AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1997
REGISTRATION NO. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE CIT GROUP SECURITIZATION CORPORATION III
THE CIT GROUP HOLDINGS, INC.
(Exact name of each registrant specified in its charter)
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DELAWARE 51-0374926
DELAWARE 6146 13-2994534
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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THE CIT GROUP SECURITIZATION CORPORATION III THE CIT GROUP HOLDINGS, INC.
650 CIT DRIVE 1211 AVENUE OF THE AMERICAS
LIVINGSTON, NEW JERSEY 07039 NEW YORK, NEW YORK 10036
(201) 535-3512 (212) 536-1950
(Address of principal executive offices) (Address of principal executive offices)
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ERNEST D. STEIN, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL & SECRETARY
THE CIT GROUP HOLDINGS, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 536-1950
(Name and address of agent for service)
Copies to:
PAUL N. WATTERSON, ESQ.
SCHULTE ROTH & ZABEL LLP
900 THIRD AVENUE
NEW YORK, NEW YORK 10022
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, 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. |_|
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT TO BE MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF REGISTERED OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED PER UNIT OFFERING PRICE(1) FEE
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Asset-Backed Certificates.......... $1,000,000 100% $1,000,000 $350.00
- ------------------------------------
Limited Guarantees of The CIT Group Holdings, Inc.(2).....
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(1) Estimated solely for the purpose of calculating the registration fee on the
basis of the proposed maximum aggregate offering price, pursuant to Rule
457(c).
(2) May be issued in connection with issuance of the Certificates by trusts
formed by The CIT Group Securitization Corporation III. No additional
consideration will be paid for the Limited Guarantees; accordingly, no
separate filing fee is being paid herewith, pursuant to Rule 457(n).
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED _______ __, 199_
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED _________, 199_)
CIT HOME EQUITY LOAN TRUST 199_-_
HOME EQUITY LOAN ASSET BACKED CERTIFICATES, SERIES 199__-__
$____________ CLASS A __% CERTIFICATES
[$_____________CLASS S NOTIONAL AMOUNT VARIABLE PASS-THROUGH RATE CERTIFICATES]
[$______________ CLASS B __% CERTIFICATES]
THE CIT GROUP SECURITIZATION CORPORATION III
DEPOSITOR
THE CIT GROUP/CONSUMER FINANCE, INC.
SELLER AND MASTER SERVICER
The Home Equity Loan Asset Backed Certificates, Series 199_-__ will consist
of the Class A [and Class S Certificates] (the "Class A Certificates" and the
"Class S Certificates," respectively, and collectively, the "Senior
Certificates"), [the Class B Certificates (the "Subordinated Certificates"),]
and the Class R Certificates (the "Residual Certificates"). The Senior
Certificates[, the Subordinated Certificates] and the Residual Certificates are
collectively referred to herein as the "Certificates," and the Senior
Certificates [and the Subordinated Certificates] are referred to herein as the
"Offered Certificates." [Only the Senior Certificates are offered hereby.]
The Certificates will represent the entire beneficial ownership interest in
a trust fund (the "Trust Fund" or "Trust"), designated as the CIT Home Equity
Loan Trust 199_ - ___, to be created pursuant to a Pooling and Servicing
Agreement, dated as of ______________ __, 19__, among The CIT Group
Securitization Corporation III (the "Depositor"), The CIT/Group Consumer
Finance, Inc., as master servicer (referred to herein as "CIT Consumer Finance",
or the "Master Servicer," as applicable), The CIT Group/Consumer Finance, Inc.
(the "Seller") and [ ], as trustee (the "Trustee"). The Trust Fund will consist
primarily of a pool of one-to four-family residential first or subordinate
mortgage loans (the "Mortgage Loans"), substantially all of which will have
original terms to maturity of not more than ___ months [and have fixed rates].
[The Mortgage Loans will be subject to [semi-annual] [annual] mortgage rate
adjustments based upon the [weekly average yield on United States Treasury
securities adjusted to a constant maturity of one year] [weekly average of
secondary market interest rates on six-month negotiable certificates of deposit]
[the London interbank offered rate ("LIBOR") for [six month] United States
dollar deposits (the "Index"), as described herein under "The Mortgage Pool."]
[Monies will be on deposit in a separate trust account (the "Pre-Funding
Account") to be maintained with the Trustee, which will be used to purchase
additional Mortgage Loans [Assets (as defined herein)]from time to time during
the Funding Period (as defined herein) in the manner described herein.]
[A Certificate Guaranty Insurance Policy (as defined herein) with respect
to the Class ___ Certificates, will be issued by:
-------------------------]
[Full and complete payment to ____________, as Trustee for the holders of
the Class ___ Certificates, of Insured Payments (as defined herein), consisting
primarily of interest due to such holders in respect of the Class __
Certificates on each Distribution Date (as defined herein) and principal at the
times described herein, is unconditionally and irrevocably guaranteed pursuant
to the terms of the Certificate Guaranty Insurance Policy. See the Certificate
Guaranty Insurance Policy annexed hereto as Exhibit __ and "Credit Enhancement"
herein for a more complete description of the Certificate Guaranty Insurance
Policy.]
PROSPECTIVE INVESTORS SHOULD REVIEW THE
INFORMATION SET FORTH
UNDER "RISK FACTORS" ON PAGE S-__ HEREIN AND ON PAGE __ IN THE
ACCOMPANYING PROSPECTUS.
THE CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR,
THE SELLER, THE MASTER SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR
GUARANTEED BY THE UNITED STATES GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC(1) DISCOUNT DEPOSITOR (1)(2)
Per Certificate............... ______% _____% ______%
Total......................... $ $ $
====== ===== =======
- --------------------------------------------------------------------------------
(1) Plus accrued interest at the Pass-Through Rate from [date].
(2) Before deduction of expenses payable by the Depositor estimated at $______.
The Offered Certificates will be purchased by ___________ (the
"Underwriter") from the Depositor and will be offered by the Underwriter from
time to time in negotiated transactions or otherwise at varying prices to be
determined at the time of sale. Proceeds to the Depositor from the sale of the
Offered Certificates are expected to be approximately __% of the aggregate
principal balance of such Certificates plus accrued interest, before deducting
issuance expenses payable by the Depositor, estimated to be $_______.
The Offered Certificates are offered by the Underwriter, subject to prior
sale, when, as and if delivered to and accepted by the Underwriter and subject
to its right to reject orders in whole or in part. It is expected that delivery
of the Offered Certificates will be made in book-entry form only through the
facilities of The Depository Trust Company in the United States or through Cedel
Bank and the Euroclear System in Europe on or about ______ __, 19__.
______ __, 19__ [NAME OF UNDERWRITER]
<PAGE>
The Class A Certificates will have an initial aggregate principal balance
of approximately $_________ and will evidence in the aggregate an initial
beneficial ownership interest of approximately ___% in the Trust Fund. [The
Subordinated Certificates will have an initial aggregate principal balance of
approximately $_________ and will evidence in the aggregate an initial
beneficial ownership interest of approximately ___% in the Trust Fund.] [The
Class S Certificates will have no principal balance but will be entitled to
distributions of interest as described herein.] The remaining beneficial
ownership interest in the Trust Fund will be evidenced by the Residual
Certificates. [The rights of the holders of the Subordinated Certificates (the
"Subordinated Certificateholders") to receive distributions with respect to the
Mortgage Loans will be subordinated to the rights of the holders of the Senior
Certificates (the "Senior Certificateholders") to the extent described herein.]
Distributions to Certificateholders will be made on the __th day of each
month or, if such __th day is not a Business Day (as defined herein), on the
first Business Day thereafter (each, a "Distribution Date"), commencing in
__________ 19__ from and to the extent of Available Funds (as defined herein).
The Trust Fund is subject to optional termination under the limited
circumstances described herein. Any such optional termination may result in an
early retirement of the Certificates offered hereby.
All of the Mortgage Loans were originated or purchased by the CIT
Group/Consumer Finance, Inc. or its affiliates.
The yield to investors on each class of Certificates will be sensitive in
varying degrees to, among other things, the rate and timing of principal
payments (including prepayments) of the Mortgage Loans and the timing of receipt
of such payments [and to the level of the Index]. The yield to maturity of a
class of Certificates may vary from the anticipated yield to the extent such
class is purchased at a discount or premium and to the extent the rate and
timing of payments thereon is sensitive to prepayments. Holders of the
Certificates should consider, in the case of any such Certificates purchased at
a discount, the risk that a lower than anticipated rate of principal payments
could result in an actual yield that is lower than the anticipated yield and, in
the case of any Certificates purchased at a premium [and the Class S
Certificates,] the risk that a faster than anticipated rate of principal
payments could result in an actual yield that is lower than the anticipated
yield. [Holders of the Class S Certificates should carefully consider the risk
that a rapid rate of principal payments on the Mortgage Loans could result in
the failure of such holders to recover their initial investment.]
[An election will be made to treat the Trust Fund as a "real estate
mortgage investment conduit" ("REMIC") for federal income tax purposes. As
described more fully herein and in the Prospectus, the Senior Certificates and
the Subordinated Certificates will constitute "regular interests" in the REMIC.
See "Certain Federal Income Tax Consequences" herein and in the Prospectus.]
The Underwriter intends to make a secondary market in the Offered
Certificates but has no obligation to do so. There is currently no secondary
market for the Offered Certificates and there can be no assurance that such a
market will develop or, if it does develop, that it will continue.
------------------------
This Prospectus Supplement does not contain complete information about the
offering of the Certificates. Additional information is contained in the
Prospectus of the Depositor dated ____________, 19__ (the "Prospectus") and
purchasers are urged to read both this Prospectus Supplement and the Prospectus
in full. Sales of the Offered Certificates may not be consummated unless the
purchaser has received both this Prospectus Supplement and the Prospectus. To
the extent, if any, that any statement in the final Prospectus Supplement is
inconsistent with statements contained in this Prospectus Supplement, the
statements in the final Prospectus Supplement shall control. Terms used and not
otherwise defined herein shall have the respective meanings ascribed to such
terms in the Prospectus.
Until ninety days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates, whether or not participating
in this distribution, may be required to deliver a Prospectus Supplement and the
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus Supplement and the Prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
S-2
<PAGE>
SUMMARY OF TERMS
This Summary of Terms is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Certain capitalized terms used in this Summary of
Terms are defined elsewhere in this Prospectus Supplement or in the Prospectus.
Reference is made to the Index to Defined Terms for the location herein of the
definitions of certain capitalized terms used herein.
Issuer..................... CIT Home Equity Loan Trust 199_ - _____ (the
"Issuer").
Title of Certificates...... Home Equity Loan Asset Backed Certificates,
Series 199__-__ (the "Certificates"),
consisting of the Class A [and Class S
Certificates] (the "Class A Certificates" and
the "Class S Certificates," respectively, and,
collectively, the "Senior Certificates"), [one
or more classes of subordinated certificates
(the "Subordinated Certificates")] and the
Class R Certificates (the "Residual
Certificates"). The Senior Certificates [and
the Subordinated Certificates] are referred to
herein as the "Offered Certificates". [Only the
Senior Certificates are offered hereby.]
The Certificates will be issued pursuant to a
Pooling and Servicing Agreement dated as of
______ __, 199_ (the "Agreement"), among the
Depositor, the Seller, the Master Servicer and
the Trustee (each, as defined herein).
Denominations.............. The Offered Certificates will be issued in
minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof except
that one Certificate in each class may be
issued in a different denomination. Each
Offered Certificate will represent a percentage
interest (a "Percentage Interest") in the
respective class determined by dividing the
original dollar amount represented by such
Certificate by the original Certificate Balance
(as defined herein) of such class.
The Depositor.............. The CIT Group Securitization Corporation III
(the "Depositor"), a Delaware corporation and a
limited purpose finance subsidiary of The CIT
Group Holdings, Inc., a Delaware corporation
("CIT"). See "The Depositor" in the Prospectus.
None of the Depositor, [CIT,] CIT Consumer
Finance (as defined herein) or any of their
respective affiliates [or any other person or
entity] will insure or guarantee or otherwise
be obligated with respect to the Certificates.
S-3
<PAGE>
Seller..................... The CIT Group/Consumer Finance, Inc. ("CIT
Consumer Finance" or "Seller", as applicable).
The Mortgage Loans (as defined herein) were
originated or purchased by the Seller or its
affiliates and were acquired by the Depositor
from the Seller in a privately negotiated
transaction.
Master Servicer............ CIT Consumer Finance (in its capacity as master
servicer of the Mortgage Loans, the "Master
Servicer"). The Master Servicer will be
responsible for the servicing of the Mortgage
Loans. See "Servicing of Mortgage Loans"
herein.
Cut-off Date............... _________ __, 19__ (the "Cut-off Date").
References herein to the Cut-off Date shall
mean the date of origination in the case of
Mortgage Loans originated after ________ __,
199_.
Closing Date............... On or about _______________ __, 19__ (the
"Closing Date").
Trustee.................... [ ], a [ ], not in its individual capacity but
solely as trustee on behalf of the holders of
the Certificates (the "Trustee").
The Trust Property......... The Certificates will represent the entire
beneficial ownership interest in a trust fund
(the "Trust" or the "Trust Fund"), which will
consist primarily of (i) a pool (the "Mortgage
Pool" or "Pool") of certain mortgage related
assets (the "Mortgage Assets") consisting of
fixed [and adjustable] rate mortgage loans (or
participation or other beneficial interests
therein) (each, a "Mortgage Loan") evidenced by
loan agreements, promissory notes or other
evidence of indebtedness (each, a "Mortgage
Note") secured by mortgages, deeds of trust or
similar security instruments (each, a
"Mortgage") creating first or subordinate liens
on one- to four-family residential properties,
[and condominium units in condominium
buildings] (each, a "Mortgaged Property"), with
an aggregate principal balance of
$_____________ as of the Cut-off Date (the
"Original Pool Principal Balance"), [and
mortgage pass-through certificates or
participation certificates evidencing an
undivided interest in a pool of mortgage loans
or collateralized mortgage obligations secured
by mortgage loans (the "Private Mortgage-Backed
Securities")] (ii) all monies received with
respect
S-4
<PAGE>
to the Mortgage Loans on and after the Cut-off
Date (other than principal and interest due
before the Cut-off Date and certain amounts
retained by the Master Servicer), [(iii) an
irrevocable securities guaranty surety bond
(the "Certificate Guaranty Insurance Policy")
to be issued on or before the Closing Date by
_____________ (the "Certificate Guaranty
Insurer") in favor of the Trustee for the
benefit of the holders of the Class A
Certificates,] [the Limited Guarantee] (iv)
certain rights of the Depositor under the
Purchase Agreement (as defined herein) and (v)
[amounts on deposit in the Spread Account or
the Reserve Fund (each, as defined herein) and]
certain other property. [The Mortgage Pool will
be divided into two groups of Mortgage Loans
(each, a "Mortgage Loan Group"). Certificates
bearing interest at a fixed rate will represent
an undivided ownership interest in a group (the
"Fixed Rate Group") of Fixed-Rate Mortgage
Loans (as defined herein), and distributions on
such Certificates will be based on amounts
available for distribution in respect of
Mortgage Loans in the Fixed Rate Group.
Certificates bearing interest at an adjustable
rate will represent an undivided ownership
interest in a group (the "Adjustable Rate
Group") of Adjustable Rate Mortgage Loans and
distributions on such Certificates will be
based on amounts available for distribution in
respect of Mortgage Loans in the Adjustable
Rate Group. As of the Cut-off Date, the
aggregate principal balance of the Mortgage
Loans in the Fixed Rate Group is ________ and
the aggregate principal balance of the Mortgage
Loans in the Adjustable Rate Group is
______________.]
Mortgage Loans............. The Mortgage Pool
will consist of conventional [adjustable rate]
[fixed rate] mortgage loans secured by first
and second [third and fourth] liens on the
Mortgaged Property. As of the Cut-off Date, __%
of the Mortgage Pool (based on the Original
Pool Principal Balance) consists of Mortgage
Loans secured by first liens on the Mortgaged
Property, and __% of the Mortgage Pool consists
of Mortgage Loans secured by second liens on
the Mortgaged Property. Distributions of
principal and interest on the Certificates will
be based solely on payments received on the
Mortgage Loans, together with payments received
with respect to the credit enhancement, as
described herein. [Additional Mortgage Loans
(the "Subsequent Mortgage
S-5
<PAGE>
Loans") may be purchased by the Trust, from
time to time, during the Funding Period (as
defined herein), from monies on deposit in the
Pre-Funding Account (as defined herein) as
described in "The Mortgage Pool" herein.]
The interest rate on each Mortgage Loan (the
"Mortgage Rate") is [fixed] (a "Fixed Rate" and
a Mortgage Loan subject thereto is a "Fixed
Rate Mortgage Loan")[adjustable] (an
"Adjustable Rate" Adjustable Rate and a
Mortgage Loan subject thereto is an "Adjustable
Rate Mortgage Loan") [semi-annually]
[annually]. [Other than during the first [six]
[twelve] months following origination, during
which time each such Adjustable Rate Mortgage
Loan will bear interest at a Mortgage Rate
fixed at origination, each Adjustable Rate
Mortgage Loan will bear interest at a Mortgage
Rate equal to the sum of the Index plus a fixed
percentage (the "Gross Margin") set forth in
the related Mortgage Note, rounded to the
nearest [one-eighth of one percent], subject to
the limitation that the Mortgage Rate will not
increase or decrease by more than ___% on any
Adjustment Date (as defined herein) (the
"Periodic Rate Cap"). In addition, adjustments
to the Mortgage Rate for each Mortgage Loan are
subject to a lifetime maximum interest rate
equal to the initial Mortgage Rate plus a fixed
percentage (the "Maximum Rate") [and a minimum
rate equal to the initial Mortgage Rate (the
"Minimum Rate")]].
[Payment of all or a substantial portion of the
principal of certain Mortgage Loans ("Balloon
Loans") will be due on maturity ("Balloon
Payments"). Certain of the Mortgage Loans
permit the mortgagee to require the Mortgagor
to pay the full principal balance of the loan
on a specified date (the "Call Date") prior to
the maturity of the loan ("Call Loans").
Certain of the Mortgage Loans provide for
monthly payments of principal and interest
which increase over a specified period of time
(a "Graduated Payment Loan").]
[Index..................... [As of any Adjustment Date, the index (the
"Index") applicable to the determination of the
Mortgage Rate on each Mortgage Loan will be the
average weekly quoted yield on U.S. Treasury
securities adjusted to a constant maturity of
one year as published by the Federal Reserve
Board in Statistical Release H.15(519) and most
recently available as of 45 days prior to such
Adjustment Date.]
S-6
<PAGE>
[As of any Adjustment Date, the index (the
"Index") applicable to the determination of the
Mortgage Rate on each Mortgage Loan will be the
weekly average of secondary market interest
rates on six-month negotiable certificates of
deposit as published by the Federal Reserve
Board in Statistical Release H.15(519) and most
recently available as of 45 days prior to such
Adjustment Date.] [As of any Adjustment Date,
the index (the "Index") applicable to the
determination of the Mortgage Rate on each
Mortgage Loan will be the London interbank
offered rate ("LIBOR") for [six-month] United
States dollar deposits which appears on the
Reuters Screen LIBOR Page as of ________,
London time, on the first Business Day (as
defined herein) of the month prior to such
Adjustment Date.] The Index published on
___________ __, 199_ was ______%. See "The
Mortgage Pool -- General" and "--The Index"
herein.]
[Pre-Funding
Account.................... On the Closing Date, an aggregate cash amount (
the "Pre-Funded Amount") will be deposited into
a separate trust account maintained with the
Trustee (the "Pre-Funding Account") in an
amount not to exceed approximately
$___________. During the period (the "Funding
Period") from the Closing Date until the
earliest of (i) the date on which the amount on
deposit in the Pre-Funding Account is less than
$100,000, (ii) the date on which a Termination
Event (as defined herein) occurs under the
Agreement or (iii) the close of business on
______ ___, 199__ [not more than three months
after the Closing Date], amounts will, from
time to time, be withdrawn from the Pre-Funding
Account to purchase Subsequent Mortgage Loans
in accordance with the Agreement. Any
Pre-Funded Amount remaining at the end of the
Funding Period will be distributed as a
principal prepayment on the next Distribution
Date (as defined herein) to the [Class A]
Certificates.
Amounts on deposit in the Pre-Funding Account
will be invested solely in the short-term
investments described herein and in the
Agreement that mature not later than one
Business Day prior to the next succeeding
Distribution Date, until they are either
applied by the Trustee during the Funding
Period to pay the Depositor the purchase price
for the Subsequent Mortgage Loans or
S-7
<PAGE>
distributed to the [Class A Certificates] as a
principal prepayment.
Class A Certificate
Balance.................... The initial Class A Certificate Balance will be
$__________ (approximate, subject to a
permitted variance of up to plus or minus __%)
and, thereafter, the Class A Certificate
Balance will be such original principal amount
reduced by all amounts of principal previously
distributed to the Class A Certificateholders
(the "Class A Certificate Balance").
[Class S Notional Amount... The initial Class S Notional Amount will be
equal to the aggregate principal balance of the
Mortgage Loans, which was, as of the Cut-off
Date, $_______. On any Distribution Date
thereafter, the Class S Notional Amount will be
equal to the Pool Principal Balance (as defined
herein) in the month preceding the month of
such Distribution Date (the "Class S Notional
Amount"). The Class S Certificates have no
principal balance, are entitled only to
distributions of a portion of the interest on
the Mortgage Loans based on their notional
amounts and are not entitled to distributions
of principal.]
[Subordinated Class
Certificate Balance........ The initial Subordinated Class Certificate
Balance will be $__________ (approximate,
subject to a permitted variance of up to plus
or minus __%) and, thereafter, the Subordinated
Class Certificate Balance will be such original
principal amount reduced by (i) all amounts of
principal previously distributed to the holders
of the Subordinated Certificates (the
"Subordinated Certificateholders") and (ii) any
Realized Losses (the "Subordinated Class
Certificate Balance"). In general, a "Realized
Loss" means, with respect to a Liquidated
Mortgage (as defined herein), the amount by
which the remaining unpaid principal balance of
the related Mortgage Loan exceeds the amount of
Liquidation Proceeds (as defined herein)
applied to the principal balance of such
Mortgage Loan, but only to the extent that such
difference is not included in (i) the amount of
the principal distribution made on the
Certificates on the immediately succeeding
Distribution Date, or (ii) the amount of a
payment made from applicable credit enhancement
on such Distribution Date.
S-8
<PAGE>
A "Liquidated Mortgage" is a Mortgage Loan as
to which the Master Servicer has determined
that all recoverable Liquidation Proceeds and
Insurance Proceeds (as defined herein) have
been received.
Distribution Date.......... The __th day of each month or, if such day is
not a Business Day, on the first Business Day
thereafter, commencing on _________, __ 19__
(each, a "Distribution Date"). [The initial
Distribution Date with respect to the
Certificates is expected to be ________ __,
1996 and the final scheduled Distribution Date
for each of the Certificates is expected to be
---------.]
Determination Date......... The [third] Business Day prior to each
Distribution Date (each, a "Determination
Date").
Record Date................ The calendar day preceding each Distribution
Date or, if Definitive Certificates (as defined
herein) are issued, the last Business Day of
the month preceding the month of such
Distribution Date (each, a "Record Date").
Business Day............... Any day other than a Saturday, Sunday or any
day on which banking institutions or trust
companies in the states of New York or Oklahoma
are authorized by law, regulation or executive
order to be closed ("Business Day").
Due Period................. With respect to any Distribution Date, the "Due
Period" is the period during which principal,
interest and other amounts will be collected on
the Mortgage loans for application towards the
payment of principal and interest to the
Certificateholders and the payment of fees on
such Distribution Date. [The "Due Period" will
be the calendar month immediately preceding the
Distribution Date.] The first Due Period will
commence on and include ______ and will end in
and include ____________.
Registration of the Offered The Offered Certificates will initially be
issued in book-entry form. Persons acquiring
beneficial ownership interests in the Offered
Certificates may elect to hold their
Certificate interests through The Depository
Trust Company ("DTC") in the United States, or
through Cedel Bank ("CEDEL") or the Euroclear
System ("Euroclear")
S-9
<PAGE>
in Europe. Transfers within DTC, CEDEL or
Euroclear, as the case may be, will be in
accordance with the usual rules and operating
procedures of the relevant system. So long as
the Offered Certificates are Book-Entry
Certificates (as defined herein), such
Certificates will be evidenced by one or more
Certificates registered in the name of Cede &
Co. ("Cede"), as the nominee of DTC or one of
the relevant depositories (collectively, the
"European Depositories"). Crossmarket transfers
between persons holding directly or indirectly
through DTC, on the one hand, and
counterparties holding directly or indirectly
through CEDEL or Euroclear, on the other, will
be effected in DTC through Citibank N.A.
("Citibank") or Morgan Guaranty Trust Company
of New York ("Morgan"), the relevant
depositories of CEDEL and Euroclear,
respectively, and each a participating member
of DTC. The Offered Certificates will initially
be registered in the name of Cede. The
interests of the holders of the Offered
Certificates will be represented by book
entries on the records of DTC and participating
members thereof. No Certificate Owner will be
entitled to receive a Definitive Certificate
representing such person's interest, except in
the event that Definitive Certificates are
issued under the limited circumstances
described herein.
See "Risk Factors -- Book-Entry Registration",
"Description of the Certificates -- Book-Entry
Certificates" and "ANNEX I" hereto.
Distributions.............. Distributions of interest and principal to the
holders of the Senior Certificates (the "Senior
Certificateholders") [and the Subordinated
Certificateholders] will be made in an
aggregate amount equal to the Senior
Distribution Amount [or the Subordinated
Distribution Amount, respectively] (as defined
herein), on each Distribution Date.
Distributions on each Distribution Date will be
made to holders of Certificates
("Certificateholders") of record as of the
applicable Record Date, except that the final
distribution on the Certificates will be made
only upon presentment and surrender of the
Certificates at the corporate trust office of
the Trustee.
S-10
<PAGE>
Distributions will be made on the Certificates
on each Distribution Date from Available Funds
(as defined herein) in the following order of
priority: (i) to interest on each class of the
Senior Certificates up to the maximum amount of
interest to be distributed on such Certificates
on such Distribution Date; (ii) to principal on
each class of Senior Certificates up to the
maximum amount of principal to be distributed
on each such class on such Distribution Date;
(iii) [to interest and principal on each Class
of the Subordinated Certificates;] and [(iv)]
to the Residual Certificates.
The "Senior Distribution Amount" for any
Distribution Date will equal the sum of (i) the
amount of interest calculated as described
under "A. Interest on Senior Certificates"
below, and (ii) the amount of principal
calculated as described under "B. Principal on
Senior Certificates" below; except that if the
Senior Distribution Amount exceeds the
Available Funds, then the Senior Distribution
Amount will instead be equal to the Available
Funds. [Following the Cross-over Date, no
further distributions will be made to the
Senior Certificateholders. The "Cross-over
Date" is the Distribution Date on which the
Certificate Balance of the Senior Certificates
is reduced to zero.]
[Distributions of principal and interest to
holders of Subordinated Certificates will be
made on each Distribution Date up to an amount
equal to Available Funds for such Distribution
Date reduced by the Senior Distribution Amount
for such Distribution Date (the "Remaining
Available Funds"). The "Subordinated
Distribution Amount" for any Distribution Date
will equal the sum of (i) the amount of
interest calculated as described under "C.
Interest on Subordinated Certificates" below
and (ii) the amount of principal calculated as
described under "D. Principal on Subordinated
Certificates" below; except that if the
Subordinated Distribution Amount exceeds the
Remaining Available Funds on such Distribution
Date, then the Subordinated Distribution Amount
will equal the sum of the Remaining Available
Funds, if any, and the amount to be paid
pursuant to the credit enhancement applicable
to the Subordinated Certificates, if any].
S-11
<PAGE>
The Available Funds will be determined as set
forth in "Description of the Certificates --
Priority of Distributions Among Certificates."
A. Interest on Senior
Certificates.......... On each Distribution Date, each class of Senior
Certificates, to the extent of Available Funds
on such Distribution Date, generally will be
entitled to receive an amount allocable to
interest (the "Senior Interest Distribution
Amount") equal to the sum of (i) one month's
interest at the applicable Pass-Through Rate
(as defined herein) on the Class A Certificate
Balance [or the Class S Notional Amount, as the
case may be,] and (ii) the sum of the amounts,
if any, by which the amount described in clause
(i) above on each prior Distribution Date
exceeded the amount actually distributed as
interest on such prior Distribution Date and
not subsequently distributed ("Unpaid Senior
Interest Amounts") [plus interest at the
applicable Pass-Through Rate from such prior
Distribution Date]. See "Description of the
Certificates--Senior Interest" herein.
B. Principal on Senior Certificates..........
On each Distribution Date, an amount received
on the Mortgage Loan during the related Due
Period and allocable to principal will be
distributed on the Class A Certificates
generally equal to the lesser of (x) Available
Funds reduced by the amount of interest
distributed on the Senior Certificates on such
Distribution Date and (y) the sum of (i) [the
Class A Percentage (as defined herein) of] (a)
the principal component of the scheduled
payment received on each Mortgage Loan during
the related Due Period, (b) the Principal
Balance of each Mortgage Loan that became a
Liquidated Mortgage during the related Due
Period, (c) the Principal Balance of each
Mortgage Loan that was repurchased by the
Seller or another person as of such
Distribution Date pursuant to the Agreement,
(d) the Substitution Adjustment (as defined
herein) in connection with any substitution of
Mortgage Loans paid as of such Distribution
Date pursuant to the Agreement and (e) any
Insurance Proceeds, Liquidation Proceeds or
Released Mortgage Property Proceeds (each, as
defined herein or in the Prospectus) received
during the related Due Period and allocable to
recoveries of principal of Mortgage Loans that
S-12
<PAGE>
are not yet Liquidated Mortgages, (ii) [the
Class A [Prepayment] Percentage (as defined
herein) of] all principal prepayments in full
("Principal Prepayments") and all partial
principal prepayments that are not Principal
Prepayments [and which exceed the scheduled
payments by a specified multiple but which was
not intended to satisfy a Mortgage Loan in full
or to cure a delinquency ("Curtailments")]
received during the related Due Period, and
(iii) the sum of (I) the amount, if any, by
which (A) the amount required to be distributed
to Class A Certificateholders in respect of
principal as of the preceding Distribution Date
exceeded (B) the amount of the actual
distribution to such Class A Certificateholders
in respect of principal on such preceding
Distribution Date (exclusive of any portion of
any Insured Payment (as defined herein) made to
such Certificateholders), and (II) if any
portion of the amount in the preceding clause
(I) represents Insured Payments made by the
Certificate Guaranty Insurer, interest on such
portion at the applicable Pass-Through Rate
from such immediately preceding Distribution
Date (the "Carry-Forward Amount")
(collectively, with respect to all of the Class
A Certificates, the "Class A Principal
Distribution Amount"). See "Description of the
Certificates--Distributions" herein.
[In addition, any amounts on deposit in the
Pre-Funding Account at the end of the Funding
Period will be distributed on the first
Distribution Date following the end of the
Funding Period to holders of the Class A
Certificates as a principal prepayment.]
[The "Class A Percentage" for any Distribution
Date is [the percentage equivalent of a
fraction the numerator of which is the Class A
Certificate Balance as of such date and the
denominator of which is the Pool Principal
Balance] [100% until the Cross-Over Date and 0%
thereafter] [_______________].
The "Pool Principal Balance" with respect to
any Distribution Date equals the aggregate of
the Principal Balances of the Mortgage Loans
(other than Liquidated Mortgages) outstanding
on the Determination Date in the month
preceding the month of such Distribution Date
[plus the funds on deposit in the Pre Funding
Account on the
S-13
<PAGE>
Determination Date.]
[No principal distributions will be made on the
Class S Certificates.]
[C. Interest on Subordinated
Certificates.............. Following the payment to the Senior
Certificateholders of the Senior Distribution
Amount, interest will be paid to the
Subordinated Certificateholders on each
Distribution Date, to the extent of the
Remaining Available Funds, if any, [and the
amount payable pursuant to the credit
enhancement, if any, applicable to the
Subordinated Certificates] and in an amount
equal to the [sum of (i)] one month's interest
at the Subordinated Pass-Through Rate (as
defined herein) on the Subordinated Class
Certificate Balance [and (ii) the sum of the
amounts, if any, by which the amount described
in clause (i) above on each prior Distribution
Date exceeded the amount actually distributed
as interest on such prior Distribution Date and
not subsequently distributed ("Unpaid
Subordinated Interest Amounts").] See
"Description of the Certificates--Subordinated
Interest" herein.]
[D. Principal on Subordinated
Certificates.............. After the amounts distributed in respect of
interest and principal to the Senior
Certificateholders and interest to the
Subordinated Certificateholders, an amount (up
to the Remaining Available Funds less interest
paid in respect of the Subordinated
Certificates on such Distribution Date [plus
any amounts in respect of applicable credit
enhancement]) allocable to principal will be
distributed [pro-rata] [as described herein
under "Description of Certificates --
Subordinated Principal"] to each class of
Subordinated Certificateholders equal to the
sum of (i) [the Subordinated Percentage (as
defined herein) of] (a) the principal component
of the scheduled payment received on each
Mortgage Loan during the related Due Period,
(b) the Principal Balance of each Mortgage Loan
that became a Liquidated Mortgage during the
related Due Period, (c) the Principal Balance
of each Mortgage Loan that was repurchased by
the Seller or another person as of such
Distribution Date pursuant to the Agreement,
(d) the Substitution Adjustment in connection
with any
S-14
<PAGE>
substitution of Mortgage Loans on such
Distribution Date pursuant to the Agreement and
(e) any Insurance Proceeds, Liquidation
Proceeds or Released Mortgage Property Proceeds
received during the related Due Period and
allocable to recoveries of principal of
Mortgage Loans that are not yet Liquidated
Mortgages and (ii) [the Subordinated
[Prepayment] Percentage (as defined herein) of]
all Principal Prepayments [and all
Curtailments] received during the related Due
Period. See "Description of the
Certificates--Distributions" herein.]
[The "Subordinated Percentage" for any
Distribution Date will be calculated as the
difference between 100% and the Class A
Percentage.]
Pass-Through Rate;
Strip Rate.................... [The pass-through rate for the Class A
Certificates for a particular Distribution Date
(the "Class A Pass-Through Rate") will be equal
to ___% per annum [but in no event to exceed
the weighted average of the Class A Remittance
Rates (as defined herein) of the Mortgage
Loans]. [The pass-through rate for the
Subordinated Certificates for a particular
Distribution Date (the "Subordinated
Pass-Through Rate") will be equal to ___% per
annum [but in no event to exceed the weighted
average of the Subordinated Remittance Rates
(as defined herein) of the Mortgage Loans.]
[The pass-through rate for the Class S
Certificates for a particular Distribution Date
(the "Class S Pass-Through Rate") will be equal
to the weighted average of the Strip Rates (as
defined herein).]
The "Class A Remittance Rate" for any Mortgage
Loan will equal the Mortgage Rate on the first
day of the month preceding the month of such
Distribution Date, less the sum of (i) ___%
[and (ii) the excess of the Gross Margin over
___% (such excess, if any, the "Strip Rate").]
[The "Subordinated Remittance Rate" for any
Mortgage Loan will equal the Mortgage Rate on
the first day of the month preceding the month
of such Distribution Date, less the sum of (i)
___% [and (ii) the excess of the Gross Margin
over ___%.]]
Each Pass-Through Rate will be computed on the
basis of a 360-day year of twelve 30-day
months.
S-15
<PAGE>
Credit Enhancement - General.. Credit enhancement for the Senior Certificates
will be provided by [the Certificate Guaranty
Insurance Policy] [the Spread Account] [the
Subordinated Certificates] [the Reserve Fund]
[CIT Limited Guarantee (as defined herein)]
[and certain forms of insurance coverage] as
described below:
[A. The Certificate Guaranty -
Insurance Policy........... On or before the Closing Date, the Master
Servicer will obtain the Certificate Guaranty
Insurance Policy, which is noncancelable, in
favor of the Trustee on behalf of the [Class A]
Certificateholders. The Certificate Guaranty
Insurance Policy will provide for coverage of
the distribution due on the [Class A]
Certificates on each Distribution Date. On each
Distribution Date, the Certificate Guaranty
Insurer will make available to the Trustee the
amount of any insufficiency in the amount
available as of such Distribution Date which is
necessary to distribute to the [Class A]
Certificateholders the ______________ on such
Distribution Date (each, an "Insured Payment").
The Certificate Guaranty Insurance Policy does
not guarantee to the [Class A]
Certificateholders any specified rate of
prepayments. See "Credit Enhancement--
Certificate Guaranty Insurance Policy" and "The
Certificate Guaranty Insurance Policy and The
Certificate Guaranty Insurer" herein.]
[B. Subordination............ The rights of the Subordinated
Certificateholders to receive distributions
with respect to the Mortgage Loans in the Trust
Fund will be subordinated to such rights of the
Senior Certificateholders only to the extent
described below. See "Description of the
Certificates--Priority of Distributions Among
Certificates," "Description of the
Certificates--Allocation of Losses" and "Credit
Enhancement -- Subordination of Subordinated
Certificates" herein. The subordination of the
Subordinated Certificates and the Residual
Certificates is intended to increase the
likelihood of receipt by Senior
Certificateholders of the maximum amount to
which they are entitled on any Distribution
Date and[, following the date on which the
amount on deposit in the Reserve Fund has been
reduced to zero,] to provide such holders
protection against losses resulting from
Liquidated Mortgages to the extent described
herein . See "Credit
S-16
<PAGE>
Enhancement -- Subordination of Subordinated
Certificates" and "Description of the
Certificates--Allocation of Losses" herein.
The protection afforded to the Senior
Certificateholders from the subordination
feature described above will be effected by the
preferential right of the Senior
Certificateholders to receive current
distributions from the Mortgage Pool.
The subordination feature described above is
intended to enhance the likelihood of timely
payment of principal and interest and to
protect holders of Senior Certificates against
losses; however, in certain circumstances the
amount of subordination may be exhausted and
shortfalls could result. If on any Distribution
Date the aggregate amount of payments received
from Mortgagors, [Advances from the Master
Servicer], funds otherwise payable to holders
of the Subordinated Certificates [and monies in
the Reserve Fund] do not provide sufficient
funds to make full distributions to holders of
the Senior Certificates, holders of the Senior
Certificates may incur a loss. [In the event
the Reserve Fund is depleted before the
available subordination amount is reduced to
zero, holders of the Senior Certificates will
nevertheless have a preferential right to
receive current distributions from the Mortgage
Loans to the extent of such available
subordination amount.] Holders of the Senior
Certificates will bear [their proportionate
share of] any losses realized on the Mortgage
Loans in excess of the available subordination
amount. See "Description of the Certificates --
Priority of Distribution among Certificates"
herein.]
[C. Reserve Fund.............
Pursuant to the Agreement, there shall be
established with the Trustee, a separate trust
account (the "Reserve Fund"), for the benefit
of the holders of the Certificates. On the
Closing Date, $_______ will be deposited into
the Reserve Fund. Subsequent to the Closing
Date, the Depositor, CITSF and CIT Consumer
Finance will have no obligation to replenish
the Reserve Fund. See "Description of the
Certificates - Credit Enhancement - Reserve
Fund" in the Prospectus and "Credit Enhancement
- The Reserve Fund" herein. The Reserve Fund
will be available to pay [prior to any draw
under the Certificate Guaranty Insurance
Policy] the ______ to the [Class A]
Certificateholders to the extent
S-17
<PAGE>
that the Available Funds are insufficient
therefor. [The Reserve Fund will also be
available to cover up to a specified amount of
losses arising from certain hazards, Liquidated
Mortgages and Mortgagor bankruptcies.]
[D. Spread Account............ Pursuant to the Agreement, there shall be
established with the Trustee a separate trust
account (the "Spread Account"), for the benefit
of the holders of the Certificates, into which
the Trustee will deposit upon receipt from the
Master Servicer on each Distribution Date,
[prior to making any payments to the
Certificateholders], the excess, if any, of the
aggregate interest [accrued] [received] during
the related Due Period on all of the Mortgage
Notes at their respective Mortgage Rates
[(including the portion of any advance
allocable thereto)] over the sum of (i) the
Senior Interest Distribution Amount for the
[Class A] Certificates, [(ii) the Monthly
Premium (as defined herein) due to the
Certificate Guaranty Insurer, (iii) any fees
due to the issuers of any Letters of Credit (as
defined herein)] and (iv) the Master Servicing
Fee (as defined herein) (such excess with
respect to each Distribution Date, the "Excess
Spread"). [Unless otherwise specified by the
Certificate Guaranty Insurer,] the Trustee is
required to retain 100% of the Excess Spread
(the "Periodic Excess Spread Amount") in the
Spread Account until the amount on deposit
therein is equal to an amount specified in the
Agreement (the "Base Spread Account
Requirement"). After the amount on deposit in
the Spread Account is equal to the Base Spread
Account Requirement, the amount required to be
on deposit in the Spread Account at any time
(the "Specified Spread Account Requirement")
may be reduced over time as specified in the
Agreement. [The percentage used in determining
the Periodic Excess Spread Amount may be
reduced at the sole discretion of the
Certificate Guaranty Insurer [with the consent
of each person obligated to reimburse issuers
of any Letters of Credit on deposit in the
Spread Account for outstanding drawings
thereunder (each such person, an "Account
Party"),] and the Base Spread Account
Requirement may be reduced at the sole
discretion of the Certificate Guaranty Insurer,
in each case without the consent of any
Certificateholder.]
The Agreement permits the Spread Account to be
funded in part by one or more letters of credit
(each, a "Letter of Credit") issued by banks,
trust companies or other
S-18
<PAGE>
institutions having on the date of delivery of
such Letter of Credit debt ratings acceptable
to Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's Ratings Group ("S&P"),
and having certain other qualifications set
forth in the Agreement. Amounts available to be
drawn under any Letter of Credit will be deemed
to be on deposit in the Spread Account.
On each Distribution Date amounts, if any, on
deposit in the Spread Account will be available
to fund any shortfall between the Available
Funds for payments to [Class A]
Certificateholders and the Senior Distribution
Amount; provided that, on and after the date
(the "Spread Account Cross-Over Date") on which
the aggregate withdrawals from the Spread
Account to cover shortfalls in amounts payable
on the [Class A] Certificates attributable to
liquidation losses on Liquidated Mortgages
(such withdrawals, "Cumulative Spread Account
Account Receipts") equal an amount specified in
the Agreement (the "Subordinated Amount"), no
further withdrawals with respect to shortfalls
in the amounts required to be paid to the
[Class A] Certificateholders may be made from
the Spread Account, and the Specified Spread
Account Requirement will thereafter be zero. In
addition, the Agreement provides that the
Specified Spread Account Requirement for any
date shall in no event be greater than the
Subordinated Amount as of such date.
On each Distribution Date, any amounts
constituting (i) Excess Spread in excess of the
Periodic Excess Spread Amount (the "Remainder
Excess Spread Amount"), (ii) amounts in the
Spread Account in excess of the Specified
Spread Account Requirement as of such
Distribution Date (any such amount, a "Spread
Account Excess") and (iii) after the Cross-Over
Date, the entire Excess Spread, will be
distributed to the Class R Certificateholders
after repayment of [outstanding draws under any
Letters of Credit and of] unreimbursed Advances
to the Master Servicer.
Neither the Class R Certificateholders nor the
Master Servicer will be required to refund any
amounts properly distributed to them,
regardless of whether there are sufficient
funds on a subsequent Distribution Date to make
a full payment to [Class A] Certificateholders
of the
S-19
<PAGE>
amount required to be paid to such
Certificateholders.
The funding and maintenance of the Spread
Account is intended to enhance the likelihood
of timely payment to [Class A]
Certificateholders of the Senior Distribution
Amount; however, in certain circumstances, the
Spread Account could be depleted [or reduced by
the Certificate Guaranty Insurer] and
shortfalls could result. The Spread Account
will be funded with Excess Spread from all
Mortgage Loans, [without regard to Mortgage
Loan Group] and will be available for
distributions to all of the [Class A]
Certificates.
Notwithstanding the depletion or reduction of
the Spread Account, the Certificate Guaranty
Insurer will be obligated to make Insured
Payments on each Distribution Date to fund the
full amount of the Senior Distribution Amount
on such Distribution Date.]
[E. Insurance................ All of the Mortgage Loans, will be covered by
standard hazard insurance policies ("Standard
Hazard Insurance Policies"). To the extent set
forth herein, the special hazard insurance
policy (the "Special Hazard Insurance Policy")
will be issued by the special hazard insurer
(the "Special Hazard Insurer") [and the primary
mortgage insurance policy (the "Primary
Mortgage Insurance Policy") will be issued by
the primary mortgage insurer] (the "Primary
Mortgage Insurer") to provide limited
protection against certain losses arising from
special hazards [and bankruptcy proceedings
with respect to Mortgagors, respectively]. See
"Credit Enhancement--Insurance--Special Hazard
Insurance Policy" herein.]
[F. Limited Guarantee.......... On or before the Closing Date, the Master
Servicer will obtain a limited guarantee (the
"Limited Guarantee") issued by The CIT Group
Holdings, Inc. ("CIT"), in favor of the Trustee
on behalf of the [Class _] Certificateholders.
The Limited Guarantee will provide for coverage
of the distribution due on the [Class _]
Certificates on each Distribution Date. On each
Distribution Date, CIT will make available to
the Trustee the amount of any insufficiency in
the amount available as of such Distribution
Date which is necessary to distribute to the
[Class _] Certificateholders the ______________
on such Distribution Date (each, a "Guarantee
Payment"). Any
S-20
<PAGE>
such Limited Guarantee will be limited to
payments of principal on the Class __
Certificates aggregating not more than $_____,
and a portion of the coverage of any such
Limited Guarantee will be separately allocated
to ____________.]
[Advances...................... The Master Servicer is obligated to make cash
advances (any such advance, an "Advance") with
respect to delinquent payments of [principal of
and] interest on any Mortgage Loan to the
extent described herein. See "Servicing of
Mortgage Loans--Advances" herein.]
Compensating Interest......... Not later than the close of business on each
Determination Date, with respect to each
Mortgage Loan as to which the Master Servicer
received during the related Due Period a
Principal Prepayment, the Master Servicer is
required to remit to the Trustee, but only to
the extent of the Master Servicing Fee for such
Due Period, an amount ("Compensating Interest")
equal to any excess of (a) 30 days' interest on
the principal balance of each such Mortgage
Loan as of the beginning of the related Due
Period, at the applicable [Mortgage Rate]
[Adjusted Mortgage Loan Remittance Rate (as
defined herein)] over (b) the amount of
interest actually received on the related
Mortgage Loan during such Due Period.
Servicing..................... The Master Servicer is entitled to a servicing
fee of _____ per annum of the principal balance
of each Mortgage Loan (the "Master Servicing
Fee") and payable monthly from the interest
portion of scheduled monthly payments,
Liquidation Proceeds, Insurance Proceeds and
certain other proceeds collected on the
Mortgage Loans. The Master Servicing Fee will
be paid on each Distribution Date [prior to
payment of the Senior Interest Distribution
Amount and will reduce the Available Funds
available to pay interest on the Certificates]
[only from the Available Funds remaining after
all payments due on the Certificates on such
Distribution Date have been made].
Payment of Certain
Expenses...................... [In order to provide for the payment of the
fees of the Certificate Guaranty Insurer, the
Trustee is required to establish and maintain
one or more trust accounts (the "Insurance
Account") into which the Trustee is required to
deposit on each Distribution Date, from amounts
on
S-21
<PAGE>
deposit in the Certificate Account (as defined
herein) and before making any required deposits
into the Spread Account and, except under
certain limited circumstances as provided in
the Agreement, before making any required
distributions to the Certificateholders, an
amount that is sufficient to pay the monthly
fee of the Certificate Guaranty Insurer (the
"Monthly Premium").] The Master Servicer is
required to pay to the Trustee from time to
time the fees of the Trustee and the reasonable
expenses, disbursements and advances incurred
or made by the Trustee in accordance with the
Agreement.
Prepayment Considerations
and Risks; Reinvestment
Risk......................... The rate of principal payments on the Offered
Certificates, the aggregate amount of
distributions on the Offered Certificates and
the yield to maturity of the Offered
Certificates will be related to the rate and
timing of payments of principal on the Mortgage
Loans.
Since the rate of payment of principal on the
Mortgage Loans will depend on future events and
a variety of factors, no assurance can be given
as to such rate or the rate of principal
prepayments. The extent to which the yield to
maturity of a Certificate may vary from the
anticipated yield will depend upon the degree
to which it is purchased at a discount or
premium, and the degree to which the timing of
payments thereon is sensitive to prepayment,
liquidations and purchases of the Mortgage
Loans. Further, in the case of any Certificate
purchased at a discount, an investor should
consider the risk that a slower than
anticipated rate of principal payments on the
Mortgage Loans could result in an actual yield
to such investor that is lower than the
anticipated yield and, in the case of any
Certificate purchased at a premium [and any
Class S Certificate,] the risk that a faster
than anticipated rate of principal payments,
liquidations and purchases could result in an
actual yield to such investor that is lower
than the anticipated yield. [An investor in a
Class S Certificate should carefully consider
the risk that a rapid rate of principal
payments on the Mortgage Loans could result in
the failure of such investor to recover its
initial investment.]
Because the Mortgage Loans may be prepaid at
any time,
S-22
<PAGE>
it is not possible to predict the rate at which
distributions of principal of the Certificates
will be received. Accordingly, since prevailing
interest rates are subject to fluctuation,
there can be no assurance that investors in the
Certificates will be able to reinvest the
distributions thereon at yields equaling or
exceeding the yields on the Certificates. It is
possible that yields on any such reinvestments
will be lower, and may be significantly lower,
than the yields on the Certificates. See
"Yield, Prepayment and Maturity Considerations"
herein.
Optional Termination........... On any Distribution Date on which the Pool
Principal Balance is less than __% of [the sum
of] the Original Pool Principal Balance [and
the original Pre-Funded Amount], the Master
Servicer will have the option to purchase, in
whole, the Mortgage Loans and the REO Property
(as defined in the Prospectus), if any,]
remaining in the Trust Fund. See "Description
of the Certificates--Optional Termination" and
"Description of Certificates--Advances" herein.
Federal Income Tax
Considerations............... [An election will be made to treat the Trust
Fund as a "real estate mortgage investment
conduit" ("REMIC") for federal income tax
purposes. The Class A, Class S and Subordinated
Certificates will constitute "regular
interests" in the REMIC and the Residual
Certificates will constitute the sole class of
"residual interests" in the REMIC.] [The Class
S Certificates will be issued with original
issue discount for federal income tax
purposes.] [The Class A Certificates may be
issued at a premium.]
[For federal income tax purposes the Trust will
be classified as a grantor trust and not as an
association taxable as a corporation or a
taxable mortgage pool. Accordingly, each holder
of a Certificate will be treated for federal
income tax purposes as the owner of an
individual interest in the Mortgage Assets
included in the Trust.]
See "Certain Federal Income Tax Consequences"
herein and in the Prospectus.
ERISA Considerations.......... [The acquisition of a Senior Certificate by a
pension or other employee benefit plan (a
"Plan") subject to the Employee Retirement
Income Security Act of 1974, as
S-23
<PAGE>
amended ("ERISA"), could, in some instances,
result in a prohibited transaction or other
violation of the fiduciary responsibility
provisions of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as amended (the
"Code"). Certain exemptions from the prohibited
transaction rules granted under Prohibited
Transaction Class Exemption 83-1 and under
Prohibited Transaction Exemption 90-59 could be
applicable to the acquisition of Class A or
Class S Certificates. The U.S. Department of
Labor has issued individual prohibited
transaction exemptions to the Underwriters (the
"Underwriters' PTEs"). Generally, the
Underwriters' PTEs provide exemptive relief
from the application of certain of the
prohibited transaction provisions of ERISA and
section 4975 of the Code relating to the
purchase, sale and holding of pass-through
certificates such as the Class A Certificates
and the servicing and operation of asset pools
such as the Mortgage Pool, provided that
certain conditions are satisfied. See "ERISA
Considerations" herein and in the Prospectus.]
[Employee benefit plans subject to ERISA will
not be eligible to purchase the Certificates]
Any Plan fiduciary considering whether to
purchase any Certificates on behalf of a Plan
should consult with its counsel regarding the
applicability of the provisions of ERISA and
the Code.
Legal Investment.............. [Although upon their initial issuance the Class
____ Certificates will be rated "___" by
Moody's and "___" by S&P,] the Class A
Certificates (other than the Class __
Certificates) will [not] constitute "mortgage
related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of
1984 ("SMMEA") [so long as they are rated in
one of the two highest rating categories by at
least one nationally recognized statistical
rating organization and, as such, are legal
investments for certain entities to the extent
provided for in SMMEA]. Institutions whose
investment activities are subject to review by
federal or state regulatory authorities should
consult with their counsel or the applicable
authorities to determine whether an investment
in the Senior Certificates complies with
applicable guidelines, policy statements or
restrictions. See "Legal Investment" in the
Prospectus.
S-24
<PAGE>
Ratings....................... It is a condition of the issuance of the Class
A Certificates [the Subordinated Certificates]
and the Class S Certificates that they be rated
[ ] by [ ] ("[ ]") and [ ] by [ ] ("[ ]" and,
together with [ ], the "Rating Agencies"). The
ratings of the Certificates should be evaluated
independently from similar ratings on other
types of securities. A rating is not a
recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at
any time by the Rating Agencies. See "Ratings"
herein.
Use of Proceeds.............. Substantially all of the net proceeds to be
received from the sale of the Certificates will
be received by the Depositor, which will apply
such proceeds to pay to CIT Consumer Finance
the purchase price for the Mortgage Loans and
to pay certain expenses of the offering.
S-25
<PAGE>
RISK FACTORS
Prospective Certificateholders (as defined herein) should consider, among
other things, the following risk factors in connection with the purchase of the
Certificates (as defined herein):
1. Limited Obligations. The Certificates will not represent an interest in
or obligation of The CIT Group Securitization Corporation III (the "Depositor"),
The CIT Group/Sales Financing, Inc. ("CITSF"), The CIT Group/Consumer Finance,
Inc. ("CIT Consumer Finance"), [The CIT Group Holdings, Inc. ("CIT")] or any of
their respective affiliates. The Certificates will not be insured or guaranteed
by any government agency or instrumentality, nor by the Depositor, CITSF, CIT
Consumer Finance, CIT [(other than to the extent provided in the Limited
Guarantee)] or any of their respective affiliates.
2. Limited Liquidity. There can be no assurance that a secondary market
will develop for the Certificates or, if it does develop, that it will provide
the holders of the Certificates with liquidity of investment or that it will
remain for the term of such Certificates. Although the Certificateholders will
receive monthly statements containing certain statistical information with
respect to the Mortgage Pool, the Depositor publishes no information relating to
the Certificates or any Mortgage Pool. The limited availability of any such
published information may influence the liquidity of the Certificates.
3. Subordination. The subordination of the Subordinated Certificates (as
defined herein) is intended to enhance the likelihood of timely payment of
principal and interest to the Senior Certificateholders (as defined herein).
However, in certain circumstances the amount of available subordination,
[including the Reserve Fund (as defined herein)] may be exhausted, and
shortfalls in distributions on the Certificates could result. Senior
Certificateholders will bear their proportionate share of any losses realized on
the Mortgage Loans in excess of the available subordination amount.
4. Geographic Concentration of Mortgaged Properties. [As of the Cut-off
Date (as defined herein), approximately _____% (by Original Pool Principal
Balance) of the Mortgaged Properties are located in the State of
_______________. An overall decline in the ____________ residential real estate
market could adversely affect the values of the Mortgaged Properties securing
such Mortgage Loans such that the Principal Balances of the related Mortgage
Loans could equal or exceed the value of such Mortgaged Properties. As the
residential real estate market is influenced by many factors, including the
general condition of the economy and interest rates, no assurances may be given
that the ________ residential real estate market will not weaken. If the
___________ residential real estate market should experience an overall decline
in property values after the dates of origination of the Mortgage Loans, the
rates of losses on the Mortgage Loans would be expected to increase, and could
increase substantially.]
5. Yield and Prepayment Considerations. The yield to maturity of the
Certificates will depend on the rate of payment of principal (including
prepayments, liquidations due to defaults, and repurchases due to conversion of
Adjustable Rate Mortgage Loans to Fixed Rate Mortgage Loans (each, as defined
herein) or breaches of representations and warranties) on the Mortgage Loans and
the price paid by Certificateholders. Such yield may be adversely affected by a
higher or lower than anticipated rate of prepayments on the related Mortgage
Loans. The yield to maturity on Certificates purchased at premiums or discounts
to par will be extremely sensitive to the rate of prepayments on the related
Mortgage Loans. In addition, the yield to maturity on the [Class __]
Certificates may be relatively more sensitive to the rate of the prepayment on
the related Mortgage Loans than other classes of Certificates.
S-26
<PAGE>
6. Book-Entry Registration. Issuance of the Certificates in book-entry form
may reduce the liquidity of such Certificates in the secondary trading market
since investors may be unwilling to purchase Certificates for which they cannot
obtain definitive physical securities representing such Certificateholders'
interests, except in certain circumstances described herein.
Since transactions in Certificates will, in most cases, be able to be
effected only through The Depository Trust Company ("DTC"), direct or indirect
participants in DTC's book-entry system ("Direct Participants" or "Indirect
Participants" and each, a "Participant") and certain banks, the ability of a
Certificateholder to pledge a Certificate to persons or entities that do not
participate in the DTC system, or otherwise to take actions in respect of such
Certificates, may be limited due to lack of a physical security.
Certificateholders may experience delay in their receipt of distributions
of interest on and principal of the Certificates since distributions will be
forwarded by the Trustee to DTC and, in such a case, DTC will be required to
credit such distributions to the accounts of its Direct Participants which
thereafter will be required to credit them to the accounts of the applicable
class of Certificateholders either directly or indirectly through Indirect
Participants.
Unless and until Definitive Certificates (as defined herein) are issued, it
is anticipated that the only "Certificateholder" of the Book-Entry Certificates
(as defined herein) will be the Depository (as defined herein) or its nominee.
Beneficial owners of the Book-Entry Certificates will not be Certificateholders,
as that term will be used in the Agreement relating to such Series of
Certificates. Beneficial owners are only permitted to exercise the rights of
Certificateholders indirectly through Financial Intermediaries (as defined in
the Prospectus) and the Depository. Monthly and annual reports on the related
Trust provided to the Depository or its nominee, as the case may be, as holder
of record of the Book-Entry Certificates, may be made available 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 Depository accounts the Book-Entry Certificates of such beneficial owners
are credited. See "Description of the Certificates -- Book-Entry Certificates."
7. ERISA Considerations. An investment in the Certificates by Plans (as
defined herein) may give rise to a prohibited transaction under ERISA (as
defined herein) Section 406 and be subject to tax under Code (as defined herein)
Section 4975 unless a statutory or administrative exemption is available.
Accordingly, fiduciaries of any employee benefit plan or other retirement
arrangement should consult their counsel before purchasing any class of
Certificates. [The Class __] Certificates will not be eligible for purchase by
Plans.] See "ERISA Considerations" herein and in the Prospectus.
8. Certificate Rating. It will be a condition to the issuance of the
Certificates that the [Senior Certificates] be rated [__] and the [Subordinated
Certificates] be rated [__] by each Rating Agency (as defined herein). Such
rating is based on, among other things, the adequacy of the value of the
Mortgage Loans [and the credit enhancement]. Such rating should not be deemed a
recommendation to purchase, hold or sell Certificates, inasmuch as it does not
address market price or suitability for a particular investor. There is also no
assurance that any such rating will remain in effect for any given period of
time or may not be lowered or withdrawn entirely by the Rating Agency if in its
judgment circumstances in the future so warrant. [In addition to being lowered
or withdrawn due to any erosion in the adequacy of the value of the Mortgage
Loans, such rating might also be lowered or withdrawn, among other reasons,
because of an adverse change in the financial or other condition of the [Credit
Enhancer] or a change in the rating of such [Credit Enhancer's] long term debt.]
S-27
<PAGE>
THE MORTGAGE POOL
General
The Certificates will represent the entire beneficial ownership interest in
a trust fund (the "Trust Fund" or the "Trust"). The assets of the Trust Fund
will consist primarily of a pool (the "Mortgage Pool" or "Pool") of certain
mortgage related assets (the "Mortgage Assets") consisting of fixed [and
adjustable] rate mortgage loans (or participation or other beneficial interests
therein) (each, a "Mortgage Loan") evidenced by loan agreements, promissory
notes or other evidence of indebtedness (each, a "Mortgage Note") secured by
mortgages, deeds of trust or similar security instruments (each, a "Mortgage")
creating first or subordinate liens on one- to four-family residential
properties, [and condominium units in condominium buildings] (each, a "Mortgaged
Property").
Certain information with respect to the Mortgage Loans included in the
Mortgage Pool is set forth below. Unless otherwise noted, the statistical
information presented herein concerning the Mortgage Pool is based on such pool
as of _______1, 199___ or , in the case of Mortgage Loans originated after
_________ 1, 199___, the date of origination (the "Cut-off Date"). A detailed
description of such Mortgage Loans on a Current Report on Form 8-K (the
"Detailed Description") will be available to purchasers of the Certificates at
or before, and will be filed with the Securities and Exchange Commission within
fifteen days after, the initial delivery of the Offered Certificates (as defined
herein). The Detailed Description will specify the aggregate principal balances
of the Mortgage Loans included in the Mortgage Pool as of the Cut-off Date (the
"Original Pool Principal Balance") and will also include the following
information regarding such Mortgage Loans: years of origination of such Mortgage
Loans, the purposes of such Mortgage Loans, the original principal balances of
such Mortgage Loans, the outstanding principal balances of such Mortgage Loans
as of the Cut-off Date, the average outstanding principal balance of such
Mortgage Loans, the Mortgage interest rates (the "Mortgage Rate") borne by such
Mortgage Loans (including the range and weighted average thereof), the original
Combined Loan-to-Value Ratios (as defined herein) of such Mortgage Loans, the
original term to maturity of such Mortgage Loans, the weighted average term to
maturity of such Mortgage Loans as of the Cut-off Date, the remaining months to
stated maturity of such Mortgage Loans, the types of properties securing such
Mortgage Loans, the priority of the lien (first, second, third or fourth) of the
Mortgage securing such Mortgage Loan, and the geographical distribution of such
Mortgage Loans by State. Prior to the Closing Date, Mortgage Loans may be
removed from the Mortgage Pool and other Mortgage Loans may be substituted
therefor. The Depositor believes that the information set forth herein with
respect to the Mortgage Pool as presently constituted is representative of the
characteristics of the Mortgage Pool as it will be constituted at _________,
199_ (the "Closing Date"), although the range of the Mortgage Rates and the
maturities and certain other characteristics of the Mortgage Loans in the
Mortgage Pool may vary.
The Depositor will purchase the Mortgage Loans from the Seller pursuant to
the Purchase Agreement, dated as of ___________ __, 199_ between the Seller and
the Depositor (the "Purchase Agreement"), and will cause the Mortgage Loans to
be assigned to the Trustee (as defined herein), for the benefit of
Certificateholders, pursuant to the Agreement (as defined herein).
S-28
<PAGE>
Under the Purchase Agreement and the Agreement, the Seller will make
certain representations, warranties and covenants relating to, among other
things, the due execution and enforceability of the Purchase Agreement and the
Agreement and certain characteristics of the Mortgage Loans and, subject to the
limitations described below under "--Assignment of the Mortgage Loans," will be
obligated to repurchase or substitute a conforming mortgage loan for any
Mortgage Loan as to which there exists deficient documentation or an uncured
material breach of any such representation, warranty or covenant. The Seller
will represent and warrant to the Depositor in the Purchase Agreement that the
Mortgage Loans were selected from among the outstanding [fixed rate] [adjustable
rate] one- to four-family mortgage loans in the Seller's portfolio at the
Closing Date as to which the representations and warranties set forth in the
Agreement can be made and that such selection was not made in a manner that
would adversely affect the interests of the Certificateholders. See "Home Equity
Lending Program -- Representations by Sellers; Repurchases" in the Prospectus.
Under the Agreement, all of the Seller's representations, warranties and
covenants (including the Seller's repurchase obligation) will be made for the
benefit of holders of the Certificates (the "Certificateholders"). The Depositor
will make no representations or warranties with respect to the Mortgage Loans
and will have no obligation to repurchase Mortgage Loans with deficient
documentation or which are otherwise defective. CIT Consumer Finance, in its
capacity as Seller of the Mortgage Loans to the Depositor, is selling such
Mortgage Loans without recourse and, accordingly, will have no obligations with
respect to the Certificates other than pursuant to such representations,
warranties, covenants and repurchase obligations. The obligations of CIT
Consumer Finance, as Master Servicer under the Agreement, with respect to the
Certificates are limited to the Master Servicer's contractual servicing
obligations under the Agreement.
The Mortgage Pool will consist of Mortgage Loans with an Original Pool
Principal Balance expected to be approximately $__________. The Mortgage Loans
provide for the amortization of the amount financed over a series of [monthly]
payments. The Mortgage Loans provide for payments due [as of various days during
each month]. The Mortgage Loans to be included in the Mortgage Pool were
originated or acquired by the Seller [or its affiliates] substantially in
accordance with the underwriting criteria specified herein and in the
Prospectus. At origination, substantially all of the Mortgage Loans had a stated
maturity of not more than __ months. [Scheduled monthly payments made by the
Mortgagors on the Mortgage Loans ("Scheduled Payments") either earlier or later
than the scheduled due dates thereof will not affect the amortization schedule
or the relative application of such payments to principal and interest.] [The
Mortgagors may prepay any Mortgage Loan at any time without penalty.]
[The aggregate amount of the initial Certificate Balance [and the initial
Class S Notional Amount] exceeds the Original Pool Principal Balance by
$_________. Funds in the amount of such excess [plus certain additional amounts
in respect of interest] (the "Pre-Funded Amount") have been deposited into a
separate trust account maintained by the Trustee (the "Pre-Funding Account").
Additional Mortgage Loans may be purchased by or on behalf of the Trust, from
time to time, during the period beginning on _________ __, 199_ and ending on
________ __, 199_ (the "Funding Period") from monies on deposit in the
Pre-Funding Account ("Subsequent Mortgage Loans"). Such Subsequent Mortgage
Loans will be purchased by or on behalf of the Trust pursuant to a contract in
which the [formula to determine the] price, the characteristics of the
S-29
<PAGE>
Mortgage Loans to be purchased and the delivery dates of such Mortgage Loans are
identified. The Pre-Funding Account may be invested in certain short-term
permitted investments, which shall consist of [(i) obligations of the United
States or any agency thereof, backed by the full faith and credit of the United
States; (ii) general obligations of or obligations guaranteed by any State, and
certificates of deposit, demand or time deposits, federal funds or banker's
acceptances issued by any depository institution or trust company incorporated
under the laws of the United States or of any state and subject to supervision
and examination by federal or state banking authorities; in each case rated in
the highest rating of each Rating Agency for such obligations, or such lower
rating as will not result in the qualification, downgrading or withdrawal of the
rating then assigned to either the Notes or the Certificates by such Rating
Agency; (iii) demand or time deposits or certificates of deposit issued by any
bank, trust company, savings bank or other savings institution, which deposits
are fully insured by the FDIC; and (iv) A-1/P-1 commercial paper, including
commercial paper issued by CIT or one of its affiliates]. Such investments shall
not mature later than one Business Day (as defined herein) prior to the next
succeeding Distribution Date (as defined herein) until they are either applied
by the Trustee during the Funding Period to pay the Depositor the purchase price
for Subsequent Mortgage Loans or distributed to the [Class A] Certificates as a
principal prepayment. The conditions precedent which must be complied with prior
to the transfer of Mortgage Loans purchased from funds on deposit in the
Pre-Funding Account are as follows: [ ]. Any amounts on deposit in the
Pre-Funding Account at the end of the Funding Period will be distributed on the
first Distribution Date following the end of the Funding Period to holders of
the [Class A] Certificates as a principal prepayment. Monies on deposit in the
Pre-Funding Account will not be available to cover losses on or in respect of
the Mortgage Loans.]
[All] [_____%] (by Original Pool Principal Balance) of the Mortgage Loans
bear interest at a Fixed Rate.
[All] [___%] (by Original Pool Principal Balance) of the Mortgage Loans
bear interest at an Adjustable Rate.
The interest rate on each Mortgage Loan (the "Mortgage Rate") is [fixed] (a
"Fixed Rate" and a Mortgage Loan subject thereto is a "Fixed Rate Mortgage
Loan")[adjustable] (an "Adjustable Rate" and a Mortgage Loan subject thereto is
an "Adjustable Rate Mortgage Loan") [semi-annually] [annually].
[The Mortgage Pool will be divided into two groups of Mortgage Loans (each,
a "Mortgage Loan Group"). Certificates bearing interest at a fixed rate will
represent an undivided ownership interest in a group of Fixed Rate Mortgage
Loans (the "Fixed Rate Group"), and distributions on such Certificates will be
based on amounts available for distribution in respect of Mortgage Loans in the
Fixed Rate Group. Certificates bearing interest at an adjustable rate will
represent an undivided ownership interest in a group of Adjustable Rate Mortgage
Loans (the "Adjustable Rate Group"), and distributions on such Certificates will
be based on amounts available for distribution in respect of Mortgage Loans in
the Adjustable Rate Group. As of the Cut-off Date, the aggregate principal
balance of the Mortgage Loans in the Fixed Rate Group is ________ and the
aggregate principal balance of the Mortgage Loans in the Adjustable Rate Group
is ____________.]
S-30
<PAGE>
[Other than during the first [six] [twelve] months following origination,
during which time each Mortgage Loan will bear interest at a Mortgage Rate fixed
at origination, each Mortgage Loan has a Mortgage Rate subject to [semi-annual]
[annual] adjustment on the first day of the month specified in the related
Mortgage Note (each such date, an "Adjustment Date") to equal the sum, rounded
to the nearest __%, of (i) [the weekly quoted average yield on United States
Treasury securities adjusted to a constant maturity of one year] [the weekly
average of secondary market interest rates on six-month negotiable certificates
of deposit] [the London interbank offered rate ("LIBOR") for [six-month] United
States dollar deposits] [other indices] (the "Index")[, as published by the
Federal Reserve Board in Statistical Release H.15(519) and most recently
available as of 45 days prior to the Adjustment Date] [which appears on the
Reuters Screen LIBOR Page as of _______, London time, on the first Business Day
of the month prior to the Adjustment Date] and (ii) a fixed percentage amount
specified in the related Mortgage Note (the "Gross Margin"); provided, however,
that the Mortgage Rate will not increase or decrease by more than % on any
Adjustment Date (the "Periodic Rate Cap") on any Adjustment Date. All the
Mortgage Loans provide that over the life of the Mortgage Loan the Mortgage Rate
will in no event be more than the initial Mortgage Rate plus a fixed percentage
(such rate, the "Maximum Rate"). [In addition, each Mortgage Loan provides that
in no event will the Mortgage Rate be less than the initial Mortgage Rate (such
rate, the "Minimum Rate").] Effective with the first payment due on a Mortgage
Loan after each related Adjustment Date, the monthly payment will be adjusted to
an amount which will fully amortize the outstanding principal balance of the
Mortgage Loan over its remaining term. [Approximately __% of the Mortgage Loans
were originated with a Mortgage Rate less than the sum of the then-applicable
Index and Gross Margin, rounded as described herein.] If the Index ceases to be
published or is otherwise unavailable, the Master Servicer will select an
alternative index for mortgage loans on single-family residential properties,
based upon comparable information, over which it has no control and which is
readily verifiable by mortgagors.]
[Payment of all or a substantial portion of the principal of certain
Mortgage Loans ("Balloon Loans") will be due on maturity ("Balloon Payments").
Certain of the Mortgage Loans permit the mortgagee to require the Mortgagor to
pay the full principal balance of the loan on a specified date (the "Call Date")
prior to the maturity of the loan ("Call Loans"). __% (by Original Pool
Principal Balance) of the Mortgage Loans provide for monthly payments of
principal and interest which increase over a specified period of time (a
"Graduated Payment Loan").]
Each Mortgage Loan was originated on or after __________ __, 199_, [and
each Adjustable Rate Mortgage Loan has an initial Adjustment Date on or before
__________ __, 199_].
The latest date on which any Mortgage Loan matures is __________ __, ____.
The earliest stated maturity date of any Mortgage Loan is __________ __, ____.
[The latest Call Date on any Call Loan is _____. The earliest Call Date on any
Call Loan is ________.
[As of the Cut-off Date, no Mortgage Loan was delinquent more than 59
days.]
[None] of the Mortgage Loans will be subject to any buydown agreement.
S-31
<PAGE>
____% of the Mortgage Loans (by principal balance as of the Cut-off Date)
were secured by Mortgages which are not subject to a senior lien mortgage, and
____% of the Mortgage Loans were "second mortgages" subject to a senior lien
mortgage.
No Mortgage Loan will have a Combined Loan-to-Value Ratio as of the Cut-off
Date of more than ___%. The weighted average of the Combined Loan-to-Value
Ratios as of the Cut-off Date of the Mortgage Loans was approximately __%. [Each
Mortgage Loan with a Combined Loan-to-Value Ratio as of the Cut-off Date of
greater than __% will be covered by a primary mortgage guaranty insurance policy
issued by a mortgage insurance company approved by the Federal National Mortgage
Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"),
which policy will provide coverage in an amount equal to the excess of the
original principal balance of the related Mortgage Loan plus accrued interest
thereon and related foreclosure expenses in excess of ___% of the value of the
related Mortgaged Property. No such primary mortgage insurance policy will be
required with respect to any such Mortgage Loan after the date on which the
related Combined Loan-to-Value Ratio is less than __%.]
The "Combined Loan-to-Value Ratio" of a Mortgage Loan at any given time is
the ratio, expressed as a percentage, determined by dividing (x) the sum of the
original principal balance of the Mortgage Loan plus the then-current principal
balance of any loan or loans secured by a senior lien on the Mortgaged Property,
by (y) the value of the related Mortgaged Property, based upon the appraisal or
other valuation made at the time of origination of the Mortgage Loan.
The Combined Loan-to-Value Ratio of a Mortgage Loan is calculated, in part,
based on the appraised value of the related Mortgaged Property determined in an
appraisal or other valuation obtained by the originator at origination of such
Mortgage Loan. No assurance can be given that values of the Mortgaged Properties
have remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. If the residential real estate market should experience
an overall decline in property values such that the outstanding principal
balances of the Mortgage Loans (and any additional financing by other lenders on
the Mortgaged Properties) in the Mortgage Pool become equal to or greater than
the value of the Mortgaged Properties, the actual rates of delinquencies,
foreclosures and losses could be higher than those now experienced by CIT
Consumer Finance or those now generally experienced in the mortgage lending
industry. In addition, adverse economic conditions and other factors (which may
or may not affect real property values) may affect the timely payment by
Mortgagors of scheduled payments of principal and interest on the Mortgage Loans
and, accordingly, the actual rates of delinquencies, foreclosures and losses
with respect to any Mortgage Pool. [To the extent that such losses are not
covered by the subordination feature described herein or [the credit
enhancement], such losses will be borne, at least in part, by the holders of the
[Subordinated] Certificates.
[None] [___%] of the Mortgage Loans is insured by any primary mortgage
guaranty insurance policy.]
[None] [___%] of the Mortgage Loan provide for deferred interest or
negative amortization.
S-32
<PAGE>
Approximately ___% and ___% of the Mortgage Loans (by principal balance as
of the Cut-off Date) will be secured by Mortgaged Properties located in
[______________] and [ ], respectively. Except as indicated in the preceding
sentence, no more than approximately __% of the Mortgage Loans (by principal
balance as of the Cut-off Date) will be secured by Mortgaged Properties located
in any one state. No more than approximately __% of the Mortgage Loans (by
principal balance as of the Cut-off Date) will be secured by Mortgaged
Properties located in any one postal zip code area.
The following information sets forth in tabular format certain information,
as of the Cut-off Date, as to the Mortgage Loans. Percentages (approximate) are
stated by principal balance as of the Cut-off Date. [The information set forth
below does not take into account any Subsequent Mortgage Loans. The composition
of the Mortgage Loans in the Mortgage Pool will change to the extent Subsequent
Mortgage Loans are purchased from funds on deposit in the Pre-Funding Account.]
S-33
<PAGE>
Mortgage Pool Statistics
Mortgage Pool
-------------
Number of Mortgage Loans .............................
Original Pool Principal Balance ...................... $
[Rate/Payment Adjustment Frequency:] .............
[6 months] ................................... %
[12 months] .................................. %
[24 months] .................................. %
[36 months] .................................. %
[60 months] .................................. %
[Call Loans] ..................................... %
[Balloon Loans] .................................. %
Mortgage Loan Principal Balance: ....................
Ranges ........................................ $ to $
Average ....................................... $
Mortgage Loans with Prepayment Penalties:
Number of Mortgage Loans.......................
Original Pool Principal Balance................ $
Original Term to Stated Maturity:
Ranges ........................................ to months
Weighted Average .............................. months
Remaining Months to Stated Maturity:
Ranges ........................................ to months
Weighted Average .............................. months
Mortgage Rate:
Ranges ........................................ % to %
Weighted Average .............................. %
Gross Margin:
Ranges ........................................ % to %
Weighted Average .............................. %
Weighted Average Months to next Rate Not more than
Adjustment Date ............................... months
Periodic Cap Rate:
Ranges ........................................
Weighted Average ..............................
Strip Rate:
Ranges ........................................ % to %
Weighted Average .............................. %
Maximum Rate:
Ranges ........................................ % to %
Weighted Average .............................. %
Minimum Rate:
Ranges ........................................ % to %
Weighted Average .............................. %
Primary Residences .................................. At least %
S-34
<PAGE>
Investment Properties ................................ No more than %
Second Homes ......................................... No more than %
Single-family Detached Residences .................... At least %
Condominiums ......................................... No more than %
Two- to Four-Family Residences ....................... No more than %
Purchase Money Mortgage Loans ........................ At least %
Refinancing Mortgage Loans ........................... No more than %
Home Improvement Mortgage Loans ...................... %
Mortgage Loans secured by:
First Priority Liens .......................... %
Second Priority Liens ......................... %
Third Priority Liens .......................... %
Fourth Priority Liens ......................... %
Weighted Average Original Combined LTVs .............. Approximately %
Limited Documentation ................................ No more than %
S-35
<PAGE>
Geographical Distribution of Mortgaged Properties
<TABLE>
<CAPTION>
% of Mortgage
% of Mortgage Pool By
Number of Pool by Number Aggregate Principal Principal Balance
Mortgage Loans of Mortgage Loans Balance Outstanding Outstanding
State As of Cut-off Date As of Cut-off Date As of Cut-off Date As of Cut-off Date
- ----- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
% $ %
-------------- ---------- ------------- ---------
Total................ 100.00% $ 100.00%
============== ========== ============= =========
</TABLE>
S-36
<PAGE>
Year Of Origination Of Mortgage Loans
<TABLE>
<CAPTION>
% of Mortgage % of Mortgage Pool
Number of Pool by Number Aggregate Principal By Principal
Mortgage Loans Of Mortgage Loans Balance Outstanding Balance Outstanding
Year of Origination As of Cut-off Date As of Cut-off Date As of Cut-off Date As of Cut-off Date
- ------------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
1988................ $ %
1989................
1990................
1991................
1992................
1993................
1994................
1995................
1996................
------------ ------------ -------
Total.......... $ 100.00%
============ ============ =======
</TABLE>
Distribution of Remaining Mortgage Loan Amounts
<TABLE>
<CAPTION>
Remaining % of Mortgage % Of Mortgage Pool
Mortgage Loan Number of Pool by Number Aggregate Principal By Principal
Amount (In Mortgage Loans Of Mortgage Loans Balance Outstanding Balance Outstanding
Dollars)(1) As of Cut-off Date As of Cut-off Date As of Cut-off Date As of Cut-off Date
---------------- ------------------ -------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Less than $5,000............. $ %
$5,000 to $9,999.99..........
$10,000-$19,999.99...........
$20,000-$29,999.99...........
$30,000-$39,999.99...........
$40,000-$49,999.99...........
$50,000-$59,999.99...........
$60,000-$69,999.99...........
$70,000-$79,999.99...........
$80,000 and over............. _ -
----------- ------------ -------
Total................. $ 100.00%
=========== ============ =======
</TABLE>
- ------------
(1) The largest remaining Mortgage Loan amount is $__________, which represents
__% of the Original Pool Principal Balance. The smallest remaining Mortgage
Loan amount is $________, which represents ___% of the Original Pool
Principal Balance.
S-37
<PAGE>
Distribution of Original Combined Loan-to-value Ratios
<TABLE>
<CAPTION>
% of Mortgage % of Mortgage Pool
Number of Pool By Number Aggregate Principal By Principal
Combined Loan-to Mortgage Loans of Mortgage Loans Balance Outstanding Balance Outstanding
Value Ratio(1) As of Cut-off Date As of Cut-off Date As of Cut-off Date As of Cut-off Date
-------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C>
Less than 61% ................. $ %
61-65% ........................
66-70% ........................
71-75% ........................
76-80% ........................
81-85% ........................
86-90% ........................
Over 90% ......................
------------ ------------ -------
Total................. $ 100.00%
============ ============ =======
</TABLE>
- ------------
(1) [Rounded to the nearest 1%. The term "Combine Loan-to-Value Ratio" as used
in this table is defined above and in the Prospectus. The loan-to-value
ratios on the Mortgage Loans may be subject to a variance of up to 5% from
the tabular presentation. Such variances were caused by information input
by CIT Consumer Finance's personnel in regional offices with respect to the
Mortgage Loans, the costs of which were estimated at the time the loan
applications were approved.]
Mortgage Rates
<TABLE>
<CAPTION>
% of Mortgage % of Mortgage Pool
Number of Pool by Number Aggregate Principal By Principal
Range of Mortgage Loans Mortgage Loans of Mortgage Loans Balance Outstanding Balance Outstanding
By Mortgage Rates As of Cut-off Date As of Cut-off Date As of Cut-off Date As of Cut-off Date
----------------- ------------------ ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
7.01% - 8.00% ...............
8.01% - 9.00% ...............
9.01% - 10.00% .............. $ %
10.01% - 11.00% ...............
11.01% - 12.00% ...............
12.01% - 13.00% ...............
13.01% - 14.00% ...............
14.01% - 15.00% ...............
15.01% - 16.00% ...............
16.01% - 16.50% ...............
Over 16.50% ...................
------------ -------------- -------
Total.................. $ 100.00%
============ ============== =======
</TABLE>
Remaining Months to Maturity
<TABLE>
<CAPTION>
% of Mortgage % of Mortgage Pool
Number of Pool by Number Aggregate Principal By Principal
Months Remaining Mortgage Loans of Mortgage Loans Balance Outstanding Balance Outstanding
As of Cut-off Date As of Cut-off Date As of Cut-off Date As of Cut-off Date As of Cut-off Date
-------------------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C>
Less than 31 .................. $ %
31-60 .........................
61-90 .........................
91-120 ........................
121-150 .......................
151-180 .......................
181-210 .......................
211-240 .......................
241-300 .......................
301-360 .......................
--------------- --------------- -------
Total.................. $ 100.00%
=============== =============== =======
</TABLE>
S-38
<PAGE>
[The Index
The Index is the figure derived from the average weekly quoted yield on U.S.
Treasury securities adjusted to a constant maturity of one year as published in
the Federal Reserve Board in Statistical Release H.15(519) and most recently
available as of 45 days prior to such Adjustment Date. Yields on treasury
securities are estimated from the U.S. Treasury's daily yield curve. This curve,
which relates the yield on a security to its time to maturity, is based on the
closing market bid yields on actively-traded treasury securities in the
over-the-counter market. These market yields are calculated from composites of
quotations reported by five leading U.S. Treasury securities dealers to the
Federal Reserve Bank of New York. The constant yield values are read from the
yield curve at fixed maturities. This method permits estimation of the yield for
a one year maturity, for example, even if no outstanding security has exactly
one year remaining to maturity.]
[As of any Adjustment Date, the Index is the figure derived from the weekly
average of secondary market interest rates on six-month negotiable certificates
of deposit as published in the Federal Reserve Statistical Release H.15(519) and
most recently available as of 45 days prior to such Adjustment Date.]
[As of any Adjustment Date, the Index shall equal the arithmetic mean (rounded
upwards, if necessary, to the nearest [one-sixteenth] of one percent of LIBOR
for [six-month] United States dollar deposits which appears on the Reuters
Screen LIBOR Page as of ___________, London time, on the first Business Day of
the month prior to any Adjustment Date for a Mortgage Loan.]
Listed below are monthly historical values of the Index beginning with January
1992. The values listed below do not purport to be a prediction of the
performance of the Index in the future.
Year(1)
-------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Month
- -----
January..........
February.........
March............
April............
May..............
June.............
July.............
August...........
September........
October..........
November.........
December.........
- ----------
(1) Monthly figures are averages of daily rates.
In the event that the Index becomes unavailable or otherwise unpublished,
the Master Servicer will select a comparable alternative index over which it has
no direct control and which is readily verifiable by the Mortgagors.]
S-39
<PAGE>
Assignment Of The Mortgage Loans
Pursuant to the Agreement, the Depositor on the Closing Date will sell,
transfer, assign, set over and otherwise convey without recourse to the Trustee
in trust for the benefit of the Certificateholders all right, title and interest
of the Depositor in and to each Mortgage Loan and all right, title and interest
in and to all other assets included in the Trust Fund, including all principal
and interest received by the Master Servicer on or with respect to the Mortgage
Loans on and after the Cut-off Date (to the extent not applied in computing the
Original Pool Principal Balance), exclusive of principal and interest due prior
to the Cut-off Date [and any funds or instruments on deposit in the Pre-Funding
Account].
[In connection with such transfer and assignment, the Seller and the
Depositor will deliver or cause to be delivered to the Trustee, or [CIT Consumer
Finance as] the custodian for the Trustee, among other things, the original
Mortgage Note (and any modification or amendment thereto) [endorsed without
recourse to the order of the Trustee (or its nominee)], the original Mortgage
with evidence of recording indicated thereon (except for any Mortgage which has
been lost or which was not returned from the public recording office, a copy of
which (together with a certificate that the original of such Mortgage was
delivered to such recording office) shall be delivered initially and the
original of which will be delivered to the Trustee as soon as the same is
available to the Depositor), [an assignment in recordable form] of the Mortgage
and, if applicable, any riders or modifications to such Mortgage Note and
Mortgage, any title insurance policies with respect to the Mortgages and any
assumption or modification agreement (collectively, the "Mortgage Documents").]
[Assignments of the Mortgage Loans will be delivered to the Trustee (or the
custodian) 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 interests in
the Mortgage Loan against the claim of any subsequent transferee or any
successor to or creditor of the Depositor or the Seller.] Subsequent to the
issuance of the Certificates, the Seller will be required [in the circumstances
specified in the related Agreement] to deliver to the Trustee (or the applicable
custodian) assignments of the related Mortgages to be recorded (at the expense
of the Seller) within ___ days after issuance of the Certificates, in which
event, the Agreement will require any such Seller to repurchase from the Trustee
any Mortgage Loan the related Mortgage of which is not recorded within such
time, at the Purchase Price with respect to repurchases by reason of defective
documentation. The enforcement of the repurchase obligation would constitute the
sole remedy available to the Certificateholders and the Trustee for failure of a
Mortgage to be recorded.
The Trustee will review each Mortgage Document within [180] days of the
Closing Date (or promptly after the Trustee's receipt of any document permitted
to be delivered after the Closing Date) and if any such document is found to be
missing or defective in a material respect is not properly executed, is
unrelated to the Mortgage Loans of the Trust or does not conform in a material
respect to the description thereof provided by or on behalf of CIT Consumer
Finance, the Trustee will notify the Master Servicer and the Depositor, and the
Master Services will notify the related Seller. If the Seller does not cure such
defect within 90 days after notice thereof from the Trustee, the Seller will be
obligated to repurchase the related Mortgage Loan from the Trust Fund at the
Purchase Price. Rather than repurchase the Mortgage Loan as provided above, the
Seller may
S-40
<PAGE>
remove such Mortgage Loan (a "Deleted Mortgage Loan") from the Trust Fund and
substitute in its place another Mortgage Loan of like kind (a "Qualified
Substitute Mortgage Loan"); however, [such substitution is permitted only within
two years of the Closing Date, and] may not be made unless an opinion of counsel
is provided to the effect that such substitution would not disqualify the Trust
Fund as a REMIC or result in a "prohibited transaction" tax as defined in
Section 860F of the Code. Any Qualified Substitute Mortgage Loan generally will,
on the date of substitution, among other characteristics set forth in the
Agreement, (i) have a Principal Balance not in excess of the Principal Balance
of the Deleted Mortgage Loan (the amount of any shortfall to be deposited by the
Seller in the Certificate Account (as defined herein) not later than the third
Business Day prior to the related Distribution Date (the "Determination Date")
and held for distribution to the Certificateholders on the related Distribution
Date (a "Substitution Adjustment")), [(ii) have a Maximum Rate not less than
(and not more than two percentage points greater than) the Maximum Rate of the
Deleted Mortgage Loan, and have a Minimum Rate not lower than (and not more than
one percentage point higher than) the Minimum Rate of the Deleted Mortgage Loan,
(iii) have the same Index and Periodic Rate Cap as the Deleted Mortgage Loan and
a Gross Margin not less than that of the Deleted Mortgage Loan and, if Mortgage
Loans equal to __% or more of the Cut-off Date Principal Balance have become
Deleted Mortgage Loans, not more than two percentage points more than that of
the Deleted Mortgage Loan, (iv) have a Mortgage Rate not lower than, and not
more than __% per annum higher than, that of the Deleted Mortgage Loan,] (v)
have a Combined Loan-to-Value Ratio not higher than that of the Deleted Mortgage
Loan; (vi) have a remaining term to maturity not greater than (and not more than
one year less than) that of the Deleted Mortgage Loan, (vii) be of the same or
better credit risk category under the Seller's underwriting guidelines; [(viii)
have the same Strip Rate as the Deleted Mortgage Loan,] and (ix) comply with all
of the representations and warranties set forth in the related Agreement as of
the date of substitution. This cure, repurchase or substitution obligation
constitutes the sole remedy available to Certificateholders or the Trustee for
omission of, or a material defect in, a Mortgage Loan document.
[Underwriting Standards
The underwriting policies that were employed by CIT Consumer Finance during
the period when the Mortgage Loans were originated were, except as noted herein
and in the Prospectus, substantially similar to those which CIT Consumer Finance
currently employs. See "The Home Equity Lending Program--Underwriting Standards"
in the Prospectus.]
SERVICING OF MORTGAGE LOANS
General
CIT Consumer Finance, as the Master Servicer, will service the Mortgage
Loans in accordance with the terms set forth in the Agreement. The Master
Servicer may perform any of its obligations under the Agreement through one or
more sub-servicers. The Master Servicer has appointed CITSF to act as
Sub-Servicer for [all] of the Mortgage Loans. Notwithstanding any such
subservicing arrangement, the Master Servicer will remain liable for its
servicing duties and obligations under the Agreement as if the Master Servicer
alone were servicing the Mortgage Loan.
S-41
<PAGE>
See "The CIT Group/Sales Financing, Inc., Master Servicer" and "The Home Equity
Lending Program--Servicing and Collections" in the Prospectus.
As of _________ __, 199_, CITSF serviced or subserviced for itself and
others approximately _____ residential first and second mortgages, representing
an outstanding balance of approximately $__________ billion. CIT Consumer
Finance currently does not service mortgages, on behalf of other owners, that it
neither purchased nor originated.
Foreclosure and Delinquency Experience
Until 199__, CITSF serviced all of the mortgage loans owned by CIT Consumer
Finance and since that date CITSF has subserviced all of those mortgage loans,
See "The CIT Group/Sales Financing, Inc., Master Servicer" in the Prospectus.
Historically, a variety of factors have limited CITSF's loss and delinquency
experience on its portfolio of serviced mortgage loans. There can be no
assurance that factors beyond CITSF's control, such as national or local
economic conditions or downturns in the real estate markets, will not result in
increased rates of delinquencies and foreclosure losses in the future. Since
CITSF commenced servicing a material amount of mortgages in 199__, data on its
foreclosure and delinquency experience is available only for __ full years, and
may not be indicative of its future foreclosure and delinquency experience.
The following table summarizes the foreclosure and delinquency experience,
respectively, on the dates indicated on conventional trust deed or mortgage
loans secured by first priority liens on the mortgaged property and serviced by
CITSF. No assurances can be given that the foreclosure and delinquency
experience presented in the table below will be indicative of such experience on
the Mortgage Loans:
<TABLE>
<CAPTION>
At 30, At December 31, At December 31, At December 31,
1997 1996 1995 1994
---- ---- ---- ----
(Dollar amounts in thousands)
<S> <C>
Principal Balances (end of period)...... $ $ $ $
Total Number of Loans...................
Total Number of Foreclosures............
Percent Foreclosed by Number of Loans... % % % %
Period of Delinquency...................
30-59 days:.............................
Principal Balance................... $ $ $ $
Number of Loans.....................
Percent Delinquent by Number of Loans % % % %
60-89 days:
Principal Balance................... $ $ $ $
Number of Loans.....................
Percent Delinquent by Number of Loans % % % %
90 days or more:
Principal Balance................... $ $ $ $
Number of Loans.....................
Percent Delinquent by Number of Loans % % % %
In Foreclosure
Principal Balance................... $ $ $ $
Number of Loans.....................
Percent by Number of Loans.......... % % % %
Total Delinquent and in Foreclosure
Principal Balance................... $ $ $ $
Number of Loans.....................
Percent by Number of Loans.......... % % % %
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
S-42
<PAGE>
The following table summarizes the foreclosure and delinquency experience,
respectively, on the dates indicated on conventional mortgage loans secured by
second priority liens on the mortgaged property and serviced by CITSF. No
assurances can be given that the foreclosure and delinquency experience
presented in the table below will be indicative of such experience on the
Mortgage Loans:
<TABLE>
<CAPTION>
At 30, At December 31, At December 31, At December 31,
1997 1996 1995 1994
---- ---- ---- ----
(Dollar amounts in thousands)
<S> <C>
Principal Balances (end of period)...... $ $ $ $
Total Number of Loans...................
Total Number of Foreclosures............
Percent Foreclosed by Number of Loans... % % % %
Period of Delinquency...................
30-59 days:.............................
Principal Balance................... $ $ $ $
Number of Loans.....................
Percent Delinquent by Number of Loans % % % %
60-89 days:
Principal Balance................... $ $ $ $
Number of Loans.....................
Percent Delinquent by Number of Loans % % % %
90 days or more:
Principal Balance................... $ $ $ $
Number of Loans.....................
Percent Delinquent by Number of Loans % % % %
In Foreclosure
Principal Balance................... $ $ $ $
Number of Loans.....................
Percent by Number of Loans.......... % % % %
Total Delinquent and in Foreclosure
Principal Balance................... $ $ $ $
Number of Loans.....................
Percent by Number of Loans.......... % % % %
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Servicing Compensation and Payment of Expenses
The servicing fees [and certain credit enhancement fees] for each Mortgage
Loan (the "Expense Fees") are payable out of the interest payments on such
Mortgage Loan. [Because the Expense Fees are payable before any distributions
are made on the Certificates on a Distribution Date, the Expense Fees will
reduce the Available Funds to make distributions of principal and interest on
the Certificates.] The Expense Fees in respect of each Mortgage Loan will be at
least ____% per annum and not more than ____% per annum of the Principal Balance
of such Mortgage Loan. The Expense Fees consist of (a) servicing compensation
payable to the Master Servicer in respect of its master servicing activities
(the "Master Servicing Fee"), [(b) certain credit enhancement fees] and [(c)
fees paid to the Trustee.] The Master Servicing Fee will be ____% per annum of
the principal balance of each Mortgage Loan. The Master Servicer is obligated to
pay certain ongoing expenses associated with the Trust Fund and incurred by the
Master Servicer in connection with its responsibilities under the Agreement and
such amounts will be paid by the Master Servicer out of the Master Servicing
Fee. The Master Servicer is also entitled to receive [all late payment fees,
prepayment fees, assumption fees and other similar charges and] all investment
S-43
<PAGE>
income earned on amounts on deposit in the Certificate Account and Distribution
Account (as defined herein).
Compensating Interest
When a Mortgage Loan is prepaid between monthly payment dates ("Due
Dates"), the Mortgagor is required to pay interest on the amount prepaid to the
date of prepayment and not thereafter. Prepayments received during a calendar
month will be distributed to Certificateholders on the Distribution Date in the
month following the month of receipt. Pursuant to the Agreement, the Master
Servicer will pay to the Trust, [but only to the extent of the Master Servicing
Fee for such month], with respect to each Mortgage Loan as to which the Master
Servicer received during the related Due Period a Principal Prepayment an amount
("Compensating Interest") equal to the excess of (i) 30 days' interest on the
principal balance of each such Mortgage Loan as of the beginning of the related
Due Period at the [Mortgage Rate] [Adjusted Mortgage Loan Remittance Rate] over,
(ii) the amount of interest actually received on the related Mortgage Loan
during such Due Period. [Any shortfalls in interest as a result of prepayments
which cause the Compensating Interest to exceed the amount of the Master
Servicing Fee for the month will reduce the amount of interest available to be
distributed to Certificateholders from what would have been the case in the
absence of such prepayments.] [The "Due Period," with respect to each
Distribution Date, will be the calendar month immediately preceding the month in
which such Distribution Date occurs.]
Advances
Subject to the following limitations, the Master Servicer will be required
to make an advance of its own funds no later than the day prior to the
Distribution Date and in no event earlier than the seventh Business Day of such
month, the amount, if any, by which 30 days' interest [at the Mortgage Rate] [at
the Adjusted Mortgage Loan Remittance Rate] on the then outstanding principal
balance of a Mortgage Loan exceeds the amount received by the Master Servicer in
respect of interest on the Mortgage Loan as of the related Record Date (any such
advance, an "Advance").
Advances are intended to maintain a regular flow of scheduled interest [and
principal] payments on the Certificates rather than to guarantee or insure
against losses. The Master Servicer is obligated to make Advances with respect
to delinquent payments of [principal of or] interest on each Mortgage Loan to
the extent that such Advances are, in its judgment, reasonably recoverable from
future payments and collections or insurance payments or proceeds of liquidation
of the related Mortgage Loan. If the Master Servicer determines on any
Determination Date to make an Advance, such Advance will be included with the
distribution to Certificateholders on the related Distribution Date.
S-44
<PAGE>
DESCRIPTION OF THE CERTIFICATES
General
The Senior Certificates offered hereby will be issued pursuant to a Pooling
and Servicing Agreement, dated as of _______ __, 199_ (the "Agreement"), among
the Depositor, the Seller, the Master Servicer and the Trustee. Set forth below
are summaries of the specific terms and provisions pursuant to which the Senior
Certificates will be issued. The following summaries do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, the provisions of the Agreement. When particular provisions or terms used in
the Agreement are referred to, the actual provisions (including definitions of
terms) are incorporated by reference.
The Home Equity Loan Asset-Backed Certificates, Series 199_-_____ (the
"Certificates") will consist of the Class A Certificates [and the Class S
Certificates] (the "Class A Certificates" and the "Class S Certificates",
respectively, and collectively, the "Senior Certificates"), [the Class B
Certificates (collectively, the "Subordinated Certificates")], and the Class R
Certificates (the "Residual Certificates"). The Senior Certificates [and the
Subordinated Certificates] may be referred to herein as the "Offered
Certificates." [Only the Senior Certificates are offered hereby.]
The Class A Certificates will evidence in the aggregate an initial
beneficial ownership interest of approximately ___% in the Trust Fund. [The
Subordinated Certificates will evidence in the aggregate an initial beneficial
ownership interest of approximately ___% in the Trust Fund.] The remaining
beneficial ownership interest in the Trust Fund will be evidenced by the
Residual Certificates. The rights of holders [of the Subordinated Certificates
(the "Subordinated Certificateholders") and] of the Residual Certificates (the
"Residual Certificateholders") to receive distributions with respect to the
Mortgage Loans will be subordinated to the rights of holders of the Senior
Certificates (the "Senior Certificateholders") to the extent described herein.
The Class A Certificates will be issuable in book-entry form only. So long
as the Class A Certificates are Book-Entry Certificates, such Certificates will
be evidenced by one or more certificates registered in the name of Cede & Co.
("Cede") in an aggregate amount equal to the initial Class A Certificate
Balance. Interests in the Class A Certificates issued in the name of Cede may be
purchased by investors in minimum denominations of $1,000 and integral multiples
of $1,000 in excess thereof. A single Class A Certificate may be issued in an
amount different than described above. [The Class S Certificates will be issued
in fully registered form in minimum denominations of 10% Percentage Interest and
multiples of 10% Percentage Interest in excess thereof, based on the percentage
interest (the "Percentage Interest") represented by each such Certificate in the
total distributions allocated to such class of Certificates.]
S-45
<PAGE>
Book-entry Certificates
The [Class A] Certificates will be book-entry Certificates (the "Book-Entry
Certificates"). The Book-Entry Certificates will be issued in one or more
certificates which equal the initial [Class A] Certificate Balance and which
will be held by a nominee of The Depository Trust Company (together with any
successor depository selected by the Depositor, the "Depository"). Beneficial
interests in the Book-Entry Certificates will be held indirectly by investors
through the book-entry facilities of the Depository, as described herein.
Investors may hold such beneficial interests in the Book-Entry Certificates in
minimum denominations representing an original principal amount (the
"Certificate Balance") of $1,000 and integral multiples of $1,000 in excess
thereof. The Depositor has been informed by the Depository that its nominee will
be Cede. Accordingly, Cede is expected to be the holder of record of the
Book-Entry Certificate(s). Except as described in the Prospectus under
"Description of the Certificates -Book-Entry Certificates", no person acquiring
a Book-Entry Certificate (each, a "beneficial owner") will be entitled to
receive a physical certificate representing such Certificate (a "Definitive
Certificate"). Unless and until Definitive Certificates are issued, it is
anticipated that the only "Certificateholder" of the Book-Entry Certificates
will be Cede, as nominee of the Depository. Beneficial owners of the Book-Entry
Certificates will not be Certificateholders, as that term is used in the
Agreement. Beneficial owners are only permitted to exercise the rights of
Certificateholders indirectly through Financial Intermediaries (as defined in
the Prospectus) and the Depository. Monthly and annual reports on the Trust Fund
provided by the Master Servicer to Cede, as nominee of the Depository, may be
made available 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 Depository accounts the Book-Entry
Certificates of such beneficial owners are credited.
For a description of the procedures applicable to the Book-Entry
Certificates, see "Description of the Certificates-Book-Entry Certificates" in
the Prospectus.
Payments on Mortgage Loans; Accounts
On or prior to the Closing Date, the Master Servicer will establish an
account (the "Certificate Account") with _______, which shall be maintained [as
a separate trust account] by the Master Servicer in trust for the benefit of the
Certificateholders, except as otherwise provided under "The Pooling and
Servicing Agreement -- Payments on Mortgage Assets; Deposits to the Certificate
Account" in the Prospectus. Funds credited to the Certificate Account may be
invested for the benefit and at the risk of the Master Servicer in Permitted
Investments (as defined in the Agreement) that are scheduled to mature on or
prior to the Business Day preceding the next Distribution Date. On or prior to
the Business Day immediately preceding each Distribution Date, the Master
Servicer shall withdraw from the Certificate Account the amount of Available
Funds and shall deposit such Available Funds in an account established and
maintained with the Trustee on behalf of the Certificateholders (the
"Distribution Account").
Distributions
Distributions on the Certificates will be made by the Trustee on the __th
day of each month, or if such day is not a Business Day, on the first Business
Day thereafter, commencing on
S-46
<PAGE>
______ __, 199_ (each, a "Distribution Date"), to the persons in whose names
such Certificates are registered at the close of business on the last Business
Day of the month preceding the month of such Distribution Date (the "Record
Date"). "Business Day" means any day other than a Saturday, Sunday or any day on
which banking institutions or trust companies in the states of New York or
Oklahoma are authorized by law, regulation or executive order to be closed.
Distributions on each Distribution Date will be made by check mailed to the
address of the person entitled thereto as it appears on the applicable
certificate register or, in the case of a Certificateholder who holds
Certificates with an aggregate initial Certificate Balance of $_______ or more
[(or in the case of the Class S Certificates, if such Certificateholder holds
Class S Certificates evidencing Percentage Interests aggregating __% or more)]
and who has so notified the Trustee in writing in accordance with the Agreement,
by wire transfer in immediately available funds to the account of such
Certificateholder at a bank or other depository institution having appropriate
wire transfer facilities; provided, however, that the final distribution in
retirement of the Certificates will be made only upon presentment and surrender
of such Certificates at the corporate trust office of the Trustee.
Priority of Distributions Among Certificates
As more fully described herein, distributions will be made on the
Certificates on each Distribution Date from Available Funds in the following
order of priority: (i) to interest on each class of Senior Certificates up to
the maximum amount of interest to be distributed on such Certificates on such
Distribution Date, (ii) to principal on each class of Senior Certificates (as
applicable) up to the maximum amount of principal to be distributed on each such
class of the Senior Certificates on such Distribution Date, (iii) [to interest
on the Subordinated Certificates, (iv) to principal on the Subordinated
Certificates] and (v) to the Residual Certificates.
Distributions of principal and interest to holders of the Senior
Certificates will be made on each Distribution Date in an amount equal to the
Senior Distribution Amount. The "Senior Distribution Amount" for any
Distribution Date will be equal to the sum of (i) the amount of interest payable
on the Senior Certificates, calculated as set forth under "-Senior Interest"
below and (ii) the amount allocated to principal calculated as set forth under
"-Senior Principal" below except that, if the Senior Distribution Amount exceeds
the amount of Available Funds on such Distribution Date, then the Senior
Distribution Amount shall instead equal the amount of such Available Funds.
[Following the Cross-over Date, no further distributions will be made to the
Senior Certificateholders. The "Cross-over Date" is the Distribution Date on
which the Certificate Balance on the Senior Certificates is reduced to zero.]
[Distributions of principal and interest to holders of Subordinated
Certificates will be made on each Distribution Date up to an amount equal to
Available Funds for such Distribution Date reduced by the Senior Distribution
Amount for such Distribution Date (the "Remaining Available Funds"). The
"Subordinated Distribution Amount" for any Distribution Date will equal the sum
of (i) the amount of interest calculated as set forth under "-Subordinated
Interest" below and (ii) the amount of principal calculated as set forth under
"-Subordinated Principal" below; except that if the Subordinated Distribution
Amount exceeds the Remaining Available Funds on
S-47
<PAGE>
such Distribution Date, then the Subordinated Distribution Amount will equal the
sum of the Remaining Available Funds, if any, and the amount to be paid pursuant
to the credit enhancement applicable to the Subordinated Certificates, if any].
"Available Funds" with respect to any Distribution Date will be equal to
the aggregate amount of funds available in the Distribution Account on such
Distribution Date for distribution on the Certificates. Available Funds for any
Distribution Date will equal the sum of the following (without duplication) (i)
all scheduled installments of interest [(net of the related Expense Fees)] and
principal received during the related Due Period together with any Advances in
respect thereof; (ii) all proceeds of the Standard Hazard Insurance Policies
[Special Hazard Insurance Policy] [Bankruptcy Bond] and any Primary Mortgage
Insurance Policy, to the extent such proceeds are not applied to the restoration
of the related Mortgaged Property or released to the Master Servicer in
accordance with the Master Servicer's normal servicing procedures (collectively,
"Insurance Proceeds"), and all other cash amounts (net of unreimbursed expenses
incurred in connection with a liquidation or foreclosure and unreimbursed
Advances, if any) received and retained in connection with the liquidation of
defaulted Mortgage Loans, by foreclosure or otherwise ("Liquidation Proceeds")
received during the month preceding such Distribution Date; (iii) all partial or
full prepayments received during the related Due Period; (iv)[all amounts
withdrawn from the Reserve Fund and deposited to the Distribution Account since
the preceding Distribution Date]; and (v) amounts received during the month
preceding such Distribution Date as the Substitution Adjustment or Purchase
Price in respect of a Mortgage Loan that was repurchased by the Seller or the
Master Servicer, respectively, provided, however, that such amounts shall be
reduced by amounts in reimbursement for Advances previously made and other
amounts as to which the Master Servicer is entitled to be reimbursed from the
Certificate Account pursuant to the Agreement.
The initial Class A Certificate Balance will be $_____________
(approximate, subject to a permitted variance of up to plus or minus __%) and,
thereafter the Class A Certificate Balance is the initial Class A Certificate
Balance reduced by all amounts previously distributed to holders of the Class A
Certificates as payments of principal (the "Class A Certificate Balance").
[The Class S Certificates have an initial notional amount of approximately
$_______ (the "Class S Notional Amount").] [The Class S Certificates will have
no principal balance, are entitled only to a portion of the interest on the
Mortgage Loans and are not entitled to any distributions of principal.]
[The initial Subordinated Class Certificate Balance will be $__________
(approximate, subject to a permitted variance of up to plus or minus __%) and,
thereafter, the Subordinated Class Certificate Balance will be such original
principal amount reduced by (i) all amounts of principal previously distributed
to the Subordinated Certificateholders and (ii) any Realized Losses (as defined
herein) allocated to such Class (the "Subordinated Class Certificate Balance".]
The "Class A Percentage" for any Distribution Date is [the percentage
equivalent of a fraction the numerator of which is the Class A Certificate
Balance as of such date and the
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denominator of which is the Pool Principal Balance] [100% until the Cross-over
Date and 0% thereafter] [_______________]. The "Pool Principal Balance" with
respect to any Distribution Date equals the aggregate of the Principal Balances
of the Mortgage Loans (other than Liquidated Mortgages) outstanding on the
Determination Date in the month preceding the month of such Distribution Date
[plus funds on deposit in the Pre-Funding Account on the Determination Date].
[The "Subordinated Percentage" for any Distribution Date will be calculated
as the difference between 100% and the Class A Percentage.]
The Pass-Through Rate for the Class A Certificates for a particular
Distribution Date (the "Class A Pass-Through Rate") will be equal to ___ % per
annum [but in no event to exceed the weighted average of the Class A Remittance
Rates (as defined herein) of the Mortgage Loans]. [The pass-through rate for the
Subordinated Certificates for a particular Distribution Date (the "Subordinated
Pass-Through Rate") will be equal to __% per annum but in no event to exceed the
weighted average of the Subordinated Remittance Rates (as defined herein) of the
Mortgage Loans]. [The pass-through rate for the Class S Certificates for a
particular Distribution Date (the "Class S Pass-Through Rate") will be equal to
the weighted average of the Strip Rates (as defined herein).]
[The "Class A Remittance Rate" for any Mortgage Loan will equal the
Mortgage Rate on the first day of the month preceding the month of such
Distribution Date, less the sum of (i) ___% and (ii) the excess of the Gross
Margin over ___% (such excess, if any, the "Strip Rate"). The "Subordinated
Remittance Rate" for any Mortgage Loan will equal the Mortgage Rate on the first
day of the month preceding the month of such Distribution Date, less the sum of
(i) ___% and (ii) the excess of the Gross Margin over ___%.]
Each Pass-Through Rate will be computed on the basis of a 360-day year of
twelve 30-day months.
[The interest entitlement described above for each class of Certificates
will be reduced by such class' allocable share of "Net Interest Shortfall,"
which is equal to (i) the amount of interest any class of Certificateholders
would otherwise have been entitled to receive with respect to any Mortgage Loan
that was the subject of a Relief Act Reduction and (ii) such class' pro rata
share of Net Prepayment Interest Shortfalls. A "Relief Act Reduction" is a
reduction in the amount of monthly interest payment on a Mortgage Loan pursuant
to the Soldiers' and Sailors' Civil Relief Act of 1940. See "Certain Legal
Aspects of Mortgage Loans--Soldiers' and Sailors' Civil Relief Act" in the
Prospectus. A "Net Prepayment Interest Shortfall" is the amount by which the
aggregate of Prepayment Interest Shortfalls during the calendar month
immediately preceding the month in which the related Due Date occurs exceeds the
aggregate amount of the Master Servicing Fee for such period. A "Prepayment
Interest Shortfall" is the amount by which interest at the Mortgage Rate
received in connection with a prepayment of principal on a Mortgage Loan is less
than one month's interest at the Mortgage Rate on the Principal Balance of the
related Mortgage Loan. Each class' pro rata share of such Net Prepayment
Interest Shortfalls will be based on the amount of interest such class otherwise
would have been entitled to receive.]
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Senior Interest
On each Distribution Date, each class of Senior Certificates, to the extent
of Available Funds on such Distribution Date, generally will be entitled to
receive an amount allocable to interest (the "Senior Interest Distribution
Amount") equal to the sum of (i) one month's interest at the applicable
Pass-Through Rate on the Class A Certificate Balance [or Class S Notional
Amount, as the case may be,] and (ii) the sum of the amounts, if any, by which
the amount described in clause (i) above on each prior Distribution Date
exceeded the amount actually distributed as interest on such prior Distribution
Dates and not subsequently distributed ("Unpaid Senior Interest Amounts") [plus
interest at the applicable Pass-Through Rate from such prior Distribution Date].
Accrued interest to be distributed on any Distribution Date will be
calculated, in the case of Class A Certificates, on the basis of the Class A
Certificate Balance immediately prior to such Distribution Date and in the case
of the Class S Certificates, on the basis of the Class S Notional Amount
immediately prior to such Distribution Date.
Interest will be calculated and payable on the basis of a 360-day year
divided into twelve 30-day months. The yield on any class of Senior Certificates
will be less than the yield that would otherwise be produced by the applicable
Pass-Through Rate and the applicable purchase price because distributions of
interest in respect of any month will be made on the __th day of the immediately
succeeding month. See "Yield, Prepayment and Maturity Considerations" herein.
In the event that, on a particular Distribution Date, Available Funds in
the Certificate Account are not sufficient to make a full distribution of
interest to the Senior Certificateholders, interest will be distributed pro rata
on each class of Senior Certificates based on the amount of interest each such
class of Certificates would otherwise have been entitled to receive in the
absence of such shortfall. The shortfall will be carried forward and added to
the amount holders of each such class of Certificates will be entitled to
receive on the next Distribution Date. Such a shortfall could occur, for
example, if losses realized on the Mortgage Loans were exceptionally high or
were concentrated in a particular month. Any such amount so carried forward will
not bear interest.
Senior Principal
On each Distribution Date, an amount received on the Mortgage Loans during
the related Due Period and allocable to principal will be distributed on the
Class A Certificates which amount shall be equal to the lesser of (1) Available
Funds reduced by the amount of interest distributed on the Senior Certificates
on such Distribution Date and (2) the sum of (i) [the Class A Percentage of] (a)
the principal components of scheduled payments received on each Mortgage Loan
during the related Due Period, (b) the Principal Balance on each Mortgage Loan
that became a Liquidated Mortgage during the related Due Period, (c) the
Purchase Price of each Mortgage Loan that was repurchased by the Seller or
another person pursuant to the Agreement, (d) the Substitution Adjustment in
connection with any Deleted Mortgage Loan and (e) any Insurance Proceeds or
Liquidation Proceeds allocable to recoveries of principal of Mortgage Loans that
are not yet Liquidated Mortgages, (ii) [the Class A [Prepayment] Percentage of]
all partial principal
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prepayments that are not Principal Prepayments [and which exceed the scheduled
payments by a specified multiple], but which was not intended to satisfy a
Mortgage Loan in full or cure a delinquency] ("Curtailments") and of all
principal prepayments in full received during the related Due Period and (iii)
the sum of (I) the amount, if any, by which (A) the amount required to be
distributed to Class A Certificateholders in respect of principal, as of the
preceding Distribution Date exceeded (B) the amount of the actual distribution
to such Class A Certificateholders in respect of principal, on such preceding
Distribution Date, exclusive of any portion of any Insured Payment made to such
Certificateholders, and (II) if any portion of the amount in the preceding
clause (I) represents Insured Payments made by the Insurer, interest on such
portion at the applicable Pass-Through Rate from such immediately preceding
Distribution Date (the "Carry-Forward Amount") (collectively, with respect to
all of the Class A Certificates, the "Class A Principal Distribution Amount").
See "--Allocation of Losses" below.
[Subordinated Interest
Following the payment to the Senior Certificateholders of the Senior
Distribution Amount, interest will be paid to the Subordinated
Certificateholders on each Distribution Date, to the extent of the Remaining
Available Funds, if any, [and the amount payable pursuant to the credit
enhancement, if any] and in an amount equal to [the sum of (i)] one month's
interest at the Subordinated Pass-Through Rate on the Subordinated Class
Certificate Balance [and (ii) the sum of the amounts, if any, by which the
amount described in clause (i) above on each prior Distribution Date exceeded
the amount actually distributed as interest on such prior Distribution Date and
not subsequently distributed ("Unpaid Subordinated Interest Amounts").]
Accrued interest to be distributed on any Distribution Date will be
calculated, in the case of a class of Subordinated Certificates, on the basis of
such class's Certificate Balance immediately prior to such Distribution Date.
Interest will be calculated and payable on the basis of a 360-day year
divided into twelve 30-day months. The yield on any class of Subordinated
Certificates will be less than the yield that would otherwise be produced by the
applicable Subordinated Pass-Through Rate and the applicable purchase price
because distributions of interest in respect of any month will be made on the
__th day of the immediately succeeding month. See "Yield, Prepayment and
Maturity Considerations" herein.
In the event that, on a particular Distribution Date, the Remaining
Available Funds in the Certificate Account are not sufficient to make a full
distribution of interest to the Subordinated Certificateholders, interest will
be distributed [pro rata on each class of Subordinated Certificates based on the
amount of interest each such class of Certificates would otherwise have been
entitled to receive in the absence of such shortfall] [based upon ________].
[The shortfall will be carried forward and added to the amount holders of each
such class of Certificates will be entitled to receive on the next Distribution
Date.] Such a shortfall could occur, for example, if losses realized on the
Mortgage Loans were exceptionally high or were concentrated in a particular
month. Any such amount so carried forward will not bear interest.]
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[Subordinated Principal
After the amounts distributed in respect of interest and principal to the
Senior Certificateholders and interest to the Subordinated Certificateholders,
an amount (up to the Remaining Available Funds less interest paid in respect of
Subordinated Certificates on such Distribution Date [plus any amounts in respect
of credit enhancement]) allocable to principal will be distributed [pro-rata]
[based upon ___________] to each class of Subordinated Certificateholders equal
to the sum of (i) [the Subordinated Percentage of] (a) the principal component
of the scheduled payments received on each Mortgage Loan during the related Due
Period, (b) the Principal Balance of each Mortgage Loan that became a Liquidated
Mortgage during the related Due Period, (c) the Principal Balance of each
Mortgage Loan that was repurchased by the Seller or another person pursuant to
the Agreement, (d) the Substitution Adjustment in connection with any
substitution of Mortgage Loans, on such Distribution Date pursuant to the
Agreement and (e) any Insurance Proceeds, Liquidation Proceeds or Released
Mortgage Property Proceeds (as defined in the Prospectus) received during the
related Due Period and allocable to recoveries of principal of Mortgage Loans
that are not yet Liquidated Mortgages and (ii) the Subordinated [Prepayment]
Percentage of all Principal Prepayments [and all Curtailments] received during
the related Due Period. See "-Allocation of Losses" below.]
[Allocation of Losses]
Realized Losses on Mortgage Loans will be allocated first to the
Subordinated Certificates until the outstanding principal balances thereof are
reduced to zero, and thereafter to the Class A Certificates. Any allocation of a
Realized Loss to a Certificate will be made by reducing the Certificate Balance
thereof immediately following the related Distribution Date.
In general, a "Realized Loss" means, with respect to a Liquidated Mortgage,
the amount by which the remaining unpaid principal balance of such Mortgage
exceeds the amount of Liquidation Proceeds applied to the principal balance of
such Liquidated Mortgage, but only to the extent that such difference is not
included in (i) the amount of the principal distribution made on the
Certificates on the immediately succeeding Distribution Date, or (ii) the amount
of a payment made from applicable credit enhancement on such Distribution Date.
A "Liquidated Mortgage" is a defaulted Mortgage Loan as to which the Master
Servicer has determined that all recoverable Liquidation Proceeds and Insurance
Proceeds have been received.
[The Class A Prepayment Percentage for any Distribution Date occurring
during the _____ years beginning on the first Distribution Date will, except as
provided below, equal 100%. Thereafter, the Class A Prepayment Percentage will
be subject to gradual reduction as described in the following paragraph. This
disproportionate allocation of certain unscheduled payments in respect of
principal will have the effect of accelerating the amortization of the Class A
Certificates while, in the absence of Realized Losses, increasing the interest
in the Pool Principal Balance evidenced by the Subordinated Certificates.
Increasing the respective interest of the Subordinated Certificates relative to
that of the Class A Certificates is intended to preserve the availability of the
subordination provided by the Subordinated Certificates.]
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[The "Class A Prepayment Percentage" for any Distribution Date occurring on
or after the _____ anniversary of the first Distribution Date will be as
follows: for any Distribution Date subsequent to _______ to and including the
Distribution Date in _______, the Class A Percentage for such Distribution Date
plus __% of the Subordinated Percentage for such Distribution Date; for any
Distribution Date subsequent to _______ to and including the Distribution Date
in _______, the Class A Percentage for such Distribution Date plus __% of the
Subordinated Percentage for such Distribution Date; for any Distribution Date
subsequent to _______ to and including the Distribution Date in _______, the
Class A Percentage for such Distribution Date plus __% of the Subordinated
Percentage for such Distribution Date; for any Distribution Date subsequent to
_______ to and including the Distribution Date in _______, the Class A
Percentage for such Distribution Date plus __% of the Subordinated Percentage
for such Distribution Date; and for any Distribution Date thereafter, the Class
A Percentage for such Distribution Date (unless on any of the foregoing
Distribution Dates the Class A Percentage exceeds the initial Class A
Percentage, in which case the Class A Prepayment Percentage for such
Distribution Date will once again equal 100%). Notwithstanding the foregoing, no
reduction to the Class A Prepayment Percentage will occur if (i) as of the first
Distribution Date as to which any such reduction applies, more than an average
of ___% of the dollar amount of all monthly payments on the Mortgage Loans due
in each of the preceding twelve months were delinquent ___ days or more
(including for this purpose any Mortgage Loans in foreclosure and Mortgage Loans
with respect to which the related Mortgaged Property has been acquired by the
Trust) or (ii) cumulative Realized Losses with respect to the Mortgage Loans
exceed (a) with respect to the Distribution Date in ______, ___% of the
principal balance of the Subordinated Certificates as the Cut-off Date (the
"Original Subordinated Principal Balance"), (b) with respect to the Distribution
Date in ______, ___% of the Original Subordinated Principal Balance, (c) with
respect to the Distribution Date in _______, ___% of the Original Subordinated
Principal Balance, (d) with respect to the Distribution Date in _______, ___% of
the Original Subordinated Principal Balance. If on any Distribution Date the
allocation to the Class A Certificates of full and partial principal prepayments
and other amounts in the percentage required above would reduce the outstanding
Class A Certificate Balance below zero, the Class A Prepayment Percentage for
such Distribution Date will be limited to the percentage necessary to reduce the
Class A Principal Balance to zero.]
[The "Subordinated Prepayment Percentage" for any Distribution Date will be
calculated as the difference between 100% and the Class A Prepayment Percentage
for such date.]
Reports to Certificateholders
On each Distribution Date, the Trustee will forward to each
Certificateholder a statement generally setting forth:
(i) the amount of the related distribution to holders of such class of
Certificates allocable to principal, separately identifying the aggregate
amount of any Principal Prepayments included therein, any principal amounts
not paid when due (the "Unpaid Principal Shortfall") included in such
distribution and any remaining Unpaid Principal Shortfall after giving
effect to such distributions;
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(ii) the amount of such distribution to holders of such class of
Certificates allocable to interest, any Unpaid Senior Interest Amounts or
Unpaid Subordinated Interest Amounts included in such distribution and any
remaining Unpaid Senior Interest Amounts or Unpaid Subordinated Interest
Amounts after giving effect to such distribution;
(iii) if the distribution to the holders of such class of Certificates
is less than the full amount that would be distributable to such holders if
there were sufficient funds available therefor, the amount of the shortfall
and the allocation thereof as between principal and interest;
(iv) the Certificate Balance of each class of Certificates after
giving effect to the distribution of principal on such Distribution Date;
(v) the Pool Principal Balance for the following Distribution Date;
(vi) the Class A Percentage and the Subordinated Percentage for the
following Distribution Date;
(vii) the related amount of the Master Servicing Fees paid to or
retained by the Master Servicer;
(viii) the Pass-Through Rate for such class of Certificates with
respect to the current Due Period;
(ix) the amount of Advances included in the distribution on such
Distribution Date and the aggregate amount of Advances outstanding as of
the close of business on such Distribution Date;
(x) the number and aggregate principal balances of Mortgage Loans (A)
delinquent (exclusive of Mortgage Loans in foreclosure) (1) 30 to 59 days,
(2) 60 to 89 days, (3) 90 or more days and (B) in foreclosure as of the
close of business on the last day of the calendar month preceding such
Distribution Date;
[(xi) with respect to any Mortgage Loan that became an REO Property
during the preceding calendar month, the loan number and Principal Balance
of such Mortgage Loan as of the close of business on the Determination Date
preceding such Distribution Date and the date of acquisition thereof;]
[(xii) the total number and principal balance of any REO Properties as
of the close of business on the Determination Date preceding such
Distribution Date;]
[(xiii) the Class A Prepayment Percentage and the Subordinated
Prepayment Percentage for the following Distribution Date;]
(xiv) the aggregate amount of Realized Losses incurred during the
preceding calendar month;
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(xv) the amount remaining in the Reserve Fund at the close of business
on such Distribution Date; and
(xvi) [indicate the remaining amount of coverage for special hazard
losses, bankruptcy losses and other particular types of losses provided by
third-party enhancers or otherwise.]
(xvii) [during the Funding Period, the amount remaining in the
Pre-Funding Account at the close of business on such Distribution Date.]
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee will prepare and deliver to the Certificateholder of
record during the previous calendar year a statement containing information
necessary to enable Certificateholders to prepare their tax returns. Such
statements will not have been examined and reported upon by an independent
public accountant. The Certificateholders will also be notified if any material
change is to be made in the procedures or forms for the reports to
Certificateholders.
Optional Termination
The Master Servicer will have the right to repurchase all remaining
Mortgage Loans and REO Properties in the Mortgage Pool and thereby effect early
retirement of the Certificates, on any Distribution Date on which the Pool
Principal Balance of such Mortgage Loans is less than or equal to 10% of the
Original Pool Principal Balance [(and the original Pre-Funded Amount)]. In the
event the Master Servicer exercises such option, the purchase price distributed
with respect to each Certificate will be 100% of its then outstanding principal
balance and (a) in the case of a Class A Certificate, one month's interest
thereon at the Class A Pass-Through Rate plus any unpaid accrued interest and
(b) in the case of a Class S Certificate, one month's interest on the Class S
Notional Amount at the Class S Pass-Through Rate plus any unpaid accrued
interest.
[Mandatory Termination]
[If not previously terminated in accordance with the terms of the
Agreement, the Trustee or the Master Servicer will sell the assets remaining in
the Trust Fund on the ___________ Distribution Date and the Trust Fund will
terminate.]
Termination Events
"Termination Events" will consist of: (i) any failure by the Master
Servicer to deposit in the Certificate Account the required amounts or remit to
the Trustee any payment (other than an Advance required to be made under the
terms of the Agreement) which continues unremedied for five Business Days after
the giving of written notice of such failure to the Master Servicer by the
Trustee or the Depositor or to the Master Servicer and the Trustee by holders of
Certificates (or, in the case of Book-Entry Certificates, the beneficial
interests therein) of any class evidencing not less than 51% of the aggregate
Percentage Interests constituting such class [or by the Certificate Guaranty
Insurer]; (ii) any failure by the Master Servicer duly to observe or perform in
any material respect any other of its covenants or agreements in the Agreement,
which continues
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unremedied for 30 days after the giving of written notice of such failure to the
Master Servicer by the Trustee or the Depositor or to the Master Servicer and
the Trustee by holders of Certificates (or, in the case of Book-Entry
Certificates, the beneficial interests therein) of any class evidencing not less
than 51% of the aggregate Percentage Interests constituting such class [or by
the Certificate Guaranty Insurer]; (iii) insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, and certain
actions by or on behalf of the Master Servicer indicating its insolvency or
inability to pay its obligations; or (iv) any failure of the Master Servicer to
make any Advance to the extent such failure materially or adversely affects the
interests of the Certificate Guaranty Insurer, or the Certificateholders which
continues unremedied for a period of five Business Days after the date on which
notice of such failure, requiring the same to be remedied, shall have been given
to the Master Servicer by the Trustee [or by the Certificate Guaranty Insurer].
Rights Upon Termination Event
So long as a Termination Event remains unremedied, the Depositor or the
Trustee may, and upon the receipt of instructions from the holders of
Certificates (or, in the case of Book-Entry Certificates, the beneficial
interests therein) of any class evidencing not less than 51% of the aggregate
Percentage Interests constituting such class [or the Certificate Guaranty
Insurer], the Depositor or Trustee shall terminate all of the rights and
obligations of the Master Servicer under the Agreement and in and to the
Mortgage Loans, whereupon the Trustee will succeed to all of the
responsibilities, duties, and liabilities of the Master Servicer under the
Agreement, including the obligation to make Advances. Notwithstanding the
foregoing, in the event of a Termination Event arising from the Master
Servicer's failure to make an Advance as described in clause (iv) in the
preceding paragraph, the Trustee shall terminate all of the rights and
obligations of the Master Servicer under the Agreement (other than the right to
receive reimbursement for Advances and Servicing Advances theretofor made) and
in and to the Mortgage Loans as described in the preceding sentence.
No Certificateholder, solely by virtue of such holder's status as a
Certificateholder, will have any right under the Agreement to institute any
proceeding with respect thereto, unless such holder previously has given to the
Trustee written notice of a Termination Event and unless the holders of
Certificates of any class evidencing not less than 25% of the aggregate
Percentage Interests constituting such class have made written request to the
Trustee to institute such proceeding in its own name as Trustee thereunder and
have offered to the Trustee reasonable indemnity, and the Trustee for ___ days
has neglected or refused to institute any such proceeding.
The Trustee
[ ] will be the trustee under the Agreement (the "Trustee"). The Depositor
and [ ] may maintain other banking relationships in the ordinary course of
business with the Trustee. Senior Certificates may be surrendered to the
corporate trust office of the Trustee located at
[____________________________________ _____], Attention: __________________ or
at such other addresses as the Trustee may designate from time to time.
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YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
Delay in Distributions; Index Lag
The effective yield to the holders of the Senior Certificates will be lower
than the yield otherwise produced by the applicable rate at which interest is
passed through to such holders and the purchase price of such Certificates
because monthly distributions will not be payable to such holders until the
___th day (or, if such day is not a Business Day, the following Business Day) of
the month following the month in which interest accrues on the Mortgage Loans
(without any additional distribution of interest or earnings thereon in respect
of such delay). [In addition, the Mortgage Rate applicable for any will be the
most recent Index announced 45 days prior to each Adjustment Date. See "The
Mortgage Pool" herein.]
Prepayment Considerations and Risks
The rate of principal payments on the Senior Certificates, the aggregate
amount of distributions on the Senior Certificates and the yield to maturity of
the Senior Certificates will be related to the rate and timing of payments of
principal on the Mortgage Loans. The rate of principal payments on the Mortgage
Loans will in turn be affected by the amortization schedules of the Mortgage
Loans [(which will change periodically to accommodate adjustments to the
Mortgage Rates)] and by the rate of Principal Prepayments (including for this
purpose prepayments resulting from refinancing, liquidations of the Mortgage
Loans due to defaults, casualties, condemnations and repurchases by the Seller
or Master Servicer). [The Mortgage Loans may be prepaid by the Mortgagors at any
time without a prepayment penalty (see "The Mortgage Pool" herein).] [As
described under "Description of the Certificates" herein, all Principal
Prepayments, until the Distribution Date occurring in [ ], will be distributed
to the Class A Certificates.] [Increases in the required monthly payments on
Mortgage Loans with an Adjustable Rate in excess of those assumed in
underwriting such Mortgage Loans may result in a default rate higher than that
which may have been experienced had such Adjustable Rate Mortgage Loans borne
Fixed Rates.] [The Mortgage Loans are subject to the "due-on-sale" provisions
included therein.] Prepayments, liquidations and purchases of the Mortgage Loans
(including any optional purchase by the Master Servicer of a defaulted Mortgage
Loan) will result in distributions to Class A Certificateholders of principal
amounts which would otherwise be distributed over the remaining terms of the
Mortgage Loans. Since the rate of payment of principal on the Mortgage Loans
will depend on future events and a variety of factors, no assurance can be given
as to such rate or the rate of Principal Prepayments. The extent to which the
yield to maturity of a Class A Certificate may vary from the anticipated yield
will depend upon the degree to which it is purchased at a discount or premium,
and the degree to which the timing of payments thereon is sensitive to
prepayments, liquidations and purchases of the Mortgage Loans. Further, in the
case of any Class A Certificate purchased at a discount, an investor should
consider the risk that a slower than anticipated rate of principal payments on
the Mortgage Loans could result in an actual yield to such investor that is
lower than the anticipated yield and, in the case of any Class A Certificate
purchased at a premium and any Class S Certificate, the risk that a faster than
anticipated rate of principal payments, liquidations and purchases could result
in an actual yield to such investor that is lower than the anticipated yield. An
investor in a Class S Certificate should carefully consider the risk that a
rapid rate of principal
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payments on the Mortgage Loans could result in the failure of such investor to
recover its initial investment.
[To the extent that amounts on deposit in the Pre-Funding Account have not
been fully applied to the purchase of Subsequent Mortgage Loans by or on behalf
of the Trust by the end of the Funding Period, the holders of the Class A
Certificates will receive a prepayment of principal in an amount equal to the
funds remaining in the Pre-Funding Account at such time, which prepayment will
be made on the first Distribution Date following the end of the Funding Period.
It is anticipated that the principal amount of Subsequent Mortgage Loans
purchased by or on behalf of the Trust will not be exactly equal to the amount
on deposit in the Pre-Funding Account and that therefore there will be at least
a nominal amount of principal prepaid to the holders of the Class A
Certificates.]
[The Class A Pass-Through Rate for each Distribution Date will not exceed
the weighted average of the Mortgage Rates on the Mortgage Loans for the
preceding calendar month.] Disproportionate principal payments (whether
resulting from full or partial prepayments) on Mortgage Loans having Mortgage
Rates higher or lower than the then current Class A Pass-Through Rate will also
affect the yield on the Class A Certificates. The yield to maturity of the Class
A Certificates will be lower than what would otherwise be produced if
disproportionate principal payments (including Principal Prepayments) are made
on Mortgage Loans having Mortgage Rates that exceed the weighted average
Mortgage Rate. Similarly, the yield to maturity of the Class S Certificates will
be lower than what would otherwise be produced if disproportionate principal
payments (including Principal Prepayments) are made on Mortgage Loans having
Strip Rates [(or Gross Margins)] that exceed the weighted average Strip Rate
[(or weighted average Gross Margin)].
[___% of the Mortgage Loans are Adjustable Rate Mortgage Loans. The rate of
principal prepayments with respect to Adjustable Rate Mortgage Loans has
fluctuated in recent years. As is the case with conventional Fixed Rate Mortgage
Loans, Adjustable Rate Mortgage Loans may be subject to a greater rate of
principal prepayments in a declining interest rate environment. For example, if
prevailing interest rates were to fall significantly, Adjustable Rate Mortgage
Loans could be subject to higher prepayment rates than if prevailing interest
rates were to remain constant because the availability of Fixed Rate Mortgage
Loans at competitive interest rates may encourage mortgagors to refinance their
Adjustable Rate Mortgage Loans to "lock in" lower Fixed Rates.] Conversely, if
prevailing interest rates were to rise significantly, the rate of prepayments on
Adjustable Rate Mortgage Loans would generally be expected to decrease, and the
rate of defaults might increase if Mortgagors were unable to meet the resulting
increases in debt service payments. The rate of payments (including prepayments)
on pools of mortgage loans is also influenced by a variety of economic,
geographic, social and other factors, including changes in mortgagors' housing
needs, job transfers, unemployment, mortgagors' net equity in the mortgaged
properties and servicing decisions. No assurances can be given as to the rate of
prepayment on the Mortgage Loans in stable or changing interest rate
environments.
The timing of changes in the rate of prepayments on the Mortgage Loans may
significantly affect an investor's actual yield to maturity, even if the average
rate of principal
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payments is consistent with an investor's expectations. In general, the earlier
a prepayment of principal on the Mortgage Loans, the greater the effect on an
investor's yield to maturity. 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 Senior
Certificates may not be offset by a subsequent like decrease (or increase in the
rate of principal payments).
[Limitation on Adjustments
Although each of the Adjustable Rate Mortgage Loans bears interest at an
Adjustable Rate, the [semi-annual] [annual] adjustments of the Mortgage Rate for
any Mortgage Loan will not exceed the Periodic Rate Cap and the Mortgage Rate
will in no event exceed the Maximum Rate for such Mortgage Loan, regardless of
the level of interest rates generally or the rate otherwise produced by the
Index and the Gross Margin. [In addition, such adjustments will be subject to
rounding to the nearest one-eighth of 1%.]]
Sensitivity of The Class S Certificates
The yield to maturity of the Class S Certificates will be highly sensitive
to the prepayment, repurchase and default experience of the Mortgage Loans
included in the Trust Fund. Investors should consider carefully the associated
risks, including the risk that a rapid rate of Principal Prepayments or
repurchases of Mortgage Loans could result in the failure of investors in the
Class S Certificates to recover their initial investment.
Prepayments on mortgage loans are commonly measured relative to a
prepayment standard or model. The model used in this Prospectus Supplement, the
Constant Prepayment Rate Model or "CPR", assumes that Principal Prepayments will
be made at a constant rate per annum. CPR further assumes that all of the
Mortgage Loans have the same principal balance and amortize at the same rate and
that each such Mortgage Loan in each month of its life will either be paid as
scheduled or be prepaid in full. CPR does not purport to be either an 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 included in the Trust Fund.
The second following table (the "Yield Table") demonstrates the sensitivity
of the pre-tax yield on the Class S Certificates to various rates of prepayment
by projecting the aggregate payments of interest on the Class S Certificates and
the corresponding pre-tax yields on a corporate bond equivalent basis, assuming
distributions on the Mortgage Loans are made as set forth in the Agreement. The
following chart sets forth certain assumptions used in calculating distributions
on the Mortgage Loans for the Yield Table.
ASSUMED MORTGAGE LOAN CHARACTERISTICS
Scheduled Principal Balance as of the Cut-off Date....... $
Mortgage Rate............................................ %
Strip Rate............................................... %
Remaining Term to Stated Maturity........................ months
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It has also been assumed that: (i) the Mortgage Loans prepay at the
specified percentages of CPR, (ii) no defaults or delinquencies on the Mortgage
Loans are experienced, (iii) the Seller is not required to repurchase or
substitute any or all of the Mortgage Loans pursuant to the Agreement and the
Master Servicer does not exercise its option to repurchase any or all of the
Mortgage Loans pursuant to the Agreement, (iv) scheduled payments for all
Mortgage Loans are received on the first day of each month (commencing ________
__, 199_) and are computed prior to giving effect to prepayments received in the
prior month, (v) all Mortgage Loans will prepay at the same rate and all such
payments will be treated as prepayments in full of individual Mortgage Loans,
with no shortfalls in collection of interest, (vi) such prepayments will be
received on the last day of each month commencing in ________ 199_ and (vii) the
Class S Certificates will be purchased on the Closing Date at a price equal to
$___________ (which includes accrued interest).
PRE-TAX YIELD ON THE CLASS S CERTIFICATES
<TABLE>
<CAPTION>
Percentages of CPR
- ---------------------------------------------------------------------------------------------------------------
3% 5% 10% 15% 17% 18% 20% 25% 30% 35%
-- -- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
% % % % % % % % % %
</TABLE>
The pre-tax yields set forth in the Yield Table were calculated by
determining the monthly discount rates which, when applied to the assumed
streams of cash flows to be paid on the Class S Certificates, would cause the
discounted present value of such assumed stream of cash flows to the Closing
Date to equal $____________, and converting such monthly rates to corporate bond
equivalent rates. Such calculation does not take into account the interest rates
at which funds received by Certificateholders as distributions on the Class S
Certificates may be reinvested and consequently does not purport to reflect the
return on any investment in the Class S Certificates when such reinvestment
rates are considered.
It is highly unlikely that the Mortgage Loans will prepay at the same rate
until maturity or that all of the Mortgage Loans will prepay at the same rate or
time or that prepayments will be spread evenly among Mortgage Loans with
differing [Gross Margins and] Strip Rates. As a result of these factors, the
pre-tax yields on the Class S Certificates are likely to differ from those shown
in the Yield Table, even if all of the Mortgage Loans prepay at the indicated
percentages of CPR. No representation is made as to the actual rate of principal
payments on the Mortgage Loans (or the Mortgage Rates thereon) for any period or
over the life of the Class S Certificates or as to the yield on the Class S
Certificates. Investors must make their own decisions as to the appropriate
prepayment assumptions to be used in deciding whether to purchase the Class S
Certificates.
CREDIT ENHANCEMENT
Subordination of Subordinated Certificates
The rights of the Subordinated Certificateholders to receive distributions
with respect to the Mortgage Loans will be subordinated to such rights of the
Senior Certificateholders only to the extent described herein [describe
subordination]. The subordination of the Subordinated Certificates and the
Residual Certificates is intended to increase the likelihood of receipt by the
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Senior Certificateholders of the maximum amount to which they are entitled on
any Distribution Date and [following the date on which the amount on deposit in
the Reserve Fund has been reduced to zero] to provide such holders protection
against losses resulting from Liquidated Mortgages to the extent described
herein].
The protection afforded to the Senior Certificateholders from the
subordination feature described above will be effected by the preferential right
of the Senior Certificateholders to receive current distributions from the
Mortgage Pool.
The subordination feature described above is intended to enhance the
likelihood of timely payment of principal and interest and to protect holders of
Senior Certificates against losses; however, in certain circumstances the amount
of subordination may be exhausted and shortfalls could result. If on any
Distribution Date the aggregate amount of payments received from Mortgagors,
[Advances from the Master Servicer], funds otherwise payable to holders of the
Subordinated Certificates [and monies in the Reserve Fund] do not provide
sufficient funds to make full distributions to holders of the Senior
Certificates, holders of the Senior Certificates may incur a loss. [In the event
the Reserve Fund is depleted before the available subordination amount is
reduced to zero, holders of the Senior Certificates will nevertheless have a
preferential right to receive current distributions from the Mortgage Loans to
the extent of such available subordination amount.] Holders of the Senior
Certificates will bear [their proportionate share of] any losses realized on the
Mortgage Loans in excess of the available subordination amount. See "Description
of the Certificates -- Priority of Distribution among Certificates" herein.]
[The Reserve Fund]
[The protection afforded to Senior Certificateholders from the
subordination feature described above will be effected both by the preferential
right of Senior Certificateholders to receive current distributions from the
Mortgage Pool and by the establishment of the reserve fund (the "Reserve
Fund").]
[The Reserve Fund will be established with a financial institution
acceptable to the Rating Agencies to cover a specified amount of certain losses
arising from Liquidated Mortgages, special hazards, and Mortgagor bankruptcy, as
set forth in the Agreement and as further described below. The initial amount of
the Reserve Fund is expected to be approximately $_________, which is equal to
the sum of (i) [ ], with respect to special hazard losses, (ii) $___ with
respect to liquidation losses on the Mortgage Loans and (iii) $_________, with
respect to bankruptcy losses, or such other amounts as are acceptable to the
Rating Agencies in each case. The initial coverage amount of the Reserve Fund is
based on the Mortgage Loans expected to be included in the Mortgage Pool on the
Closing Date, and is subject to change based on changes in the Mortgage Pool
prior to that date. See "The Mortgage Pool" herein.
Special Hazard Coverage
Special hazard coverage under the Reserve Fund will initially equal
approximately $________. On each anniversary of the Cut-off Date, special hazard
coverage will be reduced to an amount equal to the amount determined in
accordance with the Agreement. However, if special
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hazard coverage as of such anniversary date has been reduced to an amount less
than such amount by reason of payment of special hazard losses, neither the
Depositor nor the Master Servicer will be obligated to increase the amount of
special hazard coverage on such anniversary of the Cut-off Date.
Bankruptcy Coverage
A portion of the principal balance of a Mortgage Loan may become unsecured
pursuant to a ruling under the federal Bankruptcy Code, resulting in a shortfall
in payment of principal and interest resulting from the recasting of any
originally scheduled monthly principal and interest payment pursuant to a ruling
under the Bankruptcy Code. Bankruptcy coverage under the Reserve Fund will be
established in the amount of $________, and will be reduced thereafter as
permitted under the Agreement.
Additional Information
The amount of coverage of the Reserve Fund may be canceled or reduced from
time to time for each of the risks covered, provided that the then current
ratings of the Certificates assigned by the Rating Agencies are not adversely
affected thereby. In addition, a letter of credit or other collateral may be
substituted for the Reserve Fund to the extent acceptable to the Rating
Agencies.
The Master Servicer will be required to instruct the Trustee from time to
time to make withdrawals from the Reserve Fund for the benefit of the
Certificateholders.
The coverage amount for each type of coverage under the Reserve Fund will
be reduced over the life of the Certificates by the aggregate amount of any
withdrawals from the Reserve Fund with respect to special hazard losses,
liquidation losses or bankruptcy losses, respectively. The amount for each type
of coverage may otherwise be reduced to the extent acceptable to the Rating
Agencies. If the aggregate amount of withdrawals from the Reserve Fund with
respect to a given category of loss reaches the maximum coverage amount for such
category, any further losses will be borne by the Certificateholders.]
[Special Hazard Insurance Policy]
Subject to the limitations described below, the Special Hazard Insurance
Policy covers (i) loss by reason of damage to Mortgaged Properties caused by
certain hazards (including earthquakes and, to a limited extent, mud flows and
floods) not insured against under the standard form of hazard insurance policy
for the respective states in which the Mortgaged Properties are located or under
a flood insurance policy if the Mortgaged Property is located in a federally
designated flood area and (ii) loss for partial damage caused by reason of the
application of the coinsurance clause contained in hazard insurance policies.
See "Credit Enhancement--Special Hazard Insurance Policies" in the Prospectus
for a description of the hazard insurance and flood insurance coverages required
to be maintained for Mortgage Loans. Claims under the Special Hazard Insurance
Policy are limited initially to __% of the Pool Principal Balance or [____ the
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Principal Balance of the Mortgage Loan with the highest outstanding principal
balance at the Cut-off Date, whichever is greater.
The special hazard insurance policy (the "Special Hazard Insurance Policy")
will be issued by _________, a __________ corporation (the "Special Hazard
Insurer"). At _________, ____, the Special Hazard Insurer had total assets of
approximately $____ million and total policy holders' surplus of $____ million.
The claim-paying ability of the Special Hazard Insurer is presently rated ______
by _____________.]
[Spread Account]
Pursuant to the Agreement, there shall be established with the Trustee a
separate trust account (the "Spread Account"), for the benefit of the holders of
the Certificates, into which the Trustee will deposit upon receipt from the
Master Servicer on each Distribution Date, [prior to making any payments to the
Certificateholders], the excess, if any, of the aggregate interest [accrued]
[received] during the related Due Period on all of the Mortgage Notes at their
respective Mortgage Rates [(including the portion of any advance allocable
thereto)] over the sum of (i) the Senior Interest Distribution Amount for the
[Class A] Certificates, (ii) the Monthly Premium due to the Certificate Guaranty
Insurer, (iii) any fees due to the issuers of any Letters of Credit (as defined
herein) and (iv) the Master Servicing Fee (such excess with respect to each
Distribution Date, the "Excess Spread"). [Unless otherwise specified by the
Certificate Guaranty Insurer,] the Trustee is required to retain 100% of the
Excess Spread (the "Periodic Excess Spread Amount") in the Spread Account until
the amount on deposit therein is equal to an amount specified in the Agreement
(the "Base Spread Account Requirement"). After the amount on deposit in the
Spread Account is equal to the Base Spread Account Requirement, the amount
required to be on deposit in the Spread Account at any time (the "Specified
Spread Account Requirement") may be reduced over time as specified in the
Agreement. The percentage used in determining the Periodic Excess Spread Amount
may be reduced at the sole discretion of the Certificate Guaranty Insurer [with
the consent of each person obligated to reimburse issuers of any Letters of
Credit on deposit in the Spread Account for outstanding drawings thereunder
(each such person, an "Account Party"),] and the Base Spread Account Requirement
may be reduced at the sole discretion of the Certificate Guaranty Insurer, in
each case without the consent of any Certificateholder.
The Agreement permits the Spread Account to be funded in part by one or
more letters of credit (each, a "Letter of Credit") issued by banks, trust
companies or other institutions having on the date of delivery of such Letter of
Credit debt ratings acceptable to Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's Ratings Group ("S&P"), and having certain other
qualifications set forth in the Agreement. Amounts available to be drawn under
any Letter of Credit will be deemed to be on deposit in the Spread Account.
On each Distribution Date amounts, if any, on deposit in the Spread Account
will be available to fund any shortfall between the Available Funds for payments
to [Class A] Certificateholders and the Senior Distribution Amount; provided
that, on and after the date (the "Spread Account Cross-Over Date") on which the
aggregate withdrawals from the Spread Account to cover shortfalls in amounts
payable on the [Class A] Certificates attributable to liquidation losses
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on Liquidated Mortgages (such withdrawals, "Cumulative Spread Account Receipts")
equal an amount specified in the Agreement (the "Subordinated Amount"), no
further withdrawals with respect to shortfalls in the amounts required to be
paid to the [Class A] Certificateholders may be made from the Spread Account,
and the Specified Spread Account Requirement will thereafter be zero. In
addition, the Agreement provides that the Specified Spread Account Requirement
for any date shall in no event be greater than the Subordinated Amount as of
such date.
On each Distribution Date, any amounts constituting (i) Excess Spread in
excess of the Periodic Excess Spread Amount (the "Remainder Excess Spread
Amount"), (ii) amounts in the Spread Account in excess of the Specified Spread
Account Requirement as of such Distribution Date (any such amount, a "Spread
Account Excess") and (iii) after the Cross-Over Date, the entire Excess Spread,
will be distributed to the Class R Certificateholders after repayment of
[outstanding draws under any Letters of Credit and of] unreimbursed Advances to
the Master Servicer.
Neither the Class R Certificateholders nor the Master Servicer will be
required to refund any amounts properly distributed to them, regardless of
whether there are sufficient funds on a subsequent Distribution Date to make a
full payment to Class A Certificateholders of the amount required to be paid to
such Certificateholders.
The funding and maintenance of the Spread Account is intended to enhance
the likelihood of timely payment to [Class A] Certificateholders of the Senior
Distribution Amount; however, in certain circumstances, the Spread Account could
be depleted or reduced by the Certificate Guaranty Insurer and shortfalls could
result. The Spread Account will be funded with Excess Spread from all Mortgage
Loans, [without regard to Mortgage Loan Group] and will be available for
distributions to all of the [Class A] Certificates.
Notwithstanding the depletion or reduction of the Spread Account, the
Certificate Guaranty Insurer will be obligated to make Insured Payments on each
Distribution Date to fund the full amount of the Senior Distribution Amount on
such Distribution Date.]
Limited Guarantee
On or before the Closing Date, the Master Servicer will obtain a limited
guarantee (the "Limited Guarantee") issued by CIT, in favor of the Trustee on
behalf of the [Class __] Certificateholders. The Limited Guarantee will provide
for coverage of the distribution due on the [Class _] Certificates on each
Distribution Date. On each Distribution Date, CIT will make available to the
Trustee the amount of any insufficiency in the amount available as of such
Distribution Date which is necessary to distribute to the [Class _]
Certificateholders the ______________ on such Distribution Date (each, a
"Guarantee Payment"). Any such Limited Guarantee will be limited to payments of
principal on the Class __ Certificates aggregating not more than $_____, and a
portion of the coverage of any such Limited Guarantee will be separately
allocated to ____________.
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[THE CERTIFICATE GUARANTY INSURANCE POLICY AND
THE CERTIFICATE GUARANTY INSURER]
The following information has been furnished by the Certificate Guaranty
Insurer for use herein. Reference is made to Exhibit A for specimens of the
Certificate Guaranty Insurer's Certificate Guaranty Insurance Policy for the
[Class _] Certificates.
On or before the Closing Date, the Servicer will obtain the certificate
guaranty insurance policy (the "Certificate Guaranty Insurance Policy") from
__________ (the "Certificate Guaranty Insurer"), in favor of the Trustee on
behalf of the [Class _] Certificateholders. The Certificate Guaranty Insurance
Policy unconditionally and irrevocably guarantees to any Owner (as described
below) that an amount equal to each full and complete Insurance Payment will be
received by the Trustee, on behalf of the Owners, for distribution by the
Trustee to each Owner of each Owner's proportionate share of the Insured
Payment. The Certificate Guaranty Insurer's obligations under the Certificate
Guaranty Insurance Policy with respect to a particular Insured Payment shall be
discharged to the extent funds equal to the applicable Insured Payment are
received by the Trustee, whether or not such funds are properly applied by the
Trustee. Insured Payments shall be made only at the time set forth in the
Certificate Guaranty Insurance Policy and no accelerated Insured Payments shall
be made regardless of any acceleration of the [Class _] Certificates, unless
such acceleration is at the sole option of the Certificate Guaranty Insurer. See
"The Agreement--Termination; Purchase of Mortgage Loans" in the Prospectus.
Notwithstanding the foregoing paragraph, the Certificate Guaranty Insurance
Policy does not cover shortfalls, if any, attributable to the liability of the
Trust or the Trustee for withholding taxes, if any (including interest and
penalties in respect of any such liability). Further, the Certificate Guaranty
Insurance Policy does not guaranty payment of __________.
The Certificate Guaranty Insurer will pay any Insured Payment that is a
Preference Amount (as described below) on the Business Day (as defined in the
Agreement) following receipt on a Business Day by the Fiscal Agent (as defined
below) of (i) a certified copy of such order, (ii) an opinion of counsel
satisfactory to the Certificate Guaranty Insurer that such order is final and
not subject to appeal, (iii) an assignment in such form as is reasonably
required by the Certificate Guaranty Insurer, irrevocably assigning to the
Certificate Guaranty Insurer all rights and claims of the Owner relating to or
arising under the applicable [Class _] Certificates against the debtor which
made such preference payment or otherwise with respect to such preference
payment and (iv) appropriate instruments to effect the appointment of the
Certificate Guaranty Insurer as agent for such Owner in any legal proceeding
related to such preference payment, such instruments being in a form
satisfactory to the Certificate Guaranty Insurer, provided that if such
documents are received after 12:00 noon New York City time on such Business Day,
they will be deemed to be received on the following Business Day. Such payments
shall be disbursed to the receiver or trustee in bankruptcy named in the final
order of the court exercising jurisdiction on behalf of the Owner and not to any
Owner directly unless such Owner has returned principal or interest paid on the
applicable [Class _] Certificate to such receiver or trustee in bankruptcy, in
which case such payment shall be disbursed to such Owner.
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The Certificate Guaranty Insurer will pay nay other amount payable under
the Certificate Guaranty Insurance Policy no later than 12:00 noon New York City
time on the later of the Distribution Date on which the related amount is due or
the Business Day following receipt in New York, New York on a Business Day by
_______, as Agent for the Certificate Guaranty Insurer or any successor fiscal
agent appointed by the Certificate Guaranty Insurer (the "Fiscal Agent") of a
Notice (as described below); provided that if such Notice is received after
12:00 noon New York City time on such Business Day, it will be deemed to be
received on the following Business Day. If any such Notice received by the
Fiscal Agent is not in proper form or is otherwise insufficient for the purpose
of making claims under the Certificate Guaranty Insurance Policy, such Notice
shall be deemed not to have been received by the Fiscal Agent for purposes of
this paragraph, and the Certificate Guaranty Insurer or the Fiscal Agent, as the
case may be, shall promptly so advise the Trustee and the Trustee may submit an
amended Notice.
Insured Payments due under the Certificate Guaranty Insurance Policy,
unless otherwise stated in the Certificate Guaranty Insurance Policy, will be
disbursed by the Fiscal Agent to the Trustee on behalf of the Owners by wire
transfer of immediately available funds in the amount of the Insured Payment
less, in respect of Insured Payments related to Preference Amounts, any amount
held by the Trustee for the payment of such Insured Payment and legally
available therefor.
The Fiscal Agent is the agent of the Certificate Guaranty Insurer only and
the Fiscal Agent shall in no event be liable to Owners for any acts of the
Fiscal Agent or any failure of the Certificate Guaranty Insurer to deposit, or
cause to be deposited, sufficient funds to make payments due under the
Certificate Guaranty Insurance Policy.
As used in the Certificate Guaranty Insurance Policy, the following terms
shall have the following meanings:
"Deficiency Amount" means with respect to any Distribution Date, ________.
"Insured Payment" means (i) as of any Distribution Date, any Deficiency
Amount and (ii) any Preference Amount.
"Notice" means the telephonic or telegraphic notice, promptly confirmed in
writing by telecopy substantially in the form of Exhibit A attached to the
related Certificate Guaranty Insurance Policy, the original of which is
subsequently delivered by registered or certified mail, from the Trustee
specifying the Insured Payment which shall be due and owing on the applicable
Distribution Date.
"Owner" means each [Class _] Certificateholder (other than the Trust) who,
on the applicable Distribution Date, is entitled under the terms of the
applicable [Class _] Certificates to payment thereunder.
"Preference Amount" means any amount previously distributed to an Owner on
the Certificates 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
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from time to time, in accordance with a final nonappealable order of a court
having competent jurisdiction.
Capitalized terms used in the Certificate Guaranty Insurance Policy and not
otherwise defined therein shall have the respective meanings set forth in the
Agreement as of the date of execution of the Certificate Guaranty Insurance
Policy, without giving effect to any subsequent amendment or modification to the
Agreement.
The Certificate Guaranty Insurance Policy will be issued under and pursuant
to, and shall be construed under, the laws of the State of ___________, without
giving effect to the conflict of laws principles thereof.
The insurance provided by the Certificate Guaranty Insurance Policy is not
covered by the __________ Fund specified in _______ of the __________ Insurance
Law.
The Certificate Guaranty Insurance Policy is not cancelable for any reason.
The premiums on the Certificate Guaranty Insurance Policy is not refundable for
any reason including payment, or provision being made for payment, prior to
maturity of the [Class _] Certificates.
The table below presents selected financial information of the Certificate
Guaranty Insurer determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities ("SAP") and
generally accepted accounting principles ("GAAP"):
[INSERT TABLE]
Audited financial statements of the Certificate Guaranty Insurer as of
______ and each of the three years and each of the three years in the period
ended __________ are included herein as Exhibit B. Unaudited financial
statements of the Certificate Guaranty Insurer for the ___ month period ended
______ are included herein as Exhibit C. Such financial statements have been
prepared on the basis of GAAP. Copies of the Certificate Guaranty Insurer's
199____ year end audited financial statements prepared in accordance with
statutory accounting practices are available from the Certificate Guaranty
Insurer. The address of the Certificate Guaranty Insurer is _______________.
The Certificate Guaranty Insurer does not accept any responsibility for the
accuracy or completeness of this Prospectus Supplement or the Prospectus or any
information or disclosure contained herein or therein, or omitted herefrom or
therefrom, other than with respect to the accuracy of the information regarding
the Certificate Guaranty Insurance Policy and the Certificate Guaranty Insurer
set forth under the heading "The Certificate Guaranty Insurance Policy and the
Certificate Guaranty Insurer" herein and in Exhibits A, B and C hereto.
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USE OF PROCEEDS
The Depositor will apply the net proceeds of the sale of the Offered
Certificates [(together with the net proceeds of the sale of the Subordinated
Certificates)] to pay to the Seller the purchase price of the Mortgage Loans and
to pay certain expenses of the offering.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain of the anticipated federal
income tax consequences of the purchase, ownership and disposition of the
Certificates offered hereby. The discussion, and the opinions referred to below,
are based on laws, regulations, rulings and decisions now in effect (or, in the
case of certain regulations, proposed), all of which are subject to change or
possibly differing interpretations. The discussion below does not purport to
deal with federal tax consequences applicable to all categories of investors,
some of which may be subject to special rules. Investors should consult their
own tax advisors in determining the federal, state, local and other tax
consequences to them of the purchase, ownership and disposition of Certificates.
For purposes of this tax discussion (except with respect to information
reporting, or where the context indicates otherwise), the terms
"Certificateholder" and "holder" mean the beneficial owner of a Certificate.
[REMIC Election
Under the Internal Revenue Code of 1986, as amended (the "Code"), an
election will be made to treat the Trust [or certain assets of such Trust as a
REMIC]. [Certificateholders will also have the benefit of a Reserve Fund and of
certain agreements (each, a "Yield Supplement Agreement") under which payment
will be made from the Reserve Fund in the event that interest accrued on the
Mortgage Loans at their Mortgage Interest Rates is insufficient to pay interest
on the Certificates (a "Basis Risk Shortfall"). The [Class __] Certificates will
be designated as "regular interests" ("REMIC Regular Certificates") in the REMIC
(within the meaning of Section 860G(a)(1) of the Code) and the Class R
Certificate will be designated as the "residual interest" ("REMIC Residual
Certificates") in the REMIC (within the meaning of Section 860G(a)(2) of the
Code).
Qualification as a REMIC. Qualification as a REMIC involves ongoing
compliance with certain requirements and the following discussion assumes that
such requirements will be satisfied by the Trust as long as there are any
Certificates outstanding. Substantially all of the assets of the REMIC must
consist of "qualified mortgages" and "permitted investments" as of the close of
the third month beginning after the day on which the REMIC issues all of its
regular and residual interests (the "Startup Day") and at all times thereafter.
The term "qualified mortgage" means any obligation (including a participation or
certificate of beneficial ownership in such obligation) which is principally
secured by an interest in real property that is transferred to the REMIC on the
Startup Day in exchange for regular or residual interests in the REMIC or is
purchased by the REMIC within the three-month period beginning on the Startup
Day if such purchase is pursuant to a fixed price contract in effect on the
Startup Day. The regulations under
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sections 860A through 860G of the Code (the "REMIC Regulations") provide that an
obligation is principally secured by an interest in real property if the fair
market value of the real property securing the obligation is at least equal to
either (i) 80% of the issue price (generally, the principal balance) of the
obligation at the time it was originated, or (ii) 80% of the adjusted issue
price (the then-outstanding principal balance, with certain adjustments) of the
obligation at the time it is contributed to a REMIC. In the case of a second or
other junior mortgage, the fair market value of the underlying real property
must be reduced by the amount of any lien that is senior to such mortgage, and
must be further reduced by a proportionate amount of any lien which is in parity
with such mortgage. Alternatively, an obligation is principally secured by an
interest in real property if substantially all of the proceeds of the obligation
were used to acquire or to improve or protect an interest in real property that,
at the origination date, is the only security for the obligation (other than the
personal liability of the obligor). A qualified mortgage also includes a
qualified replacement mortgage that is used to replace any qualified mortgage
within three months of the Startup Day or to replace a defective mortgage within
two years of the Startup Day.
Permitted Investments. Permitted investments consist of (a) temporary
investments of cash received under qualified mortgages before distribution to
holders of interests in the REMIC ("cash-flow investments"), (b) amounts, such
as a fund (a "reserve fund"), if any, reasonably required to provide for full
payment of expenses of the REMIC, the principal and interest due on regular or
residual interests in the event of defaults on qualified mortgages, lower than
expected returns on cash-flow investments, prepayment interest shortfalls or
certain other contingencies ("qualified reserve assets"), and (c) certain
property acquired as a result of foreclosure of defaulted qualified mortgages
("foreclosure property"). Certain credit enhancement arrangements which provide
for full or partial payment on one or more classes of REMIC Regular Certificates
in the event of defaults or delinquencies on qualified mortgages, unanticipated
losses or expenses incurred by the REMIC or lower than expected returns on cash
flow investments are not treated as separate assets of the REMIC under the REMIC
Regulations and payments under such arrangements are treated as payments
received on qualified mortgages. In addition, the REMIC Regulations do not treat
certain reserve funds maintained outside of the REMIC as an asset of the REMIC.
A reserve fund will not be qualified if more than 30% of the gross income from
the assets in the reserve fund is derived from the sale or other disposition of
property held for less than three months, unless such sale is necessary to
prevent a default in payment of principal or interest on a regular interest as
the result of a default on a qualified mortgage. In accordance with Section
860G(a)(7) of the Code, a reserve fund must be "promptly and appropriately"
reduced as payments on Mortgage Loans are received. Foreclosure property will be
a permitted investment only to the extent that such property is not held for
more than two years.
The Code requires that in order to qualify as a REMIC an entity must make
reasonable arrangements designed to ensure that certain specified entities,
generally including governmental entities or other entities that are exempt from
United States tax, including the tax on unrelated business income ("Disqualified
Organizations"), not hold residual interests in the REMIC. Consequently, in the
case of any Trust for which a REMIC election is made the transfer, sale or other
disposition of a REMIC Residual Certificate to a Disqualified Organization will
be
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prohibited and the ability of a REMIC Residual Certificate to be transferred
will be conditioned on the Trustee's receipt of a certificate or other document
representing that the proposed transferee is not a Disqualified Organization.
The transferor of a REMIC Residual Certificate must not, as of the time of the
transfer, have actual knowledge that such representation is false. The Code
further requires that reasonable arrangements must be made to enable a REMIC to
provide the Internal Revenue Service (the "Service") and certain other parties,
including transferors of residual interests in a REMIC, with the information
needed to compute the tax imposed by Section 860E(e)(1) of the Code if, in spite
of the steps taken to prevent Disqualified Organizations from holding residual
interests, such an organization does, in fact, acquire a residual interest.
If the Trust fails to comply with one or more of the ongoing requirements
for qualification as a REMIC, the Trust will not be treated as a REMIC for the
year during which such failure occurs and thereafter unless the Service
determines, in its discretion, that such failure was inadvertent (in which case,
the Service may require any adjustments which it deems appropriate). [Failure to
treat the Trust as a REMIC may cause the Trust to be treated as an association
taxable as a corporation. Such treatment could result in income of the Trust
being subject to corporate tax in the hands of the Trust and in a reduced amount
being available for distribution to Certificateholders as a result of the
payment of such taxes.]
Certificates
With respect to each series of Certificates, the Trustee will agree in the
Agreement to elect to treat the related Trust [or certain assets of such Trust]
as a REMIC. Qualification as a REMIC requires ongoing compliance with certain
conditions. Upon the issuance of each series of Certificates, Schulte Roth &
Zabel LLP, counsel to the Depositor, will deliver its opinion generally to the
effect that, with respect to each series of Certificates for which a REMIC
election is to be made, under then existing law and assuming (i) a proper and
timely REMIC election, and (ii) ongoing compliance with the provisions of the
Agreement and applicable provisions of the Code and applicable Treasury
regulations and rulings, and in reliance upon the representations and warranties
in the Agreement, at the initial issuance of Certificates in such Series, the
related Trust or certain assets of such Trust will be a REMIC and the
Certificates will be considered to evidence ownership of "regular interests" in
the REMIC within the meaning of Section 860G(a)(1) of the Code or "residual
interests" in the REMIC within the meaning of the Section 860G(a)(2) of the
Code.
[Holders of the REMIC Regular Certificates who are entitled to payments
from the Reserve Fund in the event of a Basis Risk Shortfall will be required to
allocate their purchase price between their beneficial ownership interests in
the related REMIC regular interests and Yield Supplement Agreements, and will be
required to report their income realized with respect to each, calculated taking
into account such allocation. In general, such allocation would be based on the
respective fair market values of the REMIC regular interests and the related
Yield Supplement Agreements on the date of purchase of the related Certificate.
No representation is or will be made as to the fair market value of the Yield
Supplement Agreements or the relative
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values of the REMIC regular interests and the Yield Supplement Agreements, upon
initial issuance of the related REMIC Regular Certificates or at any time
thereafter. Holders of the REMIC Regular Certificates are advised to consult
their own tax advisors concerning the determination of such fair market values.
Under the Agreement, holders of applicable classes of REMIC Regular Certificates
will agree that, for federal income tax purposes, they will be treated as owners
of the respective class of regular interests and of the corresponding Yield
Supplement Agreement.]
Status of Certificates as Real Property Loans. The Certificates will be
"real estate assets" for purposes of Section 856(c)(5)(A) of the Code and a
"regular . . . interest in a REMIC" within the meaning of Section
7701(a)(19)(C)(xi) of the Code (assets qualifying under one or more of those
sections, applying each section separately, "qualifying assets") to the extent
that the REMIC's assets are qualifying assets. However, if at least 95 percent
of the REMIC's assets are qualifying assets, then 100 percent of the
Certificates will be qualifying assets, but not to the extent that the Trust's
assets consist of Yield Supplement Agreements. Similarly, income on the
Certificates will be treated as "interest on obligations secured by mortgages on
real property" within the meaning of Section 856(c)(3)(B) of the Code, subject
to the limitations of the preceding two sentences. [In addition to Mortgage
Assets, the REMIC's assets will include payments on Mortgage Assets held pending
distribution to holders of Certificates, amounts in reserve accounts (if any),
other credit enhancements (if any) and possibly Buydown Funds.] The Mortgage
Assets generally will be qualifying assets under all three of the foregoing
sections of the Code. However, Mortgage Assets that are not secured by
residential real property or real property used primarily for church purposes
may not constitute qualifying assets under Section 7701(a)(19)(c)(v) of the
Code. The REMIC Regulations treat (credit enhancements) as part of the mortgage
or pool of mortgages to which they relate, and therefore (credit enhancements)
generally should be qualifying assets. Regulations issued in conjunction with
the REMIC Regulations provide that amounts paid on Mortgage Assets and held
pending distribution to holders of Certificates ("cash flow investments") will
be treated as qualifying assets. [It is unclear whether reserve funds or Buydown
Funds would also constitute qualifying assets under any of those provisions.] In
certain instances, the principal balance of a Mortgage Loan may exceed the value
of the Mortgaged Property which secures such Mortgage Loan. Although no specific
authority addresses this issue, in such instances, the extent to which such a
Mortgage Loan may be treated as a qualifying asset and the extent to which
interest on such a Mortgage Loan comprises "interest on obligations secured by
mortgages on real property" under Section 856(c)(3)(B) of the Code may be
limited. REMIC Regular Certificates held by a regulated investment company or a
real estate investment trust will not constitute "Government Securities" within
the meaning of Sections 851(b)(4)(A)(i) and 856(c)(5)(A) of the Code,
respectively.
[Tiered REMIC Structures
Two or more separate elections will be made to treat [designated portions
of the related Trust] as REMICs ("Tiered REMICs") for federal income tax
purposes. Upon the issuance of the Certificates, Schulte Roth & Zabel LLP will
deliver its opinion generally to the effect that, assuming (i) proper and timely
REMIC elections and (ii) compliance with all provisions of the
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Agreement and applicable provisions of the Code and applicable Treasury
regulations and rulings, and in reliance upon the representations and warranties
in the Agreement at the initial issuance of Certificates, the Tiered REMICs will
each qualify as a REMIC and the Certificates issued by the Tiered REMICs,
respectively, will be considered to evidence ownership of "regular interests" or
"residual interests" in the related REMIC within the meaning of the REMIC
provisions of the Code.
Solely for purposes of determining whether the Certificates will be "real
estate assets" within the meaning of Section 856(c)(5)(A) 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.]
REMIC Regular Certificates
Current Income on REMIC Regular Certificates -- General. Except as
otherwise indicated herein, the REMIC Regular Certificates will be treated for
federal income tax purposes (but not necessarily for accounting or other
purposes) as debt instruments that are issued by the REMIC on the date of
issuance of the REMIC Regular Certificates and not as ownership interests in the
REMIC or the REMIC's assets. Stated interest on a REMIC Regular Certificate will
be taxable as ordinary income. Holders of REMIC Regular Certificates who would
otherwise report income under a cash method of accounting will be required to
report income with respect to REMIC Regular Certificates under an accrual
method.
Under Temporary Treasury Regulations, if a Trust, with respect to which a
REMIC election is made, is considered to be a "single-class REMIC," a portion of
the REMIC's servicing fees, administrative and other non-interest expenses,
including assumption fees and late payment charges retained by the Master
Servicer [or the Depositor] will be allocated as a separate item to those
holders of REMIC Regular Certificates that are "pass-through interest holders".
Generally, a single-class REMIC is defined as a REMIC that would be treated as a
fixed investment trust under applicable law but for its qualification as a
REMIC, or a REMIC that is substantially similar to an investment trust but is
structured with the principal purpose of avoiding this allocation requirement
imposed by the Temporary Treasury Regulations. Generally, a pass-through
interest holder refers to individuals, entities taxed as individuals, such as
certain trusts and estates, which hold their REMIC Regular Certificates either
directly or through certain pass-through entities. Such a holder of a REMIC
Regular Certificate in a single-class REMIC will be allowed to deduct the
foregoing expenses under Section 212 of the Code only to the extent that, in the
aggregate and combined with certain other miscellaneous itemized deductions,
they exceed 2% of the adjusted gross income of the holder. In addition, Section
68 of the Code provides that the amount of certain itemized deductions
(including those provided for in Section 212 of the Code) otherwise allowable
for the taxable year for an individual whose adjusted gross income exceeds an
inflation-adjusted threshold amount specified in the Code ($121,200 for taxable
years beginning in 1997, in the case of a joint return) will be reduced by the
lesser of (i) 3% of the excess of adjusted gross income over the specified
threshold amount, or (ii) 80% of the amount
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of itemized deductions otherwise allowable for such taxable year. As a result of
the foregoing limitations, certain holders of REMIC Regular Certificates in
"single-class REMICs" may not be entitled to deduct all of any part of the
foregoing expenses.
Payments of interest on REMIC Regular Certificates may be based on a fixed
rate, a variable rate as permitted by the REMIC Regulations, or may consist of a
specified portion of the interest payments on qualified mortgages where such
portion does not vary during the period the REMIC Regular Certificate is
outstanding. The definition of a variable rate for purposes of the REMIC
Regulations is based on the definition of a qualified floating rate for purposes
of the rules governing original issue discount set forth in Sections 1271
through 1275 of the Code and the regulations thereunder (the "OID Regulations")
with certain modifications and permissible variations. See "REMIC Regular
Certificates-Current Income on REMIC Regular Certificates -- Original Issue
Discount---Variable Rate REMIC Regular Certificates," below, for a discussion of
the definition of a qualified floating rate for purposes of the OID Regulations.
In contrast to the OID Regulations, for purposes of the REMIC Regulations, a
qualified floating rate does not include any multiple of a qualified floating
rate (also excluding multiples of qualified floating rates that themselves would
constitute qualified floating rates under the OID Regulations), and the
characterization of a variable rate that is subject to a cap, floor or similar
restriction as a qualified floating rate for purpose of the REMIC Regulations
will not depend upon the OID Regulations relating to caps, floors, and similar
restrictions. See "REMIC Regular Certificates-Current Income on REMIC Regular
Certificates--Original Issue Discount---Variable Rate REMIC Regular
Certificates," below, for a discussion of the OID Regulations relating to caps,
floors and similar restrictions. A qualified floating rate, as defined above for
purposes of the REMIC Regulations (a "REMIC qualified floating rate"), qualifies
as a variable rate for purposes of the REMIC Regulations if such REMIC qualified
floating rate is set at a "current rate" as defined in the OID Regulations. In
addition, a rate equal to the highest, lowest or an average of two or more REMIC
qualified floating rates qualifies as a variable rate for REMIC purposes. A
REMIC Regular Certificate also may have a variable rate based on a weighted
average of the interest rates on some or all of the qualified mortgages held by
the REMIC where each qualified mortgage taken into account has a fixed rate or a
variable rate that is permissible under the REMIC Regulations. Further, a REMIC
Regular Certificate may have a rate that is the product of a REMIC qualified
floating rate or a weighted average rate and a fixed multiplier, is a constant
number of basis points more or less than a REMIC qualified floating rate or a
weighted average rate, or is the product, plus or minus a constant number of
basis points, of a REMIC qualified floating rate or a weighted average rate and
a fixed multiplier. An otherwise permissible variable rate for a REMIC Regular
Certificate, described above, will not lose its character as such because it is
subject to a floor or a cap, including a "funds available cap" as that term is
defined in the REMIC Regulations. Lastly, a REMIC Regular Certificate will be
considered as having a permissible variable rate if it has a fixed or otherwise
permissible variable rate during one or more payment or accrual periods and
different fixed or otherwise permissible variable rates during other payment or
accrual periods.
[Original Issue Discount. REMIC Regular Certificates of certain series will
be issued with "original issue discount" within the meaning of Section 1273(a)
of the Code ("OID"). Holders of REMIC Regular Certificates issued with original
issue discount generally must
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include original issue discount in gross income for federal income tax purposes
as it accrues, in advance of receipt of the cash attributable to such income,
under a method that takes account of the compounding of interest. The Code
requires that information with respect to the original issue discount accruing
on any REMIC Regular Certificate be reported periodically to the Service and to
certain categories of holders of such REMIC Regular Certificates.
Each Trust will report original issue discount, if any, to the holders of
REMIC Regular Certificates based on the OID Regulations. The OID Regulations
were effective April 4, 1994. Proposed OID Regulations concerning contingent
payments have not been finalized. Certificateholders should be aware that the
OID Regulations do not address certain issues relevant to prepayable securities
such as the REMIC Regular Certificates.
These rules provide that, in the case of a debt instrument such as a REMIC
Regular Certificate, (i) the amount and rate of accrual of original issue
discount will be calculated based on a reasonable assumed prepayment rate (the
"Prepayment Assumption"), and (ii) adjustments will be made in the amount and
rate of accrual of such discount to reflect differences between the actual
prepayment rate and the Prepayment Assumption. The method for determining the
appropriate assumed prepayment rate will eventually be set forth in Treasury
regulations, but those regulations have not yet been issued. The applicable
legislative history indicates, however, that such regulations will provide that
the assumed prepayment rate for securities as the REMIC Regular Certificates
will be the rate used in pricing the initial offering of the securities. The
Prepayment Assumption is ____________ but no representation is made that the
REMIC Regular Certificates will, in fact, prepay at a rate based on the
Prepayment Assumption or at any other rate.
In general, a REMIC Regular Certificate will be considered to be issued
with original issue discount if its stated redemption price at maturity exceeds
its issue price. Except as discussed below under "Payment Lag REMIC Regular
Certificates," and "Qualified Stated Interest," and in the case of certain
Variable Rate REMIC Regular Certificates (as defined herein) and accrual
certificates, the stated redemption price at maturity of a REMIC Regular
Certificate is its principal amount. The issue price of a REMIC Regular
Certificate is the initial offering price to the public (excluding bond houses
and brokers) at which a substantial amount of the class of REMIC Regular
Certificates was sold. If a portion of the initial offering price of a REMIC
Regular Certificate is allocable to interest that has accrued prior to its date
of issue, the issue price of such a REMIC Regular Certificate will be computed
by including pre-issuance accrued interest. The issue price will be reduced if
any portion of such price is allocable to a related Yield Supplement Agreement.
Notwithstanding the general definition of original issue discount, such discount
will be considered to be zero for any REMIC Regular Certificate on which such
discount is less than 0.25% of its stated redemption price at maturity
multiplied by its weighted average life. Although there is some uncertainty, in
the absence of authority to the contrary, the Depositor expects to compute the
weighted average life of a REMIC Regular Certificate for purposes of this de
minimis rule as the sum, for all distributions included in the stated redemption
price at maturity of the REMIC Regular Certificate, of the amounts determined by
multiplying (i) the number of complete years (rounding down for partial years)
from the date of initial issuance of Certificates, (the "Closing Date") to the
date on which each such
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distribution is expected to be made, determined under the Prepayment Assumption,
by (ii) a fraction, the numerator of which is the amount of such distribution
and the denominator of which is the REMIC Regular Certificate's stated
redemption price at maturity. Generally, the original holder of a REMIC Regular
Certificate that includes a de minimis amount of original issue discount
includes that original issue discount in income as principal payments are made.
The amount includable in income with respect to each principal payment equals a
pro rata portion of the entire amount of de minimis original issue discount with
respect to that REMIC Regular Certificate. Any de minimis amount of original
issue discount includable in income by a holder of a REMIC Regular Certificate
is generally treated as a capital gain if the REMIC Regular Certificate is a
capital asset in the hands of the holder thereof.
The holder of a REMIC Regular Certificate issued with original issue
discount must include in gross income the sum of the "daily portions" of such
original issue discount for each day during its taxable year on which it held
such REMIC Regular Certificate. In the case of an original holder of a REMIC
Regular Certificate, the daily portions of original issue discount are
determined first by calculating the portion of the original issue discount that
accrued during each period (an "accrual period") that begins on the date
following a Distribution Date (or in the case of the first such period, begins
on the Closing Date) and ends on the next succeeding Distribution Date. The
original issue discount accruing during each accrual period is then allocated
ratably to each day during such period to determine the daily portion of
original issue discount for that day.
The portion of the original issue discount that accrues in any accrual
period will equal the excess, if any, of (i) the sum of (A) the present value,
as of the end of the accrual period, of all of the distributions to be made on
the REMIC Regular Certificate, if any, in future periods, and (B) the
distributions made on the REMIC Regular Certificate during the accrual period
that are included in such REMIC Regular Certificate's stated redemption price at
maturity, over (ii) the adjusted issue price of such REMIC Regular Certificate
at the beginning of the accrual period. The present value of the remaining
distributions referred to in the preceding sentence will be calculated (i)
assuming that the REMIC Regular Certificates will be prepaid in future periods
at a rate computed in accordance with the Prepayment Assumption, and (ii) using
a discount rate equal to the original yield to maturity of the REMIC Regular
Certificates. For these purposes, the original yield to maturity of the REMIC
Regular Certificates will be calculated based on their issue price and assuming
that the REMIC Regular Certificates will be prepaid in accordance with the
Prepayment Assumption. The adjusted issue price of a REMIC Regular Certificate
at the beginning of any accrual period will equal the issue price of such REMIC
Regular Certificate, increased by the portion of the original issue discount
that has accrued during prior accrual periods, and reduced by the amount of any
distributions made on such REMIC Regular Certificate in prior accrual periods
that were included in such REMIC Regular Certificate's stated redemption price
at maturity.
The daily portions of original issue discount may increase or decrease
depending on the extent to which the actual rate of prepayments diverges from
the Prepayment Assumption. If original issue discount accruing during any
accrual period computed as described above is negative, it is likely that a
holder will be entitled to offset such amount only against positive original
issue discount accruing on such REMIC Regular Certificate in future accrual
periods.
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Although not entirely fee from doubt, such a holder may be entitled to deduct a
loss to the extent that its remaining basis would exceed the maximum amount of
future payments to which such holder is entitled. It is unclear whether the
Prepayment Assumption is taken into account for this purpose.
A subsequent holder which purchases a REMIC Regular Certificate issued with
original issue discount at a cost less than its remaining stated redemption
price at maturity will also generally be required to include in gross income,
for each day on which it holds such REMIC Regular Certificate, the daily
portions of original issue discount with respect to the REMIC Regular
Certificate, calculated as described above. However, if (i) the excess of the
remaining stated redemption price at maturity over such cost is less than (ii)
the aggregate amount of such daily portions for all days after the date of
purchase until final retirement of such REMIC Regular Certificate, then such
daily portions will be reduced proportionately in determining the income of such
holder.
Qualified Stated Interest. Unless interest payable on a REMIC Regular
Certificate constitutes "qualified stated interest" for purposes of the OID
Regulations, such interest payments will be includable in the stated redemption
price at maturity of the REMIC Regular Certificate. Interest payments will not
qualify as qualified stated interest unless the interest payments are
"unconditionally payable." Under the OID Regulations, there is some uncertainty
as to treating stated interest on a debt obligation like a REMIC Regular
Certificate as "unconditionally payable." In the absence of authority to the
contrary, Depositor expects to treat stated interest of REMIC Regular
Certificates as unconditionally payable.]
Premium. A purchase of a REMIC Regular Certificate that purchases such
REMIC Regular Certificate at a cost greater than its remaining stated redemption
price at maturity will be considered to have purchased such REMIC Regular
Certificate at a premium, and may, under Section 171 of the Code, elect to
amortize such premium under a constant yield method over the life of the REMIC
Regular Certificate. In addition, it appears that the same methods that apply to
the accrual of market discount on installment obligations are intended to apply
in computing the amortizable bond premium deduction with respect to a REMIC
Regular Certificate. It is not clear, however, (i) whether the alternatives to
the constant-yield method which may be available for the accrual of market
discount are available for amortizing premium on REMIC Regular Certificates, and
(ii) whether the Prepayment Assumption should be taken into account in
determining the term of a REMIC Regular Certificate for this purpose. Except as
provided in regulations, amortizable premium will be treated as an offset to
interest income on the REMIC Regular Certificate.
[Payment Lag REMIC Regular Certificates. Certain REMIC Regular Certificates
will provide for distributions of interest based on a period that is the same
length as the interval between Distribution Dates but ends prior to each
Distribution Date. The OID Regulations provide a special application of the de
minimis rule for debt instruments with first accrual periods where the interest
payable for the first period is
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at a rate which is effectively less than that which applies in all other
periods. In such cases, for the sole purpose of determining whether original
issue discount is de minimis, the OID Regulations provide that the stated
redemption price is equal to the instrument's issue price plus the greater of
the amount of foregone interests or the excess (if any) of the instrument's
stated principal amount over its issue price.]
[Variable Rate REMIC Regular Certificates. Under the OID Regulations, REMIC
Regular Certificates paying interest at a variable rate (a "Variable Rate REMIC
Regular Certificate") are subject to special rules. A Variable Rate REMIC
Regular Certificate will qualify as a "variable rate debt instrument" if (i) its
issue price does not exceed the total noncontingent principal payments due under
the Variable Rate REMIC Regular Certificate by more than a specified de minimis
amount, and (ii) it provides for stated interest, paid or compounded at least
annually, at (A) one or more qualified floating rates, (B) a single fixed rate
and one or more qualified floating rates, (C) a single objective rate, or (D) a
single fixed rate and a single objective rate that is a qualified inverse
floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Rate REMIC Regular Certificate is denominated. A multiple of a
qualified floating rate will generally not itself constitute a qualified
floating rate for purposes of the OID Regulations. However, a variable rate
equal to (i) the product of a qualified floating rate and a fixed multiple that
is greater than zero but not more than 1.35 or (ii) the product of a qualified
floating rate and a fixed multiple that is greater than zero but not more than
1.35, increased or decreased by a fixed rate will constitute a qualified
floating rate for purposes of the OID Regulations. In addition, under the OID
Regulations, two or more qualified floating rates that can reasonably be
expected to have approximately the same values throughout the term of the
Variable Rate REMIC Regular Certificate will be treated as a single qualified
floating rate (a "Presumed Single Qualified Floating Rate"). Two or more
qualified floating rates with values within 25 basis points of each other as
determined on the Variable Rate REMIC Regular Certificate's issue date will be
conclusively presumed to be a Presumed Single Qualified Floating Rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute a
qualified floating rate but which is subject to one or more restrictions such as
a cap or floor, will not be a qualified floating rate for purposes of the OID
Regulations unless the restriction is fixed throughout the term of the Variable
Rate REMIC Regular Certificate or the restriction will not significantly affect
the yield of the Variable Rate REMIC Regular Certificate.
An "objective rate" is a rate that is not itself a qualified floating rate
but which is determined using a single fixed formula and which is based upon (i)
one or more qualified floating rates, (ii) one or more rates where each rate
would be a qualified floating rate for a debt instrument denominated in a
currency other than the currency in which the Variable Rate REMIC Regular
Certificate is denominated, (iii) either the yield or changes in the price of
one or more items of actively traded personal property, or (iv) a combination of
rates described in (i), (ii) and (iii). The OID Regulations also provide that
other variable rates may be treated as objective rates if so designated by the
Service in the future. Despite the foregoing, a variable rate of interest on a
Variable Rate REMIC Regular Certificate will not constitute an objective rate if
it is reasonably expected that the average value of such rate during the first
half of the Variable Rate REMIC Regular Certificate's term will be either
significantly less than or significantly greater than the
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average value of the rate during the final half of the Variable Rate REMIC
Regular Certificate's term. An objective rate will qualify as a "qualified
inverse floating rate" if such rate is equal to a fixed rate minus a qualified
floating rate and variations in the rate can reasonably be expected to inversely
reflect contemporaneous variations in the cost of newly borrowed funds. The OID
Regulations also provide that if a Variable Rate REMIC Regular Certificate
provides for stated interest at a fixed rate for an initial period of less than
one year followed by a variable rate that is either a qualified floating rate or
an objective rate and if the variable rate on the Variable Rate REMIC Regular
Certificate's issue date is intended to approximate the fixed rate, then the
fixed rate and the variable rate together will constitute either a single
qualified floating rate or objective rate, as the case may be (a "Presumed
Single Variable Rate"). If the value of the variable rate and the initial fixed
rate are within 25 basis points of each other as determined on the Variable Rate
REMIC Regular Certificate's issue date, the variable rate will be conclusively
presumed to approximate the fixed rate.
For Variable Rate REMIC Regular Certificates that qualify as a "variable
rate debt instrument" under the OID Regulations and provide for interest at
either a single qualified floating rate, a single objective rate, a Presumed
Single Qualified Floating Rate or a Presumed Single Variable Rate throughout the
term (a "Single Variable Rate REMIC Regular Certificate"), original issue
discount is computed as described in "REMIC Regular Certificates-Current Income
on REMIC Regular Certificates -- Original Issue Discount" based on the
following: (i) stated interest on the Single Variable Rate REMIC Regular
Certificate which is unconditionally payable in cash or property (other than
debt instruments of the issuer) at least annually will constitute qualified
stated interest and (ii) by assuming that the variable rate on the Single
Variable Rate REMIC Certificate is a fixed rate equal to: (a) in the case of a
Single Variable Rate REMIC Regular Certificate with a qualified floating rate or
a qualified inverse floating rate, the value of, as of the issue date, of the
qualified floating rate or the qualified inverse floating rate or (b) in the
case of a Single Variable Rate REMIC Regular Certificate with an objective rate
(other than a qualified inverse floating rate), a fixed rate which reflects the
reasonably expected yield for such Single Variable Rate REMIC Regular
Certificate.
In general, any Variable Rate REMIC Regular Certificate other than a Single
Variable Rate REMIC Regular Certificate (a "Multiple Variable Rate REMIC Regular
Certificate") that qualifies as a "variable rate debt instrument" will be
converted into an "equivalent" fixed rate debt instrument for purposes of
determining the amount and accrual of original issue discount and qualified
stated interest on the Multiple Variable Rate REMIC Regular Certificate. The OID
Regulations generally require that such a Multiple Variable Rate REMIC Regular
Certificate be converted into an "equivalent" fixed rate debt instrument by
substituting any qualified floating rate or qualified inverse floating rate
provided for under the terms of the Multiple Variable Rate REMIC Regular
Certificate with a fixed rate equal to the value of the qualified floating rate
or qualified inverse floating rate, as the case may be, as of the Multiple
Variable Rate REMIC Regular Certificate's issue date. Any objective rate (other
than a qualified inverse floating rate) provided for under the terms of the
Multiple Variable Rate REMIC Regular Certificate is converted into a fixed rate
that reflects the yield that is reasonably expected for the Multiple Variable
Rate REMIC Regular Certificate. In the case of a Multiple Variable Rate REMIC
Regular Certificate that qualifies as a "variable rate debt instrument" and
provides for stated
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interest at a fixed rate in addition to either one or more qualified floating
rates or a qualified inverse floating rate, the fixed rate is initially
converted into a qualified floating rate (or a qualified inverse floating rate,
if the Multiple Variable Rate REMIC Regular Certificate provides for a qualified
inverse floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be such that
the fair market value of the Multiple Variable Rate REMIC Regular Certificate as
of the Multiple Variable Rate REMIC Regular Certificate's issue date is
approximately the same as the fair market value of an otherwise identical debt
instrument that provides for either the qualified floating rate or qualified
inverse floating rate rather than the fixed rate. Subsequent to converting the
fixed rate into either a qualified floating rate or a qualified inverse floating
rate, the Multiple Variable Rate REMIC Regular Certificate is then converted
into an "equivalent" fixed rate debt instrument in the manner described above.
Once the Multiple Variable Rate REMIC Regular Certificate is converted into
an "equivalent" fixed rate debt instrument pursuant to the foregoing rules, the
amount of original issue discount and qualified stated interest, if any, are
determined for the "equivalent" fixed rate debt instrument by applying the
original issue discount rules to the "equivalent" fixed rate debt instrument in
the manner described in "REMIC Regular Certificates-Current Income on REMIC
Regular Certificates--Original Issue Discount". A holder of the Multiple
Variable Rate REMIC Regular Certificate will account for such original issue
discount and qualified stated interest as if the holder held the "equivalent"
fixed rate debt instrument. Each accrual period appropriate adjustments will be
made to the amount of qualified stated interest or original issue discount
assumed to have been accrued or paid with respect to the "equivalent" fixed rate
debt instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Multiple Variable Rate REMIC Regular Certificate
during the accrual period.
The OID Regulations do not clearly address the treatment of a Variable Rate
REMIC Regular Certificate that is based on a weighted average of the interest
rates on underlying Mortgage Assets. Under the OID Regulations, interest
payments on such a Variable Rate REMIC Regular Certificate may be characterized
as qualified stated interest which is includable in income in a manner similar
to that described in the previous paragraph. However, it is also possible that
interest payments on such a Variable Rate REMIC Regular Certificate would be
treated as contingent interest (possibly includable in income when the payments
become fixed) or in some other manner.
If a Variable Rate REMIC Regular Certificate does not qualify as a
"variable rate debt instrument" under the OID Regulations, then the Variable
Rate REMIC Regular Certificate would be treated as a contingent payment debt
obligation. It is not clear under current law how a Variable Rate REMIC Regular
Certificate would be taxed if such REMIC Regular Certificate were treated as a
contingent payment debt obligation.]
[Interest-Only REMIC Regular Certificates. The Trust intends to report
income from interest-only classes of REMIC Regular Certificates to the Service
and to holders of interest-only REMIC Regular Certificates based on the
assumption that the stated redemption price at maturity
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is equal to the sum of all payments determined under the Prepayment Assumption.
As a result, such interest-only REMIC Regular Certificates will be treated as
having original issue discount.]
Market Discount. A holder that acquires a REMIC Regular Certificate at a
market discount (that is, a discount that exceeds any unaccrued original issued
discount) will recognize gain upon receipt of a principal distribution,
regardless of whether the distribution is scheduled or is a prepayment. In
particular, the REMIC Regular Certificateholder will be required to allocate
that principal distribution first to the portion of the market discount on such
REMIC Regular Certificate that has accrued but has not previously been
includable in income, and will recognize ordinary income to that extent. In
general terms, unless Treasury regulations when issued state otherwise, market
discount on a REMIC Regular Certificate may be treated, at the REMIC Regular
Certificateholder's election, as accruing either (i) under a constant yield
method, taking into account the Prepayment Assumption, or (ii) in proportion to
accruals of original issue discount (or, if there is no original issue discount,
in proportion to payments of interest at the Pass-Through Rate).
In addition, a holder may be required to defer deductions for a portion of
the holder's interest expense on any debt incurred or continued to purchase or
carry a REMIC Regular Certificate purchased with market discount. The deferred
portion of any interest deduction would not exceed the portion of the market
discount on the REMIC Regular Certificate that accrues during the taxable year
in which such interest would otherwise be deductible and, in general, would be
deductible when such market discount is included in income upon receipt of a
principal distribution on, or upon the sale of, the REMIC Regular Certificate.
The Code requires that information necessary to compute accruals of market
discount be reported periodically to the Service and to certain categories of
holders of REMIC Regular Certificates.
Notwithstanding the above rules, market discount on a REMIC Regular
Certificate will be considered to be zero if such discount is less than 0.25% of
the remaining stated redemption price at maturity of such REMIC Regular
Certificate multiplied by its weighted average remaining life. Although there is
some uncertainty, in the absence of authority to the contrary, the Depositor
expects to calculate the weighted average remaining life in a manner similar to
weighted average life (described above under "Current Income on REMIC Regular
Certificates-Original Issue Discount"), taking into account distributions
(including prepayments) prior to the date of acquisition of such REMIC Regular
Certificate by the subsequent purchaser. If market discount on a REMIC Regular
Certificate is treated as zero under this rule, the actual amount of such
discount must be allocated to the remaining principal distributions on the REMIC
Regular Certificate, and when each such distribution is made, gain equal to the
discount, if any, allocated to the distribution will be recognized.
Election to Treat All Interest Under the Constant Yield Rules. The OID
Regulations provide that all holders may elect to include in gross income all
interest that accrues on a debt instrument by using the constant yield method.
For purposes of this election, interest includes stated interest, original issue
discount (including de minimis original issue discount), and market discount
(including any de minimis market discount), as adjusted to account for any
premium.
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Holders should consult their own tax advisors regarding the availability or
advisability of such an election.
Sales of REMIC Regular Certificates. If a REMIC Regular Certificate is
sold, the seller will recognize gain or loss equal to the difference between the
amount realized on the sale and its adjusted basis in the REMIC Regular
Certificate. A holder's adjusted basis in a REMIC Regular Certificate generally
equals the cost of the REMIC Regular Certificate to the holder, increased by
income reported by the holder with respect to the REMIC Regular Certificate and
reduced (but not below zero) by distributions on the REMIC Regular Certificate
received by the holder and by amortized premium. Except as indicated in the next
two paragraphs, any such gain or loss generally will be capital gain or loss
provided the REMIC Regular Certificate is held as a capital asset.
Gain from the sale of a REMIC Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent that such gain
does not exceed the excess, if any, of (i) the amount that would have been
includable in the seller's income with respect to the REMIC Regular Certificate
had income accrued thereon at a rate equal to 110% of "the applicable Federal
rate" (generally, an average of current yields on Treasury securities),
determined as of the date of purchase of the REMIC Regular Certificate, over
(ii) the amount actually includable in the seller's income. In addition, gain
recognized on the sale of a REMIC Regular Certificate by a seller who purchased
the REMIC Regular Certificate at a market discount would be taxable as ordinary
income in an amount not exceeding the portion of such discount that accrued
during the period the REMIC Regular Certificate was held by such seller, reduced
by any market discount includable in income under the rules described above
under "Current Income on REMIC Regular Certificates--Market Discount."
REMIC Regular Certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(i) of the Code, so that gain or loss recognized from a
sale of a REMIC Regular Certificate by a bank or other financial institution to
which such section applies would be ordinary income or loss.
Certain Taxes on the REMIC. The REMIC provisions of the Code impose a 100%
tax on any net income derived by a REMIC from certain prohibited transactions.
Such transactions are (i) any disposition of a qualified mortgage, other than
pursuant to the substitution of a qualified replacement mortgage for a qualified
mortgage (or the repurchase in lieu of substitution of a defective obligation),
a disposition incident to the foreclosure, default, or imminent default of a
mortgage, the bankruptcy or insolvency of the REMIC, or a qualified liquidation
of the REMIC; (ii) the receipt of income from assets other than qualified
mortgages and permitted investments; (iii) the receipt of compensation for
services; and (iv) the receipt of gain from the dispositions of cash flow
investments. The REMIC Regulations provide that the modification of the terms of
a Mortgage Loan occasioned by default or a reasonably foreseeable default of the
Mortgage Loan, the assumption of the Mortgage Loan or the waiver of a
due-on-sale clause will not be treated as a disposition of the Mortgage Loan.
The Code also imposes a 100% tax on contributions to a REMIC made after the
Startup Day, unless such contributions are payments made to facilitate a cleanup
call or a qualified liquidation of the REMIC, payments in a nature of a
guaranty,
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contributions during the three-month period beginning on the Startup Day or
contributions to a qualified reserve fund of the REMIC by a holder of a residual
interest in the REMIC. The Code also imposes a tax on a REMIC at the highest
corporate rate on certain net income from foreclosure property that the REMIC
derives from the management, sale, or disposition of any real property, or any
personal property incident thereto, acquired by the REMIC in connection with the
default or imminent default of a loan. Generally, it is not anticipated that the
Trust will generate a significant amount of such income.
Liquidation of the REMIC. A REMIC may liquidate without the imposition of
entity-level tax only in a "qualified liquidation." A liquidation is considered
qualified if a REMIC adopts a plan of complete liquidation and sells all of its
assets (other than cash) within the ninety-day period beginning on the date of
the adoption of the plan of liquidation, provided that it distributes to holders
of REMIC Regular Certificates or REMIC Residual Certificates, on or before the
last day of the ninety-day liquidation period, all the proceeds of the
liquidation (plus all cash), less amounts remained to meet claims.
Termination. The REMIC will terminate shortly following the REMIC's receipt
of the final payment in respect of the Mortgage Assets. The last distribution on
a REMIC Regular Certificate should be treated as a payment in full retirement of
a debt instrument.
[Tax Treatment of Yield Supplement Agreements
Whether a REMIC Regular Certificateholder of a series will have a separate
contractual right to payments under a Yield Supplement Agreement, and the tax
treatment of such payments, if any, will be addressed in the related Prospectus
Supplement.]
Foreign Investors
For purposes of this discussion, a "Foreign Holder" is a Certificateholder
who holds a REMIC Regular Certificate and who is not (i) a citizen or resident
of the United States, (ii) a corporation, partnership, or other entity organized
in or under the laws of the United States or a political subdivision thereof, or
(iii) an estate or trust the income of which is includable in gross income for
United States tax purposes regardless of its source. Unless the interest on a
REMIC Regular Certificate is effectively connected with the conduct by the
Foreign Holder of a trade or business within the United States, the Foreign
Holder is not subject to federal income or withholding tax on interest (or
original issue discount, if any) on a REMIC Regular Certificate (subject to
possible backup withholding of tax, discussed below), provided the Foreign
Holder is not a controlled foreign corporation related to the Depositor (or
subsequent holder of the REMIC Residual Certificates) and does not own actually
or constructively 10% or more of the voting stock of the Depositor (or
subsequent holder of the REMIC Residual Certificates). To qualify for this tax
exemption, the Foreign Holder will be required to provide periodically a
statement signed under penalties of perjury certifying that the Foreign Holder
meets the requirements for treatment as a Foreign Holder and providing the
Foreign Holder's name an address. The statement, which may be made on a Form
W-8 or substantially similar substitute form, generally
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must be provided in the year a payment occurs or in either of the two preceding
years. The statement must be provided either directly or through a clearing
organization financial institution intermediaries, to the person that otherwise
would withhold tax. This exemption may not apply to a Foreign Holder of a REMIC
Regular Certificate which also owns, actually or constructively, a REMIC
Residual Certificate. If the interest on a REMIC Regular Certificate is
effectively connected with the conduct by a Foreign Holder of a trade or
business within the United States, then the Foreign Holder will be subject to
tax at the regular graduated rates and such a Foreign Holder may avoid
withholding of tax on such interest (or original issue discount, if any) if the
Foreign Holder provides a properly completed Form 4224. Under Proposed
Regulations, which are proposed to be effective for Payments made after December
31, 1997, Form W-8 and Form 4224, as well as certain other forms, would be
combined into a new Form W-8 which would generally be valid from the date signed
through the end of the third succeeding calendar year, unless the beneficial
owner's taxpayer identification number is provided, in which case the form
generally would be valid indefinitely. The proposed regulations would also
provide certain alternative means for qualifying for interest withholding
exemptions.
Any gain recognized by a Foreign Holder upon a sale, retirement or other
taxable disposition of a REMIC Regular Certificate generally will not be subject
to United States federal income tax unless either (i) the Foreign Holder is a
non-resident alien individual who holds the REMIC Regular Certificate as a
capital asset and who is present in the United States for 183 days or more in
the taxable year of the disposition and either the gain is attributable to an
office or other fixed place of business maintained in the U.S. by the individual
or the individual has a "tax home" in the United States, or (ii) the gain is
effectively connected with the conduct by the Foreign Holder of a trade or
business within the United States.
A REMIC Regular Certificate will not be includable in the estate of a
Foreign Holder who does not own actually or constructively 10% or more of the
voting stock of the Depositor (or subsequent holder of the REMIC Residual
Certificates).
Backup Withholding
Under certain circumstances, a Certificateholder may be subject to "backup
withholding" at a 31% rate. Backup withholding may apply to a Certificateholder
who is a United States person if the holder, among other circumstances, fails to
furnish his Social Security number or other taxpayer identification number to
the Trustee. Backup withholding may apply, under certain circumstances, to a
Certificateholder who is a foreign person if the Certificateholder fails to
provide the trustee or the Certificateholder's securities broker with the
statement necessary to establish the exemption from federal income and
withholding tax on interest on the Certificate. Backup withholding, however,
does not apply to payments on a Certificate made to certain exempt recipients,
such as corporations and tax-exempt organizations, and to certain foreign
persons.
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Reporting Requirements and Tax Administration
The Trustee will report annually to the Service, holders of record of the
REMIC Regular Certificates that are not excepted from the reporting requirements
and, to the extent required by the Code, other interested parties, information
with respect to the interest paid or accrued on the REMIC Regular Certificates,
original issue discount, if any, accruing on the REMIC Regular Certificates and
information necessary to compute the accrual of any market discount or the
amortization of any premium on the REMIC Regular Certificates.
The Treasury Department has issued temporary regulations concerning certain
aspects of REMIC tax administration. Under those regulations, a Residual
Certificateholder must be designated as the REMIC's "tax matters person". The
tax matters person generally has responsibility for overseeing and providing
notice to the other Residual Certificateholders of certain administrative and
judicial proceedings regarding the REMIC's tax affairs. The Depositor will be
designated as the tax matters person for each REMIC, and in conjunction with the
Trustee will act as the agent of the Residual Certificateholders in the
preparation and filing of the REMIC's federal and state income tax and other
information returns.]
[Certificates
Tax Status of the Trust. Upon the issuance of each series of Certificates,
Schulte Roth & Zabel LLP, counsel to the Depositor, will deliver its opinion to
the effect that, under then current law, assuming compliance with the Agreement,
the related Trust will be classified for federal income tax purposes as a
grantor trust and not as an association taxable as a corporation or a taxable
mortgage pool. Accordingly, each holder of a Certificate will be treated for
federal income tax purposes as the owner of an undivided interest in the
Mortgage Assets included in the Trust. As further described below, each holder
of a Certificate therefore must report on its federal income tax return the
gross income from the portion of the Mortgage Assets that is allocable to such
Certificate and may deduct the portion of the expenses incurred by the Trust
that is allocable to such Certificate, at the same time and to the same extent
as such items would be reported by such holder if it had purchased and held
directly such interest in the Mortgage Assets and received directly its share of
the payments on the Mortgage Assets and incurred directly its share of expenses
incurred by the Trust when those amounts are received or incurred by the Trust.
Certificateholders will be required to report on their federal income tax
returns, and in a manner consistent with their respective methods of accounting,
their pro rata share of the entire income arising from the Mortgage Loans
comprising such Mortgage Loan pool, including interest, original issue discount,
if any, prepayment fees, assumption fees, and late payment charges received by
the Master Servicer or the Depositor, and any gain upon disposition of such
Mortgage Loans. (For purposes of this discussion, the term "disposition" when
used with respect to the Mortgage Loans, includes scheduled or prepaid
collections with respect to the Mortgage Loans, as well as the sale or exchange
of a Certificate.) Certificateholders will be entitled under Section 162 or 212
of the Code to deduct their pro rata share of related servicing fees,
administrative and other non-interest expenses, including assumption fees and
late payment
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charges retained by the Company. An individual, an estate, or a trust that holds
a Certificate either directly or through a pass-through entity will be allowed
to deduct such expenses under Section 212 of the Code only to the extent that,
in the aggregate and combined with certain other miscellaneous itemized
deductions, they exceed 2% of the adjusted gross income of the holder. In
addition, Section 68 of the Code provides that the amount of certain itemized
deductions (including those provided for in Section 212 of the Code) otherwise
allowable for the taxable year for an individual whose adjusted gross income
exceeds an inflation-adjusted threshold amount specified in the Code ($121,200
for taxable years beginning in 1997, in the case of a joint return) will be
reduced by the lesser of (i) 3% of the excess of adjusted gross income over the
specified threshold amount, or (ii) 80% of the amount of itemized deductions
otherwise allowable for such taxable year. To the extent that a
Certificateholder is not permitted to deduct servicing fees allocable to a
Certificate, the taxable income of the Certificateholder attributable to that
Certificate will exceed the net cash distributions related to such income.
Certificateholders may deduct any loss on disposition of the Mortgage Loans to
the extent permitted under the Code.
Status of the Certificates as Real Property Loans. The Certificates may be
"real estate assets" for purposes of Section 856(c)(5)(A) 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 (assets qualifying under one or more of those
sections, applying each section separately, "qualifying assets") to the extent
that the Trust's assets are qualifying assets. [The Certificates may not be
qualifying assets under any of the foregoing sections of the Code to the extent
that the Trust's assets include Buydown Funds, reserve funds, or payments on
mortgages held pending distribution to Certificateholders.] Further, the
Certificates may not be "real estate assets" to the extent loans held by the
trust are not secured by real property, and may not be "loans . . . secured by
an interest in real property" to the extent loans held by the trust are not
secured by residential real property or real property used primarily for church
purposes. In certain instances, the principal balance of a Mortgage Loan may
exceed the value of the Mortgaged Property which secures such Mortgage Loan.
Although no specific authority addresses this issue, in such instances, the
extent to which such a Mortgage Loan may be treated as a qualifying asset and
the extent to which interest on such a Mortgage Loan comprises "interest on
obligations secured by mortgages on real property" under Section 856(c)(3)(B) of
the Code may be limited.
Taxation of Certificates Under Stripped Bond Rules. The federal income tax
treatment of the Certificates will depend on whether they are subject to the
rules of section 1286 of the Code (the "stripped bond rules"). The Certificates
will be subject to those rules if stripped interest-only Certificates are
issued. In addition, whether or not stripped interest-only Certificates are
issued, the Service may contend that the stripped bond rules apply on the ground
that the Master Servicer's servicing fee, or other amounts, if any, paid to (or
retained by) the Master Servicer, represent greater than an arm's length
consideration for servicing the Mortgage Loans and should be characterized for
federal income tax purposes as an ownership interest in the Mortgage Loans. The
Service has taken the position in Revenue Ruling 91-46 that retained interest in
excess of reasonable compensation for servicing is treated as a "stripped
coupon" under the rules of Code Section 1286.
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If interest retained for the Master Servicer's servicing fee or other
interest is treated as a "stripped coupon," the Certificates will either be
subject to the original issue discount rules or the market discount rules. A
holder of a Certificate will account for any discount on the Certificate as
market discount rather than original issue discount if either (i) the amount of
original issue discount with respect to the Certificate was treated as zero
under the original issue discount de minimis rule when the Certificate was
stripped or (ii) no more than 100 basis points (including any amount of
servicing in excess of reasonable servicing) is stripped off from the Mortgage
Loans. If neither of the above exceptions applies, the original issue discount
rules will apply to the Certificates.
If the original issue discount rules apply, the holder of a Certificate
(whether a cash or accrual method taxpayer) will be required to report interest
income from the Certificate in each taxable year equal to the income that
accrues on the Certificate in that year calculated under a constant yield method
based on the yield of the Certificate (or, possibly, the yield of each Mortgage
Asset underlying such Certificate) to such holder. Such yield would be computed
at the rate (assuming monthly compounding) that, if used in discounting the
holder's share of the payments on the Mortgage Assets, would cause the present
value of those payments to equal the price at which the holder purchased the
Certificate. With respect to certain categories of debt instruments, Section
1272(a)(6) of the Code requires that original issue discount be accrued based on
a prepayment assumption determined in a manner prescribed by forthcoming
regulations. It is unclear whether such regulations would apply this rule to the
Certificates, whether Section 1272(a)(6) might apply to the Certificates in the
absence of such regulations, or whether the Service could require use of a
reasonable prepayment assumption based on other tax law principles. If required
to report original issue discount on the Certificates to the Service under the
stripped bond rules, it is anticipated that the Trustee will calculate the yield
of the Certificates based on a representative initial offering price of the
Certificates and a reasonable assumed rate of prepayment of the Mortgage Assets
(although such yield may differ from the yield to any particular holder that
would be used in calculating the interest income of such holder). The Prospectus
Supplement for each series of Certificates will describe the prepayment
assumption that will be used for this purpose, but no representation is made
that the Mortgage Assets will prepay at that rate or at any other rate.
In the case of a Certificate acquired at a price equal to the principal
amount of the Mortgage Assets allocable to the Certificate, the use of a
reasonable prepayment assumption would not have any significant effect on the
yield used in calculating accruals of interest income. In the case, however, of
a Certificate acquired at a discount or premium (that is, at a price less than
or greater than such principal amount, respectively), the use of a reasonable
prepayment assumption would increase or decrease such yield, and thus accelerate
or decelerate the reporting of interest income, respectively.
If a Mortgage Loan is prepaid, the holder of a Certificate acquired at a
discount or premium generally will recognize ordinary income or loss equal to
the difference between the portion of the prepaid principal amount of the
Mortgage Loan that is allocable to the Certificate and the portion of the
adjusted basis of the Certificate (see "Sales of Certificates" below) that is
allocable to the portion of the Mortgage Loan that is prepaid. The method of
allocating such
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basis among the Mortgage Loans may differ depending on whether a reasonable
repayment assumption is used in calculating the yield of the Certificates for
purposes of accruing original issue discount. It is not clear whether any other
adjustments would be required to reflect differences between the prepayment rate
that was assumed in calculating yield and the actual rate of prepayments.
Certificates of certain series ("Variable Rate Certificates") may provide
for a Pass-Through Rate based on the weighted average of the interest rates of
the Mortgage Assets held by the Trust, which interest rates may be fixed or
variable. In the case of a Variable Rate Certificate that is subject to the
original issue discount rules, the daily portions of original issue discount
generally will be calculated under the principles discussed in "REMIC Regular
Certificates-Current Income on REMIC Regular Certificates--Original Issue
Discount--Variable Rate REMIC Regular Certificates."
Taxation of Certificates Where Stripped Bond Rules Do Not Apply. If the
stripped bond rules do not apply to a Certificate, then the holder will be
required to include in income its share of the interest earned on the Mortgage
Assets in accordance with its tax accounting method. In addition, if the holder
purchased the Certificate at a discount or premium, the holder will be required
to account for such discount or premium in the manner described below. The
treatment of any discount will depend on whether the discount is original issue
discount as defined in the Code and, in the case of discount other than original
issue discount, whether such other discount exceeds a de minimis amount. In the
case of original issue discount with respect to a Mortgage Loan originated on or
after March 2, 1984, the holder (whether a cash or accrual method taxpayer) will
be required to report as additional interest income in each month the portion of
such discount that accrues in that month, calculated based on a constant yield
method. In general it is not anticipated that the amount of original issue
discount to be accrued in each month, if any, will be significant relative to
the interest paid currently on the Mortgage Assets. However, original issue
discount could arise with respect to a Mortgage Loan that provides for interest
at an initial fixed rate for one or more periods below the then prevailing
market fixed interest rates followed by interest at a rate equal to the sum of
an index of market interest rates and a fixed number. The original issue
discount for Adjustable Rate Mortgages generally will be determined under the
principles discussed in "REMIC Regular Certificates-Current Income on REMIC
Regular Certificates--Original Issue Discount--Variable Rate REMIC Regular
Certificates."
If discount other than original issue discount exceeds a de minimis amount
(described below), the holder will also generally be required to include in
income in each month the amount of such discount accrued through such month and
not previously included in income, but limited, with respect to the portion of
such discount allocable to any Mortgage Asset, to the amount of principal on
such Mortgage Asset received by the Trust in that month. Because the Mortgage
Assets will provide for monthly principal payments, such discount may be
required to be included in income at a rate that is not significantly slower
than the rate at which such discount accrues (and therefore at a rate not
significantly slower than the rate at which such discount would be included in
income if it were original issue discount). The holder may elect to accrue such
discount under a constant yield method based on the yield of the Certificate to
such holder. In the absence of such an election, it may be necessary to accrue
such discount under a more
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rapid straight-line method. Under the de minimis rule, market discount with
respect to a Certificate will be considered to be zero if it is less than the
product of (i) 0.25% of the principal amount of the Mortgage Assets allocable to
the Certificate, and (ii) the weighted average life (in complete years) of the
Mortgage Assets remaining at the time of purchase of the Certificate.
If a holder purchases a Certificate at a premium, such holder may elect
under Section 171 of the Code to amortize the portion of such premium that is
allocable to a Mortgage Loan under a constant yield method based on the yield of
the Mortgage Loan to such holder, provided that such Mortgage Loan was
originated after September 27, 1985. Premium allocable to a Mortgage Loan
originated on or before that date should be allocated among the principal
payments on the Mortgage Loan and allowed as an ordinary deduction as principal
payments are made or, perhaps, upon termination.
It is not clear whether the foregoing adjustments for discount or premium
would be made based on the scheduled payments on the Mortgage Loans or taking
account of a reasonable prepayment assumption.
If a Mortgage Loan is prepaid, the holder of a Certificate acquired at a
discount or premium will recognize ordinary income or loss equal to the
difference between the portion of the prepaid principal amount of the Mortgage
Loan that is allocable to the Certificate and the portion of the adjusted basis
of the Certificate (see "Sales of Certificates" below) that is allocable to the
portion of the Mortgage Loan that is prepaid. The method of allocating such
basis among the Mortgage Loans may differ depending on whether a reasonable
prepayment assumption is used in calculating the yield of the Certificates for
purposes of accruing original issue discount. It is not clear whether any other
adjustments would be required to reflect differences between the prepayment rate
that was assumed in accounting for discount or premium and the actual rate of
prepayments.
Sales of Certificates. A holder that sells a Certificate will recognize
gain or loss equal to the difference between the amount realized in the sale and
its adjusted basis in the Certificate. In general, such adjusted basis will
equal the holder's cost for the Certificate, increased by the amount of any
income previously reported with respect to the Certificate and decreased by the
amount of any losses previously reported with respect to the Certificate and the
amount of any distributions received thereon. Any such gain or loss generally
will be capital gain or loss if the assets underlying the Certificate were held
as capital assets, except that, for a Certificate to which the stripped bond
rules do not apply and that was acquired with more than a de minimis amount of
discount other than original issue discount (see "Taxation of Certificates Where
Stripped Bond Rules Do Not Apply" above), such gain will be treated as ordinary
interest income to the extent of the portion of such discount that accrued
during the period in which the seller held the Certificate and that was not
previously included in income.
Foreign Investors. Generally, interest or original issue discount paid to
or accruing for the benefit of a Certificateholder who is a Foreign Holder (as
defined in "REMIC Series--Foreign Investors") will be treated as "portfolio
interest" and therefore will be exempt from the 30% withholding tax, but only to
the extent the Mortgage Loans were originated after July 18,
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1984 and provided that such Certificateholder periodically provides the Trustee
(or other person who would otherwise be required to withhold tax) with a
statement certifying under penalty of perjury that such Certificateholder is not
a United States person and providing the name and address of such
Certificateholder. The statement, which may be made on a Form W-8 or
substantially similar substitute form, generally must be provided in the year a
payment occurs or in either of the two preceding years. The statement must be
provided either directly or through clearing organization or financial
institution intermediaries, to the person that otherwise would withhold tax. If
the interest on a Certificate is effectively connected with the conduct by a
Foreign Holder of a trade or business within the United States, then the Foreign
Holder will be subject to tax at the regular graduated rates and such a foreign
holder may avoid withholding tax on such interest (or original issue discount,
if any) if the Foreign Holder provides a properly completed Form 4224.
Tax Administration and Reporting. The Trustee will furnish to each
Certificateholder with each distribution a statement setting forth the amount of
such distribution allocable to principal and to interest. In addition, the
Trustee will furnish, within a reasonable time after the end of each calendar
year, to each Certificateholder who was a Certificateholder at any time during
such year, information regarding the amount of servicing compensation received
by the Master Servicer and any sub-servicer and such other customary factual
information as the Trustee deems necessary or desirable to enable
Certificateholders to prepare their tax returns. Reports will be made annually
to the Service and to Certificateholders of record that are not excepted from
the reporting requirements regarding information as may be required with respect
to interest and original issue discount, if any, with respect to the
Certificates.
Taxable Mortgage Pools
Certain entities classified as "taxable mortgage pools" are subject to
corporate level tax on their net income. A "taxable mortgage pool" is generally
defined as an entity that meets the following requirements: (i) the entity is
not a REMIC, (ii) substantially all of the assets of the entity are debt
obligations, and more than 50 percent of such debt obligations consist of real
estate mortgages (or interests therein), (iii) the entity is the obligor under
debt obligations with two or more maturities, and (iv) payments on the debt
obligations on which the entity is the obligor bear a relationship to the
payments on the debt obligations which the entity holds as assets. With respect
to requirement (iii), regulations provide that an ownership interest in an
entity classified as a grantor trust for federal income tax purposes will not be
treated as a debt obligation of the Trust. As described above, counsel will
opine that upon the issuance of each series of Certificates, the related Trust
will not be a "taxable mortgage pool."]
S-89
<PAGE>
ERISA CONSIDERATIONS
The following describes certain considerations under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and the Code, which
apply to the Certificates.
ERISA imposes requirements on employee benefit plans (and on certain other
retirement plans and arrangements, including individual retirement accounts and
annuities, Keogh plans and collective investment funds, separate accounts and
insurance company general accounts in which such plans, accounts or arrangements
are invested) (collectively "Plans") subject to ERISA and on persons who are
fiduciaries with respect to such Plans. Generally, ERISA applies to investments
made by Plans. Among other things, ERISA requires that the assets of Plans be
held in trust and that the trustee, or other duly authorized fiduciary, have
exclusive authority and discretion to manage and control the assets of such
Plans. ERISA also imposes certain duties on persons who are fiduciaries of
Plans. Under ERISA, any person who exercises any authority or control respecting
the management or disposition of the assets of a Plan is considered to be a
fiduciary of such Plan (subject to certain exceptions not here relevant).
Certain employee benefit plans, such as governmental plans (as defined in ERISA
Section 3(32)) and, if no election has been made under Section 410(d) of the
Code, church plans (as defined in ERISA Section 3(33)), are not subject to ERISA
requirements. Accordingly, assets of such plans may be invested in [Senior]
Certificates without regard to the ERISA considerations described above and
below, subject to the provisions of applicable state law. Any such plan which is
qualified and exempt from taxation under Code Sections 401(a) and 501(a),
however, is subject to the prohibited transaction rules set forth in Code
Section 503.
On November 13, 1986, the United States Department of Labor (the "DOL")
issued final regulations concerning the definition of what constitutes the
assets of a Plan. (Labor Reg. Section 2510.3-101) Under this regulation, the
underlying assets and properties of corporations, partnerships and certain other
entities in which a Plan makes an "equity" investment could be deemed for
purposes of ERISA to be assets of the investing Plan in certain circumstances.
However, the regulation provides that, generally, the assets of a corporation or
partnership in which a Plan invests will not be deemed for purposes of ERISA to
be assets of such Plan if the equity interest acquired by the investing Plan is
a publicly-offered security. A publicly-offered security, as defined in Labor
Reg. Section 2510.3-101, is a security that is widely held, freely transferable
and registered under the Securities Exchange Act of 1934, as amended.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA prohibits a broad range of transactions
involving Plan assets and persons ("Parties in Interest") having certain
specified relationships to a Plan and imposes additional prohibitions where
Parties in Interest are fiduciaries with respect to such Plan. Because the
Mortgage Loans may be deemed Plan assets of each Plan that purchases
Certificates, an investment in the Certificates by a Plan might be a prohibited
transaction under ERISA Sections 406 and 407 and subject to an excise tax under
Code Section 4975 unless a statutory or administrative exemption applies.
S-90
<PAGE>
In Prohibited Transaction Exemption 83-1 ("PTE 83-1"), which amended
Prohibited Transaction Exemption 81-7, the DOL exempted from ERISA's prohibited
transaction rules certain transactions relating to the operation of residential
mortgage pool investment trusts and the purchase, sale and holding of "mortgage
pool pass-through certificates" in the initial issuance of such certificates.
PTE 83-1 permits, subject to certain conditions, transactions that might
otherwise be prohibited between Plans and Parties in Interest with respect to
those Plans related to the origination, maintenance and termination of mortgage
pools consisting of mortgage loans secured by first or second mortgages or deeds
of trust on single-family residential property (defined as non-farm property
comprising one to four dwelling units and condominiums), and the acquisition and
holding of certain mortgage pool pass-through certificates representing an
interest in such mortgage pools ("Single Family Certificates") by Plans. If the
general conditions (discussed below) of PTE 83-1 are satisfied, investments by a
Plan in certificates that represent interests in a mortgage pool, consisting of
mortgage loans representing loans for single family homes ("Single Family
Certificates") will be exempt from the prohibitions of ERISA Sections 406(a) and
407 (relating generally to transactions with Parties in Interest who are not
fiduciaries) if the Plan purchases the Single Family Certificates at no more
than fair market value and will be exempt from the prohibitions of ERISA
Sections 406(b)(1) and (2) (relating generally to transactions with fiduciaries)
if, in addition, the purchase is approved by an independent fiduciary, no sales
commission is paid to the pool sponsor, the Plan does not purchase more than
twenty-five percent (25%) of all Single Family Certificates and at least fifty
percent (50%) of all Single Family Certificates are purchased by persons
independent of the pool sponsor or pool trustee. [PTE 83-1 does not provide an
exemption for transactions involving Subordinated Certificates. No transfer of a
Subordinated Certificate may be made to a Plan.]
The discussion in this and the next succeeding paragraph applies only to
Single Family Certificates. The Depositor believes that, for purposes of PTE
83-1, the term "mortgage pass-through certificate" would include [the
Certificates] [the Senior Certificates]. [It is not clear whether a class of
Certificates that evidences the beneficial ownership in a Trust divided into
mortgage loan groups, beneficial ownership of a specified percentage of interest
payments only or principal payments only, or a notional amount of either
principal or interest payments, or a class of Certificates entitled to receive
payments of interest and principal on the Mortgage Loans only after payments to
other classes or after the occurrence of certain specified events would be a
"mortgage pass-through certificate" for purposes of PTE 83-1.]
PTE 83-1 sets forth three general conditions which must be satisfied for
any transaction to be eligible for exemption: (i) the maintenance of a system of
insurance or other protection for the pooled mortgage loans and property
securing such loans and for indemnifying certificateholders against reductions
in pass-through payments due to property damage or defaults in loan payments in
an amount not less than the greater of one percent (1%) of the aggregate
principal balance of all covered pooled mortgage loans or the principal balance
of the largest covered pooled mortgage loan; (ii) the existence of a pool
trustee who is not an affiliate of the pool sponsor; and (iii) a limitation on
the amount of the payment retained by the pool sponsor, together with other
funds inuring to its benefit, to not more than adequate consideration for
selling the mortgage loans plus reasonable compensation for services provided by
the pool sponsor to the mortgage pool. The Depositor believes that the first
general condition referred to
S-91
<PAGE>
above will be satisfied with respect to [the Certificates] [Senior Certificates
provided that the subordination, the pool insurance or other form of credit
enhancement described herein (such subordination, pool insurance or other form
of credit enhancement being the system of insurance or other protection referred
to above) is maintained in an amount not less than the greater of one percent of
the aggregate principal balance of the Mortgage Loans or the principal balance
of the largest Mortgage Loan.] See "Description of the Certificates" herein. In
the absence of a ruling that the system of insurance or other protection with
respect to the Certificates satisfies the first general condition referred to
above, there can be no assurance that these features will be so viewed by the
DOL. The Trustee will not be affiliated with the Depositor.
Each Plan fiduciary who is responsible for making the investment decisions
whether to purchase or commit to purchase and to hold Single Family Certificates
must make its own determination as to whether the first and third general
conditions, and the specific conditions described briefly in the preceding
paragraph, of PTE 83-1 have been satisfied, or as to the availability of any
other prohibited transaction exemptions. Each Plan fiduciary should also
determine whether, under the general fiduciary standards of investment prudence
and diversification, an investment in the Certificates is appropriate for the
Plan, taking into account the overall investment policy of the Plan and the
composition of the Plan's investment portfolio.
[The U.S. Department of Labor has granted to ____________________, an
administrative exemption (Prohibited Transaction Exemption ______; Exemption
Application No. ______) (the "Exemption") 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 Exemption. The Exemption applies to mortgage loans such as
the Mortgage Loans in the Trust Fund.
[Insert general description of the Exemption and the conditions that must
be satisfied for the Exemption to apply].
The Underwriter believes that the Exemption will apply to the acquisition
and holding of the Class A Certificates and the Class S Certificates by Plans
and that all conditions of the Exemption other than those within the control of
the investors will be met. In addition, as of the date hereof, there is no
single Mortgagor that is the obligor on 5% of the Mortgage Loans included in the
Trust Fund by aggregate unamortized principal balance of the assets of the Trust
Fund.
Prospective Plan investors should consult with their legal advisors
concerning the impact of ERISA and the Code, the applicability of PTCE 83-1
described in the Prospectus and the Exemption, and the potential consequences in
their specific circumstances, prior to making an investment in the Class A
Certificates or the Class S Certificates. Moreover, each Plan fiduciary should
determine whether under the general fiduciary standards of investment prudence
and diversification, an investment in the Class A Certificates or the Class S
Certificates is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio.
S-92
<PAGE>
No transfer of Subordinated Certificates will be permitted to be made to a
Plan unless such Plan, at its expense, delivers to the Trustee and the Depositor
an opinion of counsel (in form satisfactory to the Trustee and the Depositor) to
the effect that the purchase or holding of a Subordinated Certificate by such
Plan will not result in the assets of the Trust being deemed to be "plan assets"
and subject to the prohibited transaction provisions of ERISA and the Code and
will not subject the Trustee, the Depositor or the Master Servicer to any
obligation or liability in addition to those undertaken in the Agreement. Unless
such opinion is delivered, each person acquiring a Subordinated Certificate will
be deemed to represent to the Trustee, the Depositor and the Master Servicer
that such person is neither a Plan nor acting on behalf of a Plan subject to
ERISA or to Section 4975 of the Code.
[Neither an Underwriter Exemption nor PTE 83-1 (each, as defined in the
Prospectus) is applicable to the purchase, holding or transfer of the
Certificates. Therefore, no Certificates may be purchased for, or on behalf of,
any employee benefit plan or other retirement arrangement which is subject to
Title I of the Employee Retirement Income Security Act of 1974, as amended,
and/or Section 4975 of the Internal Revenue Code of 1986, as amended, or any
entity whose underlying assets include plan assets by reason of such plan or
account investing in such entity (including insurance company separate or
general accounts and collective investment funds). Each Certificateholder will
be deemed to have represented and warranted that it is not subject to the
foregoing limitations. See "ERISA Considerations" in the Prospectus.]
LEGAL INVESTMENT
[Although upon their initial issuance the Class ____ Certificates will be
rated "___" by Moody's and "___" by S&P,] the [Class A] Certificates (other than
the Class __ Certificates) will [not] constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA")
[so long as they are rated in one of the two highest rating categories by at
least one nationally recognized statistical rating organization and, as such,
are legal investments for certain entities to the extent provided for in SMMEA].
Institutions whose investment activities are subject to review by federal or
state regulatory authorities should consult with their counsel or the applicable
authorities to determine whether an investment in the Senior Certificates
complies with applicable guidelines, policy statements or restrictions. See
"Legal Investment" in the Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting Agreement
between the Depositor and the Underwriter, the Depositor has agreed to sell to
the Underwriter, and the Underwriter has agreed to purchase from the Depositor,
the Senior Certificates. Distribution of the Senior Certificates will be made by
the Underwriter from time to time in negotiated transactions or otherwise at
varying prices to be determined at the time of sale. In connection with the sale
of the Senior Certificates, the Underwriter may be deemed to have received
compensation from the Depositor in the form of underwriting discounts.
S-93
<PAGE>
The Depositor has been advised by the Underwriter that it intends to make a
market in the Senior Certificates but has no obligation to do so. There can be
no assurance that a secondary market for the Senior Certificates will develop
or, if it does develop, that it will continue.
The Seller has agreed to indemnify the Underwriter against, or make
contributions to the Underwriter with respect to, certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
LEGAL MATTERS
The validity of the Certificates, including certain federal income tax
consequences with respect thereto, will be passed upon for the Depositor by
Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022.
RATINGS
It is a condition of the issuance of the Class A Certificates and the Class
S Certificates that they be rated [ ] by [ ] and [ ] by [ ].
[The ratings assigned by _________________ to home equity loan pass-through
certificates address the likelihood of the receipt of all distributions on the
mortgage loans by the related Certificateholders under the agreements pursuant
to which such certificates are issued. __________ ratings take into
consideration the credit quality of the related mortgage pool, including any
credit support providers, structural and legal aspects associated with such
certificates, and the extent to which the payment stream on such mortgage pool
is adequate to make payments required by such certificates. __________ ratings
on such certificates do not, however, constitute a statement regarding frequency
of prepayments on the related mortgage loans.]
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the Rating Agencies.
No person is obligated to maintain the rating on any [Class __] Certificate and,
accordingly, there can be no assurance that the ratings assigned to the
Certificates upon initial issuance will not be lowered or withdrawn by a Rating
Agency at any time thereafter.
Neither of the ratings addresses the possibility that holders of the Class
S Certificates might fail to recoup their initial investments.
The Depositor has not requested a rating of the Senior Certificates by any
rating agency other than [ ] and [ ]; there can be no assurance, however, as to
whether any other rating agency will rate the Senior Certificates or, if it
does, what rating would be assigned by such other rating agency. The rating
assigned by such other rating agency to the Senior Certificates could be lower
than the respective ratings assigned by [ ] and [ ].
S-94
<PAGE>
ANNEX 1
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
S-95
<PAGE>
INDEX TO DEFINED TERMS
Page
----
Account Party 18, 63
Adjustable Rate 6, 30
Adjustable Rate Group 4, 5, 30
Adjustable Rate Mortgage Loan 6, 30
Adjustment Date 31
Advance 21, 44
Agreement 3, 45
Available Funds 48
Balloon Loans 6, 31
Balloon Payments 6, 31
Base Spread Account Requirement 18, 63
Basis Risk Shortfall 68
beneficial owner 46
Book-Entry Certificates 46
Business Day 9, 47
Call Date 6, 31
Call Loans 6, 31
Carry-Forward Amount 12, 13, 51
Cede 9, 10, 45
CEDEL 9
Certificate Account 46
Certificate Balance 46
Certificate Guaranty Insurance Policy 4, 5
Certificate Guaranty Insurer 4, 5
Certificateholders 10, 29
Certificates 1, 3, 45
CIT 3, 20, 26, 64
CIT Consumer Finance 1, 4, 26
Citibank 9, 10
CITSF 26, 41
Class A Certificate Balance 8, 48
Class A Certificates 1, 3, 45
Class A Pass-Through Rate 15, 49
Class A Percentage 13, 48
Class A Prepayment Percentage 53
Class A Principal Distribution Amount 12, 13, 51
Class A Remittance Rate 15, 49
Class S Certificates 1, 3, 45
Class S Notional Amount 8, 48
Class S Pass-Through Rate 15, 49
Closing Date 4, 28, 74
Code 23, 24, 68
Combined Loan-to-Value Ratio 32
Compensating Interest 21, 44
S-96
<PAGE>
CPR 59
Cross-over Date 11, 47
Cumulative Spread Account Receipts 19, 64
Curtailments 12, 13, 51
Cut-off Date 4, 28
Definitive Certificate 46
Deleted Mortgage Loan 41
Depositor 1, 3, 26
Depository 46
Detailed Description 28
Determination Date 9, 41
Direct Participants 27
Disqualified Organizations 69
Distribution Account 46
Distribution Date 2, 9, 47
DOL 90
DTC 9, 27
Due Dates 44
Due Period 9, 44
ERISA 23, 24, 90
Euroclear 9
European Depositories 9, 10
Excess Spread 18, 63
Exemption 92
Expense Fees 43
FHLMC 32
Fixed Rate 6, 30
Fixed Rate Group 30
Fixed Rate Mortgage Loan 6, 30
FNMA 32
Funding Period 7, 29
Graduated Payment Loan 6, 31
Gross Margin 6, 31
Guarantee Payment 20, 64
Index 1, 6, 7, 31
Indirect Participants 27
Insurance Account 21
Insurance Proceeds 48
Insured Payment 16
Issuer 3
Letter of Credit 18, 63
LIBOR 1, 31
Limited Guarantee 20, 64
Liquidated Mortgage 9, 52
Liquidation Proceeds 48
Master Servicer 1, 4
Master Servicing Fee 21, 43
Maximum Rate 6, 31
Minimum Rate 6, 31
Monthly Premium 21, 22
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<PAGE>
Moody's 18, 19, 63
Morgan 9, 10
Mortgage 4, 28
Mortgage Assets 4, 28
Mortgage Documents 40
Mortgage Loan 4, 28
Mortgage Loan Group 4, 5, 30
Mortgage Loans 1
Mortgage Note 4, 28
Mortgage Pool 4, 28
Mortgage Rate 6, 28, 30
Mortgaged Property 4, 28
Multiple Variable Rate REMIC Regular Certificate 78
Net Interest Shortfall 49
Net Prepayment Interest Shortfall 49
Offered Certificates 1, 3, 45
OID 73
OID Regulations 73
Original Pool Principal Balance 4, 28
Original Subordinated Principal Balance 53
Participant 27
Percentage Interest 3, 45
Periodic Excess Spread Amount 18, 63
Periodic Rate Cap 6, 31
Plan 23
Plans 90
Pool 4, 28
Pool Principal Balance 13, 49
Pre-Funded Amount 7, 29
Pre-Funding Account 1, 7, 29
Prepayment Assumption 74
Prepayment Interest Shortfall 49
Presumed Single Qualified Floating Rate 77
Primary Mortgage Insurance Policy 20
Primary Mortgage Insurer 20
Principal Prepayments 12, 13
Private Mortgage-Backed Securities 4
Prospectus 2
PTE 83-1 91
Purchase Agreement 28
Qualified Substitute Mortgage Loan 41
Rating Agencies 25
Realized Loss 8, 52
Record Date 9, 47
Relief Act Reduction 49
Remainder Excess Spread Amount 19, 64
Remaining Available Funds 11, 47
REMIC 2, 23
S-98
<PAGE>
REMIC Regular Certificates 68
REMIC Regulations 69
REMIC Residual Certificates 68
Reserve Fund 17, 61
Residual Certificateholders 45
Residual Certificates 1, 3, 45
S&P 18, 19, 63
Scheduled Payments 29
Seller 1, 4
Senior Certificateholders 2, 10, 45
Senior Certificates 1, 3, 45
Senior Distribution Amount 10, 47
Senior Interest Distribution Amount 12, 50
Service 70
Single Family Certificates 91
Single Variable Rate REMIC Regular Certificate 78
SMMEA 24, 93
Special Hazard Insurance Policy 20, 63
Special Hazard Insurer 20, 63
Specified Spread Account Requirement 18, 63
Spread Account 18, 63
Spread Account Cross-Over Date 19, 63
Spread Account Excess 19, 64
Standard Hazard Insurance Policies 20
Startup Day 68
Strip Rate 15, 49
Subordinated Amount 19, 64
Subordinated Certificateholders 2, 8, 45
Subordinated Certificates 1, 3, 45
Subordinated Class Certificate Balance 8, 48
Subordinated Distribution Amount 11, 47
Subordinated Pass-Through Rate 15, 49
Subordinated Percentage 15, 49
Subordinated Prepayment Percentage 53
Subordinated Remittance Rate 15, 49
Subsequent Mortgage Loans 5, 6, 29
Substitution Adjustment 41
Termination Events 55
Tiered REMICs 71
Trust 1, 4, 28
Trust Fund 1, 4, 28
Trustee 1, 4, 56
Underwriter 1
Underwriters' PTEs 23, 24
Unpaid Principal Shortfall 53
Unpaid Senior Interest Amounts 12, 50
Unpaid Subordinated Interest Amounts 14, 51
Variable Rate REMIC Regular Certificate 77
Yield Supplement Agreement 68
Yield Table 59
S-99
<PAGE>
PROSPECTUS
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 21, 1997
THE CIT GROUP SECURITIZATION CORPORATION III
Depositor
Home Equity Loan Asset Backed Certificates
(Issuable in Series)
-------------------
This Prospectus relates to Home Equity Loan Asset Backed Certificates (the
"Certificates"), which may be sold from time to time in one or more series
(each, a "Series") by The CIT Group Securitization Corporation III (the
"Depositor"), on terms determined at the time of sale and described in this
Prospectus and the related Prospectus Supplement. The Certificates of a Series
will evidence fractional undivided beneficial ownership interests in a trust
fund (a "Trust Fund" or "Trust"). As specified in the related Prospectus
Supplement, the primary assets of a Trust Fund for a Series of Certificates will
include one or more pools of certain mortgage related assets (the "Mortgage
Assets") consisting of (i) mortgage loans (or participation or other beneficial
interests therein) secured by mortgages, deeds of trust or similar security
instruments (the "Mortgages") creating first or subordinate liens on one- to
four-family residential properties (the "Mortgage Loans"), (ii) Private
Mortgage-Backed Securities (as defined herein), together with payments in
respect of such Mortgage Assets, and (iii) certain other accounts, obligations
or agreements, in each case as specified in the related Prospectus Supplement.
The Mortgage Assets will be acquired by the Depositor, either directly or
indirectly, from The CIT Group/Consumer Finance, Inc. ("CIT Consumer Finance")
and/or other affiliates of the Depositor (each, a "Seller"), and conveyed by the
Depositor to the related Trust Fund. The related Prospectus Supplement may
provide that monies will be on deposit in a separate trust account (the
"Pre-Funding Account") not to exceed 25% of the Certificate Balance (as defined
herein) to be maintained with the Trustee (as defined herein), which will be
used to purchase additional Mortgage Assets from the Depositor or any Seller
from time to time during the funding period specified in such Prospectus
Supplement in the manner set forth therein. If specified in the related
Prospectus Supplement, certain Certificates may evidence a fractional undivided
ownership interest in a Trust Fund which will hold a beneficial ownership
interest in another trust fund which will contain the Mortgage Assets. A Trust
Fund also may include insurance policies, cash accounts, reinvestment income,
limited guarantees by The CIT Group Holdings, Inc. ("CIT"), third party
guarantees (any of which may be limited in nature), letters of credit, other
forms of credit enhancement or other assets to the extent described in the
related Prospectus Supplement. In addition to or in lieu of the foregoing,
credit enhancement may be provided by means of subordination as described herein
and in the related Prospectus Supplement. See "Description of the Certificates"
and "Credit Enhancement" herein.
(cover continued on next page)
THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR
OBLIGATION OF THE DEPOSITOR, THE MASTER SERVICER, THE CIT GROUP/CONSUMER
FINANCE, INC., THE CIT GROUP/SALES FINANCING, INC., THE CIT GROUP HOLDINGS, INC.
OR ANY OF THEIR RESPECTIVE AFFILIATES, EXCEPT AS SET FORTH HEREIN AND IN THE
RELATED PROSPECTUS SUPPLEMENT. NEITHER THE CERTIFICATES NOR THE UNDERLYING
MORTGAGE LOANS WILL BE INSURED OR GUARANTEED BY THE DEPOSITOR, THE MASTER
SERVICER, THE CIT GROUP/CONSUMER FINANCE, INC., THE CIT GROUP/SALES FINANCING,
INC., THE CIT GROUP HOLDINGS, INC. OR ANY OF THEIR AFFILIATES EXCEPT AS SET
FORTH HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
SEE "RISK FACTORS" BEGINNING ON PAGE 22 FOR CERTAIN FACTORS TO BE CONSIDERED IN
PURCHASING THE CERTIFICATES.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
Prior to issuance there will have been no market for the Certificates of
any Series, and there can be no assurance that a secondary market for any
Certificates will develop or, if it does develop, that it will continue. The
Depositor does not intend to list any of the Certificates on any securities
exchange and has not made any other arrangements for secondary trading of the
Certificates. This Prospectus may not be used to consummate sales of a Series of
Certificates unless accompanied by a Prospectus Supplement.
Offers of the Certificates may be made through one or more different
methods, including offerings through underwriters, as more fully described under
"Method of Distribution" herein and in the related Prospectus Supplement.
The date of the Prospectus is __________ __, 1997.
<PAGE>
Each Series of Certificates will be issuable in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership interests
of a specified percentage (which may be 0%) or portion of future interest
payments and a specified percentage (which may be 0%) or portion of future
principal payments on the Mortgage Assets in the related Trust. A class of
Certificates may be divided into two or more sub-classes, as specified in the
related Prospectus Supplement. A Series of Certificates may include one or more
classes that are senior in right of payment to one or more other classes of
Certificates of such Series. Certain Series or classes of Certificates may be
covered by insurance policies, surety bonds or other forms of credit
enhancement, in each case as described herein and in the related Prospectus
Supplement. One or more classes of Certificates of a Series may be entitled to
receive distributions of principal, interest or any combination thereof.
Distributions on one or more classes of a Series of Certificates may be made
prior to one or more other classes of Certificates of such Series, after the
occurrence of specified events, in accordance with a schedule or formula, on the
basis of collections from designated portions of the Mortgage Assets in the
related Trust, or on a different basis, or one or more classes of a Series of
Certificates may be required to absorb one or more types of losses prior to one
or more other classes of Certificates of such Series, in each case as specified
in the related Prospectus Supplement. The timing and amounts of such
distributions may vary among classes or over time as specified in the related
Prospectus Supplement.
Distributions to holders of Certificates (the "Certificateholders") will be
made monthly, quarterly, semiannually or at such other intervals and on the
dates specified in the related Prospectus Supplement. Distributions on the
Certificates of a Series will be made from the assets of the related Trust Fund
or funds or other assets held for the benefit of the Certificateholders as
specified in the related Prospectus Supplement.
The Certificates of any Series will not be insured or guaranteed by any
governmental agency or instrumentality or, unless otherwise specified in the
related Prospectus Supplement, by any other person. Unless otherwise specified
in the related Prospectus Supplement, the only obligations of the Depositor with
respect to a Series of Certificates will be to obtain certain representations
and warranties from each Seller and to assign to the Trustee for the related
Series of Certificates the Depositor's rights with respect to such
representations and warranties. Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer for each Series of Certificates will
be The CIT Group/Consumer Finance, Inc. The principal obligations of the Master
Servicer named in the related Prospectus Supplement with respect to the related
Series of Certificates will be limited to obligations pursuant to certain
representations and warranties and to its contractual servicing obligations,
including any obligation it may have to advance delinquent payments on the
Mortgage Assets in the related Trust Fund to the extent described in the related
Prospectus Supplement.
The yield on each class of Certificates of a Series will be affected by,
among other things, the rate and timing of payment of principal (including
prepayments) on the Mortgage Assets in the related Trust Fund and the timing of
receipt of such payments as described herein and in the related Prospectus
Supplement. A Trust Fund may be subject to early termination under the
circumstances described herein and in the related Prospectus Supplement.
Each Trust Fund will be held in trust for the benefit of the holders of the
related Certificates of a Series pursuant to an Agreement (as defined herein) as
more fully described herein. If specified in the related Prospectus Supplement
for the Certificates of a Series, one or more elections may be made to treat the
related Trust Fund or specified portions thereof as one or more "real estate
mortgage investment conduits" (each, a "REMIC") for federal income tax purposes.
See "Certain Federal Income Tax Consequences" herein.
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PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to the Certificates of each Series to be
offered hereunder will, among other things, set forth with respect to such
Certificates, as appropriate: (i) a description of the class or classes of
Certificates and the related Pass-Through Rate (as defined herein) or method of
determining the amount of interest, if any, to be passed through to each such
class, (ii) the initial aggregate Certificate Balance (as defined herein) of
each class of Certificates included in such Series, Distribution Dates (as
defined herein) relating to such Series and, if applicable, the initial and
final scheduled Distribution Dates for each class; (iii) information as to the
assets comprising the Trust Fund, including the general characteristics of the
Mortgage Assets included therein and, if applicable, the insurance surety bonds,
guarantees, financial guaranty insurance policies, letters of credit or other
instruments or agreements included in the Trust Fund, any overcollateralization,
and the amount and source of any Reserve Fund (as defined herein) or any other
cash account; (iv) the circumstances, if any, under which the Trust Fund may be
subject to early termination; (v) the method used to calculate the amount of
principal, if any, to be distributed with respect to each class of Certificates;
(vi) the order of application of distributions to each of the classes within
such Series, whether sequential, pro rata, or otherwise; (vii) additional
information with respect to the plan of distribution of such Certificates;
(viii) whether one or more REMIC elections will be made and designation of the
regular interests and residual interests; (ix) the aggregate original percentage
ownership interest in the Trust Fund to be evidenced by each class of
Certificates; (x) information as to the nature and extent of subordination with
respect to any class of Certificates that is subordinate in right of payment to
any other class of Certificates; and (xi) information as to the Seller, the
Master Servicer, CIT and the Trustee.
AVAILABLE INFORMATION
The Depositor and CIT have filed with the Securities and Exchange
Commission (the "Commission") on behalf of each Trust Fund a Registration
Statement (together with all amendments and exhibits thereto, the "Registration
Statement"), of which this Prospectus is a part, under the Securities Act of
1933, as amended, with respect to the Certificates offered pursuant to this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to such Registration Statement including exhibits
filed as part thereof. Such Registration Statement and exhibits can be inspected
without charge and copied at prescribed rates at the public reference facilities
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
Regional Offices located as follows: Chicago Regional Office, Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661;
and New York Regional Office, Seven World Trade Center, New York, New York
10048. Both registrants also file electronically. The Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's Web site is http://www.sec.gov. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document filed as an exhibit to the Registration Statement, while complete in
all material respects, do not necessarily describe all terms or provisions of
such contract, agreement or other document. For a complete description,
reference is made to each such contract, agreement or other document filed as an
exhibit to the Registration Statement. The Master Servicer, on behalf of each
Trust Fund, will also file or cause to be filed with the Commission such
periodic reports as are required under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the Commission
thereunder. However, in accordance with the Exchange Act and the rules and
regulations of the Commission thereunder, the Depositor expects that each
Trust's obligation to file such reports will be terminated following the end of
the year in which such Trust Fund is formed. Such reports and other information
filed on behalf of each Trust Fund will be available for inspection as set forth
above.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by CIT are incorporated
by reference in this Prospectus:
(a) CIT's Annual Report on Form 10-K for the year ended December 31, 1995
together with the report of KPMG Peat Marwick LLP, independent certified public
accountants, which report refers to a change in the method of accounting for
postretirement benefits other than pensions in 1993;
(b) CIT's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996; and
(c) CIT's Current Reports on Form 8-K dated January 18, 1996, April 11,
1996, April 12, 1996, July 16, 1996, August 14, 1996, October 17, 1996, December
24, 1996, January 23, 1997 (as amended by Form 8-K/A dated February 14, 1997)
and February 13, 1997.
All documents filed by CIT pursuant to Sections 13(a) and (c), 14, or 15(d) of
the Exchange Act after the date hereof and prior to the termination of the
offering of the securities offered hereby shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
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 purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute part of this Prospectus.
CIT WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS
DELIVERED, UPON REQUEST, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS
DESCRIBED ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). SUCH REQUEST SHOULD
BE DIRECTED TO:
CORPORATE SECRETARY
THE CIT GROUP HOLDINGS, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 536-1950
All documents subsequently filed by or on behalf of the Trust Fund referred
to in the accompanying Prospectus Supplement with the Commission 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 Certificates
issued by such Trust Fund 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 such 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 accompanying 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 such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Trustee on behalf of any Trust Fund 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 above that have
been or may be incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Such requests should be directed to the corporate
trust office of the Trustee specified in the accompanying Prospectus Supplement.
--------------
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the securities covered by such Prospectus Supplement,
whether or not participating in the distribution thereof, may be required to
deliver such Prospectus Supplement and this Prospectus. This is in addition to
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the obligation of dealers to deliver a Prospectus and Prospectus Supplement when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Certificates
offered hereby and thereby nor an offer of the Certificates to any person in any
state or other jurisdiction in which such offer would be unlawful. The delivery
of this Prospectus at any time does not imply that information herein is correct
as of any time subsequent to its date.
--------------------
REPORTS TO CERTIFICATEHOLDERS
Periodic and annual reports concerning any Certificates and the related
Trust Fund will be provided to the Certificateholders. See "Description of the
Certificates -- Reports to Certificateholders" herein. If specified in the
related Prospectus Supplement, a Series of Certificates may be issuable in
book-entry form. In such event, the related Certificates will be registered in
the name of Cede & Co. ("Cede"), the nominee of The Depository Trust Company
("DTC"). All reports will be provided to Cede, which in turn will provide such
reports to its Participants and Indirect Participants (each, as defined herein).
Such Participants and Indirect Participants will then forward such reports to
the beneficial owners of Certificates. If specified in the related Prospectus
Supplement, Certificateholders may also hold Certificates of a Series through
Cedel Bank, societe anonyme ("Cedel") or the Euroclear System ("Euroclear") in
Europe, if they are participants in such systems or indirectly through
organizations that are participants in such systems. See "Description of the
Certificates -- Book-Entry Certificates" herein.
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SUMMARY OF TERMS
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and in the related Prospectus
Supplement with respect to the Series offered thereby. The Prospectus Supplement
for each Series will specify the extent (if any) to which the terms of such
Series or the related Trust Fund vary from the description of the Certificates
and Trust Funds in general that is contained in this Prospectus. Reference is
made to the Index to Defined Terms for the location herein of the definitions of
certain capitalized terms used herein.
Title of Securities............ Home Equity Loan Asset Backed Certificates
(the "Certificates"), issuable in series
(each, a "Series"). Each Series will be
issued under a separate pooling and servicing
agreement (each, an "Agreement") to be
entered into among the Depositor, the Master
Servicer, the applicable Sellers and the
Trustee (each, as defined herein) with
respect to each such Series.
Depositor...................... The CIT Group Securitization Corporation III,
a Delaware corporation (the "Depositor").
Seller......................... The entity or entities named as seller (each,
a "Seller") in the related Prospectus
Supplement, which will be The CIT
Group/Consumer Finance, Inc. ("CIT Consumer
Finance") and/or another affiliate of the
Depositor.
Master Servicer................ The CIT Consumer Finance or such other entity
named as master servicer in the related
Prospectus Supplement (the "Master
Servicer"), which may be an affiliate of the
Depositor. See "The CIT Group/Consumer
Finance, Inc., Master Servicer" and "The
Pooling and Servicing Agreement--Certain
Matters Regarding the Master Servicer and the
Depositor" herein.
Sub-Servicer................... Unless otherwise specified in the related
Prospectus Supplement, The CIT Group/Sales
Financing, Inc. ("CITSF") will be appointed
as a Sub-Servicer for all of the Mortgage
Loans (as defined herein) in each Mortgage
Pool (as defined herein), and as a
Sub-Servicer, will perform all or most of the
servicing responsibilities described under
"The Pooling and Servicing Agreement" herein
and "Servicing of Mortgage Loans" in the
related Prospectus Supplement. All references
in this Prospectus and any related Prospectus
Supplement to the "Master Servicer" or to CIT
Consumer Finance in a servicing capacity
shall include CIT Consumer Finance acting
through any Sub-Servicer, including CITSF, or
any agent.
Trustee........................ The trustee (the "Trustee") for each Series
of Certificates will be specified in the
related Prospectus Supplement. See "The
Pooling and Servicing Agreement" herein for a
description of the Trustee's rights and
obligations.
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Closing Date................... The date of initial issuance of a Series of
Certificates, as specified in the related
Prospectus Supplement (the "Closing Date").
Description of
the Certificates............... Each Certificate will represent a beneficial
ownership interest in a Trust created by the
Depositor pursuant to an Agreement among the
Depositor, the applicable Sellers, the Master
Servicer and the Trustee for the related
Series. The primary assets of such Trust will
be a Pool (as defined herein) of Mortgage
Loans and certain other Mortgage Assets (as
defined herein). See "-The Mortgage Assets"
below. The Certificates of any Series may be
issued in one or more classes as specified in
the related Prospectus Supplement. A Series
of Certificates may include one or more
classes of senior Certificates (the "Senior
Certificates") which receive certain
preferential treatment specified in the
related Prospectus Supplement with respect to
one or more classes of subordinate
Certificates (the "Subordinated
Certificates"). Each class may be divided
into sub-classes, each of which bears a
different Pass-Through Rate (as defined
herein) and has a specified priority in
payments of interest and principal. Certain
Series or classes of Certificates may be
covered by a Certificate Guaranty Insurance
Policy, Mortgage Pool Insurance Policy,
Special Hazard Insurance Policy, Bankruptcy
Bond (each, as defined herein) or other
insurance policies, a Reserve Fund (as
defined herein), guarantees (including
guarantees by The CIT Group Holdings, Inc.,
its affiliates or an unaffiliated third
party, any of which may be limited in
nature), letters of credit, a spread account,
cash collateral account and/or other
accounts, or other forms of credit
enhancement, in each case as described herein
and in the related Prospectus Supplement.
Each class of Certificates within a Series
will evidence the interests specified in the
related Prospectus Supplement, which may (i)
include the right to receive
disproportionate, nominal or no distributions
allocable only to principal, only to interest
or to any combination thereof; (ii) include
the right to receive disproportionate,
nominal or no distributions only of
prepayments of principal throughout the lives
of the Certificates or during specified
periods; (iii) be subordinated in the right
to receive distributions of scheduled
payments of principal, prepayments of
principal, interest or any combination
thereof to one or more other classes of
Certificates of such Series throughout the
lives of the Certificates or during specified
periods or may be subordinated with respect
to certain losses or delinquencies; (iv)
include the right to receive distributions
only after the occurrence of events specified
in the related Prospectus Supplement; (v)
include the right to receive distributions in
accordance with a schedule or formula or on
the basis of collections from designated
portions of the assets in the related Trust;
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<PAGE>
(vi) include, as to Certificates entitled to
distributions allocable to interest, the
right to receive interest at a Fixed Rate or
at an Adjustable Rate (each, as defined
herein) that is subject to change from time
to time, or the right to receive interest
based on the weighted average Mortgage Rate
(as defined herein), or the right to receive
interest as otherwise determined as specified
in the related Prospectus Supplement; and
(vii) include, as to Certificates entitled to
distributions allocable to interest, the
right to distributions allocable to interest
only after the occurrence of events specified
in the related Prospectus Supplement, and in
each case, may accrue interest until such
events occur, as specified in the related
Prospectus Supplement. The timing and amounts
of such distributions may vary among classes,
over time, or otherwise as specified in the
related Prospectus Supplement. A Series of
Certificates may also include one or more
classes of Certificates entitled to payments
derived from a specified group or groups of
Mortgage Assets held by the related Trust.
Unless otherwise specified in the related
Prospectus Supplement, the Certificates will
be issuable in fully registered form, in
minimum denominations of $1,000 and integral
multiples of $1,000 in excess thereof, except
that one Certificate of each class may be
issued in a different denomination. See
"Description of the Certificates" herein.
Distributions
on the Certificates............. All distributions will be made to
Certificateholders in the priority, manner
and amount specified in the related
Prospectus Supplement. The amount allocable
to payments of principal and interest on any
Distribution Date will be determined as
specified in the related Prospectus
Supplement. The rate at which interest will
be passed through to holders of each class of
Certificates entitled thereto may be a Fixed
Rate or an Adjustable Rate from the date and
for the periods, in each case, as specified
in the related Prospectus Supplement. Any
such rate will be calculated as described in
the related Prospectus Supplement.
Distribution Date.............. Distributions on the Certificates entitled
thereto will be made monthly, quarterly,
semi-annually or at such other intervals and
on the dates specified in the related
Prospectus Supplement (each, a "Distribution
Date") out of the payments received in
respect of the assets of the related Trust or
other assets held for the benefit of the
Certificateholders as specified in the
related Prospectus Supplement.
Determination Date............. Unless otherwise specified in the related
Prospectus Supplement, the "Determination
Date" is the third Business Day (as defined
herein) prior to each Distribution Date. On
each Determination Date, the Master Servicer
will determine the
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amounts of principal and interest which will
be passed through to Certificateholders on
the related Distribution Date.
Due Period..................... The "Due Period" for any Series is the period
specified in the related Prospectus
Supplement. The "Due Period" is the period
during which principal, interest and other
amounts will be collected on the Mortgage
Loans for application to the payment of
principal and interest to the
Certificateholders and the payment of fees on
such Distribution Date.
Business Day................... A "Business Day" is any day other than a
Saturday, Sunday or any day on which banking
institutions or trust companies in the states
of New York, Oklahoma and such other states
(if any) specified in the related Prospectus
Supplement are authorized by law, regulation
or executive order to be closed.
Cut-off Date................... The first day of the month of the issuance of
the related Series of Certificates or such
other date as is specified in the related
Prospectus Supplement (the "Cut-off
Date").
The Mortgage Assets............ The primary assets of the trust fund for a
Series of Certificates (each, a "Trust Fund"
or "Trust") will consist of one or more pools
(each a "Mortgage Pool" or "Pool") of certain
mortgage related assets (the "Mortgage
Assets") consisting of (i) mortgage loans (or
participation or other beneficial interests
therein) secured by mortgages, deeds of trust
or similar security instruments (the
"Mortgages") creating first or subordinate
liens on one- to four-family residential
properties (the "Mortgage Loans"), and, if
specified in the related Prospectus
Supplement, (ii) mortgage pass-through
certificates or participation certificates
evidencing an undivided interest in a pool of
mortgage loans or collateralized mortgage
obligations secured by mortgage loans (the
"Private Mortgage-Backed Securities"),
together with payments in respect of such
Mortgage Assets, and (iii) certain other
accounts, obligations or agreements, in each
case as specified in the related Prospectus
Supplement.
A. Mortgage Loans............ Unless otherwise specified in the related
Prospectus Supplement, the Mortgage Loans
will be secured by Mortgages creating first
or subordinate liens on one- to four-family
residential properties (each, a "Mortgaged
Property"). If specified in the related
Prospectus Supplement, the Mortgage Loans may
include loans or participations therein
secured by Mortgages on condominium units in
condominium buildings together with such
condominium units' appurtenant interests in
the common elements of the condominium
buildings. If specified in the related
Prospectus Supplement, the Mortgage Assets of
the related Trust may include mortgage
participation certificates evidencing
interests in mortgage loans. Unless otherwise
specified in the related Prospectus
Supplement, such Mortgage Loans
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will be loans that are not insured or
guaranteed by any governmental agency.
B. General Attributes of
Mortgage Loans.............. The payment terms of the Mortgage Loans to be
included in a Trust will be described in the
related Prospectus Supplement and may include
any of the following features or combinations
thereof or other features described in the
related Prospectus Supplement:
(a) Interest may be payable at a fixed rate
(a "Fixed Rate" and a Mortgage Loan
subject thereto is a "Fixed Rate
Mortgage Loan"), a rate adjustable from
time to time in relation to an index
(which will be specified in the related
Prospectus Supplement), a rate that is
fixed for a period of time or under
certain circumstances and is followed by
an adjustable rate, a rate that
otherwise varies from time to time, or a
rate that is convertible from an
adjustable rate to a fixed rate (each of
the foregoing, an "Adjustable Rate" and
a Mortgage Loan subject thereto is an
"Adjustable Rate Mortgage Loan").
Changes to an Adjustable Rate may be
subject to periodic limitations, maximum
rates, minimum rates or a combination of
such limitations. Accrued interest may
be deferred and added to the principal
of a Mortgage Loan for such periods and
under such circumstances as may be
specified in the related Prospectus
Supplement. The loan agreement or
promissory note (the "Mortgage Note") in
respect of a Mortgage Loan may provide
for the payment of interest at a rate
lower than the interest rate (the
"Mortgage Rate") specified in such
Mortgage Note for a period of time or
for the life of the Mortgage Loan, and
the amount of any difference may be
contributed from funds supplied by the
seller of the related Mortgaged Property
or another source or may be treated as
accrued interest and added to the
principal of the Mortgage Loan.
(b) Principal may be payable on a declining
balance basis to fully amortize the
Mortgage Loan over its term, may be
calculated on the basis of an assumed
amortization schedule that is
significantly longer than the original
term to maturity or on an interest rate
that is different from the Mortgage Rate
or may not be amortized during all or a
portion of the original term. Payment of
all or a substantial portion of the
principal of certain Mortgage Loans
("Balloon Loans") may be due on maturity
("Balloon Payments"). Mortgage Loans may
permit the mortgagee to require the
Mortgagor (as defined herein) to pay the
full principal balance of the loan on a
specified date (the "Call Date") prior
to the maturity of the loan ("Call
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Loans"). Principal may include interest
that has been deferred and added to the
principal balance of the Mortgage Loan.
(c) Monthly payments of principal and
interest may be fixed for the life of
the Mortgage Loan, may increase over a
specified period of time (a "Graduated
Payment Loan") or may change from period
to period. The terms of a Mortgage Loan
may include limits on periodic increases
or decreases in the amount of monthly
payments and may include maximum or
minimum amounts of monthly payments.
(d) The Mortgage Loans generally may be
prepaid in whole or in part at any time.
If specified in the related Prospectus
Supplement, some prepayments of the full
principal balance of a loan may be
subject to a prepayment penalty or
premium. Such prepayment penalty or
premium will be applicable to certain
prepayments of principal made during a
specified period of time during the life
of the Mortgage Loan. The Mortgage Note
in respect of any Mortgage Loan subject
to a prepayment penalty or premium
generally will set forth the terms of
prepayment. Prepayments on the Mortgage
Loans as a result of a refinancing by
the Seller or Seller's transferee
generally will not be subject to a
prepayment penalty or premium. The
Mortgage Loans generally include "due on
sale" clauses which permit the mortgagee
to demand payment of the entire Mortgage
Loan in connection with the sale or
certain transfers of the related
Mortgaged Property. Other Mortgage Loans
may be assumable by persons meeting the
then applicable underwriting standards
for such Mortgage Loan.
(e) The real property constituting security
for repayment of a Mortgage Loan may be
located in any one of the fifty states
or the District of Columbia. Unless
otherwise specified in the related
Prospectus Supplement, all of the
Mortgage Loans will be covered by
standard hazard insurance policies
(each, a "Standard Hazard Insurance
Policy") insuring against losses due to
fire and various other causes. Mortgage
Loans with certain Combined
Loan-to-Value Ratios (as defined herein)
and/or certain principal balances are
generally not covered wholly or
partially by Primary Mortgage Insurance
Policies (as defined herein) unless
otherwise specified in the related
Prospectus Supplement.
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(f) Unless otherwise specified in the
related Prospectus Supplement, certain
of the Mortgage Loans underlying a given
Series of Certificates may have been
originated by CIT Consumer Finance or
affiliates thereof and certain Mortgage
Loans may have been purchased by CIT
Consumer Finance or an affiliate thereof
in the open market or in privately
negotiated transactions, including
transactions with entities affiliated
with CIT Consumer Finance.
The Prospectus Supplement for each Series of
Certificates will specify with respect to all
Mortgage Loans expected to be included in the
related Pool as of the date specified in the
related Prospectus Supplement, among other
things, (i) the expected aggregate
outstanding principal balance and the
expected average outstanding principal
balance of the Mortgage Loans in such Pool,
(ii) the largest expected principal balance
and the smallest expected principal balance
of any of the Mortgage Loans, (iii) the types
of Mortgaged Properties (e.g., detached
residential one- to four-family properties,
individual units in condominium apartment
buildings, vacation and second homes, or
other real property) and/or other assets
securing the Mortgage Loans, (iv) the
original terms to maturity of the Mortgage
Loans, (v) the expected weighted average term
to maturity of the Mortgage Loans as of the
date specified in such Prospectus Supplement
and the expected range of the terms to
maturity, (vi) the earliest origination date
and latest maturity date of any of the
Mortgage Loans, (vii) the expected aggregate
principal balance of Mortgage Loans having
Combined Loan-to-Value Ratios in specified
ranges, (viii) in the case of Fixed Rate
Mortgage Loans, the expected weighted average
Mortgage Rate and ranges of Mortgage Rates
borne by the Mortgage Loans (as the case may
be), (ix) in the case of Adjustable Rate
Mortgage Loans, the expected weighted average
of the Adjustable Rates as of the date set
forth in such Prospectus Supplement, any
periodic or lifetime rate caps or floors,
maximum permitted Adjustable Rates, if any,
and the Index (as defined herein) upon which
the Adjustable Rate is based, (x) the
expected aggregate outstanding principal
balance, if any, of Buydown Loans (as defined
herein) and Graduated Payment Loans, as of
the date set forth in such Prospectus
Supplement, (xi) the expected aggregate
outstanding principal balance, if any, of
Call Loans and Balloon Loans, (xii) the
amount of any Certificate Guaranty Insurance
Policy, Mortgage Pool Insurance Policy,
Special Hazard Insurance Policy or Bankruptcy
Bond to be maintained with respect to such
Pool, (xiii) the amount, if any, and terms of
any other Credit Enhancement (as defined
herein) to be provided with respect to all or
any Mortgage Loans or the Pool, (xiv) the
priority of the Mortgages (first, second,
third or fourth) and (xv) the expected
geographic location of the Mortgaged
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Properties. See "The Trusts - The Mortgage
Loans-General" herein.
C. Private Mortgage-Backed
Securities................ Private Mortgage-Backed Securities may
consist of (i) mortgage pass-through
certificates or participation certificates
evidencing an undivided interest in a pool of
mortgage loans or (ii) collateralized
mortgage obligations secured by such mortgage
loans. Private Mortgage-Backed Securities may
include stripped mortgage-backed securities
representing an undivided interest in all or
a part of any of the principal distributions
(but not the interest distributions) or the
interest distributions (but not the principal
distributions) or in some specified portion
of the principal and interest distributions
(but not all of such distributions) on
certain mortgage loans. Although individual
mortgage loans underlying a Private
Mortgage-Backed Security may be insured or
guaranteed by the United States or an agency
or instrumentality thereof, they need not be,
and the Private Mortgage-Backed Securities
themselves will not be so insured or
guaranteed. Unless otherwise specified in the
related Prospectus Supplement, payments on
the Private Mortgage-Backed Securities will
be distributed directly to the Trustee as
registered owner of such Private
Mortgage-Backed Securities. See "The
Trusts--Private Mortgage-Backed Securities"
herein.
The related Prospectus Supplement for a
Series for which the Trust includes Private
Mortgage-Backed Securities will specify, with
respect to any Private Mortgage-Backed
Securities owned by the related Trust, among
other things, (i) the approximate aggregate
principal amount and type of any Private
Mortgage-Backed Securities to be included in
the Trust for such Series; (ii) certain
characteristics of the mortgage loans that
comprise the underlying assets for the
Private Mortgage-Backed Securities including:
(A) the payment features of such mortgage
loans, (B) the approximate aggregate
principal amount, if known, of such mortgage
loans that are insured or guaranteed by a
governmental entity, (C) the servicing fee or
range of servicing fees with respect to such
mortgage loans and (D) the minimum and
maximum stated maturities of such mortgage
loans at origination; (iii) the maximum
original term-to-stated maturity of the
Private Mortgage-Backed Securities; (iv) the
weighted average term-to-stated maturity of
the Private Mortgage-Backed Securities; (v)
the pass-through or certificate rate or
ranges thereof for the Private
Mortgage-Backed Securities; (vi) the weighted
average pass-through or certificate rate of
the Private Mortgage-Backed Securities; (vii)
the issuer of the Private Mortgage-Backed
Securities (the "PMBS Issuer"), the servicer
of the Private Mortgage-Backed Securities
(the "PMBS Servicer") if other than the PMBS
Issuer and the trustee of the Private
Mortgage-Backed Securities (the "PMBS
Trustee"); (viii) certain characteristics of
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credit support, if any, such as reserve
funds, insurance policies, surety bonds,
letters of credit or guarantees, relating to
the mortgage loans that comprise the
underlying assets for the Private
Mortgage-Backed Securities or to such Private
Mortgage-Backed Securities themselves; (ix)
the terms on which the mortgage loans that
comprise the underlying assets for such
Private Mortgage-Backed Securities may, or
are required to, be repurchased prior to
their stated maturity or the stated maturity
of the Private Mortgage-Backed Securities;
and (x) the terms on which substitute
mortgage loans may be delivered to replace
those initially deposited with the PMBS
Trustee. See "The Trusts" herein.
Pre-Funding Account............ If provided in the related Prospectus
Supplement, the original principal amount of
a Series of Certificates may exceed the
principal balance of the Mortgage Assets
initially being delivered to the Trustee with
respect to such Series. Cash in an amount
equal to such difference (the "Pre-Funded
Amount") will be deposited into a separate
trust account (the "Pre-Funding Account")
maintained with the Trustee. The Pre-Funded
Amount will not exceed 25% of the Certificate
Balance (as defined herein). During the
period ("Funding Period") set forth in the
related Prospectus Supplement, amounts on
deposit in the Pre-Funding Account may be
used to purchase additional Mortgage Assets
for the related Trust. In addition, if
provided in the related Prospectus
Supplement, certain additional amounts in
respect of interest will be deposited into
the Pre-Funding Account or in a separate
trust account. The related Prospectus
Supplement will specify the conditions which
must be satisfied prior to the transfer of
any such additional Mortgage Assets,
including the requisite characteristics of
such Mortgage Assets. Any amounts remaining
in the Pre-Funding Account at the end of the
Funding Period will be distributed as a
principal prepayment to the holders of the
related Series of Certificates at the time
and in the manner set forth in the related
Prospectus Supplement. Unless otherwise
specified in the related Prospectus
Supplement, the specified period for the
acquisition by a Trust of additional Mortgage
Assets will not exceed three months from the
date such Trust is established.
Credit Enhancement............. The Mortgage Assets in a Trust or the
Certificates of one or more classes in the
related Series may have the benefit of one or
more types of credit enhancement described in
the related Prospectus Supplement. See
"Credit Enhancement" herein. The protection
against losses afforded by any such credit
support may be limited. Credit Enhancement
may include one or more of the following
types:
A. Subordination............. A Series of Certificates may consist of one
or more classes of Senior Certificates and
one or more classes of Subordinated
Certificates. The rights of the holders of
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<PAGE>
the Subordinated Certificates of a Series
(the Certificateholders Subordinated
distributions "Subordinated
Certificateholders") to receive with respect
to the assets in the related Trust will be
subordinated to such rights of the holders of
the Senior Certificates of the same Series
(the "Senior Certificateholders") to the
extent described in the related Prospectus
Supplement. This subordination is intended to
enhance the likelihood of regular receipt by
Senior Certificateholders of the full amount
of the monthly payments of principal and
interest due to them. The protection afforded
to the Senior Certificateholders of a Series
by means of the subordination feature will be
accomplished by (i) the preferential right of
such holders to receive, prior to any
distribution being made in respect of the
related Subordinated Certificates, the
amounts of principal and interest due them on
each Distribution Date out of the funds
available for distribution on such date in
the related Certificate Account (as defined
herein) and, to the extent described in the
related Prospectus Supplement, by the right
of such holders to receive future
distributions on the assets in the related
Trust that would otherwise have been payable
to the Subordinated Certificateholders, (ii)
reducing the ownership interest of the
related Subordinated Certificates, (iii) a
combination of clauses (i) and (ii) above, or
(iv) as otherwise described in the related
Prospectus Supplement. If specified in the
related Prospectus Supplement, subordination
may apply only in the event of certain types
of losses not covered by other forms of
credit support, such as hazard losses not
covered by Standard Hazard Insurance Policies
or losses due to the bankruptcy or fraud of
the Mortgagor not covered by a Bankruptcy
Bond. The protection afforded to Senior
Certificateholders through subordination also
may be accomplished by allocating certain
types of losses or delinquencies to the
related Subordinated Certificates to the
extent described in the related Prospectus
Supplement. The related Prospectus Supplement
will set forth information concerning, among
other things, the amount of subordination of
a class or classes of Subordinated
Certificates in a Series, the circumstances
in which such subordination will be
applicable and the manner, if any, in which
the amount of subordination will decrease
over time. If specified in the related
Prospectus Supplement, the same class of
Certificates may constitute Senior
Certificates with respect to certain types of
payments or certain losses or delinquencies
and Subordinated Certificates with respect to
other types of payments or losses or
delinquencies.
B. Overcollateralization..... If specified in the related Prospectus
Supplement, credit support may consist of
overcollateralization whereby the aggregate
principal amount of the Mortgage Assets
exceeds the Certificate Balance of the
Certificates of such Series. Such
overcollateralization may exist on the
Closing Date or develop thereafter as a
result of the application of certain interest
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<PAGE>
collections or other collections received in
connection with the Mortgage Assets in excess
of amounts necessary to pay the Pass-Through
Rate on the Certificates. The existence of
any overcollateralization and the manner, if
any, by which it increases or decreases, will
be set forth in the related Prospectus
Supplement.
C. Reserve Fund.............. One or more reserve funds (each, a "Reserve
Fund") may be established and maintained for
each Series. The related Prospectus
Supplement will specify whether or not any
such Reserve Fund will be included in the
corpus of the Trust for such Series and will
also specify the manner of funding the
related Reserve Fund and the conditions under
which the amounts in any such Reserve Fund
will be used to make distributions to holders
of Certificates of a particular class or
released from the related Trust.
D. Certificate Guaranty
Insurance Policy.......... A certificate guaranty insurance policy or
policies (each, a "Certificate Guaranty
Insurance Policy") may be obtained and
maintained for one or more class or classes
of a Series of Certificates. Certificate
Guaranty Insurance Policies generally
unconditionally and irrevocably guarantee to
Certificateholders that the full amount of
the distributions of principal and interest,
as well as any other amounts specified in the
related Prospectus Supplement, will be
received by an agent of the Trustee on behalf
of Certificateholders for distribution by the
Trustee to Certificateholders. Certificate
Guaranty Insurance Policies may have certain
limitations set forth in the related
Prospectus Supplement, including (but not
limited to) limitations on the insurer's
obligation to guarantee the Sellers' or the
Master Servicer's obligation to repurchase or
substitute for any Mortgage Loans, to
guarantee any specified rate of prepayments
or to provide funds to redeem Certificates on
any specified date.
E. Mortgage Pool
Insurance Policy.......... A mortgage pool insurance policy or policies
(each, a "Mortgage Pool Insurance Policy")
may be obtained and maintained for a Mortgage
Pool, which shall be limited in scope,
covering defaults on the related Mortgage
Loans in an initial amount equal to a
specified percentage of the aggregate
principal balance of all Mortgage Loans
included in the Mortgage Pool as of the
Cut-off Date which are not covered as to
their entire outstanding principal balances
by Primary Mortgage Insurance Policies.
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<PAGE>
F. Special Hazard
Insurance Policy.......... A special hazard insurance policy or policies
(each, a "Special Hazard Insurance Policy"),
may be obtained and maintained for a Mortgage
Pool, covering certain physical risks that
are not otherwise insured against by standard
hazard insurance policies. Each Special
Hazard Insurance Policy will be limited in
scope and will cover losses pursuant to the
provisions of each such Special Hazard
Insurance Policy as described in the related
Prospectus Supplement.
G. Bankruptcy Bond........... A bankruptcy bond or bonds (each, a
"Bankruptcy Bond") may be obtained to cover
certain losses resulting from proceedings
under the federal Bankruptcy Code with
respect to a Mortgage Loan. The level of
coverage and the limitations in scope of each
Bankruptcy Bond will be specified in the
related Prospectus Supplement.
H. Cross Collateralization... If specified in the related Prospectus
Supplement, the beneficial ownership of
separate Trusts or separate groups of assets
included in a Trust may be evidenced by
separate classes of the related Series of
Certificates. In such case, credit support
may be provided by a cross collateralization
feature which requires that distributions be
made with respect to Certificates evidencing
beneficial ownership of one or more separate
Trusts or asset groups prior to distributions
to Certificates evidencing a beneficial
ownership interest in other separate Trusts
or asset groups within the same Trust. If
specified in the related Prospectus
Supplement, the coverage provided by one or
more forms of credit support may apply
concurrently to two or more separate Trusts,
without priority among such Trusts, until the
credit support is exhausted. If applicable,
the related Prospectus Supplement will
identify the Trusts or asset groups to which
such credit support relates and the manner of
determining the amount of the coverage
provided thereby and of the application of
such coverage to the identified Trusts or
asset groups.
I. Other Credit Enhancement.. Other credit enhancement arrangements, as
described in the related Prospectus
Supplement, including (but not limited to)
one or more spread accounts, cash collateral
accounts and/or other accounts, letters of
credit, surety bonds, financial guaranty
insurance policies, interest rate swaps,
caps, floors and other derivative products,
guaranteed investment contracts or third
party guarantees (including guarantees by The
CIT Group Holdings, Inc., its affiliates, or
an unaffiliated third party, any of which may
be limited in nature) or similar instruments
or agreements, may be used to provide
coverage for certain risks or defaults or
losses. These arrangements may be in addition
to or in substitution for any forms of credit
support described in this Prospectus. Any
such arrangement must be acceptable to each
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nationally recognized statistical rating
organization that provides a rating for one
or more classes of the related Series of
Certificates (each, a "Rating Agency").
Advances....................... Unless otherwise specified in the related
Prospectus Supplement, the Master Servicer
will be required to remit to the Trustee no
later than the day prior to the Distribution
Date and in no case earlier than the seventh
Business Day of such month the amount (an
"Advance"), if any, by which 30 days'
interest at the Mortgage Rate (or, if
specified in the related Prospectus
Supplement, at the Adjusted Mortgage Loan
Remittance Rate (as defined herein)) on the
then outstanding principal balance of a
Mortgage Loan exceeds the amount received by
the Master Servicer in respect of interest on
the Mortgage Loan as of the related Record
Date (as defined herein). Any Advances by the
Master Servicer will be reimbursable to the
Master Servicer out of recoveries on the
specific Mortgage Assets with respect to
which such Advances were made (e.g., late
payments made by the related Mortgagors, any
related Insurance Proceeds, Liquidation
Proceeds, Released Mortgaged Property
Proceeds (each, as defined herein) or
proceeds of any Mortgage Loan repurchased by
the Depositor, a Sub-Servicer or a Seller
pursuant to the related Agreement) and any
other amount that would otherwise be
distributed to the holder or holders of
Certificates representing the residual
interest of a Trust for which a REMIC
election has been made. In addition, Advances
by the Master Servicer also will be
reimbursable to the Master Servicer from cash
otherwise distributable to Certificateholders
(including Senior Certificateholders) to the
extent that the Master Servicer determines
that any such Advances previously made are
not ultimately recoverable as described in
the immediately preceding sentence. See
"Description of the Certificates -- Advances
and Compensating Interest" herein. Any
obligation to make Advances may be subject to
limitations as specified in the related
Prospectus Supplement. If provided in the
related Prospectus Supplement, the obligation
of the Master Servicer to make such Advances
will be limited to amounts corresponding to
delinquent interest payments on a Mortgage
Loan and/or will be limited to amounts that
the Master Servicer believes will be
recoverable out of late payments by
Mortgagors on a Mortgage Loan, Liquidation
Proceeds, Insurance Proceeds or otherwise.
Compensating Interest.......... Unless otherwise specified in the related
Prospectus Supplement, not later than the
close of business on the Business Day prior
to each Determination Date, with respect to
each Mortgage Loan as to which the Master
Servicer receives during the related Due
Period a principal payment in full in advance
of the final scheduled due date (a "Principal
Prepayment"), the Master Servicer will be
required to remit to the Trustee for deposit
in the Certificate Account from amounts
otherwise payable to the Master Servicer as
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servicing compensation, an amount
("Compensating Interest") equal to any excess
of (a) 30 days' interest on the principal
balance of each such Mortgage Loan as of the
beginning of the related Due Period at the
applicable Mortgage Rate (or, if specified in
the related Prospectus Supplement, at the
Adjusted Mortgage Loan Remittance Rate) over
(b) the amount of interest actually received
on the related Mortgage Loan during such Due
Period.
Optional Termination........... The Master Servicer, the Depositor, the
holder of the residual interest in a REMIC,
certain insurers or certain other entities
specified in the related Prospectus
Supplement may have the option to effect
early termination of a Series of Certificates
through the purchase of the Mortgage Assets
and other assets in the related Trust under
the circumstances and in the manner specified
in the related Prospectus Supplement and
herein under "The Pooling and Servicing
Agreement--Termination; Purchase of Mortgage
Loans."
Mandatory Termination.......... The Trustee, the Master Servicer or certain
other entities specified in the related
Prospectus Supplement may be required to
effect early termination of a Series of
Certificates under the circumstances and in
the manner specified in the related
Prospectus Supplement and herein under "The
Pooling and Servicing Agreement--Termination;
Purchase of Mortgage Loans."
Legal Investment............... The Prospectus Supplement for each Series of
Certificates will specify which, if any, of
the classes of Certificates offered thereby
will constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Classes of
Certificates that qualify as "mortgage
related securities" will be legal investments
for certain types of institutional investors
to the extent provided in SMMEA, subject, in
any case, to any other regulations that may
govern investments by such institutional
investors. Investors should consult with
their counsel or the applicable authorities
to determine whether an investment in a
particular class of Certificates (whether or
not such class constitutes a "mortgage
related security") complies with applicable
guidelines, policy statements or
restrictions. See "Legal Investment" herein.
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<PAGE>
Certain Federal Income Tax
Consequences................... The federal income tax consequences to
Certificateholders will vary depending on
whether one or more elections are made to
treat the Trust or specified portions thereof
as a "real estate mortgage investment
conduit" ("REMIC") under the provisions of
the Internal Revenue Code of 1986, as amended
(the "Code"). The Prospectus Supplement for
each Series of Certificates will specify
whether such an election will be made.
Investors are advised to consult their tax
advisors and to review "Certain Federal
Income Tax Consequences" herein and, if
applicable, in the related Prospectus
Supplement.
ERISA Considerations........... A fiduciary of any employee benefit plan or
other retirement plan or arrangement
(including individual retirement accounts,
certain Keogh plans, and collective
investment funds, separate accounts and
insurance company general accounts in which
such plans, accounts or arrangements are
invested) subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), or the Code should carefully
review with its legal advisors whether an
investment in Certificates will cause the
assets of the related Trust to be considered
plan assets under the Department of Labor
("DOL") regulations set forth in 29 C.F.R.
Section 2510.3-101 (the "Plan Asset
Regulations"), thereby subjecting the Trustee
and the Master Servicer to the fiduciary
investment standards of ERISA, and whether
the purchase, holding or transfer of
Certificates could give rise to a transaction
prohibited or not otherwise permissible under
ERISA or the Code or subject to the excise
tax provisions of Section 4975 of the Code,
unless a DOL administrative exemption
applies. See "ERISA Considerations" herein
and in the related Prospectus Supplement. If
specified in the related Prospectus
Supplement, certain classes of Certificates
may not be transferred unless the Trustee and
the Depositor are furnished with a letter of
representation or an opinion of counsel to
the effect that such transfer will not result
in a violation of the prohibited transaction
provisions of ERISA and the Code and will not
subject the Trustee, the Depositor or the
Master Servicer to additional obligations.
See "Description of the
Certificates--General" and "ERISA
Considerations" herein and in the related
Prospectus Supplement.
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<PAGE>
Registration of
Certificates................... If specified in the related Prospectus
Supplement, Certificates will be represented
by global certificates registered in the name
of Cede & Co. ("Cede"), as nominee of The
Depository Trust Company ("DTC"), or another
nominee. In such case, Certificateholders
will not be entitled to receive Definitive
Certificates (as defined herein) representing
such Certificateholders' interests, except in
certain circumstances described in the
related Prospectus Supplement. If specified
in the related Prospectus Supplement,
Certificateholders may also hold Certificates
of a Series through Cedel Bank, societe
anonyme ("Cedel") or the Euroclear System
("Euroclear") in Europe, if they are
participants in such systems or indirectly
through organizations that are participants
in such systems. See "Description of the
Certificates--Book-Entry Certificates"
herein.
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<PAGE>
RISK FACTORS
Prospective Certificateholders (as defined herein) should consider, among
other things, the following risk factors in connection with the purchase of the
Certificates (as defined herein):
1. General. An investment in Certificates evidencing interests in Mortgage
Loans (as defined herein) may be affected, among other things, by a decline in
real estate values or changes in mortgage market rates. An overall decline in
the market value of residential real estate, the general condition of a
Mortgaged Property (as defined herein), or other factors, could adversely affect
the values of the Mortgaged Properties such that the outstanding balances of the
Mortgage Loans, together with any senior liens on the Mortgaged Properties,
equal or exceed the value of the Mortgaged Properties. Such a decline could
extinguish the interest of the related Trust (as defined herein) in the
Mortgaged Properties before having any effect on the interest of the related
senior mortgagee. Certain of the Mortgage Loans may be secured by Mortgaged
Properties located in areas of the country which have experienced declines in
real estate values over the last few years. The Depositor (as defined herein)
will not be able to quantify the impact of any property value declines on the
Mortgage Loans or predict whether, to what extent or how long such declines may
continue. In periods of such declines, the actual rates of delinquencies,
foreclosures and losses on the Mortgage Loans could be higher than those
historically experienced in the mortgage lending industry in general. See "The
Home Equity Lending Program--Servicing and Collections" herein. To the extent
that such losses are not covered by the subordination of any class or Series (as
defined herein) of Certificates, applicable insurance policies or alternate
credit enhancement, holders of the Certificates of a Series evidencing interests
in a Mortgage Pool (as defined herein) will bear all risk of loss resulting from
default by borrowers on such Mortgage Loans (each a "Mortgagor") and will have
to look primarily to the value of the Mortgaged Properties for recovery of the
outstanding principal and unpaid interest of the defaulted Mortgage Loans. See
"The Trusts" herein.
2. Limited Obligations. The Certificates will not represent an interest in
or obligation of The CIT Group Securitization Corporation III (the "Depositor"),
The CIT Group/Sales Financing, Inc. ("CITSF"), The CIT Group/Consumer Finance,
Inc. ("CIT Consumer Finance"), The CIT Group Holdings, Inc. ("CIT") or any of
their respective affiliates, unless (and to the extent) expressly provided in
the related Prospectus Supplement. Unless expressly provided in the related
Prospectus Supplement, the Certificates will not be insured or guaranteed by any
government agency or instrumentality, nor by the Depositor, CIT Consumer
Finance, CITSF, CIT or any of their respective affiliates.
3. Yield and Prepayment Considerations. The yield to maturity of the
Certificates of each Series will depend on the rate of payment of principal
(including prepayments, liquidations due to defaults, and repurchases due to
conversion of Adjustable Rate Mortgage Loans to Fixed Rate Mortgage Loans (each,
as defined herein) or breaches of representations and warranties) on the
Mortgage Loans and the price paid by Certificateholders. Such yield may be
adversely affected by a higher or lower than anticipated rate of prepayments on
the related Mortgage Loans. The yield to maturity on Certificates purchased at
premiums or discounted to par will be extremely sensitive to the rate of
prepayments on the related Mortgage Loans. In addition, the yield to maturity on
certain other types of classes of Certificates, including certain other classes
in a Series including more than one class of Certificates, may be relatively
more sensitive to the rate of the prepayment on the related Mortgage Loans than
other classes of Certificates. See "Yield and Prepayment Considerations" herein.
Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans generally may be prepaid in whole or in part at any time.
However, if permitted by the mortgage documentation and applicable law, the
Master Servicer may charge a prepayment penalty or premium in connection with a
prepayment, but CIT Consumer Finance's current operating system cannot process
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<PAGE>
prepayment penalties for partial prepayments on any Mortgage Loan. Such
penalties or premiums will be property of the related Trust. See "Certain Legal
Aspects of the Mortgage Loans - Prepayment and Late Charges" and "Description of
the Certificates - Distributions on Certificates - Available Funds" herein. The
rate of prepayments of the Mortgage Loans cannot be predicted. The prepayment
experience on the Mortgage Loans and the mortgage loans underlying the Private
Mortgage-Backed Securities (as defined herein) will affect the average life of
the Certificates or each class of Certificates. Prepayments on the Mortgage
Loans and the mortgage loans underlying the Private Mortgage-Backed Securities
may be influenced by a variety of economic, geographic, social and other
factors, including the difference between the interest rates on the Mortgage
Loans or the mortgage loans underlying the Private Mortgage-Backed Securities
and prevailing mortgage rates (giving consideration to the cost of refinancing).
Therefore, no assurance can be given as to the level of prepayments that a Trust
will experience.
Evidence suggests that the prepayment behavior of a pool including home
equity loans may be significantly different from that of a pool composed
entirely of first-lien purchase money mortgage loans with equivalent interest
rates and maturities. For example, the smaller average principal balance of a
pool of home equity loans may result in a higher prepayment rate than that of a
pool of first-lien purchase money mortgage loans with a larger average balance,
regardless of the interest rate environment. A small principal balance, however,
also may make refinancing a home equity loan at a lower interest rate less
attractive to the borrower relative to refinancing a larger balance first-lien
purchase money mortgage loan because the borrower may perceive the impact of
lower interest rates on the size of the monthly payment for a home equity
mortgage loan to be less than for a first-lien purchase money mortgage loan with
a larger balance. The amounts of, and interest rates on, the underlying senior
mortgage loans might be expected to affect the prepayment rate of a pool of
junior mortgage loans. The use of first-lien mortgage loans as long-term
financing for home purchase and the use of junior lien mortgage loans as
shorter-term financing for a variety of purposes, including home improvement,
education expenses and purchases of consumer durables such as automobiles might
also affect prepayment rates. Accordingly, the Mortgage Loans which are home
equity loans may experience a higher rate of prepayment than traditional
fixed-rate mortgage loans. In addition, any future limitations on the right of
borrowers to deduct interest payments on home equity mortgage loans for federal
income tax purposes may further increase the rate of prepayments of such home
equity loans. See "Yield and Prepayment Considerations" herein.
Prepayments of the Mortgage Loans may result from voluntary early payments
by Mortgagors (including payments in connection with refinancings of the related
senior mortgage loan or loans), sales of Mortgaged Properties subject to "due on
sale" provisions and liquidations due to default, as well as the receipt of
proceeds from physical damage, credit life and disability insurance policies, if
any. The Mortgage Loans generally contain "due on sale" provisions, and the
Master Servicer will be required to enforce such provisions unless (i) such
enforcement will impair or threaten to impair any recovery under any related
Primary Mortgage Insurance Policy (as defined herein) or will materially
increase the risk of default or delinquency on, or materially decrease the
security for, such Mortgage Loan or (ii) such enforcement is not permitted by
applicable law or the applicable Mortgage (as defined herein), in which case the
Master Servicer is authorized to permit the purchaser of the related Mortgaged
Property to assume the Mortgage Loan. See "The Pooling and Servicing Agreement"
and "Certain Legal Aspects of the Mortgage Loans - Due on Sale Clauses" herein
and the related Prospectus Supplement.
Collections on the Mortgage Loans may vary due to the level of incidence of
delinquent payments and of prepayments. Collections on the Mortgage Loans may
also vary due to seasonal purchasing and payment habits of Mortgagors.
Prepayments may also result from mandatory prepayments relating to unused
moneys held in Pre-Funding Accounts (as defined herein), if any, and
refinancings by a Seller (as defined herein) of the Mortgage Loan. In addition,
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repurchases or purchases from a Trust of Mortgage Loans or substitution
adjustments required to be made under the related Agreement will have the same
effect on the Certificateholders as a prepayment of such Mortgage Loans.
4. Risk of Early Defaults. Certain of the Mortgage Loans underlying a
Series of Certificates may be recently originated as of the date of inclusion in
the related Mortgage Pool. Although little data is available, defaults on
mortgage loans are generally expected to occur with greater frequency in their
early years. Certain of the Mortgage Loans underlying a Series of Certificates
may be delinquent in respect of the payment of principal and interest. In
addition, certain of the Mortgagors under the Mortgage Loans underlying a Series
of Certificates may be subject to personal bankruptcy proceedings. Such Mortgage
Loans may be subject to a greater risk of default. See "Trusts" herein and "The
Mortgage Pool" in the related Prospectus Supplement.
5. Risk of the Losses Associated with Junior Liens. A substantial
proportion of the residential mortgage loans originated by CIT Consumer Finance
historically have been mortgage loans secured by second, third or fourth liens
("Junior Lien Loans") subordinate to the rights of the mortgagee under each
related senior mortgage. In most (or all) cases such senior mortgage or deed or
trust will not be included in the Mortgage Pool. Although little data is
available on CIT Consumer Finance's portfolio, the rate of default of Junior
Lien Loans may be greater than that of mortgage loans secured by senior liens on
comparable properties.
A primary risk to holders of Junior Lien Loans is the possibility that
adequate funds will not be received in connection with a foreclosure of the
related senior lien to satisfy both the senior mortgage and the Junior Lien
Loan. The proceeds from any liquidation, insurance or condemnation proceedings
will be available to satisfy the principal balance of a Junior Lien Loan only to
the extent that the claims, if any, of each such senior mortgagee or beneficiary
are satisfied in full, including any related foreclosure costs and, in the case
of a judicial foreclosure, only to the extent that the junior mortgagee has
answered and established its claim. In addition, a mortgagee holding a Junior
Lien Loan may not foreclose on the related mortgaged property unless it
forecloses subject to the related senior mortgage or mortgages, in which case it
must either pay the entire amount of each senior mortgage to the applicable
mortgagee at or prior to the foreclosure sale or undertake the obligation to
make payments on each senior mortgage in the event of default thereunder. See
"Certain Legal Aspects of the Mortgage Loans - Foreclosure" herein.
In servicing Junior Lien Loans in its portfolio, it has been the practice
of CIT Consumer Finance to satisfy each such senior mortgage at or prior to the
foreclosure sale only to the extent that it determines any amount so paid will
be recoverable from future payments and collections on such Junior Lien Loans or
otherwise. In servicing Junior Lien Loans in its portfolio, it has been the
practice of CIT Consumer Finance to advance funds to keep the senior lien
current in the event the mortgagor is in default thereunder until such time as
CIT Consumer Finance satisfies the senior lien by sale of the mortgaged
property, but only to the extent that it determines such advances will be
recoverable from future payments and collections on that Junior Lien Loan or
otherwise. CIT Consumer Finance may modify these practices at any time. The
related Trust will have no source of funds to satisfy a senior mortgage or to
make payments due to any senior mortgagee. The Junior Lien Loans are subject and
subordinate to any senior liens affecting the related Mortgaged Property,
including limitations and prohibitions which may be contained in such senior
liens upon subordinate financing. See "Certain Legal Aspects of The Mortgage
Loans" herein.
6. Potential Conflict of Interest. CIT Consumer Finance may hold both a
senior mortgage and a Junior Lien Loan on the same Mortgaged Property (or CIT
Consumer Finance may in the future originate a mortgage loan which is junior or
senior to a Mortgage Loan included in the Mortgage Pool). In such circumstances,
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CIT Consumer Finance may, in its role as Master Servicer, be required to make
decisions regarding a Mortgage Loan which could affect the value or
collectability of a mortgage held by CIT Consumer Finance (or by a trust for
which CIT Consumer Finance acts as servicer) on the same Mortgaged Property.
7. Limited Liquidity. There can be no assurance that a secondary market
will develop for the Certificates of any Series or, if it does develop, that it
will provide the holders of Certificates of such Series with liquidity of
investment or that it will remain for the life of such Series of Certificates.
Although the Certificateholders of each Series will receive monthly statements
containing certain statistical information with respect to the related Mortgage
Pool, the Depositor publishes no information relating to the Certificates of any
Series or any Mortgage Pool. The limited availability of any such published
information may influence the liquidity of the Certificates.
8. Subordination. With respect to Certificates of a Series having a class
of Subordinated Certificates (as defined herein), while the subordination
feature is intended to enhance the likelihood of timely payment of principal and
interest to Senior Certificateholders (as defined herein), the level of
subordination may be limited, as specified in the Prospectus Supplement, the
Reserve Fund (as defined herein), if any, could be depleted, and payments
applied to the Senior Certificates (as defined herein) which are otherwise due
to the Subordinated Certificates may be less than the losses.
9. Risk of Losses Associated with Balloon and Call Loans. Certain of the
Mortgage Loans may constitute Balloon Loans and Call Loans (each, as defined
herein). Balloon Loans are originated with a stated maturity of less than the
period of time required to amortize the Balloon Loan principal based upon the
monthly payment amount. Consequently, upon the maturity of a Balloon Loan, the
Mortgagor will be required to make a Balloon Payment (as defined herein) that
will be significantly larger than the previous monthly payments. Call Loans have
a scheduled payment and term which fully amortizes principal. The terms of a
Call Loan permit the mortgagee to require the Mortgagor to pay the full
principal balance of the Mortgage Loan on a specified date before its scheduled
maturity date. If the mortgagee exercises the call option in a Call Loan, the
Mortgagor will be required to make a payment that will be significantly larger
than the previous monthly payments. The ability of such a Mortgagor to repay a
Balloon Loan at maturity or a Call Loan on the date a call option is exercised
frequently will depend on such Mortgagor's ability to refinance the Mortgage
Loan. The ability of a Mortgagor to refinance such a Mortgage Loan will be
affected by a number of factors, including the level of available mortgage rates
at the time, the value of the related Mortgaged Property, the Mortgagor's equity
in the related Mortgaged Property, the creditworthiness of the Mortgagor, the
tax laws and general economic conditions at the time.
Although a low interest rate environment may facilitate the refinancing of
a Balloon Payment, the receipt and reinvestment by Certificateholders of the
proceeds in such an environment may produce a lower return than that previously
received in respect of the related Mortgage Loan. Conversely, a high interest
rate environment may make it more difficult for the Mortgagor to accomplish a
refinancing and may result in delinquencies or defaults. None of the Depositor,
the Sellers, the Master Servicer or the Trustee will be obligated to provide
funds to refinance any Mortgage Loan, including Balloon Loans or Call Loans. CIT
Consumer Finance may at its option elect to provide such refinancing or CIT
Consumer Finance may be required by law to provide such refinancing.
10. Risk of Losses Associated with Adjustable Rate Mortgage Loans.
Adjustable Rate Mortgage Loans (as defined herein) may be underwritten on the
basis of an assessment that Mortgagors will have the ability to make payments in
higher amounts after relatively short periods of time. In some instances, a
Mortgagor's income may not be sufficient to enable him or her to continue to
make his or her loan payments as such payments increase and thus the likelihood
of default will increase.
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11. Risk of Losses Associated with Bankruptcy of Mortgagors. General
economic conditions have an impact on the ability of Mortgagors to repay
Mortgage Loans. Loss of earnings, illness and other similar factors also may
lead to an increase in delinquencies and bankruptcy filings by Mortgagors. In
the event of personal bankruptcy of a Mortgagor, it is possible that a Trust
could experience a loss with respect to such Mortgagor's Mortgage Loan. In
conjunction with a Mortgagor's bankruptcy, a bankruptcy court may suspend or
reduce the payments of principal and interest to be paid with respect to such
Mortgage Loan or permanently reduce the principal balance of such Mortgage Loan,
thereby either delaying or permanently limiting the amount received by the Trust
with respect to such Mortgage Loan. Moreover, in the event a bankruptcy court
prevents the transfer of the related Mortgaged Property to a Trust, any
remaining balance on such Mortgage Loan may not be recoverable.
12. Delays in Liquidating Defaulted Mortgage Loans. Even if one assumes
that the Mortgaged Properties provide adequate security for the Mortgage Loans,
substantial delays could be encountered in connection with the liquidation of
defaulted Mortgage Loans resulting in corresponding delays in the receipt of
related proceeds by the Certificateholders. An action to foreclose on a
Mortgaged Property securing a Mortgage Loan is regulated by state statutes,
rules and judicial decisions and is subject to many of the delays and expenses
of other lawsuits if defenses or counterclaims are interposed, sometimes
requiring several years to complete. Furthermore, in some states, an action to
obtain a deficiency judgment against the Mortgagor is not permitted following a
nonjudicial sale of a Mortgaged Property. In the event of a default by a
Mortgagor, these restrictions, among other things, may impede the ability of the
Master Servicer to foreclose on or sell the Mortgaged Property or to obtain
liquidation proceeds (net of expenses) sufficient to repay all amounts due on
the related Mortgage Loan. The Master Servicer will be entitled to deduct from
Liquidation Proceeds (as defined herein) all expenses reasonably incurred in
attempting to recover amounts due on the related liquidated Mortgage Loan and
not yet repaid, including payments to prior lienholders, accrued Master
Servicing Fees (as defined herein), legal fees and costs of legal action, real
estate taxes, and maintenance and preservation expenses. In the event that the
Mortgaged Properties fail to provide adequate security for the related Mortgage
Loans and insufficient funds are available from any applicable credit
enhancement, Certificateholders could experience a loss on their investment.
Liquidation expenses with respect to defaulted Mortgage Loans do not vary
directly with the outstanding principal balance of the loan at the time of
default. Therefore, assuming that the Master Servicer takes the same steps in
realizing upon a defaulted Mortgage Loan having a small remaining principal
balance as it would in the case of a defaulted Mortgage Loan having a larger
principal balance, the amount realized after expenses of liquidation would be
less as a percentage of the outstanding principal balance of the smaller
principal balance Mortgage Loan than would be the case with a larger principal
balance loan. Because the average outstanding principal balances of the Mortgage
Loans which are home equity loans are small relative to the size of the loans in
a typical pool composed entirely of first mortgages, realizations net of
liquidation expenses on defaulted Mortgage Loans which are home equity loans may
also be smaller as a percentage of the principal amount of such home equity
loans than would be the case with a typical pool of first Mortgage Loans.
13. Risk of Losses Associated with Mortgaged Properties. No assurance can
be given that values of the Mortgaged Properties have remained or will remain at
their levels on the dates of origination of the related Mortgage Loans. If the
residential real estate market should experience an overall decline in property
values such that the outstanding principal balances of the Mortgage Loans (and
any additional financing by other lenders on the Mortgaged Properties) in a
particular Mortgage Pool become equal to or greater than the value of the
Mortgaged Properties, the actual rates of delinquencies, foreclosures and losses
could be higher than those now experienced by CIT Consumer Finance or those now
generally experienced in the mortgage lending industry. In addition, adverse
economic conditions and other factors (which may or may not affect real property
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values) may affect the timely payment by Mortgagors of scheduled payments of
principal and interest on the Mortgage Loans and, accordingly, the actual rates
of delinquencies, foreclosures and losses with respect to any Mortgage Pool. To
the extent that such losses are not covered by subordination provisions or
alternative credit enhancement arrangements, such losses will be borne, at least
in part, by the holders of the Certificates of the related Series.
Certain of the Mortgaged Properties relating to Mortgage Loans may not be
owner occupied. It is possible that the rate of delinquencies, foreclosures and
losses on Mortgage Loans secured by nonowner occupied properties could be higher
than for loans secured by the primary residence of the Mortgagor.
Other factors affecting Mortgagors' ability to repay Mortgage Loans include
excessive building resulting in an oversupply of housing stock or a decrease in
employment reducing the demand for units in an area; federal, state or local
regulations and controls affecting rents; prices of goods and energy;
environmental restrictions; increasing labor and material costs; and the
relative attractiveness of the Mortgaged Properties. To the extent that such
losses are not covered by credit enhancements, such losses will be borne, at
least in part, by the Certificateholders of the related Series.
14. Litigation. Any material litigation pending against the Depositor, a
Seller or the Master Servicer will be specified in the related Prospectus
Supplement.
15. Geographic Concentration of Mortgaged Properties. Certain geographic
regions from time to time will experience weaker regional economic conditions
and housing markets than will other regions, and, consequently, will experience
higher rates of loss and delinquency on mortgage loans generally. The Mortgage
Loans underlying certain Series of Certificates may be concentrated in such
regions, and such concentrations may present risk considerations in addition to
those generally present for similar mortgage loan asset-backed securities
without such concentrations. Information with respect to geographic
concentration of Mortgaged Properties will be specified in the related
Prospectus Supplement.
16. Legal Considerations. Applicable state laws generally regulate interest
rates and other charges, require certain disclosures, and require licensing of
the Mortgage Loan originators, the Master Servicer and any Sub-Servicer (as
defined herein). In addition, most states have other laws, public policy and
general principles of equity relating to the protection of consumers, unfair and
deceptive practices and practices that may apply to the origination, servicing
and collection of the Mortgage Loans. Depending on the provisions of the
applicable law and the specific facts and circumstances involved, violations of
these laws, policies and principles may limit the ability of a Trust or of the
Master Servicer to collect all or part of the principal of or interest on the
Mortgage Loans, may entitle the Mortgagor to a refund of amounts previously paid
and, in addition, could subject a Trust and the Master Servicer to damages and
administrative sanctions. See "Certain Legal Aspects of The Mortgage Loans"
herein. Unless otherwise specified in the related Prospectus Supplement, neither
the related Trust nor the Depositor will obtain any licenses under any federal
or state consumer laws or regulations. The absence of such licenses may impede
the enforcement of certain rights or may give rise to certain defenses in
actions seeking enforcement of such rights which may prevent a Trust from
collecting amounts due under the Mortgage Loans.
The Mortgage Loans may also be subject to federal laws, including: (i) the
Federal Truth-in-Lending Act and Regulation Z promulgated thereunder and the
Real Estate Settlement Procedures Act and Regulation X promulgated thereunder,
which require certain disclosures to the Mortgagors regarding the terms of the
Mortgage Loans; (ii) the Equal Credit Opportunity Act and Regulation B
promulgated thereunder, which prohibit discrimination in the extension of credit
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and administration of loans on the basis of age, race, color, sex, religion,
marital status, national origin, receipt of public assistance or the exercise of
any right under the Consumer Credit Protection Act; (iii) the Fair Credit
Reporting Act, which regulates the use and reporting of information related to
the Mortgagor's credit experience, and (iv) the Fair Housing Act, which
prohibits discrimination on the basis of, among other things, familial status or
handicap.
The Mortgage Loans may be subject to the Home Ownership and Equity
Protection Act of 1994 (the "Home Ownership Act") which amended the Federal
Truth-in-Lending Act as it applies to mortgages subject to the Home Ownership
Act. The Home Ownership Act requires certain additional disclosures, specifies
the timing of such disclosures and limits or prohibits the inclusion of certain
provisions in mortgages subject to the Home Ownership Act. The Home Ownership
Act also provides that any purchaser or assignee of a mortgage covered by the
Home Ownership Act 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 by a borrower from an assignee in an action under the Home
Ownership Act are the remaining amount of indebtedness plus the total amount
paid by the borrower in connection with the mortgage loan. Any Trust for which
the Mortgage Assets (as defined herein) include Mortgage Loans subject to the
Home Ownership Act would be subject to all of the claims and defenses which the
Mortgagor could assert against the original lender. Any violation of the Home
Ownership Act which would result in such liability would be a breach of the
Seller's representations and warranties, and the Seller would be obligated to
cure, repurchase or, if permitted by the related Agreement, substitute another
Mortgage Loan for the Mortgage Loan in question.
Depending on the provisions of the applicable law and the specific facts
and circumstances involved, violations of these laws, policies and general
principles of equity may limit the ability of a Trust or of the Master Servicer
to collect all or part of the principal of or interest on the Mortgage Loans,
may entitle the Mortgagor to rescind the Mortgage Loan and the Mortgage or to
obtain a refund of amounts previously paid and, in addition, could subject a
Trust or the Master Servicer to damages and administrative sanctions. If the
Master Servicer is unable to collect all or part of the principal or interest on
the Mortgage Loans because of a violation of the aforementioned laws, public
policies or general principles of equity, then the Trust may delay payments to,
or be unable to repay all amounts owed to, Certificateholders. Furthermore,
depending upon whether damages and sanctions are assessed against the Master
Servicer such violations may materially impact the financial ability of CIT
Consumer Finance to continue to act as Master Servicer or the ability of CIT
Consumer Finance to repurchase or replace Mortgage Loans if such violation
breaches a representation or warranty contained in the related Agreement.
In addition, numerous other federal and state statutory provisions,
including the federal bankruptcy laws, the Soldiers' and Sailors' Civil Relief
Act of 1940, as amended (the "Relief Act") and state debtor relief laws, may
also adversely affect the Master Servicer's ability to collect the principal of
or interest on the Mortgage Loans and also would affect the interests of the
Certificateholders in such Mortgage Loans if such laws result in the Mortgage
Loans being uncollectible. See "Certain Legal Aspects of the Mortgage Loans"
herein.
Generally, under the terms of the Relief Act or similar state legislation,
a Mortgagor who enters military service after the origination of the related
Mortgage Loan (including a Mortgagor who is a member of the National Guard or is
in reserve status at the time of the origination of the Mortgage Loan and is
later called to active duty) may not be charged interest (including fees and
charges) above an annual rate of 6% during the period of such Mortgagor's active
duty status, unless a court orders otherwise upon application of the lender. It
is possible that such action could have an effect, for an indeterminate period
of time, on the ability of the Master Servicer to collect full amounts of
interest on certain of the Mortgage Loans. In addition, the Relief Act imposes
limitations that would impair the ability of the Master Servicer to foreclose on
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an affected Mortgage Loan during the Mortgagor's period of active duty status.
Thus, in the event that such a Mortgage Loan goes into default, there may be
delays and losses occasioned by the inability to realize upon the Mortgaged
Property in a timely fashion.
Under environmental legislation and judicial decisions applicable in
various states, a secured party which takes a deed in lieu of foreclosure, or
acquires at a foreclosure sale a mortgaged property that, prior to foreclosure,
has been involved in decisions or actions which may lead to contamination of a
property, may be liable for the costs of cleaning up the purportedly
contaminated site. It is unclear whether such costs, which could be substantial,
would be imposed on a holder of a mortgage note (such as a Trust) which does not
directly or through its agents use the Mortgaged Properties in a manner causing
an environmental hazard. See "Certain Legal Aspects of The Mortgage Loans"
herein.
17. Liens and Certain Other Aspects of the Mortgage Loans. A variety of
factors may limit the ability of the Certificateholders to realize upon the
Mortgaged Properties securing the Mortgage Loans or may limit the amount
realized to less than the amount due. See "Certain Legal Aspects of the Mortgage
Loans" herein.
Because of the expense and administrative inconvenience involved, the
Seller and the Depositor will not deliver to the Trustee any assignments in
recordable form of the Mortgages. Consequently, in some states, if the
assignment is not recorded in the proper office, the assignment to the Trustee
may not be effective against creditors of the Seller or the Depositor or a
trustee in bankruptcy of the Seller or the Depositor. As a result, the Trust
would not be able to claim the Mortgaged Property as collateral for a Mortgage
Loan.
18. The Status of the Mortgage Loans in the Event of Bankruptcy of the
Depositor, CIT Consumer Finance or CITSF. In the event of the bankruptcy of the
Depositor, CIT Consumer Finance, CITSF or any affiliate thereof which originated
any Mortgage Loans, a trustee in bankruptcy of the Depositor, CIT Consumer
Finance, CITSF or such affiliate, or the creditors thereof could attempt to
convince the relevant court to recharacterize the transfer of the Mortgage Loans
to the related Trust as a borrowing by the Depositor, CIT Consumer Finance,
CITSF or such affiliate with the result, if such recharacterization were upheld,
that the Certificateholders would be deemed creditors of the Depositor, CIT
Consumer Finance, CITSF or such affiliate, secured by a pledge of the Mortgage
Loans. If the Mortgage Loans were deemed "sold" to the related Trust, the
Mortgage Loans would not be assets of the Depositor, CIT Consumer Finance, CITSF
or such affiliate and would not be available to their creditors. In the event
that an attempt to convince the relevant court to recharacterize the transfer of
the Mortgage Loans as a secured loan were successful, the Trustee, on behalf of
the holders of the Certificates, would have a secured claim against the relevant
entity but would be delayed or prohibited from exercising remedies with respect
to the Mortgage Loans or taking actions with respect to the relevant entity
absent court approval. In addition, other collateral might be substituted for
the Mortgage Loans, and collections on the Mortgage Loans or such other
collateral might be applied to make distributions of principal and interest on
the Certificates at different times than those required by the related
Agreement. Moreover, payment of interest which accrued after the commencement of
the bankruptcy or insolvency proceeding might be limited, and payment of the
"loan" could be accelerated, with holders of Certificates losing the right to
future interest distributions. Even if such an attempt were not successful, it
is possible that distributions on the Certificates would be subject to delays
while the claim was being resolved by a court.
19. ERISA Considerations. An investment in a class of Certificates of any
Series by Plans (as defined herein) may give rise to a prohibited transaction
under ERISA (as defined herein) Section 406 and be subject to tax under Code (as
defined herein) Section 4975 unless a statutory or administrative exemption is
available. Accordingly, fiduciaries of any employee benefit plan or other
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retirement arrangement should consult their counsel before purchasing any class
of Certificates. Certain classes of Certificates will not be eligible for
purchase by Plans. See "ERISA Considerations" herein and in the related
Prospectus Supplement.
20. Limitations, Reduction and Substitution of Credit Enhancement. Credit
enhancement may be provided with respect to one or more classes of Certificates
of a Series to cover certain types of losses on the underlying Mortgage Loans.
Credit enhancement may be provided by one or more forms, including, but not
limited to, subordination of one or more classes of Certificates of such Series,
letter of credit, financial guaranty insurance policy, mortgage pool insurance
policy, special hazard insurance policy, reserve fund, spread account, cash
collateral account, overcollateralization, cross collateralization or other type
of credit enhancement (each, a "Credit Enhancement" and the entity providing it,
a "Credit Enhancer"). The coverage of any Credit Enhancement may be limited or
have exclusions from coverage and may decline over time or under certain
circumstances, all as specified in the related Prospectus Supplement. See
"Credit Enhancement" herein.
21. Certificate Rating. It will be a condition to the issuance of a Series
of Certificates that each class be rated in the rating categories specified in
the related Prospectus Supplement by each Rating Agency (as defined herein)
identified in the related Prospectus Supplement. Any such rating would be based
on, among other things, the adequacy of the value of the Mortgage Loans and any
credit enhancement with respect to such Series. Such rating should not be deemed
a recommendation to purchase, hold or sell Certificates, inasmuch as it does not
address market price or suitability for a particular investor. Ratings on
mortgage pass-through certificates do not represent an assessment of the
likelihood of principal prepayments by mortgagors or of the degree by which such
prepayments might differ from those originally anticipated. There is also no
assurance that any such rating will remain in effect for any given period of
time or may not be lowered or withdrawn entirely by the Rating Agency if in its
judgment circumstances in the future so warrant. In addition to being lowered or
withdrawn due to any erosion in the adequacy of the value of the Mortgage Loans,
such rating might also be lowered or withdrawn, among other reasons, because of
an adverse change in the financial or other condition of a Credit Enhancer or a
change in the rating of such a Credit Enhancer's long term debt. In the event
the rating is lowered or withdrawn, the liquidity of the related Certificates
may be adversely affected.
The rating of Certificates credit enhanced through external Credit
Enhancement such as a letter of credit, financial guaranty insurance policy or
mortgage pool insurance will depend primarily on the creditworthiness of the
Credit Enhancer. Any reduction in the rating assigned to the claims-paying
ability of the related Credit Enhancer below the rating initially given to the
Certificates would likely result in a reduction in the rating of the
Certificates. See "Ratings" herein and in the related Prospectus Supplement.
22. The Subsequent Mortgage Loans. The conveyance of additional Mortgage
Assets by the Depositor during the Funding Period (as defined herein), is
subject to the conditions described in the related Prospectus Supplement. If the
Depositor is unable to originate Mortgage Loans satisfying such conditions
during the Funding Period, the Depositor will have insufficient Mortgage Loans
to sell to the Trust, thereby resulting in prepayments of principal to
Certificateholders as described below.
Each additional Mortgage Asset must satisfy the eligibility criteria
specified in the related Prospectus Supplement and in the related Agreement at
the time of its addition. The Depositor or its affiliate (the seller of any
additional Mortgage Assets to the Trust) will certify that all such eligibility
criteria have been satisfied and CIT Consumer Finance or its affiliate (the
seller of any additional Mortgage Assets to the Depositor) will certify that all
conditions precedent to the sale of the additional Mortgage Assets to the Trust
have been satisfied. It is a condition to the sale of any additional Mortgage
Assets to the Trust that the Rating Agencies, after receiving prior notice of
the proposed transfer of additional Mortgage Assets to the Trust, have not
advised the Seller or the Trustee that the conveyance of such additional
Mortgage Assets will result in a qualification, downgrade, or withdrawal of its
then current rating of the Certificates. Following the transfer of additional
Mortgage Assets to the Pool the aggregate characteristics of the Mortgage Assets
then held in the Pool may vary from those of the Mortgage Loans originally
included therein.
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The ability of the Trust to invest in additional Mortgage Assets is largely
dependent upon whether CIT Consumer Finance or its affiliates are able to
originate or purchase Mortgage Loans that meet the requirements for transfer
from CIT Consumer Finance to the Depositor under the related Agreement. The
ability of CIT Consumer Finance or its affiliates to originate or purchase such
Mortgage Loans may be affected by a variety of social and economic factors.
Moreover, such factors may affect the ability of the Mortgagors thereunder to
perform their obligations thereunder which may cause Mortgage Loans originated
or purchased by CIT Consumer Finance or its affiliates to fail to meet the
requirements for transfer under the related Agreement. Economic factors include
interest rates, unemployment levels, the rate of inflation and consumer
perception of economic conditions generally. However, CIT Consumer Finance is
unable to determine and has no basis to predict whether or to what extent
economic or social factors will affect the performance by such Mortgagors and
the availability of additional Mortgage Loans.
23. Prepayment from the Pre-Funding Account. To the extent that the
Pre-Funded Amount has not been fully applied by the Trust to purchase additional
Mortgage Assets by the end of the Funding Period, the amount remaining on
deposit in the Pre-Funding Account will be payable as principal to
Certificateholders on the first Distribution Date following the end of the
Funding Period, or, if the end of the Funding Period is on a Distribution Date,
then on such date.
In the event that amounts remain on deposit in the Pre-Funding Account at
the end of the Funding Period and are applied to the payment of principal to the
Certificateholders, such partial retirement of Certificates may shorten the
average life of the Certificates and may cause the Certificateholders to
experience a lower yield on the Certificates. In addition, any reinvestment risk
resulting from such partial retirement will be borne by the holders of such
Certificates.
24. Risk of Commingling. At any time that the requirements as specified
under "The Pooling and Servicing Agreement--Payments on Mortgage Assets;
Deposits to Certificate Account," are met, the Master Servicer may deposit
payments and collections received on or with respect to the Mortgage Loans in
the Certificate Account monthly on the Deposit Date (as defined herein). Until
the Master Servicer makes such a monthly deposit into the Certificate
Account,the Master Servicer may invest collections on the Mortgage Loans at its
own risk and for its own benefit and need not segregate the collections from its
own funds. If the Master Servicer were unable to remit such funds or if the
Master Servicer became insolvent, the holders of the Certificates could incur a
loss with respect to collections not deposited in the Certificate Account.
25. Book-Entry Registration. Issuance of the Certificates in book-entry
form may reduce the liquidity of such Certificates in the secondary trading
market since investors may be unwilling to purchase Certificates for which they
cannot obtain definitive physical securities representing such
Certificateholders' interests, except in certain circumstances described in the
related Prospectus Supplement.
Transactions in Certificates will, in most cases, be able to be effected
only through The Depository Trust Company ("DTC"), Participants or Indirect
Participants (each, as defined herein) and certain banks or through Cedel Bank,
societe anonyme ("Cedel") or the Euroclear System ("Euroclear") in Europe. Since
a Certificateholder will not generally be able to obtain a physical security
under such systems, the ability of a Certificateholder to use effectively the
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Certificate as collateral for a loan from persons or entities that do not
participate in such systems, or otherwise to take actions in respect of such
Certificates, may be limited.
Certificateholders may experience delay in their receipt of distributions
of interest on and principal of the Certificates since distributions will be
forwarded by the Trustee to DTC and, in such a case, DTC will be required to
credit such distributions to the accounts of its Participants which thereafter
will be required to credit them to the accounts of the applicable class of
Certificateholders either directly or indirectly through Indirect Participants.
Unless and until Definitive Certificates (as defined herein) are issued, it
is anticipated that the only "Certificateholder" of the Book-Entry Certificates
(as defined herein) will be DTC or its nominee. Beneficial owners of the
Book-Entry Certificates will not be Certificateholders, as that term will be
used in the Agreement relating to such Series of Certificates. Beneficial owners
are only permitted to exercise the rights of Certificateholders indirectly
through Financial Intermediaries (as defined herein) and DTC. Monthly and annual
reports on the related Trust provided to DTC or its nominee, as the case may be,
as holder of record of the Book-Entry Certificates, may be made available to
beneficial owners upon request, in accordance with the rules, regulations and
procedures creating and affecting DTC, and to the Financial Intermediaries to
whose DTC accounts the Book-Entry Certificates of such beneficial owners are
credited. See "Description of the Certificates -- Book-Entry Certificates"
herein.
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THE TRUSTS
The Trust for each Series will be held by the Trustee for the benefit of
the related Certificateholders. Each Trust will consist of one or more pools
(each, a "Mortgage Pool" or "Pool") of certain mortgage related assets (the
"Mortgage Assets") consisting of (i) mortgage loans (or participation or other
beneficial interests therein) secured by mortgages, deeds of trust or similar
security instruments (the "Mortgages") creating first or subordinate liens on
one- to four-family residential properties (the "Mortgage Loans") and, if
specified in the related Prospectus Supplement, (ii) Private Mortgage-Backed
Securities, together with payments in respect of such Mortgage Assets, and (iii)
certain other accounts, obligations or agreements, in each case as specified in
the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
Certificates will be entitled to payment from the assets of the related Trust or
other assets held for the benefit of the holders of such Certificates (the
"Certificateholders") as specified in the related Prospectus Supplement and will
not be entitled to payments in respect of the assets of any other trust
established by the Depositor, a Seller or any of their affiliates.
The Mortgage Assets will be acquired by the Depositor either directly or
indirectly from CIT Consumer Finance and/or other affiliates of the Depositor
(each, a "Seller") and conveyed by the Depositor to the related Trust Fund.
Mortgage Loans acquired by the Depositor will have been originated or purchased
by CIT Consumer Finance or its affiliates in accordance with the underwriting
criteria specified below under "Mortgage Loan Program--Underwriting Standards"
or as otherwise described in a related Prospectus Supplement. Certain Mortgage
Loans originated in the State of Minnesota will have been originated or
purchased by CITSF in accordance with the same underwriting criteria. Certain
Mortgage Loans originated in the State of New York will have been originated or
purchased by The CIT Group/Consumer Finance, Inc. (NY), a New York corporation
and a wholly owned subsidiary of CIT, in accordance with the same underwriting
criteria. Mortgage Loans may have been acquired by CIT Consumer Finance or an
affiliate thereof in the open market or in privately negotiated transactions,
including transactions with entities affiliated with CIT Consumer Finance.
The following is a brief description of the Mortgage Assets expected to be
included in the Trusts. If provided in the related Prospectus Supplement, the
original principal amount of a Series of Certificates may exceed the principal
balance of the Mortgage Assets initially being delivered to the Trustee with
respect to such Series. Cash in an amount equal to such difference (the
"Pre-Funded Amount") will be deposited into a separate trust account (the
"Pre-Funding Account") maintained with the Trustee. The Pre-Funded Amount will
not exceed 25% of the Certificate Balance (as defined herein). During the period
(the "Funding Period") set forth in the related Prospectus Supplement, amounts
on deposit in the Pre-Funding Account may be used to purchase additional
Mortgage Assets for the related Trust. In addition, if so provided in the
related prospectus Supplement, certain additional amounts in respect of interest
will be deposited into the Pre-Funding Account or in a separate trust account.
The related Prospectus Supplement will specify the conditions which must be
satisfied prior to the transfer of any such additional Mortgage Assets,
including the requisite characteristics of such Mortgage Assets. Any amounts
remaining in the Pre-Funding Account at the end of such Funding Period will be
distributed as a principal prepayment to the holders of the related Series of
Certificates at the time and in the manner set forth in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement, the
specified period for the acquisition by a Trust of additional Mortgage Assets
will not exceed three months from the date such Trust is established.
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If specific information with respect to the Mortgage Assets is not known at
the time the related Series of Certificates initially is offered, more general
information of the nature described below will be provided in the related
Prospectus Supplement, and specific information will be set forth in a report on
a Current Report on Form 8-K to be filed with the Securities and Exchange
Commission (the "Commission") within fifteen days after the initial issuance of
such Certificates (the "Detailed Description"). A copy of the Agreement with
respect to each Series of Certificates will be attached to the Current Report on
Form 8-K and will be available for inspection at the corporate trust office of
the Trustee specified in the related Prospectus Supplement. A schedule of the
Mortgage Assets relating to such Series will be attached to the Agreement
delivered to the Trustee upon delivery of the Certificates.
THE MORTGAGE LOANS-GENERAL
For purposes hereof, the real property that secures repayment of the
Mortgage Loans is referred to collectively as "Mortgaged Properties." The
Mortgaged Properties may be located in any one of the fifty states or the
District of Columbia. Unless otherwise specified in the related Prospectus
Supplement, all of the Mortgage Loans will be loans that are not insured or
guaranteed by any governmental agency. Mortgage Loans with certain Combined
Loan-to-Value Ratios and/or certain principal balances may be covered wholly or
partially by primary mortgage guaranty insurance policies (each, a "Primary
Mortgage Insurance Policy") to the extent provided in the related Prospectus
Supplement. Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans will generally be covered by standard hazard insurance policies
(each, a "Standard Hazard Insurance Policy"). The existence, extent and duration
of any such coverage will be described in the related Prospectus Supplement.
The Mortgage Loans in a Mortgage Pool will have monthly payments due on
various days of each month. The payment terms of the Mortgage Loans to be
included in a Trust will be described in the related Prospectus Supplement and
may include any of the following features or combination thereof or other
features described in the related Prospectus Supplement:
(a) Interest may be payable at a fixed rate ("Fixed Rate" and a
Mortgage Loan subject thereto is a "Fixed Rate Mortgage Loan"), a rate
adjustable from time to time in relation to an index which will be
specified in the related Prospectus Supplement, a rate that is fixed for a
period of time or under certain circumstances and is followed by an
adjustable rate, a rate that otherwise varies from time to time, or a rate
that is convertible from an adjustable rate to a fixed rate (each of the
foregoing, an "Adjustable Rate" and a Mortgage Loan subject thereto is an
"Adjustable Rate Mortgage Loan"). Changes to an Adjustable Rate may be
subject to periodic limitations, maximum rates, minimum rates or a
combination of such limitations. Accrued interest may be deferred and added
to the principal of a loan for such periods and under such circumstances as
may be specified in the related Prospectus Supplement. The loan agreement
or promissory note (the "Mortgage Note") in respect of a Mortgage Loan may
provide for the payment of interest at a rate lower than the interest rate
(the "Mortgage Rate") specified in such Mortgage Note for a period of time
or for the life of the Mortgage Loan, and the amount of any difference may
be contributed from funds supplied by the seller of the related Mortgaged
Property or another source or may be treated as accrued interest added to
the principal of the Mortgage Loan.
(b) Principal may be payable on a declining balance basis to fully
amortize the Mortgage Loan over its term, may be calculated on the basis of
an assumed amortization schedule that is significantly longer than the
original term to maturity or on an interest rate that is different from the
Mortgage Rate or may not be amortized during all or a portion of the
original term. Payment of all or a substantial portion of the principal of
certain Mortgage Loans ("Balloon Loans") may
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be due on maturity ("Balloon Payments"). Mortgage Loans may permit the
mortgagee to require the Mortgagor to pay the full principal balance of the
loan on a specified date the ("Call Date") prior to the maturity of the
Loan ("Call Loans"). Principal may include interest that has been deferred
and added to the principal balance of the Mortgage Loan.
(c) Monthly payments of principal and interest may be fixed for the
life of the Mortgage Loan, may increase over a specified period of time (a
"Graduated Payment Loan") or may change from period to period. The terms of
a Mortgage Loan may include limits on periodic increases or decreases in
the amount of monthly payments and may include maximum or minimum amounts
of monthly payments. Graduated Payment Loans may require the monthly
payments of principal and interest to increase for a specified period,
provide for deferred payment of a portion of the interest due monthly
during such period, and recoup the deferred interest through negative
amortization whereby the difference between the scheduled payment of
interest and the amount of interest actually accrued is added monthly to
the outstanding principal balance. Other Mortgage Loans sometimes referred
to as "growing equity" mortgage loans may provide for periodic scheduled
payment increases for a specified period with the full amount of such
increases being applied to reduce principal.
(d) The Mortgage Loans generally may be prepaid in whole or in part at
any time. If specified in the related Prospectus Supplement, some
prepayments of the full principal balance of a loan may be subject to a
prepayment penalty or premium. Such prepayment penalty or premium will be
applicable to certain prepayments of principal made during a specified
period of time during the life of the Mortgage Loan. The Mortgage Note in
respect of any Mortgage Loan subject to a prepayment penalty or premium
generally will set forth the terms of prepayment. Prepayments on the
Mortgage Loans as a result of a refinancing by the Seller or Seller's
transferee generally will not be subject to a prepayment penalty or
premium. The Mortgage Loans generally include "due on sale" clauses which
permit the mortgagee to demand payment of the entire Mortgage Loan in
connection with the sale or certain transfers of the related Mortgaged
Property. Other Mortgage Loans may be assumable by persons meeting the then
applicable underwriting standards for such Mortgage Loan.
A Trust may contain certain Mortgage Loans ("Buydown Loans") that include
provisions whereby a third party partially subsidizes the monthly payments of
the Mortgagors on such Buydown Loans during the early years of such Buydown
Loans, the difference to be made up from a fund (a "Buydown Fund") contributed
by such third party at the time of origination of the Buydown Loan. A Buydown
Fund will be in an amount equal either to the discounted value or full aggregate
amount of future payment subsidies. The underlying assumption of buydown plans
is that the income of the Mortgagor will increase during the buydown period as a
result of normal increases in compensation and inflation, so that the Mortgagor
will be able to meet the full mortgage payments at the end of the buydown
period. To the extent that this assumption as to increased income is not
fulfilled, the possibility of defaults on Buydown Loans is increased. The
related Prospectus Supplement will contain information with respect to any
Buydown Loan concerning limitations on the interest rate paid by the Mortgagor
initially, on annual increases in the interest rate and on the length of the
buydown period.
Unless otherwise specified in the Prospectus Supplement, the Mortgage Loans
will be Simple Interest Loans, Scheduled Accrual Loans and Precomputed Loans.
"Simple Interest Loans" provide that interest is charged to the Mortgagor
at the applicable Mortgage Rate (as defined herein) on the outstanding principal
balance of the related Mortgage Note (as defined herein) and calculated based on
the actual days elapsed from receipt of the Mortgagor's last payment to receipt
of the Mortgagor's most current payment. Such interest is deducted from the
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Mortgagor's payment amount and the remainder, if any, of the payment is applied
as a reduction to the outstanding principal balance of such Mortgage Note.
Although the Mortgagor is required to remit equal monthly payments on a
specified monthly payment date that would reduce the outstanding principal
balance of such Mortgage Note to zero at such Mortgage Note's maturity date,
payments that are made by the Mortgagor after the due date therefor (assuming
all other payments are made on their specified monthly payment dates) would
cause the outstanding principal balance of such Mortgage Note not to be reduced
to zero. In such a case, the Mortgagor would be required to make an additional
principal payment at the maturity date for such Mortgage Note. On the other
hand, if a Mortgagor makes a payment before the due date therefor or pays an
amount greater than the scheduled payment amount (assuming all other payments
are made on their specified monthly payment dates), the reduction in the
outstanding principal balance of such Mortgage Note would occur over a shorter
period of time than it would have occurred had it been based on the original
amortization schedule of such Mortgage Note.
"Scheduled Accrual Loans" provide that interest is charged to the Mortgagor
at the applicable Mortgage Rate (as defined herein) on the outstanding principal
balance of the related Mortgage Note and calculated as though each payment is
made on the scheduled payment date. Scheduled monthly payments made by the
Mortgagors on the Scheduled Accrual Loans either earlier or later than the
scheduled due dates thereof will not affect the amortization schedule or the
relative application of such payments to principal and interest. Interest on
such Scheduled Accrual Loans will be calculated based on a 360-day year of
twelve 30-day months. When the Mortgagor remits a payment greater than the
amount currently due on the Mortgage Note, the additional payment is generally
applied to the next scheduled installment unless otherwise specified by the
Mortgagor. This application will not affect the amortization schedule or the
relative application of such payment to principal and interest. No more than two
future installments can be paid ahead in such manner. If payments are received
which would result in the Mortgage Note being paid ahead more than two months or
if the Mortgagor specifically instructs that any additional payment be applied
to principal, then this partial prepayment of principal is generally effective
as of the most recently paid installment and the relative application of
principal and interest of future payments will be adjusted to reflect the
partial principal prepayment. When a full prepayment of principal is made on a
Scheduled Accrual Loan during a month, the Mortgagor is charged interest only on
the days of the month actually elapsed up to the date of such prepayment, at a
daily interest rate that is applied to the principal amount of the loan so
prepaid.
A "Precomputed Loan" provides for the payment by the related Mortgagor of a
specified total amount of payments, payable in monthly installments on each due
date, which total represents the principal and precomputed interest in an amount
calculated at the stated Mortgage Rate for the term of the Mortgage Loan on the
declining principal balance on the assumption that all scheduled payments are
made when due. Any partial prepayment received in excess of the current amount
due will be applied against future installments and will have no effect on the
amortization of principal and interest. If a Mortgage Loan prepays in full, the
Mortgagor will receive a refund of unearned interest calculated on an actuarial
basis, which calculation may vary from state to state depending on state
regulations.
The Prospectus Supplement for each Series of Certificates will specify with
respect to all Mortgage Loans expected to be included in the related Pool as of
the date specified in the related Prospectus Supplement, among other things, (i)
the expected aggregate outstanding principal balance and the expected average
outstanding principal balance of the Mortgage Loans in such Pool, (ii) the
largest expected principal balance and the smallest expected principal balance
of any of the Mortgage Loans, (iii) the types of Mortgaged Properties (e.g.,
detached residential one- to four-family properties, individual units in
condominiums, vacation and second homes, or other real property) and/or other
assets securing the Mortgage Loans, (iv) the original terms to maturity of the
Mortgage Loans, (v) the expected weighted average term to maturity of the
Mortgage Loans as of the date specified in such Prospectus Supplement and the
expected range of the terms of maturity, (vi) the earliest origination date and
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latest maturity date of any of the Mortgage Loans, (vii) the expected aggregate
principal balance of Mortgage Loans having Combined Loan-to-Value Ratios (as
defined herein) in specified ranges, (viii) in the case of Fixed Rate Mortgage
Loans, the expected weighted average Mortgage Rate and ranges of Mortgage Rates
borne by the Mortgage Loans (as the case may be), (ix) in the case of Adjustable
Rate Mortgage Loans, the expected weighted average of the Adjustable Rates as of
the date set forth in such Prospectus Supplement, any periodic or lifetime rate
caps or floors, maximum permitted Adjustable Rates, if any, and the Index (as
defined herein) upon which the Adjustable Rate is based, (x) the expected
aggregate outstanding principal balance, if any, of Buydown Loans and Graduated
Payment Loans, as of the date set forth in the Prospectus Supplement, (xi) the
expected aggregate outstanding principal balance, if any, of Call Loans and
Balloon Loans, (xii) the amount of any Certificate Guaranty Insurance Policy,
Mortgage Pool Insurance Policy, Special Hazard Insurance Policy or Bankruptcy
Bond (each, as defined herein) to be maintained with respect to such Pool,
(xiii) the amount, if any, and terms of any other Credit Enhancement to be
provided with respect to all or any Mortgage Loans or the Pool, (xiv) the
priority of the Mortgages (first, second, third or fourth) and (xv) the expected
geographic location of the Mortgaged Properties. If specific information
respecting the Mortgage Loans is not known to the Depositor at the time the
related Certificates are initially offered, more general information of the
nature described above will be provided in the Detailed Description.
The "Combined Loan-to-Value Ratio" of a Mortgage Loan at any given time is
the ratio, expressed as a percentage, determined by dividing (x) the sum of the
original principal balance of the Mortgage Loan (less the amount, if any, for
the items specified in the related Prospectus Supplement) plus the principal
balance of any loan or loans secured by a senior lien on the Mortgaged Property
at the time of origination of the Mortgage Loan, by (y) the value of the related
Mortgaged Property, based upon the appraisal or other valuation made at the time
of origination of the Mortgage Loan (see "The Home Equity Lending Program --
Underwriting Standards").
The Depositor will cause the Mortgage Loans comprising each Mortgage Pool
to be assigned to the Trustee named in the related Prospectus Supplement for the
benefit of the Certificateholders of the related Series. The Master Servicer
named in the related Prospectus Supplement will service the Mortgage Loans,
either directly or through other mortgage servicing institutions (each, a
"Sub-Servicer"), pursuant to a Pooling and Servicing Agreement (each, an
"Agreement"), and will receive a fee for such services. See "The Home Equity
Lending Program" and "The Pooling and Servicing Agreement" herein.
Unless otherwise specified in the related Prospectus Supplement, CITSF will
be appointed as a Sub-Servicer for all of the Mortgage Loans in each Mortgage
Pool, and as a Sub-Servicer, will perform all or most of the servicing
responsibilities described under "The Pooling and Servicing Agreement" herein
and "Servicing of Mortgage Loans" in the related Prospectus Supplement. All
references in this Prospectus and any related Prospectus Supplement to the
"Master Servicer" or to CIT Consumer Finance in a servicing capacity shall
include CIT Consumer Finance acting through any Sub-Servicer, including CITSF,
or any agent. With respect to Mortgage Loans serviced by the Master Servicer
through a Sub-Servicer, the Master Servicer will remain liable for its servicing
obligations under the related Agreement as if the Master Servicer alone were
servicing such Mortgage Loans.
The Mortgage Loans generally will be evidenced by Mortgage Notes and
secured by Mortgages. The "Mortgage Documents" for each Mortgage Loan are (i)
the original Mortgage Note (except in the circumstances discussed under "The
Pooling and Servicing Agreement--Assignment of Mortgage Assets"), (ii) the
Mortgage with evidence of recording indicated thereon (except for any Mortgage
not returned from the public recording office or which has been lost, in which
case the Depositor will, unless otherwise specified in the related Prospectus
Supplement, deliver or cause to be delivered to the custodian a copy of such
Mortgage together with a certificate that the original of such Mortgage was
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delivered to such recording office), (iii) any intervening assignments of the
Mortgages (iv) any title insurance policies with respect to the Mortgages, (v)
any assumption or modification agreement and (vi) such other security documents
as may be specified in the related Prospectus Supplement or the related
Agreement. Some or all of the Mortgage Documents may, as specified in the
related Prospectus Supplement, be held for the benefit of the Trust by a
custodian appointed pursuant to the related Agreement or a separate custodial
agreement among the Depositor, the Trustee and such custodian. If specified in
the related Prospectus Supplement, CIT Consumer Finance will be appointed as
custodian of the Mortgage Documents pursuant to the related Agreement and, in
such capacity, will retain possession of the Mortgage Documents.
Unless otherwise specified in the related Prospectus Supplement, the
Depositor will have no obligations with respect to a Series of Certificates. See
"The Pooling and Servicing Agreement--Assignment of Mortgage Assets" herein.
The obligations of the Master Servicer with respect to the Mortgage Loans will
consist principally of its contractual servicing obligations under the related
Agreement, including its obligation to enforce the obligations of the
Sub-Servicers or Sellers, or both, as more fully described herein under "The
Home Equity Lending Program--Representations by Sellers; Repurchases" and its
obligation to make certain cash advances in the event of delinquencies in
payments on or with respect to the Mortgage Loans in the amounts described
herein under "Description of the Certificates--Advances" herein. The obligations
of the Master Servicer to make advances may be subject to limitations, to the
extent provided herein and in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans will be secured by Mortgages creating first or subordinate liens
on one- to four-family residential properties (each such property, a "Mortgaged
Property"). If so specified in the related Prospectus Supplement, the Mortgage
Loans may include loans or participations therein secured by Mortgages on
condominium units in condominium buildings together with such condominium units'
appurtenant interests in the common elements of the condominium buildings. If
specified in the related Prospectus Supplement, the Mortgage Assets of the
related Trust may include mortgage participation certificates evidencing
interests in Mortgage Loans. Unless otherwise specified in the related
Prospectus Supplement, such Mortgage Loans will be loans that are not insured or
guaranteed by any governmental agency.
The Mortgaged Properties relating to Mortgage Loans will consist of
detached or semi-detached one-family dwelling units, two- to four-family
dwelling units, townhouses, rowhouses, individual condominium units, individual
units in planned unit developments and certain other dwelling units. Such
Mortgaged Properties may include vacation and second homes, investment
properties and leasehold interests. In the case of leasehold interests, the term
of the leasehold will exceed the scheduled maturity of the Mortgage Loan by at
least five years, unless otherwise specified in the related Prospectus
Supplement.
PRIVATE MORTGAGE-BACKED SECURITIES
"Private Mortgage-Backed Securities" may consist of (i) mortgage
pass-through certificates or participation certificates evidencing an undivided
interest in a pool of mortgage loans, (ii) collateralized mortgage obligations
secured by mortgage loans, together with payments in respect of such Mortgage
Assets, and (iii) certain other accounts, obligations or agreements, in each
case as specified in the related Prospectus Supplement. Private Mortgage-Backed
Securities may include stripped mortgage-backed securities representing an
undivided interest in all or a part of either the principal distributions (but
not the interest distributions) or the interest distributions (but not the
principal distributions) or in some specified portion of the principal and
interest distributions (but not all of such distributions) on certain mortgage
loans. Private Mortgage-Backed Securities will have been issued pursuant to a
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pooling and servicing agreement, an indenture or similar agreement (a "PMBS
Agreement"). Unless otherwise specified in the related Prospectus Supplement,
the seller/servicer of the underlying mortgage loans will have entered into the
PMBS Agreement with the trustee under such PMBS Agreement (the "PMBS Trustee").
The PMBS Trustee or its agent, or a custodian, will possess the mortgage loans
underlying such Private Mortgage-Backed Security. Mortgage loans underlying a
Private Mortgage-Backed Security will be serviced by a servicer (the "PMBS
Servicer") directly or by one or more sub-servicers who may be subject to the
supervision of the PMBS Servicer.
The issuer of the Private Mortgage-Backed Securities (the "PMBS Issuer")
will be a financial institution or other entity engaged generally in the
business of mortgage 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
housing loans to such trusts and selling beneficial interests in such trusts. If
specified in the related Prospectus Supplement, the PMBS Issuer may be an
affiliate of the Depositor. The obligations of the PMBS Issuer will generally be
limited to certain representations and warranties with respect to the assets
conveyed by it to the related Trust. Unless otherwise specified in the related
Prospectus Supplement, the PMBS Issuer will not have guaranteed any of the
assets conveyed to the related Trust or any of the Private Mortgage-Backed
Securities issued under the PMBS Agreement. Additionally, although the
individual mortgage loans underlying the Private Mortgage-Backed Securities may
be guaranteed by the United States or an agency or instrumentality thereof, they
need not be, and the Private Mortgage-Backed Securities themselves will not be
so insured or guaranteed.
Distributions of principal and interest will be made on the Private
Mortgage-Backed Securities on the dates specified in the related Prospectus
Supplement. The Private Mortgage-Backed Securities may be entitled to receive
nominal or no principal distributions or nominal or no interest distributions.
Principal and interest distributions will be made on the Private Mortgage-Backed
Securities by the PMBS Trustee or the PMBS Servicer directly to the Trustee as
registered owner of such Private Mortgage-Backed Securities, unless otherwise
specified in the related Prospectus Supplement. The PMBS Issuer or the PMBS
Servicer may have the right to repurchase assets underlying the Private
Mortgage-Backed Securities after a certain date or under other circumstances
specified in the related Prospectus Supplement.
The mortgage loans underlying the Private Mortgage-Backed Securities may
consist of Fixed Rate, level payment, fully amortizing Mortgage Loans or
Graduated Payment Loans, Buydown Loans, Adjustable Rate Mortgage Loans or
Mortgage Loans having balloon or other special payment features. Such Mortgage
Loans may be secured by single family property or multifamily property or by a
condominium or by an assignment of the proprietary lease or occupancy agreement
relating to a specific dwelling within a Cooperative and the related shares
issued by such Cooperative.
The related Prospectus Supplement for a Series for which the Trust includes
Private Mortgage-Backed Securities will specify, with respect to any Private
Mortgage-Backed Securities owned by the related Trust, among other things, (i)
the approximate aggregate principal amount and type of any Private
Mortgage-Backed Securities to be included in the Trust for such Series; (ii)
certain characteristics of the mortgage loans that comprise the underlying
assets for the Private Mortgage-Backed Securities including: (A) the payment
features of such mortgage loans, (B) the approximate aggregate principal amount,
if known, of such mortgage loans that are insured or guaranteed by a
governmental entity, (C) the servicing fee or range of servicing fees with
respect to such mortgage loans and (D) the minimum and maximum stated maturities
of such mortgage loans at origination; (iii) the maximum original term-to-stated
maturity of the Private Mortgage-Backed Securities; (iv) the weighted average
term-to-stated maturity of the Private Mortgage-Backed Securities; (v) the
pass-through or certificate rate of the Private Mortgage-Backed Securities; (vi)
the weighted average pass-through or certificate rate of the Private
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Mortgage-Backed Securities; (vii) the PMBS Issuer, the PMBS Servicer (if other
than the PMBS Issuer) and the PMBS Trustee for such Private Mortgage-Backed
Securities; (viii) certain characteristics of credit support, if any, such as
reserve funds, insurance policies, surety bonds, letters of credit or
guarantees, relating to the mortgage loans that comprise the underlying assets
for the Private Mortgage-Backed Securities or to such Private Mortgage-Backed
Securities themselves; (ix) the terms on which the mortgage loans that comprise
the underlying assets for such Private Mortgage-Backed Securities may, or are
required to, be purchased prior to their stated maturity or the stated maturity
of the Private Mortgage-Backed Securities; and (x) the terms on which substitute
mortgage loans may be delivered to replace those initially deposited with the
PMBS Trustee.
SUBSTITUTION OF MORTGAGE ASSETS
Substitution of Mortgage Assets will be permitted in the event of breaches
of representations and warranties with respect to any Mortgage Asset or in the
event the documentation with respect to any Mortgage Asset is determined by the
Trustee to be incomplete. The period during which such substitution will be
permitted generally and the criteria for substituting for a Mortgage Asset will
be indicated in the related Prospectus Supplement. The related Prospectus
Supplement will describe any other conditions upon which Mortgage Assets may be
substituted for Mortgage Assets initially included in the Trust.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor to the purchase of Mortgage Assets from the applicable
Sellers and to pay expenses of the offering. The applicable Sellers will apply
the proceeds for general corporate purposes, including the origination and
acquisition of residential mortgage loans and other loans. The Depositor expects
to sell Certificates in Series from time to time, but the timing and amount of
offerings of Certificates will depend on a number of factors, including the
volume of Mortgage Assets acquired by the Depositor, prevailing interest rates,
availability of funds and general market conditions.
THE CIT GROUP HOLDINGS, INC.
CIT, a Delaware corporation, is a successor to a company founded in St.
Louis, Missouri on February 11, 1908. It has its principal executive offices at
1211 Avenue of the Americas, New York, New York 10036, and its telephone number
is (212) 536-1950. CIT, operating directly or through its subsidiaries primarily
in the United States, engages in financial services activities through a
nationwide distribution network. CIT provides financing primarily on a secured
basis to commercial borrowers, ranging from middle-market to larger companies,
and to a lesser extent to consumers. While these secured lending activities
reduce the risk of losses from extending credit, CIT's results of operations can
also be affected by other factors, including general economic conditions,
competitive conditions, the level and volatility of interest rates,
concentrations of credit risk, and government regulation and supervision. CIT
does not finance the development or construction of commercial real estate. CIT
has eight strategic business units which offer commercial and consumer financing
and factoring products and services to clients.
The Dai-Ichi Kangyo Bank, Limited ("DKB") owns eighty percent (80%) of the
issued and outstanding shares of common stock of CIT. DKB purchased a sixty
percent (60%) common stock interest in CIT from Manufacturers Hanover
Corporation ("MHC") at year-end 1989 and acquired an additional twenty percent
(20%) common stock interest in CIT on December 15, 1995, from CBC Holding
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(Delaware) Inc. (formerly known as MHC Holdings (Delaware) Inc.) ("CBC
Holding"). DKB has a five-year option, expiring December 15, 2000, to purchase
the remaining twenty percent (20%) common stock interest from CBC and its
parent.
CBC Holding became a direct, wholly owned subsidiary of Chemical Banking
Corporation ("CBC") after the merger between MHC and CBC on December 31, 1991.
On March 31, 1996, CBC was merged into The Chase Manhattan Corporation ("CMC"),
and CMC became the sole stockholder of CBC Holding.
In accordance with a stockholders agreement among DKB, CMC, as direct
successor to CBC and indirect successor to MHC, and CIT, dated as of December
29, 1989, as amended by an Amendment to Stockholders' Agreement, dated December
15, 1995 (the "Stockholders Agreement"), one nominee of the Board of Directors
is designated by CMC. The Stockholders Agreement also contains restrictions with
respect to the transfer of the stock of CIT to third parties.
CIT is subject to the informational requirements of The Securities Exchange
Act of 1934, as amended, and, in accordance therewith, files reports and other
information with the Commission. Such reports and other information can be
inspected and copied at the offices of the Commission. Certain of CIT's
securities are listed on the New York Stock Exchange and reports and other
information concerning CIT can also be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. See "Available
Information" herein.
Unless CIT has issued a Limited Guarantee (as defined herein) with respect
to any Series of Certificates, CIT will have no obligations or liabilities with
respect to any Series of Certificates.
THE CIT GROUP SECURITIZATION CORPORATION III,
THE DEPOSITOR
The CIT Group Securitization Corporation III (the "Depositor") was
incorporated in the State of Delaware on April 8, 1996 and is a wholly-owned,
limited purpose finance subsidiary of CIT. The Depositor maintains its principal
office at 650 CIT Drive, Livingston, New Jersey 07039. Its telephone number is
(201) 535-3512.
As described herein and in the related Prospectus Supplement, the
obligations, if any, of the Depositor with respect to any Series of Certificates
are limited. The Depositor will have no ongoing servicing obligations or
responsibilities with respect to any Mortgage Assets. CIT Consumer Finance is an
affiliate of the Depositor. Unless otherwise specified in the Prospectus
Supplement, the Depositor will acquire the Mortgage Assets in a privately
negotiated transaction from CIT Consumer Finance.
Unless otherwise specified in the related Prospectus Supplement, neither
CIT nor any of its affiliates, including the Depositor and CIT Consumer Finance,
will be obligated with respect to any Series of Certificates. Accordingly, the
Depositor has determined that financial statements of CIT Consumer Finance and
its affiliates, including the Depositor, are not material to the offering of any
Series of Certificates. If, with respect to a Series of Certificates any such
financial statements are material, they will be included or incorporated by
reference in the related Prospectus Supplement.
THE CIT GROUP/CONSUMER FINANCE, INC., SELLER AND MASTER SERVICER
Unless otherwise specified in the related Prospectus Supplement, the
Mortgage Loans and any other applicable Mortgage Assets will be purchased by the
Depositor, either directly or through affiliates, from CIT Consumer Finance or
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its affiliates, as Seller. Unless otherwise specified in the related Prospectus
Supplement, the Mortgage Loans so acquired by the Depositor will have been
originated or purchased by CIT Consumer Finance or its affiliates in accordance
with the underwriting criteria specified below under "Underwriting Standards."
Unless otherwise specified in the related Prospectus Supplement, CIT
Consumer Finance will be appointed pursuant to the related Agreement as the
master servicer for each Trust (the "Master Servicer").
CIT Consumer Finance is a Delaware corporation and a wholly-owned
subsidiary of CIT. It has its principal executive office at 650 CIT Drive,
Livingston, New Jersey 07039, and its telephone number is (201) 740-5000.
CIT Consumer Finance offers loans to consumers secured by first and
subordinate mortgages on residential real estate (including condominiums).
Business is generated through several distribution channels across the country.
CIT Consumer Finance originates loans directly to consumers, using both its own
employees and mortgage brokers. CIT Consumer Finance also purchases loans from
mortgage bankers and other mortgage lenders, often referred to as
"correspondents." CIT Consumer Finance purchases loans individually and in
larger batches, including bulk portfolio purchases.
CIT Consumer Finance is the master servicer for the loans held in its
portfolio. CITSF performs many servicing functions for CIT Consumer Finance as
its Sub-Servicer from CITSF's Oklahoma City, Oklahoma Asset Service Center as
described below. CIT Consumer Finance has a network of offices nationwide which
handle business origination, credit, administration and management. In addition,
CIT Consumer Finance maintains its quality control department and its original
document retention and processing facility at its Marlton, New Jersey office.
THE CIT GROUP/SALES FINANCING, INC., SUB-SERVICER
Unless otherwise specified in the related Prospectus Supplement, CITSF will
be appointed as a Sub-Servicer for all of the Mortgage Loans in each Mortgage
Pool, and as a Sub-Servicer, will perform all or most of the servicing
responsibilities described under "The Pooling and Servicing Agreement". All
references in this Prospectus and any related Prospectus Supplement to the
"Master Servicer" or to CIT Consumer Finance in a servicing capacity shall
include CIT Consumer Finance acting through any Sub-Servicer, including CITSF,
or any agent.
Unless otherwise specified in the related Prospectus Supplement, CITSF
originated the Mortgage Loans, if any, for which the Mortgaged Properties are
located in the State of Minnesota and will sell such Mortgage Loans to CIT
Consumer Finance for resale to the Depositor and then to a Trust.
CITSF is a Delaware corporation and a wholly-owned subsidiary of CIT. It
has its principal executive office at 650 CIT Drive, Livingston, New Jersey
07039 and its telephone number is (201) 740-5000.
CITSF originates, purchases and services retail installment sales
contracts, direct loans and mortgages for manufactured housing, recreational
vehicles, recreational marine and other consumer goods throughout the United
States and services mortgage loans originated and purchased by CIT Consumer
Finance and other affiliates of CIT. CITSF has a centralized asset service
facility (the "Asset Service Center") in Oklahoma City, Oklahoma. CITSF
services, on behalf of other owners, retail installment contracts, direct loans
and mortgage loans that were not originated by CITSF. These servicing
arrangements may be made with
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respect to the portfolios of other lending institutions or finance companies,
the portfolios of governmental agencies or instrumentalities, or portfolios that
have been sold by CITSF or others to securitization trusts.
The Asset Service Center of CITSF services consumer credit transactions in
50 states and the District of Columbia. It provides full servicing for retail
installment contracts, direct loans and mortgages. In order to service these
transactions, CITSF uses sub-servicers, outside collectors and field remarketers
located throughout the United States.
THE HOME EQUITY LENDING PROGRAM
Overview
The mortgage lending activities of CIT Consumer Finance consist primarily
of originating, purchasing and selling Mortgage Loans secured by Mortgages
creating first or subordinate liens on Mortgaged Properties (each such Mortgage
Loan, a "Home Equity Loan"). Such Mortgaged Properties include condominiums,
single-family detached homes, single-family attached homes and planned unit
developments. It has been the policy of CIT Consumer Finance generally not to
make Home Equity Loans secured by cooperative residences or other categories of
properties that management believes have demonstrated relatively high levels of
risk. CIT Consumer Finance makes the majority of its Home Equity Loans to
borrowers who own a single-family detached home. CIT Consumer Finance approves
Home Equity Loans to enable its borrowers to refinance an existing mortgage (in
many cases replacing the existing loan with a loan with a larger principal
balance), purchase a home, pay for education, pay for home improvements and
consolidate debt, among other purposes.
Initially, CIT Consumer Finance originated or purchased the majority of its
Home Equity Loans with original terms of up to 180 months. Starting in 1994, CIT
Consumer Finance began more frequently to originate and purchase Home Equity
Loans with original terms of up to 360 months. CIT Consumer Finance believes
that the longer term, and correspondingly lower monthly payments, of these Home
Equity Loans are attractive to customers who might otherwise refinance an
existing loan or obtain a new loan from a bank or other traditional long term
lender. CIT Consumer Finance believes that its rapid turnaround time from
application to funding a Home Equity Loan also makes CIT Consumer Finance more
competitive with more traditional lenders.
CIT Consumer Finance's area offices are located throughout the country.
Three regional offices supervise the operations of a group of states. All Home
Equity Loan area offices have a manager who reports to senior management. The
supervision of all of CIT Consumer Finance's underwriting and administrative
functions is conducted from the Livingston, New Jersey headquarters.
The following sections describe the origination, underwriting and servicing
procedures which CIT Consumer Finance follows in its Home Equity Loan program.
Home Equity Loan Origination
The entire application process for Home Equity Loans is generally conducted
either in person or by phone, facsimile, direct mail response, or the internet.
Each loan application is entered into an automated application processing system
which obtains a credit bureau report and calculates CIT Consumer Finance's
proprietary internal credit score. CIT Consumer Finance attempts to process the
applications as quickly as possible for borrowers meeting the underwriting
criteria. A loan officer is responsible for completing, evaluating and
processing the loan application of a prospective borrower based on information
obtained from the borrower, some of which is verified with third parties.
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Depending on the characteristics of the requested loan, loan applications will
be reviewed by an underwriter in the area office, regional office, or the
Livingston, New Jersey headquarters.
Loan officers are trained to structure loans that meet the applicant's
needs, while satisfying CIT Consumer Finance's underwriting criteria. If an
applicant does not meet the underwriting criteria under the applicable loan
program, the loan officer may decline the application or suggest a loan on
different terms.
CIT Consumer Finance originates business directly to the consumer through a
direct marketing campaign and through mortgage brokers.
Direct Marketing
Utilizing a staff of marketing professionals, CIT Consumer Finance markets
directly to the consumer through print ads, direct mail, and other media.
Prospective applicants submit an application by mailing in a loan application
included in the advertisement or by calling a toll free telephone number and
giving the information to a representative. Applicants who apply by mail will
also supply additional required information by telephone after CIT Consumer
Finance has received the application. Once a completed application is received,
a preliminary approval may be given within twenty four hours.
Broker Business
CIT Consumer Finance also originates Home Equity Loans based upon
applications received from independent mortgage brokers. CIT Consumer Finance
will directly underwrite and fund these broker loans. A nationwide network of
CIT Consumer Finance sales executives solicits broker business. These sales
executives are responsible for the development and maintenance of the broker
relationships and the coordination between the mortgage broker and CIT Consumer
Finance's offices. Mortgage brokers participating in this program must be
approved by CIT Consumer Finance by satisfying its established requirements
pertaining to experience, size of business, and various licenses and approvals.
After the mortgage broker is approved, CIT Consumer Finance conducts regular
periodic reviews of the relationship and the broker's performance. In these
reviews, CIT Consumer Finance will examine the performance of loans originated
by the broker and sometimes other factors, including maintenance of required
regulatory licenses. Based upon the review, CIT Consumer Finance may adjust or
terminate its relationship with the broker.
CIT also purchases loans from mortgage bankers and other mortgage lenders,
as described below.
Correspondent Lending
CIT Consumer Finance also purchases Mortgage Loans through its
correspondent lending program. CIT Consumer Finance will purchase loans on an
individual basis from correspondents based upon applications which CIT Consumer
Finance has previously approved. CIT Consumer Finance will also purchase from
correspondents groups of loans submitted in small batches referred to as
"bulks." CIT Consumer Finance establishes certain requirements which every
correspondent must meet. These requirements concern the correspondent's
experience, financial stability, and its various government licenses and
approvals. CIT Consumer Finance has agreements with the correspondents governing
the nature of the relationship. Generally, all loans acquired through these
correspondents conform to the underwriting criteria used by CIT Consumer Finance
for its direct originations.
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Institutional Bulk Portfolios
CIT Consumer Finance also purchases portfolios of Home Equity Loans from
other lenders ("Institutional Bulk Portfolios") which originated these loans
under their own underwriting criteria. Institutional Bulk Portfolios are
reviewed at the Livingston, New Jersey headquarters by senior level management,
who formulate a bid to purchase the portfolio. CIT Consumer Finance performs a
financial analysis on the portfolio as a whole. Depending upon the size of the
portfolio, CIT Consumer Finance performs a due diligence review on either all
the loans in the portfolio or on a statistical sample of the loans in the
portfolio. The due diligence review includes legal and credit file reviews and
recertification of property values. When purchasing Institutional Bulk
Portfolios, CIT Consumer Finance may rely upon representations and warranties
made by the seller to cover certain risks relating to origination, documentation
and other matters which might have come to the attention of CIT Consumer Finance
during the due diligence review process. CIT Consumer Finance also adjusts the
price it offers for an Institutional Bulk Portfolio based upon CIT Consumer
Finance's perception of the risk inherent in the portfolio as a whole.
When CIT Consumer Finance purchases an Institutional Bulk Portfolio, the
origination, underwriting, valuation and documentation standards are those of
the originating lender. The description of CIT Consumer Finance's origination,
underwriting and valuation practices set forth herein may not apply to a
transaction from an Institutional Bulk Portfolio. Each Institutional Bulk
Portfolio is different and the loans in its pool have different characteristics.
When CIT Consumer Finance reviews an Institutional Bulk Portfolio, it may find
certain risks inherent in the portfolio which are different from the risks which
CIT Consumer Finance accepts for direct originations. In purchasing an
Institutional Bulk Portfolio, CIT Consumer Finance may adjust its offering price
or require representations and warranties from the seller to cover any such
risks in origination, underwriting, valuation or documentation for loans in the
portfolio.
Underwriting Policies and Procedures
Overview
The following is a brief description of certain of the underwriting
policies and procedures used by CIT Consumer Finance to underwrite Home Equity
Loans. Underwriting standards are applied by a lender to evaluate the borrower's
credit standing and repayment ability, and the value and adequacy of the
mortgaged property as collateral for the Home Equity Loan.
CIT Consumer Finance uses a combination of credit scoring and judgmental
credit analysis in making its underwriting decisions. As part of its
underwriting process, CIT Consumer Finance will adjust the interest rate it
charges on each Home Equity Loan to reflect CIT Consumer Finance's evaluation of
the relative risk associated with a particular loan applicant. This practice is
known as "risk-based" pricing.
Initially, CIT Consumer Finance's credit criteria focused on high quality
loans with substantial equity in the collateral. These loans generally had
shorter terms and were mostly second mortgages. In 1994, CIT Consumer Finance
introduced risk-based pricing and changed its credit criteria to include certain
specialized loan programs such as high loan to value, no income verification and
purchase money loan programs. Under these specialized programs, underwriters can
approve applicants with certain positive attributes (such as a high credit
score, good credit bureau history, or characteristics of stability) with low
equity in the property, without income verification, or if the purpose of the
loan is to purchase real estate. These factors might have disqualified the
applicant under CIT Consumer Finance's pre-1994 loan programs. CIT Consumer
Finance believes that the positive attributes of these applicants overcome the
other less favorable indicators that may be present.
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In 1995, CIT Consumer Finance added loan programs accommodating applicants
with a record of more serious credit problems. Under the terms of these
programs, the underwriter places greater emphasis on the applicant's equity in a
home as well as other positive factors which are intended to compensate for the
previous blemished credit record.
CIT Consumer Finance may in the future change the underwriting policies and
procedures described herein.
Description of Underwriting Process
CIT Consumer Finance's underwriting process occurs at the local office,
regional office, and the home office. Generally, loan applications for direct,
broker, and correspondent business are input into an automated application
processing system which allows CIT Consumer Finance to track its underwriting
systematically and to achieve more uniform underwriting decisions. The system
displays both an internal proprietary credit score and in some cases the credit
bureau score ("FICO"). The internal credit score which CIT Consumer Finance
utilizes is a proprietary model that was purchased from Fair, Isaac Company. CIT
Consumer Finance's internal score is calculated by evaluating the
characteristics of each individual loan application. The characteristics
include: (1) occupancy status; (2) length of time at the residence; (3) length
of time at the present employer; (4) debt to income ratio; (5) liquid assets;
(6) credit bureau information and (7) loan-to-value ratio.
The underwriter evaluates the application and loan package based upon both
the applicable credit scores and other characteristics of the application. The
underwriter may approve or deny the application even if the credit score does
not indicate that approval or denial is warranted if, in the opinion of the
underwriter, other factors exist which would support an approval or denial of
the application. The extent of an underwriter's credit authority will be based
in part on certain minimum internal credit scores and the FICO score.
The Chief Credit Officer of CIT Consumer Finance assigns credit authority
to individual underwriters based upon their experience and understanding of CIT
Consumer Finance's underwriting policies and procedures. There is a hierarchy of
credit authority in the organization beginning at the office level, progressing
to the regional office and then to headquarters. If an underwriter believes that
an approval is warranted but the underwriter does not have the authority to
issue a loan approval, the underwriter recommends the loan application to the
next higher credit authority. This more senior underwriter may have the
appropriate level of authority to approve the loan. This process insures that an
underwriter with the appropriate level of experience is reviewing the loan
application. CIT Consumer Finance's Credit Department management monitors the
performance of its underwriters.
CIT Consumer Finance has produced and consistently updates a written
policies and procedures manual detailing the loan underwriting process and
procedures as well as the loan programs.
Generally, loan applications are subject to a credit investigation. A
prospective borrower applying for a home equity loan directly from CIT Consumer
Finance is required to fill out or to submit information to complete an
application. The application is designed to provide to the underwriting officer
pertinent credit information with respect to the applicant's liabilities,
income, credit history, employment history and personal information. In
addition, with respect to each purchase money mortgage, each applicant may be
required to have adequate cash to pay the down payment and closing costs.
Credit reports, whether or not received as part of the original loan
application, are generally obtained and reviewed for all lines of business. For
direct originations, correspondent lending and broker business, CIT Consumer
Finance requires a credit report on each applicant from a credit reporting
company. The credit report typically contains information relating to such
matters as credit history with local and
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national merchants and lenders, installment debt payments and any record of
defaults, bankruptcy, repossession, suits or judgments. All adverse information
obtained relative to legal actions, payment records and character is required to
be satisfactorily explained and acceptable to the underwriter. The applicant may
be required to provide a letter explaining all late payments on mortgage and
consumer (i.e., non-mortgage) debt noted on the credit report.
CIT Consumer Finance generally obtains other evidence of employment to
verify information provided by the borrower. CIT Consumer Finance sometimes
obtains a written verification from the borrower's employer. This verification
usually reports the length of employment with that organization, the borrower's
current salary and whether it is expected that the borrower will continue such
employment in the future. Instead of the written verification from the
borrower's employer, CIT Consumer Finance may instead obtain from the applicant
recent tax returns or other tax forms (e.g., W-2 forms) or current pay stubs or
may telephone the applicant's employer to verify an applicant's employment
status. If the employer will not verify employment history over the telephone,
CIT Consumer Finance may rely solely on the other information provided by the
applicant. If a prospective borrower is self-employed, the borrower may be
required to submit copies of the two most recent signed tax returns. The
borrower may also be required to authorize verification of deposits at financial
institutions where the borrower has demand or savings accounts.
As part of the loan approval, the underwriter will assign a credit risk
rating to the proposed loan. The underwriter may also add written conditions
required in order to fund the loan.
Correspondent Business Underwriting
For correspondent business, the loan package or application is reviewed,
the information input into an automated application processing system, a credit
report obtained, and the property appraisal reviewed by a collateral risk
manager. After this process is complete, the underwriter will review the loan
application and other materials. If the underwriter approves the loan, the
underwriter will do so based upon the criteria applicable to the program under
which the loan is approved. In the loan approval, the underwriter will add
written conditions required in order to fund the loan. CIT Consumer Finance will
purchase the loan only if the borrower and correspondent meet these written
conditions.
Loans purchased from a correspondent on a bulk basis are reviewed in some
cases at the correspondent's office. CIT Consumer Finance's underwriter will
approve the loan package based on the information in the file and subject to the
confirmation of this information. When CIT Consumer Finance receives the loan
documentation from the correspondent for funding, CIT Consumer Finance generally
obtains a credit report, verifies employment and determines that all other
conditions to funding have been met.
Institutional Bulk Portfolio Underwriting
In the case of an Institutional Bulk Portfolio, CIT Consumer Finance may
underwrite the entire portfolio by taking a representative statistical sample of
loans from the portfolio to review to determine if these loans would, at the
time of their origination, have met the underwriting criteria of CIT Consumer
Finance. Based upon the sampling, the senior underwriter may approve the
purchase of the entire portfolio without underwriting each loan in the pool.
Since CIT Consumer Finance does not actually review the documents in each loan
file, it cannot determine if all loan files have the same characteristics as the
sample. Similarly, CIT Consumer Finance cannot determine if all its underwriting
criteria have been met for each loan in the Institutional Bulk Portfolio since
it has not reviewed the files on every loan. If, during the credit review of an
Institutional Bulk Portfolio, CIT Consumer Finance determines that the loans do
not conform to its underwriting standards, CIT Consumer Finance may purchase the
Institutional Bulk Portfolio at a price which CIT Consumer Finance believes will
reflect the increased risk in the portfolio.
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Valuation Underwriting - General
In determining the adequacy of the mortgaged property as collateral,
Combined Loan-to-Value Ratio guidelines are established depending on the type of
loan. Except as otherwise set forth in the related Prospectus Supplement, the
maximum Combined Loan-to-Value Ratio is determined by the loan program and
credit risk rating. Property values for properties appraised at over $400,000
(or $500,000 in California, New Jersey, Connecticut and the New York
metropolitan area) are adjusted downward, generally by 20% of the appraised
amount in excess of $400,000 (or $500,000 in California, New Jersey, Connecticut
and the New York metropolitan area). The Combined Loan-to-Value Ratio is
generally lower for self-employed individuals, and is reduced in respect of
properties other than single family detached owner occupied properties.
Generally, CIT Consumer Finance confirms the value of the property to be
mortgaged by appraisals performed by independent appraisers or other valuation
methods.
Valuation Methods And Standards By Different Lines Of Business
For loans originated by CIT Consumer Finance including loans referred by
third party brokers, appraisals may be obtained from outside service companies
approved by CIT Consumer Finance. Standards for this approval may vary by line
of business. Such appraisals are based upon an appraiser's inspection of the
subject property and verification that such property is in acceptable condition.
Following each appraisal, the appraiser prepares a report which includes a
market data analysis based on recent sales of comparable homes in the area and,
when deemed appropriate, a replacement cost analysis based on the current cost
of constructing a similar home. All appraisals are required to conform to FNMA
or FHLMC appraisal standards then in effect. Every independent appraisal is
reviewed by a CIT Consumer Finance underwriter before the loan is funded. CIT
Consumer Finance's collateral risk managers also perform desktop reviews on
selected appraisals. If CIT Consumer Finance determines that these valuations
are inaccurate, it may reevaluate the appraiser or in some cases require a
recourse party to repurchase the transaction.
CIT Consumer Finance requires a full appraisal for certain transactions
based upon its underwriting guidelines which take into account the loan amount,
the loan to value ratio and the type of property. Based upon the underwriting
guidelines, CIT Consumer Finance may not require a full appraisal for a loan.
Instead, CIT Consumer Finance may accept a "drive-by" valuation, which is made
by an appraiser who does not inspect the interior of the building. Drive-by
valuations involve a visual observation of the exterior characteristics and
condition of the property and the neighborhood. Since the appraiser has not
inspected the interior dimensions, improvements and conditions of the property,
the drive-by method produces only a general approximation of value for the
particular property. If there is an appraisal which was completed within six
months of the loan application, in certain cases CIT Consumer Finance may rely
on the prior appraisal.
Application packages received from correspondents for pre-approval will
have the property appraisal reviewed by a CIT Consumer Finance collateral risk
manager prior to funding. Each appraisal for correspondent loans purchased in
bulk from correspondents is reviewed by a CIT Consumer Finance collateral risk
manager after purchasing the loan. Loans originated and closed by third party
correspondents and subsequently sold to CIT Consumer Finance also include a
collateral evaluation by CIT Consumer Finance. The appraisals of these mortgaged
properties are reviewed by CIT Consumer Finance's collateral risk managers.
After funding the correspondent loan, each property appraisal is reviewed by a
collateral risk manager and if there is any variance outside of the tolerance
shown in the correspondent agreement, the loan may be presented to the
correspondent for repurchase.
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CIT Consumer Finance will review the accuracy of appraised values of all or
a portion of the mortgaged properties securing the loans in an Institutional
Bulk Portfolio. This verification may include obtaining new full or drive-by
appraisals or relying on an external vendor's automated appraised value
database. In addition, CIT Consumer Finance's collateral risk managers will
generally conduct a desktop review of the appraisals from the statistical
sampling of loan files selected for due diligence review.
Underwriting - Other Issues
CIT Consumer Finance has several procedures which it uses to verify the
applicant's outstanding balance and payment history on any senior mortgage,
including a telephone call to the senior mortgage lender. If the senior mortgage
lender does not verify this information by telephone, CIT Consumer Finance may
rely upon information provided by the applicant, such as a recent statement from
the senior lender and evidence of payment, such as canceled checks, or upon
information provided by national credit bureaus.
Once all applicable employment, credit and property information is
received, CIT Consumer Finance makes a determination as to whether the
prospective borrower has sufficient monthly income available to meet the
borrower's (i) monthly obligations on the proposed mortgage and any other
mortgage debt on the mortgaged property and other expenses related to the
mortgaged property (such as property taxes and hazard insurance), (ii) monthly
housing expenses and other financial obligations and (iii) monthly living
expenses. Specialized underwriting programs described below may also apply to
prospective borrowers.
Currently, CIT Consumer Finance generally accepts debt service ratios with
respect to fixed rate mortgage loans and adjustable rate mortgage loans of up to
45% of the proposed borrower's estimated monthly gross income, generally based
upon historically consistent income over a two year period. For adjustable rate
mortgage loans, CIT Consumer Finance computes the borrower's monthly obligation
on the proposed mortgage loan using the initial mortgage amount and the maximum
mortgage rate permitted after one year. CIT Consumer Finance makes exceptions to
the underwriting criteria described above. For example, for certain types of
loans CIT Consumer Finance may approve debt service ratios up to 55% with lower
maximum Combined Loan-to-Value Ratios.
CIT Consumer Finance also offers different loan programs with different
underwriting standards, particularly with respect to the level of loan
documentation and the mortgagor's income and credit history, in appropriate
cases where factors such as low Combined Loan-to-Value Ratios or other favorable
credit factors exist.
Certain of the types of loans in CIT Consumer Finance's portfolio have been
originated under new programs and may involve additional credit uncertainties
not present in traditional types of loans. For example, certain of the mortgage
loans may provide for escalating or variable payments by the mortgagor. CIT
Consumer Finance may underwrite such a loan on the basis of a judgment that the
mortgagor can make the initial monthly payments. In some instances, however, a
mortgagor may not have sufficient income to continue to make the required loan
payments as such payments increase. CIT Consumer Finance may also underwrite
such a loan in reliance on Combined Loan-to-Value Ratios or other favorable
credit factors.
CIT Consumer Finance will not purchase or close a Home Equity Loan prior to
receiving evidence that the property securing the loan is insured against
casualty loss. CIT Consumer Finance requires evidence of fire and extended
coverage casualty insurance on the home in an amount at least equal to the
principal balance of the related mortgage loan plus, in the case of a mortgage
loan secured by a subordinate priority lien on the mortgaged property, the
amount of each mortgage secured by senior priority liens, or, if required by
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law, the replacement cost of the property if such replacement cost is less than
the mortgages. In addition, at the closing, the borrower is required to sign a
letter addressed to his insurance carrier naming CIT Consumer Finance as a loss
payee under the insurance policy, which CIT Consumer Finance will thereafter
mail to the insurer. Accordingly, CIT Consumer Finance normally will not be
named as a loss payee with respect to the property securing the Home Equity Loan
at the time the loan is made or purchased and insurance proceeds might not be
available to cover any loss to CIT Consumer Finance.
After closing, CIT Consumer Finance monitors the continued existence of
casualty insurance on the mortgaged properties. However, CIT Consumer Finance
does not generally "force place" casualty insurance coverage if CIT Consumer
Finance discovers that casualty insurance coverage has lapsed. Instead, CIT
Consumer Finance requires its borrowers to reinstate any lapsed insurance as
required by the terms of the mortgage documentation.
CIT Consumer Finance requires title insurance on all of its mortgage loans
secured by liens on real property where the loan amount is over $100,000, if the
borrower is a trust, if there is a transfer of title, if closing is conducted
pursuant to a power of attorney, if the home was not subject to an existing
mortgage or, if the first lien holder is a not an institutional lender. In cases
where CIT Consumer Finance does not require title insurance, it instead obtains
a last owner title search which is ordered to verify that the borrower is the
last owner of record of the mortgaged property.
The actual maximum amount that it will lend is determined by an evaluation
of the applicant's ability to repay the loan, the value of the applicant's
equity in the real estate, and the ratio of such equity to the real estate's
appraised value.
Specialized Underwriting Programs
CIT Consumer Finance also originates or purchases mortgage loans pursuant
to alternative sets of underwriting criteria under its No Income Verification
program, No Income Qualify program and Lite Documentation program. Under these
programs, relatively more emphasis is placed on property underwriting than on
credit underwriting and certain credit underwriting documentation concerning
income and employment verification therefore is waived. Mortgage loans
underwritten under these programs are limited to self-employed borrowers with
credit histories that demonstrate an established ability to repay indebtedness
in a timely fashion. Permitted maximum Combined Loan-to-Value Ratios under these
programs, which currently range up to 75%, are more restrictive than under CIT
Consumer Finance's standard underwriting criteria. Mortgage loans underwritten
pursuant to these programs generally must be secured by owner-occupied primary
residences. These programs are designed to facilitate the loan approval process
and thereby improve CIT Consumer Finance's competitive position among other
mortgage loan originators. Under the No Income Verification program, the
customer does not provide income documentation. Under the No Income Qualify
program income documentation is provided by the customer but the documentation
does not support the stated income reported by the prospective borrower to CIT
Consumer Finance. The stated income must appear reasonable and realistic to the
underwriter compared to the customer's assets and credit history. The Lite
Documentation program stresses the verification of the borrower's cash flow by
reviewing bank statements.
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CIT Consumer Finance may modify or eliminate these specialized underwriting
programs from time to time. CIT Consumer Finance may also introduce new,
additional specialized underwriting programs in the future, which may modify the
underwriting guidelines set forth herein.
QUALITY CONTROL
CIT Consumer Finance implements quality control programs in three areas: 1)
lending and documentation standards, 2) re-certification of appraisals, and 3)
re-verification of employment.
CIT Consumer Finance applies the lending and documentation standards
quality control program to its own originations and to purchased loans. The
quality control procedures are designed to assure that a consistent level of
quality applies to all loans in the portfolio, regardless of source. CIT
Consumer Finance may vary quality control procedures based upon the business
source for the loan. CIT Consumer Finance also performs general quality control
review through a central quality control effort. These procedures include a
review of a sample of originated and purchased loans from each of CIT Consumer
Finance's production offices. Every office is audited monthly and loans
originated during prior months are reviewed for compliance with lending and
documentation standards. In addition, loans originated by CIT Consumer Finance
are audited at random on a monthly basis for compliance with lending and
documentation standards.
In order to confirm the validity of appraisals obtained at the time loans
are made, reappraisals are obtained for the property securing some of such
loans. In this manner, CIT Consumer Finance monitors the quality of the original
appraiser and the appraisal process.
In addition, CIT Consumer Finance re-verifies employment of its borrowers.
These re-verifications are conducted monthly on some of the loans in the
portfolio to detect fraud and to confirm the accuracy of the information
provided in the application.
Refinancing Policy
Where CIT Consumer Finance believes that borrowers having existing loans
with it are likely to refinance such loans due to interest rate changes or other
reasons, CIT Consumer Finance actively attempts to retain such borrowers through
solicitations of such borrowers to refinance with CIT Consumer Finance. Such
refinancings may generate fee income for CIT Consumer Finance. CIT Consumer
Finance may refinance Mortgage Loans held by a Trust. Since the solicited
borrowers may refinance their existing loans in any case, CIT Consumer Finance
believes that this practice will be unlikely to affect the prepayment experience
of the Home Equity Loans in a material respect. CIT Consumer Finance also
solicits its borrowers who are in good standing to apply for additional loans
secured by the same property, consistent with its origination standards. As a
result, CIT Consumer Finance may, now or in the future, hold a loan (or may sell
a loan to another trust) which is also secured by a Mortgaged Property securing
a Mortgage Loan held by a Trust.
Servicing and Collections
CIT Consumer Finance, as Master Servicer, will be required under the
related Agreement to service the Mortgage Loans and other Mortgage Assets
underlying a particular Series of Certificates with the same degree of skill and
care that it exercises with respect to all comparable loans and assets that it
services for its own account. In the servicing of its own portfolio, CIT
Consumer Finance currently delegates most of the servicing duties described
below to CITSF, as Sub-Servicer, pursuant to a servicing
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agreement between CIT Consumer Finance and CITSF. Accordingly, references herein
to actions taken by CIT Consumer Finance as Master Servicer refer in most cases
to actions taken by CITSF as Sub-Servicer. CIT Consumer Finance typically
performs the quality control reviews, oversees the recording of the mortgages,
follows through on insurance documentation and maintains the Mortgage Loan
files. CITSF is generally responsible for billing, collecting and foreclosure
procedures. Servicing by CITSF also includes customer service, remittance
handling, and liquidations.
Borrowers are sent monthly statements which specify the payment due. Due
dates for payments occur throughout the calendar month. Generally if payment is
not received within 10 working days after the due date, an initial collection
effort by telephone is made in an attempt to bring the delinquent account
current. CIT Consumer Finance continues to monitor and evaluate the various
stages of delinquency on a continuous basis.
Delinquent accounts are contacted by collection staff by various methods
including, but not limited to, telephone calls and collection letters. When an
account is 30 days past due, the collection supervisor analyzes the account to
determine the appropriate course of action. If a borrower is experiencing
difficulty in making payments on time, CIT Consumer Finance may modify the
payment schedule consistent with CIT Consumer Finance's procedures.
The course of action taken by CIT Consumer Finance is dependent upon a
number of factors including the borrower's payment history, the amount of equity
in the related mortgaged property and the reason for the current inability to
make timely payments.
When a loan is 60 days past due, the related mortgaged property may be
reappraised and the results evaluated by CIT Consumer Finance to determine a
course of action. Foreclosure laws and practices and the rights of the owner in
default vary from state to state, but generally foreclosure procedures may be
initiated if: (i) the loan is 90 days or more delinquent; (ii) a notice of
default on a senior lien is received or (iii) the loan is otherwise in default.
During the foreclosure process, any expenses incurred by CIT Consumer Finance
may be added to the amount owed by the borrower, to the extent permitted by
applicable law. Upon completion of the foreclosure, the property is sold to an
outside bidder, or passes to the mortgagee in which case CIT Consumer Finance
proceeds to liquidate the asset.
CIT Consumer Finance may not foreclose on the property securing a Junior
Lien Loan unless it forecloses subject to the related senior mortgages. In such
cases, CIT Consumer Finance may pay the amount due on the senior mortgages to
the senior mortgagees, if CIT Consumer Finance considers it to be advisable to
do so. In the event that foreclosure proceedings have been instituted on a
senior mortgage prior to the initiation of CIT Consumer Finance's foreclosure
action, CIT Consumer Finance will either satisfy such mortgage at the time of
the foreclosure sale or take other appropriate action. In servicing Junior Lien
Loans in its portfolio, it has been the practice of CIT Consumer Finance to
satisfy each such senior mortgage at or prior to the foreclosure sale only to
the extent that it determines any amount so paid will be recoverable from future
payments and collections on such Junior Lien Loans or otherwise. In servicing
Junior Lien Loans, it is generally the practice of CIT Consumer Finance to
advance funds to keep the senior lien current in the event the mortgagor is in
default thereunder until such time as CIT Consumer Finance satisfies the senior
lien by sale of the mortgaged property, but only to the extent that it
determines such advances will be recoverable from future payments and
collections on that Junior Lien or otherwise. Such practice may not be followed
by CIT Consumer Finance in servicing loans more junior than second Mortgages or
may be modified at any time.
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CIT Consumer Finance's servicing and charge-off policies and collection
practices may change over time in accordance with CIT Consumer Finance's
business judgment, changes in its serviced loan portfolio and applicable laws
and regulations, as well as other items.
Regulations and practices regarding the liquidation of properties (e.g.,
foreclosure) and the rights of the borrower in default vary greatly from state
to state. CIT Consumer Finance will generally initiate a foreclosure only if the
delinquency or other breach will not be cured. If, after determining that
purchasing a property securing a mortgage loan will minimize the loss associated
with such defaulted loan, CIT Consumer Finance may bid at the foreclosure sale
for such property or accept a deed in lieu of foreclosure.
DESCRIPTION OF THE CERTIFICATES
The Home Equity Loan Asset Backed Certificates (the "Certificates") will be
issuable in series (each, a "Series") and each Series of Certificates will be
issued pursuant to an Agreement (see "The Pooling and Servicing AgreementThe
Pooling and Servicing Agreement" herein), dated as of the first day of the month
of issuance of such Series of Certificates or such other date as is specified in
the related Prospectus Supplement (the "Cut-off Date"), among the Depositor, the
Master Servicer, the applicable Sellers and the Trustee for the benefit of the
holders of the Certificates of such Series. The provisions of each Agreement
will vary depending upon the nature of the Certificates to be issued thereunder
and the nature of the related Trust. A form of an Agreement is an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summaries describe certain provisions that may appear in each Agreement. The
Prospectus Supplement for a Series of Certificates will describe any provision
of the Agreement relating to such Series that materially differs from, or is in
addition to, the description thereof contained in this Prospectus. The following
summaries do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the Agreement for each
Series of Certificates and the related Prospectus Supplement. The Depositor will
provide a copy of the Agreement (without exhibits) relating to any Series
without charge upon written request of a holder of record of a Certificate of
such Series addressed to the Depositor at 650 CIT Drive, Livingston, New Jersey
07039.
General
The Certificates of each Series will not represent an interest in or
obligation of the Depositor, CIT Consumer Finance, CITSF, CIT or any of their
respective affiliates, except as set forth herein and in the related Prospectus
Supplement. Neither the certificates nor the underlying mortgage loans will be
insured or guaranteed by the Depositor, CIT Consumer Finance, CITSF, CIT, or any
of their affiliates except as set forth herein and in the related Prospectus
Supplement.
Unless otherwise specified in the Prospectus Supplement, the Certificates
of each Series will be issued in either fully registered or book-entry form in
the authorized denominations specified in the related Prospectus Supplement,
will evidence specified beneficial ownership interests in certain trusts (each,
a "Trust Fund" or "Trust") created pursuant to the related Agreement and will
not be entitled to payments in respect of the assets included in any other Trust
established by the Depositor. The Mortgage Loans will not be insured or
guaranteed by any governmental entity or other person, unless otherwise
specified in the related Prospectus Supplement. Each Trust will consist of, to
the extent provided in the related Agreement, (i) the Mortgage Assets that from
time to time are subject to the related Agreement (exclusive of any amounts
specified in the related Prospectus Supplement (the "Retained Interest")); (ii)
such assets as from time to time are required to be deposited in the related
Certificate Account (as defined herein) or other fund or account which, pursuant
to the related Agreement, constitutes part of a Trust; (iii) properties that
secured Mortgage Loans and that are acquired on behalf of the
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Certificateholders by foreclosure or deed in lieu of foreclosure or comparable
procedure ("REO Property"); (iv) any Primary Mortgage Insurance Policies and any
other insurance policies or other forms of credit enhancement required to be
maintained pursuant to the related Agreement; and (v) such other property
(including amounts on deposit in a Pre-Funding Account) as may be specified in
the related Prospectus Supplement. If specified in the related Prospectus
Supplement, a Trust may also include one or more of the following: reinvestment
income on payments received on the Mortgage Assets, a Reserve Fund, a
Certificate Guaranty Insurance Policy, a Mortgage Pool Insurance Policy, a
Special Hazard Insurance Policy, a Bankruptcy Bond, one or more spread accounts,
cash collateral accounts and/or other accounts, letters of credit, surety bonds,
financial guarantee insurance policies, third party guarantees (including
guarantees by CIT, its affiliates, or an unaffiliated third party, any of which
may be limited in nature), interest rate swaps, caps, floors or other derivative
products, or similar instruments or other agreements.
Each Series of Certificates will be issued in one or more classes. Each
class of Certificates of a Series will evidence beneficial ownership of a
specified percentage (which may be 0%) or portion of future interest payments
and a specified percentage (which may be 0%) or portion of future principal
payments on the Mortgage Assets in the related Trust. A class of Certificates
may be divided into two or more sub-classes, as specified in the related
Prospectus Supplement. A Series of Certificates may include one or more classes
that are senior in right to payment to one or more other classes of Certificates
of such Series (See "Credit Enhancement--Subordination" herein). Certain Series
or classes of Certificates may be covered by insurance policies, surety bonds or
other forms of credit enhancement, in each case as described herein and in the
related Prospectus Supplement. One or more classes of Certificates of a Series
may be entitled to receive distributions of principal, interest or any
combination thereof. Distributions on one or more classes of a Series of
Certificates may be made prior to one or more other classes of Certificates of
such Series, after the occurrence of specified events, in accordance with a
schedule or formula, on the basis of collections from designated portions of the
Mortgage Assets in the related Trust, or on a different basis, or one or more
classes of a Series of Certificates may be required to absorb one or more types
of loses prior to one or more other classes of Certificates of such Series, in
each case as specified in the related Prospectus Supplement. The timing and
amounts of such distributions may vary among classes or over time as specified
in the related Prospectus Supplement.
Definitive Certificates, if issued, will be freely transferable and
exchangeable at the corporate trust office of the Trustee as set forth in the
related Prospectus Supplement or, at the election of the Trustee, at the office
of a certificate registrar appointed by the Trustee. No service charge will be
made for any registration of exchange or transfer of Certificates of any Series,
but the Trustee may require payment of a sum sufficient to cover any related tax
or other governmental charge.
Under current law the purchase and holding by or on behalf of any employee
benefit plan or other retirement arrangement (including individual retirement
accounts and annuities, Keogh plans and collective investment funds in which
such plans, accounts or arrangements are invested) subject to provisions of
ERISA or the Code of a class of Certificates entitled only to a specified
percentage of payments of either interest or principal or a notional amount of
either interest or principal on the related Mortgage Assets or a class of
Certificates entitled to receive payments of interest and principal on the
Mortgage Assets only after payments to other classes or after the occurrence of
certain specified events may result in "prohibited transactions" within the
meaning of ERISA and the Code. See "ERISA Considerations" herein and in the
related Prospectus Supplement. If specified in the related Prospectus
Supplement, transfer of Certificates of such a class will not be registered
unless the transferee (i) represents that it is not, and is not purchasing on
behalf of, any such plan, account or arrangement or (ii) provides an opinion of
counsel satisfactory to the Trustee and the Depositor that the purchase of
Certificates of such a class by or on behalf of such plan, account or
arrangement is permissible under applicable law and will not subject the
Trustee, the Master Servicer or the Depositor to any obligation or liability in
addition to those undertaken in the Agreement.
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As to each Series, an election may be made to treat the related Trust or
designated portions thereof as one or more "real estate mortgage investment
conduits" (each, a "REMIC") as defined in the Code. The related Prospectus
Supplement will specify whether a REMIC election is to be made. Alternatively,
the Agreement for a Series may provide that a REMIC election may be made at the
discretion of the Depositor or the Master Servicer and may be made only if
certain conditions are satisfied. As to any such Series, the terms and
provisions applicable to the making of a REMIC election, as well as any material
federal income tax consequences to Certificateholders not otherwise described
herein, will be set forth in the related Prospectus Supplement. If such an
election is made with respect to a Series, one of the classes will be designated
as evidencing the sole class of "residual interests" in the related REMIC, as
defined in the Code. All other classes of Certificates in such a Series will
constitute "regular interests" in the related REMIC, as defined in the Code. As
to each Series with respect to which a REMIC election is to be made, the Master
Servicer or a holder of the related residual certificate or certificates will be
obligated to take all actions required in order to comply with applicable laws
and regulations and will be obligated to pay any prohibited transaction taxes.
The Master Servicer, unless otherwise specified in the related Prospectus
Supplement, will be entitled to reimbursement for any such payment from any
holder of the related residual certificate or certificates.
Distributions on Certificates
General. In general, the method of determining the amount of distributions
on a particular Series of Certificates will depend on the type of credit
support, if any, that is used with respect to such Series. See "Credit
Enhancement" herein and in the related Prospectus Supplement. The Prospectus
Supplement for each Series of Certificates will describe the method to be used
in determining the amount of distributions on the Certificates of such Series.
Unless otherwise specified in the related Prospectus Supplement,
distributions of principal and interest (or, where applicable, of principal only
or interest only) on the related Certificates will be made by the Trustee,
monthly, quarterly, semi-annually or at such other intervals and on the dates
specified in the Prospectus Supplement (each, a "Distribution Date") out of the
payments received in respect of the assets of the related Trust or other assets
held for the benefit of the Certificateholders as specified in the related
Prospectus Supplement. The amount allocable to payments of principal and
interest on any Distribution Date will be determined as specified in the related
Prospectus Supplement. Distributions will be made to the persons in whose names
the Certificates are registered at the close of business on the dates specified
in the related Prospectus Supplement (each, a "Record Date"). Distributions will
be made by check or money order mailed to the persons entitled thereto at the
address appearing in the register maintained for holders of Certificates (the
"Certificate Register") or, if specified in the related Prospectus Supplement,
in the case of Certificates that are of a certain minimum denomination, upon
written request by the Certificateholder, by wire transfer or by such other
means as are described therein; provided, however, that the final distribution
in retirement of Certificates will be made only upon presentation and surrender
of the Certificates at the office or agency of the Trustee or other person
specified in the notice to Certificateholders of such final distribution.
Distributions allocable to principal of and interest on the Certificates
will be made by the Trustee out of, and only to the extent of, funds in the
related Certificate Account, including any funds transferred from any Reserve
Fund or Pre-Funding Account. (See "The Pooling And Servicing Agreement--Payments
on Mortgage Assets; Deposits to Certificate Account" herein.) As between
Certificates of different classes and as between distributions of principal
(and, if applicable, between distributions of
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Principal Prepayments (as defined herein) and scheduled payments of principal)
and interest, distributions made on any Distribution Date will be allocated and
applied as specified in the related Prospectus Supplement. All distributions to
any class of Certificates will be made in the priority, manner and amount
specified in the related Prospectus Supplement.
Available Funds. All distributions on the Certificates of each Series on
each Distribution Date will be made from the Available Funds, in accordance with
the terms described in the related Prospectus Supplement and specified in the
related Agreement. Unless otherwise provided in the related Prospectus
Supplement, "Available Funds" for each Distribution Date will generally equal
the amount on deposit in the related Certificate Account (including any
prepayment charges, assumption fees and late payment charges and other
administrative fees and charges, to the extent collected from Mortgagors), and,
if applicable, the amount on deposit in the related Pre-Funding Account on such
Distribution Date or on the last day of the Due Period (net of related fees and
expenses payable by the related Trust) (see "The Pooling And Servicing
Agreement--Payments on Mortgage Assets; Deposits to Certificate Account" and
"The Pooling and Servicing Agreement -- Servicing and Other Compensation and
Payment of Expenses") other than amounts to be held therein for distribution on
future Distribution Dates.
Unless otherwise specified in the related Prospectus Supplement, the
"Determination Date" is the third Business Day prior to each Distribution Date.
On each Determination Date, the Master Servicer will determine the amounts of
principal and interest which will be passed through to Certificateholders on the
related Distribution Date. The "Due Period" for any Series is the period
specified in the related Prospectus Supplement. The "Due Period" is the period
during which principal, interest and other amounts will be collected on the
Mortgage Loans for application to the payment of principal and interest to the
Certificateholders and the payment of fees on such Distribution Date. A
"Business Day" is any day other than a Saturday, Sunday or any day on which
banking institutions or trust companies in the states of New York, Oklahoma and
such other states (if any) specified in the related Prospectus Supplement are
authorized by law, regulation or executive order to be closed.
Distributions of Interest. Unless otherwise specified in the related
Prospectus Supplement, interest will accrue on the aggregate Certificate Balance
(or, in the case of Certificates entitled only to distributions allocable to
interest, the aggregate notional amount) of each class of Certificates (the
"Class Certificate Balance") entitled to interest at the "Pass-Through Rate"
(which may be a Fixed Rate or an Adjustable Rate as specified in such Prospectus
Supplement) from the date and for the periods specified in such Prospectus
Supplement. To the extent funds are available therefor, interest accrued during
each such specified period on each class of Certificates entitled to interest
(other than a class of Certificates that provides for interest that accrues, but
is not currently payable, referred to hereafter as "Accrual Certificates") will
be distributable on the Distribution Dates specified in the related Prospectus
Supplement until the Class Certificate Balance of such class has been
distributed in full or, in the case of Certificates entitled only to
distributions allocable to interest, until the aggregate notional amount of such
Certificates is reduced to zero or for the period of time designated in the
related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the original Certificate Balance of each Certificate will
equal the aggregate distributions allocable to principal to which such
Certificate is entitled. Unless otherwise specified in the related Prospectus
Supplement, distributions allocable to interest on each Certificate which is not
entitled to distributions allocable to principal will be calculated based on the
notional amount of such Certificate. The notional amount of a Certificate will
not evidence an interest in or entitlement to distributions allocable to
principal but will be used solely for convenience in expressing the calculation
of interest and for certain other purposes.
If specified in the related Prospectus Supplement, one or more class or
classes of Certificates may provide that any interest that has accrued but is
not paid on a given Distribution Date will be added to the Class Certificate
Balance of such class of Certificates on that Distribution Date (such
Certificates,
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"Accrual Certificates"). Unless otherwise specified in the related Prospectus
Supplement, distributions of interest on each class of Accrual Certificates will
commence only after the occurrence of the events specified in such Prospectus
Supplement and, prior to such time, the beneficial ownership interest of such
class of Accrual Certificates in the Trust, as reflected in the Class
Certificate Balance of such class of Accrual Certificates, will increase on each
Distribution Date by the amount of interest that accrued on such class of
Accrual Certificates during the preceding interest accrual period but that was
not required to be distributed to such class on such Distribution Date. Any such
class of Accrual Certificates will thereafter accrue interest on its outstanding
Class Certificate Balance as so adjusted.
Distributions of Principal. Unless otherwise specified in the related
Prospectus Supplement, the aggregate original balance of the Certificates (the
"Certificate Balance") will equal the aggregate distributions allocable to
principal that such Certificates will be entitled to receive. Unless otherwise
specified in the related Prospectus Supplement, the Class Certificate Balance of
any class of Certificates entitled to distributions of principal will be the
original Class Certificate Balance of such class of Certificates specified in
such Prospectus Supplement, reduced by all distributions allocable to principal
and (i) in the case of Accrual Certificates, unless otherwise specified in the
related Prospectus Supplement, increased by all interest accrued but not then
distributable on such Accrual Certificates, and (ii) in the case of Adjustable
Rate Certificates, unless otherwise specified in the related Prospectus
Supplement, subject to the effect of negative amortization. The related
Prospectus Supplement will specify the method by which the amount of principal
to be distributed on the Certificates on each Distribution Date will be
calculated and the manner in which such amount will be allocated among the
classes of Certificates entitled to distributions of principal.
If so provided in the related Prospectus Supplement, one or more classes of
senior Certificates (the "Senior Certificates") will be entitled to receive all
or a disproportionate percentage of the payments of principal that are received
from Mortgagors in advance of their scheduled due dates and are not accompanied
by amounts representing scheduled interest due after the month of such payments
("Principal Prepayments") in the percentages and under the circumstances or for
the periods specified in such Prospectus Supplement. Any such allocation of
Principal Prepayments to such class or classes of Senior Certificates will have
the effect of accelerating the amortization of such Senior Certificates while
increasing the interests evidenced by the subordinated Certificates (the
"Subordinated Certificates") in the Trust. Increasing the interests of the
Subordinated Certificates relative to that of the Senior Certificates is
intended to preserve the availability of the subordination provided by the
Subordinated Certificates. See "Credit Enhancement--Subordination" herein and
"Credit Enhancement--Subordination of the Subordinated Certificates" in the
related Prospectus Supplement.
Unscheduled Distributions. If specified in the related Prospectus
Supplement, the Certificates will be subject to receipt of distributions before
the next scheduled Distribution Date under the circumstances and in the manner
described below and in such Prospectus Supplement. If applicable, the Trustee
will be required to make such unscheduled distributions on the day and in the
amount specified in the related Prospectus Supplement if, due to substantial
payments of principal (including Principal Prepayments) on the Mortgage Assets,
the Trustee or the Master Servicer determines that the funds available or
anticipated to be available from the Certificate Account and, if applicable, any
Pre-Funding Account or Reserve Fund, may be insufficient to make required
distributions on the Certificates on such Distribution Date. Unless otherwise
specified in the related Prospectus Supplement, the amount of any such
unscheduled distribution that is allocable to principal will not exceed the
amount that would otherwise have been required to be distributed as principal on
the Certificates on the next Distribution Date. Unless otherwise specified in
the related Prospectus Supplement, all unscheduled distributions will include
interest at the applicable Pass-Through Rate (if any) on the amount of the
unscheduled distribution allocable to principal for the period and to the date
specified in such Prospectus Supplement.
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Unless otherwise specified in the related Prospectus Supplement, all
distributions allocable to principal in any unscheduled distribution will be
made in the same priority and manner as distributions of principal on the
Certificates would have been made on the next Distribution Date. With respect to
Certificates of the same class, unscheduled distributions of principal will be
made in the priority and manner specified in the related Prospectus Supplement.
The Trustee will give notice to Certificateholders of any unscheduled
distribution prior to the date of such distribution.
Example of Distributions
The following is an example of the flow of funds as it would relate to a
hypothetical Series of Certificates issued, and with a Cut-off Date occurring in
July, 1997 (all days are assumed to be Business Days):
July 1 - July 30........... (1) Due Period. Master Servicer
receives scheduled payments on the
Mortgage Assets and any Principal
Prepayments made by Mortgagors and
applicable interest thereon.
July 30.................... (2) Record Date.
August 12.................. (3) Determination Date. Distribution
amount determined.
August 14.................. (4) Deposit Date.
August 15.................. (5) Distribution Date.
Succeeding months follow the pattern above, subject to adjustment if the
Distribution Date is not a Business Day as specified in the related Prospectus
Supplement. The flow of funds with respect to any Series of Certificates may
differ from the above, and the flow of funds for each Series of Certificates
will be specified in the related Prospectus Supplement. Reference should be made
to the related Prospectus Supplement to determine the flow of funds for any
particular Series of Certificates. In addition, there are other sources and uses
of funds with respect to each Series of Certificates, as outlined herein and in
the related Prospectus Supplement, that are not specified in the above example
(see "The Pooling and Servicing Agreement" and "Credit Enhancement" herein).
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(1) Scheduled payments and Principal Prepayments may be received at any time
during this period and will be deposited on the Deposit Date in the
Certificate Account by the Master Servicer for distribution to
Certificateholders. When a Mortgage Loan is prepaid in full, interest on
the amount prepaid is collected from the Mortgagor only to the date of
payment.
(2) Distributions on the Distribution Date will be made to Certificateholders
of record at the close of business on the last business day of the month
immediately preceding the month of distribution.
(3) On August 12 (the third Business Day prior to the Distribution Date), the
Master Servicer will determine the amounts of principal and interest which
will be passed through on the Distribution Date.
(4) On August 14 (the Business Day immediately preceding the Distribution
Date), the Master Servicer may advance funds to cover any delinquencies, in
which event the distribution to Certificateholders on the Distribution Date
will include the full amounts of principal and interest due during the
period in respect of the delinquencies. The Master Servicer will also
calculate any changes in the relative interests evidenced by the Senior
Certificates and the Subordinate Certificates in the Trust Fund, if
applicable.
(5) On August 15, the amounts determined on August 12 will be distributed to
Certificateholders of record on the Record Date.
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Advances and Compensating Interest
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will be required to remit to the Trustee no later than the day prior to
each Distribution Date and in no case earlier than the seventh Business Day of
such month, the amount (an "Advance"), if any by which 30 days' interest at the
Mortgage Rate (or, if specified in the related Prospectus Supplement, at the
Adjusted Mortgage Loan Remittance Rate) on the then outstanding principal
balance of a Mortgage Loan exceeds the amount received by the Master Servicer in
respect of interest on the Mortgage Loan as of the related Record Date. If
provided in the related Prospectus Supplement, the obligation of the Master
Servicer to make such Advances will be limited to amounts corresponding to
delinquent interest payments on a Mortgage Loan and/or will be limited to
amounts that the Master Servicer believes will be recoverable out of late
payments by Mortgagors on a Mortgage Loan, Liquidation Proceeds, Insurance
Proceeds (each, as defined herein) or otherwise. If and to the extent specified
in the related Prospectus Supplement, the amount of the Advance may be
determined based on an "Adjusted Mortgage Loan Remittance Rate" (determined as
set forth in the Prospectus Supplement), and may include delinquent principal
payments and other amounts.
Unless otherwise specified in the related Prospectus Supplement, in making
Advances, the Master Servicer will endeavor to maintain a regular flow of
scheduled interest payments to Certificateholders, rather than to guarantee or
insure against losses. Unless otherwise specified in the related Prospectus
Supplement, if Advances are made by the Master Servicer from cash being held for
future distribution to Certificateholders, the Master Servicer will replace such
funds on or before any future Distribution Date to the extent that funds in the
applicable Certificate Account on such Distribution Date would be less than the
amount required to be available for distributions to Certificateholders on such
date. Unless otherwise specified in the related Prospectus Supplement, any
Advances by the Master Servicer will be reimbursable to the Master Servicer out
of recoveries on the specific Mortgage Assets with respect to which such
Advances were made (e.g., late payments made by the related Mortgagors, any
related Insurance Proceeds, Liquidation Proceeds, Released Mortgaged Property
Proceeds (as defined herein) or proceeds of any Mortgage Loan repurchased by the
Depositor, a Sub-Servicer or a Seller pursuant to the related Agreement) and any
other amount that would otherwise be distributed to the holder or holders of
Certificates representing the residual interest of a Trust for which a REMIC
election has been made. Unless otherwise specified in the related Prospectus
Supplement, Advances by the Master Servicer also will be reimbursable to the
Master Servicer from cash otherwise distributable to Certificateholders
(including Senior Certificateholders) to the extent that the Master Servicer
determines that any such Advances previously made are not ultimately recoverable
as described in the immediately preceding sentence.
If specified in the Prospectus Supplement, the Master Servicer also will be
obligated to make Advances, to the extent recoverable out of Insurance Proceeds,
Liquidation Proceeds or otherwise, in respect of certain taxes and insurance
premiums not paid by Mortgagors on a timely basis. Funds so advanced are
reimbursable to the Master Servicer to the extent permitted by the related
Agreement.
If specified in the related Prospectus Supplement, the obligations of the
Master Servicer to make Advances may be supported by a cash advance reserve
fund, a surety bond or other arrangement, in each case as described in such
Prospectus Supplement.
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Unless otherwise specified in the related Prospectus Supplement, not later
than the close of business on the Business Day prior to each Determination Date,
with respect to each Mortgage Loan as to which the Master Servicer receives
during the related Due Period a principal payment in full in advance of the
final scheduled due date (a "Principal Prepayment"), the Master Servicer will be
required to remit to the Trustee for deposit in the Certificate Account from
amounts otherwise payable to the Master Servicer as servicing compensation, an
amount ("Compensating Interest") equal to the excess of (a) 30 days' interest on
the principal balance of each such Mortgage Loan as of the beginning of the
related Due Period at the applicable Mortgage Rate (or, if specified in the
related Prospectus Supplement, at the Adjusted Mortgage Loan Remittance Rate),
over (b) the amount of interest actually received on the related Mortgage Loan
for such Due Period.
REPORTS TO CERTIFICATEHOLDERS
Prior to or concurrently with each distribution on a Distribution Date and
except as otherwise set forth in the related Prospectus Supplement, the Master
Servicer or the Trustee will furnish to each Certificateholder of record of the
related Series a statement setting forth, to the extent applicable to such
Series of Certificates, among other things:
(i) the amount available in the Certificate Account;
(ii) the amount of such distribution allocable to principal for each
class of the related Series, separately identifying the aggregate amount of
any Principal Prepayments and, if so specified in the related Prospectus
Supplement, prepayment penalties included therein;
(iii) the amount of such distribution allocable to interest for each
class of the related Series;
(iv) the amount of any Advance;
(v) the aggregate amount (a) otherwise allocable to the Subordinated
Certificateholders on such Distribution Date and (b) withdrawn from the
Reserve Fund, if any, that is included in the amounts distributed to the
Certificateholders;
(vi) the aggregate amount, if any, withdrawn from letters of credit,
pool policies or other forms of credit enhancement that is included in
amounts distributed to Certificateholders;
(vii) the Class Certificate Balance and corresponding pool factor or
notional amount of each class of the related Series after giving effect to
the distribution of principal on such Distribution Date;
(viii) the percentage of principal payments on the Mortgage Assets
(excluding prepayments), if any, which each such class will be entitled to
receive on the following Distribution Date;
(ix) the percentage of Principal Prepayments with respect to the
Mortgage Assets, if any, which each such class will be entitled to receive
on the following Distribution Date;
(x) the related amount of the servicing compensation retained or
withdrawn from the Certificate Account by the Master Servicer, and the
amount of additional servicing compensation received by the Master Servicer
attributable to penalties, fees, excess Liquidation Proceeds and other
similar charges and items;
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(xi) the number and aggregate principal balances of Mortgage Loans:
(A) delinquent (exclusive of Mortgage Loans in foreclosure) (1) 30 to 59
days, (2) 60 to 89 days and (3) 90 or more days, and (B) in foreclosure as
of the close of business on the last day of the calendar month preceding
such Distribution Date;
(xii) the number and aggregate principal balances of Mortgage Loans
acquired (and not subsequently sold) through foreclosure or grant of a deed
in lieu of foreclosure as of the end of the related Due Period;
(xiii) the number and aggregate principal balances of Mortgage Loans
acquired through foreclosure or grant of a deed in lieu of foreclosure
during the related Due Period;
(xiv) the number and aggregate principal balance of Mortgage Loans
which became Liquidated Mortgages and the amount of Liquidation Proceeds
received during the related Due Period;
(xv) the cumulative number and aggregate principal balance of Mortgage
Loans which became Liquidated Mortgages and the cumulative amount of
Liquidation Proceeds;
(xvi) if applicable, the amount remaining in the Reserve Fund at the
close of business on the Distribution Date;
(xvii) the Pass-Through Rate and the applicable Index for Adjustable
Rate classes expected to be applicable on the next Distribution Date to
such class;
(xviii) any amounts remaining under financial guaranty insurance
policies, letters of credit, guarantees, pool policies or other forms of
credit enhancement;
(xix) the aggregate amount on deposit in the Pre-Funding Account, if
any; and
(xx) the number and aggregate principal amount of additional Mortgage
Assets purchased by the Trust, if any.
Where applicable, any amount set forth above may be expressed as a dollar
amount per single Certificate of the relevant class having the Percentage
Interest (as defined herein) specified in the related Prospectus Supplement. The
report to Certificateholders for any Series of Certificates may include
additional or other information of a similar nature to that specified above.
In addition, within a reasonable period of time after the end of each
calendar year, the Master Servicer or the Trustee will mail to each
Certificateholder of record at any time during such calendar year a report (a)
as to the aggregate of amounts reported pursuant to clause (i) and (ii) above
for such calendar year or, in the event such person was a Certificateholder of
record during a portion of such calendar year, for the applicable portion of
such year, and (b) such other customary information as may be deemed necessary
or desirable for Certificateholders to prepare their tax returns.
Book-Entry Certificates
If specified in the related Prospectus Supplement, one or more classes of
the Certificates of any Series (each, a class of "Book-Entry Certificates") may
be initially issued through the book-entry facilities of DTC in the United
States or Cedel or Euroclear in Europe. Each class of Book-Entry Certificates of
a Series will be issued in one or more certificates which equal the aggregate
initial Class
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Certificate Balance of each such class and which will be registered in the name
of Cede as nominee of DTC. Cedel and Euroclear will hold omnibus positions with
respect to the Certificates on behalf of Cedel Participants and Euroclear
Participants (each, as defined herein), respectively, through customers'
securities accounts in Cedel's and Euroclear's name on the books of their
respective depositories (each, a "Depository") which in turn will hold such
positions in customers' securities accounts in the Depositories' names on the
books of 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 New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC accepts securities for deposit from its
participating organizations ("Participants") and facilitates the clearance and
settlement of securities transactions between Participants in such securities
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations. Indirect access to the DTC system
is also 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").
Beneficial interests in the Book-Entry Certificates of a Series will be
held indirectly by investors through the book-entry facilities of DTC, as
described herein. Investors may hold such beneficial interests in the Book-Entry
Certificates in minimum denominations representing an original principal amount
of $1,000 and integral multiples in excess thereof. Accordingly, DTC or its
nominee is expected to be the holder of record of the Book-Entry Certificates.
Except as described below, no person acquiring a Book-Entry Certificate (each, a
"beneficial owner") will be entitled to receive a physical certificate
representing such Certificate (a "Definitive Certificate").
The beneficial owner's ownership of a Book-Entry Certificate 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 such purpose. In turn, the Financial
Intermediary's ownership of such Book-Entry Certificate will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will be recorded on the records of DTC, if the
beneficial owner's Financial Intermediary is not a Participant). Therefore, the
beneficial owner must rely on the foregoing procedures to evidence its
beneficial ownership of a Book-Entry Certificate. Beneficial ownership of a
Book-Entry Certificate may only be transferred by compliance with the procedures
of such Financial Intermediaries and Participants.
In accordance with its normal procedures, DTC is expected to record the
positions held by each Participant in the Book-Entry Certificates, whether held
for its own account or as a nominee for another person. In general, beneficial
ownership of Book-Entry Certificates will be subject to the rules, regulations
and procedures governing DTC and Participants as in effect from time to time.
Distributions on the Book-Entry Certificates will be made on each
Distribution Date by the Trustee to DTC. DTC will be responsible for crediting
the amount of such payments to the accounts of the applicable Participants in
accordance with DTC's normal procedures. Each Participant will be responsible
for disbursing such payments to the beneficial owners of the Book-Entry
Certificates that it represents and to each Financial Intermediary for which it
acts as agent. Each such Financial Intermediary will be responsible for
disbursing funds to the beneficial owners of the Book-Entry Certificates that it
represents.
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Under a book-entry format, beneficial owners of the Book-Entry Certificates
may experience delay in their receipt of payments, since payments will be
forwarded by the Trustee to DTC or its nominee, as the case may be, as holder of
record of the Book-Entry Certificates. Because DTC can act only on behalf of
Financial Intermediaries, the ability of a beneficial owner to pledge Book-Entry
Certificates to persons or entities that do not participate in DTC system, or
otherwise take actions in respect of such Book-Entry Certificates, may be
limited due to the lack of physical certificates for such Book-Entry
Certificates. In addition, issuance of the Book-Entry Certificates in book-entry
form may reduce the liquidity of such Certificates in the secondary market since
certain potential investors may be unwilling to purchase Certificates for which
they cannot obtain physical certificates.
Unless and until Definitive Certificates are issued, it is anticipated that
the only "Certificateholder" of the Book-Entry Certificates will be DTC or its
nominee. Beneficial owners of the Book-Entry Certificates will not be
Certificateholders, as that term will be used in the Agreement relating to such
Series of Certificates. Beneficial owners are only permitted to exercise the
rights of Certificateholders indirectly through Financial Intermediaries and
DTC. Monthly and annual reports on the related Trust provided to DTC or its
nominee, as the case may be, as holder of record of the Book-Entry Certificates,
may be made available to beneficial owners upon request, in accordance with the
rules, regulations and procedures creating and affecting DTC, and to the
Financial Intermediaries to whose DTC accounts the Book-Entry Certificates of
such beneficial owners are credited.
Unless otherwise specified in the related Prospectus Supplement, unless and
until Definitive Certificates are issued, DTC will take any action permitted to
be taken by the holders of the Book-Entry Certificates of a particular Series
under the related Agreement only at the direction of one or more Financial
Intermediaries to whose DTC accounts such Book-Entry Certificates are credited
to the extent that such actions are taken on behalf of Financial Intermediaries
whose holdings include such Book-Entry Certificates.
Transfers between Participants will occur in accordance with DTC's rules,
regulations and procedures. Transfers between Cedel Participants and Euroclear
Participants will occur in accordance with their respective rules and operating
procedures.
Due to time zone differences, credits of securities received in Cedel 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. Such credits or any transactions in such securities
settled during such processing will be reported to the relevant Euroclear or
Cedel Participant on such business day. Cash received in Cedel or Euroclear as
result of sales of Certificates by or through a Cedel Participant or Euroclear
Participant to a DTC Participant will be received with value on the DTC
settlement date but will be available in the relevant Cedel or Euroclear cash
account only as of the business day following settlement in DTC.
Cross-market transfers between persons directly or indirectly holding
Certificates through DTC, on the one hand, and directly or indirectly through
Cedel Participants or Euroclear Participants, on the other, will be effected in
DTC in accordance with DTC's rules, regulations and procedures on behalf of the
relevant European international clearing system by its Depository; however, such
cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadline
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to its
Depository 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. Cedel
Participants and Euroclear Participants may not deliver instructions directly to
the Depositories.
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Definitive Certificates
Unless otherwise specified in the related Prospectus Supplement, Definitive
Certificates will be issued to beneficial owners of Book-Entry Certificates, or
their nominees, rather than to DTC, only if (i) DTC or the Depositor advises the
Trustee in writing that DTC is no longer willing, qualified or able to discharge
properly its responsibilities as nominee and depository with respect to the
Book-Entry Certificates and the Depositor or the Trustee is unable to locate a
qualified successor; (ii) the Depositor, at its sole option, elects to terminate
the book-entry system through DTC; or (iii) after the occurrence of an Event of
Default (as defined in the related Agreement), beneficial owners of Certificates
representing not less than 51% of the aggregate Percentage Interests evidenced
by each class of Certificates of the related Series issued as Book-Entry
Certificates advise the Trustee and DTC through the Financial Intermediaries in
writing that the continuation of a book-entry system through DTC (or a successor
thereto) is no longer in the best interests of the beneficial owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all beneficial
owners of the occurrence of such event and the availability of Definitive
Certificates. Upon surrender by DTC of the global certificate or certificates
representing the Book-Entry Certificates and instructions for re-registration,
the Trustee will issue the Definitive Certificates, and thereafter the Trustee
will recognize the holders of such Definitive Certificates as Certificateholders
under the Agreement relating to such Series of Certificates.
CREDIT ENHANCEMENT
General
Credit enhancement may be provided with respect to one or more classes of a
Series of Certificates or with respect to the Mortgage Assets in the related
Trust. Credit enhancement may be in the form of a limited Certificate Guaranty
Insurance Policy issued by an entity named in the related Prospectus Supplement,
the subordination of one or more classes of the Certificates of such Series, the
establishment of one or more reserve funds, the use of a cross collateralization
feature, the use of overcollateralization, the use of a Mortgage Pool Insurance
Policy, Certificate Guaranty Insurance Policy, Bankruptcy Bond, Special Hazard
Insurance Policy, surety bond, letter of credit, guaranteed investment contract,
financial guaranty insurance policy, third party guarantee (which may be limited
in nature), a Limited Guarantee issued by CIT, spread accounts, cash collateral
accounts and/or other accounts, or the use of any similar instruments or
agreements or other methods of credit enhancement described in the related
Prospectus Supplement, or any combination of the foregoing. Unless otherwise
specified in the related Prospectus Supplement, no credit enhancement will
provide protection against all risks of loss or guarantee repayment of the
entire principal balance of the Certificates and interest thereon. If losses
occur which exceed the amount covered by any credit enhancement or which are not
covered by any credit enhancement, Certificateholders will bear their allocable
share of any deficiencies. If a form of credit enhancement applies to several
classes of Certificates, and if principal payments equal to the aggregate
principal balances of certain classes will be distributed prior to such
distributions to other classes, the classes which receive such distributions at
a later time are more likely to bear any losses which exceed the amount covered
by credit enhancement. Unless otherwise specified in the Prospectus Supplement,
coverage under any credit enhancement may be canceled or reduced by the Master
Servicer if such cancellation or reduction would not adversely affect the rating
or ratings of the related Certificates. The Trustee of the related Trust will
have the right to sue providers of credit enhancement if a default is made on a
required payment.
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Subordination
If specified in the related Prospectus Supplement, the rights of the
holders of one or more classes of Subordinated Certificates (the "Subordinated
Certificateholders") will be subordinate to the rights of holders of one or more
other classes of Senior Certificates (the "Senior Certificateholders") of such
Series to receive distributions in respect of scheduled principal, Principal
Prepayments, interest or any combination thereof that otherwise would have been
payable to holders of Subordinated Certificates under the circumstances and to
the extent specified in the related Prospectus Supplement. This subordination is
intended to enhance the likelihood of regular receipt by Senior
Certificateholders of the full amount of the monthly payments of principal and
interest which such holders would be entitled to receive if there had been no
losses or delinquencies.
The protection afforded to the Senior Certificateholders of a Series by
means of the subordination feature will be accomplished by (i) the preferential
right of such holders to receive, prior to any distribution being made in
respect of the related Subordinated Certificates, the amounts of principal and
interest due them on each Distribution Date out of the funds available for
distribution on such date in the related Certificate Account (as defined herein)
and, to the extent described in the related Prospectus Supplement, by the right
of such holders to receive future distributions on the assets in the related
Trust that would otherwise have been payable to the Subordinated
Certificateholders; (ii) reducing the ownership interest of the related
Subordinated Certificates; (iii) a combination of clauses (i) and (ii) above; or
(iv) as otherwise described in the related Prospectus Supplement. If specified
in the related Prospectus Supplement, subordination may apply only in the event
of certain types of losses not covered by other forms of credit support, such as
hazard losses not covered by Standard Hazard Insurance Policies or losses due to
the bankruptcy or fraud of the Mortgagor not covered by a Bankruptcy Bond. The
protection afforded to Senior Certificateholders through subordination also may
be accomplished by allocating certain types of losses or delinquencies to the
related Subordinated Certificates to the extent described in the related
Prospectus Supplement. The related Prospectus Supplement will set forth
information concerning, among other things, the amount of subordination of a
class or classes of Subordinated Certificates in a Series, the circumstances in
which such subordination will be applicable and the manner, if any, in which the
amount of subordination will decrease over time, the manner of funding any
Reserve Fund, and the conditions under which amounts in any such Reserve Fund
will be used to make distributions to Senior Certificateholders or released to
Subordinated Certificateholders from the related Trust.
If specified in the related Prospectus Supplement, delays in receipt of
scheduled payments on the Mortgage Assets and losses with respect to the
Mortgage Assets will be borne first by the various classes of Subordinated
Certificates and thereafter by the various classes of Senior Certificates, in
each case under the circumstances and subject to the limitations specified in
such Prospectus Supplement. The aggregate distributions in respect of delinquent
payments on the Mortgage Assets over the lives of the Certificates or at any
time, the aggregate losses in respect of Mortgage Assets which must be borne by
the Subordinated Certificates by virtue of subordination and the amount of the
distributions otherwise distributable to the Subordinated Certificateholders
that will be distributable to Senior Certificateholders on any Distribution Date
may be limited as specified in the related Prospectus Supplement. If aggregate
distributions in respect of delinquent payments on the Mortgage Assets or
aggregate losses in respect of such Mortgage Assets were to exceed the total
amounts payable and available for distribution to holders of Subordinated
Certificates or, if applicable, were to exceed the amount specified in the
related Prospectus Supplement, Senior Certificateholders would experience losses
on the Certificates.
In addition to or in lieu of the foregoing, if so specified in the
Prospectus Supplement, all or any portion of distributions otherwise payable to
holders of Subordinated Certificates on any Distribution Date may instead be
deposited into one or more Reserve Funds established and maintained with the
Trustee. If specified in the Prospectus Supplement, such deposits may be made on
each Distribution Date for specified periods or until the balance in the Reserve
Fund has reached a specified amount and,
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following payments from the Reserve Fund, to holders of Senior Certificates or
otherwise, thereafter to the extent necessary to restore balance in the Reserve
Fund to required levels, in each case as specified in the Prospectus Supplement.
If specified in the related Prospectus Supplement, amounts on deposit in the
Reserve Fund may be released to the holders of the class of Certificates
specified in the Prospectus Supplement at the times and under the circumstances
specified in the Prospectus Supplement. See "--Reserve Fund" below.
If specified in the related Prospectus Supplement, the same class of
Certificates may be Senior Certificates with respect to certain types of
payments or certain types of losses or delinquencies and Subordinated
Certificates with respect to other types of payment or types of losses or
delinquencies.
If specified in the related Prospectus Supplement, various classes of
Senior Certificates and Subordinated Certificates may themselves be subordinate
in their right to receive certain distributions to other classes of Senior and
Subordinated Certificates, respectively, through a cross collateralization
mechanism or otherwise.
As between classes of Senior Certificates and as between classes of
Subordinated Certificates, distributions may be allocated among such classes (i)
in the order of their scheduled final distribution dates, (ii) in accordance
with a schedule or formula, (iii) in relation to the occurrence of events or
(iv) otherwise, in each case as specified in the related Prospectus Supplement.
The related Prospectus Supplement will set forth information concerning the
amount of subordination of a class or classes of Subordinated Certificates in a
Series, the circumstances in which such subordination will be applicable, the
manner, if any, in which the amount of subordination will decrease over time,
the manner of funding any Reserve Funds, and the conditions under which amounts
in any such Reserve Funds will be used to make distributions to Senior
Certificateholders or released to Subordinated Certificateholders from the
related Trust. As between classes of Subordinated Certificates, payments to
Senior Certificateholders on account of delinquencies or losses and payments to
the Reserve Fund will be allocated as specified in the related Prospectus
Supplement.
Overcollateralization
If specified in the related Prospectus Supplement, credit support may
consist of overcollateralization whereby the aggregate principal amount of the
Mortgage Assets exceeds the Certificate Balance (as defined herein) of the
Certificates of such Series. Such overcollateralization may exist on the Closing
Date or develop thereafter as a result of the application of certain interest
collections or other collections received in connection with the Mortgage Assets
in excess of amounts necessary to pay the Pass-Through Rate on the Certificates.
The existence of any overcollateralization and the manner, if any, by which it
increases or decreases, will be set forth in the related Prospectus Supplement.
Reserve Fund
If so specified in the related Prospectus Supplement, credit support with
respect to a Series of Certificates may be provided by the establishment and
maintenance with the Trustee for such Series of Certificates, of one or more
reserve funds (each, a "Reserve Fund") for such Series. The related Prospectus
Supplement will specify whether or not a Reserve Fund will be included in the
corpus of the Trust for such Series.
The Reserve Fund for a Series will be funded (i) by the deposit therein of
cash, investment securities or instruments evidencing ownership of principal or
interest payments thereon, letters of credit, demand notes, certificates of
deposit or a combination thereof in the aggregate amount specified in the
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related Prospectus Supplement, (ii) by the deposit therein from time to time of
certain amounts, as specified in the related Prospectus Supplement, to which the
Subordinated Certificateholders, if any, would otherwise be entitled, or (iii)
in such other manner as may be specified in the related Prospectus Supplement.
Any amounts on deposit in the Reserve Fund and the proceeds of any other
instrument deposited therein upon maturity will be held in cash or will be
invested in "Permitted Investments" which, unless otherwise specified in the
related Prospectus Supplement, will include obligations of the United States and
certain agencies thereof, certificates of deposit, certain commercial paper
(including commercial paper issued by CIT), time deposits and bankers
acceptances sold by eligible commercial banks and certain repurchase agreements
of United States government securities with eligible commercial banks. If a
letter of credit is deposited with the Trustee, such letter of credit will be
irrevocable unless replaced. Unless otherwise specified in the related
Prospectus Supplement, any letter of credit deposited therein will name the
Trustee, in its capacity as trustee for the Certificateholders, as beneficiary
and will be issued by an entity acceptable to each Rating Agency. Additional
information with respect to such instruments deposited in the Reserve Funds will
be set forth in the related Prospectus Supplement.
Any amounts so deposited and payments on instruments so deposited will be
available for withdrawal from the Reserve Fund for distribution to the
Certificateholders for the purposes, in the manner and at the times specified in
the related Prospectus Supplement.
Certificate Guaranty Insurance Policies
If so specified in the related Prospectus Supplement, a certificate
guaranty insurance policy or policies (each, a "Certificate Guaranty Insurance
Policy") may be obtained and maintained for one or more class or classes of
Series of Certificates. The issuer of any Certificate Guaranty Insurance Policy
(a "Certificate Guaranty Insurer") will be described in the related Prospectus
Supplement. A copy of any such Certificate Guaranty Insurance Policy will be
attached as an exhibit to the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement,
Certificate Guaranty Insurance Policies generally unconditionally and
irrevocably guarantee to Certificateholders that an amount equal to each full
and complete Insured Payment will be received by an agent of the Trustee (an
"Insurance Paying Agent") on behalf of Certificateholders, for distribution by
the Trustee to each Certificateholder. The "Insured Payment" will equal the full
amount of the distributions of principal and interest to which
Certificateholders are entitled under the related Agreement plus any other
amounts specified therein or in the related Prospectus Supplement.
The specific terms of any Certificate Guaranty Insurance Policy will be as
set forth in the related Prospectus Supplement. Certificate Guaranty Insurance
Policies may have limitations including (but not limited to) limitations on the
Certificate Guaranty Insurer's obligation to guarantee the Seller's or the
Master Servicer's obligation to repurchase or substitute for any Mortgage Loans,
to guarantee any specified rate of prepayments or to provide funds to redeem
Certificates on any specified date.
Subject to the terms of the related Agreement, the Certificate Guaranty
Insurer may be subrogated to the rights of each Certificateholder to receive
payments under the Certificates to the extent of any payments by such
Certificate Guaranty Insurer under the related Certificate Guaranty Insurance
Policy.
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Mortgage Pool Insurance Policies
If specified in the related Prospectus Supplement relating to a Mortgage
Pool, a separate mortgage pool insurance policy or policies (each, a "Mortgage
Pool Insurance Policy") will be obtained and maintained for the Mortgage Pool
and issued by the insurer (the "Pool Insurer") named in such Prospectus
Supplement. Each Mortgage Pool Insurance Policy will, subject to the limitations
described below, cover loss by reason of default in payment on Mortgage Loans in
the Mortgage Pool in an amount equal to a percentage specified in such
Prospectus Supplement of the aggregate principal balance of such Mortgage Loans
on the Cut-off Date which are not covered as to their entire outstanding
principal balances by Primary Mortgage Insurance Policies. As more fully
described below, the Master Servicer will present claims thereunder to the Pool
Insurer on behalf of itself, the Trustee and the Certificateholders. The
Mortgage Pool Insurance Policies, however, are not blanket policies against
loss, since claims thereunder may be made only respecting particular defaulted
Mortgage Loans and only upon satisfaction of certain conditions precedent
described below. Unless otherwise specified in the related Prospectus
Supplement, the Mortgage Pool Insurance Policies will not cover losses due to a
failure to pay or denial of a claim under a Primary Mortgage Insurance Policy.
Unless otherwise specified in the related Prospectus Supplement, each
Mortgage Pool Insurance Policy will provide that no claims may be validly
presented unless (i) any required Primary Mortgage Insurance Policy is in effect
for the defaulted Mortgage Loan and a claim thereunder has been submitted and
settled; (ii) hazard insurance on the related Mortgaged Property has been kept
in force and real estate taxes and other protection and preservation expenses
have been paid; (iii) if there has been physical loss or damage to the Mortgaged
Property, the damaged property has been restored to its physical condition
(reasonable wear and tear excepted) at the time of issuance of the policy; and
(iv) the insured has acquired good and marketable title to the Mortgaged
Property free and clear of liens except certain permitted encumbrances. Upon
satisfaction of these conditions, the Pool Insurer will have the option either
(i) to purchase the Mortgaged Property at a price equal to the principal balance
of the related Mortgage Loan plus accrued and unpaid interest at the Mortgage
Rate to the date of such purchase and certain expenses incurred by the Master
Servicer on behalf of the Trustee and Certificateholders, or (ii) to pay the
amount by which the sum of the principal balance of the defaulted Mortgage Loan
plus accrued and unpaid interest at the Mortgage Rate to the date of payment of
the claim and the aforementioned expenses exceeds the proceeds received from an
approved sale of the Mortgaged Property, in either case net of certain amounts
paid or assumed to have been paid under the related Primary Mortgage Insurance
Policy. If any Mortgaged Property is damaged, and proceeds, if any, from the
related hazard insurance policy or the applicable Special Hazard Insurance
Policy are insufficient to restore the damaged property to a condition
sufficient to permit recovery under the Mortgage Pool Insurance Policy, the
Master Servicer will not be required to expend its own funds to restore the
damaged property unless it determines that (i) such restoration will increase
the proceeds to Certificateholders on liquidation of the Mortgage Loan after
reimbursement of the Master Servicer for its expenses, and (ii) such expenses
will be recoverable by it through proceeds of the sale of the Mortgaged Property
or proceeds of the related Mortgage Pool Insurance Policy or any related Primary
Mortgage Insurance Policy.
Unless otherwise specified in the related Prospectus Supplement, no
Mortgage Pool Insurance Policy will insure (and many Primary Mortgage Insurance
Policies do not insure) against loss sustained by reason of a default arising
from, among other things, (i) fraud or negligence in the origination or
servicing of a Mortgage Loan, including misrepresentation by the Mortgagor, the
originator or persons involved in the origination thereof, or (ii) failure to
construct a Mortgaged Property in accordance with plans and specifications. If
specified in the related Prospectus Supplement, an endorsement to the Mortgage
Pool Insurance Policy, a bond or other credit support may cover fraud in
connection with the origination of Mortgage Loans. If specified in the related
Prospectus Supplement, a failure of coverage attributable to one of the
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foregoing events might result in a breach of the related Seller's
representations described above and, in such event, might give rise to an
obligation on the part of such Seller to repurchase the defaulted Mortgage Loan
if the breach cannot be cured by such Seller. No Mortgage Pool Insurance Policy
will cover (and many Primary Mortgage Insurance Policies do not cover) a claim
in respect of a defaulted Mortgage Loan occurring when the Master Servicer of
such Mortgage Loan, at the time of default or thereafter, was not approved by
the applicable insurer.
Unless otherwise specified in the related Prospectus Supplement, the
original amount of coverage under each Mortgage Pool Insurance Policy will be
reduced over the life of the related Certificates by the aggregate dollar amount
of claims paid less the aggregate of the net amounts realized by the Pool
Insurer upon disposition of all foreclosed properties. The amount of claims paid
will include certain expenses incurred by the Master Servicer as well as accrued
interest on delinquent Mortgage Loans to the date of payment of the claim,
unless otherwise specified in the related Prospectus Supplement. Accordingly, if
aggregate net claims paid under any Mortgage Pool Insurance Policy reach the
original policy limit, coverage under that Mortgage Pool Insurance Policy will
be exhausted and any further losses will be borne by the Certificateholders.
The terms of any pool insurance policy relating to a Pool will be described
in the related Prospectus Supplement.
Special Hazard Insurance Policies
If specified in the related Prospectus Supplement, a separate special
hazard insurance policy or policies (each, a "Special Hazard Insurance Policy")
will be obtained and maintained for the Mortgage Pool and will be issued by the
insurer (the "Special Hazard Insurer") named in such Prospectus Supplement. Each
Special Hazard Insurance Policy will, subject to limitations described below,
protect holders of the related Certificates from (i) loss by reason of damage to
Mortgaged Properties caused by certain hazards (including earthquakes and, to a
limited extent, tidal waves and related water damage or as otherwise specified
in the related Prospectus Supplement) not insured against under the standard
form of hazard insurance policy for the respective states in which the Mortgaged
Properties are located or under a flood insurance policy if the Mortgaged
Property is located in a federally designated flood area, and (ii) loss caused
by reason of the application of the coinsurance clause contained in hazard
insurance policies. See "The Pooling and Servicing Agreement--Hazard Insurance"
herein. No Special Hazard Insurance Policy will cover losses occasioned by fraud
or conversion by the Trustee or Master Servicer, war, insurrection, civil war,
certain governmental action, errors in design, faulty workmanship or materials
(except under certain circumstances), nuclear or chemical reaction, flood (if
the Mortgaged Property is located in a federally designated flood area), nuclear
or chemical contamination and certain other risks. The amount of coverage under
any Special Hazard Insurance Policy will be specified in the related Prospectus
Supplement. Each Special Hazard Insurance Policy will provide that no claim may
be paid unless hazard and, if applicable, flood insurance on the property
securing the Mortgage Loan have been kept in force and other protection and
preservation expenses have been paid.
Subject to the foregoing limitations, and unless otherwise specified in the
related Prospectus Supplement, each Special Hazard Insurance Policy will provide
that where there has been damage to property securing a foreclosed Mortgage Loan
(title to which has been acquired by the insured) and to the extent such damage
is not covered by the hazard insurance policy or flood insurance policy, if any,
maintained by the Mortgagor or the Master Servicer, the Special Hazard Insurer
will pay the lesser of (i) the cost of repair or replacement of such property,
or (ii) upon transfer of the property to the Special Hazard Insurer, the unpaid
principal balance of such Mortgage 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 Master
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Servicer with respect to such property. If the unpaid principal balance of a
Mortgage Loan plus accrued interest and certain expenses is paid by the Special
Hazard Insurer, the amount of further coverage under the related Special Hazard
Insurance Policy will be reduced by such amount less any net proceeds from the
sale of the property. Any amount paid as the cost of repair of such property
will further reduce coverage by such amount. So long as a Mortgage 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 Mortgage
Loan plus accrued interest and certain expenses will not affect the total
insurance proceeds paid to Certificateholders, but will affect the relative
amounts of coverage remaining under the related Special Hazard Insurance Policy
and Mortgage Pool Insurance Policy. Any hazard losses not covered by either the
standard hazard insurance policies or the Special Hazard Insurance Policy will
not be insured against, and, unless otherwise specified in the related
Prospectus Supplement, will be borne by the Certificateholders.
To the extent specified in the Prospectus Supplement, the Master Servicer
may deposit cash, an irrevocable letter of credit or any other instrument
acceptable to each Rating Agency in a special trust account to provide
protection in lieu of or in addition to that provided by a Special Hazard
Insurance Policy. The amount of any Special Hazard Insurance Policy or of the
deposit to the special trust account in lieu thereof relating to such
Certificates may be reduced so long as any such reduction will not result in a
downgrading of the rating of such Certificates by any such Rating Agency.
Unless otherwise specified in the related Prospectus Supplement, since each
Special Hazard Insurance Policy will be designed to permit full recovery under
the Mortgage Pool Insurance Policy in circumstances in which such recoveries
would otherwise be unavailable because property has been damaged by a cause not
insured against by a standard hazard policy and thus would not be restored, each
Agreement will provide that, if the related Mortgage Pool Insurance Policy shall
have been terminated or been exhausted through payment of claims, the Master
Servicer will be under no further obligation to maintain such Special Hazard
Insurance Policy.
The terms of any Special Hazard Insurance Policy relating to a Pool will be
described in the related Prospectus Supplement.
Bankruptcy Bonds
If specified in the related Prospectus Supplement, a bankruptcy bond or
bonds (each, a "Bankruptcy Bond") may be obtained to cover certain losses
resulting from proceedings under the federal Bankruptcy Code with respect to a
Mortgage Loan. Such Bankruptcy Bond will be issued by an insurer named in such
Prospectus Supplement. Each Bankruptcy Bond will cover, to the extent specified
in the related Prospectus Supplement, certain losses resulting from a reduction
by a bankruptcy court of scheduled payments of principal and interest on a
Mortgage Loan or a reduction by such court of the principal amount of a Mortgage
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 required
amount of coverage under, and the limitations in scope of, each Bankruptcy Bond
will be set forth in the related Prospectus Supplement. Coverage under a
Bankruptcy Bond may be canceled or reduced by the Master Servicer if such
cancellation or reduction would not adversely affect the then current rating or
ratings of the related Certificates. See "Certain Legal Aspects of the Mortgage
Loans--Anti-Deficiency Legislation and Other Limitations on Lenders" herein.
To the extent specified in the Prospectus Supplement, the Master Servicer
may deposit cash, an irrevocable letter of credit or any other instrument
acceptable to each Rating Agency in a special trust account to provide
protection in lieu of or in addition to that provided by a Bankruptcy Bond. The
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amount of any Bankruptcy Bond or of the deposit to the special trust account in
lieu thereof relating to such Certificates may be reduced so long as any such
reduction will not result in a downgrading of the rating of such Certificates by
any such Rating Agency.
The terms of any Bankruptcy Bond relating to a Pool will be described in
the related Prospectus Supplement.
Cross Collateralization
If specified in the related Prospectus Supplement, the beneficial ownership
of separate Trusts or separate groups of assets included in a Trust may be
evidenced by separate classes of the related Series of Certificates. In such
case, credit support may be provided by a cross collateralization feature which
requires that distributions be made with respect to Certificates evidencing
beneficial ownership of one or more separate Trusts or asset groups prior to
distributions to Certificates evidencing a beneficial ownership interest in
other separate Trusts or asset groups within the same Trust. The related
Prospectus Supplement for a Series that includes a cross collateralization
feature will describe the manner and conditions for applying such cross
collateralization feature.
If specified in the related Prospectus Supplement, the coverage provided by
one or more forms of credit support may apply concurrently to two or more
separate Trusts, without priority among such Trusts, until the credit support is
exhausted. If applicable, the related Prospectus Supplement will identify the
Trusts or asset groups to which such credit support relates and the manner of
determining the amount of the coverage provided thereby and of the application
of such coverage to the identified Trusts or asset groups.
Limited Guarantee
If specified in the related Prospectus Supplement, certain payments on a
class of the Certificates of a Series, certain deficiencies in principal or
interest payments on the Mortgage Loans, or certain liquidation losses on the
Mortgage Loans, may be covered by a limited guarantee or other similar
instrument (the "Limited Guarantee") limited in scope and amount, issued by CIT.
If not specified, the Certificateholders will have no recourse to CIT for any
amounts due on the Certificates. If specified, CIT may be obligated to take one
or more of the following actions in the event the Seller or Master Servicer
fails to do so: make deposits to an account, make advances, or purchase
defaulted Mortgage Loans. Any such Limited Guarantee will be limited in an
amount and a portion of the coverage of any such Limited Guarantee may be
separately allocated to certain events. The scope, amount and, if applicable,
the allocation of any Limited Guarantee will be described in the related
Prospectus Supplement.
Other Insurance, Surety Bonds, Guarantees, Letters of Credit and Similar
Instruments or Agreements
If specified in the related Prospectus Supplement, a Trust may also include
insurance, third party guarantees (any of which may be limited in nature),
surety bonds, spread accounts, cash collateral accounts and/or other accounts,
letters of credit, interest rate swaps, caps, floors or other derivative
products, or similar arrangements for the purpose of (i) maintaining timely
payments or providing additional protection against losses or interest rate
fluctuations on the assets included in such Trust, (ii) paying administrative
expenses, (iii) establishing a minimum reinvestment rate on the payments made in
respect of such assets or principal payment rate on such assets, or (iv)
accomplishing such other purpose as may be described in the Prospectus
Supplement. The Trust may include a guaranteed investment contract or
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reinvestment agreement pursuant to which funds held in one or more accounts will
be invested at a specified rate. If any class of Certificates has a floating
interest rate, or if any of the Mortgage Assets has a floating interest rate,
the Trust may include an interest rate swap contract, an interest rate cap
agreement or similar contract providing limited protection against interest rate
risks. Such arrangements may include agreements under which Certificateholders
are entitled to receive amounts deposited in various accounts held by the
Trustee upon the terms specified in such Prospectus Supplement. These
arrangements may be in addition to or in substitution for any forms of credit
support described in this Prospectus. Any such arrangement must be acceptable to
each Rating Agency.
YIELD AND PREPAYMENT CONSIDERATIONS
The yields to maturity and weighted average lives of the Certificates will
be affected primarily by the amount and timing of principal payments received on
or in respect of the Mortgage Assets included in the related Trust, the
allocation of available funds to various classes of Certificates, the
Pass-Through Rates for various classes of Certificates and the purchase price
paid for the Certificates. The original terms to maturity of the underlying
Mortgage Loans with respect to the Mortgage Assets in a given Mortgage Pool will
vary depending upon the type of Mortgage Loans included therein, and each
Prospectus Supplement will contain information with respect to the type and
maturities of such Mortgage Loans. Unless otherwise specified in the related
Prospectus Supplement, the Mortgage Loans may be prepaid without penalty in full
or in part at any time, although a prepayment fee or penalty may be imposed in
connection therewith. The prepayment experience on the underlying Mortgage Loans
with respect to the Mortgage Assets will affect the life of the related Series
of Certificates.
Generally, home equity loans have smaller average principal balances than
senior or first mortgage loans and are not viewed by borrowers as permanent
financing. Accordingly, mortgage loans which are home equity loans may
experience a higher rate of prepayment than mortgage loans which represent first
liens. In addition, any future limitations on the right of borrowers to deduct
interest payments on mortgage loans for Federal income tax purposes may result
in a higher rate of prepayment of the mortgage loans (particularly the home
equity loans). The obligation of the Master Servicer to enforce "due on sale"
provisions (described below) of the mortgage loans may also increase
prepayments. The prepayment experience of the Mortgage Pools may be affected by
a wide variety of factors, including general and local economic conditions,
mortgage market interest rates, the availability of alternative financing and
homeowner mobility.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer generally will enforce any "due on sale" or due on encumbrance clause,
to the extent it has knowledge of the conveyance or further encumbrance or the
proposed conveyance or proposed further encumbrance of the Mortgaged Property
and reasonably believes that it is entitled to do so under applicable law and
the applicable Mortgage; provided, however, that the Master Servicer will not
take any enforcement action that would impair or threaten to impair any recovery
under any related insurance policy or materially increase the risk of default or
delinquency on, or materially decrease the security for, the Mortgage Loan. See
"The Pooling and Servicing Agreement -- Collection Procedures" and "Certain
Legal Aspects of the Mortgage Loans" herein for a description of certain
provisions of each Agreement and certain legal developments that may affect the
prepayment experience on the Mortgage Loans.
The rate of prepayments with respect to conventional mortgage loans has
fluctuated significantly in recent years. In general, if prevailing rates fall
significantly below the Mortgage Rates borne by the Mortgage Loans, the Mortgage
Loans are likely to be subject to higher prepayment rates than if prevailing
interest rates remain at or above such Mortgage Rates. Conversely, if prevailing
interest rates rise appreciably above the Mortgage Rates borne by the Mortgage
Loans, the Mortgage Loans are likely to experience a lower prepayment rate than
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if prevailing rates remain at or below such Mortgage Rates. However, there can
be no assurance that such will be the case.
Greater than anticipated prepayments of principal will increase the yield
on Certificates purchased at a price less than par. Similarly, greater than
anticipated prepayments of principal will decrease the yield on Certificates
purchased at a price greater than par. The effect on an investor's yield of
principal prepayments on the Mortgage Loans occurring at a rate that is faster
(or slower) than the rate anticipated by the investor in the period immediately
following the issuance of the applicable class of Certificates may not be offset
by a subsequent like reduction (or increase) in the rate of principal payments.
The weighted average lives of Certificates will also be affected by the
amount and timing of delinquencies and defaults on the Mortgage Loans and the
liquidations of defaulted Mortgage Loans. Delinquencies and defaults will
generally slow the rate of payment of principal to the Certificateholders.
However, this effect will be offset to the extent that lump sum recoveries on
defaulted Mortgage Loans and foreclosed Mortgaged Properties result in principal
payments on the Mortgage Loans faster than otherwise scheduled.
When a full prepayment is made on a Simple Interest Loan, the Mortgagor is
charged interest on the principal amount of the Simple Interest Loan so prepaid
only for the number of days in the month actually elapsed up to the date of the
prepayment. This is generally also the case with respect to Scheduled Accrual
Loans and Precomputed Loans. With respect to each Simple Interest Loan, when a
principal payment is made that exceeds the principal portion of the scheduled
payment, but which was not intended by the Mortgagor to satisfy the Mortgage
Loan in full or to cure a delinquency, interest will cease to accrue on the
principal amount so prepaid as of the date of the prepayment. Unless otherwise
specified in the related Prospectus Supplement, the effect of prepayments will
be to reduce the amount of interest passed through in the following month to
Certificateholders because interest on the principal amount of any Simple
Interest Loan so prepaid will be paid only to the date of prepayment. Partial
prepayments in a given month may be applied to the outstanding principal
balances of the Simple Interest Loans so prepaid on the date of receipt. Unless
otherwise specified in the related Prospectus Supplement, both full and partial
prepayments will not be passed through until the Distribution Date following the
Due Period in which it is received. Interest shortfalls also could result from
the application of the Relief Act as described under "Certain Legal Aspects of
the Mortgage Loans--Soldiers' and Sailors' Civil Relief Act" herein. Unless
otherwise specified in the related Prospectus Supplement, in the event that less
than 30 days' interest is collected on a Mortgage Loan during a Due Period due
to prepayment in full, the Master Servicer will be obligated to pay Compensating
Interest with respect thereto. To the extent such shortfalls exceed the amount
of Compensating Interest that the Master Servicer is obligated to pay, the yield
on the Certificates could be adversely affected.
As a result of the payment terms of Simple Interest Loans, the making of a
scheduled payment, or the prepayment of, such a Simple Interest Loan prior to
its scheduled due date may result in the collection of less than one month's
interest on such Simple Interest Loan for the period since the preceding payment
was made. Conversely, if the scheduled payment on such a Simple Interest Loan is
made after its scheduled payment date or the Simple Interest Loan is prepaid
after the scheduled due date, the collection of interest on such Simple Interest
Loan for such period may be greater than one month's interest on such Simple
Interest Loan. In addition, the extent to which Simple Interest Loans experience
early payment or late payment of scheduled payments will correspondingly change
the amount of principal received during a monthly period and, accordingly, the
amount of principal to be distributed on the related Distribution Date and the
amount of unpaid principal due at the stated maturity of such Simple Interest
Loans. To the extent shortfalls attributable to prepayments or the early receipt
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of scheduled payments on Simple Interest Loans are not compensated for by any
forms of credit enhancement described in the related Prospectus Supplement, the
Certificateholders will experience delays or losses in amounts due them.
If a Mortgagor pays more than one scheduled installment on a Simple
Interest Loan at a time, the entire amount of the additional installment will be
treated as a principal prepayment and passed through to Certificateholders in
the month following the month of receipt. In such case, although the Mortgagor
may not be required to make the next regularly scheduled installment, interest
will continue to accrue on the principal balance of the Simple Interest Loan, as
reduced by the application of the additional installment. As a result, when the
Mortgagor pays the next required installment, the installment so paid may be
insufficient to cover the interest that has accrued since the last payment by
the Mortgagor. Notwithstanding such insufficiency, the Mortgagor's Simple
Interest Loan would be considered to be current. If specified in the related
Prospectus Supplement, the Master Servicer will be required to advance the
amount of such insufficiency. This insufficiency will continue until the
installment payments received are once again sufficient to cover all accrued
interest and to reduce the principal balance of the Simple Interest Loan.
Depending on the principal balance and interest rate of the related Simple
Interest Loan and on the number of installments that were paid early, there may
be extended periods of time during which Simple Interest Loans that are current
are not amortizing.
Under certain circumstances, the Master Servicer, the holders of the
residual interests in a REMIC, certain insurers or other entities specified in
the related Prospectus Supplement may have the option to purchase the assets of
a Trust Fund thereby effecting earlier retirement of the related Series of
Certificates. See "The Pooling and Servicing Agreement--Termination; Purchase of
Mortgage Loans" herein.
If and to the extent specified in the related Prospectus Supplement, one or
more class or classes of Certificates of a Series may receive a principal
payment at the end of the Funding Period from the portion of the Pre-Funded
Amount, if any, not used to purchase additional Mortgage Assets during such
Funding Period.
Factors other than those identified herein and in the related Prospectus
Supplement could significantly affect principal prepayments at any time and over
the lives of the Certificates. The relative contribution of the various factors
affecting prepayment may also vary from time to time. There can be no assurance
as to the rate of payment of principal of the Mortgage Assets at any time or
over the lives of the Certificates.
The Prospectus Supplement relating to a Series of Certificates will discuss
in detail the effect of the rate and timing of principal payments (including
Principal Prepayments), delinquencies and losses on the yield, weighted average
lives and maturities of such Certificates.
THE POOLING AND SERVICING AGREEMENT
Set forth below is a summary of certain provisions of each Agreement which
are not described elsewhere in this Prospectus. Where particular provisions or
terms used in an Agreement are referred to, such provisions or terms are as
specified in the related Agreement. The summary does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the provisions
of each Agreement.
Assignment of Mortgage Assets
Assignment of the Mortgage Loans. At the time of issuance of the
Certificates of a Series, the Depositor will cause the Mortgage Loans and other
Mortgage Assets comprising the related Trust to be assigned to the Trustee,
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together with all principal and interest received (or, in certain circumstances,
due) on or with respect to such Mortgage Loans on and after the Cut-off Date,
other than, if specified in the related Prospectus Supplement, principal and
interest due before the Cut-off Date and other than any Retained Interest
specified in the related Prospectus Supplement. The Trustee will, concurrently
with such assignment, deliver the Certificates to the Depositor in exchange for
the Mortgage Loans and other Mortgage Assets. Each Mortgage Loan will be
identified in a schedule appearing as an exhibit to the related Agreement. Such
schedule will include information as to the outstanding principal balance of
each Mortgage Loan transferred to the Trust, as well as information regarding
the Mortgage Rate, the current scheduled monthly payment of principal and
interest, the maturity of the loan, and certain other information.
In addition, unless otherwise specified in the related Prospectus
Supplement or as described below, the Seller and the Depositor will deliver or
cause to be delivered to the Trustee (or the custodian hereinafter referred to)
the Mortgage Documents relating to each Mortgage Loan. If specified in the
related Prospectus Supplement, CIT Consumer Finance will be appointed as
custodian of the Mortgage Documents pursuant to the related Agreement and, in
such capacity, will retain possession of the Mortgage Documents. However, except
as otherwise specified in the related Prospectus Supplement, the Seller and the
Depositor will not deliver to the Trustee (or the custodian) assignments of the
related Mortgages to be recorded in the appropriate public office for real
property records. Subsequent to the issuance of the Certificates, the Seller may
be required in the circumstances specified in the related Agreement to deliver
to the Trustee (or the custodian) assignments of the related Mortgages to be
recorded (at the expense of the Seller) at such time after issuance of the
Certificates as may be specified in the related Prospectus Supplement, in such
an event, the Agreement may, as specified in the related Prospectus Supplement,
require any such Seller to repurchase from the Trustee any Mortgage Loan the
related Mortgage of which is not recorded within the specified time period, at
the Purchase Price. Unless otherwise provided in the related Prospectus
Supplement, the enforcement of the repurchase obligation would constitute the
sole remedy available to the Certificateholders and the Trustee for the failure
of a Mortgage to be recorded.
If the Depositor were to make a sale, assignment, satisfaction or discharge
of any Mortgage Loan prior to recording or filing the assignments to the
Trustee, the other parties to such sale, assignment, satisfaction or discharge
might have rights superior to those of the Trustee. If the Depositor were to do
so without authority under the Agreement, it would be liable to the related
Certificateholders. In addition, if insolvency proceedings relating to the
Depositor were commenced prior to such recording or filing, creditors of the
Depositor might be able to assert rights in the affected Mortgage Loans superior
to those of the Trustee.
In no event will the Seller be required to cause assignments of the
Mortgages to be recorded in states in which, in the opinion of counsel
acceptable to the Trustee, such recording is not required to protect the
Trustee's interest in such loans against the claim of any subsequent transferee
or any successor to or creditor of the Depositor or the originator of such
loans. Under each Agreement, the Trustee will be appointed attorney-in-fact for
each Seller and the Depositor with power to prepare, execute and record
assignments of the related Mortgages to the related Trust in the event that the
Seller and the Depositor fail to do so on a timely basis.
For certain Mortgage Loans transferred by the Depositor to the Trust, CIT
Consumer Finance will deliver to the Trustee (or the custodian), in lieu of the
original Mortgage Note, a new promissory note signed by the borrower confirming
its obligation under the original Mortgage Note (a "Confirmatory Mortgage
Note"). Furthermore, a Trust may include Mortgage Loans where the original
Mortgage Note or a Confirmatory Mortgage Note is not delivered to the Trustee
(or the custodian) if CIT Consumer Finance instead delivers to the Trustee (or
the custodian) an affidavit of the Seller certifying
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that the Seller or the Depositor was the sole owner of the indebtedness
evidenced by such note and the original thereof has been lost or destroyed and
the Seller indemnifies the Trust against any loss, liability, damage, claim or
expense resulting from CIT Consumer Finance's failure to deliver to the Trustee
(or the custodian) the original Mortgage Note or Confirmatory Mortgage Note.
Such indemnification will be terminated if CIT Consumer Finance subsequently
delivers the original Mortgage Note or a Confirmatory Mortgage Note. If CIT
Consumer Finance delivers such a lost note affidavit or fails to deliver any
assumption and modification agreement, within 45 days after the date of initial
issuance of the related series of Certificates it will deliver to the Trustee
(or the custodian) either the original Mortgage Note or Confirmatory Mortgage
Note and assumption and modification agreement, as applicable, or an opinion of
counsel satisfactory to the Trustee from counsel admitted to practice in the
jurisdiction in which the related Mortgaged Property is located to the effect
that the absence of the originals of such documents will not preclude the Master
Servicer from initiating or prosecuting to completion any foreclosure proceeding
with respect to such Mortgaged Property. If CIT Consumer Finance does not
deliver such documents or an opinion of counsel within such 45-day period, it
will be required to use its best reasonable efforts to substitute another
Mortgage Loan or, if it is unable to make such substitution, to repurchase the
original Mortgage Loan at the Purchase Price.
The Trustee (or the custodian if such custodian is not the Master Servicer
or CITSF) will review such Mortgage Documents within the time period specified
in the related Prospectus Supplement after receipt thereof, and will hold such
documents in trust for the benefit of the Certificateholders. Unless otherwise
specified in the related Prospectus Supplement, if any such document is found to
be missing or defective in any material respect, is not properly executed, is
unrelated to the Mortgage Loans of the related Trust or does not conform in a
material respect to the description thereof provided by or on behalf of CIT
Consumer Finance, the Trustee (or the custodian) or the Certificate Guaranty
Insurer, if any, will notify the Master Servicer and the Depositor, and the
Master Servicer will notify the related Seller. The related Seller is required
to use reasonable efforts to remedy a material defect in a document of which it
is so notified. If, however (unless otherwise specified in the related
Prospectus Supplement), within 90 days after the Trustee's notice to it
respecting such defect, such Seller has not remedied the defect and the defect
materially and adversely affects the interest of the Trust in the related
Mortgage Loan or the interests of the Certificate Guaranty Insurer, if any, such
Seller is required to (i) substitute in lieu of such Mortgage Loan a Qualified
Substitute Mortgage Loan (as defined herein) and, if the then outstanding
principal balance of such Qualified Substitute Mortgage Loan is less than the
principal balance of such Mortgage Loan as of the date of such substitution,
deposit in the related Certificate Account the Substitution Adjustment (as
defined herein), or (ii) purchase such Mortgage Loan at a price equal to the
Purchase Price related to such Mortgage Loan, which purchase price will be
deposited in the Certificate Account and delivered to the Trustee on the next
succeeding Deposit Date, except for the portion thereof, if any, relating to
unreimbursed Insured Payments, if any, which shall be paid directly to the
Certificate Guaranty Insurer.
There can be no assurance that a Seller will fulfill this purchase
obligation. Although the Master Servicer may be obligated to enforce such
obligation to the extent described above under "Mortgage Loan
Program--Representations by Sellers; Repurchases," neither the Master Servicer
nor the Depositor will be obligated to purchase such Mortgage Loan if such
Seller defaults on its purchase obligation. Unless otherwise specified in the
related Prospectus Supplement, this purchase obligation constitutes the sole
remedy available to the Certificateholders or the Trustee for omission of, or a
material defect in, a Mortgage Document.
Unless otherwise specified in the related Prospectus Supplement, the
Trustee will appoint a custodian (which, if specified in the related Prospectus
Supplement, may be the Master Servicer or CITSF) pursuant to a custodial
agreement to maintain possession of and, if applicable, to review the Mortgage
Documents as agent of the Trustee.
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Notwithstanding the foregoing provisions, with respect to a Trust for which
a REMIC election is to be made, unless the related Prospectus Supplement
otherwise provides, no purchase of or substitution for a Mortgage Loan will be
made if such purchase or substitution would result in a prohibited transaction
tax or would cause such Trust to fail to qualify as a REMIC. If a REMIC election
is to be made with respect to a Trust, unless otherwise provided in the related
Prospectus Supplement, the Master Servicer or a holder of the related residual
certificate will be obligated to pay any prohibited transaction tax that may
arise in connection with any such repurchase or substitution. The Master
Servicer, unless otherwise specified in the related Prospectus Supplement, will
be entitled to reimbursement for any such payment from any holder of the related
residual certificate. See "Description of the Certificates--General" herein and
in the related Prospectus Supplement.
Assignment of Private Mortgage-Backed Securities. The Depositor will cause
the Private Mortgage-Backed Securities to be registered in the name of the
Trustee. The Trustee (or the custodian) will have possession of any certificated
Private Mortgage-Backed Securities. Unless otherwise specified in the related
Prospectus Supplement, the Trustee will not be in possession of or be assignee
of record of any underlying assets for a Private Mortgage-Backed Security. See
"The Trusts--Private Mortgage-Backed Securities" herein. Each Private
Mortgage-Backed 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 and certain other pertinent
information for each Private Mortgage-Backed Security conveyed to the Trustee.
Payments on Mortgage Assets; Deposits to Certificate Account
The Master Servicer will establish and maintain or cause to be established
and maintained with respect to the related Trust a separate account or accounts
for the collection of payments on the related Mortgage Assets in the Trust (the
"Certificate Account"), which unless otherwise specified in the related
Prospectus Supplement, must be either (i) maintained with a depository
institution the short-term debt obligations of which (or in the case of a
depository institution that is the principal subsidiary of a holding company,
the short-term debt obligations of which) are rated in the highest short-term
rating category by the nationally recognized statistical rating organization(s)
that provides a rating for one or more classes of the related Series of
Certificates (each, a "Rating Agency"), (ii) an account or accounts the deposits
in which are fully insured by the FDIC, (iii) an account or accounts the
deposits in which are insured by the FDIC, and the uninsured deposits in which
are otherwise secured such that the Certificateholders have a claim with respect
to the funds in the Certificate Account or a perfected first priority security
interest against any collateral securing such funds that is superior to the
claims of any other depositors or general creditors of the depository
institution with which the Certificate Account is maintained, (iv) a trust
account or accounts maintained with the trust department of a Federal or a state
chartered depository institution or trust company, acting in a fiduciary
capacity or (v) an account or accounts otherwise acceptable to each such Rating
Agency. The collateral eligible to secure amounts in the Certificate Account is
limited to Permitted Investments. A Certificate Account may be maintained as an
interest bearing account or the funds held therein may be invested pending each
succeeding Distribution Date in Permitted Investments. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer or its
designee will be entitled to receive any such interest or other income earned on
funds in the Certificate Account as additional compensation and will be
obligated to deposit in the Certificate Account the amount of any loss
immediately as realized. The Certificate Account may be maintained with the
Master Servicer or with a depository institution that is an affiliate of the
Master Servicer, provided it meets the standards set forth above.
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Unless otherwise specified herein or in the related Prospectus Supplement,
the Master Servicer will deposit in the Certificate Account no later than two
Business Days following receipt thereof the following payments and collections
received or made by it (net of the Master Servicing Fee and other amounts due to
the Master Servicer) subsequent to the Cut-off Date (including scheduled
payments of principal and interest due on or after the Cut-off Date but received
by the Servicer on or before the Cut-off Date):
(i) all payments on account of principal, including Principal
Prepayments and, if specified in the related Prospectus Supplement,
prepayment penalties, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans, net of
applicable servicing compensation;
(iii) all proceeds (net of unreimbursed payments of property taxes,
insurance premiums and similar items ("Insured Expenses") incurred, and
unreimbursed Advances made, by the Master Servicer, if any) of the hazard
insurance policies and any Primary Mortgage Insurance Policies and any
other insurance policies covering a Mortgage Loan, Mortgaged Property or
REO Property, to the extent such proceeds are not applied to the
restoration of the Mortgaged Property or released to the Mortgagor in
accordance with the Master Servicer's normal servicing procedures
(collectively, "Insurance Proceeds") and all other cash amounts (net of
unreimbursed expenses and Servicing Advances incurred in connection with
liquidation or foreclosure ("Liquidation Expenses") and unreimbursed
Advances, if any) received and retained in connection with the liquidation
of defaulted Mortgage Loans, by foreclosure or otherwise ("Liquidation
Proceeds"), together with any net proceeds received on a monthly basis with
respect to any Mortgaged Properties acquired on behalf of the
Certificateholders by foreclosure or deed in lieu of foreclosure;
(iv) all proceeds of any Mortgage Loan or Mortgaged Property in
respect thereof purchased by the Master Servicer, the Depositor or any
Seller as described under "The Pooling and Servicing
Agreement--Representations by Sellers; Repurchases" or "The Pooling and
Servicing Agreement--Assignment of Mortgage Assets" above and all proceeds
of any Mortgage Loan repurchased as described under "The Pooling and
Servicing Agreement--Termination; Optional Termination" below;
(v) all payments required to be deposited in the Certificate Account
with respect to any deductible clause in any blanket insurance policy
described under "--Hazard Insurance" below;
(vi) any amount required to be deposited by the Master Servicer in
connection with losses realized on investments for the benefit of the
Master Servicer of funds held in the Certificate Account and, to the extent
specified in the related Prospectus Supplement, any payments required to be
made by the Master Servicer in connection with prepayment interest
shortfalls;
(vii) all other amounts required to be deposited in the Certificate
Account pursuant to the Agreement including, if applicable, funds from (A)
any credit enhancement, (B) the Pre-Funding Account, and (C) all payments
on Private Mortgage-Backed Securities; and
(viii) proceeds received during the related Due Period in connection
with a taking of a related Mortgaged Property with respect to a Mortgage
Loan by condemnation or the exercise of eminent domain or in connection
with a release of part of any such Mortgaged Property from the related lien
("Released Mortgaged Property Proceeds").
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Subject to compliance with the Agreement, for as long as CIT Consumer
Finance remains the Master Servicer under the Agreement and CIT Consumer Finance
remains a direct or indirect subsidiary of CIT, and if CIT has and maintains a
short-term debt rating of at least A-1 by S&P (as defined herein) and either a
short-term debt rating of P-1 or higher or a long-term debt rating of at least
A2 by Moody's (as defined herein), the Master Servicer (or any Sub-Servicer
which is an affiliate of CIT) will not be required to make such deposits into
the Certificate Account (the "Delayed Deposits") until the Business Day
immediately preceding the Distribution Date (the "Deposit Date") following the
last day of the Due Period within which such payments were processed by the
Servicer.
In those cases where a Sub-Servicer which is not an affiliate of CIT is
servicing a Mortgage Loan, the Sub-Servicer will establish and maintain an
account ("Sub-servicing Account") that will comply with the standards set forth
above, and which is otherwise acceptable to the Master Servicer. The
Sub-Servicer is required to deposit into the Sub-servicing Account on a daily
basis all amounts enumerated in the preceding paragraph in respect of the
Mortgage Loans received by the Sub-Servicer, less its servicing compensation. On
the date specified in the related Prospectus Supplement, the Sub-Servicer shall
remit to the Master Servicer all funds held in the Sub-servicing Account with
respect to each Mortgage Loan. The Sub-Servicer may, to the extent described in
the related Prospectus Supplement, be required to advance any monthly
installment of principal and interest that was not received less its servicing
fee, by the date specified in the related Prospectus Supplement.
The Master Servicer (or the Sub-Servicer or the Depositor, as applicable)
may from time to time direct the institution that maintains the Certificate
Account to withdraw funds from the Certificate Account for the following
purposes:
(i) to pay to the Master Servicer the servicing fees described in the
related Prospectus Supplement, the Master Servicing Fees (subject to
reduction) and, as additional servicing compensation, earnings on or
investment income with respect to funds in the Certificate Account;
(ii) to reimburse the Master Servicer for Advances, such right of
reimbursement with respect to any Mortgage Loan being limited to amounts
received that represent late recoveries of payments of principal and/or
interest on such Mortgage Loan (or Insurance Proceeds, Liquidation Proceeds
or Released Mortgaged Property Proceeds with respect thereto) with respect
to which such Advance was made, proceeds of any Mortgage Loans repurchased
by the Depositor, a Sub-Servicer or a Seller pursuant to the related
Agreement and any other amount otherwise distributable to the holder or
holders of Certificates representing the residual interest in the related
Trust if a REMIC election has been made with respect thereto;
(iii) to reimburse the Master Servicer for any Advances previously
made which the Master Servicer has determined to be nonrecoverable;
(iv) to reimburse the Master Servicer from Insurance Proceeds for
expenses incurred by the Master Servicer and covered by the related
insurance policies;
(v) to reimburse the Master Servicer for unpaid Master Servicing Fees
and unreimbursed out-of-pocket costs and expenses incurred by the Master
Servicer in the performance of its servicing obligations;
(vi) to pay to the Master Servicer, with respect to each Mortgage Loan
or Mortgaged Property acquired in respect thereof that has been purchased
by the Master Servicer pursuant to the Agreement, all amounts received
thereon and not taken into account in determining the principal balance of
such repurchased Mortgage Loan;
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(vii) to reimburse the Master Servicer or the Depositor for
liquidation expenses incurred in connection with Liquidated Mortgages and
reimbursable pursuant to the Agreement;
(viii) to withdraw any amount deposited in the Certificate Account and
not required to be deposited therein; and
(ix) to clear and terminate the Certificate Account upon termination
of the Agreement.
Unless otherwise specified in the related Prospectus Supplement, on or
prior to the Business Day immediately preceding each Distribution Date, the
Master Servicer shall withdraw from the Certificate Account the amount of
Available Funds, to the extent on deposit, for deposit in an account maintained
by the Trustee for the related Series of Certificates.
Except as otherwise provided in the related Prospectus Supplement with
respect to each Buydown Loan, the Master Servicer will deposit the Buydown Funds
in a custodial account (which may be interest-bearing) complying with the
requirements set forth above for the Certificate Account (the "Buydown
Account"). The amount of such deposit, together with investment earnings thereon
at the rate specified in the related Prospectus Supplement, will provide funds
sufficient to support the payments on such Buydown Loan on a level debt service
basis. The Master Servicer will not be obligated to add to the Buydown Account
should investment earnings prove insufficient to maintain the scheduled level of
payments on the Buydown Loans, in which event, distributions to the
Certificateholders may be affected.
With respect to each Graduated Payment Loan, the Master Servicer will, if
and to the extent provided in the related Prospectus Supplement, deposit in a
custodial account (which may be interest-bearing) complying with the
requirements set forth above for the Certificate Account an amount which,
together with investment earnings thereon at the rate set forth in the related
Prospectus Supplement, will provide funds sufficient to support the payments
thereon on a level debt service basis (the "Graduated Payment Account"). The
Master Servicer will not be obligated to supplement the Graduated Payment
Account should investment earnings thereon prove insufficient to maintain the
scheduled level of payments, in which event, distributions to the
Certificateholders may be affected.
Representations by Sellers; Repurchases
Each Seller will have made representations and warranties in the related
Agreement in respect of the Mortgage Loans sold by such Seller and evidenced by
a Series of Certificates. Such representations and warranties, unless otherwise
provided in the related Prospectus Supplement, generally include, among other
things: (i) that any required title insurance (or in the case of Mortgaged
Properties located in areas where such policies are generally not available, an
attorney's certificate of title) and any required hazard insurance policy were
effective at the origination of each Mortgage Loan, and that each policy (or
certificate of title as applicable) remained in effect on the date of purchase
of the Mortgage Loan from the Seller by or on behalf of the Depositor; (ii) that
the Seller had good title to each such Mortgage Loan and such Mortgage Loan was
subject to no offsets, defenses, counterclaims or rights of rescission except to
the extent that any buydown agreement described herein may forgive certain
indebtedness of a Mortgagor; (iii) that each Mortgage Loan constituted a valid
lien on the Mortgaged Properties (subject only to exceptions described in the
related Agreement) and that the Mortgaged Property, to the best knowledge of the
Seller, was free from damage and was in good repair; (iv) that there were no
delinquent tax or assessment liens against the Mortgaged Property; (v) as of the
related Cut-off Date, no Mortgage Loan will be 60 days or more delinquent in
payment; and (vi) that each Mortgage Loan was made in compliance with, and is
enforceable under, all applicable local, state and federal laws and regulations
in all material respects except as limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies.
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If specified in the related Prospectus Supplement, the representations and
warranties of a Seller in respect of a Mortgage Loan will be made not as of the
Cut-off Date but as of the date on which such Seller sold the Mortgage Loan to
the Depositor or one of its affiliates. Under such circumstances, a substantial
period of time may have elapsed between such date and the date of initial
issuance of the Series of Certificates evidencing an interest in such Mortgage
Loan. Since the representations and warranties of a Seller do not address events
that may occur following the sale of a Mortgage Loan by such Seller, its
repurchase obligation described below will not arise if the relevant event that
would otherwise have given rise to such an obligation with respect to a Mortgage
Loan occurs after the date of sale of such Mortgage Loan by such Seller to the
Depositor or its affiliates. However, the Depositor will not include any
Mortgage Loan in the Trust for any Series of Certificates if anything has come
to the Depositor's attention that would cause it to believe that the
representations and warranties of a Seller will not be accurate and complete in
all material respects in respect of such Mortgage Loan as of the date of initial
issuance of the related Series of Certificates. If the Master Servicer is also a
Seller of Mortgage Loans with respect to a particular Series, such
representations will be in addition to the representations and warranties made
by the Master Servicer in its capacity as the Master Servicer.
If the Depositor elects to cause the Trust relating to a Series of
Certificates to be treated as a REMIC, each Seller will make representations and
warranties in the related Agreement with respect to the related Mortgage Loans
as of the date of initial issuance of such Series of Certificates (the "Closing
Date"), including that (i) each Mortgage Loan is a "qualified mortgage" under
Section 860G(a)(3) of the Code, and (ii) none of the Mortgage Loans had a
loan-to-value ratio greater than 125% at the time of origination and, in the
case of a Mortgage Loan that has been modified, at the time of origination and
at the time such Mortgage Loan has been modified. For purposes of computing such
loan-to-value ratio for a Mortgage Loan which, with respect to the real estate
on which the related Mortgaged Property is located, is not secured by a first
mortgage, the fair market value of the Mortgaged Property and other property
securing the Mortgage Loan must be reduced by the amount of any lien that is
senior to the Mortgage Loan, and must be further reduced by a proportionate
amount of any lien that is on a parity with the Mortgage Loan.
Pursuant to the Agreement, the Master Servicer, the Trustee, any
Sub-Servicer, CIT Consumer Finance, or the Certificate Guaranty Insurer, if any,
will promptly notify the relevant Seller of any material breach of any
representation or warranty made by such Seller in respect of a Mortgage Loan
that materially and adversely affects the interests of the Certificateholders
(or the interests of the Certificate Guaranty Insurer, if any) in such Mortgage
Loan. Unless otherwise specified in the related Prospectus Supplement, if such
Seller does not cure such breach by the earlier of (i) 90 days after such Seller
became aware of such breach, and (ii) 85 days after receipt of notice from the
Master Servicer, the Trustee, CIT Consumer Finance, any Sub-Servicer, or the
Certificate Guaranty Insurer, if any, then such Seller will be obligated (A) to
remove such Mortgage Loan and substitute in lieu of such Mortgage Loan a
substitute Mortgage Loan which qualifies for substitution under the related
Agreement (a "Qualified Substitute Mortgage Loan") and, if the then outstanding
principal balance of such Qualified Substitute Mortgage Loan is less than the
principal balance of such Mortgage Loan as of the date of such substitution,
deposit in the related Certificate Account the amount of such shortfall in
principal balance arising from such substitution (the "Substitution
Adjustment"), or (B) to repurchase such Mortgage Loan from the Trust at a price
(the "Purchase Price") equal to 100% of the outstanding principal balance
thereof as of the date of the repurchase plus accrued interest thereon to the
first day of the month in which the Purchase Price is to be distributed at the
Mortgage Rate (less any unreimbursed Advances or amount payable as related
servicing compensation if such Seller is the Master Servicer with respect to
such Mortgage Loan), which Purchase Price will be deposited in the Certificate
Account and delivered to
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the Trustee on the next succeeding Deposit Date, except for the portion thereof,
if any, relating to unreimbursed Insured Payments, if any, which shall be paid
directly to the Certificate Guaranty Insurer. Notwithstanding the foregoing
provisions, with respect to a Trust for which a REMIC election is to be made,
unless the related Prospectus Supplement otherwise provides, no purchase of or
substitution for a Mortgage Loan will be made if such purchase or substitution
would result in a prohibited transaction tax or would cause such Trust to fail
to qualify as a REMIC. If a REMIC election is to be made with respect to a
Trust, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer or a holder of the related residual certificate will be
obligated to pay any prohibited transaction tax that may arise in connection
with any such repurchase or substitution. The Master Servicer, unless otherwise
specified in the related Prospectus Supplement, will be entitled to
reimbursement for any such payment from any holder of the related residual
certificate. See "Description of the Certificates--General" herein and in the
related Prospectus Supplement. Except in those cases in which the Master
Servicer is a Seller, the Master Servicer will be required under the applicable
Agreement to enforce this obligation for the benefit of the Trustee and the
Certificateholders, following the practices it would employ in its good faith
business judgment were it the owner of such Mortgage Loan. This repurchase
obligation will constitute the sole remedy available to Certificateholders, the
Trustee or the Certificate Guaranty Insurer, if any, for a breach of
representation by a Seller.
Neither the Depositor nor the Master Servicer (unless the Master Servicer
is a Seller) will be obligated to purchase a Mortgage Loan if a Seller defaults
on its obligation to do so, and no assurance can be given that Sellers will
carry out their respective repurchase obligations with respect to Mortgage
Loans.
Collection Procedures
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer will agree to master service the Mortgage Loans in accordance with the
related Agreement and, where applicable, prudent mortgage servicing standards.
"Prudent mortgage servicing standards" generally will require the Master
Servicer to exercise collection and foreclosure procedures with respect to the
Mortgage Loans with the same degree of care and skill that it would use in
master servicing similar mortgage loans for its own account and for the account
of its affiliates. The Master Servicer will make reasonable efforts to collect
all payments called for under the Mortgage Loans and will, consistent with each
Agreement and any Mortgage Pool Insurance Policy, Primary Mortgage Insurance
Policy and Bankruptcy Bond or alternative arrangements, follow such collection
procedures as are customary with respect to mortgage loans that are comparable
to the Mortgage Loans. Nonetheless, the Master Servicer, in determining the type
of action that is reasonable to pursue may consider, among other things, the
unpaid principal balance of a Mortgage Loan against the estimated cost of
collection or foreclosure action, the unpaid balance of the related prior
mortgage, if any, the condition and estimated market value ("as is" and "if
repaired"), the estimated marketability of the related Mortgage Property and the
borrower's ability to repay.
Waivers And Deferrals
Consistent with the above, the Master Servicer may, in its discretion, (i)
waive any assumption fee, prepayment charge, penalty interest, late payment or
other charge in connection with a Mortgage Loan, and (ii) to the extent not
inconsistent with the coverage of such Mortgage Loan by a Mortgage Pool
Insurance Policy, Primary Mortgage Insurance Policy or Bankruptcy Bond or
alternative arrangements, if applicable, arrange with a Mortgagor a schedule for
the repayment of delinquent amounts subject to any limitations set forth in the
Agreement. To the extent the Master Servicer
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consents to the deferment of the due dates for payments due on a Mortgage Note,
the Master Servicer will nonetheless make payment of any required Advance with
respect to the payments so extended to the same extent as if such installment
had not been deferred.
Escrow Account
If and to the extent specified in the related Prospectus Supplements and
under the related Agreement, the Master Servicer, to the extent permitted by
law, may establish and maintain an escrow account (the "Escrow Account") in
which Mortgagors will be required to deposit amounts sufficient to pay taxes,
assessments, mortgage and hazard insurance premiums, collection expenses, other
comparable items and any other amount permitted to be escrowed by law.
Withdrawals from the Escrow Account maintained for Mortgagors may be made to
effect timely payment of taxes, assessments, mortgage and hazard insurance, to
refund to Mortgagors amounts determined to be overages, to pay interest to
Mortgagors on balances in the Escrow Account to the extent required by law, to
repair or otherwise protect the Mortgaged Property, to clear and terminate such
account and to pay such other amounts as may be permitted by applicable law or
the escrow agreement. The Master Servicer will be responsible for the
administration of the Escrow Account and will be obligated to make payments to
such account when a deficiency exists therein.
Enforcement of Due on Sale Clauses
Unless otherwise specified in the related Prospectus Supplement, in any
case in which Mortgaged Property securing a conventional Mortgage Loan has been,
or is about to be, conveyed by the Mortgagor, the Master Servicer will, to the
extent it has knowledge of such conveyance or proposed conveyance, exercise or
cause to be exercised its rights to accelerate the maturity of such Mortgage
Loan under any "due on sale" clause applicable thereto, but only if, in the
reasonable belief of the Master Servicer, the exercise of such rights is
permitted by applicable law and the applicable Mortgage, will not impair or
threaten to impair any recovery under any related Primary Mortgage Insurance
Policy and will not materially increase the risk of default or delinquency on,
or materially decrease the security for, such Mortgage Loan. If these conditions
are not met or if the Master Servicer reasonably believes it is unable under
applicable law and under the applicable Mortgage to enforce such "due on sale"
clause, the Master Servicer will enter into or cause to be entered into an
assumption and modification agreement with the person to whom such Mortgaged
Property has been or is about to be conveyed, pursuant to which such person
becomes liable for repayment of the Mortgage Loan and, to the extent permitted
by applicable law and the applicable Mortgage, the Mortgagor also remains liable
thereon. Any fee collected by or on behalf of the Master Servicer for entering
into an assumption agreement will be retained by or on behalf of the Master
Servicer as additional servicing compensation. See "Certain Legal Aspects of the
Mortgage Loans--Due on Sale Clauses" herein. The Master Servicer also will be
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.
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Hazard Insurance
Unless otherwise specified in the related Prospectus Supplement, all
Mortgages will contain provisions requiring the Mortgagor on each Mortgage Loan
to maintain a hazard insurance policy providing for no less than the coverage of
the standard form of fire insurance policy with extended coverage customary for
the type of Mortgaged Property in the state in which such Mortgaged Property is
located. Such coverage will be in an amount that is at least equal to the lesser
of (i) the maximum insurable value of the improvements securing such Mortgage
Loan or (ii) the outstanding principal balance of the Mortgage Loan and the
related senior mortgage (if any) and (iii) the minimum amount required to
compensate for damage or loss on a replacement cost basis. If the Mortgagor
fails to maintain such insurance coverage, however, the Master Servicer will not
be obligated to obtain such insurance and advance premiums for such insurance on
behalf of the Mortgagor (i.e. "force placement" of hazard insurance). All
amounts collected by the Master Servicer under any hazard policy (except for
amounts to be applied to the restoration or repair of the Mortgaged Property or
released to the Mortgagor in accordance with the Master Servicer's normal
servicing procedures) will be deposited in the related Certificate Account. In
the event that the Master Servicer maintains a blanket policy insuring against
hazard losses on all the Mortgage Loans comprising part of a Trust, it will
conclusively be deemed to have satisfied its obligation relating to the
maintenance of hazard insurance. Such blanket policy may contain a deductible
clause, in which case the Master Servicer will be required to deposit from its
own funds into the related Certificate Account the amounts that would have been
deposited therein but for such clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements securing a Mortgage Loan
by fire, lightning, explosion, smoke, windstorm and hail, riot, strike and civil
commotion, subject to the conditions and exclusions particularized in each
policy. Although the policies relating to the Mortgage Loans may have been
underwritten by different insurers under different state laws in accordance with
different applicable forms and therefore may not contain identical terms and
conditions, the basic terms thereof are dictated by the respective state laws,
and most such policies typically do not cover any physical damage resulting from
the following: war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and mud
flows), nuclear reactions, wet or dry rot, vermin, rodents, insects or domestic
animals, theft and, in certain cases, vandalism.
The foregoing list is merely indicative of certain kinds of uninsured risks
and is not intended to be all inclusive. If the appraisal (if any) of the
Mortgaged Property securing a Mortgage Loan indicates that the Mortgaged
Property is located in a federally designated special flood area at the time of
origination identified in the Federal Register by the Flood Emergency Management
Agency as having special flood hazards (and such flood insurance has been made
available), the Master Servicer will in some cases require the Mortgagor to
obtain flood insurance subject to the maximum amount of insurance available
under the National Flood Insurance Act of 1968, as amended.
The Master Servicer will also be required to maintain, to the extent such
insurance is available, on REO Property, fire and hazard insurance in the
applicable amounts described above, liability insurance and, to the extent
required and available under the National Flood Insurance Act of 1968, as
amended, flood insurance in an amount equal to that required above.
The hazard insurance policies covering Mortgaged Properties typically
contain a clause which in effect requires the insured at all times to carry
insurance of a specified percentage (generally 80% to 90%) of the full
replacement value of the Mortgaged Property in order to recover the full amount
of any partial loss. If the insured's coverage falls below this specified
percentage, then the insurer's liability in the event of partial loss will not
exceed the larger of (i) the actual cash value (generally defined as replacement
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cost at the time and place of loss, less physical depreciation) of the
improvements damaged or destroyed, or (ii) such proportion of the loss as the
amount of insurance carried bears to the specified percentage of the full
replacement cost of such improvements. Since improved real estate generally has
appreciated in value over time in the past, in the event of partial loss the
hazard insurance proceeds may be insufficient to restore fully the damaged
property. If specified in the related Prospectus Supplement, a special hazard
insurance policy will be obtained to insure against certain of the uninsured
risks described above. See "Credit Enhancement--Special Hazard Insurance
Policies" herein.
Realization Upon Defaulted Mortgage Loans
Unless otherwise specified in the Prospectus Supplement, the Master
Servicer will be required to foreclose upon or otherwise comparably convert the
ownership to the name of the Trustee (or to a nominee of the Trustee or the
Master Servicer) of Mortgaged Properties relating to defaulted Mortgage Loans as
to which no satisfactory arrangements can be made for collection of delinquent
payments to the extent that such action would be consistent with prudent
mortgage servicing standards. However, the Master Servicer will be required to
take into account the existence of any hazardous substances, hazardous wastes or
solid wastes on a Mortgaged Property in determining whether to foreclose upon or
otherwise comparably convert the ownership of such Mortgaged Property.
Primary Mortgage Insurance Policies. The Master Servicer will maintain or
cause to be maintained, as the case may be, in full force and effect, but only
if and to the extent specified in the related Prospectus Supplement, a Primary
Mortgage Insurance Policy with regard to each Mortgage Loan for which such
coverage is required. The Master Servicer will not cancel or refuse to renew any
such Primary Mortgage Insurance Policy in effect at the time of the initial
issuance of a Series of Certificates that is required to be kept in force under
the applicable Agreement unless the replacement Primary Mortgage Insurance
Policy for such canceled or nonrenewed policy is maintained with an insurer
whose claims-paying ability is sufficient to maintain the current rating of the
classes of Certificates of such Series which have been rated.
Although the terms and conditions of primary mortgage insurance vary, the
amount of a claim for benefits under a Primary Mortgage Insurance Policy
covering a Mortgage Loan will consist of the insured percentage of the unpaid
principal amount of the covered Mortgage Loan and accrued and unpaid interest
thereon and reimbursement of certain expenses, less (i) all rents or other
payments collected or received by the insured (other than the proceeds of hazard
insurance) that are derived from or in any way related to the Mortgaged
Property, (ii) hazard insurance proceeds in excess of the amount required to
restore the Mortgaged Property and which have not been applied to the payment of
the Mortgage Loan, (iii) amounts expended but not approved by the issuer of the
related Primary Mortgage Insurance Policy (the "Primary Insurer"), (iv) claim
payments previously made by the Primary Insurer, and (v) unpaid premiums.
Primary Mortgage Insurance Policies reimburse certain losses sustained by
reason of defaults in payments by borrowers. Primary Mortgage Insurance Policies
will not insure against, and exclude from coverage, a loss sustained by reason
of a default arising from or involving certain matters, including (i) fraud or
negligence in origination or servicing of the Mortgage Loans, including
misrepresentation by the originator, Seller, Mortgagor or other persons involved
in the origination of the Mortgage Loan; (ii) failure to construct the Mortgaged
Property subject to the Mortgage Loan in accordance with specified plans; (iii)
physical damage to the Mortgaged Property; and (iv) the related Sub-Servicer not
being approved as a servicer by the Primary Insurer.
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Recoveries Under a Primary Mortgage Insurance Policy. As conditions
precedent to the filing of or payment of a claim under a Primary Mortgage
Insurance Policy covering a Mortgage Loan, the insured will be required to (i)
advance or discharge (a) all hazard insurance policy premiums, and (b) as
necessary and approved in advance by the Primary Insurer, (1) real estate
property taxes, (2) all expenses required to maintain the related Mortgaged
Property in at least as good a condition as existed at the effective date of
such Primary Mortgage Insurance Policy, ordinary wear and tear excepted, (3)
Mortgaged Property sales expenses, (4) any outstanding liens (as defined in such
Primary Mortgage Insurance Policy) on the Mortgaged Property, and (5)
foreclosure costs, including court costs and reasonable attorneys' fees; (ii) in
the event of any physical loss or damage to the Mortgaged Property, restore and
repair the Mortgaged Property to at least as good a condition as existed at the
effective date of such Primary Mortgage Insurance Policy, ordinary wear and tear
excepted; and (iii) tender to the Primary Insurer good and marketable title to
and possession of the Mortgaged Property.
The Master Servicer, on behalf of itself, the Trustee and the
Certificateholders, will present claims to the insurer under each Primary
Mortgage Insurance Policy, and will take such reasonable steps as are necessary
to receive payment or to permit recovery thereunder with respect to defaulted
Mortgage Loans. As set forth above, all collections by or on behalf of the
Master Servicer under any Primary Mortgage Insurance Policy and, when the
Mortgaged Property has not been restored, the related hazard insurance policy
are to be deposited in the Certificate Account, subject to withdrawal as
heretofore described.
If the Mortgaged Property securing a defaulted Mortgage Loan is damaged and
proceeds, if any, from the related hazard insurance policy are insufficient to
restore the damaged Mortgaged Property to a condition sufficient to permit
recovery under the related Primary Mortgage Insurance Policy, if any, the Master
Servicer is not required to expend its own funds to restore the damaged
Mortgaged Property unless it determines (i) that such restoration will increase
the proceeds to Certificateholders on liquidation of the Mortgage Loan after
reimbursement of the Master Servicer for its expenses; and (ii) that such
expenses will be recoverable by it from related Insurance Proceeds or
Liquidation Proceeds.
If coverage under a Primary Mortgage Insurance Policy is not available or
is insufficient. If recovery on a defaulted Mortgage Loan under any related
Primary Mortgage Insurance Policy is not available for the reasons set forth in
the preceding paragraph, or if the defaulted Mortgage Loan is not covered by a
Primary Mortgage Insurance Policy, the Master Servicer will be obligated to
follow or cause to be followed such normal practices and procedures as it deems
necessary or advisable to realize upon the defaulted Mortgage Loan. If the
proceeds of any liquidation of the Mortgaged Property securing the defaulted
Mortgage Loan are less than the principal balance of such Mortgage Loan plus
interest accrued thereon that is payable to Certificateholders, the Trust will
realize a loss in the amount of such difference plus the aggregate of expenses
incurred by the Master Servicer in connection with such proceedings that are
reimbursable under the Agreement. In the unlikely event that any such
proceedings result in a total recovery which is, after reimbursement to the
Master Servicer of its expenses, in excess of the principal balance of such
Mortgage Loan plus interest accrued thereon that is payable to
Certificateholders, the Master Servicer will be entitled to withdraw or retain
from the Certificate Account amounts representing its normal servicing
compensation with respect to such Mortgage Loan and, unless otherwise specified
in the related Prospectus Supplement, amounts representing the balance of such
excess, exclusive of any amount required by law to be forwarded to the related
Mortgagor, as additional servicing compensation.
If the Master Servicer or its designee recovers Insurance Proceeds which,
when added to any related Liquidation Proceeds and after deduction of certain
expenses reimbursable to the Master Servicer, exceed the principal balance of a
Mortgage Loan plus interest accrued thereon that is payable to
Certificateholders, the Master Servicer will be entitled to withdraw or retain
from the Certificate Account amounts representing its normal servicing
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compensation with respect to such Mortgage Loan. In the event that the Master
Servicer has expended its own funds to restore the damaged Mortgaged Property
and such funds have not been reimbursed under the related hazard insurance
policy, it will be entitled to withdraw from the Certificate Account out of
related Liquidation Proceeds or Insurance Proceeds an amount equal to such
expenses incurred by it, in which event the Trust may realize a loss up to the
amount so charged. Since Insurance Proceeds cannot exceed deficiency claims and
certain expenses incurred by the Master Servicer, no such payment or recovery
will result in a recovery to the Trust that exceeds the principal balance of the
defaulted Mortgage Loan together with accrued interest thereon. See "Credit
Enhancement" herein and in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement or the
related Agreement, the proceeds from any liquidation of a Mortgage Loan will be
applied in the following order of priority: first, to reimburse the Master
Servicer for any unreimbursed costs of collection and expenses incurred by it in
the liquidation or to restore the related Mortgaged Property and any servicing
compensation payable to the Master Servicer with respect to such Mortgage Loan;
second, to reimburse the Master Servicer for any unreimbursed Advances or
Servicing Advances with respect to such Mortgage Loan; third, to repay accrued
and unpaid interest (to the extent no Advance has been made for such amount) on
such Mortgage Loan; and fourth, to repay principal of such Mortgage Loan.
Servicing and Other Compensation and Payment of Expenses
The principal servicing compensation to be paid to the Master Servicer in
respect of its master servicing activities for each Series of Certificates will
be equal to the percentage per annum described in the related Prospectus
Supplement (which may vary under certain circumstances) of the outstanding
principal balance of each Mortgage Loan, and such compensation will be retained
by it from collections of interest on such Mortgage Loan in the related Trust
(the "Master Servicing Fee"). Unless otherwise specified in the related
Prospectus Supplement, as compensation for its servicing duties, the Master
Servicer will be entitled to a monthly servicing fee as described in the related
Prospectus Supplement. In addition, the Master Servicer will retain any benefit
that may accrue as a result of the investment of funds in the applicable
Certificate Account (unless otherwise specified in the related Prospectus
Supplement), and certain other excess amounts.
The Master Servicer will pay or cause to be paid the reasonable and
customary ongoing expenses associated with each Trust and incurred by it in
connection with its responsibilities under the related Agreement, including,
without limitation, payment of the fees and disbursements of the Trustee, any
custodian appointed by the Trustee, the certificate registrar and any paying
agent, and payment of expenses incurred in enforcing the obligations of
Sub-Servicers and Sellers. The Master Servicer will be entitled to reimbursement
of expenses incurred in enforcing the obligations of Sub-Servicers and Sellers
under certain limited circumstances. In addition, the Master Servicer will pay
the cost of (i) the preservation, restoration and protection of any Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
and (iii) the management and liquidation of Mortgaged Property acquired in
satisfaction of the related Mortgage Loan. Such expenditures may include costs
of collection efforts, reappraisals when a Mortgage Loan is past due, legal fees
in connection with foreclosure actions, advancing payments on the related senior
mortgage, if any, advances of delinquent property taxes, upkeep and maintenance
of the Mortgaged Property if it is acquired through foreclosure and similar
types of expenses. Each such expenditure constitutes a "Servicing Advance." The
Master Servicer will be obligated to make the Servicing Advances incurred in the
performance of its servicing obligations only if it determines (i) that such
actions will increase the proceeds of liquidation of the Mortgage Loan to
Certificateholders after reimbursement to itself for such expenses, and (ii)
that such expenses will be recoverable to it as described below. Unless
otherwise specified in the related Prospectus Supplement, the Master Servicer
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will be entitled to recover Servicing Advances to the extent permitted by the
Mortgage Loans or, if not theretofore recovered from the Mortgagor on whose
behalf such Servicing Advance was made, from Liquidation Proceeds, Insurance
Proceeds and such other amounts as may be collected by the Master Servicer from
the Mortgagor or otherwise relating to the Mortgage Loan. Servicing Advances
will be reimbursable to the Master Servicer from the sources described above out
of the funds on deposit in the Certificate Account, such right of reimbursement
being prior to the rights of Certificateholders to receive any related
Liquidation Proceeds (including Insurance Proceeds). A "Liquidated Mortgage" is
a Mortgage Loan as to which the Master Servicer has determined that all
recoverable Liquidation Proceeds and Insurance Proceeds have been received.
Evidence as to Compliance
Each Agreement will provide that on or before a specified date in each
year, a firm of independent public accountants will furnish a statement to the
Trustee to the effect that, on the basis of the examination by such firm
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers, the servicing by or on behalf of the Master
Servicer of Mortgage Loans, or Private Mortgage-Backed Securities, under
Agreements substantially similar to each other (including the related Agreement)
was conducted in compliance with the minimum servicing standards set forth in
the Uniform Single Attestation Program for Mortgage Bankers except for any
significant exceptions or errors in records that, in the opinion of the firm,
the Uniform Single Attestation Program for Mortgage Bankers requires it to
report. In rendering its statement such firm may rely, as to matters relating to
the direct servicing of Mortgage Loans or Private Mortgage-Backed Securities by
Sub-Servicers, upon comparable statements for examinations conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers (rendered within one year of such statement) of firms of
independent public accountants with respect to the related Sub-Servicer.
Each Agreement will also provide for delivery to the Trustee, on or before
a specified date in each year, of an annual statement signed by an officer of
the Master Servicer to the effect that the Master Servicer has fulfilled its
obligations under the Agreement throughout the preceding year.
Copies of the annual accountants' statement and the statement of officers
of the Master Servicer may be obtained by Certificateholders of the related
Series without charge upon written request to the Master Servicer at the address
set forth in the related Prospectus Supplement.
List of Certificateholders
Each Agreement will provide that three or more holders of Certificates of
any Series may, by written request to the Trustee and at their expense, obtain
access to the list of all Certificateholders maintained by the Trustee for the
purpose of communicating with other Certificateholders with respect to their
rights under the Agreement and the Certificates.
Certain Matters Regarding the Master Servicer and the Depositor
CIT Consumer Finance will be the Master Servicer under each Agreement, and
is an affiliate of the Depositor. Unless otherwise specified in the related
Prospectus Supplement, CIT Consumer Finance will appoint CITSF as a Sub-Servicer
for all of the Mortgage Loans in each Mortgage Pool.
Each Agreement will provide that the Master Servicer may not resign from
its obligations and duties under such Agreement except upon a determination that
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the performance by it of its duties thereunder is no longer permissible under
applicable law. No such resignation will become effective until the Trustee or a
successor servicer has assumed the Master Servicer's obligations and duties
under the Agreement.
Each Agreement will further provide that neither the Master Servicer, the
Sub-Servicer (if an affiliate of CIT), the Depositor nor any director, officer,
employee, or agent of the Master Servicer, or the Depositor will be under any
liability to the related Trust or Certificateholders for any action taken or for
refraining from the taking of any action in good faith pursuant to the
Agreement, or for errors in judgment; provided, however, that neither the Master
Servicer, the Sub-Servicer (if an affiliate of CIT), the Depositor nor any such
person will be protected against any liability that would otherwise be imposed
by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties thereunder or by reason of reckless disregard of
obligations and duties thereunder. In addition, each Agreement will provide that
neither the Master Servicer, the Sub-Servicer (if an affiliate of CIT), nor the
Depositor will be under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its respective responsibilities under
the Agreement and which in its opinion may involve it in any expense or
liability. The Master Servicer, the Sub-Servicer (if an affiliate of CIT), or
the Depositor may, however, in their discretion undertake, appear in or defend
any such action including any cross claims or third party claims which either
may deem necessary or desirable with respect to the Agreement and the rights and
duties of the parties thereto and the interests of the Certificateholders
thereunder. In such event, the legal expenses and costs of such action and any
liability resulting therefrom will be expenses, costs and liabilities of the
Trust, and the Master Servicer, the Sub-Servicer (if an affiliate of CIT), the
Depositor, as the case may be, will be entitled to be reimbursed therefor out of
funds otherwise distributable to Certificateholders.
Any person into which the Master Servicer or the Sub-Servicer (if an
affiliate of CIT), may be merged or consolidated, or any person resulting from
any merger or consolidation to which the Master Servicer or the Sub-Servicer (if
an affiliate of CIT), is a party, or any person succeeding to the business of
the Master Servicer, or the Sub-Servicer (if an affiliate of CIT), will be the
successor of the Master Servicer or the Sub-Servicer (if an affiliate of CIT),
as applicable, under each Agreement, provided that such person is qualified to
service mortgage loans under the related Agreement, and further provided that
such merger, consolidation or succession does not adversely affect the then
current rating or ratings of the class or classes of Certificates of such Series
that have been rated.
Termination Events
Unless otherwise specified in the related Prospectus Supplement,
Termination Events under each Agreement will consist of (i) any failure by the
Master Servicer to deposit or cause to be deposited any required amount (other
than an Advance or Servicing Advance) into the Certificate Account which
continues unremedied for five Business Days after the giving of written notice
of such failure to the Master Servicer by the Trustee or to the Master Servicer
and the Trustee by the Certificate Guaranty Insurer (if any) or the holders of
Certificates having not less than 51% of the aggregate Percentage Interest
constituting each class of Certificates (other than the Certificates
representing the residual interest in a Trust for which a REMIC election has
been made) (the "Majority Certificateholders"); (ii) any failure by the Master
Servicer to make an Advance or, Servicing Advance, as required under the
Agreement, unless cured as specified therein, to the extent such failure
materially or adversely affects the interests of the Certificate Guaranty
Insurer, if any, or the Certificateholders; (iii) any failure by the Master
Servicer duly to observe or perform in any material respect any of its other
covenants or agreements in the Agreement which continues unremedied for thirty
days after the giving of written notice of such failure to the Master Servicer
by the Trustee, or to the Master Servicer and the Trustee by the Certificate
Guaranty Insurer (if any) or the Majority; and (iv) certain events of
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insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceeding and certain actions by or on behalf of the Master Servicer
indicating its insolvency, reorganization or inability to pay its obligations.
If specified in the related Prospectus Supplement, the Agreement will
permit the Trustee to sell the Mortgage Assets and the other assets of the Trust
in the event that payments in respect thereto are insufficient to make payments
required in the Agreement. The assets of the Trust will be sold only under the
circumstances and in the manner specified in the related Prospectus Supplement.
Rights Upon Termination Event
Unless otherwise specified in the related Prospectus Supplement, so long as
a Termination Event under an Agreement remains unremedied, the Depositor or the
Trustee may, and at the direction of (i) the Certificate Guaranty Insurer (if
any), or (ii) the Majority Certificateholders and under such other circumstances
as may be specified in such Agreement, the Trustee shall, terminate all of the
rights and obligations of the Master Servicer under the Agreement relating to
such Trust (other than its right to recovery of Advances, Servicing Advances and
other expenses and amounts advanced pursuant to the terms of such Agreement,
which rights the Master Servicer will retain under all circumstances), and with
respect to the Mortgage Assets by written notice to the Master Servicer (with,
if specified in the related Prospectus Supplement, the prior written consent of
the Certificate Guaranty Insurer, if any, which consent may not be unreasonably
withheld), whereupon the Trustee will succeed to all of the responsibilities,
duties and liabilities of the Master Servicer under the Agreement, including, if
specified in the related Prospectus Supplement, the obligation to make Advances,
and will be entitled to similar compensation arrangements not to exceed the
Servicing Fee. "Percentage Interest" means the original principal amount (or
notional principal amount) of a Certificate divided by the original Certificate
Balance of such class of Certificates. In the event that the Trustee is
unwilling or unable so to act, it may appoint, or petition a court of competent
jurisdiction for the appointment of, a mortgage loan servicing institution with
a net worth of at least $15,000,000 to act as successor to the Master Servicer
under the Agreement. Pending such appointment, the Trustee is obligated to act
in such capacity. The Trustee and any such successor may agree without consent
of the Certificateholders upon the servicing compensation to be paid to the
successor servicer, which in no event may be greater than the compensation
payable to the Master Servicer under the Agreement.
No Certificateholder, solely by virtue of such holder's status as a
Certificateholder, will have any right under any Agreement to institute any
proceeding with respect to such Agreement, unless such holder previously has
given to the Trustee written notice of default and unless the holders of any
class of Certificates of such Series evidencing not less than 25% of the
aggregate Percentage Interests constituting such class (with, if specified in
the related Prospectus Supplement, the prior written consent of the Certificate
Guaranty Insurer, if any, which consent may not be unreasonably withheld), have
made written request upon the Trustee to institute such proceeding in its own
name as Trustee thereunder and have offered to the Trustee reasonable indemnity,
and the Trustee for 60 days has neglected or refused to institute any such
proceeding.
Amendment
Unless otherwise specified in the related Prospectus Supplement, each
Agreement may be amended by the Depositor, the Master Servicer and the Trustee,
without the consent of any of the Certificateholders, (i) to cure any ambiguity;
(ii) to correct or supplement any provision therein which may be defective or
inconsistent with any other provision therein; (iii) to add to the duties of a
Seller, the Trustee or the Master Servicer or a Sub-Servicer; (iv) to add any
other provisions with respect to matters or questions arising under such
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Agreement or related Credit Enhancement; (v) to add or amend any provisions of
such Agreement as required by a Rating Agency in order to maintain or improve
the rating of the Certificates (it being understood that none of any Seller, the
Servicer, the Depositor or the Trustee is obligated to maintain or improve such
rating); (vi) to make any other revisions with respect to matters or questions
arising under the Agreement that are not inconsistent with the provisions
thereof, provided, that such amendment pursuant to clause (vi) will not
materially and adversely affect in any material respect the interests of any
Certificateholder of such Series or, if specified in the related Prospectus
Supplement, the interests of the Certificate Guaranty Insurer; or (vii) to make
any revisions to the Agreement, provided that such amendment will not materially
and adversely affect in any material respect the interests of any
Certificateholder of such Series or, if specified in the related Prospectus
Supplement, the interests of the Certificate Guaranty Insurer, if any. An
amendment will be deemed not to adversely affect in any material respect the
interests of the Certificateholders if the person requesting such amendment
obtains a letter from each Rating Agency stating that such amendment will not
result in the downgrading or withdrawal of the respective ratings then assigned
to such Certificates. In addition, to the extent provided in the related
Agreement, an Agreement may be amended without the consent of any of the
Certificateholders to change the manner in which the Certificate Account is
maintained, provided, that any such change does not adversely affect the then
current rating of the class or classes of Certificates of such Series that have
been rated. In addition, if a REMIC election is made with respect to a Trust,
the related Agreement may be amended to modify, eliminate or add to any of its
provisions to such extent as may be necessary to maintain the qualification of
the related Trust as a REMIC, provided that the Trustee has received an opinion
of counsel to the effect that such action is necessary or helpful to maintain
such qualification. Unless otherwise specified in the related Prospectus
Supplement, each Agreement may also be amended by the Depositor, the Master
Servicer, the applicable Sellers and the Trustee with the consent of holders of
Certificates of such Series evidencing not less than 51% of the aggregate
Percentage Interests of each class affected thereby (and, if specified in the
related Prospectus Supplement, the consent of the Certificate Guaranty Insurer)
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Agreement or of modifying in any manner
the rights of the holders of the related Certificates; provided, however, that
no such amendment may (i) reduce in any manner the amount of, or delay the
timing of, payments on any Certificate without the consent of the holder of such
Certificate, or (ii) reduce the aforesaid percentage of Certificates of any
class of holders that is required to consent to any such amendment without the
consent of the holders of all Certificates of such class covered by such
Agreement then outstanding.
If a REMIC election is made with respect to a Trust, the Trustee will not
be entitled to consent to an amendment to the related Agreement without having
first received an opinion of counsel knowledgeable in federal income tax matters
to the effect that such amendment will not cause such Trust to fail to qualify
as a REMIC.
Each Agreement may be amended from time to time by the Master Servicer, the
applicable Sellers, the Depositor and the Trustee by written agreement, upon the
prior written consent of the Certificate Guaranty Insurer, if any, without the
notice to or consent of the Certificateholders in connection with the
substitution of cash, a letter of credit or any other collateral deposited in a
Reserve Fund.
It will not be necessary for the consent of holders of any Certificate to
approve the particular form of any proposed amendment, but it will be sufficient
if such consent shall approve the substance thereof.
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Termination; Purchase of Mortgage Loans
Unless otherwise specified in the related Agreement, the obligations
created by each Agreement for each Series of Certificates will terminate upon
the payment to the related Certificateholders of all amounts held in the
Certificate Account or by the Master Servicer and required to be paid to them
pursuant to such Agreement following the later of (i) the final payment or other
liquidation of the last of the Mortgage Assets subject thereto or the
disposition of all property acquired upon foreclosure of any such Mortgage
Assets remaining in the Trust; or (ii) the purchase by the Master Servicer or,
if REMIC treatment has been elected and if specified in the related Prospectus
Supplement, by the holder of the residual interest in the REMIC (see "Certain
Federal Income Tax Consequences" below and in the related Prospectus
Supplement), or by such other entity as may be specified in the related
Prospectus Supplement from the related Trust of all of the remaining Mortgage
Assets and all property acquired in respect of such Mortgage Assets.
Unless otherwise specified in the related Prospectus Supplement, any
purchase of Mortgage Assets and property acquired in respect of Mortgage Assets
evidenced by a Series of Certificates will be made at the option of the Master
Servicer, the Depositor or, if applicable, the holder of the REMIC residual
interest, by the Certificate Guaranty Insurer (if any), or by such other entity
as may be specified in the related Prospectus Supplement, at a price, and in
accordance with the procedures, specified in the related Prospectus Supplement.
The exercise of such right will effect early termination of the Certificates of
that Series, but the right of the Master Servicer, the Depositor or, if
applicable, such holder of the REMIC residual interest, Certificate Guaranty
Insurer or other entity, so to purchase is subject to the principal balance of
the related Mortgage Assets being less than 10% (or such other percentage
specified in the related Prospectus Supplement) of the aggregate principal
balance of the Mortgage Assets at the Cut-off Date for the Series (together with
the original balance of any Pre-Funding Account). The foregoing is subject to
the provision that if a REMIC election is made with respect to a Trust, any
repurchase pursuant to clause (ii) above will be made only in connection with a
"qualified liquidation" of the REMIC within the meaning of Section 860F(g)(4) of
the Code and the repurchases of the Mortgage Loans will not constitute
"prohibited transactions" within the meaning of section 860F(a)(2) of the Code.
In no event shall the trust created by an Agreement for a Series of Certificates
continue beyond the expiration of 21 years from the death of the last survivor
of the persons named in the Agreement. Unless otherwise provided in the related
Prospectus Supplement, the repurchase price will equal the principal amount of
such Mortgage Loans or Private Mortgage-Backed Securities (or, with respect to
any property acquired in respect of a Mortgage Loan, the outstanding principal
balance of the Mortgage Loan at the time of foreclosure) plus accrued interest
from the first day of the month of repurchase to the first day of the next
succeeding month at the Mortgage Rates borne by such Mortgage Loans or Private
Mortgage-Backed Securities or at the weighted average of such Mortgage Rates,
less related unreimbursed Advances (to the extent not already reflected in the
computation of the aggregate principal balance of such Mortgage Assets) and
unreimbursed expenses (that are reimbursable pursuant to the terms of the
Pooling and Servicing Agreement).
The Trustee
The trustee (the "Trustee") under each Agreement will be named in the
related Prospectus Supplement. The commercial bank or trust company serving as
Trustee may have banking relationships with the Depositor, the Master Servicer,
the Sub-Servicer, any Seller and any of their respective affiliates.
The Trustee may resign at any time, in which event the Master Servicer will
be obligated to appoint a successor Trustee. The Master Servicer may also remove
the Trustee if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. The Trustee may also be removed
at any time by the Majority Certificateholders in the related Trust as specified
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in the Agreement. 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.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries, which are general in nature,
of certain legal matters relating to the Mortgage Loans. Because such legal
aspects are governed primarily by applicable state law (which laws may differ
substantially), the summaries do not purport to be complete or to reflect the
laws of any particular state or to encompass the laws of all states in which the
Mortgaged Properties are located. The summaries are qualified in their entirety
by reference to the appropriate laws of the states in which Mortgage Loans may
be originated.
General
The Mortgage Loans will be secured by deeds of trust, mortgages, security
deeds or deeds to secure debt, depending upon the prevailing practice in the
state in which the property subject to the loan is located. A mortgage creates a
lien upon the real property encumbered by the mortgage, which lien is generally
not prior to the lien for real estate taxes and assessments. Priority between
mortgages depends generally on the order of recording with a state or county
office. Priority also may be affected by the express terms of the mortgage or
the deed of trust and any subordination agreement among the lenders.
Although priority among liens on the same property generally depends in the
first instance on the order of filing, there are a number of ways in which a
lien that is a senior lien when it is filed can become subordinate to a lien
filed at a later date. A deed of trust or mortgage generally is not prior to any
liens for real estate taxes and assessments, certain federal liens (including
certain federal criminal liens, environmental liens and tax liens), certain
mechanics and materialmen's liens, and other liens given priority by applicable
law.
There are two parties to a mortgage - the mortgagor, who is the borrower
and owner of the mortgaged property, and the mortgagee, who is the lender. Under
the mortgage instrument, the mortgagor delivers to the mortgagee a note or bond
and the mortgage. Although a deed of trust is similar to a mortgage, a deed of
trust formally has three parties - the borrower-property owner (similar to a
mortgagor) called the trustor, a lender (similar to a mortgagee) called the
beneficiary, and a third-party grantee called the trustee. Under a deed of
trust, the borrower grants the property, irrevocably until the debt is paid, in
trust, generally with a power of sale, to the trustee to secure payment of the
obligation. A security deed and a deed to secure debt are special types of deeds
which indicate on their face that they are granted to secure an underlying debt.
By executing a security deed or deed to secure debt, the grantor conveys title
to the property to the grantee, as opposed to merely creating a lien upon the
property, until such time as the underlying debt is repaid. The trustee's
authority under a deed of trust, the mortgagee's authority under a mortgage and
the grantee's authority under a security deed or deed to secure debt are
governed by law and, with respect to some deeds of trust, the directions of the
beneficiary.
Foreclosure
Deed of Trust. Foreclosure of a deed of trust is generally accomplished by
a nonjudicial sale under a specific provision in the deed of trust which
authorizes the trustee to sell the property at public auction 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 any notice of default and notice of sale.
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In addition, the trustee must provide notice in some states to any other
individual having an interest of record 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, these notice provisions generally 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.
In some states, the borrower-trustor has the right to reinstate the loan at
any time following default until shortly before the trustee's sale. In general,
the borrower, or any other person having a junior encumbrance on the real
estate, may, during a reinstatement period, cure the default by paying the
entire amount in arrears plus the costs and expenses incurred in enforcing the
obligation. Certain state laws control the amount of foreclosure expenses and
costs, including attorney's fees, which may be recoverable by a lender.
The trustee's sale generally must be conducted by public auction in the
county or city in which all or some part of the property is located. At the
sale, the trustee generally requires a bidder to deposit with the trustee a set
amount or a percentage of the full amount of the bidder's final bid in cash (or
an equivalent thereto satisfactory to the trustee) prior to and as a condition
to recognizing such bid, and may conditionally accept and hold these amounts for
the duration of the sale. The beneficiary of the deed of trust generally need
not bid cash at the sale, but may instead make a "credit bid" up to the extent
of the total amount due under the deed of trust, including costs and expenses
actually incurred in enforcing the deed of trust, as well as the trustee's fees
and expenses. The trustee will sell the property to the highest proper bidder at
the sale.
A sale conducted in accordance with the terms of the power of sale
contained in the deed of trust generally is presumed to be conducted regularly
and fairly, and, on a conveyance of the property by trustee's deed, confers
absolute legal title to the property to the purchaser, free of all junior deeds
of trust and free of all other liens and claims subordinate to the deed of trust
under which the sale is made. The purchaser's title, however, is subject to all
senior liens and other senior claims. Thus, if the deed of trust being enforced
is a junior deed of trust, the trustee will convey title to the property to the
purchaser subject to the first deed of trust and any other prior liens and
claims. A trustee's sale or judicial foreclosure under a junior deed of trust
generally has no effect on any senior deed of trust, with the possible exception
of the right of a senior beneficiary to accelerate its indebtedness under a
default clause or a "due on sale" clause contained in the senior deed of trust.
Because a potential buyer at the sale may find it difficult to determine
the exact status of title and other facts about the property, and because the
physical condition of the property may have deteriorated, third parties may not
be interested in purchasing the property at a trustee's sale or judicial
foreclosure sale. In a non-judicial foreclosure, it is common for the lender to
purchase the property from the trustee or referee for an amount equal to the
principal amount of the deed of trust, accrued and unpaid interest and expenses
of foreclosure. In judicial foreclosures, it is not uncommon for the lender to
make a bid to purchase the property. The amount of the bid may vary depending on
applicable law, the value of the property, the amount of senior liens and other
considerations. In either case, after a foreclosing lender purchases the
mortgage property, as a business practice it will frequently assume the burdens
of ownership, including the obligations to service any senior deed of trust, to
obtain hazard insurance and to make such repairs at its own expense as are
necessary to render the property suitable for sale. The lender will commonly
attempt to sell the property and obtain the services of a real estate broker and
pay the broker a 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 insurance proceeds.
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The proceeds received by the trustee from the sale generally are applied
first to the costs, fees and expenses of sale and then to satisfy the
indebtedness secured by the deed of trust under which the sale was conducted.
Any remaining proceeds generally are payable to the holders of junior deeds of
trust and other liens and claims in order of their priority. Any balance
remaining generally is payable to the grantor. Following the sale, if there are
insufficient proceeds to repay the secured debt, the beneficiary under the
foreclosed lien generally may obtain a deficiency judgment against the grantor.
See "- Anti-Deficiency Legislation and Other Limitations on Lenders" herein.
Courts have imposed general equitable principles upon foreclosure, which
are generally designed to mitigate the legal consequences to the borrower of the
borrower's defaults under the loan documents. Some courts have been faced with
the issue of whether federal or state constitutional provisions reflecting due
process concerns for fair notice require that borrowers under deeds of trust
receive notice longer than that prescribed by statute. For the most part, these
cases have upheld the notice provisions as being reasonable or have found that
the sale by a trustee under a deed of trust does not involve sufficient state
action to afford constitutional protection to the borrower.
Mortgages. Foreclosure of a mortgage is generally accomplished by judicial
action. The action is initiated by the service of legal pleadings upon all
parties having an interest in the real property. Delays in completion of the
foreclosure may occasionally result from difficulties in locating necessary
parties defendant. Judicial foreclosure proceedings are often not contested by
any of the parties defendant. However, when the mortgagee's right to foreclosure
is contested, the legal proceedings necessary to resolve the issue can be time
consuming. 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. Some mortgages
contain a power of sale, and non-judicial foreclosure is permitted. See "--
Foreclosure - Deed of Trust" above for a discussion of foreclosure by
non-judicial foreclosure.
A foreclosure action is subject to most of the delays and expenses of other
lawsuits if defenses or counterclaims are interposed, sometimes requiring up to
several years to complete. However, a suit against the debtor on the related
mortgage note may take several years and, generally, is an alternative remedy to
foreclosure, since the mortgagee is precluded from pursuing both actions at the
same time. After the completion of a judicial foreclosure proceeding, the court
generally issues a judgment of foreclosure and appoints a referee or other court
officer to conduct the sale of the property.
In case of foreclosure under a mortgage, the sale by the referee or other
designated officer or the sale by the trustee is a public sale. However, because
of the difficulty a potential buyer at the sale would have in determining the
exact status of title and other facts about the property, and because the
physical condition of the property may have deteriorated, third parties may not
be interested in purchasing the property at the foreclosure sale. In a
non-judicial foreclosure, it is common for the lender to purchase the property
from the trustee or referee for an amount equal to the principal amount of the
mortgage, accrued and unpaid interest and expenses of foreclosure. In judicial
foreclosures, it is not uncommon for the lender to make a bid to purchase the
property. The amount of the bid may vary depending on applicable law, the value
of the property, the amount of senior liens and other considerations. In either
case, after a foreclosing lender purchases the mortgaged property, as a business
practice it will frequently assume the burdens of ownership, including the
obligations to service any senior mortgage, to obtain hazard insurance and to
make such repairs at its own expense as are necessary to render the property
suitable for sale. The lender will commonly attempt to sell the property and
obtain the services of a real estate broker and pay the broker a commission in
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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 insurance proceeds.
Rights of Redemption
In some states after sale pursuant to a deed of trust or foreclosure of a
mortgage, the borrower and certain 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 certain other states, this right of redemption applies only to sales
following judicial foreclosure, and not to sales pursuant to a nonjudicial power
of sale. In most states where the right of redemption is available, statutory
redemption may occur upon payment of the foreclosure purchase price, accrued
interest and taxes. In some states, the right to redeem is an equitable right.
The effect of a 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 judicial foreclosure or sale under a deed of trust.
Consequently, the practical effect of the redemption right is to force the
lender to retain the property and pay the expenses of ownership until the
redemption period has run.
Junior Mortgages; Rights of Senior Mortgages
The mortgage loans comprising or underlying the Mortgage Assets included in
the Trust Fund for a Series will 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 (and therefore the Holders),
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, thereby
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 some states, absent a
provision in the mortgage or deed of trust, no notice of default is required to
be given to a junior mortgagee. In addition, as described above, the rights of
the Trust may be or become subject to liens for real estate taxes and other
obligations. It is CIT Consumer Finance's standard practice to protect its
interest by monitoring any such sale of which it is aware and bidding for
property if it determines that it is in CIT Consumer Finance's best interests to
do so.
The standard form of the mortgage used by most institutional lenders, like
that generally used by CIT Consumer Finance, confers on the mortgagee the right
both to receive all proceeds collected under any hazard insurance policy
required to be maintained by the borrower and all awards made in connection with
condemnation proceedings. The lender generally has the right, subject to the
specific provisions of the deed of trust or mortgage securing its loan, to apply
such proceeds and awards to repair of any damage to the security property or to
payment of any indebtedness secured by the deed of trust or mortgage, in such
order as the beneficiary 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
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senior mortgages or deeds of trust. If available, proceeds in excess of the
amount of senior mortgage indebtedness, in most cases, will be applied to the
indebtedness of a junior mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by institutional lenders obligates the mortgagor to pay 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 thereof. Upon a failure of the grantor or
mortgagor to perform any of these obligations, the mortgagee or beneficiary is
given the right under certain mortgages to perform the obligation itself, at its
election, with the mortgagor agreeing to reimburse the mortgagee or beneficiary
for any sums expended by the mortgagee or beneficiary on behalf of the mortgagor
or grantor. The mortgage or deed of trust typically provides that all sums so
expended by the mortgagee become part of the indebtedness secured by the
mortgage.
Anti-deficiency Legislation and Other Limitations on Lenders
Anti-Deficiency Legislation. Certain states have imposed statutory
restrictions that 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. 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 some states, exceptions to the anti-deficiency statutes are provided for
in certain instances where the value of the lender's security has been impaired
by acts or omissions of the borrower, for example, in the event of waste of the
property.
A deficiency judgment is a personal judgment against the 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. However, some states
calculate the deficiency as the difference between the outstanding indebtedness
and the greater of the fair market value of the property and the sales price of
the property. As a result of these restrictions, it is anticipated that in many
instances the Master Servicer will utilize the nonjudicial foreclosure remedy
and forego any possible deficiency, and after a judicial foreclosure will not
seek deficiency judgments against defaulting Mortgagors where anti-deficiency
statutes may apply.
Election of Remedies. Some state statutes may 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 such property; 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 property.
Consequently, the practical effect of the election requirement, when applicable,
is that lenders will usually proceed first against the property rather than
bringing a personal action against the borrower.
Other Limitations on Lenders. In addition to anti-deficiency and related
legislation, numerous other federal and state statutory provisions, including
the federal bankruptcy laws, the Relief Act and state laws affording relief to
debtors, may interfere with or affect the ability of the secured mortgage lender
to realize upon its security. For example, in a proceeding under the federal
Bankruptcy Code, the filing of a petition acts as a stay against the enforcement
of remedies for collection of a debt, and a lender may not foreclose on a
mortgaged property without the permission of the bankruptcy court. Moreover, a
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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. The rehabilitation plan proposed by the debtor may provide, if
the mortgaged property is not the debtor's principal residence and the court
determines that the value of the mortgaged property is less than the principal
balance of the mortgage loan, for the reduction of the secured indebtedness to
the value of the mortgaged property as of the date of the commencement of the
bankruptcy, rendering the lender a general unsecured creditor for the
difference, and also may reduce the monthly payments due under such mortgage
loan, change the rate of interest and alter the mortgage loan repayment
schedule. The effect of any such proceedings under the federal Bankruptcy Code,
including but not limited to any automatic stay, could result in delays in
receiving payments on the Mortgage Loans underlying a Series of Certificates and
possible reductions in the aggregate amount of such payments.
In a case under the Bankruptcy Code, the lender is precluded from
foreclosing without authorization from the bankruptcy court. In a Chapter 11
case, the lender's lien may be transferred to other collateral and/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 and federal tax laws provide priority to certain tax
liens over the lien of a mortgagee or secured party. This may delay or interfere
with the enforcement of rights in respect of a defaulted Mortgage Loan. Numerous
federal and state consumer protection laws impose substantive requirements upon
mortgage lenders and servicers in connection with the origination, servicing and
enforcement of mortgage loans. These laws include the Federal Truth-in-Lending
Act, Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, Fair
Housing Act, Fair Credit Reporting Act and related statutes and regulations.
These federal and state laws impose specific statutory liabilities upon lenders
who fail to comply with the provisions of the law. In some cases, this liability
may affect assignees of the loans.
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 such property. In addition, under the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended, the United States Environmental Protection Agency
("EPA") may impose a lien on property where the EPA has incurred clean-up costs
with respect to the property. However, a CERCLA lien is subordinate to
pre-existing, perfected security interests. In addition, under federal
environmental legislation and possibly under state law in a number of states, a
secured party which takes a deed in lieu of foreclosure or acquires a property
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at a foreclosure sale may be liable for the costs of cleaning up a contaminated
site. Such cleanup costs may be substantial. In the event that a Trust acquired
title to a property securing a Mortgage Loan and cleanup costs were incurred in
respect of the property, the holders of the Certificates might incur a delay in
the payment if such costs were required to be paid by such Trust. It is possible
that such cleanup costs could reduce the amounts otherwise distributable to the
Certificateholders if the Trust Fund were deemed to be liable for such cleanup
costs and if such cleanup costs were incurred.
Except as otherwise specified in the applicable Prospectus Supplement, at
the time the Mortgage Loans were originated, no environmental assessment of the
Mortgage Properties was conducted, although an appraiser might comment upon
environmental factors.
Due on Sale Clauses
The Mortgage Loans generally include a "due on sale" clause which will
provide that if the Mortgagor sells, transfers or conveys the Mortgaged
Property, the Mortgage Loan may be accelerated by the mortgagee. In recent
years, court decisions and legislative actions have placed substantial
restriction on the right of lenders to enforce such clauses in many states. For
instance, the California Supreme Court in August 1978 held that "due on sale"
clauses were generally unenforceable. However, the Garn-St Germain Depository
Institutions Act of 1982 (the "Garn-St Germain Act"), subject to certain
exceptions, preempts state constitutional, statutory and case law prohibiting
the enforcement of "due on sale" clauses. As to loans secured by an
owner-occupied residence, the Garn-St Germain Act sets forth nine specific
instances in which a mortgagee covered by the Garn-St Germain Act may not
exercise its rights under a "due on sale" clause, notwithstanding the fact that
a transfer of the property may have occurred. For example, "due on sale" clauses
are not enforceable in those states whose legislatures exercised their authority
to regulate the enforceability of such clauses with respect to mortgage loans
that were (i) 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 (ii) originated by lenders other than national banks, federal savings
institutions and federal credit unions. FHLMC has taken the position in its
published mortgage servicing standards that, out of a total of eleven "window
period states," five states (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.
The inability to enforce a "due on sale" clause may result in transfer of
the related Mortgaged Property to an uncreditworthy person, which could increase
the likelihood of default or may result in a Mortgage Loan bearing an interest
rate below the current market rate being assumed by a new home buyer, which may
affect the average life of the Mortgage Loans and the number of Mortgage Loans
which may extend to maturity.
Prepayment Charges and Late Charges
Under certain state laws, prepayment charges may not be imposed after a
certain period of time following the origination of mortgage loans with respect
to prepayments on loans secured by liens encumbering owner-occupied residential
properties. Since many of the Mortgaged Properties will be owner-occupied, it is
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anticipated that prepayment charges may not be imposed with respect to many of
the Mortgage Loans. The absence of such a restraint on prepayment, particularly
with respect to fixed rate Mortgage Loans having higher Mortgage Rates, may
increase the likelihood of refinancing or other early retirement of such
Mortgage Loans.
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. 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.
Late charges and prepayment fees are property of the Trust and will be made
available to pay the Certificateholders. The Mortgage Loans originated by CIT
Consumer Finance generally do not make provision for late charges, but other
Mortgage Loans in a Mortgage Pool may make provision for late charges. CIT
Consumer Finance's current practice is to waive such fees (by noncollection) in
most cases. CIT Consumer Finance's current operating system cannot process
prepayment penalties for partial prepayments on any Mortgage Loan.
Equitable Limitations on Remedies
In connection with lenders' attempts to realize upon their collateral,
courts have invoked general equitable principles. The equitable principles are
generally designed to relieve the borrower from the legal effect of his defaults
under the loan documents. Examples of judicial remedies that have been fashioned
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. 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.
Alternative Mortgage Transactions Parity Act
The Alternative Mortgage Transactions Parity Act ("AMTPA"), enacted in
1982, preempts state laws which restrict or limit the structure of adjustable
rate provisions, balloon payments, graduated payments and other terms contained
in non-traditional (fixed rate fixed term) mortgage loans. These state statutes
are replaced, at the option of the lender, by federal regulations. The lender
must follow in their entirety either state laws or federal regulations, and
cannot select and combine the most advantageous terms of each. Six states
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(Arizona, Maine, Massachusetts, New York, South Carolina and Wisconsin) have
used their now-expired ability to opt out of all or part of the AMTPA
provisions. CIT Consumer Finance generally elects to have the federal
regulations apply, in the states where applicable, to the types of mortgage
loans originated by it that are covered by AMTPA.
Applicability of Usury Laws
Many states have usury laws which limit the interest and other amounts that
may be charged under certain loans. Title V of the Depository Institutions
Deregulation and Monetary Control Act of 1980, enacted in March 1980 ("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. The statute authorized the states to reimpose interest rate limits by
adopting, before April 1, 1983, a law or constitutional provision 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, which
need not expressly reject Title V, limiting discount points or other charges on
mortgage loans covered by Title V. Certain states have taken action to limit
discount points or other charges.
Soldiers' and Sailors' Civil Relief Act
Generally, under the terms of the Relief Act, a borrower who enters
military service after the origination of such borrower's mortgage loan
(including a borrower who is a member of the National Guard or is in reserve
status at the time of the origination of the mortgage loan and is later called
to active duty) (i) may not be charged interest above an annual rate of 6%
during the period of such borrower's active duty status, unless a court orders
otherwise upon application of the lender, (ii) 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 (iii) 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 of (i), (ii), or (iii) 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 Mortgage Loan included in a Trust
Fund for a Series is relieved pursuant to the Relief Act, none of the Trustee,
the Master Servicer, the Depositor, the Sellers nor the Trustee will be required
to advance such amounts, and any loss in respect thereof may reduce the amounts
available to be paid to the Certificateholders of such Series. Unless otherwise
specified in the related Prospectus Supplement, any shortfalls in interest
collections on the mortgage loans underlying the Private Mortgage-Backed
Securities included in a Trust Fund for a Series resulting from application of
the Relief Act will be allocated to each class of Certificates of such Series
that is entitled to receive interest in respect of such mortgage loans in
proportion to the interest that each such class of Certificates would have
otherwise been entitled to receive in respect of such mortgage loans had such
interest shortfall not occurred.
It is possible that such interest rate limitation could have an effect, for
an indeterminate period of time, on the ability of the Master Servicer to
collect full amounts of interest on certain of the Mortgage Loans. Unless
otherwise provided in the applicable Prospectus Supplement, any shortfall in
interest collections resulting from the application of the Relief Act could
result in losses to the holders of the Certificates. In the event that such a
Mortgage Loan goes into default, there may be delays and losses occasioned by
the inability to realize upon the Mortgaged Property in a timely fashion.
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Home Ownership Act
The Mortgage Loans may be subject to the Home Ownership and Equity
Protection Act of 1994 (the "Home Ownership Act") which amended the Federal
Truth-in-Lending Act as it applies to mortgages subject to the Home Ownership
Act. The Home Ownership Act requires certain additional disclosures, specifies
the timing of such disclosures and limits or prohibits the inclusion of certain
provisions in mortgages subject to the Home Ownership Act. The Home Ownership
Act also provides that any purchaser or assignee of a mortgage covered by the
Home Ownership Act 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 by a borrower from an assignee in an action under the Home
Ownership Act are the remaining amount of indebtedness plus the total amount
paid by the borrower in connection with the mortgage loan. Any Trust for which
the Mortgage Assets include Mortgage Loans subject to the Home Ownership Act
would be subject to all of the claims and defenses which the Mortgagor could
assert against the original lender. Any violation of the Home Ownership Act
which would result in such liability would be a breach of the Seller's
representations and warranties, and the Seller would be obligated to cure,
repurchase or, if permitted by the related Agreement, substitute for, the
Mortgage Loan in question.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below and in the related Prospectus Supplement for each Series of
Certificates is a general discussion of certain of the anticipated federal
income tax consequences of the purchase, ownership and disposition of the
Certificates offered hereby. The discussion and the opinions referred to below,
are based on laws, regulations, rulings and decisions now in effect (or, in the
case of certain regulations, proposed), all of which are subject to change or
possibly differing interpretations. The discussion below does not purport to
deal with federal tax consequences applicable to all categories of investors,
some of which may be subject to special rules. Investors should consult their
own tax advisors in determining the federal, state, local and other tax
consequences to them of the purchase, ownership and disposition of Certificates.
For purposes of this tax discussion (except with respect to information
reporting, or where the context indicates otherwise), the terms
"Certificateholder" and "holder" mean the beneficial owner of a Certificate.
Each Trust will be provided with an opinion of Schulte Roth & Zabel LLP,
counsel for the Depositor, regarding certain of the federal income tax matters
discussed below and in the related Prospectus Supplement. An opinion of counsel,
however, is not binding on the IRS, and no ruling on any of the issues discussed
below will be sought from the IRS. For purposes of the following summary,
references to the Trust, the Certificates and related terms, parties and
documents will be deemed to refer, unless otherwise specified herein, to each
Trust and the Certificates and related terms, parties and documents applicable
to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether an election is made to treat the Trust as a REMIC for
federal income tax purposes or if the Trust is classified as a grantor trust or
is given an alternative characterization for federal income tax purposes. The
related Prospectus Supplement for each Series of Certificates will specify
whether an election to treat the Trust as a REMIC for federal income tax
purposes will be made and, if not, how the Trust is intended to be treated.
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Scope of the Tax Opinions
It is expected that Schulte Roth & Zabel LLP will deliver, upon issuance of
a Series of Certificates, its opinion that, with respect to each Series of
Certificates for which a REMIC election is to be made, the related Trust or
certain assets of such Trust will be, under then existing law and assuming (i) a
proper and timely REMIC election, and (ii) ongoing compliance with the
provisions of the related Agreement and applicable provisions of the Code and
applicable Treasury regulations and rulings, and in reliance upon the
representations and warranties in the related Agreement, a REMIC and the
Certificates will be considered to evidence ownership of "regular interests" in
the REMIC within the meaning of Section 860G(a)(1) of the Code or "residual
interests" in the REMIC within the meaning of the Section 860G(a)(2) of the
Code.
It is expected that Schulte Roth & Zabel LLP, will deliver, upon issuance
of a Series of Certificates, its opinion that, with respect to each Series of
Certificates for which a REMIC election is not made, the related Trust will be,
under then existing law and assuming compliance with the related Agreement,
classified for federal income tax purposes as a grantor trust and not as an
association taxable as a corporation or a taxable mortgage pool.
In addition, Schulte Roth & Zabel LLP will render its opinion that it has
reviewed the statements herein and in the related Prospectus Supplement under
the heading "Certain Federal Income Tax Consequences," and is of the opinion
that such statements are correct in all material respects. Such statements are
intended as an explanatory discussion for the possible effects of the
classification of the Trust as a REMIC, a grantor trust or other classification,
as the case may be, for federal income tax purposes on investors generally and
of related tax matters affecting investors generally, but do not purport to
furnish information in the level of detail or with the attention to the
investor's specific tax circumstances that would be provided by an investor's
own tax adviser. Accordingly, each investor is advised to consult its own tax
advisers with regard to the tax consequences to it of investing in the
Certificates.
Other Tax Consequences
No advice has been received as to local income, franchise, personal
property, or other taxation in any state or locality, or as to the tax effect of
ownership of the Certificates in any state or locality. Certificateholders are
advised to consult their own tax advisors with respect to any state or local
income, franchise, personal property, or other tax consequences arising out of
their ownership of the Certificates.
Alternative Tax Treatment
In the event that, as a result of a change in applicable laws or
regulations or the interpretation thereof, the federal income tax
characteristics of the Certificates are not anticipated to be as described
above, the related Prospectus Supplement will include a discussion of the
anticipated federal income tax treatment of the Certificates.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Certain
Federal Income Tax Considerations," potential investors should consider the
state and local income, franchise, personal property, or other tax consequences
of the acquisition, ownership, and disposition of the Certificates. 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, potential investors should consult
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their own tax advisors with respect to the various tax consequences of
investments in the Certificates.
ERISA CONSIDERATIONS
Set forth below and in the related Prospectus Supplement for each Series of
Certificates is a general discussion of certain considerations of the purchase,
ownership and disposition of the Certificates under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and the Code. The discussion
in the related Prospectus Supplement and below, are based on laws, regulations,
rulings and decisions now in effect (or, in the case of certain regulations,
proposed), all of which are subject to change or possibly differing
interpretations. The discussion below does not purport to deal with all issues
applicable to an investor subject to ERISA. Investors should consult their own
advisors in determining the consequences to them under ERISA and the Code of the
purchase, ownership and disposition of Certificates. If Certificates are divided
into subclasses the related Prospectus Supplement will contain information
concerning considerations relating to ERISA and the Code that are applicable to
such Certificates.
ERISA imposes requirements on employee benefit plans (and on certain other
retirement plans and arrangements, including individual retirement accounts and
annuities, Keogh plans and collective investment funds, separate accounts and
insurance company general accounts in which such plans, accounts or arrangements
are invested) (collectively "Plans") subject to ERISA and on persons who are
fiduciaries with respect to such Plans. Generally, ERISA applies to investments
made by Plans. Among other things, ERISA requires that the assets of Plans be
held in trust and that the trustee, or other duly authorized fiduciary, have
exclusive authority and discretion to manage and control the assets of such
Plans. ERISA also imposes certain duties on persons who are fiduciaries of
Plans. Under ERISA, any person who exercises any authority or control respecting
the management or disposition of the assets of a Plan is considered to be a
fiduciary of such Plan (subject to certain exceptions not here relevant).
Certain employee benefit plans, such as governmental plans (as defined in ERISA
Section 3(32)) and, if no election has been made under Section 410(d) of the
Code, church plans (as defined in ERISA Section 3(33)), are not subject to ERISA
requirements. Accordingly, assets of such plans may be invested in Senior
Certificates without regard to the ERISA considerations described above and
below, subject to the provisions of applicable state law. Any such plan which is
qualified and exempt from taxation under Code Sections 401(a) and 501(a),
however, is subject to the prohibited transaction rules set forth in Code
Section 503.
On November 13, 1986, the United States Department of Labor (the "DOL")
issued final regulations concerning the definition of what constitutes the
assets of a Plan. (Labor Reg. Section 2510.3-101) Under this regulation, the
underlying assets and properties of corporations, partnerships and certain other
entities in which a Plan makes an "equity" investment could be deemed for
purposes of ERISA to be assets of the investing Plan in certain circumstances.
However, the regulation provides that, generally, the assets of a corporation or
partnership in which a Plan invests will not be deemed for purposes of ERISA to
be assets of such Plan if the equity interest acquired by the investing Plan is
a publicly-offered security. A publicly-offered security, as defined in Labor
Reg. Section 2510.3-101, is a security that is widely held, freely transferable
and registered under the Securities Exchange Act of 1934, as amended.
In addition to the imposition of general fiduciary standards of investment
prudence and diversification, ERISA prohibits a broad range of transactions
involving Plan assets and persons ("Parties in Interest") having certain
specified relationships to a Plan and imposes additional prohibitions where
Parties in Interest are fiduciaries with respect to such Plan. Because the
Mortgage Loans may be deemed Plan assets of each Plan that purchases
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Certificates, an investment in the Certificates by a Plan might be a prohibited
transaction under ERISA Sections 406 and 407 and subject to an excise tax under
Code Section 4975 unless a statutory or administrative exemption applies.
In Prohibited Transaction Exemption 83-1 ("PTE 83-1"), which amended
Prohibited Transaction Exemption 81-7, the DOL exempted from ERISA's prohibited
transaction rules certain transactions relating to the operation of residential
mortgage pool investment trusts and the purchase, sale and holding of "mortgage
pool pass-through certificates" in the initial issuance of such certificates.
The DOL also 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.
The Prospectus Supplement for each Series of Certificates will indicate the
classes of Certificates, if any, offered thereby as to which it is expected that
PTE 83-1, an Underwriter Exemption or any other exemptions will apply.
Any Plan fiduciary which proposes to cause a Plan to purchase Certificates
should consult with its counsel concerning the impact of ERISA and the Code, the
applicability of PTE 83-1, the availability and applicability of any Underwriter
Exemption or any other exemptions from the prohibited transaction provisions of
ERISA and the Code and the potential consequences in their specific
circumstances, prior to making such investment. Moreover, each Plan fiduciary
should determine whether under the general fiduciary standards of investment
procedure and diversification an investment in the Certificates 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
The Prospectus Supplement for each Series of Certificates will specify
which, if any, of the classes of Certificates offered thereby will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). Classes of Certificates that qualify as
"mortgage related securities" will be legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including depository institutions, life insurance companies and pension funds)
created pursuant to or existing under the laws of the United States or of any
state (including the District of Columbia and Puerto Rico) whose authorized
investments are subject to state regulation to the same extent as, under
applicable law, obligations issued by or guaranteed as to principal and interest
by the United States or any such entities. Under SMMEA, if a state enacts
legislation prior to October 4, 1991 specifically limiting the legal investment
authority of any such entities with respect to "mortgage related securities,"
the Certificates will constitute legal investments for entities subject to such
legislation only to the extent provided therein. Approximately twenty-one states
adopted such legislation prior to the October 4, 1991 deadline. SMMEA provides,
however, that in no event will the enactment of any such legislation affect the
validity of any contractual commitment to purchase, hold or invest in
Certificates, or require the sale or other disposition of Certificates, so long
as such contractual commitment was made or such Certificates acquired prior to
the enactment of such legislation.
SMMEA also amended the legal investment authority of federally-chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in Certificates
without limitations as to the percentage of their assets represented thereby,
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federal credit unions may invest in mortgage related securities, and national
banks may purchase Certificates for their own account without regard to the
limitations generally applicable to investment securities set forth in 12 U.S.C.
24 (Seventh), subject in each case to such regulations as the applicable federal
authority may prescribe. In this connection, federal credit unions should review
the National Credit Union Administration ("NCUA") Letter to Credit Unions No.
96, as modified by Letter to Credit Unions No. 108, which includes guidelines to
assist federal credit unions in making investment decisions for mortgage related
securities, and the NCUA's regulation "Investment and Deposit Activities" (12
C.F.R. Part 703), (whether or not the class of Certificates under consideration
for purchase constitutes a "mortgage related security").
All depository institutions considering an investment in the Certificates
(whether or not the class of certificates under consideration for purchase
constitutes a "mortgage related security" should review the Federal Financial
Institutions Examination Council's Supervisory Policy Statement on Securities
Activities (to the extent adopted by their respective regulators) (the "Policy
Statement"), setting forth, in relevant part, certain securities trading and
sales practices deemed unsuitable for an institution's investment portfolio, and
guidelines for (and restrictions on) investing in mortgage derivative products
including "mortgage related securities" that are "high-risk mortgage securities"
as defined in the Policy Statement. According to the Policy Statement, such
"high-risk mortgage securities" include securities such as Certificates not
entitled to distributions allocated to principal or interest, or Subordinated
Certificates. Under the Policy Statement, it is the responsibility of each
depository institution to determine, prior to purchase (and at stated intervals
thereafter), whether a particular mortgage derivative product is a "high-risk
mortgage security", and whether the purchase (or retention) of such a product
would be consistent with the Policy Statement.
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines, or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits and provisions
that may restrict or prohibit investment in securities that are not "interest
bearing" or "income paying."
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Certificates or to
purchase Certificates representing more than a specified percentage of the
investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Certificates constitute legal
investments for such investors.
METHOD OF DISTRIBUTION
Certificates are being offered hereby in Series from time to time (each
Series evidencing a separate Trust) through any of the following methods:
1. By negotiated firm commitment underwriting and public reoffering by
underwriters;
2. By agency placements through one or more placement agents primarily
with institutional investors and dealers; and
3. By placement directly by the Depositor with institutional
investors.
A Prospectus Supplement will be prepared for each Series which will
describe the method of offering being used for that Series and will set forth
the identity of any underwriters thereof and either the price at which such
Series is being offered, the nature and amount of any underwriting discounts or
additional compensation to such underwriters and the proceeds of the offering to
the Depositor, or the method by which the price at which the underwriters will
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sell the Certificates will be determined. Each Prospectus Supplement for an
underwritten offering will also contain information regarding the nature of the
underwriters' obligations, any material relationship between the Depositor and
any underwriter and, where appropriate, information regarding any discounts or
concessions to be allowed or reallowed to dealers or others and any arrangements
to stabilize the market for the Certificates so offered. In firm commitment
underwritten offerings, the underwriters will be obligated to purchase all of
the Certificates of such Series if any such Certificates are purchased.
Certificates may be acquired by the underwriters for their own accounts and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale.
Underwriters and agents may be entitled under agreements entered into with
the Depositor and CIT Consumer Finance to indemnification by the Depositor and
CIT Consumer Finance against certain civil liabilities, including liabilities
under the Securities Act of 1933, as amended, or to contribution with respect to
payments which such underwriters or agents may be required to make in respect
thereof.
If a Series is offered other than through underwriters, the Prospectus
Supplement relating thereto will contain information regarding the nature of
such offering and any agreements to be entered into between the Depositor and
purchasers of Certificates of such Series.
LEGAL MATTERS
The validity of the Certificates, including certain federal income tax
consequences with respect thereto, will be passed upon for the Depositor by
Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022.
FINANCIAL INFORMATION
A new Trust will be formed with respect to each Series of Certificates and
no Trust will engage in any business activities or have any assets or
obligations prior to the issuance of the related Series of Certificates.
Accordingly, no financial statements with respect to any Trust will be included
in this Prospectus or in the related Prospectus Supplement.
CIT Consumer Finance and CITSF each has determined that its financial
statements are not material to the offering made hereby.
RATINGS
It is a condition to the issuance of the Certificates of each Series
offered hereby and by the related Prospectus Supplement that they shall have
been rated in the rating categories specified in the related Prospectus
Supplement by the Rating Agency or Agencies specified in the related Prospectus
Supplement.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the credit enhancer or guarantor, if any. Ratings on
mortgage pass-through certificates do not represent any assessment of the
likelihood of principal prepayments by mortgagors or of the degree by which such
prepayments might differ from those originally anticipated. As a result,
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certificateholders might suffer a lower than anticipated yield, and, in
addition, holders of stripped pass-through certificates in extreme cases might
fail to recoup their underlying investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
EXPERTS
The financial statements listed under the heading "Exhibits, Financial
Statement Schedule and Reports on Form 8-K" in CIT's 1995 Annual Report on Form
10-K have been incorporated by reference herein in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, also
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing. The report of KPMG Peat Marwick LLP refers to a
change in the method of accounting for postretirement benefits other than
pensions in 1993.
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Page
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INDEX TO DEFINED TERMS
Accrual Certificates.........................................................57
Adjustable Rate..........................................................10, 34
Adjustable Rate Mortgage Loan............................................10, 34
Adjusted Mortgage Loan Remittance Rate.......................................59
Advance..................................................................18, 59
Agreement.................................................................6, 37
AMTPA.......................................................................100
Asset Service Center.........................................................42
Available Funds..............................................................56
Balloon Loans............................................................10, 34
Balloon Payments.........................................................10, 35
Bankruptcy Bond..........................................................17, 70
beneficial owner.............................................................62
Book-Entry Certificates......................................................61
Business Day..............................................................9, 56
Buydown Account..............................................................80
Buydown Fund.................................................................35
Buydown Loans................................................................35
Call Date................................................................10, 35
Call Loans...............................................................10, 35
CBC..........................................................................41
CBC Holding..................................................................41
Cede......................................................................5, 21
Cedel.................................................................5, 21, 31
CERCLA.......................................................................98
Certificate Account..........................................................77
Certificate Balance..........................................................57
Certificate Guaranty Insurance Policy....................................16, 67
Certificate Guaranty Insurer.................................................67
Certificate Register.........................................................55
Certificateholders........................................................2, 33
Certificates...........................................................1, 6, 53
CIT.......................................................................1, 22
CIT Consumer Finance...................................................1, 6, 22
CITSF.....................................................................6, 22
Class Certificate Balance....................................................56
Closing Date..............................................................7, 81
CMC..........................................................................41
Code.........................................................................20
Combined Loan-to-Value Ratio.................................................37
Commission................................................................3, 34
Compensating Interest....................................................19, 60
Confirmatory Mortgage Note...................................................75
Credit Enhancement...........................................................30
Credit Enhancer..............................................................30
Cut-off Date..............................................................9, 53
Definitive Certificate.......................................................62
Delayed Deposits.............................................................79
Deposit Date.................................................................79
Depositor..............................................................1, 6, 22
Depository...................................................................62
Detailed Description.........................................................34
Determination Date........................................................8, 56
Distribution Date.........................................................8, 55
DKB..........................................................................40
DOL.....................................................................20, 104
DTC...................................................................5, 21, 31
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Page
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Due Period................................................................9, 56
EPA..........................................................................98
ERISA...................................................................20, 104
Escrow Account...............................................................83
Euroclear.............................................................5, 21, 31
Exchange Act..................................................................3
Financial Intermediary.......................................................62
Fixed Rate...............................................................10, 34
Fixed Rate Mortgage Loan.................................................10, 34
Funding Period...........................................................14, 33
Garn-St Germain Act..........................................................99
Graduated Payment Account....................................................80
Graduated Payment Loan...................................................11, 35
Home Equity Loan.............................................................43
Home Ownership Act......................................................28, 102
Indirect Participants........................................................62
Insurance Paying Agent.......................................................67
Insurance Proceeds...........................................................78
Insured Expenses.............................................................78
Insured Payment..............................................................67
Junior Lien Loans............................................................24
Limited Guarantee............................................................71
Liquidated Mortgage..........................................................88
Liquidation Expenses.........................................................78
Liquidation Proceeds.........................................................78
Majority Certificateholders..................................................89
Master Servicer...........................................................6, 42
Master Servicing Fee.........................................................87
MHC..........................................................................40
Mortgage Assets........................................................1, 9, 33
Mortgage Documents...........................................................37
Mortgage Loans.........................................................1, 9, 33
Mortgage Note............................................................10, 34
Mortgage Pool.............................................................9, 33
Mortgage Pool Insurance Policy...........................................16, 68
Mortgage Rate............................................................10, 34
Mortgaged Properties.........................................................34
Mortgaged Property........................................................9, 38
Mortgages..............................................................1, 9, 33
Mortgagor....................................................................22
NCUA........................................................................106
Participants.................................................................62
Pass-Through Rate............................................................56
Percentage Interest..........................................................90
Permitted Investments........................................................67
Plan Asset Regulations.......................................................20
Plans.......................................................................104
PMBS Agreement...............................................................39
PMBS Issuer..............................................................13, 39
PMBS Servicer............................................................13, 39
PMBS Trustee.............................................................13, 39
Policy Statement............................................................106
Pool......................................................................9, 33
Pool Insurer.................................................................68
Precomputed Loan.............................................................36
Pre-Funded Amount........................................................14, 33
Pre-Funding Account...................................................1, 14, 33
Primary Insurer..............................................................85
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Primary Mortgage Insurance Policy............................................34
Principal Prepayment.....................................................18, 60
Principal Prepayments........................................................57
Private Mortgage-Backed Securities........................................9, 38
PTE 83-1....................................................................105
Purchase Price...............................................................81
Qualified Substitute Mortgage Loan...........................................81
Rating Agency............................................................18, 77
Record Date..................................................................55
Registration Statement........................................................3
Released Mortgaged Property Proceeds.........................................78
Relief Act...................................................................28
REMIC.................................................................2, 20, 55
REO Property.................................................................54
Reserve Fund.............................................................16, 66
Retained Interest............................................................53
Scheduled Accrual Loans......................................................36
Seller.................................................................1, 6, 33
Senior Certificateholders................................................15, 65
Senior Certificates.......................................................7, 57
Series.................................................................1, 6, 53
Servicing Advance............................................................87
Simple Interest Loans........................................................35
SMMEA...................................................................19, 105
Special Hazard Insurance Policy..........................................17, 69
Special Hazard Insurer.......................................................69
Standard Hazard Insurance Policy.........................................11, 34
Stockholders Agreement.......................................................41
Subordinated Certificateholders..........................................15, 65
Subordinated Certificates.................................................7, 57
Sub-Servicers................................................................37
Sub-servicing Account........................................................79
Substitution Adjustment......................................................81
The Pooling and Servicing Agreement..........................................53
Title V.....................................................................101
Trust..................................................................1, 9, 53
Trust Fund.............................................................1, 9, 53
Trustee...................................................................6, 92
Underwriter Exemptions......................................................105
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================================================================================
No dealer, sales person or other individual has been authorized to give any
information or to make any representations other than those contained in this
prospectus supplement and the accompanying prospectus and, if given or made,
such information or representations must not be relied upon. This prospectus
supplement and the accompanying prospectus do not constitute an offer to sell or
a solicitation of an offer to buy any of the securities offered hereby, nor an
offer of offered certificates in any state or jurisdiction in which, or to any
person to whom, such offer would be unlawful. The delivery of this prospectus
supplement or the accompanying prospectus at any time does not imply that the
information contained herein or therein is correct as of any time subsequent to
its date.
------------------------
TABLE OF CONTENTS
Page
----
Prospectus Supplement
Summary of Terms.............................................................S-3
Risk Factors................................................................S-26
The Mortgage Pool...........................................................S-28
Servicing of Mortgage Loans.................................................S-41
Description of the Certificates.............................................S-45
Yield, Prepayment and Maturity Considerations...............................S-57
Credit Enhancement..........................................................S-60
[The Certificate Guaranty Insurance Policy
and the Certificate Guaranty Insurer].......................................S-65
Use of Proceeds.............................................................S-68
Certain Federal Income Tax Consequences.....................................S-68
ERISA Considerations........................................................S-90
Legal Investment............................................................S-93
Method of Distribution......................................................S-93
Legal Matters...............................................................S-94
Ratings.....................................................................S-94
Annex I-Global Clearance, Settlement
and Tax Documentation Procedures............................................S-95
Index to Defined Terms......................................................S-96
Prospectus
Prospectus Supplement..........................................................3
Available Information..........................................................3
Incorporation of Certain Documents by Reference................................4
Reports to Certificateholders..................................................4
Summary of Terms...............................................................6
Risk Factors..................................................................22
The Trusts....................................................................33
Use of Proceeds...............................................................40
The CIT Group Holdings, Inc...................................................40
The CIT Group Securitization Corporation III,
The Depositor.................................................................41
The CIT Group/Consumer Finance, Inc., Seller
and Master Servicer...........................................................41
The CIT Group/Sales Financing, Inc., Sub-Servicer.............................42
The Home Equity Lending Program...............................................43
Description of the Certificates...............................................53
Credit Enhancement............................................................64
Yield and Prepayment Considerations...........................................72
The Pooling and Servicing Agreement...........................................74
Certain Legal Aspects of the Mortgage Loans...................................93
Certain Federal Income Tax Consequences......................................102
State Tax Considerations.....................................................103
ERISA Considerations.........................................................104
Legal Investment.............................................................105
Method of Distribution.......................................................106
Legal Matters................................................................107
Financial Information........................................................107
Ratings......................................................................107
Experts......................................................................108
Index to Defined Terms.......................................................109
================================================================================
================================================================================
$----------------
(Approximate)
THE CIT GROUP
SECURITIZATION
CORPORATION III
Depositor
THE CIT GROUP/CONSUMER
FINANCE, INC.
Master Servicer
HOME EQUITY LOAN ASSET BACKED
CERTIFICATES
(Issuable in Series)
----------------------------
PROSPECTUS
----------------------------
_______ __, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
SEC registration fee.......................................... $350.00
Attorney's fees and expenses ................................. *
Accounting fees and expenses ................................. *
Blue sky fees and expenses ................................... *
Rating agency fees ........................................... *
Trustee's fees and expenses .................................. *
Printing expenses ............................................ *
Miscellaneous fees and expenses .............................. *
=======
Total.....................................................
* To be completed by amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law of Delaware
empowers a corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation except that no indemnification may be made in
respect of any claim, issue, or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director, officer,
employee, or agent of a corporation has been successful in the defense of any
action, suit, or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue, or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith; that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and empowers the corporation to purchase and maintain insurance on
behalf of any person acting in any of the capacities set forth in the second
preceding paragraph against any liability asserted against him or incurred by
him in any such capacity or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.
The Registrants' By-Laws provide for indemnification of directors and
officers of each Registrant to the full extent permitted by Delaware law.
Article X of the By-laws of CIT and Article VIII of the By-laws of the
Depositor provide, in effect, that, in addition to any rights afforded to an
officer, director or employee of such Registrant by contract or operation of
law, such Registrant may indemnify any person who is or was a director, officer,
employee, or agent of such Registrant, or of any other corporation which he
served at the request of such Registrant, against any and all liability and
reasonable expense incurred by him in connection with or resulting from any
claim, action, suit, or proceeding (whether brought by or in the right of such
Registrant or such other corporation or otherwise), civil or criminal, in which
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<PAGE>
he may have become involved, as a party or otherwise, by reason of his being or
having been such director, officer, employee, or agent of such Registrant or
such other corporation, whether or not he continues to be such at the time such
liability or expense is incurred, provided that such person acted in good faith
and in what he reasonably believed to be the best interests of such Registrant
or such other corporation, and, in connection with any criminal action
proceeding, had no reasonable cause to believe his conduct was unlawful.
Such Articles further provide that any person who is or was a director,
officer, employee, or agent of such Registrant or any director or indirect
wholly-owned subsidiary of such Registrant shall be entitled to indemnification
as a matter of right if he has been wholly successful, on the merits or
otherwise, with respect to any claim, action, suit, or proceeding of the type
described in the foregoing paragraph.
In addition, the Registrants maintain directors' and officers'
reimbursement and liability insurance pursuant to standard form policies with
aggregate limits of $65,000,000. The risks covered by such policies do not
exclude liabilities under the Securities Act of 1933.
Pursuant to the form of Underwriting Agreement, the Underwriters will
agree, subject to certain conditions, to indemnify the Registrants, their
directors, certain of their officers and persons who control the Registrants
within the meaning of the Securities Act of 1933 against certain liabilities.
Pursuant to the form of Underwriting Agreement, the Underwriters will
agree, subject to certain conditions, to indemnify the Registrant, its
directors, certain of its officers and persons who control the Registrant within
the meaning of the Securities Act of 1933 against certain liabilities.
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of The CIT Group Securitization
Corporation III.
3.2 Bylaws of The CIT Group Securitization Corporation III.
4.1 Form of Pooling and Servicing Agreement.
4.2 Form of Limited Guarantee.
5.1 Opinion of Schulte Roth & Zabel LLP as to legality of the
Certificates.
8.1 Opinion of Schulte Roth & Zabel LLP as to certain tax matters.
10.1 Form of Mortgage Loan Purchase Agreement.
10.2 Form of Subsequent Mortgage Loan Purchase Agreement.
23.1 Consent of Schulte Roth & Zabel LLP (included in exhibits 5.1 and 8.1
hereof).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Powers of Attorney of The CIT Group Securitization Corporation III
(included on page II-4).
24.2 Powers of Attorney of The CIT Group Holdings, Inc.
II-2
<PAGE>
b. Financial Statement Schedules:
Not applicable.
ITEM 17. Undertakings.
The Registrants hereby undertake:
(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 (the "Act");
(ii) To reflect in the prospectus any fact 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;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Act, 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.
(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.
The undersigned Registrants undertake that, for purposes of determining any
liability under the Act, each filing of the Registrants' annual reports pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Registrants hereby agree to provide to the underwriter at
the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrants
pursuant to the foregoing provisions, or otherwise, the Registrants have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrants of expenses incurred
or paid by a director, officer or controlling person of the Registrants 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 Registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
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 the Town of Livingston, State of New Jersey, on February 21,
1997.
THE CIT GROUP SECURITIZATION CORPORATION III
By:_________________________________________
Name: Thomas B. Hallman
Title: President
POWER OF ATTORNEY
Each person whose signature to this Registration Statement appears below
hereby constitutes and appoints Thomas B. Hallman, Ron G. Arrington and Joseph
J. Carroll, or any of them (with the full power of each of them to act alone),
as his true and lawful attorney-in-fact and agent, with full power of
substitution, to sign on his behalf individually and in the capacity stated
below and to perform any acts necessary to be done in order to file all
amendments and post-effective amendments to this Registration Statement, and any
and all instruments or documents filed as part of or in connection with this
Registration Statement or the amendments thereto, and each of the undersigned
does hereby ratify and confirm all that said attorney-in-fact and agent, or his
substitutes, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Thomas B. Hallman President and Director February 21, 1997
- ---------------------
Thomas B. Hallman
/s/ Ron G. Arrington Vice President and Director February 21, 1997
- --------------------
Ron G. Arrington
/s/ Joseph J. Carroll Director February 21, 1997
- ---------------------
Joseph J. Carroll
/s/ Daniel A. Andriola Vice President and Controller February 21, 1997
- ---------------------- (principal financial
Daniel A. Andriola and accounting officer)
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
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 the City of New York and State of New York, on February 21, 1997.
THE CIT GROUP HOLDINGS, INC.
By:/s/ ERNEST D. STEIN
---------------------------
Ernest D. Stein
Executive Vice President, General
Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature and Title Date
------------------- ----
Albert R. Gamper, Jr.*
- -----------------------------------
President, Chief Executive Officer,
and Director (Principal executive
officer)
Hisao Kobayashi*
- -----------------------------------
Director
Takasuke Kaneko*
- -----------------------------------
Director
Kenji Nakamura*
- -----------------------------------
Director
Joseph A. Pollicino*
- -----------------------------------
Director
Paul N. Roth*
- -----------------------------------
Director
II-5
<PAGE>
Signature and Title Date
------------------- ----
*By: /s/ ERNEST D. STEIN
-------------------------------
Ernest D. Stein
Attorney-in-fact
February 21, 1997
Peter J. Tobin*
-------------------------
Director
Keiji Torii*
-------------------------
Director
Yukihara Uno*
-------------------------
Director
Yasuo Tsunemi*
-------------------------
Director
/s/ JOSEPH M. LEONE February 21, 1997
- -----------------------------------
Joseph M. Leone
Executive Vice President and
Chief Financial Officer
(principal financial and accounting officer)
Original powers of attorney authorizing Albert R. Gamper, Jr., Ernest D.
Stein, and Donald J. Rapson and each of them to sign the Registration Statement
and amendments thereto on behalf of the directors and officers of the Registrant
indicated above are held by The CIT Group Holdings, Inc. and available for
examination pursuant to Item 302(b) of Regulation S-T.
II-6
Exhibit 1.1
Form of Underwriting Agreement
<PAGE>
FORM OF UNDERWRITING AGREEMENT
[UNDERWRITER]
as Representative of
the Several Underwriters (the "Representative")
[Address]
Dear Sirs:
1. Introductory. The CIT Group Securitization Corporation III, a Delaware
corporation (the "Seller") and a wholly-owned limited-purpose finance subsidiary
of The CIT Group Holdings, Inc., a Delaware corporation ("CIT") proposes to
cause CIT Home Equity Loan Trust 19__-_ (the "Trust") to issue and sell
$_________ principal amount of its ____% Asset Backed Certificates (the
"Certificates"). The Certificates are registered under the registration
statement referred to in Section 2(a). The assets of the Trust include, among
other things, a pool of mortgage loans (the "Initial Mortgage Loans") secured by
residential properties financed thereby (the "Initial Mortgaged Properties"),
and certain monies received thereunder on or after ___________, 199_, amounts
deposited in the Pre-Funding Account and Capitalized Interest Account the right
to receive payments under certain circumstances from funds deposited in the Cash
Collateral Account pursuant to the Cash Collateral Agreement to be dated as of
_______, 199_ (the "Cash Collateral Agreement") between the Trust, the Trustee,
the Master Servicer and [The Dai-Ichi Kangyo Bank, Limited, New York Branch]
(the "Cash Collateral Depositor") and the Pooling and Servicing Agreement (as
defined below), additional mortgage loans (the "Subsequent Mortgage Loans;" and
together with the Initial Mortgage Loans, the "Mortgage Loans") secured by
residential properties financed thereby (the "Subsequent Mortgaged Properties;"
and together with the Initial Mortgaged Properties, the "Mortgaged Properties")
to be conveyed to the Trust subsequent to the date of issuance of the
Certificates and certain monies received thereunder on or after their respective
subsequent cutoff dates, and the other property and the proceeds thereof to be
conveyed to the Trust pursuant to the Pooling and Servicing Agreement to be
dated as of __________, 199_ (the "Pooling and Servicing Agreement") among the
Seller, the Trustee and The CIT Group/Consumer Finance, Inc., a wholly-owned
subsidiary of CIT, as Master Servicer ("CIT Consumer Finance" or the "Master
Servicer"). The Mortgage Loans and other assets of the Trust will be sold by CIT
Consumer Finance to the Seller pursuant to a Mortgage Loan Purchase Agreement to
be dated as of_________, 199_ (the "Purchase Agreement") between CIT Consumer
Finance and the Seller, and finally by the Seller to the Trust pursuant to the
Sale and Servicing Agreement. Certain of the Mortgage Loans and other property
sold by CIT Consumer Finance to the Seller will first be purchased by CIT
Consumer Finance from The CIT Group/Sales Financing, Inc. ("CITSF") pursuant to
a Mortgage Loan Purchase Agreement to be dated as of _________, 199_ (the "CITSF
Purchase Agreement") between CITSF and CIT Consumer Finance. The Master Servicer
will service the Mortgage Loans on behalf of the Trust pursuant to the Pooling
and Servicing Agreement. The Certificates, each representing a fractional
undivided interest in the Trust, will be issued pursuant to the Pooling and
Servicing Agreement.
<PAGE>
Capitalized terms used herein and not otherwise defined shall have the
meanings given them in the Pooling and Servicing Agreement.
The Seller and CIT Consumer Finance hereby agree with the several
Underwriters named in Schedule I hereto (the "Underwriters") as follows:
2. Representations and Warranties of the Seller and CIT Consumer Finance.
Each of the Seller and CIT Consumer Finance, jointly and severally, represents
and warrants to, and agrees with, the Underwriters, as of the date hereof and as
of the date of the purchase and sale of the Certificates pursuant to Section 3
hereof (the "Closing Date") that:
(a) A registration statement on Form S-3 (No. 333 - ______) relating to the
Certificates, including a form of prospectus and prospectus supplement, has been
filed with the Securities and Exchange Commission (the "Commission") and either
(i) has been declared effective under the Securities Act of 1933, as amended
(the "Act"), and is not proposed to be amended or (ii) is proposed to be amended
by amendment or post-effective amendment. If the Seller does not propose to
amend such registration statement and if any post-effective amendment to such
registration statement has been filed with the Commission prior to the execution
and delivery of this Agreement, the most recent such amendment has been declared
effective by the Commission. For purposes of this Agreement, "Effective Time"
means (i) if the Seller has advised the Representative that it does not propose
to amend such registration statement, the date and time as of which such
registration statement, or the most recent post-effective amendment thereto (if
any) filed prior to the execution and delivery of this Agreement, was declared
effective by the Commission, or (ii) if the Seller has advised the
Representative that it proposes to file an amendment or post-effective amendment
to such registration statement, the date and time as of which such registration
statement, as amended by such amendment or post-effective amendment, as the case
may be, is declared effective by the Commission. "Effective Date" means the date
of the Effective Time. Such registration statement, as amended at the Effective
Time, including all material incorporated by reference therein and including all
information (if any) deemed to be a part of such registration statement as of
the Effective Time pursuant to Rule 430A(b) under the Act, is hereinafter
referred to as the "Registration Statement," and the form of prospectus and
prospectus supplement relating to the Certificates, as first filed with the
Commission pursuant to and in accordance with Rule 415 ("Rule 415") under the
Act or (if no such filing is required) as included in the Registration
Statement, including all material incorporated by reference in such prospectus
and prospectus supplement is hereinafter referred to as the "Prospectus."
(b) If the Effective Time is prior to the execution and delivery of this
Agreement: (i) on the Effective Date, the Registration Statement conformed in
all respects to the requirements of the Act, the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act") and the rules and regulations of the
Commission promulgated under the Act and the Trust Indenture Act (the "Rules and
Regulations") and did not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ii) on the date of this
Agreement, the Registration
-2-
<PAGE>
Statement conforms, and at the time of filing of the Prospectus pursuant to Rule
415, the Registration Statement and the Prospectus will conform, in all respects
to the requirements of the Act, the Trust Indenture Act and the Rules and
Regulations, and neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading. If the Effective Time is subsequent to the execution and delivery of
this Agreement: (i) on the Effective Date, the Registration Statement and the
Prospectus will conform in all material respects to the requirements of the Act,
the Trust Indenture Act and the Rules and Regulations, (ii) on the Effective
Date, the Registration Statement will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading and (iii) on
the Effective Date, at the time of filing of the Prospectus pursuant to Rule 415
and at the Closing Date, the Prospectus will not include any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The two preceding
sentences do not apply to statements in or omissions from the Registration
Statement or Prospectus based upon written information furnished to the Seller
by any Underwriter through the Representative specifically for use therein. The
Seller and CIT Consumer Finance acknowledge that any information furnished by
any of the Underwriters specifically for use in the Registration Statement, any
preliminary prospectus or the Prospectus is the Underwriters' Information (as
defined in Section 7(b)).
(c) Each of the Seller, CITSF and CIT Consumer Finance have been duly
organized and are validly existing as corporations in good standing under the
laws of the State of Delaware. Each of the Seller, CIT Consumer Finance and
CITSF have corporate power and authority to own, lease and operate their
respective properties and conduct their respective businesses as described in
the Prospectus and to enter into and perform their obligations under each of the
Basic Documents (as defined below) to which it is a party; and each of the
Seller, CIT Consumer Finance and CITSF is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
character of the business transacted by it or properties owned or leased by it
requires such qualification and in which the failure so to qualify would have a
material adverse effect on its respective business, properties, assets, or
condition (financial or other) or on its ability to perform its obligations
under any of the Basic Documents to which it is a party. "Basic Documents" means
this Agreement, the Pooling and Servicing Agreement, the Cash Collateral
Agreement, the CITSF Purchase Agreement, the Purchase Agreement and the
Certificate Depository Agreement.
(d) The Seller is not in violation of its certificate of incorporation or
by-laws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any Mortgage Loan,
indenture, mortgage, loan agreement, note, lease or other instrument to which it
is a party or by which it or its properties may be bound, which default might
result in any material adverse change in the financial condition, earnings,
affairs or business of the Seller or, which might materially and adversely
affect the properties or assets thereof or the ability to perform its
obligations under any of the Basic Documents to which it is a party.
-3-
<PAGE>
(e) Neither CIT Consumer Finance nor CITSF is in violation of its
certificate of incorporation or by-laws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any material contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which it is a party or by which it or its
respective properties may be bound, which default might result in any material
adverse change in the financial condition, earnings, affairs or business of
either of CIT Consumer Finance or CITSF or which might materially and adversely
affect the properties or assets thereof or their ability to perform its
obligations under any of the Basic Documents to which it is a party.
(f) The execution and delivery by the Seller on the Closing Date of the
Basic Documents to which it is a party and the performance of its obligations
thereunder will be within its corporate power of the Seller and duly authorized
by all necessary corporate action on the part of the Seller on and as of the
Closing Date; and neither the issuance and sale of the Certificates to the
Underwriters, nor the execution and delivery by the Seller of the Basic
Documents to which it is a party, nor the consummation by the Seller of the
transactions therein contemplated, nor compliance by the Seller with the
provisions hereof or thereof, will materially conflict with or result in a
material breach of, or constitute a material default under, any of the
provisions of any law, governmental rule, regulation, judgment, decree or order
binding on the Seller or its properties or the certificate of incorporation or
by-laws of the Seller or any of the provisions of any indenture, mortgage,
contract or other instrument to which the Seller is a party or by which the
Seller is bound or result in the creation or imposition of any lien, charge or
encumbrance upon any of its property pursuant to the terms of any such
indenture, mortgage, contract or other instrument.
(g) The execution and delivery by each of CIT Consumer Finance and CITSF on
and as of the Closing Date of any of the Basic Documents to which it is a party
and the performance of its obligations thereunder, will be within the corporate
power of each of CIT Consumer Finance and CITSF and duly authorized by all
necessary corporate action on the part of each of CIT Consumer Finance and CITSF
on and as of the Closing Date; and neither the issuance and sale of the
Certificates to the Underwriters, nor the execution and delivery by CIT Consumer
Finance and CITSF of any of the Basic Documents to which it is a party, nor the
consummation by CIT Consumer Finance and CITSF of the transactions therein
contemplated, nor compliance by CIT Consumer Finance and CITSF with the
provisions hereof or thereof, will materially conflict with or result in a
material breach of, or constitute a material default under, any of the
provisions of any law, governmental rule, regulation, judgment, decree or order
binding on CIT Consumer Finance or CITSF or their respective properties or the
certificate of incorporation or by-laws of CIT Consumer Finance or CITSF, or any
of the provisions of any material indenture, mortgage, contract or other
instrument to which CIT Consumer Finance or CITSF is a party or by which CIT
Consumer Finance or CITSF is bound or result in the creation or imposition of
any lien, charge or encumbrance upon any of their respective property pursuant
to the terms of any such material indenture, mortgage, contract or other
instrument.
(h) This Agreement has been duly authorized, executed and delivered by each
of the Seller and CIT Consumer Finance, and it constitutes a legal, valid and
binding instrument
-4-
<PAGE>
enforceable against each of the Seller and CIT Consumer Finance in accordance
with its terms, subject (i) to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights
generally, (ii) as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law) and (iii) as to enforceability with respect to rights of indemnity
thereunder, to limitations of public policy under applicable securities laws.
(i) The Pooling and Servicing Agreement when executed and delivered on the
Closing Date will be duly authorized, executed and delivered by each of the
Seller and CIT Consumer Finance, and will constitute a legal, valid and binding
instrument enforceable against each of the Seller and CIT Consumer Finance in
accordance with its terms, subject (i) to applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws affecting creditors' rights
generally and (ii) as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(j) The Cash Collateral Agreement when executed and delivered on the
Closing Date will be duly authorized, executed and delivered by CIT Consumer
Finance and will constitute a legal, valid and binding instrument enforceable
against CIT Consumer Finance in accordance with its terms, subject (i) to
applicable bankruptcy, reorganization, insolvency, moratorium or other similar
laws affecting creditors' rights generally, and (ii) as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(k) The Certificates, when duly and validly executed by the Trustee or an
agent thereof on behalf of the Trust, authenticated and delivered in accordance
with the Sale and Servicing Agreement, and delivered to and paid for pursuant
hereto will be validly issued and outstanding and entitled to the benefits of
the Pooling and Servicing Agreement.
(l) No filing or registration with, notice to or consent, approval,
authorization or order of any court or governmental authority or agency is
required for the consummation by any of the Seller and CIT Consumer Finance of
the transactions contemplated by any of the Basic Documents to which it is a
party, except such as may be required under the Act, the Rules and Regulations,
or state securities or Blue Sky laws or such other filings, registrations,
notices, consents, approvals, authorizations, orders or permits as have been
obtained.
(m) The Seller, CITSF and CIT Consumer Finance each possess all material
licenses, certificates, authorities or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to conduct the
businesses now operated by them and as described in the Prospectus, other than
such licenses, certificates, authorities or permits the failure of which to
possess would not have a material adverse effect on the interests of the
Certificateholders under the Basic Documents, and neither the Seller, CIT
Consumer Finance nor CITSF have received any notice of proceedings relating to
the revocation or modification of any such license, certificate, authority or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would materially and adversely affect the conduct
of the business, operations, financial condition or income of any of the Seller,
CIT Consumer Finance
-5-
<PAGE>
or CITSF or their ability to perform their respective obligations under any of
the Basic Documents to which it is a party.
(n) As of the Closing Date, the Initial Mortgage Loans and related property
will have been duly and validly assigned to the Trustee in accordance with the
Basic Documents; and when such assignment is effected, a duly and validly
perfected transfer of all such Initial Mortgage Loans subject to no prior lien,
mortgage, security interest, pledge, charge or other encumbrance created by the
Seller, CIT Consumer Finance or CITSF will have occurred. As of each Subsequent
Transfer Date, the Subsequent Mortgage Loans and related property conveyed to
the Trust on such date will have been duly and validly assigned to the Trustee
in accordance with the Basic Documents; and when such assignment is effected,
the duly and validly perfected transfer of all such Subsequent Mortgage Loans
will be subject to no prior lien, mortgage, security interest, pledge, charge or
other encumbrance created by the Seller, CIT Consumer Finance or CITSF.
(o) As of the Closing Date, each of the Initial Mortgage Loans will meet
the eligibility criteria described in the Prospectus and as of each Subsequent
Transfer Date, each of the Subsequent Mortgage Loans being transferred to the
Trust will meet the eligibility criteria described in the Prospectus.
(p) The chief executive office of each of the Seller, CIT Consumer Finance
and CITSF is listed opposite its name on Schedule II hereto, which office is the
place where it is "located" for the purposes of Section 9-103(3)(d) of the
Uniform Commercial Code as in effect in the State of New York, and the offices
of each of the Seller, CIT Consumer Finance and CITSF where it keeps its
respective records concerning the Mortgage Loans are also listed in said
Schedule opposite its name and there have been no other such locations during
the four months preceding the Closing Date.
(q) Neither the Seller, CIT Consumer Finance nor the Trust Fund created by
the Sale and Servicing Agreement will be subject to registration as an
"investment company" under the Investment Company Act of 1940, as amended (the
"Investment Company Act").
(r) In connection with the offering of the Certificates in the State of
Florida, the Seller hereby certifies that they have complied with all provisions
of Section 5.17.075 of the Florida Securities and Investor Protection Act.
(s) As of the Closing Date, each of the respective representations and
warranties of the Seller, CIT Consumer Finance and CITSF set forth in the Basic
Documents will be true and correct, and the Underwriters may rely on such
representations and warranties as if they were set forth herein in full.
3. Purchase, Sale and Delivery of Certificates. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Seller agrees to cause the Trust to
sell to the Underwriters, and the Underwriters agree, severally and not jointly,
to purchase from the Trust, the principal amount of
-6-
<PAGE>
the Certificates set forth opposite the name of such Underwriter in Schedule
I hereto at a purchase price equal to the Total Price to Seller specified in
Schedule III hereto plus accrued interest at the Pass-Through Rate from
__________, 199_ to (but excluding) the Closing Date. The Seller will deliver
the Certificates to the Representative, for the account of the Underwriters,
against payment of the purchase price by wire transfer of immediately available
funds to the Seller, or to such bank as may be designated by the Seller, at the
office of Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022
on __________, 199_ at 10:00 a.m., New York City time, or at such other time not
later than seven full business days thereafter as the Representative and the
Seller determine, such time being herein referred to as the "Closing Date." The
Certificates to be so delivered be initially represented by one or more
Certificates registered in the name of Cede & Co., the nominee of The Depository
Trust Company ("DTC"). The interests of beneficial owners of the Certificates
will be represented by book entries on the records of DTC and participating
members thereof. Definitive Certificates will be available only under the
limited circumstances set forth in the Pooling and Servicing Agreement. The
certificates evidencing the Certificates will be made available for checking and
packaging at the offices of Schulte Roth & Zabel LLP at least 24 hours prior to
the Closing Date.
4. Offering by Underwriters. It is understood that, after the Registration
Statement becomes effective, the Underwriters propose to offer the Certificates
for sale to the public (which may include selected dealers), on the terms set
forth in the Prospectus.
5. Covenants of the Seller and CIT Consumer Finance. Each of the Seller and
CIT Consumer Finance, jointly and severally, covenants and agrees with the
several Underwriters that:
(a) If the Effective Time is prior to the execution and delivery of this
Agreement, the Seller will file the Prospectus, properly completed, with the
Commission pursuant to and in accordance with subparagraph (1) (or, if
applicable and if consented to by the Representative which consent shall not be
unreasonably withheld, subparagraph (4)) of Rule 415 not later than the earlier
of (i) the second business day following the execution and delivery of this
Agreement or (ii) the fifth business day after the Effective Date. The Seller
will advise the Representative promptly of any such filing pursuant to Rule 415.
(b) The Seller will advise the Representative promptly of any proposal to
amend or supplement the registration statement as filed or the related
prospectus or the Registration Statement or the Prospectus, and will not effect
any such amendment or supplementation without the Representative's consent which
consent shall not be unreasonably withheld; and the Seller will also advise the
Representative promptly of the effectiveness of the Registration Statement (if
the Effective Time is subsequent to the execution and delivery of this
Agreement) and of any amendment or supplementation of the Registration Statement
or the Prospectus and of the institution by the Commission of any stop order
proceedings in respect of the Registration Statement and will use its best
efforts to prevent the issuance of any such stop order and to obtain as soon as
possible its lifting, if issued.
-7-
<PAGE>
(c) The Seller will arrange for the qualification of the Certificates for
offering and sale under the securities laws of such jurisdictions in the United
States as the Representative may reasonably designate and will continue such
qualifications in effect so long as necessary under such laws for the
distribution of such Certificates, provided that in connection therewith the
Seller shall not be required to qualify as a foreign corporation to do business
nor become subject to service of process generally, but only to the extent
required for such qualification, in any jurisdiction in which it is not
currently so qualified.
(d) If, at any time when a prospectus relating to the Certificates is
required to be delivered by law in connection with sales by any Underwriter or
dealer, either (i) any event 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, not misleading, or (ii) for any other reason it shall be necessary to
amend or supplement the Prospectus to comply with the Act, the Seller will
promptly notify the Representative and will promptly prepare and file with the
Commission, at their own expense, an amendment or a supplement to the Prospectus
which will correct such statement or omission or effect such compliance. Neither
the consent of the Representative to, nor the Underwriters' delivery of, any
such amendment or supplement shall constitute a waiver of any of the conditions
set forth in Section 6 hereof.
(e) As soon as practicable, but not later than the Availability Date (as
defined below), the Seller will cause the Trust to make generally available to
Certificateholders an earnings statement of the Trust covering a period of at
least 12 months beginning after the Effective Date which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 of the applicable Rules and
Regulations thereunder. For the purpose of the preceding sentence, "Availability
Date" means the 45th day after the end of the fourth fiscal quarter following
the fiscal quarter that includes the Effective Date, except that, if such fourth
fiscal quarter is the last quarter of the Trust's fiscal year, "Availability
Date" means the 90th day after the end of such fourth fiscal quarter.
(f) The Seller will furnish to each of the Underwriters copies of the
Registration Statement (two of which will be signed and include all exhibits),
each related preliminary prospectus, the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in such
quantities as the Representative may from time to time reasonably request.
(g) So long as any of the Certificates are outstanding, the Seller or CIT
Consumer Finance, as the case may be, will furnish to the Representative copies
of all written reports or other written communications (financial or otherwise)
furnished or made available to Certificateholders, and deliver to the
Representative during such same period, (i) as soon as they are available,
copies of any reports and financial statements filed by or on behalf of the
Trust by the Seller with the Commission pursuant to the Exchange Act and (ii)
such additional information concerning the Seller or CIT Consumer Finance
(relating to the Mortgage Loans, the
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servicing thereof or the ability of CIT Consumer Finance to act as Master
Servicer), the Certificates or the Trust as the Representative may reasonably
request from time to time.
(h) Whether or not the transactions contemplated by this Agreement are
consummated, the Seller and CIT Consumer Finance will pay or cause to be paid
all costs and expenses incident to the performance of their respective
obligations hereunder, including (i) the preparation, issuance and delivery of
the Certificates, (ii) any fees charged by Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Structured Ratings Group, a Division of The
McGraw-Hill Companies, Inc. ("S&P" and, together with Moody's, the "Rating
Agencies"), for the rating of the Certificates, (iii) the expenses incurred in
printing, reproducing and distributing the registration statement as filed, the
Registration Statement, preliminary prospectuses and the Prospectus (including
any amendments and supplements thereto required pursuant to Section 5(d)
hereof), (iv) the fees and disbursements of counsel to the Seller and CIT
Consumer Finance and the independent public accountants of the Seller, (v) the
fees and disbursement of the Trustee and its counsel, (vi) the fees of DTC in
connection with the book-entry registration of the Certificates, (vii) the
reasonable expenses of the Representative including the reasonable fees and
disbursements of its counsel, in connection with the initial qualification of
the Certificates for sale in the jurisdictions that the Representative may
designate pursuant to Section 5(c) hereof and in connection with the preparation
of any blue sky survey and legal investment survey and (viii) the printing and
delivery to the Underwriters, in such quantities as the Underwriters may
reasonably request, of copies of the Basic Documents. Subject to Section 8
hereof, the Underwriters shall be responsible for their own costs and expenses,
including the fees and expenses of their counsel (other than the reasonable
expenses of the Representative including the reasonable fees and disbursements
of its counsel, in connection with the initial qualification of the Certificates
for sale in the jurisdictions that the Representative may designate pursuant to
Section 5(c) hereof and in connection with the preparation of any blue sky
survey and legal investment survey).
(i) On or before the Closing Date, the Seller, CIT Consumer Finance and
CITSF shall cause each of their respective books and records (including any
computer records) relating to the Initial Mortgage Loans to be marked to show
the absolute ownership by the Trustee in accordance with Section ________ of the
Pooling and Servicing Agreement, on behalf of the Trust, of the Initial Mortgage
Loans, and from and after the Closing Date neither the Seller, CIT Consumer
Finance, as Master Servicer, nor CITSF shall take any action inconsistent with
the ownership by the Trustee on behalf of the Trust of the Initial Mortgage
Loans, other than as permitted by the Basic Documents.
(j) On or before each Subsequent Transfer Date, the Seller, CIT Consumer
Finance and CITSF shall cause each of their respective books and records
(including any computer records) relating to the Subsequent Mortgage Loans to be
sold on such Subsequent Transfer Date to be marked to show the absolute
ownership by the Trustee in accordance with Section ______ of the Pooling and
Servicing Agreement, on behalf of the Trust, of such Subsequent Mortgage Loans,
and from and after such Subsequent Transfer Date neither the Seller, CIT
Consumer Finance, as Master Servicer, nor CITSF shall take any action
inconsistent
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with the ownership by the Trustee on behalf of the Trust of such Subsequent
Mortgage Loans, other than as permitted by the Basic Documents.
(k) Until the retirement of the Certificates, or until such time as the
Underwriters shall cease to maintain a secondary market in the Certificates,
whichever occurs first, the Seller or CIT Consumer Finance will deliver to the
Representative the certified public accountants' annual statements of compliance
furnished to the Trustee pursuant to the Pooling and Servicing Agreement, as
soon as such statements are furnished to the Trustee.
(l) To the extent, if any, that either of the ratings provided with respect
to the Certificates by either Rating Agency is conditional upon the furnishing
of documents or the taking of any other actions by the Seller, CIT Consumer
Finance or CITSF, the Seller, CIT Consumer Finance or CITSF, as the case may be,
shall furnish such documents and take any such other actions as may be required
to satisfy such conditions. A copy of any such document shall be provided to the
Representative at the time it is delivered to the Rating Agencies.
6. Conditions of the Obligations of the Underwriters. The obligations of
the several Underwriters to purchase and pay for the Certificates will be
subject to the accuracy of the representations and warranties on the part of the
Seller and CIT Consumer Finance, and contained or incorporated herein, to the
accuracy of the statements of officers of the Seller and CIT Consumer Finance
made pursuant to the provisions hereof, to the performance by the Seller and CIT
Consumer Finance of its obligations hereunder and to the following additional
conditions precedent:
(a) (i) On the date of this Agreement, the Representative and the Seller
shall have received a draft of a letter, dated the date of delivery thereof, of
KPMG Peat Marwick LLP confirming that they are independent public accountants
with respect to the Seller and CIT Consumer Finance within the meaning of the
Act and the Rules and Regulations, substantially in the form of the draft to
which the Representative has previously agreed and otherwise in form and
substance satisfactory to the Representative and counsel for the Underwriters
and (ii) on the Closing Date, a letter, dated the date of delivery thereof, of
KPMG Peat Marwick LLP confirming that they are independent public accountants
with respect to the Seller and CIT Consumer Finance within the meaning of the
Act and the Rules and Regulations, consistent with the letter delivered pursuant
to clause (i) above and otherwise in form and substance satisfactory to the
Representative and counsel for the Underwriters.
(b) If the Effective Time is not prior to the execution and delivery of
this Agreement, the Effective Time shall have occurred not later than 10:00
p.m., New York City time, on the date of this Agreement or such later date as
shall have been consented to by the Representative. If the Effective Time is
prior to the execution and delivery of this Agreement, the Prospectus shall have
been filed with the Commission in accordance with the Rules and Regulations and
Section 5(a) hereof. On or prior to the Closing Date, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge of
the Seller, shall be contemplated by the Commission.
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(c) The Representative shall have received a certificate, dated the Closing
Date, executed by any two of the President, any Vice President, the principal
financial officer or the principal accounting officer of (i) the Seller
representing and warranting that, as of the Closing Date, to the best of each
such officer's knowledge after reasonable investigation, the representations and
warranties of the Seller in this Agreement and the other Basic Documents to
which it is a party are true and correct, that the Seller has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
hereunder or thereunder at or prior to the Closing Date, that no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or, to the best of their
knowledge, are contemplated by the Commission and (ii) CIT Consumer Finance in
which such officers shall state that, to the best of each such officer's
knowledge after reasonable investigation, the representations and warranties of
CIT Consumer Finance in this Agreement and the other Basic Documents to which it
is a party are true and correct and that CIT Consumer Finance has complied with
all agreements and satisfied all conditions on its part to be performed or
satisfied hereunder or thereunder at or prior to the Closing Date.
(d) Subsequent to the execution and delivery of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting particularly the business or properties of the Trust,
the Seller, CIT Consumer Finance or CITSF which, in the judgment of a majority
in interest of the Underwriters (including the Representative), materially
impairs the investment quality of the Certificates or makes it impractical or
inadvisable to proceed with completion of the sale of and payment for the
Certificates; (ii) any downgrading in the rating of any debt securities of CIT
or CIT Consumer Finance or any of their direct or indirect subsidiaries by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any such debt
securities (other than an announcement with positive implications of a possible
upgrading, and no implication of a possible downgrading, of such rating); (iii)
any suspension or limitation of trading in securities generally on the New York
Stock Exchange or any setting of minimum prices for trading on such exchange;
(iv) any banking moratorium declared by Federal, New Jersey or New York
authorities; or (v) any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in the judgment
of a majority in interest of the Underwriters (including the Representative),
the effect of any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the sale of
and payment for the Certificates.
(e) The Representative shall have received a written opinion of in-house
General Counsel of the Seller, CIT Consumer Finance and CITSF, or other counsel
satisfactory to the Representative in its reasonable judgment, dated the Closing
Date, in substantially the form set forth below, with such changes therein as
the Representative and counsel for the Underwriters shall reasonably agree:
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<PAGE>
(i) The Seller, CITSF and CIT Consumer Finance have each been duly
organized and are validly existing as corporations in good standing under the
laws of the State of Delaware.
(ii) The Seller, CIT Consumer Finance and CITSF each have the
corporate power and corporate authority to carry on their respective businesses
as described in the Prospectus and to own and operate their respective
properties in connection therewith.
(iii) The Seller, CIT Consumer Finance and CITSF are each corporations
duly organized, validly existing and in good standing under the laws of the
jurisdiction of their organization and each has the corporate power to own its
assets and to transact the business in which it is currently engaged and to
perform their respective obligations under each of the Basic Documents to which
it is a party. The Seller, CIT Consumer Finance and CITSF are each qualified to
do business as a foreign corporation and each is in good standing in each
jurisdiction in which the character of the business transacted by it or
properties owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of the Seller, CIT
Consumer Finance or CITSF, respectively or on their ability to perform their
respective obligations under the Basic Documents.
(iv) This Agreement has been duly authorized, executed and delivered
by each of the Seller and CIT Consumer Finance, and is a valid and binding
obligation of each of the Seller and CIT Consumer Finance enforceable against
each of the Seller and CIT Consumer Finance in accordance with its terms, except
that (A) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, (B) such enforcement may be limited by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law), and (C) the enforceability as to rights to
indemnity thereunder may be limited under applicable law.
(v) Each of the Basic Documents to which the Seller, CIT Consumer
Finance or CITSF is a party have been duly authorized, executed and delivered by
each of the Seller, CIT Consumer Finance and CITSF, and each constitutes a valid
and binding obligation of, each of the Seller, CIT Consumer Finance and CITSF,
enforceable against each of the Seller, CIT Consumer Finance and CITSF in
accordance with its terms, except that (A) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (B) such
enforcement may be limited by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
(vi) The execution and delivery by each of the Seller, CIT Consumer
Finance and CITSF of each of the Basic Documents to which it is a party, the
performance of their respective obligations thereunder and the signing of the
Registration Statement by the Seller are within the corporate power of the
Seller, CIT Consumer Finance and CITSF, as applicable, and have been duly
authorized by all necessary corporate action on the part of the Seller, CIT
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Consumer Finance and CITSF, as applicable; and neither the issue and sale of the
Certificates, nor the consummation of the transactions contemplated by the Basic
Documents nor the fulfillment of the terms thereof, will, to the best of such
counsel's knowledge, conflict with or constitute a breach of, or default under,
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or asset of the Seller, CIT Consumer Finance or CITSF pursuant to,
any contract, indenture, mortgage, loan agreement, note, lease or other
instrument, if any, to which the Seller, CIT Consumer Finance or CITSF is a
party or by which either may be bound or to which the property or assets of the
Seller, CIT Consumer Finance or CITSF are subject (which contracts, indentures,
mortgages, loan agreements, notes, leases and other such instruments, if any,
have been identified by the Seller, CIT Consumer Finance or CITSF to such
counsel), nor will such action result in any violation of the provisions of the
certificate of incorporation or by-laws of the Seller, CIT Consumer Finance or
CITSF or, to the best of such counsel's knowledge, any law, administrative
regulation or administrative or court decree of any state or federal courts,
regulatory bodies, other body, governmental entity or arbitrator having
jurisdiction over the Seller, CIT Consumer Finance or CITSF.
(vii) The Seller has duly authorized and executed the written order to
the Trustee to execute and deliver the Certificates.
(viii) To the best of such counsel's knowledge, no filing or
registration with or notice to or consent, approval, authorization or order of
any New Jersey, New York or federal court or governmental authority or agency is
required for the consummation by the Seller, CIT Consumer Finance or CITSF of
the transactions contemplated by this Agreement, except such as may be required
under the Act or the Rules and Regulations, or state securities or Blue Sky laws
or such other filings, registrations, notices, consents, approvals,
authorizations, orders or permits as have been obtained.
(ix) There are no legal or governmental proceedings pending to which
the Seller, CIT Consumer Finance or CITSF is a party or of which any property of
the Seller, CIT Consumer Finance or CITSF is the subject, and no such
proceedings are known by such counsel to be threatened or contemplated by
governmental authorities or threatened by others, (A) that are required to be
disclosed in the Registration Statement and are not disclosed therein or (B)(1)
asserting the invalidity of all or part of any of the Basic Documents, (2)
seeking to prevent the issuance of the Certificates, (3) that could materially
and adversely affect the Seller's, CIT Consumer Finance's or CITSF's obligations
under any of the Basic Documents or (4) seeking to affect adversely the federal
or state income tax attributes of the Certificates.
(x) Such counsel is familiar with CIT Consumer Finance's and CITSF's
standard operating procedures relating to CIT Consumer Finance's and CITSF's
acquisition of a perfected first priority security interest in the properties
financed by CIT Consumer Finance and CITSF's pursuant to mortgage loans. Other
than with respect to mechanic's and materialmen's liens, assuming that CIT
Consumer Finance's standard procedures are followed with respect to the
perfection of security interests in the Mortgaged Properties (and such counsel
has no reason to believe that either CIT Consumer Finance or CITSF has not or
will not continue to follow its standard procedures in connection with the
perfection of security
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interests in the Mortgaged Properties), CIT Consumer Finance and CITSF have
acquired or will acquire a perfected first priority security interest in the
Mortgaged Properties.
(xi) The form of assignment to be executed and delivered by CIT
Consumer Finance to the Seller pursuant to the Purchase Agreement is sufficient
in form and substance to convey to the Seller all of CIT Consumer Finance's
right, title and interest in and to the Mortgage Loans and any security
interests securing the Mortgage Loans. When the Purchase Agreement has been duly
executed and delivered by all parties thereto, the assignment described in the
Purchase Agreement has been duly executed and delivered to the Seller by CIT
Consumer Finance, and the purchase price has been paid to CIT Consumer Finance
by the Seller in the manner specified in the Purchase Agreement, all of CIT
Consumer Finance's right, title and interest in and to the Mortgage Loans and
any security interests securing the Mortgage Loans will have been conveyed to
the Seller and the Seller will be the holder of a valid, binding and enforceable
security interest in the Mortgage Loans against CIT Consumer Finance.
(xii) The form of assignment to be executed and delivered by the
Seller to the Trustee pursuant to the Pooling and Servicing Agreement is
sufficient in form and substance to convey to the Trustee all of the Seller's
right, title and interest in and to the Mortgage Loans and any security
interests securing the Mortgage Loans. When the Basic Documents have each been
duly executed and delivered by all parties thereto, the assignment described in
the Pooling and Servicing Agreement has been duly executed and delivered to the
Trust by the Seller, the purchase price therefor has been paid to the Seller by
the Trust in the manner specified in the Sale and Servicing Agreement, and the
Certificates have been duly executed and duly authenticated and delivered by the
Trustee, to or upon the order of the Seller in accordance with the Pooling and
Servicing Agreement, all of the Seller's right, title and interest in and to the
Mortgage Loans and any security interests securing the Mortgage Loans will have
been conveyed to the Trust and the Trust will be the holder of a valid and
binding security interest in the Mortgage Loans against the Seller.
(f) The Representative shall have received a written opinion of [New Jersey
Counsel], special local New Jersey counsel for the Seller and CIT Consumer
Finance, dated the Closing Date, in form and substance satisfactory to the
Representative and counsel for the Underwriters, to the effect that:
(i) (A) If the transfer of the Mortgage Loans is deemed to be the
grant of a security interest, and not a true sale, (1) to the extent that the
Uniform Commercial Code as in effect in the State of New Jersey (the "New Jersey
UCC") applies to the perfection of the Seller's security interests in the
Mortgage Loans and the proceeds thereof under Section 9-103 of the New Jersey
UCC, when the financing statements executed by CIT Consumer Finance as debtor
(the "First Step Financing Statements") have been duly executed and delivered
and filed or recorded, as appropriate, in the office of the Secretary of State
of New Jersey, such security interests will be perfected and (2) to the extent
that the New Jersey UCC applies to the perfection of the Trust's security
interests in the Mortgage Loans and the proceeds thereof under Section 9-103 of
the New Jersey UCC, when the First Step Financing Statements and the financing
statements executed by the Seller as "debtor" ("Second Step Financing
Statements")
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have been duly executed and delivered and filed or recorded, as appropriate, in
the office of the Secretary of State of New Jersey, such security interests will
be perfected and (B) based solely on such counsel's review of those Financing
Statements, officer certificates and specified New Jersey UCC search reports,
the security interests of the Trust in the Mortgage Loans are subject to no
equal or prior security interest under the New Jersey UCC; provided, however
that (1) for purposes of its opinions in this paragraph, such counsel may assume
that: (a) the Seller is the holder of valid, binding and enforceable security
interests in the Mortgage Loans and the Trust is the holder of valid, binding
and enforceable security interests in the Mortgage Loans; (b) the New Jersey UCC
governs the perfection of the security interest in the Mortgage Loans, the
priority of those security interests and the classification of the Mortgage
Loans; (c) the chief executive office of each of the Company and the Seller is,
and during the past four months has been, in the State of New Jersey; (d)
neither CIT Consumer Finance, the Seller nor the Trust has assigned, nor will
assign, any Mortgage Loan to a buyer who takes possession of it in the ordinary
course of its business and who acts without knowledge that such Mortgage Loan is
subject to a security interest; (e) the Mortgage Loans exist and each of CIT
Consumer Finance and the Seller, respectively, has rights in the Mortgage Loans;
(f) (i) no lien creditor has executed on or attached to the Mortgage Loans prior
to the perfection of the security interests of the Seller or the Trust in the
Mortgage Loans and the proceeds thereof; and (ii) the Mortgage Loans are not
subject to the rights of the holder of a perfected "purchase money security
interest" (as such term is defined in Section 9-107 of the New Jersey UCC); (g)
no Mortgage Loan, or the proceeds thereof, constitutes proceeds of any property
subject to the security interest of a third party; (h) none of the proceeds of
the Mortgage Loans which constitute "securities" under Article 8 of the New
Jersey UCC are transferred to a bona fide purchaser (other than the Indenture
Trustee) under Section 8-302 of the New Jersey UCC; (i) the Seller and the
Trustee have and will maintain a list describing the Mortgage Loans for
inspection during normal business hours by interested parties; (j) the
underlying facts in the officer certificates to be received by such counsel are
correct; (k) all financing statements or other notice of liens, other than the
financing statements, in which CIT Consumer Finance, the Seller or the Trust is
named as debtor were properly filed and indexed, that the New Jersey UCC search
reports have revealed all recorded liens against CIT Consumer Finance and the
Seller and that no filings or notices covering CIT Consumer Finance or the
Seller were made between the dates last searched and reported on in the New
Jersey UCC search reports and the time of such financing statements, and (1)
from and after the date hereof CIT Consumer Finance, acting in a capacity as
Master Servicer and custodian for the Trustee, will have taken, and will
maintain, exclusive possession of the Mortgage Loans; and (2) such counsel need
express no opinion: (a) regarding perfection as to any government or
governmental agency (including without limitation the United States of America
or any State thereof or any agency or department of the United States of America
or any State thereof) of any security interest in any Mortgage Loans with
respect to which such government or agency is obligated; (b) on the perfection
of any security interests in the collateral described in the Mortgage Loans; (c)
as to the priority of any perfected security interests under the New Jersey UCC
of any liens, claims or other interests that do not require filing or similar
action to attach or that arise by operation of law against any claim or lien in
favor of the United States or any State or any agency or instrumentality of the
United States or any State (including, without limitation, liens arising under
the federal tax laws or the Employment Retirement Income Security Act of 1974,
as amended) or against the rights of a "lien creditor" (as defined in the New
Jersey UCC);
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and (d) as to the effect of the laws of any other state that may govern the
perfection or priority of the security interest in the Mortgage Loans by
possession or other than by filing a financing statement under the UCC; (3) such
opinions may be subject to the effect of (i) the limitations on the existence
and perfection of security interests in proceeds resulting from the operation of
Section 9-306 of the New Jersey UCC; (ii) the limitations with respect to
documents and instruments imposed by Section 9-309 of the New Jersey UCC; (iii)
bankers' liens, rights of set-off and other rights of persons in possession of
money, instruments and proceeds constituting certificated or uncertificated
securities; (iv) the priority of any security interests perfected by possession;
(v) the priority of security interests which may be perfected by any means other
than by filing a financing statement under the New Jersey UCC and (and such
counsel may note that CIT Consumer Finance, the Seller and the Trust have
respectively represented that no such security interests exist) and (vi) Section
552 of the Bankruptcy Code with respect to any Mortgage Loans acquired by the
Seller or the Trust subsequent to the commencement of a case by or against CIT
Consumer Finance, the Seller or the Trust under the Bankruptcy Code; (4) such
counsel's opinions may be inapplicable to any Subsequent Mortgage Loans unless,
upon the proper filing of New Jersey UCC financing statements describing the
Subsequent Mortgage Loans, (i) the assumptions, qualifications and limitations
in this letter shall be true as to conditions then existing and as to the
Subsequent Mortgage Loans, (ii) there are no changes in law, and (iii) all
searches have been updated and reveal no liens against any of the Subsequent
Mortgage Loans; and (5) such counsel's opinion may be further subject to the
effect of general principles of equity, regardless of whether such principles
are considered in a proceeding in equity or at law, as the same may be applied
in a proceeding seeking to enforce any obligation.
(ii) Solely insofar as the present laws of the State of New Jersey and
the Federal law of the United States of America are concerned, in a properly
presented and decided case, a court would conclude that the transfer of the
Mortgage Loans and the proceeds thereof by CIT Consumer Finance to the Seller
constitute true sales of such Mortgage Loans and, assuming a court reached that
conclusion, in such a case a court would conclude that the Mortgage Loans and
the proceeds would not be considered property of the estate of CIT Consumer
Finance pursuant to Section 541 of the Bankruptcy Code, and the Mortgage Loans
and the proceeds thereof would not be subject to the automatic stay pursuant to
Section 362 of the Bankruptcy Code; provided, however, such counsel need express
no opinion (A) with respect to how long the Seller could be denied possession of
the Mortgage Loans before the issues discussed in this paragraph are finally
decided on appeal or other review, (B) with respect to the availability of a
preliminary injunction or temporary restraining order pursuant to the broad
equitable powers granted to a bankruptcy court and (C) as to the conveyance of
any Subsequent Mortgage Loans unless, upon the proper filing of UCC financing
statements describing the Subsequent Mortgage Loans, (1) the assumptions,
qualifications and limitations in such opinion shall be true as to conditions
then existing and (2) all searches have been updated and reveal no liens against
any of the Subsequent Mortgage Loans.
(iii) Solely insofar as the present laws of the State of New Jersey
and the Federal law of the United States of America are concerned, in a properly
presented and decided case, a court would conclude that the transfer of the
Mortgage Loans and the proceeds thereof by the Seller to the Trust constitute
true sales of such Mortgage Loans and, assuming a
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court reached that conclusion, in such a case a court would conclude that the
Mortgage Loans and the proceeds would not be considered property of the estate
of the Seller pursuant to Section 541 of the Bankruptcy Code, and the Mortgage
Loans and the proceeds thereof would not be subject to the automatic stay
pursuant to Section 362 of the Bankruptcy Code; provided, however, such counsel
need express no opinion (A) with respect to how long the Trust could be denied
possession of the Mortgage Loans before the issues discussed in this paragraph
are finally decided on appeal or other review, (B) with respect to the
availability of a preliminary injunction or temporary restraining order pursuant
to the broad equitable powers granted to a bankruptcy court and (C) as to the
conveyance of any Subsequent Mortgage Loans unless, upon the proper filing of
UCC financing statements describing the Subsequent Mortgage Loans, (1) the
assumptions, qualifications and limitations in such opinion shall be true as to
conditions then existing and (2) all searches have been updated and reveal no
liens against any of the Subsequent Mortgage Loans. Such opinion may contain
such assumptions, qualifications and limitations as are customary in opinions of
this type and are reasonably acceptable to counsel to the Underwriters. In
rendering such opinion, such counsel may state that they express no opinion as
to the laws of any jurisdiction other than the Federal law of the United States
of America and the laws of the State of New Jersey.
(i) The Representative shall have received a written opinion of
Schulte Roth & Zabel LLP, special counsel to the Seller, CIT Consumer Finance
and CITSF, dated the Closing Date, in substantially the form set forth below,
with such changes therein as the Representative and counsel for the Underwriters
shall reasonably agree:
(i) The Registration Statement became effective under the Act as
of __________, 199_ and, to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement or any part thereof
or any amendment thereto has been issued under the Act and no proceeding for
that purpose has been instituted or threatened by the Commission.
(ii) The Sale and Servicing Agreement does not need to be
qualified under the Trust Indenture Act. The Trust is not, and will not as a
result of the offer and sale of the Certificates as contemplated in the
Prospectus and in this Agreement become, required to register as an "investment
company" under the Investment Company Act.
(iii) The statements in the Prospectus under the caption "The
Certificates" and "The Purchase Agreements" insofar as such statements purport
to summarize certain terms of the Certificates and the Basic Documents, present
a fair summary of the terms of such documents.
(iv) To the best of such counsel's knowledge, there are no
Mortgage Loans or documents of the Seller which are required to be filed as
exhibits to the Registration Statement pursuant to the Act or the Rules or
Regulations which have not been so filed.
(v) The statements in the Prospectus under the headings "Certain
Federal Income Tax Consequences" and "ERISA Considerations," to the extent that
they
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constitute matters of law or legal conclusions with respect thereto are correct
in all material respects.
(vi) The registration statement on Form S-3 (No. 333-_________)
relating to the Certificates as of the Effective Date, the Registration
Statement and the Prospectus as of the date of this Agreement, and any amendment
or supplement thereto, as of its date, complied as to form in all material
respects with the requirements of the Act and the applicable Rules and
Regulations. Such counsel need express no opinion with respect to the financial
statements, the exhibits, annexes and other financial, statistical, numerical or
portfolio data, economic conditions or financial condition of the portfolio
information included in the registration statement on Form S-3 (No. 333 -
______) relating to the Certificates, the Registration Statement, the Prospectus
or any amendment or supplement thereto.
Such counsel shall state that it has participated in conferences with officers
and representatives of the Seller, CIT Consumer Finance, Counsel to CIT Consumer
Finance and officers and representatives of the Underwriters, at which
conferences certain of the contents of the Registration Statement and the
Prospectus were discussed and, although such counsel is not passing upon and
does not assume any responsibility whatsoever for, the factual accuracy,
completeness or fairness of the statements contained in the registration
statement on Form S-3 (No. 333 - ______) relating to the Certificates, the
Registration Statement or Prospectus (except as stated in Sections 6(i)(v) and
6(i)(vii) above) and has made no independent check or verification thereof for
the purpose of rendering this opinion, on the basis of the foregoing (relying as
to materiality to a large extent upon the certificates of officers and other
representatives of the Seller and CIT Consumer Finance), no facts have come to
their attention that leads such counsel to believe that the registration
statement on Form S-3 (No. 333 - _____) relating to the Certificates, as of the
Effective Date, the Registration Statement, when it became effective, contained
any 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 or that the Prospectus on its date contained or on the Closing Date
contains, any untrue statement of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that such counsel need express no view with respect
to the financial statements, tables, schedules, exhibits, annexes and other
financial, statistical, numerical or portfolio data, or information on economic
conditions or financial condition of the portfolio included in or incorporated
by reference into, the Registration Statement or Prospectus. Said counsel may
state that they are admitted to practice only in the State of New York, that
they are not admitted to the Bar in any other State and are not experts in the
law of any other State and to the extent that the foregoing opinions concern the
laws of any other State such counsel may rely upon the opinion of counsel
satisfactory to the Underwriters and admitted to practice in such jurisdiction.
Any opinions relied upon by such counsel as aforesaid shall be addressed to the
Underwriters and shall be delivered together with the opinion of such counsel,
which shall state that such counsel believes that their reliance thereon is
justified.
(j) The Representative shall have received an opinion of [Underwriter's
Counsel], counsel for the Underwriters, dated the Closing Date, with respect to
the validity of the
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Certificates and such other related matters as the Representative shall require
and the Seller shall have furnished or caused to be furnished to such counsel
such documents as they may reasonably request for the purpose of enabling them
to pass upon such matters.
(k) The Representative shall have received an opinion of [Cash Collateral
Depositor's Counsel], counsel to the Cash Collateral Depositor, dated the
Closing Date, in form and substance satisfactory to the Representative and
counsel for the Underwriters, to the effect that:
(i) The Cash Collateral Depositor is licensed to maintain a branch in
the State of New York and has full power and authority to enter into, and to
take all action required of it, under the Cash Collateral Agreement.
(ii) The Cash Collateral Agreement has been duly authorized, executed
and delivered by the Cash Collateral Depositor.
(iii) The Cash Collateral Agreement constitutes a legal, valid and
binding agreement of the Cash Collateral Depositor, enforceable against the Cash
Collateral Depositor in accordance with its terms, except as enforceability
thereof may be limited by bankruptcy, insolvency, liquidation, reorganization,
moratorium or other similar laws affecting the enforcement of rights of
creditors against the Cash Collateral Depositor generally, as such laws would
apply in the event of bankruptcy, insolvency, liquidation, receivership, or
reorganization or any moratorium or similar occurrence affecting the Cash
Collateral Depositor, and the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or law).
(l) The Representative shall have received an opinion of [Japanese
Counsel], Japanese counsel to the Cash Collateral Depositor, in form and
substance satisfactory to the Representative and counsel for the Underwriters,
to the effect that the Cash Collateral Depositor is a banking corporation
validly existing under the laws of Japan.
(m) The Representative shall have received an opinion of [Trustee Counsel],
counsel to the Trustee, dated the Closing Date, in form and substance
satisfactory to the Representative and counsel for the Underwriters, to the
effect that:
(i) The Trustee is a ______________ duly incorporated and validly
existing under the laws of the state of _________.
(ii) The Trustee has the full power and authority to accept the office
of owner trustee under the Pooling and Servicing Agreement and to enter into and
perform its obligations under the Pooling and Servicing Agreement and the
transactions contemplated thereby.
(iii) The execution and delivery of the Pooling and Servicing
Agreement by the Trustee and the performance by the Trustee of its obligations
under the
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Pooling and Servicing Agreement have been duly authorized by all necessary
action of the Trustee and the Pooling and Servicing Agreement has been duly
executed and delivered by the Trustee.
(iv) The Pooling and Servicing Agreement constitutes valid and binding
obligations of the Trustee enforceable against the Trustee in accordance with
its terms, except as the enforceability thereof may be (a) limited by
bankruptcy, insolvency, reorganization, moratorium, liquidation or other similar
laws affecting the rights of creditors generally, and (b) subject to general
principals of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(v) The execution and delivery by the Trustee of the Trust Agreement
and the transactions contemplated thereby do not require any consent, approval
or authorization of, or any registration or filing with, any applicable
governmental authority of the State of Delaware which has not been obtained or
done.
(vi) Neither the consummation by the Trustee of the transactions
contemplated in the Pooling and Servicing Agreement, nor the fulfillment of the
terms thereof by the Trustee will conflict with, result in a breach or violation
of, or constitute a default under the Article of Association, By-Laws or other
organizational documents of the Trustee
(n) The Certificates shall have been rated [at least "A2" by Moody's and
"A" by S&P].
(o) The Representative shall have received copies of each opinion of
counsel delivered to either Rating Agency or the Cash Collateral Depositor,
together with a letter addressed to the Representative, dated the Closing Date,
to the effect that each Underwriter may rely on each such opinion to the same
extent as though such opinion was addressed to each as of its date.
(p) The Representative shall have received evidence satisfactory to it and
counsel for the Underwriters that, on or before the Closing Date, UCC-1
financing statements shall have been submitted to the Trustee for filing in the
appropriate filing offices reflecting the transfer of the interest in the
Mortgage Loans and the proceeds thereof (A) from CITSF to CIT Consumer Finance,
to the extent such Mortgage Loans have been transferred to CIT Consumer Finance
from CITSF, (B) from CIT Consumer Finance to the Seller, (C) from the Seller to
the Trustee, on behalf of the Trust, or the Trust, as the case may be.
(q) On the Closing Date, counsel for the Underwriters shall have been
furnished with such documents and opinions as they reasonably may require for
the purpose of enabling them to pass upon the issuance and sale of the
Certificates 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 Seller in connection with the issuance and sale of
the Certificates as
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herein contemplated shall be in form and substance satisfactory to the
Representative and counsel for the Underwriters.
7. Indemnification and Contribution. (a) CIT Consumer Finance will
indemnify and hold each Underwriter harmless against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the 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 any material fact contained in
the Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus or arise out of or are based upon
the omission or alleged or mission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that (i) CIT Consumer Finance will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Seller or CIT Consumer
Finance by any Underwriter through the Representative specifically for use
therein it being understood and agreed that the only such information furnished
by any Underwriter consists of the Underwriters' Information (ii) such indemnity
with regard to any related preliminary prospectus shall not inure to the benefit
of each Underwriter (or any person controlling each Underwriter) from whom the
person asserting any such loss, claim, damage or liability purchased the
Certificates which are the subject thereof if such person did not receive a copy
of the Prospectus (or, in the event it is amended or supplemented, such
Prospectus as amended or supplemented) at or prior to the confirmation of the
sale of such Certificates to such person if such Prospectus (or, in the event it
is amended or supplemented, such Prospectus as amended or supplemented) was
timely forwarded to each Underwriter as required by this Agreement and the
untrue statement or omission of a material fact contained in such related
preliminary prospectus was corrected in the Prospectus (or, in the event it is
amended or supplemented, such Prospectus as amended or supplemented) and (iii)
CIT Consumer Finance shall not, in connection with any one such action or
separate but substantially similar or related transactions 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 for all such Underwriters, which firm shall be designated in
accordance with Section 7(c) hereof.
(b) Each Underwriter, severally and not jointly, will indemnify and hold
harmless the Seller and CIT Consumer Finance against any losses, claims, damages
or liabilities to which the Seller or CIT Consumer Finance may become subject,
under the 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 any material fact contained in
the Registration Statement, the Prospectus or any amendment or supplement
thereto, or any related preliminary prospectus or arise out of or are based upon
the omission or the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such
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untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Seller or CIT Consumer Finance by such Underwriter through the
Representative specifically for use therein, and will reimburse any legal or
other expenses reasonably incurred by the Seller or CIT Consumer Finance in
connection with investigating or defending any such action or claim as such
expenses are incurred, it being understood and agreed that (i) the only such
information furnished by any Underwriter consists of the following information
contained in the Prospectus: (a) the last paragraph at the bottom of the cover
page concerning the terms of the offering by the Underwriters, (b) the legend
concerning over-allotments and (c) the information contained under the caption
"Underwriting" (the "Underwriters' Information") and (ii) the Underwriters 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 for each of the Seller and
CIT Consumer Finance, which firm shall be designated in accordance with Section
7(c) hereof.
(c) Promptly after receipt by an indemnified party under this Section of
written notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and after acceptance by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above in such proportion as is
appropriate to reflect not only the relative benefits received by the Seller and
CIT Consumer Finance on the one hand and the Underwriters on the other from the
offering of the Certificate but also the relative fault of the Seller and CIT
Consumer Finance on the one hand and the Underwriters on the other in connection
with the statements or omissions which
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<PAGE>
resulted in such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by the Seller
and CIT Consumer Finance on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Certificate (before deducting expenses) received by the Seller
and CIT Consumer Finance bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Seller, CIT Consumer
Finance or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
action or claim which is the subject of this subsection (d). Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Certificate underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of CIT Consumer Finance under this Section shall be in
addition to any liability which the Seller or CIT Consumer Finance may otherwise
have and shall extend, upon the same terms and conditions, to each person, if
any, who controls any Underwriter within the meaning of the Act; and the
obligations of the Underwriters under this Section shall be in addition to any
liability which the respective Underwriters may otherwise have and shall extend,
upon the same terms and conditions, to each director of the Seller or CIT
Consumer Finance, to each officer of the Seller or CIT Consumer Finance who has
signed the Registration Statement and to each person, if any, who controls the
Seller or CIT Consumer Finance within the meaning of the Act.
8. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Seller and CIT Consumer Finance or their respective officers and of the
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation or statement as to the results
thereof, made by or on behalf of any Underwriter, the Seller, CIT Consumer
Finance or any of their respective representatives, officers or directors or any
controlling person, and will survive delivery of and payment for the
Certificate. If this Agreement is terminated pursuant to Section 9 or if for any
reason the purchase of the Certificates by the Underwriters is not consummated,
the Seller, CIT Consumer Finance and CITSF shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 hereof and the
respective obligations of the Seller, CIT Consumer Finance and the
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<PAGE>
Underwriters pursuant to Section 7 hereof shall remain in effect. If the
purchase of the Certificate by the Underwriters is not consummated for any
reason other than solely because of the termination of this Agreement pursuant
to Section 9 or the occurrence of any event specified in clauses (iii), (iv) or
(v) of Section 6(e) hereof, the Seller and CIT Consumer Finance will reimburse
the Underwriters for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Certificate.
9. Failure to Purchase the Certificates. If any Underwriter or Underwriters
default in their obligations to purchase the principal amount of the
Certificates opposite such Underwriter's name on Schedule I hereto and the
aggregate principal amount of the Certificates that such defaulting Underwriter
or Underwriters agreed but failed to purchase does not exceed 10% of the total
principal amount of the Certificates, the Representative may make arrangements
satisfactory to the Seller and CIT Consumer Finance for the purchase of such
Certificates by other persons, including any of the Underwriters, but if no such
arrangements are made by the Closing Date, the non-defaulting Underwriters shall
be obligated severally, in proportion to their respective commitments hereunder,
to purchase the Certificates that such defaulting Underwriters agreed but failed
to purchase. If any Underwriter or Underwriters so default and the aggregate
principal amount of the Certificates with respect to such default or defaults
exceeds 10% of the total principal amount of the Certificates and arrangements
satisfactory to the Representative, the Seller and CIT Consumer Finance for the
purchase of such Certificates by other persons are not made within 36 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter, the Seller or CIT Consumer Finance, except as
provided in Section 8. As used in this Agreement, the term "Underwriter"
includes any person substituted for an Underwriter under this Section. Nothing
herein will relieve a defaulting Underwriter or Underwriters from liability for
its default.
10. Notices. All communications hereunder will be in writing and, if sent
to the Representative or the Underwriters, will be mailed, delivered or sent by
facsimile transmission and confirmed to the Representative at [Address],
Attention: ______________ (facsimile number (___) ________); if sent to the
Seller, will be mailed, delivered or sent by facsimile transmission and
confirmed to it at The CIT Group Securitization Corporation III, 650 CIT Drive,
Livingston, New Jersey 07039, Attention: James J. Egan, Jr., President
(facsimile number (201) 740-5410); if sent to CIT, will be mailed, delivered or
sent by facsimile transmission and confirmed to it by The CIT Group Holdings,
Inc., 1211 Avenue of the Americas, New York, New York 10036, Attention: Joseph
M. Leone, Executive Vice President and Chief Financial Officer (facsimile number
(212) 536-1971); and if sent to CIT Consumer Finance, will be mailed, delivered
or sent by facsimile transmission and confirmed to it at The CIT Group/Consumer
Finance, Inc., 650 CIT Drive, Livingston, New Jersey 07039, Attention: James J.
Egan, Jr., President (facsimile number (201) 740-5410).
11. No Bankruptcy Petition. Each Underwriter agrees that, prior to the date
which is one year and one day after the payment in full of all securities issued
by the Seller or by a trust for which the Seller was the depositor or by the
Trust, which securities were rated by any nationally recognized statistical
rating organization, it will not institute against, or join any other person in
instituting against, the Seller or the Trust any bankruptcy, reorganization,
arrangement,
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insolvency or liquidation proceedings or other proceedings under any Federal or
state bankruptcy or similar law.
12. Successors. This Agreement will inure to the benefit of and be binding
upon the Underwriters, the Seller, CIT and CIT Consumer Finance and their
respective successors and the officers and directors and controlling persons
referred to in Section 7, and no other person will have any right or obligations
hereunder.
13. Representation of Underwriters. The Representative will act for the
several Underwriters in connection with the transactions described in this
Agreement, and any action taken by Representative under this Agreement will be
binding upon all the Underwriters.
14. Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.
15. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflicts of laws.
If the foregoing is in accordance with the Representative's understanding
of our agreement, kindly sign and return to us a counterpart hereof, whereupon
it will become a binding agreement among the Seller, CIT Consumer Finance and
the several Underwriters in accordance with its terms.
Very truly yours,
THE CIT GROUP SECURITIZATION
CORPORATION III
By: _______________________________
Name:
Title:
THE CIT GROUP/CONSUMER FINANCE, INC.
By: _______________________________
Name:
Title:
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The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written:
[UNDERWRITER]
By: _____________________________
Name:
Title:
Acting on behalf of itself
and as the Representative
of the several Underwriters.
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Exhibit 3.1
Certificate of Incorporation of The Cit Group Securitization Corporation III
<PAGE>
CERTIFICATE OF INCORPORATION
OF
THE CIT GROUP SECURITIZATION CORPORATION III
FIRST: The name of the Corporation is The CIT Group Securitization
Corporation III (hereinafter referred to as the "Corporation").
SECOND: The address of the registered office of the corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle 19801. The name of the registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is limited to: (a) issuing and
selling one or more series of bonds, pass-through certificates or other
securities secured primarily by mortgages, deeds of trust, equipment,
manufactured housing, recreational vehicle or marine retail installment
contracts or any other type of loan agreements (all of the foregoing
collectively referred to herein as the "Contracts"), investing in certain
Contracts to be purchased with the proceeds of bonds, pass-through certificates
or other securities secured by Contracts and taking certain other action with
respect thereto, (b) selling interests in Contracts, evidencing such interests
with bonds, pass-through certificates or other securities secured by the
Contracts, using the proceeds of the sale of such bonds, pass-through
certificates or other securities secured by the Contracts, to acquire Contracts,
retaining or acquiring an interest (including a subordinated interest) in
Contracts acquired and sold, and taking certain other action with respect
thereto, and (c) acting as settlor or depositor of trusts or other entities
formed to issue bonds, pass-through certificates or other securities secured by
Contracts and investing in or selling beneficial interests in the same. The
Corporation is not otherwise authorized to trade or deal in securities, or
engage in any other activity other than (a) issuing and selling bonds,
pass-through certificates or other securities under an indenture, trust
agreement, pooling and servicing agreement or other agreement, (b) acting as
settlor or depositor of a trust or other entity formed to issue and sell bonds,
pass-through certificates or other securities and investing in or selling
beneficial interests in the same, (c) acquiring, owning, holding and pledging or
selling interests in Contracts, (d) investing cash balances on an interim basis
in certain short-term investments and (e) engaging in activities incidental to
and necessary to accomplish the foregoing.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 200 shares of no par Common Stock.
FIFTH:
(1) The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
(2) In furtherance and not in limitation of the power conferred upon
the directors by law, the directors shall, with the approval of 100% of the
directors (including the
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Independent Director, or if there is more than one, all of the Independent
Directors), have power to make, adopt, alter, amend and repeal from time to
time by-laws of the Corporation, subject to the right of the stockholders
entitled to vote with respect thereto to alter and repeal by-laws made by
the directors.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the
Corporation. Election of directors need not be by written ballot unless the
By-Laws so provide. At least one director (the Independent Director, or if
there is more than one, all of the Independent Directors) will not be a
director, officer or employee of , or holder of any direct or indirect
economic interest in, or be a significant advisor or consultant to, or
agent of, any direct or ultimate parent of the Corporation or of any direct
or indirect subsidiary of such parent. Notwithstanding the foregoing, the
Independent Director may be a director, officer or employee of any direct
or indirect subsidiary of the ultimate parent of the Corporation, provided
that each such corporation is formed with purposes limited to those similar
to the purposes of the Corporation.
(4) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the
provisions of the General Corporation Law of the State of Delaware (the
"GCL"), this Certificate of Incorporation and any By-Laws adopted by the
stockholders; provided, however, that no By-Laws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would
have been valid if such By-Laws had not been adopted. The Corporation's
board of directors will duly authorize all of the Corporation's actions.
(5) The Corporation's assets will not be commingled with those of any
direct or ultimate parent of the Corporation or any subsidiary or affiliate
thereof.
(6) The Corporation will maintain separate corporate records and books
of account from those of any direct or ultimate parent of the Corporation
or any subsidiary or affiliate thereof.
(7) The Corporation will maintain and conduct its business from an
office separate from that of any direct or ultimate parent of the
Corporation or any subsidiary or affiliate thereof.
SIXTH: Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the GCL) outside the State of Delaware at
such place or places as may be designated from time to time by the Board of
Directors or in the By-Laws of the Corporation.
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<PAGE>
SEVENTH: The Corporation shall, to the maximum extent permitted from time
to time under the law of the State of Delaware, indemnify and upon request shall
advance expenses to any person who is or was a party or is threatened to be made
a party to any threatened, pending or completed action, suit, proceeding or
claim, whether civil, criminal, administrative or investigative, by reason of
the fact that such person is or was or has agreed to be a director or officer of
this corporation or while a director or officer is or was serving at the request
of this corporation as a director, officer, partner, trustee, employee or agent
of any corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, against expenses
(including attorney's fees and expenses), judgments, fines, penalties and
amounts paid in settlement incurred in connection with the investigation,
preparation to defend or defense of such action, suit, proceeding or claim;
provided, however, that the foregoing shall not require the Corporation to
indemnify or advance expenses to any person in connection with any action, suit,
proceeding, claim or counterclaim initiated by or on behalf of such person. Such
indemnification shall not be exclusive of other indemnification rights arising
under any by-law, agreement, vote of directors or stockholders or otherwise and
shall inure to the benefit of the heirs and legal representatives of such
person. Any person seeking indemnification under this Article SEVENTH shall be
deemed to have met the standard of conduct required for such indemnification
unless the contrary shall be established. Any repeal or modification of the
foregoing provisions of this Article SEVENTH shall not adversely affect any
right or protection of a director or officer of the Corporation with respect to
any acts or omissions of such director or officer occurring prior to such repeal
or modification.
EIGHTH: No director shall be personally liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the GCL or (iv) for any transaction from
which the director derived an improper personal benefit. Any repeal or
modification of this Article NINTH by the stockholders of the Corporation shall
not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
NINTH: The Corporation shall not, without the affirmative vote of one
hundred percent (100%) of the directors (including the Independent Director, or
if there is more than one, all of the Independent Directors), institute
proceedings to be adjudicated bankrupt or insolvent; or consent to the
institution of bankruptcy or insolvency proceedings against it; or file a
petition seeking, or consent to, reorganization or relief under any applicable
federal or state law relating to bankruptcy; or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of this corporation or a substantial part of its property; or
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<PAGE>
make any assignment for the benefit of creditors; or admit in writing its
inability to pay its debts generally as they become due; or take any corporate
action in furtherance of any such action.
TENTH: For so long as the Corporation is able to pay its debts generally as
they become due, the Corporation shall not institute proceedings to be
adjudicated bankrupt or insolvent; or consent to the institution of bankruptcy
or insolvency proceedings against it; or file a petition seeking, or consent to,
reorganization or relief under any applicable federal or state law relating to
bankruptcy; or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the corporation or of a
substantial part of its property; or make any assignment for the benefit of
creditors; or admit in writing its inability to pay its debts generally as they
become due; or take any corporate action in furtherance of any such action.
ELEVENTH: The Corporation will not issue any securities (other than common
stock of the Corporation), nor will it act as settlor or depositor of any trust
or other entity which issues securities of any securities, if either such action
would result in the downgrading by any nationally recognized statistical rating
organization (as defined in Rule 15c3-1 under the Securities Exchange Act of
1934 or any successor Rule) of any outstanding securities of either the
Corporation or any trust or other entity of which the Corporation is the settlor
or depositor (an "NRSO"), which securities are then rated by such nationally
recognized statistical rating organization.
TWELFTH: In the event Moody's Investor's Service, Inc.'s (hereinafter
referred to as "Moody's") rating of the long-term debt of The CIT Group
Holdings, Inc. falls below A-2, one additional Independent Director shall be
elected to the Board of Directors of the Corporation.
THIRTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation, provided that, none
of Articles THIRD, FIFTH, EIGHTH, NINTH, TENTH, ELEVENTH, TWELFTH or FOURTEENTH
shall be amended without the affirmative vote of all the directors, including
the Independent Director, or if there is more than one, all of the Independent
Directors. The Corporation shall provide notice to each NRSO of any amendment to
any of Articles THIRD, FIFTH, EIGHTH, NINTH, TENTH, ELEVENTH, TWELFTH or
FOURTEENTH within a reasonable period of time after the adoption of such
amendment.
FOURTEENTH: Notwithstanding any other provision of this Certificate of
Incorporation and any provision of law that otherwise so empowers the
Corporation, the Corporation shall not, without the affirmative vote of one
hundred percent (100%) of the directors (including the Independent Director, or
if there is more than one, all of the Independent Directors), (i) merge or
consolidate with any other corporation or (ii) except as otherwise
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provided in Article III and elsewhere in this Certificate of Incorporation, sell
all or substantially all of the assets of the Corporation; provided that the
Corporation shall provide 60 days prior written notice to each NRSO of any such
merger, consolidation or sale.
FIFTEENTH: Craig S. Barrack is the Sole Incorporator and his mailing
address is c/o Schulte Roth & Zabel, 900 Third Avenue, New York, New York 10022.
Dated: April 4, 1996
/s/ Craig S. Barrack
--------------------
Craig S. Barrack
c/o Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
6
Exhibit 3.2
Bylaws of The CIT Group Securitization Corporation III
<PAGE>
BY-LAWS
OF
THE CIT GROUP SECURITIZATION CORPORATION III
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the election
of directors or for any other purpose shall be held at such time and place,
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting or in
a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten, nor more than sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by the
Certificate of Incorporation, Special Meetings of Stockholders, for any purpose
or purposes, may be called by either (i) the Chairman, if there be one, or (ii)
the President, (iii) any Vice President, if there be one, (iv) the Secretary or
(v) any Assistant Secretary, if there be one, and shall be called by any such
officer at the request in writing of a majority of the Board of Directors or at
the request in writing of stockholders owing a majority of the capital stock of
the Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting. Written notice of a
Special Meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called shall be given not less than
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<PAGE>
ten nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these By-Laws (including without limitation Article III,
Section 7, Article VII, Sections 5 and 6 and Article IX, Section 1 hereof), any
question brought before any meeting of stockholders shall be decided by the vote
of the holders of a majority of the stock represented and entitled to vote
thereat. Each stockholder represented at a meeting of stockholders shall be
entitled to cast one vote for each share of the capital stock entitled to vote
thereat held by such stockholder. Such votes may be cast in person or by proxy
but, no proxy shall be voted on or after three years from its date, unless such
proxy provides for a longer period. The Board of Directors, in its discretion,
or the officer of the Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders of the Corporation,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereof were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the
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<PAGE>
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder of the Corporation who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number, Election and Removal of Directors. The Board of
Directors shall consist of not less than one nor more than fifteen members, the
exact number of which shall initially be fixed by the Incorporator and
thereafter from time to time by the Board of Directors. The Board of Directors
shall at all times include at least one Director (the "Independent Director") or
if there is more than one, all of the Independent Directors will not be a
director, officer or employee of , or holder of any direct or indirect economic
interest in, or be a significant advisor or consultant to, or agent of, any
direct or ultimate parent of the Corporation or of any direct or indirect
subsidiary of such parent. Notwithstanding the foregoing, the Independent
Director may be a director, officer or employee of any direct or indirect
subsidiary of the ultimate parent of the Corporation, provided that each such
corporation is formed with purposes limited to those similar to the purposes of
the Corporation. Except as provided in Section 2 of this Article, directors
shall be elected by a plurality of the votes cast at Annual Meetings of
Stockholders, and each director so elected shall hold office until the next
Annual Meeting and until his successor is duly elected and qualified, or until
his earlier resignation or removal. Any director may resign at any time upon
notice to the Corporation. Directors need not be stockholders. At any time,
Directors may be removed and their successors chosen by the unanimous written
consent of the holders of the outstanding stock of the Corporation entitled to
vote on the election of Directors. The Independent Director may resign at any
time upon notice to the Corporation and the Corporation shall promptly appoint a
new Independent Director, but until a new Independent Director shall have been
appointed the resignation of the Independent Director shall not become
effective.
Section 2. Vacancies. Subject to Section 1 of this Article, vacancies and
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and qualified, or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done by
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<PAGE>
the stockholders. The directors of the Corporation shall act independently and
in the interests of the Corporation and in a manner consistent will the purposes
stated herein and in the Articles of Incorporation of the Corporation.
Section 4. Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman, if there be one, the President, or any two directors. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the date of
the meeting, by telephone or telegram on twenty-four (24) hours notice, or on
such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided by law,
the Certificate of Incorporation or these By-Laws, at all meetings of the Board
of Directors, a majority of the entire Board of Directors shall constitute a
quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the Certificate
of Incorporation or these By-Laws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 7 shall constitute
presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution passed by
a majority of the entire Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of any such committee. In the absence or disqualification of a member of
a committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof
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<PAGE>
present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any absent or
disqualified member. Any committee, to the extent allowed by law and provided in
the resolution establishing such committee, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. Compensation. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors and may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefore. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Section 10. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the shareholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
Section 11. Voluntary Bankruptcy, Insolvency or Other Similar Proceeding.
No amendment, modification or waiver of the Corporate Separateness Agreement
dated as of July 1, 1994 and no voluntary bankruptcy, insolvency or other
similar proceeding may be filed, instituted, approved or take place on behalf of
the Corporation without in each case the prior unanimous vote of the full Board
of Directors (including the Independent Director, or if there is more than one,
all of the Independent Directors) that specifically approves and authorizes such
action.
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<PAGE>
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a President, a Vice President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, may also choose a Chairman
of the Board of Directors (who must be a director) and one or more Assistant
Vice-Presidents, Assistant Secretaries, Assistant Treasurers and other officers.
Any number of offices may be held by the same person, unless otherwise
prohibited by law, the Certificate of Incorporation or these By-Laws. The
officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board of Directors, need such officers
be directors of the Corporation. The officers of the Corporation shall act
independently and in the interests of the Corporation and in a manner consistent
with the purposes stated herein or in the Articles of Incorporation of the
Corporation.
Section 2. Election. The Board of Directors at its first meeting held after
each Annual Meeting of Stockholders shall elect the officers of the Corporation
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the President or any Vice-President and any such
officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the Board of
Directors, if there be one, shall preside at all meetings of the stockholders
and of the Board of Directors. He shall be the Chief Executive Officer of the
Corporation, and except where by law the signature of the President is required,
the Chairman of the Board of Directors shall possess the same power as the
President to sign all contracts, certificates and other instruments of the
Corporation which may be authorized by the Board of Directors. During the
absence or disability of the President, the Chairman of the Board of Directors
shall exercise all the powers and discharge all the duties of the President. The
Chairman of the Board of Directors shall also
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perform such other duties and may exercise such other powers as from time to
time may be assigned to him by these By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of Directors,
have general supervision of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, the President
shall be the Chief Executive Officer of the Corporation. The President shall
also perform such other duties and may exercise such other powers as from time
to time may be assigned to him by these By-Laws or by the Board of Directors.
Section 6. Vice-Presidents. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice-President or the Vice-Presidents
if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. Each
Vice-President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board of Directors and no Vice-President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the President or
in the event of the inability or refusal of the President to act, shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President.
Section 7. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he shall be. If the Secretary shall be unable or shall refuse to
cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no Assistant Secretary, then
either the Board of Directors or the President may choose another officer to
cause such notice to be given. The Secretary shall have custody of the seal of
the Corporation and the Secretary or any Assistant Secretary, if there be one,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing by his signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.
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<PAGE>
Section 8. Treasurer. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all his transactions as Treasurer
and of the financial condition of the Corporation. If required by the Board of
Directors, the Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise provided in
these By-Laws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, any Vice-President, if there be one, or the
Secretary, and in the absence of the Secretary or in the event of his disability
or refusal to act, shall perform the duties of the Secretary, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice-President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman
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of the Board of Directors, the President or a Vice-President and (ii) by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares owned by him in the
Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in the
manner prescribed by law and in these By-Laws. Transfers of stock shall be made
on the books of the Corporation only by the person named in the certificate or
by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be canceled before a new certificate shall be
issued.
Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders of
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix in advance, a
record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to
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or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock. Before payment of
any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced, or otherwise.
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<PAGE>
Section 5. Separate Books and Records; Separate Accounts. The Corporation
shall (i) keep correct and complete books and records of account on an
unconsolidated basis, (ii) ensure that its funds and other assets are not
deposited in the same account as, or commingled with, those of its parent or any
subsidiary or affiliate of its parent, and (iii) maintain separate financial
statements, corporate records and books of account from those of its parent or
any subsidiary or affiliate of its parent.
Section 6. No Advances or Guarantees. The Corporation shall not (i) make
any advances to, or guarantees on behalf of, its parent or any subsidiary or
affiliate thereof, or (ii) receive from its parent or any subsidiary or
affiliate thereof any advance or guarantee on the Corporation's behalf.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other Than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, has reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that
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<PAGE>
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnify for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under this
Article VIII (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Section 1 or Section
2 of this Article VIII, as the case may be. Such determination shall be made (i)
by the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) if such quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders. To the extent, however, that a director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust or other
enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, employee or agent. The provisions of this
Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VIII. The basis of such
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<PAGE>
indemnification by a court shall be a determination by such court that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standards of conduct set forth
in Sections 1 or 2 of this Article VIII, as the case may be. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application.
Section 6. Expenses Payable in Advance. Expenses incurred in defending or
investigating a threatened or pending action, suit or proceeding may be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in this Article
VIII.
Section 7. Non-exclusivity and Survival of Indemnification. The
indemnification provided by this Article VIII shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
any By-Law, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware, or
otherwise. The indemnification provided by this Article VIII shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
person.
Section 8. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or another enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VIII.
Section 9. Meaning of "Corporation" for Purposes of Article VIII. For
purposes of this Article VIII, references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had the power and authority
to indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article VIII with respect to the resulting or
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<PAGE>
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
ARTICLE IX
AMENDMENTS
Section 1. Amendment of By-Laws. Except as otherwise set forth in this
Article IX, these By-Laws may be altered, amended or repealed, in whole or in
part, or new By-Laws may be adopted by the stockholders or by the Board of
Directors; provided, however, that notice of such alteration, amendment, repeal
or adoption of new By-Laws be contained in the notice of such meeting of
stockholders or Board of Directors, as the case may be. All such amendments must
be approved by either the holders of a majority of the outstanding capital stock
entitled to vote thereon or by a majority of the entire Board of Directors then
in office. Section 11 of Article III and Sections 5 and 6 of Article VII of
these By-Laws may be altered, amended or repealed only upon the unanimous vote
of the full Board of Directors (including the Independent Director, or if there
is more than one, all of the Independent Directors); provided, however, that
notice of such alteration, amendment, repeal or adoption of new By-Laws be
contained in the notice of such meeting of the Board of Directors.
Section 2. Entire Board of Directors. As used in this Article IX and in
these By-Laws generally, the term "entire Board of Directors" means the total
number of directors that the Corporation would have if there were no vacancies.
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Exhibit 4.1
Form of Pooling and Servicing Agreement
<PAGE>
- --------------------------------------------------------------------------------
Home Equity Loan
[Senior/Subordinate]
Asset Backed Certificates
Series 199_-_
POOLING AND SERVICING AGREEMENT
among
THE CIT GROUP SECURITIZATION CORPORATION III
as Depositor,
THE CIT GROUP/CONSUMER FINANCE, INC.
as Seller and Master Servicer,
and
[TRUSTEE]
not in its individual capacity but solely as Trustee
Dated as of ___________, 199_
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS .........................................................1
SECTION 1.01. General ......................................................1
SECTION 1.02. Specific Terms................................................1
ARTICLE II ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS......................15
SECTION 2.01. Closing .....................................................15
SECTION 2.02. Conditions of the Closing....................................15
SECTION 2.03. Acceptance by Trustee........................................16
SECTION 2.04. REMIC Designations...........................................17
SECTION 2.05. REMIC Tax Matters............................................17
SECTION 2.06. REMIC Certificate Maturity Date..............................17
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................18
SECTION 3.01. Representations and Warranties Regarding
CIT Consumer Finance.........................................18
SECTION 3.02. Representations and Warranties Regarding
Each Mortgage Loan...........................................19
SECTION 3.03. Representations and Warranties Regarding
the Mortgage Loans in the Aggregate..........................21
SECTION 3.04. Representations and Warranties Regarding
the Mortgage Loan Files......................................22
SECTION 3.05. Repurchase of Mortgage Loans or Substitution of
Mortgage Loans for Breach of Representations and Warranties..22
ARTICLE IV PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS........25
SECTION 4.01. Custody of Mortgage Loans....................................25
SECTION 4.02. Filings......................................................26
SECTION 4.03. Name Change or Relocation....................................26
SECTION 4.04. Chief Executive Office.......................................26
SECTION 4.05. Costs and Expenses...........................................27
ARTICLE V SERVICING OF CONTRACTS..............................................28
SECTION 5.01. Responsibility for Mortgage Loan Administration..............28
SECTION 5.02. Standard of Care.............................................28
SECTION 5.03. Records......................................................28
SECTION 5.04. Inspection; Computer Tape....................................28
SECTION 5.05. Certificate Account..........................................29
SECTION 5.06. Enforcement..................................................31
SECTION 5.07. Trustee to Cooperate.........................................32
SECTION 5.08. Costs and Expenses...........................................32
SECTION 5.09. Maintenance of Insurance.....................................32
SECTION 5.10. REMIC Compliance.............................................33
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Page
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SECTION 5.11. Foreclosure..................................................35
ARTICLE VI REPORTS............................................................36
SECTION 6.01. Monthly Reports to the Trustee...............................36
SECTION 6.02. Certificate of Servicing Officer.............................36
SECTION 6.03. Other Data...................................................36
SECTION 6.04. Annual Report of Accountants.................................36
SECTION 6.05. Statements to Certificateholders.............................36
ARTICLE VII SERVICE TRANSFER..................................................38
SECTION 7.01. Event of Termination.........................................38
SECTION 7.02. Transfer.....................................................38
SECTION 7.03. Trustee to Act; Appointment of Successor.....................39
SECTION 7.04. Notification to Certificateholders and to Rating Agency......40
SECTION 7.05. Effect of Transfer...........................................40
SECTION 7.06. Transfer of Certificate Account..............................40
ARTICLE VIII DISTRIBUTIONS AND WITHDRAWALS FROM CERTIFICATE ACCOUNT...........42
SECTION 8.01. Monthly Distributions........................................42
SECTION 8.02. Permitted Withdrawals from the Certificate Account...........43
SECTION 8.03. Repurchase Option............................................44
[SECTION 8.04. Credit Enhancement for [Class A] [Class B] Certificates.
[Text to be provided.] ].....................................45
ARTICLE IX THE CERTIFICATES...................................................48
SECTION 9.01. The Certificates.............................................48
SECTION 9.02. Registration of Transfer and Exchange of Certificates........48
SECTION 9.03. No Charge; Disposition of Void Certificates..................51
SECTION 9.04. Mutilated, Destroyed, Lost or Stolen Certificates............51
SECTION 9.05. Persons Deemed Owners........................................52
SECTION 9.06. Access to List of Certificateholders' Names and Addresses....52
SECTION 9.07. Authenticating Agents........................................52
ARTICLE X INDEMNITIES.........................................................54
SECTION 10.01. Liabilities to Mortgagors...................................54
SECTION 10.02. Tax Indemnification.........................................54
SECTION 10.03. Master Servicer's Indemnities...............................54
SECTION 10.04. Operation of Indemnities....................................54
ARTICLE XI THE TRUSTEE........................................................55
SECTION 11.01. Duties of Trustee...........................................55
SECTION 11.02. Certain Matters Affecting the Trustee.......................56
SECTION 11.03. Trustee Not Liable for Certificates or Mortgage Loans.......57
SECTION 11.04. Rights of Certificateholders to Direct
Trustee and to Waive Events of Termination..................57
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Page
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SECTION 11.05. Master Servicer to Pay Trustee's Fees and Expenses..........61
SECTION 11.06. Eligibility Requirements for Trustee........................61
SECTION 11.07. Resignation or Removal of Trustee...........................62
SECTION 11.08. Successor Trustee...........................................62
SECTION 11.09. Merger or Consolidation of Trustee..........................60
SECTION 11.10. Mortgagor Claims............................................60
SECTION 11.11. Separate Trustees and Co-Trustees...........................61
SECTION 11.12. Trustee May Own Certificates................................62
SECTION 11.13. Agents of Trustee...........................................62
ARTICLE XII MISCELLANEOUS 65
SECTION 12.01. Master Servicer Not To Resign..............................63
SECTION 12.02. Maintenance of Officer or Agency...........................63
SECTION 12.03. Termination................................................63
SECTION 12.04. Acts of Certificateholders.................................65
SECTION 12.05. Calculations...............................................66
SECTION 12.06. Assignment or Delegation by the Master Servicer;
Merger or Consolidation of the Company, CIT Consumer
Finance or the Master Servicer.............................66
SECTION 12.07. Amendment..................................................67
SECTION 12.08. Contribution of Assets.....................................78
SECTION 12.09. Notices....................................................69
SECTION 12.10. Merger and Integration.....................................70
SECTION 12.11. Headings...................................................70
SECTION 12.12. Governing Law..............................................70
SECTION 12.13. Counterparts...............................................70
Exhibit A [FORM OF CLASS A CERTIFICATE].......................................1
Exhibit B [Form of Class B Certificate].......................................1
Exhibit C [FORM OF CLASS R CERTIFICATE].......................................1
Exhibit D [FORM OF ASSIGNMENT]................................................1
Exhibit E THE CIT GROUP/CONSUMER FINANCE, INC. CERTIFICATE OF OFFICERS........1
Exhibit F [FORM OF OPINION OF COUNSEL FOR THE CIT GROUP/
CONSUMER FINANCE, INC.]........................................................1
Exhibit G FORM OF TRUSTEE'S ACKNOWLEDGMENT AND CERTIFICATION..................1
Exhibit H THE CIT GROUP/CONSUMER FINANCE, INC. CERTIFICATE
OF SERVICING OFFICERS..........................................................1
Exhibit I-1 THE CIT GROUP/CONSUMER FINANCE, INC.
CERTIFICATE REGARDING REPURCHASED CONTRACTS....................................1
Exhibit J FORM OF INVESTMENT LETTER...........................................1
Exhibit K-1 [FORM OF TRANSFEROR'S CERTIFICATE]................................1
Exhibit L THE CIT GROUP SECURITIZATION CORPORATION III HOME
EQUITY LOAN SENIOR/SUBORDINATE ASSET BACKED CERTIFICATES,
SERIES 199_ MONTHLY REPORT.....................................................1
EXHIBIT M FORM OF TRANSFER AFFIDAVIT..........................................1
EXHIBIT N LIST OF MORTGAGE LOANS..............................................1
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<PAGE>
AGREEMENT, dated as of _________ ___, ____, among The CIT Group
Securitization Corporation III, as Depositor (together with its permitted
successors and assigns, the "Company"), The CIT Group/Consumer Finance, Inc., a
corporation organized and existing under the laws of the State of Delaware, as
Seller and Master Servicer (in its individual capacity, "CIT Consumer Finance,"
or, together with its permitted successors and assigns, the "Master Servicer"),
and , a _____________________ organized and existing under the laws of
______________, not in its individual capacity but solely as Trustee (together
with permitted successors and assigns, the "Trustee").
NOW, THEREFORE, in consideration of the mutual agreements hereinafter set
forth, the parties hereto agree as provided herein:
ARTICLE I
DEFINITIONS
SECTION 1.01. GeneralSECTION 1.01. General.
For the purpose of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, the terms defined in this Article
include the plural as well as the singular, the words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article, Section or other subdivision, and Section
references refer to Sections of this Agreement.
SECTION 1.02. Specific TermsSECTION 1.02. Specific Terms.
"Advance Payment" means any payment by an Mortgagor in advance of the Due
Period in which it would be due under such Mortgage Loan and which payment is
not a Principal Prepayment.
"Affiliate" of any specified Person means any other Person controlling or
controlled by or under 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" or "controlled" have meanings
correlative to the foregoing.
"Agreement" means this Pooling and Servicing Agreement.
"Amount Available" means, as to any Distribution Date, an amount equal to
(a) the amount on deposit (or which would have been on deposit on such day but
for the operation of the penultimate sentence of Section 5.05(a)) in the
Certificate Account as of the close of business on the last day of the related
Due Period less (b) the sum, as of the close of business on the Business Day
preceding such Distribution Date, of (i) the Amount Held for Future
Distribution, and (ii) amounts permitted to be withdrawn by the Master Servicer
from the Certificate Account in respect of the Mortgage Loans pursuant to
clauses (b) - (g), inclusive, of Section 8.02.
<PAGE>
"Amount Held for Future Distribution" means, as to any Distribution Date,
the total of the amounts on deposit (or which would have been on deposit on such
day but for the operation of the penultimate sentence of Section 5.05(a)) in the
Certificate Account as of the close of business on the last day of the related
Due Period on account of Advance Payments in respect of such Due Period.
"Applicants" has the meaning assigned in Section 9.06.
"Appraised Value" means, with respect to any Mortgaged Property, the value
of such Mortgaged Property as determined by a professional appraiser (who may be
an employee of CIT Consumer Finance).
"Assumption Fee" means any assumption or other similar fee paid by the
Mortgagor on a Mortgage Loan.
"Authenticating Agent" means any authenticating agent appointed pursuant to
Section 9.07.
"Book-Entry Certificate" means any Certificate registered in the name of
the Depository or its nominee, ownership of which is reflected on the books of
the Depository or on the books of a person maintaining an account with such
Depository (directly or as an indirect participant in accordance with the rules
of such Depository).
"Business Day" means any day other than (a) a Saturday or a Sunday or (b)
another day on which national banking institutions in the States of Oklahoma,
__________ or New York are authorized or obligated by law, executive order, or
governmental decree to be closed.
"Certificate" means a Home Equity Loan Asset Backed Certificate executed
and delivered by the Trustee substantially in the form of Exhibits A, B or C.
"Certificate Account" means a separate trust account maintained in the name
of the Trust in an Eligible Institution.
"Certificate Owner" means the person who is the beneficial owner of a
Book-Entry Certificate.
"Certificate Register" means the register maintained pursuant to Section
9.02.
"Certificate Registrar" or "Registrar" means the registrar appointed
pursuant to Section 9.02.
"Certificateholder" or "Holder" means the person in whose name a
Certificate is registered on the Certificate Register, except that, solely for
the purposes of giving any consent, waiver, request or demand pursuant to this
Agreement, any Class A Certificate [and any Class B Certificate] registered in
the name of the Mortgage Loan Seller, the Master Servicer or any Affiliate of
the Mortgage Loan Seller or the Master Servicer shall be deemed not to be
outstanding, and the Percentage Interest evidenced thereby shall not be taken
into account in determining whether the
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<PAGE>
requisite Percentage Interest necessary to effect any such consent, request,
waiver or demand has been obtained unless all the Class A Certificates [or all
the Class B Certificates] are held by such Persons; provided, however, that in
determining whether the Trustee shall be protected in relying upon any such
consent, waiver, request or demand only Class A Certificates [and Class B
Certificates] which the Trustee knows to be so owned shall be so disregarded.
"Class," "Class A," ["Class B"] or "Class R" means pertaining to Class A
Certificates[, Class B Certificates] and/or Class R Certificates, as the case
may be.
"Class A Certificate" means any one of the certificates executed and
delivered by the Trustee and authenticated by the Authenticating Agent
substantially in the form set forth in Exhibit A and evidencing an interest
designated as a "regular interest" in the Trust for purposes of the REMIC
Provisions[, which certificates shall be senior to the Class B Certificates].
"Class A Certificate Balance" means, as to any Distribution Date, the
Original Class A Certificate Balance less all amounts previously distributed to
Holders of Class A Certificates on account of principal.
"Class A Interest Distribution Amount" means, as to any Distribution Date,
an amount equal to the sum of (a) one month's interest at the Class A
Pass-Through Rate on the Class A Certificate Balance and (b) the Unpaid Class A
Interest Shortfall, if any, for such Distribution Date.
"Class A Interest Shortfall" means, as to any Distribution Date, any amount
by which the amount distributed to Holders of the Class A Certificates on such
Distribution Date is less than the Class A Interest Distribution Amount for such
Distribution Date.
"Class A Pass-Through Rate" means ____% per annum, computed on the basis of
a 360-day year of twelve 30-day months.
["Class B Certificate" means any one of the certificates executed by the
Trustee and authenticated by the Authenticating Agent substantially in the form
set forth in Exhibit B hereto and evidencing an interest designated as a
"regular interest" in the Trust for purposes of the REMIC Provisions which
certificates shall be subordinate to the Class A Certificates.](1)
["Class B Certificate Balance" means, as to any Distribution Date, the
Original Class B Certificate Balance minus the sum of all amounts previously
distributed to Class B Certificateholders on account of principal.]
["Class B Enhancement Payment" means _______________.]
- ----------
(1) Class B definitions apply only wherer the regular interests in the REMIC
are represented by a senior (Class A) and a subordinated (Class B) class.
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<PAGE>
["Class B Interest Distribution Amount" means, as to any Distribution Date,
the sum of (a) one month's interest at the Class B Pass-Through Rate on the
Class B Certificate Balance and (b) the Unpaid Class B Interest Shortfall, if
any, for such Distribution Date.]
["Class B Interest Shortfall" means, as to any Distribution Date, any
amount by which the amount distributed to Holders of Class B Certificates on
such Distribution Date is less than the Class B Interest Distribution Amount for
such Distribution Date.]
["Class B Pass-Through Rate" means ____% per annum, computed on the basis
of a 360-day year of twelve 30-day months.]
["Class B Principal Loss Liquidation Amount" means, as to any Distribution
Date prior to the Cross-over Date, the amount, if any, by which the sum of the
Class A Certificate Balance and the Class B Certificate Balance for such
Distribution Date exceeds the Pool Scheduled Certificate Balance for such
Distribution Date.]
"Class R Certificate" means any one of the Certificates executed by the
Trustee and authenticated by the Authenticating Agent substantially in the form
set forth in Exhibit C hereto and evidencing an interest designated as a
"residual interest" in the Trust for purposes of the REMIC Provisions.
"Class R Certificateholder" means the person in whose name a Class R
Certificate is registered on the Certificate Register.
"Class R Distribution Amount" means, as to any Distribution Date, the
amount, if any, payable to the Holders of the Class R Certificates pursuant to
subsection 8.01(c)(iii).
"Closing Date" means _________ __, 199_.
"Code" means the Internal Revenue Code of 1986, as amended.
"Computer Tape" means the computer tape generated by the Master Servicer
which provides information relating to the Mortgage Loans, and includes the
master file and the history file.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of the execution of this Agreement is located at the
address set forth in Section 12.09.
"Cross-over Date" means the Distribution Date on which the Class A
Certificate Balance (after giving effect to the distributions and adjustments on
the Class A Certificates on such Distribution Date) is reduced to zero.
"Cut-off Date" means _____________, 199_.
"Cut-off Date Pool Certificate Balance" means the aggregate of the Cut-off
Date Certificate Balances of the Mortgage Loans.
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<PAGE>
"Cut-off Date Certificate Balance" means, as to any Mortgage Loan, the
unpaid Scheduled Certificate Balance thereof at the Cut-off Date.
"Defaulted Mortgage Loan" means, with respect to any Due Period, a Mortgage
Loan in respect of which payments exceeding $25 in the aggregate were delinquent
120 days or more as of the last day of such Due Period, provided that any
Mortgage Loan in respect of which such delinquencies were permitted by the
Soldiers' and Sailors' Relief Act of 1940 shall not be deemed a Defaulted
Mortgage Loan.
"Depository" means the initial Depository, The Depository Trust Company,
the nominee of which is CEDE & CO., and any permitted successor depository. The
Depository shall at all times be a "clearing corporation" defined in Section
8-102(3) of the Uniform Commercial Code of the State of New York.
"Depository Participant" means a broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.
"Determination Date" means the third Business Day prior to each
Distribution Date during the term of this Agreement.
"Distribution Date" means the _____________ day of each calendar month
during the term of this Agreement, or if such day is not a Business Day, the
next succeeding Business Day, commencing __________ __, 199_.
"Due Date" means, as to any Mortgage Loan, the date of the month on which
the scheduled monthly payment for such Mortgage Loan is due.
"Due Period" means, as to any Distribution Date, the period commencing on
the 26th day of the month (or, if the 25th day of such month is not a Business
Day, the day following the first preceding Business Day) in the second month
preceding the month of such Distribution Date (or the Cut-off Date, in the case
of the first Distribution Date) and ending on the 25th day of the month (or, if
such day is not a Business Day, the preceding Business Day) in the month
preceding the month of such Distribution Date.
"Electronic Ledger" means the electronic master record of installment sales
contracts of the Master Servicer.
"Eligible Institution" means the Trustee or any depository institution or
trust company (which may be the Trustee or an Affiliate of the Trustee)
organized under the laws of the United States or any state, the deposits of
which are insured to the full extent permitted by law by the Bank Insurance Fund
(presently administered by the Federal Deposit Insurance Corporation), which is
subject to supervision and examination by federal or state authorities and whose
short term securities or unsecured long-term debt has been rated [A-1 or higher
by Standard & Poor's and P-1 or higher by Moody's] in the case of short term
securities, or in one of the two highest rating categories by [Standard & Poor's
and Moody's] in the case of unsecured long-term debt.
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"Eligible Investments" has the meaning assigned in Section 5.05(b).
"Eligible Master Servicer" means CIT Consumer Finance or any Person
qualified to act as Master Servicer of the Mortgage Loans under applicable
federal and state laws and regulations, which Person services not less than
$100,000,000 in outstanding principal amount of mortgage loans.
"Eligible Substitute Mortgage Loan" means, as to any Replaced Mortgage Loan
for which such Eligible Substitute Mortgage Loan is being substituted pursuant
to Section 3.05(b), a Mortgage Loan that (a) as of the date of its substitution,
satisfies all of the representations and warranties (which, except when
expressly stated to be as of origination, shall be deemed to be determined as of
the date of its substitution rather than as of the Cut-off Date or the Closing
Date) in Section 3.02 and does not cause any of the representations and
warranties in Section 3.03, after giving effect to such substitution, to be
incorrect, (b) after giving effect to the scheduled payment due in the month of
such substitution, has a Scheduled Certificate Balance that is not greater than
the Scheduled Certificate Balance of such Replaced Mortgage Loan, (c) has a
Mortgage Loan Rate that is at least equal to the Mortgage Loan Rate of such
Replaced Mortgage Loan and (d) has a remaining term to scheduled maturity that
is not greater than the remaining term to scheduled maturity of the Replaced
Mortgage Loan. Notwithstanding the foregoing, in the event that on any date more
than one Eligible Substitute Mortgage Loan is substituted for one or more
Replaced Mortgage Loans, the requirement set forth in clause (b) above with
respect to the Scheduled Certificate Balance may be satisfied if the aggregate
of the Scheduled Certificate Balances of such Eligible Substitute Mortgage Loans
is not greater than the aggregate of the Scheduled Certificate Balances of such
Replaced Mortgage Loans, the requirement set forth in clause (c) above with
respect to the Mortgage Loan Rate may be satisfied if the weighted average
Mortgage Loan Rate of such Eligible Substitute Mortgage Loans is at least equal
to the weighted average Mortgage Loan Rate of such Replaced Mortgage Loans; and
the requirement set forth in clause (d) above with respect to remaining term to
scheduled maturity may be satisfied if the weighted average remaining term to
scheduled maturity of such Eligible Substitute Mortgage Loans is not greater
than the weighted average remaining term to scheduled maturity of such Replaced
Mortgage Loans.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Termination" has the meaning assigned in Section 7.01.
"Extension Fee" means any extension or other similar fee paid by the
Mortgagor on a Mortgage Loan.
"Final Distribution Date" means the Distribution Date on which the final
distribution in respect of Certificates is made pursuant to Section 12.03.
"Formula Principal Distribution Amount" means, as to any Distribution Date,
the sum of (i) in the case of each Mortgage Loan which is a Precomputed Mortgage
Loan, all scheduled payments of principal due on each Outstanding Mortgage Loan
during the Due Period which ends during the month preceding the month in which
such Distribution Date occurs as
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specified in the amortization schedule at the time applicable thereto (after
adjustments for previous Partial Principal Prepayments but before any adjustment
to such amortization schedule by reason of any bankruptcy of an Mortgagor or
similar proceeding or any moratorium or similar waiver or grace period) and, in
the case of each Mortgage Loan which is a simple interest Mortgage Loan, any
payments in respect of principal received during such Due Period; (ii) all
Partial Principal Prepayments applied and all Principal Prepayments in Full
received during such preceding Due Period; (iii) the Scheduled Certificate
Balance of each Mortgage Loan that became a Liquidated Mortgage Loan during such
preceding Due Period; and (iv) the Scheduled Certificate Balance of each
Mortgage Loan which was repurchased immediately prior to such Distribution Date
pursuant to Section 3.05.
"Hazard Insurance Policy" means, with respect to each Mortgage Loan, the
policy of fire and extended coverage insurance (and federal flood insurance, if
the Mortgaged Property is located in a federally designated special flood area)
required to be maintained for the related Mortgaged Property, as provided in
Section 5.09, and which, as provided in said Section 5.09, may be a blanket
policy maintained by the Master Servicer in accordance with the terms and
conditions of said Section 5.09.
"Holder" has the same meaning as "Certificateholder".
"Independent" means, with respect to any specified Person, any person or
firm rendering an opinion at Closing or any Person who (a) is in fact
independent of the specified Person, (b) does not have any direct financial
interest or any material indirect financial interest in the specified Person or
any Affiliate of the specified Person (other than acting as outside counsel for
the specified Person or such Affiliate), and (c) is not connected with the
specified Person as an officer, employee, promoter, underwriter, trustee,
partner, director (other than a law firm a member of which is a director) or
person performing similar functions. Except with respect to any person or firm
rendering an opinion at the Closing, whenever it is herein provided that any
Independent Person's opinion or certificate shall be furnished to the Trustee,
such person shall be approved by the Trustee and such opinion or certificate
shall state that the signer has read this definition and that the signer is
independent within the meaning hereof.
"Insurance Proceeds" means proceeds paid by any insurer pursuant to any
insurance policy or contract.
"Late Payment Fees" means late payment fees paid by Mortgagors on Mortgage
Loans.
"Liquidated Mortgage Loan" means any Defaulted Mortgage Loan as to which
the Master Servicer has determined that all amounts which it expects to recover
from or on account of such Mortgage Loan have been recovered.
"Liquidation Expenses" means out-of-pocket expenses (exclusive of any
overhead expenses) which are incurred by the Master Servicer in connection with
the liquidation of any Defaulted Mortgage Loan.
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"Liquidation Proceeds" means cash (including Insurance Proceeds) received
in connection with the liquidation of Defaulted Mortgage Loans, whether through
foreclosure sale or otherwise.
"List of Mortgage Loans" means the list attached hereto as Exhibit N
identifying each Mortgage Loan constituting part of the corpus of the Trust,
which list (a) identifies each Mortgage Loan and (b) sets forth as to each
Mortgage Loan (i) the Cut-off Date Certificate Balance, (ii) the amount of
monthly payment due from the Mortgagor, (iii) the Mortgage Loan Rate and (iv)
the maturity date.
"Loan-to-Value Ratio" means, with respect to any Mortgage Loan, the
original principal amount thereof divided by the Original Value of the Mortgaged
Property.
"Monthly Report" has the meaning assigned in Section 6.05. The forms of the
Monthly Report for the Certificates are attached as Exhibit L hereto.
"Monthly Servicing Fee" means, as to any Distribution Date, one-twelfth of
the product of ____% and the Pool Scheduled Certificate Balance for such
Distribution Date.
["Moody's" means Moody's Investors Service Inc. or any successor thereto.]
"Mortgage" means the mortgage or deed of trust creating a first lien on an
estate in fee simple in the real property securing a Mortgage Loan.
"Mortgaged Property" means the property subject to a Mortgage.
"Mortgage Loan(s)" means one or more of the mortgage loans described in the
List of Mortgage Loans, which constitute part of the corpus of the Trust, and
which Mortgage Loans are to be assigned by the Company to the Trustee;
including, without limitation, all related security interests, collateral,
liens, insurance policies and guarantees of the obligations of the related
Mortgagor and any and all rights to receive payments which are due, in the case
of Precomputed Mortgage Loans, or received, in the case of simple interest
Mortgage Loans, pursuant thereto from and after the Cut-off Date, but excluding
any rights to receive payments which are due, in the case of Precomputed
Mortgage Loans, or received, in the case of Simple Interest contracts, pursuant
thereto prior to the Cut-off Date.
"Mortgage Loan File" means, as to each Mortgage Loan (a) the original copy
of the Mortgage Loan, (b) the original Mortgage and [(c) each assignment of the
Mortgage Loan evidencing the chain of title of the Mortgage Loan from the
originator thereof (if other than CIT Consumer Finance) to CIT Consumer
Finance,] and (d) any extension, modification or waiver agreement(s).
"Mortgage Loan Holders' Errors and Omissions Protection Policy" means the
contract holders' errors and omissions policy maintained by the Master Servicer
or any similar replacement policy, if any, pursuant to Section 5.09(c).
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["Mortgage Loan Originator" means _____________________.]
"Mortgage Loan Purchase Agreement" means the Mortgage Loan Purchase
Agreement, dated as of __________ __, 199_ between CIT Consumer Finance and the
Company, providing for the sale of the Mortgage Loans from CIT Consumer Finance
to the Company.
"Mortgage Loan Rate" means, with respect to any particular Mortgage Loan,
the rate of interest specified in that Mortgage Loan and computed on a
precomputed basis with an actuarial rebate of unearned interest upon prepayment,
provided that the rebate upon prepayment of Mortgage Loans originated in
California and Oklahoma may be computed on the simple interest method if so
required by applicable law or regulations.
"Mortgage Loan Seller" means CIT Consumer Finance.
"Mortgagor" means each Person who is indebted under a Mortgage Loan.
"Net Liquidation Loss" means, with respect to a Liquidated Mortgage Loan,
the amount, if any, by which (a) the outstanding Certificate Balance of such
Liquidated Mortgage Loan plus accrued and unpaid interest thereon to the date on
which such Liquidated Mortgage Loan became a Liquidated Mortgage Loan exceeds
(b) the Net Liquidation Proceeds for such Liquidated Mortgage Loan.
"Net Liquidation Proceeds" means, as to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses.
"NRSRO" means any nationally recognized statistical rating organization.
"Officers' Certificate" means a certificate signed by the chairman of the
board, president or any vice president of the Master Servicer and delivered to
the Trustee.
"Opinion of Counsel" means a written opinion of counsel acceptable to the
Trustee, who may be counsel for the Master Servicer, except that any opinion of
counsel relating to the qualification of the Trust as a REMIC or compliance with
the REMIC Provisions must be an opinion of counsel Independent with respect to
the Company and the Master Servicer.
"Original Class A Certificate Balance" means $_____________.
["Original Class B Certificate Balance" means $____________.]
["Originating Institution" means _________________.]
["Original Value" means _________________.]
"Outstanding Mortgage Loan" means, as to any Due Period, a
Mortgage Loan which was not the subject of a Principal Prepayment in Full prior
to such Due Period, which did not
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become a Liquidated Mortgage Loan prior to such Due Period, which was not
purchased prior to such Due Period pursuant to Section 3.05 and the scheduled
maturity date (as it existed on the Cut-off Date) of which has not occurred
prior to such Due Period.
"Ownership Interest" means with respect 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.
"Partial Principal Prepayment" means (a) any Principal Prepayment other
than a Principal Prepayment in Full and (b) any cash amount deposited in the
Certificate Account pursuant to the proviso in Section 3.05(a) or pursuant to
Section 3.05(b).
"Paying Agent" has the meaning assigned in Section 8.01(e).
"Percentage Interest" means, as to any Certificate, the percentage interest
evidenced thereby in distributions made on the related Class, such percentage
interest being equal to, in the case of the Class A Certificates, the percentage
(carried to eight places) obtained from dividing the denomination of such
Certificate by the aggregate denomination of all Class A Certificates (which
equals the Original Class A Certificate Balance) [and the aggregate denomination
of all Class B Certificates (which equals the Original Class B Certificate
Balance) in the case of the Class B Certificates] and, in the case of the Class
R Certificates, being equal to the percentage specified on the face of such
Certificate. The aggregate Percentage Interests for each Class of Certificates
shall equal 100%.
"Permitted Transferee" means, as to any Class R Certificateholder or any
other prospective transferee of a Class R Certificate, any Person other than (a)
the United States, a State or any political subdivision thereof, any possession
of the United States, a foreign government, an international organization, or
any agency or instrumentality of any of the foregoing, (b) an organization
(other than a cooperative described in Section 521 of the Code) which would not
be subject to tax under the Code (including the tax on unrelated business
taxable income, as defined in Section 512(a)(1) of the Code) on any excess
inclusions (as defined in Section 860E(c)(1) of the Code) with respect to any
Class R Certificate, or (c) an organization which is engaged in furnishing
electrical energy, or providing telephone service, to persons in rural areas (as
described in Section 1381(a)(2)(C) of the Code). The terms "United States,"
"State" and "international organization" shall have the meanings set forth in
Code Section 7701 or any successor provision. A corporation will not be treated
as an instrumentality of the United States or of any State or political
subdivision thereof, if all of the activities are subject to tax, and, with the
exception of the Federal Home Loan Mortgage Corporation, a majority of its board
of directors is not selected by such governmental unit.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.
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"Pool Factor" means, at any time, the percentage derived from a fraction,
the numerator of which is the aggregate Certificate Balance of each Class of
Certificates at such time and the denominator of which is the Cut-off Date Pool
Certificate Balance.
"Pool Scheduled Certificate Balance" means, as to any Distribution Date,
the aggregate of the Scheduled Certificate Balance of each Mortgage Loan that
was an Outstanding Mortgage Loan on the last day of the Due Period next
preceding such Distribution Date.
"Precomputed Mortgage Loan" means any Mortgage Loan as to which its
scheduled monthly payment for each Due Date is, by the terms thereof, applied to
interest and principal in accordance with a precomputed allocation, regardless
of whether such scheduled monthly payment is paid on such Due Date; provided
that a Rule of 78s Mortgage Loan shall be deemed to be a Precomputed Mortgage
Loan.
"Principal Prepayment" means a payment or other recovery of principal on a
Mortgage Loan (exclusive of Liquidation Proceeds) which is received in advance
of its Due Date and applied upon receipt (or, in the case of a Partial Principal
Prepayment, upon the next scheduled payment date on such Mortgage Loan) to
reduce the outstanding principal amount due on such Mortgage Loan prior to the
date or dates on which such principal amount is due.
"Principal Prepayment in Full" means any Principal Prepayment of the entire
Certificate Balance of a Mortgage Loan.
"Qualified Bank" means any depositary institution whose unsecured long-term
debt is rated at least __ by Rating Agency.
["Qualified Institutional Buyer" shall have the meaning specified in Rule
144A.]
"Rating Agency" means _________________ or any successor thereto; provided
that if [Rating Agency] no longer has a rating outstanding on any Class of the
Certificates, then references herein to [Rating Agency] shall be deemed to refer
to the NRSRO then rating any Class of the Certificates (or, if more than one
such NRSRO is then rating any Class of the Certificates, to such NRSRO as may be
designated by the Master Servicer), and references herein to ratings by or
requirements of [Rating Agency] shall be deemed to have the equivalent meanings
with respect to ratings by or requirements of such NRSRO.
"Record Date" means the last Business Day of any calendar month.
"REMIC" means a "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Certificate Maturity Date" means the "latest maturity date" of the
Class A Certificates [and Class B Certificates] as that term is defined in
Section 2.06.
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"REMIC Change of Law" means any proposed, temporary or final regulation,
revenue ruling, revenue procedure or other official announcement or
interpretation relating to the REMIC and the REMIC Provisions issued after the
Closing Date.
"REMIC Provisions" means provisions of the federal income tax law and the
applicable state and local law relating to REMICs and related provisions, and
regulations promulgated thereunder, as the foregoing may be in effect from time
to time.
"REO Disposition" means a disposition of REO Property, as described in
Section 5.10.
"REO Property" means any Mortgaged Property acquired in a foreclosure.
"Replaced Mortgage Loan" has the meaning given in Section 3.05(b).
"Repurchase Event" shall mean (a) any Mortgage Loan being subject to any
right of rescission, setoff, counterclaim or defense, including the defense of
usury, (b) the operation of any of the terms of any Mortgage Loan or the
exercise of any right thereunder (i) rendering such Mortgage Loan unenforceable
in whole or in part or (ii) subjecting such Mortgage Loan to any right of
rescission, setoff, counterclaim or defense, including the defense of usury; and
in each case such condition materially adversely affects the Trust's interest in
such Mortgage Loan.
"Repurchase Price" means, with respect to a Mortgage Loan to be repurchased
hereunder, an amount equal to the remaining principal amount outstanding on such
Mortgage Loan on the date of repurchase plus accrued and unpaid interest thereon
at its Mortgage Loan Rate up to the Due Date in the month of such repurchase.
"Responsible Officer" means, with respect to the Trustee, the chairman and
any vice chairman of the board of directors, the president, the chairman and
vice chairman of any executive committee of the board of directors, every vice
president, assistant vice president, the secretary, every assistant secretary,
cashier or any assistant cashier, controller or assistant controller, the
treasurer, every assistant treasurer, every trust officer, assistant trust
officer and every other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by persons who at the time shall
be such officers, respectively, or to whom a corporate trust matter is referred
because of knowledge of, familiarity with, and authority to act with respect to
a particular matter.
["Rule 144A" shall mean Rule 144A under the Securities Act, as such Rule
may be amended from time to time.]
"Scheduled Certificate Balance" means (a) as to any Mortgage Loan which as
a Precomputed Mortgage Loan and any Distribution Date or the Cut-off Date, the
Certificate Balance of such Mortgage Loan as of the Due Date in the Due Period
next preceding such Distribution Date or as of the Due Date next preceding the
Cut-off Date, as specified in the amortization schedule at the time relating
thereto (before any adjustment to such amortization schedule by reason of any
bankruptcy of an Mortgagor or similar proceeding or any moratorium or similar
waiver or grace
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period), after giving effect to any previous Partial Principal Prepayments and
to the payment of principal due on such Due Date and irrespective of any
delinquency in payment by, or extension granted to, the related Mortgagor, and
(b) as to any Mortgage Loan which is a simple interest Mortgage Loan and any
Distribution Date or the Cut-off Date, the unpaid Certificate Balance thereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Service Transfer" has the meaning assigned in Section 7.02.
"Servicing Fee" means, as to any Distribution Date, the sum of (a) the
Monthly Servicing Fee for such Distribution Date, (b) any Late Payment Fees paid
during the preceding calendar month, (c) any Extension Fees paid during the
preceding calendar month, (d) any Assumption Fees paid during the preceding
calendar month, and (e) any net investment earnings due to the Master Servicer
as of such Distribution Date.
"Servicing Officer" means any officer of the Master Servicer involved in,
or responsible for, the administration and servicing of Mortgage Loans whose
name appears on a list of servicing officers appearing in an Officers'
Certificate furnished to the Trustee by the Master Servicer, as the same may be
amended from time to time.
"Simple Interest Mortgage Loan" means a Mortgage Loan as to which interest
is calculated each day on the basis of the actual Certificate Balance
outstanding on such day.
["Standard & Poor's" means Standard & Poor's Corporation or any successor
thereto.]
"Transfer" means any direct or indirect transfer or sale of any Ownership
Interest in a Certificate.
"Transferee" means any Person who is acquiring by Transfer any Ownership
Interest in a Certificate.
"Treasury Regulations" means any proposed, temporary or final regulation
promulgated under the Code.
"Trust" means the trust created by this Agreement, the corpus of which
consists of (a) all the rights, benefits, and obligations arising from and in
connection with each Mortgage Loan and any related Mortgage, (b) all rights
under any Hazard Insurance Policy relating to a Mortgaged Property securing a
Mortgage Loan for the benefit of the creditor of such Mortgage Loan and proceeds
from any Mortgage Loan Holders' Errors and Omissions Protection Policy and any
blanket hazard policy to the extent such proceeds relate to any Mortgaged
Property, (c) all remittances, deposits and payments made into the Certificate
Account and amounts in the Certificate Account, (d) all proceeds in any way
derived from any of the foregoing items and (e) all documents contained in the
Mortgage Loan Files [and (f) [description of credit enhancement, if any]].
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"Trustee's Fee" means the fees and expenses of the Trustee as described in
Section 11.05.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
"Unpaid Class A Interest Shortfall" means, as to any Distribution Date, the
amount, if any, of the Class A Interest Shortfall for the prior Distribution
Date, plus accrued interest (to the extent payment thereof is legally
permissible) at the Class A Pass-Through Rate on the amount thereof from such
prior Distribution Date to such current Distribution Date.
["Unpaid Class B Interest Shortfall" means, as to any Distribution Date,
the amount, if any, of the Class B Interest Shortfall for the prior Distribution
Date, plus accrued interest (to the extent payment thereof is legally
permissible) at the Class B Pass-Through Rate on the amount thereof from such
prior Distribution Date to such current Distribution Date.]
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ARTICLE II
ESTABLISHMENT OF TRUST; TRANSFER OF CONTRACTS
SECTION 2.01. Closing.
(a) There is hereby created, by the Company as settlor, a separate
trust which shall be known as Home Equity Loan Asset Backed Certificate Trust
199_. [By the execution and delivery of this Agreement, the Company has agreed
that it will elect, or cause an election to be made, to treat the pool of assets
comprising the Trust as a REMIC.] The Trust shall be administered pursuant to
the provisions of this Agreement for the benefit of Certificateholders.
(b) On the Closing Date, the Company shall sell, transfer, assign, set
over and otherwise convey to the Trust by execution of an assignment
substantially in the form of Exhibit D hereto (i) all the right, title and
interest of the Company in and to the Mortgage Loans, including, without
limitation, the security interest created thereby and any related Mortgages and
all interest and principal received by the Company on or with respect to the
Mortgage Loans (other than principal and interest due on the Mortgage Loans
before the Cut-off Date or the date of origination, if later), (ii) all rights
under any Hazard Insurance Policy relating to a Mortgaged Property securing a
Mortgage Loan for the benefit of the creditor of such Mortgage Loan, (iii) the
proceeds from any Mortgage Loan Holders' Errors and Omissions Protection Policy
and all rights under any blanket hazard insurance policy to the extent they
relate to the Mortgaged Properties, (iv) all documents contained in the Mortgage
Loan Files, and (v) all proceeds in any way derived from any of the foregoing.
The parties intend that the conveyance of the Company's right, title and
interest in and to the Mortgage Loans pursuant to this Agreement shall
constitute an absolute sale.
SECTION 2.02. Conditions of the Closing
On or before the Closing Date, the Master Servicer shall deliver the
following documents to the Trustee:
(a) The List of Mortgage Loans.
(b) A certificate of officers of CIT Consumer Finance, substantially in the
form of Exhibit E hereto.
(c) Opinions of counsel for CIT Consumer Finance, substantially in the form
of Exhibit F hereto.
(d) A letter from _________________, or another nationally recognized
accounting firm that is Independent with respect to CIT Consumer Finance,
stating that such firm has reviewed the Mortgage Loans on a statistical sampling
basis [and, based on such sampling, concluding that the Mortgage Loans conform
in all material respects to the List of Mortgage Loans, generally to a
confidence level of ____%, with an error rate of ____%, specifying those
Mortgage Loans which do not so conform].
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(e) Copies of resolutions of the board of directors of CIT Consumer Finance
approving the execution, delivery and performance of this Agreement and the
transactions contemplated hereunder.
(f) Officially certified recent evidence of due organization and good
standing of CIT Consumer Finance.
(g) Evidence of filing with the appropriate office in the following
jurisdictions of the following UCC-1 financing statements, each listing the
Mortgage Loans: (i) UCC-1 financing statement executed by CIT Consumer Finance
as debtor, naming the Company as secured party and filed in [New Jersey and
Oklahoma] to perfect the sale from CIT Consumer Finance to the Company; (ii)
UCC-1 financing statement executed by the Company as debtor, naming the Trustee
as secured party and filed in [New Jersey and Oklahoma] to perfect the sale from
the Company to the Trustee and (iii) such other filings under the UCC as may be
appropriate.
(h) A blanket assignment of the Mortgage Loans for each of the transfers
specified in Section 2.02(g).
(i) An Officers' Certificate listing the Master Servicer's Servicing
Officers.
(j) An Officers' Certificate stating that the Master Servicer has reviewed
each Mortgage Loan and Mortgage Loan File and confirming that each Mortgage Loan
and Mortgage Loan File conforms in all material respects to the List of Mortgage
Loans, that each Mortgage Loan File is complete in all material respects, and
that each Mortgaged Property securing a Mortgage Loan is covered by a Hazard
Insurance Policy as required by Section 3.02(f).
(k) Letter[s] from ______________ confirming that the Class __ Certificates
have been assigned a rating of "__".
[(l) Letters from [Rating Agency] confirming that the Class ___
Certificates have been assigned a rating of "___".]
(m) Evidence of deposit in the Certificate Account of all funds received
with respect to the Mortgage Loans from the Cutoff Date to the Closing Date,
other than amounts due before the Cutoff Date, together with an Officer's
Certificate to the effect that such amount is correct.
(n) Any other documents or certificates that the Trustee may reasonably
request.
SECTION 2.03. Acceptance by TrusteeSECTION 2.03. Acceptance by Trustee. On
the Closing Date, if the conditions set forth in Section 2.02 have been
satisfied, the Trustee shall deliver a certificate to the Company substantially
in the form of Exhibit G hereto acknowledging conveyance of the Mortgage Loans,
Mortgage Loan Files to the Trustee and declaring that the Trustee, through the
Master Servicer, as custodian, pursuant to Section 4.01 hereof, will hold all
Mortgage Loans that have been delivered in trust, upon the trusts herein set
forth, for the use and benefit of all Certificateholders, and shall issue
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to or upon the order of the Company Certificates representing ownership of a
beneficial interest in 100% of the Trust.
SECTION 2.04. REMIC Designations
The Closing Date is hereby designated as the "start-up day" of the REMIC
within the meaning of Section 860G(a)(9) of the Code. The Company hereby
designates each of the Class A Certificates [and the Class B Certificates] as a
class of "regular interests", and the Class R Certificates as the single class
of "residual interests" in the Trust for purposes of the REMIC Provisions.
SECTION 2.05. REMIC Tax Matters
The tax year of the Trust shall be the calendar year, and the Trust shall
use the accrual method of reporting income and loss.
SECTION 2.06. REMIC Certificate Maturity Date
Solely for purposes of satisfying Section 1.860G-1(a)(4)(iii) of the
Treasury Regulations, and based upon certain assumptions described below, the
"latest possible maturity date" of each of the Class A [and Class B]
Certificates is no later than __________ __, ____. The foregoing date represents
the date by which the Certificates would be reduced to zero as determined under
a hypothetical scenario which assumes, among other things, that (i) no scheduled
interest and principal payments on the Mortgage Loans are received after the
respective Due Date, (ii) there are no principal prepayments and (iii) the
Company and the Master Servicer will not exercise its option to purchase the
Certificates pursuant to Section 8.03 of this Agreement and thereby cause a
termination of the Trust pursuant to Section ______ of this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties Regarding CIT Consumer
Finance.
CIT Consumer Finance represents and warrants that:
(a) Organization and Good Standing. CIT Consumer Finance is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate power to own its assets
and to transact the business in which it is currently engaged. CIT Consumer
Finance is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the character of the business transacted
by it or properties owned or leased by it requires such qualification and in
which the failure so to qualify would have a material adverse effect on the
business, properties, assets, or condition (financial or other) of CIT Consumer
Finance.
(b) Authorization; Binding Obligations. CIT Consumer Finance has the power
and authority to make, execute, deliver and perform this Agreement and all of
the transactions contemplated under this Agreement, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement. When executed and delivered, this Agreement will constitute the
legal, valid and binding obligation of CIT Consumer Finance enforceable in
accordance with its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies.
(c) No Consent Required. CIT Consumer Finance is not required to obtain the
consent of any other party or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority, bureau or
agency in connection with the execution, delivery, performance, validity or
enforceability of this Agreement the failure of which so to obtain would have a
material adverse effect on the business, properties, assets or condition
(financial or otherwise) of CIT Consumer Finance.
(d) No Violations. The execution, delivery and performance of this
Agreement by CIT Consumer Finance will not violate any provision of any existing
law or regulation or any order or decree of any court or the Articles of
Incorporation or Bylaws of CIT Consumer Finance, or constitute a material breach
of any mortgage, indenture, contract or other agreement to which CIT Consumer
Finance is a party or by which CIT Consumer Finance may be bound.
(e) Litigation. No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the knowledge
of CIT Consumer Finance threatened, against CIT Consumer Finance or any of its
properties or with respect to this Agreement or the Certificates which, if
adversely determined, would in the opinion of CIT Consumer Finance have a
material adverse effect on the transactions contemplated by this Agreement.
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SECTION 3.02. Representations and Warranties Regarding Each Mortgage Loan
The Mortgage Loans have been sold by CIT Consumer Finance to the Company
pursuant to the Mortgage Loan Purchase Agreement. In connection with such sale,
CIT Consumer Finance made the representations and warranties in Sections 3.02,
3.03 and 3.04 to the Company and assumed the obligations in Section 3.05. As a
condition of the purchase by the Company, the Company has required that CIT
Consumer Finance make such representations and warranties directly to the
Trustee and the Certificateholders so that the Trustee may recover directly
against CIT Consumer Finance on such representations and warranties rather than
indirectly through claims by the Company against CIT Consumer Finance.
Consequently, CIT Consumer Finance represents and warrants to the Trustee and
the Certificateholders as to each Mortgage Loan as of the Closing Date (except
as otherwise expressly stated):
(a) List of Mortgage Loans. The information set forth in the List of
Mortgage Loans is true and correct as of its date.
(b) Payments. As of the Cut-off Date, the scheduled payment of principal
and interest for its Due Date next preceding the Cut-off Date was made by or on
behalf of the Mortgagor (without any advance from CIT Consumer Finance or any
Person acting at the request of CIT Consumer Finance) or was not delinquent for
more than 60 days.
(c) No Waivers. The terms of the Mortgage Loan have not been waived,
altered or modified in any respect, except by instruments or documents
identified in the Mortgage Loan File.
(d) Binding Obligation. The Mortgage Loan is the legal, valid and binding
obligation of the Mortgagor thereunder and is enforceable in accordance with its
terms, except as such enforceability may be limited by laws affecting the
enforcement of creditors' rights generally.
(e) No Defenses. No right of rescission, setoff, counterclaim or defense,
including the defense of usury, has been asserted with respect to the Mortgage
Loan.
(f) Insurance. The Mortgaged Property securing the Mortgage Loan is or will
be covered by a Hazard Insurance Policy in the amount required by Section 5.09.
All premiums due as of the Closing Date on such insurance have been paid in
full.
(g) Origination. The Mortgage Loan was [either (i) was purchased by CIT
Consumer Finance or an Originating Institution in the ordinary course of its
business, (ii) originated by an Originating Institution in the ordinary course
of its business or (iii)] originated by CIT Consumer Finance in the ordinary
course of its business.
(h) Lawful Assignment. The Mortgage Loan was not originated in and is not
subject to the laws of any jurisdiction whose laws would make the transfer of
the Mortgage Loan to the Company under the Mortgage Loan Purchase Agreement, to
the Trustee under this Agreement or pursuant to transfers of Certificates, or
the ownership of the Mortgage Loans by the Trust, unlawful.
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(i) Compliance with Law. All requirements of any federal, state or local
law, including, without limitation, usury, truth in lending and equal credit
opportunity laws, applicable to the Mortgage Loan have been complied with and
such compliance is not affected by the Trust's ownership of the Mortgage Loans,
and CIT Consumer Finance shall for at least the period of this Agreement,
maintain in its possession, available for the Trustee's inspection, and shall
deliver to the Trustee upon demand, evidence of compliance with all such
requirements.
(j) Mortgage Loan in Force. The Mortgage Loan has not been satisfied or
subordinated in whole or in part or rescinded, and the Mortgaged Property
securing the Mortgage Loan has not been released from the lien of the Mortgage
Loan in whole or in part.
(k) Valid Security Interest. The Mortgage Loan creates a valid and
enforceable perfected first priority security interest in favor of CIT Consumer
Finance [(or, if CIT Consumer Finance is not the Mortgage Loan Originator, such
Mortgage Loan Originator)] in the Mortgaged Property covered thereby as security
for payment of the Cut-off Date Certificate Balance of such Mortgage Loan[,
which security interest has been validly and effectively assigned to CIT
Consumer Finance]. CIT Consumer Finance has assigned all of its right, title and
interest in such Mortgage Loan, including the security interest in the Mortgaged
Property covered thereby, to the Company, and the Company has assigned all of
its right, title and interest in such Mortgage Loan and related Mortgaged
Property to the Trustee. Subject to the effect of Section 4.02, the Trustee has
and will have a valid and perfected and enforceable first priority security
interest in such Mortgaged Property. The Trustee, pursuant to the sale in
Section 2.01, has and will have a valid and perfected ownership interest in such
Mortgage Loan. Each Mortgage is a valid first lien on real property in favor of
CIT Consumer Finance [(or, if CIT Consumer Finance is not the Mortgage Loan
Originator, such Mortgage Loan Originator)] securing the amount owed by the
Mortgagor under the Mortgage Loan subject only to (i) the lien of current real
property taxes and assessments, (ii) covenants, conditions and restrictions,
rights of way, easements and other matters of public record as of the date of
recording of such Mortgage, such exceptions appearing of record being acceptable
to mortgage lending institutions generally in the area wherein the property
subject to the Mortgage is located or specifically reflected in the appraisal
obtained in connection with the origination of the related Mortgage Loan
obtained by the Originator and (iii) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of the
security intended to be provided by such Mortgage. CIT Consumer Finance has
assigned to the Company, and the Company has assigned to the Trustee, all of its
right, title and interest in such Mortgage. Subject to the effect of Section
4.02, the Trustee has and will have a valid and perfected and enforceable first
priority security interest in such Mortgage. The Trustee, pursuant to the sale
in Section 2.01, has and will have a valid and perfected ownership interest in
such Mortgage.
(l) Capacity of Parties. All parties to the Mortgage Loan had legal
capacity to execute the Mortgage Loan.
(m) Good Title. CIT Consumer Finance has not sold, assigned or pledged the
Mortgage Loan to any person other than the Company and prior to the transfer of
the Mortgage Loan by CIT Consumer Finance to the Company and the Company to the
Trust, CIT Consumer Finance had good and marketable title thereto free and clear
of any encumbrance, equity, loan,
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pledge, charge, claim or security interest and was the sole owner thereof with
full right to transfer the Mortgage Loan to the Company. The Company paid fair
value to CIT Consumer Finance for the Mortgage Loan.
(n) No Defaults. As of the Cut-off Date (or the date of origination, if
later), there was no default, breach, violation or event permitting acceleration
existing under the Mortgage Loan and no event which, with notice and the
expiration of any grace or cure period, would constitute such a default, breach,
violation or event permitting acceleration under such Mortgage Loan (except
payment delinquencies permitted by clause (b) above). CIT Consumer Finance has
not waived any such default, breach, violation or event permitting acceleration
except payment delinquencies permitted by clause (c) above.
(o) No Liens. As of the Closing Date there are, to the best of CIT Consumer
Finance's knowledge, no liens or claims which have been filed for work, labor or
materials affecting the Mortgaged Property securing the Mortgage Loan which are
or may be liens prior to, or equal or coordinate with, the lien of the Mortgage
Loan.
(p) Equal Installments. The Mortgage Loan [has a fixed Mortgage Loan Rate
and provides for level monthly payments which fully amortize the loan over its
term].
(q) Enforceability. The Mortgage Loan contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the collateral of the benefits of the
security, except as enforceability of such provisions may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies.
(r) Loan-to-Value Ratio. At the time of their origination, (i) all [but
__%] of the Mortgage Loans had Loan-to-Value Ratios not greater than __% and
(ii) each of the Mortgage Loans had a Loan-to-Value Ratio not greater than 125%.
(s) Qualified Mortgage for REMIC. Each Mortgage Loan is a "qualified
mortgage" under Section 860G(a)(3) of the Code.
SECTION 3.03. Representations and Warranties Regarding the Mortgage Loans
in the AggregateSECTION 3.03. Representations and Warranties Regarding the
Mortgage Loans in the Aggregate.
CIT Consumer Finance represents and warrants to the Trustee and the
Certificateholders, that:
(a) Amounts. The aggregate principal amounts payable by Mortgagors under
the Mortgage Loans as of the Cut-off Date equal the Cut-off Date Pool
Certificate Balance.
(b) Characteristics. The Mortgage Loans have the following characteristics
as of the Cut-off Date: (i) not more than __% of the Mortgage Loans are located
in any one state (except Mortgage Loans secured by Mortgaged Properties located
in ___________, which represent ___% of the Cut-off Date Pool Certificate
Balance); (ii) not more than __% of the
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Mortgage Loans by remaining Certificate Balance are secured by Mortgaged
Properties located in an area with the same zip code; (iii) no Mortgage Loan has
a remaining maturity of less than __ months or more than ___ months; (iv) the
final scheduled payment date on the Mortgage Loan with the latest maturity is in
_________, ____; (v) no more than __% of the Cut-off Date Pool Certificate
Balance is attributable to loans for purchases of used Mortgaged Properties;
(vi) no Mortgage Loan was originated before _____ __, 19__; (vii) the Mortgage
Loan Rate on each Mortgage Loan is not less than ___% and not greater than __%;
and (viii) the Scheduled Certificate Balance of each Mortgage Loan is not less
than $______.
(c) Computer Tape. The Computer Tape made available by the Master Servicer
was complete and accurate as of its date and includes a description of the same
Mortgage Loans that are described in the List of Mortgage Loans.
(d) Marking Records. By the Closing Date, CIT Consumer Finance has caused
the portions of the Electronic Ledger relating to the Mortgage Loans
constituting part of the Trust to be clearly and unambiguously marked to
indicate that such Mortgage Loans constitute part of the Trust and are owned by
the Trust in accordance with the terms of the trust created hereunder.
(e) No Adverse Selection. Except for the effect of the representations and
warranties made in Section 3.02 and 3.03 hereof, no adverse selection procedures
have been employed in selecting the Mortgage Loans.
SECTION 3.04. Representations and Warranties Regarding the Mortgage Loan
Files.
CIT Consumer Finance represents and warrants to the Trustee and the
Certificateholders that:
(a) Possession. Immediately prior to the Closing Date, CIT Consumer Finance
will have possession of each original Mortgage Loan and the related Mortgage
Loan File, and there are and there will be no custodial agreements in effect
materially and adversely affecting the right of CIT Consumer Finance to make, or
to cause to be made, any delivery required in connection with the conveyance of
the Mortgage Loans to the Company.
(b) Bulk Transfer Laws. The transfer, assignment and conveyance of the
Mortgage Loans and the Mortgage Loan Files to the Company are not subject to the
bulk transfer or any similar statutory provisions in effect in any applicable
jurisdiction.
SECTION 3.05. Repurchase of Mortgage Loans or Substitution of Mortgage
Loans for Breach of Representations and WarrantiesSECTION 3.05. Repurchase of
Mortgage Loans or Substitution of Mortgage Loans for Breach of Representations
and Warranties2.
(a) Subject to Section 3.05(b), CIT Consumer Finance shall repurchase a
Mortgage Loan, at its Repurchase Price, not later than 85 days after CIT
Consumer Finance receives written notice from the Trustee or the Master
Servicer, or not later than 90 days after CIT Consumer Finance otherwise becomes
aware, of (i) a breach of any representation or warranty of CIT Consumer Finance
set forth in Section 3.02 or 3.03 of this Agreement that materially adversely
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affects the Trust's interest in such Mortgage Loan and which breach has not been
cured or (ii) the occurrence of a Repurchase Event which has not been cured. CIT
Consumer Finance shall effect such repurchase by paying to the Master Servicer
for deposit in the Certificate Account on the Business Day immediately preceding
the Distribution Date in the month following the month in which the loan was
repurchased the aggregate of the Repurchase Price of all Mortgage Loans that are
required to be repurchased pursuant to the preceding sentence. With respect to
any Mortgage Loan incorrectly described on the List of Mortgage Loans only with
respect to remaining unpaid Certificate Balance, which CIT Consumer Finance
would otherwise be required to repurchase pursuant to this Section 3.05, CIT
Consumer Finance may, in lieu of repurchasing such Mortgage Loan, deposit in the
Certificate Account, not later than one Business Day after the first
Determination Date which is more than 90 days after CIT Consumer Finance becomes
aware or receives written notice from the Trustee or the Master Servicer of such
incorrect description, cash in an amount sufficient to cure such deficiency or
discrepancy. CIT Consumer Finance shall send written notice of any such cash
deposit to [Rating Agency] as promptly as possible following such deposit.
Notwithstanding any other provision of the Agreement, the obligation of CIT
Consumer Finance under this Section shall not terminate upon a Service Transfer
pursuant to Article VII.
Notwithstanding the provisions of the preceding paragraph, but subject to
Section 3.05(b), CIT Consumer Finance will not be required to repurchase a
Mortgage Loan (or deposit cash in the Certificate Account as provided in the
preceding paragraph) as a result of a breach of a representation or warranty or
the occurrence of a Repurchase Event unless the Trustee has received an Opinion
of Counsel that such repurchase (or deposit of cash) will not cause the Trust to
fail to qualify as a REMIC at any time under the then applicable REMIC
Provisions. The Master Servicer shall attempt to obtain such Opinion of Counsel.
CIT Consumer Finance shall, subject to Section 3.05(b), repurchase such Mortgage
Loan (or deposit cash in the Certificate Account as provided in the preceding
paragraph) and shall guarantee the payment of any tax imposed under the REMIC
Provisions as a result of such repurchase or deposit by paying to the Trustee
the amount of such tax not later than five Business Days before such tax shall
be due and payable to the extent that amounts previously paid over to and then
held by the Trustee pursuant to Section 5.10 hereof are insufficient to pay such
tax and all other taxes chargeable under Section 5.10. Pursuant to Section 5.10,
the Master Servicer is hereby directed to withhold, and shall withhold and pay
over to the Trustee, an amount sufficient to pay such tax and any other taxes
imposed on "prohibited transactions" under Section 860F(a)(i) of the Code or
imposed on "contributions after start up date" under Section 860G(d) of the Code
from amounts otherwise distributable to Class R Certificateholders. The Master
Servicer shall give notice to the Trustee at the time of such repurchase (or
deposit) of the amounts due from CIT Consumer Finance pursuant to the guarantee
of CIT Consumer Finance and notice as to who should receive such payment.
The Trustee shall have no obligation to pay any such amounts pursuant to
this Section other than from moneys provided to it by CIT Consumer Finance or
from moneys held in the funds and accounts created under this Agreement. The
Trustee shall be deemed conclusively to have complied with this Section if it
follows the directions of CIT Consumer Finance.
In the event any tax that is guaranteed by CIT Consumer Finance is refunded
to the Trust or otherwise is determined not to be payable, CIT Consumer Finance
shall be repaid
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the amount of such refund or that portion of any guarantee payment made by CIT
Consumer Finance that is not applied to the payment of such tax.
(b) On or prior to the date that is the second anniversary of the Closing
Date, CIT Consumer Finance, at its election, may substitute an Eligible
Substitute Mortgage Loan for a Mortgage Loan that it is obligated to repurchase
pursuant to Section 3.05(a) (such Mortgage Loan being referred to as the
"Replaced Mortgage Loan") upon satisfaction of the following conditions:
(i) CIT Consumer Finance shall have conveyed to the Trustee the
Mortgage Loan to be substituted for the Replaced Mortgage Loan and the
Mortgage Loan File related to such Mortgage Loan and CIT Consumer Finance
shall have marked the Electronic Ledger indicating that such Mortgage Loan
constitutes part of the Trust;
(ii) the Mortgage Loan to be substituted for the Replaced Mortgage
Loan is an Eligible Substitute Mortgage Loan and CIT Consumer Finance
delivers an Officers' Certificate, substantially in the form of Exhibit I-2
hereto, to the Trustee certifying that such Mortgage Loan is an Eligible
Substitute Mortgage Loan;
(iii) CIT Consumer Finance shall have delivered to the Trustee
evidence of filing of a UCC-1 financing statement executed by CIT Consumer
Finance naming the Trustee as secured party and filed in _______, listing
such Mortgage Loan;
(iv) CIT Consumer Finance shall have delivered to the Trustee an
Opinion of Counsel to the effect that the substitution of such Mortgage
Loan for such Replaced Mortgage Loan will not cause the Trust to fail to
qualify as a REMIC at any time under then applicable REMIC Provisions or
cause any "prohibited transaction" that will result in the imposition of a
tax under such REMIC Provision; and
(v) if the Scheduled Certificate Balance of such Replaced Mortgage
Loan is greater than the Scheduled Certificate Balance of the Mortgage Loan
being substituted, CIT Consumer Finance shall have deposited in the
Certificate Account the amount of such excess and shall have included in
the Officers' Certificate required by clause (ii) above a certification
that such deposit has been made.
Upon satisfaction of such conditions, the Trustee shall add such Mortgage Loan
to, and delete such Replaced Mortgage Loan from, the List of Mortgage Loans.
Such substitution shall be effected prior to the expiration of the period in
which CIT Consumer Finance is otherwise obligated to repurchase such Replaced
Mortgage Loan pursuant to Section 3.05(a). Promptly after any substitution of
Mortgage Loan, CIT Consumer Finance shall give written notice of such
substitution to [Rating Agency].
(c) Promptly after the repurchase referred to in Section 3.05(a) or the
substitution referred to in Section 3.05(b), the Trustee shall execute such
documents as are presented to it by CIT Consumer Finance and are reasonably
necessary to reconvey the repurchased Mortgage Loan or Replaced Mortgage Loan,
as the case may be, to CIT Consumer Finance.
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ARTICLE IV
PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS
SECTION 4.01. Custody of Mortgage Loans
(a) Subject to the terms and conditions of this Section 4.01, the Master
Servicer shall act as custodian of the Mortgage Loan Files for the benefit of
the Certificateholders and the Trustee.
(b) The Master Servicer agrees to maintain the related Mortgage Loan Files
at its offices in the State of New Jersey, or at such of its offices of the
Master Servicer in the State of Oklahoma as shall from time to time be
identified to the Trustee by written notice. The Master Servicer may temporarily
move individual Mortgage Loan Files or any portion thereof without notice as
necessary to conduct collection and other servicing activities in accordance
with its customary practices and procedures.
(c) As custodian, the Master Servicer shall have and perform the following
powers and duties:
(i) hold the Mortgage Loan Files on behalf of the Certificateholders
and the Trustee, maintain accurate records pertaining to each Mortgage Loan
to enable it to comply with the terms and conditions of this Agreement,
maintain a current inventory thereof, conduct annual physical inspections
of Mortgage Loan Files held by it under this Agreement and certify to the
Trustee annually that it continues to maintain possession of such Mortgage
Loan Files;
(ii) implement policies and procedures in writing and signed by a
Servicing Officer, with respect to persons authorized to have access to the
Mortgage Loan Files on the Master Servicers' premises and the receipting
for Mortgage Loan Files taken from their storage area by an employee of the
Master Servicer for purposes of servicing or any other purposes; and
(iii) attend to all details in connection with maintaining custody of
the Mortgage Loan Files on behalf of the Certificateholders and the
Trustee.
(d) In performing its duties under this Section 4.01, the Master Servicer
agrees to act with reasonable care, consistent with the same degree of skill and
care that it exercises with respect to similar contracts serviced by it for its
own account. The Master Servicer shall promptly report to the Trustee any
failure by it to hold the Mortgage Loan Files as herein provided and shall
promptly take appropriate action to remedy any such failure. In acting as
custodian of the Mortgage Loan Files, the Master Servicer agrees further not to
assert any beneficial ownership interests in the Mortgage Loans or the Mortgage
Loan Files. The Master Servicer agrees to indemnify the Certificateholders and
the Trustee for any and all liabilities, obligations, losses, damages, payments,
costs, or expense of any kind whatsoever which may be imposed on, incurred or
asserted against the Certificateholders and the Trustee as the result of any act
or omission by the
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Master Servicer relating to the maintenance and custody of the Mortgage Loan
Files; provided, however, that the Master Servicer will not be liable for any
portion of any such amount resulting from the negligence or willful misconduct
of any Certificateholder or the Trustee.
SECTION 4.02. FilingsSECTION 4.02. Filings.
On or prior to the Closing Date, the Master Servicer shall cause the UCC-1
financing statements referred to in Section 2.02(g) to be filed. The Master
Servicer shall cause to be filed all necessary continuation statements of the
UCC-1 financing statement referred to in Section 2.02(g) on which it is the
debtor, and the Company shall cause to be filed all necessary continuation
statements of the UCC-1 financing statement referred to in Section 2.02(g) on
which it is the debtor. From time to time the Master Servicer shall, subject to
the following sentence, take and cause to be taken such actions and execute such
documents as are necessary to perfect and protect the Certificateholders'
interests in the Mortgage Loans and their proceeds and the Mortgaged Properties
against all other persons, including, without limitation, the filing of
financing statements, amendments thereto and continuation statements.
The Master Servicer will maintain the Trustee's perfected first priority
security interest in each Mortgaged Property so long as the related Mortgage
Loan is the property of the Trust; provided, however, that because of the
expense and administrative inconvenience involved, the Master Servicer will not
record the successive assignments of the first lien on any Mortgaged Property
from the related Mortgage Loan Originator to CIT Consumer Finance, from CIT
Consumer Finance to the Company and from the Company to the Trustee.
SECTION 4.03. Name Change or RelocationSECTION 4.03. Name Change or
Relocation.
(a) During the term of this Agreement, neither the Company nor CIT Consumer
Finance shall change its name, identity or structure or relocate its chief
executive office without first giving notice thereof to the Trustee and the
Master Servicer. In addition, following any such change in the name, identity,
structure or location of the chief executive office of the Company or CIT
Consumer Finance, the Company or CIT Consumer Finance, as appropriate, shall
give written notice thereof to [Rating Agency].
(b) If any change in the Company's, the Master Servicer's or CIT Consumer
Finance's name, identity or structure or the relocation of its chief executive
office would make any financing or continuation statement or notice of lien
filed under this Agreement seriously misleading within the meaning of applicable
provisions of the UCC or would cause any such financing or continuation
statement or notice of lien to become unperfected (whether immediately or with
lapse of time), the Master Servicer no later than five days after the effective
date of such change, shall file, or cause to be filed, such amendments or
financing statements as may be required to preserve, perfect and protect the
Certificateholders' interests in the Mortgage Loans and proceeds thereof and in
the Mortgaged Properties.
SECTION 4.04. Chief Executive Office
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During the term of this Agreement, the Company and CIT Consumer Finance
will maintain their respective chief executive offices in one of the States of
the United States.
SECTION 4.05. Costs and ExpensesSECTION 4.05. Costs and Expenses.
The Master Servicer agrees to pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against all
third parties, of the Certificateholders' right, title and interest in and to
the Mortgage Loans (including, without limitation, the security interest in the
Mortgaged Properties granted thereby).
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ARTICLE V
SERVICING OF CONTRACTS
SECTION 5.01. Responsibility for Mortgage Loan Administration
The Master Servicer shall manage, administer, service and make collections
on the Mortgage Loans and perform or cause to be performed all contractual and
customary undertakings of the holder of the Mortgage Loans to the Mortgagor. The
Trustee, at the request of a Servicing Officer, shall furnish the Master
Servicer with any reasonable documents or take any action reasonably requested,
necessary or appropriate to enable the Master Servicer to carry out its
servicing and administrative duties hereunder. CIT Consumer Finance is hereby
appointed the Master Servicer until such time as any Service Transfer shall be
effected under Article VII.
SECTION 5.02. Standard of Care
In managing, administering, servicing and making collections on the
Mortgage Loans pursuant to this Agreement, the Master Servicer will exercise
that degree of skill and care consistent with the same degree of skill and care
that the Master Servicer exercises with respect to similar contracts serviced by
the Master Servicer for its own account; provided, however, that (i) such degree
of skill and care shall be at least as favorable as the degree of skill and care
generally applied by Master Servicers of mortgage loans for institutional
investors and (ii) notwithstanding the foregoing, the Master Servicer shall not,
other than in connection with a default or an imminent default on a Mortgage
Loan, release or waive the right to collect the unpaid balance on such Mortgage
Loan, unless the Master Servicer obtains an Opinion of Counsel to the effect
that such action will not cause the Trust to fail to qualify as a REMIC under
the Code and under the relevant state and local law or result in the imposition
of taxes on the Trust under the REMIC Provisions.
SECTION 5.03. Records
The Master Servicer shall during the period it is Master Servicer
hereunder, maintain such books of account and other records as will enable the
Trustee to determine the status of each Mortgage Loan.
SECTION 5.04. Inspection; Computer Tape
(a) At all times during the term hereof, the Master Servicer shall afford
the Trustee and its authorized agents reasonable access during normal business
hours to the Master Servicer's records relating to the Mortgage Loans and will
cause its personnel to assist in any examination of such records by the Trustee
or its authorized agents. The examination referred to in this Section 5.04 will
be conducted in a manner which does not unreasonably interfere with the Master
Servicer's normal operations or customer or employee relations. Without
otherwise limiting the scope of the examination the Trustee may make, the
Trustee or its authorized agents may, using generally accepted audit procedures,
verify the status of each Mortgage Loan and review the Electronic Ledger and
records relating thereto for conformity to Monthly Reports prepared pursuant
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to Article VI and compliance with the standards represented to exist as to each
Mortgage Loan in this Agreement.
(b) At all times during the term hereof, the Master Servicer shall keep
available a copy of the List of Mortgage Loans at its principal executive office
for inspection by Certificateholders.
SECTION 5.05. Certificate Account
(a) On or before the Closing Date, the Trustee shall establish the
Certificate Account on behalf of the Trust with an Eligible Institution. The
Certificate Account shall be entitled "_________________________ as trustee for
the benefit of Holders of Home Equity Loan Asset Backed Certificates, Series
_____ (The CIT Group/Consumer Finance, Inc., Master Servicer)." The Master
Servicer shall, subject to the second following sentence, deposit in the
Certificate Account, no later than two Business Days after the Closing Date, any
amounts representing (i) scheduled payments of principal and interest due on
Precomputed Mortgage Loans on or after the Cut-off Date (but not including
payments received after the Cut-off Date but due before the Cut-off Date)
regardless of when the Master Servicer received such payments and (ii) payments
received on the simple interest Mortgage Loans on or after the Cut-off Date,
regardless of when due. The Master Servicer shall, subject to the following
sentence, pay into the Certificate Account as promptly as practicable (not later
than the second Business Day) following the receipt thereof by the Master
Servicer, all amounts received in respect of the Mortgage Loans (other than in
respect of principal of and interest on the Precomputed Mortgage Loans due
before the Cut-off Date), including all loan payments from Mortgagors,
Liquidation Proceeds (net of Liquidation Expenses) and any Repurchase Price (or
cash deposit) paid pursuant to Section 3.05. Notwithstanding anything in this
Agreement to the contrary, for so long as, and only so long as, CIT Consumer
Finance shall remain the Master Servicer hereunder, if (i) The CIT Group
Holdings, Inc. shall have and maintain a short-term debt rating of at least __
by [Rating Agency] and (ii) the Trustee shall have received an Opinion of
Counsel that any action taken pursuant to this sentence shall not adversely
affect the status of the Trust as a REMIC or result in the imposition of a tax
upon the Trust, the Master Servicer may make the deposits to the Certificate
Account specified in the two preceding sentences on a monthly basis, but not
later than the Business Day immediately preceding the Distribution Date
following the last day of the Due Period within which such payments were
processed by the Master Servicer, in an amount equal to the net amount of such
deposits and payments which would have been made to the Certificate Account
during such Due Period but for the provisions of this paragraph. All amounts
paid into the Certificate Account under this Agreement shall be held in trust
for the Certificateholders until payment of any such amounts is authorized under
this Agreement.
(b) The Eligible Institution maintaining the Certificate Account shall, in
the name of the Trustee, as trustee, invest the amounts in the Certificate
Account solely in Eligible Investments that mature not later than one Business
Day prior to the next succeeding Distribution Date, in accordance with
instructions provided to the Trustee by the Master Servicer in writing. Once
such funds are invested, such Eligible Institution shall not change the
investment of such funds. All net income and gain from such investments shall be
deposited in the Certificate
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Account. All income and gain realized from any such investments shall be for the
benefit of the Master Servicer and may be withdrawn by the Master Servicer on
each Distribution Date pursuant to subsection 8.02(g). An amount equal to any
net loss on such investments shall be deposited in the Certificate Account by
the [Master Servicer/Class R Certificateholders] out of its own funds, without
right to reimbursement, immediately as realized. "Eligible Investments" are any
of the following:
(i) direct obligations of, and obligations fully guaranteed by, the
United States of America, the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, or any agency or instrumentality of
the United States of America the obligations of which are backed by the
full faith and credit of the United States of America and which are
non-callable;
(ii) [A] demand and time deposits in, certificates of deposit of,
bankers' acceptances issued by, or federal funds sold by any depository
institution or trust company (including the Trustee or any Affiliate of the
Trustee, acting in its commercial capacity) incorporated under the laws of
the United States of America or any state thereof and subject to
supervision and examination by federal and/or state authorities, so long
as, at the time of such investment or contractual commitment providing for
such investment, the commercial paper or other short-term debt obligations
of such depository institution or trust company have been rated [P-1 by
Moody's/A-1 or higher by Standard & Poor's] [and (B) any other demand or
time deposit or certificate of deposit which is fully insured by the
Federal Deposit Insurance Corporation];
(iii) repurchase obligations with respect to any security described in
either clause (i) or (ii) above and entered into with any institution whose
commercial paper is rated at least [P-1 from Moody's/A-1 from Standard &
Poor's];
(iv) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or
any State thereof which have a credit rating of at least [Aa from
Moody's/AA from Standard & Poor's] at the time of such investment;
(v) commercial paper having a rating of at least [P-1 from Moody's/A-1
from Standard & Poor's] at the time of such investment; and
(vi) [shares of an investment company registered under the Investment
Company Act of 1940, whose shares are registered under the Securities Act
of 1933 and have the highest credit rating then available from Moody's or
money market funds rated AAAm or AAAm-G by Standard & Poor's.]
The Trustee may trade with itself or with an Affiliate on an arm's length
basis in the purchase or sale of such Eligible Investments.
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SECTION 5.06. Enforcement
(a) The Master Servicer will, consistent with customary servicing
procedures and the terms of this Agreement, act with respect to the Mortgage
Loans in such manner as will maximize the receipt of principal and interest on
the Mortgage Loans and Liquidation Proceeds in respect of Defaulted Mortgage
Loans.
(b) The Master Servicer may sue to enforce or collect upon Mortgage Loans,
including foreclosure of any security interest or Mortgaged Property, in its own
name, if possible, or as agent for the Trustee. If the Master Servicer elects to
commence a legal proceeding to enforce a Mortgage Loan, the act of commencement
shall be deemed to be an automatic assignment of the Mortgage Loan to the Master
Servicer for purposes of collection only. If, however, in any enforcement suit
or legal proceeding it is held that the Master Servicer may not enforce a
Mortgage Loan on the ground that it is not a real party in interest or a holder
entitled to enforce the Mortgage Loan, the Trustee on behalf of the Trust shall,
at the Master Servicer's expense, take such steps as the Master Servicer deems
necessary to enforce the Mortgage Loan, including bringing suit in its name or
the names of the Certificateholders.
(c) The Master Servicer shall exercise any rights of recourse against third
persons that exist with respect to any Mortgage Loan in accordance with Master
Servicer's usual practice. In exercising recourse rights, the Master Servicer is
authorized on the Trustee's behalf to reassign the Mortgage Loan or to resell
the related Mortgaged Property to the person against whom recourse exists at the
price set forth in the document creating the recourse.
(d) Prior to a Service Transfer the Master Servicer may grant to the
Mortgagor on any Mortgage Loan any rebate, refund or adjustment out of the
Certificate Account that the Master Servicer in good faith believes is required
because of prepayment in full of the Mortgage Loan. The Master Servicer will not
permit any rescission or cancellation of any Mortgage Loan.
(e) Prior to a Service Transfer, the Master Servicer may, consistent with
its customary servicing procedures and consistent with Section 5.02, grant to
the Mortgagor on any contract an extension of payments due under such Mortgage
Loan, provided that such extension does not result in any payments coming due on
or after __________ __, ____, and provided further that Mortgagors may not be
solicited for extensions and no more than one extension of payments under a
Mortgage Loan may be granted in any twelve-month period.
(f) The Master Servicer may enforce any due-on-sale clause in a Mortgage
Loan if such enforcement is called for under its then current servicing policies
for obligations similar to the Mortgage Loans, provided that such enforcement is
permitted by applicable law and will not adversely affect any applicable
insurance policy. If an assumption of a Mortgage Loan is permitted by the Master
Servicer upon the conveyance of the related Mortgaged Property, the Master
Servicer shall use its best efforts to obtain an assumption agreement in
connection therewith and deliver such assumption agreement to the Trustee for
addition to the related Mortgage Loan File.
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(g) In the event that applicable state law requires that the sale of any
Mortgaged Property to which the Trustee has acquired title, through foreclosure
or otherwise, be conducted through a licensed real estate broker, the Master
Servicer shall retain such broker, and the fees payable to such broker in
connection with any such sale shall constitute Liquidation Expenses.
SECTION 5.07. Trustee to Cooperate
Upon payment in full on any Mortgage Loan, the Master Servicer will notify
the Trustee by certification of a Servicing Officer (which certification shall
include a statement to the effect that all amounts received in connection with
such payments which are required to be deposited in the Certificate Account
pursuant to Section 5.05 have been so deposited). The Master Servicer is
authorized to execute an instrument in satisfaction of such Mortgage Loan and to
do such other acts and execute such other documents as the Master Servicer deems
necessary to discharge the Mortgagor thereunder and eliminate the security
interest in the Mortgaged Property related thereto. The Master Servicer shall
determine when a Mortgage Loan has been paid in full. To the extent that
insufficient payments are received on a Mortgage Loan credited by the Master
Servicer as prepaid or paid in full and satisfied, the shortfall shall be paid
by the Master Servicer out of its own funds.
SECTION 5.08. Costs and Expenses
All costs and expenses incurred by the Master Servicer in carrying out its
duties hereunder, including all fees and expenses incurred in connection with
the enforcement of Mortgage Loans (including enforcement of Defaulted Mortgage
Loans), shall be paid by the Master Servicer and the Master Servicer shall not
be entitled to reimbursement hereunder, except that the Master Servicer shall be
reimbursed out of the Liquidation Proceeds of a Defaulted Mortgage Loan for
customary Liquidation Expenses incurred by it directly in connection with
realizing upon the related Mortgaged Property. To the extent that nonpayment of
any taxes or charges would result in the creation of a lien upon any Mortgaged
Property having a priority equal or senior to the lien of the related Mortgage
Loan, the Master Servicer shall pay any such delinquent tax or charge and be
reimbursed by the related Mortgagor or from Liquidation Proceeds in respect of
such Mortgage Loan.
SECTION 5.09. Maintenance of Insurance
(a) Except as otherwise provided in subsection (b) of this Section 5.09,
the Master Servicer shall cause to be maintained with respect to each Mortgage
Loan in connection with a Defaulted Mortgage Loan one or more Hazard Insurance
Policies which provide, at a minimum, the same coverage as a standard form fire
and extended coverage insurance policy that is customary for home equity loans,
issued by a company authorized to issue such policies in the state in which the
related Mortgaged Property is located, and in an amount which is not less than
the maximum insurable value of such Mortgaged Property or the Certificate
Balance due from the Mortgagor on the related Mortgage Loan, whichever is less;
provided, however, that the amount of coverage provided by each Hazard Insurance
Policy shall be sufficient to avoid the application of any co-insurance clause
contained therein; and provided, further, that such Hazard Insurance Policies
may provide for customary deductible amounts. When a Mortgaged Property's
location
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was, at the time of origination of the related Mortgage Loan, and continues to
be, within a federally designated special flood hazard area, the Master Servicer
shall also cause such flood insurance to be maintained, which coverage shall be
at least equal to the minimum amount specified in the preceding sentence or such
lesser amount as may be available under the federal flood insurance program.
Each Hazard Insurance Policy caused to be maintained by the Master Servicer
shall contain a standard loss payee clause in favor of the Master Servicer and
its successors and assigns. If any Mortgagor is in default in the payment of
premiums on its Hazard Insurance Policy or Policies, the Master Servicer shall
pay such premiums out of its own funds, and may separately add such premium to
the Mortgagor's obligation as provided by the Mortgage Loan, but shall not add
such premium to the remaining Certificate Balance of the Mortgage Loan.
(b) The Master Servicer may, in lieu of causing individual Hazard Insurance
Policies to be maintained with respect to each Mortgaged Property pursuant to
subsection (a) of this Section 5.09, and shall, to the extent that the related
Mortgage Loan does not require the Mortgagor to maintain a Hazard Insurance
Policy with respect to the related Mortgaged Property, maintain one or more
blanket insurance policies covering losses on the Mortgagor's interest in the
Mortgage Loans resulting from the absence or insufficiency of individual Hazard
Insurance Policies. Any such blanket policy shall be substantially in the form
and in the amount carried by the Master Servicer as of the date of this
Agreement. The Master Servicer shall pay the premium for such policy on the
basis described therein. The Master Servicer shall not, however, be required to
deposit any deductible amount with respect to (a) claims under individual Hazard
Insurance Policies maintained pursuant to subsection (a) of this Section 5.09,
or (b) claims under any blanket insurance policy. If the insurer under such
blanket insurance policy shall cease to be acceptable to the Master Servicer,
the Master Servicer shall exercise its best reasonable efforts to obtain from
another insurer a replacement policy comparable to such policy.
(c) The Master Servicer shall keep in force throughout the term of this
Agreement (i) at such time as the long-term debt of its parent is rated less
than [A by Standard & Poor's], a policy or policies of insurance covering errors
and omissions for failure to maintain insurance as required by this Agreement,
and (ii) a fidelity bond. Such policy or policies and such fidelity bond shall
be in such form and amount as is generally customary among Persons which service
a portfolio of mortgage loans having an aggregate principal amount of
$100,000,000 or more and which are generally regarded as Master Servicers
acceptable to institutional investors.
SECTION 5.10. REMIC Compliance
The parties intend that the Trust formed hereunder shall constitute, and
that the affairs of the Trust shall be conducted so as to qualify it as, a "real
estate mortgage investment conduit" as defined in and in accordance with the
REMIC Provisions. In furtherance of such intention, the Trustee covenants and
agrees that it shall, to the extent permitted by applicable law, act as agent
(and the Trustee is hereby appointed to act as agent) on behalf of the Trust and
that in such capacity it shall: (a) cause to be prepared by a nationally
recognized firm of public accountants designated by the Company and filed, all
required federal tax returns for the Trust including, but not limited to, Form
1066 (which must be signed by the Trustee) and Schedule Q, using a calendar year
as the taxable year for the Trust when and as required by the REMIC
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Provisions and other applicable federal income tax laws; (b) cause an election
to be made, on behalf of the Trust, to be treated as a REMIC on the federal
information tax return of the Trust for its first taxable year, in accordance
with the REMIC Provisions; (c) prepare and forward or cause to be prepared and
forwarded, to the Certificateholders all information reports as and when
required to be provided to them in accordance with the REMIC Provisions; (d)
conduct the affairs of the Trust at all times that any Class A [or Class B]
Certificate is outstanding so as to maintain the status thereof as a REMIC under
the REMIC Provisions; and (e) not knowingly or intentionally take any action or
omit to take any action that would cause the termination of the REMIC status of
the Trust. The Master Servicer covenants and agrees that it shall, to the extent
permitted by law, act as agent (and the Master Servicer is hereby appointed to
act as agent) on behalf of the Trust and in such capacity it shall: (a) pay the
amount of any federal income tax (to the extent that funds distributable to the
Class R Certificateholders are not available), including prohibited transaction
penalty taxes (exclusive of any such tax charged to CIT Consumer Finance (if CIT
Consumer Finance is not the Master Servicer) pursuant to Section 3.05), imposed
on the Trust when and as the same shall be due and payable (but such obligation
shall not prevent the Master Servicer or any other appropriate Person from
contesting any such tax in appropriate proceedings and shall not prevent the
Master Servicer from withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings); (b) conduct the affairs of the Trust
at all times that any Class A [or Class B] Certificate is outstanding so as to
maintain the status thereof as a REMIC under the REMIC Provisions; and (c) not
knowingly or intentionally take any action or omit to take any action that would
cause the termination of the REMIC status of the Trust.
In the event that any tax is imposed on "prohibited transactions" of the
Trust as defined in Section 860F(a)(2) of the Code or on "contributions after
startup date" as defined in Section 860G(d) of the Code, such tax shall be
charged against amounts otherwise distributable to the holders of the Class R
Certificates in accordance with their Percentage Interests to the extent
hereinafter provided. Notwithstanding anything to the contrary contained herein,
the Master Servicer shall retain from amounts otherwise distributable to the
holders of the Class R Certificates on any Distribution Date sufficient funds
for the payment of such tax, including without limitation any tax payable
pursuant to Section 3.05, and shall pay such amount to the Trustee or, if the
Master Servicer (other than as a Class R Certificateholder) has paid such tax,
reimburse the Master Servicer therefor (to the extent that the Master Servicer
has not been previously reimbursed or indemnified therefor). The Master Servicer
agrees first to seek indemnification for any such tax payment from any
indemnifying parties before reimbursing itself from amounts otherwise
distributable to the holders of the Class R Certificates.
In the event that any Mortgaged Property is acquired in a foreclosure or
other realization procedure (an "REO Property"), the Master Servicer shall sell
such REO Property within two years of its acquisition by the Trust, unless, at
the request of the Master Servicer, the Trustee seeks, and subsequently
receives, an Opinion of Counsel, addressed to the Trustee and the Master
Servicer, to the effect that the holding by the Trust of such REO Property
subsequent to two years after its acquisition will not result in the imposition
of taxes on "prohibited transactions" of the Trust as defined in Section 860F of
the Code or cause the Trust to fail to qualify as a REMIC at any time that any
Certificates are outstanding. The Master Servicer shall manage, conserve,
protect and operate each REO Property such that it will qualify as "foreclosure
property" within the meaning of
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Section 860G(a)(8) and will not result in the receipt by the REMIC of any
"income from nonpermitted assets" within the meaning of Section 860F(a)(2)(B) or
the Code. Pursuant to its efforts to sell such REO Property, the Master Servicer
shall either itself or through an agent selected by the Master Servicer protect
and conserve such REO Property in the same manner and to such extent as it 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,
rent the same, or any part thereof, as the Master Servicer deems to be in the
best interest of the Master Servicer and the Certificateholders for the period
prior to the sale of such REO Property.
The Master Servicer shall deposit all Liquidation Proceeds (net of
Liquidation Expenses) in the Certificate Account in accordance with Section
5.05(a). The Master Servicer shall include with its Monthly Report to the
Trustee a separate report specifying, with respect to each Mortgage Loan that
becomes a Liquidated Mortgage Loan during the prior Due Period, the unpaid
Certificate Balance and the Liquidation Proceeds (net of Liquidation Expenses)
for such Mortgage Loan.
SECTION 5.11. Foreclosure
Notwithstanding the standard of care specified in Section 5.02, the Master
Servicer shall commence procedures for the foreclosure upon any Mortgaged
Property or take such other steps that in the Master Servicer's reasonable
judgment will maximize the receipt of principal and interest or Liquidation
Proceeds with respect to the Mortgage Loan secured by such Mortgaged Property,
subject to the requirements of the applicable state and federal law, no later
than five Business Days after the time when such Mortgage Loan becomes a
Defaulted Mortgage Loan, provided that if the Master Servicer has actual
knowledge that a Mortgaged Property is affected by hazardous waste, then the
Master Servicer shall not cause the Trustee to acquire title to such Mortgaged
Property in a foreclosure or similar proceeding. For purposes of the last
proviso in the preceding sentence, the Master Servicer shall not be deemed to
have actual knowledge that a Mortgaged Property is affected by hazardous waste
unless it shall have received written notice that hazardous waste is present on
such property and such written notice has been made a part of the Mortgage Loan
File with respect to the related Mortgage Loan. In connection with such
foreclosure or other conversion, the Master Servicer shall follow such practices
and procedures as it shall deem necessary or advisable and as shall be
consistent with Section 5.02. In the event that title to any Mortgaged Property
is acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Trustee, as Trustee, or, at its
election, to its nominee on behalf of the Trustee, as Trustee.
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ARTICLE VI
REPORTS
SECTION 6.01. Monthly Reports to the Trustee
On the third Business Day next preceding each Distribution Date, the Master
Servicer shall furnish a report (the "Monthly Report") to the Trustee, any
Paying Agent and (if CIT Consumer Finance is not the Master Servicer) CIT
Consumer Finance. The determination by the Master Servicer of the amount of the
distributions to be made to the Class A[, the Class B] and the Class R
Certificateholders shall, in the absence of obvious error, be presumptively
deemed to be correct for all purposes hereunder, and the Trustee shall be
protected in relying upon the same without any independent check or
verification.
SECTION 6.02. Certificate of Servicing Officer
Each Monthly Report pursuant to Section 6.01 shall be accompanied by a
certificate of a Servicing Officer substantially in the form of Exhibit H,
certifying the accuracy of the Monthly Report and that no Event of Termination
or event that with notice or lapse of time or both would become an Event of
Termination has occurred, or if such event has occurred and is continuing,
specifying the event and its status.
SECTION 6.03. Other Data
In addition, the Master Servicer shall, on request of the Trustee, furnish
the Trustee such underlying data as can be generated by the Master Servicer's
existing data processing system without undue modification or expense.
SECTION 6.04. Annual Report of Accountants
On or before __________ __ of each year, commencing __________ __, ____,
the Master Servicer, at its expense, shall cause a firm of independent public
accountants which is a member of the American Institute of Certified Public
Accountants to furnish a statement to the Trustee to the effect that such firm
has examined certain documents and records relating to the servicing of mortgage
loans under pooling and servicing agreements similar to and including this
Agreement one to another (such statement to have attached thereto a schedule
setting forth the pooling and servicing agreements covered thereby, including
this Agreement) and that, on the basis of such examination conducted
substantially in compliance with generally accepted auditing standards, such
servicing has been conducted in compliance with such pooling and servicing
agreements except for such significant exception or errors in records that, in
the opinion of such firm, generally accepted auditing standards requires it to
report. Copies of the annual statement of accountants shall also be provided to
[Rating Agency].
SECTION 6.05. Statements to Certificateholders
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Concurrently with each distribution charged to the Certificate Account, the
Trustee, so long as it has received the Monthly Report from the Master Servicer,
shall forward or cause to be forwarded by mail to each Certificateholder, the
Monthly Report in the form attached as Exhibit L hereto.
The Trustee and the Master Servicer shall inform any Certificateholder
inquiring by telephone of the information contained in the most recent Monthly
Report.
Within a reasonable period of time after the end of each calendar year, the
Trustee shall furnish or cause to be furnished to each Person who at any time
during the calendar year was a Certificateholder a statement containing the
information with respect to interest accrued and principal paid on its
Certificates during such calendar year. Such obligation of the Trustee shall be
deemed to have been satisfied to the extent that substantially comparable
information shall be provided by the Trustee pursuant to any requirements of the
Code as from time to time in force.
Copies of all reports provided to the Trustee for the Certificateholders
shall also be provided to [Rating Agency].
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ARTICLE VII
SERVICE TRANSFER
SECTION 7.01. Event of Termination
"Event of Termination" means the occurrence of any of the following:
(a) Any failure by the Master Servicer to make any deposit into an account
required to be made hereunder and the continuance of such failure for a period
of five Business Days after the Master Servicer has become aware that such
deposit was required;
(b) Failure on the Master Servicer's part to observe or perform in any
material respect any covenant or agreement in this Agreement, which failure
continues unremedied for 30 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been given to the Master
Servicer by the Trustee or the Company or to the Master Servicer and the Trustee
by Holders of Class A Certificates [and Class B Certificates] evidencing, as to
such Class, Percentage Interests aggregating not less than 25%;
(c) Any assignment by the Master Servicer of its duties or rights hereunder
except as specifically permitted hereunder, or any attempt to make such an
assignment;
(d) A court or other governmental authority having jurisdiction in the
premises shall have entered a decree or order for relief in respect of the
Master Servicer in an involuntary case under any applicable 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 Master Servicer, as the case may be, or for any substantial
liquidation of its affairs, and such order remains undischarged and unstayed for
at least 60 days;
(e) The Master Servicer shall have commenced a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall have consented to the entry of an order for relief in an
involuntary case under any such law, or shall have consented to the appointment
of or taking possession by a receiver, liquidator, assignee, trustee, custodian
or sequestrator (or other similar official) of the Master Servicer or for any
substantial part of its property, or shall have made any general assignment for
the benefit of its creditors, or shall have failed to, or admitted in writing
its inability to, pay its debts as they become due, or shall have taken any
corporate action in furtherance of the foregoing; or
(f) The failure of the Master Servicer to be an Eligible Master Servicer.
SECTION 7.02. Transfer
If an Event of Termination has occurred and is continuing, the Trustee may
[or at the written direction of Certificateholders with aggregate Percentage
Interests representing ___% or more of the Trust shall], unless prohibited by
applicable law, terminate all (but not less than all) of the Master Servicer's
management, administrative, servicing and collection functions (such
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termination being herein called a "Service Transfer"). On receipt of such notice
(or, if later, on a date designated therein), all authority and power of the
Master Servicer under this Agreement, whether with respect to the Mortgage
Loans, the Mortgage Loan Files or otherwise (except with respect to the
Certificate Account, the transfer of which shall be governed by Section 7.06),
shall pass to and be vested in the Trustee pursuant to and under this Section
7.02; and, without limitation, the Trustee is authorized and empowered to
execute and deliver on behalf of the Master Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do any and all
acts or things necessary or appropriate to effect the purposes of such notice of
termination. Each of CIT Consumer Finance and the Master Servicer agrees to
cooperate with the Trustee in effecting the termination of the responsibilities
and rights of the Master Servicer hereunder, including, without limitation, the
transfer to the Trustee for administration by it of all cash amounts which shall
at the time be held by the Master Servicer for deposit, or have been deposited
by the Master Servicer, in the Certificate Account, or for its own account in
connection with its services hereafter or thereafter received with respect to
the Mortgage Loans. The Master Servicer shall be entitled to receive any other
amounts which are payable to the Master Servicer under this Agreement, at the
time of the termination of its activities as Master Servicer. The Master
Servicer shall transfer to the new Master Servicer (i) the Master Servicer's
records relating to the Mortgage Loans in such electronic form as the new Master
Servicer may reasonably request and (ii) the Mortgage Loans and the Mortgage
Loan Files in the Master Servicer's possession.
SECTION 7.03. Trustee to Act; Appointment of Successor
On and after the time the Master Servicer receives a notice of termination
pursuant to Section 7.02, the Trustee shall be the successor in all respects to
the Master Servicer in its capacity as Master Servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Master Servicer by the terms and provisions hereof, and the Master Servicer
shall be relieved of such responsibilities, duties and liabilities arising after
such Service Transfer; provided, however, that (i) the Trustee will not assume
any obligations of CIT Consumer Finance pursuant to Section 3.05 and (ii) the
Trustee shall not be liable for any acts or omissions of the Master Servicer
occurring prior to such Service Transfer or for any breach by CIT Consumer
Finance of any of its representations and warranties contained herein or in any
related document or agreement. As compensation therefor, the Trustee shall,
except as provided in Section 7.02 and in this Section 7.03, be entitled to such
compensation as the Master Servicer would have been entitled to hereunder if no
such notice of termination had been given. Notwithstanding the above, the
Trustee may, if it shall be unwilling so to act, or shall, if it is legally
unable so to act, appoint, or petition a court of competent jurisdiction to
appoint, an Eligible Master Servicer as the successor to the Master Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Master Servicer hereunder. Pending appointment of a
successor to the Master Servicer hereunder, unless the Trustee is prohibited by
law from so acting, the Trustee shall act in such capacity as hereinabove
provided. In connection with such appointment and assumption, the Trustee may
make such arrangements for the compensation of such successor out of payments on
Mortgage Loans as it and such successor shall agree; provided, however, that no
such compensation shall, without the written consent of 100% of the
Certificateholders, be in excess of
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the Servicing Fee. The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession.
SECTION 7.04. Notification to Certificateholders and to Rating Agency
(a) Promptly following the occurrence of any Event of Termination, the
Master Servicer shall give written notice thereof to the Trustee,
Certificateholders at their respective addresses appearing on the Certificate
Register and to [Rating Agency].
(b) Within 10 days following any termination or appointment of a successor
to the Master Servicer pursuant to this Article VII, the Trustee shall give
written notice thereof to Certificateholders at their respective addresses
appearing on the Certificate Register.
(c) The Trustee shall give written notice to [Rating Agency] at least 30
days prior to the date upon which any Eligible Master Servicer (other than the
Trustee) is to assume the responsibilities of Master Servicer pursuant to
Section 7.03, naming such Successor Master Servicer.
SECTION 7.05. Effect of Transfer
(a) After the Service Transfer, the Trustee or new Master Servicer may
notify the Mortgagors to make payments directly to the new Master Servicer that
are due under the Mortgage Loans after the effective date of the Service
Transfer.
(b) After the Service Transfer, the replaced Master Servicer shall have no
further obligations with respect to the management, administration, servicing or
collection of the Mortgage Loans and the new Master Servicer shall have all of
such obligations, except that the replaced Master Servicer shall remain liable
for any liability of the replaced Master Servicer hereunder that was already
accrued at the time of the Service Transfer and except that the replaced Master
Servicer will transmit or cause to be transmitted directly to the new Master
Servicer for its own account, promptly on receipt and in the same form in which
received, any amounts (properly endorsed where required for the new Master
Servicer to collect them) received as payments upon or otherwise in connection
with the Mortgage Loans.
(c) A Service Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities and other
agreements of the Master Servicer and CIT Consumer Finance pursuant to Article X
and Sections 3.05, 11.05 and 11.10(f)) other than those relating to the
management, administration, servicing or collection of the Mortgage Loans.
SECTION 7.06. Transfer of Certificate Account
Notwithstanding the provisions of Section 7.02, if the Certificate Account
shall be maintained with the Master Servicer and an Event of Termination shall
occur and be continuing, the Master Servicer shall, promptly after receipt of a
notice of termination, if any, pursuant to Section 7.02, establish, or cooperate
with the Trustee to establish, a new account or accounts in
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trust for the Certificateholders conforming with the requirements of this
Agreement at the trust department of the Trustee or with an Eligible Institution
other than the Master Servicer and promptly transfer, or cooperate with the
Trustee to transfer, all funds in the Certificate Account to such new account,
which shall thereafter be deemed the Certificate Account for the purposes
hereof.
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ARTICLE VIII
DISTRIBUTIONS AND WITHDRAWALS FROM
CERTIFICATE ACCOUNT
SECTION 8.01. Monthly Distributions
(a) Distributions on the Certificates shall be made from funds in the
Certificate Account (but only to the extent of the Amount Available for the
related Distribution Date). Each Certificateholder as of a Record Date shall be
paid on the next succeeding Distribution Date by check mailed to such
Certificateholder at the address for such Certificateholder appearing on the
Certificate Register (or, if a Class A Certificateholder holds Class A
Certificates with an aggregate Percentage Interest of Class A Certificates of at
least 5%[, a Class B Certificateholder holds Class B Certificates with an
aggregate Percentage Interest as to the Class B Certificates of at least 20%] or
a Class R Certificateholder holds Class R Certificates with an aggregate
Percentage Interest as to the Class R Certificates of at least 20%, and if such
Certificateholder so requests, by wire transfer of immediately available funds
pursuant to written instructions delivered to the Trustee at least 10 days prior
to such Distribution Date, which instructions, until revised, shall remain
operative for all Distribution Dates thereafter), such Certificateholder's
Percentage Interest of the amount to be distributed to the Class A[, the Class
B] or the Class R Certificateholders, as the case may be. Final payment on any
Certificate shall be made only upon presentation of such Certificate at the
office or agency of the Paying Agent.
(b) Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit the amount of such distribution to
the accounts of its Depository Participants in accordance with its normal
procedures. Each Depository Participant shall be responsible for disbursing such
distribution to the Certificate Owners that it represents and to each indirect
participating brokerage firm (a "brokerage firm" or "indirect participating
firm") for which it acts as agent. Each brokerage firm shall be responsible for
disbursing funds to the Certificate Owners that it represents. All such credits
and disbursements with respect to a Book-Entry Certificate are to be made by the
Depository and the Depository Participants in accordance with the provisions of
the Book Entry Certificates. Neither the Trustee, the Certificate Registrar, the
Seller nor the Master Servicer shall have any responsibility therefor except as
otherwise provided by applicable law. To the extent applicable and not contrary
to the rules of the Depository, the Trustee shall comply with the provisions of
the forms of the Class A [and Class B] Certificates as set forth in Exhibit[s] A
[and B] hereto.
(c) On each Distribution Date, the Amount Available in the Certificate
Account will be distributed to Certificateholders in the amounts and in the
priorities set forth below:
[(i) the Class A Interest Distribution Amount to the Class A
Certificateholders;
(ii) [the Class B Interest Distribution Amount to the Class B
Certificateholders;
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(iii) prior to the Cross-over Date, after payment of the amounts
specified in clauses (i) and (ii) above, the Formula Principal Distribution
Amount to the Class A Certificateholders, provided, however, that the
aggregate of all amounts distributed on all Distribution Dates pursuant to
this clause (iii) shall not exceed the sum of the Original Class A
Certificate Balance;
(iv) after payment of the amounts specified in clauses (i) through
(iii) above, on and after the Cross-over Date, the Formula Principal
Distribution Amount, and, prior to the Cross-over Date, the Class B
Principal Loss Liquidation Amount to the Class B Certificateholders,
provided that the aggregate of all amounts distributed under this subclause
(iv) shall not exceed the Original Class B Certificate Balance; and
(v)] the Class R Distribution Amount to the Class R
Certificateholders.]
(d) Notwithstanding the preceding paragraph, amounts otherwise
distributable to a Certificateholder pursuant to such paragraph which are
required to be withheld and remitted to a taxing authority shall be withheld and
remitted to such taxing authority, and such amounts shall be treated as actually
distributed to such Certificateholder for all purposes of this Agreement.
(e) The Trustee shall appoint an Eligible Institution to be the paying
agent (the "Paying Agent") and cause it to make the payments to the
Certificateholders required hereunder. The Trustee initially appoints [itself],
with its office at , as such Paying Agent. The Trustee shall require the Paying
Agent (if other than the Trustee) to agree in writing that all amounts held by
it for payment hereunder will be held in trust for the benefit of the
Certificateholders and that it will notify the Trustee of any failure by the
Master Servicer to make funds available to the Paying Agent for the Payment of
amounts due on the Certificates. In respect of each Distribution Date, the
Trustee shall withdraw from the Certificate Account (to the extent of the
related Amount Available) in accordance with this Agreement and deposit in an
account established by the Paying Agent for the purpose of this Section funds
sufficient to make the distribution to Certificateholders pursuant to this
Section. Such funds shall be available to the Paying Agent by ____ A.M. on each
Distribution Date.
SECTION 8.02. Permitted Withdrawals from the Certificate Account
The Trustee may, from time to time as provided herein, make withdrawals
from the Certificate Account of amounts deposited in said account pursuant to
Section 5.05 that are attributable to the Mortgage Loans for the following
purposes:
(a) to make payments to Certificateholders in the amounts and in the manner
provided for in Section 8.01;
(b) to pay to CIT Consumer Finance with respect to each Mortgage Loan or
property acquired in respect thereof that has been purchased pursuant to Section
3.05, all amounts received thereon and not required to be distributed to
Certificateholders as of the date on which the related Scheduled Certificate
Balance or Repurchase Price is determined;
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(c) to reimburse the Master Servicer out of Liquidation Proceeds for
Liquidation Expenses incurred by it, to the extent such reimbursement is
permitted pursuant to Section 5.08;
(d) to reimburse the Master Servicer for the payment of taxes as permitted
by Section 5.10;
(e) to withdraw any amount deposited in the Certificate Account that was
not required to be deposited therein;
(f) to pay to the Master Servicer the Servicing Fee for such Distribution
Date and the Servicing Fee from any prior Distribution Date previously unpaid;
and
(g) to pay to the Master Servicer net investment earnings due to the Master
Servicer pursuant to Section 5.05(b).
Since, in connection with withdrawals pursuant to clause (b) of the
preceding paragraph, CIT Consumer Finance's entitlement thereto is limited to
collections or other recoveries on the related Mortgage Loan, the Master
Servicer shall keep and maintain separate accounting, on a Mortgage Loan by
Mortgage Loan basis, for the purpose of justifying any withdrawal from the
Certificate Account pursuant to such clause.
SECTION 8.03. Repurchase Option
(a) The Trust created hereby and the respective obligations and
responsibilities of the Company, the Master Servicer and the Trustee created
hereby (other than the responsibility of the Trustee to make any final
distributions to Certificateholders as set forth below) shall terminate upon the
earlier of (i) the later of the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan remaining in the Trust
or the termination of the Trust pursuant to Section 12.03, or (ii) the purchase
by the Company or the Master Servicer pursuant to the following sentence. The
Company or the Master Servicer, at their respective options and subject to
Subsection 8.03(b), may purchase all of the Mortgage Loans and all property
acquired in respect of any Mortgage Loan remaining in the Trust at any time at
which the Pool Scheduled Certificate Balance is less than __% of the Cut-off
Date Pool Certificate Balance at a price equal to the greatest of (A) 100% of
the Certificate Balance of each Mortgage Loan, (B) the aggregate fair market
value (as determined by the Master Servicer as of the close of business on such
third Business Day) of all of the assets of the Trust, and (C) the remaining
Pool Scheduled Certificate Balance as of the close of business on such third
Business Day, plus, in each case, any Unpaid Class A Interest Shortfall [and any
Unpaid Class B Interest Shortfall] as well as one month's interest at the
applicable Mortgage Loan Rate on the Scheduled Certificate Balance of each
Mortgage Loan.
(b) The Master Servicer or the Company shall not exercise the purchase
option in the last sentence of paragraph (a) above unless it shall have
delivered to the Trustee an Opinion of Counsel in form and substance
satisfactory to the Trustee to the effect that payment of the purchase price
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to the Certificateholders will not constitute a voidable preference or a
fraudulent transfer under the United States Bankruptcy Code.
(c) In the case of any purchase by the Company pursuant to the last
sentence of paragraph (a) above, the Master Servicer shall cooperate fully with
the Company in effecting such purchase and the transfer of the Mortgage Loans
and related Mortgage Loan Files and records to the Mortgage Loans. In addition,
the Master Servicer shall provide to the Trustee the certification required by
Section 5.07 and the Trustee shall, promptly following payment of the purchase
price release to the Company or the Master Servicer the Mortgage Loan Files
pertaining to the Mortgage Loans being purchases.
[SECTION 8.04. Credit Enhancement for [Class A] [Class B] Certificates.
[Text to be provided.] ]
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ARTICLE IX
THE CERTIFICATES
SECTION 9.01. The Certificates
The Class A[, the Class B] and the Class R Certificates shall be
substantially in the forms set forth in Exhibits A[, B] and C, respectively, and
shall, on original issue, be executed by manual or facsimile signature of the
Company by any one of its President, Vice Presidents, Secretary, Treasurer or
other authorized officers and authenticated by the Trustee to or upon the order
of the Company upon receipt. The Class A Certificates shall be evidenced by one
or more Class A Certificates representing $___________ initial aggregate
Certificate Balance, beneficial ownership of such Certificates to be held
through Book-Entry Certificates in minimum dollar denominations of $1,000 and
integral dollar multiples of $1,000 in excess thereof. [The Class B Certificates
shall be evidenced by [(i)] one or more Class B Certificates representing
$____________ initial aggregate Certificate Balance, beneficial ownership of
such Certificate to be held through one or more [Book-Entry] Certificates in
minimum dollar denominations of $1,000/_________ and integral dollar multiples
of $1,000 in excess thereof [and (ii) a single certificate representing
$__________ in initial Certificate Balance].] The Class R Certificates shall be
issuable in Percentage Interests.
The Certificates shall be authenticated by manual signature on behalf of
the Trustee by a duly authorized Responsible Officer or authorized signatory.
Certificates bearing the signatures of individuals who were at any time the
proper officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Certificate or did not hold such offices at
the date of such Certificates. No Certificate shall be entitled to any benefit
under this Agreement, or be valid for any purpose, unless such Certificate has
been authenticated by manual signature in accordance with this Section, and such
signature upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication,
except for those Certificates authenticated on the Closing Date, which shall be
dated the Closing Date.
SECTION 9.02. Registration of Transfer and Exchange of Certificates
(a) The Trustee shall keep at the office or agency to be maintained in
accordance with Section 12.02 a "Certificate Register" in which Trustee shall
provide for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. The Trustee initially appoints itself to be the
"Certificate Registrar" and transfer agent for the purpose of registering
Certificates and transfers and exchanges of Certificates as provided herein.
Promptly after the Closing Date the Trustee will give the Master Servicer, in
writing, the names of all [Class B and] Class R Certificateholders and the
Trustee will give the Master Servicer, prompt written notice of any change in
the [Class B and] Class R Certificateholders. The Trustee will give prompt
written notice to Certificateholders and the Master Servicer of any change in
the Certificate Registrar.
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(b) No transfer of any [Class B or] Class R Certificate or any interest
therein shall be made unless such transfer is made pursuant to an effective
registration statement under the Securities Act and effective registration or
qualification under applicable state securities laws or is made in a transaction
that does not require such registration or qualification. Until such time as the
[Class B and] Class R Certificates shall be registered pursuant to a
registration statement filed under the Securities Act, the [Class B and] Class R
Certificates shall bear a legend to the effect set forth in the preceding
sentence.
In the event that (i) registration of a transfer of a [Class B or] Class R
Certificate is to be made in reliance upon the exemption from registration under
the Securities Act contained in Rule 144A, (ii) the transferor delivers an
officer's certificate substantially in the form of Exhibit K-1 to each of the
Mortgage Loan Seller and the Trustee, and (iii) the transferee delivers an
officer's certificate in the form of Exhibit K-2 to the Mortgage Loan Seller and
the Trustee, the Trustee shall register such transfer.
In the event that registration of a transfer of a [Class B or] Class R
Certificate is to be made in reliance upon an exemption from registration under
the Securities Act (other than the exemption from registration contained in Rule
144A) and applicable state securities laws in order to assure compliance with
the Securities Act, the transferor or the transferee shall, as a condition to
the registration of such transfer, deliver to the Trustee and the Seller either
(i) an investment letter from the transferee for such Certificate, in the form
of Exhibit J and which is addressed to the Mortgage Loan Seller, the Master
Servicer and the Trustee or (ii) an Opinion of Counsel (which may be internal
counsel) that such transfer may be made pursuant to an exemption from the
Securities Act (other than the exemption from registration contained in Section
3(a)(2) thereof).
The Holder of a [Class B or] Class R Certificate desiring to effect a
transfer of such Certificate shall, and does hereby agree to, indemnify the
Trustee, the Company and the Master Servicer against any liability that may
result if such transfer is not so exempt or is not made in accordance with such
federal and state laws.
Neither the Seller nor the Trustee is obligated to register the [Class B
or] Class R Certificates under the Securities Act or under any state securities
laws.
Prospective transferor of [Class B or] Class R Certificates, and
prospective transferees of [Class B or] Class R Certificates that are Qualified
Institutional Buyers buying Certificates in reliance upon Rule 144A, may request
from the Master Servicer information regarding the Trust and the Trust Assets.
Within 5 Business Days of any such request, the Master Servicer shall deliver to
any such prospective transferor or transferee (i) a copy of each Monthly Report
delivered to Certificateholders since the first Distribution Date pursuant to
Section 6.05, (ii) information relating to the Seller, the Master Servicer, the
Mortgage Loans and this Agreement substantially in the form of [private
placement memorandum relating to the Class B Certificates] [Prospectus and
Prospectus Supplement relating to the Certificates], dated __________ __, ____
and (iii) such other information as may be required to comply with Rule 144A and
any interpretation thereof. The Mortgage Loan Seller authorizes the Master
Servicer to so deliver such monthly statements.
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(c) [Reserved.]
(d) Each Person who has or who acquires any Ownership Interest in a Class R
Certificate shall be deemed by the acceptance or acquisition of such Ownership
Interest to have agreed to be bound by the following provisions and to have
irrevocably appointed the Master Servicer 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 Class R Certificate are expressly subject to the following provisions:
(i) Each Person holding or acquiring any Ownership Interest in a Class
R Certificate shall be a Permitted Transferee and shall promptly notify the
Master Servicer of any change or impending change in its status as a
Permitted Transferee.
(ii) No Ownership Interest in a Class R Certificate may be Transferred
without the express written consent of the Master Servicer, and the Trustee
shall not register the Transfer of any Class R Certificate without such
consent with respect to any proposed Transfer. In connection with any
proposed Transfer of any Ownership Interest in a Class R Certificate, the
Master Servicer shall, as a condition to such consent, require delivery to
it, form and substance satisfactory to it, and the proposed Transferee
shall deliver to the Master Servicer, the following:
(A) an affidavit (a "Transfer Affidavit") of the proposed
Transferee, in the form attached as Exhibit M hereto, that it is not a
"disqualified organization" within the meaning of Section 860E(e)(5)
of the Code, and that the proposed Transferee is not acquiring its
Ownership Interest in the Class R Certificate as a nominee, trustee or
agent for, or for the benefit of, any Person who is not a Permitted
Transferee; and
(B) an express agreement by the proposed Transferee to be bound
by and to abide by the provisions of this Section and the restrictions
noted on the face of the Class R Certificates.
(iii) Notwithstanding the delivery of a Transfer Affidavit by a
proposed Transferee under clause (ii) above, if the Master Servicer has
actual knowledge that the Transfer Affidavit is false, no Transfer of an
Ownership Interest in a Class R Certificate to such proposed Transferee
shall be effected.
(iv) Each Person holding or acquiring any Ownership Interest in a
Class R Certificate shall agree (A) to require a Transfer Affidavit from
any other Person to whom such Person attempts to Transfer its Ownership
Interest in a Class R Certificate and (B) not to Transfer its Ownership
Interest in a Class R Certificate or to cause the Transfer of an Ownership
Interest in a Class R Certificate to any other Person if it has actual
knowledge that such Transfer Affidavit is false.
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(v) Any attempted or purported Transfer of any Ownership Interest in a
Class R Certificate in violation of the provisions of this Section shall be
absolutely null and void and shall vest no rights in the purported
Transferee. If any purported Transferee shall become a Holder of a Class R
Certificate in violation of the provisions of this Section, then, upon
discovery by or due notification of the Trustee that the registration of
Transfer of such Class R Certificate was not in fact permitted by this
Section, the last preceding Permitted Transferee shall be restored to all
rights as Holder thereof retroactive to the date of registration of
Transfer of such Class R Certificate. The Trustee shall be under no
liability to any Person for any registration of transfer of a Class R
Certificate that is in fact not permitted by this Section or for making any
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 with the express prior written
consent of the Master Servicer. The Trustee shall be entitled but not
obligated to recover from any Holder of a Class R 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 Class R 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 Permitted Transferee of such
Certificate.
(vi) If any purported Transferee shall become a Holder of a Class R
Certificate in violation of the restrictions in this Section, then the
Master Servicer shall have the right without notice to the Holder or any
prior Holder of such Class R Certificate, to sell such Class R Certificate
to a purchaser selected by the Master Servicer on such terms as the Master
Servicer may choose. Such purchaser may be the Master Servicer itself or
any Affiliate of the Master Servicer. The proceeds of such sale, net of
commissions (which may include commissions payable to the Master Servicer
or its Affiliates), expenses and taxes due, if any, will be remitted by the
Master Servicer to the last preceding Permitted Transferee of such Class R
Certificate, except that in the event that the Master Servicer determines
that the Holder or any prior Holder of such Class R Certificate may be
liable for any amount due under this Section or any other provision of this
Agreement, the Master Servicer may withhold a corresponding amount from
such remittance as security for such claim. The terms and conditions of any
sale under this clause (vi) shall be determined in the sole discretion of
the Master Servicer, and it shall not be liable to any Person having an
Ownership Interest in a Class R Certificate as a result of its exercise of
such discretion.
Upon notice to the Master Servicer that any legal or beneficial interest in
any portion of a Class R Certificate has been transferred, either directly or
indirectly to any person that is not a Permitted Transferee or an agent
(including a broker, nominee, or middleman) of such Transferee in contravention
of the foregoing restrictions, the Master Servicer agrees to furnish to the
Internal Revenue Service and to the transferor of such Class R Certificate or
such agent such information necessary to the application of Section 860E(e) of
the Code as may be required by the Code or any regulations or administrative
pronouncements thereunder, including but not limited to the present value of the
total anticipated excess inclusions with respect to such Class R Certificate (or
portion thereof) for periods after such transfer. At the election of the Master
Servicer, the Master Servicer may charge a reasonable fee for computing and
furnishing such information to the
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transferor or to such agent referred to above; however, the Master Servicer
shall in no event be excused from furnishing such information to the Internal
Revenue Service. The foregoing restrictions on transfer contained in this
Section 9.02(d) shall cease to apply to Transfers occurring on or after the date
on which there shall have been delivered to the Trustee, the Company and the
Master Servicer, in form and substance satisfactory to the Master Servicer, an
Opinion of Counsel that eliminating such restrictions will not cause the Trust
to fail to qualify as a REMIC at any time while the Certificates are
outstanding.
(e) At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of the same Class of authorized denominations of the same
aggregate denomination, upon surrender of the Certificates to be exchanged at
such office. Whenever any Certificates are so surrendered for exchange, the
Company shall execute and deliver, and the Trustee shall authenticate, the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for transfer or exchange
shall be duly endorsed by, or shall be accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by, the holder thereof or his or her attorney duly authorized in
writing.
(f) Except as provided in paragraph (e) below the Book-Entry Certificates
shall at all times remain registered in the name of the Depository or its
nominee and at all times: (i) registration of the Class A [and Class B]
Certificates may not be transferred by the Trustee except to another Depository;
(ii) the Depository shall maintain book-entry records with respect to the
Certificate Owners and with respect to ownership and transfers of such Class A
[and Class B] Certificates; (iii) ownership and transfers of registration of the
Class A [and Class B] Certificates on the books of the Depository shall be
governed by applicable rules established by the Depository; (iv) the Depository
may collect its usual and customary fees, charges and expenses from its
Depository Participants; (v) the Trustee shall deal with the Depository,
Depository Participants and indirect participating firms as representatives of
the Certificate Owners of the Class A [and Class B] Certificates for purposes of
exercising the rights of Holders under this Agreement, and requests and
directions for and votes of such representatives shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; and
(vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and persons shown on the books of such indirect
participating firms as direct or indirect Certificate Owners.
All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owner. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificates Owners
it represents or of brokerage firms for which it acts as agent in accordance
with the Depository's normal procedures.
(g) If (x)(i) the Company or the Depository advises the Trustee in writing
that the Depository is no longer willing or able properly to discharge its
responsibilities as Depository, and (ii) the Trustee or the Company is unable to
locate a qualified successor, or (y) the Company at
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its sole option advises the Trustee in writing that it elects to terminate the
book-entry system through the Depository, the Trustee shall notify all
Certificate Owners, through the Depository, of the occurrence of any such event
and of the availability of definitive, fully registered Class A Certificates [or
Class B] Certificates (the "Definitive Certificates") to Certificate Owners
requesting the same. Upon surrender to the Trustee of the Class A Certificates
[or Class B Certificates] by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall issue the
Definitive Certificates. Neither the Company nor the Trustee shall be liable for
any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates all references herein to obligations imposed upon or to
be performed by the Depository shall be deemed to be imposed upon and performed
by the Trustee, to the extent applicable with respect to such Definitive
Certificates and the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.
(h) On or prior to the Closing Date, there shall be delivered to the
Depository one Class A Certificate [and one Class B Certificate], each in
registered form registered in the name of the Depository's nominee, Cede & Co.,
the total face amount of which represents 100% of the Original Class A
Certificate Balance, [and the Original Class B Certificate Balance,
respectively]. If, however, the aggregate principal amount of [a Class of] Class
A Certificates [or the Class B Certificates] exceeds $_______________, one Class
A Certificate [and/or one Class B Certificate] will be issued with respect to
each $_______________________ of principal amount and an additional Certificate
[of such Class or Classes] will be issued with respect to any remaining
principal amount. Each such Class A [or Class B] Certificate registered in the
name of the Depository's nominee shall bear the following legend:
"Unless this Certificate is presented by an authorized representative of
The Depository Trust Company to the Trustee or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment is made to Cede &
Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein."
SECTION 9.03. No Charge; Disposition of Void Certificates
No service charge shall be made to a Certificateholder for any transfer or
exchange of Certificates, but the Certificate Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any transfer or exchange of Certificates. All Certificates
surrendered for transfer and exchange shall be disposed of in a manner approved
by the Trustee.
SECTION 9.04. Mutilated, Destroyed, Lost or Stolen Certificates
If (a) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate, and (b) there is delivered to
the Certificate Registrar and the Trustee such security or
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indemnity as may be required by each to save each of them harmless, then in the
absence of notice to the Certificate Registrar or the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
authenticate, and the Company shall execute and deliver, in exchange for or in
lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of [the same Class and] same denomination. Upon the issuance of any
new Certificate under this Section 9.04, the Trustee may require the payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses connected therewith. Any
duplicate Certificate issued pursuant to this Section 9.04 shall constitute
complete and indefeasible evidence of ownership of the Percentage Interest
evidenced thereby, as if originally issued, whether or not the destroyed, lost
or stolen Certificate shall be found at any time.
SECTION 9.05. Persons Deemed Owners
Prior to due presentation of a Certificate for registration of transfer,
the Master Servicer, the Company, the Trustee, the Paying Agent and the
Certificate Registrar 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 8.01 and for all other purposes whatsoever, and
none of the Master Servicer, the Company, the Trustee, the Certificate
Registrar, the Paying Agent or any agent of the Master Servicer, the Company,
the Trustee, the Paying Agent or the Certificate Registrar shall be affected by
notice to the contrary.
SECTION 9.06. Access to List of Certificateholders' Names and Addresses
The Certificate Registrar will furnish to the Trustee, the Master Servicer
and the Company within five Business Days after receipt by the Certificate
Registrar of a request therefor from the Trustee, the Master Servicer or the
Company, in writing, a list, in such form as the Trustee, the Master Servicer or
the Company may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date. If Holders of Certificates
evidencing, as to any Class, Percentage Interests aggregating 25% or more
(hereinafter referred to as "Applicants") apply in writing to the Trustee, 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 is accompanied by a copy of the communication which such
Applicants propose to transmit, then the Trustee shall, within five Business
Days after the receipt of such application, afford such Applicants access during
normal business hours to the most recent list of Certificateholders held by the
Trustee. If such list is as of a date more than 90 days prior to the date of
receipt of such Applicants' request, the Trustee shall promptly request from the
Certificate Registrar a current list as provided above, and shall afford such
Applicants access to such list promptly upon receipt. Every Certificateholder,
by receiving and holding a Certificate, agrees with the Certificate Registrar
and the Trustee that none of the Company, the Master Servicer, the Certificate
Registrar or the Trustee shall be held accountable by reason of the disclosure
of any such information as to the names and addresses of the Certificateholders
hereunder, regardless of the source from which such information was derived.
SECTION 9.07. Authenticating Agents
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The Trustee may appoint one or more Authenticating Agents with power to act
on its behalf and subject to its direction in the authentication of the
Certificates. For all purposes of this Agreement, the authentication of
Certificates by the Authenticating Agent pursuant to this Section shall be
deemed to be the authentication of Certificates "by the Trustee."
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ARTICLE X
INDEMNITIES
SECTION 10.01. Liabilities to Mortgagors
No liability to any Mortgagor under any of the Mortgage Loans arising out
of any act or omission to act of the Master Servicer in servicing the Mortgage
Loans prior to the Closing Date is intended to be assumed by the Company, the
Trust or the Certificateholders under or as a result of this Agreement and the
transactions contemplated hereby and, to the maximum extent permitted and valid
under mandatory provisions of law, the Company, the Trust and the
Certificateholders expressly disclaim such assumption.
SECTION 10.02. Tax Indemnification
CIT Consumer Finance agrees to pay, and to indemnify, defend and hold
harmless the Trust, the Trustee, the Certificateholders and the Company from,
any taxes which may at any time be asserted with respect to, and as of the date
of, the transfer of the Mortgage Loans to the Trust, including, without
limitation, any sales, gross receipts, personal or real property, privilege or
license taxes (but not including any federal, state or other taxes arising out
of the creation of the Trust and the issuance of the Certificates or
distributions with respect thereto) and costs, expenses and reasonable counsel
fees in defending against the same.
SECTION 10.03. Master Servicer's Indemnities
The Master Servicer shall defend and indemnify the Company, the Trust, the
Trustee and the Certificateholders against any and all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation, in respect of any negligent or wrongful
action taken or failed to be taken by the Master Servicer with respect to any
Mortgage Loan. This indemnity shall survive any Service Transfer (but a Master
Servicer's obligations under this Section 10.03 shall not relate to any actions
of any subsequent Master Servicer after a Service Transfer) and any payment of
the amount owing under, or any repurchase by CIT Consumer Finance of, any such
Mortgage Loan.
SECTION 10.04. Operation of Indemnities
Indemnification under this Article shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation. If CIT
Consumer Finance or the Master Servicer has made any indemnity payments to the
Trustee, the Company or the Certificateholders pursuant to this Article and if
either the Trustee, the Company or the Certificateholders thereafter collects
any of such amounts from others, the Trustee, the Company or the Trust will
repay such amounts collected to CIT Consumer Finance or the Master Servicer, as
the case may be, without interest.
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ARTICLE XI
THE TRUSTEE
SECTION 11.01. Duties of Trustee
The Trustee, prior to the occurrence of an Event of Termination and after
the curing of all Events of Termination which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. If an Event of Termination has occurred (which has not been cured),
the Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform as to form to the requirements of this Agreement.
Subject to Section 11.03, no provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own misconduct; provided, however, that:
(a) Prior to the occurrence of an Event of Termination, and after the
curing of all such Events of Termination which may have occurred, the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Agreement, the Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement against the
Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Trustee and conforming to the requirements of this Agreement;
(b) The Trustee shall not be personally liable for an error of judgment
made in good faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts;
(c) 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 Holders of Class A Certificates [or Class B Certificates]
evidencing Percentage Interests aggregating 25% or more 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; and
(d) The Trustee shall not be charged with knowledge of any event referred
to in Section 7.01 unless a Responsible Officer of the Trustee at the Corporate
Trust Office obtains
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actual knowledge of such event or the Trustee receives written notice of such
event from the Master Servicer or the Holders of Certificates evidencing[, as to
any Class,] Percentage Interests aggregating 25% or more.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it. None
of the provisions contained in this Agreement shall in any event require the
Trustee to perform, or be responsible for the manner of performance of, any of
the obligations of CIT Consumer Finance, the Company or the Master Servicer
under this Agreement, except during such time, if any, as the Trustee shall be
the successor to, and be vested with the rights, duties, powers and privileges
of, the Master Servicer in accordance with the terms of this Agreement.
SECTION 11.02. Certain Matters Affecting the Trustee
Except as otherwise provided in Section 11.01:
(a) The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officers' Certificate, certificate of a
Servicing Officer, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, consent, order, appraisal, bond or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) The Trustee may consult with counsel and any opinion of any counsel
shall be full and complete authorization and protection in respect of any action
taken or suffered or omitted by it hereunder in good faith and in accordance
with such opinion of counsel;
(c) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Agreement, or to institute, conduct or defend any
litigation hereunder or in relation hereto, at the request, order or direction
of any of the Certificateholders, pursuant to the provisions of this Agreement,
unless such Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby; provided, however, that nothing contained herein
shall relieve the Trustee of the obligations, upon the occurrence of an Event of
Termination (which has not been cured), to exercise such of the rights and
powers vested in it by this Agreement, and to use the same degree of care and
skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs;
(d) Prior to the occurrence of an Event of Termination and after the curing
of all Events of Termination which may have occurred, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing so to do by Certificateholders with aggregate Percentage
Interests representing 25% or more the Trust; 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
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investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Agreement, the
Trustee may require reasonable indemnity against such cost, expense or liability
as a condition to so proceeding. The reasonable expense of every such
examination shall be paid by the Master Servicer or, if paid by the Trustee,
shall be reimbursed by the Master Servicer upon demand; and
(e) The Trustee may execute any of the trusts or powers hereunder or
perform by duties hereunder either directly or by or through agents or attorneys
and shall not be liable for any acts or omissions of such agents or attorneys if
appointed by its with due care hereunder.
SECTION 11.03. Trustee Not Liable for Certificates or Mortgage Loans
The Trustee assumes no responsibility for the correctness of the recitals
contained herein or in the Certificates (other than the Trustee's authentication
thereof). The Trustee makes no representations as to the validity or sufficiency
of this Agreement or of the Certificates (other than its authentication or
execution thereof) or of any Mortgage Loan, Mortgage Loan File or related
document. The Trustee shall not be accountable for the use or application by the
Master Servicer or CIT Consumer Finance of funds paid to CIT Consumer Finance in
consideration of conveyance of the Mortgage Loans to the Company by CIT Consumer
Finance or deposited in or withdrawn from the Certificate Account by the Master
Servicer.
SECTION 11.04. Rights of Certificateholders to Direct Trustee and to Waive
Events of Termination
Holders of Class A Certificates [and Holders of Class B Certificates]
evidencing[, as to each such Class,] Percentage Interests aggregating 25% or
more 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; provided, however, that, subject to Section
11.01, the Trustee shall have the right to decline to follow any such direction
of the Trustee being advised by counsel determines that the action so directed
may not lawfully be taken, or if the Trustee in good faith shall, by a
Responsible Officer or Officers of the Trustee, determine that the proceedings
so directed would be illegal or involve it in personal liability or be unduly
prejudicial to the rights of Certificateholders not parties to such direction;
provided further that nothing in this Agreement shall impair the right of the
Trustee to take any action deemed proper by the Trustee and which is not
inconsistent with such direction by the Certificateholders; and provided further
that the Trustee shall instead follow the directions of the Holders of Class A
Certificates [and Holders of Class B Certificates] evidencing[, as to each such
Class,] Percentage Interests aggregating 51% or more whenever it receives
conflicting directions from Class A Certificateholders and Class B
Certificateholders. Holders of Class A Certificates [and Holders of Class B
Certificates] evidencing[, as to each such Class,] Percentage Interests
aggregating 51% or more may on behalf of Certificateholders waive any past Event
of Termination hereunder and its consequences, except a default in respect of a
covenant or provision hereof which under Section 12.07 cannot be modified or
amended without the consent of all Class A Certificateholders, and upon any such
waiver, such Event of Termination shall cease to exist and shall be deemed to
have been cured for every purpose of this Agreement; but no such waiver shall
extend to any subsequent
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or other Event of Termination or impair any right consequent thereon. [Following
the Cross-over Date, if all distributions payable to the Class A
Certificateholders have either been made or provided for in accordance with this
Agreement, then to the Holders of Class B Certificates may exercise the rights
given to the Class R Certificateholders under this Section.]
SECTION 11.05. Master Servicer to Pay Trustee's Fees and Expenses
The Master Servicer agrees:
(a) that the Master Servicer shall pay to the Trustee reasonable
compensation on each Distribution Date for all services rendered by its
hereunder (which compensation is set forth in a letter agreement between the
Master Servicer and the Trustee dated the Closing Date and which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust);
(b) except as otherwise expressly provided herein, that the Master Servicer
shall reimburse the Trustee on each Distribution Date, to the extent requested
by the Trustee, for all reasonable expenses, disbursements and advances incurred
or made by the Trustee in accordance with any provisions of this Agreement
(including the reasonable compensation and the expenses and disbursements of it
agents and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
Trust and its duties hereunder, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The covenants in this Section 11.05 shall be for the benefit of the Trustee
in its capacities as Trustee, Paying Agent and Certificate Registrar hereunder,
and shall survive the termination of this Agreement.
SECTION 11.06. Eligibility Requirements for Trustee
The Trustee hereunder shall at all times be a corporation or a national
banking association having its principal office in a state and city acceptable
to the Company and organized and doing business under the laws of the United
States of America or any State, authorized under such laws to exercise corporate
trust powers, and, approved for insurance by the Secretary of Housing and Urban
Development pursuant to Section 2 of the National Housing Act, and shall have a
combined capital and surplus of at least $50,000,000 or shall be a member of a
bank holding system the aggregate combined capital and surplus of which is
$50,000,000 provided that the Trustee's separate capital and surplus shall at
all times be at least the amount required by Section 310(a)(2) of the Trustee
Indenture Act of 1939, as amended and the Trustee shall be subject to
supervision and examination by a federal or state authority having jurisdiction
over depositary institutions. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of a supervising or
examining authority, then for the purposes of this Section
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11.06, the combined capital and surplus of such Person 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 11.06, the Trustee shall resign
immediately in the manner and with the effect specified in Section 11.07.
SECTION 11.07. Resignation or Removal of Trustee
The Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice thereof to the Master Servicer, the Company and
[Rating Agency]. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to each of the Master Servicer and
the Company and one copy to the successor Trustee. If no successor Trustee shall
have been so appointed and shall have accepted appointment within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If, at any time, the Trustee shall cease to be eligible in accordance with
the provisions of Section 11.06 and shall fail to resign after written request
therefor by the Company, or if at any time the Trustees shall be legally unable
to act, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Company may remove the
Trustee. If the Company shall have removed the Trustee under the authority of
the immediately preceding sentence, the Company shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor Trustee. Upon appointment of any successor Trustee, the Trustee being
replaced shall change the name of the Certificate Account to the name of such
successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section 11.07 shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 11.08.
SECTION 11.08. Successor Trustee
Any successor Trustee appointed as provided in Section 11.07 shall execute,
acknowledge and deliver to the Master Servicer, the Company and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee. [The predecessor Trustee shall deliver or cause to be
delivered to the successor Trustee the Mortgage Loans and Mortgage Loan Files
and any related documents and statements held by it hereunder.] The Master
Servicer, the Company and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Trustee all such rights,
powers, duties and obligations.
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No successor Trustee shall accept appointment as provided in this Section
11.08 unless at the time of such acceptance such successor Trustee shall be
eligible under the provisions of Section 11.06.
Upon acceptance of appointment by a successor Trustee as provided in this
Section 11.08, the Master Servicer shall cause notice of the succession of such
Trustee hereunder to be mailed to each Certificateholder at their addresses as
shown in the Certificate Register. If the Master 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
Master Servicer.
SECTION 11.09. Merger or Consolidation of Trustee
Any Person into which the Trustee may be merged or converted or with which
it may be consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding to
the corporate trustee business of the Trustee, shall be the successor of the
Trustee hereunder, provided such Person shall be eligible under the provisions
of Section 11.06, 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 11.10. Mortgagor Claims
In connection with any offset defenses, or affirmative claims for recovery,
asserted in legal actions brought by Mortgagors under one or more Mortgage Loans
based upon provisions therein or upon other rights or remedies arising from, any
legal requirements applicable to the Mortgage Loans, including, without
limitation, the Federal Trade Commission's Trade Regulation Rule Concerning
Preservation of Consumers' Claims and Defenses (16 C.F.R. ss. 433) as amended
from time to time:
(a) The Trustee is not, and shall not be deemed to be, either in any
individual capacity, as trustee hereunder or otherwise, a creditor, or a
joint venturer with or an Affiliate of, or acting in concert or cooperation
with, any seller of Mortgaged Properties, in the arrangement, origination
or making of Mortgage Loans. The Trustee is the holder of the Mortgage
Loans only as trustee on behalf of the Certificateholders, and not as a
principal or in any individual or personal capacity.
(b) The Trustee shall not be personally liable for or obligated to pay
Mortgagors, any affirmative claims asserted thereby, or responsible to
Certificateholders for any offset defense amounts applied against Mortgage
Loan payments, pursuant to such legal actions.
(c) The Trustee will pay, solely from available Trust money,
affirmative claims for recovery by Mortgagors only pursuant to final
judicial orders or judgments, or judicially-approved settlement agreements,
resulting from such legal actions.
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(d) The Trustee will comply with judicial orders and judgments which
require its actions or cooperation in connection with Mortgagors' legal
actions to recover affirmative claims against Certificateholders.
(e) The Trustee will cooperate with and assist Certificateholders in
their defense of legal actions by Mortgagors to recover affirmative claims
if such cooperation and assistance is not contrary to the interests of the
Trustee as a party such legal actions and if the Trustee is satisfactorily
indemnified for all liability, costs and expenses arising therefrom.
(f) CIT Consumer Finance hereby agrees to indemnify, hold harmless and
defend the Company, the Trustee and Certificateholders from and against any
and all liability, loss, costs and expenses of the Company, the Trustee and
Certificateholders resulting from any affirmative claims for recovery
asserted or collected by Mortgagors under the Mortgage Loans.
Notwithstanding any other provision of this Agreement, the obligation of
CIT Consumer Finance under this Section 11.10(f) shall not terminate upon a
Service Transfer pursuant to Article VII; provided, however, that CIT
Consumer Finance is not obligated under this Section on account of any
claims arising due to the actions of any successor Master Servicer.
SECTION 11.11. Separate Trustees and Co-Trustees
The Company shall have the power from time to time to appoint one or more
persons or corporations to act either as co-trustees jointly with the Trustee,
or as separate trustees, or as custodians, for the purpose of conforming to any
legal requirement, restriction or condition (i) with respect to the holding of
the Mortgage Loans and the Mortgage Loan Files or (ii) with respect to the
enforcement of a Mortgage Loan in any state in which a Mortgaged Property is
located or in any state in which any portion of the Trust is located. The
separate trustees, co-trustees, or custodians so appointed shall be trustees or
custodians for the benefit of all Certificateholders and shall, subject to the
provisions of the following paragraph, have such power, rights and remedies as
shall be specified in the instrument of appointment; provided, however, that no
such appointment shall, or shall be deemed to, constitute the appointee an agent
of the Trustee.
Every separate trustee, co-trustee and custodian shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(a) all powers, duties, obligations and rights conferred upon the Trustee
in respect of the receipt, custody and payment of moneys shall be exercised
solely by the Trustee;
(b) all other rights, powers, duties and obligations conferred or imposed
upon the Trustee, to the extent also imposed upon such separate trustees,
co-trustees or custodians, shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee, co-trustee, or custodian
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed, the Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including
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holding of the Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed by such separate trustee, co-trustee, or custodian;
(c) no separate trustee, co-trustee or custodian hereunder shall be
personally liable by reason of any act or omission or any other separate
trustee, co-trustee or custodian hereunder; and
(d) the Company may at any time accept the resignation of or remove any
separate trustee, co-trustee or custodian, so appointed by it.
If any separate trustee, co-trustee or custodian 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 or custodian. The reasonable fees and expenses of any such separate
trustee, co-trustee or custodian shall be treated as additional fees and
expenses of the Trustee subject to Section 11.05 and payable by the Master
Servicer if and only to the extent the Master Servicer shall have consented in
writing to his or its appointment, which consent shall not be unnecessarily
withheld.
SECTION 11.12. Trustee May Own Certificates
The Trustee in its individual or other capacity may become the owner or
pledgee of Certificates representing less than all the beneficial interest in
the Trust with the same rights as it would have if it were not Trustee.
SECTION 11.13. Agents of Trustee
To the extent not prohibited by law and not inconsistent with the terms of
this Agreement (including, without limitation, Section 11.11), the Trustee may,
with the prior consent of the Company, appoint one or more agents to carry out
ministerial matters on behalf of the Trustee under this Agreement.
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ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Master Servicer Not To Resign
The Master Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that the performance of its duties
hereunder is no longer permissible under applicable law. Any such determination
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel for the Master Servicer to such effect delivered to the
Trustee. No such resignation shall become effective until the Trustee or a
successor Master Servicer shall have assumed the responsibilities and
obligations of the Master Servicer in accordance with Section 7.03.
SECTION 12.02. Maintenance of Officer or Agency
The Trustee will maintain an office in ____________. Such offices are
currently located at the addresses set forth in Section 12.09. The Trustee will
give prompt written notice to Certificateholders of any change in the location
of the Certificate Register or any such office or agency.
SECTION 12.03. Termination
(a) Subject to the other provisions of this Section, the respective
obligations and responsibilities of the Company, the Master Servicer and the
Trustee created hereby (other than the obligation of the Trustee to make certain
payments after the Final Distribution Date to Certificateholders and the
obligation of the Master Servicer to send certain notices as hereinafter set
forth) shall terminate upon the last action required to be taken by the Trustee
on the Distribution Date pursuant to this Section 12.03 following the earlier
of: (i) the purchase by the Company or the Master Servicer on any Distribution
Date of all Mortgage Loans and all property acquired in respect of any Mortgage
Loan remaining in the Trust pursuant to Section 8.03 or (ii) the final payment
or other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust or the disposition of all property acquired upon
foreclosure of any Mortgaged Property; provided, however, that in no event shall
the trust created hereby continue beyond the expiration of 21 years from the
death of the last survivor of the descendants of Joseph P. Kennedy, the late
ambassador of the United States to the Court of St. James, living on the date
hereof.
(b) Notice of any termination, specifying the Final Distribution Date
(which shall be a date that would otherwise be a Distribution Date) upon which
the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Master Servicer (if the Company or the Master Servicer is exercising its
right to purchase the assets of the Trust) or by the Trustee (in any other case)
by letter to Certificateholders mailed out not earlier than the 15th day and not
later than the 25th day of the month (or, in the case of final payment of
liquidation of the last contract remaining in the Trust, as
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promptly as practicable after receipt of such final payment or liquidation) next
preceding the month of such final distribution specifying (i) the Final
Distribution Date upon which final payment of the Certificates will be made upon
presentation and surrender of the Certificates at the office or agency of the
Trustee therein designated, (ii) the amount of any such final payment and (iii)
that the Record Date otherwise applicable to such Distribution Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee herein specified. [Such
notice shall provide that, in addition to any other office or agency of the
Trustee designated therein, the presentation and surrender of Certificates as
aforesaid may occur at an office or agency of the Trustee in New York City
specified therein.] If the Master Servicer is obligated to give notice to
Certificateholders as aforesaid, it shall give such notice to the Trustee, the
Certificate Registrar and to [Rating Agency] at the time such notice is given to
Certificateholders. In the event such notice is given by the Master Servicer,
the Company or the Master Servicer shall deposit in the Certificate Account on
or before the Final Distribution Date in immediately available funds an amount
equal to the purchase price for the assets of the Trust computed as above
provided.
(c) Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to Certificateholders on the Final Distribution Date in
proportion to their respective Percentage Interests an amount equal to (i) as to
Class A Certificates, the Class A Certificate Balance, together with any Unpaid
Class A Interest Shortfall and one month's interest at the Class A Pass-Through
Rate on the Class A Certificate Balance[, (ii) as to Class B Certificates, the
Class B Certificate Balance together with any Unpaid Class B Interest Shortfall
and one month's interest at the Class B Pass-Through Rate on the Class B
Certificate Balance] and (iii) as to Class R Certificates, the amount which
remains on deposit in the Certificate Account (other than amounts retained to
meet claims) after application pursuant to clauses (i)[, (ii)] and (iii) above.
The distribution on the Final Distribution Date shall be in lieu of the
distribution otherwise required to be made on such Distribution Date in respect
of each Class of Certificates.
(d) In the event that all of the Certificateholders shall not surrender
their Certificates for final payment and cancellation on or before the Final
Distribution Date, the Trustee shall on such date cause all funds in the
Certificate Account not distributed in final distribution to Certificateholders
to be withdrawn therefrom and credited to the remaining Certificateholders by
depositing such funds in a separate escrow account for the benefit of such
Certificateholders, and the Master Servicer (if the Company or the Master
Servicer exercised its right to purchase the assets of the Trust) or the Trustee
(in any other case) shall give a second written notice to the remaining
Certificateholders to surrender their Certificates for cancellation and receive
the final distribution with respect thereto. If, within one year after the
second notice, all 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 on deposit in such escrow account.
(e) Upon any termination pursuant to this Section, the Trust shall be
terminated in accordance with the following additional requirements, unless the
Trustee has received an Opinion of Counsel to the effect that the failure of the
Trust to comply with the requirements of this Section will not (i) result in the
imposition of taxes on "prohibited transactions" of the Trust as
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described in Section 860F of the Code, or (ii) cause the Trust to fail to
qualify as a REMIC at any time that any Class A [or Class B] Certificates are
outstanding:
(i) Within 90 days prior to the Final Distribution Date set forth in
the notice given by the Master Servicer or the Trustee under this Section,
the Holders of 100% of the aggregate Percentage Interests evidenced by the
Class R Certificates shall adopt a plan of complete liquidation of the
Trust; and
(ii) At or after the time of adoption of such a plan of complete
liquidation and at or prior to the Final Distribution Date, the Master
Servicer as agent of the Trustee shall sell all of the assets of the Trust
to the Company or the Master Servicer as the case may be, for cash.
By their acceptance of the Class R Certificates, the holders thereof hereby
agree to adopt such a plan of complete liquidation upon the written request of
the Master Servicer or the Company and to take such other action in connection
therewith as may be reasonably requested by CIT Consumer Finance.
SECTION 12.04. Acts of Certificateholders
(a) Except as otherwise specifically provided herein, whenever
Certificateholder approval, authorization, direction, notice, consent, waiver,
or other action is required hereunder, such approval, authorization, direction,
notice, consent, waiver or other action shall be deemed to have been given or
taken on behalf of, and shall be binding upon, all Certificateholders if agreed
to by Holders of Certificates of the specified Class or Classes evidencing, as
to each such Class, Percentage Interests aggregating 51% or more.
(b) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
agent 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 Trustee and, where required, to the Master Servicer. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Agreement and (subject to Section
11.01) conclusive in favor of the Trustee, the Master Servicer and the Company
if made in the manner provided in this Section.
(c) The fact and date of the execution by any Certificateholder of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(d) The ownership of Certificates shall be proved by the Certificate
Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver
or other act by a Certificateholder shall bind every holder of every Certificate
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything
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done, or omitted to be done by the Trustee, the Master Servicer or the Company
in reliance thereon, whether or not notation of such action is made upon such
security.
(f) The Trustee may require such additional proof of any matter referred to
in this Section as it shall deem necessary.
SECTION 12.05. Calculations
Except as otherwise provided in this Agreement, all interest rate and basis
point calculations under this Agreement will be made on the basis of a 360-day
year consisting of twelve thirty-day months and will be carried out to at least
three decimal places.
SECTION 12.06. Assignment or Delegation by the Master Servicer; Merger or
Consolidation of the Company, CIT Consumer Finance or the Master Servicer
Except as specifically authorized hereunder, and except for its obligations
as Master Servicer, in respect of which a transfer thereof is dealt with under
Article VII, the Master Servicer may not assign or delegate any of its rights or
obligations hereunder, except its right to receive any fees pursuant to this
Agreement, absent the prior written consent of Holders of Certificates of each
Class evidencing, as to each such Class, Percentage Interests aggregating
66-1/2% or more, and any attempt to do so without such consent shall be void.
Notwithstanding the foregoing, CIT Consumer Finance may not delegate its
obligation to repurchase contracts under Section 3.05.
Notwithstanding the foregoing, any person into which the Company, CIT
Consumer Finance or the Master Servicer may be merged or consolidated, or any
corporation resulting from any merger or consolidation to which the Company, CIT
Consumer Finance or the Master Servicer shall be a party, or any Person
succeeding to the business of the Company, CIT Consumer Finance or the Master
Servicer, shall be the successor of the Company, CIT Consumer Finance or the
Master Servicer hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding; provided, however, that the successor or surviving
Person to the Master Servicer shall satisfy the criteria set forth in the
definition of an Eligible Master Servicer. Each of CIT Consumer Finance, the
Company and the Master Servicer shall promptly notify [Rating Agency] of any
such merger to which it is a party.
Neither the Master Servicer nor the Company, nor any of the directors,
officers, employees or agents of the Master Servicer or the Company, shall be
under any liability to the Trustee 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 Master Servicer, the Company or any such person
against any breach of warranties or representations made herein, or failure to
perform its or his obligations in compliance with any standard of care set forth
in this Agreement, or any liability which otherwise would be imposed by reason
of any breach of the terms and conditions of this Agreement. The Master
Servicer, the Company and any director, officer, employee or agent of the
Company 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.
Neither the Master Servicer nor the Company
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shall be under any obligation to appear in, prosecute or defend any legal
action, which arises under this Agreement and which in its opinion may involve
it in any expenses or liability; provided, however, that the Master Servicer or
the Company may in its discretion undertake any such action which it may deem
necessary or desirable to in respect of this Agreement and the rights and duties
of the parties hereto. In such event, the legal expenses and costs of such
action and any liability resulting therefrom shall be expenses, costs and
liabilities payable from the Certificate Account and the Master Servicer and the
Company shall be entitled to be reimbursed therefor out of the Certificate
Account.
SECTION 12.07. Amendment
(a) This Agreement may be amended from time to time by the Company, the
Master Servicer and the Trustee, without the consent of any of the
Certificateholders, (i) to correct manifest error, to cure any ambiguity, to
correct or supplement any provisions herein or therein which may be inconsistent
with any other provisions herein or therein, as the case may be, (ii) to add any
other provisions with respect to matters or questions arising under this
Agreement which shall not be inconsistent with the provisions of this Agreement,
(iii) to add or amend any provisions as required by [Rating Agency] or another
NRSRO in order to maintain any rating of the Class A [or Class B] Certificates
(it being understood that, after the rating required by Section 2.02 hereof has
been obtained, neither the Trustee, the Company nor CIT Consumer Finance is
obligated to maintain or improve such rating); provided, however, that such
action shall not, as evidenced by an Opinion of Counsel for the Master Servicer
or the Company, adversely affect in any material respect the interests of any
Certificateholder (including, without limitation, the maintenance of the status
of the Trust as a REMIC under the Code and under relevant state and local law).
(b) This Agreement may also be amended from time to time by the Company,
the Master Servicer and the Trustee, with the consent of Holders of Certificates
of each Class affected thereby evidencing, as to each such Class, Percentage
Interests aggregating 51% or more, for the purpose of adding any of the
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the
Certificateholders; provided, however, that no such amendment shall (i) reduce
in any manner the amount of, or delay the timing of, collections of payments on
the Mortgage Loans or distributions which are required to be made on any
Certificate without the consent of the holder of each Certificate affected
thereby, (ii) reduce the aforesaid percentage required to consent to any such
amendment, without the consent of the holders of all Certificates then
outstanding, (iii) result in the disqualification of the Trust as a REMIC under
the Code, (iv) adversely affect the status of the Trust as a REMIC or the status
of the Certificates as "regular interests" therein, (v) cause any tax (other
than any tax imposed on "net income from foreclosure property" under Section
860G(c)(1) of the Code that would be imposed without regard to such amendment)
to be imposed on the Trust, including, without limitation, any tax imposed on
"prohibited transactions" under Section 860G(d)(1) of the Code, or (vi)
adversely affect in any material respect the interest of the Class R
Certificateholders without the unanimous consent of the Class R
Certificateholders.
(c) This Agreement may also be amended from time to time, without the
consent of any of the Certificateholders, by the Company, the Master Servicer
and the Trustee to
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modify, eliminate or add to the provisions of this Agreement to such extent as
shall be necessary to (i) maintain the qualification of the Trust as a REMIC
under the Code and under relevant state and local law or avoid, or reduce the
risk of, the imposition of any tax on the Trust under the Code that would be a
claim against the Trust assets, provided that (A) there shall have been
delivered an Opinion of Counsel addressed to the Trustee to the effect that such
action is necessary to maintain such qualification or avoid any such tax or
reduce the risk of its imposition and (B) such amendment shall not have any of
the effects described in the proviso to Section 12.07(a), or (ii) prevent the
Trust from entering into any "prohibited transaction" as defined in Section 860F
of the Code, provided that such amendment shall not, as evidenced by an Opinion
of Counsel, adversely affect in any material respect the interests of any
Certificateholder (including, without limitation, the maintenance of the Trust
as a REMIC under the Code and under relevant state and local law).
(d) This Agreement shall not be amended under this section without the
consent of any of the Certificateholders if such amendment would result in the
disqualification of the Trust as a REMIC under the Code or relevant state and
local law.
(e) Promptly after the execution of any amendment or consent pursuant to
this Section, the Trustee shall furnish written notification of the substance of
such amendment to each Certificateholder (but only if such amendment is pursuant
to Section 12.07(b) and affects the Class of Certificates held by such
Certificateholder) and to [Rating Agency], which notification will be prepared
by the Master Servicer and delivered to the Trustee.
(f) It shall not be necessary for the consent of Certificateholders under
this Section 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
requirements as the Trustee may prescribe.
(g) The Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Trustee's own rights, duties or immunities under
this Agreement or otherwise.
(h) In connection with any amendment pursuant to this Section, the Trustee
shall be entitled to receive an Opinion of Counsel to the Master Servicer to the
effect that such amendment is authorized or permitted by the Agreement.
(i) Upon the execution of any amendment or consent pursuant to this
Section, this Agreement shall be modified in accordance therewith, and such
amendment or consent shall form a part of this Agreement for all purposes, and
every Holder of Certificates theretofore or thereafter issued hereunder shall be
bound thereby.
SECTION 12.08. Contribution of Assets
Following the Closing Date, the Trustee shall not accept any contribution
of additional assets to the Trust unless the Trustee has received an Opinion of
Counsel addressed to the Trustee to the effect that (i) the contribution of such
assets into the Trust will not cause the Trust
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to fail to qualify as a REMIC under the Code and under the relevant state and
local law and (ii) such contribution will not cause the imposition of a tax on
"prohibited transactions" (as defined in Section 860F of the Code or under
similar provisions under the relevant state and local law) or on contributions
to the Trust after the "start-up day" (as defined in Section 860G of the Code or
under similar provisions under the relevant state and local law) with respect
thereto.
SECTION 12.09. Notices
All communications and notices pursuant hereto to the Company, the Master
Servicer and the Trustee and [Rating Agency] shall be in writing and delivered
or mailed to it at the appropriate following address:
If to the Company:
The CIT Group Securitization Corporation III
650 CIT Drive
Livingston, New Jersey 07039
Attention: President
If to the Master Servicer:
The CIT Group/Consumer Finance, Inc.
650 CIT Drive
Livingston, New Jersey 07039
Attention: President
If to the Trustee:
_________________________________
_________________________________
_________________________________
If to the Paying Agent:
_________________________________
_________________________________
_________________________________
If to [Rating Agency]:
_________________________________
_________________________________
_________________________________
or at such other address as the party may designate by notice to the other
parties hereto, which notice shall be effective when received.
All communications and notices pursuant hereto to a Certificateholder shall
be in writing and delivered or mailed at the address shown in the Certificate
Register.
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SECTION 12.10. Merger and Integration
Except as specifically stated otherwise herein, this Agreement sets forth
the entire understanding of the parties relating to the subject matter hereof,
and all prior understandings, written or oral, are superseded by this Agreement.
This Agreement may not be modified, amended, waived, or supplemented except as
provided herein.
SECTION 12.11. Headings
The headings herein are for purposes of reference only and shall not
otherwise affect the meaning or interpretation of any provision hereof.
SECTION 12.12. Governing Law
This Agreement shall be governed by, and construed and enforced in
accordance with the laws of the State of New York, without regard to its
conflict-of-laws provisions.
SECTION 12.13. Counterparts
This Agreement may be executed in two or more counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the 1st
day of _________, 199_.
THE CIT GROUP/CONSUMER FINANCE, INC.
By: ___________________________
Name:
Title:
THE CIT GROUP SECURITIZATION
CORPORATION III
By: ___________________________
Name:
Title:
[TRUSTEE]
not in its individual
capacity but solely as
Trustee
By:
Name:
Title:
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EXHIBITS TO POOLING AND SERVICING AGREEMENT
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Exhibit A
[FORM OF CLASS A CERTIFICATE]
[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.]
Class A (Senior) No.
Date of Pooling and Servicing Agreement: Pass-Through Rate: ____%
As of _____ __, 199_
Denomination: $__________
Cut-off Date: _____ __, 199_ Aggregate Denomination of all Class A
Certificates: $_______
First Distribution Date: First Distribution Date:
________ __, 199_ ________ __, 199_
Master Servicer: The CIT Group/Consumer CUSIP: _______________
Finance, Inc.
A-1
<PAGE>
HOME EQUITY LOAN
SENIOR/SUBORDINATE ASSET BACKED CERTIFICATES,
SERIES 199_, CLASS A (SENIOR)
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN THE
CIT GROUP SECURITIZATION CORPORATION III, THE CIT GROUP/CONSUMER FINANCE, INC.
OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE AGREEMENT.
This certifies that ___________________ is the registered owner of the
undivided Percentage Interest represented by the denomination specified above in
certain monthly distributions with respect to a Trust consisting of a pool of
mortgage loans (including, without limitation, all related security interests
and any and all rights to receive payments which are due pursuant thereto on or
after ______ __, 199_) formed and sold by The CIT Group Securitization
Corporation III (the "Company"). The Trust has been created pursuant to a
Pooling and Servicing Agreement (the "Agreement"), dated as of ______ __, 199__,
among the Company, as Depositor, The CIT Group/Consumer Finance, Inc., as Seller
and Master Servicer, and _____________, as trustee of the Trust (the "Trustee").
This Certificate is one of the Certificates described in the Agreement and is
issued pursuant and subject to the Agreement. By acceptance of this Certificate,
the holder assents to and becomes bound by the Agreement. To the extent not
defined herein, all capitalized terms have the meanings assigned to such terms
in the Agreement.
The Agreement contemplates, subject to its terms, payment on the _____ day
(or if such day is not a Business Day, the next succeeding Business Day) (the
"Distribution Date") of each calendar month commencing ______ __, 199_ so long
as the Agreement has not been terminated, by check (or, if such
Certificateholder holds a Class of Class A Certificates with an aggregate
Percentage Interest of at least 5% and so desires, by wire transfer pursuant to
instructions delivered to the Trustee at least 10 days prior to such
Distribution Date) to the registered Certificateholder at the address appearing
on the Certificate Register as of the last Business Day of the immediately
preceding calendar month, in an amount equal to the Certificateholder's
Percentage Interest of the portion of the [Class A Distribution Amount] to be
distributed to such Class of Class A Certificates. The final scheduled
Distribution Date of this Certificate is ______ __, ____ or the next succeeding
Business Day if such date is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account to the extent
available for distribution to the Certificateholder as provided in the Agreement
for payment hereunder and that the Trustee in its individual capacity is not
personally liable to the Certificateholder for any amounts payable under this
Certificate or the Agreement or, except as expressly provided in the Agreement,
subject to any liability under the Agreement. By acceptance of this Certificate,
the Certificateholder agrees to disclosure of his, her or its name and address
to other Certificateholders under the conditions specified in the Agreement.
A-2
<PAGE>
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all Amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
_____________, accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by the
holder thereof or his or her attorney duly authorized in writing, and thereupon
one or more new Certificates evidencing the same aggregate Percentage Interest
will be issued to the designated transferee or transferees.
[Unless this Certificate is presented by an authorized representative of
The Depository Trust Company to the Trustee or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment is made to Cede &
Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.]
The Company, the Master Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Master Servicer, the
Trustee, the Paying Agent or the Certificate Registrar may treat the person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Company, the Master Servicer, the Trustee, the Paying Agent, the
Certificate Registrar nor any such agent shall be affected by any notice to the
contrary.
A-3
<PAGE>
Unless this Certificate has been authenticated by the Trustee or its
Authenticating Agent, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed.
Dated: THE CIT GROUP SECURITIZATION
CORPORATION III
By:__________________________
Authorized Officer
[Form of Certificate of Authentication]
This is one of the Certificates referred
to in the within-mentioned Agreement.
_______________________, or [TRUSTEE]
Authenticating Agent
By:________________________ By:__________________________
Authorized Signatory
A-4
<PAGE>
Exhibit B
[Form of Class B Certificate]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES
TO THE EXTENT SET FORTH IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.
[THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR "BLUE SKY" LAWS
IN RELIANCE UPON EXEMPTIONS PROVIDED BY SUCH ACTS. NO TRANSFER OF THIS
CERTIFICATE SHALL BE MADE UNLESS SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IS MADE IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT, INCLUDING A TRANSFER MADE
IN ACCORDANCE WITH THE EXEMPTION PROVIDED IN RULE 144A OF THE SECURITIES ACT,
AND APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS, AND UNLESS SUCH TRANSFER IS
MADE IN ACCORDANCE WITH SECTION 9.02 OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.]
[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.]
Class B (Subordinate) No. ____
Date of Pooling and Servicing Pass-Through Rate: ____%
Agreement: As of _____ __, 199_
Denomination: $_____________
Cut-off Date: _____ __, 199_ Aggregate Denomination of all
Class B Certificates: $________
First Distribution Date: Final Distribution Date:
_______ __, 199__ ____________ __, ____
Master Servicer: The CIT Group/Consmuer CUSIP:__________________________
Finance, Inc.
B-1
<PAGE>
HOME EQUITY LOAN
SENIOR/SUBORDINATE ASSET BACKED CERTIFICATES,
SERIES 199_, CLASS B (SUBORDINATE)
THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR AN INTEREST IN THE
CIT GROUP SECURITIZATION CORPORATION III, THE CIT GROUP/CONSUMER FINANCE, INC.
OR ANY AFFILIATE THEREOF, EXCEPT TO THE EXTENT SET FORTH IN THE AGREEMENT.
This certifies that ___________________ is the registered owner of the
undivided Percentage Interest represented by the denomination specified above in
certain monthly distributions with respect to a Trust consisting of a pool of
mortgage loans (including, without limitation, all related security interests
and any and all rights to receive payments which are due pursuant thereto on or
after ______ __, 199_) formed and sold by The CIT Group Securitization
Corporation III (the "Company"). The Trust has been created pursuant to a
Pooling and Servicing Agreement (the "Agreement"), dated as of ______ __, 199_,
among the Company, as Depositor, The CIT Group/Consumer Finance, Inc., as Seller
and Master Servicer, and _____________, as trustee of the Trust (the "Trustee").
This Certificate is one of the Certificates described in the Agreement and is
issued pursuant and subject to the Agreement. By acceptance of this Certificate
the holder assents to and becomes bound by the Agreement. To the extent not
defined herein, all capitalized terms have the meanings assigned to such terms
in the Agreement.
The Agreement contemplates, subject to its terms, payment on the _____ day
(or if such day is not a Business Day, the next succeeding Business Day) (the
"Distribution Date") of each calendar month commencing ______ __, 199_ so long
as the Agreement has not been terminated, by check (or, if such
Certificateholder holds Class B Certificates with an aggregate Percentage
Interest of at least 20% and so desires, by wire transfer pursuant to
instructions delivered to the Trustee at least 10 days prior to such
Distribution Date) to the registered Certificateholder at the address appearing
on the Certificate Register as of the last Business Day of the immediately
preceding calendar month, in an amount equal to the Certificateholder's
Percentage Interest of the [Class B Distribution Amount]. The final scheduled
Distribution Date of this Certificate is ______ __, ____ or the next succeeding
Business Day if such date is not a Business Day.
The Certificateholder, by its acceptance of this Certificate, agrees that
it will look solely to the funds in the Certificate Account [and the Available
Credit Enhancement Amount], to the extent available for distribution to the
Certificateholder as provided in the Agreement, for payment hereunder and that
the Trustee in its individual capacity is not personally liable to the
Certificateholder for any amounts payable under this Certificate or the
Agreement or, except as expressly provided in the Agreement, subject to any
liability under the Agreement. By acceptance of this Certificate, the
Certificateholder agrees to disclosure of his, her or its name and address to
other Certificateholders under the conditions specified in the Agreement.
B-2
<PAGE>
This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for information with respect to the interests, rights,
benefits, obligations, proceeds and duties evidenced hereby and the rights,
duties and immunities of the Trustee. Copies of the Agreement and all Amendments
thereto will be provided to any Certificateholder free of charge upon a written
request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Certificate is registrable in the Certificate
Register of the Certificate Registrar upon surrender of this Certificate for
registration of transfer at the office or agency maintained by the Trustee in
_____________, accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by the
holder thereof or his or her attorney duly authorized in writing, and thereupon
one or more new Certificates evidencing the same aggregate Percentage Interest
will be issued to the designated transferee or transferees.
[Unless this Certificate is presented by an authorized representative of
The Depository Trust Company to the Trustee or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or such other name as requested by an authorized
representative of The Depository Trust Company and any payment is made to Cede &
Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an
interest herein.]
[This Certificate has not been registered or qualified under the Securities
Act or any state securities law.]
[No transfer, sale, pledge or other disposition of any Certificate or any
interest therein shall be made unless such transfer is made pursuant to an
effective registration statement under the Securities Act and effective
registration or qualification under applicable state securities laws or is made
in a transaction that does not require such registration or qualification.]
[In the event that (i) registration of a transfer of this Certificate is to
be made in reliance upon the exemption from registration under the Securities
Act contained in Rule 144A, (ii) the Holder of this Certificate delivers an
officer's certificate substantially in the form of Exhibit K-1 to the Pooling
and Servicing Agreement to each of the Seller and the Trustee, and (iii) the
transferee of this Certificate delivers an officer's certificate in the form of
Exhibit K-2 to the Agreement to the Seller and the Trustee, the Trustee shall
register such transfer.]
[In the event that registration of a transfer is to be made in reliance
upon an exemption from registration under the Securities Act (other than the
exemption from registration contained in Rule 144A) and applicable state
securities laws, the Company shall require, in order to assure compliance with
the Securities Act, the transferee or the transferor of this Certificate to
deliver to the Company and the Trustee either (i) an investment letter from such
transferee in the form of Exhibit J to the Agreement, or (ii) an Opinion of
Counsel that such transfer may be made pursuant to an exemption from the
Securities Act (other than the exemption from registration contained in Section
3(a)(2) thereof).]
B-3
<PAGE>
[Neither the Company nor the Trustee is obligated to register this
Certificate under the Securities Act or under any state securities laws.]
[No service charge will be made for any such registration of transfer of
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.]
The Company, the Master Servicer, the Trustee, the Paying Agent and the
Certificate Registrar and any agent of the Company, the Master Servicer, the
Trustee, the Paying Agent or the Certificate Registrar may treat the person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Company, the Master Servicer, the Trustee, the Paying Agent, the
Certificate Registrar nor any such agent shall be affected by any notice to the
contrary.
Unless this Certificate has been authenticated by the Trustee or its
Authenticating Agent, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed.
Dated: THE CIT GROUP SECURITIZATION
CORPORATION III
By:__________________________
Authorized Officer
[Form of Certificate of Authentication]
This is one of the Certificates referred
to in the within mentioned Agreement.
_______________________, or [TRUSTEE]
Authenticating Agent
By:________________________ By:__________________________
Authorized Signatory Authorized Signatory
B-4
<PAGE>
Exhibit C
[FORM OF CLASS R CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A CERTIFICATES
AND THE CLASS B CERTIFICATES TO THE EXTENT SET FORTH IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES OR "BLUE SKY" LAWS
IN RELIANCE UPON EXEMPTIONS PROVIDED BY SUCH ACTS. NO TRANSFER OF THIS
CERTIFICATE SHALL BE MADE UNLESS SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IS MADE IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT, INCLUDING A TRANSFER MADE
IN ACCORDANCE WITH THE EXEMPTION PROVIDED IN RULE 144A OF THE SECURITIES ACT,
AND APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS, AND UNLESS SUCH TRANSFER IS
MADE IN ACCORDANCE WITH SECTION 9.02 OF THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.
[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT" AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE.
THIS CERTIFICATE MAY ONLY BE TRANSFERRED TO A PERMITTED TRANSFEREE (AS DEFINED
IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN); ANY SUCH TRANSFER
MUST ALSO SATISFY THE OTHER REQUIREMENTS OF SECTION 9.02 OF SUCH POOLING AND
SERVICING AGREEMENT.]
Class R (Subordinate) No. ___
Date of Pooling and Servicing Percentage Interest: ____%
Agreement: As of _____ __, 199_
Cut-off Date: ____ __, 199_
First Distribution Date:
_______ __, 199_
Master Servicer: The CIT Group/Consumer
Finance, Inc.
C-1
<PAGE>
HOME EQUITY LOAN SENIOR/SUBORDINATE
ASSET BACKED CERTIFICATES, SERIES 199_
Initial Principal Amount of the Trust: $________
This certifies that __________ is the registered owner of the undivided
Percentage Interest stated above in the Residual Interest in the Trust referred
to herein, and entitled to certain distributions with respect to such Trust,
which Trust consists of a pool of mortgage loans, including, without limitation,
all related security interests and any and all rights to receive payments which
are due pursuant thereto on or after ______ __, 199_ (the "Mortgage Loans")
formed and sold by The CIT Group Securitization Corporation III (the "Company").
The Trust has been created pursuant to a Pooling and Servicing Agreement (the
"Agreement"), dated as of ______ __, 199_, between the Company, as Depositor,
and The CIT Group/Consumer Finance, Inc., as Seller and Master Servicer,
and/National Association, as Trustee of the Trust (the "Trustee"). This Class R
Certificate is one of the Class R Certificates described in the Agreement and is
issued pursuant and subject to the Agreement. By acceptance of this Class R
Certificate the holder assents to and becomes bound by the Agreement. To the
extent not defined herein, all capitalized terms have the meanings assigned to
such terms in the Agreement.
The Agreement contemplates, subject to its terms, payment on the _____ day
(or if such is not a Business Day, the next succeeding Business Day) (the
"Distribution Date") of each calendar month commencing ______ __, 199_, so long
as the Agreement has not been terminated, by check (or, if such Class R
Certificateholder holds Class R Certificates with an aggregate Percentage
Interest of at least 20% and so desires, by wire transfer pursuant to
instructions delivered to the Trustee at least ten days prior to such
Distribution Date) to the registered Class R Certificateholder at the address
appearing on the Certificate Register as of the last Business Day of the
immediately preceding calendar month (each such month during the term of this
Agreement constituting a "Due Period"), in an amount equal to [the difference
between (A) the Amount Available, and (B) the sum of (i) [the Class A
Distribution Amount], (ii) [the Class B Distribution Amount], (iii) the Monthly
Servicing Fee, (iv) amounts to reimburse the Class R Certificateholder for
expenses incurred by and reimbursable to it, [and (v) the Credit Enhancement
Fee]]. The final scheduled Distribution Date of this Class C Certificate is
______ __, ____ or the next succeeding Business Day if such date is not a
Business Day.
The Class R Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the funds in the Certificate Account to the
extent available for distribution to the Class R Certificateholder as provided
in the Agreement for payment hereunder and that the Trustee in its individual
capacity is not personally liable to the Class R Certificateholder for any
amounts payable under this Certificate or the Agreement or, except as expressly
provided in the Agreement, subject to any liability under the Agreement. By
acceptance of this Certificate, the Certificateholder agrees to disclosure of
his, her or its name and address to other Certificateholders under the
conditions specified in the Agreement.
C-2
<PAGE>
This Class R Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Class R Certificateholder
free of charge upon a written request to the Trustee.
As provided in the Agreement and subject to the limitations set forth
therein, the transfer of this Class R Certificate is registrable in the
Certificate Register of the Certificate Registrar upon surrender of this Class R
Certificate for registration of transfer at the office or agency maintained by
the Trustee in ________, accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Certificate Registrar duly executed by the
holder thereof or his or her attorney duly authorized in writing, and thereupon
one or more new Class R Certificates evidencing the same aggregate amount of
Class R Certificates will be issued to the designated transferee or transferees.
As provided in the Agreement and subject to certain limitations therein set
forth, this Class R Certificate is exchangeable for new Class R Certificates of
authorized denominations evidencing the same aggregate Percentage Interest as
requested by the holder surrendering the same.
No transfer of a Class R Certificate will be made unless such transfer is
exempt from the registration requirements of the Securities Act of 1933, as
amended, and any applicable state securities laws or is made in accordance with
said Act and laws. The Trustee, the Company or CIT Consumer Finance may require
an opinion of counsel acceptable to and in form and substance satisfactory to
the Trustee, the Company and CIT Consumer Finance that such transfer is exempt
(describing the applicable exemption and the basis therefor) from or is being
made pursuant to the registration requirements of the Securities Act of 1933, as
amended, and of any applicable statute of any state, and the transferee shall
execute an investment letter in the form described by the Agreement. The Holder
hereof desiring to effect such transfer shall, and does hereby agree to,
indemnify the Trustee, the Master Servicer and the Company against any liability
that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws.
Neither this Certificate nor any beneficial interest herein may be directly
or indirectly, assigned, sold, pledged, hypothecated or otherwise transferred
except upon satisfaction of the conditions set forth in Section 9.02(d) of the
Agreement pursuant to which this Certificate was issued. Any attempted transfer
in violation of such restrictions shall be null and void and shall vest no
rights in any purported transferee, and shall subject the Holder hereof to
liability for any tax imposed (and related expenses, if any) with respect to
such attempted transfer.
No service charge will be made for any such registration of transfer of
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
The Company, the Master Servicer, the Trustee and the Certificate Registrar
and any agent of the Company, the Master Servicer, the Trustee or the
Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and
C-3
<PAGE>
none of the Company, the Master Servicer, the Trustee, the Certificate Registrar
nor any such agent shall be affected by notice to the contrary.
[The holder of this Class R Certificate, by acceptance hereof, agrees that,
in accordance with the requirements of Section 860D(b)(1) of the Code, the
federal tax return of the Trust for its first taxable year shall provide that
the Trust elects to be treated as a "real estate mortgage investment conduit" (a
"REMIC") under the Code for such taxable year and all subsequent taxable years.
The Certificates shall be "regular interests" in the REMIC and the Class R
Certificates shall be the "residual interest" in the REMIC.]
Unless this Certificate has been authenticated by the Trustee or its
Authenticating Agent, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purposes.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed.
Dated: THE CIT GROUP SECURITIZATION
CORPORATION III
By:_________________________
Authorized Officer
[Form of Certificate of Authentication]
This is one of the Certificates referred
to in the within mentioned Agreement.
_______________________, or [TRUSTEE]
Authenticating Agent
By______________________ By:_________________________
Authorized Signatory Authorized Signatory
C-4
<PAGE>
Exhibit D
[FORM OF ASSIGNMENT]
In accordance with the Pooling and Servicing Agreement (the "Agreement")
dated as of ______ __, 199_, among The CIT Group/Consumer Finance Inc. ("CIT
Consumer Finance"), The CIT Group Securitization Corporation III (the
"Company"), and __________________________ Chicago, as trustee (the "Trustee"),
the Company does hereby sell, transfer, assign, set over and otherwise convey to
the Trust created by the Agreement, to be held in trust as provided in the
Agreement, (i) all the right, title and interest of the Company in and to the
Mortgage Loans, including, without limitation, the security interest created
thereby and any related Mortgages and all interest and principal received by the
Company on or with respect to the Mortgage Loans (other than principal and
interest due on the Mortgage Loans before the Cut-off Date or the date of
origination, if later), (ii) all rights under any Hazard Insurance Policy
relating to a Mortgaged Property securing a Mortgage Loan for the benefit of the
creditor of such Mortgage Loan, (iii) the proceeds from any Mortgage Loan
Holders' Errors and Omissions Protection Policy and all rights under any blanket
hazard insurance policy to the extent they relate to the Mortgaged Properties,
(iv) all documents contained in the Mortgage Loan Files, and (v) all proceeds in
any way derived from any of the foregoing. All capitalized terms used herein
without definition have the meanings ascribed to such terms in the Agreement.
This Assignment is made pursuant to and upon the representation and
warranties on the part of the undersigned contained in Article III of the
Agreement and no others.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed this ___ day of ______ __, 199_.
THE CIT GROUP SECURITIZATION
CORPORATION III
By:__________________________
Name:
Title:
D-1
<PAGE>
Exhibit E
THE CIT GROUP/CONSUMER FINANCE, INC.
CERTIFICATE OF OFFICERS
The undersigned certify that they are the [title] and [title], respectively
of The CIT Group/Consumer Finance, Inc., a corporation organized under the laws
of Delaware ("CIT Consumer Finance"), and that as such they are duly authorized
to execute and deliver this certificate on behalf of CIT Consumer Finance in
connection with the Pooling and Servicing Agreement, dated as of ______ __, 199_
(the "Agreement"), among CIT Consumer Finance, The CIT Group Securitization
Corporation III and _______________, as Trustee (all capitalized terms used
herein without definition having the respective meanings specified in the
Agreement), and further certify that:
(i) attached hereto as Exhibit I is a true and correct copy of the
Articles of Incorporation of CIT Consumer Finance, together with all
amendments thereto as in effect on the date hereof;
(ii) attached hereto as Exhibit II is a true and correct copy of the
By-laws of CIT Consumer Finance, as amended, as in effect on the date
hereof;
(iii) the representations and warranties of CIT Consumer Finance
contained in Sections 3.01 and 3.04 of the Agreement are true and correct
on and as of the date hereof and, to the best of their knowledge, the
representations and warranties of CIT Consumer Finance contained in
Sections 3.02 and 3.03 of the Agreement are true and correct on and as of
the date hereof;
(iv) no event with respect to CIT Consumer Finance has occurred and is
continuing which would constitute an Event of Termination or an event that,
with notice or lapse of time or both, would become an Event of Termination
under the Agreement; and
E-1
<PAGE>
(v) each of the agreements and conditions of CIT Consumer Finance to
be performed on or before the date hereof pursuant to the Agreement have
been performed in all material respects.
IN WITNESS WHEREOF, we have affixed hereunto our signatures this ______ day
of ______ __, 199_.
_________________________
[Name]
[Title]
_________________________
[Name]
[Title]
E-2
<PAGE>
Exhibit F
[FORM OF OPINION OF COUNSEL FOR THE CIT GROUP/
CONSUMER FINANCE, INC.]
F-1
<PAGE>
Exhibit G
FORM OF TRUSTEE'S ACKNOWLEDGMENT AND CERTIFICATION
______________________________, a National Banking Association organized
under the laws of the United States, acting as trustee (the "Trustee") of the
trust created pursuant to the Pooling and Servicing Agreement dated as of ______
__, 199_ among The CIT Group Securitization Corporation III, The CIT
Group/Consumer Finance, Inc. and the Trustee (the "Agreement"), acknowledges,
pursuant to Section 2.03 of the Agreement, that the Trustee has received, and
holds in trust thereunder the following: (i) all right, title and interest in
the mortgage loans (including, without limitation, all security interests and
any and all rights to receive payments which are due pursuant thereto from and
after ______ __, 199_, but excluding any rights to receive payments which were
due pursuant thereto prior to ______ __, 199_), identified in the List of
Mortgage Loans delivered pursuant to Section 2.02(a) of the Agreement, which
list of Mortgage Loans is also attached as an Exhibit to the Agreement, (ii) all
rights under any Hazard Insurance Policy relating to a Mortgaged Property
securing a Mortgage Loan for the benefit of the creditor of such Mortgage Loan
and all rights under any blanket hazard insurance policy and the proceeds from
any Mortgage Loan Holders' Errors and Omissions Protection Policy, to the extent
they relate to the Mortgaged Properties, (iii) all documents contained in the
Mortgage Loan Files, provided that the Mortgage Loan Files will be held by the
Master Servicer, as custodian, for the benefit of the Certificateholders and the
Trustee, and (iv) all proceeds in any way derived from any of the foregoing. The
Trustee shall issue to, or upon the order of, the Company Certificates
representing ownership of a beneficial interest in 100% of the Trust.
Capitalized terms used herein have the meanings given them in the Agreement.
IN WITNESS WHEREOF, ________________________________, as Trustee, has
caused this acknowledgment to be executed by its duly authorized officer as of
this ___ day of ______, 199_.
[TRUSTEE], as Trustee
By_____________________
Its____________________
By_____________________
Its____________________
G-1
<PAGE>
Exhibit H
THE CIT GROUP/CONSUMER FINANCE, INC.
CERTIFICATE OF SERVICING OFFICERS
The undersigned certify that they are the [title] and [title], respectively
of The CIT Group/Consumer Finance, Inc., a corporation organized under the laws
of Delaware ("CIT Consumer Finance"), and that as such they are duly authorized
to execute and deliver this certificate on behalf of CIT Consumer Finance
pursuant to Section 6.02 of the Pooling and Servicing Agreement, dated as of
______ __, 199_ (the "Agreement"), among CIT Consumer Finance, The CIT Group
Securitization Corporation III and ____________________________, as Trustee (all
capitalized terms used herein without definition having the respective meanings
specified in the Agreement), and further certify that:
The Monthly Report for the period from _________ to _______ attached to
this certificate is complete and accurate in accordance with the requirements of
Sections 6.01 and 6.02 of the Agreement; and
As of the date hereof, no Event of Termination or event that with notice or
lapse of time or both would become an Event of Termination has occurred.
IN WITNESS WHEREOF, we have affixed hereunto our signatures this ____ day
of _____, 199_.
THE CIT GROUP/CONSUMER FINANCE, INC.
By_________________________________
[Name]
[Title]
By_________________________________
[Name]
[Title]
H-1
<PAGE>
Exhibit I-1
THE CIT GROUP/CONSUMER FINANCE, INC.
CERTIFICATE REGARDING REPURCHASED CONTRACTS
The undersigned certify that they are [title] and [title], respectively of
The CIT Group/Consumer Finance, Inc., a corporation organized under the laws of
Delaware ("CIT Consumer Finance"), and that as such they are duly authorized to
execute and deliver this certificate on behalf of CIT Consumer Finance pursuant
to Section 3.05(a) of the Pooling and Servicing Agreement, dated as of ______
__, 199_ (the "Agreement"), among CIT Consumer Finance, The CIT Group
Securitization Corporation III and ____________________________, as Trustee (all
capitalized terms used herein without definition having the respective meanings
specified in the Agreement), and further certify that :
1. The Mortgage Loans on the attached schedule are to be repurchased on the
date hereof pursuant to Section 3.05 of the Agreement.
2. Upon deposit of the Repurchase Price for such Mortgage Loans, such
Mortgage Loans may be assigned by the Trustee to CIT Consumer Finance.
IN WITNESS WHEREOF, we have affixed hereunto our signatures this ____ day
of ______, 199_.
THE CIT GROUP/CONSUMER FINANCE, INC.
By:_______________________________
[Name]
[Title]
By:_______________________________
[Name]
[Title]
I-1
<PAGE>
Exhibit I-2
THE CIT GROUP/CONSUMER FINANCE, INC.
CERTIFICATE REGARDING SUBSTITUTED CONTRACTS
The undersigned certify that they are [title] and [title], respectively of
The CIT Group/Consumer Finance, Inc., a corporation organized under the laws of
Delaware ("CIT Consumer Finance"), and that as such they are duly authorized to
execute and deliver this certificate on behalf of CIT Consumer Finance pursuant
to Section 3.05(b) of the Pooling and Servicing Agreement, dated as of ______
__, 199_ (the "Agreement"), among CIT Consumer Finance, The CIT Group
Securitization Corporation III and _______________________________, as Trustee
(all capitalized terms used herein without definition having the respective
meanings specified in the Agreement), and further certify that:
1. The Mortgage Loan and Mortgage Loan File for each such Eligible
Substitute Mortgage Loan [are being held by CIT Consumer Finance, as Master
Servicer] [have been delivered to ______, the successor Master Servicer].
2. The Mortgage Loans on the attached schedule are to be substituted on the
date hereof pursuant to Section 3.05(b) of the Agreement and each such Mortgage
Loan is an Eligible Substitute Mortgage Loan [description, as to each Mortgage
Loan, as to how it satisfies the definition of "Eligible Substitute Mortgage
Loan"].
3. The UCC-1 financing statements in respect of the Mortgage Loans to be
substituted, in the form required by Section 3.05(b)(iii) of the Agreement, has
been filed with the appropriate offices.
[4. There has been deposited in the Certificate Account the amounts listed
on the schedule attached hereto as the amount by which the Scheduled Certificate
Balance of each Replaced Mortgage Loan exceeds the Scheduled Certificate Balance
of each Mortgage Loan being substituted therefor.]
I-2
<PAGE>
IN WITNESS WHEREOF, we have affixed hereunto our signatures this ____ day
of ______, 199_.
THE CIT GROUP/CONSUMER FINANCE, INC.
By:_______________________________
[Name]
[Title] By:_______________________________
[Name]
[Title]
I-3
<PAGE>
Exhibit J
FORM OF INVESTMENT LETTER
[Date]
The CIT Group Securitization Corporation III
650 CIT Drive
Livingston, New Jersey 07039
Attention: President
The CIT Group/Consumer Finance, Inc.
650 CIT Drive
Livingston, New Jersey 07039
Attention: President
[ ]
Re: Purchase of $_______ Principal Amount of The CIT Group Securitization
Corporation III Home Equity Loan Senior/Subordinate Asset Backed
Certificates Series 199_ - Class [B] [R] Certificates
Dear Sirs:
In connection with our purchase of the above referenced Certificates (the
"Certificates"), the undersigned (the "Purchaser") hereby certifies and agrees
on behalf of the Purchaser:
1. The Purchaser is an accredited investor and is acquiring the
Certificates for its own account or accounts for which it exercises sole
investment discretion and not with a view to, or for sale in connection
with, any distribution thereof, subject nevertheless to any requirement of
law that the disposition of the Purchaser's property shall at all times be
and remain within its control.
2. The Purchaser has received (a) a copy of the __________ dated
______ __, ____, relating to the Certificates, (b) a copy of the Pooling
and Servicing Agreement dated as of ______ __, 199_ (the "Pooling and
Servicing Agreement"), among The CIT Group Securitization Corporation III,
the CIT Group/Consumer Finance, Inc. and __________________, as Trustee,
and (c) other information concerning the Certificates and the Mortgage
Loans (as defined in the Pooling and Servicing Agreement) requested by the
Purchaser and relevant to the Purchaser's decision to purchase the
Certificates.
J-1
<PAGE>
3. The Purchaser has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Certificates and the Purchaser is able to bear the
economic risks of such an investment.
4. The Purchaser will comply with all applicable federal and state
securities laws in connection with any subsequent resale of the
Certificates by the Purchaser.
5. The Purchaser understands that the Certificates have not been and
will not be registered under the Securities Act of 1933, as amended (the
"Securities Act"), that neither the Company, the Seller nor the Trust (as
such terms are defined in the Pooling and Servicing Agreement) is required
to so register the Certificates, and that the Certificates may be resold
only if registered pursuant to the provisions of the Securities Act or if
an exemption from registration thereunder is available.
6. If the Purchaser sells any of the Certificates, the Purchaser, at
its option, will either (a) obtain from any accredited investor that
purchases any Certificate from it a certificate containing the same
representations, warranties and agreements contained in the foregoing
paragraphs 1, 2(b), 3 through 5 and this paragraph 6, (b) deliver an
opinion of counsel to such institutional investor, addressed to the Seller,
the Master Servicer and the Trustee (as such terms are defined in the
Pooling and Servicing Agreement), to the effect that such sale is in
compliance with all applicable federal and state securities laws, or (c)
comply with the requirements of paragraph Second of Section 9.02(b) of the
Pooling and Servicing Agreement.
Very truly yours,
_______________________________________
(Name of Purchaser)
By:____________________________________
(Authorized Officer)
J-2
<PAGE>
Exhibit K-1
[FORM OF TRANSFEROR'S CERTIFICATE]
THE CIT GROUP SECURITIZATION CORPORATION III
HOME EQUITY LOAN
SENIOR/SUBORDINATE ASSET BACKED CERTIFICATES
SERIES 199_
____________________________________________
The undersigned, a duly authorized representative of _______________ (the
"Transferor"), pursuant to the Pooling and Servicing Agreement dated as of
______ __, 199_ (the "Pooling and Servicing Agreement"), among The CIT Group
Securitization Corporation III (the "Company"), The CIT Group/Consumer Finance,
Inc. and ______________________________, as trustee (the "Trustee"), does hereby
certify to the Company and the Trustee that:
1. The undersigned is duly authorized to execute and deliver this
Certificate to the Trustee and to the Company.
2. This Certificate is delivered pursuant to Section 9.02(b) of the
Pooling and Servicing Agreement.
3. In connection with the transfer (the "Transfer") of Investor
Certificate No. [B-_] [R-_] from the Transferor to _________ (the
"Transferee"):
(a) the Transferor reasonably believes the Transferee to be a
Qualified Institutional Buyer as defined in Rule 144A ("Rule 144A")
under the Securities Act of 1933, as amended; and
(b) registration of the Transfer is to be made in reliance upon the
exemption from transfer contained in Rule 144A.
IN WITNESS WHEREOF, the undersigned has duly executed this certificate this
____ day of ______, ____.
______________________________
Name:
Title:
K-1
<PAGE>
Exhibit K-2
[FORM OF TRANSFEREE'S CERTIFICATE]
THE CIT GROUP SECURITIZATION CORPORATION III
HOME EQUITY LOAN
SENIOR/SUBORDINATE ASSET BACKED CERTIFICATES
SERIES 199_
____________________________________________
The undersigned, a duly authorized representative of _______________ (the
"Transferee"), pursuant to the Pooling and Servicing Agreement dated as of
______ __, 199_ (the "Pooling and Servicing Agreement"), among The CIT Group
Securitization Corporation III (the "Company"), The CIT Group/Consumer Finance,
Inc. and ____________________, as trustee (the "Trustee"), does hereby certify
to the Company and the Trustee that:
1. The undersigned is duly authorized to execute and deliver this
Certificate to the Trustee and to the Company.
2. This Certificate is delivered pursuant to Section 9.02(b) of the
Pooling and Servicing Agreement.
3. In connection with the transfer (the "Transfer") of Investor
Certificate No. [B-_] [R-_] from _______________ (the "Transferor") to the
Transferee:
(a) the Transferee is a Qualified Institutional Buyer as defined in
Rule 144A ("Rule 144A") under the Securities Act of 1933, as amended
(the "Securities Act");
(b) the Transferee acknowledges that the Transferor, the Company and
the Trustee are relying upon the Transferee's representations set
forth herein in order to claim the exemption from registration
contained in Rule 144A;
(c) [the Transferee requested information from the Master Servicer
concerning the assets of the Trust, and received from the Master
Servicer a copy of the monthly statements relating to the Trust for
the period through _____, ____ [,] [and] the disclosure document
annexed hereto as Annex 1 [and _____________.]
OR
K-2
<PAGE>
[(c) the Transferee did not request information from the Master
Servicer and the Trust Assets.]
The Transferee acknowledges that the Certificate referred to above has not
been registered under the Securities Act or under any state securities or "Blue
Sky" laws, in reliance upon exemptions provided by such Acts.
IN WITNESS WHEREOF, the undersigned has duly executed this certificate this
____ day of ______, ____.
_____________________________
Name:
Title:
K-3
<PAGE>
Exhibit L
THE CIT GROUP SECURITIZATION CORPORATION III
HOME EQUITY LOAN
SENIOR/SUBORDINATE ASSET BACKED
CERTIFICATES, SERIES 199_
MONTHLY REPORT
DISTRIBUTION DATE:____
CLASS A CERTIFICATES
Distribution Amounts
1. Aggregate Class A Distribution $_____________
2. Aggregate Class B Distribution $_____________
3. Aggregate Class R Distribution $_____________
Interest
1. Aggregate Class A Interest $_____________
2. Amount applied to Unpaid $_____________
Class A Interest Shortfall
3. Remaining Unpaid Class A $_____________
Interest Shortfall
Principal
4. Formula Principal Distribution Amount $_____________
(a) Scheduled Principal $_____________
(b) Principal Prepayments $_____________
(c) Liquidated Mortgage Loans $_____________
(d) Repurchases $_____________
5. Pool Scheduled Certificate Balance $_____________
L-1
<PAGE>
[6. Class A Scheduled Principal Deficiency
Amount (if any) following prior
Distribution Date $_____________]
7. Class A Principal Distribution Amount $_____________
8. Class A Certificate Balance $_____________
9. Class B Certificate Balance $_____________
[10. Class A Scheduled Principal Deficiency
Amount (if any) following current
Distribution Date $_____________]
11. Class A Pool Factor (Pool Scheduled
Certificate Balance divided by Cut-off
Date Certificate Balance) $_____________
Delinquency Information
Aggregate Principal
Number Balance
------ -------
12. Delinquent Mortgage Loans
(a) 30-59 days ______ $__________________
(b) 60-89 days ______ $__________________
(c) 90 days or more ______ $__________________
13. Foreclosed Mortgage Loans ______ $__________________
14. Foreclosed Mortgage Loans
Remaining in Inventory ______ $__________________
CLASS B/CLASS R CERTIFICATES
Amount Available $_____________
[Available Credit Enhancement Amount] $_____________
Class B Certificates
Interest
1. Aggregate Class B Interest $_____________
2. Amount applied to Unpaid
Class B Interest Shortfall $_____________
L-2
<PAGE>
3. Remaining Unpaid Class B
Interest Shortfall $_____________
Principal
4. Aggregate Principal (until
Class A Certificate Balance reaches zero,
Aggregate Principal equals Class B
Principal Loss Liquidation Amount) $_____________
5. Principal Prepayments $_____________
6. Class B Principal Loss Liquidation
Amount $_____________
7. Amount, if any, by which the [Class B
Distribution Amount] for such Remittance
Date exceeds the Amount Available in the
Certificate Account available for
distributions on Class B Certificates
on such Distribution Date. $_____________
[8. Class B Enhancement Payment $_____________]
9. Class B Certificate Balance $_____________
Class R Certificates
10. Class R Residual Payment $_________
a. The amount (if any) by which
the Amount Available exceeds
the [Class A Distribution
Amount] and the Class
B Distribution
Amount]. $_________
L-3
<PAGE>
EXHIBIT M
FORM OF TRANSFER AFFIDAVIT
DATE OF )
: ss.:
COUNTY OF )
The undersigned, being first duly sworn, deposes and says as follows:
1. The undersigned is an officer of __________, the proposed Transferee of
an Ownership Interest in the Class R Certificate of the Home Equity Loan
Senior/Subordinate Asset Backed Certificates Series ____, issued pursuant to the
Pooling and Servicing Agreement, dated as of ______ __, 199_ (the "Agreement"),
among The CIT Group Securitization Corporation III, The CIT Group/Consumer
Finance, Inc. and _____________________________, as trustee. Capitalized terms
used but not defined herein shall have the meanings ascribed to such terms in
the Agreement. The Transferee has authorized the undersigned to take this
affidavit on behalf of the Transferee.
2. The Transferee is, as of the date hereof, and will be, as of the date of
the Transfer, a Permitted Transferee. The Transferee is acquiring its Ownership
Interest in the Class R Certificate either (i) for its own account or (ii) as
nominee, trustee or agent for another person and has attached hereto an
Affidavit from such person in substantially the same form as this Affidavit. The
Transferee has no knowledge that any such Affidavit is false.
3. The Transferee has been advised and understands that (i) a tax shall be
imposed on Transfers of Ownership Interests in the Class R Certificate to
persons that are not permitted Transferees; (ii) such tax would be imposed on
the transferor, or, if such Transfer is through an agent (which includes a
broker, nominee or middleman) for a person that is not a permitted Transferee,
on such agent; and (iii) the person otherwise liable for the tax shall be
relieved of liability for the tax if the subsequent Transferee furnishes to such
person an affidavit that such subsequent Transferee is a Permitted transferee
and, at the time of Transfer, such person does not have actual knowledge that
the affidavit is false.
4. The Transferee has been advised and understands that a tax shall be
imposed on a "pass-through entity" holding Ownership Interest in the Class R
Certificate if at any time during the taxable year of the pass-through entity a
person that is not a Permitted Transferee is the record holder of an interest in
such entity. The Transferee understands that no tax will be imposed for any
period for which the record holder furnishes to the pass-through entity an
affidavit stating that the record holder is a Permitted Transferee and the
pass-through entity does not have actual knowledge that such affidavit is false.
(For this purpose, a "pass-through entity" includes a regulated investment
company, a real estate investment trust or common trust fund, a partnership,
trust or estate, and certain cooperatives and, except as may be provided in
Treasury Regulations, persons holding interests in pass-through entities as a
nominee for another Person.)
M-1
<PAGE>
5. The Transferee has reviewed the provisions of Section 9.02 of the
Agreement (attached hereto as Exhibit 1 and incorporated herein by reference)
and understands the legal consequences of the acquisition of an Ownership
Interest in the Class R Certificate including, without limitation, the
restrictions on subsequent Transfers and the provisions regarding voiding the
Transfers and mandatory sales. The Transferee expressly agrees to be bound by
and abide by the provisions of Section 9.02 of the Agreement and the
restrictions noted on the face of the Class R Certificate. The Transferee
understands and agrees that any breach of any of the representations included
herein shall render the attempted Transfer null and void.
6. The Transferee agrees to require a Transfer Affidavit from any person to
whom the Transferee attempts to Transfer its Ownership Interest in the Class R
Certificate, and in connection with any Transfer by a person for whom the
Transferee is acting as nominee, trustee or agent. The Transferee agrees to not
Transfer its Ownership Interest or cause any Ownership Interest to be
Transferred to any person that the Transferee knows is not a Permitted
Transferee.
7. The Transferee represents and warrants that (i) no purpose of its
purchase of an Ownership Interest in the Class R Certificates is or will be to
impede the assessment or collection of any tax, and (ii) it has no present
knowledge or expectation that it will become insolvent or subject to a
bankruptcy proceeding for so long as it holds the Class R Certificate.
8. The Transferee's taxpayer identification number is ___________.
M-2
<PAGE>
IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
duly authorized officer this ___ day of __________.
[NAME OF TRANSFEREE]
By: ________________________
Name:
Title:
M-3
<PAGE>
EXHIBIT N
LIST OF MORTGAGE LOANS
- --------
1 Class B definitions apply only where the regular interests in the REMIC are
represented by a senior (Class A) and a subordinated (Class B) class.
N-1
Exhibit 4.2
Form of Limited Guarantee
<PAGE>
LIMITED GUARANTEE, dated as of _____, 199_, made by The CIT Group Holdings,
Inc. ("Holdings") in favor of , not in its individual capacity but solely as
Trustee (the "Trustee") under the Pooling and Servicing Agreement dated as of
_____, 199_ (the "Pooling and Servicing Agreement"), among The CIT Group
Securitization Corporation III (the "Company"), The CIT Group/Consumer Finance,
Inc. ("CIT Consumer Finance") and the Trustee for the benefit of the
Certificateholders.
WHEREAS, Section _____ of the Pooling and Servicing Agreement requires the
execution and delivery of this Limited Guarantee by Holdings on or before the
Closing Date (as defined in the Pooling and Servicing Agreement);
WHEREAS, Holdings will derive substantial benefit from the transactions
contemplated by the Pooling and Servicing Agreement, including, without
limitation, the payment of the Guarantee Fee (as defined in the Pooling and
Servicing Agreement) to Holdings and the sale of the mortgage loans by Holdings'
subsidiary, CIT Consumer Finance, to the Company, the sale of the mortgage loans
by the Company to the CIT Home Equity Loan Trust 199_-_, and the issuance and
sale of the Certificates (as defined in the Pooling and Servicing Agreement) in
the manner contemplated therein;
WHEREAS, capitalized terms used herein and not otherwise defined herein
shall have the meaning ascribed to such terms in the Pooling and Servicing
Agreement; and
WHEREAS, in order to induce the parties to the Pooling and Servicing
Agreement to enter into the Pooling and Servicing Agreement and perform their
respective obligations thereunder, Holdings is willing to execute and deliver
this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Holdings hereby unconditionally
agrees as follows:
SECTION 1. The Guarantee.
(a) Holdings hereby unconditionally and absolutely guarantees the payment
to the Trustee, on behalf of the Certificateholders, of the Guarantee Payment
due to the Certificateholders on each Distribution Date. Not later than the
third Business Day prior to each Distribution Date, the Servicer shall notify
Holdings of the amount of the Guarantee Payment, if any, for such Distribution
Date and not later than the Business Day preceding each Distribution Date,
Holdings shall deposit the Guarantee Payment, if any, for such Distribution Date
into the Collection Account.
(b) Notwithstanding the obligation of Holdings in clause (a) above, in no
event will Holdings be obligated to make payments under this Agreement, if the
aggregate amounts paid under this Agreement would exceed $____________ (the
"Guarantee Payment Limit"). Upon the date on which the aggregate amounts paid
hereunder equal the Guarantee Payment Limit, Holdings shall have no further
liability under this Limited Guarantee, and Holdings shall be deemed to have
satisfied in full all of its obligations under this Limited Guarantee.
<PAGE>
(c) The obligations of Holdings under this Limited Guarantee shall not
terminate upon or otherwise be reduced by a Service Transfer pursuant to Article
VII of the Pooling and Servicing Agreement, by any amendment to the Pooling and
Servicing Agreement, the Purchase Agreement, any Subsequent Purchase Agreement
or any other agreement relating to the Certificateholders or any breach by any
party to any such agreement of its obligations thereunder or the failure of
Holdings to receive all or any part of the Guarantee Fee.
(d) The obligations of Holdings under this Limited Guarantee shall
terminate on the earlier of (i) the date referred to in Section 1(b) hereof,
(ii) one year following the Distribution Date on which the Certificate Balance
has been reduced to zero and all accrued interest on the Certificates has been
paid in full, or (iii) the date on which there shall have been deposited
Eligible Investments with the Trustee equal to the Defeasance Amount. The
"Defeasance Amount" is equal to such amount as shall satisfy the Rating Agency
Condition with respect to the Certificates.
(e) The obligation of Holdings to make the Guarantee Payments described in
clause (a) above shall be unconditional and irrevocable, subject to the
limitation set forth in clause (b) above.
SECTION 2. Representations and Warranties.
In making this Limited Guarantee Holdings represents and warrants to the
Trustee and the Certificateholders that:
(a) Organization and Good Standing. Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the corporate power to own its assets
and to transact the business in which it is currently engaged. Holdings is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the character of the business transacted by it or
properties owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or other) of Holdings.
(b) Authorization; Binding Obligations. Holdings has the power and
authority to make, execute, deliver and perform this Limited Guarantee and all
of the transactions contemplated under this Limited Guarantee, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Limited Guarantee. When executed and delivered, this Limited Guarantee
will constitute the legal, valid and binding obligation of Holdings enforceable
in accordance with its terms, except as enforcement of such terms may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and by the availability of equitable remedies.
(c) No Consent Required. Holdings is not required to obtain the consent of
any other party or any consent, license, approval or authorization from, or
registration or declaration with, any governmental authority, bureau or agency
in connection with the execution, delivery, performance, validity or
enforceability of this Limited Guarantee the failure of which so to obtain would
have a material adverse effect on the business, properties, assets or condition
(financial or otherwise) of Holdings.
-2-
<PAGE>
(d) No Violations. The execution, delivery and performance of this Limited
Guarantee by Holdings will not violate any provision of any existing law or
regulation or any order or decree of any court or the Articles of Incorporation
or Bylaws of Holdings, or constitute a material breach of any mortgage,
indenture, contract or other agreement to which Holdings is a party or by which
Holdings may be bound.
(e) Litigation. No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the knowledge
of Holdings threatened, against Holdings or any of its properties or with
respect to this Limited Guarantee or the Certificates which, if adversely
determined, would in the opinion of Holdings have a material adverse effect on
the transactions contemplated by this Limited Guarantee.
SECTION 3. Miscellaneous.
(a) All payments by Holdings under this Limited Guarantee will be made free
and clear of and without deduction for any present or future income, stamp or
other taxes, levies, imposts, deductions, charges, fees, withholdings,
liabilities, restrictions or conditions of any nature whatsoever now or
hereafter imposed, levied, collected, assessed or withheld by any jurisdiction
or by any political subdivision or taxing authority thereof or therein, and all
interest, penalties or similar liabilities ("Taxes"); provided, however, that
Holdings shall not be obligated to pay any amount allocable to Taxes (i) which
the Trust was required to withhold or (ii) which result or were incurred by
reason of the ownership of any interest in a Certificate by any non-U.S. Person
which is not eligible for a complete exemption from U.S. withholding tax on U.S.
source interest.
(b) Holdings will not exercise any rights which it may acquire by way of
subrogation hereunder, by any payment made by it hereunder or otherwise, until
such date when all amounts of principal and interest payable to the Holders of
the Certificates shall have been paid in full. If any amount shall be paid to
Holdings on account of such subrogation rights at any time when all of the
amounts of principal and interest payable to the Holders of the Certificates
shall not have been paid in full, such amount shall be held in trust for the
benefit of the Certificateholders, shall be segregated from the other funds of
Holdings and shall forthwith be applied in whole or in part against such amounts
owed in accordance with the terms of the Pooling and Servicing Agreement.
(c) This Limited Guarantee is not secured by a security interest in, pledge
of or lien on any assets of Holdings or any of its subsidiaries. The Limited
Guarantee is a senior, unsecured general obligation of Holdings and is not
supported by any letter of credit or other credit enhancement arrangement.
(d) This Limited Guarantee may be amended from time to time by Holdings,
the Servicer and the Trustee, without the consent of any of the
Certificateholders, (i) to correct manifest error, to cure any ambiguity, to
correct or supplement any provisions herein or therein which may be inconsistent
with any other provisions herein or therein, as the case may be, (ii) to add any
other provisions with respect to matters or questions arising under this Limited
Guarantee which shall not be inconsistent with the provisions of this Limited
Guarantee, and (iii) to add or amend any provisions as required by Moody's,
Standard & Poor's or another NRSRO in order to maintain or
-3-
<PAGE>
improve the rating of the Certificates (it being understood that, after the
rating required by Section _____ of the Pooling and Servicing Agreement has been
obtained, neither the Trustee, the Company, CIT Consumer Finance or Holdings is
obligated to maintain or improve such rating); provided, however, that such
action shall not, as evidenced by an opinion of counsel for Holdings, adversely
affect in any material respect the interests of any Certificateholder.
This Limited Guarantee may also be amended from time to time by Holdings,
the Servicer and the Trustee, with the consent of Holders of the Certificates
aggregating 51% or more of the Certificate Balance as of the preceding
Determination Date, for the purpose of adding any of the provisions to or
changing in any manner or eliminating any of the provisions of this Limited
Guarantee or of modifying in any manner the rights of the Certificateholders;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, any Guarantee Payment or (ii) grant by
contract or operation of law any defense to the payment of any Guarantee Payment
without the consent of the Holder of each Certificate affected thereby.
The Guarantor shall provide Moody's and Standard & Poor's with a copy of
any amendment made to this Limited Guarantee no later than five (5) days after
the execution and delivery thereof.
(e) This Limited Guarantee shall be construed in accordance with and
governed by the internal laws of the State of New York applicable to contracts
made and to be performed thereon without regard to conflicts of law principles.
Any litigation relating to or arising out of this Limited Guarantee shall be
brought and maintained in the courts of the State of New York or in the United
States District Court for the Southern District of New York.
(f) Holdings agrees that, prior to the date which is one year and one day
after the payment in full of the Certificates it will not institute against, or
join any other person in instituting against, the Company or the Trust any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other proceedings under any Federal or state bankruptcy or similar law.
(g) Holdings hereby acknowledges that the Guarantee Fee is subordinated to
payments in respect of the Certificates and the Monthly Servicing Fee to the
extent provided in the Pooling and Servicing Agreement and will be payable only
if and to the extent funds are available therefor in accordance with the Pooling
and Servicing Agreement. Holdings further acknowledges that the failure of
Holdings to receive, in whole or in part, payment of the Guarantee Fee shall not
in any way diminish Holdings' obligations hereunder and Holdings hereby waives
any right of set-off or counterclaim against the Trust for the failure to
receive all or any part of such Guarantee Fee or for the failure to receive
reimbursement for Guarantee Payments.
-4-
<PAGE>
IN WITNESS WHEREOF, The CIT Group Holdings, Inc. has duly executed this
Limited Guarantee as of the day and year first written above.
THE CIT GROUP HOLDINGS, INC.
By:__________________________________
Name:
Title:
-5-
Exhibit 5.1
Opinion of Schulte Roth & Zabel LLP
<PAGE>
February 21, 1997
The CIT Group Securitization Corporation III
650 CIT Drive
Livingston, New Jersey 07039
The CIT Group Holdings, Inc.
1211 Avenue of the Americas
New York, New York 10036
Dear Sirs:
We have acted as special counsel to you (the "Corporations") in connection
with the Registration Statement on Form S-3 (the "Registration Statement"),
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the asset
backed certificates and the limited guarantees (the "Guarantees") of certain of
the Certificates by The CIT Group Holdings, Inc. ("Holdings"), each described in
the prospectus and prospectus supplement which form a part of the Registration
Statement (the "Prospectus" and the "Prospectus Supplement," respectively). Each
series of Certificates will be issued pursuant to a pooling and servicing
agreement (the "Pooling and Servicing Agreement") substantially in the form
filed as Exhibit 4.1 to the Registration Statement, pursuant to which The CIT
Group Securitization Corporation III will originate the CIT Home Equity Loan
Trust (the "Trust"). Certain rights of the holders of the Certificates will be
governed by the Pooling and Servicing Agreement.
In connection with this opinion, we have examined signed copies of the
Registration Statement and originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Corporations and such
agreements, certificates of public officials, certificates of officers or
representatives of the Corporations and others, and such other documents,
certificates and corporate or other records as we have deemed necessary or
appropriate as a basis for this opinion.
<PAGE>
The CIT Group Securitization Corporation III
The CIT Group Holdings, Inc.
February 21, 1997
Page 2
As to all matters of fact, we have relied upon and assumed the accuracy of
statements and representations of officers and other representatives of the
Corporations and others.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons signing or delivering any instrument, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents.
We have also assumed, with respect to the Guarantees and the Pooling and
Servicing Agreement (collectively, the "Basic Documents"), that: (a) each of the
Basic Documents will be duly executed and delivered by each of the parties
thereto prior to the issuance of any of the Certificates thereunder; (b) at the
time of such execution, each such party, other than the Corporations, will be
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and will have all requisite power and authority
to execute, deliver and perform its obligations under each of the Basic
Documents; (c) the execution and delivery of the Basic Documents and performance
of such obligations will have been duly authorized by all necessary actions on
the part of each such party, other than the Corporations; (d) the Basic
Documents will be the legal, valid and binding obligation of each such party,
other than the Corporations, and will be enforceable against each such party,
other than the Corporations, in accordance with its terms; and (e) during the
period from the date hereof until the date of such execution and delivery, there
will be no change in (i) any relevant authorization, law or regulation, or
interpretation thereof, (ii) the terms and conditions of the Basic Documents or
(iii) any set of facts or circumstances relating to the Basic Documents.
Based upon the foregoing, we are of the opinion that: (a) assuming the due
execution of the Basic Documents, each in substantially the form presented to
us, upon the issuance, authentication and delivery of the Certificates in
accordance with the terms of the Pooling and Servicing Agreement against payment
therefor as contemplated by the Prospectus and the Prospectus Supplement, the
Certificates will constitute valid and binding obligations of the Trust, each
enforceable in accordance with its terms; and (b) the Guarantees have been duly
authorized and, when duly executed by Holdings and issued and delivered in
accordance with the terms of the Pooling and Servicing Agreement as contemplated
by the Prospectus and the Prospectus Supplement, will be valid and binding
obligations of Holdings, enforceable in accordance with their terms, subject as
to enforcement of remedies with respect to (a) and (b) above to applicable
bankruptcy, reorganization, fraudulent conveyance, insolvency,
<PAGE>
The CIT Group Securitization Corporation III
The CIT Group Holdings, Inc.
February 21, 1997
Page 3
moratorium or other laws affecting creditors' rights generally from time to time
in effect and to general principles of equity, and will be entitled to the
benefits of the Basic Documents.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm appearing under the
heading "Legal Matters" in the Prospectus. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the General Rules and Regulations of
the Commission thereunder.
Very truly yours,
/s/ Schulte Roth & Zabel LLP
Exhibit 8.1
Opinion of Schulte Roth & Zabel LLP
<PAGE>
February 21, 1997
The CIT Group Securitization Corporation III
650 CIT Drive
Livingston, New Jersey 07039
The CIT Group Holdings, Inc.
1211 Avenue of the Americas
New York, New York 10036
Dear Sirs:
We have acted as special counsel to you in connection with the Registration
Statement on Form S-3 (the "Registration Statement"), filed with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the asset backed certificates (the
"Certificates") and the limited guarantees (the "Guarantees") of certain of the
Certificates by The CIT Group Holdings, Inc. ("Holdings"), each described in the
prospectus and prospectus supplement which form a part of the Registration
Statement (the "Prospectus" and the "Prospectus Supplement"). Each series of
Certificates will be issued pursuant to a pooling and servicing agreement (the
"Pooling and Servicing Agreement") substantially in the form filed as Exhibit
4.1 to the Registration Statement, pursuant to which The CIT Group
Securitization Corporation III will originate the CIT Home Equity Loan Trust
(the "Trust"). Certain rights of the holders of the Certificates will be
governed by the Pooling and Servicing Agreement.
We hereby confirm that the statements set forth in the Prospectus and the
Prospectus Supplement under the heading "Certain Federal Income Tax
Consequences" accurately describe the material Federal income tax consequences
to holders of the Certificates.
<PAGE>
The CIT Group Securitization Corporation III
The CIT Group Holdings, Inc.
February 21, 1997
Page 2
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act or the General Rules and Regulations of the Commission
thereunder.
Very truly yours,
/s/ Schulte Roth & Zabel LLP
Exhibit 10.1
Form of Mortgage Loan Purchase Agreement
<PAGE>
FORM OF MORTGAGE LOAN
PURCHASE AGREEMENT
This Mortgage Loan Purchase Agreement dated as of ________________, 199_
(the "Agreement"), is between THE CIT GROUP SECURITIZATION CORPORATION III, as
purchaser (the "Purchaser"), and THE CIT GROUP/CONSUMER FINANCE, INC., as seller
(the "Seller").
Subject to the terms hereof, the Seller agrees to sell, and the Purchaser
agrees to purchase, the mortgage loans set forth on Exhibit A (collectively, the
"Initial Mortgage Loans"), having an aggregate outstanding principal balance as
of ________________, 199_ (the "Initial Cut-off Date") of approximately
$____________.
It is the intention of the Seller and the Purchaser that the Purchaser
shall sell the Initial Mortgage Loans to the CIT Home Equity Loan Trust 199_ - _
and shall enter into a Pooling and Servicing Agreement, dated as of the date
hereof, among the Purchaser, the Seller, as seller and master servicer and
___________, as trustee, pursuant to which Home Equity Loan Asset Backed
Certificates, Series 199_-_ (the "Certificates"), evidencing ownership interests
in the Initial Mortgage Loans will be issued.
The Purchaser and the Seller wish to prescribe the terms and conditions of
the purchase by the Purchaser of the Initial Mortgage Loans and the servicing
and administration of the Initial Mortgage Loans.
In consideration of the premises and the mutual agreements hereinafter set
forth, the Purchaser and the Seller agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Certain capitalized terms used in this Agreement
shall have the respective meanings assigned to them in the Pooling and Servicing
Agreement. All references in this Agreement to Articles, Sections, subsections
and exhibits are to the same contained in or attached to this Agreement unless
otherwise specified.
<PAGE>
ARTICLE II
SALE AND CONVEYANCE OF INITIAL MORTGAGE LOANS;
MORTGAGE LOAN FILES
SECTION 2.01. Sale and Conveyance of Initial Mortgage Loans. On the Closing
Date, subject to the terms and conditions hereof, the Seller shall sell,
transfer, assign absolutely, set over and otherwise convey to the Purchaser (i)
all the right, title and interest of the Seller in and to the Initial Mortgage
Loans and all the rights, benefits, and obligations arising from and in
connection with each Initial Mortgage Loan, (ii) assignments of the security
interests in the Initial Mortgaged Properties granted by the Mortgagors pursuant
to the Initial Mortgage Loans, (iii) all payments received by the Seller on or
with respect to the Initial Mortgage Loans on or after the Initial Cut-off Date,
(iv) the interest of the Seller in any Initial Mortgaged Property (including any
right to receive future Net Liquidation Proceeds) that secures the Initial
Mortgage Loans; (v) all rights of the Seller to proceeds of Insurance Policies
covering the Mortgagors and the Initial Mortgage Loans, (vi) the proceeds from
any Master Servicer's Errors and Omissions Protection Policy, any fidelity bond
and any blanket physical damage policy, to the extent such proceeds relate to
any Initial Mortgaged Property, (vii) all rights of recourse against any
cosigner or under any personal guarantee with respect to the Initial Mortgage
Loans, (viii) all amounts held for the Trust in the Collection Account, [(ix)
all amounts held for the Trust in the Pre-Funding Account, (x) all amounts held
for the Trust in the Capitalized Interest Account], (xi) all proceeds in any way
derived from any of the foregoing items, and (xii) all documents contained or
required to be contained in the Mortgage Loan Files relating to the Initial
Mortgage Loans. The parties intend and agree that the conveyance of the Seller's
right, title and interest in and to the Initial Mortgage Loans pursuant to this
Agreement shall constitute an absolute sale.
The Seller hereby declares and covenants that it shall at no time have any
legal, equitable or beneficial interest in, or any right, including without
limitation any reversionary or offset right, to the Collection Account, [the
Pre-Funding Account, the Capitalized Interest Account and the Reserve Account,]
and that, in the event it receives any of the same, it shall hold same in trust
for the benefit of the Trust on behalf of the Certificateholders and shall
immediately endorse over to the Trust any such amount it receives.
SECTION 2.02. Purchase Price; Payments on the Initial Contracts.
(a) The purchase price for the Initial Mortgage Loans shall be an amount
equal to $ ______________. Such purchase price shall be payable in immediately
available funds on the Closing Date.
(b) The Purchaser shall be entitled to all payments of principal and
interest received on or after the Initial Cut-off Date. All payments of
principal and interest received before the Initial Cut-off Date shall belong to
the Seller. The Seller shall hold in trust for the Purchaser and shall promptly
remit to the Purchaser, any payments on the Initial Mortgage Loans received by
the Seller that belong to the Purchaser under the terms of this Agreement.
2
<PAGE>
SECTION 2.03. Conditions to Sale of Initial Mortgage Loans. The Purchaser's
obligations hereunder are subject to the following conditions:
(a) The Purchaser shall have received (i) the Pooling and Servicing
Agreement executed by all the parties thereto, (ii) all documents required by
the Pooling and Servicing Agreement and (iii) such other opinions and documents
as the Purchaser may reasonably require in connection with the purchase of the
Initial Mortgage Loans hereunder or the sale of the Certificates;
(b) The representations and warranties of the Seller and the Master
Servicer made in the Pooling and Servicing Agreement shall be true and correct
on the Closing Date; and
(c) The Purchaser shall have received from counsel to the Seller a letter
stating that the Purchaser may rely on such counsel's opinion delivered pursuant
to the Pooling and Servicing Agreement and such counsel's opinions to Moody's
Investors Service, Inc. and Standard and Poor's Ratings Service in respect of
the sale of the Initial Mortgage Loans to the Purchaser by the Seller, or such
opinions may be addressed and delivered to the Purchaser.
SECTION 2.04. Examination of Files. The Seller will make the Mortgage Loan
Files with respect to the Initial Mortgage Loans available to the Purchaser or
its agent for examination at the Trust's offices or such other location as
otherwise shall be agreed upon by the Purchaser and the Seller.
SECTION 2.05. Transfer of Initial Mortgage Loans. Pursuant to the Pooling
and Servicing Agreement, the Purchaser will assign all of its right, title and
interest in and to the Initial Mortgage Loans to the Trust for the benefit of
the Certificateholders. The Purchaser has the right to assign its interest under
this Agreement as may be required to effect the purposes of the Pooling and
Servicing Agreement, by written notice to the Seller and without the consent of
the Seller, and the assignee shall succeed to the rights and obligations
hereunder of the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER;
REPURCHASE OF INITIAL MORTGAGE LOANS
SECTION 3.01. Representations and Warranties of the Seller.
(a) The representations and warranties of the Seller contained in the
Pooling and Servicing Agreement are incorporated herein, and are made to the
Purchaser on the date hereof, as if set forth herein and as if made to the
Purchaser on the date hereof. The Seller will make such representations and
warranties in the Pooling and Servicing Agreement directly to the Trust
3
<PAGE>
and will become obligated in respect of such representations and warranties
pursuant to the Pooling and Servicing Agreement. On the Closing Date, the Seller
shall deliver to the Purchaser an Officers' Certificate, dated the Closing Date,
to the effect that the representations and warranties made in the Pooling and
Servicing Agreement by the Seller are true and correct as of the Closing Date.
(b) It is understood and agreed that the representations and warranties
incorporated by reference in this Agreement by Section 3.01(a) hereof shall
remain operative and in full force and effect, shall survive the transfer and
conveyance of the Initial Mortgage Loans by the Seller to the Purchaser and by
the Purchaser to the Trust, and shall inure to the benefit of the Purchaser, the
Trust and their successors and permitted assignees.
(c) The Seller shall indemnify the Purchaser and the Master Servicer and
hold the Purchaser and the Master Servicer harmless against any loss, penalties,
fines, forfeitures, legal fees and related costs, judgments and other costs and
expenses resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, a breach of the Seller's representations and
warranties contained or incorporated by reference in this Agreement. It is
understood and agreed that the obligation of the Seller set forth in this
Section 3.01 to indemnify the Purchaser and the Master Servicer as provided in
this Section 3.01 constitutes the sole remedy of the Purchaser and the Master
Servicer respecting a breach of the foregoing representations and warranties.
The Trust shall also have the remedies provided in the Pooling and Servicing
Agreement.
(d) Each indemnified party shall give prompt notice to the Seller of any
action commenced against it with respect to which indemnity may be sought
hereunder but failure to so notify an indemnifying party shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement, unless the failure to notify materially prejudices the rights and
condition of the Seller. The Seller shall be entitled to participate in any such
action, and to assume the defense thereof, and after notice from the Seller to
an indemnified party of its election to assume the defense thereof, the Seller
will not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof.
(e) Any cause of action against the Seller or relating to or arising out of
the breach of any representations and warranties made or incorporated by
reference in this Section 3.01 shall accrue as to any Initial Mortgage Loan upon
(i) discovery of such breach by the Purchaser or the Servicer or notice thereof
by the Seller to the Purchaser and the Servicer, (ii) failure by the Seller to
cure such breach and (iii) demand upon the Seller by the Purchaser for all
amounts payable in respect of such Initial Mortgage Loan.
4
<PAGE>
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.01. Amendment. This Agreement may be amended from time to time by
the Seller and the Purchaser by written agreement signed by the Seller and the
Purchaser.
SECTION 4.02. Counterparts. For the purpose of facilitating the execution
of this Agreement as herein provided and for other purposes, this Agreement may
be executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
SECTION 4.03. Termination. The Seller's obligations under this Agreement
shall survive the sale of the Initial Mortgage Loans to the Purchaser.
SECTION 4.04. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
SECTION 4.05. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed by
first class mail, postage prepaid, to (i) in the case of the Seller, The CIT
Group/Consumer Finance, Inc., 650 CIT Drive, Livingston, New Jersey 07039,
Attention: President, or such other address as may hereafter be furnished to
Purchaser in writing by the Seller or (ii) in the case of the Purchaser, The CIT
Group Securitization Corporation III, 650 CIT Drive, Livingston, New Jersey
07039, Attention: President, or such other address as may hereafter be furnished
to the Seller by the Purchaser.
SECTION 4.06. Severabilitv of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
SECTION 4.07. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the Seller and the Purchaser and their respective
successors and assigns, as may be permitted hereunder.
5
<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their names to
be signed hereto by their respective officers thereunto duly authorized as of
the day and year first above written.
THE CIT GROUP SECURITIZATION
CORPORATION III,
as Purchaser
By:____________________________________
Name:
Title:
THE CIT GROUP/CONSUMER FINANCE, INC.,
as Seller
By:____________________________________
Name:
Title:
6
<PAGE>
EXHIBIT A
List of Initial Mortgage Loans
<PAGE>
EXHIBIT B
FORM OF OPINION OF COUNSEL
_________________, 199_
solely in its capacity as [Trustee] Trustee
under the Pooling and Servicing Agreement
[Address]
Dear Ladies and Gentlemen:
I have acted as counsel to The CIT Group/Consumer Finance, Inc. ("CITCF")
and The CIT Group Securitization Corporation III, a Delaware corporation (the
"Company"), in connection with the sale of CIT Home Equity Loan Trust 199_-_
Asset-Backed Certificates (the "Certificates"). The Certificates represent
interests in, a trust, the CIT Home Equity Loan Trust 199_-_ (the "Trust"),
consisting of a pool of mortgage loans secured by residential properties
(collectively, the "Mortgage Loans") and certain related property. The Company
purchased certain of the Mortgage Loans from CITCF (the "Initial Mortgage
Loans") pursuant to a residential properties Purchase Agreement, dated as of
________________, 199_, by and between CITCF and the Company. Additional
Mortgage Loans are being purchased by the Company from CITCF (the "Subsequent
Mortgage Loans") pursuant to the Subsequent Mortgage Loan Purchase Agreement
dated as of _________________, 199_ (the "Subsequent Purchase Agreement").
Pursuant to a Pooling and Servicing Agreement, dated as of _________________,
199_ (the "Pooling and Servicing Agreement"), among the Company, CITCF, as
Master Servicer and the Trustee, the Company transferred the Initial Mortgage
Loans to the Trust. The Company will also transfer, pursuant to the Pooling and
Servicing Agreement, the Subsequent Mortgage Loans to the Trust, the corpus of
which will consist of each of the Initial Mortgage Loans and the Subsequent
Mortgage Loans and certain other property transferred by the Company to the
Trust.
A11 capitalized terms used herein and not defined shall have the meanings
assigned to them in the Subsequent Purchase Agreement.
In rendering the following opinions, I have examined (i) the Subsequent
Purchase Agreement; (ii) the Pooling and Servicing Agreement; (iii) the
Certificate of Incorporation of each of CITCF and the Company; (iv) the By-Laws
of each of CITCF and the Company; (v) copies of certain unanimous consents
adopted by the Board of Directors of the
<PAGE>
Company authorizing the issuance and sale of the Certificates and the purchase
of the Mortgage Loans; and (vi) copies of certain unanimous written consents of
the Board of Directors of CITCF. I have also examined such other documents and
made such investigations of law as I have considered necessary and appropriate
for the purposes of the opinions expressed herein. I have assumed the
authenticity of signatures on original documents and the conformity to the
original of all documents submitted to me as certified, conformed or photostatic
copies and have relied as to all matters of fact on certificates,
representations or statements by officers of the Company or CITCF.
In making my examination of agreements, instruments and other documents and
in giving opinions herein, I have assumed that the Trustee has and had the power
and capacity to execute and deliver such agreements, instruments and other
documents and to perform all of their obligations thereunder and that such
agreements, instruments and other documents were duly authorized by all
requisite action by or on behalf of the Trustee were duly executed,
acknowledged, as necessary, and delivered by or on behalf of and are the legal,
valid and binding obligations of, and are enforceable in accordance with their
terms against, the Trustees.
Based upon, and subject to, the foregoing I am of the opinion that:
1. The Subsequent Purchase Agreement has been duly authorized, executed and
delivered by each of CITCF and the Company and constitutes the legal, valid and
binding agreement of each of CITCF and the Company, and is enforceable against
each of CITCF and the Company in accordance with its terms; the Subsequent
Purchase Agreement is effective to transfer all of CITCF's right, title and
interest in and to the Subsequent Mortgage Loans and other property described in
Section 2.1 of the Subsequent Purchase Agreement to the Company; the Pooling and
Servicing Agreement is effective to transfer all of the Company's right, title
and interest in and to such Subsequent Mortgage Loans and other property to the
Trust subject to no prior liens or encumbrances.
2. No consent, approval, authorization or order of, registration or filing
with, or notice to any governmental authority or court is required under federal
laws or the laws of the State of Delaware for the execution, delivery and
performance by the Company of the Subsequent Purchase Agreement or the
consummation of any other transaction contemplated thereby by the Company,
except for those which have been obtained or except such as may be required
under the Securities Act of 1933, as amended or the regulations promulgated
thereunder or state securities or Blue Sky laws of any jurisdiction.
3. No consent, approval, authorization or order of, registration or filing
with, or notice to, any governmental authority or court is required under
federal laws or the laws of the State of Delaware for the execution, delivery
and performance by CITCF of the Subsequent Purchase Agreement or the
consummation of any other transaction contemplated thereby by CITCF except for
those which have been obtained or except such as may be required under the
Securities Act of 1933, as amended or the regulations promulgated thereunder or
state securities or Blue Sky laws of any jurisdiction.
<PAGE>
I am furnishing this opinion to you solely for your benefit. This opinion
is not to be used, circulated, quoted or otherwise referred to or relied on by
any other person or for any other purpose.
The foregoing opinion is given on the express understanding that the
undersigned is an officer of the Company and CITCF and shall in no event incur
any personal liability in connection with the said opinion.
Very truly yours,
Exhibit 10.2
Form of Subsequent Mortgage Loan Purchase Agreement
<PAGE>
FORM OF SUBSEQUENT MORTGAGE
LOAN PURCHASE AGREEMENT
This Subsequent Mortgage Loan Purchase Agreement dated as of
_______________, 199__ (the "Agreement"), is between THE CIT GROUP
SECURITIZATION CORPORATION III, as purchaser (the "Purchaser"), and THE CIT
GROUP/CONSUMER FINANCE, INC., as seller (the "Seller").
Reference is hereby made to the Mortgage Loan Purchase Agreement dated as
of ______________, 199__ between the parties hereto (the "Purchase Agreement")
pursuant to which the Purchaser purchased from the Seller the mortgage loans set
forth on Exhibit A thereto (the "Initial Mortgage Loans"). The Purchaser sold
the Initial Mortgage Loans to the trust established pursuant to the Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement") dated as of
________________, 199__ among the Purchaser, the Seller, as the seller and as
the master servicer and _______________________________, as trustee (the
"Trustee").
Pursuant to the Pooling and Servicing Agreement, the Purchaser agreed to
purchase from the Seller and the Seller agreed to sell to the Purchaser, subject
to the terms and conditions set forth in Section _____ of the Pooling and
Servicing Agreement, Subsequent Mortgage Loans for the fixed purchase price
specified in the Pooling and Servicing Agreement for delivery on the date
specified therein. The purchase price for any Subsequent Mortgage Loan will be
funded from money on deposit in the Pre-Funding Account during the Funding
Period. The purchase of any Subsequent Mortgage Loan by the Purchaser must be
evidenced by the execution and delivery of a Subsequent Mortgage Loan Purchase
Agreement substantially in the form of Exhibit __ to the Pooling and Servicing
Agreement. Accordingly, subject to the terms hereof and the Pooling and
Servicing Agreement, the Seller agrees to sell, and the Purchaser agrees to
purchase, the mortgage loans set forth on Exhibit A hereto (collectively, the
"Subsequent Mortgage Loans"), having an aggregate outstanding principal balance
as of _____________, 199__ (the "Subsequent Cut-Off Date") of $______________.
The Purchaser and the Seller wish to prescribe the terms and conditions of
the purchase by the Purchaser of the Subsequent Mortgage Loans and the servicing
and administration of the Subsequent Mortgage Loans.
In consideration of the premises and the mutual agreements hereinafter set
forth, the Purchaser and the Seller agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Certain capitalized terms used in this Agreement
shall have the respective meanings assigned to them in the Pooling and Servicing
Agreement. All references in this Agreement to Articles, Sections, subsections
and exhibits are to the same contained in or attached to this Agreement unless
otherwise specified.
ARTICLE II
SALE AND CONVEYANCE OF SUBSEQUENT MORTGAGE LOANS;
MORTGAGE LOAN FILES
SECTION 2.1. Sale and Conveyance of Contracts. On ____________, 199__ (the
"Subsequent Transfer Date") subject to the terms and conditions hereof, the
Seller shall sell, transfer, assign absolutely, set over and otherwise convey to
the Purchaser as of the Subsequent Transfer Date (i) all the right, title and
interest of the Seller in and to the Subsequent Mortgage Loans and all the
rights, benefits, and obligations arising from and in connection with each
Subsequent Mortgage Loan, (ii) an assignment of the security interests in the
Subsequent Mortgaged Properties granted by the Mortgagors pursuant to the
Subsequent Mortgage Loans, (iii) all payments received by the Seller on or with
respect to the Subsequent Mortgage Loans on or after the Subsequent Cut-off
Date, (iv) the interest of the Seller in any Subsequent Mortgaged Property
(including any right to receive future Net Liquidation Proceeds) that secures
the Subsequent Mortgage Loans; (v) all rights of the Seller to proceeds of
Insurance Policies covering the Mortgagors and the Subsequent Mortgage Loans,
(vi) the proceeds from any Master Servicer's Errors and Omissions Protection
Policy, any fidelity bond and any blanket physical damage policy, to the extent
such proceeds relate to any Subsequent Mortgaged Property, (vii) all rights of
recourse against any cosigner or under any personal guarantee with respect to
the Subsequent Mortgage Loans; (viii) all proceeds in any way derived from any
of the foregoing items, and (ix) all documents contained or required to be
contained in the Mortgage Loan Files relating to the Subsequent Mortgage Loans.
The parties intend and agree that the conveyance of the Seller's right, title
and interest in and to the Subsequent Mortgage Loans (and all rights,
entitlements and amounts listed above) pursuant to this Agreement shall
constitute an absolute sale.
SECTION 2.2. Purchase Price; Payments on the Subsequent Mortgage Loans.
The purchase price for the Subsequent Mortgage Loans shall be an amount
equal to $________________, which is the aggregate outstanding principal balance
of the Subsequent Mortgage Loans transferred pursuant to this Agreement as of
the Subsequent Cut-off Date, and the Seller hereby acknowledges receipt of such
amount in respect of the sale of the Subsequent Mortgage Loans hereunder. Such
purchase price shall be payable in immediately available funds on the Subsequent
Transfer Date from funds on deposit in the Pre-Funding Account.
2
<PAGE>
The Purchaser shall be entitled to all payments of principal and interest
received on or after the Subsequent Cut-off Date. All payments of principal and
interest received before the Subsequent Cut-off Date shall belong to the Seller.
The Seller shall hold in trust for the Purchaser and shall promptly remit to the
Purchaser, any payments on the Subsequent Mortgage Loans received by the Seller
that belong to the Purchaser under the terms of this Agreement.
SECTION 2.3. Conditions to Sale of Subsequent Contracts. The Purchaser's
obligations hereunder are subject to the following conditions:
1. The Purchaser shall have received:
a. the Pooling and Servicing Agreement executed by all the parties
thereto,
b. the documents listed in Section______ of the Pooling and
Servicing Agreement, and
c. such other opinions and documents as the Purchaser may reasonably
require in connection with the purchase of the Subsequent
Mortgage Loans hereunder or the sale of the Certificates;
2. The representations and warranties with respect to the Subsequent
Mortgage Loans of (i) the Seller and the Master Servicer made in the
Pooling and Servicing Agreement and (ii) the Seller made in the
Purchase Agreement and this Agreement shall be true and correct with
respect to the Subsequent Mortgage Loans on the Subsequent Transfer
Date; and
3. The conditions for transfer of the Subsequent Mortgage Loans from the
Purchaser to the Trust set forth in Section _____ of the Sale and
Servicing Agreement have been fulfilled.
SECTION 2.4. Examination of Files. The Seller will make the Mortgage Loan
Files with respect to the Subsequent Mortgage Loans available to the Purchaser
or its agent for examination at the Trust's offices or such other location as
otherwise shall be agreed upon by the Purchaser and the Seller.
SECTION 2.5. Transfer of Subsequent Contracts. Pursuant to the Pooling and
Servicing Agreement, the Purchaser will assign all of its right, title and
interest in and to the Subsequent Mortgage Loans to the Trust for the benefit of
the Certificateholders. The Purchaser has the right to assign its interest under
this Agreement as may be required to effect the purposes of the Pooling and
Servicing Agreement, by written notice to the Seller and without the consent of
the Seller, and the assignee shall succeed to the rights and obligations
hereunder of the Purchaser.
3
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 3.1. Representations and Warranties of the Seller.
(a) The representations and warranties of the Seller contained in Article
____ of the Pooling and Servicing Agreement with respect to the Subsequent
Mortgage Loans are incorporated herein, and are made to the Purchaser on the
Subsequent Transfer Date, as if set forth herein and as if made to the Purchaser
on the date hereof. The Seller will make such representations and warranties in
the Pooling and Servicing Agreement directly to the Trust and will become
obligated in respect of such representations and warranties pursuant to Article
___ of the Pooling and Servicing Agreement. On the Subsequent Transfer Date, the
Seller shall deliver to the Purchaser an Officers' Certificate, dated the
Subsequent Transfer Date, to the effect that the representations and warranties
made in the Pooling and Servicing Agreement with respect to the Subsequent
Mortgage Loans by the Seller are true and correct as of the Subsequent Transfer
Date.
(b) It is understood and agreed that the representations and warranties
incorporated by reference in this Agreement by Section 3.1(a) hereof shall
remain operative and in full force and effect, shall survive the transfer and
conveyance of the Subsequent Mortgage Loans by the Seller to the Purchaser and
by the Purchaser to the Trust, and shall inure to the benefit of the Purchaser,
the Trust and their successors and permitted assignees.
(c) The Seller shall indemnify the Purchaser and the Master Servicer and
hold the Purchaser and the Master Servicer harmless against any loss, penalties,
fines, forfeitures, legal fees and related costs, judgments and other costs and
expenses resulting from any claim, demand, defense or assertion based on or
grounded upon, or resulting from, a breach of the Seller's representations and
warranties contained or incorporated by reference in this Agreement. It is
understood and agreed that the obligation of the Seller set forth in this
Section 3.1 to indemnify the Purchaser and the Master Servicer as provided in
this Section 3.1 constitutes the sole remedy of the Purchaser and the Master
Servicer respecting a breach of the foregoing representations and warranties.
The Trust shall also have the remedies provided in the Pooling and Servicing
Agreement.
(d) Each indemnified party shall give prompt notice to the Seller of any
action commenced against it with respect to which indemnity may be sought
hereunder but failure to so notify an indemnifying party shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement, unless the failure to notify materially prejudices the rights and
condition of the Seller. The Seller shall be entitled to participate in any such
action, and to assume the defense thereof, and after notice from the Seller to
an indemnified party of its election to assume the defense thereof, the Seller
will not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof.
4
<PAGE>
(e) Any cause of action against the Seller or relating to or arising out of
the breach of any representations and warranties made or incorporated by
reference in this Section 3.1 shall accrue as to any Subsequent Mortgage Loan
upon discovery of such breach by the Purchaser or the Master Servicer or notice
thereof by the Seller to the Purchaser and the Master Servicer, failure by the
Seller to cure such breach and demand upon the Seller by the Purchaser for all
amounts payable in respect of such Subsequent Mortgage Loan.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 4.1. Amendment. This Agreement may be amended from time to time by
the Seller and the Purchaser by written agreement signed by the Seller and the
Purchaser.
SECTION 4.2. Counterparts. For the purpose of facilitating the execution of
this Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.
SECTION 4.3. Termination. The Seller's obligations under this Agreement
shall survive the sale of the Subsequent Mortgage Loans to the Purchaser.
SECTION 4.4. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of New York and the obligations, rights and remedies
of the parties hereunder shall be determined in accordance with such laws.
SECTION 4.5. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed by
first class mail, postage prepaid, to in the case of the Seller, The CIT
Group/Consumer Finance, Inc., 650 CIT Drive, Livingston, New Jersey 07039,
Attention: President, or such other address as may hereafter be furnished to
Purchaser in writing by the Seller, or in the case of the Purchaser, The CIT
Group Securitization Corporation III, 650 CIT Drive, Livingston, New Jersey
07039, Attention: President, or such other address as may hereafter be furnished
to the Seller by the Purchaser.
SECTION 4.6. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
SECTION 4.7. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the Seller and the Purchaser and their respective
successors and assigns, as may be permitted hereunder.
5
<PAGE>
SECTION 4.8. Opinion. The Counsel to the Seller shall deliver to the
Purchaser and the Trustee an opinion in the form of Exhibit B hereto.
6
<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their names to
be signed hereto by their respective officers thereunto duly authorized as of
the day and year first above written.
THE CIT GROUP SECURITIZATION
CORPORATION III,
as Purchaser
By:____________________________________
Name:__________________________________
Title:_________________________________
THE CIT GROUP/CONSUMER FINANCE, INC.,
as Seller
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
EXHIBIT A
List of Subsequent Mortgage Loans
<PAGE>
EXHIBIT B
FORM OF OPINION OF COUNSEL
________________, 199__
[Trustee]
[Address]
Dear Ladies and Gentlemen:
I have acted as counsel to The CIT Group/Consumer Finance, Inc., a Delaware
corporation ("CIT Consumer Finance") and The CIT Group Securitization
Corporation III, a Delaware corporation (the "Company"), in connection with the
sale of CIT Home Equity Loan Trust 199_-_ Asset Backed Certificates (the
"Certificates"). The Certificates represent interests in, a trust, the CIT Home
Equity Loan Trust 199_-_ (the "Trust"), consisting of a pool of mortgage loans
secured by residential properties (collectively, the "Mortgage Loans") and
certain related property. The Company purchased certain of the Mortgage Loans
from CIT Consumer Finance (the "Initial Mortgage Loans") pursuant to a Mortgage
Loan Purchase Agreement, dated as of __________, 199__, by and between CIT
Consumer Finance and the Company. Additional Mortgage Loans are being purchased
by the Company from CIT Consumer Finance (the "Subsequent Mortgage Loans")
pursuant to the Subsequent Mortgage Loan Purchase Agreement dated as of
_______________, 199__ (the "Subsequent Purchase Agreement"). Pursuant to a
Pooling and Servicing Agreement, dated as of ______________, 199__ (the "Pooling
and Servicing Agreement"), among the Company, CIT Consumer Finance, as seller
and as master servicer and the [Trustee], as trustee (the "Trustee"), the
Company transferred the Initial Mortgage Loans to the Trust. The Company will
also transfer, pursuant to the Pooling and Servicing Agreement, the Subsequent
Mortgage Loans to the Trust, the corpus of which will consist of each of the
Initial Mortgage Loans and the Subsequent Mortgage Loans and certain other
property transferred by the Company to the Trust.
All capitalized terms used herein and not defined shall have the meanings
assigned to them in the Subsequent Purchase Agreement.
In rendering the following opinions, I have examined (i) the Subsequent
Purchase Agreement; (ii) the Pooling and Servicing Agreement; (iii) the
Certificate of Incorporation of
B-1
<PAGE>
each of CIT Consumer Finance and the Company; (iv) the By-Laws of each of CIT
Consumer Finance and the Company; (v) copies of certain unanimous written
consents adopted by the Board of Directors of the Company authorizing the
issuance and sale of the Certificates and the purchase of the Mortgage Loans;
and (vi) copies of certain unanimous written consents of the Board of Directors
of CIT Consumer Finance. I have also examined such other documents and made such
investigations of law as I have considered necessary and appropriate for the
purposes of the opinions expressed herein. I have assumed the authenticity of
signatures on original documents and the conformity to the original of all
documents submitted to me as certified, conformed or photostatic copies and have
relied as to all matters of fact on certificates, representations or statements
by officers of the Company or CIT Consumer Finance.
In making my examination of agreements, instruments and other documents and
in giving opinions herein, I have assumed that the Trustee has and had the power
and capacity to execute and deliver such agreements, instruments and other
documents and to perform all of their obligations thereunder and that such
agreements, instruments and other documents were duly authorized by all
requisite action by or on behalf of the Trustee were duly executed,
acknowledged, as necessary, and delivered by or on behalf of and are the legal,
valid and binding obligations of, and are enforceable in accordance with their
terms against, the Trustees.
Based upon, and subject to, the foregoing I am of the opinion that:
1. The Subsequent Purchase Agreement has been duly authorized, executed and
delivered by each of CIT Consumer Finance and the Company and constitutes the
legal, valid and binding agreement of each of CIT Consumer Finance and the
Company, and is enforceable against each of CIT Consumer Finance and the Company
in accordance with its terms; the Subsequent Purchase Agreement is effective to
transfer all of CIT Consumer Finance's right, title and interest in and to the
Subsequent Mortgage Loans and other property described in Section 2.1 of the
Subsequent Purchase Agreement to the Company; the Pooling and Servicing
Agreement is effective to transfer all of the Company's right, title and
interest in and to such Subsequent Mortgage Loans and other property to the
Trust subject to no prior liens or encumbrances.
2. No consent, approval, authorization or order of, registration or filing
with, or notice to any governmental authority or court is required under federal
laws or the laws of the State of Delaware for the execution, delivery and
performance by the Company of the Subsequent Purchase Agreement or the
consummation of any other transaction contemplated thereby by the Company,
except for those which have been obtained or except such as may be required
under the Securities Act of 1933, as amended or the regulations promulgated
thereunder or state securities or Blue Sky laws of any jurisdiction.
3. No consent, approval, authorization or order of, registration or filing
with, or notice to, any governmental authority or court is required under
federal laws or the laws of the State of Delaware for the execution, delivery
and performance by CIT Consumer Finance of the Subsequent Purchase Agreement or
the consummation of any other transaction contemplated
B-2
<PAGE>
thereby by CIT Consumer Finance except for those which have been obtained or
except such as may be required under the Securities Act of 1933, as amended or
the regulations promulgated thereunder or state securities or Blue Sky laws of
any jurisdiction.
I am furnishing this opinion to you solely for your benefit. This opinion
is not to be used, circulated, quoted or otherwise referred to or relied on by
any other person or for any other purpose.
The foregoing opinion is given on the express understanding that the
undersigned is an officer of the Company and CIT Consumer Finance and shall in
no event incur any personal liability in connection with the said opinion.
Very truly yours,
B-3
EXHIBIT 23.2
Consent of KPMG Peat Marwick LLP
<PAGE>
Exhibit 23.2
Independent Auditors' Consent
The Board of Directors of
The CIT Group Holdings, Inc.
We consent to the use of our report dated January 18, 1996, relating to the
consolidated balance sheets of The CIT Group Holdings, Inc. and subsidiaries as
of December 31, 1995 and 1994, and the related consolidated statements of
income, changes in stockholders' equity, and cash flows for each of the years in
the three-year period ended December 31, 1995, incorporated by reference in this
Registration Statement on Form S-3 of The CIT Group Securitization Corporation
III and The CIT Group Holdings, Inc., which report appears in the December 31,
1995 Annual Report on Form 10-K of The CIT Group Holdings, Inc., and to the
reference to our firm under the heading "Experts" in the Registration Statement.
Our report on the consolidated financial statements refers to a change in the
method of accounting for postretirement benefits other than pensions in 1993.
/s/ KPMG Peat Marwick LLP
Short Hills, New Jersey
February 21, 1997
EXHIBIT 24.2
Powers of Attorney of The CIT Group Holdings, Inc.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP HOLDINGS, INC., a Delaware corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-3, for the registration of
the Corporation's guarantee of certain notes and certificates issued by The CIT
Group Securitization Corporation III, a wholly-owned subsidiary of the
Corporation, under said Act, which notes and certificates may be issued in an
aggregate principal amount of up to $1,000,000,000, or if issued at an original
discount, such greater principal amount as shall result in an aggregate initial
public offering price of up to $1,000,000,000 (all in United States dollars or
an equivalent amount in another currency or composite currency), hereby
constitutes and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J.
RAPSON his true and lawful attorneys-in-fact and agents, and each of them with
full power to act without the others, for him and in his name, place, and stead,
in any and all capacities, to sign such Registration Statement and any and all
amendments thereof, with power where appropriate to affix the corporate seal of
said Corporation thereto and to attest to said seal, and to file such
Registration Statement and each such amendment, with all exhibits thereto, and
any and all other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 5th
day of February, 1997.
/s/ Albert R. Gamper, Jr.
-------------------------
Albert R. Gamper, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP HOLDINGS, INC., a Delaware corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-3, for the registration of
the Corporation's guarantee of certain notes and certificates issued by The CIT
Group Securitization Corporation III, a wholly-owned subsidiary of the
Corporation, under said Act, which notes and certificates may be issued in an
aggregate principal amount of up to $1,000,000,000, or if issued at an original
discount, such greater principal amount as shall result in an aggregate initial
public offering price of up to $1,000,000,000 (all in United States dollars or
an equivalent amount in another currency or composite currency), hereby
constitutes and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J.
RAPSON his true and lawful attorneys-in-fact and agents, and each of them with
full power to act without the others, for him and in his name, place, and stead,
in any and all capacities, to sign such Registration Statement and any and all
amendments thereof, with power where appropriate to affix the corporate seal of
said Corporation thereto and to attest to said seal, and to file such
Registration Statement and each such amendment, with all exhibits thereto, and
any and all other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 5th
day of February, 1997.
/s/ Hisao Kobayashi
-------------------
Hisao Kobayashi
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP HOLDINGS, INC., a Delaware corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-3, for the registration of
the Corporation's guarantee of certain notes and certificates issued by The CIT
Group Securitization Corporation III, a wholly-owned subsidiary of the
Corporation, under said Act, which notes and certificates may be issued in an
aggregate principal amount of up to $1,000,000,000, or if issued at an original
discount, such greater principal amount as shall result in an aggregate initial
public offering price of up to $1,000,000,000 (all in United States dollars or
an equivalent amount in another currency or composite currency), hereby
constitutes and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J.
RAPSON his true and lawful attorneys-in-fact and agents, and each of them with
full power to act without the others, for him and in his name, place, and stead,
in any and all capacities, to sign such Registration Statement and any and all
amendments thereof, with power where appropriate to affix the corporate seal of
said Corporation thereto and to attest to said seal, and to file such
Registration Statement and each such amendment, with all exhibits thereto, and
any and all other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 5th
day of February, 1997.
/s/ Takasuke Kaneko
-------------------
Takasuke Kaneko
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP HOLDINGS, INC., a Delaware corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-3, for the registration of
the Corporation's guarantee of certain notes and certificates issued by The CIT
Group Securitization Corporation III, a wholly-owned subsidiary of the
Corporation, under said Act, which notes and certificates may be issued in an
aggregate principal amount of up to $1,000,000,000, or if issued at an original
discount, such greater principal amount as shall result in an aggregate initial
public offering price of up to $1,000,000,000 (all in United States dollars or
an equivalent amount in another currency or composite currency), hereby
constitutes and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J.
RAPSON his true and lawful attorneys-in-fact and agents, and each of them with
full power to act without the others, for him and in his name, place, and stead,
in any and all capacities, to sign such Registration Statement and any and all
amendments thereof, with power where appropriate to affix the corporate seal of
said Corporation thereto and to attest to said seal, and to file such
Registration Statement and each such amendment, with all exhibits thereto, and
any and all other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 5th
day of February, 1997.
/s/ Kenji Nakamura
------------------
Kenji Nakamura
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP HOLDINGS, INC., a Delaware corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-3, for the registration of
the Corporation's guarantee of certain notes and certificates issued by The CIT
Group Securitization Corporation III, a wholly-owned subsidiary of the
Corporation, under said Act, which notes and certificates may be issued in an
aggregate principal amount of up to $1,000,000,000, or if issued at an original
discount, such greater principal amount as shall result in an aggregate initial
public offering price of up to $1,000,000,000 (all in United States dollars or
an equivalent amount in another currency or composite currency), hereby
constitutes and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J.
RAPSON his true and lawful attorneys-in-fact and agents, and each of them with
full power to act without the others, for him and in his name, place, and stead,
in any and all capacities, to sign such Registration Statement and any and all
amendments thereof, with power where appropriate to affix the corporate seal of
said Corporation thereto and to attest to said seal, and to file such
Registration Statement and each such amendment, with all exhibits thereto, and
any and all other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 5th
day of February, 1997.
/s/ Joseph A. Pollicino
-----------------------
Joseph A. Pollicino
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP HOLDINGS, INC., a Delaware corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-3, for the registration of
the Corporation's guarantee of certain notes and certificates issued by The CIT
Group Securitization Corporation III, a wholly-owned subsidiary of the
Corporation, under said Act, which notes and certificates may be issued in an
aggregate principal amount of up to $1,000,000,000, or if issued at an original
discount, such greater principal amount as shall result in an aggregate initial
public offering price of up to $1,000,000,000 (all in United States dollars or
an equivalent amount in another currency or composite currency), hereby
constitutes and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J.
RAPSON his true and lawful attorneys-in-fact and agents, and each of them with
full power to act without the others, for him and in his name, place, and stead,
in any and all capacities, to sign such Registration Statement and any and all
amendments thereof, with power where appropriate to affix the corporate seal of
said Corporation thereto and to attest to said seal, and to file such
Registration Statement and each such amendment, with all exhibits thereto, and
any and all other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 5th
day of February, 1997.
/s/ Paul N. Roth
----------------
Paul N. Roth
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP HOLDINGS, INC., a Delaware corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-3, for the registration of
the Corporation's guarantee of certain notes and certificates issued by The CIT
Group Securitization Corporation III, a wholly-owned subsidiary of the
Corporation, under said Act, which notes and certificates may be issued in an
aggregate principal amount of up to $1,000,000,000, or if issued at an original
discount, such greater principal amount as shall result in an aggregate initial
public offering price of up to $1,000,000,000 (all in United States dollars or
an equivalent amount in another currency or composite currency), hereby
constitutes and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J.
RAPSON his true and lawful attorneys-in-fact and agents, and each of them with
full power to act without the others, for him and in his name, place, and stead,
in any and all capacities, to sign such Registration Statement and any and all
amendments thereof, with power where appropriate to affix the corporate seal of
said Corporation thereto and to attest to said seal, and to file such
Registration Statement and each such amendment, with all exhibits thereto, and
any and all other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 5th
day of February, 1997.
/s/ Peter J. Tobin
------------------
Peter J. Tobin
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP HOLDINGS, INC., a Delaware corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-3, for the registration of
the Corporation's guarantee of certain notes and certificates issued by The CIT
Group Securitization Corporation III, a wholly-owned subsidiary of the
Corporation, under said Act, which notes and certificates may be issued in an
aggregate principal amount of up to $1,000,000,000, or if issued at an original
discount, such greater principal amount as shall result in an aggregate initial
public offering price of up to $1,000,000,000 (all in United States dollars or
an equivalent amount in another currency or composite currency), hereby
constitutes and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J.
RAPSON his true and lawful attorneys-in-fact and agents, and each of them with
full power to act without the others, for him and in his name, place, and stead,
in any and all capacities, to sign such Registration Statement and any and all
amendments thereof, with power where appropriate to affix the corporate seal of
said Corporation thereto and to attest to said seal, and to file such
Registration Statement and each such amendment, with all exhibits thereto, and
any and all other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 5th
day of February, 1997.
/s/ Keiji Torii
---------------
Keiji Torii
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP HOLDINGS, INC., a Delaware corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-3, for the registration of
the Corporation's guarantee of certain notes and certificates issued by The CIT
Group Securitization Corporation III, a wholly-owned subsidiary of the
Corporation, under said Act, which notes and certificates may be issued in an
aggregate principal amount of up to $1,000,000,000, or if issued at an original
discount, such greater principal amount as shall result in an aggregate initial
public offering price of up to $1,000,000,000 (all in United States dollars or
an equivalent amount in another currency or composite currency), hereby
constitutes and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J.
RAPSON his true and lawful attorneys-in-fact and agents, and each of them with
full power to act without the others, for him and in his name, place, and stead,
in any and all capacities, to sign such Registration Statement and any and all
amendments thereof, with power where appropriate to affix the corporate seal of
said Corporation thereto and to attest to said seal, and to file such
Registration Statement and each such amendment, with all exhibits thereto, and
any and all other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 5th
day of February, 1997.
/s/ Yasuo Tsunemi
-----------------
Yasuo Tsunemi
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and/or
officer of THE CIT GROUP HOLDINGS, INC., a Delaware corporation (the
"Corporation"), which is about to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the Securities Act of
1933, as amended, a Registration Statement on Form S-3, for the registration of
the Corporation's guarantee of certain notes and certificates issued by The CIT
Group Securitization Corporation III, a wholly-owned subsidiary of the
Corporation, under said Act, which notes and certificates may be issued in an
aggregate principal amount of up to $1,000,000,000, or if issued at an original
discount, such greater principal amount as shall result in an aggregate initial
public offering price of up to $1,000,000,000 (all in United States dollars or
an equivalent amount in another currency or composite currency), hereby
constitutes and appoints ALBERT R. GAMPER, JR., ERNEST D. STEIN, and DONALD J.
RAPSON his true and lawful attorneys-in-fact and agents, and each of them with
full power to act without the others, for him and in his name, place, and stead,
in any and all capacities, to sign such Registration Statement and any and all
amendments thereof, with power where appropriate to affix the corporate seal of
said Corporation thereto and to attest to said seal, and to file such
Registration Statement and each such amendment, with all exhibits thereto, and
any and all other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform any and all acts
and things requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person and hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereby.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on the 5th
day of February, 1997.
/s/ Yukiharu Uno
----------------
Yukiharu Uno
