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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 26, 1998
ASSET BACKED SECURITIES CORPORATION (as depositor under a Pooling and Servicing
Agreement dated as of June 1, 1998 providing for, inter alia, the issuance of
Chevy Chase Bank, F.S.B. Mortgage-Backed Pass-Through Certificates, Series 1998-
CCB2)
Asset Backed Securities Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 333-365 13-3354848
(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
11 Madison Avenue, New York, New York 10010
- ----------------------------------------------- -------------------------------
(Address of principal executive offices) (Zip code)
(212) 325-2000
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Registrant's telephone number, including area code
Not Applicable
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(Former name or former address, if changed since last report)
Exhibit Index Located on Page 2
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Items 1 through 4, 6 and 8 are not included because they are not applicable.
Item 5. Other Events.
------------
The consolidated financial statements of Ambac Assurance Corporation
and its subsidiaries as of December 31, 1997 and December 31, 1996 and for the
three year period ended December 31, 1997, included in the Annual Report on Form
10-K of Ambac Financial Group, Inc. (which was filed with the Securities and
Exchange Commission on March 31, 1998) and the consolidated financial statements
of Ambac Assurance Corporation and its subsidiaries as of March 31, 1998, and
for periods ended March 31, 1998 and March 31, 1997, included in the Quarterly
Report on Form 10-Q of Ambac Financial Group, Inc. for the period ended March
31, 1998 (which was filed with the Securities and Exchange Commission on May 15,
1998) are hereby incorporated by reference in (i) this Current Report on Form 8-
K; (ii) the registration statement (No. 333-365) of the Registrant; and (iii)
the Prospectus Supplement for Chevy Chase Bank, F.S.B. Mortgage-Backed Pass-
Through Certificates, Series 1998-CCB2, and shall be deemed to be a part hereof.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
-------------------------------------------------------------------
(a) Not applicable
(b) Not applicable
(c) Exhibits (executed copies) - The following execution copies of
Exhibits to the Form S-3 Registration Statement of the Registrant are hereby
filed:
Sequentially
Numbered
Exhibit Exibit
Number Page
- ------ ------------
7(c) Pooling and Servicing Agreement, dated as of June 1, 1998 among
Asset Backed Securities Corporation, as depositor, Chevy Chase
Bank, F.S.B., as seller and servicer, and U.S. Bank National
Association, as trustee
23. Consent of KPMG Peat Marwick LLP, independent auditors of Ambac
Assurance Corporation with respect to (a) the incorporation by
reference in the Prospectus Supplement of their report dated
January 29, 1998 on the audit of the consolidated financial
statements of Ambac Assurance Corporation as of December 31, 1997
and December 31, 1996 and for the three years ended December 31,
1997 and (b) the reference to their firm under the heading
"Experts" in the Prospectus Supplement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASSET BACKED SECURITIES CORPORATION, Registrant
By: /s/ Kari Skilbred
--------------------------------
Name: Kari Skilbred
Title: Vice President
Dated: June 26, 1998
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Exhibit 7(c)
EXECUTION COPY
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ASSET BACKED SECURITIES CORPORATION,
Depositor,
CHEVY CHASE BANK, F.S.B.,
Seller and Servicer,
and
U.S. BANK NATIONAL ASSOCIATION,
Trustee
----------------------------
POOLING AND SERVICING AGREEMENT
Dated as of June 1, 1998
relating to
CHEVY CHASE BANK, F.S.B.
MORTGAGE-BACKED PASS-THROUGH CERTIFICATES, SERIES 1998-CCB2
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- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS................................................................................2
ARTICLE II. CONVEYANCE OF TRUST FUND; REPRESENTATIONS AND WARRANTIES..................................23
Section 2.01. Conveyance of Trust Fund.........................................................23
Section 2.02. Acceptance by Trustee............................................................25
Section 2.03. Representations, Warranties and Covenants of the Servicer and Seller.............25
Section 2.04. Representations, Warranties and Covenants of the Servicer and the Seller
with respect to the Mortgage Loans...............................................27
Section 2.05. Issuance of Certificates.........................................................34
Section 2.06. REMIC Provisions.................................................................34
ARTICLE III. ADMINISTRATION AND SERVICING OF MORTGAGE LOANS............................................38
Section 3.01. Servicing Standard...............................................................38
Section 3.02. Enforcement of the Obligations of Sub-Servicers..................................39
Section 3.03. Termination of the Rights of Sub-Servicers.......................................40
Section 3.04. Liability of the Servicer........................................................40
Section 3.05. Rights of the Depositor and the Trustee in Respect of the Servicer...............41
Section 3.06. Trustee to Act as Servicer.......................................................41
Section 3.07. Collection of Mortgage Loan Payments.............................................41
Section 3.08. Collection of Taxes, Assessments and Similar Items; Escrow Accounts..............43
Section 3.09. Permitted Withdrawals from the Custodial Account.................................43
Section 3.10. Maintenance of Primary Mortgage Insurance Policies; Collections Thereunder.......45
Section 3.11. Maintenance of Hazard Insurance and Other Insurance..............................45
Section 3.12. Enforcement of Due-On-Sale Clauses; Assumption Agreements........................46
Section 3.13. Realization Upon Defaulted Mortgage Loans........................................48
Section 3.14. Trustee to Cooperate; Release of Trustee Mortgage Files..........................49
Section 3.15. Documents, Records and Funds in Possession of Servicer to be Held for the
Depositor and the Trustee for the Benefit of the Certificateholders..............50
Section 3.16. Servicing Compensation...........................................................50
Section 3.17. Reports to the Depositor; Account Statements.....................................51
Section 3.18. Annual Statement as to Compliance................................................51
Section 3.19. Annual Independent Public Accountants' Servicing Report..........................51
Section 3.20. Reports to Trustee...............................................................52
Section 3.21. Converted Mortgage Loans; Certain Procedures and Purchases.......................52
ARTICLE IV. PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS.............................................53
Section 4.01. Certificate Account..............................................................53
Section 4.02. Distributions....................................................................53
Section 4.03. Allocation of Realized Losses....................................................55
Section 4.04. Monthly Statements to Certificateholders.........................................56
Section 4.05. Prepayment Interest Shortfalls and Relief Act Shortfalls.........................57
Section 4.06. The Policy.......................................................................58
Section 4.07. Reserve Account..................................................................58
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(continued)
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ARTICLE V. ADVANCES..................................................................................59
Section 5.01. Monthly Advances by the Servicer.................................................59
Section 5.02. Advances for Attorneys' Fees.....................................................60
Section 5.03. Nonrecoverable Advances..........................................................60
Section 5.04. Advance Procedures...............................................................61
ARTICLE VI. THE CERTIFICATES..........................................................................61
Section 6.01. The Certificates.................................................................61
Section 6.02. Registration of Transfer and Exchange of Certificates............................62
Section 6.03. Mutilated, Destroyed, Lost or Stolen Certificates................................66
Section 6.04. Persons Deemed Owners............................................................66
Section 6.05. Access to List of Certificateholders' Names and Addresses........................66
Section 6.06. Maintenance of Office or Agency..................................................67
Section 6.07. Book-Entry Certificates..........................................................67
Section 6.08. Notices to Clearing Agency.......................................................68
Section 6.09. Definitive Certificates..........................................................68
ARTICLE VII. THE DEPOSITOR AND THE SERVICER............................................................68
Section 7.01. Liabilities of the Depositor and the Servicer....................................68
Section 7.02. Merger or Consolidation of the Depositor or the Servicer.........................68
Section 7.03. Limitation on Liability of the Depositor, the Servicer and Others................69
Section 7.04. Servicer Not to Resign...........................................................70
Section 7.05. Errors and Omissions Insurance; Fidelity Bonds...................................70
Section 7.06. Servicer May Own Certificates....................................................70
ARTICLE VIII. DEFAULT...................................................................................70
Section 8.01. Events of Default................................................................70
Section 8.02. Trustee to Act; Appointment of Successor.........................................72
Section 8.03. Notification to Certificateholders...............................................73
Section 8.04. Waiver of Events of Default......................................................73
ARTICLE IX. CONCERNING THE TRUSTEE....................................................................73
Section 9.01. Duties of Trustee................................................................73
Section 9.02. Certain Matters Affecting the Trustee............................................75
Section 9.03. Trustee Not Liable for Certificates or Mortgage Loans............................76
Section 9.04. Trustee May Own Certificates.....................................................76
Section 9.05. Trustee's Fees and Expenses......................................................76
Section 9.06. Eligibility Requirements for Trustee.............................................76
Section 9.07. Resignation and Removal of Trustee...............................................77
Section 9.08. Successor Trustee................................................................77
Section 9.09. Merger or Consolidation of Trustee...............................................78
Section 9.10. Appointment of Co-Trustee or Separate Trustee....................................78
Section 9.11. Office of the Trustee............................................................79
Section 9.12. Tax Returns......................................................................79
ARTICLE X. TERMINATION...............................................................................79
Section 10.01. Termination upon Liquidation or Repurchase of all Mortgage Loans.................79
Section 10.02. Procedure Upon Optional Termination..............................................80
Section 10.03. Additional Termination Requirements..............................................81
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(continued)
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ARTICLE XI. MISCELLANEOUS PROVISIONS.................................................................82
Section 11.01. Amendment.......................................................................82
Section 11.02. Recordation of Agreement; Counterparts..........................................83
Section 11.03. Governing Law...................................................................83
Section 11.04. Intention of Parties............................................................83
Section 11.05. Notices.........................................................................84
Section 11.06. Severability of Provisions......................................................85
Section 11.07. Limitation on Rights of Certificateholders......................................85
Section 11.08. Certificates Nonassessable and Fully Paid.......................................86
Section 11.09. Rights of the Insurer...........................................................86
EXHIBITS
Exhibit A: Form of Class A Certificate.....................................................A-1
Exhibit B: Form of Class S Certificate.....................................................B-1
Exhibit C: Form of Class R Certificate.....................................................C-1
Exhibit D: Schedule of Mortgage Loans......................................................D-1
Exhibit E: Form of Initial Certification of Trustee........................................E-1
Exhibit F: Form of Final Certification of Trustee..........................................F-1
Exhibit G: Form of Request for Release.....................................................G-1
Exhibit H: Form of Investor Representation Letter..........................................H-1
Exhibit I: Form of Transferor Representation Letter........................................I-1
Exhibit J: Form of Investor Transfer Affidavit and Agreement...............................J-1
Exhibit K: Form of Transfer Certificate....................................................K-1
Exhibit L: Certificate Guaranty Insurance Policy...........................................L-1
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THIS POOLING AND SERVICING AGREEMENT, dated as of June 1, 1998, is
hereby executed by and between ASSET BACKED SECURITIES CORPORATION, depositor
(the "Depositor"), CHEVY CHASE BANK, F.S.B. ("Chevy Chase"), in its capacity as
seller (the "Seller") and in its capacity as servicer (the "Servicer") and U.S.
BANK NATIONAL ASSOCIATION, a national banking association, as trustee (the
"Trustee"). Capitalized terms used in this Agreement and not otherwise defined
will have the meanings assigned to them in Article I below.
PRELIMINARY STATEMENT
The Depositor is the owner of the Mortgage Loans and the other
property being conveyed by it to the Trustee in its capacity as trustee of the
Trust Fund, in accordance with this Agreement, and the Depositor has duly
authorized the execution and delivery of this Agreement to provide for the
conveyance to the Trustee of the Trust Fund.
As provided herein, the Depositor will elect to treat the assets
consisting of the Mortgage Loans and certain other assets as described herein as
a real estate mortgage investment conduit (a "remic") for federal income tax
purposes, and such segregated pool of assets will be designated as the "Trust
REMIC". The Class R Certificates will represent the sole class of "residual
interests" in the Trust REMIC for purposes of the REMIC Provisions (as defined
herein) under federal income tax law. The following table irrevocably sets
forth the designation, Certificate Rate, aggregate Initial Certificate Principal
Balance and Maturity Date for each Class of Certificates comprising the
interests representing "regular interests" in the Trust REMIC (the "REMIC
Regular Certificates"). The "latest possible maturity date" (determined solely
for purposes of satisfying Treasury Regulation Section 1.860G-1(a)(4)(iii)) for
each Class of REMIC Regular Certificates shall be the first Distribution Date
that follows the stated maturity date for the Mortgage Loan included in the
Trust Fund as of the Closing Date with the longest remaining term to stated
maturity.
<TABLE>
<CAPTION>
Aggregate Initial
Certificate
Designation Type Certificate Rate Principal Balances Maturity Date
- ------------------- ----------- ---------------- ------------------ -------------
<S> <C> <C> <C> <C>
Class A-I Senior Adjustable $200,132,742 May 25, 2028
Class A-II Senior Adjustable $ 70,514,000 May 25, 2028
Class S Subordinate * N/A
</TABLE>
* As set forth in the definition of "Certificate Rate" herein.
All covenants and agreements made by the Depositor herein are for the
benefit and security of the Certificateholders and the Insurer. The Depositor
is entering into this Agreement, and the Trustee is accepting the trusts created
hereby and thereby, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged. The principal balance of the
Mortgage Loans as of the Cut-off Date is $270,646,742.
The parties hereto intend to effect an absolute sale and assignment of
the Mortgage Loans to the Trustee for the benefit of Certificateholders and the
Insurer under the Mortgage Loan Purchase Agreement and this Agreement. However,
the Seller will hereunder absolutely assign, and as a precautionary matter grant
a security interest in and to, its rights, if any, in the Mortgage Loans, the CD
Collateral and the Reserve Account to the Trustee on behalf of
Certificateholders and the Insurer to ensure that the interest of the
Certificateholders and the Insurer hereunder in the Mortgage Loans, the CD
Collateral and the Reserve Account is fully protected.
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W I T N E S S E T H T H A T:
In consideration of the mutual agreements herein contained, the
Depositor, the Servicer, the Seller and the Trustee agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
Adjusted Servicing Fee Rate: For each Distribution Date, as to each
---------------------------
Mortgage Loan, a per annum rate equal to the percentage equivalent of a fraction
the numerator of which is the amount described in clause (i) of the definition
of Servicing Fee for such Mortgage Loan in effect as of the Due Date in the
preceding calendar month, and the denominator of which is the Principal Balance
of such Mortgage Loan immediately preceding such Distribution Date.
Adjustment Date: As to each Mortgage Loan, each date set forth in the
---------------
related Mortgage Note on which an adjustment to the interest rate on such
Mortgage Loan becomes effective.
Adverse REMIC Event: As defined in Section 2.06(f).
-------------------
Agreement: This Pooling and Servicing Agreement and any and all
---------
amendments or supplements hereto.
Appraised Value: The appraised value of the Mortgaged Property based
---------------
upon the appraisal made for the originator at the time of the origination of the
related Mortgage Loan or the sales price of the Mortgaged Property at the time
of such origination, whichever is less, or with respect to any Mortgage Loan
that represents a refinancing, the appraised value of the Mortgaged Property
based upon the appraisal made at the time of such refinancing.
Available Distribution Amount: With respect to any Distribution Date
-----------------------------
and each Loan Group, the excess of
(a) the sum of (i) the aggregate amount of payments and collections
received by the Servicer in respect of each Mortgage Loan on or prior to the
related Determination Date and not previously remitted, from any source,
including amounts received from the related Mortgagor, Insurance Proceeds,
Liquidation Proceeds (net of related Liquidation Expenses) and condemnation
awards, and amounts received in connection with the purchase of any Mortgage
Loans by the Seller or Servicer and the substitution of Replacement Mortgage
Loans, and excluding interest and other earnings on amounts on deposit in or
credited to the Custodial Account and the Certificate Account, (ii) the
aggregate amount of Monthly Advances required to be remitted by the Servicer
relating to such Distribution Date, (iii) amounts withdrawn from the Reserve
Account pursuant to Section 4.07(c) for such Distribution Date, and (iv) Insured
Payments payable pursuant to the Policy with respect to such Distribution Date
(in each case with respect to the related Loan Group);
over
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(b) the sum of (i) the aggregate amount of the servicing compensation
to be to the Servicer pursuant to the terms hereof (including, without
limitation, Servicing Fees, prepayment penalties, fees or premiums, late payment
charges and assumption fees and any excess interest charges payable by the
Mortgagor by virtue of any default or other non-compliance by the Mortgagor with
the terms of the Mortgage Loan or any other instrument or document executed in
connection therewith or otherwise), (ii) any amount included therein
representing late payments or other recoveries of principal or interest
(including Liquidation Proceeds (net of Liquidation Expenses), Insurance
Proceeds and condemnation awards) with respect to any Mortgage Loans in respect
of which the Servicer has made a previously unreimbursed Monthly Advance to the
extent of such Monthly Advance, (iii) amounts included therein representing
reimbursement of Nonrecoverable Advances and other amounts permitted to be
withdrawn from the Custodial Account or the Certificate Account, (iv) all
Monthly Payments or portions thereof (other than Principal Prepayments and other
unscheduled collections of principal) received in respect of scheduled principal
and interest on any Mortgage Loan due after the related Due Period and included
therein, (v) all payments due on any Mortgage Loan on or prior to the Cut-off
Date and included therein, (vi) an amount equal to the Principal Balance of each
Mortgage Loan immediately prior to such Distribution Date multiplied by one-
twelfth of the Trustee Fee Rate, (vii) Principal Prepayments and other
unscheduled collections of principal received after the related Prepayment
Period and included therein and (viii) the Insurer Premium payable as of such
Distribution Date (in each case with respect to the related Loan Group).
The Available Distribution Amount, when used without reference to a particular
Loan Group, means the sum of the Available Distribution Amounts for both Loan
Groups.
Bankruptcy Code: The United States Bankruptcy Code, as amended from
---------------
time to time (11 U.S.C.).
Beneficial Holder: A Person holding a beneficial interest in any
-----------------
Certificate through a Participant or an Indirect Participant or a Person holding
a beneficial interest in any Definitive Certificate, as defined in Section 6.07.
Book-Entry Certificates: Certificates evidencing a beneficial
-----------------------
interest in the Trust Fund, ownership and transfers of which shall be made
through book entries, as described in Section 6.07.
Business Day: Any day other than (i) a Saturday or a Sunday, or (ii)
------------
a day on which the Insurer or banking institutions in New York or the state in
which the Servicer or the Corporate Trust Office are located are authorized or
obligated by law or executive order to be closed.
CD Account: With respect to each CD Pledge Loan, the certificate of
----------
deposit account established by the related Mortgagor at Chevy Chase Bank, F.S.B.
CD Collateral: Collateral pledged to the Seller by a Mortgagor in
-------------
connection with the origination of a Mortgage Loan in lieu of a cash
downpayment, including without limitation, the related pledge and guaranty
agreement, the certificate of deposit and all right, title and interest in and
to the related certificate of deposit account.
CD Pledge Agreement: With respect to each CD Pledge Loan, the pledge
-------------------
and guaranty agreement signed by the related Mortgagor upon origination of such
CD Pledge Loan, whereby the Mortgagor, among other things, pledges a security
interest to the Seller in the related CD Account to secure the related Mortgage
Note.
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CD Pledge Loan: A Mortgage Loan with respect to which the related
--------------
Mortgagor has pledged CD Collateral to the Seller in connection with the
origination of such Mortgage Loan.
Certificate: Any Class A-I, Class A-II, Class S or Class R
-----------
Certificate executed and authenticated by the Trustee for the benefit of the
Certificateholders in substantially the form or forms attached as Exhibits
hereto.
Certificate Account: The separate account or accounts created and
-------------------
maintained by the Trustee pursuant to Section 4.01, in the name of the Trustee
for the benefit of the Certificateholders and the Insurer for deposit of
payments and collections in respect of the Mortgage Loans pursuant to Section
4.01 hereof, which account or accounts must be an Eligible Account or Accounts.
Certificate Principal Balance: On any date and with respect to each
-----------------------------
Class of the Class A Certificates, the Initial Certificate Principal Balance of
such Class less the sum of (i) all amounts previously distributed to Holders of
such Class with respect to principal pursuant to Section 4.02 and (ii) all
amounts of Realized Losses previously allocated to such Class pursuant to
Section 4.03, unless an Insured Payment in respect of such amount has been paid
by the Insurer and is included in clause (i) above.
Certificate Rate: In the case of each Class of the Class A
----------------
Certificates and any Distribution Date, a per annum rate equal to the weighted
average, expressed as a percentage, of the Net Mortgage Rates of the Mortgage
Loans in the related Loan Group, weighted on the basis of the respective
Principal Balances of such Mortgage Loans at the close of business on the Due
Date immediately preceding the related Due Period after giving effect to
distributions on such date allocable to principal. With respect to the Class S
Certificates and any Distribution Date, a rate per annum equal to 0.70% Interest
on the Certificates will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
Certificate Register: The register maintained pursuant to Section
--------------------
6.02(a) hereof.
Certificateholder or Holder: The Person in whose name a Certificate
----------------- ------
is registered in the Certificate Register.
Class: Each of the Class A-I, Class A-II, Class S or Class R
-----
Certificates, as appropriate.
Class A Certificate: Any of the Class A-I Certificates or Class A-II
-------------------
Certificates.
Class A-I Certificate: A Certificate executed and authenticated by
---------------------
the Trustee in substantially the form set forth in Exhibit A hereto and
---------
designated as a Class A-I Certificate and evidencing ownership of interests
designated as "regular interests" in the Trust REMIC for purposes of the REMIC
Provisions.
Class A-II Certificate: A Certificate executed and authenticated by
----------------------
the Trustee in substantially the form set forth in Exhibit A hereto and
---------
designated as a Class A-II Certificate and evidencing ownership of interests
designated as "regular interests" in the Trust REMIC for purposes of the REMIC
Provisions.
Class A-I Cumulative Interest Shortfall Amount: On any Distribution
----------------------------------------------
Date, an amount equal to (i) any portion of a Class A-I Interest Distribution
Amount that was not distributed to the Holders of the Class A-I Certificates on
any preceding Distribution Date less (ii) any amount described in
4
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clause (i) hereof that is included in a Realized Loss that has been allocated to
the Class A-I Certificates on or prior to such Distribution Date.
Class A-II Cumulative Interest Shortfall Amount: On any Distribution
-----------------------------------------------
Date, an amount equal to (i) any portion of a Class A-II Interest Distribution
Amount that was not distributed to the Holders of the Class A-II Certificates on
any preceding Distribution Date less (ii) any amount described in clause (i)
hereof that is included in a Realized Loss that has been allocated to the Class
A-II Certificates on or prior to such Distribution Date.
Class A-I Interest Distribution Amount: On any Distribution Date, (a)
--------------------------------------
one-twelfth of the product of (i) the Certificate Principal Balance of the Class
A-I Certificates immediately prior to such Distribution Date and (ii) the
related Certificate Rate, minus (b) the related Insurer Premium and the
aggregate amount of Prepayment Interest Shortfalls and Relief Act Shortfalls
allocated to such Certificates pursuant to Section 4.05 on such Distribution
Date.
Class A-II Interest Distribution Amount: On any Distribution Date,
---------------------------------------
(a) one-twelfth of the product of (i) the Certificate Principal Balance of the
Class A-II Certificates immediately prior to such Distribution Date and (ii) the
related Certificate Rate, minus (b) the related Insurer Premium and the
aggregate amount of Prepayment Interest Shortfalls and Relief Act Shortfalls
allocated to such Certificates pursuant to Section 4.05 on such Distribution
Date.
Class A-I Principal Distribution Amount: (a) On any Distribution
---------------------------------------
Date, the sum of (i) the principal due on the related Due Date for each Group I
Loan and received during the related Due Period or with respect to which a
Monthly Advance was made with respect to the related Due Period, (ii) for each
Group I Loan that was prepaid during the related Prepayment Period, the amount
of the Principal Prepayment including, with respect to any Group I Loan that was
the subject of a Debt Service Reduction in any prior Prepayment Period, the
amount of any such Principal Prepayment that exceeds the Principal Balance of
such Group I Loan as of the date of the prepayment, (iii) for each Group I Loan
that was purchased by the Seller or Servicer during the related Prepayment
Period pursuant to Section 2.01, 2.02, 2.04, 3.12, 3.21 or 10.01 hereof, the
principal amount of the Purchase Price (net of any amounts with respect to which
a distribution of principal has already been made) and the amount of any
shortfall deposited in the Custodial Account in connection with the substitution
of a Deleted Mortgage Loan pursuant to Section 2.01, 2.02 or 2.04 hereof during
the related Prepayment Period, (iv) the aggregate amount of the principal
portion of Liquidation Proceeds and the principal portion of Insurance Proceeds
received with respect to such Group I Loan net of any withdrawals permitted
hereunder to be made by the Servicer from the Custodial Account with respect to
such Group I Loan, (v) for each Group I Loan with respect to which any other
unscheduled recovery of principal has been received during the related
Prepayment Period, the amount of such unscheduled recovery, (vi) that portion,
if any, of the Class S Interest Distribution Amount for such Distribution Date
allocated to the Class A-I Certificates (as provided in the definition of Class
S Interest Distribution Amount) in respect of the principal portion of Realized
Losses on Group I Loans in the related Prepayment Period, (vii) amounts
withdrawn from the Reserve Account in respect of the principal portion of
Realized Losses related to Group I Loans in the related Prepayment Period in
accordance with Section 4.07(c) and (viii) any amounts paid in respect of a
Collateralization Deficit related to Loan Group I pursuant to the Policy, and
(b) on the Scheduled Final Distribution Date, the outstanding Certificate
Principal Balance of the Class A-I Certificates.
Class A-II Principal Distribution Amount: (a) On any Distribution
----------------------------------------
Date, the sum of (i) the principal due on the related Due Date for each Group II
Loan and received during the related Due Period or with respect to which a
Monthly Advance was made with respect to the related Due Period, (ii) for each
Group II Loan that was prepaid during the related Prepayment Period, the amount
of the
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Principal Prepayment including, with respect to any Group II Loan that was the
subject of a Debt Service Reduction in any prior Prepayment Period, the amount
of any such Principal Prepayment that exceeds the Principal Balance of such
Group II Loan as of the date of the prepayment, (iii) for each Group II Loan
that was purchased by the Seller or Servicer during the related Prepayment
Period pursuant to Section 2.01, 2.02, 2.04, 3.12, 3.21 or 10.01 hereof, the
principal amount of the Purchase Price (net of any amounts with respect to which
a distribution of principal has already been made) and the amount of any
shortfall deposited in the Custodial Account in connection with the substitution
of a Deleted Mortgage Loan pursuant to Section 2.01, 2.02 or 2.04 hereof during
the related Prepayment Period, (iv) the aggregate amount of the principal
portion of Liquidation Proceeds and the principal portion of Insurance Proceeds
received with respect to such Group II Loan net of any withdrawals permitted
hereunder to be made by the Servicer from the Custodial Account with respect to
such Group II Loan, (v) for each Group II Loan with respect to which any other
unscheduled recovery of principal has been received during the related
Prepayment Period, the amount of such unscheduled recovery, (vi) that portion,
if any, of the Class S Interest Distribution Amount for such Distribution Date
allocated to the Class A-II Certificates (as provided in the definition of Class
S Interest Distribution Amount) in respect of the principal portion of Realized
Losses on Group II Loans in the related Prepayment Period, (vii) amounts
withdrawn from the Reserve Account in respect of the principal portion of
Realized Losses related to Group II Loans in the related Prepayment Period in
accordance with Section 4.07(c) and (viii) any amounts paid in respect of a
Collateralization Deficit related to Loan Group II pursuant to the Policy, and
(b) on the Scheduled Final Distribution Date, the outstanding Certificate
Principal Balance of the Class A-II Certificates.
Class R Certificate: A Certificate executed and authenticated by the
-------------------
Trustee in substantially the form set forth in Exhibit C and designated as a
Class R Certificate and evidencing an interest designated as a "residual
interest" in the Trust REMIC for purposes of the REMIC Provisions.
Class S Certificate: A Certificate executed and authenticated by the
-------------------
Trustee in substantially the form set forth in Exhibit B hereto and designated
as a Class S Certificate and evidencing ownership of interests designated as
"regular interests" in the Trust REMIC for purposes of the REMIC Provisions.
Class S Interest Distribution Amount: On any Distribution Date, (a)
------------------------------------
the aggregate of the product of (i) the Principal Balance of each Mortgage Loan
immediately after the Distribution Date preceding such Distribution Date (or,
with respect to the first Distribution Date, immediately prior to the Closing
Date) and (ii) one-twelfth of 0.70%, minus (b) the aggregate amount of
Prepayment Interest Shortfalls and Relief Act Shortfalls allocated to the Class
S Certificates pursuant to Section 4.05 on such Distribution Date. On any
Distribution Date with respect to which there are Realized Losses, the Class S
Interest Distribution Amount, to the extent of such Realized Losses, shall be
allocated between the Class A-I and Class A-II Certificates in proportion to the
Realized Losses on the related Loan Group for the related Distribution Date.
Clearing Agency: An organization registered as a "clearing agency"
---------------
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended,
which initially shall be DTC.
Code: The Internal Revenue Code of 1986.
----
Collateralization Deficit: With respect to any Distribution Date and a
-------------------------
Loan Group, the excess of (x) the aggregate outstanding Certificate Principal
Balance of the related Class of Class A Certificates (after giving effect to all
distributions to be made on such Distribution Date other than distributions from
amounts attributable to related Insured Payments) as of such Distribution Date
over (y) the aggregate outstanding Principal Balance of the Mortgage Loans in
such Loan Group as of the close of
6
<PAGE>
business on the related Due Date (reduced, to the extent not already reflected,
by any amounts received by the Servicer in respect of scheduled payments of
principal after such Due Date but before the related Determination Date and any
amounts allocable to principal paid by the Servicer as part of a Monthly Advance
after such Due Date but on or before the related Servicer Advance Date, in each
case with respect to the Mortgage Loans in such Loan Group).
Converted Mortgage Loan: A Convertible Mortgage Loan the interest on
-----------------------
which has converted to a fixed interest rate in accordance with the terms of the
related Mortgage Note.
Convertible Mortgage Loan: Any Mortgage Loan which by its terms
-------------------------
grants to the related Mortgagor the option to convert the interest rate borne by
such Mortgage Loan from an adjustable interest rate to a fixed interest rate.
Converting Mortgage Loan: Any Convertible Mortgage Loan with respect
------------------------
to which the related Mortgagor has given notice of its intent to convert from an
adjustable interest rate to a fixed interest rate and prior to the conversion of
such Convertible Mortgage Loan.
Corporate Trust Office: The designated office of the Trustee in the
----------------------
State of Minnesota at which at any particular time its corporate trust business
shall be administered, which office at the date of the execution of this
Agreement is located at 180 East Fifth Street, Minneapolis, Minnesota 55101.
Cumulative Insurance Payments: As of any time of determination, the
-----------------------------
aggregate amount of all Insured Payments previously made by the Insurer under
the Policy plus any unpaid Insurer Premium, plus interest thereon from the date
such amounts became due until paid in full, at a rate of interest equal to the
Late Payment Rate and in accordance with Section 3.03(a) of the Insurance
Agreement, minus the aggregate of all payments previously made to the Insurer
pursuant to Section 4.02 hereof as reimbursement for such amounts.
Custodial Account: The deposit account or accounts created and
-----------------
maintained by the Servicer pursuant to Section 3.07 hereof in the name of a
depository institution which may be the Servicer for the benefit of the
Certificateholders and the Insurer, which account or accounts must be Eligible
Accounts.
Cut-off Date: June 1, 1998.
------------
Debt Service Reduction: With respect to any Mortgage Loan, a
----------------------
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction constituting a Deficient Valuation or any reduction that results in a
permanent forgiveness of principal.
Deficiency Amount: With respect to each Class of the Class A
-----------------
Certificates as of any Distribution Date, the sum of (i) any shortfall in the
related Available Distribution Amount to pay the Class A-I Interest Distribution
Amount or Class A-II Interest Distribution Amount, as applicable, and (ii) the
related Collateralization Deficit.
Deficient Valuation: With respect to any Mortgage Loan, a valuation
-------------------
by a court of competent jurisdiction of the Mortgaged Property in an amount less
than the then outstanding indebtedness under the Mortgage Loan, or that results
in a permanent forgiveness of principal, which valuation in either case results
from a proceeding under the Bankruptcy Code.
7
<PAGE>
Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced by a
---------------------
Replacement Mortgage Loan.
Delivered: With respect to any Eligible Investment, when the steps
---------
applicable to such item as specified below are completed:
(i) if such item is an instrument, delivering such
instrument to the Trustee endorsed to the Trustee or endorsed in blank;
(ii) if such item is a certificated security, delivering such
certificated security to the Trustee in bearer form or in registered form
issued to the Trustee or endorsed to the Trustee or endorsed in blank by an
effective endorsement;
(iii) if such item is a security entitlement other than a
United States Security Entitlement, causing a securities intermediary (who
shall maintain the related financial asset in a quantity corresponding to
the aggregate of all security entitlements it has established with respect
to such financial asset) to indicate by book entry that such security
entitlement has been credited to a securities account of the Trustee with
such securities intermediary;
(iv) if such item is a United States Security Entitlement,
causing a securities intermediary (who shall maintain the related financial
asset in a quantity corresponding to the aggregate of all security
entitlements it has established with respect to such financial asset) to
indicate by book entry that such United States Security Entitlement has
been credited to a securities account of the Trustee with such securities
intermediary;
(v) if such item is a securities account, causing the
securities intermediary to indicate by book entry that all security
entitlements carried in the securities account have been credited to such
securities account; and
(vi) if such item is an uncertificated security, causing the
issuer of such uncertificated security to register the Trustee as the
registered owner of such uncertificated security.
Delivery Date: June 17 1998.
-------------
Depositor: Asset Backed Securities Corporation, a Delaware
---------
corporation, or its successor in interest.
Depository Agreement: The Letter of Representation dated as of June
--------------------
17, 1998 by and among DTC, the Depositor and the Trustee.
Determination Date: The 15th day (or if such 15th day is not a
------------------
Business Day, the Business Day immediately preceding such 15th day) of the month
of the related Distribution Date.
Disqualified Organization: Any organization defined as a
-------------------------
"disqualified organization" under Section 860E(e)(5) of the Code, which includes
any of the following: (i) the United States, any State or political subdivision
thereof, any possession of the United States, or any agency or instrumentality
of any of the foregoing (other than an instrumentality which is a corporation if
all of its activities are subject to tax and, except for the FHLMC, a majority
of its board of directors is not selected by such governmental unit), (ii) a
foreign government, any international organization, or any agency or
8
<PAGE>
instrumentality of any of the foregoing, (iii) any organization (other than
certain farmers' cooperatives described in Section 521 of the Code) which is
exempt from the tax imposed by Chapter 1 of the Code (including the tax imposed
by Section 511 of the Code on unrelated business taxable income), (iv) rural
electric and telephone cooperatives described in Section 1381(a)(2)(C) of the
Code. A Disqualified Organization also includes any "electing large
partnership" as defined in Section 775(a) of the Code and any other Person so
designated by the Trustee based upon an Opinion of Counsel that the holding of
an Ownership Interest in a Class R Certificate by such Person may cause the
Trust REMIC or any Person having an Ownership Interest in any Class of
Certificates (other than such Person) to incur a liability for any federal tax
imposed under the Code that would not otherwise be imposed but for the Transfer
of an Ownership Interest in a Class R Certificate to such Person. The terms
"United States", "State" and "international organization" shall have the
meanings set forth in Section 7701 of the Code or successor provisions.
Distribution Date: The 25th day of each calendar month, or if such
-----------------
25th day is not a Business Day, the next succeeding Business Day, commencing in
July, 1998.
DTC: The Depository Trust Company.
---
Due Date: The first day of the calendar month in which the related
--------
Distribution Date occurs.
Due Period: The period from and including the second day of the
----------
calendar month preceding the calendar month in which any Distribution Date
occurs to and including the first day of the calendar month in which such
Distribution Date occurs.
Eligible Account: Either (i) an account or accounts maintained with a
----------------
federal or state-chartered depository institution or trust company (which may be
the Servicer or an affiliate of the Servicer or which may be the Trustee or an
affiliate of the Trustee) the short-term unsecured debt obligations of which
(or, in the case of a depository institution or trust company that is the
principal subsidiary of a holding company, the short-term unsecured debt
obligations of such holding company) are rated by each Rating Agency not lower
than P-1 in the case of Moody's and A-1+ in the case of Standard & Poor's, (ii)
an account or accounts the deposits in which are fully insured by the FDIC,
provided that any such deposits not so insured shall be otherwise maintained
such that (as evidenced by an Opinion of Counsel delivered to the Trustee and
the Rating Agencies) the applicable Certificateholders have a claim with respect
to the funds in such account or a perfected first priority security interest
against any collateral (which shall be limited to Eligible Investments) securing
such funds that is superior to claims of any other depositors or creditors of
the depository institution or trust company with which such account is
maintained, (iii) a trust account or accounts maintained with the trust
department of a federal or state chartered depository institution or trust
company acting in its fiduciary capacity, provided that any such state chartered
depository institution is subject to regulation regarding funds on deposit
substantially similar to the regulations set forth in 12 C.F.R. (S) 9.10(b) or
(iv) any account maintained at any Federal Home Loan Bank.
Eligible Investments: At any time, any one or more of the following
--------------------
obligations, instruments and securities:
(i) obligations of the United States or any agency thereof,
provided such obligations are backed by the full faith and credit of the
United States;
(ii) general obligations of or obligations guaranteed by any
state of the
9
<PAGE>
United States or the District of Columbia receiving the highest long-term
rating of Moody's and Standard & Poor's, or such lower ratings as are
acceptable to the Insurer and will not result in the downgrading or
withdrawal of the rating, if any, then assigned to the Class A Certificates
by each applicable Rating Agency;
(iii) commercial paper (having original maturities of not more
than 270 days) which is then rated in the highest commercial paper rating
category of Moody's and Standard & Poor's, or such lower category as is
acceptable to the Insurer and will not result in the downgrading or
withdrawal of the rating then assigned to the Class A Certificates by each
applicable Rating Agency;
(iv) certificates of deposit, demand or time deposits,
federal funds or bankers' acceptances (in each case having maturities of
not more than 365 days) issued by any depository institution or trust
company incorporated under the laws of the United States or of any state
thereof and subject to supervision and examination by federal and/or state
banking authorities, provided that the commercial paper and/or long-term
debt obligations of such depository institution or trust company (or in the
case of a depository institution or trust company that is the principal
subsidiary of a holding company, the commercial paper or long-term debt
obligations of such holding company) are then rated in the highest rating
category of Moody's and Standard & Poor's, in the case of commercial paper,
and in the highest category in the case of long-term debt obligations, or
such lower categories as is acceptable to the Insurer and will not result
in the downgrading or withdrawal of the rating then assigned to the Class A
Certificates by each applicable Rating Agency (without regard to the
Policy), and, in the case of short-term debt obligations which have
maturities of 30 days or less, a rating of P-1 by Moody's, and a rating of
A-1+ by Standard & Poor's;
(v) demand or time deposits or certificates of deposit
issued by (a) any Federal Home Loan Bank or (b) any bank or trust company
or savings association which is rated at least "A" by Standard & Poor's
which has combined capital, surplus and undistributed profits of not less
than $50 million and fully insured by the FDIC;
(vi) repurchase obligations with respect to any security
described in (i) and (ii) above or any other security issued or guaranteed
by an agency or instrumentality of the United States, in either case
entered into with a depository institution or trust company (acting as
principal) described in (iv) above;
(vii) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States or any
state thereof which, at the time of such investment or contractual
commitment providing for such investments are then rated in the highest
rating category of Moody's and Standard & Poor's or in such lower rating
category as will not result in the downgrading or withdrawal of the rating,
if any, then assigned to the Class A Certificates by each applicable Rating
Agency;
(viii) such other investments which are acceptable to the
Insurer and do not adversely affect the rating, if any, on the Class A
Certificates by each applicable Rating Agency; and
(ix) units of taxable money-market portfolios rated in the
highest rating category by Moody's and Standard & Poor's and not restricted
to obligations issued or guaranteed by any agency or instrumentality of the
United States or entities whose obligations
10
<PAGE>
are backed by the full faith and credit of the United States and repurchase
agreements collateralized by such obligations.
provided that (A) such obligation or security is held for a temporary period
pursuant to Treasury Regulations Section 1.860G-2(g)(1), and (B) Eligible
Investments shall include only such obligations or securities that mature on or
before the (i) Business Day immediately preceding the next Distribution Date
with respect to amounts on deposit in the Certificate Account or the Reserve
Account and (ii) the second Business Day immediately preceding the next
Distribution Date with respect to amounts on deposit in the Custodial Account.
In addition, no Eligible Investment which incorporates a penalty for early
withdrawal will be used unless the maturity of such Eligible Investment is on or
before the Business Day immediately preceding the next Distribution Date.
Escrow Account: As defined in Section 3.08.
--------------
Event of Default: As defined in Section 8.01 hereof.
----------------
FDIC: The Federal Deposit Insurance Corporation, or any successor
----
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
-----
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.
Final Distribution Date: The Distribution Date on which the final
-----------------------
distribution in respect of the Certificates will be made pursuant to Section
10.01, which Final Distribution Date shall in no event be later than the end of
the 90-day liquidation period described in Section 10.03.
FNMA: The Federal National Mortgage Association, a federally
----
chartered and privately owned corporation organized and existing under the
Federal National Mortgage Association Charter Act, or any successor thereto.
Group I Loans: The Mortgage Loans designated on the Mortgage Loan
-------------
Schedule attached hereto as Exhibit D-1. The Group I Loans relate to the Class
A-I Certificates.
Group II Loans: The Mortgage Loans designated on the Mortgage Loan
--------------
Schedule attached hereto as Exhibit D-2. The Group II Loans relate to the Class
A-II Certificates.
Index: The One-Year Index.
-----
Indirect Participants: Entities, such as banks, brokers, dealers and
---------------------
trust companies, that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly.
Initial Certificate Principal Balance: With respect to the Class A-I
-------------------------------------
Certificates, $200,132,742, and with respect to the Class A-II Certificates,
$70,514,000
Insurance Account: The account or accounts created and maintained
-----------------
pursuant to Section 4.06, which shall be entitled "U.S. Bank National
Association, as trustee, in trust for the registered holders of Chevy Chase
Bank, F.S.B., Mortgage-Backed Pass-Through Certificates, Series 1998-CCB2, Class
A," and which must be an Eligible Account.
Insurance Agreement: The Insurance and Indemnification Agreement
-------------------
dated as of June [17], 1998 among the Insurer, the Trustee, the Servicer, the
Seller and the Depositor.
11
<PAGE>
Insurance Proceeds: Amounts paid pursuant to any insurance policy
------------------
with respect to a Mortgage Loan that have not been used to restore the related
property.
Insured Payment: With respect to each Class of the Class A
---------------
Certificates, as of any Distribution Date, the related Deficiency Amount, if
any, for such Distribution Date.
Insurer: Ambac Assurance Corporation, a Wisconsin-domiciled stock
-------
insurance corporation or its successors in interest.
Insurer Default: The existence and continuance of any of the
---------------
following: (a) a failure by the Insurer to make a payment required under the
Policy in accordance with its terms; or (b)(i) the Insurer (A) files any
petition or commences any case or proceeding under any provision or chapter of
the Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (B) makes
a general assignment for the benefit of its creditors, or (C) has an order for
relief entered against it under the Bankruptcy Code or any other similar federal
or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization which is final and nonappealable; or (ii) a court of competent
jurisdiction, the New York Department of Insurance or other competent regulatory
authority enters a final and nonappealable order, judgment or decree (A)
appointing a custodian, trustee, agent or receiver for the Insurer or for all or
any material portion of its property or (B) authorizing the taking of possession
by a custodian, trustee, agent or receiver of the Insurer (or the taking of
possession of all or any material portion of the property of the Insurer).
Insurer Premium: With respect to any Distribution Date and each Class
---------------
of the Class A Certificates, an amount equal to one-twelfth of the product of
the Insurer Premium Rate and the aggregate Certificate Principal Balance of such
Class of Certificates immediately prior to such Distribution Date.
Insurer Premium Rate: The rate set forth in the Insurance Agreement.
--------------------
Late Payment Rate: As defined in the Insurance Agreement.
-----------------
Lender-Paid MI Loan: A Mortgage Loan so indicated on the Mortgage
-------------------
Loan Schedule.
Liquidated Loan: With respect to any Distribution Date, a Mortgage
---------------
Loan which, as of the close of business on the Business Day next preceding the
related Determination Date, (a) has been liquidated through deed in lieu of
foreclosure, sale in foreclosure, trustee's sale or other realization as
provided by applicable law of real property subject to the related Mortgage and
any security agreements or (b) with respect to which payment under related
private mortgage insurance or hazard insurance and/or from any public or
governmental authority on account of a taking or condemnation of any such
property has been received; provided, however, that any REO Property shall not
be treated as a Liquidated Loan until such property has been finally liquidated.
Liquidation Expenses: Customary and reasonable "out of pocket"
--------------------
expenses incurred by the Servicer (or the related Sub-Servicer) in connection
with the liquidation of any defaulted Mortgage Loan and not recovered by the
Servicer (or the related Sub-Servicer) under a Primary Mortgage Insurance Policy
for reasons other than the Servicer's failure to comply with Section 3.10
hereof, such expenses including, without limitation, legal fees and expenses,
any unreimbursed amount expended by the Servicer pursuant to Section 3.11 hereof
respecting the related Mortgage and any related and unreimbursed expenditures
for real estate property taxes or for property restoration or preservation to
the
12
<PAGE>
extent not previously reimbursed under any hazard insurance policy for reasons
other than the Servicer's failure to comply with Section 3.11 hereof.
Liquidation Proceeds: Amounts other than Insurance Proceeds received
--------------------
in connection with the liquidation of a defaulted Mortgage Loan, whether through
trustee's sale, foreclosure sale or otherwise or amounts received in connection
with any condemnation or partial release of a Mortgaged Property.
Loan Group: Either or both of Loan Group I and Loan Group II.
----------
Loan Group I: The group of Mortgage Loans comprised of the Group I
------------
Loans.
Loan Group II: The group of Mortgage Loans comprised of the Group II
-------------
Loans.
Loan-to-Value Ratio: As of any date, the fraction, expressed as a
-------------------
percentage, the numerator of which is the Principal Balance of the related
Mortgage Loan at the date of determination (less, in the case of a CD Pledge
Loan, the amount of cash held in the related CD Account) and the denominator of
which is the Appraised Value of the related Mortgaged Property or, in the case
of a Replacement Mortgage Loan, the appraised value of the related Mortgaged
Property based upon an appraisal made within 180 days prior to the date of
substitution of such Replacement Mortgage Loan for a Deleted Mortgage Loan.
Margin: As to each Mortgage Loan, the fixed percentage set forth in
------
the related Mortgage Note, which percentage is added to the applicable Index on
each Adjustment Date to determine (subject to rounding in accordance with the
related Mortgage Note, the applicable Periodic Cap, Maximum Interest Rate and
Minimum Interest Rate) the interest rate to be borne by such Mortgage Loan until
the next Adjustment Date thereof.
Maturity Date: The latest possible maturity date, solely for purposes
-------------
of Section 1.860G-1(a)(4)(iii) of the Treasury regulations, by which the
Certificate Principal Balance, if any, of each Class of Regular Certificates
would be reduced to zero as determined under a hypothetical scenario which
assumes that such date is the Distribution Date in the month of the maturity
date of the Mortgage Loan with the latest scheduled maturity date. The Maturity
Date for each Class of Regular Certificates is May 25, 2028.
Maximum Interest Rate: As to any Mortgage Loan, the maximum interest
---------------------
rate that may be borne by such Mortgage Loan as set forth in the related
Mortgage Note, which rate may be applicable to such Mortgage Loan at any time
during the life of such Mortgage Loan.
Minimum Interest Rate: As to any Mortgage Loan, the minimum interest
---------------------
rate that may be borne by such Mortgage Loan as set forth in the related
Mortgage Note, which rate may be applicable to such Mortgage Loan at any time
during the life of such Mortgage Loan.
Monthly Advance: The aggregate of the advances made by or on behalf
---------------
of the Servicer with respect to any Distribution Date pursuant to Section 5.01
hereof, the amount of any such advances being equal to the regular monthly
installments of principal and interest on the Mortgage Loans that were due on
the related Due Date and delinquent as of the close of business on the related
Determination Date, after adjustment of any delinquent interest payment to be
equal to interest at a rate equal to the Mortgage Rate less the Servicing Fee
Rate on the Principal Balance of the Mortgage Loans, less the aggregate
13
<PAGE>
amount of any such delinquent payments that the Servicer has determined would
constitute a Nonrecoverable Advance if made.
Monthly Payment: The scheduled monthly payment of principal and
---------------
interest on a Mortgage Loan.
Moody's: Moody's Investors Service, Inc. or any successor thereto.
-------
Mortgage: The mortgage, deed of trust or other instrument creating a
--------
first lien on a fee simple or leasehold estate in real property securing a
Mortgage Note.
Mortgage File: For each Mortgage Loan, the Trustee Mortgage File and
-------------
the Servicer Mortgage File.
Mortgage Loan: Each of the mortgage loans transferred and assigned to
-------------
the Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Trust Fund, evidenced by a Mortgage Note and secured by a Mortgage,
the mortgage loans so held being identified in the Mortgage Loan Schedule, as
amended from time to time.
Mortgage Loan Purchase Agreement: The Mortgage Loan Purchase
--------------------------------
Agreement dated as of June 1, 1998 between the Depositor, Credit Suisse First
Boston Corporation and the Seller, pursuant to which the Depositor purchased the
Mortgage Loans from the Seller.
Mortgage Loan Repurchase Price: The price, calculated as set forth in
------------------------------
Section 10.01, to be paid in connection with the repurchase of the Mortgage
Loans pursuant to an Optional Termination of the Trust Fund.
Mortgage Loan Schedule: The list of Mortgage Loans transferred to the
----------------------
Trustee as part of the Trust Fund for the Certificates and from time to time
subject to this Agreement (as from time to time amended by the Servicer to
reflect the addition of Replacement Mortgage Loans and the deletion of Deleted
Mortgage Loans pursuant to the provisions of this Agreement), attached hereto as
Exhibit D-1 (with respect to the Group I Loans) and Exhibit D-2 (with respect to
- ----------- -----------
the Group II Loans), setting forth the following information with respect to
each Mortgage Loan:
(i) the loan number;
(ii) the city, state and zip code for each Mortgaged Property;
(iii) the Index;
(iv) the Margin;
(v) the Maximum Interest Rate;
(vi) the Minimum Interest Rate;
(vii) the original term to maturity;
(viii) the remaining term to maturity;
(ix) the original principal balance;
14
<PAGE>
(x) the Principal Balance as of the Cut-off Date;
(xi) the first Due Date;
(xii) the Monthly Payment in effect as of the Cut-off Date;
(xiii) the Loan-to-Value Ratio at origination;
(xiv) the Appraised Value of the Mortgaged Property;
(xv) the Net Mortgage Rate;
(xvi) a code indicating whether the Mortgaged Property is either
(a) a detached single-family dwelling or a de minimis planned
unit development, (b) a condominium unit or a dwelling in a
planned unit development, (c) a townhouse, or (d) a two- to
four-family residential property;
(xvii) a code indicating whether the Mortgaged Property at the time
of origination was represented to be owner-occupied;
(xviii) a code indicating whether the Mortgage Loan is a Lender-Paid
MI Loan;
(xix) a code indicating whether the Mortgage Loan is a CD Pledge
Loan;
(xx) the amount of any CD Collateral pledged to secure such
Mortgage Loan; and
(xxi) the purpose for which the financing was made.
Such schedule shall also set forth the total of the amounts described under (ix)
above for all of the Mortgage Loans. Such schedule may be in the form of more
than one list collectively setting forth all of the information required and
shall also be in a computer-readable format acceptable to the Trustee and the
Insurer.
Mortgage Note: The original executed note or other evidence of the
-------------
indebtedness of a Mortgagor under a Mortgage Loan, including a lost note
affidavit with a copy of the related note.
Mortgage Rate: The annual rate of interest borne by a Mortgage Note,
-------------
which is set forth in the related Mortgage Note. The Mortgage Rate for each
Mortgage Loan as of the Cut-off Date will be adjusted on each Adjustment Date to
a rate equal to the sum of the Index applicable to such Adjustment Date and the
Margin, rounded to or up to the nearest multiple of 0.125%, as specified in the
related Mortgage Note, subject to the application of the applicable Periodic
Cap, Maximum Interest Rate and Minimum Interest Rate.
Mortgaged Property: The underlying property securing a Mortgage Loan.
------------------
Mortgagor: The obligor on a Mortgage Note.
---------
Net Mortgage Rate: As to each Mortgage Loan, with respect to any
-----------------
Distribution Date, a rate per annum equal to (a) the Mortgage Rate in effect as
of the Due Date in the preceding calendar month minus (b) the Adjusted Servicing
Fee Rate minus (c) the Trustee Fee Rate minus (d) 0.70% per annum.
15
<PAGE>
1933 Act: The Securities Act of 1933, as amended.
--------
Nonrecoverable Advance: The portion of any Monthly Advance previously
----------------------
made or proposed to be made by the Servicer or other advance previously made by
the Servicer that, in the good faith judgment of the Servicer, will not or, in
the case of a current delinquency, would not be, ultimately recoverable by the
Servicer from Insurance Proceeds or Liquidation Proceeds (net of Liquidation
Expenses) with respect to the related Mortgage Loan.
Officers' Certificate: A certificate signed by the Chairman of the
---------------------
Board, any Vice Chairman of the Board, the President, an Executive Vice
President, Senior Vice President, a Vice President, or other authorized officer,
and by the Treasurer, the Secretary, or one of the Assistant Treasurers or
Assistant Secretaries of the Depositor, the Seller, the Servicer, a Sub-Servicer
or the Trustee, as the case may be, and delivered to the Insurer, the Depositor,
the Servicer or the Trustee, as required by this Agreement.
One-Year Index: With respect to any Mortgage Loan and as to any
--------------
Adjustment Date therefor, a per annum rate equal to the weekly average yield on
U.S. Treasury securities adjusted to a constant maturity of one year as reported
by the Federal Reserve Board in statistical Release No. H.15(519) as of the date
specified in the related Mortgage Note, or, in the event that such index is no
longer available, an index selected by the Servicer and reasonably acceptable to
the Trustee that is based on comparable information.
Opinion of Counsel: A written opinion of counsel, who may be counsel
------------------
for the Depositor or the Servicer, reasonably acceptable to the Trustee and the
Insurer. With respect to the definition of Eligible Account in this Article I
and Sections 2.04 and 7.04 hereof and any opinion dealing with the qualification
of a remic or compliance with the REMIC Provisions, such counsel must (i) in
fact be independent of the Depositor and the Servicer, (ii) not have any direct
financial interest in the Depositor or the Servicer or in any affiliate of
either of them and (iii) not be connected with the Depositor or the Servicer as
an officer, employee, promoter, underwriter, trustee, partner, director or
Person performing similar functions.
Optional Termination: The purchase of the Mortgage Loans pursuant to
--------------------
Section 10.01.
Optional Termination Date: The date fixed by the Servicer for the
-------------------------
purchase of the Mortgage Loans pursuant to Section 10.01.
Participant: A broker, dealer, bank, other financial institution or
-----------
other Person for whom DTC effects book-entry transfers and pledges of securities
deposited with DTC.
Pass-Through Entity: (a) a regulated investment company described in
-------------------
Section 851 of the Code, a real estate investment trust described in Section 856
of the Code, a common trust fund or an organization described in Section 1381(a)
of the Code, (b) any partnership, trust or estate or (c) any person holding a
Class A Certificate as nominee for another person.
Percentage Interest: The percentage interest (which may be expressed
-------------------
as a fraction) evidenced by any Certificate, which (a) in the case of each Class
of the Class A Certificates, is equal to a fraction, the numerator of which is
the Initial Certificate Principal Balance of such Certificate, and the
denominator of which is equal to the aggregate Initial Certificate Principal
Balances of all Certificates of the same Class and (b) in the case of the Class
S or Class R Certificates, is set forth on the face thereof.
16
<PAGE>
Periodic Cap: With respect to each Mortgage Loan, the maximum
------------
increase or decrease in the Mortgage Rate on any Adjustment Date (other than
with respect to certain of the Mortgage Loans, the first Adjustment Date for
such Mortgage Loan), as specified in the related Mortgage Note.
Person: Any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.
Policy: The Certificate Guaranty Insurance Policy No. AB0172BE issued
------
by the Insurer in respect of the Class A Certificates, a copy of which is
attached hereto as Exhibit L.
Prepayment Interest Shortfall: As to any Distribution Date and any
-----------------------------
Mortgage Loan (other than a Mortgage Loan secured by an REO Property) that was
the subject of a Principal Prepayment during the related Prepayment Period, an
amount equal to the excess of one month's interest at the Mortgage Rate on the
Principal Balance of such Mortgage Loan over the amount of interest paid by the
Mortgagor for such Prepayment Period to the date of such Principal Prepayment.
Prepayment Period: With respect to any Distribution Date, the
-----------------
calendar month prior to the month in which such Distribution Date occurs.
Primary Mortgage Insurance Policy: Each primary policy of mortgage
---------------------------------
guaranty insurance with respect to the Mortgage Loans or any replacement policy
therefor.
Principal Balance: With respect to any Mortgage Loan, as of the date
-----------------
of any determination, the principal balance of such Mortgage Loan remaining to
be paid by the Mortgagor as of the Cut-off Date after deduction of all payments
due on or before the Cut-off Date, reduced (but not below zero) by the sum of
(i) all amounts previously received or collected by the Servicer in respect of
principal of such Mortgage Loan subsequent to the Cut-off Date, other than
amounts representing payments due on such Mortgage Loan on or prior to the Cut-
off Date; (ii) all Liquidation Proceeds (net of Liquidation Expenses) and
Insurance Proceeds allocated to principal; (iii) all amounts allocable to the
principal of such Mortgage Loan previously paid by the Servicer as part of a
Monthly Advance, in each case which were distributed to Certificateholders
pursuant to Section 4.02; and (iv) all Realized Losses allocated to
Certificateholders with respect thereto on any previous Distribution Date. In
the case of a Replacement Mortgage Loan, "Principal Balance" shall mean, at the
time of any determination, the principal balance of such Replacement Mortgage
Loan on the date of substitution after deduction of all payments due on or
before the Due Date in the month of substitution, reduced by the sums described
in (i) through (iv), above, after such Due Date.
Principal Prepayment: Any Mortgagor payment or other recovery of
--------------------
principal on a Mortgage Loan that is received in advance of its scheduled Due
Date and is not accompanied by an amount as to interest representing scheduled
interest due on any date or dates in any month or months subsequent to the month
of prepayment.
Purchase Price: With respect to any Mortgage Loan required to be
--------------
purchased by the Seller or Servicer pursuant to Section 2.01, 2.02, 2.04 or 3.12
or which the Servicer purchases pursuant to Section 3.21 the sum of (i) 100% of
the Principal Balance of the Mortgage Loan on the date of such purchase, (ii)
accrued and unpaid interest on the Mortgage Loan at a rate equal to the sum of
the Net Mortgage Rate, the Trustee Fee Rate and 0.70% per annum to the next Due
Date and (iii) the amount of any unreimbursed Monthly Advances and other
advances made by the Servicer with respect to such Mortgage Loan and
reimbursable to the Servicer hereunder. With respect to any Mortgage Loan
required
17
<PAGE>
or allowed to be purchased, the Servicer or Seller, as applicable, shall deliver
to the Trustee an Officers' Certificate as to the calculation of the Purchase
Price.
Qualified Insurer: A mortgage guaranty insurance company duly
-----------------
qualified as such under the laws of the state of its principal place of business
and each other state having jurisdiction over such insurer in connection with
the insurance policy issued by such insurer, duly authorized and licensed by the
insurance regulatory authority of the state of its principal place of business
and, to the extent required by applicable law, each such other state, to
transact a mortgage guaranty insurance business in such state and each such
other state and to write the insurance provided by the insurance policy issued
by it and approved as an insurer by FHLMC or FNMA and whose claims-paying
ability will not adversely affect the rating on the Certificates.
Rating Agency: Moody's and Standard & Poor's or any successor
-------------
thereto.
Realized Loss: An amount determined by the Servicer and evidenced by
-------------
an Officers' Certificate delivered to the Trustee, in connection with any
Mortgage Loan equal to (a) with respect to any Liquidated Loan, the excess of
the Principal Balance of such Liquidated Loan plus interest thereon at a rate
equal to the sum of the applicable Net Mortgage Rate and the Trustee Fee Rate
from the Due Date as to which interest was last paid up to the Due Date next
succeeding such liquidation over proceeds, if any, received in connection with
such liquidation, after application of all withdrawals permitted to be made by
the Servicer from the related Custodial Account with respect to such Mortgage
Loan, (b) with respect to any Mortgage Loan which has become the subject of a
Deficient Valuation, the excess of the Principal Balance of the Mortgage Loan
over the principal amount as reduced in connection with the proceedings
resulting in the Deficient Valuation or (c) with respect to any Mortgage Loan
which has become the subject of a Debt Service Reduction, the present value of
all monthly Debt Service Reductions on such Mortgage Loan, assuming that the
Mortgagor pays each Monthly Payment on the applicable Due Date and that no
Principal Prepayments are received with respect to such Mortgage Loan,
discounted monthly at the applicable Mortgage Rate.
Record Date: With respect to any Distribution Date, the close of
-----------
business on the last Business Day of the month preceding the month in which the
applicable Distribution Date occurs.
Regular Certificates: All of the Certificates other than the Class R
--------------------
Certificates.
Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
----------
amended.
Relief Act Shortfalls: With respect to any Distribution Date and any
---------------------
Mortgage Loan, the amount of any interest that is not collectible from the
Mortgagor during the related Due Period pursuant to the Relief Act or similar
legislation or regulations as in effect from time to time.
remic: A "real estate mortgage investment conduit", within the
-----
meaning of Section 860D of the Code.
REMIC Election: An election, for federal income tax purposes, to
--------------
treat certain assets as a remic.
REMIC Regular Interest: Any of the Class A Certificates and Class S
----------------------
Certificates. The Class A Certificates shall accrue interest at the related
Certificate Rate in effect from time to time, minus the Insurer Premium Rate,
and shall be entitled to distributions of principal, subject to the terms and
conditions hereof, in an aggregate amount equal to their initial Certificate
Principal Balance as set forth
18
<PAGE>
in the preliminary statement hereto. The Class S Certificates shall accrue
interest at the related Certificate Rate, and shall not be entitled to any
distributions of principal.
REMIC Provisions: Provisions of the federal income tax law relating
----------------
to remics, which appear at Section 860A through 860G of the Subchapter M of
Chapter 1 of the Code and related provisions, and regulations promulgated
thereunder, as the foregoing may be in effect from time to time.
REO Property: Any Mortgaged Property acquired by or in the name of
------------
the Trustee for the benefit of the Certificateholders and the Insurer in
foreclosure or by deed-in-lieu of foreclosure.
Replacement Mortgage Loan: A Mortgage Loan substituted by the
-------------------------
Servicer or Seller for a Deleted Mortgage Loan which must, on the date of such
substitution, as confirmed in an Officers' Certificate delivered to the Trustee,
(i) have an outstanding Principal Balance, after deduction of the principal
portion of the Monthly Payment due in the month of substitution (or in the case
of a substitution of more than one Mortgage Loan for a Deleted Mortgage Loan, an
aggregate Principal Balance, after such deduction), not in excess of the
Principal Balance of the Deleted Mortgage Loan (the amount of any shortage to be
deposited by the Servicer or Seller, as the case may be, in the Certificate
Account in the month of substitution as set forth in Section 2.03 of this
Agreement); (ii) at the time of substitution have a Net Mortgage Rate equal to
or exceeding the Net Mortgage Rate of the Deleted Mortgage Loan; (iii) have a
Loan-to-Value Ratio no higher than the Loan-to-Value Ratio of the Deleted
Mortgage Loan; (iv) have a remaining term to maturity no greater than (and not
more than one year less than) the Deleted Mortgage Loan; (v) be of the same or
better credit quality classification as that of the Deleted Mortgage Loan; and
(vi) comply with each representation and warranty relating to the Mortgage Loans
set forth in Section 2.04 hereof.
Required Insurance Policy: With respect to any Mortgage Loan, any
-------------------------
insurance policy that is required to be maintained from time to time under this
Agreement in respect of such Mortgage Loan, including each standard hazard and,
if applicable, flood insurance policy.
Reserve Account: The account established and maintained by the
---------------
Trustee in accordance with Section 4.07.
Reserve Account Balance: With respect to each Distribution Date
-----------------------
(other than the first Distribution Date), the amount on deposit in the Reserve
Account as of the preceding Distribution Date after giving effect to all
distributions to be made on such preceding Distribution Date, and with respect
to the first Distribution Date, as of the Closing Date.
Reserve Account Decrease Amount: As of any Distribution Date, the
-------------------------------
excess, if any, of the amount on deposit in the Reserve Account on such
Distribution Date (after taking into account all allocations and distributions
to be made on such Distribution Date, including payments from the Reserve
Account in respect of Realized Losses) over the Reserve Account Requirement as
of such Distribution Date.
Reserve Account Increase Amount: On any Distribution Date, the
-------------------------------
excess, if any, of the Reserve Account Requirement as of such Distribution Date
over the amount on deposit in the Reserve Account as of such Distribution Date
(after taking into account all distributions to be made on such Distribution
Date, including payments from the Reserve Account in respect of Realized
Losses).
Reserve Account Initial Target: $2,706,467.42.
------------------------------
19
<PAGE>
Reserve Account Monthly Investment Income: With respect to each
-----------------------------------------
Distribution Date, actual investment income received in respect of deposits in
the Reserve Account during the investment period applicable to the related
Eligible Investment in which such deposits were invested.
Reserve Account Requirement:
---------------------------
(a) As of the Delivery Date, zero;
(b) for any Distribution Date occurring during the period commencing
on the Delivery Date and ending on the later of the thirtieth distribution date
following the Delivery Date and the date upon which an aggregate amount equal to
one-half of the aggregate Principal Balance of the Mortgage Loans as of the Cut-
off Date has been received by the Class A Certificateholders as payments in
reduction of the Certificate Principal Balance thereof, the greater of: (i) the
Reserve Account Initial Target and (ii) two multiplied by the excess, if any, of
(a) one-half of the aggregate Principal Balance of Mortgage Loans that are 90
days or more delinquent over (b) five multiplied by the Class S Interest
Distribution Amount for such month; and
(c) for any Distribution Date occurring after the end of the period in
clause (b) above, the greatest of (i) 2.00% of the aggregate Principal Balance
of the Mortgage Loans as of the close of business on the last day of the related
Due Period preceding such Distribution Date, (ii) two multiplied by the excess,
if any, of (a) one-half of the aggregate Principal Balance of Mortgage Loans
that are 90 days or more delinquent over (b) five multiplied by the Class S
Interest Distribution Amount for such month; and (iii) the greater of (x) 0.25%
of the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date
and (y) the aggregate Principal Balance of the three Mortgage Loans with the
greatest Principal Balance as of such Distribution Date.
Notwithstanding the above, in the event of a claim on the Policy, the Reserve
Account Requirement shall not step down from the amount of the Reserve Account
Requirement in effect as of the Distribution Date immediately preceding such
claim on the Policy until such time as the amount of such claim is reimbursed to
the Insurer.
Responsible Officer: When used with respect to the Trustee, the
-------------------
Chairman or Vice Chairman of the Board of Directors or Trustees, the Chairman or
Vice Chairman of the Executive or Standing Committee of the Board of Directors
or Trustees, the President, the Chairman of the Committee on Trust Matters, any
Vice President, any Assistant Vice President, the Secretary, any Assistant
Secretary, the Treasurer, any Assistant Treasurer, the Cashier, any Assistant
Cashier, any Trust Officer or Assistant Trust Officer, the Controller and any
Assistant Controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject.
Rule 144A: Rule 144A under the 1933 Act, as in effect from time to
---------
time.
Scheduled Final Distribution Date: May 25, 2029.
---------------------------------
Seller: Chevy Chase Bank, F.S.B. or its successor in interest.
------
Servicer: Chevy Chase Bank, F.S.B. or any successor under the terms
--------
of this Agreement.
20
<PAGE>
Servicer Advance Date: The date on which the Servicer is required to
---------------------
make a Monthly Advance pursuant to Section 5.04 hereof.
Servicer Mortgage File: All documents pertaining to a Mortgage Loan
----------------------
not required to be included in the Trustee Mortgage File and held by the
Servicer or any Sub-Servicer.
Servicing Fee: For each calendar month, as to each Mortgage Loan, (i)
-------------
an amount equal to one month's interest (or in the event of any payment of
interest which accompanies a Principal Prepayment in full made by the Mortgagor,
interest for the number of days covered by such payment of interest) at a rate
equal to the sum of (A) the applicable Servicing Fee Rate and (B) in the case of
Lender-Paid MI Loans, one-twelfth of the additional interest rate payable
thereon by the related Mortgagor on the Principal Balance of such Mortgage Loan
immediately preceding the Distribution Date occurring in such month and (ii)
increased by any late payment charges, assumption fees and other usual and
customary fees collected from the Mortgagor and by any net income on Eligible
Investments held in the Custodial Account.
Servicing Fee Rate: 0.375% per annum.
------------------
Servicing Officer: Any officer of the Servicer involved in, or
-----------------
responsible for, the administration and servicing of the Mortgage Loans whose
name appears on a list of servicing officers furnished to the Trustee and the
Insurer on the Delivery Date by the Servicer pursuant to this Agreement, as such
list may from time to time be amended.
Standard & Poor's: Standard & Poor's Ratings Services, a division of
-----------------
the McGraw-Hill Companies, or its successor in interest.
Sub-Servicer: Any other entity with respect to any Mortgage Loan
------------
under any Sub-Servicing Agreement applicable to such Mortgage Loan and any
successors and assigns under such Sub-Servicing Agreement.
Sub-Servicing Agreement: Any servicing agreement between the Servicer
-----------------------
and a Sub-Servicer pursuant to which the Servicer delegates any of its servicing
responsibilities with respect to any of the Mortgage Loans.
Transferee Affidavit and Agreement: As defined in Section
----------------------------------
6.02(g)(i)(B).
Trust Fund: Collectively, the assets of the Trust REMIC plus the
----------
Reserve Account and all amounts deposited therein pursuant to the provisions of
this Agreement.
Trust REMIC: The corpus of the trust created by this Agreement
-----------
consisting of (a) the Mortgage Loans listed in the Mortgage Loan Schedule,
including all interest and principal received or receivable by the Depositor on
or with respect to the Mortgage Loans after the Cut-off Date, but not including
payments of principal and interest due and payable on the Mortgage Loans on or
before the Cut-off Date, together with the Mortgage Files relating to the
Mortgage Loans, (b) CD Collateral, (c) REO Property, (d) the Custodial Account
and the Certificate Account and all amounts deposited therein pursuant to the
applicable provisions of this Agreement, (e) any insurance policies with respect
to the Mortgage Loans and (f) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid property. The
Trust REMIC specifically excludes the Reserve Account.
21
<PAGE>
Trustee: U.S. Bank National Association, a national banking
-------
association, not in its individual capacity, but solely in its capacity as
trustee for the benefit of the Certificateholders and the Insurer under this
Agreement, and any successor thereto, as provided herein.
Trustee Fee: The fee payable to the Trustee on each Distribution Date
-----------
for its services as Trustee hereunder, in an amount equal to one-twelfth of the
Trustee Fee Rate multiplied by the Principal Balance of the Mortgage Loans
immediately prior to such Distribution Date.
Trustee Fee Rate: 0.01% per annum.
----------------
Trustee Mortgage File: The mortgage documents listed in Section 2.01
---------------------
hereof pertaining to a particular Mortgage Loan and any additional documents
required to be added to the Trustee Mortgage File pursuant to this Agreement.
United States Regulations: 31 C.F.R. Part 357; 12 C.F.R. Part 615,
-------------------------
Subpart O; 12 C.F.R. Part 912; 12 C.F.R. Part 1511; 24 C.F.R. Part 81; 31 C.F.R.
Part 354; and 18 C.F.R. Part 1314.
United States Securities Entitlement: A "Security Entitlement" as
------------------------------------
defined in a United States Regulation.
U.S. Person: A citizen or resident of the United States, a
-----------
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any state (including the District of Columbia)
thereof, or an estate or trust whose income from sources without the United
States is includable in gross income for United States federal income tax
purposes regardless of its connection with the conduct of a trade or business
within the United States.
Voting Rights: The portion of the aggregate voting rights of all the
-------------
Certificates evidenced by a Certificate. 98% of all Voting Rights will be
allocated to the Class A Certificates in proportion to their Certificate
Principal Balances, 1% of all Voting Rights will be allocated among the Class S
Certificates in proportion to their Percentage Interests and 1% of all Voting
Rights will be allocated to the Class R Certificates.
ARTICLE II.
CONVEYANCE OF TRUST FUND;
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. Conveyance of Trust Fund.
-------------------------
The Depositor hereby sells, transfers, assigns, delivers, sets over
and otherwise conveys to the Trustee for the benefit of the Certificateholders
and the Insurer, without recourse, the Depositor's right, title and interest in
and to (a) the Mortgage Loans listed in the Mortgage Loan Schedule, including
all interest and principal received or receivable by the Depositor on or with
respect to the Mortgage Loans after the Cut-off Date, but not including payments
of principal and interest due and payable on the Mortgage Loans on or before the
Cut-off Date, which Mortgage Loans the Depositor shall cause to be delivered to
the Trustee on or prior to the Delivery Date, together with the Trustee Mortgage
Files relating to the Mortgage Loans, (b) all CD Collateral, (c) all amounts on
deposit in the Reserve Account, (d) REO Property, (e) the Custodial Account, the
Certificate Account and all amounts deposited therein or other property credited
thereto pursuant to the applicable provisions of this Agreement, (f) any
22
<PAGE>
insurance policy with respect to the Mortgage Loans and (g) all proceeds of the
conversion, voluntary or involuntary, of any of the foregoing into cash or other
liquid property.
The Seller hereby sells, transfers, assigns, delivers, sets over and
otherwise conveys to the Trustee for the benefit of the Insurer and
Certificateholders, without recourse, any and all right, title and interest of
the Seller, if any, in and to (a) the Mortgage Loans listed in the Mortgage Loan
Schedule, including all interest and principal received or receivable by the
Seller on or with respect to the Mortgage Loans after the Cut-off Date, but not
including payments of principal and interest due and payable on the Mortgage
Loans on or before the Cut-off Date, (b) all CD Collateral, (c) all amounts on
deposit in the Reserve Account, (d) REO Property, (e) the Custodial Account, the
Certificate Account and all amounts deposited therein or other property credited
thereto pursuant to the applicable provisions of this Agreement, (f) any
insurance policy with respect to the Mortgage Loans and (g) all proceeds of the
conversion, voluntary or involuntary, of any of the foregoing into cash or other
liquid property.
The Holder of the Class S Certificates hereby transfers, assigns,
delivers, sets over and otherwise conveys to the Trustee for the benefit of the
Insurer and Certificateholders, without recourse, any and all right, title and
interest of the Holder of the Class S Certificates, if any, in and to amounts on
deposit in the Reserve Account, but not including any amounts to which the
Holder of such Class S Certificates is entitled pursuant to Section 4.07, and
all proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash or other liquid property.
In connection with any such transfer and assignment, the Depositor
shall deliver to, and deposit with, the Trustee the following documents or
instruments with respect to each Mortgage Loan so assigned:
(i) the Mortgage Note, endorsed without recourse to the order
of the Trustee, with all intervening endorsements showing a complete chain
of endorsement from the originator to the last endorser (or an original
lost note affidavit from the Seller stating that the Mortgage Note was
lost, misplaced or destroyed, together with a copy of the related Mortgage
Note, with respect to such Mortgage Loans identified in the Trustee's
Initial Certification referenced in Section 2.02), and if the Mortgage Note
or Mortgage or any other material document or instrument relating to the
Mortgage Loan has been signed on behalf of the Mortgagor by another person,
the original power of attorney or other instrument that authorized and
empowered such person to sign, or a copy of the original power of attorney
or other instrument;
(ii) the original Mortgage, and any intervening assignment
thereof, in each case as recorded, with evidence of recording indicated
thereon, except in jurisdictions under the laws of which in the opinion of
counsel the recordation of such assignment is not necessary to protect the
Trustee's and the Certificateholders' interest in the related Mortgage
Loan;
(iii) an original assignment or assignments of Mortgage showing
an unbroken chain of title from the originator to the preceding assignee to
the Trustee with evidence of recording indicated thereon, except in
jurisdictions under the laws of which in the opinion of counsel the
recordation of such assignment is not necessary to protect the Trustee's
and the Certificateholders' interest in the related Mortgage Loan;
(iv) the original copy of each assumption, modification,
written assurance or substitution agreement, if any, with respect to such
Mortgage Loan, as identified on the Mortgage Loan Schedule; and
23
<PAGE>
(v) in the case of the CD Pledge Loans, the original copy of
each related certificate of deposit and CD Pledge Agreement.
Notwithstanding the foregoing, in the event that in connection with
any Mortgage Loan the Depositor cannot deliver an original recorded counterpart
of any of the documents required to be delivered pursuant to clauses (ii) or
(iii) above with evidence of recording thereon concurrently with the execution
and delivery hereof, the Depositor shall deliver, or cause the Servicer to
deliver, to the Trustee a duplicate original or true copy of such document
certified by the Depositor or the Servicer or the applicable public recording
office to be a true and complete duplicate original or copy of the original
thereof submitted for recording, or a copy of the Mortgage certified by a title
insurance or escrow company or companies reasonably acceptable to the Insurer,
evidencing that such Mortgage or assignment of Mortgage has been delivered to
the appropriate public recording office for recordation. In the event that the
Depositor cannot deliver a duplicate original or true copy certified as stated
above of such document required to be delivered pursuant to clauses (ii) or
(iii) above, within 45 days of the Delivery Date, the Servicer shall purchase
the related Mortgage Loan at the Purchase Price therefor. The Depositor shall
promptly deliver, or cause the Servicer to deliver, to the Trustee (A) such
original document with evidence of recording indicated thereon or a photocopy of
such document certified by the appropriate county recorder's office to be a true
and complete copy of the original thereof, upon receipt thereof from the public
recording official or from the Servicer, and (B) upon discovery of any defect or
omission in the deliveries of any of items (ii) through (iv) above with respect
to any Mortgage Loan, a correct and complete document or instrument meeting the
requirements of such item or a certified copy thereof, certified by the relevant
recording office, but in no event shall any such delivery be made later than 90
days following the Delivery Date (unless such document has not been returned
from the relevant recording office at such time, in which case the Servicer
shall make such delivery within 270 days of the Delivery Date; provided,
however, that such 270 day period shall be extended to 360 days upon
presentation of an officer's certificate of the Servicer to the effect that such
document has not yet been returned from the relevant recording office, and shall
be extended for additional thirty-day periods upon the written consent of the
Insurer). From time to time the Servicer may forward or cause to be forwarded
to the Trustee for the benefit of the Certificateholders and the Insurer
additional original documents evidencing an assumption or modification of a
Mortgage Loan.
The Trustee shall promptly complete the endorsement of the Mortgage
Note referred to in (i) above and the assignment of Mortgage referred to in
(iii) above to the Trustee for the benefit of the Holders of the Chevy Chase
Bank, F.S.B. Mortgage-Backed Pass-Through Certificates, Series 1998-CCB2 and
Ambac Assurance Corporation. The Trustee on behalf of the Servicer shall within
180 days of the Closing Date record in the appropriate public office for real
property records each original assignment referred to in (iii) above with
respect to each Mortgaged Property, and the Trustee shall release any such
assignment to the Depositor or the Servicer, as applicable, for such purpose.
The Depositor or the Servicer shall promptly deliver to the Trustee each
original assignment with evidence of recording indicated thereon or a photocopy
thereof certified by the appropriate county recorder's office to be a true and
complete copy of the original thereof, upon receipt thereof from the public
recording official. If any assignment is returned unrecorded to the Depositor
or the Servicer because of any defect therein, the Depositor or the Servicer
shall cure or correct such defect and cause such assignment to be recorded in
accordance with this paragraph and if such defect is not cured the Servicer
shall purchase the Mortgage Loan at the Purchase Price therefor.
SECTION 2.02. Acceptance by Trustee.
----------------------
The Trustee will hold the documents referred to in Section 2.01 above
and the other documents constituting a part of the Trustee Mortgage Files
delivered to it in trust for the use and benefit
24
<PAGE>
of all present and future Certificateholders and the Insurer. Upon execution and
delivery of this Agreement and within 45 days after the execution and delivery
of this Agreement, the Trustee shall ascertain whether all documents required to
be delivered to it pursuant to Section 2.01 hereof are in its possession, and
shall deliver to the Depositor, the Insurer and the Servicer a certification
(upon execution and delivery of this Agreement, the "Initial Certification" and
within 45 days thereof, the "Final Certification", respectively) in the forms
set forth as Exhibits E and F hereto to the effect that, as to each Mortgage
---------- -
Loan listed in the Mortgage Loan Schedule: (a) all documents required to be
delivered to the Trustee pursuant to this Agreement are in its possession, (b)
such documents have been reviewed by it and have not been mutilated, damaged,
defaced, torn or otherwise physically altered, and such documents relate to such
Mortgage Loan, (c) based on its examination and only as to the foregoing
documents, the information set forth in items (i) through (vi) of the definition
of Mortgage Loan Schedule respecting such Mortgage Loan accurately reflects the
information contained in the documents in the Trustee Mortgage File and (d) each
Mortgage Note has been endorsed and each assignment of Mortgage has been
delivered as provided in Section 2.01 hereof. The Trustee shall deliver to the
Depositor, the Insurer and the Servicer a copy of such Final Certification. If,
in the course of such review, the Trustee finds any document or documents
constituting a part of a Mortgage File which do not meet the requirements of
(a)-(d) above, the Trustee shall promptly notify the Servicer, the Insurer and
the Depositor in writing, and request that the Servicer correct or cure such
defect. The Trustee shall promptly notify the Depositor in writing if any
original assignment referred to in clause (iii) of Section 2.01 has not been
received by it prior to September 30, 1998. In the event the Servicer or
Depositor shall fail to cure any document deficiency or defect reflected in the
Final Certification or as otherwise required under Section 2.01, it shall not be
the obligation of the Trustee hereunder to cure the same, and the Servicer shall
purchase the Mortgage Loan at the Purchase Price therefor.
The Depositor agrees that at any time and from time to time upon
written request of the Trustee or the Insurer, the Depositor shall promptly and
duly execute and deliver any and all such further documents and assurances, and
take such further actions as the Trustee reasonably may request in order to
obtain or more fully vest the benefits of the assignment intended hereunder (as
set forth hereinabove in Section 2.01 and hereinbelow in Section 2.03) and of
the rights and powers herein granted.
The Trustee shall retain possession and custody of each Trustee
Mortgage File in accordance with and subject to the terms and conditions set
forth herein.
SECTION 2.03. Representations, Warranties and Covenants of the
------------------------------------------------
Servicer and Seller.
- --------------------
Chevy Chase, as Seller and Servicer, hereby represents and warrants
to, and covenants with, the Depositor, the Insurer and the Trustee that, as of
the date hereof:
(i) Chevy Chase is a federal savings bank, validly existing
and in good standing under the laws of the United States of America and is
duly authorized and qualified to transact any and all business contemplated
by this Agreement in any state in which a Mortgaged Property is located or
is otherwise not required under applicable law to effect such qualification
and, in any event, is in compliance with the doing business laws of any
such State, to the extent necessary to ensure the enforceability of each
Mortgage Loan and the servicing of the Mortgage Loans in accordance with
the terms of this Agreement;
(ii) Chevy Chase has the full corporate power and authority
to service each Mortgage Loan, and to execute, deliver and perform, and to
enter into and consummate the transactions contemplated by this Agreement
and has duly authorized by all necessary corporate action on the part of
Chevy Chase the execution, delivery and performance of this Agreement;
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and this Agreement, assuming the due authorization, execution and delivery
thereof by the Depositor and the Trustee, constitutes a legal, valid and
binding obligation of Chevy Chase, enforceable against Chevy Chase in
accordance with its terms, except that (A) the enforceability thereof may
be limited to bankruptcy, insolvency, moratorium, receivership and other
similar laws relating to creditors' rights generally and (B) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought;
(iii) the execution and delivery of this Agreement by Chevy
Chase, the servicing of the Mortgage Loans by Chevy Chase hereunder, the
consummation of any other of the transactions herein contemplated, and the
fulfillment of or compliance with the terms hereof are in the ordinary
course of business of Chevy Chase and will not (A) result in a material
breach of any term or provision of the charter or by-laws of Chevy Chase or
(B) materially conflict with, result in a material breach, violation or
acceleration of, or result in a material default under, the terms of any
other material agreement or instrument to which Chevy Chase is a party or
by which it may be bound, or any statute, order or regulation applicable to
Chevy Chase of any court, regulatory body, administrative agency or
governmental body having jurisdiction over Chevy Chase; and Chevy Chase is
not a party to, bound by, or in breach or violation of any material
indenture or other material agreement or instrument, or subject to or in
violation of any statute, order or regulation of any court, regulatory
body, administrative agency or governmental body having jurisdiction over
it, which materially and adversely affects, or, to Chevy Chase's knowledge
would in the future materially and adversely affect, (1) the ability of
Chevy Chase to perform its obligations under this Agreement or (2) the
business, operations, financial condition, properties or assets of the
Servicer taken as a whole;
(iv) Chevy Chase is, and will remain, subject to supervision
and examination by any state or federal authority as may be applicable and
will remain in good standing and qualified to do business where so required
by applicable law and is, and will remain an approved servicer of
conventional mortgage loans for FNMA or FHLMC;
(v) no litigation is pending or, to the best of Chevy
Chase's knowledge, threatened, against Chevy Chase that would materially
and adversely affect the execution, delivery or enforceability of this
Agreement or the ability of Chevy Chase to service the Mortgage Loans or to
perform any of its other obligations hereunder in accordance with the terms
hereof;
(vi) Chevy Chase will at all times comply in the performance
of its obligations under this Agreement with all reasonable rules and
requirements of the insurer under each Required Insurance Policy;
(vii) no written information, certificate of an officer,
statement furnished in writing or written report delivered to the Insurer,
the Depositor, any affiliate of the Depositor or the Trustee and prepared
by Chevy Chase pursuant to this Agreement will contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
information, certificate, statement or report not misleading;
(viii) except for permits and similar authorizations required
under the securities or "blue sky" laws no consent, approval, authorization
or order of any court or governmental agency or body is required for the
execution, delivery and performance by Chevy Chase of, or compliance by
Chevy Chase with, this Agreement or the consummation of the
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transactions contemplated hereby, or if any such consent, approval,
authorization or order is required, Chevy Chase has obtained the same;
(ix) Chevy Chase will service the Mortgage Loans in
accordance with the standards set forth in this Agreement; and
(x) this Agreement and all other documents related hereto to
which the Seller is a party have been approved by the Seller's board of
directors, which approval is reflected in the minutes of such board, and
shall continuously from the time of each such document's execution, be
maintained as an official record of the Seller.
SECTION 2.04. Representations, Warranties and Covenants of the
------------------------------------------------
Servicer and the Seller with respect to the Mortgage Loans.
----------------------------------------------------------
The Seller and the Servicer hereby represents and warrants to, and
covenants with, the Depositor, the Insurer and the Trustee for the benefit of
the Certificateholders that, as to each Mortgage Loan, as of the Cut-off Date or
such other date specifically set forth herein, and with respect to
representation (i) listed below, as of the Delivery Date:
(i) The information set forth in the Mortgage Loan Schedule
is complete, true and correct.
(ii) All payments required to be made up to, but excluding,
the Cut-off Date for such Mortgage Loan under the terms of the Mortgage
Note have been made; none of the Mortgage Loans are more than 30 days
delinquent; Chevy Chase has not advanced funds, or induced, solicited or
knowingly received any advance of funds from a party other than the owner
of the Mortgaged Property subject to the Mortgage, directly or indirectly,
for the payment of any amount required by the Mortgage Loan.
(iii) To the best of the Servicer's knowledge, there are no
delinquent taxes, ground rents, water charges, sewer rents, assessments,
insurance premiums, leasehold payments, including assessments payable in
future installments or other outstanding charges affecting the related
Mortgaged Property.
(iv) The terms of the Mortgage Note and the Mortgage have not
been impaired, waived, altered or modified in any respect, except by
written instruments which have been recorded, if necessary to protect the
interests of the Trustee, and which have been delivered to the Trustee or
the Trustee's designee, the substance of which waiver, alteration or
modification has been approved by the primary mortgage guaranty insurer, if
any, and by the title insurer, to the extent required by the related policy
and is reflected on the Mortgage Loan Schedule. No instrument of waiver,
alteration or modification has been executed, and no Mortgagor has been
released, in whole or in part, except in connection with an assumption
agreement approved by the primary mortgage insurer, if any, and title
insurer, to the extent required by the policy, and which assumption
agreement is part of the Mortgage File and the terms of which are reflected
in the Mortgage Loan Schedule.
(v) The Mortgage Note and the Mortgage are not subject to
any right of rescission, set-off, counterclaim or defense, including the
defense of usury, nor will the operation of any of the terms of the
Mortgage Note and Mortgage, or the exercise of any right thereunder, render
the Mortgage unenforceable, in whole or in part, or subject to any right of
rescission, set-
27
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off, counterclaim or defense, including the defense of usury and no such
right of rescission, set-off, counterclaim or defense has been asserted
with respect thereto.
(vi) All buildings upon the Mortgaged Property are insured by
a generally acceptable insurer against loss by fire, hazards of extended
coverage and such other hazards as are customary in the area where the
Mortgaged Property is located. All such insurance policies contain a
standard mortgagee clause naming the Servicer, its successors and assigns
as mortgagee and all premiums thereon have been paid. If upon origination
of the Mortgage Loan, the Mortgaged Property was in an area identified in
the Federal Register by the Federal Emergency Management Agency as having
special flood hazards (and such flood insurance has been made available) a
flood insurance policy meeting the requirements of the current guidelines
of the Federal Insurance Administration is in effect which policy conforms
to the requirements of FNMA and FHLMC. The Mortgage obligates the Mortgagor
thereunder to maintain all such insurance at Mortgagor's cost and expense,
and on the Mortgagor's failure to do so, authorizes the holder of the
Mortgage to maintain such insurance at Mortgagor's cost and expense and to
seek reimbursement therefor from the Mortgagor.
(vii) Any and all requirements of any federal, state or local
law including, without limitation, environmental, usury, truth in lending,
real estate settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws applicable to the Mortgage Loan and the
related Mortgaged Property have been complied with.
(viii) The Mortgage has not been satisfied, canceled or
subordinated, or rescinded, in whole or in part, and the Mortgaged Property
has not been released from the lien of the Mortgage, in whole or in part,
nor has any instrument been executed that would effect any such release,
cancellation, subordination or rescission.
(ix) The Mortgage is a valid, existing and enforceable first
lien on the Mortgaged Property, including all improvements on the Mortgaged
Property subject only to (A) the lien of current real property taxes and
assessments not yet due and payable, (B) covenants, conditions and
restrictions, rights of way, easements and other matters of the public
record as of the date of recording being acceptable to mortgage lending
institutions generally and specifically referred to in lender's title
insurance policy delivered to the originator of the Mortgage Loan and which
do not adversely affect the Appraised Value of the Mortgaged Property, and
(C) other matters to which like properties are commonly subject which do
not materially interfere with the benefits of the security intended to be
provided by the Mortgage or the use, enjoyment, value or marketability of
the related Mortgaged Property. Any security agreement, chattel mortgage or
equivalent document related to and delivered in connection with the
Mortgage establishes and creates a valid, existing and enforceable first
lien and first priority security interest on the property described therein
and the Seller has full right to sell and assign the same to the Depositor.
(x) The Mortgage Note and the related Mortgage are genuine
and each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, or reorganization.
(xi) All parties to the Mortgage Note and the Mortgage had
legal capacity to enter into the Mortgage Loan and to execute and deliver
the Mortgage Note and the Mortgage, and the Mortgage Note and the Mortgage
have been duly and properly executed by such parties.
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(xii) The proceeds of the Mortgage Loan have been fully
disbursed and there is no requirement for future advances thereunder and any and
all requirements as to completion of any on-site or off-site improvement and as
to disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage were paid, and the Mortgagor is not entitled to any
refund of any amounts paid or due under the Mortgage Note or Mortgage.
(xiii) The Mortgage Note and the Mortgage are not assigned or
pledged, and immediately prior to the sale of the Mortgage Loan to the Depositor
the Seller was the sole owner of record and holder thereof and with full right
to transfer and sell the Mortgage Loan to the Depositor free and clear of any
encumbrance, equity, lien, pledge, charge, claim or security interest and with
full right and authority subject to no interest or participation of, or
agreement with, any other party, to sell and assign each Mortgage Loan pursuant
to the Mortgage Loan Purchase Agreement.
(xiv) All parties which have had any interest in the Mortgage,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (A) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
the Mortgaged Property is located, and (B) organized under the laws of such
state, or (C) qualified to do business in such state, or (D) federal savings and
loan associations or national banks having principal offices in such state, or
(E) not doing business in such state.
(xv) The Mortgage Loan is covered by an ALTA lender's title
insurance policy acceptable to FNMA or FHLMC, issued by a title insurer
acceptable to FNMA and FHLMC and qualified to do business in the jurisdiction
where the Mortgaged Property is located, insuring (subject to the exceptions
contained in (ix)(A) and (B) above) the Seller, its successors and assigns as to
the first priority lien of the Mortgage in the original principal amount of the
Mortgage Loan. The original title policy and all riders thereto are in the
possession of the Servicer or the Trustee. Additionally, such lender's title
insurance policy affirmatively insures ingress and egress, and against
encroachments by or upon the Mortgaged Property or any interest therein. The
Seller is the sole insured of such lender's title insurance policy, and such
lender's title insurance policy is in full force and effect and will be in full
force and effect upon the consummation of the transactions contemplated by this
Agreement. No claims have been made under such lender's title insurance policy,
and no prior holder of the related Mortgage, including the Seller, has done, by
act or omission, anything which would impair the coverage of such lender's title
insurance policy.
(xvi) There is no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any grace
or cure period, would constitute a default, breach, violation or event of
acceleration, and the Seller has not waived any default, breach, violation or
event of acceleration.
(xvii) To the best of the Servicer's knowledge, there are no
mechanics' or similar liens or claims which have been filed for work, labor or
material (and no rights are outstanding that under law could give rise to such
lien) affecting the related Mortgaged Property which are or may be liens prior
to, or equal or coordinate with, the lien of the related Mortgage.
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(xviii) All improvements which were considered in determining
the Appraised Value of the related Mortgaged Property lay wholly within the
boundaries and building restriction lines of the Mortgaged Property, and no
improvements on adjoining properties encroach upon the Mortgaged Property.
(xix) The Mortgage Loan was originated by the Seller or a
subsidiary of the Seller which is a FNMA-approved, FHLMC-approved or HUD-
approved mortgage banker, or savings and loan association, a savings bank, a
commercial bank or similar banking institution which is supervised and examined
by a federal or state authority. Principal payments on the Mortgage Loan
commenced no more than sixty days after funds were disbursed in connection with
the Mortgage Loan. The Mortgage Note is payable on the first day of each month
in monthly installments of principal and interest, with interest in arrears, and
requires Monthly Payments sufficient to amortize the original principal balance
of the Mortgage Loan over a term of not more than 30 years. No Mortgage Loans
have provisions which will require negative amortization. No Mortgage Loan
requires a balloon payment at the end of its term.
(xx) The origination practices used by the Seller and the
collection practices used by the Servicer with respect to each Mortgage Note and
Mortgage have been in all respects legal, proper, prudent and customary in the
mortgage origination and servicing business. With respect to escrow deposits and
escrow payments, if any, all such payments are in the possession of, or under
the control of, the Servicer and there exist no deficiencies in connection
therewith for which customary arrangements for repayment thereof have not been
made. No escrow deposits or escrow payments or other charges or payments due the
Seller have been capitalized under any Mortgage or the related Mortgage Note.
(xxi) To the best of the Servicer's knowledge, the Mortgaged
Property is free of damage and waste and there is no proceeding pending for the
total or partial condemnation thereof.
(xxii) The Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the benefits of
the security provided thereby, including, (A) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (B) otherwise by judicial
foreclosure. There is no other exemption available to the Mortgagor which would
interfere with the right to sell the Mortgaged Property at a trustee's sale or
the right to foreclose the Mortgage. The Mortgagor has not notified the Servicer
and the Servicer has no knowledge of any relief requested or allowed to the
Mortgagor under the Relief Act.
(xxiii) The Mortgage Loan was underwritten generally in
accordance with the Seller's underwriting standards in effect at the time the
Mortgage Loan was originated.
(xxiv) The Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage and the security
interest of any applicable security agreement or chattel mortgage referred to in
(ix) above and, in the case of the CD Pledge Loans, the CD Collateral.
(xxv) The Mortgage File contains an appraisal of the related
Mortgaged Property signed prior to the approval of the Mortgage Loan application
by a qualified appraiser, duly appointed by the originator of the Mortgage Loan,
who had no interest, direct or indirect in
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the Mortgaged Property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Mortgage
Loan.
(xxvi) In the event the Mortgage constitutes a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the Mortgage, and no fees or
expenses are or will become payable by the Depositor to the trustee under the
deed of trust, except, in connection with a trustee's sale after default by the
Mortgagor.
(xxvii) Except for 2 Group I Loans representing 0.16% of the aggregate
Principal Balance of the Group I Loans as of the Cut-off Date and 5 Group II
Loans representing 1.64% the aggregate Principal Balance of the Group II Loans
as of the Cut-off Date, each of which was originated in accordance with the
guidelines of the Seller and FNMA, no Mortgage Loan contains provisions pursuant
to which Monthly Payments are (A) paid or partially paid with funds deposited in
any separate account established by the Seller, the Mortgagor, or anyone on
behalf of the Mortgagor, (B) paid by any source other than the Mortgagor or (C)
contains any other similar provisions which may constitute a "buydown"
provision. No Mortgage Loan was a graduated payment mortgage loan as of the date
of its origination. No Mortgage Loan has a shared appreciation or other
contingent interest feature.
(xxviii) The Seller does not expect, as to any particular Mortgage Loan
included in the Trust Fund, that such Mortgage Loan will become a defaulted
Mortgage Loan and that the related Mortgaged Property will be foreclosed upon
(or acquired by deed-in-lieu of foreclosure).
(xxix) No Mortgage Loan was made in connection with facilitating the
trade-in or exchange of a Mortgaged Property.
(xxx) The Seller has no knowledge of any circumstances or condition
with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the
Mortgagor's credit standing that can reasonably be expected to cause the
Mortgage Loan to be an unacceptable investment, cause the Mortgage Loan to
become delinquent, or adversely affect the value of the Mortgage Loan.
(xxxi) Each such Mortgage Loan with a Loan-to-Value Ratio at
origination in excess of 80% is and will be subject to a Primary Mortgage
Insurance Policy, issued by a FNMA or FHLMC approved insurer, which insures that
portion of the Mortgage Loan over 75% of the Loan-to-Value Ratio. All provisions
of such Primary Mortgage Insurance Policy have been and are being complied with,
such policy is in full force and effect, and all premiums due thereunder have
been paid. Any Mortgage subject to any such Primary Mortgage Insurance Policy
obligates the Mortgagor thereunder to maintain such insurance and to pay all
premiums and charges in connection therewith, except in the case of the Lender-
Paid MI Loans, where such premiums are paid by the Servicer from amounts
collected as part of the Mortgage Rate. The Mortgage Rate for each Mortgage Loan
is net of any such insurance premium, except in the case of the Lender-Paid MI
Loans.
(xxxii) To the best of the Servicer's knowledge, the Mortgaged Property
is lawfully occupied under applicable law. All inspections, licenses and
certificates required to be made or issued with respect to all occupied portions
of the Mortgaged Property and, with respect
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to the use and occupance of the same, including but not limited to certificates
of occupancy, have been made or obtained from the appropriate authorities.
(xxxiii) No action has been taken or failed to be taken, no event has
occurred and no state of facts exists or has existed on or prior to the Cut-off
Date (whether or not known to the Seller on or prior to such date) which has
resulted or will result in an exclusion from, denial of, or defense coverage
under any private mortgage insurance (including, without limitation, any
exclusions, denials or defenses which would limit or reduce the availability of
the timely payment of the full amount of the loss otherwise due thereunder to
the insured) whether arising out of actions, representations, errors, omissions,
negligence, or fraud of the Seller, the related Mortgagor or any party involved
in the application for such coverage, including the appraisal, plans and
specifications and other exhibits or documents submitted therewith to the
insurer under such insurance policy, or for any other reason under such
coverage, but not including the failure of such insurer to pay by reason of such
insurer's breach of such insurance policy or such insurer's financial inability
to pay.
(xxxiv) The Assignment of Mortgage, is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located.
(xxxv) Any future advances made to the Mortgagor prior to the Cut-off
Date have been consolidated with the outstanding principal amount secured by the
Mortgage, and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term. The lien of the Mortgage securing the
consolidated principal amount is expressly insured as having consolidated
principal amount is expressly insured as having first lien priority by a title
insurance policy, an endorsement to the policy insuring the mortgagee's
consolidated interest or by other title evidence acceptable to FNMA and FHLMC.
The consolidated principal amount does not exceed the original principal amount
of the Mortgage Loan.
(xxxvi) If the Mortgaged Property is a condominium unit or a planned
unit development (other than a de minimis planned unit development) such
condominium or planned unit development project meets FNMA or FHLMC eligibility
requirements.
(xxxvii) With respect to each Convertible Mortgage Loan, (x) the related
Mortgagor has the option to convert the interest rate borne by such Mortgage
Loan from an adjustable interest rate to a fixed interest rate determined
pursuant to the terms of the related Mortgage Note and (y) the fixed interest
rate to be borne by each such Convertible Mortgage Loan upon the conversion of
the interest rate on such Mortgage Loan is intended to approximate a market rate
of interest for newly originated mortgages at the time of the conversion.
(xxxviii) Each Mortgage is a "qualified mortgage" for purposes of the
REMIC Provisions.
(xxxix) Immediately prior to the transfer and sale of the CD Pledge
Loans to the Depositor, the Seller had a first priority perfected security
interest in the related CD Collateral with full right and authority, without the
consent of the related Mortgagor, to transfer and sell such right to the
Depositor. Following the sale and transfer of the CD Pledge Loans from the
Seller to the Depositor and from the Depositor to the Trustee, the Trustee will
have a first priority perfected security interest in the related CD Collateral
other than the cash held in the CD Account, and the Seller will apply such cash
in accordance with the terms of the related pledge and guaranty agreement.
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Upon the discovery by the Depositor, the Servicer, the Insurer or the
Trustee (or upon notice thereof in writing from a Certificateholder) of a breach
or breaches of any of the representations and warranties made in Section 2.04 in
respect of any Mortgage Loan, or any breach of a representation or warranty of
the Servicer set forth in Section 2.03, which breach or breaches, individually
or in the aggregate, materially and adversely affect the interests of the
Certificateholders or the Insurer, the party discovering such breach shall give
prompt written notice to the other parties. The Trustee shall promptly notify
the Seller and Servicer of such breach and request that the Seller or Servicer,
as the case may be, cure such breach within 60 days from the date of such
notice, and if the Seller or Servicer does not cure such breach in all material
respects, the Seller or Servicer, as the case may be, shall either (i) upon the
consent of the Insurer which shall not be unreasonably withheld, substitute a
Replacement Mortgage Loan or Loans for the related Mortgage Loan, which
substitution must be made as specified in this Section or (ii) purchase such
Mortgage Loan held for the benefit of the Certificateholders and the Insurer
from the Trustee at the Purchase Price therefor.
The Seller or Servicer shall not have any right to substitute a Replacement
Mortgage Loan or Loans for the affected Mortgage Loan more than three months
after the Delivery Date (or more than two years after the Delivery Date if the
related Mortgage Loan is a "defective obligation" within the meaning of Section
860G(a)(4)(B)(ii) of the Code), and any substitution must be accompanied by an
Officers' Certificate delivered to the Trustee and the Insurer, certifying that
such Replacement Mortgage Loan conforms to the requirements of this Agreement,
and by an Opinion of Counsel to the effect that such substitution will not cause
the Trust REMIC to fail to qualify as a remic and will not result in a
prohibited transaction tax, which Opinion of Counsel shall be paid for by the
Seller or Servicer, as the case may be. Notwithstanding the foregoing, if any
such breach would cause a Mortgage Loan to be other than a "qualified mortgage
loan" as described in Section 860G(a)(3) of the Code, any substitution or
purchase shall occur within 90 days of the discovery of the breach.
As to any Replacement Mortgage Loan or Loans, the Seller or Servicer shall
deliver to the Trustee for such Replacement Mortgage Loan or Loans, the Mortgage
Note, the Mortgage, the related assignment of the Mortgage, and such other
documents and agreements as are required by Section 2.01, with the Mortgage Note
endorsed to the Trustee for the benefit of the Insurer and the Holders of the
Chevy Chase Bank, F.S.B. Mortgage-Backed Pass-Through Certificates, Series 1998-
CCB2. No substitution will be made in any calendar month after the Determination
Date for such month. Monthly payments due with respect to Replacement Mortgage
Loans in the month of substitution shall not be part of the Trust Fund and will
be remitted by the Servicer or Seller to the Depositor on the next succeeding
Distribution Date. For the month of substitution, distributions to
Certificateholders will include the Monthly Payment due on such Deleted Mortgage
Loan for such month and thereafter the Seller or Servicer, as the case may be,
shall be entitled to retain all amounts received in respect of such Deleted
Mortgage Loan.
Upon such substitution, the Servicer shall amend or cause to be amended the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan and
the substitution of the Replacement Mortgage Loan or Loans. Upon such
substitution, the Replacement Mortgage Loan or Loans shall be subject to the
terms of this Agreement in all respects and the Seller shall be deemed to have
made, as of the date of substitution, with respect to the Replacement Mortgage
Loan or Loans, the representations and warranties pertaining to the Mortgage
Loans contained in Section 2.04 hereof. Upon receipt of the Trustee Mortgage
File pertaining to any Replacement Mortgage Loans, the Trustee shall release the
Trustee Mortgage File held for the benefit of the Certificateholders and the
Insurer relating to such Deleted Mortgage Loan to the Seller or Servicer as
applicable and shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as shall be necessary to vest title
(to
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the extent that such title was transferred to the Trustee) in the Seller or
Servicer as applicable, or its designee to any Deleted Mortgage Loan substituted
for pursuant to this Section 2.04.
In any month in which the Seller or Servicer substitutes one or more
Replacement Mortgage Loans for one or more Deleted Mortgage Loans, the Servicer
will determine the amount (if any) by which the aggregate Principal Balance of
all such Replacement Mortgage Loans as of the date of substitution is less than
the aggregate Principal Balance of all such Deleted Mortgage Loans (in each case
after application of scheduled principal portion of the monthly payments
received in the month of substitution). The amount of such shortage shall be
deposited into the Custodial Account by the Seller or Servicer in the month of
substitution pursuant to Section 3.07, without any reimbursement thereof. The
Servicer shall give notice in writing to the Trustee of such event, which notice
shall be accompanied by an Officers' Certificate as to the calculation of such
shortage.
In the event that the Seller or Servicer shall have repurchased a Mortgage
Loan, upon receipt by the Trustee of written notification of the deposit of the
Purchase Price, the Trustee shall release the related Trustee Mortgage File held
for the benefit of the Certificateholders and the Insurer to the Seller or
Servicer as applicable and the Trustee shall execute and deliver the related
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to transfer title (to the extent that such title was transferred to
the Trustee) from the Trustee for the benefit of the Certificateholders and the
Insurer and vest title in the Seller or Servicer, or the designee thereof, as
the case may be, to any Mortgage Loan purchased pursuant to this Section 2.04.
It is understood and agreed that the obligation under this Agreement of any
Person to repurchase or substitute any Mortgage Loan as to which such breach has
occurred and is continuing shall constitute the sole and exclusive remedy
respecting such breach available to Certificateholders or the Trustee on their
behalf (except for the Insurer's rights under the Insurance Agreement).
SECTION 2.05. Issuance of Certificates.
-------------------------
The Trustee acknowledges the assignment to it of the Mortgage Loans
together with the assignment to it of all other assets included in the Trust
Fund, receipt of which is hereby acknowledged. Concurrently with such assignment
and delivery and in exchange therefor, the Trustee, pursuant to the written
request of the Depositor executed by an officer of the Depositor, has executed
the Class A, Class S and Class R Certificates and caused them to be
authenticated and delivered to or upon the order of the Depositor in authorized
denominations which evidence ownership of the Trust Fund. The rights of the
Holders of such Certificates to receive distributions from the Trust Fund and
all ownership interests of the Holders of the Class A, Class S and Class R
Certificates in such distributions shall be as set forth in this Agreement.
SECTION 2.06. REMIC Provisions.
-----------------
(a) The Depositor hereby elects and authorizes the Trustee to treat the
Trust REMIC as a remic under the Code and, if necessary, under applicable state
law. Such election will be made on Form 1066 or other appropriate federal tax or
information return (including Form 8811) or any appropriate state return (x) for
the taxable year ending on the last day of the calendar year in which the
Certificates are issued and (y) for the taxable year ending on the last day of
the calendar year in which Certificates are first sold by Chevy Chase to a third
party. The Delivery Date is hereby designated as the "startup day" of the Trust
REMIC within the meaning of Section 860G(a)(9) of the Code. The "regular
interests" (within the meaning of Section 860G of the Code) in the Trust REMIC
shall consist of the Class A-I, Class A-II and Class S Certificates and the
"residual interest" in the Trust REMIC shall consist of the Class R
Certificates. The Depositor and the Trustee shall not permit the creation of any
"interests"
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(within the meaning of Section 860G of the Code) in the Trust REMIC other than
the Class A-I Certificates, Class A-II Certificates, Class S Certificates and
Class R Certificates.
(b) Chevy Chase Bank, F.S.B. on behalf of the Holders of the Class R
Certificates, shall act as agent for the Class R Certificateholder as the "tax
matters person" (within the meaning of the REMIC Provisions) for the Trust REMIC
in the manner provided under Treasury regulations section 1.860F-4(d) and
temporary Treasury regulations section 301.6231(a)(7)-1T. By its acceptance of a
Class R Certificate, each Holder thereof shall have agreed to such appointment
and shall have consented to the appointment of the Trustee as its agent to act
on behalf of the Trust REMIC pursuant to the specific duties outlined herein.
(c) A Holder of the Class R Certificates, by the purchase of such
Certificates, shall be deemed to have agreed to timely pay, upon demand by the
Trustee, the amount of any minimum California state franchise taxes due with
respect to the Trust REMIC under Sections 23151(a) and 23153(a) of the
California Revenue and Taxation Code. Notwithstanding the foregoing, the Trustee
shall be authorized to retain the amount of such tax from amounts otherwise
distributable to such Holder in the event such Holder does not promptly pay such
amount upon demand by the Trustee. In the event that any other federal, state or
local tax is imposed, including without limitation taxes imposed on a
"prohibited transaction" of a remic as defined in Section 860F of the Code, such
tax shall be charged against amounts otherwise available for distribution to the
applicable Holder of a Class R Certificate and then against amounts otherwise
available for distribution to the Holders of Regular Certificates in accordance
with the provisions set forth in Sections 4.02 and 4.03, respectively. The
Trustee shall promptly deposit in the Certificate Account any amount of
"prohibited transaction" tax that results from a breach of the Trustee's duties
under this Agreement. The Servicer shall promptly deposit in the Certificate
Account any amount of "prohibited transaction" tax that results from a breach of
the Servicer's duties under this Agreement.
(d) The Trustee shall act as attorney-in-fact and as agent on behalf of
the tax matters person of the Trust REMIC and in such capacity the Trustee
shall: (i) prepare, sign and file, or cause to be prepared, signed and filed,
federal and state tax returns using a calendar year as the taxable year for the
Trust REMIC when and as required by the REMIC Provisions and other applicable
federal income tax laws as the direct representative of the Trust REMIC in
compliance with the Code and shall provide copies of such returns as required by
the Code; (ii) make an election, on behalf of the Trust REMIC, to be treated as
a remic on the federal tax return of the Trust REMIC for its first taxable year,
in accordance with the REMIC Provisions; and (iii) prepare and forward, or cause
to be prepared and forwarded, to the Certificateholders and to any governmental
taxing authority all information reports as and when required to be provided to
them in accordance with the REMIC Provisions and the Code. The expenses of
preparing and filing such returns shall be borne by the Trustee. The Depositor
and Servicer shall provide on a prompt and timely basis to the Trustee or its
designee such information with respect to the Trust REMIC as is in their
possession and reasonably required or requested by the Trustee to enable it to
perform its obligations under this subsection.
In its capacity as attorney-in-fact and as agent on behalf of the tax
matters person, Chevy Chase shall also: (A) act on behalf of the Trust REMIC in
relation to any tax matter or controversy involving the Trust Fund, (B)
represent the Trust Fund in any administrative or judicial proceeding relating
to an examination or audit by any governmental taxing authority with respect
thereto and (C) cause to be paid solely from the sources provided herein the
amount of any taxes imposed on the Trust REMIC when and as the same shall be due
and payable (but such obligation shall not prevent the Trustee or any other
appropriate Person from contesting any such tax in appropriate proceedings and
shall not prevent the Trustee from withholding payment of such tax, if permitted
by law, pending the outcome of such proceedings).
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(e) The Trustee shall provide (i) to any transferor of a Class R
Certificate such information as is necessary for the application of any tax
relating to the transfer of a Class R Certificate to any Person who is not a
permitted transferee, (ii) to the Certificateholders such information or reports
as are required by the Code or the REMIC Provisions including reports relating
to interest, original issue discount and market discount or premium and (iii) to
the Internal Revenue Service the name, title, address and telephone number of
the person who will serve as the representative of the Trust REMIC.
(f) The Trustee, the Depositor and the Holder of the Class R Certificates
shall take any action or cause the Trust Fund to take any action necessary to
create or maintain the status of the Trust REMIC as a remic under the REMIC
Provisions and shall assist each other as necessary to create or maintain such
status. Neither the Trustee nor the Holder of the Class R Certificates shall
take any action, cause the Trust Fund to take any action or fail to take (or
fail to cause the Trust Fund to take) any action that, under the REMIC
Provisions, if taken or not taken, as the case may be, could (i) endanger the
status of the Trust REMIC as a remic or (ii) result in the imposition of a tax
upon the Trust REMIC (including, but not limited to, the tax on prohibited
transactions as defined in Code Section 860F(a)(2) and the tax on prohibited
contributions set forth in Section 860G(d) of the Code) (either such event, an
"Adverse REMIC Event") unless the Trustee has received an Opinion of Counsel (at
the expense of the party seeking to take such action) to the effect that the
contemplated action will not endanger such status or result in the imposition of
such a tax.
The Trustee shall not take or fail to take any action (whether or not
authorized hereunder) as to which the Servicer or Depositor has advised it in
writing that it has received an Opinion of Counsel to the effect that an Adverse
REMIC Event could occur with respect to such action. In addition, prior to
taking any action with respect to the Trust REMIC or its assets, or causing the
Trust REMIC to take any action, which is not expressly permitted under the terms
of this Agreement, the Trustee will consult with the Servicer and Depositor or
their designees, in writing, with respect to whether such action could cause an
Adverse REMIC Event to occur with respect to the Trust REMIC, and the Trustee
shall not take any such action or cause the Trust REMIC to take any such action
as to which the Servicer or Depositor has advised it in writing that an Adverse
REMIC Event could occur.
In addition, prior to taking any action with respect to the Trust REMIC or
the assets therein, or causing the Trust REMIC to take any action, which is not
expressly permitted under the terms of this Agreement, the Holder of the Class R
Certificates will consult with the Trustee or its designee, in writing, with
respect to whether such action could cause an Adverse REMIC Event to occur with
respect to the Trust REMIC, and no such Person shall take any action or cause
the Trust Fund to take any such action as to which the Trustee has advised it in
writing that an Adverse REMIC Event could occur. The Trustee may consult with
counsel to make such written advice, and the cost of same shall be borne by the
party seeking to take action not permitted by this Agreement.
At all times as may be required by the Code, the Servicer will to the
extent within its control and the scope of its duties more specifically set
forth herein, maintain substantially all of the assets of the Trust REMIC as
"qualified mortgages" as defined in Section 860G(a)(3) of the Code and
"permitted investments" as defined in Section 860G(a)(5) of the Code.
(g) In the event that any tax is imposed on "prohibited transactions" of
the Trust REMIC, as defined in Section 860F(a)(2) of the Code, on "net income
from foreclosure property" of the Trust REMIC, as defined in Section 860G(c) of
the Code, on any contributions to the Trust REMIC after the Startup Day therefor
pursuant to Section 860G(d) of the Code, or any other tax is imposed by the Code
or any applicable provisions of state or local tax laws, such tax shall be
charged (i) to the Servicer, if such tax arises out of or results from a breach
by the Servicer of any of its obligations under this
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Agreement or if the Servicer has in its sole discretion determined to indemnify
the Trust Fund against such tax, (ii) to the Trustee, if such tax arises out of
or results from a breach by the Trustee of any of its obligations under this
Article II, or (iii) otherwise against amounts on deposit in the Custodial
Account as provided by Section 3.09 and on the Distribution Date(s) following
such reimbursement the aggregate of such taxes shall be allocated in reduction
of the Interest Distribution Amount on each Class entitled thereto in the same
manner as if such taxes constituted a Prepayment Interest Shortfall.
(h) The Trustee and the Servicer shall, for federal income tax purposes,
maintain books and records with respect to the Trust REMIC on a calendar year
and on an accrual basis or as otherwise may be required by the REMIC Provisions.
(i) Following the Startup Day, neither the Servicer nor the Trustee shall
accept any contributions of assets to the Trust REMIC unless the Servicer and
the Trustee shall have received an Opinion of Counsel (at the expense of the
party seeking to make such contribution) to the effect that the inclusion of
such assets in the Trust REMIC will not cause the Trust REMIC to fail to qualify
as a remic at any time that any Certificates are outstanding, or subject the
Trust REMIC to any tax under the REMIC Provisions or other applicable provisions
of federal, state and local law or ordinances.
(j) Neither the Servicer nor the Trustee shall enter into any arrangement
by which the Trust REMIC will receive a fee or other compensation for services
nor permit the Trust REMIC to receive any income from assets other than
"qualified mortgages" as defined in Section 860G(a)(3) of the Code or "permitted
investments" as defined in Section 860G(a)(5) of the Code.
(k) Within 30 days after the Closing Date, the Trustee shall prepare and
file with the Internal Revenue Service Form 8811, "Information Return for Real
Estate Mortgage Investment Conduits (REMIC) and Issuers of Collateralized Debt
Obligations" for the Trust REMIC.
(l) Neither the Trustee nor the Servicer shall sell, dispose of or
substitute for any of the Mortgage Loans (except in connection with (i) the
default, imminent default or foreclosure of a Mortgage Loan, including but not
limited to, the acquisition or sale of a Mortgaged Property acquired by deed in
lieu of foreclosure, (ii) the bankruptcy of the Trust REMIC, (iii) the
termination of the Trust REMIC pursuant to Article X of this Agreement or (iv) a
purchase of Mortgage Loans pursuant to Article II or III of this Agreement) nor
acquire any assets for the Trust REMIC, nor sell or dispose of any investments
in the Custodial Account or the Certificate Account for gain nor accept any
contributions to the Trust REMIC after the Closing Date (a) unless it has
received an Opinion of Counsel that such sale, disposition, substitution or
acquisition will not affect adversely the status of the Trust REMIC as a remic
or (b) unless the Servicer has determined in its sole discretion to indemnify
the Trust Fund against such tax.
(m) In order to enable the Trustee to perform its duties as set forth
herein, the Depositor shall provide, or cause to be provided to the Trustee,
within ten days after the Delivery Date, all information or data that the
Trustee determines to be relevant for tax purposes to the valuations and
offering prices of the Certificates, including, without limitation, the price,
yield, prepayment assumption and projected cash flows of the Certificates and
the Mortgage Loans and the Trustee shall be entitled to rely upon any and all
such information and data in the performance of its duties set forth herein.
Thereafter, the Servicer shall provide, promptly upon request therefor, any such
additional information or data that the Trustee may from time to time reasonably
request in order to enable the Trustee to perform its duties as set forth herein
and the Trustee shall be entitled to rely upon any and all such information and
data in the performance of its duties set forth herein. The Depositor shall
indemnify the Trustee and hold its harmless for any loss, liability, damage,
claim or expense of the Trustee arising from any failure
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of the Depositor to provide, or to cause to be provided, accurate information or
data to the Trustee on a timely basis. The Servicer shall indemnify the Trustee
and hold it harmless for any loss, liability, damage, claim or expense of the
Trustee arising from any failure of the Servicer to provide, or to cause to be
provided, accurate information or data to the Trustee on a timely basis. The
indemnification provisions hereunder shall survive the termination of this
Agreement and shall extend to any co-trustee appointed pursuant to this
Agreement.
ARTICLE III.
ADMINISTRATION AND SERVICING
OF MORTGAGE LOANS
SECTION 3.01. Servicing Standard.
-------------------
For and on behalf of the Trustee, the Insurer and the Certificateholders,
the Servicer shall service and administer the Mortgage Loans in accordance with
prudent mortgage loan servicing standards and procedures generally accepted in
the mortgage banking industry and generally in a manner consistent with FNMA
guidelines except as otherwise expressly provided in this Agreement. In
connection with such servicing and administration, the Servicer shall have full
power and authority, acting alone and/or through any Sub-Servicer as provided in
Section 3.02 hereof, to do or cause to be done any and all things that it may
deem necessary or desirable in connection with such servicing and
administration, including but not limited to, the power and authority, subject
to the terms hereof (a) to execute and deliver, on behalf of the
Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents (including, without limitation, estoppel
certificates), (b) to consent to transfers of any Mortgaged Property and
assumptions of the Mortgage Notes and related Mortgages (but only in the manner
provided in this Agreement), (c) to collect any Insurance Proceeds and
Liquidation Proceeds, (d) to consent to any subordinate financings to be secured
by any Mortgaged Property to the extent that such consent is required pursuant
to the terms of the related Mortgage, (e) to consent to the application of any
proceeds of insurance policies or condemnation awards to the restoration of the
applicable Mortgaged Property or otherwise, and (f) subject to the provisions of
Section 3.07 and 3.13, to effectuate foreclosure or other conversion of the
ownership of the Mortgage Property securing any Mortgage Loan; provided,
however, that the Servicer shall take no action that is materially inconsistent
with or materially prejudices the interest of the Trustee, the Insurer or the
Certificateholders in any Mortgage Loan or the rights and interest of the
Depositor, the Insurer, the Trustee and the Certificateholders under the terms
of this Agreement unless such action is specifically called for by the terms
hereof.
Without limiting the generality of the foregoing, but subject to the terms
hereof, the Servicer, in its own name or in the name of the Depositor and the
Trustee, is hereby authorized and empowered by the Depositor and the Trustee,
when the Servicer believes it appropriate in its best judgment, to execute and
deliver, on behalf of the Trustee, the Depositor, the Certificateholders or any
of them, any and all instruments of modification, satisfaction, cancellation or
assignment, or of partial or full release or discharge and all other comparable
instruments, with respect to the Mortgage Loans, and with respect to the
Mortgaged Properties held for the benefit of the Certificateholders. The
Servicer shall promptly notify the Trustee of any such execution and delivery.
The Depositor and the Trustee for the benefit of the Certificateholders shall
furnish the Servicer with any powers of attorney and other documents necessary
or appropriate to enable the Servicer to service and administer the Mortgage
Loans.
In accordance with the standards of the preceding paragraph, the Servicer
shall advance or cause to be advanced funds as necessary for the purpose of
effecting the timely payment of taxes and assessments on each Mortgaged Property
or any related unpaid insurance premiums that are not timely
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paid by the Mortgagors prior to any such time as a Mortgage Loan is in
foreclosure; provided, however, that the Servicer shall be required to advance
only to the extent that such advances, in the good faith judgment of the
Servicer, will be recoverable by the Servicer out of Insurance Proceeds,
Liquidation Proceeds (net of Liquidation Expenses) or otherwise; and provided
further, that such payments shall be advanced when the tax, premium or other
cost for which such payment is intended is due. Any such advances shall be
reimbursable in the first instance from related collections from the related
Mortgagors pursuant to Section 3.07 hereof, and further as Liquidation Expenses
as provided in Section 3.13 hereof and may be withdrawn from the Custodial
Account pursuant to Section 3.09 hereof. All costs incurred by the Servicer or
by the related Sub-Servicer in effecting the timely payments of taxes and
assessments on the Mortgaged Properties and related insurance premiums shall
not, for the purpose of calculating monthly distributions to the
Certificateholders, be added to the Principal Balance under the related Mortgage
Loans, notwithstanding that the terms of such Mortgage Loans so permit.
Notwithstanding anything in this Agreement to the contrary, the Servicer
shall not (unless the Mortgagor is in default with respect to the Mortgage Loan
or such default is, in the judgment of the Servicer, imminent) permit any
modification with respect to any Mortgage Loan (i) that would change the Net
Mortgage Rate or, reduce or increase the principal balance (except for
reductions resulting from actual payments of principal), except for conversions
to a fixed rate in accordance with the terms of the Mortgage Loan or (ii) that
would both constitute a sale or exchange of such Mortgage Loan within the
meaning of Section 1001 of the Code (including any proposed, temporary or final
regulations promulgated thereunder) (other than in connection with a proposed
conveyance or assumption of such Mortgage Loan that is a Principal Prepayment
made (or treated as made) by the Mortgagor of the entire principal balance of a
Mortgage Loan) and cause the Trust REMIC to fail to qualify as a remic under the
Code.
SECTION 3.02. Enforcement of the Obligations of Sub-Servicers.
------------------------------------------------
(a) For purposes of this Agreement, the Servicer shall be deemed to have
received the payments on the Mortgage Loans referred to in Sections 3.07 and
3.08 hereof when the related Sub-Servicer has received such payments and shall
remain obligated to deposit such payments in accordance with Sections 3.07 and
3.08 hereof, regardless of whether such payments are remitted by the Sub-
Servicer to the Servicer. The Servicer and the related Sub-Servicer may enter
into amendments to any applicable Sub-Servicing Agreement; provided, however,
that any such amendments shall be consistent with and shall not violate the
provisions of this Agreement; and provided further, that the substance of any
such material amendment or material change shall be transmitted promptly to the
Depositor, the Trustee, the Insurer and the Rating Agencies.
(b) As part of its servicing activities hereunder, the Servicer, for the
benefit of the Depositor, the Trustee, the Insurer and the Certificateholders,
shall supervise, administer, monitor and oversee the servicing of the Mortgage
Loans that are not serviced by it directly, and shall enforce the obligations of
each Sub-Servicer under the related Sub-Servicing Agreement. Such enforcement
shall include, without limitation, the legal prosecution of claims, termination
of Sub-Servicing Agreements, as appropriate, and the pursuit of other
appropriate remedies, and shall be in such form and carried out to such an
extent and at such time as the Servicer, in its good faith business judgment,
would require were it the owner of the related Mortgage Loans. The Servicer
shall pay the costs of such enforcement at its own expense, but shall be
reimbursed therefor only (i) from a general recovery resulting from such
enforcement only to the extent, if any, that such recovery exceeds all amounts
due in respect of the related Mortgage Loans or (ii) from a specific recovery of
costs, expenses or attorneys fees against the party against whom such
enforcement is directed. The Servicer shall not waive any event of default by a
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Sub-Servicer under a Sub-Servicing Agreement which is a failure to remit any
payment required to be made by such Sub-Servicer that would result in an Event
of Default under this Agreement.
(c) During the term of this Agreement, the Servicer shall consult fully
with each of the Sub-Servicers as may be necessary from time to time to perform
and carry out the Servicer's obligations hereunder and receive, review and
evaluate all reports, information and other data that are provided to the
Servicer by each Sub-Servicer and otherwise exercise reasonable efforts to cause
each Sub-Servicer to perform and observe the covenants, obligations and
conditions to be performed or observed by it under its Sub-Servicing Agreement.
If any Sub-Servicer materially breaches or fails to perform or observe any
material obligations or conditions of its Sub-Servicing Agreement, the Servicer
shall promptly deliver to the Depositor, the Insurer and to the Trustee an
Officers' Certificate certifying that such Sub-Servicer is in default and
describing the events and circumstances giving rise to the default and what
action (if any) has been, or is to be, taken by the Sub-Servicer to cure the
default and setting forth the action to be taken by the Servicer.
SECTION 3.03. Termination of the Rights of Sub-Servicers.
-------------------------------------------
If the Servicer terminates the rights of a Sub-Servicer under any Sub-
Servicing Agreement, the Servicer shall service the Mortgage Loans directly
pursuant to and in accordance with the terms of this Agreement, or at the
Servicer's election, enter into a substitute servicing agreement with another
mortgage loan servicing company reasonably acceptable to the Trustee and the
Servicer under which such mortgage loan servicing company shall assume, satisfy,
perform and carry out all liabilities, duties, responsibilities and obligations
that are to be, or otherwise were to have been, satisfied, performed and carried
out by the terminated Sub-Servicer, regardless of whether such liabilities,
duties, responsibilities or obligations shall have accrued before or after the
termination of the rights of such Sub-Servicer; provided, however, that any such
substitute servicer and any such substitute servicing shall satisfy the
requirements of Sections 3.01 and 3.02. If the Servicer does not elect to enter
into a substitute servicing agreement with a successor servicer, the Servicer
shall nevertheless service the Mortgage Loans directly pursuant to and in
accordance with the terms of this Agreement, until a substitute Sub-Servicer has
been appointed and designated and a substitute servicing agreement has been
entered into by the Servicer and such substitute Sub-Servicer. The Servicer
shall give notice to the Trustee, the Insurer and the Rating Agencies of any
termination of a Sub-Servicer and any appointment or designation of a substitute
Sub-Servicer.
SECTION 3.04. Liability of the Servicer.
--------------------------
Notwithstanding the provisions of any Sub-Servicing Agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer or a Sub-Servicer or reference to actions taken through a Sub-Servicer
or otherwise, the Servicer shall remain obligated and liable to the Depositor,
the Trustee, the Insurer and the Certificateholders for the servicing and
administering of the Mortgage Loans included in the Trust Fund in accordance
with (and subject to the limitations contained within) the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
Sub-Servicing Agreements or agreements or arrangements or by virtue of
indemnification from the Sub-Servicer and to the same extent and under the same
terms and conditions as if the Servicer alone were servicing and administering
the Mortgage Loans. The Servicer shall be entitled to enter into any agreement
with the Depositor or a Sub-Servicer for indemnification of the Servicer and
nothing contained in this Agreement shall be deemed to limit or modify such
indemnification.
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SECTION 3.05. Rights of the Depositor and the Trustee in Respect of
-----------------------------------------------------
the Servicer.
- -------------
The Servicer shall afford the Depositor, the Insurer and the Trustee,
without charge but only upon reasonable notice and during normal business hours,
access to all records and documentation in the Servicer's possession regarding
the Mortgage Loans and to all accounts, insurance policies and other matters in
the Servicer's possession relating to this Agreement and access to officers of
the Servicer responsible for its obligations hereunder. The Depositor may, but
is not obligated to, enforce the obligations of the Servicer hereunder. The
Depositor shall not have any responsibility or liability for any action or
failure to act by the Servicer and is not obligated to supervise the performance
of the Servicer hereunder or otherwise.
SECTION 3.06. Trustee to Act as Servicer.
---------------------------
In the event that the Servicer shall for any reason no longer be the
Servicer hereunder (including by reason of an Event of Default), the Trustee
shall thereupon assume all of the rights and obligations of the Servicer
hereunder arising thereafter (except that the Trustee shall not be liable for
losses of the Servicer pursuant to Section 3.07 hereof, obligated to make
Monthly Advances if prohibited by applicable law, nor to effectuate repurchases
or substitutions of Mortgage Loans hereunder as substitute Servicer, including
pursuant to Section 2.04 hereof and except that the Trustee makes no
representations and warranties hereunder, including pursuant to Section 2.04
hereof). If the Servicer shall for any reason no longer be the Servicer
(including by reason of any Event of Default), the Trustee (or any other
successor servicer) shall succeed to any rights and obligations of the Servicer
under any Sub-Servicing Agreement and shall be deemed to have assumed the
Servicer's interest therein; provided, however, that the Servicer shall not
thereby be relieved of any liability or obligations under this Agreement, any
Sub-Servicing or substitute servicing agreement arising prior to the date of
such succession.
The Servicer shall, upon request of the Trustee, but at the expense of
the Servicer, deliver to the assuming party all documents and records relating
to the Mortgage Loans then being serviced thereunder and an accounting of
amounts collected held by it and otherwise use its best efforts to effect the
orderly and efficient transfer of servicing to the assuming party.
SECTION 3.07. Collection of Mortgage Loan Payments.
-------------------------------------
The Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans and shall, to
the extent such procedures shall be consistent with this Agreement, follow such
collection procedures as it follows with respect to mortgage loans comparable to
the Mortgage Loans held in its own portfolio and serviced by the Servicer.
Consistent with the foregoing, the Servicer may in its discretion (a) waive any
late payment charge or any prepayment charge or penalty interest in connection
with the prepayment of a Mortgage Loan and (b) subject to Section 3.01, only
upon determining that the coverage of such Mortgage Loan by any related Primary
Mortgage Insurance Policy will not be affected, extend the due dates for
payments due on a Mortgage Note for a period not greater than 270 days, but in
no event beyond the maturity date of any Mortgage Loan. In the event of any
such arrangement described in clause (b) of the preceding sentence, the Servicer
shall continue to make timely Monthly Advances on the related Mortgage Loan,
pursuant to and in accordance with Section 5.01 of this Agreement (but subject
to any limitations contained therein), during the scheduled period in accordance
with the amortization schedule of such Mortgage Loan without modification
thereof by reason of such arrangements.
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The Servicer shall establish and maintain, in its name on behalf of
the Certificateholders and the Insurer, the Custodial Account. The Servicer
shall deposit into the Custodial Account within two Business Days of receipt by
the Servicer, or receipt from the Sub-Servicers except as otherwise specifically
provided herein, the following payments and collections received or made by it
subsequent to the Cut-off Date (other than in respect of principal of and
interest and any other payments on the Mortgage Loans due on or before the Cut-
off Date):
(i) all payments on account of principal, including Principal
Prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage
Loans;
(iii) all Insurance Proceeds and Liquidation Proceeds, other
than proceeds to be applied to the restoration or repair of the Mortgaged
Property or released to the Mortgagor in accordance with the Servicer's
normal servicing procedures, net of Liquidation Expenses, unpaid servicing
compensation and unreimbursed Monthly Advances;
(iv) all Monthly Advances made by the Servicer pursuant to
Section 5.01 hereof;
(v) any amount of any losses required to be deposited by the
Servicer pursuant to the second succeeding paragraph of this Section 3.07
in connection with any losses on Eligible Investments;
(vi) any amounts required to be deposited by the Servicer
pursuant to Section 3.11 hereof;
(vii) all proceeds of any purchase by the Seller or the
Servicer, as the case may be, of any Mortgage Loans or property acquired in
respect of the Mortgage Loans pursuant to Sections 2.01, 2.02, 2.04, 3.12,
3.21 or 10.01 hereof and all amounts required to be deposited in connection
with the substitution of Replacement Mortgage Loans pursuant to Sections
2.01, 2.02 or 2.04 hereof; and
(viii) any other amounts required to be deposited in the
Custodial Account pursuant to this Agreement including, without limitation,
the amounts required to be deposited therein pursuant to Section 3.13
hereof.
The foregoing requirements for remittance by the Servicer shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of prepayment penalties, fees or
premiums, late payment charges, assumption fees and any excess interest charges
payable by the Mortgagor by virtue of any default or other non-compliance by the
Mortgagor with the terms of the Mortgage or any other instrument or document
executed in connection therewith or otherwise, if collected, need not be
remitted or deposited into the Custodial Account by the Servicer. In the event
that the Servicer shall remit or deposit any amount not required to be remitted
or deposited and not otherwise subject to withdrawal pursuant to Section 3.09
hereof, it may at any time withdraw such amount from the Custodial Account on
the following Distribution Date, any provision herein to the contrary
notwithstanding. Such direction may be accomplished by delivering an Officers'
Certificate to the Trustee which describes the amounts deposited in error in the
Custodial Account. All funds deposited in the Custodial Account shall be held
by the Servicer in trust for the Certificateholders and the Insurer until
disbursed in accordance with this Agreement or withdrawn in accordance with
Section 3.09.
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In no event shall the Trustee incur liability for withdrawals from the Custodial
Account at the direction of the Servicer.
The Servicer shall invest the funds in the Custodial Account in
Eligible Investments, which shall mature not later than the second Business Day
preceding the Distribution Date following the date of such investment (except
that if such Eligible Investment is an obligation of the institution that
maintains the Custodial Account, then such Eligible Investment shall mature not
later than such Distribution Date). All such Eligible Investments shall be made
in the name of the Trustee for the benefit of the Certificateholders and the
Insurer (in its capacity as such) or its nominee. The Servicer shall cause each
such Eligible Investment to be Delivered to the Trustee or its nominee
(including a securities intermediary). All income and gain net of any losses
realized from any such investment shall be for the benefit of the Servicer and
shall be subject to withdrawal at its direction from time to time. The amount
of any losses net of any gains not paid to the Servicer incurred in respect of
any such investments shall be remitted to the Trustee or deposited in the
Custodial Account out of the Servicer's own funds promptly following the date
the same are realized.
The Servicer shall promptly give notice to the Trustee, the Rating
Agencies, the Insurer and the Depositor of the location of the Custodial Account
and of any change thereof.
SECTION 3.08. Collection of Taxes, Assessments and Similar Items;
---------------------------------------------------
Escrow Accounts.
- ----------------
In addition to the Custodial Account, the Servicer shall establish and
maintain one or more custodial accounts (each, an "Escrow Account") and deposit
and retain therein all collections from the Mortgagors (or advances by the
Servicer) for the payment of taxes, assessments and hazard insurance premiums or
comparable items for the account of the Mortgagors. Escrow Accounts shall be
Eligible Accounts.
Withdrawals of amounts so collected from the Escrow Accounts may be
made only to effect timely payment of taxes, assessments, hazard insurance
premiums or Primary Mortgage Insurance Policy premiums, condominium or PUD
association dues, or comparable items, to reimburse the Servicer pursuant to
Sections 3.10 hereof (with respect to the Primary Mortgage Insurance Policy) and
3.08 hereof (with respect to taxes and assessments) and 3.11 hereof (with
respect to hazard insurance), to refund to any Mortgagors any sums as may be
determined to be overages, to pay interest, if required, to Mortgagors on
balances in the Escrow Account or to clear and terminate the Escrow Account at
the termination of this Agreement in accordance with Section 10.01 hereof. As
part of its servicing duties, the Servicer shall, and the Sub-Servicers shall,
pursuant to any Sub-Servicing Agreement, be required to, pay to the Mortgagors
interest on funds in the Escrow Account, to the extent required by law.
The Servicer shall, with respect to each Mortgage Loan, to the extent
any related Sub-Servicer does not do so, advance the payments referred to in the
preceding paragraph that are not timely paid by the Mortgagors; provided,
however, that the Servicer shall be required to so advance only to the extent
that such advances, in the good faith judgment of the Servicer, will be
recoverable by the Servicer out of Insurance Proceeds, Liquidation Proceeds or
otherwise of the related Mortgage Loan; and provided further, that such payments
shall be advanced when the tax, premium or other cost for which such payment is
intended is due.
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SECTION 3.09. Permitted Withdrawals from the Custodial Account.
-------------------------------------------------
The Servicer may (and, with respect to clauses (e) and (g) below,
shall), from time to time, direct the Trustee to make, and the Trustee shall
make, to the extent required or authorized hereunder, withdrawals from the
Custodial Account for the following purposes:
(a) to pay to the Servicer as additional servicing compensation,
earnings on or investment income with respect to funds in the Custodial Account
credited to the Custodial Account;
(b) to reimburse the Servicer for advances made pursuant to Sections
3.01, 3.10, 3.13, 5.01 and 5.02 hereof, such right of reimbursement pursuant to
this subclause (b) being limited to amounts received in respect of the
particular Mortgage Loan (including, for this purpose, Insurance Proceeds,
Liquidation Proceeds, amounts representing proceeds of other insurance policies,
if any, covering the related Mortgaged Property, rental and other income from
REO Property and proceeds of any purchase or repurchase of the related Mortgage
Loan);
(c) to reimburse the Servicer for any Nonrecoverable Advances;
(d) to reimburse the Servicer from Liquidation Proceeds for
Liquidation Expenses and, to the extent that Liquidation Proceeds after such
reimbursement are in excess of the Principal Balance of the related Mortgage
Loan together with accrued and unpaid interest thereon at a rate equal to the
sum of the Net Mortgage Rate and the Trustee Fee Rate, to pay out of such excess
the amount of any unpaid servicing compensation with respect to the related
Mortgage Loan to the Servicer, which may include any unpaid servicing
compensation to the Sub-Servicer (for disbursement in accordance with Section
3.16 hereof);
(e) to pay to the Seller or the Servicer, as the case may be, with
respect to each Mortgage Loan or property acquired in respect thereof that has
been purchased pursuant to Sections 2.01, 2.02, 2.04 or 3.12 hereof all amounts
received thereon and not taken into account in determining the Purchase Price of
such repurchased Mortgage Loan;
(f) to reimburse the Servicer or the Depositor for expenses incurred
by and reimbursable to the Servicer or the Depositor pursuant to Section 7.03
hereof;
(g) to withdraw any amount deposited in the Custodial Account pursuant
to Section 3.07 and not required to be deposited therein; and
(h) to clear and terminate the Custodial Account upon termination of
this Agreement pursuant to Section 10.01 hereof.
The Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Custodial Account pursuant to such subclauses (a), (b), (c),
(d), (e) and (f). The Servicer may apply Liquidation Proceeds and Insurance
Proceeds received with respect to a particular Mortgage Loan to reimbursements
permitted by clauses (b), (c) and (d) above in any order as the Servicer deems
appropriate.
On or prior to the second Business Day preceding each Distribution
Date after payment of items (a) through (h) above, the Servicer shall withdraw
from the Custodial Account and remit to the Trustee, in immediately available
funds, and the Trustee, upon receipt thereof, shall deposit in the
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Certificate Account, an amount equal to the sum of the Available Distribution
Amount, the Trustee Fee, the Servicing Fee and the Insurer Premium for such
Distribution Date.
SECTION 3.10. Maintenance of Primary Mortgage Insurance Policies;
---------------------------------------------------
Collections Thereunder.
-----------------------
The Servicer shall not take, or permit any Sub-Servicer to take, any
action that would result in loss of coverage under any applicable Primary
Mortgage Insurance Policy for any loss which, but for the actions of the
Servicer or Sub-Servicer, would have been covered thereunder.
The Servicer shall use its best reasonable efforts to cause such Sub-
Servicer to keep in full force and effect each Primary Mortgage Insurance Policy
applicable to a Mortgage Loan being serviced by it, including for each Lender-
Paid MI Loan, until the principal balance of the related Mortgage Loan, in the
case of a Mortgage Loan having a Loan-to-Value Ratio at origination in excess of
80%, is reduced to (a) 80% or less of the Appraised Value or (b) 80% or less of
its current value based on a new appraisal. The Servicer agrees to pay to the
extent the related Sub-Servicer does not do so, the premiums for each Primary
Mortgage Insurance Policy on a timely basis and shall use its best reasonable
efforts to cause itself or the Sub-Servicer to be named as loss payee. In the
event that the insurer under any Primary Mortgage Insurance Policy shall cease
to be qualified to transact a mortgage guaranty insurance business under the
laws of the state of its organization or any other state that has jurisdiction
over such insurer (or if such insurer's claims-paying ability shall adversely
affect the rating on the Class A Certificates) or such Primary Mortgage
Insurance Policy is cancelled or terminated for any reason, the Servicer shall
exercise its best reasonable efforts to obtain, or to cause the related Sub-
Servicer to obtain, from another Qualified Insurer, a replacement policy
comparable to such Primary Mortgage Insurance Policy at the expense of the
Mortgagor. The Servicer shall not consent to the cancellation or refusal to
renew any such Primary Mortgage Insurance Policy applicable to any Mortgage
Loan, which is in effect at the date of the initial issuance of the Certificates
and is required to be kept in force hereunder unless the replacement Primary
Mortgage Insurance Policy for such cancelled or non-renewed policy is maintained
with an insurer with a rating not lower than the insurer issuing the Primary
Mortgage Insurance Policy in effect at the date of the initial issuance of the
Certificates or whose claims-paying will not adversely affect the rating on the
Class A Certificates or unless any such cancellation or refusal, or consent
thereto, will not adversely affect the rating on the Class A Certificates. In
connection with any assumption and modification agreement entered into by the
Servicer or a Sub-Servicer pursuant to Section 3.12, the Servicer shall obtain a
replacement Primary Mortgage Insurance Policy, as provided above.
In connection with its activities as administrator and servicer of the
Mortgage Loans, the Servicer agrees to present, on behalf of itself, the
Depositor, the Trustee for the benefit of the Certificateholders and the
Insurer, claims to the insurer under any Primary Mortgage Insurance Policies
and, in this regard, to take such reasonable action as shall be necessary to
permit recovery under any Primary Mortgage Insurance Policies respecting
defaulted Mortgage Loans. Pursuant to Section 3.07 hereof, any amounts
collected by the Servicer under any Primary Mortgage Insurance Policy shall be
deposited in the Custodial Account, subject to withdrawal pursuant to Section
3.09 hereof.
SECTION 3.11. Maintenance of Hazard Insurance and Other Insurance.
----------------------------------------------------
The Servicer shall cause to be maintained for each Mortgage Loan,
hazard insurance with extended coverage in an amount that is at least equal to
the maximum insurable value of improvements securing such Mortgage Loan or its
Principal Balance, whichever is less.
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Each policy of standard hazard insurance shall contain, or have an
accompanying endorsement that contains, a standard mortgagee clause complying in
all material respects in form and substance to applicable FNMA guidelines. The
Servicer shall cause to be maintained on property acquired upon foreclosure or
deed in lieu of foreclosure of any Mortgage Loan, liability insurance and, to
the extent described below, flood insurance. Pursuant to Section 3.07 hereof,
any amounts collected by the Servicer under any such policies (other than
amounts to be applied to the restoration or repair of the related Mortgaged
Property or property thus acquired or amounts released to the Mortgagor in
accordance with the terms of the applicable Mortgage or the Servicer's normal
servicing procedures) shall be deposited in the Custodial Account, subject to
withdrawal pursuant to Section 3.09 hereof.
Any cost incurred by the Servicer or the related Sub-Servicer in
maintaining any such insurance shall not, for the purpose of calculating monthly
distributions to the Certificateholders or remittances to the Trustee for their
benefit, be added to the Principal Balance of the Mortgage Loan, notwithstanding
that the terms of the Mortgage Loan so permit. Such costs shall be recoverable
by the Servicer out of payments by the related Mortgagor or out of Insurance
Proceeds or Liquidation Proceeds to the extent permitted by Section 3.09 hereof.
If the Mortgaged Property is located at the time of origination of the Mortgage
Loan in a federally designated special flood hazard area, the Servicer shall
cause flood insurance to be maintained. Such flood insurance shall be in an
amount equal to the lesser of (i) the unpaid Principal Balance of the related
Mortgage Loan or (ii) the maximum amount of such insurance available for the
related Mortgaged Property under the national flood insurance program, if the
area in which such Mortgaged Property is located is participating in such
program.
In the event that the Servicer shall obtain and maintain a blanket
policy insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first sentence of this Section 3.11, it being understood and agreed that such
policy may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers, and
provided that the provider of such blanket policy is rated by A.M. Best Company
A:V or higher and the claims-paying ability of such provider is rated in one of
the three highest rating categories by at least one nationally recognized
statistical rating organization. If such policy contains a deductible clause,
the Servicer shall, to the extent that there shall not have been maintained on
the related Mortgaged Property a policy complying with the first sentence of
this Section 3.11 and there shall have been a loss that would have been covered
by such policy, remit to the Trustee for deposit in the Custodial Account the
amount not otherwise payable under the blanket policy because of such deductible
clause, accompanied by an Officers' Certificate describing the calculation of
such amount. In connection with its activities as administrator and servicer of
the Mortgage Loans, the Servicer agrees to present, on behalf of itself, the
Depositor, the Trustee for the benefit of the Certificateholders, claims under
any such blanket policy.
SECTION 3.12. Enforcement of Due-On-Sale Clauses; Assumption
----------------------------------------------
Agreements.
- -----------
(a) Except as otherwise provided in this Section 3.12(a), when any
property subject to a Mortgage has been conveyed by the Mortgagor, the Servicer
shall, to the extent that it has knowledge of such conveyance, enforce any due-
on-sale clause contained in any Mortgage Note or Mortgage, to the extent
permitted under applicable law and governmental regulations, but only to the
extent that such enforcement will not adversely affect or jeopardize coverage
under any Required Insurance Policy. In the event that the Servicer or the
related Sub-Servicer is prohibited by law from enforcing any such due-on-sale
clause, or if coverage under any Required Insurance Policy would be adversely
affected, the Servicer is authorized, subject to Section 3.12(b), to take or
enter into an assumption and modification agreement from or with the person to
whom such property has been or is about to be conveyed, pursuant to which such
person becomes liable under the Mortgage Note and, unless prohibited by
applicable state
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law, the Mortgagor remains liable thereon, provided that the Mortgage Loan shall
continue to be covered (if so covered before the Servicer enters such agreement)
by the applicable Required Insurance Policies. The Servicer, subject to Section
3.12(b), is also authorized with the prior approval of the insurers under any
Required Insurance Policies 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. Notwithstanding the foregoing, the Servicer shall not be
deemed to be in default under this Section 3.12(a) by reason of any transfer or
assumption which the Servicer is restricted by law from preventing, for any
reason whatsoever.
(b) Subject to the Servicer's duty to enforce any due-on-sale clause
to the extent set forth in Section 3.12(a) hereof, in any case in which a
Mortgaged Property has been conveyed to a Person by a Mortgagor, if an
assumption is permitted under Section 3.12(a) and such Person is to enter into
an assumption agreement or modification agreement or supplement to the Mortgage
Note or Mortgage held for the benefit of the Certificateholders and the Insurer
that requires the signature of the Trustee, or if an instrument of release
signed by the Trustee is required releasing the Mortgagor from liability on the
Mortgage Loan, the Servicer shall deliver or cause to be delivered to the
Trustee for signature the assumption agreement with the Person to whom the
Mortgaged Property is to be conveyed and such modification agreement or
supplement to the Mortgage Note or Mortgage or other instruments as are
reasonable or necessary to carry out the terms of the Mortgage Note or Mortgage
or otherwise to comply with any applicable laws regarding assumptions or the
transfer of the Mortgaged Property to such Person. The Servicer shall also
deliver or cause to be delivered to the Trustee with the foregoing documents a
letter explaining the nature of such documents and the reason or reasons why the
Trustee's signature is required.
With such letter, the Servicer shall deliver to the Trustee a
certificate of a Servicing Officer certifying that: (i) a Servicing Officer has
examined and approved such documents as to form and substance, (ii) the
Trustee's execution and delivery thereof will not conflict with or violate any
terms of this Agreement or cause the unpaid balance and interest on the Mortgage
Loan to be uncollectible in whole or in part, (iii) any required consents of
insurers under any Required Insurance Policies have been obtained and (iv)
subsequent to the closing of the transaction involving the assumption or
transfer (A) the Mortgage Loan will continue to be secured by a first mortgage
lien pursuant to the terms of the Mortgage, (B) such transaction will not
adversely affect the coverage under any Required Insurance Policies, (C) the
Mortgage Loan will fully amortize over the remaining term thereof or, if the
Mortgage Loan provided that the amortization period on which the Monthly
Payments were based was a longer period, such period has not been extended, (D)
the interest rate on the Mortgage Loan will not be altered nor will the term of
the Mortgage Loan be increased as a result of such assumption or transfer and
(E) if the seller/transferor of the Mortgaged Property is to be released from
liability on the Mortgage Loan, the Servicer used the same underwriting
standards in evaluating the creditworthiness of the purchaser/transferee as were
used in making the original Mortgage Loan, and such release will not (based on
the Servicer's good faith determination) adversely affect the collectibility of
the Mortgage Loan. Upon receipt of such certificate, the Trustee for the
benefit of the Certificateholders and the Insurer shall execute any necessary
instruments for such assumption or substitution of liability. Upon the closing
of the transactions contemplated by such documents, the Servicer shall cause the
originals of the assumption agreement, the release (if any), or the modification
or supplement to the Mortgage Note or Mortgage to be delivered to the Trustee
for the benefit of the Certificateholders and the Insurer and deposited with the
Trustee Mortgage File for such Mortgage Loan. Any fee collected by the Servicer
for entering into an assumption or substitution of liability agreement will be
retained by the Servicer as additional servicing compensation.
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In the event that the Servicer, in connection with any such assumption
or modification agreement or supplement to the Mortgage Note, is unable to
deliver the certificate of the Servicing Officer set forth above, the Servicer
shall purchase, or cause the related Sub-Servicer to purchase the related
Mortgage Loan in the manner, and at the Purchase Price, set forth in Section
2.04 hereof.
SECTION 3.13. Realization Upon Defaulted Mortgage Loans.
------------------------------------------
The Servicer shall foreclose upon or otherwise comparably convert the
ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which, in the reasonable judgment of the Servicer,
no satisfactory arrangements can, in accordance with prudent lending practices,
be made for collection of delinquent payments pursuant to Section 3.01 hereof.
In connection with such foreclosure or other conversion, the Servicer shall
follow such practices and procedures as it shall deem necessary or advisable, as
shall be normal and usual in its general mortgage servicing activities and for
its own portfolio and as are in accordance with the requirements of the insurer
under any Required Insurance Policy and shall deliver to the Insurer a
liquidation report with respect to the related Mortgage Loan on the form of
report customarily prepared by the Servicer. In particular, the Servicer will
service each Mortgage Loan in a manner that preserves the right to proceed
against all collateral securing such Mortgage Loan (e.g., in accordance with any
applicable "single action" rule). The Servicer shall not be required to expend
its own funds in connection with any foreclosure or towards the restoration,
repair, protection or maintenance of any property unless it shall determine in
its sole discretion that such expenses will be recoverable to it as Liquidation
Expenses either through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Custodial Account pursuant to
Section 3.09 hereof) or through Insurance Proceeds (respecting which it shall
have similar priority). The Servicer shall be responsible for all other costs
and expenses incurred by it in any such proceedings; provided, however, that it
shall be entitled to reimbursement thereof from the proceeds of liquidation of
the related Mortgaged Property, as contemplated in Section 3.09 hereof.
In the event that any Mortgaged Property becomes an REO Property, the
deed or certificate of sale shall be taken in the name of the Trustee for the
benefit of the Certificateholders and the Insurer, or its nominee, on behalf of
the Certificateholders and the Insurer. Pursuant to its efforts to sell such
REO Property, the Servicer shall either itself or through an agent selected by
the Servicer protect and conserve such REO Property in the same manner and to
such extent as is customary in the locality where such REO Property is located
and may, incident to its conservation and protection of the interests of the
Certificateholders and the Insurer, rent the same, or any part thereof, as the
Servicer deems to be in the best interest of the Servicer, the Insurer and the
Certificateholders for the period prior to the sale of such REO Property on such
terms and conditions and for such periods as the Servicer deems to be in the
best interest of the Servicer, the Insurer and the Certificateholders.
Notwithstanding anything herein to the contrary, in the event that the Trust
REMIC acquires any REO Property as aforesaid or otherwise in connection with a
default or imminent default on a Mortgage Loan, the Servicer, on behalf of the
Trust REMIC, shall dispose of such REO Property within three full years after
the taxable year of its acquisition by the Trust REMIC for purposes of Section
860G(a)(8) of the Code (or such shorter period as may be necessary under
applicable state (including any state in which such property is located) law to
maintain the status of the Trust REMIC as a remic under applicable state law and
avoid taxes resulting from such property failing to be foreclosure property
under applicable state law) or, at the expense of the Trust REMIC, request, more
than 60 days before the day on which such grace period would otherwise expire,
an extension of such grace period unless the Servicer obtains for the Trustee an
Opinion of Counsel, addressed to the Trustee, the Insurer and the Servicer, to
the effect that the holding by the Trust REMIC of such REO Property subsequent
to such period will not result in the imposition of taxes on "prohibited
transactions" as defined in Section 860F of the Code, or cause the Trust REMIC
to fail to qualify as a remic under the Code at any time that any Certificates
of the Trust
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REMIC are outstanding, in which case the Trust REMIC may continue to hold such
REO Property (subject to any conditions contained in such Opinion of Counsel).
The Servicer shall be entitled to be reimbursed from the Custodial Account for
any costs incurred in obtaining such Opinion of Counsel. Notwithstanding any
other provision of this Agreement, no REO Property acquired by the Trust REMIC
shall be rented (or allowed to continue to be rented) or otherwise used by or on
behalf of the Trust REMIC in such circumstances or manner or pursuant to any
terms that would (i) cause such REO Property to fail to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code or (ii) subject
the Trust REMIC to the imposition of any federal income taxes on the income
earned from such REO Property, including any taxes imposed by reason of Section
860G(c) of the Code, unless the Servicer has agreed to indemnify and hold
harmless the Trust REMIC with respect to the imposition of any such taxes.
The decision of the Servicer to foreclose on a defaulted Mortgage Loan
shall be subject to a determination by the Servicer that the proceeds of such
foreclosure would exceed the costs and expenses of bringing such a proceeding.
The income earned from the management of any Mortgaged Properties acquired
through foreclosure or other judicial proceeding on behalf of the
Certificateholders and the Insurer, net of reimbursement to the Servicer for
expenses incurred (including any taxes) in connection with such management,
advances made by the Servicer pursuant to Sections 3.01, 3.11, 3.13 or 5.01 in
connection with the related Mortgage Loan or REO Property and Liquidation
Expenses incurred by the Servicer in connection with the related Mortgage Loan,
shall be applied to the payment of principal of and interest on the related
defaulted Mortgage Loans (with interest accruing and principal amortizing as
though such Mortgage Loans were still current) and all such income shall be
deemed, for all purposes in this Agreement, to be payments on account of
principal of and interest on the related Mortgage Notes and shall be deposited
into the Custodial Account.
Prior to obtaining or causing the Trustee to obtain a deed as a result
of or in lieu of foreclosure, or otherwise acquiring (or causing the Trustee to
acquire) possession of or title to any Mortgaged Property, if the Servicer
determines that obtaining a deed or otherwise acquiring title or possession of
such Mortgaged Property would likely subject the Servicer, the Trustee or the
Trust Fund to substantial liability in respect of environmental conditions
concerning the Mortgaged Property, (a) the Servicer shall (i) notify the Trustee
and the Depositor of such determination and (ii) refrain from obtaining or
directing the Trustee to obtain a deed as a result of or in lieu of foreclosure
or otherwise acquiring title or possession to such Mortgaged Property and (b)
the obligations of the Servicer to make advances, including, without limitation,
Monthly Advances, in connection with the Mortgage Loan in question shall cease
as of the date that the Servicer makes such determination.
SECTION 3.14. Trustee to Cooperate; Release of Trustee Mortgage Files.
--------------------------------------------------------
Upon the payment in full of any Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, and upon notification by the Servicer in the form
of a certification (which certification shall include a statement to the effect
that all amounts received or to be received in connection with such payment
which are required to be deposited in the Custodial Account have been or will be
so deposited) of a Servicing Officer and a Request for Release of the Trustee
Mortgage File in the form of Exhibit G hereto the Trustee shall promptly release
the related Trustee Mortgage File to the Servicer, and the Trustee shall execute
and deliver to the Servicer the request for reconveyance, deed of reconveyance
or release, satisfaction or assignment of mortgage or such instrument releasing
the lien of the Mortgage, and, in each case, such other documents or instruments
as may be reasonably required in connection therewith, as directed by the
Servicer, together with the Mortgage Note with written evidence of cancellation
thereon. The provisions of the immediately preceding sentence shall not, in any
manner, limit or impair the right of the Servicer
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to execute and deliver, on behalf of the Trustee, the Depositor, the
Certificateholders or any of them, any and all instruments of satisfaction,
cancellation or assignment, or of partial or full release or discharge and all
other comparable instruments, with respect to the Mortgage Loans, and with
respect to the Mortgaged Properties held for the benefit of the
Certificateholders. No expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the Certificate
Account but shall be paid by the Servicer. From time to time and as shall be
appropriate for the servicing or foreclosure of any Mortgage Loan, including,
without limitation, for such purpose, collection under any policy of flood
insurance, any fidelity bond or errors or omissions policy, or for the purposes
of effecting a partial or total release of any Mortgaged Property from the lien
of the Mortgage or the making of any corrections to the Mortgage Note or the
Mortgage or any of the other documents included in the Trustee Mortgage File,
the Trustee shall, upon request of the Servicer and the delivery to the Trustee
of a Request for Release signed by a Servicing Officer, in the form of Exhibit G
hereto, release the Trustee Mortgage File to the Servicer. If the Servicer at
any time seeks to initiate a foreclosure proceeding in respect of any Mortgaged
Property, the Servicer shall deliver to the Depositor or the Trustee, for
signature as appropriate, any court pleadings, requests for trustee's sale or
other documents necessary to effectuate such foreclosure or any legal action
brought to obtain judgment against the Mortgagor on the Mortgage Note or the
Mortgage or to obtain a deficiency judgment or to enforce any other remedies or
rights provided by the Mortgage Note or the Mortgage or otherwise available at
law or in equity, together with a certificate of a Servicing Officer requesting
that such pleadings or documents be executed by the Trustee. A Servicing Officer
shall certify as to the reason such documents or pleadings are required and that
the execution and delivery thereof by the Trustee will not invalidate the
insurance coverage under any Required Insurance Policy or invalidate or
otherwise affect the lien of the Mortgage except for the termination of such
lien upon completion of the foreclosure.
SECTION 3.15. Documents, Records and Funds in Possession of Servicer
------------------------------------------------------
to be Held for the Depositor and the Trustee for the
----------------------------------------------------
Benefit of the Certificateholders.
----------------------------------
Notwithstanding any other provisions of this Agreement, the Servicer
shall transmit to the Trustee to the extent required by this Agreement all
documents and instruments coming into the possession of the Servicer from time
to time and shall account fully to the Trustee for the benefit of the
Certificateholders and the Insurer for any funds received by the Servicer or
which otherwise are collected by the Servicer as Liquidation Proceeds or
Insurance Proceeds in respect of any Mortgage Loan. All Servicer Mortgage Files
or Trustee Mortgage Files and funds collected or held by, or under the control
of, the Servicer in respect of any Mortgage Loans, whether from the collection
of principal and interest payments or from Liquidation Proceeds or Insurance
Proceeds, including but not limited to, any funds on deposit in the Custodial
Account, shall be held by the Servicer for and on behalf of the Depositor, the
Trustee for the benefit of the Certificateholders and the Insurer and shall be
and remain the sole and exclusive property of the Trustee, subject to the
applicable provisions of this Agreement. The Servicer also agrees that it shall
not create, incur or subject any Servicer Mortgage File or Trustee Mortgage File
or any funds that are deposited in the Custodial Account or any Servicing or
Escrow Account, or any funds that otherwise are or may become due or payable to
the Trustee for the benefit of the Certificateholders, to any claim, lien,
security interest, judgment, levy, writ of attachment or other encumbrance, or
assert by legal action or otherwise any claim or right of setoff against any
Servicer Mortgage File or Trustee Mortgage File or any funds collected on, or in
connection with, a Mortgage Loan, except, however, that the Servicer shall be
entitled to set off against and deduct from any such funds any amounts that are
properly due and payable to the Servicer under this Agreement subject to the
terms of this Agreement.
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SECTION 3.16. Servicing Compensation.
-----------------------
As compensation for its activities hereunder, the Servicer shall be
entitled to retain from the Custodial Account or withdraw from the Custodial
Account the amounts specified in subclause (a) of Section 3.09 hereof as payable
to it.
Additional servicing compensation in the form of prepayment penalties,
fees or premiums, assumption fees, modification fees, late payment charges or
otherwise or any excess interest charges payable by the Mortgagor by virtue of
any default or other non-compliance by the Mortgagor with the terms of the
Mortgage or any other instrument or document executed in connection therewith or
otherwise shall be retained by the Servicer to the extent not required to be
deposited in the Custodial Account pursuant to Section 3.07 hereof. The
Servicer shall be required to pay all expenses incurred by it in connection with
its servicing activities hereunder (including payment of premiums for Primary
Mortgage Insurance Policies, to the extent such premiums are not required to be
paid or have not been paid by the related Mortgagor or the related Sub-Servicer,
payment of any premiums for hazard insurance, as required by Section 3.11 hereof
and maintenance of the other forms of insurance coverage required by Section
3.11 hereof) the payment of servicing compensation to any Sub-Servicers pursuant
to any Sub-Servicing Agreement and the payment of the expenses of the Trustee to
the extent provided in Section 9.05, and shall not be entitled to reimbursement
therefor except as specifically provided in Sections 3.09, 3.13 and 5.03 hereof.
SECTION 3.17. Reports to the Depositor; Account Statements.
---------------------------------------------
Within five Business Days following each Distribution Date, the
Servicer shall deliver to the Trustee, the Insurer and the Depositor a statement
setting forth the status of the Custodial Account, if any, as of the close of
business on such Distribution Date showing, for the period covered by such
statement, the aggregate of deposits in or withdrawals from the Custodial
Account, if any, for each category of deposit specified in Section 3.07 hereof
and each category of withdrawal specified in Section 3.09 hereof. The Servicer
shall forward a copy of such statement to the Rating Agencies. Within ten
Business Days following each Distribution Date, the Trustee shall deliver to the
Depositor and the Insurer a statement setting forth the status of the
Certificate Account as of the close of business on such Distribution Date
showing, for the period covered by such statement, the aggregate of deposits in
or withdrawals from the Certificate Account. The Trustee shall forward a copy
of such statement to the Rating Agencies.
SECTION 3.18. Annual Statement as to Compliance.
----------------------------------
The Servicer shall deliver to the Depositor, the Insurer and the
Trustee on or before January 31 of each year, commencing January 31, 2000, an
Officers' Certificate stating, as to each signer thereof, that (a) a review of
the activities of the Servicer during the year ended on the preceding September
30 and of the performance of the Servicer under this Agreement has been made
under such officer's supervision, (b) to the best of such officer's knowledge,
based on such review, the Servicer has fulfilled all its obligations under this
Agreement in all material respects throughout such year, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof, (c) a Servicing Officer
has conducted an examination of the activities of each Sub-Servicer during the
immediately preceding year and its performance under any Sub-Servicing
Agreement, and (d) to the best of such Servicing Officer's knowledge, based on
such examination, each Sub-Servicer has performed and fulfilled its duties,
responsibilities and obligations under such Sub-Servicing Agreement in all
material respects throughout such year, or if there has been a default in the
performance or fulfillment of any such duties, responsibilities or obligations,
specifying
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each such default known to such Servicing Officer and the nature and status
thereof. The Servicer shall forward a copy of each such statement to the Rating
Agencies.
SECTION 3.19. Annual Independent Public Accountants' Servicing
------------------------------------------------
Report.
-------
On or before January 31 of each year, beginning with the first January
31 that occurs at least eleven months after the Cut-off Date, the Servicer, at
its expense, shall cause a firm of independent public accountants that is a
member of the American Institute of Certified Public Accountants to furnish a
statement to the Depositor, the Insurer and the Trustee for the benefit of the
Certificateholders to the effect that such firm has examined certain documents
substantially similar to this Agreement and records relating to the servicing of
mortgage loans serviced by the Servicer or any successor servicer that are
substantially similar to the Mortgage Loans and that, on the basis of an
examination conducted substantially in compliance with the Uniform Single Audit
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC, such servicing has been conducted in compliance with such agreements
except for such significant exceptions or errors in records that, in the opinion
of such firm, the Uniform Single Audit Program for Mortgage Bankers or the Audit
Program for Mortgages serviced for FHLMC requires it to report. In rendering
such statement such firm may rely, as to matters relating to direct servicing of
Mortgage Loans by Sub-Servicers, if any, upon comparable statements for
examinations conducted substantially in compliance with the Uniform Single Audit
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC (rendered within one year of such statement) of independent public
accounts with respect to the related Sub-Servicer. The Servicer shall forward a
copy of each such report to the Rating Agencies.
SECTION 3.20. Reports to Trustee.
-------------------
On or before the third Business Day of each month, the Servicer shall
cause to be delivered to the Trustee and the Insurer a monthly servicing report
in electronic format containing the information required by the Trustee to
prepare the information set forth in Section 4.04(a). The Trustee may
conclusively rely on information provided by the Servicer and shall have no
obligation to recompute, recalculate, or verify the accuracy of such
information.
SECTION 3.21. Converted Mortgage Loans; Certain Procedures and
------------------------------------------------
Purchases.
----------
(a) The Trustee, as Note Holder (as defined in the Mortgage Notes for
the Mortgage Loans) on behalf of the Certificateholders and the Insurer is
hereby authorized and hereby authorizes and directs the Servicer, on behalf
of the Note Holder, to determine fixed interest rates into which Mortgagors
under Convertible Mortgage Loans may convert the adjustable interest rates
on their Mortgage Notes in accordance with the terms set forth in such
Mortgage Notes. The Servicer agrees to make such determinations and
otherwise administer the program contemplated in the Mortgage Notes for the
Convertible Mortgage Loans until the later to occur of (i) the date on
which all the Convertible Mortgage Loans have become Converted Mortgage
Loans, and (ii) the last date on which Mortgagors have the option to
convert the adjustable interest rates on their Mortgage Notes to fixed
interest rates.
(b) The Seller shall purchase such Converting Mortgage Loan. All
amounts paid by the Seller in connection with the purchase of a Converting
Mortgage Loan or Converted Mortgage Loan, as the case may be, will be
deposited in the Custodial Account.
(c) Notwithstanding that a Mortgage Loan becomes a Converting Mortgage
Loan or Converted Mortgage Loan in any month, in the event that such
Mortgage Loan is not purchased pursuant to Section 3.21(b) such Converting
Mortgage Loan or Converted Mortgage Loan shall remain in the
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Trust Fund and all payments in respect thereof shall remain in the Trust
Fund unless and until such Converting Mortgage Loan or Converted Mortgage
Loan, as the case may be, is purchased by the Seller, pursuant to Section
3.21(b).
(d) Upon any purchase of a Converting Mortgage Loan or Converted
Mortgage Loan, as the case may be, by the Seller pursuant to Section
3.21(b) and the deposit in the Custodial Account of the Purchase Price, the
Seller shall give the Trustee written notice thereof and, based thereon,
the Trustee shall release, or cause any Custodian to release, the related
Mortgage File and convey such Mortgage Loan to the purchaser whereupon such
purchased Converted Mortgage Loan shall cease to be part of the Trust Fund.
ARTICLE IV.
PAYMENTS AND STATEMENTS TO CERTIFICATEHOLDERS
SECTION 4.01. Certificate Account.
--------------------
The Trustee shall establish, prior to the Delivery Date, and shall
maintain, in the name of the Trustee on behalf of the Holders of interests in
the Trust Fund and the Insurer, the Certificate Account, which shall be an
Eligible Account, into which the Trustee upon receipt from the Servicer shall
deposit all payments remitted by the Servicer and any amounts required to be
remitted by the Depositor pursuant to the terms hereof. All distributions to be
made from time to time to Holders of interests in the Trust Fund out of funds in
the Certificate Account shall be made by or on behalf of the Trustee. The
Trustee will give notice to the Servicer, the Rating Agencies, the Insurer and
the Depositor of the location of the Certificate Account and of any change
thereof, prior to the use thereof. Funds held in the Certificate Account and
delivered to the Trustee earlier than one Business Day prior to the next
Distribution Date shall be invested by the Trustee in Eligible Investments as
directed by the Servicer or shall remain uninvested. The Trustee shall cause
each such Eligible Investment to be Delivered to it or its nominee (including a
securities intermediary). All income and gain net of any losses realized from
any such investment shall be for the benefit of the Servicer and shall be
subject to withdrawal at the Servicer's direction from time to time. The amount
of any losses net of any gains not paid to the Servicer incurred in respect of
any such investments shall be deposited in the Certificate Account out of the
Servicer's own funds immediately as realized.
In addition, the Trustee shall (i) withdraw from the Reserve Account
and deposit into the Certificate Account an amount equal to the amount of any
Realized Losses on the Mortgage Loans during the related Prepayment Period in
excess of the Class S Interest Distribution Amount, to the extent of funds
available in the Reserve Account (with such withdrawal allocated between the
Loan Groups in proportion to Realized Losses on each Loan Group) and (ii)
withdraw from the Insurance Account and deposit into the Certificate Account the
amount necessary to make any Insured Payment on each Distribution Date, to the
extent received from the Insurer (with such withdrawal allocated to the Loan
Group to which an Insured Payment relates).
The Trustee shall make, to the extent required or authorized
hereunder, withdrawals from the Certificate Account for the following purposes:
(i) to withdraw any amount deposited in the Certificate Account and
not required to be deposited therein;
(ii) to reimburse the Servicer for any unreimbursed Nonrecoverable
Advance;
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(iii) to make required distributions pursuant to Section 4.02; and
(iv) to pay to the Depositor any amount to which it is entitled
pursuant to Section 7.03.
SECTION 4.02. Distributions.
--------------
(a) On each Distribution Date the Trustee shall apply amounts in the
Certificate Account (including any withdrawals from the Reserve Account in
accordance with Section 4.01 and any Insured Payment transferred from the
Insurance Account and payable to the Class A Certificateholders in accordance
with Section 4.06), to pay the following amounts in the following order of
priority:
(i) to pay to the Insurer, the Insurer Premium (with such amount
allocated to each Loan Group pro rata based on the aggregate Principal
Balance of the Mortgage Loans in such Loan Group);
(ii) to pay to itself on each Distribution Date an amount equal to
the Principal Balance of each Mortgage Loan immediately prior such
Distribution Date multiplied by one-twelfth of the Trustee Fee Rate (with
such fee allocated to each Loan Group pro rata based on the aggregate
Principal Balance of the Mortgage Loans in such Loan Group);
(iii) to pay to the Servicer, on any Distribution Date, the Servicing
Fee due on such Distribution Date, if the Servicer has remitted prior to
the related Distribution Date funds directly to the Trustee for deposit in
the Certificate Account (with such fee allocated to each Loan Group pro
rata based on the aggregate Principal Balance of the Mortgage Loans in such
Loan Group);
(iv) to pay to the Insurer the amount of Cumulative Insurance
Payments as of such Distribution Date (with such amount allocated to the
related Loan Group);
(v) concurrently,
(A) to the holders of the Class A-I Certificates, to the extent
of the related Available Distribution Amount remaining, the Class A-I
Interest Distribution Amount and the Class A-I Cumulative Interest
Shortfall Amount for which no Insured Payment has been previously paid to
the Class A-I Certificateholders; and
(B) to the holders of the Class A-II Certificates, to the extent
of the related Available Distribution Amount remaining, the Class A-II
Interest Distribution Amount and the Class A-II Cumulative Interest
Shortfall Amount for which no Insured Payment has been previously paid to
the Class A-II Certificateholders;
(vi) concurrently,
(A) to the holders of the Class A-I Certificates, to the extent
of the related Available Distribution Amount remaining, the Class A-I
Principal Distribution Amount, until the Certificate Principal Balance
thereof has been reduced to zero;
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(B) to the holders of the Class A-II Certificates, to the extent
of the related Available Distribution Amount remaining, the Class A-II
Principal Distribution Amount, until the Certificate Principal Balance
thereof has been reduced to zero;
(C) to the holders of the Class A-I Certificates, to the extent
of the Available Distribution Amount for Loan Group II remaining, the
portion of Class A-I Principal Distribution Amount remaining unpaid for
such Distribution Date, until the Certificate Principal Balance thereof has
been reduced to zero; and
(D) to the holders of the Class A-II Certificates, to the extent
of the Available Distribution Amount for Loan Group I remaining, the
portion of Class A-II Principal Distribution Amount remaining unpaid for
such Distribution Date, until the Certificate Principal Balance thereof has
been reduced to zero;
(vii) to the holders of the Class S Certificates, or to the Reserve
Account to the extent the Reserve Account Requirement is not satisfied, to the
extent of the Available Distribution Amount remaining, the Class S Interest
Distribution Amount in the following order of priority:
(A) first, to the Reserve Account, any Reserve Account Increase
Amount;
(B) second, to the holders of the Class S Certificates, the
remaining portion, if any, of the Class S Interest Distribution Amount; and
(viii) to the holder of the Class R Certificates, the balance, if any,
of the Available Distribution Amount.
(b) Within five Business Days before the related Distribution Date, the
Servicer shall notify the Trustee of the amounts, if any, payable to the Insurer
pursuant to Sections 4.02(a)(iv).
(c) The Trustee shall be responsible for the calculations with respect to
distributions from the Certificate Account so long as the Trust Fund has not
been terminated in accordance with this Agreement. All distributions made to
Certificateholders of any Class on such Distribution Date will be made to the
Certificateholders of the respective Class of record on the immediately
preceding Record Date, except for the final distribution, which shall be made as
provided in the form of Certificate. All distributions made to the
Certificateholders shall be based upon the Percentage Interest represented by
their respective Certificates. If on any Determination Date, the Trustee
determines that there are no Mortgage Loans outstanding and no other funds or
assets in the Trust Fund other than the funds in the Certificate Account, the
Trustee shall promptly send the final distribution notice to each
Certificateholder specifying the manner in which the final distribution will be
made.
(d) Any Certificateholder shall be entitled to receive distributions
hereunder on a Distribution Date (other than as provided in Section 10.02
respecting the final distribution) by wire transfer to the account specified in
writing by the Certificateholder to the Trustee if the Initial Certificate
Principal Balance evidenced by such Holder's Certificate is at least equal to
$2,500,000 or the Percentage Interest thereof is 100%. In each case, the account
must be specified in writing at least five Business Days prior to the Record
Date for the Distribution Date on which wire transfers will commence. All other
distributions shall be made by check payable to the Certificateholder mailed by
first class mail to the address of such Certificateholder reflected in the
Certificate Register.
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SECTION 4.03. Allocation of Realized Losses.
------------------------------
Prior to each Distribution Date, based on the information provided by
the Servicer in its monthly report, the Trustee shall determine the total of
Realized Losses, if any, incurred with respect to the Mortgage Loans in each
Loan Group during the previous Prepayment Period. On each Distribution Date,
Realized Losses will be allocated after the distribution of principal and
interest on such Distribution Date; provided, however, that if the Certificate
Principal Balance of any Class of Certificates would be reduced to zero as a
result of Realized Losses to be allocated on such Distribution Date if no funds
were available for distributions on the Certificates, then Realized Losses will
be allocated to such Class prior to the distribution of principal and interest.
In every case, such Realized Losses shall be allocated first to the Class S
Certificates, by operation of clause (vi) of the definitions of Class A-I
Principal Distribution Amount and Class A-II Principal Distribution Amount, up
to the amount of the Class S Interest Distribution Amount for the related
Distribution Date. If the amount of Realized Losses in respect of any
Prepayment Period exceeds the amount of the Class S Interest Distribution Amount
for such Distribution Date, the Trustee shall transfer to the Certificate
Account from, and to the extent of, the funds on deposit in the Reserve Account
in accordance with Sections 4.01 and 4.07.
To the extent Realized Losses allocated with respect to any
Distribution Date exceed the Class S Interest Distribution Amount and amounts
available on deposit in the Reserve Account, and payments are not made in
respect thereof by the Insurer as required under the Policy, the remaining
Realized Losses will be allocated to the related Class of Class A Certificates.
SECTION 4.04. Monthly Statements to Certificateholders.
-----------------------------------------
(a) Not later than each Distribution Date, the Trustee shall prepare
and the Trustee shall cause to be forwarded by mail to each Certificateholder,
the Servicer, the Insurer, the Depositor and the Rating Agencies a statement
setting forth:
(i) the amount of such distribution representing principal of
the Mortgage Loans, separately identifying the aggregate amount of any
Principal Prepayments included therein, and the portion of such
distribution, if any, representing a Monthly Advance of principal and the
Certificate Principal Balance of the Class A Certificates after giving
effect to such distributions;
(ii) the amount of such distribution representing interest on
the Mortgage Loans and the portion of such distribution, if any,
representing a Monthly Advance of interest;
(iii) the aggregate Principal Balances of the Mortgage Loans as
of the close of business on such Distribution Date and the amount of
Principal Prepayments received during the immediately preceding Prepayment
Period;
(iv) the related amount of the Servicing Fees retained or
withdrawn from the Custodial Account or the Certificate Account;
(v) the amount of Monthly Advances paid by the Servicer;
(vi) the number and aggregate principal amounts of Mortgage
Loans (A) delinquent (1) one month, (2) two months, (3) three months or
more and (B) in foreclosure and (C) in bankruptcy;
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(vii) the book value (within the meaning of 12 C.F.R. (S) 571.13
or comparable provision) of any REO Property;
(viii) the respective amounts, if any, of Realized Losses
allocated to the respective Classes of Certificates with respect to such
Distribution Date;
(ix) all Monthly Advances recovered during the related Due
Period;
(x) the amount of any tax imposed on a "prohibited transaction"
of the Trust Fund as defined in Section 860F of the Code during the related
Due Period;
(xi) the amount of any reduction in Certificate Principal
Balance, cumulative interest shortfall amount or interest distribution
amount for any Class attributable to the application of Realized Losses
thereto on such Distribution Date;
(xii) the amount of any Insured Payment made on such Distribution
Date, the amount of any reimbursement payment made to the Insurer on such
Distribution Date pursuant to Section 4.02(b) and the amount of Cumulative
Insurance Payments after giving effect to any such Insured Payment or any
such reimbursement payment to the Insurer;
(xiii) the Certificate Rate on the Class A Certificates for such
Distribution Date;
(xiv) the aggregate principal balance of all Converting Mortgage
Loans and Converted Mortgage Loans, as the case may be, purchased by the
Servicer pursuant to Section 3.21, the proceeds of which are being
distributed on such Distribution Date and the aggregate principal balance
of all Converted Mortgage Loans which have not been so purchased pursuant
to Section 3.21;
(xv) the aggregate principal balance of all Mortgage Loans which
are the subject of substitution or purchase by the Servicer pursuant to
Section 2.04, during the month of such Distribution Date, together with the
number of such Mortgage Loans removed and the amount of any resulting
shortage deposited into the Custodial Account by the Seller or Servicer in
such month;
(xvi) cumulative Realized Losses since the Delivery Date and for
the three year period commencing on the Delivery Date; and
(xvii) the amount of any payment made from or to the Reserve
Account and the balance of the Reserve Account after giving effect to such
amount.
(b) Upon reasonable advance notice in writing, if required by federal
regulation, the Trustee will provide to each Certificateholder that is a savings
association, bank or insurance company certain reports and access to information
and documentation regarding the Mortgage Loans sufficient to permit such
Certificateholder to comply with applicable regulations of the Office of Thrift
Supervision or other regulatory authorities with respect to investment in the
Certificates and the Servicer shall cooperate with the Trustee in providing such
information; provided, however, that the Trustee shall be entitled to be
reimbursed by each such Certificateholder for the Trustee's actual expenses
incurred in providing such reports and access. The Trustee will provide to any
Certificateholder upon request the outstanding Certificate Principal Balance as
of such dates and, if then known by the Trustee, the outstanding
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Certificate Principal Balances after giving effect to any distribution to be
made on the next following Distribution Date.
SECTION 4.05. Prepayment Interest Shortfalls and Relief Act
---------------------------------------------
Shortfalls.
-----------
Prepayment Interest Shortfalls resulting from a Principal Prepayment
of a Mortgage Loan during any Prepayment Period and Relief Act Shortfalls will
be applied first, to reduce the Class A Interest Distribution Amount payable on
the related Distribution Date as set forth in the definition of the Class A
Interest Distribution Amount and second, to reduce the Class S Interest
Distribution Amount payable on the related Distribution Date, in respect of such
Mortgage Loan.
SECTION 4.06. The Policy.
-----------
(a) If the Trustee determines that the Deficiency Amount is greater
than zero with respect to any Distribution Date, the Trustee shall complete
the notice in the Form of Exhibit A to the Policy (the "Notice") and submit
such Notice in accordance with the Policy to the Insurer no later than
12:00 P.M., New York City time, on the third Business Day immediately
preceding each Distribution Date, as a claim for an Insured Payment in an
amount equal to such Deficiency Amount.
(b) The Trustee shall establish and maintain the Insurance Account on
behalf of the Holders of the Class A Certificates. Upon receipt of an
Insured Payment from the Insurer on behalf of the Holders of the applicable
Class of Class A Certificates, the Trustee shall deposit such Insured
Payment in the Insurance Account. All amounts on deposit in the Insurance
Account shall remain uninvested. On each Distribution Date, the Trustee
shall transfer any Insured Payment then on deposit in the Insurance Account
to the Certificate Account. The Trustee shall distribute on each
Distribution Date any Deficiency Amount for such Distribution Date from the
Certificate Account, together with the distributions to be made to the
Class A Certificateholders on such Distribution Date, as distributions of
interest and principal, respectively.
(c) The Trustee shall (i) receive as attorney-in-fact of each Class A
Certificateholder any Insured Payment from the Insurer and (ii) distribute
such Insured Payment to the applicable Class A Certificateholders as set
forth in subsection (b) above. Insured Payments disbursed by the Trustee
from proceeds of the Policy shall not be considered payment by the Trust
Fund with respect to the Class A Certificates, nor shall such disbursement
of such Insured Payments discharge the obligations of the Trust Fund with
respect to the amounts thereof, and the Insurer shall become owner of such
amounts to the extent covered by such Insured Payments as the deemed
assignee of such Class A Certificateholders. The Trustee hereby agrees on
behalf of each Class A Certificateholder (and each Class A
Certificateholder, by its acceptance of its Class A Certificates, hereby
agrees) for the benefit of the Insurer that the Trustee shall recognize
that to the extent the Insurer pays Insured Payments, either directly or
indirectly (as by paying through the Trustee), to the Holders of the
applicable Class of Class A Certificates, the Insurer is subrogated to the
rights of such Class A Certificateholders to the extent of such payments.
SECTION 4.07. Reserve Account.
----------------
(a) The Trustee shall establish, prior to the Delivery Date, and shall
maintain, in the name of the Trustee on behalf of the Holders of interests in
the Trust Fund and the Insurer, the Reserve Account, which shall be an Eligible
Account, into which the Trustee shall deposit all amounts required to be
deposited therein pursuant to Section 4.02(a)(vii). All distributions to be made
from time to time to Holders of interests in the Trust Fund out of funds in the
Reserve Account shall be made by or on behalf
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of the Trustee in accordance with the terms of this Agreement. The Trustee will
give notice to the Servicer, the Rating Agencies, the Insurer and the Depositor
of the location of the Reserve Account and of any change thereof, prior to the
use thereof. Funds held in the Reserve Account shall be invested by the Trustee
in Eligible Investments, as directed by the Holder of the Class S Certificates,
that will mature so that such funds will be available at the close of business
on the Business Day preceding each Distribution Date.
(b) On each Distribution Date, the Reserve Account Monthly Investment
Income with respect to such Distribution Date shall be distributed to the Holder
of the Class S Certificates. The balance, if any, remaining in the Reserve
Account on the Distribution Date on which the Certificate Principal Balance of
each Class of the Class A Certificates is reduced to zero will be distributed by
the Trustee to the Holder of the Class S Certificates. In addition, on any
Distribution Date, any Reserve Account Decrease Amount shall be distributed to
the Holder of the Class S Certificates on such Distribution Date.
(c) On each Distribution Date, to the extent of funds available in the
Reserve Account after the allocation in Section 4.07(b), the Trustee shall
withdraw from the Reserve Account and deposit into the Certificate Account an
amount equal to the excess, if any, of any Realized Losses on the Mortgage Loans
during the related Prepayment Period over the Class S Interest Distribution
Amount for such Distribution Date, with such amount allocated as set forth in
Section 4.01.
(d) For federal income tax purposes, the Holder of the Class S
Certificates shall be the owner of the Reserve Account and shall report all
items of income, deduction, gain or loss arising therefrom. Notwithstanding
anything herein to the contrary, the Reserve Account shall not be an asset of
the Trust REMIC. To the extent that the Reserve Account constitutes reserve
funds for federal income tax purposes, (1) it shall be an outside reserve fund
and not an asset of the Trust REMIC, (2) it shall be owned by the Holder of the
Class S Certificates and (3) amounts transferred by the Trust REMIC to the
Reserve Account shall be treated as transferred to the Holder of the Class S
Certificates, all within the meaning of Section 1.860G-2(h) of the Treasury
Regulations. The Reserve Account may not be owned by more than one Person.
(e) The provisions of this Section 4.07 may be modified and the
Reserve Account Requirement may be reduced or eliminated by the Insurer at its
sole discretion at any time. Upon receipt of written notice of such reduction or
elimination from the Insurer, the Servicer shall give written notice thereof to
the Rating Agencies, the Trustee and the Certificateholders.
ARTICLE V.
ADVANCES
SECTION 5.01. Monthly Advances by the Servicer.
---------------------------------
Subject to the conditions of this Article V, the Servicer, as required
below, shall make a Monthly Advance to the Certificate Account maintained by the
Trustee, in the amount, if any, of the aggregate Monthly Payments less
Prepayment Interest Shortfalls and Relief Act Shortfalls, after adjustment of
the interest portion of each such Monthly Payment to the Mortgage Rate less the
applicable Servicing Fee Rate, on the Mortgage Loans that were due on the Due
Date but that were not received and remitted to the Certificate Account on or
prior to the Servicer Advance Date. The Servicer shall be obligated to make any
such Monthly Advance only to the extent that such advance, in the good faith
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judgment of the Servicer, will be recoverable by the Servicer from Insurance
Proceeds, Liquidation Proceeds (less Liquidation Expenses), or otherwise on the
related Mortgage Loan.
On the Determination Date immediately preceding the related
Distribution Date, the Servicer shall determine whether and to what extent any
Mortgagor has failed to make any Monthly Payment due on the Due Date and whether
such deficiencies, if advanced by the Servicer, would be recoverable by the
Servicer from related Insurance Proceeds or Liquidation Proceeds (net of
Liquidation Expenses). If the Servicer shall have determined that it is not
obligated to make the entire Monthly Advance because all or a lesser portion of
such Monthly Advance would not be recoverable by the Servicer from related
Insurance Proceeds or Liquidation Proceeds (net of Liquidation Expenses), the
Servicer shall deliver to the Trustee, not less than two Business Days prior to
the related Distribution Date, for the benefit of the Certificateholders and the
Insurer, an Officers' Certificate setting forth the reasons for such
determination.
In lieu of making all or a portion of any Monthly Advance, the
Servicer may cause to be made an appropriate entry in its records relating to
the Custodial Account that funds in such account, including but not limited to
any amounts received in respect of scheduled principal and interest on any
Mortgage due after the related Due Period, in excess of the Available
Distribution Amount (less the amount of such Monthly Advance) for the related
Distribution Date have been used by the Servicer in discharge of its obligation
to make any such Monthly Advance. Any funds so applied shall be replaced by the
Servicer by deposit, in the manner set forth above, in the Custodial Account no
later than the Servicer Advance Date to the extent that funds in the Custodial
Account on such date are less than the amounts required to be distributed on the
related Distribution Date. The Servicer shall be entitled to be reimbursed from
the Custodial Account for all Monthly Advances of its own funds made pursuant to
this Section as provided in Section 3.09.
SECTION 5.02. Advances for Attorneys' Fees.
-----------------------------
The Servicer shall make advances from time to time for attorneys' fees
and court costs incurred, or which reasonably can be expected to be incurred,
for the foreclosure of any Mortgage Loan or for any transaction in which the
Trustee for the benefit of the Certificateholders and the Insurer is expected to
receive a deed-in-lieu of foreclosure, unless the Servicer has made a good faith
determination that such advances would not be recoverable from Insurance
Proceeds or Liquidation Proceeds relating to the Mortgage Loan. If the Servicer
shall make a good faith determination that such advances would not be so
recoverable, the Servicer shall promptly deliver to the Trustee an Officers'
Certificate setting forth the reasons for such determination. The Servicer
shall be entitled to reimbursement for any such advance as provided in Section
3.09 hereof.
SECTION 5.03. Nonrecoverable Advances.
------------------------
The determination by the Servicer that it has made a Nonrecoverable
Advance shall be evidenced by an Officers' Certificate of the Servicer promptly
delivered to the Trustee setting forth the reasons for such determination.
Following the Trustee's receipt of the Officers' Certificate, the Servicer shall
be entitled to reimbursement for such Nonrecoverable Advance as provided in
Section 3.09 hereof.
SECTION 5.04. Advance Procedures.
-------------------
(a) If, on any Determination Date, the Servicer determines to make a
Monthly Advance in accordance with Section 5.01, it shall make such Monthly
Advance on or before noon, St. Paul time, on the second Business Day prior to
the related Distribution Date (the "Servicer Advance
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Date"). The Servicer shall notify the Trustee of the aggregate amount of
Monthly Advances for a Distribution Date on or before three Business Days
prior to such Distribution Date. Any such Monthly Advance shall be included
with the distribution on the related Distribution Date pursuant to Section
4.02.
(b) In the event that the Servicer fails to make a Monthly
Advance required to be made pursuant to Section 5.01 on or before 3 p.m.,
St. Paul, Minnesota time, on the Servicer Advance Date, the Trustee shall
on or before 12 noon, New York time on the next Business Day provide to the
Servicer, by telecopy, written notice of such failure and the amount of
such failure and that continuance of such failure for a period of one
Business Day will be an Event of Default.
ARTICLE VI.
THE CERTIFICATES
SECTION 6.01. The Certificates.
-----------------
The Certificates shall be in substantially the forms set forth in
Exhibits A, B and C hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Agreement or as may in the reasonable judgment of the Trustee or the Depositor
be necessary, appropriate or convenient to comply, or facilitate compliance,
with applicable laws, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange on which any of the
Certificates may be listed, or as may, consistently herewith, be determined by
the officers executing such Certificates, as evidenced by their execution
thereof.
The definitive Certificates shall be printed, typewritten,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which any of the Certificates may be listed, all as determined by
the officers executing such Certificates, as evidenced by their execution
thereof.
The Class A-I Certificates will be in fully-registered form only in
minimum denominations of $100,000 Certificate Principal Balance and integral
multiples of $1,000 in excess thereof, provided that one Class A-I Certificate
may be issued in such other amount as is required so that the aggregate of the
Class A-I Certificate equals its aggregate Certificate Principal Balance. The
Class A-II Certificates will be in fully-registered form only in minimum
denominations of $100,000 Certificate Principal Balance and integral multiples
of $1,000 in excess thereof, provided that one Class A-II Certificate may be
issued in such other amount as is required so that the aggregate of the Class A-
II Certificate equals its aggregate Certificate Principal Balance. The Class S
Certificates will be issued in fully-registered form only in minimum Percentage
Interests of 20% and integral multiples thereof. The Class R Certificates will
be in fully-registered form issuable only as a single Certificate.
The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by a Responsible Officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the authentication and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless there appears on such Certificate a certificate of
authentication executed by the Trustee by manual signature, and such certificate
of authentication upon any Certificate shall be conclusive evidence, and the
only evidence, that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be
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conclusive evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificated shall be date of their
authentication.
SECTION 6.02. Registration of Transfer and Exchange of Certificates.
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(a) The Trustee shall maintain, or cause to be maintained, a
Certificate Register in which, subject to such reasonable regulations as it
may prescribe, the Trustee shall provide for the registration of
Certificates and of transfers and exchanges of Certificates as herein
provided. Upon surrender for registration of transfer of any Certificate,
the Trustee shall execute, authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates in like
aggregate interest and of the same Class.
(b) At the option of a Certificateholder, Certificates may be
exchanged for other Certificates of authorized denominations and the same
aggregate interest in the Trust Fund and of the same Class, upon surrender
of the Certificates to be exchanged at the office or agency of the Trustee
set forth in Section 9.11. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute, authenticate and deliver the
Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by the Holder
thereof or his attorney duly authorized in writing.
(c) No service charge to the Certificateholders shall be made for
any registration of transfer or exchange of Certificates, but payment of a
sum sufficient to cover any tax or governmental charge that may be imposed
in connection with any transfer or exchange of Certificates may be
required.
(d) All Certificates surrendered for registration of transfer and
exchange shall be canceled and subsequently destroyed by the Trustee in
accordance with the Trustee's customary procedures.
(e) No transfer of any Class S or Class R Certificate shall be
made unless that transfer is made pursuant to an effective registration
statement under the 1933 Act and effective registration or qualification
under applicable state securities laws, or is made in a transaction which
does not require such registration or qualification. In the event that a
transfer is to be made without registration or qualification, (i) the
Trustee shall require, in order to assure compliance with such laws, that
the Certificateholder desiring to effect the transfer and such
Certificateholder's prospective transferee each certify to the Trustee in
writing in the forms set forth in Exhibit H and Exhibit I, respectively,
the facts surrounding the transfer and (ii) the Depositor or the Trustee
shall require an opinion of counsel reasonably satisfactory to the
requesting party that such transfer may be made without such registration
or qualification, which Opinion of Counsel shall not be required to be an
expense of the Depositor or the Trustee. Neither the Depositor nor the
Trustee is obligated to register or qualify any Class S or Class R
Certificate under the 1933 Act or any other securities law or to take any
action not otherwise required under this Agreement to permit the transfer
of such Certificate or interest without registration or qualification. Any
such Holder desiring to effect such transfer shall, and does hereby agree
to, indemnify the Trustee and the Depositor against any liability that may
result if the transfer is not so exempt, or is not made in accordance with
federal and state laws.
(f) No transfer of a Class S or Class R Certificate shall be made
to any employee benefit or other plan that is subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section
4975 of the Code, to a trustee or other person acting on behalf of any such
plan, or to any other person using "plan assets" to effect such
acquisition, unless the prospective
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transferee of a Certificateholder desiring to transfer its Certificate
provides the Trustee with (i) in the case of a transfer of Class S
Certificates only, a certification as set forth in paragraph 6 of Exhibit
H, or (ii) in the case of a transfer of Class S or Class R Certificates, an
Opinion of Counsel which establishes to the reasonable satisfaction of the
Depositor and the Trustee that the purchase and holding of a Class S or
Class R Certificate by, on behalf of or with "plan assets" of such plan is
permissible under applicable local law, would not constitute or result in a
non-exempt prohibited transaction under Section 406 of ERISA or Section
4975 of the Code, and would not subject the Depositor or the Trustee to any
obligation or liability (including liabilities under ERISA or Section 4975
of the Code) in addition to those undertaken in this Agreement or any other
liability. The Trustee shall require that such prospective transferee
certify to the Trustee in writing the facts establishing that such
transferee is not such a plan and is not acting on behalf of or using "plan
assets" of any such plan to effect such acquisition.
(g) Additional restrictions on transfers of the Class R
Certificates to Disqualified Organizations are set forth below:
(i) 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 authorized the Trustee or its designee
under clause (iii)(A) below to deliver payments to a Person other than such
Person and to negotiate the terms of any mandatory sale under clause
(iii)(B) below and to execute all instruments of transfer and to do all
other things necessary in connection with any such sale. The rights of each
Person acquiring any ownership interest in a Class R Certificate are
expressly subject to the following provisions:
(A) Each Person holding or acquiring any ownership
interest in a Class R Certificate shall be other than a Disqualified
Organization and shall promptly notify the Trustee of any change or
impending change in its status as other than a Disqualified Organization.
(B) In connection with any proposed transfer of any
ownership interest in a Class R Certificate to a U.S. Person, the Trustee
shall require delivery to it, and shall not register the transfer of a
Class R Certificate until its receipt of (1) an affidavit and agreement (a
"Transferee Affidavit and Agreement" attached hereto as Exhibit J) from the
proposed transferee, in form and substance satisfactory to the Servicer,
representing and warranting, among other things, that it is not a non-U.S.
Person, that such transferee is other than a Disqualified Organization,
that it is not acquiring its ownership interest in a Class R Certificate
that is the subject of the proposed Transfer as a nominee, trustee or agent
for any Person who is not other than a Disqualified Organization, that for
so long as it retains its ownership interest in a Class R Certificate, it
will endeavor to remain other than a Disqualified Organization, and that it
has reviewed the provisions of this Section 6.02(g) and agrees to be bound
by them, and (2) a certificate, attached hereto as Exhibit K, from the
Holder wishing to transfer a Class R Certificate, in form and substance
satisfactory to the Servicer, representing and warranting, among other
things, that no purpose of the proposed transfer is to allow such Holder to
impede the assessment or collection of tax.
(C) Notwithstanding the delivery of a Transferee Affidavit
and Agreement by a proposed transferee under clause (B) above, if the
Trustee has actual knowledge that the proposed transferee is not other than
a Disqualified Organization, no
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transfer of an ownership interest in a Class R Certificate to such proposed
transferee shall be effected.
(D) Each Person holding or acquiring any ownership
interest in a Class R Certificate agrees, by holding or acquiring such
ownership interest, (1) to require a Transferee Affidavit and Agreement
from the other Person to whom such Person attempts to transfer its
ownership interest and to provide a certificate to the Trustee in the form
attached hereto as Exhibit K, and (2) to obtain the express written consent
of the Servicer prior to any transfer of such ownership interest, which
consent may be withheld in the Servicer's sole discretion.
(ii) The Trustee shall register the transfer of any
Class R Certificate only if it shall have received the Transferee Affidavit
and Agreement, a certificate of the Holder requesting such transfer in the
form attached hereto as Exhibit J and all of such other documents as shall
have been reasonably required by the Trustee as a condition to such
registration.
(iii) If any Disqualified Organization shall become a Holder
of a Class R Certificate, then the last preceding Holder that was other than a
Disqualified Organization shall be restored, to the extent permitted by law, to
all rights and obligations as Holder thereof retroactive to the date of
registration of such transfer of such Class R Certificate. If any non-U.S.
Person shall become a Holder of a Class R Certificate, then the last preceding
Holder that is a U.S. Person shall be restored, to the extent permitted by law,
to all rights and obligations as Holder thereof retroactive to the date of
registration of the transfer to such non-U.S. Person of such Class R
Certificate. If a transfer of a Class R Certificate is disregarded pursuant to
the provisions of Treasury Regulations Section 1.860E-1 or Section 1.860G-3,
then the last preceding Holder that was other than a Disqualified Organization
shall be restored, to the extent permitted by law, to all rights and obligations
as Holder thereof retroactive to the date of registration of such 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 6.02(g) or for making any payments due on such
Certificate to the Holder thereof or for taking any other action with respect to
such Holder under the provisions of this Agreement.
(A) If any purported transferee of a Class R Certificate
shall become a Holder of a Class R Certificate in violation of the
restrictions in this Section 6.02(g) and to the extent that the retroactive
restoration of the rights of the Holder of such Class R Certificate as
described in clause (iii)(A) above shall be invalid, illegal or
unenforceable, then the 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 Servicer on such terms
as the Servicer may choose. Such purported transferee shall promptly
endorse and deliver a Class R Certificate in accordance with the
instructions of the Servicer. Such purchaser may be the Servicer itself or
any affiliate of the Servicer. The proceeds of such sale, net of the
commissions (which may include commissions payable to the Servicer or its
affiliates), expenses and taxes due, if any, shall be remitted by the
Servicer to such purported transferee. The terms and conditions of any sale
under this clause (iii)(B) shall be determined in the sole discretion of
the Servicer, and the Servicer shall not be liable to any Person having an
ownership interest or a purported ownership interest in a Class R
Certificate as a result of its exercise of such discretion.
(iv) The Servicer, on behalf of the Trustee, shall make
available, upon written request from the Trustee, all information
reasonably available to it that is necessary to compute
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any tax imposed (A) as a result of the transfer of an ownership interest in
a Class R Certificate to any Person who is not other than a Disqualified
Organization, including the information regarding "excess inclusions" of
such Residual Certificate required to be provided to the Internal Revenue
Service and certain Persons as described in Treasury Regulation Sections
1.860E-2(a)(5) or 1.860D-1(b)(5), and (B) as a result of any regulated
investment company, real estate investment trust, common trust fund,
partnership, trust, estate or organizations described in Section 1381 of
the Code having as among its record holders at any time any Person who is
not other than a Disqualified Organization. Reasonable compensation for
providing such information may be required by the Servicer from such
Person.
(v) The provisions of this Section 6.02(g) set forth prior
to this Section (v) may be modified, added to or eliminated by the
Servicer, provided that there shall have been delivered to the Trustee the
following:
(A) written notification from each Rating Agency to
the effect that the modification, addition to or elimination of such
provisions will not cause such Rating Agency to downgrade its then-current
rating of the Certificates; and
(B) a certificate of the Servicer stating that the
Servicer has received an Opinion of Counsel, in form and substance
satisfactory to the Servicer, to the effect that such modification,
addition to or elimination of such provisions will not cause the Trust
REMIC to cease to qualify as a remic and will not create a risk that (i)
the Trust REMIC may be subject to an entity-level tax caused by the
transfer of a Class R Certificate to a Person which is not other than a
Disqualified Organization or (2) a Certificateholder or another Person will
be subject to a remic-related tax caused by the transfer of applicable
Class R Certificate to a Person which is not other than a Disqualified
Organization.
(vi) The following legend shall appear on each Class R Certificate:
ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE
MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES A TRANSFER AFFIDAVIT TO
THE Servicer AND THE TRUSTEE THAT (1) SUCH TRANSFEREE IS NOT (A) THE
UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN
GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER
THAN A COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS
EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH
ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE CODE,
(C) ANY ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C) OF THE CODE
(ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B), OR (C)
BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION"), OR
(D) AN AGENT OF A DISQUALIFIED ORGANIZATION AND (2) NO PURPOSE OF SUCH
TRANSFER IS TO ENABLE THE TRANSFEROR TO IMPEDE THE ASSESSMENT OR
COLLECTION OF TAX. SUCH AFFIDAVIT SHALL INCLUDE CERTAIN
REPRESENTATIONS AS TO THE FINANCIAL CONDITION OF THE PROPOSED
TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE CERTIFICATE
REGISTER OF ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS CLASS R
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CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A
DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF
NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER, INCLUDING,
BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE.
EACH HOLDER OF THE CLASS R CERTIFICATE BY ACCEPTANCE OF THIS
CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF
THIS PARAGRAPH.
(h) The Trustee shall have no liability to the Trust Fund arising
from a transfer of any such Certificate in reliance upon a certification,
ruling or Opinion of Counsel described in this Section 6.02; provided,
however, that the Trustee shall not register the transfer of any Class R
Certificate if it has actual knowledge that the proposed transferee does
not meet the qualifications of a permitted Holder of a Class R Certificate
as set forth in this Section 6.02.
SECTION 6.03. Mutilated, Destroyed, Lost or Stolen Certificates.
--------------------------------------------------
If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and (b) there is delivered to the Servicer, the Insurer and
the Trustee such security or indemnity as may be required by them to save each
of them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and interest in the Trust Fund. In connection with the issuance of any new
Certificate under this Section 6.03, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee) connected therewith. Any replacement Certificate issued pursuant to
this Section 6.03 shall constitute complete and indefeasible evidence of
ownership in the Trust Fund, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
SECTION 6.04. Persons Deemed Owners.
----------------------
Prior to due presentation of a Certificate for registration of
transfer, the Servicer, the Trustee, and any agent of the Servicer, the Insurer
or the Trustee may treat the person in whose name any Certificate is registered
as the owner of such Certificate for the purpose of receiving distributions as
provided in this Agreement and for all other purposes whatsoever, and neither
the Servicer, the Trustee, the Insurer nor any agent of the Servicer, the
Insurer or the Trustee shall be affected by any notice to the contrary.
SECTION 6.05. Access to List of Certificateholders' Names and
-----------------------------------------------
Addresses.
- ----------
(a) If three or more Certificateholders (i) request in writing from
the Trustee a list of the names and addresses of Certificateholders, (ii)
state that such Certificateholders desire to communicate with other
Certificateholders with respect to their rights under this Agreement or
under the Certificates and (iii) provide a copy of the communication which
such Certificateholders propose to transmit, then the Trustee shall, within
ten Business Days after the receipt of such request, afford such
Certificateholders access during normal business hours to a current list of
the Certificateholders. The expense of providing any such information
requested by a Certificateholder shall be borne by the Certificateholders
requesting such information and shall not be borne by the Trustee. Every
Certificateholder, by receiving and holding a Certificate, agrees that the
Trustee shall not be held
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accountable by reason of the disclosure of any such information as to the
list of the Certificateholders hereunder, regardless of the source from
which such information was derived.
(b) The Servicer, so long as it is the master servicer hereunder,
shall have unlimited access to a list of the names and addresses of the
Certificateholders which list shall be provided by the Trustee promptly
upon the request of the Servicer.
SECTION 6.06. Maintenance of Office or Agency.
--------------------------------
The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in St. Paul, Minnesota where
Certificates may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Trustee in respect of the Certificates
and this Agreement may be served. The Trustee initially designates the office
described in Section 9.11 as its office for such purpose. The Trustee will give
prompt written notice to the Certificateholders of any change in the location of
any such office or agency.
SECTION 6.07. Book-Entry Certificates.
------------------------
Notwithstanding the foregoing, each class of the Class A Certificates,
upon original issuance, shall be issued in the form of one or more typewritten
Certificates representing the Book-Entry Certificates, to be delivered to DTC,
the initial Clearing Agency, by, or on behalf of, the Depositor. The Class A
Certificates shall initially be registered on the Certificate Register in the
name of Cede & Co., the nominee of DTC, as the initial Clearing Agency, and no
Beneficial Holder will receive a definitive certificate representing such
Beneficial Holder's interest in the Certificates, except as provided in Section
6.09. Unless and until definitive, fully registered Certificates ("Definitive
Certificates") have been issued to the Beneficial Holders pursuant to Section
6.09:
(a) the provisions of this Section 6.07 shall be in full force and
effect with respect to the Class A Certificates;
(b) the Depositor and the Trustee may deal with the Clearing Agency
for all purposes with respect to the Class A Certificates (including the
making of distributions on such Certificates) as the sole Holder of such
Certificates;
(c) to the extent that the provisions of this Section 6.07 conflict
with any other provisions of this Agreement, the provisions of this Section
6.07 shall control; and
(d) the rights of the Beneficial Holders of the Class A
Certificates shall be exercised only through the Clearing Agency and the
Participants and shall be limited to those established by law and
agreements between such Beneficial Holders and the Clearing Agency and/or
the Participants. Pursuant to the Depository Agreement, unless and until
Definitive Certificates are issued pursuant to Section 6.09, the initial
Clearing Agency will make book-entry transfers among the Participants and
receive and transmit distributions of principal and interest on the related
Certificates to such Participants.
For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of, Holders of each
Class of the Class A Certificates evidencing a specified percentage of the
aggregate unpaid principal amount of such Certificates, such direction or
consent may be given by the Clearing Agency at the direction of Beneficial
Holders owning such Certificates evidencing the requisite percentage of
principal amount of such Certificates. The Clearing Agency may
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take conflicting actions with respect to each Class of the Class A Certificates
to the extent that such actions are taken on behalf of the Beneficial Holders.
SECTION 6.08. Notices to Clearing Agency.
---------------------------
Whenever notice or other communication to the Holders of each Class of
Class A Certificates is required under this Agreement, unless and until
Definitive Certificates shall have been issued to the related Certificateholders
pursuant to Section 6.09, the Trustee shall give all such notices and
communications specified herein to be given to Holders of each Class of the
Class A Certificates to the Clearing Agency which shall give such notices and
communications to the related Participants in accordance with its applicable
rules, regulations and procedures.
SECTION 6.09. Definitive Certificates.
------------------------
If (a) the Depositor advises the Trustee in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
under the Depository Agreement with respect to the Certificates and the Trustee
or the Depositor is unable to locate a qualified successor, (b) the Depositor,
at its option, advises the Trustee in writing that it elects to terminate the
book-entry system with respect to the Class A Certificates through the Clearing
Agency or (c) after the occurrence of an Event of Default, Holders of each Class
of Class A Certificates evidencing not less than 66-2/3% of the aggregate
Certificate Principal Balance of such Class of the Class A Certificates advise
the Trustee in writing that the continuation of a book-entry system with respect
to the such Certificates through the Clearing Agency is no longer in the best
interests of the Holders of such Certificates with respect to such Class of the
Class A Certificates, the Trustee shall notify all Holders of such Certificates
of the occurrence of any such event and the availability of Definitive
Certificates. Upon surrender to the Trustee of the such Certificates by the
Clearing Agency, accompanied by registration instructions from the Clearing
Agency for registration, the Trustee shall authenticate and deliver the
Definitive Certificates. Neither the Depositor nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. Upon the issuance of
Definitive Certificates all references herein to obligations imposed upon or to
be performed by the Clearing Agency 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
Definitive Certificates as Certificateholders hereunder.
ARTICLE VII.
THE DEPOSITOR AND THE SERVICER
SECTION 7.01. Liabilities of the Depositor and the Servicer.
----------------------------------------------
The Depositor and the Servicer shall each be liable in accordance
herewith only to the extent of the obligations specifically and respectively
imposed upon and undertaken by them herein.
SECTION 7.02. Merger or Consolidation of the Depositor or the
-----------------------------------------------
Servicer.
---------
The Depositor and the Servicer will each do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights and franchises (charter and statutory) and will each obtain and preserve
its qualification to do business as a foreign corporation in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, or any of the Mortgage Loans and to perform
its respective duties under this Agreement.
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Any Person into which the Depositor or the Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Depositor or the Servicer shall be a party, or any Person succeeding to the
business of the Depositor or the Servicer, shall be the successor of the
Depositor or the Servicer, as the case may be, hereunder, without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding; provided, however, that
the successor or surviving Person to the Servicer shall be qualified to sell
mortgage loans to, and to service mortgage loans on behalf of, FNMA or FHLMC.
Notwithstanding anything else in this Section 7.02 or in Section 7.04
hereof to the contrary, the Servicer may assign its rights and delegate its
duties and obligations under this Agreement (except for the obligation of the
Servicer or Seller to effectuate repurchases or substitutions of Mortgage Loans
hereunder, including pursuant to Section 2.01, 2.02 or 2.04 hereof, which shall
remain with Chevy Chase hereunder); provided, however, that the Servicer gives
the Depositor, the Insurer and the Trustee notice of such assignment; and
provided further, that such purchaser or transferee accepting such assignment
and delegation shall be an institution that is a FNMA and FHLMC approved
seller/servicer in good standing, which has a net worth of at least $15,000,000,
and which is willing to service the Mortgage Loans and executes and delivers to
the Depositor and the Trustee an agreement accepting such delegation and
assignment, which contains an assumption by such Person of the rights, powers,
duties, responsibilities, obligations and liabilities of the Servicer, with like
effect as if originally named as a party to this Agreement; and provided
further, that each of the Rating Agencies acknowledge that its rating of the
Certificates in effect immediately prior to such assignment and delegation and
its rating of the risk undertaken by the Insurer with respect to the Policy will
not be qualified or reduced as a result of such assignment and delegation. In
the case of any such assignment and delegation, the Servicer shall be released
from its obligations under this Agreement (except as provided above), except
that the Servicer shall remain liable for all liabilities and obligations
incurred by it as Servicer hereunder prior to the satisfaction of the conditions
to such assignment and delegation set forth in the preceding sentence.
SECTION 7.03. Limitation on Liability of the Depositor, the Servicer
------------------------------------------------------
and Others.
- -----------
Neither the Depositor, the Servicer, any Sub-Servicer nor any of the
directors, officers, employees or agents of the Depositor, the Servicer or any
Sub-Servicer shall be under any liability to the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor or the Servicer against any
breach of representations or warranties made by it herein or protect the
Depositor or the Servicer or any such person from any liability which would
otherwise be imposed by reasons of willful misfeasance, bad faith or negligence
in the performance of duties or by reason of reckless disregard of obligations
and duties hereunder. The Depositor, the Servicer, any Sub-Servicer and any
director, officer, employee or agent of the Depositor, the Servicer or any Sub-
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Depositor, the Servicer, any Sub-Servicer and any director, officer,
employee or agent of the Depositor, the Servicer or any Sub-Servicer shall be
indemnified by the Trust Fund and held harmless against any loss, liability or
expense incurred in connection with any legal action relating to this Agreement
or the Certificates, other than any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of
duties hereunder or by reason of reckless disregard of obligations and duties
hereunder, provided that the foregoing indemnification by the Trust Fund shall
be limited to amounts that would otherwise be distributable with respect to the
Class S Certificates. Neither the Depositor, the Servicer nor any Sub-Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
that is not incidental to their respective duties hereunder and which in its
opinion may involve it in any expense or liability; provided, however, that
either the Depositor, the Servicer or any Sub-Servicer may in its
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discretion undertake any such action that it may deem necessary or desirable in
respect of this Agreement and the rights and duties of the parties hereto and
interests of the Trustee and the Certificateholders hereunder.
SECTION 7.04. Servicer Not to Resign.
-----------------------
The Servicer shall not resign from the obligations and duties imposed
upon it hereunder except upon determination that such obligations and duties
hereunder are no longer permissible under applicable law. Any such determination
permitting the resignation of the Servicer under this Section 7.04 shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee and
the Insurer. The Servicer shall give notice of any proposed resignation to the
Trustee, the Certificateholders, the Insurer and the Rating Agencies. No such
resignation by the Servicer shall become effective until the Trustee or a
successor servicer acceptable to the Insurer shall have assumed the Servicer's
responsibilities and obligations in accordance with Section 8.02 hereof.
SECTION 7.05. Errors and Omissions Insurance; Fidelity Bonds.
-----------------------------------------------
The Servicer shall, for so long as it acts as servicer under this
Agreement, obtain and maintain in force (a) a policy or policies of insurance
covering errors and omissions in the performance of its obligations as servicer
hereunder, and (b) a fidelity bond in respect of its officers, employees and
agents. Each such policy or policies and bond shall, together, comply with the
requirements from time to time of FNMA or FHLMC for persons performing servicing
for mortgage loans purchased by FNMA or FHLMC. In the event that any such policy
or bond ceases to be in effect, the Servicer shall obtain a comparable
replacement policy or bond from an insurer or issuer, meeting the requirements
set forth above as of the date of such replacement.
SECTION 7.06 Servicer May Own Certificates.
------------------------------
The Servicer in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Servicer.
ARTICLE VIII.
DEFAULT
SECTION 8.01 Events of Default.
------------------
"Event of Default", wherever used herein, means any one of the
following events (whatever reason for such Event of Default and whether it shall
be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body):
(a) any failure by the Servicer to remit to the Certificateholders,
the Insurer or to the Trustee any payment other than a Monthly Advance
required to be made by the Servicer under the terms of this Agreement,
which failure shall continue unremedied for a period of one Business Day
after the date upon which written notice of such failure shall have been
given to the Servicer by the Trustee, the Insurer or the Depositor or to
the Servicer, the Insurer and the Trustee by the Holders of Certificates
having not less than 25% of the Voting Rights evidenced by the
Certificates; or
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(b) any failure by the Servicer to observe or perform in any
material respect any other of the covenants or agreements on the part of
the Servicer contained in this Agreement (except as set forth in (c) below)
which failure (i) materially affects the rights of the Certificateholders
or the Insurer and (ii) shall continue unremedied for a period of 60 days
(except that such number of days shall be 15 in the case of a failure to
pay the premium for any Required Insurance Policy) after the date on which
written notice of such failure shall have been given to the Servicer by the
Trustee or the Depositor, or to the Servicer and the Trustee by the Holders
of Certificates evidencing not less than 25% of the Voting Rights evidenced
by the Certificates; or
(c) if a representation or warranty set forth in Section 2.03 or
2.04 hereof shall prove to be materially incorrect as of the time made in
any respect that materially and adversely affects interests of the
Certificateholders or the Insurer, and the circumstances or condition in
respect of which such representation or warranty was incorrect shall not
have been eliminated or cured, or the affected Mortgage Loan shall not have
been substituted for or repurchased, within 60 days after the date on which
written notice thereof shall have been given to the Servicer and Seller by
the Trustee for the benefit of the Certificateholders and the Insurer or by
the Depositor; or
(d) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Servicer
and such decree or order shall have remained in force undischarged or
unstayed for a period of 60 days; or
(e) the Servicer shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or relating
to the Servicer or all or substantially all of the property of the
Servicer; or
(f) the Servicer shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of,
or commence a voluntary case under, any applicable insolvency or
reorganization statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations; or
(g) either Rating Agency shall lower or withdraw the outstanding
rating of the Certificates because the existing or prospective financial
condition or mortgage loan servicing capability of the Servicer is
insufficient to maintain such outstanding rating;
(h) any failure of the Servicer to make any Monthly Advance in the
manner and at the time required to be made from its own funds pursuant to
this Agreement and after receipt of notice from the Trustee pursuant to
Section 5.04, which failure continues unremedied after 5 p.m., St. Paul,
Minnesota time, on the Business Day immediately preceding the Distribution
Date;
(i) cumulative Realized Losses since the Delivery Date equal or
exceed 1% of the aggregate Principal Balance of the Mortgage Loans as of the
Cut-Off Date; or
(j) any Event of Default in the Insurance Agreement.
If an Event of Default due to the actions or inaction of the Servicer
described in clauses (a) through (g), (i) or (j) of this Section shall occur,
then, and in each and every such case, so long as such Event of Default shall
not have been remedied, the Trustee shall at the direction of the Insurer
(unless an Insurer Default is continuing) or, if so directed by the Holders of
Certificates evidencing not less than 25% of the Voting Rights evidenced by the
Certificates, by notice in writing to the Servicer (with the prior written
consent of the Insurer and with a copy to the Rating Agencies), terminate all of
the rights
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and obligations of the Servicer under this Agreement (other than rights to
reimbursement for Monthly Advances or other advances previously made, as
provided in Section 3.09) provided, however, that unless an Insurer Default is
continuing the successor to the Servicer appointed pursuant to Section 7.02
shall be acceptable to the Insurer and shall have accepted the duties of
Servicer effective upon the resignation of the Servicer.
If an Event of Default described in clause (h) shall occur, the
Trustee with the consent of the Insurer (which shall not be unreasonably
withheld) shall, prior to the next Distribution Date, terminate the rights and
obligations of the Servicer hereunder and succeed to the rights and obligations
of the Servicer hereunder pursuant to Section 8.02, including the obligation to
make Monthly Advances on such Distribution Date pursuant to the terms hereof.
SECTION 8.02. Trustee to Act; Appointment of Successor.
-----------------------------------------
On and after the time the Servicer receives a notice of termination
pursuant to Section 8.01 hereof or resigns pursuant to Section 7.04 hereof,
subject to the provisions of Section 3.06 hereof, the Trustee shall be the
successor in all respects to the Servicer in its capacity as servicer under this
Agreement and with respect to the transactions set forth or provided for herein
and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof,
provided that the Trustee shall not be deemed to have made any representation or
warranty as to any Mortgage Loan made by the Servicer and shall not effect any
repurchases or substitutions of any Mortgage Loan. As compensation therefor,
the Trustee shall be entitled to all funds relating to the Mortgage Loans that
the Servicer would have been entitled to charge to the related Custodial Account
if the Servicer had continued to act hereunder (except that the terminated
Servicer shall retain the right to be reimbursed for advances (including,
without limitation, Monthly Advances) theretofore made by the Servicer with
respect to which it would be entitled to be reimbursed if it had not been so
terminated as Servicer). Notwithstanding the foregoing, if the Trustee has
become the successor to the Servicer in accordance with this Section 8.02, the
Insurer may, and if the Insurer fails to the Trustee may, if it shall be
unwilling to so act, or shall, if it is unable to so act (exclusive of the
obligations with respect to Monthly Advances), appoint, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution acceptable to the Insurer, the appointment of which does not
adversely affect the then current rating of the Certificates, as the successor
to the Servicer hereunder in the assumption of all or any part of the
responsibilities, duties or liabilities of the Servicer, provided that such
successor to the Servicer shall not be deemed to have made any representation or
warranty as to any Mortgage Loan made by the Servicer. Pending appointment of a
successor to the Servicer hereunder, the Trustee, unless the Trustee is
prohibited by law from so acting, shall act in such capacity as provided herein.
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 be in excess of that permitted the Servicer hereunder. The
Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. Neither the
Trustee nor any other successor servicer shall be deemed to be in default
hereunder by reason of any failure to make, or any delay in making, any
distribution hereunder or any portion thereof caused by the failure of the
Servicer to deliver, or any delay in delivering, cash, documents or records to
it.
The Servicer that has been terminated shall, at the request of the
Trustee but at the expense of such Servicer, deliver to the assuming party all
documents and records relating to each Sub-Servicing Agreement and the related
Mortgage Loans and an accounting of amounts collected and held by it and
otherwise use its best efforts to effect the orderly and efficient transfer of
each Sub-Servicing Agreement to the assuming party.
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The Servicer shall cooperate with the Trustee and any successor
servicer in effecting the termination of the Servicer's responsibilities and
rights hereunder, including without limitation, the transfer to such successor
for administration by it of all cash amounts which shall at the time be credited
by the Servicer to the Custodial Account or thereafter received with respect to
the Mortgage Loans.
Neither the Trustee nor any other successor servicer shall be deemed
to be in default hereunder by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof caused by (a) the
failure of the Servicer to (i) deliver, or any delay in delivering, cash,
documents or records to it, (ii) cooperate as required by this Agreement, or
(iii) deliver the Mortgage Loan to the Trustee as required by this Agreement, or
(b) restrictions imposed by any regulatory authority having jurisdiction over
the Servicer.
Any successor to the Servicer as servicer shall during the term of
its service as servicer maintain in force the policy or policies that the
Servicer is required to maintain pursuant to Section 7.05 hereof.
SECTION 8.03. Notification to Certificateholders.
-----------------------------------
(a) Upon any termination or appointment of a successor to the
Servicer, the Trustee shall give prompt written notice thereof to the
Insurer, the Certificateholders at their respective addresses appearing in
the Certificate Register and to the Rating Agencies.
(b) Within 2 Business Days after the occurrence of any Event of
Default, the Trustee shall transmit by mail to the Insurer and all
Certificateholders and the Rating Agencies notice of each such Event of
Default hereunder known to the Trustee, unless such Event of Default shall
have been cured or waived.
SECTION 8.04. Waiver of Events of Default.
----------------------------
The Insurer or the Holders representing at least 66-2/3% of the
Voting Rights of Certificates affected by a default or Event of Default
hereunder may waive any default or Event of Default, with the written consent of
the Insurer, which consent shall not be unreasonably withheld; provided,
however, that (a) a default or Event of Default under clause (i) of Section 8.01
may be waived, with the written consent of the Insurer, only by all of the
Holders of Certificates affected by such default or Event of Default (which
Voting Rights of the Class A Certificateholders may be exercised by the Insurer
without the consent of such Holders and may only be exercised by such Holders
with the prior written consent of the Insurer so long as there does not exist a
failure by the Insurer to make a required payment under the Policy) and (b) no
waiver pursuant to this Section 8.04 shall affect the Holders of Certificates in
the manner set forth in Section 11.01(b)(i), (ii) or (iii). Upon any such waiver
of a default or Event of Default by the Insurer or the Holders representing the
requisite percentage of Voting Rights of Certificates affected by such default
or Event of Default with the consent of the Insurer, which consent shall not be
unreasonably withheld, such default or Event of Default shall cease to exist and
shall be deemed to have been remedied for every purpose hereunder. No such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon except to the extent expressly so waived.
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ARTICLE IX.
CONCERNING THE TRUSTEE
SECTION 9.01. Duties of Trustee.
------------------
The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default that may have occurred, undertakes with
respect to the Trust Fund to perform such duties and only such duties as are
specifically set forth in this Agreement. In case an Event of Default has
occurred and remains uncured, the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs. Any permissive right
of the Trustee set forth in this Agreement shall not be construed as a duty.
The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are specifically required to be furnished pursuant to any
provision of this Agreement shall examine them to determine whether they conform
to the requirements of this Agreement. The Trustee shall have no duty to
recompute, recalculate or verify the accuracy of any resolution, certificate,
statement, opinion, report, document, order or other instrument so furnished to
the Trustee.
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, its negligent failure to perform its obligations
in compliance with this Agreement, or any liability which would be imposed by
reason of its willful misfeasance or bad faith; provided, however, that:
(a) prior to the occurrence of an Event of Default, and after the
curing of all such Events of Default that 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 personally 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 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 which it reasonably believed in good faith to be genuine and
to have been duly executed by the proper authorities respecting any matters
arising hereunder;
(b) the Trustee shall not be personally liable for an error of
judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless the Trustee was negligent or acted in bad
faith or with willful misfeasance;
(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 Holders of Certificates evidencing not
less than 25% of the Voting Rights allocated to each Class of Certificates
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) no provision of this Agreement shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of any of
its rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
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Except with respect to an Event of Default described in clause (a) of
Section 8.01, the Trustee shall not be deemed to have knowledge of any Event of
Default or event which, with notice or lapse of time, or both, would become an
Event of Default, unless a Responsible Officer of the Trustee shall have
received written notice thereof from the Servicer, the Depositor, a
Certificateholder or the Insurer, or a Responsible Officer of the Trustee has
actual notice thereof, and in the absence of such notice no provision hereof
requiring the taking of any action or the assumption of any duties or
responsibility by the Trustee following the occurrence of any Event of Default
or event which, with notice or lapse of time or both, would become an Event of
Default, shall be effective as to the Trustee.
The Trustee shall have no duty hereunder with respect to any
complaint, claim, demand, notice or other document it may receive or which may
be alleged to have been delivered to or served upon it by the parties as a
consequence of the assignment of any Mortgage Loan hereunder; provided, however,
that the Trustee shall use its best efforts to remit to the Servicer upon
receipt of any such complaint, claim, demand, notice or other document (i) which
is delivered to the Corporate Trust Office of the Trustee, (ii) of which a
Responsible Officer has actual knowledge, and (iii) which contains information
sufficient to permit the Trustee to make a determination that the real property
to which such document relates is a Mortgaged Property.
SECTION 9.02. Certain Matters Affecting the Trustee.
--------------------------------------
(a) Except as otherwise provided in Section 9.01:
(i) the Trustee may request and rely upon and shall be
protected in acting or refraining from acting upon any resolution,
Officers' Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(ii) the Trustee may consult with counsel and any Opinion
of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good
faith and in accordance with such Opinion of Counsel;
(iii) the Trustee shall be under no obligation to exercise
any of the trusts 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; nothing contained herein
shall, however, relieve the Trustee of the obligation, upon the occurrence of an
Event of Default (which has not been cured or waived), to exercise such of the
rights and powers vested in it by this Agreement, and to use the same degree of
care and skill in their exercise as a prudent person would exercise or use under
the circumstances in the conduct of such person's own affairs;
(iv) the Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and believed by it to
be authorized or within the discretion or rights or powers conferred upon
it by this Agreement;
(v) prior to the occurrence of an Event of Default
hereunder and after the curing of all Events of Default that may have
occurred, the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
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instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing so to do by
Holders of Certificates evidencing not less than 25% of the Voting Rights
allocated to each Class of Certificates; provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation
is, in the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Agreement, the Trustee may
require reasonable indemnity against such expense or liability as a
condition to taking any such action; the reasonable expense of every such
investigation shall be paid by the Servicer in the event that such
investigation relates to an Event of Default by the Servicer, if an Event
of Default by the Servicer shall have occurred and is continuing, and
otherwise by the Certificateholders requesting the investigation;
(vi) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys;
(vii) the Trustee shall not be required to expend its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such liability is not
assured to it; and
(viii) the Trustee shall not be liable for any loss on any
investment of funds pursuant to this Agreement.
(b) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the
trial or other proceeding relating thereto, and any such suit, action or
proceeding instituted by the Trustee shall be brought in its name for the
benefit of all the Holders of such Certificates, subject to the provisions
of this Agreement.
SECTION 9.03. Trustee Not Liable for Certificates or Mortgage Loans.
------------------------------------------------------
The recitals contained herein shall be taken as the statements of the
Depositor or the Servicer, as the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Agreement, the Certificates or of any
Mortgage Loan or related document. The Trustee shall not be accountable for the
use or application by the Depositor or the Servicer of any funds paid to the
Depositor or the Servicer in respect of the Mortgage Loans or deposited in or
withdrawn from the Certificate Account by the Depositor or the Servicer.
SECTION 9.04. Trustee May Own Certificates.
-----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Trustee.
SECTION 9.05. Trustee's Fees and Expenses.
----------------------------
The Trustee shall pay to itself on each Distribution Date from
amounts on deposit in the Certificate Account, an amount equal to the Trustee
Fee in accordance with Section 4.02(a). Any amount payable to the Trustee on
such Distribution Date in excess of such amount on deposit will be paid by the
Servicer from its own funds. Any payment hereunder made by the Servicer to the
Trustee, other than any
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amount to be paid from the Certificate Account pursuant to this Section 9.05,
shall be paid from the Servicer's own funds, without reimbursement from the
Trust Fund therefor.
The Trustee and any director, officer, employee or agent of the
Trustee shall be indemnified by the Depositor and held harmless against any
loss, liability or expense (a) incurred in connection with any legal action
relating to this Agreement or the Certificates, or the performance of any of the
Trustee's duties hereunder, other than any loss, liability or expense incurred
by reason of willful misfeasance, bad faith or negligence in the performance of
any of the Trustee's duties hereunder or by reason of reckless disregard of the
Trustee's obligations and duties hereunder and (b) resulting from the exercise
of any power of attorney granted by the Trustee in accordance with this
Agreement. Such indemnity shall survive the termination of this Agreement or
the resignation or removal of the Trustee hereunder.
SECTION 9.06. Eligibility Requirements for Trustee.
-------------------------------------
The Trustee hereunder shall at all times be a corporation or
association having its principal office in a state and city acceptable to the
Depositor and the Insurer and organized and doing business under the laws of
such state or the United States of America, authorized under such laws to
exercise corporate trust powers, having ratings on its long-term debt
obligations at the time of such appointment in at least the third highest rating
category by both Moody's and Standard & Poor's or such lower ratings as will not
cause Moody's or Standard & Poor's to lower their then-current ratings of the
Class A Certificates (without regard to the Policy), acceptable to the Insurer,
having a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal or state authority. If such corporation
or association publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section 9.06 the combined capital and surplus of such
corporation or association 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 9.06, the Trustee shall resign immediately in the
manner and with the effect specified in Section 9.07 hereof.
SECTION 9.07. Resignation and Removal of Trustee.
-----------------------------------
The Trustee may at any time resign and be discharged from the trusts
hereby created by (a) giving written notice of resignation to the Depositor and
the Insurer and by mailing notice of resignation by first class mail, postage
prepaid, to the Certificateholders at their addresses appearing on the
Certificate Register, and to the Rating Agencies, not less than 60 days before
the date specified in such notice when, subject to Section 9.08, such
resignation is to take effect, and (b) acceptance by a successor trustee
acceptable to the Insurer in accordance with Section 9.08 meeting the
qualifications set forth in Section 9.06. If no successor trustee shall have
been so appointed and have accepted appointment within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 hereof and shall fail to resign after
written request thereto by the Depositor, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation or if the
Trustee breaches any of its obligations or representations hereunder, then the
Insurer or, with the prior written consent of the Insurer, the Depositor may
remove the Trustee and appoint a successor
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trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the Trustee and one copy to the successor trustee. The Trustee
may also be removed at any time by the Holders of Certificates evidencing not
less than 50% of the Voting Rights evidenced by the Certificates with the prior
written consent of the Insurer. Notice of any removal of the Trustee and
acceptance of appointment by the successor trustee shall be given to the Rating
Agencies by the Servicer.
Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 9.07 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 9.08 hereof.
SECTION 9.08. Successor Trustee.
------------------
Any successor trustee appointed as provided in Section 9.07 hereof
shall execute, acknowledge and deliver to the Depositor and to its predecessor
trustee an instrument accepting such appointment hereunder and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The Depositor and the predecessor trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties, and obligations.
No successor trustee shall accept appointment as provided in this
Section 9.08 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 9.06 hereof and its appointment is
acceptable to the Insurer and shall not adversely affect the then current rating
of the Certificates.
Upon acceptance of appointment by a successor trustee as provided in
this Section 9.08, the Servicer shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates at their addresses as shown in
the Certificate Register. If the Servicer fails to mail such notice within ten
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of the Depositor.
SECTION 9.09. 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 business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such Person shall be eligible under the provisions of Section 9.06
hereof without the execution or filing of any paper or further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding.
SECTION 9.10. Appointment of Co-Trustee or Separate Trustee.
----------------------------------------------
Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Mortgage Note may at the
time be located, the Servicer and the Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the applicable Certificateholders, such title to the Trust Fund, or
any part thereof, and,
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subject to the other provisions of this Section 9.10, such powers, duties,
obligations, rights and trusts as the Servicer and the Trustee may consider
necessary or desirable. If the Servicer shall not have joined in such
appointment within fifteen days after the receipt by it of a request to do so,
or in the case an Event of Default shall have occurred and be continuing, the
Trustee alone shall have the power to make such appointment. No co-trustee or
separate trustee hereunder shall be required to meet the terms of eligibility as
a successor trustee under Section 9.06 and no notice to Certificateholders of
the appointment of any co-trustee or separate trustee shall be required under
Section 9.08.
Every separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(a) all rights, powers, duties and obligations conferred or imposed
upon the Trustee, except for any obligation of the Trustee under this
Agreement to advance funds on behalf of the Servicer, shall be conferred or
imposed upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed by
the Trustee (whether as Trustee hereunder or as successor to the Servicer),
the Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations (including
the holding of title to the Trust Fund or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee;
(b) no trustee hereunder shall be held personally liable by reason
of any act or omission of any other trustee hereunder; and
(c) the Servicer and the Trustee acting jointly may at any time
accept the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article IX. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Servicer and the Depositor.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 9.11. Office of the Trustee.
----------------------
The office of the Trustee for purposes of receipt of notices and
demands is 180 East Fifth Street, St. Paul, Minnesota 55101, Attn: Structured
Finance/Chevy Chase 1998-CCB2.
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SECTION 9.12. Tax Returns.
------------
The Servicer, upon request, will furnish the Trustee with all such
information in the possession of the Servicer as may be reasonably required in
connection with the preparation by the Trustee of all tax and information
returns of the Trust Fund, and the Trustee shall sign such returns. The
Servicer shall indemnify the Trustee for all reasonable costs, including legal
fees, related to errors in such tax returns due to errors in information
provided by the Servicer.
ARTICLE X.
TERMINATION
SECTION 10.01. Termination upon Liquidation or Repurchase of
---------------------------------------------
all Mortgage Loans.
-------------------
The obligations and responsibilities of the Servicer, the Depositor
and the Trustee created hereby with respect to the Trust Fund created hereby
shall terminate upon the earlier of:
(a) the repurchase by the Servicer at its election, of all Mortgage
Loans and all property acquired in respect of any Mortgage Loan remaining
in the Trust Fund, which repurchase right the Servicer may exercise at its
sole and exclusive election as of any Distribution Date (such applicable
Distribution Date being herein referred to as the "Optional Termination
Date") on or after the date on which the aggregate Principal Balance of the
Mortgage Loans at the time of the repurchase is less than or equal to 5% of
the aggregate Principal Balance of the Mortgage Loans as of the Cut-off
Date; and
(b) the later of (i) twelve months after the maturity of the last
Mortgage Loan remaining in the Trust Fund, (ii) the liquidation (or any
advance with respect thereto) of the last Mortgage Loan remaining in the
Trust Fund and the disposition of all REO Property and (iii) the
distribution to Certificateholders of all amounts required to be
distributed to them pursuant to this Agreement.
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 Mr. Joseph P.
Kennedy, former Ambassador of the United States to Great Britain, living on the
date of execution of this Agreement.
The Mortgage Loan Repurchase Price for any such Optional Termination
of the Trust Fund shall be equal to the aggregate Principal Balance of the
Mortgage Loans as of the date of repurchase, together with accrued and unpaid
interest thereon from the date to which such interest was paid or advanced at
the sum of the applicable Net Mortgage Rate and the Trustee Fee Rate with
respect to each Mortgage Loan through the last day of the month of such
repurchase, plus any sums on account of such Mortgage Loan that have been
advanced by the Servicer and are reimbursable to the Servicer hereunder
(including the Principal Balance of each Mortgage Loan that was secured by any
REO Property) plus any amounts due the Insurer under the Insurance Agreement;
provided, however, that if the Servicer shall so choose, the Servicer may remit
the Mortgage Loan Repurchase Price net of advances that would otherwise be
reimbursable to the Servicer and the Servicer would have no further entitlement
to reimbursement for such advances. The Trustee shall give notice to the
Insurer and the Rating Agencies of the Servicer's election to purchase the
Mortgage Loans pursuant to this Section 10.01 and of the Optional Termination
Date. No purchase pursuant to clause (a) is permitted if it would result in a
draw on the Policy unless the Insurer consents.
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SECTION 10.02. Procedure Upon Optional Termination.
------------------------------------
(a) In case of any Optional Termination pursuant to Section 10.01, the
Servicer shall, at least twenty days prior to the date notice is to be mailed to
the affected Certificateholders notify the Trustee and the Insurer of such
Optional Termination Date and of the applicable repurchase price of the Mortgage
Loans to be repurchased.
(b) Any repurchase of the Mortgage Loans by the Servicer shall be made
on an Optional Termination Date by deposit of the applicable repurchase price
into the Certificate Account, as applicable, before the Distribution Date on
which such repurchase is effected. Upon receipt by the Trustee of an Officers'
Certificate of the Servicer certifying as to the deposit of such repurchase
price into the Certificate Account, the Trustee and each co-trustee and separate
trustee, if any, then acting as such under this Agreement, shall, upon request
and at the expense of the Servicer execute and deliver all such instruments of
transfer or assignment, in each case without recourse, as shall be reasonably
requested by the Seller or the Servicer, to vest title in the Servicer in the
Mortgage Loans so repurchased and shall transfer or deliver to the Servicer the
repurchased Mortgage Loans. Any distributions on the Mortgage Loans received by
the Trustee subsequent to (or with respect to any period subsequent to) the
Optional Termination Date shall be promptly remitted by it to the Servicer.
(c) Notice of the Distribution Date on which the Servicer anticipates
that the final distribution shall be made (whether upon Optional Termination or
otherwise), shall be given promptly by the Servicer to the Trustee and the
Insurer and by the Trustee by first class mail to Holders of the affected
Certificates. Such notice shall be mailed no earlier than the 15th day and not
later than the 10th day preceding the Optional Termination Date or date of final
distribution, as the case may be. Such notice shall specify (i) the Distribution
Date upon which final distribution on the affected Certificates will be made
upon presentation and surrender of such Certificates at the office or agency
therein designated, (ii) the amount of such final distribution and (iii) that
the Record Date otherwise applicable to such Distribution Date is not
applicable, such distribution being made only upon presentation and surrender of
such Certificates at the office or agency maintained for such purposes (the
address of which shall be set forth in such notice).
(d) In the event that any Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining such Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months 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 and other assets which remain subject to
the Trust Fund.
SECTION 10.03. Additional Termination Requirements.
------------------------------------
(a) In the event the Servicer exercises its purchase option pursuant to
Section 10.01, the Trust REMIC 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 REMIC to comply with the
requirements of this Section will not (i) result in the imposition of taxes on a
"prohibited transaction" of the Trust REMIC, as described in Section 860F of the
Code, or (ii) cause the Trust REMIC to fail to qualify as a remic at any time
that any Certificates are outstanding:
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(A) within 90 days prior to the final Distribution Date set forth
in the notice given by the Servicer under Section 10.02, the Holder of
the Class R Certificates shall adopt a plan of complete liquidation of
the Trust REMIC and specify the first day of the applicable 90-day
liquidation period in a statement attached to the Trust Fund's final
tax return pursuant to Treasury Regulations Section 1.860F-1, and
satisfy (or cause to be satisfied) all of the requirements of a
qualified liquidation under the REMIC Provisions; and
(B) at or after the time of adoption of any such plan of complete
liquidation for the Trust REMIC at or prior to the final Distribution
Date, the Trustee shall sell all of the assets of the Trust Fund to the
Depositor for cash; provided, however, that in the event that a
calendar quarter ends after the time of adoption of such a plan of
complete liquidation but prior to the final Distribution Date, the
Trustee shall not sell any of the assets of the Trust Fund prior to the
close of that calendar quarter.
(b) By its acceptance of a Class R Certificate, the Holder thereof
hereby agrees to adopt such a plan of complete liquidation and to take such
other action in connection therewith as may be reasonably required to liquidate
and otherwise terminate the Trust REMIC.
ARTICLE XI.
MISCELLANEOUS PROVISIONS
SECTION 11.01. Amendment.
----------
(a) This Agreement may be amended from time to time by the Depositor
and the Trustee, with the consent of the Insurer but without the consent of any
of the Certificateholders,
(i) to cure any ambiguity,
(ii) to correct or supplement any provisions herein that may be
inconsistent with any other provisions herein,
(iii) to modify, eliminate or add to any of its provisions to such
extent as shall be necessary or desirable to maintain the qualification of
the Trust REMIC as a remic at all times that any Certificate is outstanding
or to avoid or minimize the risk of the imposition of any tax on the Trust
Fund pursuant to the Code that would be a claim against the Trust Fund,
provided that the Trustee has received an Opinion of Counsel to the effect
that (A) such action is necessary or desirable to maintain such
qualification or to avoid or minimize the risk of the imposition of any
such tax and (B) such action will not adversely affect the status of the
Trust REMIC as a remic or adversely affect in any material respect the
interests of any Certificateholder, or
(iv) to make any other provisions with respect to matters or
questions arising under this Agreement that are not materially inconsistent
with the provisions of this Agreement, provided that such action shall not
adversely affect in any material respect the interests of any
Certificateholder or cause an Adverse REMIC Event.
(b) This Agreement may be amended from time to time by the Depositor,
the Servicer and the Trustee with the consent of the Insurer and the Holders of
Certificates evidencing, in the aggregate, not less than 66-2/3% of the Voting
Rights of all the Certificates for the purpose of adding any
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provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Holders of the
Certificates; provided, however, that no such amendment may (i) reduce in any
manner the amount of, delay the timing of or change the manner in which payments
received on or with respect to Mortgage Loans are required to be distributed
with respect to any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
Holders of a Class of Certificates in a manner other than as set forth in (i)
above without the consent of the Holders of Certificates evidencing not less
than 66-2/3% of the Voting Rights of such Class, (iii) reduce the aforesaid
percentages of Voting Rights, the holders of which are required to consent to
any such amendment without the consent of 100% of the Holders of Certificates of
the Class affected thereby, (iv) change the percentage of the Principal Balance
of the Mortgage Loans specified in Section 10.01(a) relating to optional
termination of the Trust Fund or (v) modify the provisions of this Section
11.01.
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
regulations as the Trustee may prescribe.
(c) This Agreement may be amended from time to time by the Seller,
without the consent of the Depositor, the Trustee, the Insurer, the Servicer or
the Certificateholders, to modify Section 3.21(b) to make purchases of
Converting Mortgage Loans or Converted Mortgage Loans by the Seller mandatory.
(d) Promptly after the execution of any amendment to this Agreement,
the Trustee shall furnish written notification of the substance of such
amendment to the Insurer, the Depositor, each Certificateholder and the Rating
Agencies.
SECTION 11.02. Recordation of Agreement; Counterparts.
---------------------------------------
(a) This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the Mortgaged Properties are situated, and
in any other appropriate public recording office or elsewhere. Such recordation,
if any, shall be effected by the Servicer at its expense on direction of the
Insurer or the Trustee, but only upon direction of the Insurer or the Trustee
accompanied by an Opinion of Counsel to the effect that such recordation
materially and beneficially affects the interests of the Certificateholders of
the Trust Fund.
(b) For the purpose of facilitating the recordation of this Agreement
as herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
SECTION 11.03. Governing Law.
--------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
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SECTION 11.04. Intention of Parties.
---------------------
(a) It is the express intent of the Depositor, the Seller and the
Trustee that the conveyance by the Seller to the Depositor pursuant to the
Mortgage Loan Purchase Agreement and the conveyance by the Depositor to the
Trustee and by the Seller to the Trustee as provided for in Section 2.01 of each
of the Seller's and Depositor's right, title and interest in and to the Mortgage
Loans and CD Collateral be, and be construed as, an absolute sale and assignment
by the Seller to the Depositor and by the Depositor to the Trustee of the
Mortgage Loans and CD Collateral for the benefit of the Certificateholders and
the Insurer. Further, it is not intended that either conveyance be deemed to be
a pledge of the Mortgage Loans and CD Collateral by the Seller to the Depositor
or by the Depositor to the Trustee to secure a debt or other obligation.
However, in the event that the Mortgage Loans or CD Collateral are held to be
property of the Seller or the Depositor, or if for any reason the Mortgage Loan
Purchase Agreement or this Agreement is held or deemed to create a security
interest in the Mortgage Loans or CD Collateral, then it is intended that (i)
this Agreement shall also be deemed to be a security agreement within the
meaning of Articles 8 and 9 of the New York Uniform Commercial Code and the
Uniform Commercial Code of any other applicable jurisdiction; (ii) the
conveyances provided for in Section 2.01 shall be deemed to be a grant by the
Seller and the Depositor to the Trustee on behalf of the Certificateholders and
the Insurer (and the Insurer directly), to secure payment in full of the Secured
Obligations (as defined below), of a security interest in all of the Seller's
and the Depositor's right (including the power to convey title thereto), title
and interest, whether now owned or hereafter acquired, in and to the Mortgage
Loans and CD Collateral, including the Mortgage Notes, the Mortgages, any
related insurance policies and all other documents in the related Mortgage
Files, and all accounts, contract rights, general intangibles, chattel paper,
instruments, documents, money, deposit accounts, certificates of deposit, goods,
letters of credit, advices of credit and uncertificated securities consisting
of, arising from or relating to (A) the Mortgage Loans, including with respect
to each Mortgage Loan, the Mortgage Note and related Mortgage, and all other
documents in the related Trustee Mortgage Files, and including any Replacement
Mortgage Loans; (B) pool insurance policies, hazard insurance policies and any
bankruptcy bond relating to the foregoing, if applicable; (C) the Certificate
Account; (D) the Custodial Account; (E) the Reserve Account and all amounts on
deposit therein; (F) all amounts payable after the Cut-off Date to the holders
of the Mortgage Loans in accordance with the terms thereof; (G) all income,
payments, proceeds and products of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts from time to time held or invested in the
Certificate Account, whether in the form of cash, instruments, securities or
other property; and (H) all cash and non-cash proceeds of any of the foregoing;
(iii) the possession by the Trustee or any other agent of the Trustee of
Mortgage Notes, any CD Collateral or such other items of property as constitute
instruments, money, documents, advices of credit, letters of credit, goods,
certificated securities or chattel paper shall be deemed to be a possession by
the secured party, or possession by a purchaser, for purposes of perfecting the
security interest pursuant to the Uniform Commercial Code (including, without
limitation, Sections 9-305 or 9-115 thereof); and (iv) notifications to persons
holding such property, and acknowledgments, receipts or confirmations from
persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, securities intermediaries,
bailees or agents of, or persons holding for, the Trustee, as applicable, for
the purpose of perfecting such security interest under applicable law. "Secured
Obligations" means (i) the rights of each Certificateholder to be paid any
amount owed to it under this Agreement, (ii) the rights of the Insurer to be
paid any amount owed to it under this Agreement, (iii) all other obligations of
the Seller and the Depositor under this Agreement and the Mortgage Loan Purchase
Agreement and (iv) the right of the Certificateholders and the Insurer to the
Mortgage Loans.
(b) The Seller and the Depositor, and, at the Depositor's direction,
the Servicer and the Trustee, shall, to the extent consistent with this
Agreement, take such reasonable actions as may be
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necessary to ensure that, if this Agreement were deemed to create a security
interest in the Mortgage Loans and the other property described above, such
security interest would be deemed to be a perfected security interest of first
priority as applicable. The Trustee shall file, at its expense, all filings
necessary to maintain the effectiveness of any original filings necessary under
the Uniform Commercial Code as in effect in any jurisdiction to perfect the
Trustee's security interest (and the security interest granted to the Insurer
directly) in or lien on the Mortgage Loans, including without limitation (i)
continuation statements, and (ii) such other statements as may be occasioned by
any transfer of any interest of the Servicer or the Depositor in any Mortgage
Loan.
SECTION 11.05. Notices.
--------
In addition to other notices provided under this Agreement, the
Trustee shall notify the Rating Agencies in writing: (a) of any substitution of
any Mortgage Loan; (b) of any payment or draw on any insurance policy applicable
to the Mortgage Loans; (c) of the final payment of any amounts owing to a Class
of Certificates; (d) any Event of Default under this Agreement; and (e) in the
event any Mortgage Loan is repurchased in accordance with this Agreement.
All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given when received (i) in the case of the
Depositor, Asset Backed Securities Corporation, 11 Madison Avenue, New York, New
York 10055, Attention: President; (ii) in the case of the Trustee, U. S. Bank
National Association, 180 East Fifth Street, St. Paul, Minnesota 55101, Attn:
Structured Finance or such other address as may hereafter be furnished to the
Depositor in writing by the Trustee; (iii) in the case of the Seller or
Servicer, Chevy Chase Bank, F.S.B., 8401 Connecticut Avenue, Chevy Chase,
Maryland 20815, Attention: General Counsel; (iv) in the case of the Insurer,
Ambac Assurance Corporation, One State Street Plaza, New York, New York 10004,
Attn: Howard Pfeffer; and (v) in the case of the Rating Agencies, Moody's
Investors Service, 99 Church Street, New York, New York 10007, Attention:
Mortgage-Backed Securities Rating Group and Standard & Poor's Rating Services,
25 Broadway, New York, New York 10004, Attention: Structured Finance. Notices
to Certificateholders shall be deemed given when mailed, first class postage
prepaid.
SECTION 11.06. 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 or of the Certificates or the rights of the Holders thereof or the
Insurer.
SECTION 11.07. Limitation on Rights of Certificateholders.
-------------------------------------------
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust Fund, nor entitle such Certificateholder's
legal representative or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a petition or winding up of the Trust
Fund, or otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
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association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.
No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee and Insurer a
written notice of an Event of Default and of the continuance thereof, as
provided herein, and such default would not result in a claim under the Policy,
and unless the Holders of Certificates evidencing not less than 25% of the
Voting Rights evidenced by the Certificates shall also have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses, and liabilities to be
incurred therein or thereby and the Insurer shall have given its written
consent, and the Trustee, for 60 days after its receipt of such notice, request
and offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders. For the protection and enforcement of
the provisions of this Section 11.07, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
SECTION 11.08. Certificates Nonassessable and Fully Paid.
------------------------------------------
It is the intention of the Depositor that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.
SECTION 11.09. Rights of the Insurer.
----------------------
(a) The Insurer is an express third-party beneficiary of this Agreement
unless an Insurer Default exists.
(b) On each Distribution Date the Trustee shall forward to the Insurer
a copy of the reports furnished to the Class A Certificateholders and the
Depositor on such Distribution Date.
(c) The Trustee shall provide to the Insurer copies of any report,
notice, Opinion of Counsel, Officer's Certificate, request for consent or
request for amendment to any document related hereto promptly upon the Trustee's
production or receipt thereof.
(d) Unless an Insurer Default exists, the Trustee and the Depositor
shall not agree to any amendment to this Agreement without first having obtained
the prior written consent of the Insurer, if such consent is not unreasonably
withheld.
(e) So long as there does not exist a failure by the Insurer to make a
required payment under the Policy, the Insurer shall have the right to exercise
all rights of the Holders of the Class A Certificates under this Agreement
without any consent of such Holders, and such Holders may exercise such rights
only with the prior written consent of the Insurer, except as provided herein.
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IN WITNESS WHEREOF, the Depositor, the Servicer and the Trustee have
caused their names to be signed hereto by their respective officers thereunto
duly authorized all as of the 17th day of June, 1998.
ASSET BACKED SECURITIES CORPORATION, as Depositor
By:
----------------------------------------------
Name: Kari A. Skilbred
Title: Vice President
CHEVY CHASE BANK, F.S.B.,
as Seller and Servicer
By:
----------------------------------------------
Name: Mark A. Holles
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------------------------
Name:
Title:
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this _____ day of June, 1998, before me, personally appeared Edward
Kachinski, known to me to be a Vice President of U.S. Bank National Association,
the national association that executed the within instrument, and also known to
me to be the person who executed it on behalf of said national association, and
acknowledged to me that such national association executed the within
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
----------------------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the _____ day of June, 1998, before me, personally appeared Kari A.
Skilbred, known to me to be a Vice President of Asset Backed Securities
Corporation, one of the corporations that executed the within instrument and
also known to me to be the person who executed it on behalf of said corporation,
and acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
---------------------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the ______ day of June, 1998, before me, a Notary Public in and for
said State, personally appeared Mark A. Holles, known to me to be a Vice
President of Chevy Chase Bank, F.S.B., the federally chartered bank that
executed the within instrument and also known to me to be the person who
executed it on behalf of said bank, and acknowledged to me that such bank
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
---------------------------------------
Notary Public
[NOTARIAL SEAL]
<PAGE>
EXHIBIT A
FORM OF CLASS [A-I] [A-II] 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 CODE.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ASSET BACKED
SECURITIES CORPORATION OR THE TRUSTEE REFERRED TO BELOW, OR OF ANY OF THEIR
AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENT
AGENCY OR INSTRUMENTALITY.
A-1
<PAGE>
CHEVY CHASE BANK, F.S.B.
MORTGAGE-BACKED PASS-THROUGH CERTIFICATE
SERIES 1998-CCB2, CLASS [A-I] [A-II]
Evidencing an undivided interest in a Trust Fund whose assets consist of a pool
of adjustable-rate, conventional mortgage loans secured by first liens on one-
to four-family, residential real properties and certain other property held in
trust transferred by
ASSET BACKED SECURITIES CORP.
CUSIP ___________ $_____ INITIAL AGGREGATE CLASS [A-I]
[A-II] CERTIFICATE PRINCIPAL
BALANCE
Certificate No. [A-I-____] [A-II-____] $_____ INITIAL CERTIFICATE PRINCIPAL
BALANCE OF THIS CERTIFICATE
First Distribution Date: Scheduled Final
July 27, 1998 Distribution Date:
___________ __, ____
THIS CERTIFIES THAT CEDE & CO. is the registered owner of a beneficial
interest in the Trust Fund referred to below consisting of a pool of adjustable-
rate conventional mortgage loans secured by first liens on one- to four-family
residential real properties (the "Mortgage Loans") and certain other property
held in trust transferred to the Trust Fund by Asset Backed Securities
Corporation (the "Depositor"), and certain related property. The Trust Fund was
created pursuant to the Pooling and Servicing Agreement, dated as of June 1,
1998 (the "Agreement"), among the Depositor, U.S. Bank National Association, as
trustee (the "Trustee", which term includes any successor entity under the
Agreement) and Chevy Chase Bank, F.S.B., as seller and servicer, a summary of
certain of the pertinent provisions of which is set forth herein. This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Agreement, to which Agreement the Holder of this Certificate
by virtue of the acceptance hereof assents and by which such Holder is bound.
This Certificate is one of a duly authorized issue of certificates by
Asset Backed Securities Corporation designated as the Chevy Chase Bank, F.S.B.
Mortgage-Backed Pass-Through Certificates, Series 1998-CCB2 (the
"Certificates"), which is comprised of the following four Classes: Class A-I,
Class A-II, Class S and Class R. Reference is hereby made to the Agreement for
a statement of the respective rights thereunder of the Depositor and the Trustee
and the Holders of the Certificates and the terms upon which the Certificates
are authenticated and delivered. This Certificate represents an interest in the
Trust Fund, which Trust Fund consists of, among other things, (i) the Mortgage
Loans and all distributions thereon payable after the Cut-off Date, net of
certain amounts in accordance with the provisions of the Agreement, (ii) the CD
Collateral, (ii) REO Property, (iv) the Certificate Account and the Custodial
Account and all amounts deposited therein pursuant to the applicable provisions
of the Agreement, net of any investment earnings thereon, (v) the interest of
the Trust Fund in any insurance policies with respect to the Mortgage Loans,
(vi) the interest of the Trust Fund in the Policy issued for
A-2
<PAGE>
the benefit of the Holders of the Class A Certificates, (vii) the rights of the
Depositor assigned to the Trustee pursuant to Sections 2.01 and 3.01 of the
Agreement, (viii) the Reserve Account and all amounts deposited therein and (ix)
all proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquid property.
This Class [A-I] [A-II] Certificate represents a Percentage Interest
equal to the Initial Certificate Principal Balance of this Certificate divided
by the Initial Certificate Principal Balance of the Class [A-I] [A-II]
Certificates, both as set forth above.
The Trustee shall distribute from the Certificate Account, to the
extent of available funds, on the 25th day of each calendar month, or, if such
25th day is not a Business Day, the Business Day immediately following such 25th
day (each, a "Distribution Date"), commencing July 27, 1998, to the Person in
whose name this Certificate is registered at the close of business on the last
Business Day of the month immediately preceding the month of such distribution
(each, a "Record Date"), a principal amount equal to the product of the
Percentage Interest evidenced by this Certificate and that portion of the
Available Distribution Amount that is allocated to principal on such Class of
Certificates on such Distribution Date.
Distributions of interest will be made on each Distribution Date, to
the extent of available funds, in an amount equal to the sum of (a) one month's
interest accrued at the per annum applicable Certificate Rate on the outstanding
Certificate Principal Balance of this Certificate as of the day immediately
prior to the related Distribution Date reduced by its pro rata portion of the
aggregate shortfalls of interest allocated to such Class of Certificates and (b)
the amount of any Class [A-I] [A-II] Cumulative Interest Shortfall Amount
payable on such Distribution Date.
Not later than each Distribution Date, the Trustee will send to each
Certificateholder a statement containing information relating to the Mortgage
Loans and payments made to Certificateholders.
Distributions on this Certificate will be made by the Trustee by check
mailed to the address of the Holder hereof entitled thereto at the address
appearing in the Certificate Register or, if such Holder holds one or more of
this Class of Certificates with an aggregate initial Certificate Principal
Balance of at least $2,500,000 or all of the Certificates of this Class, by wire
transfer in immediately available funds to the account of such Certificateholder
designated in writing to the Trustee at least five Business Days prior to the
applicable Record Date. Notwithstanding the above, the final distribution on
this Certificate will be made after due notice of the pendency of such final
distribution and only upon presentation and surrender of this Certificate at the
office or agency designated in such notice.
The Agreement permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the Trustee and the rights of the Certificateholders under the
Agreement at any time by the Depositor and the Trustee with the consent of the
Holders of Certificates evidencing Voting Rights aggregating not less than 66-
2/3% of the Voting Rights of all the Certificates; provided, however, that no
such amendment may (i) reduce in any manner the amount of, delay the timing of
or change the manner in which payments received on Mortgage Loans are required
to be distributed in respect of any Certificate without the consent of the
Holder of such Certificate, (ii) adversely affect in any material respect the
interests of the Holders of a Class of Certificates in a manner other than in
(i) above without the consent of the Holders of Certificates evidencing not less
than 66-2/3% of the Voting Rights of such Class and (iii) reduce the aforesaid
percentages of Voting Rights, the holders of which are required to consent to
any such amendment, without the consent of 100% of the Holders of Certificates
of the Class affected thereby. Any such
A-3
<PAGE>
consent by the Holder of this Certificate shall be conclusive and binding on
such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the Depositor and the Trustee to amend certain terms
and conditions set forth in the Agreement without the consent of Holders of the
Certificates. At any time that any of the Class A Certificates are outstanding,
98% of all Voting Rights will be allocated to the Holders of the Class A
Certificates, in proportion to their then outstanding Certificate Principal
Balances, 1% of all Voting Rights will be allocated to the Holders of the Class
S Certificates and 1% of all Voting Rights will be allocated to the Holders of
the Class R Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable on the
Certificate Register upon surrender of this Certificate for registration of
transfer at the office or agency of the Trustee designated therefor, duly
endorsed by, or accompanied by a written instrument of transfer in a form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class and of authorized denominations, and for the same aggregate
interest in the Trust Fund will be issued to the designated transferee or
transferees.
The Class [A-I] [A-II] Certificates will be issued in fully registered
form in minimum denominations of $100,000 Certificate Principal Balance and in
integral multiples of $1,000 in excess of such amount; provided, however, that
one Certificate of each Class may be issued in such other amount as is required
so that the aggregate of each Class of Certificates equals its respective
aggregate Certificate Principal Balance. As provided in the Agreement and
subject to certain limitations therein set forth, this Certificate is
exchangeable for one or more new Certificates of the same Class and of
authorized denominations evidencing a like aggregate Certificate Principal
Balance, as requested by the Holder surrendering the same.
No service charge will be made for such registrations of transfers or
exchanges, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. The Trustee
and any agent of the Trustee may treat the person in whose name this Certificate
is registered as the owner hereof for all purposes, and neither the Trustee nor
any such agent thereof shall be affected by notice to the contrary.
The obligations and responsibilities of the Depositor and the Trustee
created by the Agreement will terminate upon the earlier of (a) the purchase by
the Holder of the Class R Certificates from the Trust Fund of all remaining
Mortgage Loans and all property acquired in respect of such Mortgage Loans,
thereby effecting early retirement of the Certificates, or (b) the maturity or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund and the disposition of all property acquired
upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan. As
provided in the Agreement, the right to purchase all Mortgage Loans pursuant to
clause (a) above shall be conditioned upon the unpaid Principal Balances of such
Mortgage Loans, at the time of any such repurchase, aggregating less than or
equal to 5% of the aggregate Principal Balances thereof as of the Cut-off Date.
Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning. If the terms hereof are inconsistent with the
Agreement, the Agreement shall control.
A-4
<PAGE>
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid or obligatory for any
purpose.
The recitals contained herein shall be taken as statements of the
Depositor and not of the Trustee. The Trustee assumes no responsibility for the
correctness of the statements contained in this Certificate and makes no
representation as to the validity or sufficiency of the Agreement, this
Certificate, any Mortgage Loan or any related document.
A-5
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its corporate seal.
U.S. BANK NATIONAL ASSOCIATION,
solely as Trustee and not individually
By:
-----------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Agreement.
Date:
-------------------
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
---------------------------
Authorized Officer
A-6
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including postal zip code, or
assignee) the undivided interest in the Trust Fund evidenced by the within
Certificate and hereby authorize(s) the transfer of registration of such
interest to the assignee on the Certificate Register.
I (we) further direct the Trustee to issue a new Certificate of the same
Class and of a like Initial Certificate Principal Balance and undivided interest
in the Trust Fund to the above-named assignee and to deliver such Certificate to
the following address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
--------------
- ----------------------- -------------------------------------
Social Security or Signature by or on behalf of assignor
other Tax Identification (signature must be signed as registered)
No. of Assignee
--------------------------------------
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Master Servicer:
Distribution shall be made by check mailed to _______________________
_______________________________________________________________________, or if
the aggregate initial Certificate Principal Balance of Certificates of this
Class held by the Holder is at least $2,500,000 or the Percentage Interest
within such Class is 100%, and the Trustee shall have received appropriate
wiring instructions in accordance with the Agreement, by wire transfer in
immediately available funds to _____________________________ the account of,
account number _______________. This information is provided by the assignee
named above, or its agent.
A-7
<PAGE>
EXHIBIT B
FORM OF CLASS S CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND
LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION
UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 6.02 OF THE AGREEMENT REFERRED TO HEREIN.
THE YIELD TO MATURITY ON THIS CERTIFICATE WILL BE EXTREMELY SENSITIVE TO THE
RATE AND TIMING OF PAYMENTS (INCLUDING PREPAYMENTS) ON THE MORTGAGE LOANS.
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 CODE.
THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSES OF APPLYING THE
U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES TO THIS
CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS JUNE __, 1998. ASSUMING
THAT THE MORTGAGE LOANS PREPAY AT 100% SPA (AS DESCRIBED IN THE PROSPECTUS
SUPPLEMENT), AND ASSUMING A CONSTANT PASS-THROUGH RATE EQUAL TO THE INITIAL
CERTIFICATE RATE, THIS CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN $__________
OF OID PER [$1,000] [$100,000] OF [INITIAL NOTIONAL AMOUNT], THE PRE-TAX YIELD
TO MATURITY IS ______% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL ACCRUAL
PERIOD IS NO MORE THAN $______________ PER [$1,000] [$100,000] OF [INITIAL
NOTIONAL AMOUNT], COMPUTED USING THE APPROXIMATE METHOD. NO REPRESENTATION IS
MADE THAT THE MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON THE STANDARD
PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE OR AS TO THE CONSTANCY OF THE
CERTIFICATE RATE.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ASSET BACKED
SECURITIES CORPORATION OR THE TRUSTEE REFERRED TO BELOW, OR OF ANY OF THEIR
AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENT
AGENCY OR INSTRUMENTALITY.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT OR OTHER PLAN
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE CODE UNLESS THE TRANSFEREE PROVIDES EITHER A
CERTIFICATION PURSUANT TO SECTION 6.02(f) OF THE AGREEMENT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE DEPOSITOR AND THE TRUSTEE THAT THE PURCHASE OF THIS
CERTIFICATE BY OR ON BEHALF OF SUCH PLAN IS PERMISSIBLE UNDER APPLICABLE LAW AND
WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER
SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE.
B-1
<PAGE>
CHEVY CHASE BANK, F.S.B.
MORTGAGE-BACKED PASS-THROUGH CERTIFICATE
SERIES 1998-CCB2, CLASS S
Evidencing an undivided interest in the interest portion of a Trust Fund whose
assets consist of a pool of adjustable-rate, conventional mortgage loans secured
by first liens on one- to four-family, residential real properties and certain
other property held in trust transferred by
ASSET BACKED SECURITIES CORPORATION
$________ INITIAL AGGREGATE
NOTIONAL AMOUNT OF
CLASS S CERTIFICATES
Certificate No. S-___ 100% PERCENTAGE INTEREST
REPRESENTED BY THIS
CERTIFICATE
First Distribution Date: Scheduled Final
July 27, 1998 Distribution Date:
___________ __, _____
THIS CERTIFIES THAT ___________________________________________ is the
registered owner of a beneficial interest in the Trust Fund referred to below
consisting of a pool of adjustable-rate, conventional mortgage loans secured by
first liens on one- to four-family residential real properties (the "Mortgage
Loans") and certain other property held in trust transferred to the Trust Fund
by Asset Backed Securities Corporation (the "Depositor"), and certain related
property. The Trust Fund was created pursuant to the Pooling and Servicing
Agreement, dated as of June 1, 1998 (the "Agreement"), among the Depositor, U.S.
Bank National Association, as trustee (the "Trustee", which term includes any
successor entity under the Agreement) and Chevy Chase Bank, F.S.B., as seller
and servicer, a summary of certain of the pertinent provisions of which is set
forth herein. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
This Certificate is one of a duly authorized issue of certificates by
Asset Backed Securities Corporation designated as the Chevy Chase Bank, F.S.B.
Mortgage-Backed Pass-Through Certificates, Series 1998-CCB2 (the
"Certificates"), which is comprised of the following four Classes: Class A-I,
Class A-II, Class S and Class R. Reference is hereby made to the Agreement for
a statement of the respective rights thereunder of the Depositor and the Trustee
and the Holders of the Certificates and the terms upon which the Certificates
are authenticated and delivered. This Certificate represents an interest in the
Trust Fund, which Trust Fund consists of, among other things, (i) the Mortgage
Loans and all distributions thereon payable after the Cut-off Date, net of
certain amounts in accordance with the provisions of the Agreement, (ii) the CD
Collateral, (ii) REO Property, (iv) the Certificate Account and the Custodial
Account and all amounts deposited therein pursuant to the applicable provisions
of the Agreement, net of any investment earnings thereon, (v) the interest of
the Trust Fund in any insurance
B-2
<PAGE>
policies with respect to the Mortgage Loans, (vi) the interest of the Trust Fund
in the Policy issued for the benefit of the Holders of the Class A Certificates,
(vii) the rights of the Depositor assigned to the Trustee pursuant to Sections
2.01 and 3.01 of the Agreement, (viii) the Reserve Account and all amounts
deposited therein and (ix) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid property.
This Class S Certificate represents the right to receive a portion of
interest with respect to the Mortgage Loans on a Distribution Date. This Class
S Certificate is not entitled to any distributions with respect to principal on
the Mortgage Loans in the Trust Fund. The Holder of this Class S Certificate
hereby acknowledges the grant of the security interest to the Trustee pursuant
to Section 2.01 of the Agreement.
The Trustee shall distribute from the Certificate Account, to the
extent of available funds, on the 25th day of each calendar month, or, if such
25th day is not a Business Day, the Business Day immediately following such 25th
day (the "Distribution Date"), commencing July 27, 1998, to the Person in whose
name this Certificate is registered at the close of business on the last
Business Day of the month immediately preceding the month of such distribution
(each a "Record Date"), distributions of interest in an amount equal to the
Class S Interest Distribution Amount for such Distribution Date.
Not later than each Distribution Date, the Trustee will send to each
Certificateholder a statement containing information relating to the Mortgage
Loans and payments made to Certificateholders.
Distributions on this Certificate will be made by the Trustee by check
mailed to the address of the Holder hereof entitled thereto at the address
appearing in the Certificate Register or, if such Holder holds all of the
Certificates of this Class, by wire transfer in immediately available funds to
the account of such Certificateholder designated in writing to the Trustee at
least five Business Days prior to the applicable Record Date. Notwithstanding
the above, the final distribution on this Certificate will be made after due
notice of the pendency of such final distribution and only upon presentation and
surrender of this Certificate at the office or agency designated in such notice.
The Agreement permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the Trustee and the rights of the Certificateholders under the
Agreement at any time by the Depositor and the Trustee with the consent of the
Holders of Certificates evidencing Voting Rights aggregating not less than 66-
2/3% of the Voting Rights of all the Certificates; provided, however, that no
such amendment may (i) reduce in any manner the amount of, delay the timing of
or change the manner in which payments received on Mortgage Loans are required
to be distributed in respect of any Certificate without the consent of the
Holder of such Certificate, (ii) adversely affect in any material respect the
interests of the Holders of a Class of Certificates in a manner other than in
(i) above without the consent of the Holders of Certificates evidencing not less
than 66-2/3% of the Voting Rights of such Class and (iii) reduce the aforesaid
percentages of Voting Rights, the holders of which are required to consent to
any such amendment, without the consent of 100% of the Holders of Certificates
of the Class affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the Depositor
and the Trustee to amend certain terms and conditions set forth in the Agreement
without the consent of Holders of the Certificates. At any time that any of the
Class A Certificates are outstanding, 98% of all Voting Rights will be allocated
to the Holders of the Class A certificates, in proportion to their then
outstanding Certificate Principal Balances, 1% of all Voting
B-3
<PAGE>
Rights will be allocated to the Holders of the Class S Certificates and 1% of
all Voting Rights will be allocated to the Holders of the Class R Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable on the
Certificate Register upon surrender of this Certificate for registration of
transfer at the office or agency of the Trustee designated therefor, duly
endorsed by, or accompanied by a written instrument of transfer in a form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class and of authorized denominations, and for the same aggregate
interest in the Trust Fund will be issued to the designated transferee or
transferees.
The Class S Certificates will be issued in fully registered form in
minimum Percentage Interests of 20% and integral multiples thereof. As provided
in the Agreement and subject to certain limitations therein set forth, this
Certificate is exchangeable for one or more new Certificates of the same Class
and of authorized Percentage Interests evidencing a like aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for such registrations of transfers or
exchanges, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. The Trustee
and any agent of the Trustee may treat the person in whose name this Certificate
is registered as the owner hereof for all purposes, and neither the Trustee nor
any such agent thereof shall be affected by notice to the contrary.
The obligations and responsibilities of the Depositor and the Trustee
created by the Agreement will terminate upon the earlier of (a) the purchase by
the Holder of the Class R Certificates from the Trust Fund of all remaining
Mortgage Loans and all property acquired in respect of such Mortgage Loans,
thereby effecting early retirement of the Certificates, or (b) the maturity or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund and the disposition of all property acquired
upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan. As
provided in the Agreement, the right to purchase all Mortgage Loans pursuant to
clause (a) above shall be conditioned upon the unpaid Principal Balances of such
Mortgage Loans, at the time of any such repurchase, aggregating less than or
equal to 5% of the aggregate Principal Balances thereof as of the Cut-off Date.
Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning. If the terms hereof are inconsistent with the
Agreement, the Agreement shall control.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid or obligatory for any
purpose.
The recitals contained herein shall be taken as statements of the
Depositor and not of the Trustee. The Trustee assumes no responsibility for the
correctness of the statements contained in this Certificate and makes no
representation as to the validity or sufficiency of the Agreement, this
Certificate, any Mortgage Loan or any related document.
B-4
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its corporate seal.
U.S. BANK NATIONAL ASSOCIATION,
solely as Trustee and not individually
By:
--------------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Agreement.
Date:
--------------------------
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
---------------------------
Authorized Officer
B-5
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including postal zip code, or
assignee) the undivided interest in the Trust Fund evidenced by the within
Certificate and hereby authorize(s) the transfer of registration of such
interest to the assignee on the Certificate Register.
I (we) further direct the Trustee to issue a new Certificate of the same
Class and of a like Initial Certificate Principal Balance and undivided interest
in the Trust Fund to the above-named assignee and to deliver such Certificate to
the following address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: ____________________
- --------------------------- ----------------------------------------
Social Security or Signature by or on behalf of assignor
other Tax Identification (signature must be signed as registered)
No. of Assignee
----------------------------------------
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Master Servicer:
Distribution shall be made by check mailed to ________________________
_______________________________________________________________________, or if
the Percentage Interest within such Class is 100%, and the Trustee shall have
received appropriate wiring instructions in accordance with the Agreement, by
wire transfer in immediately available funds to ____________________________ the
account of , account number ________________________________________. This
information is provided by the assignee named above, or its agent.
B-6
<PAGE>
EXHIBIT C
FORM OF CLASS R CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED PURSUANT TO SUCH ACT AND
LAWS OR IS SOLD OR TRANSFERRED IN TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION
UNDER SUCH ACT AND UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 6.02 OF THE 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 OF
1986 (THE "CODE"). THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED
STATES PERSON.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR OBLIGATION OF ASSET BACKED
SECURITIES CORPORATION OR THE TRUSTEE REFERRED TO BELOW, OR OF ANY OF THEIR
AFFILIATES. THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENT
AGENCY OR INSTRUMENTALITY.
ANY SALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE MAY BE MADE
ONLY IF THE PROPOSED TRANSFEREE PROVIDES A TRANSFER AFFIDAVIT TO THE TRUSTEE TO
THE EFFECT THAT (1) SUCH TRANSFEREE AGREES TO BE BOUND BY THE TERMS OF THE
AGREEMENT AND ALL RESTRICTIONS SET FORTH ON THE FACE HEREOF, (2) SUCH TRANSFEREE
IS NOT EITHER (A) THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF,
ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER THAN A
COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX
IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX
IMPOSED BY SECTION 511 OF THE CODE, (C) AN ELECTING LARGE PARTNERSHIP UNDER
SECTION 775 OF THE CODE OR ANY ORGANIZATION DESCRIBED IN SECTION 1381(a)(2)(C)
OF THE CODE, (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES (A), (B) OR (C)
BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION") OR (D) AN AGENT
OF A DISQUALIFIED ORGANIZATION, AND (3) NO PURPOSE OF SUCH TRANSFER IS TO ENABLE
THE TRANSFEROR TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX. SUCH AFFIDAVIT
SHALL INCLUDE CERTAIN REPRESENTATIONS AS TO THE FINANCIAL CONDITION OF THE
PROPOSED TRANSFEREE.
NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT OR OTHER PLAN
SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), OR SECTION 4975 OF THE CODE UNLESS THE TRANSFEREE PROVIDES AN OPINION
OF COUNSEL SATISFACTORY TO THE DEPOSITOR AND THE TRUSTEE THAT THE PURCHASE OF
THIS CERTIFICATE BY OR ON BEHALF OF SUCH PLAN IS PERMISSIBLE UNDER APPLICABLE
LAW AND WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION
UNDER SECTION 406 OF ERISA AND SECTION 4975 OF THE CODE.
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<PAGE>
CHEVY CHASE BANK, F.S.B.
MORTGAGE-BACKED PASS-THROUGH CERTIFICATE
SERIES 1998-CCB2, CLASS R
Evidencing an undivided interest in a Trust Fund whose assets consist of a pool
of adjustable-rate, conventional mortgage loans secured by first liens on one-
to four-family, residential real properties and certain other property held in
trust transferred by
ASSET BACKED SECURITIES CORPORATION
Certificate No. R-___ 100% PERCENTAGE INTEREST
REPRESENTED BY THIS
CERTIFICATE
First Distribution Date: Scheduled Final
July 27, 1998 Distribution Date:
___________ __, _____
THIS CERTIFIES THAT _________________________________ is the
registered owner of a beneficial interest in the Trust Fund referred to below
consisting of a pool of adjustable-rate conventional mortgage loans secured by
first liens on one- to four-family residential real properties (the "Mortgage
Loans") and certain other property held in trust transferred to the Trust Fund
by Asset Backed Securities Corporation (the "Depositor"), and certain related
property. The Trust Fund was created pursuant to the Pooling and Servicing
Agreement, dated as of June 1, 1998 (the "Agreement"), among the Depositor, U.S.
Bank National Association, as trustee (the "Trustee", which term includes any
successor entity under the Agreement) and Chevy Chase Bank, F.S.B., as seller
and servicer, a summary of certain of the pertinent provisions of which is set
forth herein. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.
This Certificate is one of a duly authorized issue of certificates by
Asset Backed Securities Corporation designated as the Chevy Chase Bank, F.S.B.
Mortgage-Backed Pass-Through Certificates, Series 1998-CCB2 (the
"Certificates"), which is comprised of the following four Classes: Class A-I,
Class A-II, Class S and Class R. Reference is hereby made to the Agreement for
a statement of the respective rights thereunder of the Depositor and the Trustee
and the Holders of the Certificates and the terms upon which the Certificates
are authenticated and delivered. This Certificate represents an interest in the
Trust Fund, which Trust Fund consists of, among other things, (i) the Mortgage
Loans and all distributions thereon payable after the Cut-off Date, net of
certain amounts in accordance with the provisions of the Agreement, (ii) the CD
Collateral, (ii) REO Property, (iv) the Certificate Account and the Custodial
Account and all amounts deposited therein pursuant to the applicable provisions
of the Agreement, net of any investment earnings thereon, (v) the interest of
the Trust Fund in any insurance policies with respect to the Mortgage Loans,
(vi) the interest of the Trust Fund in the Policy issued for the benefit of the
Holders of the Class A Certificates, (vii) the rights of the Depositor assigned
to the Trustee pursuant to Sections 2.01 and 3.01 of the Agreement, (viii) the
Reserve Account and all amounts
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<PAGE>
deposited therein and (ix) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid property.
This Class R Certificate is not entitled to any distributions with
respect to principal or interest on the Mortgage Loans in the Trust Fund.
Not later than each Distribution Date, the Trustee will send to each
Certificateholder a statement containing information relating to the Mortgage
Loans and payments made to Certificateholders.
The Agreement permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the Trustee and the rights of the Certificateholders under the
Agreement at any time by the Depositor and the Trustee with the consent of the
Holders of Certificates evidencing Voting Rights aggregating not less than 66-
2/3% of the Voting Rights of all the Certificates; provided, however, that no
such amendment may (i) reduce in any manner the amount of, delay the timing of
or change the manner in which payments received on Mortgage Loans are required
to be distributed in respect of any Certificate without the consent of the
Holder of such Certificate, (ii) adversely affect in any material respect the
interests of the Holders of a Class of Certificates in a manner other than in
(i) above without the consent of the Holders of Certificates evidencing not less
than 66-2/3% of the Voting Rights of such Class or (iii) reduce the aforesaid
percentages of Voting Rights, the holders of which are required to consent to
any such amendment, without the consent of 100% of the Holders of Certificates
of the Class affected thereby. Any such consent by the Holder of this
Certificate shall be conclusive and binding on such Holder and upon all future
Holders of this Certificate and of any Certificate issued upon the transfer
hereof or in exchange herefor or in lieu hereof whether or not notation of such
consent is made upon this Certificate. The Agreement also permits the Depositor
and the Trustee to amend certain terms and conditions set forth in the Agreement
without the consent of Holders of the Certificates. At any time that any of the
Class A Certificates are outstanding, 98% of all Voting Rights will be allocated
among the Holders of the Class A, in proportion to their then outstanding
Certificate Principal Balances, 1% of all Voting Rights will be allocated to the
Holders of the Class S Certificates and 1% of all Voting Rights will be
allocated to the Holders of the Class R Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable on the
Certificate Register upon surrender of this Certificate for registration of
transfer at the office or agency of the Trustee designated therefor, duly
endorsed by, or accompanied by a written instrument of transfer in a form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class and of authorized denominations, and for the same aggregate
interest in the Trust Fund will be issued to the designated transferee or
transferees.
The Class R Certificates will be issued in fully registered form in
minimum Percentage Interests of 20% and integral multiples thereof. As provided
in the Agreement and subject to certain limitations therein set forth, this
Certificate is exchangeable for one or more new Certificates of the same Class
and of authorized Percentage Interests evidencing a like aggregate Percentage
Interest, as requested by the Holder surrendering the same.
No service charge will be made for such registrations of transfers or
exchanges, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. The Trustee
and any agent of the Trustee may treat the person in whose name
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<PAGE>
this Certificate is registered as the owner hereof for all purposes, and neither
the Trustee nor any such agent thereof shall be affected by notice to the
contrary.
Pursuant to the Agreement, the Depositor will make an election to
treat the Trust REMIC as a real estate mortgage investment conduit (a "remic")
for federal income tax purposes. The Class R Certificates will be the "residual
interest" in the Trust REMIC, and all other Classes of Certificates will
constitute the "regular interests" in the Trust REMIC.
The obligations and responsibilities of the Depositor and the Trustee
created by the Agreement will terminate upon the earlier of (a) the purchase by
the Holder of the Class R Certificates from the Trust Fund of all remaining
Mortgage Loans and all property acquired in respect of such Mortgage Loans,
thereby effecting early retirement of the Certificates, or (b) the maturity or
other liquidation (or any advance with respect thereto) of the last Mortgage
Loan remaining in the Trust Fund and the disposition of all property acquired
upon foreclosure or deed in lieu of foreclosure of any Mortgage Loan. As
provided in the Agreement, the right to purchase all Mortgage Loans pursuant to
clause (a) above shall be conditioned upon the unpaid Principal Balances of such
Mortgage Loans, at the time of any such repurchase, aggregating less than or
equal to 5% of the aggregate Principal Balances thereof as of the Cut-off Date.
Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning. If the terms hereof are inconsistent with the
Agreement, the Agreement shall control.
Unless the certificate of authentication hereon has been executed by
or on behalf of the Trustee by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid or obligatory for any
purpose.
The recitals contained herein shall be taken as statements of the
Depositor and not of the Trustee. The Trustee assumes no responsibility for the
correctness of the statements contained in this Certificate and makes no
representation as to the validity or sufficiency of the Agreement, this
Certificate, any Mortgage Loan or any related document.
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<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed under its corporate seal.
U.S. BANK NATIONAL ASSOCIATION,
solely as Trustee and not individually
By:
-------------------------------------
Authorized Officer
CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Agreement.
Date:
-------------------------
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------
Authorized Officer
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<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including postal zip code, or
assignee) the undivided interest in the Trust Fund evidenced by the within
Certificate and hereby authorize(s) the transfer of registration of such
interest to the assignee on the Certificate Register.
I (we) further direct the Trustee to issue a new Certificate of the same
Class and of a like Initial Certificate Principal Balance and undivided interest
in the Trust Fund to the above-named assignee and to deliver such Certificate to
the following address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated: ____________________
- --------------------------- ----------------------------------------
Social Security or Signature by or on behalf of assignor
other Tax Identification (signature must be signed as registered)
No. of Assignee
----------------------------------------
Signature Guaranteed
DISTRIBUTION INSTRUCTIONS
The assignee should include the following for the information of the
Master Servicer:
Distribution shall be made by check mailed to ________________________
______________________________________________________________________, or if
the Percentage Interest within such Class is 100%, and the Trustee shall have
received appropriate wiring instructions in accordance with the Agreement, by
wire transfer in immediately available funds to___________________the account
of , account number ____________________________. This information is provided
by the assignee named above, or its agent.
C-6
<PAGE>
EXHIBIT D
SCHEDULE OF MORTGAGE LOANS
D-1
<PAGE>
EXHIBIT E
FORM OF INITIAL CERTIFICATION OF TRUSTEE
__________ __, 1998
Asset Backed Securities Corporation
11 Madison Avenue, 5th Floor
New York, New York 10010
Re: Pooling and Servicing Agreement ("Pooling and Servicing
Agreement") relating to Chevy Chase Bank, F.S.B. Mortgage-Backed
Pass-Through Certificates, Series 1998-CCB2
Ladies and Gentlemen:
In accordance with and subject to the provisions of Section 2.02 of
the Pooling and Servicing Agreement, the undersigned, as Trustee, hereby
certifies that, except for the exceptions noted on the schedule attached hereto,
it has (a) received an original Mortgage Note with respect to each Mortgage Loan
listed on the Mortgage Loan Schedule and (b) received an original Mortgage (or a
certified copy thereof) with respect to each Mortgage Loan listed on the
Mortgage Loan Schedule in accordance with Section 2.01 of the Pooling and
Servicing Agreement. The Trustee has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
mentioned above. The Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any of the documents
delivered in accordance with Section 2.01 of the Pooling and Servicing Agreement
or any of the Mortgage Loans identified in the Mortgage Loan Schedule, or (ii)
the collectibility, insurability, effectiveness or suitability of any such
Mortgage Loan.
The Trustee acknowledges receipt of notice that the Depositor has
granted to the Trustee for the benefit of the Certificateholders a security
interest in all of the Depositor's right, title and interest in and to the
Mortgage Loans.
Capitalized terms used herein without definition shall have the
meaning assigned to them in the Pooling and Servicing Agreement.
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------------------------
Authorized Representative
E-1
<PAGE>
EXHIBIT F
FORM OF FINAL CERTIFICATION OF TRUSTEE
[date]
Asset Backed Securities Corporation
11 Madison Avenue, 5th Floor
New York, New York 10010
Re: Pooling and Servicing Agreement ("Pooling and Servicing
Agreement") relating to Chevy Chase Bank, F.S.B. Mortgage-Backed
Pass-Through Certificates, Series 1998-CCB2
Ladies and Gentlemen:
In accordance with and subject to the provisions of Section 2.02 of the
above-referenced Pooling and Servicing Agreement the undersigned, as Trustee,
hereby certifies that, except for the exceptions noted on the schedule attached
hereto, as to each Mortgage Loan listed in the Mortgage Loan Schedule it has
reviewed the Mortgage File and has determined that (based solely on its review
of each such documents on its face) (i) all documents described in clauses (i)-
(v) of Section 2.01 of the Pooling and Servicing Agreement are in its
possession, (ii) such documents have been reviewed by it and have not been
mutilated, damaged, defaced, torn or otherwise physically altered and such
documents relate to such Mortgage Loan and (iii) each Mortgage Note has been
endorsed and each assignment of Mortgage has been delivered as provided in
Section 2.01 of the Pooling and Servicing Agreement. The Trustee has made no
independent examination of any documents required to be delivered in accordance
with Section 2.01 of the Pooling and Servicing Agreement beyond the review
specifically required therein. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any of the
documents required to be delivered in accordance with Section 2.01 of the
Pooling and Servicing Agreement or any of the Mortgage Loans identified on the
Mortgage Loan Schedule, or (ii) the collectibility, insurability, effectiveness
or suitability of any such Mortgage Loan.
Capitalized terms used herein without definition have the meanings ascribed
to them in the Pooling and Servicing Agreement.
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------------------------
Authorized Representative
F-1
<PAGE>
EXHIBIT G
FORM OF REQUEST FOR RELEASE
[date]
To:
In connection with the administration of the Mortgage Loans held by
you as Trustee under the Pooling and Servicing Agreement dated as of June 1,
1998, between Asset Backed Securities Corporation, as Depositor, and you, as
Trustee (the "Pooling and Servicing Agreement"), the undersigned hereby requests
a release of the Mortgage File held by you as Trustee with respect to the
following described Mortgage Loan for the reason indicated below.
Mortgagor's Name:
Address:
Loan No.:
Reason for requesting file:
____ 1. Mortgage Loan paid in full. (The Servicer hereby certifies that all
amounts received in connection with the Mortgage Loan have been or
will be credited to the Certificate Account pursuant to the Pooling
and Servicing Agreement.)
____ 2. Mortgage Loan repurchased. (The Servicer hereby certifies that the
Purchase Price has been credited to the Certificate Account pursuant
to the Pooling and Servicing Agreement.)
____ 3. The Mortgage Loan is being foreclosed.
____ 4. Other. (Describe)
The undersigned acknowledges that the above Mortgage File will be held
by the undersigned in accordance with the provisions of the Pooling and
Servicing Agreement and will be returned, except if the Mortgage Loan has been
paid in full or repurchased (in which case the Mortgage File will be retained by
us permanently) when no longer required by us for such purpose.
Capitalized terms used herein shall have the meanings ascribed to them
in the Pooling and Servicing Agreement.
[SERVICER]
By:
-----------------------------------
Name:
Title:
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<PAGE>
EXHIBIT H
FORM OF INVESTOR REPRESENTATION LETTER
[date]
Asset Backed Securities Corporation
11 Madison Avenue, 5th Floor
New York, New York 10010
U.S. Bank National Association
180 East Fifth Street
St. Paul, MN 55101
Re: Chevy Chase Bank, F.S.B. Mortgage-Backed Pass-Through
Certificates, Series 1998-CCB2
Ladies and Gentlemen:
[______________________________________________] (the "Purchaser") intends
to purchase from [______________________________________________] (the "Seller")
the Chevy Chase Bank, F.S.B. Mortgage-Backed Pass-Through Certificates, Series
1998-CCB2 [Class S] [Class R] (together, the "Certificates"), issued pursuant to
the Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"),
dated as of June 1, 1998 among Asset Backed Securities Corporation, as Depositor
(the "Company"), Chevy Chase Bank, F.S.B., as seller and servicer, and U.S. Bank
National Association, as trustee (the "Trustee"). All terms used herein and not
otherwise defined shall have the meanings set forth in the Pooling and Servicing
Agreement. The Purchaser hereby certifies, represents and warrants to, and
covenants with, the Company and the Trustee that:
1. The Purchaser understands that (a) the Certificates have not been
and will not be registered or qualified under the Securities Act of 1933, as
amended (the "Act") or any state securities law, (b) the Company is not required
to so register or qualify the Certificates, (c) the Certificates may be resold
only if registered and qualified pursuant to the provisions of the Act or any
state securities law, or if an exemption from such registration and
qualification is available, (d) the Pooling and Servicing Agreement contains
restrictions regarding the transfer of the Certificates and (e) the Certificates
will bear a legend to the foregoing effect.
2. The Purchaser is acquiring the Certificates for its own account
for investment only and not with a view to or for sale in connection with any
distribution thereof in any manner that would violate the Act or any applicable
state securities laws.
3. The Purchaser is (a) a substantial, sophisticated institutional
investor having such knowledge and experience in financial and business matters,
and, in particular, in such matters related to securities similar to the
Certificates, such that it is capable of evaluating the merits and risks of
investment in the Certificates, (b) able to bear the economic risks of such an
investment and (c) an "accredited investor" within the meaning of Rule 501(a)
promulgated pursuant to the Act.
4. The Purchaser has been furnished with, and has had an opportunity
to review (a) a copy of the Pooling and Servicing Agreement and (b) such other
information concerning the Certificates, the Mortgage Loans and the Company as
has been requested by the Purchaser from the
H-1
<PAGE>
Company or the Seller and is relevant to the Purchaser's decision to purchase
the Certificates. The Purchaser has had any questions arising from such review
answered by the Company or the Seller to the satisfaction of the Purchaser.
5. The Purchaser has not and will not nor has it authorized or will
it authorize any person to (a) offer, pledge, sell, dispose of or otherwise
transfer any Certificate, any interest in any Certificate or any other similar
security to any person in any manner, (b) solicit any offer to buy or to accept
a pledge, disposition of other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c)
otherwise approach or negotiate with respect to any Certificate, any interest in
any Certificate or any other similar security with any person in any manner, (d)
make any general solicitation by means of general advertising or in any other
manner or (e) take any other action, that (as to any of (a) through (e) above)
would constitute a distribution of any Certificate under the Act, that would
render the disposition of any Certificate a violation of Section 5 of the Act or
any state securities law, or that would require registration or qualification
pursuant thereto. The Purchaser will not sell or otherwise transfer any of the
Certificates, except in compliance with the provisions of the Pooling and
Servicing Agreement.
6. The Purchaser
(a) is not an employee benefit or other plan subject to the prohibited
transaction provisions of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as
amended (the "Code") (a "Plan"), or any other person (including an investment
manager, a named fiduciary or a trustee of any Plan) acting, directly or
indirectly, on behalf of or purchasing any Certificate with "plan assets" of any
Plan; or
(b) is buying Class S Certificates and is an insurance company, the
source of funds to be used by it to purchase the Class S Certificates is an
"insurance company general account" (within the meaning of Department of Labor
Prohibited Transaction Class Exemption ("PTCE") 95-60), and the purchase is
being made in reliance upon the availability of the exemptive relief afforded
under Sections I and III of PTCE 95-60.
Very truly yours,
[Purchaser]
By:
-------------------------------------
Name:
Title:
H-2
<PAGE>
EXHIBIT I
FORM OF TRANSFEROR REPRESENTATION LETTER
[date]
Asset Backed Securities Corporation
11 Madison Avenue, 5th Floor
New York, New York 10010
U.S. Bank National Association
180 East Fifth Street
St. Paul, MN 55101
Re: Chevy Chase Bank, F.S.B. Mortgage-Backed Pass-Through
Certificates, Series 1998-CCB2
Ladies and Gentlemen:
In connection with the sale by
[______________________________________________] (the "Seller") to
[______________________________________________] (the "Purchaser") the Chevy
Chase Bank, F.S.B. Mortgage-Backed Pass-Through Certificates, Series 1998-CCB2
[Class S] [Class R] (together, the "Certificates"), issued pursuant to the
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"), dated
as of March 1, 1998 among Asset Backed Securities Corporation, as Depositor (the
"Company"), Chevy Chase Bank, F.S.B., as seller and servicer, and U.S. Bank
National Association, as trustee (the "Trustee"), the Seller hereby certifies,
represents and warrants to, and covenants with, the Company and the Trustee
that:
Neither the Seller nor anyone acting on its behalf has (a) offered,
pledged, sold, disposed of or otherwise transferred any Certificate, any
interest in any Certificate or any other similar security to any person in any
manner, (b) has solicited any offer to buy or to accept a pledge, disposition or
other transfer of any Certificate, any interest in any Certificate or any other
similar security from any person in any manner, (c) has otherwise approached or
negotiated with respect to any Certificate, any interest in any Certificate or
any other similar security with any person in any manner, (d) has made any
general solicitation by means of general advertising or in any other manner, or
(e) has taken any other action, that (as to any of (a) through (e) above) would
constitute a distribution of the Certificates under the Securities Act of 1933
(the "Act"), that would render the disposition of any Certificate a violation of
Section 5 of the Act or any state securities law, or that would require
registration or qualification pursuant thereto. The Seller will not act, in any
manner set forth in the foregoing sentence with respect to any Certificate. The
Seller has not and will not sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of the Pooling and Servicing Agreement.
Very truly yours,
[Seller]
By:
----------------------------------------
Name:
Title:
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<PAGE>
EXHIBIT J
FORM OF INVESTOR TRANSFER AFFIDAVIT AND AGREEMENT
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
[NAME OF OFFICER], being first duly sworn, deposes and says:
1. That he is [Title of Officer] or [Name of Owner] (record or
beneficial owner (the "Owner") of the Class R Certificates (the "Class R
Certificates")), a [savings institution] [corporation] duly organized and
existing under the laws of [the State of
________________________________________] [the United States], on behalf of
which he makes this affidavit and agreement.
2. That the Owner (i) is not and will not be a "disqualified
organization" as of [date of transfer] within the meaning of Section 860E(e)(5)
of the Internal Revenue Code of 1986, as amended (the "Code"), (ii) will
endeavor to remain other than a disqualified organization for so long as it
retains its ownership interest in the Class R Certificates, and (iii) is
acquiring the Class R Certificates for its own account or for the account of
another Owner from which it has received an affidavit and agreement in
substantially the same form as this affidavit and agreement. A "Permitted
Transferee" is any person other than a "disqualified organization". (For this
purpose, a "disqualified organization" means the United States, any state or
political subdivision thereof, any agency or instrumentality of any of the
foregoing (other than an instrumentality all of the activities of which are
subject to tax and, except for the Federal Home Loan Mortgage Corporation, a
majority of whose board of directors is not selected by any such governmental
entity) or any foreign government, international organization or any agency or
instrumentality of such foreign government or organization, any electing large
partnership under Section 775 of the Code or any rural electric or telephone
cooperative, or any organization (other than certain farmers' cooperatives) that
is generally exempt from federal income tax unless such organization is subject
to the tax on unrelated business taxable income).
3. That the Owner is aware (i) of the tax that would be imposed on
transfers of Class R Certificates to disqualified organizations under the Code;
(ii) that such tax would be on the transferor (or, with respect to electing
large partnerships, on such partnership), or, if such transfer is through an
agent (which person includes a broker, nominee or middleman) for a non-Permitted
Transferee, on the agent; (iii) that the person (other than with transfers with
respect to electing large partnerships) otherwise liable for the tax shall be
relieved of liability for the tax if the transferee furnishes to such person an
affidavit that the transferee is a Permitted Transferee and, at the time of
transfer, such person does not have actual knowledge that the affidavit is
false; and (iv) that the Class R Certificates may be "noneconomic residual
interests" within the meaning of Treasury regulations promulgated pursuant to
the Code and that the transferor of a noneconomic residual interest will remain
liable for any taxes due with respect to the income on such residual interest,
if a significant purpose of the transfer was to enable the transferor to impede
the assessment or collection of tax.
4. That the Owner is aware of the tax imposed on a "pass-through
entity" holding Class R Certificates if at any time during the taxable year of
the pass-through entity a non-Permitted Transferee is the record holder of an
interest in such entity. (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.)
J-1
<PAGE>
5. That the Owner is aware that the Trustee will not register the
Transfer of any Class R Certificates unless the transferee, or the transferee's
agent, delivers to it an affidavit and agreement, among other things, in
substantially the same form as this affidavit and agreement. The Owner
expressly agrees that it will not consummate any such transfer if it knows or
believes that any of the representations contained in such affidavit and
agreement are false.
6. That the Owner has reviewed the restrictions set forth on the face
of the Class R Certificates and the provisions of Section 6.02 of the Pooling
and Servicing Agreement under which the Class R Certificates were issued. The
Owner expressly agrees to be bound by and to comply with such restrictions and
provisions.
7. That the Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Owner that is a Permitted Transferee.
8. That the Owner's Taxpayer Identification Number is
____________________________.
9. That the Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States is includable in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.
10. That no purpose of the Owner relating to the purchase of the
Class R Certificate by the Owner is or will be to impede the assessment or
collection of tax.
11. That the Owner has no present knowledge or expectation that it
will be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.
12. That the Owner has no present knowledge or expectation that it
will become insolvent or subject to a bankruptcy proceeding for so long as any
of the Certificates remain outstanding.
13. That no purpose of the Owner relating to any sale of the Class R
Certificate by the Owner will be to impede the assessment or collection of tax.
14. The Owner hereby agrees to cooperate with the Trustee and to take
any action required of it by the Code or Treasury regulations thereunder
(whether now or hereafter promulgated) in order to create or maintain the REMIC
status of the Trust Fund.
15. The Owner hereby agrees that it will not take any action that
could endanger the REMIC status of the Trust Fund or result in the imposition of
tax on the Trust Fund unless counsel for, or acceptable to, the Trustee has
provided an opinion that such action will not result in the loss of such REMIC
status or the imposition of such tax, as applicable.
J-2
<PAGE>
IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Title of Officer] and its corporate seal to be hereunto attached, attested
by its [Assistant] Secretary, this ________ day of.
[NAME OF OWNER]
By:
--------------------------------------
[Name of Officer]
[Title of Officer]
[Corporate Seal]
ATTEST:
[Assistant] Secretary
Personally appeared before me the above-named [Name of Officer], known
or proved to me to be the same person who executed the foregoing instrument and
to be the [Title of Officer] of the Owner, and acknowledged to me that he
executed the same as his free act and deed and the free act and deed of the
Owner.
Subscribed and sworn before me this ________ day of _________________.
------------------------------------------
NOTARY PUBLIC
COUNTY OF
---------------------------------
STATE OF
----------------------------------
My Commission expires the ______ day of
______________, 19______.
J-3
<PAGE>
EXHIBIT K
FORM OF TRANSFER CERTIFICATE
[date]
Asset Backed Securities Corporation
11 Madison Avenue, 5th Floor
New York, New York 10010
U.S. Bank National Association
180 East Fifth Street
St. Paul, MN 55101
Re: Chevy Chase Bank, F.S.B. Mortgage-Backed Pass-Through
Certificates, Series 1998-CCB2, Class R (the "Certificates")
------------------------------------------------------------
Ladies and Gentlemen:
This letter is delivered to you in connection with the sale by
______________________________ (the "Seller") to
____________________________________________________________________ (the
"Purchaser") of a ______% Percentage Interest in the above referenced
Certificates, pursuant to Section 6.02 of the Pooling and Servicing Agreement
(the "Pooling and Servicing Agreement"), dated as of June 1, 1998 among Asset
Backed Securities Corporation as depositor (the "Depositor"), U.S. Bank National
Association, as trustee (the "Trustee") and Chevy Chase Bank, F.S.B., as seller
and servicer. All terms used herein and not otherwise defined shall have the
meanings set forth in the Pooling and Servicing Agreement. The Seller hereby
certifies, represents and warrants to, and covenants with, the Depositor and the
Trustee that:
1. No purpose of the Seller relating to sale of the Certificate by
the Seller to the Purchaser is or will be to enable the Seller to impede the
assessment or collection of any tax.
2. The Seller understands that the Purchaser has delivered to the
Trustee a transfer affidavit and agreement in the form attached to the Pooling
and Servicing Agreement as Exhibit J. The Seller does not know or believe that
any representation contained therein is false.
3. The Seller has no actual knowledge that the proposed Transferee is
not a Permitted Transferee.
4. The Seller has no actual knowledge that the Purchaser would be
unwilling or unable to pay taxes due on its share of the taxable income
attributable to the Certificate.
5. The Seller has conducted a reasonable investigation of the
financial condition of the Purchaser and, as a result of the investigation,
found that the Purchaser has historically paid its debts as they came due, and
found no significant evidence to indicate that the Purchaser will not continue
to pay its debts as they come due in the future.
6. The Purchaser has represented to the Seller that, if the
Certificate constitutes a noneconomic residual interest, it (i) understands that
as holder of a noneconomic residual interest it may
K-1
<PAGE>
incur tax liabilities in excess of any cash flows generated by the interest, and
(ii) intends to pay taxes associated with its holding of the Certificate as they
become due.
Very truly yours,
[SELLER]
By:
-------------------------------------
Name:
Title:
K-2
<PAGE>
EXHIBIT L
CERTIFICATE GUARANTY INSURANCE POLICY
L-1
<PAGE>
<TABLE>
<S> <C>
Ambac Ambac Assurance Corporation
Certificate Guaranty Insurance Policy c/o CT Corporation Systems
44 East Mifflin Street, Madison Wisconsin 53703
Administrative Office:
One State Street Plaza, New York, New York 10004
Telephone: (212) 668-0340
$270,646,742 Policy Number: AB0172BE
Insured Obligations: Chevy Chase Bank, F.S.B., Mortgage-Backed
Pass Through Certificates, Series 1998-CCB2, Class A-I and
Class A-2
Premium: Calculated as set forth in
the Certificate Guaranty Insurance
Policy Endorsement attached hereto
</TABLE>
Ambac Assurance Corporation (Ambac) A Wisconsin Stock Insurance Company in
consideration of the payment of the premium and subject to the terms of this
Policy, hereby agrees unconditionally and irrevocably to pay to the Trustee for
the benefit of the Holders of the Insured Obligations, that portion of the
Insured Amounts which shall become Due for Payment but shall be unpaid by reason
of Nonpayment.
Ambac will make such payments to the Trustee from its own funds on the later of
(a) one (1) Business Day following notification to Ambac of Nonpayment or (b)
the Business Day on which the Insured Amounts are Due for Payment. Such
payments of principal or interest shall be made only upon presentation of an
instrument of assignment in form and substance satisfactory to Ambac,
transferring to Ambac all rights under such Insured Obligations to receive the
principal of and interest on the Insured Obligation. Ambac shall be subrogated
to all the Holders' rights to payment on the Insured Obligations to the extent
of the insurance disbursements so made. Once payments of the Insured Amounts
have been made to the Trustee, Ambac shall have no further obligation hereunder
in respect of such Insured Amounts.
In the event the Trustee for the Insured Obligations has notice that any payment
of principal or interest on an Insured Obligation which has become Due for
Payment and which is made to a Holder by or on behalf of the Trustee has been
deemed a preferential transfer and theretofore recovered from its Holder
pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court of competent jurisdiction, such Holder will be
entitled to payment from Ambac to the extent of such recovery if sufficient
funds are not otherwise available.
This Policy is noncancelable by Ambac for any reason, including failure to
receive payment of any premium due hereunder. The premium on this Policy is not
refundable for any reason. This Policy does not insure against loss of any
prepayment or other acceleration payment which at any time may become due in
respect of any Insured Obligation, other than at the sole option of Ambac, nor
against any risk other than Nonpayment, including failure of the Trustee to make
any payment due Holders of Insured Amounts.
To the fullest extent permitted by applicable law, Ambac hereby waives and
agrees not to assert any and all rights and defenses, to the extent such rights
and defenses may be available to Ambac, to avoid payment of its obligations
under this Policy in accordance with the express provisions hereof.
Any capitalized terms not defined herein shall have the meaning given such terms
in the endorsement attached hereto or in the Agreement.
In witness whereof, Ambac has caused this Policy to be affixed with its
corporate seal and to be signed by its duly authorized officers in facsimile to
become effective as their original signatures and binding upon Ambac by virtue
of the countersignature of its duly authorized representative.
/s/ Phil Lassiter [Corporate Seal] /s/ Stephen D. Cooke
President Secretary
/s/ Ted Molin
Effective Date: June 15, 1998 Authorized Representative
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Ambac Assurance Corporation
We consent to the incorporation by reference in the registration statement (No.
333-365) of Asset Backed Securities Corporation (the "Registrant"), and in the
Prospectus Supplement of the Registrant (the "Prospectus Supplement"), included
in Form 8-K of the Registrant dated June 26, 1998, of our report dated January
29, 1998 on the consolidated financial statements of Ambac Assurance Corporation
as of December 31, 1997 and 1996, and for each of the years in the three-year
period ended December 31, 1997 which report appears in the Form 10-K of Ambac
Financial Group, Inc. dated March 31, 1998 and to the reference to our firm
under the heading "Experts" in the Prospectus Supplement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
June 26, 1998
