
to the rights of securityholders of such series.
Evidence as to Compliance
If specified in the prospectus supplement, the applicable Agreement for
each series will provide that each year, a firm of independent public
accountants will furnish a statement to the trustee to the effect that the
firm has examined certain documents and records relating to the servicing of
the loans by a servicer and that, on the basis of the examination, the firm is
of the opinion that the servicing has been conducted in compliance with such
Agreement, except for exceptions as the firm believes to be immaterial and any
other exceptions that are set forth in the statement.
If specified in the prospectus supplement, the applicable Agreement for
each series will also provide for delivery to the trustee of an annual
statement signed by an officer of the related servicer to the effect that such
servicer has fulfilled its obligations under such Agreement, throughout the
preceding calendar year.
Termination and Liability of a Servicer
The servicer or servicers will be identified in the prospectus
supplement. A servicer may be an affiliate of the depositor and may have other
business relationships with the depositor and its affiliates.
In the event of an event of default under either a sale and servicing
agreement or a pooling and servicing agreement, any servicer may be replaced
by the trustee or a successor servicer. In general, events of default and the
rights of the trustee upon such a default under the Agreement for the related
series will be substantially similar to those described under "The
Agreements--Events of Default; Rights Upon Events of Default--Pooling and
Servicing Agreement; Sale and Servicing Agreement."
A servicer usually does not have the right to assign its rights and
delegate its duties and obligations under the related Agreement unless the
related successor servicer accepting the assignment or delegation:
o services similar loans in the ordinary course of its business,
o is reasonably satisfactory to the trustee for the related series,
o has a net worth of not less than the amount specified in the related
Agreement,
o would not cause any rating agency's rating of the securities for such
series in effect immediately prior to such assignment, sale or
transfer to be qualified, downgraded or withdrawn as a result of such
assignment, sale or transfer, and
o executes and delivers to the trustee an agreement, in form and
substance reasonably satisfactory to the trustee, which contains an
assumption by the successor servicer of the due and punctual
performance and observance of each covenant and condition to be
performed or observed by such servicer under the related Agreement
from and after the date of such agreement.
No assignment will become effective until the trustee or a successor servicer
has assumed the related servicer's obligations and duties under the related
Agreement. To the extent that a servicer transfers its obligations to a
wholly-owned subsidiary or affiliate, such subsidiary or affiliate need not
satisfy the criteria set forth in this paragraph; however, in such instance,
the assigning servicer will remain liable for the servicing obligations under
the related Agreement. Any entity into which a servicer is merged or
consolidated or any successor corporation resulting from any merger,
conversion or consolidation will succeed to such servicer's obligations under
the related Agreement, provided that such successor or surviving entity meets
the requirements for a successor servicer. However, a servicer may have the
right to enter into subservicing arrangements which will be referred to in the
related Agreement. Any such arrangement will not relieve the servicer from its
obligations under the related Agreement.
Typically, each Agreement will provide that neither any servicer, nor any
director, officer, employee or agent of a servicer, will be under any
liability to the trust, the depositor or the securityholders for any action
taken or for failing to take any action in good faith pursuant to the related
Agreement, or for errors in judgment; provided, however, that neither a
servicer nor any such person will be protected against:
o any breach of warranty or representations made under such Agreement,
o the failure to perform its obligations in compliance with any
standard of care set forth in such Agreement, or
o liability which would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of their
duties or by reason of reckless disregard of their obligations and
duties.
Each Agreement will further provide that a servicer and any director, officer,
employee or agent of a servicer is entitled to indemnification from the trust
and will be held harmless against any loss, liability or expense incurred in
connection with any legal action relating to the Agreement or the securities,
other than any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties or by reason
of reckless disregard of obligations and duties. In addition, the related
Agreement will provide that a servicer is not under any obligation to appear
in, prosecute or defend any legal action which is not incidental to its
servicing responsibilities under such Agreement which, in its opinion, may
involve it in any expense or liability. A servicer may, in its discretion,
undertake any action which it may deem necessary or desirable with respect to
the related Agreement and the rights and duties of the parties and the
interests of the securityholders. In such event, the legal expenses and costs
of such action and any resulting liability may be expenses, costs, and
liabilities of the trust and the related servicer may be entitled to be
reimbursed out of the collection account.
The Agreements
The following summaries describe the provisions of the Agreements. The
summaries do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the provisions of the Agreements. Where
particular provisions or terms used in the Agreement are referred to, such
provisions or terms are as specified in the related Agreement.
Assignment of Trust Assets
General.
At the time of issuance of the securities of a series, the depositor will
transfer, convey and assign to the trust all right, title and interest of the
depositor in the trust assets and other property to be transferred to the
trust for a series. The assignment will usually include all principal and
interest due on or with respect to the trust assets after the cut-off date
specified in the prospectus supplement. The trustee will, concurrently with
the assignment, execute and deliver the securities.
Assignment of Loans.
As specified in the prospectus supplement, the depositor will, as to each
loan secured by a mortgage, deliver or cause to be delivered to the trustee,
or a custodian on behalf of the trustee,
o the mortgage note endorsed without recourse to the order of the
trustee or in blank,
o the original mortgage with evidence of recording indicated thereon,
(except for any mortgage not returned from the public recording
office, in which case a copy of that mortgage will be delivered,
together with a certificate that the original of that mortgage was
delivered to the recording office) and
o an assignment of the mortgage in recordable form.
The trustee, or the custodian, will hold the documents in trust for the
benefit of the holders of securities.
In general, the depositor will, as to each manufactured housing or home
improvement contract, deliver or cause to be delivered to the trustee or the
custodian the original manufactured housing or home improvement contract and
copies of documents and instruments related to the contract and, other than in
the case of unsecured home improvement contracts, the security interest in the
property securing the contract. In order to give notice of the right, title
and interest of securityholders to the manufactured housing contracts or home
improvement contracts, the depositor or the related seller will execute a
UCC-1 financing statement identifying the trustee as the secured party and
identifying all contracts as collateral. Usually, the contracts will not be
stamped or otherwise marked to reflect their assignment to the trust.
Therefore, if, through negligence, fraud or otherwise, a subsequent purchaser
were able to take physical possession of the contracts without notice of such
assignment, the interest of securityholders in the contracts could be
defeated. See "Legal Aspects of the Loans--Loans Not Secured by Mortgages."
With respect to loans secured by mortgages, if so specified in the
prospectus supplement, the depositor will, at the time of issuance of the
securities, cause assignments to the trustee of the mortgages relating to the
loans for a series to be recorded in the appropriate public office for real
property records, except in states where, in the opinion of counsel acceptable
to the trustee, such recording is not required to protect the trustee's
interest in the related loans. If specified in the prospectus supplement, the
depositor will cause such assignments to be recorded within the time after
issuance of the securities as is specified in the prospectus supplement, in
which event, the Agreement may require the depositor or the related seller to
repurchase from the trustee any loan the related mortgage of which is not
recorded within such time, at the price described under "--Repurchase and
Substitution of Non-Conforming Trust Assets" with respect to repurchases by
reason of defective documentation. The enforcement of the repurchase
obligation would constitute the sole remedy available to the securityholders
or the trustee for the failure of a mortgage to be recorded. If the Agreement
for a series does not require that assignments be recorded at closing, the
related prospectus supplement will describe the circumstances, if any, under
which recordation would be required in the future.
Each loan will be identified in a schedule appearing as an exhibit to the
related Agreement. The loan schedule will specify with respect to each loan:
o the original principal amount and unpaid principal balance as of the
cut-off date;
o the current interest rate;
o the current scheduled payment of principal and interest;
o the maturity date, if any, of the related mortgage note; and,
o if the loan is an adjustable rate loan,
o the lifetime rate cap, if any, and
o the current index, if applicable.
Assignment of Private Securities.
The depositor will cause the private securities to be registered in the
name of the trustee or its nominee or correspondent. The trustee or its
nominee or correspondent will have possession of any certificated private
securities. As specified in the prospectus supplement, the trustee will not be
in possession of or be an assignee of record of any underlying assets for a
private security. See "The Trusts--Private Securities." Each private security
will be identified in a schedule appearing as an exhibit to the related
Agreement, which will specify the original principal amount, outstanding
principal balance as of the cut-off date, annual pass-through rate or interest
rate and maturity date for each private security conveyed to the trust. In the
Agreement, the depositor will represent and warrant to the trustee regarding
the private securities:
o that the information contained in the private security schedule is
true and correct in all material respects,
o that, immediately prior to the conveyance of the private securities,
the depositor had good title thereto to the extent good title was
conveyed to it, and was the sole owner thereof subject to any
retained interest of the depositor or any seller,
o that there has been no other sale by it of the private securities,
and
o that there is no existing lien, charge, security interest or other
encumbrance other than any retained interest of the depositor or any
seller on the private securities.
Repurchase and Substitution of Defective Trust Assets.
Unless otherwise provided in the prospectus supplement, if any document
in the file relating to the trust assets delivered by the depositor or any
seller to the trustee or custodian is found by the trustee during its
examination to be defective in any material respect and the depositor or the
related seller do not cure such defect within the required time period, the
depositor or the related seller will within the required period after the
trustee's notice to the depositor or the related seller, as the case may be,
of the defect, repurchase the related trust asset or any property acquired in
respect thereof from the trustee. The repurchase will be at a price equal to,
unless otherwise specified in the prospectus supplement, the outstanding
principal balance thereof, plus unpaid accrued interest to the date of the
next scheduled payment at a rate set forth in the related Agreement, plus
certain servicing expenses that are payable to any servicer.
If provided in the prospectus supplement, the depositor or the related
seller, as the case may be, may, rather than repurchase the trust asset as
described in the previous paragraph, remove such trust asset from the trust
and substitute in its place one or more other trust assets provided, however,
that with respect to a trust for which a REMIC election is made, such
substitution must be effected within two years of the date of initial issuance
of the securities.
As specified in the prospectus supplement, any substitute trust asset
will have, on the date of substitution:
o an outstanding principal balance, after deduction of all scheduled
payments due in the month of substitution, not in excess of the
outstanding principal balance of the deleted trust asset; with the
amount of any shortfall to be deposited to the collection account in
the month of substitution for distribution to securityholders,
o an interest rate not less than the interest rate of the deleted trust
asset, and
o a remaining term-to-stated maturity not greater than and not more
than one year less than that of the deleted trust asset, and will
comply with all of the representations and warranties set forth in
the applicable Agreement as of the date of substitution.
The depositor, any seller or another entity will make representations and
warranties with respect to the trust assets. If the depositor, the related
seller or the other entity cannot cure a breach of any of its representations
and warranties in all material respects within the time period specified in
the prospectus supplement after notification by the trustee of the breach, and
if the breach is of a nature that materially and adversely affects the value
of the trust asset, the depositor, the related seller or the entity is
obligated to repurchase the affected trust asset or, if provided in the
prospectus supplement, provide a substitute trust asset under the same
conditions and limitations provided for purchases and substitutions described
above.
The depositor's only source of funds to effect any cure, repurchase or
substitution will be through the enforcement of the corresponding obligations
of the responsible originator or seller of the trust assets. This cure,
repurchase or substitution obligation generally constitutes the sole remedies
available to the securityholders or the trustee for a material defect in a
document for a trust asset.
No securityholder, solely by virtue of their status as a securityholder,
will have any right under the applicable Agreement to institute any proceeding
with respect to such Agreement, unless the securityholder previously has given
to the trustee written notice of default and unless the securityholders
evidencing not less than a majority of the aggregate voting rights of the
securities have made written request upon the trustee to institute such
proceeding in its own name as trustee and have offered to the trustee
reasonable indemnity, and the trustee for 60 days has neglected or refused to
institute any such proceeding within the time set forth in the Agreement.
Pre-Funding Account
The depositor or the seller may be required, on behalf of the
securityholders, deposit cash into a pre-funding account on the closing date.
The pre-funding account will be maintained with the trustee. The money will be
used by the trustee to purchase qualifying additional loans from time to time
during the funding period. Monies on deposit in the pre-funding account will
not be available to cover losses on or in respect of the loans. The funding
period for a trust will begin on the closing date and will end on the date
specified in the prospectus supplement, which will not be later than one year
after the closing date. Monies on deposit in the pre-funding account may be
invested in Eligible Investments as specified in the related Agreement.
Earnings or losses on investment of funds in the pre-funding account will be
applied as specified in the prospectus supplement. Any amounts remaining in
the pre-funding account at the end of the funding period will be distributed
to securityholders as a prepayment of principal, in the manner and priority
specified in the prospectus supplement.
In addition, on the closing date the depositor or the seller may be
required to make a deposit to a capitalized interest account, which will be
maintained with the trustee. The funds on deposit in the capitalized interest
account will be used solely to cover shortfalls in interest that may arise as
a result of investment of the pre-funding account. Monies on deposit in the
capitalized interest account will not be available to cover losses on or in
respect of the loans. To the extent that the entire amount on deposit in the
capitalized interest account has not been used to cover shortfalls in interest
by the end of the funding period, any remaining amounts will be paid to the
depositor or the seller.
Reports to Securityholders
The trustee or other entity specified in the prospectus supplement will
prepare and forward to each securityholder on each distribution date, or as
soon thereafter as is practicable, a statement setting forth, to the extent
applicable to any series, among other things:
(a) the amount of principal distributed to holders of the securities and
the outstanding principal balance of the securities following the
distribution;
(b) the amount of interest distributed to holders of the securities and
the current interest rate on the securities;
(c) the amounts of any advances made by any servicer;
(d) the amounts of any realized losses or liquidation proceeds to be
allocated as reductions in the outstanding principal balances of the
securities;
(e) the amount received under any enhancement, and the remaining amount
available under the enhancement;
(f) the amount of any delinquencies with respect to payments on the
trust assets;
(g) the amounts of fees paid to the trustee and any servicer;
(h) the total loan balances of the loans held by the trust;
(i) the number and loan balances of loans relating to any REO property
acquired by the trust; and
(j) such other information as specified in the related Agreement.
The report to securityholders for any series of securities may include
additional or other information of a similar nature.
In addition, within a reasonable period of time after the end of each
calendar year, a servicer or the trustee will mail to each securityholder of
record at any time during the calendar year a report containing customary
information as may be deemed necessary or desirable for securityholders to
prepare their tax returns. The report will not be examined or reported upon by
independent public accountants. However, a servicer will provide to the
trustee a report by independent public accountants with respect to the
servicer's servicing of the loans. See "Servicing of Loans--Evidence as to
Compliance."
Events of Default; Rights Upon Event of Default
Pooling and Servicing Agreement; Sale and Servicing Agreement.
As specified in the prospectus supplement, events of default under the
applicable Agreement for a series relating to the servicing of loans generally
include:
o any failure by a servicer to deposit amounts in the collection
account and distribution account to enable the trustee to distribute
to securityholders of such series any required payment, which failure
continues unremedied for the specified number of days after the
giving of written notice of such failure to the servicer by the
trustee for such series, or to the servicer and the trustee by the
securityholders of such series evidencing a specified percentage of
the aggregate voting rights of the securityholders for such series,
o any failure by a servicer duly to observe or perform in any material
respect any other of its covenants or agreements in the applicable
Agreement which continues unremedied for the specified number of days
after the giving of written notice of such failure to the servicer by
the trustee, or to the servicer and the trustee by the
securityholders of such series evidencing a specified percentage of
the aggregate voting rights of the securityholders, and
o certain events of insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings and certain actions by
a servicer indicating its insolvency, reorganization or inability to
pay its obligations.
So long as an event of default relating to the servicing of loans remains
unremedied under the applicable Agreement, as specified in the prospectus
supplement, the trustee for the series or securityholders of securities of the
series evidencing a specified percentage of the aggregate voting rights of the
securities for the series may terminate all of the rights and obligations of
the related servicer under the applicable Agreement, other than its right to
recovery of other expenses and amounts advanced pursuant to the terms of the
Agreement which rights such servicer will retain under all circumstances,
whereupon the trustee (or successor servicer) will succeed to all the
responsibilities, duties and liabilities of the servicer under the Agreement.
In that case, the trustee will be entitled to reasonable servicing
compensation not to exceed the applicable servicing fee, together with other
servicing compensation in the form of assumption fees, late payment charges or
otherwise as provided in the Agreement.
In the event that the trustee is unwilling or unable so to act, it may
select, or petition a court of competent jurisdiction to appoint a financial
institution, bank or loan servicing institution meeting the requirements of
the Agreement to act as successor servicer under the provisions of the
Agreement. The successor servicer would be entitled to reasonable servicing
compensation in an amount not to exceed the servicing fee as set forth in the
prospectus supplement, together with the other servicing compensation in the
form of assumption fees, late payment charges or otherwise, as provided in
such Agreement.
During the continuance of any event of default of a servicer under an
Agreement for a series of securities, the trustee for such series will have
the right to take action to enforce its rights and remedies and to protect and
enforce the rights and remedies of the securityholders of such series, and, as
specified in the prospectus supplement, securityholders of securities
evidencing a specified percentage of the aggregate voting rights of the
securities for the series may direct the time, method and place of conducting
any proceeding for any remedy available to the trustee or exercising any trust
or power conferred upon that trustee. However, the trustee will not be under
any obligation to pursue any remedy or to exercise any of the trusts or powers
unless the securityholders have offered the trustee reasonable security or
indemnity against the cost, expenses and liabilities which may be incurred by
the trustee.
Indenture.
As specified in the prospectus supplement, events of default under the
indenture for each series of notes generally include:
o a default for a specified number of days in the payment of any
interest on any note of that series or the default in the payment of
the principal of any note at the note's maturity,
o failure to perform in any material respect any other covenant of the
depositor or the trust in the indenture which continues for a
specified number of days after notice is given in accordance with the
procedures described in the prospectus supplement,
o any representation or warranty made by the depositor or the trust in
the indenture or in any certificate or other writing delivered
pursuant or in connection with the series having been incorrect in a
material respect as of the time made, and such breach is not cured
within a specified number of days after notice is given in accordance
with the procedures described in the prospectus supplement,
o certain events of bankruptcy, insolvency, receivership or liquidation
of the depositor or the trust, or
o any other event of default provided with respect to notes of that
series.
If an event of default with respect to the notes of any series at the
time outstanding occurs and is continuing, either the trustee or the holders
of a specified percentage of the then aggregate outstanding amount of the
notes of the series may declare the principal amount or, if the notes of that
series are zero coupon securities, such portion of the principal amount as may
be specified in the terms of that series, of all the notes of the series to be
due and payable immediately. Such declaration may, under certain
circumstances, be rescinded and annulled by the holders of a specified
percentage in aggregate outstanding amount of the notes of the series.
If, following an event of default with respect to any series of notes,
the notes of such series have been declared to be due and payable, the trustee
may, in its discretion, notwithstanding any acceleration, elect to maintain
possession of the collateral securing the notes of the series and to continue
to apply distributions on the collateral as if there had been no declaration
of acceleration if the collateral continues to provide sufficient funds for
the payment of principal and interest on the notes of that series as they
would have become due if there had not been a declaration of acceleration. In
addition, the trustee may not sell or otherwise liquidate the collateral
securing the notes of a series following an event of default, unless:
o the holders of 100% of the then aggregate outstanding amount of the
notes of the series consent to the sale,
o the proceeds of the sale or liquidation are sufficient to pay in full
the principal and accrued interest, due and unpaid, on the
outstanding notes of the series at the date of the sale,
o the trustee determines that the collateral would not be sufficient on
an ongoing basis to make all payments on the notes as the payments
would have become due if the notes had not been declared due and
payable, and the trustee obtains the consent of the holders of a
specified percentage of the then aggregate outstanding amount of the
notes of the series.
As specified in the prospectus supplement, in the event the principal of
the notes of a series is declared due and payable, the holders of any notes
issued at a discount from par may be entitled to receive no more than an
amount equal to the unpaid principal amount less the amount of such discount
which is unamortized.
Subject to the provisions for indemnification and certain limitations
contained in the indenture, the holders of a specified percentage of the then
aggregate outstanding amount of the notes of a series shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee with respect to the notes of the series, and the holders of a
specified percentage of the then aggregate outstanding amount of the notes of
such series may, in certain cases, waive any default, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the indenture that cannot be modified without the waiver or
consent of all the holders of the outstanding notes of such series affected
thereby.
The Trustee
The identity of the commercial bank, savings and loan association or
trust company named as the trustee for each series of securities will be set
forth in the prospectus supplement. The entity serving as trustee may have
normal banking relationships with the depositor or any servicer. In addition,
for the purpose of meeting the legal requirements of certain local
jurisdictions, the trustee will have the power to appoint co-trustees or
separate trustees of all or any part of the trust relating to a series of
securities. In the event of such appointment, all rights, powers, duties and
obligations conferred or imposed upon the trustee by the Agreement relating to
such series will be conferred or imposed upon the trustee and each such
separate trustee or co-trustee jointly, or, in any jurisdiction in which the
trustee shall be incompetent or unqualified to perform certain acts, singly
upon such separate trustee or co-trustee who shall exercise and perform such
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. The agents shall have any or all of the rights, powers, duties
and obligations of the trustee conferred on them by such appointment; provided
that the trustee shall continue to be responsible for its duties and
obligations under the Agreement.
Duties of the Trustee
The trustee makes no representations as to the validity or sufficiency of
the Agreement, the securities or of any trust asset or related documents. If
no event of default has occurred, the trustee is required to perform only
those duties specifically required of it under the 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 Agreement; however, the
trustee will not be responsible for the accuracy or content of any such
documents furnished by it or the securityholders to any servicer under the
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
securityholders in 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 Agreement, or in the exercise of
any of its rights or powers, if it has reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
Resignation of Trustee
The trustee may, upon written notice to the depositor, resign at any
time, in which event the depositor 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 a specified number of days after giving
such 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 as such under the
Agreement,
o if the trustee becomes insolvent, or
o by the securityholders of securities evidencing a specified
percentage of the aggregate voting rights of the securities in the
trust upon written notice to the trustee and to the depositor.
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.
Amendment of Agreement
As specified in the prospectus supplement, the Agreement for each series
of securities may be amended by the parties to the Agreement, without notice
to or consent of the securityholders:
(a) to cure any ambiguity,
(b) to correct any defective provisions or to correct or supplement any
provision,
(c) to add any other provisions with respect to matters or questions
arising under such Agreement or related enhancement,
(d) to comply with any requirements imposed by the Code;
provided that any amendment except pursuant to clause (d) above, will not
adversely affect in any material respect the interests of any securityholders
of the series, as evidenced by an opinion of counsel. If provided in the
Agreement, any amendment except as pursuant to clause (d) of the preceding
sentence shall be deemed not to adversely affect in any material respect the
interests of any securityholder if the trustee receives written confirmation
from each rating agency rating the securities that the amendment will not
cause the rating agency to reduce the then current rating.
As specified in the prospectus supplement, the Agreement may also be
amended by the parties to the Agreement with the consent of the
securityholders possessing a specified percentage of the aggregate outstanding
principal amount of the securities. If only certain classes are affected by
the amendment, a specified percentage of the aggregate outstanding principal
amount of each class affected must consent, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of the Agreement or modifying in any manner the rights of securityholders;
provided, however, that no such amendment may without the consent of
securityholders of 100% of the affected securities:
(a) reduce the amount or delay the timing of payments on any security
without the consent of the securityholder of such security or
(b) reduce the percentage required to consent to any such amendment.
Voting Rights
The prospectus supplement may set forth a method of determining
allocation of voting rights with respect to a series.
REMIC Administrator
For any series with respect to which a REMIC election is made,
preparation of certain reports and certain other administrative duties with
respect to the trust may be performed by a REMIC administrator, who may be an
affiliate of the depositor, any servicer or any seller.
Termination
Pooling and Servicing Agreement; Sale and Servicing Agreement.
The obligations created by the Agreement for a series will terminate upon
the distribution to securityholders of all amounts distributable to them
pursuant to the Agreement after the earlier of:
o the later of (a) the final payment or other liquidation of the last
trust asset remaining in the trust and (b) the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure or
repossession in respect of any trust asset or
o the repurchase by a servicer or other entity specified in the
prospectus supplement from the trustee of all trust assets and other
property at that time subject to the Agreement.
As specified in the prospectus supplement, the Agreement for each series
permits, but does not require, a servicer or other entity specified in the
prospectus supplement to purchase from the trust all remaining trust assets at
a price equal to:
o 100% of the aggregate principal balance of such trust assets,
o plus, with respect to any property acquired in respect of a trust
asset, if any, the outstanding principal balance of the related trust
asset at the time of foreclosure,
o minus related unreimbursed advances, or in the case of the trust
assets, only to the extent not already reflected in the computation
of the aggregate principal balance of such trust assets,
o minus unreimbursed expenses that are reimbursable pursuant to the
terms of the pooling and servicing agreement,
o plus accrued interest at the weighted average rate on the trust
assets through the last day of the due period in which such
repurchase occurs;
provided, however, that if an election is made for treatment as a REMIC under
the Code, the repurchase price may equal the greater of:
o 100% of the aggregate principal balance of the trust assets, plus
accrued interest thereon at the applicable net rates on the trust
assets through the last day of the month of the repurchase and
o the aggregate fair market value of the trust assets plus the fair
market value of any property acquired in respect of a trust asset and
remaining in the trust.
The exercise of such right will effect early retirement of the
securities, but the right to purchase the trust assets only vests when the
principal balance of the trust assets has been reduced to an amount set forth
in the prospectus supplement. In no event, however, will the trust created by
the Agreement continue beyond the expiration of 21 years from the death of the
last survivor of certain persons identified in the Agreement. For each series,
a servicer or the trustee, as applicable, will give written notice of
termination of the Agreement to each securityholder, and the final
distribution will be made only upon surrender and cancellation of the
securities at an office or agency specified in the notice of termination. If
provided in the prospectus supplement, the depositor, any seller or another
entity may effect an optional termination of the trust under the circumstances
described in the prospectus supplement. See "Description of the
Securities--Optional Redemption, Purchase or Termination."
Indenture.
The indenture will be discharged with respect to a series of notes,
except with respect to certain continuing rights specified in the indenture,
upon the delivery to the trustee for cancellation of all the notes or, with
certain limitations, upon deposit with the trustee of funds sufficient for the
payment in full of all of the notes.
In addition to such discharge with certain limitations, the indenture may
provide that the trust will be discharged from any and all obligations in
respect of the notes, except for certain administrative duties, upon the
deposit with the trustee of money or direct obligations of or obligations
guaranteed by the United States of America which through the payment of
interest and principal in accordance with their terms will provide money in an
amount sufficient to pay the principal of and each installment of interest on
the notes on the last scheduled distribution date and any installment of
interest on such notes in accordance with the terms of the indenture and the
notes. In the event of any defeasance and discharge of notes, noteholders
would be able to look only to such money or direct obligations for payment of
principal and interest, if any, on their notes until maturity.
Legal Aspects of the Loans
The following discussion contains summaries of the material legal aspects
of mortgage loans, manufactured housing and home improvement installment sales
contracts and home improvement installment loan agreements which are general
in nature. Because certain of these legal aspects are governed by applicable
state law and each state's laws differ, the summaries do not purport to be
complete nor reflect the laws of any particular state, nor encompass the laws
of all states in which the properties securing the loans are situated. The
summaries are qualified in their entirety by reference to the applicable
federal and state laws governing the loans.
Mortgages
The mortgage loans for a series generally will, and certain manufactured
housing contracts and home improvement contracts for a series may, be secured
by either mortgages or deeds of trust or deeds to secure debt, depending upon
the prevailing practice in the state in which the property subject to a
mortgage loan is located. The filing of a mortgage, deed of trust or deed to
secure debt creates a lien or title interest upon the real property covered by
the instrument and represents the security for the repayment of an obligation
that is customarily evidenced by a promissory note. It is not prior to the
lien for real estate taxes and assessments or other charges imposed under
governmental police powers and may also be subject to other liens pursuant to
the laws of the jurisdiction in which the mortgaged property is located.
Priority with respect to the instruments depends on their terms, the knowledge
of the parties to the mortgage and on the order of recording with the
applicable state, county or municipal office. There are two parties to a
mortgage, the mortgagor, who is the borrower/property owner or the land
trustee, and the mortgagee, who is the lender. Under the mortgage instrument,
the mortgagor delivers to the mortgagee a note or bond and the mortgage. In
the case of a land trust, there are three parties because title to the
property is held by a land trustee under a land trust agreement of which the
borrower/property owner is the beneficiary; at origination of a mortgage loan,
the borrower executes a separate undertaking to make payments on the mortgage
note. A deed of trust transaction normally has three parties, the trustor, who
is the borrower/property owner; the beneficiary, who is the lender; and the
trustee, a third-party grantee. Under a deed of trust, the trustor grants the
property, irrevocably until the debt is paid, in trust, typically with a power
of sale, to the trustee to secure payment of the obligation. The mortgagee's
authority under a mortgage and the trustee's authority under a deed of trust
are governed by the law of the state in which the real property is located,
the express provisions of the mortgage or deed of trust, and, in some deed of
trust transactions, the directions of the beneficiary.
Foreclosure on Mortgages
Foreclosure of a mortgage is usually accomplished by judicial action.
Typically, the action is initiated by the service of legal pleadings upon all
parties having an interest of record in the real property. Delays in
completion of the foreclosure occasionally may result from difficulties in
locating necessary parties defendant. When the mortgagee's right to
foreclosure is contested, the legal proceedings necessary to resolve the issue
can be time-consuming and expensive. After the completion of a judicial
foreclosure proceeding, the court may issue a judgment of foreclosure and
appoint a receiver or other officer to conduct the sale of the property. In
some states, mortgages may also be foreclosed by advertisement, pursuant to a
power of sale provided in the mortgage. Foreclosure of a mortgage by
advertisement is essentially similar to foreclosure of a deed of trust by
non-judicial power of sale.
Foreclosure of a deed of trust is usually accomplished by a non-judicial
trustee's sale under a specific provision in the deed of trust which
authorizes the trustee to sell the property upon any default by the borrower
under the terms of the note or deed of trust. In certain states, such
foreclosure also may be accomplished by judicial action in the manner provided
for foreclosure of mortgages. In some states, the trustee must record a notice
of default and send a copy to the borrower-trustor and to any person who has
recorded a request for a copy of a notice of default and notice of sale. In
addition, the trustee in some states must provide notice to any other
individual having an interest in the real property, including any junior
lienholders. If the deed of trust is not reinstated within any applicable cure
period, a notice of sale must be posted in a public place and, in most states,
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 of record in the
property. The trustor, borrower, or any 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. Generally, state law controls the amount of
foreclosure expenses and costs, including attorney's fees, which may be
recovered by a lender. If the deed of trust is not reinstated, a notice of
sale must be posted in a public place and, in most states, 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,
recorded and sent to all parties having an interest in the real property.
An action to foreclose a mortgage is an action to recover the mortgage
debt by enforcing the mortgagee's rights under the mortgage. It is regulated
by statutes and rules and subject throughout to the court's equitable powers.
Typically, a mortgagor is bound by the terms of the related mortgage note and
the mortgage as made and cannot be relieved from his default if the mortgagee
has exercised his rights in a commercially reasonable manner. However, since a
foreclosure action historically was equitable in nature, the court may
exercise equitable powers to relieve a mortgagor of a default and deny the
mortgagee foreclosure on proof that either the mortgagor's default was neither
willful nor in bad faith or the mortgagee's action established a waiver,
fraud, bad faith, or oppressive or unconscionable conduct such as to warrant a
court of equity to refuse affirmative relief to the mortgagee. Under certain
circumstances a court of equity may relieve the mortgagor from an entirely
technical default where such default was not willful.
A foreclosure action is subject to most of the delays and expenses of
other lawsuits if defenses or counter-claims are interposed, sometimes
requiring up to several years to complete. Moreover, a non-collusive,
regularly conducted foreclosure sale may be challenged as a fraudulent
conveyance, regardless of the parties' intent, if a court determines that the
sale was for less than fair consideration and such sale occurred while the
mortgagor was insolvent and within one year, or within the state statute of
limitations if the trustee in bankruptcy elects to proceed under state
fraudulent conveyance law, of the filing of bankruptcy. Similarly, a suit
against the debtor on the related mortgage note may take several years and is
an alternative remedy to foreclosure, the mortgagee being precluded from
pursuing both at the same time.
In the case of foreclosure under either a mortgage or a deed of trust,
the sale by the referee or other designated officer or by the trustee is a
public sale. However, because of the difficulty potential third party
purchasers at the sale have in determining the exact status of title and
because 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 a foreclosure sale. Rather, it is common for the lender to
purchase the property from the trustee or referee for an amount which may be
equal to the unpaid principal amount of the mortgage note secured by the
mortgage or deed of trust plus accrued and unpaid interest and the expenses of
foreclosure, in which event the mortgagor's debt will be extinguished or the
lender may purchase for a lesser amount in order to preserve its right against
a borrower to seek a deficiency judgment in states where such a judgment is
available. Thereafter, subject to the right of the borrower in some states to
remain in possession during the redemption period, the lender will assume the
burdens of ownership, including obtaining hazard insurance, paying taxes and
making such 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 lender's investment in the property.
Any loss may be reduced by the receipt of any mortgage guaranty insurance
proceeds.
Environmental Risks
Real property pledged as security to a lender may be subject to
unforeseen environmental risks. Under the laws of certain states,
contamination of a property may give rise to a lien on the property to assure
the payment of the costs of clean-up. In several states such a lien has
priority over the lien of an existing mortgage against the property. In
addition, under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA"), the EPA may impose a lien on property
where the EPA has incurred clean-up costs. However, a CERCLA lien is
subordinate to pre-existing, perfected security interests.
Under the laws of some states, and under CERCLA, it is conceivable that a
secured lender may be held liable as an owner or operator for the costs of
addressing releases or threatened releases of hazardous substances at a
mortgaged property, even though the environmental damage or threat was caused
by a prior or current owner or operator. CERCLA imposes liability for such
costs on any and all responsible parties, including owners or operators.
However, CERCLA excludes from the definition of "owner or operator" a secured
creditor who holds indicia of ownership primarily to protect its security
interest (the "secured creditor exclusion"). Thus, if a lender's activities
begin to encroach on the actual management of a contaminated facility or
property, the lender may incur liability as an owner or operator under CERCLA.
Similarly, if a lender forecloses and takes title to a contaminated facility
or property, the lender may incur CERCLA liability in various circumstances,
including, but not limited to, when it holds the facility or property as an
investment, including leasing the facility or property to a third party, or
fails to market the property in a timely fashion.
If a lender is or becomes liable for environmental problems, it can bring
an action for contribution against any other responsible parties, including a
previous owner or operator, who created the environmental hazard, but those
persons or entities may be bankrupt or otherwise judgment proof. The costs
associated with environmental cleanup may be substantial and may result in a
loss to securityholders.
CERCLA does not apply to petroleum products, and the secured creditor
exclusion does not govern liability for cleanup costs under federal laws other
than CERCLA, in particular Subtitle I of the federal Resource Conservation and
Recovery Act ("RCRA"), which regulates underground petroleum storage tanks,
except heating oil tanks. The EPA has adopted a lender liability rule for
underground storage tanks under Subtitle I of RCRA. Under this 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. In addition, under the Asset Conservation, Lender
Liability and Deposit Insurance Protection Act of 1996, the protections
accorded to lenders under CERCLA are also accorded to holders of security
interests in underground tanks. It should be noted, however, that liability
for cleanup of petroleum contamination may be governed by state law, which may
not provide for any specific protection for secured creditors.
Whether actions taken by a lender would constitute participation in the
management of a mortgaged property, or the business of a borrower, so as to
render the secured creditor exemption unavailable to a lender has been a
matter of judicial interpretation of the statutory language, and court
decisions have been inconsistent. In 1990, the Court of Appeals for the
Eleventh Circuit suggested 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 exemption to the lender.
This ambiguity appears to have been resolved by the enactment of the
Asset Conservation, Lender Liability and Deposit Insurance Protection Act of
1996. This legislation 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 the borrower. The
legislation 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 exemption only if it exercises decision-making control over
the borrower's environmental compliance and hazardous substance handling and
disposal practices, or assumes day-to-day management of all operational
functions of the mortgaged property.
As specified in the prospectus supplement, at the time the loans were
originated, no environmental assessments or very limited environmental
assessments of the properties were conducted.
Rights of Redemption
In some states, after sale pursuant to a deed of trust or foreclosure of
a mortgage, the trustor or mortgagor and foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale.
The right of redemption should be distinguished from the equity of redemption,
which is a non-statutory right that must be exercised prior to the foreclosure
sale. In some states, redemption may occur only upon payment of the entire
principal balance of the loan, accrued interest and expenses of foreclosure.
In other states, redemption may be authorized if the former borrower pays only
a portion of the sums due. The effect of a statutory right of redemption is to
diminish the ability of the lender to sell the foreclosed property. The
exercise of a right of redemption would defeat the title of any purchaser at a
foreclosure sale, or of any purchaser from the lender subsequent to
foreclosure or sale under a deed of trust. Consequently, the practical effect
of a right of redemption is to force the lender to retain the property and pay
the expenses of ownership until the redemption period has run. In some states,
there is no right to redeem property after a trustee's sale under a deed of
trust.
Junior Mortgages; Rights of Senior Mortgages
The mortgage loans comprising or underlying the trust assets included in
the trust for a series will generally be secured by mortgages or deeds of
trust which may be second or more junior mortgages to other mortgages held by
other lenders or institutional investors. The rights of the trust, as
mortgagee under a junior mortgage, are subordinate to those of the mortgagee
under the senior mortgage, including the prior rights of the senior mortgagee
to receive hazard insurance and condemnation proceeds and to cause the
property securing the mortgage loan to be sold upon default of the mortgagor,
extinguishing the junior mortgagee's lien unless the junior mortgagee asserts
its subordinate interest in the property in foreclosure litigation and,
possibly, satisfies the defaulted senior mortgage. A junior mortgagee may
satisfy a defaulted senior loan in full and, in some states, may cure such
default and bring the senior loan current, in either event adding the amounts
expended to the balance due on the junior loan. In most states, absent a
provision in the mortgage or deed of trust, no notice of default is required
to be given to a junior mortgagee.
The standard form of the mortgage used by most institutional lenders
confers on the mortgagee the right both to receive all proceeds collected
under any hazard insurance policy and all awards made in connection with
condemnation proceedings, and to apply such proceeds and awards to any
indebtedness secured by the mortgage, in such order as the mortgagee may
determine. Thus, in the event improvements on the property are damaged or
destroyed by fire or other casualty, or in the event the property is taken by
condemnation, the mortgagee or beneficiary under underlying senior mortgages
will have the prior right to collect any insurance proceeds payable under a
hazard insurance policy and any award of damages in connection with the
condemnation and to apply the same to the indebtedness secured by the senior
mortgages. Proceeds in excess of the amount of senior mortgage indebtedness,
in most cases, may be applied to the indebtedness of a junior mortgage.
Another provision sometimes found in the form of the mortgage or deed of
trust used by institutional lenders obligates the mortgagor to pay before
delinquency all taxes and assessments on the property and, when due, all
encumbrances, charges and liens on the property which appear prior to the
mortgage or deed of trust, to provide and maintain fire insurance on the
property, to maintain and repair the property and not to commit or permit any
waste, and to appear in and defend any action or proceeding purporting to
affect the property or the rights of the mortgagee under the mortgage. Upon a
failure of the mortgagor to perform any of these obligations, the mortgagee is
given the right under certain mortgages to perform the obligation itself, at
its election, with the mortgagor agreeing to reimburse the mortgagee for any
sums expended by the mortgagee on behalf of the mortgagor. All sums so
expended by the mortgagee become part of the indebtedness secured by the
mortgage.
The form of credit line, deed of trust or mortgage used by most
institutional lenders which make revolving home equity loans typically
contains a "future advance" clause, which provides, in essence, that
additional amounts advanced to or on behalf of the borrower by the beneficiary
or lender are to be secured by the deed of trust or mortgage. The priority of
the lien securing any advance made under the clause may depend in most states
on whether the deed of trust or mortgage is called and recorded as a credit
line deed of trust or mortgage. If the beneficiary or lender advances
additional amounts, the advance is entitled to receive the same priority as
amounts initially advanced under the deed of trust or mortgage,
notwithstanding the fact that there may be junior deeds of trust or mortgages
and other liens which intervene between the date of recording of the deed of
trust or mortgage and the date of the future advance, and notwithstanding that
the beneficiary or lender had actual knowledge of such intervening junior
deeds of trust or mortgages and other liens at the time of the advance. In
most states, the deed of trust or mortgage lien securing mortgage loans of the
type which includes revolving home equity credit lines applies retroactively
to the date of the original recording of the deed of trust or mortgage,
provided that the total amount of advances under the home equity credit line
does not exceed the maximum specified principal amount of the recorded deed of
trust or mortgage, except as to advances made after receipt by the lender of a
written notice of lien from a judgment lien creditor of the trustor.
Anti-Deficiency Legislation and the Bankruptcy Code
Certain states have imposed statutory prohibitions which limit the
remedies of a beneficiary under a deed of trust or a mortgagee under a
mortgage. In some states, statutes limit the right of the beneficiary or
mortgagee to obtain a deficiency judgment against the borrower following
foreclosure or sale under a deed of trust. A deficiency judgment is a personal
judgment against the former borrower 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 require the beneficiary or mortgagee 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
borrower. In certain other states, the lender has the option of bringing a
personal action against the borrower on the debt without first exhausting the
security; however, in some of these states, the lender, following judgment on
such personal action, may be deemed to have elected a remedy and may be
precluded from exercising remedies with respect to the security. Consequently,
the practical effect of the election requirement, when applicable, is that
lenders will usually proceed first against the security rather than bring a
personal action against the borrower. Finally, other statutory provisions
limit any deficiency judgment against the former borrower following a
foreclosure sale to the excess of the outstanding debt over the fair market
value of the property at the time of the public sale. The purpose of these
statutes is generally to prevent a beneficiary or a mortgagee from obtaining a
large deficiency judgment against the former borrower as a result of low or no
bids at the foreclosure sale.
In addition to laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including the federal bankruptcy laws,
the Federal Soldiers' and Sailors' Relief Act, and state laws affording relief
to debtors, may interfere with or affect the ability of the secured lender to
realize upon collateral or enforce a deficiency judgment. For example, with
respect to federal bankruptcy law, the filing of a petition acts as a stay
against the enforcement of remedies for collection of a debt. Moreover, a
court with federal bankruptcy jurisdiction may permit a debtor through a
Chapter 13 Bankruptcy Code rehabilitative plan to cure a monetary default with
respect to a loan on a debtor's residence by paying arrearages within a
reasonable time period and reinstating the original loan payment schedule even
though the lender accelerated the loan and the lender has taken all steps to
realize upon his security, provided no sale of the property has yet occurred,
prior to the filing of the debtor's Chapter 13 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 loan default
by permitting the obligor to pay arrearages over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that the
terms of a mortgage loan may be modified if the borrower has filed a petition
under Chapter 13. These courts have suggested that such 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 a general
unsecured creditor for the difference between the value of the residence and
the outstanding balance of the loan. Federal bankruptcy law and limited case
law indicate that the foregoing modifications could not be applied to the
terms of a loan secured by property that is the principal residence of the
debtor. In all cases, the secured creditor is entitled to the value of its
security plus post-petition interest, attorney's fees and costs to the extent
the value of the security exceeds the debt.
In a Chapter 11 case under the Bankruptcy Code, the lender is precluded
from foreclosing without authorization from the bankruptcy court. The lender's
lien may be transferred to other collateral or be limited in amount to the
value of the lender's interest in the collateral as of the date of the
bankruptcy. The loan term may be extended, the interest rate may be adjusted
to market rates and the priority of the loan may be subordinated to bankruptcy
court-approved financing. The bankruptcy court can, in effect, invalidate
due-on-sale clauses through confirmed Chapter 11 plans of reorganization.
The Bankruptcy Code provides priority to certain tax liens over the
lender's security. This may delay or interfere with the enforcement of rights
in respect of a defaulted loan. In addition, substantive requirements are
imposed upon lenders in connection with the organization and the servicing of
mortgage loans by numerous federal and some state consumer protection laws.
The laws include the federal Truth-in-Lending Act, Real Estate Settlement
Procedures Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair
Credit Reporting Act and related statutes and regulations. These federal laws
impose specific statutory liabilities upon lenders who originate loans and who
fail to comply with the provisions of the law. In some cases, this liability
may affect assignees of the loans.
Due-On-Sale Clauses In Mortgage Loans
Due-on-sale clauses permit the lender to accelerate the maturity of the
loan if the borrower sells or transfers, whether voluntarily or involuntarily,
all or part of the real property securing the loan without the lender's prior
written consent. The enforceability of these clauses has been the subject of
legislation or litigation in many states, and in some cases, typically
involving single family residential mortgage transactions, their
enforceability has been limited or denied. In any event, the Garn-St. Germain
Depository Institutions Act of 1982 (the "Garn-St. Germain Act") generally
preempts state constitutional, 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. As a result, due-on-sale clauses have
become enforceable except in those states whose legislatures exercised their
authority to regulate the enforceability of such clauses with respect to
mortgage loans that were:
o originated or assumed during the "window period" under the Garn-St.
Germain Act which ended in all cases not later than October 15, 1982,
and
o originated by lenders other than national banks, federal savings
institutions and federal credit unions.
Freddie Mac has taken the position in its published mortgage servicing
standards that, out of a total of eleven "window period states", five states,
i.e., Arizona, Michigan, Minnesota, New Mexico and Utah, have enacted statutes
extending, on various terms and for varying periods, the prohibition on
enforcement of due-on-sale clauses with respect to certain categories of
window period loans. Also, 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, under federal bankruptcy law, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances, be
eliminated in any modified mortgage resulting from such bankruptcy proceeding.
Enforceability of Prepayment and Late Payment Fees
Forms of notes, mortgages and deeds of trust used by lenders may contain
provisions obligating the borrower to pay a late charge if payments are not
timely made, and in some circumstances may provide for prepayment fees or
penalties if the obligation is paid prior to maturity. In certain states,
there are or may be specific limitations upon the late charges which a lender
may collect from a borrower for delinquent payments. Certain states also limit
the amounts that a lender may collect from a borrower as an additional charge
if the loan is prepaid. Late charges are typically paid to servicers as
additional servicing compensation.
Equitable Limitations on Remedies
In connection with lenders' attempts to realize upon their security,
courts have invoked general equitable principles. The equitable principles are
designed to relieve the borrower from the legal effect of his defaults under
the loan documents. Examples of judicial remedies that have been fathomed
include judicial requirements that the lender undertake affirmative and
expensive actions to determine the causes of the borrower's default and the
likelihood that the borrower 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 borrowers who are suffering from temporary financial
disability. In other cases, courts have limited the right of a lender to
realize upon his security if the default under the security agreement is not
monetary, such as the borrower's failure to adequately maintain the property
or the borrower's execution of secondary financing affecting the property.
Finally, 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 under security agreements receive
notices in addition to the statutorily-prescribed minimums. For the most part,
these cases have upheld the notice provisions as being reasonable or have
found that, in cases involving the sale by a trustee under a deed of trust or
by a mortgagee under a mortgage having a power of sale, there is insufficient
state action to afford constitutional protections to the borrower.
Most conventional single-family mortgage loans may be prepaid in full or
in part without penalty. The regulations of the Federal Home Loan Bank Board
prohibit the imposition of a prepayment penalty or equivalent fee for or in
connection with the acceleration of a loan by exercise of a due-on-sale
clause. A mortgagee to whom a prepayment in full has been tendered may be
compelled to give either a release of the mortgage or an instrument assigning
the existing mortgage. The absence of a restraint on prepayment, particularly
with respect to mortgage loans having higher mortgage rates, may increase the
likelihood of refinancing or other early retirements of such mortgage loans.
Applicability of Usury Laws
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980, as amended ("Title V"), provides that state usury limitations
shall not apply to certain types of residential first mortgage loans
originated by certain lenders after March 31, 1980. Similar federal statutes
were in effect with respect to mortgage loans made during the first three
months of 1980. The Federal Home Loan Bank Board is authorized to issue rules
and regulations and to publish interpretations governing implementation of
Title V. Title V authorizes any state to reimpose interest rate limits by
adopting, before April 1, 1983, a state law, or by certifying that the voters
of such state have voted in favor of any provision, constitutional or
otherwise, which expressly rejects an application of the federal law. Fifteen
states adopted such a law prior to the April 1, 1983 deadline. In addition,
even where Title V is not so rejected, any state is authorized by the law to
adopt a provision limiting discount points or other charges on mortgage loans
covered by Title V.
Applicability of Lending Laws
The loans may be subject to the Home Ownership and Equity Protection Act
of 1994 ("HOEPA") which amended the Truth in Lending Act as it applies to
mortgages subject to HOEPA. HOEPA requires certain additional disclosures,
specifies the timing of such disclosures and limits or prohibits inclusion of
certain provisions in mortgages, generally "high-cost mortgages", subject to
HOEPA. HOEPA also provides that any purchaser or assignee of a mortgage
covered by HOEPA, such as the trust with respect to the loans, is subject to
all of the claims and defenses which the borrower could assert against the
original lender. The maximum damages that may be recovered under HOEPA from an
assignee is the remaining amount of indebtedness plus the total amount paid by
the borrower in connection with the loan. If the trust includes loans subject
to HOEPA, it will be subject to all of the claims and defenses which the
borrower could assert against the depositor or the related seller. Any
violation of HOEPA which would result in such liability would be a breach of
the depositor's or seller's representations and warranties, and the related
seller would be obligated to cure, repurchase or, if permitted by the
Agreement, substitute for the loan in question.
Cooperative Loans
If specified in the prospectus supplement, the mortgage loans may also
consist of cooperative apartment loans secured by security interests in shares
issued by a cooperative housing corporation (a "cooperative") and in the
related proprietary leases or occupancy agreements granting exclusive rights
to occupy specific dwelling units in the cooperatives' buildings. The security
agreement will create a lien upon, or grant a title interest in, the property
that it covers, the priority of which will depend on the terms of the
particular security agreement as well as the order of recordation of the
agreement in the appropriate recording office. That lien or title interest is
not prior to the lien for real estate taxes and assessments and other charges
imposed under governmental police powers.
Each cooperative owns in fee or has a leasehold interest in all the real
property and owns in fee or leases the building and all separate dwelling
units therein. The cooperative is directly responsible for property management
and, in most cases, payment of real estate taxes, other governmental
impositions and hazard and liability insurance. If there is a blanket mortgage
or mortgages on the cooperative apartment building or underlying land, as is
generally the case, or an underlying lease of the land, as is the case in some
instances, the cooperative, as property borrower, or lessee, as the case may
be, is also responsible for meeting these mortgage or rental obligations. A
blanket mortgage is ordinarily incurred by the cooperative in connection with
either the construction or purchase of the cooperative's apartment building or
obtaining of capital by the cooperative. The interest of the occupant under
proprietary leases or occupancy agreements as to which that cooperative is the
landlord are generally subordinate to the interest of the holder of a blanket
mortgage and to the interest of the holder of a land lease.
If the cooperative is unable to meet the payment obligations (1) arising
under a blanket mortgage, the mortgagee holding a blanket mortgage could
foreclose on that mortgage and terminate all subordinate proprietary leases
and occupancy agreements or (2) arising under its land lease, the holder of
the landlord's interest under the land lease could terminate it and all
subordinate proprietary leases and occupancy agreements. Also, a blanket
mortgage on a cooperative may provide financing in the form of a mortgage that
does not fully amortize, with a significant portion of principal being due in
one final payment at maturity. The inability of the cooperative to refinance a
mortgage and its consequent inability to make that final payment could lead to
foreclosure by the mortgagee. Similarly, a land lease has an expiration date
and the inability of the cooperative to extend its term or, in the
alternative, to purchase the land could lead to termination of the
cooperative's interest in the property and termination of all proprietary
leases and occupancy agreement. In either event, a foreclosure by the holder
of a blanket mortgage or the termination of the underlying lease could
eliminate or significantly diminish the value of any collateral held by the
lender that financed the purchase by an individual tenant stockholder of
cooperative shares or, in the case of the mortgage loans, the collateral
securing the cooperative loans.
The cooperative is owned by tenant-stockholders who, through ownership of
stock or shares in the corporation, receive proprietary lease or occupancy
agreements that confer exclusive rights to occupy specific units. Generally, a
tenant-stockholder of a cooperative must make a monthly payment to the
cooperative representing that tenant-stockholder's pro rata share of the
cooperative's payments for its blanket mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership
interest in a cooperative and accompanying occupancy rights are financed
through a cooperative loan evidenced by a promissory note and secured by an
assignment of and a security interest in the occupancy agreement or
proprietary lease and a security interest in the related cooperative shares.
The lender generally takes possession of the share certificate and a
counterpart of the proprietary lease or occupancy agreement and a financing
statement covering the proprietary lease or occupancy agreement and the
cooperative shares is filed in the appropriate state and local offices to
perfect the lender's interest in its collateral. Subject to the limitations
discussed below, upon default of the tenant-stockholder, the lender may sue
for judgment on the promissory note, dispose of the collateral at a public or
private sale or otherwise proceed against the collateral or tenant-stockholder
as an individual as provided in the security agreement covering the assignment
of the proprietary lease or occupancy agreement and the pledge of cooperative
shares.
Foreclosure on Cooperative Loans
The cooperative shares owned by the tenant-stockholder and pledged to the
lender are, in almost all cases, subject to restrictions on transfer as set
forth in the cooperative's certificate of incorporation and bylaws, as well as
the proprietary lease or occupancy agreement, and may be canceled by the
cooperative for failure by the tenant-stockholder to pay rent or other
obligations or charges owed by that tenant-stockholder, including mechanics'
liens against the cooperative apartment building incurred by that
tenant-stockholder. The proprietary lease or occupancy agreement generally
permit the cooperative to terminate the lease or agreement in the event a
borrower fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the cooperative enter into a
recognition agreement that establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder under the
proprietary lease or occupancy agreement will usually constitute a default
under the security agreement between the lender and the tenant-stockholder.
The recognition agreement generally provides that, if the
tenant-stockholder has defaulted under the proprietary lease or occupancy
agreement, the cooperative will take no action to terminate that lease or
agreement until the lender has been provided with an opportunity to cure the
default. The recognition agreement typically provides that if the proprietary
lease or occupancy agreement is terminated, the cooperative will recognize the
lender's lien against proceeds from the sale of the cooperative apartment,
subject, however, to the cooperative's right to sums due under that
proprietary lease or occupancy agreement. The total amount owed to the
cooperative by the tenant-stockholder, which the lender generally cannot
restrict and does not monitor, could reduce the value of the collateral below
the outstanding principal balance of the cooperative loan and accrued and
unpaid interest thereon.
Recognition agreements also provide that in the event of a foreclosure on
a cooperative loan, the lender must obtain the approval or consent of the
cooperative as required by the proprietary lease before transferring the
cooperative shares or assigning the proprietary lease. Generally, the lender
is not limited in any rights it may have to dispossess the
tenant-stockholders.
In some states, foreclosure on the cooperative shares is accomplished by
a sale in accordance with the provisions of Article 9 of the UCC and the
security agreement relating to those shares. Article 9 of the UCC requires
that a sale be conducted in a "commercially reasonable" manner. Whether a
foreclosure sale has been conducted in a "commercially reasonable" manner will
depend on the facts in each case. In determining commercial reasonableness, a
court will look to the notice given the debtor and the method, manner, time,
place and terms of the foreclosure. Generally, a sale conducted according to
the usual practice of banks selling similar collateral will be considered
reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be
applied first to pay the costs and expenses of the sale and then to satisfy
the indebtedness secured by the lender's security interest. The recognition
agreement, however, generally provides that the lender's right to
reimbursement is subject to the right of the cooperatives to receive sums due
under the proprietary lease or occupancy agreement. If there are proceeds
remaining, the lender must account to the tenant-stockholder for the surplus.
Conversely, if a portion of the indebtedness remains unpaid, the
tenant-stockholder is generally responsible for the deficiency.
Manufactured Housing and Home Improvement Contracts
General
The manufactured housing and home improvement contracts, other than those
manufactured housing and home improvement contracts that are unsecured or
secured by mortgages on real estate generally are "chattel paper" or
constitute "purchase money security interests" each as defined in the UCC.
Such manufactured housing and home improvement contracts are hereinafter
referred to in this section as "contracts". Pursuant to the UCC, the sale of
chattel paper is treated in a manner similar to perfection of a security
interest in chattel paper. Under the related Agreement, the depositor will
transfer physical possession of the contracts to the trustee or a designated
custodian or may retain possession of the contracts as custodian for the
trustee. In addition, the depositor will make an appropriate filing of a UCC-1
financing statement in the appropriate states to give notice of the trustee's
ownership of the contracts. As specified in the prospectus supplement, the
contracts will not be stamped or otherwise marked to reflect their assignment
from the related seller to the trustee. Therefore, if through negligence,
fraud or otherwise, a subsequent purchaser were able to take physical
possession of the contracts without notice of such assignment, the trustee's
interest in the contracts could be defeated.
Security Interests in Home Improvements
The contracts that are secured by the home improvements financed grant to
the originator of the contracts a purchase money security interest in the home
improvements to secure all or part of the purchase price of such home
improvements and related services. A financing statement generally is not
required to be filed to perfect a purchase money security interest in consumer
goods. Such purchase money security interests are assignable. In general, a
purchase money security interest grants to the holder a security interest that
has priority over a conflicting security interest in the same collateral and
the proceeds of such collateral. However, to the extent that the collateral
subject to a purchase money security interest becomes a fixture, in order for
the related purchase money security interest to take priority over a
conflicting interest in the fixture, the holder's interest in such home
improvement must generally be perfected by a timely fixture filing. In
general, under the UCC, a security interest does not exist under the UCC in
ordinary building material incorporated into an improvement on land. Home
improvement contracts that finance lumber, bricks, other types of ordinary
building material or other goods that are deemed to lose such
characterization, upon incorporation of such materials into the related
property, will not be secured by a purchase money security interest in the
home improvement being financed.
Security Interests in the Manufactured Homes
The manufactured homes securing the manufactured housing contracts may be
located in all 50 states. Security interests in manufactured homes may
generally be perfected either by notation of the secured party's lien on the
certificate of title or by delivery of the required documents and payment of a
fee to the state motor vehicle authority, depending on state law. In some
nontitle states, perfection pursuant to the provisions of the UCC is required.
As manufactured homes have become larger and often have been attached to their
sites without any apparent intention to move them, courts in many states have
held that manufactured homes, under some circumstances, may become subject to
real estate title and recording laws. As a result, a security interest in a
manufactured home could be rendered subordinate to the interests of other
parties claiming an interest in the manufactured home under applicable state
real estate law. In order to perfect a security interest in a manufactured
home under real estate laws, the secured party must file either a "fixture
filing" under the provisions of the UCC or a real estate mortgage under the
real estate laws of the state where the home is located. These filings must be
made in the real estate records office of the county where the manufactured
home is located. If so specified in the related prospectus supplement, the
manufactured housing contracts may contain provisions prohibiting the borrower
from permanently attaching the manufactured home to its site. So long as the
borrower does not violate this agreement, a security interest in the
manufactured home will be governed by the certificate of title laws or the
UCC, and the notation of the security interest on the certificate of title or
the filing of a UCC financing statement will be effective to maintain the
priority of the security interest in the manufactured home. If, however, a
manufactured home is permanently attached to its site, the related lender may
be required to perfect a security interest in the manufactured home under
applicable real estate laws.
In the event that the owner of a manufactured home moves it to a state
other than the state in which the manufactured home initially is registered,
under the laws of most states the perfected security interest in the
manufactured home would continue for four months after the relocation and
thereafter only if and after the owner re-registers the manufactured home in
the state to which the owner moved. If the owner were to relocate a
manufactured home to another state and not re-register the manufactured home
in that state, and if steps are not taken to re-perfect a security interest in
that state, the security interest in the manufactured home would cease to be
perfected. A majority of states generally require surrender of a certificate
of title to re-register a manufactured home; accordingly, the secured party
must surrender possession if it holds the certificate of title to the
manufactured home or, in the case of manufactured homes registered in states
which provide for notation of lien on the certificate of title, notice of
surrender would be given to the secured party noted on the certificate of
title. In states which do not require a certificate of title for registration
of a manufactured home, re-registration could defeat perfection.
Under the laws of most states, liens for repairs performed on a
manufactured home and liens for personal property taxes take priority over a
perfected security interest in the manufactured home.
Enforcement of Security Interest in Manufactured Homes and Home
Improvements
So long as the manufactured home or home improvement has not become
subject to the real estate law, a creditor can repossess a manufactured home
or home improvement securing a contract by voluntary surrender, by self-help
repossession that is peaceful or, in the absence of voluntary surrender and
the ability to repossess without breach of the peace, by judicial process. The
holder of a contract must give the debtor a number of days' notice, which
varies from 10 to 30 days depending on the state, prior to commencement of any
repossession. The UCC and consumer protection laws in most states place
restrictions on repossession sales, including requiring prior notice to the
debtor and commercial reasonableness in effecting such a sale. The laws in
most states also requires that the debtor be given notice of any sale prior to
resale of the unit that the debtor may redeem it at or before such resale.
Under the laws applicable in most states, a creditor is entitled to
obtain a deficiency judgement from a debtor for any deficiency on repossession
and resale of the property securing the debtor's loan. However, some states
impose prohibitions or limitations on deficiency judgements, and in many cases
the defaulting borrower would have no assets with which to pay a judgement.
Certain other statutory provisions, including federal and state
bankruptcy and insolvency laws and general equitable principles, may limit or
delay the ability of a lender to repossess and resell collateral or enforce a
deficiency judgment.
Consumer Protection Laws
The so-called "Holder-in-Due-Course" rule of the Federal Trade Commission
is intended to defeat the ability of the transferor of a consumer credit
contract who sold goods which gave rise to the transaction and certain related
lenders and assignees to transfer such contract free of notice of claims by
the debtor. The effect of this rule is to subject the assignee of a contract
to all claims and defenses which the debtor could assert against the seller of
goods. Liability under this rule is limited to amounts paid under a contract;
however, the obligor also may be able to assert the rule to set off remaining
amounts due as a defense against a claim brought by the trustee against the
obligor. Numerous other federal and state consumer protection laws impose
requirements applicable to the origination and lending pursuant to the
contracts, including the Truth in Lending Act, the Federal Trade Commission
Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal
Credit Opportunity Act, the Fair Debt Collection Practices Act and the Uniform
Consumer Credit Code. In the case of some of these laws, the failure to comply
with their provisions may affect the enforceability of the related contract.
Applicability of Usury Laws
Title V provides that, subject to the following conditions, state usury
limitations shall not apply to any contract which is secured by a first lien
on certain kinds of consumer goods. The contracts would be covered if they
satisfy certain conditions, among other things, governing the terms of any
prepayments, late charges and deferral fees and requiring a 30-day notice
period prior to instituting any action leading to repossession of the related
unit.
Title V authorized any state to reimpose limitations on interest rates
and finance charges by adopting before April 1, 1983 a law or constitutional
provision which expressly rejects application of the federal law. Fifteen
states adopted such a law prior to the April 1, 1983 deadline. In addition,
even where Title V was not so rejected, any state is authorized by the law to
adopt a provision limiting discount points or other charges on loans covered
by Title V.
Installment Contracts
The loans may also consist of installment contracts. Under an installment
contract the seller (hereinafter referred to in this section as the "lender")
retains legal title to the property and enters into an agreement with the
purchaser (hereinafter referred to in this section as the "borrower") for the
payment of the purchase price, plus interest, over the term of such contract.
Only after full performance by the borrower of the contract is the lender
obligated to convey title to the property to the purchaser. As with a mortgage
or deed of trust financing, during the effective period of the installment
contract, the borrower is typically responsible for maintaining the property
in good condition and for paying real estate taxes, assessments and hazard
insurance premiums associated with the property.
The method of enforcing the rights of the lender under an installment
contract vary on a state-by-state basis depending upon the extent to which
state courts are willing, or able pursuant to state statute, to enforce the
contract strictly according to the terms. The terms of installment contracts
typically provide that upon a default by the borrower, the borrower loses his
or her right to occupy the property, the entire indebtedness is accelerated,
and the buyer's equitable interest in the property is forfeited. The lender in
such a situation does not have to foreclose in order to obtain title to the
property, although in some cases a quiet title action is in order if the
borrower has filed the installment contract in local land records and an
ejectment action may be necessary to recover possession. In a few states,
particularly in cases involving a borrower default during the early years of
an installment contract, the courts will permit ejectment of the buyer and a
forfeiture of his or her interest in the property. However, most state
legislatures have enacted provisions by analogy to mortgage law protecting
borrowers under installment contracts from the harsh consequences of
forfeiture. Under such statutes, a judicial or nonjudicial foreclosure may be
required, the lender may be required to give notice of default and the
borrower may be granted some grace period during which the installment
contract may be reinstated upon full payment of the default amount and the
borrower may have a post-foreclosure statutory redemption right. In other
states, courts in equity may permit a borrower with significant investment in
the property under an installment contract for the sale of real estate to
share in the proceeds of sale of the property after the indebtedness is repaid
or may otherwise refuse to enforce the forfeiture clause.
In most cases, the lender's procedures for obtaining possession and clear
title under an installment contract in a given state are simpler and less
time-consuming and costly than are the procedures for foreclosing and
obtaining clear title to a property subject to one or more liens.
Soldiers' and Sailors' Civil Relief Act of 1940
Under the Soldiers' and Sailors' Civil Relief Act of 1940, members of all
branches of the military on active duty, including draftees and reservists in
military service:
o are entitled to have interest rates reduced and capped at 6% per
annum, on obligations, including loans, incurred prior to the
commencement of military service for the duration of military
service,
o may be entitled to a stay of proceedings on any kind of foreclosure
or repossession action in the case of defaults on such obligations
entered into prior to military service for the duration of military
service and
o may have the maturity of such obligations incurred prior to military
service extended, the payments lowered and the payment schedule
readjusted for a period of time after the completion of military
service.
However, the benefits noted above are subject to challenge by creditors and
if, in the opinion of the court, the ability of a person to comply with such
obligations is not materially impaired by military service, the court may
apply equitable principles accordingly. If a borrower's obligation to repay
amounts otherwise due on a loan included in a trust for a series is relieved
pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940, none of the
trust, any servicer, any seller, the depositor nor the trustee will be
required to advance such amounts, and any consequent loss may reduce the
amounts available to be paid to the holders of the certificates of such
series. As specified in the prospectus supplement, any shortfalls in interest
collections on loans or underlying loans relating to the Private Securities,
as applicable, included in a trust for a series resulting from application of
the Soldiers' and Sailors' Civil Relief Act of 1940 will be allocated to each
class of securities of the series that is entitled to receive interest in
respect of the loans or underlying loans in proportion to the interest that
each class of securities would have otherwise been entitled to receive in
respect of the loans or underlying loans had the interest shortfall not
occurred.
Consumer Protection Laws
Numerous federal and state consumer protection laws impose substantive
requirements upon mortgage lenders in connection with originating, servicing
and enforcing loans secured by certain residential properties. Theses laws
include the federal Truth-in-Lending Act and Regulation Z, Real Estate
Settlement Procedures Act and Regulation B, Equal Credit Opportunity Act, Fair
Credit Billing Act, Fair Credit Reporting Act and related statutes and
regulations. In particular, Regulation Z requires certain disclosures to
borrowers regarding terms of the loans; the Equal Credit Opportunity Act and
Regulation B prohibit discrimination in the extension of credit on the basis
of age, race, color, sex, religion, martial status, national origin, receipt
of public assistance or the exercise of any right under the Consumer Credit
Protection Act; and the Fair Credit Reporting Act regulates the use and
reporting of information related to the borrower's credit experience. Certain
provisions of these laws impose specific statutory liabilities upon lenders
who fail to comply therewith. In addition, violations of these laws may limit
the ability of a servicer to collect all or part of the principal of or
interest on the loans and could subject the servicer and in some cases its
assignees to damages and administrative enforcement.
The Depositor
General
The depositor was established in the State of Delaware on November ,
1999, and is wholly-owned by Finance America, LLC, a Delaware limited
liability company. The depositor's principal executive offices are located at
16802 Aston Street, Irvine, California 92606. None of the depositor, Finance
America, LLC, any servicer, the trustee or any seller has guaranteed or is
otherwise obligated with respect to the securities of any series.
Use of Proceeds
The depositor will apply all or substantially all of the net proceeds
from the sale of each series of securities for one or more of the following
purposes:
o to purchase the related trust assets,
o to repay any indebtedness which has been incurred to obtain funds to
acquire the related trust assets,
o to establish any reserve funds described in the prospectus
supplement,
o to pay costs of structuring and issuing such securities, including
the costs of obtaining enhancement, if any, and
o for general corporate purposes.
If specified in the prospectus supplement, the purchase of the trust assets
for a series may be effected by an exchange of securities with the depositor
of the trust assets.
Federal Income Tax Considerations
General
The following is a summary of the material federal income tax
consequences of the purchase, ownership, and disposition of the securities and
is based on advice of tax counsel. The summary is based upon the provisions of
the Internal Revenue Code of 1986, as amended (the "Code") and the regulations
promulgated thereunder, including, where applicable, proposed regulations, and
the judicial and administrative rulings and decisions now in effect, all of
which are subject to change or possible differing interpretations. The
statutory provisions, regulations, and interpretations on which this
interpretation is based are subject to change, and those changes could apply
retroactively.
The summary does not purport to deal with all aspects of federal income
taxation that may affect particular investors in light of their individual
circumstances, nor with certain types of investors subject to special
treatment under the federal income tax laws. This summary focuses primarily
upon investors who will hold securities as capital assets within the meaning
of Section 1221 of the Code, but much of the discussion is applicable to other
investors as well. Prospective investors are advised to consult their own tax
advisers concerning the federal, state, local and any other tax consequences
to them of the purchase, ownership and disposition of the securities.
The federal income tax consequences to holders will vary depending on
whether:
o the securities are classified as indebtedness,
o an election is made to treat the trust as a REMIC or a FASIT under
the Code,
o the securities represent an ownership interest in some or all of the
trust assets, or
o an election is made to treat the trust as a partnership.
The prospectus supplement will specify how the securities will be treated
for federal income tax purposes and will discuss whether a REMIC or FASIT
election will be made.
As used herein, the term "U.S. person" is a person who is (i) a citizen
or resident of the United States; (ii) a corporation (or entity treated as a
corporation for tax purposes) created or organized in the United States or
under the laws of the United States or of any state, including for this
purpose the District of Columbia; (iii) a partnership (or entity treated as a
partnership for tax purposes) organized in the United States or under the laws
of the United States or of any state, including for this purpose the District
of Columbia (unless provided otherwise by future Treasury regulations); (iv)
an estate whose income is includible in gross income for United States income
tax purposes regardless of its source; or, (v) a trust, if a court within the
United States is able to exercise primary supervision over the administration
of the trust and one or more U.S. persons have authority to control all
substantial decisions of the trust. Notwithstanding the last clause of the
preceding sentence, to the extent provided in Treasury regulations, certain
trusts in existence on August 20, 1996, and treated as U.S. persons prior to
such date, that elect to continue to be treated as U.S. persons, also will be
U.S. persons.
Taxation of Debt Securities
Status as Real Property Loans.
Typically, tax counsel will have advised the seller that:
o securities held by a domestic building and loan association will
constitute "loans... secured by an interest in real property" within
the meaning of Code Section 7701(a)(19)(C)(v), and
o securities held by a real estate investment trust will constitute
"real estate assets" within the meaning of Code Section 856(c)(5)(A)
and interest on these securities will be considered "interest on
obligations secured by mortgages on real property or on interests in
real property" within the meaning of Code Section 856(c)(3)(B).
Interest and Acquisition Discount.
Securities representing regular interests in a REMIC are generally
taxable to holders in the same manner as evidences of indebtedness issued by
the REMIC. Stated interest on the regular interest securities will be taxable
as ordinary income and taken into account using the accrual method of
accounting, regardless of the holder's normal accounting method. Interest,
other than original issue discount, on securities, other than regular interest
securities, that are characterized as indebtedness for federal income tax
purposes will be includible in income by holders in accordance with their
usual methods of accounting. Securities characterized as debt for federal
income tax purposes and regular interest securities will be referred to
collectively as debt securities. If a FASIT election is made, the material
federal tax income consequences for investors associated with the purchase,
ownership and disposition of those securities will be set forth under the
heading "Federal Income Tax Considerations" in the prospectus supplement.
Debt securities that are compound interest securities will, and other
debt securities may, be issued with original issue discount, which we refer to
as "OID". The following discussion is based in part on the rules governing OID
which are set forth in Sections 1271-1275 of the Code and the Treasury
regulations issued thereunder (the "OID Regulations"). A holder should be
aware, however, that the OID Regulations do not adequately address some issues
relevant to prepayable securities, such as the debt securities.
In general, OID, will equal the difference between the stated redemption
price at maturity of a debt security and its issue price. A holder of a debt
security must include OID in gross income as ordinary interest income as it
accrues under an accrual method of accounting. In general, OID must be
included in income in advance of the receipt of the cash representing that
income. The amount of OID on a debt security will be considered to be zero if
it is less than a de minimis amount determined under the Code.
The issue price of a debt security is the first price at which a
substantial amount of debt securities of that class are sold to the public,
excluding bond houses, brokers, underwriters or wholesalers. If less than a
substantial amount of a particular class of debt securities is sold for cash
on or prior to the closing date, the issue price for the class will be treated
as the fair market value of the class on the closing date. The issue price of
a debt security also includes the amount paid by an initial debt security
holder for accrued interest that relates to a period prior to the issue date
of the debt security. The stated redemption price at maturity of a debt
security includes the original principal amount of the debt security, but
generally will not include distributions of interest if distributions
constitute qualified stated interest.
Under the OID Regulations, qualified stated interest generally means
interest payable at a single fixed rate or qualified variable rate and those
interest payments are unconditionally payable at intervals of one year or less
during the entire term of the debt security. The OID Regulations state that
interest payments are unconditionally payable only if a late payment or
nonpayment is expected to be penalized or reasonable remedies exist to compel
payment. Some debt securities may provide for default remedies in the event of
late payment or nonpayment of interest. The interest on those debt securities
will be unconditionally payable and constitute qualified stated interest, not
OID. However, absent clarification of the OID Regulations, where debt
securities do not provide for default remedies, the interest payments will be
included in the debt security's stated redemption price at maturity and taxed
as OID. Interest is payable at a single fixed rate only if the rate
appropriately takes into account the length of the interval between payments.
Distributions of interest on debt securities on which deferred interest will
accrue will not constitute qualified stated interest payments and will be part
of the stated redemption price at maturity of those debt securities. Where the
interval between the issue date and the first distribution date on a debt
security is either longer or shorter than the interval between subsequent
distribution dates, all or part of the interest foregone, in the case of the
longer interval, and all of the additional interest, in the case of the
shorter interval, will be included in the stated redemption price at maturity
and tested under the de minimis rule described in the next paragraph. In the
case of a debt security with a long first period which has non-de minimis OID,
all stated interest in excess of interest payable at the effective interest
rate for the long first period will be included in the stated redemption price
at maturity and the debt security will usually have OID. Holders of debt
securities should consult their own tax advisors to determine the issue price
and stated redemption price at maturity of a debt security.
Under the de minimis rule, OID on a debt security will be considered to
be zero if the OID is less than 0.25% of the stated redemption price at
maturity of the debt security multiplied by the weighted average maturity of
the debt security. For this purpose, the weighted average maturity of the debt
security is computed as the sum of the amounts determined by multiplying the
number of full years from the issue date until each distribution in reduction
of stated redemption price at maturity is scheduled to be made by a fraction,
the numerator of which is the amount of each distribution included in the
stated redemption price at maturity of the debt security and the denominator
of which is the stated redemption price at maturity of the debt security.
Holders usually must report de minimis OID pro rata as principal payments are
received, and such income will be capital gain if the debt security is held as
a capital asset. However, accrual method holders may elect to accrue all de
minimis OID as well as market discount under a constant interest method.
Debt securities may provide for interest based on a qualified variable
rate. Under the OID Regulations, interest is treated as payable at a qualified
variable rate and not as contingent interest if, generally:
o the interest is unconditionally payable at least annually,
o the issue price of the debt instrument does not exceed the total
noncontingent principal payments, and
o interest is based on a qualified floating rate, an objective rate, or a
combination of qualified floating rates that do not operate in a manner
that significantly accelerates or defers interest payments on the debt
security.
In the case of compound interest securities, some interest weighted
securities, and other debt securities, none of the payments under the
instrument will be considered qualified stated interest, and thus the
aggregate amount of all payments will be included in the stated redemption
price.
The regulations governing the calculation of OID on instruments having
contingent interest payments specifically do not apply for purposes of
calculating OID on debt instruments subject to Code Section 1272(a)(6), such
as the debt security. Additionally, the OID Regulations do not contain
provisions specifically interpreting Code Section 1272(a)(6). Until the
Treasury issues guidance to the contrary, the trustee intends to base its
computation on Code Section 1272(a)(6) and the OID Regulations as described in
this Prospectus. However, because no regulatory guidance currently exists
under Code Section 1272(a)(6), there can be no assurance that this methodology
represents the correct manner of calculating OID.
The holder of a debt security issued with OID must include in gross
income, for all days during its taxable year on which it holds the debt
security, the sum of the "daily portions" of the OID. The amount of OID
includible in income by a holder will be computed by allocating to each day
during a taxable year a pro rata portion of the OID that accrued during the
relevant accrual period. In the case of a debt security that is not a regular
interest security and the principal payments on which are not subject to
acceleration resulting from prepayments on the loans, the amount of OID
includible in income of a holder for an accrual period, which typically is the
period over which interest accrues on the debt instrument, will equal the
product of the yield to maturity of the debt security and the adjusted issue
price of the debt security, reduced by any payments of qualified stated
interest. The adjusted issue price is the sum of its issue price plus prior
accruals or OID, reduced by the total payments made with respect to the debt
security in all prior periods, other than qualified stated interest payments.
The amount of OID to be included in income by a holder of a debt
instrument, that is subject to acceleration due to prepayments on other debt
obligations securing such instruments, is computed by taking into account the
anticipated rate of prepayments assumed in pricing the debt instrument. The
amount of OID that will accrue during an accrual period on a this type of
security is the excess, if any, of the sum of
o the present value of all payments remaining to be made on the security as
of the close of the accrual period and
o the payments during the accrual period of amounts included in the stated
redemption price of the security, over the adjusted issue price of the
security at the beginning of the accrual period.
The present value of the remaining payments is to be determined on the basis
of three factors:
o the original yield to maturity of the pay-through security, which is
determined on the basis of compounding at the end of each accrual period
and properly adjusted for the length of the accrual period,
o events which have occurred before the end of the accrual period, and
o the assumption that the remaining payments will be made in accordance
with the original prepayment assumption.
The effect of this method is to increase the portions of OID required to be
included in income by a holder to take into account prepayments with respect
to the loans at a rate that exceeds the prepayment assumption, and to
decrease, but not below zero for any period, the portions of OID required to
be included in income by a holder of this type of security to take into
account prepayments with respect to the loans at a rate that is slower than
the prepayment assumption. Although OID will be reported to holders of these
securities based on the prepayment assumption, no representation is made to
holders that loans will be prepaid at that rate or at any other rate.
The depositor may adjust the accrual of OID on a class of regular
interest securities or other regular interests in a REMIC in a manner that it
believes to be appropriate, to take account of realized losses on the loans,
although the OID Regulations do not provide for such adjustments. If the IRS
were to require that OID be accrued without such adjustments, the rate of
accrual of OID for a class of regular interest securities could increase.
Some classes of regular interest securities may represent more than one
class of REMIC regular interests. As specified in the prospectus supplement,
the trustee intends, based on the OID Regulations, to calculate OID on these
securities as if, solely for the purposes of computing OID, the separate
regular interests were a single debt instrument.
A subsequent holder of a debt security will also be required to include
OID in gross income, but a holder who purchases that debt security for an
amount that exceeds its adjusted issue price will be entitled, as will an
initial holder who pays more than a debt security's issue price, to offset
such OID by comparable economic accruals of portions of the excess.
Effects of Defaults and Delinquencies.
Holders will be required to report income with respect to the securities
under an accrual method without giving effect to delays and reductions in
distributions attributable to a default or delinquency on the loans, except
possibly to the extent that it can be established that those amounts are
uncollectible. As a result, the amount of income, including OID, reported by a
holder of that security in any period could significantly exceed the amount of
cash distributed to the holder in that period. The holder will eventually be
allowed a loss, or will be allowed to report a lesser amount of income, to the
extent that the aggregate amount of distributions on the securities is
deducted as a result of a loan default. However, the timing and character of
the losses or reductions in income are uncertain and, accordingly, holders of
securities should consult their own tax advisors on this point.
Interest Weighted Securities.
It is not clear how income should be accrued with respect to regular
interest securities or stripped securities, which we define under "--Tax
Status as a Grantor Trust; General", the payments on which consist solely or
primarily of a specified portion of the interest payments on qualified
mortgages held by the REMIC or on loans underlying pass-through securities
which we refer to interest weighted securities. The depositor intends to take
the position that all of the income derived from an interest weighted security
should be treated as OID and that the amount and rate of accrual of such OID
should be calculated by treating the interest weighted security as a compound
interest security. However, in the case of interest weighted securities that
are entitled to some payments of principal and that are regular interest
securities the IRS could assert that income derived from an interest weighted
security should be calculated as if the security were a security purchased at
a premium equal to the excess of the price paid by the holder for the security
over its stated principal amount, if any. Under this approach, a holder would
be entitled to amortize such premium only if it has in effect an election
under Section 171 of the Code with respect to all taxable debt instruments
held by such holder. Alternatively, the IRS could assert that an interest
weighted security should be taxable under the rules governing bonds issued
with contingent payments. That treatment may be more likely in the case of
interest weighted securities that are stripped securities. See "--Tax Status
as a Grantor Trust--Discount or Premium on Pass-Through Securities."
Variable Rate Debt Securities.
In the case of debt securities bearing interest at a rate that varies
directly, according to a fixed formula, with an objective index, it appears
that
o the yield to maturity of those debt securities, and
o in the case of pay-through securities, the present value of all
payments remaining to be made on those debt securities, should be
calculated as if the interest index remained at its value as of the
issue date of those securities.
Because the proper method of adjusting accruals of OID on a variable rate debt
security is uncertain, holders of variable rate debt securities should consult
their own tax advisers regarding the appropriate treatment of such securities
for federal income tax purposes.
Market Discount.
A purchaser of a security may be subject to the market discount rules of
Sections 1276-1278 of the Code. A holder that acquires a debt security with
more than a prescribed de minimis amount of market discount, which generally
is the excess of the principal amount of the debt security over the
purchaser's purchase price, will be required to include accrued market
discount in income as ordinary income in each month, but limited to an amount
not exceeding the principal payments on the debt security received in that
month and, if the securities are sold, the gain realized. Market discount
would accrue in a manner to be provided in Treasury regulations but, until
regulations are issued, market discount would in general accrue either:
o on the basis of a constant yield, in the case of a security subject to
prepayment, taking into account a prepayment assumption, or
o in the ratio of (a) in the case of securities or the loans underlying
pass-through security that have not been originally issued with OID,
stated interest payable in the relevant period to total stated interest
remaining to be paid at the beginning of the period or (b) in the case of
securities or the loans underlying pass-through security originally
issued at a discount, OID in the relevant period to total OID remaining
to be paid.
Section 1277 of the Code provides that, regardless of the origination
date of the debt security or the loans for a pass-through security, the excess
of interest paid or accrued to purchase or carry a security or the underlying
loans for a pass-through security with market discount over interest received
on the security is allowed as a current deduction only to the extent excess is
greater than the market discount that accrued during the taxable year in which
interest expense was incurred. In general, the deferred portion of any
interest expense will be deductible when market discount is included in
income, including upon the sale, disposition, or repayment of the security or
an underlying loan for a pass-through security. A holder may elect to include
market discount in income currently as it accrues, on all market discount
obligations acquired by holder during the taxable year the election is made
and after, in which case the interest deferral rule will not apply.
Premium.
A holder who purchases a debt security, other than an interest weighted
security as described under "--Taxation of Debt Securities; Interest Weighted
Securities", at a cost greater than its stated redemption price at maturity,
generally will be considered to have purchased the security at a premium,
which it may elect to amortize as an offset to interest income on such
security, and not as a separate deduction item, on a constant yield method.
Although no regulations addressing the computation of premium accrual on
securities similar to the securities have been issued, the legislative history
of the 1986 Act indicates that premium is to be accrued in the same manner as
market discount. Accordingly, it appears that the accrual of premium on a
class of pay-through securities will be calculated using the prepayment
assumption used in pricing. If a holder makes an election to amortize premium
on a debt security, the election will apply to all taxable debt instruments,
including all REMIC regular interests and all pass-through securities
representing ownership interests in a trust holding debt obligations, held by
the holder at the beginning of the taxable year in which the election is made,
and to all taxable debt instruments acquired after by the holder, and will be
irrevocable without the consent of the IRS. Purchasers who pay a premium for
the securities should consult their tax advisers regarding the election to
amortize premium and the method to be employed. Recently, the IRS issued final
regulations dealing with amortizable bond premium. These regulations
specifically do not apply to prepayable debt instruments subject to Code
Section 1272(a)(6) such as the securities. Absent further guidance from the
IRS, the trustee intends to account for amortizable bond premium in the manner
described above. Prospective purchasers of the securities should consult their
tax advisors regarding the possible application of these regulations.
Election to Treat All Interest as Original Issue Discount.
The OID Regulations permit a holder of a debt security to elect to accrue
all interest, discount, including de minimis market or OID, and premium income
as interest, based on a constant yield method. If an election were to be made
with respect to a debt security with market discount, the holder of the debt
security would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such holder of the debt security acquires during the year
of the election or thereafter. Similarly, a holder of a debt security that
makes this election for a debt security that is acquired at a premium will be
deemed to have made an election to amortize bond premium for all debt
instruments having amortizable bond premium that such holder owns or acquires.
The election to accrue interest, discount and premium on a constant yield
method for a debt security is irrevocable.
Taxation of the REMIC and its Holders
In the opinion of tax counsel, if a REMIC election is made with respect
to a series of securities, then the arrangement by which the securities of
that series are issued will be treated as a REMIC as long as all of the
provisions of the applicable Agreement are complied with and the statutory and
regulatory requirements are satisfied. Securities will be designated as
regular interests or residual interests in a REMIC, as specified in the
prospectus supplement.
Generally, if a REMIC election is made with respect to a series of
securities:
o securities held by a domestic building and loan association will
constitute "a regular or a residual interest in a REMIC within the
meaning of Code Section 7701(a)(19)(C)(xi), assuming that at least
95% of the REMIC's assets consist of cash, government securities,
"loans secured by an interest in real property", and other types of
assets described in Code Section 7701(a)(19)(C), and
o securities held by a real estate investment trust will constitute
"real estate assets" within the meaning of Code Section 856(c)(5)(B),
and income with respect to the securities will be considered
"interest on obligations secured by mortgages on real property or on
interests in real property" within the meaning of Code Section
856(c)(3)(B), assuming, for both purposes, that at least 95% of the
REMIC's assets are qualifying assets.
If less than 95% of the REMIC's assets consist of the qualifying assets
described above, then a security will be a qualifying asset in the proportion
that REMIC assets are qualifying assets.
Status of Manufactured Housing Contracts.
The REMIC Regulations provide that obligations secured by interests in
manufactured housing that qualify as "single family residences" within the
meaning of Code Section 25(e)(10) may be treated as "qualified mortgages" of
the REMIC.
Under Section 25(e)(10), the term "single family residence" includes any
manufactured home which has a minimum of 400 square feet of living space and a
minimum width in excess of 102 inches and which is of a kind customarily used
at a fixed location.
REMIC Expenses; Single Class REMICs
As a general rule, all of the expenses of a REMIC will be taken into
account by holders of the residual interest securities. In the case of a
single class REMIC, however, the expenses will be allocated, under Treasury
regulations, among the holders of the regular interest securities and the
holders of the residual interest securities, on a daily basis in proportion to
the relative amounts of income accruing to each holder on that day. In the
case of a holder of a regular interest security who is an individual or a
pass-through interest holder, including certain pass-through entities but not
real estate investment trusts, expenses will be deductible only to the extent
that expenses, plus other "miscellaneous itemized deductions" of the holder,
exceed 2% of the holder's adjusted gross income. In addition, the amount of
itemized deductions otherwise allowable for the taxable year for an individual
whose adjusted gross income exceeds the applicable amount, which amount will
be adjusted for inflation, will be reduced by the lesser of:
o 3% of the excess of adjusted gross income over the applicable amount, or
o 80% of the amount of itemized deductions otherwise allowable for such
taxable year.
The reduction or disallowance of this deduction may have a significant
impact on the yield of the regular interest security to such a holder. In
general terms, a single class REMIC is one that either:
o would qualify, under existing Treasury regulations, as a grantor trust if
it were not a REMIC, treating all interests as ownership interests, even
if they would be classified as debt for federal income tax purposes, or
o is similar to a trust and which is structured with the principal purpose
of avoiding the single class REMIC rules.
As specified in the prospectus supplement, the expenses of the REMIC will be
allocated to holders of the related residual interest securities.
Taxation of the REMIC
General.
Although a REMIC is a separate entity for federal income tax purposes, a
REMIC is not generally subject to entity-level tax. Rather, the taxable income
or net loss of a REMIC is taken into account by the holders of residual
interests. As described in "--Taxation of Debt Securities; Interest and
Acquisition Discount", the regular interests are generally taxable as debt of
the REMIC.
Tiered REMIC Structures.
For certain series of REMIC certificates, two or more separate elections
may be made to treat designated portions of the related trust as REMICs
("Tiered REMICs") for federal income tax purposes. Upon the issuance of any
such series of REMIC certificates, special counsel to the depositor will
deliver its opinion generally to the effect that, assuming compliance with all
provisions of the related pooling and servicing agreement, the Tiered REMICs
will each qualify as a REMIC and the REMIC certificates issued by the Tiered
REMICs, respectively, will be considered to evidence ownership of Regular
certificates or Residual certificates in the related REMIC within the meaning
of the REMIC Provisions.
Solely for purposes of determining whether the REMIC certificates will be
"qualifying real property loans" under Section 593(d) of the Code, "real
estate assets" within the meaning of Section 856(c)(5)(B) of the Code, and
"loans secured by an interest in real property" under Section 7701(a)(19)(C)
of the Code, and whether the income on such certificates is interest described
in Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one
REMIC.
Calculation of REMIC Income.
The taxable income or net loss of a REMIC is determined under an accrual
method of accounting and in the same manner as in the case of an individual,
with certain adjustments. In general, the taxable income or net loss will be
the difference between
o the gross income produced by the REMIC's assets, including stated interest
and any OID or market discount on loans and other assets, and
o deductions, including stated interest and OID accrued on regular interest
securities, amortization of any premium with respect to loans, and
servicing fees and other expenses of the REMIC.
A holder of a residual interest security that is an individual or a
pass-through interest holder, including certain pass-through entities, but not
including real estate investment trusts, will be unable to deduct servicing
fees payable on the loans or other administrative expenses of the REMIC for a
given taxable year, to the extent that such expenses, when aggregated with
such holder's other miscellaneous itemized deductions for that year, do not
exceed two percent of such holder's adjusted gross income.
For purposes of computing its taxable income or net loss, the REMIC
should have an initial aggregate tax basis in its assets equal to the
aggregate fair market value of the regular interests and the residual
interests on the day that the interests are issued, which we refer to as the
"start up day". The aggregate basis will be allocated among the assets of the
REMIC in proportion to their respective fair market values.
The OID provisions of the Code apply to loans of individuals originated
on or after March 2, 1984, and the market discount provisions apply to loans
originated after July 18, 1984. Subject to possible application of the de
minimis rules, the method of accrual by the REMIC of OID income on the loans
will be equivalent to the method under which holders of pay-through securities
accrue OID, i.e., under the constant yield method taking into account the
prepayment assumption. The REMIC will deduct OID on the regular interest
securities in the same manner that the holders of the regular interest
securities include such discount in income, but without regard to the de
minimis rules. See "Taxation of Debt Securities". However, a REMIC that
acquires loans at a market discount must include such market discount in
income currently, as it accrues, on a constant interest basis.
To the extent that the REMIC's basis allocable to loans that it holds
exceeds their principal amounts, the resulting premium, if attributable to
mortgages originated after September 27, 1985, will be amortized over the life
of the loans, taking into account the prepayment assumption on a constant
yield method. Although the law is somewhat unclear regarding recovery of
premium attributable to loans originated on or before that date, it is
possible that the premium may be recovered in proportion to payments of loan
principal.
Prohibited Transactions and Contributions Tax.
The REMIC will be subject to a 100% tax on any net income derived from a
"prohibited transaction". For this purpose, net income will be calculated
without taking into account any losses from prohibited transactions or any
deductions attributable to any prohibited transaction that resulted in a loss.
In general, prohibited transactions include:
o the sale or other disposition of any qualified mortgage transferred to the
REMIC,
o the sale or other disposition of a cash flow investment,
o the receipt of any income from assets not permitted to be held by the
REMIC, or
o the receipt of any fees or other compensation for services rendered by the
REMIC.
It is anticipated that a REMIC will not engage in any prohibited transactions
in which it would recognize a material amount of net income. In addition, a
tax is generally imposed at the rate of 100% on amounts contributed to a REMIC
after the close of the three-month period beginning on the startup day. The
holders of residual interest securities will generally be responsible for the
payment of any such taxes imposed on the REMIC. To the extent not paid by such
holders or otherwise, however, taxes will be paid out of the trust and will be
allocated pro rata to all outstanding classes of securities of such REMIC.
Taxation of Holders of Residual Interest Securities
The holder of a security representing a residual interest security will
take into account the "daily portion" of the taxable income or net loss of the
REMIC for each day during the taxable year on which holder held the residual
interest security. The daily portion is determined by allocating to each day
in any calendar quarter its ratable portion of the taxable income or net loss
of the REMIC for such quarter, and by allocating that amount among the
holders, on that day of the residual interest securities in proportion to
their respective holdings on such day.
The holder of a residual interest security must report its proportionate
share of the taxable income of the REMIC whether or not it receives cash
distributions from the REMIC attributable to the income or loss. The reporting
of taxable income without corresponding distributions could occur, for
example, in certain REMIC issues in which the loans held by the REMIC were
issued or acquired at a discount, since mortgage prepayments cause recognition
of discount income, while the corresponding portion of the prepayment could be
used in whole or in part to make principal payments on REMIC regular interests
issued without any discount or at an insubstantial discount. If this occurs,
it is likely that cash distributions will exceed taxable income in later
years. Taxable income may also be greater in earlier years of certain REMIC
issues as a result of the fact that interest expense deductions, as a
percentage of outstanding principal on REMIC regular interest securities, will
typically increase over time as lower yielding securities are paid, whereas
interest income with respect to loans will generally remain constant over time
as a percentage of loan principal.
In any event, because the holder of a residual interest security is taxed
on the net income of the REMIC, the taxable income derived from a residual
interest security in a given taxable year will not be equal to the taxable
income associated with investment in a corporate bond or stripped instrument
having similar cash flow characteristics and pretax yield. Therefore, the
after-tax yield on the residual interest security may be less than that of a
bond or instrument.
Limitation on Losses.
The amount of the REMIC's net loss that a holder may take into account
currently is limited to the holder's adjusted basis at the end of the calendar
quarter in which the loss arises. A holder's basis in a residual interest
security will initially equal such holder's purchase price, and will
subsequently be increased by the amount of the REMIC's taxable income
allocated to the holder, and decreased, but not below zero, by the amount of
distributions made and the amount of the REMIC's net loss allocated to the
holder. Any disallowed loss may be carried forward indefinitely, but may be
used only to offset income of the REMIC generated by the same REMIC. The
ability of holders of residual interest securities to deduct net losses may be
subject to additional limitations under the Code, as to which such holders
should consult their tax advisers.
Distributions.
Distributions on a residual interest security, whether at their scheduled
times or as a result of prepayments, will generally not result in any
additional taxable income or loss to a holder of a residual interest security.
If the amount of such payment exceeds a holder's adjusted basis in the
residual interest security, however, the holder will recognize gain, treated
as gain from the sale of the residual interest security, to the extent of the
excess.
Sale or Exchange.
A holder of a residual interest security will recognize gain or loss on
the sale or exchange of a residual interest security equal to the difference,
if any, between the amount realized and the holder's adjusted basis in the
residual interest security at the time of the sale or exchange. Any loss upon
disposition of a residual interest security will be disallowed if the selling
holder acquires any residual interest in a REMIC or similar mortgage pool
within six months before or after the disposition.
Excess Inclusions.
The portion of the REMIC taxable income of a holder of a residual
interest security consisting of "excess inclusion" income may not be offset by
other deductions or losses, including net operating losses, on the holder's
federal income tax return. Further, if the holder of a residual interest
security is an organization subject to the tax on unrelated business income
imposed by Code Section 511, the holder's excess inclusion income will be
treated as unrelated business taxable income of the holder. In addition, under
Treasury regulations yet to be issued, if a real estate investment trust, a
regulated investment company, a common trust, or certain cooperatives were to
own a residual interest security, a portion of dividends or other
distributions paid by the real estate investment trust or other entity would
be treated as excess inclusion income. If a residual security is owned by a
foreign person excess inclusion income is subject to tax at a rate of 30%
which may not be reduced by treaty, is not eligible for treatment as portfolio
interest and is subject to certain additional limitations. See "Tax Treatment
of Foreign Investors."
The excess inclusion portion of a REMIC's income is generally equal to
the excess, if any, of REMIC taxable income for the quarterly period allocable
to a residual interest security, over the daily accruals for the quarterly
period of:
o 120% of the long term applicable federal rate on the startup day
multiplied by
o the adjusted issue price of the residual interest security at the
beginning of the quarterly period.
The adjusted issue price of a residual interest at the beginning of each
calendar quarter will equal its issue price, calculated in a manner analogous
to the determination of the issue price of a regular interest, increased by
the aggregate of the daily accruals for prior calendar quarters, and
decreased, but not below zero, by the amount of loss allocated to a holder and
the amount of distributions made on the residual interest security before the
beginning of the quarter. The long-term federal rate, which is announced
monthly by the Treasury Department, is an interest rate that is based on the
average market yield of outstanding marketable obligations of the United
States government having remaining maturities in excess of nine years.
The Small Business Job Protection Act of 1996 has eliminated the special
rule permitting Section 593 institutions, i.e., thrift institutions, to use
net operating losses and other allowable deductions to offset their excess
inclusion income from REMIC residual certificates that have "significant
value" within the meaning of the REMIC Regulations, effective for taxable
years beginning after December 31, 1995, except with respect to residual
certificates continuously held by a thrift institution since November 1, 1995.
In addition, the Small Business Job Protection Act of 1996 provides three
rules for determining the effect on excess inclusions on the alternative
minimum taxable income of a residual holder. First, alternative minimum
taxable income for such residual holder is determined without regard to the
special rule that taxable income cannot be less than excess inclusions.
Second, a residual holder's alternative minimum taxable income for a tax year
cannot be less than the excess inclusions for the year. Third, the amount of
any alternative minimum tax net operating loss deductions must be computed
without regard to any excess inclusions. These rules are effective for tax
years beginning after December 31, 1986, unless a residual holder elects to
have such rules apply only to tax years beginning after August 20, 1996.
Under the REMIC Regulations, in certain circumstances, transfers of
residual securities may be disregarded. See "--Restrictions on Ownership and
Transfer of Residual Interest Securities" and "--Tax Treatment of Foreign
Investors" below.
Restrictions on Ownership and Transfer of Residual Interest Securities.
As a condition to qualification as a REMIC, reasonable arrangements must
be made to prevent the ownership of a residual interest security by any
disqualified organization. Disqualified organizations include the United
States, any State or political subdivision of the United States, any foreign
government, any international organization, or any agency or instrumentality
of any of the foregoing, a rural electric or telephone cooperative described
in Section 1381(a)(2)(C) of the Code, or any entity exempt from the tax
imposed by Sections 1-1399 of the Code, if such entity is not subject to tax
on its unrelated business income. Accordingly, the applicable Agreement will
prohibit disqualified organizations from owning a residual interest security.
In addition, no transfer of a residual interest security will be permitted
unless the proposed transferee shall have furnished to the trustee an
affidavit representing and warranting that it is neither a disqualified
organization nor an agent or nominee acting on behalf of a disqualified
organization.
If a residual interest security is transferred to a disqualified
organization in violation of the restrictions set forth above, a substantial
tax will be imposed on the transferor of the residual interest security at the
time of the transfer. In addition, if a disqualified organization holds an
interest in a pass-through entity, including, among others, a partnership,
trust, real estate investment trust, regulated investment company, or any
person holding as nominee, that owns a residual interest security, the
pass-through entity will be required to pay an annual tax on its allocable
share of the excess inclusion income of the REMIC.
Under the REMIC Regulations, if a residual interest security is a
noneconomic residual interest, a transfer of the residual interest security to
a United States person will be disregarded for all federal tax purposes unless
no significant purpose of the transfer was to impede the assessment or
collection of tax. A residual interest security is a noneconomic residual
interest unless, at the time of the transfer:
o the present value of the expected future distributions on the residual
interest security at least equals the product of the present value of the
anticipated excess inclusions and the highest rate of tax for the year in
which the transfer occurs, and
o the transferor reasonably expects that the transferee will receive
distributions from the REMIC at or after the time at which the taxes
accrue on the anticipated excess inclusions in an amount sufficient to
satisfy the accrued taxes.
If a transfer of a residual interest is disregarded, the transferor would be
liable for any Federal income tax imposed upon taxable income derived by the
transferee from the REMIC. The REMIC Regulations provide no guidance as to how
to determine if a significant purpose of a transfer is to impede the
assessment or collection of tax. A similar type of limitation exists with
respect to certain transfers of residual interest securities by foreign
persons to United States persons. See "--Tax Treatment of Foreign Investors."
Mark to Market Rules.
Prospective purchasers of a residual interest security should be aware
that a residual interest security acquired after January 3, 1995 cannot be
marked-to-market.
Administrative Matters
The REMIC's books must be maintained on a calendar year basis and the
REMIC must file an annual federal income tax return. The REMIC will also be
subject to the procedural and administrative rules of the Code applicable to
partnerships, including the determination of any adjustments to, among other
things, items of REMIC income, gain, loss, deduction, or credit, by the IRS in
a unified administrative proceeding.
Tax Status as a Grantor Trust
General.
As specified in the prospectus supplement if a REMIC election is not
made, in the opinion of tax counsel, the trust relating to a series of
securities will be classified for federal income tax purposes as a grantor
trust under Subpart E, Part I of Subchapter J of the Code and not as an
association taxable as a corporation. In some series there will be no
separation of the principal and interest payments on the loans. In such
circumstances, a holder will be considered to have purchased a pro rata
undivided interest in each of the loans. In other cases, i.e. stripped
securities, sale of the securities will produce a separation in the ownership
of all or a portion of the principal payments from all or a portion of the
interest payments on the loans.
Each holder must report on its federal income tax return its share of the
gross income derived from the loans, not reduced by the amount payable as
trustee fees and the servicing fees, at the same time and in the same manner
as those items would have been reported under the holder's tax accounting
method had it held its interest in the loans directly, received directly its
share of the amounts received with respect to the loans, and paid directly its
share of the servicing fees. In the case of pass-through securities other than
stripped securities, the income will consist of a pro rata share of all of the
income derived from all of the loans and, in the case of stripped securities,
the income will consist of a pro rata share of the income derived from each
stripped bond or stripped coupon in which the holder owns an interest. The
holder of a security will generally 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 the services rendered by the trustee and
the master servicer or third parties that are compensated for the performance
of services. 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, the amount of itemized deductions otherwise allowable
for the taxable year for an individual whose adjusted gross income exceeds the
applicable amount, which will be adjusted for inflation, will be reduced by
the lesser of:
o 3% of the excess of adjusted gross income over the applicable amount,
or
o 80% of the amount of itemized deductions otherwise allowable for the
taxable year.
Discount or Premium on Pass-Through Securities.
The holder's purchase price of a pass-through security is to be allocated
among the loans in proportion to their fair market values, determined as of
the time of purchase of the securities. In the typical case, the trustee, to
the extent necessary to fulfill its reporting obligations, will treat each
loan as having a fair market value proportional to the share of the aggregate
principal balances of all of the loans that it represents, since the
securities generally will have a relatively uniform interest rate and other
common characteristics. To the extent that the portion of the purchase price
of a pass-through security allocated to a loan, other than to a right to
receive any accrued interest thereon and any undistributed principal payments,
is less than or greater than the portion of the principal balance of the loan
allocable to the security, the interest in the loan allocable to the
pass-through security will be deemed to have been acquired at a discount or
premium, respectively.
The treatment of any discount will depend on whether the discount
represents OID or market discount. In the case of a loan with OID in excess of
a prescribed de minimis amount or a stripped security, a holder of a security
will be required to report as interest income in each taxable year its share
of the amount of OID that accrues during that year in the manner described
above. OID with respect to a loan could arise, for example, by virtue of the
financing of points by the originator of the loan, or by virtue of the
charging of points by the originator of the loan in an amount greater than a
statutory de minimis exception, in circumstances under which the points are
not deductible under the Code. Any market discount or premium on a loan will
be includible in income, generally in the manner described in "--Taxation of
Debt Securities; Market Discount" and "--Premium", except that in the case of
pass-through securities, market discount is calculated on the loans underlying
the Certificate, rather than on the security. A holder that acquires an
interest in a loan originated after July 18, 1984 with more than a de minimis
amount of market discount, generally, the excess of the principal amount of
the loan over the purchaser's allocable purchase price, will be required to
include accrued market discount in income in the manner set forth above. See
"--Taxation of Debt Securities; Market Discount" and "--Premium" above.
In the case of market discount on a pass-through security attributable to
loans originated on or before July 18, 1984, the holder generally will be
required to allocate the portion of the discount that is allocable to a loan
among the principal payments on the loan and to include the discount allocable
to each principal payment in ordinary income at the time such principal
payment is made. That treatment would generally result in discount being
included in income at a slower rate than discount would be required to be
included in income using the method described in the preceding paragraph.
Stripped Securities.
A stripped security may represent a right to receive only a portion of
the interest payments on the loans, a right to receive only principal payments
on the loans, or a right to receive certain payments of both interest and
principal. Certain stripped securities such as ratio strip securities may
represent a right to receive differing percentages of both the interest and
principal on each loan. Under Section 1286 of the Code, the separation of
ownership of the right to receive some or all of the interest payments on an
obligation from ownership of the right to receive some or all of the principal
payments results in the creation of stripped bonds with respect to principal
payments and stripped coupons with respect to interest payments. Section 1286
of the Code applies the OID rules to stripped bonds and stripped coupons. For
purposes of computing OID, a stripped bond or a stripped coupon is treated as
a debt instrument issued on the date that such stripped interest is purchased
with an issue price equal to its purchase price or, if more than one stripped
interest is purchased, the ratable share of the purchase price allocable to
the stripped interest.
Servicing fees in excess of reasonable servicing fees will be treated
under the stripped bond rules. If the excess servicing fees are less than 100
basis points or 1% interest on the loan principal balance or the securities
are initially sold with a de minimis discount, assuming no prepayment
assumption is required, any non-de minimis discount arising from a subsequent
transfer of the securities should be treated as market discount. The IRS
appears to require that reasonable servicing fees be calculated on a loan by
loan basis, which could result in some loans being treated as having more than
100 basis points of interest stripped off.
The Code, OID Regulations and judicial decisions provide no direct
guidance as to how the interest and OID rules are to apply to stripped
securities and other pass-through securities. Under the method described in
"--Taxation of Debt Securities; Interest and Acquisition Discount" for
prepayment securities or the cash flow bond method, a prepayment assumption is
used and periodic recalculations are made which take into account with respect
to each accrual period the effect of prepayments during the period. The Code
prescribes the same method for debt instruments "secured by" other debt
instruments, the maturity of which may be affected by prepayments on the
underlying debt instruments. However, the Code, absent Treasury regulations,
appear specifically to cover instruments such as the stripped securities which
technically represent ownership interests in the underlying loans, rather than
being debt instruments secured by those loans. Nevertheless, it is believed
that the cash flow bond method is a reasonable method of reporting income for
the securities, and it is expected that OID will be reported on that basis, as
specified in the prospectus supplement. In applying the calculation to
pass-through securities, the trustee will treat all payments to be received by
a holder with respect to the underlying loans as payments on a single
installment obligation. The IRS could, however, assert that OID must be
calculated separately for each loan underlying a security.
Under certain circumstances, if the loans prepay at a rate faster than
the prepayment assumption, the use of the cash flow bond method may accelerate
a holder's recognition of income. If, however, the loans prepay at a rate
slower than the prepayment assumption, in some circumstances the use of this
method may decelerate a holder's recognition of income.
In the case of a stripped security that is an interest weighted security,
the trustee intends, absent contrary authority, to report income to
securityholders as OID, in the manner described above for interest weighted
securities.
Possible Alternative Characterizations.
The characterizations of the stripped securities described in the
preceding section are not the only possible interpretations of the applicable
Code provisions. Among other possibilities, the IRS could contend that:
o in some series, each non-interest weighted security is composed of an
unstripped undivided ownership interest in loans and an installment
obligation consisting of stripped principal payments,
o the non-interest weighted securities are subject to the contingent payment
provisions of the Contingent Regulations,
o each interest weighted stripped security is composed of an unstripped
undivided ownership interest in loans and an installment obligation
consisting of stripped interest payments, or
o there are as many stripped bonds or stripped coupons as there are
scheduled payments of principal and/or interest on each mortgage loan.
Given the variety of alternatives for treatment of the stripped
securities and the different federal income tax consequences that result from
each alternative, potential purchasers are urged to consult their own tax
advisers regarding the proper treatment of the securities for federal income
tax purposes.
Character as Qualifying Loans.
In the case of stripped securities, there is no specific legal authority
existing regarding whether the character of the securities, for federal income
tax purposes, will be the same as the loans. The IRS could take the position
that the loans' character is not carried over to the securities. Pass-through
securities will be, and, although the matter is not free from doubt, stripped
securities should be considered to represent "real estate assets" within the
meaning of Section 856(c)(5)(B) of the Code and "loans secured by an interest
in real property" within the meaning of Section 7701(a)(19)(C)(v) of the Code.
In addition, interest income attributable to the securities should be
considered to represent "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. Reserves or funds underlying the securities may
cause a proportionate reduction in the above-described qualifying status
categories of securities.
Sale or Exchange
Subject to the discussion below with respect to trusts as to which a
partnership election is made, a holder's tax basis in its security is the
price such holder pays for a security, plus amounts of original issue or
market discount included in income and reduced by any payments received, other
than qualified stated interest payments, and any amortized premium. Gain or
loss recognized on a sale, exchange, or redemption of a security, measured by
the difference between the amount realized and the security's basis as so
adjusted, will generally be capital gain or loss, assuming that the security
is held as a capital asset. In the case of a security held by a bank, thrift,
or similar institution described in Section 582 of the Code, however, gain or
loss realized on the sale or exchange of a regular interest security will be
taxable as ordinary income or loss. In addition, gain from the disposition of
a regular interest security that might otherwise be capital gain will be
treated as ordinary income to the extent of the excess, if any, of the amount
that would have been includible in the holder's income if the yield on the
regular interest security had equaled 110% of the applicable federal rate as
of the beginning of the holder's holding period, over the amount of ordinary
income actually recognized by the holder on the regular interest security.
Miscellaneous Tax Aspects
Backup Withholding.
Subject to the discussion below with respect to trusts as to which a
partnership election is made, a holder, other than a holder of a residual
interest security, may, under certain circumstances, be subject to "backup
withholding" at a rate of 31% with respect to distributions or the proceeds of
a sale of certificates to or through brokers that represent interest or OID on
the securities. This withholding generally applies if the holder of a
security:
o fails to furnish the trustee with its taxpayer identification number,
o furnishes the trustee an incorrect taxpayer identification number,
o fails to report properly interest, dividends or other "reportable
payments" as defined in the Code, or
o under some circumstances, fails to provide the trustee or such holder's
securities broker with a certified statement, signed under penalty of
perjury, that the taxpayer identification number provided is its correct
number and that the holder is not subject to backup withholding.
Backup withholding will not apply, however, to some payments made to holders,
including payments to certain exempt recipients, such as exempt organizations,
and to certain nonresidents. The Treasury Department issued regulations which
make certain modifications to the withholding and information reporting rules.
The regulations will generally be effective for payments made after December
31, 2000, subject to certain transition rules. Holders should consult their
tax advisers as to their qualification for exemption from backup withholding
and the procedure for obtaining the exemption.
The trustee will report to the holders and to the master servicer for
each calendar year the amount of any reportable payments during the year and
the amount of tax withheld, if any, with respect to payments on the
securities.
Tax Treatment of Foreign Investors
Subject to the discussion below with respect to trusts as to which a
partnership election is made, under the Code, unless interest, including OID,
paid on a security, other than a residual interest security, is considered to
be effectively connected with a trade or business conducted in the United
States by a nonresident alien individual, foreign partnership or foreign
corporation, which we define as "nonresident", those interest will normally
qualify as portfolio interest, except where the recipient is a holder,
directly or by attribution, of 10% or more of the capital or profits interest
in the issuer, or the recipient is a controlled foreign corporation to which
the issuer is a related person, and will be exempt from federal income tax.
Upon receipt of appropriate ownership statements, the issuer normally will be
relieved of obligations to withhold tax from the interest payments. These
provisions supersede the generally applicable provisions of United States law
that would otherwise require the issuer to withhold at a 30% rate, unless that
rate were reduced or eliminated by an applicable tax treaty, on, among other
things, interest and other fixed or determinable, annual or periodic income
paid to nonresidents. Holders of pass-through securities and stripped
securities, including ratio strip securities, however, may be subject to
withholding to the extent that the loans were originated on or before July 18,
1984.
Interest and OID of holders who are foreign persons are not subject to
withholding if they are effectively connected with a United States business
conducted by the holder. They will, however, generally be subject to the
regular United States income tax.
Payments to holders of residual interest securities who are foreign
persons will generally be treated as interest for purposes of the 30% or lower
treaty rate United States withholding tax. Holders should assume that the
income does not qualify for exemption from United States withholding tax as
portfolio interest. It is clear that, to the extent that a payment represents
a portion of REMIC taxable income that constitutes excess inclusion income, a
holder of a residual interest security will not be entitled to an exemption
from or reduction of the 30% or lower treaty rate withholding tax rule. If the
payments are subject to United States withholding tax, they generally will be
taken into account for withholding tax purposes only when paid or distributed
or when the residual interest security is disposed of. The Treasury has
statutory authority, however, to promulgate regulations which would require
that these amounts to be taken into account at an earlier time in order to
prevent the avoidance of tax. Such regulations could, for example, require
withholding prior to the distribution of cash in the case of residual interest
securities that do not have significant value. Under the REMIC Regulations, if
a residual interest security has tax avoidance potential, a transfer of a
residual interest security to a nonresident will be disregarded for all
federal tax purposes. A residual interest security 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 these amounts will be distributed at or
after the time at which the excess inclusions accrue and not later than the
calendar year following the calendar year of accrual. If a Nonresident
transfers a residual interest security to a United States person, and if the
transfer has the effect of allowing the transferor to avoid tax on accrued
excess inclusions, then the transfer is disregarded and the transferor
continues to be treated as the owner of the residual interest security for
purposes of the withholding tax provisions of the Code. See "--Excess
Inclusions."
The Treasury Department issued regulations which make certain
modifications to the withholding and information reporting rules described in
the preceding paragraph. The regulations attempt to unify certification
requirements and modify reliance standards. The regulations will generally be
effective for payments made after December 31, 2000, subject to certain
transition rules. We suggest that prospective investors consult their own tax
advisors regarding the regulations.
Tax Characterization of the Trust as a Partnership
Tax counsel will deliver its opinion that a trust for which a partnership
election is made will not be treated as a publicly traded partnership taxable
as a corporation for federal income tax purposes. This opinion will be based
on the assumption that the terms of the related Agreement and related
documents will be complied with, and on counsel's conclusions that the nature
of the income of the trust will exempt it from the rule that certain publicly
traded partnerships are taxable as corporations or the issuance of the
securities has been structured as a private placement under an IRS safe
harbor, so that the trust will not be characterized as a publicly traded
partnership taxable as a corporation.
If the trust were taxable as a corporation for federal income tax
purposes, the trust would be subject to corporate income tax on its taxable
income. The trust's taxable income would include all its income, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the notes and
distributions on the certificates, and certificateholders could be liable for
any tax that is unpaid by the trust.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness.
The trust will agree, and the noteholders will agree by their purchase of
notes, to treat the notes as debt for federal income tax purposes. Generally,
tax counsel will advise the depositor that the notes will be classified as
debt for federal income tax purposes. The discussion below assumes this
characterization of the notes is correct.
OID, Indexed Securities, etc.
The discussion below assumes that all payments on the notes are
denominated in U.S. dollars, and that the notes are not indexed securities or
strip notes. Moreover, the discussion assumes that the interest formula for
the notes meets the requirements for qualified stated interest under the OID
Regulations, and that any OID on the notes, i.e., any excess of the principal
amount of the notes over their issue price, does not exceed a de minimis
amount, i.e., 0.25% of their principal amount multiplied by the number of full
years included in their term, all within the meaning of the OID Regulations.
If these conditions are not satisfied with respect to any given series of
notes, additional tax considerations with respect to such notes will be
disclosed in the prospectus supplement.
Interest Income on the Notes.
Based on the above assumptions, except as discussed in the following
paragraph, the notes will not be considered issued with OID. The stated
interest thereon will be taxable to a noteholder as ordinary interest income
when received or accrued in accordance with noteholder's method of tax
accounting. Under the OID Regulations, a holder of a note issued with a de
minimis amount of OID must include such OID in income, on a pro rata basis, as
principal payments are made on the note. It is believed that any prepayment
premium paid as a result of a mandatory redemption will be taxable as
contingent interest when it becomes fixed and unconditionally payable. A
purchaser who buys a note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
A holder of a note that has a fixed maturity date of not more than one
year from the issue date of note which we refer to as a short-term note may be
subject to special rules. An accrual basis holder of a short-term note and
certain cash method holders, including regulated investment companies, as set
forth in Section 1281 of the Code generally would be required to report
interest income as interest accrues on a straight-line basis over the term of
each interest period. Other cash basis holders of a short-term note would, in
general, be required to report interest income as interest is paid or, if
earlier, upon the taxable disposition of the short-term note. However, a cash
basis holder of a short-term note reporting interest income as it is paid may
be required to defer a portion of any interest expense otherwise deductible on
indebtedness incurred to purchase or carry the short-term note until the
taxable disposition of the short-term note. A cash basis taxpayer may elect
under Section 1281 of the Code to accrue interest income on all nongovernment
debt obligations with a term of one year or less, in which case the taxpayer
would include interest on the short-term note in income as it accrues, but
would not be subject to the interest expense deferral rule referred to in the
preceding sentence. Certain special rules apply if a short-term note is
purchased for more or less than its principal amount.
Sale or Other Disposition.
If a noteholder sells a note, the holder will recognize gain or loss in
an amount equal to the difference between the amount realized on the sale and
the holder's adjusted tax basis in the note. The adjusted tax basis of a note
to a particular noteholder will equal the holder's cost for the note,
increased by any market discount, acquisition discount, OID and gain
previously included by noteholder in income with respect to the note and
decreased by the amount of bond premium, if any, previously amortized and by
the amount of principal payments previously received by noteholder with
respect to the note. Any such gain or loss will be capital gain or loss if the
note was held as a capital asset, except for gain representing accrued
interest and accrued market discount not previously included in income.
Capital losses generally may be used only to offset capital gains.
Foreign Holders.
Interest payments made or accrued to a noteholder who is a nonresident
alien, foreign corporation or other non-United States person generally will be
considered portfolio interest, and generally will not be subject to United
States federal income tax and withholding tax, if the interest is not
effectively connected with the conduct of a trade or business within the
United States by the foreign person, and the foreign person:
o is not actually or constructively a "10 percent shareholder" of the trust
or the seller, including a holder of 10% of the outstanding certificates,
or a "controlled foreign corporation" with respect to which the trust or
the seller is a "related person" within the meaning of the Code, and
o provides the trustee or other person who is otherwise required to withhold
U.S. tax with respect to the notes with an appropriate statement on Form
W-8 or a similar form, signed under penalties of perjury, certifying that
the beneficial owner of the note is a foreign person and providing the
foreign person's name and address.
If a note is held through a securities clearing organization or certain other
financial institutions, the organization or institution may provide the
relevant signed statement to the withholding agent; in that case, however, the
signed statement must be accompanied by a Form W-8 or substitute form provided
by the foreign person that owns the note. If such interest is not portfolio
interest, then it will be subject to United States federal income and
withholding tax at a rate of 30 percent, unless reduced or eliminated by an
applicable tax treaty. Prospective investors are urged to consult their own
tax advisors regarding the withholding and information reporting rules.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a foreign person will be exempt from United
States federal income and withholding tax, if:
o the gain is not effectively connected with the conduct of a trade or
business in the United States by the foreign person, and
o in the case of an individual foreign person, the foreign person is not
present in the United States for 183 days or more in the taxable year.
Backup Withholding.
Each holder of a note, other than an exempt holder such as a corporation,
tax-exempt organization, qualified pension and profit-sharing trust,
individual retirement account or nonresident alien who provides certification
as to status as a nonresident, will be required to provide, under penalties of
perjury, a certificate containing the holder's name, address, correct federal
taxpayer identification number and a statement that the holder is not subject
to backup withholding. Should a nonexempt noteholder fail to provide the
required certification, the trust will be required to withhold 31 percent of
the amount otherwise payable to the holder, and remit the withheld amount to
the IRS as a credit against the holder's federal income tax liability.
Prospective investors are urged to consult their own tax advisors regarding
the withholding and information reporting rules.
Possible Alternative Treatments of the Notes.
If, contrary to the opinion of tax counsel, the IRS successfully asserted
that one or more of the notes did not represent debt for federal income tax
purposes, the notes might be treated as equity interests in the trust. If so
treated, the trust might be treated as a publicly traded partnership taxable
as a corporation with the adverse consequences described in "--Tax
Characterization of the Trust as a Partnership" and the taxable corporation
would not be able to reduce its taxable income by deductions for interest
expense on notes recharacterized as equity. Alternatively, and most likely in
the view of tax counsel, the trust might be treated as a publicly traded
partnership that would not be taxable as a corporation because it would meet
certain qualifying income tests. Nonetheless, treatment of the notes as equity
interests in such a publicly traded partnership could have adverse tax
consequences to some holders. For example, income to certain tax-exempt
entities including pension funds would be unrelated business taxable income,
income to foreign holders generally would be subject to U.S. tax and U.S. tax
return filing and withholding requirements, and individual holders may be
limited in their ability to deduct their share of the trust's expenses.
Tax Consequences to Holders of the Certificates
Treatment of the Trust as a Partnership.
The trust and any servicer will agree, and the certificateholders will
agree by their purchase of certificates, to treat the trust as a partnership
for purposes of federal and state income tax, franchise tax and any other tax
measured in whole or in part by income, with the assets of the partnership
being the assets held by the trust, the partners of the partnership being the
certificateholders, and the notes being debt of the partnership. However, the
proper characterization of the arrangement involving the trust, the
certificates, the notes, the trust and any servicer is not clear because there
is no authority on transactions closely comparable to that contemplated
herein.
A variety of alternative characterizations are possible. For example,
because the certificates have certain features characteristic of debt, the
certificates might be considered debt of the trust. Any such characterization
would not result in materially adverse tax consequences to certificateholders
as compared to the consequences from treatment of the certificates as equity
in a partnership. The following discussion assumes that the certificates
represent equity interests in a partnership.
Indexed Securities, etc.
The following discussion assumes that all payments on the certificates
are denominated in U.S. dollars, none of the certificates are indexed
securities or strip certificates, and that a series of securities includes a
single class of certificates. If these conditions are not satisfied with
respect to any given series of certificates, additional tax considerations
with respect to such certificates will be disclosed in the prospectus
supplement.
Partnership Taxation.
As a partnership, the trust will not be subject to federal income tax.
Rather, each certificateholder will be required to separately take into
account such holder's allocated share of income, gains, losses, deductions and
credits of the trust. The trust's income will consist primarily of interest
and finance charges earned on the loans including appropriate adjustments for
market discount, OID and bond premium and any gain upon collection or
disposition of loans. The trust's deductions will consist primarily of
interest accruing with respect to the notes, servicing and other fees, and
losses or deductions upon collection or disposition of loans.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the related Agreement and
related documents. The Agreement will provide, in general, that the
certificateholders will be allocated taxable income of the trust for each
month equal to the sum of:
o the interest that accrues on the certificates in accordance with their
terms for the month, including interest accruing at the pass-through rate
for the month and interest on amounts previously due on the certificates
but not yet distributed,
o any trust income attributable to discount on the loans that corresponds to
any excess of the principal amount of the certificates over their initial
issue price,
o prepayment premium payable to the certificateholders for the month, and
o any other amounts of income payable to the certificateholders for the
month.
The allocation will be reduced by any amortization by the trust of
premium on loans that corresponds to any excess of the issue price of
certificates over their principal amount. All remaining taxable income of the
trust will be allocated to the depositor or the seller. Based on the economic
arrangement of the parties, this approach for allocating trust income should
be permissible under applicable Treasury regulations, although no assurance
can be given that the IRS would not require a greater amount of income to be
allocated to certificateholders. Moreover, even under the foregoing method of
allocation, certificateholders may be allocated income equal to the entire
pass-through rate plus the other items described in the preceding paragraph
even though the trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis holders will in effect be
required to report income from the certificates on the accrual basis and
certificateholders may become liable for taxes on trust income even if they
have not received cash from the trust to pay taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
certificateholders but certificateholders may be purchasing certificates at
different times and at different prices, certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the trust.
All of the taxable income allocated to a certificateholder that is a
pension, profit sharing or employee benefit plan or other tax-exempt entity
including an individual retirement account will constitute unrelated business
taxable income generally taxable to the holder under the Code.
An individual taxpayer's share of expenses of the trust including
servicing fees but not interest expense would be miscellaneous itemized
deductions. The deductions might be disallowed to the individual in whole or
in part and might result in the holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to the holder over the life of
the trust.
The trust intends to make all tax calculations relating to income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each loan, the trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on certificateholders.
Discount and Premium.
It is believed that the loans were not issued with OID, and, therefore,
the trust should not have OID income. However, the purchase price paid by the
trust for the loans may be greater or less than the remaining principal
balance of the loans at the time of purchase. If so, the loan will have been
acquired at a premium or discount, as the case may be. As indicated above, the
trust will make this calculation on an aggregate basis, but might be required
to recompute it on a loan by loan basis.
If the trust acquires the loans at a market discount or premium, the
trust will elect to include any discount in income currently as it accrues
over the life of the loans or to offset any premium against interest income on
the loans. As indicated above, a portion of market discount income or premium
deduction may be allocated to certificateholders.
Section 708 Termination.
Under Code Section 708, a sale or exchange of 50% or more of the capital
and profits in a partnership within a 12-month period would cause a deemed
contribution of assets of the partnership (the "old partnership") to a new
partnership (the "new partnership") in exchange for interests in the new
partnership. Such interests would be deemed distributed to the partners of the
old partnership in liquidation thereof, which would not constitute a sale or
exchange. Accordingly, if the trust were characterized as a partnership and a
sale of certificates terminated the partnership under Code Section 708, the
purchaser's basis in its ownership interest would not change.
Disposition of Certificates.
Generally, capital gain or loss will be recognized on a sale of
certificates in an amount equal to the difference between the amount realized
and the seller's tax basis in the certificates sold. A certificateholder's tax
basis in a certificate will generally equal the holder's cost increased by the
holder's share of trust income includible in income and decreased by any
distributions received with respect to such certificate. In addition, both the
tax basis in the certificates and the amount realized on a sale of a
certificate would include the holder's share of the notes and other
liabilities of the trust. A holder acquiring certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
certificates, and, upon sale or other disposition of some of the certificates,
allocate a portion of such aggregate tax basis to the certificates sold rather
than maintaining a separate tax basis in each certificate for purposes of
computing gain or loss on a sale of that certificate.
Any gain on the sale of a certificate attributable to the holder's share
of unrecognized accrued market discount on the loans would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The trust does not expect to have any other assets
that would give rise to such special reporting requirements. Thus, to avoid
those special reporting requirements, the trust will elect to include market
discount in income as it accrues.
If a certificateholder is required to recognize an aggregate amount of
income not including income attributable to disallowed itemized deductions
described in "--Tax Consequences to Holders of Certificates; Partnership
Taxation" over the life of the certificates that exceeds the aggregate cash
distributions, the excess will generally give rise to a capital loss upon the
retirement of the certificates.
Allocations Between Transferors and Transferees.
In general, the trust's taxable income and losses will be determined
monthly and the tax items for a particular calendar month will be apportioned
among the certificateholders in proportion to the principal amount of
certificates owned by them as of the close of the last day of such month. As a
result, a holder purchasing certificates may be allocated tax items which will
affect its tax liability and tax basis attributable to periods before the
actual transaction.
The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed or only applies to
transfers of less than all of the partner's interest, taxable income or losses
of the trust might be reallocated among the certificateholders. The trust's
method of allocation between transferors and transferees may be revised to
conform to a method permitted by future regulations.
Section 754 Election.
In the event that a certificateholder sells its certificates at a profit
or loss, the purchasing certificateholder will have a higher lower basis in
the certificates than the selling certificateholder had. The tax basis of the
trust's assets will not be adjusted to reflect that higher or lower basis
unless the trust were to file an election under Section 754 of the Code. In
order to avoid the administrative complexities that would be involved in
keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the trust will not make an election. As a
result, certificateholders might be allocated a greater or lesser amount of
trust income than would be appropriate based on their own purchase price for
certificates.
Administrative Matters.
The trustee is required to keep or have kept complete and accurate books
of the trust. Such books will be maintained for financial reporting and tax
purposes on an accrual basis and the fiscal year of the trust will be the
calendar year. The trustee will file a partnership information return on IRS
Form 1065 with the IRS for each taxable year of the trust and will report each
certificateholder's allocable share of items of trust income and expense to
holders and the IRS on Schedule K-1. The trust will provide the Schedule K-l
information to nominees that fail to provide the trust with the information
statement described in the following paragraph and nominees will be required
to forward information to the beneficial owners of the certificates.
Generally, holders must file tax returns that are consistent with the
information return filed by the trust or be subject to penalties unless the
holder notifies the IRS of all inconsistencies .
Under Section 6031 of the Code, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the trust
with a statement containing certain information on the nominee, the beneficial
owners and the certificates so held. The information includes:
o the name, address and taxpayer identification number of the nominee and
o as to each beneficial owner
o the name, address and identification number of the person,
o whether the person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly owned
agency or instrumentality of either of the foregoing, and
o some information on certificates that were held, bought or sold on behalf
of the person throughout the year.
In addition, brokers and financial institutions that hold certificates through
a nominee are required to furnish directly to the trust information as to
themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the trust. The information referred to above for any
calendar year must be furnished to the trust on or before the following
January 31. Nominees, brokers and financial institutions that fail to provide
the trust with the information described above may be subject to penalties.
The depositor will be designated as the tax matters partner in the
Agreement and will be responsible for representing the certificateholders in
any dispute with the IRS. The Code provides for administrative examination of
a partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return
is filed. Any adverse determination following an audit of the return of the
trust by the appropriate taxing authorities could result in an adjustment of
the returns of the certificateholders. In some circumstances, a
certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the trust. An adjustment could also result in an
audit of a certificateholder's returns and adjustments of items not related to
the income and losses of the trust.
Tax Consequences to Foreign Certificateholders.
It is not clear whether the trust would be considered to be engaged in a
trade or business in the United States for purposes of federal withholding
taxes with respect to non-U.S. persons because there is no clear authority
dealing with that issue under facts substantially similar to those describing
the trust. Although it is not expected that the trust would be engaged in a
trade or business in the United States for such purposes, the trust will
withhold as if it were so engaged in order to protect the trust from possible
adverse consequences of a failure to withhold. The trust expects to withhold
on the portion of its taxable income that is allocable to foreign
certificateholders under Section 1446 of the Code, as if such income were
effectively connected to a U.S. trade or business, at a rate of 35% for
foreign holders that are taxable as corporations and 39.6% for all other
foreign holders. In determining a holder's withholding status, the trust may
rely on IRS Form W-8, IRS Form W-9 or the holder's certification of nonforeign
status signed under penalties of perjury. Prospective investors are urged to
consult their own tax advisors regarding the withholding and information
reporting rules.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return including, in the case of a corporation, the
branch profits tax on its share of the trust's income. Each foreign holder
must obtain a taxpayer identification number from the IRS and submit that
number to the trust on Form W-8 in order to assure appropriate crediting of
the taxes withheld. A foreign holder generally would be entitled to file with
the IRS a claim for refund with respect to taxes withheld by the trust taking
the position that no taxes were due because the trust was not engaged in a
U.S. trade or business. However, interest payments made or accrued to a
certificateholder who is a foreign person generally will be considered
guaranteed payments to the extent such payments are determined without regard
to the income of the trust. If these interest payments are properly
characterized as guaranteed payments, then the interest will not be considered
portfolio interest. As a result, certificateholders will be subject to United
States federal income tax and withholding tax at a rate of 30 percent, unless
reduced or eliminated by an applicable treaty. In that case, a foreign holder
would only be entitled to claim a refund for that portion of the taxes in
excess of the taxes that should be withheld with respect to the guaranteed
payments.
Backup Withholding. Distributions made on the certificates and proceeds
from the sale of the certificates will be subject to a "backup" withholding
tax of 31% if, in general, the certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code. Prospective investors are urged to consult
their own tax advisors regarding the withholding and information reporting
rules.
FASIT Securities
General
The FASIT provisions of the Code were enacted by the Small Business Job
Protection Act of 1996 and create a new elective statutory vehicle for the
issuance of mortgage-backed and asset-backed securities. Although the FASIT
provisions of the Code became effective on September 1, 1997, no Treasury
regulations or other administrative guidance has been issued with respect to
those provisions. Accordingly, definitive guidance cannot be provided with
respect to many aspects of the tax treatment of FASIT securityholders. In the
opinion tax counsel, if a FASIT election is made with respect to a series of
securities, then the arrangement by which the securities of that series are
issued will be treated as a FASIT assuming compliance with all of the
provisions of the applicable Agreement, including the making of a timely FASIT
election, and certain representations made by the depositor as to factual
matters. In addition, the trust's qualification as a FASIT depends on its
ability to satisfy the requirements of the FASIT provisions on an ongoing
basis, including, without limitation, requirements of proposed, temporary or
final Treasury regulations that may be promulgated in the near future under
the FASIT provisions and that may apply to the trust or as a result of any
change in the applicable law. Investors also should note that the FASIT
discussion contained herein constitutes only a summary of the federal income
tax consequences to holders of FASIT securities. With respect to each series
of FASIT securities, the prospectus supplement will provide a detailed
discussion regarding the federal income tax consequences associated with the
particular transaction.
FASIT securities will be classified as either FASIT regular securities,
which generally will be treated as debt for federal income tax purposes, or
FASIT ownership securities, which generally are not treated as debt for
federal income tax purposes, but rather as representing rights and
responsibilities with respect to the taxable income or loss of the related
series FASIT. The prospectus supplement for each series of securities will
indicate whether one or more FASIT elections will be made for that series and
which securities of that series will be designated as regular interests, and
which, if any, will be designated as ownership interests.
Qualification as a FASIT
The trust underlying a series, or one or more designated pools of assets
held in the trust, will qualify under the Code as a FASIT in which the FASIT
regular securities and the FASIT ownership securities will constitute the
"regular interests" and the "ownership interests", respectively, if
o a FASIT election is in effect,
o certain tests concerning the composition of the FASIT's assets and the
nature of the securityholders' interests in the FASIT are met on a
continuing basis, and
o the trust is not a regulated investment company as defined in Section
851(a) of the Code.
Asset Composition
In order for a trust, or one or more designated pools of assets held by a
trust, to be eligible for FASIT status, substantially all of the assets of the
trust or the designated pool must consist of "permitted assets" as of the
close of the third month beginning after the closing date and at all times
thereafter (the "FASIT Qualification Test"). Permitted assets include:
o cash or cash equivalents,
o debt instruments with fixed terms that would qualify as REMIC regular
interests if issued by a REMIC, i.e., instruments that provide for
interest at a fixed rate, a qualifying variable rate, or a qualifying
interest-only type rate),
o foreclosure property,
o certain hedging instruments, generally, interest and currency rate swaps
and enhancement contracts, that are reasonably required to guarantee or
hedge against the FASIT's risks associated with being the obligor on FASIT
interests,
o contract rights to acquire qualifying debt instruments or qualifying
hedging instruments,
o FASIT regular interests, and
o REMIC regular interests.
Permitted assets do not include any debt instruments issued by the holder
of the FASIT's ownership interest or by any person related to the holder.
Interests in a FASIT
In addition to the foregoing asset qualification requirements, the
interests in a FASIT also must meet certain requirements. All of the interests
in a FASIT must belong to either of the following:
o one or more classes of regular interests or
o a single class of ownership interest that is held by a fully taxable
domestic C corporation.
In the case of series that include FASIT ownership securities, the
ownership interest will be represented by the FASIT ownership securities.
A FASIT interest generally qualifies as a regular interest if:
o it is designated as a regular interest,
o it has a stated maturity no greater than thirty years,
o it entitles its holder to a specified principal amount,
o the issue price of the interest does not exceed 125% of its stated
principal amount,
o the yield to maturity of the interest is less than the applicable Treasury
rate published by the IRS plus 5%, and
o if it pays interest, such interest is payable at either (a) a fixed rate
with respect to the principal amount of the regular interest or (b) a
permissible variable rate with respect to such principal amount.
Permissible variable rates for FASIT regular interests are the same as
those for REMIC regular interests, i.e., certain qualified floating rates
and weighted average rates. See "--Taxation of Debt Securities--Variable
Rate Debt Securities."
If a FASIT security fails to pay a specified principal amount, has an
issue price that exceeds 125% of its stated principal amount, or has yield to
maturity in excess of the AFR, but otherwise meets the above requirements, it
may still qualify as a type of regular interest known as a high-yield
interest. In addition, if a FASIT security fails to pay a fixed rate or a
permissible variable rate, but the interest payable on the security consists
of a specified portion of the interest payments on permitted assets and that
portion does not vary over the life of the security, the security also will
qualify as a high-yield interest. A high-yield interest may be held only by
domestic C corporations that are fully subject to corporate income tax
("Eligible Corporations"), other FASITs, and dealers in securities who acquire
high yield interests as inventory, rather than for investment. In addition,
holders of high-yield interests may be limited in offsetting income derived
from such interest. See "--Tax Treatment of FASIT Regular
Securities--Treatment of High-Yield Interests."
Consequences of Disqualification
If a series FASIT fails to comply with one or more of the Code's ongoing
requirements for FASIT status during any taxable year, the Code provides that
its FASIT status may be lost for that year and thereafter. If FASIT status is
lost, the treatment of the former FASIT and the interests therein for federal
income tax purposes is uncertain. The former FASIT might be treated as a
grantor trust, as a separate association taxation as a corporation, or as a
partnership. See "--Tax Characterization of the Trust as a Partnership". The
FASIT Regular securities could be treated as debt instruments for federal
income tax purposes or as equity interests. Although the Code authorizes the
Treasury to issue regulations that address situations where a failure to meet
the requirements for FASIT status occurs inadvertently and in good faith,
FASIT regulations have not yet been issued. It is possible that
disqualification relief might be accompanied by sanctions, such as the
imposition of a corporate tax on all or a portion of the FASIT's income for
the period of time in which the requirements for FASIT status are not
satisfied.
Tax Treatment of FASIT Regular Securities
General.
Payments received by holders of FASIT regular securities generally should
be accorded the same tax treatment under the Code as payments received on
other taxable corporate debt instruments and on REMIC regular interests. As in
the case of holders of REMIC Regular interests, holders of FASIT regular
interests must report income from such interests under an accrual method of
accounting, even if they otherwise would have used the cash receipts and
disbursements method. Except in the case of FASIT regular interests issued
with original issue discount or acquired with market discount or premium,
interest paid or accrued on a FASIT regular interest generally will be treated
as ordinary income to the securityholder and a principal payment on such
security will be treated as a return of capital to the extent that the
securityholder's basis is allocable to that payment. FASIT regular interests
issued with original issue discount or acquired with market discount or
premium generally will treat interest and principal payments on such
securities in the same manner described for REMIC regular interests. See
"--Taxation of Debt Securities,"--Market Discount", and "--Premium" above.
High-yield securities may be held only by fully taxable domestic C
corporations, other FASITs, and certain securities dealers. Securityholders of
high-yield securities may be limited in their ability to use current losses or
net operating loss carryforwards or carrybacks to offset any income derived
from those securities.
If a FASIT regular interest is sold or exchanged, the securityholder
generally will recognize gain or loss upon the sale in the manner described in
"--Taxation of Debt Securities; Sale or Exchange. In addition, if a FASIT
regular interest becomes wholly or partially worthless as a result of default
and delinquencies on the underlying assets, the holder of such security should
be allowed to deduct the loss sustained or alternatively be able to report a
lesser amount of income. However, the timing and character of such losses in
income are uncertain. See "--Taxation of Debt Securities--Effects of Default
and Delinquencies."
FASIT regular securities held by a REIT will qualify as "real estate
assets" within the meaning of section 856(c)(5)(B) of the Code, and interest
on such securities will be considered Qualifying REIT Interest to the same
extent that REMIC securities would be so considered. FASIT regular securities
held by a thrift institution taxed as a "domestic building and loan
association" will represent qualifying assets for purposes of the
qualification requirements set forth in Code Section 7701(a)(19) to the same
extent that REMIC securities would be so considered. See "--Taxation of Debt
Securities. In addition, FASIT regular securities held by a financial
institution to which Section 585 of the Code applies will be treated as
evidences of indebtedness for purposes of Section 582(c)(1) of the Code. FASIT
securities will not qualify as "government securities" for either REIT or RIC
qualification purposes.
Treatment of High-Yield Interests
High-yield interests are subject to special rules regarding the
eligibility of holders of such interests, and the ability of such holders to
offset income derived from their FASIT security with losses. High-yield
interests may be held only by Eligible Corporations, other FASITs, and dealers
in securities who acquire such interests as inventory. If a securities dealer,
other than an Eligible Corporation, initially acquires a high-yield interest
as inventory, but later begins to hold it for investment, the dealer will be
subject to an excise tax equal to the income from the high-yield interest
multiplied by the highest corporate income tax rate. In addition, transfers of
high-yield interests to disqualified holders will be disregarded for federal
income tax purposes, and the transferor still will be treated as the holder of
the high-yield interest.
The holder of a high-yield interest may not use non-FASIT current losses
or net operating loss carryforwards or carrybacks to offset any income derived
from the high-yield interest, for either regular federal income tax purposes
or for alternative minimum tax purposes. In addition, the FASIT provisions
contain an anti-abuse rule that imposes corporate income tax on income derived
from a FASIT regular interest that is held by a pass-through entity, other
than another FASIT, that issues debt or equity securities backed by the FASIT
regular interest and that have the same features as high-yield interests.
Tax Treatment of FASIT Ownership Securities
A FASIT ownership security represents the residual equity interest in a
FASIT. As such, the holder of a FASIT ownership security determines its
taxable income by taking into account all assets, liabilities, and items of
income, gain, deduction, loss, and credit of a FASIT. In general, the
character of the income to the holder of a FASIT ownership interest will be
the same as the character of such income to the FASIT, except that any
tax-exempt interest income taken into account by the holder of a FASIT
ownership interest is treated as ordinary income. In determining that taxable
income, the holder of a FASIT ownership security must determine the amount of
interest, original issue discount, market discount, and premium recognized
with respect to the FASIT's assets and the FASIT regular securities issued by
the FASIT according to a constant yield methodology and under an accrual
method of accounting. In addition, holders of FASIT ownership securities are
subject to the same limitations on their ability to use losses to offset
income from their FASIT security as are the holders of high-yield interests.
See "--Tax Treatment of FASIT Regular Securities--Treatment of High-Yield
Interests."
Rules similar to the wash sale rules applicable to REMIC residual
securities also will apply to FASIT ownership securities. Accordingly, losses
on dispositions of a FASIT ownership security generally will be disallowed
where, within six months before or after the disposition, the seller of the
security acquires any other FASIT ownership security or, in the case of a
FASIT holding mortgage assets, any interest in a taxable mortgage pool, that
is economically comparable to a FASIT ownership security. In addition, if any
security that is sold or contributed to a FASIT by the holder of the related
FASIT ownership security was required to be marked-to-market under Code
section 475 by such holder, then section 475 will continue to apply to such
securities, except that the amount realized under the mark-to-market rules
will be the greater of the securities value under present law or the
securities value after applying special valuation rules contained in the FASIT
provisions. Those special valuation rules generally require that the value of
debt instruments that are not traded on an established securities market be
determined by calculating the present value of the reasonably expected
payments under the instrument using a discount rate of 120% of the applicable
federal rate, compounded semiannually.
The holder of a FASIT ownership security will be subject to a tax equal
to 100% of the net income derived by the FASIT from any "prohibited
transactions". Prohibited transactions include:
o the receipt of income derived from assets that are not permitted
assets,
o certain dispositions of permitted assets,
o the receipt of any income derived from any loan originated by a
FASIT, and
o in certain cases, the receipt of income representing a servicing fee
or other compensation.
Any series for which a FASIT election is made generally will be
structured in order to avoid application of the prohibited transaction tax.
Backup Withholding, Reporting and Tax Administration
Securityholders of FASIT securities will be subject to backup withholding
to the same extent holders of REMIC securities would be subject. See
"--Miscellaneous Tax Aspects--Backup Withholding". For purposes of reporting
and tax administration, holders of record of FASIT securities generally will
be treated in the same manner as holders of REMIC securities.
Foreign Securityholders
Foreign holders of FASIT securities will be subject to withholding to the
same extent foreign holders of notes would be subject. See "--Tax Consequences
to Holders of the Notes - Foreign Holders."
Due to the complexity of the federal income tax rules applicable to
securityholders and the considerable uncertainty that exists with respect to
many aspects of those rules, we suggest that potential investors consult their
own tax advisors regarding the tax treatment of the acquisition, ownership,
and disposition of the securities.
State Tax Considerations
In addition to the federal income tax consequences described in "Federal
Income Tax Considerations", potential investors should consider the state and
local income tax consequences of the acquisition, ownership, and disposition
of the securities. State and local income tax law may differ substantially
from the corresponding federal law, and this discussion does not purport to
describe any aspect of the income tax laws of any state or locality.
Therefore, we suggest that potential investors consult their own tax advisors
with respect to the various state and local tax consequences of an investment
in the securities.
ERISA Considerations
The Employee Retirement Income Security Act of 1974, as amended ("ERISA")
and the Code impose certain restrictions on employee benefit plans subject to
ERISA and on plans and other arrangements subject to Section 4975 of the Code
("Plans"), and on persons who are parties in interest or disqualified persons
("parties in interest") with respect to such Plans. Certain employee benefit
plans, such as governmental plans and church plans (if no election has been
made under Section 410(d) of the Code), are not subject to the restrictions of
ERISA, and assets of such plans may be invested in the securities without
regard to the ERISA considerations described in this section, subject to other
applicable federal and state law. However, any such governmental or church
plan which is qualified under Section 401(a) of the Code and exempt from
taxation under Section 501(a) of the Code is subject to the prohibited
transaction rules set forth in Section 503 of the Code.
Investments by Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that a Plan's investments be made in
accordance with the documents governing the Plan.
Section 406 of ERISA prohibits parties in interest with respect to a Plan
from engaging in prohibited transactions involving a Plan and its assets
unless a statutory, regulatory or administrative exemption applies to the
transaction. Section 4975 of the Code imposes certain excise taxes or, in some
cases, a civil penalty may be assessed under Section 502(i) of ERISA, on
parties in interest which engage in non-exempt prohibited transactions.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase or holding of the
securities--for example:
o Prohibited Transaction Class Exemption ("PTE") 96-23, exempts certain
transactions effected on behalf of a Plan by an in-house asset
manager,
o PTE 95-60, exempts certain transactions between insurance company
general accounts and parties in interest,
o PTE 91-38, exempts certain transactions between bank collective
investment funds and parties in interest,
o PTE 90-1, exempts certain transactions between insurance company
pooled separate accounts and parties in interest, and
o PTE 84-14, exempts certain transactions effected on behalf of a Plan
by a qualified professional asset manager.
There can be no assurance that any of these exemptions will apply with respect
to any Plan's investment in the securities, or that such an exemption, if it
did apply, would apply to all prohibited transactions that may occur in
connection with such investment. Furthermore, these exemptions would not apply
to transactions involved in operation of the trust if the assets of the trust
were considered to include Plan assets.
The DOL has issued a final regulation (29 C.F.R. Section 2510.3-101) (the
"Plan Assets Regulation") containing rules for determining what constitutes
the assets of a Plan. The Plan Assets Regulation provides that, as a general
rule, the underlying assets and properties of corporations, partnerships,
trusts and certain other entities in which a Plan makes an investment in an
equity interest will be deemed for purposes of ERISA to be assets of the Plan
unless certain exceptions apply.
Under the terms of the Plan Assets Regulation, the trust may be deemed to
hold plan assets by reason of a Plan's investment in a security; such plan
assets would include an undivided interest in the trust assets and any other
assets held by the trust. In such an event, persons providing services with
respect to the assets of the trust may be parties in interest, subject to the
fiduciary responsibility provisions of Title I of ERISA, including the
prohibited transaction provisions of Section 406 of ERISA and of Section 4975
of the Code, with respect to transactions involving such assets unless such
transactions are subject to a statutory, regulatory or administrative
exemption.
The look-through rule of the Plan Assets Regulation does not apply if the
interest acquired by the Plan is treated as indebtedness under applicable
local law and has no substantial equity features. Generally, a profits
interest in a partnership, an undivided ownership interest in property and a
beneficial ownership interest in a trust are deemed to be equity interests
under the final regulation. If notes of a particular series were deemed to be
indebtedness under applicable local law without any substantial equity
features, an investing Plan's assets would include such notes, but not, by
reason of such purchase, the underlying assets of the trust. The prospectus
supplement related to a series will indicate the expected treatment of the
securities in that series under the Plan Assets Regulation.
If the interest is an equity interest, the Plan Assets Regulation creates
an exception if the class of equity interests in question is:
o widely held, i.e., held by 100 or more investors who are independent
of the depositor and each other,
o freely transferable, and
o sold as part of an offering pursuant to
o an effective registration statement under the Securities
Act of 1933 (the "Securities Act"), and then subsequently
registered under the Exchange Act or
o an effective registration statement under Section 12(b) or
12(g) of the Exchange Act.
In addition, the regulation provides that if at all times more than 75% of the
value of all classes of equity interests in the depositor or the trust are
held by investors other than benefit plan investors, which includes Plans;
employee benefit plans as defined under ERISA, whether or not they are subject
to ERISA; and any entity whose underlying assets include plan assets by reason
of a plan's investment in the entity, the investing Plan's assets will not
include any of the underlying assets of the depositor or the trust.
The DOL has granted to certain underwriters individual administrative
exemptions (the "Underwriter Exemptions") from certain of the prohibited
transaction rules of ERISA and the related excise tax provisions of Section
4975 of the Code with respect to the initial purchase, the holding and the
subsequent resale by Plans of certificates in pass-through trusts that consist
of certain receivables, loans and other obligations that meet the conditions
and requirements of the Underwriter Exemptions. These securities may include
the certificates. The obligations covered by the Underwriter Exemptions
include obligations such as the trust assets other than private securities and
agency securities which are not insured or guaranteed by the United States or
an agency or instrumentality of the United States, or home improvement
contracts that are unsecured. The Underwriter Exemptions may apply to the
acquisition, holding and resale of the securities by a Plan provided that
certain conditions are met, including those listed in the next paragraph.
While each Underwriter Exemption is an individual exemption separately
granted to a specific underwriter, the terms and conditions are generally
similar and include:
o the acquisition of the certificates by a Plan is 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 are not subordinated to the rights and interests evidenced
by other certificates of the trust,
o the certificates acquired by the Plan have received a rating at the
time of such acquisition that is in one of the three highest generic
rating categories from either Standard & Poor's Rating Group, Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. or Fitch
IBCA Inc.,
o The sum of all payments made to the underwriter in connection with
the distribution of the certificates represents not more than
reasonable compensation for underwriting the certificates. The sum of
all payments made to and retained by the depositor pursuant to the
sale of the obligations to the trust represents not more than the
fair market value of such obligations. The sum of all payments made
to and retained by any servicer represents not more than reasonable
compensation for such servicer's services under the related 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 is an accredited investor as
defined in Rule 501(a)(1) of Regulation D under the Securities Act.
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 securities in such other investment pools must have been rated in one
of the three highest rating categories of a rating agency for at
least one year prior to the Plan's acquisition of securities, and
o securities evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one
year prior to any Plan's acquisition of securities.
On July 21, 1997, the DOL published in the Federal Register an
amendment to the Underwriter Exemptions, which extends exemptive relief
to certain mortgage-backed and asset-backed securities transactions using
pre-funding accounts for trusts issuing pass-through certificates. The
amendment generally allows mortgage loans or other secured receivables
(the "Obligations") supporting payments to certificateholders, and having
a value equal to no more than twenty-five percent (25%) of the total
principal amount of the certificates being offered by the trust, to be
transferred to the trust within a 90-day or three-month pre-funding
period following the closing date, instead of requiring that all such
Obligations be either identified or transferred on or before the closing
date. The relief is available when the following conditions are met:
(1) The ratio of the amount allocated to the pre-funding
account to the total principal amount of the certificates being
offered must not exceed twenty-five percent (25%).
(2) All Obligations transferred after the closing date (the
"Additional Obligations") must meet the same terms and conditions
for eligibility as the original Obligations used to create the
trust, which terms and conditions have been approved by a rating
agency.
(3) The transfer of such Additional Obligations to the trust
during the pre-funding period must not result in the certificates to
be covered by the Underwriter Exemption receiving a lower credit
rating from a rating agency upon termination of the pre-funding
period than the rating that was obtained at the time of the initial
issuance of the certificates by the trust.
(4) Solely as a result of the use of pre-funding, the weighted
average annual percentage interest rate for all of the Obligations
in the trust at the end of the pre-funding period must not be more
than 100 basis points lower than the average interest rate for the
Obligations transferred to the trust on the closing date.
(5) In order to insure that the characteristics of the
Additional Obligations are substantially similar to those of the
original Obligations which were transferred to the trust:
o the characteristics of the Additional Obligations must
be monitored by an insurer or other credit support
provider that is independent of the depositor, or
o an independent accountant retained by the depositor
must provide the depositor with a letter (with copies
provided to each rating agency rating the
certificates, the related underwriter and the related
trustee) stating whether or not the characteristics of
the Additional Obligations conform to the
characteristics described in the related prospectus,
prospectus supplement, or pooling and servicing
agreement. In preparing such letter, the independent
accountant must use the same type of procedures as
were applicable to the Obligations transferred to the
trust as of the closing date.
(6) The pre-funding period must end no later than three months
or 90 days after the closing date or earlier in certain
circumstances if the pre-funding account falls below the minimum
level specified in the pooling and servicing agreement or an Event
of Default occurs.
(7) Amounts transferred to any pre-funding account and
capitalized interest account used in connection with the pre-funding
may be invested only in certain permitted investments.
(8) The related prospectus or prospectus supplement must
describe:
o any pre-funding account and capitalized interest
account used in connection with a pre-funding account,
o the duration of the pre-funding period,
o the percentage or dollar value of the amount allocated
to the pre-funding account for the trust, and
o that the amounts remaining in the pre-funding account
at the end of the pre-funding period will be remitted
to certificateholders as repayments of principal.
(9) The related pooling and servicing agreement must describe
the permitted investments for the pre-funding account and
capitalized interest account and, if not disclosed in the related
prospectus or prospectus supplement, the terms and conditions for
eligibility of Additional Obligations.
Moreover, the Underwriter Exemptions provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur when
the Plan fiduciary causes a Plan to acquire securities in a trust holding
receivables as to which the fiduciary or its affiliates is an obligor provided
that, among other requirements:
o in the case of an acquisition in connection with the initial issuance
of securities, at least fifty (50) percent of each class of
securities in which Plans have invested is acquired by persons
independent of the Restricted Group and at least fifty (50) percent
of the aggregate interest in the trust is acquired by persons
independent of the Restricted Group,
o such fiduciary or affiliate is an obligor with respect to five (5)
percent or less of the fair market value of the obligations contained
in the trust,
o a Plan's investment in securities does not exceed twenty-five (25)
percent of all of the securities outstanding after the acquisition,
and
o immediately after the acquisition, no more than twenty-five (25)
percent of the assets of any Plan for which such person is a
fiduciary are invested in securities representing an interest in one
or more trusts containing assets sold or serviced by the same entity.
The Underwriter Exemptions do not apply to Plans sponsored by the depositor,
the underwriters of the securities, any trustee, any servicer, any insurer,
any obligor with respect to obligations included in a trust constituting more
than five (5) percent of the aggregate unamortized principal balance of the
assets in a trust, or any affiliate of such parties (the "Restricted Group").
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the potential application of the
Underwriter Exemptions to the purchase and holding of the securities and the
potential consequences to their specific circumstances, prior to making an
investment in the securities. Moreover, each Plan fiduciary should determine
whether under the general fiduciary standards of investment procedure and
diversification an investment in the securities is appropriate for the Plan,
taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
Legal Investment Considerations
As specified in the prospectus supplement, the securities may or may not
constitute mortgage-related securities under the Secondary Mortgage Market
Enhancement Act of 1984. Accordingly, investors whose investment authority is
subject to legal restrictions should consult their own legal advisors to
determine whether and to what extent the securities constitute legal
investments for them.
Ratings
It will be a requirement for issuance of any series that the securities
offered by this prospectus and the prospectus supplement be rated by at least
one rating agency in one of its four highest applicable rating categories. The
rating or ratings applicable to securities of each series offered hereby and
by the prospectus supplement will be as set forth in the prospectus
supplement. A securities rating should be evaluated independently of similar
ratings on different types of securities. A securities rating does not address
the effect that the rate of prepayments on loans or underlying loans, as
applicable, for a series may have on the yield to investors in the securities
of such series. A securities rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any time by
any rating agency.
Plan of Distribution
The depositor may offer each series of securities through one or more
underwriters that may be designated at the time of each offering of such
securities. The prospectus supplement will set forth the specific terms of the
offering of the series of securities and of each class within the series, the
names of the underwriters, the purchase price of the securities, the proceeds
to the depositor from such sale, any securities exchange on which the
securities may be listed, and, if applicable, the initial public offering
prices, the discounts and commissions to the underwriters and any discounts
and concessions allowed or reallowed to certain dealers. The place and time of
delivery of each series of securities will also be set forth in the prospectus
supplement relating to the series.
Legal Matters
Certain legal matters referred to in the prospectus supplement in
connection with the securities will be passed upon for the depositor by Brown
& Wood LLP, Washington, D.C.
Available Information
The depositor is subject to the informational requirements of the
Exchange Act and accordingly files reports and other information with the SEC.
Such reports and other information can be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its Regional Offices located as follows:
o Midwest Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and
o Northeast Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048.
Copies of such material can also be obtained from the Public Reference
Section of the SEC, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the SEC maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the depositor, that file
electronically with the SEC.
Copies of the registration statement of which this prospectus forms a
part and the exhibits are on file at the offices of the SEC in Washington,
D.C. Copies may be obtained at rates prescribed by the SEC upon request to the
SEC, and may be inspected, without charge, at the offices of the SEC, 450
Fifth Street, N.W., Washington, D.C.
Incorporation of Documents by Reference
All documents subsequently filed by or on behalf of the trust referred to
in the accompanying prospectus supplement with the SEC pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this
prospectus and prior to the termination of any offering of the securities
issued by the trust shall be deemed to be incorporated by reference in this
prospectus and to be a part of this prospectus from the date of the filing of
the documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for all purposes of this prospectus to the extent that a statement
contained herein or in the prospectus supplement or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
modifies or replaces such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this prospectus.
The depositor on behalf of any trust will provide without charge to each
person to whom this prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the documents referred to in the previous
paragraph that have been or may be incorporated by reference in this
prospectus but not including exhibits to the information that is incorporated
by reference unless the exhibits are specifically incorporated by reference
into the information that this prospectus incorporates. Such requests should
be directed to Corporate Secretary, 16802 Aston Street, Irvine, California
92606.
<PAGE>
Index of Defined Terms
Additional Obligations............................106
Agreement...........................................5
Beneficial Owner....................................9
Book-Entry Securities...............................6
borrower...........................................66
CERCLA.............................................54
Clearstream.........................................9
Code...............................................68
contracts..........................................63
cooperative........................................60
Cooperative Corporation............................10
Definitive Securities...............................6
DTC.................................................9
Eligible Corporations..............................99
Eligible Investments...............................26
ERISA.............................................103
Euroclear...........................................9
Euroclear Operator.................................10
European Depositaries..............................11
Exchange Act........................................9
Fannie Mae.........................................22
FASIT Qualification Test...........................98
FHA................................................15
Financial Intermediary.............................11
Freddie Mac........................................22
Garn-St. Germain Act...............................58
Ginnie Mae.........................................22
HOEPA..............................................60
Housing Act........................................23
HUD................................................23
Indirect Participants...............................9
lender.............................................65
loans..............................................15
mortgaged properties...............................15
new partnership....................................93
Obligations.......................................106
OID................................................70
OID Regulations....................................70
old partnership....................................93
Participants........................................9
parties in interest...............................103
Plan Assets Regulation............................104
Plans.............................................103
PS Agreement.......................................20
PS Servicer........................................20
PS Sponsor.........................................20
PS Trustee.........................................20
PTE...............................................103
RCRA...............................................54
Relevant Depositary................................11
Restricted Group..................................108
Rules..............................................11
SEC................................................20
secured creditor exclusion.........................54
Securities Act....................................104
Servicemen's Readjustment Act......................25
Terms and Conditions...............................10
Tiered REMICs......................................77
Title V............................................60
U.S. person........................................69
UCC.................................................9
Underwriter Exemptions............................105
VA.................................................15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses expected to be incurred by the Registrant in
connection with the issuance and distribution of the securities being
registered, other than underwriting compensation, are as follows:
SEC Registration Fee............................................ $264.00
Trustee's Fees and Expenses (including counsel fees)*........... **
Printing and Engraving Costs*................................... **
Rating Agency Fees*............................................. **
Legal Fees and Expenses*........................................ **
Blue Sky Fees and Expenses*..................................... **
Accounting Fees and Expenses*................................... **
Miscellaneous*.................................................. **
--
Total........................................................ $264.00
* Estimated in accordance with Item 511 of Regulation S-K.
** To be filed by Amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware Limited Liability Company Act (Section 18-108) gives
Delaware limited liability companies broad powers to indemnify and hold
harmless any member, manager or other person from and against any and all
claims and demands. The Limited Liability Company Agreement of the Registrant
provides that any member, officer, director, employee or agent of the
Registrant and any employee, representative, agent or affiliate of a member
(collectively, the "Covered Persons") shall, to the fullest extent permitted
by applicable law, be entitled to indemnification from the Registrant for any
loss, damage or claim incurred by such Covered Person by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf
of the Registrant and in a manner reasonably believed to be within the scope
of the authority conferred on such Covered Person by the Limited Liability
Company Agreement, except that no Covered Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such Covered
Person by reason of such Covered Person's gross negligence or willful
misconduct with respect to such acts or omissions; PROVIDED, HOWEVER, that any
indemnity under the Limited Liability Company Agreement shall be provided out
of and to the extent of Registrant assets only, and no member shall have
personal liability on account thereof; and PROVIDED FURTHER that so long as
any Registrant indebtedness is outstanding, no indemnity payment from funds of
the Registrant (as distinct from funds from other sources, such as insurance)
of any indemnity under the Limited Liability Company Agreement shall be
payable except out of funds that have been released from the lien of the
applicable indenture. In addition, to the fullest extent permitted by
applicable law, expenses (including legal fees) incurred by a Covered Person
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Registrant prior to the final disposition of such
claim, demand, action, suit or proceeding upon receipt by the Registrant of an
undertaking by or on behalf of the Covered Person to repay such amount if it
shall be determined that the Covered Person is not entitled to be indemnified
as authorized in the Limited Liability Company Agreement.
The Pooling and Servicing Agreement or Sale and Servicing Agreement
for each series of securities will provide either that the Registrant and the
partners, members, directors, officers, employees and agents of the
Registrant, or that the Servicer and the partners, members, directors,
officers, employees and agents of the Servicer, 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, Sale and Servicing Agreement or the
securities, other than any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or gross negligence in the performance of his
or its duties thereunder or by reason of reckless disregard of his or its
obligations and duties thereunder.
The Underwriting Agreement for each series of Securities will
generally provide that each underwriter will indemnify the Registrant, each of
its directors, each of its members, each of its officers who signs the
Registration Statement, and each person who controls the Registrant within the
meaning of either the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, against claims, damages, or liability, to
which the Registrant may become subject, under the Securities Act or 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 material fact furnished by the
underwriter for the preparation of a prospectus, or included in any
computational materials, term sheets or similar documents delivered to
prospective investors by the underwriter (other than any such untrue statement
that is based on materials previously provided to the underwriter by the
Registrant).
ITEM 16. EXHIBITS.
1.1 Form of Underwriting Agreement
4.1 Form of Trust Agreement
4.2 Form of Administration Agreement
4.3 Form of Pooling and Servicing Agreement
4.4 Form of Indenture
4.5 Form of Sale and Servicing Agreement
5.1 Opinion of Brown & Wood LLP as to legality (including
consent of such firm)
8.1 Opinion of Brown & Wood LLP as to certain tax matters
(including consent of such firm) (included in Exhibit 5.1)
23.1 Consent of Brown & Wood LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-4)
ITEM 17. UNDERTAKINGS
A. Undertaking in respect of Rule 415 offering.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended; (ii) 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 thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change of such information in the
Registration Statement;
provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in the post-effective amendment is
contained in periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934, as amended, that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
(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.
B. Undertaking in respect of filings incorporating subsequent Exchange Act
documents by reference.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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 the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
C. Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant 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 such indemnification by
it is against public policy as expressed in the Securities Act of 1933, as
amended, and will be governed by the final adjudication of such issue.
D. Undertakings for registration statement permitted by Rule 430A.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933, as amended, shall
be deemed to be part of this Registration Statement as of the time it was
declared effective; and
(2) For the purpose of determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
E. Undertaking in respect of qualification of Indentures under the Trust
Indenture Act of 1939.
The Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act of 1939 in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Trust Indenture Act of 1939.
<PAGE>
SIGNATURES
Pursuant to 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 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Irvine, California on the 4th
day of February, 2000.
FINANCE AMERICA SECURITIES, LLC
By: /s/ Brian Libman
Brian Libman
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form S-3 has been signed below by the
following persons in the capacities and on the dates indicated. Each person
whose signature appears below constitutes and appoints Brian Libman, Karen H.
Cornell, Graham Fleming and M. Katheryn Boyle, and each of them his or her
true and lawful attorney-in-fact and agent, acting together or alone, with
full powers of substitution and resubstitution, for them and in their name,
place and stead, to sign any or all amendments to this Registration Statement
(including any pre-effective or post-effective amendment), and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, acting together or alone, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as they might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, acting together or alone, or other
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Signature Title Date
/s/ Brian Libman Chief Executive Officer and February 4, 2000
- --------------------------- Director (Principal
Brian Libman Executive Officer)
/s/ Graham Fleming Treasurer (Principal February 4, 2000
- --------------------------- Financial and Accounting
Graham Fleming Officer)
/s/ Karen H. Cornell Secretary and Director February 4, 2000
- ---------------------------
Karen H. Cornell
/s/ M. Katheryn Boyle Director February 4, 2000
- ---------------------------
M. Katheryn Boyle
Exhibit 1.1
Form of Underwriting Agreement
<PAGE>
Exhibit No. 1.1
$[ ]
FINANCE AMERICA SECURITIES, LLC
[ ]
Asset-Backed [Certificates] [Notes], Series [ ],
Class [ ]
Class [ ]
UNDERWRITING AGREEMENT
[ ]
[UNDERWRITERS]
[ ]
[ ]
Ladies and Gentlemen:
[Finance America Securities, LLC (the "Depositor") has authorized the
issuance and sale of Finance America Securities, LLC Asset-Backed
Certificates, Series [ ] Class [ ], and Class [ ] Certificates (the "Class [ ]
Certificates") and the Class [R] Certificates (the "Class [R] Certificates"
and together with the Class [ ] Certificates, the "Securities"). The
Securities evidence in the aggregate the beneficial interest in a pool of [ ]
mortgage loans (the "Mortgage Loans") and certain funds on deposit in accounts
held by the Trustee in Trust for the Trust. The Mortgage Loans are secured by
first [or second] deeds of trust and mortgages primarily on [one-to
four-family residential] properties.]
[Finance America Securities, LLC (the "Depositor") has entered into a
Trust Agreement dated as of ____________ ] (the "Trust Agreement") with
[_____________________] (the "Owner Trustee") and [____________________], as
seller creating Finance America Securities, LLC [ ] Loan Trust [________] (the
"Trust"), a statutory business trust established under the laws of the State
of [Delaware]. The Depositor proposes to direct the Owner Trustee pursuant to
the Trust Agreement to cause the Trust to issue Finance America Securities,
LLC [ ] Loan Trust Series [____________], Class [ ] Notes (the "Class [ ]
Notes") and a single class of ownership interests (the "Ownership Interests"
and, together with the Class [ ] Notes, the "Securities").]
Only the Class [ ] [Certificates] [Notes] are being purchased by [ ],
[ ______________ ] and [ ______________ ] (each, an "Underwriter" and
collectively, the "Underwriters"), severally, in the amount set forth opposite
their names on Schedule A, except that the amount purchased by each
Underwriter may change in accordance with Section X of this Agreement.
[The Securities will be issued under a pooling and servicing agreement
(the "Pooling and Servicing ____ Agreement"), _____ dated ____ as ____ of ____
[ ____ ] ____ among ____ the ____ Depositor, [ ], as servicer (the
"Servicer"), [ _________ ], as seller (the "Seller") and [ ], _______ as
________ trustee ________ (the ________ "Trustee"). ________ The ________
Securities will evidence fractional undivided interests in the property held
in trust for the holders of such Securities (the "Trust"). The assets of the
Trust will include, among other things, the Mortgage ____ Loans ____ conveyed
____ to ____ the ____ Trust ____ on ____ [ ]. ____ The ____ aggregate
undivided interest in the Trust represented by the Class [ ] Certificates
initially will be ____ equal ____ to ____ $[ ] of ____ principal, ____ which
____ represents ____ approximately [ ]% of the outstanding principal balances
of the Mortgage Loans as of [ ] ____ (the _____ "Cut-Off _____ Date"). _____
Simultaneously _____ with ____ the _____ execution ____ of the Pooling and
Servicing Agreement, the Depositor will enter into a mortgage loan purchase
agreement (the "Purchase Agreement") with the Seller, pursuant to which the
Seller will transfer to the Depositor all of its right, title and interest in
and to the Mortgage Loans as of the Cut-Off Date and the collateral securing
each Mortgage Loan.]
[The Class [ ] Notes will be secured by the assets of the Trust
consisting of a pool of mortgage loans secured by first [or second] deeds of
trust and mortgages primarily on [one-to four-family residential properties]
(the "Mortgage Loans") conveyed to the Trust by the Depositor pursuant to a
sale and servicing agreement dated as of [ ___________ ] (the "Sale and
Servicing Agreement") among the Depositor, the Trust, [ ______________ ], as
indenture trustee (the "Indenture Trustee") and [ ______________ ], as seller
(the "Seller") and servicer (the "Servicer"). The Depositor will acquire the
Mortgage Loans, simultaneously with the execution of the Sale and Servicing
Agreement, pursuant to a mortgage loan purchase agreement dated as of [
__________ ] (the "Purchase Agreement") between the Depositor, as purchaser
and [ ____________ ], as seller, pursuant to which the Seller will transfer to
the Depositor all of its right, title and interest in and to the Mortgage
Loans after the Cut-Off Date and the collateral securing each Mortgage Loan.]
[The Class [ ] Notes will be issued pursuant to an indenture to be
dated as of [ ] (the "Indenture") between the Trust, as issuer and the
Indenture Trustee. The Ownership Interests will evidence fractional undivided
interests in the property held in the Trust. The aggregate principal balance
of the Class [ ] Notes initially will be equal to $[ ___________ ], which
represents approximately [ ____ ]% of the outstanding principal balances of
the Mortgage Loans as of the close of business on [ _______________ ] (the
"Cut-Off Date").]
[The Class [ ] [Certificates] [Notes] will have the benefit of a
financial guaranty insurance policy (the "Policy") issued by [ ] (the
"Insurer"), pursuant to an Insurance Agreement (the "Insurance Agreement")
dated as of [ ] among the Seller, the Servicer, the Depositor, the [Indenture]
Trustee and the Insurer.]]
[An election will be made to treat the assets of the Trust as a "real
estate mortgage investment conduit" (the "REMIC") for federal income tax
purposes. The Class [ ] Certificates will represent beneficial ownership of
"regular interests" in the REMIC and the Class [R] Certificates will represent
beneficial ownership of the single class of "residual interests" in the
REMIC.]
The Class [ ] [Certificates] [Notes] are more fully described in a
Registration Statement which the Depositor has furnished to the Underwriters.
Capitalized terms used but not defined herein shall have the meanings given to
them in [the Pooling and Servicing Agreement] [the Sale and Servicing
Agreement].
[The Depositor will enter into an Indemnification Agreement (the
"Indemnification Agreement"), dated as of [ ], among the Underwriters, the
Depositor, the Insurer and the Seller, to govern the liability of the several
parties with respect to the losses resulting from material misstatements or
omissions contained in the Prospectus Supplement.]
This Underwriting Agreement, [the Pooling and Servicing Agreement]
[the Sale and Servicing Agreement], [the Insurance Agreement,] the Purchase
Agreement and [the Indemnification Agreement] are referred to collectively
herein as the "Agreements".
Section I. Representations and Warranties of the Depositor. The
Depositor represents and warrants to, and agrees with the Underwriters that:
A. A Registration Statement on Form S-3 (No. 333-[ ]) has (i) been
prepared by the Depositor in conformity with the requirements of the
Securities Act of 1933 (the "Securities Act") and the rules and regulations
(the "Rules and Regulations") of the United States Securities and Exchange
Commission (the "Commission") thereunder, (ii) been filed with the Commission
under the Securities Act and (iii) become effective under the Securities Act.
Copies of such Registration Statement have been delivered by the Depositor to
the Underwriters. As used in this Agreement, "Effective Time" means the date
and the time as of which such Registration Statement, or the most recent
post-effective amendment thereto, if any, was declared effective by the
Commission; "Effective Date" means the date of the Effective Time;
"Registration Statement" means such registration statement, at the Effective
Time, including any documents incorporated by reference therein at such time;
and "Prospectus" means such final prospectus, as first supplemented by a
prospectus supplement (the "Prospectus Supplement") relating to the Class [ ]
[Certificates] [Notes], as first filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations. Reference made herein to the Prospectus
shall be deemed to refer to and include any documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Securities Act, as
of the date of the Prospectus, and any reference to any amendment or
supplement to the Prospectus shall be deemed to refer to and include any
document filed under the Securities Exchange Act of 1934 (the "Exchange Act")
after the date of the Prospectus and incorporated by reference in the
Prospectus; and any reference to any amendment to the Registration Statement
shall be deemed to include any report filed with the Commission with respect
to the Trust pursuant to Section 13(a) or 15(d) of the Exchange Act after the
date of the Prospectus that is incorporated by reference in the Registration
Statement. There are no contracts or documents of the Depositor which are
required to be filed as exhibits to the Registration Statement pursuant to the
Securities Act or the Rules and Regulations which have not been so filed or
incorporated by reference therein on or prior to the Effective Date of the
Registration Statement. The conditions for use of Form S-3, as set forth in
the General Instructions thereto, have been satisfied.
To the extent that any Underwriter (i) has provided to the
Depositor Collateral term sheets (as hereinafter defined) that such
Underwriter has provided to a prospective investor, the Depositor has filed
such Collateral term sheets as an exhibit to a report on Form 8-K within two
business days of its receipt thereof, or (ii) has provided to the Depositor
Structural term sheets or Computational Materials (each as defined below) that
such Underwriter has provided to a prospective investor, the Depositor will
file or cause to be filed with the Commission a report on Form 8-K containing
such Structural term sheet and Computational Materials, as soon as reasonably
practicable after the date of this Agreement, but in any event, not later than
the date on which the Prospectus is filed with the Commission pursuant to Rule
424 of the Rules and Regulations.
B. The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the Commission,
as the case may be, conform in all respects to the requirements of the
Securities Act and the Rules and Regulations. The Registration Statement, as
of the Effective Date thereof and of any amendment thereto, did not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading. The Prospectus as of its date and as amended or supplemented as of
the Closing Date does not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that no representation or warranty is made as
to information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information
furnished to the Depositor in writing by the Underwriters expressly for use
therein.
C. The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Securities Act
or the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
and any further documents so filed and incorporated by reference in the
Prospectus, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
D. Since the respective dates as of which information is given in the
Prospectus, there has not been any material adverse change in the general
affairs, management, financial condition, or results of operations of the
Depositor, otherwise than as set forth or contemplated in the Prospectus as
supplemented or amended as of the Closing Date.
E. The Depositor has been duly incorporated and is validly existing as
a limited liability company in good standing under the laws of its
jurisdiction of formation, is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which its ownership
or lease of property or the conduct of its business requires such
qualification, and has all power and authority necessary to own or hold its
properties, to conduct the business in which it is engaged and to enter into
and perform its obligations under the Agreements and to cause the Securities
to be issued.
F. There are no actions, proceedings or investigations pending before
or threatened by any court, administrative agency or other tribunal to which
the Depositor is a party or of which any of its properties is the subject (a)
which if determined adversely to the Depositor would have a material adverse
effect on the business or financial condition of the Depositor, (b) asserting
the invalidity of the Agreements or the Securities, (c) seeking to prevent the
issuance of the Securities or the consummation by the Depositor of any of the
transactions contemplated by any of the Agreements or (d) which might
materially and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, any of the Agreements
or the Securities.
G. This Agreement has been, and [the Pooling and Servicing Agreement]
[the Sale and Servicing Agreement], the Purchase Agreement, [the
Indemnification Agreement and the Insurance Agreement] when executed and
delivered as contemplated hereby and thereby will have been, duly authorized,
executed and delivered by the Depositor, and this Agreement constitutes, and
[the Pooling and Servicing Agreement] [the Sale and Servicing Agreement], the
Purchase Agreement, [the Indemnification Agreement and the Insurance
Agreement,] when executed and delivered as contemplated herein, will
constitute, legal, valid and binding instruments enforceable against the
Depositor in accordance with their respective terms, subject as to
enforceability to (x) applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws affecting creditors' rights generally, (y)
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law), and (z) with respect to rights of indemnity
under this Agreement, the Purchase Agreement, [the Indemnification Agreement
and the Insurance Agreement,] limitations of public policy under applicable
securities laws.
H. The execution, delivery and performance of the Agreements by the
Depositor and the consummation of the transactions contemplated hereby and
thereby, and the issuance and delivery of the Securities do not and will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Depositor
is a party, by which the Depositor is bound or to which any of the property or
assets of the Depositor or any of its subsidiaries is subject, nor will such
actions result in any violation of the provisions of the certificate of
formation or limited liability company agreement of the Depositor or any
statute or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Depositor or any of its properties or
assets.
I. [ ] are independent public accountants with respect to the
Depositor as required by the Securities Act and the Rules and Regulations.
J. The direction by the Depositor to the [Indenture] Trustee to
execute, authenticate, issue and deliver the Securities has been duly
authorized by the Depositor, and assuming the [Indenture] Trustee has been
duly authorized to do so, when executed, authenticated, issued and delivered
by the [Indenture] Trustee in accordance with [the Pooling and Servicing
Agreement] [the Indenture and the Trust Agreement], the Securities will be
validly issued and outstanding and will be entitled to the benefits provided
by [the Pooling and Servicing Agreement] [the Indenture and the Trust
Agreement].
K. No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the
United States is required for the issuance of the Class [ ] [Certificates]
[Notes] and the sale of the Class [ ] [Certificates] [Notes] to the
Underwriters, or the consummation by the Depositor of the other transactions
contemplated by the Agreements, except such consents, approvals,
authorizations, registrations or qualifications as may be required under State
securities or Blue Sky laws in connection with the purchase and distribution
of the Class [ ] [Certificates] [Notes] by the Underwriters or as have been
obtained.
L. At the time of execution and delivery of [the Pooling and Servicing
Agreement] [the Sale and Servicing Agreement and the Trust Agreement], the
Depositor will: (i) have equitable title to the interest in the Mortgage Loans
conveyed by the Seller, free and clear of any lien, mortgage, pledge, charge,
encumbrance, adverse claim or other security interest (collectively, "Liens");
(ii) not have assigned to any person (other than the [Owner] Trustee) any of
its right, title or interest in the Mortgage Loans, in the Purchase Agreement
or in [the Pooling and Servicing Agreement] [the Sale and Servicing
Agreement]; and (iii) have the power and authority to sell its interest in the
Mortgage Loans to the [Indenture] Trustee and to sell the Class [ ]
[Certificates] [Notes] to the Underwriters. Upon execution and delivery of
[the Pooling and Servicing Agreement] [the Sale and Servicing Agreement] by
the [Indenture] Trustee, the [Indenture] Trustee will have acquired beneficial
ownership of all of the Depositor's right, title and interest in and to the
Mortgage Loans. Upon delivery to the Underwriters of the Class [ ]
[Certificates] [Notes], the Underwriters will have good title to the Class [ ]
[Certificates] [Notes] free of any Liens.
M. Neither the Depositor nor the Trust created by [the Pooling and
Servicing Agreement] [the Trust Agreement] is an "investment company" within
the meaning of such term under the Investment Company Act of 1940 (the "1940
Act") and the rules and regulations of the Commission thereunder.
N. At the Closing Date, the Securities and [the Pooling and Servicing
Agreement] [the Sale and Servicing Agreement] and the Purchase Agreement will
conform in all material respects to the descriptions thereof contained in the
Prospectus.
O. At the Closing Date, the Class [ ] [Certificates] [Notes] shall
have been rated in the [highest] rating category by at least two nationally
recognized rating agencies.
P. Any taxes, fees and other governmental charges in connection with
the execution, delivery and issuance of the Agreements and the Securities have
been paid or will be paid at or prior to the Closing Date.
Any certificate signed by an officer of the Depositor and delivered to
the Underwriters or counsel for the Underwriters in connection with an
offering of the Class [ ] [Certificates] [Notes] shall be deemed, and shall
state that it is, a representation and warranty as to the matters covered
thereby to each person to whom the representations and warranties in this
Section I are made.
Section II. Purchase and Sale. The commitment of the Underwriters to
purchase the Class [ ] [Certificates] [Notes] pursuant to this Agreement shall
be deemed to have been made on the basis of the representations and warranties
herein contained and shall be subject to the satisfaction of the terms and
conditions set forth herein. The Depositor agrees to instruct the [Indenture]
Trustee to issue and agrees to sell to the Underwriters, and the Underwriters
agree (except as provided in Sections X and XI hereof) to purchase from the
Depositor, the Class [ ] [Certificates] [Notes] in the principal amounts set
forth opposite their names and at the purchase price set forth in Schedule A.
Section III. Delivery and Payment. Delivery of and payment for the
Class [ ] [Certificates] [Notes] to be purchased by the Underwriters shall be
made at the offices of Brown & Wood LLP, 1666 K Street, N.W., Washington, D.C.
20006, or at such other place as shall be agreed upon by the Underwriters and
the Depositor at [ ] a.m. Eastern time on [ ] or at such other time or date as
shall be agreed upon in writing by the Underwriters and the Depositor (such
date being referred to as the "Closing Date"). Payment shall be made to the
Depositor by wire transfer of same day funds payable to the account of the
Depositor. Delivery of the Class [ ] [Certificates] [Notes] shall be made to
the Underwriters for the account of the Underwriters against payment of the
purchase price thereof. The Class [ ] [Certificates] [Notes] shall be in such
denominations and registered in such names as the Underwriter may request in
writing at least two business days prior to the Closing Date. The Class [ ]
[Certificates] [Notes] will be made available for examination by the
Underwriters no later than [ ] p.m. Eastern time on the first business day
prior to the Closing Date.
Section IV. Offering by the Underwriters. It is understood that,
subject to the terms and conditions hereof, the Underwriters propose to offer
the Class [ ] [Certificates] [Notes] for sale to the public as set forth in
the Prospectus.
Section V. Covenants of the Depositor. The Depositor agrees as
follows:
A. To prepare the Prospectus in a form approved by the Underwriters
and to file such Prospectus pursuant to Rule 424(b) under the Securities Act
not later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement; to make no further
amendment or any supplement to the Registration Statement or to the Prospectus
prior to the Closing Date except as permitted herein; to advise the
Underwriters, promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has been filed and
to furnish the Underwriters with copies thereof; to file promptly all reports
and any definitive proxy or information statements required to be filed by the
Depositor with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the Prospectus and, for so long as
the delivery of a prospectus is required in connection with the offering or
sale of the Class [ ] [Certificates] [Notes], to promptly advise the
Underwriters of its receipt of notice of the issuance by the Commission of any
stop order or of: (i) any order preventing or suspending the use of the
Prospectus; (ii) the suspension of the qualification of the Class [ ]
[Certificates] [Notes] for offering or sale in any jurisdiction; (iii) the
initiation of or threat of any proceeding for any such purpose; (iv) any
request by the Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional information. In the
event of the issuance of any stop order or of any order preventing or
suspending the use of the Prospectus or suspending any such qualification, the
Depositor promptly shall use its best efforts to obtain the withdrawal of such
order by the Commission.
B. To furnish promptly to the Underwriters and to counsel for the
Underwriters a signed copy of the Registration Statement as originally filed
with the Commission, including all consents and exhibits filed therewith.
C. To deliver promptly to the Underwriters such number of the
following documents as the Underwriters shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case including exhibits); (ii)
the Prospectus and any amended or supplemented Prospectus; and (iii) any
document incorporated by reference in the Prospectus (including exhibits
thereto). If the delivery of a prospectus is required at any time prior to the
expiration of nine months after the Effective Time in connection with the
offering or sale of the Class [ ] [Certificates] [Notes], and if at such time
any events shall have occurred as a result of which the Prospectus as then
amended or supplemented would include any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason it
shall be necessary during such same period to amend or supplement the
Prospectus or to file under the Exchange Act any document incorporated by
reference in the Prospectus in order to comply with the Securities Act or the
Exchange Act, the Depositor shall notify the Underwriters and, upon the
Underwriters' request, shall file such document and prepare and furnish
without charge to the Underwriters and to any dealer in securities as many
copies as the Underwriters may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which corrects such
statement or omission or effects such compliance, and in case the Underwriters
are required to deliver a Prospectus in connection with sales of any of the
Class [ ] [Certificates] [Notes] at any time nine months or more after the
Effective Time, upon the request of the Underwriters but at its expense, the
Depositor shall prepare and deliver to the Underwriters as many copies as the
Underwriters may reasonably request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Securities Act.
D. To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Depositor or the Underwriters, be required by
the Securities Act or requested by the Commission.
E. Prior to filing with the Commission any (i) supplement to the
Prospectus, or document incorporated by reference in the Prospectus, or (ii)
Prospectus pursuant to Rule 424 of the Rules and Regulations, to furnish a
copy thereof to the Underwriters and counsel for the Underwriters and obtain
the consent of the Underwriters to the filing.
F. To make generally available to holders of the Class [ ]
[Certificates] [Notes] as soon as practicable, but in any event not later than
90 days after the close of the period covered thereby, a statement of earnings
of the Trust (which need not be audited) complying with Section 11(a) of the
Securities Act and the Rules and Regulations (including, at the option of the
Depositor, Rule 158) and covering a period of at least twelve consecutive
months beginning not later than the first day of the first fiscal quarter
following the Closing Date.
G. To use its best efforts, in cooperation with the Underwriters, to
qualify the Class [ ] [Certificates] [Notes] for offering and sale under the
applicable securities laws of such states and other jurisdictions of the
United States as the Underwriters may designate, and maintain or cause to be
maintained such qualifications in effect for as long as may be required for
the distribution of the Class [ ] [Certificates] [Notes]. The Depositor will
file or cause the filing of such statements and reports as may be required by
the laws of each jurisdiction in which the Class [ ] [Certificates] [Notes]
have been so qualified.
H. So long as the Class [ ] [Certificates] [Notes] shall be
outstanding, to deliver to the Underwriters as soon as such statements are
furnished to the [Indenture] Trustee: (i) the annual statement as to
compliance delivered to the [Indenture] Trustee pursuant to Section [5.16] of
[the Pooling and Servicing Agreement] [the Sale and Servicing Agreement]; (ii)
the annual statement of a firm of independent public accountants furnished to
the [Indenture] Trustee pursuant to Section [5.17] of [the Pooling and
Servicing Agreement] [the Sale and Servicing Agreement]; and (iii) the
[Indenture] Trustee Remittance Report furnished to the Securityholders
pursuant to Section [6.07] of [the Pooling and Servicing Agreement] [the Sale
and Servicing Agreement].
I. To apply the net proceeds from the sale of the Class [ ]
[Certificates] [Notes] in the manner set forth in the Prospectus.
Section VI. Conditions to the Underwriters' Obligations. The
obligation of the Underwriters to purchase the Class [ ] [Certificates]
[Notes] pursuant to this Agreement is subject to: (i) the accuracy on and as
of the Closing Date of the representations and warranties on the part of the
Depositor herein contained; (ii) the performance by the Depositor of all of
its obligations hereunder; and (iii) the following conditions as of the
Closing Date:
A. The Underwriters shall have received confirmation of the
effectiveness of the Registration Statement. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission. Any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus shall
have been complied with.
B. The Underwriters shall not have discovered and disclosed to the
Depositor on or prior to the Closing Date that the Registration Statement or
the Prospectus or any amendment or supplement thereto contains an untrue
statement of a fact or omits to state a fact which, in the opinion of [ ],
____ counsel ____ for the ____ Underwriters, ____ is ____ material ____ and is
required to be stated therein or is necessary to make the statements therein
not misleading.
C. All corporate proceedings and other legal matters relating to the
authorization, form and validity of the Agreements the Class [ ]
[Certificates] [Notes], the Registration Statement and the Prospectus, and all
other legal matters relating to this Agreement and the transactions
contemplated hereby shall be satisfactory in all respects to counsel for the
Underwriters, and the Depositor shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters.
D. Brown & Wood LLP shall have furnished to the Underwriters their
written opinion, as counsel to the Depositor, addressed to the Underwriters
and dated the Closing Date, in form and substance satisfactory to the
Underwriters, to the effect that:
1. The conditions to the use by the Depositor of a registration
statement on Form S-3 under the Securities Act, as set forth in the
General Instructions to Form S-3, have been satisfied with respect to
the Registration Statement and the Prospectus.
2. The Registration Statement and any amendments thereto have
become effective under the 1933 Act; to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and not withdrawn and no
proceedings for that purpose have been instituted or threatened and
not terminated; and the Registration Statement, the Prospectus and
each amendment or supplement thereto, as of their respective effective
or issue dates (other than the financial and statistical information
contained therein, as to which such counsel need express no opinion),
complied as to form in all material respects with the applicable
requirements of the 1933 Act and the rules and regulations thereunder.
3. To the best of such counsel's knowledge, there are no material
contracts, indentures or other documents of a character required to be
described or referred to in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto.
4. The statements in the base Prospectus under the headings
["Legal Aspects of Loans", "ERISA Considerations" and "Federal Income
Tax Considerations",] and the statements in the Prospectus Supplement
under the headings ["Summary--Federal Income Tax Considerations", and
"--ERISA Considerations", "Certain Federal Income Tax Considerations",
and "ERISA Considerations",] to the extent that they constitute
matters of federal law or legal conclusions with respect thereto, have
been reviewed by us and are correct in all material respects with
respect to those consequences or aspects that are discussed.
5. [The Pooling and Servicing Agreement conforms in all material
respects to the description thereof contained in the Prospectus and is
not required to be qualified under the Trust Indenture Act of 1939, as
amended, and the Trust is not required to be registered under the
Investment Company Act of 1940, as amended.]
6. [The Sale and Servicing Agreement and the Trust Agreement
conform in all material respects to the descriptions thereof contained
in the Prospectus Supplement and are not required to be qualified
under the Trust Indenture Act of 1939, as amended. The Indenture has
been duly qualified under the Trust Indenture Act of 1939, as
amended.]
7. Neither the Depositor nor the Trust is an "investment company"
or under the control of an "investment company" as such terms are
defined in the 1940 Act.
8. [The Trust as described in the Prospectus Supplement and the
Pooling and Servicing Agreement will qualify to be treated as a "real
estate mortgage investment conduit" (the "REMIC") as defined in the
Internal Revenue Code of 1986, as amended (the "Code"), the Class [ ]
Certificates will be treated as "regular interests" in the REMIC and
the Class [R] Certificates will be treated as the single class of
"residual interests" in the REMIC assuming: (i) an election is made to
treat the Trust as a REMIC, (ii) compliance with the Pooling and
Servicing Agreement and (iii) compliance with changes in the law,
including any amendments to the Code or applicable Treasury
regulations thereunder.]
9. The Class [ ] [Certificates] [Notes] will, when issued,
conform to the description thereof contained in the Prospectus.
Such counsel shall also have furnished to the Underwriters a written
statement, addressed to the Underwriters and dated the Closing Date, in form
and substance satisfactory to the Underwriters to the effect that no facts
have come to the attention of such counsel which lead them to believe that:
(a) the Registration Statement (other than the documents incorporated therein
by reference (including, without limitation, the Derived Information (as
defined below)) and the financial and statistical information contained
therein, as to which no opinion shall be given) at the time it became
effective, or at the date of such opinion, contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (b) the Purchaser Information (as defined in the Purchase
Agreement) in the Prospectus (other than the information incorporated therein
by reference, including, without limitation, the Derived Information) and the
financial, statistical and numerical information contained therein, as to
which no opinion shall be expressed, contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
E. The Underwriters shall have received the favorable opinion, dated
the Closing Date, of Brown & Wood LLP, counsel for the Depositor, addressed to
the Depositor [and satisfactory to the Insurer,] [_____________] and
[_________] ("[ ]" and, together with [______________], the "Rating Agencies")
and the Underwriters, with respect to certain matters relating to the transfer
of the Mortgage Loans to the Trust, and such counsel shall have consented to
reliance on such opinion by the Rating Agencies as though such opinion had
been addressed to them.
F. The Underwriters shall have received the favorable opinion, dated
the Closing Date, of [_________________], counsel to the Seller, addressed to
the Depositor, [the Insurer and] the Underwriters and satisfactory to the
Rating Agencies, with respect to certain matters relating to the transfer of
the Mortgage Loans to the Depositor, and such counsel shall have consented to
reliance on such opinion by the Rating Agencies as though such opinion had
been addressed to them.
G. (a) [_______________], counsel to the Seller, shall have furnished
to the Underwriters its opinion, addressed to the Underwriters, the Depositor
[and the Insurer,] dated the Closing Date, in form and substance satisfactory
to the Underwriters, to the effect that:
1. [__________________] has been duly organized, is validly
existing as a [______________________] in good standing under the laws
of the [_______________] and has all requisite power and authority to
own its properties and carry on its business and to execute, deliver
and perform the Purchase Agreement, [the Insurance Agreement and the
Indemnification Agreement.]
2. Each of the Purchase Agreement, [the Pooling and Servicing
Agreement] [the Sale and Servicing Agreement], [the Insurance
Agreement and the Indemnification Agreement] has been duly authorized,
executed and delivered by [ _______________ ], and constitutes the
legal, valid and binding agreements of [ _______________ ].
3. No consent, approval, authorization or order of, registration
or filing with, or notice to, any court or governmental agency or body
is required under any state or federal statute or regulation
applicable to [ ] for the execution, delivery or performance by [ ]
of, or compliance by [ ] with, the Purchase Agreement, [the Pooling
and Servicing Agreement] [the Sale and Servicing Agreement], [the
Insurance Agreement and the Indemnification Agreement], except such as
may be required under the blue sky laws of any jurisdiction.
4. There is no action, suit, proceeding or investigation pending
or, to such counsel's knowledge, threatened against [ ] which, in such
counsel's judgement, either in any one instance or in the aggregate
would draw into question the validity or enforceability of [the
Insurance Agreement, the Indemnification Agreement] [the Pooling and
Servicing Agreement] [the Sale and Servicing Agreement], or the
Purchase Agreement or the Securities or of any action taken or to be
taken in connection with the transaction contemplated thereby, or
which would be likely to impair materially the ability of [ ] to
perform its obligations under the terms of [the Insurance Agreement,
the Indemnification Agreement] [the Pooling and Servicing Agreement]
[the Sale and Servicing Agreement], or the Purchase Agreement.
5. Neither the transfer of the Mortgage Loans as provided by the
Purchase Agreement nor the consummation of the transaction
contemplated by or the fulfillment of the terms of [the Insurance
Agreement, the Indemnification Agreement], [the Pooling and Servicing
Agreement] [the Sale and Servicing Agreement] and the Purchase
Agreement (i) will result in a breach of any term or provision of the
articles of association or by-laws of [ ], (ii) will result in a
breach, violation or acceleration of, or constitute a default under
the terms of, any indenture or other material agreement or instrument
to which [ ] is a party or by which it is bound or subject, or (iii)
will result in a material breach of any statute or regulation
presently applicable to [ ] or any order, writ, injunction or decree
of any court, governmental agency or regulatory body to which [ ] is
subject or by which its or its properties are bound.
(b) [________________], counsel to Servicer, shall have furnished to
the Underwriters their opinion addressed to the Underwriters, the Depositor
[and the Insurer], dated the Closing Date, in form and substance satisfactory
to the Underwriters, to the effect that:
1. [_____________] has been duly organized, is validly existing
as a [_______________ ] in good standing under the laws of the
[_________________] and has all requisite power and authority to own
its properties and carry on its business and to execute, deliver and
perform [the Pooling and Servicing Agreement] [the Sale and Servicing
Agreement] [and the Insurance Agreement.]
2. Each of [the Pooling and Servicing Agreement] [the Sale and
Servicing Agreement] [and the Insurance Agreement] has been duly
authorized, executed and delivered by [_______________], and
constitutes the legal, valid and binding agreements of
[_____________________].
3. No consent, approval, authorization or order of, registration
or filing with, or notice to, any court or governmental agency or body
is required under any state or federal statute or regulation
applicable to [____________] for the execution, delivery or
performance by [_______________] of, or compliance by [___________]
with, [the Pooling and Servicing Agreement] [the Sale and Servicing
Agreement] [and the Insurance Agreement], except such as may be
required under the blue sky laws of any jurisdiction.
4. There is no action, suit, proceeding or investigation pending
or, to such counsel's knowledge, threatened against [____________]
which, in such counsel's judgement, either in any one instance or in
the aggregate would draw into question the validity or enforceability
of [the Pooling and Servicing Agreement] [the Sale and Servicing
Agreement] [or the Insurance Agreement] or the Securities or of any
action taken or to be taken in connection with the transaction
contemplated thereby, or which would be likely to impair materially
the ability of [___________ ] to perform its obligations under the
terms of [the Pooling and Servicing Agreement] [the Sale and Servicing
Agreement] [or the Insurance Agreement].
5. Neither the transfer of the Mortgage Loans as provided by the
Purchase Agreement nor the consummation of the transaction
contemplated by or the fulfillment of the terms of [the Pooling and
Servicing Agreement] [the Sale and Servicing Agreement] [and the
Insurance Agreement] (i) will result in a breach of any term or
provision of the articles of association or by-laws of [____________],
(ii) will result in a breach, violation or acceleration of, or
constitute a default under the terms of, any indenture or other
material agreement or instrument to which [___________] is a party or
by which it is bound or subject, or (iii) will result in a material
breach of any statute or regulation presently applicable to
[_____________] or any order, writ, injunction or decree of any court,
governmental agency or regulatory body to which [______________] is
subject or by which its or its properties are bound.
Such counsel shall also have furnished to the
Underwriters a written statement, addressed to the Underwriters and
dated the Closing Date, in form and substance satisfactory to the
Underwriters to the effect that no facts have come to the attention of
such counsel which lead them to believe that the information in the
Prospectus Supplement under the headings ["SUMMARY--The Mortgage
Loans," "--Servicer," and "--Servicing," and "THE SERVICER,"], other
than the financial, statistical and numerical information contained
therein, as to which no opinion shall be expressed, contained or
contains an untrue statement or a material fact or omitted or omits to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
H. Counsel for the Depositor shall have furnished to the Underwriters
its written opinion, addressed to the Underwriters and dated the Closing Date,
in form and substance satisfactory to the Underwriters, to the effect that:
1. The Depositor has been duly incorporated and is validly
existing as a limited liability company in good standing under the
laws of Delaware, and has all power and authority necessary to own or
hold its properties and to conduct the business in which it is engaged
and to enter into and perform its obligations under the Agreements,
and to cause the issuance of the Securities.
2. Each of the Agreements has been duly authorized, executed and
delivered by the Depositor and, assuming the due authorization,
execution and delivery of the Agreements by the other parties thereto,
each of the Agreements constitutes a valid and binding obligation of
the Depositor, enforceable against the Depositor in accordance with
their respective terms.
3. The execution, delivery and performance of the Agreements by
the Depositor, and the consummation of the transactions contemplated
thereby, do not and will not result in a material breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Depositor is a party or by which
the Depositor is bound or to which any of the property or assets of
the Depositor is subject, nor will such actions result in any
violation of the provisions of the certificate of formation or limited
liability company agreement of the Depositor or, to such counsel's
knowledge without independent investigation, any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Depositor or any of its properties or assets
(except for such conflicts, breaches, violations and defaults as would
not have a material adverse effect on the ability of the Depositor to
perform its obligations under the Agreements).
4. To such counsel's knowledge without any independent
investigation, no consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body of the United States or any other jurisdiction is
required for the issuance of the Securities and the sale of the Class
[ ] [Certificates] [Notes] to the Underwriters, or the consummation by
the Depositor of the other transactions contemplated by the
Agreements, except such consents, approvals, authorizations,
registrations or qualifications as (a) may be required under State
securities or Blue Sky laws, (b) have been previously obtained or (c)
the failure of which to obtain would not have a material adverse
effect on the performance by the Depositor of its obligations under,
or the validity or enforceability of, the Agreements.
5. There are no actions, proceedings or investigations pending
before or, to my knowledge, threatened by any court, administrative
agency or other tribunal to which the Depositor is a party or of which
any of its properties is the subject: (a) which if determined
adversely to the Depositor would have a material adverse effect on the
business, results of operations or financial condition of the
Depositor; (b) asserting the invalidity of the Agreements or the
Securities; (c) seeking to prevent the issuance of the Securities or
the consummation by the Depositor of any of the transactions
contemplated by the Agreements, as the case may be; (d) which might
materially and adversely affect the performance by the Depositor of
its obligations under, or the validity or enforceability of, the
Agreements.
I. The Underwriters shall have received the favorable opinion of
counsel to the [Indenture] Trustee, dated the Closing Date, addressed to the
Underwriters and in form and scope satisfactory to counsel to the
Underwriters, to the effect that:
1. The [Indenture] Trustee is a [___________________] corporation
with trust powers, duly organized and validly existing in good
standing under the laws of the United States, and has all requisite
power and authority to enter into [the Pooling and Servicing
Agreement] [the Sale and Servicing Agreement, the Indenture, the
Administration Agreement] [and the Insurance Agreement] and perform
its obligations thereunder.
2. [The Pooling and Servicing Agreement] [the Sale and Servicing
Agreement, the Indenture, the Administration Agreement] [and the
Insurance Agreement] have been duly authorized, executed and delivered
by the [Indenture] Trustee and constitute the legal, valid and binding
obligations of the [Indenture] Trustee, enforceable against the
[Indenture] Trustee in accordance with their respective terms, subject
to bankruptcy laws and other similar laws of general application
affecting creditors' rights and subject to the application of the
rules of equity, including those respecting the availability of
specific performance.
3. No approval, authorization or other action by, or filing with,
any court or governmental agency or authority having jurisdiction over
the banking or trust powers of the [Indenture] Trustee is required in
connection with its execution and delivery of [the Pooling and
Servicing Agreement] [the Sale and Servicing Agreement, the Indenture,
the Administration Agreement] [and the Insurance Agreement] according
to their terms.
4. The execution, delivery and performance of [the Pooling and
Servicing Agreement] [the Sale and Servicing Agreement, the Indenture,
the Administration Agreement] [and the Insurance Agreement] do not
result in a violation of (a) any law or regulation of the United
States governing the banking or trust powers of the [Indenture]
Trustee or any order, writ, judgement or decree of any court,
arbitrator or governmental authority applicable to the [Indenture]
Trustee or any of its assets or (b) the articles of association or
by-laws of the [Indenture] Trustee.
5. The Securities have been authenticated by the [Indenture]
Trustee in accordance with [the Pooling and Servicing Agreement]
[Indenture].
6. There are no actions, proceedings or investigations pending or
threatened against or affecting the [Indenture] Trustee before or by
any court, arbitrator, administrative agency or other governmental
authority which, if decided adversely to the [Indenture] Trustee,
would materially and adversely affect the ability of the [Indenture]
Trustee to carry out the transactions contemplated in [the Pooling and
Servicing Agreement] [the Sale and Servicing Agreement, the Indenture,
the Administration Agreement] or [the Insurance Agreement.]
J. The Underwriters shall have received the favorable opinion or
opinions, dated the date of the Closing Date, of counsel for the Underwriters,
with respect to the issue and sale of the Class [ ] [Certificates] [Notes],
the Registration Statement, this Agreement, the Prospectus and such other
related matters as the Underwriters may reasonably require.
K. [The Underwriters shall have received the favorable opinion dated
the Closing Date of counsel to the Insurer ("Insurer Counsel") in form and
scope satisfactory to counsel for the Underwriters, to the effect that:
1. The Insurer is a stock insurance corporation, duly
incorporated and validly existing under the laws of the State of
[_______________] and is licensed and has the power and authority to
issue the Policy under the laws of the State of
[______________________].
2. The Policy has been duly authorized, executed and delivered
and is the valid and binding obligation of the Insurer enforceable in
accordance with its terms, except that the enforcement of the Policy
may be limited by laws relating to bankruptcy, insolvency,
reorganization, moratorium, receivership and other similar laws
affecting creditors' rights generally and by general principles of
equity (regardless of whether the enforcement of such remedies is
considered in a proceeding in equity or at law).
3. The Insurer has the power and authority to perform its
obligations under the Insurance Agreement and the Indemnification
Agreement and the Insurance Agreement and the Indemnification
Agreement have been duly executed and are the valid and binding
obligations of the Insurer, each enforceable in accordance with its
terms, except that the enforcement of the Insurance Agreement and the
Indemnification Agreement may be limited by laws relating to
bankruptcy, insolvency, reorganization, moratorium, receivership and
other similar laws affecting creditors' rights generally and by
general principles of equity and, in the case of the Indemnification
Agreement, subject to principles of public policy limiting the right
to enforce the indemnification provisions contained therein insofar as
such provisions relate to indemnification for liabilities arising
under the securities laws.
4. No consent, approval, authorization, filing or order of any
state or federal court or governmental agency or body is required on
the part of the Insurer the lack of which would adversely affect the
validity and enforceability of the Policy.
5. The execution, delivery and performance by the Insurer of its
obligations under the Policy do not contravene any provision of the
charter or by-laws of the Insurer. The execution, delivery and
performance by the Insurer of its obligations under the Policy do not,
to the extent that either of the following would affect the validity
or enforceability of the Policy, (a) contravene any law or government
regulation or order presently binding on the Insurer or (b) contravene
any provision of or constitute a default under any indenture, contract
or other instrument to which the Insurer is a party or by which it is
bound.
6. To the extent that the Policy constitutes a security within
the meaning of Section 2(l) of the Securities Act, it is a security
exempt from the registration requirements of the Securities Act.
7. The description of the Policy in the Prospectus Supplement
under the headings ["The Insurer" and "Description of the
Securities--The Policy"] is, to the extent that such description
constitutes statements of matters of law or legal conclusions with
respect thereto, accurate in all material respects; provided, however,
that no opinion need be expressed as to the accuracy of any financial
statements or other financial or statistical data contained in or
omitted from the Prospectus Supplement, including such statements or
other information included under such caption or in any appendix to
the Prospectus Supplement.]
L. [The Underwriters shall have received the favorable opinion, dated
the Closing Date of [ _______________________ ], counsel to the Owner Trustee,
with respect to the issue and sale of the Class [ ] Notes and the Ownership
Interests, the status of the Trust, the Trust Agreement, perfections of
applicable security interests and such other matters as the Underwriters may
reasonably require.]
M. The Depositor shall have furnished to the Underwriters. a
certificate, dated the Closing Date, of its Chief Executive Officer, its
President, or a Vice President stating that:
1. The representations and warranties of the Depositor in Section
I of this Agreement are true and correct as of the Closing Date; and
the Depositor has complied with all its agreements contained herein.
2. Such person has carefully examined the Registration Statement
and the Prospectus and, in his opinion (x) as of the Effective Date,
the Registration Statement and Prospectus did not include an untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (y) since the Effective Date no event has
occurred which should have been set forth in a supplement or amendment
to the Registration Statement or the Prospectus.
N. The [Indenture] Trustee shall have furnished to the Underwriters a
certificate of the [Indenture] Trustee, signed by one or more duly authorized
officers of the [Indenture] Trustee, dated the Closing Date, as to the due
authorization, execution and delivery of [the Pooling and Servicing Agreement]
[the Sale and Servicing Agreement, Indenture] [and the Insurance Agreement] by
the [Indenture] Trustee and the acceptance by the [Indenture] Trustee of the
trusts created hereby and the due execution, authentication and delivery of
the Securities by the [Indenture] Trustee under [the Pooling and Servicing
Agreement] [Indenture] and such other matters as the Underwriters shall
reasonably request.
O. [The Policy shall have been issued by the Insurer and shall have
been duly authenticated by an authorized agent of the Insurer, if so required
under applicable state law or regulations.]
P. The Class [____] [Certificates] [Notes] shall have been rated
"[_____]" by [__________________] and "[____]" by [______________].
Q. The Underwriters shall have received at or before the Closing Date,
from [________________], letters, dated as of the date of this Agreement,
satisfactory in form and content (the "Initial Letters") and bring-down
letters dated as of the Closing Date, (A) confirming that they are independent
public accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission, (B) stating
the conclusions and findings of such firm with respect to the financial
information and other matters covered by its letter, and (C) in the case of
the bring-down letters, confirming in all material respects the conclusions
and findings set forth in the Initial Letters.
R. Prior to the Closing Date, counsel for the Underwriters shall have
been furnished with such documents and opinions as they may reasonably require
for the purpose of enabling them to pass upon the issuance and sale of the
Class [ ] [Certificates] [Notes] as herein contemplated and related
proceedings or in order to evidence the accuracy and completeness of any of
the representations and warranties, or the fulfillment of any of the
conditions, herein contained, and all proceedings taken by the Depositor in
connection with the issuance and sale of the Class [ ] [Certificates] [Notes]
as herein contemplated shall be satisfactory in form and substance to the
Underwriters and counsel for the Underwriters.
S. Subsequent to the execution and delivery of this Agreement none of
the following shall have occurred: (i) trading in securities generally on the
New York Stock Exchange, the American Stock Exchange or the over-the-counter
market shall have been suspended or minimum prices shall have been established
on either of such exchanges or such market by the Commission, by such exchange
or by any other regulatory body or governmental authority having jurisdiction;
(ii) a banking moratorium shall have been declared by Federal or state
authorities; (iii) the United States shall have become engaged in hostilities,
there shall have been an escalation of hostilities involving the United States
or there shall have been a declaration of a national emergency or war by the
United States; or (iv) there shall have occurred such a material adverse
change in general economic, political or financial conditions (or the effect
of international conditions on the financial markets of the United States
shall be such) as to make it, in the judgment of the Underwriters, impractical
or inadvisable to proceed with the public offering or delivery of the Class [
] [Certificates] [Notes] on the terms and in the manner contemplated in the
Prospectus.
If any condition specified in this Section VI shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Underwriters by notice to the Depositor at any time at or
prior to the Closing Date, and such termination shall be without liability of
any party to any other party except as provided in Section VII.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriters.
Section VII. Payment of Expenses. As between the Depositor and the
Underwriters, the Depositor agrees to pay: (a) the costs incident to the
authorization, issuance, sale and delivery of the Class [ ] [Certificates]
[Notes] and any taxes payable in connection therewith; (b) the costs incident
to the preparation, printing and filing under the Securities Act of the
Registration Statement and any amendments and exhibits thereto; (c) the costs
of distributing the Registration Statement as originally filed and each
amendment thereto and any post-effective amendments thereof (including, in
each case, exhibits), the Preliminary Prospectus, the Prospectus and any
amendment or supplement to the Prospectus or any document incorporated by
reference therein, all as provided in this Agreement; (d) the costs of
reproducing and distributing this Agreement; (e) the fees and expenses of
qualifying the Class [ ] [Certificates] [Notes] under the securities laws of
the several jurisdictions as provided in Section V(G) hereof and of preparing,
printing and distributing a Blue Sky Memorandum and a Legal Investment Survey
(including related fees and expenses of counsel to the Underwriters); (f) any
fees charged by securities rating services for rating the Class [ ]
[Certificates] [Notes]; and (g) all other costs and expenses incident to the
performance of the obligations of the Depositor (including costs and expenses
of your counsel); provided that, except as provided in this Section VII, the
Underwriters shall pay their own costs and expenses, including the costs and
expenses of their counsel, any transfer taxes on the Class [ ] [Certificates]
[Notes] which they may sell and the expenses of advertising any offering of
the Class [ ] [Certificates] [Notes] made by the Underwriters.
If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section VI, Section X or Section XI, the Depositor shall
reimburse the Underwriters for all reasonable out-of-pocket expenses,
including fees and disbursements of counsel to the Underwriters.
Section VIII. Indemnification and Contribution. A. The Depositor
agrees to indemnify and hold harmless the Underwriters and each person, if
any, who controls the Underwriters within the meaning of Section 15 of the
Securities Act from and against any and all loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, but not limited
to, any loss, claim, damage, liability or action relating to purchases and
sales of the Class [ ] [Certificates] [Notes]), to which the Underwriters or
any such controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement, (ii) 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, (iii) any
untrue statement or alleged untrue statement of a material fact contained in
the Prospectus or (iv) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading and shall reimburse the Underwriters and each such
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by the Underwriters or such controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Depositor shall not be liable in any such case to
the extent that any such loss, claim, damage, liability or action arises out
of, or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in the Prospectus or the Registration
Statement in reliance upon and in conformity with written information
furnished to the Depositor by or on behalf of the Underwriters specifically
for inclusion therein. The foregoing indemnity agreement is in addition to any
liability which the Depositor may otherwise have to the Underwriters or any
controlling person of the Underwriters.
B. Each Underwriter, severally, and not jointly, agrees to indemnify
and hold harmless the Depositor, each of its directors, each of its officers
who signed the Registration Statement, and each person, if any, who controls
the Depositor within the meaning of Section 15 of the Securities Act against
any and all loss, claim, damage or liability, or any action in respect
thereof, to which the Depositor or any such director, officer or controlling
person may become subject, under the Securities Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, (ii) 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, (iii) any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus or
(iv) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, but
in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was (i) made in reliance upon and in
conformity with written information furnished to the Depositor by or on behalf
of the Underwriters specifically for inclusion therein and (ii) in the Derived
Materials other than a misstatement or omission arising from a misstatement or
omission in the Seller-Provided Information, and shall reimburse the Depositor
and any such director, officer or controlling person for any legal or other
expenses reasonably incurred by the Depositor or any director, officer or
controlling person in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which the Underwriters may otherwise have to the Depositor or any
such director, officer or controlling person.
C. Promptly after receipt by any indemnified party under this Section
VIII of notice of any claim or the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
any indemnifying party under this Section VIII, notify the indemnifying party
in writing of the claim or the commencement of that action; provided, however,
that the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section VIII except to the extent it
has been materially prejudiced by such failure and, provided, further, that
the failure to notify any indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section VIII.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this
Section VIII for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if
such indemnified party notifies the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party,
the indemnifying party shall not have the right to assume the defense of such
action on behalf of such indemnified party, it being understood, however, the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for
the reasonable fees and expenses of more than one separate firm of attorneys
(in addition to local counsel) at any time for all such indemnified parties,
which firm shall be designated in writing by the Underwriters, if the
indemnified parties under this Section VIII consist of the Underwriters or any
of its controlling persons, or by the Depositor, if the indemnified parties
under this Section VIII consist of the Depositor or any of the Depositor's
directors, officers or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section VIII(A) and (B), shall use its best efforts to cooperate
with the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees
to indemnify and hold harmless any indemnified party from and against any loss
or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement.
D. Each Underwriter agrees to provide the Depositor no later than two
Business Days prior to which the Prospectus Supplement is required to be filed
pursuant to Rule 424 with a copy of its Derived Information for filing with
the Commission on Form 8-K.
E. Each Underwriter agrees, assuming all Seller-Provided Information
(as defined below) is accurate and complete in all material respects, to
indemnify and hold harmless the Depositor, each of the Depositor's officers
and directors and each person who controls the Depositor within the meaning of
Section 15 of the Securities Act against any and all losses, claims, damages
or liabilities, joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement of a material fact contained in the Derived Information
provided by either Underwriter, 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, in the light of the
circumstances under which they were made, not misleading, and agrees to
reimburse each such indemnified party for any legal or other expenses
reasonably incurred by him, her or it in connection with investigating or
defending or preparing to defend any such loss, claim, damage, liability or
action as such expenses are incurred. The obligations of the Underwriters
under this Section VIII(E) shall be in addition to any liability which the
Underwriters may otherwise have.
The procedures set forth in Section VIII(C) shall be equally
applicable to this Section VIII(E).
F. If the indemnification provided for in this Section VIII shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section VIII(A), (B) or (E) in respect of any loss, claim, damage
or liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Depositor on the one hand and the Underwriters on the other
from the offering of the Class [ ] [Certificates] [Notes] or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law or
if the indemnified party failed to give the notice required under Section
VIII(C), in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Depositor on the one hand and the Underwriters on the other with respect to
the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations.
The relative benefits of the Underwriters and the Depositor shall be
deemed to be in such proportions that the each Underwriter is responsible for
its pro rata portion of such losses, liabilities, claims, damages and expenses
determined in accordance with the ratio that the excess of the aggregate
resale price received by such Underwriter for the Class [ ] [Certificates]
[Notes] over the purchase price paid to the Depositor by such Underwriter
(before deducting expenses) bears to the aggregate resale price received by
such Underwriter for the Class [ ] [Certificates] [Notes], and the Depositor
shall be responsible for the balance.
The relative fault of the Underwriters and the Depositor shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Depositor or by the Underwriters, the intent of
the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission and other
equitable considerations.
The Depositor and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section VIII(F) were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above in
this Section VIII(F) shall be deemed to include, for purposes of this Section
VIII(F), any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
In no case shall the Underwriters be responsible for any amount in
excess of the difference between the purchase price paid to the Depositor by
the Underwriters and the aggregate resale price received by the Underwriters.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
G. For purposes of this Section VIII, the term "Derived Information"
means such portion, if any, of the information delivered to the Depositor
pursuant to Section VIII(D) for filing with the Commission on Form 8-K as:
(i) is not contained in the Prospectus without taking into
account information incorporated therein by reference; and
(ii) does not constitute Seller-Provided Information.
(iii) is of the type of information defined as Collateral term
sheets, Structural term sheets or Computational Materials (as such
terms are interpreted in the No-Action Letters (as defined below)).
"Seller-Provided Information" means the information contained on any computer
tape furnished to the Underwriters by [the Seller] concerning the assets
comprising the Trust.
The terms "Collateral term sheet" and "Structural term sheet" shall
have the respective meanings assigned to them in the February 13, 1995 letter
(the "PSA Letter") of Cleary, Gottlieb, Steen & Hamilton on behalf of the
Public Securities Association (which letter, and the SEC staff's response
thereto, were publicly available February 17, 1995). The term "Collateral term
sheet" as used herein includes any subsequent Collateral term sheet that
reflects a substantive change in the information presented. The term
"Computational Materials" has the meaning assigned to it in the May 17, 1994
letter (the "Kidder letter" and together with the PSA Letter, the "No-Action
Letters") of Brown & Wood llp on behalf of Kidder, Peabody & Co., Inc. (which
letter, and the SEC staff's response thereto, were publicly available May 20,
1994).
H. The Underwriters confirm that the information set forth (i) in the
[________] paragraph on the cover page, (ii) in the [___________] paragraphs
under the caption "Underwriting" in the Prospectus Supplement and (iii) the
Derived Information is correct and constitutes the only information furnished
in writing to the Depositor by or on behalf of the Underwriters specifically
for inclusion in the Registration Statement and the Prospectus.
Section IX. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or contained in certificates of officers of the Depositor submitted
pursuant hereto shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the Underwriters or
controlling persons thereof, or by or on behalf of the Depositor and shall
survive delivery of any Class [ ] [Certificates] [Notes] to the Underwriters.
Section X. Default by One of the Underwriters. If one of the
Underwriters participating in the public offering of the Class [ ]
[Certificates] [Notes] shall fail at the Closing Date to purchase the Class [
] [Certificates] [Notes] which it is obligated to purchase hereunder (the
"Defaulted Securities"), then the non-defaulting Underwriter shall have the
right, within 24 hours thereafter, to purchase all, but not less than all, of
the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth. If, however, the non-defaulting Underwriters have not
completed such arrangements within such 24-hour period, then:
(i) if the aggregate principal amount of Defaulted Securities does not
exceed 10% of the aggregate principal amount of the Class [ ] [Certificates]
[Notes] to be purchased pursuant to this Agreement, the non-defaulting
Underwriters shall be obligated to purchase the full amount thereof, or
(ii) if the aggregate principal amount of Defaulted Securities exceeds
10% of the aggregate principal amount of the Class [ ] [Certificates] [Notes]
to be purchased pursuant to this Agreement, this Agreement shall terminate,
without any liability on the part of the non-defaulting Underwriters.
No action taken pursuant to this Section X shall relieve a defaulting
Underwriter from the liability with respect to any default of such Underwriter
under this Agreement.
In the event of a default by any Underwriter as set forth in this
Section X, each of the non-defaulting Underwriters and the Depositor shall
have the right to postpone the Closing Date for a period not exceeding five
Business Days in order that any required changes in the Registration Statement
or Prospectus or in any other documents or arrangements may be effected.
Section XI. Termination of Agreement. The Underwriters may terminate
this Agreement immediately upon notice to the Depositor, at any time at or
prior to the Closing Date if any of the events or conditions described in
Section VI(S) of this Agreement shall occur and be continuing. In the event of
any such termination, the covenant set forth in Section V(D), the provisions
of Section VII, the indemnity agreement set forth in Section VIII, and the
provisions of Sections IX and XIII shall remain in effect.
Section XII. Notices. All statements, requests, notices and agreements
hereunder shall be in writing, and:
A. if to the Underwriters, shall be delivered or sent by mail, telex
or facsimile transmission to [___________________], [________________],
Attention: [________________________].
B. if to the Depositor, shall be delivered or sent by mail, telex or
facsimile transmission to Finance America Securities, LLC, 16802 Aston Street,
Irvine, California, Attention: [_________________________].
Section XIII. Persons Entitled to the Benefit of this Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriters
and the Depositor, and their respective successors. This Agreement and the
terms and provisions hereof are for the sole benefit of only those persons,
except that the representations, warranties, indemnities and agreements
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control the Underwriters within the meaning of
Section 15 of the Securities Act, and for the benefit of directors of the
Depositor, officers of the Depositor who have signed the Registration
Statement and any person controlling the Depositor within the meaning of
Section 15 of the Securities Act. Nothing in this Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section XIII, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
Section XIV. Survival. The respective indemnities, representations,
warranties and agreements of the Depositor and the Underwriters contained in
this Agreement, or made by or on behalf of them, respectively, pursuant to
this Agreement, shall survive the delivery of and payment for the Class [ ]
[Certificates] [Notes] and shall remain in full force and effect, regardless
of any investigation made by or on behalf of any of them or any person
controlling any of them.
Section XV. Definition of the Term "Business Day". For purposes of
this Agreement, "Business Day" means any day on which the New York Stock
Exchange, Inc. is open for trading.
Section XVI. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
Section XVII. Counterparts. This Agreement may be executed in
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
Section XVIII. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
<PAGE>
If the foregoing correctly sets forth the agreement between the
Depositor and the Underwriter, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
FINANCE AMERICA SECURITIES, LLC
By: ______________________________
Name:
Title:
CONFIRMED AND ACCEPTED, as of the date first above written:
[ ]
By: ___________________________
Name:
Title:
[ ]
By: ___________________________
Name:
Title:
[ ]
By: ___________________________
Name:
Title:
<PAGE>
SCHEDULE A
Initial Class Principal Balance and Purchase Price
of Class [ ] [Certificates] [Notes] Purchased by Underwriters
Class [ ] [Certificates] [Notes]
Underwriters Principal Purchase Price
[ ] $[ ] [ ]%
[ ] $[ ]
[ ] $[ ]
Total $[ ]
Class [ ] [Certificates] [Notes]
Underwriters Principal Purchase Price
[ ] $[ ] [ ]%
[ ] $[ ]
[ ] $[ ]
Total $[ ]
Exhibit 4.1
Form of Trust Agreement
<PAGE>
Exhibit No. 4.1
TRUST AGREEMENT
between
FINANCE AMERICA SECURITIES, LLC
as Depositor,
and
[ ]
as Owner Trustee
Dated as of [ ]
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE ONE
DEFINITIONS
Section 1.01. Capitalized Terms...........................................1
Section 1.02. Other Definitional Provisions...............................3
ARTICLE TWO
ORGANIZATION
Section 2.01. Name........................................................4
Section 2.02. Office......................................................4
Section 2.03. Purposes and Powers.........................................4
Section 2.04. Appointment of Owner Trustee................................5
Section 2.05. Initial Capital Contribution of Trust Estate................5
Section 2.06. Declaration of Trust........................................5
Section 2.07. Liability of the Owners.....................................5
Section 2.08. Title to Trust Property.....................................5
Section 2.09. Situs of Trust..............................................6
Section 2.10. Representations and Warranties of the Depositor.............6
Section 2.11. Federal Income Tax Allocations..............................7
Section 2.12. Investment Company..........................................7
ARTICLE THREE
CERTIFICATES AND TRANSFER OF INTERESTS
Section 3.01. Initial Ownership...........................................8
Section 3.02. The Certificates............................................8
Section 3.03. Authentication of Certificates..............................8
Section 3.04. Limitations on Transfer of the Certificates.................8
Section 3.05. Registration of Transfer and Exchange of Certificates......11
Section 3.06. Mutilated, Destroyed, Lost or Stolen Certificates..........11
Section 3.07. Persons Deemed Owners......................................12
Section 3.08. Access to List of Certificateholders' Names and Addresses..12
Section 3.09. Maintenance of Office or Agency............................12
Section 3.10. Appointment of Paying Agent................................12
Section 3.11. Book-Entry Certificates....................................13
Section 3.12. Notices to Clearing Agency.................................14
Section 3.13. Definitive Certificates....................................14
ARTICLE FOUR
ACTIONS BY OWNER TRUSTEE
Section 4.01. Prior Notice to Owners with Respect to Certain Matters.....14
Section 4.02. Action by Owners with Respect to Certain Matters...........17
Section 4.03. Action with Respect to Bankruptcy..........................17
Section 4.04. Restrictions on Owners' Power..............................18
Section 4.05. Majority Control...........................................18
ARTICLE FIVE
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
Section 5.01. Certificate Distribution Account...........................18
Section 5.02. Application of Trust Funds.................................18
Section 5.03. Method of Payment..........................................19
Section 5.04. Segregation of Moneys; No Interest.........................19
Section 5.05. Tax Administration.........................................19
ARTICLE SIX
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.01. General Authority..........................................20
Section 6.02. General Duties.............................................20
Section 6.03. Action upon Instruction....................................21
Section 6.04. No Duties Except as Specified in this Agreement
or in Instructions ......................................22
Section 6.05. No Action Except Under Specified Documents or
Instructions ............................................22
Section 6.06. Restrictions...............................................22
ARTICLE SEVEN
CONCERNING THE OWNER TRUSTEE
Section 7.01. Acceptance of Trusts and Duties............................23
Section 7.02. Furnishing of Documents....................................24
Section 7.03. Representations and Warranties.............................24
Section 7.04. Reliance; Advice of Counsel................................25
Section 7.05. Not Acting in Individual Capacity..........................25
Section 7.06. Owner Trustee Not Liable for Certificates or
Mortgage Loans ..........................................26
Section 7.07. Owner Trustee May Own Certificates and Notes...............26
Section 7.08. Doing Business in Other Jurisdictions......................26
Section 7.09. Licenses...................................................26
Section 7.10. Liability of Certificate Registrar and Paying Agent........27
ARTICLE EIGHT
COMPENSATION OF OWNER TRUSTEE
Section 8.01. Owner Trustee's Fees and Expenses..........................27
Section 8.02. Indemnification............................................27
Section 8.03. Payments to the Owner Trustee..............................28
ARTICLE NINE
TERMINATION OF TRUST AGREEMENT
Section 9.01. Termination of Trust Agreement.............................28
ARTICLE TEN
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.01. Eligibility Requirements for Owner Trustee.................29
Section 10.02. Resignation or Removal of Owner Trustee....................29
Section 10.03. Successor Owner Trustee....................................30
Section 10.04. Merger or Consolidation of Owner Trustee...................31
Section 10.05. Appointment of Co-Trustee or Separate Trustee..............31
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Supplements and Amendments.................................32
Section 11.02. No Legal Title to Trust Estate in Owners...................33
Section 11.03. Limitations on Rights of Others............................34
Section 11.04. Notices....................................................34
Section 11.05. Severability...............................................34
Section 11.06. Separate Counterparts......................................34
Section 11.07. Successors and Assigns.....................................34
Section 11.08. No Petition................................................34
Section 11.09. No Recourse................................................35
Section 11.10. Headings...................................................35
Section 11.11. Governing Law..............................................35
Section 11.12. [Grant of Certificateholder Rights to Note Insurer.........35
Section 11.13. [Third-Party Beneficiary...................................35
Section 11.14. [Suspension and Termination of Note Insurer's Rights.......36
Section 11.15. [Fiduciary Obligation to Holders of the Certificates.......36
<PAGE>
THIS [AMENDED AND RESTATED] TRUST AGREEMENT dated as of [ ] (the
"Trust Agreement"), between FINANCE AMERICA SECURITIES, LLC, a Delaware Limited
Liability Company, as depositor (the "Depositor") and [ ], a [ ] banking
corporation, as owner trustee (the "Owner Trustee").
W I T N E S S E T H:
In consideration of the mutual agreements and covenants herein
contained, the Depositor and the Owner Trustee hereby agree for the benefit of
each of them and the holders of the Certificates as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01 Capitalized Terms. For all purposes of this Agreement,
the following terms shall have the meanings set forth below:
Aggregate Voting Interests: The aggregate of the Voting Interests of
all or a specified Class or Classes of Certificates.
Agreement: This Trust Agreement, as the same may be amended and
supplemented from time to time.
Book-Entry Certificates: Beneficial interests in Certificates
designated as "Book-Entry Certificates" in this Agreement, ownership and
transfers of which shall be evidenced or made through book entries by a Clearing
Agency as described in Section 3.11; provided, that after the occurrence of a
condition whereupon Definitive Certificates are to be issued to Certificate
Owners, such Book-Entry Certificates shall no longer be "Book-Entry
Certificates." No Certificate shall be Book-Entry Certificate.
[Business Trust Statute: Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code section 3801 ET SEQ., as the same may be amended from time to
time.]
Certificate Depository Agreement: Any agreement among the Trust, the
Owner Trustee, the Administrator and The Depository Trust Company, as the
initial Clearing Agency relating to the Certificates pursuant to which a
Certificate is issued in book-entry form.
[Certificate of Trust: The Certificate of Trust substantially in the
form attached hereto as Exhibit B filed for the Trust pursuant to Section
3810(a) of the Business Trust Statute.]
Certificate Owner: With respect to a Book-Entry Certificate, the
Person that is the beneficial owner of such Book-Entry Certificate, as reflected
on the books of the Clearing Agency or on the books of a Person maintaining an
account with such Clearing Agency (directly as a Clearing Agency Participant or
as an indirect participant, in each case in accordance with the rules of such
Clearing Agency).
Certificate Register and Certificate Registrar: The register mentioned
and the registrar appointed pursuant to Section 3.05.
Certificateholder or Holder: A Person in whose name a Certificate is
registered on the Certificate Register.
Corporate Trust Office: With respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee, located at [ ],
Attention: [ ], or at such other address as the Owner Trustee may designate by
notice to the Owners, [the Note Insurer] and the Depositor, or the principal
corporate trust office of any successor Owner Trustee at the address designated
by such successor Owner Trustee by notice to the Owners and the Depositor.
Definitive Certificate: As defined in Section 3.11.
ERISA-Restricted Certificate: Any Certificate.
Expenses: The meaning assigned to such term in Section 8.02.
Indemnified Parties: The meaning assigned to such term in Section
8.02.
Non-United States Person: Any person other than a United States
Person.
Owner: Each Holder of a Certificate.
Paying Agent: Any paying agent or co-paying agent appointed pursuant
to Section 3.10; the initial Paying Agent shall be Bankers Trust Company.
Prospective Owner: Each prospective purchaser and any subsequent
transferee of a Certificate.
Residual Interest Certificate: Any residual interest certificate
evidencing the ownership interest in the Trust, substantially in the form
attached hereto as Exhibit A.
Sale and Servicing Agreement: The Sale and Servicing Agreement dated
as of [ ], among the Trust, as issuer, the Depositor, the Servicer, and [ ], as
Indenture Trustee, as such may be amended or supplemented from time to time.
Secretary of State: The Secretary of State of the State of [ ].
Treasury Regulations: Regulations, including proposed or temporary
regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
Trust: The trust established under this Agreement.
Voting Interests: The portion of the voting rights of all the
Certificates that is allocated to any Certificate for purposes of the voting
provisions of this Agreement. At all times during the term of this Agreement,
Voting Interests shall be allocated to the Residual Interest Certificates.
Voting Interests allocated to any Class of Certificates shall be allocated among
the Certificates of such Class in proportion to the Percentage Interests
thereof. Notwithstanding the foregoing, solely for the purposes of the giving of
any consent, waiver, request or demand pursuant to this Agreement, any
Certificate registered in the name of the Seller, the Issuer, the Owner Trustee,
the Indenture Trustee, the Servicer, the Administrator or any of their
respective Affiliates, shall be deemed not to be outstanding and the Voting
Interests allocated thereto shall not be taken into account in determining
whether the requisite Aggregate Voting Interests necessary to take any such
action or effect any such consent, waiver, request or demand have been obtained
(unless such action requires the consent, waiver, request or demand of 100% of
the Aggregate Voting Interests represented by a particular Class and 100% of the
Voting Interests represented by such Class are registered in the name of one or
more of the foregoing entities). The Owner Trustee may obtain and conclusively
rely upon a certificate of the Issuer, the Seller, the Servicer or any
Sub-Servicer to determine whether a Certificate is registered in the name of an
Affiliate of any of them.
Section 1.02 Other Definitional Provisions. (a) Capitalized terms used
and not otherwise defined herein have the meanings assigned to them in the Sale
and Servicing Agreement or, if not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE TWO
ORGANIZATION
Section 2.01 Name. The Trust created hereby shall be known as "Finance
America Securities, LLC [ ] Trust [ ]," in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and sue and be sued.
Section 2.02 Office. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address in [ ] as the
Owner Trustee may designate by written notice to the Owners, [the Note Insurer]
and the Depositor.
Section 2.03 Purposes and Powers. (a) The purpose of the Trust is to
engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the
Certificates pursuant to this Agreement and to sell the Notes and the
Certificates;
(ii) with the proceeds of the sale of the Notes and the
Certificates, to purchase the Mortgage Loans, to pay the
organizational, start-up and transactional expenses of the Trust and
to pay the balance to the Depositor pursuant to the Sale and Servicing
Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey the
Trust Estate pursuant to the Indenture and to hold, manage and
distribute to the Owners pursuant to the terms of the Sale and
Servicing Agreement any portion of the Trust Estate released from the
lien of, and remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with
conservation of the Trust Estate and the making of distributions to
the Owners and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
Section 2.04. Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
Section 2.05. Initial Capital Contribution of Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Trust Estate and
shall be deposited in the Certificate Distribution Account. The Depositor shall
pay organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee.
Section 2.06. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Trust Estate in trust upon and subject to the conditions
set forth herein for the use and benefit of the Owners, subject to the
obligations of the Trust under the Basic Documents. It is the intention of the
parties hereto that the Trust constitute a [business trust under the Business
Trust Statute] [trust under the common law of the State of New York] and that
this Agreement constitute the governing instrument of such [business] trust. It
is the intention of the parties hereto that, solely for federal, state and local
income and franchise tax purposes (i) so long as the sole owners of the Trust
are the Residual Interestholders, (A) the Trust shall be treated as a [grantor
trust], with the assets of the Trust being the Mortgage Loans and other assets
held by the Trust and the Notes being non-recourse debt of the sole owner, and
(B) the arrangement between the Residual Interestholders' interest in the
Mortgage Loans and the Noteholders shall be treated as a security arrangement,
and (ii) if the Residual Interestholders are not the sole owners of the Trust,
the Trust shall be treated as a partnership for income and franchise tax
purposes, with the assets of the partnership being the Mortgage Loans and other
assets held by the Trust, the partners of the partnership being the owners and
notes being debt of the partnership to the extent they have not otherwise been
recharacterized. The Trust shall not elect to be treated as an association under
Treasury Regulation Section 301, 7701-3(a) for federal income tax purposes. The
parties agree that, unless otherwise required by appropriate tax authorities,
the Trust will file or cause to be filed annual or other necessary returns,
reports and other forms consistent with the characterization of the Trust as a
security arrangement for tax purposes. Effective as of the date hereof, the
Owner Trustee shall have all rights, powers and duties set forth herein [and in
the Business Trust Statute] with respect to accomplishing the purposes of the
Trust.
Section 2.07. Liability of the Owners. No Owner shall have any
personal liability for any liability or obligation of the Trust.
Section 2.08. Title to Trust Property.
(a) Subject to the Indenture, legal title to the Trust Estate shall be
vested at all times in the Trust as a separate legal entity except where
applicable law in any jurisdiction requires title to any part of the Trust
Estate to be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee, a co-trustee and/or a separate
trustee, as the case may be.
(b) The Owners shall not have legal title to any part of the Trust
Estate. No transfer by operation of law or otherwise of any interest of the
Owners shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of any part of
the Trust Estate.
Section 2.09. Situs of Trust. The Trust will be located and
administered in the State of [ ]. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of [ ] [or the
State of New York], except with respect to accounts maintained by the
Administrator or the Indenture Trustee on behalf of the Owner Trustee. The Trust
shall not have any employees in any state other than [ ]; PROVIDED, HOWEVER,
that nothing herein shall restrict or prohibit the Owner Trustee from having
employees within or without the State of [ ]. Payments will be received by the
Trust only in [ ] [or New York], and payments will be made by the Trust only
from [ ] [or New York]. The only office of the Trust will be at the Corporate
Trust Office in [ ].
Section 2.10. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee [and the Note
Insurer] that:
(a) The Depositor is a [limited liability company] duly organized,
validly existing, and in good standing under the laws of the State of
[Delaware].
(b) The Depositor has the corporate power and authority to execute and
deliver this Agreement and to perform in accordance herewith; the execution,
delivery and performance of this Agreement (including all instruments of
transfer to be delivered pursuant to this Agreement) by the Depositor and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action of the Depositor.
(c) This Agreement evidences the valid, binding and enforceable
obligation of the Depositor; and all requisite action has been taken by the
Depositor to make this Agreement valid, binding and enforceable upon the
Depositor in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium and other, similar laws relating to or
affecting creditors' rights generally or the application of equitable principles
in any proceeding, whether at law or in equity.
(d) No consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required for
the execution, delivery and performance of or compliance by the Depositor with
this Agreement or the consummation by the Depositor of any of the transactions
contemplated hereby, except as have been made on or prior to the Closing Date.
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof do not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under, the charter or bylaws of the Depositor, or
conflict with or breach any of the material terms or provisions of, or
constitute (with or without lapse of time) a default under, any indenture,
agreement or other instrument to which the Depositor is a party or by which it
is bound; or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); or violate any law or,
to the best knowledge of the Depositor, any order, rule or regulation applicable
to the Depositor of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Depositor or its properties.
(f) There are no proceedings or investigations pending or, to the best
knowledge of the Depositor, threatened before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality (A)
asserting the invalidity of this Agreement, (B) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or (C)
seeking any determination or ruling that, in the reasonable judgment of the
Depositor, would materially and adversely affect the performance by the
Depositor of its obligations under this Agreement.
(g) The Depositor 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 other governmental agency, which default might have consequences
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Depositor or its properties or might have
consequences that would materially and adversely affect its performance
hereunder.
(h) The representations and warranties of the Depositor in Section
[3.02] of the Sale and Servicing Agreement are true and correct.
(i) The Depositor shall not take any action (i) that is inconsistent
with the purposes of the Trust set forth in Section 2.03 or (ii) that, to the
actual knowledge of the Depositor, would result in the Trust's becoming taxable
as a corporation for federal income tax purposes.
Section 2.11. Federal Income Tax Allocations. Net income of the Trust
as computed for federal income tax purposes (including each item of income,
gain, and deduction, but not including any default loss realized by the Trust
with respect to the Mortgage Loans) for any taxable year shall be allocated as
follows: (a) to the extent that the Certificates are owned (for federal income
tax purposes) by a single owner, 100% to the Certificateholder, and (b) to the
extent that a Holder of a Certificate is different from the Residual
Interestholders, income shall be calculated separately for each Certificate
based on the respective Mortgage Loans and other assets of the Trust treated as
owned by the particular Certificate of the related Class and income shall be
allocated to each Certificateholder accordingly.
Section 2.12. Investment Company. The Depositor hereby agrees, and
each Certificateholder shall be deemed to have agreed by acceptance of such
Certificate, not to take any action that would cause the Trust to become an
"investment company" which would be required to register under the Investment
Company Act of 1940, as amended.
ARTICLE THREE
CERTIFICATES AND TRANSFER OF INTERESTS
Section 3.01. Initial Ownership. Upon the formation of the Trust by
the contribution by the Depositor pursuant to Section 2.05 and until the
issuance of the Certificates, the Depositor shall be the sole beneficiary of the
Trust. Upon such issuance of the Certificates, the Depositor shall cease to be
the beneficial owner of the Trust and its beneficial interest in the Trust shall
be and shall be deemed cancelled, void, and of no further force and effect.
Section 3.02. The Certificates. Each Residual Interest Certificate
shall be issued and maintained in definitive, fully registered form as a single
Certificate evidencing a Percentage Interest of not less than 25%. Each
Certificate shall be executed on behalf of the Trust by manual or facsimile
signature of an authorized officer of the Owner Trustee. Certificates bearing
the manual or facsimile signatures of individuals who were, at the time when
such signatures shall have been affixed, authorized to sign on behalf of the
Trust, shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Certificates or did
not hold such offices at the date of authentication and delivery of such
Certificates.
Upon issuance of the Certificates, the Owner Trustee shall
authenticate the Certificates in accordance with the written instructions of the
prospective transferee thereof. Neither the Certificate Registrar nor the Owner
Trustee shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of any such Certificate, the Owner Trustee shall recognize the
Holders of the Certificates as Certificateholders. The Certificates shall be
printed, lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Owner Trustee, as evidenced by its execution
thereof.
A transferee of a Certificate shall become a Certificateholder and
shall be entitled to the rights and subject to the obligations of a
Certificateholder hereunder upon such transferee's acceptance of a Certificate
duly registered in such transferee's name pursuant to Section 3.04.
Section 3.03. Authentication of Certificates. On the Closing Date, the
Owner Trustee shall cause the Certificates to be executed on behalf of the
Trust, authenticated and delivered to or upon the written order of the
Depositor, without further trust action by the Depositor, in authorized
denominations. No Certificate shall entitle its Holder to any benefit under this
Agreement or be valid for any purpose unless there shall appear on such
Certificate a certificate of authentication substantially in the forms set forth
in Exhibit A, executed by the Owner Trustee or the Owner Trustee's
authenticating agent, by manual signature; such authentication shall constitute
conclusive evidence that such Certificate shall have been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication.
Section 3.04. Limitations on Transfer of the Certificates. (a) Each
Prospective Owner of a Book-Entry Certificate other than the Depositor or the
Seller or an affiliate of either of them shall be deemed to have represented and
warranted, and each Prospective Owner of a Definitive Certificate and each
Prospective Owner of a Certificate upon initial issuance shall represent and
warrant in writing, in substantially the form set forth in Exhibit C or Exhibit
D, as applicable, to the Owner Trustee, [the Note Insurer] and the Certificate
Registrar and any of their respective successors that:
(i) Such Person is duly authorized to purchase the Certificates
and its purchase of investments having the characteristics of the
Certificates is authorized under, and not directly or indirectly in
contravention of, any law, charter, trust instrument or other
operative document, investment guidelines or list of permissible or
impermissible investments that is applicable to the investor; and
(ii) Such Person understands that each holder of a Certificate,
by virtue of its acceptance thereof, assents to the terms, provisions
and conditions of the Agreement.
(b) Each Prospective Owner of a Book-Entry Certificate shall be deemed
to have represented and warranted, and each Prospective Owner of a Definitive
Certificate and each Prospective Owner of a Certificate upon initial issuance,
shall represent and warrant in writing, in substantially the form set forth in
Exhibit C or Exhibit D, as applicable, to the Owner Trustee, [the Note Insurer]
and the Certificate Registrar and any of their respective successors that:
(i) Such Person is (A) a qualified institutional buyer (a "QIB")
as defined in Rule 144A under the Securities Act ("Rule 144A") and is
aware that the seller of such Certificate may be relying on the
exemption from the registration requirements of the Securities Act
provided by Rule 144A and is acquiring such Certificate for its own
account or for the account of one or more qualified institutional
buyers for whom it is authorized to act, or (B), in the case of a
Prospective Owner of a Certificate other than the Residual Interest
Certificate, an institutional investor that is an "accredited
investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
(ii) It understands that such Certificates have not been
registered under the Securities Act, and that, if in the future it
decides to offer, resell, pledge or otherwise transfer such
Certificates, such Certificates may be offered, resold, pledged or
otherwise transferred only (A) pursuant to a registration statement
which has been declared effective under the Securities Act, (B) for so
long as such Certificates are eligible for resale pursuant to Rule
144A, to a person whom the seller reasonably believes is a QIB that is
purchasing such Certificates for its own account or for the account of
a QIB to whom notice is given that the transfer is being made in
reliance on Rule 144A, or (C) to an institutional "accredited
investor" within the meaning of subparagraph (a)(1), (2), (3) or (7)
of Rule 501 under the Securities Act that is acquiring such
Certificates for its own account or for the account of an
institutional "accredited investor," for investment purposes and not
with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act, in each case in
compliance with the requirements of the Trust Agreement.
In the event that a transfer of a Definitive Certificate is to be made
in reliance upon an exemption from the Securities Act and state securities laws,
in order to assure compliance with the Securities Act and such laws, the
prospective transferee shall certify to the Owner Trustee [and the Note Insurer]
in writing the facts surrounding the transfer in substantially the form set
forth in Exhibit C or Exhibit D, as applicable. As a condition to any transfer
pursuant to clause (b)(ii)(C) above, the Owner Trustee, [the Note Insurer] or
the Certificate Registrar may require that the prospective transferee (x)
certify in writing that such transfer is to be made in accordance with Rule 144
under the Securities Act or (y) deliver an Opinion of Counsel satisfactory to
the Owner Trustee, [the Note Insurer] or the Certificate Registrar, as
applicable, to the effect that such transfer will be exempt from registration
under the Securities Act.
The Owner Trustee on behalf of the Depositor (and with the Depositor's
cooperation) shall provide to any Holder of a Certificate and any prospective
transferee designated by any such Holder, information regarding the Certificates
and the Mortgage Loans and such other information as shall be necessary to
satisfy the condition to eligibility set forth in Rule 144A(d)(4) for transfer
of any such Certificate without registration thereof under the Securities Act
pursuant to the registration exemption provided by Rule 144A. Each Holder of a
Definitive Certificate desiring to effect such a transfer shall, and does hereby
agree to, indemnify the Trust, the Owner Trustee, [the Note Insurer] and the
Depositor against any liability that may result if the transfer is not so exempt
or is not made in accordance with federal and state securities laws.
(c) With respect to transfers of ERISA-Restricted Certificates, each
Prospective Owner of a Book-Entry Certificate shall be deemed to have
represented and warranted, and each Prospective Owner of a Definitive
Certificate and each Prospective Owner of a Certificate upon initial issuance
shall represent and warrant in writing, in substantially the form set forth in
Exhibit E, to the Owner Trustee, [the Note Insurer] and the Certificate
Registrar and any of their respective successors that (i) such Prospective Owner
is not, and on the date of transfer of such Certificate will not be, and on such
date will not be investing the funds of, an employee benefit plan subject to
ERISA or a plan subject to Section 4975 of the Code or (ii) such Prospective
Owner is an insurance company investing assets of its general account and the
exemptions provided by Section III(a) of Department of Labor Prohibited
Transaction Class Exemption 95-60, 60 Fed. Reg. 35925 (July 12, 1995) apply to
such Prospective Owner's acquisition and holding of such Certificate. No
transfer of an ERISA-Restricted Certificate that is also a Definitive
Certificate shall be made to any Person unless the Owner Trustee has received a
certificate from the transferee in substantially the form set forth in Exhibit E
to the foregoing effect.
(d) Notwithstanding anything to the contrary herein, no transfer of
any Residual Interest Certificate shall be made to any Person unless the Owner
Trustee has received a certificate (i) from the transferee in substantially the
form set forth in Exhibit D, to the effect that such Person is a QIB and is
aware that the seller of such Certificate may be relying on the exemption from
the registration requirements of the Securities Act provided by Rule 144A and is
acquiring such Certificate for its own account or for the account of one or more
QIBs for whom it is authorized to act or (ii) to the effect that the transferee
is the Depositor or the Seller, or an affiliate (as defined in Rule 405 under
the Securities Act) of the Depositor or the Seller, and in each case stating
that such person understands that such Residual Interest Certificate bears a
legend substantially similar to the legend provided in Exhibit A hereto.
(e) The Owner Trustee shall cause each Certificate to contain a
legend, substantially similar to the applicable legends provided in Exhibit A
hereto, stating that transfer of such Certificate is subject to certain
restrictions and referring prospective purchasers of the Certificates to this
Section 3.04 with respect to such restrictions.
Section 3.05. Registration of Transfer and Exchange of Certificates.
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.09, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Administrator is hereby
appointed as the initial Certificate Registrar.
Upon surrender for registration of transfer of any Certificate at the
office or agency maintained pursuant to Section 3.09 and upon satisfaction of
the applicable conditions set forth in Section 3.04, the Owner Trustee shall
execute, authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of a like
aggregate amount dated the date of authentication by the Owner Trustee or any
authenticating agent. At the option of a Holder, Certificates may be exchanged
for other Certificates of authorized denominations of a like aggregate amount
upon surrender of the Certificates to be exchanged at the office or agency
maintained pursuant to Section 3.09.
Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Holder or such Holder's attorney duly authorized in writing.
Each Certificate surrendered for registration of transfer or exchange shall be
cancelled and subsequently disposed of by the Owner Trustee in accordance with
its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
Section 3.06. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate shall be surrendered to the Certificate Registrar,
or if the Certificate Registrar shall receive evidence to its satisfaction of
the destruction, loss or theft of any Certificate and (b) there shall be
delivered to the Certificate Registrar and the Owner Trustee such security or
indemnity as may be required by them to save each of them harmless, then in the
absence of notice that such Certificate has been acquired by a bona fide
purchaser , and upon certification provided by the Holder of such Certificate
that the requirements of Section 8-405 of the Relevant UCC have been met, the
Owner Trustee on behalf of the Trust shall execute and the Owner Trustee or the
Owner Trustee's authenticating agent, shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and denomination. In connection
with the issuance of any new Certificate under this Section, the Owner Trustee
or the Certificate Registrar may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Certificate issued pursuant to this Section shall
constitute conclusive evidence of ownership in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
Section 3.07. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Owner Trustee, the Certificate
Registrar or any Paying Agent may treat the Person in whose name any Certificate
is registered in the Certificate Register as the owner of such Certificate for
the purpose of receiving distributions pursuant to Section 5.02 and for all
other purposes whatsoever, and none of the Owner Trustee, the Certificate
Registrar or any Paying Agent shall be bound by any notice to the contrary.
Section 3.08. Access to List of Certificateholders' Names and
Addresses. The Certificate Registrar shall furnish or cause to be furnished to
the Servicer, [the Note Insurer] and the Depositor, within 15 days after receipt
by the Certificate Registrar of a written request therefor from the Servicer,
[the Note Insurer] or the Depositor, a list, in such form as the Servicer or the
Depositor may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date. If three or more
Certificateholders or one or more Holders of Certificates evidencing not less
than 25% of the Voting Interests of the Certificates apply in writing to the
Certificate Registrar, and such application states that the applicants desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates and such application is accompanied by
a copy of the communication that such applicants propose to transmit, then the
Certificate Registrar shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to the
current list of Certificateholders. Each Holder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Depositor,
[the Note Insurer] the Certificate Registrar or the Owner Trustee accountable by
reason of the disclosure of its name and address, regardless of the source from
which such information was derived.
Section 3.09. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or offices
or agency or agencies where Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Owner Trustee
in respect of the Certificates and the Basic Documents may be served. The Owner
Trustee initially designates the Administrator's office in New York as its
office for such purposes. The Owner Trustee shall give prompt written notice to
the Depositor, [the Note Insurer] and to the Certificateholders of any change in
the location of the Certificate Register or any such office or agency.
Section 3.10. Appointment of Paying Agent. The Paying Agent shall make
distributions to Certificateholders from the Certificate Distribution Account
pursuant to Section 5.02 and shall report the amounts of such distributions to
the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. The Owner Trustee may revoke such power and
remove the Paying Agent if the Owner Trustee determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect. The Paying Agent initially shall be the
Administrator (who is hereby appointed as Paying Agent), and any co-paying agent
chosen by the Depositor and acceptable to the Owner Trustee. The Administrator
shall be permitted to resign as Paying Agent upon 30 days' written notice to the
Owner Trustee. In the event that the Administrator shall no longer be the Paying
Agent, the Owner Trustee shall promptly appoint a successor to act as Paying
Agent (which shall be a bank or trust company). The Owner Trustee shall cause
such successor Paying Agent or any additional Paying Agent appointed by the
Owner Trustee to execute and deliver to the Owner Trustee an instrument in which
such successor Paying Agent or additional Paying Agent shall agree with the
Owner Trustee that, as Paying Agent, such successor Paying Agent or additional
Paying Agent will hold all sums, if any, held by it for payment to the
Certificateholders in trust for the benefit of the Certificateholders entitled
thereto until such sums shall be paid to such Certificateholders. The Paying
Agent shall return all unclaimed funds to the Owner Trustee and upon removal of
a Paying Agent such Paying Agent shall also return all funds in its possession
to the Owner Trustee. The provisions of Sections 7.01, 7.03, 7.04 and 8.01 shall
apply to the Owner Trustee also in its role as Paying Agent, for so long as the
Owner Trustee shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise.
Section 3.11. Book-Entry Certificates. Any Book-Entry Certificates
shall be issued in the form of typewritten certificates or global certificates
representing Book-Entry Certificates, to be delivered to, or to the
Administrator as custodian for, The Depository Trust Company, the initial
Clearing Agency, by or on behalf of the Trust. Such Book-Entry Certificate or
Book-Entry Certificates shall initially be registered on the Certificate
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and except as provided in Section 3.13, no Certificate Owner will receive a
Definitive Certificate representing such Certificate Owner's interest in such
Book-Entry Certificate. So long as any Book-Entry Certificates are outstanding,
unless and until definitive, fully registered Certificates (the "Definitive
Certificates") have been issued to Certificate Owners pursuant to Section 3.13:
(a) The provisions of this Section shall be in full force and effect;
(b) The Certificate Registrar and the Owner Trustee shall be entitled
to deal with the Clearing Agency for all purposes of this Agreement (including
the payment of principal of and interest on the Book-Entry Certificates and the
giving of instructions or directions hereunder) as the sole Holder of the
Book-Entry Certificates and shall have no obligation to the Certificate Owners;
(c) To the extent that the provisions of this Section conflict with
any other provisions of this Agreement, the provisions of this Section shall
control;
(d) The rights of Certificate Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Certificate Owners and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Certificate Depository Agreement,
unless and until Definitive Certificates are issued pursuant to Section 3.13,
the initial Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments of principal of and
interest on the Book-Entry Certificates to such Clearing Agency Participants;
and
(e) Whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of Holders of Book-Entry Certificates
evidencing a specified percentage of the Voting Interests thereof, the Clearing
Agency shall be deemed to represent such percentage only to the extent that it
has received instructions to such effect from Certificate Owners and/or Clearing
Agency Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Book-Entry Certificates and has
delivered such instructions to the Owner Trustee.
Section 3.12. Notices to Clearing Agency. So long as any Book-Entry
Certificates are outstanding, whenever a notice or other communication to a
Certificateholder is required under this Agreement, unless and until Definitive
Certificates shall have been issued to Certificate Owners pursuant to Section
3.13, the Owner Trustee shall give all such notices and communications specified
herein to be given to Certificateholders to the Clearing Agency, and shall have
no obligations to the Certificate Owners.
Section 3.13. Definitive Certificates. So long as any Book-Entry
Certificates are outstanding, if (i) the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Certificates and the Issuer is unable to locate a qualified successor, (ii) the
Issuer at its option advises the Owner Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Default under the Indenture or an Event of Servicer
Default under the Sale and Servicing Agreement, Certificate Owners representing
beneficial interests aggregating at least a majority of the Voting Rights advise
the Clearing Agency in writing that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interest of the Certificate
Owners, then the Clearing Agency shall notify all Certificate Owners and the
Owner Trustee of the occurrence of any such event and of the availability of the
Definitive Certificates to Certificate Owners requesting the same. Upon
surrender to the Owner Trustee of the typewritten Certificate or Certificates
representing the Book-Entry Certificates by the Clearing Agency, accompanied by
registration instructions, the Owner Trustee shall execute and authenticate the
Definitive Certificates in accordance with the instructions of the Clearing
Agency. Neither the Certificate Registrar nor the Owner Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates, the Owner Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders. The Definitive Certificates shall
be issued in definitive, fully registered form and shall be printed,
lithographed or engraved or produced in any other manner as is reasonably
acceptable to the Owner Trustee, as evidenced by its execution thereof.
ARTICLE FOUR
ACTIONS BY OWNER TRUSTEE
Section 4.01. Prior Notice to Owners with Respect to Certain Matters.
(a) With respect to the following matters, the Owner Trustee shall not take
action unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders [and the Note Insurer] in
writing of the proposed action and [(i) the Note Insurer shall have consented
thereto and (ii)] the Owners shall not have notified the Owner Trustee in
writing prior to the 30th day after such notice is given that such Owners have
withheld consent or, [with the consent of the Note Insurer,] provided
alternative direction:
(i) the initiation of any claim or lawsuit by the Trust (except
claims or lawsuits brought in connection with the collection of the
Mortgage Loans) and the compromise of any action, claim or lawsuit
brought by or against the Trust (except with respect to the
aforementioned claims or lawsuits for collection of the Mortgage
Loans);
(ii) the election by the Trust to file an amendment to the
Certificate of Trust [(unless such amendment is required to be filed
under the Business Trust Statute)];
(iii) the amendment or other change to this Agreement or any
Basic Document;
(iv) the appointment pursuant to the Indenture of a successor
Note Registrar, Paying Agent or Indenture Trustee or pursuant to this
Agreement of a successor Certificate Registrar, or the consent to the
assignment by the Note Registrar, Paying Agent or Indenture Trustee or
Certificate Registrar of its obligations under the Indenture or this
Agreement, as applicable;
(v) the consent to the calling or waiver of any default of any
Basic Document;
(vi) except as provided in Article Nine hereof, the dissolution,
termination or liquidation of the Trust in whole or in part;
(vii) the merger or consolidation of the Trust with or into any
other entity, or conveyance or transfer of all or substantially all of
the Trust's assets to any other entity;
(viii) causing the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement;
(ix) doing any act that conflicts with any other Basic Document;
(x) doing any act which would make it impossible to carry on the
ordinary business of the Trust as described in Section 2.03 hereof;
(xi) the confession of a judgment against the Trust;
(xii) the possession of Trust assets, or assignment of the
Trust's right to property, for other than a Trust purpose;
(xiii) causing the Trust to lend any funds to any entity; or
(xiv) the change of the Trust's purpose and powers from those set
forth in this Trust Agreement.
(b) The Owner Trustee on behalf of the Trust agrees to abide by the
following restrictions:
(i) other than as contemplated by the Basic Documents and related
documentation, the Trust shall not incur any indebtedness;
(ii) other than as contemplated by the Basic Documents and
related documentation, the Trust shall not engage in any dissolution,
liquidation, consolidation, merger or sale of assets;
(iii) the Trust shall not engage in any business activity in
which it is not currently engaged other than as contemplated by the
Basic Documents and related documentation;
(iv) the Trust shall not form, or cause to be formed, any
subsidiaries and shall not own or acquire any asset other than as
contemplated by the Basic Documents and related documentation; and
(v) other than as contemplated by the Basic Documents and related
documentation, the Trust shall not follow the directions or
instructions of the Depositor.
(c) The Owner Trustee on behalf of the Trust shall:
(i) maintain books and records separate from any other person or
entity;
(ii) maintain its office and bank accounts separate from any
other person or entity;
(iii) not commingle its assets with those of any other person or
entity;
(iv) conduct its own business in its own name;
(v) other than as contemplated by the Basic Documents and related
documentation, pay its own liabilities and expenses only out of its
own funds;
(vi) [observe all formalities required under the Business Trust
Statute];
(vii) not guarantee or become obligated for the debts of any
other person or entity;
(viii) not hold out its credit as being available to satisfy the
obligation of any other person or entity;
(ix) not acquire the obligations or securities of its Affiliates
or the Seller;
(x) other than as contemplated by the Basic Documents and related
documentation, not make loans to any other person or entity or buy or
hold evidence of indebtedness issued by any other person or entity;
(xi) other than as contemplated by the Basic Documents and
related documentation, not pledge its assets for the benefit of any
other person or entity;
(xii) hold itself out as a separate entity from the Depositor and
not conduct any business in the name of the Depositor;
(xiii) correct any known misunderstanding regarding its separate
identity; and
(xiv) not identify itself as a division of any other person or
entity.
So long as the Notes or any other amounts owed under the Indenture
remain outstanding, the Trust shall not amend this Section 4.01 without the
prior written consent of [the Note Insurer and] 100% of the Voting Interests of
the Notes and the consent of each Rating Agency, in addition to the requirements
under Section 11.01.
(d) The Owner Trustee shall not have the power, except upon the
direction of the Owners [and the Note Insurer] and, subject to [Section 11.18]
of the Indenture, 100% of the Noteholders, and to the extent otherwise
consistent with the Basic Documents, to (i) remove or replace the Servicer or
the Indenture Trustee.
Section 4.02. Action by Owners with Respect to Certain Matters. The
Owner Trustee shall not have the power, except upon the direction of the Owners
[and the Note Insurer], to (a) remove the Administrator under the Administration
Agreement pursuant to Section [8] thereof, (b) appoint a successor Administrator
pursuant to Section [8] of the Administration Agreement, (c) remove the Servicer
under the Sale and Servicing Agreement pursuant to Section [7.01] thereof, or
(d) except as expressly provided in the Basic Documents, sell the Mortgage Loans
after the termination of the Indenture. The Owner Trustee shall take the actions
referred to in the preceding sentence only upon written instructions signed by
the Owners [and the Note Insurer], but only to the extent expressly permitted in
the Basic Documents.
Section 4.03. Action with Respect to Bankruptcy.
(a) The Trust shall not, without prior written consent of the Owner
Trustee, (i) institute any proceedings to adjudicate the Trust a bankrupt or
insolvent, (ii) consent to the institution of bankruptcy or insolvency
proceedings against the Trust, (iii) file a petition seeking or consenting to
reorganization or relief under any applicable federal or state law relating to
bankruptcy with respect to the Trust, (iv) consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Trust or a substantial part of its property, (v) make any
assignment for the benefit of the Trust's creditors; (vi) cause the Trust to
admit in writing its inability to pay its debts generally as they become due; or
(vii) take any action in furtherance of any of the foregoing (any of the above
foregoing actions, a "Bankruptcy Action"). In considering any Bankruptcy Action,
the Owner Trustee, with consent of the Certificateholders (which consent the
Certificateholders believe to be the best interest of Certificateholders and the
Trust), shall at all times consider the interests of creditors of the Trust in
addition to the interests of the Trusts and whether the Trust is insolvent. The
Owner Trustee shall not be liable to any Certificateholder on account of the
Owner Trustee's good faith reliance on the provisions of this Section and no
Certificateholder shall have any claim for breach of fiduciary duty or otherwise
against the Owner Trustee for failing to take any Bankruptcy Action.
(b) No Certificateholder has power to commence any Bankruptcy Action
on the part of the Trust or to direct the Owner Trustee to take any Bankruptcy
Action on the part of the Trust. To the extent permitted by applicable law, the
consent of [the Note Insurer and] the Indenture Trustee shall be obtained prior
to taking any Bankruptcy Action.
(c) The provisions of this Section do not constitute an acknowledgment
or admission by the Owner Trustee, any Certificateholder or any creditor of the
Trust that the Trust is eligible to be a debtor under the United States
Bankruptcy Code, 11 U.S.C.sections 101 et seq., as amended.
Section 4.04. Restrictions on Owners' Power. The Owners shall not
direct the Owner Trustee to take or to refrain from taking any action if such
action or inaction would be contrary to any obligation of the Trust or the Owner
Trustee under this Agreement or any of the Basic Documents or would be contrary
to Section 2.03, nor shall the Owner Trustee be obligated to follow any such
direction, if given.
Section 4.05. Majority Control. Except as expressly provided herein,
any action that may be taken by the Owners under this Agreement may be taken by
the Holders of Certificates evidencing not less than a majority of the Aggregate
Voting Interests of all of the Certificates. Except as expressly provided
herein, any written notice of the Owners delivered pursuant to this Agreement
shall be effective if signed by Holders of Certificates evidencing not less than
a majority of the Aggregate Voting Interests of all of the Certificates at the
time of the delivery of such notice.
ARTICLE FIVE
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
Section 5.01. Certificate Distribution Account. All of the right,
title and interest of the Trust in all funds on deposit from time to time in the
Certificate Distribution Account and in all proceeds thereof shall be held for
the benefit of the Owners and such other persons entitled to distributions
therefrom. Except as otherwise expressly provided herein or in the Sale and
Servicing Agreement, the Certificate Distribution Account shall be under the
sole dominion and control of the Trust for the benefit of the Owners.
The Certificate Distribution Account shall be subject to and
established and maintained in accordance with the applicable provisions of the
Sale and Servicing Agreement, including, without limitation, the provisions of
Sections [6.01, 6.02 and 6.05] thereof.
Section 5.02. Application of Trust Funds. (a) On each Distribution
Date, the Paying Agent shall distribute to the Certificateholders from amounts
on deposit in the Certificate Distribution Account the distributions provided in
Section [6.05] of the Sale and Servicing Agreement with respect to such
Distribution Date. All distributions of interest or principal on any Class of
Certificates other than the Residual Interest Certificates, and all
distributions of amounts due on or in respect of the Residual Interest
Certificates, shall be made PRO RATA to the Certificateholders of such Class
entitled thereto.
(b) On each Distribution Date, the Indenture Trustee shall send or
cause the Trust to send to each Certificateholder the statement or statements
provided to the Trust by the Servicer pursuant to Section [5.19] of the Sale and
Servicing Agreement with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to an Owner, such tax shall reduce the amount
otherwise distributable to the Owner in accordance with this Section. The Trust
is hereby authorized and directed to direct the Paying Agent to retain from
amounts otherwise distributable to the Owners sufficient funds for the payment
of any tax that is legally owed by the Trust (but such authorization shall not
prevent the Trust from contesting any such tax in appropriate proceedings and
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The amount of any withholding tax imposed with respect to an
Owner shall be treated as cash distributed to such Owner at the time it is
withheld by the Trust and remitted to the appropriate taxing authority. If the
amount withheld was not withheld from actual distributions, the Trust may, at
its option, (i) require the Owner to reimburse the Trust for such withholding
(and each Owner agrees to reimburse the Trust promptly following such request)
or (ii) reduce any subsequent distributions by the amount of such withholding.
If there is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a non-U.S. Owner), the Trust may in its
sole discretion direct the Paying Agent to withhold such amounts in accordance
with this paragraph (c). In the event that an Owner wishes to apply for a refund
of any such withholding tax, the Trust shall reasonably cooperate with such
Owner in making such claim so long as such Owner agrees to reimburse the Owner
Trustee for any out-of-pocket expenses incurred.
Section 5.03. Method of Payment. Subject to Section 9.01(d),
distributions required to be made to Certificateholders on any Distribution Date
shall be made to each Certificateholder of record on the preceding Record Date
either by wire transfer, in immediately available funds, to the account of such
Holder at a bank or other entity having appropriate facilities therefor, if such
Certificateholder shall have provided to the Certificate Registrar appropriate
written instructions at least five Business Days prior to such Distribution
Date, or, if not, by check mailed to such Certificateholder at the address of
such holder appearing in the Certificate Register; provided, that, a
Certificateholder shall only be entitled to receive distributions by wire
transfer if such Certificateholder is the registered Holder of Certificates
having an initial aggregate principal amount equal to or in excess of $5,000,000
or a Percentage Interest equal to or in excess of 25%, and in all other cases by
check mailed to each such Certificateholder at such Holder's address appearing
in the Certificate Register.
Section 5.04. Segregation of Moneys; No Interest. Subject to Sections
5.01 and 5.02, moneys received by the Owner Trustee hereunder and deposited in
the Certificate Distribution Account will be segregated and shall be invested in
Permitted Investments at the direction of the Depositor. The Owner Trustee shall
not be liable for payment of any interest in respect of such moneys.
Section 5.05. Tax Administration. The Owner Trustee, upon instruction
from the Depositor, shall sign on behalf of the Trust the tax returns of the
Trust, including Internal Revenue Service Form 1041 as required for a grantor
trust, unless applicable law requires an Owner to sign such documents, in which
case such documents shall be signed by the Residual Interestholders. In
addition, the Owner Trustee shall deliver or shall cause to be delivered to the
Residual Interestholders such information, reports or statements as may be
required by the Code and applicable Treasury Regulations and as may be required
to enable the Residual Interestholders to prepare their federal and state income
tax returns. Consistent with the Trust's characterization for tax purposes as a
grantor trust, no federal income tax return shall be filed on behalf of the
Trust unless either (i) the Owner Trustee shall receive an Opinion of Counsel
that, based on a change in applicable law occurring after the date hereof, the
Code requires such a filing or (ii) the Internal Revenue Service shall determine
that the Trust is required to file such a return. In the event that the Trust is
required to file tax returns and applicable law requires an Owner to sign such
documents, the Owner Trustee shall prepare or shall cause to be prepared any tax
returns required to be filed by the Trust and shall remit such returns to the
Residual Interestholders (or if the Residual Interestholders no longer
beneficially own the Trust, the beneficial owner designated for such purpose by
the Residual Interestholders to the Owner Trustee in writing) at least five days
before such returns are due to be filed. The Residual Interestholders (or such
designee beneficial owner, as applicable) shall promptly sign such returns and
deliver such returns after signature to the Owner Trustee and the Owner Trustee
shall file or shall cause to have filed such returns with the appropriate tax
authorities. In no event shall the Owner Trustee or the Residual Interestholders
(or such designee beneficial owner, as applicable) be liable for any
liabilities, costs or expenses of the Trust or the Noteholders arising out of
the application of any tax law, including federal, state, foreign or local
income or excise taxes or any other tax imposed on or measured by income (or any
interest, penalty or addition with respect thereto or arising from a failure to
comply therewith) except for any such liability, cost or expense attributable to
any act or omission by the Owner Trustee or the Residual Interestholders (or
such designee owner, as applicable), as the case may be, in breach of its
obligations under this Agreement.
ARTICLE SIX
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.01. General Authority. The Owner Trustee is authorized and
directed to execute and deliver or cause to be executed and delivered the Notes,
the Certificates and the Basic Documents to which the Trust is to be a party and
each certificate or other document attached as an exhibit to or contemplated by
the Basic Documents to which the Trust is to be a party and any amendment or
other agreement or instrument described in Article Three, in each case, in such
form as the Depositor shall approve, as evidenced conclusively by the Owner
Trustee's execution thereof, and, on behalf of the Trust, to direct the
Indenture Trustee to authenticate and deliver the Notes. In addition to the
foregoing, the Owner Trustee is authorized, but shall not be obligated, to take
all actions required of the Trust pursuant to the Basic Documents. The Owner
Trustee is further authorized from time to time to take such action as the
Administrator recommends with respect to the Basic Documents, provided that such
activities are consistent with the terms of the Basic Documents.
Section 6.02. General Duties. It shall be the duty of the Owner
Trustee:
(a) to discharge (or cause to be discharged) all of its
responsibilities pursuant to the terms of this Agreement and the Basic Documents
to which the Trust is a party and to administer the Trust in the interest of the
Owners, subject to the Basic Documents and in accordance with the provisions of
this Agreement. Notwithstanding the foregoing, the Owner Trustee shall be deemed
to have discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Owner Trustee or
the Trust hereunder or under any Basic Document, and the Owner Trustee shall not
be held liable for the default or failure of the Administrator to carry out its
obligations under the Administration Agreement; and
(b) to cooperate with the Depositor in obtaining and preserving (or
causing to be obtained and preserved) the Issuer's qualification to do business
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of the Indenture, the Notes the
Collateral and each other instrument and agreement included in the Trust Estate;
provided, however, that the Owner Trustee shall have no obligation to determine
whether and to what extent such qualification shall be necessary; and provided,
further, that the Owner Trustee shall only be required to take action under this
Section 6.02(b) if authorized and directed in writing to do so by the Depositor.
Section 6.03. Action upon Instruction. (a) Subject to this Agreement
and in accordance with the terms of the Basic Documents, the Owners may by
written instruction direct the Owner Trustee in the management of the Trust but
only to the extent consistent with the limited purpose of the Trust. Such
direction may be exercised at any time by written instruction of the Owners
pursuant to Article Four.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Owners [and the Note
Insurer] requesting instruction as to the course of action to be adopted, and to
the extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Owners, [with the prior written consent of the Note Insurer,]
the Owner Trustee shall not be liable on account of such action to any Person.
If the Owner Trustee shall not have received appropriate instruction within 10
days of such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action not
inconsistent with this Agreement or the Basic Documents, as it shall deem to be
in the best interests of the Owners, and, subject to Section 7.01, shall have no
liability to any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Owners [and
the Note Insurer] requesting instruction and, to the extent that the Owner
Trustee acts or refrains from acting in good faith in accordance with any such
instruction received from [the Note Insurer or, with the prior consent of the
Note Insurer,] the Owners, the Owner Trustee shall not be liable, on account of
such action or inaction, to any Person. If the Owner Trustee shall not have
received appropriate instruction within 10 days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Agreement or the
Basic Documents, as it shall deem to be in the best interests of the Owners,
and, subject to Section 7.01, shall have no liability to any Person for such
action or inaction.
Section 6.04. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement, any Basic Document or in any document or written instruction
received by the Owner Trustee pursuant to Section 6.03; and no implied duties or
obligations shall be read into this Agreement or any Basic Document against the
Owner Trustee. The Owner 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 or any Basic Document. The
Owner Trustee nevertheless agrees that it will, at its own cost and expense,
promptly take all action as may be necessary to discharge any liens on any part
of the Trust Estate that result from actions by, or claims against, the Owner
Trustee solely in its individual capacity that are not related to the ownership
or the administration of the Trust Estate.
Section 6.05. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Trust Estate except (i) in accordance
with the powers granted to and the authority conferred upon the Owner Trustee
pursuant to this Agreement, (ii) in accordance with the Basic Documents and
(iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.03.
Section 6.06. Restrictions. The Owner Trustee shall not take any
action (a) that is inconsistent with the purposes of the Trust set forth in
Section 2.03 or (b) that, to the actual knowledge of the Owner Trustee, would
result in the Trust's becoming taxable as a corporation for federal income tax
purposes. The Owners shall not direct the Owner Trustee to take action that
would violate the provisions of this Section.
ARTICLE SEVEN
CONCERNING THE OWNER TRUSTEE
Section 7.01. Acceptance of Trusts and Duties. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts, but only upon the terms of this Agreement and the
Basic Documents. The Owner Trustee also agrees to disburse all moneys actually
received by it constituting part of the Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee, in its capacity as Owner
Trustee, shall not be answerable or accountable hereunder or under any Basic
Document under any circumstances, except (i) for its own willful misconduct,
negligence or bad faith or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.03 expressly made by the Owner
Trustee in its individual capacity. In particular, but not by way of limitation
(and subject to the exceptions set forth in the preceding sentence):
(a) The Owner Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer of the Owner Trustee;
(b) The Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of the
Administrator or any Owner;
(c) No provision of this Agreement or any Basic Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or under
any Basic Document if the Owner Trustee shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured or provided to it;
(d) Under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) The Owner Trustee shall not be responsible for or in respect of
the validity or sufficiency of this Agreement or for the due execution hereof by
the Depositor, for the form, character, genuineness, sufficiency, value or
validity of any of the Trust Estate, or for or in respect of the validity or
sufficiency of the Basic Documents, other than the certificate of authentication
on the Certificates, and the Owner Trustee shall in no event assume or incur any
liability, duty or obligation to any Noteholder or to any Owner, other than as
expressly provided for herein or expressly agreed to in the Basic Documents;
(f) The Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Servicer, the Depositor or the Indenture
Trustee under any of the Basic Documents or otherwise, and the Owner Trustee
shall have no obligation or liability to perform the obligations of the Trust
under this Agreement or the Basic Documents that are required to be performed by
the Administrator under the Administration Agreement, the Indenture Trustee
under the Indenture or the Seller, the Depositor, the Servicer or the Indenture
Trustee under the Sale and Servicing Agreement; and
(g) The Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation under this Agreement or otherwise or in relation to this
Agreement or any Basic Document, at the request, order or direction of any of
the Owners, unless such Owners have offered to the Owner Trustee reasonable
security or indemnity satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby
(provided, that if an Owner is an institutional investor with a rating of at
least investment grade from a nationally recognized statistical rating
organization (or nominee of such institutional investor), the unsecured
agreement of indemnity of such institutional investor shall be deemed
satisfactory for such purpose). The right of the Owner Trustee to perform any
discretionary act enumerated in this Agreement or in any Basic Document shall
not be construed as a duty, and the Owner Trustee shall not be answerable for
other than its negligence, bad faith or willful misconduct in the performance of
any such act.
Section 7.02. Furnishing of Documents. The Owner Trustee shall furnish
to the Owners [and the Note Insurer] promptly upon receipt of a written request
therefor, duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to the
Owner Trustee under the Basic Documents.
Section 7.03. Representations and Warranties. (a) The Owner Trustee
hereby represents and warrants to the Depositor and the Note Insurer, for the
benefit of the Owners, that:
(i) The Owner Trustee is a banking corporation duly organized and
validly existing in good standing under the laws of the State of [ ]
[United States of America]. It has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement.
(ii) The Owner Trustee has taken all corporate action necessary
to authorize the execution and delivery by it of this Agreement, and
this Agreement will be executed and delivered by one of its officers
who is duly authorized to execute and deliver this Agreement on its
behalf.
(iii) Neither the execution or the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby, nor compliance by it with any of the terms or provisions
hereof will contravene any federal or [ ] law, governmental rule or
regulation governing the banking or trust powers of the Owner Trustee
or any judgment or order binding on it, or constitute any default
under its charter documents or bylaws or any indenture, mortgage,
contract, agreement or instrument to which it is a party or by which
any of its properties may be bound.
(iv) The execution, delivery, authentication and performance by
it of this Agreement 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.
(v) This Agreement, assuming due authorization, execution and
delivery by the Depositor, constitutes a valid, legal and binding
obligation of the Owner Trustee, enforceable against it in accordance
with the terms hereof subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the enforcement of
creditors' rights generally and to general principles of equity,
regardless of whether such enforcement is considered in a proceeding
in equity or at law.
(vi) The Owner Trustee 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 might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Owner Trustee or
its properties or might have consequences that would materially
adversely affect its performance hereunder.
(vii) No litigation is pending or, to the best of the Owner
Trustee's knowledge, threatened against the Owner Trustee which would
prohibit its entering into this Agreement or performing its
obligations under this Agreement.
Section 7.04. Reliance; Advice of Counsel. (a) Except as provided in
Section 7.01, the Owner Trustee shall incur no liability to anyone in acting
upon any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond, or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Owner Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of determination of
which is not specifically prescribed herein, the Owner Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or other authorized officers of the relevant
party, as to such fact or matter, and such certificate shall constitute full
protection to the Owner Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled Persons to be selected with reasonable care and employed by it.
Except as provided in Section 7.01, the Owner Trustee shall not be liable for
anything done, suffered or omitted in good faith by it in accordance with the
written opinion or advice of any such counsel, accountants or other such Persons
and not contrary to this Agreement or any Basic Document.
Section 7.05. Not Acting in Individual Capacity. Except as provided in
this Agreement, in accepting the trusts hereby created [ ] acts solely as Owner
Trustee hereunder and not in its individual capacity, and all Persons having any
claim against the Owner Trustee by reason of the transactions contemplated by
this Agreement or any Basic Document shall look only to the Trust Estate for
payment or satisfaction thereof.
Section 7.06. Owner Trustee Not Liable for Certificates or Mortgage
Loans. The recitals contained herein and in the Certificates (other than the
signature and countersignature of the Owner Trustee on the Certificates) shall
be taken as the statement of the Depositor, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Agreement, of any
Basic Document or of the Certificates (other than the signature and
countersignature of the Owner Trustee on the Certificates and as specified in
Section 7.03) or the Notes, or of the Mortgage Loans or related documents. The
Owner Trustee shall at no time have any liability for or with respect to the
legality, validity and enforceability of any Collateral or the perfection and
priority of any security interest created by any Collateral or the maintenance
of any such perfection and priority, or for or with respect to the sufficiency
of the Trust Estate or its ability to generate the payments to be distributed to
Certificateholders under this Agreement or the Noteholders under the Indenture,
including, without limitation: the existence, condition and ownership of any
Collateral; the existence and enforceability of any insurance thereon; the
existence and contents of any Collateral on any computer or other record
thereof; the validity of the assignment of any Collateral to the Trust or of any
intervening assignment; the performance or enforcement of any Collateral; the
compliance by the Depositor or the Servicer with any warranty or representation
made under any Basic Document or in any related document or the accuracy of any
such warranty or representation, or any action of the Administrator, the
Indenture Trustee, the Servicer or any subservicer taken in the name of the
Owner Trustee.
Section 7.07. Owner Trustee May Own Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates or Notes and may deal with the Depositor, the Administrator, the
Indenture Trustee and the Servicer in banking transactions with the same rights
as it would have if it were not Owner Trustee.
Section 7.08. Doing Business in Other Jurisdictions. Notwithstanding
anything contained herein to the contrary, [ ] shall not be required to take any
action in any jurisdiction other than in the State of [ ] if the taking of such
action will (i) require the consent or approval or authorization or order of or
the giving of notice to, or the registration with or the taking of any other
action in respect of, any state or other governmental authority or agency of any
jurisdiction other than the State of [ ]; (ii) result in any fee, tax or other
governmental charge under the laws of any jurisdiction or any political
subdivisions thereof in existence on the date hereof other than the State of [ ]
becoming payable by [ ]; or (iii) subject [ ] to personal jurisdiction in any
jurisdiction other than the State of [ ] for causes of action arising from acts
unrelated to the consummation of the transactions by [ ] contemplated hereby.
The Owner Trustee shall be entitled to obtain advice of counsel to determine
whether any action required to be taken pursuant to the Agreement results in the
consequences described in clauses (i), (ii) and (iii) of the preceding sentence.
In the event that said counsel advises the Owner Trustee that such action will
result in such consequences, the Owner Trustee will appoint an additional
trustee pursuant to Section 10.05 to proceed with such action.
Section 7.09. Licenses. The Owner Trustee shall cooperate with the
Depositor in causing the Trust to use its best efforts to obtain and maintain
the effectiveness of any licenses required in connection with this Agreement and
the Basic Documents and the transactions contemplated hereby and thereby until
such time as the Trust shall terminate in accordance with the terms hereof;
PROVIDED, HOWEVER, that the Owner Trustee shall have no obligation to determine
whether and to what extent such licensing shall be necessary; and provided,
further, that the Owner Trustee shall only be required to take action under this
Section 7.09 if authorized and directed in writing to do so by the Depositor.
Section 7.10. Liability of Certificate Registrar and Paying Agent. All
provisions affording protection to or limiting the liability of the Owner
Trustee shall inure as well to the Certificate Registrar and Paying Agent.
ARTICLE EIGHT
COMPENSATION OF OWNER TRUSTEE
Section 8.01. Owner Trustee's Fees and Expenses. The Owner Trustee
shall receive as compensation for its services hereunder such fees as are set
forth in the Fee Letter Agreement between the Seller and the Owner Trustee
attached hereto as Exhibit F, and the Owner Trustee shall be entitled to be
reimbursed for such fees and expenses as are set forth in the Fee Letter
Agreement as provided in the Sale and Servicing Agreement.
Section 8.02. Indemnification. The Seller shall be liable as primary
obligor for, and shall indemnify the Owner Trustee and its successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against the Owner Trustee or any Indemnified Party in any way relating
to or arising out of this Agreement, the Basic Documents, the Trust Estate, the
administration of the Trust Estate or the action or inaction of the Owner
Trustee hereunder, except only that the Seller shall not be liable for or
required to indemnify an Indemnified Party from and against Expenses arising or
resulting from any of the matters described in the third sentence of Section
7.01, (ii) with respect to any such claim, the Indemnified Party shall have
given the Seller written notice thereof, (iii) while maintaining control over
its own defense, the Seller shall consult with the Indemnified Party in
preparing such defense, and (iv) notwithstanding anything in this Agreement to
the contrary, the Seller shall not be liable for settlement of any claim by an
Indemnified Party entered into without the prior consent of the Seller which
consent shall not be reasonably withheld. The indemnities contained in this
Section shall survive the resignation or termination of the Owner Trustee or the
termination of this Agreement. In any event of any claim, action or proceeding
for which indemnity will be sought pursuant to this Section, the Owner Trustee's
choice of legal counsel shall be subject to the approval of the Seller, which
approval shall not be unreasonably withheld. In addition, upon written notice to
the Owner Trustee and with the consent of the Owner Trustee, which consent shall
not be unreasonably withheld, the Seller has the right to assume the defense of
any claim, action or proceeding against the Owner Trustee; provided, however,
that the Seller shall not be entitled to assume the defense of any such claim,
action or proceeding if such claim, action or proceeding involves a possible
imposition of criminal liability or penalty or a material civil penalty on the
Owner Trustee, a conflict of interest between the Owner Trustee and the Seller
or another indemnitee or the granting of material injunctive relief against such
indemnitee, and the Owner Trustee informs the Seller that it desires to be
represented by separate counsel, in which case the reasonable fees and expenses
of such separate counsel shall be borne by the Seller.
Section 8.03. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article Eight shall be deemed not to be a part of
the Trust Estate immediately after such payment.
ARTICLE NINE
TERMINATION OF TRUST AGREEMENT
Section 9.01. Termination of Trust Agreement. (a) This Agreement
(other than Article Eight) shall terminate and the Trust shall dissolve, wind up
and terminate and be of no further force or effect upon the earlier of (i) the
final distribution by the Owner Trustee of all moneys or other property or
proceeds of the Trust Estate in accordance with the terms of the Indenture, the
Sale and Servicing Agreement and Article Five and the termination of the
Indenture [and the Insurance Agreement]; and (ii) the expiration of 21 years
from the death of the last survivor of the descendants of Joseph P. Kennedy (the
late ambassador of the United States to the Court of St. James's). The
bankruptcy, liquidation, dissolution, death or incapacity of any Owner shall not
(x) operate to terminate this Agreement or the Trust, (y) entitle such Owner'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 all or any part of the
Trust or Trust Estate or (z) otherwise affect the rights, obligations and
liabilities of the parties hereto.
(b) The Certificates shall be subject to early termination at the
option of the Majority Residual Interestholders in the manner and subject to the
provisions of Section 8.01 of the Sale and Servicing Agreement.
(c) Except as provided in Sections 9.01(a) and (b), none of the
Depositor or any Owner shall be entitled to revoke or terminate the Trust.
(d) Notice of any termination of the Trust, specifying the
Distribution Date upon which Certificateholders shall surrender their
Certificates to the Paying Agent for payment of the final distribution and
cancellation, shall be given by the Owner Trustee by letter to
Certificateholders [and the Note Insurer] mailed within five Business Days of
receipt of notice of such termination from the Majority Residual
Interestholders, given pursuant to Section 8.01 of the Sale and Servicing
Agreement, stating (i) the Distribution Date upon or with respect to which final
payment of the Certificates shall be made upon presentation and surrender of the
Certificates at the office of the Paying Agent 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 Paying
Agent therein specified. The Owner Trustee shall give such notice to the
Certificate Registrar (if other than the Owner Trustee) and the Paying Agent at
the time such notice is given to Certificateholders. Upon presentation and
surrender of the Certificates, the Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant to
Section [6.05] of the Sale and Servicing Agreement.
In the event that all of the Certificateholders shall not have
surrendered their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner 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 one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an 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 that shall
remain subject to this Agreement. Subject to applicable escheat laws, any funds
remaining in the Trust after exhaustion of such remedies shall be distributed by
the Owner Trustee to the Residual Interestholders on a PRO RATA basis.
(e) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be cancelled by filing a
certificate of cancellation with the Secretary of State [in accordance with the
provisions of Section 3810(d) of the Business Trust Statute].
ARTICLE TEN
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.01. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be [a corporation satisfying the provisions of
Section 3807(a) of the Business Trust Statute] [and] [reasonably acceptable to
the Note Insurer]; authorized to exercise corporate trust powers; having a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal or state authorities; and having (or having a parent
that has) time deposits that are rated at least "F-1" or "P-1" (or the
equivalent) by each Rating Agency or are otherwise acceptable to each Rating
Agency. If such corporation shall publish reports of condition at least annually
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purpose of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section, the Owner Trustee shall resign immediately in
the manner and with the effect specified in Section 10.02.
Section 10.02. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving 30 days' prior written notice thereof to the Administrator, [the Note
Insurer,] and the Indenture Trustee. Upon receiving such notice of resignation,
the Administrator shall promptly appoint a successor Owner Trustee [with the
consent of the Note Insurer] by written instrument, in duplicate, one copy of
which instrument shall be delivered to the resigning Owner Trustee and one copy
to the successor Owner Trustee. If no successor Owner Trustee shall have been so
appointed and have accepted appointment within 30 days after the giving of such
notice of resignation, the resigning Owner Trustee may petition any court of
competent jurisdiction for the appointment of a successor Owner Trustee
[reasonably acceptable to the Note Insurer].
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.01 and shall fail to resign after
written request therefor by the Administrator [or the Note Insurer], or if at
any time the Owner Trustee shall be legally unable to act, or shall be adjudged
bankrupt or insolvent, or a receiver of the Owner Trustee or of its property
shall be appointed, or any public officer shall take charge or control of the
Owner Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Administrator may remove the Owner
Trustee. If the Administrator shall remove the Owner Trustee under the authority
of the immediately preceding sentence, the Administrator shall promptly appoint
a successor Owner Trustee [reasonably acceptable to the Note Insurer] by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
outgoing Owner Trustee so removed and one copy to the successor Owner Trustee,
and shall pay all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.03 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each Rating Agency [and the Note
Insurer].
Section 10.03. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.02 shall execute, acknowledge and deliver to
the Depositor, [the Note Insurer,] the Administrator and to its predecessor
Owner Trustee an instrument accepting such appointment under this Agreement, and
thereupon the resignation or removal of the predecessor Owner Trustee shall
become effective, and such successor Owner Trustee, without any further act,
deed or conveyance, shall become fully vested with all the rights, powers,
duties and obligations of its predecessor under this Agreement, with like effect
as if originally named as Owner Trustee. The predecessor Owner Trustee shall
upon payment of its fees and expenses deliver to the successor Owner Trustee all
documents and statements and monies held by it under this Agreement; and the
Depositor, the Administrator and the predecessor Owner Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor Owner Trustee
all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Owner Trustee pursuant
to this Section, the Administrator shall mail notice thereof to
Certificateholders, the Indenture Trustee, the Noteholders and each Rating
Agency. If the Administrator shall fail to mail such notice within 10 days after
acceptance of such appointment by the successor Owner Trustee, the successor
Owner Trustee shall cause such notice to be mailed at the expense of the
Administrator.
Section 10.04. Merger or Consolidation of Owner Trustee. Any
corporation into which the Owner Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Owner Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, without the execution or filing of any instrument or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding; PROVIDED, that such corporation shall be eligible pursuant to
Section 10.01; and, PROVIDED, FURTHER, that the Owner Trustee shall mail notice
of such merger or consolidation to each Rating Agency [and the Note Insurer].
Section 10.05. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Estate or any Collateral may at the time be located, the
Administrator and the Owner Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Administrator, [the Note Insurer] and Owner Trustee to act as
co-trustee, jointly with the Owner Trustee, or as separate trustee or separate
trustees, of all or any part of the Trust Estate, and to vest in such Person, in
such capacity, such title to the Trust or any part thereof and, subject to the
other provisions of this Section, such powers, duties, obligations, rights and
trusts as the Administrator, [the Note Insurer] and the Owner Trustee may
consider necessary or desirable. If the Administrator shall not have joined in
such appointment within 15 days after the receipt by it of a request so to do,
the Owner Trustee alone shall have the power to make such appointment [with the
consent of the Note Insurer]. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
Owner Trustee pursuant to Section 10.01 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.03.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed by the
Owner Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not authorized to act
separately without the Owner Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts are
to be performed, the Owner Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust Estate or any portion
thereof in any such jurisdiction) shall be exercised and performed singly by
such separate trustee or co-trustee, but solely at the direction of the Owner
Trustee;
(b) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement; and
(c) The Administrator and the Owner Trustee acting jointly may at any
time accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Owner 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. 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 Owner
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 Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor co-trustee or separate trustee.
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01. Supplements and Amendments. This Agreement may be
amended by the Depositor and the Owner Trustee [with the prior written consent
of the Note Insurer], and with prior written notice to each Rating Agency,
without the consent of any of the Noteholders or the Certificateholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement or for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions in this Agreement or of modifying in any manner the rights
of the Noteholders or the Certificateholders; PROVIDED, HOWEVER, that such
action shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder or Certificateholder [or the
rights of the Note Insurer] or cause the Trust to be subject to an entity level
tax for federal income tax purposes. An amendment shall not be deemed to
adversely affect in any material respect the interests of any Noteholder or
Certificateholder and no opinion referred to in the preceding proviso shall be
required to be delivered if the Person requesting the amendment obtains a letter
from each Rating Agency stating that the amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to each Class
of Notes and Certificates. Notwithstanding the preceding sentence, an opinion
shall be required with respect to tax matters as set forth in this paragraph.
This Agreement may also be amended from time to time by the Depositor
and the Owner Trustee, with prior written notice to each Rating Agency, with the
consent of [the Note Insurer and] the Holders (as defined in the Indenture) of
Notes evidencing not less than 66 2/3% of the Aggregate Voting Interests of the
Notes and the consent of the Holders of Certificates evidencing not less than 66
2/3% of the Aggregate Voting Interests of the Certificates, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders or the Certificateholders; PROVIDED, HOWEVER, that no such amendment
shall (a) reduce in any manner the amount of, or accelerate or delay the timing
of, distributions that shall be required to be made for the benefit of the
Noteholders, [or] the Certificateholders [or the Note Insurer] or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the Voting
Interests of the Certificates required to consent to any such amendment, without
the consent of the holders of all the outstanding Securities affected thereby
[and the Note Insurer]; and PROVIDED, HOWEVER, that such action shall not, as
evidenced by an Opinion of Counsel, cause the Trust to be subject to an entity
level tax for federal income tax purposes.
Notwithstanding the foregoing, no provision of Sections 2.03 or 4.01
hereof may be amended in any manner unless (i) 100% of the Noteholders have
consented in writing thereto, (ii) the Rating Agencies [and the Note Insurer]
have consent in writing thereto or (iii) the Notes have been paid in full and
the Indenture has been discharged.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee, [the Note
Insurer] and each Rating Agency.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Certificateholders provided for in this Agreement or in any
other Basic Document) and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such reasonable requirements
as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee [and the Note Insurer] shall be entitled
to receive and rely upon an Opinion of Counsel stating that the execution of
such amendment is authorized or permitted by this Agreement. The Owner Trustee
may, but shall not be obligated to, enter into any such amendment that affects
the Owner Trustee's own rights, duties or immunities under this Agreement or
otherwise.
In connection with the execution of any amendment to this Trust
Agreement or any amendment of any other agreement to which the Issuer is a
party, the Owner Trustee shall be entitled to receive and conclusively rely upon
an Opinion of Counsel to the effect that such amendment is authorized or
permitted by the Basic Documents and that all conditions precedent in the Basic
Documents for the execution and delivery thereof by the Issuer or the Owner
Trustee, as the case may be, have been satisfied.
Section 11.02. No Legal Title to Trust Estate in Owners. The Owners
shall not have legal title to any part of the Trust Estate. The Owners shall be
entitled to receive distributions with respect to their undivided ownership
interest therein only in accordance with Articles Five and Nine. No transfer, by
operation of law or otherwise, of any right, title or interest of the Owners to
and in their ownership interest in the Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Trust
Estate.
Section 11.03. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Depositor, the
Owners, [the Note Insurer,] the Administrator and, to the extent expressly
provided herein, the Indenture Trustee and the Noteholders, and nothing in this
Agreement, whether express or implied, shall be construed to give to any other
Person any legal or equitable right, remedy or claim in the Trust Estate or
under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.
Section 11.04. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt by the intended recipient (except that notice to the
Owner Trustee shall be deemed given only upon actual receipt by the Owner
Trustee), to the applicable address specified for each party [and the Note
Insurer] in the Sale and Servicing Agreement; or, as to each party, at such
other address as shall be designated by such party in a written notice to each
other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any such notice
also shall be given to each Rating Agency in the manner described above. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given when mailed, whether or not the
Certificateholder and each Rating Agency receives such notice.
Section 11.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 11.06. Separate Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 11.07. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
Depositor and its permitted assignees, the Owner Trustee and its successors and
each Owner and its successors and permitted assigns, all as herein provided. Any
request, notice, direction, consent, waiver or other instrument or action by an
Owner shall bind the successors and assigns of such Owner.
Section 11.08. No Petition. (a) The Owner Trustee, by entering into
this Agreement, each Certificateholder, by accepting a Certificate, and the
Indenture Trustee and each Noteholder, by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the Depositor or the Trust, or join in any institution against the
Depositor or the Trust of, any bankruptcy proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Certificates, the Notes, this Agreement or any of the Basic
Documents.
(b) The Depositor shall not be liable for the default or misconduct of
the Administrator, the Owner Trustee, the Indenture Trustee, the Paying Agent or
the Servicer under any of the Basic Documents or otherwise and the Depositor
shall have no obligation or liability to perform the obligations of the Trust
under this Agreement or the Basic Documents that are required to be performed by
the Administrator under the Administration Agreement, the Indenture Trustee
under the Indenture or the Servicer under the Sale and Servicing Agreement.
Section 11.09. No Recourse. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificate represents
beneficial interests in the Trust only and do not represent interests in or
obligations of the Depositor, the Servicer, the Administrator, the Owner
Trustee, the Indenture Trustee or any Affiliate thereof and no recourse may be
had against such parties or their assets, except as may be expressly set forth
or contemplated in this Agreement, the Certificates or the Basic Documents.
Section 11.10. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 11.11. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF [ ], WITHOUT REFERENCE TO ITS CONFLICT
OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.12. [Grant of Certificateholder Rights to Note Insurer.
(a) In consideration for the issuance of the Certificates and for the
guarantee of the Notes by the Note Insurer pursuant to the Insurance Policy, the
holders of the Certificates hereby grant to the Note Insurer the right to act as
the holder of 100% of the outstanding Certificates for the purpose of exercising
the rights of the Certificateholders under this Agreement without the consent of
the Certificateholders, including the voting rights of such holders hereunder,
but excluding those rights requiring the consent of all such holders under
Section 11.01 and any rights of such holders to distributions under Section
5.02(a); provided that the preceding grant of rights to the Note Insurer by the
holders of the Trust Interest shall be subject to Section 11.14.
(b) The rights of the Note Insurer to direct certain actions and
consent to certain actions of the Certificateholders hereunder will terminate at
such time as the Class Principal Amount of the Notes has been reduced to zero
and the Note Insurer has been reimbursed for any amounts owed under the
Insurance Policy and the Insurance Agreement and the Note Insurer has no further
obligation under the Insurance Policy.]
Section 11.13. [Third-Party Beneficiary.
The Note Insurer is an intended third-party beneficiary of this
Agreement, and this Agreement shall be binding upon and inure to the benefit of
the Note Insurer; provided that, notwithstanding the foregoing, for so long as a
Note Insurer Default is continuing with respect to its obligations under the
Note Insurance Policy, the Noteholders shall succeed to the Note Insurer's
rights hereunder. Without limiting the generality of the foregoing, all
covenants and agreements in this Agreement that expressly confer rights upon the
Note Insurer shall be for the benefit of and run directly to the Note Insurer,
and the Note Insurer shall be entitled to rely on and enforce such covenants to
the same extent as if it were a party to this Agreement.]
Section 11.14. [Suspension and Termination of Note Insurer's Rights.
During the continuation of a Note Insurer Default, rights granted or
reserved to the Note Insurer hereunder shall vest instead in the Owners;
provided that the Note Insurer shall be entitled to any distributions in
reimbursement of the Reimbursement Amount, and the Note Insurer shall retain
those rights under Section 11.01 to consent to any amendment of this Agreement.
At such time as either (i) the Class Principal Amount of the Notes has
been reduced to zero or (ii) the Insurance Policy has been terminated and in
either case of (i) or (ii) the Note Insurer has been reimbursed for all amounts
owed under the Insurance Policy and the Insurance Agreement (and the Note
Insurer no longer has any obligation under the Insurance Policy, except for
breach thereof by the Note Insurer), then the rights and benefits granted or
reserved to the Note Insurer hereunder (including the rights to direct certain
actions and receive certain notices) shall terminate and the Certificateholders
shall be entitled to the exercise of such rights and to receive such benefits of
the Note Insurer following such termination to the extent that such rights and
benefits are applicable to the Certificateholders.]
Section 11.15. [Fiduciary Obligation to Holders of the Certificates.
Nothing in this Agreement shall be construed or deemed to impair the
fiduciary obligation of the Owner Trustee to the Holders of the Certificates. In
acting in accordance with the direction of the Note Insurer pursuant to this
Agreement, the Owner Trustee shall not be deemed to (i) owe any fiduciary
obligation to the Note Insurer or (ii) to have violated any fiduciary obligation
or responsibility to the Holders of the Certificates.]
* * * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
FINANCE AMERICA SECURITIES, LLC
as the Depositor
By:____________________________________
Name:
Title:
[ ],
in its individual capacity and as
Owner Trustee
By:____________________________________
Name:
Title:
Exhibit 4.2
Form of Administation Agreement
<PAGE>
Exhibit No. 4.2
ADMINISTRATION AGREEMENT
between
FINANCE AMERICA SECURITIES, LLC [ ]
Issuer
and
[ ],
Administrator
Dated as of [ ]
<PAGE>
This Administration Agreement (the "Agreement") is entered into as of
[ ], between Finance America Securities, LLC Trust [ ], a [Delaware] business
trust (the "Issuer") and [ ], a [national banking association], not in its
individual capacity but as administrator (the "Administrator").
Capitalized terms used but not defined herein shall have the meanings
assigned to such terms in the Indenture, the Trust Agreement, the Custodial
Agreement or the Sale and Servicing Agreement (each as defined herein).
W I T N E S S E T H:
WHEREAS, the Issuer is a business trust under the Delaware Business
Trust Act (12 Del.C. ss. 3801 et seq.) created by a Trust Agreement relating
to the Trust, dated as of August 1, 1999 (the "Trust Agreement"), between
Finance America Securities, LLC, as depositor (in such capacity, the
"Depositor") and [ ], as owner trustee (the "Owner Trustee");
WHEREAS, the Issuer will issue Notes and Certificates designated as
Finance America Securities, LLC [ ] Trust [Asset Backed] Securities, Series [
] (collectively, the "Securities");
WHEREAS, the Notes will be secured by certain collateral, as more
particularly set forth in the Indenture, dated as of [ _ ]
(the "Indenture"), between the Issuer and [ ], as indenture
trustee (in such capacity, the "Indenture Trustee");
WHEREAS, the Certificates will be issued pursuant to the Trust
Agreement and will represent the undivided beneficial ownership interest in
the Trust;
WHEREAS, the Issuer has entered into certain agreements in connection
with the issuance of the Securities, including (i) a Sale and Servicing
Agreement, dated as of [ ] (as amended and supplemented from time to time, the
"Sale and Servicing Agreement"), among the Issuer, [ ],
as servicer (the "Servicer"), the Depositor and the Indenture Trustee, (ii)
the Note Depository Agreement (as defined in the Indenture), (iii) the
Indenture, (iv) the Trust Agreement, and (v) the Custodial Agreement dated as
of [ ] (the "Custodial Agreement") among the Issuer, the
Indenture Trustee, the Servicer and [ ], as
custodian (in such capacity the "Custodian") (the Sale and Servicing
Agreement, the Note Depository Agreement, the Indenture, the Trust Agreement
and the Custodial Agreement being hereinafter referred to collectively as the
"Related Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer is required to
perform certain duties in connection with (a) the Notes and the Collateral
therefor pledged pursuant to the Indenture and (b) the beneficial ownership
interest in the Issuer represented by the Certificates;
WHEREAS, the Issuer desires to have the Administrator perform certain
of the duties of the Issuer referred to in the preceding clause, and to
provide such additional services consistent with the terms of this Agreement
and the Related Agreements as the Issuer may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the respective
services required hereby and is willing to perform such services for the
Issuer on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
Section 1. Duties of the Administrator with Respect to the Note
Depository Agreement, the Sale and Servicing Agreement, the Indenture, the
Trust Agreement and the Custodial Agreement.
(a) The Administrator agrees to perform all of the duties of the
Issuer under the Note Depository Agreement. In addition, the Administrator
shall consult with the Owner Trustee regarding the duties of the Issuer under
the Indenture, to the extent that such consultation is, in the judgment of the
Administrator, necessary or appropriate to the performance by it of its
obligations hereunder. The Administrator shall advise the Owner Trustee when
action is necessary to comply with the Issuer's duties under the Indenture.
The Administrator shall prepare for execution by the Owner Trustee or shall
cause the preparation by the appropriate persons of all such documents,
reports, filings, instruments, certificates and opinions that it shall be the
duty of the Issuer or the Owner Trustee to prepare pursuant to the Indenture,
and the Administrator shall take all appropriate action that is the duty of
the Issuer to take with respect to the following matters under the Indenture
(references are to sections of the Indenture):
(i) the preparation of the Notes for execution by the Owner
Trustee upon their issuance and upon the registration of any transfer
or exchange of the Notes (Sections [2.02, 2.03 and 2.04];
(ii) the duty to cause the Note Register to be kept if the Issuer
assumes the duties of Note Registrar, and to give the Indenture
Trustee notice of any appointment of a new Note Registrar and the
location, or change in location, of the Note Register (Section
[2.03]);
(iii) the preparation of an Issuer Order for authentication of
the Notes and delivery of the same to the Indenture Trustee (Section
[2.08]);
(iv) the preparation of an Issuer Request required for the
release of collateral and delivery of the same to the Indenture
Trustee and the preparation, obtaining or filing of the instruments,
opinions, certificates and other documents required for the release of
collateral (Section [2.09]);
(v) the preparation of Definitive Notes in accordance with the
instructions of the Clearing Agency, the duty to attempt to locate a
qualified successor to the Clearing Agency, if necessary, and the
preparation of written notice to the Indenture Trustee of termination
of the book entry system through the Clearing Agency (Section [2.12]);
(vi) the maintenance of an office in [ ], for
registration of transfer or exchange of Notes (Section [3.02]);
(vii) the preparation of an Issuer Order required to appoint a
Paying Agent, the preparation of written notice to the Indenture
Trustee [and the Note Insurer] of such appointment and the duty to
cause newly appointed Paying Agents, if any, to execute and deliver to
the Indenture Trustee the instrument specified in the Indenture
regarding funds held in trust (Section [3.03]);
(viii) the preparation of an Issuer Order required to direct the
Paying Agent to pay to the Indenture Trustee all sums held in trust by
the Paying Agent (Section [3.03]);
(ix) the provision to the Indenture Trustee of calculations
pertaining to original issue discount, if any, on the Notes and, if
applicable, the accrual of market discount or the amortization of
premium on the Notes to the extent that the Administrator has received
from [ ___________________________ ] sufficient information to
calculate such amounts (Section [3.03]);
(x) the preparation and execution of all supplements, amendments,
financing statements, continuation statements, instruments of further
assurance and other instruments, in accordance with Section [3.05] of
the Indenture, necessary to protect the Collateral (Section [3.05]);
(xi) the annual delivery of Opinions of Counsel, in accordance
with Section [3.06] of the Indenture, as to the Trust Estate, and the
annual delivery of the Officers' Certificate and certain other
statements, in accordance with Section [3.09] of the Indenture, as to
compliance with the Indenture (Sections [3.06 and 3.09]);
(xii) upon written notice or actual knowledge thereof, the
notification of the Indenture Trustee, [the Note Insurer] and each
Rating Agency of an Event of Default under the Sale and Servicing
Agreement and, if such Event of Default arises from the failure of the
Servicer to perform any of its duties under the Sale and Servicing
Agreement with respect to the Mortgage Loans, the taking of all
reasonable steps available to remedy such failure (Section [3.07(d)]);
(xiii) the monitoring of the Issuer's compliance with its
negative covenants (Section [3.08]);
(xiv) upon written notice or actual knowledge thereof, the
delivery of notice to the Indenture Trustee [the Note Insurer] and the
Rating Agencies of each Event of Default under the Indenture and each
default by the Servicer or Depositor under the Sale and Servicing
Agreement (Section [3.14]);
(xv) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture (Section [4.01]);
(xvi) the preparation of an Officer's Certificate and the
obtaining of the Opinion of Counsel and the Independent Certificate
relating thereto with respect to any request by the Issuer to the
Indenture Trustee to take any action under the Indenture (Sections
[4.01 and 11.01]);
(xvii) the compliance with any directive of the Indenture Trustee
with respect to the preparation of documents in connection with the
sale of the Trust Estate in a commercially reasonable manner if an
Event of Default shall have occurred and be continuing under the
Indenture (Section [5.04]);
(xviii) the compliance with any directive of the Indenture
Trustee with respect to the sale of the Collateral in a commercially
reasonable manner if an Event of Default shall have occurred and be
continuing under the Indenture (Section [5.05]);
(xix) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee
is not the Note Registrar (Section [7.01]);
(xx) the preparation and filing of all documents and reports
by the Issuer as required under the Exchange Act, the rules and
regulations of the Commission and the TIA (Section [7.03]);
(xxi) the preparation of an Issuer Request and Officers'
Certificate and the obtaining of an Opinion of Counsel and Independent
Certificates, if necessary, for the release of the Collateral, as
defined in the Indenture (Sections [8.05 and 8.06]);
(xxii) the preparation of Issuer Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental
indentures and, if necessary, the mailing to the Noteholders of
notices with respect to their consent to such supplemental indentures
(Sections [9.01, 9.02 and 9.03]);
(xxiii) the preparation of Issuer Orders and the obtaining of
Opinions of Counsel with respect to any proposed amendment of the
Trust Agreement or amendment to or waiver of any provision of any
other document relating to the Trust Agreement (Section [9.07]);
(xxiv) the notification of the Rating Agencies [and the Note
Insurer] of a redemption of the Notes (Section [10.01]);
(xxv) the preparation and delivery to Noteholders and the
Indenture Trustee of any agreements with respect to alternate payment
and notice provisions (Section [11.04]); and
(xxvi) any other duties expressly required to be performed by the
Administrator under the Indenture.
(b) The Administrator shall consult with the Owner Trustee regarding
the duties of the Issuer or the Owner Trustee under the Sale and Servicing
Agreement, to the extent that such consultation is, in the judgment of the
Administrator, necessary or appropriate to the performance by it of its
obligations hereunder. The Administrator shall advise the Owner Trustee when
action is necessary to comply with the Issuer's or the Owner Trustee's duties
under the Sale and Servicing Agreement. The Administrator shall prepare for
execution by the Owner Trustee, or shall cause the preparation by other
appropriate persons of, all such documents, reports, filings, instruments,
certificates and opinions that it shall be the duty of the Issuer or the Owner
Trustee to prepare, file or deliver pursuant to the Sale and Servicing
Agreement, except as otherwise provided herein.
(c) The Administrator shall perform, or cause to be performed, such
duties and take, or cause to be taken, such actions, as are required to be
performed or taken with respect to the Trust under the Code, including the
duties and actions of the Owner Trustee under Section [5.05] of the Trust
Agreement. The Administrator shall prepare for signature by the Owner Trustee
and, upon obtaining such signature, shall file or cause to be filed with the
Internal Revenue Service federal tax or information returns with respect to
the Trust and the Securities containing such information and at the times and
in such manner as may be required by the Code or applicable Treasury
regulations, and shall furnish to Holders such statements or information at
the times and in such manner as may be required thereby; PROVIDED, HOWEVER,
that the Administrator shall not be required to compute the Issuer's gross
income; and provided, further, that the Administrator shall not be required to
prepare and file partnership tax returns on behalf of the Issuer unless it
receives an opinion of counsel (which shall not be at the Administrator's
expense, but shall be at the expense of the Seller or other party furnishing
such opinion) as to the necessity of such filings. The Owner Trustee shall
sign all tax information returns filed pursuant to this Section.
(d) The Administrator shall timely file all reports required to be
filed by the Trust with any federal, state or local governmental authority
having jurisdiction over the Trust, including the Internal Revenue Service's
Form 1041 prepared for a grantor trust signed by the Owner Trustee, and
including any other reports that must be filed with the Securityholders.
Furthermore, the Administrator shall report to Holders, if required, with
respect to the allocation of expenses pursuant to Section 212 of the Code in
accordance with the specific instructions to the Administrator by the Seller
with respect to such allocation of expenses. Absent specific instructions, the
Administrator shall allocate expenses to Holders based on the right of each
Holder to gross stated interest on the Home Loans. The Administrator shall
collect any forms or reports from the Holders determined by the Seller to be
required under applicable federal, state and local tax laws.
(e) Unless required otherwise by provisions of the Internal Revenue
Code or interpretations thereof, the Administrator shall treat the Trust as a
grantor trust and not as an association taxable as a corporation for federal
income tax purposes.
(f) The Administrator hereby accepts its appointment under Section
[3.05] of the Trust Agreement as Certificate Registrar and its appointment
under Section [3.10] of the Trust Agreement as Paying Agent. The Administrator
shall consult with the Owner Trustee regarding the duties of the Issuer or the
Owner Trustee under the Trust Agreement, to the extent that such consultation
is, in the judgment of the Administrator, necessary or appropriate to the
performance by it of its obligations hereunder. The Administrator shall advise
the Owner Trustee when action is necessary to comply with the Issuer's or the
Owner Trustee's duties under the Trust Agreement. The Administrator shall
prepare for execution by the Issuer, or shall cause the preparation by other
appropriate persons of, all such documents, reports, filings, tax returns,
instruments, certificates and opinions that it shall be the duty of the Issuer
or the Owner Trustee to prepare, file or deliver pursuant to the Trust
Agreement and shall take all appropriate action that is the duty of the Issuer
or the Owner Trustee to take pursuant to the Trust Agreement, as required with
respect to the following matters under the Trust Agreement (references are to
sections of the Trust Agreement):
(i) the preparation of Definitive Certificates in accordance with
the instructions of the Clearing Agency, the duty to attempt to locate
a qualified successor to the Clearing Agency, if necessary, and the
preparation of written notice to the Owner Trustee of termination of
the book-entry system through the Clearing Agency (Section 3.13);
(ii) the preparation of Certificates for execution by the Owner
Trustee upon their issuance and upon the registration of any transfer
or exchange of the Certificates and delivery thereof (Sections [3.02,
3.05, and 3.06]);
(iii) the duty to furnish a list of Certificateholders of record
(Section 3.08);
(iv) the maintenance of an office in [ ], for registration of
transfer or exchange of Certificates (Section [3.09]);
(v) the duty to cause newly appointed Paying Agents, if any, to
deliver the instrument specified in the Trust Agreement regarding
funds held in the Certificate Distribution Account (Section [3.10]);
(vi) the delivery to the Owners of any documents furnished to the
Owner Trustee under the Related Agreements (Section [7.02]);
(vii) the duties required to be performed by the Administrator in
connection with the resignation or removal of the Owner Trustee
(Section [10.02]);
(viii) any other duties expressly required to be performed by the
Administrator under the Trust Agreement; and
(ix) the delivery to any Certificateholder and any prospective
transferee designated by any such Certificateholder of information
necessary to satisfy the condition of eligibility set forth in Rule
144A under the Securities Act for transfer of any Certificate (Section
[3.04(b)]).
(g) The Administrator, to the extent of the Custodian's obligation to
do so pursuant to the Custodial Agreement, shall prepare for filing by the
Custodian or shall cause the preparation by other appropriate persons of any
federal and state income tax returns and information statements required to be
prepared and filed by the Custodian on behalf of the custodial arrangement as
a grantor trust, in compliance with the method of reporting required by
Treasury Regulation 1.67-4.
(h) In addition to the duties of the Administrator set forth above,
the Administrator, to the extent of the Issuer's obligation to do so, shall
prepare for execution by the Issuer or shall cause the preparation by other
appropriate persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer to prepare,
file or deliver pursuant to the Related Agreements, and at the request of the
Owner Trustee or the Custodian shall take all appropriate action that it is
the duty of the Issuer or the Custodian to take pursuant to the Related
Agreements. Subject to Section 4 of this Agreement, and in accordance with the
directions of the Owner Trustee [or the Note Insurer], the Administrator shall
administer, perform or supervise the performance of such other activities in
connection with the Trust Estate (including the Related Agreements) as are not
covered by any of the foregoing provisions and as are expressly requested by
the Owner Trustee [or the Note Insurer] and are reasonably within the
capability of the Administrator. The Administrator shall use the same degree
of care and skill as is reasonably expected of financial institutions acting
in comparable capacities.
With respect to matters that in the reasonable judgment of the
Administrator are non-ministerial, the Administrator shall not be obligated to
take any action, and in any event shall not take any action, unless within a
reasonable time before the taking of such action, the Administrator shall have
notified the Owner Trustee [and the Note Insurer] of the proposed action and
the Owner Trustee [and the Note Insurer] shall not have withheld consent or
provided an alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include, without limitation, (A) the amendment
of or any supplement to any of the Related Documents; (B) the initiation of
any claim or lawsuit by the Issuer, the Owner Trustee or the Custodian and the
compromise of any action, claim or lawsuit brought by or against the Issuer,
the Owner Trustee or the Custodian; (C) any involvement in any lawsuit or
other legal action against the Indenture Trustee or the Servicer, including
without limitation, consenting to the settlement of any third party claim by
the Indenture Trustee; (D) the removal of the Indenture Trustee or the
appointment of a successor Indenture Trustee pursuant to the Indenture; (E)
the appointment of a successor Servicer pursuant to the Sale and Servicing
Agreement; (F) the removal of the Owner Trustee; and (G) any action that the
Issuer or the Owner Trustee is entitled but not obligated to take under the
Related Documents, provided that, notwithstanding the foregoing, the
Administrator may with the consent of the Owner Trustee [and the Note Insurer]
take any action with respect to non-ministerial matters that the
Administrator, in its good faith judgment, deems to be in the best interests
of the Issuer.
Notwithstanding anything to the contrary in this Agreement, (A) the
Administrator, in its individual capacity, shall not be responsible for any
payment obligation of the Issuer or the Owner Trustee and (B) the
Administrator shall not be obligated to, and shall not, take any action that
the Owner Trustee directs the Administrator not to take on its behalf or on
behalf of the Issuer.
(i) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax is
imposed on the Trust's payments (or allocations of income) to an Owner as
contemplated in Section [5.02(c)] of the Trust Agreement. Any such notice
shall specify the amount of any withholding tax required to be withheld by the
Owner Trustee pursuant to such provision.
(j) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
performance of the duties of the Owner Trustee set forth in Section [5.05(a),
(b), (c) and (d)] of the Trust Agreement with respect to, among other things,
accounting and reports to Owners; PROVIDED, HOWEVER, that the Owner Trustee
shall retain responsibility for the distribution (with the Depositor's
cooperation) of any information necessary to enable each Owner to prepare its
federal and state income tax returns.
Section 2. Records. The Administrator shall maintain appropriate books
of account and records relating to services performed hereunder, which books
of account and records shall be accessible for inspection by the Issuer or the
Indenture Trustee at any time after reasonable notice during normal business
hours.
Section 3. Compensation. The Administrator will perform the duties and
provide the services called for under Section 1 above without any separate
compensation therefor for so long as the Agency Agreement dated as of
[ ] between the Administrator and the Indenture Trustee
remains in effect, and thereafter for such compensation as shall be agreed
upon between the Administrator and the Owner Trustee. The Administrator shall
perform any other services as may be agreed between the Administrator and the
Owner Trustee for such compensation as may be agreed between the Administrator
and the Owner Trustee. The Administrator agrees to perform all its duties
under this Agreement regardless of any non-payment of fees or expenses by the
Owner Trustee.
Section 4. Additional Information to be Furnished to the Issuer. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Trust Estate as the Issuer shall reasonably request.
Section 5. Independence of the Administrator. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not
be subject to the supervision of the Issuer or the Owner Trustee with respect
to the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer or the Owner Trustee, as
applicable, the Administrator shall have no authority to act for or represent
the Issuer or the Owner Trustee in any way and shall not otherwise be deemed
an agent of the Issuer or the Owner Trustee.
Section 6. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Administrator and either of the Issuer or the Owner
Trustee as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
Section 7. Other Activities of Administrator. Nothing herein shall
prevent the Administrator or its Affiliates from engaging in other businesses
or, in its sole discretion, from acting in a similar capacity as an
administrator for any other person or entity even though such person or entity
may engage in business activities similar to those of the Issuer or the Owner
Trustee.
Section 8. Term of Agreement; Resignation and Removal of
Administrator.
(a) This Agreement shall continue in force until the termination of
the Trust Agreement in accordance with its terms, upon which event this
Agreement shall automatically terminate.
(b) Subject to Section 8(e) hereof, the Administrator may resign its
duties hereunder by providing the Issuer [and the Note Insurer] with at least
60 days' prior written notice.
(c) Subject to Section 8(e) hereof, the Issuer may remove the
Administrator without cause by providing the Administrator with at least 60
days' prior written notice [with a copy to the Note Insurer].
(d) Subject to Section 8(e) hereof, the Issuer may remove the
Administrator immediately upon written notice of termination to the
Administrator if any of the following events shall occur:
(i) the Administrator shall default in the performance of any of
its duties under this Agreement and, after notice of such default,
shall not cure such default within ten days (or, if such default
cannot be cured in such time, shall not give within ten days such
assurance of cure as shall be reasonably satisfactory to the Issuer
and the Custodian, as applicable);
(ii) a court having jurisdiction in the premises shall (x) enter
a decree or order for relief, which decree or order shall not have
been vacated within 60 days, in respect of the Administrator in any
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, (y) appoint a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official for the Administrator or any substantial part of its
property, or (z) order the winding-up or liquidation of the
Administrator's affairs; or
(iii) the Administrator shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, shall consent to the entry of an order for relief
in an involuntary case under any such law, shall consent to the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or similar official for the Administrator or any
substantial part of its property, shall consent to the taking of
possession by any such official of any substantial part of its
property, shall make any general assignment for the benefit of
creditors or shall fail generally to pay its debts as they become due.
The Administrator agrees that if any of the events specified in
clauses (ii) or (iii) of this Section shall occur, it shall give written
notice thereof to the Issuer, the Note Insurer and the Indenture Trustee
within seven days after the occurrence of such event.
(e) No resignation or removal of the Administrator pursuant to this
Section shall be effective until [(i) a successor Administrator reasonably
acceptable to the Note Insurer shall have been appointed by the Issuer and
(ii)] such successor Administrator shall have agreed in writing to be bound by
the terms of this Agreement in the same manner as the Administrator is bound
hereunder.
(f) The appointment of any successor Administrator shall be effective
only after satisfaction of the Rating Agency Condition with respect to the
proposed appointment.
Section 9. Action upon Termination, Resignation or Removal of the
Administrator. Promptly upon the effective date of termination of this
Agreement pursuant to Section 8(a) hereof or the resignation or removal of the
Administrator pursuant to Section 8(b) or (c) hereof, respectively, the
Administrator shall be entitled to be paid all reimbursable expenses accruing
to it to the date of such termination, resignation or removal. The
Administrator shall forthwith upon such termination pursuant to Section 8(a)
deliver to the Issuer all property and documents of or relating to the
Collateral then in the custody of the Administrator. In the event of the
resignation or removal of the Administrator pursuant to Section 8(b), (c) or
(d), respectively, the Administrator shall cooperate with the Issuer and take
all reasonable steps requested to assist the Issuer in making an orderly
transfer of the duties of the Administrator.
Section 10. Notices. Any notice, report or other communication given
hereunder shall be in writing and addressed as follows:
(a) if to the Issuer, to:
Finance America Securities, LLC [ ] Trust [ ]
(b) if to the Administrator, to:
(c) [if to the Note Insurer, to:]
or to such other address as any party shall have provided to the other party
in writing. All notices required hereunder shall be deemed given when
delivered to the address of such party as provided above.
Section 11. Amendments. This Agreement may be amended from time to
time by the Issuer, [the Note Insurer] and the Administrator without the
consent of any of the Securityholders, (i) to cure any ambiguity, (ii) to
correct or supplement any provision herein that may be defective or
inconsistent with any other provisions herein or to conform the provisions
hereof to those of the Offering Document or the Related Documents, (iii) to
obtain a rating for a Class of Securities from a nationally recognized
statistical rating organization, or (iv) to make any other provisions with
respect to matters or questions arising under this Agreement; PROVIDED,
HOWEVER, that no such amendment effected pursuant to clause (iv) of this
paragraph shall adversely affect in any material respect the interests of any
Holder not consenting thereto. Prior to entering into any amendment without
the consent of Holders pursuant to this paragraph, the Issuer may require an
Opinion of Counsel (in the case of clauses (i) and (ii), at the expense of the
Issuer, and otherwise at the expense of the party requesting such amendment)
to the effect that such amendment is permitted under this paragraph. Any such
amendment shall be deemed not to adversely affect in any material respect any
Holder of Securities that are rated by either Rating Agency if the Issuer
receives written confirmation from such Rating Agency that such amendment will
not cause such Rating Agency to qualify, reduce or withdraw the then current
rating assigned to such Class of rated Securities.
Section 12. Successors and Assigns. This Agreement may not be assigned
by the Administrator unless such assignment is previously consented to in
writing by the Owner Trustee, [the Note Insurer] and the Rating Agency
Condition in respect thereof has been satisfied. An assignment with such
consent and satisfaction, if accepted by the assignee, shall bind the assignee
hereunder in the same manner as the Administrator is bound hereunder.
Notwithstanding the foregoing, this Agreement may be assigned by the
Administrator without the consent of the Owner Trustee to a corporation or
other organization that is a successor (by merger, consolidation or purchase
of assets) to the Administrator, provided that such successor organization
executes and delivers to the Issuer and the Owner Trustee an agreement in
which such corporation or other organization agrees to be bound hereunder by
the terms of said assignment in the same manner as the Administrator is bound
hereunder. Subject to the foregoing, this Agreement shall bind any successors
or assigns of the parties hereto.
Section 13. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 14. Headings. The section headings hereof have been inserted
for convenience of eference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.
Section 15. Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall together constitute one and
the same agreement.
Section 16. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.
Section 17. Limitation of Liability of Owner Trustee. Notwithstanding
anything contained herein to the contrary, this Agreement has been
countersigned by [ ] not in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall
[ ] in its individual capacity or any beneficial owner of the
Issuer have any liability for the representations, warranties, covenants,
agreements or other obligations of the Issuer hereunder, as to all of which
recourse shall be had solely to the assets of the Issuer. For all purposes of
this Agreement, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles [Six, Seven and Eight] of the Trust
Agreement.
Section 18. Limitation on Liability of the Administrator. The
Administrator shall have no duties or obligations other than those
specifically set forth herein, and no further duties or obligations shall
arise by implication or otherwise. None of the Administrator or any director,
officer, employee or agent of the Administrator shall be under any liability
for any action taken, or not taken, in good faith pursuant to this Agreement,
or for errors in judgment; PROVIDED, HOWEVER, that this provision shall not
protect the Administrator against any liability which would otherwise be
imposed by reason of the Administrator's willful misconduct, bad faith or
negligence in the performance of its obligations or duties hereunder. The
Administrator and any director, officer, employee or agent of the
Administrator may rely in good faith on any document of any kind which, prima
facie, is properly executed and submitted by any Person respecting any matters
arising hereunder. The Administrator shall be under no duty to inquire into or
investigate the validity, accuracy or content of such document, except in any
circumstance in which the Issuer would otherwise be required to make such
inquiry or investigation. No provision of this Agreement shall require the
Administrator to expend or risk its own funds or otherwise incur financial
liability in the performance of its duties hereunder if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity is not reasonably assured to it. [Finance America, LLC] shall
indemnify the Administrator for and hold it harmless against any loss,
liability or expense arising out of or in connection with this Agreement and
carrying out its duties hereunder, including the costs and expenses of
defending itself against any claim of liability, except in those cases where
the Administrator has been guilty of bad faith, negligence or willful
misconduct. The foregoing indemnification shall survive any termination of
this Agreement or the resignation or removal of the Administrator.
Section 19. [Benefit of Agreement. It is expressly agreed that in
performing its duties under this Agreement, the Administrator will act for the
benefit of the Note Insurer, the holders of the Securities as well as for the
benefit of the Trust, and that such obligations on the part of the
Administrator shall be enforceable at the instance of the Indenture Trustee
and the Trust. The parties hereto acknowledge that the Note Insurer is an
express third party beneficiary hereof entitled to enforce any rights reserved
to it as if it were actually a party hereto.]
Section 20. Bankruptcy Matters. No party to this Agreement shall take
any action to cause the Trust to dissolve in whole or in part or file a
voluntary petition or otherwise initiate proceedings to have the Trust
adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against the Trust, or file a petition seeking or
consenting to reorganization or relief of the Trust as debtor under any
applicable federal or state law relating to bankruptcy, insolvency, or other
relief for debtors with respect to the Trust; or seek or consent to the
appointment of any trustee, receiver, conservator, assignee, sequestrator,
custodian, liquidator (or other similar official) of the Trust or of all or
any substantial part of the properties and assets of the Trust, or cause the
Trust to make any general assignment for the benefit of creditors of the
Trust, or take any action in furtherance of any of the above actions.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Administration
Agreement to be duly executed and delivered as of the day and year first above
written.
FINANCE AMERICA SECURITIES, LLC [ ]
Trust [ ], as Issuer
By: [ ], not in its
individual capacity but solely as Owner
Trustee
By: ___________________________________
Name:
Title:
[ ],
as Administrator
By: __________________________________
Name:
Title:
Acknowledged and Agreed to:
[FINANCE AMERICA, LLC]
By: __________________________________
Name:
Title:
By: __________________________________
Name:
Title:
Exhibit 4.3
Form of Pooling and Servicing Agreement
<PAGE>
Exhibit No. 4.3
FINANCE AMERICA SECURITIES, LLC,
as Depositor
[ ],
as Servicer
and
[ ],
as Trustee
POOLING AND SERVICING AGREEMENT
Dated as of [ ]
----------
Mortgage Loan Trust [ ]
Pass-Through Certificates
<PAGE>
Table of Contents
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions: ...................................................2
Section 1.02. Provisions of General Application. ............................28
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans; Special Deposit; Priority
and Subordination of Ownership Interests ....................29
Section 2.02. Possession of Mortgage Files; Access to Mortgage Files. .......30
Section 2.03. Delivery of Mortgage Loan Documents [and the Certificate
Insurance Policy] ...........................................31
Section 2.04. Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee .....................33
Section 2.05. Execution of Certificates. ....................................34
Section 2.06. Further Action Evidencing Assignment. .........................35
Section 2.07. Conveyance of the Subsequent Mortgage Loans. ..................35
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations of the Servicer. ..............................35
Section 3.02. Representations, Warranties and Covenants of the Depositor. ...36
Section 3.03. Purchase And Substitution. ....................................38
ARTICLE IV
THE CERTIFICATES
Section 4.01. The Certificates. .............................................39
Section 4.02. Registration of Transfer and Exchange of Certificates. ........39
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates. ............44
Section 4.04. Persons Deemed Owners. ........................................45
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01. Appointment of the Servicer. ..................................45
Section 5.02. Subservicers. .................................................46
Section 5.03. Collection of Certain Mortgage Loan Payments;
Collection Account ..........................................48
Section 5.04. Permitted Withdrawals from the Collection Account. ............50
Section 5.05. Payment of Taxes, Insurance and Other Charges. ................51
Section 5.06. Maintenance Of Casualty Insurance. ............................51
Section 5.07. Maintenance of Mortgage Impairment Insurance Policy. ..........52
Section 5.08. Fidelity Bond; Errors and Omissions Policy. ...................52
Section 5.09. Collection of Taxes, Assessments and Other Items;
Servicing Account ...........................................53
Section 5.10. Periodic Filings With The Securities And Exchange
Commission; Additional Information ..........................53
Section 5.11. Enforcement of Due-on-Sale Clauses; Assumption Agreements. ....53
Section 5.12. Realization Upon Defaulted Mortgage Loans. ....................54
Section 5.13. Trustee to Cooperate; Release of Mortgage Files. ..............55
Section 5.14. Servicing Fee; Servicing Compensation. ........................57
Section 5.15. Reports to the Trustee and the Depositor; Collection
Account Statements ..........................................57
Section 5.16. Annual Statement as to Compliance. ............................57
Section 5.17. Annual Independent Public Accountants' Servicing Report. ......58
Section 5.18. Purchase of Defaulted Mortgage Loans. .........................58
Section 5.19. Reports to be Provided by the Servicer. .......................59
Section 5.20. Adjustment of Servicing Compensation In Respect of
Prepaid Mortgage Loans 59
Section 5.21. Periodic Advances. ............................................59
Section 5.22. Inspections. ..................................................60
Section 5.23. Maintenance of Corporate Existence and Licenses; Merger
or Consolidation of the Servicer ............................60
Section 5.24. Assignment of Agreement by Servicer; Servicer Not to Resign. ..61
Section 5.25. Information Reports to be Filed by the Servicer. ..............61
Section 5.26. [Reserved].....................................................61
Section 5.27. Waiver of Prepayment Premiums. ................................61
Section 5.28. Adjustable Rate Mortgage Loans. ...............................61
Section 5.29. [Notices of Material Events.] .................................62
Section 5.30. [Purchase of Receivables upon Breach.] ........................62
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS
Section 6.01. Establishment of Certificate Accounts; Deposits to the
Certificate Accounts ........................................63
Section 6.02. Permitted Withdrawals from the Certificate Account. ...........63
Section 6.03. Collection of Money. ..........................................64
Section 6.04. [The Certificate Insurance Policy.] ...........................64
Section 6.05. Distributions. ................................................66
Section 6.06. Investment of Accounts. .......................................69
Section 6.07. Reports by Trustee. ...........................................69
Section 6.08. Additional Reports by Trustee. ................................73
Section 6.09. Compensating Interest. ........................................73
Section 6.10. [Effect of Payments by the Certificate Insurer; Subrogation]. .73
Section 6.11. Allocation of Realized Losses. ................................74
Section 6.12. Pre-Funding Account. ..........................................74
Section 6.13. Capitalized Interest Account. .................................74
Section 6.14. Determination of LIBOR. .......................................74
Section 6.15. The Basis Risk Reserve Fund. ..................................75
ARTICLE VII
DEFAULT
Section 7.01. Events of Default. ............................................76
Section 7.02. Trustee to Act; Appointment of Successor. .....................78
Section 7.03. Waiver of Defaults. ...........................................81
Section 7.04. [Mortgage Loans, Trust Fund and Accounts Held for Benefit
of the Certificate Insurer] .................................81
Section 7.05. [Rights of the Certificate Insurer to Exercise Rights
of Certificateholders] .....................................81
Section 7.06. [Trustee to Act Solely with Consent of the
Certificate Insurer] .......................................81
ARTICLE VIII
TERMINATION
Section 8.01. Termination. ..................................................82
Section 8.02. Additional Termination Requirements. ..........................83
ARTICLE IX
CONCERNING THE TRUSTEE
Section 9.01. Duties of Trustee. ............................................84
Section 9.02. Certain Matters Affecting the Trustee. ........................85
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans. ........86
Section 9.04. Trustee May Own Certificates. .................................86
Section 9.05. Payment of Trustee's Fees. ....................................86
Section 9.06. Eligibility Requirements for Trustee. .........................87
Section 9.07. Resignation and Removal of the Trustee. .......................87
Section 9.08. Successor Trustee. ............................................88
Section 9.09. Merger or Consolidation of Trustee. ...........................89
Section 9.10. Appointment of Co-Trustee or Separate Trustee. ................89
Section 9.11. Appointment of Custodians. ....................................90
Section 9.12. Appointment of Agent. .........................................90
ARTICLE X
REMIC PROVISIONS
Section 10.01. REMIC Administration. ........................................91
Section 10.02. Prohibited Transactions and Activities. ......................94
Section 10.03. Trustee and Servicer Indemnification. ........................94
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Limitation on Liability of the Depositor and the Servicer. ...94
Section 11.02. Acts of Certificateholders. ..................................96
Section 11.03. Amendment. ...................................................97
Section 11.04. Recordation of Agreement. ....................................98
Section 11.05. Notices. .....................................................98
Section 11.06. Severability of Provisions. ..................................98
Section 11.07. Counterparts. ................................................99
Section 11.08. Successors and Assigns. ......................................99
Section 11.09. Headings. ....................................................99
Section 11.10. [Certificate Insurer Default]. ...............................99
Section 11.11. Third Party Beneficiary. .....................................99
Section 11.12. Intent of the Parties. .......................................99
Section 11.13. Notice to Rating Agencies.....................................99
Section 11.14. Governing Law. ..............................................100
Section 11.15. Appointment of Agent. .......................................100
<PAGE>
EXHIBITS
--------
Exhibit A [Certificate Insurance Policy]
Exhibit B-1 Forms of Regular Certificates
Exhibit B-2 Form of Residual Certificate
Exhibit C Mortgage File
Exhibit D Mortgage Loan Schedule
Exhibit E Acknowledgment of Receipt
Exhibit F Initial Certification
Exhibit G Final Certification
Exhibit H Request For Release of Documents
Exhibit I Form of Residual Transfer Affidavit And Agreement
Exhibit J Form of Residual Transferor Certificate
Exhibit K Form of ERISA Affidavit
Exhibit L Form of Liquidation Report
Exhibit M Certificate Re: Prepaid Loans
Exhibit N Subsequent Transfer Instrument
Exhibit O Form of Investor Representation Letter
Exhibit P Form of Transferor Representation Letter
Exhibit Q Form of Rule 144A Investment Representation
Exhibit R Premium Exhibit
<PAGE>
POOLING AND SERVICING AGREEMENT, dated as of [ ], by and among Finance
America Securities, LLC, a Delaware limited liability company, in its capacity
as depositor (the "Depositor"), [ ], a [ ] corporation, in its capacity as
servicer (the "Servicer"), and [ ], a [ ], in its capacity as trustee (the
"Trustee").
PRELIMINARY STATEMENT:
The Depositor intends to sell certificates (collectively, the
"Certificates"), to be issued hereunder in the classes listed below (each, a
"Class"), which in the aggregate will evidence the entire beneficial ownership
interest in the Trust Fund (as defined herein), consisting of the Mortgage Loans
and certain other assets specified herein. As provided herein, the Trustee will
make an election to treat the assets of the Trust Fund (other than the Basis
Risk Reserve Fund) as a real estate mortgage investment conduit (a "REMIC") for
federal income tax purposes. The Regular Certificates (as defined herein) will
represent ownership of "regular interests" in the REMIC, and the Class R
Certificates will constitute the sole Class of "residual interest" in the REMIC
for purposes of the REMIC Provisions (as defined herein) under federal income
tax law.
The following table sets forth the Class designation, Interest Rate,
initial Class Principal Amount (or Class Notional Amount) (each as defined
herein), and minimum denominations for each Class of Certificates constituting
the interests in the Trust Fund created hereunder.
INITIAL CLASS
PRINCIPAL INTEREST MINIMUM
CLASS AMOUNT RATE DENOMINATION
- ----- ------------- -------- ------------
A........................ $ (1) $[25,000]
M1....................... (2) [25,000]
M2....................... (3) [25,000]
B........................ (4) [25,000]
R........................ (5) (5) (6)
- ----------
(1) The Interest Rate with respect to any Distribution Date for the Class A
Certificates is the per annum rate equal to the lesser of (i) LIBOR plus [
]% and (ii) the Net Funds Cap for such date; PROVIDED, that if the
[Residual Certificateholder] does not exercise its option to purchase the
Mortgage Loans and other property of the Trust Fund pursuant to Section
8.01(b) on the Distribution Date on which it is first entitled to do so,
then with respect to each subsequent Distribution Date the per annum rate
calculated pursuant to clause (i) above shall be LIBOR plus [ ]%.
(2) The Interest Rate with respect to any Distribution Date for the Class M1
Certificates is the per annum rate equal to the lesser of (i) LIBOR plus [
]% and (ii) the Net Funds Cap for such date; PROVIDED, that if the
[Residual Certificateholder] does not exercise its option to purchase the
Mortgage Loans and other property of the Trust Fund pursuant to Section
8.01(b) on the Distribution Date on which it is first entitled to do so,
then with respect to each subsequent Distribution Date the per annum rate
calculated pursuant to clause (i) above shall be LIBOR plus [ ]%.
(3) The Interest Rate with respect to any Distribution Date for the Class M2
Certificates is the per annum rate equal to the lesser of (i) LIBOR plus [
]% and (ii) the Net Funds Cap for such date; PROVIDED, that if the
[Residual Certificateholder] does not exercise its option to purchase the
Mortgage Loans and other property of the Trust Fund pursuant to Section
8.01(b) on the Distribution Date on which it is first entitled to do so,
then with respect to each subsequent Distribution Date the per annum rate
calculated pursuant to clause (i) above shall be LIBOR plus [ ]%.
(4) The Interest Rate with respect to any Distribution Date for the Class B
Certificates is the per annum rate equal to the lesser of (i) LIBOR plus [
]% and (ii) the Net Funds Cap for such date; PROVIDED, that if the
[Residual Certificateholder] does not exercise its option to purchase the
Mortgage Loans and other property of the Trust Fund pursuant to Section
8.01(b) on the Distribution Date on which it is first entitled to do so,
then with respect to each subsequent Distribution Date the per annum rate
calculated pursuant to clause (i) above shall be LIBOR plus [ ]%.
(5) The Class R Certificate will be issued without a Class Principal Amount and
will not bear interest.
(6) The Class R Certificate will be issued as a single Certificate evidencing
the entire Percentage Interest in such Class.
The Mortgage Loans (as defined herein) have an aggregate Principal
Balance (as defined herein) as of the Cut-off Date equal to $[ ].
In consideration of the mutual agreements herein contained, the
Depositor, the Servicer and the Trustee agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions: Whenever used herein, the following words
and phrases, unless the context otherwise requires, shall have the following
meanings.
Accepted Servicing Practices: The Servicer's normal servicing
practices, which in all material respects will conform to the mortgage servicing
practices of prudent mortgage lending institutions which service for their own
and others' account mortgage loans of the same type as the Mortgage Loans in the
jurisdictions in which the related Mortgaged Properties are located, which are
exercised with prudent and reasonable care and which give due consideration to
the Certificateholders' [and the Certificate Insurer's] reliance on the
Servicer.
Account: Any Eligible Account established pursuant to Sections 5.03,
5.09, 6.01, 6.04, 6.12, 6.13 or 6.15 hereof.
Accrual Period: With respect to any Distribution Date and any Class of
LIBOR Certificates, the one-month period beginning on the immediately preceding
Distribution Date (or on the Closing Date, in the case of the first Accrual
Period) and ending on the day immediately preceding the related Distribution
Date. With respect to any Distribution date and any other Class of Certificates,
the calendar month immediately preceding the month in which such Distribution
Date occurs.
Act: The Securities Act of 1933, as amended.
Addition Notice:
Adjustable Rate Mortgage Loan: Any Mortgage Loan as to which the
related Mortgage Note provides for the adjustment of the Mortgage Rate
applicable thereto.
Adjusted Net Mortgage Rate:
Adverse REMIC Event: As defined in Section 10.01(f).
Affiliate: With respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
Agreement: This Pooling and Servicing Agreement, including the
Exhibits hereto, and all amendments hereof and supplements hereto.
Applied Loss Amount: With respect to any Distribution Date, the
amount, if any, by which (x) the aggregate Certificate Principal Amount of the
Certificates after giving effect to distributions on such date, but before
giving effect to any application of the Applied Loss Amount with respect to such
date, exceeds (y) the Total Loan Balance for such date.
Appraised Value: As to any Mortgaged Property, the lesser of (i) the
appraised value of such Mortgaged Property based upon the appraisal made at the
time of the origination of the related Mortgage Loan, and (ii) the sales price
of the Mortgaged Property at such time of origination, except in the case of a
Mortgaged Property securing a refinanced or modified Mortgage Loan as to which
it is the lesser of the appraised value determined above or the appraised value
determined in an appraisal at the time of refinancing or modification, as the
case may be.
Assignment Of Mortgage: With respect to each Mortgage Loan, 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 of record the sale of the
Mortgage to the Trustee for the benefit of the Certificateholders [and the
Certificate Insurer].
Authorized Denomination: With respect to each Class of Certificates,
the applicable minimum denomination specified in the Preliminary Statement
hereto.
Balloon Mortgage Loan: Any Mortgage Loan having an original term to
maturity that is shorter than its amortization schedule, and a final Monthly
Payment that is disproportionately large in comparison to other Monthly
Payments.
Balloon Payment: The final scheduled payment under the terms of a
Balloon Mortgage Loan.
Basis Risk Reserve Fund: A fund created as part of the Trust Fund
pursuant to Section 6.15 of this Agreement but which is not an asset of any
REMIC.
Basis Risk Shortfall: With respect to any Distribution Date and any
Class of Certificates other than the Residual Certificates, the amount by which
the Interest Rate applicable to such Certificate for such date, determined
without regard to the Net Funds Cap for such date but subject to the Net Maximum
Interest Rate, exceeds such Net Funds Cap.
Blanket Mortgage: The mortgage or mortgages encumbering a Cooperative
Property.
Book-Entry Certificates: Beneficial interests in Certificates
designated as "Book-Entry Certificates" in this Agreement, ownership and
transfers of which shall be evidenced or made through book entries by the
Depository; provided, that after the occurrence of a condition whereupon
book-entry registration and transfer are no longer permitted and Definitive
Certificates are to be issued to Certificateholders, such Book-Entry
Certificates shall no longer be "Book-Entry Certificates." As of the Closing
Date, the following Classes of Certificates constitute Book-Entry Certificates:
[Class A, Class M1, Class M2 and Class B].
Business Day: Any day other than (a) a Saturday or Sunday [(b) a day
on which the Certificate Insurer is closed or] or (b) a day on which banking
institutions in the State of New York, the State of [ ] or (if other than New
York) the city in which the Trustee's Corporate Trust Division is located are
authorized or obligated by law or executive order to be closed.
Capitalized Interest Account:
Capitalized Interest Amount:
Carryforward Interest: With respect to any Distribution Date and each
Class of Certificates, the sum of (i) the amount, if any, by which (x) the sum
of (A) Current Interest for such Class for the immediately preceding
Distribution Date and (B) any unpaid Carryforward Interest for such Class for
such immediately preceding Distribution Date exceeds (y) the amount distributed
in respect of interest on such Class on such immediately preceding Distribution
Date, and (ii) interest on such amount for the related Accrual Period at the
applicable Interest Rate.
Certificate: Any certificate of a Class identified in the Preliminary
Statement hereto executed by the Trustee on behalf of the Trust Fund and
authenticated by the Trustee in substantially the forms attached hereto as
Exhibits B-1 and B-2.
Certificate Account: The account established in accordance with
Section 6.01(a) hereof and maintained by the Trustee, in the name of "[ ], as
Trustee of Finance America Securities, LLC Mortgage Loan Trust [ ] under the
Pooling and Servicing Agreement dated as of [ ] ."
Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, solely for the purposes of giving any
consent (except any consent required to be obtained pursuant to Section 11.03),
waiver, request or demand pursuant to this Agreement, any Certificate registered
in the name of the Depositor or the Servicer or any Affiliate thereof shall be
deemed not to be outstanding and the rights to which it is entitled shall not be
taken into account in determining whether the requisite percentage of rights
necessary to effect any such consent has been obtained, except as otherwise
provided in Section 11.03. The Trustee shall be entitled to rely upon a
certification of the Depositor or the Servicer in determining whether any
Certificates are registered in the name of a respective Affiliate. [Any
Certificates on which payments are made under the Certificate Insurance Policy
shall be deemed to be outstanding and held by the Certificate Insurer to the
extent of such payment.]
[Certificate Insurance Payments Account: The Certificate Insurance
Payments Account established in accordance with Section 6.04(c) hereof and
maintained by the Trustee.]
[Certificate Insurance Policy: The Certificate Guaranty Insurance
Policy No. [ ], dated the Closing Date, and any endorsements thereto, issued by
the Certificate Insurer for the benefit of Holders of the Insured Certificates,
a copy of which is attached hereto as Exhibit A.]
[Certificate Insurer: [ ], a [ ] organized and created under the laws
of the State of [ ], and any successors thereto.]
[Certificate Insurer Default: Any failure by the Certificate Insurer
to make a payment required under the Certificate Insurance Policy in accordance
with its terms, which failure continues unremedied for five Business Days.]
Certificate Principal Amount: With respect to any Certificate other
than any Notional Certificate or Residual Certificate, the initial Certificate
Principal Amount thereof, less the amount of all principal distributions
previously made with respect to such Certificate and any Applied Loss Amount
previously allocated to such Certificate. The Notional and Residual Certificates
are issued without Certificate Principal Amounts.
Certificate Register: As described in Section 4.02(a).
Certificate Registrar:
Class: All Certificates having the same class designation.
[Class B Principal Distribution Amount: With respect to any
Distribution Date, the amount, if any, by which (x) the sum of (i) the aggregate
Certificate Principal Amount of the Class A, Class M1 and Class M2 Certificates,
in each case after giving effect to distributions on such Distribution Date, and
(ii) the Class Principal Amount of the Class B Certificates immediately prior to
such Distribution Date exceeds (y) the lesser of (i) the product of (A) if a
Cumulative Loss Trigger Event has not occurred with respect to such date, [ ]%,
and if a Cumulative Loss Trigger Event has occurred with respect to such date, [
]%, and (B) the Total Loan Balance for such Distribution Date and (ii) the
amount, if any, by which the Total Loan Balance for such Distribution Date
exceeds $[ ].]
[Class M1 Principal Distribution Amount: With respect to any
Distribution Date, the amount, if any, by which (x) the sum of (i) the Class
Principal Amount of the Class A Certificates after giving effect to
distributions on that Distribution Date, and (ii) the Class Principal Amount of
the Class M1 Certificates immediately prior to such Distribution Date exceeds
(y) the lesser of (i) the product of (A) if a Cumulative Loss Trigger Event has
not occurred with respect to such date, [ ]%, and if a Cumulative Loss Trigger
Event has occurred with respect to such date, [ ]%, and (B) the Total Loan
Balance for such Distribution Date and (ii) the amount, if any, by which the
Total Loan Balance for such Distribution Date exceeds $[ ].]
[Class M2 Principal Distribution Amount: With respect to any
Distribution Date, the amount, if any, by which (x) the sum of (i) the aggregate
Certificate Principal Amount of the Class A and Class M1 Certificates, in each
case after giving effect to distributions on that Distribution Date, and (ii)
the Class Principal Amount of the Class M2 Certificates immediately prior to
such Distribution Date exceeds (y) the lesser of (i) the product of (A) if a
Cumulative Loss Trigger Event has not occurred with respect to such date, [ ]%,
and if a Cumulative Loss Trigger Event has occurred with respect to such date, [
]% and (B) the Total Loan Balance for such Distribution Date and (ii) the
amount, if any, by which the Total Loan Balance for such Distribution Date
exceeds $[ ].]
Class Notional Amount:
Class Principal Amount: With respect to each Class of Certificates
other than the Residual Certificates and any Class of Notional Certificates, the
aggregate of the Certificate Principal Amounts of all Certificates of such Class
at the date of determination.
Closing Date:
Code: The Internal Revenue Code of 1986, as amended, and as it may be
further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
Collection Account: The account established in accordance with Section
5.03(b) hereof and maintained by the Servicer, in the name of "[ ], as Trustee
of Finance America Securities, LLC Mortgage Loan Trust [ ] under the Pooling and
Servicing Agreement dated as of [ ]".
Compensating Interest: As defined in Section 6.09.
Cooperative Corporation: The entity that holds title (fee or an
acceptable leasehold estate) to the real property and improvements constituting
the Cooperative Property and which governs the Cooperative Property, which
Cooperative Corporation must qualify as a Cooperative Housing Corporation under
Section 216 of the Code.
Cooperative Loan: Any Mortgage Loan secured by Cooperative Shares and
a Proprietary Lease.
Cooperative Loan Documents: With respect to any Cooperative Loan, (i)
the Cooperative Shares, together with a stock power in blank; (ii) the original
executed Security Agreement and the assignment of the Security Agreement
endorsed in blank; (iii) the original executed Proprietary Lease and the
assignment of the Proprietary Lease endorsed in blank; (iv) the original
executed Recognition Agreement and the assignment of the Recognition Agreement
(or a blanket assignment of all Recognition Agreements) endorsed in blank; (v)
the executed UCC-1 financing statement with evidence of recording thereon, which
has been filed in all places required to perfect the security interest in the
Cooperative Shares and the Proprietary Lease; and (vi) executed UCC-3 financing
statements (or copies thereof) or other appropriate UCC financing statements
required by state law, evidencing a complete and unbroken line from the
mortgagee to the Trustee with evidence of recording thereon (or in a form
suitable for recordation).
Cooperative Property: The real property and improvements owned by the
Cooperative Corporation, that includes the allocation of individual dwelling
units to the holders of the Cooperative Shares of the Cooperative Corporation.
Cooperative Shares: Shares issued by a Cooperative Corporation.
Cooperative Unit: A single family dwelling located in a Cooperative
Property.
Corporate Trust Division: The principal office of the Trustee, at
which its corporate trust business shall be administered, which office at the
date of execution of this Agreement is located at [ ].
Cumulative Loss Percentage: With respect to any Distribution Date, the
aggregate of all Realized Losses from the Cut-off Date through the close of the
Due Period immediately preceding such Distribution Date, expressed as a
percentage of the Cut-off Date Loan Balance.
Cumulative Loss Trigger Event: A Cumulative Loss Trigger Event will
have occurred with respect to any Distribution Date if (a) the Cumulative Loss
Percentage for such Distribution Date is greater than (b) the Targeted
Cumulative Loss Percentage for such Distribution Date.
Current Interest: With respect to each Class of Certificates and any
Distribution Date, (a) the aggregate amount of interest accrued at the
applicable Interest Rate during the related Accrual Period on the Class
Principal Amount or Class Notional Amount of such Class immediately prior to
such Distribution Date, on the basis of a 360-day year and the actual number of
days in such Accrual Period, MINUS (b) any Relief Act Shortfall for such date.
Curtailment: With respect to a Mortgage Loan, any payment of principal
received during a Due Period as part of a payment that is in excess of the
amount of the Monthly Payment due for such Due Period and which is not intended
to satisfy the Mortgage Loan in full, nor is intended to cure a delinquency.
Custodial Agreement: Any custodial agreement entered into by the
Trustee and a Custodian pursuant to the terms of this Agreement.
Custodian: As defined in Section 2.02(c).
Cut-off Date:
Cut-off Date Loan Balance: The Total Loan Balance as of the Cut-off
Date.
[DCR: Duff & Phelps Credit Rating Co., or its successor in interest.]
Deferred Amount: With respect to any Distribution Date and each [Class
B] Certificate, the aggregate of Applied Loss Amounts previously applied in
reduction of the Certificate Principal Amount thereof, less any amounts
previously reimbursed in respect thereof.
[Deficiency Amount: With respect to any Distribution Date, the amount,
if any, by which (a) the sum of (i) Current Interest for the Senior Certificates
for such date and (ii) if the Senior Enhancement Percentage is zero, the
Subordination Deficit for such date, exceeds (b) the Available Funds for such
date.]
Deficient Valuation: With respect to any Mortgage Loan, a valuation of
the related Mortgaged Property by a court of competent jurisdiction in an amount
less than the then outstanding principal balance of the Mortgage Loan, which
valuation results from a proceeding initiated under the United States Bankruptcy
Code.
Deleted Mortgage Loan: A Mortgage Loan replaced by or to be replaced
by a Qualified Substitute Mortgage Loan.
Delinquency Rate: With respect to any Due Period, the fraction,
expressed as a percentage, the numerator of which is the aggregate outstanding
principal balance of all Mortgage Loans 60 or more days Delinquent, all Mortgage
Loans in foreclosure and all REO Mortgage Loans as of the close of business on
the last day of such Due Period, and the denominator of which is the Total Loan
Balance for the related Distribution Date.
Delinquent: A Mortgage Loan is "delinquent" if any payment due thereon
is not made by the close of business on the day such payment is scheduled to be
due. A Mortgage Loan is "30 days delinquent" if such payment has not been
received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there is
no such corresponding day (e.g., as when a 30-day month follows a 31- day month
in which a payment was due on the 31st day of such month) then on the last day
of such immediately succeeding month. Similarly for "60 days delinquent," "90
days delinquent" and so on.
[Delinquency Trigger Event: A Delinquency Trigger Event will have
occurred with respect to any Distribution Date if the Three Month Delinquency
Rate for such Distribution Date equals or exceeds [ ]% of the Senior Enhancement
Percentage for such Distribution Date.]
Depositor: Finance America Securities, LLC, a Delaware limited
liability company, and any successor thereto.
Depository: The Depository Trust Company, 55 Water Street, New York,
New York 10041 and any successor Depository hereafter named. The nominee of the
initial Depository for purposes of registering those Certificates that are to be
Book-Entry Certificates is Cede & Co. The Depository shall at all times be a
"clearing corporation" as defined in Section 8-102(3) of the Uniform Commercial
Code of the State of New York and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
Determination Date: The close of business on the [15th] day of each
month, or if such [15th] day is not a Business Day, the immediately preceding
Business Day.
Direct Participant: Any broker-dealer, bank or other financial
institution for which the Depository holds Book Entry Certificates from time to
time as a securities depositary.
Disqualified Non-United States Person: A transferee of a Class R
Certificate other than a person that (i) is not a Non-United States Person or
(ii) is a Non-United States Person that holds a Class R Certificate in
connection with the conduct of a trade or business within the United States and
has furnished the transferor and the Trustee with an effective Internal Revenue
Service Form 4224 or (iii) is a Non-United States Person that has delivered to
both the transferor and the Trustee an opinion of a nationally recognized tax
counsel to the effect that the transfer of a Class R Certificate to it is in
accordance with the requirements of the Code and the regulations promulgated
thereunder and that such transfer of a Class R Certificate will not be
disregarded for federal income tax purposes.
Disqualified Organization: Any of (i) the United States, any State or
political subdivision thereof, any possession of the United States, or any
agency or instrumentality of any of the foregoing (other than an instrumentality
which is a corporation if all of its activities are subject to tax and, except
for the FHLMC, a majority of its board of directors is not selected by such
governmental unit), (ii) any foreign government, any international organization,
or any agency or instrumentality of any of the foregoing, (iii) any organization
(other than certain farmers' cooperatives described in Section 521 of the Code)
which is exempt from the tax imposed by Chapter 1 of the Code (unless such
organization is subject to the tax imposed by Section 511 of the Code on
unrelated business taxable income), or rural electric and telephone cooperatives
described in Section 1381(a)(2)(C) of the Code and (iv) any other Person so
designated by the Trustee based upon an Opinion of Counsel provided to the
Trustee [and the Certificate Insurer] that the holding of an ownership interest
in a Class R Certificate by such Person may cause the REMIC or any Person having
an ownership interest in any Class of Certificates (other than such Person) to
incur liability for any federal tax imposed under the Code that would not
otherwise be imposed but for the transfer of an ownership interest in the Class
R Certificate to such Person. The terms "United States", "State" and
"international organization" shall have the meanings set forth in Section 7701
of the Code.
Distribution Date: The [25th] day of any month or if such [25th] day
is not a Business Day, the first Business Day immediately following, commencing
in [ ].
Due Date: The first day of each calendar month.
Due Period: With respect to each Distribution Date, the period
beginning on the opening of business on the second day of the calendar month
preceding the calendar month in which such Distribution Date occurs, and ending
at the close of business on the first day of the calendar month in which such
Distribution Date occurs.
Eligible Account: Either (A) a segregated account or accounts
maintained with an institution (which may include the Trustee, provided such
institution otherwise meets these requirements) whose deposits are insured by
the FDIC, the unsecured and uncollateralized debt obligations of which
institution shall be rated [AA] (or the equivalent) or better by each Rating
Agency and in the highest short term rating category by each Rating Agency, and
which is (i) a federal savings and loan association duly organized, validly
existing and in good standing under the federal banking laws, (ii) an
institution (including the Trustee) duly organized, validly existing and in good
standing under the applicable banking laws of any state, (iii) a national
banking association duly organized, validly existing and in good standing under
the federal banking laws, (iv) a principal subsidiary of a bank holding company,
or (v) approved in writing by [the Certificate Insurer and] each Rating Agency
or (B) a segregated trust account or accounts maintained in the trust department
of a federal or state chartered depository institution, acting in its fiduciary
capacity.
ERISA: As defined in Section 4.02(m) hereof.
ERISA-Restricted Certificate: Any [Class M1, Class M2 or Class B]
Certificate.
Event Of Default: One or more of the events described in Section 7.01
hereof.
[Extra Principal Distribution Amount: With respect to any Distribution
Date, the lesser of (a) Monthly Excess Interest, if any, for such date and (b)
the Overcollateralization Deficiency, if any, for such date.]
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
FNMA: Fannie Mae and any successor thereto.
[Fitch: Fitch ICBA, Inc., or its successor in interest.]
Fixed Rate Mortgage Loan: Any Mortgage Loan as to which the related
Mortgage Note provides for a fixed Mortgage Rate.
GAAP: Generally accepted accounting principles.
Index: The index specified in the related Mortgage Note for
calculation of the Mortgage Rate thereof.
Indirect Participant: Any financial institution for whom any Direct
Participant holds an interest in a Book-Entry Certificate.
Initial Capitalized Interest Amount:
Initial LIBOR Rate:
Initial Mortgage Loan:
[Insurance Agreement: The Insurance Agreement dated as of [ ] among
the Certificate Insurer, the Originator, the Seller, the Depositor, the Servicer
and the Trustee, as such agreement may be amended or supplemented in accordance
with the provisions thereof.]
Insurance Policy: Any standard hazard insurance policy, flood
insurance policy, earthquake insurance policy or title insurance policy relating
to a Mortgage Loan or a Mortgaged Property.
Insurance Proceeds: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan to the extent such proceeds are not
applied to the restoration of the related Mortgaged Property or released to the
related Mortgagor in accordance with Accepted Servicing Practices. ["Insurance
Proceeds" do not include "Insured Payments."]
[Insured Certificate: Any [Class A] Certificate.]
[Insured Certificateholder: Any Holder of a [Class A] Certificate.]
[Insured Payment: As defined in the Certificate Insurance Policy.]
Interest Rate: With respect to each Class of Certificates and any
Distribution Date, the applicable per annum rate set forth or described in the
Preliminary Statement hereto.
Interest Remittance Amount: With respect to any Distribution Date, the
sum of (i) all interest collected (other than Payaheads) or advanced in respect
of Monthly Payments on the Mortgage Loans during the related Due Period, LESS
(x) the related Servicing Fees to the extent provided in this Agreement and (y)
unreimbursed Periodic Advances and, without duplication, Nonrecoverable Advances
due to the Servicer or the Trustee with respect to the Mortgage Loans, to the
extent allocable to interest and to the extent provided in this Agreement, (ii)
any Compensating Interest paid by the Servicer with respect to such Distribution
Date, (iii) the portion of the Loan Purchase Price paid for any Mortgage Loan
that was purchased from the Trust Fund during the related Prepayment Period, to
the extent allocable to interest, (iv) the portion of any Substitution
Adjustment paid with respect to the Mortgage Loans during the related Prepayment
Period allocable to interest, (v) all Net Liquidation Proceeds, Insurance
Proceeds, Net REO Proceeds, Released Mortgaged Property Proceeds and other
recoveries collected with respect to such Mortgage Loans during the related
Prepayment Period, to the extent allocable to interest, and (vi) any amounts
paid by the Servicer and the Trustee in respect of investment losses on amounts
on deposit in the Collection Account and the Certificate Account. The Interest
Remittance Amount does not include Prepayment Premiums.
Junior Mortgage Loan: Any Mortgage Loan secured by a junior lien on
the related Mortgaged Property.
[Late Payment Rate: As defined in the Insurance Agreement.]
LIBOR: With respect to each Accrual Period, the per annum rate
determined pursuant to Section 6.14 on the basis of London interbank offered
rate quotations for one-month Eurodollar deposits, as such quotations may appear
on the display designated as page 3750 on the Dow Jones Telerate Service (or
such other page as may replace such page on that service for the purpose of
displaying London interbank offered quotations of major banks).
LIBOR Certificate: Any [Class A, Class M1, Class M2 or Class B]
Certificate.
LIBOR Determination Date: The second London Business Day preceding the
commencement of each Accrual Period.
Liquidated Mortgage Loan: A Mortgage Loan with respect to which the
related Mortgaged Property has been acquired, liquidated or foreclosed and with
respect to which the Servicer determines, in accordance with Accepted Servicing
Practices, that all Liquidation Proceeds which it expects to recover have been
recovered or that the cost of obtaining any additional recoveries therefrom
would exceed the amount of such recoveries.
Liquidation Expenses: Expenses incurred by the Servicer in connection
with the liquidation of any defaulted Mortgage Loan or property acquired in
respect thereof (including, without limitation, legal fees and expenses,
committee or referee fees, and, if applicable, brokerage commissions and
conveyance taxes), any unreimbursed amount expended by the Servicer pursuant to
Sections 5.05, 5.06 and 5.12 respecting the related Mortgage Loan and any
unreimbursed expenditures for real property taxes or for property restoration or
preservation of the related Mortgaged Property. Liquidation Expenses shall not
include any previously incurred expenses in respect of an REO Mortgage Loan
which have been netted against related REO Proceeds.
Liquidation Proceeds: Amounts received by the Servicer (including
Insurance Proceeds) in connection with the liquidation of defaulted Mortgage
Loans or property acquired in respect thereof, whether through foreclosure, sale
or otherwise, including payments in connection with such Mortgage Loans received
from the Mortgagor, other than amounts required to be paid to the Mortgagor
pursuant to the terms of the applicable Mortgage or to be applied otherwise
pursuant to law.
Loan Purchase Price: With respect to any Mortgage Loan purchased from
the Trust Fund pursuant to this Agreement or the Purchase Agreement, the sum of
(i) the outstanding principal balance of such Mortgage Loan as of the date of
purchase, (ii) all interest accrued thereon and unpaid to the end of the Due
Period during which such purchase occurs, (iii) the amount of any Servicing
Advances remaining unreimbursed with respect to such Mortgage Loan and (iv) the
amount of any Servicing Advances reimbursed other than from collections or other
recoveries in respect of such Mortgage Loan.
Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of such Mortgage Loan, as of the date of origination of the Mortgage
Loan, DIVIDED BY the Appraised Value of the related Mortgaged Property.
London Business Day: Any day on which banks are open for dealing in
foreign currency and exchange in London, England and New York City.
Maintenance: With respect to any Cooperative Unit, the rent or fee
paid by the Mortgagor to the Cooperative Corporation pursuant to the Proprietary
Lease.
Majority Certificateholders: The Holder or Holders of Certificates
evidencing Percentage Interests in excess of 51% of each Class outstanding.
[Monthly Excess Cashflow: With respect to any Distribution Date, the
sum of (x) Monthly Excess Interest, if any, for such date and (y) the
Overcollateralization Release Amount, if any, for such date.]
[Monthly Excess Interest: With respect to any Distribution Date, the
amount of any Interest Remittance Amount remaining after application pursuant to
[clauses FIRST through FIFTH of Section 6.05(b)(i)] on such date.]
Monthly Payment: As to any Mortgage Loan (including any REO Mortgage
Loan) and any Due Date, the scheduled payment of principal and interest due
thereon for such Due Date (after adjustment for Deficient Valuations occurring
prior to such Due Date but before any adjustment to such amortization schedule
by reason of any bankruptcy, other than Deficient Valuations or similar
proceeding or any moratorium or similar waiver or grace period).
[Moody's: Moody's Investors Service, or its successor in interest.]
Mortgage: The mortgage, deed of trust or other instrument creating a
lien on the Mortgaged Property.
Mortgage File: The mortgage documents listed in Exhibit C attached
hereto pertaining to a particular Mortgage Loan and any additional documents
required to be added to the Mortgage File pursuant to this Agreement; provided
that whenever the term "Mortgage File" is used to refer to documents actually
received by the Trustee or the Custodian on behalf of the Trustee, such term
shall not be deemed to include such additional documents required to be added
unless they are actually so added.
Mortgage Impairment Insurance Policy: As defined in Section 5.07.
Mortgage Loan: An individual mortgage loan that is assigned and
transferred to the Trustee pursuant to this Agreement and identified on Exhibit
D hereto, together with the rights and obligations of a holder thereof and
payments thereon and proceeds therefrom (other than payments of interest that
accrued on each Mortgage Loan up to and including the Due Date therefor
occurring on or prior to the Cut-off Date), the Mortgage Loans originally
subject to this Agreement being identified on the Mortgage Loan Schedule. As
applicable, Mortgage Loan shall be deemed to refer to the related REO Property.
Mortgage Loan Schedule: The list of the Mortgage Loans transferred to
the Trustee or the Custodian on behalf of the Trustee on or before the Closing
Date or Subsequent Transfer Date as part of the Trust Fund and attached hereto
as Exhibit D and delivered in computer readable format, which list shall set
forth at a minimum the following information as to each Mortgage Loan:
(i) last name of Mortgagor;
(ii) the Mortgage Loan identifying number;
(iii) the city, state and zip code of the Mortgaged Property;
(iv) the type of property;
(v) the current Monthly Payment as of the Cut-off Date;
(vi) the original number of months to maturity;
(vii) the scheduled maturity date;
(viii) the Principal Balance as of the Cut-off Date (with respect
to an Initial Mortgage Loan) or subsequent Cut-off Date (with respect
to a Subsequent Mortgage Loan);
(ix) the Loan-to-Value Ratio at origination;
(x) the Mortgage Rate as of the date of origination;
(xi) the Mortgage Rate as of the Cut-off Date (with respect to an
Initial Mortgage Loan) or Subsequent Cut-off Date (with respect to a
Subsequent Mortgage Loan);
(xii) the Appraised Value;
(xiii) the stated purpose of the loan at origination;
(xiv) the type of occupancy at origination;
(xv) the documentation type;
(xvi) the loan classification; and
(xvii) the Servicing Fee with respect to such Mortgage Loan,
expressed as a rate per annum.
Such schedule may consist of multiple reports that collectively set
forth all of the information required.
Mortgage Note: The original, executed note or other evidence of the
indebtedness of a Mortgagor under a Mortgage Loan.
Mortgage Pool: The aggregate of the Mortgage Loans identified on the
Mortgage Loan Schedule.
Mortgage Rate: As to any Mortgage Loan, the per annum rate at which
interest accrues under the related Mortgage Note.
Mortgaged Property: The underlying property securing a Mortgage Loan,
consisting of a fee simple estate in a single parcel of land improved by a
Residential Dwelling.
Mortgagor: The obligor on a Mortgage Note.
Net Excess Spread: With respect to any Distribution Date, the
fraction, expressed as a percentage, the numerator of which is equal to the
product of (i) the amount, if any, by which (a) the Optimal Interest Remittance
Amount for such Distribution Date exceeds (b) the Current Interest payable with
respect to the Certificates for such date and (ii) twelve, and the denominator
of which is the Total Loan Balance for such date.
Net Funds Cap: With respect to any Distribution Date, the per annum
rate equal to the fraction, expressed as a percentage, the numerator of which is
the product of (i) the Optimal Interest Remittance Amount for such date and (ii)
twelve, and the denominator of which is the Total Loan Balance for the
immediately preceding Distribution Date.
Net Liquidation Proceeds: As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of, without duplication, Liquidation Expenses and net
of any unpaid Servicing Fees, unreimbursed Periodic Advances and unreimbursed
Servicing Advances made by the Servicer. For all purposes of this Agreement, Net
Liquidation Proceeds shall be allocated first to accrued and unpaid interest on
the related Mortgage Loan and then to the unpaid principal balance thereof.
Net Maximum Interest Rate: With respect to any Class of LIBOR
Certificates and any Distribution Date, the per annum rate equal to (a) the
weighted average (by Principal Balance) of the maximum interest rates applicable
to the Adjustable Rate Mortgage Loans under the applicable Mortgage Notes and
the Mortgage Rates applicable to the Fixed Rate Mortgage Loans, MINUS (b) the
Total Expense Rate.
Net Mortgage Rate: With respect to each Mortgage Loan at any time of
determination, a rate equal to the Mortgage Rate on such Mortgage Loan MINUS the
Total Expense Rate.
Net REO Proceeds: As to any REO Mortgage Loan, REO Proceeds net of,
without duplication, any unpaid Servicing Fees, unreimbursed Periodic Advances
and unreimbursed Servicing Advances made by the Servicer. For all purposes of
this Agreement, Net REO Proceeds shall be allocated first to accrued and unpaid
interest on the related Mortgage Loan and then to the unpaid principal balance
thereof.
Nonrecoverable Advances: With respect to any Mortgage Loan, (a) any
Periodic Advance or Servicing Advance previously made and not reimbursed from
late collections pursuant to Section 5.04(a), or (b) a Periodic Advance proposed
to be made in respect of a Mortgage Loan or REO Property, either of which, in
the good faith business judgment of the Servicer, as evidenced by an Officer's
Certificate delivered to [the Certificate Insurer and] the Trustee no later than
the Business Day following such determination would not be ultimately
recoverable pursuant to Section 5.04(a).
Non-United States Person: Any Person other than a United States
Person.
Notional Certificate:
Offering Document: The Prospectus.
Officer's Certificate: A certificate signed by the Chairman of the
Board, the President or a Vice President and the Treasurer, the Secretary, one
of the Assistant Treasurers or Assistant Secretaries or a Servicing Officer of
the Seller, the Servicer, or the Depositor, as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, which opinion shall
be reasonably acceptable in form and substance to [the Certificate Insurer and]
the Trustee and delivered to [the Certificate Insurer and] the Trustee from
counsel experienced in matters relating to the subject of such opinion; except
that any opinion of counsel relating to (a) the qualification of the Trust Fund
as a REMIC or (b) compliance with the REMIC Provisions must be an opinion of
counsel who (i) is in fact independent of the Seller, the Servicer and the
Trustee, (ii) does not have any direct financial interest or any material
indirect financial interest in the Seller or the Servicer or the Trustee or in
an Affiliate thereof and (iii) is not connected with the Seller or the Servicer
or the Trustee as an officer, employee, director or person performing similar
functions [and (iv) is reasonably acceptable to the Certificate Insurer].
Optimal Interest Remittance Amount: With respect to each Distribution
Date, the product of (1)(x) the weighted average of the Net Mortgage Rates of
the Mortgage Loans as of the first day of the related Due Period, DIVIDED BY (y)
twelve, and (2) the Total Loan Balance for the immediately preceding
Distribution Date.
Original Pre-Funded Amount:
Originator: [AMRESCO Residential Mortgage Corporation, a Delaware
corporation] [ ], a [ ] corporation], in its capacity as Originator under the
Purchase Agreement.
Outstanding Mortgage Loan: As to any Due Date, a Mortgage Loan
(including an REO Mortgage Loan) which was not the subject of a Principal
Prepayment in Full prior to such Due Date, which did not become a Liquidated
Mortgage Loan prior to such Due Date, and which was not purchased by the
Servicer, the Seller or the Originator prior to such Due Date.
[Overcollateralization Amount: With respect to any Distribution Date,
the amount, if any, by which (x) the Total Loan Balance for such Distribution
Date exceeds (y) the aggregate Certificate Principal Amount of the Certificates
after giving effect to distributions on such Distribution Date.]
[Overcollateralization Deficiency: With respect to any Distribution
Date, the amount, if any, by which (x) the Targeted Overcollateralization Amount
for such Distribution Date exceeds (y) the Overcollateralization Amount for such
Distribution Date, calculated for this purpose after giving effect to the
reduction on such Distribution Date of the Certificate Principal Amounts of the
Certificates resulting from the distribution of the Principal Remittance Amount
(but not any Extra Principal Distribution Amount) on such Distribution Date, but
before the allocation of any Applied Loss Amount on such Distribution Date.]
[Overcollateralization Release Amount: With respect to any
Distribution Date, the amount, if any, by which (a) the Overcollateralization
Amount for such date exceeds (b) the Targeted Overcollateralization Amount for
such date.]
Ownership Interest: As to any Certificate, any ownership or security
interest in such Certificate, including any interest in such Certificate as the
Holder thereof and any other interest therein, whether direct or indirect, legal
or beneficial, as owner or as pledgee.
Owner-Occupied Mortgaged Property: A Residential Dwelling as to which
the related Mortgagor represented an intent to occupy as such Mortgagor's
primary, secondary or vacation residence at the origination of the Mortgage
Loan.
Payahead: With respect to any Mortgage Loan and any Due Date therefor,
any Monthly Payment received by the Servicer during any Due Period in addition
to the Monthly Payment due on such Due Date, intended by the related Mortgagor
to be applied on a subsequent Due Date.
Percentage Interest: With respect to a Regular Certificate and any
date of determination, the portion evidenced by such Certificate, expressed as a
percentage rounded to four decimal places, equal to a fraction the numerator of
which is the initial Certificate Principal Amount represented by such
Certificate and the denominator of which is the initial Class Principal Amount
or Class Notional Amount of such Class of Certificates. With respect to a Class
R Certificate and any date of determination, the portion evidenced thereby as
stated on the face of such Certificate.
Periodic Advance: The aggregate of the advances with respect to
Mortgage Loans and REO Properties required to be made by the Servicer on any
Servicer Remittance Date pursuant to Section 5.21 hereof, the amount of any such
advances being equal to the sum of: (i) with respect to the Mortgage Loans other
than REO Properties as described in clause (ii) below, all Monthly Payments (net
of the related Servicing Fee) other than any Balloon Payment on such Mortgage
Loans that were Delinquent as of the related Determination Date, plus (ii) with
respect to each REO Property, which REO Property was acquired during or prior to
the related Prepayment Period and as to which an REO Disposition did not occur
during the related Prepayment Period, an amount equal to the Monthly Payment
(net of the related Servicing Fee) for the most recently ended Due Period for
the related Mortgage Loan MINUS the net income from such REO Property
transferred to the related Certificate Account for such Distribution Date, MINUS
(iii) the amount of any advance otherwise required for such Distribution Date
pursuant to clauses (i) and (ii) above which the Servicer has determined to be a
Nonrecoverable Advance.
Permitted Investments: As used herein, Permitted Investments shall be
limited to the following:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and
interest by, the United States or any agency or instrumentality
thereof, provided such obligations are backed by the full faith and
credit of the United States and any obligation of, or guaranties by,
FHLMC or FNMA (other than senior debt obligations and mortgage
pass-through certificates guaranteed by FHLMC or FNMA) shall be a
Permitted Investment; [provided that at the time of such investment,
such investment is acceptable to the Certificate Insurer,] but
excluding any of such securities whose terms do not provide for
payment of a fixed dollar amount upon maturity or call for redemption;
(b) federal funds and certificates of deposit, time and demand
deposits and banker's acceptances (having original maturities of not
more than 365 days) issued by any bank or trust company incorporated
under the laws of the United States or any state thereof and subject
to supervision and examination by federal or state banking
authorities, provided that at the time of such investment or
contractual commitment providing for such investment the short-term
debt obligations of such bank or trust company at the date of
acquisition thereof have been rated in its highest rating by each
Rating Agency; provided that any such certificates of deposit must be
secured at all times by collateral described in clause (a) or (b)
above, such collateral must be held by a third party and the Trustee
must have a perfected first priority security interest in such
collateral;
(c) commercial paper (having original maturities of not more than
180 days) rated in its highest rating by each Rating Agency;
(d) investments in money market funds rated in its highest rating
by each Rating Agency, which funds are registered under the Investment
Company Act of 1940 and whose shares are registered under the Act; and
(e) other investments approved by the Rating Agencies in writing
delivered to the Trustee;
provided that each such Permitted Investment shall be a "permitted investment"
within the meaning of Section 860G(a)(5) of the Code and that no instrument
described hereunder shall evidence either the right to receive (x) only interest
with respect to the obligations underlying such instrument or (y) both principal
and interest payments derived from obligations underlying such instrument and
the interest and principal payments with respect to such instrument provided a
yield to maturity at par greater than 120% of the yield to maturity at par of
the underlying obligations; and PROVIDED, FURTHER, that no instrument described
hereunder may be purchased at a price greater than par.
Permitted Transferee: Any transferee of a Class R Certificate other
than a Disqualified Non-United States Person or Disqualified Organization.
Person: Any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency or
political subdivision thereof.
Plan: As defined in Section 4.02(m).
[Preference Amount: Any amount previously distributed to an Insured
Certificateholder that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.)as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.]
[Preference Claim: As defined in Section 6.04(f).]
Pre-Funded Amount:
Pre-Funding Account:
Pre-Funding Period:
[Premium Amount: On each Distribution Date, the product of 1/12 of the
Premium Percentage and the aggregate Certificate Principal Amount of the Insured
Certificates immediately prior to the related Distribution Date.]
[Premium Percentage: The rate per annum set forth as the premium
percentage in the Insurance Agreement.]
[Premium Rate: With respect to any Distribution Date, the fraction,
expressed as a percentage, the numerator of which is the product of (i) the
Premium Percentage and (ii) the aggregate Certificate Principal Amount of the
Insured Certificates immediately prior to such date, and the denominator of
which is the Total Loan Balance for the immediately preceding Distribution
Date.]
[Prepayment Interest Excess: With respect to any Distribution Date,
for each Mortgage Loan that was the subject during the related Prepayment Period
and from the first day through the 15th day of a calendar month of a Principal
Prepayment in Full, an amount equal to any payment of interest received in
connection with such Principal Prepayment in Full, LESS the Servicing Fee,
representing interest accrued after the Due Date in such Prepayment Period.]
[Prepayment Interest Shortfall: With respect to any Distribution Date,
for each Mortgage Loan that was the subject during the related Prepayment Period
of a Curtailment or of a Principal Prepayment in Full from the 16th day through
the last day of a calendar month, an amount equal to (a) 30 days' interest on
the Principal Balance of such Mortgage Loan at a per annum rate equal to the
Mortgage Rate MINUS the rate at which the Servicing Fee is calculated MINUS (b)
the amount of interest actually remitted by the Mortgagor in connection with
such Principal Prepayment in Full or Curtailment less the Servicing Fee for such
Mortgage Loan in such month.]
[Prepayment Period: With respect to any Distribution Date, the period
beginning on the Cut-off Date, in the case of the first Distribution Date, and
on the day immediately following the close of the immediately preceding
Prepayment Period, in the case of each succeeding Distribution Date, and ending
on the 15th day (or if that day is not a Business Day, the immediately preceding
Business Day) of the month in which that Distribution Date occurs.]
Prepayment Premium: Any prepayment fee, penalty, charge or premium
paid by a Mortgagor under the terms of the related Mortgage Note in connection
with a Principal Prepayment in Full or Curtailment.
Principal Balance: As to any Mortgage Loan and Distribution Date, the
principal balance of such Mortgage Loan as of the Due Date preceding such date
of determination as specified for such Due Date in the amortization schedule
(before any adjustment to such amortization schedule by reason of any bankruptcy
(other than Deficient Valuations) or similar proceeding or any moratorium or
similar waiver or grace period) after giving effect to Principal Prepayments in
Full or Curtailments received prior to the close of the related Prepayment
Period, Deficient Valuations incurred prior to such Due Date, to any
Curtailments applied by the Servicer in reduction of the unpaid principal
balance of such Mortgage Loan as of the close of the related Prepayment Period
and to the payment of principal due on or before such Due Date and irrespective
of any delinquency in payment by the related Mortgagor. The Principal Balance of
a Mortgage Loan that becomes a Liquidated Mortgage Loan prior to the close of
the related Prepayment Period shall be zero.
Principal Distribution Amount: With respect to any Distribution Date,
an amount equal to the sum of (a) the Principal Remittance Amount MINUS any
Overcollateralization Release Amount for such date and (b) any Extra Principal
Distribution Amount for such date.
Principal Prepayment in Full: Any payment or other recovery of
principal on a Mortgage Loan equal to the outstanding principal balance thereof,
received in advance of the final scheduled Due Date.
Principal Remittance Amount: With respect to any Distribution Date,
the sum of (i) all principal collected (other than Payaheads) or advanced in
respect of Monthly Payments on the Mortgage Loans during the related Due Period,
(ii) all Principal Prepayments in Full and all Curtailments received during the
related Prepayment Period, (iii) the outstanding principal balance of each
Mortgage Loan that was purchased from the Trust Fund during the related
Prepayment Period, (iv) the portion of any Substitution Adjustment paid with
respect to the Mortgage Loans during the related Prepayment Period allocable to
principal, and (v) all Net Liquidation Proceeds, Insurance Proceeds, Net REO
Proceeds, Released Mortgaged Property Proceeds and other recoveries collected
with respect to such Mortgage Loans during the related Prepayment Period, to the
extent allocable to principal, as reduced, in each case to the extent
applicable, without duplication, by unreimbursed Periodic Advances and
Nonrecoverable Advances due to the Servicer or the Trustee, to the extent
allocable to principal and as provided in this Agreement.
Proprietary Lease: With respect to any Cooperative Unit, a lease or
occupancy agreement between a Cooperative Corporation and a holder of related
Cooperative Shares.
Prospectus: The prospectus supplement dated [ ], together with the
accompanying prospectus dated [ ], relating to the [Class A, Class M1, Class M2
and Class B] Certificates.
Purchase Agreement: The Mortgage Loan Purchase Agreement dated as of
[ ], among the Originator, the Seller and the Depositor.
Qualified Mortgage: "Qualified Mortgage" shall have the meaning set
forth in the definition thereof at Section 860G(a)(3) of the Code (or any
successor statute thereto) (but without regard to the rule in Treasury
Regulation Section 1.860G-2(f)(2) that treats a defective obligation as a
qualified mortgage, or any similar provision).
Qualified Substitute Mortgage Loan: A mortgage loan substituted by the
Originator for a Deleted Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding principal balance, after deduction of all
Monthly Payments due and received in the month of substitution (or in the case
of a substitution of more than one mortgage loan for a Deleted Mortgage Loan, an
aggregate principal balance), not in excess of the Principal Balance of the
Deleted Mortgage Loan and not less than 90% of the Principal Balance of the
Deleted Mortgage Loan (the amount of any shortfall to be paid by the Originator
in the month of substitution), (ii) have a remaining term to maturity not
greater than (and not more than one year less than) that of the Deleted Mortgage
Loan, (iii) have a Mortgage Rate not less than the Mortgage Rate of the Deleted
Mortgage Loan, (iv) have a Servicing Fee Rate as provided herein for all
Mortgage Loans subject to this Agreement, (v) with respect to each Adjustable
Rate Mortgage Loan, have a minimum rate not less than that of the Deleted
Mortgage Loan, (vi) with respect to each Adjustable Rate Mortgage Loan, have a
maximum rate not less than that of the Deleted Mortgage Loan, (vii) with respect
to each Adjustable Rate Mortgage Loan, have a margin not less than that of the
Deleted Mortgage Loan, (viii) with respect to each Adjustable Rate Mortgage
Loan, have a periodic rate cap equal to that of the Deleted Mortgage Loan, (ix)
have a Loan-to-Value Ratio equal to or less than the Loan-to-Value Ratio of the
Deleted Mortgage Loan, (x) with respect to each Adjustable Rate Mortgage Loan,
have the same adjustment frequency as that of the Deleted Mortgage Loan, (xi)
with respect to each Adjustable Rate Mortgage Loan, have the same Index as the
Deleted Mortgage Loan, (xii) comply as of the date of substitution with each
representation and warranty set forth in [Section 6] of the Purchase Agreement,
(xiii) be in the same credit grade category as the Deleted Mortgage Loan (xiv)
have a Prepayment Premium of the same type as that of the Deleted Mortgage Loan,
(xv) is of the same or better property type or is a single family dwelling and
the same or better occupancy status or is a primary residence as the Mortgage
Loan being replaced, (xvi) shall be a first lien on the Mortgaged Property,
(xvii) shall not provide for a Balloon Payment (and if such related Mortgage
Loan provided for a Balloon Payment, such Qualified Substitute Mortgage Loan
shall have an original maturity of not less than the original maturity of such
related Mortgage Loan), (xviii) shall be a fixed rate Mortgage Loan or an
Adjustable Rate Mortgage Loan if the Mortgage Loan being replaced is an
Adjustable Rate Mortgage Loan, (xix) satisfies the criteria set forth from time
to time in the definition thereof at Section 860G(a)(4) of the Code (or any
successor statute thereto) and applicable to the Trust, (xx) satisfies the
representations and warranties set forth in Sections [5(b)(viii), (xii) and
(xiv)] of the Purchase Agreement, (xxi) shall not be 30 days or more delinquent,
(xxii) with respect to each Adjustable Rate Mortgage Loan, shall have a next
adjustment date not more than two months later than the next adjustment date of
the Deleted Mortgage Loan, and (xxiii) shall have the same Due Date as the
Mortgage Loan being replaced.
In the event that one or more mortgage loans are proposed to be
substituted for one or more Mortgage Loans, [the Certificate Insurer may allow]
the foregoing tests may be met on a weighted average basis, except that the
requirements of clauses (ii), (iii), (v), (vi), (vii), (viii), (ix), (x), (xi),
(xii), (xiii), (xix), (xx), (xxii), and (xxiii) hereof must be satisfied as to
each Qualified Substitute Mortgage Loan.
Rating Agency: Each of [Moody's, S&P, DCR and Fitch].
Realized Loss: With respect to any Distribution Date, the aggregate of
the amount of losses with respect to each Mortgage Loan that became a Liquidated
Mortgage Loan during the Prepayment Period preceding such Distribution Date,
equal to (i) the unpaid principal balance of each such Liquidated Mortgage Loan,
plus accrued interest thereon in accordance with the amortization schedule at
the time applicable thereto at the applicable Mortgage Rate from the Due Date as
to which interest was last paid with respect thereto through the last day of the
month in which such Mortgage Loan became a Liquidated Mortgage Loan, plus,
without duplication, the amount of any Periodic Advances and Servicing Advances
paid by the related Mortgagor, MINUS (ii) Net Liquidation Proceeds with respect
to such Liquidated Mortgage Loan.
Recognition Agreement: With respect to any Cooperative Loan, an
agreement between the related Cooperative Corporation and the originator of such
Mortgage Loan to establish the rights of such originator in the related
Cooperative Property.
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.
Reference Banks: As defined in Section 6.14.
Regular Certificate: Each Certificate other than a Residual
Certificate.
Regular Certificateholder: Each Holder of a Regular Certificate.
[Reimbursement Amount: As of any Distribution Date, the sum of (a)(i)
all Insured Payments (as defined in the Certificate Insurance Policy) previously
paid by the Certificate Insurer and in each case not previously repaid to the
Certificate Insurer pursuant to Section 6.05 hereof plus (ii) interest accrued
on each such Insured Payment not previously repaid calculated at the Late
Payment Rate from the date such Insured Payment was made and (b)(i) any amounts
then due and owing to the Certificate Insurer under the Insurance Agreement, as
certified to the Trustee by the Certificate Insurer plus (ii) interest on such
amounts at the Late Payment Rate (as defined in the Insurance Agreement). The
Certificate Insurer shall notify the Trustee and the Depositor of the amount of
any Reimbursement Amount.]
Released Mortgaged Property Proceeds: As to any Mortgage Loan,
proceeds received by the Servicer in connection with (a) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation or
(b) any release of part of the Mortgaged Property from the lien of the related
Mortgage, whether by partial condemnation, sale or otherwise; which are not
released to the Mortgagor in accordance with applicable law, Accepted Servicing
Practices and this Agreement.
Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
Relief Act Shortfall: With respect to any Distribution Date and each
Mortgage Loan as to which there has been a reduction in the amount of interest
collected with respect to the related Due Period as a result of application of
the Relief Act, the amount by which (a) interest collectible on such Mortgage
Loan during such Due Period is less than (b) one month's interest on the
Principal Balance of such Mortgage Loan at the applicable Mortgage Rate before
giving effect to the Relief Act.
REMIC: A "real estate mortgage investment conduit" within the meaning
of Section 860D of the Code.
REMIC Maturity Date:
REMIC Opinion: As defined in Section 10.02.
REMIC Provisions: Provisions of the federal income tax law relating to
real estate mortgage investment conduits, which appear at Sections 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
temporary and final regulations promulgated thereunder and published rulings,
notices and announcements, as the foregoing may be in effect from time to time.
REO Acquisition: The acquisition of any REO Property pursuant to
Section 5.12.
REO Disposition: The final sale by the Servicer of a Mortgaged
Property acquired by the Servicer in foreclosure or by deed in lieu of
foreclosure.
REO Mortgage Loan: Any Mortgage Loan which is not a Liquidated
Mortgage Loan and as to which the indebtedness evidenced by the related Mortgage
Note is discharged and the related Mortgaged Property is held as part of the
Trust Fund.
REO Proceeds: Proceeds received in respect of any REO Mortgage Loan
(including, without limitations, proceeds from the rental of the related REO
Property).
REO Property: A Mortgaged Property acquired by the Trust Fund through
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Mortgage Loan or otherwise treated as having been acquired pursuant to the REMIC
Provisions.
Representation Letter: Letters to, or agreements with, the Depository
to effectuate a book entry system with respect to the Book-Entry Certificates
registered in the Certificate Register under the nominee name of the Depository.
Request for Release: A request for release in substantially the form
attached as Exhibit H hereto.
Required Reserve Fund Deposit: With respect to any Distribution Date
on which the Net Excess Spread is less than 0.25%, the amount by which (a) the
sum of any Basis Risk Shortfall, any Unpaid Basis Risk Shortfall, and the
product of 1.00% and the Total Loan Balance for such date exceeds (b) the amount
on deposit in the Basis Risk Reserve Fund immediately prior to such date. With
respect to any Distribution Date on which the Net Excess Spread is equal to or
greater than 0.25%, the amount by which (a) the sum of any Basis Risk Shortfall,
any Unpaid Basis Risk Shortfall, and $1,000 exceeds (b) the amount on deposit in
the Basis Risk Reserve Fund immediately prior to such date.
Reserve Interest Rate: As defined in Section 6.14.
Residential Dwelling: A one- to four-family dwelling, a unit in a
planned unit development, a unit in a condominium development, a townhouse or a
manufactured housing unit which is non-mobile.
Residual Certificate: Any Class R Certificate.
Residual Certificateholder: Any Holder of a Residual Certificate.
Responsible Officer: When used with respect to the Trustee, any
officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Assistant Vice President, Senior Trust Officer,
Trust Officer, Assistant Trust Officer, Assistant Treasurer, any Assistant
Secretary, any trust officer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers who has direct responsibility for the administration of this Agreement
or to whom, with respect to a particular matter, such matter is referred because
of such officer's knowledge of and familiarity with the particular subject. When
used with respect to the Seller or the Servicer, the President or any Vice
President, Assistant Vice President, or any Secretary or Assistant Secretary.
Restricted Certificate: Any Class R Certificate.
[S&P: Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or its successor in interest.]
SEC: As defined in Section 5.10.
Security Agreement: With respect to any Cooperative Loan, the
agreement between the owner of the related Cooperative Shares and the originator
of the related Mortgage Note that defines the terms of the security interest in
such Cooperative Shares and the related Proprietary Lease.
Seller: [ ], a [ ]
corporation, or its successor in interest.
Senior Certificate: Any [Class A] Certificate.
Senior Enhancement Percentage: With respect to any Distribution Date,
the fraction, expressed as a percentage, the numerator of which is the sum of
the aggregate Certificate Principal Amount of the [Class M1, Class M2 and Class
B] Certificates and the Overcollateralization Amount (which amount, for purposes
of this definition, shall not be less than zero), in each case calculated after
giving effect to distributions on such date, and the denominator of which is the
Total Loan Balance for such date.
Senior Mortgage Loan: With respect to any Junior Mortgage Loan, a
mortgage loan on the related Mortgaged Property that is senior to the lien
provided by such Junior Mortgage Loan.
[Senior Principal Distribution Amount: With respect to any
Distribution Date, the amount, if any, by which (x) the Class Principal Amount
of the Class A Certificates immediately prior to such Distribution Date exceeds
(y) the lesser of (i) the product of (A) if a Cumulative Loss Trigger Event has
not occurred with respect to such date, [ ]%, and if a Cumulative Loss Trigger
Event has occurred with respect to such date, [ ]%, and (B) the Total Loan
Balance for such Distribution Date and (ii) the amount, if any, by which the
Total Loan Balance for such Distribution Date exceeds $[ ].]
Servicer: [ ], a [ ]
corporation, or any successor appointed as herein provided.
Servicer Remittance Date: With respect to any Distribution Date, the
24th day of the month in which such Distribution Date occurs, or if such 24th
day is not a Business Day, the Business Day immediately preceding such 24th day.
Servicer Termination Test: The Servicer Termination Test is satisfied
for any date of determination if the Cumulative Loss Percentage for such period
does not exceed [ ]%.
Servicing Account: The account created and maintained pursuant to
Section 5.09.
Servicing Advances: All reasonable and customary "out-of-pocket" costs
and expenses relating to a borrower default or delinquency or other
unanticipated event incurred by the Servicer in the performance of its servicing
obligations, including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Mortgaged Property including, without
limitation, taxes and insurance costs, (b) any enforcement or judicial
proceedings, including foreclosures, (c) the management and liquidation of the
REO Property, including reasonable fees paid to any independent contractor in
connection therewith, (d) compliance with the obligations under Sections 5.05,
5.07, 5.09, 5.12 or 5.21(b), all of which reasonable and customary out-of-pocket
costs and expenses are reimbursable to the Servicer to the extent provided in
Section 5.04.
Servicing Compensation: The Servicing Fee and other amounts to which
the Servicer is entitled pursuant to Section 5.14.
Servicing Fee: As to each Mortgage Loan, the annual fee payable to the
Servicer and the related Subservicer, if any, as indicated on the related
Mortgage Loan Schedule. Such fee shall be equal to the product the Servicing Fee
Rate and the outstanding principal balance of the Mortgage Loans at the start of
the related Due Period. Such fee shall be calculated and payable monthly only
from the amounts received in respect of interest on such Mortgage Loan and shall
be computed on the basis of the same principal amount and for the period
respecting which any related interest payment on a Mortgage Loan is computed.
The Servicing Fee includes any servicing fees owed or payable to any
Subservicer.
Servicing Fee Rate: [ ]% per annum.
Servicing Officer: Any employee of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Trustee [and the Certificate Insurer] by the Servicer, as such list may from
time to time be amended.
Startup Day: The day designated as such pursuant to Section 10.01(b)
hereof.
[Stepdown Date: The earlier to occur of (a) the first Distribution
Date after the Class Principal Amount of the Senior Certificates has been
reduced to zero and (b) the later to occur of (x) the Distribution Date in [ ]
and (y) the first Distribution Date on which the Senior Enhancement Percentage
(calculated for this purpose after giving effect to payments or other recoveries
on the Mortgage Loans during the related Due Period but before giving effect to
distributions on any Certificates on such Distribution Date) is greater than or
equal to [ ]% if a Cumulative Loss Trigger Event has not occurred with respect
to such date, or [ ]% if a Cumulative Loss Trigger Event has occurred with
respect to such date.]
[Subordination Deficit: With respect to any Distribution Date on which
the Senior Enhancement Percentage is zero, the amount, if any, by which (a) the
aggregate Certificate Principal Amount of the Senior Certificates on such date
prior to giving effect to distributions of principal on such date exceeds (b)
the Total Loan Balance for such date.]
Subsequent Cut-off Date:
Subsequent Mortgage Loan:
Subsequent Transfer Date:
Subsequent Transfer Instrument:
Subservicer: Any Person that satisfies the requirements of Section
5.02 with which the Servicer has entered into a Subservicing Agreement pursuant
to the terms of this Agreement.
Subservicing Agreement: The contract between the Servicer and any
Subservicer.
Substitution Adjustment: As to any date on which a substitution occurs
pursuant to Sections 2.04 or 3.03, the sum of (i) the amount (if any) by which
the aggregate unpaid principal balances of the Qualified Substitute Mortgage
Loans (after application of principal payments received on or before the date of
substitution of any Qualified Substitute Mortgage Loans as of the date of
substitution), are less than the aggregate of the unpaid principal balances of
the related Deleted Mortgage Loans, (ii) interest accrued and unpaid on the
related Deleted Mortgage Loans, (iii) the amount of any Servicing Advances
remaining unreimbursed with respect to such Deleted Mortgage Loans and (iv) the
amount of any Servicing Advances reimbursed other than from collections or other
recoveries in respect of such Deleted Mortgage Loans.
[Targeted Cumulative Loss Percentage: With respect to any Distribution
Date occurring during the time periods set forth below, the percentage specified
below for such time period:]
Targeted Cumulative
Periods (dates inclusive) Loss Percentage
------------------------- ---------------
[ ]-[ ]......... [ ]%
[ ]-[ ]......... [ ]%
[ ]-[ ]......... [ ]%
[ ]-[ ]......... [ ]%
[ ] and thereafter..... [ ]%
[Targeted Overcollateralization Amount: With respect to any
Distribution Date (a) prior to the Stepdown Date, and if a Cumulative Loss
Trigger Event has not occurred for such Distribution Date, the product of [ ]%
and the Cut-off Date Balance; (b) prior to the Stepdown Date, and if a
Cumulative Loss Trigger Event has occurred for such Distribution Date, the
product of [ ]% and the Cut-off Date Balance; (c) on and after the Stepdown
Date, and if a Cumulative Loss Trigger Event has not occurred for such
Distribution Date, the greater of (i) the product of [ ]% and the Total Loan
Balance for the related Distribution Date, and (ii) the product of [ ]% and the
Cut-Off Date Balance; and (d) on and after the Stepdown Date, and if a
Cumulative Loss Trigger Event has occurred for such Distribution Date, the
greater of (i) the product of [ ]% and the Total Loan Balance for such
Distribution Date, and (ii) the product of [ ]% and the Cut-off Date Balance.]
Tax Matters Person: The Person or Persons appointed pursuant to
Section 10.01(c) from time to time to act as the "tax matters person" (within
the meaning of the REMIC Provisions) of the Trust Fund.
Tax Return: The federal income tax return on Internal Revenue Service
Form 1066, "U.S. Real Estate Mortgage Investment Conduit Income Tax Return,"
including Schedule Q thereto, "Quarterly Notice to Residual Interest Holders of
REMIC Taxable Income or Net Loss Allocation", or any successor forms, to be
filed on behalf of the Trust Fund due to its classification as a REMIC under the
REMIC Provisions, together with any and all other information reports or returns
that may be required to be furnished to the Certificateholders or filed with the
Internal Revenue Service or any other governmental taxing authority under any
applicable provision of federal, state or local tax laws in connection with the
Trust Fund.
Three Month Delinquency Rate: With respect to any Distribution Date,
the average of the Delinquency Rates for each of the three (or one and two, in
the case of the first and second Distribution Dates) immediately preceding Due
Periods.
Total Distribution Amount: With respect to any Distribution Date, the
sum of the Interest Remittance Amount for such date, the aggregate of the
Principal Remittance Amounts for such date and the aggregate of the Prepayment
Premiums received by the Servicer during the Prepayment Period immediately
preceding such date.
Total Expense Rate: With respect to any Distribution Date, the sum of
the Servicing Fee Rate [, the Premium Rate] and the Trustee Fee Rate for such
date.
Total Loan Balance: The aggregate of the Principal Balances of all
Mortgage Loans at the date of determination.
[Transaction Document: As defined in the Insurance Agreement.]
Transfer: Any direct or indirect transfer, sale, pledge, hypothecation
or other form of assignment of any Ownership Interest in a Certificate.
Transfer Affidavit And Agreement: As defined in Section 4.02(j).
Transferee: Any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.
Transferor: Any Person who is disposing by Transfer any Ownership
Interest in a Certificate.
Trust Fund: The segregated pool of assets subject hereto, constituting
the trust created hereby and to be administered hereunder, consisting of: (a)
such Mortgage Loans as from time to time are subject to this Agreement, together
with the Mortgage Files relating thereto and all collections thereon and
proceeds thereof due after the Cut-off Date, (b) such assets as from time to
time are identified as deposited in the Certificate Account, (c) such assets as
from time to time are identified as REO Property and collections thereon and
proceeds thereof, (d) assets that are deposited in the Accounts, including
amounts on deposit in the Accounts and invested in Permitted Investments, (e)
the Trustee's rights with respect to the Mortgage Loans under all insurance
policies required to be maintained pursuant to this Agreement [(including the
Certificate Insurance Policy)] and any Insurance Proceeds [(and any proceeds of
the Certificate Insurance Policy)], (f) Liquidation Proceeds, (g) Released
Mortgaged Property Proceeds, (h) REO Proceeds, (i) the rights (but not the
obligations) of the Depositor under the Purchase Agreement to the extent
assigned to the Trustee hereunder, (j) the Basis Risk Reserve Fund, including
amounts on deposit from time to time therein, (k) the Depositor's security
interest in any collateral pledged to secure the Mortgage Loans, including the
Mortgaged Properties, and (l) any and all proceeds of the foregoing.
Trustee: [ ], a [ ],
or its successor in interest, or any successor trustee appointed as herein
provided.
Trustee Fee: As to any Distribution Date, the fee payable to the
Trustee in respect of its services as Trustee that accrues at a monthly rate
equal to the product of 1/12 of the Trustee Fee Rate and Total Loan Balance of
each Mortgage Loan as of the immediately preceding Due Date.
Trustee Fee Rate: [ ]% per annum.
Trustee Remittance Report: As defined in Section 6.07.
UCC: The Uniform Commercial Code in effect in the applicable
jurisdiction.
UCC Financing Statement: A financing statement executed and filed
pursuant to the UCC.
United States Person: (i) a citizen or resident of the United States;
(ii) a corporation (or entity treated as a corporation for tax purposes) created
or organized in the United States or under the laws of the United States or of
any state thereof, including, for this purpose, the District of Columbia; (iii)
a partnership (or entity treated as a partnership for tax purposes) organized in
the United States or under the laws of the United States or of any state
thereof, including, for this purpose, the District of Columbia (unless provided
otherwise by future Treasury regulations); (iv) an estate whose income is
includible in gross income for United States income tax purposes regardless of
its source; or (v) a trust, if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more U.S. Persons have authority to control all substantial decisions of the
trust. Notwithstanding the last clause of the preceding sentence, to the extent
provided in Treasury regulations, certain trusts in existence on August 20,
1996, and treated as U.S. Persons prior to such date, may elect to continue to
be U.S. Persons.
Unpaid Basis Risk Shortfall: With respect to any Distribution Date and
any Certificate, the aggregate of all Basis Risk Shortfalls with respect to such
Certificate remaining unpaid from previous Distribution Dates, plus interest
accrued thereon at the applicable Interest Rate (calculated without giving
effect to the applicable Net Funds Cap).
Unpaid REO Amortization: As to any REO Mortgage Loan and any month,
the aggregate of the installments of principal and accrued interest (adjusted to
the related Net Mortgage Rate) deemed to be due in such month and in any prior
months that remain unpaid, calculated in accordance with Section 5.12.
Section 1.02. Provisions of General Application. (a) All accounting
terms not specifically defined herein shall be construed in accordance with
GAAP.
(b) The terms defined in this Article include the plural as well
as the singular.
(c) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole. All references to Articles
and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(d) Reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes.
(e) All calculations of interest (other than with respect to the
Mortgage Loans, or as otherwise specifically set forth herein) provided for
herein shall be made on the basis of a 360-day year consisting of twelve 30-day
months. All calculations of interest with respect to any Mortgage Loan provided
for herein shall be made in accordance with the terms of the related Mortgage
Note and Mortgage.
(f) Any Mortgage Loan payment is deemed to be received on the date
such payment is actually received by the Servicer, provided, however, that for
purposes of calculating distributions on the Certificates, Prepayments in Full
and Curtailments with respect to any Mortgage Loan are deemed to be received on
the date they are applied in accordance with customary servicing practices
consistent with the terms of the related Mortgage Note and Mortgage to reduce
the outstanding principal balance of such Mortgage Loan on which interest
accrues.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans; Special Deposit; Priority
and Subordination of Ownership Interests. (a) The Depositor does hereby sell,
transfer, assign, set over and convey to the Trustee without recourse but
subject to the provisions of this Section 2.01 and the other terms and
provisions of this Agreement, all of the right, title and interest of the
Depositor in and to the Mortgage Loans (other than interest and principal due
thereon on or before the Cut-off Date), and all other assets included or to be
included in the Trust Fund for the benefit of the Certificateholders [and the
Certificate Insurer]. In connection with such transfer and assignment, the
Depositor does hereby also irrevocably transfer, assign, set over and otherwise
convey to the Trustee all of its rights under the Purchase Agreement, other than
[Section 17] thereof. The Trustee hereby accepts such assignment, and shall be
entitled to exercise all rights of the Depositor under the Purchase Agreement as
if, for such purpose, it were the Depositor.
(b) The rights of the Certificateholders to receive payments with
respect to the Mortgage Loans in respect of the Certificates, and all ownership
interests of the Certificateholders in such payments, shall be as set forth in
this Agreement. In this regard, all rights of the Class R Certificateholders to
receive payments in respect of the Class R Certificates are subject and
subordinate to the preferential rights of the Regular Certificateholders to
receive payments in respect of the Regular Certificates [and to the Certificate
Insurer's rights to be reimbursed for Insured Payments together with interest
thereon at the rate specified herein or in the Insurance Agreement]. In
accordance with the foregoing, the ownership interest of the Class R
Certificateholders in amounts deposited in the Certificate Account and the Basis
Risk Reserve Fund from time to time shall not vest unless and until such amounts
are distributed in respect of the Class R Certificates in accordance with the
terms of this Agreement.
(c) It is intended that the conveyance of the Mortgage Loans and the
other assets to be included in the Trust Fund by the Depositor to the Trustee as
provided in this Section be, and be construed as, a sale of the Mortgage Loans
and the other assets to be included in the Trust Fund by the Depositor to the
Trustee for the benefit of the Certificateholders [and the Certificate Insurer].
It is, further, not intended that such conveyance be deemed a pledge of the
Mortgage Loans and such other assets by the Depositor to the Trustee to secure a
debt or other obligation of the Depositor. However, in the event that the
Mortgage Loans and the other assets to be included in the Trust Fund are held to
be property of the Depositor, or if for any reason this Agreement is held or
deemed to create a security interest in the Mortgage Loans and such other
assets, then it is intended that, (a) this Agreement shall also be deemed to be
a security agreement within the meaning of Articles 8 and 9 of the New York UCC
and the UCC of any other applicable jurisdiction; (b) the conveyance provided
for in this Section shall be deemed to be (1) a grant by the Depositor to the
Trustee of a security interest in all of the Depositor's right (including the
power to convey title thereto), title and interest, whether now owned or
hereafter acquired, in and to (A) the Mortgage Loans, including the Mortgage
Notes, the Mortgages, any related insurance policies and all other documents in
the related Mortgage Files, (B) all amounts payable to the holders of the
Mortgage Loans in accordance with the terms thereof [the Certificate Insurance
Policy] and (C) all proceeds of the conversion, voluntary or involuntary, of the
foregoing into cash, instruments, securities or other property, including
without limitation all Liquidation Proceeds, all Insurance Proceeds, all REO
Proceeds, all Released Mortgaged Property Proceeds, all amounts from time to
time held or invested in the Certificate Account, the Collection Account or the
Basis Risk Reserve Fund, whether in the form of cash, instruments, securities or
other property and (2) an assignment by the Depositor to the Trustee of any
security interest in any and all of the Seller's right (including the power to
convey title thereto), title and interest, whether now owned or hereafter
acquired, in and to the property described in the foregoing clauses (1)(A) and
(B) granted by the Seller to the Depositor pursuant to the Purchase Agreement;
(c) the possession by the Trustee or its agent of Mortgage Notes and such other
items of property as constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party" or
possession by a purchaser or a person designated by such secured party, for
purposes of perfecting the security interest pursuant to the New York UCC and
the UCC of any other applicable jurisdiction (including, without limitation,
Sections 9-305, 8-313 or 8-321 thereof); and (d) notifications to persons
holding such property, and acknowledgments, receipts or confirmations from
persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Trustee for the purpose of perfecting
such security interest under applicable law. The Depositor and, at the
Depositor's direction, the Seller and the Trustee shall, to the extent
consistent with this Agreement, take such reasonable actions as may be necessary
to ensure that, if this Agreement were deemed to create a security interest in
the Mortgage Loans and other property of the Trust Fund, such security interest
would be deemed to be a perfected security interest of first priority under
applicable law and will be maintained as such throughout the term of the
Agreement.
Section 2.02. Possession of Mortgage Files; Access to Mortgage Files.
(a) Upon the issuance of the Certificates, the ownership of each Mortgage Note,
the Mortgage and the contents of the Mortgage File related to each Mortgage Loan
is vested in the Trustee for the benefit of the Certificateholders [and the
Certificate Insurer].
(b) The Depositor has delivered or caused to be delivered the Mortgage
File related to each Mortgage Loan to the Trustee or the Custodian on behalf of
the Trustee.
(c) As provided in Section 9.11, the Trustee may [, with the prior
written consent of the Certificate Insurer,] enter into a custodial agreement
pursuant to which the Trustee will appoint a custodian (a "Custodian") to hold
the Mortgage Files in trust for the benefit of all present and future
Certificateholders [and the Certificate Insurer]; PROVIDED, HOWEVER, that the
Custodian so appointed shall in no event be the Depositor or the Servicer or any
Person known to a Responsible Officer of the Trustee to be an Affiliate of the
Depositor or the Servicer.
(d) The Trustee shall cause the Custodian to afford the Depositor and
the Servicer reasonable access to all records and documentation regarding the
Mortgage Loans relating to this Agreement, such access being afforded at
customary charges, upon reasonable prior notice and during normal business hours
at the offices of the Custodian. Section 2.03. Delivery of Mortgage Loan
Documents [and the Certificate Insurance Policy]. In connection with each
conveyance pursuant to Section 2.01 hereof, the Depositor has delivered or does
hereby agree to deliver or cause to be delivered to the Trustee (or the
Custodian on behalf of the Trustee) on or before the Closing Date, [, the
Certificate Insurance Policy,] the Mortgage Loan Schedule and each of the
following documents for each Mortgage Loan sold by the Seller to the Depositor
and sold by the Depositor to the Trust Fund:
(i) The original Mortgage Note bearing all intervening
endorsements showing a complete chain of endorsements from the
originator of such Mortgage Loan to the Originator, endorsed by the
Originator without recourse in the following form: "Pay to the order
of __________________, without recourse" and signed manually or by
facsimile in the name of the Originator by an authorized officer;
(ii) The original Mortgage with evidence of recording indicated
thereon;
(iii) An original assignment of the Mortgage, in form acceptable
for recordation in the jurisdiction in which the related Mortgaged
Property is located (except for the assignee's name and recordation
information not yet received), such assignment to be in blank and
signed in the name of the Originator by an authorized officer;
(iv) The originals of all intervening assignments of the Mortgage
(with evidence of recording thereon) showing a complete chain of
assignments from the originator of such Mortgage Loan to the
Originator;
(v) Any assumption, modification, consolidation or extension
agreements (with evidence of recording thereon);
(vi) The original policy of title insurance (or the original
commitment for title insurance, if the policy is being held by the
title insurance company pending recordation of the Mortgage); and
(vii) The certificate of primary mortgage guaranty insurance, if
any, issued with respect to such Mortgage Loan.
With respect to each Mortgage Loan as to which the Depositor has
received recording information by the Closing Date, the Depositor shall cause,
within [30] days following the Closing Date, and with respect to each other
Mortgage Loan, the Depositor shall cause, within [30] days of receipt of such
recording information, Assignments of Mortgages to "[ ], as Trustee of Finance
America Securities, LLC Mortgage Loan Trust [ ] under the Pooling and Servicing
Agreement dated as of [ ]" to be submitted for recording in the appropriate
jurisdictions; PROVIDED, that the Depositor shall not be required to record an
Assignment of Mortgage if the Depositor furnishes to the Trustee [and the
Certificate Insurer], on or before the Closing Date, at the Depositor's expense,
an Opinion of Counsel with respect to the relevant jurisdiction that such
recording is not necessary to protect the Trustee's interest in the related
Mortgage Loans (in form and substance satisfactory to the Trustee [, the
Certificate Insurer] and the Rating Agencies); PROVIDED FURTHER, notwithstanding
the delivery of any legal opinions, each Assignment of Mortgage shall be
recorded by the Trustee upon the earliest to occur of: [(i) reasonable direction
by the Certificate Insurer,] (i) the occurrence of an Event of Default, or (ii)
the occurrence of a bankruptcy, insolvency or foreclosure relating to the
Originator.
The Depositor shall deliver the title insurance policy or title
searches, the original Mortgages and such recorded assignments, together with
originals or duly certified copies of any and all prior assignments (other than
unrecorded warehouse assignments), to the Trustee or its Custodian, within [15]
days of receipt thereof by the Originator (but in any event, with respect to any
Mortgage as to which original recording information has been made available to
the Originator, within 12 months after the Closing Date).
In instances where the original recorded Mortgage or intervening
assignment (other than the Assignment of Mortgage) cannot be delivered to the
Trustee or its Custodian prior to or concurrently with the execution and
delivery of this Agreement due to a delay in connection with recording, the
Depositor may in lieu of delivering such original recorded Mortgage or
intervening assignment (other than the Assignment of Mortgage), deliver to the
Trustee or its Custodian a copy thereof, provided that the Originator provides a
copy of such document and certifies that the original Mortgage or intervening
assignment (other than the Assignment of Mortgage) has been delivered to a title
insurance company for recordation after receipt of its policy of title insurance
or binder therefor. In all such instances, the Depositor will deliver or cause
to be delivered the original recorded Mortgage or intervening assignment (other
than the Assignment of Mortgage) to the Trustee or its Custodian promptly upon
receipt by the Originator of the original recorded Mortgage or intervening
assignment (other than the Assignment of Mortgage) but in no event later than 12
months after the Closing Date.
Notwithstanding anything to the contrary contained in this Section
2.03, in those instances where the public recording office retains the original
Mortgage, the Assignment of Mortgage or the intervening assignments of the
Mortgage after it has been recorded, the Depositor shall be deemed to have
satisfied its obligations hereunder (and the Originator shall be deemed to have
satisfied its obligations under the Purchase Agreement) upon delivery to the
Trustee or its Custodian of a copy of such Mortgage, such Assignment or
intervening assignments of Mortgage certified by the public recording office to
be a true copy of the recorded original thereof.
Within a period of [30] days from the Closing Date, the Trustee shall,
or shall cause the Custodian to, complete the endorsement of each Mortgage Note
and each Assignment of Mortgage and assignment of leases, if any, in the name of
the Trustee on behalf of the Trust Fund.
(b) In the event that any such original document is required pursuant
to the terms of this Section 2.03 to be a part of a Mortgage File, such document
shall be delivered promptly by the Depositor to the Trustee or its Custodian. If
the Servicer receives any such original document, the Servicer agrees further
that it does not and will not have or assert any beneficial ownership interest
in the Mortgage Loans or the Mortgage Files, and shall transfer such original to
the Trustee or the Custodian on behalf of the Trustee.
Section 2.04. Acceptance by Trustee of the Trust Fund; Certain
Substitutions; Certification by Trustee. (a) The Trustee agrees to execute and
deliver, or cause to be executed and delivered, to the Depositor, [the
Certificate Insurer,] the Servicer and the Seller [on or prior to the Closing
Date an acknowledgment of receipt of the Certificate Insurance Policy and,] with
respect to each Mortgage Loan, on or prior to the Closing Date, an
acknowledgment of receipt of the original Mortgage Note (with any exceptions
noted), and, subject to the review provided for in this Section, its receipt of
the Mortgage Files in substantially the form attached as Exhibit E hereto and
declares that it will hold such documents and any amendments, replacements or
supplements thereto, as well as any other assets included in the definition of
Trust Fund and delivered to the Trustee (or the Custodian on behalf of the
Trustee), as Trustee in trust upon and subject to the conditions set forth
herein for the benefit of the Certificateholders [and the Certificate Insurer].
The Trustee agrees, for the benefit of the Certificateholders [and the
Certificate Insurer], to review, or cause to be reviewed, each Mortgage File
within [45] Business Days after the Closing Date (with respect to the Mortgage
Loans), and to deliver or cause to be delivered to the Seller, the Servicer and
the Depositor [and the Certificate Insurer] a certification of the Trustee or
the Custodian on behalf of the Trustee substantially in the form attached hereto
as Exhibit F to the effect that, as to each Mortgage Loan listed in the related
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any
Mortgage Loan specifically identified in such certification as not covered by
such certification), (i) all documents required to be delivered to it pursuant
to Section 2.03 are in its possession and that the Mortgage Notes have been
endorsed as provided in Section 2.03, (ii) each such document has been reviewed
by it and has not been mutilated, damaged, torn or otherwise physically altered
(handwritten additions, changes or corrections shall not constitute physical
alteration if initialed by the Mortgagor), appears regular on its face and
relates to such Mortgage Loan, and (iii) based on its examination and only as to
the foregoing documents, the information set forth on the Schedule of Mortgage
Loans accurately reflects the information set forth in the Mortgage File with
respect to the Servicer's loan number, maturity date, original principal
balance, first payment date and original term to maturity. The Trustee makes no
representations as to and shall not be responsible to verify (i) the validity,
legality, enforceability, sufficiency, due authorization, recordability or
genuineness of any of the documents contained in each Mortgage File or of any of
the Mortgage Loans or (ii) the collectability, insurability, effectiveness or
suitability of any such Mortgage Loan.
Within [180] days after the Closing Date, the Trustee shall deliver or
cause to be delivered to the Servicer, the Seller and the Depositor [and the
Certificate Insurer] a final certification of the Trustee or the Custodian
substantially in the form attached hereto as Exhibit G to the effect that, as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), (i) all documents required
to be delivered to it pursuant to Section 2.03 are in its possession and that
the Mortgage Notes have been endorsed as provided in Section 2.03, (ii) each
such document has been reviewed by it and has not been mutilated, damaged, torn
or otherwise physically altered (handwritten additions, changes or corrections
shall not constitute physical alteration if initialed by the Mortgagor), appears
regular on its face and relates to such Mortgage Loan, and (iii) based on its
examination and only as to the foregoing documents, the information set forth on
the Mortgage Loan Schedule accurately reflects the information set forth in the
Mortgage File with respect to the Servicer's loan number, maturity date,
original principal balance, first payment date and original term to maturity.
(b) If [the Certificate Insurer or] the Trustee (or its Custodian)
during the process of reviewing the Mortgage Files or otherwise finds any
document constituting a part of a Mortgage File which is not executed, has not
been received, is unrelated to the Mortgage Loan identified in the related
Mortgage Loan Schedule, or does not conform to the requirements of Section 2.03
or the description thereof as set forth in the related Mortgage Loan Schedule,
the Trustee [or the Certificate Insurer, as applicable,] shall promptly so
notify the Servicer, the Seller and the Originator [or the Certificate Insurer].
In performing any such review, the Trustee (or its Custodian) may conclusively
rely on the Seller as to the purported genuineness of any such document and any
signature thereon. It is understood that the scope of the Trustee's (or its
Custodian's) review of the Mortgage Files is limited solely to confirming that
the documents listed in Section 2.03 have been executed and received and relate
to the Mortgage Files identified in the related Mortgage Loan Schedule and such
documents conform to the standard set forth in clauses (ii) and (iii) of the
immediately preceding paragraph. The Trustee shall enforce its rights as to any
defective Mortgage Loan document against the Seller and the Originator under the
Purchase Agreement for the benefit of Certificateholders [and the Certificate
Insurer]. It is understood and agreed that the Depositor has assigned to the
Trustee certain of its rights under the Purchase Agreement including the right
to enforce any remedy against the Seller and the Originator thereunder (other
than under [Section 17] thereof). For purposes of calculating the amount the
Servicer is required to remit on the Servicer Remittance Date following such
repurchase or substitution, any Loan Purchase Price or Substitution Adjustment
that is paid and deposited in the related Collection Account as provided above
shall be deemed to have been deposited in the related Collection Account in the
Prepayment Period preceding such Servicer Remittance Date.
(c) Upon receipt by the Trustee or its Custodian of a certification of
a Servicing Officer of such substitution or purchase (which certification shall
be in the form of Exhibit H hereto) and, in the case of a substitution, upon
receipt of the related Mortgage File, and the deposit of the amounts described
above in the Collection Account, the Trustee shall, or shall cause the Custodian
to, release to the Servicer for release to the Seller and the Originator, as
applicable, the related Mortgage File and shall execute, without recourse, and
deliver such instruments of transfer furnished by the Seller and the Originator,
as applicable, as may be necessary to transfer such Mortgage Loan to the Seller
and the Originator, as applicable. [The Trustee shall, or shall cause the
Custodian to, notify the Certificate Insurer if the Seller or the Originator, as
applicable, fails to repurchase or substitute for a Mortgage Loan in accordance
with the foregoing.]
Section 2.05. Execution of Certificates. The Trustee acknowledges the
assignment to it of the Mortgage Loans and the delivery of the Mortgage Files
relating thereto to the Custodian on behalf of the Trustee and, concurrently
with such delivery, has executed, authenticated and delivered to or upon the
order of the Depositor, in exchange for the Mortgage Loans, the Mortgage Files
and the other assets included in the definition of Trust Fund, Certificates duly
authenticated by the Trustee in Authorized Denominations evidencing the entire
ownership of the Trust Fund.
Section 2.06. Further Action Evidencing Assignment. (a) The Depositor
agrees that, from time to time, at the Seller's expense, the Depositor shall
cause the Seller promptly to execute and deliver all further instruments and
documents, and take all further action, that may be necessary or appropriate, or
that the Servicer [, the Certificate Insurer] or the Trustee may reasonably
request, in order to perfect, protect or more fully evidence the transfer of
ownership of the Trust Fund or to enable the Trustee to exercise or enforce any
of its rights hereunder. Without limiting the generality of the foregoing, the
Depositor will, upon the request of the Servicer or of the Trustee, execute and
file (or cause to be executed and filed) such real estate filings, financing or
continuation statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or appropriate.
(b) The Depositor hereby grants to the Servicer and the Trustee, and
this Agreement shall constitute, a power of attorney to execute all documents on
its behalf under this Agreement as may be necessary or desirable to effectuate
the foregoing.
Section 2.07. Conveyance of the Subsequent Mortgage Loans. [ ].
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations of the Servicer. The Servicer hereby
represents and warrants to the Trustee, the Depositor [, the Certificate
Insurer] and the Certificateholders as of the Closing Date:
(a) The Servicer is a corporation duly organized, validly existing and
in good standing under the laws of the State of [ ] and is duly authorized and
qualified to transact any and all business contemplated by this Agreement to be
conducted by the Servicer in any state in which a Mortgaged Property is located
or is otherwise not required under applicable law to effect such qualification
and, in any event, is in compliance with the doing business laws of any such
State, to the extent necessary to ensure its ability to enforce each Mortgage
Loan and to service the Mortgage Loans in accordance with the terms of this
Agreement;
(b) The Servicer has the full corporate power and authority to service
each Mortgage Loan, and to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by this Agreement and has duly
authorized by all necessary corporate action on the part of the Servicer the
execution, delivery and performance of this Agreement; and this Agreement,
assuming the due authorization, execution and delivery thereof by the Depositor
and the Trustee, constitutes a legal, valid and binding obligation of the
Servicer, enforceable against the Servicer in accordance with its terms, except
to the extent that (a) the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, receivership and other similar laws relating to
creditors' rights generally and (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought;
(c) The execution and delivery of this Agreement by the Servicer, the
servicing of the Mortgage Loans by the Servicer hereunder, the consummation of
any other of the transactions herein contemplated, and the fulfillment of or
compliance with the terms hereof are in the ordinary course of business of the
Servicer and will not (A) result in a breach of any term or provision of the
charter or by-laws of the Servicer or (B) conflict with, result in breach,
violation or acceleration of, or result in a default under, the terms of any
other material agreement or instrument to which the Servicer is a party or by
which it may be bound, or any statute, order or regulation applicable to the
Servicer of any court, regulatory body, administrative agency or governmental
body having jurisdiction over the Servicer; and the Servicer is not a party to,
bound by, or in breach or violation of any indenture or other agreement or
instrument, or subject to or in violation of any statute, order or regulation of
any court, regulatory body, administrative agency or governmental body having
jurisdiction over it, which materially and adversely affects or, to the
Servicer's knowledge, would in the future materially and adversely affect, (x)
the ability of the Servicer to perform its obligations under this Agreement or
(y) the business, operations, financial condition, properties or assets of the
Servicer taken as a whole;
(d) The Servicer is an approved seller/servicer for Fannie Mae or
Freddie Mac in good standing and is a HUD approved mortgagee pursuant to Section
203 of the National Housing Act;
(e) No litigation is pending, or to the best of the Servicer's
knowledge, threatened, against the Servicer that would materially and adversely
affect the execution, delivery or enforceability of this Agreement or the
ability of the Servicer to service the Mortgage Loans or to perform any of its
other obligations hereunder in accordance with the terms hereof; and
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Agreement or the consummation of the transactions contemplated hereby, or if any
such consent, approval, authorization or order is required, the Service has
obtained the same.
It is understood and agreed that the representations and warranties
set forth in this Section 3.01 shall survive the delivery of the respective
Mortgage Files to the Trustee or to a Custodian, as the case may be, and inure
to the benefit of the Trustee and the Certificateholders.
Section 3.02. Representations, Warranties and Covenants of the
Depositor. The Depositor hereby represents, warrants and covenants to the
Trustee, the Servicer [, the Certificate Insurer] and the Certificateholders
that as of the date of this Agreement or as of such date specifically provided
herein:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of [ ];
(b) The Depositor has the corporate power and authority to convey the
Mortgage Loans and to execute, deliver and perform, and to enter into and
consummate transactions contemplated by, this Agreement;
(c) This Agreement has been duly and validly authorized, executed and
delivered by the Depositor, all requisite corporate action having been taken,
and, assuming the due authorization, execution and delivery hereof by the
Servicer and the Trustee, constitutes or will constitute the legal, valid and
binding agreement of the Depositor, enforceable against the Depositor in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally, and by general
equity principles (regardless of whether such enforcement is considered in a
proceeding in equity or at law);
(d) No consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required for
the execution, delivery and performance of or compliance by the Depositor with
this Agreement or the consummation by the Depositor of any of the transactions
contemplated hereby, except as have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of, or
constitutes or will constitute a default or results or will result in an
acceleration under (A) the charter or by-laws of the Depositor, or (B) of any
term, condition or provision of any material indenture, deed of trust, contract
or other agreement or instrument to which the Depositor or any of its
subsidiaries is a party or by which it or any of its subsidiaries is bound; (ii)
results or will result in a violation of any law, rule, regulation, order,
judgment or decree applicable to the Depositor of any court or governmental
authority having jurisdiction over the Depositor or its subsidiaries; or (iii)
results in the creation or imposition of any lien, charge or encumbrance which
would have a material adverse effect upon the Mortgage Loans or any documents or
instruments evidencing or securing the Mortgage Loans;
(f) There are no actions, suits or proceedings before or against or
investigations of, the Depositor pending, or to the knowledge of the Depositor,
threatened, before any court, administrative agency or other tribunal, and no
notice of any such action, which, in the Depositor's reasonable judgment, might
materially and adversely affect the validity or enforceability of the Mortgage
Loans or the performance by the Depositor of its obligations under this
Agreement, or the validity or enforceability of this Agreement;
(g) The Depositor 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 that would materially and adversely affect its
performance hereunder;
(h) Immediately prior to the sale and assignment by the Depositor to
the Trustee on behalf of the Trust Fund of each Mortgage Loan, the Depositor had
good title to, and was the sole owner of, each Mortgage Loan subject to no prior
lien, claim, participation interest, mortgage, security interest, pledge, charge
or other encumbrance or other interest of any nature;
(i) Upon execution and delivery of this Agreement the Depositor
transferred all right, title and interest in the Mortgage Loans to the Trustee
on behalf of the Trust Fund; and
(j) The transfer, assignment and conveyance of the Mortgage Notes and
the Mortgages by the Depositor hereunder are not subject to the bulk transfer
laws of any similar statutory provisions in effect in any applicable
jurisdiction.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.02 shall survive delivery of the
respective Mortgage Files to the Trustee or to the Custodian, as the case may
be, and shall inure to the benefit of the Trustee, the Servicer and the
Certificateholders [and the Certificate Insurer].
Section 3.03. Purchase And Substitution. (a) Upon discovery by the
Seller, the Depositor, the Servicer [, the Certificate Insurer] or the Trustee
of a breach of any of representation or warranty set forth in [Section 5 or
Section 6] of the Purchase Agreement which materially and adversely affects the
value of any Mortgage Loan or the interests of Certificateholders [or the
Certificate Insurer], the party discovering such breach shall give prompt
written notice to the others, and the Trustee shall enforce its rights as to any
Mortgage Loan with respect to which such a breach of representation or warranty
has occurred against the Seller or the Originator, as applicable, under the
Purchase Agreement for the benefit of Certificateholders [and the Certificate
Insurer].
(b) Any Loan Purchase Price paid in connection with the repurchase of
a Deleted Mortgage Loan, and any Substitution Adjustment paid in connection with
the substitution of a Qualified Substitute Mortgage Loan, shall be deposited
into the Collection Account.
(c) The Servicer shall deposit in the Collection Account all payments
received in connection with such Qualified Substitute Mortgage Loan or Loans
after the date of such substitution (which date shall not be later than two
years after the Closing Date). Monthly Payments received with respect to
Qualified Substitute Mortgage Loans on or before the date of substitution will
be retained by the Seller or the Originator, as applicable. The Trust Fund will
own all payments received on the Deleted Mortgage Loan on or before the date of
substitution, and the Seller or the Originator, as applicable, will thereafter
be entitled to retain all amounts subsequently received in respect of such
Deleted Mortgage Loan. The Servicer shall give written notice to the Trustee
[and the Certificate Insurer] that such substitution has taken place and shall
amend the Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage
Loan from the terms of this Agreement and the substitution of the Qualified
Substitute Mortgage Loan. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall be subject to the terms of this Agreement in all
respects.
(d) With respect to each Qualified Substitute Mortgage Loan to be
delivered to the Trustee (or its Custodian) pursuant to the terms of this
Article III in exchange for a Deleted Mortgage Loan: (i) the Seller or the
Originator, as applicable, shall deliver to the Trustee (or its Custodian) the
Mortgage File for the Qualified Substitute Mortgage Loan containing the
documents set forth in Section 2.03(a) along with a written certification
certifying as to the delivery of such Mortgage File and containing the granting
language set forth in Section 2.01(a); and (ii) the Seller or the Originator, as
applicable, will be deemed to have made, with respect to such Qualified
Substitute Mortgage Loan, each of the representations and warranties made by it
with respect to the related Deleted Mortgage Loan. As soon as practicable after
the delivery of any Qualified Substitute Mortgage Loan hereunder, the Servicer,
at the expense of the Depositor and with the cooperation of the Servicer, shall
cause the Assignment of Mortgage to be recorded if required pursuant to Section
2.03.
(e) It is understood and agreed that the obligations of the Seller and
the Originator set forth in [Sections 4, 5, 6 and 7] of the Purchase Agreement
to cure, purchase or substitute for a defective Mortgage Loan constitute the
sole remedies of the Trustee [, the Certificate Insurer] and the
Certificateholders respecting a breach of the representations and warranties of
the Seller and the Originator set forth in [Sections 5 and 6] of the Purchase
Agreement [, except as provided for in the Insurance Agreement]. In addition, it
is understood and agreed that the Depositor has assigned to the Trustee all of
its rights under the Purchase Agreement (other than [Section 17]), including the
right to enforce any remedy against the Seller or the Originator as provided in
[Section 7] thereof. The Trustee shall give prompt written notice to the Rating
Agencies [and the Certificate Insurer] of any repurchase or substitution made
pursuant to this Section 3.03 or Section 2.04(b).
ARTICLE IV
THE CERTIFICATES
Section 4.01. The Certificates. The Certificates shall be
substantially in the forms annexed hereto as Exhibits B-1 and B-2. The
Certificates shall be issued in Authorized Denominations only. All Certificates
shall be executed by manual or facsimile signature on behalf of the Trustee by
an authorized officer and authenticated by the manual or facsimile signature of
an authorized officer. Certificates bearing the signatures of individuals who
were at the time of the execution of the Certificates the authorized officers of
the Trustee shall bind the Trustee, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the delivery of such
Certificates or did not hold such offices at the date of such Certificates. All
Certificates issued hereunder shall be dated the date of their authentication.
Section 4.02. Registration of Transfer and Exchange of Certificates.
(a) The Trustee, as registrar, shall cause to be kept a register (the
"Certificate Register") in which, subject to such reasonable regulations as it
may prescribe, the Trustee shall provide for the registration of Certificates
and the registration of transfer of Certificates. The Trustee hereby appoints
the Certificate Registrar for the purpose of registering Certificates and
transfers of Certificates as herein provided. [The Certificate Insurer shall be
entitled to inspect and verify the Certificate Register and the records of the
Trustee and the Certificate Registrar, and obtain copies thereof, relating to
the Certificates during normal business hours upon reasonable notice.]
(b) All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid evidence of the same ownership interests
in the Trust Fund and entitled to the same benefits under this Agreement as the
Certificates surrendered upon such registration of transfer or exchange.
(c) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
Holder thereof or his attorney duly authorized in writing.
(d) No service charge shall be made to a Holder for any registration
of transfer or exchange of Certificates, but the Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of
Certificates; any other expenses in connection with such transfer or exchange
shall be an expense of the Trust Fund.
(e) It is intended that the Book-Entry Certificates be registered so
as to participate in a global book-entry system with the Depository, as set
forth herein. Each Class of Book-Entry Certificates shall, except as otherwise
provided in the next paragraph, be initially issued in the form of a single
fully registered Book-Entry Certificate of such Class with a denomination equal
to the initial Certificate Principal Amount of such Class. Upon initial
issuance, the ownership of each such Book-Entry Certificate shall be registered
in the Certificate Register in the name of Cede & Co., or any successor thereto,
as nominee for the Depository. The Depositor and the Trustee are hereby
authorized to execute and deliver the Representation Letter with the Depository.
With respect to Book-Entry Certificates registered in the Certificate Register
in the name of Cede & Co., as nominee of the Depository, the Depositor, the
Seller, the Servicer and the Trustee [and the Certificate Insurer] shall have no
responsibility or obligation to Direct or Indirect Participants or beneficial
owners for which the Depository holds Book-Entry Certificates from time to time
as a Depository. Without limiting the immediately preceding sentence, the
Depositor, the Seller, the Servicer and the Trustee [and the Certificate
Insurer] shall have no responsibility or obligation with respect to (i) the
accuracy of the records of the Depository, Cede & Co., or any Direct or Indirect
Participant with respect to any Ownership Interest, (ii) the delivery to any
Direct or Indirect Participant or any other Person, other than a
Certificateholder, of any notice with respect to the Book-Entry Certificates or
(iii) the payment to any Direct or Indirect Participant or any other Person,
other than a Certificateholder, of any amount with respect to any distribution
of principal or interest on the Book-Entry Certificates. No Person other than a
Certificateholder shall receive a certificate evidencing such Book-Entry
Certificate. Upon delivery by the Depository to the Trustee of written notice to
the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the Certificateholders
appearing as Certificateholders at the close of business on a Record Date, the
name "Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(f) In the event that (i) the Depository or the Depositor advises the
Trustee in writing that the Depository is no longer willing or able to discharge
properly its responsibilities as nominee and depository with respect to the
Book-Entry Certificates and the Depositor or the Depository is unable to locate
a qualified successor or (ii) the Depositor at its sole option elects to
terminate the book-entry system through the Depository, the Book-Entry
Certificates shall no longer be restricted to being registered in the
Certificate Register in the name of Cede & Co. (or a successor nominee) as
nominee of the Depository. At that time, the Depositor may determine that the
Book-Entry Certificates shall be registered in the name of and deposited with a
successor depository operating a global book-entry system, as may be acceptable
to the Depositor, or such depository's agent or designee but, if the Depositor
does not select such alternative global book-entry system, then the Book-Entry
Certificates may be registered in whatever name or names Certificateholders
transferring Book-Entry Certificates shall designate, in accordance with the
provisions hereof; PROVIDED, HOWEVER, that any such reregistration shall be at
the expense of the Depositor.
(g) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Book-Entry Certificate is registered in the name of
Cede & Co., as nominee of the Depository, all distributions of principal or
interest on such Book-Entry Certificates as the case may be and all notices with
respect to such Book-Entry Certificates as the case may be shall be made and
given, respectively, in the manner provided in the Representation Letter.
(h) Except as provided in Section 4.02(i), no transfer, sale, pledge
or other disposition of a Restricted Certificate shall be made unless such
transfer, sale, pledge or other disposition is exempt from the registration
requirements of the Act, and any applicable state securities laws or is made in
accordance with said Act and laws. In the event that a transfer of a Restricted
Certificate is to be made under this Section 4.02(h), (i) the Depositor may
direct the Trustee to require an Opinion of Counsel in form and substance
satisfactory to the Trustee and the Depositor [and the Certificate Insurer] that
such transfer shall be made pursuant to an exemption, describing the applicable
exemption and the basis therefor, from said Act and laws or is being made
pursuant to said Act and laws, which Opinion of Counsel shall not be an expense
of the Trustee, the Depositor [, the Certificate Insurer] or the Servicer,
provided that such Opinion of Counsel will not be required in connection with
the initial transfer of any such Certificate by the Depositor or any affiliate
thereof, to a non-affiliate of the Depositor and (ii) the Trustee shall require
the transferee to execute a representation letter, substantially in the form of
Exhibit O hereto, and the Trustee shall require the transferor to execute a
representation letter, substantially in the form of Exhibit P hereto, each
acceptable to and in form and substance satisfactory to the Depositor and the
Trustee certifying to the Depositor and the Trustee the facts surrounding such
transfer, which representation letters shall not be an expense of the Trustee,
the Depositor or the Servicer, provided that such representation letter will not
be required in connection with any transfer of any such Certificate by the
Depositor to an affiliate of the Depositor. Any such Certificateholder desiring
to effect such transfer shall, and does hereby agree to, indemnify the Trustee,
the Depositor [, the Certificate Insurer] and the Servicer against any liability
that may result if the transfer is not so exempt or is not made in accordance
with such applicable federal and state laws.
(i) Transfers of Restricted Certificates may be made in accordance
with this Section 4.02(i) if the prospective transferee of a Restricted
Certificate provides the Trustee and the Depositor with an investment letter
substantially in the form of Exhibit Q attached hereto, which investment letter
shall not be an expense of the Trustee, the Depositor or the Servicer, and which
investment letter states that, among other things, such transferee is a
"qualified institutional buyer" as defined under Rule 144A under the Act. Such
transfers shall be deemed to have complied with the requirements of Section
4.02(h) hereof; PROVIDED, HOWEVER, that no Transfer of any of the Restricted
Certificates may be made pursuant to this Section 4.02(i) by the Depositor. Any
such Certificateholder desiring to effect such transfer shall, and does hereby
agree to, indemnify the Trustee, the Depositor [, the Certificate Insurer] and
the Servicer against any liability that may result if the transfer is not so
exempt or is not made in accordance with such applicable federal and state laws.
(j) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions and to
have irrevocably appointed the Depositor or its designee as its attorney-in-fact
to negotiate the terms of any mandatory sale under clause (vi) below and to
execute all instruments of transfer and to do all other things necessary in
connection with any such sale, and the rights of each Person acquiring any
Ownership Interest in a Residual Certificate are expressly subject to the
following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall be a Permitted Transferee and shall
promptly notify the Trustee of any change or impending change in its
status as a Permitted Transferee.
(ii) In connection with any proposed Transfer of any Ownership
Interest in a Residual Certificate, the Trustee shall require delivery
to it, and shall not register the Transfer of any Residual Certificate
until its receipt of, an affidavit and agreement (a "Transfer
Affidavit and Agreement") attached hereto as Exhibit I from the
proposed Transferee, in form and substance satisfactory to the
Trustee, representing and warranting, among other things, that such
Transferee is a Permitted Transferee, that it is not acquiring its
Ownership Interest in the Residual Certificate that is the subject of
the proposed Transfer as a nominee, trustee or agent for any Person
that is not a Permitted Transferee, that for so long as it retains its
Ownership Interest in a Residual Certificate, it will endeavor to
remain a Permitted Transferee, and that it has reviewed the provisions
of this Section 4.02(j) and agrees to be bound by them.
(iii) Notwithstanding the delivery of a Transfer Affidavit and
Agreement by a proposed Transferee under clause (ii) above, if a
Responsible Officer of the Trustee has actual knowledge that the
proposed Transferee is not a Permitted Transferee, no Transfer of an
Ownership Interest in a Residual Certificate to such proposed
Transferee shall be effected.
(iv) Each Person holding or acquiring any Ownership Interest in a
Residual Certificate shall agree (x) to require a Transfer Affidavit
and Agreement from any other Person to whom such Person attempts to
transfer its Ownership Interest in a Residual Certificate and (y) not
to transfer its Ownership Interest unless it provides a certificate
(attached hereto as Exhibit J) to the Trustee stating that, among
other things, it has no actual knowledge that such other Person is not
a Permitted Transferee.
(v) The Trustee will register the Transfer of any Residual
Certificate only if it shall have received the Transfer Affidavit and
Agreement and all of such other documents as shall have been
reasonably required by the Trustee as a condition to such
registration. In addition, no Transfer of a Residual Certificate shall
be made unless the Trustee shall have received a representation letter
from the Transferee of such Certificate to the effect that such
Transferee is not a Disqualified Non-United States Person and is not a
Disqualified Organization. Transfers of the Residual Certificates to
Disqualified Non-United States Persons and Disqualified Organizations
are prohibited.
(vi) Any attempted or purported transfer of any Ownership
Interest in a Residual Certificate in violation of the provisions of
this Section 4.02 shall be absolutely null and void and shall vest no
rights in the purported transferee. If any purported transferee shall
become a Holder of a Residual Certificate in violation of the
provisions of this Section 4.02, then the last preceding Permitted
Transferee shall be restored to all rights as Holder thereof
retroactive to the date of registration of transfer of such Residual
Certificate. The Trustee shall notify the Depositor [and the
Certificate Insurer] upon receipt of written notice or discovery by a
Responsible Officer that the registration of transfer of a Residual
Certificate was not in fact permitted by this Section 4.02. Knowledge
shall not be imputed to the Trustee with respect to an impermissible
transfer in the absence of such a written notice or discovery by a
Responsible Officer. The Trustee shall be under no liability to any
Person for any registration of transfer of a Residual Certificate that
is in fact not permitted by this Section 4.02 or for making any
payments due on such Certificate to the Holder thereof or taking any
other action with respect to such Holder under the provisions of this
Agreement so long as the transfer was registered after receipt of the
related Transfer Affidavit and Transfer Certificate. The Trustee shall
be entitled, but not obligated to recover from any Holder of a
Residual Certificate that was in fact not a Permitted Transferee at
the time it became a Holder or, at such subsequent time as it became
other than a Permitted Transferee, all payments made on such Residual
Certificate at and after either such time. Any such payments so
recovered by the Trustee shall be paid and delivered by the Trustee to
the last preceding Holder of such Certificate.
(k) The Trustee shall make available to the Internal Revenue Service
and those Persons specified by the REMIC Provisions, all information necessary
to compute any tax imposed (A) as a result of the transfer of an ownership
interest in a Residual Certificate to any Person who is a Disqualified
Organization, including the information regarding "excess inclusions" of such
Residual Certificates required to be provided to the Internal Revenue Service
and certain Persons as described in Treasury Regulations Sections 1.860D-1(b)(5)
and 1.860E- 2(a)(5), and (B) as a result of any regulated investment company,
real estate investment trust, common trust fund, partnership, trust, estate or
organization described in Section 1381 of the Code that holds an Ownership
Interest in a Residual Certificate having as among its record holders at any
time any Person who is a Disqualified Organization. The Trustee may charge and
shall be entitled to reasonable compensation for providing such information as
may be required from those Persons which may have had a tax imposed upon them as
specified in clauses (A) and (B) of this paragraph for providing such
information.
(l) No transfer of an ERISA-Restricted Certificate shall be made to
any Person unless the Trustee has received (A) a certificate substantially in
the form of Exhibit K hereto from such transferee or (B) an Opinion of Counsel
satisfactory to the Trustee [, the Certificate Insurer] and the Depositor to the
effect that the purchase and holding of such a Certificate will not constitute
or result in the assets of the Trust Fund being deemed to be "plan assets"
subject to the prohibited transactions provisions of ERISA or Section 4975 of
the Code and will not subject the Trustee or the Depositor to any obligation in
addition to those undertaken in this Agreement; PROVIDED, HOWEVER, that the
Trustee will not require such certificate or opinion in the event that, as a
result of a change of law or otherwise, counsel satisfactory to the Trustee has
rendered an opinion to the effect that the purchase and holding of an
ERISA-Restricted Certificate by a Plan or a Person that is purchasing or holding
such a Certificate with the assets of a Plan will not constitute or result in a
prohibited transaction under ERISA or Section 4975 of the Code. The preparation
and delivery of the certificate and opinions referred to above shall not be an
expense of the Trust Fund, the Trustee [, the Certificate Insurer] or the
Depositor. Notwithstanding the foregoing, no opinion or certificate shall be
required for the initial issuance of the ERISA-Restricted Certificates.
(m) No transfer of a Residual Certificate or any interest therein
shall be made to any employee benefit plan or other retirement arrangement,
including individual retirement accounts and annuities, Keogh plans and
collective investment funds and separate accounts in which such plans, accounts
or arrangements are invested, that is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Code (each, a "Plan"), unless
the prospective transferee of such Residual Certificate provides the Servicer
and the Trustee with a certification of facts and, at the prospective
transferee's expense, an Opinion of Counsel which establish to the satisfaction
of the Servicer [, the Certificate Insurer] and the Trustee that such transfer
will not result in a violation of Section 406 of ERISA or Section 4975 of the
Code or cause the Servicer or the Trustee to be deemed a fiduciary of such Plan
or result in the imposition of an excise tax under Section 4975 of the Code. In
the absence of their having received the certification of facts or Opinion of
Counsel contemplated by the preceding sentence, the Trustee and the Servicer
shall require the prospective transferee of any Residual Certificate to certify
in the form of Exhibit O or Exhibit Q that (A) it is neither (i) a Plan nor (ii)
a Person who is directly or indirectly purchasing a Residual Certificate on
behalf of, as named fiduciary of, as trustee of, or with assets, of a Plan and
(B) all funds used by such transferee to purchase such Certificates will be
funds held by it in its general account which it reasonably believes do not
constitute "plan assets" of any Plan.
(n) Subject to the restrictions set forth in this Agreement, upon
surrender for registration of transfer of any Certificate at the office or
agency of the Trustee located in [ ], the Trustee shall execute, authenticate
and deliver in the name of the designated transferee or transferees, a new
Certificate of the same Class and Percentage Interest and dated the date of
authentication by the Trustee. At the option of the Certificateholders,
Certificates may be exchanged for other Certificates of Authorized Denominations
of a like aggregate Percentage Interest, upon surrender of the Certificates to
be exchanged at such office. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute, authenticate and deliver the Certificates
which the Certificateholder making the exchange is entitled to receive. 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. All Certificates surrendered for transfer and exchange
shall be cancelled by the Trustee.
All Certificates surrendered for registration of transfer or exchange
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly canceled by it. No Certificate shall be
authenticated in lieu of or in exchange for any Certificate canceled as provided
in this Section, except as expressly permitted by this Agreement. All canceled
Certificates may be held by the Trustee in accordance with its standard
retention policy.
Section 4.03. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) 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 (b) there is delivered to the Trustee [and the Certificate
Insurer] such security or indemnity as may reasonably be required by each of
them to save each of them harmless, then, in the absence of notice to the
Trustee that such Certificate has been acquired by a bona fide purchaser, the
Trustee shall execute, authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of
like tenor and Percentage Interest, but bearing a number not contemporaneously
outstanding. Upon the issuance of any new Certificate under this Section 4.03,
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 their fees
and expenses connected therewith. Any duplicate Certificate issued pursuant to
this Section 4.03 shall constitute complete and indefeasible evidence of
ownership in the Trust Fund, as if originally issued, whether or not the
mutilated, destroyed, lost or stolen Certificate shall be found at any time.
Section 4.04. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer and subject to the provisions of
Section 4.02 and Article X, the Servicer, the Depositor, the Seller [, the
Certificate Insurer] and the Trustee may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving remittances pursuant to Section 6.05 and for all other purposes
whatsoever, and the Servicer, the Depositor, the Seller [, the Certificate
Insurer] and the Trustee shall not be affected by notice to the contrary.
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01. Appointment of the Servicer. Acting directly or through
one or more Subservicers as provided in Section 5.02, the Servicer shall service
and administer the Mortgage Loans on behalf of the Trustee and in the best
interests of and for the benefit of the holders of Certificates [and the
Certificate Insurer] in accordance with this Agreement and the terms of the
respective Mortgage Loans, and Accepted Servicing Practices, and shall have full
power and authority, acting alone, to do or cause to be done any and all things
in connection with such servicing and administration which it may deem necessary
or desirable but without regard to: (i) any relationship that the Servicer, any
Subservicer or any Affiliate of the Servicer or any Subservicer may have with
the related Mortgagor; (ii) the ownership of any Certificate by the Servicer or
any Affiliate of the Servicer; (iii) the Servicer's obligation to make Periodic
Advances or Servicing Advances; or (iv) the Servicer's or any Subservicer's
right to receive compensation for its services hereunder or with respect to any
particular transaction.
Subject to Section 5.02 hereof, the Servicer may, and is hereby
authorized to, perform any of its servicing responsibilities with respect to
all or certain of the Mortgage Loans through a Subservicer as it may from time
to time designate, but no such designation of a Subservicer shall serve to
release the Servicer from any of its obligations under this Agreement. Such
Subservicer shall have the rights and powers of the Servicer which have been
delegated to such Subservicer with respect to such Mortgage Loans under this
Agreement; PROVIDED, HOWEVER, the Servicer shall remain primarily liable for
all duties and obligations of the Servicer hereunder.
Without limiting the generality of the foregoing, but subject to
Sections 5.12 and 5.13, the Servicer in its own name or in the name of a
Subservicer is hereby authorized and empowered to execute and deliver, on behalf
of itself, the Certificateholders and the Trustee or any of them, (i) any and
all instruments of satisfaction or cancellation or of partial or full release or
discharge and all other comparable instruments with respect to the Mortgage
Loans and with respect to the Mortgaged Properties, (ii) to institute
foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect
ownership of any Mortgaged Property in the name of the Servicer on behalf of the
Trustee, and (iii) to hold title to any Mortgaged Property upon such foreclosure
or deed in lieu of foreclosure on behalf of the Trustee [; PROVIDED, HOWEVER,
that to the extent any instrument described in clause (i) preceding would be
delivered by the Servicer outside of its usual procedures for Mortgage Loans
held in its own portfolio the Servicer shall, prior to executing and delivering
such instrument, obtain the prior written consent of the Certificate Insurer].
The Trustee hereby grants to the Servicer, and this Agreement shall constitute,
a power of attorney to execute all documents on its behalf under this Agreement
as may be necessary or desirable to effectuate the provisions of this paragraph;
PROVIDED, HOWEVER, that instruments of satisfaction, cancellation, release or
discharge shall only be executed with respect to Mortgage Loans paid in full or
foreclosed (or with respect to which payment in full has been escrowed).
Revocation of the power of attorney created by the preceding sentence shall take
effect upon (i) the receipt by the Servicer of written notice thereof from the
Trustee, (ii) an Event of Default or (iii) the termination of the Trust Fund.
The Trustee shall execute any documentation furnished to it by the Servicer for
recordation by the Servicer in the appropriate jurisdictions, as shall be
necessary to effectuate the foregoing. Subject to Sections 5.12 and 5.13, the
Trustee shall, if necessary, execute additional powers of attorney to the
Servicer or any Subservicer and furnish them with any other documents as the
Servicer or such Subservicer shall reasonably request to enable the Servicer and
such Subservicer to carry out their respective servicing and administrative
duties hereunder.
Upon the request of the Trustee, the Servicer shall send to the
Trustee [and, if requested by the Certificate Insurer, the Certificate Insurer,]
the details concerning the servicing of the Mortgage Loans on computer generated
tape, diskette or other machine readable format which is mutually agreeable.
The Servicer shall give prompt written notice to the Trustee [and the
Certificate Insurer] of any action, of which the Servicer has actual knowledge,
to (i) assert a claim against the Trust Fund or (ii) assert jurisdiction over
the Trust Fund.
Servicing Advances incurred by the Servicer or any Subservicer in
connection with the servicing of the Mortgage Loans (including any penalties in
connection with the payment of any taxes and assessments or other charges) on
any Mortgaged Property shall be recoverable by the Servicer or such Subservicer
to the extent provided in Section 5.21(b) hereof.
Section 5.02. Subservicers. (a) The Servicer may [, with the prior
written consent of the Certificate Insurer,] enter into Subservicing Agreements
for any servicing and administration of Mortgage Loans with any institution
which [is acceptable to the Certificate Insurer and which,], (v) is an
institution approved as a mortgage loan originator by the Federal Housing
Administration or an institution, the deposit accounts of which are insured by
the FDIC, (w) a FHLMC or FNMA approved mortgage servicer, (x) is in compliance
with the laws of each state necessary to enable it to perform its obligations
under such Subservicing Agreement, (y) has experience servicing mortgage loans
that are similar to the Mortgage Loans and (z) has equity of not less than
[$5,000,000] (as determined in accordance with generally accepted accounting
principles). The Servicer shall give written notice to the Trustee, the
Certificateholders [, the Certificate Insurer] and the Rating Agencies of the
appointment of any Subservicer. For purposes of this Agreement, the Servicer
shall be deemed to have received payments on Mortgage Loans when any Subservicer
has received such payments. [The Servicer shall not amend any such Subservicing
Agreement without the Certificate Insurer's prior written consent.] Each
Subservicer shall be required to service the Mortgage Loans in accordance with
this Agreement and any such Subservicing Agreement shall be consistent with and
not violate the provisions of this Agreement. Each Subservicing Agreement shall
provide that the Trustee (if acting as successor Servicer) or any other
successor Servicer shall have the option to terminate such agreement without
payment of any fees if the original Servicer is terminated or resigns. The
Servicer shall deliver to the Trustee copies of all Subservicing Agreements, and
any amendments or modifications thereof promptly upon the Servicer's execution
and delivery of such instrument.
The Servicer shall not be relieved of its obligations under this
Agreement notwithstanding any Subservicing Agreement or any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and a
Subservicer and the Servicer shall be obligated to the same extent and under the
same terms and conditions as if it alone were servicing and administering the
Mortgage Loans. The Servicer shall be entitled to enter into any agreement with
a Subservicer for indemnification of the Servicer by such Subservicer and
nothing contained in such Subservicing Agreement shall be deemed to limit or
modify this Agreement.
(b) The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either itself directly service the related Mortgage Loans or
enter into a Subservicing Agreement with a successor Subservicer that qualifies
under this Section.
As part of its servicing activities hereunder, the Servicer (except as
otherwise provided in the last sentence of this paragraph), for the benefit of
the Trustee [, the Certificate Insurer] and the Certificateholders, shall
enforce the obligations of each Subservicer under the related Subservicing
Agreement and of the Originator and the Seller under the Purchase Agreement,
including, without limitation, any obligation to make advances in respect of
delinquent payments as required by a Subservicing Agreement, or to purchase a
Mortgage Loan on account of missing or defective documentation or on account of
a breach of a representation, warranty or covenant, as described in Section 3.03
hereof and [Section 7] of the Purchase Agreement. Such enforcement, including,
without limitation, the legal prosecution of claims, termination of any
Subservicing Agreement, and the pursuit of other appropriate remedies, shall be
in such form and carried out to such an extent and at such time as the Servicer,
in its good faith business judgment, would require were it the owner of the
related Mortgage Loans. The Servicer shall pay the costs of such enforcement
(except against the Seller) at its own expense, and shall be reimbursed therefor
only (i) from a general recovery resulting from such enforcement, to the extent,
if any, that such recovery exceeds all amounts due in respect of the related
Mortgage Loans, or (ii) from a specific recovery of costs, expenses or
attorneys' fees against the party against whom such enforcement is directed.
Enforcement of the Purchase Agreement against the Originator shall be effected
by the Servicer to the extent it is not the Originator, and otherwise by the
Trustee, in accordance with the foregoing provisions of this paragraph.
(c) Any Subservicing Agreement and any other transactions or services
relating to the Mortgage Loans involving a Subservicer shall be deemed to be
between the Subservicer and the Servicer alone and the Trustee and the
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to any Subservicer
except as set forth in paragraph (d) below. The Servicer shall be solely liable
for all fees and expenses owed by it to any Subservicer, irrespective of whether
the Servicer's compensation pursuant to this Agreement is sufficient to pay such
fees and expenses.
(d) In connection with the assumption of the responsibilities, duties
and liabilities and of the authority, power and rights of the Servicer hereunder
by the Trustee pursuant to Section 7.02 or by another successor Servicer, it is
understood and agreed that the Servicer's rights and obligations under any
Subservicing Agreement then in force between the Servicer and a Subservicer
shall be assumed simultaneously by the Trustee or other successor Servicer
without act or deed on part of the Trustee except that (i) the predecessor
Servicer shall not thereby be relieved of any liability or obligations under any
Subservicing Agreement that arose before it ceased to be the Servicer and (ii)
none of the Trustee, its designee or any successor Servicer shall be deemed to
have assumed any liability or obligation of the predecessor Servicer that arose
before it ceased to be the Servicer; PROVIDED, HOWEVER, that the Trustee (if
acting as successor Servicer) or any other successor Servicer may [, with the
consent of the Certificate Insurer, and shall, at the direction of the
Certificate Insurer,] terminate the Subservicer as provided in Section 5.02.
The Servicer shall, upon the reasonable request of the Trustee but at
the expense of the Servicer, deliver to the assuming party documents and records
relating to each Subservicing Agreement and an accounting of amounts collected
and held by it and otherwise use its best reasonable efforts to effect the
orderly and efficient transfer of the Subservicing Agreements to the assuming
party.
Section 5.03. Collection of Certain Mortgage Loan Payments; Collection
Account. (a) The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans, and shall, to
the extent such procedures shall be consistent with this Agreement and the terms
and provisions of any applicable Insurance Policy, follow Accepted Servicing
Practices.
(b) The Servicer shall establish and maintain in the name of the
Trustee the Collection Account, in trust for the benefit of the
Certificateholders [and the Certificate Insurer]. The Collection Account shall
be established and maintained as an Eligible Account. If the Collection Account
ceases to be an Eligible Account hereunder, then the Servicer shall immediately
be required to establish a new Collection Account that is an Eligible Account
and transfer all funds on deposit in such existing Collection Account to such
new Collection Account. If the Servicer fails to fulfill such requirement, then
the Collection Account shall thenceforth be held as a trust account with a
depository institution selected by the Trustee. The Servicer shall notify the
Trustee [and the Certificate Insurer] if there is a change in the name, account
number or institution holding the Collection Account.
The Servicer shall deposit in the Collection Account (i) on the
Closing Date, any amounts representing Monthly Payments on the Mortgage Loans
due or to be applied as of a date after the Cut-off Date and (ii) thereafter, on
a daily basis within [one] Business Day of receipt of good funds (except as
otherwise permitted herein), the following payments and collections received or
made by it:
(i) all payments received after the Cut-off Date on account of
principal on the Mortgage Loans (other than payments of principal due
on or prior to the Cut-off Date) and all Principal Prepayments in
Full, Curtailments and all Net REO Proceeds collected after the
Cut-off Date;
(ii) all payments received after the Cut-off Date on account of
interest on the Mortgage Loans (other than payments of interest that
accrued on each Mortgage Loan up to and including the Cut-off Date),
including all Prepayment Premiums;
(iii) all Net Liquidation Proceeds;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of any
Mortgage Loan and the amount of any Substitution Adjustment pursuant
to Sections 2.04 and 3.03; and
(vii) any amount expressly required to be deposited in the
Collection Account in accordance with certain provisions of this
Agreement, including, without limitation Sections 2.04(b), 2.04(c),
3.03(b), 3.03(c), 5.06, 5.07 and 5.18 of this Agreement; PROVIDED,
HOWEVER, that the Servicer shall be entitled, at its election, either
(a) to withhold and to pay to itself the applicable Servicing Fee from
any payment on account of interest or other recovery (including Net
REO Proceeds) as received and prior to deposit of such payments in the
Collection Account or (b) to withdraw the applicable Servicing Fee
from the Collection Account after the entire payment or recovery has
been deposited therein.
The Servicer shall invest the funds in the Collection Account only in
Permitted Investments, and any such investment shall mature no later than the
Business Day immediately preceding the next Servicer Remittance Date. No
Permitted Investment shall be sold or disposed of at a gain prior to maturity.
All income (other than any gain from a sale or disposition of the type referred
to in the preceding sentence) realized from any such Permitted Investment shall
be for the benefit of the Servicer as additional servicing compensation and may
only be withdrawn from the Collection Account by the Servicer immediately
following the remittance to the Trustee on each Servicer Remittance Date by the
Servicer in accordance with the terms hereof. The amount of any net losses
incurred in respect of any such investments shall be deposited in the Collection
Account by the Servicer out of its own funds immediately as realized.
The foregoing requirements for deposit in the Collection Account shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of those described in the
first paragraph of Section 5.14 need not be deposited by the Servicer in the
Collection Account. If the Servicer deposits in the Collection Account any
amount not required to be deposited therein, it may at any time withdraw such
amount from the Collection Account, any provision herein to the contrary
notwithstanding. All funds deposited by the Servicer in the Collection Account
shall be held in the Collection Account for the account of the Trustee in trust
for the Certificateholders [and the Certificate Insurer] until disbursed in
accordance with Section 6.01 or withdrawn in accordance with Section 5.04.
(c) The Collection Account may [, upon written notice by the Trustee
to the Certificate Insurer,] be transferred to a different depository
institution so long as such transfer is to an Eligible Account.
Section 5.04. Permitted Withdrawals from the Collection Account. The
Servicer may, from time to time, make withdrawals from the Collection Account
for the following purposes:
(a) to reimburse itself for any accrued unpaid Servicing Fees and for
unreimbursed Periodic Advances and Servicing Advances; PROVIDED, HOWEVER, that
the Servicer's right to reimbursement for unpaid Servicing Fees and unreimbursed
Servicing Advances and Periodic Advances shall be limited to late collections on
the related Mortgage Loan and to Liquidation Proceeds, REO Proceeds, Released
Mortgaged Property Proceeds, Insurance Proceeds and such other amounts as may be
collected by the Servicer from the related Mortgagor or otherwise relating to
the Mortgage Loan in respect of which such unreimbursed amounts are owed limited
as follows: The Servicer's right to reimbursement of unpaid Servicing Fees shall
be limited to the portion of such amounts allocable to interest; the Servicer's
right to reimbursement of Periodic Advances from late collections shall be
limited to the portion of any Monthly Payment allocable to principal and
interest; and the Servicer's right to reimbursement of Servicing Advances from
late collections shall be limited to amounts allocable to escrow payments for
taxes, assessments or insurance, to the extent that such Servicing Advances were
made for such purposes.
(b) to reimburse itself for any Periodic Advances and Servicing
Advances determined to have become Nonrecoverable Advances and amounts
reimbursable to itself pursuant to Section 11.01, such reimbursement to be made
from any funds in the Collection Account;
(c) [Reserved]
(d) to withdraw any funds deposited in the Collection Account that
were not required to be deposited therein;
(e) to pay itself Servicing Compensation owed pursuant to Section 5.14
hereof to the extent not retained or paid pursuant to Sections 5.03 or 5.14;
(f) to pay to the Seller or the Originator, as applicable, with
respect to each Mortgage Loan or property acquired in respect thereof that has
been repurchased or replaced pursuant to Sections 2.04 or 3.03 or to pay to
itself with respect to each Mortgage Loan or property acquired in respect
thereof that has been purchased pursuant to Section 8.01 all amounts received
thereon and not required to be distributed as of the date on which the related
repurchase or purchase price or Principal Balance, as the case may be, was
determined;
(g) to pay to the Seller with respect to each Mortgage Loan the amount
of interest accrued and unpaid on such Mortgage Loan on the Cut-off Date;
(h) to remit to the Trustee amounts to be deposited into the
Certificate Account in the amounts and in the manner provided for herein;
(i) to pay itself any net interest earned on or net investment income
earned with respect to funds in the Collection Account;
(j) to pay to the Trustee, any amounts payable or reimbursable thereto
under Section 9.05 hereof, and to the Servicer, any amounts payable or
reimbursable thereto under Section 7.02 (with respect to Servicer set-up
expenses and with respect to successor Servicers) hereof; and
(k) to clear and terminate the Collection Account upon the termination
of this Agreement.
The Servicer shall keep and maintain a separate accounting for each
Mortgage Loan for the purpose of accounting for withdrawals from the Collection
Account pursuant to subclause (a).
[In addition, if (a) there has been a draw on the Certificate
Insurance Policy for which the Originator or the Servicer is required to
reimburse the Certificate Insurer pursuant to the Insurance Agreement; (b) the
Originator or the Servicer has reimbursed the Certificate Insurer for all such
amounts required by the Insurance Agreement (c) the Certificate Insurer has paid
the draw amount to the Trustee for the benefit of the Insured Certificateholders
and (d) the Servicer has received late payments on the Mortgage Loans in respect
of which such draw was made, then the Servicer may, upon notice to the Trustee
and the Certificate Insurer, reimburse itself or the Originator, as applicable,
from such late payments for the draw amount.]
Section 5.05. Payment of Taxes, Insurance and Other Charges. With
respect to each Mortgage Loan, the Servicer shall maintain accurate records
reflecting casualty insurance coverage. With respect to each Mortgage Loan as to
which the Servicer maintains escrow accounts, the Servicer shall maintain
accurate records reflecting the status of ground rents, taxes, assessments,
water rates and other charges which are or may become a lien upon the Mortgaged
Property and the status of primary mortgage guaranty insurance premiums, if any,
and casualty 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 and at a
time appropriate for securing maximum discounts allowable, employing for such
purpose deposits of the Mortgagor in any 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, if it has
received notice of a default or deficiency, monitor such payments to determine
if they are made by the Mortgagor. The Servicer shall effect payment of taxes,
assessments, primary mortgage or hazard insurance premiums and other charges
which are or may become a lien upon the Mortgaged Property prior to the
applicable penalty or termination date and at a time appropriate for securing
maximum discounts allowable but the Servicer shall be required to so advance
only to the extent that such advances, in the good faith judgment of the
Servicer, will be recoverable by the Servicer pursuant to Section 5.04 out of
Liquidation Proceeds, Insurance Proceeds or other recoveries.
Section 5.06. Maintenance Of Casualty Insurance. (a) The Servicer
shall cause to be maintained with respect to each Mortgage Loan fire insurance
with extended coverage on the related Mortgaged Property in an amount which is
at least equal to the least of (i) the current principal balance of such
Mortgage Loan, (ii) the amount necessary to fully compensate for any damage or
loss to the improvements that are a part of such property on a replacement cost
basis and (iii) the maximum insurable value of the improvements that are a part
of such Mortgaged Property, in each case in an amount not less than such amount
as is necessary to avoid the application of any coinsurance clause contained in
the related hazard insurance policy. The Servicer shall also cause to be
maintained fire insurance with extended coverage on each REO Property in an
amount which is at least equal to the lesser of (i) the maximum insurable value
of the improvements which are a part of such property and (ii) the outstanding
principal balance of the related Mortgage Loan at the time it became an REO
Property. The Servicer will comply in the performance of this Agreement with all
reasonable rules and requirements of each insurer under any such hazard
policies. The Servicer shall maintain the insurance policies required hereunder
in the name of the mortgagee, its successors and assigns, and shall be named as
loss payee. Any cost incurred by the Servicer in maintaining any such insurance
shall not, for the purpose of calculating distributions to Certificateholders
[and the Certificate Insurer], be added to the unpaid principal balance of the
related Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so
permit. It is understood and agreed that no earthquake or other additional
insurance is to be required of any Mortgagor other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. If the Mortgaged Property or REO Property is
at any time in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards, the Servicer will
cause to be maintained a flood insurance policy in respect thereof. Such flood
insurance shall be in an amount equal to the lesser of (i) the unpaid principal
balance of the related Mortgage Loan and (ii) the maximum amount of such
insurance available for the related Mortgaged Property under the national flood
insurance program (assuming that the area in which such Mortgaged Property is
located is participating in such program). The Insurance Policies shall require
the insurer to provide the mortgagee with 30 days' notice prior to any
cancellation or as otherwise required by law.
(b) Amounts collected by the Servicer under any Insurance Policies net
of amounts remitted to the Mortgagor for repairs shall be deposited into the
Collection Account, subject to withdrawal pursuant to Section 5.04.
Section 5.07. Maintenance of Mortgage Impairment Insurance Policy. In
the event that the Servicer shall obtain and maintain a blanket policy (a
"Mortgage Impairment Insurance Policy") with an insurer having a General Policy
Rating of A:X or better in Best's Key Rating Guide insuring against hazard
losses on all of the Mortgage Loans, it shall conclusively be deemed to have
satisfied its obligations as set forth in the first two sentences of Section
5.06, it being understood and agreed that such policy may contain a deductible
clause, in which case the Servicer shall, in the event that there shall not have
been maintained on the related Mortgaged Property or REO Property a policy
complying with the first two sentences of Section 5.06, and there shall have
been one or more losses which would have been covered by such policy, deposit to
the Collection Account from its own funds the amount not otherwise payable under
the blanket policy because of such deductible clause. In connection with its
activities as administrator and servicer of the Mortgage Loans, the Servicer
agrees to prepare and present, on behalf of itself, the Trustee and
Certificateholders [and the Certificate Insurer], claims under any such blanket
policy in a timely fashion in accordance with the terms of such Insurance
Policy.
Section 5.08. Fidelity Bond; Errors and Omissions Policy. The Servicer
(including the Trustee if it shall become the Servicer hereunder) agrees to
maintain errors and omissions coverage and a fidelity bond, each at least to the
extent required by Section 305 of Part I of FNMA Guide or any successor
provision thereof; PROVIDED, HOWEVER, that in any event that the fidelity bond
or the errors and omissions coverage is no longer in effect, the Servicer shall
notify the Trustee and the Trustee shall promptly give such notice to the
Certificateholders [and the Certificate Insurer] and shall secure replacement
coverage in conformity with this Section.
Section 5.09. Collection of Taxes, Assessments and Other Items;
Servicing Account. In addition to the Collection Account, the Servicer shall
establish and maintain a Servicing Account, which shall be an Eligible Account,
and shall deposit therein all payments by Mortgagors for taxes, assessments,
primary mortgage or hazard insurance premiums or comparable items. Withdrawals
from the Servicing Account may be made to effect payment of taxes, assessments,
primary mortgage or hazard insurance premiums or comparable items, to reimburse
the Servicer out of related collections for any advances made in the nature of
any of the foregoing, to refund to any Mortgagors any sums determined to be
overages, or to pay any interest owed to Mortgagors on such account to the
extent required by law or to clear and terminate the Servicing Account at the
termination of this Agreement upon the termination of the Trust Fund.
Section 5.10. Periodic Filings With The Securities And Exchange
Commission; Additional Information. The Depositor shall prepare or cause to be
prepared the initial current report on Form 8-K and thereafter the Trustee shall
prepare or cause to be prepared, on the basis of information supplied by the
Servicer, Form 10-Ks and Form 10-Qs (if necessary), or monthly current reports
on Form 8-K, on behalf of the Trust Fund, as may be required by applicable law,
for filing with the Securities and Exchange Commission (the "SEC"). The Trustee
shall sign each such report on behalf of the Trust Fund. The Trustee will
forward a copy of each such report to the Depositor promptly after such report
has been filed with the SEC. The Trustee agrees to use its best efforts to seek
to terminate such filing obligation promptly after the period during which such
filings are required under the Securities Exchange Act of 1934. Promptly after
filing a Form 15 or other applicable form with the SEC in connection with such
termination, the Trustee shall deliver to the Depositor a copy of such form
together with copies of confirmations of receipt by the SEC of each report filed
therewith on behalf of the Trust Fund.
The Servicer and the Depositor each agree to promptly furnish to the
Trustee, from time to time upon request, such further information, reports and
financial statements within their control and customarily generated related to
this Agreement and the Mortgage Loans as the Trustee reasonably deems
appropriate to prepare and file all necessary reports with the SEC.
Section 5.11. Enforcement of Due-on-Sale Clauses; Assumption
Agreements. When a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall, to the extent it has knowledge of such conveyance
or prospective conveyance, exercise its rights to accelerate the maturity of the
related Mortgage Loan under any "due-on-sale" clause contained in the related
Mortgage or Mortgage Note; PROVIDED, HOWEVER, that the Servicer shall not
exercise any such right if the "due-on-sale" clause, in the reasonable belief of
the Servicer, is not enforceable under applicable law. In such event, the
Servicer shall enter into an assumption and modification agreement with the
person to whom such property has been or is about to be conveyed, pursuant to
which such person becomes liable under the Mortgage Note and, unless prohibited
by applicable law or the Mortgage documents, the Mortgagor remains liable
thereon. If the foregoing is not permitted under applicable law, the Servicer is
authorized to enter into a substitution of liability agreement with such person,
pursuant to which the original Mortgagor is released from liability and such
person is substituted as Mortgagor and becomes liable under the Mortgage Note.
In connection with any assumption or substitution, the Servicer shall apply such
underwriting standards and follow such practices and procedures as shall be
normal and usual in its general mortgage originating activities and as it
applies to other mortgage loans owned solely by it. The Servicer shall not take
or enter into any assumption and modification agreement, however, unless (to the
extent practicable in the circumstances) it shall have received confirmation, in
writing, of the continued effectiveness of any applicable hazard insurance
policy, or a new policy meeting the requirements of this Section is obtained.
The Servicer shall notify the Trustee that any such assumption or substitution
agreement has been completed by forwarding to the Trustee the original copy of
such assumption or substitution agreement (indicating the Mortgage File to which
it relates) 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. The Servicer shall be responsible for recording any such
assumption or substitution agreements. In connection with any such assumption or
substitution agreement, no material term of the Mortgage Loan (including,
without limitation, the required monthly payment on the related Mortgage Loan,
the stated maturity, the outstanding principal amount or the Mortgage Rate)
shall be changed nor shall any required monthly payments of principal or
interest be deferred or forgiven. Any fee collected by the Servicer or the
Subservicer for consenting to any such conveyance or entering into an assumption
or substitution agreement shall be retained by or paid to the Servicer as
additional servicing compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 5.12. Realization Upon Defaulted Mortgage Loans. (a) The
Servicer shall foreclose upon or otherwise comparably effect the ownership in
the name of the Trustee on behalf of the Trust Fund of Mortgaged Properties
relating to defaulted Mortgage Loans as to which no satisfactory arrangements
can be made for collection of Delinquent payments and which the Servicer has not
purchased pursuant to Section 5.18. In connection with such foreclosure or other
conversion, the Servicer shall use Accepted Servicing Practices. Any amounts so
advanced including any amounts described below regarding environmental
inspections shall constitute "Servicing Advances" within the meaning of Section
5.21(b) hereof. The Servicer shall sell any REO Property within 35 months from
the close of the taxable year of its acquisition by the Trust Fund, at such
price as the Servicer in good faith deems necessary to comply with this covenant
unless the Servicer obtains for [the Certificate Insurer and] the Trustee, an
Opinion of Counsel (the expense of which opinion shall be a Servicing Advance)
experienced in federal income tax matters acceptable to [the Certificate Insurer
and] the Trustee, addressed to [the Certificate Insurer and] the Trustee and the
Servicer, to the effect that the holding by the Trust Fund of such REO Property
for any greater period will not result in the imposition of taxes on "Prohibited
Transactions" of the Trust Fund or any REMIC as defined in Section 860F of the
Code or cause either REMIC to fail to qualify as a REMIC under the REMIC
Provisions at any time that any Certificates are Outstanding. Notwithstanding
the generality of the foregoing provisions, the Servicer shall manage, conserve,
protect and operate each REO Property for the Certificateholders solely for the
purpose of its prompt disposition and sale in a manner which does not cause such
REO Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code or result in the receipt by any REMIC created
hereunder of any "income from non-permitted assets" within the meaning of
Section 860F(a)(2)(B) of the Code or any "net income from foreclosure property"
which is subject to taxation under the REMIC Provisions. Pursuant to its efforts
to sell such REO Property, the Servicer shall either itself or through an agent
selected by the Servicer protect and conserve such REO Property in the same
manner and to such extent as is customary in the locality where such REO
Property is located and may, incident to its conservation and protection of the
interests of the Certificateholders [and the Certificate Insurer], rent the
same, or any part thereof, as the Servicer deems to be in the best interest of
the Certificateholders [and the Certificate Insurer] for the period prior to the
sale of such REO Property.
Notwithstanding anything to the contrary herein, the Servicer shall be
under no obligation to foreclose upon or otherwise convert the ownership of any
Mortgaged Property which it believes may be contaminated with or affected by
hazardous or toxic wastes or substances. If the Servicer has actual knowledge of
any environmental or hazardous waste risk with respect to the Mortgaged Property
that the Servicer is contemplating acquiring in foreclosure or deed in lieu of
foreclosure, the Servicer will cause an environmental inspection of the
Mortgaged Property in accordance with Accepted Servicing Practices. If such
environmental audit or report reveals or if the Servicer has knowledge or notice
that such Mortgaged Property contains toxic wastes or substances, the Servicer
shall, in accordance with Accepted Servicing Practices, take such action as it
deems to be in the best interests of Certificateholders [and the Certificate
Insurer].
(b) The Servicer shall determine, with respect to each defaulted
Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts it expects to recover from or on
account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a Liquidated Mortgage Loan [and the Servicer shall promptly submit a
liquidation report to the Certificate Insurer in form acceptable to the
Certificate Insurer as attached hereto as Exhibit L].
(c) The Servicer shall not agree to any modification, waiver or
amendment of any provision of any Mortgage Loan unless, in the Servicer's good
faith judgment, such modification, waiver or amendment would minimize the loss
that might otherwise be experienced with respect to such Mortgage Loan and the
Servicer shall not: (i) permit (unless the Mortgagor is in default with respect
to the Mortgage Loan or such default is, in the judgment of the Servicer,
reasonably foreseeable) any modification with respect to any Mortgage Loan that
would change the Mortgage Rate, reduce or increase the Principal Balance (except
for reductions resulting from actual payments of principal) or extend the
maturity date of such Mortgage Loan or (ii) permit any modification, waiver or
amendment of any term of any Mortgage Loan that would both (A) effect an
exchange or reissuance of such Mortgage Loan under Section 1001 of the Code (or
Treasury regulations promulgated thereunder) and (B) cause any REMIC to fail to
qualify as a REMIC under the Code or the imposition of any tax on "prohibited
transactions" or "contributions after the startup date" under the REMIC
Provisions [; provided that the Certificate Insurer's prior written consent
shall be required for any modification, waiver or amendment if the aggregate
number of Mortgage Loans outstanding which have been modified, waived or amended
exceeds 5% of the number of Mortgage Loans as of the Cut-off Date].
Notwithstanding anything set out in this Section 5.12(c) or elsewhere in this
Agreement to the contrary, the Servicer shall be permitted to modify, waive or
amend any provision of a Mortgage Loan if required by statute or a court of
competent jurisdiction to do so.
Section 5.13. Trustee to Cooperate; Release of Mortgage Files. (a)
Upon the payment in full of any Mortgage Loan (including any liquidation of such
Mortgage Loan through foreclosure or otherwise), or the receipt by the Servicer
of a notification that payment in full will be escrowed in a manner customary
for such purposes, the Servicer shall deliver to the Trustee or the Custodian on
behalf of the Trustee a written request and certification of the Servicer
substantially in the form attached hereto as Exhibit H signed by a Servicing
Officer which states the purpose of the release of a Mortgage File. Upon receipt
of such written request and certification, the Trustee or the Custodian on
behalf of the Trustee will promptly release the related Mortgage File, in trust,
to (i) the Servicer, (ii) an escrow agent or (iii) any employee, agent or
attorney of the Trustee. Upon any such payment in full, or the receipt of such
notification that such funds have been placed in escrow, the Servicer is
authorized to give, as attorney-in-fact for the Trustee and the mortgagee under
the Mortgage which secured the Mortgage Note, an instrument of satisfaction (or
assignment of Mortgage without recourse) regarding the Mortgaged Property
relating to such Mortgage, which instrument of satisfaction or assignment, as
the case may be, shall be delivered to the Person or Persons entitled thereto
against receipt therefor of payment in full, it being understood and agreed that
no expense incurred in connection with such instrument of satisfaction or
assignment, as the case may be, shall be chargeable to the Collection Account,
the Certificate Account, the Trustee or the Trust Fund. In lieu of executing any
such satisfaction or assignment, as the case may be, the Servicer may prepare
and submit to the Trustee a satisfaction (or assignment without recourse, if
requested by the Person or Persons entitled thereto) in form for execution by
the Trustee with all requisite information completed by the Servicer; in such
event, the Trustee shall execute and acknowledge such satisfaction or
assignment, as the case may be, and deliver the same with the related Mortgage
File, as aforesaid.
(b) [Reserved]
(c) From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any applicable Insurance
Policy, the Custodian shall release the related Mortgage File to the Servicer,
promptly upon a written request and certification of the Servicer in form
attached hereto as Exhibit H signed by a Servicing Officer, which states the
purpose of the release of a Mortgage File [; provided, however, that no more
than 10% of the outstanding Mortgage Loans (by number) shall be released to the
Servicer at any time without the prior written consent of the Certificate
Insurer]. Such receipt shall obligate the Servicer to return the Mortgage File
to the Trustee or the Custodian on behalf of the Trustee when the need therefore
by the Servicer no longer exists.
(d) In all cases where the Servicer needs the Trustee to sign any
document or to release a Mortgage File within a particular period of time, the
Servicer shall notify a Responsible Officer of the Trustee by telephone of such
need and the Trustee shall thereon use its best efforts to comply with the
Servicer's needs, but in any event will comply within two Business Days of such
request.
(e) No costs associated with the procedures described in this Section
5.13 shall be an expense of the Trust Fund.
(f) Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer [, with copies to the Certificate
Insurer,] any court pleadings, requests for trustee's sale or other documents
reasonably necessary to the foreclosure or trustee's sale in respect of a
Mortgaged Property or to any legal action brought to obtain judgment against any
Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency judgment,
or to enforce any other remedies or rights provided by the Mortgage Note or
Mortgage or otherwise available at law or in equity. Each such certification
shall include a request that such pleadings or documents be executed by the
Trustee and a statement as to the reason such documents or pleadings are
required.
Section 5.14. Servicing Fee; Servicing Compensation. As compensation
for its activities hereunder, the Servicer shall be entitled to be paid (or to
retain) the amount of the related Servicing Fee with respect to each Mortgage
Loan, but only to the extent of payments or recoveries allocable to interest
thereon. Additional servicing compensation in the form of release fees, bad
check charges, assumption fees, late payment charges, or any other
servicing-related fees (other than Prepayment Premiums) and similar items may,
to the extent collected from Mortgagors, be retained by the Servicer, unless a
successor Servicer is appointed pursuant to Section 7.02 hereof, in which case
the successor Servicer shall be entitled to such fees as are agreed upon by the
Trustee [, the Certificate Insurer] and the successor Servicer. In addition, the
Servicer shall be entitled to retain, as additional servicing compensation,
investment earnings, net of losses, on amounts on deposit in the Collection
Account and in the Certificate Account, to the extent provided in Section 6.01.
The right to receive the Servicing Fee may not be transferred in whole
or in part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement.
The aggregate Servicing Fee shall be offset as provided in Section
5.20. The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder (including maintenance of the
hazard insurance required by Section 5.05) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
Section 5.15. Reports to the Trustee and the Depositor; Collection
Account Statements. Not later than [15] days after each Distribution Date, the
Servicer shall provide to the Trustee [, the Certificate Insurer] and the
Depositor a statement, certified by a Servicing Officer, setting forth the
status of the Collection Account as of the close of business on the last day of
the immediately preceding calendar month, showing, for the period covered by
such statement, the aggregate of deposits into and withdrawals from the
Collection Account for each category of deposit specified in Section 5.03 and
each category of withdrawal specified in Section 5.04 and the aggregate of
deposits into the Certificate Accounts as specified in Section 6.05(a). Such
statement shall also state the aggregate unpaid principal balance of all the
Mortgage Loans as of the close of business on the last day of the month
preceding the month in which such Distribution Date occurs. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon
request.
Section 5.16. Annual Statement as to Compliance. The Servicer, at its
own expense, will deliver to the Trustee, [the Certificate Insurer,] the
Depositor, and the Rating Agencies, on or before April 15 of each year,
commencing in [ ], an Officer's Certificate stating, as to each signer thereof,
that (i) a review of the activities of the Servicer during such preceding
calendar year and of performance under this Agreement has been made under such
officers' supervision, and (ii) to the best of such officers' knowledge, based
on such review, the Servicer has fulfilled all its obligations under this
Agreement for such year, or, if there has been a default in the fulfillment of
all such obligations, specifying each such default known to such officers and
the nature and status thereof including the steps being taken by the Servicer to
remedy such default.
The Servicer shall deliver to the Trustee, the Depositor [, the
Certificate Insurer] and the Rating Agencies, promptly after having obtained
knowledge thereof but in no event later than five Business Days thereafter,
written notice by means of an Officer's Certificate of any event which with the
giving of notice or the lapse of time would become an Event of Default.
Section 5.17. Annual Independent Public Accountants' Servicing Report.
On or before April 15 of each year, commencing in [ ], the Servicer, at its own
expense, shall cause to be delivered to the Trustee, [the Certificate Insurer,]
the Depositor, and the Rating Agencies a letter or letters of a firm of
independent, nationally recognized certified public accountants [reasonably
acceptable to the Certificate Insurer] stating that (i) it has obtained a letter
of representation regarding certain matters from the management of the Servicer
which includes an assertion that the Servicer has complied with certain minimum
residential mortgage loan servicing standards, identified in the Uniform Single
Attestation Program for Mortgage Bankers established by the Mortgage Bankers
Association of America, with respect to the servicing of residential mortgage
loans during the most recently completed calendar year and (ii) on the basis of
an examination conducted by such firm in accordance with standards established
by the American Institute of Certified Public Accountants, such representation
is fairly stated in all material respects, subject to such exceptions and other
qualifications that may be appropriate. In rendering its report such firm may
rely, as to matters relating to the direct servicing of residential mortgage
loans by Subservicers, upon comparable reports of firms of independent certified
public accountants rendered on the basis of examinations conducted in accordance
with the same standards (rendered within one year of such report) with respect
to those Subservicers. Immediately upon receipt of such report, the Servicer
shall furnish a copy of such report to the Trustee [, the Certificate Insurer]
and each Rating Agency. Copies of such statement shall be provided by the
Trustee to any Certificateholder upon request at the Servicer's expense,
provided that such statement is delivered by the Servicer to the Trustee.
Section 5.18. Purchase of Defaulted Mortgage Loans. [(a) Subject to
paragraph (b) below,] The Servicer shall have the option, but not the
obligation, to purchase for its own account any Mortgage Loan that becomes [90]
or more days Delinquent, in whole or in part, or any Mortgage Loan as to which
foreclosure proceedings have been brought by the Servicer; PROVIDED, HOWEVER,
that the Servicer may not purchase any such Mortgage Loan unless the Servicer
has delivered to the Trustee [and the Certificate Insurer], at the Servicer's
expense, an Opinion of Counsel acceptable to the Trustee [and the Certificate
Insurer] to the effect that such a purchase would not constitute a Prohibited
Transaction for the Trust Fund or otherwise subject the Trust Fund to tax and
would not jeopardize the status of the Trust Fund as a REMIC. Any such Mortgage
Loan so purchased shall be purchased by the Servicer on or prior to a Servicer
Remittance Date at a purchase price equal to the Loan Purchase Price thereof,
which purchase price shall be deposited in the Collection Account.
(b) [If a Mortgage Loan to be purchased by the Servicer pursuant to
paragraph (a) above is the greatest number of days Delinquent of all then
Delinquent Mortgage Loans (including Mortgage Loans relating to REO Property),
the Servicer may purchase such Mortgage Loan without having first notified the
Certificate Insurer of such purchase. In all other cases, the Servicer must
notify the Certificate Insurer and the Trustee, in writing, of its intent to
purchase a Mortgage Loan and the Servicer may not purchase such Mortgage Loan
without the written consent of the Certificate Insurer.]
Section 5.19. Reports to be Provided by the Servicer. The Servicer
shall provide to the Trustee and the Depositor [and the Certificate Insurer]
access to the documentation regarding the Mortgage Loans, such access being
afforded without charge but only upon reasonable prior notice and during normal
business hours at the offices of the Servicer designated by it.
Upon any change in the format of the computer tape or file maintained
by the Servicer in respect of the Mortgage Loans, the Servicer shall deliver a
copy of such computer tape or file to the Trustee, and in addition shall provide
a copy of such computer tape or file to the Trustee [and the Certificate
Insurer] at such other times as the Trustee [or the Certificate Insurer] may
reasonably request.
The Servicer shall deliver to the Depositor, the Seller and the
Trustee [and the Certificate Insurer] monthly, not later than the close of
business on the [20th] day of each month (or, if such [20th] day is not a
Business Day, the immediately preceding Business Day), such information, in a
format mutually agreeable to the Servicer and the Trustee, as is necessary for
the calculation of distributions and preparation of the reports required to be
delivered by the Trustee under Section 6.07.
Section 5.20. Adjustment of Servicing Compensation In Respect of
Prepaid Mortgage Loans. The aggregate amount of the Servicing Fees that the
Servicer shall be entitled to receive with respect to all of the Mortgage Loans
and each Distribution Date shall be offset on such Distribution Date by an
amount equal to the aggregate Compensating Interest with respect to all Mortgage
Loans that were subjects of Principal Prepayments in Full or Curtailments during
the month preceding the month of such Distribution Date, calculated as provided
in Section 6.09. The amount of any offset against the aggregate Servicing Fee
with respect to any Distribution Date under this Section 5.20 shall be limited
to the aggregate amount of the Servicing Fees otherwise payable to the Servicer
(without adjustment on account of Prepayment Interest Shortfalls) with respect
to such Distribution Date.
Section 5.21. Periodic Advances. (a) On or before each Servicer
Remittance Date, the Servicer shall be required to remit to the Trustee for
deposit to the Certificate Account out of the Servicer's own funds or from
collections on any Mortgage Loans that are not required to be remitted to the
Trustee on such Servicer Remittance Date (all or any portion of such amount to
be replaced on future Servicer Remittance Dates) any Periodic Advances for such
date.
The Servicer shall be permitted to reimburse itself on any Business
Day for any Periodic Advances paid from the Servicer's own funds, from late
collections on the related Mortgage Loan or as provided in Section 5.04.
Notwithstanding the foregoing, in the event that the Servicer
determines in accordance with the servicing standards set out herein that any
proposed Periodic Advance would be a Nonrecoverable Advance, the Servicer shall
not be required to make Periodic Advances with respect to such Mortgage Loan. To
the extent that the Servicer previously has made any Periodic Advance with
respect to a Mortgage Loan that the Servicer subsequently determines is a
Nonrecoverable Advance, the Servicer shall be entitled to reimbursement for such
aggregate Nonrecoverable Advances from collections on any Mortgage Loan on
deposit in the Collection Account. The Servicer shall give written notice of
such determination as to why such amount would not be recoverable to the Trustee
[and the Certificate Insurer]; the Trustee shall promptly furnish a copy of such
notice to the Holders of the Class R Certificates; PROVIDED, FURTHER, that the
Servicer shall be entitled to recover any unreimbursed Periodic Advances in
accordance with Section 5.04.
(b) The Servicer will pay all "out-of-pocket" costs and expenses
relating to a Mortgagor delinquency or default or other unanticipated event
incurred in the performance of its servicing obligations, including, but not
limited to, (i) property preservation expenses, (ii) the cost of any
enforcement or judicial proceedings, including foreclosures, (iii) the cost of
the management and liquidation of REO Property, and (iv) advances required by
Section 5.12(a), except to the extent that such amounts are determined by the
Servicer in its reasonable business judgment not to be recoverable. Such costs
will constitute Servicing Advances. If the Servicer determines that a
Servicing Advance, if made, would be a Nonrecoverable Advance, the Servicer
shall make such Servicing Advance only if, in the good faith business judgment
of the Servicer, the making of such Servicing Advance is in the best interests
of the Certificateholders [and the Certificate Insurer]. To the extent that
the Servicer previously has made any Servicing Advance with respect to a
Mortgage Loan that the Servicer subsequently determines is a Nonrecoverable
Advance, the Servicer shall be entitled to reimbursement for such aggregate
Nonrecoverable Advances from collections on any Mortgage Loan on deposit in
the Collection Account. The Servicer shall give written notice of such
determination as to why such amount would not be recoverable to the Trustee
[and the Certificate Insurer]; the Trustee shall promptly furnish a copy of
such notice to the Holders of the Class R Certificates; PROVIDED, FURTHER,
that the Servicer shall be entitled to recover any unreimbursed Servicing
Advances in accordance with Section 5.04.
(c) Any cost incurred by the Servicer or by Subservicers in effecting
the timely payment of taxes and assessments on a Mortgaged Property shall not,
for the purpose of calculating distributions to Certificateholders, be added to
the unpaid principal balance of the related Mortgage Loan, notwithstanding that
the terms of such Mortgage Loan so permit.
Section 5.22. Inspections. At any reasonable time and from time to
time upon reasonable notice, the Trustee, [the Certificate Insurer,] any
Certificateholder of a Residual Certificate, or any agents thereof may inspect
the Servicer's servicing operations and discuss the servicing operations of the
Servicer during the Servicer's normal business hours with any of its officers or
directors; PROVIDED, HOWEVER, that the costs and expenses incurred by the
Servicer or its agents or representatives in connection with any such
examinations or discussions shall be paid by the Servicer, other than
extraordinary costs and expenses, which shall be paid by the inspecting party.
Section 5.23. Maintenance of Corporate Existence and Licenses; Merger
or Consolidation of the Servicer. (a) The Servicer will keep in full effect its
existence, rights and franchises as a corporation, will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction
necessary to protect the validity and enforceability of this Agreement or any of
the Mortgage Loans and to perform its duties under this Agreement and will
otherwise operate its business so as to cause the representations and warranties
under Section 3.01 to be true and correct at all times under this Agreement.
(b) Any corporation into which the Servicer may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Servicer shall be a party or
any corporation succeeding to all or substantially all of the business or assets
of the Servicer shall be the successor of the Servicer hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto [provided that such corporation is acceptable to the Certificate
Insurer].
Section 5.24. Assignment of Agreement by Servicer; Servicer Not to
Resign. The Servicer shall not assign this Agreement or resign from the
obligations and duties hereby imposed on it except by [mutual] consent of the
Trustee [and the Certificate Insurer], which consent shall not be unreasonably
withheld, or upon the determination that the Servicer's duties hereunder are no
longer permissible under applicable law and that such incapacity cannot be cured
by the Servicer without incurring unreasonable expense. Any such determination
that the Servicer's duties hereunder are no longer permissible under applicable
law permitting the resignation of the Servicer shall be evidenced by a written
Opinion of Counsel to such effect delivered to the Trustee, the Seller and the
Depositor [and the Certificate Insurer]. No such assignment or resignation shall
become effective until the Trustee or a successor Servicer appointed in
accordance with the terms of this Agreement has assumed the Servicer's
responsibilities and obligations hereunder in accordance with Section 7.02. The
Servicer shall provide the Trustee and the Rating Agencies [and the Certificate
Insurer] with [30] days prior written notice of its intention to resign pursuant
to this Section 5.24.
Section 5.25. Information Reports to be Filed by the Servicer. The
Servicer shall file information returns with respect to the receipt of mortgage
interest received in a trade or business, reports of foreclosures and
abandonments of any Mortgaged Property and cancellation of indebtedness income
with respect to any Mortgaged Property as required by Sections 6050H, 6050J and
6050P of the Code, respectively.
Section 5.26. [Reserved]
Section 5.27. Waiver of Prepayment Premiums. The Servicer shall not
waive any Prepayment Premium, whether in connection with a refinancing of a
Mortgage Loan that is related to a default or a reasonably foreseeable default
or otherwise, unless (i) such waiver would maximize recovery of total proceeds
with respect to such Mortgage Loan, taking into account the value of the
Prepayment Premium and the related Mortgage Loan and (ii) such waiver is
standard and customary in servicing similar mortgage loans. In no event shall
the Servicer waive any Prepayment Premium in connection with a refinancing of a
Mortgage Loan that is not related to a default or a reasonably foreseeable
default.
Section 5.28. Adjustable Rate Mortgage Loans. The Servicer shall
enforce each Adjustable Rate Mortgage Loan in accordance with its terms and
shall timely calculate, record, report and apply all interest rate adjustments
in accordance with the related Mortgage Note. The Servicer's records shall, at
all times, reflect the then Mortgage Rate and monthly payment and the Servicer
shall timely notify the Mortgagor of any changes to the Mortgage Rate or the
Mortgagor's monthly payment. If the Servicer fails to make either a timely or
accurate adjustment to the Mortgage Rate or monthly payment or to notify the
Mortgagor of such adjustments, upon the Servicer's discovery of such error and
such continued failure, the Servicer shall pay from its own funds any shortage.
If the Servicer's continued failure after notice thereof to make a scheduled
change affects the Trust Fund's rights to make future adjustments under the
terms of such Adjustable Rate Mortgage Loan, the Servicer shall repurchase such
Adjustable Rate Mortgage Loan in accordance with the provisions hereof by
depositing the Loan Purchase Price in the Collection Account. Any amounts paid
by the Servicer pursuant to this Section shall not be an advance and shall not
be reimbursable from the proceeds of any Mortgage Loan.
Section 5.29. [Notices of Material Events.] [The Servicer shall give
prompt written notice to the Certificate Insurer, the Trustee and the Rating
Agencies of the occurrence of any of the following events:
(a) Any default or any fact or event of which with notice or the
passage of time, or both, would result in the occurrence of a default by the
Servicer under any Transaction Document or would constitute a material breach of
a representation, warranty or covenant under any Transaction Document;
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Servicer to which the Servicer has knowledge in any federal, state or local
court or before any governmental body or agency or before any arbitration board
or any such proceedings threatened by any governmental agency, which, if
adversely determined, would have a material adverse effect upon the Servicer's
ability to perform its obligations under any Transaction Document;
(c) The commencement of any proceedings by or against the Servicer
under any applicable bankruptcy, reorganization, liquidation, insolvency or
other similar law now or hereafter in effect or of any proceeding in which a
receiver, liquidator, trustee or other similar official shall have been, or may
be, appointed or requested for the Servicer; and
(d) The receipt of notice from any agency or governmental body having
authority over the conduct of the Servicer's business that the Servicer is to
cease or desist, or to undertake any practice, program, procedure or policy
employed by the Servicer in the conduct of the business of any of them, and such
cessation or undertaking will materially and adversely affect the conduct of the
Servicer' s business or its ability to perform under the Transaction Document
(as defined in the Insurance Agreement) or materially and adversely affect the
financial affairs of the Servicer.]
Section 5.30. [Purchase of Receivables upon Breach.] [The Depositor,
the Servicer, the Trustee and the Certificate Insurer shall inform the Servicer
promptly, in writing, upon the discovery of any breach pursuant to Section
5.12(c). Unless the breach shall have been cured within [60] days following such
discovery thereof by the Servicer or the receipt by the Servicer of written
notice of such breach, the Servicer shall be obligated to purchase any Mortgage
Loan in which the interests of the Certificateholders or the Certificate Insurer
are materially and adversely affected by such breach as of the first day
succeeding the end of such [60] day period that is the last day of a Due Period.
In the event of any such repurchase pursuant to this Section, a REMIC Opinion
shall be required to be delivered by the Servicer. Any required purchase or
substitution, if delayed by the absence of such opinion, shall nonetheless occur
upon the earlier of (i) the occurrence of a default or imminent default with
respect to the Mortgage Loan or (ii) the delivery of such opinion. In the event
that any such repurchase results in a "prohibited transaction," the Trustee
shall immediately notify the Servicer in writing thereof and the Servicer shall,
within 10 days of receiving notice thereof from the Trustee, deposit the amount
due from the Trust Fund with the Trustee for the payment thereof, including any
interest and penalties, in immediately available funds. In consideration of the
purchase of any such Mortgage Loan pursuant to the preceding sentence, the
Servicer shall remit the Loan Purchase Price to the Collection Account. The sole
remedy of the Trustee or the Certificateholders with respect to such a breach
shall be to require the Servicer to purchase Mortgage Loans pursuant to this
Section and the indemnity provided in Section 10.01(g) and Section 10.03 hereof.
The Trustee shall have no duty to conduct any affirmative investigation as to
the occurrence of any condition requiring the purchase of any Mortgage Loan
pursuant to this Section.]
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS
Section 6.01. Establishment of Certificate Accounts; Deposits to the
Certificate Accounts. (a) The Trustee shall establish and maintain a Certificate
Account in the name of the Trustee in trust for the benefit of the
Certificateholders [and the Certificate Insurer]. The Certificate Account shall
be an Eligible Account.
(b) The Trustee shall invest the funds in the Certificate Account only
in Permitted Investments as directed in writing by the Servicer. With respect to
each Distribution Date, one day's investment income realized from any such
Permitted Investment shall be for the benefit of the Trustee as additional
compensation, and the remainder of the investment income from such Permitted
Investments with respect to such Distribution Date, if any, shall be paid to the
Servicer as additional servicing compensation. The amount of any losses incurred
in respect of any such investments shall be deposited in the related Certificate
Account by the Servicer out of its own funds immediately as realized.
Section 6.02. Permitted Withdrawals from the Certificate Account. The
Trustee shall withdraw or cause to be withdrawn funds from the Certificate
Account for the following purposes:
(a) to effect the distributions described in Section 6.05;
(b) to pay to the Seller or the Originator, as applicable, with
respect to each Mortgage Loan or property acquired in respect thereof that has
been repurchased or replaced pursuant to Section 2.04 or 3.03 or to pay to the
Servicer with respect to each Mortgage Loan or property acquired in respect
thereof that has been purchased all amounts received thereon and not required to
be distributed as of the date on which the related repurchase or purchase price
or Principal Balance was determined;
(c) to pay itself and the Servicer any interest earned on or
investment income earned with respect to funds in the Certificate Account as
provided in Section 6.01;
(d) to return to the Collection Account any amount deposited in the
Certificate Account that was not required to be deposited therein; and
(e) to clear and terminate the Certificate Account upon termination of
any of the Trust Fund pursuant to Article VIII.
The Trustee shall keep and maintain a separate accounting for
withdrawals from the Certificate Account pursuant to each of subclauses (a)
through (e) listed above.
Section 6.03. Collection of Money. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of all money and
other property payable to or receivable by the Trustee pursuant to this
Agreement, including [(a)] all payments due on the Mortgage Loans in accordance
with the respective terms and conditions of such Mortgage Loans and required to
be paid over to the Trustee by the Servicer [(b) Insured Payments]. The Trustee
shall hold all such money and property received by it as part of the Trust Fund
and shall apply it as provided in this Agreement.
Section 6.04. [The Certificate Insurance Policy.] [(a) If, on the
third Business Day before any Distribution Date, the Trustee determines that a
Deficiency Amount exists for such Distribution Date, the Trustee shall determine
the amount of any such Insured Payment and shall give notice to the Certificate
Insurer by completing a notice in the form of Exhibit A to the Certificate
Insurance Policy and submitting such notice by 12:00 noon New York City time on
such third Business Day as a claim for an Insured Payment. The Trustee's
responsibility for delivering a notice to the Certificate Insurer, as provided
in the preceding sentence, is limited to the availability, timeliness and
accuracy of the information provided by the Servicer.]
(b) [In the event that the Trustee receives a certified copy of an
order of the appropriate court that any scheduled payment of principal or
interest on an Insured Certificates has been voided in whole or in part as a
preference payment under applicable bankruptcy law, the Trustee shall (i)
promptly notify the Certificate Insurer, as appropriate, and the Fiscal Agent,
if any, and (ii) comply with the provisions of the Certificate Insurance Policy
to obtain payment by the Certificate Insurer of such voided payment. In
addition, the Trustee shall mail notice to all Holders of Insured Certificates
so affected that, in the event that any such Holder's payment is so recovered,
such Holder will be entitled to payment pursuant to the terms of the Certificate
Insurance Policy, a copy of which shall be made available to such Holders by the
Trustee. The Trustee shall furnish to the Certificate Insurer and the
appropriate Fiscal Agent, if any, its records listing the payments on the
affected Insured Certificates, if any, that have been made by the Trustee and
subsequently recovered from the affected Holders, and the dates on which such
payments were made by the Trustee.]
(c) [The Trustee shall establish a separate Eligible Account for the
benefit of Holders of the Insured Certificates and the Certificate Insurer
referred to herein as the "Certificate Insurance Payments Account" over which
the Trustee shall have exclusive control and sole right of withdrawal. The
Trustee shall deposit upon receipt any amount paid under the Certificate
Insurance Policy in the Certificate Insurance Payments Account and distribute
such amount only for purposes of payment to Insured Certificateholders of the
Insured Payment and such amount may not be applied to satisfy any costs,
expenses or liabilities of the Servicer, the Trustee or the Trust Fund. Amounts
paid under the Certificate Insurance Policy, to the extent needed to pay the
Insured Payment shall be transferred by the Trustee from the Certificate
Insurance Payments Account to the Certificate Account on the related
Distribution Date and disbursed by the Trustee to Insured Certificateholders in
accordance with Section 6.05. It shall not be necessary for payments made under
the Certificate Insurance Policy to be made by checks or wire transfers separate
from other amounts distributed pursuant to Section 6.05. However, the amount of
any payment of principal or of interest on the Certificates to be paid from
funds transferred from the Certificate Insurance Payments Account shall be noted
as provided in paragraph (d) below. Funds held in the Certificate Insurance
Payments Account shall not be invested. Any funds remaining in the Certificate
Insurance Payments Account on the first Business Day following a Distribution
Date shall be returned to the Certificate Insurer pursuant to the written
instructions of the Certificate Insurer by the end of such Business Day.]
(d) [The Trustee Remittance Report shall indicate the amount of
interest and principal paid in respect of the Insured Certificates from moneys
received under the Certificate Insurance Policy. The Trustee shall keep a
complete and accurate record of the amount of interest and principal paid in
respect of any Insured Certificate from moneys received under the Certificate
Insurance Policy. The Certificate Insurer shall have the right to inspect such
records at reasonable times during normal business hours upon one Business Day's
prior notice to the Trustee.]
(e) [The Trustee shall promptly notify the Certificate Insurer of any
proceeding or the institution of any action, of which a Responsible Officer of
the Trustee has actual knowledge, seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership or similar law (a
"Preference Claim") of any distribution made with respect to the Insured
Certificates. Each Certificateholder, by its acceptance of a Certificate, the
Servicer and the Trustee agree that, the Certificate Insurer (so long as no
Certificate Insurer Default exists) may at any time during the continuation of
any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to such Preference Claim and (ii) the posting of
any surety, supersedeas or performance bond pending any such appeal. In addition
and without limitation of the foregoing, the Certificate Insurer shall be
subrogated to, and each Certificateholder, the Servicer and the Trustee hereby
delegate and assign to the Certificate Insurer, to the fullest extent permitted
by law, the rights of the Servicer, the Trustee and each Certificateholder in
the conduct of any such Preference Claim, including, without limitation, all
rights of any party to any adversary proceeding or action with respect to any
court order issued in connection with any such Preference Claim.]
(f) [Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on any of the Insured Certificates which is
made with moneys received pursuant to the terms of the Certificate Insurance
Policy shall not be considered payment of such Certificates from the Trust Fund
and shall not result in the payment of or the provision for the payment of the
principal of or interest on such Certificates within the meaning of Section
6.05. The Depositor, the Servicer and the Trustee acknowledge, and each Holder
by its acceptance of a Certificate agrees, that without the need for any further
action on the part of the Certificate Insurer, the Depositor, the Servicer, the
Trustee or the Certificate Registrar (a) to the extent the Certificate Insurer
makes payments, directly or indirectly, on account of principal of or interest
on any Insured Certificates to the Holders of such Insured Certificates, the
Certificate Insurer will be fully subrogated to the rights of such Holders to
receive such principal and interest from the Trust Fund and (b) the Certificate
Insurer shall be paid such principal and interest but only from the sources and
in the manner provided herein for the payment of such principal and interest.]
[The Trustee, the Depositor and the Servicer shall cooperate in all
respects with any reasonable request by the Certificate Insurer for action to
preserve or enforce the Certificate Insurer's rights or interests under this
Agreement without limiting the rights or affecting the interests of the Holders
as otherwise set forth therein.]
[(g) The Trustee will hold the Certificate Insurance Policy in trust
for the benefit of the Insured Certificateholders for the purpose of making
claims thereon and distributing the proceeds thereof. Each Insured
Certificateholder, by accepting its Insured Certificates, appoints the Trustee
as attorney-in-fact for the purpose of making claims on the Certificate
Insurance Policy.]
Section 6.05. Distributions. (a) Not later than the close of business
on each Servicer Remittance Date, the Servicer shall remit to the Trustee for
deposit into the Certificate Account from funds on deposit in the Collection
Account an amount equal to the Total Distribution Amount.
(b) With respect to funds deposited in the Certificate Account, on
each Distribution Date, the Trustee shall make the following allocations,
disbursements and transfers, and each such allocation, transfer and disbursement
shall be treated as having occurred only after all preceding allocations,
transfers and disbursements have occurred:
(i) On each Distribution Date, the Trustee shall distribute the
Interest Remittance Amount for such date in the following order of
priority:
[FIRST, to the Trustee, the Trustee Fee for such date;]
[SECOND, to the Certificate Insurer, the Premium Amount for
such date;]
[SECOND, to the Class A Certificates, Current Interest for
such Class for such date and any Carryforward Interest for such
Class for such date;]
[THIRD, to the Class M1 Certificates, Current Interest for
such Class for such date;]
[FOURTH, to the Certificate Insurer, in reimbursement of any
Reimbursement Amount not yet reimbursed, to the extent that such
amount was paid in respect of Current Interest on the Insured
Certificates, together with interest thereon at the Late Payment
Rate;]
[FOURTH, to the Class M2 Certificates, Current Interest for
such Class for such date;]
[FIFTH, to the Class B Certificates, Current Interest for
such Class for such date; and]
[SIXTH, for application as part of Monthly Excess Cashflow
for such date, as provided in subsection (b)(iii) of this
Section, any Interest Remittance Amount remaining after
application pursuant to clauses FIRST through FIFTH above.]
(ii) On each Distribution Date, the Trustee shall distribute the
Principal Distribution Amount for such date as follows:
(1) On each Distribution Date (A) prior to the Stepdown Date
or (B) with respect to which a Delinquency Trigger Event has
occurred, the Trustee will distribute the Principal Distribution
Amount for such date in the following order of priority:
[FIRST, to the Class A Certificates, until the Class
Principal Amount has been reduced to zero;]
[SECOND, to the Certificate Insurer, in reimbursement
of any Reimbursement Amount not yet reimbursed, to the
extent that such amount was paid in respect of a
Subordination Deficit, together with interest thereon at the
Late Payment Rate;]
[SECOND, to the Class M1 Certificates, until the Class
Principal Amount has been reduced to zero;]
[THIRD, to the Class M2 Certificates, until the Class
Principal Amount has been reduced to zero;]
[FOURTH, to the Class B Certificates, until the Class
Principal Amount has been reduced to zero; and]
[FIFTH, for application as part of Monthly Excess
Cashflow for such date, as provided in subsection (b)(iii)
of this Section, any Principal Distribution Amount remaining
after application pursuant to clauses FIRST through FOURTH
above.]
(2) On each Distribution Date (A) on and after the Stepdown
Date and (B) on any Distribution Date on which a Delinquency
Trigger Event has not occurred, the Trustee will distribute the
Principal Distribution Amount for such date in the following
order of priority:
[FIRST, to the Class A Certificates, the lesser of (x)
the Principal Distribution Amount and (y) the Senior
Principal Distribution Amount for such date, until the Class
Principal Amount has been reduced to zero;]
[SECOND, to the Certificate Insurer, in reimbursement
of any Reimbursement Amount not yet reimbursed, to the
extent that such amount was paid in respect of a
Subordination Deficit, together with interest thereon at the
Late Payment Rate;]
[SECOND, to the Class M1 Certificates, the lesser of
(x) the remaining Principal Distribution Amount and (y) the
Class M1 Principal Distribution Amount for such date, until
the Class Principal Amount has been reduced to zero;]
[THIRD, to the Class M2 Certificates, the lesser of (x)
the remaining Principal Distribution Amount and (y) the
Class M2 Principal Distribution Amount for such date, until
the Class Principal Amount has been reduced to zero;]
[FOURTH, to the Class B Certificates, the lesser of (x)
the remaining Principal Distribution Amount and (y) the
Class B Principal Distribution Amount for such date, until
the Class Principal Amount has been reduced to zero; and]
[FIFTH, for application as part of Monthly Excess
Cashflow for such date, as provided in subsection (b)(iii)
of this Section, any Principal Distribution Amount remaining
after application pursuant to clauses FIRST through FOURTH
above.]
(iii) On each Distribution Date, the Trustee shall distribute the
Monthly Excess Cashflow for such date, in the following order of
priority:
[FIRST, to the Certificate Insurer, in reimbursement of any
Reimbursement Amount;]
[FIRST, to the extent of Monthly Excess Interest, to fund
the Extra Principal Distribution Amount for such date;]
[SECOND, to the Class M1 Certificates, any Carryforward
Interest for such date;]
[THIRD, to the Class M1 Certificates, any Deferred Amount
for such date;]
[FOURTH, to the Class M2 Certificates, any Carryforward
Interest for such date;]
[FIFTH, to the Class M2 Certificates, any Deferred Amount
for such date;]
[SIXTH, to the Class B Certificates, any Carryforward
Interest for such date;]
[SEVENTH, to the Class B Certificates, any Deferred Amount
for such date;]
[EIGHTH, for deposit into the Basis Risk Reserve Fund, as
required under Section 6.15(b) of this Agreement;]
[NINTH, from the Basis Risk Reserve Fund, to the Class A
Certificates, in an amount equal to any outstanding Basis Risk
Shortfall and Unpaid Basis Risk Shortfall for such Class for such
date;]
[TENTH, from the Basis Risk Reserve Fund, to the Class M1
Certificates, in an amount equal to any outstanding Basis Risk
Shortfall and Unpaid Basis Risk Shortfall for such Class for such
date;]
[ELEVENTH, from the Basis Risk Reserve Fund, to the Class M2
Certificates, in an amount equal to any outstanding Basis Risk
Shortfall and Unpaid Basis Risk Shortfall for such Class for such
date;]
[TWELFTH, from the Basis Risk Reserve Fund, to the Class B
Certificates, in an amount equal to any outstanding Basis Risk
Shortfall and Unpaid Basis Risk Shortfall for such Class for such
date; and]
[THIRTEENTH, to the Class R Certificate, any remaining
Monthly Excess Cashflow for such date.]
(iv) [On each Distribution Date, the Trustee shall distribute any
Insured Payment for such date to the Insured Certificateholders
entitled thereto.]
(v) On each Distribution Date, the Trustee shall distribute the
amount of all Prepayment Premiums received by the Servicer during the
related Prepayment Period to the holder of the Class R Certificate.
Section 6.06. Investment of Accounts. (a) So long as no Event of
Default shall have occurred and be continuing, and consistent with any
requirements of the Code, all or a portion of any Account, other than the
Collection Account [and the Certificate Insurance Payments Account,], held by
the Trustee shall be invested and reinvested by the Trustee, as directed in
writing by the Servicer (with respect to the Certificate Account) or the
Depositor (with respect to any Pre-Funding Account or Capitalized Interest
Account) in one or more Permitted Investments bearing interest or sold at a
discount. If an Event of Default shall have occurred and be continuing or if the
Servicer does not provide investment directions, the Trustee shall invest all
Accounts in Permitted Investments described in paragraph (d) of the definition
of Permitted Investments. No such investment in any Account shall mature later
than the Business Day immediately preceding the next Distribution Date (except
that if such Permitted Investment is an obligation of the Trustee, then such
Permitted Investment shall mature not later than such Distribution Date).
(b) Subject to Section 9.01 hereof, the Trustee shall not in any way
be held liable by reason of any insufficiency in any Account held by the Trustee
resulting from any investment loss on any Permitted Investment included therein
(except to the extent that the Trustee is the obligor and has defaulted
thereon).
Section 6.07. Reports by Trustee. (a) On each Distribution Date the
Trustee shall provide to each Holder, to the Servicer, to the Seller, [to the
Certificate Insurer,] to the Depositor and to the Rating Agencies a report (the
"Trustee Remittance Report"), setting forth information including, without
limitation, the following information:
(i) the amount of the distribution with respect to each Class of
Certificates;
(ii) the amount of such distributions allocable to principal,
separately identifying the aggregate amount of any Principal
Prepayments in Full and Curtailments or other unscheduled recoveries
of principal included therein;
(iii) the amount of such distributions allocable to interest and
the calculation thereof;
(iv) the Class Principal Amount or Class Notional Amount of each
Class of Regular Certificates as of such Distribution Date after
giving effect to any payment of principal on such Distribution Date;
(v) [the amount of any Insured Payment included in the amounts
distributed to the Insured Certificateholders on such Distribution
Date;]
(vi) the total of any Substitution Adjustments and any Loan
Purchase Price amounts included in such distribution;
(vii) the amounts, if any, of any Realized Losses for the
Prepayment Period immediately preceding such Distribution Date and the
cumulative amount of Realized Losses from the Closing Date;
(viii) the number of Mortgage Loans and the aggregate Principal
Balance of Mortgage Loans purchased or substituted for pursuant to
Sections 3.03 and 2.04 for the related Distribution Date and, since
the Closing Date, the cumulative number and Principal Balance of
Mortgage Loans purchased or substituted for pursuant to Sections 3.03
and 2.04;
(ix) the Interest Rate applicable to each Class of Certificates
for such Distribution Date;
(x) the amount of any outstanding Carryforward Interest for each
Class of Certificates;
(xi) the amount of any outstanding Basis Risk Shortfall and
Unpaid Basis Risk Shortfall for each Class of Certificates;
(xii) the amount of any unreimbursed Deferred Amount for the
Class M1, Class M2 and Class B Certificates;
(xiii) the amount of any Periodic Advances included in
distributions on such Distribution Date;
(xiv) the amount of the Servicing Fees [, Premium Amount] and
Trustee Fee with respect to such Distribution Date;
(xv) [the amount of any Reimbursement Amount paid to the
Certificate Insurer on such date;]
(xvi) the amount of any distribution to the Residual Certificates
on such Distribution Date;
(xvii) the amount on deposit in the Basis Risk Reserve Fund
before and after withdrawals on such Distribution Date;
(xviii) the Targeted Overcollateralization Amount,
Overcollateralization Amount and Overcollateralization Deficiency for
such Distribution Date;
(xix) the Senior Principal Distribution Amount for such
Distribution Date;
(xx) the Class M1 Principal Distribution Amount for such
Distribution Date;
(xxi) the Class M2 Principal Distribution Amount for such
Distribution Date;
(xxii) the Class B Principal Distribution Amount for such
Distribution Date;
(xxiii) LIBOR for such Distribution Date; and
(xxiv) Monthly Excess Interest and Monthly Excess Cashflow for
such Distribution Date.
Items (i), (ii) and (iii) above shall, with respect to the Regular
Certificates, be presented on the basis of a Certificate having a $1,000
denomination. In addition, by March 31 of each calendar year (or such earlier
date as may be required by applicable law or regulation) following any year
during which the Certificates are outstanding, the Trustee shall furnish a
report to each Holder of record if so requested in writing at any time during
each calendar year as to the aggregate of amounts reported pursuant to (i), (ii)
and (iii) with respect to the Certificates for such calendar year. Such
information shall be deemed to have been furnished if provided pursuant to the
requirements of the Code from time to time in force.
(b) All distributions made to each Class of Certificates on each
Distribution Date will be made on a pro rata basis among the Certificateholders
of such Class on the next preceding Record Date based on the Percentage Interest
represented by their respective Certificates, and shall be made by wire transfer
of immediately available funds at the expense of such Certificateholder to the
account of such Certificateholder at a bank or other entity having appropriate
facilities therefor, if such Certificateholder shall have provided complete
wiring instructions by the Record Date, and otherwise by check mailed to the
address of such Certificateholder appearing in the Certificate Register.
(c) In addition, on each Distribution Date the Trustee will provide to
each Holder, [to the Certificate Insurer,] to the Servicer, to the Depositor and
to the Rating Agencies, together with the information described in subsection
(a) preceding, the following information with respect to the Mortgage Loans,
based on information provided by the Servicer, as of the following dates, as
applicable: (1) with respect to Monthly Payments, the close of business on the
last day of the related Due Period; (2) with respect to Principal Prepayments in
Full, Curtailments, Liquidation Proceeds, Insurance Proceeds, REO Proceeds,
Released Mortgaged Property Proceeds and any other unscheduled payments or
recoveries, and with respect to Realized Losses, the close of business on the
last day of the related Prepayment Period; (3) with respect to Mortgage Loans
that are Delinquent, the close of business on the last day of the immediately
preceding calendar month and (4) in all other cases, unless otherwise specified,
the close of business on the last day of the related Due Period:
(i) the total number of Mortgage Loans and the aggregate
Principal Balances thereof for such Distribution Date, together with
the number and aggregate Principal Balances of such Mortgage Loans and
the percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of all Mortgage Loans (A) 30-59 days Delinquent, (B)
60-89 days Delinquent and (C) 90 or more days Delinquent;
(ii) the number and aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans in
foreclosure proceedings and the number and aggregate Principal
Balances of all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage Loans
which are also included in any of the statistics described in the
foregoing clauses (i)(A), (i)(B) and (i)(C);
(iii) the number and aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans
relating to Mortgagors in bankruptcy proceedings and the number and
aggregate Principal Balances of all Mortgage Loans and percentage
(based on the aggregate Principal Balances of the Mortgage Loans) of
any such Mortgage Loans which are also included in any of the
statistics described in the foregoing clauses (i)(A), (i)(B) and
(i)(C);
(iv) the number and aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans
relating to REO Properties and the number and aggregate Principal
Balances of all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage Loans
which are also included in any of the statistics described in the
foregoing clause (i)(A), (i)(B) and (i)(C);
(v) the weighted average Mortgage Rate as of the Due Date
occurring in the Due Period related to such Distribution Date;
(vi) the weighted average remaining term to stated maturity of
all Mortgage Loans;
(vii) the book value of any REO Property;
(viii) the Total Loan Balance for such Distribution Date;
(ix) the number of REO Properties and aggregate Principal Balance
of REO Mortgage Loans;
(x) Liquidation Proceeds, Liquidation Expenses and Net
Liquidation Proceeds received by the Servicer during the related
Prepayment Period;
(xi) the Three Month Delinquency Rate for such Distribution Date;
(xii) the Targeted Cumulative Loss Percentage for such
Distribution Date;
(xiii) the Cumulative Loss Percentage for such Distribution Date;
(xiv) the aggregate Principal Balance of the three Mortgage Loans
having the largest Principal Balances in the Mortgage Pool; and
(xv) the aggregate outstanding principal balance of Mortgage
Loans 270 or more days Delinquent as of the close of the related Due
Period.
Section 6.08. Additional Reports by Trustee. [(a)] The Trustee shall
report to the Depositor and the Servicer [and the Certificate Insurer] with
respect to the amount then held in each Account (including investment earnings
accrued or scheduled to accrue) held by the Trustee and the identity of the
investments included therein, as the Depositor or the Servicer may from time to
time request in writing.
(b) [From time to time, at the request of the Certificate Insurer, the
Trustee shall report to the Certificate Insurer with respect to its actual
knowledge of any breach of any of the representations or warranties relating to
individual Mortgage Loans set forth in the Purchase Agreement or in Section 3.01
or 3.02 hereof.]
Section 6.09. Compensating Interest. Not later than the close of
business on the Servicer Remittance Date prior to the Distribution Date, the
Servicer shall remit to the Trustee (without right or reimbursement therefor)
for deposit into the Certificate Account an amount equal to the lesser of (a)
the excess of (i) the aggregate of the Prepayment Interest Shortfalls for the
related Distribution Date resulting from Principal Prepayments in Full and
Curtailments during the related Prepayment Period over (ii) any Prepayment
Interest Excess resulting from Principal Prepayments in Full during such
Prepayment Period and (b) its aggregate Servicing Fees for such Distribution
Date and shall not have the right to reimbursement therefor (the "Compensating
Interest").
Section 6.10. [Effect of Payments by the Certificate Insurer;
Subrogation]. [Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on the Insured Certificates that is made
with moneys received pursuant to the terms of the Certificate Insurance Policy
shall not be considered payment of the Certificates from the Trust Fund. The
Depositor, the Servicer and the Trustee acknowledge, and each Holder by its
acceptance of a Certificate agrees, that without the need for any further action
on the part of the Certificate Insurer, the Depositor, the Servicer, the Trustee
or the Certificate Registrar (a) to the extent the Certificate Insurer makes
payments, directly or indirectly, on account of principal of or interest on the
Insured Certificates to the Holders of such Certificates, the Certificate
Insurer will be fully subrogated to, and each Certificateholder, the Servicer
and the Trustee hereby delegate and assign to the Certificate Insurer, to the
fullest extent permitted by law, the rights of such Holders to receive such
principal and interest from the Trust Fund, including, without limitation, any
amounts due to the Certificateholders in respect of securities law violations
arising from the offer and sale of the Insured Certificates, and (b) the
Certificate Insurer shall be paid such amounts but only from the sources and in
the manner provided herein for the payment of such amounts. The Trustee and the
Servicer shall cooperate in all respects with any reasonable request by the
Certificate Insurer for action to preserve or enforce the Certificate Insurer's
rights or interests under this Agreement without limiting the rights or
affecting the interests of the Holders as otherwise set forth herein.]
Section 6.11. Allocation of Realized Losses. On each Distribution
Date, the Class Principal Amounts of the [Class M1, Class M2 and Class B]
Certificates will be reduced by the amount of any Applied Loss Amount for such
date, in the following order of priority:
[FIRST, to the Class B Certificates, until the Class Principal
Amount thereof has been reduced to zero;]
[SECOND, to the Class M2 Certificates, until the Class Principal
Amount thereof has been reduced to zero; and]
[THIRD, to the Class M1 Certificates, until the Class Principal
Amount thereof has been reduced to zero.] Section 6.12. Pre-Funding
Account. [ ].
Section 6.13. Capitalized Interest Account. [ ].
Section 6.14. Determination of LIBOR. If the outstanding Certificates
include any LIBOR Certificates, then on each LIBOR Determination Date the
Trustee shall determine LIBOR for the next succeeding Accrual Period by
reference to the display designated as page 3750 on the Dow Jones Telerate
Service (or such other page as may replace such page on that service for the
purpose of displaying London interbank offered quotations of major banks).
If such rate does not appear on Telerate Page 3750, the rate for such
day shall be determined on the basis of the rates at which deposits in United
States dollars are offered by the Reference Banks at approximately 11:00 a.m.,
London time, on such day to banks in the London interbank market for a term
equal to the relevant Accrual Period. The Trustee shall request the principal
London office of each of the Reference Banks to provide a quotation of its rate.
If at least two such quotations are provided, LIBOR for the next applicable
Accrual Period shall be the arithmetic mean of those quotations.
As used herein, "Reference Banks" means leading banks selected by the
Trustee and engaged in transactions in Eurodollar deposits in the international
Eurocurrency market.
If on any LIBOR Determination Date only one or none of the Reference
Banks provides the offered quotations, LIBOR for the next applicable Accrual
Period shall be the arithmetic mean of the rates quoted by major banks in New
York City, selected by the Trustee, at approximately 11:00 a.m., New York City
time, on such day for loans in United States dollars to leading European banks
for a term equal to the relevant Accrual Period. If on any LIBOR Determination
Date the Trustee is unable to determine LIBOR for an Accrual Period, LIBOR for
such Accrual Period shall be LIBOR as determined on the previous LIBOR
Determination Date.
Notwithstanding the foregoing, LIBOR for the next succeeding Accrual
Period shall not be based on LIBOR for the immediately preceding Accrual Period
for two consecutive LIBOR Determination Dates. If, under the procedures
described above, LIBOR for the next succeeding Accrual Period would be based on
LIBOR for the previous LIBOR Determination Date for the second consecutive LIBOR
Determination Date, the Trustee shall select an alternative index (over which
the Trustee has no control) used for determining Eurodollar lending rates that
is calculated and published (or otherwise made available) by an independent
third party.
The establishment of LIBOR by the Trustee and the Trustee's subsequent
calculation of the rate of interest applicable to the LIBOR Certificates for the
relevant Accrual Period, in the absence of manifest error, shall be final and
binding.
Section 6.15. The Basis Risk Reserve Fund. (a) On the Closing Date,
the Trustee shall establish and maintain in its name, in trust for the benefit
of the holders of the [Class A, Class M1, Class M2 and Class B] Certificates, a
Basis Risk Reserve Fund, into which the Depositor shall cause to be deposited
$1,000. The Basis Risk Reserve Fund shall be an Eligible Account, and funds on
deposit therein shall be held separate and apart from, and shall not be
commingled with, any other moneys, including, without limitation, other moneys
of the Trustee held pursuant to this Agreement.
(b) On each Distribution Date on which the Net Excess Spread is less
than 0.25%, the Trustee shall transfer the Required Reserve Fund Deposit from
the Certificate Account to the Basis Risk Reserve Fund pursuant to Section
6.05(b)(iii). The Trustee shall make withdrawals from the Basis Risk Reserve
Fund to make distributions pursuant to Section 6.05(b)(iii).
(c) Funds in the Basis Risk Reserve Fund shall be invested in
Permitted Investments. The Class R Certificate shall evidence ownership of the
Basis Risk Reserve Fund solely for federal income tax purposes and for no other
purpose, and the Holder thereof shall direct the Trustee, in writing, as to
investment of amounts on deposit therein. In the absence of written instructions
from the Class R Certificateholder as to investment of funds on deposit in the
Basis Risk Reserve Fund, such funds shall be invested pursuant to clause (d) of
the definition of Permitted Investments. Any amounts on deposit in the Basis
Risk Reserve Fund on any Distribution Date in excess of the Required Reserve
Fund Deposit for such date after giving effect to withdrawals therefrom pursuant
to Section 6.05(b)(iii) on such date shall be distributed to the Class R
Certificate on such Distribution Date.
Upon termination of the Trust Fund, any amounts remaining in the Basis
Risk Reserve Fund shall be distributed to the Class R Certificateholder. Each
Class R Certificateholder, by its acceptance of a Class R Certificate,
acknowledges and agrees that such Certificateholder has and shall have no
present interest in the Basis Risk Reserve Fund and the amounts on deposit or to
be deposited therein, but shall have only a contingent interest in amounts
distributable on the Class R Certificate as provided in this Agreement.
ARTICLE VII
DEFAULT
Section 7.01. Events of Default. (a) "Event of Default," wherever used
herein, means any one of the following events:
(i) any failure by the Servicer to remit to the Trustee any
payment, excluding any Periodic Advance and any Servicing Advance,
required to be made by the Servicer under the terms of this Agreement
which continues unremedied for [one] Business Day after delivery of
notice thereof to the Servicer;
(ii) any failure by the Servicer to make any required Servicing
Advance which failure continues unremedied for a period of [60] 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
Trustee or to the Servicer and the Trustee by any Certificateholder
[or the Certificate Insurer];
(iii) any failure on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or
agreements on the part of the Servicer contained in this Agreement
(or, if the Servicer is the Originator, the failure of the Originator
to repurchase a Mortgage Loan as to which a breach has been
established that requires a repurchase pursuant to the terms of the
Purchase Agreement), or the failure of any representation and warranty
made pursuant to Section 3.01 to be true and correct which continues
unremedied for a period of [90] days after the earlier of (A) the date
on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer, as the case may be,
by the Depositor or the Trustee or to the Servicer and the Trustee by
any Certificateholder [or the Certificate Insurer] and (B) actual
knowledge of such failure by a Servicing Officer or Responsible
Officer of the Servicer [; PROVIDED, HOWEVER, that if, prior to the
occurrence of a Certificate Insurer Default, the Servicer shall have
given notice to the Certificate Insurer of corrective action it
proposes to take, which corrective action is agreed in writing by the
Certificate Insurer to be satisfactory, such period may be extended by
the Certificate Insurer];
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case under any present
or future federal or state bankruptcy, insolvency or similar law or
for the appointment of a conservator or 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, 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 shall have resulted in the entry of an order
for relief or any such adjudication or appointment;
(v) the Servicer shall consent 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 Servicer or of or relating to all or
substantially all of the Servicer's property;
(vi) the Servicer shall admit in writing its inability to pay its
debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend payment of
its obligations;
(vii) the Servicer no longer meets the qualifications of either a
FNMA or FHLMC seller/servicer;
(viii) the Servicer attempts to assign any of its rights or
delegate any of its duties hereunder other than in compliance with the
terms of this Agreement;
(ix) the Servicer shall fail to satisfy the Servicer Termination
Test;
(x) any failure of the Servicer to make any Periodic Advance on
any Servicer Remittance Date required to be made which continues
unremedied until 3:00 p.m. New York time on the Business Day
immediately following the Servicer Remittance Date;
(xi) [any failure of the Servicer to provide any of the reports
and information to the Trustee as provided in Section 5.19 which
results in a draw on the Certificate Insurance Policy;]
(xii) [the Certificate Insurer notifies the Trustee of an Event
of Default with respect to the Servicer under the Insurance
Agreement;]
(b) If an Event of Default described in this Section shall occur,
then, and in each and every such case, so long as such Event of Default shall
not have been remedied [the Certificate Insurer may or] the Trustee shall [, but
only at the direction of the Certificate Insurer] (x) in the case of an Event of
Default specified in clause (i) or clause (x) of Section 7.01(a), and (y) in the
case of any other Event of Default at the direction of the Majority
Certificateholders, by notice in writing to the Servicer terminate all the
rights and obligations of the Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof, as servicer. Upon receipt by the
Servicer of such written notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Mortgage Loans or otherwise, shall,
subject to Section 7.02, pass to and be vested in the Trustee or its designee
[approved by the Certificate Insurer (or another successor Servicer appointed by
the Certificate Insurer)] and the Trustee (or such other successor Servicer, as
applicable) is hereby authorized and empowered to execute and deliver, on behalf
of the Servicer, as attorney-in-fact or otherwise, at the expense of the
Servicer, any and all documents and other instruments 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 Mortgage Loans and related documents. The
Servicer agrees to cooperate (and pay any related costs and expenses) with the
Trustee or another successor Servicer, as applicable, in effecting the
termination of the Servicer's responsibilities and rights hereunder, including,
without limitation, the transfer to the Trustee or its designee or another
successor Servicer, as applicable, for administration by it of all amounts which
shall at the time be credited by the Servicer to the Collection Account or
thereafter received with respect to the Mortgage Loans. The Trustee shall
promptly notify [the Certificate Insurer and] the Rating Agencies of the
occurrence of an Event of Default. [The Certificate Insurer may appoint a
successor Servicer other than the Trustee.] Until a successor Servicer has been
appointed, the Trustee shall be the successor Servicer in all respects without
further action, and all authority and power of the Servicer under this agreement
shall pass to and be vested in the Trustee on and after the effective date of
termination.
(c) [On or before [ ] and prior to conclusion of the servicing review
described in subsection (d) of this Section, the Certificate Insurer may, in its
sole discretion, remove the Servicer, without cause, by providing written notice
of termination to the Servicer.]
(d) [Between [ ] and [ ], the Certificate Insurer may cause a review
of the operations of the Servicer. The Certificate Insurer shall bear all costs
and expenses of the Certificate Insurer in connection with such review,
including (without limitation) fees and expenses of accountants of the
Certificate Insurer. Upon the conclusion of such servicing review and receipt of
unsatisfactory results, the Certificate Insurer may, in its sole discretion,
remove the Servicer, by providing written notice of termination to the
Servicer.]
Section 7.02. Trustee to Act; Appointment of Successor. (a) On and
after the time that the Servicer receives a notice of termination pursuant to
Section 7.01, or the Trustee receives the resignation of the Servicer evidenced
by an Opinion of Counsel pursuant to Section 5.24, or the Servicer is removed as
Servicer pursuant to Section 7.01, in which event the Trustee shall promptly
notify the Rating Agencies, and except as otherwise provided in Section 7.01,
the Trustee or another successor [acceptable to the Certificate Insurer] shall
be the successor in all respects to the Servicer in its capacity as servicer
under this Agreement and the transactions set forth or provided for herein and
shall be subject to all the responsibilities, duties and liabilities relating
thereto placed on the Servicer by the terms and provisions hereof arising on or
after the date of succession; PROVIDED, HOWEVER, that the Trustee shall not be
liable for any actions or the representations and warranties of any servicer
prior to it and including, without limitation, the obligations of the Servicer
set forth in Sections 2.04 and 3.03. The Trustee, as successor Servicer, or any
other successor Servicer shall be obligated to pay Compensating Interest
pursuant to Section 6.09 in any event and to make advances pursuant to Section
5.21 unless, and only to the extent the Trustee as successor servicer determines
reasonably and in good faith that such advances would not be recoverable
pursuant to Section 5.04 [, such determination to be evidenced by a
certification of a Responsible Officer of the Trustee, as successor Servicer
delivered to the Certificate Insurer].
(b) Notwithstanding the above, the Trustee may, if it shall be
unwilling to so act, or shall, if it is unable to so act or if the Majority
Certificateholders [with the consent of the Certificate Insurer or the
Certificate Insurer] so requests in writing to the Trustee, appoint, pursuant to
the provisions set forth in paragraph (f) below, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution [acceptable to the Certificate Insurer] as the successor to the
Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Servicer hereunder. Notwithstanding the above, the
Trustee shall perform all obligations of the Servicer [until the Certificate
Insurer] or the Trustee [with the prior written consent of the Certificate
Insurer] appoints a successor Servicer [acceptable to the Certificate Insurer].
[The Certificate Insurer may appoint a successor Servicer other than
the Trustee. If the Certificate Insurer fails to appoint a successor Servicer,]
The Trustee shall, if it is unable to obtain a qualifying bid and is prevented
by law from acting as Servicer, appoint, or petition a court of competent
jurisdiction to appoint, any housing an home finance institution, bank or
mortgage servicing institution which has been designated as an approved
seller-servicer by FNMA or FHLMC for first and second home equity loans and
having equity of not less than $[5,000,000] [(or such lower level as may be
acceptable to the Certificate Insurer)], as determined in accordance with
generally accepted accounting principles [and acceptable to the Certificate
Insurer] as the successor to the Servicer hereunder in the assumption of all or
any part of the responsibilities, duties or liabilities of the Servicer
hereunder. The compensation of any successor Servicer (other than the Trustee in
its capacity as successor Servicer) so appointed shall be the amount agreed to
between the successor Servicer [, the Certificate Insurer] and the Trustee (up
to a maximum of [ ]% per annum on the outstanding Principal Balance of each
Mortgage Loan), together with the other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided in Sections 5.14;
PROVIDED, HOWEVER, that if the Trustee becomes the successor Servicer it shall
receive as its compensation the same compensation paid to the Servicer
immediately prior to the Servicer's removal or resignation. The successor
Servicer shall be entitled to set-up expenses, if any, in connection with
becoming Servicer pursuant to Section 5.04(j) hereof.
(c) [Reserved]
(d) The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession,
including the notification by such successor of all Mortgagors of the transfer
of servicing to the extent that the predecessor Servicer fails to do so. The
predecessor Servicer agrees to cooperate with the Trustee and any successor
Servicer in effecting the termination of the predecessor Servicer's servicing
responsibilities and rights hereunder and shall promptly provide the Trustee or
such successor Servicer, as applicable, at the predecessor Servicer's cost and
expense, all documents and records reasonably requested by it to enable it to
assume the Servicer's functions hereunder and shall promptly also transfer to
the Trustee or such successor Servicer, as applicable, all amounts that then
have been or should have been deposited in the Collection Account by the
Servicer or that are thereafter received with respect to the Mortgage Loans. Any
collections received by the predecessor Servicer after such removal or
resignation shall be endorsed by it to the Trustee and remitted directly to the
Trustee or, at the direction of the Trustee, to the successor Servicer. Any
amounts and documents which are property of the Trust Fund held by the
predecessor Servicer shall be held in trust on behalf of the Trustee until
transferred to the successor Servicer or Trustee. Neither the Trustee nor any
other successor Servicer shall be held liable by reason of any failure to make,
or any delay in making, any distribution hereunder or any portion thereof caused
by (i) the failure of the Servicer to deliver, or any delay in delivering, cash,
documents or records to it, or (ii) restrictions imposed by any regulatory
authority having jurisdiction over the Servicer hereunder. No appointment of a
successor to the Servicer hereunder shall be effective until [the Certificate
Insurer shall have consented in writing thereto, and] written notice of such
proposed appointment shall have been provided by the Trustee to [the Certificate
Insurer and] each Certificateholder. The Trustee shall not resign as Servicer
until a successor Servicer [acceptable to the Certificate Insurer] has been
appointed.
(e) Pending appointment of a successor to the 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 Mortgage Loans as it [, the
Certificate Insurer] and such successor shall agree; PROVIDED, HOWEVER, that no
such compensation shall be in excess of that permitted the Servicer pursuant to
Section 5.14. The Servicer, the Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.
(f) Notwithstanding anything to the contrary in this Article VII, upon
removal or resignation of the Servicer the Trustee shall (i) solicit bids from
prospective successor Servicers as described below and (ii) until such time as
another successor Servicer is appointed [by the Certificate Insurer], assume the
duties and obligations of the Servicer. The Trustee agrees to act as Servicer
during such solicitation process and shall assume all duties and obligations of
the Servicer. The Trustee shall solicit, by public announcement, bids from
housing and home finance institutions, banks and mortgage servicing institutions
[from a list of one or more institutions acceptable to the Certificate Insurer].
Such public announcement shall specify that the successor Servicer shall be
entitled to servicing compensation in accordance with this Agreement. [Within
thirty days after the Certificate Insurer has provided the list of eligible
institutions as provided above,] The Trustee shall negotiate and effect the
sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest satisfactory bid as to
the price it will pay to obtain servicing [provided that the Certificate Insurer
has given its prior written consent]. The Trustee shall deduct from any sum
received by the Trustee from the successor to the Servicer in respect of such
sale, transfer and assignment all costs and expenses of any public announcement
and of any sale, transfer and assignment of the servicing rights and
responsibilities hereunder. After such deductions, the remainder of such sum
less any amounts due the Trustee or the Trust from the Servicer shall be paid by
the Trustee to the predecessor Servicer at the time of such sale, transfer and
assignment to the Servicer's successor.
If the Servicer resigns or is replaced hereunder, the costs and
expenses of the successor Servicer relating to the transfer of servicing rights
and responsibilities remaining, if any, after deduction from the sale price as
described above shall be payable to the successor Servicer pursuant to Section
5.04(j) hereof.
(g) The Trustee or any other successor Servicer, upon assuming the
duties of Servicer hereunder, shall immediately (i) record all Assignments of
Mortgage not previously recorded in the name of the Trustee pursuant to Section
2.03 as a result of an Opinion of Counsel and (ii) make all Periodic Advances
and Compensating Interest payments and deposit them to the Collection Account,
which amounts the predecessor Servicer has theretofore failed to remit with
respect to the Mortgage Loans.
(h) The Servicer that is being removed or is resigning shall give
notice to the Mortgagors and to the Rating Agencies of the transfer of the
servicing to the successor.
(i) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities of the predecessor Servicer including,
but not limited to, the maintenance of the hazard insurance policies, the
fidelity bond and an errors and omissions policy pursuant to Section 5.08 and
shall be entitled to the Servicing Compensation and all of the rights granted to
the predecessor Servicer by the terms and provisions of this Agreement. The
appointment of a successor Servicer shall not affect any liability or right of
the predecessor Servicer which may have arisen or accrued under this Agreement
prior to its termination as Servicer (including, without limitation, any
deductible under an insurance policy) and any right to reimbursement pursuant to
Section 5.04 or otherwise under this Agreement, nor shall any successor Servicer
be liable for any acts or omissions of the predecessor Servicer or for any
breach by such Servicer of any of its representations or warranties contained
herein or in any related document or agreement.
Section 7.03. Waiver of Defaults. The Majority Certificateholders [or
the Certificate Insurer] may, on behalf of all Certificateholders, [and subject
to the consent of the Certificate Insurer,] waive any events permitting removal
of the Servicer as servicer pursuant to this Article VII; PROVIDED, HOWEVER,
that the Majority Certificateholders may not waive a default in making a
required distribution on a Certificate without the consent of the holder of such
Certificate. Upon any waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement unless otherwise specified in such
waiver. No such waiver shall extend to any subsequent or other default or impair
any right consequent thereto except to the extent expressly so waived. Notice of
any such waiver shall be given by the Trustee to the Rating Agencies.
Section 7.04. [Mortgage Loans, Trust Fund and Accounts Held for
Benefit of the Certificate Insurer]. [(a) The Trustee shall hold the Trust Fund
and shall hold, directly or indirectly through its Custodian, the Mortgage Files
for the benefit of the Certificateholders and the Certificate Insurer and all
references in this Agreement and in the Certificates to the benefit of Holders
of the Certificates shall be deemed to include the Certificate Insurer. The
Trustee shall cooperate in all reasonable respects with any reasonable request
by the Certificate Insurer for action to preserve or enforce the Certificate
Insurer's rights or interests under this Agreement and the Certificates.]
(b) [The Servicer hereby acknowledges and agrees that it shall service
the Mortgage Loans for the benefit of the Certificateholders and for the benefit
of the Certificate Insurer, and all references in this Agreement to the benefit
of or actions on behalf of the Certificateholders shall be deemed to include the
Certificate Insurer.]
Section 7.05. [Rights of the Certificate Insurer to Exercise Rights of
Certificateholders]. [By accepting its Certificate, each Regular
Certificateholder agrees that unless a Certificate Insurer Default exists, the
Certificate Insurer shall be deemed to be the Regular Certificateholders for all
purposes (other than with respect to payment on the Certificates) and shall have
the right to exercise all rights of the Regular Certificateholders under this
Agreement and under each Class of Regular Certificates without any further
consent of such Certificateholders.]
Section 7.06. [Trustee to Act Solely with Consent of the Certificate
Insurer]. [Unless Certificate Insurer Default exists, the Trustee shall not,
without the Certificate Insurer's consent or unless directed by the Certificate
Insurer:
(a) terminate the rights and obligations of the Servicer as Servicer
pursuant to Section 7.01;
(b) agree to any amendment pursuant to Article XI, PROVIDED, HOWEVER,
that such consent shall not be unreasonably withheld; or
(c) undertake any litigation.]
[The Certificate Insurer may, in writing and in its sole discretion
renounce all or any of its rights under section 7.04, 7.05 or 7.06 or any
requirement for the Certificate Insurer's consent for any period of time.]
ARTICLE VIII
TERMINATION
Section 8.01. Termination. (a) Subject to Section 8.02, this Agreement
shall terminate upon notice to the Trustee of either: (i) the disposition of all
funds with respect to the last Mortgage Loan and the remittance of all funds due
hereunder and the payment of all amounts due and payable to the Trustee [and the
Certificate Insurer] or (ii) mutual consent of the Servicer [, the Certificate
Insurer] and all Certificateholders in writing; PROVIDED, HOWEVER, that in no
event shall the Trust Fund established by this Agreement terminate later than
twenty-one years after the death of the last surviving lineal descendant of
Joseph P. Kennedy, late Ambassador of the United States to the Court of St.
James, alive as of the date hereof.
(b) In addition, subject to Section 8.02, the [Residual
Certificateholder] may, at its option and at its sole cost and expense, upon
[20] days' prior written notice to the Trustee, terminate this Agreement on any
date on which the Total Loan Balance is less than [10%] of the sum of (x) the
Cut-off Date Loan Balance plus (y) the aggregate of the Principal Balances of
any Subsequent Mortgage Loans on their respective Subsequent Cut-off Dates, by
purchasing, during the Prepayment Period relating to the next succeeding
Distribution Date, all of the outstanding Mortgage Loans and REO Properties for
a price (the "Termination Price") equal to the sum of (i) the greater of (x)
100% of the unpaid principal balance of each such outstanding Mortgage Loan and
each REO Property plus the aggregate amount of accrued and unpaid interest on
such Mortgage Loans through the related Due Period and (y) the aggregate
Certificate Principal Amount of the Regular Certificates, plus interest accrued
and unpaid thereon, (ii) any Deferred Amount not yet reimbursed to the [Class
M1, Class M2 and Class B] Certificateholders, (iii) any unreimbursed Servicing
Advances, [(iv) any unreimbursed amounts due to the Certificate Insurer under
this Agreement or the Insurance Agreement,] and (iv) the fair market value of
any other property held by the Trust Fund. If the [Residual Certificateholder]
does not exercise such purchase option within three calendar months of the date
on which it is first entitled to do so, the Servicer shall have the option, at
its sole cost and expense, upon [20] days' prior written notice to Trustee, to
purchase all of the outstanding Mortgage Loans and REO Properties for the
Termination Price.
Any such purchase shall be accomplished by deposit into the
Certificate Account of the Termination Price. From the Termination Price so
deposited, the Trustee shall reimburse the Servicer for the amount of any unpaid
Servicing Fees, unreimbursed Periodic Advances and unreimbursed Servicing
Advances made by the Servicer with respect to the related Mortgage Loans. [No
such termination is permitted without the prior written consent of the
Certificate Insurer if it would result in a draw on the Certificate Insurance
Policy.]
(c) [Reserved]
(d) Notice of any termination, specifying the Distribution Date upon
which the Trust Fund will terminate and that the Certificateholders shall
surrender their Certificates to the Trustee or the Certificate Registrar for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee by letter to the Certificateholders mailed during the month of such
final distribution before the Servicer Remittance Date in such month, specifying
(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 or the Certificate Registrar 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 or the
Certificate Registrar therein specified. [The obligations of the Certificate
Insurer hereunder shall terminate upon the deposit with the Trustee of the
Termination Price and when the aggregate Certificate Principal Amount of the
Certificates has been reduced to zero, whereupon the Trustee will return the
Certificate Insurance Policy to the Certificate Insurer for cancellation.]
(e) In the event that not all Certificateholders 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, all of the Certificates shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an 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
hereto. If within nine months after the second notice all the Certificates shall
not have been surrendered for cancellation, the Class R Certificateholders shall
be entitled to all unclaimed funds and other assets [(other than amounts
relating to Insured Payments, which shall be disbursed to the Certificate
Insurer)] which remain subject hereto and the Trustee upon transfer of such
funds shall be discharged of any responsibility for such funds and the
Certificateholders shall look only to such Class R Certificateholders for
payment. Such funds shall remain uninvested.
Section 8.02. Additional Termination Requirements. (a) In the event
that the Residual Certificateholder or the Servicer exercises its purchase
option with respect to the Trust Fund as provided in Section 8.01, the Trust
Fund shall be terminated in accordance with the following additional
requirements, unless the Trustee [and the Certificate Insurer] has been
furnished with an Opinion of Counsel to the effect that the failure of the Trust
Fund to comply with the requirements of this Section 8.02 will not (i) result in
the imposition of taxes on "prohibited transactions" of the Trust Fund as
defined in Section 860F of the Code or (ii) cause the Trust Fund to fail to
qualify as a REMIC at any time that any Regular Certificates are outstanding:
(i) The Trustee shall establish a 90-day liquidation period for
the Trust Fund and specify the first day of such period in a statement
attached to the Trust Fund's final Tax Return pursuant to Treasury
Regulation Section 1.860F-1. The Trustee shall satisfy all the
requirements of a qualified liquidation under Section 860F of the Code
and any regulations thereunder;
(ii) During such 90-day liquidation period, and at or prior to
the time of making of the final payment on the Certificates, the
Trustee shall sell all of the assets of the Trust Fund for cash; and
(iii) [At the time of the making of the final payment on the
Certificates, the Trustee shall distribute or credit, or cause to be
distributed or credited, to the Holders of the Class R Certificates
all cash on hand in the Trust Fund (other than cash retained to meet
claims), and the REMIC shall terminate at that time.]
(b) By their acceptance of the Class R Certificates, the Holders
thereof hereby agree to authorize the Trustee to specify the 90-day liquidation
period for the Trust Fund, which authorization shall be binding upon all
successor Class R Certificateholders.
ARTICLE IX
CONCERNING THE TRUSTEE
Section 9.01. Duties of Trustee. The Trustee, prior to the occurrence
of an Event of Default and after the curing 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. If an Event of Default occurs and is
continuing, 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 its exercise
as a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs. Any permissive right of the Trustee enumerated in
this Agreement shall not be construed as a duty.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform on their face to the requirements of 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 Servicer or the Seller hereunder. If any such
instrument is found not to conform to the requirements of this Agreement in a
material manner, the Trustee shall take action as it deems appropriate to have
the instrument corrected [and will provide notice thereof to the Certificate
Insurer].
The Trustee shall sign on behalf of the Trust Fund any tax return that
the Trustee is required to sign pursuant to applicable federal, state or local
tax laws.
The Trustee covenants and agrees that it shall perform its obligations
hereunder in a manner so as to maintain the status of the Trust Fund as a REMIC
under the REMIC Provisions and to prevent the imposition of any federal, state
or local income, prohibited transaction, contribution or other tax on the Trust
Fund to the extent that maintaining such status and avoiding such taxes are
reasonably within the control of the Trustee and are reasonably within the scope
of its duties under this Agreement.
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 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; and
(ii) The Trustee shall not be personally 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 personally liable with respect to
any action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction of the Certificate Insurer relating
to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Agreement.
Section 9.02. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 9.01:
(a) The Trustee may request and rely upon and shall be protected in
acting or refraining from acting upon any resolution, Officers' Certificate,
Opinion of Counsel, 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;
(b) The Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any action
taken or suffered or omitted by it hereunder in good faith and in accordance
therewith;
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement or to make any investigation of
matters arising hereunder or to institute, conduct or defend any litigation
hereunder or in relation hereto at the request, order or direction of any of the
Certificateholders [or the Certificate Insurer], pursuant to the provisions of
this Agreement, unless such Certificateholders [or the Certificate Insurer, as
the case may be,] 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 (which has not
been cured and of which a Responsible Officer of the Trustee has actual
knowledge or notice), 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 its exercise as
a prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs;
(d) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Agreement;
(e) Prior to the occurrence of an Event of Default hereunder and after
the curing 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 [the Certificate Insurer or by] at least a
[25]% Percentage Interest of any Class of Regular Certificates; PROVIDED,
HOWEVER, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by such Certificateholders or this Agreement, the Trustee may require
reasonable security or indemnity against such expense, or liability from such
Certificateholders as a condition to taking any such action;
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys;
(g) The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the Trustee
shall not be answerable for other than its negligence or willful misconduct in
the performance of such act; and
(h) The Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust created hereby or the powers granted
hereunder.
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates, other than the signature
of the Trustee on the Certificates and the certificate of authentication, shall
be taken as the statements of the Depositor or the Servicer, as the case may be,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations or warranties as to the validity or sufficiency of this
Agreement or of the Certificates or of any Mortgage Loan or related document,
other than the signature of the Trustee on the Certificates and the certificate
of authentication. The Trustee shall not be accountable for the use or
application by the Depositor or the Servicer 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 in respect of the Mortgage Loans or deposited in or withdrawn
from the Collection Account or any other account by or on behalf of the
Depositor or the Servicer, other than any funds held by or on behalf of the
Trustee in accordance with Article VI.
Section 9.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights it would have if it were not Trustee.
Section 9.05. Payment of Trustee's Fees. The Trustee shall withdraw
from the Certificate Account on each Distribution Date and pay to itself the
Trustee Fee as provided in Section [6.05(b)(i)]. Except as otherwise provided in
this Agreement, the Trustee and any director, officer, employee or agent of the
Trustee shall be indemnified by the Trust Fund and held harmless against any
loss, liability or unanticipated out-of-pocket expense incurred or paid to third
parties (which expenses shall not include salaries paid to employees, or
allocable overhead, of the Trustee) in connection with the acceptance or
administration of its trusts hereunder or the Certificates, [or its performance
under the Insurance Agreement,] other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of duties hereunder [or under the Insurance Agreement] or by reason
of reckless disregard of obligations and duties hereunder [or under the
Insurance Agreement]. All such amounts shall be payable from funds in the
Collection Account as provided in Section 5.04.
The Servicer covenants and agrees to indemnify the Trustee and any
director, officer, employee or agent of the Trustee against any losses,
liabilities, damages, claims or expenses (including reasonable legal fees and
such related expenses) that may be sustained by the Trustee in connection with
this Agreement related to willful misfeasance, bad faith or negligence in the
performance of the Servicer's duties hereunder.
The provisions of this Section 9.05 shall survive the termination of
this Agreement and the removal or resignation of the Trustee.
Section 9.06. Eligibility Requirements for Trustee. The Trustee
hereunder shall at all times be a corporation or a national banking association
organized and doing business under the laws of any state or the United States of
America or the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
[$50,000,000] and subject to supervision or examination by federal or state
authority and having a deposit rating of at least ["A-"] or the equivalent by
each Rating Agency. In addition, the Trustee shall at all times be acceptable to
the Rating Agencies rating the Certificates [and the Certificate Insurer]. If
such corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section the combined capital and surplus of such
corporation shall be deemed to be its 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, the Trustee shall resign immediately in the manner and with the effect
specified in Section 9.07. The corporation or national banking association
serving as Trustee may have normal banking and trust relationships with the
Seller and their affiliates or the Servicer and its affiliates; PROVIDED,
HOWEVER, that such corporation cannot be an affiliate of the Servicer other than
the Trustee in its role as successor to the Servicer.
Section 9.07. Resignation and Removal of the Trustee. The Trustee may
at any time resign and be discharged from the trusts hereby created by giving
notice thereof to the Depositor, [the Certificate Insurer,] the Servicer and to
all Certificateholders; PROVIDED, that such resignation shall not be effective
until a successor trustee [acceptable to the Certificate Insurer] is appointed
and accepts appointment in accordance with the following provisions. Upon
receiving such notice of resignation, the Servicer shall [, with the prior
written consent of the Certificate Insurer,] promptly appoint a successor
trustee who meets the eligibility requirements of Section 9.06 by written
instrument, in duplicate, which instrument shall be delivered to the resigning
Trustee and to the successor trustee. A copy of such instrument shall be
delivered to the Certificateholders [, the Certificate Insurer] and the Servicer
by the Depositor. If no successor trustee shall have been so appointed and have
accepted appointment within [60] 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; PROVIDED, HOWEVER, that
the resigning Trustee shall not resign and be discharged from the trusts hereby
created until such time as each Rating Agency [and the Certificate Insurer]
rating the Certificates approve the successor trustee.
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 Servicer [or the Certificate Insurer], or if at any time
the Trustee shall become incapable of acting, or shall be adjudged 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, or if the rating of the long-term debt obligations of the Trustee
is not acceptable to the Rating Agencies in respect of mortgage pass-through
certificates having a rating equal to the then current rating on the
Certificates or if the Trustee fails to perform its duties in accordance with
this Agreement, then [the Certificate Insurer or] the Servicer may remove the
Trustee and appoint a successor trustee who meets the eligibility requirements
of Section 9.06 by written instrument, in duplicate, which instrument shall be
delivered to the Trustee so removed and to the successor trustee. A copy of such
instrument shall be delivered to the Certificateholders [, the Certificate
Insurer] and the Depositor by the Servicer.
The Majority Certificateholders [, with the prior written consent of
the Certificate Insurer,] may at any time remove the Trustee and appoint a
successor trustee by written instrument or instruments, in triplicate, signed by
[the Certificate Insurer] such Holders or their attorneys-in-fact duly
authorized, one complete set of which instruments shall be delivered to the
Servicer, one complete set to the Trustee so removed and one complete set to the
successor so appointed. A copy of such instrument shall be delivered to the
Certificateholders [, the Certificate Insurer] and the Depositor by the
Servicer.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 9.08.
Section 9.08. Successor Trustee. Any successor trustee appointed as
provided in Section 9.07 shall execute, acknowledge and deliver to the Servicer
[, the Certificate Insurer] and to its predecessor trustee an instrument
accepting such appointment hereunder, and thereupon the resignation or removal
of the predecessor trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become fully vested with all
the rights, powers, duties and obligations of its predecessor hereunder, with
the like effect as if originally named as trustee herein. The predecessor
trustee shall deliver to the successor trustee all of the Mortgage Files and
related documents and statements held by it hereunder, and the 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.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 9.06.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Servicer shall mail notice of the succession of such trustee
hereunder to [the Certificate Insurer and] all Holders of Certificates at their
addresses as shown in the Certificate Register provided that the Servicer has
received such Certificate Register. If the Servicer fails to mail such notice
within ten days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Servicer.
[Notwithstanding anything to the contrary contained herein, so long as
no Certificate Insurer Default exists, the appointment of any successor trustee
pursuant to any provision of this Agreement will be subject to the prior written
consent of the Certificate Insurer.]
Section 9.09. Merger or Consolidation of Trustee. Any corporation into
which the Trustee may be merged or converted or with which it may be
consolidated or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be eligible under the provisions of
Section 9.06, 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 9.10. Appointment of Co-Trustee or Separate Trustee.
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 Fund or property securing the same may at the time be located, the
Depositor and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee [and acceptable to the Certificate Insurer] to act as co-trustee or
co-trustees, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of the Trust Fund, and to vest in such Person or Persons, in
such capacity, such title to the Trust Fund, or any part thereof, and, subject
to the other provisions of this Section 9.10, such powers, duties, obligations,
rights and trusts as the Depositor and the Trustee may consider necessary or
desirable. If the Depositor shall not have joined in such appointment within
[15] days after the receipt by it of a request so to do, or in case an Event of
Default shall have occurred and be continuing, the Trustee [, subject to the
approval of the Certificate Insurer,] shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 9.06
hereunder and no notice to Holders of Certificates of the appointment of
co-trustee(s) or separate trustee(s) shall be required under Section 9.08
hereof.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 9.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed (whether as Trustee hereunder or
as successor to the Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust Fund or any
portion thereof in any such jurisdiction) shall be exercised and performed by
such separate trustee or co-trustee solely at the direction of the Trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article 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 [and a copy thereof delivered to
the Certificate Insurer].
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 9.11. Appointment of Custodians. The Trustee may [, with the
consent of the Certificate Insurer,] appoint one or more Custodians to hold all
or a portion of the Mortgage Files as agent for the Trustee. The Trustee shall
pay any and all fees and expenses of any Custodian in accordance with each
Custodial Agreement. The Trustee initially appoints [ ] as Custodian, and the
Depositor and the Servicer [and the Certificate Insurer] consent to such
appointment. Subject to the terms of this Agreement, the Trustee agrees to
comply with the terms of each Custodial Agreement, if any, and to enforce the
terms and provisions thereof against the Custodian for the benefit of the
Certificateholders [and the Certificate Insurer] having an interest in any
Mortgage File held by such Custodian. Each Custodian shall be a depository
institution or trust company subject to supervision by federal or state
authority, shall have combined capital and surplus of at least [$10,000,000] and
shall be qualified to do business in the jurisdiction in which it holds any
Mortgage File. Each Custodial Agreement [shall be acceptable to the Certificate
Insurer and] may be amended only as provided in section 11.03 thereof. Subject
to the provisions of this Agreement, in no event shall the appointment of any
Custodian pursuant to a Custodial Agreement diminish the obligations of the
Trustee hereunder.
Section 9.12. Appointment of Agent. The Trustee hereby appoints [ ] as
its agent and, as necessary, its attorney in fact, for the purpose of performing
the duties of the Trustee under this Agreement and the Custodial Agreement
(including payment of fees and expenses of the Custodian) relating to compliance
with the REMIC Provisions and related reporting obligations (including payment
by such agent of amounts otherwise payable by the Trustee under Sections
10.01(c) and (d)), SEC reporting, distributions and related reporting
requirements, registration, execution and authentication of Certificates in its
capacity as Certificate Registrar, establishment and maintenance of accounts and
the holding of the Trust Fund (other than the Mortgage Files).
ARTICLE X
REMIC PROVISIONS
Section 10.01. REMIC Administration. (a) The Trustee shall make an
election to treat the Trust Fund (exclusive of the Basis Risk Reserve Fund) as a
REMIC under the Code, and if necessary, under applicable state law. Such
election will be made on Form 1066 or other appropriate federal tax or
information return or any appropriate state return for the taxable year ending
on the last day of the calendar year in which the Certificates are issued. For
purposes of the REMIC election, (i) each Class of Regular Certificates shall be
designated as representing ownership of "regular interests" and the Class R
Certificates shall be designated as the sole Class of "residual interest" in the
REMIC. The Trustee shall not permit the creation of any "interests" in the REMIC
(within the meaning of Section 860G of the Code) other than the REMIC regular
interests and the residual interest represented by the Certificates.
(b) The Closing Date is hereby designated as the Startup Day of the
REMIC within the meaning of Section 860G(a)(9) of the Code.
(c) The Trustee shall pay out of its own funds, without any right of
reimbursement, any and all expenses relating to any tax audit of the Trust Fund
(including, but not limited to, any professional fees or any administrative or
judicial proceedings with respect thereto that involved the Internal Revenue
Service or state tax authorities), other than the expense of obtaining any tax
related Opinion of Counsel not obtained in connection with such an audit and
other than taxes, in either case except as specified herein; PROVIDED, HOWEVER,
that if such audit resulted from the negligence of the Servicer or the
Depositor, then the Servicer or the Depositor, as the case may be, shall pay
such expenses. The Trustee, as agent for the tax matters person, shall (i) act
on behalf of the Trust Fund in relation to any tax matter or controversy
involving the Trust Fund and (ii) represent the Trust Fund in any administrative
or judicial proceeding relating to an examination or audit by any governmental
taxing authority with respect thereto. The Holder of the largest Percentage
Interest in the Class R Certificates from time to time is hereby designated as
Tax Matters Person with respect to the REMIC and hereby irrevocably appoints and
authorizes the Trustee to act its agent to perform the duties of the Tax Matters
Person with respect to the REMIC. To the extent authorized under the Code and
the regulations promulgated thereunder, each Holder of a Class R Certificate
hereby irrevocably appoints and authorizes the Trustee to be its
attorney-in-fact for purposes of signing any Tax Returns required to be filed on
behalf of the Trust Fund.
(d) The Trustee shall prepare or cause to be prepared, sign and file
all of the Tax Returns in respect of the Trust Fund created hereunder, other
than Tax Returns required to be filed by the Servicer pursuant to Section 5.25.
The expenses of preparing and filing such returns shall be borne by the Trustee
without any right of reimbursement therefor.
(e) The Trustee shall perform on behalf of the Trust Fund all
reporting and other tax compliance duties that are the responsibility of the
Trust Fund under the Code, REMIC Provisions or other compliance guidance issued
by the Internal Revenue Service or any state or local taxing authority. Among
its other duties, as required by the Code, the REMIC Provisions or other such
compliance guidance, the Trustee shall provide (i) to any Transferor of a Class
R Certificate and to the Internal Revenue Service such information as is
necessary for the application of any tax relating to the transfer of a Class R
Certificate to any Person who is not a Disqualified Organization, (ii) to
Certificateholders such information or reports as are required by the Code or
the REMIC Provisions including reports relating to interest, original issue
discount and market discount or premium and (iii) to the Internal Revenue
Service the name, title, address and telephone number of the person who will
serve as the representative of the Trust Fund. In addition, the Depositor shall
provide or cause to be provided to the Trustee, within ten (10) days after the
Closing Date, all information or data that the Trustee reasonably determines to
be relevant for tax purposes as to the valuations and issue prices of the
Certificates, including, without limitation, the price, yield, prepayment
assumption and projected cash flow of the Certificates. The Depositor shall
indemnify the Trustee and hold it harmless for any loss, liability, damage,
claim, or expense of the Trustee arising from any failure of the Depositor to
provide, or to cause to be provided, in response to the reasonable requests of
the Trustee made pursuant to this paragraph, accurate information or data to the
Trustee on a timely basis. The indemnification provisions hereunder shall
survive the termination of this Agreement.
(f) The Trustee shall take such action and shall cause the Trust Fund
created hereunder to take such action as shall be necessary to create or
maintain the status of the Trust Fund (exclusive of the Basis Risk Reserve Fund)
as a REMIC under the REMIC Provisions (and the Servicer shall assist it, to the
extent reasonably requested by it). The Trustee shall not take any action, cause
the Trust Fund 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 Trust Fund (exclusive of the Basis
Risk Reserve Fund) as a REMIC or (ii) result in the imposition of a tax upon the
Trust Fund (including but not limited to the tax on prohibited transactions as
defined in Section 860F(a)(2) of the Code and the tax on contributions to a
REMIC set forth in Section 860G(d) of the Code) (either such event, an "Adverse
REMIC Event") unless the Trustee [and the Certificate Insurer] received an
Opinion of Counsel (at the expense of the party seeking to take such action but
in no event shall such Opinion of Counsel be an expense of the Trustee) to the
effect that the contemplated action will not, with respect to the Trust Fund
created hereunder, endanger such status or result in the imposition of such a
tax. The Servicer shall not take or fail to take any action (whether or not
authorized hereunder) as to which the Trustee has advised it in writing that it
has received an Opinion of Counsel (which such Opinion of Counsel shall not be
an expense of the Trustee) to the effect that an Adverse REMIC Event could occur
with respect to such action. In addition, prior to taking any action with
respect to the Trust Fund or its assets, or causing the Trust Fund to take any
action which is not expressly permitted under the terms of this Agreement, the
Servicer will consult with the Trustee or its designee, in writing, with respect
to whether such action could cause an Adverse REMIC Event to occur with respect
to the Trust Fund, and the Servicer shall not take any such action or cause the
Trust Fund to take any such action as to which the Trustee has advised it in
writing that an Adverse REMIC Event could occur. The Trustee may consult with
counsel to make such written advice, and the cost of same shall be borne by the
party seeking to take the action not permitted by this Agreement (but in no
event shall such cost be an expense of the Trustee). At all times as may be
required by the Code, the Trustee will ensure that substantially all of the
assets of the Trust Fund (exclusive of the Basis Risk Reserve Fund) will consist
of "qualified mortgages" as defined in Section 860G(a)(3) of the Code and
"permitted investments" as defined in Section 860G(a)(5) of the Code.
(g) In the event that any tax is imposed on "prohibited transactions"
of the Trust Fund created hereunder as defined in Section 860F(a)(2) of the Code
on "net income from foreclosure property" of the Trust Fund as defined in
Section 860G(c) of the Code, on any contributions to the Trust Fund after the
Startup Day therefor pursuant to Section 860G(d) of the Code, or any other tax
is imposed by the Code or any applicable provisions of state or local tax laws,
such tax shall be charged (i) to the Trustee, if such tax arises out of or
results from a breach by the Trustee of any of its obligations under this
Article X, (ii) to the Servicer pursuant to Section 10.03 hereof, if such tax
arises out of or results from a breach by the Servicer of any of its obligations
under Article V or this Article X, or otherwise (iii) to the Holders of the
Residual Certificates.
(h) On or before April 15 of each calendar year, commencing April 15,
[ ], the Trustee shall deliver to the Servicer and each Rating Agency a
certificate from a Responsible Officer of the Trustee stating the Trustee's
compliance with this Article X.
(i) The Servicer and the Trustee shall, for federal income tax
purposes, maintain books and records with respect to the Trust Fund on a
calendar year and on an accrual basis.
(j) The Trustee shall not accept any contributions of assets to the
Trust Fund unless it [and the Certificate Insurer] shall have received an
Opinion of Counsel (which such Opinion of Counsel shall not be an expense of the
Trustee) to the effect that the inclusion of such assets in the Trust Fund will
not cause the Trust Fund (exclusive of the Basis Risk Reserve Fund) to fail to
qualify as a REMIC at any time that any Certificates are outstanding or subject
the Trust Fund to any tax under the REMIC Provisions or other applicable
provisions of federal, state and local law or ordinances.
(k) Neither the Trustee nor the Servicer shall enter into any
arrangement by which the Trust Fund will receive a fee or other compensation for
services nor permit the Trust Fund to receive any income from assets other than
"qualified mortgages" as defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the Code.
(l) Solely for purposes of satisfying Section 1.860G-1(a)(4)(iii) of
the Treasury Regulations, the "latest possible maturity date" of the Regular
Certificates is the REMIC Maturity Date.
(m) Upon filing with the Internal Revenue Service, the Trustee shall
furnish to the Holders of the Class R Certificates the Form 1066 and each Form
1066Q.
(n) The Trustee shall treat the Basis Risk Reserve Fund as an outside
reserve fund within the meaning of Treasury Regulation Section 1.860G-2(h) that
is owned by the Holder of the Class R Certificate and that is not an asset of
the REMIC. The Trustee shall treat the rights of the [Class A, Class M1, Class
M2, and Class B] Certificateholders to receive payments from the Basis Risk
Reserve Fund in the event of a Basis Risk Shortfall as rights in an interest
rate cap contract written by the Class R Certificateholder in favor of the Class
A, Class M1, Class M2, and Class B Certificateholders. Thus, each [Class A,
Class M1, Class M2, and Class B] Certificate shall be treated as representing
not only ownership of regular interests in the Trust Fund, but also ownership of
an interest in a discrete interest rate cap contract. For purposes of
determining the issue prices of the regular interests, the Trustee shall assume
that the interest rate cap contract has only a nominal value. This provision is
intended to satisfy the requirements of Treasury Regulation Section 1.860G-2(i),
concerning the treatment of property rights coupled with regular interests, and
shall be interpreted in a manner consistent with such regulations.
Section 10.02. Prohibited Transactions and Activities. Neither the
Depositor, the Servicer nor the Trustee shall sell, dispose of or substitute for
any of the Mortgage Loans, except in connection with (i) the foreclosure of a
Mortgage Loan, including but not limited to, the acquisition or sale of a
Mortgaged Property acquired by deed in lieu of foreclosure, (ii) the bankruptcy
of the Trust Fund, (iii) the termination of the Trust Fund pursuant to Article
VIII of this Agreement, or (iv) a purchase of Mortgage Loans pursuant to Article
II or III of this Agreement, nor acquire any assets for the Trust Fund, nor sell
or dispose of any investments in the Certificate Accounts for gain, nor accept
any contributions to the Trust Fund after the Closing Date unless it [and the
Certificate Insurer] have received an Opinion of Counsel (at the expense of the
party seeking to cause such sale, disposition, substitution or acquisition but
in no event shall such Opinion of Counsel be an expense of the Trustee) that
such sale, disposition, substitution or acquisition will not (a) affect
adversely the status of the Trust Fund (exclusive of the Basis Risk Reserve
Fund) as a REMIC or (b) cause the Trust Fund to be subject to a tax on
"prohibited transactions" or "contributions" pursuant to the REMIC Provisions
(such opinion, a "REMIC Opinion").
Section 10.03. Trustee and Servicer Indemnification. (a) The Trustee
agrees to indemnify the Trust Fund, the Depositor [, the Certificate Insurer]
and the Servicer for any taxes and costs (including, without limitation, any
reasonable attorneys' fees) imposed on or incurred by the Trust Fund, the
Depositor or the Servicer as a result of a breach of the Trustee's covenants set
forth in this Article X.
(b) The Servicer agrees to indemnify the Trust Fund, the Depositor and
the Trustee for any taxes and costs (including, without limitation, any
reasonable attorneys' fees) imposed on or incurred by the Trust Fund, the
Depositor or the Trustee, as a result of a breach of the Servicer's covenants
set forth in this Article X or in Article V with respect to compliance with the
REMIC Provisions, including without limitation, any penalties arising from the
Trustee's execution of Tax Returns prepared by the Servicer pursuant to Section
5.25 that contain errors or omissions.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Limitation on Liability of the Depositor and the
Servicer. (a) Neither the Depositor, the Servicer nor any of the directors,
members, officers, employees or agents of the Depositor or the Servicer shall be
under any liability to [the Certificate Insurer,] the Trust Fund or the
Certificateholders 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 Depositor or the
Servicer against any breach of warranties or representations made herein, or
against any specific liability imposed on the Servicer or the Depositor pursuant
to any other Section hereof; and provided further that this provision shall not
protect the Depositor, the Servicer or any such person, against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Depositor, the Servicer and any director,
member, officer, employee or agent of the Depositor or 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 Depositor,
the Servicer and any director, officer, member, employee or agent of the
Depositor or the Servicer shall be indemnified and held harmless by the Trust
Fund against any loss, liability or expense incurred in connection with any
legal action relating to this Agreement or the Certificates, other than any
loss, liability or expense related to the Servicer's servicing obligations with
respect to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) or related to the Servicer's obligations under this Agreement, or any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. Neither the Depositor nor the
Servicer shall be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its respective duties under this
Agreement and which in its opinion may involve it in any expense or liability;
PROVIDED, HOWEVER, that the Depositor or the Servicer may in its sole 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 the event the Depositor or the
Servicer take any action as described in the preceding sentence, the legal
expenses and costs of such action [, if previously approved in writing by the
Certificate Insurer, which approval shall not be unreasonably withheld,] and any
liability resulting therefrom will be expenses, costs and liabilities of the
Trust Fund, and the Servicer or the Depositor, as the case may be, will be
entitled to be reimbursed therefor as provided in Section 5.04.
(b) [Reserved]
(c) The Servicer agrees to indemnify and hold the Trustee, the
Depositor [, the Certificate Insurer] and each Certificateholder harmless
against any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments, and any other costs, fees and expenses that the
Trustee, the Depositor and any Certificateholder may sustain resulting from the
failure of the Servicer to perform its duties and service the Mortgage Loans in
compliance with the terms of this Agreement. The Servicer shall immediately
notify the Trustee, the Depositor [, the Certificate Insurer] and each
Certificateholder if a claim is made by a third party arising out of or based
upon the alleged actions of the Servicer or alleged failure of the Servicer to
perform its duties and service the Mortgage Loans in compliance with the terms
of this Agreement, and the Servicer shall assume (with the consent of the
Trustee [and the Certificate Insurer]) the defense of any such claim and pay all
expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the Servicer, the Trustee, the Depositor [, the Certificate Insurer]
and/or Certificateholder in respect of such claim. Notwithstanding the
foregoing, the Servicer shall not be obligated to indemnify the Trust Fund or
assume the defense for any claim by a third party that does not arise out of and
is not based upon the alleged actions of the Servicer or alleged failure of the
Servicer to perform its duties and service the Mortgage Loans in compliance with
the terms of this Agreement.
(d) The Servicer shall reimburse itself from amounts in the Collection
Account pursuant to Section 5.04 for all amounts advanced by it pursuant to the
preceding sentence, except when a final nonappealable adjudication determines
that the claim relates directly to the failure of the Servicer to perform its
duties in compliance with this Agreement. The provision of this Section 11.01(d)
shall survive the termination of this Agreement and the payment of the
outstanding Certificates.
Section 11.02. Acts of Certificateholders. (a) Except as otherwise
specifically provided herein, whenever Certificateholder action, consent or
approval is required under this Agreement, such action, consent or approval
shall be deemed to have been taken or given on behalf of, and shall be binding
upon, all Certificateholders if the Majority Certificateholders [or the
Certificate Insurer] agree to take such action or give such consent or approval.
(b) The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heir to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of the
Trust Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
(c) No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the Certificates,
be construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
(d) No Certificateholder shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Agreement [or the
Certificate Insurance Policy], or for the appointment of a receiver or trustee
of the Trust Fund, or for any other remedy with respect to an event of default
hereunder, unless: (i) such Certificateholder has previously given written
notice to the Depositor [, the Certificate Insurer] and the Trustee of such
Certificateholder's intention to institute such proceeding; (ii) the
Certificateholders of not less than [51]% of the Percentage Interests
represented by the Senior Certificates then outstanding or, if there are no
Senior Certificates then outstanding, by a majority of the Percentage Interests
represented by the outstanding Classes of Certificates, shall have made written
request to the Trustee to institute such proceeding in its own name as Trustee
establishing the Trust Fund; (iii) such Certificateholder or Certificateholders
have offered to the Trustee reasonable indemnity against the costs, expenses and
liabilities to be insured in compliance with such request; (iv) the Trustee for
[60] days after its receipt of such notice, request and offer of indemnity has
failed to institute such proceeding; [(v) as long as any Senior Certificates are
outstanding or any Reimbursement Amounts are owed to the Certificate Insurer,
the Certificate Insurer has consented in writing thereto (unless a Certificate
Insurer Default has occurred and is continuing);] and (v) no direction
inconsistent with such written request has been given to the Trustee during such
[60-day] period by the Certificateholders of a majority of the Percentage
Interests represented by the Senior Certificates or, if there are no Senior
Certificates then outstanding, by a majority of the Percentage Interests
represented by the outstanding Classes of Certificates; it being understood and
intended that no one or more Certificateholders shall have any right in any
manner whatever by virtue of, or by availing themselves of, any provision of
this Agreement to affect, disturb or prejudice the rights of any other
Certificateholder of the same Class or to obtain or to seek to obtain priority
or preference over any other Certificateholder of the same Class or to enforce
any right under this Agreement, except in the manner herein provided and for the
equal and ratable benefit of all the Certificateholders of the same Class. [In
the event the Trustee shall receive conflicting or inconsistent requests and
indemnity from two or more groups of Certificateholders, each representing less
than a majority of the applicable Class of Certificates and each conforming to
paragraphs (i)-(vi) of this Section 11.02(d), the Trustee shall so notify the
Certificate Insurer and the Certificate Insurer in its sole discretion may
determine what action, if any, shall be taken, notwithstanding any other
provision of this Agreement.]
Section 11.03. Amendment. This Agreement may be amended from time to
time by the Depositor, the Servicer and the Trustee [with the prior written
consent of the Certificate Insurer] without the consent of any of the
Certificateholders, (i) to cure any ambiguity or mistake, (ii) to correct,
modify or supplement any provisions herein which may be inconsistent with any
other provisions herein or in an Offering Document, (iii) to make any other
provisions with respect to matters or questions arising under this Agreement
that are not materially inconsistent with the provisions hereof amend this
Agreement in any respect subject to the provisions below, or (iv) if such
amendment, as evidenced by an Opinion of Counsel (provided by the Person
requesting such amendment) delivered to the Trustee [and the Certificate
Insurer], is reasonably necessary to comply with any requirements imposed by the
Code or any successor or amendatory statute or any temporary or final
regulation, revenue ruling, revenue procedure or other written official
announcement or interpretation relating to federal income tax laws or any
proposed such action which, if made effective, would apply retroactively to the
Trust Fund at least from the effective date of such amendment; provided that in
the case of clause (iii) such action shall not adversely affect in any material
respect the interests of any Certificateholder (other than Certificateholders
who shall consent to such amendment) [or the Certificate Insurer], as evidenced
either by an Opinion of Counsel (provided by the Person requesting such
amendment) or written notification from each Rating Agency to the effect that
such amendment will not cause such Rating Agency to lower or withdraw the then
current ratings on the Certificates [(without regard to the Certificate
Insurance Policy)], delivered to the Trustee [and the Certificate Insurer].
This Agreement may also be amended from time to time by the Depositor,
the Servicer and the Trustee with the consent of the Majority Certificateholders
[and the Certificate Insurer] for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Holders of Certificates; PROVIDED,
HOWEVER, that no such amendment shall (i) reduce in any manner the amount of, or
delay the timing of, payments received on Mortgage Loans which are required to
be distributed on any Certificate without the consent of the Holder of such
Certificate or (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 [and the Certificate Insurer] then outstanding.
Notwithstanding any other provision of this Agreement, for purposes of the
giving or withholding of consents pursuant to this Section 11.03, Certificates
registered in the name of the Depositor or the Servicer or any affiliate thereof
shall be entitled to voting rights with respect to matters described in (i) and
(ii) of this paragraph.
Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it [and the
Certificate Insurer] shall have first received an Opinion of Counsel (provided
by the Person requesting such amendment) to the effect that such amendment will
not result in the imposition of any tax on the Trust Fund pursuant to the REMIC
Provisions or cause the Trust Fund to fail to qualify as a REMIC at any time
that any of the Certificates are outstanding.
Promptly after the execution of any such amendment the Trustee shall
furnish a statement describing the amendment to each Certificateholder [, the
Certificate Insurer] and each Rating Agency.
It shall not be necessary for the consent of Certificateholders under
this Section 11.03 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
Section 11.04. Recordation of Agreement. To the extent permitted by
applicable law, this Agreement, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate public offices for
real property records in all of the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgages are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Servicer at the Certificateholders' [or the Certificate
Insurer's] expense on direction and at the expense of Majority
Certificateholders [or the Certificate Insurer's] requesting such recordation,
but only when accompanied by an Opinion of Counsel to the effect that such
recordation materially and beneficially affects the interests of the
Certificateholders [or the Certificate Insurer], as applicable, or is necessary
for the administration or servicing of the Mortgage Loans.
Section 11.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (i) in the case of the Servicer, [ , Attention: [ ]; (ii) in the
case of Finance America Securities, LLC, 16802 Aston Street, Irvine, California
92606, Attention: [ ]; (iii) in the case of the Trustee, [ , Attention: [ ];
(iv) in the case of the Certificateholders, as set forth in the Certificate
Register; (v) in the case of Moody's, Moody's Investors Service, 99 Church
Street, New York, New York 10007, Attention: Residential Mortgage Pass-through
Monitoring; (vi) in the case of S&P, Standard & Poor's Rating Services, 55 Water
Street, New York, New York 10004; and (vii) in the case of Fitch, Fitch ICBA,
Inc., One State Street Plaza, New York, New York 10004 [; and (viii) in the case
of the Certificate Insurer [ ]. Any such notices shall be deemed to be effective
with respect to any party hereto upon the receipt of such notice by such party,
except that notices to the Certificateholders shall be effective upon mailing or
personal delivery.
Section 11.06. 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 covenants, agreements, provisions or terms of this
Agreement or of the Certificates or the rights of the Holders thereof.
Section 11.07. Counterparts. 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.
Section 11.08. Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the Servicer, the Depositor, the Trustee and
the Certificateholders and their respective successors and permitted assigns.
Section 11.09. Headings. The headings of the various articles and
sections of this Agreement have been inserted for convenience of reference only
and shall not be deemed to be part of this Agreement.
Section 11.10. [Certificate Insurer Default]. [Any right conferred to
the Certificate Insurer, including, without limitation, the right to receive the
Premium Amount shall be suspended during any period in which a Certificate
Insurer Default exists. At such time as the Certificates are no longer
outstanding hereunder, and no amounts owed to the Certificate Insurer hereunder
or under the Insured Amount remain unpaid, the Certificate Insurer's rights
hereunder shall terminate.]
Section 11.11. Third Party Beneficiary. The parties agree that the
Seller [and the Certificate Insurer] is intended to have and shall have all
rights of a third-party beneficiary of this Agreement.
Section 11.12. Intent of the Parties. It is the intent of the
Depositor and Certificateholders that, for federal income taxes, state and local
income or franchise taxes and other taxes imposed on or measured by income, the
Certificates will be treated as evidencing beneficial ownership interests in a
REMIC. The parties to this Agreement and the holder of each Certificate, by
acceptance of its Certificate, and each beneficial owner thereof, agree to
treat, and to take no action inconsistent with the treatment of, the
Certificates in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
Section 11.13. Notice to Rating Agencies.
The Trustee shall use its best efforts to promptly provide notice to
the Rating Agencies 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;
3. The resignation or termination of the Servicer or the Trustee;
and
4. The final payment to Certificateholders.
In addition, the Trustee shall promptly furnish to the Rating Agencies
copies of the following:
1. Each report to Certificateholders described in Section 6.07;
and
2. Each annual independent public accountants' servicing report
described in Section 5.17.
Any such notice pursuant to this Section 11.13 shall be in writing and
shall be deemed to have been duly given if personally delivered or mailed by
first class mail, postage prepaid, or by express delivery service [(except in
the case of notice to the Certificate Insurer which notice shall be given in
accordance with Section 11.05 hereof)].
Section 11.14. Governing Law. THIS AGREEMENT AND THE CERTIFICATES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS
OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 11.15. Appointment of Agent. The Depositor hereby appoints
Deutsche Bank Securities Inc. as its agent for the purpose of performing the
duties of the Depositor under this Agreement, other than the duties of the
Depositor under Article II and Section 3.02 hereof.
<PAGE>
IN WITNESS WHEREOF, the Servicer, the Trustee and the Depositor have
caused their names to be signed hereto by their respective officers thereunto
duly authorized as of the day and year first above written.
FINANCE AMERICA SECURITIES, LLC
as Depositor
By: ________________________________
Name:
Title:
[ ]
as Servicer
By: ________________________________
Name:
Title:
[ ]
as Trustee
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT A
[CERTIFICATE INSURANCE POLICY]
<PAGE>
EXHIBIT B-1
FORMS OF REGULAR CERTIFICATES
<PAGE>
FORM OF SENIOR CERTIFICATE
THIS CERTIFICATE IS A REMIC REGULAR INTEREST CERTIFICATE. THIS
CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND IS NOT
GUARANTEED BY, THE DEPOSITOR, THE TRUSTEE, OR ANY AFFILIATE OF ANY OF THEM AND
IS NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL AMOUNT OF THIS
CERTIFICATE MAY BE MADE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE
CERTIFICATE PRINCIPAL AMOUNT OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN ON THE FACE HEREOF.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), 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 IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
FINANCE AMERICA SECURITIES, LLC
MORTGAGE LOAN TRUST [ ]
PASS-THROUGH CERTIFICATE, CLASS [ ]
Evidencing a beneficial interest in a pool consisting
primarily of certain fixed and adjustable rate, fully amortizing and
balloon, conventional, first-lien residential mortgage loans and other
assets in a trust fund established by
FINANCE AMERICA SECURITIES, LLC
Initial Class _________ Initial Certificate
Principal Amount of the Class [ ] Principal Amount of this
Certificates: $[ ] Certificate: $[ ]
Certificate Cut-off Date: [ ]
Interest Rate: Variable
Number [ ] CUSIP: [ ]
ISIN: [ ]
Common Code: [ ]
<PAGE>
THIS CERTIFIES THAT [ ] is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the initial
Certificate Principal Amount of this Certificate by the initial Class Principal
Amount of the Class [ ] Certificates, both as specified above) in (i) certain
distributions of principal and interest on certain fixed and adjustable rate,
fully amortizing and balloon, conventional, first lien residential mortgage
loans (the "Mortgage Loans") acquired from Finance America Securities, LLC (the
"Depositor"), a Delaware limited liability company, (ii) such amounts and
investments as from time to time may be held in the Trust Fund established
pursuant to the Pooling and Servicing Agreement (as defined on the reverse
hereof) and (iii) certain other assets, if any, as described in the Pooling and
Servicing Agreement (the foregoing assets hereinafter collectively referred to
as the "Trust Fund").
Distributions on this Certificate will be made on the [25th] day of
each month or, if such a day is not a Business Day, then on the next succeeding
Business Day, commencing in [ ] (each, a "Distribution Date"), to the Person in
whose name this Certificate is registered at the close of business on the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs (the "Record Date"), in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount, if any,
required to be distributed to all the Certificates of the Class represented by
this Certificate. All sums distributable on this Certificate are payable in the
coin or currency of the United States of America which at the time of payment is
legal tender for the payment of public and private debts.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which shall have the same effect as though
fully set forth on the face of this Certificate.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, whose name appears below by manual signature, this
Certificate shall not be entitled to any benefit under the Pooling and Servicing
Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
[ ],
as Trustee
By: _________________________________
AUTHORIZED SIGNATORY
Dated: __________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Pooling and Servicing Agreement.
[ ],
as Trustee
By: _________________________________
AUTHORIZED SIGNATORY
Dated: __________________________
<PAGE>
FINANCE AMERICA SECURITIES, LLC
MORTGAGE LOAN TRUST [ ]
PASS-THROUGH CERTIFICATE
This Certificate is one of a duly authorized issue of certificates
designated as Finance America Securities, LLC Mortgage Loan Trust [ ]
Pass-Through Certificates (the "Certificates"), representing all or part of a
beneficial ownership interest in a Trust Fund established pursuant to a Pooling
and Servicing Agreement dated as of [ ] (the "Pooling and Servicing Agreement"),
among Finance America Securities, LLC, as Depositor, [ ], as Trustee, and [ ],
as Servicer, to which terms, provisions and conditions thereof the Holder of
this Certificate by virtue of the acceptance hereof assents, and by which such
Holder is bound. The Certificates consist of the following Classes: [the Class A
Certificates (the "Senior Certificates"), the Class M1, Class M2 and Class B
Certificates (the "Subordinate Certificates")] and the Class R Certificate (the
"Residual Certificate").
On each Distribution Date, the Total Distribution Amount for such date
will be distributed from the Certificate Account to Holders of the Certificates
according to the terms of the Pooling and Servicing Agreement. All distributions
or allocations made with respect to each Class of Certificates on each
Distribution Date shall be allocated among the outstanding Certificates of such
Class based on the Percentage Interest of each such Certificate.
Distributions on this Certificate will be made by check mailed to the
Holder of record of this Certificate on the immediately preceding Record Date at
the address of such Holder as it appears on the Certificate Register (except
that with respect to a Certificate registered in the name of a Clearing Agency
or its nominee, distributions will be made by wire transfer of immediately
available funds) or by wire transfer in immediately available funds, upon
written request made to the Trustee or as otherwise permitted by the Trustee.
Wire transfers will be made at the expense of the Holder requesting the same by
deducting a wire transfer fee from the related distribution. The final
distribution on this Certificate will be made, after due notice to the Holder of
the pendency of such distribution, only upon presentation and surrender of this
Certificate at the Corporate Trust Office (as defined below).
The Corporate Trust Office with respect to the presentment and
surrender of Certificates for the final distribution thereon and the presentment
and surrender of the Certificates for any other purpose is the corporate trust
office of the Trustee at [ ], Attention: [ ]. The Trustee may designate another
address from time to time by notice to the Holders of the Certificates and the
Depositor.
The Pooling and Servicing Agreement permits the amendment thereof from
time to time by the Depositor, the Servicer and the Trustee [with the consent of
the Certificate Insurer] for the purpose of adding, changing or eliminating any
provisions of the Pooling and Servicing Agreement or modifying the rights of the
Holders of the Certificates thereunder; PROVIDED, HOWEVER, that (i) no such
amendment may be made unless the Trustee receives an opinion of counsel as to
certain tax matters specified in the Pooling and Servicing Agreement and (ii) no
such amendment may (a) reduce the amount or delay the timing of distributions
required to be made on any Certificate without the consent of the Holder of such
Certificate, or (b) reduce the percentage of aggregate outstanding Percentage
Interest of each Class the Holders of which are required to consent to any such
amendment, without [the Certificate Insurer and] the consent of the Holders of
all Certificates then outstanding. Any consent by the Holder of this Certificate
will be conclusive and binding on such Holder and upon all future Holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Pooling and Servicing Agreement also permits the
amendment thereof, in certain limited circumstances, [with the consent of the
Certificate Insurer but] without the consent of the Holders of any of the
Certificates.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, the transfer of this Certificate is
registerable in the Certificate Register upon surrender of this Certificate for
registration of transfer, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Certificate Registrar, duly
executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class of
authorized denominations evidencing the same initial Certificate Principal
Amount (or Percentage Interest) will be issued to the designated transferee or
transferees. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, this Certificate is exchangeable for new
Certificates of the same Class evidencing the same aggregate initial Certificate
Principal Amount (or Percentage Interest) as requested by the Holder
surrendering the same. No service charge will be made for any such registration
of transfer or exchange, but the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The [Class A, Class M1, Class M2 and Class B] Certificates are
issuable only in registered form, in minimum denominations of $[25,000] in
initial Certificate Principal Amount and in integral multiples of $1 in excess
thereof registered in the name of the nominee of the Clearing Agency, which
shall maintain such Certificates through its book-entry facilities. The Class R
Certificate will be issued as a single Certificate and maintained in physical
form. The Class R Certificate shall remain outstanding until the latest final
Distribution Date for the Certificates.
The Certificates are subject to optional prepayment in full in
accordance with the Pooling and Servicing Agreement on any Distribution Date on
which the Total Loan Balance is less than [10]% of the Cut-off Date Loan Balance
thereof for an amount as specified in the Pooling and Servicing Agreement. In no
event will the trust created by the Pooling and Servicing Agreement continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants living at the date of the Pooling and Servicing Agreement of a
certain person named in the Pooling and Servicing Agreement.
The Depositor, the Trustee and the Certificate Registrar 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 Depositor, the Trustee,
nor the Certificate Registrar nor any such agent shall be affected by any notice
to the contrary.
As provided in the Pooling and Servicing Agreement, this Certificate
and the Pooling and Servicing Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to the
conflict of laws principles applied in the State of New York. In the event of
any conflict between the provisions of this Certificate and the Pooling and
Servicing Agreement, the Pooling and Servicing Agreement shall be controlling.
Any term used herein and not otherwise defined shall be as defined in the
Pooling and Servicing Agreement.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s) and assign(s) and
transfer(s) unto
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee
and social security number or employer identification number)
- ------------------------------------------------------------------------------
the within Certificate stating in the names of the undersigned in the
Certificate Register and does hereby irrevocably constitute and appoint
- ------------------------------------------------------------------------------
to transfer such Certificate in such Certificate Register of the Trust.
I [we] further direct the Certificate Registrar to issue a new Certificate of
the same Class of like principal to the above-named assignee and deliver such
Certificate to the following address:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Dated:____________________ __________________________________________
Signature by or on behalf of Assignor
__________________________ __________________________________________
Authorized Officer Signature Guaranteed
__________________________ __________________________________________
Name of Institution NOTICE: The signature(s) of this
assignment must correspond with the name(s)
on the face of this Certificate without
alteration or any change whatsoever. The
signature must be guaranteed by a participant
in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange
Medallion Signature Program or the Stock
Exchanges Medallion Program. Notarized or
witnessed signatures are not acceptable as
guaranteed signatures.
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information
of the Certificate Registrar. Distributions shall be made by wire transfer in
immediately available funds to
______________________________________________________________________________
for the account of ___________________________________________________________
account number __________________ or, if mailed by check, to _________________
______________________________________________________________________________
Applicable reports and statements should be mailed to ________________________
______________________________________________________________________________
This information is provided by _____________________________________________
the assignee named above, or ____________________________________ as its agent.
<PAGE>
FORM OF CLASS M1 CERTIFICATE
THIS CERTIFICATE IS A REMIC REGULAR INTEREST CERTIFICATE. THIS
CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND IS NOT
GUARANTEED BY, THE DEPOSITOR, THE TRUSTEE, OR ANY AFFILIATE OF ANY OF THEM AND
IS NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL AMOUNT OF THIS
CERTIFICATE MAY BE MADE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE
CERTIFICATE PRINCIPAL AMOUNT OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS CERTIFICATE IS SUBORDINATE IN RIGHT OF PAYMENT AS DESCRIBED IN
THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), 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 IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NO TRANSFER OF THIS CERTIFICATE SHALL BE REGISTERED UNLESS THE
PROSPECTIVE TRANSFEREE PROVIDES THE TRUSTEE AND THE DEPOSITOR WITH (A) A
CERTIFICATION TO THE EFFECT THAT SUCH TRANSFEREE (1) IS NEITHER AN EMPLOYEE
BENEFIT PLAN SUBJECT TO SECTION 406 OR SECTION 407 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THE TRUSTEE OF ANY SUCH
PLAN OR A PERSON ACTING ON BEHALF OF ANY SUCH PLAN NOR A PERSON USING THE ASSETS
OF ANY SUCH PLAN OR (2) IF SUCH TRANSFEREE IS AN INSURANCE COMPANY, SUCH
TRANSFEREE IS PURCHASING SUCH CERTIFICATES WITH FUNDS CONTAINED IN AN "INSURANCE
COMPANY GENERAL ACCOUNT" (AS SUCH TERM IS DEFINED IN SECTION V(e) OF THE
PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60")) AND THAT THE
PURCHASE AND HOLDING OF SUCH CERTIFICATES ARE COVERED UNDER PTCE 95-60; OR (B)
AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AND THE DEPOSITOR, AND UPON
WHICH THE TRUSTEE AND THE DEPOSITOR SHALL BE ENTITLED TO RELY, TO THE EFFECT
THAT THE PURCHASE OR HOLDING OF SUCH CERTIFICATE BY THE PROSPECTIVE TRANSFEREE
WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE PLAN ASSETS
AND SUBJECT TO THE PROHIBITED TRANSACTION PROVISIONS OF ERISA OR THE CODE AND
WILL NOT SUBJECT THE TRUSTEE OR THE DEPOSITOR TO ANY OBLIGATION IN ADDITION TO
THOSE UNDERTAKEN BY SUCH ENTITIES IN THE POOLING AND SERVICING AGREEMENT, WHICH
OPINION OF COUNSEL SHALL NOT BE AN EXPENSE OF THE TRUST FUND, THE TRUSTEE OR THE
DEPOSITOR.
FINANCE AMERICA SECURITIES, LLC
MORTGAGE LOAN TRUST [ ]
PASS-THROUGH CERTIFICATE, CLASS M1
Evidencing a beneficial interest in a pool consisting
primarily of certain fixed and adjustable rate, fully amortizing and
balloon, conventional, first-lien residential mortgage loans and other
assets in a trust fund established by
FINANCE AMERICA SECURITIES, LLC
Initial Class Initial Certificate
Principal Amount of the Class M1 Principal Amount of this
Certificates: $[ ] Certificate: $[ ]
Certificate Cut-off Date: [ ]
Interest Rate: Variable
Number [ ] CUSIP: [ ]
ISIN: [ ]
Common Code: [ ]
<PAGE>
THIS CERTIFIES THAT [ ] is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the initial
Certificate Principal Amount of this Certificate by the initial Class Principal
Amount of the Class M1 Certificates, both as specified above) in (i) certain
distributions of principal and interest on certain fixed and adjustable rate,
fully amortizing and balloon, conventional, first lien residential mortgage
loans (the "Mortgage Loans") acquired from Finance America Securities, LLC (the
"Depositor"), a Delaware limited liability company, (ii) such amounts and
investments as from time to time may be held in the Trust Fund established
pursuant to the Pooling and Servicing Agreement (as defined on the reverse
hereof) and (iii) certain other assets, if any, as described in the Pooling and
Servicing Agreement (the foregoing assets hereinafter collectively referred to
as the "Trust Fund").
Distributions on this Certificate will be made on the [25th] day of
each month or, if such a day is not a Business Day, then on the next succeeding
Business Day, commencing in [ ] (each, a "Distribution Date"), to the Person in
whose name this Certificate is registered at the close of business on the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs (the "Record Date"), in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount, if any,
required to be distributed to all the Certificates of the Class represented by
this Certificate. All sums distributable on this Certificate are payable in the
coin or currency of the United States of America which at the time of payment is
legal tender for the payment of public and private debts.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which shall have the same effect as though
fully set forth on the face of this Certificate.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, whose name appears below by manual signature, this
Certificate shall not be entitled to any benefit under the Pooling and Servicing
Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
[ ],
as Trustee
By: ________________________________
AUTHORIZED SIGNATORY
Dated:__________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Pooling and Servicing Agreement.
[ ],
as Trustee
By: ________________________________
AUTHORIZED SIGNATORY
Dated:__________________________
<PAGE>
FINANCE AMERICA SECURITIES, LLC
MORTGAGE LOAN TRUST [ ]
PASS-THROUGH CERTIFICATE
This Certificate is one of a duly authorized issue of certificates
designated as Finance America Securities, LLC Mortgage Loan Trust [ ]
Pass-Through Certificates (the "Certificates"), representing all or part of a
beneficial ownership interest in a Trust Fund established pursuant to a Pooling
and Servicing Agreement dated as of [ ] (the "Pooling and Servicing Agreement"),
among Finance America Securities, LLC, as Depositor, [ ], as Trustee, and [ ],
as Servicer, to which terms, provisions and conditions thereof the Holder of
this Certificate by virtue of the acceptance hereof assents, and by which such
Holder is bound. The Certificates consist of the following Classes: [the Class A
Certificates (the "Senior Certificates"), the Class M1, Class M2 and Class B
Certificates (the "Subordinate Certificates")] and the Class R Certificate (the
"Residual Certificate").
On each Distribution Date, the Total Distribution Amount for such date
will be distributed from the Certificate Account to Holders of the Certificates
according to the terms of the Pooling and Servicing Agreement. All distributions
or allocations made with respect to each Class of Certificates on each
Distribution Date shall be allocated among the outstanding Certificates of such
Class based on the Percentage Interest of each such Certificate.
Distributions on this Certificate will be made by check mailed to the
Holder of record of this Certificate on the immediately preceding Record Date at
the address of such Holder as it appears on the Certificate Register (except
that with respect to a Certificate registered in the name of a Clearing Agency
or its nominee, distributions will be made by wire transfer of immediately
available funds) or by wire transfer in immediately available funds, upon
written request made to the Trustee or as otherwise permitted by the Trustee.
Wire transfers will be made at the expense of the Holder requesting the same by
deducting a wire transfer fee from the related distribution. The final
distribution on this Certificate will be made, after due notice to the Holder of
the pendency of such distribution, only upon presentation and surrender of this
Certificate at the Corporate Trust Office (as defined below).
The Corporate Trust Office with respect to the presentment and
surrender of Certificates for the final distribution thereon and the presentment
and surrender of the Certificates for any other purpose is the corporate trust
office of the Trustee at [ , Attention: [ ]. The Trustee may designate another
address from time to time by notice to the Holders of the Certificates and the
Depositor.
The Pooling and Servicing Agreement permits the amendment thereof from
time to time by the Depositor, the Servicer and the Trustee [with the consent of
the Certificate Insurer] for the purpose of adding, changing or eliminating any
provisions of the Pooling and Servicing Agreement or modifying the rights of the
Holders of the Certificates thereunder; PROVIDED, HOWEVER, that (i) no such
amendment may be made unless the Trustee receives an opinion of counsel as to
certain tax matters specified in the Pooling and Servicing Agreement and (ii) no
such amendment may (a) reduce the amount or delay the timing of distributions
required to be made on any Certificate without the consent of the Holder of such
Certificate, or (b) reduce the percentage of aggregate outstanding Percentage
Interest of each Class the Holders of which are required to consent to any such
amendment, without [the Certificate Insurer and] the consent of the Holders of
all Certificates then outstanding. Any consent by the Holder of this Certificate
will be conclusive and binding on such Holder and upon all future Holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Pooling and Servicing Agreement also permits the
amendment thereof, in certain limited circumstances, [with the consent of the
Certificate Insurer but] without the consent of the Holders of any of the
Certificates.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, the transfer of this Certificate is
registerable in the Certificate Register upon surrender of this Certificate for
registration of transfer, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Certificate Registrar, duly
executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class of
authorized denominations evidencing the same initial Certificate Principal
Amount (or Percentage Interest) will be issued to the designated transferee or
transferees. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, this Certificate is exchangeable for new
Certificates of the same Class evidencing the same aggregate initial Certificate
Principal Amount (or Percentage Interest) as requested by the Holder
surrendering the same. No service charge will be made for any such registration
of transfer or exchange, but the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The [Class A, Class M1, Class M2 and Class B] Certificates are
issuable only in registered form, in minimum denominations of $[25,000] in
initial Certificate Principal Amount and in integral multiples of $1 in excess
thereof registered in the name of the nominee of the Clearing Agency, which
shall maintain such Certificates through its book-entry facilities. The Class R
Certificate will be issued as a single Certificate and maintained in physical
form. The Class R Certificate shall remain outstanding until the latest final
Distribution Date for the Certificates.
The Certificates are subject to optional prepayment in full in
accordance with the Pooling and Servicing Agreement on any Distribution Date on
which the Total Loan Balance is less than [10]% of the Cut-off Date Loan Balance
thereof for an amount as specified in the Pooling and Servicing Agreement. In no
event will the trust created by the Pooling and Servicing Agreement continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants living at the date of the Pooling and Servicing Agreement of a
certain person named in the Pooling and Servicing Agreement.
The Depositor, the Trustee and the Certificate Registrar 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 Depositor, the Trustee,
nor the Certificate Registrar nor any such agent shall be affected by any notice
to the contrary.
As provided in the Pooling and Servicing Agreement, this Certificate
and the Pooling and Servicing Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to the
conflict of laws principles applied in the State of New York. In the event of
any conflict between the provisions of this Certificate and the Pooling and
Servicing Agreement, the Pooling and Servicing Agreement shall be controlling.
Any term used herein and not otherwise defined shall be as defined in the
Pooling and Servicing Agreement.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s) and assign(s) and
transfer(s) unto
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee
and social security number or employer identification number)
- ------------------------------------------------------------------------------
the within Certificate stating in the names of the undersigned in the
Certificate Register and does hereby irrevocably constitute and appoint
- ------------------------------------------------------------------------------
to transfer such Certificate in such Certificate Register of the Trust.
I [we] further direct the Certificate Registrar to issue a new Certificate of
the same Class of like principal to the above-named assignee and deliver such
Certificate to the following address:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Dated:____________________ __________________________________________
Signature by or on behalf of Assignor
__________________________ __________________________________________
Authorized Officer Signature Guaranteed
__________________________ __________________________________________
Name of Institution NOTICE: The signature(s) of this
assignment must correspond with the name(s)
on the face of this Certificate without
alteration or any change whatsoever. The
signature must be guaranteed by a
participant in the Securities Transfer
Agents Medallion Program, the New York Stock
Exchange Medallion Signature Program or the
Stock Exchanges Medallion Program. Notarized
or witnessed signatures are not acceptable
as guaranteed signatures.
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Certificate Registrar. Distributions shall be made by wire transfer in
immediately available funds to
- ------------------------------------------------------------------------------
for the account of ___________________________________________________________
account number __________________ or, if mailed by check, to _________________
- ------------------------------------------------------------------------------
Applicable reports and statements should be mailed to ________________________
- ------------------------------------------------------------------------------
This information is provided by _________________________________________
the assignee named above, or _______________________________ as its agent.
<PAGE>
FORM OF CLASS M2 CERTIFICATE
THIS CERTIFICATE IS A REMIC REGULAR INTEREST CERTIFICATE. THIS
CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND IS NOT
GUARANTEED BY, THE DEPOSITOR, THE TRUSTEE, OR ANY AFFILIATE OF ANY OF THEM AND
IS NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL AMOUNT OF THIS
CERTIFICATE MAY BE MADE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE
CERTIFICATE PRINCIPAL AMOUNT OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS CERTIFICATE IS SUBORDINATE IN RIGHT OF PAYMENT AS DESCRIBED IN
THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), 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 IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NO TRANSFER OF THIS CERTIFICATE SHALL BE REGISTERED UNLESS THE
PROSPECTIVE TRANSFEREE PROVIDES THE TRUSTEE AND THE DEPOSITOR WITH (A) A
CERTIFICATION TO THE EFFECT THAT SUCH TRANSFEREE (1) IS NEITHER AN EMPLOYEE
BENEFIT PLAN SUBJECT TO SECTION 406 OR SECTION 407 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THE TRUSTEE OF ANY SUCH
PLAN OR A PERSON ACTING ON BEHALF OF ANY SUCH PLAN NOR A PERSON USING THE ASSETS
OF ANY SUCH PLAN OR (2) IF SUCH TRANSFEREE IS AN INSURANCE COMPANY, SUCH
TRANSFEREE IS PURCHASING SUCH CERTIFICATES WITH FUNDS CONTAINED IN AN "INSURANCE
COMPANY GENERAL ACCOUNT" (AS SUCH TERM IS DEFINED IN SECTION V(e) OF THE
PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60")) AND THAT THE
PURCHASE AND HOLDING OF SUCH CERTIFICATES ARE COVERED UNDER PTCE 95-60; OR (B)
AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AND THE DEPOSITOR, AND UPON
WHICH THE TRUSTEE AND THE DEPOSITOR SHALL BE ENTITLED TO RELY, TO THE EFFECT
THAT THE PURCHASE OR HOLDING OF SUCH CERTIFICATE BY THE PROSPECTIVE TRANSFEREE
WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE PLAN ASSETS
AND SUBJECT TO THE PROHIBITED TRANSACTION PROVISIONS OF ERISA OR THE CODE AND
WILL NOT SUBJECT THE TRUSTEE OR THE DEPOSITOR TO ANY OBLIGATION IN ADDITION TO
THOSE UNDERTAKEN BY SUCH ENTITIES IN THE POOLING AND SERVICING AGREEMENT, WHICH
OPINION OF COUNSEL SHALL NOT BE AN EXPENSE OF THE TRUST FUND, THE TRUSTEE OR THE
DEPOSITOR.
FINANCE AMERICA SECURITIES, LLC
MORTGAGE LOAN TRUST [ ]
PASS-THROUGH CERTIFICATE, CLASS M2
Evidencing a beneficial interest in a pool consisting
primarily of certain fixed and adjustable rate, fully amortizing and
balloon, conventional, first-lien residential mortgage loans and other
assets in a trust fund established by
FINANCE AMERICA SECURITIES, LLC
Initial Class Initial Certificate
Principal Amount of the Class M2 Principal Amount of this
Certificates: $[ ] Certificate: $[ ]
Certificate Cut-off Date: [ ]
Interest Rate: Variable
Number [ ] CUSIP: [ ]
ISIN: [ ]
Common Code: [ ]
<PAGE>
THIS CERTIFIES THAT [ ] is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the initial
Certificate Principal Amount of this Certificate by the initial Class Principal
Amount of the Class M1 Certificates, both as specified above) in (i) certain
distributions of principal and interest on certain fixed and adjustable rate,
fully amortizing and balloon, conventional, first lien residential mortgage
loans (the "Mortgage Loans") acquired from Finance America Securities, LLC (the
"Depositor"), a Delaware limited liability company, (ii) such amounts and
investments as from time to time may be held in the Trust Fund established
pursuant to the Pooling and Servicing Agreement (as defined on the reverse
hereof) and (iii) certain other assets, if any, as described in the Pooling and
Servicing Agreement (the foregoing assets hereinafter collectively referred to
as the "Trust Fund").
Distributions on this Certificate will be made on the [25th] day of
each month or, if such a day is not a Business Day, then on the next succeeding
Business Day, commencing in [ ] (each, a "Distribution Date"), to the Person in
whose name this Certificate is registered at the close of business on the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs (the "Record Date"), in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount, if any,
required to be distributed to all the Certificates of the Class represented by
this Certificate. All sums distributable on this Certificate are payable in the
coin or currency of the United States of America which at the time of payment is
legal tender for the payment of public and private debts.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which shall have the same effect as though
fully set forth on the face of this Certificate.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, whose name appears below by manual signature, this
Certificate shall not be entitled to any benefit under the Pooling and Servicing
Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
[ ]
as Trustee
By: _________________________________
AUTHORIZED SIGNATORY
Dated:___________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Pooling and Servicing Agreement.
[ ],
as Trustee
By: _________________________________
AUTHORIZED SIGNATORY
Dated:___________________________
<PAGE>
FINANCE AMERICA SECURITIES, LLC
MORTGAGE LOAN TRUST [ ]
PASS-THROUGH CERTIFICATE
This Certificate is one of a duly authorized issue of certificates
designated as Finance America Securities, LLC Mortgage Loan Trust [ ]
Pass-Through Certificates (the "Certificates"), representing all or part of a
beneficial ownership interest in a Trust Fund established pursuant to a Pooling
and Servicing Agreement dated as of [ ] (the "Pooling and Servicing Agreement"),
among Finance America Securities, LLC, as Depositor, [ ], as Trustee, and [ ],
as Servicer, to which terms, provisions and conditions thereof the Holder of
this Certificate by virtue of the acceptance hereof assents, and by which such
Holder is bound. The Certificates consist of the following Classes: [the Class A
Certificates (the "Senior Certificates"), the Class M1, Class M2 and Class B
Certificates (the "Subordinate Certificates")] and the Class R Certificate (the
"Residual Certificate").
On each Distribution Date, the Total Distribution Amount for such date
will be distributed from the Certificate Account to Holders of the Certificates
according to the terms of the Pooling and Servicing Agreement. All distributions
or allocations made with respect to each Class of Certificates on each
Distribution Date shall be allocated among the outstanding Certificates of such
Class based on the Percentage Interest of each such Certificate.
Distributions on this Certificate will be made by check mailed to the
Holder of record of this Certificate on the immediately preceding Record Date at
the address of such Holder as it appears on the Certificate Register (except
that with respect to a Certificate registered in the name of a Clearing Agency
or its nominee, distributions will be made by wire transfer of immediately
available funds) or by wire transfer in immediately available funds, upon
written request made to the Trustee or as otherwise permitted by the Trustee.
Wire transfers will be made at the expense of the Holder requesting the same by
deducting a wire transfer fee from the related distribution. The final
distribution on this Certificate will be made, after due notice to the Holder of
the pendency of such distribution, only upon presentation and surrender of this
Certificate at the Corporate Trust Office (as defined below).
The Corporate Trust Office with respect to the presentment and
surrender of Certificates for the final distribution thereon and the presentment
and surrender of the Certificates for any other purpose is the corporate trust
office of the Trustee at [ ], Attention: [ ]. The Trustee may designate another
address from time to time by notice to the Holders of the Certificates and the
Depositor.
The Pooling and Servicing Agreement permits the amendment thereof from
time to time by the Depositor, the Servicer and the Trustee [with the consent of
the Certificate Insurer] for the purpose of adding, changing or eliminating any
provisions of the Pooling and Servicing Agreement or modifying the rights of the
Holders of the Certificates thereunder; PROVIDED, HOWEVER, that (i) no such
amendment may be made unless the Trustee receives an opinion of counsel as to
certain tax matters specified in the Pooling and Servicing Agreement and (ii) no
such amendment may (a) reduce the amount or delay the timing of distributions
required to be made on any Certificate without the consent of the Holder of such
Certificate, or (b) reduce the percentage of aggregate outstanding Percentage
Interest of each Class the Holders of which are required to consent to any such
amendment, without [the Certificate Insurer and] the consent of the Holders of
all Certificates then outstanding. Any consent by the Holder of this Certificate
will be conclusive and binding on such Holder and upon all future Holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Pooling and Servicing Agreement also permits the
amendment thereof, in certain limited circumstances, [with the consent of the
Certificate Insurer but] without the consent of the Holders of any of the
Certificates.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, the transfer of this Certificate is
registerable in the Certificate Register upon surrender of this Certificate for
registration of transfer, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Certificate Registrar, duly
executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class of
authorized denominations evidencing the same initial Certificate Principal
Amount (or Percentage Interest) will be issued to the designated transferee or
transferees. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, this Certificate is exchangeable for new
Certificates of the same Class evidencing the same aggregate initial Certificate
Principal Amount (or Percentage Interest) as requested by the Holder
surrendering the same. No service charge will be made for any such registration
of transfer or exchange, but the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The [Class A, Class M1, Class M2 and Class B] Certificates are
issuable only in registered form, in minimum denominations of $[25,000] in
initial Certificate Principal Amount and in integral multiples of $1 in excess
thereof registered in the name of the nominee of the Clearing Agency, which
shall maintain such Certificates through its book-entry facilities. The Class R
Certificate will be issued as a single Certificate and maintained in physical
form. The Class R Certificate shall remain outstanding until the latest final
Distribution Date for the Certificates.
The Certificates are subject to optional prepayment in full in
accordance with the Pooling and Servicing Agreement on any Distribution Date on
which the Total Loan Balance is less than [10]% of the Cut-off Date Loan Balance
thereof for an amount as specified in the Pooling and Servicing Agreement. In no
event will the trust created by the Pooling and Servicing Agreement continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants living at the date of the Pooling and Servicing Agreement of a
certain person named in the Pooling and Servicing Agreement.
The Depositor, the Trustee and the Certificate Registrar 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 Depositor, the Trustee,
nor the Certificate Registrar nor any such agent shall be affected by any notice
to the contrary.
As provided in the Pooling and Servicing Agreement, this Certificate
and the Pooling and Servicing Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to the
conflict of laws principles applied in the State of New York. In the event of
any conflict between the provisions of this Certificate and the Pooling and
Servicing Agreement, the Pooling and Servicing Agreement shall be controlling.
Any term used herein and not otherwise defined shall be as defined in the
Pooling and Servicing Agreement.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s) and assign(s) and
transfer(s) unto
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee
and social security number or employer identification number)
- ------------------------------------------------------------------------------
the within Certificate stating in the names of the undersigned in the
Certificate Register and does hereby irrevocably constitute and appoint
- ------------------------------------------------------------------------------
to transfer such Certificate in such Certificate Register of the Trust.
I [we] further direct the Certificate Registrar to issue a new Certificate of
the same Class of like principal to the above-named assignee and deliver such
Certificate to the following address:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Dated:____________________ __________________________________________
Signature by or on behalf of Assignor
__________________________ __________________________________________
Authorized Officer Signature Guaranteed
__________________________ __________________________________________
Name of Institution NOTICE: The signature(s) of this
assignment must correspond with the name(s)
on the face of this Certificate without
alteration or any change whatsoever. The
signature must be guaranteed by a participant
in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange
Medallion Signature Program or the Stock
Exchanges Medallion Program. Notarized or
witnessed signatures are not acceptable as
guaranteed signatures.
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Certificate Registrar. Distributions shall be made by wire transfer in
immediately available funds to
- ------------------------------------------------------------------------------
for the account of ___________________________________________________________
account number ______________ or, if mailed by check, to _____________________
- ------------------------------------------------------------------------------
Applicable reports and statements should be mailed to ________________________
- ------------------------------------------------------------------------------
This information is provided by ___________________________________________
the assignee named above, or ____________________________________ as its agent.
<PAGE>
FORM OF CLASS B CERTIFICATE
THIS CERTIFICATE IS A REMIC REGULAR INTEREST CERTIFICATE. THIS
CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND IS NOT
GUARANTEED BY, THE DEPOSITOR, THE TRUSTEE, OR ANY AFFILIATE OF ANY OF THEM AND
IS NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR PRIVATE INSURER.
DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL AMOUNT OF THIS
CERTIFICATE MAY BE MADE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE
CERTIFICATE PRINCIPAL AMOUNT OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN
THE AMOUNT SHOWN ON THE FACE HEREOF.
THIS CERTIFICATE IS SUBORDINATE IN RIGHT OF PAYMENT AS DESCRIBED IN
THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), 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 IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
NO TRANSFER OF THIS CERTIFICATE SHALL BE REGISTERED UNLESS THE
PROSPECTIVE TRANSFEREE PROVIDES THE TRUSTEE AND THE DEPOSITOR WITH (A) A
CERTIFICATION TO THE EFFECT THAT SUCH TRANSFEREE (1) IS NEITHER AN EMPLOYEE
BENEFIT PLAN SUBJECT TO SECTION 406 OR SECTION 407 OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THE TRUSTEE OF ANY SUCH
PLAN OR A PERSON ACTING ON BEHALF OF ANY SUCH PLAN NOR A PERSON USING THE ASSETS
OF ANY SUCH PLAN OR (2) IF SUCH TRANSFEREE IS AN INSURANCE COMPANY, SUCH
TRANSFEREE IS PURCHASING SUCH CERTIFICATES WITH FUNDS CONTAINED IN AN "INSURANCE
COMPANY GENERAL ACCOUNT" (AS SUCH TERM IS DEFINED IN SECTION V(e) OF THE
PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ("PTCE 95-60")) AND THAT THE
PURCHASE AND HOLDING OF SUCH CERTIFICATES ARE COVERED UNDER PTCE 95-60; OR (B)
AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AND THE DEPOSITOR, AND UPON
WHICH THE TRUSTEE AND THE DEPOSITOR SHALL BE ENTITLED TO RELY, TO THE EFFECT
THAT THE PURCHASE OR HOLDING OF SUCH CERTIFICATE BY THE PROSPECTIVE TRANSFEREE
WILL NOT RESULT IN THE ASSETS OF THE TRUST FUND BEING DEEMED TO BE PLAN ASSETS
AND SUBJECT TO THE PROHIBITED TRANSACTION PROVISIONS OF ERISA OR THE CODE AND
WILL NOT SUBJECT THE TRUSTEE OR THE DEPOSITOR TO ANY OBLIGATION IN ADDITION TO
THOSE UNDERTAKEN BY SUCH ENTITIES IN THE POOLING AND SERVICING AGREEMENT, WHICH
OPINION OF COUNSEL SHALL NOT BE AN EXPENSE OF THE TRUST FUND, THE TRUSTEE OR THE
DEPOSITOR.
FINANCE AMERICA SECURITIES, LLC
MORTGAGE LOAN TRUST [ ]
PASS-THROUGH CERTIFICATE, CLASS B
Evidencing a beneficial interest in a pool consisting
primarily of certain fixed and adjustable rate, fully amortizing and
balloon, conventional, first-lien residential mortgage loans and other
assets in a trust fund established by
FINANCE AMERICA SECURITIES, LLC
Initial Class Initial Certificate
Principal Amount of the Class B Principal Amount of this
Certificates: $[ ] Certificate: $[ ]
Certificate Cut-off Date: [ ]
Interest Rate: Variable
Number [ ] CUSIP: [ ]
ISIN: [ ]
Common Code: [ ]
<PAGE>
THIS CERTIFIES THAT [ ] is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the initial
Certificate Principal Amount of this Certificate by the initial Class Principal
Amount of the Class B Certificates, both as specified above) in (i) certain
distributions of principal and interest on certain fixed and adjustable rate,
fully amortizing and balloon, conventional, first lien residential mortgage
loans (the "Mortgage Loans") acquired from Finance America Securities, LLC (the
"Depositor"), a Delaware limited liability company, (ii) such amounts and
investments as from time to time may be held in the Trust Fund established
pursuant to the Pooling and Servicing Agreement (as defined on the reverse
hereof) and (iii) certain other assets, if any, as described in the Pooling and
Servicing Agreement (the foregoing assets hereinafter collectively referred to
as the "Trust Fund").
Distributions on this Certificate will be made on the [25th] day of
each month or, if such a day is not a Business Day, then on the next succeeding
Business Day, commencing in [ ] (each, a "Distribution Date"), to the Person in
whose name this Certificate is registered at the close of business on the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs (the "Record Date"), in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount, if any,
required to be distributed to all the Certificates of the Class represented by
this Certificate. All sums distributable on this Certificate are payable in the
coin or currency of the United States of America which at the time of payment is
legal tender for the payment of public and private debts.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which shall have the same effect as though
fully set forth on the face of this Certificate.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, whose name appears below by manual signature, this
Certificate shall not be entitled to any benefit under the Pooling and Servicing
Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
[ ],
as Trustee
By: _________________________________
AUTHORIZED SIGNATORY
Dated: ________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Pooling and Servicing Agreement.
[ ],
as Trustee
By: _________________________________
AUTHORIZED SIGNATORY
Dated: ________________________
<PAGE>
FINANCE AMERICA SECURITIES, LLC
MORTGAGE LOAN TRUST [ ]
PASS-THROUGH CERTIFICATE
This Certificate is one of a duly authorized issue of certificates
designated as Finance America Securities, LLC Mortgage Loan Trust [ ]
Pass-Through Certificates (the "Certificates"), representing all or part of a
beneficial ownership interest in a Trust Fund established pursuant to a Pooling
and Servicing Agreement dated as of [ ] (the "Pooling and Servicing Agreement"),
among Finance America Securities, LLC, as Depositor, [ ], as Trustee, and [ ],
as Servicer, to which terms, provisions and conditions thereof the Holder of
this Certificate by virtue of the acceptance hereof assents, and by which such
Holder is bound. The Certificates consist of the following Classes: [the Class A
Certificates (the "Senior Certificates"), the Class M1, Class M2 and Class B
Certificates (the "Subordinate Certificates")] and the Class R Certificate (the
"Residual Certificate").
On each Distribution Date, the Total Distribution Amount for such date
will be distributed from the Certificate Account to Holders of the Certificates
according to the terms of the Pooling and Servicing Agreement. All distributions
or allocations made with respect to each Class of Certificates on each
Distribution Date shall be allocated among the outstanding Certificates of such
Class based on the Percentage Interest of each such Certificate.
Distributions on this Certificate will be made by check mailed to the
Holder of record of this Certificate on the immediately preceding Record Date at
the address of such Holder as it appears on the Certificate Register (except
that with respect to a Certificate registered in the name of a Clearing Agency
or its nominee, distributions will be made by wire transfer of immediately
available funds) or by wire transfer in immediately available funds, upon
written request made to the Trustee or as otherwise permitted by the Trustee.
Wire transfers will be made at the expense of the Holder requesting the same by
deducting a wire transfer fee from the related distribution. The final
distribution on this Certificate will be made, after due notice to the Holder of
the pendency of such distribution, only upon presentation and surrender of this
Certificate at the Corporate Trust Office (as defined below).
The Corporate Trust Office with respect to the presentment and
surrender of Certificates for the final distribution thereon and the presentment
and surrender of the Certificates for any other purpose is the corporate trust
office of the Trustee at [ , Attention: [ ]. The Trustee may designate another
address from time to time by notice to the Holders of the Certificates and the
Depositor.
The Pooling and Servicing Agreement permits the amendment thereof from
time to time by the Depositor, the Servicer and the Trustee [with the consent of
the Certificate Insurer] for the purpose of adding, changing or eliminating any
provisions of the Pooling and Servicing Agreement or modifying the rights of the
Holders of the Certificates thereunder; PROVIDED, HOWEVER, that (i) no such
amendment may be made unless the Trustee receives an opinion of counsel as to
certain tax matters specified in the Pooling and Servicing Agreement and (ii) no
such amendment may (a) reduce the amount or delay the timing of distributions
required to be made on any Certificate without the consent of the Holder of such
Certificate, or (b) reduce the percentage of aggregate outstanding Percentage
Interest of each Class the Holders of which are required to consent to any such
amendment, without [the Certificate Insurer and] the consent of the Holders of
all Certificates then outstanding. Any consent by the Holder of this Certificate
will be conclusive and binding on such Holder and upon all future Holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Pooling and Servicing Agreement also permits the
amendment thereof, in certain limited circumstances, [with the consent of the
Certificate Insurer but] without the consent of the Holders of any of the
Certificates.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, the transfer of this Certificate is
registerable in the Certificate Register upon surrender of this Certificate for
registration of transfer, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Certificate Registrar, duly
executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class of
authorized denominations evidencing the same initial Certificate Principal
Amount (or Percentage Interest) will be issued to the designated transferee or
transferees. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, this Certificate is exchangeable for new
Certificates of the same Class evidencing the same aggregate initial Certificate
Principal Amount (or Percentage Interest) as requested by the Holder
surrendering the same. No service charge will be made for any such registration
of transfer or exchange, but the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The [Class A, Class M1, Class M2 and Class B] Certificates are
issuable only in registered form, in minimum denominations of $[25,000] in
initial Certificate Principal Amount and in integral multiples of $1 in excess
thereof registered in the name of the nominee of the Clearing Agency, which
shall maintain such Certificates through its book-entry facilities. The Class R
Certificate will be issued as a single Certificate and maintained in physical
form. The Class R Certificate shall remain outstanding until the latest final
Distribution Date for the Certificates.
The Certificates are subject to optional prepayment in full in
accordance with the Pooling and Servicing Agreement on any Distribution Date on
which the Total Loan Balance is less than [10]% of the Cut-off Date Loan Balance
thereof for an amount as specified in the Pooling and Servicing Agreement. In no
event will the trust created by the Pooling and Servicing Agreement continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants living at the date of the Pooling and Servicing Agreement of a
certain person named in the Pooling and Servicing Agreement.
The Depositor, the Trustee and the Certificate Registrar 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 Depositor, the Trustee,
nor the Certificate Registrar nor any such agent shall be affected by any notice
to the contrary.
As provided in the Pooling and Servicing Agreement, this Certificate
and the Pooling and Servicing Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to the
conflict of laws principles applied in the State of New York. In the event of
any conflict between the provisions of this Certificate and the Pooling and
Servicing Agreement, the Pooling and Servicing Agreement shall be controlling.
Any term used herein and not otherwise defined shall be as defined in the
Pooling and Servicing Agreement.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s) and assign(s) and
transfer(s) unto
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee
and social security number or employer identification number)
- ------------------------------------------------------------------------------
the within Certificate stating in the names of the undersigned in the
Certificate Register and does hereby irrevocably constitute and appoint
- ------------------------------------------------------------------------------
to transfer such Certificate in such Certificate Register of the Trust.
I [we] further direct the Certificate Registrar to issue a new Certificate of
the same Class of like principal to the above-named assignee and deliver such
Certificate to the following address:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Dated:____________________ __________________________________________
Signature by or on behalf of Assignor
__________________________ __________________________________________
Authorized Officer Signature Guaranteed
__________________________ __________________________________________
Name of Institution NOTICE: The signature(s) of this
assignment must correspond with the name(s)
on the face of this Certificate without
alteration or any change whatsoever. The
signature must be guaranteed by a
participant in the Securities Transfer
Agents Medallion Program, the New York Stock
Exchange Medallion Signature Program or the
Stock Exchanges Medallion Program. Notarized
or witnessed signatures are not acceptable
as guaranteed signatures.
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Certificate Registrar. Distributions shall be made by wire transfer in
immediately available funds to
- ------------------------------------------------------------------------------
for the account of ___________________________________________________________
account number ______________ or, if mailed by check, to _____________________
- ------------------------------------------------------------------------------
Applicable reports and statements should be mailed to ________________________
- -----------------------------------------------------------------------------
This information is provided by _____________________________________________
the assignee named above, or ____________________________________ as its agent.
<PAGE>
EXHIBIT B-2
FORM OF RESIDUAL CERTIFICATE
<PAGE>
THIS CERTIFICATE IS A REMIC RESIDUAL INTEREST CERTIFICATE. THIS
CERTIFICATE DOES NOT EVIDENCE AN OBLIGATION OF, OR AN INTEREST IN, AND IS NOT
GUARANTEED BY, THE DEPOSITOR, THE TRUSTEE, OR ANY AFFILIATE OF ANY OF THEM AND
IS NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR PRIVATE INSURER.
THIS CERTIFICATE IS NOT ENTITLED TO DISTRIBUTIONS OF PRINCIPAL AND
WILL NOT ACCRUE INTEREST. THE HOLDER OF THIS CERTIFICATE WILL BE ENTITLED ONLY
TO CERTAIN LIMITED DISTRIBUTIONS AS PROVIDED IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE IS SUBORDINATE IN RIGHT OF PAYMENT AS DESCRIBED IN
THE POOLING AND SERVICING AGREEMENT.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
CERTIFICATE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION, UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CERTIFICATE BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH CERTIFICATE ONLY (A) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE 1933 ACT, (B)
TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE 1933 ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT
THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE 1933 ACT, (C) TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH
(A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE 1933 ACT THAT IS ACQUIRING THE
CERTIFICATE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE 1933 ACT
OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT, SUBJECT TO THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING IN THE POOLING AND SERVICING AGREEMENT.
NEITHER THIS CERTIFICATE, NOR ANY BENEFICIAL INTEREST IN THIS
CERTIFICATE, MAY BE TRANSFERRED, SOLD, PLEDGED, OR OTHERWISE DISPOSED OF UNLESS
PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE AN
AFFIDAVIT STATING (A) THAT THE PROPOSED TRANSFEREE IS NOT A "DISQUALIFIED
ORGANIZATION" WITHIN THE MEANING OF SECTION 860E(E)(5) OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE") AND IS NOT PURCHASING THE CERTIFICATE ON
BEHALF OF A DISQUALIFIED ORGANIZATION, (B) THAT THE PROPOSED TRANSFEREE (1) IS
NOT AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED ("ERISA"), (2) IS NOT INVESTING THE ASSETS OF ANY SUCH
PLAN, (3) IS NOT A PLAN SUBJECT TO CODE SECTION 4975 OR (4) A PERSON OR ENTITY
THAT IS USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO ACQUIRE
THIS CERTIFICATE, (C) THAT NO PURPOSE OF SUCH TRANSFER IS TO AVOID OR IMPEDE THE
ASSESSMENT OR COLLECTION OF TAX, AND (D) IN THE CASE OF A NON-U.S. PERSON, IS A
NON-U.S. PERSON THAT HOLDS A RESIDUAL CERTIFICATE IN CONNECTION WITH THE CONDUCT
OF A TRADE OR BUSINESS WITHIN THE UNITED STATES AND HAS FURNISHED THE TRANSFEROR
AND THE TRUSTEE WITH AN EFFECTIVE INTERNAL REVENUE SERVICE FORM 4224 OR
SUCCESSOR FORM AT THE TIME AND IN THE MANNER REQUIRED BY THE CODE. IN ADDITION,
THIS CERTIFICATE MAY NOT BE HELD BY A NOMINEE.
FINANCE AMERICA SECURITIES, LLC
MORTGAGE LOAN TRUST [ ]
PASS-THROUGH CERTIFICATE, CLASS R
Evidencing a beneficial interest in a pool consisting
primarily of certain fixed and adjustable rate, fully amortizing and
balloon, conventional, first lien residential mortgage loans and other
assets in a trust fund established by
FINANCE AMERICA SECURITIES, LLC
Percentage Interest: 100% Cut-off Date: [ ]
Number [ ]
<PAGE>
THIS CERTIFIES THAT [ ] is the registered owner of the Percentage
Interest evidenced by this Certificate in (i) certain distributions of amounts
in respect of certain fixed and adjustable rate, fully amortizing and balloon,
conventional, first lien residential mortgage loans (the "Mortgage Loans")
acquired from Finance America Securities, LLC (the "Depositor"), a Delaware
corporation, (ii) such amounts and investments as from time to time may be held
in the Trust Fund established pursuant to the Pooling and Servicing Agreement
(as defined on the reverse hereof) and (iii) certain other assets, if any, as
described in the Pooling and Servicing Agreement (the foregoing assets
hereinafter collectively referred to as the "Trust Fund").
Distributions on this Certificate will be made on the [25th] day of
each month or, if such a day is not a Business Day, then on the next succeeding
Business Day, commencing in [ ] (each, a "Distribution Date"), to the Person in
whose name this Certificate is registered at the close of business on the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs (the "Record Date"), in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount, if any,
required to be distributed to all the Certificates of the Class represented by
this Certificate. All sums distributable on this Certificate are payable in the
coin or currency of the United States of America which at the time of payment is
legal tender for the payment of public and private debts.
Solely for federal income tax purposes, and for no other purpose, the
Class R Certificate shall evidence ownership of the Basis Risk Reserve Fund.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which shall have the same effect as though
fully set forth on the face of this Certificate.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee, whose name appears below by manual signature, this
Certificate shall not be entitled to any benefit under the Pooling and Servicing
Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
[ ],
as Trustee
By: __________________________________
AUTHORIZED SIGNATORY
Dated: ___________________________
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Pooling and Servicing Agreement.
[ ],
as Trustee
By: __________________________________
AUTHORIZED SIGNATORY
Dated: ___________________________
<PAGE>
FINANCE AMERICA SECURITIES, LLC
MORTGAGE LOAN TRUST [ ]
PASS-THROUGH CERTIFICATE
This Certificate is one of a duly authorized issue of certificates
designated as Finance America Securities, LLC Mortgage Loan Trust [ ]
Pass-Through Certificates (the "Certificates"), representing all or part of a
beneficial ownership interest in a Trust Fund established pursuant to a Pooling
and Servicing Agreement dated as of [ ] (the "Pooling and Servicing Agreement"),
among Finance America Securities, LLC, as Depositor, [ ], as Trustee, and [ ],
as Servicer, to which terms, provisions and conditions thereof the Holder of
this Certificate by virtue of the acceptance hereof assents, and by which such
Holder is bound. The Certificates consist of the following Classes: [the Class A
Certificates (the "Senior Certificates"), the Class M1, Class M2 and Class B
Certificates (the "Subordinate Certificates")] and the Class R Certificate (the
"Residual Certificate").
On each Distribution Date, the Total Distribution Amount for such date
will be distributed from the Certificate Account to Holders of the Certificates
according to the terms of the Pooling and Servicing Agreement. All distributions
or allocations made with respect to each Class of Certificates on each
Distribution Date shall be allocated among the outstanding Certificates of such
Class based on the Percentage Interest of each such Certificate.
Distributions on this Certificate will be made by check mailed to the
Holder of record of this Certificate on the immediately preceding Record Date at
the address of such Holder as it appears on the Certificate Register (except
that with respect to a Certificate registered in the name of a Clearing Agency
or its nominee, distributions will be made by wire transfer of immediately
available funds) or by wire transfer in immediately available funds, upon
written request made to the Trustee or as otherwise permitted by the Trustee.
Wire transfers will be made at the expense of the Holder requesting the same by
deducting a wire transfer fee from the related distribution. The final
distribution on this Certificate will be made, after due notice to the Holder of
the pendency of such distribution, only upon presentation and surrender of this
Certificate at the Corporate Trust Office (as defined below).
The Corporate Trust Office with respect to the presentment and
surrender of Certificates for the final distribution thereon and the presentment
and surrender of the Certificates for any other purpose is the corporate trust
office of the Trustee at [ , Attention: [ ]. The Trustee may designate another
address from time to time by notice to the Holders of the Certificates and the
Depositor.
The Pooling and Servicing Agreement permits the amendment thereof from
time to time by the Depositor, the Servicer and the Trustee [with the consent of
the Certificate Insurer] for the purpose of adding, changing or eliminating any
provisions of the Pooling and Servicing Agreement or modifying the rights of the
Holders of the Certificates thereunder; PROVIDED, HOWEVER, that (i) no such
amendment may be made unless the Trustee receives an opinion of counsel as to
certain tax matters specified in the Pooling and Servicing Agreement and (ii) no
such amendment may (a) reduce the amount or delay the timing of distributions
required to be made on any Certificate without the consent of [the Certificate
Insurer and] the Holder of such Certificate, or (b) reduce the percentage of
aggregate outstanding Percentage Interest of each Class the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all Certificates then outstanding. Any consent by the Holder of this Certificate
will be conclusive and binding on such Holder and upon all future Holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Pooling and Servicing Agreement also permits the
amendment thereof, in certain limited circumstances, [with the consent of the
Certificate Insurer but] without the consent of the Holders of any of the
Certificates.
As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, the transfer of this Certificate is
registerable in the Certificate Register upon surrender of this Certificate for
registration of transfer, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Certificate Registrar, duly
executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class of
authorized denominations evidencing the same initial Certificate Principal
Amount (or Percentage Interest) will be issued to the designated transferee or
transferees. As provided in the Pooling and Servicing Agreement and subject to
certain limitations therein set forth, this Certificate is exchangeable for new
Certificates of the same Class evidencing the same aggregate initial Certificate
Principal Amount (or Percentage Interest) as requested by the Holder
surrendering the same. No service charge will be made for any such registration
of transfer or exchange, but the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
The [Class A, Class M1, Class M2 and Class B] Certificates are
issuable only in registered form, in minimum denominations of [$25,000] in
initial Certificate Principal Amount and in integral multiples of $1 in excess
thereof registered in the name of the nominee of the Clearing Agency, which
shall maintain such Certificates through its book-entry facilities. The Class R
Certificate will be issued as a single Certificate and maintained in physical
form. The Class R Certificate shall remain outstanding until the latest final
Distribution Date for the Certificates.
The Certificates are subject to optional prepayment in full in
accordance with the Pooling and Servicing Agreement on any Distribution Date on
which the Total Loan Balance is less than [10%] of the Cut-off Date Loan Balance
thereof for an amount as specified in the Pooling and Servicing Agreement. In no
event will the trust created by the Pooling and Servicing Agreement continue
beyond the expiration of 21 years from the death of the last survivor of the
descendants living at the date of the Pooling and Servicing Agreement of a
certain person named in the Pooling and Servicing Agreement.
The Depositor, the Trustee and the Certificate Registrar 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 Depositor, the Trustee,
nor the Certificate Registrar nor any such agent shall be affected by any notice
to the contrary.
As provided in the Pooling and Servicing Agreement, this Certificate
and the Pooling and Servicing Agreement shall be construed in accordance with
and governed by the laws of the State of New York, without regard to the
conflict of laws principles applied in the State of New York. In the event of
any conflict between the provisions of this Certificate and the Pooling and
Servicing Agreement, the Pooling and Servicing Agreement shall be controlling.
Any term used herein and not otherwise defined shall be as defined in the
Pooling and Servicing Agreement.
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s) and assign(s) and
transfer(s) unto
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee
and social security number or employer identification number)
- ------------------------------------------------------------------------------
the within Certificate stating in the names of the undersigned in the
Certificate Register and does hereby irrevocably constitute and appoint
- ------------------------------------------------------------------------------
to transfer such Certificate in such Certificate Register of the Trust.
I [we] further direct the Certificate Registrar to issue a new Certificate of
the same Class of like principal to the above-named assignee and deliver such
Certificate to the following address:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Dated:____________________ __________________________________________
Signature by or on behalf of Assignor
_________________________ __________________________________________
Authorized Officer Signature Guaranteed
_________________________ __________________________________________
Name of Institution NOTICE: The signature(s) of this
assignment must correspond with the name(s)
on the face of this Certificate without
alteration or any change whatsoever. The
signature must be guaranteed by a
participant in the Securities Transfer
Agents Medallion Program, the New York Stock
Exchange Medallion Signature Program or the
Stock Exchanges Medallion Program. Notarized
or witnessed signatures are not acceptable
as guaranteed signatures.
<PAGE>
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Certificate Registrar. Distributions shall be made by wire transfer in
immediately available funds to
- ------------------------------------------------------------------------------
for the account of ___________________________________________________________
account number ______________ or, if mailed by check, to _____________________
- ------------------------------------------------------------------------------
Applicable reports and statements should be mailed to ________________________
- ------------------------------------------------------------------------------
This information is provided by ______________________________________________
the assignee named above, or ____________________________________ as its agent.
<PAGE>
EXHIBIT C
MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall include
each of the following items (copies to the extent the originals have been
delivered to the Trustee or the Custodian on behalf of the Trustee pursuant to
Section 2.03 of the Agreement), all of which shall be available for inspection
by the Certificateholders [and the Certificate Insurer], to the extent required
by applicable laws:
(i) The original Mortgage Note bearing all intervening
endorsements showing a complete chain of endorsements from the
originator of such Mortgage Loan to the Originator, endorsed by the
Originator without recourse in the following form: "Pay to the order
of __________________, without recourse" and signed manually or by
facsimile in the name of the Originator by an authorized officer;
(ii) The original Mortgage with evidence of recording indicated
thereon;
(iii) An original assignment of the Mortgage, in form acceptable
for recordation in the jurisdiction in which the related Mortgaged
Property is located (except for the assignee's name and recordation
information not yet received), such assignment to be in blank and
signed in the name of the Originator by an authorized officer;
(iv) The originals of all intervening assignments of the Mortgage
(with evidence of recording thereon) showing a complete chain of
assignments from the originator of such Mortgage Loan to the
Originator;
(v) Any assumption, modification, consolidation or extension
agreements (with evidence of recording thereon);
(vi) The original policy of title insurance (or the original
commitment for title insurance, if the policy is being held by the
title insurance company pending recordation of the Mortgage); and
(vii) The certificate of primary mortgage guaranty insurance, if
any, issued with respect to such Mortgage Loan.
<PAGE>
EXHIBIT D
MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT E
ACKNOWLEDGMENT OF RECEIPT
___________, 1999
Finance America Securities, LLC
[address]
[Servicer]
[address]
[Certificate Insurer]
[address]
Re: Pooling and Servicing Agreement, dated as of ______________ among
Finance America Securities, LLC, as Depositor, _________________,
as Servicer, and _______________________, as Trustee,
Certificates, Series ___________
Ladies and Gentlemen:
In accordance with Section 2.04 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as [Custodian], hereby certifies: except
as noted on the attachment hereto, if any (the "Loan Exception Report"), it has
received the original Mortgage Note (item (i) in Section 2.03(a)) with respect
to each Mortgage Loan listed in the Mortgage Loan Schedule and , subject to the
review provided in Section 2.04 of the Pooling and Servicing Agreement, the
other documents in the Mortgage File, and the documents contained therein appear
to bear original or facsimile signatures or copies of originals if the originals
have not yet been delivered.
The [Custodian] has made no independent examination of any such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement. The [Custodian] makes no representations as to:
(i) the validity, legality, sufficiency, enforceability or genuineness of any
such documents or 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.
______________________
as [Custodian]
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT F
INITIAL CERTIFICATION
__________________, 1999
Finance America Securities, LLC
[address]
[Servicer]
[address]
[Certificate Insurer]
[address]
Re: Pooling and Servicing Agreement, dated as of ______________
among Finance America Securities, LLC, as Depositor,
_____________________, as Servicer, and _____________________,
as Trustee, Certificates, Series ___________
Ladies and Gentlemen:
In accordance with the provisions of Section 2.04 of the above-
referenced Pooling and Servicing Agreement, the undersigned, as [Custodian],
hereby certifies that, except as noted on the attached exception report, as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or any Mortgage Loan listed on the attachment hereto), it has
reviewed the documents delivered to it pursuant to Section 2.03 of the Pooling
and Servicing Agreement and has determined that (i) all documents required to be
delivered to it pursuant to the above-referenced Pooling and Servicing Agreement
are in its possession, (ii) such documents have been reviewed by it and appear
regular on their face and have not been mutilated, damaged, torn or otherwise
physically altered and relate to such Mortgage Loan, (iii) based on its
examination and only as to the foregoing documents, the information set forth in
the Mortgage Loan Schedule (described in items (i), (ii), (v), (vi), (x), (xi)
and (xiii) of the definition of Mortgage Loan Schedule) respecting such Mortgage
Loan accurately reflects the information set forth in the Mortgage File with
respect to the Servicer's loan number, maturity date, original principal
balance, first payment date and original term to maturity and (iv) each Mortgage
Note has been endorsed as provided in Section 2.03 of the Pooling and Servicing
Agreement. The [Custodian] has made no independent examination of such documents
beyond the review specifically required in the above-referenced Pooling and
Servicing Agreement. The [Custodian] makes no representations as to: (i) the
validity, legality, enforceability or genuineness of any such documents
contained in each or any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (ii) the collectability, insurability, effectiveness or suitability
of any such Mortgage Loan.
<PAGE>
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
____________________________________
as [Custodian]
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT G
FINAL CERTIFICATION
_____________, 19__
Finance America Securities, LLC
[address]
[Servicer]
[address]
[Certificate Insurer]
[address]
Re: Pooling and Servicing Agreement, dated as of ______________
among Finance America Securities, LLC, as Depositor,
_____________________, as Servicer, and _______________________,
as Trustee, Certificates, Series ___________
Ladies and Gentlemen:
In accordance with Section 2.04 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as [Custodian], hereby certifies that,
except as noted on the attachment hereto, as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on
the attachment hereto) it has reviewed the documents delivered to it pursuant to
Section 2.03 of the Pooling and Servicing Agreement and has determined that (i)
all documents required to be delivered to it pursuant to the above-referenced
Pooling and Servicing Agreement are in its possession, (ii) such documents have
been reviewed by it and appear regular on their face and have not been
mutilated, damaged, torn or otherwise physically altered and relate to such
Mortgage Loan, and (iii) based on its examination, and only as to the foregoing
documents, the information set forth in the Mortgage Loan Schedule (described in
items (i), (ii), (v), (vi), (x), (xi) and (xiii) of the definition of Mortgage
Loan Schedule) respecting such Mortgage Loan accurately reflects the information
set forth in the Mortgage File with respect to the Servicer's loan number,
maturity date, original principal balance, first payment date and original term
to maturity. The [Custodian] has made no independent examination of such
documents beyond the review specifically required in the above-referenced
Pooling and Servicing Agreement. The [Custodian] makes no representations as to:
(i) the validity, legality, enforceability or genuineness of any such documents
contained in each or any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (ii) the collectability, insurability, effectiveness or suitability
of any such Mortgage Loan.
<PAGE>
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.
____________________________________
as [Custodian]
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT H
REQUEST FOR RELEASE OF DOCUMENTS
_____________, 19__
To: [Custodian]
Re: Finance America Securities, LLC, Certificates, Series ___________
In connection with the administration of the pool of Mortgage Loans
held by you as [Custodian], we request the release, and acknowledge receipt, of
the (Mortgage File/[specify document]) for the Mortgage Loan described below,
for the reason indicated.
MORTGAGOR'S NAME, ADDRESS & ZIP CODE:
MORTGAGE LOAN NUMBER:
REASON FOR REQUESTING DOCUMENTS (check one)
_____ 1. Mortgage Loan Paid in Full (Servicer hereby certifies that all amounts
received in connection therewith have been credited to the Collection Account.)
_____ 2. Mortgage Loan Liquidated (Servicer hereby certifies that all proceeds
of foreclosure, insurance or other liquidation have been finally received and
credited to the Collection Account.)
_____ 3. Mortgage Loan in foreclosure _____
_____ 4. Mortgage Loan purchased pursuant to Section 5.18, 5.30 or 8.01 of the
Pooling and Servicing Agreement, and the Servicer hereby certifies that the
applicable Loan Purchase Price or Termination Price has been credited to the
Collection Account.
_____ 5. Mortgage Loan purchased or substituted pursuant to Article II or III of
the Pooling and Servicing Agreement (Servicer hereby certifies that the
repurchase price or Substitution Adjustment has been credited to the Collection
Account and that the substituted mortgage loan is a Qualified Substitute
Mortgage Loan.)
_____ 6. Other (explain)
If box 1, 2, 4 or 5 above is checked, and if all or part of the
Mortgage File was previously released to us, please release to us our previous
receipt on file with you, as well as any additional documents in your possession
relating to the above specified Mortgage Loan.
<PAGE>
If item 3 or 6 above is checked, upon our return of all of the above
documents to you as Trustee, please acknowledge your receipt by signing in the
space indicated below, and returning this form.
By: _____________________________________
Name:
Title:
Documents returned to [Custodian]:
Trustee
By: ________________________________
Date:
<PAGE>
EXHIBIT I
FORM OF TRANSFER AFFIDAVIT AND AGREEMENT
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 Purchaser] (record or
beneficial owner of the [Asset Backed] Certificates, Series 199__-__, Class R
(the "Purchaser")), 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 and agreement.
2. That the Purchaser (i) is not and will not be a "disqualified
organization" as of [date of transfer] within the meaning of Section 860E(e)(5)
of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) will
endeavor to remain other than a disqualified organization for so long as it
retains its ownership interest in the Class R Certificates, and (iii) is
acquiring the Class R Certificates for its own account or for the account of
another Purchaser from which it has received an affidavit and agreement in
substantially the same form as this affidavit and agreement. (For this purpose,
a "disqualified organization" means the United States, any state or political
subdivision thereof, any agency or instrumentality of any of the foregoing
(other than an instrumentality all of the activities of which are subject to tax
and, except for the Federal Home Loan Mortgage Corporation, a majority of whose
board of directors is not selected by any such governmental entity) or any
foreign government, international organization or any agency or instrumentality
of such foreign government or organization, any rural electric or telephone
cooperative, or any organization (other than certain farmers' cooperatives) that
is generally exempt from federal income tax unless such organization is subject
to the tax on unrelated business taxable income).
3. That the Purchaser is aware (i) of the tax that would be imposed on
transfers of Class R Certificates to disqualified organizations under the Code,
that applies to all transfers of Class R Certificates after March 31, 1988; (ii)
that such tax would be on the transferor, or, if such transfer is through an
agent (which person includes a broker, nominee or middleman) for a disqualified
organization, on the agent; (iii) that the person otherwise liable for the tax
shall be relieved of liability for the tax if the transferee furnishes to such
person an affidavit that the transferee is not a disqualified organization and,
at the time of transfer, such person does not have actual knowledge that the
affidavit is false; and (iv) that the Class [R] Certificates may be "noneconomic
residual interests" within the meaning of Treasury regulations promulgated
pursuant to the Code and that the transferor of a noneconomic residual interest
will remain liable for any taxes due with respect to the income on such residual
interest, unless no significant purpose of the transfer was to impede the
assessment or collection of tax.
4. That the Purchaser is aware that the Trustee will not register the
transfer of any Class R Certificates unless the transferee, or the transferee's
agent, delivers to it an affidavit and agreement, among other things, in
substantially the same form as this affidavit and agreement. The Purchaser
expressly agrees that it will not consummate any such transfer if it knows or
believes that any of the representations contained in such affidavit and
agreement are false.
5. That the Purchaser has reviewed the restrictions set forth on the
face of the Class R Certificates and the provisions of Section 4.02(i) of the
Pooling and Servicing Agreement under which the Class R Certificates were issued
(in particular, clause (g) and (h) of Section 4.02(i) which authorize the
Trustee to deliver payments to a person other than the Purchaser in the event
the Purchaser holds such Certificates in violation of Section 4.02(i)). The
Purchaser expressly agrees to be bound by and to comply with such restrictions
and provisions.
6. That the Purchaser consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Purchaser that is not a disqualified
organization.
7. The Purchaser's Taxpayer Identification Number is ___________.
8. This affidavit and agreement relates only to the Class R
Certificates held by the Purchaser and not to any other holder of the Class R
Certificates. The Purchaser understands that the liabilities described herein
relate only to the Class R Certificates.
9. That no purpose of the Purchaser relating to the transfer of any of
the Class R Certificates by the Purchaser is or will be to impede the assessment
or collection of any tax.
10. That the Purchaser has no present knowledge or expectation that it
will be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding. In this regard, the Purchaser hereby represents
to and for the benefit of the person from whom it acquired the Class R
Certificate that the Purchaser intends to pay taxes associated with holding such
Class R Certificate as they become due, fully understanding that it may incur
tax liabilities in excess of any cash flows generated by the Class R
Certificate.
11. That the Purchaser has no present knowledge or expectation that it
will become insolvent or subject to a bankruptcy proceeding for so long as any
of the Class R Certificates remain outstanding.
12. The Purchaser is (i) a citizen or resident of the United States;
(ii) a corporation (or entity treated as a corporation for tax purposes) created
or organized in the United States or under the laws of the United States or of
any state thereof, including, for this purpose, the District of Columbia; (iii)
a partnership (or entity treated as a partnership for tax purposes) organized in
the United States or under the laws of the United States or of any state
thereof, including, for this purpose, the District of Columbia (unless provided
otherwise by future Treasury regulations); (iv) an estate whose income is
includible in gross income for United States income tax purposes regardless of
its source; or (v) a trust, if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more persons described in this Paragraph 12 have authority to control all
substantial decisions of the trust.
13. The Purchaser is not an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), nor
a Person acting directly on behalf of any such plan.
<PAGE>
IN WITNESS WHEREOF, the Purchaser has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this ____ day of _______________, 199__.
[NAME OF PURCHASER]
By: __________________________
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
[Assistant] Secretary
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 Purchaser, and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of the
Purchaser.
Subscribed and sworn before me this ____ day of ________________, 199__.
NOTARY PUBLIC
COUNTY OF STATE OF ______________
My Commission expires the ____ day of _______________, 19__.
<PAGE>
EXHIBIT J
FORM OF TRANSFEROR CERTIFICATE
__________________, 19__
Finance America Securities, LLC
[Address]
[Trustee]
Re: Finance America Securities, LLC Certificates, Series [ ]
Ladies and Gentlemen:
This letter is delivered to you in connection with the transfer by
_______________________________ (the "Seller") to ________________________ (the
"Purchaser") of a ____% Percentage Interests of Asset Backed Certificates,
Series 199__-__, Class R Certificates (the "Certificates"), pursuant to Section
4.02 of the Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), dated as of __________, 199__, among Finance America Securities,
LLC, as seller (the "Depositor"), ______________________, as Servicer, and
______________________, as trustee (the "Trustee"). All terms used herein and
not otherwise defined shall have the meanings set forth in the Pooling and
Servicing Agreement. The Seller hereby certifies, represents and warrants to,
and covenants with, the Depositor and the Trustee that:
1. No purpose of the Seller relating to the transfer of the
Certificates by the Seller to the Purchaser is or will be to impede the
assessment or collection of any tax.
2. The Seller understands that the Purchaser has delivered to the
Trustee and the Servicer a transfer affidavit and agreement in the form attached
to the Pooling and Servicing Agreement as Exhibit I. The Seller does not know or
believe that any representation contained therein is false.
3. The Seller has at the time of the transfer conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Seller has determined that the Purchaser has historically
paid its debts as they become due and has found no significant evidence to
indicate that the Purchaser will not continue to pay its debts as they become
due in the future. The Seller understands that the transfer of a Class R
Certificate may not be respected for United States income tax purposes (and the
Seller may continue to be liable for United States income taxes associated
therewith) unless the Seller has conducted such an investigation.
4. The Seller has no actual knowledge that the proposed Purchaser is
not both a United States Person and a Permitted Transferee.
Very truly yours,
(Seller)
By: __________________________
Name:
Title:
<PAGE>
EXHIBIT K
FORM OF ERISA TRANSFER AFFIDAVIT
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is the ______________________ of (the "Investor"),
a [corporation duly organized] and existing under the laws of __________, on
behalf of which he makes this affidavit.
2. The Investor either (x) is not an employee benefit plan subject to
Section 406 or Section 407 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"), the Trustee of any such plan or a person acting
on behalf of any such plan nor a person using the assets of any such plan or (2)
if the Investor is an insurance company, such Investor is purchasing such
Certificates with funds contained in an "Insurance Company General Account" (as
such term is defined in Section v(e) of the Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates are covered under PTCE 95-60; or (y) shall deliver to the Trustee
and the Depositor an opinion of counsel (a "Benefit Plan Opinion") satisfactory
to the Trustee and the Depositor, and upon which the Trustee and the Depositor
shall be entitled to rely, to the effect that the purchase or holding of such
Certificate by the Investor will not result in the assets of the Trust Fund
being deemed to be plan assets and subject to the prohibited transaction
provisions of ERISA or the Code and will not subject the Trustee, the Servicer
or the Depositor to any obligation in addition to those undertaken by such
entities in the Trust Agreement, which opinion of counsel shall not be an
expense of the Trustee, the Servicer or the Depositor.
3. The Investor hereby acknowledges that under the terms of the
Pooling and Servicing Agreement (the "Agreement") among Finance America
Securities, LLC, as Depositor, and [ ], as Trustee, dated as of [ ], no transfer
of the ERISA-Restricted Certificates shall be permitted to be made to any person
unless the Trustee has received a certificate from such transferee in the form
hereof.
<PAGE>
IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to proper authority, by its duly authorized
officer, duly attested, this ____ day of _______________, 199 .
__________________________________
[Investor]
By:______________________________
Name:
Title:
ATTEST:
__________________________
STATE OF )
) ss:
COUNTY OF )
Personally appeared before me the above-named ________________,
known or proved to me to be the same person who executed the foregoing
instrument and to be the ____________________ of the Investor, and
acknowledged 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 _________ 199_.
__________________________
NOTARY PUBLIC
My commission expires the
_____ day of __________, 19__.
<PAGE>
EXHIBIT L
FORM OF LIQUIDATION REPORT
Customer Name:
Account Number:
Original Loan Balance:
1. Type of Liquidation (REO disposition/charge-off/short pay-off)
Date last paid
Date of Foreclosure
Date of REO
Date of REO Disposition
Property Sale Price/Estimated Market Value at Disposition
2. Liquidation Proceeds
Any Principal Prepayment $____________
Proceeds from the Sale of the Property ____________
Net Insurance Proceeds ____________
Other (itemize) ____________
Total Proceeds $____________
3. Liquidation Expenses
Servicing Advances $____________
Periodic Advances ____________
Servicing Fees ____________
Total Advances $____________
4. Net Liquidation Proceeds $____________
(Item 2 MINUS Item 3)
5. Principal Balance of Mortgage Loan $____________
6. Loss, if any (Item 5 MINUS Item 4) $____________
<PAGE>
EXHIBIT M
CERTIFICATE RE: PREPAID LOANS
I, ______________, ________________ of Finance America Securities,
LLC, as Depositor, hereby certify that between the "Cut-Off Date" (as defined in
the Pooling and Servicing Agreement dated as of ___________, 199__ among Finance
America Securities, LLC, as depositor, ___________________________, as servicer
and __________________________, as trustee) and the "Startup Day" the following
schedule of "Mortgage Loans" (each as defined in the Pooling and Servicing
Agreement) have been prepaid in full.
Dated:
By:
<PAGE>
EXHIBIT N
SUBSEQUENT TRANSFER INSTRUMENT
[RESERVED]
<PAGE>
EXHIBIT O
FORM OF INVESTOR REPRESENTATION LETTER
____________, 1996
[Trustee]
Re: Finance America Securities, LLC Certificates, Series [ ]
Ladies and Gentlemen:
_______________________(the "Purchaser") intends to purchase from
____________________ (the "Seller"), a ____% Percentage Interest of
Certificates, Series 199__-__, Class _____ (the "Certificates"), issued pursuant
to the Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"),
dated as of ____________, 199__ among Finance America Securities, LLC, as
depositor (the "Depositor"), ______________________________, as servicer, and
_________________________, as trustee (the "Trustee"). All terms used herein and
not otherwise defined shall have the meanings set forth in the Pooling and
Servicing Agreement. The Purchaser hereby certifies, represents and warrants to,
and covenants with, the Depositor and the Trustee that:
1. The Purchaser understands that (a) the Certificates have not been
and will not be registered or qualified under the Securities Act of 1933, as
amended (the "Act") or any state securities law, (b) the Depositor is not
required to so register or qualify the Certificates, (c) the Certificates may be
resold only if registered and qualified pursuant to the provisions of the Act or
any state securities law, or if an exemption from such registration and
qualification is available, (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates and (e) the Certificates
will bear a legend to the foregoing effect.
2. The Purchaser is acquiring the Certificates for its own account for
investment only and not with a view to or for sale in connection with any
distribution thereof in any manner that would violate the Act or any applicable
state securities laws.
3. The Purchaser is (a) a substantial, sophisticated institutional
investor having such knowledge and experience in financial and business matters,
and, in particular, in such matters related to securities similar to the
Certificates, such that it is capable of evaluating the merits and risks of
investment in the Certificates, (b) able to bear the economic risks of such an
investment and (c) an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) promulgated pursuant to the Act.
4. The Purchaser has been furnished with, and has had an opportunity
to review a copy of the Pooling and Servicing Agreement and such other
information concerning the Certificates, the Mortgage Loans and the Depositor as
has been requested by the Purchaser from the Depositor or the Seller and is
relevant to the Purchaser's decision to purchase the Certificates. The Purchaser
has had any questions arising from such review answered by the Depositor or the
Seller to the satisfaction of the Purchaser. If the Purchaser did not purchase
the Certificates from the Seller in connection with the initial distribution of
the Certificates and was provided with a copy of the Private Placement
Memorandum (the "Memorandum") relating to the original sale (the "Original
Sale") of the Certificates by the Depositor, the Purchaser acknowledges that
such Memorandum was provided to it by the Seller, that the Memorandum was
prepared by the Depositor solely for use in connection with the Original Sale
and the Depositor did not participate in or facilitate in any way the purchase
of the Certificates by the Purchaser from the Seller, and the Purchaser agrees
that it will look solely to the Seller and not to the Depositor with respect to
any damage, liability, claim or expense arising out of, resulting from or in
connection with (a) error or omission, or alleged error or omission, contained
in the Memorandum, or (b) any information, development or event arising after
the date of the Memorandum.
5. The Purchaser has not and will not nor has it authorized or will it
authorize any person to (a) offer, pledge, sell, dispose of or otherwise
transfer any Certificate, any interest in any Certificate or any other similar
security to any person in any manner, (b) solicit any offer to buy or to accept
a pledge, disposition of other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any Certificate, any interest in
any Certificate or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or in any other
manner or (e) take any other action, that (as to any of (a) through (e) above)
would constitute a distribution of any Certificate under the Act, that would
render the disposition of any Certificate a violation of Section 5 of the Act or
any state securities law, or that would require registration or qualification
pursuant thereto. The Purchaser will not sell or otherwise transfer any of the
Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement.
6. The Purchaser either (x) is not an employee benefit plan subject to
Section 406 or Section 407 of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"), the Trustee of any such plan or a person acting
on behalf of any such plan nor a person using the assets of any such plan or (2)
if the Purchaser is an insurance company, such Purchaser is purchasing such
Certificates with funds contained in an "Insurance Company General Account" (as
such term is defined in Section v(e) of the Prohibited Transaction Class
Exemption 95-60 ("PTCE 95-60")) and that the purchase and holding of such
Certificates are covered under PTCE 95-60; or (y) shall deliver to the Trustee
and the Depositor an opinion of counsel (a "Benefit Plan Opinion") satisfactory
to the Trustee and the Depositor, and upon which the Trustee and the Depositor
shall be entitled to rely, to the effect that the purchase or holding of such
Certificate by the Purchaser will not result in the assets of the Trust Fund
being deemed to be plan assets and subject to the prohibited transaction
provisions of ERISA or the Code and will not subject the Trustee, the Servicer
or the Depositor to any obligation in addition to those undertaken by such
entities in the Pooling and Servicing Agreement, which opinion of counsel shall
not be an expense of the Trustee, the Servicer or the Depositor.
Very truly yours,
By: __________________________
Name:
Title:
<PAGE>
EXHIBIT P
FORM OF TRANSFEROR REPRESENTATION LETTER
___________, 199__
[Trustee]
Re: Finance America Securities, LLC, [Asset Backed] Certificates,
Series 199__-__
Ladies and Gentlemen:
In connection with the sale by _____________ (the "Seller") to
__________________ (the "Purchaser") of $___________ Initial Certificate
Principal Balance of Certificates, Series 199__-__, Class ___ (the
"Certificates"), issued pursuant to the Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement"), dated as of __________, 199__ among Finance
America Securities, LLC, as company (the "Depositor"),
_________________________, as servicer, and ______________________________, as
trustee (the "Trustee"). The Seller hereby certifies, represents and warrants
to, and covenants with, the Depositor and the Trustee that:
Neither the Seller nor anyone acting on its behalf has (a) offered,
pledged, sold, disposed of or otherwise transferred any Certificate, any
interest in any Certificate or any other similar security to any person in any
manner, (b) has solicited any offer to buy or to accept a pledge, disposition or
other transfer of any Certificate, any interest in any Certificate or any other
similar security from any person in any manner, (c) has otherwise approached or
negotiated with respect to any Certificate, any interest in any Certificate or
any other similar security with any person in any manner, (d) has made any
general solicitation by means of general advertising or in any other manner, or
(e) has taken any other action, that (as to any of (a) through (e) above) would
constitute a distribution of the Certificates under the Securities Act of 1933
(the "Act"), that would render the disposition of any Certificate a violation of
Section 5 of the Act or any state securities law, or that would require
registration or qualification pursuant thereto. The Seller will not act in any
manner set forth in the foregoing sentence with respect to any Certificate. The
Seller has not and will not sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of the Pooling and Servicing Agreement.
Very truly yours,
(Seller)
By: ______________________________
Name:
Title:
<PAGE>
EXHIBIT Q
FORM OF RULE 144A INVESTMENT REPRESENTATION
Description of Rule 144A Securities, including numbers:
Finance America Securities, LLC [Asset Backed] Certificates
Series [ ], Class ___, No. ___
The undersigned seller, as registered holder (the "Transferor"),
intends to transfer the Rule 144A Securities described above to the undersigned
buyer (the "Buyer").
1. In connection with such transfer and in accordance with the
agreements pursuant to which the Rule 144A Securities were issued, the
Transferor hereby certifies the following facts: Neither the Transferor nor
anyone acting on its behalf has offered, transferred, pledged, sold or otherwise
disposed of the Rule 144A Securities, any interest in the Rule 144A Securities
or any other similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Rule 144A Securities, or otherwise
approached or negotiated with respect to the Rule 144A Securities, any interest
in the Rule 144A Securities or any other similar security with, any person in
any manner, or made any general solicitation by means of general advertising or
in any other manner, or taken any other action, which would constitute a
distribution of the Rule 144A Securities under the Securities Act of 1933, as
amended (the "1933 Act"), or which would render the disposition of the Rule 144A
Securities a violation of Section 5 of the 1933 Act or require registration
pursuant thereto, and that the Transferor has not offered the Rule 144A
Securities to any person other than the Buyer or another "qualified
institutional buyer" as defined in Rule 144A under the 1933 Act.
2. The Buyer warrants and represents to, and covenants with, the
Transferor, the Trustee and the Servicer pursuant to Section 5.02 of the Pooling
and Servicing Agreement as follows:
a. The Buyer understands that the Rule 144A Securities have not
been registered under the 1933 Act or the securities laws of any
state.
b. The Buyer considers itself a substantial, sophisticated
institutional investor having such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of investment in the Rule 144A Securities.
c. The Buyer has been furnished with all information regarding
the Rule 144A Securities that it has requested from the Transferor,
the Trustee or the Servicer.
d. Neither the Buyer nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of the Rule 144A
Securities, any interest in the Rule 144A Securities or any other
similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Rule 144A Securities, any
interest in the Rule 144A Securities or any other similar security
from, or otherwise approached or negotiated with respect to the Rule
144A Securities, any interest in the Rule 144A Securities or any other
similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner,
or taken any other action, that would constitute a distribution of the
Rule 144A Securities under the 1933 Act or that would render the
disposition of the Rule 144A Securities a violation of Section 5 of
the 1933 Act or require registration pursuant thereto, nor will it
act, nor has it authorized or will it authorize any person to act, in
such manner with respect to the Rule 144A Securities.
e. The Buyer is a "qualified institutional buyer" as that term is
defined in Rule 144A under the 1933 Act. The Buyer is aware that the
sale to it is being made in reliance on Rule 144A. The Buyer is
acquiring the Rule 144A Securities for its own account or the account
of other qualified institutional buyers, understands that such Rule
144A Securities may be resold, pledged or transferred only (i) to a
person reasonably believed to be a qualified institutional buyer that
purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to
another exemption from registration under the 1933 Act.
3. The Buyer warrants and represents to, and covenants with, the
Transferor, the Servicer and the Depositor that either (1) the Buyer is not an
employee benefit plan within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("Plan"), or a plan
within the meaning of Section 4975(e)(1) of the Internal Revenue Code of 1986
(the "Code") (also a "Plan"), and the Buyer is not directly or indirectly
purchasing the Rule 144A Securities on behalf of, as investment manager of, as
named fiduciary of, as trustee of, or with assets of a Plan, or (2) the Buyer's
purchase of the Rule 144A Securities will not result in a prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code.
4. This document 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 document.
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this document as
of the date set forth below.
Print Name of Transferor Print Name of Buyer
______________________________________ _________________________________
By: _________________________________ By: ____________________________
Name: Name:
Title Title
Taxpayer Identification No: Taxpayer Identification No:
Date: Date:
Exhibit 4.4
Form of Indenture
<PAGE>
Exhibit No. 4.4
INDENTURE
between
FINANCE AMERICA SECURITIES, LLC [ ] TRUST [ ],
as Issuer
and
[ ]
as Indenture Trustee
Dated as of [ ]
FINANCE AMERICA SECURITIES, LLC [ ] TRUST [ ],
Asset Backed Notes, Series [ ]
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.....................................................2
Section 1.02. Incorporation by Reference of Trust Indenture Act...............6
Section 1.03. Rules of Construction...........................................7
ARTICLE II
THE NOTES
Section 2.01. Form............................................................7
Section 2.02. Execution, Authentication, Delivery and Dating..................8
Section 2.03. Registration; Registration of Transfer and Exchange.............8
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes......................9
Section 2.05. Persons Deemed Note Owners.....................................10
Section 2.06. Payment of Principal and Interest; Defaulted Interest..........11
Section 2.07. Cancellation...................................................11
Section 2.08. Conditions Precedent to the Authentication of the Notes........12
Section 2.09. Release of Collateral..........................................14
Section 2.10. Book-Entry Notes...............................................14
Section 2.11. Notices to Clearing Agency.....................................15
Section 2.12. Definitive Notes...............................................15
Section 2.13. Tax Treatment..................................................16
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest..............................16
Section 3.02. Maintenance of Office or Agency................................16
Section 3.03. Money for Payments to Be Held in Trust.........................17
Section 3.04. Existence......................................................18
Section 3.05. Protection of Collateral.......................................19
Section 3.06. Annual Opinions as to Collateral...............................19
Section 3.07. Performance of Obligations; Servicing of Mortgage Loans........20
Section 3.08. Negative Covenants.............................................21
Section 3.09. Annual Statement as to Compliance..............................22
Section 3.10. Covenants of the Issuer........................................22
Section 3.11. Servicer's Obligations.........................................22
Section 3.12. Restricted Payments............................................22
Section 3.13. Issuer May Consolidate, etc....................................23
Section 3.14. Successor or Transferee........................................24
Section 3.15. Treatment of Notes as Debt for Tax Purposes....................25
Section 3.16. Notice of Events of Default....................................25
Section 3.17. Further Instruments and Acts...................................25
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture........................25
Section 4.02. Application of Trust Money.....................................26
Section 4.03. Repayment of Moneys Held by Paying Agent.......................26
ARTICLE V
REMEDIES
Section 5.01. Events of Default..............................................27
Section 5.02. Acceleration of Maturity; Rescission and Annulment.............28
Section 5.03. Collection of Indebtedness and Suits for Enforcement
by Indenture Trustee ........................................29
Section 5.04. Remedies; Priorities...........................................31
Section 5.05. Optional Preservation of the Collateral........................32
Section 5.06. Limitation of Suits............................................33
Section 5.07. Unconditional Rights of Noteholders to Receive
Principal and Interest ......................................33
Section 5.08. Restoration of Rights and Remedies.............................34
Section 5.09. Rights and Remedies Cumulative.................................34
Section 5.10. Delay or Omission Not a Waiver.................................34
Section 5.11. Control by Noteholders.........................................34
Section 5.12. Waiver of Past Defaults........................................35
Section 5.13. Undertaking for Costs..........................................35
Section 5.14. Waiver of Stay or Extension Laws...............................35
Section 5.15. Action on Notes................................................36
Section 5.16. Performance and Enforcement of Certain Obligations.............36
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee....................................36
Section 6.02. Rights of Indenture Trustee....................................38
Section 6.03. Individual Rights of Indenture Trustee.........................38
Section 6.04. Indenture Trustee's Disclaimer.................................39
Section 6.05. Notices of Default.............................................39
Section 6.06. Reports by Indenture Trustee to Holders........................39
Section 6.07. Compensation and Indemnity.....................................39
Section 6.08. Replacement of Indenture Trustee...............................40
Section 6.09. Successor Indenture Trustee by Merger..........................41
Section 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee ...........................................41
Section 6.11. Eligibility; Disqualification..................................42
Section 6.12. Preferential Collection of Claims Against Issuer...............42
Section 6.13. Appointment of Agent...........................................42
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS'
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses
of Noteholders ..............................................43
Section 7.02. Preservation of Information; Communications to Noteholders.....43
Section 7.03. Reports by Issuer..............................................43
Section 7.04. Reports by Indenture Trustee...................................44
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money............................................44
Section 8.02. Trust Accounts; Distributions..................................45
Section 8.03. General Provisions Regarding Accounts..........................45
Section 8.04. Servicer's Monthly Statements..................................46
Section 8.05. Release of Collateral..........................................46
Section 8.06. Opinion of Counsel.............................................46
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.........47
Section 9.02. Supplemental Indentures with Consent of Noteholders............48
Section 9.03. Execution of Supplemental Indentures...........................49
Section 9.04. Effect of Supplemental Indentures..............................49
Section 9.05. Conformity with Trust Indenture Act............................50
Section 9.06. Reference in Notes to Supplemental Indentures..................50
Section 9.07. Amendments to Trust Agreement..................................50
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption....................................................50
Section 10.02. Form of Redemption Notice.....................................51
Section 10.03. Notes Payable on Redemption Date; Provision for
Payment of Indenture Trustee and Note Insurer................51
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc.....................51
Section 11.02. Form of Documents Delivered to Indenture Trustee..............53
Section 11.03. Acts of Noteholders...........................................54
Section 11.04. Notices, etc., to Indenture Trustee, Issuer, Rating
Agencies and Note Insurer ..................................54
Section 11.05. Notices to Noteholders; Waiver................................55
Section 11.06. Conflict with Trust Indenture Act.............................55
Section 11.07. Effect of Headings and Table of Contents......................55
Section 11.08. Successors and Assigns........................................55
Section 11.09. Separability..................................................56
Section 11.10. Benefits of Indenture.........................................56
Section 11.11. Legal Holidays................................................56
Section 11.12. GOVERNING LAW.................................................56
Section 11.13. Counterparts..................................................56
Section 11.14. Recording of Indenture........................................56
Section 11.15. Trust Obligation..............................................56
Section 11.16. No Petition...................................................57
Section 11.17. Inspection....................................................57
Section 11.18. [Grant of Noteholder Rights to Note Insurer...................57
Section 11.19. [Third Party Beneficiary......................................57
Section 11.20. [Suspension and Termination of Note Insurer's Rights..........58
Exhibits
--------
EXHIBIT A Form of Notes
<PAGE>
This Indenture dated as of [ ], between FINANCE AMERICA
SECURITIES, LLC [ ] TRUST [ ], a [Delaware]
business trust, as Issuer (the "Issuer"), and [ ], as
Indenture Trustee (the "Indenture Trustee"),
W I T N E S S E T H T H A T:
In consideration of the mutual covenants herein contained, the Issuer
and the Indenture Trustee hereby agree as follows for the benefit of each of
them and for the equal and ratable benefit of the holders of the Notes:
GRANTING CLAUSE
Subject to the terms of this Indenture, the Issuer hereby Grants on
the Closing Date to the Indenture Trustee, as Indenture Trustee for the benefit
of the Holders of the Notes [and the Note Insurer], all of the Issuer's right,
title and interest in and to: (i) the Trust Estate (as defined in the Sale and
Servicing Agreement); (ii) the Issuer's rights and benefits but none of its
obligations under the Sale and Servicing Agreement (including the Issuer's right
to cause the Seller to repurchase Mortgage Loans from the Issuer under certain
circumstances described therein); (iii) the Trust Accounts, all amounts and
property in the Trust Accounts from time to time, and the Security Entitlements
to all Financial Assets credited to the Trust Accounts from time to time; and
(iv) the Issuer's rights and benefits but none of its obligations under the
[Custodial Agreement], (v) the Issuer's rights and benefits but none of its
obligations under the Administration Agreement; (vi) the Issuer's rights and
benefits but none of its obligations under the [Mortgage Loan Sale Agreement],
(vii) all other property of the Trust from time to time and (viii) all present
and future claims, demands, causes of action and choses in action in respect of
any or all of the foregoing and all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion thereof, voluntary or involuntary, into
cash or other liquid property, all cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and other
forms of obligations and receivables, instruments and other property which at
any time constitute all or part of or are included in the proceeds of any of the
foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, and to secure compliance with the provisions of this Indenture, all as
provided in this Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the Holders
of the Notes [and the Note Insurer], acknowledges such Grant, accepts the trusts
hereunder and agrees to perform the duties required of it in this Indenture to
the best of its ability to the end that the interests of the Holders of the
Notes [and the Note Insurer] may adequately and effectively be protected. The
Indenture Trustee agrees and acknowledges that the Indenture Trustee's Loan
Files will be held by the Custodian for the benefit of the Indenture Trustee in
[ ]. The Indenture Trustee further agrees and acknowledges that each other item
of Collateral that is physically delivered to the Indenture Trustee will be held
by the Indenture Trustee in [ ].
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. (a) Except as otherwise specified herein or
as the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture.
Act: The meaning specified in Section 11.03(a) hereof.
Administration Agreement: The Administration Agreement dated as of
[ ] between the Issuer and [ ], as administrator.
Administrator: [ ], or any successor thereto.
Authorized Officer: With respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture Trustee [and the Note Insurer] on the
Closing Date (as such list may be modified or supplemented from time to time
thereafter) and, so long as the Administration Agreement is in effect, any
officer of the Administrator who is authorized to act for the Administrator in
matters relating to the Issuer and to be acted upon by the Administrator
pursuant to the Administration Agreement and who is identified on the list of
Authorized Officers delivered by the Administrator to the Indenture Trustee [and
the Note Insurer] on the Closing Date (as such list may be modified or
supplemented from time to time thereafter).
Book-Entry Notes: A beneficial interest in any Class of Notes,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.10 hereof.
Certificate of Trust: The certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
Clearing Agency Participant: A broker, dealer, bank, other financial
institution or other Person for which from time to time a Clearing Agency
effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
Collateral: The meaning specified in the Granting Clause of this
Indenture.
Corporate Trust Office: The principal office of the Indenture Trustee
at which at any particular time its corporate trust business shall be
administered, which office at date of execution of this Agreement is located at
[ ]; Attention: [ ], or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, [the Note Insurer] and
the Issuer, or the principal corporate trust office of any successor Indenture
Trustee at the address designated by such successor Indenture Trustee by notice
to the Noteholders, [the Note Insurer] and the Issuer.
Default: Any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
Definitive Notes: The meaning specified in Section 2.12 hereof.
Depository Institution: Any depository institution or trust company,
including the Indenture Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations that
are rated in the highest rating category by each Rating Agency, or is otherwise
acceptable to each Rating Agency.
Event of Default: The meaning specified in Section 5.01 hereof.
Executive Officer: With respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
Grant: Mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture. A Grant of the Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the granting party or otherwise, and generally to do
and receive anything that the granting party is or may be entitled to do or
receive thereunder or with respect thereto.
Highest Priority Class Notes: The Class [ ] Notes.
Holder or Noteholder: The Person in whose name a Note is registered on
the Note Register.
Independent: When used with respect to any specified Person, that the
Person (a) is in fact independent of the Issuer, any other obligor on the Notes,
the Seller and any Affiliate of any of the foregoing Persons, (b) does not have
any direct financial interest or any material indirect financial interest in the
Issuer, any such other obligor, the Seller or any Affiliate of any of the
foregoing Persons and (c) is not connected with the Issuer, any such other
obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
Independent Certificate: A certificate or opinion to be delivered to
the Indenture Trustee [and the Note Insurer] under the circumstances described
in, and otherwise complying with, the applicable requirements of Section 11.01
hereof, made by an Independent appraiser or other expert appointed by an Issuer
Order and approved by the Indenture Trustee [and the Note Insurer] in the
exercise of reasonable care, and such opinion or certificate shall state that
the signer has read the definition of "Independent" in this Indenture and that
the signer is Independent within the meaning thereof.
Issuer: Finance America Securities, LLC [ ] Trust [ ] until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the Notes.
Issuer Order and Issuer Request: A written order or request signed in
the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee.
Majority Highest Priority Class Noteholders: On any date, Holders of
Highest Priority Class Notes representing more than 50% of the Voting Interests
of the Highest Priority Class Notes then Outstanding.
Maturity Date: [ ].
Non-Priority Class: As of any date of determination, any outstanding
Class of Notes other than the Highest Priority Class Notes.
Note Depository Agreement: The agreement to be entered into among the
Issuer, the Administrator, the Indenture Trustee and The Depository Trust
Company, as the initial Clearing Agency, relating to the Book-Entry Notes.
Note Owner: With respect to a Book-Entry Note, the Person that is the
beneficial owner of such Book-Entry Note, as reflected on the books of the
Clearing Agency or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant, in each case in accordance with the rules of such Clearing Agency),
and with respect to a Definitive Note, the Person that is the beneficial owner
of such Note as reflected in the Note Register.
Note Register and Note Registrar: The respective meanings specified in
Section 2.03 hereof. The initial Note Registrar shall be [ ].
Officer's Certificate: A certificate signed by any Authorized Officer
of the Issuer or the Administrator, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01 hereof,
and delivered to the Indenture Trustee. Unless otherwise specified, any
reference in this Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer or the Administrator.
Opinion of Counsel: One or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be an employee of or
counsel to the Issuer and who shall be satisfactory to the Indenture Trustee
[and the Note Insurer], and which opinion or opinions shall be addressed to the
Indenture Trustee, as Indenture Trustee, [and the Note Insurer] and shall comply
with any applicable requirements of Section 11.01 hereof and shall be in form
and substance satisfactory to the Indenture Trustee [and the Note Insurer].
Outstanding: With respect to any Note and as of the date of
determination, any Note theretofore authenticated and delivered under this
Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has theretofore been deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(PROVIDED, HOWEVER, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture or
provision for such notice satisfactory to the Indenture Trustee has
been made);
(iii) Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a bona fide purchaser; PROVIDED, HOWEVER, that in
determining whether the Holders of the requisite Voting Interests of
the Outstanding Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any Basic
Document, Notes owned by the Issuer, any other obligor upon the Notes,
the Seller or any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be Outstanding, except that, in
determining whether the Indenture Trustee shall be protected in
relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that the Indenture Trustee knows
to be owned in such manner shall be disregarded. Notes owned in such
manner that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Indenture Trustee that the pledgee has the right so to act with
respect to such Notes and that the pledgee is not the Issuer, any
other obligor upon the Notes, the Seller or any Affiliate of any of
the foregoing Persons; and
(iv) Notes for which the related Maturity Date has occurred.
Outstanding Amount: The aggregate principal amount of all Notes, or
Class of Notes, as applicable, Outstanding at the date of determination.
Paying Agent: The Indenture Trustee or any other Person that meets the
eligibility standards for the Indenture Trustee specified in Section 6.11 hereof
and is authorized by the Issuer to make payments to and distributions from the
Note Distribution Account, including payments of principal of or interest on the
Notes on behalf of the Issuer. The initial Paying Agent shall be [ ].
Predecessor Note: With respect to any particular Note, every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purpose of this definition, any Note authenticated
and delivered under Section 2.04 hereof in lieu of a mutilated, lost, destroyed
or stolen Note shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Note.
Proceeding: Any suit in equity, action at law or other judicial or
administrative proceeding.
Rating Agency Condition: With respect to any action to which a Rating
Agency Condition applies, that each Rating Agency shall have been given 10 days'
(or such shorter period as is acceptable to each Rating Agency) prior notice
thereof and that each of the Rating Agencies shall have notified the Depositor,
the Servicer, [the Note Insurer] and the Issuer in writing that such action will
not result in a reduction or withdrawal of the then current rating of the Notes.
Redemption Date: In the case of a redemption of the Notes pursuant to
Section 10.01 hereof, the Distribution Date specified by the Indenture Trustee
pursuant to such Section 10.01.
Registered Holder: The Person in whose name a Note is registered on
the Note Register on the applicable Record Date.
Sale and Servicing Agreement: The Sale and Servicing Agreement dated
as of [ ], among the Issuer, the Depositor, the Servicer, and the Indenture
Trustee.
Trust Indenture Act or TIA: The Trust Indenture Act of 1939 as in
force on the date hereof, unless otherwise specifically provided.
Voting Interests: With respect to any Class of Notes, the percentage
equal to the product of (i) 100% and (ii) a fraction, the numerator of which is
equal to the Class Principal Amount of such Class of Notes and the denominator
of which is equal to the aggregate Class Principal Amount of all Classes of
Notes Outstanding.
(b) Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used but not otherwise defined herein have
the respective meanings set forth in the Sale and Servicing Agreement for all
purposes of this Indenture.
Section 1.02. Incorporation by Reference of Trust Indenture Act.
(a) Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Indenture
Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
(b) All other TIA terms used in this Indenture that are defined in the
TIA, defined by TIA reference to another statute or defined by rule of the
Securities and Exchange Commission have the respective meanings assigned to them
by such definitions.
Section 1.03. Rules of Construction. Unless the context otherwise
requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in effect
in the United States from time to time;
(c) "or" is not exclusive;
(d) "including" means including without limitation;
(e) words in the singular include the plural and words in the plural
include the singular; and
(f) any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented (as provided in such agreements) and includes (in the case of
agreements or instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
ARTICLE II
THE NOTES
Section 2.01. Form. The Notes shall be designated as the "Finance
America Securities, LLC [ ] Trust [ ] [Asset Backed] Notes, Series [ ]." Each
Class of Notes shall be in substantially the form set forth in Exhibit A hereto,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may, consistently herewith, be determined by the officers executing
such Notes, as evidenced by their execution thereof. Any portion of the text of
any Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods, all as determined by the officers
executing such Notes, as evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes are set forth in Exhibit A hereto. The terms of each Class of Notes
are part of the terms of this Indenture.
Section 2.02. Execution, Authentication, Delivery and Dating. The
Notes shall be executed on behalf of the Issuer by an Authorized Officer of the
Owner Trustee or the Administrator. The signature of any such Authorized Officer
on the Notes may be manual or facsimile. Notes bearing the manual or facsimile
signature of individuals who were at any time Authorized Officers of the Owner
Trustee or the Administrator shall bind the Issuer, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Notes or did not hold such offices at the
date of such Notes. Subject to the satisfaction of the conditions set forth in
Section 2.08 hereof, the Indenture Trustee shall, upon Issuer Order,
authenticate and deliver the Notes for original issue in the aggregate principal
amounts with respect to each Class as specified below:
Class Class Principal Amount
----- ----------------------
[ ] $[ ]
The aggregate principal amounts of such Classes of Notes outstanding
at any time may not exceed such respective amounts.
The Notes that are authenticated and delivered by the Indenture
Trustee to or upon the order of the Issuer on the Closing Date shall be dated
the Closing Date. All other Notes that are authenticated after the Closing Date
for any other purpose under the Indenture shall be dated the date of their
authentication. The Notes shall be issuable as registered Notes in the minimum
denomination of [$100,000] and integral multiples of $1 in excess thereof.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee or the Note Registrar by the manual signature
of one of its authorized signatories, and such certificate upon any Note shall
be conclusive evidence, and the only evidence, that such Note has been duly
authenticated and delivered hereunder.
Section 2.03. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. [ ]
initially shall be the "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Indenture Trustee or [ ] is appointed by
the Issuer as Note Registrar, the Issuer will give the Indenture Trustee [and
the Note Insurer] prompt written notice of the appointment of such Note
Registrar and of the location, and any change in the location, of the Note
Register, and the Indenture Trustee [and the Note Insurer] shall have the right
to inspect the Note Register at all reasonable times and to obtain copies
thereof, and the Indenture Trustee [and the Note Insurer] shall have the right
to rely upon a certificate executed on behalf of the Note Registrar by an
Executive Officer thereof as to the names and addresses of the Holders of the
Notes and the principal amounts (or notional amounts) and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Issuer to be maintained as provided in Section 3.02 hereof, the
Issuer shall execute, and the Indenture Trustee or the Certificate Registrar
shall authenticate and the Noteholder shall be entitled to obtain from the
Indenture Trustee or the Certificate Registrar, in the name of the designated
transferee or transferees, one or more new Notes of the same Class in any
authorized denominations, of a like aggregate principal amount (or notional
amount).
At the option of the Holder, Notes may be exchanged for other Notes of
the same Class in any authorized denominations, of a like aggregate principal
amount (or notional amount), upon surrender of the Notes to be exchanged at such
office or agency. Whenever any Notes are so surrendered for exchange, the Issuer
shall execute, and the Indenture Trustee or the Certificate Registrar shall
authenticate and the Noteholder shall be entitled to obtain from the Indenture
Trustee or the Certificate Registrar, the Notes which the Noteholder making the
exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar, which requirements include membership or
participation in the Securities Transfer Agents' Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Exchange Act.
No service charge shall be made to a Holder [or the Note Insurer] for
any registration of transfer or exchange of Notes, but the Issuer may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Notes, other than exchanges pursuant to Sections 2.04 and 9.06 hereof not
involving any transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make, and the Note Registrar need not register,
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to such
Note.
Section 2.04. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee [and the Note
Insurer] such security or indemnity as may reasonably be required by it to hold
the Issuer, [the Note Insurer] and the Indenture Trustee harmless, then, in the
absence of notice to the Issuer, the Note Registrar, [the Note Insurer] or the
Indenture Trustee that such Note has been acquired by a bona fide purchaser, an
Authorized Officer of the Owner Trustee or the Administrator on behalf of the
Issuer shall execute, and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same Class; PROVIDED,
HOWEVER, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer, [the Note Insurer] and the Indenture Trustee shall be
entitled to recover such replacement Note (or such payment) from the Person to
whom it was delivered or any Person taking such replacement Note from such
Person to whom such replacement Note was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer, [the Note Insurer] or the Indenture Trustee
in connection therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer may require the payment by the Holder of such Note, [other than the Note
Insurer], of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other reasonable expenses (including
the fees and expenses of the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.05. Persons Deemed Note Owners. Prior to due presentment for
registration of transfer of any Note, the Issuer, [the Note Insurer], the
Indenture Trustee and any agent of the Issuer, [the Note Insurer] or the
Indenture Trustee may treat the Person in whose name any Note is registered (as
of the day of determination) as the Note Owner for the purpose of receiving
payments of principal of and interest, if any, on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and none of the
Issuer, [the Note Insurer] the Indenture Trustee or any agent of the Issuer or
the Indenture Trustee shall be affected by notice to the contrary.
Section 2.06. Payment of Principal and Interest; Defaulted Interest.
(a) Each Class of Notes shall accrue interest at the related Interest Rate, and
such interest shall be payable on each Distribution Date as specified in Exhibit
A hereto, subject to Section 3.01 hereof. With respect to each outstanding Class
of LIBOR Securities, if any, the Indenture Trustee shall determine LIBOR for
each applicable Accrual Period on the second London Business Day prior thereto.
All interest payments on each Class of Notes shall be made PRO RATA to the
Noteholders of such Class entitled thereto. Any installment of interest or
principal, if any, payable on any Note that is punctually paid or duly provided
for by the Issuer on the applicable Distribution Date shall be paid to the
Person in whose name such Note (or one or more Predecessor Notes) is registered
on the Record Date (or, in the case of payment of Deferred Amounts, to the
Person in whose name such Note was most recently registered, if such Note has
previously been surrendered to the Indenture Trustee for final payment) by check
mailed first-class postage prepaid to such Person's address as it appears on the
Note Register on such Record Date, except that, unless Definitive Notes have
been issued pursuant to Section 2.12 hereof, with respect to Notes registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co.), payment will be made by wire transfer in
immediately available funds to the account designated by such nominee and except
for the final installment of principal payable with respect to such Note on a
Distribution Date or on the applicable Maturity Date for such Class of Notes
(and except for the Termination Price for any Note called for redemption
pursuant to Section 10.01) hereof, which shall be payable as provided below. The
funds represented by any such checks returned undelivered shall be held in
accordance with Section 3.03 hereof.
(b) The principal of each Note shall be payable in installments on
each Distribution Date as provided in the forms of the Notes set forth in
Exhibit A hereto. Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes together with the amount of any Deferred Amounts in respect
thereof of a Class of Notes shall be due and payable, if not previously paid, on
the earlier of (i) the applicable Maturity Date, (ii) the Redemption Date or
(iii) the date on which an Event of Default shall have occurred and be
continuing, if the Indenture Trustee or the Majority Highest Priority Class
Noteholders shall have declared the Notes to be immediately due and payable in
the manner provided in Section 5.02 hereof.
All principal payments on each Class of Notes shall be made PRO RATA
to the Noteholders of such Class entitled thereto. The Indenture Trustee shall
notify the Person in whose name a Note is registered at the close of business on
the Record Date preceding the Distribution Date on which the Issuer expects that
the final installment of principal of and interest on such Note will be paid.
Such notice shall be mailed or transmitted by facsimile prior to such final
Distribution Date and shall specify that such final installment will be payable
only upon presentation and surrender of such Note and shall specify the place
where such Note may be presented and surrendered for payment of such
installment. [A copy of such form of notice shall be sent to the Note Insurer by
the Indenture Trustee.] Notices in connection with redemptions of Notes shall be
mailed to Noteholders as provided in Section 10.02 hereof.
Section 2.07. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall promptly be cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall promptly be cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes canceled as provided in this Section, except as expressly permitted by
this Indenture. All canceled Notes may be held or disposed of by the Indenture
Trustee in accordance with its standard retention or disposal policy as in
effect at the time unless the Issuer shall direct by an Issuer Order that they
be destroyed or returned to it; PROVIDED, HOWEVER, that such Issuer Order is
timely and the Notes have not been previously disposed of by the Indenture
Trustee.
Section 2.08. Conditions Precedent to the Authentication of the Notes.
The Notes may be authenticated by the Indenture Trustee, upon Issuer Request and
upon receipt by the Indenture Trustee of the following:
(a) An Issuer Order authorizing the execution and authentication of
such Notes by the Issuer.
(b) All of the items of Collateral that are to be delivered to the
Indenture Trustee or its designee.
(c) A Certificate of Fair Value certifying as to the value of the
Collateral.
(d) An executed counterpart of the Trust Agreement.
(e) An Opinion of Counsel addressed to the Indenture Trustee and [the
Note Insurer] to the effect that:
(i) all conditions precedent provided for in this Indenture
relating to the authentication of the Notes have been complied with;
(ii) the Owner Trustee has power and authority to execute,
deliver and perform its obligations under the Trust Agreement;
(iii) the Issuer has been duly formed, is validly existing as a
business trust under the laws of the State of Delaware, 12 Del. C.
Section 3801 et seq., and has power, authority and legal right to
execute and deliver this Indenture, the Administration Agreement, [the
Custodial Agreement,] the Insurance Agreement and the Sale and
Servicing Agreement;
(iv) this Indenture creates a valid security interest in favor of
the Indenture Trustee, for the benefit of the Noteholders [and the
Note Insurer], in the Issuer's right, title and interest in and to the
Mortgage Loans securing the obligations of the Issuer hereunder;
(v) the Notes have been duly authorized by the Issuer and, when
duly executed and delivered by the Owner Trustee, on behalf of the
Issuer, and authenticated by the Indenture Trustee in accordance with
the terms of this Indenture and delivered and paid for, will be
validly issued and outstanding and entitled to the benefits and
security provided for by this Indenture and will constitute the legal,
valid and binding obligations of the Issuer, enforceable in accordance
with their terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
and to general principles of equity regardless of whether enforcement
is sought in a proceeding in equity or at law;
(vi) this Indenture has been duly qualified under the Trust
Indenture Act;
(vii) no authorization, approval or consent of any governmental
body having jurisdiction in the premises which has not been obtained
by the Issuer is required to be obtained by the Issuer for the valid
issuance and delivery of the Notes, except that no opinion need be
expressed with respect to any such authorizations, approvals or
consents as may be required under any state securities or "blue sky"
laws; and
(viii) any other matters as the Indenture Trustee may reasonably
request.
(f) An Officer's Certificate complying with the requirements of
Section 11.01 hereof and stating that:
(i) the Issuer is not in Default under this Indenture and the
issuance of the Notes will not result in any breach of any of the
terms, conditions or provisions of, or constitute a default under, the
Trust Agreement, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Issuer is a party or by which it
is bound, or any order of any court or administrative agency entered
in any Proceeding to which the Issuer is a party or by which it may be
bound or to which it may be subject, and that all conditions precedent
provided in this Indenture relating to the authentication and delivery
of the Notes applied for have been complied with;
(ii) the Issuer is the owner of all of the Mortgage Loans, has
not, other than pursuant to this Indenture, assigned any interest or
participation in the Mortgage Loans (or, if any such interest or
participation has been assigned, it has been released) and has the
right to Grant all of the Mortgage Loans to the Indenture Trustee;
(iii) the Issuer has Granted to the Indenture Trustee all of its
right, title and interest in and to the Collateral, and has delivered
or caused the same to be delivered to the Indenture Trustee;
(iv) attached thereto are true and correct copies of letters
signed by each Rating Agency confirming that each of the Notes have
been rated "[ ]" or the equivalent by each Rating Agency; and
(v) all conditions precedent provided for in this Indenture
relating to the authentication of the Notes have been complied with.
(g) The Opinions of Counsel to be delivered pursuant to subsection (d)
above may differ from the Opinions of Counsel described in such subsection so
long as such Opinions of Counsel so delivered are acceptable to [the Note
Insurer], each Rating Agency and the Indenture Trustee, which shall be
conclusively evidenced by the delivery on the Closing Date of the Note Insurance
Policy and of each such Rating Agency's rating letter and by the Indenture
Trustee's authentication and delivery of the Notes, respectively, and such
acceptable opinions shall be deemed to be the Opinions of Counsel required
pursuant to subsection (d) above
Section 2.09. Release of Collateral. (a) Except as otherwise provided
in subsections (b) and (c) of this Section, Section 11.01 hereof and the terms
of the Basic Documents, the Indenture Trustee shall release property from the
lien of this Indenture only upon receipt by it [and the Note Insurer] of an
Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel,
certificates in accordance with TIA Sections 3.14(c) and (d)(1), and Independent
Certificates in accordance with TIA Sections 314(c) and 314(d)(1) or an Opinion
of Counsel in lieu of such Independent Certificates to the effect that the TIA
does not require any such Independent Certificates; provided that no such
Independent Certificates or Opinion of Counsel in lieu of such Independent
Certificates shall be necessary in respect of property released from the lien of
the Indenture in accordance with the provisions hereof if such property consists
solely of cash. [The Indenture Trustee shall surrender the Note Insurance Policy
upon satisfaction of the conditions in Section 4.01.]
(b) The Servicer, on behalf of the Issuer, shall be entitled to obtain
a release from the lien of this Indenture for any Mortgage Loan and the related
Mortgaged Property at any time (i) after a payment by the Seller or the Issuer
of the Loan Purchase Price of the Mortgage Loan, (ii) after a Qualified
Substitute Mortgage Loan is substituted for such Mortgage Loan and payment of
the Substitution Adjustment, if any, (iii) after liquidation of the Mortgage
Loan in accordance with [Section 5.12] of the Sale and Servicing Agreement and
the deposit of all net recoveries thereon in the Collection Account, (iv) upon
the termination of a Mortgage Loan (due to, among other causes, a prepayment in
full of the Mortgage Loan and sale or other disposition of the related Mortgaged
Property, or (v) as contemplated by [Section 8.01] of the Sale and Servicing
Agreement. Any such release other than as contemplated by [Section 8.01] of the
Sale and Servicing Agreement or pursuant to the preceding sentence shall be
subject to the condition that the Issuer shall have delivered to the Indenture
Trustee and [the Note Insurer] an Issuer Request (A) identifying the Mortgage
Loan and the related Mortgaged Property to be released, (B) requesting the
release thereof, (C) setting forth the amount deposited in the Collection
Account with respect thereto, and (D) certifying that the amount deposited in
the Collection Account (x) equals the Loan Purchase Price of the Mortgage Loan,
in the event a Mortgage Loan and the related Mortgaged Property are being
released from the lien of this Indenture pursuant to item (i) above, (y) equals
the Substitution Adjustment related to the Qualified Substitute Mortgage Loan
and the Deleted Mortgage Loan released from the lien of the Indenture pursuant
to item (ii) above, or (z) equals the entire amount of net recoveries received
with respect to such Mortgage Loan and the related Mortgaged Property in the
event of a release from the lien of this Indenture pursuant to items (iii) or
(iv) above.
(c) The Indenture Trustee shall, if requested by the Servicer,
temporarily release or cause the Custodian temporarily to release to the
Servicer the Mortgage File pursuant to the provisions of Section [5.13] of the
Sale and Servicing Agreement upon compliance by the Servicer with the provisions
thereof; PROVIDED, however, that the Mortgage File shall have been stamped to
signify the Issuer's pledge to the Indenture Trustee under the Indenture.
Section 2.10. Book-Entry Notes. The Notes, when authorized by an
Issuer Order, will be issued in the form of typewritten Notes representing the
Book-Entry Notes, to be delivered to The Depository Trust Company, the initial
Clearing Agency, by or on behalf of the Issuer. The Book-Entry Notes shall be
registered initially on the Note Register in the name of Cede & Co., the nominee
of the initial Clearing Agency, and no Note Owner will receive a definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12 hereof. Unless and until definitive, fully registered Notes (the
"Definitive Notes") have been issued to such Note Owners pursuant to Section
2.12 hereof:
(a) the provisions of this Section shall be in full force and effect;
(b) the Note Registrar and the Indenture Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture (including the
payment of principal of and interest on the Notes and the giving of instructions
or directions hereunder) as the sole Holder of the Notes, and shall have no
obligation to the Note Owners;
(c) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section shall
control;
(d) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and agreements
between such Note Owners and the Clearing Agency and/or the Clearing Agency
Participants pursuant to the Note Depository Agreement. Unless and until
Definitive Notes are issued pursuant to Section 2.12 hereof, the initial
Clearing Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and interest on
the Notes to such Clearing Agency Participants; and
(e) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a specified
percentage of the Voting Interests of the Outstanding Notes, the Clearing Agency
shall be deemed to represent such percentage only to the extent that it has
received instructions to such effect from Note Owners and/or Clearing Agency
Participants owning or representing, respectively, such required percentage of
the beneficial interest in the Notes and has delivered such instructions to the
Indenture Trustee.
Section 2.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to such Note Owners pursuant to
Section 2.12 hereof, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency and shall have no obligation to such Note Owners.
Section 2.12. Definitive Notes. If (i) the Issuer advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes and the Administrator is unable to locate a qualified successor, (ii) the
Issuer at its option advises the Indenture Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Default, Owners of the Book- Entry Notes representing
beneficial interests aggregating at least a majority of the Voting Interests of
the Outstanding Notes advise the Clearing Agency in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of such Note Owners, then the Clearing Agency shall notify
all Note Owners and the Indenture Trustee of the occurrence of such event and of
the availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Notes representing the
Book-Entry Notes by the Clearing Agency, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, [the Note Insurer], the Note Registrar or
the Indenture Trustee shall be liable for any delay in delivery of such
instructions and each of them may conclusively rely on, and shall be protected
in relying on, such instructions. Upon the issuance of Definitive Notes, the
Indenture Trustee shall recognize the Holders of the Definitive Notes as
Noteholders.
Section 2.13. Tax Treatment. The Issuer has entered into this
Indenture, and the Notes will be issued, with the intention that for all
purposes, including federal, state and local income, single business and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Collateral. The Issuer, by entering into this Indenture, and each
Noteholder, by its acceptance of a Note (and each Note Owner by its acceptance
of an interest in the applicable Book-Entry Note), agree to treat the Notes for
all purposes, including federal, state and local income, single business and
franchise tax purposes, as indebtedness of the Issuer.
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest. The Issuer will duly
and punctually pay (or will cause to be paid duly and punctually) the principal
of and interest on the Notes in accordance with the terms of the Notes and this
Indenture. Without limiting the foregoing, unless the Notes have been declared
due and payable pursuant to Section 5.02 and monies collected by the Indenture
Trustee are being applied in accordance with Section 5.04(b), subject to and in
accordance with Section 8.02(c) hereof, the Issuer will cause to be distributed
all amounts on deposit in the Note Distribution Account on each Distribution
Date deposited therein pursuant to the Sale and Servicing Agreement (i) for the
benefit of the Notes of each Class, to the Holders thereof. Amounts properly
withheld under the Code by any Person from a payment to any Noteholder of
interest and/or principal shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.
The Notes shall be non-recourse obligations of the Issuer and shall be
limited in right of payment to amounts available from the Collateral [and any
amounts received by the Indenture Trustee under the Note Insurance Policy in
respect of the Notes], as provided in this Indenture. The Issuer shall not
otherwise be liable for payments on the Notes. If any other provision of this
Indenture shall be deemed to conflict with the provisions of this Section 3.01,
the provisions of this Section 3.01 shall control.
Section 3.02. Maintenance of Office or Agency. The Issuer will or will
cause the Administrator to maintain in [ ] an office or agency where Notes may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer hereby initially appoints the Administrator to serve as its
agent for the foregoing purposes and to serve as Paying Agent with respect to
the Notes. The Issuer will give prompt written notice to the Indenture Trustee
of the location, and of any change in the location, of any such office or
agency. If at any time the Issuer shall fail to maintain any such office or
agency or shall fail to furnish the Indenture Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent
to receive all such surrenders, notices and demands.
Section 3.03. Money for Payments to Be Held in Trust. As provided in
Section 8.02(a) and (b) hereof, all payments of amounts due and payable with
respect to any Notes that are to be made from amounts withdrawn from the
Collection Account and the Note Distribution Account pursuant to Section 8.02(c)
hereof shall be made on behalf of the Issuer by the Indenture Trustee or by the
Paying Agent, and no amounts so withdrawn from the Collection Account and the
Note Distribution Account for payments of Notes shall be paid over to the Issuer
except as provided in this Section.
On or before the Business Day preceding each Distribution Date and the
Redemption Date, the Paying Agent shall deposit or cause to be deposited in the
Note Distribution Account an aggregate sum sufficient to pay the amounts due on
such Distribution Date or the Redemption Date under the Notes, such sum to be
held in trust for the benefit of the Persons entitled thereto, and (unless the
Paying Agent is the Indenture Trustee) shall promptly notify the Indenture
Trustee of its action or failure so to act.
Any Paying Agent shall be appointed by Issuer Order with written
notice thereof to the Indenture Trustee [and the Note Insurer]. Any Paying Agent
appointed by the Issuer shall be a Person which would be eligible to be
Indenture Trustee hereunder as provided in Section 6.11 hereof. The Issuer shall
not appoint any Paying Agent (other than the Indenture Trustee) which is not, at
the time of such appointment, a Depository Institution.
The Issuer will cause each Paying Agent other than the Administrator
to execute and deliver to the Indenture Trustee [and the Note Insurer] an
instrument in which such Paying Agent shall agree with the Indenture Trustee
(and if the Indenture Trustee acts as Paying Agent, it hereby so agrees),
subject to the provisions of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and pay such sums to such Persons as herein provided;
(b) give the Indenture Trustee [and the Note Insurer] notice of any
default by the Issuer (or any other obligor upon the Notes) of which it has
actual knowledge in the making of any payment required to be made with respect
to the Notes;
(c) at any time during the continuance of any such default, upon the
written request of the Indenture Trustee, forthwith pay to the Indenture Trustee
all sums so held in trust by such Paying Agent;
(d) immediately resign as a Paying Agent and forthwith pay to the
Indenture Trustee all sums held by it in trust for the payment of Notes if at
any time it ceases to meet the standards required to be met by a Paying Agent at
the time of its appointment; and
(e) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith; PROVIDED, HOWEVER, that with respect to
withholding and reporting requirements applicable to original issue discount,
the accrual of market discount or the amortization of PREMIUMS (if any) on the
Notes, the Issuer shall have first provided the calculations pertaining thereto
to the Indenture Trustee.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds or
abandoned property, any money held by the Indenture Trustee or any Paying Agent
in trust for the payment of any amount due with respect to any Note and
remaining unclaimed for two years after such amount has become due and payable
shall be discharged from such trust and be paid to the Issuer on Issuer Request;
and the Holder of such Note shall thereafter, as an unsecured general creditor,
look only to the Issuer for payment thereof (but only to the extent of the
amounts so paid to the Issuer), and all liability of the Indenture Trustee or
such Paying Agent with respect to such trust money shall thereupon cease;
PROVIDED, HOWEVER, that the Indenture Trustee or such Paying Agent, before being
required to make any such repayment, shall at the expense and direction of the
Issuer cause to be published, once in a newspaper of general circulation in The
City of [ ] customarily published in the English language on each Business Day,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the Issuer.
The Indenture Trustee shall also adopt and employ, at the expense and direction
of the Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Indenture Trustee or of any Paying Agent,
at the last address of record for each such Holder).
Section 3.04. Existence. (a) Subject to subparagraph (b) of this
Section 3.04, the Issuer will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of [Delaware]
[(unless subject to the prior written consent of the Note Insurer it becomes, or
any successor Issuer hereunder is or becomes, organized under the laws of any
other State or of the United States of America, in which case the Issuer will
keep in full effect its existence, rights and franchises under the laws of such
other jurisdiction)] and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes, the Collateral and each other instrument or agreement included in the
Collateral.
(b) Any successor to the Owner Trustee appointed pursuant to [Section
10.02] of the Trust Agreement shall be the successor Owner Trustee under this
Indenture without the execution or filing of any paper, instrument or further
act to be done on the part of the parties hereto.
(c) Upon any consolidation or merger of or other succession to the
Owner Trustee, the Person succeeding to the Owner Trustee under the Trust
Agreement may exercise every right and power of the Owner Trustee under this
Indenture with the same effect as if such Person had been named as the Owner
Trustee herein.
Section 3.05. Protection of Collateral. The Issuer will from time to
time [or upon the direction of the Note Insurer] execute and deliver all such
supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
and will take such other action necessary or advisable to:
(a) provide further assurance with respect to the Grant of all or any
portion of the Collateral;
(b) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the purposes
hereof;
(c) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture;
(d) enforce any rights with respect to the Collateral; or
(e) preserve and defend title to the Collateral and the rights of the
Indenture Trustee, the Noteholders [and the Note Insurer] in such Collateral
against the claims of all persons and parties.
The Issuer hereby designates the Administrator, its agent and
attorney-in-fact, to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.05.
Section 3.06. Annual Opinions as to Collateral. On or before March
15th in each calendar year, beginning in [ ], the Issuer shall furnish to the
Indenture Trustee [and the Note Insurer] an Opinion of Counsel either stating
that, in the opinion of such counsel, such action has been taken with respect to
the recording, filing, re-recording and refiling of this Indenture, any
indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements and continuation
statements as is necessary to maintain the lien and security interest created by
this Indenture and reciting the details of such action or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and filing of any
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest of this
Indenture until [ ] of the following calendar year.
Section 3.07. Performance of Obligations; Servicing of Mortgage Loans.
(a) The Issuer will not take any action and will use its best efforts not to
permit any action to be taken by others that would release any Person from any
of such Person's material covenants or obligations under any instrument or
agreement included in the Collateral or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Sale and Servicing Agreement or such
other instrument or agreement.
(b) The Issuer may contract with or otherwise obtain the assistance of
other Persons (including, without limitation, the Administrator under the
Administration Agreement) to assist it in performing its duties under this
Indenture, and any performance of such duties by a Person identified to the
Indenture Trustee [and the Note Insurer] in an Officer's Certificate of the
Issuer shall be deemed to be action taken by the Issuer. Initially, the Issuer
has contracted with the Administrator to assist the Issuer in performing its
duties under this Indenture. Notwithstanding anything to the contrary herein,
the Issuer shall in all respects remain liable for its obligations hereunder and
under the Basic Documents.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, in the Basic Documents
and in the instruments and agreements included in the Collateral, including but
not limited to (i) filing or causing to be filed all UCC financing statements
and continuation statements required to be filed by the terms of this Indenture
and the Sale and Servicing Agreement and (ii) recording or causing to be
recorded all Mortgages, Assignments of Mortgage, all intervening Assignments of
Mortgage and all assumption and modification agreements required to be recorded
by the terms of the Sale and Servicing Agreement, in accordance with and within
the time periods provided for in this Indenture and/or the Sale and Servicing
Agreement, as applicable. Except as otherwise expressly provided therein, the
Issuer shall not waive, amend, modify, supplement or terminate any Basic
Document or any provision thereof without the consent of the Indenture Trustee,
[the Note Insurer] and the Holders of at least a majority of the Voting
Interests of the Outstanding Notes.
(d) If the Issuer shall have knowledge of the occurrence of an Event
of Default under the Sale and Servicing Agreement, the Issuer shall promptly
notify the Indenture Trustee, [the Note Insurer] and the Rating Agencies
thereof, and shall specify in such notice the action, if any, the Issuer is
taking with respect to such default.
(e) As promptly as possible after the giving of notice to the Servicer
of the termination of the Servicer's rights and powers pursuant to [Section
7.01] of the Sale and Servicing Agreement, the Indenture Trustee shall proceed
in accordance with [Section 7.02] of the Sale and Servicing Agreement.
(f) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees (i) that it will not, without the
prior written consent of the Indenture Trustee [and the Note Insurer unless a
Note Insurer Default has occurred and is continuing,] amend, modify, waive,
supplement, terminate or surrender, or agree to any amendment, modification,
supplement, termination, waiver or surrender of, the terms of any Collateral
(except to the extent otherwise provided in the Sale and Servicing Agreement) or
the Basic Documents, or waive timely performance or observance by the Servicer
or the Depositor under the Sale and Servicing Agreement; and (ii) that any such
amendment shall not (A) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, distributions that are required to be made
for the benefit of the Noteholders or (B) reduce the aforesaid percentage of the
Notes that is required to consent to any such amendment, without the consent of
the Holders the Voting Interests of all Outstanding Notes. If any such
amendment, modification, supplement or waiver shall so be consented to by the
Indenture Trustee [and the Note Insurer unless a Note Insurer Default has
occurred and is continuing,] the Issuer agrees, promptly following a request by
the Indenture Trustee [or the Note Insurer] to do so, to execute and deliver, in
its own name and at its own expense, such agreements, instruments, consents and
other documents as the Indenture Trustee [or the Note Insurer] may deem
necessary or appropriate in the circumstances.
Section 3.08. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(a) except as expressly permitted by this Indenture, the Mortgage Loan
Sale Agreement or the Sale and Servicing Agreement, sell, transfer, exchange or
otherwise dispose of any of the properties or assets of the Issuer, including
those included in the Collateral, unless directed to do so by the Indenture
Trustee or [the Note Insurer];
(b) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly withheld
from such payments under the Code) or assert any claim against any present or
former Noteholder by reason of the payment of the taxes levied or assessed upon
any part of the Collateral;
(c) engage in any business or activity other than as permitted by the
Trust Agreement or other than in connection with, or relating to, the issuance
of Notes pursuant to this Indenture, or amend the Trust Agreement as in effect
on the Closing Date other than in accordance with [Section 11.01] thereof;
(d) issue debt obligations under any other indenture;
(e) incur or assume any indebtedness or guaranty any indebtedness of
any Person, except for such indebtedness as may be incurred by the Issuer in
connection with the issuance of the Notes pursuant to this Indenture;
(f) dissolve or liquidate in whole or in part or merge or consolidate
with any other Person;
(g) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be released from
any covenants or obligations with respect to the Notes under this Indenture
except as may expressly be permitted hereby, (B) permit any lien, charge,
excise, claim, security interest, mortgage or other encumbrance (other than the
lien of this Indenture) to be created on or extend to or otherwise arise upon or
burden the Collateral or any part thereof or any interest therein or the
proceeds thereof (other than tax liens, mechanics' liens and other liens that
arise by operation of law, in each case on any of the Mortgaged Properties and
arising solely as a result of an action or omission of the related Obligors) or
(C) permit the lien of this Indenture not to constitute a valid first priority
(other than with respect to any such tax, mechanics' or other lien) security
interest in the Collateral;
(h) remove the Administrator without cause unless the Rating Agency
Condition shall have been satisfied in connection with such removal [and the
Note Insurer shall have given its prior written consent];
(i) take any other action or fail to take any action which may cause
the Issuer to be taxable as (a) an association pursuant to Section 7701 of the
Code and the corresponding regulations or (b) as a taxable mortgage pool
pursuant to Section 7701(i) of the Code and the corresponding regulations; or
(j) made any expenditure by long-term or operating lease or otherwise
for capital assets (either realty or personalty).
Section 3.09. Annual Statement as to Compliance. The Issuer will
deliver to the Indenture Trustee [and the Note Insurer], within 120 days after
the end of each fiscal year of the Issuer (commencing in the fiscal year [ ]),
an Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that:
(a) a review of the activities of the Issuer during such year and of
its performance under this Indenture has been made under such Authorized
Officer's supervision; and
(b) to the best of such Authorized Officer's knowledge, based on such
review, the Issuer has complied with all conditions and covenants under this
Indenture throughout such year, or, if there has been a default in its
compliance with any such condition or covenant, specifying each such default
known to such Authorized Officer and the nature and status thereof. Section
3.10. Covenants of the Issuer. All covenants of the Issuer in this Indenture are
covenants of the Issuer and are not covenants of the Owner Trustee. The Owner
Trustee is, and any successor Owner Trustee under the Trust Agreement will be,
entering into this Indenture solely as Owner Trustee under the Trust Agreement
and not in its respective individual capacity, and in no case whatsoever shall
the Owner Trustee or any such successor Owner Trustee be personally liable on,
or for any loss in respect of, any of the statements, representations,
warranties or obligations of the Issuer hereunder, as to all of which the
parties hereto agree to look solely to the property of the Issuer.
Section 3.11. Servicer's Obligations. The Issuer shall cause the
Servicer to comply with the Sale and Servicing Agreement.
Section 3.12. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
PROVIDED, HOWEVER, that the Issuer may make, or cause to be made, (x)
distributions to the Servicer, the Indenture Trustee, the Owner Trustee and the
Securityholders as contemplated by, and to the extent funds are available for
such purpose under, the Sale and Servicing Agreement, the Indenture or the Trust
Agreement and (y) payments to the Indenture Trustee pursuant to the
Administration Agreement. The Issuer will not, directly or indirectly, make or
cause to be made payments to or distributions from the Note Distribution
Account, the Collection Account except in accordance with this Indenture and the
Basic Documents.
Section 3.13. Issuer May Consolidate, etc., Only on Certain Terms.
(a) The Issuer shall not consolidate or merge with or into any other
Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Indenture
Trustee [and the Note Insurer], in form satisfactory to the Indenture
Trustee [and the Note Insurer], the due and punctual payment of the
principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture on the
part of the Issuer to be performed or observed, all as provided
herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee [and the
Note Insurer]) to the effect that such transaction will not have any
material adverse tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee and
[the Note Insurer], an Officer's Certificate and an Opinion of Counsel
each stating that such consolidation or merger and such supplemental
indenture comply with this Article III and that all conditions
precedent herein provided for relating to such transaction have been
complied with (including any filing required by the Exchange Act); and
(vii) [the Note Insurer has given its prior written consent.]
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person other than
in accordance with the Basic Documents, unless:
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of
which is hereby restricted (A) shall be a United States citizen or a
Person organized and existing under the United States of America or
any State, (B) expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee [and the Note
Insurer], in form satisfactory to the Indenture Trustee [and the Note
Insurer], the due and punctual payment of the principal of and
interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to
be performed or observed, all as provided herein, (C) expressly agrees
by means of such supplemental indenture that all right, title and
interest so conveyed or transferred shall be subject and subordinate
to the rights of Holders of the Notes [and the Note Insurer], (D)
unless otherwise provided in such supplemental indenture, expressly
agrees to indemnify, defend and hold harmless the Issuer against and
from any loss, liability or expense arising under or related to this
Indenture and the Notes and (E) expressly agrees by means of such
supplemental indenture that such Person (or, if a group of Persons,
one specified Person) shall make all filings with the Commission (and
any other appropriate Person) required by the Exchange Act in
connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee [and the
Note Insurer]) to the effect that such transaction will not have any
material adverse tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee
[and the Note Insurer] an Officer's Certificate and an Opinion of
Counsel each stating that such conveyance or transfer and such
supplemental indenture comply with this Article III and that all
conditions precedent herein provided for relating to such transaction
have been complied with (including any filing required by the Exchange
Act); and
(vii) [the Note Insurer has given its prior written consent.]
Section 3.14. Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in accordance with
Section 3.13(a), the Person formed by or surviving such consolidation or merger
(if other than the Issuer) shall succeed to, and be substituted for, and may
exercise every right and power of, the Issuer under this Indenture with the same
effect as if such Person had been named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.13(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed by or performed on the
part of the Issuer with respect to the Notes immediately upon the delivery of
written notice to the Indenture Trustee [and the Note Insurer] stating that the
Issuer is to be so released.
Section 3.15. Treatment of Notes as Debt for Tax Purposes. The Issuer
shall, and shall cause the Administrator to, treat the Notes as indebtedness for
all purposes.
Section 3.16. Notice of Events of Default. The Issuer shall give the
Indenture Trustee, [the Note Insurer] and the Rating Agencies prompt written
notice of each Event of Default hereunder, each default on the part of the
Servicer or the Depositor of its obligations under the Sale and Servicing
Agreement and each default on the part of the Seller of its obligations under
the [Mortgage Loan Sale Agreement].
Section 3.17. Further Instruments and Acts. Upon request of the
Indenture Trustee [or the Note Insurer], the Issuer will execute and deliver
such further instruments and do such further acts as may be reasonably necessary
or proper to carry out more effectively the purpose of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes (except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08
3.10, 3.12 and 3.16 hereof, (v) the rights, obligations and immunities of the
Indenture Trustee hereunder (including the rights of the Indenture Trustee under
Section 6.07 hereof and the obligations of the Indenture Trustee under Section
4.02 hereof) and (vi) the rights of Noteholders as beneficiaries hereof with
respect to the property so deposited with the Indenture Trustee payable to all
or any of them), and the Indenture Trustee, on demand of and at the expense of
the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when either (I) the Sale
and Servicing Agreement has been terminated pursuant to [Section 8.01] thereof
or (II) all of the following have occurred:
(a) either
(i) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.04 hereof and (ii) Notes for
the payment of which money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to
the Issuer or discharged from such trust, as provided in Section 3.03
hereof) shall have been delivered to the Indenture Trustee for
cancellation; or
(ii) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
(A) shall have become due and payable, or
(B) will become due and payable within one year at the
Maturity Date (or, if one or more Classes of Notes have different
Maturity Dates, the latest Maturity Date), or
(C) are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for the giving
of notice of redemption by the Indenture Trustee in the name, and
at the expense, of the Issuer,
(D) and the Issuer, in the case of clause (A), (B) or (C)
above, has irrevocably deposited or caused irrevocably to be
deposited with the Indenture Trustee cash or direct obligations
of or obligations guaranteed by the United States of America
(which will mature prior to the date such amounts are payable),
in trust for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Notes (including
Deferred Amounts to the extent required to be paid hereunder) not
theretofore delivered to the Indenture Trustee for cancellation
when due to the applicable Maturity Date of such Class of Notes
or the Redemption Date (if Notes shall have been called for
redemption pursuant to Section 10.01 hereof), as the case may be;
and
(b) the latest of (i) 18 months after payment in full of all
outstanding obligations under the Notes, (ii) the payment in full of all unpaid
fees and expenses of the Trust [and all sums owing to the Note Insurer under the
Insurance Agreement] and (iii) the date on which the Issuer has paid or caused
to be paid all other sums payable hereunder by the Issuer; and
(c) the Issuer shall have delivered to the Indenture Trustee [and the
Note Insurer] an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA or the Indenture Trustee) an Independent Certificate from a firm of
certified public accountants, each meeting the applicable requirements of
Section 11.01(a) hereof and, subject to Section 11.02 hereof, each stating that
all conditions precedent herein provided for, relating to the satisfaction and
discharge of this Indenture with respect to the Notes, have been complied with.
Section 4.02. Application of Trust Money. All moneys deposited with
the Indenture Trustee pursuant to Sections 3.03 and 4.01 hereof shall be held in
trust and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to [the Note Insurer and] the Holders of the
particular Notes for the payment or redemption of which such moneys have been
deposited with the Indenture Trustee, of all sums due and to become due thereon
for principal and/or interest; but such moneys need not be segregated from other
funds except to the extent required herein or in the Sale and Servicing
Agreement or required by law.
Section 4.03. Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.03 hereof and thereupon such Paying Agent shall be released from
all further liability with respect to such moneys.
ARTICLE V
REMEDIES
Section 5.01. Events of Default. (a) "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) subject to Section 5.01(b) and notwithstanding that there may
be insufficient sums in the Note Distribution Account for payment
thereof on the related Distribution Date, default in the payment of
any interest on any Note when the same becomes due and payable, and
continuance of such default for a period of five (5) days; or
(ii) subject to Section 5.01(b) and notwithstanding that there
may be insufficient sums in the Note Distribution Account for payment
thereof on the related Distribution Date, default in the payment of
any installment of principal when the same becomes due and payable,
and continuance of such default for a period of five (5) days, or of
the entire Principal Amount (including any Deferred Amount to the
extent required to be paid hereunder) of any Note on the applicable
Maturity Date; or
(iii) the existence of an unpaid Deferred Amount in respect of
any Highest Priority Class Notes; or
(iv) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant
or agreement, a default in the observance or performance of which is
elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture, the
Insurance Agreement, the Sale and Servicing Agreement or in any
certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or
condition in respect of which such misrepresentation or warranty was
incorrect shall not have been eliminated or otherwise cured, for a
period of 30 days after there shall have been given, by registered or
certified mail, to the Issuer by the Indenture Trustee [or the Note
Insurer], or to the Issuer and the Indenture Trustee by the Holders of
at least 25% of the Voting Interests of the Outstanding Notes, a
written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice
is a notice of Default hereunder; or
(v) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any
substantial part of the Collateral in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Collateral, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; or
(vi) the commencement by the Issuer of a voluntary case under any
applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such
law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Collateral, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of
any action by the Issuer in furtherance of any of the foregoing.
(b) The Issuer promptly shall deliver to the Indenture Trustee [and
the Note Insurer], within five days after the occurrence thereof, written notice
in the form of an Officer's Certificate of any event which with the giving of
notice and the lapse of time would become an Event of Default under clauses (iv)
and (v) above, the status of such event and what action the Issuer is taking or
proposes to take with respect thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If
an Event of Default should occur and be continuing, then and in every such case
the Indenture Trustee may, and at the direction or upon the prior written
consent of [the Note Insurer or] the Majority Highest Priority Class Noteholders
[with the written consent of the Note Insurer] shall, declare all the Notes to
be immediately due and payable, by a notice in writing to the Issuer (and to the
Indenture Trustee if given by Noteholders), and upon any such declaration the
unpaid principal amount of such Notes, together with accrued and unpaid interest
thereon through the date of acceleration, shall become immediately due and
payable.
At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the moneys due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided,
[the Note Insurer or] the Majority Highest Priority Class Noteholders [with the
prior written consent of the Note Insurer], by written notice to the Issuer and
the Indenture Trustee, may rescind and annul such declaration and its
consequences if:
(a) the Issuer has paid or deposited with the Indenture Trustee a sum
sufficient to pay:
(i) all payments of principal of and/or interest on all Highest
Priority Class Notes and all other amounts that would then be due
hereunder or upon such Highest Priority Class Notes if the Event of
Default giving rise to such acceleration had not occurred; and
(ii) all sums paid or advanced by the Indenture Trustee hereunder
[plus all amounts due to the Note Insurer under the Basic Documents]
and the reasonable compensation, expenses, disbursements and advances
of each of the Indenture Trustee [and the Note Insurer] and its agents
and counsel; and
(b) all Events of Default, other than the nonpayment of the principal
of the Notes that has become due solely by such acceleration, have been cured or
waived as provided in Section 5.12 hereof.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
The Holders of Notes of a Non-Priority Class shall have no right to
exercise any remedies of Noteholders under this Article V, except to the extent
otherwise expressly provided herein.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee. (a) The Issuer covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and payable, and
such default continues for a period of five days, or (ii) default is made in the
payment of any installment of principal when the same becomes due and payable,
and continuance of such default for a period of five (5) days, or of the
Principal Amount of any Note at the applicable Maturity Date, the Issuer shall,
[upon demand of the Indenture Trustee made at the direction of the Note
Insurer], pay to the Indenture Trustee, for the benefit of the Holders of the
Notes [and the Note Insurer], the whole amount then due and payable on such
Notes for principal and/or interest, with interest upon the overdue principal
and, to the extent payment at such rate of interest shall be legally
enforceable, upon overdue installments of interest at the rate borne by the
Notes and in addition thereto such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee [and
the Note Insurer] and their respective agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, shall [at the direction of the Note Insurer, and if a Note Insurer
Default has occurred and is continuing,] the Indenture Trustee may, and shall at
the direction of the Majority Highest Priority Class Noteholders, institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Issuer or other obligor upon such Notes and collect in the manner provided
by law out of the property of the Issuer or other obligor upon such Notes,
wherever situated, the moneys adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee shall, [at the direction of the Note Insurer, and if a Note Insurer
Default has occurred and is continuing,] the Indenture Trustee may, in its
discretion, and shall, at the direction of the Majority Highest Priority Class
Noteholders, as more particularly provided in Section 5.04, proceed to protect
and enforce its rights and the rights of [the Note Insurer and] the Noteholders
by such appropriate Proceedings as the Indenture Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Indenture Trustee by this Indenture or by
law.
(d) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Collateral, Proceedings under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Indenture Trustee, irrespective of whether the
principal of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, [upon the direction of the Note Insurer], by
intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and/or interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
(including any claim for reasonable compensation to the Indenture
Trustee, each predecessor Indenture Trustee and Note Insurer, and
their respective agents, attorneys and counsel, and for reimbursement
of all expenses and liabilities incurred, and all advances made, by
the Indenture Trustee and each predecessor Indenture Trustee, except
as a result of negligence or bad faith), [the Note Insurer and] of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders, [the Note
Insurer] and the Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee, [the Note Insurer] or the Holders of Notes allowed
in any judicial proceedings relative to the Issuer, its creditors and
its property;
(v) and any trustee, receiver, liquidator, custodian or other
similar official in any such Proceeding is hereby authorized by each
of such Noteholders [and the Note Insurer] to make payments to the
Indenture Trustee and, in the event that the Indenture Trustee shall
consent to the making of payments directly to such Noteholders [and
the Note Insurer], to pay to the Indenture Trustee such amounts as
shall be sufficient to cover reasonable compensation to the Indenture
Trustee, each predecessor Indenture Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities
incurred and all advances made by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad
faith.
(e) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Noteholder [or the Note Insurer] any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof [or the Note Insurer] or to authorize the Indenture Trustee to
vote in respect of the claim of any Noteholder in any such proceeding except, as
aforesaid, to vote for the election of a trustee in bankruptcy or similar
Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or Proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents, attorneys and counsel, shall be
for the ratable benefit of the Holders of the Notes [and the Note Insurer].
(g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make any
Noteholder a party to any such Proceedings.
Section 5.04. Remedies; Priorities.
(a) If an Event of Default shall have occurred, the Indenture Trustee
shall, [at the direction of the Note Insurer, and if a Note Insurer Default has
occurred and is continuing,] the Indenture Trustee may, do one or more of the
following (subject to Section 5.05 hereof):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Collateral;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights
and remedies of the Indenture Trustee, [the Note Insurer] or the
Noteholders; and
(iv) sell the Collateral or any portion thereof or rights or
interest therein in a commercially reasonable manner, at one or more
public or private sales called and conducted in any manner permitted
by law;
PROVIDED, HOWEVER, that the Indenture Trustee may not sell or otherwise
liquidate the Collateral following an Event of Default, unless (A) the Holders
of 100% of the Voting Interests of the Outstanding Notes consent thereto, (B)
the proceeds of such sale or liquidation distributable to the Noteholders are
sufficient to discharge in full all amounts then due and unpaid upon such Notes
for principal (including any Deferred Amounts) and/or interest or (C) the
Indenture Trustee determines that the Collateral will not continue to provide
sufficient funds for the payment of principal of (including any Deferred
Amounts) and interest on the Notes as they would have become due if the Notes
had not been declared due and payable, and the Indenture Trustee obtains the
consent of Holders of 66-2/3% of the Voting Interests of the Highest Priority
Class Notes. In determining such sufficiency or insufficiency with respect to
clauses (B) and (C) of this subsection, the Indenture Trustee may, but need not,
obtain and rely upon an opinion of an Independent investment banking or
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Collateral for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant
to this Article V, it shall pay out the money or property in the following
order:
FIRST: to the Indenture Trustee for any costs or expenses
incurred by it in connection with the enforcement of the remedies
provided for in this Article V, and, if [ ] is no longer the Servicer,
for the Indenture Trustee Fee then due and to the Owner Trustee and
the Custodian for the Owner Trustee Fee and any compensation to the
Custodian then due;
[SECOND: to the Note Insurer for the Premium Amount then due and
unpaid;]
THIRD: to the Servicer for the Servicing Fee then due and unpaid;
FOURTH: to the Noteholders for amounts due and unpaid on the
Notes for interest, PRO RATA according to the amounts due and payable
on the Notes for interest;
FIFTH: to the applicable Noteholders for amounts due and unpaid
on the Notes for principal, PRO RATA among the Holders of each such
Class of Notes, according to the amounts due and payable and in the
order and priorities set forth in [Section 6.05(b)(i)] of the Sale and
Servicing Agreement;
[SIXTH: to the Note Insurer for any amounts then due and payable
under the Insurance Agreement;]
SEVENTH: PRO RATA, to the Servicer and the Depositor, any
outstanding amounts payable or reimbursable thereto under the Sale and
Servicing Agreement; and
EIGHTH: to the Owner Trustee, for any amounts to be distributed
to the holders of the Residual Interest Certificates pursuant to the
Trust Agreement.
The Indenture Trustee may fix a record date and payment date for any
payment to be made to the Noteholders pursuant to this Section. At least 15 days
before such record date, the Indenture Trustee shall mail to each Noteholder,
[the Note Insurer] and the Issuer a notice that states the record date, the
payment date and the amount to be paid.
Section 5.05. Optional Preservation of the Collateral. If the Notes
have been declared to be due and payable under Section 5.02 hereof following an
Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Collateral. It is the desire of the parties hereto
and the Noteholders that there be at all times sufficient funds for the payment
of principal of and interest on the Notes, and the Indenture Trustee shall take
such desire into account when determining whether or not to maintain possession
of the Collateral. In determining whether to maintain possession of the
Collateral, the Indenture Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Collateral for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall have
any right to institute any Proceeding, judicial or otherwise, with respect to
this Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder [for so long as a Note Insurer Default has not occurred or is
not continuing, and shall not have any such right if a Note Insurer Default has
occurred and is continuing,] unless:
(a) such Holder has previously given written notice to the Indenture
Trustee of a continuing Event of Default;
(b) the Majority Highest Priority Class Noteholders have made written
request to the Indenture Trustee to institute such Proceeding in respect of such
Event of Default in its own name as Indenture Trustee hereunder;
(c) such Holder or Holders have offered to the Indenture Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in complying with such request;
(d) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute such Proceeding;
(e) no direction inconsistent with such written request has been given
to the Indenture Trustee during such 60-day period by the Majority Highest
Priority Class Noteholders; and
(f) [the Note Insurer has given its prior written consent.]
It is understood and intended that no one or more Holders of Notes
shall have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided.
In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes
pursuant to this Section, each representing less than the Majority Highest
Priority Class Noteholders, the Indenture Trustee in its sole discretion may
determine what action, if any, shall be taken, notwithstanding any other
provisions of this Indenture.
Section 5.07. Unconditional Rights of Noteholders to Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on, and Deferred
Amounts, if any, on such Note on or after the applicable Maturity Date thereof
expressed in such Note or in this Indenture (or, in the case of redemption, on
or after the Redemption Date) and to institute suit for the enforcement of any
such payment, and such right shall not be impaired without the consent of such
Holder.
Section 5.08. Restoration of Rights and Remedies. If the Indenture
Trustee, [the Note Insurer] or any Noteholder has instituted any Proceeding to
enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason or has been determined adversely to the
Indenture Trustee, [the Note Insurer] or to such Noteholder, then and in every
such case the Issuer, the Indenture Trustee, [the Note Insurer] and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Indenture Trustee, [the Note Insurer] and the
Noteholders shall continue as though no such Proceeding had been instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy
herein conferred upon or reserved to the Indenture Trustee, [the Note Insurer]
or to the Noteholders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee, [the Note Insurer] or any Holder of any Note to exercise
any right or remedy accruing upon any Default or Event of Default shall impair
any such right or remedy or constitute a waiver of any such Default or Event of
Default or an acquiescence therein. Every right and remedy given by this Article
V or by law to the Indenture Trustee, [the Note Insurer] or to the Noteholders
may be exercised from time to time, and as often as may be deemed expedient, by
the Indenture Trustee, [the Note Insurer] or by the Noteholders, as the case may
be, [subject, in each case, however, to the right of the Note Insurer to control
any such right and remedy, except as provided in Section 11.20.]
Section 5.11. Control by Noteholders. The Majority Highest Priority
Class Noteholders shall have the right to direct the time, method and place of
conducting any Proceeding for any remedy available to the Indenture Trustee with
respect to the Notes or exercising any trust or power conferred on the Indenture
Trustee; PROVIDED, HOWEVER, that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture;
(b) subject to the express terms of Section 5.04 hereof, any direction
to the Indenture Trustee to sell or liquidate the Collateral shall be by Holders
of Notes representing not less than 100% of the Voting Interests of all Class of
Notes Outstanding;
(c) if the conditions set forth in Section 5.05 hereof have been
satisfied and the Indenture Trustee elects to retain the Collateral pursuant to
such Section, then any direction to the Indenture Trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Highest Priority
Class Notes to sell or liquidate the Collateral shall be of no force and effect;
and
(d) the Indenture Trustee may take any other action deemed proper by
the Indenture Trustee that is not inconsistent with such direction.
Notwithstanding the rights of the Noteholders set forth in this
Section 5.11, subject to Section 6.01 hereof, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
Section 5.12. Waiver of Past Defaults. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02 hereof
[the Note Insurer may, or with the prior written consent of the Note Insurer],
the Majority Highest Priority Class Noteholders may waive any past Default or
Event of Default and its consequences, except a Default (a) in the payment of
principal of or interest on any of the Notes or (b) in respect of a covenant or
provision hereof that cannot be modified or amended without the consent of [the
Note Insurer or] the Holder of each Note. In the case of any such waiver, the
Issuer, the Indenture Trustee, [the Note Insurer] and the Holders of the Notes
shall be restored to their former positions and rights hereunder, respectively;
but no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee [or the Note Insurer], (b) any suit instituted by any
Noteholder, or group of Noteholders, in each case holding in the aggregate more
than 10% of the Voting Interests of the Outstanding Notes or (c) any suit
instituted by any Noteholder for the enforcement of the payment of principal of
or interest on any Note on or after the respective due dates expressed in such
Note and in this Indenture (or, in the case of redemption, on or after the
Redemption Date).
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee [or the Note Insurer], but will suffer and permit the
execution of every such power as though no such law had been enacted.
Section 5.15. Action on Notes. The Indenture Trustee's right to seek
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee, [the Note Insurer] or the Noteholders shall
be impaired by the recovery of any judgment by the Indenture Trustee [or the
Note Insurer] against the Issuer or by the levy of any execution under such
judgment upon any portion of the Collateral or upon any of the assets of the
Issuer. Any money or property collected by the Indenture Trustee shall be
applied in accordance with Section 5.04(b) hereof.
Section 5.16. Performance and Enforcement of Certain Obligations (a)
Promptly following a request from the Indenture Trustee [or the Note Insurer] to
do so and at the Administrator's expense, the Issuer shall take all such lawful
action as the Indenture Trustee may request to compel or secure the performance
and observance by the Depositor and the Servicer, as applicable, of each of
their obligations to the Issuer under or in connection with the Sale and
Servicing Agreement, or by the Seller of its obligations under or in connection
with the Mortgage Loan Sale Agreement and to exercise any and all rights,
remedies, powers and privileges lawfully available to the Issuer under or in
connection with the Sale and Servicing Agreement to the extent and in the manner
directed by the Indenture Trustee, or [the Note Insurer] including the
transmission of notices of default on the part of the Depositor, the Seller or
the Servicer thereunder and the institution of legal or administrative actions
or proceedings to compel or secure performance by the Depositor, the Seller or
the Servicer of each of their obligations under the Sale and Servicing Agreement
or the Mortgage Loan Sale Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, [with the prior written consent of the Note Insurer, and
shall at the direction of the Note Insurer or with the prior written consent of
the Note Insurer], and at the direction (which direction shall be in writing or
by telephone, confirmed in writing promptly thereafter) of the Majority Highest
Priority Class Noteholders shall, exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Depositor or the Servicer under
or in connection with the Sale and Servicing Agreement, or against the Seller
under or in connection with the Mortgage Loan Sale Agreement including the right
or power to take any action to compel or secure performance or observance by the
Depositor, the Seller or the Servicer, as the case may be, of each of their
obligations to the Issuer thereunder and to give any consent, request, notice,
direction, approval, extension, or waiver under the Sale and Servicing Agreement
or the Mortgage Loan Sale Agreement, as the case may be, and any right of the
Issuer to take such action shall be suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of Indenture Trustee. (a) If an Event of Default
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and
no implied covenants or obligations shall be read into this Indenture
against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates
or opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; PROVIDED, HOWEVER, that the Indenture
Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 6.01;
(ii) the Indenture Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it is
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with
a direction received by it pursuant to Section 5.11 hereof.
(d) Every provision of this Indenture that in any way relates to the
Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this Section
6.01.
(e) The Indenture Trustee shall not be liable for interest on any
money received by it except as the Indenture Trustee may agree in writing with
the Issuer.
(f) Money held in trust by the Indenture Trustee shall be segregated
from other funds except to the extent permitted by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture Trustee
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 it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it; PROVIDED, HOWEVER, that the Indenture Trustee shall
not refuse or fail to perform any of its duties hereunder solely as a result of
nonpayment of its normal fees and expenses and PROVIDED, FURTHER, that nothing
in this Section 6.01(g) shall be construed to limit the exercise by the
Indenture Trustee of any right or remedy permitted under this Indenture or
otherwise in the event of the Issuer's failure to pay the Indenture Trustee's
fees and expenses pursuant to Section 6.07 hereof. In determining that such
repayment or indemnity is not reasonably assured to it, the Indenture Trustee
must consider not only the likelihood of repayment or indemnity by or on behalf
of the Issuer but also the likelihood of repayment or indemnity from amounts
payable to it from the Collateral pursuant to Section 6.07 hereof.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
(i) The Indenture Trustee shall not be required to take notice or be
deemed to have notice or knowledge of any Event of Default (other than an Event
of Default pursuant to Section 5.01(a)(i) or (ii) hereof) unless a Responsible
Officer of the Indenture Trustee shall have received written notice thereof or
otherwise shall have actual knowledge thereof. In the absence of receipt of
notice or such knowledge, the Indenture Trustee may conclusively assume that
there is no Event of Default.
(j) The Administrator, on behalf of the Indenture Trustee, shall, and
hereby agrees that it will, hold the Note Insurance Policy in trust, and will
hold any proceeds of any claim on the Note Insurance Policy in trust solely for
the use and benefit of the Noteholders.
Section 6.02. Rights of Indenture Trustee.
(a) The Indenture Trustee may rely on any document believed by it to
be genuine and to have been signed or presented by the proper person. The
Indenture Trustee need not investigate any fact or matter stated in any such
document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel from the appropriate
party. The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on an Officer's Certificate or Opinion
of Counsel from the appropriate party.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee. Notwithstanding anything to the
contrary herein, the Indenture Trustee shall remain liable for the performance
of any of its obligations hereunder or under the Basic Documents.
(d) The Indenture Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or within its
rights or powers; PROVIDED, HOWEVER, that such action or omission by the
Indenture Trustee does not constitute willful misconduct, negligence or bad
faith. Subject to the provisions of this Indenture, in no event shall the
appointment of any Custodian pursuant to a Custodial Agreement diminish the
obligations of the Indenture Trustee hereunder.
(e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
with respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
Section 6.03. Individual Rights of Indenture Trustee. The Indenture
Trustee in its individual or any other capacity other than as Indenture Trustee
may become the owner or pledgee of Notes and may otherwise deal with the Issuer
or its Affiliates with the same rights it would have if it were not Indenture
Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying agent may
do the same with like rights. However, the Indenture Trustee must comply with
Sections 6.11 and 6.12 hereof.
Section 6.04. Indenture Trustee's Disclaimer. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, and shall not be accountable for the
Issuer's use of the proceeds from the Notes or responsible for any statement of
the Issuer in the Indenture or in any document issued in connection with the
sale of the Notes or in the Notes other than the Indenture Trustee's certificate
of authentication.
Section 6.05. Notices of Default. If a Default occurs and is
continuing and if it is known to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall mail to [the Note Insurer] notice of the Default
after it occurs and each Noteholder notice of the Default within 90 days after
it occurs. Except in the case of a Default in payment of principal of or
interest on any Note (including payments pursuant to the mandatory redemption
provisions of such Note), the Indenture Trustee may withhold the notice if and
so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
Section 6.06. Reports by Indenture Trustee to Holders. The Indenture
Trustee shall deliver to each Noteholder such information as may be required to
enable such Holder to prepare its federal and state income tax returns.
Section 6.07. Compensation and Indemnity. As compensation for its
services hereunder, the Indenture Trustee shall be entitled to receive, on each
Distribution Date, investment income from the Note Distribution Account and the
Certificate Distribution Account as specified in [Section 6.01] of the Sale and
Servicing Agreement (which compensation shall not be limited by any law on
compensation of a trustee of an express trust). The Seller agrees to indemnify
the Indenture Trustee against any and all loss, liability or expense (including
attorneys' fees) incurred by it in connection with the administration of this
trust and the performance of its duties hereunder or any of the other Basic
Documents. The Indenture Trustee shall notify the Issuer, [the Note Insurer] and
the Seller promptly of any claim for which it may seek indemnity. Failure by the
Indenture Trustee so to notify the Issuer and the Seller shall not relieve the
Issuer or the Seller of its obligations hereunder. The Issuer shall or shall
cause the Seller to defend any such claim, and the Indenture Trustee may have
separate counsel reasonably acceptable to the Seller and the Issuer shall or
shall cause the Seller to pay the reasonable fees and expenses of such counsel.
Neither the Issuer nor the Seller need reimburse any expense or indemnify
against any loss, liability or expense incurred by the Indenture Trustee through
the Indenture Trustee's own willful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section 6.07 shall survive the discharge of this Indenture. When the
Indenture Trustee incurs expenses in connection with the occurrence of a Default
specified in Section 5.01(a)(v) or (vi) hereof with respect to the Issuer, the
expenses are intended to constitute expenses of administration under Title 11 of
the United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
Section 6.08. Replacement of Indenture Trustee. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee
may resign at any time by so notifying the Issuer [and the Note Insurer]. [The
Note Insurer or] the Holders of a Majority of the Voting Interests of the
Outstanding Notes [with the consent of the Note Insurer] may remove the
Indenture Trustee by so notifying the Indenture Trustee and may appoint a
successor Indenture Trustee [acceptable to the Note Insurer]. The Issuer shall
remove the Indenture Trustee [upon the prior written consent of the Note
Insurer] if:
(a) the Indenture Trustee fails to comply with Section 6.11 hereof;
(b) the Indenture Trustee is adjudged a bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the Indenture
Trustee or its property;
(d) the Indenture Trustee otherwise becomes incapable of acting; or
(e) the Indenture Trustee breaches any representation or warranty or
covenant made by it under any Basic Document.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), [the Note
Insurer may and if it fails to] the Issuer shall promptly appoint a successor
Indenture Trustee [acceptable to the Note Insurer] that satisfies the
eligibility requirements of Section 6.11.
The resigning or removed Indenture Trustee shall cooperate with the
Servicer and any successor Indenture Trustee in effecting the termination of the
resigning or removed Indenture Trustee's responsibilities and rights hereunder
and shall promptly provide such successor Indenture Trustee all documents and
records reasonably requested by it to enable it to assume the Indenture
Trustee's functions hereunder. The successor Indenture Trustee shall deliver a
written acceptance of its appointment to the retiring Indenture Trustee, [the
Note Insurer] and to the Issuer. Thereupon the resignation or removal of the
retiring Indenture Trustee shall become effective, and the successor Indenture
Trustee shall have all the rights, powers and duties of the Indenture Trustee
under this Indenture. The successor Indenture Trustee shall mail a notice of its
succession to Noteholders. The retiring Indenture Trustee shall promptly
transfer all property held by it as Indenture Trustee to the successor Indenture
Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, [the Note Insurer], the Issuer or the Holders of a majority
of the Voting Interests of Outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Indenture Trustee [acceptable to
the Note Insurer]. If the Indenture Trustee fails to comply with Section 6.11
hereof, any Noteholder [with the prior written consent of the Note Insurer] may
petition any court of competent jurisdiction for the removal of the Indenture
Trustee and the appointment of a successor Indenture Trustee [acceptable to the
Note Insurer]. Notwithstanding the replacement of the Indenture Trustee pursuant
to this Section 6.08, the Issuer's and the Administrator's obligations under
Section 6.07 hereof shall continue for the benefit of the retiring Indenture
Trustee.
Section 6.09. Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; PROVIDED,
HOWEVER, that such corporation or banking association shall [be acceptable to
the Note Insurer] and otherwise be qualified and eligible under Section 6.11
hereof. The Indenture Trustee shall provide [the Note Insurer and] the Rating
Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
Section 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee. (a) Notwithstanding any other provisions of this Indenture,
at any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Collateral may at the time be located, the
Indenture Trustee shall have the power, [with the prior written consent of the
Note Insurer], and may execute and deliver all instruments to appoint one or
more Persons to act as a co-trustee or co- trustees, or separate trustee or
separate trustees, of all or any part of the Trust Estate, and to vest in such
Person or Persons, in such capacity and for the benefit of the Noteholders [and
the Note Insurer] such title to the Collateral, or any part hereof, and, subject
to the other provisions of this Section, such powers, duties, obligations,
rights and trusts as the Indenture Trustee [or the Note Insurer] may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
6.11 hereof and no notice to Noteholders of the appointment of any co-trustee or
separate trustee shall be required under Section 6.08 hereof; [provided that the
Indenture Trustee shall deliver notice of any such co-trustee or separate
trustee to the Note Insurer].
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that
under any law of any jurisdiction in which any particular act or acts
are to be performed the Indenture 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
Collateral or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
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 VI. 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, jointly with the Indenture
Trustee, subject to all the provisions of this Indenture, specifically including
every provision of this Indenture relating to the conduct of, affecting the
liability of, or affording protection to, the Indenture Trustee. Every such
instrument shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or co-
trustee shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 6.11. Eligibility; Disqualification. The Indenture Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The Indenture
Trustee [shall be acceptable to the Note Insurer] and shall have a combined
capital and surplus of at least [$50,000,000] as set forth in its most recent
published annual report of condition and it or its parent shall have a long-term
debt rating of not less than ["A"] by S&P or shall otherwise be acceptable to
each Rating Agency. The Indenture Trustee shall comply with TIA Section 310(b),
including the optional provision permitted by the second sentence of TIA Section
310(b)(9); PROVIDED, HOWEVER, that there shall be excluded from the operation of
TIA Section 310(b)(1) any indenture or indentures under which other securities
of the Issuer are outstanding if the requirements for such exclusion set forth
in TIA Section 310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against Issuer. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee which has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
Section 6.13. Appointment of Agent. The Indenture Trustee hereby
appoints Bankers Trust Company as its agent (referred to in the Basic Documents
as the "Administrator") and, as necessary, its attorney in fact, for the purpose
of performing the duties of the Indenture Trustee under this Agreement and the
Custodial Agreement relating to compliance with tax requirements and related
reporting obligations, SEC reporting, distributions and related reporting
requirements, registration, execution and authentication of Notes in its
capacity as Note Registrar, establishment and maintenance of accounts and the
holding of the Trust Estate (other than the Mortgage Files), and such other
obligations as are set forth in the Agency Agreement, including but not limited
to those obligations set forth in Section 6.01 of this Agreement.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS'
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses
of Noteholders. The Issuer will furnish or cause to be furnished to the
Indenture Trustee (a) not more than five days after each Record Date, a list, in
such form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders of Notes as of such Record Date, (b) at such other
times as the Indenture Trustee may request in writing, within 30 days after
receipt by the Issuer of any such request, a list of similar form and content as
of a date not more than 10 days prior to the time such list is furnished;
PROVIDED, HOWEVER, that so long as the Indenture Trustee is the Note Registrar,
no such list shall be required to be furnished. [The Indenture Trustee, or if
the Indenture Trustee is no longer the Note Registrar, the Issuer shall furnish
to the Note Insurer in writing on an annual basis and at such times as the Note
Insurer shall request a copy of the list of Noteholders.]
Section 7.02. Preservation of Information; Communications to
Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
in Section 7.01 hereof and the names and addresses of Holders of Notes received
by the Indenture Trustee in its capacity as Note Registrar. The Indenture
Trustee may destroy any list furnished to it as provided in such Section 7.01
upon receipt of a new list so furnished. [The Indenture Trustee shall make such
list available to the Note Insurer upon request.]
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall
have the protection of TIA Section 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Indenture Trustee [and the Note Insurer],
within 15 days after the Issuer is required to file the same with the
Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the Commission may from time to time by rules and
regulations prescribe) that the Issuer may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee, [the Note Insurer] and the
Commission in accordance with the rules and regulations prescribed
from time to time by the Commission such additional information,
documents and reports with respect to compliance by the Issuer with
the conditions and covenants of this Indenture as may be required from
time to time by such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA Section
313(c)) such summaries of any information, documents and reports
required to be filed by the Issuer pursuant to clauses (i) and (ii) of
this Section 7.03(a) and by rules and regulations prescribed from time
to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. Reports by Indenture Trustee. If required by TIA Section
313(a), within 60 days after each [ ] 1, beginning with [ ], the Indenture
Trustee shall mail to [the Note Insurer] and each Noteholder as required by TIA
Section 313(c) a brief report dated as of such date that complies with TIA
Section 313(a). The Indenture Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Indenture Trustee with the Commission and each securities
exchange, if any, on which the Notes are listed. The Issuer shall notify the
Indenture Trustee if and when the Notes are listed on any securities exchange.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money.
(a) General. Except as otherwise expressly provided herein, the
Indenture Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall apply
all such money received by it as provided in this Indenture. Except as otherwise
expressly provided in this Indenture, if any default occurs in the making of any
payment or performance under any agreement or instrument that is part of the
Collateral, the Indenture Trustee may, and upon written request of the
Securities Insurer shall, take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article V hereof.
(b) [Claims Under Note Insurance Policy. The Notes will be insured by
the Note Insurance Policy pursuant to the terms set forth therein,
notwithstanding any provisions to the contrary contained in this Indenture or
the Sale and Servicing Agreement. All amounts received under the Note Insurance
Policy shall be used solely for the payment to Noteholders of principal and
interest on the Insured Notes.]
Section 8.02. Trust Accounts; Distributions. (a) On or prior to the
Closing Date, the Issuer shall cause the Servicer to establish and maintain, or
the Indenture Trustee shall establish and maintain, in the name of the Indenture
Trustee for the benefit of the Noteholders [and the Note Insurer], or on behalf
of the Owner Trustee for the benefit of the Securityholders, the Trust Accounts,
as provided in the Sale and Servicing Agreement. The Issuer shall cause the
Servicer to, and the Paying Agent shall, deposit amounts into each of the Trust
Accounts in accordance with the terms hereof and the Sale and Servicing
Agreement.
(b) On each Distribution Date, to the extent funds are available in
the Note Distribution Account, the Indenture Trustee shall either retain funds
in the Note Distribution Account for distribution on such date in accordance
with [Section 6.05] of the Sale and Servicing Agreement or make the withdrawals
from the Note Distribution Account and deposits into the Certificate
Distribution Account for distribution on such Distribution Date as required
pursuant to [Section 6.05] of the Sale and Servicing Agreement.
(c) On each Distribution Date and each Redemption Date, to the extent
of the interest of the Indenture Trustee in the Certificate Distribution Account
(as provided in [Section 6.07] of the Sale and Servicing Agreement), the
Indenture Trustee hereby authorizes the Owner Trustee or the Paying Agent, as
applicable, to make the distributions from the Certificate Distribution Account
as required pursuant to [Section 6.05] of the Sale and Servicing Agreement.
(d) [The Indenture Trustee shall make claims under the Note Insurance
Policy pursuant to [Section 6.04] of the Sale and Servicing Agreement and in
accordance with the Note Insurance Policy. The Indenture Trustee shall deposit
any Insured Payment received from the Note Insurer in the Note Distribution
Account for payment to Insured Noteholders. With respect to claims under the
Note Insurance Policy for a Preference Amount, the Indenture Trustee shall
distribute such amount in accordance with the terms of the Note Insurance
Policy. All amounts received under the Note Insurance Policy shall be used
solely for the payment to Noteholders of principal and interest on the Insured
Notes.]
Section 8.03. General Provisions Regarding Accounts. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Trust Accounts shall be invested in accordance with
the provisions of the Sale and Servicing Agreement, and all income or other gain
from investments of moneys deposited in the Trust Accounts shall be disbursed in
accordance with the provisions of the Sale and Servicing Agreement. The Issuer
will not direct the Indenture Trustee to make any investment of any funds or to
sell any investment held in any of the Trust Accounts unless the security
interest Granted and perfected in such account will continue to be perfected in
such investment or the proceeds of such sale, in either case without any further
action by any Person.
(b) Subject to Section 6.01(c) hereof, the Indenture Trustee shall not
in any way be held liable by reason of any insufficiency in any of the Trust
Accounts resulting from any loss on any Eligible Investment included therein
except (i) for losses attributable to the Indenture Trustee's failure to make
payments on such Eligible Investments issued by the Indenture Trustee, in its
commercial capacity as principal obligor and not as trustee, in accordance with
their terms and (ii) as expressly provided herein or in the Sale and Servicing
Agreement.
Section 8.04. Servicer's Monthly Statements. On each Distribution
Date, the Indenture Trustee shall deliver the Servicer's Monthly Remittance
Report with respect to such Distribution Date to DTC, the Rating Agencies [and
the Note Insurer].
Section 8.05. Release of Collateral. (a) Subject to the payment of its
fees and expenses pursuant to Section 6.07 hereof, the Indenture Trustee may,
and when required by the provisions of this Indenture or the Sale and Servicing
Agreement shall, execute instruments to release property from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Indenture or the Sale and Servicing Agreement. No party relying upon an
instrument executed by the Indenture Trustee as provided in this Article VIII
shall be bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due to [the Note Insurer], the Indenture Trustee and
the Servicer pursuant to this Indenture, the Sale and Servicing Agreement and
the Basic Documents have been paid, release any remaining portion of the
Collateral that secured the Notes from the lien of this Indenture and release to
the Issuer or any other Person entitled thereto any funds then on deposit in the
Trust Accounts. The Indenture Trustee shall release property from the lien of
this Indenture pursuant to this Subsection (b) only upon receipt by it [and the
Note Insurer] of an Issuer Request accompanied by an Officer's Certificate, an
Opinion of Counsel and (if required by the TIA) Independent Certificates in
accordance with TIA Sections 314(c) and 314(d)(1) meeting the applicable
requirements of Section 11.01 hereof.
Section 8.06. Opinion of Counsel. The Indenture Trustee [and the Note
Insurer] shall receive at least seven days' prior notice when requested by the
Issuer to take any action pursuant to Section 8.05(a) hereof, accompanied by
copies of any instruments involved, and the Indenture Trustee [and the Note
Insurer] may also require, as a condition to such action, an Opinion of Counsel,
in form and substance satisfactory to the Indenture Trustee [and the Note
Insurer], stating the legal effect of any such action, outlining the steps
required to complete the same, and concluding that all conditions precedent to
the taking of such action have been complied with and such action will not
materially and adversely impair the security for the Notes or the rights of the
Noteholders in contravention of the provisions of this Indenture; PROVIDED,
HOWEVER, that such Opinion of Counsel shall not be required to express an
opinion as to the fair value of the Collateral. Counsel rendering any such
opinion may rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with prior
notice to the Rating Agencies [and with the prior written consent of the Note
Insurer], the Issuer and the Indenture Trustee, when authorized by an Issuer
Order, at any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Trustee any property subject or
required to be subjected to the lien of this Indenture, or to subject
to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes [and the Note Insurer], or to surrender any
right or power herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture that may be inconsistent with
any other provision herein or in any supplemental indenture or to
conform the provisions hereof to those of any Offering Document, to
obtain a rating for a Class of Securities from a nationally recognized
statistical rating organization, or to make any other provisions with
respect to matters or questions arising under this Indenture or in any
supplemental indenture; PROVIDED, HOWEVER, that such action shall not
adversely affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI hereof; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
PROVIDED, HOWEVER, that no such supplemental indenture shall be entered into
unless the Indenture Trustee shall have received an Opinion of Counsel stating
that entering into such supplemental indenture will not (A) result in a
"substantial modification" of the Notes under Treasury Regulation Section
1.1001.3 or adversely affect the status of the Notes as indebtedness for federal
income tax purposes or (B) cause the Trust to be subject to an entity level tax.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, [with the prior written
consent of the Note Insurer], when authorized by an Issuer Order, may, also
without the consent of any of the Holders of the Notes but with prior consent of
the Rating Agencies, enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Indenture; PROVIDED,
HOWEVER, that such action shall not, as evidenced by (i) an Opinion of Counsel
or (ii) satisfaction of the Rating Agency Condition, adversely affect in any
material respect the interests of any Noteholder.
Section 9.02. Supplemental Indentures with Consent of Noteholders.
The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, also may, with prior consent of the Rating Agencies, [the Note Insurer]
and with the consent of the Holders of not less than a majority of the Voting
Interests of the Outstanding Notes, by Act of such Holders delivered to the
Issuer and the Indenture Trustee, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; PROVIDED, HOWEVER, that no such supplemental indenture shall, without
the consent of the Holder of each Outstanding Note affected thereby [and the
Note Insurer] if affected thereby:
(a) change the date of payment of any installment of principal of or
interest on any Note, or reduce the Principal Amount (or Notional Amount)
thereof, the Interest Rate thereon or the Termination Price with respect
thereto, change the provisions of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Collateral to payment of
principal of or interest on the Notes, or change any place of payment where, or
the coin or currency in which, any Note or the interest thereon is payable, or
impair the right to institute suit for the enforcement of the provisions of this
Indenture requiring the application of funds available therefor, as provided in
Article V hereof, to the payment of any such amount due on the Notes on or after
the respective due dates thereof (or, in the case of redemption, on or after the
Redemption Date);
(b) reduce the percentage of the Voting Interests of the Outstanding
Notes, the consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any waiver of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences provided for in this Indenture;
(c) modify or alter the provisions of the proviso to the definitions
of the term "Outstanding" or "Voting Interests";
(d) reduce the percentage of the Voting Interests of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Collateral pursuant to Section 5.04 hereof;
(e) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional provisions of
this Indenture or the Basic Documents cannot be modified or waived without the
consent of the Holder of each Outstanding Note affected thereby;
(f) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest or principal
due on any Note on any Distribution Date (including the calculation of any of
the individual components of such calculation) or to affect the rights of the
Holders of Notes to the benefit of any provisions for the mandatory redemption
of the Notes contained herein; or
(g) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Collateral or,
except as otherwise permitted or contemplated herein, terminate the lien of this
Indenture on any property at any time subject hereto or deprive the Holder of
any Note of the security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not
any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
In connection with requesting the consent of the Noteholders pursuant
to this Section 9.02, the Indenture Trustee shall mail to the Holders of the
Notes to which such amendment or supplemental indenture relates a notice setting
forth in general terms the substance of such supplemental indenture. It shall
not be necessary for any Act of Noteholders under this Section 9.02 to approve
the particular form of any proposed supplemental indenture, but it shall be
sufficient if such Act shall approve the substance thereof.
Section 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02 hereof, shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Indenture Trustee
may, but shall not be obligated to, enter into any such supplemental indenture
that affects the Indenture Trustee's own rights, duties, liabilities or
immunities under this Indenture or otherwise. The Indenture Trustee shall
provide a fully executed copy of any supplemental indenture to this Indenture,
to [the Note Insurer and] each Rating Agency.
Section 9.04. Effect of Supplemental Indentures. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and shall be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 9.05. Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee [and the Note Insurer]
as to any matter provided for in such supplemental indenture. If the Issuer or
the Indenture Trustee shall so determine, new Notes so modified as to conform,
in the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
Section 9.07. Amendments to Trust Agreement. Subject to [Section
11.01] of the Trust Agreement, the Indenture Trustee shall, upon Issuer Order,
consent to any proposed amendment to the Trust Agreement or an amendment to or
waiver of any provision of any other document relating to the Trust Agreement,
such consent to be given without the necessity of obtaining the consent of the
Holders of any Notes [but with the consent of the Note Insurer] upon
satisfaction of the requirements under [Section 11.1] of the Trust Agreement.
Nothing in this Section shall be construed to require that any Person
obtain the consent of the Indenture Trustee to any amendment or waiver or any
provision of any document where the making of such amendment or the giving of
such waiver without obtaining the consent of the Indenture Trustee is not
prohibited by this Indenture or by the terms of the document that is the subject
of the proposed amendment or waiver.
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption.
The Majority Residual Interestholders may, at their option, effect an
early redemption of the Notes on any Distribution Date on or after the
Distribution Date on which the Total Loan Balance declines to 10% or less of the
Cut-off Date Pool Balance. The Majority Residual Interestholders shall effect
such early redemption in the manner specified in and subject to the provisions
of [Section 8.01] of the Sale and Servicing Agreement. [If the Majority Residual
Interestholders do not exercise such option within three calendar months of the
date in which it is first entitled to do so, the Note Insurer shall have the
option to effect such early redemption in the manner specified in and subject to
the provisions of [Section 8.01] of the Sale and Servicing Agreement.]
The Indenture Trustee shall furnish the Rating Agencies and [the Note
Insurer] notice of any such redemption in accordance with Section 10.02 hereof.
Section 10.02. Form of Redemption Notice. Notice of redemption under
Section 10.01 hereof shall be given by the Indenture Trustee by first- class
mail, postage prepaid, or by facsimile mailed or transmitted not later than 10
days prior to the applicable Redemption Date to [the Note Insurer and] each
Holder of Notes, as of the close of business on the Record Date preceding the
applicable Redemption Date, at such Holder's address or facsimile number
appearing in the Note Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Termination Price; and
(c) the place where such Notes are to be surrendered for payment of
the Termination Price (which shall be the office or agency of the Issuer to be
maintained as provided in Section 3.02 hereof).
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name of the Issuer and at the expense of the Servicer. Failure to
give to any Holder of any Note notice of redemption, or any defect therein,
shall not impair or affect the validity of the redemption of any other Note.
Section 10.03. Notes Payable on Redemption Date; Provision for Payment
of Indenture Trustee and Note Insurer. The Notes to be redeemed shall, following
notice of redemption as required by Section 10.02 hereof (in the case of
redemption pursuant to Section 10.01) hereof, on the Redemption Date become due
and payable at the Termination Price and (unless the Issuer shall default in the
payment of the Termination Price) no interest shall accrue thereon for any
period after the date to which accrued interest is calculated for purposes of
calculating the Termination Price. The Issuer may not redeem the Notes unless
(i) all outstanding obligations under the Notes have been paid in full and (ii)
the Indenture Trustee has been paid all amounts to which it is entitled
hereunder [and the Note Insurer has been paid all Reimbursement Amounts to which
it is entitled as of the applicable Redemption Date].
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture (except with respect to the Servicer's
servicing activity in the ordinary course of its business), the Issuer shall
furnish to the Indenture Trustee [and the Note Insurer] (i) an Officer's
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with, (ii) an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with and (iii) (if required by
the TIA) an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this Section, except that, in the case of
any such application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.01(a) hereof
or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Issuer
of the Collateral or other property or securities to be so deposited.
(c) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in subsection (b) above, the Issuer shall
also deliver to the Indenture Trustee [and the Note Insurer] an Independent
Certificate as to the same matters, if the fair value to the Issuer of the
securities to be so deposited and of all other such securities made the basis of
any such withdrawal or release since the commencement of the then-current fiscal
year of the Issuer, as set forth in the certificates delivered pursuant to
subsection (b) above and this subsection (c), is 10% or more of the Outstanding
Amount of the Notes, but such a certificate need not be furnished with respect
to any securities so deposited, if the fair value thereof to the Issuer as set
forth in the related Officer's Certificate is less than [$25,000] or less than
one percent of the Outstanding Amount of the Notes.
(d) Whenever any property or securities are to be released from the
lien of this Indenture, the Issuer shall also furnish to the Indenture Trustee
[and the Note Insurer] an Officer's Certificate certifying or stating the
opinion of each person signing such certificate as to the fair value (within 90
days of such release) of the property or securities proposed to be released and
stating that in the opinion of such person the proposed release will not impair
the security under this Indenture in contravention of the provisions hereof.
(e) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in subsection (d) above, the Issuer shall
also furnish to the Indenture Trustee [and the Note Insurer] an Independent
Certificate as to the same matters if the fair value of the property or
securities and of all other property, other than securities released from the
lien of this Indenture since the commencement of the then-current calendar year,
as set forth in the certificates required by subsection (d) above and this
subsection (e), equals 10% or more of the Outstanding Amount of the Notes, but
such certificate need not be furnished in the case of any release of property or
securities if the fair value thereof as set forth in the related Officer's
Certificate is less than [$25,000] or less than one percent of the then
Outstanding Amount of the Notes.
Section 11.02. Form of Documents Delivered to Indenture Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Servicer, the Depositor, the Issuer or the
Administrator, stating that the information with respect to such factual matters
is in the possession of the Servicer, the Depositor, the Issuer or the
Administrator, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI hereof.
Section 11.03. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Indenture Trustee, and,
where it is hereby expressly required, to the Issuer. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Noteholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01 hereof) conclusive in favor of the Indenture
Trustee and the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
Section 11.04. Notices, etc., to Indenture Trustee, Issuer, Rating
Agencies and Note Insurer. Any request, demand, authorization, direction,
notice, consent, waiver or Act of Noteholders or other documents provided or
permitted by this Indenture shall be in writing and if such request, demand,
authorization, direction, notice, consent, waiver or act of Noteholders is to be
made upon, given or furnished to or filed with:
(a) the Indenture Trustee by any Noteholder, [the Note Insurer] or by
the Issuer shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at its Corporate
Trust Office, or
(b) the Issuer by the Indenture Trustee, [the Note Insurer] or by any
Noteholder shall be sufficient for every purpose hereunder if in writing and
made, given, furnished or filed with the Issuer addressed to: Finance America
Securities, LLC [ ] Trust [ ], in care of [ ], Attention: [ ], or at any other
address previously furnished in writing to the Indenture Trustee by the Issuer
or the Administrator. The Issuer shall promptly transmit any notice received by
it from the Noteholders to the Indenture Trustee.
Notices required to be given to the Rating Agencies [and the Note
Insurer] by the Issuer, the Indenture Trustee or the Owner Trustee shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, to the applicable address specified in the Sale and Servicing
Agreement.
Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have duly been given.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
Section 11.06. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on
any person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 11.07. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 11.08. Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors, co-trustees and agents.
Section 11.09. Separability. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 11.10. Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Collateral, any benefit or any legal or equitable right, remedy or claim
under this Indenture. Each Noteholder and Note Owner, by acceptance of a Note
or, in the case of a Note Owner, a beneficial interest in a Note, consents to
and agrees to be bound by the terms and conditions of this Indenture.
Section 11.11. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.12. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF [ ], AND TO THE EXTENT PERMITTED BY LAW
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.
Section 11.13. Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.14. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense of the Servicer accompanied by an
Opinion of Counsel (which may be counsel to the Indenture Trustee or any other
counsel reasonably acceptable to the Indenture Trustee [and the Note Insurer])
to the effect that such recording is necessary either for the protection of the
Noteholders or any other Person secured hereunder or for the enforcement of any
right or remedy granted to the Indenture Trustee under this Indenture.
Section 11.15. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or, except as expressly provided for in
Article VI hereof, under this Indenture or any certificate or other writing
delivered in connection herewith or therewith, against (i) the Indenture Trustee
or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director, employee or agent of the Indenture Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Owner Trustee or the Indenture Trustee or of any successor or assign of the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such Person may expressly have agreed (it being understood that the Indenture
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity. For all purposes of this Indenture, in the performance of
any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
Section 11.16. No Petition. The Indenture Trustee, by entering into
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Depositor, the
Servicer or the Issuer, or join in any institution against the Depositor, the
Servicer or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law, in connection with any
obligations relating to the Notes, this Indenture or any of the Basic Documents.
Section 11.17. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee [or the Note
Insurer], during the Issuer's normal business hours, to examine all the books of
account, records, reports and other papers of the Issuer, to make copies and
extracts therefrom, to cause such books to be audited by Independent certified
public accountants, and to discuss the Issuer's affairs, finances and accounts
with the Issuer's officers, employees, and Independent certified public
accountants, all at such reasonable times and as often as may reasonably be
requested. The Indenture Trustee shall and shall cause its representatives to
hold in confidence all such information except to the extent disclosure may be
required by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Indenture Trustee may reasonably
determine that such disclosure is consistent with its obligations hereunder.
Section 11.18. [Grant of Noteholder Rights to Note Insurer. In
consideration for the guarantee of the Insured Notes by the Note Insurer
pursuant to the Note Insurance Policy, the Noteholders hereby grant to the Note
Insurer the right to act as the holder of 100% of the Outstanding Notes for the
purpose of exercising the rights of the Holders of the Notes hereunder,
including the voting rights of such Holders, but excluding those rights to
distributions under Section 8.02 hereof; provided that the preceding grant of
rights to the Note Insurer by the Noteholders shall be subject to Section 11.20
hereof. The rights of the Note Insurer to direct certain actions and consent to
certain actions of the Noteholders hereunder will terminate at such time as the
Class Principal Amount of each Class of Insured Notes has been reduced to zero
and the Note Insurer has been reimbursed for all Insured Payments and any other
amounts owed under the Note Insurance Policy and the Insurance Agreement and the
Note Insurer has no further obligation under the Note Insurance Policy.]
Section 11.19. [Third Party Beneficiary. The parties hereto
acknowledge that the Note Insurer is an express third party beneficiary hereof
entitled to enforce any rights reserved to it hereunder as if it were actually a
party hereto.]
Section 11.20. [Suspension and Termination of Note Insurer's Rights.
(a) During the continuation of a Note Insurer Default, rights granted or
reserved to the Note Insurer hereunder shall vest instead in the Noteholders;
provided that the Note Insurer shall be entitled to any distributions in
reimbursement of the Note Insurer Reimbursement Amount, and the Note Insurer
shall retain those rights under Section 9.02 hereof to consent to any supplement
to this Indenture.
(b) At such time at either (i) the Class Principal Amount of each
Class of Insured Notes has been reduced to zero or (ii) the Note Insurance
Policy has been terminated following a Note Insurer Default, and in case of
either (i) or (ii) the Note Insurer has been reimbursed for all Insured Payments
and any other amounts owed under the Note Insurance Policy and the Insurance
Agreement (and the Note Insurer no longer has any obligation under the Note
Insurance Policy, except for breach thereof by the Note Insurer), then the
rights and benefits granted or reserved to the Note Insurer hereunder (including
the rights to direct certain actions and receive certain notices) shall
terminate and the Noteholders shall be entitled to exercise of such rights and
to receive such benefits of the Note Insurer following such termination to the
extent that such rights and benefits are applicable to the Noteholders.]
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
FINANCE AMERICA SECURITIES, LLC [ ]
TRUST [ ], as Issuer
By: [ ],
not in its individual capacity but
solely as Owner Trustee
By: _______________________________
Name:
Title:
[ ],
as Indenture Trustee
By: ___________________________________
Name:
Title:
Accepted and Agreed to for
purposes of Section 6.07 only:
[ ],
as Seller
By: ___________________________________
Name:
Title:
<PAGE>
STATE OF )
)
COUNTY OF )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ___________________________,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of the
said ___________, not in its individual capacity, but solely as Owner Trustee on
behalf of FINANCE AMERICA SECURITIES, LLC [ ] TRUST [ ], a [Delaware] business
trust, and that such person executed the same as the act of said business trust
for the purpose and consideration therein expressed, and in the capacities
therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of __________,
[ ].
Notary Public in and for the State of [ ]
My commission expires:
<PAGE>
STATE OF )
)
COUNTY OF )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared __________________________,
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of
___________________, a ________________________, and that such person executed
the same as the act of said corporation for the purpose and consideration
therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ___ day of _________,
[ ].
Notary Public in and for the State of [ ] (Seal)
My commission expires:
<PAGE>
EXHIBIT A
FORM OF NOTES
Exhibit 4.5
Form of Sale and Servicing Agreement
<PAGE>
Exhibit No. 4.5
FINANCE AMERICA SECURITIES, LLC MORTGAGE LOAN TRUST [ ],
as Issuer
FINANCE AMERICA SECURITIES, LLC,
as Depositor
[ ],
as Servicer
and
[ ],
as Indenture Trustee
SALE AND SERVICING AGREEMENT
Dated as of [ ]
Finance America Securities, LLC Mortgage Loan Trust [ ]
Asset Backed Securities
<PAGE>
<TABLE>
<CAPTION>
Table of Contents
Page
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Definitions:...................................................................1
Section 1.02. Provisions of General Application.............................................25
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans; Special Deposit; Priority and
Subordination of Ownership Interests..........................................26
Section 2.02. Possession of Mortgage Files; Access to Mortgage Files........................27
Section 2.03. Delivery of Mortgage Loan Documents [and Note Insurance Policy]...............28
Section 2.04. Acceptance by Indenture Trustee of the Mortgage Loans; Certain
Substitutions; Certification..................................................30
Section 2.05. Further Action Evidencing Assignment..........................................31
Section 2.06. Conveyance of the Subsequent Mortgage Loans...................................32
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations of the Servicer...............................................32
Section 3.02. Representations, Warranties and Covenants of the Depositor....................33
Section 3.03. Purchase And Substitution.....................................................35
ARTICLE IV
[RESERVED]
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01. Appointment of the Servicer...................................................36
Section 5.02. Subservicers..................................................................37
Section 5.03. Collection of Certain Mortgage Loan Payments; Collection Account..............39
Section 5.04. Permitted Withdrawals from the Collection Account.............................40
Section 5.05. Payment of Taxes, Insurance and Other Charges.................................42
Section 5.06. Maintenance Of Casualty Insurance.............................................42
Section 5.07. Maintenance of Mortgage Impairment Insurance Policy...........................43
Section 5.08. Fidelity Bond; Errors and Omissions Policy....................................43
Section 5.09. Collection of Taxes, Assessments and Other Items; Servicing Account...........44
Section 5.10. Periodic Filings With The Securities And Exchange Commission;
Additional Information........................................................44
Section 5.11. Enforcement of Due-on-Sale Clauses; Assumption Agreements.....................44
Section 5.12. Realization Upon Defaulted Mortgage Loans.....................................45
Section 5.13. Indenture Trustee to Cooperate; Release of Mortgage Files.....................46
Section 5.14. Servicing Fee; Servicing Compensation.........................................48
Section 5.15. Reports to the Indenture Trustee and the Depositor and the Note
Insurer; Collection Account Statements........................................48
Section 5.16. Annual Statement as to Compliance.............................................48
Section 5.17. Annual Independent Public Accountants' Servicing Report.......................49
Section 5.18. Purchase of Defaulted Mortgage Loans..........................................49
Section 5.19. Reports to be Provided by the Servicer........................................49
Section 5.20. Adjustment of Servicing Compensation In Respect of Prepaid Mortgage
Loans.........................................................................50
Section 5.21. Periodic Advances.............................................................50
Section 5.22. Inspections by Note Insurer...................................................51
Section 5.23. Maintenance of Corporate Existence and Licenses; Merger or
Consolidation of the Servicer.................................................51
Section 5.24. Assignment of Agreement by Servicer; Servicer Not to Resign...................51
Section 5.25. Information Reports to be Filed by the Servicer...............................52
Section 5.26. [Reserved]....................................................................52
Section 5.27. Waiver of Prepayment Premiums.................................................52
Section 5.28. Adjustable Rate Mortgage Loans................................................52
Section 5.29. [Notices of Material Events]..................................................53
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS
Section 6.01. Establishment of Trust Accounts and Certificate Distribution Account;
Deposits to the Trust Accounts and Certificate Distribution Account...........53
Section 6.02. Permitted Withdrawals from the Note Distribution Account and the
Certificate Distribution Account..............................................59
Section 6.03. Collection of Money...........................................................59
Section 6.04. [The Note Insurance Policy]...................................................60
Section 6.05. Distributions.................................................................62
Section 6.06. [Reserved].63
Section 6.07. Reports by Indenture Trustee..................................................63
Section 6.08. Additional Reports by Indenture Trustee.......................................65
Section 6.09. Compensating Interest.........................................................66
Section 6.10. [Effect of Payments by the Note Insurer; Subrogation].........................66
Section 6.11. Allocation of Realized Losses.................................................66
Section 6.12. Pre-Funding Account...........................................................66
Section 6.13. Capitalized Interest Account..................................................66
Section 6.14. Determination of LIBOR........................................................66
Section 6.15. The Reserve Fund..............................................................67
ARTICLE VII
DEFAULT
Section 7.01. Events of Default.............................................................67
Section 7.02. Indenture Trustee to Act; Appointment of Successor............................69
Section 7.03. Waiver of Defaults............................................................72
Section 7.04. [Mortgage Loans, Trust Estate and Accounts Held for Benefit of the Note
Insurer]......................................................................73
Section 7.05. [Rights of the Note Insurer to Exercise Rights of Securityholders]............73
Section 7.06. [Indenture Trustee to Act Solely with Consent of the Note Insurer]............73
ARTICLE VIII
TERMINATION
Section 8.01. Termination...................................................................73
ARTICLE IX
[RESERVED]
ARTICLE X
[RESERVED]
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Limitation on Liability of the Depositor and the Servicer....................75
Section 11.02. Acts of Securityholders......................................................76
Section 11.03. Amendment....................................................................77
Section 11.04. Recordation of Agreement.....................................................78
Section 11.05. Notices......................................................................78
Section 11.06. Severability of Provisions...................................................78
Section 11.07. Counterparts.................................................................79
Section 11.08. Successors and Assigns.......................................................79
Section 11.09. Headings.....................................................................79
Section 11.10. [Note Insurer Default].......................................................79
Section 11.11. Third Party Beneficiary......................................................79
Section 11.12. [Reserved.]..................................................................79
Section 11.13. Notice to Rating Agencies and Note Insurer.79
Section 11.14. Governing Law................................................................80
Section 11.15. Appointment of Agent.........................................................80
Section 11.16. Taxes........................................................................80
</TABLE>
EXHIBITS
Exhibit A Note Insurance Policy
Exhibit B Mortgage File
Exhibit C Mortgage Loan Schedule
Exhibit D Acknowledgment of Receipt
Exhibit E Initial Certification
Exhibit F Final Certification
Exhibit G Request For Release of Documents
Exhibit H Form of Liquidation Report
Exhibit I Certificate Re Prepaid Loans
Exhibit J Subsequent Transfer Instrument
Exhibit K Forms of Lost Note Affidavit
<PAGE>
SALE AND SERVICING AGREEMENT, dated as of [_________________________],
by and among Finance America Securities, LLC Mortgage Loan Trust [ __________
], a [Delaware business trust], in its capacity as issuer (the "Issuer"),
Finance America Securities, LLC, a Delaware limited liability company, in its
capacity as depositor (the "Depositor"), [ ], a [
_______________________________ ] corporation, in its capacity as servicer
(the "Servicer"), and [ ], a [ _______________________________ ], in its
capacity as indenture trustee (the "Indenture Trustee").
PRELIMINARY STATEMENT:
WHEREAS, the Issuer desires to purchase a pool of Mortgage Loans that
were originated or purchased by [_________________________________________ ]
(the "Seller") in the ordinary course of business of the Seller;
WHEREAS, the Depositor is willing to sell such Mortgage Loans to the
Issuer; and
WHEREAS, the Servicer is willing to service such Mortgage Loans in
accordance with the terms of this Agreement on behalf of the Custodian, the
Owner Trustee, the Indenture Trustee and the Note Insurer;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the Issuer, the Depositor, the Servicer and the Indenture Trustee
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions: Whenever used herein, the following words
and phrases, unless the context otherwise requires, shall have the following
meanings.
Accepted Servicing Practices: The Servicer's normal servicing
practices, which in all material respects will conform to the mortgage
servicing practices of prudent mortgage lending institutions which service for
their own and others' account mortgage loans of the same type as the Mortgage
Loans in the jurisdictions in which the related Mortgaged Properties are
located, which are exercised with prudent and reasonable care and which give
due consideration to the Securityholders' [and the Note Insurer's] reliance on
the Servicer. The Servicer's normal servicing practices, which in all material
respects will conform to its mortgage servicing practices for mortgage loans
of the same type as the Mortgage Loans which it services.
Account: Any Eligible Account established pursuant to Sections 5.03,
5.09, 6.01 or 6.04 hereof.
Accrual Period: With respect to any Distribution Date and any Class of
LIBOR Securities, the one-month period beginning on the immediately preceding
Distribution Date (or on the Closing Date, in the case of the first Accrual
Period) and ending on the day immediately preceding the related Distribution
Date. With respect to any Distribution Date and any other Class of Securities,
the calendar month immediately preceding the month in which such Distribution
Date occurs.
Act: The Securities Act of 1933, as amended.
Addition Notice:
Adjustable Rate Mortgage Loan: Any Mortgage Loan as to which the
related Mortgage Note provides for the adjustment of the Mortgage Rate
applicable thereto.
Administration Agreement: The Administration Agreement dated as of
[ ], between [ ], as administrator, and the Issuer.
Administrator: [ ], in its capacity as administrator under the
Administration Agreement.
Affiliate: With respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
Agreement: This Sale and Servicing Agreement, including the Exhibits
hereto, and all amendments hereof and supplements hereto.
Applied Loss Amount:
Appraised Value: As to any Mortgaged Property, the lesser of (i) the
appraised value of such Mortgaged Property based upon the appraisal made at
the time of the origination of the related Mortgage Loan, and (ii) the sales
price of the Mortgaged Property at such time of origination, except in the
case of a Mortgaged Property securing a refinanced or modified Mortgage Loan
as to which it is the lesser of the appraised value determined above or the
appraised value determined in an appraisal at the time of refinancing or
modification, as the case may be.
Assignment Of Mortgage: With respect to each Mortgage Loan, 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 of record the sale of the
Mortgage to the Indenture Trustee for the benefit of the Securityholders [and
the Note Insurer].
[Available Collection Amount: With respect to any Distribution Date,
the sum of (a) all amounts received in respect of the Mortgage Loans or paid
by the Servicer, the Seller or the Depositor (exclusive of amounts not
required to be deposited in the Collection Account) during the related Due
Period (and, in the case of amounts required to be paid by the Seller in
connection with the purchase or substitution of a Deleted Mortgage Loan,
deposited in the Collection Account on or before the related Determination
Date), as reduced by any portion thereof that may not be withdrawn therefrom
pursuant to an order of a United States bankruptcy court of competent
jurisdiction imposing a stay pursuant to Section 362 of the United States
Bankruptcy Code, (b) with respect to the final Distribution Date, or an early
redemption or termination of the Securities pursuant to Section 8.01(b), the
Termination Price, and (c) any income or gain from investment of funds in the
Collection Account.]
[Available Funds: With respect to any Distribution Date, the Available
Collection Amount for such date less the Servicing Fee.]
Balloon Mortgage Loan: Any Mortgage Loan having an original term to
maturity that is shorter than its amortization schedule, and a final Monthly
Payment that is disproportionately large in comparison to other Monthly
Payments.
Balloon Payment: The final scheduled payment under the terms of a
Balloon Mortgage Loan.
[Base Specified Overcollateralization Amount: With respect to any
Distribution Date on which a Step-up Trigger Event has not occurred or is not
continuing, the product of [ ]% and the Cut-off Date Balance; with respect to
any Distribution Date on which a Step-up Trigger Event has occurred or is
continuing, the product of [ ______ ]% and the Cut-off Date Balance.]
Basic Documents: This Agreement, the Indenture, the Trust Agreement,
the Mortgage Loan Purchase Agreement, the Administration Agreement and the
Custodial Agreement.
Basis Risk Shortfall:
Blanket Mortgage: The mortgage or mortgages encumbering a Cooperative
Property.
Business Day: Any day other than (a) a Saturday or Sunday, (b) a day
on which the Note Insurer is closed or (c) a day on which banking institutions
in the State of New York, the State of [__________________________________ ]
(if other than New York) the city in which the Indenture Trustee's corporate
trust office is located are authorized or obligated by law or executive order
to be closed.
[Calculated Loss Percentage: With respect to any Distribution Date,
the fraction, expressed as a percentage, the numerator of which is the Total
Expected Losses for such Distribution Date and the denominator of which is the
Cut-off Date Balance.]
Capitalized Interest Account:
Capitalized Interest Amount:
Certificate(s): Any Residual Interest Certificate.
Certificate Distribution Account: The account established in
accordance with Section 6.01(a)(iii) hereof and maintained on behalf of the
Owner Trustee.
Certificateholder: The holder of a Residual Certificate.
Certificate Register: As defined in the Trust Agreement.
Class: All Securities having the same class designation.
Class Notional Amount:
Class Principal Amount: With respect to each Class of Securities other
than the Residual Interest Certificates and any Class of Notional Securities,
the aggregate of the Principal Amounts of all Securities of such Class at the
date of determination.
Closing Date: [ ].
Collection Account: The account established in accordance with
Sections 5.03(b) and 6.01(a)(i) hereof and maintained by the Servicer, on
behalf of the Indenture Trustee.
Compensating Interest: As defined in Section 6.09.
Cooperative Corporation: The entity that holds title (fee or an
acceptable leasehold estate) to the real property and improvements
constituting the Cooperative Property and which governs the Cooperative
Property, which Cooperative Corporation must qualify as a Cooperative Housing
Corporation under Section 216 of the Code.
Cooperative Loan: Any Mortgage Loan secured by Cooperative Shares and
a Proprietary Lease.
Cooperative Loan Documents: With respect to any Cooperative Loan, (i)
the Cooperative Shares, together with a stock power in blank; (ii) the
original executed Security Agreement and the assignment of the Security
Agreement endorsed in blank; (iii) the original executed Proprietary Lease and
the assignment of the Proprietary Lease endorsed in blank; (iv) the original
executed Recognition Agreement and the assignment of the Recognition Agreement
(or a blanket assignment of all Recognition Agreements) endorsed in blank; (v)
the executed UCC-1 financing statement with evidence of recording thereon,
which has been filed in all places required to perfect the security interest
in the Cooperative Shares and the Proprietary Lease; and (vi) executed UCC-3
financing statements (or copies thereof) or other appropriate UCC financing
statements required by state law, evidencing a complete and unbroken line from
the mortgagee to the Indenture Trustee with evidence of recording thereon (or
in a form suitable for recordation).
Cooperative Property: The real property and improvements owned by the
Cooperative Corporation, that includes the allocation of individual dwelling
units to the holders of the Cooperative Shares of the Cooperative Corporation.
Cooperative Shares: Shares issued by a Cooperative Corporation.
Cooperative Unit: A single family dwelling located in a Cooperative
Property.
Corporate Trust Office: The principal office of the Indenture Trustee,
at which its corporate trust business shall be administered, which office at
the date of execution of this Agreement is located at [ ], or at such other
address as the Indenture Trustee may designate from time to time by notice to
the Noteholders[, the Note Insurer] and the Issuer, or the principal corporate
trust office of any successor Indenture Trustee at the address designated by
such Indenture Trustee by notice to the Noteholder[, the Note Insurer] and the
Issuer.
Cumulative Realized Losses: With respect to any date of determination,
the aggregate of all Realized Losses from the Cut-off Date through the
immediately preceding Determination Date.
Curtailment: With respect to a Mortgage Loan, any payment of principal
received during a Due Period as part of a payment that is in excess of the
amount of the Monthly Payment due for such Due Period and which is not
intended to satisfy the Mortgage Loan in full, nor is intended to cure a
delinquency.
Custodial Agreement: Any custodial agreement entered into by the
Indenture Trustee in accordance with this Agreement. Initially, the Custodial
Agreement dated as of [ ], among [ ], the Indenture Trustee, the Servicer and
the Issuer, as such may be amended or supplemented from time to time.
Custodian: As defined in Section 2.02(c). Initially, the Custodian
shall be [___________________________________].
Custodian Compensation: All amounts payable or reimbursable to the
Custodian pursuant to Sections 11, 12, 13, 14, 15 and 20 of the Custodial
Agreement; provided that any fees and expenses of attorneys payable pursuant
to Section 11 thereof shall not exceed $75,000 per calendar year (on an
average basis), so that any excess not paid pursuant to Section 6.05(b)(i)
EIGHTH shall be paid in a subsequent year.
Cut-off Date: [ ].
Cut-off Date Balance: The Total Loan Balance as of the Cut-off Date.
[DCR: Duff & Phelps Credit Rating Co., or its successor in interest.]
Deferred Amount:
[Deficiency Amount: With respect to any Distribution Date, the excess,
if any, of (a) the sum of (i) for any Distribution Date, the Noteholders'
Interest Distribution Amount and (ii) for any Distribution Date on which the
Overcollateralization Amount is zero, the amount by which the Class Principal
Amount of the Notes as of such Distribution Date (before giving effect to
distributions of principal on the Notes on such Distribution Date) exceeds the
Total Loan Balance for such Distribution Date over (b) the Available Funds
(net of the Premium Amount payable to MBIA, and the Owner Trustee Compensation
and the Custodian Compensation) for such Distribution Date.]
Deleted Mortgage Loan: A Mortgage Loan replaced by or to be replaced
by a Qualified Substitute Mortgage Loan.
[Delinquency Loss Factor: With respect to any Distribution Date, the
aggregate of the Principal Balances of all Mortgage Loans that are (a) 30 to
59 days Delinquent, MULTIPLIED BY [ ______ ]%, (b) 60 to 89 days Delinquent,
MULTIPLIED BY [ _____ ]%, and (c) 90 or more days Delinquent.]
Delinquent: A Mortgage Loan is "delinquent" if any payment due thereon
is not made by the close of business on the day such payment is scheduled to
be due. A Mortgage Loan is "30 days delinquent" if such payment has not been
received by the close of business on the corresponding day of the month
immediately succeeding the month in which such payment was due, or, if there
is no such corresponding day (e.g., as when a 30-day month follows a 31- day
month in which a payment was due on the 31st day of such month) then on the
last day of such immediately succeeding month. Similarly for "60 days
delinquent," "90 days delinquent" and so on.
Depositor: Finance America Securities, LLC, a Delaware limited
liability company, and any successor thereto.
Designated Depository Institution: With respect to the Collection
Account, the trust department of a federal or state chartered depository
institution acceptable to the Note Insurer, acting in its fiduciary capacity,
having combined capital and surplus of at least [$100,000,000]; PROVIDED,
HOWEVER, that if the Collection Account is not maintained with the Indenture
Trustee, (i) such institution shall have a long-term debt rating of at least
["A"] or the equivalent by each Rating Agency and (ii) the Servicer shall
provide the Indenture Trustee [and the Note Insurer] with a statement
identifying the location and account information of the Collection Account
upon a change in the location of such account.
Determination Date: With respect to each Distribution Date, the last
day of the month immediately preceding the month in which such Distribution
Date occurs.
Distribution Date: The [25th] day of any month, or if such [25th] day
is not a Business Day, the first Business Day immediately following,
commencing in [ ].
Due Date: With respect to any Mortgage Loan, the day of the month in
which the related Monthly Payment is due.
Due Period: With respect to each Distribution Date, the calendar month
immediately preceding the month in which such Distribution Date occurs.
Eligible Account: Either (A) a segregated account or accounts
maintained with an institution (which may include the Indenture Trustee,
provided such institution otherwise meets these requirements) whose deposits
are insured by the FDIC, the unsecured and uncollateralized debt obligations
of which institution shall be rated [AA] (or the equivalent) or better by each
Rating Agency and in the highest short term rating category by each Rating
Agency, and which is (i) a federal savings and loan association duly
organized, validly existing and in good standing under the federal banking
laws, (ii) an institution duly organized, validly existing and in good
standing under the applicable banking laws of any state, (iii) a national
banking association (including the Indenture Trustee) duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or (v) approved in writing by the Note
Insurer and each Rating Agency or (B) a segregated trust account or accounts
maintained with the corporate trust department of a federal or state chartered
depository institution acceptable to each Rating Agency [and the Note Insurer]
(the Indenture Trustee and the Custodian shall be deemed acceptable, provided
that the Indenture Trustee or the Custodian, as applicable, otherwise meets
these requirements), having capital and surplus of not less than
[$100,000,000], acting in its fiduciary capacity.
Entitlement Holder: The meaning specified in Section 8-102(a)(7) of
the New York UCC.
Entitlement Order: The meaning specified in Section 8-102(a)(8) of the
New York UCC (I.E., generally, orders directing the transfer or redemption of
any Financial Asset).
ERISA: The Employee Retirement Income Security Act of 1974, as amended.
Event Of Default: One or more of the events described in Section 7.01
hereof.
[Excess Spread: With respect to any Distribution Date, the amount, if
any, by which (a) the Available Funds for such Distribution Date exceed (b)
the sum of the Regular Principal Distribution Amount, the Noteholders'
Interest Distribution Amount, the Premium Amount and the Reimbursement Amount
and the Owner Trustee Compensation and the Custodian Compensation.]
FDIC: The Federal Deposit Insurance Corporation and any successor
thereto.
Fee Letter Agreement: The fee letter agreement between the Owner
Trustee and the Seller attached as Exhibit F to the Trust Agreement.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor
thereto.
Financial Asset: The meaning specified in Section 8-102(a)(9) of the
New York UCC.
[Fitch: Fitch ICBA, Inc., or its successor in interest.]
Fixed Rate Mortgage Loan: Any Mortgage Loan as to which the related
Mortgage Note provides for a fixed Mortgage Rate.
FNMA: The Federal National Mortgage Association and any successor
thereto.
Foreclosure Property: Any real property or personal property securing
a Mortgage Loan that has been acquired by the Servicer through foreclosure,
deed in lieu of foreclosure or similar proceedings in respect of the related
Mortgage Loan.
Mortgage Loan Purchase Agreement: The Mortgage Loan Purchase Agreement
dated as of [____________________________], between the Seller and the
Depositor.
HUD: The United States Department of Housing and Urban Development.
Indenture: The Indenture dated as of [___________________________],
between the Issuer and the Indenture Trustee.
Indenture Trustee: [_______________________], a [__________________],
or any successor trustee appointed as herein provided.
Indenture Trustee Fee:
Indenture Trustee Fee Rate:
Indenture Trustee Remittance Report: As defined in Section 6.07.
Initial Capitalized Interest Amount:
Initial LIBOR Rate:
Initial Mortgage Loan:
[Insurance Agreement: The Insurance Agreement dated as of
[ ______________________________ ] among the Note Insurer, the Seller, the
Depositor, the Servicer, the Issuer and the Indenture Trustee, as such
agreement may be amended or supplemented in accordance with the provisions
thereof.]
Insurance Policy: Any standard hazard insurance policy, flood
insurance policy, earthquake insurance policy or title insurance policy
relating to a Mortgage Loan or a Mortgaged Property.
Insurance Proceeds: Proceeds paid by any insurer pursuant to any
insurance policy covering a Mortgage Loan to the extent such proceeds are not
applied to the restoration of the related Mortgaged Property or released to
the related Mortgagor in accordance with Accepted Servicing Practices.
["Insurance Proceeds" do not include "Insured Payments."]
[Insured Note: Any Note.]
[Insured Noteholder: Any holder of an Insured Note.]
[Insured Payment: As defined in the Note Insurance Policy.]
Interest Rate: With respect to each Class of Securities, the per annum
rate of interest applicable to Securities of such Class, as specified below:
Class Interest Rate
----- -------------
[ ] [ ]%(1)
Residual (2)
(1) The Interest Rate applicable to the Class A Notes remaining
outstanding will be increased by [ ______ ]% with respect to each
Distribution Date occurring after the date on which the [Majority
Residual Interestholders] are first permitted to exercise the option to
redeem or terminate the Securities pursuant to Section 8.01(b).
(2) The Residual Interest Certificates will be issued without a Class
Principal Amount and will not bear interest.
Junior Mortgage Loan: Any Mortgage Loan secured by a junior lien on
the related Mortgaged Property.
Late Payment Rate: As defined in the Insurance Agreement.
LIBOR: With respect to each Accrual Period, the per annum rate
determined pursuant to Section 6.14 on the basis of London interbank offered
rate quotations for one-month Eurodollar deposits, as such quotations may
appear on the display designated as page 3750 on the Dow Jones Telerate
Service (or such other page as may replace such page on that service for the
purpose of displaying London interbank offered quotations of major banks).
LIBOR Security:
LIBOR Determination Date: The second London Business Day preceding the
commencement of each Accrual Period.
Liquidated Mortgage Loan: A Mortgage Loan with respect to which the
related Mortgaged Property has been acquired, liquidated or foreclosed and
with respect to which the Servicer determines, in accordance with Accepted
Servicing Practices, that all Liquidation Proceeds which it expects to recover
have been recovered or that the cost of obtaining any additional recoveries
therefrom would exceed the amount of such recoveries.
Liquidation Expenses: Expenses incurred by the Servicer in connection
with the liquidation of any defaulted Mortgage Loan or property acquired in
respect thereof (including, without limitation, legal fees and expenses,
committee or referee fees, and, if applicable, brokerage commissions and
conveyance taxes), any unreimbursed amount expended by the Servicer pursuant
to Sections 5.05, 5.06 and 5.12 respecting the related Mortgage Loan and any
unreimbursed expenditures for real property taxes or for property restoration
or preservation of the related Mortgaged Property. Liquidation Expenses shall
not include any previously incurred expenses in respect of an Liquidated
Mortgage Loan which have been netted against related Foreclosure Property.
Liquidation Proceeds: Amounts received by the Servicer (including
Insurance Proceeds) in connection with the liquidation of defaulted Mortgage
Loans or property acquired in respect thereof, whether through foreclosure,
sale or otherwise, including payments in connection with such Mortgage Loans
received from the Mortgagor, other than amounts required to be paid to the
Mortgagor pursuant to the terms of the applicable Mortgage or to be applied
otherwise pursuant to law. With respect to a Liquidated Mortgage Loan, any
cash amounts received in connection with the liquidation of such Liquidated
Mortgage Loan, whether through trustee's sale, foreclosure sale or other
disposition, and any other amounts required to be deposited in the Collection
Account pursuant to Section 5.12, in each case other than Post-Liquidation
Proceeds, Insurance Proceeds and Released Mortgaged Property Proceeds.
Loan Purchase Price: With respect to any Mortgage Loan purchased from
the Trust Estate pursuant to this Agreement or the Mortgage Loan Purchase
Agreement, the sum of (i) the outstanding principal balance of such Mortgage
Loan as of the date of purchase, (ii) all interest accrued thereon and unpaid
to the end of the Due Period during which such purchase occurs and (iii) the
amount of any Servicing Advances remaining unreimbursed with respect to such
Mortgage Loan.
Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of such Mortgage Loan, as of the date of origination of the Mortgage
Loan, DIVIDED BY the Appraised Value of the related Mortgaged Property.
London Business Day: Any day on which banks are open for dealing in
foreign currency and exchange in London, England and New York City.
Lost Note Affidavit: Any lost note affidavit provided by the Seller,
substantially in the forms attached hereto as Exhibit K.
Maintenance: With respect to any Cooperative Unit, the rent or fee
paid by the Mortgagor to the Cooperative Corporation pursuant to the
Proprietary Lease.
Majority Residual Interestholders: The Holder or Holders of Residual
Interest Certificates evidencing Percentage Interests in excess of 51% of such
Class.
Majority Securityholders: The Holder or Holders of Securities
evidencing Percentage Interests in excess of 51% of each Class outstanding.
Monthly Payment: As to any Mortgage Loan and any Due Date, the
scheduled payment of principal and interest due thereon for such Due Date.
[Moody's: Moody's Investors Service, or its successor in interest.]
Mortgage: The mortgage, deed of trust or other instrument creating a
lien on the Mortgaged Property.
Mortgage File: The mortgage documents listed in Exhibit B attached
hereto pertaining to a particular Mortgage Loan and any additional documents
required to be added to the Mortgage File pursuant to this Agreement; provided
that whenever the term "Mortgage File" is used to refer to documents actually
received by the Indenture Trustee or the Custodian on behalf of the Indenture
Trustee, such term shall not be deemed to include such additional documents
required to be added unless they are actually so added.
Mortgage Loan: An individual mortgage loan that is assigned and
transferred to the Issuer pursuant to this Agreement and identified on Exhibit
C hereto, together with the rights and obligations of a holder thereof and
payments thereon and proceeds therefrom (other than payments of interest that
accrued on each Mortgage Loan up to and including the Due Date therefor
occurring on or prior to the Cut-off Date), the Mortgage Loans originally
subject to this Agreement being identified on the Mortgage Loan Schedule. As
applicable, Mortgage Loan shall be deemed to refer to the related Foreclosure
Property.
Mortgage Loan Schedule: The list of the Mortgage Loans transferred to
the Trustee or the Custodian on behalf of the Indenture Trustee on or before
the Closing Date or Subsequent Transfer Date as part of the Trust Estate and
attached hereto as Exhibit D and delivered in computer readable format, which
list shall set forth at a minimum the following information as to each
Mortgage Loan:
(i) last name of Mortgagor;
(ii) the Mortgage Loan identifying number;
(iii) the city, state and zip code of the Mortgaged Property;
(iv) the type of property;
(v) the current Monthly Payment as of the Cut-off Date;
(vi) the original number of months to maturity;
(vii) the scheduled maturity date;
(viii) the Principal Balance as of the Cut-off Date (with respect
to an Initial Mortgage Loan) or subsequent Cut-off Date (with respect
to a Subsequent Mortgage Loan);
(ix) the Loan-to-Value Ratio at origination;
(x) the Mortgage Rate as of the date of origination;
(xi) the Mortgage Rate as of the Cut-off Date (with respect to an
Initial Mortgage Loan) or Subsequent Cut-off Date (with respect to a
Subsequent Mortgage Loan);
(xii) the Appraised Value;
(xiii) the stated purpose of the loan at origination;
(xiv) the type of occupancy at origination;
(xv) the documentation type;
(xvi) the loan classification; and
(xvii) the Servicing Fee with respect to such Mortgage Loan,
expressed as a rate per annum.
Such schedule may consist of multiple reports that collectively set
forth all of the information required.
Mortgage Note: The original, executed note or other evidence of the
indebtedness of a Mortgagor under a Mortgage Loan.
Mortgage Pool: The aggregate of the Mortgage Loans identified on the
Mortgage Loan Schedule.
Mortgage Rate: As to any Mortgage Loan, the per annum rate at which
interest accrues under the related Mortgage Note.
Mortgaged Property: The underlying property securing a Mortgage Loan,
consisting of a fee simple estate in a single parcel of land improved by a
Residential Dwelling.
Mortgagor: The obligor on a Mortgage Note.
Net Liquidation Proceeds: As to any Liquidated Mortgage Loan,
Liquidation Proceeds net of, without duplication, Liquidation Expenses and net
of any unpaid Servicing Fees, unreimbursed Periodic Advances and unreimbursed
Servicing Advances made by the Servicer. For all purposes of this Agreement,
Net Liquidation Proceeds shall be allocated first to accrued and unpaid
interest on the related Mortgage Loan and then to the unpaid principal balance
thereof.
Net Mortgage Rate:
Nonrecoverable Advances: With respect to any Mortgage Loan, (a) any
Periodic Advance or Servicing Advance previously made and not reimbursed from
late collections pursuant to Section 5.04(a), or (b) a Periodic Advance
proposed to be made in respect of a Mortgage Loan or Foreclosure Property,
either of which, in the good faith business judgment of the Servicer, as
evidenced by an Officer's Certificate delivered to [the Note Insurer and] the
Trustee no later than the Business Day following such determination would not
be ultimately recoverable pursuant to Section 5.04(a).
[Non-reduction Trigger Event: A Non-reduction Trigger Event will have
occurred with respect to any Distribution Date if (a) prior to the
Distribution Date in [ ], the Three Month Annualized Loss Rate for such
Distribution Date exceeds [ _____ ]% and (b) on and after the Distribution
Date in [ ], the Three Month Annualized Loss Rate for such Distribution Date
exceeds [ _____ ]%. Following the occurrence of any of a Non-reduction Trigger
Event, such event shall be deemed to be continuing on succeeding Distribution
Date until the following is true for each of six consecutive Distribution
Dates: the Three Month Annualized Loss Rate is less than the applicable level
specified in the first sentence above.]
Note(s): One or more of the Class A Notes.
Note Distribution Account: The account established in accordance with
Section 6.01(a)(ii) hereof and maintained by or on behalf of the Indenture
Trustee.
[Note Insurance Payment Account: The Note Insurance Payment Account
established in accordance with Section 6.04(c) hereof and maintained on behalf
of the Indenture Trustee.]
[Note Insurance Policy: The Note Guaranty Insurance Policy No. [ ],
dated the Closing Date, and any endorsements thereto, issued by the Note
Insurer for the benefit of Holders of the Insured Notes, a copy of which is
attached hereto as Exhibit A.]
[Note Insurer: [ ], a stock insurance company organized and created
under the laws of the State of [ ], and any successors thereto.]
[Note Insurer Default: Any failure by the Note Insurer to make a
payment required under the Note Insurance Policy in accordance with its terms,
which failure continues unremedied for five Business Days.]
Note Register: As defined in the Indenture.
Noteholder: Each holder of a Note.
[Noteholders' Interest Carryforward Amount: With respect to any
Distribution Date, the excess, if any, of the Noteholders' Monthly Interest
Distributable Amount for the immediately preceding Distribution Date and any
Noteholders' Interest Carryforward Amount remaining outstanding with respect
to prior Distribution Dates, over the amount in respect of interest that was
paid on the Notes on such immediately preceding Distribution Date, and
interest on that amount for the related Accrual Period at the Interest Rate.]
[Noteholders' Interest Distribution Amount: With respect to any
Distribution Date, the sum of the Noteholders' Monthly Interest Distribution
Amount for such Distribution Date and the Noteholders' Interest Carryforward
Amount for such Distribution Date.]
[Noteholders' Monthly Interest Distribution Amount: With respect to
any Distribution Date, the aggregate of interest accrued for the related
Accrual Period at the applicable Interest Rate on the Class Principal Amount
of the Notes immediately preceding such Distribution Date.]
Notional Security:
Offering Document: The Prospectus.
Officer's Certificate: A certificate signed by the Chairman of the
Board, the President or a Vice President and the Treasurer, the Secretary, one
of the Assistant Treasurers or Assistant Secretaries or a Servicing Officer of
the Seller, the Servicer, or the Depositor, as required by this Agreement.
Opinion of Counsel: A written opinion of counsel, which opinion shall
be acceptable in form and substance to the Indenture Trustee and the Note
Insurer and delivered to the Indenture Trustee and the Note Insurer from
counsel reasonably acceptable to each addressee of such opinion and
experienced in matters relating to the subject of such opinion; except that
any opinion of counsel relating to federal income tax matters must be an
opinion of counsel who (i) is in fact independent of the Seller, the Servicer
and the Indenture Trustee, (ii) does not have any direct financial interest or
any material indirect financial interest in the Seller or the Servicer or the
Indenture Trustee or in an Affiliate thereof, (iii) is not connected with the
Seller or the Servicer or the Indenture Trustee as an officer, employee,
director or person performing similar functions and (iv) is reasonably
acceptable to the Note Insurer.
[Optimal Principal Amount: With respect to any Distribution Date, an
amount equal to the Total Loan Balance as of the immediately preceding
Determination Date MINUS the Targeted Overcollateralization Amount for such
Distribution Date.]
Original Pre-Funded Amount:
Outstanding Mortgage Loan: As to any Due Date, a Mortgage Loan which
was not the subject of a Principal Prepayment in Full prior to such Due Date,
which did not become a Liquidated Mortgage Loan prior to such Due Date, and
which was not purchased by the Servicer or the Seller prior to such Due Date.
[Overcollateralization Amount: With respect to any Distribution Date,
the amount, if any, by which (x) the Total Loan Balance for such Distribution
Date exceeds (y) the Class Principal Amount of the Notes after giving effect,
unless otherwise specified, to distributions in respect of the Notes on such
Distribution Date.]
[Overcollateralization Release Amount: With respect to any
Distribution Date, the lesser of (a) the Regular Principal Distribution Amount
and (b) the excess, if any, of the Overcollateralization Amount for such
Distribution Date over the Targeted Overcollateralization Amount for such
date.]
[Overcollateralization Shortfall: With respect to any Distribution
Date, the amount, if any, by which (x) the Targeted Overcollateralization
Amount for such Distribution Date exceeds (y) the Overcollateralization Amount
for such Distribution Date, calculated for this purpose before giving effect
to the reduction on such Distribution Date of the Class Principal Amount of
the Notes resulting from payments in respect of the Notes on such Distribution
Date.]
Owner Trustee: [ ], a[ ]
banking corporation, and any successor in interest, not in its individual
capacity, but solely as owner trustee under the Trust Agreement.
Owner Trustee Compensation: The Owner Trustee Fee and any other
amounts payable to the Owner Trustee under the fee agreement attached as
Exhibit F to the Trust Agreement.
Owner Trustee Fee: The annual fee of $[ ] payable to the Owner Trustee
pursuant to the Fee Letter Agreement.
Owner-Occupied Mortgaged Property: A Residential Dwelling as to which
the related Mortgagor represented an intent to occupy as such Mortgagor's
primary, secondary or vacation residence at the origination of the Mortgage
Loan.
Ownership Interest: As to any Security, any ownership or security
interest in such Security, including any interest in such Security as the
Holder thereof and any other interest therein, whether direct or indirect,
legal or beneficial, as owner or as pledgee.
Payahead: With respect to any Mortgage Loan and any Due Date therefor,
any Monthly Payment received by the Servicer during any Due Period in addition
to the Monthly Payment due on such Due Date, intended by the related Mortgagor
to be applied on a subsequent Due Date.
Percentage Interest: With respect to a Note and any date of
determination, the portion evidenced by such Note, expressed as a percentage
rounded to four decimal places, equal to a fraction the numerator of which is
the initial Principal Amount represented by such Note and the denominator of
which is the initial Class Principal Amount or Class Notional Amount of such
Class of Notes. With respect to a Residual Interest Certificate and any date
of determination, the portion evidenced thereby as stated on the face of such
Certificate.
Periodic Advance: The aggregate of the advances with respect to
Mortgage Loans and Foreclosure Properties required to be made by the Servicer
on any Servicer Remittance Date pursuant to Section 5.21 hereof, the amount of
any such advances being equal to the sum of: (i) with respect to the Mortgage
Loans other than Foreclosure Properties as described in clause (ii) below, all
Monthly Payments (net of the related Servicing Fee) other than any Balloon
Payment on such Mortgage Loans that were Delinquent as of the related
Determination Date, plus (ii) with respect to each Foreclosure Property, an
amount equal to the Monthly Payment (net of the related Servicing Fee) for the
most recently ended Due Period for the related Mortgage Loan MINUS the net
income from such Foreclosure Property transferred to the related Note
Distribution Account or Certificate Distribution Account for such Distribution
Date, MINUS (iii) the amount of any advance otherwise required for such
Distribution Date pursuant to clauses (i) and (ii) above which the Servicer
has determined to be a Nonrecoverable Advance.
Permitted Investments: As used herein, Permitted Investments shall be
limited to the following:
(a) direct general obligations of, or obligations fully and
unconditionally guaranteed as to the timely payment of principal and interest
by, the United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United States and
any obligation of, or guaranties by, FHLMC or FNMA (other than senior debt
obligations and mortgage pass-through certificates guaranteed by FHLMC or
FNMA) shall be a Permitted Investment; provided that at the time of such
investment, such investment is acceptable to the Note Insurer, but excluding
any of such securities whose terms do not provide for payment of a fixed
dollar amount upon maturity or call for redemption;
(b) federal funds and certificates of deposit, time and demand
deposits and banker's acceptances (having original maturities of not more than
365 days) issued by any bank or trust company incorporated under the laws of
the United States or any state thereof and subject to supervision and
examination by federal or state banking authorities, provided that at the time
of such investment or contractual commitment providing for such investment the
short-term debt obligations of such bank or trust company at the date of
acquisition thereof have been rated in its highest rating by each Rating
Agency; provided that any such certificates of deposit must be secured at all
times by collateral described in clause (a) or (b) above, such collateral must
be held by a third party and the Indenture Trustee must have a perfected first
priority security interest in such collateral;
(c) commercial paper (having original maturities of not more than 180
days) rated in its highest rating by each Rating Agency;
(d) investments in money market funds rated in its highest rating by
each Rating Agency, which funds are registered under the Investment Company
Act of 1940 and whose shares are registered under the Act; and
(e) other investments approved by the Rating Agencies and the Note
Insurer in writing delivered to the Indenture Trustee;
provided that each such Permitted Investment shall be a "permitted investment"
within the meaning of Section 860G(a)(5) of the Code and that no instrument
described hereunder shall evidence either the right to receive (x) only
interest with respect to the obligations underlying such instrument or (y)
both principal and interest payments derived from obligations underlying such
instrument and the interest and principal payments with respect to such
instrument provided a yield to maturity at par greater than 120% of the yield
to maturity at par of the underlying obligations; and PROVIDED, FURTHER, that
no instrument described hereunder may be purchased at a price greater than
par.
Person: Any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, national
banking association, unincorporated organization or government or any agency
or political subdivision thereof.
Pool Balance:
Pool Percentage:
[Post-Stepdown Overcollateralization Amount: With respect to any
Distribution Date (a) on or after the Stepdown Date and (b) with respect to
which (i) no claim has been made for payment under the Note Insurance Policy
and (ii) a Step-up Trigger Event has not occurred or is not continuing, the
greater at (A) the product of [ ______ ]% and the Total Loan Balance as of the
related Determination Date and (B) the product of [ ______ ]% and the Cut-off
Date Balance; with respect to any Distribution Date (x) on or after the
Stepdown Date and (y) with respect to which (1) no claim has been made for
payment under the Note Insurance Policy and (2) a Step-up Trigger Event has
occurred or is continuing, the greater at (A) the product of [ ______ ]% and
the Total Loan Balance as of the related Determination Date and (B) the
product of [ ______ ]% and the Cut-off Date Balance.]
Preference Amount: Any amount previously distributed to an Insured
Noteholder that is recoverable and sought to be recovered as a voidable
preference by a trustee in bankruptcy pursuant to the United States Bankruptcy
Code (11 U.S.C.) as amended from time to time, in accordance with a final
nonappealable order of a court having competent jurisdiction.
Preference Claim: As defined in Section 6.04(e).
Pre-Funded Amount:
Pre-Funding Account:
Pre-Funding Period:
[Premium Amount: On each Distribution Date, the product of 1/12 of the
Premium Percentage and the aggregate Principal Amount of the Insured Notes
immediately prior to the related Distribution Date.]
[Premium Percentage: The rate per annum set forth as the premium
percentage in the Insurance Agreement.]
[Premium Rate: With respect to any Distribution Date, the fraction,
expressed as a percentage, the numerator of which is the product of (i) the
Premium Percentage and (ii) the aggregate Principal Amount of the Insured
Notes immediately prior to such date, and the denominator of which is the
Total Loan Balance for the immediately preceding Distribution Date.]
[Prepayment Interest Excess: With respect to any Distribution Date,
for each Mortgage Loan that was the subject during the related Prepayment
Period and from the first day through the 15th day of a calendar month of a
Principal Prepayment in Full, an amount equal to any payment of interest
received in connection with such Principal Prepayment in Full, LESS the
Servicing Fee, representing interest accrued after the Due Date in such
Prepayment Period.]
[Prepayment Interest Shortfall: With respect to any Distribution Date,
for each Mortgage Loan that was the subject during the related Prepayment
Period of a Curtailment or of a Principal Prepayment in Full from the 16th day
through the last day of a calendar month, an amount equal to (a) 30 days'
interest on the Principal Balance of such Mortgage Loan at a per annum rate
equal to the Mortgage Rate MINUS the rate at which the Servicing Fee is
calculated MINUS (b) the amount of interest actually remitted by the Mortgagor
in connection with such Principal Prepayment in Full or Curtailment less the
Servicing Fee for such Mortgage Loan in such month.]
[Prepayment Period: With respect to any Distribution Date, the period
beginning on the Cut-off Date, in the case of the first Distribution Date, and
on the day immediately following the close of the immediately preceding
Prepayment Period, in the case of each succeeding Distribution Date, and
ending on the 15th day (or if that day is not a Business Day, the immediately
preceding Business Day) of the month in which that Distribution Date occurs.]
Prepayment Premium: Any prepayment fee, penalty, charge or premium
paid by a Mortgagor under the terms of the related Mortgage Note in connection
with a Principal Prepayment in Full or Curtailment.
Principal Amount: With respect to any Security other than any Notional
Security or Residual Interest Certificate, the initial Principal Amount
thereof, less the amount of all principal distributions previously made with
respect to such Security and any Applied Loss Amount previously allocated to
such Security. The Notional Securities and Residual Interest Certificates are
issued without Principal Amounts.
Principal Balance: With respect to any date of determination and any
Mortgage Loan or related Foreclosure Property, an amount equal to the Cut-off
Date principal balance of such Mortgage Loan minus all principal reductions
credited against the Principal Balance of such Mortgage Loan since such
Cut-off Date through the end of the immediately preceding Due Period;
provided, however, that the Principal Balance of a Liquidated Mortgage Loan
shall be zero.
Principal Distribution Amount:
Principal Prepayment in Full: Any payment or other recovery of
principal on a Mortgage Loan equal to the outstanding principal balance
thereof, received in advance of the final scheduled Due Date.
Proprietary Lease: With respect to any Cooperative Unit, a lease or
occupancy agreement between a Cooperative Corporation and a holder of related
Cooperative Shares.
Prospectus: The prospectus supplement dated [ ], together
with the accompanying prospectus dated [ ], relating to the Notes.
Qualified Substitute Mortgage Loan: A mortgage loan substituted by the
Originator for a Deleted Mortgage Loan which must, on the date of such
substitution, (i) have an outstanding principal balance, after deduction of
all Monthly Payments due and received in the month of substitution (or in the
case of a substitution of more than one mortgage loan for a Deleted Mortgage
Loan, an aggregate principal balance), not in excess of the Principal Balance
of the Deleted Mortgage Loan and not less than 90% of the Principal Balance of
the Deleted Mortgage Loan (the amount of any shortfall to be paid by the
Originator in the month of substitution), (ii) have a remaining term to
maturity not greater than (and not more than one year less than) that of the
Deleted Mortgage Loan, (iii) have a Mortgage Rate not less than the Mortgage
Rate of the Deleted Mortgage Loan, (iv) have a Servicing Fee Rate as provided
herein for all Mortgage Loans subject to this Agreement, (v) with respect to
each Adjustable Rate Mortgage Loan, have a minimum rate not less than that of
the Deleted Mortgage Loan, (vi) with respect to each Adjustable Rate Mortgage
Loan, have a maximum rate not less than that of the Deleted Mortgage Loan,
(vii) with respect to each Adjustable Rate Mortgage Loan, have a margin not
less than that of the Deleted Mortgage Loan, (viii) with respect to each
Adjustable Rate Mortgage Loan, have a periodic rate cap equal to that of the
Deleted Mortgage Loan, (ix) have a Loan-to-Value Ratio equal to or less than
the Loan-to-Value Ratio of the Deleted Mortgage Loan, (x) with respect to each
Adjustable Rate Mortgage Loan, have the same adjustment frequency as that of
the Deleted Mortgage Loan, (xi) with respect to each Adjustable Rate Mortgage
Loan, have the same Index as the Deleted Mortgage Loan, (xii) comply as of the
date of substitution with each representation and warranty set forth in
[Section 6] of the Mortgage Loan Purchase Agreement, (xiii) be in the same
credit grade category as the Deleted Mortgage Loan (xiv) have a Prepayment
Premium of the same type as that of the Deleted Mortgage Loan, (xv) is of the
same or better property type or is a single family dwelling and the same or
better occupancy status or is a primary residence as the Mortgage Loan being
replaced, (xvi) shall be a first lien on the Mortgaged Property, (xvii) shall
not provide for a Balloon Payment (and if such related Mortgage Loan provided
for a Balloon Payment, such Qualified Substitute Mortgage Loan shall have an
original maturity of not less than the original maturity of such related
Mortgage Loan), (xviii) shall be a fixed rate Mortgage Loan or an Adjustable
Rate Mortgage Loan if the Mortgage Loan being replaced is an Adjustable Rate
Mortgage Loan, (xix) satisfies the criteria set forth from time to time in the
definition thereof at Section 860G(a)(4) of the Code (or any successor statute
thereto) and applicable to the Trust, (xx) satisfies the representations and
warranties set forth in [Sections 5(b)(viii), (xii) and (xiv)] of the Mortgage
Loan Purchase Agreement, (xxi) shall not be 30 days or more delinquent, (xxii)
with respect to each Adjustable Rate Mortgage Loan, shall have a next
adjustment date not more than two months later than the next adjustment date
of the Deleted Mortgage Loan, and (xxiii) shall have the same Due Date as the
Mortgage Loan being replaced.
In the event that one or more mortgage loans are proposed to be
substituted for one or more Mortgage Loans, [the Note Insurer may allow] the
foregoing tests may be met on a weighted average basis, except that the
requirements of clauses (ii), (iii), (v), (vi), (vii), (viii), (ix), (x),
(xi), (xii), (xiii), (xix), (xx), (xxii), and (xxiii) hereof must be satisfied
as to each Qualified Substitute Mortgage Loan.
Rating Agency: Each of [Moody's and S&P]. If no such organization or
successor is any longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable Person
designated by the Note Insurer notice by which designation shall be given to
the Issuer, the Indenture Trustee, the Owner Trustee and the Servicer.
Realized Loss: With respect to any Distribution Date, the aggregate of
the amount of losses with respect to each Mortgage Loan that became a
Liquidated Mortgage Loan during the Prepayment Period preceding such
Distribution Date, equal to (i) the unpaid principal balance of each such
Liquidated Mortgage Loan, plus accrued interest thereon in accordance with the
amortization schedule at the time applicable thereto at the applicable
Mortgage Rate from the Due Date as to which interest was last paid with
respect thereto through the last day of the month in which such Mortgage Loan
became a Liquidated Mortgage Loan, plus, without duplication, the amount of
any Periodic Advances and Servicing Advances paid by the related Mortgagor,
MINUS (ii) Net Liquidation Proceeds with respect to such Liquidated Mortgage
Loan.
Recognition Agreement: With respect to any Cooperative Loan, an
agreement between the related Cooperative Corporation and the originator of
such Mortgage Loan to establish the rights of such originator in the related
Cooperative Property.
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.
Reference Banks: As defined in Section 6.14.
[Regular Distribution Amount: With respect to any Distribution Date,
the lesser of (a) the Available Funds remaining after payment of (i) the
Premium Amount and (ii) the Owner Trustee Compensation and the Custodian
Compensation, and (b) the sum of (i) the Noteholders' Interest Distribution
Amount and (ii) the Regular Principal Distribution Amount.]
[Regular Principal Distribution Amount: With respect to each
Distribution Date, an amount equal to the lesser of:
(a) the sum of (i) each scheduled payment of principal collected by
the Servicer in the related Due Period, (ii) all partial and full principal
prepayments applied by the Servicer during such Due Period, (iii) the
principal portion of all Net Liquidation Proceeds, Insurance Proceeds and
Released Mortgaged Property Proceeds received by the Servicer during such Due
Period in respect of any Mortgage Loan, to the extent received on or prior to
the date on which such Mortgage Loan became a Liquidated Mortgage Loan, (iv)
that portion of the Purchase Price of any repurchased Mortgage Loan allocable
to principal, (v) the principal portion of any Substitution Adjustments
required to be deposited in the Collection Account as of the related
Determination Date and (vi) the principal portion of the Termination Price, if
any; and
(b) the aggregate of the outstanding principal balances of the Notes
immediately prior to such Distribution Date.]
[Reimbursement Amount: As of any Distribution Date, the sum of (a)(i)
all Insured Payments (as defined in the Note Insurance Policy) previously paid
by the Note Insurer and in each case not previously repaid to the Note Insurer
pursuant to Section 6.05 hereof plus (ii) interest accrued on each such
Insured Payment not previously repaid calculated at the Late Payment Rate from
the date such Insured Payment was made and (b)(i) any amounts then due and
owing to the Note Insurer under the Insurance Agreement, as certified to the
Indenture Trustee by the Note Insurer plus (ii) interest on such amounts at
the Late Payment Rate (as defined in the Insurance Agreement). The Note
Insurer shall notify the Indenture Trustee and the Depositor of the amount of
any Reimbursement Amount.]
Released Mortgaged Property Proceeds: With respect to each
Distribution Date and any Mortgage Loan, an amount equal to the proceeds
received by the Servicer in connection with (a) a taking of an entire
Mortgaged Property by exercise of the power of eminent domain or condemnation
or (b) any release of part of the Mortgaged Property from the lien of the
related Mortgage, whether by partial condemnation, sale or otherwise; which
are not released to the Mortgagor in accordance with applicable law, Accepted
Servicing Practices and this Agreement.
Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.
Relief Act Shortfall: With respect to any Distribution Date and each
Mortgage Loan as to which there has been a reduction in the amount of interest
collected with respect to the related Due Period as a result of application of
the Relief Act, the amount by which (a) interest collectible on such Mortgage
Loan during such Due Period is less than (b) one month's interest on the
Principal Balance of such Mortgage Loan at the applicable Mortgage Rate before
giving effect to the Relief Act.
Request for Release: A request for release in substantially the form
attached as Exhibit G hereto.
Reserve Interest Rate:
Residential Dwelling: A one- to four-family dwelling, a unit in a
planned unit development, a unit in a condominium development, a townhouse or
a manufactured housing unit which is non-mobile.
Residual Interest Certificate: As defined in the Trust Agreement.
Residual Certificateholder: Any Holder of a Residual Interest
Certificate.
Responsible Officer: When used with respect to the Indenture Trustee,
any officer assigned to the Corporate Trust Office (or any successor thereto),
including any Vice President, Assistant Vice President, Senior Trust Officer,
Trust Officer, Assistant Trust Officer, Assistant Treasurer, any Assistant
Secretary, any trust officer or any other officer of the Indenture Trustee
customarily performing functions similar to those performed by any of the
above designated officers who has direct responsibility for the administration
of this Agreement or to whom, with respect to a particular matter, such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to the Seller or the Servicer, the
President or any Vice President, Assistant Vice President, or any Secretary or
Assistant Secretary.
[Rolling Loss Percentage: With respect to any Distribution Date, the
fraction, expressed as a percentage, the numerator of which is the aggregate
of Realized Losses incurred during the immediately preceding 12 Due Periods
and the denominator of which is the average Principal Balance of the Mortgage
Loans as of the first day of the 12th preceding Due Period.] [Search]
[S&P: Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or its successor in interest.]
Securities Intermediary: The Person acting as Securities Intermediary
under this Agreement ( which is the Indenture Trustee, or the Administrator on
behalf of the Indenture Trustee), its successor in interest, and any successor
Securities Intermediary appointed pursuant to Section 6.01(c).
Security: Any Note or Certificate.
Security Agreement: With respect to any Cooperative Loan, the
agreement between the owner of the related Cooperative Shares and the
originator of the related Mortgage Note that defines the terms of the security
interest in such Cooperative Shares and the related Proprietary Lease.
Security Entitlement: The meaning specified in Section 8-102(a)(17) of
the New York UCC.
Securityholder or Holder: The Person in whose name a Security is
registered in the Note Register or the Certificate Register, as applicable.
Seller: [ ], a [ ] corporation, or its successor in
interest.
Senior Enhancement Percentage:
Senior Mortgage Loan: With respect to any Junior Mortgage Loan, a
mortgage loan on the related Mortgaged Property that is senior to the lien
provided by such Junior Mortgage Loan.
Servicer: [ ], a [ ] corporation,
or any successor appointed as herein provided.
Servicer Remittance Date: With respect to any Distribution Date, the
[24th] day of the month in which such Distribution Date occurs, or if such
[24th] day is not a Business Day, the Business Day immediately preceding such
[24th] day.
Servicer's Monthly Remittance Report: The report containing the
information described in Section 5.19 hereof.
Servicing Account: The account created and maintained pursuant to
Section 5.09.
Servicing Advances: All reasonable and customary "out-of-pocket" costs
and expenses relating to a borrower default or delinquency or other
unanticipated event incurred by the Servicer in the performance of its
servicing obligations, including, but not limited to, the cost of (a) the
preservation, restoration and protection of the Mortgaged Property including,
without limitation, taxes and insurance costs, (b) any enforcement or judicial
proceedings, including foreclosures, (c) the management and liquidation of the
Foreclosure Property, including reasonable fees paid to any independent
contractor in connection therewith, (d) compliance with the obligations under
Sections 5.05, 5.07, 5.09, 5.12 or 5.21(b), all of which reasonable and
customary out-of-pocket costs and expenses are reimbursable to the Servicer to
the extent provided in Section 5.04.
Servicing Compensation: The Servicing Fee and other amounts to which
the Servicer is entitled pursuant to Section 5.14.
Servicing Fee: As to each Mortgage Loan, the annual fee payable to the
Servicer and the related Subservicer, if any, as indicated on the related
Mortgage Loan Schedule. Such fee shall be equal to the product the Servicing
Fee Rate and the outstanding principal balance of the Mortgage Loans at the
start of the related Due Period. Such fee shall be calculated and payable
monthly only from the amounts received in respect of interest on such Mortgage
Loan and shall be computed on the basis of the same principal amount and for
the period respecting which any related interest payment on a Mortgage Loan is
computed. The Servicing Fee includes any servicing fees owed or payable to any
Subservicer.
Servicing Fee Rate: [ ]% per annum.
Servicing Officer: Any employee of the Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished
to the Indenture Trustee and the Note Insurer by the Servicer, as such list
may from time to time be amended.
[Stepdown Date: The latest to occur of (a) the Distribution Date in [
]; (b) the first Distribution Date on which the Overcollateralization Amount
for such date equals or exceeds the product of (i) [ ______ ]% and (ii) the
Total Loan Balance for such date, and (c) the first Distribution Date on which
the Class Principal Amount of the Notes after giving effect to distributions
on such date is equal to or less than $[ ___________________________ ];
provided, in each case, that a Step-up Trigger Event has not occurred with
respect to the Distribution Date and no claim has been made for payment under
the Note Insurance Policy.]
[Step-up Trigger Event: A Step-up Trigger Event will have occurred
with respect to any Distribution Date if either (1) the Three Month
Delinquency Rate for such Distribution Date is equal to or greater than [
______ ]%; (2) (i) prior to the Distribution Date in [ ], the Three Month
Annualized Loss Rate for such Distribution Date exceeds [ ______ ]% and (ii)
on and after the Distribution Date in [ ], the Three Month Annualized Loss
Rate for such Distribution Date exceeds [ ______ ]%; or (3) the Calculated
Loss Percentage for such Distribution Date exceed the applicable Total
Expected Loss Percentage. Following the occurrence of any of the events
described in subclauses (1) through (3) above, a Step-up Trigger Event shall
be deemed to be continuing on succeeding Distribution Dates until each of the
following is true for each of six consecutive Distribution Dates: (i) the
Three Month Delinquency Rate is less than [ ______ ]%, (ii) the Three Month
Annualized Loss Rate is less than the applicable level specified in subclause
(2) above, and (iii) the Calculated Loss Percentage is less than the
applicable Total Expected Loss Percentage.]
Subsequent Cut-off Date:
Subsequent Mortgage Loan:
Subsequent Transfer Date:
Subsequent Transfer Instrument:
Subservicer: Any Person that satisfies the requirements of Section
5.02 with which the Servicer has entered into a Subservicing Agreement
pursuant to the terms of this Agreement.
Subservicing Agreement: The contract between the Servicer and any
Subservicer.
Substitution Adjustment: With respect to any date on which a
substitution occurs pursuant to Sections 2.04 or 3.03, the sum of (i) the
amount (if any) by which the aggregate unpaid principal balances of the
Qualified Substitute Mortgage Loans (after application of principal payments
received on or before the date of substitution of any Qualified Substitute
Mortgage Loans as of the date of substitution), are less than the aggregate of
the unpaid principal balances of the related Deleted Mortgage Loans, (ii)
interest accrued and unpaid on the related Deleted Mortgage Loans, (iii) the
amount of any Servicing Advances remaining unreimbursed with respect to such
Deleted Mortgage Loans and (iv) the amount of any Servicing Advances
reimbursed other than from collections or other recoveries in respect of such
Deleted Mortgage Loans.
Superior Lien: With respect to any Mortgage Loan which is secured by
other than a first priority lien, the mortgage(s) relating to the
corresponding Mortgaged Property having a superior priority lien.
[Targeted Overcollateralization Amount: With respect to any
Distribution Date occurring prior to the Stepdown Date, and with respect to
any Distribution Date as to which a claim has been made for payment under the
Note Insurance Policy, an amount equal to the Base Specified
Overcollateralization Amount for such date. With respect to any other
Distribution Date, an amount equal to the Post-Stepdown Overcollateralization
Amount for such date. Notwithstanding the foregoing, the Targeted
Overcollateralization Amount for any Distribution Date with respect to which a
Non-reduction Trigger Event has occurred or is continuing shall not be less,
expressed as a dollar amount, than the Targeted Overcollateralization Amount
on the last Distribution Date prior to the initial occurrence of such
Non-reduction Trigger Event.]
Termination Price: With respect to any date of determination, an
amount equal to the sum of (1) 100% of the total outstanding principal balance
of the Mortgage Loans plus accrued interest thereon at the applicable Mortgage
Loan Rate, and (2) the fair market value of all other property being
purchased; PROVIDED, that the Termination Price will not be less than the sum
of the following: (i) the Class Principal Amount of the Notes plus all accrued
and unpaid interest thereon at the Interest Rate, (ii) any Servicing Fees due
and unpaid, (iii) any unreimbursed Servicing Advances, including Servicing
Advances deemed to be nonrecoverable, (iv) any amounts owed to the Indenture
Trustee, the Owner Trustee and the Custodian, [and (v) any amounts owed to the
Note Insurer under the Insurance Agreement, including reimbursement for
payments under the Insurance Policy.]
[Three Month Annualized Loss Rate: With respect to any Distribution
Date, the average of the percentage equivalents of the fractions determined
for each of the three immediately preceding Determination Dates (or such fewer
number of Determination Dates since the Cut-off Date, in the case of the first
two Distribution Dates), the numerator of which is equal to the aggregate of
all Realized Losses incurred during the calendar month ending on such
Determination Date MULTIPLIED BY 12 and the denominator of which is the Total
Loan Balance as of each such Determination Date.]
[Three Month Delinquency Rate: With respect to any Distribution Date,
the average of the percentage equivalents of the fractions determined for each
of the three immediately preceding Determination Dates (or such fewer number
of Determination Dates since the Cut-off Date, in the case of the first two
Distribution Dates), the numerator of which is equal to the aggregate
Principal Balance of all Mortgage Loans more than 60 days Delinquent as of
each such Determination Date and the denominator of which is the Total Loan
Balance as of each such Determination Date.]
Total Expense Rate:
[Total Expected Loss Percentage: With respect to any Distribution
Date, the percentage specified below for the period of time during which such
Distribution Date occurs:
Period Percentage]
------ ----------
[Total Expected Losses: With respect to any Distribution Date, the sum
of (a) the aggregate of all Realized Losses from the Cut-off Date through the
related Determination Date and (b) the Delinquency Loss Factor for such
Distribution Date.]
Total Loan Balance: The aggregate of the Principal Balances of all
Mortgage Loans at the date of determination.
[Transaction Document: As defined in the Insurance Agreement.]
Trust: The Issuer.
Trust Account: As defined in Section 6.01(b).
Trust Account Property: The Trust Accounts, the Certificate
Distribution Account, all amounts and investments held from time to time in
the Trust Accounts and the Certificate Distribution Account (whether in the
form of deposit accounts, physical property, book-entry securities,
uncertificated securities, securities entitlements, investment property or
otherwise) and all proceeds of the foregoing.
Trust Agreement: The Trust Agreement dated as of [ ]
between the Depositor and the Owner Trustee.
Trust Estate: The assets subject to this Agreement and the Indenture,
transferred by the Depositor to the Issuer and pledged by the Issuer to the
Indenture Trustee, consisting of all accounts, accounts receivable, contract
rights, general intangibles, chattel paper, instruments, documents, money,
deposit accounts, certificates of deposit, goods, notes, drafts, letters of
credit, advices of credit, investment property, uncertificated securities and
rights to payment of any and every kind consisting of, advising from or
relating to any of the following: (a) such Mortgage Loans as from time to time
are subject to this Agreement, together with the Mortgage Files relating
thereto and all collections thereon and proceeds thereof received on and after
the Cut-off Date, (b) such assets as from time to time are identified as
deposited in the Certificate Distribution Account, (c) such assets as from
time to time are identified as Foreclosure Property and collections thereon
and proceeds thereof, (d) assets that are deposited in the Trust Accounts,
including amounts on deposit in the Trust Accounts and invested in Permitted
Investments, (e) the Indenture Trustee's rights with respect to the Mortgage
Loans under all insurance policies required to be maintained pursuant to this
Agreement [(including the Note Insurance Policy)] and any Insurance Proceeds
[(and any proceeds of the Note Insurance Policy)], (f) Liquidation Proceeds,
(g) Released Mortgaged Property Proceeds, (h) the rights (but not the
obligations) of the Depositor under the Mortgage Loan Purchase Agreement to
the extent assigned to the Indenture Trustee hereunder, (i) the Depositor's
security interest in any collateral pledged to secure the Mortgage Loans,
including the Mortgaged Properties, and (j) any and all income, revenues,
issues, products, revisions, substitutions, replacements, profits, rents and
all cash and non-cash proceeds of the foregoing.
UCC: The Uniform Commercial Code in effect in the applicable
jurisdiction.
UCC Financing Statement: A financing statement executed and filed
pursuant to the UCC.
Unpaid Basis Risk Shortfall:
Section 1.02. Provisions of General Application. (a) All accounting
terms not specifically defined herein shall be construed in accordance with
GAAP.
(b) The terms defined in this Article include the plural as well as
the singular.
(c) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole. All references to Articles
and Sections shall be deemed to refer to Articles and Sections of this
Agreement.
(d) Reference to statutes are to be construed as including all
statutory provisions consolidating, amending or replacing the statute to which
reference is made and all regulations promulgated pursuant to such statutes.
(e) All calculations of interest (other than with respect to the
Mortgage Loans, or as otherwise specifically set forth herein) provided for
herein shall be made on the basis of a 360-day year consisting of twelve
30-day months. All calculations of interest with respect to any Mortgage Loan
provided for herein shall be made in accordance with the terms of the related
Mortgage Note and Mortgage.
(f) Any Mortgage Loan payment is deemed to be received on the date
such payment is actually received by the Servicer, provided, however, that for
purposes of calculating distributions on the Securities, Prepayments in Full
and Curtailments with respect to any Mortgage Loan are deemed to be received
on the date they are applied in accordance with customary servicing practices
consistent with the terms of the related Mortgage Note and Mortgage to reduce
the outstanding principal balance of such Mortgage Loan on which interest
accrues.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01. Conveyance of Mortgage Loans; Special Deposit; Priority
and Subordination of Ownership Interests. (a) The Depositor does hereby sell,
transfer, assign, set over and convey to the Issuer without recourse but
subject to the provisions of this Section 2.01 and the other terms and
provisions of this Agreement, all of the right, title and interest of the
Depositor in and to the Mortgage Loans (other than interest and principal due
thereon on or before the Cut-off Date), and all other assets included or to be
included in the Trust Estate for the benefit of the Securityholders [and the
Note Insurer]. In connection with such transfer and assignment, the Depositor
does hereby also irrevocably transfer, assign, set over and otherwise convey
to the Issuer all of its rights (but not its obligations) under the Mortgage
Loan Purchase Agreement. The Issuer hereby accepts such assignment, and shall
be entitled to exercise all rights of the Depositor under the Mortgage Loan
Purchase Agreement as if, for such purpose, it were the Depositor.
(b) It is intended that the conveyance of the Mortgage Loans and the
other assets to be included in the Trust Estate by the Depositor to the Issuer
as provided in this Section be, and be construed as, a sale of the Mortgage
Loans and the other assets to be included in the Trust Estate by the Depositor
to the Issuer for the benefit of the Securityholders [and the Note Insurer].
It is, further, not intended that such conveyance be deemed a pledge of the
Mortgage Loans and such other assets by the Depositor to the Issuer to secure
a debt or other obligation of the Depositor. However, in the event that the
Mortgage Loans and the other assets to be included in the Trust Estate are
held to be property of the Depositor, or if for any reason this Agreement is
held or deemed to create a security interest in the Mortgage Loans and such
other assets, then it is intended that, (a) this Agreement shall also be
deemed to be a security agreement within the meaning of Articles 8 and 9 of
the New York UCC and the UCC of any other applicable jurisdiction; (b) the
conveyance provided for in this Section shall be deemed to be (1) a grant by
the Depositor to the Issuer of a security interest in all of the Depositor's
right (including the power to convey title thereto), title and interest,
whether now owned or hereafter acquired, in and to (A) the Mortgage Loans,
including the Mortgage Notes, the Mortgages, any related insurance policies
and all other documents in the related Mortgage Files, (B) all amounts payable
to the holders of the Mortgage Loans in accordance with the terms thereof,
[(C) the Note Insurance Policy], and (D) all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, instruments, securities
or other property, including without limitation all Liquidation Proceeds, all
Insurance Proceeds, all Released Mortgaged Property Proceeds, all amounts from
time to time held or invested in the Certificate Distribution Account, the
Note Distribution Account, the Collection Account, whether in the form of
cash, instruments, securities or other property and (2) an assignment by the
Depositor to the Issuer of any security interest in any and all of the
Seller's right (including the power to convey title thereto), title and
interest, whether now owned or hereafter acquired, in and to the property
described in the foregoing clauses (1)(A) through (C) granted by the Seller to
the Depositor pursuant to the Mortgage Loan Purchase Agreement; (c) the
possession by the Issuer or its agent of Mortgage Notes and such other items
of property as constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession by the secured party" or possession by
a purchaser or a person designated by such secured party, for purposes of
perfecting the security interest pursuant to the New York UCC and the UCC of
any other applicable jurisdiction (including, without limitation, Sections
9-305, 8-313 or 8-321 thereof); and (d) notifications to persons holding such
property, and acknowledgments, receipts or confirmations from persons holding
such property, shall be deemed notifications to, or acknowledgments, receipts
or confirmations from, financial intermediaries, bailees or agents (as
applicable) of the Issuer for the purpose of perfecting such security interest
under applicable law. The Depositor and, at the Depositor's direction, the
Seller and the Issuer shall, to the extent consistent with this Agreement,
take such reasonable actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Mortgage Loans and
other property of the Trust Estate, such security interest would be deemed to
be a perfected security interest of first priority under applicable law and
will be maintained as such throughout the term of the Agreement.
Section 2.02. Possession of Mortgage Files; Access to Mortgage Files.
(a) Upon the issuance of the Securities, the ownership of each Mortgage Note,
the Mortgage and the contents of the Mortgage File related to each Mortgage
Loan is vested in the Issuer, subject to the lien created by the Indenture in
favor of the Indenture Trustee for the benefit of the Noteholders [and the
Note Insurer].
(b) The Depositor has delivered or caused to be delivered the Mortgage
File related to each Mortgage Loan to the Indenture Trustee or the Custodian
on behalf of the Indenture Trustee.
(c) The Indenture Trustee may, [with the prior written consent of the
Note Insurer,] enter into a Custodial Agreement pursuant to which the
Indenture Trustee will appoint a custodian (a "Custodian") to hold the
Mortgage Files in trust for the benefit of all present and future
Securityholders [and the Note Insurer]; provided, however, that the custodian
so appointed shall in no event be the Depositor or the Servicer or any Person
known to a Responsible Officer of the Indenture Trustee to be an Affiliate of
the Depositor or the Servicer.
(d) The Indenture Trustee shall cause the Custodian to afford the
Depositor, the Note Insurer and the Servicer reasonable access to all records
and documentation regarding the Mortgage Loans relating to this Agreement,
such access being afforded at customary charges, upon reasonable prior written
notice and during normal business hours at the offices of the Custodian.
Section 2.03. Delivery of Mortgage Loan Documents [and Note Insurance
Policy]. In connection with each conveyance pursuant to Section 2.01 hereof,
the Depositor has delivered or does hereby agree to deliver or cause to be
delivered to the Indenture Trustee (or the Custodian or the Administrator, as
applicable, on behalf of the Indenture Trustee) on or before the Closing Date,
[the Note Insurance Policy,] the Mortgage Loan Schedule and each of the
following documents for each Mortgage Loan sold by the Seller to the Depositor
and sold by the Depositor to the Issuer:
(i) The Mortgage Note bearing all intervening endorsements,
endorsed "Pay to the order of [ ], as Indenture Trustee for Finance
America Securities, LLC [ ] Trust [ ], without recourse" or in blank,
and signed manually or by facsimile by an authorized officer;
(ii) The original Mortgage with evidence of recording thereon, or
a copy thereof;
(iii) An original assignment of the Mortgage, in form acceptable
for recordation in the jurisdiction in which the related Mortgaged
Property is located (except for the assignee's name and recordation
information not yet received), such assignment to be in blank and
signed by an authorized officer;
(iv) The originals of all intervening assignments of the Mortgage
(with evidence of recording thereon) showing a complete chain of
assignments from the originator of such Mortgage Loan;
(v) Any assumption, modification, consolidation or extension
agreements (with evidence of recording thereon);
(vi) The original policy of title insurance (or the original
commitment for title insurance, if the policy is being held by the
title insurance company pending recordation of the Mortgage); and
(vii) The certificate of primary mortgage guaranty insurance, if
any, issued with respect to such Mortgage Loan.
With respect to each Mortgage Loan, the Depositor shall cause,
promptly following the Closing Date, but in no event later than [30] days
following the Closing Date, Assignments of Mortgages to "[
_______________________________________________ ], as Indenture Trustee of
Finance America Securities, LLC Mortgage Loan Trust [ _____________ ]" to be
submitted for recording in the appropriate jurisdictions; PROVIDED, that the
Depositor shall not be required to record an Assignment of Mortgage if the
Depositor furnishes to the Indenture Trustee [and the Note Insurer], on or
before the Closing Date, at the Depositor's expense, an Opinion of Counsel
with respect to the relevant jurisdiction that such recording is not
necessary to protect the Indenture Trustee's interest in the related Mortgage
Loans (in form and substance satisfactory to the Indenture Trustee, the Note
Insurer and the Rating Agencies); PROVIDED FURTHER, notwithstanding the
delivery of any legal opinions, each Assignment of Mortgage shall be recorded
by the Indenture Trustee upon the earliest to occur of: [(i) reasonable
direction by the Note Insurer,] (ii) the occurrence of an Event of Default,
or (iii) the occurrence of a bankruptcy, insolvency or foreclosure relating
to the Seller.
The Depositor shall deliver the title insurance policy or title
searches, the original Mortgages and such recorded assignments, together with
originals or duly certified copies of any and all prior assignments (other
than unrecorded warehouse assignments), to the Indenture Trustee or its
Custodian, within [15] days of receipt thereof (but in any event, with respect
to any Mortgage as to which original recording information has been made
available, within 12 months after the Closing Date).
In instances where the original recorded Mortgage or intervening
assignment (other than the Assignment of Mortgage) cannot be delivered to the
Indenture Trustee or its Custodian prior to or concurrently with the execution
and delivery of this Agreement due to a delay in connection with recording,
the Depositor may in lieu of delivering such original recorded Mortgage or
intervening assignment (other than the Assignment of Mortgage), deliver to the
Indenture Trustee or its Custodian a copy thereof, provided that the Seller
provides a copy of such document and certifies that the original Mortgage or
intervening assignment (other than the Assignment of Mortgage) has been
delivered to the appropriate party for recordation. In all such instances, the
Depositor will deliver or cause to be delivered the original recorded Mortgage
or intervening assignment (other than the Assignment of Mortgage) to the
Indenture Trustee or its Custodian promptly upon receipt by the Seller of the
original recorded Mortgage (other than the Assignment of Mortgage) or
intervening assignment but in no event later than 12 months after the Closing
Date.
Notwithstanding anything to the contrary contained in this Section
2.03, in those instances where the public recording office retains the
original Mortgage, the Assignment of Mortgage or the intervening assignments
of the Mortgage after it has been recorded, the Depositor shall be deemed to
have satisfied its obligations hereunder (and the Seller shall be deemed to
have satisfied its obligations under the Mortgage Loan Purchase Agreement)
upon delivery to the Indenture Trustee or its Custodian of a copy of such
Mortgage, such Assignment or intervening assignments of Mortgage certified by
the public recording office to be a true copy of the recorded original
thereof.
Within a period of [30] days from the Closing Date, the Indenture
Trustee shall, or shall cause the Custodian to, complete the endorsement of
each Mortgage Note and each Assignment of Mortgage in the name of the
Indenture Trustee.
(b) In the event that any such original document is required pursuant
to the terms of this Section 2.03 to be a part of a Mortgage File, such
document shall be delivered promptly by the Depositor to the Indenture Trustee
or its Custodian. If the Servicer receives any such original document, the
Servicer agrees further that it does not and will not have or assert any
beneficial ownership interest in the Mortgage Loans or the Mortgage Files, and
shall transfer such original to the Indenture Trustee or the Custodian on
behalf of the Indenture Trustee.
Section 2.04. Acceptance by Indenture Trustee of the Mortgage Loans;
Certain Substitutions; Certification. (a) The Indenture Trustee agrees to
execute and deliver, or cause to be executed and delivered, to the Depositor,
[the Note Insurer,] the Servicer and the Seller [on or prior to the Closing
Date an acknowledgment of receipt of the Note Insurance Policy and,] with
respect to each Mortgage Loan, on or prior to the Closing Date, an
acknowledgment of receipt of the original Mortgage Note (with any exceptions
noted), and, subject to the review provided for in this Section, its receipt
of the Mortgage Files in substantially the form attached as Exhibit D hereto
and declares that it will hold such documents and any amendments, replacements
or supplements thereto, as well as any other assets included in the definition
of Trust Estate and delivered to the Indenture Trustee (or the Custodian on
behalf of the Indenture Trustee), as Indenture Trustee in trust upon and
subject to the conditions set forth herein for the benefit of the
Securityholders [and the Note Insurer]. The Indenture Trustee agrees, for the
benefit of the Securityholders [and the Note Insurer], to review, or cause to
be reviewed, each Mortgage File within [45] Business Days after the Closing
Date (with respect to the Mortgage Loans) and to deliver or cause to be
delivered to the Seller, the Servicer, the Depositor [and the Note Insurer] a
certification of the Indenture Trustee or the Custodian on behalf of the
Indenture Trustee substantially in the form attached hereto as Exhibit E to
the effect that, as to each Mortgage Loan listed in the related Mortgage Loan
Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan
specifically identified in such certification as not covered by such
certification), (i) all documents required to be delivered to it pursuant to
Section 2.03 are in its possession and that the Mortgage Notes have been
endorsed as provided in Section 2.03, (ii) each such document has been
reviewed by it and has not been mutilated, damaged, torn or otherwise
physically altered (handwritten additions, changes or corrections shall not
constitute physical alteration if initialed by the Mortgagor), appears regular
on its face and relates to such Mortgage Loan, and (iii) based on its
examination and only as to the foregoing documents, the information set forth
on the Schedule of Mortgage Loans accurately reflects the information set
forth in the Mortgage File with respect to the loan number, maturity date,
original principal balance, first payment date and original term to maturity.
The Indenture Trustee makes no representations as to and shall not be
responsible to verify (i) the validity, legality, enforceability, sufficiency,
due authorization, recordability or genuineness of any of the documents
contained in each Mortgage File or of any of the Mortgage Loans or (ii) the
collectability, insurability, effectiveness or suitability of any such
Mortgage Loan.
Within [180] days after the Closing Date, the Indenture Trustee shall
deliver or cause to be delivered to the Servicer, the Seller, the Depositor
[and the Note Insurer] a final certification of the Indenture Trustee or the
Custodian substantially in the form attached hereto as Exhibit F to the effect
that, as to each Mortgage Loan listed in the Mortgage Loan Schedule (other
than any Mortgage Loan paid in full or any Mortgage Loan specifically
identified in such certification as not covered by such certification), (i)
all documents required to be delivered to it pursuant to Section 2.03 are in
its possession and that the Mortgage Notes have been endorsed as provided in
Section 2.03, (ii) each such document has been reviewed by it and has not been
mutilated, damaged, torn or otherwise physically altered (handwritten
additions, changes or corrections shall not constitute physical alteration if
initialed by the Mortgagor), appears regular on its face and relates to such
Mortgage Loan, and (iii) based on its examination and only as to the foregoing
documents, the information set forth on the Mortgage Loan Schedule accurately
reflects the information set forth in the Mortgage File with respect to the
loan number, maturity date, original principal balance, first payment date and
original term to maturity.
(b) If [the Note Insurer or] the Indenture Trustee (or its Custodian)
during the process of reviewing the Mortgage Files or otherwise finds any
document constituting a part of a Mortgage File which is not executed, has not
been received, is unrelated to the Mortgage Loan identified in the related
Mortgage Loan Schedule, or does not conform to the requirements of Section
2.03 or the description thereof as set forth in the related Mortgage Loan
Schedule, the Indenture Trustee (or its Custodian) [or the Note Insurer, as
applicable,] shall promptly so notify the Servicer, the Seller, the Depositor,
[the Note Insurer] and the Indenture Trustee. In performing any such review,
the Indenture Trustee (or its Custodian) may conclusively rely on the Seller
as to the purported genuineness of any such document and any signature
thereon. It is understood that the scope of the Indenture Trustee's (or its
Custodian's) review of the Mortgage Files is limited solely to confirming that
the documents listed in Section 2.03 have been executed and received and
relate to the Mortgage Files identified in the related Mortgage Loan Schedule
and such documents conform to the standard set forth in clauses (ii) and (iii)
of the immediately preceding paragraph. The Indenture Trustee shall enforce
its rights as to any defective Mortgage Loan document against the Seller under
the Mortgage Loan Purchase Agreement for the benefit of Securityholders [and
the Note Insurer]. It is understood and agreed that the Depositor has assigned
to the Issuer, and the Issuer has assigned to the Indenture Trustee under the
Indenture, its rights under the Mortgage Loan Purchase Agreement including the
right to enforce any remedy against the Seller thereunder. For purposes of
calculating the amount the Servicer is required to remit on the Servicer
Remittance Date following such repurchase or substitution, any Loan Purchase
Price or Substitution Adjustment that is paid and deposited in the related
Collection Account as provided above shall be deemed to have been deposited in
the related Collection Account in the Due Period preceding such Servicer
Remittance Date.
(c) Upon receipt by the Indenture Trustee or its Custodian of a
certification of a Servicing Officer of such substitution or purchase (which
certification shall be in the form of Exhibit G hereto) and, in the case of a
substitution, upon receipt of the related Mortgage File, and the deposit of
the amounts described above in the Collection Account, the Indenture Trustee
shall, or shall cause the Custodian to, release to the Servicer for release to
the Seller the related Mortgage File and shall execute, without recourse, and
deliver such instruments of transfer furnished by the Seller as may be
necessary to transfer such Mortgage Loan to the Seller. [The Indenture Trustee
shall notify the Note Insurer if the Seller fails to repurchase or substitute
for a Mortgage Loan in accordance with the foregoing.]
Section 2.05. Further Action Evidencing Assignment. (a) The Depositor
agrees that, from time to time, at the Seller's expense, the Depositor shall
cause the Seller promptly to execute and deliver all further instruments and
documents, and take all further action, that may be necessary or appropriate,
or that the Servicer[, the Note Insurer] or the Indenture Trustee may
reasonably request, in order to perfect, protect or more fully evidence the
transfer of ownership of the Trust Estate or to enable the Indenture Trustee
to exercise or enforce any of its rights hereunder. Without limiting the
generality of the foregoing, the Depositor will, upon the request of the
Servicer or of the Indenture Trustee, execute and file (or cause to be
executed and filed) such real estate filings, financing or continuation
statements, or amendments thereto or assignments thereof, and such other
instruments or notices, as may be necessary or appropriate.
(b) The Depositor hereby grants to the Servicer and the Indenture
Trustee, and this Agreement shall constitute, a power of attorney to execute
all documents on its behalf under this Agreement as may be necessary or
desirable to effectuate the foregoing.
Section 2.06. Conveyance of the Subsequent Mortgage Loans. [ ].
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations of the Servicer. The Servicer hereby
represents and warrants to the Indenture Trustee, the Depositor, the
Securityholders [and the Note Insurer] as of the Closing Date:
(a) The Servicer is a corporation duly organized, validly existing and
in good standing under the laws of the State of [ _______________________ ]
and is duly authorized and qualified to transact any and all business
contemplated by this Agreement to be conducted by the Servicer in any state in
which a Mortgaged Property is located or is otherwise not required under
applicable law to effect such qualification and, in any event, is in
compliance with the doing business laws of any such State, to the extent
necessary to ensure its ability to enforce each Mortgage Loan and to service
the Mortgage Loans in accordance with the terms of this Agreement;
(b) The Servicer has the full corporate power and authority to service
each Mortgage Loan, and to execute, deliver and perform, and to enter into and
consummate the transactions contemplated by this Agreement and has duly
authorized by all necessary corporate action on the part of the Servicer the
execution, delivery and performance of this Agreement; and this Agreement,
assuming the due authorization, execution and delivery thereof by the
Depositor and the Indenture Trustee, constitutes a legal, valid and binding
obligation of the Servicer, enforceable against the Servicer in accordance
with its terms, except to the extent that (a) the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought;
(c) The execution and delivery of this Agreement by the Servicer, the
servicing of the Mortgage Loans by the Servicer hereunder, the consummation of
any other of the transactions herein contemplated, and the fulfillment of or
compliance with the terms hereof are in the ordinary course of business of the
Servicer and will not (A) result in a breach of any term or provision of the
charter or by-laws of the Servicer or (B) conflict with, result in breach,
violation or acceleration of, or result in a default under, the terms of any
other material agreement or instrument to which the Servicer is a party or by
which it may be bound, or any statute, order or regulation applicable to the
Servicer of any court, regulatory body, administrative agency or governmental
body having jurisdiction over the Servicer; and the Servicer is not a party
to, bound by, or in breach or violation of any indenture or other agreement or
instrument, or subject to or in violation of any statute, order or regulation
of any court, regulatory body, administrative agency or governmental body
having jurisdiction over it, which materially and adversely affects or, to the
Servicer's knowledge, would in the future materially and adversely affect, (x)
the ability of the Servicer to perform its obligations under this Agreement or
(y) the business, operations, financial condition, properties or assets of the
Servicer taken as a whole;
(d) The Servicer is an approved seller/servicer for Fannie Mae or
Freddie Mac in good standing and is a HUD approved mortgagee pursuant to
Section 203 of the National Housing Act;
(e) No litigation is pending, or to the best of the Servicer's
knowledge, threatened, against the Servicer that would materially and
adversely affect the execution, delivery or enforceability of this Agreement
or the ability of the Servicer to service the Mortgage Loans or to perform any
of its other obligations hereunder in accordance with the terms hereof; and
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Servicer of, or compliance by the Servicer with, this
Agreement or the consummation of the transactions contemplated hereby, or if
any such consent, approval, authorization or order is required, the Service
has obtained the same.
It is understood and agreed that the representations and warranties
set forth in this Section 3.01 shall survive the delivery of the respective
Mortgage Files to the Indenture Trustee or to a custodian, as the case may be,
and inure to the benefit of the Indenture Trustee, the Securityholders [and
the Note Insurer].
Section 3.02. Representations, Warranties and Covenants of the
Depositor. The Depositor hereby represents, warrants and covenants to the
Indenture Trustee, the Servicer, the Securityholders [and the Note Insurer]
that as of the date of this Agreement or as of such date specifically provided
herein:
(a) The Depositor is a corporation duly organized, validly existing
and in good standing under the laws of the State of [ ];
(b) The Depositor has the corporate power and authority to convey the
Mortgage Loans and to execute, deliver and perform, and to enter into and
consummate transactions contemplated by, this Agreement;
(c) This Agreement has been duly and validly authorized, executed and
delivered by the Depositor, all requisite corporate action having been taken,
and, assuming the due authorization, execution and delivery hereof by the
Servicer and the Indenture Trustee, constitutes or will constitute the legal,
valid and binding agreement of the Depositor, enforceable against the
Depositor in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors generally, and by
general equity principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
(d) No consent, approval, authorization or order of or registration or
filing with, or notice to, any governmental authority or court is required for
the execution, delivery and performance of or compliance by the Depositor with
this Agreement or the consummation by the Depositor of any of the transactions
contemplated hereby, except as have been made on or prior to the Closing Date;
(e) None of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or thereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement,
(i) conflicts or will conflict with or results or will result in a breach of,
or constitutes or will constitute a default or results or will result in an
acceleration under (A) the charter or bylaws of the Depositor, or (B) of any
term, condition or provision of any material indenture, deed of trust,
contract or other agreement or instrument to which the Depositor or any of its
subsidiaries is a party or by which it or any of its subsidiaries is bound;
(ii) results or will result in a violation of any law, rule, regulation,
order, judgment or decree applicable to the Depositor of any court or
governmental authority having jurisdiction over the Depositor or its
subsidiaries; or (iii) results in the creation or imposition of any lien,
charge or encumbrance which would have a material adverse effect upon the
Mortgage Loans or any documents or instruments evidencing or securing the
Mortgage Loans;
(f) There are no actions, suits or proceedings before or against or
investigations of, the Depositor pending, or to the knowledge of the
Depositor, threatened, before any court, administrative agency or other
tribunal, and no notice of any such action, which, in the Depositor's
reasonable judgment, might materially and adversely affect the validity or
enforceability of the Mortgage Loans or the performance by the Depositor of
its obligations under this Agreement, or the validity or enforceability of
this Agreement;
(g) The Depositor 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 that would materially and adversely affect
its performance hereunder;
(h) Immediately prior to the sale and assignment by the Depositor to
the Indenture Trustee on behalf of the Trust of each Mortgage Loan, the
Depositor had good title to, and was the sole owner of, each Mortgage Loan
subject to no prior lien, claim, participation interest, mortgage, security
interest, pledge, charge or other encumbrance or other interest of any nature;
(i) Upon execution and delivery of this Agreement the Depositor
transferred all right, title and interest in the Mortgage Loans to the Issuer
on behalf of the Trust; and
(j) The transfer, assignment and conveyance of the Mortgage Notes and
the Mortgages by the Depositor hereunder are not subject to the bulk transfer
laws of any similar statutory provisions in effect in any applicable
jurisdiction.
It is understood and agreed that the representations, warranties and
covenants set forth in this Section 3.02 shall survive delivery of the
respective Mortgage Files to the Indenture Trustee or to the Custodian, as the
case may be, and shall inure to the benefit of the Indenture Trustee, the
Servicer, the Securityholders [and the Note Insurer].
Section 3.03. Purchase And Substitution. (a) Upon discovery by the
Seller, the Depositor, the Servicer, the Indenture Trustee [or the Note
Insurer] of a breach of any of representation or warranty set forth in
[Section 5 or Section 6] of the Mortgage Loan Purchase Agreement which
materially and adversely affects the value of any Mortgage Loan or the
interests of Securityholders [or the Note Insurer], the party discovering such
breach shall give prompt written notice to the others, and the Indenture
Trustee shall enforce its rights as to any Mortgage Loan with respect to which
such a breach of representation or warranty has occurred against the Seller
under the Mortgage Loan Purchase Agreement for the benefit of Securityholders
[and the Note Insurer].
(b) Any Loan Purchase Price paid in connection with the repurchase of
a Deleted Mortgage Loan, and any Substitution Adjustment paid in connection
with the substitution of a Qualified Substitute Mortgage Loan, shall be
deposited into the Collection Account.
(c) The Servicer shall deposit in the Collection Account all payments
received in connection with such Qualified Substitute Mortgage Loan or Loans
after the date of such substitution. Monthly Payments received with respect to
Qualified Substitute Mortgage Loans on or before the date of substitution will
be retained by the Seller. The Trust will own all payments received on the
Deleted Mortgage Loan on or before the date of substitution, and the Seller
will thereafter be entitled to retain all amounts subsequently received in
respect of such Deleted Mortgage Loan. The Servicer shall give written notice
to the Indenture Trustee and the Note Insurer that such substitution has taken
place and shall amend the Mortgage Loan Schedule to reflect the removal of
such Deleted Mortgage Loan from the terms of this Agreement and the
substitution of the Qualified Substitute Mortgage Loan. Upon such
substitution, such Qualified Substitute Mortgage Loan or Loans shall be
subject to the terms of this Agreement in all respects.
(d) With respect to each Qualified Substitute Mortgage Loan to be
delivered to the Indenture Trustee (or its Custodian) pursuant to the terms of
this Article III in exchange for a Deleted Mortgage Loan: (i) the Seller shall
deliver to the Indenture Trustee (or its custodian) the Mortgage File for the
Qualified Substitute Mortgage Loan containing the documents set forth in
Section 2.03(a) along with a written certification certifying as to the
delivery of such Mortgage File and containing the granting language set forth
in Section 2.01(a); and (ii) the Seller will be deemed to have made, with
respect to such Qualified Substitute Mortgage Loan, each of the
representations and warranties made by it with respect to the related Deleted
Mortgage Loan. As soon as practicable after the delivery of any Qualified
Substitute Mortgage Loan hereunder, the Servicer, at the expense of the
Depositor and with the cooperation of the Servicer, shall cause the Assignment
of Mortgage to be recorded if required pursuant to Section 2.03.
(e) It is understood and agreed that the obligations of the Seller set
forth in Sections [4, 5, 6 and 7] of the Mortgage Loan Purchase Agreement to
cure, purchase or substitute for a defective Mortgage Loan constitute the sole
remedies of the Indenture Trustee, [the Note Insurer] and the Securityholders
respecting a breach of the representations and warranties of the Seller set
forth in [Sections 5 and 6] of the Mortgage Loan Purchase Agreement[, except
as provided in the Insurance Agreement]. In addition, it is understood and
agreed that the Depositor has assigned to the Issuer all of its rights under
the Mortgage Loan Purchase Agreement, including the right to enforce any
remedy against the Seller as provided in [Section 7] thereof. The Indenture
Trustee shall, or shall cause the Custodian to, give prompt written notice to
[the Note Insurer and] the Rating Agencies of any repurchase or substitution
made pursuant to this Section 3.03 or Section 2.04(b).
ARTICLE IV
[RESERVED]
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01. Appointment of the Servicer. Acting directly or through
one or more Subservicers as provided in Section 5.02, the Servicer shall
service and administer the Mortgage Loans on behalf of the Indenture Trustee
and in the best interests of and for the benefit of the Securityholders [and
the Note Insurer] in accordance with this Agreement and the terms of the
respective Mortgage Loans, and Accepted Servicing Practices, and shall have
full power and authority, acting alone, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable but without regard to: (i) any relationship that the
Servicer, any Subservicer or any Affiliate of the Servicer or any Subservicer
may have with the related Mortgagor; (ii) the ownership of any Note by the
Servicer or any Affiliate of the Servicer; (iii) the Servicer's obligation to
make Periodic Advances or Servicing Advances; or (iv) the Servicer's or any
Subservicer's right to receive compensation for its services hereunder or with
respect to any particular transaction.
Subject to Section 5.02 hereof, the Servicer may, and is hereby
authorized to, perform any of its servicing responsibilities with respect to
all or certain of the Mortgage Loans through a Subservicer as it may from time
to time designate, but no such designation of a Subservicer shall serve to
release the Servicer from any of its obligations under this Agreement. Such
Subservicer shall have the rights and powers of the Servicer which have been
delegated to such Subservicer with respect to such Mortgage Loans under this
Agreement; PROVIDED, HOWEVER, the Servicer shall remain primarily liable for
all duties and obligations of the Servicer hereunder.
Without limiting the generality of the foregoing, but subject to
Sections 5.12 and 5.13, the Servicer in its own name or in the name of a
Subservicer is hereby authorized and empowered to execute and deliver, on
behalf of itself, the Securityholders and the Indenture Trustee or any of
them, (i) any and all instruments of satisfaction or cancellation or of
partial or full release or discharge and all other comparable instruments with
respect to the Mortgage Loans and with respect to the Mortgaged Properties,
(ii) to institute foreclosure proceedings or obtain a deed in lieu of
foreclosure so as to effect ownership of any Mortgaged Property in the name of
the Servicer on behalf of the Indenture Trustee, and (iii) to hold title to
any Mortgaged Property upon such foreclosure or deed in lieu of foreclosure on
behalf of the Indenture Trustee[; PROVIDED, HOWEVER, that to the extent any
instrument described in clause (i) preceding would be delivered by the
Servicer outside of its usual procedures for Mortgage Loans held in its own
portfolio the Servicer shall, prior to executing and delivering such
instrument, obtain the prior written consent of the Note Insurer]. The
Indenture Trustee hereby grants to the Servicer, and this Agreement shall
constitute, a power of attorney to execute all documents on its behalf under
this Agreement as may be necessary or desirable to effectuate the provisions
of this paragraph; PROVIDED, HOWEVER, that instruments of satisfaction,
cancellation, release or discharge shall only be executed with respect to
Mortgage Loans paid in full or foreclosed (or with respect to which payment in
full has been escrowed). Revocation of the power of attorney created by the
preceding sentence shall take effect upon (i) the receipt by the Servicer of
written notice thereof from the Indenture Trustee, (ii) an Event of Default or
(iii) the termination of the Trust. The Indenture Trustee shall execute any
documentation furnished to it by the Servicer for recordation by the Servicer
in the appropriate jurisdictions, as shall be necessary to effectuate the
foregoing. Subject to Sections 5.12 and 5.13, the Indenture Trustee shall, if
necessary, execute additional powers of attorney to the Servicer or any
Subservicer and furnish them with any other documents as the Servicer or such
Subservicer shall reasonably request to enable the Servicer and such
Subservicer to carry out their respective servicing and administrative duties
hereunder.
Upon the request of the Indenture Trustee, the Servicer shall send to
the Indenture Trustee [and, if requested by the Note Insurer, the Note
Insurer,] the details concerning the servicing of the Mortgage Loans on
computer generated tape, diskette or other machine readable format that is
mutually agreeable.
The Servicer shall give prompt written notice to the Indenture Trustee
and the Note Insurer of any action of which the Servicer has actual knowledge
to (i) assert a claim against the Trust or (ii) assert jurisdiction over the
Trust.
Servicing Advances incurred by the Servicer or any Subservicer in
connection with the servicing of the Mortgage Loans (including any penalties
in connection with the payment of any taxes and assessments or other charges)
on any Mortgaged Property shall be recoverable by the Servicer or such
Subservicer to the extent provided in Section 5.21(b) hereof.
Section 5.02. Subservicers. (a) The Servicer may[, with the prior
written consent of the Note Insurer,] enter into Subservicing Agreements for
any servicing and administration of Mortgage Loans with any institution which
[is acceptable to the Note Insurer and which,], (v) is an institution approved
as a mortgage loan originator by the Federal Housing Administration or an
institution, the deposit accounts of which are insured by the FDIC, (w) a
FHLMC or FNMA approved mortgage servicer, (x) is in compliance with the laws
of each state necessary to enable it to perform its obligations under such
Subservicing Agreement, (y) has experience servicing mortgage loans that are
similar to the Mortgage Loans and (z) has equity of not less than [$5,000,000]
(as determined in accordance with generally accepted accounting principles).
The Servicer shall give prior written notice to the Issuer, the Indenture
Trustee, the Securityholders, the Rating Agencies [and the Note Insurer] of
the appointment of any Subservicer. For purposes of this Agreement, the
Servicer shall be deemed to have received payments on Mortgage Loans when any
Subservicer has received such payments. [The Servicer shall not amend any such
Subservicing Agreement without the Note Insurer's prior written consent.] Each
Subservicer shall be required to service the Mortgage Loans in accordance with
this Agreement and any such Subservicing Agreement shall be consistent with
and not violate the provisions of this Agreement. Each Subservicing Agreement
shall provide that the Indenture Trustee (if acting as successor Servicer) or
any other successor Servicer shall have the option to terminate such agreement
without payment of any fees if the original Servicer is terminated or resigns.
The Servicer shall deliver to the Indenture Trustee copies of all Subservicing
Agreements, and any amendments or modifications thereof promptly upon the
Servicer's execution and delivery of such instrument.
The Servicer shall not be relieved of its obligations under this
Agreement notwithstanding any Subservicing Agreement or any of the provisions
of this Agreement relating to agreements or arrangements between the Servicer
and a Subservicer and the Servicer shall be obligated to the same extent and
under the same terms and conditions as if it alone were servicing and
administering the Mortgage Loans. The Servicer shall be entitled to enter into
any agreement with a Subservicer for indemnification of the Servicer by such
Subservicer and nothing contained in such Subservicing Agreement shall be
deemed to limit or modify this Agreement.
(b) The Servicer shall be entitled to terminate any Subservicing
Agreement in accordance with the terms and conditions of such Subservicing
Agreement and to either itself directly service the related Mortgage Loans or
enter into a Subservicing Agreement with a successor Subservicer that
qualifies under this Section.
As part of its servicing activities hereunder, the Servicer (except as
otherwise provided in the last sentence of this paragraph), for the benefit of
the Indenture Trustee, the Issuer [and the Note Insurer], shall enforce the
obligations of each Subservicer under the related Subservicing Agreement and
of the Seller under the Purchase Agreement, including, without limitation, any
obligation to make advances in respect of delinquent payments as required by a
Subservicing Agreement, or to purchase a Mortgage Loan on account of missing
or defective documentation or on account of a breach of a representation,
warranty or covenant, as described in Section 3.03 hereof and [Section 7] of
the Mortgage Loan Purchase Agreement. Such enforcement, including, without
limitation, the legal prosecution of claims, termination of any Subservicing
Agreement, and the pursuit of other appropriate remedies, shall be in such
form and carried out to such an extent and at such time as the Servicer, in
its good faith business judgment, would require were it the owner of the
related Mortgage Loans. The Servicer shall pay the costs of such enforcement
(except against the Seller) at its own expense, and shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement, to
the extent, if any, that such recovery exceeds all amounts due in respect of
the related Mortgage Loans, or (ii) from a specific recovery of costs,
expenses or attorneys' fees against the party against whom such enforcement is
directed. Enforcement of the Mortgage Loan Purchase Agreement against the
Seller shall be effected by the Servicer to the extent it is not the Seller,
and otherwise by the Trustee, in accordance with the foregoing provisions of
this paragraph.
(c) Any Subservicing Agreement and any other transactions or services
relating to the Mortgage Loans involving a Subservicer shall be deemed to be
between the Subservicer and the Servicer alone and the Indenture Trustee and
the Securityholders shall not be deemed parties thereto and shall have no
claims, rights, obligations, duties or liabilities with respect to any
Subservicer except as set forth in paragraph (d) below. The Servicer shall be
solely liable for all fees and expenses owed by it to any Subservicer,
irrespective of whether the Servicer's compensation pursuant to this Agreement
is sufficient to pay such fees and expenses.
(d) In connection with the assumption of the responsibilities, duties
and liabilities and of the authority, power and rights of the Servicer
hereunder by the Indenture Trustee pursuant to Section 7.02 or by another
successor Servicer, it is understood and agreed that the Servicer's rights and
obligations under any Subservicing Agreement then in force between the
Servicer and a Subservicer shall be assumed simultaneously by the Indenture
Trustee or other successor Servicer without act or deed on part of the
Indenture Trustee except that (i) the predecessor Servicer shall not thereby
be relieved of any liability or obligations under any Subservicing Agreement
that arose before it ceased to be the Servicer and (ii) none of the Indenture
Trustee, its designee or any successor Servicer shall be deemed to have
assumed any liability or obligation of the predecessor Servicer that arose
before it ceased to be the Servicer; PROVIDED, HOWEVER, that the Indenture
Trustee (if acting as successor Servicer) or any other successor Servicer may
[, with the consent of the Note Insurer, and shall, at the direction of the
Note Insurer,] terminate the Subservicer as provided in Section 5.02.
The Servicer shall, upon the reasonable request of the Indenture
Trustee but at the expense of the Servicer, deliver to the assuming party
documents and records relating to each Subservicing Agreement and an
accounting of amounts collected and held by it and otherwise use its best
reasonable efforts to effect the orderly and efficient transfer of the
Subservicing Agreements to the assuming party.
Section 5.03. Collection of Certain Mortgage Loan Payments; Collection
Account. (a) The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement
and the terms and provisions of any applicable Insurance Policy, follow
Accepted Servicing Practices.
(b) The Servicer shall establish and maintain at one or more
Designated Depository Institutions in the name of the Indenture Trustee the
Collection Account, in trust for the benefit of the Securityholders [and the
Note Insurer]. The Collection Account shall be established and maintained as
an Eligible Account. If the institution at any time holding the Collection
Account ceases to be eligible as a Designated Depository Institution
hereunder, then the Servicer shall immediately be required to name a successor
institution meeting the requirements for a Designated Depository Institution
hereunder. If the Servicer fails to name such a successor institution, then
the Collection Account shall thenceforth be held as a trust account with a
qualifying Designated Depository Institution selected by the Indenture
Trustee. The Servicer shall notify the Indenture Trustee [and the Note
Insurer] if there is a change in the name, account number or institution
holding the Collection Account.
The Servicer shall deposit in the Collection Account (i) on the
Closing Date, any amounts representing Monthly Payments on the Mortgage Loans
due or to be applied as of a date after the Cut-off Date and (ii) thereafter,
on a daily basis within [one] Business Day of receipt (except as otherwise
permitted herein), the following payments and collections received or made by
it:
(i) all payments received on or after the Cut-off Date on account
of principal on the Mortgage Loans;
(ii) all payments received on or after the Cut-off Date on
account of interest on the Mortgage Loans;
(iii) all Net Liquidation Proceeds and Post-Liquidation Proceeds;
(iv) all Insurance Proceeds;
(v) all Released Mortgaged Property Proceeds;
(vi) any amounts payable in connection with the repurchase of any
Mortgage Loan and the amount of any Substitution Adjustment pursuant
to Sections 2.04 and 3.03; and
(vii) any other amount expressly required to be deposited in the
Collection Account in accordance with certain provisions of this
Agreement; PROVIDED, HOWEVER, that the Servicer shall be entitled, at
its election, either (a) to withhold and to pay to itself the
applicable Servicing Fee from any payment on account of interest or
other recovery as received and prior to deposit of such payments in
the Collection Account or (b) to withdraw the applicable Servicing Fee
from the Collection Account after the entire payment or recovery has
been deposited therein.
The Servicer shall invest the funds in the Collection Account only in
Permitted Investments, and any such investment shall mature no later than the
Business Day immediately preceding the next Servicer Remittance Date. No
Permitted Investment shall be sold or disposed of at a gain prior to maturity.
All income (other than any gain from a sale or disposition of the type
referred to in the preceding sentence) realized from any such Permitted
Investment shall be for the benefit of the Servicer as additional servicing
compensation and may only be withdrawn from the Collection Account by the
Servicer immediately following the remittance to the Trustee on each Servicer
Remittance Date by the Servicer in accordance with the terms hereof. The
amount of any net losses incurred in respect of any such investments shall be
deposited in the Collection Account by the Seller out of its own funds
immediately as realized.
The foregoing requirements for deposit in the Collection Account shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of those described in the
first paragraph of Section 5.14 need not be deposited by the Servicer in the
Collection Account. If the Servicer deposits in the Collection Account any
amount not required to be deposited therein, it may at any time withdraw such
amount from the Collection Account, any provision herein to the contrary
notwithstanding. All funds deposited by the Servicer in the Collection Account
shall be held in the Collection Account for the account of the Indenture
Trustee in trust for the Securityholders [and the Note Insurer] until
disbursed in accordance with Section 6.01 or withdrawn in accordance with
Section 5.04.
(c) The Collection Account may[, upon written notice by the Indenture
Trustee to the Note Insurer,] be transferred to a different Designated
Depository Institution so long as such transfer is to an Eligible Account.
Section 5.04. Permitted Withdrawals from the Collection Account. The
Servicer may, from time to time, make withdrawals from the Collection Account
for the following purposes:
(a) to reimburse itself for any accrued unpaid Servicing Fees and for
unreimbursed Periodic Advances and Servicing Advances; PROVIDED, HOWEVER, that
the Servicer's right to reimbursement for unpaid Servicing Fees and
unreimbursed Servicing Advances and Periodic Advances shall be limited to late
collections on the related Mortgage Loan and to Liquidation Proceeds,
Foreclosure Property proceeds, Released Mortgaged Property Proceeds, Insurance
Proceeds and such other amounts as may be collected by the Servicer from the
related Mortgagor or otherwise relating to the Mortgage Loan in respect of
which such unreimbursed amounts are owed limited as follows: The Servicer's
right to reimbursement of unpaid Servicing Fees shall be limited to the
portion of such amounts allocable to interest; the Servicer's right to
reimbursement of Periodic Advances from late collections shall be limited to
the portion of any Monthly Payment allocable to principal and interest; and
the Servicer's right to reimbursement of Servicing Advances from late
collections shall be limited to amounts allocable to escrow payments for
taxes, assessments or insurance, to the extent that such Servicing Advances
were made for such purposes.
(b) to reimburse itself for any Periodic Advances and Servicing
Advances determined to have become Nonrecoverable Advances and amounts
reimbursable to itself pursuant to Section 11.01, such reimbursement to be
made from any funds in the Collection Account;
(c) [Reserved]
(d) to withdraw any funds deposited in the Collection Account that
were not required to be deposited therein;
(e) to pay itself servicing compensation owed pursuant to Section 5.14
hereof to the extent not retained or paid pursuant to Sections 5.03 or 5.14;
(f) to pay to the Seller, with respect to each Mortgage Loan or
property acquired in respect thereof that has been repurchased or replaced
pursuant to Sections 2.04 or 3.03 or to pay to itself with respect to each
Mortgage Loan or property acquired in respect thereof that has been purchased
pursuant to Section 8.01 all amounts received thereon and not required to be
distributed as of the date on which the related repurchase or purchase price
or Principal Balance, as the case may be, was determined;
(g) to pay to the Seller with respect to each Mortgage Loan the amount
of interest accrued and unpaid on such Mortgage Loan on the Cut-off Date;
(h) to remit to the Indenture Trustee amounts to be deposited into the
Note Distribution Account and the Certificate Distribution Account in the
amounts and in the manner provided for herein;
(i) to pay itself any net interest earned on or net investment income
earned with respect to funds in the Collection Account;
(j) to pay to the Servicer, any amounts payable or reimbursable
thereto under Section 7.02 (with respect to Servicer set-up expenses and with
respect to successor Servicers) hereof; and
(k) to clear and terminate the Collection Account upon the termination
of this Agreement.
The Servicer shall keep and maintain a separate accounting for each
Mortgage Loan for the purpose of accounting for withdrawals from the
Collection Account pursuant to subclause (a).
[In addition, if (a) there has been a draw on the Note Insurance
Policy for which the Seller or the Servicer is required to reimburse the Note
Insurer pursuant to the Insurance Agreement; (b) the Seller or the Servicer
has reimbursed the Note Insurer for all such amounts required by the Insurance
Agreement; (c) the Note Insurer has paid the draw amount to the Indenture
Trustee for the benefit of the Insured Noteholders; and (d) the Servicer has
received late payments on the Mortgage Loans in respect of which such draw was
made, then the Servicer may, upon notice to the Indenture Trustee and the Note
Insurer, reimburse itself or the Seller, as applicable, from such late
payments for the draw amount.]
Section 5.05. Payment of Taxes, Insurance and Other Charges. With respect to
each Mortgage Loan, the Servicer shall maintain accurate records reflecting
casualty insurance coverage. With respect to each Mortgage Loan as to which
the Servicer maintains escrow accounts, the Servicer shall maintain accurate
records reflecting the status of ground rents, taxes, assessments, water rates
and other charges which are or may become a lien upon the Mortgaged Property
and the status of primary mortgage guaranty insurance premiums, if any, and
casualty 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 and at a
time appropriate for securing maximum discounts allowable, employing for such
purpose deposits of the Mortgagor in any 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, if it has
received notice of a default or deficiency, monitor such payments to determine
if they are made by the Mortgagor. The Servicer shall effect payment of taxes,
assessments, primary mortgage or hazard insurance premiums and other charges
which are or may become a lien upon the Mortgaged Property prior to the
applicable penalty or termination date and at a time appropriate for securing
maximum discounts allowable but the Servicer shall be required to so advance
only to the extent that such advances, in the good faith judgment of the
Servicer, will be recoverable by the Servicer pursuant to Section 5.04 out of
Liquidation Proceeds, Insurance Proceeds or other recoveries.
Section 5.06. Maintenance Of Casualty Insurance. (a) The Servicer
shall cause to be maintained with respect to each Mortgage Loan fire insurance
with extended coverage on the related Mortgaged Property in an amount which is
at least equal to the least of (i) the current principal balance of such
Mortgage Loan, (ii) the amount necessary to fully compensate for any damage or
loss to the improvements that are a part of such property on a replacement
cost basis and (iii) the maximum insurable value of the improvements that are
a part of such Mortgaged Property, in each case in an amount not less than
such amount as is necessary to avoid the application of any coinsurance clause
contained in the related hazard insurance policy. The Servicer shall also
cause to be maintained fire insurance with extended coverage on each
Foreclosure Property in an amount which is at least equal to the lesser of (i)
the maximum insurable value of the improvements which are a part of such
property and (ii) the outstanding principal balance of the related Mortgage
Loan at the time it became an Foreclosure Property. The Servicer will comply
in the performance of this Agreement with all reasonable rules and
requirements of each insurer under any such hazard policies. The Servicer
shall maintain the insurance policies required hereunder in the name of the
mortgagee, its successors and assigns, and shall be named as loss payee. Any
cost incurred by the Servicer in maintaining any such insurance shall not, for
the purpose of calculating distributions to Securityholders [and the Note
Insurer], be added to the unpaid principal balance of the related Mortgage
Loan, notwithstanding that the terms of such Mortgage Loan so permit. It is
understood and agreed that no earthquake or other additional insurance is to
be required of any Mortgagor other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property or Foreclosure Property is at
any time in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards, the Servicer will
cause to be maintained a flood insurance policy in respect thereof. Such flood
insurance shall be in an amount equal to the lesser of (i) the unpaid
principal balance of the related Mortgage Loan and (ii) the maximum amount of
such insurance available for the related Mortgaged Property under the national
flood insurance program (assuming that the area in which such Mortgaged
Property is located is participating in such program). The Insurance Policies
shall require the insurer to provide the mortgagee with 30 days' notice prior
to any cancellation or as otherwise required by law.
(b) Amounts collected by the Servicer under any Insurance Policies net
of amounts remitted to the Mortgagor for repairs shall be deposited into the
Collection Account, subject to withdrawal pursuant to Section 5.04.
Section 5.07. Maintenance of Mortgage Impairment Insurance Policy. In
the event that the Servicer shall obtain and maintain a blanket policy (a
"Mortgage Impairment Insurance Policy") with an insurer having a General
Policy Rating of A:X or better in Best's Key Rating Guide insuring against
hazard losses on all of the Mortgage Loans, it shall conclusively be deemed to
have satisfied its obligations as set forth in the first two sentences of
Section 5.06, it being understood and agreed that such policy may contain a
deductible clause, in which case the Servicer shall, in the event that there
shall not have been maintained on the related Mortgaged Property or
Foreclosure Property a policy complying with the first two sentences of
Section 5.06, and there shall have been one or more losses which would have
been covered by such policy, deposit to the Collection Account from its own
funds the amount not otherwise payable under the blanket policy because of
such deductible clause. In connection with its activities as administrator and
servicer of the Mortgage Loans, the Servicer agrees to prepare and present, on
behalf of itself, the Indenture Trustee and Securityholders [and the Note
Insurer], claims under any such blanket policy in a timely fashion in
accordance with the terms of such Insurance Policy.
Section 5.08. Fidelity Bond; Errors and Omissions Policy. The Servicer
(including the Indenture Trustee if it shall become the Servicer hereunder)
agrees to maintain errors and omissions coverage and a fidelity bond, each at
least to the extent required by Section 305 of Part I of FNMA Guide or any
successor provision thereof; PROVIDED, HOWEVER, that in any event that the
fidelity bond or the errors and omissions coverage is no longer in effect, the
Servicer shall notify the Indenture Trustee and the Indenture Trustee shall
promptly give such notice to [the Note Insurer and] the Securityholders and
shall secure replacement coverage in conformity with this Section.
Section 5.09. Collection of Taxes, Assessments and Other Items;
Servicing Account. In addition to the Collection Account, the Servicer shall
establish and maintain a Servicing Account, which shall be an Eligible
Account, and shall deposit therein all payments by Mortgagors for taxes,
assessments, primary mortgage or hazard insurance premiums or comparable
items. Withdrawals from the Servicing Account may be made to effect payment of
taxes, assessments, primary mortgage or hazard insurance premiums or
comparable items, to reimburse the Servicer out of related collections for any
advances made in the nature of any of the foregoing, to refund to any
Mortgagors any sums determined to be overages, or to pay any interest owed to
Mortgagors on such account to the extent required by law or to clear and
terminate the Servicing Account at the termination of this Agreement upon the
termination of the Issuer.
Section 5.10. Periodic Filings With The Securities And Exchange
Commission; Additional Information. The Depositor shall prepare or cause to be
prepared the initial current report on Form 8-K and thereafter the Indenture
Trustee shall prepare or cause to be prepared, on the basis of information
supplied by the Servicer, Form 10-Ks and Form 10-Qs (if necessary), or monthly
current reports on Form 8-K, on behalf of the Issuer, as may be required by
applicable law, for filing with the Securities and Exchange Commission (the
"SEC"). The Indenture Trustee shall sign each such report on behalf of the
Issuer. The Indenture Trustee (or the Administrator on behalf of the Indenture
Trustee) shall forward a copy of each such report to the Depositor promptly
after such report has been filed with the SEC. The Indenture Trustee agrees to
use its best efforts to seek to terminate such filing obligation promptly
after the period during which such filings are required under the Securities
Exchange Act of 1934. Promptly after filing a Form 15 or other applicable form
with the SEC in connection with such termination, the Indenture Trustee shall
deliver to the Depositor a copy of such form together with copies of
confirmations of receipt by the SEC of each report filed therewith on behalf
of the Issuer.
The Servicer and the Depositor each agree to promptly furnish to the
Indenture Trustee, from time to time upon request, such further information,
reports and financial statements within their control and customarily
generated related to this Agreement and the Mortgage Loans as the Indenture
Trustee reasonably deems appropriate to prepare and file all necessary reports
with the Securities and Exchange Commission.
Section 5.11. Enforcement of Due-on-Sale Clauses; Assumption
Agreements. When a Mortgaged Property has been or is about to be conveyed by
the Mortgagor, the Servicer shall, to the extent it has knowledge of such
conveyance or prospective conveyance, exercise its rights to accelerate the
maturity of the related Mortgage Loan under any "due-on-sale" clause contained
in the related Mortgage or Mortgage Note; provided, however, that the Servicer
shall not exercise any such right if the "due-on-sale" clause, in the
reasonable belief of the Servicer, is not enforceable under applicable law. In
such event, the Servicer shall enter into an assumption and modification
agreement with the person to whom such property has been or is about to be
conveyed, pursuant to which such person becomes liable under the Mortgage Note
and, unless prohibited by applicable law or the Mortgage Loan documents, the
Mortgagor remains liable thereon. If the foregoing is not permitted under
applicable law, the Servicer is authorized to enter into a substitution of
liability agreement with such person, pursuant to which the original Mortgagor
is released from liability and such person is substituted as Mortgagor and
becomes liable under the Mortgage Note. In connection with any assumption or
substitution, the Servicer shall apply such underwriting standards and follow
such practices and procedures as shall be normal and usual in its general
mortgage originating activities and as it applies to other mortgage loans
owned solely by it. The Servicer shall not take or enter into any assumption
and modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the
continued effectiveness of any applicable hazard insurance policy, or a new
policy meeting the requirements of this Section is obtained. The Servicer
shall notify the Indenture Trustee that any such substitution or assumption
agreement has been completed by forwarding to the Indenture Trustee the
original of such substitution or assumption agreement, which original shall be
added by the Indenture Trustee to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. The Servicer
shall be responsible for recording any such assumption or substitution
agreements. In connection with any such assumption or substitution agreement,
no material term of the Mortgage Loan (including, without limitation, the
required monthly payment on the related Mortgage Loan, the stated maturity,
the outstanding principal amount or the Mortgage Rate) shall be changed nor
shall any required monthly payments of principal or interest be deferred or
forgiven. Any fee collected by the Servicer or the Subservicer for consenting
to any such conveyance or entering into an assumption or substitution
agreement shall be retained by or paid to the Servicer as additional servicing
compensation.
Notwithstanding the foregoing paragraph or any other provision of this
Agreement, the Servicer shall not be deemed to be in default, breach or any
other violation of its obligations hereunder by reason of any assumption of a
Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever.
Section 5.12. Realization Upon Defaulted Mortgage Loans. (a) The
Servicer shall foreclose upon or otherwise comparably effect the ownership in
the name of the Indenture Trustee on behalf of the Issuer of Mortgaged
Properties relating to defaulted Mortgage Loans as to which no satisfactory
arrangements can be made for collection of Delinquent payments and which the
Servicer has not purchased pursuant to Section 5.18. In connection with such
foreclosure or other conversion, the Servicer shall use Accepted Servicing
Practices. Any amounts so advanced including any amounts described below
regarding environmental inspections shall constitute "Servicing Advances"
within the meaning of Section 5.21(b) hereof. In addition, the Servicer shall
have the power and authority to sell any Foreclosure Property on behalf of the
Indenture Trustee for the benefit of the Securityholders [and the Note
Insurer] to one or more third party purchasers in a manner that, in the
reasonable judgment of the Servicer, will be likely to maximize the net
proceeds realizable therefrom[; provided, however, that the Servicer shall
obtain the prior written consent of the Note Insurer to any sale of a
Foreclosure Property to an Affiliate of the Servicer.] Pursuant to its efforts
to sell Foreclosure Property, the Servicer shall either itself or through an
agent selected by the Servicer protect and conserve such Foreclosure Property
in the same manner and to such extent as is customary in the locality where
such Foreclosure Property is located and may, incident to its conservation and
protection of the interests of the Securityholders [and the Note Insurer],
rent the same, or any part thereof, as the Servicer deems to be in the best
interest of the Securityholders [and the Note Insurer] for the period prior to
the sale of such Foreclosure Property.
Notwithstanding anything to the contrary herein, the Servicer shall be
under no obligation to foreclose upon or otherwise convert the ownership of
any Mortgaged Property which it believes may be contaminated with or affected
by hazardous or toxic wastes or substances. If the Servicer has actual
knowledge of any environmental or hazardous waste risk with respect to the
Mortgaged Property that the Servicer is contemplating acquiring in foreclosure
or deed in lieu of foreclosure, the Servicer will cause an environmental
inspection of the Mortgaged Property in accordance with Accepted Servicing
Practices. If such environmental audit or report reveals or if the Servicer
has knowledge or notice that such Mortgaged Property contains toxic wastes or
substances, the Servicer shall, in accordance with Accepted Servicing
Practices, take such action as it deems to be in the best interests of
Securityholders [and the Note Insurer].
(b) The Servicer shall determine, with respect to each defaulted
Mortgage Loan, when it has recovered, whether through trustee's sale,
foreclosure sale or otherwise, all amounts it expects to recover from or on
account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall
become a Liquidated Mortgage Loan [and the Servicer shall promptly submit a
liquidation report to the Note Insurer in form acceptable to the Note Insurer
as attached hereto as Exhibit H].
(c) The Servicer shall not agree to any modification, waiver or
amendment of any provision of any Mortgage Loan unless, in the Servicer's good
faith judgment, such modification, waiver or amendment would minimize the loss
that might otherwise be experienced with respect to such Mortgage Loan and the
Servicer shall not permit (unless the Mortgagor is in default with respect to
the Mortgage Loan or such default is, in the judgment of the Servicer,
reasonably foreseeable) any modification with respect to any Mortgage Loan
that would change the Mortgage Rate, reduce or increase the Principal Balance
(except for reductions resulting from actual payments of principal) or extend
the maturity date of such Mortgage Loan [; provided that the Note Insurer's
prior written consent shall be required for any modification, waiver or
amendment if the aggregate number of Mortgage Loans outstanding which have
been modified, waived or amended exceeds 5% of the number of Mortgage Loans as
of the Cut-off Date]. Notwithstanding anything set out in this Section 5.12(c)
or elsewhere in this Agreement to the contrary, the Servicer shall be
permitted to modify, waive or amend any provision of a Mortgage Loan if
required by statute or a court of competent jurisdiction to do so.
Section 5.13. Indenture Trustee to Cooperate; Release of Mortgage
Files. (a) Upon the payment in full of any Mortgage Loan (including any
liquidation of such Mortgage Loan through foreclosure or otherwise), or the
receipt by the Servicer of a notification that payment in full will be
escrowed in a manner customary for such purposes, the Servicer shall deliver
to the Indenture Trustee or the Custodian on behalf of the Indenture Trustee a
written request and certification of the Servicer substantially in the form
attached hereto as Exhibit G signed by a Servicing Officer which states the
purpose of the release of a Mortgage File. Upon receipt of such written
request and certification, the Indenture Trustee or the Custodian on behalf of
the Indenture Trustee will promptly release the related Mortgage File, in
trust, to (i) the Servicer, (ii) an escrow agent or (iii) any employee, agent
or attorney of the Indenture Trustee. Upon any such payment in full, or the
receipt of such notification that such funds have been placed in escrow, the
Servicer is authorized to give, as attorney-in-fact for the Indenture Trustee
and the mortgagee under the Mortgage which secured the Mortgage Note, an
instrument of satisfaction (or assignment of Mortgage without recourse)
regarding the Mortgaged Property relating to such Mortgage, which instrument
of satisfaction or assignment, as the case may be, shall be delivered to the
Person or Persons entitled thereto against receipt therefor of payment in
full, it being understood and agreed that no expense incurred in connection
with such instrument of satisfaction or assignment, as the case may be, shall
be chargeable to the Collection Account, the Certificate Distribution Account,
the Note Distribution Account, the Indenture Trustee or the Issuer. In lieu of
executing any such satisfaction or assignment, as the case may be, the
Servicer may prepare and submit to the Indenture Trustee a satisfaction (or
assignment without recourse, if requested by the Person or Persons entitled
thereto) in form for execution by the Indenture Trustee with all requisite
information completed by the Servicer; in such event, the Indenture Trustee
shall execute and acknowledge such satisfaction or assignment, as the case may
be, and deliver the same with the related Mortgage File, as aforesaid.
(b) [Reserved]
(c) From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any applicable Insurance
Policy, the Custodian shall release the related Mortgage File to the Servicer,
promptly upon a written request and certification of the Servicer in form
attached hereto as Exhibit G signed by a Servicing Officer, which states the
purpose of the release of a Mortgage File [; provided, however, that no more
than 10% of the outstanding Mortgage Loans (by number) shall be released to
the Servicer at any time without the prior written consent of the Note
Insurer]. Such receipt shall obligate the Servicer to return the Mortgage File
to the Indenture Trustee or the Custodian on behalf of the Indenture Trustee
when the need therefore by the Servicer no longer exists.
(d) In all cases where the Servicer needs the Indenture Trustee to
sign any document or to release a Mortgage File within a particular period of
time, the Servicer shall notify a Responsible Officer of the Indenture Trustee
by telephone of such need and the Indenture Trustee shall thereon use its best
efforts to comply with the Servicer's needs, but in any event will comply
within two Business Days of such request.
(e) No costs associated with the procedures described in this Section
5.13 shall be an expense of the Issuer.
(f) Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer [, with copies to the Note Insurer,]
any court pleadings, requests for trustee's sale or other documents reasonably
necessary to the foreclosure or trustee's sale in respect of a Mortgaged
Property or to any legal action brought to obtain judgment against any
Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency judgment,
or to enforce any other remedies or rights provided by the Mortgage Note or
Mortgage or otherwise available at law or in equity. Each such certification
shall include a request that such pleadings or documents be executed by the
Indenture Trustee and a statement as to the reason such documents or pleadings
are required.
Section 5.14. Servicing Fee; Servicing Compensation. As compensation
for its activities hereunder, the Servicer shall be entitled to be paid (or to
retain) the amount of the related Servicing Fee with respect to each Mortgage
Loan, but only to the extent of payments or recoveries allocable to interest
thereon. Additional servicing compensation in the form of release fees, bad
check charges, assumption fees, late payment charges, or any other
servicing-related fees and similar items may, to the extent collected from
Mortgagors, be retained by the Servicer, unless a successor Servicer is
appointed pursuant to Section 7.02 hereof, in which case the successor
Servicer shall be entitled to such fees as are agreed upon by the Indenture
Trustee [, the Note Insurer] and the successor Servicer. In addition, the
Servicer shall be entitled to retain, as additional servicing compensation,
investment earnings, net of losses, on amounts on deposit in the Collection
Account, to the extent provided in Section 6.01.
The right to receive the Servicing Fee may not be transferred in whole
or in part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement.
The aggregate Servicing Fee shall be offset as provided in Section
5.20. The Servicer shall be required to pay all expenses incurred by it in
connection with its servicing activities hereunder (including maintenance of
the hazard insurance required by Section 5.05) and shall not be entitled to
reimbursement therefor except as specifically provided herein.
Section 5.15. Reports to the Indenture Trustee and the Depositor and
the Note Insurer; Collection Account Statements. Not later than [15] days
after each Distribution Date, the Servicer shall provide to the Indenture
Trustee, [the Note Insurer] and the Depositor a statement, certified by a
Servicing Officer, setting forth the status of the Collection Account as of
the close of business on the last day of the immediately preceding calendar
month, showing, for the period covered by such statement, the aggregate of
deposits into and withdrawals from the Collection Account for each category of
deposit specified in Section 5.03 and each category of withdrawal specified in
Section 5.04 and the aggregate of deposits into the Certificate Distribution
Account and the Note Distribution Account, as specified in Section 6.05. Such
statement shall also state the aggregate unpaid principal balance of all the
Mortgage Loans as of the close of business on the last day of the month
preceding the month in which such Distribution Date occurs. Copies of such
statement shall be provided by the Indenture Trustee to any Securityholder
upon request.
Section 5.16. Annual Statement as to Compliance. The Servicer, at its
own expense, will deliver to the Indenture Trustee, [the Note Insurer,] the
Depositor, and the Rating Agencies, on or before April 15 of each year,
commencing in [ _______________ ], an Officer's Certificate stating, as to
each signer thereof, that (i) a review of the activities of the Servicer
during such preceding calendar year and of performance under this Agreement
has been made under such officers' supervision, and (ii) to the best of such
officers' knowledge, based on such review, the Servicer has fulfilled all its
obligations under this Agreement for such year, or, if there has been a
default in the fulfillment of all such obligations, specifying each such
default known to such officers and the nature and status thereof including the
steps being taken by the Servicer to remedy such default.
The Servicer shall deliver to the Indenture Trustee, the Depositor[,
the Note Insurer] and the Rating Agencies, promptly after having obtained
knowledge thereof but in no event later than five Business Days thereafter,
written notice by means of an Officer's Certificate of any event which with
the giving of notice or the lapse of time would become an Event of Default.
Section 5.17. Annual Independent Public Accountants' Servicing Report.
On or before April 15 of each year, commencing in [ _______ ], the Servicer,
at its own expense, shall cause to be delivered to the Indenture Trustee, [the
Note Insurer,] the Depositor, and the Rating Agencies a letter or letters of a
firm of independent, nationally recognized certified public accountants
[reasonably acceptable to the Note Insurer] stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Servicer which includes an assertion that the Servicer has complied with
certain minimum residential mortgage loan servicing standards, identified in
the Uniform Single Attestation Program for Mortgage Bankers established by the
Mortgage Bankers Association of America, with respect to the servicing of
residential mortgage loans during the most recently completed calendar year
and (ii) on the basis of an examination conducted by such firm in accordance
with standards established by the American Institute of Certified Public
Accountants, such representation is fairly stated in all material respects,
subject to such exceptions and other qualifications that may be appropriate.
In rendering its report such firm may rely, as to matters relating to the
direct servicing of residential mortgage loans by Subservicers, upon
comparable reports of firms of independent certified public accountants
rendered on the basis of examinations conducted in accordance with the same
standards (rendered within one year of such report) with respect to those
Subservicers. Immediately upon receipt of such report, the Servicer shall
furnish a copy of such report to the Indenture Trustee[, the Note Insurer] and
each Rating Agency. Copies of such statement shall be provided by the
Indenture Trustee to any Securityholder upon request at the Servicer's
expense, provided that such statement is delivered by the Servicer to the
Indenture Trustee.
Section 5.18. Purchase of Defaulted Mortgage Loans. [(a) Subject to
paragraph (b) below,] The Servicer shall have the option, but not the
obligation, to purchase for its own account any Mortgage Loan that becomes
[90] or more days Delinquent, in whole or in part, or any Mortgage Loan as to
which foreclosure proceedings have been brought by the Servicer. Any such
Mortgage Loan so purchased shall be purchased by the Servicer on or prior to a
Servicer Remittance Date at a purchase price equal to the Loan Purchase Price
thereof, which purchase price shall be deposited in the Collection Account.
(b) [If a Mortgage Loan to be purchased by the Servicer pursuant to
paragraph (a) above is the greatest number of days Delinquent of all then
Delinquent Mortgage Loans (including Mortgage Loans relating to Foreclosure
Property), the Servicer may purchase such Mortgage Loan without having first
notified the Note Insurer of such purchase. In all other cases, the Servicer
must notify the Note Insurer and the Indenture Trustee, in writing, of its
intent to purchase a Mortgage Loan and the Servicer may not purchase such
Mortgage Loan without the written consent of the Note Insurer.]
Section 5.19. Reports to be Provided by the Servicer. The Servicer
shall provide to the Indenture Trustee, the Depositor [and the Note Insurer]
access to the documentation regarding the Mortgage Loans, such access being
afforded without charge but only upon reasonable prior notice and during
normal business hours at the offices of the Servicer designated by it.
Upon any change in the format of the computer tape or file maintained
by the Servicer in respect of the Mortgage Loans, the Servicer shall deliver a
copy of such computer tape or file to the Indenture Trustee, and in addition
shall provide a copy of such computer tape or file to the Indenture Trustee
[and the Note Insurer] at such other times as the Indenture Trustee [or the
Note Insurer] may reasonably request.
The Servicer shall deliver to the Depositor, the Seller, the Indenture
Trustee and the Note Insurer monthly, not later than the close of business on
the [20th] day of the month or, if such [20th] day is not a Business Day, the
immediately preceding Business Day (the "Servicer Reporting Date"), such
information, in a format mutually agreeable to the Servicer and the Indenture
Trustee, as is necessary for the calculation of distributions and preparation
of the reports required to be delivered by the Indenture Trustee under Section
6.07.
Section 5.20. Adjustment of Servicing Compensation In Respect of
Prepaid Mortgage Loans. The aggregate amount of the Servicing Fees that the
Servicer shall be entitled to receive with respect to all of the Mortgage
Loans and each Distribution Date shall be offset on such Distribution Date by
an amount equal to the aggregate Compensating Interest with respect to all
Mortgage Loans that were subjects of Principal Prepayments in Full or
Curtailments during the month preceding the month of such Distribution Date,
calculated as provided in Section 6.09. The amount of any offset against the
aggregate Servicing Fee with respect to any Distribution Date under this
Section 5.20 shall be limited to the aggregate amount of the Servicing Fees
otherwise payable to the Servicer with respect to such Distribution Date.
Section 5.21. Periodic Advances. (a) On or before each Servicer
Remittance Date, the Servicer shall be required to remit to the Indenture
Trustee out of the Servicer's own funds or from collections on any Mortgage
Loans that are not required to be remitted to the Indenture Trustee on such
Servicer Remittance Date (all or any portion of such amount to be replaced on
future Servicer Remittance Dates) any Periodic Advances for such date.
The Servicer shall be permitted to reimburse itself on any Business
Day for any Periodic Advances paid from the Servicer's own funds, from late
collections on the related Mortgage Loan or as provided in Section 5.04.
Notwithstanding the foregoing, in the event that the Servicer
determines in accordance with the servicing standards set out herein that any
proposed Periodic Advance would be a Nonrecoverable Advance, the Servicer
shall not be required to make Periodic Advances with respect to such Mortgage
Loan. To the extent that the Servicer previously has made any Periodic Advance
with respect to a Mortgage Loan that the Servicer subsequently determines is a
Nonrecoverable Advance, the Servicer shall be entitled to reimbursement for
such aggregate Nonrecoverable Advances from collections on any Mortgage Loan
on deposit in the Collection Account. The Servicer shall give written notice
of such determination as to why such amount would not be recoverable to the
Indenture Trustee [and the Note Insurer]; PROVIDED, FURTHER, that the Servicer
shall be entitled to recover any unreimbursed Periodic Advances in accordance
with Section 5.04.
(b) The Servicer will pay all "out-of-pocket" costs and expenses
relating to a Mortgagor delinquency or default or other unanticipated event
incurred in the performance of its servicing obligations, including, but not
limited to, (i) property preservation expenses, (ii) the cost of any
enforcement or judicial proceedings, including foreclosures, (iii) the cost of
the management and liquidation of Foreclosure Property, and (iv) advances
required by Section 5.12(a), except to the extent that such amounts are
determined by the Servicer in its reasonable business judgment not to be
recoverable. Such costs will constitute Servicing Advances. If the Servicer
determines that a Servicing Advance, if made, would be a Nonrecoverable
Advance, the Servicer shall make such Servicing Advance only if, in the good
faith business judgment of the Servicer, the making of such Servicing Advance
is in the best interests of the Securityholders [and the Note Insurer]. To the
extent that the Servicer previously has made any Servicing Advance with
respect to a Mortgage Loan that the Servicer subsequently determines is a
Nonrecoverable Advance, the Servicer shall be entitled to reimbursement for
such aggregate Nonrecoverable Advances from collections on any Mortgage Loan
on deposit in the Collection Account. The Servicer shall give written notice
of such determination as to why such amount would not be recoverable to the
Indenture Trustee [and the Note Insurer]; PROVIDED, FURTHER, that the Servicer
shall be entitled to recover any unreimbursed Servicing Advances in accordance
with Section 5.04.
(c) Any cost incurred by the Servicer or by Subservicers in effecting
the timely payment of taxes and assessments on a Mortgaged Property shall not,
for the purpose of calculating distributions to Securityholders, be added to
the unpaid principal balance of the related Mortgage Loan, notwithstanding
that the terms of such Mortgage Loan so permit.
Section 5.22. Inspections by Note Insurer. At any reasonable time and
from time to time upon reasonable notice, the Indenture Trustee, [the Note
Insurer,] any Holder of a Residual Interest Certificate, or any agents thereof
may inspect the Servicer's servicing operations and discuss the servicing
operations of the Servicer during the Servicer's normal business hours with
any of its officers or directors; PROVIDED, HOWEVER, that the costs and
expenses incurred by the Servicer or its agents or representatives in
connection with any such examinations or discussions shall be paid by the
Servicer.
Section 5.23. Maintenance of Corporate Existence and Licenses; Merger
or Consolidation of the Servicer. (a) The Servicer will keep in full effect
its existence, rights and franchises as a corporation, will obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction necessary to protect the validity and enforceability of this
Agreement or any of the Mortgage Loans and to perform its duties under this
Agreement and will otherwise operate its business so as to cause the
representations and warranties under Section 3.01 to be true and correct at
all times under this Agreement.
(b) Any corporation into which the Servicer may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Servicer shall be a party or
any corporation succeeding to all or substantially all of the business or
assets of the Servicer shall be the successor of the Servicer hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto [provided that such corporation is acceptable to the
Note Insurer].
Section 5.24. Assignment of Agreement by Servicer; Servicer Not to
Resign. The Servicer shall not resign from its obligations and duties
hereunder except by consent of [the Note Insurer and] the Indenture Trustee,
which consent shall not be unreasonably withheld, or upon the determination
that the Servicer's duties hereunder are no longer permitted under applicable
law and that such incapacity cannot be cured by the Servicer without
unreasonable expense. Any such determination that the Servicer's duties
hereunder are no longer permissible under applicable law permitting the
resignation of the Servicer shall be evidenced by a written Opinion of Counsel
to such effect delivered to the Seller, the Depositor [and the Note Insurer].
No such resignation shall become effective until the Indenture Trustee or a
successor Servicer appointed in accordance with the terms of this Agreement
has assumed the Servicer's responsibilities and obligations hereunder in
accordance with Section 7.02.
Notwithstanding the foregoing, the Servicer may assign its rights and
delegate its obligations hereunder to a successor Servicer, which shall assume
the Servicer's responsibilities and obligations hereunder in accordance with
Section 7.02.
The Servicer shall provide the Indenture Trustee, the Rating Agencies
[and the Note Insurer] with [30] days prior written notice of its intention to
assign this Agreement or resign from its obligations and duties hereunder.
Section 5.25. Information Reports to be Filed by the Servicer. The
Servicer shall file information returns with respect to the receipt of
mortgage interest received in a trade or business, reports of foreclosures and
abandonments of any Mortgaged Property and cancellation of indebtedness income
with respect to any Mortgaged Property as required by Sections 6050H, 6050J
and 6050P of the Code, respectively.
Section 5.26. [Reserved]
Section 5.27. Waiver of Prepayment Premiums. The Servicer shall not
waive any Prepayment Premium, whether in connection with a refinancing of a
Mortgage Loan that is related to a default or a reasonably foreseeable default
or otherwise, unless (i) such waiver would maximize recovery of total proceeds
with respect to such Mortgage Loan, taking into account the value of the
Prepayment Premium and the related Mortgage Loan and (ii) such waiver is
standard and customary in servicing similar mortgage loans. In no event shall
the Servicer waive any Prepayment Premium in connection with a refinancing of
a Mortgage Loan that is not related to a default or a reasonably foreseeable
default.
Section 5.28. Adjustable Rate Mortgage Loans. The Servicer shall
enforce each Adjustable Rate Mortgage Loan in accordance with its terms and
shall timely calculate, record, report and apply all interest rate adjustments
in accordance with the related Mortgage Note. The Servicer's records shall, at
all times, reflect the then Mortgage Rate and monthly payment and the Servicer
shall timely notify the Mortgagor of any changes to the Mortgage Rate or the
Mortgagor's monthly payment. If the Servicer fails to make either a timely or
accurate adjustment to the Mortgage Rate or monthly payment or to notify the
Mortgagor of such adjustments, upon the Servicer's discovery of such error and
such continued failure, the Servicer shall pay from its own funds any
shortage. If the Servicer's continued failure after notice thereof to make a
scheduled change affects the Issuer's rights to make future adjustments under
the terms of such Adjustable Rate Mortgage Loan, the Servicer shall repurchase
such Adjustable Rate Mortgage Loan in accordance with the provisions hereof by
depositing the Loan Purchase Price in the Collection Account. Any amounts paid
by the Servicer pursuant to this Section shall not be an advance and shall not
be reimbursable from the proceeds of any Mortgage Loan.
Section 5.29. [Notices of Material Events]. [The Servicer shall give
prompt written notice to the Note Insurer, the Indenture Trustee and the
Rating Agencies of the occurrence of any of the following events:
(a) Any default or any fact or event of which with notice or the
passage of time, or both, would result in the occurrence of a default by the
Servicer under any Transaction Document or would constitute a material breach
of a representation, warranty or covenant under any Transaction Document;
(b) The submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Servicer to which the Servicer has knowledge in any federal, state or local
court or before any governmental body or agency or before any arbitration
board or any such proceedings threatened by any governmental agency, which, if
adversely determined, would have a material adverse effect upon the Servicer's
ability to perform its obligations under any Transaction Document;
(c) The commencement of any proceedings by or against the Servicer
under any applicable bankruptcy, reorganization, liquidation, insolvency or
other similar law now or hereafter in effect or of any proceeding in which a
receiver, liquidator, trustee or other similar official shall have been, or
may be, appointed or requested for the Servicer; and
(d) The receipt of notice from any agency or governmental body having
authority over the conduct of the Servicer's business that the Servicer is to
cease or desist, or to undertake any practice, program, procedure or policy
employed by the Servicer in the conduct of the business of any of them, and
such cessation or undertaking will materially and adversely affect the conduct
of the Servicer' s business or its ability to perform under any Transaction
Document or materially and adversely affect the financial affairs of the
Servicer.]
ARTICLE VI
DISTRIBUTIONS AND PAYMENTS
Section 6.01. Establishment of Trust Accounts and Certificate Distribution
Account; Deposits to the Trust Accounts and Certificate Distribution Account.
(a) (i) The Servicer shall establish and maintain in the name of the
Securities Intermediary the Collection Account as provided in Section 5.03,
which account shall be pledged to the Indenture Trustee for the benefit of
Securityholders.
(ii) The Indenture Trustee, for the benefit of the Noteholders,
shall establish and maintain in the name of the Securities
Intermediary an Eligible Account (the "Note Distribution Account"),
which account shall be pledged to the Indenture Trustee and shall bear
a designation clearly indicating that the funds deposited therein are
held for the benefit of the Noteholders.
(iii) The Indenture Trustee, for the benefit of the
Certificateholders, shall establish and maintain in the name of the
Owner Trustee an Eligible Account (the "Certificate Distribution
Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Certificateholders.
(b) Funds on deposit in the Collection Account and the Note
Distribution Account (each, a "Trust Account"), and funds in the Certificate
Distribution Account, may be invested, and if invested shall be invested in
Permitted Investments at the direction of the Servicer, in the case of the
Collection Account, and otherwise at the direction of the Indenture Trustee
and such investments shall not be sold or disposed of prior to their maturity.
All such investments shall be made in the name of the Indenture Trustee in the
manner provided herein. Subject to paragraph (b)(ii) below, funds on deposit
in the Trust Accounts and the Certificate Distribution Account may be invested
and if invested shall be invested (1) in Permitted Investments selected (x) in
the case of the Collection Account, by the Servicer, and (y) in the case of
the Note Distribution Account and the Certificate Distribution Account, by the
Indenture Trustee or (2) by an investment manager in Permitted Investments
selected by such investment manager; PROVIDED that (A) such investment manager
shall be selected by the Servicer, in the case of the Collection Account, and
by the Indenture Trustee, in the case of the Note Distribution Account and the
Certificate Distribution Account, (B) such investment manager shall have
agreed to comply with the terms of this Agreement as it relates to investing
such funds, (C) any investment so selected by such investment manager shall be
made in the name of the Indenture Trustee and shall be settled by a delivery
to the Indenture Trustee that complies with the terms of this Agreement as it
relates to investing such funds, and (D) prior to the settlement of any
investment so selected by such investment manager, the Indenture Trustee, to
the extent practicable, shall affirm that such investment is a Permitted
Investment. It is understood and agreed that the Indenture Trustee shall not
be liable for any loss arising from an investment in Permitted Investments
made in accordance with this Section 6.01(b). All such Permitted Investments
shall be held by the Indenture Trustee for the benefit of the Noteholders and
the Certificateholders, as applicable; PROVIDED, that on the Servicer
Remittance Date immediately prior to each Distribution Date all interest and
other investment income (net of losses and investment expenses) on funds on
deposit in the Collection Account shall be payable to the Servicer. Other than
as permitted by each Rating Agency and except otherwise set forth herein,
funds on deposit in the Trust Accounts and the Certificate Distribution
Account shall be invested in Permitted Investments that will mature not later
than the Business Day immediately preceding the next Distribution Date (or on
such next Distribution Date if either (x) such investment is held in the trust
department of the institution with which the Collection Account, the Note
Distribution Account or the Certificate Distribution Account, as applicable,
is then maintained and is invested in a time deposit of the Indenture Trustee
rated at least P-1 (or the equivalent) by each Rating Agency (such account
being maintained within the trust department of the Indenture Trustee) or (y)
the Indenture Trustee (so long as the short-term unsecured debt obligations of
the Indenture Trustee are either (A) rated at least P-1 (or the equivalent) by
each Rating Agency on the date such investment is made or (B) guaranteed by an
entity whose short-term unsecured debt obligations are rated at least P-1 (or
the equivalent) by each Rating Agency on the date such investment is made) has
agreed to advance funds on such Distribution Date to the Note Distribution
Account or the Certificate Distribution Account, as applicable, in the amount
payable on such investment on such Distribution Date pending receipt thereof
to the extent necessary to make distributions on such Distribution Date). For
the purposes of the foregoing, unless the Indenture Trustee affirmatively
agrees in writing to make such advance with respect to such investment prior
to the time an investment is made, it shall not be deemed to have agreed to
make such advance. The Servicer shall deposit into the Collection Account an
amount equal to any loss realized on any investment of funds in the Collection
Account immediately as any such loss is realized. The Indenture Trustee shall
deposit in the Note Distribution Account or the Certificate Distribution
Account, as applicable, an amount equal to any loss realized on any investment
of funds in such account immediately as any such loss is realized. Funds on
deposit in the Collection Account shall be withdrawn therefrom by the Servicer
on the Servicer Remittance Date immediately preceding each Distribution Date
to make deposits and distributions on each such date in the manner and
priorities set forth in Section 6.05.
(c) The Indenture Trustee shall possess all right, title and interest
in all funds on deposit from time to time in the Trust Accounts and in all
proceeds thereof (including all income thereon) and all such funds,
investments, proceeds and income shall be part of the Trust Estate. The Trust
Accounts shall be under the sole dominion and control of the Indenture Trustee
for the benefit of the Noteholders or the Noteholders and the
Certificateholders, as the case may be. If, at any time, any of the Trust
Accounts or the Certificate Distribution Account ceases to be an Eligible
Account, the Indenture Trustee (or the Servicer on its behalf) shall within
[30] Business Days establish a new Trust Account or a new Certificate
Distribution Account, as applicable, as an Eligible Account and shall transfer
any cash and/or any investments to such new account.
The Depositor, the Issuer and the Indenture Trustee hereby appoint the
Indenture Trustee, or the Administrator on behalf of the Indenture Trustee, as
Securities Intermediary with respect to the Trust Accounts and the Certificate
Distribution Account, and the Issuer has, pursuant to the Indenture, granted
to the Indenture Trustee, for the benefit of the Securityholders, a security
interest to secure all amounts due Noteholders hereunder in and to the Trust
Accounts and the Security Entitlements to all Financial Assets credited to the
Trust Accounts, including without limitation all amounts, securities,
investments, Financial Assets, investment property and other property from
time to time deposited in or credited to the Trust Accounts and all proceeds
thereof, and the Depositor hereby grants to the Issuer, as collateral agent
for the benefit of Certificateholders, a security interest to secure all
amounts due Certificateholders hereunder in and to the Certificate
Distribution Account and the Security Entitlements and all Financial Assets
credited to the Certificate Distribution Account, including without limitation
all amounts, securities, investments, Financial Assets, investment property
and other property from time to time deposited in or credited to such account
and all proceeds thereof. Amounts held from time to time in the Trust Accounts
will continue to be held by the Securities Intermediary for the benefit of the
Indenture Trustee, as collateral agent, for the benefit of the
Securityholders, and amounts held from time to time in the Certificate
Distribution Account will continue to be held by the Securities Intermediary
for the benefit of the Issuer, as collateral agent, for the benefit of the
Certificateholders. Upon the termination of the Trust or the discharge of the
Indenture, the Indenture Trustee shall inform the Securities Intermediary of
such termination. By acceptance of their Securities or interests therein, the
Securityholders shall be deemed to have appointed the Indenture Trustee, or
the Administrator on behalf of the Indenture Trustee, as Securities
Intermediary. The Indenture Trustee hereby accepts such appointment as
Securities Intermediary.
(i) With respect to the Trust Account Property credited to the
Trust Accounts, or the Certificate Distribution Account, the
Securities Intermediary agrees that:
(A) with respect to any Trust Account Property that
is held in deposit accounts, each such deposit account shall be
subject to the exclusive custody and control of the Securities
Intermediary, and the Securities Intermediary shall have sole
signature authority with respect thereto;
(B) the sole assets permitted in the Trust Accounts
and the Certificate Distribution Account shall be those as the
Securities Intermediary agrees to treat as Financial Assets;
and
(C) any such Trust Account Property that is, or is
treated as, a Financial Asset shall be physically delivered
(accompanied by any required endorsements) to, or credited to
an account in the name of, the Securities Intermediary or other
eligible institution maintaining any Trust Account or the
Certificate Distribution Account in accordance with the
Securities Intermediary's customary procedures such that the
Securities Intermediary or such other institution establishes a
Security Entitlement in favor of the Indenture Trustee (or the
issuer, in the case of the Certificate Distribution Account)
with respect thereto over which the Securities Intermediary or
such other institution has Control;
(ii) The Securities Intermediary hereby confirms that (A) each
Trust Account and the Certificate Distribution Account is an account
to which Financial Assets are or may be credited, and the Securities
Intermediary shall, subject to the terms of this Agreement, treat the
Indenture Trustee, as collateral agent, as entitled to exercise the
rights that comprise any Financial Asset credited to any Trust
Account, and the Issuer, as collateral agent, as entitled to exercise
the rights that comprise any Financial Asset credited to the
Certificate Distribution Account, (B) all Trust Account Property in
respect of any Trust Account or the Certificate Distribution Account
will be promptly credited by the Securities Intermediary to such
account, and (C) all securities or other property underlying any
Financial Assets credited to any Trust Account or the Certificate
Distribution Account shall be registered in the name of the Securities
Intermediary, endorsed to the Securities Intermediary or in blank or
credited to another securities account maintained in the name of the
Securities Intermediary and in no case (x) will any Financial Asset
credited to any Trust Account be registered in the name of the Seller
or the Issuer, payable to the order of the Seller or the Issuer or
specially endorsed to the Seller or the Issuer, or (y) will any
Financial Asset credited to the Certificate Distribution Account be
registered in the name of the Seller, payable to the order of the
Seller or specially endorsed to the Seller, except to the extent the
foregoing have been specially endorsed to the Securities Intermediary
or in blank;
(iii) The Securities Intermediary hereby agrees that each item of
property (whether investment property, Financial Asset, security,
instrument or cash) credited to any Trust Account or the Certificate
Distribution Account shall be treated as a Financial Asset;
(iv) If at any time the Securities Intermediary shall receive an
Entitlement Order from the Indenture Trustee directing transfer or
redemption of any Financial Asset relating to any Trust Account, the
Securities Intermediary shall comply with such Entitlement Order
without further consent by the Seller, the Issuer or any other Person.
If at any time the Indenture Trustee notifies the Securities
Intermediary in writing that the Trust has been terminated or the
Indenture discharged in accordance herewith and with the Trust
Agreement or the Indenture, as applicable, and the security interest
granted pursuant to the Indenture has been released, then thereafter
if the Securities Intermediary shall receive any order from the Seller
or the Issuer directing transfer or redemption of any Financial Asset
relating to any Trust Account, the Securities Intermediary shall
comply with such Entitlement Order without further consent by the
Indenture Trustee or any other Person;
If at any time the Securities Intermediary shall receive an
Entitlement Order from the Issuer directing transfer or redemption of
any Financial Asset relating to the Certificate Distribution Account,
the Securities Intermediary shall comply with such Entitlement Order
without further consent by the Seller or any other Person. If at any
time the Issuer notifies the Securities Intermediary in writing that
the Trust has been terminated in accordance herewith and with the
Trust Agreement and the security interest granted above has been
released, then thereafter if the Securities Intermediary shall receive
any order from the Seller directing transfer or redemption of any
Financial Asset relating to the Certificate Distribution Account, the
Securities Intermediary shall comply with such entitlement order
without further consent by the Issuer or any other Person;
(v) In the event that the Securities Intermediary has or
subsequently obtains by agreement, operation of law or otherwise a
security interest in any Trust Account or the Certificate Distribution
Account or any Financial Asset credited thereto, the Securities
Intermediary hereby agrees that such security interest shall be
subordinate to the security interest of the Indenture Trustee, in the
case of the Trust Accounts, or of the Issuer, in the case of the
Certificate Distribution Account. The Financial Assets credited to the
Trust Accounts, or the Certificate Distribution Account will not be
subject to deduction, set-off, banker's lien, or any other right in
favor of any Person other than the Indenture Trustee in the case of
the Trust Accounts, or of the Issuer, in the case of the Certificate
Distribution Account (except that the Securities Intermediary may
set-off (i) all amounts due to it in respect of its customary fees and
expenses for the routine maintenance and operation of the Trust
Accounts, and the Certificate Distribution Account, and (ii) the face
amount of any checks which have been credited to any Trust Account or
the Certificate Distribution Account but are subsequently returned
unpaid because of uncollected or insufficient funds);
(vi) There are no other agreements entered into between the
Securities Intermediary in such capacity and the Depositor or the
Issuer with respect to any Trust Account, or the Depositor with
respect to the Certificate Distribution Account. In the event of any
conflict between this Agreement (or any provision of this Agreement)
and any other agreement now existing or hereafter entered into, the
terms of this Agreement shall prevail;
(vii) The rights and powers granted under the Indenture and
herein to (x) the Indenture Trustee have been granted in order to
perfect its security interest in the Trust Accounts and the Security
Entitlements to the Financial Assets credited thereto, and (y) the
Issuer have been granted in order to perfect its security interest in
the Certificate Distribution Account and the Security Entitlements to
the Financial Assets credited thereto, and are powers coupled with an
interest and will neither be affected by the bankruptcy of the
Depositor or the Issuer nor by the lapse of time. The obligations of
the Securities Intermediary hereunder shall continue in effect until
the security interest of the Indenture Trustee in the Trust Accounts
or of the Issuer in the Certificate Distribution Account, and in such
Security Entitlements, has been terminated pursuant to the terms of
this Agreement and the Indenture Trustee or the Issuer, as applicable,
has notified the Securities Intermediary of such termination in
writing; and
(viii) Notwithstanding anything else contained herein, the
Depositor and the Issuer agree that the Trust Accounts and the
Certificate Distribution Account will be established only with the
Securities Intermediary or another institution meeting the
requirements of this Section, which by acceptance of its appointment
as Securities Intermediary agrees substantially as follows: (1) it
will comply with Entitlement Orders related to the Trust Accounts
issued by the Indenture Trustee, as collateral agent, without further
consent by the Depositor or the Issuer, and with Entitlement Orders
related to the Certificate Distribution Account issued by the Issuer,
as collateral agent, without further consent by the Depositor; (2)
until termination of the Trust or discharge of the Indenture, it will
not enter into any other agreement related to such accounts pursuant
to which it agrees to comply with Entitlement Orders of any Person
other than the Indenture Trustee, as collateral agent with respect to
the Trust Accounts or the Issuer, as collateral agent with respect to
the Certificate Distribution Account; and (3) all assets delivered or
credited to it in connection with such accounts and all investments
thereof will be promptly credited to the applicable account.
(d) Notwithstanding the foregoing, the Issuer shall have the
power, revocable by the Indenture Trustee or by the Owner Trustee with the
consent of the Indenture Trustee, to instruct the Indenture Trustee and the
Servicer to make withdrawals and distributions from the Trust Accounts for the
purpose of permitting the Servicer or the Owner Trustee to carry out its
respective duties hereunder or permitting the Indenture Trustee to carry out
its duties under the Indenture.
(e) Each of the Depositor and the Issuer agrees to take or cause
to be taken such further actions, to execute, deliver and file or cause to be
executed, delivered and filed such further documents and instruments
(including, without limitation, any financing statements under the UCC or this
Agreement) as may be necessary to perfect the interests created by this
Section in favor of the Issuer and the Indenture Trustee and otherwise fully
to effectuate the purposes, terms and conditions of this Section. The
Depositor shall:
(i) promptly execute, deliver and file any financing statements,
amendments, continuation statements, assignments, certificates and
other documents with respect to such interests and perform all such
other acts as may be necessary in order to perfect or to maintain the
perfection of the Issuer's and the Indenture Trustee's security
interest in the Trust Account Property; and
(ii) make the necessary filings of financing statements or
amendments thereto within five days after the occurrence of any of the
following: (1) any change in its corporate name or any trade name; (2)
any change in the location of its chief executive office or principal
place of business; and (3) any merger or consolidation or other change
in its identity or corporate structure and promptly notify the Issuer
and the Indenture Trustee of any such filings.
None of the Securities Intermediary or any director, officer, employee
or agent of the Securities Intermediary shall be under any liability to the
Indenture Trustee or the Securityholders for any action taken, or not taken,
in good faith pursuant to this Agreement, or for errors in judgment; PROVIDED,
HOWEVER, that this provision shall not protect the Securities Intermediary
against any liability to the Indenture Trustee or the Securityholders which
would otherwise be imposed by reason of the Securities Intermediary's willful
misconduct, bad faith or negligence in the performance of its obligations or
duties hereunder. The Securities Intermediary and any director, officer,
employee or agent of the Securities Intermediary may rely in good faith on any
document of any kind which, prima facie, is properly executed and submitted by
any Person respecting any matters arising hereunder. The Securities
Intermediary shall be under no duty to inquire into or investigate the
validity, accuracy or content of such document. The Issuer shall indemnify the
Securities Intermediary for and hold it harmless against any loss, liability
or expense arising out of or in connection with this Agreement and carrying
out its duties hereunder, including the costs and expenses of defending itself
against any claim of liability, except in those cases where the Securities
Intermediary has been guilty of bad faith, negligence or willful misconduct.
The foregoing indemnification shall survive any termination of this Agreement
or the resignation or removal of the Administrative Agent.
Section 6.02. Permitted Withdrawals from the Note Distribution Account and the
Certificate Distribution Account. The Indenture Trustee shall withdraw or
cause to be withdrawn funds from each of the Note Distribution Account and the
Certificate Distribution Account for the following purposes:
(a) to effect the distributions described in Section 6.05;
(b) to pay itself any interest earned on or investment income
earned with respect to funds in the Note Distribution Account and the
Certificate Distribution Account;
(c) to return to the Collection Account any amount deposited in
the Note Distribution Account or the Certificate Distribution Account that was
not required to be deposited therein; and
(d) to clear and terminate the Note Distribution Account and the
Certificate Distribution Account upon termination of the Trust pursuant to
Article VIII.
The Indenture Trustee shall keep and maintain a separate accounting
for withdrawals from the Note Distribution Account and the Certificate
Distribution Account pursuant to each of subclauses (a) through (d) listed
above.
Section 6.03. Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of all
money and other property payable to or receivable by the Indenture Trustee
pursuant to this Agreement, including (a) all payments due on the Mortgage
Loans in accordance with the respective terms and conditions of such Mortgage
Loans and required to be paid over to the Indenture Trustee by the Servicer
[and (b) Insured Payments]. The Indenture Trustee shall hold all such money
and property received by it as part of the Trust Estate and shall apply it as
provided in this Agreement.
Section 6.04. [The Note Insurance Policy]. [(a) If, on the [third]
Business Day before any Distribution Date, the Indenture Trustee determines
that a Deficiency Amount exists for such Distribution Date, the Indenture
Trustee shall determine the amount of any such Insured Payment and shall give
notice to the Note Insurer by completing a notice in the form of Exhibit A to
the Note Insurance Policy and submitting such notice by 12:00 noon New York
City time on such third Business Day as a claim for an Insured Payment. The
Indenture Trustee's responsibility for delivering a notice to the Note
Insurer, as provided in the preceding sentence, is limited to the
availability, timeliness and accuracy of the information provided by the
Servicer.]
(b) [In the event that the Indenture Trustee receives a certified copy
of an order of the appropriate court that any scheduled payment of principal
or interest on an Insured note has been voided in whole or in part as a
preference payment under applicable bankruptcy law, the Indenture Trustee
shall (i) promptly notify the Note Insurer, as appropriate, and the Fiscal
Agent, if any, and (ii) comply with the provisions of the Note Insurance
Policy to obtain payment by the Note Insurer of such voided payment. In
addition, the Indenture Trustee shall mail notice to all Insured Noteholders
so affected that, in the event that any such Securityholder's payment is so
recovered, such Securityholder will be entitled to payment pursuant to the
terms of the Note Insurance Policy, a copy of which shall be made available to
such Holders by the Indenture Trustee. The Indenture Trustee shall furnish to
the Note Insurer and the appropriate Fiscal Agent, if any, its records listing
the payments on the affected Insured Notes, if any, that have been made by the
Indenture Trustee and subsequently recovered from the affected
Securityholders, and the dates on which such payments were made by the
Indenture Trustee.]
(c) [The Indenture Trustee shall establish a separate Eligible Account
for the benefit of Insured Noteholders and the Note Insurer referred to herein
as the "Note Insurance Payment Account" over which the Indenture Trustee shall
have exclusive control and sole right of withdrawal. The Indenture Trustee
shall deposit upon receipt any amount paid under the Note Insurance Policy in
the Note Insurance Payment Account and distribute such amount only for
purposes of payment to Insured Noteholders of the Insured Payment and such
amount may not be applied to satisfy any costs, expenses or liabilities of the
Servicer, the Indenture Trustee or the Trust Estate. Amounts paid under the
Note Insurance Policy, to the extent needed to pay the Insured Payment shall
be transferred by the Indenture Trustee from the Note Insurance Payment
Account to the Note Distribution Account on the related Distribution Date and
disbursed by the Indenture Trustee to Insured Noteholders in accordance with
Section 6.05. It shall not be necessary for payments made under the Note
Insurance Policy to be made by checks or wire transfers separate from other
amounts distributed pursuant to Section 6.05. However, the amount of any
payment of principal or of interest on the Notes to be paid from funds
transferred from the Note Insurance Payment Account shall be noted as provided
in paragraph (d) below. Funds held in the Note Insurance Payment Account shall
not be invested. Any funds remaining in the Note Insurance Payment Account on
the first Business Day following a Distribution Date shall be returned to the
Note Insurer pursuant to the written instructions of the Note Insurer by the
end of such Business Day.]
(d) [The Indenture Trustee Remittance Report shall indicate the amount
of interest and principal paid in respect of the Insured Notes from moneys
received under the Note Insurance Policy. The Indenture Trustee shall keep a
complete and accurate record of the amount of interest and principal paid in
respect of any Insured Note from moneys received under the Note Insurance
Policy. The Note Insurer shall have the right to inspect such records at
reasonable times during normal business hours upon one Business Day's prior
notice to the Indenture Trustee.]
(e) [The Indenture Trustee shall promptly notify the Note Insurer of
any proceeding or the institution of any action, of which a Responsible
Officer of the Indenture Trustee has actual knowledge, seeking the avoidance
as a preferential transfer under applicable bankruptcy, insolvency,
receivership or similar law (a "Preference Claim") of any distribution made
with respect to the Insured Notes. Each Securityholder, by its acceptance of a
Security, the Servicer and the Indenture Trustee agree that, the Note Insurer
(so long as no Note Insurer Default exists) may at any time during the
continuation of any proceeding relating to a Preference Claim direct all
matters relating to such Preference Claim, including, without limitation, (i)
the direction of any appeal of any order relating to such Preference Claim and
(ii) the posting of any surety, supersedeas or performance bond pending any
such appeal. In addition and without limitation of the foregoing, the Note
Insurer shall be subrogated to, and each Securityholder, the Servicer and the
Indenture Trustee hereby delegate and assign to the Note Insurer, to the
fullest extent permitted by law, the rights of the Servicer, the Indenture
Trustee and each Securityholder in the conduct of any such Preference Claim,
including, without limitation, all rights of any party to any adversary
proceeding or action with respect to any court order issued in connection with
any such Preference Claim.]
(f) [Anything herein to the contrary notwithstanding, any payment with
respect to principal of or interest on any of the Insured Notes which is made
with moneys received pursuant to the terms of the Note Insurance Policy shall
not be considered payment of such Securities from the Trust Estate and shall
not result in the payment of or the provision for the payment of the principal
of or interest on such Securities within the meaning of Section 6.05. The
Depositor, the Servicer and the Indenture Trustee acknowledge, and each Holder
by its acceptance of a Security agrees, that without the need for any further
action on the part of the Note Insurer, the Depositor, the Servicer and the
Indenture Trustee acknowledge, and each Holder by its acceptance of a Security
agrees, that without the need for any further action on the part of the Note
Insurer, the Depositor, the Servicer, the Indenture Trustee or the Note
Registrar (a) to the extent the Note Insurer makes payments, directly or
indirectly, on account of principal of or interest on any Insured Notes to the
Holders of such Insured Notes, the Note Insurer will be fully subrogated to
the rights of such Holders to receive such principal and interest from the
Trust Estate and (b) the Note Insurer shall be paid such principal and
interest but only from the sources and in the manner provided herein for the
payment of such principal and interest.]
[The Indenture Trustee, the Depositor and the Servicer shall cooperate
in all respects with any reasonable request by the Note Insurer for action to
preserve or enforce the Note Insurer's rights or interests under this
Agreement without limiting the rights or affecting the interests of the
Holders as otherwise set forth therein.]
(g) [The Indenture Trustee will hold the Note Insurance Policy in
trust as agent for the Holders of the Insured Notes for the purpose of making
claims thereon and distributing the proceeds thereof. Each Holder of Insured
Notes, by accepting its Insured Notes, appoints the Indenture Trustee as
attorney-in-fact for the purpose of making claims on the Note Insurance
Policy.]
Section 6.05. Distributions. (a) Not later than the close of business
on each Servicer Remittance Date, the Servicer shall remit to the Indenture
Trustee for deposit into the Note Distribution Account from funds on deposit
in the Collection Account an amount equal to the Available Funds for the
related Distribution Date.
(b) With respect to funds deposited in the Note Distribution Account,
on each Distribution Date, the Indenture Trustee shall make the following
allocations, disbursements and transfers, and each such allocation, transfer
and disbursement shall be treated as having occurred only after all preceding
allocations, transfers and disbursements have occurred:
(i) On each Distribution Date, the Indenture Trustee shall
distribute the Available Funds for such date in the following order of
priority:
[FIRST, to pay the Owner Trustee Compensation and the
Custodian Compensation;]
[SECOND, to the Note Insurer, the Premium Amount for such
date;]
[THIRD, for retention in the Note Distribution Account, the
Noteholders' Interest Distribution Amount for such date, to be
paid PRO RATA to the Noteholders;]
[FOURTH, for retention in the Note Distribution Account, the
amount necessary to reduce the Class Principal Amount of the
Notes to the Optimal Principal Amount for such date, to be paid
PRO RATA to the Noteholders until the Class Principal Amount of
the Class A Notes has been reduced to zero;]
[FIFTH, for retention in the Note Distribution Account, for
distribution to the Note Insurer, any previously unreimbursed
Reimbursement Amount;]
[SIXTH, to the Servicer, the amount of any Nonrecoverable
Advances not previously reimbursed;]
[SEVENTH, to the Servicer, any amounts payable or
reimbursable thereto pursuant to Sections 7.02 and 11.01 hereof;]
[EIGHTH, to the Custodian, any amount payable or
reimbursable thereto under the Custodial Agreement in excess of
the Custodian Compensation; and]
[NINTH, to the Certificate Distribution Account, for
distribution to the Residual Certificateholders on a PRO RATA
basis.]
(ii) [On each Distribution Date, the Indenture Trustee shall
distribute any Insured Payment for such date to the Insured
Noteholders entitled thereto.]
(c) All distributions made to each Class of Securities on each
Distribution Date will be made on a PRO RATA basis among the Securityholders
of such Class on the next preceding Record Date based on the Percentage
Interest represented by their respective Securities, and shall be made by wire
transfer of immediately available funds at the expense of such Securityholder
to the account of such Securityholder at a bank or other entity having
appropriate facilities therefor, if such Securityholder shall have provided
complete wiring instructions by the Record Date, and otherwise by check mailed
to the address of such Securityholder appearing in the Security Register.
Section 6.06. [Reserved].
Section 6.07. Reports by Indenture Trustee. (a) On each Distribution
Date the Indenture Trustee shall provide to each Holder, to the Servicer, [to
the Note Insurer,] to the Depositor and to the Rating Agencies a report (the
"Indenture Trustee Remittance Report"), setting forth information including,
without limitation, the following information:
(i) the Available Collection Amount for the related Distribution
Date;
(ii) the Class Principal Amount or Class Notional Amount of each
Class of Notes as of such Distribution Date after giving effect to any
payment of principal on such Distribution Date;
(iii) the amount of principal and interest received on the
Mortgage Loans during the related Due Period;
(iv) the Noteholders' Interest Distribution Amount;
(v) the amount, if any of the Overcollateralization Release
Amount and, if applicable, the Overcollateralization Reduction Amount
or any other amount to be distributed to the Securityholders on such
Distribution Date;
(vi) the Servicing Fee, the Indenture Trustee Fee, the Owner
Trustee Compensation, the Custodian Compensation and the Premium
Amount for such Distribution Date;
(vii) the Overcollateralization Amount on such Distribution Date
and the Targeted Overcollateralization Amount as of such Distribution
Date;
(viii) the weighted average maturity of the Mortgage Loans and
the weighted average Mortgage Rate of the Mortgage Loans;
(ix) [the amount of any Insured Payment included in the amounts
distributed to the Insured Noteholders on such Distribution Date;]
(x) the amount of any Reimbursement Amount to be distributed to
the Note Insurer on such Distribution date and the amount of any
Reimbursement Amount remaining unsatisfied following such
distribution;
(xi) the scheduled principal payments and the principal
prepayments received with respect to the Mortgage Loans during the
related Due Period;
(xii) the number of Mortgage Loans and the aggregate Principal
Balance of Mortgage Loans purchased or substituted for pursuant to
Sections 3.03 and 2.04 for the related Distribution Date and, since
the Closing Date, the cumulative number and Principal Balance of
Mortgage Loans purchased or substituted for pursuant to Sections 3.03
and 2.04; and
(xiii) such other information as may be reasonably requested by
the Indenture Trustee or Note Insurer.
In addition, by January 31 of each calendar year following any year
during which the Securities are outstanding, the Indenture Trustee shall
furnish a report to each Holder of record if so requested in writing at any
time during each calendar year as to the aggregate of amounts reported
pursuant to (iv) with respect to the Securities for such calendar year. Such
information shall be deemed to have been furnished if provided pursuant to the
requirements of the Code from time to time in force.
(b) [Reserved].
(c) In addition, on each Distribution Date the Indenture Trustee will
provide to each Holder, [to the Note Insurer,] to the Servicer, to the
Depositor and to the Rating Agencies, together with the information described
in subsection (a) preceding, the following information with respect to the
Mortgage Loans as of the following dates, as applicable: (1) with respect to
Monthly Payments, the close of business on the last day of the related Due
Period; (2) with respect to Principal Prepayments in Full, Curtailments,
Liquidation Proceeds, Insurance Proceeds, Released Mortgaged Property Proceeds
and any other unscheduled payments or recoveries, the close of business on the
last day of the related Due Period; (3) with respect to Mortgage Loans that
are Delinquent, the close of business on the last day of the immediately
preceding calendar month and (4) in all other cases, unless otherwise
specified, the close of business on the last day of the related Due Period.
(i) the total number of Mortgage Loans and the aggregate
Principal Balances thereof for such Distribution Date, together with
the number and aggregate Principal Balances of such Mortgage Loans and
the percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of all Mortgage Loans (A) 30-59 days Delinquent, (B)
60-89 days Delinquent and (C) 90 or more days Delinquent;
(ii) the number and aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans in
foreclosure proceedings and the number and aggregate Principal
Balances of all Mortgage Loans and percentage (based on the aggregate
Principal Balances of the Mortgage Loans) of any such Mortgage Loans
which are also included in any of the statistics described in the
foregoing clauses (i)(A), (i)(B) and (i)(C);
(iii) the number and aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans
relating to Mortgagors in bankruptcy proceedings and the number and
aggregate Principal Balances of all Mortgage Loans and percentage
(based on the aggregate Principal Balances of the Mortgage Loans) of
any such Mortgage Loans which are also included in any of the
statistics described in the foregoing clauses (i)(A), (i)(B) and
(i)(C);
(iv) the number and aggregate Principal Balances of all Mortgage
Loans and percentage (based on the aggregate Principal Balances of the
Mortgage Loans) of the aggregate Principal Balances of such Mortgage
Loans to the aggregate Principal Balance of all Mortgage Loans
relating to Foreclosure Properties and the number and aggregate
Principal Balances of all Mortgage Loans and percentage (based on the
aggregate Principal Balances of the Mortgage Loans) of any such
Mortgage Loans which are also included in any of the statistics
described in the foregoing clause (i)(A), (i)(B) and (i)(C);
(v) the weighted average Mortgage Rate as of the Due Date
occurring in the Due Period related to such Distribution Date;
(vi) the weighted average remaining term to stated maturity of
all Mortgage Loans;
(vii) the book value of any Foreclosure Property;
(viii) the Total Loan Balance for such Distribution Date;
(ix) the number of Foreclosure Properties and aggregate Principal
Balance of related Mortgage Loans; and
(x) Liquidation Proceeds, Liquidation Expenses and Net
Liquidation Proceeds received by the Servicer during the related Due
Period.
(d) The obligation of the Indenture Trustee to provide the information
required under this Section shall be subject to the timely availability and
accuracy of the information provided by the Servicer under Section 5.19.
Section 6.08. Additional Reports by Indenture Trustee. (a) The
Indenture Trustee shall report to the Depositor, the Servicer [and the Note
Insurer] with respect to the amount then held in each Account (including
investment earnings accrued or scheduled to accrue) held by the Indenture
Trustee and the identity of the investments included therein, as the
Depositor, the Servicer or the Note Insurer may from time to time request in
writing.
(b) [From time to time, at the request of the Note Insurer, the
Indenture Trustee shall report to the Note Insurer with respect to its actual
knowledge of any breach of any of the representations or warranties relating
to individual Mortgage Loans set forth in the Mortgage Loan Purchase Agreement
or in Section 3.01 or 3.02 hereof.]
Section 6.09. Compensating Interest. Not later than the close of
business on the Servicer Remittance Date prior to the Distribution Date, the
Servicer shall remit to the Trustee (without right or reimbursement therefor)
for deposit into the Certificate Account an amount equal to the lesser of (a)
the excess of (i) the aggregate of the Prepayment Interest Shortfalls for the
related Distribution Date resulting from Principal Prepayments in Full and
Curtailments during the related Prepayment Period over (ii) any Prepayment
Interest Excess resulting from Principal Prepayments in Full during such
Prepayment Period and (b) its aggregate Servicing Fees for such Distribution
Date and shall not have the right to reimbursement therefor (the "Compensating
Interest").
Section 6.10. [Effect of Payments by the Note Insurer; Subrogation].
[Anything herein to the contrary notwithstanding, any payment with respect to
principal of or interest on the Insured Notes that is made with moneys
received pursuant to the terms of the Note Insurance Policy shall not be
considered payment of the Securities from the Trust Estate. The Depositor, the
Servicer and the Indenture Trustee acknowledge, and each Holder by its
acceptance of a Security agrees, that without the need for any further action
on the part of the Note Insurer, the Depositor, the Servicer, the Indenture
Trustee or the Note Registrar (a) to the extent the Note Insurer makes
payments, directly or indirectly, on account of principal of or interest on
the Insured Notes to the Holders of such Securities, the Note Insurer will be
fully subrogated to, and each Securityholder, the Servicer and the Indenture
Trustee hereby delegate and assign to the Note Insurer, to the fullest extent
permitted by law, the rights of such Holders to receive such principal and
interest from the Trust Estate, including, without limitation, any amounts due
to the Securityholders in respect of securities law violations arising from
the offer and sale of the Insured Notes, and (b) the Note Insurer shall be
paid such amounts but only from the sources and in the manner provided herein
for the payment of such amounts. The Indenture Trustee and the Servicer shall
cooperate in all respects with any reasonable request by the Note Insurer for
action to preserve or enforce the Note Insurer's rights or interests under
this Agreement without limiting the rights or affecting the interests of the
Holders as otherwise set forth herein.]
Section 6.11. Allocation of Realized Losses. [ ].
Section 6.12. Pre-Funding Account. [ ].
Section 6.13. Capitalized Interest Account. [ ].
Section 6.14. Determination of LIBOR. If the outstanding Securities
include any LIBOR Securities, then on each LIBOR Determination Date the
Indenture Trustee shall determine LIBOR for the next succeeding Accrual Period
by reference to the display designated as page 3750 on the Dow Jones Telerate
Service (or such other page as may replace such page on that service for the
purpose of displaying London interbank offered quotations of major banks).
If such rate does not appear on Telerate Page 3750, the rate for such
day shall be determined on the basis of the rates at which deposits in United
States dollars are offered by the Reference Banks at approximately 11:00 a.m.,
London time, on such day to banks in the London interbank market for a term
equal to the relevant Accrual Period. The Indenture Trustee shall request the
principal London office of each of the Reference Banks to provide a quotation
of its rate. If at least two such quotations are provided, LIBOR for the next
applicable Accrual Period shall be the arithmetic mean of those quotations.
As used herein, "Reference Banks" means leading banks selected by the
Indenture Trustee and engaged in transactions in Eurodollar deposits in the
international Eurocurrency market.
If on any LIBOR Determination Date only one or none of the Reference
Banks provides the offered quotations, LIBOR for the next applicable Accrual
Period shall be the arithmetic mean of the rates quoted by major banks in New
York City, selected by the Indenture Trustee, at approximately 11:00 a.m., New
York City time, on such day for loans in United States dollars to leading
European banks for a term equal to the relevant Accrual Period. If on any
LIBOR Determination Date the Indenture Trustee is unable to determine LIBOR
for an Accrual Period, LIBOR for such Accrual Period shall be LIBOR as
determined on the previous LIBOR Determination Date.
Notwithstanding the foregoing, LIBOR for the next succeeding Accrual
Period shall not be based on LIBOR for the immediately preceding Accrual
Period for two consecutive LIBOR Determination Dates. If, under the procedures
described above, LIBOR for the next succeeding Accrual Period would be based
on LIBOR for the previous LIBOR Determination Date for the second consecutive
LIBOR Determination Date, the Indenture Trustee shall select an alternative
index (over which the Indenture Trustee has no control) used for determining
Eurodollar lending rates that is calculated and published (or otherwise made
available) by an independent third party.
The establishment of LIBOR by the Indenture Trustee and the Indenture
Trustee's subsequent calculation of the rate of interest applicable to the
LIBOR Securities for the relevant Accrual Period, in the absence of manifest
error, shall be final and binding.
Section 6.15. The Reserve Fund. [ ].
ARTICLE VII
DEFAULT
Section 7.01. Events of Default. (a) "Event of Default", wherever used
herein, means any one of the following events:
(i) any failure by the Servicer to remit to the Indenture Trustee
any payment, excluding any Periodic Advance and any Servicing Advance,
required to be made by the Servicer under the terms of this Agreement
which continues unremedied for [one] Business Day after delivery of
notice thereof to the Servicer;
(ii) any failure by the Servicer to make any required Servicing
Advance which failure continues unremedied for a period of [60] 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
Indenture Trustee or to the Servicer and the Indenture Trustee by any
Securityholder [or the Note Insurer];
(i) any failure by the Servicer to deposit amounts received with
respect to the Mortgage Loans in the Collection Account on a daily
basis within [one] Business Days of receipt in accordance with Section
5.03 hereof;
(iii) any failure on the part of the Servicer duly to observe or
perform in any material respect any other of the covenants or material
agreements on the part of the Servicer contained in this Agreement, or
the failure of any representation and warranty made pursuant to
Section 3.01 to be true and correct in all material respects which
continues unremedied for a period of [90] days after the earlier of
(A) the date on which written notice of such failure, requiring the
same to be remedied, shall have been given to the Servicer, as the
case may be, by the Depositor or the Indenture Trustee or to the
Servicer and the Indenture Trustee by any Securityholder [or the Note
Insurer] and (B) actual knowledge of such failure by a Servicing
Officer or Responsible Officer of the Servicer[; PROVIDED, HOWEVER,
that if, prior to the occurrence of a Note Insurer Default, the
Servicer shall have given notice to the Note Insurer of corrective
action it proposes to take, which corrective action is agreed in
writing by the Note Insurer to be satisfactory, such period may be
extended by the Note Insurer].
(iv) a decree or order of a court or agency or supervisory
authority having jurisdiction in an involuntary case under any present
or future federal or state bankruptcy, insolvency or similar law or
for the appointment of a conservator or 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, 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 shall have resulted in the entry of an order
for relief or any such adjudication or appointment;
(v) the Servicer shall consent 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 Servicer or of or relating to all or
substantially all of the Servicer's property;
(vi) the Servicer shall admit in writing its inability to pay its
debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors, or voluntarily suspend payment of
its obligations;
(vii) the Servicer no longer meets the qualifications of either a
FNMA or FHLMC seller/servicer;
(ii) any failure by the Servicer to maintain its license to do
business or service residential mortgage loans in any jurisdiction
where a Mortgaged Property is located;
(viii) the Servicer attempts to assign any of its rights or
delegate any of its duties hereunder other than in compliance with the
terms of this Agreement;
(ix) [any failure of the Servicer to provide any of the reports
and information to the Indenture Trustee as provided in Section 5.19
which results in a draw on and under the terms of the Note Insurance
Policy;]
(x) [the Note Insurer notifies the Indenture Trustee of an Event
of Default with respect to the Servicer under the Insurance Agreement;
or]
(iii) any failure of the Servicer to make any Periodic Advance on
any Servicer Remittance Date required to be made which continues
unremedied until 3:00 p.m. New York time on the Business Day
immediately following the Servicer Remittance Date;
(b) If an Event of Default described in this Section shall occur,
then, and in each and every such case, so long as such Event of Default shall
not have been remedied [the Note Insurer may or] the Indenture Trustee shall,
but only at the direction of [the Note Insurer or] the Majority
Securityholders [and with the prior written consent of the Note Insurer,] by
notice in writing to the Servicer and a Responsible Officer of the Indenture
Trustee, terminate all the rights and obligations of the Servicer under this
Agreement and in and to the Mortgage Loans and the proceeds thereof, as
servicer. Upon receipt by the Servicer of such written notice, all authority
and power of the Servicer under this Agreement, whether with respect to the
Mortgage Loans or otherwise, shall, subject to Section 7.02, pass to and be
vested in the Indenture Trustee or its designee [approved by the Note Insurer
(or another successor Servicer appointed by the Note Insurer)] and the
Indenture Trustee (or such other successor Servicer, as applicable) is hereby
authorized and empowered to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, at the expense of the Servicer, any and all
documents and other instruments 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 Mortgage Loans and related documents. The Servicer agrees to
cooperate (and pay any related costs and expenses) with the Indenture Trustee
or another successor Servicer, as applicable, in effecting the termination of
the Servicer's responsibilities and rights hereunder, including, without
limitation, the transfer to the Indenture Trustee or its designee or another
successor Servicer, as applicable, for administration by it of all amounts
which shall at the time be credited by the Servicer to the Collection Account
or thereafter received with respect to the Mortgage Loans. The Indenture
Trustee shall promptly notify [the Note Insurer] and the Rating Agencies of
the occurrence of an Event of Default. [The Note Insurer may appoint a
successor Servicer other than the Indenture Trustee.] Until a successor
Servicer has been appointed [by the Note Insurer,] the Indenture Trustee shall
be the successor Servicer in all respects without further action, and all
authority and power of the Servicer under this agreement shall pass to and be
vested in the Indenture Trustee on and after the effective date of
termination.
Section 7.02. Indenture Trustee to Act; Appointment of Successor. (a)
On and after the time that the Servicer receives a notice of termination
pursuant to Section 7.01, or the Indenture Trustee receives the resignation of
the Servicer evidenced by an Opinion of Counsel pursuant to Section 5.24, or
the Servicer is removed as Servicer pursuant to Section 7.01, in which event
the Indenture Trustee shall promptly notify the Rating Agencies, and except as
otherwise provided in Section 7.01, the Indenture Trustee or another successor
[acceptable to the Note Insurer] shall be the successor in all respects to the
Servicer in its capacity as servicer under this Agreement and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof arising on or after the date of
succession; provided, however, that the Indenture Trustee shall not be liable
for any actions or the representations and warranties of any servicer prior to
it and including, without limitation, the obligations of the Servicer set
forth in Sections 2.04 and 3.03. The Indenture Trustee, as successor Servicer,
or any other successor Servicer shall be obligated to make advances pursuant
to Section 5.21 unless, and only to the extent the Indenture Trustee as
successor servicer determines reasonably and in good faith that such advances
would not be recoverable pursuant to Section 5.04, [such determination to be
evidenced by a certification of a Responsible Officer of the Indenture
Trustee, as successor Servicer delivered to the Note Insurer].
(b) Notwithstanding the above, the Indenture Trustee may, if it shall
be unwilling to so act, or shall, if it is unable to so act or if the Majority
Securityholders [with the consent of the Note Insurer or the Note Insurer] so
requests in writing to the Indenture Trustee, appoint, pursuant to the
provisions set forth in paragraph (f) below, or petition a court of competent
jurisdiction to appoint, any established mortgage loan servicing institution
[acceptable to the Note Insurer] as the successor to the Servicer hereunder in
the assumption of all or any part of the responsibilities, duties or
liabilities of the Servicer hereunder. Notwithstanding the above, the
Indenture Trustee shall perform all obligations of the Servicer until [the
Note Insurer or] the Indenture Trustee [with the prior written consent of the
Note Insurer] appoints a successor Servicer [acceptable to the Note Insurer].
[The Note Insurer may appoint a successor Servicer other than the
Indenture Trustee. If the Note Insurer fails to appoint a successor Servicer,]
the Indenture Trustee shall, if it is unable to obtain a qualifying bid and is
prevented by law from acting as Servicer, appoint, or petition a court of
competent jurisdiction to appoint, any housing an home finance institution,
bank or mortgage servicing institution which has been designated as an
approved seller-servicer by FNMA or FHLMC for first and second home equity
loans and having equity of not less than $[5,000,000] [(or such lower level as
may be acceptable to the Note Insurer),] as determined in accordance with
generally accepted accounting principles [and acceptable to the Note Insurer]
as the successor to the Servicer hereunder in the assumption of all or any
part of the responsibilities, duties or liabilities of the Servicer hereunder.
The compensation of any successor Servicer (other than the Indenture Trustee
in its capacity as successor Servicer) so appointed shall be the amount agreed
to between the successor Servicer[, the Note Insurer] and the Indenture
Trustee (up to a maximum of the Servicing Fee Rate on the outstanding
Principal Balance of each Mortgage Loan), together with the other Servicing
Fee in the form of assumption fees, late payment charges or otherwise as
provided in Sections 5.14; PROVIDED, HOWEVER, that if the Indenture Trustee
becomes the successor Servicer it shall receive as its compensation the same
compensation paid to the Servicer immediately prior to the Servicer's removal
or resignation. The successor Servicer shall be entitled to set-up expenses,
if any, in connection with becoming Servicer pursuant to Section 6.05(b)(i)
hereof.
(c) [Reserved]
(d) The Indenture Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession, including the notification by such successor of all Mortgagors of
the transfer of servicing to the extent that the predecessor Servicer fails to
do so. The predecessor Servicer agrees to cooperate with the Indenture Trustee
and any successor Servicer in effecting the termination of the predecessor
Servicer's servicing responsibilities and rights hereunder and shall promptly
provide the Indenture Trustee or such successor Servicer, as applicable, at
the predecessor Servicer's cost and expense, all documents and records
reasonably requested by it to enable it to assume the Servicer's functions
hereunder and shall promptly also transfer to the Indenture Trustee or such
successor Servicer, as applicable, all amounts that then have been or should
have been deposited in the Collection Account by the Servicer or that are
thereafter received with respect to the Mortgage Loans. Any collections
received by the predecessor Servicer after such removal or resignation shall
be endorsed by it to the Indenture Trustee and remitted directly to the
Indenture Trustee or, at the direction of the Indenture Trustee, to the
successor Servicer. Any amounts and documents which are property of the Trust
Estate held by the predecessor Servicer shall be held in trust on behalf of
the Indenture Trustee until transferred to the successor Servicer or Trustee.
Neither the Indenture Trustee nor any other successor Servicer shall be held
liable by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by (i) the failure of the
Servicer to deliver, or any delay in delivering, cash, documents or records to
it, or (ii) restrictions imposed by any regulatory authority having
jurisdiction over the Servicer hereunder. No appointment of a successor to the
Servicer hereunder shall be effective until [the Note Insurer shall have
consented in writing thereto, and] written notice of such proposed appointment
shall have been provided by the Indenture Trustee [to the Note Insurer and] to
each Securityholder. The Indenture Trustee shall not resign as Servicer until
a successor Servicer [acceptable to the Note Insurer] has been appointed.
(e) Pending appointment of a successor to the Servicer hereunder, the
Indenture Trustee shall act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Indenture Trustee may
make such arrangements for the compensation of such successor out of payments
on Mortgage Loans as it[, the Note Insurer] and such successor shall agree;
provided, however, that no such compensation shall be in excess of that
permitted the Servicer pursuant to Section 5.14. The Servicer, the Indenture
Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
(f) Notwithstanding anything to the contrary in this Article VII, upon
removal or resignation of the Servicer the Indenture Trustee shall (i) solicit
bids from prospective successor Servicers as described below and (ii) until
such time as another successor Servicer is appointed [by the Note Insurer],
assume the duties and obligations of the Servicer. The Indenture Trustee
agrees to act as Servicer during such solicitation process and shall assume
all duties and obligations of the Servicer. The Indenture Trustee shall
solicit, by public announcement, bids from housing and home finance
institutions, banks and mortgage servicing institutions [from a list of one or
more institutions acceptable to the Note Insurer]. Such public announcement
shall specify that the successor Servicer shall be entitled to servicing
compensation in accordance with this Agreement. [Within thirty days after the
Note Insurer has provided the list of eligible institutions as provided
above,] The Indenture Trustee shall negotiate and effect the sale, transfer
and assignment of the servicing rights and responsibilities hereunder to the
qualified party submitting the highest satisfactory bid as to the price it
will pay to obtain servicing [provided that the Note Insurer has given its
prior written consent]. The Indenture Trustee shall deduct from any sum
received by the Indenture Trustee from the successor to the Servicer in
respect of such sale, transfer and assignment all costs and expenses of any
public announcement and of any sale, transfer and assignment of the servicing
rights and responsibilities hereunder. After such deductions, the remainder of
such sum less any amounts due the Indenture Trustee or the Issuer from the
Servicer shall be paid by the Indenture Trustee to the predecessor Servicer at
the time of such sale, transfer and assignment to the Servicer's successor.
If the Servicer resigns or is replaced hereunder, the costs and
expenses of the successor Servicer relating to the transfer of servicing
rights and responsibilities remaining, if any, after deduction from the sale
price as described above shall be payable to the successor Servicer pursuant
to Section 6.05 hereof.
(g) The Indenture Trustee or any other successor Servicer, upon
assuming the duties of Servicer hereunder, shall immediately (i) record all
Assignments of Mortgage not previously recorded in the name of the Indenture
Trustee pursuant to Section 2.03 as a result of an Opinion of Counsel and (ii)
make all Periodic Advances and Compensating Interest payments and deposit them
to the Collection Account, which amounts the predecessor Servicer has
theretofore failed to remit with respect to the Mortgage Loans.
(h) The Servicer that is being removed or is resigning shall give
notice to the Mortgagors and to the Rating Agencies of the transfer of the
servicing to the successor.
(i) Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities of the predecessor Servicer
including, but not limited to, the maintenance of the fidelity bond and errors
and omissions policy pursuant to Section 5.08 and shall be entitled to the
Servicing Fee and all of the rights granted to the predecessor Servicer by the
terms and provisions of this Agreement. The appointment of a successor
Servicer shall not affect any liability or right of the predecessor Servicer
which may have arisen or accrued under this Agreement prior to its termination
as Servicer (including, without limitation, any deductible under an insurance
policy) and any right to reimbursement pursuant to Section 5.04 or otherwise
under this Agreement, nor shall any successor Servicer be liable for any acts
or omissions of the predecessor Servicer or for any breach by such Servicer of
any of its representations or warranties contained herein or in any related
document or agreement.
Section 7.03. Waiver of Defaults. [The Note Insurer or] Majority
Securityholders may, on behalf of all Securityholders, [and subject to the
consent of the Note Insurer,] waive any events permitting removal of the
Servicer as servicer pursuant to this Article VII; provided, however, that the
Majority Securityholders may not waive a default in making a required
distribution on a Security without the consent of the holder of such Security.
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 unless otherwise specified in such waiver. No
such waiver shall extend to any subsequent or other default or impair any
right consequent thereto except to the extent expressly so waived. Notice of
any such waiver shall be given by the Indenture Trustee to the Rating
Agencies.
Section 7.04. [Mortgage Loans, Trust Estate and Accounts Held for
Benefit of the Note Insurer]. [(a) The Indenture Trustee shall hold the Trust
Estate and shall hold, directly or indirectly through its Custodian, the
Mortgage Files for the benefit of the Securityholders and the Note Insurer and
all references in this Agreement and in the Securities to the benefit of
Holders of the Securities shall be deemed to include the Note Insurer. The
Indenture Trustee shall cooperate in all reasonable respects with any
reasonable request by the Note Insurer for action to preserve or enforce the
Note Insurer's rights or interests under this Agreement and the Securities.]
(b) [The Servicer hereby acknowledges and agrees that it shall service
the Mortgage Loans for the benefit of the Issuer, the Indenture Trustee and
the Note Insurer, and all references in this Agreement to the benefit of or
actions on behalf of the Securityholders shall be deemed to include the Note
Insurer.]
Section 7.05. [Rights of the Note Insurer to Exercise Rights of
Securityholders]. [By accepting its Security, each Securityholder agrees that
unless a Note Insurer Default exists, the Note Insurer shall be deemed to be
the Securityholders for all purposes (other than with respect to payment on
the Securities) and shall have the right to exercise all rights of the
Securityholders under this Agreement and under each Class of Securities
without any further consent of the Securityholders.]
Section 7.06. [Indenture Trustee to Act Solely with Consent of the
Note Insurer]. [Unless Note Insurer Default exists, the Indenture Trustee
shall not, without the Note Insurer's consent or unless directed by the Note
Insurer:
(a) terminate the rights and obligations of the Servicer as Servicer
pursuant to Section 7.01;
(b) agree to any amendment pursuant to Article XI, PROVIDED, HOWEVER,
that such consent shall not be unreasonably withheld; or
(c) undertake any litigation.]
[The Note Insurer may, in writing and in its sole discretion renounce
all or any of its rights under section 7.04, 7.05 or 7.06 or any requirement
for the Note Insurer's consent for any period of time.]
ARTICLE VIII
TERMINATION
Section 8.01. Termination. (a) Subject to Section 8.02, this Agreement
shall terminate upon notice to the Indenture Trustee of either: (i) the
disposition of all funds with respect to the last Mortgage Loan and the
remittance of all funds due hereunder and the payment of all amounts due and
payable to [the Note Insurer and] the Indenture Trustee or (ii) mutual consent
of the Servicer, the Note Insurer and all Securityholders in writing;
provided, however, that in no event shall this Agreement terminate later than
twenty-one years after the death of the last surviving lineal descendant of
Joseph P. Kennedy, late Ambassador of the United States to the Court of St.
James's, alive as of the date hereof. (b) In addition, subject to Section
8.02, the [Majority Residual Interestholders] may, at their option and at
their sole cost and expense, upon [20] days' prior written notice to the
Indenture Trustee, terminate this Agreement on any date on which the Total
Loan Balance is less than [10]% of the Cut-off Date Balance by purchasing,
during the Due Period relating to the next succeeding Distribution Date, all
of the outstanding Mortgage Loans and Foreclosure Properties, and other
property of the Trust, for the Termination Price. If the [Majority Residual
Interestholders] do not exercise such purchase option within three calendar
months of the date in which they are first entitled to do so, [the Note
Insurer] shall have the option, at its sole cost and expense, upon [20] days'
prior notice to the Indenture Trustee, to purchase all of the outstanding
Mortgage Loans and Foreclosure Properties and other property of the Trust for
the Termination Price.
Any such purchase shall be accomplished by deposit into the Collection
Account of the Termination Price. From the Termination Price so deposited, the
Indenture Trustee shall reimburse the Servicer for the amount of any unpaid
Servicing Fees, Unreimbursed Periodic Advances and unreimbursed Servicing
Advances made by the Servicer with respect to the related Mortgage Loans. [No
such termination is permitted without the prior written consent of the Note
Insurer if it would result in a draw on the Note Insurance Policy.]
(c) [Reserved]
(d) Notice of any termination, specifying the Distribution Date upon
which the Trust will terminate and that the Securityholders shall surrender
their Securities to the Indenture Trustee for payment of the final
distribution and cancellation, shall be given promptly by the Indenture
Trustee by letter to the Securityholders mailed during the month of such final
distribution before the Servicer Remittance Date in such month, specifying (i)
the Distribution Date upon which final payment of the Securities will be made
upon presentation and surrender of the Securities at the office of the
Indenture 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 Securities at the office of the Indenture
Trustee therein specified. [The obligations of the Note Insurer hereunder
shall terminate upon the deposit with the Indenture Trustee of the Termination
Price and when the aggregate Principal Amount of the Securities has been
reduced to zero, whereupon the Indenture Trustee will return the Note
Insurance Policy to the Note Insurer for cancellation.]
(e) In the event that not all Securityholders surrender their
Securities for cancellation within six months after the time specified in the
above-mentioned written notice, the Indenture Trustee shall give a second
written notice to the remaining Securityholders to surrender their Securities
for cancellation and receive the final distribution with respect thereto. If
within six months after the second notice, all of the Securities shall not
have been surrendered for cancellation, the Indenture Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Securityholders concerning surrender of their Securities
and the cost thereof shall be paid out of the funds and other assets which
remain subject hereto. If within nine months after the second notice all the
Securities shall not have been surrendered for cancellation, the
Certificateholders shall be entitled to all unclaimed funds and other assets
[(other than amounts relating to Insured Payments, which shall be disbursed to
the Note Insurer)] which remain subject hereto and the Indenture Trustee upon
transfer of such funds shall be discharged of any responsibility for such
funds and the Securityholders shall look only to such Certificateholders for
payment. Such funds shall remain uninvested.
ARTICLE IX
[RESERVED]
ARTICLE X
[RESERVED]
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01. Limitation on Liability of the Depositor and the
Servicer. (a) Neither the Depositor, the Servicer nor any of the directors,
members, officers, employees or agents of the Depositor or the Servicer shall
be under any liability to [the Note Insurer,] the Issuer or the
Securityholders 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 Depositor or the
Servicer 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 against any specific liability imposed on the
Servicer or the Depositor pursuant to any other Section hereof; and provided
further that this provision shall not protect the Depositor, the Servicer or
any such person, against any liability which would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence in the performance of
duties or by reason of reckless disregard of obligations and duties hereunder.
The Depositor, the Servicer and any director, member, officer, employee or
agent of the Depositor or 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 Depositor, the Servicer and any
director, member, officer, employee or agent of the Depositor or the Servicer
shall be indemnified and held harmless by the Trust against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Securities, other than any loss, liability or expense
related to Servicer's failure to perform its duties and service the Mortgage
Loans in compliance with the terms of this Agreement, or any loss, liability
or expense incurred by reason of willful misfeasance, bad faith or negligence
in the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder; provided, however, that such indemnity shall
be payable solely as provided in Section 6.05(b)(i). Neither the Depositor nor
the Servicer shall be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its respective duties under this
Agreement and which in its opinion may involve it in any expense or liability;
provided, however, that the Depositor or the Servicer may in its sole
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 Securityholders hereunder. In the event the Depositor
or the Servicer take any action as described in the preceding sentence, the
legal expenses and costs of such action[, if previously approved in writing by
the Note Insurer, which approval shall not be unreasonably withheld,] and any
liability resulting therefrom will be expenses, costs and liabilities of the
Issuer, and the Servicer or the Depositor, as the case may be, will be
entitled to be reimbursed therefor as provided in Section 6.05(b)(i).
(b) [Reserved]
(c) The Servicer agrees to indemnify and hold the Issuer, Indenture
Trustee, the Depositor[, the Note Insurer] and each Noteholder harmless
against any and all claims, losses, penalties, fines, forfeitures, legal fees
and related costs, judgments, and any other costs, fees and expenses actually
sustained by the Issuer, Indenture Trustee, the Depositor, the Note Insurer or
any Noteholder resulting from the failure of the Servicer to perform its
duties and service the Mortgage Loans in compliance with the terms of this
Agreement. The Servicer shall immediately notify the Issuer, Indenture
Trustee, the Depositor[, the Note Insurer] and each Securityholder if a claim
is made by a third party arising out of or based upon the alleged actions of
the Servicer or alleged failure of the Servicer to perform its duties and
service the Mortgage Loans in compliance with the terms of this Agreement, and
the Servicer shall assume (with the consent of the Indenture Trustee [and the
Note Insurer]) the defense of any such claim and pay all expenses in
connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the
Servicer, the Indenture Trustee, the Depositor[, the Note Insurer] and/or
Securityholder in respect of such claim. Notwithstanding the foregoing, the
Servicer shall not be obligated to indemnify any such party or assume the
defense for any claim by a third party that does not arise out of and is not
based upon the alleged actions of the Servicer or alleged failure of the
Servicer to perform its duties and service the Mortgage Loans in compliance
with the terms of this Agreement.
(d) The Indenture Trustee shall, in accordance with instructions
received from the Servicer, reimburse the Servicer only from amounts otherwise
distributable on the Residual Interest Certificates for all amounts advanced
by it pursuant to the preceding sentence, except when a final nonappealable
adjudication determines that the claim relates directly to the failure of the
Servicer to perform its duties in compliance with this Agreement. The
provision of this Section 11.01 shall survive the termination of this
Agreement and the payment of the outstanding Securities.
Section 11.02. Acts of Securityholders. (a) Except as otherwise
specifically provided herein, whenever Securityholder action, consent or
approval is required under this Agreement, such action, consent or approval
shall be deemed to have been taken or given on behalf of, and shall be binding
upon, all Securityholders if the Majority Securityholders or the Note Insurer
agrees to take such action or give such consent or approval.
(b) The death or incapacity of any Securityholder shall not operate to
terminate this Agreement or the Trust, nor entitle such Securityholder's legal
representatives or heir 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.
(c) No Securityholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the
operation and management of the Trust Estate, or the obligations of the
parties hereto, nor shall anything herein set forth, or contained in the terms
of the Securities, be construed so as to constitute the Securityholders from
time to time as partners or members of an association; nor shall any
Securityholder 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.
Section 11.03. Amendment. This Agreement may be amended from time to
time by the Depositor, the Servicer and the Indenture Trustee [with the prior
written consent of the Note Insurer] without the consent of any of the
Securityholders, (i) to cure any ambiguity or mistake, (ii) to correct, modify
or supplement any provisions herein which may be inconsistent with any other
provisions herein or in an Offering Document, (iii) to make any other
provisions with respect to matters or questions arising under this Agreement
that are not materially inconsistent with the provisions hereof amend this
Agreement in any respect subject to the provisions below, or (iv) if such
amendment, as evidenced by an Opinion of Counsel (provided by the Person
requesting such amendment) delivered to the Indenture Trustee [and the Note
Insurer], is reasonably necessary to comply with any requirements imposed by
the Code or any successor or amendatory statute or any temporary or final
regulation, revenue ruling, revenue procedure or other written official
announcement or interpretation relating to federal income tax laws or any
proposed such action which, if made effective, would apply retroactively to
the Trust at least from the effective date of such amendment; provided that in
the case of clause (iii) such action shall not adversely affect in any
material respect the interests of any Securityholder (other than
Securityholders who shall consent to such amendment) or the Note Insurer, as
evidenced either by an Opinion of Counsel (provided by the Person requesting
such amendment) or written notification from each Rating Agency to the effect
that such amendment will not cause such Rating Agency to lower or withdraw the
then current ratings on the Securities [(without regard to the Note Insurance
Policy)], delivered to the Indenture Trustee [and the Note Insurer].
This Agreement may also be amended from time to time by the Depositor,
the Servicer and the Indenture Trustee with the consent of [the Note Insurer
and] the Majority Securityholders for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Holders of
Securities; provided, however, that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, payments received on Mortgage
Loans which are required to be distributed on any Security without the consent
of the Holder of such Security or (ii) reduce the aforesaid percentage of
Securities the Holders of which are required to consent to any such amendment,
without the consent of [the Note Insurer and] the Holders of all Securities
then outstanding. Notwithstanding any other provision of this Agreement, for
purposes of the giving or withholding of consents pursuant to this Section
11.03, Securities registered in the name of the Depositor or the Servicer or
any affiliate thereof shall be entitled to voting rights with respect to
matters described in clauses (i) and (ii) of this paragraph.
Notwithstanding any contrary provision of this Agreement, the
Indenture Trustee shall not consent to any amendment to this Agreement unless
it [and the Note Insurer] shall have first received an Opinion of Counsel
(provided by the Person requesting such amendment) to the effect that such
amendment will not result in the imposition of any tax on the Trust or cause
the Trust to fail to qualify as a grantor trust at any time that any of the
Securities are outstanding.
Promptly after the execution of any such amendment the Indenture
Trustee shall furnish a statement describing the amendment to each
Securityholder, the Note Insurer, and each Rating Agency.
It shall not be necessary for the consent of Securityholders under
this Section 11.03 to approve the particular form of any proposed amendment,
but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Securityholders shall be subject to
such reasonable regulations as the Indenture Trustee may prescribe.
The Indenture Trustee may, but shall not be obligated to enter into
any amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.
Section 11.04. Recordation of Agreement. To the extent permitted by
applicable law, this Agreement, or a memorandum thereof if permitted under
applicable law, is subject to recordation in all appropriate public offices
for real property records in all of the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages
are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the
Securityholders' [or the Note Insurer's] expense on direction and at the
expense of Majority Securityholders [or the Note Insurer's] requesting such
recordation, but only when accompanied by an Opinion of Counsel to the effect
that such recordation materially and beneficially affects the interests of the
Securityholders or the Note Insurer, as applicable, or is necessary for the
administration or servicing of the Mortgage Loans.
Section 11.05. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered to (i) in the case of the Servicer, [ ], Attention: [ ]; (ii) in the
case of Finance America Securities, LLC, 16802 Aston Street, Irvine,
California 92606, Attention: [ ]; (iii) in the case of the Indenture Trustee,
[ ], Attention: [ ______________________________________________________ ];
(iv) in the case of the Securityholders, as set forth in the Security
Register; (v) in the case of Moody's, Moody's Investors Service, 99 Church
Street, New York, New York 10007, Attention: Residential Mortgage Pass-through
Monitoring; (vi) in the case of S&P, Standard & Poor's Rating Services, 55
Water Street, New York, New York 10041; and (vii) in the case of the Note
Insurer, [ ____________________________________________________________ ],
Attention: [ ]. Any such notices shall be deemed to be effective with respect
to any party hereto upon the receipt of such notice by such party, except that
notices to the Securityholders shall be effective upon mailing or personal
delivery.
Section 11.06. 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 covenants, agreements, provisions or terms of
this Agreement or of the Securities or the rights of the Holders thereof.
Section 11.07. Counterparts. 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.
Section 11.08. Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the Servicer, the Depositor, the Indenture
Trustee and the Securityholders and their respective successors and permitted
assigns.
Section 11.09. Headings. The headings of the various articles and
sections of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be part of this Agreement.
Section 11.10. [Note Insurer Default]. [Any right conferred to the
Note Insurer, including, without limitation, the right to receive the Premium
Amount shall be suspended during any period in which a Note Insurer Default
exists. At such time as the Securities are no longer outstanding hereunder,
and no amounts owed to the Note Insurer hereunder or under the Insured Amount
remain unpaid, the Note Insurer's rights hereunder shall terminate.]
Section 11.11. Third Party Beneficiary. The parties agree that each of
the Seller [and the Note Insurer] are intended to have and shall have all
rights of a third-party beneficiary of this Agreement.
Section 11.12. [Reserved.]
Section 11.13. Notice to Rating Agencies and Note Insurer.
The Indenture Trustee shall use its best efforts to promptly provide
notice to the Rating Agencies and the Note Insurer 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;
3. The resignation or termination of the Servicer or the
Indenture Trustee; and
4. The final payment to Securityholders.
In addition, the Indenture Trustee shall promptly furnish to the
Rating Agencies copies of the following:
1. Each report to Securityholders described in Section 6.07; and
2. Each annual independent public accountants' servicing report
described in Section 5.17.
Any such notice pursuant to this Section 11.13 shall be in writing and
shall be deemed to have been duly given if personally delivered or mailed by
first class mail, postage prepaid, or by express delivery service [(except in
the case of notice to the Note Insurer which notice shall be given in
accordance with Section 11.05 hereof)].
Section 11.14. Governing Law. THIS AGREEMENT AND THE CERTIFICATES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS
OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.
Section 11.15. Appointment of Agent. The Depositor hereby appoints
Deutsche Bank Securities Inc. as its agent (the "Administrative Agent") for
the purpose of performing the duties of the Depositor under this Agreement and
the other Basic Documents, other than the duties of the Depositor under
Article II and Section 3.02 hereof.
Section 11.16. Taxes.
(a) As provided in the Administration Agreement, the Administrator
will perform, or cause to be performed, such duties and take, or cause to be
taken, such actions, as are required to be performed or taken with respect to
the Trust under the Code, including the duties and actions of the Owner
Trustee under Section [5.05] of the Trust Agreement. The Administrator will
prepare for signature by the Owner Trustee and, upon obtaining such signature,
shall file or cause to be filed with the Internal Revenue Service federal tax
or information returns with respect to the Trust and the Securities containing
such information and at the times and in such manner as may be required by the
Code or applicable Treasury regulations, and shall furnish to Holders such
statements or information at the times and in such manner as may be required
thereby; PROVIDED, HOWEVER, that the Administrator will not be required to
compute the Issuer's gross income; and provided, further, that the
Administrator will not be required to prepare and file partnership tax returns
on behalf of the Issuer unless it receives an opinion of counsel (which shall
not be at the Administrator's expense, but shall be at the expense of the
Seller or other party furnishing such opinion) as to the necessity of such
filings. The Owner Trustee shall sign all tax information returns filed
pursuant to this Section.
(b) As provided in the Administration Agreement, the Administrator
will timely file all reports required to be filed by the Trust with any
federal, state or local governmental authority having jurisdiction over the
Trust, including the Internal Revenue Service's Form 1041 prepared for a
grantor trust signed by the Owner Trustee, and including any other reports
that must be filed with the Securityholders. Furthermore, the Servicer shall
report to Holders, if required, with respect to the allocation of expenses
pursuant to Section 212 of the Code in accordance with the specific
instructions to the Administrator by the Seller with respect to such
allocation of expenses. Absent specific instructions, the Administrator will
allocate expenses to Holders based on the right of each Holder to gross stated
interest on the Mortgage Loans. The Administrator will collect any forms or
reports from the Holders determined by the Seller to be required under
applicable federal, state and local tax laws.
(c) Unless required otherwise by provisions of the Internal Revenue
Code or interpretations thereof, the Administrator will treat the Trust as a
grantor trust and not as an association taxable as a corporation for federal
income tax purposes.
(d) The Depositor, the Indenture Trustee, the Servicer and the Issuer
covenant and agree to, within ten Business Days after the Closing Date,
provide to the Administrator any information necessary to enable the Issuer to
meet its obligations under subsection (b) above.
(e) The Indenture Trustee, the Issuer, the Depositor and the Servicer
each covenants and agrees for the benefit of the Holders to knowingly take no
action or fail to take any action, which would, if taken or not taken, as the
case may be, result in the failure of the Trust at any time to qualify as a
grantor trust under the Code, including, without limitation, for purposes of
this paragraph any alteration, modification, amendment, extension, waiver or
forbearance with respect to any Mortgage Loan.
(f) Neither the Depositor, the Owner Trustee nor the Indenture Trustee
shall enter into any arrangement by which the Indenture Trustee or the Owner
Trustee will receive a fee or other compensation for services rendered
pursuant to this Agreement, which fee or other compensation is paid from the
Trust, other than as expressly contemplated by this Agreement; provided, that
the Indenture Trustee, the Owner Trustee and the Depositor may engage in any
of the transactions prohibited by such clauses, provided that the Indenture
Trustee and the Issuer shall have received an Opinion of Counsel experienced
in federal income tax matters to the effect that such transaction does not
result in a tax imposed on the Trust or cause the Trust to fail to qualify as
a grantor trust under the Code; PROVIDED, HOWEVER, that such transaction is
otherwise permitted under this Agreement.
(g) Except as otherwise provided in this Agreement, neither the
Indenture Trustee nor the Issuer shall, without having obtained an Opinion of
Counsel experienced in federal income tax matters to the effect that such
transaction does not result in a tax imposed on the Trust or cause the Trust
to fail to qualify as a grantor trust under the Code, (i) sell any assets of
the Trust, (ii) accept any contribution of assets after the Closing Date or
(iii) agree to any modification of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Servicer, the Indenture Trustee and the
Depositor have caused their names to be signed hereto by their respective
officers thereunto duly authorized as of the day and year first above written.
FINANCE AMERICA SECURITIES, LLC,
as Depositor
By:
Name:
Title:
[ ],
as Servicer
By:
Name:
Title:
[
],
as Indenture Trustee
By:
Name:
Title:
FINANCE AMERICA SECURITIES, LLC
MORTGAGE LOAN TRUST [ ],
as Issuer
By: [ ],
not in its individual capacity
but solely as Owner Trustee
By:
Name:
Title:
<PAGE>
EXHIBIT A
[NOTE INSURANCE POLICY]
<PAGE>
EXHIBIT B
MORTGAGE FILE
<PAGE>
EXHIBIT C
MORTGAGE LOAN SCHEDULE
<PAGE>
EXHIBIT D
ACKNOWLEDGMENT OF RECEIPT
___________, 1999
Finance America Securities, LLC
[Servicer]
[Note Insurer]
Re: Sale and Servicing Agreement, dated as of ______________ among
Finance America Securities, LLC, as Depositor,
_____________________, as Servicer, and _______________________,
as Indenture Trustee, Securities, Series ___________
Ladies and Gentlemen:
In accordance with Section 2.04 of the above-captioned Sale and
Servicing Agreement, the undersigned, as [Indenture Trustee] [Custodian],
hereby certifies: (1) except as noted on the attachment hereto, if any (the
"Loan Exception Report"), it has received the original Mortgage Note (item (i)
in Section 2.03(a)) with respect to each Mortgage Loan listed in the Mortgage
Loan Schedule and , subject to the review provided in Section 2.04 of the Sale
and Servicing Agreement, the other documents in the Mortgage File, and the
documents contained therein appear to bear original or facsimile signatures or
copies of originals if the originals have not yet been delivered, and (2) it
has received the Note Insurance Policy.
The [Indenture Trustee] [Custodian] has made no independent
examination of any such documents beyond the review specifically required in
the above-referenced Sale and Servicing Agreement. The [Indenture Trustee]
[Custodian] makes no representations as to: (i) the validity, legality,
sufficiency, enforceability or genuineness of any such documents or 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 Sale and Servicing Agreement.
______________________
as [Indenture Trustee] [Custodian]
By: _____________________________
Name:
Title:
<PAGE>
EXHIBIT E
INITIAL CERTIFICATION
__________________, 1999
Finance America Securities, LLC
[Servicer]
[Seller]
[Note Insurer]
Re: Sale and Servicing Agreement, dated as of ______________ among
Finance America Securities, LLC, as Depositor,
_____________________, as Servicer, and _______________________,
as Indenture Trustee, Securities, Series ___________
Ladies and Gentlemen:
In accordance with the provisions of Section 2.04 of the above-
referenced Sale and Servicing Agreement, the undersigned, as [Custodian],
hereby certifies that, except as noted on the attached exception report, as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or any Mortgage Loan listed on the attachment
hereto), it has reviewed the documents delivered to it pursuant to Section
2.03 of the Sale and Servicing Agreement and has determined that (i) all
documents required to be delivered to it pursuant to the above-referenced Sale
and Servicing Agreement are in its possession, (ii) such documents have been
reviewed by it and appear regular on their face and have not been mutilated,
damaged, torn or otherwise physically altered and relate to such Mortgage
Loan, (iii) based on its examination and only as to the foregoing documents,
the information set forth in the Mortgage Loan Schedule (described in items
(i), (ii), (iii), (iv), (v), (vi), and (viii) of the definition of Mortgage
Loan Schedule) respecting such Mortgage Loan accurately reflects the
information set forth in the Mortgage File and (iv) each Mortgage Note has
been endorsed as provided in Section 2.03 of the Sale and Servicing Agreement.
The [Custodian] has made no independent examination of such documents beyond
the review specifically required in the above-referenced Sale and Servicing
Agreement. The [Custodian] makes no representations as to: (i) the validity,
legality, enforceability or genuineness of any such documents contained in
each or any of the Mortgage Loans identified on the Mortgage Loan Schedule, or
(ii) the collectability, insurability, effectiveness or suitability of any
such Mortgage Loan.
<PAGE>
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Sale and Servicing Agreement.
____________________________________
as [Custodian]
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT F
FINAL CERTIFICATION
_____________, 19__
Finance America Securities, LLC
[Servicer]
[Note Insurer]
Re: Re: Sale and Servicing Agreement, dated as of ______________
among Finance America Securities, LLC, as Depositor,
_____________________, as Servicer, and _______________________,
as Indenture Trustee, Securities, Series ___________
Ladies and Gentlemen:
In accordance with Section 2.04 of the above-captioned Sale and
Servicing Agreement, the undersigned, as [Custodian], hereby certifies that,
except as noted on the attachment hereto, as to each Mortgage Loan listed in
the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or
listed on the attachment hereto) it has reviewed the documents delivered to it
pursuant to Section 2.03 of the Sale and Servicing Agreement and has
determined that (i) all documents required to be delivered to it pursuant to
the above-referenced Sale and Servicing Agreement are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
have not been mutilated, damaged, torn or otherwise physically altered and
relate to such Mortgage Loan, and (iii) based on its examination, and only as
to the foregoing documents, the information set forth in the Mortgage Loan
Schedule (described in items (i), (ii), (iii), (iv), (v), (vi) and (viii) of
the definition of Mortgage Loan Schedule) respecting such Mortgage Loan
accurately reflects the information set forth in the Mortgage File. The
[Custodian] has made no independent examination of such documents beyond the
review specifically required in the above-referenced Sale and Servicing
Agreement. The [Custodian] makes no representations as to: (i) the validity,
legality, enforceability or genuineness of any such documents contained in
each or any of the Mortgage Loans identified on the Mortgage Loan Schedule, or
(ii) the collectability, insurability, effectiveness or suitability of any
such Mortgage Loan.
<PAGE>
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Sale and Servicing Agreement.
__________________________________
as [Custodian]
By_______________________________
Name:
Title:
<PAGE>
EXHIBIT G
REQUEST FOR RELEASE OF DOCUMENTS
_____________, 19__
To: [Custodian]
Re: Finance America Securities, LLC, Securities, Series ___________
In connection with the administration of the pool of Mortgage Loans
held by you as [Custodian], we request the release, and acknowledge receipt,
of the (Mortgage File/[specify document]) for the Mortgage Loan described
below, for the reason indicated.
MORTGAGOR'S NAME, ADDRESS & ZIP CODE:
MORTGAGE LOAN NUMBER:
REASON FOR REQUESTING DOCUMENTS (check one)
_____ 1. Mortgage Loan Paid in Full (Servicer hereby certifies that all
amounts received in connection therewith have been credited to the Collection
Account.)
_____ 2. Mortgage Loan Liquidated (Servicer hereby certifies that all
proceeds of foreclosure, insurance or other liquidation have been finally
received and credited to the Collection Account.)
_____ 3. Mortgage Loan in foreclosure _____
_____ 4. Mortgage Loan purchased pursuant to Section 5.18 of the Sale and
Servicing Agreement.
_____ 5. Mortgage Loan purchased or substituted pursuant to Article II
or III of the Sale and Servicing Agreement (Servicer hereby certifies that the
repurchase price or Substitution Adjustment has been credited to the
Collection Account and that the substituted mortgage loan is a Qualified
Substitute Mortgage Loan.)
_____ 6. Other (explain)
If box 1, 4 or 5 above is checked, and if all or part of the Mortgage
File was previously released to us, please release to us our previous receipt
on file with you, as well as any additional documents in your possession
relating to the above specified Mortgage Loan.
<PAGE>
If item 2, 3 or 6 above is checked, upon our return of all of the
above documents to you as Indenture Trustee, please acknowledge your receipt
by signing in the space indicated below, and returning this form.
By:
Name:
Title:
Documents returned to [Custodian]:
Trustee
By:
Date:
<PAGE>
EXHIBIT H
FORM OF LIQUIDATION REPORT
Customer Name:
Account Number:
Original Loan Balance:
1. Type of Liquidation (Foreclosure disposition/charge-off/short pay-off)
Date last paid
Date of Foreclosure
Date of Foreclosure
Date of Foreclosure Disposition
Property Sale Price/Estimated Market Value at Disposition
2. Liquidation Proceeds
Any Principal Prepayment $____________
Proceeds from the Sale of the Property ____________
Net Insurance Proceeds ____________
Other (itemize) ____________
Total Proceeds $____________
3. Liquidation Expenses
Servicing Advances $____________
Periodic Advances ____________
Servicing Fees ____________
Total Advances $____________
4. Net Liquidation Proceeds $____________
(Item 2 minus Item 3)
5. Principal Balance of Mortgage Loan $____________
6. Loss, if any (Item 5 minus Item 4) $____________
<PAGE>
EXHIBIT I
CERTIFICATE RE: PREPAID LOANS
I, ______________, ________________ of Finance America Securities,
LLC, as Depositor, hereby certify that between the "Cut-Off Date" (as defined
in the Sale and Servicing Agreement dated as of ___________, 199__ among
Finance America Securities, LLC Mortgage Loan Trust [ _______________ ], as
issuer, Finance America Securities, LLC, as depositor,
___________________________, as servicer and __________________________, as
indenture trustee) and the "Closing Date " the following schedule of "Mortgage
Loans" (each as defined in the Sale and Servicing Agreement) have been prepaid
in full.
Dated:
By:
<PAGE>
EXHIBIT J
SUBSEQUENT TRANSFER INSTRUMENT
[RESERVED]
<PAGE>
EXHIBIT K
FORMS OF LOST NOTE AFFIDAVITS
Exhibit 5.1
Opinion of Brown & Wood LLP as to legality
(including consent of such firm)
<PAGE>
Exhibit No. 5.1
February 8, 2000
Finance America Securities, LLC
16802 Aston Street
Irvine, California 92606
Re: Finance America Securities, LLC
Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We will act as counsel for Finance America Securities, LLC, a Delaware
limited liability company (the "Company"), in connection with the offering, from
time to time, in one or more Series (each, a "Series") of the Company's Asset
Backed Certificates (the "Certificates") and Asset Backed Notes (the "Notes,"
and together with the Certificates, the "Securities"). The Securities 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 Securities
will be offered pursuant to a prospectus, as supplemented by a prospectus
supplement (the "Base Prospectus" and "Prospectus Supplement," respectively),
which will be filed with the Commission pursuant to Rule 424 under the
Securities Exchange Act. As set forth in the Registration Statement, each Series
of Certificates will be issued under either (a) a separate pooling and servicing
agreement (each, a "Pooling and Servicing Agreement") among the Company, a
trustee to be identified in the Prospectus Supplement for such Series of
Certificates (a "Trustee") and a Servicer (the "Servicer") to be identified in
the Prospectus Supplement for such Series of Certificates or (b) under a
separate trust agreement (each, a "Trust Agreement") between the Company and an
owner trustee to be identified in the Prospectus Supplement for such Series of
Certificates (an "Owner Trustee"), pursuant to which a trust (the "Trust") will
be created. Each Series of Notes will be issued under a separate indenture
(each, an "Indenture") between the Trust and an indenture trustee to be
identified in the Prospectus Supplement for such Series of Notes (an "Indenture
Trustee").
We have examined copies of the Company's Certificate of Formation,
Limited Liability Company Agreement, the form of Pooling and Servicing
Agreement, the form of Trust Agreement, the form of Indenture (each as
incorporated by reference as an exhibit to the Registration Statement) and such
other records, documents and statutes as we have deemed necessary for purposes
of this opinion.
Based upon the foregoing, we are of the opinion that:
(1) When any Pooling and Servicing Agreement or Trust Agreement
relating to a Series of Certificates 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, the Trustee or the
Owner Trustee, as applicable, any Servicer, if applicable, and any
other party thereto, such Pooling and Servicing Agreement or Trust
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, reorganization, moratorium or other similar laws now or
hereafter relating to or affecting creditors' rights generally or by
general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law).
(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 or Owner Trustee
for such Series in accordance with the terms of the related Pooling
and Servicing Agreement or Trust Agreement, as applicable, 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 related Pooling and
Servicing Agreement or Trust Agreement, as applicable.
(3) When any Indenture relating to a Series of Notes has been
duly and validly authorized by all necessary action on the part of the
Trust and has been duly executed and delivered by the Trust, the
Indenture Trustee and any other party thereto, such Indenture will
constitute a legal, valid and binding agreement of the Trust,
enforceable against the Trust in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
relating to or affecting creditors' rights generally or by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(4) When a Series of Notes has been duly authorized by all
necessary action on the part of the Trust (subject to the terms
thereof being otherwise in compliance with applicable law at such
time), duly executed and authenticated by the Indenture Trustee for
such Series in accordance with the terms of the related Indenture and
issued and delivered against payment therefor as described in the
Registration Statement, such Series of Notes will be legally and
validly issued, fully paid and nonassessable, and the holders thereof
will be entitled to the benefits of the related Indenture.
We have also advised the Company with respect to certain federal
income tax consequences of the proposed issuance of the Securities. This advice
is summarized under "Federal Income Tax Considerations" in the Base Prospectus.
Such description does not purport to discuss all possible federal income tax
ramifications of the proposed issuance, but with respect to those federal income
tax consequences that are discussed, in our opinion, the description is accurate
in all material respects.
In rendering the foregoing opinions, we express no opinion as to the
laws of any jurisdiction other than the laws of the State of New York (excluding
choice of law principles therein) and the federal laws of the United States of
America.
We hereby consent to the filing of this letter and to the references
to this firm under the headings "Legal Matters" and "Federal Income Tax
Considerations" in the Base Prospectus and Prospectus Supplement, without
implying or admitting that we are "experts" within the meaning of the Act or the
rules and regulations of the Commission issued thereunder, with respect to any
part of the Base Prospectus or any Prospectus Supplement.
Very truly yours,
/s/ Brown & Wood LLP
<PAGE>
Exhibit 8.1
Opinion of Brown & Wood LLP as to certain tax matters
(including consent of such firm)
(included in Exhibit 5.1)
<PAGE>
Exhibit 23.1
Consent of Brown & Wood LLP
(included in Exhibit 5.1)
<PAGE>
Exhibit 24.1
Power of Attorney
(included on page II-4)
